MERRILL CORPORATION
1996 NON-EMPLOYEE DIRECTOR PLAN
1. PURPOSE OF PLAN.
The purpose of the Merrill Corporation 1996 Non-Employee Director Plan
(the "Plan") is to advance the interests of Merrill Corporation (the
"Company") and its shareholders by enabling the Company to attract and retain
the services of experienced and knowledgeable non-employee directors and to
increase the proprietary interests of such non-employee directors in the
Company's long-term success and progress and their identification with the
interests of the Company's shareholders.
2. DEFINITIONS.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1 "ANNUAL OPTION" means the right to purchase shares of Common Stock
pursuant to Section 5.1(b) of the Plan.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as amended.
2.4 "COMMITTEE" means the group of individuals administering the Plan,
as provided in Section 3 of the Plan.
2.5 "COMMON STOCK" means the common stock of the Company, par value
$0.01 per share, or the number and kind of shares of stock or other
securities into which such Common Stock may be changed in accordance with
Section 4.3 of the Plan.
2.6 "DISABILITY" means the disability of an Eligible Director such as
would entitle the Eligible Director to receive disability income benefits
pursuant to the long-term disability plan of the Company then covering the
Eligible Director or, if no such plan exists or is applicable to the Eligible
Director, the permanent and total disability of the Eligible Director within
the meaning of Section 22(e)(3) of the Code.
2.7 "ELIGIBLE DIRECTORS" means all directors of the Company who are not
employees of the Company or any subsidiary of the Company.
2.8 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
2.9 "FAIR MARKET VALUE" means, with respect to the Common Stock, as of any
date (or, if no shares were traded on such date, as of the next preceding date
on which there was such a trade), the average of the reported high and low sales
prices of the Common Stock as reported by the Nasdaq National Market.
2.10 "INCENTIVE AWARDS" means Options and Retainer Stock.
2.11 "OPTIONS" means the One-Time Options and Annual Options.
2.12 "ONE-TIME OPTION" means the right to purchase shares of Common Stock
pursuant to Section 5.1(a) of the Plan.
2.13 "RETAINER STOCK" means shares of Common Stock granted to an Eligible
Director pursuant to Section 6 of the Plan.
2.14 "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. PLAN ADMINISTRATION.
The Plan will be administered by a committee (the "Committee")
consisting solely of two or more members of the Board. All questions of
interpretation of the Plan will be determined by the Committee, each
determination, interpretation or other action made or taken by the Committee
pursuant to the provisions of the Plan will be conclusive and binding for all
purposes and on all persons, and no member of the Committee will be liable
for any action or determination made in good faith with respect to the Plan
or any Incentive Award granted under the Plan. The Committee, however, will
have no power to determine the eligibility for participation in the Plan, the
number of shares of Common Stock to be subject to Incentive Awards, or the
timing, pricing or other terms and conditions of Incentive Awards.
4. SHARES AVAILABLE FOR ISSUANCE.
4.1 MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as
provided in Section 4.3 of the Plan, the maximum number of shares of Common
Stock that will be available for issuance under the Plan will be 200,000
shares. The shares available for issuance under the Plan shall be authorized
but unissued shares.
4.2 ACCOUNTING FOR INCENTIVE AWARDS. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Incentive Awards
will be applied to reduce the maximum number of shares of Common Stock
remaining available for issuance under the Plan. Any shares of Common Stock
that are subject to an Option that lapses, expires, or for any reason is
terminated unexercised will automatically again become available for issuance
under the Plan.
4.3 ADJUSTMENTS TO SHARES AND INCENTIVE AWARDS. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the
Committee (or, if the Company is not the surviving corporation in any such
transaction, the board of directors of the surviving corporation) will make
appropriate adjustment (which determination will be conclusive) as to the
number and kind of securities available for issuance under the Plan and, in
order to prevent dilution or enlargement of the rights of Eligible Directors,
the number, kind and, where applicable, exercise price of securities subject
to outstanding Incentive Awards.
5. OPTIONS.
5.1 GRANT.
(a) At such time as new Eligible Directors are first elected or
appointed to the Board to fill new directorships or to fill vacancies, such
Eligible Directors will be granted automatically, on a one-time basis on
the date of such election or appointment, a non-statutory stock option to
purchase 10,000 shares of Common Stock (subject to adjustment as provided
in Section 4.3 of the Plan).
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(b) Commencing with the annual meeting of shareholders of the Company
that first occurs following the date that an Eligible Director is first
elected or appointed to the Board, each Eligible Director who is elected or
re-elected to the Board at an annual meeting of shareholders will be
granted automatically, on the date of each such annual meeting, a non-
statutory stock option to purchase 3,000 shares of Common Stock (subject to
adjustment as provided in Section 4.3 of the Plan).
5.2 EXERCISE PRICE OF OPTIONS. The per share price to be paid by an
Eligible Director upon exercise of an Option will be 100% of the Fair Market
Value of one share of Common Stock on the date of grant. The total purchase
price of the shares to be purchased upon exercise of an Option must be paid
entirely in cash (including check, bank draft or money order).
5.3 EXERCISABILITY AND DURATION OF OPTIONS. Each One-Time Option will
become exercisable, on a cumulative basis, with respect to 20% of the shares
originally subject to such One-Time Option on each anniversary of the date of
grant of such One-Time Option. Each Annual Option will become exercisable in
full six months following the date of grant of such Annual Option. Each
Option will expire and will no longer be exercisable 10 years following the
date of grant of such Option.
5.4 MANNER OF EXERCISE OF OPTIONS. An Option may be exercised by an
Eligible Director in whole or in part from time to time, subject to the
conditions contained in the Plan and in the agreement evidencing such Option,
by delivery in person, by facsimile (with written confirmation) or through
the mail of written notice of exercise to the Company at its principal
executive office in St. Paul, Minnesota and by paying in full the total
exercise price for the shares of Common Stock to be purchased in accordance
with Section 5.2 of the Plan.
6. RETAINER STOCK.
Commencing with the date of the annual meeting of shareholders of the
Company to be held in 1996 and continuing on the date of each succeeding
annual meeting of shareholders of the Company, each Eligible Director who
continues to serve in such capacity following such annual meeting will
receive, as part of such Eligible Director's annual retainer for the ensuing
year, such number of shares of Common Stock (rounded to the nearest whole
share) as equals $6,000 divided by the average of the Fair Market Value of
one share of Common Stock for the 10 trading days immediately preceding the
date of such annual meeting.
7. TERMINATION OF SERVICE AS A DIRECTOR.
7.1 TERMINATION DUE TO DEATH OR DISABILITY. In the event an Eligible
Director's service as a director of the Company is terminated by reason of
death or Disability, all outstanding Options then held by such Eligible
Director will become immediately exercisable in full and will remain
exercisable for a period of one year after such death or Disability (but in
no event after the expiration date of any such Options).
7.2 TERMINATION FOR REASONS OTHER THAN DEATH OR DISABILITY. In the
event an Eligible Director's service as a director of the Company is
terminated for any reason other than death or Disability, all outstanding
Options then held by such Eligible Director will remain exercisable to the
extent exercisable as of such termination for a period of three months after
such termination (but in no event after the expiration date of any such
Options).
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7.3 DATE OF TERMINATION. An Eligible Director's service as a director
of the Company will, for purposes of the Plan, be deemed to have terminated
on the date recorded on the personnel or other records of the Company, as
determined by the Committee based upon such records.
8. RIGHTS OF ELIGIBLE DIRECTORS; TRANSFERABILITY OF INTERESTS.
8.1 SERVICE AS A DIRECTOR. Nothing in the Plan will interfere with or
limit in any way the right of the shareholders to terminate an Eligible
Director's service as a director of the Company at any time, and neither the
Plan, nor the granting of an Incentive Award nor any other action taken
pursuant to the Plan, will constitute or be evidence of any agreement or
understanding, express or implied, that the shareholders will retain an
Eligible Director as a director of the Company for any period of time or at
any particular rate of compensation.
8.2 RIGHTS AS A SHAREHOLDER. An Eligible Director will have no rights
as a shareholder unless and until Retainer Stock is issued or an Option is
exercised and the Eligible Director becomes the holder of record of such
shares. Except as otherwise provided in the Plan, no adjustment will be made
for dividends or distributions with respect to Incentive Awards as to which
there is a record date preceding the date the Eligible Director becomes the
holder of record of such shares.
8.3 RESTRICTIONS ON TRANSFER OF INTERESTS. Except pursuant to
testamentary will or the laws of descent and distribution or as otherwise
expressly permitted by the Plan, no right or interest of any Eligible
Director in an Option prior to the exercise of such Option will be assignable
or transferable, or subjected to any lien, during the lifetime of the
Eligible Director, either voluntarily or involuntarily, directly or
indirectly, by operation of law or otherwise. An Eligible Director will,
however, be entitled to designate a beneficiary to receive an Option upon
such Eligible Director's death, and in the event of an Eligible Director's
death, payment of any amounts due under the Plan will be made to, and
exercise of any Options (to the extent permitted pursuant to Section 7 of the
Plan) may be made by, the Eligible Director's legal representatives, heirs
and legatees.
8.4 NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation plans or
programs of the Company or create any limitations on the power or authority
of the Board to adopt such additional or other compensation arrangements as
the Board may deem necessary or desirable.
9. SECURITIES LAW AND OTHER RESTRICTIONS.
Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue
any shares of Common Stock under this Plan, and an Eligible Director may not
sell, assign, transfer or otherwise dispose of shares of Common Stock issued
in connection with an Incentive Award granted under the Plan, unless (a)
there is in effect with respect to such shares a registration statement under
the Securities Act and any applicable state securities laws or an exemption
from such registration under the Securities Act and applicable state
securities laws, and (b) there has been obtained any other consent, approval
or permit from any other regulatory body which the Committee, in its sole
discretion, deems necessary or advisable. The Company may condition such
issuance, sale or transfer upon the receipt of any representations or
agreements from the parties involved, and the placement of any legends on
certificates representing shares of Common Stock, as may be deemed necessary
or advisable by the Company in order to comply with such securities law or
other restrictions.
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10. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the
Board may deem advisable in order that Incentive Awards granted under the
Plan will conform to any change in applicable laws or regulations or in any
other respect the Board may deem to be in the best interests of the Company;
provided, however, that (a) no amendments to the Plan will be effective
without approval of the shareholders of the Company if shareholder approval
of the amendment is then required pursuant to Rule 16b-3 under the Exchange
Act or the rules of the Nasdaq National Market, and (b) to the extent
prohibited by Rule 16b-3 of the Exchange Act, the Plan may not be amended
more than once every six months. No termination, suspension or amendment of
the Plan may adversely affect any outstanding Incentive Award without the
consent of the affected Eligible Director; provided, however, that this
sentence will not impair the right of the Committee to take whatever action
it deems appropriate under Section 4.3 of the Plan.
11. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan will be effective as of the date it is adopted by the
shareholders of the Company. The Plan will terminate at midnight on May 21,
2001 but may be terminated prior thereto by Board action. No Incentive
Awards may be granted after such termination, but Options outstanding upon
termination of the Plan may continue to be exercised in accordance with their
terms.
12. MISCELLANEOUS
12.1 GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in
accordance with the laws of the State of Minnesota, notwithstanding any
conflicts of law principles.
12.2 SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure to
the benefit of the successors and permitted assigns of the Company and the
Eligible Directors.
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