JOHN WILEY & SONS, INC.
FY 1998 EXECUTIVE LONG TERM INCENTIVE PLAN
PLAN DOCUMENT
CONFIDENTIAL
MAY 1, 1997
CONTENTS
Section Subject Page
I. Definitions 2
II. Plan Objectives 4
III. Eligibility 4
IV. Incentive 4
V. Performance Measurement and Objectives 5
VI. Performance Evaluation 5
VII. Payouts 7
VIII. Restricted Performance Shares 7
IX. Stock Option 9
X. Administration and Other Matters 10
I. DEFINITIONS
Following are definitions for words and phrases used in this document. Unless
the context clearly indicates otherwise, these words and phrases are considered
to be defined terms and appear in this document in italicized print:
company
John Wiley & Sons, Inc.
plan
The company's FY (Fiscal Year) 1998 Executive Long Term Incentive Plan as
set forth in this document.
shareholder plan
The company's 1991 Key Employee Stock Plan.
plan cycle
The three year period from May 1, 1997 to April 30, 2000.
executive compensation and development committee (ECDC) The committee of the
company's Board of Directors (Board) responsible for reviewing executive
compensation.
financial goals
The company's objectives to achieve specific financial results
in terms of EBITDA and earnings per share as defined below, for the plan cycle,
including interim revised financial goals, if any, as determined by the ECDC,
the Finance Committee and the Board, and confirmed in writing.
financial results
The company's actual achievement against the financial goals
set for the plan cycle, as reflected in the company's audited financial
statements.
participant
Any person who is eligible and is selected to participate in the
plan, as defined in Section III.
target incentive
The target incentive as determined and authorized by the ECDC at the committee
meeting held on June 19, 1997 is a restricted performance shares award, which
represents the number of restricted performance shares that a participant is
eligible to receive if 100% of his/her applicable financial goals are achieved
and the participant remains an employee of the company through April 30, 2002,
except as otherwise provided in Section VIII. The target incentive is based on
the participant's position and is described in Section IV.
stock
Class A Common Stock of the company.
restricted performance shares
Stock issued pursuant to this plan and the shareholder plan that is subject to
forfeiture. In the shareholder plan, such stock is referred to as "Restricted
Stock." The value of each share of restricted performance shares under this plan
will be determined by reference to the stock closing sale price, as reported by
New York Stock Exchange (NYSE), on the date the ECDC acts at the beginning of
the plan cycle (June 19, 1997). In the event the stock is not traded on June 19,
1997 or the date the ECDC acts, whichever is later, the closing sales price
shall be the price of the stock on the next day after June 19, 1997 or the date
the ECDC acts on which the stock trades.
restricted period
The period during which the shares of restricted performance
shares shall be subject to forfeiture in whole or in part, as defined in the
shareholder plan, in accordance with the terms of the award.
plan end adjusted restricted performance shares award. The final amount of
restricted performance shares awarded to a participant, at the end of the plan
cycle after adjustments, if any, are made, as set forth in Section VIII.
stock option
A right granted to a participant, as more fully described under Section IX, to
purchase a specific number of shares of stock at a specified price. The stock
option granted under this plan will be non-qualified (i.e. is not intended to
comply with the terms and conditions for a tax-qualified option, as set forth in
Section 422A of the Internal Revenue Code of 1986).
grant date
The date on which a participant is granted the stock option. This is also the
date on which the exercise price of the stock option is based.
payout amount
Cash, if any, plus plan end adjusted restricted performance shares award, as set
forth in Section VIII, to a participant under this plan, if any, for achievement
of the financial goals, as further discussed in this plan.
performance levels
threshold
The minimum acceptable level of achievement for each financial goal. If
threshold performance is achieved against all company financial goals, a
participant may earn 25% of the target incentive amount for which he/she is
eligible. If threshold performance is achieved against all divisional financial
goals, a participant may earn 25% of the target incentive amount for which
he/she is eligible.
target
Achievement in aggregate of the financial goals. Each individual financial goal
is set at a level which is both challenging and achievable.
outstanding
Superior achievement of the financial goals. If outstanding performance is
achieved against all financial goals, the maximum amount a participant may earn
is 200% of the target incentive amount for which he/she is eligible.
payout factor
The percentage applied to the target incentive amount exclusive of the stock
option portion, if any, to determine the payout amount based on the percentage
of financial goals deemed achieved.
EBITDA Income before interest, taxes, depreciation and amortization for the
final year of the plan cycle.
earnings per share
Earnings per share, as reported in the company's annual report for the final
year of the plan cycle.
divisional operating income
Operating income before allocations for corporate support services and taxes,
excluding the effects of any unusual activity, for the final year of the plan
cycle.
divisional cash flow from operations after investing activities (divisional cash
flow) operating income before allocations and taxes, excluding unusual items not
related to the period being measured, plus/minus any non-cash items included in
divisional operating income (other than provisions for bad debts), and changes
in controllable assets and liabilities, less normal investments in product
development assets and direct property and equipment additions, for the final
year of the plan cycle. Controllable assets and liabilities are inventory,
composition, author advances, other deferred publication costs, and deferred
subscription revenues.
II. PLAN OBJECTIVES
The purpose of this plan is to enable the company to reinforce and sustain a
culture devoted to excellent performance, emphasize long term financial
performance at the corporate and division levels, reward significant
contributions to the success of the company, attract and retain highly qualified
executives, and provide an opportunity for each participant to acquire equity in
the company.
III. ELIGIBILITY
The participant is selected by the ECDC in its sole discretion, from among those
employees in key management positions deemed able to make the most significant
contributions to the growth and profitability of the company. An employee must
be a participant of the FY 1998 Executive Annual Incentive Plan to be eligible
to participate in this plan. The President and CEO of the company is a
participant.
IV. INCENTIVE
A. The participant's target incentive is determined based on the participant's
position in the company and the contributions the position is deemed able
to make in achieving the financial goals of the company.
B. The participant's target incentive is recommended by the President and CEO
to the ECDC for its and the Board's approval. In the case of the President
and CEO, the target incentive is recommended by the ECDC for the Board's
approval.
V. PERFORMANCE MEASUREMENT AND OBJECTIVES
A. The objectives for the financial goals are recommended by the ECDC with
the advice of the Finance Committee to the Board for its approval. The
financial goals performance objectives are set at a level which are
challenging and achievable.
B. Financial goals established for each participant may include one or more
organizational level's financial goals (e.g. company and division), and
one or more financial goals for a particular organizational unit (e.g.
cash flow, income, divisional operating income). The weighting of and
between the two organizational levels' financial goals may vary,
depending upon the participant's position. Weighting of the participant's
financial goals is recommended by the President and CEO to the ECDC. In
the case of the President and CEO, the financial goals are EBITDA and
earnings per share..
C. Threshold, target and outstanding performance levels for the financial
goals are recommended by the President and CEO for approval by the ECDC,
and the Board.
VI. PERFORMANCE EVALUATION
A. Financial Results
1. Actual financial results achieved by the company and by each
division will be calculated at the end of the plan cycle, subject
to adjustment for audited results, and will be compared with the
previously set financial goals.
2. The financial results will be reviewed by the President and CEO to
determine proposed payout factors for the company and for the
divisions.
3. The President and CEO will provide to the ECDC a view of the
company's achievement of its financial goals, as well as divisional
achievement of like objectives, if any, and will recommend payout
factors to be used for the company and divisional objectives.
B. Award Determination
1. At least threshold performance, in aggregate, of a participant's
particular organizational level's objectives is necessary for the
participant to receive a payout for the particular organizational
level. However, once the overall threshold is achieved for any single
measure the non-achievement of any one particular goal's target
objective does not preclude a payout.
2. The determination of the performance level achievement (threshold,
target and outstanding, or points in between) for each organizational
level's financial goals will be made independently of any other
organizational level's financial goals a participant may have.
3. If the participant has more than one organizational level's financial
goals, the non-achievement of a threshold performance level of one
organizational level's financial goals does not preclude a payout for
the other organizational level's financial goals.
4. The following details the effect of the financial results performance
levels on a participant's payout amount. The actual payout factors
will be in the sole judgment and discretion of the ECDC, taking into
account the following guidelines:
a. For below threshold performance in aggregate, the payout amount
is zero.
b. For company threshold performance in aggregate, 25% of the target
incentive may be recommended. For divisional threshold
performance in aggregate, 25% of the target incentive may be
recommended
c. For between company threshold and target performance in
aggregate, at minimum 25% of the target incentive and up to 100%
of the target incentive may be recommended. For between
divisional threshold and target performance in aggregate, at
minimum 25% of the target incentive and up to 100% of the target
incentive may be recommended.
d. For target performance in aggregate, 100% of the target incentive
may be recommended.
e. For between target and outstanding performance in aggregate,
at minimum 100% of the target incentive and up to 200% of
the target incentive may be recommended.
f. For outstanding performance in aggregate, 200% of the target
incentive may be recommended.
5. Notwithstanding anything to the contrary, the maximum payout
amount, if any, a participant may receive is 200% of the target
incentive.
VII PAYOUTS
A. The restricted performance shares payout amount, if any, will be made as
set forth in Section VIII below. The determination by the ECDC of plan end
adjusted restricted performance shares shall constitute payout of this
portion of the award.
B. The ECDC, in its sole discretion, may direct that the payout be made wholly
or partly in cash.
C. In the event of a participant's death, permanent disability, retirement or
leave of absence prior to the end of the plan cycle, restricted performance
shares awarded at the beginning of the plan cycle, if any, are forfeited,
and the payout amount, if any, will be determined by the ECDC in its sole
discretion.
D. A participant who resigns, or whose employment is terminated by the
company, with or without cause, prior to the end of the plan cycle, is not
eligible for a payout amount and shall forfeit any restricted performance
shares awarded at the beginning of the plan cycle.
VIII. RESTRICTED PERFORMANCE SHARES AWARD PROVISIONS
A. Since one of the objectives of this plan is to provide the participant with
an equity stake in the company and align management and shareholder
interests, the target incentive will be awarded as restricted performance
shares .
B. Restricted performance shares, if any, shall be awarded at the beginning of
the plan cycle, after the June, 1997 ECDC meeting. The amount of restricted
performance shares awarded shall be based on the proportion of the target
incentive allocated to restricted performance shares, as determined by the
ECDC. The value of each share will be determined based on the stock closing
sale price, as reported by the NYSE, on the date the ECDC acts at the
beginning of the plan cycle (June 19, 1997). In the event the stock is not
traded on June 19, 1997 or the date the ECDC acts, whichever is later, the
closing sales price shall be the price of the stock on the next day after
June 19, 1997 or the date the ECDC acts on which the stock trades,
whichever is later. The restricted performance shares awarded at the
beginning of the plan cycle also are subject to adjustment at the end of
the plan cycle as set forth in Sections VIII (C) and (D) below. Restricted
performance shares, if any, shall be awarded pursuant to the shareholder
plan, as approved by the ECDC. In addition to the terms and conditions set
forth in the shareholder plan and Section VII (D) and (E) below, the
following conditions shall apply:
1. During the plan cycle, the participant shall not have the right to
receive dividends or - other distributions with respect to restricted
performance shares received at the beginning of the plan cycle and
shall not have the right to vote such shares. After the end of the
plan cycle, and after all adjustments to the amount of restricted
performance shares are made by the ECDC as set forth in Section VII(D)
and (E) below, the participant shall have the right to receive
dividends or other distributions with respect to the final amount of
restricted performance shares issued and shall have the right to vote
such shares. The date on which the dividend and voting rights shall
commence is the date on which the ECDC makes its determination of the
final number of restricted performance shares awarded after the plan
cycle ends pursuant to Section VII(D) and (E) below. 2. During the
restricted period, the restricted performance shares may not be sold
or transferred. Restricted performance shares shall be legended and
held by the Company.
3. Withholding taxes relating to restricted performance shares awarded
may be satisfied by surrendering shares to the company, in lieu of
cash, upon lapse of the restrictions.
4. The restricted period for restricted performance shares awarded shall
be as follows: subject to continued employment except as otherwise set
forth in the shareholder plan or Sections VII and VIII of this plan,
the lapse of restrictions on one-half of the restricted performance
shares awarded will occur on the first anniversary (April 30, 2001) of
the plan end date at which time the participant will receive a new
stock certificate in a number of shares equal to one-half of the
restricted performance shares awarded with the restrictive legend
deleted, and the lapse of restrictions on the remaining half will
occur on the second anniversary (April 30, 2002) of the plan end date
at which time the participant will receive a new stock certificate in
a number of shares equal to the remaining half with the restrictive
legend deleted.
5. If the participant dies or becomes permanently disabled during the
restricted period, the restrictions on the restricted performance
shares will lapse on the date of such event.
6. If the participant retires during the restricted period at or after
his/her normal retirement date, the restrictions on the restricted
performance shares will lapse on the date of such event.
7. If the participant takes early retirement during the restricted
period, the restrictions on the restricted performance shares will not
lapse until the restricted period expires. If the participant dies
between the time the participant takes early retirement and the end of
the restricted period (April 30, 2002), the lapse of restrictions on
the restricted performance shares will occur on the date of such
event.
8. The restricted performance shares may be adjusted by the ECDC for any
change in the capital stock of the company, as provided in Section II
of the shareholder plan and are in all respects subject to the
provisions of that plan.
9. In the event of a change of control, whether before or after the end
of the plan cycle, as defined in the shareholder plan, all shares of
restricted performance shares which would otherwise remain subject to
restrictions under the plan shall be free of such restrictions.
C. The number of shares of restricted performance shares awarded at the
beginning of the plan cycle, may be adjusted at the end of the plan cycle
based on actual achievement of target objectives.
D. The final amount of restricted performance shares will be determined as
follows: The restricted performance shares established by the ECDC at the
beginning of the plan cycle times the payout factor equals the number of
shares for the plan end adjusted restricted performance shares award. The
result of this calculation will be compared to the restricted performance
shares awarded at the beginning of the plan cycle, and the appropriate
amount of restricted performance shares will be awarded or forfeited, as
required, to bring the restricted performance shares award to the number
of shares designated as the plan end adjusted restricted performance
shares award.
IX. STOCK OPTION
The participant may be granted a stock option pursuant to the shareholder plan
at the beginning of the plan cycle, representing another incentive vehicle by
which the participant is able to share in the equity growth of the company. The
number of shares in the stock option granted to a participant under this plan is
based on a set of variables and assumptions, applied consistently to all
participants, regarding the monetary value a participant might receive upon
exercise of the stock option. The terms and conditions of the award of the stock
option are contained in the shareholder plan and in the stock option award.
Withholding taxes relating to the gain realized on the exercise of an option may
be satisfied by surrendering to the company the equivalent value of the taxes,
or a portion thereof, in option shares in lieu of cash.
X. ADMINISTRATION AND OTHER MATTERS
A. This plan will be administered by the ECDC, who will have authority in its
sole discretion to interpret and administer this plan, including, without
limitation, all questions regarding eligibility and status of any
participant, and no participant shall have any right to receive any
restricted performance shares or payment of any kind whatsoever, except as
determined by the ECDC hereunder.
B. The company will have no obligation to reserve or otherwise fund in advance
any amount which may become payable under the plan.
C. Restricted performance shares, stock options awarded and any cash paid out
under this plan shall not be considered as compensation for purposes of
defining compensation for retirement, savings or supplemental executive
retirement plans, or similar type plans.
D. This plan may not be modified or amended except with the approval of the
ECDC. Notwithstanding the foregoing, Section VIII B (8) shall not be
amended.
E. In the event of a conflict between the provisions of this plan and the
provisions of the shareholder plan, the provisions of the shareholder plan
shall apply.