THE WMF GROUP, LTD.
NON-EMPLOYEE DIRECTOR AWARD AGREEMENT
This Non-Employee Director Award Agreement (the "Agreement") is made
and entered into as of the 8th day of December, 1997, by and between The WMF
Group, Ltd. (hereinafter referred to as the "Company") and Capricorn Investors
II, L.P. (hereinafter referred to as the "Participant"). The Options specified
herein have a grant date of December 8, 1997 (the "Grant Date").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the Company and the Participant, and pursuant
to and subject to all the terms and conditions set forth herein and in that Key
Employee Incentive Plan adopted by the Company as of December 5, 1997 and all
amendments thereto (the "Plan"), a copy of which Plan is attached to this
Agreement as EXHIBIT A, and which Exhibit and all provisions thereof are
incorporated into this Agreement as an integral part thereof, the Company
desires to grant to the Participant, and the Participant desires to accept, an
option to purchase 5,000 shares of the Common Shares of the Company as
specifically provided in this Agreement (the "Option Shares"), and, accordingly,
the Company and the Participant agree upon the terms and provisions specified in
this Agreement.
Unless specifically defined in this Agreement, all capitalized words
and phrases in this Agreement shall have the meaning ascribed to them in the
Plan.
1. GRANT AND ACCEPTANCE OF OPTION; VESTING
(a) Subject to the terms and provisions of this Agreement and the Plan,
the Company has granted to Participant the right and option to purchase Five
Thousand (5,000) shares of Common Shares of the Company at a price of $9.15 per
share, the fair market value of the Option Shares on the Grant Date. Participant
hereby accepts the grant and agrees to all of the terms and provisions of this
Agreement and of the Plan. Unless otherwise specifically provided in this
Agreement, the right and option granted herein shall vest and be exercisable by
the Participant six (6) months after the Grant Date.
(b) The specific option (hereinafter referred to as the "Option") which
is granted to Participant is intended to be treated for income tax purposes as a
non-qualified stock option. The granting of a non-qualified stock option will
not be treated as a taxable event so long as the Option does not have an
ascertainable fair market value. Participant acknowledges that when the Option
is exercised, the Participant may recognize income if and to the extent the fair
market value of the Option Shares at the time the Option is exercised is greater
than the Option price. The Option is granted in connection with Participant's
service as a Non-Employee Director.
2. PERIOD OF OPTION; CERTAIN LIMITATIONS ON RIGHT TO EXERCISE
(a) Unless terminated earlier as otherwise provided in this Agreement,
the Option shall expire at 5:00 PM, Washington, D.C. time, on the tenth (10th)
anniversary of the date of this Agreement, viz., December 8, 2007 (the "Option
Term"). The period of the Option may be reduced only as provided in this
Agreement and in the Plan.
(b) Nothing in this Agreement shall have the effect of accelerating the
six-month period during which Director Options are not exercisable..
(c) If, for any reason other than death or permanent and total
disability, a Non-Employee director ceases to be a member of the Board, each
Director Option held by that Non-Employee Director on the date that the
Non-Employee Director ceases to be a member of the Board may be exercised in
whole or in part at any time within one year after the date of such termination
or until the expiration of the Director Option, whichever is earlier.
(d) If a Non-Employee Director dies or becomes permanently and totally
disabled (within the meaning of Section 422(c)(6) of the Code) while a member of
the Board (or within the period that the Director Options remain exercisable
after the Non-Employee Director ceases to be a member of the Board), each
Director Option then held by that Non-Employee Director may be exercised, in
whole or in part, by the Non-Employee Director, by the Non-Employee Director's
personal representative or by the person to whom the Non-Employee Director
transferred the Director Option by will or the laws of descent and distribution,
or approved assignment, at any time within two years after the date of death or
permanent and total disability of the Non-Employee Director or until the
expiration date of the Director Option, whichever is earlier.
3. LISTING AND REGISTRATION OF SHARES
If at any time the Committee, in its discretion, shall determine that
it is necessary or desirable to list, register or qualify the Option Shares upon
any securities exchange or under any state or federal law, or to obtain the
consent or approval of any governmental regulatory body, as a condition of, or
in connection with, the granting of the Option or the issue or purchase of
shares hereunder, the Option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
4. RIGHTS AS A SHAREHOLDER
Neither Participant nor Participant's legal representative shall have
any rights as a shareholder of the Company with respect to any Option Shares
until evidence of ownership is properly issued for those shares.
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5. AMENDMENT OF OPTION AGREEMENT
This Agreement may be amended by the Company or the Committee at any
time; provided, however, any change adversely affecting the Participant must
receive the Participant's written consent, unless the Company or the Committee
determines, in its sole discretion, that amendment is necessary or advisable in
light of any change or amendment to the Code or to the U.S. Treasury Regulations
promulgated thereunder, or any federal or state securities law or other law or
regulations, which change occurs after the Grant Date and by its terms applies
to the Option.
6. METHOD OF EXERCISING OPTION
Participant may exercise the Option, or any portion thereof, by
providing the Committee with written notice of the number of shares which
Participant desires to purchase. Participant shall deliver to the Company
consideration in the form of cash or other consideration permitted by the
Committee for the full purchase price of the Option Shares to be acquired. Upon
the payment of such purchase price, the Company shall issue and deliver to
Participant evidence of ownership for such shares and shall register such
evidence of ownership in Participant's name (or, upon Participant's written
request, jointly in Participant's name and the name of Participant's spouse,
with rights of survivorship).
7. CONFLICTING PROVISIONS
The wording of this Agreement is based upon the provisions of the Plan,
under which the Option is issued. There has been no attempt made to repeat all
of the provisions of the Plan verbatim herein. In the event of any conflict
between the terms and conditions of this Agreement and the provisions of the
Plan, the provisions of the Plan shall control in all respects.
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IN WITNESS WHEREOF, the Company has caused this Key Employee Incentive
Award Agreement to be duly executed by its authorized officer, and Participant
has set his/her hand and seal, as of the day and year first hereinabove written.
Witness: THE WMF GROUP, LTD.
_____________________________ By: __________________________________
Xxxxxx Xxxxxxxxxx
Its: President and
Chief Executive Officer
Witness: PARTICIPANT
CAPRICORN INVESTORS II, L.P.
Approved Assignee
_____________________________ By: __________________________________
Xxxxxxx X. Xxxxxxx
Authorized Agent
Page 4
KEY EMPLOYEE INCENTIVE PLAN
OF
THE WMF GROUP LTD.
1. PURPOSE OF THE PLAN AND DEFINITIONS
-----------------------------------
1.1 PURPOSE. The purpose of this Key Employee Incentive Plan ("the
Plan") of The WMF Group, Ltd.(the "Company") is to:
(a) furnish incentives to individuals chosen to receive
stock-based awards because they are considered capable of responding by
improving operations and increasing profits and shareholder value;
(b) encourage selected persons to accept or continue
employment with the Company; and increase the interest of key executives in the
Company's welfare through their participation in the growth in value of the
Company's Shares.
To accomplish these purposes, this Plan provides a means whereby
executives and key employees, board members, and other enumerated persons may
receive Awards.
1.2 DEFINITIONS. For purposes of this Plan, the following terms
have the following meanings:
"AFFILIATE" means a parent or subsidiary entity, to be interpreted in
accordance with the comparable terms "parent" and "subsidiary" corporation in
the applicable provisions (currently Section 424) of the Code at the time this
definition is being applied.
"ASSUMED OPTION" means any option assumed by the Company with respect
to Common Stock as a result of the Separation Agreement between the Company and
NHP, Inc., to be entered as of December 8, 1997.
"AWARD" means any award under this Plan, including any grant of
Options, Performance Shares or Director Options.
"AWARD AGREEMENT" means, with respect to each Award, the written
agreement executed by the Company and the Participant or other written document
approved by the Committee setting forth the terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor statute.
"COMMISSION" means the Securities and Exchange Commission and any
successor agency.
"COMMITTEE" has the meaning given it in Section 4.1.
"COMMON SHARES" or "SHARES" means shares of the common stock of the
Company, par value $0.01 per share.
"COMPANY" has the meaning given it in Section 1.1.
"DIRECTOR" means a person duly elected or appointed and serving as a
Director of the Company in accordance with the by-laws of the Company.
"DIRECTOR OPTIONS" has the meaning given it in Section 5.3.
"EMPLOYEE" has the meaning ascribed to it for purposes of Section
3401(c) of the Code and the Treasury Regulations adopted under that Section.
"EMPLOYMENT TERMINATION" means that a Participant has ceased, for any
reason and with or without cause, to be an Employee or Director of, or a
consultant to, the Company or any Affiliate of the Company. However, the term
"Employment Termination" shall not include a Non-Employee Director ceasing to be
a Director or a transfer of a Participant from the Company to an Affiliate or
vice versa, or from one Affiliate to another, or a leave of absence duly
authorized by the Company unless the Committee has provided otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute.
"EXERCISE NOTICE" has the meaning given it in Section 6.1(h).
"GRANT DATE" has the meaning given it in Section 6.1(d).
"INCENTIVE STOCK OPTION" or "ISO" mean any Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code or successor provision.
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"NON-EMPLOYEE DIRECTOR" means a person who qualifies as a "Non-Employee
Director" as defined in Rule 16b-3 and an "outside director" as defined in
Treasury Regulation 1.162-27(e)(3) and any successor Treasury Regulation.
"NON-QUALIFIED STOCK OPTION" or "NQO" means any Option that is not an
Incentive Stock Option.
"OPTION" means an option granted under Section 5.
"PARTICIPANT" means an eligible person who is granted an Award.
"PLAN" means this Key Employee Incentive Plan.
"PERFORMANCE SHARE AWARD" means an Award granted under Section 5.4
"RULE 16B-3" means Rule 16b-3 adopted under Section 16(b) of the
Exchange Act or any successor rule, as it may be amended from time to time, and
references to paragraphs or clauses of Rule 16b-3 refer to the corresponding
paragraphs or clauses of Rule 16b-3 as it exists at the Effective Date or the
comparable paragraph or clause of Rule 16b-3 or successor rule, as that
paragraph or clause may thereafter be amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time
to time, and any successor statute.
"SPINOFF" means the distribution of Shares pursuant to the Rights
Agreement dated as of April 21, 1997.
"TEN PERCENT SHAREHOLDER" means any person who, at the time this
definition is being applied, owns directly or indirectly (or is treated as
owning by reason of attribution rules currently set forth in Section 424 of the
Code or any successor statute), shares of the Company constituting more than ten
percent (10%) of the total combined voting power of all classes of outstanding
shares of the Company or of any Affiliate of the Company.
2. ELIGIBLE PERSONS
Every person who, at or as of the Grant Date, is (a) an Employee of the
Company or an Affiliate of the Company, or (b) someone whom the Committee
designates as eligible for an Award (other than for Incentive Stock Options)
because the person (i) performs bona fide consulting or advisory services for
the Company or an Affiliate of the Company (other than services in connection
with the offer or sale of securities in a capital-raising transaction) and (ii)
has a direct and significant effect on the financial development of the Company
or an
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Affiliate of the Company, shall be eligible to receive Awards hereunder.
Directors of the Company who are not Employees are only eligible to receive
Director Options under Section 5.3.
3. SHARES SUBJECT TO THE PLAN
The total number of Shares that may be issued under Award, all or any
part of which may be issued to any Participant, is eight percent (8.00%) of the
total shares outstanding of the Company, plus that number of shares needed to
satisfy the Assumed Options; provided, however, that ISOs may not be more than
368,000 Shares, plus that number of shares needed to satisfy the Assumed Options
that are ISOs. Such Shares may consist, in whole or in part, of authorized and
unissued Common Shares or Shares reacquired in private transactions or open
market purchases, but all Shares issued under the Plan, regardless of their
source, shall be counted against the foregoing limitation. Any Shares that are
retained by the Company upon exercise or settlement of an Award in order to
satisfy the exercise price in whole or in part, or to pay withholding taxes due
with respect to such exercise or settlement, shall be treated as issued to the
Participant and will thereafter not be available under the Plan. The number of
Shares reserved for issuance under this Plan is subject to adjustment in
accordance with the provisions for adjustment in this Plan.
4. ADMINISTRATION
4.1 COMMITTEE. This plan shall be administered by a committee (the
"Committee") appointed by the Board. The Committee shall be constituted so that,
as long as Shares are registered under Section 12 of the Exchange Act, each
member of the Committee shall be a Non-Employee Director. The number of persons
that shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board; provided, however, the Committee shall
not consist of fewer than two persons.
4.2 COMMITTEE'S POWERS. Subject to the express provisions of this Plan
and Rule 16b-3 (so long as it is applicable) and the terms of the Assumed
Options, the Committee shall have the authority, in its sole discretion: (a) to
adopt, amend and rescind administrative and interpretive rules and regulation
relating to the Plan; (b) to determine the eligible persons to whom, and the
time or times at which, Awards shall be granted; (c) to determine the number of
Shares that shall be the subject of each Award; (d) to determine the terms and
provisions of each Award Agreement (which need not be identical) and any
amendments thereto, including provisions defining or otherwise relating to (i)
the period or periods and extent of exercisability of any Option, (ii) the
extent to which the transferability of Shares issued or transferred pursuant to
any Award is restricted, (iii) the effect of Employment Termination on an Award,
and (iv) the effect of approved leaves of absence (consistent with applicable
Treasury Regulations); (e) to accelerate the time of exercisability of any
Option; (f) to construe the respective Award
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Agreements and the Plan; (g) to make determinations of the fair market value of
Shares; (h) to waive any provision, condition or limitation set forth in an
Award Agreement; (i) to delegate its duties under the Plan to such agents as it
may appoint from time to time, PROVIDED, HOWEVER, that the Committee may not
delegate its duties with respect to making or exercising discretion with respect
to Awards to eligible persons if such delegation would cause Awards not to
qualify for the exemptions provided by Rule 16b-3 (unless the Board expressly
determines not to have Awards under the Plan comply with Rule 16b-3); and (j) to
make all other determinations, perform all other acts and exercise all other
powers and authority necessary or advisable for administering the Plan,
including the delegation of those ministerial acts and responsibilities as the
Committee deems appropriate. Subject to Rule 16b-3 (so long as it is
applicable), the Committee may correct any defect, supply any omission or
reconcile any inconsistency in the Plan, in any Award or in any Award Agreement
in the manner and to the extent it deems necessary or desirable to implement the
Plan, and the Committee shall be the sole and final judge of that necessity or
desirability. The determinations of the Committee on the matters referred to in
this Section 4.4 shall be final and conclusive. Notwithstanding any provision in
the Plan to the contrary, Awards will be made to Non-Employee Directors under
Sections 5.3 and 8 of this Plan. In addition, notwithstanding any provision of
this Plan to the contrary, the Committee may not in any manner exercise
discretion under the Plan with respect to any Awards made to Non-Employee
Directors.
4.3 TERM OF PLAN No awards shall be granted under this Plan after
10 years from the Effective Date of this Plan.
5. GRANT OF OPTIONS
5.1 WRITTEN AGREEMENT. Each option shall be evidenced by an Award
Agreement. The Award Agreement shall specify whether each Option it evidences is
a NQO or an ISO.
5.2 ANNUAL $100,000 LIMITATION ON ISOS. To the extent that the
aggregate "fair market value" of Shares with respect to which ISOs first become
exercisable by a Participant in any calendar year exceeds $100,000 taking into
account ISOs granted under this Plan, the Options covering such additional
Shares becoming exercisable in that year shall cease to be ISOs and thereafter
be NQOs. For this purpose, the "fair market value" of the ISOs shall be
determined as of the Grant Date of the Options. In reducing the number of
Options treated as ISOs to meet this $100,000 limit, the most recently granted
Options shall be reduced first.
5.3 ANNUAL GRANTS TO NON-EMPLOYEE DIRECTORS. On the last day of
each calendar year beginning with the last day of 1997, each Non-Employee
Director who is then a member of the Board shall automatically be granted NQOs
to purchase 5,000 Shares. Each option referred to in the previous sentence is
referred to as a "Director Option." The exercise price of Director Options shall
be the fair market value of the Shares subject to the Option on the
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date the Option is granted. Each Director Option shall be fully exercisable
commencing six months after the date of grant and continuing, unless sooner
terminated as provided in this Plan, for 10 years after the date it is granted.
If, for any reason other than death or permanent and total disability, a
Non-Employee Director ceases to be a member of the Board, each Director Option
held by that Non-Employee Director on the date that the Non-Employee Director
ceases to be a member of the Board may be exercised in whole or in part at any
time within one year after the date of such termination or until the expiration
of the Director Option, whichever is earlier. If a Non-Employee Director dies or
becomes permanently and totally disabled (within the meaning of Section
422(c)(6) of the Code) while a member of the Board (or within the period that
the Director Options remain exercisable after the Non-Employee Director ceases
to be a member of the Board), each Director Option then held by that
Non-Employee Director may be exercised, in whole or in part, by the Non-Employee
Director, by the Non-Employee Director's personal representative or by the
person to whom the Non-Employee Director transferred the Director Option by will
or the laws of descent and distribution, at any time within two years after the
date of death or permanent and total disability of the Non-Employee Director or
until the expiration date of the Director Option, whichever is earlier. Nothing
in this Section 5.3 or in Section 6.1(c) shall have the effect of accelerating
the six-month period during which Director Options are not exercisable. Each
Director Option shall be evidenced by an Award Agreement.
5.4 GRANTS OF PERFORMANCE SHARE AWARDS. The Committee may, in its
discretion, grant Performance Share Awards to eligible Employees. An Award shall
specify the maximum number of shares of Common Shares (if any) subject to the
Performance Share Award and its terms and conditions. The Committee shall
establish the specified period (a "performance cycle") for the Performance Share
Award and the measure(s) of the performance of the Company (or any part thereof)
or the Participant. The Committee may, during the performance cycle, make such
adjustments to the measure(s) of performance as it may deem appropriate to
compensate for, or reflect, any significant changes that may occur in accounting
practices, tax laws, other laws or regulations that alter or affect the
computation of the measure(s). The Award Agreement shall specify how the degree
of attainment of the measure(s) over the performance cycle is to be determined.
The Committee may provide for full or partial credit, prior to completion of
such performance cycle or the attainment of the performance achievement
specified in the Award, in the event of the Participant's death.
5.5 ASSUMED OPTIONS. As provided in the Separation Agreement
between the Company and NHP, Inc., to be entered into as of December 8, 1997,
the Company assumes obligations with respect to the Assumed Options through this
Plan.
6. CERTAIN TERMS AND CONDITIONS OF OPTIONS AND OTHER AWARDS
Each option shall be designated as an ISO or a NQO and shall be subject
to the terms and conditions set forth in Section 6.1. Notwithstanding the
foregoing, the Committee
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may provide for different terms and conditions in any Award Agreement or
amendment thereto as provided in Section 4.2.
6.1 ALL AWARDS. All Options and other Awards shall be subject to
the following terms and conditions, except as may be otherwise provided in the
Assumed Options:
(a) CHANGES IN CAPITAL STRUCTURE: If the number of
outstanding Shares is increased by means of a share dividend payable in Shares,
a share split or other subdivision or by a reclassification of Shares, then,
from and after the record date for such dividend, subdivision or
reclassification, the number and class of Shares subject to this Plan (including
without limitation its Sections 3 and 5.3) and each outstanding Award shall be
increased in proportion to such increase in outstanding Shares and the
then-applied exercise price of each outstanding Award shall be correspondingly
decreased. If the number of outstanding Shares is decreased by means of a share
split or other subdivision or by a reclassification of Shares, then, from and
after the record date for such split, subdivision or reclassification, the
number and class of Shares subject to this Plan (including without limitation
its Sections 3 and 5.3) and each outstanding Award shall be decreased in
proportion to such decrease in outstanding Shares and the then-applicable
exercise price of each outstanding Award shall be correspondingly increased.
(b) GRANT DATE: Each Award Agreement shall specify the date
as of which it shall be effective (the "Grant Date").
(c) FAIR MARKET VALUE: For purposes of this Plan, the fair
market value of Shares shall be determined as follows:
(i) If the Shares are listed on any established
stock exchange or a national market system, including, without limitation, the
National Market System of the National Association of Securities Dealers
Automated Quotation System, its fair market value shall be the closing sales
price for the Shares, or the mean between the high bid and low asked prices if
no sales were reported, as quoted on such system or exchange (or, if the Shares
are listed on more than one exchange, then on the largest such exchange) for the
date the value is to be determined (or if there are no sales or bids for such
date, then for the last preceding business day on which there were sales or
bids), as reported in THE WALL STREET JOURNAL or similar publication.
(ii) If the Shares are regularly quoted by a
recognized securities dealer but selling prices are not reported, its fair
market value shall be determined in good faith by the Committee, with reference
to the Company's net worth, prospective earning power, dividend-paying capacity
and other relevant factors, including the goodwill of the Company, the economic
outlook in the Company's industry, the Company's position in the industry and
its management, and the values of stock of other corporations in the same or
similar lines of business.
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(d) TIME OF EXERCISE; VESTING: Awards may, in the sole
discretion of the Committee, be exercisable or may vest, and restrictions may
lapse, as the case may be, at such times and in such amounts as may be specified
by the Committee in the grant of the Award.
(e) NONASSIGNABILITY OF RIGHTS: No Award that is a
derivative security (as defined in Rule 16a-1(c) under the Exchange Act) shall
be transferable other than with the consent of the Committee (which consent will
not be granted in the case of ISOs unless the conditions for transfer of ISOs
specified in the Code have been satisfied) or by will or the laws of the descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Code or Title I of ERISA. Awards requiring exercise shall be exercisable
only by the Participant, assignees that were approved by the Committee,
executors, administrators or beneficiaries of the Participant (who are the
permitted transferees hereunder), guardians or members of a committee for an
incompetent Participant, or similar persons duly authorized by law to administer
the estate or assets of a Participant.
(f) NOTICE AND PAYMENT: To the extent it is exercisable, an
Award shall be exercisable only by written or recorded electronic notice of
exercise, in the manner specified by the Committee from time to time, delivered
to the Company or its designated agent during the term of the Award (the
"Exercise Notice"). The Exercise Notice shall: (a) state the number of Shares
with respect to which the Award is being exercised; (b) be signed by the holder
of the Award or by the person authorized to exercise the Award pursuant to
Section 6.1(c) and (c) include such other information, instruments and documents
as may be required to satisfy any other condition to exercise set forth in the
Award Agreement. Except as provided below, payment in full, in cash or check,
shall be made for all Shares purchased at the time notice of exercise of an
Award is given to the Company. The proceeds of any payment shall constitute
general funds of the Company. At the time an Award is granted or before it is
exercised, the Committee, in the exercise of its sole discretion, may authorize
any one or more of the following additional methods of payment:
(i) for all Participants, acceptance of such
Participants' full recourse promissory note for some or all of the exercise
price of the Shares being acquired, payable on such terms and bearing such
interest rate as determined by the Committee, and secured in such manner, if at
all, as the Committee shall approve, including, without limitation, by a
security interest in the Shares which are the subject of the Award or other
securities;
(ii) for all Participants, delivery by such
Participants of Shares of the Company already owned by such Participants for all
or part of the exercise price of the Award being exercised, provided that the
fair market value of such Shares are equal on the date of exercise to the
exercise price of the Award being exercised, or such portion thereof as the
Participants are authorized to pay and elect to pay by delivery of such Shares;
(iii) for all Participants, surrender by such
Participants, or withholding by the Company from the Shares issuable upon
exercise of the Award, of a number
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of Shares subject to the Award being exercised with a fair market value equal to
some or all of the exercise price of the Shares being acquired, together with
such documentation as the Committee and the broker, if applicable, shall
require; or
(iv) for all Participants, to the extent permitted
by applicable law, payment may be made pursuant to arrangements with a brokerage
firm under which that brokerage firm, on behalf of such Participants, shall pay
to the Company the exercise price of the Award being exercised (either as a loan
to the Participant or from the proceeds of the sale of Shares issued under that
Award), and the Company shall promptly cause the Shares being purchased under
the Award to be delivered to the brokerage firm. Such transactions shall be
effected in accordance with the procedures that the Committee may establish from
time to time.
If the exercise price is satisfied in whole or in part by the
delivery of Shares pursuant to paragraph (ii) above, the Committee may issue to
the Participant an additional Option, with terms identical to those set forth in
the option agreement governing the exercised Option, except for the exercise
price which shall be the fair market value used for such delivery and the number
of Shares subject to such additional Option shall be the number of Shares so
delivered.
(g) TERMINATION OF EMPLOYMENT: Any Award or portion thereof
which has not vested on or before the date of a Participant's Employment
Termination shall expire on the date of Employment Termination. As to an Award
or portion thereof that has vested by the time of Employment Termination, the
Committee shall establish, in respect of each Award when granted, the effect of
an Employment Termination on the rights and benefits thereunder and in so doing
may, but need not, make distinctions based upon the cause of termination (such
as retirement, death, disability or other factors) or which party effected the
termination (the employer or the Employee). Notwithstanding any other provision
in this Plan or the Award Agreement, the Committee may decide in its discretion
at the time of any Employment Termination (or within a reasonable time
thereafter) to extend the exercise period of an Award (but not beyond the period
specified in Section 6.2(b) or 6.3(b), as applicable) and not decrease the
number of Shares covered by the Award with respect to which the Award is
exercisable or vested.
(h) DEATH: Any Award or portion thereof which has not vested
on or before the date of the Participant's death shall expire on the date of
such Participant's death. As to an Award or portion thereof that has vested by
the date of death of the Participant, such Awards or portions thereof must be
exercised within two years of the date of the Participant's death by a person
authorized under this Plan to exercise such Awards.
(i) PAYMENT OF DIVIDENDS UPON EXERCISE OF OPTIONS: Upon
exercise of an Option, other than an Assumed Option, the Participant shall be
entitled to receive a cash payment from the Company equal to the amount of cash
dividends that have been paid from the Grant Date of the Option through the date
of exercise of the Option on that number of Common Shares that is equal to the
number of Common Shares being purchased upon exercise of such Option.
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(j) OTHER PROVISIONS: Each Award Agreement may contain such
other terms, provisions and conditions not inconsistent with this Plan, as may
be determined by the Committee, and each ISO granted under this Plan shall
include such provisions and conditions as are necessary to qualify such Option
as an "incentive stock option" within the meaning of Section 422 of the Code,
unless the Committee determined otherwise.
(k) WITHHOLDING AND EMPLOYMENT TAXES: At the time of exercise
of an Award, the lapse of restrictions on an Award or a disqualifying
disposition of Shares issued under an ISO (within the meaning of Section
6.3(c)), the Participant shall remit to the Company in cash all applicable
federal and state withholding and employment taxes. If and to the extent
authorized and approved by the Committee in its sole discretion, a Participant
may elect, by means of a form of election to be prescribed by the Committee, to
have Shares which are acquired upon exercise of an Award withheld by the Company
or tender other Shares owned by the Participant to the Company at the time the
amount of such taxes is determined, in order to pay the amount of such tax
obligations, subject to such limitations as the Committee determines are
necessary or appropriate to comply with Rule 16b-3 in the case of Participants
who are subject to Section 16(b).
(l) NAMED OFFICER PROVISIONS: The Award Agreements (other than
the Assumed Options) for Participants determined by the Committee to be named
officers ("Named Officers") shall contain the following terms and definitions:
SEVERANCE. If a Named Officer is terminated without
"cause" (as defined below), he or she will be paid his or her then current
salary for two years if he or she is the Chief Executive Officer, for one year
if he or she is an Executive Vice President, for six months if he or she is a
Senior Vice President, or for three months if he or she is a Group Vice
President. If there is a "transfer of control" of the Company (as defined below)
and such an employee is terminated within 180 days of such change, he or she
will be paid his or her then current salary for three years if he or she is the
Chief Executive Officer, for two years if he or she is an Executive Vice
President, for one year if he or she is a Senior Vice President, or for six
months if he or she is a Group Vice President.
CAUSE. With respect to the termination of the
Participant's employment by the Company, "cause" means: (i) the engaging by the
Participant in any act of dishonesty in connection with the performance of his
employment duties and responsibilities, (ii) the final judgment of any United
States federal or state court convicting the Participant of a felony, (iii) the
failure of the Participant to perform his duties or responsibilities as
specified by the Company or any Affiliate of the Company, and (iv) the inability
of the Participant to perform his duties or responsibilities for a period of
more than one hundred twenty (120) consecutive days due to physical or mental
illness or incapacity.
TRANSFER OF CONTROL. For the purposes of this Agreement, a
"transfer of control" shall occur, after the Company's Spinoff, upon: (i) a
transfer of a majority of
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the Company's voting stock outstanding on the day of the transfer, (ii) sale of
substantially all of the Company's assets, to any entity or person unaffiliated
with the Company, (iii) the consolidation of the Company with or its merger into
any other unaffiliated corporation, or (iv) an act by the Company, or any entity
or person affiliated with the Company, which results in the dissolution of the
Company.
6.2 TERMS AND CONDITION TO WHICH ONLY NQOS ARE SUBJECT. Options
granted under this Plan (other than Assumed Options) which are designated as
NQOs shall be subject to the following terms and conditions:
(a) EXERCISE PRICE. The exercise price of a NQO shall be
determined by the Committee.
(b) OPTION TERM. Unless an earlier expiration date is
specified by the Committee at the Grant Date, each NQO shall expire 10 years
after the Grant Date or, if required by applicable state securities laws in the
case of a NQO granted to a Ten Percent Shareholder, five years after the Grant
Date.
6.3 TERMS AND CONDITIONS TO WHICH ONLY ISOS ARE SUBJECT. Options
granted under this Plan (other than Assumed Options) which are designated as
ISOs shall be subject to the following terms and conditions:
(a) EXERCISE PRICE. The exercise price of an ISO shall
be determined in accordance with the applicable provisions of the Code and shall
in no event be less that 100% of the fair market value of the Shares covered by
the ISO at the Grant Date; PROVIDED, HOWEVER, that the exercise price of an ISO
granted to a Ten Percent Shareholder shall not be less than 110% of such fair
market value.
(b) OPTION TERM. Unless an earlier expiration date is
specified by the Committee at the Grant Date, each ISO shall expire 10 years
after the Grant Date; PROVIDED, HOWEVER, that an ISO granted to a Ten Percent
Shareholder shall expire no later than five year after the Grant Date.
(c) DISQUALIFYING DISPOSITIONS. If Shares acquired by
exercise of an ISO are disposed of within two years after the Grant Date or
within one year after the transfer of the Shares to the optionee, the holder of
the Shares immediately before the disposition shall promptly notify the Company
in writing of the date and terms of the disposition and shall provide such other
information regarding the disposition as the Company may reasonably require and
shall pay the Company any withholding and employment taxes which the Company in
its sole discretion deem applicable to the disposition.
(d) TERMINATION OF EMPLOYMENT. All vested ISOs must be
exercised within three months after an optionee ceases to be an Employee unless
such cessation is due to
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the employee being disabled (within the meaning of Section 422 (c)(6) of the
Code), in which case the ISO shall be exercised within one year of the cessation
of employment.
6.4 SURRENDER OF OPTIONS.. The Committee, acting in its sole
discretion, may include a provision in an option agreement allowing the optionee
to surrender the Option covered by the agreement, in whole or in part in lieu of
exercise in whole or in part, on any date that the fair market value of the
Shares subject to the Option exceeds the exercise price and the Option is
exercisable (to the extent being surrendered). The surrender shall be effected
by the delivery of the option agreement, together with a signed statement which
specifies the number of shares as to which the optionee is surrendering the
Option, together with a request for such type of payment. Upon such surrender,
the optionee shall receive (subject to any limitations imposed by Rule 16b-3),
at the election of the Committee, payment in cash or shares, or a combination of
the two, equal to (or equal in fair market value to) the excess of the fair
market value of the Shares covered by the portion of the Option being
surrendered on the date of surrender over the form of payment, taking into
account such factors as it deems appropriate. To the extent necessary to satisfy
Rule 16b-3, the Committee may terminate an optionee's rights to receive payments
in cash for fractional Shares. Any option agreement providing for such surrender
privilege shall also incorporate such additional restrictions on the exercise or
surrender of options as may be necessary to satisfy the conditions of Rule
16b-3.
7. SECURITY LAWS
Nothing in this Plan or in any Award or Award Agreement shall require
the Company to issue any Shares with respect to any Award if, in the opinion of
counsel for the Company, that issuance could constitute a violation of the
Securities Act, any other law or the rules of any applicable securities exchange
or securities association then in effect. As a condition to the grant or
exercise of an Award, the Company may require the Participant (or, in the event
of the Participant's death, the Participant's legal representatives, heirs,
legatees or distributees) to provide written representations concerning the
Participant's (or such other person's) intentions with regard to the retention
or disposition of the Shares covered by the Award and written covenants as to
the manner of disposal of such Shares as may be necessary or useful to ensure
that the grant, exercise or disposition will not violate the Securities Act, and
other law or any rule of any applicable securities exchange or securities
association then in effect. The Company shall not be required to register any
Shares under the Securities Act or register or qualify any Shares under any
state or other securities laws.
8. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board may at any time amend, suspend or discontinue this Plan
without shareholder approval, except as required by applicable law; PROVIDED,
HOWEVER, that no amendment, alteration, suspension or discontinuation shall be
made which would impair the
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rights of any Participant under any Award previously granted, without the
Participant's consent, except to conform this Plan and Awards granted to the
requirements of federal or other tax laws including without limitation Section
422 of the Code and/or ERISA, or to the requirements of Rule 16b-3. The Board
may choose to require that the Company's shareholders approve any amendment to
this Plan in order to satisfy the requirements of Section 422 of the Code, Rule
16b-3 or for any other reason.
9. SEVERABILITY
If any provision of this Plan is held to be illegal or invalid for any
reason, that illegality or invalidity shall not affect the remaining portions of
the Plan, but such provision shall be fully severable and the Plan shall be
construed and enforced as if the illegal or invalid provision had never been
included in this Plan. Such an illegal or invalid provision shall be replaced by
a revised provision that most nearly comports to the substance of the illegal or
invalid provision.
10. EFFECTIVE DATE
This Plan was originally adopted by the Board of Directors on October
21, 1997. It was approved in that form by the holders of the Company's voting
shares on _____________ (the earlier of which is the "Effective Date"). It was
further amended by the Board on December 5, 1997.
I hereby certify that the foregoing is a full, true and correct copy of
the Key Employee Incentive Plan of The WMF Group Ltd., a Delaware Corporation,
as in effect on the date hereof.
Witness my hand and the seal of the Corporation.
Dated: _______________________ ________________________________
Xxxxxxx Xxxxxxx, Secretary
(SEAL)
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