DAYTON HUDSON CORPORATION
EXECUTIVE LONG TERM INCENTIVE PLAN
OF 1981
(AS AMENDED AND RESTATED JANUARY 13, 1999)
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.1 The name of this plan shall be "The Dayton Hudson Corporation
Executive Long Term Incentive Plan of 1981" (hereinafter called the "Plan").
1.2 The purpose of the Plan is to advance the interim performance and
long-term growth of the Company by offering long-term incentives, in addition
to current compensation and other benefits, to those key employees of the
Company and its Subsidiaries who the Plan Committee determines will
contribute to such performance and growth inuring to the benefit of the
shareholders of the Company. Such long-term incentives may take the form of
Stock Options, or Performance Shares, or Restricted Stock Awards or any
combination.
ARTICLE II
DEFINITIONS
2.1 AWARD. An "Award" is used at times in the Plan to refer to the
act of granting a Stock Option, Performance Share or Restricted Stock Award
under the Plan.
2.2 BOARD. "Board" is the Board of Directors of Dayton Hudson
Corporation.
2.3 CODE. "Code" is the Internal Revenue Code of 1986, as amended,
as now in force or as hereafter amended.
2.4 COMPANY. "Company" is Dayton Hudson Corporation, a Minnesota
corporation, and any successor thereof.
2.5 COVERED OFFICER. "Covered Officer" includes all Participants
whose compensation, in the year in which the Award is made, is subject to the
compensation expense deduction limitations set forth in Section 162(m) of the
Code.
2.6 DATE OF GRANT. "Date of Grant" shall be the date designated in
the resolution by the Plan Committee as the date of such Stock Option(s) or
Performance Share(s) or Restricted Stock Award(s), but such date shall not be
earlier than the date of the resolution and action thereon by the Plan
Committee, or earlier than the effective date of the Plan, and in the absence
of a date of grant or a fixed method of computing such date being
specifically set forth in the Plan Committee's resolution, then the Date of
Grant shall be the date of such Plan Committee's resolution and action.
2.7 FAIR MARKET VALUE. "Fair Market Value" of a share of Company
common stock on any date is 100% of the mean between the high and low prices
for such stock as reported for such stock on the New York Stock Exchange
Composite Transactions Listing ("Composite Listing") on such date, or in the
absence of such report 100% of the mean between the high and low prices of
such stock on the New York Stock Exchange on such date or, if no sale has
been recorded on the Composite Listing or made on such Exchange on such date,
then on the last preceding date on which any such sale shall have been made
in the order of primacy above indicated.
2.8 HOLDER. A "Holder" is a person who has been granted a Restricted
Stock Award.
2.9 INCENTIVE STOCK OPTIONS. "Incentive Stock Options" are Stock
Options that are intended to qualify under Section 422 of the Code.
2.10 NON-QUALIFIED OPTIONS. "Non-Qualified Options" are Stock
Options that are not intended to qualify under Section 422 of the Code.
2.11 PARTICIPANT. A "Participant" is a person designated as such by
the Plan Committee, pursuant to Article III hereof, for participation in the
Plan.
2.12 PERFORMANCE GOALS. "Performance Goals" are defined in Section
4.1 hereof.
2.13 PERFORMANCE PERIOD. "Performance Period", with respect to a
Performance Share, is a period of four consecutive fiscal years of the
Company, beginning with the fiscal year in which such Performance Share is
granted and may be referred to herein and by the Plan Committee by use of the
calendar year in which a particular Performance Period commences.
2.14 PERFORMANCE SHARE. A "Performance Share" is a potential award
consisting of a right to one share of the Company's $.3333 par value common
stock (subject to increase as provided in Section 4.2 hereof) or a lesser
number of shares and the cash payment set forth in Section 5.2 hereof. A
Performance Share shall be of no value to a Participant unless and until
earned in accordance with Article V hereof.
2.15 PLAN COMMITTEE. The "Plan Committee" is the Committee
referenced in Article IX hereof.
2.16 PLAN YEAR. The "Plan Year" shall be a fiscal year of the
Company falling within the term of this Plan.
2.17 RELEVANT CHANGE ADJUSTMENTS. Appropriate adjustments in the
number of shares and in the option price per share as authorized herein, may
be made by the Plan Committee, in its discretion (except as provided in
Section 11.8 hereof), to give effect to adjustments made in the number of
shares of Company common stock through a merger, consolidation,
recapitalization, reclassification, combination, spin-off, common stock
dividend, stock split or other relevant change.
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2.18 RESTRICTED STOCK AWARD. A "Restricted Stock Award" is an Award
granted under Article VII of this Plan.
2.19 STOCK OPTION. A "Stock Option" is a right accruing in a
Participant to purchase from the Company one share of the Company's $.3333
par value common stock at the Fair Market Value of such share of common stock
on the Date of Grant of the Stock Option, such exercise of option to be made
any time within ten years and one day (ten years with respect to Incentive
Stock Options) following the Date of Grant, and containing the terms and
conditions set forth or allowed under Article VI hereof. Stock Options may
be either Non-Qualified Options or Incentive Stock Options.
2.20 SUBSIDIARY CORPORATION. For purposes of this Plan, the term
"Subsidiary" or "Subsidiary Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations beginning with the Company,
in which each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain as determined at the point in time when reference
is made to such "Subsidiary" or "Subsidiary Corporation" in this Plan.
2.21 CHANGE IN CONTROL. A "Change in Control" shall be deemed to
have occurred if:
(a) a majority of the directors of the Company shall be persons other
than persons
(i) for whose election proxies shall have been solicited by the
Board or
(ii) who are then serving as directors appointed by the Board to
fill vacancies on the Board caused by death or resignation
(but not by removal) or to fill newly-created
directorships,
(b) 30% or more of the outstanding Voting Stock (as defined in Article
IV of the Restated Articles of Incorporation, as amended, of the
Company) of the Company is acquired or beneficially owned (as
defined in Article IV of the Restated Articles of Incorporation,
as amended, of the Company) by any person (as defined in Article
IV of the Restated Articles of Incorporation, as amended, of the
Company), or
(c) the shareholders of the Company approve a definitive agreement or
plan to
(i) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with
a Subsidiary of the Company or (2) a merger in which the
Company is the surviving corporation and either (A) no
outstanding Voting Stock of the Company (other than
fractional shares) held by shareholders immediately prior
to the merger is converted into cash (except cash upon the
exercise by holders of Voting Stock of the Company of
statutory dissenters' rights), securities, or other
property or (B) all holders of outstanding Voting Stock of
the Company (other than fractional shares) immediately
prior to the merger (except those that exercise statutory
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dissenters' rights) have substantially the same
proportionate ownership of the Voting Stock of the Company
or its parent corporation immediately after the merger),
(ii) exchange, pursuant to a statutory exchange of shares of
Voting Stock of the Company held by shareholders of the
Company immediately prior to the exchange, shares of one or
more classes or series of Voting Stock of the Company for
shares of another corporation or other securities, cash or
other property,
(iii) sell or otherwise dispose of all or substantially all of
the assets of the Company (in one transaction or a series
of transactions) or
(iv) liquidate or dissolve the Company.
ARTICLE III
GRANTING OF STOCK OPTIONS, PERFORMANCE SHARES
AND RESTRICTED STOCK AWARDS TO PARTICIPANTS
3.1 ELIGIBLE EMPLOYEES. Stock Options, Restricted Stock Awards or
Performance Shares may be granted by the Plan Committee to any key employee
of the Company or a Subsidiary Corporation. A Stock Option(s) or Performance
Share(s) or Restricted Stock Award(s) may be granted to a director of the
Company provided that he/she is also at the time of grant a key employee of
the Company or a Subsidiary Corporation. No Stock Option(s) or Performance
Share(s) or Restricted Stock Award(s) shall be granted to a person who is at
the time of award a member of the Plan Committee. A person who has been
engaged by the Company for employment shall be eligible for grants under the
Plan, provided such person actually reports for and commences such employment
within ninety days after the Date of Grant.
3.2 DESIGNATION OF PARTICIPANTS. At any time and from time to time
during the Plan Year, the Plan Committee may designate the key employees of
the Company and its Subsidiaries eligible for Awards.
3.3 ALLOCATION OF STOCK OPTION(S), PERFORMANCE SHARE(S) OR RESTRICTED
STOCK AWARD(S). Contemporaneously with the designation of a Participant
pursuant to Section 3.2 hereof, the Plan Committee shall determine the number
of Stock Option(s) and/or Restricted Stock Award(s) and/or Performance
Share(s) to be granted to such Participant and the Date of Grant for such
related Stock Option or Performance Share or Restricted Stock Award, taking
into consideration such factors as it deems relevant, which may include the
following:
(a) the total number of Stock Option(s) and/or Restricted Stock
Award(s) and/or Performance Share(s) available for allocation to
all Participants; and
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(b) the work assignment or the position of the Participant and its
sensitivity and/or impact in relationship to the profitability and
growth of the Company and its Subsidiaries; and
(c) the Participant's current and potential performance in reference
to such factors.
Allocation of Awards may, in the discretion of the Plan Committee, be in the
form of Stock Option(s) solely or Performance Share(s) solely, or Restricted
Stock Award(s) solely, or any combination in whatever relationship one to the
other, if any, as the Plan Committee in its discretion so determines.
Allocation of Stock Options may, in the discretion of the Plan Committee, be
in the form of Incentive Stock Option(s) solely or Non-Qualified Option(s)
solely or a combination in whatever relationship to the other, if any, as the
Plan Committee in its discretion so determines.
3.4 NOTIFICATION TO PARTICIPANTS AND DELIVERY OF DOCUMENTS. As soon
as practicable after such determinations have been made, each Participant,
shall be notified of (i) his/her designation as a Participant, (ii) the Date
of Grant, and (iii) the number of Stock Option(s), and/or Restricted Stock
Award(s) and/or the number of Performance Share(s) granted to the
Participant, and in the case of Performance Share(s), the Performance Period
and in the case of Restricted Stock Award(s), the Restriction Period. The
Participant shall thereafter be supplied with written evidence of any such
granted Performance Share(s) and/or Restricted Stock Award(s), and shall
receive a Stock Option exercisable for purchase of one share of the Company's
$.3333 par value common stock for each Stock Option granted to the
Participant pursuant to this Plan or indicating the aggregate of such grant,
which option agreement(s) shall be in conformity with the provisions of
Article VI hereof.
ARTICLE IV
PERFORMANCE GOALS AND MAXIMUM AWARD
4.1 ESTABLISHMENT OF GOALS. Within a reasonable period of time after
the beginning of each Performance Period, Performance Goals relative to such
Performance Period shall be established by the Plan Committee in its absolute
discretion. Such Performance Goals may include, but, except as provided
below, are not limited to, criteria such as PTOC, EVA, amount or rate of
growth in consolidated profits of the Company expressed as a percent,
earnings per share, return on capital, return on investment, return on
shareholders' equity. Performance Goals for Covered Officers must be based
upon one or more of the foregoing specifically described performance goals.
Performance Goals may be absolute in their terms or be measured against or in
relationship to other companies comparably, similarly or otherwise situated.
The Plan Committee, in its sole discretion, may modify the Performance Goals
if it determines that circumstances have changed and modification is required
to reflect the original intent of the Performance Goals. The Plan Committee
may in its discretion classify Participants into as many groups as it
determines, and as to any Participant(s) relate his/her Performance Goals
partially, or entirely, to the measured performance, either absolutely or
relatively, of an identified Subsidiary, operating company or test strategy
or new venture of the Company.
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4.2 LEVELS OF PERFORMANCE REQUIRED TO EARN PERFORMANCE SHARES. At or
about the same time that Performance Goals are established for a specific
period, the Plan Committee shall in its absolute discretion establish the
percentage (not to exceed 150% thereof) of the Performance Share(s) granted
for such Performance Period which shall be earned by the Participant for
various levels of performance measured in relation to achievement of
Performance Goals for such Performance Period.
4.3 OTHER RESTRICTIONS. The Plan Committee may provide restrictions
on the delivery of common stock of the Company upon the earning of
Performance Shares, including the future forfeiture of all or part of the
common stock earned. The Plan Committee may provide that the shares of the
Company's .3333 par value common stock issued on Performance Shares Earned be
held in escrow and/or legended.
4.4 NOTIFICATION TO PARTICIPANTS. Promptly after the Plan Committee
has established Performance Goals for a specific Performance Period or
modified such goals, each Participant who has received a grant of any
Performance Share(s) for that period shall be provided with written evidence
of the Performance Goals so established or modified.
4.5 During any Plan Year, no Covered Officer may receive Awards that,
in the aggregate, could result in that Participant receiving, earning or
acquiring more than 1,000,000 shares of the Company's $.3333 par value common
stock, subject to the adjustments described in Section 2.17.
ARTICLE V
EARNING OF PERFORMANCE SHARES
5.1 MEASUREMENT OF PERFORMANCE AGAINST PERFORMANCE GOALS. The Plan
Committee shall as soon as practicable after the close of each Performance
Period, make a determination of:
(a) the extent to which the Performance Goals for such Performance
Period have been achieved;
(b) the percentage of the Performance Shares granted for such
Performance Period which are earned for such Performance Period by
Participants who have been from his/her date of hire in the
continuous employ of the Company or Subsidiary or a combination
thereof, during the subject Performance Period; and
(c) the percentage of Performance Shares to be paid in cash, if any.
The percentage paid in cash shall be uniform for all Participants
in a particular Performance Period.
These determinations shall be absolute and final as to the facts and
conclusions therein made and be binding on all parties. Promptly after the
Plan Committee has made the foregoing determination each Participant who has
earned Performance Share(s) based thereon shall be notified, in writing, of
the number of Performance Shares so earned. For all purposes of this Plan
notice shall be deemed to have been given the date action is taken by the
Plan Committee making the determination.
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5.2 TREATMENT OF PERFORMANCE SHARES EARNED. Upon the determination
that a percentage of the Performance Share(s) has been earned for a
Performance Period, a Participant to whom such earned Performance Share(s)
has been granted and who has been (or was) in the employ of the Company or a
Subsidiary thereof continuously from the date of his/her hire during the
subject Performance Period to which the grant relates, subject to the
exceptions set forth at Section 5.5 and Section 5.6 hereof, shall be
entitled, subject to the other conditions of this Plan, to receive the shares
of the Company's $.3333 par value common stock for each Performance Share
earned (less the shares paid in cash), plus a cash payment in the amount of
the Fair Market Value of the shares of common stock to be paid in cash as
determined in Section 5.1(c) hereof, calculated as of the close of business
on the date of the notice referred to in Section 5.1 hereof. The provisions
of Section 5.5 to the contrary notwithstanding, the Plan Committee may
provide that the issued shares of common stock be held in escrow and/or be
legended and that the common stock be subject to restrictions, including the
future forfeiture of all or a part of the shares. Performance Shares shall
under no circumstances become earned or have any value whatsoever for any
Participant who is not in the employ of the Company or its Subsidiaries
continuously during the entire Performance Period for which such Performance
Shares are granted, except as provided at Section 5.5 or Section 5.6 hereof.
5.3 STOCK-CASH DISTRIBUTION. Each distribution determined in
accordance with Section 5.2 above shall be made as soon as practicable after
Performance Shares have been determined to have been earned unless the
provisions of Section 5.4(a) hereof are applicable to a Participant.
5.4(a) DEFERRAL OF RECEIPT OF PERFORMANCE SHARE EARNOUT. A
Participant who has received a grant of Performance Shares may by compliance
with the then applicable procedures under the Plan irrevocably elect in
writing to defer receipt of all or any part of the stock-cash distribution
associated with the earnout, if any, of the Performance Shares (the
combination thereof hereafter referred to as the "deferred account"). The
deferral shall be effective until the Participant terminates his/her
employment with the Company and its Subsidiaries except as otherwise provided
herein.
The terms and conditions of such deferral, including but not limited
to, the period of time for, and form of, election; the manner and method of
payout; the form in which the deferred account shall be held; the interest
equivalent or other payment that shall accrue upon the deferred account
pending its payout; and the use and form of dividend equivalents in respect
of stock units included within any deferred account, shall be as determined
from time to time by the Plan Committee, which Plan Committee may change any
and all of the terms and conditions at any time applicable to deferrals
thereafter made.
5.4(b) AMENDMENT OF DEFERRAL ARRANGEMENTS. The Plan Committee may,
at any time and from time to time, but prospectively only except as
hereinafter provided, amend, modify, change, suspend or cancel any and all of
the rights, procedures, mechanics and timing parameters relating to the
deferral of receipt of Performance Share earnout under the Plan as set forth
at Section 5.4(a) hereof. In addition, the Plan Committee may, in its sole
discretion, accelerate the payout of the deferred account, or any portion
thereof, either in a lump sum or in a series of payments, but under the
following conditions only:
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(a) the Federal tax statutes, regulations or interpretations are
amended, modified, or otherwise changed or affected in such a
manner as to adversely alter or modify the tax effect of the
"deferred account" as it is comprehended under the tax law and
interpretations in effect for deferred accounts as of the
effective date of this Plan, or
(b) the deferred account holder suffers or incurs an event that would
qualify for a "withdrawal" of contributions that have not been
accumulated for two years without adverse consequences on the tax
status of a qualified profit-sharing or stock bonus plan under the
Federal tax laws applicable from time to time to such types of
plans.
5.5 NON-DISQUALIFYING TERMINATION OF EMPLOYMENT. Except for Section
5.6 hereof, the only exceptions to the requirement of continuous employment
during a Performance Period for Performance Share earnout eligibility are
termination of a Participant's employment by reason of death (in which event
the Performance Shares may be transferable by will or the laws of descent and
distribution only to such Participant's beneficiary designated to receive the
Performance Shares or to the Participant's applicable legal representatives,
heirs or legatees), total and permanent disability, normal or late retirement
or early retirement, with the consent of the Plan Committee, or transfer of
an executive in a spin-off, with the consent of the Plan Committee, occurring
during the Performance Period applicable to the subject Performance share
grant. In such instance an earnout of the Performance Shares shall be made,
as of the end of the Performance Period, and 100% of the total Performance
Shares that would have been earned during the Performance Period shall be
earned and paid out; provided, however, in a spin-off situation the Plan
Committee may set additional conditions, such as, without limiting the
generality of the foregoing, continuous employment with the spin-off entity.
If a Participant's termination of employment does not meet the criteria set
forth above, but the Participant had at least 15 years of continuous
employment with the Corporation or a Subsidiary or any combination thereof,
provided that if the person is not an Executive Officer (as defined under the
Securities Exchange Act of 1934, as amended, and the regulations promulgated
thereunder) of the Corporation at time of termination such 15 years need not
be continuous, the Plan Committee may allow earn-outs of up to 100% of the
total Performance Shares for the Performance Period(s) in which the
termination of employment occurred, subject to any conditions that the Plan
Committee shall determine.
5.6 CHANGE IN CONTROL. In the event of a Change in Control, all
outstanding Performance Shares granted under the Plan shall be proratably
payable ten days after the Change in Control; provided that no Performance
Share shall be payable to a Participant within six months after the Date of
Grant. The amount of Performance Shares payable shall be determined by
multiplying 100% of each Performance Share grant by a fraction, the numerator
of which shall be the number of months that have elapsed in the applicable
Performance Period and the denominator of which shall be forty-eight.
ARTICLE VI
STOCK OPTIONS
6.1 NON-QUALIFIED OPTION. Non-Qualified Options granted under the
Plan are not intended to be Incentive Stock Options under the provisions of
Section 422 of the Code. The Non-Qualified
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Options shall be evidenced by Non-Qualified Option agreements in such form
and not inconsistent with the Plan as the Plan Committee shall in its sole
discretion approve from time to time, which agreements shall specify the
number of shares to which they pertain and the purchase price of such shares
and shall, but without limitation, contain in substance the following terms
and conditions:
(a) OPTION PERIOD. Each option granted shall expire and all rights to
purchase shares thereunder shall cease ten years and one day after
the Date of Grant of the Stock Option or on such date prior
thereto as may be fixed by the Plan Committee, or on such date
prior thereto as is provided by this Plan in the event of
termination of employment or death or reorganization pursuant to
Section 11.8(b) hereof. No option shall permit the purchase of
any shares thereunder during the first year after the Date of
Grant of such option, except as provided in Section 6.3 hereof.
(b) TRANSFERABILITY AND TERMINATION OF OPTIONS. During the lifetime of
an individual to whom an option is granted, the option may be
exercised only by such individual and only while such individual
is an employee of the Company or a Subsidiary and only if the
Participant has been continuously so employed by any one or
combination thereof since the Date of Grant of the option;
provided, however, that if the employment of such Participant by
the Company or a Subsidiary Corporation terminates, the option may
additionally be exercised as follows, or in any other manner
provided by the Plan Committee, but in no event later than 10
years and one day after the Date of Grant of the Stock Option,
except as set forth in (ii) below:
(i) if a Participant's termination of employment occurs by
reason of normal or late retirement under any retirement
plan of the Company or its Subsidiaries, such Participant's
Stock Options may be exercised within five years after the
date of such termination of employment. If a Participant's
termination of employment occurs by reason of early
retirement under any retirement plan of the Company or its
Subsidiaries, or, by reason of the transfer of an executive
in a spin-off, or by reason of total and permanent
disability, as determined by the Plan Committee, without
retirement, then such Participant's Stock Options shall be
exercisable for a period of up to five years after the date
of such termination of employment if the Plan Committee
consents to such an extension. During the extension period
the right to exercise options, if any, accruing in
installments, shall continue; provided, however, in an
early retirement or a spin-off situation the Plan Committee
may set additional conditions, such as, without limiting
the generality of the foregoing, an agreement to not
provide services to a competitor of the Company and its
Subsidiaries and/or continuous employment with the spin-off
entity.
(ii) if a Participant's termination of employment occurs by
reason of death, then within five years after the date of
death or the life of the option, whichever is
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less, but in no event less than one year after the date of
death, during which time installments shall continue to
accrue.
(iii) if a Participant's termination of employment occurs for any
reason other than as specified in Section 6.1(b)(i) or (ii)
hereof, the Participant has been continuously employed by
the Company or a Subsidiary or any combination for more
than 15 years, provided that if the person is not an
Executive Officer (as defined under the Securities Exchange
Act of 1934, as amended, and the regulations promulgated
thereunder) of the Corporation at the time of termination
such 15 years need not be continuous, and if the Plan
Committee so approves, then within a period of up to five
years after the date of termination of employment. During
the period the right to exercise options, if any, accruing
in installments shall continue; provided, however, the Plan
Committee may set additional conditions.
(iv) if a Participant's termination of employment occurs for any
reason other than as specified in Section 6.1(b)(i) or (ii)
hereof, the Plan Committee has not approved an extension
pursuant to Section 6.1(b)(iii) and Participant's
termination of employment is not occasioned by the
commission of a dishonest or other illegal act, then, but
only with respect to installments that have as of the date
of termination already accrued, within ninety days after
the date of such termination of employment except in the
case of Participants who would at the time be subject to
the provisions of Section 16(b) of the Securities Exchange
Act of 1934, in which instance the period of exercise shall
be two hundred ten days after termination. Those
Participants terminated because of the commission of a
dishonest or other illegal act shall have no additional
period after termination of employment in which to exercise
their options. Absence on a leave of absence approved by
the Plan Committee shall not be deemed a termination or
interruption of continuous employment for the purposes of
the Plan.
(v) Rights accruing to a Participant under the aforesaid
Subsections (b)(i), (b)(iii) and (b)(iv) may, upon the
death of a Participant subsequent to his/her termination of
employment, be exercised or perfected by his/her duly
designated beneficiary or otherwise by his/her applicable
legal representatives, heirs or legatees to the extent
vested in and unexercised or perfected by the Participant
at the date of his/her death.
No option shall be assignable or transferable by the
individual to whom it is granted, except that it may be
transferable by will or the laws of descent and
distribution in accordance with the provisions of the Plan.
An option, if so transferable, may be exercised after the
death of the individual to whom it is granted only by such
individual's beneficiary designated to exercise the option
or otherwise by his/her applicable legal representatives,
heirs or legatees, and only within the specific time period
set forth above.
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In no event whether by the Participant directly or by
his/her beneficiary or other representative shall any
option be exercisable at any time after its expiration date
as stated in the option agreement. When an option is no
longer exercisable it shall be deemed for all purposes and
without further act to have lapsed and terminated. The
Plan Committee may in its sole discretion, but shall not be
required to, determine, solely for the purposes of the
Plan, that a Participant is permanently and totally
disabled and the acts and decisions of the Plan Committee
made in good faith in relation to any such determination
shall be conclusive upon all persons and interests affected
thereby.
(c) EXERCISE OF OPTIONS. An individual entitled to exercise an option
may, subject to its terms and conditions and the terms and
conditions of the Plan, exercise it in whole at any time, or in
part from time to time, by delivery to the Company at its
principal office of written notice of exercise, specifying the
number of whole shares with respect to which the option is being
exercised. Before shares may be issued payment must be made in
full, in legal United States tender, in the amount of the purchase
price of the shares to be purchased at the time and any amounts
for withholding as provided in Section 11.9 hereof; provided,
however, in lieu of paying for the exercise price in cash as
described above, the individual may pay (subject to such
conditions and procedures as the Plan Committee may establish) all
or part of such exercise price by delivering owned and
unencumbered shares of the Company common stock having a Fair
Market Value on the date of exercise of the option equal to or
less than the exercise price of the options exercised, with cash,
as set forth above, for the remainder, if any, of the purchase
price. Subject to rules established by the Plan Committee, the
withholdings required by Section 11.9 hereof may be satisfied by
the Company withholding shares of Company common stock issued on
exercise that have a Fair Market Value on the date of exercise of
the option equal to or less than the withholding required by
Section 11.9 hereof.
6.2 INCENTIVE STOCK OPTION. Incentive Stock Options granted under
the Plan are intended to be incentive stock options under Section 422 of the
Code and the Plan shall be administered, except with respect to the right to
exercise options after termination of employment, to qualify Incentive Stock
Options issued hereunder as incentive stock options under Section 422 of the
Code. An Incentive Stock Option shall not be granted to an employee who
owns, or is deemed under Section 424(d) of the Code to own, stock of the
Company (or of any parent or Subsidiary of the Company) possessing more than
10% of the total combined voting power of all classes of stock therein. The
aggregate Fair Market Value (determined as of the time the option is granted)
of the stock with respect to which Incentive Stock Options are exercisable
for the first time by any Participant during any calendar year (under all
incentive stock option plans of the Company or any parent or Subsidiary of
the Company) shall not exceed $100,000. The Incentive Stock Options shall be
evidenced by Incentive Stock Option Agreements in such form and not
inconsistent with the Plan as the Plan Committee shall in its sole discretion
approve from time to time, which agreements shall specify the number of
shares to which they pertain and the purchase price of such shares.
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The terms and conditions set forth in Subsections (a) through (c) of
Section 6.1 hereof shall apply to an Incentive Stock Option; provided that
the term of the Incentive Stock Option shall not exceed ten years; and
provided, further, that in the event Section 6.1(b)(i) hereof is applicable,
all installments shall become immediately exercisable.
6.3 CHANGE IN CONTROL. In the event of a Change in Control, all
outstanding options granted under the Plan shall accelerate and will be
exercisable in full for a period of two hundred ten (210) days after the
Change in Control; provided that no option shall be exercisable by a
Participant (i) within six months after the Date of Grant of the option or
(ii) after the termination date of the option.
ARTICLE VII
RESTRICTED STOCK
7.1 RESTRICTION PERIOD TO BE ESTABLISHED BY THE PLAN COMMITTEE. At
the time a Restricted Stock Award is made, the Plan Committee shall establish
a period of time (the "Restriction Period") applicable to such Award, which
shall be not less than three years. Each Restricted Stock Award may have a
different Restriction Period, at the discretion of the Plan Committee.
Except as permitted or pursuant to Sections 7.4, 7.5 or 11.8 hereof, the
Restriction Period applicable to a particular Restricted Stock Award shall
not be changed.
7.2 OTHER TERMS AND CONDITIONS. Company common stock awarded
pursuant to a Restricted Stock Award shall be represented by a stock
certificate registered in the name of the Holder of such Restricted Stock
Award. The Holder shall have the right to enjoy all shareholder rights
during the Restriction Period with the exception that:
(i) The Holder shall not be entitled to delivery of the stock
certificate until the Restriction Period shall have expired.
(ii) The Company may either issue shares subject to such restrictive
legends and/or stop-transfer instructions as it deems appropriate
or provide for retention of custody of the Company common stock
during the Restriction Period.
(iii) The Holder may not sell, transfer, pledge, exchange, hypothecate
or otherwise dispose of the Company common stock during the
Restriction Period.
(iv) A breach of the terms and conditions established by the Plan
Committee pursuant to the Restricted Stock Award shall cause a
forfeiture of the Restricted Stock Award, and any dividends
withheld thereon.
(v) Dividends payable in cash or in shares of stock or otherwise may
be either currently paid or withheld by the Company for the
Holder's account. At the discretion of the Plan Committee,
interest may be paid on the amount of cash dividends withheld,
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including cash dividends on stock dividends, at a rate and subject
to such terms as determined by the Plan Committee.
Provided, however, and the provisions of Section 7.4 to the contrary
notwithstanding, in lieu of the foregoing, the Plan Committee may provide
that no shares of common stock be issued until the Restriction Period is over
and further provide that the shares of common stock issued after the
Restriction Period has been completed, be issued in escrow and/or be legended
and that the common stock be subject to restrictions including the forfeiture
of all or a part of the shares.
7.3 PAYMENT FOR RESTRICTED STOCK. A Holder shall not be required to
make any payment for Company common stock received pursuant to a Restricted
Stock Award, unless the Plan Committee requires payment for such stock in the
Restricted Stock Award.
7.4 FORFEITURE PROVISIONS. Subject to Section 7.5, in the event a
Holder terminates employment during a Restriction Period, a Restricted Stock
Award will be forfeited; provided, however, when the Plan Committee issues
the Restricted Stock Award, it may provide in the Restricted Stock Award
agreement for proration or full payout in the event of a termination of
employment because of normal or late retirement, early retirement or spin-off
with the consent of the Plan Committee, or death or total and permanent
disability, as determined by the Plan Committee, or termination of employment
after 15 years of continuous employment with the Corporation or a Subsidiary
or any combination thereof, provided that if the person is not an Executive
Officer (as defined under the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder) of the Corporation at the time of
termination such 15 years need not be continuous, subject to any other
conditions the Plan Committee may determine.
7.5 CHANGE IN CONTROL. In the event of a Change in Control, all
outstanding Restricted Stock Awards granted under the Plan will be proratably
payable ten days after the Change in Control; provided that no Restricted
Stock Award shall be payable to a Participant within six months after the
Date of Grant. The amount of Company common stock payable shall be
determined by multiplying each Restricted Stock Award granted by a fraction,
the numerator of which shall be the number of months that have elapsed in the
applicable Restriction Period and the denominator of which shall be the
number of months in the Restriction Period.
ARTICLE VIII
SHARES OF STOCK SUBJECT TO THE PLAN
8.1 The total number of shares that may be available for issuance
under all Performance Shares, Stock Options and Restricted Stock Awards
granted pursuant to the Plan shall not exceed in the aggregate 18,600,000
shares of the Company's $.3333 par value common stock. Shares covered by
granted Performance Shares which are not earned pursuant to any of the
provisions of Article V hereof, or Stock Options or Performance Shares or
Restricted Stock Awards which are forfeited for any reason or are not
distributed or are covered by options that lapse or are cancelled before
exercise, shall (unless the Plan shall have been terminated) again be
available in the same relative amounts for other Performance Share,
Restricted Stock Award and Stock Option grants under the Plan (except for
shares for which cash equivalent payments are received by Participants
pursuant to
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the Plan), except that 660,825 shares for Stock Options, Performance Shares
or Restricted Stock Awards that were outstanding on April 10, 1991 that are
not earned or are forfeited for any reason or are not distributed or lapse or
are cancelled before exercise shall be available for future grants and any
additional shares for Stock Options, Performance Shares or Restricted Stock
Awards that were outstanding on April 10, 1991 that are not earned or are
forfeited for any reason or are not distributed or lapse or are cancelled
before exercise shall not be available for future Performance Shares,
Restricted Stock Awards or Stock Option Grants. Such shares may be
authorized and unissued shares, or may be treasury shares held by the Company
or may be shares purchased or held by the Company or a Subsidiary for
purposes of the Plan, or any combination thereof.
ARTICLE IX
ADMINISTRATION OF THE PLAN
9.1 The Plan will be administered by a committee of the Board
appointed from time to time by the Board. Each member of the committee shall
be a "non-employee director" as that term is defined under Rule 16b-3,
promulgated under the Securities Exchange Act of 1934, as amended, or any
successor statute or regulation comprehending the same subject matter.
9.2 The Plan Committee shall have and exercise all of the powers and
responsibilities granted expressly or by implication to it by the provisions
of the Plan. Subject to and as limited by such provisions, the Plan
Committee may from time to time enact, amend and rescind such rules,
regulations and procedures with respect to the administration of the Plan as
it deems appropriate or convenient.
9.3 All questions arising under the Plan, any Incentive Stock Option,
Non-Qualified Stock Option, Performance Share or Restricted Stock Award
agreement, or any rule, regulation or procedure adopted by the Plan Committee
shall be determined by the Plan Committee, and its determination thereof
shall be conclusive and binding upon all parties.
9.4 Any action required or permitted to be taken by the Plan
Committee under the Plan shall require the affirmative vote of a majority of
a quorum of the members of the Plan Committee. A majority of all members of
the Plan Committee shall constitute a "quorum" for Plan Committee business.
The Plan Committee may act by written determination instead of by affirmative
vote at a meeting, provided that any written determination shall be signed by
all members of the Plan Committee, and any such written determination shall
be as fully effective as a majority vote of a quorum at a meeting.
ARTICLE X
REDUCTION IN AWARDS
10.1 Anything in this Plan to the contrary notwithstanding, the
provisions of this Article X shall apply to a Participant if Ernst & Young
determines that each of (a) and (b) below are applicable.
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(a) Payments or distributions hereunder, determined without
application of this Article X, either alone or together with other
payments in the nature of compensation to the Participant which
are contingent on a change in the ownership or effective control
of the Company, or in the ownership of a substantial portion of
the assets of the Company, or otherwise (but after any elimination
or reduction of such payments under the terms of the Company's
Income Continuance Policy Statement or SMG Income Continuance
Policy Statement), would result in any portion of the payments
hereunder being subject to an excise tax on excess parachute
payments imposed under Section 4999 of the Code.
(b) The excise tax imposed on the Participant under Section 4999 of
the Code on excess parachute payments, from whatever source, would
result in a lesser net aggregate present value of payments and
distributions to the Participant (after subtraction of the excise
tax) than if payments and distributions to the Participant were
reduced to the maximum amount that could be made without incurring
the excise tax.
10.2 Under this Article X the payments and distributions under this
Plan shall be reduced (but not below zero) so that the present value of such
payments and distributions shall equal the Reduced Amount. The "Reduced
Amount" (which may be zero) shall be an amount expressed in present value
which maximizes the aggregate present value of payments and distributions
under this Plan which can be made without causing any such payment to be
subject to the excise tax under Section 4999 of the Code. The determinations
and reductions under this paragraph shall be made after eliminations or
reductions, if any, have been made under the Company's Income Continuance
Policy Statement or SMG Income Continuance Policy Statement.
10.3 If Ernst & Young determines that this Article X is applicable to a
Participant, it shall so advise the Plan Committee. The Plan Committee shall
then promptly give the Participant notice to that effect together with a copy of
the detailed calculation supporting such determination which shall include a
statement of the Reduced Amount. The Participant may then elect, in his/her
sole discretion, which and how much of the Stock Options, Restricted Stock
Awards and/or Performance Shares otherwise awarded under this Plan shall be
eliminated or reduced (as long as after such election the aggregate present
value of the remaining Stock Options, Restricted Stock Awards and/or Performance
Shares under this Plan equals the Reduced Amount), and shall advise the Plan
Committee in writing of his/her election within ten days of his/her receipt of
notice. If no such election is made by the Participant within such ten-day
period, the Plan Committee may elect which and how much of the Stock Options,
Restricted Stock Awards, and/or Performance Shares shall be eliminated or
reduced (as long as after such election their aggregate present value equals the
Reduced Amount) and shall notify the Participant promptly of such election. For
purposes of this Article X, present value shall be determined in accordance with
Section 280G of the Code. All the foregoing determinations made by Ernst &
Young under this Article X shall be made as promptly as practicable after it is
determined that parachute payments will be made to the Participant if an
elimination or reduction is not made. As promptly as practicable following the
election hereunder, the Company shall provide to or for the benefit of the
Participant such amounts and shares as are then due to the Participant under
this Plan and shall promptly provide to or for the
15
benefit of the Participant in the future such amounts and shares as become
due to the Participant under this Plan.
10.4 As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by Ernst & Young
hereunder, it is possible that payments or distributions under this Plan will
have been made which should not have been made ("Overpayment") or that
additional payments or distributions which will have not been made could have
been made ("Underpayment"), in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that Ernst & Young, based upon
the assertion of a deficiency by the Internal Revenue Service against the
Company or the Participant which Ernst & Young believes has a high
probability of success, determines that an Overpayment has been made, any
such Overpayment shall be treated for all purposes as a loan to the
Participant which the Participant shall repay together with interest at the
applicable Federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Participant if and
to the extent such payment would not reduce the amount which is subject to
the excise tax under Section 4999 of the Code. In the event that Ernst &
Young, based upon controlling precedent, determines that an Underpayment has
occurred, any such Underpayment shall be promptly paid to or for the benefit
of the Participant together with interest at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code.
10.5 In making its determination under this Article X, the value of
any non-cash benefit shall be determined by Ernst & Young in accordance with
the principles of Section 280G(d)(3) of the Code.
10.6 All determinations made by Ernst & Young under this Article X
shall be binding upon the Company, the Plan Committee and the Participant.
ARTICLE XI
GENERAL PROVISIONS
11.1 AMENDMENT OR TERMINATION. The Board may at any time amend,
suspend, discontinue or terminate the Plan (including the making of any
necessary enabling, conforming and procedural amendments to the Plan to
authorize and implement the granting of qualified Stock Options or other
income tax preferred stock options which may be authorized by enactment of
the United States Congress and/or the Internal Revenue Service subsequent to
the effective date of this Plan); provided, however, that no amendment by the
Board shall, without further approval of the shareholders of the Company:
(a) except as provided at Section 2.17 hereof, increase the total
number of shares of Company common stock which may be made subject
to the Plan; or
(b) except as provided at Section 2.17 hereof, change the purchase
price of Company common stock under the Plan; or
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(c) materially modify the class of employees that are eligible to
receive Stock Options and/or Performance Shares and/or Restricted
Stock Awards pursuant to the Plan.
No action taken pursuant to this Section 11.1 of the Plan shall, without the
consent of a Participant, alter or impair any Performance Share(s) or Stock
Option(s) or Restricted Stock Award(s) which have been previously granted to
a Participant.
11.2 NON-ALIENATION OF RIGHTS AND BENEFITS. Except as expressly
provided herein, no right or benefit under the Plan shall be subject to
anticipation, alienation, sale, assignment, pledge, encumbrance or charge and
any attempt to anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such right or benefit. If any Participant or beneficiary
hereunder should become bankrupt or attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge any right or benefit hereunder, then such
right or benefit shall, in the sole discretion of the Plan Committee, cease
and in such event the Company may hold or apply the same or any or no part
thereof for the benefit of the Participant or beneficiary, his/her spouse,
children or other dependents or any of them in any such manner and in such
proportion as the Plan Committee in its sole discretion may deem proper.
11.3 NO RIGHTS AS SHAREHOLDER. The granting of Performance Share(s)
and/or Stock Option(s) and/or Restricted Stock Award(s) under the Plan shall
not entitle a Participant or any other person succeeding to his/her rights,
to any dividend, voting or other right as a shareholder of the Company unless
and until the issuance of a stock certificate to the Participant or such
other person pursuant to the provisions of the Plan and then only subsequent
to the date of issuance thereof.
11.4 LIMITATION OF LIABILITY OR OBLIGATION OF THE COMPANY. As
illustrative only of the limitations of liability or obligation of the
Company and not intended to be exhaustive thereof, nothing in the Plan shall
be construed:
(a) to give any employee of the Company any right to be granted any
Stock Option and/or Performance Share and/or Restricted Stock
Award other than at the sole discretion of the Plan Committee;
(b) to give any Participant any rights whatsoever with respect to
shares of the Company's $.3333 par value common stock except as
specifically provided in the Plan;
(c) to limit in any way the right of the Company or any Subsidiary to
terminate, change or modify, with or without cause, the employment
of any Participant at any time; or
(d) to be evidence of any agreement or understanding, express or
implied, that the Company or any Subsidiary will employ any
Participant in any particular position at any particular rate of
compensation or for any particular period of time.
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11.5 GOVERNMENT REGULATIONS. Notwithstanding any other provisions of
the Plan seemingly to the contrary, the obligation of the Company with
respect to Performance Shares, Stock Options or Restricted Stock Awards
granted under the Plan shall at all times be subject to any and all
applicable laws, rules, and regulations and such approvals by any government
agencies as may be required or deemed by the Board or Plan Committee as
reasonably necessary or appropriate for the protection of the Company.
In connection with any sale, issuance or transfer hereunder, the
Participant acquiring the shares shall, if requested by the Company give
assurances satisfactory to counsel of 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 may deem
desirable to assure compliance with all applicable legal requirements.
11.6 NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board nor the submission of the Plan to shareholders of the Company
for approval shall be construed as creating any limitations on the power or
authority of the Board to adopt such other or additional incentive or other
compensation arrangements of whatever nature as the Board may deem necessary
or desirable or preclude or limit the 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 lawfully put into effect, including, without
limitation, any retirement, pension, savings, profit sharing or stock
purchase plan, insurance, death and disability benefits, and executive short
term incentive plans.
11.7 EFFECTIVE DATE. Subject to the approval of this restated Plan
by the holders of a majority of the voting power of the shares present and
entitled to vote at the Company's Annual Meeting of Shareholders to be held
May 21, 1997 and any necessary approval being obtained from any department,
board or agency of the United States or states having jurisdiction, the Plan
shall be effective as of May 21, 1997.
11.8 REORGANIZATION. In case the Company is merged or consolidated
with another corporation, or in case the property or stock of the Company is
acquired by another corporation, or in case of a separation, reorganization
or liquidation of the Company, the Plan Committee or a comparable committee
of any corporation assuming the obligations of the Company hereunder, shall
either:
(a) make appropriate provision for the protection of any outstanding
Performance Shares, Stock Options and Restricted Stock Awards
granted thereunder by the substitution on an equitable basis of
appropriate stock of the Company, or of the merged, consolidated
or otherwise reorganized corporation which will be issuable in
respect to the shares of the Company's $.3333 par value common
stock. Stock to be issued pursuant to such Performance Shares
shall be limited so that the excess of the aggregate fair market
value of the shares subject to the Performance Shares immediately
after such substitution over the purchase price thereof is not
more than the excess of the aggregate fair market value of the
shares subject to such
18
Performance Shares immediately before such substitution over the
purchase price thereof; or
(b) upon written notice to the Participant, provide that all
Performance Shares granted to the Participant are deemed earned,
that the Restriction Period of all Restricted Stock Awards has
been eliminated and that all outstanding Stock Options shall
accelerate and become exercisable in full but that all outstanding
Stock Options, whether or not exercisable prior to such
acceleration, must be exercised within not less than sixty days of
the date of such notice or they will be terminated. In any such
case the Plan Committee may, in its discretion, extend the
sixty-day exercise period.
11.9 WITHHOLDING TAXES, ETC. All distributions under the Plan shall
be subject to any required withholding taxes and other withholdings and, in
case of distributions in Company common stock, the Participant or other
recipient may, as a condition precedent to the delivery of the common stock,
be required to pay to his/her participating employer the excess, if any, of
the amount of required withholding over the withholdings, if any, from any
distributions in cash under the Plan. No distribution under the Plan shall
be made in fractional shares of the Company's common stock, but the
proportional market value thereof shall be paid in cash.
11.10 GENERAL RESTRICTION. Each Performance Share, Stock Option and
Restricted Stock Award shall be subject to the requirement that, if at any
time the Board shall determine, in its discretion, that the listing,
registration or qualification of the shares subject to such option and/or
right upon any securities exchange or under any state or Federal Law, or the
consent or approval of any government regulatory body, is necessary or
desirable as a condition of, or in connection with the granting of such
Performance Share or Stock Option or Restricted Stock Award or the issue or
purchase of shares respectively thereunder, such Performance Share or Stock
Option or Restricted Stock Award may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Board.
11.11 USE OF PROCEEDS. The proceeds derived from the sale of the
stock pursuant to Stock Options or Restricted Stock Awards granted under the
Plan shall constitute general funds of the Company.
11.12 HEADINGS. The headings of the Articles and their subparts in
this Plan are for convenience of reading only and are not meant to be of
substantive significance and shall not add to or detract from the meaning of
such Article or subpart to which it refers.
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