Aflac Incorporated
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(Exact name of registrant as specified in its charter)
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Georgia
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001-07434
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58-1167100
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(State or other jurisdiction
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(Commission
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(IRS Employer
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of incorporation)
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File Number)
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Identification No.)
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1932 Wynnton Road, Columbus, Georgia
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31999
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(Address of principal executive offices)
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(Zip Code)
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706.323.3431
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(Registrant’s telephone number, including area code)
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(Former name or former address, if changed since last report)
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¨
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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¨
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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¨
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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¨
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 5.02
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
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VOTES
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For
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Against
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Abstentions
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Broker
Non-Votes
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(1) Election of 14 members to the board of directors:
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Daniel P. Amos
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737,094,081
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16,340,492
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2,279,107
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58,651,119
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Paul S. Amos II
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735,522,576
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19,001,824
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1,189,280
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58,651,119
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W. Paul Bowers
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748,936,480
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5,122,746
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1,654,454
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58,651,119
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Kriss Cloninger III
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732,723,431
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21,634,140
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1,356,109
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58,651,119
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Toshihiko Fukuzawa
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749,642,590
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4,563,244
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1,507,846
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58,651,119
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Elizabeth J. Hudson
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741,326,950
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12,584,782
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1,801,948
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58,651,119
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Douglas W. Johnson
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738,452,612
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15,322,495
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1,938,573
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58,651,119
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Robert B. Johnson
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733,898,932
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19,759,954
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2,054,794
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58,651,119
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Thomas J. Kenny
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740,945,532
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12,827,931
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1,940,217
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58,651,119
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Charles B. Knapp
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738,982,380
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14,782,781
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1,948,519
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58,651,119
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Karole F. Lloyd
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748,783,925
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5,022,460
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1,907,295
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58,651,119
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Joseph L. Moskowitz
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744,781,849
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8,967,158
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1,964,673
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58,651,119
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Barbara K. Rimer, Dr. PH
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724,920,046
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29,305,940
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1,487,694
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58,651,119
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Melvin T. Stith
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746,847,067
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6,912,413
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1,954,200
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58,651,119
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(2) Non-binding advisory proposal on executive compensation
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612,862,464
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140,564,902
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2,286,314
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58,651,119
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1 Year
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2 Years
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3 Years
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Abstentions
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(3) Non-binding advisory vote on the frequency of future advisory votes on executive compensation
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740,714,533
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5,285,876
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8,115,546
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1,597,725
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For
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Against
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Abstentions
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Broker
Non-Votes
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(4) Ratification of appointment of KPMG LLP as independent registered public accounting firm of the Company for the year ending December 31, 2017
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803,782,973
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9,253,572
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1,328,254
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0
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(5) Adoption of the Aflac Incorporated Long-Term Incentive Plan (as amended and restated February 14, 2017) ("2017 LTIP") with additional shares authorized under the 2017 LTIP
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719,718,869
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31,237,403
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4,757,408
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58,651,119
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(6) Adoption of the 2018 Management Incentive Plan ("2018 MIP")
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734,382,124
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16,305,369
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5,026,187
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58,651,119
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Aflac Incorporated
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May 4, 2017
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/s/ June Howard
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(June Howard)
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Senior Vice President, Financial Services
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Chief Accounting Officer
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(i)
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the substantial and continuing failure of the Participant to render services to the Company or any Affiliate in accordance with the Participant’s obligations and position with the Company or Affiliate;
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(ii)
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dishonesty, gross negligence, or breach of fiduciary duty by the Participant;
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(iii)
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the commission by the Participant of an act of fraud or embezzlement, as found by a court of competent jurisdiction;
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(iv)
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the conviction of the Participant of or plea by the Participant of guilty or nolo contendre to a felony or any crime involving moral turpitude; or
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(v)
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a material breach by the Participant of the terms of an agreement with the Company or any
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(i)
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any “person,” as such term is used in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) of the Exchange Act (other than (1) the Company, or any of its subsidiaries, (2) any trustee or other fiduciary holding securities under a benefit plan of the Company or any of its subsidiaries, (3) any underwriter temporarily holding securities pursuant to an offering of such securities, or (4) any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Company Stock), is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its Affiliates) representing twenty percent (20%) or more of the combined voting power of the Company’s then outstanding voting securities;
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(ii)
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individuals who, as of May 1, 2017, constitute the Board of Directors, and any new director (other than an individual whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose election by the Board of Directors or nomination for election by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof;
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(iii)
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there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (A) a merger or consolidation which would result in the “beneficial owners” (as hereinabove defined) of the securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company, at least seventy-five percent (75%) of the combined voting power of the securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, in substantially the same proportions as their ownership of the Company immediately prior to such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined), directly or indirectly, acquires more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities (not including any securities acquired directly from the Company or its Affiliates); or
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(iv)
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the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets (or any transaction having a similar effect), other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 75% of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.
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(i)
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A material reduction of the Participant’s base salary;
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(ii)
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A significant diminution of the Participant’s duties and responsibilities;
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(iii)
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The relocation of the Company’s principal office or of Participant’s own office to any place beyond twenty-five (25) miles from the current principal office of the Company in Columbus, Georgia, or the Participant’s own office, respectively, without the Participant’s consent; and
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(a)
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Shares Available for Awards.
The maximum number of shares of Company Stock reserved for issuance under the Plan shall be 37,500,000 shares (subject to adjustment as provided in Section 3(c) hereof). Such shares may be authorized but unissued Company Stock or authorized and issued Company Stock held in the Company’s treasury. No more than 19,000,000 shares (subject to adjustment as provided in Section 3(c) hereof) of Company Stock may be awarded under the Plan in the aggregate in respect of Awards other than Options or Stock Appreciation Rights.
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(b)
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Individual Limitation.
The total number of shares of Company Stock subject to Awards granted to any Participant in any fiscal year of the Company shall not exceed 1,500,000 (subject to adjustment as provided in Section 3(c) hereof).
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(c)
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Adjustment for Change in Capitalization.
In the event that any dividend or other distribution is declared (whether in the form of cash, Company Stock, or other property), or there occurs any recapitalization, Company Stock split, reverse Company Stock split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event, if the Committee determines that it is appropriate to do so, (i) the number and kind of shares of Company Stock which may thereafter be issued in connection with Awards, (ii) the number and kind of shares of Company Stock issued or issuable in respect of outstanding Awards, (iii) the exercise price, grant price or purchase price relating to any Award, and (iv) the maximum number of shares subject to Awards which may be awarded to any Participant during any fiscal year of the Company and the number of Options granted pursuant to Section 12(a)(i) hereof shall be equitably adjusted as necessary to prevent the dilution or enlargement of the rights of Participants without change in the aggregate purchase price; provided that, with respect to Incentive Stock Options, such adjustment shall be made in accordance with Section 424 of the Code. Notwithstanding the foregoing, any actions taken under this Section 3(c) shall be made in a manner consistent with Section 409A, including without limitation any restrictions with regard to the adjustment of stock options and stock appreciation rights that are considered exempt from Section 409A.
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(d)
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Substitution for Awards.
In the event of (i) a liquidation of the Company, (ii) a reorganization, merger, or consolidation of the Company as a result of which the outstanding Company Stock is changed into or exchanged for cash or property or securities not of the Company’s issue, (iii) a sale, exchange, or transfer of all or substantially all of the property of the Company, or one of its business units, to another person or corporation, (iv) the direct or indirect acquisition of all or substantially all of the outstanding voting shares of the Company by another person, corporation or other entity, or (v) any other Change in Control (any such event, a “Corporate Transaction”), the Board of Directors may, in its sole discretion, arrange with the surviving entity, continuing successor, or purchasing corporation or other entity or parent thereof, as the case may be (the “Acquiring Entity”), for the Acquiring Entity to assume the Company’s rights and obligations under outstanding Awards or substitute Awards based on the Acquiring Entity’s stock for such outstanding Awards. To the extent the Acquiring Entity elects not to assume the Company’s rights and obligations under or substitute for such outstanding Awards, the Board of Directors (as constituted prior to any Change in Control resulting from such Corporate Transaction) may, in its sole discretion, determine the subsequent treatment of each outstanding Award, which may include (but is not limited to) providing that any such Awards shall become fully exercisable and free of restrictions, as applicable, as of a date prior to such Corporate Transaction, as the Board so determines. Notwithstanding the foregoing, any actions taken under this Section 3(d) shall be made in a manner consistent with Section 409A, including without limitation any restrictions with regard to the adjustment of stock options and stock appreciation rights that are considered exempt from Section 409A.
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(e)
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Reuse of Shares.
If any shares of Company Stock subject to an Award are forfeited, canceled,
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(i)
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shares tendered in payment for an Option;
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(ii)
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shares delivered or withheld by the Company or the Participant to satisfy any tax withholding obligation; or
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(iii)
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shares covered by a stock-settled Stock Appreciation Right that were not issued upon the settlement of the Award
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(a)
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In General.
The Plan shall be administered by the Committee. The Committee shall have the authority in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to grant Awards; to determine the persons to whom and the time or times at which Awards shall be granted; to determine the type and number of Awards to be granted, the number of shares of Company Stock to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any Award; to determine whether, to what extent, and under what circumstances an Award may be settled, canceled, forfeited, exchanged, or surrendered; to make adjustments in the performance goals in recognition of unusual or nonrecurring events affecting the Company or the financial statements of the Company, or in response to changes in applicable laws, regulations, or accounting principles; to construe and interpret the Plan and any Award; to prescribe, amend and rescind rules and regulations relating to the Plan, including without limitation, rules and regulations relating to leaves of absence and changes from an employee to a service provider or consultant and vice versa; to determine the terms and provisions of Agreements; and to make all other determinations deemed necessary or advisable for the administration of the Plan.
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(b)
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Prohibited Actions.
Notwithstanding anything in the Plan to the contrary, without the approval of the shareholders of the Company, no action taken by the Committee (or any delegate of the Committee) shall have the effect of:
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(ii)
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canceling any previously granted Option or Stock Appreciation Right in exchange for another Award if the exercise price of such Option or the grant price of such Stock Appreciation Right exceeds the Fair Market Value of a share of Company Stock on the date of such cancellation, in each case, other than in connection with a Change in Control or pursuant to Section 3(c) or 3(d) herein; or
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(iii)
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canceling in exchange for cash any previously granted Option or Stock Appreciation Right with an exercise or grant price in excess of the Fair Market Value of a share of Company Stock on the date of such cancellation.
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(c)
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Acceleration of Awards.
The Committee may, in its sole discretion, without amendment to the Plan, in the event of a Participant’s death, Disability or retirement, (i) relax or waive any service-based or (except in the case of retirement) performance-based condition to the exercise of any Option or Stock Appreciation Right granted to the Participant, waive or amend the operation of Plan provisions respecting exercise after termination of employment or otherwise adjust any of the terms of such Option or Stock Appreciation Right, and (ii) relax or waive any service-based or (except in the case of retirement) performance-based condition to the vesting of any Restricted Stock or Restricted Stock Unit granted to the Participant or otherwise adjust any of the terms applicable to
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(d)
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Delegation of Authority.
Except as required by Rule 16b-3 with respect to grants of Awards to individuals who are subject to Section 16 of the Exchange Act, or as otherwise required for compliance with Rule 16b-3 or other applicable law, or as required to qualify an Award as performance-based compensation under Section 162(m) of the Code where such qualification is intended, the Committee may delegate all or any part of its authority under the Plan (other than the authority described in Section 4(c) hereof) to an employee, employees or committee of employees of the Company.
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(e)
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Effect of Committee Decisions.
All decisions made by the Committee (or its designee pursuant to Section 4(d) hereof) pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including without limitation the Company and the Participants. No member of the Board of Directors or the Committee, nor any officer or employee of the Company or its Affiliates acting on behalf of the Board of Directors or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board of Directors or the Committee and each and any officer or employee of the Company or its Affiliates acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.
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(a)
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Awards Generally.
The Committee may grant Options, Restricted Stock, Restricted Stock Units and Stock Appreciation Rights in such amounts and with such terms and conditions as the Committee shall determine, subject to Section 6(b) hereof and the other provisions of the Plan.
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(b)
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Non-employee Directors.
Awards to Non-employee Directors shall be made exclusively in accordance with Section 12 hereof.
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(c)
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Agreement.
Each Award granted under the Plan shall be evidenced by an Agreement which shall contain such provisions as the Committee may in its sole discretion deem necessary or desirable and which are not in conflict with the terms of the Plan. By accepting an Award, a Participant thereby agrees that the Award shall be subject to all of the terms and provisions of the Plan and the applicable Agreement.
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(d)
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Special Vesting Requirements.
Notwithstanding any other provision of the Plan (but except as otherwise provided in this Section 6(d)), Awards (including, without limitation, each Award with respect to which performance goals are imposed) shall vest (i.e., become nonforfeitable) over a minimum period of one year; provided that (i) in the event of a Change in Control or, in respect of such an Award to any Participant, in the event of the Participant’s death, or Disability, no such minimum vesting period shall be required, (ii) an Award pursuant to Section 12 hereof granted on
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(a)
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Identification of Options.
Each Option shall be clearly identified in the applicable Agreement as either an Incentive Stock Option or a Nonqualified Stock Option. Nonqualified Stock Options and Stock Appreciation Rights may be granted only with respect to “service recipient stock” as such term is used in Section 409A.
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(b)
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Exercise Price.
Each Agreement with respect to an Option shall set forth the amount (the “option exercise price”) payable by the grantee to the Company upon exercise of the Option. The option exercise price per share shall be determined by the Committee; provided, however, that the option exercise price shall in no event be less than the Fair Market Value of a share of Company Stock on the date the Option is granted.
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(c)
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Term and Exercise of Options.
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(i)
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Options shall become exercisable over the exercise period determined by the Committee. The Committee shall determine the expiration date of each Option; provided, however, that no Option shall be exercisable more than 10 years after the date of grant.
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(ii)
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If any Option is exercisable in the amount of 100 or more full shares of Company Stock, the Company shall not be obligated to permit the partial exercise of such exercisable Option for less than 100 full shares.
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(iii)
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An Option shall be exercised by delivering notice as specified in the Agreement on the form of notice provided by the Company. Payment for shares of Company Stock purchased upon the exercise of an Option shall be made on the effective date of such exercise by one or a combination of the following means:
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(B)
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in shares of Company Stock owned by the Participant valued at their Fair Market Value on the effective date of such exercise; or
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(C)
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by any such other methods as the Committee may from time to time authorize. In the case of a Participant who is subject to Section 16 of the Exchange Act, the Company may require that the method of making such payment be in compliance with Section 16 of the Exchange Act and the rules and regulations thereunder.
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(iv)
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Subject to an agreement between a Participant and the Company to the contrary, certificates for shares of Company Stock purchased upon the exercise of an Option shall be issued in the name of or for the account of the Participant or other person entitled to receive such shares, and delivered to the Participant or such other person as soon as practicable following the date on which the Option is exercised.
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(d)
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Limitations on Incentive Stock Options.
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(i)
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To the extent that the aggregate Fair Market Value of shares of Company Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of the Company or a Subsidiary shall exceed $100,000, such Options shall be treated as Nonqualified Stock Options. Such Fair Market Value shall be determined as of the date on which each such Incentive Stock Option is granted.
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(ii)
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No Incentive Stock Option may be granted to an individual if, at the time of the proposed grant, such individual owns (or is deemed to own under the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company unless (A) the exercise price of such Incentive Stock Option is at least one hundred ten percent (110%) of the Fair Market Value of a share of Company Stock at the time such Incentive Stock Option is granted and (B) such Incentive
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(e)
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Effect of Termination of Employment.
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(i)
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In the event that the employment or service of a Participant with the Company and its Affiliates shall terminate for any reason other than (i) Cause, (ii) death, or (iii) Disability, the Options granted to such Participant, to the extent that they are exercisable at the time of such termination, shall remain exercisable for such period as may be provided in the Agreement, but in no event following the expiration of its term. The treatment of any Option that is unexercisable as of the date of termination shall be as set forth in the Agreement.
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(ii)
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In the event that the employment or service of a Participant with the Company and its Affiliates shall terminate on account of the death or Disability of the Participant, Options granted to such Participant that are outstanding and exercisable as of the date of death or Disability shall remain exercisable, as the case may be, by the Participant or the Participant’s legal representatives, heirs or legatees for such period as may be provided in the Agreement, but in no event following the expiration of its term. The treatment of any Option that is unexercisable as of the date of termination shall be as set forth in the Agreement.
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(iii)
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In the event of the termination of a Participant’s employment or service for Cause, all outstanding Options granted to such Participant shall expire at the commencement of business on the date of such termination.
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(iv)
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The Committee in its sole discretion may vary any of the provisions of this Section 7(e).
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(a)
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Price.
At the time of the grant of shares of Restricted Stock, the Committee shall determine the price (if any), which, to the extent required by law, shall not be less than the par value of a share of Company Stock, to be paid by the Participant for each share of Restricted Stock subject to the Award.
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(b)
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Vesting Date.
At the time of the grant of shares of Restricted Stock, the Committee shall establish a Vesting Date or Vesting Dates with respect to such shares. The Committee may divide such shares into classes and assign a different Vesting Date for each class. Provided that all conditions to the vesting of a share of Restricted Stock imposed pursuant to Section 8(c) are satisfied, and except as provided in Section 8(h), upon the occurrence of the Vesting Date with respect to a share of Restricted Stock, such share shall vest and the restrictions of Section 8(d) shall lapse.
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(c)
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Conditions to Vesting.
At the time of the grant of shares of Restricted Stock, the Committee may impose such restrictions or conditions to the vesting of such shares as it, in its sole discretion, deems appropriate.
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(d)
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Restrictions on Transfer Prior to Vesting.
Unless the Committee determines otherwise, prior to the vesting of a share of Restricted Stock, no transfer of a Participant’s rights with respect to such share, whether voluntary or involuntary, by operation of law or otherwise, shall be permitted. Unless the Committee determines otherwise, immediately upon any attempt to transfer such rights, such share, and all of the rights related thereto, shall be forfeited by the Participant.
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(e)
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Dividends on Restricted Stock.
Dividends on Restricted Stock shall be payable at the time and pursuant to the payment schedule, or reinvested in shares of Company Stock, as specified by the Committee at the time of grant in the Agreement relating to such Award, subject to the requirements of Section 409A to the extent applicable, or, if the Committee does not provide a time and schedule of payment at the time of grant, any dividends shall be payable in a lump sum on the date the dividend on Company Stock is payable to shareholders generally.
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(f)
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Issuance of Certificates.
Reasonably promptly after the date of grant with respect to shares of Restricted Stock, the Company shall cause to be issued a stock certificate (or make a book entry transfer), registered in the name of or for the account of the Participant to whom such shares were granted, evidencing such shares. Each such stock certificate and book entry statement shall bear a legend substantially in the following form:
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(g)
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Consequences of Vesting.
Upon the vesting of a share of Restricted Stock pursuant to the terms hereof, the restrictions of Section 8(d) shall lapse with respect to such share. Reasonably promptly after a share of Restricted Stock vests, the Company shall cause to be delivered to the Participant to whom such shares were granted a certificate evidencing such share, free of the legend set forth in Section 8(f).
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(h)
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Effect of Termination of Employment.
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(i)
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Except as otherwise provided in the applicable Agreement, upon the termination of a Participant’s employment or service for any reason other than Cause, any and all unvested shares of Restricted Stock shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company. In the event of a forfeiture of shares pursuant to this Section 8(h), the Company shall repay to the Participant (or the Participant’s estate) any amount paid by the Participant for such shares, without interest. In the event that the Company requires a return of shares, it shall also have the right to require the return of all dividends paid on such shares, other than dividends actually paid to the Participant in cash, whether by termination of any escrow arrangement under which such dividends are held or otherwise.
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(ii)
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In the event of the termination of a Participant’s employment or service for Cause, all shares of Restricted Stock granted to such Participant which had not vested as of the date of such termination shall immediately be forfeited and returned to the Company, together with any dividends paid on such shares, other than dividends actually paid to the Participant in cash, in return for which the Company shall repay to the Participant any amount paid by the Participant for such shares, without interest.
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(a)
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Vesting Date.
At the time of the grant of Restricted Stock Units, the Committee shall establish a Vesting Date or Vesting Dates with respect to such units. The Committee may divide such units into classes and assign a different Vesting Date for each class. Provided that all conditions to the vesting of a Restricted Stock Unit imposed pursuant to Section 9(c) are satisfied, and except as provided in Section 9(e), upon the occurrence of the Vesting Date with respect to a Restricted Stock Unit, such unit shall vest.
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(b)
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Issuance of Shares.
No shares of Company Stock (or other property) shall be issued at the time Restricted Stock Units are granted. Upon the lapse or waiver of restrictions and the restricted period relating to Restricted Stock Units and no later than 30 days thereafter (or at such later time as may be determined by the Committee and specified at the time of grant in the Agreement relating to such Award, in accordance with the requirements of Section 409A to the extent applicable), shares of Company Stock shall be issued to the holder of the Restricted Stock Units and evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates.
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(c)
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Conditions to Vesting.
At the time of the grant of Restricted Stock Units, the Committee may impose such restrictions or conditions to the vesting of such units as it, in its sole discretion, deems appropriate, to be contained in the Agreement.
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(d)
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Dividend Equivalents.
Dividend Equivalents shall be credited to a Participant in respect of Restricted Stock Units held by the Participant. Such Dividend Equivalents shall be converted into
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(e)
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Effect of Termination of Employment.
Except as otherwise provided in the applicable Agreement, Restricted Stock Units that have not vested, and any Dividend Equivalents credited to such Restricted Stock Units, shall be forfeited upon the Participant’s termination of employment for any reason.
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(a)
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Grant of SARs.
The Committee may grant SARs in such number and on such terms and conditions as the Committee shall determine in its sole discretion.
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(b)
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Grant Price.
The grant price of an SAR shall be established by the Committee and shall not be less than the Fair Market Value of a share of Company Stock on the date of grant of the SAR.
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(c)
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Exercise.
SARs may be exercised upon whatever terms and conditions the Committee, in its sole discretion, imposes upon them.
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(d)
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Term of SARs.
The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion, provided that such term shall not exceed ten (10) years.
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(e)
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Payment of SAR Amount.
Upon exercise of an SAR, a Participant shall be entitled to receive payment from the Company in an amount determined by multiplying:
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(i)
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the difference between the Fair Market Value of a share of Company Stock on the date of exercise over the grant price; by
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(ii)
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the number of shares of Company Stock with respect to which the SAR is exercised.
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(a)
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Performance Vesting.
The Committee in its sole discretion may condition the vesting or exercisability of any Award granted under the Plan on the attainment of performance goals that are pre-established by the Committee and that are based, for any period specified by the Committee in its sole discretion, on one or more of the following criteria: new premium sales; premium income; investment income; revenues; total insurance benefits (cash claims, increase in future benefits and incurred but not reported claims); expense levels; premium payment levels; persistency rate (based on premiums or policies); policy renewals; profit margins; operating earnings (excluding in the Committee’s sole discretion the effects of one or more of the following items: realized gains or losses on investments, the impact from passive derivative activities and hedging, the change in fair value of the interest rate component of cross-currency swaps, and items considered by the Committee to be nonrecurring in nature such as restructuring or subsidiary conversion charges, assessments by a state guaranty association or similar entity, or other nonrecurring charges, or items excluded from the presentation of operating earnings in the information filed or furnished by the Company with the United States Securities and Exchange Commission from time to time); net earnings (either before or after provision for the cumulative effect of required accounting changes for the applicable period); return on equity (operating earnings excluding the impact of foreign exchange divided by the average of common shareholders’ equity in the Company as of the beginning and end of the applicable period, excluding in the Committee’s sole discretion accumulated comprehensive income as recognized under ASC 320); new money investment yield;
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(b)
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Change in Control.
Unless an employment agreement between the Company or an Affiliate and the Participant provides otherwise, but in any event subject to the provisions of Section 3(d) hereof, in the event that within 24 months of a Change in Control, the Company shall cease to employ the Participant due to a termination of employment other than by (i) the Company for Cause, or (ii) the Participant without Good Reason, then:
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(i)
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any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested, except that as to each Award with respect to which performance goals are imposed, a pro rata portion of such Award (based on the number of full and partial months that have elapsed with respect to each performance period) shall become fully exercisable and vested as of the date of such termination, and any performance goals imposed with respect to Awards shall be measured as of the date of such termination of employment; and
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(ii)
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the restrictions, deferral limitations, payment conditions, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested, except that as to each Award with respect to which performance goals are imposed, a pro rata portion of such Award (based on the number of full and partial months that have elapsed with respect to each performance period) shall be deemed fully vested and any performance goals imposed with respect to Awards shall be measured as of the date of such termination of employment.
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(a)
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Annual Awards.
Awards shall (or in the case of clause (ii), below, may) be granted to Non-employee Directors as provided in the following provisions of this Section 12(a) and otherwise on the same terms and conditions as apply under the other provisions of this Plan, provided that with respect to such Awards, the Board of Directors (exclusive of the Non-employee Director to whom
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(i)
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Each person who first becomes a Non-employee Director on or after the Effective Date shall be granted on the date such person first becomes a Non-employee Director either a Nonqualified Stock Option, a Stock Appreciation Right, Restricted Stock, or a combination thereof, in any event having a value as of the date of grant (as reasonably determined in good faith by the Board of Directors or its designee) not in excess of the value of an Option covering an aggregate of 10,000 shares of Company Stock (subject to adjustment as provided in Section 3(c) hereof); provided, however, that no such Award shall be granted to a director who previously did not qualify as a Non-employee Director but subsequently becomes a Non-employee Director solely as a result of the termination of his or her status as an employee of the Company or its Affiliates.
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(ii)
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Each Non-employee Director (including any director who previously did not qualify as a Non-employee Director but who subsequently becomes a Non-employee Director) may be granted Nonqualified Stock Options, Stock Appreciation Rights, Restricted Stock, or a combination thereof from time to time (but in the case of any Non-employee Director who was granted an Award pursuant to clause (i), above, not earlier than the first fiscal year of the Company following the fiscal year of the Company in which such Award was made pursuant to clause (i), above) with a value as of the date of grant (as reasonably determined in good faith by the Board of Directors or its designee) not in excess of $475,000.
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(b)
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Awards in Lieu of Fees.
The Board of Directors may provide that all or a portion of a Non-employee Director’s annual retainer and/or meeting fees shall be payable in the form of an Award on the same terms and conditions as apply to Awards under the other provisions of this Plan, provided that any such Award shall have a value as of the date of grant (as reasonably determined in good faith by the Board of Directors or its designee) not in excess of the annual retainer and/or meeting fee in respect of which it is made.
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(a)
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R
egistration and Delivery of Shares.
Neither the Company nor its Affiliates shall be under any obligation to effect the registration pursuant to the Securities Act of any interests in the Plan or any shares of Company Stock to be issued hereunder or to effect similar compliance under any state laws. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be issued or delivered any certificates evidencing shares of Company Stock pursuant to the Plan unless and until the Company is advised by its counsel that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Company Stock are traded. The Committee may require, as a condition of the issuance and delivery of certificates evidencing
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(b)
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Limitations on Transfer.
The transfer of any shares of Company Stock hereunder shall be effective only at such time as counsel to the Company shall have determined that the issuance and delivery of such shares is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which shares of Company Stock are traded. The Committee may, in its sole discretion, defer the effectiveness of any transfer of shares of Company Stock hereunder in order to allow the issuance of such shares to be made pursuant to registration or an exemption from registration or other methods for compliance available under federal or state securities laws. The Committee shall inform the Participant in writing of its decision to defer the effectiveness of a transfer. During the period of such deferral in connection with the exercise of an Option or SAR, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.
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(a)
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General Prohibition Upon Transfer.
Upon the death of a Participant or Non-employee Director, outstanding Awards granted to such Participant or Non-employee Director may be exercised only by the executor or administrator of the Participant’s or Non-employee Director’s estate or by a person who shall have acquired the right to such exercise by will or by the laws of descent and distribution. No transfer of an Award by will or the laws of descent and distribution shall be effective to bind the Company unless the Committee shall have been furnished with (i) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer, and (ii) an agreement by the transferee to comply with all the terms and conditions of the Award that are or would have been applicable to the Participant or Non-employee Director and to be bound by the acknowledgments made by the Participant or Non-employee Director in connection with the grant of the Award.
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(b)
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Certain Transfers Permitted.
During the lifetime of a Participant or Non-employee Director, the Committee may, in its sole discretion, permit the transfer of an outstanding Option, unless such Option is an Incentive Stock Option and the Committee and the Participant intend that it shall retain such status. Subject to the approval of the Committee and to any conditions that the Committee may prescribe, a Participant or Non-employee Director may, upon providing written notice to the Secretary of the Company, elect to transfer any or all Options granted to such Participant pursuant to the Plan to members of his or her immediate family (including, but not limited to, children, grandchildren and spouse or to trusts for the benefit of such immediate family members or to partnerships in which such family members are the only partners) or to other persons or entities approved by the Committee; provided, however, that no such transfer by any Participant or Non-employee Director may be made in exchange for consideration.
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