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ECOLAB INC.
1977 STOCK INCENTIVE PLAN
As Amended and Restated Through
May 12, 2000
1. Purposes
The purposes of the Plan are to provide additional incentive for such
Key Employees of the Company, its subsidiaries and divisions, as may be
designated for participation in the Plan, by authorizing payment of
incentive compensation in shares of Common Stock and by encouraging
such Key Employees to invest in shares of Common Stock, thereby
furthering their identity of interest with the interest of the
Company's stockholders, increasing their stake in the future growth and
prosperity of the Company and stimulating and sustaining constructive
and imaginative thinking; and to enable the Company, by offering
comparable incentives, to induce the employment and continued
employment of Key Employees and to compete with other organizations in
attracting and retaining the services of competent executives.
2. Definitions
Unless otherwise required by the context, the following terms, when
used in the Plan, shall have the meanings set forth in this section 2.
Amendment Agreement: An agreement entered into between the Corporation
and an employee of the Corporation or a Subsidiary in order to amend a
Stock Incentive agreement relating to the Plan.
Board of Directors or Board: The Board of Directors of the Company.
Committee: Such committee or committees as shall be appointed by the
Board of Directors to administer the Plan pursuant to the provisions of
section 10.
Common Stock: The Common Stock of the Company, par value $1.00 per
share, or such other class of shares or other securities as may be
applicable pursuant to the provisions of section 8.
Company: Ecolab Inc., a Delaware corporation.
Fair Market Value: As applied to any date, shall be the mean of the
high and low selling prices of Common Stock, as reported on the
principal stock exchange on which such stock is listed and traded, or
if the stock is not listed on an exchange, then Fair Market Value shall
be the mean of the representative bid and asked quotations for such
stock in the over-the-counter market on such date, or if no such sales
were made on such date, on the next preceding date on which there
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were such sales of Common Stock on such Exchange or in the
over-the-counter market, provided, however, that if such method of
determining Fair Market Value shall not be consistent with regulations
of the Treasury Department at the time applicable to the determination
of Fair Market Value in respect of a Stock Incentive, Fair Market Value
in the case of such Stock Incentive shall be determined in accordance
with such regulations and shall mean the value as so determined.
ISO: An Option which is intended to qualify as an incentive stock
option under Section 422A of the Internal Revenue Code.
Key Employee: An employee of the Company or of a Subsidiary, including
an officer or director who is an employee, who in the opinion of the
Committee can contribute significantly to the growth and successful
operations of the Company or a Subsidiary. The recommendation of the
grant of a Stock Incentive to an employee by the Committee shall be
deemed a determination by the Committee that such employee is a Key
Employee.
Nonqualified Stock Option: An Option which is not intended to qualify
as an incentive stock option under Section 422A of the Internal Revenue
Code.
Option: A Nonqualified Stock Option or an ISO.
Plan: The Ecolab Inc. 1977 Stock Incentive Plan herein set forth as the
same may from time to time be amended.
Stock Appreciation Right: A right to receive a number of shares of
Common Stock or, at the election of the Company, cash, in either event
based on the increase in the Fair Market Value of the number of shares
of Common Stock subject to such right as set forth in section 6.
Stock Award: An issuance or transfer of shares of Common Stock or an
undertaking to issue or transfer such shares in the future as set forth
in section 7.
Stock Incentive: An incentive granted under the Plan in one of the
forms provided for in section 3.
Subsidiary: A corporation or other form of business association of
which shares (or other ownership interests) having 50% or more of the
voting power are owned or controlled, directly or indirectly, by the
Company. Provided, that for the purpose of the continued effectiveness
of Stock Incentives granted to Key Employees of the Corporation or a
Subsidiary prior to the employment of such Key Employees by a joint
venture entity organized by the Corporation and Henkel KGaA ("the Joint
Venture Entities"), such Joint Venture Entities, for such initial
period as the Corporation, directly or indirectly, owns or controls
shares or other ownership interests having 20% or
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more of the voting power of such Joint Venture Entity, shall be deemed
to be a Subsidiary with respect to such Key Employees who have entered
into an Amendment Agreement with terms and conditions satisfactory to
the General Counsel of the Corporation.
3. Grants of Stock Incentives
(a) Subject to the provisions of the Plan, the Committee may at
any time, or from time to time, grant Stock Incentives under
this Plan to, and only to, Key Employees, provided, however,
that no Stock Incentive shall be granted to a Key Employee who
at the time of such grant is a member of the Board of
Directors except by or upon the recommendation of the
Committee, or by a majority of disinterested members of the
Board as provided in paragraph (b) of section 10.
(b) Stock Incentives may be granted in the following forms:
(i) an Option, which may be an ISO or a Nonqualified
Stock Option, in accordance with section 5, or
(ii) a Stock Appreciation Right or Limited Right, in
accordance with section 6, or
(iii) a Stock Award, in accordance with section 7, or
(iv) a combination of any of the foregoing.
4. Stock Subject to the Plan
(a) Subject to the provisions of paragraph (c) of this section 4
and of section 8, the aggregate number of shares of Common
Stock which may be issued or transferred pursuant to Stock
Incentives granted under the Plan shall not exceed 2,382,115
shares of Common Stock.
(b) Authorized but unissued shares of Common Stock and shares of
Common Stock held in the treasury, whether acquired by the
Company specifically for use under the Plan or otherwise, may
be used, as the Board of Directors may from time to time
determine, for purposes of the Plan, provided, however, that
any shares acquired or held by the Company for the purposes of
the Plan shall be and at all times remain treasury shares of
the Company, irrespective of whether such shares are entered
in a special account for purposes of the Plan, and shall be
available for any corporate purpose unless and until
transferred to a Key Employee in accordance with the terms and
conditions of a Stock Incentive.
(c) If any shares of Common Stock subject to a Stock Incentive
shall not be issued or transferred and shall cease to be
issuable or transferable because of the termination, in whole
or in part, of such Stock Incentive or, subject to the
provisions of paragraph (h) of section 5 and paragraph (d) of
section
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6, for any other reason, or if any such shares shall, after
issuance or transfer, be reacquired by the Company or a
Subsidiary because of an employee's failure to comply with the
terms and conditions of a Stock Incentive, the shares not so
issued or transferred, or the shares so reacquired by the
Company or a Subsidiary, shall no longer be charged against
the limitation provided for in paragraph (a) of this section 4
and may again be made subject to Stock Incentives.
5. Options
Stock Incentives in the form of Options shall be subject to the
following provisions:
(a) The per share Option exercise price shall be determined by the
Committee from time to time, but in no instance shall be less
than the Fair Market Value of a share of Common Stock on the
date the Option shall be granted.
(b) Each Option shall expire at such time as is determined by the
Committee, which determination shall be made at the time such
Option is granted. No ISO shall expire later than ten years
from the date such ISO shall be granted, and no Nonqualified
Stock Option shall expire more than ten years and three months
from the date such Nonqualified Stock Option shall be granted.
When an Option is granted for a term of less than the maximum
term specified in the foregoing sentence, the Committee may,
with the holder's consent and at any time prior to the
expiration of the Option, extend its term for a period which,
when added to the original term of the Option, shall not be
longer than such maximum term.
(c) The Option may be exercised solely by the person to whom
granted except as hereinafter provided in the case of such
person's death or in Section 11(g) below. Except as provided
in Section 11(g), during the lifetime of the optionee, the
Option and any rights and privileges pertaining thereto shall
not be transferred, assigned, pledged or hypothecated in any
way, whether by operation of law or otherwise, and shall not
be subject to execution, attachment or similar process.
(d) The optionee must complete twelve months of continuous
employment with the Company or a Subsidiary, or both,
immediately following the date on which the Option shall be
granted before any part of the Option may be exercised by him.
Whether authorized leave of absence or absence for military or
government service shall constitute termination of employment
or interruption of continuous employment for the purposes of
the Plan shall be determined by the Committee on an individual
basis.
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(e) After the completion of the required period of employment, and
subject to the terms of the Option, the Option may be
exercised, in whole or in part, from time to time during the
balance of the term of the Option. The Committee may, in its
discretion, accelerate the date on which all or any portion of
an Option becomes exercisable, provided, however, that no ISO
granted prior to January 1, 1987 shall be exercisable while
there is outstanding any incentive stock option which was
granted before the granting of such ISO, to purchase stock in
the Company or in a corporation which at the date of such ISO
is a parent or subsidiary of the Company or the predecessor of
any such corporation.
(f) The Option shall terminate if and when the optionee shall
cease to be an employee of the Company or its Subsidiaries,
except as follows:
(i) If employment of the optionee by the Company or its
Subsidiaries shall be terminated, upon the retirement
or disability of the optionee under a retirement,
pension or disability plan approved by the Board or
the Committee, after he shall have completed twelve
months of continuous employment following the date
upon which the Option was granted, then the Option
shall be exercisable within such period as shall be
set forth in the Option grant, but not later than
three years after the date of termination of
employment and not after the expiration of the
specific period fixed in the Option grant as in
effect at the time.
(ii) If the optionee shall die while in the employ of the
Company or a Subsidiary, or within three months of
the termination of his employment with the Company or
its Subsidiaries after he shall have completed twelve
months of continuous employment following the date
upon which the Option was granted, then the Option
shall be exercisable within such period as shall be
set forth in the Option grant by such person or
persons as shall have acquired the optionee's rights
under the Option by Will or by the laws of descent
and distribution, but not later than three years
after the date of death and not after the expiration
of the specific period fixed in the Option grant as
in effect at the time.
(iii) If employment of the optionee by the Company or its
Subsidiaries shall have terminated for any reason
other than those specified in subparagraphs (f)(i)
and (f)(ii) above and after he shall have completed
at least twelve months of continuous employment
following the date upon which the Option is granted,
subject to subparagraph (f)(ii) above, the Option
shall be exercisable by him only within the three
months after such termination, but not after the
expiration of the term of the Option.
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(g) (i) Shares purchased under the Option shall be paid for
in full, in cash or such other forms of payment as
are approved by the Committee, at the time of the
exercise of the Option as to such shares, including,
but not limited to, by tender or attestation as to
ownership of shares of Common Stock that have been
held for the period of time necessary to avoid a
charge to the Company's earnings for financial
reporting purposes and that are otherwise acceptable
to the Committee. For purposes of such payment, any
shares so tendered or covered by an attestation will
be valued at their Fair Market Value on the exercise
date.
(ii) The Committee may, in its sole discretion, permit an
optionee to exercise an Option (other than an ISO
granted prior to May 12, 1988) by delivering to the
Company a properly executed Broker Exercise Notice in
form and substance acceptable to the Committee. This
Broker Exercise Notice shall contain irrevocable
instructions from the optionee to the Company to
issue to a broker the stock certificates for the
shares to be purchased upon exercise of the Option,
and the Company shall, if the Committee decides to
permit the Option to be exercised in this manner,
acknowledge to the broker that the Company consents
to such procedure. In addition, the Broker Exercise
Notice shall contain or be accompanied by irrevocable
instructions from the optionee to such broker to sell
a number of shares of Common Stock, or loan to the
optionee an amount, sufficient to pay the exercise
price of the Option and any withholding obligations
due upon such exercise and to promptly deliver to the
Company the amount of such sale or loan proceeds.
(h) The Option agreements or Option grants authorized by the Plan
may contain such other provisions as the Committee shall deem
advisable. Without limiting the foregoing and if so provided
in the Option, or if so authorized by the Committee and
subject to such terms and conditions as are specified in the
Option or by the Committee, the Company may, with the consent
of the holder of the Option, and at any time or from time to
time, cancel all or a portion of the Option then subject to
exercise and discharge its obligation in respect of the Option
either by payment to the holder of an amount of money equal to
the excess, if any, of the Fair Market Value, at such time or
times, of the shares subject to the portion of the Option so
cancelled over the aggregate purchase price of such shares, or
by issuance or transfer to the holder of shares of Common
Stock with a Fair Market Value, at such time or times, equal
to any such excess, or by a combination of cash and shares.
The number of shares of Common Stock subject to the Option, or
portion thereof, so cancelled shall, in the event that a
payment of money or transfer of shares is made by the Company
in
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respect of such cancellation, be charged against the maximum
limitation set forth in paragraph (a) of section 4.
(i) Options may be granted under the Plan from time to time in
substitution for stock options held by employees of other
corporations who are about to become employees of the Company
or a Subsidiary as the result of a merger or consolidation of
the employing corporation with the Company or a Subsidiary, or
the acquisition by the Company or a Subsidiary of the assets
of the employing corporation, or the acquisition by the
Company or a Subsidiary of stock of the employing corporation
as the result of which it becomes a Subsidiary. The terms and
conditions of the substitute Options so granted may vary from
the terms and conditions set forth in paragraphs (a) through
(h) of this section 5 to such extent as the Board of Directors
at the time of grant may deem appropriate to conform, in whole
or in part, to the provision of the options in substitution
for which they are granted. This paragraph shall not require
the Company to grant Options under the Plan to any such
persons, nor shall it prohibit the Company from assuming any
options as a part of any acquisition, merger, or
consolidation.
(j) (i) The aggregate Fair Market Value, determined as of the
date an Option is granted, of the Common Stock for
which a Key Employee may be granted ISOs in any
calendar year after December 31, 1980 and prior to
January 1, 1987, under all stock option plans of the
Company and its Subsidiaries shall not exceed
$100,000 plus any unused limit carryover to such year
(within the meaning of Section 422A of the Internal
Revenue Code).
(ii) With respect to ISOs granted on or after January 1,
1987, the aggregate Fair Market Value, determined as
of the date an ISO is granted, of the Common Stock
with respect to which incentive stock options (within
the meaning of Section 422A of the Internal Revenue
Code) are exercisable for the first time by an
optionee during any calendar year (under the Plan and
any other incentive stock option plans of the Company
and any parent corporation (within the meaning of
Section 425(e) of the Internal Revenue Code) or
Subsidiary) shall not exceed $100,000.
(k) The Committee may, with the consent of the optionee affected
thereby, accept the surrender of any outstanding Option, to
the extent not previously exercised, and the Committee may
authorize the grant of new Options in substitution therefor to
the extent not previously exercised.
6. Stock Appreciation Rights and Limited Rights
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(a) Stock Appreciation Rights may be granted in connection with
any Option granted under the Plan, either at the time of the
grant of such Option or at any time thereafter during the term
of the Option, or may be granted independently of the grant of
an Option.
(b) If granted in connection with an Option, Stock Appreciation
Rights shall entitle the holder of the related Option, upon
exercise of the Stock Appreciation Rights, to surrender the
Option, or any portion thereof, to the extent unexercised, and
to receive a number of shares of Common Stock, or cash,
determined pursuant to paragraph (c)(iii) of this section 6.
Such Option shall, to the extent so surrendered, thereupon
cease to be exercisable. If granted independently of an
Option, Stock Appreciation Rights shall entitle the holder of
the Stock Appreciation Rights to receive a number of shares of
common Stock, or cash, determined pursuant to paragraph
(c)(iii) of this section 6.
(c) Stock Appreciation Rights shall be subject to the following
terms and conditions and to such other terms and conditions
not inconsistent with the Plan as shall from time to time be
approved by the Committee.
(i) If granted in connection with an Option, Stock
Appreciation Rights shall be exercisable at such time
or times and to the extent, but only to the extent,
that the Option to which they relate shall be
exercisable. If granted independently of an Option,
Stock Appreciation Rights shall be exercisable at
such time or times as shall be determined by the
Committee at the time of the grant of the Stock
Appreciation Rights but in no event later than three
months after the employment of the holder of the
Stock Appreciation Rights by the Company or a
Subsidiary shall have terminated other than by reason
of death or by reason of retirement or disability
under a retirement, pension or disability plan
approved by the Board or the Committee. In the event
of termination of employment by reason of death,
Stock Appreciation Rights shall be exercisable by the
beneficiary designated pursuant to paragraph (g) of
section 11 no later than three years after such
termination of employment. In the event of
termination of employment by reason of retirement or
disability under a plan specified above, Stock
Appreciation Rights shall be exercisable no later
than three years after such termination of
employment.
(ii) Stock Appreciation Rights shall in no event be
exercisable unless and until the holder of the Stock
Appreciation Rights shall have completed at least
twelve months of continuous service with the Company
or a Subsidiary, or both, immediately following the
date upon which the Stock Appreciation Rights shall
have been granted. Whether authorized leaves of
absence or absence for military or
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government service shall constitute termination of
employment or interruption of continuous employment
for purposes of the Plan shall be determined by the
Committee on an individual basis.
(iii) Upon exercise of a Stock Appreciation Right, the
holder thereof shall be entitled to receive a number
of shares equal in Fair Market Value to the amount by
which the Fair Market Value of one share of Common
Stock on the date such Stock Appreciation Right is
exercised exceeds the Fair Market Value of one share
of Common Stock on the date of grant, multiplied by
the number of shares in respect of which the Stock
Appreciation Right shall have been exercised. All or
any part of the Company's obligation arising out of
an exercise of Stock Appreciation Rights may, at the
discretion of the Company, be settled by the payment
of cash equal to the aggregate value of shares of
Common Stock (or fraction of a share) that the
Company would otherwise be obligated to deliver under
the preceding sentence of this section 6(c)(iii).
(d) To the extent that Stock Appreciation Rights shall be
exercised, an Option in connection with which such Stock
Appreciation Rights shall have been granted shall be deemed to
have been exercised for the purpose of the maximum limitation
set forth in paragraph (a) of section 4. In the case of Stock
Appreciation Rights granted independently of an Option, the
number of shares of Common Stock in respect of which such
Stock Appreciation Rights shall be exercised shall be charged
against the maximum limitation set forth in paragraph (a) of
section 4.
(e) Stock Appreciation Rights may provide that, upon exercise of
such Stock Appreciation Rights, the shares or cash, as the
case may be, which the holder of such Stock Appreciation
Rights shall be entitled to receive shall be distributed or
paid in such installments and over such number of years as the
Committee may direct, with distribution or payment of each
such installment contingent upon continued services of the
employee to the Company or a Subsidiary, or both (except for
death, disability, or retirement pursuant to the provisions of
the pension plans of the Company or a Subsidiary, or
termination of employment by the Company or with its consent)
to the time for distribution or payment of such installment.
(f) (i) For Stock Incentives granted prior to August 11,
1989:
(A) if (i) any corporation, person or other
entity (other than the Company) makes a
tender or exchange offer for shares of
Common Stock pursuant to which purchases are
made ("Offer"), (ii) the stockholders of the
Company approve a definitive agreement to
merge or consolidate the Company with or
into another corporation or to sell or
otherwise
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dispose of all or substantially all of its
assets, (iii) more than 25 percent of the
Company's then outstanding Common Stock is
acquired by any person or group, or (iv)
during any period of two consecutive years,
individuals who at the beginning of such
period were members of the Board cease for
any reason to constitute at least a majority
thereof (unless the election, or the
nomination for election by the Company's
stockholders, of each new director was
approved by a vote of at least two-thirds of
the directors then still in office who were
directors at the beginning of the period),
then the date of the first purchase of
Common Stock pursuant to such Offer, or the
date of any such stockholder approval, or
the date on which public announcement of the
acquisition of such percentage shall have
been made, or the date on which the change
in the composition of the Board set forth
above shall have occurred shall be the
"Effective Date" of such transaction or
occurrence.
(B) the preceding section 6(f)(i)(A) shall not
apply to a merger or consolidation in which
the Company is the surviving corporation and
shares of Common Stock are not converted
into or exchanged for stock, securities of
any other corporation, cash or any other
thing of value and such transactions shall
have no Effective Date for purposes of this
section 6. In case of any consolidation or
merger of another corporation into the
Company in which the Company is the
surviving corporation and in which there is
a reclassification or change (including a
change to the right to receive cash or other
property) of the shares of Common Stock
(other than a change in par value, or from
par value to no par value, or as a result of
a subdivision or combination, but including
any change in such shares into two or more
classes or series of shares), section 8
shall apply.
(ii) (A) For purposes of Stock Incentives granted on
or after August 11, 1989, a "Change of
Control" shall be deemed to have occurred
if:
(i) Any "person" as such term is used
in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934
(other than the Company, any
trustee or other fiduciary holding
securities under any employee
benefit plan of the Company, or any
corporation owned, directly or
indirectly, by the stockholders of
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the Company in substantially the
same proportions as their ownership
of stock of the Company), is or
becomes, including pursuant to a
tender or exchange offer for shares
of Common Stock pursuant to which
purchases are made ("Offer"), the
"beneficial owner" (as defined in
Rule 13d-3 under the Securities
Exchange Act of 1934), directly or
indirectly of securities of the
Company representing 25 percent or
more of the combined voting power
of the Company's then outstanding
securities, other than in a
transaction arranged or approved by
the Board of Directors prior to its
occurrence; provided, however, that
if any such person shall become the
beneficial owner, directly or
indirectly, of securities of the
Company representing 34 percent or
more of the combined voting power
of the Company's then outstanding
securities, a Change of Control
shall be deemed to occur whether or
not any or all of such beneficial
ownership is obtained in a
transaction arranged or approved by
the Board prior to its occurrence,
and other than in a transaction in
which such person shall have
executed a written agreement with
the Company (and approved by the
Board) on or prior to the date on
which such person becomes the
beneficial owner of 25 percent or
more of the combined voting power
of the Company's then outstanding
securities, which agreement imposes
one or more limitations on the
amount of such person's beneficial
ownership of shares of Common Stock
("Shareholder Agreement"), if, and
so long as, such Shareholder
Agreement (or any amendment thereto
approved by the Board provided that
no such amendment shall cure any
prior breach of such Shareholder
Agreement or any amendment thereto)
continues to be binding on such
person and such person is in
compliance (as determined by the
Board in its discretion) with the
terms of such Shareholder Agreement
(including such amendment);
provided, however, that if any such
person shall become the beneficial
owner directly or indirectly, of
securities of the Company
representing 50 percent or more of
the combined voting power of the
Company's then outstanding
securities, a Change of Control
shall be deemed to occur whether or
not such beneficial ownership was
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held in compliance with a binding
Shareholder Agreement.
(ii) During any period of two
consecutive years (not including
any period prior to August 11,
1989), individuals who at the
beginning of such period constitute
the Board, and any new director
(other than a director designated
by a person who has entered into an
agreement with the Company to
effect a transaction which would
constitute a Change of Control
pursuant to clause (i), (iii) or
(iv) of this section 6(f)(ii)(A))
whose election by the Board or
nomination for election by the
Company's stockholders was approved
by a vote of at least two-thirds of
the directors then still in office
who either were directors at the
beginning of the period or whose
election or nomination for election
was previously so approved, cease
for any reason to constitute at
least a majority thereof;
(iii) The stockholders of the Company
approve a merger or consolidation
of the Company with any other
corporation, other than (x) a
merger or consolidation which would
result in the voting securities of
the Company outstanding immediately
prior thereto continuing to
represent (either by remaining
outstanding or by being converted
into voting securities of the
surviving entity) more than 80
percent of the combined voting
power of the voting securities of
the Company or such surviving
entity outstanding immediately
after such merger or consolidation
or (y) a merger or consolidation
effected to implement a
recapitalization of the Company (or
similar transaction) in which no
person acquires a percentage of the
combined voting power of the
Company's then outstanding
securities which would constitute a
Change of Control pursuant to
section 6(f)(ii)(A)(i). In case of
any consolidation or merger of
another corporation into the
Company in which the Company is the
surviving corporation and in which
there is a reclassification or
change (including a change to the
right to receive cash or other
property) of the shares of Common
Stock (other than a change in par
value, or from par value to no par
value, or as a result of a
subdivision or combination, but
including any
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change in such shares into two or
more classes or series of shares),
section 8 shall apply.
(iv) The stockholders of the Company
approve a plan of complete
liquidation of the Company or an
agreement for the sale or
disposition by the Company of all or
substantially all of the Company's
assets.
(B) In the event a Change of Control shall be
deemed to have occurred pursuant to the
foregoing section 6(f)(ii)(A), the
"Effective Date" of such Change of Control
shall (1) in the case of an Offer, be the
date of the first purchase of Common Stock
pursuant to such Offer, (2) in the case of
any Change of Control (other than pursuant
to an Offer) pursuant to section
6(f)(ii)(A)(i), be the date on which public
announcement of the acquisition of the
applicable triggering percentage shall have
been made, (3) in the case of a Change of
Control pursuant to section 6(f)(ii)(A)(ii),
the date on which the change in the
composition of the Board shall have
occurred, (4) in the case of a Change of
Control pursuant to section 6(f)(ii)(A)(iii)
or (iv), the date of the applicable
stockholder approval.
(g) (i) The Committee shall have authority to grant a limited
stock appreciation right (a "Limited Right") to the
holder of any Option granted under the Plan (the
"Related LSAR Option") with respect to all or some of
the shares of Common Stock covered by such Related
LSAR Option. A Limited Right may be granted either at
the time of grant of the Related LSAR Option or any
time thereafter during its term. A Limited Right may
be granted to an optionee irrespective of whether
such optionee is being granted or has been granted a
Stock Appreciation Right under this section 6. A
Limited Right may be exercised only during the
sixty-day period beginning on an Effective Date (as
defined in section 6(f)(i)(A) or section 6(f)(ii)(B)
hereof). Each Limited Right shall be exercisable only
if, and to the extent that, the Related LSAR Option
is exercisable and, in the case of a Limited Right
granted in respect of an ISO, only when the Fair
Market Value per share of Common Stock exceeds the
option price per share. Notwithstanding the
provisions of the two immediately preceding
sentences, no Limited Right may be exercised until
the expiration of six (6) months from the date of
grant of the Limited Right. Upon the exercise of a
Limited Right, such Related LSAR Option and any Stock
Appreciation rights granted in connection therewith
shall cease to be exercisable to the extent of the
shares of Common Stock with
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respect to which such Limited Right is exercised, but
shall be considered to have been exercised, to that
extent for purposes of determining the number of
shares of Common Stock available for the grant of
further Options and Stock Appreciation Rights
pursuant to the Plan. Upon the exercise or
termination of a Related LSAR Option, the Limited
Right with respect to such Related LSAR Option shall
terminate to the extent of the shares of Common Stock
with respect to which the Related LSAR Option was
exercised or terminated.
(ii) Upon the exercise of a Limited Right, the holder
thereof shall receive in cash whichever of the
following amounts is applicable:
(A) in the case of exercise by reason of the
occurrence of an Offer (as defined in
section 6(f)(i)(A) or section 6(f)(ii)(A)(i)
hereof), an amount equal to the Offer Spread
(as defined in section 6(g)(iv) hereof);
(B) in the case of exercise by reason of
stockholder approval of an agreement
described in section 6(f)(i)(A)(ii) or
section 6(f)(ii)(A)(iii) or (iv), an amount
equal to the Merger Spread (as defined in
section 6(g)(vi) hereof);
(C) in the case of exercise by reason of an
acquisition of Common Stock described in
section 6(f)(i)(A)(iii) or section
6(f)(ii)(A)(i) if other than pursuant to an
Offer, an amount equal to the Acquisition
Spread (as defined in section 6(g)(viii)
hereof); or
(D) in the case of exercise by reason of the
change in composition of the Board of
Directors described in section
6(f)(i)(A)(iv) or section 6(f)(ii)(A)(ii),
an amount equal to the Spread (as defined in
section 6(g)(ix) hereof).
Notwithstanding the foregoing, in the case of a
Limited Right granted in respect of an ISO, the
holder may not receive an amount in excess of such
amount as will enable such option to qualify as an
ISO.
(iii) The term "Offer Price per Share" as used in this
section 6 shall mean, with respect to the exercise of
any Limited Right by reason of the occurrence of an
Offer, the greater of (1) the highest price per share
of Common Stock paid in any Offer, which Offer is in
effect at any time during the sixty-day period ending
on the date on which such Limited Right is exercised,
or (2) the highest Fair Market Value per share of the
Common Stock during such sixty-
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day period. Any securities or property which are part
or all of the consideration paid for shares of Common
Stock in the Offer shall be valued in determining the
Offer Price per Share at the higher of (A) the
valuation placed on such securities or property by
the corporation, person or other entity making such
Offer or (B) the valuation placed on such securities
or property by the Committee.
(iv) The term "Offer Spread" as used in this section 6
shall mean an amount equal to the product computed by
multiplying (1) the excess of (A) the Offer Price per
Share over (B) the option price per share of Common
Stock at which the Related LSAR Option is
exercisable, by (2) the number of shares of Common
Stock with respect to which such Limited Right is
being exercised.
(v) The term "Merger Price per Share" as used in this
section 6 shall mean, with respect to the exercise of
any Limited Right by reason of stockholder approval
of an agreement described in section 6(f)(i)(A)(ii)
or in section 6(f)(ii)(A)(iii), the greater of (1)
the fixed or formula price for the acquisition of
shares of Common Stock specified in such agreement if
such fixed or formula price is determinable on the
date on which such Limited Right is exercised, and
(2) the highest Fair Market Value per share of Common
Stock during the sixty-day period ending on the date
on which such Limited Right is exercised.
(vi) The term "Merger Spread" as used in this section 6
shall mean an amount equal to the product computed by
multiplying (1) the excess of (A) the Merger Price
per Share over (B) the option price per share of
Common Stock at which the Related LSAR option is
exercisable, by (2) the number of shares of Common
Stock with respect to which such Limited Right is
being exercised.
(vii) The term "Acquisition Price per Share" as used in
this section 6 shall mean, with respect to the
exercise of any Limited Right by reason of an
acquisition of Common Stock described in section
6(f)(i)(A)(iii) or in section 6(f)(ii)(A)(i) if other
than pursuant to an Offer, the greater of (1) the
highest price per share shown on the Statement of
Schedule 13D or amendment thereto filed by the holder
of 25 percent or more of the Company's Common Stock
which gives rise to the exercise of such Limited
Right, and (2) the highest Fair Market Value per
share of Common Stock during the sixty-day period
ending on the date the Limited Right is exercised.
(viii) The term "Acquisition Spread" as used in this section
6 shall mean an amount equal to the product computed
by multiplying (1) the excess of (A) the Acquisition
Price per Share over (B) the option
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<PAGE>
price per share of Common Stock at which the Related
LSAR Option is exercisable, by (2) the number of
shares of Common Stock with respect to which such
Limited Right is being exercised.
(ix) The term "Spread" as used in this section 6 shall
mean, with respect to the exercise of any Limited
Right by reason of a change in the composition of the
Board described in section 6(f)(i)(A)(iv) or in
section 6(f)(ii)(A)(ii), an amount equal to the
product computed by multiplying (1) the excess of (A)
the highest Fair Market Value per share of Common
Stock during the sixty-day period ending on the date
the Limited Right is exercised over (B) the option
price per share of Common Stock at which the Related
LSAR Option is exercisable, by (2) the number of
shares of Common Stock with respect to which the
Limited Right is being exercised.
(x) Notwithstanding any other provision of the Plan, no
Stock Appreciation Right granted hereunder may be
exercised at a time when any Limited Right held by
the holder of such Stock Appreciation Right may be
exercised.
7. Stock Awards
Stock Incentives in the form of Stock Awards shall be subject to the
following provisions:
(a) For the purposes of the Plan, in determining the value of a
Stock Award, all shares of Common Stock subject to such Stock
Award shall be valued at not less than 100% of the Fair Market
Value of such shares on the date such Stock Award is granted,
regardless of whether or when such shares are issued or
transferred to the Key Employee and whether or not such shares
are subject to restrictions which affect their value.
(b) Shares of Common Stock subject to a Stock Award may be issued
or transferred to a Key Employee at the time the Stock Award
is granted, or at any time subsequent thereto, or in
installments from time to time, as the Committee shall
determine. Any amount payable in shares of Common Stock under
the terms of a Stock Award may, at the discretion of the
Company, be paid in cash on each date on which delivery of
shares would otherwise have been made, in an amount equal to
the Fair Market Value, on such date, of the shares which would
otherwise have been delivered.
(c) A Stock Award shall contain such terms and conditions as the
Committee shall determine with respect to payment or
forfeiture of all or any part of the Stock Award upon
termination of employment.
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<PAGE>
(d) A Stock Award shall be subject to such other terms and
conditions, including, without limitation, restrictions on
sale or other disposition of the Stock Award or of the shares
issued or transferred pursuant to such Stock Award, as the
Committee shall determine, provided, however, that upon the
issuance or transfer of shares pursuant to a Stock Award, the
recipient shall, with respect to such shares, be and become a
stockholder of the Company fully entitled to receive
dividends, to vote and exercise all other rights of a
stockholder except to the extent otherwise provided in the
Stock Award. Each Stock Award shall be evidenced by a written
instrument in such form as the Committee shall determine,
provided the Stock Award is consistent with the Plan and
incorporates it by reference.
8. Adjustment Provisions
In the event that any recapitalization, or reclassification, split-up
or consolidation of shares of Common Stock shall be effected, or the
outstanding shares of Common Stock are, in connection with a merger or
consolidation of the Company or a sale by the Company of all or a part
of its assets, exchanged for a different number or class of shares of
stock or other securities of the Company or for shares of the stock or
other securities of any other corporation, or new, different or
additional shares or other securities of the Company or of another
corporation are received by the holder of Common Stock or any
distribution is made to the holders of Common Stock other than a cash
dividend, (a) the number and class of shares or other securities that
may be issued or transferred pursuant to Stock Incentives, (b) the
number and class of shares or other securities which have not been
issued or transferred under outstanding Stock Incentives, (c) the
purchase price to be paid per share under outstanding Options, and (d)
the price to be paid per share by the Company or a Subsidiary for
shares or other securities issued or transferred pursuant to Stock
Incentives which are subject to a right of the Company or a Subsidiary
to reacquire such share or other securities, shall in each case be
equitably adjusted.
9. Term
The Plan shall become effective on the date it is approved by the
stockholders of the Company. No Stock Incentives shall be granted under
the Plan after May 31, 1993.
10. Administration
(a) The Plan shall be administered by a Committee which shall
consist of not less than three directors of the Company
designated by the Board of Directors, provided, however, that
no director shall be designated as or continue to be a member
of the Committee unless he shall at the time of designation
and service be a "disinterested person" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934 (or any
successor
17
<PAGE>
provision at the time in effect). In no event shall a member
of the Committee be eligible to be granted a Stock Incentive
while serving on the Committee. Grants of Stock Incentives may
be recommended or granted either in or without consultation
with employees, but, anything in the Plan to the contrary
notwithstanding, the Committee shall have full authority to
act in the matter of selection of all Key Employees who are
members of the Board of Directors and in recommending Stock
Incentives to be granted to them.
(b) The Board of Directors may delegate to the Committee any or
all of its authority under the Plan, including the authority
to award Stock Incentives, except its authority to amend or
discontinue the Plan. Any powers conferred on the Committee by
this section 10 or by any other provision of the Plan shall,
to the extent such authority shall not have been so delegated
by the Board of Directors, be exercised by the Board,
provided, however, that with respect to the participation in
the Plan of any director, unless his participation shall have
been recommended by the Committee, a majority of the members
of the Board and a majority of its members acting in the
matter shall, at the time so acting, be "disinterested
persons" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 (or any successor provision at the time
in effect).
(c) The Committee may establish such rules and regulations, not
inconsistent with the provisions of the Plan, as it deems
necessary to determine eligibility to participate in the Plan
and for the proper administration of the Plan, and may amend
or revoke any rule or regulation so established. The Committee
may make such determinations and interpretations under or in
connection with the Plan as it deems necessary or advisable.
All such rules, regulations, determinations and
interpretations shall be binding and upon their and respective
legal representatives, beneficiaries, successors and assigns
and upon all other persons claiming under or through any of
them.
(d) Any action required or permitted to be taken by the Committee
under the Plan shall require the affirmative vote of a
majority of all the members of the Committee. The Committee
may act by written determination instead of by affirmative
vote at a meeting, provided that any written determination
shall be signed by all of the members of the Committee, and
any such written determination shall be as fully effective as
a majority vote at a meeting.
(e) Members of the Board of Directors and members of the Committee
acting under the Plan shall be fully protected in relying in
good faith upon the advice of counsel and shall incur no
liability except for gross negligence or willful misconduct in
the performance of their duties.
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<PAGE>
11. General Provisions
(a) Nothing in the Plan nor in any instrument executed pursuant
thereto shall confer upon any employee any right to continue
in the employ of the Company or a Subsidiary or shall affect
the right of the Company or of a Subsidiary to terminate the
employment of any employee with or without cause.
(b) No shares of Common Stock shall be issued or transferred
pursuant to a Stock Incentive unless and until all legal
requirements applicable to the issuance or transfer of such
shares have, in the opinion of counsel to the Company, been
complied with. In connection with any such issuance or
transfer, the person acquiring the shares shall, if requested
by the Company, give assurances satisfactory to counsel to the
Company that the shares are being acquired for investment and
not with a view to resale or distribution thereof and
assurances in respect of such other matters as the Company or
Subsidiary may deem desirable to assure compliance with all
applicable legal requirements.
(c) No employee (individually or as a member of a group), and no
beneficiary or other person claiming under or through him,
shall have any right, title or interest in or to any shares of
Common Stock allocated or reserved for the purposes of the
Plan or subject to any Stock Incentive except as to such
shares of Common Stock, if any, as shall have been issued or
transferred to him.
(d) The Company or a subsidiary may, with the approval of the
Committee, enter into an agreement or other commitment to
grant a Stock Incentive in the future to a person who is or
will be a Key Employee at the time of grant, and,
notwithstanding any other provision of the Plan, any such
agreement or commitment shall not be deemed the grant of a
Stock Incentive until the date on which the Committee takes
action to implement such agreement or commitment.
(e) In the case of a grant of a Stock Incentive to any employee of
a Subsidiary, such grant may, if the Committee so directs, be
implemented by the Company issuing or transferring the shares,
if any, covered by the Stock Incentive to the Subsidiary, for
such lawful consideration as the Committee may specify, upon
the condition or understanding that the Subsidiary will
transfer the shares to the employee in accordance with the
terms of the Stock Incentive specified by the Committee
pursuant to the provisions of the Plan. Notwithstanding any
other provision hereof, such Stock Incentive may be issued by
and in the name of the Subsidiary and shall be deemed granted
on the date it is approved by the Committee, on the date it is
delivered by the Subsidiary, or on such other date between
such two dates, as the Committee shall specify.
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<PAGE>
(f) (i) The Company or a Subsidiary may make such provisions
as it may deem appropriate for the withholding of any
taxes which the Company or Subsidiary determines it
is required to withhold in connection with any Stock
Incentive.
(ii) With respect to any withholding tax obligation which
may arise in connection with the exercise of a
Nonqualified Stock Option, in connection with a
disqualifying disposition of stock received upon the
exercise of an Incentive Stock Option or in
connection with the receipt of, or the lapse or
termination of restrictions imposing a risk of
forfeiture with respect to, a Stock Award, the
Committee may, in its discretion and subject to such
rules as the Committee may adopt, permit a Key
Employee to satisfy, in whole or in part, such
withholding tax obligation by electing to have the
Corporation withhold from the shares of Common Stock
to be issued upon exercise of the Nonqualified Stock
Option, to be issued in connection with the exercise
of an Incentive Stock Option, to be issued in
connection with the grant of a Stock Award or
released in connection with the lapse or termination
of restrictions imposing a risk of forfeiture on all
or a part of a Stock Award or by electing to deliver
to the Corporation or attest to ownership of
already-owned shares of Common Stock, that have been
held for the period of time necessary to avoid a
charge to the Company's earnings for financial
reporting purposes and that are otherwise acceptable
to the Committee, any case having a Fair Market
Value, on the date such tax is determined under the
Internal Revenue Code (the "Tax Date"), no greater
than the amount necessary to satisfy the withholding
amount due. A Key Employee's election to have the
Corporation withhold shares of Common Stock or
deliver already-owned shares of Common Stock is
irrevocable and is subject to the consent or
disapproval of the Committee.
(g) No Stock Incentive and no rights under the Plan, contingent or
otherwise, shall be assignable or subject to any encumbrance,
pledge or charge of any nature except that,
(i) under such rules and regulations as the Committee may
establish, a beneficiary may be designated in respect
of a Stock Incentive in the event of the death of the
holder of such Stock Incentive and except, also, that
if such beneficiary shall be the executor or
administrator of the estate of the holder of such
Stock Incentive, any rights in respect of such Stock
Incentive may be transferred to the person or persons
or entity (including a trust) entitled thereto
20
<PAGE>
under the Will of the holder of such Stock Incentive
or, in case of intestacy, under the laws relating to
intestacy; and
(ii) upon a Key Employee's request, the Committee may, in
its sole discretion, permit a transfer of all or a
portion of a Non-Qualified Stock Option, other than
for value, to such Key Employee's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse,
former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, any person sharing
such Key Employee's household (other than a tenant or
employee), a trust in which any of the foregoing have
more than fifty percent of the beneficial interests,
a foundation in which any of the foregoing (or the
Key Employee) control the management of assets, and
any other entity in which these persons (or the Key
Employee) own more than fifty percent of the voting
interests. Any permitted transferee will remain
subject to all the terms and conditions applicable to
the Key Employee prior to the transfer. To the extent
permitted, such transfer may be conditioned upon such
requirements as the Committee may, in its sole
discretion, determine, including, but not limited to,
execution and/or delivery of appropriate
acknowledgments, opinion of counsel, or other
documents by the transferee.
(h) Nothing in the Plan is intended to be a substitute for, or
shall preclude or limit the establishment or continuation of,
any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees generally, or to
any class or group of employees which the Company or any
Subsidiary now has or may hereafter lawfully put into effect,
including, without limitation, any retirement, pension,
insurance, stock purchase, incentive compensation or bonus
plan.
(i) The place of administration of the Plan shall conclusively be
deemed to be within the State of Minnesota and the validity,
construction, interpretation and administration of the Plan
and of any rules and regulations or determinations or
decisions made thereunder, and the rights of any and all
persons having or claiming to have any interest therein or
thereunder, shall be governed by, and determined exclusively
and solely in accordance with, the laws of the State of
Minnesota. Without limiting the generality of the foregoing,
the period within which any action arising under or in
connection with the Plan must be commenced, shall be governed
by the laws of the State of Minnesota, irrespective of the
place where the act or omission complained of took place and
of the residence of any party to such action and irrespective
of the place where the action may be brought.
12. Amendment or Discontinuance of Plan
21
<PAGE>
(a) The Plan may be amended by the Board of Directors at any time, provided
that, without the approval of the stockholders of the Company, no
amendment shall be made which
(i) increases the aggregate number of shares of Common
Stock that may be issued or transferred pursuant to
Stock Incentives as provided in paragraph (a) of
section 4,
(ii) amends the provisions of paragraph (a) of section 10
with respect to eligibility and disinterest of a
majority of members of the Board of Directors,
(iii) permits any person who is not determined to be a Key
Employee at the time to be granted a Stock Incentive,
(iv) amends the provisions of paragraph (a) of section 5
or paragraph (a) of section 7 to permit shares to be
valued or to be optional at less than 100% of Fair
Market Value,
(v) amends section 9 to extend the term of the Plan, or
(vi) amends this section 12.
(b) The Board of Directors may by resolution adopted by a majority
of the entire Board of Directors discontinue the Plan.
(c) No amendment or discontinuance of the Plan by the Board of
Directors or the stockholders of the Company shall adversely
affect, without the consent of the holder, any Stock Incentive
theretofore granted.
22
