UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from __________ to ___________
-------------------------------
Commission file number 1-7725
I.R.S. Employer Identification Number 36-2687938
COMDISCO, INC.
(a Delaware Corporation)
6111 North River Road
Rosemont, Illinois 60018
Telephone: (847) 698-3000
Name of each Number of shares
Title of exchange on outstanding as of
each class which registered December 31, 1995
- ------------ ----------------- -----------------
Common stock, New York Stock Exchange 51,283,897
$.10 par value Chicago Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes XX No .
1
<PAGE>
Comdisco, Inc. and Subsidiaries
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings and Retained Earnings --
Three Months Ended December 31, 1995 and 1994.........................3
Consolidated Balance Sheets --
December 31, 1995 and September 30, 1995..............................4
Consolidated Statements of Cash Flows --
Three Months Ended December 31, 1995 and 1994.........................5
Notes to Consolidated Financial Statements............................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................11
SIGNATURES....................................................................13
2
<PAGE>
PART I. FINANCIAL INFORMATION
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS (UNAUDITED)
(in millions except per share data)
For the Three Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Three Months Ended
December 31
1995 1994
----- -----
<S> <C> <C>
Revenue
Leasing
Operating ........................................... $ 316 $ 249
Direct financing .................................... 40 47
Sales-type .......................................... 40 64
Total leasing .................................... 396 360
Sales ................................................. 51 90
Disaster recovery ..................................... 70 64
Other ................................................. 13 10
----- -----
Total revenue ....................................... 530 524
Costs and expenses
Leasing
Operating ........................................... 235 181
Sales-type .......................................... 24 46
----- -----
Total leasing .................................... 259 227
Sales ................................................. 41 74
Disaster recovery ..................................... 61 58
Selling, general and administrative ................... 60 56
Interest .............................................. 65 68
----- -----
Total costs and expenses ............................ 486 483
----- -----
Earnings before income taxes ............................. 44 41
Income taxes ............................................. 17 16
----- -----
Net earnings before preferred dividends .................. 27 25
Preferred dividends ...................................... (2) (2)
----- -----
Net earnings available to common
stockholders ......................................... $ 25 $ 23
===== =====
Retained earnings at beginning of period ................. $ 764 $ 681
Net earnings available to common stockholders ............ 25 23
Cash dividends paid on common stock ...................... (4) (3)
----- -----
Retained earnings at end of period ....................... $ 785 $ 701
===== =====
Net earnings per common and common equivalent share:
Net earnings available to common stockholders ....... $ .47 $ .41
===== =====
Common and common equivalent shares outstanding .......... 54 56
===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(in millions except number of shares)
<TABLE>
<CAPTION>
December 31 September 30
1995 1995
------- -------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Cash and cash equivalents .............................. $ 31 $ 85
Cash - legally restricted .............................. 34 30
Receivables, net ....................................... 177 176
Inventory of equipment ................................. 133 133
Leased assets:
Direct financing and sales-type ...................... 1,913 1,968
Operating (net of accumulated depreciation) .......... 2,233 2,107
------- -------
Net leased assets .................................. 4,146 4,075
Buildings, furniture and other, net .................... 156 163
Other assets ........................................... 381 377
------- -------
$ 5,058 $ 5,039
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable .......................................... $ 851 $ 661
Term notes payable ..................................... 355 507
Senior and subordinated debt ........................... 1,299 1,289
Accounts payable ....................................... 137 111
Income taxes ........................................... 253 244
Other liabilities ...................................... 326 327
Discounted lease rentals ............................... 1,062 1,124
------- -------
4,283 4,263
Stockholders' equity:
Preferred stock $.10 par value
8.75% Cumulative Preferred Stock, Series A and B
$25 stated value and liquidation preference,
3,625,800 shares issued ............................ 91 91
Common stock $.10 par value
Authorized 200,000,000 shares issued 71,983,805 shares
(71,936,982 at September 30, 1995) ................. 7 5
Additional paid-in capital ........................... 156 154
Deferred compensation (ESOP) ......................... (7) (8)
Deferred translation adjustment ...................... 11 13
Retained earnings .................................... 785 764
------- -------
1,043 1,019
Common stock held in treasury, at cost ............... (268) (243)
------- -------
Total stockholders' equity ..................... 775 776
------- -------
$ 5,058 $ 5,039
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in millions)
Three Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Increase (decrease) in cash and cash equivalents:
1995 1994
----- -----
<S> <C> <C>
Cash flows from operating activities:
Operating lease and other leasing receipts ............. $ 333 $ 322
Direct financing and sales-type leasing receipts ....... 236 236
Leasing costs, primarily rentals paid .................. (7) (10)
Sales .................................................. 52 77
Sales costs ............................................ (31) (44)
Disaster recovery receipts ............................. 70 66
Disaster recovery costs ................................ (45) (53)
Other revenue .......................................... 13 10
Selling, general and administrative expenses ........... (64) (63)
Interest ............................................... (63) (64)
Income taxes ........................................... (3) 13
----- -----
Net cash provided by operating activities ............ 491 490
----- -----
Cash flows from investing activities:
Equipment purchased for leasing ......................... (488) (513)
Investment in disaster recovery facilities .............. (9) (3)
Other ................................................... 5 (22)
----- -----
Net cash used in investing activities ................ (492) (538)
----- -----
Cash flows from financing activities:
Discounted lease proceeds ............................... 91 115
Net increase (decrease) in notes payable ............... 190 (68)
Issuance of term notes and senior notes ................. 50 261
Maturities and repurchases of term notes and senior notes (192) (43)
Principal payments on secured debt ...................... (153) (190)
Decrease (increase) in legally restricted cash .......... (4) 2
Preferred stock repurchased ............................. -- (5)
Common stock repurchased and placed in treasury ......... (30) (7)
Dividends paid on common stock .......................... (4) (3)
Dividends paid on preferred stock ....................... (2) (2)
Other ................................................... 1 2
----- -----
Net cash provided (used) by financing activities ..... (53) 62
----- -----
Net increase (decrease) in cash and cash equivalents ...... (54) 14
Cash and cash equivalents at beginning of period .......... 85 51
----- -----
Cash and cash equivalents at end of period ................ $ 31 $ 65
===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
Comdisco, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) -- CONTINUED
(in millions)
Three Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
----- -----
<S> <C> <C>
Reconciliation of net earnings to net cash
provided by operating activities:
Net earnings ......................................... $ 27 $ 25
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Leasing costs, primarily
depreciation and amortization .................. 252 217
Leasing revenue, primarily principal portion of
direct financing and sales-type lease rentals .. 173 198
Cost of sales ................................... 10 30
Interest ......................................... 2 4
Income taxes ..................................... 14 29
Other - net ...................................... 13 (13)
----- -----
Net cash provided by operating activities ........ $ 491 $ 490
===== =====
Supplemental schedule of noncash financing activities:
Common stock issued in acquistion of Netforce MTI .... $ 9 $ --
===== =====
See accompanying notes to consolidated financial statements.
</TABLE>
6
<PAGE>
Comdisco, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
December 31, 1995 and 1994
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. For further
information, refer to the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended September 30, 1995.
The balance sheet at September 30, 1995 has been derived from the audited
financial statements included in the Company's Annual Report of Form 10-K
for the year ended September 30, 1995.
Legally restricted cash represents cash and cash equivalents that are
restricted solely for use as collateral in secured borrowings and are not
available to other creditors.
2. Interest-Bearing Liabilities
At December 31, 1995, the Company had $1.2 billion of available domestic
and international borrowing capacity under various lines of credit from
commercial banks and commercial paper facilities, of which approximately
$350 million was unused.
The average daily borrowings outstanding during the three months ended
December 31, 1995 were approximately $3.5 billion, with a related weighted
average interest rate of 7.17%. This compares to average daily borrowings
during the first three months of fiscal 1995 of approximately $3.6 billion,
with a related weighted average interest rate of 7.22%.
3. Senior Notes
In October, 1995, the Company filed a Registration Statement on Form S-3
with the Securities and Exchange Commission for the shelf offering (the
"Shelf Offering") of up to $750 million of senior debt securities with
terms to be set at the time of the sale. Pursuant to the Shelf Offering,
the Company filed a Prospectus Supplement on January 12, 1996 relating to
$400 million in medium-term notes. The Company sold $75 million of
medium-term notes between January 12, 1996 and January 31, 1996.
Pursuant to the Shelf Offering, the Company filed a Prospectus Supplement
on February 9, 1996 relating to $250 million in 5.75% Notes due February
15, 2001. The Company will issue the Notes on February 12, 1996.
7
<PAGE>
4. Common Stock
On January 23, 1996, the Board of Directors declared a quarterly cash
dividend of $.07 per share to be paid on March 12, 1996 to stockholders of
record as of February 9, 1996.
During the quarter ended December 31, 1995, the Company purchased 1.5
million shares of its common stock at an aggregate cost of approximately
$30 million. An additional 1 million shares were purchased between December
31, 1995 and January 31, 1996, at a cost of $22 million.
5. Earnings Per Share
Average common and common equivalent shares outstanding for the three
months ended December 31, 1995 and 1994 were 54.0 million and 55.8 million,
respectively.
Earnings per common and common equivalent share reflects the assumed
exercise of stock options that would have a dilutive effect on earnings per
share if exercised.
8
<PAGE>
Comdisco, Inc. and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
NET EARNINGS
Net earnings available to common stockholders (hereinafter referred to as "net
earnings") for the three months ended December 31, 1995 were $25 million, or
$.47 per share, as compared to $23 million, or $.41 per share, for the three
months ended December 31, 1994. The increase in net earnings in the current
quarter compared to the year earlier period is due to an increase in earnings
contributions from operating leases and disaster recovery activities, offset by
decreases in earnings contributions from direct financing leases and remarketing
activities. Earnings per share in the current quarter benefited from the
Company's stock repurchase program, which has reduced the average common and
common equivalent shares outstanding.
The Company's operating results are subject to quarterly fluctuations resulting
from a variety of factors, including product announcements by manufacturers,
economic conditions, interest rate fluctuations and variations in the mix of
leases written. The mix of leases written in a quarter is a result of a
combination of factors, including, but not limited to, changes in customer
demands and/or requirements, new product announcements, price changes, changes
in delivery dates, changes in maintenance policies and the pricing policies of
equipment manufacturers, and price competition from other lessors.
THREE MONTHS ENDED DECEMBER 31, 1995
Leasing volume in the first quarter of fiscal 1996 increased as compared to both
the year earlier quarter and the prior quarter, and was the highest quarterly
volume level since the fourth quarter of fiscal 1992. Cost of equipment placed
on lease was $540 million during the quarter ended December 31, 1995. This
compares to cost of equipment placed on lease of $502 million and $496 million
during the quarters ended December 31, 1994 and September 30, 1995,
respectively. Among other factors, the continued growth of the Company's
electronic equipment leasing activities had a favorable impact on volume in the
current quarter compared to the year earlier period. Remarketing activity, which
is an important contributor to quarterly earnings, declined compared to both the
first and fourth quarters of fiscal 1995.
Total revenue for the three months ended December 31, 1995 was $530 million
compared to $524 million in the prior year quarter. Total leasing revenue of
$396 million for the quarter ended December 31, 1995 represented an increase of
10% compared to the year earlier period. Total leasing revenue was $414 million
in the fourth quarter of fiscal 1995.
Operating lease revenue minus operating lease cost was $81 million, or 25.6% of
operating lease revenue (the "Lease Percentage"), and $68 million, or 27.3% of
operating lease revenue, in the three months ended December 31, 1995 and 1994,
respectively. Operating lease revenue minus operating lease cost was $78
million, or 25.6% of operating lease revenue in the quarter ended September 30,
1995. The Company expects the Lease Percentage to remain at or slightly above
current levels throughout the remainder of fiscal 1996.
Revenue from disaster recovery activities for the three months ended December
31, 1995 and 1994 was $70 million and $64 million, respectively, a 9% increase.
Cost of disaster recovery activities for the three months ended December 31,
1995 and 1994 was $61 million and $58 million, respectively, a 5% increase.
9
<PAGE>
Other revenue was for the quarter ended December 31, 1995 was $13 million
compared to $10 million in the year earlier period. The increase is primarily
due to gains generated form the sale of stock, originally received by the
Company in fiscal 1993 in connection with the sale of all of the assets of its
wholly-owned subsidiary, Comdisco Systems, Inc. Revenue from the sale of
ownership positions generated in conjunction with the Company's lease financing
transactions with early-stage high technology companies was $3 million in the
both the current and prior year periods.
Total costs and expenses for the quarter ended December 31, 1995 was $486
million compared to $483 million in the prior year period. The increase in total
costs and expenses is primarily due to increased leasing costs related to
increasing operating lease revenue, offset by lower sales-type costs and cost of
sales related to the reduced level of remarketing activity.
Cost of sales for the three months ended December 31, 1995 and 1994 were $41
million and $74 million, respectively. Margins on sales were 20% and 18% in the
quarters ended December 31, 1995 and 1994, respectively.
Selling, general and administrative expenses totaled $60 million in the quarter
ended December 31, 1995 compared to $56 million in the quarter ended December
31, 1994 and $61 million in the quarter ended September 30, 1995. Factors
contributing to the increase in the current quarter compared to the year earlier
period include the development of the Company's system integration activities
and the growth of the Company's electronic equipment leasing activities.
Interest expense for the three months ended December 31, 1995 totaled $65
million in comparison to $68 million in the quarters ended December 31, 1994 and
September 30, 1995. The decrease in interest expense in the current quarter
compared to the fourth quarter of fiscal 1994 primarily reflects a decrease in
interest rates on domestic short-term borrowings and an decrease in average
daily borrowings (see Note 2 of Notes to Consolidated Financial Statements). The
Company expects an increase in the second quarter of fiscal 1996, primarily as a
result of its expanding lease base (recent actions by the Federal Reserve Board
should have a favorable impact on the Company's borrowing costs).
FINANCIAL CONDITION
The Company's current financial resources and estimated cash flows from
operations are considered adequate to fund anticipated future growth and
operating requirements. The Company utilizes a variety of financial instruments
to fund its short and long-term needs.
Capital expenditures for equipment are financed by cash flows from operations,
recourse debt, or by assigning the noncancellable lease rentals to various
financial institutions at fixed interest rates on a nonrecourse basis. Cash
provided by operating activities for the three months ended December 31, 1995
was $491 million, compared to $490 million for the year earlier period. Cash
provided by operations has been used to finance equipment purchases and,
accordingly, had a positive impact on the level of borrowing required to support
the Company's investment in its lease portfolio.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ---------------------------------------------------------------
3.01 Restated Certificate of Incorporation of Registrant dated
February 12, 1998
Incorporated by reference to Exhibit 4.1 filed with the
Company's Registration Statement on Forms S-8 and S-3, File No.
33-20715, filed March 8, 1988.
3.02 By-Laws of Registrant as amended through November 18, 1987
Incorporated by reference to Exhibit 3.5 filed with the
Company's Annual Report for the year ended September 30, 1987
on Form 10-K, File No. 1-7725.
3.03 Certificate of Designations with respect to the Company's
8 3/4% Cumulative Preferred Stock, Series A, as filed with
the Secretary of State of Delaware on September 18, 1992
Incorporated by reference to Exhibit 4.1 filed with the
Company's Current Report on Form 8-K dated September 17, 1992,
as filed with the Commission October 9, 1992, File No. 1-7725.
3.04 Certificate of Designations with respect to the Company's
8 3/4% Cumulative Preferred Stock, Series B, as filed with
the Secretary of the State of Delaware on July 2, 1994.
Incorporated by reference to Exhibit 4.1 filed with the
Company's Current Report on Form 8-K dated June 30, 1994, as
filed with the Commission July 21, 1994, File No. 1-7725.
4.01 Shareholder Rights Agreement dated November 18, 1987, as
amended and restated as of November 7, 1994, between Comdisco,
Inc. and Chemical Bank, as Rights Agent, which includes as
Exhibit A thereto the Form of Rights Certificate
Incorporated by reference to Exhibit 4.1 filed with the
Company's Current Report on Form 8-K, filed on December 6,1994,
File No. 1-7725.
4.02 Indenture Agreement between Registrant and Yasuda Bank and
Trust Company (U.S.A), as Trustee dated as of December 1, 1995
Incorporated by reference to Exhibit 4.1 filed with the
Company's Current Report on Form 8-K dated January 12, 1996, as
filed with the Commission on January 17, 1996, File No. 1-7725,
the copy of the Indenture dated as of December 1, 1995 between
the Registrant and Yasuda Bank and Trust Company (U.S.A), as
Trustee.
11
<PAGE>
Exhibit No. Description of Exhibit
- ----------- ---------------------------------------------------------------
10.01 1995 Long-Term Stock Ownership Incentive Plan
11 Computation of Earnings Per Common Share
12 Ratio of Earnings to Fixed Charges
27 Financial Data Schedule
99.01 Opinion of Counsel regarding the issuance of $250 million in
5 3/4% Notes of Comdisco, Inc. due February 15, 2001
b) Reports on Form 8-K:
On January 17, 1996, the Company filed a current report on Form
8-K, dated January 12, 1996, reporting Item 7. Financial
Statements and Exhibits. The filing was related to the
Company's 1996 Shelf Offering and included the Distribution
Agreement, the Indenture and the forms of Series E notes.
On January 10, 1996, the Company filed a current report of Form
8-K, dated January 10, 1996, reporting Item 7. Financial
Statements and Exhibits. The filing was related to the
Company's medium term note program under the 1996 Shelf and
included the opinion of counsel and the independent auditors'
consent.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMDISCO, INC.
Registrant
Date: February 9, 1996 /s/ John J. Vosicky
John J. Vosicky
Chief Financial Officer and
Senior Vice President
13
COMDISCO, INC.
1995 LONG-TERM STOCK OWNERSHIP INCENTIVE PLAN
THE PLAN. Comdisco, Inc., a Delaware corporation (the
"Company"), hereby establishes the Comdisco, Inc. 1995 Long-Term Stock Ownership
Incentive Plan as set forth herein and as may from time to time be amended (the
"Plan"), effective September 27, 1995 subject to the approval by a majority of
the Stockholders at the first annual meeting of stockholders held after the
effective date.
1. PURPOSE. The purposes of the Plan are to
encourage selected employees, agents and Directors of the Company and its
Subsidiaries who are capable of having an impact on the performance of the
Company (as defined below) to acquire a long term proprietary interest in the
growth and performance of the Company, to generate an increased incentive to
contribute to the Company's future success and prosperity (thus enhancing the
value of the Company for the benefit of its stockholders), and to enhance the
ability of the Company and its Subsidiaries to attract and retain qualified
individuals upon whom the sustained progress, growth, and profitability of the
Company depend.
2. DEFINITIONS. As used in the Plan, terms
defined immediately after their use shall have the respective meanings provided
by such definitions and the terms set forth below shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
(a) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under the 1934 Act.
(b) "Award" means options, shares of Restricted Stock, Stock
Appreciation Rights, Performance Units, or Stock Bonuses granted under the Plan.
(c) "Award Agreement" has the meaning specified in Section 4
(c)(v).
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" includes termination based on the commission of
any act or acts involving dishonesty, fraud, illegality or moral turpitude.
(f) "Code" means the Internal Revenue Code of 1986, as
amended. References to a particular section of the Code shall include references
to successor provisions.
(g) "Committee" means the committee of the Board appointed
pursuant to Section 4.
(h) "Company" has the meaning set forth in the introductory
paragraph.
(i) "Disability" means, as relates to the exercise of an
Incentive Stock Option after termination of employment, a disability within the
meaning of Section 22(e)(3) of the Code, and for all other purposes, a mental or
physical condition which, in the opinion of the Committee, renders a Grantee
unable or incompetent to carry out the job responsibilities which such Grantee
held or the tasks to which such Grantee was assigned at the time the disability
was incurred, and which is expected to be permanent or for an indefinite
duration exceeding one year.
(j) "Dividend Equivalents" means cash amounts, with respect
to Performance Units held by a Grantee equal to and paid in the same manner at
the same time, and in the same amount paid as a dividend and share of Stock to
the extent the Committee so provides.
(k) "Effective Date" means September 27, 1995 provided that
the Plan and any Awards granted prior to the 1996 annual meeting of the
Company's stockholders are subject to approval of the Plan by the stockholders
at such annual meeting.
(l) "Fair Market Value" of any security of the Company
means, as of any applicable date, the closing price, regular way, of the
security as reported on the New York Stock Exchange Composite Tape, or if no
such reported sale of the security shall have occurred on such date, on the next
preceding date on which there was such a reported sale.
(m) "Grant Date" means the date on which an Award shall be
duly granted, as determined in accordance with Section 6(a)(i).
(n) "Grantee" means an individual who has been granted an
Award.
(o) "Including" or "includes" means "including, without
limitation," or "includes, without limitation."
(p) "Performance Period" has the meaning specified in
Section 6(f)(i)(B).
(q) "1934 Act" means the Securities Exchange Act of 1934, as
amended. References to a particular section of, or rule under, the 1934 Act
shall include references to successor provisions.
(r) "Option Price" means the per share purchase price of
Stock subject to an option.
(s) "Performance Percentage" has the meaning specified in
Section 6(f)(i)(c).
(t) "Plan" has the meaning set forth in the introductory
paragraph.
(u) "Restricted Period" shall mean (i) in relation to shares
of Stock receivable in payment for Performance Units, the period beginning at
the end of the applicable performance period during which restrictions on the
transferability of such shares of Stock are in effect; and (ii) in relation to
Restricted Stock, the period, beginning with the first day of the month in which
Restricted Stock is granted, during which restrictions on the transferability of
the Restricted Stock are in effect.
(v) "Retirement" means a termination of employment with the
Company and its Subsidiaries any time after attaining age 60.
(w) "SEC" means the Securities and Exchange Commission.
(x) "Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.
(y) "Stock" means the common stock of the Company, $0.10 par
value.
(z) "Subsidiary" means (i) with respect to Incentive Stock
Options, a corporation as defined in Section 424(f) of the Code with the Company
being treated as the employer corporation for purposes of this definition, and
(ii) for all other purposes any entity in which the Company directly or through
intervening subsidiaries owns at least a majority interest of the total combined
voting power or value of all classes of stock or, in the case of an
unincorporated entity, at least a majority in the capital and profits.
(aa) "10% Owner" means a person who owns stock (including
stock treated as owned under Section 424(d) of the Code) possessing more than
10% of the total combined voting power of all classes of stock of the Company.
3. SCOPE OF THE PLAN.
(a) Two million five hundred thousand (2,500,000) shares of Stock are hereby
made available and reserved for delivery on account of the exercise of Awards
and payment of benefits in connection with Awards.
Such shares may be treasury shares, newly issued shares, or shares purchased on
the open market (including private purchases) in accordance with applicable
securities laws, or any combination of the foregoing, as may be determined from
time to time by the Board or the Committee.
(b) Subject to adjustment as provided in Section 24, the maximum number of
shares of Stock for which Awards may be granted to any Grantee in any one-year
period shall not exceed two hundred thousand (200,000).
(c) To the extent an Award shall expire or terminate for any reason without
having been exercised in full (including a cancellation and re-grant of an
option pursuant to Section 17), or shall be forfeited, without, in either case,
the Grantee having enjoyed any of the benefits of Stock ownership (other than
voting rights or dividends that are also forfeited), the shares of Stock
(including Restricted Stock) associated with such Award shall become available
for other Awards.
(d) For purposes of this Section 3,
(i) if an Award (other than a Dividend Equivalent) is
denominated in shares of Stock, the number of shares covered by such
Award, or to which such Award relates, shall be counted on the date of
grant of such Award against the aggregate number of shares of Stock
available for granting Awards under the Plan; and
(ii) all outstanding shares of Stock issued under the
Plan, even if the Stock is subject to restrictions, shall be counted on
the date of grant of any Award against the aggregate number of shares
of Stock available for granting Awards under the Plan; and
(iii) the shares of Stock underlying outstanding
options, Stock Appreciation Rights ("SARs"), and similar Awards shall
be counted while the award is outstanding against the aggregate number
of shares of Stock available for granting Awards under the Plan;
(iv) where SARs are exercised for cash, the shares of
Stock subject to such SARs shall become available for other Awards;
(v) in the event of a stock-for-stock exercise of an
option, the gross number of shares of Stock subject to the option
exercised, not the net number of shares actually issued upon exercise
shall be counted against the aggregate number of shares of Stock
available for granting Awards under the Plan.
4. ADMINISTRATION. (a) Subject to Section 4(b),
the Plan shall be administered by a committee ("Committee") which shall consist
of not less than two persons who are directors of the Company. Membership on the
Committee shall be subject to such limitations as the Board deems appropriate to
permit transactions in Stock pursuant to the Plan to be exempt from liability
under Section 16(b) of the 1934 Act pursuant to Rule 16b-3 thereunder.
(b) The Board may, in its discretion, reserve to
itself or delegate to another committee of the Board, any or all of the
authority and responsibility of the Committee with respect to Awards to Grantees
who are not Section 16 Grantees at the time any such delegated authority or
responsibility is exercised. Such other committee may consist of two or more
directors who may, but need not be, officers or employees of the Company or of
any of its Subsidiaries. To the extent that the Board has reserved to itself or
delegated to such other committee the authority and responsibility of the
Committee, all references to the Committee in the Plan shall be to the Board or
such other committee.
(c) The Committee shall have full and final
authority, in its discretion, but subject to the express provisions of the Plan,
as follows:
(i) to grant Awards;
(ii) to determine (A) when Awards may be granted, and
(B) whether or not specific Awards shall be identified with other
specific Awards, and if so, whether they shall be exercisable
cumulatively with or alternatively to such other specific Awards;
(iii) to interpret the Plan and to make all
determinations necessary or advisable for the administration of the
Plan;
(iv) to prescribe, amend, and rescind rules and
regulations relating to the Plan, including rules with respect to the
exercisability and non-forfeitability of Awards upon the termination of
employment of a Grantee;
(v) to determine the terms and provisions and any
restrictions or conditions (including specifying such performance
criteria as the Committee deems appropriate, and imposing restrictions
with respect to Stock acquired upon exercise of an option, which
restrictions may continue beyond the Grantee's termination of
employment) of the written agreements by which all Awards shall be
evidenced ("Award Agreements") which need not be identical and, with
the consent of the Grantee where required by contract law, to modify
any such Award Agreement at any time;
(vi) to impose, incidental to an Award, conditions
with respect to competitive employment or other activities, to the
extent such conditions do not conflict with the Plan;
(vii) to grant Awards under which the Grantee is
entitled to receive payments equivalent to dividends or interest
("Dividend Equivalents") with respect to a number of shares of Stock
determined by the Committee, and the Committee may provide that such
amount (if any) shall be deemed to have been reinvested in additional
shares of Stock or otherwise reinvested;
(viii) to cancel, with the consent of the Grantee,
outstanding Awards and to grant new Awards in substitution therefor;
(ix) to authorize foreign Subsidiaries to adopt
plans as provided in Section 16;
(x) to delegate its duties and responsibilities under
the Plan and with respect to such foreign Subsidiary plans, except its
duties and responsibilities with respect to Section 16 Grantees, and
(A) the acts of such delegates shall be treated hereunder as acts of
the Committee, and (B) such delegates shall report to the Committee
regarding the delegated duties and responsibilities;
(xi) to accelerate the exercisability of, and to
accelerate or waive any or all of the restrictions and conditions
applicable to, any Award, or any group of Awards for any reason;
(xii) subject to Section 6(a)(ii), to extend
the time during which any Award or group of Awards may be exercised;
(xiii) to make such adjustments or modifications to
awards to Grantees working outside the United States as are necessary
and advisable to fulfill the purposes of the Plan;
(xiv) to impose such additional conditions,
restrictions, and limitations upon the grant, exercise or retention of
Awards as the Committee may, before or concurrently with the grant
thereof, deem appropriate, including requiring simultaneous exercise of
related identified Awards, and limiting the percentage of Awards which
may from time to time be exercised by a Grantee;
(xv) to certify attainment of any performance
criteria to which Awards are subject, if any.
The determination of the Committee on all matters relating to the Plan or
any Award Agreement shall be conclusive and final. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Award.
5. ELIGIBILITY. Awards may be granted to any agent,
director, employee (including any officer) of the Company or any of its domestic
Subsidiaries, or any agent, employee, officer or director of any of the
Company's foreign Subsidiaries provided however that Incentive Stock Option
awards may not be granted to any person who is not an employee of the Company or
a domestic or foreign Subsidiary (as defined in Section 2(Z)(i) of the Plan) on
the date of the grant. In selecting the individuals to whom Awards may be
granted, as well as in determining the number of shares of Stock subject to, and
the other terms and conditions applicable to, each Award, the Committee shall
take into consideration such factors as it deems relevant in promoting the
purposes of the Plan.
6. CONDITIONS TO GRANTS. (a) General Conditions:
(i) The Grant Date of an Award shall be the date on which
the Committee grants the Award or such later date as specified in advance by th
Committee;
(ii) The term of each Award (subject to Section 6(c) with
respect to Incentive Stock Options) shall be a period of not more than 15 years
from the Grant Date, and shall be subject to earlier termination as herein
provided;
(iii) A Grantee may, if otherwise eligible, be granted
additional Awards in any combination.
(b) Grant of Options and Option Price.
No later than the Grant Date of any option, the Committee shall determine the
Option Price of such option. Subject to Section 6(c) hereof, the Option Price of
an option shall not be less than 100% of the Fair Market Value of the Stock on
the Grant Date. Such price shall be subject to adjustment as provided in Section
24. The Award Agreement may provide that the option shall be exercisable for
Restricted Stock.
(c) Grant of Incentive Stock Options. At the time of
the grant of any option, the Committee may designate that such option shall be
made subject to additional restrictions to permit it to qualify as an "Incentive
Stock Option" under the requirements of Section 422 of the Code. The Option
Price of any option designated as an "Incentive Stock Option" shall not be less
than 100% of the Fair Market Value of the Stock on the Grant Date. Any option
designated as an Incentive Stock Option:
(i) shall only be granted to individuals who are
employed by the Company or any of its Subsidiaries on the Grant Date;
(ii) shall not be granted to a 10% Owner unless the Option
Price is at least 110% of the Fair Market Value of the Stock subject to
such option on the Grant Date and shall be exercisable for a period of
not more than five (5) years from the Grant Date;
(iii) except as provided in (ii) above, shall be exercisable
for a period of not more than 10 years from the Grant Date, and shall
be subject to earlier termination as provided herein or in the
applicable Award Agreement;
(iv) shall not have an aggregate Fair Market Value
(determined for each Incentive Stock Option at its Grant Date) of Stock
with respect to which Incentive Stock Options are exercisable
for the first time by such Grantee during any calendar year
(under the Plan and any other employee stock option plan of the
Grantee's employer or any parent or Subsidiary thereof ("Other
Plans")), determined in accordance with the provisions of Section 422
of the Code, which exceeds $100,000 (the "$100,000 Limit");
(v) shall, if the aggregate Fair Market Value of Stock
(determined on the Grant Date) with respect to all Incentive Stock
Options previously granted under the Plan and any Other Plans ("Prior
Grants") and any Incentive Stock Options under such grant (the "Current
Grant") which are exercisable for the first time during any calendar
year would exceed the $100,000 Limit, be exercisable as follows:
(A) the portion of the Current Grant
exercisable for the first time by the Grantee during any
calendar year which would, when added to any portions of any
Prior Grants, be exercisable for the first time by the Grantee
during such calendar year with respect to Stock which would
have an aggregate Fair Market Value (determined as of the
respective Grant Dates for such options) in excess of the
$100,000 Limit shall, notwithstanding the terms of the Current
Grant, be exercisable for the first time by the Grantee in the
first subsequent calendar year or years in which it could be
exercisable for the first time by the Grantee when added to
all Prior Grants without exceeding the $100,000 Limit; and
(B) viewed as of the date of the Current
Grant, if any portion of a Current Grant could not be
exercised under the provisions of the immediately preceding
sentence during any calendar year commencing with the calendar
year in which it is first exercisable through and including
the last calendar year in which it may by its terms be
exercised, such portion of the Current Grant shall not be an
Incentive Stock Option, but shall be exercisable as a separate
option at such date or dates as are provided in the Current
Grant;
(vi) shall be granted within 10 years from the earlier of
the date the Plan is adopted or the date the Plan is approved by the
stockholders of the Company;
(vii) shall require the Grantee to notify the Committee of
any disposition of any Stock issued pursuant to the exercise of
the Incentive Stock Option under the circumstances described in
Section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition; and
(viii) shall by its terms not be assignable
or transferable other than by will or the laws of descent and
distribution and may be exercised during the Grantee's lifetime only by
the Grantee; provided, however, that the Grantee may, to the extent
provided in the Plan in any manner specified by the Committee,
designate in writing a beneficiary to exercise his/her Incentive Stock
Option after the Grantee's death.
Notwithstanding the foregoing and Section 4(c)(v),
the Committee may, without the consent of the Grantee, at any time before the
exercise of an option (whether or not an Incentive Stock Option), take any
action necessary to prevent such option from being treated as an Incentive Stock
Option.
(d) Grant of Shares of Restricted Stock.
(i) The Committee may, in its discretion, grant
shares of Restricted Stock to any individual eligible under Section 5
to receive Awards.
(ii) The Committee shall, in its discretion,
determine the amount, if any, that a Grantee shall pay for shares of
Restricted Stock. Awards shall be granted for no cash consideration or
for such minimal cash consideration as may be required by applicable
law. If any such cash consideration is required, payment shall be made
in full by the Grantee before the delivery of the shares and in any
event no later than 10 days after the Grant Date for such shares. In
the discretion of the Committee and to the extent permitted by law,
payment may also be made in accordance with Section 10.
(iii) The Committee may, but need not, provide that
all or any portion of a Grantee's Award of Restricted Stock, or
Restricted Stock acquired upon exercise of an option shall be
forfeited:
(A) except as otherwise specified in the
Award Agreement, upon the Grantee's termination of employment
for any reason specified in the Award Agreement within a
specified time period after the Grant Date, or
(B) if the Company or the Grantee does not
achieve specified performance objectives (if any) within a
specified time period after the Grant Date and before the
Grantee's termination of employment, or
(C) upon failure to satisfy such other
restrictions as the Committee may specify in the Award
Agreement; provided that, subject to Sections 4(c)(xi) and 14,
in no case shall such Award become nonforfeitable before the
first anniversary of the Grant Date.
(iv) If a share of Restricted Stock is forfeited,
then (A) if the Grantee was required to pay for such share or acquired
such Restricted Stock upon the exercise of an option, the Grantee shall
be deemed to have resold such share of Restricted Stock to the Company
at the lesser of (1) the amount paid or, if the Restricted Stock was
acquired on exercise of an option, the Option Price paid by the Grantee
for such share of Restricted Stock, or (2) the Fair Market Value of a
share of Stock on the date of such forfeiture; (B) the Company shall
pay to the Grantee the amount determined under clause (A) of this
sentence as soon as is administratively practical; and (C) such share
of Restricted Stock shall cease to be outstanding, and shall no longer
confer on the Grantee thereof any rights as a stockholder of the
Company, from and after the later of the date the event causing the
forfeiture occurred or the date of the Company's tender of the payment
specified in clause (B) of this sentence, whether or not such tender is
accepted by the Grantee.
(v) The Committee may provide that any share of
Restricted Stock shall be held (together with a stock power executed in
blank by the Grantee) in escrow by the Secretary of the Company until
the expiration of the Restricted Period and/or such shares become
nonforfeitable or are forfeited. Any share of Restricted Stock shall
bear an appropriate legend specifying that such share is
non-transferable and subject to the restrictions set forth in the Plan
and the Award Agreement. If any shares of Restricted Stock become
nonforfeitable, and any applicable Restricted Period has ended, the
Company shall cause certificates for such shares to be issued or
reissued without such legend.
(vi) The Committee may provide one or more Restricted
Periods applicable to Restricted Stock, at its discretion. Such
Restricted Period shall be measured from the first day of the month in
which Restricted Stock is granted with respect to such Restricted
Period.
(vii) Each grant of Restricted Stock shall be
evidenced by a written instrument stating the number of shares of
Restricted Stock granted, the Restriction Period, the restrictions
applicable to such Restricted Stock, the nature and terms of payment of
consideration, if any, the consequences of forfeiture that will apply
to such Restricted Stock, and any other terms, conditions and rights
with respect to such grant.
(viii) Any other provision of the Plan to the
contrary notwithstanding, the Committee may at any time shorten any
Restricted Period, if it determines that conditions, including but not
limited to, changes in the economy, changes in competitive conditions,
changes in laws or government or regulations, changes in generally
accepted accounting principles, changes in the Company's accounting
policies, acquisitions or dispositions, or the occurrence of other
unusual, unforeseen, or extraordinary events, so warrant.
(ix) The Company may, in its sole discretion, offer a
Grantee the right, by execution of a written agreement, to defer
receipt of all or a portion of the payment, if any, for Restricted
Stock. If such an election to defer is made, the shares of Stock
receivable in payment for Restricted Stock shall be deferred as
Performance Units equal in number to and exchangeable, at the end of
the deferral period, for the number of shares of Stock that would have
been paid to the Grantee ("Stock Units"). Such Stock Units shall
represent only a contractual right and shall not give the Grantee any
interest, right, or title to any shares of Stock during the deferral
period or any rights as a Shareholder. Fractional shares receivable for
Restricted Stock shall be deferred as Performance Units payable in
cash. Deferred Stock Units may be credited annually with the
appreciation factor contained in the deferred compensation agreement,
which may include Dividend Equivalents. All other terms and conditions
of deferred payments shall be as contained in the written agreement.
(e) Grant of Stock Appreciation Rights.
When granted, Stock Appreciation Rights may, but need not, be identified
with shares of Stock subject to a specific option, specific shares of Restricted
Stock, or specific Performance Units of the Grantee (including any option,
shares of Restricted Stock, or Performance Units granted on or before the Grant
Date of the Stock Appreciation Rights) in a number equal to or different from
the number of Stock Appreciation Rights so granted. If Stock Appreciation Rights
are identified with shares of Stock subject to an option, with shares of
Restricted Stock, or with Performance Units, then, unless otherwise provided in
the applicable Award Agreement, the Grantee's associated Stock Appreciation
Rights shall terminate upon (i) the expiration, termination, forfeiture, or
cancellation of such option, shares of Restricted Stock, or Performance Units,
(ii) the exercise of such option or Performance Units, or (iii) the date such
shares of Restricted Stock become nonforfeitable. Stock Appreciation Rights
granted in connection with Incentive Stock Options must expire no later than the
last date on which the underlying Incentive Stock Option can be exercised; may
be granted for no more than 100% of the difference between the Option Price of
the underlying Incentive Stock Option and the Fair Market Value of the Stock
subject to the underlying Incentive Stock Option at the time the Stock
Appreciation Right is exercised; are transferable only to the extent and at the
same time and on the same conditions as the underlying Incentive Stock Options;
may be exercised only when the underlying Incentive Stock Options may be
exercised; and may be exercised only when the Fair Market Value of the shares of
Stock subject to the Incentive Stock Options exceeds the exercise price of the
Incentive Stock Options.
(f) Grant of Performance Units.
(i) Before the grant of any Performance Unit, the
Committee shall:
(A) determine performance objectives
applicable to such grant;
(B) designate a period of not less than one
year nor more than ten years for the measurement of the extent
to which performance objectives are attained, which period may
begin prior to the Grant Date (the "Performance Period");
(C) assign a "Performance Percentage" to
each level of attainment of performance objectives goals
during the Performance Period, with the percentage applicable
to minimum attainment being zero percent (O%) and the
percentage applicable to maximum attainment to be determined
by the Committee from time to time;
(D) determine the Restricted Period,
if any; and
(E) determine whether Dividend Equivalents
shall, during the Performance Period, be paid on the
Performance Units.
(ii) In establishing performance goals, the Committee
may consider any performance factor or factors it deems appropriate,
including net income, growth in net income, earnings per share, growth
of earnings per share, return on equity or return on capital,
employment for a specified period, or any other factor measured
internally or relative to other organizations and before or after
extraordinary items. Any such factors, however, shall include all
accruals for grants made under the Plan and for all other employee
benefit plans of the Company. The performance goals may be established
for the Company as a whole or for only that part of the Company in
which a given Grantee is involved, or a combination thereof. The
Committee may, in its discretion, establish intermediate levels at
which given proportions of the Performance Units shall be payable. The
Committee may, at any time, in its discretion, modify performance goals
in order to facilitate their attainment for any reason, including
recognition of unusual or nonrecurring events affecting the Company or
a Subsidiary or changes in applicable laws, regulations or accounting
principles. If a Grantee is promoted, demoted or transferred to a
different business unit of the Company during a Performance Period,
then, to the extent the Committee determines the performance goals or
Performance Period are no longer appropriate, (A) the Committee may
adjust, change or eliminate the performance goals, the applicable
Performance Period, or Restricted Period, if any, as it deems
appropriate in order to make them appropriate and comparable to the
initial performance goals or Performance Period; or (B) make a cash
payment to the Grantee in an amount determined in accordance with the
method described in Section 14(b)(iii), substituting the effective date
of such promotion, demotion or transfer for the termination of
employment referred to in Section 14(b)(iii).
(iii) When granted, Performance Units may, but need
not, be identified with shares of Stock subject to a specific option,
specific shares of Restricted Stock or specific Stock Appreciation
Rights of the Grantee granted under the Plan in a number equal to or
different from the number of the Performance Units so granted. If
Performance Units are identified with shares of Stock subject to an
option, shares of Restricted Stock or Stock Appreciation Rights, then,
unless otherwise provided in the applicable Award Agreement, the
Grantee's associated Performance Units shall terminate upon (A) the
expiration, termination, forfeiture or cancellation of such option,
shares of Restricted Stock or Stock Appreciation Rights, (B) the
exercise of such option or Stock Appreciation Rights or (C) the date
such shares of Restricted Stock become nonforfeitable.
There shall be no limitation on the number of Performance Periods or
Restriction Periods established by the Committee, and more than one Performance
Period may encompass the same fiscal year.
(iv) Any provision of the Plan to the contrary
notwithstanding, the Committee may at any time adjust performance
objectives (up or down) and minimum or full performance levels (and any
intermediate levels and proportion of payments related thereto), adjust
the way performance objectives are measured, or shorten any Performance
Period or Restricted Period, if it determines that conditions,
including but not limited to, changes in the economy, changes in
competitive conditions, changes in laws or governmental regulations,
changes in generally accepted accounting principles, changes in the
Company's accounting policies, acquisition or dispositions, or the
occurrence of other unusual, unforeseen, or extraordinary events, so
warrant.
(g) Grant of Stock Bonuses. The Committee may, in its
discretion, grant to any individual eligible under Section 5 to receive Awards,
other than executive officers of the Company, shares of Stock or such other
Awards that are denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, shares of Stock (including,
without limitation, securities convertible into shares), as are deemed by the
Committee to be consistent with the purposes of the Plan, provided, however,
that such grants must comply with applicable law. Subject to the terms of the
Plan and any applicable Award Agreement, the Committee shall determine the terms
and conditions of such Awards.
7. GRANTEE'S AGREEMENT TO SERVE. Each Grantee
who is granted an Award shall, by executing such Grantee's Award Agreement,
agree that such Grantee will remain in the employ of the Company or any of its
Subsidiaries for at least one year after the Grant Date. No obligation of the
Company or any of its Subsidiaries as to the length of any Grantee's employment
shall be implied by the terms of the Plan, any grant of an Award hereunder or
any Award Agreement. The Company and its Subsidiaries reserve the same rights to
terminate employment of any Grantee as existed before the Effective Date.
8. NON-TRANSFERABILITY. Each Award (other than
Restricted Stock) granted hereunder shall not be assignable or transferable
other than by will or the laws of descent and distribution; provided, however,
that a Grantee may in a manner specified by the Committee and to the extent
provided in the Plan (a) designate in writing a beneficiary to exercise his/her
Award after the Grantee's death and (b) transfer an option (other than an
Incentive Stock Option), Stock Appreciation Right or Performance Unit to a
revocable, inter vivos trust as to which the Grantee is both the settlor and
trustee, but in no event shall any transfer described in this clause (b) by a
Section 16 Grantee be effective unless the staff of the SEC shall have issued an
interpretive or "no action" letter to the effect that a provision to such effect
is not inconsistent with Rule 16b-3(a)(2) of the SEC under the 1934 Act; and (c)
if the Award Agreement expressly permits, transfer an award (other than
Restricted Stock or an Incentive Stock Option) for no consideration to any of
the following permissible transferees (each a "Permissible Transferee"): (x) any
member of the Immediate Family of the Grantee to whom such Award was granted,
(y) any trust solely for the benefit of members of the Grantee's Immediate
Family, or (z) any partnership whose only partners are members of the Grantee's
Immediate Family; and further provided that (I) the transferee shall remain
subject to all of the terms and conditions applicable to such Award prior to
such transfer; and (ii) any such transfer shall be subject to and in accordance
with the rules and regulations prescribed by the Committee in accordance with
Section 4(c)(xiv). For purposes of this Section 8, "Immediate Family" means,
with respect to a particular Grantee, such Grantee's spouse, children and
grandchildren. Each share of Restricted Stock shall be nontransferable until
such share becomes nonforfeitable and the Restricted Period, if any, lapses.
9. EXERCISE. (a) Exercise of Options. Subject
to Sections 4(c)(xi) and 14 and such terms and conditions as the Committee may
impose, each option shall be exercisable in one or more installments.
Each option shall be exercised by delivery to the
Company of written notice of intent to purchase a specific number of shares of
Stock subject to the option. The Option Price of any shares of Stock or shares
of Restricted Stock as to which an option shall be exercised shall be paid in
full at the time of the exercise. Payment may, at the election of the Grantee,
be made in any one or any combination of the following:
(i) cash;
(ii) Stock held by the Grantee for at least
6 months prior to exercise of the option, valued at its Fair Market
Value on the date of exercise;
(iii) with the approval of the Committee, shares of
Restricted Stock held by the Grantee for at least 6 months prior to
exercise of the option, each valued at the Fair Market Value of a share
of Stock on the date of exercise; or
(iv) through simultaneous sale through a broker of
shares acquired on exercise, as permitted under Regulation T of the
Federal Reserve Board.
In the discretion of the Committee and to the extent
permitted by law, payment may also be made in accordance with Section 10.
If Restricted Stock ("Tendered Restricted Stock")is used to
pay the Option Price for Stock subject to an option, then the Committee may, but
need not, specify that (i) all the shares of Stock acquired on exercise of the
option shall be subject to the same restrictions as the Tendered Restricted
Stock, determined as of the date of exercise of the option, or (ii) a number of
shares of Stock acquired on exercise of the option equal to the number of shares
of Tendered Restricted Stock shall, unless the Committee provides otherwise, be
subject to the same restrictions as the Tendered Restricted Stock, determined as
of the date of exercise of the option.
(b) Exercise of Stock Appreciation Rights. Subject
to Sections 4(c)(xi) and 14 and such terms and conditions as the Committee may
impose, each Stock Appreciation Right shall be exercisable not earlier than the
first anniversary of the Grant Date of such Stock Appreciation Right, to the
extent the option with which it is identified, if any, may be exercised, to the
extent the Restricted Stock with which it is identified, if any, is
nonforfeitable and the Restricted Period, if any, has lapsed, or to the extent
the Performance Unit with which it is identified, if any, may be exercised
unless otherwise provided by the Committee. Stock Appreciation Rights shall be
exercised by delivery to the Company of written notice of intent to exercise a
specific number of Stock Appreciation Rights. Unless otherwise provided in the
applicable Award Agreement, the exercise of Stock Appreciation Rights which are
identified with shares of Stock subject to an option, shares of Restricted Stock
or Performance Units shall result in the cancellation or forfeiture of such
option, shares of Restricted Stock or Performance Units, as
the case may be, to the extent of such exercise.
The benefit for each Stock Appreciation Right exercised shall be
equal to:
(i) the Fair Market Value of a share of Stock on the
date of such exercise or, if the Committee shall so determine in the
case of any such right other than one related to any Incentive Stock
Option, at any time during a specified period before or after the date
of exercise, reduced by
(ii) an amount equal to:
(A) for any Stock Appreciation Right
identified with shares of Stock subject to an option, the
Option Price of such option, unless the Committee in the grant
of the Stock Appreciation Right specified a higher amount, or
(B) for any other Stock Appreciation Right,
the Fair Market Value of a share of Stock on the Grant Date of
such Stock Appreciation Right, unless the Committee in the
grant of the Stock Appreciation Right specified a higher
amount; provided that the Committee, in its discretion, may
provide that the benefit for any Stock Appreciation Right
shall not exceed such percentage of the Fair Market Value of a
share of Stock on such Grant Date as the Committee shall
specify.
The benefit upon the exercise of a Stock Appreciation Right shall be
payable in cash, except that the Committee, may, in its discretion, provide in
the Award Agreement that benefits, with respect to any particular exercise, may
be paid wholly or partly in Stock.
(c) Exercise of Performance Units.
(i) Subject to Section 14 and such terms and
conditions as the Committee may impose, if, with respect to any
Performance Unit, the minimum performance objectives have been achieved
during the applicable Performance Period, then such Performance Unit
shall be exercisable commencing on the later of (A) the first
anniversary of the Grant Date or (B) the first day after the end of the
applicable Performance Period.
Performance Units shall be exercised by delivery to the
Company of written notice of intent to exercise a specific number of
Performance Units; provided, however, that Performance Units not
identified with shares of Stock subject to an option, shares of
Restricted Stock or Stock Appreciation Rights shall be deemed exercised
on the date on which they first become exercisable. Unless otherwise
provided in the applicable Award Agreement, the exercise of Performance
Units which are identified with shares of Stock subject to an option,
shares of Restricted Stock or Stock Appreciation Rights shall result in
the cancellation or forfeiture of such shares of Stock subject to
option, shares of Restricted Stock or Stock Appreciation Rights, as the
case may be, to the extent of such exercise.
(ii) The benefit for each Performance Unit exercised
shall be an amount equal to the product of:
(A) the Unit Value (as defined below) multiplied by
(B) the Performance Percentage attained during
the Performance Period for such Performance Unit.
(iii) The Unit Value shall be, as specified by the
Committee,
(A) a dollar amount, or
(B) an amount equal to the Fair Market Value
of one share of Stock on the exercise date of the Performance
Unit, including, if so provided in the Award Agreement, an
amount ("Dividend Equivalent Amount") equal to the value that
would result if dividends paid on a share of Stock on or after
the Grant Date and on or before the exercise date were
invested in shares of Stock as of each respective dividend
payment date, or
(C) an amount equal to the Fair Market Value
of one share of Stock on the Grant Date (plus, if so specified
in the Award Agreement, a Dividend Equivalent Amount), or
(D) an amount equal to the Fair Market Value of one
share of Stock on the exercise date of the Performance Unit (plus, if
so specified in the Award Agreement, a Dividend Equivalent Amount),
reduced by the Fair Market Value of a share of Stock on the Grant Date
of the Performance Unit, or
(E) a number of shares of Stock.
(iv) The benefit upon the exercise of a
Performance Unit shall be payable upon termination of the applicable
Restricted Period as soon as is administratively practicable after the
later of (A) the date the Grantee exercises or is deemed to exercise
such Performance Unit, or (B) the date (or dates in the event of
installment payments) as provided in the applicable Award Agreement.
Such benefit shall be payable in cash or wholly or partly in
shares of Stock. If a Restricted Period has been established in
relation to a Performance Unit payable, in whole or in part, in shares
of Stock ("Stock Performance Unit"), one or more certificates
representing the number of shares of Stock equal to the number of
shares of Stock payable under the Performance Units shall be registered
in the name of the Grantee but shall be held by the Company for the
account of the Grantee. Such shares of Stock will be nonforfeitable but
restricted as to transferability during the applicable Restricted
Period. At the end of the Restricted Period all restrictions applicable
to the shares of Stock, and other securities or property received with
respect to the shares held by the Company for the account of each
recipient of shares of Stock under Performance Units granted in
relation to such Restricted Period shall lapse, and one or more
certificates for such shares of Stock, free of the restrictions shall
be delivered to the Grantee.
In event the Award Agreement provides that the benefit may be
paid wholly in Stock unless the Committee, in its discretion, specifies
at the time of exercise that the benefit shall be paid partly or wholly
in cash, the number of shares of Stock payable in lieu of cash shall be
determined by valuing the Stock at its Fair Market Value on the date
such benefit is to be paid.
(v) The Committee may, in its sole discretion, offer
a Grantee the right, by execution of a written agreement, to defer the
receipt of all or any portion of the payment, if any, of shares of
Stock or cash due under a Performance Unit. If such an election to
defer is made, the Stock receivable in payment for shares under a
Performance Unit shall be deferred as Stock Units equal in number to
and exchangeable, at the end of the deferral period, for the number of
shares of Stock that would have been paid to the Grantee but for the
deferral. Such Stock Units shall represent only a contractual right and
shall not give the Grantee any interest, right or title to any Stock
during the deferral period. The cash or fractional shares receivable in
payment for Performance Units shall be deferred as cash units. Deferred
Stock Units and cash units may be credited annually with the
appreciation factor contained in the written agreement, which may
include Dividend Equivalents. All other terms and conditions of
deferred payments shall be as contained in the written agreement.
(d) Special Rules for Section 16 Grantees. No Stock
Appreciation Right, option or Performance Unit (if the benefit payable with
respect to such Performance Unit is to be determined by reference to the Fair
Market Value of the Stock on the date the Performance Unit is exercised) shall
be exercisable by a Section 16 Grantee during the first six months after its
Grant Date, except as exempted from Section 16 of the 1934 Act under Rule 16a-2
(d) under the 1934 Act. Any grant hereunder to a Section 16 Grantee shall be
subject to approval of the Plan by a majority of the Stockholders of the
Company.
10. LOANS AND GUARANTEES. The Committee may, in its
discretion:
(a) allow a Grantee to defer payment to the Company of all or
any portion of (i) the Option Price of an option, (ii) the purchase price of
a share of Restricted Stock, or (iii) any taxes associated with a benefit
hereunder which is not a cash benefit at the time such benefit is so taxable, or
(b) cause the Company to guarantee a loan from a third party
to the Grantee, in an amount equal to all or any portion of such Option Price,
purchase price, or any related taxes.
Any such payment, deferral or guarantee by the Company
pursuant to this Section 10 shall be on such terms and conditions as the
Committee may determine; provided that the interest rate applicable to any such
payment deferral shall not be more favorable to the Grantee than the terms
applicable to funds borrowed by the Company and, in the case of any payment
deferral for the Option Price for an Incentive Stock Option, shall not be less
than the "applicable federal rate", as defined in Section 1274 of the Code, in
effect at the time of such payment deferral, or any other minimum interest rate
established under Federal tax laws to avoid the imputation of interest.
Notwithstanding the foregoing, a Grantee shall not be entitled to defer the
payment of such Option Price, purchase price or any related taxes unless the
Grantee enters into a binding obligation with the Company to pay the deferred
amount. If the Committee has permitted a payment deferral or caused the Company
to guarantee a loan pursuant to this Section 10, then the Committee may, in its
discretion, require the immediate payment of such deferred amount or the
immediate release of such guarantee upon the Grantee's termination of employment
or if the Grantee sells or otherwise transfers the Grantee's shares of Stock
purchased pursuant to such deferral or guarantee.
11. NOTIFICATION UNDER CODE SECTION 83(b). The
Committee may, on the Grant Date or any later date, prohibit a Grantee from
making the election described below. If the Committee has not prohibited such
Grantee from making such election, and the Grantee shall, in connection with the
exercise of any option, the grant of any share of Restricted Stock, or the grant
of a Performance Unit for Stock, make the election permitted under Section 83(b)
of the Code (i.e., an election to include in such Grantee's gross income in the
year of transfer the amounts specified in Section 83(b) of the Code), such
Grantee shall notify the Company of such election within 10 days of filing
notice of the election with the Internal Revenue Service, in addition to any
filing and notification required pursuant to regulations issued under the
authority of Section 83(b) of the Code.
12. MANDATORY WITHHOLDING OF TAXES.
(a) Whenever under the Plan, cash or
shares of Stock are to be delivered upon exercise or payment of an Award or upon
a share of Restricted Stock becoming nonforfeitable, or any other event occurs
which subjects the Grantee to income taxes with respect to rights and benefits
hereunder, the Company shall be entitled to require as a condition of delivery
(i) that the Grantee remit an amount sufficient to satisfy all federal, state,
and local withholding tax requirements related thereto, (ii) the withholding of
such sums from compensation otherwise due to the Grantee or from any shares of
Stock due to the Grantee under the Plan, or (iii) any combination of the
foregoing.
(b) If any disqualifying disposition
described in Section 6(c)(vii) is made with respect to shares of Stock acquired
under an Incentive Stock Option granted pursuant to the Plan or any election
described in Section 11 is made, then the person making such disqualifying
disposition or election shall remit to the Company an amount sufficient to
satisfy all federal, state, and local withholding taxes thereby incurred;
provided that, in lieu of or in addition to the foregoing, the Company shall
have the right to withhold such sums from compensation otherwise due to the
Grantee or from any shares of Stock due to the Grantee under the Plan.
13. ELECTIVE SHARE WITHHOLDING.
(a) Subject to Section 13(b), a Grantee may elect the
withholding ("Share Withholding") by the Company of a portion of the shares of
Stock otherwise deliverable to such Grantee upon the exercise or payment of an
Award or upon a share of Restricted Stock becoming nonforfeitable (each a
"Taxable Event") having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required
federal, state, or local withholding tax liability attributable to the
Taxable Event (in 1995, the minimum amount required by federal tax
withholding rules is 20% of the Grantee's taxable income); or
(ii) with the Committee's prior approval, a greater
amount, not to exceed the estimated total amount of such Grantee's tax
liability with respect to the Taxable Event.
(b) Each Share Withholding election by a Grantee shall be
subject to the following restrictions:
(i) any Grantee's election shall be subject to the
Committee's right to revoke such election of Share Withholding by such
Grantee at any time before the Grantee's election if the Committee has
reserved the right to do so in the Award Agreement;
(ii) if the Grantee is a Section 16 Grantee, such
Grantee's election shall be subject to the approval of the Committee at
any time, whether or not the Committee has reserved the right to do so;
(iii) the Grantee's election must be made before the
date (the "Tax Date") on which the amount of tax to be withheld is
determined;
(iv) the Grantee's election shall be irrevocable;
(v) a Section 16 Grantee may not elect Share
Withholding within six months after the grant of the related Option or
Stock Appreciation Rights (except if the Grantee dies or incurs a
Disability before the end of the six-month period);
(vi) except to the extent such condition may be
waived by the Senior Vice President/Legal of the Company, a Section 16
Grantee must elect Share Withholding either six months before the Tax
Date or during the ten business day period beginning on the third
business day after the release of the Company's quarterly or annual
summary statement of sales and earnings; and
(vii) provided, however, that no share withholding
shall be effective with respect to an Award which was transferred by
the Grantee in accordance with this Plan.
14. TERMINATION OF EMPLOYMENT.
(a) For Cause. If a Grantee has a
termination of employment for Cause,
(i) the Grantee's shares of Restricted Stock that
are forfeitable shall thereupon be forfeited, subject to the provisions
of Section 6(d)(iv) regarding repayment of certain amounts to the
Grantee; and
(ii) any unexercised option, Stock Appreciation
Right, or Performance Unit shall thereupon terminate.
(b) On Account of Death or Disability.
Except as may otherwise be provided in the Award Agreement if the Grantee has a
termination of employment:
(i) Restricted Stock.
(A) prior to the shares of
Restricted Stock becoming non-forfeitable by reason of:
(i) death, all Restricted Stock granted to such
Grantee shall become non-forfeitable.
(ii) the Disability of Grantee, such termination
shall not constitute a termination of employment for
purposes of Restricted Stock and such Grantee shall
not forfeit any Restricted Stock held by him\her,
provided that during the balance of the period in
which the Restricted Stock would otherwise remain
forfeitable such Grantee does not engage in or assist
any business that the Company, in its sole
discretion, determines to be in competition with
business engaged in by it. A Grantee who does engage
in or assist any business that the Company, in its
sole discretion, determines to be in competition with
business engaged in by it, shall be deemed to have
terminated employment.
(B) after the Restricted Stock
is nonforfeitable but prior to the end of Restricted Period, b
reason of death or Disability all Restricted Stock granted to such
Grantee shall be immediately payable.
(ii) Options/SARs. By reason of death or Disability,
any unexercised option or Stock Appreciation Right, to the extent
exercisable on the date of termination of employment upon death or
Disability, may be exercised, in whole or in part, at any time within
five months after such termination of employment by the Grantee, the
Grantee's guardian, legal representative, or, after the Grantee's
death, by (A) his/her personal representative, executor, administrator,
or by the person to whom the option or Stock Appreciation Right is
transferred by will or the applicable laws of descent and distribution,
(B) the Grantee's beneficiary designated in accordance with Sections
6(c)(viii) or 8, or (C) the then-acting trustee of the trust described
in clause (b) of the first sentence of Section 8 (but only if the
condition set forth in such clause (b) has been satisfied); and
(iii) Performance Units. (A) By reason of death or
Disability, any unexercised Performance Unit, to the extent exercisable
on the date of termination of employment on account of the Grantee's
death or Disability, may be exercised in whole or in part, at any time
within five months after termination of employment by the Grantee, the
Grantee's guardian, legal representative, or after the Grantee's death,
by (A) his/her personal representative, executor, administrator, or by
the person to whom the Performance Unit is transferred by will or the
applicable laws of descent and distribution, (B) the Grantee's
beneficiary designated in accordance with Section 8, or (C) the
then-serving trustee of the trust described in clause (b) of the first
sentence of Section 8 (but only if the condition set forth in such
clause (b) has been satisfied); provided that the benefit payable with
respect to any Performance Unit with respect to which the Performance
Period has not ended as of the date of such termination of employment
shall be equal to the product of the Unit Value multiplied successively
by each of the following:
(1) a fraction, the numerator of which is
the number of calendar months (including as a whole month any
partial month) that have elapsed since the beginning of such
Performance Period until the date of such termination of
employment and the denominator of which is the number of
months (including as a whole month any partial month) in the
Performance Period (the "Time Proration Factor"); and
(2) a percentage equal to the greater of
the target percentage, if any, specified in the applicable
Award Agreement or the maximum percentage, if any, that would
be earned under the terms of the applicable Award Agreement
assuming that the rate at which the performance goals have
been achieved as of the date of such termination of employment
would continue until the end of the Performance Period (the
"Performance Percentage Factor"); and
provided further, that in the case of Disability and following
Disability, such Grantee does not engage in or assist in any business that the
Company, in its sole discretion, determines to be in competition with the
business engaged in by it during the remainder of the applicable Performance
Period. A Grantee who does engage in or assist any business that the Company, in
its sole discretion, determines to be in competition with the business engaged
in by it shall be deemed to have terminated employment.
(c) On Account of Retirement.
(i) If a Grantee has a termination of employment on
account of Retirement, any unexercised option or Stock Appreciation
Right (other than a Stock Appreciation Right identified with a share of
Restricted Stock or a Performance Unit) which is then exercisable, may
be exercised, in whole or in part, not later than the 30th day
following the Grantee's Retirement, provided that following Retirement,
such Grantee does not engage in or assist in any business that the
Company, in its sole discretion, determines to be in competition with
the business engaged in by it during such period; provided, however,
that if such 30th day is not a business day, such option or Stock
Appreciation Right may be exercised not later than the first business
day following such 30th day; and provided further, that if the Grantee
dies within such thirty-day period, then the exercisability of the
Grantee's options and Stock Appreciation Rights shall be determined
under Section 14(b).
(ii) The non-forfeitability and exercisability of
the Grantee's Restricted Stock and Performance Units (and any Stock
Appreciation Rights identified therewith) shall be determined under
Section 14(d).
(d) Any Other Reason. If a Grantee has a
termination of employment for a reason other than for Cause, death of the
Grantee, the Grantee's Disability, and, with respect to options and Stock
Appreciation Rights (other than Stock Appreciation Rights identified with a
share of Restricted Stock or a Performance Unit), the termination of employment
is for reasons other than the Grantee's Retirement,
(i) Restricted Stock. The Grantee's shares of
Restricted Stock (and any Stock Appreciation Rights identified
therewith), to the extent forfeitable on the date of the Grantee's
termination of employment, shall be forfeited on such date. If the
termination of employment occurs after the Restricted Stock becomes
nonforfeitable but prior to the end of a Restricted Period, such
termination shall not have any effect on any Restricted Period, unless
the Committee, in its sole discretion, finds that the circumstances so
warrant and determines that the Restricted Period shall end on an
earlier date as determined by the Committee, and that shares held by
the Company shall be paid as soon as practicable following such earlier
date;
(ii) Options. Any unexercised option or Stock
Appreciation Right (other than a Stock Appreciation Right identified
with a share of Restricted Stock or Performance Unit) to the extent
exercisable on the date of the Grantee's termination of employment, may
be exercised in whole or in part, not later than the 30th day following
the Grantee's termination of employment; provided, however, that if
such 30th day is not a business day, such option or Stock Appreciation
Right may be exercised not later than the first business day following
such 30th day; and provided further, that if the Grantee dies within
such thirty-day period, then the exercisability of the Grantee's
options and Stock Appreciation Rights shall be determined under Section
14(b).
(iii) Performance Units. The Grantee's Performance
Units (and any Stock Appreciation Rights identified therewith) may
become non-forfeitable and may be exercised in whole or in part, but
only if and to the extent determined by the Committee in its sole
discretion.
(e) Extension of Term. In the event of
termination of employment other than for Cause, the term of any Award which
by its terms would otherwise expir after the Grantee's termination o
employment but prior to th end of the period following the Grantee's
termination of employment described in Sections (b), (c), and (d) above for
exercise of Awards shall be extended so as to permit any unexercised portion
thereof to be exercised at any time within such period to the extent exercisable
on the date of the Grantee's termination of employment; provided, however, that
in no event may the term of any Award expire or be exercisable more than 15
years (ten years for Incentive Stock Options) after the Grant Dat of such
Award.
15. CHANGE IN CONTROL. Notwithstanding
any other provision of the Plan to the contrary, if, while any Awards remain
outstanding under this Plan, a "Change in Control" (as defined below) should
occur, then (1) all options and SARs that are outstanding at the time of such
Change in Control shall become immediately vested and exercisable in full; (2)
all restrictions with respect to shares of Restricted Stock shall lapse, and
such shares shall be fully vested and nonforfeitable; and (3) with respect to
Awards of Performance Units, all Performance Periods outstanding at the time of
such Change in Control shall be deemed to have been completed, the maximum level
of performance assigned to all Performance Percentages shall be deemed to have
been attained, all applicable Restricted Periods shall lapse and a pro rata
portion (based on the number of full and partial months which have elapsed with
respect to each Performance Period) of each such outstanding Award for all
outstanding Performance Periods shall become payable in cash to each Grantee,
with the remainder of each such outstanding Award being cancelled for no value.
A Change in Control shall be deemed to have occurred if the conditions set forth
in any one of the following paragraphs shall have been satisfied:
(i) any person (as defined in Section 3(a)(9) of the
1934 Act, as such term is modified in Sections 13(d) and 14(d) of the
1934 Act), other than (1) any employee plan established by the Company,
any Affiliate, or any Subsidiary (2) the Company, an Affiliate or
Subsidiary, (3) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (4) a corporation owned, directly
or indirectly, by stockholders of the Company in substantially the same
proportions as their ownership of the Company, is or becomes the
beneficial owner (within the meaning of Rule 13d-3 promulgated under
the 1934 Act), directly or indirectly, of securities of the Company
(not including in the securities beneficially owned by such person any
securities acquired directly from the Company, its Subsidiaries or its
Affiliates) representing 50% or more of either the then outstanding
shares of Stock or the combined voting power of the Company's then
outstanding voting securities;
(ii) a change in the composition of the Board such
that individuals who, as of September 30, 1995, constitute the Board
(including individuals deemed to be members of the Board as of
September 30, 1995 by virtue of the application of this paragraph,
although actually elected at a later time) cease for any reason to
constitute at least a majority thereof; for purposes of this paragraph,
any person who becomes a member of the Board subsequent to September
30, 1995 and whose nomination for election is approved by at least a
majority of the members of the Board as of September 30, 1995 (other
than a nomination of an individual whose initial assumption of office
is in connection with an actual or threatened election contest relating
to the election of the members of the Board, as such terms are used in
Rule 14a-11 of Regulation 14A under the 1934 Act) shall be deemed a
member of the Board as of September 30, 1995;
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other corporation,
other than (1) 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 or any parent
thereof), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any Affiliate or Subsidiary, at least 50% of the combined
voting power of the voting securities of the Company or such surviving
entity or any parent thereof outstanding immediately after such merger
or consolidation, or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no person (determined pursuant to clause (i) above) is or becomes
the beneficial owner, directly or indirectly, of securities of the
Company (not including in the securities beneficially owned by such
person any securities acquired directly from the Company, its
Subsidiaries or its Affiliates) representing 50% or more of either the
then outstanding shares of Stock or the combined voting power of the
Company's then outstanding voting securities; or
(iv) the stockholders of the Company approve a plan
of 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, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 50% of
the combined voting power of the voting securities of which are owned
by persons in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, no Change in Control shall be
deemed to have occurred if there is consummated any transaction or
series of integrated transactions immediately following which the
record holders of Stock immediately prior to such transaction or series
of transactions continue to have substantially the same proportionate
ownership in an entity which owns substantially all of the assets of
the Company immediately prior to such transaction or series of
transactions.
16. EQUITY INCENTIVE PLANS OF FOREIGN SUBSIDIARIES.
The Committee may authorize any foreign Subsidiary to adopt a plan for granting
Awards ("Foreign Equity Incentive Plan"). All awards granted under such Foreign
Equity Incentive Plans shall be treated as grants under the Plan. Such Foreign
Equity Incentive Plans shall have such terms and provisions as the Committee
permits not inconsistent with the provisions of the Plan and which may be more
restrictive than those contained in the Plan. Awards granted under such Foreign
Equity Incentive Plans shall be governed by the terms of the Plan except to the
extent that the provisions of the Foreign Equity Incentive Plans are more
restrictive than the terms of the Plan, in which case such terms of the Foreign
Equity Incentive Plans shall control.
17. SUBSTITUTED AWARDS. If the Committee cancels
any Award (granted under this Plan or any plan of any entity acquired by the
Company or any of its Subsidiaries), and a new Award is substituted therefor,
then the Committee may, in its discretion, determine the terms and conditions of
such new Award; provided that (a) the Option Price of any new option shall not
be less than l00% of the Fair Market Value of a share of Stock on the date of
grant of the new Award; (b) no Award shall be cancelled without the consent of
Grantee if the terms and conditions of the new Award to be substituted are not
at least as favorable as the terms and conditions of the Award to be cancelled
(and the Grant Date of the new Award shall be the date on which such new Award
is granted); and (c) no Section 16 Grantee may exercise a substituted Stock
Appreciation Right or a substituted option (or substituted Performance Unit)
identified with a Stock Appreciation Right within six months after the Grant
Date (calculated without reference to this Section 17) of such substituted
option, unless the Company shall have received an opinion of counsel for the
Company or "no action" or interpretive letter from the staff of the SEC to the
effect that such limitation is not necessary in order to avoid liability under
Section 16(b) of the 1934 Act.
18. SECURITIES LAW MATTERS. (a) If the Committee
deems necessary to comply with the Securities Act of 1933, the Committee may
require a written investment intent representation by the Grantee and may
require that a restrictive legend be affixed to certificates for shares of
Stock.
(b) If, based upon the opinion of counsel for the
Company, the Committee determines that the exercise or non-forfeitability of,
or delivery of benefits pursuant to, any Award would violate any
applicable provision of (i) federal or state securities laws or (ii) the listing
requirements of any national securities exchange on which are listed any of the
Company's equity securities, then the Committee may postpone any such exercise,
non-forfeitability or delivery, as the case may be, but the Company shall use
its best efforts to cause such exercise, non-forfeitability or delivery to
comply with all such provisions at the earliest practicable date.
(c) With respect to Section 16 Grantees, transactions
under this Plan are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the 1934 Act. To the extent that any
provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
19. FUNDING. Benefits payable under the Plan to
any person shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for payment of,
benefits under the Plan.
20. NO EMPLOYMENT RIGHTS. Neither the establishment
of the Plan, nor the granting of any Award shall be construed to (a) give any
Grantee the right to remain employed by the Company or any of its Subsidiaries
or to any benefits not specifically provided by the Plan or (b) in any manner
modify the right of the Company or any of its Subsidiaries to modify, amend, or
terminate any of its employee benefit plans. Further, the Company or Subsidiary
may at any time dismiss a Grantee from employment, free from any liability, or
any claim under the plan, unless otherwise expressly provided in the Plan or in
any Award Agreement.
21. RIGHTS AS A STOCKHOLDER. A Grantee shall not,
by reason of any Award (other than Bonus Stock or Restricted Stock) have any
right as a stockholder of the Company with respect to the shares of Stock
which may be deliverable upon exercise or payment of such Award until such
shares have been delivered to him. Shares of Restricted Stock held by a Grantee
or held in escrow by the Secretary of the Company shall confer on the Grantee
all rights of a stockholder of the Company, except as otherwise provided in
the Plan. The Committee, in its discretion, at the time of grant of Restricted
Stock, may permit or require the payment of cash dividends thereon to be
deferred and, if the Committee so determines, reinvested in additional
Restricted Stock to the extent shares are available under Section 3 or otherwise
reinvested. Stock dividends and deferred cash dividends issued with respect
to Restricted Stock shall be treated as additional shares of Restricted Stock
that are subject to the same restrictions and other terms as apply to the shares
with respect to which such dividends are issued. The Committee may, in its
discretion, provide for crediting to and payment of interest on deferred cash
dividends.
22. NATURE OF PAYMENTS. Any and all grants,
payments of cash, or deliveries of shares of Stock hereunder shall constitute
special incentive payments to the Grantee and shall not be taken into account in
computing the amount of salary or compensation of the Grantee for the
purposes of determining any pension, retirement, death or other benefits under
(a) any pension, retirement, profit-sharing, bonus, life insurance or other
employee benefit plan of the company or any of its Subsidiaries or (b) any
agreement between the Company or any Subsidiary, on the one hand, and the
Grantee, on the other hand, except as such plan or agreement shall otherwise
expressly provide.
23. NON-UNIFORM DETERMINATIONS. Neither the
Committee's nor the Board's determinations under the Plan need be uniform
and may be made by the Committee or the Board selectively among persons who
receive, or are eligible to receive, Awards (whether or not such persons are
similarly situated). Without limiting the generality of the foregoing, the
Committee shall be entitled, among other things, to make non-uniform and
selective determinations and to enter into non-uniform and selective Award
Agreements, as to (a) the identity of the Grantees, (b) the terms and provisions
of Awards, and (c) the treatment, under Section 14, of terminations of
employment. Notwithstanding the foregoing, the Committee's interpretation of
Plan provisions shall be uniform as to similarly situated Grantees.
24. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION.
The Committee shall make such adjustment, as it shall deem equitable, to any
or all of:
(a) the aggregate numbers of shares of
Stock, shares of Restricted Stock, and bonus stock available under Sections 3(a)
and 3(b);
(b) the number of shares of Stock, shares
of Restricted Stock, Stock Appreciation Rights or Performance Units covered by
an Award;
(c) the performance objectives for
Performance Periods not yet completed, including performance l evels and the
proportion of payments related thereto;
(d) the Option Price;
(e) the Fair Market Value of Stock to be
used to determine the amount of the benefit payable under exercise of Stock
Appreciation Rights or Performance Units; and
(f) any other terms or provisions of any
outstanding grants of stock options, Restricted Stock, Performance Units or
Stock Appreciation Rights:
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, acquisition of property or
shares, separation, spin-off, reorganization, stock rights offering, liquidation
or similar event, of or by the Company, or, if deemed appropriate, the Committee
may make provisions for a cash payment to the holder of an outstanding Award;
provided, however, in each case, that with respect to Awards of Incentive Stock
Options no such adjustment shall be authorized to the extent that the authority
to make such adjustments would cause the Plan to violate Section 422(b)(1) of
the Code; and provided further, that the number of shares subject to any Award
denominated in shares of Stock shall always be a whole number. Notwithstanding
any part of the foregoing to the contrary, upon the approval by the stockholders
of the Company of a plan of liquidation for the Company, any unexercised
options, Stock Appreciation Rights, and Performance Units previously granted
become exercisable, and any shares of Restricted Stock that have not become
nonforfeitable shall become nonforfeitable.
25. AMENDMENT OF THE PLAN. The Board may from time
to time in its discretion amend or modify the Plan without the approval of
the stockholders of the Company, except as such stockholder approval may be
required (a) to permit the grant of Awards under, and transactions in Stock
pursuant to, the Plan to be exempt from liability under Section 16(b) of the
1934 Act, (b) under the listing requirements of any national securities
exchange on which are listed any of the Company's equity securities, or (c) to
permit the continued grant of options which qualify as Incentive Stock Options
under the Plan.
26. TERMINATION OF THE PLAN. The Plan shall
terminate on the tenth (10th) anniversary of the Effective Date or at such
earlier time as the Board may determine. Any termination, whether in whole
or in part, shall not affect any Award then outstanding under the Plan.
27. OTHER COMPENSATION PLANS. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other or additional compensation arrangements, and such
arrangements may be either generally applicable or applicable only in specific
cases.
28. NO ILLEGAL TRANSACTIONS. The Plan and all
Awards granted pursuant to it are subject to all laws and regulations of any
governmental authority which may be applicable thereto; and notwithstanding any
provision of the Plan or any Award, Grantees shall not be entitled to exercise
Awards or receive the benefits thereof and the Company shall not be obligated
to deliver any Stock or pay any
benefits to a Grantee if such exercise, delivery, receipt or payment of benefits
would constitute a violation by the Grantee or the Company of any provision of
any such law or regulation.
29. NO TRUST OR FUND CREATED. Neither the Plan nor
any Award shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company or Subsidiary
and a Grantee or any other person. To the extent that any person acquires a
right to receive payments from the Company or Subsidiary pursuant to an Award,
such right shall be no greater than the right of an unsecured general creditor
of the Company or Subsidiary.
30. CONTROLLING LAW. The law of the State of
Illinois, except its law with respect to choice of law and except as to matters
relating to corporate law (in which case the corporate law of the State of
Delaware shall control), shall be controlling in all matters relating to the
Plan.
31. TAX LITIGATION. The Company shall have the
right to contest, at its expense, any tax ruling or decision, administrative
or judicial, on any issue that is related to the Plan and that the Company
believes to be important to Grantees and to conduct any such contest or any
litigation arising therefrom to a final decision.
32. SEVERABILITY. If all or any part of the
Plan is declared by any court or governmental authority to be unlawful
or invalid, such unlawfulness or invalidity shall not serve to invalidate any
portion of the Plan not declared to be unlawful or invalid. Any Section or
part of a Section so declared to be unlawful or invalid shall, if possible,
be construed in a manner in which will give effect to the terms of such Section
or part of a Section to the fullest extent possible while remaining lawful and
valid.
33. INDEMNIFICATION. Each person who is or at
any time serves as a member of the Board or the Committee shall be
indemnified and held harmless by the Company against and from: (i) any loss,
cost, liability or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any claim, action, suit, or
proceeding to which such person may be a party or in which such person may be
involved by reason of any action or failure to act under the Plan; and (ii) any
and all amounts paid by such person in satisfaction of judgment in any such
action, suit or proceeding relating to the Plan. Each person covered by this
indemnification shall give the Company an opportunity, at its own expense, to
handle and defend the same before such person undertakes to handle and defend
it on such person's own behalf. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the By-Laws of the Company, as a matter of law, or other-
wise, or any power that the Company may have to indemnify such person or hold
such person harmless.
34. RELIANCE ON REPORTS. Each member of the Board
and the Committee shall be fully justified in relying or acting in good
faith upon any report made by the independent public accountants of, or
counsel for, the Company and upon any other information furnished in connection
with the Plan. In no event shall any person who is or shall have been a member
of the Board or the Committee be liable for any determination made or other
action taken or any omission to act in reliance upon any such report or
information or for any action taken, including the furnishing of information,
or failure to act, if in good faith.
35. EXPENSES. The Company shall bear all expenses
of administering the Plan.
36. TITLES AND HEADINGS. The titles and headings
of the sections in the Plan are for convenience of reference only, and in the
event of any conflict, the text of the Plan, rather than such titles or
headings, shall control.
Comdisco, Inc. and Subsidiaries Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(in millions except per share data)
Average shares used in computing net earnings per common and common equivalent
share were as follows:
<TABLE>
<CAPTION>
Three months
ended
December 31
-------------
1995 1994
---- ----
<S> <C> <C>
Average shares outstanding ......................... 52 54
Effect of dilutive options ......................... 2 2
---- ----
Total ........................................... 54 56
==== ====
Net earnings available
to common stockholders ......................... $ 25 $ 23
==== ====
Net earnings per common and
common equivalent share ........................ $.47 $.41
==== ====
</TABLE>
14
Comdisco, Inc. and Subsidiaries Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)
<TABLE>
<CAPTION>
Three months ended
December 31 For the years ended September 30,
-------------- --------------------------------------------
1995 1994 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges
Interest expense 1 ......................................... $ 66 $ 69 $278 $266 $295 $355 $371
Approximate portion of
rental expense representative
of an interest factor .................................... 2 3 11 13 22 29 37
---- ---- ---- ---- ---- ---- ----
Fixed charges .............................................. 68 72 289 279 317 384 408
Earnings from continuing operations
before income taxes and
extraordinary item, and cumulative
effect of change in accounting principle,
net of preferred stock dividends .......................... 42 39 160 80 137 34 136
---- ---- ---- ---- ---- ---- ----
Earnings from continuing operations before income taxes,
extraordinary item, cumulative effect of change
in accounting principle, net of
preferred stock dividend ................................... $110 $111 $449 $359 $454 $418 $544
==== ==== ==== ==== ==== ==== ====
Ratio of earnings to fixed charges ........................... 1.62 1.54 1.55 1.29 1.43 1.09 1.33
==== ==== ==== ==== ==== ==== ====
Rental expense:
Equipment subleases ........................................ $ 5 $ 6 $ 22 $ 30 $ 57 $ 77 $103
Office space, furniture, etc ............................... 2 2 10 8 8 10 9
---- ---- ---- ---- ---- ---- ----
Total ................................................... $ 7 $ 8 $ 32 $ 38 $ 65 $ 87 $112
==== ==== ==== ==== ==== ==== ====
1/3 of rental expense ................................... $ 2 $ 3 $ 11 $ 13 $ 22 $ 29 $ 37
==== ==== ==== ==== ==== ==== ====
1 Includes interest expense incurred by disaster recovery services and included
in disaster recovery services expenses on the statements of earnings.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information
extracted from the Quarterly Report on Form 10-Q
for the quarter ended December 31, 1995 and is qualified
in its entirety by reference to such financial statments.
</LEGEND>
<CIK> 0000722487
<NAME> Comdisco, Inc.
<MULTIPLIER> 1,000,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> Oct-01-1995
<PERIOD-END> DEC-31-1995
<EXCHANGE-RATE> 1
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 197
<ALLOWANCES> (20)
<INVENTORY> 133
<CURRENT-ASSETS> 341
<PP&E> 4,146
<DEPRECIATION> (1,592)
<TOTAL-ASSETS> 5,058
<CURRENT-LIABILITIES> 988
<BONDS> 1,299
0
91
<COMMON> 7
<OTHER-SE> 677
<TOTAL-LIABILITY-AND-EQUITY> 5,058
<SALES> 396
<TOTAL-REVENUES> 530
<CGS> 259
<TOTAL-COSTS> 421
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65
<INCOME-PRETAX> 44
<INCOME-TAX> 17
<INCOME-CONTINUING> 27
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-PRIMARY> 0.470
<EPS-DILUTED> 0.470
</TABLE>
Exhibit 99.1
[COMDISCO, INC. LETTERHEAD]
February 9, 1996
The Board of Directors of
Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Re: Issuance of $250 Million in 5 3/4% Notes of Comdisco, Inc. due
February 15, 2001
--------------------------------------------------------------
Ladies and Gentlemen:
Reference is made to the form of the Registration Statement on Form S-3
(File No. 33-63823) filed with the Securities and Exchange Commission (the
"Commission") on October 31, 1995 (the "Registration Statement") by Comdisco,
Inc., a Delaware corporation (the "Company"), under the Securities Act of 1933,
as amended (the "Act"), and declared effective December 15, 1995, relating to
$750,000,000 in aggregate principal amount of Debt Securities of the Company
(the "Debt Securities") and Common Stock as may be issuable from time to time
upon conversion or exchange or Debt Securities to the extent such Debt
Securities are, by their terms, convertible or exchangeable for Debt Securities
pursuant to Rule 415 under the Act for issuance from time to time. This opinion
is being furnished to you for filing on a Current Report on Form 8-K which will
be incorporated by reference as a supplemental exhibit to the Registration
Statement.
I am familiar with the proceedings taken and proposed to be taken by
the Company in connection with the proposed authorization, issue and sale of
$250 million in aggregate principal amount of 5 3/4% Notes due February 15, 2001
to be offered by the Company as Debt Securities under the Registration Statement
(the "Notes") and I have examined the originals, or copies, certified or
otherwise identified, of corporate records of the Company, certificates of
public officials and the representatives of the Company, statutes and other
documents and instruments, as the basis for the opinion hereinafter expressed. I
have also examined the form of Indenture between the Company and Yasuda Bank and
Trust Company (U.S.A.), as Trustee, under which the Notes are to be issued (the
"Indenture") and the form of Underwriting Agreement by and among the Company,
and certain Underwriters pursuant to which the Notes will be distributed (the
"Underwriting Agreement"), the forms of each of which have been filed as
exhibits to the Registration Statement. I am also familiar with the form of
Prospectus Supplement and Prospectus relating to the Notes and their offering by
the Company, each dated February 7, 1996 and to be filed with the Commission on
or about February 9, 1996. I am also familiar with the proposed opinion of legal
counsel qualified to practice in New York concerning the validity, legality and
binding effect of the Notes under New York law, upon which I will rely in
delivering my opinion pursuant to the Distribution Agreement and upon which
opinion I am relying in connection with this opinion.
Based upon the foregoing examination, and in reliance thereon, I am of
the opinion that, subject to the terms of the Notes being otherwise in
compliance with applicable law, the Notes, when duly authorized, executed,
authenticated and delivered in the form contemplated by the Indenture and in
accordance with the terms of the applicable resolutions of the Board of
Directors of the Company, and any legally required consents, approvals,
authorizations and other orders of the Commission or any other judicial or
regulatory authorities required to be obtained, against payment therefor as
described in the Registration Statement, will be legally issued and will be
binding obligations of the Company, entitled to the benefits of Indenture.
The foregoing opinion is subject to (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) with respect to the enforceability of any agreement to
general principles of equity (regardless of whether such enforceability is
considered in an action at law or in equity).
I am qualified to practice law in the State of Illinois and do not
purport to be an expert on, or to express any opinion herein concerning any law
other than the laws of the State of Illinois, the corporation laws of the State
of Delaware, and the federal laws of the United States. Without limiting the
generality of the foregoing, I express no opinion as to the effect of the law of
any jurisdiction other than the State of Illinois or the corporate law of
Delaware.
I hereby consent to the filing of this opinion as an exhibit to the
Company's Quarterly Report on Form 10-Q to be incorporated by reference into the
Registration Statement.
Very truly yours,
/s/ Jeremiah M. Fitzgerald
Jeremiah M. Fitzgerald
Vice President and
General Counsel
