DYNEX CAPITAL, INC. STOCK APPRECIATION RIGHTS AGREEMENT
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Exhibit
10.3
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DYNEX
CAPITAL, INC.
2004
STOCK INCENTIVE PLAN
THIS
AGREEMENT, dated this 2nd
day of
January, 2005 between DYNEX CAPITAL, INC. (the “Corporation”), and ___________
(the “Recipient”).
WHEREAS,
pursuant to the DYNEX CAPITAL, INC. 2004 Stock Incentive Plan (the “Plan”), the
Committee wishes to award the Recipient for contributions to the achievement
of
specified objectives and results for the Corporation during the year ended
December 31, 2004, and also wishes to enable the Recipient to participate
in its future success and to associate their interests with those of the
Corporation and its shareholders; and
WHEREAS,
the Recipient desires to accept said award in accordance with the terms and
provisions of the Plan and this Agreement.
NOW
THEREFORE, in consideration of the premises and of the mutual covenants and
agreements hereinafter set forth, the Corporation and the Recipient agree as
follows:
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1.
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Grant
of SAR.
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Subject
to the terms and conditions of the Plan and subject further to the terms and
conditions set forth herein, the Corporation hereby awards to the Recipient
on
January 3, 2005 (“Date of Grant”) SARs with respect to ________ shares of Common
Stock with an Initial Value of $7.81 per share which is the Fair Market Value
of
Common Stock on the Date of Grant. These SARs will be exercisable as hereafter
provided. Capitalized terms not otherwise defined herein have the meanings
given
to them in the Plan.
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2.
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Exercise
of SARs.
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(a) Except
as
provided in subsections (b), (c) and (d) below, the SARs awarded in this
Agreement may be exercised in whole or in part in accordance with the following
schedule:
(i) The
first
installment for ________ SARs may be exercised in whole or in part beginning
January 3, 2006;
(ii) The
second installment for ________ SARs may be exercised in whole or in part
beginning January 3, 2007;
(iii) The
third
installment for ________ SARs may be exercised in whole or in part beginning
January 3, 2008; and
(iv) The
fourth installment for ________ SARs may be exercised in whole or in part
beginning January 3, 2009.
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To
the
extent not exercised, installments shall accumulate and be exercisable by the
Recipient until termination under section 6 below.
(b) The
Compensation Committee may in its discretion accelerate the time at which the
SARs may be exercised.
(c) Notwithstanding
the foregoing, the SARs awarded by this Agreement shall immediately be fully
exercisable upon a Change of Control of the Corporation and the Corporation
may
make a cash payment in settlement of such SARs within ten (10) business days
following the Control Change Date based on the Fair Market Value of the Common
Stock on the Control Change Date.
(d) In
addition, upon Retirement (as defined in section 6 below), the Recipient will
become vested in the SARs in accordance with the following schedule to the
extent such SARs are not fully vested in accordance with (a) above.
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Years
of Service
With
the Corporation
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Vesting
Percentage
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5
or more
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100%
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4
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80%
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3
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60%
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2
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40%
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1
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20%
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3.
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Method
of Exercising SARs.
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The
SARs
shall be exercised by delivery of a written Notice of Exercise stating the
number of SARs the Recipient desires to exercise. The form of Notice of Exercise
is attached to this Agreement as Exhibit A. The exercise date shall be the
later
of the date specified in the Notice of Exercise or the date such notice is
received by the Corporation. Notices should be delivered to Dynex Capital,
Inc.,
at its Corporate headquarters, Attention: Chief Financial Officer.
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4.
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Payment
to Recipient.
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The
payment to Recipient upon the exercise of the SARs shall be made solely in
cash.
Upon the exercise of the SARs, the Recipient shall receive a cash payment from
the Corporation which is equal to (i) the excess of the Fair Market Value of
a
share of Common Stock on the date of exercise over the Initial Value times
(ii)
the number of SARs exercised.
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5.
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Certain
Tax Matters.
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Unless
the Recipient pays to the Corporation in cash the withholding for any federal,
state, or local taxes on the income realized from the exercise of the SAR prior
to or at the time of exercise, the Corporation shall withhold from the cash
payment the amount of taxes to be withheld by the Corporation.
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6.
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Termination.
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The
SARs
granted pursuant to this Agreement shall terminate upon the earliest of the
following events:
(a) December
31, 2011.
(b) The
expiration of ninety (90) days after the date of termination of the Recipient’s
employment, other than termination of employment on account of death, disability
or Retirement. During this period, the Recipient shall have the right to
exercise the SARs to the extent it is exercisable on the Recipient’s termination
of employment.
(c) The
expiration of twelve (12) months after the date of death of the Recipient if
death occurs while the Recipient is in the employ of the Corporation. During
this period, the Recipient’s estate, personal representative or beneficiary
shall have the right to exercise the SARs to the extent it is exercisable on
the
date of Recipient’s death.
(d) The
expiration of twelve (12) months after the date the Recipient’s employment is
terminated due to disability. During this period, the Recipient shall have
the
right to exercise the SARs to the extent it is exercisable on the date of
termination due to disability.
(e) The
expiration of twelve (12) months after the date of the Recipient’s Retirement.
During this period, the Recipient shall have the right to exercise the SARs
to
the extent it is exercisable on the date of Retirement.
For
purposes of this Agreement, Retirement means termination of his employment
with
the Corporation on or after age 62.
The
Board
or the Committee shall have absolute discretion to determine whether any
termination of Recipient’s employment or authorized leave of absence or absence
due to military or government service is to be considered as Retirement for
purposes of this Agreement and whether an authorized leave of absence or absence
due to military or government service shall constitute a termination of
employment for the purposes of this Agreement. Any determination made by the
Board or the Committee with respect to any matter referred to in this paragraph
6 shall be final and conclusive.
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7.
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Nontransferability.
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The
SARs
granted under this Agreement shall be nontransferable except by will or the
laws
of descent and distribution. The SARs are exercisable during the Recipient’s
lifetime only by the Recipient.
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8.
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Rights
as a Shareholder.
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3
The
Recipient shall have no rights as a shareholder with respect to any Common
Stock
covered by the SARs prior to the exercise of the SAR.
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9.
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Recapitalization.
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If
the
Corporation shall effect a subdivision or consolidation of shares of Common
Stock, or other capital readjustment, or the payment of a stock dividend, or
other increase or decrease in the number of shares of Common Stock outstanding,
without receiving compensation therefore, then (a) in the event of any increase
in the number of shares of Common Stock outstanding, the number of SARs on
Common Stock then remaining hereunder shall be proportionately increased (except
that any fractional share resulting from any such adjustment shall be excluded
from the operation of this Agreement), and the cash consideration payable per
share shall be proportionately reduced) but not below the par value of such
share), and (b) in the event of a reduction in the number of shares of Common
Stock outstanding, the number of SARs on Common Stock then remaining hereunder
shall be proportionately reduced (except that any fractional share resulting
from any such adjustments shall be excluded from the operation of this
Agreement), and the cash consideration payable per share shall be
proportionately increased.
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10.
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Merger,
Consolidation or Share Exchange.
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After
any
merger, consolidation or share exchange in which the Corporation is the
surviving or resulting corporation, the Recipient shall be entitled, upon the
exercise of a SAR, to receive the consideration to which the Recipient would
have been entitled, if, immediately prior to such merger, consolidation or
share
exchange, the Recipient had been the holder of record of a number of shares
of
Common Stock equal to the number of SARs exercised. If the Corporation is not
the surviving or resulting corporation in any merger, consolidation or share
exchange, the surviving or resulting corporation shall tender SARs on terms
and
conditions that substantially preserve the rights and benefits under this
Agreement.
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11.
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Certain
Restrictions.
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(a) It
is
understood and recognized by the Recipient and the Corporation that the vendors,
customers, employees, consultants, and agents are an integral part of the
Corporation’s business. The Recipient and the Corporation also recognize that an
important part of the Recipient’s duties with the Corporation will be the
Recipient’s dealings with customers, vendors and others (including other
employees) having business relationships with the Corporation and its
affiliates. It is therefore understood and agreed by the parties that because
of
the nature of the Corporation’s business it is necessary to afford maximum
protection to the Corporation from the loss of any such entities or individuals.
Consequently, as a material inducement to and as consideration for the
Corporation’s grant of the SARs hereunder to the Recipient, the Recipient
covenants and agrees that unless the Recipient’s employment is terminated
without Cause as hereinafter defined, at all times during the Recipient’s
employment with the Corporation or any of its affiliates (the “Employment
Period”) and, in the case of actions specified in (ii), (iii), and (iv) below,
for a period of one year after the termination of the Recipient’s employment for
whatever reason, the Recipient shall not, in any capacity whatsoever, whether
directly or
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indirectly,
through any entity, family member or otherwise, on his own behalf, or on behalf
of any other person, firm, partnership, corporation, limited liability company,
association or other entity (collectively, “Person”):
(i) own,
manage, invest, participate or engage in any activity which compromises or
is
similar to the Corporation’s business activities anywhere in the United States,
unless (a) the ownership is less than 1% of a publicly traded entity with a
market value in excess of $100 million, or (b) specifically approved in writing
by the President or Chairman of the Board;
(ii) suggest
to, solicit, induce or persuade any vendor or customer of the Corporation or
its
affiliates to discontinue doing business with, or to change the terms or
conditions of such relationship with the Corporation or its affiliates, or
otherwise disparage, disrupt or disturb the relationship of the Corporation
or
its affiliates with such vendor or customer;
(iii) suggest
to, solicit, induce or persuade any vendor or customer of the Corporation or
its
affiliates to do business with any other Person which conducts or is planning
to
conduct a business that is in competition with or similar to the Corporation’s
business activities; provided
however, the
foregoing will not apply after the Employment Period (a) to any customer that
represents less than 2% of the Corporation’s volume in that particular line of
business over the prior twelve month period, or (b) to any vendor whose products
or services are already used widely in that particular business area by other
Persons;
(iv) suggest
to, solicit, induce or persuade any employee or consultant of the Corporation
or
its affiliates to leave the employ or engagement of the Corporation or its
affiliates or hire any employee of the Corporation or its affiliates;
and
(v) participate
in planning for or consult with any business that is or would be in competition
with or similar to any business of the Corporation or its
affiliates.
(b) The
Recipient further covenants and agrees that for a period of one year after
the
Employment Period, the Recipient shall not seek employment with or be employed
by any former employee of the Corporation who terminated employment with the
Corporation within one year of the end of the Recipient’s Employment Period, in
any capacity whatsoever, whether directly or indirectly, through any Person
if
the Recipient and the former employee of the Corporation are employed in the
same business activity as they were when they were employees of the
Corporation.
(c) Reasonableness
of Restrictions.
Recipient has carefully read and considered the provisions of this Section
11
and having done so agrees that the restrictions set forth in this section are
fair and reasonable and are reasonably required for the protection of the
Corporation and its business. Notwithstanding anything to the contrary in this
Section 11, the restrictions set forth in this section shall not apply after
the
Employment Period if the Corporation is not actively engaged in the business
activity in which the Recipient was engaged by the Corporation.
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(d) Invalidity,
Etc.
If any
covenant or provision contained in any part of Section 11(a) and/or 11 (b)
hereof is found by a court having jurisdiction to be unreasonable in duration,
geographic scope or charter of restrictions, the covenant or provision shall
not
be rendered unenforceable thereby, but rather the duration, geographical scope
or character of restriction, the covenant or provision shall be deemed reduced
or modified with retroactive effect to render such covenant or provision
reasonable and such covenant or provision shall be enforced as modified. lithe
court having jurisdiction will not review the covenant or provision, the parties
shall mutually agree to a revision having an effect as close as permitted by
law
to the provision declared unenforceable. The Recipient agrees that if a court
having jurisdiction determines, despite the express intent of the Recipient,
that any portion of the restrictive covenants contained in Section 11 (a) and/or
11 (b) hereof are unenforceable, the remaining provisions shall be valid and
enforceable.
(e) Equitable
Relief.
The
Recipient recognizes and acknowledges that if he breaches the provisions of
Section 11 (a), damages to the Corporation would be difficult if not impossible
to ascertain, and because of the immediate and irreparable damage and loss
that
may have been caused to the Corporation for which it would have no adequate
remedy, it is therefore agreed that the Corporation, in addition to and without
limiting any other remedy or right it may have, shall be entitled to have an
injunction or other equitable relief in a court of competent jurisdiction,
enjoining any such breach, and the Recipient hereby waives any and all defenses
he may have on the grounds of competence of a court to grant such an injunction
or other equitable relief. The existence of this right shall not preclude the
applicability or exercise of any other rights and remedies at law or in equity
which the Corporation may have.
(f) Definition
of “Cause”.
When
used in this Section 11, the word “Cause” shall mean any of the
following:
(i) the
willful and continued failure of the Recipient to perform substantially the
Recipient’s duties with the Corporation (other than any such failure resulting
from incapacity due to physical or mental illness), if, within 30 days of
receiving a written demand for substantial performance from the Board or the
President of the Corporation which specifically identifies the manner in which
the Recipient has not substantially performed his duties, the Recipient shall
have failed to cure such performance or to take measures
to cure the performance,
or
(ii) the
willful engaging by the Recipient in illegal conduct or gross misconduct which
is materially and demonstrably injurious to the Corporation.
For
purposes of this provision, no act or failure to act, on the part of the
Recipient, shall be considered “willful” unless it is done, or omitted to be
done, by the Recipient in bad faith or without reasonable belief that the
Recipient’s action or omission was in the best interests of the Corporation. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly
adopted by the Board or a committee thereof, or based upon the advice of counsel
for the Corporation shall be conclusively presumed to be done, or omitted to
be
done, by the Recipient in good faith and in the best interests of the
Corporation. The cessation of employment of the
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Recipient
shall not be deemed to be for Cause unless and until there shall have been
delivered to the Recipient a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of
the
Board at a meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Recipient and the Recipient is given an
opportunity, together with counsel, to be heard before the Board), finding
that,
in the good faith opinion of the Board, the Recipient is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
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12.
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No
Rights to Continued Employment.
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Nothing
in this Agreement or in the Plan shall confer any right to continued employment
with the Corporation or its subsidiaries nor restrict the termination of the
employment relationship with the Recipient at any time.
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13.
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Recipient’s
Agreement.
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Notwithstanding
any other provision of this Agreement, Recipient agrees that Recipient will
not
exercise any SAR and the Corporation shall not be obligated to make any payment
in the form of Common Stock, if counsel to the Corporation determines such
exercise or payment would violate any law or regulation of any governmental
authority or agreement between the Corporation and any securities exchange
upon
which the Common Stock is listed.
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14.
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Other.
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This
Agreement does not amend or supersede the provisions of any other written
employment agreement between the Corporation, including its affiliates, and
the
Recipient. In the event that any term or provision of this Agreement conflicts
with such other employment contract, the terms and provisions of the employment
contract shall control, as long as such employment contract is in
effect.
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15.
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Resolution
of Disputes.
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Any
dispute or disagreement which shall arise under, or as a result of, or pursuant
to, this Agreement other than for any dispute or disagreement relating to
Section 11 shall be determined by the Board or the Committee in its absolute
discretion, and any determination by the Board or the Committee under or
pursuant to this Agreement and any interpretation by the Board of Directors
or
the Committee of the terms of this Agreement shall be final, binding and
conclusive on all persons affected thereby.
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16.
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Amendments.
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The
Committee shall have the right, in its absolute discretion, to alter or amend
this Agreement in any manner, and any alteration or amendment of the Agreement
by the Committee shall, upon adoption thereof by the Committee, become and
be
binding and conclusive on all persons affected thereby without written notice
to
the Recipient of any alteration or amendment of this Agreement by the Committee
as promptly as practical after the adoption thereof.
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Notwithstanding
the foregoing provisions of this paragraph 16, no alteration or amendment of
this Agreement shall be made that would adversely affect the rights of the
Recipient without the Recipient’s consent.
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17.
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Construction.
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This
Agreement has been entered into in accordance with the terms of the Plan, and
wherever a conflict may arise between the terms of this Agreement and the terms
of the Plan, the terms of the Plan shall control.
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18.
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Governing
Law.
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This
Agreement shall be governed by and construed and enforced in accordance with
the
laws of the Commonwealth of Virginia.
IN
WITNESS WHEREOF,
the
Corporation has caused this Agreement to be executed by its duly authorized
officer, and the Recipient has hereunto set his hand and seal, all on the day
and year first above written.
DYNEX
CAPITAL, INC.
By:
THE
RECIPIENT
Date:
8
DYNEX
CAPITAL, INC.
2004
Stock Incentive Plan
STOCK
APPRECIATION RIGHTS
NOTICE
OF EXERCISE
Chief
Financial Officer
Dynex
Capital, Inc.
0000
Xxx
Xxxx
Xxxxx
000
Xxxx
Xxxxx, Xxxxxxxx 00000
Phone:
(000) 000-0000
Telecopy:
(000) 000-0000
I
hereby
exercise ________ vested SARs pursuant to the SAR Agreement dated _____, ____,
at an exercise price of $____ per share.
Dated:
Recipient’s
Signature
Recipient’s
Name
