FORMS OF AMENDED AND RESTATED STOCK OPTION AGREEMENTS EXHIBIT 10(m)
AMENDED AND RESTATED
INCENTIVE STOCK OPTION AGREEMENT
PURSUANT TO THE
21ST CENTURY INSURANCE GROUP
(FORMERLY 20TH CENTURY INDUSTRIES)
1995 STOCK OPTION PLAN
This Amended and Restated Incentive Stock Option Agreement ("Option
Agreement") is made and entered into as of the Date of Grant shown on the
attached Notice of Grant of Stock Options and Option Agreement (The "Notice of
Grant") by and between 21st Century Insurance Group, a California corporation,
(the "Company") and the person named on the Notice of Grant (the "Optionee").
WHEREAS, Optionee is an employee of the Company and/or one or more of its
"subsidiary corporations," as such term is defined in Section 424(f), of the
Internal Revenue Code (the "Code");
WHEREAS, pursuant to the Company's 1995 Stock Option Plan (the "1995
Plan"), the committee of the Board of Directors of the Company administering the
1995 Plan (the "Committee") has approved the grant to Optionee of an option to
purchase shares of the Common Stock of the Company (the "Common Shares"), on the
terms and conditions set forth herein; and
WHEREAS, the parties hereto desire to amend and restate the original
Incentive Stock Option Agreement the parties entered into ( the "Original
Agreement") in order to ensure it complies with the Section 402 of the
Xxxxxxxx-Xxxxx Act of 2002, which generally prohibits the Company from directly
or indirectly extending or maintaining credit, arranging for the extension of
credit or renewing an extension of credit in the form of a personal loan to or
for its directors and executive officers.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereby agree to amend and restate the
Original Agreement as follows:
1. GRANT OF OPTION; CERTAIN TERMS AND CONDITIONS. The Company hereby
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grants to Optionee, and Optionee hereby accepts, as of the Date of Grant, an
option (the "Option") to purchase the number of Common Shares indicated on the
Notice of Grant (the "Option Shares") at the Exercise Price per share indicated
on the Notice of Grant. The Option shall expire at 5:00 p.m., prevailing Pacific
Time, on the Expiration Date indicated on the Notice of Grant and shall be
subject to all of the terms and conditions set forth in the 1995 Plan and this
Option Agreement.
2. INCENTIVE STOCK OPTION; INTERNAL REVENUE CODE REQUIREMENTS. The
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Option is intended to qualify as an incentive stock option under Section 422 of
the Code.
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3. ACCELERATION AND TERMINATION OF OPTION.
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(a) Termination of Employment.
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(i) Retirement. In the event that Optionee shall cease to be an
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employee of the Company or any "subsidiary corporation" (as defined above)
(such event shall be referred to herein as "Termination of Employment") by
reason of retirement in accordance with the Company's then-current
retirement practices, then the Option shall fully vest with respect to all
Option Shares upon the date of such Termination of Employment and shall
terminate no later than the Expiration Date.
(ii) Death or Permanent Disability. If the Termination of
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Employment occurs by reason of the death or Permanent Disability (as
hereinafter defined) of Optionee, then the Option shall fully vest with
respect to all Option Shares upon the date of such Termination of
Employment, shall be exercisable by Optionee or, in the event of death, the
person or persons to whom Optionee's rights under the Option shall have
passed by will or by the applicable laws of descent or distribution, and
shall terminate on the first anniversary of the date of such Termination of
Employment. "Permanent Disability" shall mean the inability to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than twelve (12) months. The Optionee shall not be deemed to have a
Permanent Disability until proof of the existence thereof shall have been
furnished to the Committee in such form and manner, and at such times, as
the Committee may require. Any determination by the Committee that Optionee
does or does not have a Permanent Disability shall be final and binding
upon the Company and Optionee.
(iii) Other Termination. If the Termination of Employment occurs
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for any reason other than those enumerated in (i) through (ii) of this
Section 3(a), then (A) the portion of the Option that has not vested on or
prior to the date of such Termination of Employment shall terminate on such
date and (B) the remaining vested portion of the Option shall terminate as
of the Expiration Date or the three (3) month anniversary of the date of
such Termination of Employment.
(b) Death Following Termination of Employment. Notwithstanding
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anything to the contrary in this Option Agreement, if Optionee shall die at any
time after the Termination of Employment and prior to the Expiration Date, then,
unless the Termination of Employment had occurred for cause, the remaining
vested but unexercised portion of the Option shall terminate on the earlier of
the Expiration Date or the first anniversary of the date of such death.
(c) Acceleration of Option. The Option shall become fully exercisable
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immediately prior to a Change in Control. A Change in Control shall be deemed to
take place upon the occurrence of any of the following:
(i) Any merger or consolidation of the Company with or into any
other person, as the result of which the holders of the Company's Common
Shares immediately prior to the transaction shall, on the basis of such
holdings prior to such transaction, hold less than 50% of the total
outstanding voting stock of the surviving corporation immediately upon
completion of the transaction.
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(ii) Any sale or exchange of all or substantially all of the
property and assets of the Company.
(iii) Any change in a majority of the Board of Directors of the
Company occurring within a period of two years or less, such that a
majority of the Board of Directors is comprised of individuals who are not
"Continuing Directors". For purposes of the foregoing, a " Continuing
Director" shall be a director (A) who was in office at the commencement of
such period of two years or (B) was elected subsequent to the commencement
of such period with the approval of not less than a majority of those
directors referred to in clause (A) who are then in office. Any director
meeting the qualifications of clause (B) of the previous sentence shall,
with respect to further determinations after the date of such director's
election, be deemed a director meeting the qualifications of clause (A) of
the previous sentence.
(iv) Any "person" (as defined in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
becoming the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of a majority of the Company's
outstanding Common Stock.
(v) the liquidation or dissolution of the Company.
(vi) any other transaction or reorganization similar to the
foregoing which in the opinion of the Committee constitutes a "change of
control" of the nature described in subparagraphs (i) through (v) hereof.
The parties agree this Section 3(c) hereof does not apply to any action
taken by American International Group, Inc. and/or its subsidiaries ("AIG") to
become the sole shareholder or shareholders of the Company; provided, however,
that in the event of an offer by AIG to acquire all outstanding shares of the
Company that it does not yet own (an "AIG Offer"), any Option subject to this
Agreement which would vest within one year from the date of an AIG Offer shall
immediately vest in favor of Employee. Any remaining Option(s) granted to the
Employee shall be terminated as of the date of the AIG Offer.
4. ADJUSTMENTS. In the event that the Common Shares are increased,
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decreased or exchanged for or converted into cash, property or a different
number or kind of securities, or if cash, property or securities are distributed
in respect of such outstanding Common Shares, in either case as a result of a
reorganization, merger, consolidation, recapitalization, restructuring,
reclassification, partial or complete liquidation, stock split, reverse stock
split or the like, or if substantially all of the property and assets of the
Company are sold, then, unless the terms of such transaction shall provide
otherwise, the Option then outstanding shall thereafter be exercisable (on
substantially the same terms and subject to substantially the same conditions as
were applicable under such Option) for the number of shares or other securities
or cash or other property as the holder of such Option would have been entitled
to receive pursuant to such transaction had such holder exercised such Option in
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full immediately prior to such transaction. The Committee shall make appropriate
and proportionate adjustments in the number and type of shares or other
securities or cash or other property that may be acquired upon the exercise in
full of the Option; provided, however, that any such adjustments in the Option
shall be made without changing the aggregate Exercise Price of the then
unexercised portion of the Option; provided further that no adjustment shall be
made to the number of Common Shares that may be acquired to the extent such
adjustment would result in the Option being treated as other than an Incentive
Stock Option.
5. EXERCISE.
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(a) In general. The Option shall be exercisable during Optionee's
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lifetime only by Optionee or by his or her guardian or legal representative, and
after Optionee's death only by the person or entity entitled to do so under
Optionee's last will and testament or applicable intestate law. The Option may
only be exercised by the delivery to the Company of a written notice of such
exercise pursuant to the notice procedures set forth in Section 7 hereof, which
notice shall specify the number of Option Shares to be purchased, which for any
single exercise may not be fewer than 100 Option Shares or, if smaller, the
number of Option Shares then vested and exercisable, (the "Purchased Shares")
and the aggregate Exercise Price for such shares (the "Exercise Price"),
together with payment in full of such aggregate Exercise Price and any
Withholding Liability (as hereinafter defined) in cash.
(b) Limitation on Exercise. Notwithstanding any other provision of
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this Option Agreement, Optionee shall not be entitled to benefit from the Option
granted hereunder and shall not be entitled to exercise any rights with respect
to this Option if such grant or exercise would violate any provision of the
charter of the Company. Pursuant to the 1995 Plan, the grant or exercise of an
Option in violation of this Section 5(b) shall be void ab initio and shall not
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be effective to convey any rights to Optionee. As a condition to exercise of
this Option, Optionee will be required to certify to the Company that the
acquisition of Common Shares pursuant to the exercise of this Option will not
result in a violation of any provision of the charter of the Company. If this
Option (or any portion thereof) is not exercisable by virtue of this Section
5(b), then such exercise shall be deferred until the earlier of such time, if
any, that Optionee becomes entitled to exercise this Option or the Expiration
Date. This Section 5(b) shall not result in an extension of the Expiration Date.
(c) Payment. Notwithstanding any provision of this Option Agreement
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to the contrary:
(i) payment of the aggregate Exercise Price for such shares and
the Optionee's tax withholding obligation, if any, with
respect to such shares shall be due the date the shares of
Common Shares underlying the Option are delivered; and
(ii) in no event shall the Company issue or deliver the Option
Shares before the Company receives payment for the Option
Shares pursuant to this Section 5.
6. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated to
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withhold an amount on account of any federal, state, or local income tax imposed
as a result of the exercise of an option granted under this Plan (such amount
will be referred to herein as the "Withholding
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Liability"), the Optionee shall pay the Withholding Liability to the Company in
full in cash on the date the shares of Common Shares underlying the Option are
delivered, and the Company shall delay issuing the Common Shares pursuant to
such exercise until it receives the Withholding Liability from the Optionee.
7. NOTICES. Any notice given to the Company shall be addressed to the
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Company at 0000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000,
Attention: Corporate Secretary, or at such other address as the Company may
hereafter designate in writing to Optionee. Any notice given to Optionee shall
be sent to the address set forth below Optionee's signature hereto, or at such
other address as Optionee may hereafter designate in writing to the Company. Any
such notice shall be deemed duly given when made by hand delivery, sent by
overnight courier, sent by prepaid certified or registered mail, or transmitted
by facsimile.
8. STOCK EXCHANGE REQUIREMENTS; APPLICABLE LAWS. Notwithstanding anything
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to the contrary in this Option Agreement, no shares of stock purchased upon
exercise of the Option, and no certificate representing all or any part of such
shares, shall be issued or delivered if (a) such shares have not been admitted
to listing upon official notice of issuance of each stock exchange upon which
shares of that class are then listed or (b) in the opinion of counsel to the
Company, such issuance or delivery would cause the Company to be in violation of
or to incur liability under any federal, state or other securities law, or any
requirement of any stock exchange listing agreement to which the Company is a
party, or any other requirement of law or of any administrative or regulatory
body having jurisdiction over the Company.
9. NONTRANSFERABILITY. Neither the Option nor any interest therein may be
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sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred
in any manner other than by will or the laws of descent and distribution.
10. 1995 PLAN. THE OPTION IS GRANTED PURSUANT TO THE 1995 PLAN, AS IN
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EFFECT ON THE DATE OF GRANT, AND IS SUBJECT TO ALL THE TERMS AND CONDITIONS OF
THE 1995 PLAN, AS THE SAME MAY BE AMENDED FROM TIME TO TIME; PROVIDED, HOWEVER,
THAT NO SUCH AMENDMENT SHALL DEPRIVE OPTIONEE, WITHOUT HIS OR HER CONSENT, OF
THE OPTION OR OF ANY OF OPTIONEE'S RIGHTS UNDER THIS OPTION AGREEMENT. THE
INTERPRETATION AND CONSTRUCTION BY THE COMMITTEE OF THE 1995 PLAN, THIS OPTION
AGREEMENT, THE OPTION AND SUCH RULES AND REGULATIONS AS MAY BE ADOPTED BY THE
COMMITTEE FOR THE PURPOSE OF ADMINISTERING THE 1995 PLAN SHALL BE FINAL AND
BINDING UPON OPTIONEE. UNTIL THE OPTION SHALL EXPIRE, TERMINATE OR BE EXERCISED
IN FULL, THE COMPANY SHALL, UPON WRITTEN REQUEST, SEND A COPY OF THE 1995 PLAN,
IN ITS THEN CURRENT FORM, TO OPTIONEE OR ANY OTHER PERSON OR ENTITY THEN
ENTITLED TO EXERCISE THE OPTION.
11. FRACTIONAL SHARES. The Company shall not be required to issue a
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fraction of a Common Share in connection with the exercise of the Option. In any
case where the Optionee would be entitled to receive a fraction of a Common
Share upon the exercise of the Option, the Company shall instead, upon the
exercise of the Option, issue the largest whole number of Common Shares
purchasable upon exercise of the Option, and pay to the Optionee in cash the
Fair Market Value (as determined by the Committee) of such fraction of a Common
Share at the time of exercise of the Option.
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12. STOCKHOLDER RIGHTS. No person or entity shall be entitled to vote,
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receive dividends or be deemed for any purpose the holder of any Option Shares
until the Option shall have been duly exercised to purchase such Option Shares
in accordance with the provisions of this Option Agreement.
13. EMPLOYMENT RIGHTS. No provision of this Option Agreement or of the
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Option granted hereunder shall (a) confer upon Optionee any right to continue in
the employ of the Company or any of its subsidiaries, (b) affect the right of
the Company and each of its subsidiaries to terminate the employment of
Optionee, with or without cause, or (c) confer upon Optionee any right to
participate in any employee welfare or benefit plan or other program of the
Company or any of its subsidiaries other than the 1995 Plan.
14. GOVERNING LAW. This Option Agreement and the Option granted hereunder
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shall be governed by and construed and enforced in accordance with the laws of
the State of California.
15. ENTIRE AGREEMENT. This Option Agreement (including the Notice of
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Grant, into which it is incorporated by reference) constitutes the entire
agreement of the parties with respect to the matters covered herein and
supersedes all prior written or oral agreements or understandings of the parties
with respect to the matters covered herein. Optionee acknowledges that he or she
has no right to receive any additional options unless and until such time, if
any, that the Committee, in its sole discretion, may approve the grant thereof,
and that the Company has not made any representation to the Optionee regarding
future or additional option grants, or any other option related matters. The
grant of any options must be in writing.
16. TAX CONSEQUENCES. The tax consequences of the Option granted under
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this Option Agreement are complicated. THE OPTIONEE IS ADVISED TO CONSULT THE
OPTIONEE'S PERSONAL TAX ADVISOR WITH REGARD TO ALL CONSEQUENCES ARISING FROM THE
OPTION GRANTED UNDER THIS OPTION AGREEMENT AND THE EXERCISE THEREOF.
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