SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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14a-11(c) or Rule 14a-12
Wisconsin Central Transportation Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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statement number, or the Form or Schedule and the date of its filing.
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<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 annual meeting of the stockholders of Wisconsin Central Transportation
Corporation (the "Company") will be held at 9:00 a.m., Central Time, on
Thursday, May 15, 1997 in the ground floor auditorium of Riverway Complex, 6133
North River Road (across River Road from the Westin Hotel and behind the
Marriott Suites Hotel), Rosemont, Illinois 60018, to elect seven directors, to
consider approval of the proposed 1997 Long-Term Incentive Plan and to transact
any other business that may properly come before the meeting.
Stockholders of record at the close of business on March 19, 1997 are entitled
to vote at the annual meeting.
By Order of the Board of Directors,
THOMAS W. RISSMAN
Secretary
April 4, 1997
<PAGE>
Wisconsin Central Transportation Corporation
One O'Hare Centre, 6250 N. River Road, 9th Floor
Rosemont, IL 60018
------------------------------------
PROXY STATEMENT
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April 4, 1997
The Board of Directors of Wisconsin Central Transportation Corporation
(the "Company") solicits your proxy for use at the 1997 Annual Meeting of
Stockholders of the Company to be held on May 15, 1997. The Board of Directors
urges you to complete and return your enclosed proxy card promptly. A proxy may
be revoked at any time prior to the voting at the meeting by submitting a later
dated proxy or by giving written notice of such revocation to the Secretary of
the Company. If you plan to attend the annual meeting in person, please mark the
appropriate box on the proxy card and return it promptly.
Holders of the Company's Common Stock of record at the close of
business on March 19, 1997 are entitled to vote at the annual meeting. On that
date, 50,829,979 shares of the Company's Common Stock were issued and
outstanding. Each share entitles the holder to one vote.
A quorum of stockholders is necessary to take action at the annual
meeting. A majority of the outstanding shares of Common Stock will constitute a
quorum of stockholders. The inspectors of election appointed for the annual
meeting will determine whether a quorum is present and will treat abstentions as
shares of Common Stock that are present and entitled to vote for purposes of
determining the presence of a quorum. If a broker indicates on a proxy that it
does not have the discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
The persons appointed by the enclosed proxy card have advised the Board
of Directors that it is their intention to vote at the annual meeting in
compliance with the instructions of the proxy cards received from stockholders
with respect to (i) election of seven directors and (ii) approval of the
proposed 1997 Long-Term Incentive Plan and in their discretion on other matters
brought before the meeting, including matters that, as of the date of this proxy
statement, the Board of Directors does not know will be brought before the
meeting. Absent any voting instructions to the contrary, shares represented by
proxies will be voted FOR election of the seven nominees for director and FOR
the proposed 1997 Long-Term Incentive Plan.
This proxy statement and the enclosed proxy card are being first mailed
to stockholders on or about April 4, 1997.
Your vote is important. Please sign and return the proxy card whether
or not you plan to attend the meeting.
<PAGE>
ITEM 1. ELECTION OF DIRECTORS
The Board of Directors is composed of seven directors, all of whom are
elected annually to serve until the next annual meeting of stockholders or until
their successors have been elected and are qualified. All seven current members
of the Board of Directors have been nominated for re-election. If for any reason
any of these nominees becomes unable or is unwilling to serve at the time of the
meeting, the persons named in the enclosed proxy card will have discretionary
authority to vote for a substitute nominee or nominees. It is not anticipated
that any nominee will be unavailable for election. A plurality of the shares of
Common Stock voted in person or by proxy is required to elect a director.
The Board of Directors recommends a vote FOR election of the seven
nominees for director.
Nominees for Election
The following table sets forth the name, age and present position with
the Company of each nominee for election at this meeting:
Name Age Position With Company
- ---- --- ---------------------
Edward A. Burkhardt 58 Chairman, President, Chief Executive
Officer and Director
Carl Ferenbach 54 Director
Roland V. McPherson 63 Director
Thomas F. Power, Jr. 56 Executive Vice President,
Chief Financial Officer and Director
Thomas W. Rissman 39 Director
A. Francis Small 50 Director
Robert H. Wheeler 51 Director
The following information regarding the nominees for election to the
Board of Directors includes each nominee's present principal occupation, period
of service as a director of the Company and its subsidiaries, other business
experience during the last five years and directorships in other publicly held
companies.
Mr. Burkhardt has served as a director, President and Chief Executive
Officer of the Company since its formation in 1987. He was elected to the
additional position of Chairman in January 1996. He serves as a director and the
President and Chief Executive Officer of each of the Company's subsidiaries. Mr.
Burkhardt is also a director and the Chairman of the Board of Tranz Rail
Holdings Limited, the New Zealand railroad in which the Company has an
investment ("Tranz Rail"), and a director and the Chairman and Chief Executive
Officer of English Welsh & Scottish Railway Holdings Limited, the Great Britain
railroad in which the Company has an investment ("EW&S"). From 1967 to 1987, Mr.
Burkhardt was employed by the Chicago and North Western Transportation Company,
most recently as Vice President, Transportation. Mr. Burkhardt has 36 years of
railroad management experience.
Mr. Ferenbach has served as a director of the Company since 1987. He
also serves as a director of the Company's principal subsidiaries, Wisconsin
Central Ltd. ("WCL"), Fox Valley
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& Western Ltd. ("FVW") and Wisconsin Central International, Inc. ("WCI"). Since
1986, he has been a member of Berkshire Partners LLC, Boston, Massachusetts, a
private equity firm sponsoring and investing in acquisitions and
recapitalizations. Mr. Ferenbach also serves as a director of Tranz Rail, EW&S
and U.S. Can Corporation.
Mr. McPherson has served as a director of the Company since 1987. He
also serves as a director of WCL, FVW and WCI. Since 1989, he has been employed
as the Chairman and Chief Executive Officer of Sullivan Industries, Inc. (a
manufacturer of air compressors). From 1988 until 1989, Mr. McPherson was
self-employed. From 1974 until 1988, Mr. McPherson was employed as Chairman and
Chief Executive Officer of Armstrong Containers, Inc. (a manufacturer of metal
containers).
Mr. Power has served as a director, Executive Vice President and Chief
Financial Officer of the Company since its formation in 1987. He serves as
Executive Vice President and Chief Financial Officer of each of the Company's
subsidiaries and as a director of each of the Company's subsidiaries other than
Algoma Central Railway Inc. ("ACRI") and WC Canada Holdings, Inc. ("WCCHI").
From 1985 to 1987, Mr. Power was self-employed. From 1970 to 1985, Mr. Power was
employed by the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, most
recently as Chief Financial Officer. Mr. Power has over 29 years of railroad
management experience. Mr. Power also serves as a director of Tranz Rail and
EW&S.
Mr. Rissman has served as a director of the Company since January 1992
and is also a director of each of the subsidiaries of the Company other than
ACRI and WCCHI. Mr. Rissman also has served as Secretary of the Company, a
non-executive office, since June 1991. Mr. Rissman has been a member of the law
firm of McLachlan, Rissman & Doll since December 1987. Mr. Rissman also serves
as a director of Tranz Rail and EW&S.
Dr. Small has served as a director of the Company since December 1996.
Dr. Small has been a director and the Managing Director of Tranz Rail and its
predecessors since 1990 and has been employed by Tranz Rail and its predecessors
for 32 years. Dr. Small has 21 years of railroad management experience.
Mr. Wheeler has served as a director of the Company since its
formation in 1987 and is also a director of each of the subsidiaries of the
Company other than ACRI and WCCHI. Mr. Wheeler was a member of the law firm of
Oppenheimer Wolff & Donnelly from December 1987 to August 1994, and is now of
counsel to that firm. Mr. Wheeler also serves as a director of Tranz Rail.
Information Regarding Board of Directors
Committees of the Board of Directors. The Board of Directors of the
Company currently maintains an Executive Committee, an Audit Committee, a
Compensation Committee and a Finance Committee. The Board of Directors does not
maintain a Nominating Committee.
The Executive Committee is authorized to meet between meetings of the
Board of Directors and, except as restricted by law, possesses the authority to
act for and on behalf of
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the Board of Directors. The members of the Executive Committee are Edward A.
Burkhardt (Chairman), Carl Ferenbach, Thomas F. Power, Jr. and Robert H.
Wheeler.
The Audit Committee annually recommends the selection of a firm of
independent public accountants to audit the consolidated financial statements of
the Company and its subsidiaries for the coming year. The Audit Committee also
reviews with representatives of the independent public accountants the auditing
arrangements and scope of the independent public accountants' audits of the
accounting records, the results of those audits, the independent public
accountants' fees, any problems identified by the independent public accountants
regarding internal accounting controls and related recommendations. The
Company's internal audit department reports to the Audit Committee. The members
of the Audit Committee are Roland V. McPherson (Chairman), Robert H. Wheeler and
Thomas W. Rissman. No member of the Audit Committee is an executive officer of
the Company.
The Compensation Committee makes recommendations to the Board of
Directors as to the salaries and other compensation of all elected officers and
as to the benefit plans for all Company employees. The members of the
Compensation Committee are Robert H. Wheeler (Chairman) and Carl Ferenbach. No
member of the Compensation Committee is an executive officer of the Company.
The Finance Committee makes recommendations to the Board of Directors
and is given specific authority by the Board of Directors from time to time to
act on behalf of the Board of Directors in approving certain matters relating to
the issuance of securities by the Company. The members of the Finance Committee
are Carl Ferenbach (Co-Chairman), Thomas W. Rissman (Co-Chairman) and Robert H.
Wheeler.
Meetings of the Board of Directors and Committees. During 1996, the
Board of Directors of the Company met seven times, the Audit Committee met
twice, and the Compensation Committee met three times. The Finance Committee and
the Executive Committee did not meet.
Compensation of Directors. Directors who are full-time employees of
the Company do not receive additional cash compensation for their services as
directors. The members of the Board of Directors who are not full-time employees
of the Company are compensated at the rate of $13,500 per year plus $750 for
each meeting attended, including meetings of the Boards of the Company's
subsidiaries. Members of the Committees of the Board of Directors are
compensated at the rate of $500 per meeting, including committees of
subsidiaries' Boards. Members are compensated for only one meeting if meetings
of the Board of Directors of the Company and a subsidiary are held on the same
day.
Pursuant to the Company's Director Stock Option Plan, approved by the
stockholders at the 1994 annual meeting, on the day after each annual meeting
(beginning in 1994) each continuing director is granted an option to purchase
6,000 shares of Common Stock, and any newly-elected director is granted an
option to purchase 18,000 shares of Common Stock. The exercise price for the
Director Stock Options is fair market value as of the date of grant. The term of
the options ends the earlier of 10 years after the date of grant or one year
after the optionee ceases to be a director of the Company. All directors,
including directors who are
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full-time employees of the Company, participate in the Director Stock Option
Plan.
Executive Compensation
Summary of Compensation. The following table summarizes the total
compensation of the Chief Executive Officer and the four other most highly
compensated executive officers of the Company for fiscal year 1996 and the total
compensation of each such individual for the Company's two previous fiscal
years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation Awards
----------------------------- -------------------------
Name and Principal Position Year Salary($) Bonus($)<F1> Stock Options(Shares)<F2>
- --------------------------- ---- --------- ------------ -------------------------
<S> <C> <C> <C> <C>
Edward A. Burkhardt, 1996 450,000 0 6,000
President and Chief 1995 324,494 12,980 6,000
Executive Officer 1994 295,000 292,193 6,000
Thomas F. Power, Jr., 1996 370,000 0 6,000
Executive Vice 1995 269,491 10,780 6,000
President and Chief 1994 245,000 234,618 6,000
Financial Officer
J. Reilly McCarren, 1996 96,212 210,000 90,000
Executive Vice 1995 -- -- --
President and Chief 1994 -- -- --
Operating Officer
of Operating Subsidiaries<F3>
Glenn J. Kerbs, 1996 140,000 0 0
Vice President, 1995 132,000 5,280 0
Engineering of 1994 121,440 52,741 30,000
Operating Subsidiaries
William R. Schauer, 1996 137,000 0 0
Vice President, 1995 130,000 5,200 0
Marketing of 1994 118,800 51,595 30,000
Operating Subsidiaries
<FN>
- --------------------
<F1> Annual bonus amounts were earned and accrued during the fiscal years
indicated and paid after the end of each applicable fiscal year.
<F2> Adjusted as appropriate for the three-for-one stock split which was
effective on May 31, 1996.
<F3> Mr. McCarren became an employee of the Company in July 1996. His 1996
bonus was paid in connection with his becoming an employee of the
Company. "Operating Subsidiaries" are WCL, FVW, ACRI and Sault Ste.
Marie Bridge Company.
</FN>
</TABLE>
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<PAGE>
Stock Option Grants In 1996. The following table sets forth information
concerning the grant of stock options during 1996 to the Chief Executive Officer
and the four other most highly compensated executive officers of the Company.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential
Realizable
Percentage Value at
of Total Assumed
Number of Options Annual Rates of
Securities Granted to Stock Price
Underlying Employees Appreciation For
Options in Exercise Option Term ($)
Granted Fiscal Year Price Expiration -----------------------
Name (Shares) 1996 ($ Per Share) Date 5% 10%
- ------------------- -------- ---- ------------- ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Edward A. Burkhardt<F1> 6,000 4% 30.84 5/16/06 116,371 294,906
Thomas F. Power, Jr.<F1> 6,000 4% 30.84 5/16/06 116,371 294,906
J. Reilly McCarren<F2> 90,000 56% 31.50 7/7/06 1,782,918 4,518,261
Glenn J. Kerbs 0 0% -- -- -- --
William R. Schauer 0 0% -- -- -- --
<FN>
- -----------------
<F1> Options were granted to Mr. Burkhardt and Mr. Power under the Company's
Director Stock Option Plan.
<F2> Options were granted to Mr. McCarren under the Company's Key Management
Stock Option Plan.
</FN>
</TABLE>
Option Exercises and Year-End Value of Options. The following table
sets forth information concerning the exercise of stock options during 1996, and
the year-end value of unexercised options, for the Chief Executive Officer and
the four other most highly compensated executive officers of the Company.
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<PAGE>
<TABLE>
<CAPTION>
OPTION EXERCISES AND YEAR-END VALUE TABLE
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired December 31, 1996 December 31, 1996($)<F1>
on Value ---------------------------- --------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Edward A. Burkhardt 0 -- 18,000 0 353,710 0
Thomas F. Power, Jr. 0 -- 18,000 0 353,710 0
J. Reilly McCarren 0 -- 0 90,000 0 731,250
Glenn J. Kerbs 0 -- 22,356 7,644 585,913 200,336
William R. Schauer 0 -- 22,356 7,644 585,913 200,336
<FN>
- -----------
<F1> Based on the closing price of one share of Common Stock on December 31,
1996 ($39.625) less the exercise price.
</FN>
</TABLE>
Compensation Committee Report on Executive Compensation
The following is a report of the Compensation Committee of the Board of
Directors:
The Compensation Committee reviews the salaries of each executive
officer of the Company annually. It consults with the Chief Executive Officer
regarding salaries other than those of the two executive directors, and it makes
recommendations to the Board of Directors for salaries of the executive
officers. Each year the Compensation Committee also recommends specific
implementation of the Company's management incentive compensation plan for the
year, for consideration by the Board of Directors. That plan provides for cash
payments to management based on the Company's achieving earnings before interest
and taxes, after certain adjustments ("EBIT"), at or above a target level and on
certain additional performance tests. The annual EBIT target is established for
each year based upon the operating plan for that year and is designed to provide
incentives to meet or exceed the operating plan performance levels. The Company
did not achieve its EBIT target for 1996, and executive officers received no
bonuses under the Incentive Compensation Plan for 1996.
The Company has not established incentive compensation based on the
performance of the stock of the Company. All executive officers of the Company
hold stock of the Company and options to acquire additional shares of stock of
the Company. In most cases the executive officer's holdings of Company
securities represent a substantial proportion of his net worth. The Committee
believes that these holdings have created economic interests for management
consistent with those of the Company's other stockholders.
The Chief Executive Officer receives a base salary as recommended by
the Compensation Committee and approved by the Board of Directors. In addition,
the Chief Executive Officer participates in the incentive compensation program
described above. The salary of the Chief Executive Officer was first negotiated
in October 1987 when the Company was organized and has been increased in each
succeeding year after an annual review by the
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Compensation Committee. In its annual review of the Chief Executive Officer's
base salary, the Compensation Committee considers the Chief Executive Officer's
responsibilities and performance, as well as the compensation paid to chief
executives of other rail transportation companies and other industrial companies
of comparable size. The Chief Executive Officer received no incentive
compensation for 1996, as described above for all executive officers. The Chief
Executive Officer's incentive compensation is not related to performance of the
stock of the Company. A significant factor in the Compensation Committee's
consideration of incentive compensation for the Chief Executive Officer is his
ownership of 3,503,736 shares of Common Stock and the resulting consistency of
his economic interests with those of the Company's other stockholders.
The Company's policy with respect to executive compensation is to have
all compensation qualify for deductibility under the provisions of the Internal
Revenue Code.
The Compensation Committee
Robert H. Wheeler, Chairman
Carl Ferenbach
Transactions With Management And Others
Oppenheimer Wolff & Donnelly, to which Robert H. Wheeler is of counsel,
has provided legal services to the Company in connection with various labor
matters, litigation, regulatory issues and corporate issues since shortly after
the Company's formation and continues to provide legal services to the Company.
The amounts paid during 1996 were $1,188,000.
McLachlan, Rissman & Doll, of which Thomas W. Rissman is a member, has
provided legal services to the Company in connection with various corporate and
financing matters since December 1, 1987 and continues to provide legal services
to the Company. The amounts paid during 1996 were $61,000.
Berkshire Partners Investment Corporation, of which Carl Ferenbach is
an indirect shareholder and an officer, borrowed $13.2 million from the Company
in December 1995 to finance temporarily its initial investment in EW&S. The loan
earned interest at approximately 9.0% and was repaid on February 22, 1996.
Tranz Rail, of which six directors of the Company are directors and
hold shares or options (or both), is party to a Management Services Agreement
with the Company under which the Company provides management services to Tranz
Rail. The amounts earned by the Company for services under the Tranz Rail
Management Services Agreement in 1996 were $700,000.
EW&S, of which four directors of the Company are directors and hold
shares and options, is party to a Management Services Agreement with the Company
under which the Company provides management services to EW&S. The amounts earned
by the Company for services under the EW&S Management Services Agreement in 1996
were $1,585,000. In 1996, the Company was also paid a promotion fee of $864,000
by EW&S in connection with the
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successful acquisition by EW&S of freight rail operations of British Rail.
Stock Price Performance Graph
The following graph compares the percentage change in cumulative total
stockholder return on the Company's common stock during the period from December
31, 1991 through December 31, 1996 with the cumulative total return on the S&P
500 Index and the S&P Railroads Index during that period assuming the investment
of $100 in the Company's Common Stock and in each such index at the beginning of
such periods and the reinvestment of all dividends.
Tabular Representation of Omitted Graph
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- -------- --------
Company ......... 100 180 299 413 657 1189
S&P 500 ......... 100 108 118 120 165 203
S&P Railroads ... 100 112 139 120 176 219
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<PAGE>
Principal Stockholders
The following table sets forth the beneficial ownership of the Company's
Common Stock (i) by each person who is known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock, (ii) by each director,
(iii) by each of the executive officers listed in the Summary Compensation Table
and (iv) by all directors and executive officers as a group. Except as indicated
in notes to the table, each beneficial owner listed in the table has advised the
Company or indicated in filings with the Securities and Exchange Commission that
such owner has sole investment and voting power with respect to the shares
indicated. The information in the table is provided based on information known
to the Company as of March 19, 1997.
Shares
Beneficially Owned(1)
------------------
Name Number Percent
---- ------ -------
Janus Capital Corporation (2) ....................... 6,025,875 11.86
Fidelity Management & Research Company (3) .......... 5,313,250 10.46
Massachusetts Financial Services Corporation (4) .... 4,382,235 8.63
The Prudential Insurance Co. of America (5) ......... 4,101,000 8.07
Edward A. Burkhardt (6) ............................. 3,522,336 6.89
Capital Group Companies, Inc. (7) ................... 3,199,300 6.30
Putnam Investments, Inc.(8) ......................... 2,542,883 5.00
Thomas F. Power, Jr. (9) ............................ 964,418 1.89
Robert H. Wheeler ................................... 520,000 1.02
Roland V. McPherson ................................. 498,332 *
Glenn J. Kerbs ...................................... 238,075 *
William R. Schauer .................................. 130,320 *
Thomas W. Rissman (10) .............................. 106,350 *
Carl Ferenbach ...................................... 92,926 *
J. Reilly McCarren .................................. 27,400 *
A. Francis Small .................................... 2,000 *
Directors and executive officers as a group
(16 persons) (11) .................................. 6,465,283 12.66
* Percentage beneficially owned does not exceed 1%.
(1) Any shares which a person has the right to acquire through exercise of
options exercisable within 60 days after March 19, 1997 are considered
to be outstanding for purposes of this table. Listed shareholders have
such options to acquire shares in the following numbers: Mr. Burkhardt:
18,000; Mr. Power: 18,000; Mr. Wheeler: 18,000; Mr. McPherson: 18,000;
Mr. Kerbs: 29,808; Mr. Schauer: 29,808; Mr. Rissman: 18,000; and Mr.
Ferenbach: 18,000.
(2) According to a Schedule 13G filed on February 14, 1997 with the
Securities and Exchange Commission by Janus Capital Corporation and
Thomas H. Bailey, which indicates that each has shared voting power and
shared dispositive power with respect to these shares, and by Janus
Venture Fund, which indicates that it has shared voting power and
shared dispositive power with respect to
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<PAGE>
3,328,000 of these shares. The address of Janus Capital Corporation,
Thomas H. Bailey and Janus Venture Fund is 100 Fillmore Street, Suite
300, Denver, Colorado 80206-4923.
(3) According to a Schedule 13G filed on February 14, 1997 with the
Securities and Exchange Commission by FMR Corp., Edward C. Johnson 3d
and Abigail P. Johnson which indicates that FMR Corp., Edward C.
Johnson 3d and Abigail P. Johnson each has sole dispositive power with
respect to these shares; Fidelity Management & Research Company, as
investment advisor to the Fidelity Funds, has sole dispositive power
with respect to 5,163,550 of these shares; the Fidelity Funds have sole
dispositive power with respect to 5,163,550 of these shares; and FMR
Corp. has sole voting power with respect to 97,100 of these shares. The
address of FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson is 82
Devonshire Street, Boston, Massachusetts 02109.
(4) According to a Schedule 13G filed on February 12, 1997 with the
Securities and Exchange Commission by Massachusetts Financial Services
Corporation ("MFS"), which indicates that MFS has sole voting power
with respect to 4,285,035 of these shares and sole dispositive power
with respect to 4,382,235 of these shares. The address of MFS is 500
Boylston Street, Boston, Massachusetts 02116.
(5) According to a Schedule 13G filed on February 6, 1997 with the
Securities and Exchange Commission by The Prudential Insurance Company
of America ("Prudential"), which indicates that Prudential has sole
voting power with respect to 408,100 of these shares, shared voting
power with respect to 3,171,400 of these shares, sole dispositive power
with respect to 408,100 of these shares and shared dispositive power
with respect to 3,692,900 of these shares. The address of Prudential is
751 Broad Street, Newark, New Jersey 07102-3777.
(6) Includes 600 shares held by Mr. Burkhardt's daughter and as to which
Mr. Burkhardt disclaims beneficial ownership. The address of Mr.
Burkhardt is One O'Hare Centre, Suite 9000, 6250 N. River Road,
Rosemont, Illinois 60018.
(7) According to a Schedule 13G filed on February 13, 1997 with the
Securities and Exchange Commission by The Capital Group Companies, Inc.
and Capital Research and Management Company (together, "Capital") which
indicates that each has sole dispositive power with respect to these
shares. Beneficial ownership of these shares is disclaimed by Capital.
The address of Capital is 333 South Hope Street, Los Angeles,
California 90071.
(8) According to a Schedule 13G filed on February 1, 1997 with the
Securities and Exchange Commission by Putnam Investments, Inc. ("PI"),
Putnam Investment Management, Inc. ("PIM") and The Putnam Advisory
Company, Inc. ("PAC"); each of PI and PAC has shared voting with
respect to 87,979 of these shares; PI has shared dispositive power with
respect to all of these shares; PIM has shared dispositive power with
respect to 2,324,000 of these shares and PAC has shared dispositive
power with respect to 218,879 of these shares. The address of PI, PIM
and PAC is One Post Office Square, Boston, Massachusetts 02109.
(9) Includes 57,000 shares held for the benefit of Mr. Power's spouse who
has sole voting and sole dispositive power with respect to those 57,000
shares.
(10) Mr. Rissman serves as one of two co-trustees who share voting and
dispositive
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power with respect to 1,695,989 shares held by the Donald J. McLachlan
Trust.
(11) Includes (i) the 600 shares held by Mr. Burkhardt's daughter and
referred to in Note 6, (ii) the 57,000 shares owned by Mr. Power's
spouse and referred to in Note 9, (iii) the 1,695,989 shares owned by
the Donald J. McLachlan Trust and referred to in Note 10, and (iv)
287,740 shares which directors and executive officers have the right to
acquire through exercise of options within 60 days after March 19,
1997.
Compliance with Section 16(a) of the Securities Exchange Act
Based upon a review of forms furnished to the Company pursuant to Rule
16a-3 under the Securities Exchange Act and representations from directors and
officers of the Company, the Company has determined that in 1996 each of J.
Reilly McCarren and A. Francis Small filed later than required a Form 3 under
Section 16 of the Securities Exchange Act of 1934, upon becoming an executive
officer or director of the Company.
ITEM 2. PROPOSAL TO APPROVE 1997 LONG-TERM INCENTIVE PLAN
Introduction. The proposed 1997 Long-Term Incentive Plan ("Plan") is an
incentive compensation plan for officers and other key employees of the Company
and its subsidiaries. The material features of the Plan are described below.
Purpose. The purposes of the Plan are (i) to align the interests of the
Company's shareholders and the recipients of awards under the Plan by increasing
the proprietary interest of such recipients in the Company's growth and success,
(ii) to advance the interests of the Company by attracting and retaining
officers and other key employees and (iii) to motivate such participants to act
in the long-term best interests of the Company's shareholders.
Administration. The Plan provides for administration by the
Compensation Committee of the Board of Directors (the "Committee"), consisting
of two or more members of the Board of Directors each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 of the Securities and
Exchange Act of 1934 ("Exchange Act") and Section 162(m) of the Internal Revenue
Code of 1986, as amended ("Code") and the regulations thereunder. Among the
powers granted to the Committee are the authority to interpret the Plan,
establish rules and regulations for its operation, select employees of the
Company and its subsidiaries to receive awards under the Plan and determine the
form and amount and other terms and conditions of such awards. The Plan
authorizes the Committee to delegate its power and authority under the Plan to
the President or other executive officer of the Company; provided, however, that
the Committee may not delegate its power and authority with regard to the
selection for participation in the Plan of an officer or other person subject to
Section 16 of the Exchange Act or decisions concerning the timing, pricing or
amount of an award to such officer or other person.
Eligibility for Participation. Officers and other key employees of the
Company and its subsidiaries are eligible to be selected to participate in the
Plan. The selection of participants is within the discretion of the Committee.
Approximately 350 officers and key
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employees will be eligible to participate in the Plan.
Types of Awards. The Plan provides for the grant of any or all of the
following types of awards: (i) options to purchase shares of the Company's
Common Stock in the form of incentive stock options or non-statutory stock
options, (ii) stock appreciation rights ("SARs") in the form of tandem SARs or
free-standing SARs, (iii) stock awards in the form of restricted stock or
unrestricted stock and (iv) performance shares. Such awards may be granted
singly, in combination or in tandem, as determined by the Committee. The market
price of one share of the Company's Common Stock on March 19, 1997 was $36.75.
Amendment of the Plan. The Board of Directors may terminate the Plan or
amend it at any time as it shall deem advisable, subject to shareholder approval
as may be required by applicable law, rule or regulation, including Rule 16b-3
under the Exchange Act, provided that no amendment may be made without
shareholder approval if such amendment would (i) increase the maximum number of
shares of the Company's Common Stock available under the Plan (subject to
adjustment as provided in the Plan), (ii) reduce the minimum purchase price in
the case of an option or the grant price in the case of an SAR, (iii) effect any
change with respect to incentive stock options inconsistent with Section 422 of
the Code or (iv) extend the term of the Plan.
Available Shares. 1,500,000 shares of the Company's Common Stock are
available for grant under the Plan subject to reduction by the sum of (i) the
number of shares of the Company's Common Stock that are issued upon the grant of
a stock award and (ii) the number of shares which are subject to, or issued upon
exercise of, options, free-standing SARs or performance shares. (The number of
shares of Common Stock available under the Plan will not be reduced by
settlements in cash of any options, free-standing SARs or performance shares.)
Stock Options. The Plan authorizes the Committee to grant awards in the
form of options to purchase shares of the Company's Common Stock. The Committee
will, with regard to each stock option, determine the number of shares subject
to option, the manner and time of the option's exercise, a vesting schedule, if
any, and the exercise price per share subject to the option. In no event,
however, may the exercise price of an incentive stock option be less than 100%
of the fair market value of the Company's Common Stock on the date of the stock
option's grant or may the exercise period of an incentive stock option be longer
than ten years from the date of the option grant. Upon exercise, the option
price may be paid in cash or, at the discretion of the Committee, in shares of
the Company's Common Stock, a combination thereof, or such other consideration
as the Plan permits. Unvested stock options of a participant who terminates
employment with the Company by reason of disability, retirement upon reaching at
least age 62, or death will become fully vested at time of termination, unless
the Committee specifies otherwise in the applicable option agreement. Any stock
option granted in the form or an incentive stock option will satisfy the
applicable requirements of Section 422 of the Code.
Stock Appreciation Rights. The Plan authorizes the Committee to grant
SARs either in tandem with a stock option ("Tandem SARs") or independent of a
stock option ("FreeStanding SARs"). An SAR is a right to receive shares of
Common Stock or a cash payment (or
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<PAGE>
a combination of cash and shares) with an aggregate value equal to the
appreciation in market value at exercise in excess of the grant price multiplied
by the stated number of shares of the Company's Common Stock subject to the
exercise.
A Tandem SAR granted in connection with an incentive stock option shall
be granted at the same time as the incentive stock option is granted. A Tandem
SAR shall be exercisable to the extent its related stock option is exercisable,
and the exercise price of such an SAR would be the same as the option price
under the related stock option. Upon the exercise of a stock option as to some
or all of the shares related to the award, the related Tandem SAR shall be
cancelled automatically to the extent of the number of shares covered by the
stock option exercise.
With regard to a Free-Standing SAR, the Committee will determine the
number of shares of the Company's Common Stock subject to the SAR, the manner
and time of the exercise of the SAR and the exercise price of the SAR. However,
the exercise price of a FreeStanding SAR may in no event be less than 100% of
the fair market value of the Company's Common Stock on the date of the grant of
the Free-Standing SAR or, under certain circumstances, an earlier date selected
by the Committee in accordance with the Plan.
Stock Awards. The Plan authorizes the Committee to grant awards in the
form of shares of the Company's Common Stock, either restricted or unrestricted.
Such awards will be subject to such terms, conditions, restrictions and
limitations, if any, as the Committee deems appropriate, including but not by
way of limitation, restrictions based on performance measures and continued
employment.
Performance Shares. The Plan authorizes the Committee to grant
"performance shares". For the purposes of the Plan, a "performance share" means
a right, contingent upon the attainment of specified performance measures within
a specified performance period, to receive one share of the Company's Common
Stock, which may be restricted, or, in lieu of all or a portion thereof, the
fair market value of such performance share. The performance objectives to be
achieved during such period and the measure of whether and to what extent such
objectives have been attained will also be determined by the Committee.
Other Terms of Awards. The Plan describes the continuation,
termination, nonforfeiture and forfeiture of stock options, SARs, stock and
performance share awards in the event of death, disability, retirement or
termination as an employee of the Company. Transfers, assignments or pledges of
such awards, other than by will, the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Company, are not
permitted.
Change in Control. The Plan provides that, in the event of a change in
control (as defined in the Plan), (i) all outstanding options and SARs shall
immediately become exercisable in full, (ii) the restriction period applicable
to any outstanding restricted stock award shall lapse, (iii) the performance
period applicable to any outstanding performance share award shall lapse and
(iv) the performance measures applicable to any outstanding restricted stock
award (if any) and to any outstanding performance share award shall be deemed to
be satisfied at the target level.
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Federal Income Tax Consequences. The following is a brief summary of
the principal United States federal income tax consequences under the Code as it
relates to the Plan. This summary is included for general information only and
is not intended to be comprehensive and, among other things, does not describe
the state or local tax consequences. Capital gains are currently taxed at a
maximum federal rate of 28%, while ordinary federal income tax rates are
graduated to a maximum rate of 39.6%. The following discusses the
characterization of income under the various Plan features as ordinary income or
capital gain or loss.
Incentive Stock Options. An individual who receives an incentive stock
option will not be treated as receiving taxable income upon the grant of the
option or upon its exercise, provided the exercise occurs, in general, during
employment with the Company or within three months after termination of
employment. However, any appreciation in the value of the shares of Common Stock
of the Company since the date of the grant will be an item of tax preference at
the time of exercise in determining liability for the alternative minimum tax.
If the Common Stock acquired pursuant to an incentive stock option is not sold
or otherwise disposed of within two years from the date of grant of the option
and is held for at least one year after delivery of the stock purchased by the
option, any gain or loss resulting from a sale or other disposition of the stock
will be treated as long-term capital gain or loss. If stock acquired upon
exercise of an incentive stock option is disposed of prior to the expiration of
such holding periods (a disqualifying disposition), the participant will realize
ordinary income in the year of such disposition in an amount equal to the excess
of the fair market value of the stock on the date exercised over the exercise
price. Any gain in excess of that ordinary income amount generally will be taxed
at capital gains rates. However, under a special rule, the ordinary income
realized upon a disqualifying disposition will not exceed the amount of the
participant's gain.
The Company will not be entitled to any deduction as a result of the
grant or exercise of any incentive stock option, or on a later disposition of
the stock received, except that in the event of a disqualifying disposition, the
Company will be entitled to a deduction equal to the excess of the fair market
value of the stock on the date exercised over the exercise price.
Non-Statutory Stock Options. No taxable income will be realized by a
participant upon the grant of a non-statutory stock option. Upon exercise of a
non-statutory stock option, the participant will realize ordinary income in an
amount measured by the excess of the fair market value of the shares acquired on
the date of exercise over the aggregate option price for such shares, and the
Company will be entitled to a corresponding deduction. (In the case of a
participant subject to Section 16(b) of the Exchange Act, unless the participant
elects otherwise, the amount and timing of such income (and deduction by the
Company) will instead by based on the fair market value of the stock on the date
that the Section 16(b) restriction lapses as to such stock.) Upon a subsequent
disposition of the shares, the participant will realize short-term or long-term
capital gain or loss to the extent of any intervening appreciation or
depreciation. The Company will not be entitled to any further deduction at that
time.
SARs. At the time of receiving an SAR, the participant will not
recognize any taxable income, and the Company will not be entitled to a
deduction for the SAR. Upon the exercise of an SAR, the participant will
recognize ordinary income in an amount equal to the value of
15
<PAGE>
the cash and shares received. (Participants who are subject to Section 16(b) of
the Exchange Act who receive stock will not recognize ordinary income until the
restrictions imposed by Section 16(b) lapse and the stock will be valued on that
date. Nevertheless, such participants may elect, at the date of exercise, to
recognize ordinary income pursuant to Section 83(b) of the Code. If such an
election is made, the stock is valued on the date of exercise of the SAR.) If a
participant receives the stock, then the fair market value of the stock
(recognized as ordinary income) becomes the participant's tax basis for
determining gains or losses on the subsequent sale of such stock. The Company
will be entitled to a deduction in the amount and at the time that the
participant first recognizes ordinary income.
Performance Shares. A participant who has been granted performance
shares will not realize taxable income at the time of the grant and the Company
will not be entitled to a deduction at that time. A participant will realize
ordinary income at the time the award is paid equal to the excess of the fair
market value of the Company's Common Stock over the amount paid by the
participant, if any, for such shares. The Company will be entitled to a
corresponding deduction.
Restricted Shares. A participant receiving an award of restricted
shares of the Company's Common Stock will not realize taxable income at the time
of the grant and the Company will not be entitled to a deduction at that time,
assuming that the restrictions constitute a substantial risk of forfeiture for
federal income tax purposes. When such restrictions lapse, the participant will
receive taxable income in an amount equal to the excess of the fair market value
of the shares at such time over the amount, if any, paid for such shares. The
Company will be entitled to a corresponding deduction. The tax treatment of
restricted shares of the Company which are disposed of will depend upon whether
the participant made an election pursuant to Section 83(b) of the Code to
include the value of the stock in income when awarded. If the participant made
such an election, any disposition thereafter will result in a long-term or
short-term capital gain depending upon the period the restricted shares of the
Company's Common Stock were held. If an election is not made, disposition prior
to the lapse of restrictions will result in ordinary income to the participant
equal to the amount received on disposition. The Company may also deduct an
amount equal to such ordinary income.
Vote Required For Approval. The affirmative vote of the holders of a
majority of the shares of Common Stock present in person or represented by proxy
at the annual meeting is required for approval of the proposed 1997 Long-Term
Incentive Plan.
Board Recommendation. The Board of Directors recommends a vote FOR
approval of the proposed 1997 Long-Term Incentive Plan.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP as
independent public accountants to conduct the annual audit of the financial
statements of the Company for the fiscal year ending December 31, 1997.
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<PAGE>
Representatives of KPMG Peat Marwick LLP are expected to be present at
the annual meeting. They will have the opportunity to make a statement if they
desire to do so, and they are expected to be available to respond to appropriate
questions.
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
The Company will provide without charge to each stockholder, on written
request, a copy of the Company's Annual Report on Form 10-K, including the
financial statements and the financial statement schedules, but excluding the
exhibits, required to be filed with the Securities and Exchange Commission for
the fiscal year ended December 31, 1996. Written requests should be directed to:
Thomas F. Power, Jr.
Executive Vice President and Chief Financial Officer
Wisconsin Central Transportation Corporation
Post Office Box 5062
Rosemont, Illinois 60017-5062
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 annual
meeting of the Company must be received by the Company no later than December
31, 1997 to be eligible for inclusion in the Company's proxy statement and form
of proxy relating to the 1998 annual meeting.
OTHER MATTERS
The cost of soliciting proxies by mail, telephone, telecopy or in
person, as needed, will be borne by the Company. Officers or regular employees
of the Company may, without additional compensation, engage in the solicitation
of proxies by telecopy, telephone or personal calls.
Highlights of the meeting will be included in the report to
stockholders on the second quarter of 1997, to be mailed on or about August 15,
1997.
By Order of the Board of Directors,
THOMAS W. RISSMAN
Secretary
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<PAGE>
APPENDIX 1 TO PROXY STATEMENT - FORM OF PROXY
WISCONSIN CENTRAL TRANSPORTATION CORPORATION
P This Proxy is solicited on Behalf of the Board of Directors of
R Wisconsin Central Transportation Corporation
O The undersigned appoints Edward A. Burkhardt, Thomas F. Power,
Jr., Robert H. Wheeler, Thomas W. Rissman, or any of them, proxies, with
X full power of substitution, to vote all shares of Common Stock of Wisconsin
Central Transportation Corporation ("WCTC") owned of record by the
Y undersigned upon all matters properly coming before the 1997 Annual Meeting
of Stockholders to be held on May 15, 1997 and any adjournments thereof.
This proxy is to be voted as directed on the reverse side of this card.
IN THE ABSENCE OF SPECIFIC DIRECTION, THE PROXIES WILL VOTE THE SHARES OF THE
UNDERSIGNED FOR THE ELECTION OF THE DIRECTOR NOMINEES LISTED ON THE REVERSE
SIDE, FOR ITEM 2 AND IN THEIR DISCRETION ON ANY OTHER MATTERS THAT MAY PROPERLY
COME BEFORE THE MEETING.
Please sign and date this proxy on the reverse side and return it
promptly in the enclosed envelope. If you do not sign and return a proxy or
attend the meeting and vote by ballot, your shares cannot be voted.
(To be signed on reverse)
SEE REVERSE
SIDE
<PAGE>
|X|
Please mark
votes as in
this example
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE FOLLOWING 2 MATTERS
1. Election of Seven Directors 2. Approval of WCTC 1997 Long-Term
Incentive Plan.
Nominees: Edward A. Burkhardt, Carl
Ferenbach, Roland V. McPherson, For Against Abstain
Thomas F. Power, Jr., Thomas W. |_| |_| |_|
Rissman, A. Francis Small and
Robert H. Wheeler
For Withheld
|_| |_| MARK HERE MARK HERE
FOR ADDRESS |_| IF YOU PLAN |_|
|_| CHANGE AND TO ATTEND
--------------------------------- NOTE AT LEFT THE MEETING
For all nominees, except as noted
above
Please sign and date this proxy and
return it promptly whether or not
you plan to attend the meeting.
Sign exactly as name appears on this
card. Joint owners should both sign.
If signing for corporation or
partnership or as agent, attorney or
fiduciary, indicate the capacity in
which you are signing.
Signature:_________________ Date:_____ Signature:___________________ Date:____
<PAGE>
APPENDIX 2 TO PROXY STATEMENT - FORM OF
PROPOSED 1997 LONG-TERM INCENTIVE PLAN
WISCONSIN CENTRAL TRANSPORTATION CORPORATION
1997 LONG-TERM INCENTIVE PLAN
I. INTRODUCTION
1.1 Purposes. The purposes of the 1997 Long-Term Incentive Plan (the
"Plan") of Wisconsin Central Transportation Corporation (the "Company") and its
subsidiaries from time to time (individually a "Subsidiary" and collectively the
"Subsidiaries") are (i) to align the interests of the Company's stockholders and
the recipients of awards under the Plan by increasing the proprietary interest
of such recipients in the Company's growth and success, (ii) to advance the
interests of the Company by attracting and retaining officers and other key
employees and (iii) to motivate such employees to act in the long-term best
interests of the Company's stockholders. For purposes of this Plan, references
to employment by the Company shall also mean employment by a Subsidiary.
1.2 Certain Definitions.
"Agreement" shall mean the written agreement evidencing an award
hereunder between the Company and the recipient of such award.
"Board" shall mean the Board of Directors of the Company.
"Bonus Stock" shall mean shares of Common Stock which are not subject
to a Restriction Period or Performance Measures.
"Bonus Stock Award" shall mean an award of Bonus Stock under this Plan.
"Cause" shall mean any act of dishonesty, commission of a felony,
significant activities harmful to the reputation of the Company, refusal to
perform or substantial disregard of duties properly assigned or significant
violation of any statutory or common law duty of loyalty to the Company.
"Change in Control" shall have the meaning set forth in Section 5.8(b).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board,
consisting of two or more members of the Board, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act.
"Common Stock" shall mean the common stock of the Company.
"Company" has the meaning specified in Section 1.1.
"Disability" shall mean the inability of the holder of an award to
perform substantially
<PAGE>
such holder's duties and responsibilities for a continuous period of at least
six months, as determined solely by the Committee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" shall mean, at any date, the closing transaction
price of a share of Common Stock on the last trading day prior to that date, as
reported by NASDAQ and published in The Wall Street Journal (Midwest Edition);
provided, however, that if Fair Market Value for any date cannot be so
determined, Fair Market Value shall be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.
"Free-Standing SAR" shall mean an SAR which is not issued in tandem
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.
"Incentive Stock Option" shall mean an option to purchase shares of
common stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.
"Incumbent Board" means the members of the Board on May 14, 1997. For
this purpose, an individual who becomes a member of the Board subsequent to May
14, 1997 and who has been nominated for election by the Company's shareholders
by resolution adopted by a vote of at least two thirds of the directors then
comprising the Incumbent Board at a duly convened meeting thereof shall be
deemed to be a member of the Incumbent Board.
"Mature Shares" shall mean shares of Common Stock to which the holder
thereof has good title, free and clear of all liens and encumbrances and which
such holder either (i) has held for at least six months or (ii) has purchased on
the open market.
"Non-Statutory Stock Option" shall mean a stock option which is not an
Incentive Stock Option.
"Performance Measures" shall mean the criteria and objectives,
established by the Committee, which shall be satisfied or met (i) as a condition
to the exercisability of all or a portion of an option or SAR, (ii) as a
condition to the grant of a Stock Award or (iii) during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or in the case of a Performance Share Award, of payment with
respect to such award. Such criteria and objectives may include, but are not
limited to, the attainment by a share of Common Stock of a specified Fair Market
Value for a specified period of time, earnings per share, total earnings, net
income, return to stockholders (including dividends), return on gross
2
<PAGE>
assets, return on net assets, growth in assets, return on equity, revenues, free
cash flow, expenses as a percentage of revenues, cost reduction goals,
shareholder value, and customer satisfaction, or any combination of the
foregoing and any other criteria and objectives established by the Committee. In
the sole discretion of the Committee, the Committee may amend or adjust the
Performance Measures or other terms and conditions of an outstanding award in
recognition of unusual or nonrecurring events affecting the Company or its
financial statements or changes in law or accounting principles.
"Performance Period" shall mean a period of not less than one year or
greater than five years, designated by the Committee during which the
Performance Measures applicable to a Performance Share Award shall be measured.
"Performance Share" shall mean a right, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu of
all or a portion thereof, the Fair Market Value of such Performance Share in
cash.
"Performance Share Award" shall mean an award of Performance Shares
under this Plan.
"Permanent and Total Disability" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
"Restricted Stock" shall mean shares of Common Stock which are subject
to a Restriction Period.
"Restricted Stock Award" shall mean an award of Restricted Stock under
this Plan.
"Restriction Period" shall mean a period of not less than one year or
greater than five years, designated by the Committee during which the Common
Stock subject to a Restricted Stock Award may not be sold, transferred,
assigned, pledged, hypothecated or otherwise encumbered or disposed of, except
as provided in this Plan or the Agreement relating to such award.
"SAR" shall mean a stock appreciation right which may be a
Free-Standing SAR or a Tandem SAR.
"Stock Award" shall mean Restricted Stock Award or a Bonus Stock Award.
"Tandem SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Sock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.
3
<PAGE>
"Tax Date" shall have the meaning set forth in Section 5.5.
1.3 Administration. This Plan shall be administered by the Committee.
Any one or a combination of the following awards may be made under this Plan to
eligible officers and other key employees of the Company and its Subsidiaries: (
i ) options to purchase shares of Common Stock in the form of Incentive Stock
Options or Non-Statutory Stock Options, (ii) SARs in the form of Tandem SARs or
Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or Bonus
Stock and (iv) Performance Shares. The Committee shall, subject to the terms of
this Plan, select eligible officers and other key employees for participation in
this Plan and determine the form, amount and timing of each award to such
persons and, if applicable, the number of shares of Common Stock, the number of
SARs and the number of Performance Shares subject to such an award, the exercise
price or base price associated with the award, the time and conditions of
exercise or settlement of the award and all other terms and conditions of the
award, including, without limitation, the form of the Agreement evidencing the
award. The Committee shall, subject to the terms of this Plan, interpret this
Plan and the application thereof, establish rules and regulations it deems
necessary or desirable for the administration of this Plan and may impose,
incidental to the grant of an award, conditions with respect to the award, such
as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be conclusive and
binding on all parties.
The Committee may delegate some or all or its power and authority
hereunder to the President or other executive officer of the Company as the
Committee deems appropriate; provided, however, that the Committee may not
delegate its power and authority with regard to the selection for participation
in this Plan of an officer or other person subject to Section 16 of the Exchange
Act or decisions concerning the timing, pricing or amount of an award to such
officer or other person.
No member of the Board of Directors or the Committee, and neither the
President and Chief Executive Officer nor any other executive officer to whom
the Committee delegates any of its power and authority hereunder, shall be
liable for any act, omission, interpretation, construction or determination made
in connection with this Plan in good faith, and the members of the Board of
Directors and the Committee and the President and Chief Executive Officer or
other executive officer shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Company's Certificate of Incorporation
and/or By-laws, and under any directors' and officers' liability insurance that
may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by a majority of the members of the Committee without a meeting.
1.4 Eligibility. Participants in this Plan shall consist of such
officers and other key employees of the Company and its Subsidiaries as the
Committee in its sole discretion may select from time to time. The Committee's
selection of a person to participate in. this Plan at any time shall not require
the Committee to select such person to participate in this Plan at any other
time.
4
<PAGE>
1.5 Shares Available. Subject to adjustment as provided in Section 5.7,
One Million Five Hundred Thousand shares of Common Stock shall be available
under this Plan, reduced by the sum of the aggregate number of shares of Common
Stock (i) that are issued upon the grant of a Stock Award and (ii) that are
subject to, or are issued upon exercise of, options, Free-Standing SARs or
Performance Shares. (The number of shares of Common Stock available under this
Plan shall not be reduced by settlements in cash of any options, FreeStanding
SARs or Performance Shares.)
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized and
issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 Stock Option. The Committee may, in its discretion, grant options
to purchase shares of Common Stock to such eligible persons as may be selected
by the Committee. Each option, or portion thereof that is not an Incentive Stock
Option, shall be a Non-Statutory Stock Option. Each Incentive Stock Option shall
be granted within ten years of the effective date of this Plan.
To the extent that the aggregate Fair Market Value (determined as of
the date of grant) of shares of Common Stock with respect to which options
designated as Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (under this Plan or any other plan of the
Company, or any parent or Subsidiary) exceeds the amount (currently $100,000)
established by the Code, such options shall constitute Non-Statutory Stock
Options.
Options shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The. number of
shares of Common Stock subject to an option and the purchase price per
share of Common Stock purchasable upon exercise of the option shall be
determined by the Committee; provided, however, that the purchase price
per share of Common Stock purchasable upon exercise of a Non-Statutory
Stock Option may be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such option and the purchase
price per share of Common Stock purchasable upon exercise of an
Incentive Stock Option shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the date of grant of such option.
(b) Option Period and Exercisability. The period during which
an option may be exercised shall be determined by the Committee;
provided, however, that no Incentive Stock Option shall be exercisable
later than ten years after its date of grant. The Committee may, in its
discretion, establish Performance Measures which shall be satisfied or
met as a condition to the grant of an option or to the exercisability
of all or a portion of an option. The Committee shall determine whether
an option shall become exercisable in cumulative or non-cumulative
installments and in part or in full
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at any time. An exercisable option, or portion thereof, may be
exercised only with respect to whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by
giving written notice to the Company specifying the number of whole
shares of Common Stock to be purchased and accompanied by payment
therefor in full (or arrangement made for such payment to the Company's
satisfaction) either (A) in cash, (B) by delivery of Mature Shares
having a Fair Market Value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such
exercise, (C) by authorizing the Company to withhold whole shares of
Common Stock which would otherwise be delivered upon exercise of the
option having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of
such exercise, (D) in cash by a broker-dealer acceptable to the Company
to whom the optionee has submitted an irrevocable notice of exercise,
or (E) a combination of (A), (B), (C) and (D) in each case to the
extent set forth in the Agreement relating to the option. (ii) if
applicable, by surrendering to the Company any tandem SARs which are
cancelled by reason of the exercise of the option and (iii) by
executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election
pursuant to any of clauses (B)-(E) and in the case of an optionee who
is subject to Section 16 of the Exchange Act, the Company may require
that the method of making such payment be in compliance with Section 16
and the rules and regulations thereunder. Any fraction of a share of
Common Stock which would be required to pay such purchase price shall
be disregarded and the remaining amount due shall be paid in cash by
the optionee. No certificate representing Common Stock shall be
delivered until the full purchase price therefor has been paid.
2.2 Stock Appreciation Rights. The Committee, may, in its discretion,
grant SARs to such eligible persons as may be selected by the Committee. The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
this Plan, as the Committee shall deem advisable:
Number of SARs and Base Price. The number of SARs subject to
an award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. Subject to the terms of this Plan and any applicable
Agreement relating to an SAR, an SAR granted under this Plan shall confer on the
holder thereof a right to receive, upon exercise thereof the excess of (i) the
Fair Market Value of one share of Common Stock on the date of exercise or, if
the Committee shall so determine in the case of any such right other than a
Tandem SAR, at any time during a specified period before or after the date of
exercise over (ii) the grant price of the right as specified by the Committee,
which shall not be less than the Fair Market Value of one share of Common Stock
on the date of grant of the SAR (or if the Committee so determines, in the case
of any SAR retroactively granted in tandem with or substitution for another
award or any outstanding award granted under any other plan of the Company, on
the date of grant of such other award). Subject to the terms of this Plan and
any applicable agreement, the grant price, term, method of exercise, method of
settlement and any other terms and conditions of any SAR shall be determined by
the Committee. The Committee may
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impose such conditions or restrictions on the exercise of any SAR or Tandem SAR
as it may deem appropriate.
2.3 Termination of Employment. (a) Disability. Subject to paragraph (f)
below and Section 5.8 and unless otherwise specified in the Agreement relating
to an option or SAR, as the case may be, if the employment with the Company of
the holder of an option or SAR terminates by reason of Disability, each option
and SAR held by such holder shall be fully exercisable and may thereafter be
exercised by such holder (or such holder's legal representative or similar
person) until and including the earliest to occur of (i) a date set by the
Committee and (ii) the expiration date of the term of such option or SAR.
(b) Retirement. Subject to paragraph (f) below and Section 5.8 and
unless otherwise specified in the Agreement relating to an option or SAR, as the
case may be, if the employment with the Company of the holder of an option or
SAR terminates by reason of retirement on or after age 62, each option and SAR
held by such holder shall be fully exercisable and may thereafter be exercised
by such holder (or such holder's legal representative or similar person) until
and including the earliest to occur of (i) a date set by the Committee and (ii)
the expiration date of the term of such option or SAR.
(c) Death. Subject to paragraph (f) below and Section 5.8 and unless
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the employment with the Company of the holder of an option or SAR
terminates by reason of death, each option and SAR held by such holder shall be
fully exercisable and may thereafter be exercised by such holder's execution
administrator legal representative, beneficiary or similar person, as the case
may be, until and including the earliest to occur of (i) the date which is 1
year after the date of death and (ii) the expiration date of the term of such
option or SAR.
(d) Other Termination. Subject to paragraph (f) below and Section 5.8
and unless otherwise specified in the Agreement relating to an option or SAR, as
the case may be, if the employment with the Company of the holder of an option
or SAR is terminated by the Company for Cause, each option and SAR held by such
holder shall terminate automatically on the effective date of such holder's
termination of employment.
Subject to paragraph (f) below and Section 5.8 and unless otherwise
specified in the Agreement relating to an option or SAR as the case may be, if
the employment with the Company of the holder of an option or SAR terminates for
any reason other than Disability, retirement on or after age 62 with the consent
of the Company, death or Cause, each option and SAR had by such holder shall be
exercisable only to the extent that such option or SAR is exercisable on the
effective date of such holder's termination of employment and may thereafter be
exercised by such holder (or such holder's legal representative or similar
person) until and including the earliest to occur of (i) the date which is 6
months after the effective date of termination of employment and (ii) the
expiration date of the term of such option or SAR.
(e) Death Following Termination of Employment. Subject to paragraph (f)
below and Section 5.8 and unless otherwise specified in the Agreement relating
to an option or SAR, as the case may be, if the holder of an option or SAR dies
during the 1 year period
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following termination of employment by reason of Disability, or if the holder of
an option or SAR dies during the 1 year period following termination of
employment by reason of retirement on or after age 62 or if the holder of an
option or SAR dies during the 6 month period following termination of employment
for any reason other than Disability or retirement on or after Age 62 (or, in
each case, such other period as set forth in the Agreement relating to such
option or SAR), each option and SAR held by such holder shall be exercisable
only to the extent that such option or SAR, as the case may be, is exercisable
on the date of such holder's death and may thereafter be exercised by the
holder's executor, administrator, legal representative, beneficiary or similar
person, as the case may be, until and including the earliest to occur of (i) the
date which is 6 months after the date of death and (ii) the expiration date of
the term of such option or SAR.
(f) Termination of Employment Incentive Stock Options. Subject to
Section 5.8 and unless otherwise specified in the Agreement relating to the
option, if the employment with the Company of a holder of an Incentive Stock
Option terminates by reason of Permanent and Total Disability, each Incentive
Stock Option held by such optionee shall be fully exercisable and may thereafter
be exercised by such optionee (or such optionee's legal representative or
similar person) until and including the earliest to occur of (i) a date set by
the Committee upon the determination a Permanent and Total Disability exists,
(ii) one year after the termination of employment and (iii) the expiration date
of the term of such option.
Subject to Section 5.8 and unless otherwise specified in the Agreement
relating to the option, if the employment with the Company of a holder of an
Incentive Stock Option terminates by reason of death, each Incentive Stock
Option held by such optionee shall be fully exercisable and may thereafter be
exercised by such optionee's executor, administrator, legal representative,
beneficiary or similar person until and including the earliest to occur of (i)
the date which is 1 year after the date of death and (ii) the expiration date of
the term of such option.
If the employment with the Company of the optionee of an Incentive
Stock Option is terminated by the Company for Cause, each Incentive Stock Option
held by such optionee shall terminate automatically on the effective date of
such optionee's termination of employment. Subject to Section 5.8 and unless
otherwise specified in the Agreement relating to the option, if the employment
with the Company of a holder of an Incentive Stock Option terminates for any
reason other than Permanent and Total Disability, death or Cause, each Incentive
Stock Option held by such optionee shall be exercisable only to the extent such
option is exercisable on the effective date of such optionee's termination of
employment, and may thereafter be exercised by such holder (or such holder's
legal representative or similar person) until and including the earliest to
occur of (i) the date which is 3 months after the effective date of such
optionee's termination of employment and (ii) the expiration date of the term of
such option.
If the holder of an Incentive Stock Option dies during the one-year
period following termination of employment by reason of Permanent and Total
Disability (or such shorter period as set forth in the Agreement relating to
such option), or if the holder of an Incentive Stock Option dies during the
three-month period following termination of employment for any reason other than
Permanent and Total Disability, death or Cause, each Incentive Stock Option held
by such optionee shall be exercisable only to the extent such option is
exercisable
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on the date of the optionee's death and may thereafter be exercised by the
optionee's executor, administrator, legal representative, beneficiary or similar
person until and including the earliest to occur of (i) the date which is 6
months after the date of death and (ii) the expiration date of the term of such
option.
III. STOCK AWARDS
3.1 Stock Awards. The Committee may, in its discretion, grant Stock
Awards to such eligible persons as may be selected by the Committee. The
Agreement relating to a Stock Award shall specify whether the Stock Award is a
Restricted Stock Award or Bonus Stock Award.
3.2 Terms of Stock Awards. Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.
(a) Number of Shares and Other Terms. The number of shares of
Common Stock subject to a Restricted Stock Award or Bonus Stock Award
and the Performance Measures (if any) and Restriction Period applicable
to a Restricted Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a
Restricted Stock Award shall provide, in the manner determined by the
Committee, in its discretion, and subject to the provisions of this
Plan, for the vesting of the shares of Common Stock subject to such
award (i) if specified Performance Measures are satisfied or met during
the specified Restriction Period or (ii) if the holder of such award
remains continuously in the employment of the Company during the
specified Restriction Period and for the forfeiture of the shares of
Common Stock subject to such award (x) if specified Performance
Measures are not satisfied or met during the specified Restriction
Period or (y) if the holder of such award does not remain continuously
in the employment of the Company during the specified Restriction
Period.
Bonus Stock Awards shall not be subject to any Performance
Measures or Restriction Periods.
(c) Share Certificates. During the Restriction Period, a
certificate or certificates representing a Restricted Stock Award may
be registered in the holder's name and may bear a legend, in addition
to any legend which may be required pursuant to Section 5.6, indicating
that the ownership of the shares of Common Stock represented by such
certificate is subject to the restrictions, terms and conditions of the
Plan and the Agreement relating to the Restricted Stock Award. All such
certificates shall be deposited with the Company, together with stock
powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if
deemed necessary or appropriate, which would permit transfer to the
Company of all or a portion of the shares of Common Stock subject to
the Restricted Stock Award in the event such award is forfeited in
whole or in part. Upon termination of any applicable Restriction Period
(and the satisfaction or attainment of applicable Performance
measures), or upon the grant of a Bonus Stock Award, in each
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case subject to the Company's right to require payment of any taxes in
accordance with Section 5.5. a certificate or certificates evidencing
ownership of the requisite number of shares of Common Stock shall be
delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless
otherwise set forth in the Agreement relating to a Restricted Stock
Award, and subject to the terms and conditions of a Restricted Stock
Award, the holder of such award shall have all rights as a stockholder
of the Company, including, but not limited to, voting rights, the right
to receive dividends and the right to participate in any capital
adjustment applicable to all holders of Common Stock; provided,
however. that a distribution with respect to shares of Common Stock,
other than a regular cash dividend, shall be deposited with the Company
and shall be subject to the same restrictions as the shares of Common
Stock with respect to which such distribution was made.
3.3 Termination of Employment (a) Disability, Retirement and Death.
Subject to Section 5.8 and unless otherwise set forth in the Agreement relating
to a Restricted Stock Award, if the employment with the Company of the holder of
such award terminates by reason of (i) Disability or death, then the Restriction
Period shall terminate as of the effective date of such holder's disability or
as of the date of death and all Performance Measures, if any, applicable to such
award shall be deemed to have been satisfied at the target level or (ii)
retirement on or after age 62 or termination by the Company without cause, the
Restriction Period shall continue to apply and all Performance Measures, if any,
applicable to such award shall also continue to apply and the restrictions on
the restricted stock awards shall be removed based on actual results with
respect to any performance measures.
(b) Other Termination. Subject to Section 5.8 and unless
otherwise set forth in the Agreement relating to a Restricted Stock Award, if
the employment with the Company of the holder of a Restricted Stock Award
terminates for any reason other, than Disability, retirement on or after age 62,
termination by the Company without Cause or death, the portion of such award
which is subject to a Restriction Period on the effective date of such holder's
termination of employment shall be forfeited and such portion shall be cancelled
by the Company.
IV. PERFORMANCE SHARE AWARDS
4.1 Performance Share Awards. The Committee may, in its discretion,
grant Performance Share Awards to such eligible persons as may be selected by
the Committee.
4.2 Terms of Performance Share Awards. Performance Share Awards shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan as
the Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures.
The number of Performance Shares subject to any award and the
Performance Measures and Performance Period applicable to such award
shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a
Performance Share
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Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting
of such award if specified Performance Measures are satisfied or met
during the specified Performance Period, and for the forfeiture of such
award, if specified Performance Measures are not satisfied or met
during the specified Performance Period.
(c) Settlement of Vested Performance Share Awards. The
Agreement relating to a Performance Share Award (i) shall specify
whether such award may be settled in shares of Common Stock (including
shares of Restricted Stock) or cash or a combination thereof and (ii)
may specify whether the holder thereof shall be entitled to receive, on
a current or deferred basis, dividend equivalents, and, if determined
by the Committee, interest on any deferred dividend equivalents, with
respect to the number of shares of Common Stock subject: to such award.
If a Performance Share Award is settled in shares of Restricted Stock,
a certificate or certificates representing such Restricted Stock shall
be issued in accordance with Section 3.2(c) and the holder of such
Restricted Stock shall have such rights of a stockholder of the Company
as determined pursuant to Section 3.2(d). Prior to the settlement of a
Performance Share Award in shares of Common Stock, including Restricted
Stock, the holder of such award shall have no rights as a stockholder
of the Company with respect to the shares of Common Stock subject to
such award and shall have rights as a stockholder of the Company in
accordance with Section 5.10.
4.3 Termination of Employment. (a) Disability, Retirement and Death.
Subject to Section 5.8 and unless otherwise set forth in the Agreement relating
to a Performance Share Award, if the employment with the Company of the holder
of such award terminates by reason of (i) Disability or death, then all
Performance Measures applicable to such award shall be deemed to have been
satisfied at the target level and the Performance Period applicable to such
award shall thereupon terminate or (ii) retirement on or after age 62 or
termination by the Company without cause, all Performance Measures applicable to
such award shall continue to apply and payment of any Performance Share Awards
shall be made in a pro rata amount at the same time and manner as with other
eligible persons with respect to such awards, based on actual results of the
Performance Measures, unless in its sole discretion, the Committee determines
otherwise. Such pro rata amount shall be determined by multiplying the award
that would have otherwise been paid had there been no termination under (ii)
above by a fraction. the numerator of which is the number of full months of
employment during the Performance Period and the denominator of which is the
number of full months in the Performance Period. A partial month shall be
treated as a full month if the holder of a Performance Share Award has held such
award for 15 or more calendar days of such month.
(b) Other Termination. Subject to Section 5.8 and unless
otherwise set forth in the Agreement relating to a Performance Share Award, if
the employment with the Company of the holder of a Performance Share Award
terminates for any reason other than Disability, retirement on or after age 62,
termination by the Company without cause or death, the portion of such award
which is subject to a Performance Period on the effective date of such holder's
termination of employment shall be forfeited and such portion shall be cancelled
by the Company.
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V. GENERAL
5.1 Effective Date and Term of Plan. This Plan shall be submitted to
the stockholders of the Company for approval and, if approved by the affirmative
vote of a majority of the shares of Common Stock present in person or
represented by proxy at the May 15, 1997 annual meeting of stockholders, shall
become effective on the date of such approval. This Plan shall terminate 10
years after its effective date unless terminated earlier by the Board.
Termination of this Plan shall not affect the terms or conditions of any award
granted prior to termination.
Awards hereunder may be made at any time prior to the termination of
this Plan, provided that no award may be made later than 10 years after the
effective date of this Plan. In the event that this Plan is not approved by the
stockholders of the Company, this Plan and any awards hereunder shall be void
and of no force or effect.
5.2 Amendments. The Board may amend this Plan as it shall deem
advisable, subject to any requirement of stockholder approval required by
applicable law, rule or regulation including Rule 16b-3 under the Exchange Act;
provided, however, that no amendment shall be made without stockholder approval
if such amendment would (a) increase the maximum number of shares of Common
Stock available under this Plan (subject to Section 5.7), (b) reduce the minimum
purchase price in the case of an option or the base price in the case of an SAR,
(c) effect any change with respect to Incentive Stock Options inconsistent with
Section 422 of the Code, or (d) extend the term of this Plan. No amendment may
impair the rights of a holder of an outstanding award without the consent of
such holder.
5.3 Agreement. Except with respect to Restricted Stock Awards under
Article V, each award under this Plan shall be evidenced by an Agreement setting
forth the terms and conditions applicable to such award. No award shall be valid
until an Agreement is executed by the Company and the recipient of such award
and, upon execution by each party and delivery of the Agreement to the Company,
such award shall be effective as of the effective date set forth in the
Agreement.
5.4 Non-Transferability of Stock Options, SARs and Performance Shares.
No option, SAR or Performance Share shall be transferable other than by will,
the laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company as set forth in the Agreement relating to
such award. Except to the extent permitted by the foregoing sentence, each
option, SAR or Performance Share may be exercised or settled during the
participant's lifetime only by the holder of the holder's legal representative
or similar person. Except as permitted by the second preceding sentence, no
option, SAR or Performance Share may be sold, transferred, assigned. pledged,
hypothecated, encumbered or otherwise disposed of (whether by operation of law;
or otherwise) or be subject to execution, attachment or similar process. Upon
any attempt to so sell, transfer, assign, pledge, hypothecate, encumber or
otherwise dispose of any option, SAR or Performance Share. such award and all
rights thereunder shall immediately become null and void.
5.5 Tax Withholding. The Company shall have the right to require, prior
to the issuance or delivery of any shares of Common Stock or the payment of any
cash pursuant to an award made hereunder, payment by the holder of such award of
any Federal, state, local
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or other taxes which may be required to be made or paid in connection with such
award. An Agreement may provide that (i) the Company shall withhold whole shares
of Common Stock which would otherwise be delivered to a holder, having an
aggregate Fair Market Value determined as of the date the obligation to withhold
or pay taxes arises in connection with an award (the "Tax Date"), or withhold an
amount of cash which would otherwise be payable to a holder, in the amount
necessary to satisfy any such obligation or, (ii) the holder may satisfy any
such obligation by any of the following means: (A) a cash payment to the
company, (B) delivery to the Company of Mature Shares having an aggregate Fair
Market Value, determined as of the Tax Date equal to the amount necessary to
satisfy any such obligation, (C) authorizing the Company to withhold whole
shares of Common stock which would otherwise be delivered having an aggregate
Fair Market Value, determined as of the Tax Date, or withhold an amount of cash
which would otherwise be payable to a holder, equal to the amount necessary to
satisfy any such obligation, (D) in the case of the exercise of an option, a
cash payment by a broker-dealer acceptable to the Company, to whom the optionee
has submitted an irrevocable notice of exercise or (E, any combination of (A),
(B), (C) and (D), in each case to the extent set forth in the Agreement relating
to the award; provided, however that the Committee shall have sole discretion to
disapprove of an election pursuant to any of clauses (B)-(E) and that in the
case of a holder who is subject to Section 16 of the Exchange Act, the Company
may require that the method of satisfying such an obligation be in compliance
with Section 16 and the rules and regulations thereunder. An Agreement may
provide for shares of Common Stock to be delivered or withheld having an
aggregate Fair Market Value in excess of the minimum amount required to be
withheld, but not in excess of the amount determined by applying the holder's
maximum marginal tax rate. Any fraction of a share of Common Stock which would
be required to satisfy such an obligation shall be disregarded and the remaining
amount due shall be paid in cash by the holder.
5.6 Restrictions on Shares. Each award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award upon any securities exchange or under any law, or the consent or approval
of any governmental body, or the taking of any other action is necessary or
desirable as a condition of, or in connection with, the delivery of shares
thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
5.7 Adjustment. In the event of any stock split, stock dividend,
recapitalization, reorganization. merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities available under this Plan, the
number and class of securities subject to each outstanding option, the purchase
price per security and the terms of each outstanding Performance Share shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding options and SARs without an increase in the aggregate purchase
price or base price. The decision of the Committee regarding any such adjustment
shall be final, binding and conclusive. If any
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such adjustment would result in a fractional security being (i) available under
this Plan, such fractional security shall be disregarded, or (ii) subject to an
award under this Plan, the Company shall pay the holder of such award, in
connection with the first vesting, exercise or settlement of such award, in
whole or in part, occurring after such adjustment, an amount in cash determined
by multiplying (i) the fraction of such security (rounded to the nearest
hundredth) by (ii) the excess, if any, of (A) the Fair Market Value on the
vesting, exercise or settlement date over (B) the exercise or base price, if
any, of such award.
5.8 Change in Control.
(a) Notwithstanding any provision in this Plan or any
Agreement. in the event of a Change in Control, (i) all outstanding options and
SARs shall immediately become exercisable in full, (ii) the Restriction Period
applicable to any outstanding Restricted Stock Award shall lapse, (iii) the
Performance Period applicable to any outstanding Performance Share Award shall
lapse, (iv) the Performance Measures applicable to any outstanding Restricted
Stock Award (if any) and to any outstanding Performance Share Award shall be
deemed to be satisfied at the target level.
(b) "Change in Control" shall be deemed to have occurred as of:
(1) The closing date of the restructuring of the Company as a
result of merger, consolidation, takeover or reorganization unless at
least a majority of the members of the Board of Directors of the
Corporation resulting from such merger, consolidation, takeover or
reorganization were members of the Incumbent Board; or
(2) the occurrence of any other event that is designated as
being a "Change in Control" by a majority vote of the directors of the
Incumbent Board who are not also employees of the Company.
5.9 No Right of Participation or Employment. No person shall have any
right to participate in this Plan. Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment by the
Company, any Subsidiary or any affiliate of the Company or affect in any manner
the right of the Company, any Subsidiary or any affiliate of the Company to
terminate the employment of any person at any time without liability hereunder.
5.10 Rights as Stockholder. No person shall have any right as a
stockholder of the Company with respect to any shares of Common Stock or other
equity security of the Company which is subject to an award hereunder unless and
until such person becomes a stockholder of record with respect to such shares or
Common Stock or equity security.
5.11 Governing Law. This Plan, each award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Illinois and construed in
accordance therewith without giving effect to principles of conflicts of laws.
14
