<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PLATINUM technology, inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 1997
----------------
To the Stockholders of
PLATINUM technology, inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of PLATINUM
technology, inc. (the "Company") will be held at 10:00 a.m., Chicago time, on
Tuesday, May 20, 1997, at the Company's principal executive offices, 1815 South
Meyers Road, Oakbrook Terrace, Illinois 60181, for the following purposes:
(1) To elect three Class III directors to the Company's Board of
Directors;
(2) To approve an amendment to the PLATINUM technology, inc. Employee
Incentive Compensation Plan;
(3) To ratify the appointment by the Board of Directors of KPMG Peat
Marwick LLP as the independent auditors of the Company's financial
statements for the year ending December 31, 1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on March 25, 1997 as
the record date for determining stockholders entitled to notice of, and to vote
at, the Annual Meeting.
By order of the Board of Directors,
LOGO
Michael C. Wyatt
Senior Vice President, General
Counsel and Secretary
Oakbrook Terrace, Illinois
April 21, 1997
ALL STOCKHOLDERS ARE URGED TO ATTEND THE MEETING IN PERSON OR BY PROXY. WHETHER
OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, SIGN AND DATE
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID
ENVELOPE FURNISHED FOR THAT PURPOSE. YOUR PROXY CAN BE WITHDRAWN AT ANY TIME
BEFORE IT IS VOTED.
<PAGE>
PLATINUM TECHNOLOGY, INC.
1815 SOUTH MEYERS ROAD
OAKBROOK TERRACE, ILLINOIS 60181
(630) 620-5000
----------------
PROXY STATEMENT
----------------
The accompanying proxy is solicited by the Board of Directors (the "Board of
Directors" or "Board") of PLATINUM technology, inc., a Delaware corporation
(the "Company"), for use at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at 10:00 a.m., Chicago time, Tuesday, May 20, 1997, at
the Company's principal executive offices, 1815 South Meyers Road, Oakbrook
Terrace, Illinois 60181, and any adjournments thereof. This Proxy Statement
and accompanying form of proxy were first released to stockholders on or about
April 21, 1997.
RECORD DATE AND OUTSTANDING SHARES. The Board of Directors has fixed the
close of business on March 25, 1997 as the record date (the "Record Date") for
the determination of stockholders entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof. As of the Record Date, the Company
had outstanding 61,351,286 shares of its Common Stock, par value $.001 per
share ("Common Stock"). Each of the outstanding shares of Common Stock is
entitled to one vote on all matters coming before the Annual Meeting.
VOTING OF PROXIES. Michael P. Cullinane and Michael C. Wyatt, the persons
named as proxies on the proxy card accompanying this Proxy Statement, were
selected by the Board of Directors of the Company to serve in such capacity.
Mr. Cullinane is an executive officer and director of the Company. The shares
represented by each executed and returned proxy will be voted and such vote
will be in accordance with the directions indicated thereon or, if no
direction is indicated, in accordance with the recommendations of the Board of
Directors contained in this Proxy Statement. The Board of Directors does not
presently intend to bring any business before the Annual Meeting other than
the specific proposals referred to in this Proxy Statement and specified in
the Notice of Annual Meeting, and so far as is known to the Board of
Directors, no other matters are to be brought before the Annual Meeting. As to
any other business that may properly come before the Annual Meeting, however,
it is intended that proxies, in the form enclosed, will be voted in respect
thereof in accordance with the judgment of the persons voting such proxies.
Each stockholder giving a proxy has the power to revoke it at any time before
the shares it represents are voted. Revocation of a proxy is effective upon
receipt by the Secretary of the Company of either (i) an instrument revoking
the proxy or (ii) a duly executed proxy bearing a later date. Additionally, a
stockholder may revoke a previously executed proxy by voting in person at the
Annual Meeting (although attendance at the Annual Meeting will not, by itself,
revoke a proxy).
REQUIRED VOTE. A plurality of the shares voted in person or by proxy is
required to elect the nominees for directors. The affirmative vote of a
majority of the shares voted affirmatively or negatively, in person or by
proxy, is required to approve the amendment to the PLATINUM technology, inc.
Employee Incentive Compensation Plan and to ratify the appointment of KPMG
Peat Marwick LLP as the independent auditors of the Company's financial
statements for the year ended December 31, 1997. Stockholders will not be
allowed to cumulate their votes in the election of directors.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES. The required quorum for the
transaction of business at the Annual Meeting will be a majority of the shares
of Common Stock issued and outstanding on the Record Date. Abstentions and
broker non-votes will be included in determining the presence of a quorum.
Neither abstentions nor broker non-votes will have any effect on the voting on
any of the three proposals.
ANNUAL REPORT TO STOCKHOLDERS. The Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1996, containing financial and other
information pertaining to the Company, is being furnished to stockholders
simultaneously with this Proxy Statement.
1
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors consists of seven directors. Article Fifth
of the Company's Certificate of Incorporation provides that the Board of
Directors shall be classified with respect to the terms for which its members
shall hold office by dividing the members into three classes. At the Annual
Meeting, three directors of Class III will be elected, each to be elected for a
term of three years expiring at the Annual Meeting of Stockholders in the year
2000. All of the nominees are presently serving as directors of the Company.
The four directors whose terms of office do not expire in 1997 will continue
to serve after the Annual Meeting until such time as their respective terms of
office expire or their successors are duly elected and qualified. See "Other
Directors" below.
If at the time of the Annual Meeting any of the nominees should be unable or
decline to serve, the persons named in the proxy will vote for such substitute
nominee or nominees as the Board of Directors recommends, or vote to allow the
vacancy created thereby to remain open until filled by the Board, as the Board
recommends. The Board of Directors has no reason to believe that any nominee
will be unable or will decline to serve as a director if elected.
NOMINEES
The names of the nominees for the office of director, together with certain
information concerning such nominees, are set forth below:
<TABLE>
<CAPTION>
SERVED AS
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE
---- --- --------------------- --------------
<S> <C> <C> <C>
Andrew J. Filipowski.... 46 President, Chief Executive 1987
Officer and Chairman of the Board
of Directors
James E. Cowie(1)(2).... 42 Director 1989
Steven D. Devick(1)(2).. 45 Director 1989
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Mr. Filipowski, a founder of the Company, has been President, Chief Executive
Officer and Chairman of the Board of Directors since the Company's formation in
April 1987. Mr. Filipowski is also a director of Platinum Entertainment, Inc.,
a publicly held integrated music recording and publishing company, and intouch
group, inc.
Mr. Cowie has been a General Partner of Frontenac Company, a Chicago-based
venture capital firm, since February 1989. Mr. Cowie is also a director of U.S.
Robotics, Inc. and US Servis, Inc.
Mr. Devick is currently the President, Chief Executive Officer and Chairman
of the Board of Directors of Platinum Entertainment, Inc., which he co-founded
in 1992. He is also the Chief Executive Officer of a number of other entities,
including DDE, Inc. (f/k/a Devick Enterprises, Inc.) and Platinum Development,
a real estate development firm, positions he has held for over five years.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR ALL OF THE
NOMINEES FOR ELECTION AS CLASS I DIRECTORS.
2
<PAGE>
OTHER DIRECTORS
The following persons will continue to serve as directors of the Company
after the Annual Meeting until their terms of office expire (as indicated
below) or until their successors are elected and qualified.
<TABLE>
<CAPTION>
SERVED AS TERM
NAME AGE POSITION WITH COMPANY DIRECTOR SINCE EXPIRES
---- --- --------------------- -------------- -------
<S> <C> <C> <C> <C>
Arthur P. Frigo(1)(2)... 55 Director 1997 1998
Gian Fulgoni(1)(2)...... 48 Director 1991 1998
Michael P. Cullinane.... 47 Executive Vice President, Chief 1991 1999
Financial Officer, Treasurer and
Director
Paul L. Humenansky...... 39 Executive Vice President-Product 1991 1999
Development, Chief Operations Officer
and Director
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Mr. Frigo is the owner and Chairman of M.B. Walton, a consumer products
company. He also serves on the Board of Directors of Modagratics, The Levy
Organization, Maxrad, Precision Extrusions, LaRabida Children's Hospital and
the Landmark Preservation Council of Illinois.
Mr. Fulgoni is Chief Executive Officer and a director of Information
Resources, Inc. ("IRI"), which provides a variety of information services
(primarily to consumer packaged goods companies) and computer decision support
services. He was elected Chief Executive Officer of IRI in 1991. From 1991 to
April 1995, Mr. Fulgoni served as Chairman of IRI, from 1989 to 1991 as Vice
Chairman, and from 1981 to 1989 as President.
Mr. Cullinane joined the Company in March 1988 as Senior Vice President and
Chief Financial Officer, becoming Executive Vice President in March 1995. He
has also served as the Company's Treasurer since April 1989 and served as
Secretary from April 1989 until October 1995. Mr. Cullinane is also a director
of Platinum Entertainment, Inc.
Mr. Humenansky, a founder of the Company, was appointed Chief Operations
Officer of the Company effective January 1993. Mr. Humenansky also serves as
Executive Vice President--Product Development, a position he has held since
the Company's formation in April 1987. Mr. Humenansky is also a director of
Platinum Entertainment, Inc.
DIRECTOR COMPENSATION
All non-employee directors of the Company are paid an annual fee of $2,500
and an attendance fee of $1,000 for each Board meeting attended and $500 for
each Committee meeting attended if such Committee meeting is not held in
conjunction with a meeting of the full Board. In addition, each non-employee
director participates in the Amended and Restated PLATINUM technology, inc.
1993 Directors' Stock Option Plan (the "Directors' Plan"). Pursuant to the
Directors' Plan, each non-employee director is granted, on the date of each
annual meeting after which such director continues to serve on the Board of
Directors, an option to purchase 10,000 shares of Common Stock at the fair
market value of the Common Stock on such date. The Company provides no
retirement benefits to non-employee directors. Directors who are also
employees of the Company receive no additional compensation from the Company
for services rendered in their capacity as directors.
MEETINGS
During the year ended December 31, 1996, the Board of Directors held five
formal meetings. Each of the Company's current directors, except Mr. Fulgoni
(excluding Mr. Frigo, who was appointed to the Board in January 1997),
attended at least 75% of the aggregate of the number of board meetings held
and the total number of meetings of Committees on which he served that were
held during 1996.
3
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee and a Compensation
Committee. Both the Audit Committee and the Compensation Committee are
currently composed entirely of directors who are not officers of the Company.
The Company does not have a standing nominating committee.
The Audit Committee generally has responsibility for recommending
independent auditors to the Board of Directors for selection, reviewing the
plan and scope of the annual audit, reviewing the Company's audit and control
functions and reporting to the full Board of Directors regarding all of the
foregoing. The Audit Committee held three formal meetings in 1996.
The Compensation Committee generally has responsibility for recommending to
the Board guidelines and standards relating to the determination of executive
compensation, reviewing the Company's executive compensation policies and
reporting to the Board of Directors regarding the foregoing. The Compensation
Committee also has responsibility for administering the Company's incentive
compensation plans, determining the number of options to be granted to the
Company's executive officers pursuant to such plans and reporting to the Board
of Directors regarding the foregoing. The Compensation Committee conferred by
telephone on a number of occasions and held one formal meeting in 1996.
EXECUTIVE OFFICERS
Set forth below is a table identifying executive officers of the Company who
are not identified in the tables under "Election of Directors--Nominees" and
"Other Directors."
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas A. Slowey.. 36 Executive Vice President--Sales
Paul A. Tatro..... 40 Executive Vice President--International Operations
</TABLE>
Mr. Slowey has served as Executive Vice President--Sales since joining the
Company in March 1988.
Mr. Tatro joined the Company in October 1987 as Director of Education and
was appointed Senior Vice President--Field Support and Affiliates in January
1990, a position he held until March 1995, when he was elected Executive Vice
President--International Operations.
The Board of Directors elects officers annually and such officers, subject
to the terms of certain employment agreements, serve at the discretion of the
Board. Messrs. Filipowski, Cullinane and Humenansky each have employment
agreements with the Company. See "Executive Compensation--Employment
Agreements." There are no family relationships among any of the directors or
officers of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934, as amended (the "Act"),
requires the Company's officers (as defined under Section 16) and directors
and persons who own greater than 10% of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with
the Securities and Exchange Commission (the "Commission"). Based solely on a
review of the forms it has received and on written representations from
certain reporting persons that no such forms were required for them, the
Company believes that, during 1996, all Section 16 filing requirements
applicable to its officers, directors and greater than 10% beneficial owners
were complied with by such persons.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table provides information concerning the annual and long-term
compensation for services in all capacities to the Company for the years ended
December 31, 1996, 1995 and 1994 of those persons who were at December 31,
1996 (i) the Chief Executive Officer and (ii) the four other most highly
compensated (based upon combined salary and bonus) executive officers of the
Company (collectively, with the Chief Executive Officer, the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------ ------------
NAME AND PRINCIPAL POSITION AWARDS (1)
- --------------------------- ------------
SECURITIES
SALARY UNDERLYING ALL OTHER
YEAR ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
---- -------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Andrew J. Filipowski, 1996 $702,000 $ -- -- (2) $113,165(3)
President, Chief Executive Officer 1995 520,000 -- 400,000 54,736
and Chairman of the Board 1994 435,000 983,245 400,000 47,091
Paul L. Humenansky, 1996 $462,000 $ -- -- (2) $ 8,558(3)
Chief Operations Officer and 1995 330,000 -- 250,000 5,128
Executive Vice President-- 1994 275,000 541,679 250,000 6,300
Product Development
Michael P. Cullinane, 1996 $445,500 $ -- -- (2) $ 11,540(3)
Executive Vice President, Chief 1995 330,000 -- 150,000 6,624
Financial Officer and Treasurer 1994 275,000 455,024 150,000 6,300
Thomas A. Slowey, 1996 $273,000 $ -- -- (2) $ 2,369(3)
Executive Vice President--Sales 1995 210,000 -- 75,000 1,500
1994 175,000 465,637 75,000 1,500
Paul A. Tatro, 1996 $273,000 $ -- -- (2) $ 2,561(3)
Executive Vice President-- 1995 210,000 -- 75,000 1,500
International Operations 1994 175,000 324,750 75,000 1,500
</TABLE>
- --------
(1) None of the Named Officers had any restricted stock holdings as of
December 31, 1996.
(2) Does not reflect options to purchase an aggregate of 1,250,000 shares of
Common Stock granted to the Named Officers in October 1996, subject to
stockholder approval at the Annual Meeting of the amendment to the
PLATINUM technology, inc. Employee Incentive Compensation Plan. See
"Proposal No. 2--Approval of Amendment to the PLATINUM technology, inc.
Employee Incentive Compensation Plan--Employee Plan Benefits."
(3) For each of the Named Officers, includes $1,500 in Company matching
contributions pursuant to the PLATINUM technology, inc., 401(k) Savings
Plan. The remainder of the amount shown for each of the Named Officers
represents the full dollar value of premiums paid by the Company with
respect to whole life and term life insurance.
5
<PAGE>
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END 1996 OPTION VALUES. The
following table provides information on the Named Officers' unexercised
options at December 31, 1996. None of the Named Officers exercised any options
in 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR-END 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
YEAR-END 1996 (#)(1) YEAR-END 1996 ($)(2)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Andrew J. Filipowski....... 1,691,875 565,625 $8,296,563 $229,688
Paul L. Humenansky......... 503,750 356,250 $ 581,875 $153,125
Michael P. Cullinane....... 539,625 209,375 $2,611,250 $ 76,563
Thomas A. Slowey........... 244,750 106,250 $1,034,023 $ 43,750
Paul A. Tatro.............. 179,166 106,250 $ 382,327 $ 43,750
</TABLE>
- --------
(1) Does not reflect options to purchase an aggregate of 1,250,000 shares of
Common Stock granted to the Named Officers in October 1996, subject to
stockholder approval at the Annual Meeting of the amendment to the
PLATINUM technology, inc. Employee Incentive Compensation Plan. See
"Proposal No. 2--Approval of Amendment to the PLATINUM technology, inc.
Employee Incentive Compensation Plan--Employee Plan Benefits."
(2) The value per option is calculated by subtracting the exercise price from
the closing price of the Common Stock on the Nasdaq National Market on
December 31, 1996, which was $13.625.
EMPLOYMENT AGREEMENTS. Effective March 1, 1991, the Company entered into
employment agreements with Messrs. Filipowski, Cullinane and Humenansky. Mr.
Filipowski's employment agreement provides for an initial base salary of
$252,000 (which has been increased annually) plus bonus compensation. Mr.
Cullinane's employment agreement provides for an initial base salary of
$160,000 (which has been increased annually) plus bonus compensation. Mr.
Humenansky's employment agreement provides for an initial base salary of
$160,000 (which has been increased annually) plus bonus compensation. The
agreements provide that all bonus arrangements for Messrs. Filipowski,
Cullinane and Humenansky are established by the Compensation Committee of the
Board of Directors. All of the employment agreements also provide for
continuation of salary, bonuses and fringe benefits for 18 months following
the executive's termination of employment with the Company for any reason
other than "Good Cause" as defined in such agreements, or for five years if
the termination occurs within a certain time period before or after a "Change
in Control" of the Company. Under such agreements, a "Change in Control" of
the Company includes (a) certain reorganizations, consolidations or mergers of
the Company, (b) certain transfers of all or substantially all of the assets
of the Company, (c) the approval by the Company's stockholders of a plan of
liquidation or dissolution, (d) a change in the Company's Board of Directors
such that a majority of the members of the Board are not "continuing"
directors, or (e) a person's becoming the holder of at least 51% of the
combined voting power of the Company's outstanding voting securities.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company is engaged in a highly competitive and dynamic industry. The
Company's success depends in large part on its ability to attract, motivate
and retain talented and dedicated senior executives. Andrew Filipowski, the
Company's Chief Executive Officer, and the other four executive officers are
initial founders or early employees of the Company and constitute the core of
senior management that has led the Company from
6
<PAGE>
its inception only ten years ago through its many achievements to date. The
Compensation Committee believes this management team is responsible, to a
significant degree, for the Company's successes to date and deserves to be
highly compensated and rewarded for the Company's achievements. The basic
philosophy of the Compensation Committee is to provide superior compensation
for superior management performance and only average compensation for average
performance. The Committee also believes that the Company should continue to
provide incentives to this management team to increase stockholder value and to
position the Company to meet the challenges of the marketplace in both near and
long-term horizons.
In setting compensation, individual contributions of particular executives
are measured against certain objective factors, as well as subjective factors,
which are considered important. Generally, the compensation of all executive
officers is comprised of a fixed base salary plus a variable cash incentive
award based upon Company performance. In addition, stock options are granted to
provide the opportunity for additional compensation based upon the performance
of the Company's stock over time.
BASE SALARIES
In 1991, each of Messrs. Filipowski, Humenansky and Cullinane entered into an
employment agreement with the Company which provides for a predetermined
initial base salary which has been annually increased by the Compensation
Committee. For 1996, the Compensation Committee elected to increase the base
salary of Mr. Filipowski by approximately 40% and the base salary of each of
the other Named Officers by approximately 35%, primarily to reflect the
Company's substantial growth, and related increases in responsibilities, in the
prior year. The increases were also based in part upon the Compensation
Committee's subjective determination that such increases were appropriate to
maintain a salary structure competitive with other high growth corporate
technology companies. In making this determination, the Compensation Committee
relied upon its members' personal knowledge and business experience and the
report of an independent compensation consulting firm retained by the Company
for these purposes. The report provided information on a group of 15 rapidly
growing publicly traded companies that make prepackaged software or
semiconductors and related devices. Some, but not all, of these companies are
in the H&Q Software Sector Index shown in the Performance Graph contained in
this Proxy Statement, and these companies were selected because they share
characteristics that are similar to those of the Company, including with
respect to marketplace and growth rates. For 1996, the base salaries of Mr.
Filipowski and the Company's executive officers, as a group, were generally
somewhat above the median of the salaries paid by these companies.
CASH INCENTIVE AWARDS
For 1996, each of the Named Officers, including Mr. Filipowski, were awarded
the opportunity to earn quarterly and annual cash incentive awards (bonuses)
pursuant to a program established under the PLATINUM technology, inc. Employee
Incentive Compensation Plan (the "Employee Plan"). Under this plan, all cash
incentive awards were contingent upon the Company's meeting or exceeding
certain targets for (i) revenues and (ii) earnings per share excluding the
effect of charges for acquired in-process technology and before payment of
executive bonuses ("Adjusted EPS"). Once these threshold targets were met, each
of the Named Officers was to receive cash incentive awards which increased in
relation to improvement over these target levels. Because in 1996 the Company
did not meet any of the designated threshold targets for Adjusted EPS, no cash
incentive awards were paid to Mr. Filipowski or any of the other Named
Officers.
STOCK OPTIONS
In addition to the cash bonus compensation based upon the Company's
performance, the Compensation Committee grants stock options to provide long-
term incentives to executive officers which are directly tied to the
performance of the Company's stock. Stock options are granted at no less than
fair market value on the date of grant and are exercisable in annual
installments beginning one year after the date of grant. Vesting periods are
used to encourage key employees to continue in the employ of the Company and to
emphasize long-term
7
<PAGE>
performance. The Compensation Committee has historically granted significant
options to the Company's key executives based upon its belief that it is
necessary in a highly competitive environment to provide key personnel the
opportunity for significant continuing equity participation and incentive to
create stockholder value over a long-term investment horizon. Further, inasmuch
as the Company's cash incentive award program does not, as a general rule,
provide any cash bonus compensation to a Named Officer unless Company
performance target thresholds are met, the Compensation Committee believes it
is also appropriate to continue to provide the opportunity for additional
compensation through stock options which appreciate in value based upon future
Company performance.
In determining whether to grant options in 1996 to the Named Officers,
including Mr. Filipowski, the Compensation Committee considered their relative
positions within the Company and their individual contributions to the Company,
particularly their efforts in connection with the Company's assimilation and
integration of its portfolio of products and services subsequent to its
aggressive acquisition campaign in 1995 and the significance of grants in prior
years. The Compensation Committee did not, however, assign any particular
weight to any one factor. With respect to Mr. Filipowski, the Compensation
Committee focused on the total number and value of options (including
exercisable and unexercisable options) already held by Mr. Filipowski, the
magnitude of his contributions to the Company's performance and on its belief
that Mr. Filipowski's vision and leadership are fundamental to future success.
Consequently, the Compensation Committee granted a significant stock option
award to Mr. Filipowski to fully recognize his contributions. Additionally, in
making its determinations as to the option awards to the other Named Officers,
the Compensation Committee considered the recommendations of Mr. Filipowski and
the total number and value of options (including exercisable and unexercisable
options) already held by each of the Named Officers. In this regard, the
Compensation Committee also granted a significant option award to each of the
Named Officers. Each of the 1996 stock option awards to Mr. Filipowski and the
other Named Officers is subject to stockholder approval at the Annual Meeting
of the amendment to the PLATINUM technology, inc. Employee Incentive
Compensation Plan. See "Proposal No. 2--Approval of Amendment to the PLATINUM
technology, inc. Employee Incentive Compensation Plan."
COMPLIANCE WITH SECTION 162(M)
The Compensation Committee currently intends for all compensation paid to the
Named Officers to be tax deductible to the Company pursuant to Section 162(m)
("Section 162(m)") of the Internal Revenue Code of 1986, as amended (the
"Code"). Section 162(m) provides that compensation paid to the Named Officers
in excess of $1,000,000 cannot be deducted by the Company for Federal income
tax purposes unless, in general, such compensation is performance-based, is
established by a committee of outside directors and is objective and the plan
or agreement providing for such performance-based compensation has been
approved in advance by stockholders. Consistent with this intention, the
Employee Plan was submitted and approved by the stockholders and, since such
approval, the Compensation Committee has provided all cash incentive award
opportunities pursuant to the Employee Plan. In the future, however, the Board
may determine to adopt a compensation program that does not satisfy the
conditions of Section 162(m) if in the Board's judgment, after considering the
additional costs of not satisfying 162(m), such program is appropriate.
COMPENSATION COMMITTEE
Steven D. Devick
James E. Cowie
Casey G. Cowell (1)
Arthur P. Frigo (2)
- --------
(1) Mr. Cowell resigned from the Compensation Committee and the Board of
Directors in December 1996.
(2) Mr. Frigo joined the Compensation Committee and the Board of Directors in
January 1997.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Cowie, Devick and Cowell were the members of the Company's
Compensation Committee during 1996. Messrs. Filipowski and Devick are executive
officers of Platinum Venture Partners, Inc. ("PVP"), and Mr. Filipowski is the
sole director of, and makes compensation decisions for, PVP. Mr. Devick is an
executive officer of Platinum Entertainment, Inc. ("PEI"), and Messrs.
Filipowski, Humenansky and Cullinane, all of whom are executive officers of the
Company, are directors of PEI. Messrs. Filipowski and Cullinane are also
members of the compensation committee of PEI.
In January 1996, the Company purchased from VREAM, Inc. ("VREAM") 400,000
shares of VREAM's Series A Preferred Stock for an aggregate purchase price of
$50,000. In December 1996, the Company acquired all of the outstanding capital
stock of VREAM (exclusive of the shares purchased by the Company in January
1996) in exchange for 760,383 shares of Common Stock, which had a market value,
based upon the closing price of the Common Stock on the Nasdaq National Market,
of approximately $10,300,000 on the date of the acquisition.
Platinum Venture Partners I, L.P. ("Venture I") and Platinum Venture Partners
II, L.P. ("Venture II") had equity interests in VREAM of approximately 17% and
22.67%, respectively, at the time of the acquisition. A portion of the equity
interests in Venture I and Venture II are owned by certain officers and
directors of the Company. These percentage interests for Venture I are as
follows: Mr. Filipowski--8.3%; Mr. Cullinane--1.7%; Mr. Humenansky--1.7%; Mr.
Tatro--1.7%; Mr. Slowey--0.8%; Mr. Devick--3.3%; Frontenac Company (of which
Mr. Cowie is a general partner)--1.7%; Mr. Frigo--5% and Mr. Fulgoni--1.7%.
These percentage ownership interests for Venture II are as follows: Mr.
Filipowski--6.8%; Mr. Cullinane--0.7%; Mr. Humenansky--0.5%; Mr. Frigo--1.4%
and Frontenac Company--4.5%. In addition, PVP is the general partner of each of
Venture I and Venture II, and Messrs. Filipowski, Cullinane and Devick are the
President and Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer, respectively, of PVP.
The Board of Directors of the Company designated a special committee,
consisting of Mr. Fulgoni and Mr. Cowie, to consider the acquisition of VREAM.
This committee retained an independent investment banking firm, which provided
its opinion that the transaction was fair from a financial point of view to the
stockholders of the Company.
In May 1996, the Company purchased from Visigenic Software, Inc.
("Visigenic") 222,222 shares of Visigenic's Series C Preferred Stock (the
"Visigenic Shares") for an aggregate purchase price of $999,999. Concurrently
therewith, the Company agreed to transfer to Venture I and Venture II all of
the Company's rights, title and interest to all of the appreciation,
depreciation and cash value of $100,000 and $150,000, respectively, of the
Visigenic Shares in exchange for the price per share paid by the Company. The
Company retained all voting and dispositive power with respect to all of the
Visigenic Shares.
9
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total returns for the
Company, the Nasdaq Stock Market-U.S. Index and the H&Q Software Sector Index
for the last five years. The comparison assumes $100 was invested on December
31, 1991 in the Common Stock, the Nasdaq Stock Market-U.S. Index and the H&Q
Software Sector Index and assumes the reinvestment of all dividends, if any.
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
<S> <C> <C> <C> <C> <C> <C>
PLATINUM technology, inc. 100.00 95.29 50.59 106.47 86.47 64.12
NASDAQ-U.S. Index 100.00 116.38 133.59 130.59 184.67 227.16
H&Q Software Sector Index 100.00 112.15 120.39 151.19 216.70 263.42
</TABLE>
CERTAIN TRANSACTIONS
See the discussion under "Compensation Committee Interlocks and Insider
Participation" above for a description of certain transactions involving the
Company and its executive officers and directors.
10
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 1, 1997 unless otherwise
indicated below, certain information with respect to the beneficial ownership
of the Company's Common Stock by (i) each person known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company, (iii) each of the Named Officers and (iv) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP(1) CLASS
---------------- ------------ -------
<S> <C> <C>
Andrew J. Filipowski(2)................................ 3,674,630 6.0%
T. Rowe Price Associates, Inc.(3)...................... 6,999,900 11.4
The Prudential Insurance Company of America(4)......... 5,873,793 9.6
Jennison Associates Capital Corp.(5)................... 5,740,500 9.4
Michael P. Cullinane(6)................................ 543,737 *
Paul L. Humenansky(7).................................. 511,397 *
Steven D. Devick(8).................................... 101,717 *
Thomas A. Slowey(9).................................... 245,372 *
Paul A. Tatro(10)...................................... 220,766 *
Gian Fulgoni(11)....................................... 19,333 *
James E. Cowie(12)..................................... 32,333 *
Arthur P. Frigo........................................ 83,600 *
All Executive Officers and Directors as a Group (9
persons)(13).......................................... 5,432,885 8.9
</TABLE>
- --------
*Less than one percent
(1) Unless otherwise indicated below, the persons in the above table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them.
(2) Includes (a) 1,691,875 shares which may be acquired pursuant to the
exercise of stock options held by Mr. Filipowski within 60 days of April
1, 1997 and (b) 189,000 shares held by a foundation established by Mr.
Filipowski. Mr. Filipowski disclaims beneficial ownership of the shares
held by the foundation. The address of Mr. Filipowski is c/o PLATINUM
technology, inc., 1815 South Meyers Road, Oakbrook Terrace, Illinois
60181.
(3) As reported on a Schedule 13G/A filed with the Securities and Exchange
Commission (the "Commission") on February 12, 1997 (the "Price 13G")
jointly by T. Rowe Price Associates, Inc. ("Price Associates") and T.
Rowe Price Science and Technology Fund, Inc. ("Price Fund"). According to
the Price 13G, Price Associates has sole voting power with respect to
235,753 shares and sole dispositive power with respect to all 6,999,900
shares, and Price Fund has sole voting power with respect to 3,000,000
shares. The address of Price Associates and Price Fund is 100 E. Pratt
Street, Baltimore, Maryland 21202.
(4) As reported on a Schedule 13G/A filed with the Commission on February 10,
1997 (the "Prudential 13G") by the Prudential Insurance Company of
America ("Prudential"). According to the Prudential 13G, Prudential has
sole voting power and sole dispositive power with respect to 16,100
shares, shared voting power with respect to 4,946,287 shares and shared
dispositive power with respect to 5,768,087 shares. The address of
Prudential is 751 Broad Street, Newark, New Jersey 07102-3777.
(5) As reported on a Schedule 13G/A filed with the Commission on February 7,
1997 (the "Jennison 13G") by Jennison Associates Capital Corp.
("Jennison"). According to the Jennison 13G, Jennison has sole voting
power with respect to 11,600 shares, shared voting power with respect to
4,936,200 shares and shared dispositive power with respect to all
5,740,500 shares. The address of Jennison is 466 Lexington Ave., New
York, New York 10017.
(6) Includes 539,625 shares which may be acquired pursuant to the exercise of
stock options held by Mr. Cullinane within 60 days of April 1, 1997.
11
<PAGE>
(7) Includes (a) 20,000 shares held in trust for the benefit of Mr.
Humenansky, and (b) 503,750 shares which may be acquired pursuant to the
exercise of stock options held by Mr. Humenansky within 60 days of April
1, 1997.
(8) Includes 9,333 shares which may be acquired pursuant to the exercise of
stock options held by Mr. Devick within 60 days of April 1, 1997.
(9) Includes 244,750 shares which may be acquired pursuant to the exercise of
stock options held by Mr. Slowey within 60 days of April 1, 1997.
(10) Includes (a) 179,766 shares which may be acquired pursuant to the
exercise of stock options held by Mr. Tatro within 60 days of April 1,
1997, and (b) 41,000 shares held as co-trustee, with his wife, of trusts
for their benefit.
(11) Represents shares which may be acquired pursuant to the exercise of stock
options held by Mr. Fulgoni within 60 days of April 1, 1997.
(12) Includes 9,333 shares which may be acquired pursuant to exercise of stock
options held by Mr. Cowie within 60 days of April 1, 1997.
(13) Includes 3,197,765 shares which may be acquired pursuant to the exercise
of stock options within 60 days of April 1, 1997.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE
PLATINUM TECHNOLOGY, INC. EMPLOYEE INCENTIVE COMPENSATION PLAN
Subject to the approval of the Company's stockholders at the Annual Meeting,
the Board of Directors adopted an amendment to Section 4.1 of the Employee
Incentive Compensation Plan (the "Employee Plan") to increase the number of
shares of Common Stock reserved and available for distribution pursuant to
Awards (as defined in the Employee Plan) from 5,000,000 to 8,600,000 shares
(the "Amendment"). Stockholder approval of the Amendment is sought to continue
(i) to meet the requirements of the Nasdaq National Market, (ii) to qualify
certain compensation under the Employee Plan as performance-based compensation
that is tax deductible without limitation under Section 162(m) of the Code,
and (iii) to qualify certain stock options granted under the Employee Plan as
incentive stock options.
The Employee Plan provides the Compensation Committee, which currently
administers the Employee Plan, with the flexibility to award stock-based and
performance-related incentives to the Company's executive officers and other
key employees, as the Compensation Committee deems appropriate. As discussed
above in the "Compensation Committee Report on Executive Compensation," stock
options have been, and will continue to be, an important element of the
Company's executive compensation program. As of December 31, 1996, the Company
had awarded options to purchase a total of 4,366,610 shares of Common Stock
under the Employee Plan (not including options granted subject to stockholder
approval of the Amendment) and, as a result, only 633,390 shares remained
available for issuance under the Employee Plan. Consequently, the Board
adopted the Amendment to authorize an additional 3,600,000 shares of Common
Stock (approximately 5.9% of the shares of Common Stock outstanding as of
March 25, 1997) for awards under the Employee Plan. In October 1996, the
Company granted to its executive officers options to purchase an aggregate of
1,250,000 shares of Common Stock under the Employee Plan, subject to
stockholder approval of the Amendment.
The Board of Directors has adopted certain other amendments to the Employee
Plan to correct certain inconsistencies and to conform the Employee Plan to
the revised version of Rule 16b-3 under the Act adopted by the Commission in
1996. These amendments are not being submitted to the Company's stockholders
for approval but, to the extent appropriate, are reflected in the description
of the Employee Plan, as amended, set forth below.
The following is a brief summary of certain features of the Employee Plan,
as amended.
12
<PAGE>
TERMS OF THE EMPLOYEE PLAN, AS AMENDED
GENERAL
The Employee Plan is a flexible plan that provides the Employee Plan
Committee broad discretion to fashion the terms of awards to provide eligible
participants with stock-based and performance-related incentives as the
Employee Plan Committee deems appropriate. It permits the issuance of awards in
a variety of forms, including: (i) non-qualified and incentive stock options
for the purchase of Common Stock, (ii) stock appreciation rights ("SARs"),
(iii) restricted stock ("Restricted Stock"), (iv) deferred stock ("Deferred
Stock"), (v) bonus stock and awards in lieu of obligations, (iv) dividend
equivalents, (vii) other stock-based awards, and (viii) performance awards and
cash incentive awards.
The persons eligible to participate in the Employee Plan are directors,
officers, employees and consultants of the Company or any subsidiary of the
Company who, in the opinion of the Employee Plan Committee, contribute to the
growth and success of the Company or its subsidiaries. There currently are five
executive officers and approximately 4,100 other employees potentially eligible
to participate in the Employee Plan.
The purpose of the Employee Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating eligible
participants to achieve long-term growth in stockholder equity in the Company
and to retain the association of these individuals. The Employee Plan is
administered by the Compensation Committee, unless the Board of Directors
establishes a committee whose sole purpose is the administration of the
Employee Plan (in any case, the "Employee Plan Committee"). The Employee Plan
Committee is comprised of at least two directors, each of whom is a "Non-
Employee Director" as defined in Rule 16b-3 of the Act and is also an "outside
director" under Section 162(m) of the Code. No member of the Employee Plan
Committee participates in the Employee Plan.
The Employee Plan provides for the award of up to 8,600,000 shares of Common
Stock. In the discretion of the Employee Plan Committee, shares of Common Stock
subject to an award under the Employee Plan that remain unissued upon
termination of such award, are forfeited or are received by the Company as
consideration for the exercise or payment of an award shall become available
for additional awards under the Employee Plan. During any fiscal year of the
Company, the number of shares underlying options or SARs, shares of restricted
stock, shares of deferred stock, shares as a bonus or in lieu of the Company
obligations and shares related to other stock-based awards granted to any one
participant shall not exceed 800,000 for each type of such award, subject to
adjustment in certain circumstances. The maximum aggregate amount that may be
paid out under the Employee Plan as final cash incentive awards or other cash
awards to any participant in any fiscal year is $5,000,000. On April 17, 1997,
the fair market value per share of the Common Stock, based upon the closing
price of the Common Stock on the Nasdaq National Market, was $11.00 per share.
In the event of a stock dividend, stock split, recapitalization, sale of
substantially all of the assets of the Company, reorganization or other similar
event, the Employee Plan Committee will adjust the aggregate number of shares
of Common Stock subject to the Employee Plan, the number of shares subject to
outstanding awards and the exercise price per share, performance conditions and
other terms of outstanding awards.
The Board of Directors or the Employee Plan Committee may amend, modify or
discontinue the Employee Plan at any time, except if such amendment impairs the
rights of a participant without the participant's consent. Any amendment is
subject to stockholder approval, if required by applicable law. Any amendment
by the Employee Plan Committee is subject to approval of the Board of
Directors. The Employee Plan Committee may amend the terms of any award granted
under the Employee Plan (other than, in the case of a stock option, to decrease
the option price), subject to the consent of a participant if such amendment
impairs the rights of such participant unless such amendment is necessary for
the Company to obtain pooling of interest accounting treatment in a
transaction.
AWARDS UNDER THE EMPLOYEE PLAN
Stock Options. The Employee Plan Committee shall determine the number of
shares of Common Stock subject to the options to be granted to each
participant. The Employee Plan Committee may grant non-qualified
13
<PAGE>
stock options, incentive stock options, or a combination thereof, to the
participants. Only persons who on the date of the grant are employees of the
Company or any parent or subsidiary of the Company may be granted options which
qualify as incentive stock options. Options granted under the Employee Plan
will provide for the purchase of Common Stock at prices determined by the
Employee Plan Committee, but in no event less than fair market value on the
date of grant. When incentive stock options are granted to an individual who
owns Common Stock possessing more than 10% of the combined voting power of all
classes of stock of the Company or any parent or subsidiary of the Company, the
option price shall not be less than 110% of fair market value. No stock option
shall be exercisable later than the tenth anniversary date of its grant. In the
case of an incentive stock option granted to a participant who owns more than
10% of the combined voting power of all classes of stock of the Company or any
parent or subsidiary of the Company, such option shall not be exercisable later
than the fifth anniversary date of its grant. No incentive stock option shall
be granted later than the tenth anniversary date of the adoption of the
Employee Plan.
Options granted under the Employee Plan shall be exercisable at such times
and subject to such terms and conditions set forth in the Employee Plan and as
the Employee Plan Committee shall determine or provide in an option agreement.
Except as otherwise provided in any option agreement or determined by the
Employee Plan Committee, options may only be transferred under the laws of
descent and distribution, and options shall be exercisable only by the
participant during such participant's lifetime. The option exercise price is
payable by the participant (i) in cash, (ii) in shares of Common Stock having a
fair market value equal to the exercise price, (iii) by delivery of evidence of
a note or other indebtedness, (iv) by authorizing the Company to retain shares
of Common Stock having a fair market value equal to the exercise price, (v) by
"cashless exercise" as permitted under the Federal Reserve Board's Regulation
T, or (vi) by any combination of the foregoing. Unless otherwise provided in an
option agreement or determined by the Employee Plan Committee, upon termination
of a participant's employment with the Company due to death or disability, all
of such participant's options shall be exercisable for the shorter of their
remaining term or 90 days after termination of employment, and a disabled
participant's subsequent death shall not affect the foregoing. Unless otherwise
provided in an option agreement or determined by the Employee Plan Committee,
if a participant retires or involuntarily ceases to be an employee of the
Company (other than due to death, disability or as a result of termination for
cause), all of such participant's options shall terminate, except that, to the
extent such options are then exercisable, such options may be exercised for the
shorter of their remaining terms or 90 days after termination of employment.
Unless otherwise provided in an option agreement or determined by the Employee
Plan Committee, if a participant voluntarily ceases to be an employee at the
Company (other than due to retirement) or is terminated as a result of cause,
all of such participant's options shall terminate immediately.
Upon receipt of a notice from a participant to exercise an option, the
Employee Plan Committee may elect to cash out all or part of any such option by
paying the participant, in cash or shares of Common Stock, the following
amount: (i) the excess of the fair market value of the Common Stock subject to
the unexercised option over the exercise price of the option, multiplied by
(ii) the number of shares for which the option is to be exercised.
Stock Appreciation Rights. An SAR shall entitle a participant to receive
Common Stock, cash or a combination thereof. If granted in conjunction with an
option, the exercise of an SAR shall require the cancellation of the
corresponding portion of the option. SARs may be granted on or after the
corresponding grant of non-qualified stock options, but only at the same time
as the corresponding grant of incentive stock options. The Employee Plan
Committee in its discretion shall determine the number of SARs awarded to a
participant, subject to the limitation described above on the number of shares
underlying SARs that may be granted to any one participant. The Employee Plan
Committee shall determine the terms and conditions of any SAR. The terms and
conditions shall be confirmed in and be subject to an agreement between the
Company and the participant. If granted in conjunction with options, an SAR
shall be exercisable for and during the same period as the corresponding
options. Upon exercise of an SAR, a participant shall receive an amount in
cash, shares of Common Stock or both equal to (i) the excess of the fair market
value of the Common Stock over the option price per share (if the SAR is
granted in conjunction with an option), multiplied by (ii) the number of shares
of Common Stock subject to the SAR. In the case of an SAR granted on a
standalone basis, the Employee Plan
14
<PAGE>
Committee shall determine in its discretion the value to be used in lieu of the
option price. In no event shall an SAR granted in tandem with an incentive
stock option be exercised unless the fair market value of the Common Stock at
the time of the exercise exceeds the option price. The transferability and
termination provisions of an SAR are as set forth above with respect to stock
options.
Restricted Stock. Restricted Stock awards are grants of shares of Common
Stock that are subject to certain restrictions and to a risk of forfeiture. The
Employee Plan Committee in its discretion shall determine the persons to whom
Restricted Stock shall be granted, the number of shares of Restricted Stock to
be granted to each participant, the periods for which Restricted Stock is
restricted, and any other restrictions to which the Restricted Stock is
subject. The Employee Plan Committee may condition the award of Restricted
Stock on such performance goals and other criteria as it may determine. The
terms and conditions of the Restricted Stock shall be confirmed in and subject
to an agreement between the Company and the participant. During the restriction
period, the Employee Plan Committee may require that the certificates
evidencing the Restricted Stock be held by the Company. During the restriction
period, the Restricted Stock may not be sold, assigned, transferred, pledged or
otherwise encumbered. Other than the foregoing restrictions imposed by the
Employee Plan Committee, the participant shall have all the rights of a holder
of Common Stock. If a participant's employment terminates during the
restriction period due to death or disability, the restrictions on the
Restricted Stock shall lapse. If a participant's employment shall terminate for
any other reason, unless otherwise agreed by the Employee Plan Committee, the
remaining Restricted Stock shall be forfeited by the participant to the
Company.
Deferred Stock. Deferred Stock awards are grants of rights to receive shares
of Common Stock, cash or a combination thereof at the end of a specified
deferral period. The Employee Plan Committee in its discretion shall determine
the persons to whom Deferred Stock shall be granted, the number of shares of
Deferred Stock to be granted to each participant, the duration of the period
prior to which Common Stock will be delivered, the conditions under which
receipt of the Common Stock will be deferred, and any other terms and
conditions of the granting of the award. The terms and conditions of the
Deferred Stock shall be confirmed in and subject to an agreement between the
Company and the participant. The Employee Plan Committee may condition the
award of Deferred Stock on such performance goals and criteria that it may
determine. During the deferral period, the Deferred Stock may not be sold,
assigned, transferred, pledged or otherwise encumbered. At the expiration of
the deferral period, the Employee Plan Committee may deliver to the participant
Common Stock, cash equal to the fair market value of such Common Stock or a
combination thereof for the shares covered by the Deferred Stock awards. Cash
dividends on Common Stock subject to Deferred Stock awards shall be
automatically deferred and reinvested in Deferred Stock, and stock dividends on
Common Stock subject to Deferred Stock awards shall be paid in the form of
Deferred Stock. If a participant's employment terminates during the deferral
period due to death or disability, the deferral restrictions shall lapse. If a
participant's employment terminates for any other reason, unless otherwise
agreed by the Employee Plan Committee, the rights to the shares still covered
by Deferred Stock awards shall be forfeited by the participant.
Bonus Stock and Awards in Lieu of Cash Obligations. The Employee Plan
Committee is authorized to grant shares of Common Stock as a bonus free of
restrictions, or to grant shares of Common Stock or other awards in lieu of
Company obligations to pay cash under other plans or compensatory arrangements,
subject to such terms as the Employee Plan Committee may specify.
Dividend Equivalents. The Employee Plan Committee is authorized to grant
dividend equivalents conferring on participants the right to receive, currently
or on a deferred basis, cash, shares of Common Stock, other awards or other
property equal in value to dividends paid on a specified number of shares of
Common Stock. Dividend equivalents may be granted on a free-standing basis or
in connection with another award, may be paid currently or on a deferred basis,
and, if deferred, may be deemed to have been reinvested in additional shares of
Common Stock, awards or other investment vehicles specified by the Employee
Plan Committee.
Other Stock-Based Awards. The Employee Plan authorizes the Employee Plan
Committee to grant awards that are denominated or payable in, valued by
reference to, or otherwise based on or related to the Common Stock. Such awards
might include convertible or exchangeable debt securities, other rights
convertible or
15
<PAGE>
exchangeable into shares, purchase rights for shares, awards with value and
payment contingent upon performance of the Company or any other factors
designated by the Employee Plan Committee, and awards valued by reference to
the book value of shares of Common Stock or the value of securities of or the
performance of specified subsidiaries. The Employee Plan Committee shall
determine the terms and conditions of such awards, including consideration to
be paid to exercise awards in the nature of purchase rights, the period during
which awards will be outstanding and forfeiture conditions and restrictions on
awards.
Performance Awards, Including Cash Incentive Awards. The right of a
participant to exercise or receive a grant or settlement of an award, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Employee Plan Committee. In addition, the Employee Plan
authorizes specific cash incentive awards, which represent a conditional right
to receive cash upon achievement of preestablished performance goals during
calendar years, quarters or other periods specified by the Employee Plan
Committee. Performance awards and cash incentive awards granted to persons the
Employee Plan Committee expects will, for the year in which a deduction arises,
be among the Named Officers, will, if so intended by the Employee Plan
Committee, be subject to provisions that should qualify such Awards as
"performance-based compensation" not subject to the limitation on tax
deductibility by the Company under Section 162(m).
The performance goals to be achieved as a condition or payment or settlement
of a performance award or annual incentive award will consist of (i) one or
more business criteria and (ii) a targeted level or levels of performance with
respect to each business criteria. In the case of performance awards intended
to meet the requirements of Section 162(m), the business criteria used must be
one of those specified in the Employee Plan, although for other participants
the Employee Plan Committee may specify any other criteria. The business
criteria specified in the Employee Plan are (1) total stockholder return; (2)
such total stockholder return as compared to total return (on a comparable
basis) of a publicly available index such as, but not limited to, the Standard
& Poor's 500, the Nasdaq Stock Market-U.S. Index or the H&Q Software Sector
Index; (3) net income; (4) pre-tax earnings; (5) EBITDA; (6) pre-tax operating
earnings after interest expense and before bonuses, service fees and
extraordinary or special items; (7) operating margin; (8) earnings per share;
(9) return on equity; (10) return on capital; (11) return on investment; (12)
operating income, excluding the effect of charges for acquired in-process
technology and before payment of executive bonuses; (13) earnings per share,
excluding the effect of charges for acquired in-process technology and before
payment of executive bonuses; (14) working capital; and (15) total revenues.
In granting cash incentive awards, the Employee Plan Committee may grant
awards on an individual basis or may establish an unfunded cash incentive award
"pool," in either case, the amount of which will be based upon the achievement
of a performance goal or goals based on one or more of the business criteria
described in the preceding paragraph. During the period required by Section
162(m), the Employee Plan Committee will determine who will potentially receive
cash incentive awards for the specified performance period, either individually
or out of the pool or otherwise. After the end of the specified performance
period, the Employee Plan Committee will determine the amount, if any, of the
maximum amount of any potential individual cash incentive award payable to a
participant or the maximum amount of potential cash incentive awards payable to
each participant in the pool. The Employee Plan Committee may, in its
discretion, determine that the amount payable as a final cash incentive award
will be increased or reduced from the amount of any potential award, but may
not exercise discretion to increase any such amount intended to qualify under
Section 162(m).
Subject to the requirements of the Employee Plan, the Employee Plan Committee
will determine other performance award and cash incentive award terms,
including the required levels of performance with respect to the business
criteria, the corresponding amounts payable upon achievement of such levels of
performance, termination and forfeiture provisions and the form of settlement.
All determinations by the Employee Plan Committee relating to performance
awards and cash incentive awards will be made in writing with respect to any
award intended to qualify under Section 162(m).
Other Terms of Awards. Awards may be settled in the form of cash, shares,
other awards or other property, in the discretion of the Employee Plan
Committee. The Employee Plan Committee may accelerate the settlement of any
award. The Employee Plan Committee may also require or permit participants to
defer the settlement of
16
<PAGE>
all or part of an award in accordance with such terms and conditions as the
Employee Plan Committee may establish, including payment or crediting of
interest or dividend equivalents on deferred amounts, and the crediting of
earnings, gains and losses based on deemed investment of deferred amounts in
specified investment vehicles. The Employee Plan Committee is authorized to
place cash, shares of Common Stock or other property in trusts or make other
arrangements to provide for payment of the Company's obligations under the
Employee Plan. The Employee Plan Committee may condition any payment relating
to an award on the withholding of taxes and may provide that a portion of any
shares of Common Stock or other property to be distributed will be withheld
(or previously acquired shares of Common Stock or other property surrendered
by the participant) to satisfy withholding and other tax obligations. Awards
granted under the Employee Plan generally may not be pledged or otherwise
encumbered and are not transferable except by will or by the laws of descent
and distribution, or to a designated beneficiary upon the participant's death.
CHANGES IN CONTROL
Upon the occurrence of a Change in Control, the following shall occur: (i)
all unexercised stock options and SARs shall become immediately exercisable,
(ii) all restrictions on the Restricted Stock and deferral limitations on the
Deferred Stock shall lapse and (iii) the performance goals and other
conditions with respect to any outstanding performance award or cash incentive
award shall be deemed satisfied in full, and such award shall be fully
distributable, to the extent provided by the Employee Plan Committee in an
award agreement or otherwise. In addition, unless the Employee Plan Committee
provides otherwise in an option agreement, after the Change in Control a
participant shall have the right to surrender all or part of the outstanding
awards and receive in cash from the Company the following amount for each
award: (i) the excess of the Change in Control Price over the exercise price
of the award, multiplied by (ii) the number of shares of Common Stock subject
to the award. "Change in Control" has the same meaning as set forth in the
Amended and Restated Directors' Plan. The "Change in Control Price" is the
higher of (i) the highest reported sales price of a share of Common Stock in
any transaction reported on the principal exchange on which such shares are
listed or on The Nasdaq Stock Market during the 60-day period prior to the
Change of Control, or (ii) if the Change in Control event is a tender offer,
merger or other reorganization, the highest price to be paid per share of
Common Stock in such transaction.
DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES
The following summary of tax consequences with respect to awards under the
Employee Plan is not comprehensive and is based upon laws and regulations in
effect on April 21, 1997. Such laws and regulations are subject to change.
Stock Options. There are generally no Federal income tax consequences either
to the participant or to the Company upon the grant of a stock option. On
exercise of an incentive stock option, the participant will not recognize any
income and the Company will not be entitled to a deduction for tax purposes,
although such exercise may give rise to liability for the participant under
the alternative minimum tax provisions of the Code. Generally, if the
participant disposes of shares acquired upon exercise of an incentive stock
option within two years of the date of grant or one year of the date of
exercise, the participant will recognize compensation income and the Company
will be entitled to a deduction for tax purposes in the amount of the excess
of the fair market value of the shares on the date of exercise over the option
exercise price (or the gain on sale, if less). Otherwise, the Company will not
be entitled to any deduction for tax purposes upon disposition of such shares,
and the entire gain for the participant will be treated as a capital gain. On
exercise of a non-qualified stock option, the amount by which the fair market
value of the shares on the date of exercise exceeds the option exercise price
(the "spread") will generally be taxable to the participant as compensation
income and will generally be deductible for tax purposes by the Company. In
determining the amount of the spread or the amount of consideration paid to
the participant, the fair market value of the Common Stock on the date of
exercise is used. The Company, in computing its Federal income tax, generally
will be entitled to a deduction in an amount equal to the compensation taxable
to the participant.
17
<PAGE>
Stock Appreciation Rights. Upon the grant of an SAR, the participant will
not recognize any taxable income and the Company will not be entitled to a
deduction. Upon the exercise of an SAR, the consideration paid to the
participant upon exercise of the SAR will constitute compensation taxable to
the participant as ordinary income. In determining the amount of the
consideration paid to the participant upon the exercise of an SAR for Common
Stock, the fair market value of the shares on the date of exercise is used.
The Company, in computing its Federal income tax, generally will be entitled
to a deduction in an amount equal to the compensation taxable to the
participant.
Other Awards. With respect to awards granted under the Employee Plan that
result in the payment or issuance of cash or shares of Common Stock or other
property that is either not restricted as to transferability or not subject to
a substantial risk of forfeiture, the participant must generally recognize
ordinary income equal to the cash or the fair market value of shares or other
property received. Deferral of the time of payment or issuance will generally
result in the deferral of the time the participant will be liable for income
taxes with respect to such payment or issuance. The Company generally will be
entitled to a deduction in an amount equal to the ordinary income received by
the participant. With respect to awards involving the issuance of shares of
Common Stock or other property that is restricted as to transferability and
subject to a substantial risk of forfeiture, the participant must generally
recognize ordinary income equal to the fair market value of the shares or
other property received at the first time the shares or other property becomes
transferable or not subject to a substantial risk of forfeiture, whichever
occurs earlier. The Company will be entitled to a deduction in an amount equal
to the ordinary income received by the participant. A participant may elect to
be taxed at the time of receipt of shares or other property rather than upon
lapse of restrictions on transferability or the substantial risk of
forfeiture, but if the participant subsequently forfeits such shares or
property such participant would not be entitled to any tax deduction,
including as a capital loss, for the value of the shares or property on which
such participant previously paid tax. The participant must file such election
with the Internal Revenue Service within 30 days of the receipt of the shares
or other property.
Section 162(m) of the Code. The Omnibus Budget Reconciliation Act of 1993
added Section 162(m) to the Code, which generally disallows a public company's
tax deduction for compensation to the Named Officers in excess of $1,000,000
in any tax year beginning on or after January 1, 1994. Compensation that
qualifies as "performance-based compensation" is excluded from the $1,000,000
deductibility cap, and therefore remains fully deductible by the company that
pays it.
The Company intends that options and SARs granted with an exercise price or
grant price equal to at least 100% of fair market value of the underlying
shares at the date of grant, and annual incentive awards and certain long-term
performance-based awards granted to employees whom the Employee Plan Committee
expects to be Named Officers at the time a deduction arises in connection with
such awards, qualify as "performance-based compensation." Accordingly, such
awards should not be subject to the Section 162(m) deductibility cap of
$1,000,000. Other awards may be granted under the Employee Plan which do not
qualify as "performance-based compensation" that is fully deductible by the
Company under Section 162(m), so that compensation paid to persons who are
Named Officers in connection with such awards will, to the extent such
compensation and other compensation subject to the Section 162(m)
deductibility cap in a given year exceeds $1,000,000, not be deductible by the
Company.
Parachute Payments. In the event any payments or rights accruing to a
participant upon a Change in Control, or any other payments awarded under the
Employee Plan, constitute "parachute payments" under Section 280G of the Code,
depending upon the amount of such payments accruing and the other income of
the participant from the Company, the participant may be subject to an excise
tax (in addition to ordinary income tax) and the Company may be disallowed a
deduction for the amount of the actual payment.
EMPLOYEE PLAN BENEFITS
The table below reports the total number of shares of Common Stock which may
be purchased upon exercise of stock options granted in 1994, 1995 and 1996
under the Employee Plan. Although the Company's
18
<PAGE>
executive officers were granted the opportunity to earn cash incentive awards
for 1995 and 1996 pursuant to the Employee Plan, no such awards were earned.
PLAN BENEFITS
PLATINUM TECHNOLOGY, INC. EMPLOYEE INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION SHARES(1)
----------------- ---------
<S> <C>
Andrew J. Filipowski,
President, Chief Executive Officer and Chairman of the Board........ 1,025,000
Paul L. Humenansky,
Chief Operations Officer and Executive Vice President--Product
Development......................................................... 550,000
Michael P. Cullinane,
Executive Vice President, Chief Financial Officer and Treasurer..... 400,000
Thomas A. Slowey,
Executive Vice President--Sales..................................... 175,000
Paul A. Tatro,
Executive Vice President--International Operations.................. 175,000
Executive Group...................................................... 2,325,000
Non-Executive Director Group......................................... 0
Non-Executive Officer Employee Group................................. 3,291,610
</TABLE>
- --------
(1) Includes options to purchase an aggregate of 1,250,000 shares of Common
Stock at an exercise price of $13.625, with an expiration date of October
10, 2007, awarded in October 1996 to the Company's executive officers (Mr.
Filipowski--500,000 shares; Mr. Humenansky--300,000 shares; Mr. Cullinane--
250,000 shares; Mr. Slowey--100,000 shares; and Mr. Tatro--100,000 shares),
subject to stockholder approval at the Annual Meeting of the Amendment. In
January 1997, an additional option to purchase 25,000 shares of Common
Stock at an exercise price of $13.5625 per share, with an expiration date
of January 8, 2007, was granted to Mr. Slowey, subject to stockholder
approval at the Annual Meeting of the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE PLATINUM TECHNOLOGY, INC. EMPLOYEE INCENTIVE COMPENSATION
PLAN.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF AUDITORS
The Company's Board of Directors, upon the recommendation of the Company's
Audit Committee, has appointed KPMG Peat Marwick LLP, independent certified
public accountants, as auditors of the Company's financial statements for the
year ending December 31, 1997. KPMG Peat Marwick LLP has acted as auditors for
the Company since 1987.
The Board has determined to afford stockholders the opportunity to express
their opinions on the matter of auditors, and, accordingly, is submitting to
stockholders at the Annual Meeting a proposal to ratify the Board's appointment
of KPMG Peat Marwick LLP. If a majority of the shares voted affirmatively or
negatively at the Annual Meeting, in person or by proxy, are not voted in favor
of the ratification of the appointment of KPMG Peat Marwick LLP, the Board of
Directors will interpret this as an instruction to seek other auditors.
It is expected that representatives of KPMG Peat Marwick LLP will be present
at the meeting and will be available to respond to appropriate questions. They
will be given an opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS OF THE
COMPANY'S FINANCIAL STATEMENTS FOR THE YEAR ENDING DECEMBER 31, 1997.
19
<PAGE>
MISCELLANEOUS MATTERS
SOLICITATION. The cost of this proxy solicitation will be borne by the
Company. The Company has engaged a proxy solicitation firm, Morrow & Co., Inc.,
to assist in the required search for beneficial owners of the Common Stock and
in the distribution of proxy materials. The Company may also request banks,
brokers, fiduciaries, custodians, nominees and certain other record holders to
send proxies, proxy statements and other materials to their principals at the
Company's expense. Such banks, brokers, fiduciaries, custodians, nominees and
other record holders will be reimbursed by the Company for their reasonable
out-of-pocket expenses of solicitation. The Company does not anticipate that
costs and expenses incurred in connection with this proxy solicitation will
exceed an amount normally expended for a proxy solicitation for an election of
directors in the absence of a contest.
PROPOSALS OF STOCKHOLDERS. Proposals of stockholders intended to be
considered at the 1998 Annual Meeting of Stockholders must be received by the
Secretary of the Company not less than 120 days nor more than 150 days prior to
April 21, 1998.
ADDITIONAL INFORMATION. The Company will furnish, without charge, a copy of
its Annual Report on Form 10-K for its year ended December 31, 1996, as filed
with the Commission, upon the written request of any person who is a
stockholder as of the Record Date. Requests for such materials should be
directed to PLATINUM technology, inc., 1815 South Meyers Road, Oakbrook
Terrace, Illinois 60181, Attention: Investor Relations.
By order of the Board of Directors
LOGO
Michael C. Wyatt
Senior Vice President, General
Counsel and Secretary
Oakbrook Terrace, Illinois
April 21, 1997
20
<PAGE>
PROXY PROXY
PLATINUM technology, inc.
1815 South Meyers Road
Oakbrook Terrace, Illinois 60181
Proxy for the Annual Meeting of Stockholders to be Held on May 20, 1997
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder(s) hereby appoints Michael C. Wyatt and Michael P.
Cullinane, and each of them, with full power of substitution, as attorneys and
proxies for and in the name and place of the undersigned, and hereby authorizes
each of them to represent and to vote all of the shares of Common Stock of
PLATINUM technology, inc. ("PLATINUM") held of record by the undersigned as of
March 25, 1997 which the undersigned is entitled to vote at the Annual Meeting
of Stockholders (the "Annual Meeting"), to be held on May 20, 1997 at the
principal executive offices of PLATINUM, 1815 South Meyers Road, Oakbrook
Terrace, Illinois 60181 at 10:00 a.m., Chicago time, and at any adjournments
thereof.
This Proxy, when properly executed and returned in a timely manner, will be
voted at the Annual Meeting and at any adjournments thereof in the manner
described herein. If no contrary indication is made, this Proxy will be voted
FOR all nominees listed in Proposal 1, FOR Proposals 2 and 3, and in accordance
with the judgment of the persons named as proxies herein on any other matters
that may properly come before the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed and dated on reverse side.)
<PAGE>
PLATINUM TECHNOLOGY, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ALL NOMINEES
LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
1. Election of Directors (terms to expire in 2000)
Nominees: Andrew J. Filipowski Steven D. Devick
James E. Cowie
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME ABOVE
For All
Except As
Withhold Marked to
For Authority the
All For All Contrary
[_] [_] [_]
2. Proposal to approve the amendment to the PLATINUM technology, inc. Employee
Incentive Compensation Plan.
For Against Abstain
[_] [_] [_]
3. Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
independent auditors of PLATINUM's financial statements.
For Against Abstain
[_] [_] [_]
4. Each of the persons named as proxies herein is authorized, in such person's
discretion, to vote upon such other matters as may properly come before the
Annual Meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT RIGHT
[_]
This Proxy must be signed exactly as your name appears hereon. When shares are
held by joint tenants, both should sign. Attorneys, executors, administrators,
trustees and guardians should indicate their capacities. If the signer is a
corporation, please print full corporate name and indicate capacity of duly
authorized officer executing on behalf of the corporation. If the signer is a
partnership or limited liability company, please print full partnership name or
limited liability company and indicate capacity of duly authorized person
executing on behalf of the partnership or limited liability company.
Signature(s)____________________________________________________________________
________________________________________________________________________________
Date _______________________________________________________________ , 1997
<PAGE>
PLATINUM technology, inc.
EMPLOYEE INCENTIVE COMPENSATION PLAN,
AS AMENDED
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<C> <S> <C>
ARTICLE I ESTABLISHMENT........................................... 1
1.1 Purpose................................................. 1
ARTICLE II DEFINITIONS............................................. 1
2.1 "Affiliate"............................................. 1
2.2 "Agreement" or "Award Agreement"........................ 1
2.3 "Award"................................................. 1
2.4 "Beneficiary"........................................... 2
2.5 "Board of Directors" or "Board"......................... 2
2.6 "Cash Incentive Award".................................. 2
2.7 "Cause"................................................. 2
2.8 "Change in Control" and "Change in Control Price"....... 2
2.9 "Code" or "Internal Revenue Code"....................... 2
2.10 "Commission"............................................ 2
2.11 "Committee"............................................. 2
2.12 "Common Stock".......................................... 3
2.13 "Company"............................................... 3
2.14 "Covered Employee"...................................... 3
2.15 "Deferred Stock"........................................ 3
2.16 "Disability"............................................ 3
2.17 "Dividend Equivalent"................................... 3
2.18 "Effective Date"........................................ 3
2.19 "Exchange Act".......................................... 3
2.20 "Fair Market Value"..................................... 3
2.21 "Grant Date"............................................ 4
2.22 "Incentive Stock Option"................................ 4
2.23 "NASDAQ"................................................ 4
2.24 "Non-Qualified Stock Option"............................ 4
2.25 "Option Period"......................................... 4
2.26 "Option Price".......................................... 4
2.27 "Other Stock Based Awards".............................. 4
2.28 "Participant"........................................... 4
2.29 "Performance Award"..................................... 4
2.30 "Plan".................................................. 4
2.31 "Representative"........................................ 4
2.32 "Restricted Stock"...................................... 5
2.33 "Retirement"............................................ 5
2.34 "Rule 16b-3"............................................ 5
2.35 "Securities Act"........................................ 5
2.36 "Stock Appreciation Right".............................. 5
2.37 "Stock Option" or "Option".............................. 5
2.38 "Termination of Employment"............................. 5
ARTICLE III ADMINISTRATION.......................................... 6
3.1 Committee Structure and Authority....................... 6
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE IV STOCK SUBJECT TO PLAN................................... 8
4.1 Number of Shares........................................ 8
4.2 Release of Shares....................................... 8
4.3 Restrictions on Shares.................................. 8
4.4 Stockholder Rights...................................... 9
4.5 Best Efforts To Register................................ 9
4.6 Anti-Dilution........................................... 9
ARTICLE V ELIGIBILITY............................................. 10
5.1 Eligibility............................................. 10
5.2 Per-Person Award Limitations............................ 10
ARTICLE VI STOCK OPTIONS........................................... 11
6.1 General................................................. 11
6.2 Grant and Exercise...................................... 11
6.3 Terms and Conditions.................................... 11
6.4 Termination by Reason of Death.......................... 13
6.5 Termination by Reason of Disability..................... 14
6.6 Other Termination....................................... 14
6.7 Cashing Out of Option................................... 14
ARTICLE VII STOCK APPRECIATION RIGHTS............................... 15
7.1 General................................................. 15
7.2 Grant................................................... 15
7.3 Terms and Conditions.................................... 15
ARTICLE VIII RESTRICTED STOCK........................................ 16
8.1 General................................................. 16
8.2 Awards and Certificates................................. 17
8.3 Terms and Conditions.................................... 17
ARTICLE IX DEFERRED STOCK.......................................... 18
9.1 General................................................. 18
9.2 Terms and Conditions.................................... 18
ARTICLE X OTHER AWARDS............................................ 20
10.1 Bonus Stock and Awards In Lieu of Obligations........... 20
10.2 Dividend Equivalents.................................... 20
10.3 Other Stock-Based Awards................................ 20
10.4 Performance Awards 20
ARTICLE XI PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE
PLAN.................................................... 24
11.1 Limited Transfer During Offering........................ 24
11.2 Committee Discretion.................................... 24
11.3 No Company Obligation................................... 24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE XII CHANGE IN CONTROL PROVISIONS............................ 24
12.1 Impact of Event......................................... 24
12.2 Definition of Change in Control......................... 25
12.3 Change in Control Price................................. 26
ARTICLE XIII MISCELLANEOUS........................................... 26
13.1 Amendments and Termination.............................. 26
13.2 Stand-Alone, Additional, Tandem, and Substitute Awards.. 27
13.3 Form and Timing of Payment Under Awards; Deferrals...... 27
13.4 Status of Awards Under Code Section 162(m).............. 27
13.5 Unfunded Status of Plan; Limits on Transferability...... 28
13.6 General Provisions...................................... 28
13.7 Mitigation of Excise Tax................................ 29
13.8 Rights with Respect to Continuance of Employment........ 30
13.9 Awards in Substitution for Awards Granted by Other
Corporations............................................ 30
13.10 Procedure for Adoption.................................. 30
13.11 Procedure for Withdrawal................................ 31
13.12 Delay................................................... 31
13.13 Headings................................................ 31
13.14 Severability............................................ 31
13.15 Successors and Assigns.................................. 31
13.16 Entire Agreement........................................ 31
</TABLE>
<PAGE>
PLATINUM technology, inc. EMPLOYEE INCENTIVE COMPENSATION PLAN, AS AMENDED
ARTICLE I
---------
ESTABLISHMENT
-------------
1.1 Purpose.
The PLATINUM technology, inc. Employee Incentive Compensation Plan (as
amended, "Plan") is hereby established by PLATINUM technology, inc. ("Company").
The purpose of the Plan is to promote the overall financial objectives of the
Company and its stockholders by motivating those persons selected to participate
in the Plan to achieve long-term growth in stockholder equity in the Company and
by retaining the association of those individuals who are instrumental in
achieving this growth. The Plan is intended to qualify certain compensation
awarded under the Plan for tax deductibility under Section 162(m) of the Code
(as defined herein) to the extent deemed appropriate by the Committee (as
defined herein). The Plan and the grant of awards thereunder are expressly
conditioned upon the Plan's approval by the stockholders of the Company. If
such approval is not obtained, then this Plan and all Awards (as defined herein)
hereunder shall be null and void ab initio. The Plan is adopted, subject to
stockholder approval, effective as of July 21, 1994.
ARTICLE II
----------
DEFINITIONS
-----------
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Company including, without limitation, any member of an affiliated group of
which the Company is a common parent corporation as provided in Section 1504 of
the Code.
2.2 "Agreement" or "Award Agreement" means, individually or collectively,
any agreement entered into pursuant to the Plan pursuant to which an Award is
granted to a Participant.
2.3 "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
Stock, Dividend Equivalent, Other Stock-Based Award, Performance Award or Cash
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
1
<PAGE>
2.4 "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under the
Plan upon such Participant's death or to which Awards or other rights are
transferred if and to the extent permitted hereunder. If, upon a Participant's
death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the person, persons, trust or trusts entitled by
will or the laws of descent and distribution to receive such benefits.
2.5 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.6 "Cash Incentive Award" means a conditional right granted to a
Participant under Section 10.4(c) hereof to receive a cash payment, unless
otherwise determined by the Committee, after the end of a specified period.
2.7 "Cause" shall mean, for purposes of whether and when a Participant has
incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall mean (a) any act or failure to
act deemed to constitute cause under the Company's established practices,
policies or guidelines applicable to the Participant or (b) the Participant's
act or act of omission which constitutes gross misconduct with respect to the
Company or an Affiliate in any material respect, including, without limitation,
an act or act of omission of a criminal nature, the result of which is
detrimental to the interests of the Company or an Affiliate, or conduct, or the
omission of conduct, which constitutes a material breach of a duty the
Participant owes to the Company or an Affiliate.
2.8 "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 12.2 and 12.3, respectively.
2.9 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.10 "Commission" means the Securities and Exchange Commission or any
successor agency.
2.11 "Committee" means the Compensation Committee of the Board or such
other Board committee as may be designated by the Board to administer the Plan;
provided, however, that the Committee shall consist solely of two or more
directors, each of whom is a "Non-Employee Director" as defined in Rule 16b-3
under the Exchange Act and each of whom is also an "outside director" under
Section 162(m) of the Code.
2
<PAGE>
2.12 "Common Stock" means the shares of the regular voting Common Stock,
$.001 par value, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the purpose
of the Plan.
2.13 "Company" means PLATINUM technology, inc., a Delaware corporation,
and includes any successor or assignee corporation or corporations into which
the Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and any assignee of
or successor to substantially all of the assets of the Company.
2.14 "Covered Employee" means a Participant who is a "covered employee"
within the meaning of Section 162(m) of the Code.
2.15 "Deferred Stock" means a right, granted to a Participant under
Section 9.1 hereof, to receive Common Stock, cash or a combination thereof at
the end of a specified deferral period.
2.16 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or an Affiliate, or if the Participant is not covered by such a plan or
the Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable of
performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan if
it is the result of (i) a willfully self-inflicted injury or willfully self-
induced sickness; or (ii) an injury or disease contracted, suffered, or incurred
while participating in a criminal offense. The determination of Disability
shall be made by the Committee. The determination of Disability for purposes of
this Plan shall not be construed to be an admission of disability for any other
purpose.
2.17 "Dividend Equivalent" means a right, granted to a Participant under
Section 10.2, to receive cash, Common Stock, other Awards or other property
equal in value to dividends paid with respect to a specified number of shares of
Common Stock.
2.18 "Effective Date" means July 21, 1994.
2.19 "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
2.20 "Fair Market Value" means the fair market value of Common Stock,
Awards, or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value per share of Common Stock as of any given date shall be the
closing sale price per share reported on a consolidated basis for stock listed
on the principal stock exchange or market on which Common Stock is traded on the
date as
3
<PAGE>
of which such value is being determined or, if there is no sale on that date,
then on the last previous day on which a sale was reported.
2.21 "Grant Date" means the date as of which an Award is granted pursuant
to the Plan.
2.22 "Incentive Stock Option" means any Stock Option intended to be and
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.23 "NASDAQ" means The Nasdaq Stock Market, including the Nasdaq National
Market.
2.24 "Non-Qualified Stock Option" means an Option to purchase Common Stock
in the Company granted under the Plan, the taxation of which is pursuant to
Section 83 of the Code.
2.25 "Option Period" means the period during which an Option shall be
exercisable in accordance with the related Agreement and Article VI.
2.26 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3(b).
2.27 "Other Stock Based Awards" means Awards granted to a Participant
under Section 10.3 hereof.
2.28 "Participant" means a person who satisfies the eligibility conditions
of Article V and to whom an Award has been granted by the Committee under the
Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of
the Participant, the Participant's parents, spouse or descendants, or a
custodian under a uniform gifts to minors act or similar statute for the benefit
of the Participant's descendants, to the extent permitted by the Committee.
Notwithstanding the foregoing, the term "Termination of Employment" shall mean
the Termination of Employment of the person to whom the Award was originally
granted.
2.29 "Performance Award" means a right, granted to a Participant under
Section 10.4 hereof, to receive Awards based upon performance criteria specified
by the Committee.
2.30 "Plan" means the PLATINUM technology, inc. Employee Incentive
Compensation Plan, as herein set forth and as may be amended from time to time.
2.31 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the
4
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Participant's primary residence at the date of the Participant's death; (b) the
person or entity acting as the guardian or temporary guardian of a Participant;
(c) the person or entity which is the Beneficiary of the Participant upon or
following the Participant's death; or (d) any person to whom an Option has been
permissibly transferred; provided that only one of the foregoing shall be the
Representative at any point in time as determined under applicable law and
recognized by the Committee.
2.32 "Restricted Stock" means Common Stock granted to a Participant under
Section 8.1 hereof, that is subject to certain restrictions and to a risk of
forfeiture.
2.33 "Retirement" means the Participant's Termination of Employment after
attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such a plan, or if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.34 "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
2.35 "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
2.36 "Stock Appreciation Right" means a right granted under Article VII.
2.37 "Stock Option" or "Option" means a right, granted to a Participant
under Section 6.1 hereof, to purchase Common Stock or other Awards at a
specified price during specified time periods.
2.38 "Termination of Employment" means the occurrence of any act or event,
whether pursuant to an employment agreement or otherwise, that actually or
effectively causes or results in the person's ceasing, for whatever reason, to
be an officer, independent contractor, director or employee of the Company or of
any Affiliate, or to be an officer, independent contractor, director or employee
of any entity that provides services to the Company or an Affiliate, including,
without limitation, death, Disability, dismissal, severance at the election of
the Participant, Retirement, or severance as a result of the discontinuance,
liquidation, sale or transfer by the Company or its Affiliates of all businesses
owned or operated by the Company or its Affiliates. With respect to any person
who is not an employee with respect to the Company or a subsidiary of the
Company, the Agreement shall establish what act or event shall constitute a
Termination of Employment for purposes of the Plan. A transfer of employment
from the Company to an Affiliate, or from an Affiliate to the Company, will not
be a Termination of Employment, unless expressly determined by the Committee. A
Termination of Employment shall occur for an employee who is employed by an
Affiliate if the Affiliate shall cease to be an Affiliate, and the
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Participant shall not immediately thereafter become an employee of the Company
or an Affiliate.
In addition, certain other terms used herein have definitions given to them
in the first place in which they are used.
ARTICLE III
-----------
ADMINISTRATION
--------------
3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee. A majority of the Committee shall constitute a quorum at any
meeting thereof (including by telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the
authority to remove, replace or fill any vacancy of any member of the Committee
upon notice to the Committee and the affected member. Any member of the
Committee may resign upon notice to the Board. The Committee may allocate among
one or more of its members, or may delegate to one or more of its agents, such
duties and responsibilities as it determines.
Among other things, the Committee shall have the authority, subject to the
terms of the Plan:
(a) to select those persons to whom Awards may be granted from time to
time;
(b) to determine whether and to what extent Awards or any combination
thereof are to be granted hereunder;
(c) to determine the number of shares of Common Stock to be covered by
each stock-based Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price, the Option
Period, any exercise restriction or limitation and any exercise
acceleration, forfeiture or waiver regarding any Award, any shares of
Common Stock relating thereto, any performance criteria and the
satisfaction of each criteria);
(e) to adjust the terms and conditions, at any time or from time to
time, of any Award, subject to the limitations of Section 13.1;
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(f) to determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be deferred;
(g) to determine under what circumstances an Award may be settled in
cash or Common Stock;
(h) to provide for the forms of Agreements to be utilized in
connection with the Plan;
(i) to determine whether a Participant has a Disability or a
Retirement;
(j) to determine what securities law requirements are applicable to
the Plan, Awards and the issuance of shares of Common Stock under the Plan
and to require of a Participant that appropriate action be taken with
respect to such requirements;
(k) to cancel, with the consent of the Participant or as otherwise
provided in the Plan or an Agreement, outstanding Awards;
(l) to interpret and make final determinations with respect to the
remaining number of shares of Common Stock available under this Plan;
(m) to require, as a condition of the exercise of an Award or the
issuance or transfer of a certificate of Common Stock, the withholding from
a Participant of the amount of any Federal, state or local taxes as may be
necessary in order for the Company or any other employer to obtain a
deduction or as may be otherwise required by law;
(n) to determine whether and with what effect a Participant has
incurred a Termination of Employment;
(o) to determine whether the Company or any other person has a right
or obligation to purchase Common Stock from a Participant and, if so, the
terms and conditions on which such Common Stock is to be purchased;
(p) to determine the restrictions or limitations on the transfer of
Common Stock;
(q) to determine whether an Award is to be adjusted, modified or
purchased, or is to become fully exercisable, under the Plan or the terms
of an Agreement;
(r) to determine the permissible methods of Award exercise and
payment, including cashless exercise arrangements;
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(s) to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan; and
(t) to appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
Any determination made by the Committee pursuant to the provisions of the
Plan shall be made in its sole discretion, and in the case of any determination
relating to an Award, may be made at the time of the grant of the Award or,
unless in contravention of any express term of the Plan or an Agreement, at any
time thereafter. All decisions made by the Committee pursuant to the provisions
of the Plan shall be final and binding on all persons, including the Company and
Participants. No determination shall be subject to de novo review if challenged
in court.
ARTICLE IV
----------
STOCK SUBJECT TO PLAN
---------------------
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 8,600,000 shares of Common Stock
authorized for issuance. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
4.2 Release of Shares. Subject to Section 7.3(f), if any shares of Common
Stock that are subject to any Award cease to be subject to an Award or are
forfeited, if any Award otherwise terminates without issuance of shares of
Common Stock being made to the Participant, or if any shares (whether or not
restricted) of Common Stock are received by the Company in connection with the
exercise of an Award, including the satisfaction of tax withholding, such
shares, in the discretion of the Committee, may again be available for
distribution in connection with Awards under the Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued as or in
conjunction with an Award shall be subject to the terms and conditions specified
herein and to such other terms, conditions and restrictions as the Committee in
its discretion may determine or provide in an Award Agreement. The Company
shall not be required to issue or deliver any certificates for shares of Common
Stock, cash or other property prior to (i) the listing of such shares on any
stock exchange or NASDAQ (or other public market) on which the Common Stock may
then be listed (or
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regularly traded), (ii) the completion of any registration or qualification of
such shares under Federal or state law, or any ruling or regulation of any
government body which the Committee determines to be necessary or advisable, and
(iii) the satisfaction of any applicable withholding obligation in order for the
Company or an Affiliate to obtain a deduction with respect to the exercise of an
Award. The Company may cause any certificate for any share of Common Stock to
be delivered to be properly marked with a legend or other notation reflecting
the limitations on transfer of such Common Stock as provided in this Plan or as
the Committee may otherwise require. The Committee may require any person
exercising an Award to make such representations and furnish such information as
it may consider appropriate in connection with the issuance or delivery of the
shares of Common Stock in compliance with applicable law or otherwise.
Fractional shares shall not be delivered, but shall be rounded to the next lower
whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Award until, after proper exercise of
the Award or other action required, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred.
Upon exercise of the Award or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a stockholder for any purpose whatsoever prior to such issuance. No
adjustment shall be made for cash dividends or other rights for which the record
date is prior to the date such shares are recorded as issued or transferred in
the Company's official stockholder records, except as provided herein or in an
Agreement.
4.5 Best Efforts To Register. The Company will register under the
Securities Act the Common Stock delivered or deliverable pursuant to Awards on
Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon after stockholder approval of the Plan
as the Committee, in its sole discretion, shall deem such registration
appropriate. The Company will use its best efforts to cause the registration
statement to become effective and will file such supplements and amendments to
the registration statement as may be necessary to keep the registration
statement in effect until the earliest of (a) one year following the expiration
of the Option Period of the last Option outstanding, (b) the date the Company is
no longer a reporting company under the Exchange Act and (c) the date all
Participants have disposed of all shares delivered pursuant to any Award.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale by
the Company of all or a substantial portion of its assets (measured on either a
stand-alone or consolidated basis), reorganization, rights offering, a partial
or complete liquidation, or any other corporate transaction, Company stock
offering or event involving the Company and having an effect similar
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to any of the foregoing, then the Committee shall adjust or substitute, as the
case may be, the number of shares of Common Stock available for Awards under the
Plan, the number of shares of Common Stock covered by outstanding Awards, the
exercise price per share of outstanding Awards, and performance conditions and
any other characteristics or terms of the Awards as the Committee shall deem
necessary or appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that the Committee may limit any such
adjustment so as to maintain the deductibility of the Awards under Section
162(m) and that any fractional shares resulting from such adjustment shall be
eliminated by rounding to the next lower whole number of shares with appropriate
payment for such fractional shares as shall reasonably be determined by the
Committee.
ARTICLE V
---------
ELIGIBILITY
-----------
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan and be granted Awards shall be those persons
who are directors, officers, employees and consultants of the Company or any
subsidiary of the Company, who shall be in a position, in the opinion of the
Committee, to make contributions to the growth, management, protection and
success of the Company and its subsidiaries. Of those persons described in the
preceding sentence, the Committee may, from time to time, select persons to be
granted Awards and shall determine the terms and conditions with respect
thereto. In making any such selection and in determining the form of the Award,
the Committee may give consideration to the person's functions and
responsibilities, the person's contributions to the Company and its
subsidiaries, the value of the individual's service to the Company and its
subsidiaries and such other factors deemed relevant by the Committee. The
Committee may designate in writing any person who is not eligible to participate
in the Plan if such person would otherwise be eligible to participate in this
Plan (and members of the Committee are expressly excluded from participation in
the Plan).
5.2 Per-Person Award Limitations. In each fiscal year during any part of
which the Plan is in effect, a Participant may not be granted Awards relating to
more than 800,000 shares of Common Stock, subject to adjustment as provided in
Section 4.6, under each of Articles VI, VII, VIII and IX and Sections 10.1,
10.2, 10.3 and 10.4(b). In addition, the maximum aggregate amount that may be
paid out as final Cash Incentive Awards or other cash Awards in any fiscal year
to any one Participant shall be $5,000,000.
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ARTICLE VI
----------
STOCK OPTIONS
-------------
6.1 General. The Committee shall have authority to grant Stock Options
under the Plan at any time or from time to time. Stock Options may be granted
alone or in addition to other Awards and may be either Incentive Stock Options
or Non-Qualified Stock Options. An Option shall entitle the Participant to
receive shares of Common Stock upon exercise of such Option, subject to the
Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement (the terms and
provisions of which may differ from other Agreements), including, without
limitation, payment of the Option Price.
6.2 Grant and Exercise. The grant of a Stock Option shall occur as of the
date the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to the
express terms and conditions set forth in the Plan. Such Agreement shall become
effective upon execution by the Participant. Only a person who is a common-law
employee of the Company, any parent corporation of the Company or a subsidiary
(as such terms are defined in Section 424 of the Code) on the date of grant
shall be eligible to be granted an Option which is intended to be and is an
Incentive Stock Option. To the extent that any Stock Option is not designated
as an Incentive Stock Option or even if so designated does not qualify as an
Incentive Stock Option, it shall constitute a Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be exercised, so as
to disqualify the Plan under Section 422 of the Code or, without the consent of
the Participant affected, to disqualify any Incentive Stock Option under such
Section 422.
6.3 Terms and Conditions. Stock Options shall be subject to such terms
and conditions as shall be determined by the Committee, including the following:
(a) Option Period. The Option Period of each Stock Option shall be
fixed by the Committee; provided that no Stock Option shall be exercisable
more than ten (10) years after the date the Stock Option is granted. In
the case of an Incentive Stock Option granted to an individual who owns
more than ten percent (10%) of the combined voting power of all classes of
stock of the Company, a corporation which is a parent corporation of the
Company or any subsidiary of the Company (each as defined in Section 424 of
the Code), the Option Period shall not exceed five (5) years from the date
of grant. No Option which is intended to be an Incentive Stock Option
shall be granted more than ten (10) years from the date the Plan is adopted
by the Company or the date the Plan is approved by the stockholders of the
Company, whichever is earlier.
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(b) Option Price. The Option Price per share of the Common Stock
purchasable under an Option shall be determined by the Committee; provided,
however, that the Option Price per share shall be not less than the Fair
Market Value per share on the date the Option is granted. If such Option
is intended to qualify as an Incentive Stock Option and is granted to an
individual who owns or who is deemed to own stock possessing more than ten
percent (10%) of the combined voting power of all classes of stock of the
Company, a corporation which is a parent corporation of the Company or any
subsidiary of the Company (each as defined in Section 424 of the Code), the
Option Price per share shall not be less than one hundred ten percent
(110%) of such Fair Market Value per share.
(c) Exercisability. Subject to Section 12.1, Stock Options shall be
exercisable at such time or times and subject to such terms and conditions
as shall be determined by the Committee. If the Committee provides that
any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part.
In addition, the Committee may at any time accelerate the exercisability of
any Stock Option. If the Committee intends that an Option be an Incentive
Stock Option, the Committee may, in its discretion, provide that the
aggregate Fair Market Value (determined at the Grant Date) of the Common
Stock as to which such Incentive Stock Option which is exercisable for the
first time during any calendar year shall not exceed $100,000.
(d) Method of Exercise. Subject to the provisions of this Article VI,
a Participant may exercise Stock Options, in whole or in part, at any time
during the Option Period by the Participant's giving written notice of
exercise on a form provided by the Committee (if available) to the Company
specifying the number of shares of Common Stock subject to the Stock Option
to be purchased. Such notice shall be accompanied by payment in full of
the purchase price by cash or check or such other form of payment as the
Company may accept. If approved by the Committee, payment in full or in
part may also be made (i) by delivering Common Stock already owned by the
Participant having a total Fair Market Value on the date of such delivery
equal to the Option Price; (ii) by the execution and delivery of a note or
other evidence of indebtedness (and any security agreement thereunder)
satisfactory to the Committee and permitted in accordance with Section
6.3(e); (iii) by authorizing the Company to retain shares of Common Stock
which would otherwise be issuable upon exercise of the Option having a
total Fair Market Value on the date of delivery equal to the Option Price;
(iv) by the delivery of cash or the extension of credit by a broker-dealer
to whom the Participant has submitted a notice of exercise or otherwise
indicated an intent to exercise an Option (in accordance with Part 220,
Chapter II, Title 12 of the Code of Federal Regulations, so-called
"cashless" exercise); or (v) by any combination of the foregoing. If
payment of the Option Price of a Non-Qualified Stock Option is made in
whole or in part in the form of Restricted Stock or Deferred Stock, the
number of shares of Common Stock to be received upon such exercise that is
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equal to the number of shares of Restricted Stock or Deferred Stock used
for payment of the Option Price shall be subject to the same forfeiture
restrictions or deferral limitations to which such Restricted Stock or
Deferred Stock was subject, unless otherwise determined by the Committee.
In the case of an Incentive Stock Option, the right to make a payment in
the form of already owned shares of Common Stock of the same class as the
Common Stock subject to the Stock Option may be authorized only at the time
the Stock Option is granted. No shares of Common Stock shall be issued
until full payment therefor, as determined by the Committee, has been made.
Subject to any forfeiture restrictions or deferral limitations that may
apply if a Stock Option is exercised using Restricted Stock or Deferred
Stock, a Participant shall have all of the rights of a stockholder of the
Company holding the class of Common Stock that is subject to such Stock
Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the Participant has given written notice
of exercise, has paid in full for such shares and such shares have been
recorded on the Company's official stockholder records as having been
issued or transferred.
(e) Company Loan or Guarantee. Upon the exercise of any Option and
subject to the pertinent Agreement and the discretion of the Committee, the
Company may at the request of the Participant:
(i) lend to the Participant an amount equal to such portion of
the Option Price as the Committee may determine; or
(ii) guarantee a loan obtained by the Participant from a
third-party for the purpose of tendering the Option Price.
The terms and conditions of any loan or guarantee, including the term,
interest rate and any security interest thereunder and whether the loan
shall be with recourse, shall be determined by the Committee, except that
no extension of credit or guarantee shall obligate the Company for an
amount to exceed the lesser of the aggregate Fair Market Value per share of
the Common Stock on the date of exercise, less the par value of the shares
of Common Stock to be purchased upon the exercise of the Award, or the
amount permitted under applicable laws or the regulations and rules of the
Federal Reserve Board and any other governmental agency having
jurisdiction.
(f) Non-transferability of Options. Except as otherwise provided in
an Agreement or determined by the Committee, no Stock Option or interest
therein shall be transferable by the Participant other than by will or by
the laws of descent and distribution, and all Stock Options shall be
exercisable during the Participant's lifetime only by the Participant.
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, any unexpired and unexercised Stock Option held by
such
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Participant shall thereafter be fully exercisable for a period of ninety (90)
days following the date of the appointment of a Representative (or such other
period or no period as the Committee may specify) or until the expiration of the
Option Period, whichever period is the shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to a Disability, any unexpired and unexercised Stock Option
held by such Participant shall thereafter be fully exercisable by the
Participant for the period of ninety (90) days (or such other period or no
period as the Committee may specify) immediately following the date of such
Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the foregoing.
In the event of Termination of Employment by reason of Disability, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of Employment
due to Retirement, or the Termination of Employment is involuntary on the part
of the Participant (but is not due to death or Disability or with Cause), any
Stock Option held by such Participant shall thereupon terminate, except that
such Stock Option, to the extent then exercisable, may be exercised for the
lesser of the ninety (90) day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period. Unless
otherwise provided in an agreement or determined by the Committee, if the
Participant incurs a Termination of Employment which is either (a) voluntary on
the part of the Participant (and is not due to Retirement) or (b) with Cause,
the Option shall terminate immediately. The death or Disability of a
Participant after a Termination of Employment otherwise provided herein shall
not extend the time permitted to exercise an Option.
6.7 Cashing Out of Option. On receipt of written notice of exercise, the
Committee may elect to cash out all or part of the portion of any Stock Option
with respect to which Option at least six months have elapsed since the Grant
Date (provided that such limitation shall not apply to an Option granted to a
Participant who has subsequently died) to be exercised by paying the Participant
an amount, in cash or Common Stock, equal to the excess of the Fair Market Value
of the Common Stock that is subject to the Option over the Option Price times
the number of shares of Common Stock subject to the Option on the effective date
of such cash-out.
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ARTICLE VII
-----------
STOCK APPRECIATION RIGHTS
-------------------------
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under the Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company the
Stock Appreciation Right and to be paid therefor in shares of the Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under the Plan, in which case the
exercise of the Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option, and the exercise of a Stock Option
shall result in the cancellation of a corresponding portion of the Stock
Appreciation Right. In the case of a Non-Qualified Stock Option, such rights
may be granted either at or after the time of grant of such Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of grant of such Stock Option. A Stock Appreciation Right may also be
granted on a stand-alone basis. The grant of a Stock Appreciation Right shall
occur as of the date the Committee determines. Each Stock Appreciation Right
granted under this Plan shall be evidenced by an Agreement, which shall embody
the terms and conditions of such Stock Appreciation Right and which shall be
subject to the terms and conditions set forth in this Plan.
7.3 Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
(a) Period and Exercise. The term of a Stock Appreciation Right shall
be established by the Committee. If granted in conjunction with a Stock
Option, the Stock Appreciation Right shall have a term which is the same as
the Option Period and shall be exercisable only at such time or times and
to the extent the related Stock Options would be exercisable in accordance
with the provisions of Article VI. A Stock Appreciation Right which is
granted on a stand-alone basis shall be for such period and shall be
exercisable at such times and to the extent provided in an Agreement.
Stock Appreciation Rights shall be exercised by the Participant's giving
written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the portion of the Stock Appreciation
Right to be exercised.
(b) Amount. Upon the exercise of a Stock Appreciation Right granted
in conjunction with a Stock Option, a Participant shall be entitled to
receive an amount in cash, shares of Common Stock or both as determined by
the Committee or as otherwise permitted in an Agreement equal in value to
the excess of the Fair Market Value per share of Common Stock over the
Option
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Price per share of Common Stock specified in the related Agreement
multiplied by the number of shares in respect of which the Stock
Appreciation Right is exercised. In the case of a Stock Appreciation Right
granted on a stand-alone basis, the Agreement shall specify the value to be
used in lieu of the Option Price per share of Common Stock. The aggregate
Fair Market Value per share of the Common Stock shall be determined as of
the date of exercise of such Stock Appreciation Right.
(c) [INTENTIONALLY OMITTED]
(d) Non-transferability of Stock Appreciation Rights. Stock
Appreciation Rights shall be transferable only when and to the extent that
a Stock Option would be transferable under the Plan, unless otherwise
provided in an Agreement or determined by the Committee.
(e) Termination. A Stock Appreciation Right shall terminate at such
time as a Stock Option would terminate under the Plan, unless otherwise
provided in an Agreement.
(f) Effect on Shares Under the Plan. Upon the exercise of a Stock
Appreciation Right, the Stock Option or part thereof to which such Stock
Appreciation Right is related shall be deemed to have been exercised for
the purpose of the limitation set forth in Section 4.2 on the number of
shares of Common Stock to be issued under the Plan, but only to the extent
of the number of shares of Common Stock covered by the Stock Appreciation
Right at the time of exercise based on the value of the Stock Appreciation
Right at such time.
(g) Incentive Stock Option. A Stock Appreciation Right granted in
tandem with an Incentive Stock Option shall not be exercisable unless the
Fair Market Value of the Common Stock on the date of exercise exceeds the
Option Price. In no event shall any amount paid pursuant to the Stock
Appreciation Right exceed the difference between the Fair Market Value on
the date of exercise and the Option Price.
ARTICLE VIII
------------
RESTRICTED STOCK
----------------
8.1 General. The Committee shall have authority to grant Restricted Stock
under the Plan at any time or from time to time. Shares of Restricted Stock may
be awarded either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the persons to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares of Restricted
Stock to be awarded to any Participant, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards. Each Award
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shall be confirmed by, and be subject to the terms of, an Agreement. The
Committee may condition the grant of Restricted Stock upon the attainment of
specified performance goals by the Participant or by the Company or an Affiliate
(including a division or department of the Company or an Affiliate) for or
within which the Participant is primarily employed or upon such other factors or
criteria as the Committee shall determine. The provisions of Restricted Stock
Awards need not be the same with respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on issuance
of shares of Common Stock otherwise provided in the Plan, each Participant
receiving an Award of Restricted Stock shall be issued a certificate in respect
of such shares of Restricted Stock. Such certificate shall be registered in the
name of such Participant and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award as determined by
the Committee. The Committee may require that the certificates evidencing such
shares be held in custody by the Company until the restrictions thereon shall
have lapsed and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Common Stock covered by such Award.
8.3 Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(a) Limitations on Transferability. Subject to the provisions of the
Plan and the Agreement, during a period set by the Committee commencing
with the date of such Award (the "Restriction Period"), the Participant
shall not be permitted to sell, assign, transfer, pledge or otherwise
encumber any interest in shares of Restricted Stock.
(b) Rights. Except as provided in Section 8.3(a), the Participant
shall have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class of Common Stock
that is the subject of the Restricted Stock, including, if applicable, the
right to vote the shares and the right to receive any cash dividends.
Unless otherwise determined by the Committee and subject to the Plan, cash
dividends on the class of Common Stock that is the subject of the
Restricted Stock shall be automatically deferred and reinvested in
additional Restricted Stock, and dividends on the class of Common Stock
that is the subject of the Restricted Stock payable in Common Stock shall
be paid in the form of Restricted Stock of the same class as the Common
Stock on which such dividend was paid.
(c) Acceleration. Based on service, performance by the Participant or
by the Company or an Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
restrictions in installments and may accelerate the vesting of all or any
part of any Award and waive the restrictions for all or any part of such
Award.
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(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Restriction Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Restricted Stock. Except to the extent otherwise provided in the
applicable Agreement and the Plan, upon a Participant's Termination of
Employment for any reason during the Restriction Period other than death or
Disability, all shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant, except the Committee shall have the
discretion to waive in whole or in part any or all remaining restrictions
with respect to any or all of such Participant's shares of Restricted
Stock.
(e) Delivery. If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction
Period, unlegended certificates for such shares shall be delivered to the
Participant.
(f) Election. A Participant may elect to further defer receipt of the
Restricted Stock for a specified period or until a specified event, subject
in each case to the Committee's approval and to such terms as are
determined by the Committee. Subject to any exceptions adopted by the
Committee, such election must be made one (1) year prior to completion of
the Restriction Period.
ARTICLE IX
----------
DEFERRED STOCK
--------------
9.1 General. The Committee shall have authority to grant Deferred Stock
under the Plan at any time or from time to time. Shares of Deferred Stock may
be awarded either alone or in addition to other Awards granted under the Plan.
The Committee shall determine the persons to whom and the time or times at which
Deferred Stock will be awarded, the number of shares of Deferred Stock to be
awarded to any Participant, the duration of the period (the "Deferral Period")
prior to which the Common Stock will be delivered, and the conditions under
which receipt of the Common Stock will be deferred and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate, including a division or department of the
Company or an Affiliate for or within which the Participant is primarily
employed, or upon such other factors or criteria as the Committee shall
determine. The provisions of Deferred Stock Awards need not be the same with
respect to any Participant.
9.2 Terms and Conditions. Deferred Stock Awards shall be subject to the
following terms and conditions:
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(a) Limitations on Transferability. Subject to the provisions of the
Plan and the Agreement, Deferred Stock Awards, or any interest therein, may
not be sold, assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period (or Elective
Deferral Period as defined in Section 9.2(e), where applicable), the
Committee may elect to deliver Common Stock, cash equal to the Fair Market
Value of such Common Stock or a combination of cash and Common Stock to the
Participant for the shares covered by the Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and subject
to the Plan, cash dividends on the Common Stock that is the subject of the
Deferred Stock Award shall be automatically deferred and reinvested in
additional Deferred Stock, and dividends on the Common Stock that is the
subject of the Deferred Stock Award payable in Common Stock shall be paid
in the form of Deferred Stock of the same class as the Common Stock on
which such dividend was paid.
(c) Acceleration. Based on service, performance by the Participant or
by the Company or the Affiliate, including any division or department for
which the Participant is employed, or such other factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting of all
or any part of any Award and waive the deferral limitations for all or any
part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination of
Employment during the Deferral Period due to death or Disability, the
restrictions shall lapse and the Participant shall be fully vested in the
Deferred Stock. Unless otherwise provided in an Agreement or determined by
the Committee, upon a Participant's Termination of Employment for any
reason during the Deferral Period other than death or Disability, the
rights to the shares still covered by the Award shall be forfeited by the
Participant, except the Committee shall have the discretion to waive in
whole or in part any or all remaining deferral limitations with respect to
any or all of such Participant's Deferred Stock.
(e) Election. A Participant may elect further to defer receipt of the
Deferred Stock payable under an Award (or an installment of an Award) for a
specified period or until a specified event (an "Elective Deferral
Period"), subject in each case to the Committee's approval and to such
terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must be made at least one (1) year
prior to completion of the Deferral Period for the Award (or of the
applicable installment thereof).
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ARTICLE X
---------
OTHER AWARDS
------------
10.1 Bonus Stock and Awards In Lieu of Obligations. The Committee is
authorized to grant Common Stock as a bonus, or to grant Common Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that acquisitions of Common Stock or other Awards are exempt from
liability under Section 16(b) of the Exchange Act. Common Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Committee.
10.2 Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Common
Stock, other Awards, or other property equal in value to dividends paid with
respect to a specified number of shares of Common Stock. Dividend Equivalents
may be awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents will be paid or distributed when
accrued or will be deemed to have been reinvested in additional Common Stock,
Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.
10.3 Other Stock-Based Awards. The Committee is authorized, subject to
limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Common Stock, purchase rights for Common Stock,
Awards with value and payment contingent upon performance of the Company or any
other factors designated by the Committee, and Awards valued by reference to the
book value of Common Stock or the value of securities of or the performance of
specified subsidiaries. The Committee shall determine the terms and conditions
of such Awards. Common Stock delivered pursuant to an Award in the nature of a
purchase right granted under this Section 10.3 shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Common Stock, other Awards or other
property, as the Committee shall determine. Cash awards, as an element of or
supplement to any other Award under the Plan, may also be granted pursuant to
this Section 10.3.
10.4 Performance Awards.
(a) Performance Conditions. The right of a Participant to exercise or
receive a grant or settlement of any Award, and its timing, may be subject
to performance conditions specified by the Committee. The Committee may use
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business criteria and other measures of performance it deems appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce or increase the amounts payable under any Award subject to
performance conditions, except as limited under Sections 10.4(b) and
10.4(c) hereof in the case of a Performance Award intended to qualify under
Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
the Committee determines that a Performance Award to be granted to a person
the Committee regards as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the
grant and/or settlement of such Performance Award shall be contingent upon
achievement of preestablished performance goals and other terms set forth
in this Section 10.4(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and
a targeted level or levels of performance with respect to such
criteria, as specified by the Committee consistent with this Section
10.4(b). Performance goals shall be objective and shall otherwise
meet the requirements of Code Section 162(m), including the
requirement that the level or levels of performance targeted by the
Committee result in the performance goals being "substantially
uncertain." The Committee may determine that more than one
performance goal must be achieved as a condition to settlement of such
Performance Awards. Performance goals may differ for Performance
Awards granted to any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or for
specified subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used exclusively by the Committee in establishing
performance goals for such Performance Awards: (1) total stockholder
return; (2) such total stockholder return as compared to total return
(on a comparable basis) of a publicly available index such as, but not
limited to, the Standard & Poor's 500, the Nasdaq Stock Market-U.S.
Index or the H&Q Software Sector Index; (3) net income; (4) pre-tax
earnings; (5) EBITDA; (6) pre-tax operating earnings after interest
expense and before bonuses, service fees, and extraordinary or special
items; (7) operating margin; (8) earnings per share; (9) return on
equity; (10) return on capital; (11) return on investment; (12)
operating income, excluding the effect of charges for acquired in-
process technology and before payment of executive bonuses; (13)
earnings per share, excluding the effect of charges for acquired in-
process technology and before payment of executive bonuses; (14)
working capital; and (15) total revenues. The foregoing business
criteria shall also be exclusively used in establishing
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performance goals for Cash Incentive Awards granted under Section
10.4(c) hereof.
(iii) Performance Period: Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over such periods as may be specified by the
Committee. Performance goals shall be established on or before the
dates that are required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Settlement of Performance Awards; Other Terms. Settlement
of Performance Awards may be in cash or Common Stock, or other Awards,
or other property, in the discretion of the Committee. The Committee
may, in its discretion, reduce the amount of a settlement otherwise to
be made in connection with such Performance Awards, but may not
exercise discretion to increase any such amount payable in respect of
a Performance Award subject to this Section 10.4(b). The Committee
shall specify the circumstances in which such Performance Awards shall
be forfeited or paid in the event of a Termination of Employment or a
Change in Control prior to the end of a performance period or
settlement of Performance Awards, and other terms relating to such
Performance Awards.
(c) Cash Incentive Awards Granted to Designated Covered Employees.
The Committee may grant Cash Incentive Awards to Participants including
those designated by the Committee as likely to be Covered Employees, which
Awards shall represent a conditional right to receive a payment in cash,
unless otherwise determined by the Committee, after the end of a specified
calendar year or calendar quarter or other period specified by the
Committee, in accordance with this Section 10.6(c).
(i) Cash Incentive Award. The Cash Incentive Award for
Participants the Committee regards as likely to be regarded as Covered
Employees shall be based on achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
10.4(b), and may be based on such criteria for any other Participant.
The Committee may specify the amount of the individual Cash Incentive
Award as a percentage of any such business criteria, a percentage
thereof in excess of a threshold amount, or another amount which need
not bear a strictly mathematical relationship to such relationship
criteria. The Committee may establish a Cash Incentive Award pool that
includes Participants the Committee regards likely to be regarded as
Covered Employees, which shall be an unfunded pool, for purposes of
measuring Company performance in connection with Cash Incentive
Awards. The amount of the Cash Incentive Award pool shall be based
upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 10.4(b) hereof in
the given
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performance period, as specified by the Committee. The Committee may
specify the amount of the Cash Incentive Award pool as a percentage of
any of such business criteria, a percentage thereof in excess of a
threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(ii) Potential Cash Incentive Awards. Not later than the date
required or permitted for "qualified performance-based compensation"
under Code Section 162(m), the Committee shall determine the
Participants who will potentially receive Cash Incentive Awards for
the specified year, quarter or other period, either as individual Cash
Incentive Awards or out of a Cash Incentive Award pool established by
such date and the amount or method for determining the amount of the
individual Cash Incentive Award or the amount of such Participant's
portion of the Cash Incentive Award pool or the individual Cash
Incentive Award.
(iii) Payout of Cash Incentive Awards. After the end of the
specified year, quarter or other period, as the case may be, the
Committee shall determine the amount, if any, of potential individual
Cash Incentive Award otherwise payable to a Participant, the Cash
Incentive Award pool and the maximum amount of potential Cash
Incentive Award payable to each Participant in the Cash Incentive
Award pool. The Committee may, in its discretion, determine that the
amount payable to any Participant as a final Cash Incentive Award
shall be increased or reduced from the amount of his or her potential
Cash Incentive Award, including a determination to make no final Award
whatsoever, but may not exercise discretion to increase any such
amount in the case of a Cash Incentive Award intended to qualify under
Code Section 162(m). The Committee shall specify the circumstances in
which a Cash Incentive Award shall be paid or forfeited in the event
of Termination of Employment by the Participant or a Change in Control
prior to the end of the period for measuring performance or the payout
of such Cash Incentive Award, and other terms relating to such Cash
Incentive Award in accordance with the Plan. Upon the completion of
the measuring period and the determination of the right to payment and
the amount, the Committee shall direct the Committee to make payment.
(d) Written Determinations. All determinations by the Committee as to
the establishment of performance goals and the potential Performance Awards
or Cash Incentive Awards related to such performance goals and as to the
achievement of performance goals relating to such Awards, the amount of any
Cash Incentive Award pool and the amount of final Cash Incentive Awards,
shall be made in writing in the case of any Award intended to qualify under
Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Cash Incentive Awards.
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ARTICLE XI
----------
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
------------------------------------------------------
11.1 Limited Transfer During Offering. In the event there is an effective
registration statement under the Securities Act pursuant to which shares of
Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of shares
received directly or indirectly pursuant to an exercise of an Award.
11.2 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a Participant's
shares of Common Stock received upon the exercise of an Award (including the
purchase of any unexercised Awards which have not expired), or may obligate a
Participant to sell shares of Common Stock to the Company; upon such terms and
conditions as the Committee may determine and set forth in an Agreement. The
provisions of this Article X shall be construed by the Committee in its sole
discretion, and shall be subject to such other terms and conditions as the
Committee may from time to time determine. Notwithstanding any provision herein
to the contrary, the Company may upon determination by the Committee assign its
right to purchase shares of Common Stock under this Article X, whereupon the
assignee of such right shall have all the rights, duties and obligations of the
Company with respect to purchase of the shares of Common Stock.
11.3 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to disclose affirmatively to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of, any material information regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or the
exercise of an Award or the Company's purchase of Common Stock or an Award from
such holder in accordance with the terms hereof.
ARTICLE XII
-----------
CHANGE IN CONTROL PROVISIONS
----------------------------
12.1 Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, unless otherwise provided in an Agreement, in the event of a
Change in Control (as defined in Section 12.2):
(a) Any Stock Appreciation Rights and Stock Options outstanding as of
the date such Change in Control and not then exercisable shall become fully
exercisable to the full extent of the original grant;
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(b) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock or other award shall lapse, and such
Restricted Stock, Deferred Stock or other award shall become free of all
restrictions and become fully vested and transferable to the full extent of
the original grant.
(c) The performance goals and other conditions with respect to any
outstanding Performance Award or Cash Incentive Award shall be deemed to
have been satisfied in full, and such Award shall be fully distributable,
if and to the extent provided by the Committee in the Agreement relating to
such Award or otherwise, notwithstanding that the Award may not be fully
deductible to the Company under Section 162(m) of the Code.
(d) Notwithstanding any other provision of the Plan, unless the
Committee shall provide otherwise in an Agreement, a Participant shall have
the right, whether or not the Award is fully exercisable or may be
otherwise realized by the Participant, by giving notice during the 60-day
period from and after a Change in Control to the Company, to elect to
surrender all or part of a stock-based Award to the Company and to receive
cash, within 30 days of such notice, in an amount equal to the amount by
which the "Change in Control Price" (as defined in Section 12.3) per share
of Common Stock on the date of such election shall exceed the amount which
the Participant must pay to exercise the Award per share of Common Stock
under the Award (the "Spread") multiplied by the number of shares of Common
Stock granted under the Award as to which the right granted under this
Section 12.1 shall have been exercised.
12.2 Definition of Change in Control. For purposes of this Plan, a "Change
in Control" shall be deemed to have occurred if (a) any corporation, person or
other entity (other than the Company, a majority-owned subsidiary of the Company
or any of its subsidiaries, or an employee benefit plan (or related trust)
sponsored or maintained by the Company), including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the
beneficial owner of stock representing more than the greater of (i) twenty-five
percent (25%) of the combined voting power of the Company's then outstanding
securities or (ii) the percentage of the combined voting power of the Company's
then outstanding securities which equals (A) ten percent (10%) plus (B) the
percentage of the combined voting power of the Company's outstanding securities
held by such corporation, person or entity on the Effective Date; (b)(i) the
stockholders of the Company approve a definitive agreement to merge or
consolidate the Company with or into another corporation other than a majority-
owned subsidiary of the Company, or to sell or otherwise dispose of all or
substantially all of the Company's assets, and (ii) the persons who were the
members of the Board of Directors of the Company prior to such approval do not
represent a majority of the directors of the surviving, resulting or acquiring
entity or the parent thereof; (c) the stockholders of the Company approve a plan
of liquidation of the Company; or (d) within any period of 24 consecutive
months, persons who were members of the Board of Directors of the Company
immediately prior to such 24-month period, together with any persons who were
first elected as
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directors (other than as a result of any settlement of a proxy or consent
solicitation contest or any action taken to avoid such a contest) during such
24-month period by or upon the recommendation of persons who were members of the
Board of Directors of the Company immediately prior to such 24-month period and
who constituted a majority of the Board of Directors of the Company at the time
of such election, cease to constitute a majority of the Board.
12.3 Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (a) the highest reported sales price of a share of
Common Stock in any transaction reported on the principal exchange on which such
shares are listed or on NASDAQ during the 60-day period prior to and including
the date of a Change in Control or (b) if the Change in Control is the result of
a tender or exchange offer, merger, consolidation, liquidation or sale of all or
substantially all of the assets of the Company (in each case a "Corporate
Transaction"), the highest price per share of Common Stock paid in such
Corporate Transaction, except that, in the case of Incentive Stock Options and
Stock Appreciation Rights relating to Incentive Stock Options, such price shall
be based only on the Fair Market Value of the Common Stock on the date any such
Incentive Stock Option or Stock Appreciation Right is exercised. To the extent
that the consideration paid in any such Corporate Transaction consists all or in
part of securities or other non-cash consideration, the value of such securities
or other non-cash consideration shall be determined in the sole discretion of
the Committee.
ARTICLE XIII
------------
MISCELLANEOUS
-------------
13.1 Amendments and Termination. The Board may amend, alter or discontinue
the Plan at any time, but no amendment, alteration or discontinuation shall be
made which would impair the rights of a Participant under a Stock Option, Stock
Appreciation Right, Restricted Stock Award or Deferred Stock Award theretofore
granted without the Participant's consent. In addition, no such amendment shall
be made without the approval of the Company's stockholders to the extent such
approval is required by law or agreement.
The Committee may amend the Plan at any time provided that (a) no amendment
shall impair the rights of any Participant under any Award theretofore granted
without the Participant's consent, and (b) any amendment shall be subject to the
approval or rejection of the Board.
The Committee may amend the terms of any Award or other Award theretofore
granted, prospectively or retroactively, but no such amendment shall impair the
rights of any Participant without the Participant's consent or reduce an Option
Price.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as
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other developments, and to grant Awards which qualify for beneficial treatment
under such rules without stockholder approval. Notwithstanding anything in the
Plan to the contrary, if any right under this Plan would cause a transaction to
be ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may modify
or adjust the right so that pooling of interest accounting shall be available,
including the substitution of Common Stock having a Fair Market Value equal to
the cash otherwise payable hereunder for the right which caused the transaction
to be ineligible for pooling of interest accounting.
13.2 Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company, any
subsidiary, or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee shall require the surrender
of such other Award or award in consideration for the grant of the new Award. In
addition, Awards may be granted in lieu of cash compensation, including in lieu
of cash amounts payable under other plans of the Company or any subsidiary, in
which the Fair Market Value of Common Stock subject to the Award is equivalent
in value to the cash compensation, or in which the exercise price, grant price
or purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Common Stock minus the value of
the cash compensation surrendered.
13.3 Form and Timing of Payment Under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Agreement, payments to be made by the
Company or an Affiliate upon the exercise of an Award or settlement of an Award
may be made in such forms as the Committee shall determine, including, without
limitation, cash, Common Stock, other Awards or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Common
Stock in connection with such settlement, in the discretion of the Committee or
upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee
(subject to Section 13.1 of the Plan) or permitted at the election of the
Participant. Payments may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred payments
or the granting or crediting of Dividend Equivalents in respect of installment
or deferred payments denominated in Common Stock.
13.4 Status of Awards Under Code Section 162(m). It is the intent of the
Company that Awards granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the
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provisions of the Plan shall be interpreted in a manner consistent with Code
Section 162(m). If any provision of the Plan or any agreement relating to such
an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
13.5 Unfunded Status of Plan; Limits on Transferability. It is intended
that the Plan be an "unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Common Stock or make payments;
provided, however, that, unless the Committee otherwise determines, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan. Unless otherwise provided in this Plan or in an Agreement,
no Award shall be subject to the claims of Participant's creditors and no Award
may be transferred, assigned, alienated or encumbered in any way other than by
will or the laws of descent and distribution or to a Representative upon the
death of the Participant.
13.6 General Provisions.
(a) Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Award to represent to and agree with the
Company in writing that such person is acquiring the shares without a view
to the distribution thereof. The certificates for such shares may include
any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan shall
prevent the Company or an Affiliate from adopting other or additional
compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal
income tax purposes with respect to any Award, the Participant shall pay to
the Company (or other entity identified by the Committee), or make
arrangements satisfactory to the Company or other entity identified by the
Committee regarding the payment of, any Federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such
amount required in order for the Company or an Affiliate to obtain a
current deduction. If the Participant disposes of shares of Common Stock
acquired pursuant to an Incentive Stock Option in any transaction
considered to be a disqualifying transaction under the Code, the
Participant must give written notice of such transfer and the Company shall
have the right to deduct any taxes required by law to be withheld from any
amounts otherwise payable to the Participant. Unless otherwise determined
by the Committee, withholding obligations may be settled with Common Stock,
including Common Stock that is part of the Award that gives rise to the
withholding requirement, provided that any applicable requirements under
Section 16 of the Exchange Act are satisfied. The
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obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company and its Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment shall be
permissible only if sufficient shares of Common Stock are available under
the Plan for such reinvestment (taking into account then outstanding
Options and other Awards).
(e) Representation. The Committee shall establish such procedures as
it deems appropriate for a Participant to designate a Representative to
whom any amounts payable in the event of the Participant's death are to be
paid.
(f) Controlling Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws
of the State of Illinois (other than its law respecting choice of law)
except to the extent the General Corporation Law of the State of Delaware
would be mandatorily applicable. The Plan shall be construed to comply with
all applicable law and to avoid liability to the Company, an Affiliate or a
Participant, including, without limitation, liability under Section 16(b)
of the Exchange Act.
(g) Offset. Any amounts owed to the Company or an Affiliate by the
Participant of whatever nature may be offset by the Company from the value
of any shares of Common Stock, cash or other thing of value under this Plan
or an Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under this Plan or an Agreement
shall be transferred unless and until all disputes between the Company and
the Participant have been fully and finally resolved and the Participant
has waived all claims to such against the Company or an Affiliate.
(h) Fail Safe. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3. To the extent any transaction under
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. The Committee may authorize the repurchase of any Award or
shares of Common Stock resulting from any Award in order to prevent a
person from incurring or potentially incurring liability under Section
16(b) of the Exchange Act.
13.7 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 13.7),
either alone or together with other payments or rights accruing to the
Participant from the Company or an Affiliate ("Total Payments"), would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall be
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reduced to the largest amount or greatest right that will result in no portion
of the amount payable or right accruing under the Plan being subject to an
excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 280G of the Code. The determination of whether any reduction in
the rights or payments under this Plan is to apply shall be made by the
Committee in good faith after consultation with the Participant, and such
determination shall be conclusive and binding on the Participant. The
Participant shall cooperate in good faith with the Committee in making such
determination and providing the necessary information for this purpose. The
foregoing provisions of this Section 13.7 shall apply with respect to any person
only if, after reduction for any applicable Federal excise tax imposed by
Section 4999 of the Code and Federal income tax imposed by the Code, the Total
Payments accruing to such person would be less than the amount of the Total
Payments as reduced, if applicable, under the foregoing provisions of the Plan
and after reduction for only Federal income taxes.
13.8 Rights with Respect to Continuance of Employment. Nothing contained
herein shall be deemed to alter the relationship between the Company or an
Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract. The Company or an
Affiliate shall have no obligation to retain the Participant in its employ or
service as a result of this Plan. There shall be no inference as to the length
of employment or service hereby, and the Company or an Affiliate reserves the
same rights to terminate the Participant's employment or service as existed
prior to the individual's becoming a Participant in this Plan.
13.9 Awards in Substitution for Awards Granted by Other Corporations.
Awards (including cash in respect of fractional shares) may be granted under the
Plan from time to time in substitution for awards held by employees, directors
or service providers of other corporations who are about to become officers,
directors or employees of the Company or an Affiliate as the result of a merger
or consolidation of the employing corporation with the Company or an Affiliate,
or the acquisition by the Company or an Affiliate of the assets of the employing
corporation, or the acquisition by the Company or Affiliate of the stock of the
employing corporation, as the result of which it becomes a designated employer
under the Plan. The terms and conditions of the Awards so granted may vary from
the terms and conditions set forth in this Plan at the time of such grant as the
majority of the members of the Committee may deem appropriate to conform, in
whole or in part, to the provisions of the awards in substitution for which they
are granted.
13.10 Procedure for Adoption. Any Affiliate of the Company may by
resolution of such Affiliate's board of directors, with the consent of the Board
of Directors and subject to such conditions as may be imposed by the Board of
Directors, adopt the Plan for the benefit of its employees as of the date
specified in the board resolution.
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13.11 Procedure for Withdrawal. Any Affiliate which has adopted the Plan
may, by resolution of the board of directors of such Affiliate, with the consent
of the Board of Directors and subject to such conditions as may be imposed by
the Board of Directors, terminate its adoption of the Plan.
13.12 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to the
extent necessary to avoid the imposition of liability shall be suspended and
delayed during the period the Participant would be subject to such liability,
but not more than six (6) months and one (1) day and not to exceed the Option
Period, or the period for exercise of a Stock Appreciation Right as provided in
the Agreement, whichever is shorter. The Company shall have the right to suspend
or delay any time period described in the Plan or an Agreement if the Committee
shall determine that the action may constitute a violation of any law or result
in liability under any law to the Company, an Affiliate or a stockholder of the
Company until such time as the action required or permitted shall not constitute
a violation of law or result in liability to the Company, an Affiliate or a
stockholder of the Company.
13.13 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
13.14 Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
13.15 Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
13.16 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
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