Exhibit 10(d)(iii) to the Annual Report
on Form 10-K of W.W. Grainger, Inc.
for the year ended December 31, 1998
W.W. GRAINGER, INC.
1990 LONG TERM STOCK INCENTIVE PLAN
AS AMENDED DECEMBER 9, 1998
Section 1. Objective.
The objective of the W.W. Grainger, Inc. 1990 Long Term Stock Incentive
Plan (the "Plan") is to attract and retain the best available executive
personnel and other key employees to be responsible for the management, growth
and success of the business, and to provide an incentive for such employees to
exert their best efforts on behalf of the Company and its shareholders.
Section 2. Definitions.
2.1. General Definitions. The following words and phrases, when used
herein, shall have the following meanings:
(a) "Act" - The Securities Exchange Act of 1934, as amended.
(b) "Agreement" - The document which evidences the grant of any Award
under the Plan and which sets forth the terms, conditions, and limitations
relating to such Award.
(c) "Award" - The grant of any stock option, stock appreciation right,
share of restricted stock, share of phantom stock, other stock-based award, or
any combination thereof.
(d) "Board" - The Board of Directors of W.W. Grainger, Inc.
(e) "Change in Control" means any one or more of the following events:
(i) approval by the shareholders of the Company of:
(A) any merger, reorganization or consolidation of
the Company or any Subsidiary with or into any corporation or
other Person if Persons who were the beneficial owners (as
such term is used in Rule 13d-3 under the Act) of Common Stock
and securities of the Company entitled to vote generally in
the election of directors ("Voting Securities") immediately
before such merger, reorganization or consolidation are not,
immediately thereafter, the beneficial owners, directly or
indirectly, of at least 60% of the then-outstanding common
shares and the combined voting power of
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the then-outstanding Voting Securities ("Voting Power") of the
corporation or other Person surviving or resulting from such
merger, reorganization or consolidation (or the parent
corporation thereof) in substantially the same respective
proportions as their beneficial ownership, immediately before
the consummation of such merger, reorganization or
consolidation, of the then-outstanding Common Stock and Voting
Power of the Company;
(B) the sale or other disposition of all or
substantially all of the consolidated assets of the Company,
other than a sale or other disposition by the Company of all
or substantially all of its consolidated assets to an entity
of which at least 60% of the common shares and the Voting
Power outstanding immediately after such sale or other
disposition are then beneficially owned (as such term is used
in Rule 13d-3 under the Act) by shareholders of the Company in
substantially the same respective proportions as their
beneficial ownership of Common Stock and Voting Power of the
Company immediately before the consummation of such sale or
other disposition; or
(C) a liquidation or dissolution of the Company;
provided, however, that if the consummation of an event described in
this paragraph (i) (a "Transaction") is subject to an Other Party
Approval Requirement (as defined below), the approval of such
Transaction by the shareholders of the Company shall not be deemed a
Change in Control until the first date on which such Other Party
Approval Requirement has been satisfied. For this purpose, "Other Party
Approval Requirement" means a requirement expressly set forth in a
Transaction Agreement (as defined below) between the Company and
another Person to the effect that such Person shall obtain the approval
of one or more elements of the Transaction by the stockholders,
members, partners, or other holders of equity interests of such Person
(or of a parent of such Person) prior to the consummation of such
Transaction in order to comply with the mandatory provisions of (x) the
law of the jurisdiction of the incorporation or organization of such
Person (or its parent) or (y) the articles of incorporation or other
charter or organizational documents of such Person (or its parent) that
are applicable to such Transaction. For this purpose, "Transaction
Agreement" means a written agreement that sets forth the terms and
conditions of the Transaction;
(ii) the following individuals cease for any reason to
constitute a majority of the directors of the Company then serving:
individuals who, on the Effective Date, constitute the Board and any
subsequently appointed or elected director of the Company (other than a
director whose initial assumption of office is in connection with an
actual or threatened election contest, including a consent
solicitation, relating to the election or removal of one or more
directors of the Company) whose appointment or election by the Board or
nomination for
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election by the Company's shareholders was approved or recommended by a
vote of at least two-thirds of the Company's directors then in office
whose appointment, election or nomination for election was previously
so approved or recommended or who were directors on the Effective Date;
or
(iii) the acquisition or holding by any person, entity or
"group" (within the meaning of Section 13(d)(3) or 14(d)(2) of the Act,
other than by any Exempt Person (as such term is defined below), the
Company, any Subsidiary, any employee benefit plan of the Company or a
Subsidiary) of beneficial ownership (within the meaning of Rule 13d-3
under the Act) of 20% or more of either the Company's then-outstanding
Common Stock or Voting Power; provided that:
(A) no such person, entity or group shall be deemed
to own beneficially any securities held by the Company or a
Subsidiary or any employee benefit plan (or any related trust)
of the Company or a Subsidiary;
(B) no Change in Control shall be deemed to have
occurred solely by reason of any such acquisition if both (x)
after giving effect to such acquisition, such person, entity
or group has beneficial ownership of less than 30% of the
then-outstanding Common Stock and Voting Power of the Company
and (y) prior to such acquisition, at least two-thirds of the
directors described in (and not excluded from) paragraph (ii)
of this definition vote to adopt a resolution of the Board to
the specific effect that such acquisition shall not be deemed
a Change in Control; and
(C) no Change in Control shall be deemed to have
occurred solely by reason of any such acquisition or holding
in connection with any merger, reorganization or consolidation
of the Company or any Subsidiary which is not a Change in
Control within the meaning of paragraph (i)(A) above.
Notwithstanding the occurrence of any of the events specified in
paragraphs (i), (ii) or (iii) of this definition, no Change in Control shall
occur with respect to any Participant if (x) the event which otherwise would be
a Change in Control (or the transaction which resulted in such event) was
initiated by such Participant, or was discussed by him with any third party,
without the approval of the Board with respect to such Participant's initiation
or discussion, as applicable, or (y) such Participant is, by written agreement,
a participant on his own behalf in a transaction in which the persons (or their
affiliates) with whom such Participant has the written agreement cause the
Change in Control to occur and, pursuant to the written agreement, such
Participant has an equity interest (or a right to acquire such equity interest)
in the resulting entity.
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(f) "Code" - The Internal Revenue Code of 1986, as amended, including
the regulations promulgated pursuant thereto.
(g) "Committee" - The Compensation Committee of the Board, which shall
consist of two or more members. The members of the Committee shall be
"non-employee directors" within the meaning of Rule 16b-3, as the same may be
amended or supplemented from time to time, as promulgated under the Act.
(h) "Common Stock" - The present shares of common stock of the Company,
and any shares into which such shares are converted, changed or reclassified.
(i) "Company" - W.W. Grainger, Inc., an Illinois corporation.
(j) "Effective Date" - December 9, 1998.
(k) "Employee" - Any person designated as an employee of the Company or
a Subsidiary on the payroll records thereof.
(l) "Exempt Person" means any one or more of the following:
(i) any descendant of W.W. Grainger (deceased) or any spouse,
widow or widower of any such descendant (any such descendants, spouses,
widows and widowers collectively defined as the "Grainger Family
Members");
(ii) any descendant of E.O. Slavik (deceased) or any spouse,
widow or widower of any such descendant (any such descendants, spouses,
widows and widowers collectively defined as the "Slavik Family Members"
and with the Grainger Family Members collectively defined as the
"Family Members");
(iii) any trust which is in existence on the Effective Date
and which has been established by one or more Grainger Family Members,
any estate of a Grainger Family Member who died on or before the
Effective Date, and The Grainger Foundation (such trusts, estates and
named entity collectively defined as the "Grainger Family Entities");
(iv) any trust which is in existence on the Effective Date and
which has been established by one or more Slavik Family Members, any
estate of a Slavik Family Member who died on or before the Effective
Date, Mark IV Capital, Inc., and Mountain Capital Corporation (such
trusts, estates and named entities collectively defined as the "Slavik
Family Entities" and with the Grainger Family Entities collectively
defined as the "Existing Family Entities");
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(v) any estate of a Family Member who dies after the Effective
Date or any trust established after the Effective Date by one or more
Family Members or Existing Family Entities; provided that one or more
Family Members, Existing Family Entities or charitable organizations
which qualify as exempt organizations under Section 501(c) of the Code
("Charitable Organizations"), collectively, are the beneficiaries of at
least 50% of the actuarially determined beneficial interests in such
estate or trust;
(vi) any Charitable Organization which is established by one
or more Family Members or Existing Family Entities (a "Family
Charitable Organization");
(vii) any corporation of which a majority of the voting power
and a majority of the equity interest is held, directly or indirectly,
by or for the benefit of one or more Family Members, Existing Family
Entities, estates or trusts described in clause (v) above, or Family
Charitable Organizations; or
(viii) any partnership or other entity or arrangement of which
a majority of the voting interest and a majority of the economic
interest is held, directly or indirectly, by or for the benefit of one
or more Family Members, Existing Family Entities, estates or trusts
described in clause (v) above, or Family Charitable Organizations.
(m) "Fair Market Value" - The fair market value of Common Stock on a
particular day shall be the closing price of the Common Stock on the New York
Stock Exchange, or any other national stock exchange on which the Common Stock
is traded, on the last preceding trading day on which such Common Stock was
traded.
(n) "Option" - The right to purchase Common Stock at a stated price for
a specified period of time. For purposes of the Plan, the option is a
non-qualified stock option.
(o) "Other Stock Based Award" - An award under Section 9 that is valued
in whole or in part by reference to, or is otherwise based on, the Common Stock.
(p) "Participant" - Any Employee designated by the Committee to
participate in the Plan.
(q) "Person" - Any individual, corporation, partnership, limited
liability company, sole proprietorship, trust or other entity.
(r) "Period of Restriction" - The period during which Shares of
Restricted Stock or Phantom Stock rights are subject to forfeiture or
restrictions on transfer pursuant to Section 8 of the Plan.
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(s) "Phantom Stock" - A right to receive payment from the Company in
cash, stock, or in combination thereof, in an amount determined by the Fair
Market Value.
(t) "Restricted Stock" - Shares granted to a Participant which are
subject to restrictions on transferability pursuant to Section 8 of the Plan.
(u) "Shares" - Shares of Common Stock.
(v) "Stock Appreciation Right" or "SAR" - The right to receive a
payment from the Company in cash, Common Stock, or in combination thereof, equal
to the excess of the Fair Market Value of a share of Common Stock on the date of
exercise over a specified price fixed by the Committee, but subject to such
maximum amounts as the Committee may impose.
(w) "Subsidiary" - Any corporation, partnership, joint venture, limited
liability company, or other entity in which the Company directly or indirectly
owns securities representing a majority of the aggregate voting power.
2.2. Other Definitions. In addition to the above definitions, certain
words and phrases used in the Plan and any Agreement may be defined elsewhere in
the Plan or in such Agreement.
Section 3. Common Stock.
3.1. Number of Shares. Subject to the provisions of Section 3.3, the
number of Shares which may be issued or sold or for which Options or Stock
Appreciation Rights may be granted under the Plan may not exceed 8,056,828
Shares.* Notwithstanding the foregoing, the total number of Shares with respect
to which Options or Stock Appreciation Rights may be granted to any Participant
shall not exceed 800,000 Shares** (proportionately adjusted pursuant to Section
3.3) in any calendar year.
3.2. Re-usage. If an Option or SAR expires or is terminated, surrendered,
or canceled without having been fully exercised, if Restricted Stock is
forfeited, or if any other grant results in any Shares not being issued, the
Shares covered by such Option,
- --------
* As adjusted to reflect (i) the number of shares remaining available for grants
under the Company's Restated 1975 Non-Qualified Stock Option Plan, (ii) the
Company's 1991 two-for-one stock split and (iii) the Company's 1998 two-for-one
stock split.
** As adjusted to reflect the Company's 1998 two-for-one stock split.
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SAR, grant of Restricted Stock or other grant, as the case may be, shall again
be immediately available for Awards under the Plan.
3.3. Adjustments. In the event of any change in the outstanding Common
Stock by reason of a stock split, stock dividend, combination, reclassification
or exchange of Shares, recapitalization, merger, consolidation or other similar
event, the number of SARs and the number of Shares available for Options, grants
of Restricted Stock, and Other Stock Based Awards and the number of Shares
subject to outstanding Options, SARs, grants of Restricted Stock, and Other
Stock Based Awards, and the price thereof, and the Fair Market Value, as
applicable, shall be appropriately adjusted by the Committee in its sole
discretion and any such adjustment shall be binding and conclusive on all
parties. Any fractional Shares resulting from any such adjustment shall be
disregarded.
Section 4. Eligibility and Participation.
Participants in the Plan shall be those key employees selected by the
Committee to participate in the Plan who hold positions of responsibility and
whose participation in the Plan the Committee or management of the Company
determines to be in the best interests of the Company.
Section 5. Administration.
5.1. Committee. The Plan shall be administered by the Committee. The
members of the Committee shall be appointed by and shall serve at the pleasure
of the Board, which may from time to time change the Committee's membership.
5.2. Authority. The Committee shall have the sole and complete authority
to:
(a) determine the individuals to whom Awards are granted, the type and
amounts of awards to be granted and the time of all such grants;
(b) determine the terms, conditions and provisions of, and restrictions
relating to, each Award granted;
(c) interpret and construe the Plan and all Agreements;
(d) prescribe, amend and rescind rules and regulations relating to the
Plan;
(e) determine the content and form of all Agreements;
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(f) determine all questions relating to Awards under the Plan;
(g) maintain accounts, records and ledgers relating to Awards;
(h) maintain records concerning its decisions and proceedings;
(i) employ agents, attorneys, accountants or other persons for such
purposes as the Committee considers necessary or desirable;
(j) do and perform all acts which it may deem necessary or appropriate
for the administration of the Plan and to carry out the objectives of the Plan.
5.3. Determinations. All determinations, interpretations, or other actions
made or taken by the Committee pursuant to the provisions of the Plan shall be
final, binding, and conclusive for all purposes and upon all persons.
5.4. Delegation. Except as required by Rule 16b-3 promulgated under the
Act (and any successor to such Rule) with respect to the grant of Awards to
Participants who are subject to Section 16 of the Act, the Committee may
delegate to appropriate senior officers of the Company its duties under the Plan
pursuant to such conditions and limitations as the Committee may establish.
Section 6. Stock Options.
6.1. Type of Option. It is intended that only non-qualified stock options
may be granted by the Committee under this section of the Plan.
6.2. Grant of Option. An Option may be granted to Participants at such
time or times as shall be determined by the Committee. Each Option shall be
evidenced by an Option Agreement that shall specify the exercise price, the
duration of the Option, the number of Shares to which the Option applies, and
such other terms and conditions not inconsistent with the Plan as the Committee
shall determine.
6.3. Option Price. The per share option price shall be at least 100% of
the Fair Market Value at the time the Option is granted.
6.4. Exercise of Options. Options awarded under the Plan shall be
exercisable at such times and shall be subject to such restrictions and
conditions, including the performance of a minimum period of service after the
grant, as the Committee may impose, which need not be uniform for all
participants; provided, however, that no Option shall be exercisable for more
than 10 years after the date on which it is granted.
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6.5. Payment. The Committee shall determine the procedures governing the
exercise of Options, and shall require that the per share option price be paid
in full at the time of exercise. The Committee may, in its discretion, permit a
Participant to make payment in cash, or in Shares already owned by the
Participant, valued at the Fair Market Value thereof, as partial or full payment
of the exercise price. As soon as practical after full payment of the exercise
price, the Company shall deliver to the Participant a certificate or
certificates representing the acquired Shares.
6.6. Rights as a Shareholder. Until the exercise of an Option and the
issuance of the Shares in respect thereof, a Participant shall have no rights as
a Shareholder with respect to the Shares covered by such Option.
Section 7. Stock Appreciation Rights.
7.1. Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted to Participants at such time or times as shall be determined by the
Committee and shall be subject to such terms and conditions as the Committee may
decide. A grant of an SAR shall be made pursuant to a written Agreement
containing such provisions not inconsistent with the Plan as the Committee shall
approve.
7.2. Exercise of SARs. SARs may be exercised at such times and subject to
such conditions, including the performance of a minimum period of service, as
the Committee shall impose. SARs which are granted in tandem with an Option may
only be exercised upon the surrender of the right to exercise an equivalent
number of Shares under the related Option and may be exercised only with respect
to the Shares for which the related Option is then exercisable. Notwithstanding
any other provision of the Plan, the Committee may impose conditions on the
exercise of an SAR, including, without limitation, the right of the Committee to
limit the time of exercise to specified periods.
7.3. Payment of SAR Amount. Upon exercise of an SAR, the Participant shall
be entitled to receive payment of an amount determined by multiplying:
(a) any increase in the Fair Market Value of a Share at the date of
exercise over the Fair Market Value of a Share at the date of grant, by
(b) the number of Shares with respect to which the SAR is exercised;
provided, however, that at the time of grant, the Committee may establish, in
its sole discretion, a maximum amount per Share which will be payable upon
exercise of an SAR.
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7.4. Method of Payment. Subject to the discretion of the Committee, which
may be exercised at the time of grant, the time of payment, or any other time,
payment of an SAR may be made in cash, Shares or any combination thereof.
Section 8. Restricted Stock or Phantom Stock.
8.1. Grant of Restricted Stock or Phantom Stock. The Committee may grant
Shares of Restricted Stock or Phantom Stock rights to such Participants at such
times and in such amounts, and subject to such other terms and conditions not
inconsistent with the Plan as it shall determine. Each grant of Restricted Stock
or Phantom Stock rights shall be evidenced by a written Agreement setting forth
the terms of such Award.
8.2. Restrictions on Transferability. Restricted Stock or Phantom Stock
rights may not be sold, transferred, pledged, assigned, or otherwise alienated
until such time, or until the satisfaction of such conditions as shall be
determined by the Committee (including without limitation, the satisfaction of
performance goals or the occurrence of such events as shall be determined by the
Committee). At the end of the period of restriction applicable to any Restricted
Stock, such Shares will be transferred to the Participant free of all
restrictions.
8.3. Rights as a Shareholder. Unless otherwise determined by the Committee
at the time of grant, Participants holding Restricted Stock granted hereunder
may exercise full voting rights and other rights as a Shareholder with respect
to those Shares during the period of restriction. Holders of Phantom Stock
rights shall not be deemed Shareholders and, except to the extent provided in
accordance with the Plan, shall have no rights related to any Shares.
8.4. Dividends and Other Distributions. Unless otherwise determined by the
Committee at the time of grant, Participants holding Restricted Stock shall be
entitled to receive all dividends and other distributions paid with respect to
those Shares, provided that if any such dividends or distributions are paid in
shares of stock, such shares shall be subject to the same forfeiture
restrictions and restrictions on transferability as apply to the Restricted
Stock with respect to which they were paid. Unless otherwise determined by the
Committee at the time of grant, Participants holding Phantom Stock rights shall
be entitled to receive cash payments equal to any cash dividends and other
distributions paid with respect to a corresponding number of Shares.
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8.5. Payment of Phantom Stock Rights. The Committee may, at the time of
grant, provide for other methods of payment in respect of Phantom Stock rights
in cash, Shares, partially in cash and partially in Shares, or in any other
manner not inconsistent with this Plan.
Section 9. Other Stock Based Awards and Other Benefits.
9.1. Other Stock Based Awards. The Committee shall have the right to grant
Other Stock Based Awards which may include, without limitation, the grant of
Shares based on certain conditions, the payment of cash based on the performance
of the Common Stock, and the payment of Shares in lieu of cash under other
Company incentive bonus programs. Payment under or settlement of any such Awards
shall be made in such manner and at such times as the Committee may determine.
9.2. Other Benefits. The Committee shall have the right to provide types
of Awards under the Plan in addition to those specifically listed utilizing
shares of stock or cash, or a combination thereof, if the Committee believes
that such Awards would further the purposes for which the Plan was established.
Payment under or settlement of any such Awards shall be made in such manner and
at such times as the Committee may determine.
Section 10. Amendment, Modification, and Termination of Plan.
The Board at any time may terminate or suspend the Plan, and from time to
time may amend or modify the Plan. No amendment, modification, or termination of
the Plan shall in any manner adversely affect any Award theretofore granted
under the Plan to a Participant without the consent of such Participant.
Section 11. Termination of Employment.
11.1. Termination of Employment Due to Retirement. Unless otherwise
determined by the Committee at the time of grant, in the event a Participant's
employment terminates by reason of retirement, any Option or SAR granted to such
Participant which is then outstanding may be exercised at any time prior to the
expiration of the term of the Option or SAR or within six (6) years following
the Participant's termination of employment, whichever period is shorter, and
any Restricted Stock, Phantom Stock rights, or other Award then outstanding for
which any restriction has not lapsed prior to the effective date of retirement
shall be forfeited.
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11.2. Termination of Employment Due to Death or Disability. Unless
otherwise determined by the Committee at the time of grant, in the event a
Participant's employment is terminated by reason of death or disability, any
Option or SAR granted to such Participant which is then outstanding may be
exercised by the Participant or the Participant's legal representative at any
time prior to the expiration date of the term of the Option or SAR or within six
(6) years following the Participant's termination of employment, whichever
period is shorter, and any Restricted Stock, Phantom Stock rights, or other
Award then outstanding shall become nonforfeitable and shall become transferable
or payable, as the case may be, as though any restriction had expired.
11.3. Termination of Employment for Any Other Reason. Unless otherwise
determined by the Committee at the time of grant, in the event the employment of
the Participant shall terminate for any reason other than misconduct or one
described in Section 11.1 or 11.2, any Option or SAR granted to such Participant
which is then outstanding may be exercised by the Participant at any time prior
to the expiration date of the term of the Option or SAR or within three (3)
months following the Participant's termination of employment, whichever period
is shorter; any Restricted Stock, Phantom Stock rights, or other Award then
outstanding for which any restriction has not lapsed prior to the date of
termination of employment shall be forfeited upon termination of employment. If
the employment of a Participant is terminated by the Company or a Subsidiary by
reason of the Participant's misconduct, any outstanding Option or SAR shall
cease to be exercisable on the date of the Participant's termination of
employment; any Restricted Stock, Phantom Stock rights, or other Award then
outstanding for which any restriction has not lapsed prior to the date of
termination of employment shall be forfeited upon termination of employment. As
used herein, "misconduct" means that the Participant has engaged, or intends to
engage, in competition with the Company or a Subsidiary, has induced any
customer of the Company or a Subsidiary to breach any contract with the Company
or a Subsidiary, has made any unauthorized disclosure of any of the secrets or
confidential information of the Company or a Subsidiary, has committed an act of
embezzlement, fraud, or theft with respect to the property of the Company or a
Subsidiary, or has deliberately disregarded the rules of the Company or a
Subsidiary in such a manner as to cause any loss, damage, or injury to, or
otherwise endanger the property, reputation, or employees of the Company or a
Subsidiary. The Committee shall determine whether a Participant's employment is
terminated by reason of misconduct.
11.4. Accrual of Right at Date of Termination. The Participant shall have
the right to exercise an Option or SAR as indicated in Sections 11.1, 11.2, and
11.3 only to the extent the Participant's right to exercise such Option or SAR
had accrued at the date of termination of employment pursuant to the terms of
the Option or SAR Agreement and had not previously been exercised.
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Section 12. Change in Control.
Except as otherwise provided in an Agreement, if a Change in Control
occurs, then:
(i) the Participant's Restricted Stock that was forfeitable
shall thereupon become nonforfeitable; and
(ii) any unexercised Option or SAR, whether or not exercisable
on the date of such Change in Control, shall thereupon be fully
exercisable and may be exercised, in whole or in part.
Section 13. Miscellaneous Provisions.
13.1. Non-transferability of Awards. Unless otherwise determined by the
Committee at the time of grant, and except as provided in Section 11, no Awards
granted under the Plan shall be assignable, transferable, or payable to or
exercisable by anyone other than the Participant to whom it was granted.
13.2. No Guarantee of Employment or Participation. Nothing in the Plan
shall interfere with or limit in any way the right of the Company or a
Subsidiary to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continue in the employment of the Company or a
Subsidiary. No employee shall have a right to be selected as a Participant, or,
having been so selected, to receive any future awards.
13.3. Tax Withholding. The Company shall have the authority to withhold,
or require a Participant to remit to the Company an amount sufficient to satisfy
federal, state, and local withholding tax requirements on any Award under the
Plan, and the Company may defer payment of cash or issuance of Shares until such
requirements are satisfied. The Committee may, in its discretion, permit a
Participant to elect, subject to such conditions as the Committee shall require,
to have Shares otherwise issuable under the Plan withheld by the Company and
having a Fair Market Value sufficient to satisfy all or part of the
Participant's estimated total federal, state, and local tax obligation
associated with the transaction.
13.4. Governing Law. The Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by the Code or Act,
shall be governed by the law of the State of Illinois and construed in
accordance therewith.
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13.5. Effectiveness of Plan. The Plan became effective upon its approval
by the shareholders of the Company on April 25, 1990; provided, however, that no
Award requiring the issuance of Shares shall be exercised or paid out unless at
the time of such exercise or payout (i) such Shares are covered by a currently
effective registration statement filed under the Securities Act of 1933, as
amended, if one is then required, or in the sole opinion of the Company and its
counsel such issuance of Shares is otherwise exempt from the registration
requirements of such act, and (ii) such Shares are listed on any securities
exchange upon which the Common Stock of the Company is listed.
13.6. Termination of the 1975 Plan. The Company's Restated 1975
Non-Qualified Stock Option Plan shall be terminated as of the date of
Shareholder approval of this Plan, provided, however, that such termination
shall not affect any Options or Stock Appreciation Rights outstanding
thereunder, all of which shall remain subject to and be governed by such plan.
13.7. Unfunded Plan. Insofar as the Plan provides for Awards of cash,
Shares, rights or a combination thereof, the Plan shall be unfunded. The Company
may maintain bookkeeping accounts with respect to Participants who are entitled
to Awards under the Plan, but such accounts shall be used merely for bookkeeping
convenience. The Company shall not be required to segregate any assets that may
at any time be represented by interests in Awards nor shall the Plan be
construed as providing for any such segregation. None of the Committee, the
Company or Board shall be deemed to be a trustee of any cash, Shares or rights
to Awards granted under the Plan. Any liability of the Company to any
Participant with respect to an Award or any rights thereunder shall be based
solely upon any contractual obligations that may be created by the Plan and any
Agreement, and no obligation of the Company under the Plan shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company.
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