ECOLAB INC.
1977 STOCK INCENTIVE PLAN
As Amended Through
November 1, 1996
1. Purposes
The purposes of the Plan are to provide additional incentive for such Key
Employees of the Company, its subsidiaries and divisions, as may be
designated for participation in the Plan, by authorizing payment of
incentive compensation in shares of Common Stock and by encouraging such
Key Employees to invest in shares of Common Stock, thereby furthering their
identity of interest with the interest of the Company's stockholders,
increasing their stake in the future growth and prosperity of the Company
and stimulating and sustaining constructive and imaginative thinking; and
to enable the Company, by offering comparable incentives, to induce the
employment and continued employment of Key Employees and to compete with
other organizations in attracting and retaining the services of competent
executives.
2. Definitions
Unless otherwise required by the context, the following terms, when used in
the Plan, shall have the meanings set forth in this section 2.
Amendment Agreement: An agreement entered into between the Corporation and
an employee of the Corporation or a Subsidiary in order to amend a Stock
Incentive agreement relating to the Plan.
Board of Directors or Board: The Board of Directors of the Company.
Committee: Such committee or committees as shall be appointed by the Board
of Directors to administer the Plan pursuant to the provisions of section
10.
Common Stock: The Common Stock of the Company, par value $1.00 per share,
or such other class of shares or other securities as may be applicable
pursuant to the provisions of section 8.
Company: Ecolab Inc., a Delaware corporation.
Fair Market Value: As applied to any date, shall be the mean of the high
and low selling prices of Common Stock, as reported on the principal stock
exchange on which such stock is listed and traded, or if the stock is not
listed on an exchange, then Fair Market Value shall be the mean of the
representative bid and asked quotations for such stock in the
over-the-counter market on such date, or if no such sales were made on
such date, on the next preceding date on which there were such sales of
Common Stock on such Exchange or in the over-the-counter market, provided,
however, that if such method of determining Fair Market Value shall not be
consistent with regulations of the Treasury Department at the time
applicable to the determination of Fair Market Value in respect of a Stock
Incentive, Fair Market Value in the case of such Stock Incentive shall be
determined in accordance with such regulations and shall mean the value as
so determined.
ISO: An Option which is intended to qualify as an incentive stock option
under Section 422A of the Internal Revenue Code.
Key Employee: An employee of the Company or of a Subsidiary, including an
officer or director who is an employee, who in the opinion of the Committee
can contribute significantly to the growth and successful operations of the
Company or a Subsidiary. The recommendation of the grant of a Stock
Incentive to an employee by the Committee shall be deemed a determination
by the Committee that such employee is a Key Employee.
Nonqualified Stock Option: An Option which is not intended to qualify as
an incentive stock option under Section 422A of the Internal Revenue Code.
Option: A Nonqualified Stock Option or an ISO.
Plan: The Ecolab Inc. 1977 Stock Incentive Plan herein set forth as the
same may from time to time be amended.
Stock Appreciation Right: A right to receive a number of shares of Common
Stock or, at the election of the Company, cash, in either event based on
the increase in the Fair Market Value of the number of shares of Common
Stock subject to such right as set forth in section 6.
Stock Award: An issuance or transfer of shares of Common Stock or an
undertaking to issue or transfer such shares in the future as set forth in
section 7.
Stock Incentive: An incentive granted under the Plan in one of the forms
provided for in section 3.
Subsidiary: A corporation or other form of business association of which
shares (or other ownership interests) having 50% or more of the voting
power are owned or controlled, directly or indirectly, by the Company.
Provided, that for the purpose of the continued effectiveness of Stock
Incentives granted to Key Employees of the Corporation or a Subsidiary
prior to the employment of such Key Employees by a joint venture entity
organized by the Corporation and Henkel KGaA ("the Joint Venture
Entities"), such Joint Venture Entities, for such initial period as the
Corporation, directly or indirectly, owns or controls shares or other
ownership interests having 20% or more of the voting power of such Joint
Venture Entity, shall be deemed to be a Subsidiary with respect to such Key
Employees who have entered into an Amendment Agreement with terms and
conditions satisfactory to the General Counsel of the Corporation.
3. Grants of Stock Incentives
(a) Subject to the provisions of the Plan, the Committee may at any time,
or from time to time, grant Stock Incentives under this Plan to, and
only to, Key Employees, provided, however, that no Stock Incentive
shall be granted to a Key Employee who at the time of such grant is a
member of the Board of Directors except by or upon the recommendation
of the Committee, or by a majority of disinterested members of the
Board as provided in paragraph (b) of section 10.
(b) Stock Incentives may be granted in the following forms:
(i) an Option, which may be an ISO or a Nonqualified Stock Option, in
accordance with section 5, or
(ii) a Stock Appreciation Right or Limited Right, in accordance with
section
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6, or
(iii) a Stock Award, in accordance with section 7, or
(iv) a combination of any of the foregoing.
4. Stock Subject to the Plan
(a) Subject to the provisions of paragraph (c) of this section 4 and of
section 8, the aggregate number of shares of Common Stock which may be
issued or transferred pursuant to Stock Incentives granted under the
Plan shall not exceed 2,382,115 shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and shares of Common
Stock held in the treasury, whether acquired by the Company
specifically for use under the Plan or otherwise, may be used, as the
Board of Directors may from time to time determine, for purposes of
the Plan, provided, however, that any shares acquired or held by the
Company for the purposes of the Plan shall be and at all times remain
treasury shares of the Company, irrespective of whether such shares
are entered in a special account for purposes of the Plan, and shall
be available for any corporate purpose unless and until transferred to
a Key Employee in accordance with the terms and conditions of a Stock
Incentive.
(c) If any shares of Common Stock subject to a Stock Incentive shall not
be issued or transferred and shall cease to be issuable or
transferable because of the termination, in whole or in part, of such
Stock Incentive or, subject to the provisions of paragraph (h) of
section 5 and paragraph (d) of section 6, for any other reason, or if
any such shares shall, after issuance or transfer, be reacquired by
the Company or a Subsidiary because of an employee's failure to comply
with the terms and conditions of a Stock Incentive, the shares not so
issued or transferred, or the shares so reacquired by the Company or a
Subsidiary, shall no longer be charged against the limitation provided
for in paragraph (a) of this section 4 and may again be made subject
to Stock Incentives.
5. Options
Stock Incentives in the form of Options shall be subject to the following
provisions:
(a) The per share Option exercise price shall be determined by the
Committee from time to time, but in no instance shall be less than the
Fair Market Value of a share of Common Stock on the date the Option
shall be granted.
(b) Each Option shall expire at such time as is determined by the
Committee, which determination shall be made at the time such Option
is granted. No ISO shall expire later than ten years from the date
such ISO shall be granted, and no Nonqualified Stock Option shall
expire more than ten years and three months from the date such
Nonqualified Stock Option shall be granted. When an Option is granted
for a term of less than the maximum term specified in the foregoing
sentence, the Committee may, with the holder's consent and at any time
prior to the expiration of the Option, extend its term for a period
which, when added to the original term of the Option, shall not be
longer than such maximum term.
(c) The Option may be exercised solely by the person to whom granted
except as hereinafter provided in the case of such person's death.
During the lifetime of the optionee, the Option and any rights and
privileges pertaining thereto shall not
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be transferred, assigned, pledged or hypothecated in any way, whether
by operation of law or otherwise, and shall not be subject to
execution, attachment or similar process.
(d) The optionee must complete twelve months of continuous employment
with the Company or a Subsidiary, or both, immediately following the
date on which the Option shall be granted before any part of the
Option may be exercised by him. Whether authorized leave of absence
or absence for military or government service shall constitute
termination of employment or interruption of continuous employment for
the purposes of the Plan shall be determined by the Committee on an
individual basis.
(e) After the completion of the required period of employment, and subject
to the terms of the Option, the Option may be exercised, in whole or
in part, from time to time during the balance of the term of the
Option. The Committee may, in its discretion, accelerate the date on
which all or any portion of an Option becomes exercisable, provided,
however, that no ISO granted prior to January 1, 1987 shall be
exercisable while there is outstanding any incentive stock option
which was granted before the granting of such ISO, to purchase stock
in the Company or in a corporation which at the date of such ISO is a
parent or subsidiary of the Company or the predecessor of any such
corporation.
(f) The Option shall terminate if and when the optionee shall cease to be
an employee of the Company or its Subsidiaries, except as follows:
(i) If employment of the optionee by the Company or its Subsidiaries
shall be terminated, upon the retirement or disability of the
optionee under a retirement, pension or disability plan approved
by the Board or the Committee, after he shall have completed
twelve months of continuous employment following the date upon
which the Option was granted, then the Option shall be
exercisable within such period as shall be set forth in the
Option grant, but not later than three years after the date of
termination of employment and not after the expiration of the
specific period fixed in the Option grant as in effect at the
time.
(ii) If the optionee shall die while in the employ of the Company or a
Subsidiary, or within three months of the termination of his
employment with the Company or its Subsidiaries after he shall
have completed twelve months of continuous employment following
the date upon which the Option was granted, then the Option shall
be exercisable within such period as shall be set forth in the
Option grant by such person or persons as shall have acquired the
optionee's rights under the Option by Will or by the laws of
descent and distribution, but not later than three years after
the date of death and not after the expiration of the specific
period fixed in the Option grant as in effect at the time.
(iii) If employment of the optionee by the Company or its Subsidiaries
shall have terminated for any reason other than those specified
in subparagraphs (f)(i) and (f)(ii) above and after he shall have
completed at least twelve months of continuous employment
following the date upon which the Option is granted, subject to
subparagraph (f)(ii) above, the Option shall be exercisable by
him only within the three months after such termination, but not
after the expiration of the term of the Option.
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(g) (i) Shares purchased under the Option shall be paid for in full, in
cash or such other forms of payment as are approved by the
Committee, at the time of the exercise of the Option as to such
shares.
(ii) The Committee may, in its sole discretion, permit an optionee to
exercise an Option (other than an ISO granted prior to May 12,
1988) by delivering to the Company a properly executed Broker
Exercise Notice in form and substance acceptable to the
Committee. This Broker Exercise Notice shall contain irrevocable
instructions from the optionee to the Company to issue to a
broker the stock certificates for the shares to be purchased
upon exercise of the Option, and the Company shall, if the
Committee decides to permit the Option to be exercised in this
manner, acknowledge to the broker that the Company consents to
such procedure. In addition, the Broker Exercise Notice shall
contain or be accompanied by irrevocable instructions from the
optionee to such broker to sell a number of shares of Common
Stock, or loan to the optionee an amount, sufficient to pay the
exercise price of the Option and any withholding obligations due
upon such exercise and to promptly deliver to the Company the
amount of such sale or loan proceeds.
(h) The Option agreements or Option grants authorized by the Plan may
contain such other provisions as the Committee shall deem advisable.
Without limiting the foregoing and if so provided in the Option, or if
so authorized by the Committee and subject to such terms and
conditions as are specified in the Option or by the Committee, the
Company may, with the consent of the holder of the Option, and at any
time or from time to time, cancel all or a portion of the Option then
subject to exercise and discharge its obligation in respect of the
Option either by payment to the holder of an amount of money equal to
the excess, if any, of the Fair Market Value, at such time or times,
of the shares subject to the portion of the Option so cancelled over
the aggregate purchase price of such shares, or by issuance or
transfer to the holder of shares of Common Stock with a Fair Market
Value, at such time or times, equal to any such excess, or by a
combination of cash and shares. The number of shares of Common Stock
subject to the Option, or portion thereof, so cancelled shall, in the
event that a payment of money or transfer of shares is made by the
Company in respect of such cancellation, be charged against the
maximum limitation set forth in paragraph (a) of section 4.
(i) Options may be granted under the Plan from time to time in
substitution for stock options held by employees of other corporations
who are about to become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation
with the Company or a Subsidiary, or the acquisition by the Company or
a Subsidiary of the assets of the employing corporation, or the
acquisition by the Company or a Subsidiary of stock of the employing
corporation as the result of which it becomes a Subsidiary. The
terms and conditions of the substitute Options so granted may vary
from the terms and conditions set forth in paragraphs (a) through (h)
of this section 5 to such extent as the Board of Directors at the time
of grant may deem appropriate to conform, in whole or in part, to the
provision of the options in substitution for which they are granted.
This paragraph shall not require the Company to grant Options under
the Plan to any such persons, nor shall it prohibit the Company from
assuming any options as a part of any acquisition, merger, or
consolidation.
(j) (i) The aggregate Fair Market Value, determined as of the date an
Option is
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granted, of the Common Stock for which a Key Employee may be
granted ISOs in any calendar year after December 31, 1980 and
prior to January 1, 1987, under all stock option plans of the
Company and its Subsidiaries shall not exceed $100,000 plus any
unused limit carryover to such year (within the meaning of
Section 422A of the Internal Revenue Code).
(ii) With respect to ISOs granted on or after January 1, 1987, the
aggregate Fair Market Value, determined as of the date an ISO is
granted, of the Common Stock with respect to which incentive
stock options (within the meaning of Section 422A of the Internal
Revenue Code) are exercisable for the first time by an optionee
during any calendar year (under the Plan and any other incentive
stock option plans of the Company and any parent corporation
(within the meaning of Section 425(e) of the Internal Revenue
Code) or Subsidiary) shall not exceed $100,000.
(k) The Committee may, with the consent of the optionee affected thereby,
accept the surrender of any outstanding Option, to the extent not
previously exercised, and the Committee may authorize the grant of new
Options in substitution therefor to the extent not previously
exercised.
6. Stock Appreciation Rights and Limited Rights
(a) Stock Appreciation Rights may be granted in connection with any Option
granted under the Plan, either at the time of the grant of such Option
or at any time thereafter during the term of the Option, or may be
granted independently of the grant of an Option.
(b) If granted in connection with an Option, Stock Appreciation Rights
shall entitle the holder of the related Option, upon exercise of the
Stock Appreciation Rights, to surrender the Option, or any portion
thereof, to the extent unexercised, and to receive a number of shares
of Common Stock, or cash, determined pursuant to paragraph (c)(iii) of
this section 6. Such Option shall, to the extent so surrendered,
thereupon cease to be exercisable. If granted independently of an
Option, Stock Appreciation Rights shall entitle the holder of the
Stock Appreciation Rights to receive a number of shares of Common
Stock, or cash, determined pursuant to paragraph (c)(iii) of this
section 6.
(c) Stock Appreciation Rights shall be subject to the following terms and
conditions and to such other terms and conditions not inconsistent
with the Plan as shall from time to time be approved by the Committee.
(i) If granted in connection with an Option, Stock Appreciation
Rights shall be exercisable at such time or times and to the
extent, but only to the extent, that the Option to which they
relate shall be exercisable. If granted independently of an
Option, Stock Appreciation Rights shall be exercisable at such
time or times as shall be determined by the Committee at the time
of the grant of the Stock Appreciation Rights but in no event
later than three months after the employment of the holder of
the Stock Appreciation Rights by the Company or a Subsidiary
shall have terminated other than by reason of death or by reason
of retirement or disability under a retirement, pension or
disability plan approved by the Board or the Committee. In the
event of termination of employment by reason of death, Stock
Appreciation Rights shall be exercisable by the
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beneficiary designated pursuant to paragraph (g) of section 11 no
later than three years after such termination of employment. In
the event of termination of employment by reason of retirement or
disability under a plan specified above, Stock Appreciation
Rights shall be exercisable no later than three years after such
termination of employment.
(ii) Stock Appreciation Rights shall in no event be exercisable
unless and until the holder of the Stock Appreciation Rights
shall have completed at least twelve months of continuous service
with the Company or a Subsidiary, or both, immediately following
the date upon which the Stock Appreciation Rights shall have been
granted. Whether authorized leaves of absence or absence for
military or government service shall constitute termination of
employment or interruption of continuous employment for purposes
of the Plan shall be determined by the Committee on an individual
basis.
(iii) Upon exercise of a Stock Appreciation Right, the holder thereof
shall be entitled to receive a number of shares equal in Fair
Market Value to the amount by which the Fair Market Value of one
share of Common Stock on the date such Stock Appreciation Right
is exercised exceeds the Fair Market Value of one share of Common
Stock on the date of grant, multiplied by the number of shares
in respect of which the Stock Appreciation Right shall have been
exercised. All or any part of the Company's obligation arising
out of an exercise of Stock Appreciation Rights may, at the
discretion of the Company, be settled by the payment of cash
equal to the aggregate value of shares of Common Stock (or
fraction of a share) that the Company would otherwise be
obligated to deliver under the preceding sentence of this section
6(c)(iii).
(d) To the extent that Stock Appreciation Rights shall be exercised, an
Option in connection with which such Stock Appreciation Rights shall
have been granted shall be deemed to have been exercised for the
purpose of the maximum limitation set forth in paragraph (a) of
section 4. In the case of Stock Appreciation Rights granted
independently of an Option, the number of shares of Common Stock in
respect of which such Stock Appreciation Rights shall be exercised
shall be charged against the maximum limitation set forth in paragraph
(a) of section 4.
(e) Stock Appreciation Rights may provide that, upon exercise of such
Stock Appreciation Rights, the shares or cash, as the case may be,
which the holder of such Stock Appreciation Rights shall be entitled
to receive shall be distributed or paid in such installments and over
such number of years as the Committee may direct, with distribution or
payment of each such installment contingent upon continued services of
the employee to the Company or a Subsidiary, or both (except for
death, disability, or retirement pursuant to the provisions of the
pension plans of the Company or a Subsidiary, or termination of
employment by the Company or with its consent) to the time for
distribution or payment of such installment.
(f) (i) For Stock Incentives granted prior to August 11, 1989:
(A) if (i) any corporation, person or other entity (other than
the Company) makes a tender or exchange offer for shares of
Common Stock pursuant to which purchases are made ("Offer"),
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(ii) the stockholders of the Company approve a definitive
agreement to merge or consolidate the Company with or into
another corporation or to sell or otherwise dispose of all
or substantially all of its assets, (iii) more than 25
percent of the Company's then outstanding Common Stock is
acquired by any person or group, or (iv) during any period
of two consecutive years, individuals who at the beginning
of such period were members of the Board cease for any
reason to constitute at least a majority thereof (unless the
election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of
at least two-thirds of the directors then still in office
who were directors at the beginning of the period), then the
date of the first purchase of Common Stock pursuant to such
Offer, or the date of any such stockholder approval, or 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 shall be the "Effective Date" of such
transaction or occurrence.
(B) the preceding section 6(f)(i)(A) shall not apply to a merger
or consolidation in which the Company is the surviving
corporation and shares of Common Stock are not converted
into or exchanged for stock, securities of any other
corporation, cash or any other thing of value and such
transactions shall have no Effective Date for purposes of
this section 6. In case of any consolidation or merger of
another corporation into the Company in which the Company is
the surviving corporation and in which there is a
reclassification or change (including a change to the right
to receive cash or other property) of the shares of Common
Stock (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or
combination, but including any change in such shares into
two or more classes or series of shares), section 8 shall
apply.
(ii) (A) For purposes of Stock Incentives granted on or after August
11, 1989, a "Change of Control" shall be deemed to have
occurred if:
(i) Any "person" as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (other
than the Company, any trustee or other fiduciary
holding securities under any employee benefit plan of
the Company, or any corporation owned, directly or
indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership
of stock of the Company), is or becomes, including
pursuant to a tender or exchange offer for shares of
Common Stock pursuant to which purchases are made
("Offer"), the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934),
directly or indirectly of securities of the Company
representing 25 percent or more of the combined voting
power of the Company's then outstanding securities,
other than in a transaction arranged or approved by the
Board of Directors prior to its occurrence; provided,
however, that if any such person
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shall become the beneficial owner, directly or
indirectly, of securities of the Company representing
34 percent or more of the combined voting power of the
Company's then outstanding securities, a Change of
Control shall be deemed to occur whether or not any or
all of such beneficial ownership is obtained in a
transaction arranged or approved by the Board prior to
its occurrence, and other than in a transaction in
which such person shall have executed a written
agreement with the Company (and approved by the Board)
on or prior to the date on which such person becomes
the beneficial owner of 25 percent or more of the
combined voting power of the Company's then outstanding
securities, which agreement imposes one or more
limitations on the amount of such person's beneficial
ownership of shares of Common Stock ("Shareholder
Agreement"), if, and so long as, such Shareholder
Agreement (or any amendment thereto approved by the
Board provided that no such amendment shall cure any
prior breach of such Shareholder Agreement or any
amendment thereto) continues to be binding on such
person and such person is in compliance (as determined
by the Board in its discretion) with the terms of such
Shareholder Agreement (including such amendment);
provided, however, that if any such person shall become
the beneficial owner directly or indirectly, of
securities of the Company representing 50 percent or
more of the combined voting power of the Company's then
outstanding securities, a Change of Control shall be
deemed to occur whether or not such beneficial
ownership was held in compliance with a binding
Shareholder Agreement.
(ii) During any period of two consecutive years (not
including any period prior to August 11, 1989),
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
an agreement with the Company to effect a transaction
which would constitute a Change of Control pursuant to
clause (i), (iii) or (iv) of this section 6(f)(ii)(A))
whose election by the Board or nomination for election
by the Company's stockholders was approved by a vote of
at least two-thirds 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 at least a majority thereof;
(iii) The stockholders of the Company approve a merger or
consolidation of the Company with any other
corporation, other than (x) 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) more than 80
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percent of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation or (y) a merger or consolidation effected
to implement a recapitalization of the Company (or
similar transaction) in which no person acquires a
percentage of the combined voting power of the
Company's then outstanding securities which would
constitute a Change of Control pursuant to section
6(f)(ii)(A)(i). In case of any consolidation or merger
of another corporation into the Company in which the
Company is the surviving corporation and in which there
is a reclassification or change (including a change to
the right to receive cash or other property) of the
shares of Common Stock (other than a change in par
value, or from par value to no par value, or as a
result of a subdivision or combination, but including
any change in such shares into two or more classes or
series of shares), section 8 shall apply.
(iv) 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 of the Company's assets.
(B) In the event a Change of Control shall be deemed to have
occurred pursuant to the foregoing section 6(f)(ii)(A), the
"Effective Date" of such Change of Control shall (1) in the
case of an Offer, be the date of the first purchase of
Common Stock pursuant to such Offer, (2) in the case of any
Change of Control (other than pursuant to an Offer) pursuant
to section 6(f)(ii)(A)(i), be the date on which public
announcement of the acquisition of the applicable triggering
percentage shall have been made, (3) in the case of a Change
of Control pursuant to section 6(f)(ii)(A)(ii), the date on
which the change in the composition of the Board shall have
occurred, (4) in the case of a Change of Control pursuant to
section 6(f)(ii)(A)(iii) or (iv), the date of the applicable
stockholder approval.
(g) (i) The Committee shall have authority to grant a limited stock
appreciation right (a "Limited Right") to the holder of any
Option granted under the Plan (the "Related LSAR Option") with
respect to all or some of the shares of Common Stock covered by
such Related LSAR Option. A Limited Right may be granted either
at the time of grant of the Related LSAR Option or any time
thereafter during its term. A Limited Right may be granted to an
optionee irrespective of whether such optionee is being granted
or has been granted a Stock Appreciation Right under this section
6. A Limited Right may be exercised only during the sixty-day
period beginning on an Effective Date (as defined in section
6(f)(i)(A) or section 6(f)(ii)(B) hereof). Each Limited Right
shall be exercisable only if, and to the extent that, the Related
LSAR Option is exercisable and, in the case of a Limited Right
granted in respect of an ISO, only when the Fair Market Value per
share of Common Stock exceeds the option price per share.
Notwithstanding the provisions of the two immediately preceding
sentences, no Limited Right may be exercised until the
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expiration of six (6) months from the date of grant of the
Limited Right. Upon the exercise of a Limited Right, such
Related LSAR Option and any Stock Appreciation rights granted in
connection therewith shall cease to be exercisable to the extent
of the shares of Common Stock with respect to which such Limited
Right is exercised, but shall be considered to have been
exercised, to that extent for purposes of determining the number
of shares of Common Stock available for the grant of further
Options and Stock Appreciation Rights pursuant to the Plan. Upon
the exercise or termination of a Related LSAR Option, the Limited
Right with respect to such Related LSAR Option shall terminate to
the extent of the shares of Common Stock with respect to which
the Related LSAR Option was exercised or terminated.
(ii) Upon the exercise of a Limited Right, the holder thereof shall
receive in cash whichever of the following amounts is applicable:
(A) in the case of exercise by reason of the occurrence of an
Offer (as defined in section 6(f)(i)(A) or section
6(f)(ii)(A)(i) hereof), an amount equal to the Offer Spread
(as defined in section 6(g)(iv) hereof);
(B) in the case of exercise by reason of stockholder approval of
an agreement described in section 6(f)(i)(A)(ii) or section
6(f)(ii)(A)(iii) or (iv), an amount equal to the Merger
Spread (as defined in section 6(g)(vi) hereof);
(C) in the case of exercise by reason of an acquisition of
Common Stock described in section 6(f)(i)(A)(iii) or section
6(f)(ii)(A)(i) if other than pursuant to an Offer, an amount
equal to the Acquisition Spread (as defined in section
6(g)(viii) hereof); or
(D) in the case of exercise by reason of the change in
composition of the Board of Directors described in section
6(f)(i)(A)(iv) or section 6(f)(ii)(A)(ii), an amount equal
to the Spread (as defined in section 6(g)(ix) hereof).
Notwithstanding the foregoing, in the case of a Limited Right
granted in respect of an ISO, the holder may not receive an
amount in excess of such amount as will enable such option to
qualify as an ISO.
(iii) The term "Offer Price per Share" as used in this section 6 shall
mean, with respect to the exercise of any Limited Right by reason
of the occurrence of an Offer, the greater of (1) the highest
price per share of Common Stock paid in any Offer, which Offer is
in effect at any time during the sixty-day period ending on the
date on which such Limited Right is exercised, or (2) the highest
Fair Market Value per share of the Common Stock during such
sixty-day period. Any securities or property which are part or
all of the consideration paid for shares of Common Stock in the
Offer shall be valued in determining the Offer Price per Share at
the higher of (A) the valuation placed on such securities or
property by the corporation, person or other entity making such
Offer or (B) the valuation placed on such securities or property
by the Committee.
(iv) The term "Offer Spread" as used in this section 6 shall mean an
amount
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equal to the product computed by multiplying (1) the excess of
(A) the Offer Price per Share over (B) the option price per share
of Common Stock at which the Related LSAR Option is exercisable,
by (2) the number of shares of Common Stock with respect to which
such Limited Right is being exercised.
(v) The term "Merger Price per Share" as used in this section 6 shall
mean, with respect to the exercise of any Limited Right by reason
of stockholder approval of an agreement described in section
6(f)(i)(A)(ii) or in section 6(f)(ii)(A)(iii), the greater of (1)
the fixed or formula price for the acquisition of shares of
Common Stock specified in such agreement if such fixed or formula
price is determinable on the date on which such Limited Right is
exercised, and (2) the highest Fair Market Value per share of
Common Stock during the sixty-day period ending on the date on
which such Limited Right is exercised.
(vi) The term "Merger Spread" as used in this section 6 shall mean an
amount equal to the product computed by multiplying (1) the
excess of (A) the Merger Price per Share over (B) the option
price per share of Common Stock at which the Related LSAR option
is exercisable, by (2) the number of shares of Common Stock with
respect to which such Limited Right is being exercised.
(vii) The term "Acquisition Price per Share" as used in this section 6
shall mean, with respect to the exercise of any Limited Right by
reason of an acquisition of Common Stock described in section
6(f)(i)(A)(iii) or in section 6(f)(ii)(A)(i) if other than
pursuant to an Offer, the greater of (1) the highest price per
share shown on the Statement of Schedule 13D or amendment thereto
filed by the holder of 25 percent or more of the Company's Common
Stock which gives rise to the exercise of such Limited Right, and
(2) the highest Fair Market Value per share of Common Stock
during the sixty-day period ending on the date the Limited Right
is exercised.
(viii) The term "Acquisition Spread" as used in this section 6 shall
mean an amount equal to the product computed by multiplying (1)
the excess of (A) the Acquisition Price per Share over (B) the
option price per share of Common Stock at which the Related LSAR
Option is exercisable, by (2) the number of shares of Common
Stock with respect to which such Limited Right is being
exercised.
(ix) The term "Spread" as used in this section 6 shall mean, with
respect to the exercise of any Limited Right by reason of a
change in the composition of the Board described in section
6(f)(i)(A)(iv) or in section 6(f)(ii)(A)(ii), an amount equal to
the product computed by multiplying (1) the excess of (A) the
highest Fair Market Value per share of Common Stock during the
sixty-day period ending on the date the Limited Right is
exercised over (B) the option price per share of Common Stock at
which the Related LSAR Option is exercisable, by (2) the number
of shares of Common Stock with respect to which the Limited Right
is being exercised.
(x) Notwithstanding any other provision of the Plan, no Stock
Appreciation Right granted hereunder may be exercised at a time
when any Limited
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Right held by the holder of such Stock Appreciation Right may be
exercised.
7. Stock Awards
Stock Incentives in the form of Stock Awards shall be subject to the
following provisions:
(a) For the purposes of the Plan, in determining the value of a Stock
Award, all shares of Common Stock subject to such Stock Award shall be
valued at not less than 100% of the Fair Market Value of such shares
on the date such Stock Award is granted, regardless of whether or when
such shares are issued or transferred to the Key Employee and whether
or not such shares are subject to restrictions which affect their
value.
(b) Shares of Common Stock subject to a Stock Award may be issued or
transferred to a Key Employee at the time the Stock Award is granted,
or at any time subsequent thereto, or in installments from time to
time, as the Committee shall determine. Any amount payable in shares
of Common Stock under the terms of a Stock Award may, at the
discretion of the Company, be paid in cash on each date on which
delivery of shares would otherwise have been made, in an amount equal
to the Fair Market Value, on such date, of the shares which would
otherwise have been delivered.
(c) A Stock Award shall contain such terms and conditions as the Committee
shall determine with respect to payment or forfeiture of all or any
part of the Stock Award upon termination of employment.
(d) A Stock Award shall be subject to such other terms and conditions,
including, without limitation, restrictions on sale or other
disposition of the Stock Award or of the shares issued or transferred
pursuant to such Stock Award, as the Committee shall determine,
provided, however, that upon the issuance or transfer of shares
pursuant to a Stock Award, the recipient shall, with respect to such
shares, be and become a stockholder of the Company fully entitled to
receive dividends, to vote and exercise all other rights of a
stockholder except to the extent otherwise provided in the Stock
Award. Each Stock Award shall be evidenced by a written instrument in
such form as the Committee shall determine, provided the Stock Award
is consistent with the Plan and incorporates it by reference.
8. Adjustment Provisions
In the event that any recapitalization, or reclassification, split-up or
consolidation of shares of Common Stock shall be effected, or the
outstanding shares of Common Stock are, in connection with a merger or
consolidation of the Company or a sale by the Company of all or a part of
its assets, exchanged for a different number or class of shares of stock or
other securities of the Company or for shares of the stock or other
securities of any other corporation, or new, different or additional shares
or other securities of the Company or of another corporation are received
by the holder of Common Stock or any distribution is made to the holders of
Common Stock other than a cash dividend, (a) the number and class of shares
or other securities that may be issued or transferred pursuant to Stock
Incentives, (b) the number and class of shares or other securities which
have not been issued or transferred under outstanding Stock Incentives, (c)
the purchase price to be paid per share under outstanding Options, and (d)
the price to be paid per share by the Company or a Subsidiary for shares or
other securities issued or transferred pursuant to Stock Incentives which
are subject to a right of the Company or a Subsidiary to reacquire such
share or other securities, shall in each case be equitably adjusted.
9. Term
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The Plan shall become effective on the date it is approved by the
stockholders of the Company. No Stock Incentives shall be granted under
the Plan after May 31, 1993.
10. Administration
(a) The Plan shall be administered by a Committee which shall consist of
not less than three directors of the Company designated by the Board
of Directors, provided, however, that no director shall be designated
as or continue to be a member of the Committee unless he shall at the
time of designation and service be a "disinterested person" within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (or
any successor provision at the time in effect). In no event shall a
member of the Committee be eligible to be granted a Stock Incentive
while serving on the Committee. Grants of Stock Incentives may be
recommended or granted either in or without consultation with
employees, but, anything in the Plan to the contrary notwithstanding,
the Committee shall have full authority to act in the matter of
selection of all Key Employees who are members of the Board of
Directors and in recommending Stock Incentives to be granted to them.
(b) The Board of Directors may delegate to the Committee any or all of its
authority under the Plan, including the authority to award Stock
Incentives, except its authority to amend or discontinue the Plan.
Any powers conferred on the Committee by this section 10 or by any
other provision of the Plan shall, to the extent such authority shall
not have been so delegated by the Board of Directors, be exercised by
the Board, provided, however, that with respect to the participation
in the Plan of any director, unless his participation shall have been
recommended by the Committee, a majority of the members of the Board
and a majority of its members acting in the matter shall, at the time
so acting, be "disinterested persons" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 (or any successor provision
at the time in effect).
(c) The Committee may establish such rules and regulations, not
inconsistent with the provisions of the Plan, as it deems necessary to
determine eligibility to participate in the Plan and for the proper
administration of the Plan, and may amend or revoke any rule or
regulation so established. The Committee may make such determinations
and interpretations under or in connection with the Plan as it deems
necessary or advisable. All such rules, regulations, determinations
and interpretations shall be binding and upon their and respective
legal representatives, beneficiaries, successors and assigns and upon
all other persons claiming under or through any of them.
(d) Any action required or permitted to be taken by the Committee under
the Plan shall require the affirmative vote of a majority of all the
members of the Committee. The Committee may act by written
determination instead of by affirmative vote at a meeting, provided
that any written determination shall be signed by all of the members
of the Committee, and any such written determination shall be as fully
effective as a majority vote at a meeting.
(e) Members of the Board of Directors and members of the Committee acting
under the Plan shall be fully protected in relying in good faith upon
the advice of counsel and shall incur no liability except for gross
negligence or willful misconduct in the performance of their duties.
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11. General Provisions
(a) Nothing in the Plan nor in any instrument executed pursuant thereto
shall confer upon any employee any right to continue in the employ of
the Company or a Subsidiary or shall affect the right of the Company
or of a Subsidiary to terminate the employment of any employee with or
without cause.
(b) No shares of Common Stock shall be issued or transferred pursuant to a
Stock Incentive unless and until all legal requirements applicable to
the issuance or transfer of such shares have, in the opinion of
counsel to the Company, been complied with. In connection with any
such issuance or transfer, the person acquiring the shares shall, if
requested by the Company, give assurances satisfactory to counsel to
the Company that the shares are being acquired for investment and not
with a view to resale or distribution thereof and assurances in
respect of such other matters as the Company or Subsidiary may deem
desirable to assure compliance with all applicable legal requirements.
(c) No employee (individually or as a member of a group), and no
beneficiary or other person claiming under or through him, shall have
any right, title or interest in or to any shares of Common Stock
allocated or reserved for the purposes of the Plan or subject to any
Stock Incentive except as to such shares of Common Stock, if any, as
shall have been issued or transferred to him.
(d) The Company or a subsidiary may, with the approval of the Committee,
enter into an agreement or other commitment to grant a Stock Incentive
in the future to a person who is or will be a Key Employee at the time
of grant, and, notwithstanding any other provision of the Plan, any
such agreement or commitment shall not be deemed the grant of a Stock
Incentive until the date on which the Committee takes action to
implement such agreement or commitment.
(e) In the case of a grant of a Stock Incentive to any employee of a
Subsidiary, such grant may, if the Committee so directs, be
implemented by the Company issuing or transferring the shares, if any,
covered by the Stock Incentive to the Subsidiary, for such lawful
consideration as the Committee may specify, upon the condition or
understanding that the Subsidiary will transfer the shares to the
employee in accordance with the terms of the Stock Incentive specified
by the Committee pursuant to the provisions of the Plan.
Notwithstanding any other provision hereof, such Stock Incentive may
be issued by and in the name of the Subsidiary and shall be deemed
granted on the date it is approved by the Committee, on the date it is
delivered by the Subsidiary, or on such other date between such two
dates, as the Committee shall specify.
(f) (i) The Company or a Subsidiary may make such provisions as it may
deem appropriate for the withholding of any taxes which the
Company or Subsidiary determines it is required to withhold in
connection with any Stock Incentive.
(ii) With respect to any withholding tax obligation which may arise in
connection with the exercise of a Nonqualified Stock Option, in
connection with a disqualifying disposition of stock received
upon the exercise of an Incentive Stock Option or in connection
with the receipt of, or the lapse or termination of restrictions
imposing a risk of forfeiture with respect to, a Stock Award, the
Committee may, in its discretion and subject to such rules as the
Committee may adopt, permit a Key Employee to satisfy, in whole
or in part, such withholding tax obligation
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by electing to have the Corporation withhold from the shares of
Common Stock to be issued upon exercise of the Nonqualified Stock
Option, to be issued in connection with the exercise of an
Incentive Stock Option, to be issued in connection with the grant
of a Stock Award or released in connection with the lapse or
termination of restrictions imposing a risk of forfeiture on all
or a part of a Stock Award or by electing to deliver to the
Corporation already-owned shares of Common Stock, in any case
having a Fair Market Value, on the date such tax is determined
under the Internal Revenue Code (the "Tax Date"), no greater than
the amount necessary to satisfy the withholding amount due. A
Key Employee's election to have the Corporation withhold shares
of Common Stock or deliver already-owned shares of Common Stock
is irrevocable and is subject to the consent or disapproval of
the Committee.
(g) No Stock Incentive and no rights under the Plan, contingent or
otherwise, shall be assignable or subject to any encumbrance, pledge
or charge of any nature except that, under such rules and regulations
as the Committee may establish, a beneficiary may be designated in
respect of a Stock Incentive in the event of the death of the holder
of such Stock Incentive and except, also, that if such beneficiary
shall be the executor or administrator of the estate of the holder of
such Stock Incentive, any rights in respect of such Stock Incentive
may be transferred to the person or persons or entity (including a
trust) entitled thereto under the Will of the holder of such Stock
Incentive or, in case of intestacy, under the laws relating to
intestacy.
(h) Nothing in the Plan is intended to be a substitute for, or shall
preclude or limit the establishment or continuation of, any other
plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of
employees which the Company or any Subsidiary now has or may hereafter
lawfully put into effect, including, without limitation, any
retirement, pension, insurance, stock purchase, incentive compensation
or bonus plan.
(i) The place of administration of the Plan shall conclusively be deemed
to be within the State of Minnesota and the validity, construction,
interpretation and administration of the Plan and of any rules and
regulations or determinations or decisions made thereunder, and the
rights of any and all persons having or claiming to have any interest
therein or thereunder, shall be governed by, and determined
exclusively and solely in accordance with, the laws of the State of
Minnesota. Without limiting the generality of the foregoing, the
period within which any action arising under or in connection with the
Plan must be commenced, shall be governed by the laws of the State of
Minnesota, irrespective of the place where the act or omission
complained of took place and of the residence of any party to such
action and irrespective of the place where the action may be brought.
12. Amendment or Discontinuance of Plan
(a) The Plan may be amended by the Board of Directors at any time,
provided that, without the approval of the stockholders of the
Company, no amendment shall be made which
(i) increases the aggregate number of shares of Common Stock that may
be issued or transferred pursuant to Stock Incentives as provided
in
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paragraph (a) of section 4,
(ii) amends the provisions of paragraph (a) of section 10 with respect
to eligibility and disinterest of a majority of members of the
Board of Directors,
(iii) permits any person who is not determined to be a Key Employee at
the time to be granted a Stock Incentive,
(iv) amends the provisions of paragraph (a) of section 5 or paragraph
(a) of section 7 to permit shares to be valued or to be optional
at less than 100% of Fair Market Value,
(v) amends section 9 to extend the term of the Plan, or
(vi) amends this section 12.
(b) The Board of Directors may by resolution adopted by a majority of the
entire Board of Directors discontinue the Plan.
(c) No amendment or discontinuance of the Plan by the Board of Directors
or the stockholders of the Company shall adversely affect, without the
consent of the holder, any Stock Incentive theretofore granted.
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