Exhibit 10(j)
R.R. DONNELLEY & SONS COMPANY
1995 STOCK INCENTIVE PLAN
(AS AMENDED ON JANUARY 25, 1996)
I. GENERAL
1. Plan. To provide incentives to management through rewards based upon the
ownership or performance of the common stock of R.R. Donnelley & Sons Company
(the "Company"), the Committee hereinafter designated, may grant cash or bonus
awards, stock options, stock appreciation rights ("SARs"), or combinations
thereof, to eligible officers and other key management employees, on the terms
and subject to the conditions stated in the Plan. In addition, to provide
incentives to members of the Board of Directors ("Board") who are not employees
of the Company ("non-employee directors"), such non-employee directors are
hereby granted options on the terms and subject to the conditions set forth in
the Plan. For purposes of the Plan, references to employment by the Company also
mean employment by a majority-owned subsidiary of the Company and employment by
any other entity designated by the Board or the Committee in which the Company
has a direct or indirect equity interest.
2. Eligibility. Officers and other key management employees of the Company,
its subsidiaries, and any other entity designated by the Board or the Committee
in which the Company has a direct or indirect equity interest, shall be
eligible, upon selection by the Committee, to receive cash or bonus awards,
stock options or SARs, either singly or in combination, as the Committee, in its
discretion, shall determine. Non-employee directors shall receive stock options
on the terms and subject to the conditions stated in the Plan.
3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 7,500,000 shares of common stock, par value $1.25
per share ("common stock"), shall be available under the Plan, reduced by the
aggregate number of shares of common stock which become subject to outstanding
bonus awards, stock options and SARs which are not granted in tandem with or by
reference to a stock option ("free-standing SARs"). Shares subject to a grant or
award which for any reason are not issued or delivered, including by reason of
the expiration, termination, cancellation or forfeiture of all or a portion of
the grant or award or by reason of the delivery or withholding of shares to pay
all or a portion of the exercise price or to satisfy tax withholding
obligations, shall again be available for future grants and awards; provided,
however, that for purposes of this sentence, stock options and SARs granted in
tandem with or by reference to a stock option granted prior to the grant of such
SARs ("tandem SARs") shall be treated as one grant. For the purpose of complying
with Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the rules and regulations thereunder, the maximum number of shares
of common stock with respect to which options or SARs or a combination thereof
may be granted during any three-year period to any person shall be 1,000,000,
subject to adjustment as provided in Section 5 of this Article I. The maximum
number of shares of common stock with
respect to which fixed awards in the form of restricted stock may be granted
hereunder is 500,000 in the aggregate, subject to adjustment as provided in
Section 5 of this Article I.
Shares of common stock to be issued may be authorized and unissued shares
of common stock, treasury stock or a combination thereof.
4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors (the "Committee"). Each member of the
Committee shall be (i) an "outside director" within the meaning of Section
162(m) of the Code, subject to any transitional rules applicable to the
definition of outside director, and (ii) a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Committee shall, subject to the terms of the Plan, select
eligible officers and key management employees for participation; determine the
form of each grant and award, either as cash, a bonus award, stock options or
SARs or a combination thereof; and determine the number of shares or units
subject to the grant or award, the fair market value of the common stock or
units when necessary, the time and conditions of vesting, exercise or
settlement, and all other terms and conditions of each grant and award,
including, without limitation, the form of instrument evidencing the grant or
award. The Committee may establish rules and regulations for the administration
of the Plan, interpret the Plan, and impose, incidental to a grant or award,
conditions with respect to competitive employment or other activities not
inconsistent with the Plan. All such rules, regulations, interpretations and
conditions shall be conclusive and binding on all parties. Each grant and award
shall be evidenced by a written instrument and no grant or award shall be valid
until an agreement is executed by the Company and the recipient thereof and,
upon execution by each party and delivery of the agreement to the Company, such
grant or award shall be effective as of the effective date set forth in the
agreement.
The Committee may delegate some or all of its power and authority hereunder
to the Chief Executive Officer or other executive officer of the Company as the
Committee deems 8appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to (i) the selection for
participation in the Plan of (A) an employee who is a "covered employee" within
the meaning of Section 162(m) of the Code or who, in the Committee's judgment,
is likely to be a covered employee at any time during the period a grant or
award hereunder to such employee would be outstanding or (B) an officer or other
person subject to Section 16 of the Exchange Act or (ii) decisions concerning
the timing, pricing or amount of a grant or award to such an employee, officer
or other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of common stock other than a regular cash
dividend, the number and class of securities available under the Plan, the
number and
-2-
class of securities subject to each outstanding bonus award, the number and
class of securities subject to each outstanding stock option and the purchase
price per security, the number of securities subject to each stock option to be
granted to non-employee directors pursuant to Article III and the terms of each
outstanding SAR shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding stock options and SARs without
a change in the aggregate purchase price or base price. If any such adjustment
would result in a fractional security being (i) available under the Plan, such
fractional security shall be disregarded, or (ii) subject to an outstanding
grant or award under the Plan, the Company shall pay the holder thereof, in
connection with the first vesting, exercise or settlement of such grant or
award, in whole or in part, occurring after such adjustment, an amount in cash
determined by multiplying (i) the fraction of such security (rounded to the
nearest hundredth) by (ii) the excess, if any, of (A) the fair market value on
the vesting, exercise or settlement date over (B) the exercise or base price, if
any, of such grant or award.
6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the 1995 annual meeting of
stockholders and, if approved, shall become effective on January 1, 1995. The
Plan shall terminate on December 31, 1999 unless terminated prior thereto by
action of the Board. No further grants or awards shall be made under the Plan
after termination, but termination shall not affect the rights of any
participant under any grants or awards made prior to termination.
7. Amendments. The Plan may be amended or terminated by the Board in any
respect except that no amendment may be made without stockholder approval if
stockholder approval is required by applicable law, rule or regulation,
including Rule 16b-3 under the Exchange Act and Section 162(m) of the Code, or
such amendment would increase (subject to Section 5 of this Article I) the
maximum number of shares available under the Plan; provided, however, that
subject to Section 5 of this Article I, the number of shares subject to stock
options granted to non-employee directors, the purchase price therefor, the date
of grant of any such option, the termination provisions relating to such options
and the category of persons eligible to be granted such options shall not be
amended more than once every six months, other than to comply with changes in
the Code or the Employee Retirement Income Security Act of 1974, as amended, or
the rules and regulations thereunder. No amendment may impair the rights of a
holder of an outstanding grant or award without the consent of such holder.
8. Prior Plans. Upon approval of the Plan by the stockholders of the Company,
no further grants or awards shall be made under the Company's 1981 Stock
Incentive Plan, as amended (the "1981 Plan"), the 1986 Stock Incentive Plan, as
amended (the "1986 Plan"), or the 1991 Stock Incentive Plan, as amended (the
"1991 Plan"), except that SARs may be granted with respect to options previously
granted and outstanding under such Plans. Grants and awards made under the 1981
Plan, the 1986 Plan and the 1991 Plan prior to approval of the Plan by the
stockholders of the Company shall continue in effect in accordance with their
terms.
-3-
II. BONUS AWARDS
1. Form of Award. Bonus awards, whether performance awards or fixed awards,
may be made to eligible officers and other key management employees in the form
of (i) cash, whether in an absolute amount or as a percentage of compensation,
(ii) stock units, each of which is substantially the equivalent of a share of
common stock but for the power to vote and, subject to the Committee's
discretion, the entitlement to an amount equal to dividends or other
distributions otherwise payable on a like number of shares of common stock,
(iii) shares of common stock issued to the employee but forfeitable and with
restrictions on transfer in any form as hereinafter provided or (iv) any
combination of the foregoing.
2. Performance Awards. Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with the actual such amount, percentage or number to be determined by reference
to the level of achievement of corporate, sector, business unit, division,
individual or other specific objectives over a performance period of not less
than one nor more than ten years, as determined by the Committee. No rights or
interests of any kind shall be vested in an individual receiving a performance
award until the conclusion of the performance period and the determination of
the level of achievement specified in the award, and the time of vesting, if
any, thereafter shall be as specified in the award.
3. Fixed Awards. Awards may be made which are not contingent on the
achievement of specific objectives, but are contingent on the participant's
continuing in the Company's employ for a period specified in the award.
4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that a distribution with
respect to shares of common stock, other than a regular quarterly cash dividend,
shall be deposited with the Company and shall be subject to the same
restrictions as the shares of common stock with respect to which such
distribution was made.
During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder's name and may bear a
legend, in addition to any legend which may be required under applicable laws,
rules or regulations, indicating that the ownership of the shares of common
stock represented by such certificate is subject to the restrictions, terms and
conditions of the Plan and the agreement relating to the restricted shares. All
such certificates shall be deposited with the Company, together with stock
powers or other instruments of assignment (including a power of attorney), each
endorsed in blank with a guarantee of signature if deemed necessary or
appropriate, which would permit transfer to the Company of all or a portion of
the shares of common stock subject to the award in the event such award is
forfeited in whole or in part. Upon termination of any applicable restriction
period, including, if applicable, the satisfaction or achievement of applicable
objectives, and subject to the Company's right to
-4-
require payment of any taxes, a certificate or certificates evidencing ownership
of the requisite number of shares of common stock shall be delivered to the
holder of such award.
5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee's discretion,
amounts equal to dividends and other distributions otherwise payable on a like
number of shares of common stock after the crediting of the units (unless the
record date for such dividends or other distributions precedes the date of grant
of such award) shall be credited to an account for the participant and held
until the award is forfeited or paid out. Interest shall be credited on the
account annually at a rate equal to the return on five year U.S. Treasury
obligations.
6. Vesting and Resultant Events. The Committee may, in its discretion, provide
for early vesting of an award in the event of the participant's death, permanent
and total disability or retirement. At the time of vesting, (i) the award, if in
units, shall be paid to the participant either in shares of common stock equal
to the number of units, in cash equal to the fair market value of such shares,
or in such combination thereof as the Committee shall determine, and the
participant's account to which dividend equivalents, other distributions and
interest have been credited shall be paid in cash, (ii) the award, if a cash
bonus award, shall be paid to the participant either in cash, or in shares of
common stock with a then fair market value equal to the amount of such award, or
in such combination thereof as the Committee shall determine and (iii) shares of
restricted common stock issued pursuant to an award shall be released from the
restrictions.
III. STOCK OPTIONS
1. Grants. (a) Options for Officers and Key Management Employees. Options to
purchase shares of common stock of the Company may be granted to such eligible
officers and key management employees as may be selected by the Committee. These
options may, but need not, constitute "incentive stock options" under Section
422 of the Code or any other form of option under the Code. To the extent that
the aggregate fair market value (determined as of the date of grant) of shares
of common stock with respect to which options designated as incentive stock
options are exercisable for the first time by a participant during any calendar
year (under the Plan or any other plan of the Company, or any parent or
subsidiary) exceeds the amount (currently $100,000) established by the Code,
such options shall not constitute incentive stock options.
(b) Options for Non-Employee Directors. An option to purchase 4,000 shares
of common stock of the Company shall be granted on the date of the 1995 annual
meeting of stockholders and, thereafter, annually on the date of the Company's
annual meeting of stockholders to each individual who immediately following such
meeting on such date is a non-employee director. An option granted to a non-
employee director pursuant to this Section 1(b) (a "Director Option") shall
become exercisable in whole or in part on the earlier to occur of (i) the date
which is the first anniversary of the date the Director Option is granted (the
date of grant being hereafter referred to as the "Option Date") or (ii) the day
immediately preceding the date of the first annual meeting of stockholders of
the Company next following the Option Date; provided, however, that the date
-5-
of such annual meeting is at least three hundred fifty-five (355) days after the
Option Date, and Director Options shall not be exercisable more than ten years
after the Option Date.
2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option; provided further, that if an incentive stock option
shall be granted to any person who, on the date of grant of such option, owns
capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
subsidiary) (a "Ten Percent Holder"), the purchase price per share of common
stock shall be the price (currently 110% of fair market value) required by the
Code in order to constitute an incentive stock option; and provided further,
that the purchase price per share of common stock subject to a Director Option
shall be 100% of the fair market value of a share of common stock on the date of
grant of such option.
3. Exercise of Options. The period during which options granted hereunder
(other than options granted to non-employee directors) may be exercised shall be
determined by the Committee; provided, however, that no incentive stock option
shall be exercised later than ten years after its date of grant; provided
further, that if an incentive stock option shall be granted to a Ten Percent
Holder, such option shall not be exercisable more than five years after its date
of grant. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an option or to
the exercisability of all or a portion of an option. The Committee shall
determine whether an option shall become exercisable in cumulative or non-
cumulative installments and in part or in full at any time. An exercisable
option, or portion thereof, may be exercised only with respect to whole shares
of common stock.
An option may be exercised (i) by giving written notice to the Company
specifying the number of whole shares of common stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) either (A) in cash, (B) in previously owned whole
shares of common stock (which the optionee has held for at least six months
prior to delivery of such shares or which the optionee purchased on the open
market and for which the optionee has good title free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (C) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (D) a combination of (A) and (B),
(ii) if applicable, by surrendering to the Company any SARs which are cancelled
by reason of the exercise of the option and (iii) by executing such documents as
the Company may reasonably request. The Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(D) and, in the case of
an optionee who is subject to Section 16 of the Exchange Act, the Company may
require that the method of making such payment be in compliance with Section 16
and the rules and regulations thereunder. Any fraction of a share of common
stock which would be required to pay such purchase price shall be disregarded
and the remaining amount due shall be paid in cash by the optionee. No
certificate representing common stock shall be delivered until the full purchase
price therefor has been paid.
-6-
4. Termination of Employment or Service. An option may be exercised during the
optionee's continued employment with the Company or service on the Board, as the
case may be, and, unless otherwise determined by the Committee as set forth in
the agreement relating to the option, for a period not in excess of ninety days
following termination of employment or service on the Board and only within the
original term of the option; provided, however, that if employment of the
optionee by the Company or service on the Board, as the case may be, shall have
terminated by reason of retirement or total and permanent disability, then the
option may be exercised to the extent set forth in the agreement relating to the
option for a period not in excess of five years following termination of
employment or service on the Board, but not after the expiration of the term of
the option. In the event of the death of an optionee (i) during employment or
service on the Board, as the case may be, (ii) within a period not in excess of
five years after termination of employment or service on the Board, as the case
may be, by reason of retirement or total and permanent disability or (iii)
within ninety days after termination of employment or service on the Board, as
the case may be, for any other reason, outstanding options held by such optionee
at the time of death may be exercised to the extent set forth in the agreement
relating to the option by the executor, administrator, personal representative,
beneficiary or similar persons of such deceased optionee within ninety days of
the date of death.
IV. UK STOCK OPTION SUB-PLAN
1. GENERAL
(a) Sub-Plan. The UK Stock Option Sub-Plan ("the Sub-Plan") has been
established in order to vary the terms on which options may be given to officers
and other key management employees who are employed in the United Kingdom by the
Company or any of its subsidiaries. Stock options granted under the Sub-Plan
shall be deemed granted under the Plan and shall, unless otherwise stated or
implied in this Article IV, comply in all respects with the terms and conditions
applicable to options granted under Article III of the Plan. Articles II and V
and Clause 2 of Article VI shall not apply to options granted under the Sub-
Plan.
(b) Definitions. In the Sub-Plan the following terms shall have the following
meanings:
"the Subsidiaries" shall mean all companies which are controlled by the
Company (as defined in Section 840 of the Income and
Corporation Taxes Act 1988) and which are affiliates
controlled by the Company directly or indirectly
through one or more intermediaries for the purposes of
Rule 12b-2 of the Exchange Act;
"the Group" shall mean the Company and the Subsidiaries;
"Associated Company" shall have the meaning attributed to it in Section
416(1) of the Income and Corporation Taxes Act 1988;
"the Committee" shall mean the committee designated to administer the
Plan;
-7-
"Full Time Employee" shall mean any director or employee who is employed by
the Group in the United Kingdom and who is required to
devote to his duties not less than 25 hours (or in the
case of an employee who is not a director of any
company in the Group, 20 hours) per week (excluding
meal breaks) and is not precluded by paragraph 8 of
Schedule 9 from participating in the Sub-Plan;
"Relevant Emoluments" shall have the meaning which the term bears in sub-
paragraph (2) of paragraph 28 of Schedule 9 by virtue
of sub-paragraph (4) of that paragraph;
"Year of Assessment" shall mean a year beginning on any 6 April and ending
on the following 5 April;
"Market Value" shall mean on any day the average of high and low
transaction prices in trading in the common stock of
the Company as reported on the New York Stock
Exchange--Composite Transactions compiled by Associated
Press or if no trading occurred on such date then on
the next preceding date on which such trading occurred;
"Schedule 9" shall mean Schedule 9 of the United Kingdom Income and
Corporation Taxes Act 1988;
"Share" or "Shares" shall mean a share or shares of common stock of par
value $1.25 which satisfy the conditions specified in
Paragraphs 10 to 14 inclusive of Schedule 9.
(c) Sub-Plan. The Committee may grant stock options to officers and other key
management employees eligible to participate in the Sub-Plan on the terms and
subject to the conditions stated in the Sub-Plan.
(d) Eligibility. Full Time Employees who are officers or other key management
employees employed by the Group in the United Kingdom under selection guidelines
to be established by the Committee, shall be eligible, upon selection by the
Committee, to receive stock options.
(e) Shares to be Issued. Shares to be issued shall be authorized and unissued
shares of common stock, treasury stock or a combination thereof. The issue of
shares of common stock shall be subject to the maximum specified in the Plan.
(f) Administration. The Sub-Plan shall be administered by the Committee in
accordance with the provisions set out in the Plan and varied by the terms of
the Sub-Plan.
-8-
(g) Effective Date and Term of the Sub-Plan. The Sub-Plan shall be submitted to
the stockholders of the Company for approval at the 1995 annual meeting of
stockholders and, if approved, shall become effective on January 1, 1995.
Options shall not be granted until the Sub-Plan has been approved by the Board
of UK Inland Revenue under the provisions of paragraph 1 of Schedule 9. Any
change required to be made to the Plan by the Board of UK Inland Revenue in
order to obtain its approval may be made without stockholder approval, except as
otherwise provided in Clause 7 of Article I. The Sub-Plan shall terminate on
December 31, 1999 unless terminated prior thereto by action of the Board. No
further grants shall be made under the Sub-Plan after termination, but
termination shall not affect the rights of any participant under the grants made
prior to termination.
(h) Amendments. The Sub-Plan may be amended or terminated by the Board subject
to the conditions specified in the Plan. No amendment may be made which will put
the Sub-Plan in breach of conditions for approval set out in Schedule 9 and no
amendment to the Sub-Plan or any provision in the Plan which applies to options
granted under the Sub-Plan shall be made without prior approval of the Board of
UK Inland Revenue.
2. STOCK OPTIONS
(a) Grants. Options to purchase shares of common stock may be granted to such
eligible Full-Time Employees as may be selected by the Committee. No variation
shall be made in relation to a spin-off nor to any class of securities available
under the Sub-Plan.
(b) Variations in Options. Variations may not be made to options granted under
the Sub-Plan pursuant to Article I clause 5 of the Plan without prior consent of
the Board of UK Inland Revenue.
(c) Terms of Options. Terms attaching to options shall be contained in a stock
option agreement, the form of which must be approved in advance by the Board of
UK Inland Revenue. If any performance targets are attached to the exercisability
of an option, these shall be objectively determined and subject to the prior
approval of the Board of UK Inland Revenue. No option shall be exercisable more
than ten years after its date of grant. The per share option price shall be
stated at the time the option is granted and shall be not less than 100% of the
Market Value of the share on the date on which the optionee is offered options
under the Sub-Plan. Upon exercise, the option price shall be paid in cash. The
provisions in Clause 3 of Article III for the exercise of options by payment in
whole shares of common stock or in cash by a broker-dealer to whom the optionee
has submitted an irrevocable notice of exercise will not apply for the purposes
of the Sub-Plan unless, in the case of the latter, approved by the Board of UK
Inland Revenue. Options shall not be transferable except that such options may
be exercised by the personal representative of a deceased optionee or a
beneficiary of such deceased optionee who has been designated pursuant to
beneficiary designation procedures approved by the Company, in each case within
ninety days of the death of the optionee. Options may be exercised during the
individual's continued employment with the Group and for a period not in excess
of ninety days following termination of employment and only within the original
term of the option. No option may be
-9-
exercised by an individual at any time when he is precluded by Paragraph 8 of
Schedule 9 from participating in the Sub-Plan.
(d) Exercise of Option. An option may be exercised by delivery of written
notice to the Company specifying the number of shares to be purchased and
accompanied by payment in full of the option price for the number of shares so
purchased. The Company shall within thirty days post to the optionee
certificates representing the number of shares specified, and shall pay all
original issue or transfer taxes and all other fees and expenses incidental to
such delivery.
(e) Limits on Options. No person shall be granted options under the Sub-Plan
which would, at the time that they are obtained, cause the aggregate Market
Value of the shares which such person may acquire in pursuance of rights
obtained under the Sub-Plan or under any other scheme established by the Group
or by any Associated Company of the Company and approved by the Board of UK
Inland Revenue under Schedule 9 (and not exercised) to exceed or further exceed
the greater of:
(1) 100,000 British Pounds Sterling or
(2) Four times the Relevant Emoluments of the optionee for the current or
preceding Year of Assessment (whichever of those years gives the greater
amount) or if there were no Relevant Emoluments for the preceding Year of
Assessment four times the amount of the Relevant Emoluments for the period of
twelve months beginning with the first day during the current Year of
Assessment in respect of which there are Relevant Emoluments. For the purposes
of this clause the Market Value of the shares shall be converted from US
Dollars to sterling at the middle rate for the buying and selling of that
amount of sterling for US Dollars as quoted by the Barclays Bank PLC at the
opening of business on the day on which the optionee is offered options under
the Sub-Plan.
V. STOCK APPRECIATION RIGHTS
1. Grants. Free-standing SARs entitling the grantee to receive cash or shares
of common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock from the date of grant to the
date of exercise of such SARs, or in the case of tandem SARs, from the date of
grant of the related stock option to the date of exercise of such tandem SARs,
may be granted to such eligible officers and other key management employees as
may be selected by the Committee. The holder of a tandem SAR may elect to
exercise either the option or the SAR, but not both.
2. Number of SARs and Base Price. The number of SARs subject to a grant shall
be determined by the Committee. Any tandem SAR related to an incentive stock
option shall be granted at the same time that such incentive stock option is
granted. The base price of a tandem SAR shall be the purchase price per share of
common stock of the related option. The base price of a free-standing SAR shall
be determined by the Committee; provided, however, that such base price shall
-10-
not be less than 100% of the fair market value of a share of common stock on the
date of grant of such SAR.
3. Exercise of SARs. The agreement relating to a grant of SARs may specify
whether such grant shall be settled in shares of common stock (including
restricted shares of common stock) or cash or a combination thereof. Upon
exercise of an SAR, the grantee shall be paid the excess of the then fair market
value of the number of shares of common stock to which the SAR relates over the
fair market value of such number of shares at the date of grant of the SAR or of
the related stock option, as the case may be. Such excess shall be paid in cash
or in shares of common stock having a fair market value equal to such excess or
in such combination thereof as the Committee shall determine. The period during
which SARs granted hereunder may be exercised shall be determined by the
Committee; provided, however, that no tandem SAR shall be exercised if the
related option has expired or has been cancelled or forfeited or has otherwise
terminated. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a tandem SAR, only with respect to whole shares of
common stock and, in the case of a free-standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for restricted shares of common
stock, a certificate or certificates representing such restricted shares shall
be issued in accordance with Section 4 of Article II and the holder of such
restricted shares shall have such rights of a stockholder of the Company as
determined pursuant to such Section. Prior to the exercise of an SAR for shares
of common stock, including restricted shares, the holder of such SAR shall have
no rights as a stockholder of the Company with respect to the shares of common
stock subject to such SAR.
A tandem SAR may be exercised (i) by giving written notice to the Company
specifying the number of whole SARs which are being exercised, (ii) by
surrendering to the Company any options which are cancelled by reason of the
exercise of such SAR and (iii) by executing such documents as the Company may
reasonably request. A free-standing SAR may be exercised (i) by giving written
notice to the Company specifying the whole number of SARs which are being
exercised and (ii) by executing such documents as the Company may reasonably
request. In the case of the holder of an SAR who is subject to Section 16 of the
Exchange Act, the Company may require that the exercise of an SAR be in
compliance with Section 16 and the rules and regulations thereunder.
4. Termination of Employment. An SAR may be exercised during the grantee's
continued employment with the Company and, unless otherwise determined by the
Committee as set forth in the agreement relating to the SAR, for a period not in
excess of ninety days following termination of employment and only within the
original term of the SAR; provided, however, that if employment of the grantee
by the Company shall have terminated by reason of retirement or total and
permanent disability, then the SAR may be exercised to the extent set forth in
the agreement relating to the SAR for a period not in excess of five years
following termination of employment but not after the expiration of the term of
the SAR. In the event of the death of a holder of an SAR (i) during employment,
(ii) within a period not in excess of five years after termination of
-11-
employment by reason of retirement or total and permanent disability or (iii)
within ninety days after termination of employment for any other reason,
outstanding SARs held by such holder at the time of death may be exercised to
the extent set forth in the agreement relating to the SAR by the executor,
administrator, personal representative, beneficiary or similar persons of such
deceased holder within ninety days of the date of death.
VI. OTHER
1. Non-Transferability of Options and Stock Appreciation Rights. No option or
SAR shall be transferable other than (i) by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise permitted under Rule 16b-3 under the Exchange Act
as determined by the Committee and set forth in the agreement relating to such
option or SAR. Each option or SAR may be exercised during the participant's
lifetime only by the participant or the participant's guardian, legal
representative or similar person. Except as permitted by the second preceding
sentence, no option or SAR may be sold, transferred, assigned, pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any option or SAR, such award and all rights thereunder
shall immediately become null and void.
2. Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of common stock or the payment of any cash
pursuant to a grant or award hereunder, payment by the holder thereof of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the "Tax
Date"), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, (C) authorizing the Company to withhold whole shares of common stock which
would otherwise be delivered having an aggregate fair market value determined as
of the Tax Date or withhold an amount of cash which would otherwise be payable
to a holder, (D) in the case of the exercise of an option, a cash payment by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C);
provided, however, that the Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (B)-(E) and that in the case of a
holder who is subject to Section 16 of the Exchange Act, the Company may require
that the method of satisfying such an obligation be in compliance with Section
16 and the rules and regulations thereunder. An agreement relating to a grant or
award hereunder may provide for shares of common stock to be delivered or
withheld having an aggregate fair market value in excess of the minimum amount
-12-
required to be withheld, but not in excess of the amount determined by applying
the holder's maximum marginal tax rates. Any fraction of a share of common stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the holder.
3. Acceleration Upon Change in Control. If while (i) any performance award or
fixed award granted under Article II is outstanding or (ii) any stock option
granted under Article III or IV of the Plan or SAR granted under Article V of
the Plan is outstanding --
(a) any "person," as such term is defined in Section 3(a)(9) of the
Exchange Act, as modified and used in Section 13(d) and 14(d) thereof (but not
including (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company) (hereinafter
a "Person") is or becomes the beneficial owner, as defined in Rule 13d-3 of
the Exchange Act, directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates, excluding an acquisition
resulting from the exercise of a conversion or exchange privilege in respect
of outstanding convertible or exchangeable securities) representing 50% or
more of the combined voting power of the Company's then outstanding
securities; or
(b) during any period of two (2) consecutive years (not including any
period prior to the effective date of the Plan), individuals who at the
beginning of such period constitute the Board and any new director (other than
a director designated by a Person who has entered into any agreement with the
Company to effect a transaction described in Clause (a), (c) or (d) of this
Section) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning
of the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 50% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no Person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or
-13-
(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of
all or substantially all the Company's assets,
(any of such events being hereinafter referred to as a "Change in Control"),
then from and after the date on which public announcement of the acquisition of
such percentage shall have been made, or the date on which the change in the
composition of the Board set forth above shall have occurred, or the date of any
such stockholder approval of a merger, consolidation, plan of complete
liquidation or an agreement for the sale of the Company's assets as described
above occurs (the applicable date being hereinafter referred to as the
"Acceleration Date"), (i) with respect to such performance awards, the highest
level of achievement specified in the award shall be deemed met and the award
shall be immediately and fully vested, (ii) with respect to such fixed awards,
the period of continued employment specified in the award upon which the award
is contingent shall be deemed completed and the award shall be immediately and
fully vested and (iii) with respect to such options and SARs, all such options
and SARs, whether or not then exercisable in whole or in part, shall be fully
and immediately exercisable.
4. Restrictions on Shares. Each grant and award made hereunder shall be
subject to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of common stock subject
thereto upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery of
shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of common stock
delivered pursuant to any grant or award made hereunder bear a legend indicating
that the sale, transfer or other disposition thereof by the holder is prohibited
except in compliance with the Securities Act of 1933, as amended, and the rules
and regulations thereunder.
5. No Right of Participation or Employment. No person (other than non-employee
directors to the extent provided in Article III) shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to continued employment by the Company,
any subsidiary or any affiliate of the Company or affect in any manner the right
of the Company, any subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
6. Rights as Stockholder. No person shall have any right as a stockholder of
the Company with respect to any shares of common stock or other equity security
of the Company which is subject to a grant or award hereunder unless and until
such person becomes a stockholder of record with respect to such shares of
common stock or equity security.
7. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.
-14-
8. Approval of Plan. The Plan and all grants and awards made hereunder shall
be null and void if the adoption of the Plan is not approved by the affirmative
vote of a majority of the shares of common stock present in person or
represented by proxy at the 1995 annual meeting of stockholders.
-15-