HON INDUSTRIES INC.
1995 STOCK-BASED COMPENSATION PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the 1995 Stock-Based Compensation Plan (the
'Plan') of HON INDUSTRIES Inc. (the 'Company') and its subsidiaries from time to
time (individually a 'Subsidiary' and collectively the Subsidiaries') are (i) to
align the interests of the Company's shareholders and the recipients of awards
under this Plan by increasing the proprietary interest of such recipients in the
Company's growth and success, (ii) to advance the interests of the Company by
attracting and retaining officers and other key employees and well-qualified
persons who are not officers or employees of the Company ('Non-Employee
Directors') for service as directors of the Company and (iii) to motivate such
employees and non-employee directors to act in the long-term best interests of
the Company's shareholders. For purposes of this Plan, references to employment
by the Company shall also mean employment by a Subsidiary.
1.2 Certain Definitions.
'Agreement' shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.
'Board' shall mean the Board of Directors of the Company.
'Bonus Stock' shall mean shares of Common Stock which are not subject to a
Restriction Period or Performance Measures.
'Bonus Stock Award' shall mean an award of Bonus Stock under this Plan.
'Change in Control' shall have the meaning set forth in Section 5.8(b).
'Code' shall mean the Internal Revenue Code of 1986, as amended.
'Committee' shall mean the Committee designated by the Board, consisting of
three or more members of the Board, each of whom shall be (i) a 'disinterested
person' within the meaning of Rule 16b-3 under the Exchange Act and (ii) an
'outside director' within the meaning of Section 162(m) of the Code, subject to
any transition rules applicable to the definition of outside director.
'Common Stock' shall mean the common stock, $1.00 par value per share, of
the Company.
'Company' has the meaning specified in Section 1.1.
'Disability' shall mean the inability of the holder of an award to perform
substantially such holder's duties and responsibilities for a continuous period
of at least six months, as determined solely by the Committee.
'ERISA' shall mean the Employee Retirement Income Security Act of 1974, as
amended.
'Exchange Act' shall mean the Securities Exchange Act of 1934, as amended.
'Fair Market Value' shall mean the average of the high and low transaction
prices of a share of Common Stock as reported in the National Association of
Securities Dealers Automated Quotation National Market System on the date as of
which such value is being determined, or, if there are no reported transactions
for such date, on the next preceding date for which transactions were reported;
provided, however, that if Fair Market Value for any date cannot be so
determined, Fair Market Value shall be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.
'Incumbent Board' shall have the meaning set forth in Section 5.8(b)(2)
hereof.
'Non-Employee Director' shall mean any director of the Company who is not
an officer or employee of the Company or any Subsidiary.
'Performance Measures' shall mean the criteria and objectives, established
by the Committee, which shall be satisfied or met during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or, in the case of a Performance Share Award, of payment with
respect to such award. Such criteria and objectives may include, but are not
limited to, the attainment by a share of Common Stock of a specified Fair Market
Value for a specified period of time, earnings per share, return on equity,
earnings of the Company, revenues, market share, cash flows or cost reduction
goals, or any combination of the foregoing and any other criteria and objectives
established by the Committee. In the sole discretion of the Committee, the
Committee may amend or adjust (upward and downward) the Performance Measures or
other terms and conditions of an outstanding award in recognition of
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unusual or nonrecurring events affecting the Company or its financial statements
or changes in law or accounting principles.
'Performance Period' shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
'Performance Share' shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to receive
one share of Common Stock, which may be Restricted Stock, or in lieu thereof,
the Fair Market Value of such Performance Share in cash.
'Performance Share Award' shall mean an award of Performance Shares under
this Plan.
'Restricted Stock' shall mean shares of Common Stock which are subject to a
Restriction Period.
'Restricted Stock Award' shall mean an award of Restricted Stock under this
Plan.
'Restriction Period' shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
'Stock Award' shall mean a Restricted Stock Award or a Bonus Stock Award.
'Tax Date' shall have the meaning set forth in Section 5.5.
1.3 Administration. This Plan shall be administered by the Committee. Any one
or a combination of the following awards may be made under this Plan to eligible
officers and other key employees of the Company and its Subsidiaries: (i) Stock
Awards in the form of Restricted Stock or Bonus Stock and (ii) Performance
Shares. The Committee shall, subject to the terms of this Plan, select eligible
officers and other key employees for participation in this Plan and determine
the form, amount and timing of each award to such persons and, if applicable,
the number of shares of Common Stock or the number of Performance Shares subject
to such an award, the time and conditions of settlement of the award and all
other terms and conditions of the award, including, without limitation, the form
of the Agreement evidencing the award. The Committee shall, subject to the
terms of this Plan, interpret this Plan and the application thereof, establish
rules and regulations it deems necessary or desirable for the administration of
this Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such as limiting competitive employment or other
activities. All such
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interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.
The Committee may delegate some or all of its power and authority hereunder
to the President and Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (i) the grant
of an award under this Plan to any person who is a 'covered employee' within the
meaning of Section 162(m) of the Code or who, in the Committee's judgment, is
likely to be a covered employee at any time during the period an award hereunder
to such employee would be outstanding or (ii) the selection for participation in
this Plan of an officer or other person subject to Section 16 of the Exchange
Act or decisions concerning the timing, pricing or amount of an award to such an
officer or other person.
No member of the Board of Directors or Committee, and neither the
President and Chief Executive Officer nor any other executive officer to whom
the Committee delegates any of its power and authority hereunder, shall be
liable for any act, omission, interpretation, construction or determination made
in connection with this Plan in good faith, and the members of the Board of
Directors and the Committee and the President and Chief Executive Officer or
other executive officer shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Company's Articles of Incorporation, By-
laws, and under any directors' and officers' liability insurance that may be in
effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
1.4 Eligibility. Participants in this Plan shall consist of such officers or
other key employees of the Company and its Subsidiaries as the Committee in its
sole discretion may select from time to time. The Committee's selection of a
person to participate in this Plan at any time shall not require the Committee
to select such person to participate in this Plan at any other time. Non-
Employee Directors shall be eligible to participate in this Plan in accordance
with Article IV.
1.5 Shares Available. Subject to adjustment as provided in Section 5.7, the
total number of shares of Common Stock available for all grants of awards under
this Plan in any calendar year, shall be one-half of one percent (.5%) of the
outstanding and
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issued Common Stock as of January 1 of such year beginning January 1, 1995, plus
the number of shares of Common Stock which shall have become available for
grants of awards under this Plan in any and all prior calendar years, but which
shall not have become subject to any award granted in any prior year.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
II. STOCK AWARDS
2.1 Stock Awards. The Committee may, in its discretion, grant Stock Awards to
such eligible persons as may be selected by the Committee. The Agreement
relating to a Stock Award shall specify whether the Stock Award is a Restricted
Stock Award or Bonus Stock Award. Stock Awards may be made in satisfaction of
the Company's obligations under the Company's Cash Bonus Plan, its Long Term
Incentive Plan or any other Plan of a similar nature that may be adopted by the
Company.
2.2 Terms of Stock Awards. Stock Awards shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of the Company
during the specified Restricted Period and for the forfeiture of the shares of
Common Stock subject to such award (x) if specified Performance Measures are not
satisfied or met during the specified Restriction Period or (y) if the holder of
such award does not remain continuously in the employment of the Company during
the specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods. Notwithstanding the foregoing,
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Bonus Stock Awards may be subject to restrictions on sale or transfer as the
Committee may determine.
(c) Share Certificates. During the Restriction Period, a certificate
or certificates representing a Restricted Stock Award shall be registered in the
holder's name and may bear a legend, in addition to any legend required pursuant
to Section 5.6, indicating that the ownership of the shares represented by such
certificate is subject to the restrictions, terms and conditions of this Plan
and the Agreement relating to the Restricted Stock Award. During any period for
which a Bonus Stock Award is subject to any restriction on sale or transfer, a
certificate or certificates representing such award shall be registered in the
holder's name and may bear a legend, in addition to any legend required pursuant
to Section 5.6, indicating that the ownership of the shares represented by such
certificate is subject to such restrictions. All such certificates shall be
deposited with the Company, together with stock powers or other instruments of
assignment (including a power of attorney), each endorsed in blank with a
guarantee of signature if deemed necessary or appropriate, which would permit
transfer to the Company of all or a portion of the shares of Common Stock
subject to the Restricted Stock Award in the event such award is forfeited in
whole or in part. Upon termination of any applicable Restriction Period (and
the satisfaction or attainment of applicable Performance Measures), upon the
expiration of any restriction on sale applicable to a Bonus Stock Award or upon
the grant of a Bonus Stock Award not subject to any restrictions, in each case
subject to the Company's right to require payment of any taxes in accordance
with Section 5.5, a certificate or certificates evidencing ownership of the
requisite number of shares of Common Stock shall be delivered to the holder of
such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a shareholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a distribution in cash, shall be deposited with the Company and shall
be subject to the same restrictions as the shares of Common Stock with respect
to which such distribution was made.
2.3 Termination of Employment. Subject to Section 5.8, all the terms relating
to the satisfaction of Performance Measures and the termination of the
Restriction Period relating to a Restricted Stock Award, or any cancellation or
forfeiture of such Restricted Stock Award upon a termination of employment with
the Company of the holder of such Restricted Stock Award, whether by
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reason of Disability, retirement, death or other termination, shall be set forth
in the Agreement relating to such Restricted Stock Award.
III. PERFORMANCE SHARE AWARDS
3.1 Performance Share Awards. The Committee may, in its discretion, grant
Performance Share Awards to such eligible persons as may be selected by the
Committee.
3.2 Terms of Performance Share Awards. Performance Share Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number
of Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of such award, if specified
Performance Measures are not satisfied or met during the specified Performance
Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on any deferred
dividend equivalents, with respect to the number of shares of Common Stock
subject to such award. If a Performance Share Award is settled in shares of
Restricted Stock, a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 2.2(c) and the holder of such
Restricted Stock shall have such rights of a shareholder of the Company as
determined pursuant to Section 2.2(d). Prior to the settlement of a Performance
Share Award in shares of Common Stock, including Restricted Stock, the holder of
such award shall have no rights as a shareholder of the Company with respect to
the shares of Common Stock subject to such award.
3.3 Termination of Employment. Subject to Section 5.8, all the terms relating
to the satisfaction of Performance Measures and
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the termination of the Performance Period relating to a Performance Share Award,
or any cancellation or forfeiture of such Performance Share Award upon a
termination of employment with the Company of the holder of such Performance
Share Award, whether by reason of Disability, retirement, death or other
termination, shall be set forth in the Agreement relating to such Performance
Share Award.
IV. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
4.1 Eligibility. Each Non-Employee Director shall be eligible to elect to
receive shares of Common Stock in accordance with this Article IV.
4.2 Time and Manner of Election. At least six (6) months prior to the date of
any annual meeting of shareholders of the Corporation during the term of this
Plan, Non-Employee Directors may file with the Committee or its designee a
written election to receive shares of Common Stock in lieu of all or a portion
of such Non-Employee Director's future annual retainer, paid quarterly,
exclusive of meeting or committee fees. Notwithstanding the foregoing, an
election made by (i) a Non-Employee Director in respect of the annual retainer
payable for the period beginning on the date of the 1995 annual meeting of the
shareholders of the Company or (ii) an individual who becomes a Non-Employee
Director on a date less than six months prior to any annual meeting of
shareholders, shall become effective on the first business day that is six
months after the date ('Effective Date') such Non-Employee Director files such
election, and such election shall be applicable only to the portion of such Non-
Employee Director's annual retainer determined by multiplying such annual
retainer by a fraction, the numerator of which is the number of calendar days
from and including the Effective Date to and including the last day for which
such Annual Retainer is payable and the denominator is 365. An election
pursuant to this Section, once made, shall be irrevocable in respect to the
annual retainer for which made.
The shares to be issued pursuant to this Section shall be issued on
each date on which an installment of the Non-Employee Director's annual retainer
would otherwise be payable in cash. The number of such shares to be issued
shall be determined by dividing the amount of the then payable installment of
the annual retainer subject to an election under this Section by the Fair Market
Value of a share of Common Stock on such date. Any fraction of a share shall be
disregarded and the remaining amount of the annual retainer shall be paid in
cash.
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V. GENERAL
5.1 Effective Date and Term of Plan. This Plan shall be submitted to the
shareholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the 1995 annual meeting of shareholders, shall become
effective on the date of such approval. This Plan shall terminate 10 years
after its effective date unless terminated earlier by the Board. Termination of
this Plan shall not affect the terms or conditions of any award granted prior to
termination.
Awards hereunder may be made at any time prior to the termination of
this Plan, provided that no award may be made later than 10 years after the
effective date of this Plan. In the event that this Plan is not approved by the
shareholders of the Company, this Plan and any awards hereunder shall be void
and of no force or effect.
5.2 Amendments. The Board may amend this Plan as it shall deem advisable,
subject to any requirement of shareholder approval required by applicable law,
rule or regulation including Rule 16b-3 under the Exchange Act and Section
162(m) of the Code; provided, however, that no amendment shall be made without
shareholder approval if such amendment would (a) increase the maximum number of
shares of Common Stock available for issuance under this Plan (subject to
Section 5.7) or (b) extend the term of this Plan. No amendment may impair the
rights of a holder of an outstanding award without the consent of such holder.
5.3 Agreement. Each award under this Plan shall be evidenced by an Agreement
setting forth the terms and conditions applicable to such award. No award shall
be valid until an Agreement is executed by the Company and the recipient of such
award and, upon execution by each party and delivery of the Agreement to the
Company, such award shall be effective as of the effective date set forth in the
Agreement.
5.4 Non-Transferability of Performance Shares. No Performance Share, and to
the extent provided pursuant to Section 2.2(c), no Bonus Stock Award, shall be
transferable other than (i) by will, the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company or (ii)
as otherwise permitted under Rule 16b-3 under the Exchange Act as set forth in
the Agreement relating to such award. Each such award may be settled during the
participant's lifetime only by the holder or the holder's legal representative
or similar person. Except as permitted by the second preceding sentence, no
such award may be sold, transferred, assigned, pledged, hypothecated, encumbered
or otherwise disposed of (whether by
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operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any such award, it and all rights thereunder
shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to an award made hereunder, payment by the holder of such award of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the 'Tax Date'), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(A) a cash payment to the Company, (B) delivery to the Company of previously
owned whole shares of Common Stock (which the holder has held for at least six
months prior to the delivery of such shares and for which the holder has good
title, free and clear of all liens and encumbrances) having an aggregate Fair
Market Value, determined as of the Tax Date, equal to the amount necessary to
satisfy any such obligation, (C) authorizing the Company to withhold whole
shares of Common Stock which would otherwise be delivered having an aggregate
Fair Market Value, determined as of the Tax Date, or withhold an amount of cash
which would otherwise be payable to a holder, equal to the amount necessary to
satisfy any such obligation, or (D) any combination of (A), (B) and (C), in each
case to the extent set forth in the Agreement relating to the award; provided,
however, that the Committee shall have sole discretion to disapprove of an
election pursuant to any of clauses (B)-(D) and that in the case of a holder who
is subject to Section 16 of the Exchange Act, the Company may require that the
method of satisfying such an obligation be in compliance with Section 16 and the
rules and regulations thereunder. An Agreement may provide for shares of Common
Stock to be delivered or withheld having an aggregate Fair Market Value in
excess of the minimum amount required to be withheld, but not in excess of the
amount determined by applying the holder's maximum marginal tax rate. Any
fraction of a share of Common Stock which would be required to satisfy such an
obligation shall be disregarded and the remaining amount due shall be paid in
cash by the holder.
5.6 Restrictions on Shares. Each award made hereunder shall be subject to the
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any
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governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of Common Stock delivered pursuant
to any award made hereunder bear a legend indicating that the sale, transfer or
other disposition thereof by the holder is prohibited except in compliance with
the Securities Act of 1933, as amended, and the rules and regulations
thereunder.
5.7 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding Stock Award, and the
terms of each outstanding Performance Share shall be appropriately adjusted by
the Committee. The decision of the Committee regarding any such adjustment
shall be final, binding and conclusive. If any such adjustment would result in
a fractional security being (i) available under this Plan, such fractional
security shall be disregarded, or (ii) subject to an award under this Plan, the
Company shall pay the holder of such award, in connection with the first vesting
or settlement of such award, in whole or in part, occurring after such
adjustment, an amount in cash determined by multiplying (i) the fraction of such
security (rounded to the nearest hundredth) by (ii) the excess, if any, of (A)
the Fair Market Value on the vesting or settlement date over (B) the exercise or
base price, if any, of such award.
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5.8 Change in Control.
(a) (1) Notwithstanding any provision in this Plan or any Agreement,
in the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of Common Stock
that are registered under Section 12 of the Exchange Act, (i) the Restriction
Period applicable to any outstanding Restricted Stock Award shall lapse, (ii)
the Performance Period applicable to any outstanding Performance Share shall
lapse, (iii) the Performance Measures applicable to any outstanding Restricted
Stock Award (if any) and to any outstanding Performance Share shall be deemed to
be satisfied at the maximum level, (iv) any other restrictions on sale or
transferability shall terminate and (v) there shall be substituted for each
share of Common Stock available under this Plan, whether or not then subject to
an outstanding award, the number and class of shares into which each outstanding
share of Common Stock shall be converted pursuant to such Change in Control.
(2) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(1) or (2) below, or in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of Common Stock that are registered under Section 12 of the Exchange
Act, each outstanding award shall be surrendered to the Company by the holder
thereof, and each such award shall immediately be cancelled by the Company, and
the holder shall receive, within ten days of the occurrence of a Change in
Control pursuant to Section (b)(1) or (2) below or within ten days of the
approval of the shareholders of the Company contemplated by Section (b)(3) or
(4) below, a cash payment from the Company in an amount equal to, in the case of
a Restricted Stock Award or Performance Share Award, the number of shares of
Common Stock or the number of Performance Shares, as the case may be, then
subject to such award, multiplied by the greater of (A) the highest per share
price offered to shareholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a share of Common
Stock on the date of occurrence of the Change in Control. The Company may, but
is not required to, cooperate with any person who is subject to Section 16 of
the Exchange Act to assure that any cash payment in accordance with the
foregoing to such person is made in compliance with Section 16 and the rules and
regulations thereunder.
(b) 'Change in Control' shall mean:
(1) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the
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Securities Exchange Act of 1934, as amended (the 'Exchange Act')) (a 'Person')
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then outstanding shares of Common
Stock of the Company (the 'Outstanding Company Common Stock') or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of Directors (the 'Outstanding
Company Voting Securities'); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
Section 5.8(b); or
(2) individuals who, as of the date hereof, constitute the Board (the
'Incumbent Board') cease for any reason to constitute at least two-thirds of the
Board; provided, however, that any individual becoming a Director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least three-quarters of the Directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of Directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(3) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
'Business Combination'), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50
percent of, respectively, the then outstanding shares of Common Stock, and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of Directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
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Company Common Stock and the Outstanding Company Voting Securities, as the case
may be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of Common Stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the Board of Directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(4) approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
5.9 No Right of Participation or Employment. No person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
5.10 Rights as Shareholder. No person shall have any right as a shareholder of
the Company with respect to any shares of Common Stock or other equity security
of the Company which is subject to an award hereunder unless and until such
person becomes a shareholder of record with respect to such shares of Common
Stock or equity security.
5.11 Governing Law. This Plan, each award hereunder and the related Agreement,
and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Iowa and construed in accordance therewith
without giving effect to principles of conflicts of laws.
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1995 Stock-Based Compensation Plan - HON Industries Inc.
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