SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Fourth Shift Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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FOURTH SHIFT CORPORATION
TWO MERIDIAN CROSSINGS
MINNEAPOLIS, MN 55423
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 4, 1999
TO THE SHAREHOLDERS OF FOURTH SHIFT CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of Fourth
Shift Corporation (the "Company") will be held on Tuesday, May 4, 1999, at the
Marriott City Center, 30 South Seventh Street, Minneapolis, Minnesota 55402 at
3:30 p.m., CST, for the following purposes:
1. To elect two directors.
2. To increase the number of shares of common stock reserved for
issuance under the Company's 1993 Stock Incentive Plan by 750,000
shares.
3. To transact such other business as may properly come before the
meeting.
Only holders of record of the Company's Common Stock at the close of
business on March 26, 1999 will be entitled to receive notice of and to vote at
the meeting or any adjournment thereof.
You are cordially invited to attend the meeting. WHETHER OR NOT YOU PLAN
TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you
later desire to revoke your proxy, you may do so at any time before it is
exercised.
BY ORDER OF THE BOARD OF DIRECTORS
Marion Melvin Stuckey, Chairman of the Board
Minneapolis, Minnesota
April 1, 1999
---------------------
IMPORTANT - PLEASE MAIL YOUR PROXY CARD PROMPTLY
IN ORDER THAT THERE MAY BE A PROPER REPRESENTATION
AT THE MEETING, YOU ARE URGED, WHETHER YOU OWN ONE
SHARE OR MANY, TO COMPLETE, SIGN AND MAIL YOUR PROXY.
---------------------
FOURTH SHIFT CORPORATION
Two Meridian Crossings
Minneapolis, MN 55423
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
May 4, 1999
This Proxy Statement is furnished in connection with the solicitation of
the enclosed proxy by the Board of Directors of Fourth Shift Corporation (the
"Company") for use at the Annual Meeting of Shareholders to be held on May 4,
1999, at 3:30 p.m., CST, at the Marriott City Center, 30 South Seventh Street,
Minneapolis, Minnesota 55402 and any adjournments thereof (the "Annual
Meeting"). Expenses in connection with the solicitation of proxies will be paid
by the Company. Proxies are being solicited primarily by mail, but, in
addition, officers and regular employees of the Company who will receive no
additional compensation for their services may solicit proxies by telephone,
facsimile or in person. This Proxy Statement and form of proxy enclosed are
being mailed to shareholders on or about April 1, 1999.
Those shares of the Company's Common Stock, $.01 par value ("Common
Stock"), represented by proxies in the form solicited will be voted in the
manner directed by the holder of such shares, and, if no direction is made, such
shares will be voted for the election of the nominees for director named in this
Proxy Statement and for the approval of the other proposal discussed herein. If
a shareholder abstains from voting as to any matter, then the shares held by
such shareholder shall be deemed present at the meeting for purposes of
determining a quorum and for purposes of calculating the vote with respect to
such matter, but shall not be deemed to have been voted in favor of such matter.
If a broker returns a "nonvote" proxy, indicating a lack of authority to vote on
such matter, then the shares covered by such nonvote shall be deemed present at
the meeting for purposes of determining a quorum but shall not be deemed to be
represented at the meeting for purposes of calculating the vote with respect to
such matter. Proxies may be revoked at any time before being exercised by
delivery to the Secretary of the Company of a written notice of termination of
the proxies' authority or a duly executed proxy bearing a later date.
A copy of the Company's Annual Report for the year ended December 31, 1998
is being furnished to each shareholder with this Proxy Statement.
Only the holders of the Common Stock whose names appear of record on the
Company's books at the close of business on March 26, 1999 will be entitled to
vote at the Annual Meeting. At the close of business on March 26, 1999, a total
of 10,304,277 shares of Common Stock was outstanding, each share being entitled
to one vote.
ITEM 1--ELECTION OF DIRECTORS
NOMINEES
The Company's Articles of Incorporation provide for a "classified board" of
directors. The number of members of the Board of Directors is currently set at
seven, and the directors are divided into Class A (consisting of two directors),
Class B (consisting of two directors) and Class C (consisting of three
directors). Jimmie H. Caldwell and Mark W. Sheffert are the Class B directors
whose terms expire at the Annual Meeting. The Board of Directors has nominated
Messrs. Caldwell and Sheffert for reelection to the Board of Directors at the
Annual Meeting for terms expiring at the annual meeting in 2002. The other
directors of the Company will continue in office for their existing terms.
Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect Messrs. Caldwell and Sheffert. If a shareholder of
record returns a proxy withholding authority to vote the proxy with respect to
any of the nominees, then the shares of the Common Stock covered by such proxy
shall be deemed present at the Annual Meeting for purposes of determining a
quorum and for purposes of calculating the vote with respect to such nominee or
nominees, but shall not be deemed to have been voted for such nominee or
nominees. The affirmative vote of a majority of the outstanding shares of the
Common Stock is necessary to elect each nominee. Cumulative voting is not
permitted in the election of directors. In the unlikely event that any of the
nominees is not a candidate for election at the Annual Meeting, the persons
named in the accompanying form of proxy will vote for such other persons as the
Board of Directors may designate. The Board of Directors has no reason to
believe that any nominee will not be a candidate for election.
The following information is furnished with respect to each nominee and
director as of February 28, 1999:
PRINCIPAL OCCUPATION AND BUSINESS
NAME AGE EXPERIENCE FOR PAST FIVE YEARS
---- --- -----------------------------------------------
NOMINEE DIRECTORS: CLASS B - TERM EXPIRING 2002
Jimmie H. Caldwell . . . 59 Mr. Caldwell has been President, Chief
Operating Officer and a Director of the Company
since 1984. Prior to that time, Mr. Caldwell
served in various positions at Control Data
Corporation ("CDC"), a multinational computer
hardware, peripherals and services company,
from 1964 to 1984 and held the position of Vice
President of Operations for CDC's Peripheral
Products Company when he left to join the
Company.
Mark W. Sheffert . . . . 51 Mr. Sheffert has been a director of the Company
since April 1998. He is the founder, and
Chairman and Chief Executive Officer, of
Manchester Companies, Inc., a Minneapolis-based
private investment banking and management
advisory firm, since January 1994. Mr.
Sheffert also serves on the Board of Directors
of Telident Inc., Medical Graphics Corporation,
and LifeRate Systems, Inc.
-2-
INCUMBENT: CLASS A - TERM EXPIRING 2001
Marion Melvin Stuckey. . 60 Mr. Stuckey is the founder of the Company and
has been the Chief Executive Officer and
Chairman of the Company since 1982. Prior to
forming the Company, Mr. Stuckey was an
executive officer of CDC from 1975 to 1982.
Prior to that Mr. Stuckey served in various
sales, marketing and management positions at
IBM from 1960 to 1975. Mr. Stuckey also serves
on the Board of Directors of ULTRADATA
Corporation, a computer software company
headquartered in California.
Michael J. Adams . . . . 53 Mr. Adams has been a Director of the Company
since 1984. He has been a senior partner of
Adams & Cesario, P.A., a law firm engaged in a
general business practice in Minneapolis, for
more than five years.
INCUMBENT DIRECTORS: CLASS C - TERM EXPIRING 2000
Anton J. Christianson. . 46 Mr. Christianson has been a Director of the
Company since 1984. He has been a principal of
Cherry Tree Investments, a venture capital
management firm, for more than five years. Mr.
Christianson also serves on the Board of
Directors of Transport Corporation of America,
TRO Learning, and Peoples Educational Holdings.
Steve J. Lair. . . . . . 52 Mr. Lair has been a director of the Company
since April 1997. He has been Senior Vice
President of Sales and Marketing and Service of
NEC Computer Corporation since March 1998. He
was Senior Vice President Marketing and Sales
of Acer America Corporation from March 1997
until March 1998; Vice President, Worldwide
Marketing and Sales, Personal Productivity
Products, of Texas Instruments, Inc. from April
1995 to March 1997; Vice President of
Marketing, Toshiba America Information Systems
from April 1992 to April 1995; and Vice
President, Dataquest Microcomputer Systems
Group from April 1988 to April 1992.
Robert M. Price. . . . . 68 Mr. Price has been a director of the Company
since 1990. He has been President of PSV, Inc.,
a technology consulting business located in
Burnsville, Minnesota, since 1990. From 1961
until 1990 he served in various executive
positions, including Chairman and Chief
Executive Officer, with CDC. Mr. Price also
serves on the Board of Directors of
International Multifoods Corporation,
Tupperware Incorporated, Affinity Technology,
Inc., and Public Service Company of New Mexico.
MEETINGS
During the fiscal year ended December 31, 1998, the Board of Directors of
the Company held five meetings. All incumbent directors attended at least 75%
of the meetings of the Board, and all incumbent directors attended at least 75%
of those meetings of the committees of which they were members.
COMMITTEES
The Board of Directors of the Company has an Audit Committee which met four
times and a Compensation Committee which met four times during 1998. The Audit
Committee reviews the Company's arrangements with its independent public
accountants, its internal accounting policies and the substance of its audits.
The Compensation
-3-
Committee determines policy with respect to compensation to executive
management, specifically reviews the performance and establishes the
compensation to the Company's Chief Executive Officer, reviews compensation to
directors, and administers the Company's stock-based employee benefit plans.
Messrs. Adams and Price (Chairperson) are members of the Compensation Committee.
Messrs. Christianson (Chairperson), Lair and Sheffert are members of the Audit
Committee.
DIRECTOR COMPENSATION
For the fiscal year ended December 31, 1998, directors who were not also
officers or employees of the Company were entitled to receive an annual fee of
$4,000, payable in equal quarterly installments, plus $1,200 per Board meeting
and $500 per committee meeting attended. All directors are entitled to
participate in the Company's 1994 Employee Stock Purchase Plan and to contribute
all (subject to limitations in such plan), or any portion, of the directors fees
they receive to that plan. During 1998, Messrs. Adams, Christianson, Lair,
Price and Sheffert elected to participate in the Employee Stock Purchase Plan
and received 3,449, 3,516, 3,077, 3,010 and 2,577 shares, respectively, for
directors fees contributed to such plan.
Directors who are not also officers or employees of the Company also
receive stock options to purchase 3,500 shares of Common Stock under the
Company's 1993 Stock Incentive Plan at the time of the annual meeting of
shareholders. New directors receive an option to purchase 5,000 shares at the
first annual meeting after they are elected. In accordance with such plan, each
of Messrs. Adams, Christianson, Lair and Price received options to purchase
3,500 shares of Common Stock, and Mr. Sheffert received an option to purchase
5,000 shares of Common Stock, at an exercise price of $3.3125 per share on May
6, 1998.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS ELECT THE NOMINEES
NAMED HEREIN TO THE TERMS AS DIRECTORS OF THE COMPANY DESCRIBED ABOVE. THE
PERSONS NAMED IN THE ACCOMPANYING PROXY INTEND TO VOTE THE PROXIES HELD BY THEM
IN FAVOR OF SUCH NOMINEES, UNLESS OTHERWISE DIRECTED. IF NO INSTRUCTION IS
GIVEN, THE ACCOMPANYING PROXY WILL BE VOTED FOR SUCH ELECTION. THE AFFIRMATIVE
VOTE OF A MAJORITY OF THE SHARES OF COMMON STOCK OUTSTANDING AS OF THE RECORD
DATE IS REQUIRED FOR THE ELECTION OF EACH DIRECTOR.
-4-
ITEM 2--PROPOSAL TO APPROVE AMENDMENT TO 1993 STOCK INCENTIVE PLAN
INTRODUCTION
On January 19, 1999, the Company's Board of Directors approved, subject to
shareholder approval, an amendment to the Company's 1993 Stock Incentive Plan
(the "1993 Plan") that will increase the number of shares reserved for issuance
under awards granted thereunder by 750,000 shares. Before the proposed
amendment, a total of 2,250,000 shares of Common Stock was reserved for issuance
under the 1993 Plan. At December 31, 1998, there remained 136,205 shares
available for future awards under the 1993 Plan.
The Company uses stock options as its principal long-term incentive to
executives. In October 1998, the Company's Compensation Committee, as part of
its review of executive compensation, determined that the historical operation
of the 1993 Plan had not provided executives with significant benefits or
incentive to perform. As a result, and as part of a special long-term incentive
program, the committee granted stock options and restricted stock for an
aggregate of 720,000 shares of Common Stock in October 1998, such options and
restricted stock vesting in the future and accelerating only upon achievement of
certain defined performance goals.
During late 1998, the Compensation Committee reviewed the size of the 1993
Plan in the context of longer term compensation objectives. Although the
Compensation Committee concluded that the special incentive program it had
created provided adequate incentive for executives for the near term, it
determined that there was an inadequate number of shares in the 1993 Plan to
meet the Company's objectives for new employees in 1999 and longer term
incentive compensation needs. Accordingly, the Compensation Committee
recommended in December, and the Board of Directors approved in January 1999, an
increase in the 1993 Plan by 750,000 shares.
SUMMARY OF THE 1993 PLAN
The Company's 1993 Plan was initially approved by the Company's Board of
Directors in April 1993 and by shareholders of the Company in June 1993. The
1993 Plan will terminate in June 2003. All employees, officers, consultants or
independent contractors providing services to the Company and its subsidiaries
and affiliates in which the Company has a significant equity interest are
eligible to receive awards under the 1993 Plan. The 1993 Plan permits the
granting of: (a) stock options, including "incentive stock options" as defined
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")
and options which do not qualify as incentive stock options ("non-qualified
stock options"); (b) stock appreciation rights ("SARs"); (c) restricted stock
and restricted stock units; (d) performance awards; (e) dividend equivalents;
and (f) other awards valued in whole or in part by reference to or otherwise
based upon the Company's stock ("other stock-based awards").
The Compensation Committee administers the 1993 Plan, except with respect
to the part of the 1993 Plan that relates to awards to non-employee directors,
which is administered by the Board of Directors. The Compensation Committee has
the authority to determine when and to whom awards will be granted and the type,
amount, form of payment and other terms and conditions of each award, consistent
with the provisions of the 1993 Plan. No participant may be granted stock
options and any other award, the value of which is based solely on an increase
in the price of the Company's Common Stock, relating to more than 100,000 shares
in the aggregate in any calendar year. Stock options granted under the 1993
Plan may not have an exercise price less than 100% of the fair market value of
the Company's Common Stock on the date of grant.
Under the 1993 Plan, non-employee directors are automatically granted
non-qualified stock options to purchase 3,500 shares on the date of the annual
meeting of directors in each year in which they remain a director of the
Company. New directors receive an option to purchase 5,000 shares at the first
annual meeting after they are elected. All of such options have an exercise
price equal to the fair market value on the date of grant, vest in annual
increments of 25% of the shares subject to the option commencing one year from
the date of grant, and expire five years from the date of grant.
-5-
The terms of these options may not be altered without a shareholder vote.
Non-employee directors may not participate in the 1993 Plan except through the
formula provisions described above.
The 1993 Plan generally permits the Board of Directors to amend or
terminate the 1993 Plan at any time, except that prior shareholder approval will
be required for any amendment to the 1993 Plan that (a) requires shareholder
approval under the rules or regulations of the National Association of
Securities Dealers, Inc. or any applicable securities exchange or (b) would
cause the Company to be unable, under the Code, to grant incentive stock options
under the 1993 Plan.
FEDERAL TAX CONSEQUENCES
Awards of stock options and restricted stock under the 1993 Plan generally
will result in the following tax consequences under current United States
federal income tax laws.
INCENTIVE STOCK OPTIONS. A recipient will realize no taxable income, and
the Company will not be entitled to any related deduction, at the time an
incentive stock option is granted under the 1993 Plan. If certain statutory
employment and holding period conditions are satisfied before the recipient
disposes of shares acquired pursuant to the exercise of such an option, then no
taxable income will result upon the exercise of such option and the Company will
not be entitled to any deduction in connection with such exercise. Upon
disposition of the shares after expiration of the statutory holding periods, any
gain or loss realized by a recipient will be a capital gain or loss. The
Company will not be entitled to a deduction with respect to a disposition of the
shares by a recipient after the expiration of the statutory holding periods.
Except in the event of death, if shares acquired by a recipient upon the
exercise of an incentive stock option are disposed of by such recipient before
the expiration of the statutory holding periods (a "disqualifying disposition"),
such recipient will be considered to have realized as compensation, taxable as
ordinary income in the year of disposition, an amount, not exceeding the gain
realized on such disposition, equal to the difference between the exercise price
and the fair market value of the shares on the date of exercise of the option.
The Company will be entitled to a deduction at the same time and in the same
amount as the recipient is deemed to have realized ordinary income. Generally,
any gain realized on the disposition in excess of the amount treated as
compensation or any loss realized on the disposition will constitute capital
gain or loss, respectively. If the recipient pays the option price with shares
that were originally acquired pursuant to the exercise of an incentive stock
option and the statutory holding periods for such shares have not been met, the
recipient will be treated as having made a disqualifying disposition of such
shares, and the tax consequences of such disqualifying disposition will be as
described above.
NON-QUALIFIED STOCK OPTIONS. A recipient will realize no taxable income,
and the Company will not be entitled to any related deduction, at the time a
non-qualified stock option is granted under the 1993 Plan. Generally, at the
time of exercise of a non-qualified stock option, the recipient will realize
ordinary income, and the Company will be entitled to a deduction, equal to the
excess of the fair market value of the shares on the date of exercise over the
option price. Upon disposition of the shares, any additional gain or loss
realized by the recipient will be taxed as a capital gain or loss.
RESTRICTED STOCK. Unless a recipient files an election to be taxed under
Section 83(b) of the Code, generally, (a) the recipient will not realize income
upon the grant of restricted stock, (b) the recipient will realize ordinary
income, and the Company will be entitled to a corresponding deduction, when the
restrictions have been removed or expire and (c) the amount of such ordinary
income and deduction will be the fair market value of the restricted stock on
the date the restrictions are removed or expire. If the recipient files an
election to be taxed under Section 83(b) of the Code, the tax consequences to
the recipient and the Company will be determined as of the date of the grant of
the restricted stock rather than as of the date of the removal or expiration of
the restrictions. When the recipient disposes of the shares, the difference
between the amount received upon such disposition and the fair market value of
such shares on the date the recipient realized ordinary income will be treated
as a capital gain or loss.
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THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS APPROVE THE
PROPOSAL TO AMEND THE 1993 PLAN. THE PERSONS NAMED IN THE ACCOMPANYING PROXY
INTEND TO VOTE THE PROXIES HELD BY THEM IN FAVOR OF SUCH PROPOSAL, UNLESS
OTHERWISE DIRECTED. IF NO INSTRUCTION IS GIVEN, THE ACCOMPANYING PROXY WILL BE
VOTED IN FAVOR OF THE PROPOSAL. AN AFFIRMATIVE VOTE OF THE HOLDERS OF A
MAJORITY OF THE SHARES OF COMMON STOCK OUTSTANDING AS OF THE RECORD DATE IS
REQUIRED FOR THE APPROVAL OF THE PROPOSAL.
EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation policies are recommended and
administered by the Compensation Committee of the Board of Directors. During
1998, the Compensation Committee consisted of Michael Adams and Robert Price,
independent, outside directors.
EXECUTIVE COMPENSATION POLICIES
The Board of Directors has adopted the following standards and policies
relative to setting executive compensation:
- Total compensation should include a significant performance component
in addition to salary.
- Salary should have a relationship to salaries in industry peer groups.
- Total compensation should be adequate to attract, motivate and retain
quality talent.
- Performance measures should relate to key characteristics accepted
within the software/high technology industry.
- Performance should be measured over time periods adequate to evaluate
a particular executive's contribution to results.
- Stock options and other awards should be integrated with other
elements of compensation to formulate a package that helps to align
executive compensation with shareholder interests.
1998 EXECUTIVE OFFICER COMPENSATION PROGRAM
Although the Company used the services of a compensation consultant in the
fall of 1997 to help establish executive compensation, because of a dramatic
restructuring of its operations in late 1997 and high research expenses that
effected its operating results, it did not significantly change executive
compensation for the 1998 fiscal year. It retained an additional consultant in
the summer of 1998 to create a form of stock-based incentive program.
BASE SALARY. As part of an effort to reduce expenses and increase
profitability, base salaries for executive officers during 1998 were maintained
at 1997 year-end levels. Mr. Stuckey's base salary was $286,000 in 1998.
CASH INCENTIVE COMPENSATION. The Compensation Committee established the
template for the 1998 cash bonus plan for executive officers during the fall of
1997. The 1998 bonus plan was tied to the Company's operating plan, focusing
primarily on operating income and cash flow. Bonuses are paid only if the
threshold financial objectives for the fiscal year are achieved. The
Compensation Committee also has the discretion to award bonuses based on other
performance objectives or criteria. The Company exceeded its budgeted
performance during 1998 and the bonus objectives were exceeded. In accordance
with the compensation plan, the executive officers received cash bonuses during
the year, with Mr. Stuckey receiving a cash bonus of $304,000.
-7-
STOCK INCENTIVE COMPENSATION. In order to further preserve cash, and to
provide significant incentive to executive management to meet projected
performance over the next four years, the Compensation Committee retained a
compensation consultant to provide advice on stock-based incentives for
executives in early Summer 1998. With the assistance of this consultant, the
Compensation Committee instituted a special stock-based compensation program in
October 1998. This program provided for the grant of both stock options and
restricted stock that vest in eight years (in the case of options) and five
years (in the case of restricted stock) but expires if the executive is
terminated prior to vesting. The vesting of both the options and the restricted
stock accelerate in the event the Company meets certain projected performance
goals, defined in terms of earnings per share, in 1999, 2000 and 2001.
The Compensation Committee believes that this program, which makes the
compensation realizable only if performance is generated that will likely be
reflected in the market value of the Company's Common Stock, directly ties the
executive's compensation to appreciation in share value. Mr. Stuckey received
options to purchase 93,750 shares and 31,250 shares of restricted stock as part
of this program.
BENEFITS. The Company provides medical and retirement savings benefits to
executive officers on terms generally available to employees. No executive
officer received perquisites in excess of 10% of salary during 1998.
SUMMARY
The Compensation Committee believes that the compensation program for
executive officers during the 1998 year was comparable to compensation programs
for similarly situated companies and that the aggregate compensation provided
under the program was appropriate.
Michael Adams
Robert Price
-8-
SUMMARY COMPENSATION TABLE
The following table sets forth the cash and noncash compensation for the
last three fiscal years awarded to or earned by the Chief Executive Officer of
the Company and the Company's two other executive officers for services
rendered.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ -------------------------------
AWARDS PAYOUTS
NAME OTHER ------------------- ------- ALL
AND ANNUAL RESTRICTED OTHER
PRINCIPAL COMPEN- STOCK LTIP COMPEN-
POSITION YEAR SALARY BONUS SATION AWARDS(1) OPTIONS PAYOUTS SATION(2)
-------- ---- ------ ----- ------ --------- ------- ------- ---------
MARION MELVIN STUCKEY 1998 $286,000 $ 304,000 $0 $ 78,125 143,750 $0 $18,333
Chairman and Chief 1997 $280,000 $ 0 $0 $ 0 0 $0 $15,000
Executive Officer 1996 $260,000 $ 0 $0 $ 0 20,000 $0 $18,125
JIMMIE H. CALDWELL 1998 $216,000 $ 225,000 $0 $ 60,938 125,000 $0 $18,333
President and Chief 1997 $212,000 $ 0 $0 $ 0 15,000 $0 $15,000
Operating Officer 1996 $200,000 $ 0 $0 $ 0 20,000 $0 $18,125
DAVID G. LATZKE 1998 $151,000 $ 140,000 $0 $ 45,703 71,250 $0 $ 3,333
Vice President, Secretary, 1997 $148,000 $ 0 $0 $ 0 10,000 $0 $ 0
Chief Financial Officer 1996 $140,000 $ 0 $0 $ 0 12,000 $0 $ 3,125
and Treasurer
- ----------------------
(1) The value of each restricted stock award was determined by multiplying the
closing market price of the Company's Common Stock on the date of grant by
the number of shares awarded. Represents a grant of 31,250 shares, 25,000
shares and 18,750 shares of restricted stock to Messrs. Stuckey, Caldwell
and Latzke, respectively, that vests five years from the date of grant but
accelerates upon achievement of certain performance targets. As of
December 31, 1998, the number and value (based on the closing market price
of the Company's Common Stock on December 31, 1998) of the aggregate
restricted stock holdings of each executive officer were as follows:
31,250 shares ($141,625) by Mr. Stuckey, 25,000 shares ($112,500) by Mr.
Caldwell, and 18,750 shares ($84,375) by Mr. Latzke.
(2) The amounts reported in this column include Company contributions to the
Company's 401(k) Plan of $3,333 in 1998 and $3,125 in 1996 for each of
Messrs. Stuckey, Caldwell and Latzke. The amounts reported for each of
Messrs. Stuckey and Caldwell for each of the three years also include
$15,000 in benefits from split-dollar life insurance policies.
-9-
STOCK OPTIONS
The Company maintains a 1989 Stock Option Plan and a 1993 Stock Incentive
Plan. No additional options under the 1989 plan were granted during 1998. The
Company may grant stock options, and other stock-based awards, to executive
officers and other employees and consultants of the Company under the 1993 Stock
Incentive Plan. The following table sets forth information with respect to
options granted to the named executive officers in 1998:
OPTION GRANTS IN 1998
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
NUMBER OF RATES OF STOCK PRICE
SHARES % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM (3)
OPTIONS TO EMPLOYEES PRICE EXPIRATION ------------------------
NAME GRANTED (1) IN 1998 ($/SHARE) DATE 5% 10%
---- ----------- ------- ----------- ---- -- ---
Mr. Stuckey 50,000 4.4% $2.563 1/8/08 $ 80,593 $ 204,238
93,750 (2) 8.3% $2.50 10/12/08 $ 147,394 $ 373,534
Mr. Caldwell 25,000 2.2% $2.563 1/8/08 $ 40,296 $ 102,119
25,000 2.2% $2.50 1/27/08 $ 39,305 $ 99,609
75,000 (2) 6.6% $2.4375 10/9/08 $ 114,969 $ 291,356
Mr. Latzke 15,000 1.3% $2.563 1/8/08 $ 24,178 $ 61,271
56,250 (2) 5.0% $2.4375 10/9/08 $ 86,227 $ 218,517
- ----------------------
(1) The options have an exercise price equal to the market price of the
Company's Common Stock on the date of grant and, unless otherwise noted,
become exercisable in annual increments of 25% of the shares subject to the
option commencing one year from the date of grant. The options also become
exercisable in the event of a change in control of the Company.
(2) The options have performance vesting requirements, which are described
above in the Compensation Committee Report on Executive Compensation under
the heading, "Stock Incentive Compensation."
(3) These amounts represent the realizable value of the subject options ten
years from the date of grant (the term of each option), without discounting
to present value, assuming appreciation in the market value of the
Company's Common Stock from the market price on the date of grant at the
rates indicated. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock
market conditions. The amounts reflected in this table may not necessarily
be achieved.
-10-
The following table sets forth information with respect to the exercise of
options and the value of options held by executive officers as of December 31,
1998:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES ACQUIRED OPTIONS AT END OF 1998(1) IN-THE-MONEY OPTIONS (2)
ON EXERCISE VALUE --------------------------- ----------------------------
NAME OF OPTIONS REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ---------- -------- ----------- ------------- ----------- -------------
Mr. Stuckey 0 $0 85,000 178,750 $ 7,500 $297,734
Mr. Caldwell 0 $0 39,250 154,750 $69,375 $271,250
Mr. Latzke 0 $0 41,750 92,500 $17,813 $153,766
- ----------------------
(1) All of such options, except those issued to Mr. Stuckey in 1995 for 100,000
shares, which were granted with an exercise price of $6.50, which was in
excess of fair market value, are exercisable at a price equal to the fair
market value of the Common Stock on the date of grant.
(2) Represents the difference between the closing price of the Company's Common
Stock as reported on the Nasdaq National Market on December 31, 1998 ($4.50
per share) and the exercise price of the options.
LONG-TERM INCENTIVE PLAN AWARDS
Other than its 1993 Stock Incentive Plan, the Company does not maintain any
long-term incentive plans.
SEVERANCE AGREEMENTS
The Company has severance agreements with Messrs. Stuckey, Caldwell and
Latzke that provide for the payment to such executive officers of severance
benefits in the event such officers are terminated, or resign for "good reason,"
within two years after a "change of control" of the Company. Such severance
benefits range from one and one-half to three times annual compensation received
by such executives averaged over the five years prior to termination. Such
agreements define change of control as the acquisition by any person or persons
acting in concert of 30% or more of the Company's voting stock, a change of
control required to be reported under the Securities Exchange Act of 1934, or
certain changes in the Board composition in connection with a hostile contest
for control. The Company does not have any other employment agreement with an
executive officer named in the Summary Compensation Table.
-11-
SHAREHOLDER RETURN
The graph set forth below compares the cumulative total shareholder return
on the Common Stock of the Company since December 31, 1993 with the cumulative
total return on a broad market index (the Nasdaq NMS Index) and a peer group
index (the Nasdaq Computer and Data Processing Index). In each case, the
cumulative return is calculated assuming an investment of $100 on December 31,
1993, and reinvestment of all dividends.
[CHART]
FOURTH SHIFT
STOCK PERFORMANCE CHART DATA
Nasdaq
Computer & Fourth Shift
Date Nasdaq NMS Data Processing Corporation
- ----------------- ------------------- --------------------- --------------------
12/31/93 $100.00 $100.00 $100.00
3/31/94 $95.80 $101.42 $85.92
6/30/94 $91.32 $99.25 $72.59
9/30/94 $98.88 $110.49 $74.07
12/30/94 $97.75 $121.44 $32.59
3/31/95 $106.57 $136.70 $47.40
6/30/95 $121.90 $162.03 $40.00
9/29/95 $136.58 $177.00 $63.70
12/29/95 $138.24 $184.95 $44.44
3/29/96 $144.69 $193.61 $56.29
6/28/96 $156.50 $215.20 $78.51
9/30/96 $162.07 $219.48 $88.88
12/31/96 $170.03 $228.22 $68.14
3/31/97 $160.82 $211.84 $44.44
6/30/97 $190.30 $271.66 $56.29
9/30/97 $222.48 $297.07 $54.81
12/31/97 $208.65 $280.36 $35.55
3/31/98 $243.71 $370.60 $31.11
6/30/98 $250.77 $411.28 $32.59
9/30/98 $227.02 $387.68 $37.78
12/31/98 $292.80 $502.03 $53.30
-12-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 28, 1999, information
regarding the ownership of Common Stock by (i) each director, (ii) each
executive officer named in the Summary Compensation Table, (iii) all directors
and executive officers (including the named individuals) as a group, and (iv)
any other shareholder who is known by the Company to own beneficially more than
5% of the outstanding Common Stock of the Company. Except as otherwise
indicated, the shareholders listed in the table have sole voting and investment
powers with respect to the shares indicated.
Shares Beneficially Owned
--------------------------
Name and Address of Beneficial Owner Number(1) Percent
------------------------------------ --------- -------
David R. Lamm (2)....................................... 871,850 8.5%
204 Marcin Lane
Burnsville, MN 55337
Hathaway & Associates, Ltd. (3)......................... 870,000 8.5%
119 Rowayton Avenue
Rowayton, CT 06853
Oscar Capital Management, LLC (4)....................... 829,016 8.1%
Andrew K. Boszhardt, Jr.
900 Third Avenue, 10th Floor
New York, NY 10022
Marion Melvin Stuckey (5)............................... 794,360 7.6%
Two Meridian Crossings
Minneapolis, MN 55423
Perkins Capital Management, Inc.(6)..................... 792,861 7.7%
730 East Lake Street
Wayzata, MN 55391-1769
Austin W. Marxe and David M. Greenhouse (7)............. 513,040 5.0%
153 East 53 Street
New York, NY 10022
Michael J. Adams (8).................................... 445,553 4.3%
Jimmie H. Caldwell(9)................................... 327,868 3.2%
Anton J. Christianson(10)............................... 127,239 1.2%
David G. Latzke(11)..................................... 80,843 *
Robert M. Price......................................... 32,324 *
Steve J. Lair........................................... 7,134 *
Mark W. Sheffert........................................ 2,577 *
All executive officers and directors.................... 1,817,898 17.3%
as a group (8 individuals)
- ----------------------
* Less than 1%
(1) Includes 10,250 shares for each of Messrs. Adams and Price, 875 shares for
each of Messrs. Christianson and Lair, 102,500 shares for Mr. Stuckey,
60,500 shares for Mr. Caldwell, 56,000 shares for Mr. Latzke and 241,250
shares for all executive officers and directors as a group of Common Stock
issuable upon the exercise of stock options which are either currently
exercisable or become exercisable within 60 days.
(2) Based upon an amended Schedule 13D dated September 5, 1997; includes
664,700 shares held by a limited partnership for which Mr. Lamm serves as
general partner.
(3) Based upon information contained in the Schedule 13G of Hathaway &
Associates, Ltd. dated January 10, 1994.
-13-
(4) Based upon an amended Schedule 13G dated February 12, 1999; includes
779,816 shares held by Oscar Capital Management, LLC, an investment fund
for which Andrew K. Boszhardt, Jr. serves as managing member, and 49,200
shares held directly by Mr. Boszhardt and his children.
(5) Includes 168,863 shares held by a corporation for which Mr. Stuckey is the
President, sole director and sole shareholder.
(6) Based upon an amended Schedule 13G of Perkins Capital Management, Inc.
("PCM") dated February 2, 1999; includes 447,438 shares over which PCM has
sole dispositive and voting powers. PCM has sole dispositive power, but
not voting power, over the remaining shares.
(7) Based upon a Schedule 13G dated February 9, 1999; includes 393,240 shares
held by Special Situations Fund, III, L.P., and 119,800 shares held by
Special Situations Cayman Fund, L.P., investment funds managed by
investment advisers for which Mr. Marxe and Mr. Greenhouse serve as
officers, directors and members or principal shareholders.
(8) Includes 18,000 shares owned by Mr. Adams' minor children, 9,600 shares
owned by Mr. Adams' spouse and 325,703 shares representing Mr. Adams' pro
rata interest in a limited partnership in which he is a limited partner.
Mr. Adams disclaims beneficial ownership of the shares held by his spouse
and such limited partnership.
(9) Includes 8,822 shares and options to purchase shares owned by Mr.
Caldwell's wife. Mr. Caldwell disclaims beneficial ownership of these
shares.
(10) Includes 118,711 shares held by a partnership for which Mr. Christianson is
a general partner.
(11) Includes 200 shares owned by Mr. Latzke's minor children.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under federal securities laws, the Company's directors and officers, and
any beneficial owner of more than 10% of a class of equity securities of the
Company, are required to report their ownership of the Company's equity
securities and any changes in such ownership to the Securities and Exchange
Commission (the "Commission") and the securities exchange on which the equity
securities are registered. Specific due dates for these reports have been
established by the Commission, and the Company is required to disclose in this
Proxy Statement any delinquent filing of such reports and any failure to file
such reports during the fiscal year ended December 31, 1998. Based on
information contained in their Forms 3, 4 and 5, all directors, officers and
beneficial holders of 10% of the Company's securities timely filed such reports
during 1998, other than Mark Sheffert who filed late his initial report of
beneficial ownership (reporting no ownership of securities).
RELATIONSHIP WITH ACCOUNTANTS
Arthur Andersen LLP have served as the Company's independent public
accountants for more than five years and will serve as the Company's independent
public accountants for the year ending December 31, 1999. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions from shareholders.
GENERAL
The Board of Directors of the Company does not know of any matters other
than those described in this Proxy Statement which will be acted upon at the
Annual Meeting. In the event that any other matters properly come before the
meeting calling for a vote of shareholders, the persons named as proxies in the
enclosed form of proxy will vote in accordance with their best judgment on such
other matters.
-14-
SHAREHOLDER PROPOSALS
Any proposal by a shareholder to be presented at the annual meeting of
shareholders held in 2000 that is requested to be included in the Company's
Proxy Statement must be received at the Company's principal executive offices,
Two Meridian Crossings, Minneapolis, MN 55423, before December 2, 1999.
Any other proposal by a shareholder to be presented at the annual meeting
of shareholders held in 2000 must be given in writing and received at the
Company's principal executive offices before December 2, 1999. The proposal
must contain the specific information required by the Company's Bylaws, a copy
of which may be obtained by writing to the Secretary of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: April 1, 1999 Marion Melvin Stuckey, Chairman of the Board
-15-
FOURTH SHIFT CORPORATION
PROXY FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints M.M. Stuckey and J.H. Caldwell, and each of
them, with full power to appoint a substitute, to vote all shares the
undersigned is entitled to vote at the Annual Meeting of Shareholders of Fourth
Shift Corporation to be held on May 4, 1999, and at all adjournments thereof, as
specified below on the matters referred to, and, in their discretion, upon any
other matters which may be brought before the meeting:
1. ELECTION OF CLASS B DIRECTORS: / / FOR all nominees (EXCEPT AS / / WITHHOLD AUTHORITY
MARKED TO THE CONTRARY BELOW) TO VOTE FOR ALL NOMINEES
TO WITHHOLD AUTHORITY TO VOTE FOR A SPECIFIC NOMINEE, PLACE A LINE THROUGH SUCH
NOMINEE'S NAME BELOW:
Jimmie H. Caldwell, Mark W. Sheffert
2. PROPOSAL TO APPROVE AMENDMENT TO 1993 STOCK INCENTIVE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
3. TO VOTE WITH DISCRETIONARY AUTHORITY ON ANY OTHER BUSINESS AS MAY PROPERLY
BE PRESENTED AT THE MEETING.
(CONTINUED ON REVERSE SIDE)
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL DIRECTORS NAMED IN ITEM 1 AND FOR THE PROPOSAL DESCRIBED IN
ITEM 2.
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated: _____________________, 1999
__________________________________
Signature
__________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
Appendix to Proxy Statement
FOURTH SHIFT CORPORATION
CERTIFICATE OF THE SECRETARY
I, David G. Latzke, being the duly elected, qualified and acting Secretary
of Fourth Shift Corporation, a Minnesota corporation (the "Company"), hereby
certify that the following is a true and correct copy of a resolution adopted by
the Board of Directors of the Company on January 19, 1999 and such resolution
has not been amended or rescinded and remains in full force and effect on the
date hereof.
RESOLVED, that subject to shareholder approval at the 1999 meeting of
shareholders, the 1993 Stock Incentive Plan is hereby amended to increase
the number of shares reserved for issuance thereunder by 750,000 shares.
IN WITNESS WHEREOF, I have executed this Certificate as of March 30, 1999.
/s/ David G. Latzke
----------------------------
David G. Latzke
Secretary
As Amended by the Board of Directors
on January 19, 1994, January 17, 1995
and January 18, 1996, and by
Shareholders on April 20, 1994, May 8, 1995
and May 7, 1996
FOURTH SHIFT CORPORATION
1993 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of the Plan is to aid in attracting and retaining
management personnel and members of the Board of Directors who are not also
employees ("Non-Employee Directors") of the FOURTH SHIFT Corporation (the
"Company") capable of assuring the future success of the Company, to offer such
personnel incentives to put forth maximum efforts for the success of the
Company's business and to afford such personnel an opportunity to acquire a
proprietary interest in the Company.
SECTION 2. DEFINITIONS.
As used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Affiliate" shall mean (i) any entity that, directly or
indirectly through one or more intermediaries, is controlled by the Company and
(ii) any entity in which the Company has a significant equity interest, in each
case as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent
or Other Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract or
other instrument or document evidencing any Award granted under the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, and any regulations promulgated thereunder.
(e) "Committee" shall mean a committee of the Board of Directors of
the Company designated by such Board to administer the Plan, which shall consist
of members appointed from time to time by the Board of Directors and shall be
comprised of not less than such number of directors as shall be required to
permit the Plan to satisfy the requirements of Rule 16b-3. Each member of the
Committee shall be a "disinterested person" within the meaning of Rule 16b-3 and
shall be an "outside director" as defined in Section 162(m) of the Code.
(f) "Company" shall mean FOURTH SHIFT Corporation, a Minnesota
corporation, and any successor corporation.
(g) "Dividend Equivalent" shall mean any right granted under
Section 6(e) of the Plan.
(h) "Eligible Person" shall mean any employee, officer, consultant or
independent contractor providing services to the Company or any Affiliate who
the Committee determines to be an Eligible Person. Eligible Person shall not
include any Non-Employee Director, who shall receive Awards only pursuant to
Section 6(h) of the Plan.
1
(i) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the fair market
value of such property determined by such methods or procedures as shall be
established from time to time by the Committee or, in the case of grants
pursuant to Section 6(h), the Board of Directors.
(j) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision.
(k) "Non-Qualified Stock Option" shall mean an option granted under
Section 6(a) of the Plan, or Section 6(h) of the Plan in the case of grants to
Participating Non-Employee Directors, that is not intended to be an Incentive
Stock Option.
(l) "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option, and shall include Restoration Options.
(m) "Other Stock-Based Award" shall mean any right granted under
Section 6(f) of the Plan.
(n) "Participant" shall mean an Eligible Person designated to be
granted an Award under the Plan.
(o) "Participating Non-Employee Director" shall mean all Non-Employee
Directors of the Company except any Non-Employee Director who has notified the
Company in writing at least six months in advance of a meeting of the
shareholders of the Company of his or her desire not to receive Non-Qualified
Stock Options pursuant to Section 6(h) of the Plan and who receives no
compensation or other consideration for such election not to receive, or
compensation or consideration in place of, such election not to receive options.
(p) "Performance Award" shall mean any right granted under
Section 6(d) of the Plan.
(q) "Person" shall mean any individual, corporation, partnership,
association or trust.
(r) "Plan" shall mean this 1993 Stock Incentive Plan, as amended from
time to time.
(s) " Reload Option" shall mean any Option granted under
Section 6(a)(iv) of the Plan.
(t) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan.
(u) "Restricted Stock Unit" shall mean any unit granted under
Section 6(c) of the Plan evidencing the right to receive a Share (or a cash
payment equal to the Fair Market Value of a Share) at some future date.
(v) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended,
or any successor rule or regulation.
(w) "Shares" shall mean shares of Common Stock, $.01 par value, of
the Company or such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.
(x) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
2
SECTION 3. ADMINISTRATION.
(a) POWER AND AUTHORITY OF THE COMMITTEE. The Plan shall be
administered by the Committee; PROVIDED, HOWEVER, that Section 6(h) of the Plan
shall not be administered by the Committee but rather by the Board of Directors
subject to the provisions and restrictions of such Section 6(h). Subject to the
express provisions of the Plan and to applicable law, and except with respect to
Section 6(h) of the Plan, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted to each Participant under the Plan; (iii) determine the number of Shares
to be covered by (or with respect to which payments, rights or other matters are
to be calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock, Restricted Stock Units
or other Awards; (vi) determine whether, to what extent and under what
circumstances Awards may be exercised in cash, Shares, other securities, other
Awards or other property, or canceled, forfeited or suspended; (vii) determine
whether, to what extent and under what circumstances cash, Shares, other
securities, other Awards, other property and other amounts payable with respect
to an Award under the Plan shall be deferred either automatically or at the
election of the holder thereof or the Committee; (viii) interpret and administer
the Plan and any instrument or agreement relating to, or Award made under, the
Plan; (ix) establish, amend, suspend or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (x) make any other determination and take any other action that
the Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award and any employee of the
Company or any Affiliate.
(b) DELEGATION. The Committee may delegate its powers and duties
under the Plan to one or more officers of the Company or any Affiliate or a
committee of such officers, subject to such terms, conditions and limitations as
the Committee may establish in its sole discretion; PROVIDED, HOWEVER, that the
Committee shall not delegate its powers and duties under the Plan with regard to
officers or directors of the Company or any Affiliate who are subject to Section
16 of the Securities Exchange Act of 1934, as amended.
SECTION 4. SHARES AVAILABLE FOR AWARDS.
(a) SHARES AVAILABLE. Subject to adjustment as provided in Section
4(c), the number of Shares available for granting Awards under the Plan shall be
2,250,000. If any Shares covered by an Award or to which an Award relates are
not purchased or are forfeited, or if an Award otherwise terminates without
delivery of any Shares, then the number of Shares counted against the aggregate
number of Shares available under the Plan with respect to such Award, to the
extent of any such forfeiture or termination, shall again be available for
granting Awards under the Plan.
(b) ACCOUNTING FOR AWARDS. For purposes of this Section 4, if an
Award entitles the holder thereof to receive or purchase Shares, the number of
Shares covered by such Award or to which such Award relates shall be counted on
the date of grant of such Award against the aggregate number of Shares available
for granting Awards under the Plan.
(c) ADJUSTMENTS. In the event that the Committee (or, in the case of
grants under Section 6(h) of the Plan, the Board of Directors) shall determine
that any dividend or other distribution (whether in the form of cash, Shares,
other securities or other property), recapitalization, stock split, reverse
stock
3
split, reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company
or other similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee (or, in the case of grants under
Section 6(h) of the Plan, the Board of Directors) to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee (or, in the case of
grants under Section 6(h) of the Plan, the Board of Directors) shall, in such
manner as it may deem equitable, adjust any or all of (i) the number and type of
Shares (or other securities or other property) which thereafter may be made the
subject of Awards, (ii) the number and type of Shares (or other securities or
other property) subject to outstanding Awards and (iii) the purchase or exercise
price with respect to any Award; PROVIDED, HOWEVER, that the number of Shares
covered by any Award or to which such Award relates shall always be a whole
number.
(d) LIMITATION ON ANNUAL AWARDS TO INDIVIDUALS. Notwithstanding any
other provision in this Plan, no Participant may be granted an Award or Awards
under the Plan, the value of which is based solely on an increase in the value
of the Shares after the date of grant of such Award or Awards, for more than
100,000 Shares in the aggregate in any one calendar year period beginning with
the period commencing on January 1, 1994 through December 31, 1994. The
foregoing annual limitation specifically includes the grant of any
"performance-based" awards within the meaning of Section 162(m) of the Code.
SECTION 5. ELIGIBILITY.
Any Eligible Person, including any Eligible Person who is an officer
or director of the Company or any Affiliate, shall be eligible to be designated
a Participant. In determining which Eligible Persons shall receive an Award and
the terms of any Award, the Committee may take into account the nature of the
services rendered by the respective Eligible Persons, their present and
potential contributions to the success of the Company or such other factors as
the Committee, in its discretion, shall deem relevant. Notwithstanding the
foregoing, an Incentive Stock Option may only be granted to full or part-time
employees (which term as used herein includes, without limitation, officers and
directors who are also employees) and an Incentive Stock Option shall not be
granted to an employee of an Affiliate unless such Affiliate is also a
"subsidiary corporation" of the Company within the meaning of Section 424(f) of
the Code or any successor provision. Participating Non-Employee Directors
shall receive Awards of Non-Qualified Stock Options as provided in Section 6(h)
of the Plan.
SECTION 6. AWARDS.
(a) OPTIONS. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) EXERCISE PRICE. The purchase price per Share purchasable under
an Option shall be determined by the Committee; PROVIDED, HOWEVER, that
such purchase price shall not be less than 100% of the Fair Market Value of
a Share on the date of grant of such Option.
(ii) OPTION TERM. The term of each Option shall be fixed by the
Committee.
(iii) TIME AND METHOD OF EXERCISE. The Committee shall determine the
time or times at which an Option may be exercised in whole or in part and
the method or methods by which, and the form or forms (including, without
limitation, cash, Shares, promissory notes, other securities, other Awards
or other property, or any combination thereof, having a Fair Market Value
on the exercise date equal to the relevant exercise price) in which,
payment of the exercise price with respect thereto may be made or deemed to
have been made.
4
(iv) RELOAD OPTIONS. The Committee may grant Reload Options,
separately or together with another Option, pursuant to which, subject to
the terms and conditions established by the Committee and any applicable
requirements of Rule 16b-3 or any other applicable law, the Participant
would be granted a new Option when the payment of the exercise price of the
option to which such Reload Option relates is made by the delivery of
Shares owned by the Participant pursuant to the relevant provisions of the
plan or agreement relating to such option, which new Option would be an
Option to purchase the number of Shares not exceeding the sum of (A) the
number of Shares so provided as consideration upon the exercise of the
previously granted option to which such Reload Option relates and (B) the
number of Shares, if any, tendered or withheld as payment of the amount to
be withheld under applicable tax laws in connection with the exercise of
the option to which such Reload Option relates pursuant to the relevant
provisions of the plan or agreement relating to such option. Reload
Options may be granted with respect to options previously granted under the
Plan or any other stock option plan of the Company, and may be granted in
connection with any option granted under the Plan or any other stock option
plan of the Company at the time of such grant.
(b) STOCK APPRECIATION RIGHTS. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under
the Plan shall confer on the holder thereof a right to receive upon exercise
thereof the excess of (i) the Fair Market Value of one Share on the date of
exercise (or, if the Committee shall so determine, at any time during a
specified period before or after the date of exercise) over (ii) the grant price
of the Stock Appreciation Right as specified by the Committee, which price shall
not be less than 100% of the Fair Market Value of one Share on the date of grant
of the Stock Appreciation Right. Subject to the terms of the Plan and any
applicable Award Agreement, the grant price, term, methods of exercise, dates of
exercise, methods of settlement and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate.
(c) RESTRICTED STOCK AND RESTRICTED STOCK UNITS. The Committee is
hereby authorized to grant Awards of Restricted Stock and Restricted Stock Units
to Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
(i) RESTRICTIONS. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share
of Restricted Stock or the right to receive any dividend or other right or
property with respect thereto), which restrictions may lapse separately or
in combination at such time or times, in such installments or otherwise as
the Committee may deem appropriate.
(ii) STOCK CERTIFICATES. Any Restricted Stock granted under the Plan
shall be evidenced by issuance of a stock certificate or certificates,
which certificate or certificates shall be held by the Company. Such
certificate or certificates shall be registered in the name of the
Participant and shall bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock. In the
case of Restricted Stock Units, no Shares shall be issued at the time such
Awards are granted.
(iii) FORFEITURE; DELIVERY OF SHARES. Except as otherwise
determined by the Committee, upon termination of employment (as determined
under criteria established by the Committee) during the applicable
restriction period, all Shares of Restricted Stock and all Restricted Stock
Units at such time subject to restriction shall be forfeited and reacquired
by the Company; PROVIDED, HOWEVER, that the Committee may, when it finds
that a waiver would be in the best
5
interest of the Company, waive in whole or in part any or all remaining
restrictions with respect to Shares of Restricted Stock or Restricted Stock
Units. Any Share representing Restricted Stock that is no longer subject
to restrictions shall be delivered to the holder thereof promptly after the
applicable restrictions lapse or are waived. Upon the lapse or waiver of
restrictions and the restricted period relating to Restricted Stock Units
evidencing the right to receive Shares, such Shares shall be issued and
delivered to the holders of the Restricted Stock Units.
(d) PERFORMANCE AWARDS. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities, other Awards or other property and (ii)
shall confer on the holder thereof the right to receive payments, in whole or in
part, upon the achievement of such performance goals during such performance
periods as the Committee shall establish. Subject to the terms of the Plan and
any applicable Award Agreement, the performance goals to be achieved during any
performance period, the length of any performance period, the amount of any
Performance Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award and any other terms and conditions of any
Performance Award shall be determined by the Committee.
(e) DIVIDEND EQUIVALENTS. The Committee is hereby authorized to
grant to Participants Dividend Equivalents under which such Participants shall
be entitled to receive payments (in cash, Shares, other securities, other Awards
or other property as determined in the discretion of the Committee) equivalent
to the amount of cash dividends paid by the Company to holders of Shares with
respect to a number of Shares determined by the Committee. Subject to the terms
of the Plan and any applicable Award Agreement, such Dividend Equivalents may
have such terms and conditions as the Committee shall determine.
(f) OTHER STOCK-BASED AWARDS. The Committee is hereby authorized to
grant to Participants such other Awards that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to,
Shares (including, without limitation, securities convertible into Shares), as
are deemed by the Committee to be consistent with the purpose of the Plan;
PROVIDED, HOWEVER, that such grants must comply with Rule 16b-3 and applicable
law. Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine the terms and conditions of such Awards. Shares or
other securities delivered pursuant to a purchase right granted under this
Section 6(f) shall be purchased for such consideration, which may be paid by
such method or methods and in such form or forms (including without limitation,
cash, Shares, promissory notes, other securities, other Awards or other property
or any combination thereof), as the Committee shall determine, the value of
which consideration, as established by the Committee, shall not be less than
100% of the Fair Market Value of such Shares or other securities as of the date
such purchase right is granted.
(g) GENERAL. Except as otherwise specified with respect to Awards to
Participating Non-Employee Directors pursuant to Section 6(h) of the Plan:
(i) NO CASH CONSIDERATION FOR AWARDS. Awards shall be granted for
no cash consideration or for such minimal cash consideration as may be
required by applicable law.
(ii) AWARDS MAY BE GRANTED SEPARATELY OR TOGETHER. Awards may, in
the discretion of the Committee, be granted either alone or in addition to,
in tandem with or in substitution for any other Award or any award granted
under any plan of the Company or any Affiliate other than the Plan. Awards
granted in addition to or in tandem with other Awards or in addition to or
in tandem with awards granted under any such other plan of the Company or
any Affiliate
6
may be granted either at the same time as or at a different time from the
grant of such other Awards or awards.
(iii) FORMS OF PAYMENT UNDER AWARDS. Subject to the terms of the
Plan and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or payment of
an Award may be made in such form or forms as the Committee shall determine
(including, without limitation, cash, Shares, promissory notes, other
securities, other Awards or other property or any combination thereof), and
may be made in a single payment or transfer, in installments or on a
deferred basis, in each case in accordance with rules and procedures
established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting of reasonable
interest on installment or deferred payments or the grant or crediting of
Dividend Equivalents with respect to installment or deferred payments.
(iv) LIMITS ON TRANSFER OF AWARDS. No Award and no right under any
such Award shall be transferable by a Participant otherwise than by will or
by the laws of descent and distribution; PROVIDED, HOWEVER, that, if so
determined by the Committee, a Participant may, in the manner established
by the Committee, designate a beneficiary or beneficiaries to exercise the
rights of the Participant and receive any property distributable with
respect to any Award upon the death of the Participant. Each Award or
right under any Award shall be exercisable during the Participant's
lifetime only by the Participant or, if permissible under applicable law,
by the Participant's guardian or legal representative. No Award or right
under any such Award may be pledged, alienated, attached or otherwise
encumbered, and any purported pledge, alienation, attachment or encumbrance
thereof shall be void and unenforceable against the Company or any
Affiliate.
(v) TERM OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee.
(vi) RESTRICTIONS; SECURITIES EXCHANGE LISTING. All certificates
for Shares or other securities delivered under the Plan pursuant to any
Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee (or, in the case of grants under
6(h) of the Plan, the Board of Directors) may deem advisable under the Plan
or the rules, regulations and other requirements of the Securities and
Exchange Commission and any applicable federal or state securities laws,
and the Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions. If the
Shares or other securities are traded on a securities exchange, the Company
shall not be required to deliver any Shares or other securities covered by
an Award unless and until such Shares or other securities have been
admitted for trading on such securities exchange.
(h) NON-QUALIFIED STOCK OPTIONS TO NON-EMPLOYEE DIRECTORS. The Board
of Directors shall issue Non-Qualified Stock Options to Participating
Non-Employee Directors in accordance with this Section 6(h).
Non-Qualified Stock Options to purchase 5,000 shares of common stock
shall be granted to each Participating Non-Employee Director on the date
the amendment creating the grants pursuant to this Section 6(h) is approved
by shareholders. Non-Qualified Stock Options to purchase 5,000 shares
shall be granted to each new Participating Non-Employee Director at the
first annual shareholders' meeting on which such director is first elected
a director by shareholders. On the date of each annual meeting of
shareholders thereafter (beginning with the 1995 annual meeting with
respect to Non-Employee Directors on the date of adoption of the amendments
to this section 6(h)), each Participating Non-Employee Director then in
office shall
7
be automatically granted non-qualified stock options to purchase 3,500
shares of Common Stock (subject to adjustment in accordance with section
4(c)).
Each Non-Qualified Stock Option granted to a Participating
Non-Employee Director pursuant to this Section 6(h) shall not be
exercisable as of the date of grant but shall become exercisable with
respect to 25% of the shares subject thereto on the first annual
anniversary of the date of grant and with respect to an additional 25% on
the second, third and fourth annual anniversary of the date of grant. Each
such option shall have an exercise price equal to the Fair Market Value of
a Share on the date of grant and shall expire on the fifth anniversary of
the date of grant, except as provided below. Reload options may not be
granted to any Non-Employee Director. This Section 6(h) shall not be
amended more than once every six months other than to comport with changes
in the Code, the Employee Retirement Income Security Act or the rules and
regulations thereunder.
All grants of Non-Qualified Stock Options pursuant to this Section
6(h) shall be automatic and non-discretionary and shall be made strictly in
accordance with the foregoing terms and the following additional
provisions:
(i) Non-Qualified Stock Options granted to a Participating
Non-Employee Director hereunder shall terminate and may no longer be
exercised if such Director ceases to be a Non-Employee Director of the
Company, except that:
(A) If such Director's term shall be terminated for any reason other
than gross and willful misconduct, death, disability, or retirement, such
Director may at any time within a period of three months after such
termination, but not after the termination date of the Option, exercise the
Option to the extent exercisable on the date of termination.
(B) If such Director's term shall be terminated by reason of gross
and willful misconduct during the course of the term, including but not
limited to, wrongful appropriation of funds of the Company or the
commission of a gross misdemeanor or felony, the Option shall be terminated
as of the date of the misconduct.
(C) If such Director's term shall be terminated by reason of
disability or retirement, such Director may exercise the Option in
accordance with the terms thereof as though such termination had never
occurred. If such Director shall die following any such termination, the
Option may be exercised in accordance with its terms by the personal
representatives or administrators of such Director or by any person or
persons to whom the Option has been transferred by will or the applicable
laws of descent and distribution.
(D) If such Director shall die while a Director of the Company or
within three months after termination of such Director's term for any
reason other than disability or retirement or gross and willful misconduct,
the Option may be exercised in accordance with its terms by the personal
representatives or administrators of such Director or by any person or
persons to whom the Option has been transferred by will or the applicable
laws of descent and distribution.
(ii) Non-Qualified Stock Options granted to Participating
Non-Employee Directors may be exercised in whole or in part from time to
time by serving written notice of exercise on the Company at its principal
executive offices, to the attention of the Company's Secretary. The notice
shall state the number of shares as to which the Option is being exercised
and be accompanied by payment of the purchase price. A Participating
Non-Employee Director may, at such Director's election, pay the purchase
price by check payable to the Company, by promissory note, or in shares of
the Company's Common Stock, or in any combination thereof
8
having a Fair Market Value on the exercise date qual to the applicable
exercise price. If payment or partial payment is made by promissory note,
such note shall (A) be secured by the Shares to be delivered upon exercise
of such Option (other than those withheld in payment of taxes as set forth
below), (B) be limited in principal amount to the maximum amount permitted
under applicable laws, rules and regulations, (C) be for a term of six
years and (D) bear interest at the applicable federal rate (as determined
in accordance with Section 1274(d) of the Code), compounded semi-annually.
(iii) In order to comply with all applicable federal or state income
tax laws or regulations, the Company may take such action as it deems
appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participating Non-Employee Director, are withheld or
collected from such Director. At any time when a Participating
Non-Employee Director is required to pay the Company an amount required to
be withheld under applicable income tax laws in connection with an Option
granted pursuant to this Section 6(h), such Director may (A) elect to have
the Company withhold a portion of the Shares otherwise to be delivered upon
exercise of such Option with a Fair Market Value equal to the amount of
such taxes (an "Election") or (B) deliver to the Company shares other than
Shares issuable upon exercise of such Option with a Fair Market Value equal
to the amount of such taxes. An Election, if any, must be made on or
before the date that the amount of tax to be withheld is determined. The
Board of Directors may disapprove of any Election, may suspend or terminate
the right to make Elections, may limit the amount of any Election, and may
make rules concerning the required information to be included in any
Election. Participating Non-Employee Directors may only make an Election
in compliance with the Rules established by the Company to comply with
Section 16(b) of the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
SECTION 7. AMENDMENT AND TERMINATION; ADJUSTMENTS.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an Award Agreement or in the Plan:
(a) AMENDMENTS TO THE PLAN. The Board of Directors of the Company
may amend, alter, suspend, discontinue or terminate the Plan; PROVIDED, HOWEVER,
that, notwithstanding any other provision of the Plan or any Award Agreement,
without the approval of the stockholders of the Company, no such amendment,
alteration, suspension, discontinuation or termination shall be made that,
absent such approval:
(i) would cause Rule 16b-3 to become unavailable with respect to the
Plan;
(ii) would violate the rules or regulations of the New York Stock
Exchange, any other securities exchange or the National Association of
Securities Dealers, Inc. that are applicable to the Company; or
(iii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan.
(b) AMENDMENTS TO AWARDS. Except with respect to Awards granted
pursuant to Section 6(h) of the Plan, the Committee may waive any conditions of
or rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Award, prospectively or retroactively, without the
consent of the Participant or holder or beneficiary thereof, except as otherwise
herein provided.
9
(c) CORRECTION OF DEFECTS, OMISSIONS AND INCONSISTENCIES. The
Committee (or, in the case of grants under Section 6(h) of the Plan, the Board
of Directors) may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
SECTION 8. INCOME TAX WITHHOLDING; TAX BONUSES.
(a) WITHHOLDING. In order to comply with all applicable federal or
state income tax laws or regulations, the Company may take such action as it
deems appropriate to ensure that all applicable federal or state payroll,
withholding, income or other taxes, which are the sole and absolute
responsibility of a Participant, are withheld or collected from such
Participant. In order to assist a Participant in paying all or a portion of the
federal and state taxes to be withheld or collected upon exercise or receipt of
(or the lapse of restrictions relating to) an Award, the Committee, in its
discretion and subject to such additional terms and conditions as it may adopt,
may permit the Participant to satisfy such tax obligation by (i) electing to
have the Company withhold a portion of the Shares otherwise to be delivered upon
exercise or receipt of (or the lapse of restrictions relating to) such Award
with a Fair Market Value equal to the amount of such taxes or (ii) delivering to
the Company Shares other than Shares issuable upon exercise or receipt of (or
the lapse of restrictions relating to) such Award with a Fair Market Value equal
to the amount of such taxes. The election, if any, must be made on or before
the date that the amount of tax to be withheld is determined.
(b) TAX BONUSES. The Committee, in its discretion, shall have the
authority, at the time of grant of any Award under this Plan or at any time
thereafter, to approve cash bonuses to designated Participants to be paid upon
their exercise or receipt of (or the lapse of restrictions relating to) Awards
in order to provide funds to pay all or a portion of federal and state taxes due
as a result of such exercise or receipt (or the lapse of such restrictions).
The Committee shall have full authority in its discretion to determine the
amount of any such tax bonus.
SECTION 9. GENERAL PROVISIONS.
(a) NO RIGHTS TO AWARDS. Except as otherwise provided in Section
6(h) of the Plan, no Eligible Person, Participant or other Person shall have any
claim to be granted any Award under the Plan, and there is no obligation for
uniformity of treatment of Eligible Persons, Participants or holders or
beneficiaries of Awards under the Plan. The terms and conditions of Awards need
not be the same with respect to any Participant or with respect to different
Participants.
(b) AWARD AGREEMENTS. No Participant will have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.
(c) NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
(d) NO RIGHT TO EMPLOYMENT. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ, or as
giving a Non-Employee Director the right to continue as a Director, of the
Company or any Affiliate, nor will it affect in any way the right of the Company
or an Affiliate to terminate such employment at any time, with or without cause.
In addition, the Company or an Affiliate may at any time dismiss a Participant
from employment, or terminate the term of a Non-Employee Director, free from any
liability or any claim under the Plan, unless otherwise expressly provided in
the Plan or in any Award Agreement.
10
(e) GOVERNING LAW. The validity, construction and effect of the Plan
or any Award, and any rules and regulations relating to the Plan or any Award,
shall be determined in accordance with the laws of the State of Minnesota.
(f) SEVERABILITY. If any provision of the Plan or any Award is or
becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed applicable by the
Committee (or, in the case of grants under Section 6(h) of the Plan, the Board
of Directors), such provision shall be construed or deemed amended to conform to
applicable laws, or if it cannot be so construed or deemed amended without, in
the determination of the Committee (or, in the case of grants under Section 6(h)
of the Plan, the Board of Directors), materially altering the purpose or intent
of the Plan or the Award, such provision shall be stricken as to such
jurisdiction or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(g) NO TRUST OR FUND CREATED. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliate pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
(h) NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee (or, in the case
of grants under Section 6(h) of the Plan, the Board of Directors) shall
determine whether cash shall be paid in lieu of any fractional Shares or whether
such fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
(i) HEADINGS. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
SECTION 10. EFFECTIVE DATE OF THE PLAN.
The Plan shall be effective as of the date on which it is approved by
the shareholders of the Company.
SECTION 11. TERM OF THE PLAN.
Unless the Plan shall have been discontinued or terminated as provided
in Section 7(a), the Plan shall terminate on the date which is ten years after
the date on which the Plan receives shareholder approval. No Award shall be
granted after the termination of the Plan. However, unless otherwise expressly
provided in the Plan or in an applicable Award Agreement, any Award theretofore
granted may extend beyond the termination of the Plan, and the authority of the
Committee provided for hereunder with respect to the Plan and any Awards, and
the authority of the Board of Directors of the Company to amend the Plan, shall
extend beyond the termination of the Plan.
11