1
EXHIBIT 10.5
GENERAL BINDING CORPORATION
1989 STOCK OPTION PLAN
(AS AMENDED AND RESTATED)
SECTION 1. PURPOSE OF THE PLAN.
The purpose of the 1989 Stock Option Plan, as hereby amended and
restated ("Plan") is to secure for General Binding Corporation ("GBC") and its
stockholders the benefits of the incentive inherent in stock ownership by
officers and other key employees of GBC and its Subsidiaries and to provide
additional compensation to these executives based on the appreciation of GBC's
Common Stock, $.125 par value (hereinafter the "Shares"). The Plan is intended
to encourage executives to continue in the employ of GBC and its Subsidiaries;
to attract new management personnel when needed for future operations; and to
provide such persons with additional incentive for industry and efficiency
through offering an opportunity to acquire a proprietary interest in GBC and
its future growth. The terms of the options issued pursuant to the Plan will
not cause them to be incentive stock options within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
SECTION 2. ELIGIBILITY.
Subject to the terms and conditions of the Plan, the Board or
committee (as defined in Section 4) may from time to time grant to such
officers (including officers who are directors) and other key employees of GBC
and its Subsidiaries as the Board or Committee may determine, options
(hereinafter the "Options") to purchase shares on such terms and conditions
2
as the Board or Committee may determine and set forth in the Option Agreement
(as defined in Section 5).
SECTION 3. EFFECTIVE DATE AND DURATION.
The Plan initially became effective on March 23, 1989. The amendment
of the Plan by this amendment and restatement shall be effective on March 13,
1996, subject to approval by the stockholders of GBC. Neither such amendment
nor any Option granted pursuant to the provisions of such amendment shall
become binding until the amended and restated Plan is approved by a vote of a
majority of GBC's outstanding voting stock. The Plan shall remain in effect,
subject to the Board's right to earlier terminate the Plan pursuant to Section
17 hereof, until all Shares subject to the Plan have been purchased or acquired
pursuant to the provisions hereof.
SECTION 4. ADMINISTRATION.
The Plan shall be generally administered by the Board of Directors of
GBC (the "Board"). The Board shall have full authority to award Options under
the Plan, to interpret the Plan, to determine the terms and provisions (which
need not be identical) of the option agreements by which such options shall be
evidenced, to require withholding from or payment in cash or with Shares by an
optionee of any federal, state, or local taxes, and to make such rules and
regulations and establish such procedures as it deems appropriate for the
administration of the Plan. The Board may from time to time appoint a
committee (the "Committee") to exercise the powers and authority of the Board
with respect to the
2
3
administration of the Plan, including but not limited to, the authority to
grant Options and SARs and to determine the terms and provisions thereof. The
Committee shall consist of two or more Board members, each of whom shall
qualify in all respects as a "disinterested person" under Rule 16b-3 of the
General Rules and Regulations ("Rule 16b-3") under the Securities Exchange Act
of 1934 (the "1934 Act") or any law or rule which may replace such Rule, and as
an "outside director" within the meaning of Code Section 162(m) and regulations
thereunder. In exercising its authority hereunder, the Committee shall be
entitled to act as the Board may act hereunder, provided that in no event shall
the Committee have any authority to take any actions required by the Board
under Sections 16 and 17 hereof. All decisions made by the Board or the
Committee on the matters referred to in this Section 4 shall be conclusive and
binding. No member of the Board or Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option or SAR
granted thereunder.
SECTION 5. GRANTING OF OPTIONS AND MINIMUM GRANT.
The officers of GBC are authorized and directed upon receipt of notice
from the Board or the Committee of the granting of an Option, to sign and
deliver on behalf of GBC, by mail or otherwise, to the optionee an Option at
the option price and upon the terms and conditions specified by the Board or
Committee in the notice and in the form of an option agreement approved by the
Board or Committee (hereinafter the "Option Agreement"). The Option Agreement
shall be dated and signed by an officer of GBC as of the date of approval of
the granting of an Option by the Board or Committee. No Option shall be
granted for less than 500 shares. More than one Option may be granted to a
single individual.
3
4
SECTION 6. EXERCISE PRICE FOR OPTIONS.
The option price at which Options may be exercised shall be determined
from time to time by the Board or Committee and be set forth in the Option
Agreement, but in no event shall be less than 85% of the Fair Market Value on
the date the Option is granted. Fair Market Value shall be deemed to be the
last reported trade price on the NASDAQ National Market System for over-the-
counter stocks on the date the Option is granted (unless the Shares are listed
on any national securities exchange in which event Fair Market Value shall be
the closing price of the shares on such exchange on the date the Option is
granted), but in no case shall it be less than the par value of the Shares. If
there is no last reported trade price, or closing price as the case may be, on
the date the Option is granted the exercise price shall be the Fair Market
Value on the next preceding day on which there was a sale reported on the
NASDAQ National Market System or, if listed, on the national securities
exchange where the Shares are listed.
SECTION 7. EXERCISE OF OPTIONS.
Unless otherwise determined by the Board or Committee and set forth in
the Option Agreement, the time and extent to which an Option granted hereunder
shall be exercisable will be as follows:
(a) The total number of Shares for which an Option is granted shall be
divided into four equal parts, each representing 25% of the total Option
granted, each such part being hereinafter referred to as an "Annual Allotment."
4
5
(b) The initial Annual Allotment may be exercised after one year from
the date of grant, and the second, third and final Annual Allotments may be
exercised after the second, third and fourth years, respectively, but no later
than eight years from the date of grant.
(c) No more than one Annual Allotment may be exercised in any annual
period, an annual period being any of the second through the eighth years after
and beginning on the anniversary of the date of grant.
SECTION 8. GENERAL TERMS AND CONDITIONS.
(a) Except as provided in Section 13 hereof or as the Board or
Committee may provide in the Option Agreement, (i) it shall be a condition of
the right to exercise any part of any Option that the optionee remain in the
employment of GBC, its Subsidiaries or Affiliates at the pleasure of such
employer, and (ii) all rights under Options shall terminate on the date an
optionee ceases to be employed by GBC, its Subsidiaries or Affiliates.
(b) To the extent that the right to purchase Shares has accrued
hereunder, Options may be exercised from time to time by written notice to GBC,
stating the number of Shares being purchased and accompanied by the payment in
full of the option price for such Shares. In no event shall GBC be required to
issue a fractional Share upon the exercise of an Option. Such payment shall be
made in cash or in previously owned Shares or in a combination of cash and such
Shares. The payment in full of the option price need not accompany the written
notice of exercise if the notice of exercise directs that the certificate for
the Shares being purchased be delivered to a licensed broker acceptable to GBC
as the agent for the optionee and, at the time the certificate for the Shares
is delivered, the broker tenders to GBC cash (or cash equivalents acceptable to
GBC) equal to the option price plus the amount, if any, of
5
6
withholding taxes required pursuant to paragraph (c) below. If Shares of
common stock are used in part or full payment for the Shares to be acquired
upon exercise of the Option, such Shares shall be valued for the purpose of
such exchange as of the date of exercise of the Option in accordance with the
determination of Fair Market Value provisions of Section 6 above. Any
certificates evidencing Shares of outstanding common stock used to pay the
option price shall be duly endorsed by the registered holder of the
certificate, and if requested by GBC's counsel or transfer agent, with the
signature thereon guaranteed. In the event the certificates tendered by the
optionee in such payment cover more Shares than are required for such payment,
the certificates shall also be accompanied by instructions from the optionee to
GBC's transfer agent with regard to disposition of the balance of the Shares
owned thereby.
(c) Shares shall not be issued upon the exercise of any Option
under the Plan unless and until any withholding tax, if any, or other
withholding obligation, if any, imposed by any governmental entity have, in the
opinion of the Company, been satisfied or provision for their satisfaction has
been made. An optionee shall satisfy such withholding obligation by (a)
depositing with GBC cash in the amount thereof within twenty (20) business days
of any exercise of the Option; or, (b) by the withholding of Shares by the
Company in the manner provided for in Section 8 hereinafter.
(d) Unless earlier terminated pursuant to the terms and conditions
thereof, each Option granted under the Plan shall terminate and all rights to
purchase Shares thereunder shall cease upon the expiration of 10 years from the
date of grant.
6
7
SECTION 9. USE OF SHARES FOR INCOME TAX WITHHOLDING.
(a) The Board or Committee may, in their discretion and subject to
rules as they may adopt consistent with the requirements of this Section 9 and
Rule 16b-3 permit an Optionee to satisfy federal and state tax withholding
obligations arising in connection with the exercise of an Option by electing
(an "Election") to have GBC withhold Shares having a Fair Market Value equal to
the amount of tax required to be withheld (the "Withholding Requirement").
Elections to have Shares withheld to satisfy the Withholding Requirement shall
be:
(i) made on or before the date that the amount of the Withholding
Requirement is determined in accordance with Section 83 of the
Internal Revenue Code of 1986, as amended, and applicable
provisions of state law (the "Tax Date");
(ii) irrevocable when made; and
(iii) made in writing; and
(iv) subject to disapproval by the Board or Committee.
(b) In addition to the foregoing requirements, an Election made by
an Optionee whose transactions in Shares are subject to Section 16(b) of the
Securities Exchange Act of 1934, as amended (an "Officer") shall to the extent
required to comply with Rule 16b-3:
(i) not be made within six months of the date of grant of an
Option (except in the event of the death or permanent
disability of the Optionee during such six month period); and
(ii) be made either
(A) six months or more prior to the Tax Date, or
(B) on or prior to the Tax Date and during the period
(the "Window Period") beginning on the third business
day and ending on the twelfth business day following
the date on which GBC has released for
7
8
publication its regularly quarterly (or, in the case
of the fourth quarter of its fiscal year, annual)
summary financial information. For purposes of the
preceding sentence, "business day" shall mean any
calendar day other than Saturday, Sunday or a
national holiday.
An election shall be deemed made on the date the election is received by GBC.
"Fair Market Value" of the Shares to be withheld (or tendered pursuant to the
following sentence of this Section 8) in payment of the Withholding Requirement
shall be the "Fair Market Value" of the Shares on the Tax Date determined in
accordance with Section 6 of this Plan. The value of any fractional share
required to fulfill the Withholding Requirement will be paid by the Optionee in
cash.
SECTION 10. NO RIGHTS AS STOCKHOLDERS.
An optionee shall have no rights as a stockholder with respect to any
Shares covered by an Option until the date of issuance of a stock certificate
to him for such Shares upon the due exercise of an Option.
SECTION 11. EMPLOYMENT.
Nothing contained in the Plan or in any Option granted pursuant to the
Plan shall be construed as an agreement on the part of GBC, its Subsidiaries or
Affiliates to employ any employee for any period of time whatsoever.
SECTION 12. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 16 hereof, the maximum
number of Shares which may be issued and sold or transferred upon the exercise
of Options granted under this
8
9
Plan and accordingly the maximum number for which Options may be granted, shall
be 1,347,275 which number of the authorized but unissued Shares shall be
reserved for such purpose, and the total number of Shares which may be made
subject to Options or SARs granted under the Plan, in any calendar year to any
single person shall not exceed 250,000. Shares to be issued upon the exercise
of Options under this Plan may be issued from the authorized but unissued
Shares or from Treasury Shares in the hands of GBC or from Shares purchased by
GBC on the open market for such purposes or from any combination of the
foregoing as the Board may determine. If Treasury Shares or Shares purchased
on the open market are issued upon the exercise of any Option, the number of
authorized but unissued Shares reserved for this Plan shall be correspondingly
reduced. If and to the extent an Option shall expire or terminate for any
reason without having been exercised in full (including, without limitation,
cancellation and re-grant), or in the event that an Option is exercised or
settled in a manner such that some or all of the Shares related to the Option
are not issued to the optionee (or beneficiary) (including as the result of the
use of shares for withholding taxes), the shares of Stock subject thereto which
have not become outstanding shall (unless the Plan shall have terminated)
become available for issuance under the Plan; provided, however, that with
respect to a share-for-share exercise, only the net shares issued shall be
deemed to have become outstanding as a result thereof. SARs which expire or
terminate for any reasons without having been earned in full, an equal number
of SARs shall (unless the Plan shall have terminated) become available for
issuance under the Plan.
9
10
SECTION 13. TERMINATION OF EMPLOYMENT, RETIREMENT, DEATH OR DISABILITY.
Except to the extent determined by the Board or Committee as set forth
in the Option Agreement:
(a) upon the optionee's involuntary termination of
employment with GBC, its Subsidiaries and Affiliates other than under
circumstances constituting retirement, death, disability, or cause
described below, all Options which were unexercised at the time of
such termination of employment shall be exercisable during a period of
three months after such termination, but only to the extent such
Options were exercisable at the time of said termination;
(b) all parts of all Options which were unexercised at
the time of the optionee's retirement after attaining age 65 or
pursuant to a retirement prior to attaining the age of 65 if approved
by GBC, may be exercised during a period of 12 months after said
retirement date;
(c) All parts of all Options which were unexercised at
the time of the death of an optionee may be exercised during a period
of 12 months after his death by the person or persons to whom they
shall have been transferred by will or the laws of descent or
distribution, or if no such transfer has been made by the executor or
administrator of the optionee's estate on behalf of said estate;
(d) should any optionee become permanently disabled, all
parts of all Options which were unexercised at the time of the
disabled optionee's termination of employment may be exercised by the
optionee or his legal guardian or other legal
10
11
representative on his behalf during a period of 12 months after said
termination date; and
(e) upon the (i) voluntary termination of the optionee's
employment with GBC, its Subsidiaries and Affiliates other than under
circumstances constituting retirement or disability, or (ii)
termination of the optionee's employment with GBC, its Subsidiaries or
Affiliates for cause (whether such termination is by GBC, its
Subsidiary or Affiliate or by optionee at a time when condition
circumstances constituting cause existed), all optionee's Options
shall expire and all rights to purchase Shares thereunder shall
terminate. For purposes of this Plan, "cause" shall mean the
optionee's commission of a felony, or of any act or omission by
optionee involving willful misconduct, dishonesty, disloyalty or fraud
with respect to GBC, its Subsidiaries or Affiliates.
SECTION 14. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee may, in its discretion, grant SARs to
any optionee hereunder if he is then eligible to receive Options hereunder.
Each SAR shall represent a right to receive cash in an amount equal to the
excess of the Fair Market Value of one Share on the date the SAR is exercised
over the Fair Market Value (as determined in Section 6) of such Share on the
date the SAR was granted. Up to 1,347,275 SARs may be granted pursuant to the
Plan.
(b) The Board may grant SARs at any time and from time to time to
any optionee, shall designate such SARs as related to Options then being
granted or granted within six
11
12
months prior to the grant date of the SAR, and may set such terms and
conditions upon the exercise of the SARs as it may determine in its discretion,
provided that the written agreement evidencing such SARs shall comply with and
be subject to the following terms and conditions:
(i) SARs granted hereunder shall not be exercisable until
the expiration of one-year from the date of the grant of such SAR
unless the employment of the optionee shall terminate by reason of
death, retirement or disability prior to the expiration of such one-
year period.
(ii) An optionee's right to exercise an SAR shall not be
transferable during the lifetime of the optionee, and shall be
exercisable only at such time and only to the extent that the Option
to which the SARs relate may be exercised.
(iii) In the event adjustments are made to the number of
shares, exercise price or time or times of exercise of outstanding
options upon the occurrence of an event described in Section 16
hereof, appropriate adjustments shall be made in the number of SARs
available for future grant, the number of SARs under existing grants
and the SAR price per share and time or times of exercise of the SARs.
(iv) Unless the agreement evidencing the SAR provides
otherwise, exercise of an SAR shall result in the extinguishment of
the pro rata portion of the related Options and exercise of an Option
shall result in the extinguishment of the pro rata portion of the
related SARs.
(v) SARs may be exercised only upon receipt by GBC of a
written notice of election which shall be dated the date of such
election, which shall be deemed to be the date when such notice is
sent by registered or certified mail or the date upon which
12
13
receipt is acknowledged by GBC if hand delivered or sent other than by
such mail; provided, however, that such notice shall only be sent or
delivered during a Window Period. The purpose of the foregoing
restriction on exercise of SARs is intended to comply with Rule 16b-
3(e) promulgated under the 1934 Act and in the event that such
restrictions shall not be or remain consistent with the provisions of
Section 16(b) of such Act or such rules and regulations thereunder
which except from the operation of said Section 16(b) in whole or in
part such SAR exercise, then such date of election and other
restrictions upon exercise shall be determined by such method
consistent with said Section 16(b) as the Board or Committee shall
select and apply.
SECTION 15. GOVERNMENTAL APPROVAL.
No Option shall be granted under the Plan and no Shares shall be
issued, transferred or delivered upon exercise of any Option granted under the
Plan unless the Board is satisfied that there has been full compliance with all
applicable requirements of the Securities Act of 1933, all applicable
requirements of any national securities exchange on which the Shares are then
listed, and all other requirements of law or of any regulatory bodies having
jurisdiction over the granting of such Options or of the issuance, transfer or
delivery of the Shares thereunder.
SECTION 16. ADJUSTMENT.
Section 6 notwithstanding, the Board shall make or provide for such
adjustment in the exercise price of any Option or in the number or kinds of
shares of GBC covered by Options or reserved for issuance under the Plan as it
may deem to be equitable as a result of any
13
14
change in the number or kind of outstanding shares of GBC resulting from any
reorganization, recapitalization, stock split, stock dividend, merger,
consolidation, rights offering or other change in capital structure or like
transaction.
SECTION 17. AMENDMENT OF PLAN.
Except as provided below, the Board may at any time and from time to
time, with respect to Shares at the time not subject to Options, alter, amend,
suspend or terminate the Plan, including, without limiting the generality of
the foregoing, the making of such amendments as the Board shall deem advisable
to conform this Plan to any change in any law or regulation applicable hereto.
The Board may not, without approval by the stockholders of GBC as may
then be required by Rule 16b-3 or any successor or comparable Rule or
Regulation promulgated under the 1934 Act, any national securities exchange or
system on which the Shares are then listed or reported, or any regulatory body
having jurisdiction with respect thereto: (a) increase the aggregate number of
Shares which may be issued pursuant to the Options granted under the Plan
(except as may be permitted by Section 16 hereof); (b) decrease the minimum
price at which Options may be granted under the Plan; (c) extend the option
period with respect to any Option; (d) permit the granting of Options to anyone
other than as provided in Section 2; or (e) provide for the administration of
the Plan by the Board or by a committee appointed by the Board unless the
membership of the Board or such committee, respectively, meets the requirements
of Rule 16b-3 for such Board or committee as provided in Section 4 of the Plan.
14
15
No termination, suspension, modification or amendment of the Plan may,
without the consent of a person to whom any Option shall theretofore have been
granted, adversely affect the rights of such person under such Option.
15