1994 Stock Incentive Plan - Avalon Bay Communities Inc.
AVALON BAY COMMUNITIES, INC.
1994 STOCK INCENTIVE PLAN
As Amended and Restated on April 13, 1998
and Subsequently Amended on July 24, 1998
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Avalon Bay Communities, Inc. 1994 Stock
Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and enable
the officers, employees, Directors and other key persons of Avalon Bay
Communities, Inc. (the "Company") and its Subsidiaries upon whose judgment,
initiative and efforts the Company largely depends for the successful conduct of
its business to acquire a proprietary interest in the Company. It is anticipated
that providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Act" means the Securities Exchange Act of 1934, as amended.
"Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards, Deferred Stock Awards, Unrestricted Stock
Awards, Performance Share Awards and Dividend Equivalent Rights.
"Board" means the Board of Directors of the Company.
"Cause" means, except as provided in an individual agreement or by the
Committee, a vote of the Board of Directors resolving that the participant
should be dismissed as a result of (i) any material breach by the participant of
any agreement to which the participant and the Company are parties, (ii) any act
(other than retirement) or omission to act by the participant which may have a
material and adverse effect on the business of the Company or any Subsidiary or
on the participant's ability to perform services for the Company or any
Subsidiary, including, without limitation, the commission of any crime (other
than ordinary traffic violations), or (iii) any material misconduct or neglect
of duties by the participant in connection with the business or affairs of the
Company or any Subsidiary.
"Change of Control" is defined in Section 16.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
<PAGE> 2
"Committee" means the Committee of the Board referred to in Section 2.
"Covered Employee" means a participant designated prior to the grant of a
Qualified Performance-based Award by the Committee who is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the year in
which the Qualified Performance-based Award is expected to be taxable to such
participant.
"Deferred Stock Award" means Awards granted pursuant to Section 7.
"Disability" means, except as provided in an individual agreement or by the
Committee, an individual's inability to perform his normal required services for
the Company and its Subsidiaries for a period of six consecutive months by
reason of the individual's mental or physical disability, as determined by the
Committee in good faith in its sole discretion.
"Dividend Equivalent Right" means Awards granted pursuant to Section 11.
"Effective Date" means the consummation of the merger contemplated by the
Agreement and Plan of Merger, by and between the Company and Avalon Properties,
Inc. dated as of March 9, 1998.
"Fair Market Value" on any given date means the last reported sale price at
which Stock is traded on such date or, if no Stock is traded on such date, the
most recent date on which Stock was traded, as reflected on the New York Stock
Exchange or, if applicable, any other national stock exchange on which the Stock
is traded.
"Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" as defined in Section 422 of the Code.
"Non-Employee Director" means a member of the Board who is not also an
employee of the Company or any Subsidiary.
"Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Cycle" means one or more periods of time, which may be of
varying and overlapping durations, as the Committee may select, over which the
attainment of one or more performance criteria will be measured for the purpose
of determining a participant's right to and the payment of a Performance Share
Award, Restricted Stock Award or Deferred Stock Award.
"Performance Share Award" means Awards granted pursuant to Section 9.
<PAGE> 3
"Qualified Performance-based Award" means any Restricted Stock Award,
Deferred Stock Award or Performance Share Award that is intended to qualify as
"performance-based compensation" under Section 162(m) of the Code and the
regulations promulgated thereunder.
"Restricted Stock Award" mean Awards granted pursuant to Section 6.
"Retirement" means the employee's termination of employment with the
Company and its Subsidiaries after attainment of the age and/or service
requirements to qualify for early or normal retirement specified in the written
instrument evidencing the Award or, if not so specified, under the Company's
retirement policy as in effect at the time of the Award.
"Stock" means the Common Stock, $.01 par value per share, of the Company,
subject to adjustments pursuant to Section 3.
"Subsidiary" means any corporation or other entity (other than the Company)
in any unbroken chain of corporations or other entities, beginning with the
Company if each of the corporations or entities (other than the last corporation
or entity in the unbroken chain) owns stock or other interests possessing 50% or
more of the total combined voting power of all classes of stock or other
interests in one of the other corporations or entities in the chain.
"Unrestricted Stock Award" means Awards granted pursuant to Section 8.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS
(a) COMMITTEE. The Plan shall be administered by all of the Non-Employee
Director members of the Compensation Committee of the Board, or a committee of
not less than two Non-Employee Directors performing similar functions, as
appointed by the Board from time to time. Any authority granted to the Committee
may also be exercised by the full Board. To the extent that any permitted action
taken by the Board conflicts with action taken by the Committee, the Board
action shall control.
(b) POWERS OF COMMITTEE. The Committee shall have the power and authority
to grant Awards consistent with the terms of the Plan, including the power and
authority:
(i) to select the officers, other employees, Non-Employee Directors
and other key persons of the Company and its Subsidiaries to whom
Awards may from time to time be granted;
(ii) to determine the time or times of grant, and the extent, if any,
of Incentive Stock Options, Non-Qualified Stock Options, Restricted
Stock Awards, Deferred Stock Awards, Unrestricted Stock Awards,
Performance Share Awards and Dividend Equivalent Rights, or any
combination of the foregoing, granted to any one or more participants;
<PAGE> 4
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any
Award, which terms and conditions may differ among individual Awards
and participants, and to approve the form of written instruments
evidencing the Awards;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award in circumstances involving a Change of Control or
the death, disability or termination of employment of a Plan
participant;
(vi) subject to the provisions of Section 5(a)(ii), to extend the
period in which Stock Options may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or
credit amounts constituting interest (at rates determined by the
Committee) or dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and practices
for administration of the Plan and for its own acts and proceedings as
it shall deem advisable; to interpret the terms and provisions of the
Plan and any Award (including related written instruments); to make
all determinations it deems advisable for the administration of the
Plan; to decide all disputes arising in connection with the Plan; and
to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.
(c) DELEGATION OF AUTHORITY TO GRANT AWARDS. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or Covered Employees. The Committee
may revoke or amend the terms of a delegation at any time but such action shall
not invalidate any prior actions of the Committee's delegate or delegates that
were consistent with the terms of the Plan.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) SHARES ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be the sum of (a) 2,500,000 shares
of Stock, plus (b) 9.9 percent of any net increase in the total number of shares
of Stock actually outstanding from time to time after April 13, 1998.
Notwithstanding the foregoing, the maximum number of
<PAGE> 5
shares of Stock for which Incentive Stock Options may be issued under the Plan
shall not exceed 2,500,000. For purposes of this limitation, the shares of Stock
underlying any Awards which are forfeited, canceled, reacquired by the Company,
satisfied without the issuance of Stock or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock available for issuance
under the Plan. Stock Options with respect to no more than 300,000 shares of
Stock may be granted to any one individual participant during any one calendar
year period. Shares issued under the Plan may be authorized but unissued shares
or shares reacquired by the Company.
(b) RECAPITALIZATIONS. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, the
Committee shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options or shares of Stock that can be granted to any one individual
participant, (iii) the number and kind of shares or other securities subject to
any then outstanding Awards under the Plan, and (iv) the price for each share
subject to any then outstanding Stock Options under the Plan, without changing
the aggregate exercise price (i.e., the exercise price multiplied by the number
of Stock Options) as to which such Stock Options remain exercisable. The
adjustment by the Committee shall be final, binding and conclusive. No
fractional shares of Stock shall be issued under the Plan resulting from any
such adjustment, but the Committee in its discretion may make a cash payment in
lieu of fractional shares.
(c) MERGERS. Upon consummation of a consolidation or merger or sale of all
or substantially all of the assets of the Company in which outstanding shares of
Stock are exchanged for securities, cash or other property of an unrelated
corporation or business entity or in the event of a liquidation of the Company
(in each case, a "Transaction"), the Board may, in its discretion, take any one
or more of the following actions, as to outstanding Stock Options: (i) provide
that such Stock Options shall be assumed, or equivalent options shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), (ii) upon written notice to the optionees, provide that all
unexercised Stock Options will terminate immediately prior to the consummation
of the Transaction unless exercised by the optionee within a specified period
following the date of such notice, and/or (iii) in the event of a business
combination under the terms of which holders of the Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the business combination, make or provide for a cash payment to the optionees
equal to the difference between (A) the value (as determined by the Committee)
of the consideration payable per share of Stock pursuant to the business
combination (the "Merger Price") times the number of shares of Stock subject to
such outstanding Stock Options (to the extent then exercisable at prices not in
excess of the Merger Price) and (B) the aggregate exercise price of all such
outstanding Stock Options in exchange for the termination of such Stock Options.
In the event Stock
<PAGE> 6
Options will terminate upon the consummation of the Transaction, each optionee
shall be permitted, within a specified period determined by the Committee, to
exercise all non-vested Stock Options, subject to the consummation of the
Transaction.
(d) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances. Any substitute awards granted under
this Plan shall not count against the share limitation set forth in Section
3(a).
SECTION 4. ELIGIBILITY
Participants in the Plan will be such full or part-time officers, other
employees, Non-Employee Directors and key persons of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company and its Subsidiaries and who are selected from time
to time by the Committee, in its sole discretion. Key persons, for purposes of
this Plan, shall include consultants and prospective employees.
SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Qualified Stock Options. Incentive Stock Options may be granted only to
employees of the Company or any Subsidiary that is a "subsidiary corporation"
within the meaning of Section 424(f) of the Code. To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option.
No Awards shall be granted under the Plan after April 13, 2008.
(a) STOCK OPTIONS GRANTED TO EMPLOYEES AND KEY PERSONS. The Committee in
its discretion may grant Stock Options to employees and key persons of the
Company or any Subsidiary. Stock Options granted to employees and key persons
pursuant to this Section 5(a) shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
If the Committee so determines, Stock Options may be granted in lieu of cash
compensation at the participant's election, subject to such terms and conditions
as the Committee may establish, as well as in addition to other compensation.
(i) EXERCISE PRICE. The exercise price per share for the Stock covered
by a Stock Option granted pursuant to this Section 5(a) shall be determined
by the
<PAGE> 7
Committee at the time of grant but shall be not less than 100% of Fair
Market Value on the date of grant (other than options granted in lieu
of cash compensation). If an employee owns or is deemed to own (by reason
of the attribution rules applicable under Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the option price shall be not less than
110% of Fair Market Value on the grant date.
(ii) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the term of such option shall be no
more than five years from the date of grant.
(iii) EXERCISABILITY; RIGHTS OF A SHAREHOLDER. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. The Committee may at any time accelerate the exercisability of all or
any portion of any Stock Option. An optionee shall have the rights of a
shareholder only as to shares acquired upon the exercise of a Stock Option
and not as to unexercised Stock Options.
(iv) METHOD OF EXERCISE. Stock Options may be exercised in whole or in
part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made
by one or more of the following methods:
(A) In cash, by certified bank check or other instrument
acceptable to the Committee;
(B) Through the delivery (or attestation to the ownership) of
shares of Stock that have been purchased by the optionee on the open
market or that have been beneficially owned by the optionee for at
least six months and are not then subject to restrictions under any
Company plan. Such surrendered shares shall be valued at Fair Market
Value on the exercise date; or
(C) By the optionee delivering to the Company a properly executed
exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable
to the Company to pay the purchase price; provided that in the event
the optionee chooses to pay the purchase price as so provided, the
optionee and the broker shall comply with such procedures and enter
into such agreements of indemnity and other agreements as the
Committee shall prescribe as a condition of such payment procedure.
Payment instruments will be received subject to collection.
<PAGE> 8
The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt from
the optionee (or a purchaser acting in his stead in accordance with the
provisions of the Stock Option) by the Company of the full purchase price for
such shares and the fulfillment of any other requirements contained in the Stock
Option or applicable provisions of laws. In the event an optionee chooses to pay
the purchase price by previously-owned shares of Stock through the attestation
method, the shares of Stock transferred to the optionee upon the exercise of the
Stock Option shall be net of the number of shares attested to.
(v) TERMINATION BY REASON OF DEATH. If any optionee's employment (or
other business relationship) by the Company and its Subsidiaries terminates
by reason of death, the Stock Option may thereafter be exercised, to the
extent exercisable at the date of death, by the legal representative or
legatee of the optionee, for a period of six months (or such longer period
as the Committee shall specify at any time in the option, employment or
other agreement) from the date of death, or until the expiration of the
stated term of the Option, if earlier.
(vi) TERMINATION BY REASON OF DISABILITY.
(A) Any Stock Option held by an optionee whose
employment (or other business relationship) by the Company
and its Subsidiaries has terminated by reason of Disability
may thereafter be exercised, to the extent it was
exercisable at the time of such termination, for a period of
twelve months (or such longer period as the Committee shall
specify at any time in the option, employment or other
agreement) from the date of such termination of employment
(or other business relationship), or until the expiration of
the stated term of the Option, if earlier.
(B) Except as otherwise provided by the Committee at
the time of grant, the death of an optionee during a period
provided in this Section 5(a)(vi) for the exercise of a
Non-Qualified Stock Option shall extend such period for six
months from the date of death, subject to termination on the
expiration of the stated term of the Option, if earlier.
(vii) TERMINATION BY REASON OF RETIREMENT.
(A) Any Stock Option held by an optionee whose
employment by the Company and its Subsidiaries is terminated
by reason of Retirement may thereafter be exercised, to the
extent it was exercisable at the time of such termination,
for a period of twelve months (or such other period as the
Committee shall specify at any time in the option,
employment or other agreement) from the date of such
termination of employment, or until the expiration of the
stated term of the Option, if earlier.
<PAGE> 9
(B) Except as otherwise provided by the Committee at
any time, the death of an optionee during a period provided
in this Section 5(a)(viii) for the exercise of a Stock
Option shall extend such period for six months from the date
of death, subject to termination on the expiration of the
stated term of the Option, if earlier.
(viii) TERMINATION FOR CAUSE. If any optionee's employment (or
other business relationship) by the Company and its Subsidiaries has
been terminated for Cause, any Stock Option held by such optionee
shall immediately terminate and be of no further force and effect;
provided, however, that the Committee may, in its sole discretion,
provide that such stock option can be exercised for a period of up to
30 days from the date of termination of employment (or other business
relationship) or until the expiration of the stated term of the
Option, if earlier.
(ix) OTHER TERMINATION. Unless otherwise determined by the
Committee, if an optionee's employment (or other business
relationship) by the Company and its Subsidiaries terminates for any
reason other than death, Disability, Retirement or for Cause, any
Stock Option held by such optionee may thereafter be exercised, to the
extent it was exercisable on the date of termination of employment (or
other business relationship), for three months (or such longer period
as the Committee shall specify at any time in the option, employment
or other agreement) from the date of termination of employment (or
other business relationship) or until the expiration of the stated
term of the Option, if earlier.
(x) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent
required for "incentive stock option" treatment under Section 422 of
the Code, the aggregate Fair Market Value (determined as of the time
of grant) of the Stock with respect to which Incentive Stock Options
granted under this Plan and any other plan of the Company or its
Subsidiaries become exercisable for the first time by an optionee
during any calendar year shall not exceed $100,000.
(xi) FORM OF SETTLEMENT. Shares of Stock issued upon exercise of
a Stock Option shall be free of all restrictions under the Plan,
except as otherwise provided in this Plan.
(b) RELOAD OPTIONS. At the discretion of the Committee, Options
granted under the Plan may include a so-called "reload" feature pursuant to
which an optionee exercising an option by the delivery of a number of
shares of Stock in accordance with Section 5(a)(iv)(B) hereof would
automatically be granted an additional Option (with an exercise price equal
to the Fair Market Value of the Stock on the date the additional Option is
granted and with the same expiration date as the original Option being
exercised, and with such other terms as the Committee may provide) to
purchase that number of shares of Stock equal to the number delivered to
exercise the original Option.
(c) STOCK OPTIONS GRANTED TO NON-EMPLOYEE DIRECTORS.
<PAGE> 10
(i) AUTOMATIC GRANT OF OPTIONS.
(A) Each Non-Employee Director who is serving as a Director of the
Company on the fifth business day after the Effective Date shall
automatically be granted on such date a Non-Qualified Stock Option to
acquire 10,000 shares of Stock.
(B) Each Non-Employee Director who is serving as a Director of the
Company on the fifth business day after each annual meeting of
stockholders, beginning with the 1999 annual meeting of stockholders, shall
automatically be granted on such day a Non-Qualified Stock Option to
acquire 10,000 shares of Stock.
(C) The exercise price per share for the Stock covered by a Stock
Option granted under this Section 5(c) shall be equal to the Fair Market
Value of the Stock on the date the Stock Option is granted.
(D) The Committee, in its discretion, may grant additional
Non-Qualified Stock Options to Non-Employee Directors.
(ii) EXERCISE; TERMINATION.
(A) Except as provided in Section 16 or in the option agreement, no
Option granted under Section 5(c) may be exercised before the first
anniversary of the date upon which it was granted; provided, however, that
any Option so granted shall become exercisable upon the termination of
service of the Non-Employee Director because of Disability or death. No
Option issued under this Section 5(c) shall be exercisable after the
expiration of ten years from the date upon which such Option is granted.
(B) The rights of a Non-Employee Director in an Option granted under
Section 5(c) shall terminate on the specified expiration date; provided,
however, that if the Non-Employee Director ceases to be a Director for
Cause, the rights shall terminate immediately on the date on which he
ceases to be a Director.
(C) Any Option granted to a Non-Employee Director and outstanding on
the date of his death may be exercised by the legal representative or
legatee of the optionee for a period of six months from the date of death
or until the expiration of the stated term of the Option, if earlier.
(D) Options granted under this Section 5(c) may be exercised only by
written notice to the Company specifying the number of shares to be
purchased. Payment of the full purchase price of the shares to be purchased
may be made
<PAGE> 11
by one or more of the methods specified in Section 5(a)(iv). An optionee
shall have the rights of a shareholder only as to shares acquired upon the
exercise of a Stock Option and not as to unexercised Stock Options.
(d) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee, or by the optionee's legal representative or
guardian in the event of the optionee's incapacity. Notwithstanding the
foregoing, the Committee may permit the optionee to transfer his Non-Qualified
Stock Options to members of his immediate family, or to trusts for the benefit
of such family members, or to partnerships in which such family members are the
only partners, provided that the transferee agrees in writing with the Company
to be bound by all of the terms and conditions of this Plan, the applicable
option agreement and all insider trading rules of the Company.
SECTION 6. RESTRICTED STOCK AWARDS
(a) NATURE OF RESTRICTED STOCK AWARD. The Committee may grant Restricted
Stock Awards to any participant. A Restricted Stock Award is an Award entitling
the recipient to acquire, at no cost or for a purchase price determined by the
Committee, shares of Stock subject to such restrictions and conditions as the
Committee may determine at the time of grant ("Restricted Stock"). Conditions
may be based on continuing employment (or other business relationship) and/or
achievement of pre-established performance goals and objectives. In addition, a
Restricted Stock Award may be granted to an employee by the Committee in lieu of
a cash bonus due to such employee pursuant to any other plan of the Company.
(b) AUTOMATIC GRANT OF RESTRICTED STOCK TO INDEPENDENT DIRECTORS.
(i) Each Non-Employee Director who is serving as Director of the
Company on the fifth business day after the Effective Date shall
automatically be granted on such date 3,000 shares of Restricted Stock;
provided, however, that a Non-Employee Director who has not served as a
director of the Company or Avalon Properties, Inc. prior to the Effective
Date shall automatically be granted on such date 2,000 shares of Restricted
Stock. Except as otherwise provided in the award agreement, such shares of
Restricted Stock shall vest twenty percent (20%) on the date of issuance
and twenty percent (20%) on each of the first four anniversaries of the
date of issuance.
(ii) Each Non-Employee Director who is serving as a Director of the
Company on the fifth business day after each annual meeting of
stockholders, beginning with the 1999 Annual Meeting of Stockholders, shall
automatically be granted on such day 2,000 shares of Restricted Stock.
Except as otherwise provided in the award agreement, such shares of
Restricted Stock shall vest twenty percent (20%) on the date of issuance
and twenty percent (20%) on each of the first four anniversaries of the
date of issuance.
<PAGE> 12
(iii) Each Non-Employee Director may, pursuant to the provisions of
Section 7(b), elect to receive Deferred Stock instead of Restricted Stock
provided in this Section 6(b). Any Deferred Stock granted in lieu of
Restricted Stock shall be subject to the same vesting requirements
applicable to the Restricted Stock.
(b) ACCEPTANCE OF AWARD. To the extent applicable, a participant who is
granted a Restricted Stock Award shall have no rights with respect to such Award
unless the participant shall have accepted the Award within 60 days (or such
shorter time period as the Committee may specify) following the award date by
making payment to the Company, if required, in cash, by certified or bank check
or other instrument or form of payment acceptable to the Committee in an amount
equal to the specified purchase price, if any, of the shares covered by the
Award and by executing and delivering to the Company a written instrument that
sets forth the terms and conditions of the Restricted Stock in such form as the
Committee shall determine.
(c) RIGHTS AS A SHAREHOLDER. Upon complying with Section 6(b) above, a
participant shall have all the rights of a shareholder with respect to the
Restricted Stock including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Stock Award. Unless the
Committee shall otherwise determine, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares
are vested as provided in Section 6(e) below.
(d) RESTRICTIONS. Except as provided in an individual agreement or as
otherwise determined by the Committee, shares of Restricted Stock may not be
sold, assigned, transferred, pledged or otherwise encumbered or disposed of.
Except as provided in an individual agreement or as otherwise determined by the
Committee, in the event of termination of employment (or other business
relationship) by the Company and its Subsidiaries for any reason (including
death, retirement, Disability, and for Cause), the Company shall have the right,
at the discretion of the Committee, to repurchase shares of Restricted Stock
with respect to which conditions have not lapsed at their purchase price, or to
require forfeiture of such shares to the Company if acquired at no cost, from
the participant or the participant's legal representative. The Company must
exercise such right of repurchase or forfeiture not later than the 90th day
following such termination of employment (or other business relationship),
unless otherwise specified in the written instrument evidencing the Restricted
Stock Award.
(e) VESTING OF RESTRICTED STOCK. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company's right of repurchase or forfeiture shall
lapse. Except as provided in Section 16, the vesting period for Restricted Stock
shall be at least three years, except that in the case of Restricted Stock that
becomes transferable and no longer subject to forfeiture upon the attainment of
such pre-established performance goals, objectives and other conditions, the
vesting period shall be at least one year. Subsequent to such date or dates
and/or the attainment of such pre-established performance goals, objectives and
other conditions, the shares on which all
<PAGE> 13
restrictions have lapsed shall no longer be Restricted Stock and shall be deemed
"vested."
(f) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
SECTION 7. DEFERRED STOCK AWARDS
(a) NATURE OF DEFERRED STOCK AWARDS. A Deferred Stock Award is an Award of
phantom stock units to a participant, subject to restrictions and conditions as
the Committee may determine at the time of grant. Conditions may be based on
continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives. The grant of a Deferred Stock
Award is contingent on the participant executing the Deferred Stock Award
agreement. The terms and conditions of each such agreement shall be determined
by the Committee, and such terms and conditions may differ among individual
Awards and participants. At the end of the deferral period, the Deferred Stock
Award, to the extent vested, shall be paid to the participant in the form of
shares of Stock. (b) Election to Receive Deferred Stock Awards in Lieu of
Compensation. The Committee may, in its sole discretion, permit a participant,
including a Non-Employee Director, to elect to receive a portion of the cash
compensation or Restricted Stock Award otherwise due to such participant in the
form of a Deferred Stock Award. Any such election shall be made in writing and
shall be delivered to the Company no later than the date specified by the
Committee and in accordance with rules and procedures established by the
Committee. The Committee shall have the sole right to determine whether and
under what circumstances to permit such elections and to impose such limitations
and other terms and conditions thereon as the Committee deems appropriate.
(c) RIGHTS AS A STOCKHOLDER. During the deferral period, a participant
shall have no rights as a stockholder; provided, however, that the participant
may be credited with Dividend Equivalent Rights with respect to the phantom
stock units underlying his Deferred Stock Award, subject to such terms and
conditions as the Committee may determine.
(d) RESTRICTIONS. A Deferred Stock Award may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of during the deferral
period.
(e) TERMINATION. Except as may otherwise be provided by the Committee
either in the Award, employment or other agreement or, subject to Section 14
below, in writing after the Award agreement is issued, a participant's right in
all Deferred Stock Awards that have not vested shall automatically terminate
upon the participant's termination of employment (or cessation of business
relationship) with the Company and its Subsidiaries for any reason.
SECTION 8. UNRESTRICTED STOCK AWARDS
The Committee may, in its sole discretion, grant (or sell at a purchase
price determined by the Committee) an Unrestricted Stock Award to any
participant which will entitle such
<PAGE> 14
participant to receive shares of Stock free of any restrictions under the Plan
("Unrestricted Stock"). Unrestricted Stock Awards may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such participant.
SECTION 9. PERFORMANCE SHARE AWARDS
(a) NATURE OF PERFORMANCE SHARES. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any
participants, including those who qualify for awards under other performance
plans of the Company. The Committee in its sole discretion shall determine
whether and to whom Performance Share Awards shall be made, the performance
goals applicable under each such Award, the periods during which performance is
to be measured, and all other limitations and conditions applicable to the
awarded Performance Shares; provided, however, that the Committee may rely on
the performance goals and other standards applicable to other performance unit
plans of the Company in setting the standards for Performance Share Awards under
the Plan.
(b) RESTRICTIONS ON TRANSFER. Performance Share Awards and all rights with
respect to such Awards may not be sold, assigned, transferred, pledged or
otherwise encumbered.
(c) RIGHTS AS A SHAREHOLDER. A participant receiving a Performance Share
Award shall have the rights of a shareholder only as to shares actually received
by the participant under the Plan and not with respect to shares subject to the
Award but not actually received by the participant. A participant shall be
entitled to receive a stock certificate evidencing the acquisition of shares of
Stock under a Performance Share Award only upon satisfaction of all conditions
specified in the written instrument evidencing the Performance Share Award (or
in a performance plan adopted by the Committee).
(d) TERMINATION. Except as may otherwise be provided by the Committee in
the Award, employment or other agreement, a participant's rights in all
Performance Share Awards shall automatically terminate upon the participant's
termination of employment (or other business relationship) by the Company and
its Subsidiaries for any reason (including death, Disability and for Cause).
(e) ACCELERATION, WAIVER, ETC. At any time prior to or upon the
participant's termination of employment (or other business relationship) by the
Company and its Subsidiaries, the Committee may in its sole discretion
accelerate, waive or, subject to Section 14, amend any or all of the goals,
restrictions or conditions imposed under any Performance Share Award.
SECTION 10. QUALIFIED PERFORMANCE-BASED AWARDS TO COVERED EMPLOYEES
<PAGE> 15
Notwithstanding anything to the contrary contained herein, if any
Restricted Stock Award, Deferred Stock Award or Performance Share Award granted
to a Covered Employee is intended to qualify as "performance-based compensation"
under Section 162(m) of the Code and the regulations promulgated thereunder (a
"Performance-based Award"), such Award shall comply with the provisions set
forth below:
(a) PERFORMANCE CRITERIA. The performance criteria used in performance
goals governing Performance-based Awards granted to Covered Employees may
include any or all of the following: (i) the Company's return on equity, assets,
capital or investment, (ii) pre-tax or after-tax profit levels of the Company or
any Subsidiary, a division, an operating unit or a business segment of the
Company, or any combination of the foregoing; (iii) cash flow, funds from
operations or similar measure; (iv) total shareholder return; (v) changes in the
market price of the Stock; (vi) market share; or (vii) earnings per share.
(b) GRANT OF QUALIFIED PERFORMANCE-BASED AWARDS. With respect to each
Performance-based Award granted to a Covered Employee, the Committee shall
select, within the first 90 days of a Performance Cycle (or, if shorter, within
the maximum period allowed under Section 162(m) of the Code) the performance
criteria for such grant, and the achievement targets with respect to each
performance criterion (including a threshold level of performance below which no
amount will become payable with respect to such Award). Each Performance-based
Award will specify the amount payable, or the formula for determining the amount
payable, upon achievement of the various applicable performance targets. The
performance criteria established by the Committee may be (but need not be)
different for each Performance Cycle and different goals may be applicable to
Performance-based Awards to different Covered Employees.
(c) PAYMENT OF QUALIFIED PERFORMANCE-BASED AWARDS. Following the completion
of a Performance Cycle, the Committee shall meet to review and certify in
writing whether, and to what extent, the performance criteria for the
Performance Cycle have been achieved and, if so, to also calculate and certify
in writing the amount of the Qualified Performance-based Awards earned for the
Performance Cycle. The Committee shall then determine the actual size of each
Covered Employee's Qualified Performance-based Award, and, in doing so, may
reduce or eliminate the amount of the Qualified Performance-based Award for a
Covered Employee if, in its sole judgment, such reduction or elimination is
appropriate.
(d) MAXIMUM AWARD PAYABLE. The maximum Qualified Performance-based Award
payable to any one Covered Employee under the Plan for a Performance Cycle is
200,000 shares of Stock (subject to adjustment as provided in Section 3(b)
hereof).
SECTION 11. DIVIDEND EQUIVALENT RIGHTS
(a) DIVIDEND EQUIVALENT RIGHTS. A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash dividends that would
have been paid on the shares of Stock specified in the Dividend Equivalent Right
(or other award to which it
<PAGE> 16
relates) if such shares had been issued to and held by the recipient. A Dividend
Equivalent Right may be granted hereunder to any participant as a component of
another Award or as a freestanding award. The terms and conditions of Dividend
Equivalent Rights shall be specified in the grant. Dividend equivalents credited
to the holder of a Dividend Equivalent Right may be paid currently or may be
deemed to be reinvested in additional shares of Stock, which may thereafter
accrue additional equivalents. Any such reinvestment shall be at Fair Market
Value on the date of reinvestment or such other price as may then apply under a
dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent
Rights may be settled in cash or shares of Stock or a combination thereof, in a
single installment or installments. A Dividend Equivalent Right granted as a
component of another Award may provide that such Dividend Equivalent Right shall
be settled upon exercise, settlement, or payment of, or lapse of restrictions
on, such other award, and that such Dividend Equivalent Right shall expire or be
forfeited or annulled under the same conditions as such other award. A Dividend
Equivalent Right granted as a component of another Award may also contain terms
and conditions different from such other award.
(b) INTEREST EQUIVALENTS. Any Award under this Plan that is settled in
whole or in part in cash on a deferred basis may provide in the grant for
interest equivalents to be credited with respect to such cash payment. Interest
equivalents may be compounded and shall be paid upon such terms and conditions
as may be specified by the grant.
(c) TERMINATION. Except as may otherwise be provided by the Committee in
the Award, employment or other agreement, a participant's rights in all Dividend
Equivalent Rights or interest equivalents shall automatically terminate upon the
participant's termination of employment (or cessation of business relationship)
with the Company and its Subsidiaries for any reason.
SECTION 12. TAX WITHHOLDING
(a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.
(b) PAYMENT IN SHARES. Subject to approval by the Committee, a participant
may elect to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares of Stock to be
issued pursuant to any Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the
withholding amount due, (ii) transferring to the Company shares of Stock owned
by the participant with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due, or (iii)
in a combination of (i) and (ii).
<PAGE> 17
SECTION 13. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment (or other business relationship):
(a) a transfer to the employment (or other business relationship) of the
Company from a Subsidiary or from the Company to a Subsidiary, or from one
Subsidiary to another Subsidiary; or
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment (or other business relationship) is guaranteed either by a statute
or by contract or under the policy pursuant to which the leave of absence was
granted or if the Committee otherwise so provides in writing.
SECTION 14. AMENDMENTS AND TERMINATION
The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award for the purpose of
satisfying changes in law or for any other lawful purpose, but no such action
shall (a) adversely affect rights under any outstanding Award without the
holder's written consent or (b) without the prior approval of the Company's
stockholders, reduce the exercise price of or otherwise reprice, including
through replacement grants, any outstanding Stock Option. The Committee may also
amend any outstanding Award that is not a Stock Option to reduce the exercise or
purchase price in order to fulfill a legitimate corporate purpose (e.g., to
retain a key employee) or to maintain the value of such outstanding Award under
circumstances beyond the control of the Company's management, but in no event
shall such amendments be made to outstanding Awards representing greater than
10% of the total number of shares of Stock authorized for issuance pursuant to
the Plan. To the extent required by the Code to ensure that Options that have
been granted hereunder as Incentive Stock Options continue to qualify as
Incentive Stock Options, Plan amendments shall be subject to approval by the
Company's stockholders.
SECTION 15. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
SECTION 16. CHANGE OF CONTROL PROVISIONS
<PAGE> 18
Notwithstanding anything in this Plan to the contrary, upon the occurrence
of a Change of Control as defined in this Section 16:
(a) Each Stock Option shall automatically become fully exercisable.
(b) Restrictions and conditions on Restricted Stock Award, Deferred Stock
Awards and Performance Share Awards shall automatically be deemed waived, and
the recipients of such Awards shall become entitled to receipt of the Stock
subject to such Awards unless the Committee shall otherwise expressly provide at
the time of grant.
(c) "Change of Control" shall mean the occurrence of any one or more of the
following events:
(i) Any individual, entity or group (a "Person") within the meaning of
Sections 13(d) and 14(d) of the Act (other than the Company, any
corporation, partnership, trust or other entity controlled by the Company
(a "Subsidiary"), or any trustee, fiduciary or other person or entity
holding securities under any employee benefit plan or trust of the Company
or any of its Subsidiaries), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Act) of
such Person, becomes the "beneficial owner" (as such term is defined in
Rule 13d-3 under the Act) of securities of the Company representing 30% or
more of the combined voting power of the Company's then outstanding
securities having the right to vote generally in an election of the
Company's Board ("Voting Securities"), other than as a result of (A) an
acquisition of securities directly from the Company or any Subsidiary or
(B) an acquisition by any corporation pursuant to a reorganization,
consolidation or merger if, following such reorganization, consolidation or
merger the conditions described in clauses (A), (B) and (C) of subparagraph
(iii) of this Section 16(c) are satisfied; or
(ii) Individuals who, as of the Effective Date, constitute the
Company's Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided, however, that any
individual becoming a director of the Company subsequent to the Effective
Date (excluding, for this purpose, (A) any such individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of members of the Board of Directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board, including by reason of agreement
intended to avoid or settle any such actual or threatened contest or
solicitation, and (B) any individual whose initial assumption of office is
in connection with a reorganization, merger or consolidation, involving an
unrelated entity), whose election or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
persons then comprising Incumbent Directors shall for purposes of this Plan
be considered an Incumbent Director;
<PAGE> 19
(iii) The approval by the shareholders of a reorganization, merger or
consolidation of the Company, or, if consummation of such reorganization,
merger or consolidation is subject, at the time of such approval by
shareholders, to the consent of any government or governmental agency,
obtaining such consent (either explicitly or implicitly by consummation),
unless, following such reorganization, merger or consolidation, (A) more
than 50% of, respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors
will beneficially own, directly or indirectly, by all or substantially all
of the individuals and entities who were the beneficial owners,
respectively, of the outstanding Voting Securities immediately prior to
such reorganization, merger or consolidation, (B) no Person (excluding the
Company, any employee benefit plan (or related trust) of the Company, a
Subsidiary or the corporation resulting from such reorganization, merger or
consolidation or any subsidiary thereof, and any Person beneficially
owning, immediately prior to such reorganization, merger or consolidation,
directly or indirectly, 30% or more of the outstanding Voting Securities),
will beneficially own, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors, and
(C) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation
will have been members of the Incumbent Board at the time of the execution
of the initial agreement providing for such reorganization, merger or
consolidation;
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company; or
(v) The approval by the shareholders of the sale, lease, exchange or
other disposition of all or substantially all of the assets of the Company,
or, if consummation of such sale, lease, exchange or other disposition is
subject, at the time of such approval by shareholders, to the consent of
any government or governmental agency, obtaining such consent (either
explicitly or implicitly by consummation), other than to a corporation,
with respect to which following such sale, lease, exchange or other
disposition (A) more than 50% of, respectively, the then outstanding shares
of common stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors will beneficially own, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners of the outstanding Voting Securities immediately
prior to such sale, lease, exchange or other disposition, (B) no Person
(excluding the Company and any employee benefit plan (or related trust) of
the Company or a Subsidiary or such corporation or a subsidiary thereof and
any Person beneficially owning, immediately prior to such sale, lease,
exchange or other disposition, directly or indirectly, 30% or more of the
outstanding Voting Securities),
<PAGE> 20
will beneficially own, directly or indirectly, 30% or more of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors and (C) at least a majority of the members of the board of
directors of such corporation will have been members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board providing for such sale, lease, exchange or other disposition of
assets of the Company.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of this Agreement solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Voting Securities outstanding, increases the proportionate voting power
represented by the Voting Securities beneficially owned by any Person to 30% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any Person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Stock or
other Voting Securities (other than pursuant to a stock split, stock dividend or
similar transaction), then a "Change of Control" shall be deemed to have
occurred for purposes of this Agreement.
SECTION 17. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee may
require each person acquiring shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop-orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.
(b) DELIVERY OF STOCK CERTIFICATES. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases. The adoption of the Plan and
the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 18. EFFECTIVE DATE OF PLAN
This Plan was amended and restated as of April 13, 1998 and subsequently
amended on
<PAGE> 21
July 24, 1998.
SECTION 19. GOVERNING LAW
This Plan shall be governed by Maryland law except to the extent such law
is preempted by federal law.
DATE OF APPROVAL OF INITIAL PLAN BY
SHAREHOLDERS: February 15, 1994
DATE OF APPROVAL OF FIRST AMENDED AND
RESTATED PLAN BY BOARD OF DIRECTORS: August 28, 1996
DATE OF APPROVAL OF FIRST AMENDED AND
RESTATED PLAN BY SHAREHOLDERS: April 25, 1997
DATE OF APPROVAL OF SECOND AMENDED AND
RESTATED PLAN BY BOARD OF DIRECTORS: February 26, 1998
DATE OF APPROVAL OF THIRD AMENDED AND
RESTATED PLAN BY BOARD OF DIRECTORS: April 13, 1998
DATE OF APPROVAL OF THIRD AMENDED AND
RESTATED PLAN BY SHAREHOLDERS: June 4, 1998
DATE OF APPROVAL OF AMENDMENTS TO THIRD
AMENDED AND RESTATED PLAN BY BOARD OF
DIRECTORS: July 24, 1998