SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
Federated Investors, Inc.
------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------
FEDERATED INVESTORS, INC.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
INFORMATION STATEMENT
March 31, 2002
INTRODUCTION
This Information Statement is furnished to the shareholders (the
"Shareholders") of Federated Investors, Inc. ("Federated") by the Board of
Directors (the "Board") in connection with the Annual Meeting of the
Shareholders to be held on Wednesday, April 24, 2002 at the Westin Convention
Center Pittsburgh, Allegheny Grand Ballroom, Third Floor, 1000 Penn Avenue,
Pittsburgh, Pennsylvania, at 10:00 a.m. local time. Action will be taken at the
Annual Meeting for (1) the election of directors; (2) approval of Federated's
Annual Incentive Plan; (3) approval of Federated's amended Stock Incentive Plan;
and (4) any other business that properly comes before the meeting.
Federated has shares of both Class A Common Stock, no par value per share
(the "Class A Common Stock") and Class B Common Stock, no par value per share
(the "Class B Common Stock") issued and outstanding. The Class B Common Stock is
listed on the New York Stock Exchange under the symbol FII. Except under certain
limited circumstances, the entire voting power of Federated is vested in the
holders of the outstanding shares of the Class A Common Stock. All of the
outstanding shares of Class A Common Stock are held by a Voting Shares
Irrevocable Trust, dated May 31, 1989 (the "Voting Trust"), and will be voted in
person at the Annual Meeting. Accordingly, Federated is not soliciting proxies
for the Annual Meeting, but is providing this Information Statement to its
Shareholders in accordance with Regulation ss.240.14c-2 of the Securities
Exchange Act of 1934 (the "Exchange Act").
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
This Information Statement is being mailed to the Shareholders on or about
March 31, 2002. Federated's 2001 Annual Report to Shareholders accompanies this
Information Statement.
TABLE OF CONTENTS
Page No.
VOTING SECURITIES.................................................... 3
BOARD OF DIRECTORS AND ELECTION OF DIRECTORS......................... 4
Meetings and Committees of the Board............................. 7
Audit Committee.................................................. 7
Audit Committee Report........................................... 7
Compensation Committee........................................... 8
Report of Compensation Committee on Executive Compensation....... 8
Compensation of Directors........................................ 10
EXECUTIVE COMPENSATION.............................................. 11
Summary Compensation Table....................................... 11
Option Grants in Last Year....................................... 13
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR 14
Values
Employment Agreements............................................ 14
Comparative Stock Performance.................................... 15
Certain Relationships and Related Transactions................... 16
SECURITY OWNERSHIP.................................................. 17
Class A Common Stock............................................. 17
Class B Common Stock............................................. 18
Section 16(a) Beneficial Ownership Reporting Compliance.......... 20
INDEPENDENT AUDITORS................................................ 21
ANNUAL INCENTIVE PLAN............................................... 22
Summary of the Annual Incentive Plan............................. 22
STOCK INCENTIVE PLAN................................................ 26
Summary of the Stock Incentive Plan.............................. 26
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING....................... 32
EXHIBIT A - ANNUAL INCENTIVE PLAN................................... 33
EXHIBIT B - STOCK INCENTIVE PLAN.................................... 39
VOTING SECURITIES
Only holders of record of Class A Common Stock at the close of business on
March 18, 2002 ("Record Date") will be entitled to vote at the Annual Meeting or
any adjournment or adjournments thereof. On that date, 9,000 shares of Class A
Common Stock were outstanding, all of which were held by the Voting Trust, the
three trustees of which are John F. Donahue, his wife, and his son J.
Christopher Donahue, for the benefit of the members of the family of John F.
Donahue.
The presence of the holder of the Class A Common Stock, constituting all of
the votes that all Shareholders are entitled to cast on a particular matter will
constitute a quorum for the transaction of business at the Annual Meeting. Any
business transacted at the meeting shall be authorized upon receiving the
affirmative vote of a majority of the votes cast by all Shareholders entitled to
vote thereon. Under the terms of the Voting Trust, the trustees are authorized
to vote shares owned by the Voting Trust, and as a result, all of the
outstanding shares of Class A Common Stock will be voted in person at the Annual
Meeting. The Voting Trust is entitled to cast one vote per share of Class A
Common Stock. Directors will be elected by a plurality of the votes cast.
Cumulative voting is not allowed. The trustees of the Voting Trust have advised
that they intend to vote in favor of all the directors nominated by the Board
and vote to approve the Annual Incentive Plan and Stock Incentive Plan approved
by the Board.
BOARD OF DIRECTORS AND ELECTION OF DIRECTORS
......The Board currently consists of eleven members. Under Federated's
bylaws, directors are elected at each annual meeting and each director holds
office until the expiration of the term of one year for which he or she was
selected and until a successor is selected and qualified.
......The Board has nominated John F. Donahue, J. Christopher Donahue,
Arthur L. Cherry, Thomas R. Donahue, Michael J. Farrell, John B. Fisher, James
F. Getz, Eugene F. Maloney, John W. McGonigle, James L. Murdy, and Edward G.
O'Connor for election as directors. All of the nominees for director have
previously served as members of the Board.
John F. Donahue Mr. John F. Donahue was Chairman and Chief
Age 77 Executive Officer of Federated and a trustee of
Federated Investors, a Delaware business trust
(the "Trust") prior to the May 1998 merger of the
Trust into Federated, its wholly-owned subsidiary
(the "Merger"), and has continued as Chairman of
Federated following the consummation of the
Merger. He served as President of Federated from
1989 until 1993 and was a founder of the
predecessor to Federated. Mr. Donahue is Chairman
or President and a director or trustee of 44
investment companies managed by subsidiaries of
Federated. Mr. Donahue is the father of J.
Christopher Donahue and Thomas R. Donahue, each of
whom serves as an executive officer and director
of Federated.
J. Christopher Donahue Mr. J. Christopher Donahue was a trustee of the
Age 52 Trust from 1989 until the Merger and has been a
director of Federated since the consummation of
the Merger. He served as President and Chief
Operating Officer of Federated from 1993 until
April 1998, when he became President and Chief
Executive Officer. Prior to 1993, he served as
Vice President of Federated. He is President or
Executive Vice President and director, trustee or
managing general partner of 44 investment
companies managed by subsidiaries of Federated.
Mr. Donahue is the son of John F. Donahue and the
brother of Thomas R. Donahue.
Arthur L. Cherry Mr. Arthur L. Cherry was a trustee of the Trust
Age 48 from 1997 until the Merger and has been a director
of Federated since the consummation of the
Merger. He is the President and Chief Executive
Officer of Federated Services Company, a
wholly-owned subsidiary of Federated. Prior to
joining Federated in January 1997, he was a
managing partner of AT&T Solutions, former
president of Scudder Services Corporation, and a
managing director of Scudder, Stevens & Clark.
Thomas R. Donahue Mr. Thomas R. Donahue was a trustee of the Trust
Age 43 from 1995 until the Merger and has been a director
of Federated since the consummation of the
Merger. He has been Vice President of Federated
since 1993 and currently serves as Vice President,
Treasurer and Chief Financial Officer. Prior to
joining Federated, Mr. Donahue was in the venture
capital business, and from 1983 to 1987 was
employed by PNC Bank in its Investment Banking
Division. Mr. Donahue is the son of John F.
Donahue and the brother of J. Christopher Donahue.
Michael J. Farrell Mr. Michael J. Farrell was elected to the Board in
Age 52 August 1998. He is currently the President of
Farrell & Co., a merchant banking firm
specializing in heavy manufacturing companies. He
has also served in executive capacities for MK
Rail Corporation, Motor Coil Manufacturing Co. and
Season-All Industries. Mr. Farrell is a Certified
Public Accountant. Mr. Farrell currently serves
as a director of C-Cor.net Corp. In July
2001, Mr. Farrell assumed the responsibility of
CEO of Freedom Forge Corporation concurrent with
its filing for protection under Chapter 11 of the
U.S. Bankruptcy code.
John B. Fisher Mr. John B. Fisher has been a director of
Age 45 Federated since the consummation of the Merger.
He is President-Institutional Sales Division of
Federated Securities Corp., a wholly-owned
subsidiary of Federated, and is responsible for
the distribution of Federated's products and
services to investment advisors, insurance
companies, retirement plans and corporations.
James F. Getz Mr. James F. Getz has been a director of Federated
Age 55 since the consummation of the Merger. He serves
as President - Retail Sales Division of Federated
Securities Corp., a wholly-owned subsidiary of
Federated and is responsible for the marketing and
sales efforts in the trust and broker/dealer
markets. Mr. Getz is a Chartered Financial
Analyst.
Eugene F. Maloney Mr. Eugene F. Maloney was a trustee of the Trust
Age 57 from 1989 until the Merger and has continued as a
director of Federated since the consummation of
the Merger. He serves as a Vice President of
Federated, and provides certain legal, technical
and management expertise to Federated's sales
divisions, including regulatory and legal
requirements relating to a bank's use of mutual
funds in both trust and commercial environments.
John W. McGonigle Mr. John W. McGonigle was a trustee of the Trust
Age 63 from 1989 until the Merger and has been a director
of Federated since the consummation of the
Merger. Mr. McGonigle has served as Secretary of
Federated since 1989. He served as Vice President
of Federated from 1989 until August 1995, when he
became Executive Vice President. Mr. McGonigle
was President and CEO of Federated Investors
Management Company until 1999. He is Chairman of
Federated International Management Limited. Mr.
McGonigle was General Counsel of Federated until
1998 when he became the Chief Legal Officer.
Mr. McGonigle is Executive Vice President and
Secretary of the investment companies managed by
subsidiaries of Federated.
James L. Murdy Mr. James L. Murdy was elected to the Board in
Age 63 August 1998. He is currently President and Chief
Executive Officer of Allegheny Technologies
Incorporated, a diversified manufacturing
corporation, and, prior to becoming President he
served as Executive Vice President and Chief
Financial Officer of Allegheny Teledyne
Incorporated and Executive Vice President and
Chief Financial Officer of Allegheny Ludlum
Corporation. Mr. Murdy is a Certified Public
Accountant.
Edward G. O'Connor Mr. Edward G. O'Connor was elected to the Board in
Age 61 April 2001. Since 2000, Mr. O'Connor has served as
Special Counsel to the litigation department of
the law firm Eckert, Seamans, Cherin & Mellott LLC
("Eckert Seamans"). From 1973 to 1999, Mr.
O'Connor was a Member of Eckert Seamans. Mr.
O'Connor's legal practice focuses primarily on
products liability and commercial litigation.
Meetings and Committees of the Board
......In 2001, the Board met on six occasions. The Board has an Audit
Committee and a Compensation Committee. The Board does not have a Nominating
Committee.
.......Audit Committee
......The Audit Committee currently consists of Michael J. Farrell, James
L. Murdy and Edward G. O'Connor, none of whom is an officer or employee (or
former officer or employee) of Federated. Mr. Murdy is Chairman of the Audit
Committee. The Board has adopted a written charter for the Audit Committee. The
members of the Audit Committee are "Independent", as defined by the Listing
Standards of the New York Stock Exchange. The Audit Committee is responsible for
assisting the Board in fulfilling its statutory and fiduciary responsibilities
for the audit function of Federated and in monitoring its accounting and
financial reporting practices; determining that Federated has adequate
administrative, operational and internal accounting controls and that Federated
is operating in accordance with its prescribed procedures and codes of conduct;
determining that Federated has in place policies and procedures to enable it to
comply with applicable laws and regulations and that such compliance is
occurring; and providing general oversight for the internal and external audit
function. Its functions include recommending to the Board the appointment of
independent auditors and reviewing with the internal auditors and the
independent auditors their annual audit plans and monitoring their progress
during the year. In discharging its responsibilities, the Audit Committee is
entitled to rely upon the reports, findings and representations of Federated's
auditors, legal counsel and responsible officers. In 2001, the Audit Committee
met on five occasions.
Audit Committee Report
The Audit Committee (the "Committee") oversees Federated's financial
reporting process on behalf of the Board of Directors (the "Board"). Management
has the primary responsibility for the financial statements and the reporting
process including the systems of internal controls. In fulfilling its oversight
responsibilities, the Committee reviewed and discussed the audited financial
statements in the Annual Report with management including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity and completeness of
disclosures in the financial statements.
The Committee discussed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of Federated's accounting principles as
applied to the financial statements and such other matters as are required to be
discussed with the Committee under generally accepted auditing standards. In
addition, the Committee has received and discussed with the independent auditors
the written disclosures required by the Independence Standards Board Standard
No. 1 relating to the auditors' independence from management and Federated. The
Committee has considered whether the provisions of non-audit services by the
independent auditors is compatible with maintaining the independent auditors'
independence.
The Committee discussed with Federated's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
with the internal and independent auditors, with and without management present,
to discuss the results of their examinations, their evaluations of Federated's
internal controls, and the overall quality of Federated's financial reporting.
In reliance on the reviews and discussions referred to above, the committee
recommended to the Board (and the Board has approved) that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2001, for filing with the Securities and Exchange Commission. The
committee also recommended to the Board the selection of Federated's independent
auditors.
Respectfully Submitted:
James L. Murdy, Audit Committee Chairman
Michael J. Farrell, Audit Committee Member
Edward G. O'Connor, Audit Committee Member
.......Compensation Committee
......The Compensation Committee (the "Committee") currently consists of
Michael J. Farrell, James L. Murdy and J. Christopher Donahue as a non-voting
member. The Committee has established a sub-committee pursuant to Section 162(m)
of the Internal Revenue Code ("Section 162(m)") which consists solely of Mr.
Farrell and Mr. Murdy (the "Sub-Committee). Mr. Donahue is the President and
Chief Executive Officer of Federated. Mr. Farrell is Chairman of the Committee.
This committee, and where required by Section 162(m) and Section 16 of the
Securities Exchange Act, the Sub-Committee, establishes performance measures and
certifies achievement, recommends compensation levels of senior management,
awards options and other stock-based compensation, works with senior management
on benefit and compensation programs for Federated employees and monitors local
and national compensation trends to ensure Federated's compensation program is
competitive within the mutual fund industry. In 2001, the Committee met once.
Report of Compensation Committee on Executive Compensation
In 2001, the Committee established the 2001 salaries and the 2000 bonuses
for the Chief Executive Officer. In January 2002, the Sub-Committee established
the 2001 bonuses for the executive officers as well as performance measures, the
bonus pool and the percentage of such pool allowable to the named executives for
2002.
Federated's compensation program for executive officers (including the
Chief Executive Officer) consists primarily of salary and annual incentive
bonuses based upon the individual's and Federated's performance. Compensation of
the named executive officers is determined by the Sub-Committee with bonus
awards for 2001 made under the Executive Annual Incentive Compensation Plan and
the Stock Incentive Plan currently in effect. For 2002, subject to shareholder
approval, compensation and bonus awards will be made pursuant to the new Annual
Incentive Plan (the "Incentive Plan") and the Stock Incentive Plan as amended
(the "Stock Plan"). Consistent with compensation practices generally applied in
the investment management business, base salaries in many areas of
responsibility are intended to form a competitive percentage of total cash
compensation with a significant portion of compensation intended to be derived
from payments made under the Incentive Plan and the Stock Plan, provided, of
course, that the performance goals are met. As a general matter, the size of the
pool available for such bonus payments under the Incentive Plan is 7.5% of
operating profits of Federated, which consists of annual total revenues less
distributions to minority interests and less total expenses excluding
amortization of intangibles and debt expenses.
In determining the appropriate level of compensation, the Sub-Committee
acknowledges that the investment management business is highly competitive and
that experienced professionals have significant career mobility. Its members
believe that the ability to attract, retain, and provide appropriate incentives
for highly qualified and experienced personnel is critical to maintain
Federated's competitive position in the investment management business, and
thereby provide for the future success of Federated. The Sub-Committee believes
that competitive levels of cash compensation, together with equity and other
incentive programs that are consistent with stockholder interests, are necessary
for the motivation and retention of Federated's professional personnel.
Federated's compensation programs are keyed to achievement, as determined by the
Sub-Committee, of short and long-term performance goals.
The Sub-Committee believes that the opportunity to earn incentive
compensation motivates employees and ties their success to that of Federated.
The payment of incentive compensation in the form of stock of Federated further
aligns the interests of the management of Federated with those of its
stockholders and encourages them to focus on the long range growth and
development of Federated. In 2001, nine of the senior executives chose to have a
portion of their cash bonus paid in options on Class B Common Stock of
Federated. Options on 187,180 shares of Class B Common Stock were awarded
pursuant to this election at an exercise price equal to the market price on the
day the options were granted.
In determining the awards for 2001 the Committee considered a variety of
factors, including Federated's revenues, earnings and earnings per share for the
year. The Committee considered the performance of Federated's stock as compared
to the indices set forth in the performance graph included in this Information
Statement and investment performance and financial performance on a comparative
basis with other public companies in the investment management business.
Marketing and sales effectiveness and product performance were also reviewed.
The Committee took into consideration Federated's historical compensation
policies as well as industry compensation trends. In its review of compensation,
and, in particular, in determining the amount and form of actual awards for the
Chief Executive Officer and the other executive officers, the Committee
considered amounts paid to executive officers in prior years as salary, bonus
and other compensation, Federated's overall performance during the prior
periods, and its future objectives and challenges. Although the Committee
considered a number of different individual and corporate performance factors,
no specific weighting was given to any such factor.
The Committee has determined that Mr. J. Christopher Donahue will
participate in the Compensation Plan. Bonuses paid to Mr. J. Christopher Donahue
depend upon both his performance and that of Federated.
The Committee's goal is to maintain compensation programs which are
competitive within the investment management business. The Committee believes
that 2001 compensation levels disclosed in this Information Statement are
reasonable and appropriate in light of Federated's strong performance.
Executive officers also participate in a combined 401(k)/Profit Sharing
Plan and are entitled to receive medical, life and disability insurance coverage
and other corporate benefits available to most employees of Federated.
Respectfully Submitted:
Compensation Committee
Michael J. Farrell, Chairman
James L. Murdy
J. Christopher Donahue (non-voting)
Compensation of Directors
Members of the Board who are also employees of Federated do not receive
cash compensation for their services as directors. Members of the Board who are
not employees receive (i) $25,000 per year, payable in quarterly installments,
(ii) options to purchase 7,500 shares of Class B Common Stock upon initial
election to the Board, which are subject to a three-year vesting schedule, (iii)
2,250 options to purchase shares of Class B Common Stock annually, which vest
immediately upon grant, and (iv) $1,000 annually as compensation for Committee
Chairmanship. According to Federated's Stock Incentive Plan, all of the vested
options granted to outside directors are immediately exercisable and may be
exercised for a period of ten years from the date of the grant, provided that,
in the event of the death or disability of the outside director, the options may
only be exercised within twelve months after the death or disability and, in the
event that the outside director's service to Federated is terminated for any
reason other than death or disability, the options may only be exercised for a
period of thirty days after the date of such termination of services.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth compensation information for the years ended
December 31, 1999, December 31, 2000 and December 31, 2001 for Federated's Chief
Executive Officer and for the four other most highly compensated executive
officers of Federated (the "Named Executive Officers").
ANNUAL COMPENSATION
LONG TERM COMPENSATION AWARDS
Other
Securities
Annual Restricted
Underlying All Other
Name and Salary Bonus Compensation Stock
Awards Options/SARs Compensation
Principal Position(s) Year ($) ($) (1)
--------------------- ------------------------------------------
($)(2) ($) (#) (3) ($)
-------------------------------------------------------------------------------------
(4)
--------------
John F. Donahue 2001 1,700,000 1,800,000 85,253 ------ ------ 11,171
Chairman 2000 1,700,000 1,000,000 90,746 ------ ------ 10,502
1999 1,680,000 900,000 86,139 ------ ------ 10,874
J. Christopher Donahue 2001 920,000 618,191 86,036 ------ 36,740 23,484
President and
2000 900,000 586,090 51,055 ------ 531,500 35,096
Chief Executive Officer 1999 890,000 513,482 ------ ------ 47,700 17,674
Arthur L. Cherry 2001 700,000 518,102 ------ ------ 30,820 8,712
President,
2000 680,000 539,203 ------ ------ 528,980 8,312
Federated Services Company1999 660,000 403,354 ------ ------ 36,900 8,309
James F. Getz 2001 420,000 617,989 ------ ------ 36,760 8,684
President,
2000 400,000 703,308 56,580 ------ 437,800 8,242
Retail Sales Division of 1999 390,000 579,244 ------ ------ 53,400 8,465
Federated Securities Corp.
Thomas R. Donahue 2001 700,000 515,126 53,486 ------ 30,620 18,717
Vice President and
2000 680,000 480,725 ------ ------ 425,820 23,405
Chief Financial Officer 1999 660,000 387,364 ------ ------ 35,400 14,314
(1)The amounts set forth in this column do not include amounts which were earned
by the Named Executive Officers in 1999, 2000 and 2001 but which the Named
Executive Officers chose to forego pursuant to a program under which such
Named Executive Officers elected to acquire options to purchase shares of
Class B Common Stock in lieu of cash compensation. These options were
awarded to the Named Executive Officers as a portion of their respective
performance bonuses in January 2000, 2001 and 2002, respectively. Based on
the fair market value of the options to purchase Class B Common Stock,
determined by using the Black-Scholes valuation methodology, Messrs. J.
Christopher Donahue, Cherry, Getz, and Thomas R. Donahue elected to forego
$286,518, $221,646, $320,756, and $212,636, respectively in 1999; $413,910,
$380,797, $496,692, and $339,275, respectively in 2000; and $371,809,
$311,898, $372,011 and $309,874, respectively in 2001, in cash bonus awards
in favor of options.
(2)For 2001, includes $21,650 attributable to Mr. J. Christopher Donahue for use
of the corporate jet. Also includes $29,524 attributable to Mr. John F.
Donahue, $40,295 attributable to Mr. J. Christopher Donahue and $40,295
attributable to Mr. Thomas R. Donahue for medical insurance premiums paid.
For 2000, includes $39,525 attributable to Mr. John F. Donahue and $21,200
attributable to Mr. Getz for use of the corporate jet respectively. Also
includes $14,606 attributable to Mr. Getz for use of the company car and
$25,452 attributable to Mr. J. Christopher Donahue for medical insurance
premiums paid.
(3) Securities reported in this column for 2001 consist of shares of Class B
Common Stock subject to options acquired in January 2002, by the Named
Executive Officers in lieu of a portion of their respective 2001 earned
cash bonus awards. All such options are currently exercisable.
Securities reported in this column for 2000 consist of shares of Class B
Common Stock subject to options acquired in January 2001, by the Named Executive
Officers in lieu of a portion of their respective 2000 earned cash bonus awards,
in the following amounts: Mr. J. Christopher Donahue, 31,500 shares; Mr. Cherry,
28,980 shares; Mr. Getz, 37,800 shares; and Mr. Thomas R. Donahue, 25,820
shares. All such options are currently exercisable. Securities reported in this
column for 2000 also consist of shares of Class B Common Stock subject to
options acquired in July 2000 (the "July 2000 options"), in the following
amounts: Mr. J. Christopher Donahue, 500,000 shares; Mr. Cherry, 500,000 shares;
Mr. Getz, 400,000 shares; and Mr. Thomas R. Donahue, 400,000 shares. None of the
July 2000 options were exercisable as of the fiscal year end.
Share totals in this column for 1999 reflect the results of Federated's 3
for 2 stock split, which was declared on June 22, 2000 and consist of shares of
Class B Common Stock subject to options acquired in January 2000, by the Named
Executive Officers in lieu of a portion of their respective 1999 earned cash
bonus awards. All such options are currently exercisable.
(4)Includes matching contributions under Federated's 401(k) Plan of $6,800 in
2001, $6,400 in 2000 and $6,400 in 1999 for each of Mr. John F. Donahue,
Mr. J. Christopher Donahue, Mr. Cherry, Mr. Getz, and Mr. Thomas R.
Donahue. Also included is the present value of the economic benefit to the
executive of the corporate premiums paid to purchase split dollar life
insurance contracts in 2001, 2000 and 1999 of $8,535, $21,084 and $3,860,
respectively for Mr. J. Christopher Donahue and $3,636, $9,251 and $330,
respectively for Mr. Thomas R. Donahue. In addition, Federated paid
premiums for life, accidental death, and long term disability insurance in
2001, 2000 and 1999 of $4,371, $4,102 and $4,474, respectively for Mr. John
F. Donahue; $8,149, $7,612 and $7414, respectively for Mr. J. Christopher
Donahue; $1,912, $1,912 and $1,909, respectively for Mr. Cherry; $1,884,
$1,842 and $2,065, respectively for Mr. Getz; and $8,281, $7,754 and
$7,584, respectively for Mr. Thomas R. Donahue. The split dollar life
insurance contract for Mr. John F. Donahue is fully paid, and Federated is
entitled to recover all of the premiums paid by it through the cash
surrender value of such policy.
Option Grants in Last Year
The table below sets forth information with respect to stock options
granted to the Named Executive Officers in 2001. The options listed below are
included in the Summary Compensation Table.
Number % of
of Total
Securities Options Grant Date
Underlying Granted Exercise Expiration Present
Name Options to Price Date Value
Granted Employees ($/Sh) ($)(3)
(1)(2) in Year
---------------------- ---------- ----------- ---------- ----------- -----------
J. Christopher 36,740 14.3 31.00 1/15/12 371,809
Donahue
Arthur L. Cherry 30,820 12.0 31.00 1/15/12 311,898
James F. Getz 36,760 14.3 31.00 1/15/12 372,011
Thomas R. Donahue 30,620 11.9 31.00 1/15/12 309,874
(1) Securities reported in this column indicate shares of Class B Common Stock
subject to options acquired in January 2002, by the Named Executive
Officers in lieu of a portion of their respective 2001 earned cash bonus
awards, which are all currently exercisable.
(2) Securities reported in this column do not reflect shares of Class B Common
Stock subject to options acquired in January 2001, by the Named Executive
Officers in lieu of a portion of their respective 2000 earned cash bonus
awards, which are currently exercisable, in the following amounts: Mr. J.
Christopher Donahue, 31,500 shares; Mr. Cherry, 28,980 shares; Mr. Getz,
37,800 shares; and Mr. Thomas R. Donahue, 25,820 shares.
(3) The Grant Date Present Value for the options acquired by the Named
Executive was calculated using the Black-Scholes option pricing model. The
Black-Scholes value was calculated using the following assumptions; an
expected volatility of 30%, a risk-free rate of return of 4.33%, a dividend
yield of 0.59% and an expected time to exercise of five years.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
The table below sets forth information with respect to stock options held
by the Named Executive Officers in 2001.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares Value at FY-End FY-End ($)(2)
Name Acquired Realized (#)(1)
on ($) Exercisable/
Exercise Exercisable/ Unexercisable
(#) Unexercisable
----------------------- ----------- --------- --------------- -------------------
J. Christopher Donahue --- --- 125,400/500,000 1,885,772/1,326,500
Arthur L. Cherry --- --- 549,180/590,000 12,975,231/3,835,700
James F. Getz --- --- 143,700/490,000 2,132,046/3,570,400
Thomas R. Donahue --- --- 91,520/490,000 1,324,300/3,570,400
-----------------------
(1) Securities reported in this column do not include shares of Class B Common
Stock subject to options acquired by the Named Executive Officers in 2002
in lieu of a portion of their respective cash bonus awards for 2001 in the
following amounts: Mr. J. Christopher Donahue, 36,740 shares; Mr. Cherry,
30,820 shares; Mr. Getz, 36,760 shares; and Mr. Thomas R. Donahue, 30,620
shares. All such options are currently exercisable.
(2) The "value of unexercised in-the-money options" is calculated by
subtracting the exercise price from $31.88, which was the closing sales
price of a share of Class B Common Stock on the New York Stock Exchange on
December 31, 2001.
Employment Agreements
Federated has entered into employment contracts with the following Named
Executive Officers:
Arthur L. Cherry. Pursuant to a January 16, 1997 agreement, Federated is
obligated to provide Mr. Cherry with (i) a base salary, (ii) an opportunity to
earn a bonus and (iii) certain other benefits, including health and severance
pay benefits, among others. Mr. Cherry agrees not to compete with Federated for
a period of six months following the termination of his employment by Federated,
unless such termination occurs more than three years following the sale of 51%
or greater of Federated's Class A Common Stock to a non-family member of the
current holders of the Class A Common Stock. Furthermore, Mr. Cherry agrees not
to solicit employees of Federated for any other organization or to employ any
employee of Federated for a period of three years following the termination of
his employment with Federated.
James F. Getz. Pursuant to a December 22, 1993 agreement, Federated is
obligated to provide Mr. Getz with an annual base salary and certain other
benefits. Upon the termination of his employment with Federated, Mr. Getz agrees
not to compete with Federated for a period of 300 days. In addition, Mr. Getz
agrees not to solicit or employ any of the employees of Federated following the
termination of his employment by Federated.
Comparative Stock Performance
The following performance graph compares the total stockholder return of an
investment in Federated's Class B Common Stock to that of the Russell 1000 (R)
Index and to a Peer Group Index of publicly-traded asset management firms for
the period commencing with May 13, 1998, the date on which the Class B Common
Stock was first registered under Section 12 of the Exchange Act and ending on
December 31, 2001. The graph assumes that the value of the investment in
Federated's Class B Common Stock and each index was $100 on May 13, 1998. Total
return includes reinvestment of all dividends. The Russell 1000 (R) Index
measures the performance of the 1,000 largest U.S. companies based on total
market capitalization. Federated is included in this index. Peer Group returns
are weighted by the market capitalization of each firm at the beginning of each
measurement period. The historical information set forth below is not
necessarily indicative of future performance. Federated does not make or endorse
any predictions as to future stock performance.
[a chart has been omitted which visually depicts the information included
in the table below]
5/13/98 12/31/98 12/31/99 12/31/00 12/31/01
------- -------- -------- -------- --------
Federated 100 95.78 107.00 234.51 258.26
Russell 1000(R) 100 110.40 133.48 126.09 107.76
Peer Group*, 100 73.93 81.37 108.24 102.62
* The following companies are included in the Peer Group:
Affiliated Managers Group, Inc.
Eaton Vance Corp.
Franklin Resources, Inc.
The John Nuveen Company
T. Rowe Price Group, Inc.
Waddell & Reed Financial, Inc.
Liberty Financial Companies, Inc. and Phoenix Investment Partners, Ltd.
were included in the graph and calculations appearing in last year's Information
Statement, dated March 31, 2001, but are excluded from this year's graph and
calculations due to the acquisition by other entities and subsequent de-listing
of their respective shares.
Certain Relationships and Related Transactions
During 2001, no director of Federated served as an executive officer of or
beneficially owned of record in excess of a 10% equity interest in (i) any
business or professional entity which made during 2001 or proposes to make
during the current year, payments to Federated for property or services in
excess of five percent of Federated's consolidated gross revenues for 2001 or in
excess of five percent of the other entity's consolidated gross revenues for the
last year, (ii) any business or professional entity to which Federated made
during 2001 or proposes to make during the current year payments for property or
services in excess of five percent of Federated's consolidated gross revenues
for 2001 or in excess of the other entity's consolidated gross revenues for its
last year, or (iii) any business or professional entity to which Federated was
indebted to at the end of 2001 in an aggregate amount in excess of five percent
of Federated's total consolidated assets at the end of 2001.
None of the current directors of Federated was, during 2001: a partner or
executive officer of any investment banking firm that performed services for
Federated during 2001 or that Federated proposes to have perform services for
Federated during the current year. In 2001, Mr. Edward G. O'Connor served as
special counsel to the litigation department of Eckert Seamans. Federated
retained Eckert Seamans in 2001 to provide Federated with limited legal services
relating almost exclusively to intellectual property matters. Federated is not
aware of any other relationships between any of the directors nominated for
election to the Board at the Annual Meeting that are similar in nature and scope
to those relationships discussed above.
SECURITY OWNERSHIP
Class A Common Stock
The following table sets forth certain information regarding beneficial
ownership of Federated's Class A Common Stock by each person who is known by
Federated to own beneficially more than 5% of the outstanding shares of Class A
Common Stock as of February 28, 2002.
Shares
BeneficiallPercent of
Name and Address of Beneficial Owner Owned Class
------------------------------------------- ----------------------
Voting Shares Irrevocable Trust
dated May 31, 9,000 100.0%
1989.................................................
c/o The Beechwood Company
Suite 850
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3716
All of the outstanding shares of Class A Common Stock are held by the
Voting Trust, the trustees of which are John F. Donahue, his wife, and his son
J. Christopher Donahue for the benefit of members of the family of John F.
Donahue. Under the terms of the Voting Trust, the trustees are authorized to
vote shares held by the Voting Trust and the trustees additionally may sell,
transfer or otherwise dispose of shares owned by the Voting Trust. The entire
voting power of Federated is vested in the holder of the outstanding shares of
Class A Common Stock, except as otherwise provided in the Restated Articles of
Incorporation of Federated or as required by applicable law.
Class B Common Stock
The following table sets forth certain information regarding beneficial
ownership of Federated's Class B Common Stock as of February 28, 2002 by (i)
each of the current Directors of Federated, (ii) Named Executive Officers of
Federated, and (iii) all Executive Officers and current Directors of Federated
as a group.
Shares
Beneficially Percent of
Name Owned (1)(2) Class
----------------------------------------- ----------------- ---------------
John F. Donahue (3) 12,820,228 11.0%
J. Christopher Donahue (4) 6,437,185 5.5
John W. McGonigle (5) 5,535,544 4.7
Thomas R. Donahue (6) 3,297,029 2.8
Arthur L. Cherry (7) 1,366,926 1.1
..
James F. Getz (8) 1,094,520 *
John B. Fisher (9) 338,020 *
Eugene F. Maloney (10) 197,075 *
Michael J. Farrell (11) 44,250 *
James L. Murdy (12) 10,600 *
Edward G. O'Connor(13) 3,676 *
All Executive Officers and current 32,338,143 27.8
Directors as a Group (16 persons)
-----------------------------------------
* Less than 1%.
(1) Calculated pursuant to Rule 13d-3(d) of the Exchange Act. Unless stated
below, each such person has sole voting and investment power with respect
to all such shares.
(2) Does not include 560,962 shares of Class B Common Stock allocated to the
accounts of directors and executive officers who are participants in the
401(k)/ Profit Sharing Plan.
(3) Includes 6,922,258 shares owned by The Beechwood Company, a limited
partnership of which AWOL, Inc. is the general partner; Mr. John F. Donahue
is a shareholder of AWOL, Inc. (Mr. Donahue disclaims beneficial ownership
of approximately 3,461,129 shares owned by The Beechwood Company);
4,400,838 shares owned by Comax Partners Limited Partnership, a limited
partnership of which Comax, Inc. is general partner; Mr. Donahue is the
sole shareholder of Comax, Inc. (Mr. Donahue disclaims beneficial ownership
of substantially all of the 4,400,838 shares owned by Comax Partners
Limited Partnership); 788,574 shares by owned Shamrock Properties, Inc., a
corporation of which Mr. Donahue is the sole shareholder; 562,000 shares
owned by Richmond Farms Realty Trust, a Pennsylvania business trust, of
which Mr. Donahue is a shareholder (Mr. Donahue disclaims beneficial
ownership of substantially all of the 562,000 shares owned by Richmond
Farms Realty Trust); and 146,558 shares owned by Bay Road Partners, a
Pennsylvania limited partnership, of which AWOL, Inc. is the general
partner.
(4) Includes 4,121,647 shares owned jointly with Mrs. J. Christopher Donahue;
includes 33,977 shares owned by Mrs. J. Christopher Donahue; includes
1,266,947 shares for which Mr. J. Christopher Donahue has the power to
sell, transfer or otherwise dispose under powers of attorney (Mr. Donahue
disclaims beneficial ownership of all of the 1,266,947 shares for which he
has powers of attorney); includes 269,480 shares for which Mr. J.
Christopher Donahue is a custodian of shares under the Uniform Transfer for
Minors Act (Mr. J. Christopher Donahue disclaims beneficial ownership of
all of the 269,480 shares for which he acts as custodian); and includes
162,140 stock options which are currently exercisable.
(5) Includes 5,478,784 shares owned by Fairview Partners, L.P. a limited
partnership of which 713 Investment Corporation is the sole general
partner; Mr. McGonigle is a shareholder of 713 Investment Corporation;
includes 37,307 currently exercisable stock options held by 713 Investment
Company, L.P., a limited partnership of which 713 Investment Corporation is
the sole general partner; includes 19,453 currently exercisable stock
options held in a trust for the benefit of certain descendants.
(6) Includes 1,655,202 shares of which Mr. Thomas R. Donahue is a custodian of
shares under the Uniform Trust for Minors Act (Mr. Thomas R. Donahue
disclaims beneficial ownership of all of the 1,655,202 shares for which he
acts as custodian); 206,509 shares owned jointly by Mr. and Mrs. Thomas R.
Donahue; 644 shares owned by Mrs. Thomas R. Donahue, 916,050 shares owned
by Maxfund Partners, L.P., a limited partnership, of which Maxfund, Inc. is
the general partner; Mr. T. Donahue is a shareholder of Maxfund, Inc.; and
includes 122,140 stock options which are currently exercisable.
(7) Includes 74,048 shares owned by or on behalf of Mr. Cherry's children;
includes 693,243 shares owned jointly by Mr. and Mrs. Cherry; includes
19,635 shares owned by Mrs. Cherry; and includes 580,000 stock options
which are currently exercisable.
(8) Includes 180,460 stock options which are currently exercisable. Includes
68,966 shares owned by Getz Enterprises. Mr. Getz is a general partner of
Getz Enterprises.
(9) Includes 67,500 shares held by Rosewood Limited Partnership, a limited
partnership of which Mr. Fisher is a general partner; and includes 70,520
stock options which are currently exercisable.
(10) Includes 36,000 shares owned by Mrs. Maloney, and 15,800 stock options
which are currently exercisable.
(11) Includes 14,250 stock options which are currently exercisable.
(12) Includes 2,250 stock options which are currently exercisable.
(13) Includes 75 shares held by Mr. O'Connor's daughter (Mr. O'Connor disclaims
beneficial ownership of the shares held by his daughter) and 3,000 stock
options which are currently exercisable.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, Federated's directors, its
executive officers and any persons beneficially owning more than ten percent of
Federated's Class A Common Stock and Class B Common Stock are required to report
their ownership of Federated's Class A and Class B Common Stock and any changes
in that ownership to the Commission and to the New York Stock Exchange. Specific
due dates for these reports have been established and Federated is required to
report in this Information Statement any failure to file by these dates. All of
these filing requirements were satisfied. In making these statements, Federated
has relied on copies of the reports that its officers, directors and beneficial
owners of more than ten percent of Federated's Class A or Class B Common Stock
have filed with the Commission.
INDEPENDENT AUDITORS
Ernst & Young LLP served as the independent auditors for 2001 and continues
to serve as independent auditors for Federated. Representatives of Ernst & Young
will be present at the Annual Meeting, will have an opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
The following fees were paid to the independent auditors for the audit of
Federated's financial statements for the fiscal year ended December 31, 2001,
the review of the financial statements in Federated's Forms 10Q for the fiscal
year 2001 and other services rendered to Federated:
Audit Fees: $360,600
----------
Financial Information Systems Design and Implementation Fees: $0
------------------------------------------------------------
All Other Fees:
--------------
Audit Related: $337,122 for audit-related professional services including
accounting and tax consultations relating to acquisitions and other
transactions.
Other Services: $406,468 for other services including professional and tax
consulting services relating to various tax matters and advisory services
relating to compensation plans.
ANNUAL INCENTIVE PLAN
Federated wishes to establish an annual incentive plan pursuant to which
discretionary annual bonuses may be paid to certain officers based on
Federated's attainment of significant business objectives. In 1993, the Internal
Revenue Code of 1986, as amended (the "Code"), was amended to add Section
162(m). Section 162(m) places a limit of $1,000,000 on the amount of
compensation that may be deducted by Federated in any tax year with respect to
each of Federated's five highest paid executives. However, certain
performance-based compensation that has been approved by the shareholders is not
subject to the deduction limit.
In light of the requirements of Section 162(m), Federated plans to submit
the Annual Incentive Plan described below (the "Annual Incentive Plan") for
approval by the holders of shares of Federated's Class A Common Stock at the
Annual Meeting. This would enable compensation paid under the Annual Incentive
Plan to qualify as performance-based compensation for purposes of Section
162(m), and thereby be deductible by Federated without regard to the deduction
limit otherwise imposed by such Section.
Summary of the Annual Incentive Plan
The following summary of the Annual Incentive Plan is qualified in its
entirety by reference to the complete text of the Annual Incentive Plan, a copy
of which is attached as Exhibit A to this Information Statement.
Purpose. The purpose of the Annual Incentive Plan is to advance the success
of Federated and to thereby increase shareholder value by promoting the
attainment of significant business objectives by Federated and basing a portion
of the annual compensation of selected officers on the attainment of such
objectives.
Term. The Annual Incentive Plan became effective on January 29, 2002 when
it was approved by the Board but is subject to further approval by the holders
of Class A Common Stock. The Annual Incentive Plan does not have a fixed
expiration date, but may be terminated by the Board at any time.
Administration. The Annual Incentive Plan will be administered by the
Section 162(m) sub-committee of the Compensation Committee of the Board
comprised solely of outsider directors (the "Sub-Committee"). The Sub-Committee
has full authority to make awards under the Annual Incentive Plan, to determine
the terms and conditions of such awards, and to interpret and make all other
determinations affecting the Annual Incentive Plan, subject to the provisions of
the Annual Incentive Plan and direction by the Board. The Sub-Committee may,
with respect to Participants who are not subject to Section 162(m), delegate
such of its powers and authority under the Annual Incentive Plan as it deems
appropriate to the Chairman, President or Chief Executive Officer of Federated.
Participation. Participation in the Annual Incentive Plan is limited to
officers who may also be members of the Board who are selected from time to time
by the Sub-Committee and unless otherwise specified by the Sub-Committee, the
Chairman of the Board, the Chief Executive Officer and any executive who is a
member of the Board or is designated as a member of the Chief Executive
Officer's senior staff shall be eligible for participation ("Participants").
Participation in the Annual Incentive Plan does not preclude participation in
any other employee benefit plans of Federated and does not create any rights to
continued employment with Federated.
Performance Period. Each period during which performance will be calculated
for purposes of determining whether an award shall be payable under the Annual
Incentive Plan is one calendar year ("Performance Period").
Performance Measures. The Sub-Committee will designate performance measures
under the Annual Incentive Plan, which must be satisfied during the Performance
Period in order for an award to become payable. The performance measures and
thresholds will be established no later than 90 days after the beginning of each
Performance Period. The performance measures will be based on achievement of
specified levels of performance with respect to any one or more of the following
measures: (i) revenues, (ii) operating income, (iii) net income, (iv) earnings
per share, (v) operating expenses, (vi) assets under management, (vii) sales,
(viii) the performance of Federated's Class B Common Stock, (ix) performance of
Federated investments, (x) operating profits, (xi) identification of business
opportunities, or (xii) project completion.
Annual Maximum and Plan Pool. The maximum bonus amount payable under the
Annual Incentive Plan to any Participant shall not exceed 24% in the case of the
Chief Executive Officer, and 19% in the case of other Participants, of the
amount available in the pool established each year by the Board. The pool of
funds available, if any, for distribution pursuant to the Annual Incentive Plan
with respect to a Performance Period shall be a percentage of Federated's
operating profits, which shall not exceed 7.5% of such operating profits. For
purposes of the Annual Incentive Plan, operating profits means Federated's total
annual revenues for the calendar year, less distributions to minority interests
and less total expenses (excluding amortization of intangible assets, impairment
losses and debt expenses, including, without limitation, interest and loan fees)
as reflected in Federated's audited financial statements for such calendar year.
New Plan Benefits. The following table assumes that the 2002 Annual
Incentive Plan was in effect in 2001, and lists those amounts that would have
been paid in 2001 to the individuals listed below. The table assumes a payment
of $5,435,000 from the available pool and the availability of 134,940 Class B
Common stock options in lieu of a cash bonus (see "Payment of Awards" below) to
those individuals participating in the Plan. The amount of the actual pool, if
any, from which awards may be made pursuant to the plan in 2002 is not
determinable at this time. Options elected in lieu of a cash bonus have an
exercise price of $31.00/share and an expiration date of 1/15/2012. The market
value of the Class B Shares underlying the option grants listed below was $31.58
as of 2/28/2002.
Bonus cash Number of
used for Options
Name and Principal Position Bonus Options Granted
--------------------------- ----- ------- -------
John F. Donahue $1,800,000 N/A N/A
Chairman and Director
J. Christopher Donahue $990,000 $371,809 36,740
President and Chief Executive Officer
and Director
Arthur L. Cherry $830,000 $311,898 30,820
President, Federated Services Company
and Director
James F. Getz $990,000 $372,011 36,760
Director and President, Retail Sales
Division
Federated Securities Corp.
Thomas R. Donahue $825,000 $309,874 30,620
Director, Vice President and Chief
Financial Officer
Executive Officers as a Group (five $5,435,000 $1,365,592 134,940
persons named above)
Directors who are not Executive Officers $0 N/A N/A
as a group
Non-Executive Officer Employees as a $0 N/A N/A
Group
Certification of Achievement of Performance Standards. The Sub-Committee
shall, prior to any payment under the Annual Incentive Plan, certify in writing
the extent, if any, of achievement of performance thresholds for each
Participant with respect to the applicable performance measure. For purposes of
this provision, the approved minutes of the Sub-Committee meeting in which the
certification is made may be treated as a written certification.
Additional Performance Conditions and Reduction of Payment. The
Sub-Committee may, in its sole discretion, establish certain additional
performance-based conditions that must be satisfied by Federated, a business
unit or the Participant as a condition precedent to the payment of all or a
portion of any awards. Such conditions precedent may include, among other
things, the receipt by a Participant of a specified annual performance rating
and the achievement of specified performance goals by Federated, business unit
or Participant. The Sub-Committee may also, in its sole discretion, reduce the
amount of any award to a Participant based upon: (i) evaluation of such
Participant's performance, (ii) comparisons with compensation received by
executive officers of other companies in Federated's industry, (iii) Federated's
financial results and conditions, and (iv) such other business factors deemed
relevant by the Committee.
Payment of Awards. Awards under the Annual Incentive Plan shall be paid in
cash as soon as practicable after audited financial statements for the
Performance Period have been prepared and certified. Notwithstanding the
foregoing the Sub-Committee may, in its sole discretion, (i) allow a Participant
to elect to receive all or a portion of the total award in the form of
non-qualified stock options to purchase shares of Class B Common Stock under
Federated's Stock Incentive Plan, in lieu of paying such amount in cash; or (ii)
elect to pay all or a portion of the total award to a Participant in four equal
quarterly installments during the calendar year in which the lump sum payment
would have been paid.
Amendment or Termination. The Board may modify, amend or terminate the
Annual Incentive Plan at any time, except that no modification, amendment or
termination may adversely affect the rights of a Participant under an award
previously made without such Participant's consent.
No Assignment. Except as expressly authorized by the Sub-Committee, the
rights under the Annual Incentive Plan, including without limitation the rights
to receive any payment, shall not be assigned, pledged or otherwise transferred,
by a Participant (except by testamentary disposition or intestate succession),
and during the lifetime of any Participant any payment shall be payable only to
such Participant.
Tax Information. Under present federal income tax regulations, Participants
will realize ordinary income equal to the amount of the cash award received in
the year of receipt. Federated will receive a deduction for the amount
constituting ordinary income to the Participant, provided that the Annual
Incentive Plan satisfies the requirements of Section 162(m) of the Code. It is
Federated's intention that the Annual Incentive Plan be constructed and
administered in a manner that ensures the deductibility of compensation for
Federated under Section 162(m) of the Code.
The foregoing brief summary of the effect of federal income taxation upon
Participants and Federated with respect to the Annual Incentive Plan does not
purport to be complete and reference should be made to the applicable provisions
of the Code. In addition, this summary does not discuss the provisions of income
tax laws of any municipality, state or foreign country in which a Participant
may reside. For the tax consequences of any options awarded under the Annual
Incentive Plan, see "Federal Income Tax Aspects of the Stock Incentive Plan"
herein.
STOCK INCENTIVE PLAN
Federated wishes to amend its stock incentive plan pursuant to which
discretionary and automatic stock-based awards may be paid to certain directors,
officers and employees to promote the long-term growth and performance of
Federated. The stock incentive plan has been amended to clarify that it is
compliant with Section 162(m) of the Internal Revenue Code. Section 162(m)
limits the deductibility by Federated of certain executive compensation for
federal income tax purposes and requires the material terms of the performance
goal under which the compensation is to be paid to be disclosed to and
subsequently approved by the shareholders of Federated before the compensation
is paid. Federated became subject to Section 162(m) when it publicly offered its
stock in 1998, but was permitted to operate under the stock plan in existence at
the time of the public offering until the end of 2001. However, any compensation
paid in 2002 will need to comply with Section 162(m).
In light of the requirements of Section 162(m), Federated plans to submit
the amended Stock Incentive Plan described below (the "Stock Incentive Plan")
for approval by the holders of shares of Federated's Class A Common Stock at the
Annual Meeting.
Summary of the Stock Incentive Plan
The following summary of the Stock Incentive Plan is qualified in its
entirety by reference to the complete text of the Stock Incentive Plan, a copy
of which is attached as Exhibit B to this Information Statement.
Purpose. The purpose of the Stock Incentive Plan is to continue to promote
the long-term growth and performance of Federated and its affiliates and to
attract and retain outstanding individuals using stock-based awards.
Stock Incentive Plan. All key employees of Federated and its affiliates are
eligible to participate in the Stock Incentive Plan. The Stock Incentive Plan
permits the granting of any or all of the following types of awards: (1)
performance shares conditioned upon meeting performance objectives; (2)
restricted stock; (3) stock options, including nonqualified stock options
("NSOs") and incentive stock options ("ISOs"); (4) stock appreciation rights
("SARs"), in tandem with stock options or freestanding; and (5) other awards
valued in whole or in part by reference to, or otherwise based on, Class B
Common Stock. In connection with any award, payment representing dividends or
interest or their equivalent may be made to Stock Incentive Plan participants.
In addition, the Stock Incentive Plan provides for automatic grants of stock
options to outside directors of Federated.
Term. The Stock Incentive Plan was adopted as of February 20, 1998 and was
most recently amended effective on January 29, 2002 when it was approved by the
Board, but is subject to further approval by the holders of Class A Common
Stock. The Stock Incentive Plan does not have a fixed expiration date but may be
terminated by the Board at any time.
Shares Subject to Stock Incentive Plan. Currently, a total of 20,250,0001
shares of Class B Common Stock may be issued under the Stock Incentive Plan. All
of the shares are available for the grant of ISOs. Currently, no participant
shall receive awards in respect of more than 900,0001 shares of Class B Common
Stock in any fiscal year of Federated. The aggregate fair market value
(determined on the date of the grant) of shares of Class B Common Stock with
respect to which ISOs granted to a participant become exercisable for the first
time in any single calendar year will not exceed $100,000. In addition, shares
issued by Federated as a result of the assumption or substitution of outstanding
grants of an acquired company or entity will not reduce the shares available for
grant under the Stock Incentive Plan. The shares of stock deliverable under the
Stock Incentive Plan may consist of authorized and unissued shares, treasury
shares, or any combination thereof. If any shares subject to any award are
forfeited, or the award is otherwise terminated without issuance of shares or
other consideration, the shares subject to such awards will again be available
for grant under the Stock Incentive Plan.
Administration. The Stock Incentive Plan is administered by the Section
162(m) Sub-Committee of the Compensation Committee (the "Sub-Committee"). With
the exception of outside director options which are administered by the Board,
the Sub-Committee has full authority to make awards under the Stock Incentive
Plan, to determine the terms and conditions of such awards, and to interpret and
make all other determinations affecting the Stock Incentive Plan, subject to the
provisions of the Stock Incentive Plan and direction by the Board. The
Sub-Committee may delegate some or all of its authority and responsibility under
the Stock Incentive Plan with respect to awards to participants who are not
subject to Section 162(m) or Section 16 of the Securities Exchange Act to the
Chief Executive Officer of Federated.
Performance Awards. Performance awards are grants of shares of Class B
Common Stock subject to the attainment of performance objectives established by
the Sub-Committee in connection with such grants and such other terms and
conditions as the Sub-Committee shall determine. Except as otherwise determined
by the Sub-Committee, recipients of performance awards will not be required to
provide consideration other than the rendering of services. Subject to the
provisions of the applicable award agreement, during the performance period,
dividends and other distributions with respect to shares covered by a
performance award shall, in the discretion of the Sub-Committee, either be paid
to the recipient or held in escrow by Federated and paid when the performance
award is earned.
Restricted Stock. Awards of shares subject to restrictions such as vesting
and otherwise as the Sub-Committee may determine may be made from time to time
to participants as selected by the Sub-Committee. Restricted stock may not be
disposed of by the recipient until the lapse of certain restrictions established
by the Sub-Committee. Upon termination of employment of the participant during
the restriction period, all restricted stock not then vested will be forfeited,
subject to such exceptions, if any, authorized by the Sub-Committee. Except as
otherwise determined by the Sub-Committee, recipients of restricted stock are
not required to provide consideration other than the rendering of services.
Recipients will have, with respect to restricted stock, all of the rights of a
shareholder of Federated including the right to receive any dividends to the
extent permitted by applicable law, unless the Sub-Committee determines
otherwise.
Stock Options. Options may be granted, from time to time, to employees
determined by the Sub-Committee on such terms, not inconsistent with the Stock
Incentive Plan, as the Sub-Committee may determine. The exercise price per share
of Class B Common Stock of stock options granted to a participant is determined
by the Sub-Committee as of the date of grant; provided, however, that (i) in the
case of ISOs granted to a participant who on the grant date is not a more than
10% stockholder of Federated ("Ten Percent Holder"), such price shall not be
less than 100% of the fair market value of a share of a Class B Common Share on
the grant date, (ii) in the case of an ISO granted to a participant who on the
grant date is a Ten Percent Holder, such price shall not be less than 110% of
the fair market value of a share of Class B Common Stock on the grant date, and
(iii) in the case of NSOs such price shall not be less than 85% of the fair
market value of a share of Class B Common Stock on the grant date. The term of
each such option, the time or times when it may be exercised, and the other
applicable terms and conditions will be fixed by the Sub-Committee. Options may
be exercised by payment of the purchase price in cash or, at the discretion of
the Sub-Committee, in shares of Class B Common Stock having a fair market value
on the date the option is exercised equal to the option exercise price or in
such other manner as the Sub-Committee may approve.
Stock Appreciation Rights. A SAR may be granted in connection with an
option or independent of an option. Upon exercise of a SAR, the holder thereof
is entitled to receive the excess of the fair market value of the shares for
which the right will be exercised over the grant price of the SAR. The grant
price (which will not be less than 100% of the fair market value of the shares
on the date of grant) and other terms of the SAR will be determined by the
Sub-Committee. Payment by Federated upon such exercise will be in cash.
Other Stock-Based Awards. In order to enable Federated to respond quickly
to significant legislative and regulatory developments and to trends in
executive compensation practices, the Sub-Committee will also be authorized to
grant to participants, either alone or in addition to other awards granted under
the Stock Incentive Plan, awards of stock and other awards that are valued in
whole or in part by reference to, or are otherwise based on, shares of Class B
Common Stock ("other stock-based awards").
The Sub-Committee will determine the employees to whom other stock-based
awards are to be made, the times at which such awards are to be made, the number
of shares to be granted pursuant to such awards and all other conditions of such
awards. The provisions of such awards need not be the same with respect to each
recipient.
Outside Directors' Stock Options. The Stock Incentive Plan provides that
directors of Federated who are not employees of Federated shall receive options
to purchase shares of Class B Common Stock. Such directors currently will
receive options with respect to 7,5001 shares upon their initial election to the
Board of Directors and with respect to 2,2501 shares annually thereafter.
All such options will be NSOs and will have a term of 10 years and an
exercise price equal to 100% of the fair market value of the underlying shares
on the date of grant. The initial grants of options to a director vest in three
installments over a three year period. The annual grants are fully vested as of
the date of grant. In the event of a director's death, the options which are
exercisable at the date of death will be exercisable for the next succeeding
twelve months. Except as set forth below under "Adjustments," neither the Board
nor the Sub-Committee will have any discretion with respect to options granted
to such directors pursuant to the Stock Incentive Plan.
Nonassignability of Awards. The Stock Incentive Plan provides that no award
granted under the Stock Incentive Plan may be sold, exchanged, assigned,
transferred, pledged or otherwise encumbered by a participant, otherwise than by
will or by the laws of descent and distribution or, if authorized by the
Sub-Committee, by gift to members of a participant's immediate family or trusts
or partnerships for the benefit of such family members. Each award will be
exercisable, during the participant's lifetime, only by the participant, or if
permissible under applicable law, by the participant's agent, guardian or
attorney-in-fact.
Adjustments. The Stock Incentive Plan provides that, in the event of any
change affecting the Class B Common Stock by reason of any stock dividend or
split, recapitalization, reorganization, merger, consolidation, or any other
change in corporate structure such that Class B Common Stock are changed into or
exchangeable for a larger or smaller number of shares, the Sub-Committee will
make such substitution or adjustment in the aggregate number or class of shares
which may be distributed under the Stock Incentive Plan and in the number, class
and option price or other price of shares subject to the outstanding awards
granted under the Stock Incentive Plan as it deems to be appropriate in order to
maintain the purpose of the original grant.
The Sub-Committee will be authorized to make adjustments in performance
award criteria or in the terms and conditions of other awards in recognition of
unusual or non-recurring events affecting Federated or its financial statements
or changes in applicable laws, regulations or accounting principles, provided no
such adjustment shall impair the rights of any participant without his consent.
The Sub-Committee will be able to correct any defect, supply any omission or
reconcile any inconsistency in the Stock Incentive Plan or any award in the
manner and to the extent it shall deem desirable to carry it into effect.
Provided that, only the full Board shall have the right to make any adjustments
to the terms or conditions of outside directors' options.
Special Forfeiture Rule. The Sub-Committee shall be authorized to impose
additional forfeiture restrictions with respect to Awards granted under the
Plan, other than outside directors' option awards, including, without
limitation, provisions for forfeiture in the event a participant shall engage in
competition with Federated or in any other circumstance the Sub-Committee may
determine.
Compliance with Section 162(m). It is Federated's intent that compensation
payable pursuant to awards (other than awards of Restricted Stock which vest
based solely on continued employment) to "covered employees" as such term is
defined in Regulation 1.162-27(c)(2) promulgated under Section 162(m) of the
Internal Revenue Code, or any successor provision, qualify as "performance-based
compensation" as defined in Regulation 1.162-27(e) under Section 162(m). If any
provision of the Stock Incentive Plan or an award is later found to make
compensation intended to be performance-based compensation ineligible for such
treatment, the provision shall be deemed null and void, unless otherwise
determined by the Sub-Committee.
New Plan Benefits. The following table assumes that the amended 2002 Stock
Incentive Plan was in effect in 2001, and lists those amounts that would have
been paid in 2001. No awards of Stock Appreciation Rights, Performance Awards or
Restricted Stock Awards were made in 2001. The market value of the Class B
Shares underlying the option awards listed below was $31.58 as of 2/28/2002.
Outside
Directors'
Name and Principal Position Stock Options Exercise Expiration
Options Price Date
John B. Fisher 15,780 N/A $31.00 1/15/2012
Director and President,
Institutional Sales Division
of Federated Securities Corp.
Eugene F. Maloney 8,720 N/A $31.00 1/15/2012
Director and Vice President
John W. McGonigle 7,420 N/A $31.00 1/15/2012
Director and Executive Vice
President, Chief Legal
Officer, Secretary
Michael J. Farrell 0 2,250 $29.00 4/25/2011
Director
James L. Murdy 0 2,250 $29.00 4/25/2011
Director
Edward G. O'Connor 0 7,500 $29.00 4/24/2011
Director
Executive Officers as a Group 36,100 N/A $31.00 1/15/2012
(five persons including those
listed above)
Directors who are not 0 12,000 $29.00 4/25/2011 or
Executive Officers as a Group 4/24/2011
(three persons listed above) depending on
grant
Non-Executive Officer 57,820 N/A $26.95-$31.00 12/31/2011
Employees depending or 1/15/2012
as a Group (four persons) on grant depending on
grant
Federal Income Tax Aspects of the Stock Incentive Plan. The following is a
summary of the federal tax consequences generally arising with respect to awards
to be granted under the Stock Incentive Plan.
The grant of an ISO has no tax consequences to Federated or to the
participant. In addition, the participant recognizes no taxable income at the
time of exercise of an ISO. However, upon exercise, the difference between the
fair market value of the shares of Class B Common Stock and the exercise price
of the ISO is includable in the participant's income for alternative minimum tax
purposes. If the participant holds the shares acquired upon exercise of an ISO
for at least two years from the date of the grant of the ISO and at least one
year from the date of exercise, he or she will recognize taxable long-term
capital gain or long-term capital loss upon a subsequent sale of the shares at a
price different from the option exercise price. In either of these events, no
deduction would be allowed to Federated for federal income tax purposes.
If the participant disposes of the shares acquired upon exercise of an ISO
within either of the holding periods described above (i) the participant will
recognize taxable ordinary income in the year of such disposition in an amount
equal to the fair market value of the shares on the exercise date minus the
exercise price of the ISO, provided that if the disposition is a sale or
exchange with an unrelated party, then the ordinary income will be limited to
the excess of the amount realized upon the sale or exchange of the shares over
the exercise price; (ii) Federated will be entitled to a deduction for such year
equal to the amount of taxable ordinary income recognized by the participant;
(iii) the participant will recognize capital gain or loss, short-term or
long-term, as the case may be, in an amount equal to the difference between (a)
the amount realized by the participant upon such sale or exchange of the shares
and (b) the option exercise price paid by the participant increased by the
amount of ordinary income, if any, recognized by the participant upon such
disposition.
The grant of an NSO has no tax consequences to Federated or to the
participant. Upon exercise of an NSO, however, the participant will recognize
taxable ordinary income in the amount of the excess of the fair market value on
the date of exercise of the shares of the Class B Common Stock acquired over the
exercise price of the NSO, and such amount will be deductible for federal income
tax purposes by Federated. This is compensation income that is subject to
payroll taxes and income tax withholding. The holder of such shares will, upon a
subsequent disposition of the shares, recognize short-term or long-term capital
gain or loss, depending on the holding period of the shares.
In general, a grant of restricted stock has no tax consequences to
Federated or the participant. Except as discussed below, the then fair market
value of the shares of Class B Common Stock issued as restricted stock will be
taxed as ordinary income to the participant as the restrictions on the stock
lapse. Federated will receive a corresponding tax deduction at that time.
Dividends received by the participant during the restriction period are treated
as compensation income and therefore are taxed as ordinary income to the
participant and are deductible by Federated. Any gain realized upon a taxable
sale or exchange of the stock will be recognized as short-term or long-term
capital gain or loss, depending on the holding period of the shares after the
restrictions lapse. Federated receives no additional deduction at the time of
disposition of the stock by the participant.
The participant may, under Section 83(b) of the Internal Revenue Code,
elect to report the current fair market value of restricted stock as ordinary
income in the year the award is made, even though the stock is subject to
restrictions. In such a case, Federated will receive an immediate tax deduction
for such fair market value of the shares in the year of the grant, but will
receive no deduction for any subsequent appreciation during or after the
restriction period. In addition, dividends paid during or after the restriction
period would be treated as dividends rather than compensation income to the
participant and, therefore, would not be deductible by Federated. If a Section
83(b) election is made, any appreciation in the value of the stock after the
date of grant will not be recognized as capital gain by the participant until
such time as the participant disposes of the stock in a taxable transaction. Any
capital gain then realized will be long-term capital gain provided that the
required holding period, measured from the date of grant, is met. If the
participant forfeits the stock (i.e., because he or she has not met the
requirements for lapse of restrictions), the participant will receive no refund
or deduction on account of taxes paid in the year of grant as a result of the
Section 83(b) election.
The grant of a SAR has no tax consequences to Federated or the participant.
To the extent that a SAR is exercised, the amount paid to the participant will
be taxed to him or her as ordinary income, and Federated will receive a
corresponding deduction at that time.
With respect to other stock-based awards granted under the Stock Incentive
Plan that are settled either in cash or in stock or other property that is
either transferable or not subject to substantial risk of forfeiture, the
participant must recognize ordinary income equal to the cash or the fair market
value of shares or other property received, and Federated will be entitled to a
deduction for the same amount. With respect to awards that are settled in stock
or other property that is restricted as to transferability and subject to
substantial risk of forfeiture, the participant must recognize ordinary income
equal to the fair market value of the shares or other property received, at the
first time the shares or other property become transferable or not subject to
substantial risk of forfeiture, whichever occurs earlier. Federated will be
entitled to a deduction for the same amount. A participant who makes an election
under Section 83(b) of the Internal Revenue Code will be taxed on the excess of
the fair market value of the stock or other property at exercise over the
purchase price. Special tax rules may apply to officers and directors who are
subject to Section 16 of the Exchange Act.
SHAREHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Rule 14a-8 of the Exchange Act contains the procedures for including
certain shareholder proposals in Federated's Information Statement and related
materials. Shareholders entitled to vote may submit a shareholder proposal
pursuant to Rule 14a-8 for the year 2003 Annual Meeting of Shareholders of
Federated prior to December 1, 2002. Except under certain limited circumstances,
the holders of Class B Common Stock are not entitled to vote their shares. Any
shareholder proposals should be addressed to the Secretary of Federated,
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779.
EXHIBIT A
FEDERATED INVESTORS, INC.
ANNUAL INCENTIVE PLAN
ARTICLE I - GENERAL PROVISIONS
1.1 Purpose
The purpose of the Federated Investors, Inc. Annual Incentive Plan (the
"Plan") is to advance the success of Federated Investors, Inc. and to thereby
increase shareholder value by promoting the attainment of significant business
objectives by the Company and basing a portion of the annual compensation of
selected officers and key employees on the attainment of such objectives. The
Plan is designed to: (i) further align the interests of Participants with the
interests of the Company's shareholders, (ii) reward Participants for creating
shareholder value as measured by objectively determinable performance goals, and
(iii) assist in the attraction and retention of employees vital to the Company's
long-term success.
1.2 Definitions
For the purpose of the Plan, the following terms shall have the meanings
indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended, including any
successor law thereto.
(c) "Company," means Federated Investors, Inc. and, solely for purposes of
determining (i) eligibility for participation in the Plan, (ii) employment,
and (iii) the calculation of any performance goal, shall include any
corporation, partnership, or other organization of which controls, directly
or indirectly, not less than 50 percent of the total combined voting power
of all classes of stock or other equity interests or which is otherwise
consolidated into the Company's audited financial statements. For purposes
of this Plan, the term "Company" shall also include any successor to
Federated Investors, Inc.
(d) "Committee" means the Compensation Committee of the Board (or any successor
committee of the Board performing a similar function or the whole Board if
the Board performs such functions) or, with respect to any particular
function under the Plan identified by the Committee or the Board, any
subcommittee of the whole Committee established by the whole Committee or
the Board in order to comply with the definition of Non-Employee Director
under Rule 16b-3 of the Exchange Act and the definition of outside director
under Section 162(m) of the Code.
(e) "Common Stock" means the Company's Class B Common Stock, no par value per
share.
(f) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(g) "Fair Market Value" means, on any date, the closing sale price of one share
of Common Stock, as reported on the New York Stock Exchange or any national
securities exchange on which the Common Stock is then listed or on the
NASDAQ Stock Market's National Market ("NNM") if the Common Stock is then
quoted thereon, as published in the Wall Street Journal or another
newspaper of general circulation, as of such date or, if there were no
sales reported as of such date, as of the last date preceding such date as
of which a sale was reported. In the event that the Common Stock is not
listed for trading on a national securities exchange or authorized for
quotation on NNM, Fair Market Value shall be the closing bid price as
reported by the NASDAQ Stock Market or The NASDAQ SmallCap Market (if
applicable), or if no such prices shall have been so reported for such
date, on the next preceding date for which such prices were so reported. In
the event that the Common Stock is not listed on the New York Stock
Exchange, a national securities exchange or NNM, and is not listed for
quotation on The NASDAQ Stock Market or The NASDAQ SmallCap Market, Fair
Market Value shall be determined in good faith by the Committee in its sole
discretion, and for this purpose the Committee shall be entitled to rely on
the opinion of a qualified appraisal firm with respect to such Fair Market
Value, but the Committee shall in no event be obligated to obtain such an
opinion in order to determine Fair Market Value.
(h) "Participant" means any person who has satisfied the eligibility
requirements set forth in Section 1.4 and to whom an award has been made
under the Plan.
(i) "Operating Profits" means the Company's total annual revenues for the
calendar year, less distributions to minority interests and less total
expenses (excluding amortization of intangible assets, impairment losses
and debt expenses, including, without limitation, interest and loan fees)
as reflected in the Company's audited financial statements for such
calendar year.
(j) "Performance Measures" means the criteria upon which awards will be based
and, unless otherwise determined by the Committee, shall be any one of the
following measures: (i) revenues; (ii) operating income; (iii) net income;
(iv) earnings per share; (v) operating expenses; (vi) assets under
management; (vii) product sales or market share; (viii) the performance of
the Common Stock; (ix) the investment performance of Company products; (x)
Operating Profits; (xi) identification of business opportunities and (xii)
project completion.
(k) "Performance Period" means, in relation to any award, the calendar year, or
any other period, for which performance is being calculated, with each such
period constituting a separate Performance Period.
(l) "Performance Threshold" means, in relation to any Performance Period, the
minimum level of performance that must be achieved with respect to a
Performance Measure in order for an award to become payable pursuant to
this Plan.
(m) "Plan Pool" means, in relation to each calendar year, the amount, if any,
that is available for distribution pursuant to the Plan with respect to
such year which amount shall be a percentage of Operating Profits that
shall not exceed 7.5% of the Operating Profits for such year.
(n) "Target Award" means that percentage of the Plan Pool which the Committee
sets as the maximum amount to be awarded to a Participant under the Plan
for such Performance Period.
1.3 Administration
The Plan shall be administered by the Committee. Subject to the terms of
the Plan, the Committee shall, among other things, determine eligibility for
participation in the Plan, make awards under the Plan, establish the terms and
conditions of such awards (including the Performance Measure(s) to be utilized)
and determine whether the Performance Measures and Performance Thresholds for
any award has been achieved. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by a majority of the
Committee, shall be deemed the acts of the Committee. Subject to the provisions
of the Plan and to directions by the Board, the Committee is authorized to
interpret the Plan, to adopt administrative rules, regulations, and guidelines
for the Plan, and to impose such terms, conditions, and restrictions on awards
as it deems appropriate. The Committee may, with respect to Participants who are
not subject to Section 162(m) of the Code, delegate such of its powers and
authority under the Plan to the Company's Chairman, President or Chief Executive
Officer as it deems appropriate. In the event of such delegation, all references
to the Committee in this Plan shall be deemed references to such officers as it
relates to those aspects of the Plan that have been delegated.
1.4 Eligibility and Participation
Participation in the Plan shall be limited to officers, who may also be
members of the Board who are determined by the Committee to be eligible for
participation in the Plan and unless otherwise determined by the Committee, the
Chairperson of the Board, the Chief Executive Officer and any executive who is a
member of the Board or is designated as a member of the Chief Executive
Officer's senior staff shall be eligible to participate in the Plan.
ARTICLE II - AWARD TERMS
2.1 Granting of Awards
The Committee may, in its discretion, from time to time make awards to
persons eligible for participation in the Plan pursuant to which the Participant
will earn compensation in the event that the Company achieves the Performance
Thresholds established by the Committee.
2.2 Establishment of Performance Thresholds
Each award shall be conditioned upon the Company's achievement of one or
more Performance Thresholds with respect to the Performance Measure(s)
established by the Committee no later than ninety (90) days after the beginning
of the applicable Performance Period. The Committee, in its discretion, may
establish Performance Thresholds for the Company as a whole or for only the
business unit of the Company in which a given Participant is involved, or a
combination thereof. In addition to establishing a minimum performance level
below which no compensation shall be payable pursuant to an award, the
Committee, in its discretion, may create a performance schedule under which an
amount less than the Target Award may be paid so long as the Performance
Threshold has been exceeded. The Committee may adjust the Performance Thresholds
and measurements to reflect significant unforeseen events and other factors;
provided, however, that the Committee may not make any such adjustment with
respect to any award to an individual who is then a "covered employee" as such
term is defined in Regulation 1.162-27(c)(2) promulgated under Section 162(m) of
the Code, or any successor provision ("Section 162(m)"), if such adjustment
would cause compensation pursuant to such award to cease to be performance-based
compensation under Section 162(m).
2.3 Other Award Terms
The Committee may, in its sole discretion, establish certain additional
performance based conditions that must be satisfied by the Company, a business
unit or the Participant as a condition precedent to the payment of all or a
portion of any awards. Such conditions precedent may include, among other
things, the receipt by a Participant of a specified annual performance rating
and the achievement of specified performance goals by the Company, business unit
or Participant. Furthermore, the Committee may, in its discretion, reduce the
amount of any award to a Participant if it concludes that such reduction is
appropriate based upon (i) evaluations of such Participant's performance, (ii)
comparisons with compensation received by executive officers of other companies
in the Company's industry (iii) the Company's financial results and conditions
and (iv) such other business factors deemed relevant by the Committee. In
addition, the Committee may establish a minimum Bonus Pool that must be
available as a condition precedent to any distribution pursuant to Section 2.5
hereof.
2.4 Certification of Achievement of Bonus Pool Performance Thresholds
The Committee shall, prior to any payment under the Plan, certify in
writing the extent, if any, that the Performance Threshold(s) has been achieved
and the amount, if any, of the Bonus Pool. For purposes of this provision, and
for so long as the Code permits, the approved minutes of the Committee meeting
in which the certification is made shall be treated as written certification.
2.5 Distribution of Awards
Awards under the Plan shall be paid in cash as soon as practicable after
audited financial statements for the Performance Period have been prepared and
the Committee has certified (i) the amount, if any, of the Bonus Pool and (ii)
that the Performance Threshold(s) has been achieved. Notwithstanding the
foregoing, the Committee may, in it sole discretion: (i) elect to pay all or a
portion of the award in four equal quarterly installments during the calendar
year that the lump sum payment would have been paid; or (ii) permit a
Participant to elect to receive all or a portion of the total award value in the
form of non-qualified stock options to purchase Common Stock, in lieu of
receiving cash. Any options granted as payment of an award shall be granted
pursuant to the Federated Investors, Inc. Stock Incentive Plan or any successor
thereto and shall have an exercise price equal to the Fair Market Value of the
Common Stock on the date of grant. The number of stock options to be granted
shall be determined by the Committee and shall be based upon the value of the
options as determined under the Black-Scholes option-pricing model or such other
option valuation model or calculation that the Committee, in its sole
discretion, shall determine is appropriate.
2.6 Termination of Employment
Unless otherwise determined by the Committee, a Participant must be
actively employed by the Company on the date his or her award (or any portion
thereof) is to be paid ("the Payment Date") in order to be entitled to payment
of any award (or portion thereof).
2.7 Maximum Amount Available for Awards
The maximum amount payable pursuant to the Plan to the Company's Chief
Executive Officer for any Performance Period shall be 24% of the Plan Pool. The
maximum amount payable pursuant to the Plan to any other Participant shall be
19% of the Plan Pool.
ARTICLE III - OTHER PROVISIONS
3.1 Withholding Taxes
Whenever payments under the Plan are to be made, the Company will withhold
therefrom an amount sufficient to satisfy any applicable governmental
withholding tax requirements related thereto.
3.2 Adjustments
Awards may be adjusted by the Committee in the manner and to the extent it
determines to be appropriate to reflect stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges, reclassifications or other relevant changes in capitalization
occurring after the date of the award; provided, however, that the Committee may
not make any such adjustment with respect to any award to an individual who is
then a "covered employee" as such term is defined in Regulation 1.162-27(c)(2)
promulgated under Section 162(m) of the Code, or any successor provision
("Section 162(m)"), if such adjustment would cause compensation pursuant to such
award to cease to be performance-based compensation under Section 162(m).
3.3 No Right to Employment
Nothing contained in the Plan or in any Award shall confer upon any
Participant any right with respect to continued employment with the Company or
its subsidiaries, nor interfere in any way with the right of the Company or its
subsidiaries to at any time reassign the Participant to a different job, change
the compensation of the Participant or terminate the Participant's employment
for any reason.
3.4 Nontransferability
A Participant's rights under the Plan, including the right to amounts
payable may not be assigned, pledged, or otherwise transferred except, in the
event of a Participant's death, to the Participant's designated beneficiary or,
in the absence of such a designation, by will or by the laws of descent and
distribution.
3.5 Unfunded Plan
Unless otherwise determined by the Committee, the Plan shall be unfunded
and shall not create (or be construed to create) a trust or separate funds. With
respect to any payment not yet made to a Participant, nothing contained herein
shall give any Participant any rights that are greater than those of a general
creditor of the Company.
3.6 Foreign Jurisdictions
The Committee shall have the authority to adopt, amend, or terminate such
arrangements, not inconsistent with the intent of the Plan, as it may deem
necessary or desirable to make available tax or other benefits of the laws of
foreign countries in order to promote achievement of the purposes of the Plan.
3.7 Other Compensation Plans
Nothing contained in this Plan shall prevent the Company from adopting
other or additional compensation arrangements for employees of the Company.
ARTICLE IV - AMENDMENT AND TERMINATION
The Board of Directors may modify, amend, or terminate the Plan at any time
except that, no modification, amendment, or termination of the Plan shall
adversely affect the rights of a Participant under an award previously made to
such Participant without the consent of such Participant.
ARTICLE V - EFFECTIVE DATE
The Plan shall become effective immediately upon the approval and adoption
thereof by Board, but is subject to the further approval and adoption by the
holders of the Class A Common Stock of the Company.
EXHIBIT B
FEDERATED INVESTORS, INC.
STOCK INCENTIVE PLAN
(Adopted as of February 20, 1998)
(Amended as of August 26,1998)
(Amended as of August 31, 1998)
(Amended as of January 26, 1999)
(Amended as of May 17, 1999)
(Amended as of January 29, 2002)
1. Purpose
The purpose of the Federated Investors, Inc. Stock Incentive Plan (the
"Plan") is to:
Facilitate the assumption by Federated Investors, Inc., as the surviving
corporation of a merger with its parent corporation, Federated Investors, of
certain stock incentive awards previously made by Federated Investors to its
employees; and
Continue to promote the long-term growth and performance of Federated
Investors, Inc. and its affiliates and to attract and retain outstanding
individuals by awarding directors, executive officers and key employees stock
options, stock appreciation rights, performance awards, restricted stock and/or
other stock-based awards.
2. Definitions
The following definitions are applicable to the Plan:
"Award" means the grant of Options, SARs, Performance Awards, Restricted
Stock or other stock-based award under the Plan.
"Board" means the Board of Directors of the Company.
"Board Committee" means the committee of the Board appointed in accordance
with Section 4 to administer the Plan.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the Class B Common Stock of the Company, no par value
per share.
"Company" means Federated Investors, Inc., a Pennsylvania corporation, and
its successors and assigns.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, on any date, the closing sale price of one share
of Common Stock, as reported on the New York Stock Exchange or any national
securities exchange on which the Common Stock is then listed or on The NASDAQ
Stock Market's National Market ("NNM") if the Common Stock is then quoted
thereon, as published in the Wall Street Journal or another newspaper of general
circulation, as of such date or, if there were no sales reported as of such
date, as of the last date preceding such date as of which a sale was reported.
In the event that the Common Stock is not listed for trading on a national
securities exchange or authorized for quotation on NNM, Fair Market Value shall
be the closing bid price as reported by The NASDAQ Stock Market or The NASDAQ
SmallCap Market (if applicable), or if no such prices shall have been so
reported for such date, on the next preceding date for which such prices were so
reported. In the event that the Common Stock is not listed on the New York Stock
Exchange, a national securities exchange or NNM, and is not listed for quotation
on The NASDAQ Stock Market or The NASDAQ SmallCap Market, Fair Market Value
shall be determined in good faith by the Board Committee in its sole discretion,
and for this purpose the Board Committee shall be entitled to rely on the
opinion of a qualified appraisal firm with respect to such Fair Market Value,
but the Board Committee shall in no event be obligated to obtain such an opinion
in order to determine Fair Market Value.
"Grant Date" means the date on which the grant of an Option under Section
5.1 hereof or a SAR under Section 6.1 hereof becomes effective pursuant to the
terms of the Stock Option Agreement or Stock Appreciation Rights Agreement, as
the case may be, relating thereto.
"Incentive Stock Option" means an option to purchase shares of Common Stock
designated as an incentive stock option and which complies with Section 422 of
the Code.
"Non-Statutory Stock Option" means an option to purchase shares of Common
Stock which is not an Incentive Stock Option.
"Offering" means the initial public offering of Class B Common Stock by
United States and international underwriters.
"Option" means any option to purchase shares of Common Stock granted under
Sections 5.1 or 10.1 hereof.
"Option Price" means the purchase price of each share of Common Stock under
an Option.
"Outside Director" means a member of the Board who is not an employee of
the Company or any Subsidiary.
"Participant" means any salaried employee of the Company and its affiliates
designated by the Board Committee to receive an Award under the Plan.
"Performance Award" means an Award of shares of Common Stock granted under
Section 7.
"Performance Period" means the period of time established by the Board
Committee for achievement of certain objectives under Section 7.1 hereof.
"Restriction Period" means the period of time specified in a Performance
Share Award Agreement or a Restricted Stock Award Agreement, as the case may be,
between the Participant and the Company during which the following conditions
remain in effect: (i) certain restrictions on the sale or other disposition of
shares of Common Stock awarded under the Plan, and (ii) subject to the terms of
the applicable agreement, a requirement of continued employment of the
Participant in order to prevent forfeiture of the Award.
"Stock Appreciation Rights" or "SARs" means the right to receive a cash
payment from the Company equal to the excess of the Fair Market Value of a
stated number of shares of Common Stock at the exercise date over a fixed price
for such shares.
"Subsidiary" means any corporation, business trust or partnership (other
than the Company) in an unbroken chain of corporations, business trusts or
partnerships beginning with the Company if each of the corporations, business
trusts or partnerships (other than the last corporation, business trust or
partnership in the chain) owns stock, beneficial interests or partnership
interests possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations, business trusts or
partnerships in the chain.
"Ten Percent Holder" means a person who owns (within the meaning of Section
424(d) of the Code) more than ten percent of the voting power of all classes of
stock of the Company or of its parent corporation or Subsidiary.
3. Shares Subject to Plan
3.1 Shares Reserved under the Plan. Subject to adjustment as provided in
Section 3.2, the number of shares of Common Stock cumulatively available under
the Plan shall equal 13,500,000 shares. All of such authorized shares of Common
Stock shall be available for the grant of Incentive Stock Options under the
Plan. No Participant shall receive Awards in respect of more than 600,000 shares
of Common Stock in any fiscal year of the Company. In addition, the aggregate
Fair Market Value (determined on the Grant Date) of Common Stock with respect to
which Incentive Stock Options granted a Participant become exercisable for the
first time in any single calendar year shall not exceed $100,000. Any Common
Stock issued by the Company through the assumption or substitution of
outstanding grants from an acquired corporation or entity shall not reduce the
shares available for grants under the Plan. Shares of Common Stock to be issued
pursuant to the Plan may be authorized and unissued shares, treasury shares, or
any combination thereof. Subject to Section 6.2 hereof, if any shares of Common
Stock subject to an Award hereunder are forfeited or any such Award otherwise
terminates without the issuance of such shares of Common Stock to a Participant,
or if any shares of Common Stock are surrendered by a Participant in full or
partial payment of the Option Price of an Option, such shares, to the extent of
any such forfeiture, termination or surrender, shall again be available for
grant under the Plan.
3.2 Adjustments. The aggregate number of shares of Common Stock which may
be awarded under the Plan and the terms of outstanding Awards shall be adjusted
by the Board Committee to reflect a change in the capitalization of the Company,
including but not limited to, a stock dividend or split, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
spin-off, spin-out or other distribution of assets to shareholders; provided
that the number and price of shares subject to outstanding Options granted to
Outside Directors pursuant to Section 10 hereof and the number of shares subject
to future Options to be granted pursuant to Section 10 shall be subject to
adjustment only as set forth in Section 10 hereof.
3.3 Merger With Federated Investors. Notwithstanding the foregoing, the
Company's merger with Federated Investors and assumption of its outstanding
stock incentive awards will not result in any adjustment to the number of shares
available under the Plan and will reduce the number of shares available under
this Plan accordingly. For purposes of this Plan, after the merger all such
stock incentive awards shall be treated as Awards under this Plan, except that
any Grant Date, Performance Period or Restricted Period shall relate back to the
date on which the awards were made by Federated Investors.
4. Administration of Plan
4.1 Administration by the Board Committee. The Plan shall be administered
as follows.
(a) Prior to an Offering, the Plan shall be administered by either the
full Board or by the Board Committee if one is established by the
Board. Prior to an Offering, any member of the Board may serve on the
Board Committee.
(b) After an Offering, the Plan shall be administered by the Board
Committee, which shall consist of no fewer than two members of the
Board who are (i) "Non-Employee Directors" for purposes of Rule 16b-3
of the Commission under the Exchange Act and (ii) to the extent
required to ensure that awards under the Plan are exempt for purposes
of Section 162(m) of the Code, "outside directors" for purposes of
Section 162(m); provided, however, that the Board Committee may
delegate some or all of its authority and responsibility under the
Plan with respect to Awards to Participants who are not subject to
Section 16 of the Exchange Act to the Chief Executive Officer of the
Company. In the event that, after an Offering, the Board does not have
two members who qualify as "Non-Employee Directors" for purposes of
Rule 16b-3, the Plan shall be administered by the full Board.
(c) The Board Committee shall have authority to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to
the Plan, to prescribe the form of any agreement or instrument
executed in connection herewith, and to make all other determinations
necessary or advisable for the administration of the Plan. All such
interpretations, rules, regulations and determinations shall be
conclusive and binding on all persons and for all purposes. In
addition, the Board Committee shall have authority, without amending
the Plan, to grant Awards hereunder to Participants who are foreign
nationals or employed outside the United States or both, on terms and
conditions different from those specified herein as may, in the sole
judgment and discretion of the Board Committee, be necessary or
desirable to further the purpose of the Plan.
(d) Notwithstanding the foregoing, the Board Committee shall not have any
discretion with respect to Options granted to Outside Directors
pursuant to Section 10 hereof. In the event that the Board does not
establish a Board Committee for any reason, any reference in this Plan
to the Board Committee shall be deemed to refer to the full Board.
4.2 Designation of Participants. Participants shall be selected, from time
to time, by the Board Committee, from those executive officers and key employees
of the Company and its affiliates who, in the opinion of the Board Committee,
have the capacity to contribute materially to the continued growth and
successful performance of the Company. Outside Directors shall be Participants
only in accordance with Section 10.
5. Stock Options
5.1 Grants. Options may be granted, from time to time, to such Participants
as may be selected by the Board Committee on such terms, not inconsistent with
this Plan, as the Board Committee shall determine. The Option Price shall be
determined by the Board Committee effective on the Grant Date; provided,
however, that (i) in the case of Incentive Stock Options granted to a
Participant who on the Grant Date is not a Ten Percent Holder, such price shall
not be less than one hundred percent (100%) of the Fair Market Value of a share
of Common Stock on the Grant Date, (ii) in the case of an Incentive Stock Option
granted to a Participant who on the Grant Date is a Ten Percent Holder, such
price shall be not less than one hundred and ten percent (110%) of the Fair
Market Value of a share of Common Stock on the Grant Date, and (iii) in the case
of Non-Statutory Stock Options, such price shall be not less than eighty-five
percent (85%) of the Fair Market Value of a share of Common Stock on the Grant
Date. The number of shares of Common Stock subject to each Option granted to
each Participant, the terms of each Option, and any other terms and conditions
of an Option granted hereunder shall be determined by the Board Committee, in
its sole discretion, effective on the Grant Date; provided, however, that no
Incentive Stock Option shall be exercisable any later than ten (10) years from
the Grant Date. Each Option shall be evidenced by a Stock Option Agreement
between the Participant and the Company which shall specify the type of Option
granted, the Option Price, the term of the Option, the number of shares of
Common Stock to which the Option pertains, the conditions upon which the Option
becomes exercisable and such other terms and conditions as the Board Committee
shall determine.
5.2 Payment of Option Price. No shares of Common Stock shall be issued upon
exercise of an Option until full payment of the Option Price therefor by the
Participant. Upon exercise, the Option Price may be paid in cash, and, subject
to approval by the Board Committee, in shares of Common Stock having a Fair
Market Value equal to the Option Price, or in any combination thereof, or in any
other manner approved by the Board Committee.
5.3 Rights as Shareholders. Participants shall not have any of the rights
of a shareholder with respect to any shares subject to an Option until such
shares have been issued upon the proper exercise of such Option.
5.4 Transferability of Options. Options granted under the Plan may not be
sold, transferred, pledged, assigned, hypothecated or otherwise disposed of
except by will or by the laws of descent and distribution; provided, however,
that, if authorized in the applicable Award agreement, a Participant may make
one or more gifts of Options granted hereunder to members of the Participant's
immediate family or trusts or partnerships for the benefit of such family
members. All Options granted to a Participant under the Plan shall be
exercisable during the lifetime of such Participant only by such Participant,
his agent, guardian or attorney-in-fact; provided, however, that all Options
transferred in a manner consistent with the terms of an Award agreement may be
exercised by the transferee.
5.5 Termination of Employment. If a Participant ceases to be an employee of
either the Company or of any of its affiliates, the Options granted hereunder
shall be exercisable in accordance with the Stock Option Agreement between the
Participant and the Company.
5.6 Designation of Incentive Stock Options. Except as otherwise expressly
provided in the Plan, the Board Committee may, at the time of the grant of an
Option, designate such Option as an Incentive Stock Option under Section 422 of
the Code.
5.7 Certain Incentive Stock Option Terms. In the case of any grant of an
Incentive Stock Option, whenever possible, each provision in the Plan and in any
related agreement shall be interpreted in such a manner as to entitle the Option
holder to the tax treatment afforded by Section 422 of the Code, and if any
provision of this Plan or such agreement shall be held not to comply with
requirements necessary to entitle such Option to such tax treatment, then (i)
such provision shall be deemed to have contained from the outset such language
as shall be necessary to entitle the Option to the tax treatment afforded under
Section 422 of the Code, and (ii) all other provisions of this Plan and the
agreement relating to such Option shall remain in full force and effect. If any
agreement covering an Option designated by the Board Committee to be an
Incentive Stock Option under this Plan shall not explicitly include any terms
required to entitle such Incentive Stock Option to the tax treatment afforded by
Section 422 of the Code, all such terms shall be deemed implicit in the
designation of such Option and the Option shall be deemed to have been granted
subject to all such terms.
6. Stock Appreciation Rights
6.1 Grants. Stock Appreciation Rights may be granted, from time to time, to
such salaried employees of the Company and its affiliates as may be selected by
the Board Committee. SARs may be granted at the discretion of the Board
Committee either (i) in connection with an Option or (ii) independent of an
Option. The price from which appreciation shall be computed shall be established
by the Board Committee at the Grant Date; provided, however, that such price
shall not be less than one-hundred percent (100%) of the Fair Market Value of
the number of shares of Common Stock subject of the grant on the Grant Date. In
the event the SAR is granted in connection with an Option, the fixed price from
which appreciation shall be computed shall be the Option Price. Each grant of a
SAR shall be evidenced by a Stock Appreciation Rights Agreement between the
Participant and the Company which shall specify the type of SAR granted, the
number of SARs, the conditions upon which the SARs vest and such other terms and
conditions as the Board Committee shall determine.
6.2 Exercise of SARs. SARs may be exercised upon such terms and conditions
as the Board Committee shall determine; provided, however, that SARs granted in
connection with Options may be exercised only to the extent the related Options
are then exercisable. Notwithstanding Section 3.1 hereof, upon exercise of a SAR
granted in connection with an Option as to all or some of the shares subject of
such Award, the related Option shall be automatically canceled to the extent of
the number of shares subject of the exercise, and such shares shall no longer be
available for grant hereunder. Conversely, if the related Option is exercised as
to some or all of the shares subject of such Award, the related SAR shall
automatically be canceled to the extent of the number of shares of the exercise,
and such shares shall no longer be available for grant hereunder.
6.3 Payment of Exercise. Upon exercise of a SAR, the holder shall be paid
in cash the excess of the Fair Market Value of the number of shares subject of
the exercise over the fixed price, which in the case of a SAR granted in
connection with an Option shall be the Option Price for such, shares.
6.4 Rights of Shareholders. Participants shall not have any of the rights
of a shareholder with respect to any Options granted in connection with a SAR
until shares have been issued upon the proper exercise of an Option.
6.5 Transferability of SARs. SARs granted under the Plan may not be sold,
transferred, pledged, assigned, hypothecated or otherwise disposed of except by
will or by the laws of descent and distribution. All SARs granted to a
Participant under the Plan shall be exercisable during the lifetime of such
Participant only by such Participant, his agent, guardian, or attorney-in-fact.
6.6 Termination of Employment. If a Participant ceases to be an employee of
either the Company or of any of its affiliates, SARs granted hereunder shall be
exercisable in accordance with the Stock Appreciation Rights Agreement between
the Participant and the Company.
7. Performance Awards
7.1 Awards. Awards of shares of Common Stock may be made, from time to
time, to such Participants as may be selected by the Board Committee. Such
shares shall be delivered to the Participant only upon (i) achievement of such
corporate, sector, division, individual or any other objectives or criteria
during the Performance Period as shall be established by the Board Committee and
(ii) the expiration of the Restriction Period. Except as provided in the
Performance Share Award Agreement between the Participant and the Company,
shares subject to such Awards under this Section 7.1 shall be released to the
Participant only after the expiration of the relevant Restriction Period. Each
Award under this Section 7.1 shall be evidenced by a Performance Share Award
Agreement between the Participant and the Company which shall specify the
applicable performance objectives, the Performance Period, the Restriction
Period, any forfeiture conditions and such other terms and conditions as the
Board Committee shall determine.
7.2 Stock Certificates. Upon an Award of shares of Common Stock under
Section 7.1 of the Plan, the Company shall issue a certificate registered in the
name of the Participant bearing the following legend and any other legend
required by any federal or state securities laws or by the Delaware Business
Trust Act:
"The sale or other transfer of the shares of stock
represented by this certificate is subject to certain
restrictions set forth in the Federated Investors, Inc. Stock
Incentive Plan, administrative rules adopted pursuant to such
Plan and a Performance Share Award Agreement between the
registered owner and Federated Investors, Inc. A copy of the
Plan, such rules and such Agreement may be obtained from the
Secretary of Federated Investors, Inc."
Unless otherwise provided in the Performance Share Award Agreement between
the Participant and the Company, such certificates shall be retained by the
Company until the expiration of the Restriction Period. Upon the expiration of
the Restriction Period, the Company shall (i) cause the removal of the legend
from the certificates for such shares as to which a Participant is entitled in
accordance with the Performance Share Award Agreement between the Participant
and the Company and (ii) release such shares to the custody of the Participant.
7.3 Rights as Shareholders. Subject to the provisions of the Performance
Share Award Agreement between the Participant and the Company, during the
Performance Period, dividends and other distributions paid with respect to all
shares awarded thereto under Section 7.1 hereof shall, in the discretion of the
Board Committee, either be paid to Participants or held in escrow by the Company
and paid to Participants only at such time and to such extent as the related
Performance Award is earned. During the period between the completion of the
Performance Period and the expiration of the Restriction Period, Participants
shall be entitled to receive dividends and other distributions only as to the
number of shares determined in accordance with the Performance Share Award
Agreement between the Participant and the Company.
7.4 Transferability of Shares. Certificates evidencing the shares of Common
Stock awarded under the Plan shall not be sold, exchanged, assigned,
transferred, pledged, hypothecated or otherwise disposed of until the expiration
of the Restriction Period.
7.5 Termination of Employment. If a Participant ceases to be an employee of
either the Company or of one of its affiliates, the number of shares subject of
the Award, if any, to which the Participant shall be entitled shall be
determined in accordance with the Performance Share Award Agreement between the
Participant and the Company.
7.6 Transfer of Employment. If a Participant transfers employment from one
business unit of the Company or any of its affiliates to another business unit
during a Performance Period, such Participant shall be eligible to receive such
number of shares of Common Stock as the Board Committee may determine based upon
such factors as the Board Committee in its sole discretion may deem appropriate.
8. Restricted Stock Awards
8.1 Awards. Awards of shares of Common Stock subject to such restrictions
as to vesting and otherwise as the Board Committee shall determine, may be made,
from time to time, to Participants as may be selected by the Board Committee.
The Board Committee may in its sole discretion at the time of the Award or at
any time thereafter provide for the early vesting of such Award prior to the
expiration of the Restriction Period. Each Award under this Section 8.1 shall be
evidenced by a Restricted Stock Award Agreement between the Participant and the
Company which shall specify the vesting schedule, any rights of acceleration,
any forfeiture conditions, and such other terms and conditions as the Board
Committee shall determine.
8.2 Stock Certificates. Upon an Award of shares of Common Stock under
Section 8.1 of the Plan, the Company shall issue a certificate registered in the
name of the Participant bearing the following legend and any other legend
required by any federal or state securities laws or by the Delaware Business
Trust Act.
"The sale or other transfer of the shares of stock
represented by this certificate is subject to certain
restrictions set forth in the Federated Investors, Inc. Stock
Incentive Plan, administrative rules adopted pursuant to such
Plan and a Restricted Stock Award Agreement between the
registered owner and Federated Investors, Inc. A copy of the
Plan, such rules and such agreement may be obtained form the
Secretary of Federated Investors, Inc."
Unless otherwise provided in the Restricted Stock Award Agreement between
the Participant and the Company, such certificates shall be retained in custody
by the Company until the expiration of the Restriction Period. Upon the
expiration of the Restriction Period, the Company shall (i) cause the removal of
the legend from the certificates for such shares as to which a Participant is
entitled in accordance with the Restricted Stock Award Agreement between the
Participant and the Company and (ii) release such shares to the custody of the
Participant.
8.3 Rights as Shareholders. During the Restriction Period, Participants
shall be entitled to receive dividends and other distributions paid with respect
to all shares awarded thereto under Section 8.1 hereof.
8.4 Transferability of Shares. Certificates evidencing the shares of Common
Stock awarded under the Plan shall not be sold, exchanged, assigned,
transferred, pledged, hypothecated or otherwise disposed of until the expiration
of the Restriction Period.
8.5 Termination of Employment. If a Participant ceases to be an employee of
either the Company or of any of its affiliates, the number of shares subject of
the Award, if any, to which the Participant shall be entitled shall be
determined in accordance with the Restricted Stock Award Agreement between the
Participant and the Company. All remaining shares as to which restrictions apply
at the date of termination of employment shall be forfeited subject to such
exceptions, if any, authorized by the Board Committee.
9. Other Stock-Based Awards
Awards of shares of Common Stock and other awards that are valued in whole
or in part by reference to, or are otherwise based on, Common Stock, may be
made, from time to time, to salaried employees of the Company and its affiliates
as may be selected by the Board Committee. Such Awards may be made alone or in
addition to or in connection with any other Award hereunder. The Board Committee
may in its sole discretion determine the terms and conditions of any such Award.
Each such Award shall be evidenced by an agreement between the Participant and
the Company which shall specify the number of shares of Common Stock subject of
the Award, any consideration therefor, any vesting or performance requirements
and such other terms and conditions as the Board Committee shall determine.
10. Outside Directors' Options
10.1 Initial Grants. Effective on the dates set forth below, each category
of Outside Director of the Company described below shall be automatically
granted an Option to purchase 5,000 shares of Common Stock:
(i) for any Outside Director serving on the Board at the effective date of
the Offering, the effective date of the Offering;
(ii) for any Outside Director elected by the shareholders of the Company
subsequent to the effective time of the Offering, the date of such
Outside Director's initial election to the Board; and
(iii)for any Outside Director appointed by the Board subsequent to the
effective time of the Offering, the date such Outside Director's
appointment to the Board becomes effective.
All such Options shall be Non-Statutory Stock Options. The Option Price for
all Options granted pursuant to this Section 10 shall be the greater of (a)
$19.00 per share or (b) one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the date of grant.
10.2 Annual Grants. Effective on the date of each Annual Meeting of the
shareholders of the Company that occurs after the Offering, each Outside
Director who will be continuing as a director after such Annual Meeting, but not
including any Outside Director who is first elected at such Annual Meeting,
shall automatically be granted an Option to purchase 1,500 shares of Common
Stock. All such Options shall be Non-Statutory Stock Options. The Option price
shall be one-hundred percent (100%) of the Fair Market Value per share of Common
Stock on the date of the grant.
10.3 Exercise of Options. Two thousand (2,000) of the initial Options
granted pursuant to Section 10.1 shall vest in an Outside Director on the first
anniversary of such grant and one thousand five hundred (1,500) of the initial
Options shall vest on each subsequent anniversary of such grant until such
Options are fully vested at the end of three years. All Options granted pursuant
to Section 10.2 shall vest immediately. All vested Options shall be immediately
exercisable and may be exercised by the Outside Director for a period of ten
(10) years from the date of grant; provided, however, that in the event of the
death or disability of an Outside Director, the Option shall be exercisable only
within the twelve (12) months next succeeding the date of death or disability
and only if and to the extent that the Outside Director was entitled to exercise
the Option at the date of the Outside Director's death or disability, as the
case may be; provided further, however, that if an Outside Director's service
with the Company terminates for any reason other than death or disability, the
Option shall be exercisable for thirty (30) days after the date of such
termination and only if and to the extent that the Outside director was entitled
to exercise the Option at the date of such termination. In the case of death,
such Options shall be exercisable only by the executor or administrator of the
Outside Director's estate or by the person or persons to whom the Outside
Director's rights under the Option shall pass by the Outside Director's will or
the laws of descent and distribution. Notwithstanding the foregoing, in no event
shall any Option be exercisable more than ten (10) years after the date of
grant.
10.4 Payment of Option price. An Option granted to an Outside Director
shall be exercisable only upon payment to the Company of the Option price.
Payment for the shares shall be in United States dollars, payable in cash or by
check.
10.5 Adjustments. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that the shares of Common Stock are changed into or become
exchangeable for a larger or smaller number of shares, thereafter the number of
shares subject to outstanding Options granted to Outside Directors and the
number of shares subject to Options to be granted to Outside Directors pursuant
to the provisions of this Section 10 shall be increased or decreased, as the
case may be, in direct proportion to the increase or decrease in the number of
shares of Common Stock by reason of such change in corporate structure, provided
that the number of shares shall always be a whole number, and the purchase price
per share of any outstanding Options shall, in the case of an increase in the
number of shares, be proportionately reduced, and in the case of a decrease in
the number of shares, shall be proportionately increased.
11. Amendment or Termination of Plan
The Board may amend, suspend or terminate the Plan or any part thereof from
time to time, provided that no change may be made which would impair the rights
of a Participant to whom shares of Common Stock have theretofore been awarded
without the consent of said Participant.
12. Miscellaneous
12.1 Rights of Employees. Nothing in the Plan shall interfere with or limit
in any way the right of the Company or any affiliate to terminate any
Participant's employment at any time, nor confer upon any Participant any right
to continued employment with the Company or any affiliate.
12.2 Tax Withholding. The Company shall have the authority to withhold, or
to require a Participant to remit to the Company, prior to issuance or delivery
of any shares or cash hereunder, an amount sufficient to satisfy federal, state
and a local tax withholding requirements associated with any Award. In addition,
the Company may, in its sole discretion, permit a Participant to satisfy any tax
withholding requirements, in whole or in part, by (i) delivering to the Company
shares of Common Stock held by such Participant having a Fair Market Value equal
to the amount of the tax; (ii) directing the Company to retain shares of Common
stock otherwise issuable to the Participant under the Plan; or (iii) any other
method approved by the Board Committee.
12.3 Status of Awards. Awards hereunder shall not be deemed compensation
for purposes of computing benefits under any retirement plan of the Company or
affiliate and shall not affect any benefits under any other benefit plan now or
hereafter in effect under which the availability or amount of benefits is
related to the level of compensation.
12.4 Waiver of Restrictions. The Board Committee may, in its sole
discretion, based on such factors as the Board Committee may deem appropriate,
waive in whole or in part, any remaining restrictions or vesting requirements in
connection with any Award hereunder.
12.5 Adjustment of Awards. Subject to Section 11, the Board Committee shall
be authorized to make adjustments in performance award criteria or in the terms
and conditions of other Awards (except Options granted pursuant to Section 10
hereof) in recognition of unusual or nonrecurring events affecting the Company
or its financial statements or changes in applicable laws, regulations or
accounting principles; provided however, that no such adjustment shall impair
the rights of any Participant without his consent. The Board Committee may also
make Awards hereunder in replacement of, or as alternatives to, Awards
previously granted to Participants, including without limitation, previously
granted Options having higher Option Prices and grants or rights under any other
plan of the Company or of any acquired entity. The Board Committee may correct
any defect, supply any omission or reconcile any inconsistency in the Plan or
any Award in the manner and to the extent it shall deem desirable to carry it
into effect. In the event the Company shall assume outstanding employee benefit
awards or the right or obligation to make future such awards in connection with
the acquisition of another corporation or business entity, the Board Committee
may, in its discretion, make such adjustments in the terms of Awards under the
Plan as it shall deem appropriate. Notwithstanding the above, only the full
Board (and not the Board Committee) shall have the right to make any adjustments
in the terms or conditions of Options granted pursuant to Section 10.
12.6 Consideration for Awards. Except as otherwise required in any
applicable agreement or by the terms of the Plan, Participants under the Plan
shall not be required to make any payment or provide consideration for an Award
other than the rendering of services.
12.7 Special Forfeiture Rule. Notwithstanding any other provision of this
Plan to the contrary, the Board Committee shall be authorized to impose
additional forfeiture restrictions with respect to Awards granted under the
Plan, other than Awards pursuant to Section 10 hereof, including, without
limitation, provisions for forfeiture in the event the Participant shall engage
in competition with the Company or in any other circumstance the Board Committee
may determine.
12.8 Effective Date and Term of Plan. The Plan shall be effective as of the
date it is approved by the Board, subject to the approval thereof by the
shareholders of the Company. Unless terminated under the provisions of Section
11 hereof, the Plan shall continue in effect indefinitely; provided, however,
that no Incentive Stock Options shall be granted after the tenth anniversary of
the effective date of the Plan.
12.9 Compliance with Section 162(m). It is the Company's intent that
compensation payable pursuant to Awards (other than Awards of Restricted Stock
which vest based solely on continued employment) to "covered employees" as such
term is defined in Regulation 1.162-27(c)(2) promulgated under Section 162(m) of
the Code, or any successor provision ("Section 162(m)"), qualify as
"performance-based compensation" as defined in Regulation 1.162-27(e) under
Section 162(m). If any provision of this Plan or an Award is later found to make
compensation intended to be performance-based compensation ineligible for such
treatment, the provision shall be deemed null and void, unless otherwise
determined by a committee of the Board comprised solely of "outside directors"
as such term is defined under Regulation 1.162-27(e)(3) under Section 162(m).
[GRAPHIC OMITTED][GRAPHIC OMITTED]
(3/02)
--------
1 Adjusted pursuant to the Stock Incentive Plan to recognize the 3 for 2
stock split in July of 2000.
1 Adjusted pursuant to the Stock Incentive Plan to recognize the 3 for 2
stock split in July of 2000.