<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. ____)
Filed by the Registrant: [X]
Filed by a Party other than the Registrant: [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
National Instruments Corporation
--------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
________________________________________________________________________
(Name of person(s) filing proxy statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________
2) Aggregate number of securities to which transaction applies:
_________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined:
___________________________________________________
4) Proposed maximum aggregate value of transaction: _____________________
5) Total fee paid: ______________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: ______________________________________________
2) Form, Schedule or Registration Statement No.: ________________________
3) Filing Party: ________________________________________________________
4) Date Filed: __________________________________________________________
<PAGE> 2
NATIONAL INSTRUMENTS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of
National Instruments Corporation, a Delaware corporation (the "Company"), will
be held on May 13, 1997, at 9:00 a.m. local time, at the Holiday Inn Northwest
Plaza, 8901 Business Park Drive, Austin, Texas, for the following purposes as
more fully described in the Proxy Statement accompanying this Notice:
1. To elect three directors to the Board of Directors for a term of
three years;
2. To approve an amendment to the Company's Amended and Restated 1994
Incentive Plan increasing the number of shares of Common Stock
reserved for issuance thereunder by 2,100,000 additional shares;
3. To ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December
31, 1997; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only stockholders of record at the close of business on March 21, 1997, are
entitled to receive notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Stockholders attending the
meeting may vote in person even if they have returned a Proxy.
Sincerely,
/s/ DAVID G. HUGLEY
DAVID G. HUGLEY
Secretary
Austin, Texas
April 4, 1997
<PAGE> 3
NATIONAL INSTRUMENTS CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of National Instruments
Corporation, a Delaware corporation (the "Company"), for use at its 1997 Annual
Meeting of Stockholders (the "Annual Meeting") to be held on May 13, 1997, at
9:00 a.m., local time, or at any adjournments or postponements thereof, for the
purposes set forth in this Proxy Statement and in the accompanying Notice of
Annual Meeting of Stockholders. The Annual Meeting will be held at the Holiday
Inn Northwest Plaza, 8901 Business Park Drive, Austin, Texas. The Company's
principal executive offices are located at 6504 Bridge Point Parkway, Austin,
Texas 78730. The Company's telephone number is (512) 338-9119.
These proxy solicitation materials were mailed on or about April 4, 1997 to
all stockholders entitled to vote at the meeting.
RECORD DATE; OUTSTANDING SHARES
Stockholders of record at the close of business on March 21, 1997 (the
"Record Date"), are entitled to receive notice of and vote at the meeting. On
the Record Date, 21,652,408 shares of the Company's Common Stock, $.01 par
value, were issued and outstanding. For information regarding holders of more
than five percent of the outstanding Common Stock, see "Election of
Directors -- Security Ownership."
REVOCABILITY OF PROXIES
Proxies given pursuant to this solicitation may be revoked at any time
before they have been used. Revocation will occur by delivering a written notice
of revocation to the Company or by duly executing a proxy bearing a later date.
Revocation will also occur if the individual attends the meeting and votes in
person.
VOTING AND SOLICITATION
Every stockholder of record on the Record Date is entitled, for each share
held, to one vote on each proposal or item that comes before the meeting. In the
election of directors, each stockholder will be entitled to vote for three
nominees and the three nominees with the greatest number of votes will be
elected.
The cost of this solicitation will be borne by the Company. The Company may
reimburse expenses incurred by brokerage firms and other persons representing
beneficial owners of shares in forwarding solicitation material to beneficial
owners. Proxies may be solicited by certain of the Company's directors, officers
and regular employees, without additional compensation, personally, by telephone
or by telegram.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals which are intended to be presented at the Company's
1998 Annual Meeting must be received by the Company no later than December 5,
1997 in order to be included in the proxy statement and form of proxy for that
meeting.
<PAGE> 4
ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors is divided into three classes, with the
term of the office of one class expiring each year. The Company currently has
seven directors with one director in one class and three directors in two
classes. The terms of office of directors Dr. James J. Truchard, Jeffrey L.
Kodosky and Dr. Peter T. Flawn expire at the 1997 Annual Meeting. Dr. Flawn is
not standing for reelection at the 1997 Annual Meeting. The term of office of
director Gerald T. Olson expires at the 1998 Annual Meeting, and the terms of
office of directors L. Wayne Ashby, William C. Nowlin, Jr. and Dr. Donald M.
Carlton expire at the 1999 Annual Meeting. At the 1997 Annual Meeting,
stockholders will elect three directors for a term of three years.
VOTE REQUIRED
The three nominees receiving the highest number of affirmative votes of the
shares present in person or represented by proxy at the Annual Meeting and
entitled to vote on the election of directors shall be elected to the Board of
Directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no legal effect under
Delaware law. While there is no definitive statutory or case law authority in
Delaware as to the proper treatment of abstentions and broker non-votes in the
election of directors, the Company believes that both abstentions and broker
non-votes should be counted for purposes of whether a quorum is present at the
Annual Meeting. In the absence of precedent to the contrary, the Company intends
to treat abstentions and broker non-votes with respect to the election of
directors in this manner. Cumulative voting is not permitted by the Company's
Certificate of Incorporation.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's three nominees named below, two of whom are
presently directors of the Company. If any nominee of the Company is unable or
declines to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee who is designated by the present Board of Directors to
fill the vacancy. It is not expected that any nominee will be unable or will
decline to serve as a director. THE BOARD OF DIRECTOR RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
The following sets forth information concerning the three nominees for
election as directors at the Annual Meeting, including information as to each
nominee's age as of the Record Date, position with the Company and business
experience.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION/PRINCIPAL OCCUPATION SINCE
- --------------------------- --- ---------------------------------------------------- --------
<S> <C> <C> <C>
Dr. James J. Truchard...... 53 Chairman of the Board of Directors and 1976
President of the Company
Jeffrey L. Kodosky......... 47 Director; Vice President, Research and 1976
Development of the Company
Dr. Ben G. Streetman....... 57 Dean, College of Engineering at --
The University of Texas at Austin
</TABLE>
James J. Truchard, Ph.D., co-founded the Company in 1976 and has served as
its President and Chairman of the Board of Directors since inception. From 1963
to 1976 Dr. Truchard was the Managing Director of the Acoustical Measurements
Division at the Applied Research Laboratories ("ARL"), The University of Texas,
Austin ("UT Austin"). Dr. Truchard received his Ph.D. in Electrical Engineering,
his MS in Physics and his BS in Physics, all from UT Austin.
Jeffrey L. Kodosky co-founded the Company in 1976 and has been a director
since that time. He was appointed Vice President of the Company in 1978 and has
served as Vice President, Research and Development since 1980. Prior to 1976, he
was employed at ARL, UT Austin. Mr. Kodosky received his BS in Physics from
Rensselaer Polytechnic Institute.
2
<PAGE> 5
Ben G. Streetman, Ph.D., is the Dean of the College of Engineering at UT
Austin, as well as Professor of Electrical and Computer Engineering, Dula D.
Cockrell Centennial Chair in Engineering, and Henry E. Singleton Research Fellow
at IC(2) Institute. From 1984 to 1996, Dr. Streetman served as Director of the
Microelectronics Research Center at UT Austin. Dr. Streetman received his BS,
MS, and Ph.D. in Electrical Engineering, all from UT Austin. Dr. Streetman has
been nominated to serve as a director of Global Marine Corporation.
INCUMBENT DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE ANNUAL MEETING
The following sets forth information concerning the directors whose terms
of office continue after the Annual Meeting, including information as to each
director's age as of the Record Date, position with the Company and business
experience.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF DIRECTOR AGE POSITION/PRINCIPAL OCCUPATION SINCE
- ----------------------------------- --- ---------------------------------------------- --------
<S> <C> <C> <C>
William C. Nowlin, Jr.(1)(2)....... 48 Director 1976
L. Wayne Ashby..................... 57 Director 1977
Dr. Donald M. Carlton(1)........... 59 President and Chief Executive Officer of 1994
Radian International LLC
Gerald T. Olson(2)................. 61 Chief Executive Officer of The Olson Group, 1980
Inc.
</TABLE>
- ---------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
William C. Nowlin, Jr. co-founded the Company in 1976 and has served as a
director since inception. Mr. Nowlin served as the Company's Chief Quality
Officer and Secretary until January 1996. Prior to that time, his positions with
the Company included Treasurer, Vice President, Engineering, Sales Manager and
Vice President of Special Projects. Mr. Nowlin received his MS in Electrical
Engineering and his BS in Electrical Engineering, both from UT Austin.
L. Wayne Ashby has been a member of the Company's Board of Directors since
1977. From January 1983 until August 1995, Mr. Ashby served as Program Manager
and as Division Head of the U.S. Navy's Electronic Warfare Programs at ARL, UT
Austin. From 1964 to 1980, Mr. Ashby worked at ARL in various positions
including Research Engineer, Project Leader and Division Head. Mr. Ashby was
Vice President, Special Projects at the Company from 1980 to 1983. Mr. Ashby
received his BS in Electrical Engineering and his MS in Electrical Engineering,
both from UT Austin.
Donald M. Carlton, Ph.D., has been a member of the Company's Board of
Directors since 1994. Since February 1996, Dr. Carlton has served as the
President and Chief Executive Officer of Radian International LLC, and from 1969
until January 1996, Dr Carlton served as President and Chairman of the Board of
Radian Corporation, both of which are environmental engineering firms. Dr.
Carlton received his BS in Chemistry from the University of St. Thomas and his
Ph.D. in Chemistry from UT Austin. Dr. Carlton is currently a director of the
following publicly traded companies: Van Kampen American Capital Closed-End
Funds, Inc., Common Sense Trust, Van Kampen American Capital Income Trust, Van
Kampen American Capital Exchange Fund, Inc., and Central & South West
Corporation.
Gerald T. Olson has been a member of the Company's Board of Directors since
1980. Mr. Olson served as the Company's Vice President of Administration from
1980 to 1983. He served as President of National Business Control Systems, a
company that marketed a credit card fuel control system, from 1983 to 1984.
During 1984 to 1985, Mr. Olson served as Marketing Representative for the
Rubicon Group, a high tech business incubator. From 1985 to 1989, he was
employed by Moore and Moore Advertising, serving as President during 1988 and
1989. From 1989 until January 1996, Mr. Olson served as President of GTO
Marketing, a marketing communication company. Since January 1996, Mr. Olson has
served as the Chief Executive Officer of The Olson Group, Inc., the successor
company to GTO Marketing. Mr. Olson received a BA, BS, and a MA from the
University of St. Thomas, St. Paul, Minnesota.
There is no family relationship between any director of the Company.
3
<PAGE> 6
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of the Record Date (i) by each of the executive officers named
in the table under "Executive Compensation--Summary Compensation Table," (ii) by
each director and nominee, (iii) by all current directors and executive officers
as a group and (iv) by all persons known to the Company, based on statements
filed by such persons pursuant to Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, as amended, to be the beneficial owners of more than 5% of
the Company's Common Stock:
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF PERCENTAGE OF TOTAL
NAME OF PERSON OR ENTITY SHARES(1) VOTING POWER
- ----------------------------------------------------------------- ---------- -------------------
<S> <C> <C>
Dr. James J. Truchard(2)......................................... 6,090,716 28.1%
6504 Bridge Point Parkway
Austin, Texas 78730
Jeffrey L. Kodosky(3)............................................ 2,754,940 12.7%
6504 Bridge Point Parkway
Austin, Texas 78730
Gail T. Kodosky(4)............................................... 2,254,940 10.4%
6504 Bridge Point Parkway
Austin, Texas 78730
William C. Nowlin, Jr(5)......................................... 1,537,108 7.1%
6504 Bridge Point Parkway
Austin, Texas 78730
L. Wayne Ashby(6)................................................ 1,670,756 7.7%
6005 Bon Terra
Austin, Texas 78731
Peter Zogas, Jr.(7).............................................. 20,170 *
Carsten Thomsen(8)............................................... 9,649 *
Joel B. Rollins(9)............................................... 7,017 *
Gerald T. Olson(10).............................................. 270,096 1.2%
Dr. Peter T. Flawn(11)........................................... 3,644 *
Dr. Donald M. Carlton(12)........................................ 4,644 *
Dr. Ben G. Streetman............................................. 500 *
All executive officers and directors as a group
(14 persons)(13)............................................... 12,389,015 57.1%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Except as indicated in the footnotes to this table, the persons names in
the table have sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2) Includes 540,000 shares held by a trust for which Dr. Truchard is the
trustee and 60,000 shares held by a corporation of which Dr. Truchard is
president.
(3) Includes an aggregate of 500,000 shares held in two trusts for which Mr.
Kodosky is the trustee; includes an aggregate of 157,000 shares held by a
corporation of which Mr. Kodosky is president and his wife, Gail T. Kodosky
is secretary; and includes 1,048,970 shares owned by his wife. Mr. Kodosky
disclaims beneficial ownership of the shares owned by his wife.
4
<PAGE> 7
(4) Includes 157,000 shares held by a corporation of which Ms. Kodosky is
secretary and her husband, Jeffrey L. Kodosky is president; and includes
1,048,970 shares owned by her husband. Ms. Kodosky disclaims beneficial
ownership of the shares owned by her husband.
(5) Includes 60,000 shares held in trusts for the benefit of Mr. Nowlin's
daughters; includes 98,000 shares held in a trust for which Mr. Nowlin is
the trustee, all of which shares Mr. Nowlin disclaims beneficial ownership
of; and includes 82 shares subject to options exercisable on or before May
20, 1997.
(6) Includes an aggregate of 159,614 shares held in two trusts for the benefit
of Mr. Ashby and his wife; and includes 254 shares subject to options
exercisable on or before May 20, 1997.
(7) Includes 5,838 shares subject to options exercisable on or before May 20,
1997.
(8) Includes 6,194 shares subject to options exercisable on or before May 20,
1997.
(9) Includes 5,942 shares subject to options exercisable on or before May 20,
1997.
(10) Includes 254 shares subject to options exercisable on or before May 20,
1997.
(11) Includes 644 shares subject to options exercisable on or before May 20,
1997.
(12) Includes 644 shares subject to options exercisable on or before May 20,
1997.
(13) Includes 27,061 shares subject to options exercisable on or before May 20,
1997.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of eight meetings during
1996. During 1996, the Board of Directors had an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or any
committee performing similar functions.
The Audit Committee, which currently consists of directors Donald M.
Carlton, Peter T. Flawn and William C. Nowlin, Jr., met four times during 1996.
The Audit Committee recommends to the Board of Directors the engagement of the
company's independent accountants, reviews with such accountants the plan, scope
and results of their examination of the consolidated financial statements and
determines the independence of such accountants.
The Compensation Committee, which currently consists of directors Peter T.
Flawn, Gerald T. Olson and William C. Nowlin, Jr. met eight times during 1996.
The Compensation Committee sets the level of compensation of executive officers
and advises management with respect to compensation levels for key employees.
The Compensation Committee also administers the Company's 1994 Incentive Plan
and Employee Stock Purchase Plan.
No director attended fewer than 75% of the total number of meetings of the
Board of Directors or the total number of meetings held by all committees of the
Board of Directors on which he served, except that Mr. Nowlin attended only 1 of
the 2 meetings of the Audit Committee held during 1996 subsequent to Mr.
Nowlin's appointment to the Audit Committee in June 1996.
BOARD COMPENSATION
Non-employee directors are paid a $10,000 annual retainer ($12,000 for
committee chairs), $1,000 for each Board meeting attended in person, $750
($1,000 for committee chairs) for each committee meeting attended in person,
$150 for each Board or committee meeting attended telephonically, and
reimbursement of out-of-town travel expenses. Prior to March 1997, non-employee
directors were also entitled to receive options (exercisable at fair market
value of the date of grant) to purchase 900 shares of Common Stock upon joining
the Board, and for 450 shares on June 1st of each year. As of the date of this
Proxy Statement, non-employee directors no longer receive automatic option
grants although they may still exercise options previously granted to them and
are currently eligible to receive discretionary option grants under the terms of
the Company's Amended and Restated 1994 Incentive Plan. Employee directors of
the Company do not receive any additional compensation for services provided as
a director.
5
<PAGE> 8
EXECUTIVE OFFICERS
The following sets forth information concerning the persons currently
serving as executive officers of the Company, including information as to each
executive officer's age as of the Record Date, position with the Company and
business experience.
<TABLE>
<CAPTION>
NAME OF EXECUTIVE OFFICER AGE POSITION
- --------------------------------------------- --- ---------------------------------------------
<S> <C> <C>
Dr. James J. Truchard........................ 53 Chairman of the Board of Directors and
President
Jeffrey L. Kodosky........................... 47 Vice President, Research and Development and
Director
Joel B. Rollins.............................. 44 Vice President, Finance, Chief Financial
Officer and Treasurer
Carsten Thomsen.............................. 47 Vice President, Engineering
Timothy R. Dehne............................. 31 Vice President, Marketing
Peter Zogas, Jr.............................. 36 Vice President, Sales
Mark A. Finger............................... 39 Vice President, Human Resources
Ruben Reynoso-Mangin......................... 49 Vice President, Manufacturing
David G. Hugley.............................. 33 Secretary, General Counsel
</TABLE>
See "Election of Directors" for additional information with respect to Dr.
Truchard and Mr. Kodosky.
Joel B. Rollins joined the Company as Corporate Controller in August 1993,
has served as Chief Financial Officer from December 1993 to the present and was
appointed Vice President, Finance and Treasurer in May 1994. From 1988 to 1993,
he was the Director of Finance for a Texas subsidiary of Cypress Semiconductor,
a semiconductor manufacturer. Mr. Rollins received his BA from Humboldt State
University and is a Certified Public Accountant in Texas and California.
Carsten Thomsen joined the Company in November 1993 as Director of
Engineering and became Vice President, Engineering in May 1994. Mr. Thomsen was
formerly employed by Bruel & Kjaer (Denmark), an instrumentation manufacturer,
from 1983 to 1993, serving as Engineering Manager from 1983 to 1991, Manager of
the Test Systems Division from 1991 to 1992 and as Manager of the Condition
Monitoring Systems Division from 1992 to 1993. Mr. Thomsen received his BA in
Math and Physics from Andrews University.
Timothy R. Dehne joined the Company in 1987 and is currently Vice
President, Marketing. He previously served as the Company's Vice President,
Strategic Marketing, Strategic Marketing Manager, GPIB Marketing Manager, GPIB
Product Manager and as an Applications Engineer. Mr. Dehne received his BS in
Electrical Engineering from Rice University.
Peter Zogas, Jr., joined the Company in 1985 and is currently Vice
President, Sales. He served as the Company's National Sales Manager from July
1992 until his appointment as Vice President, Sales in July 1996. Earlier
positions with the Company include Business Development Manager, Regional Sales
Manager, and Sales Engineer. Prior to joining the Company, Mr. Zogas worked as
an engineer at Texas Instruments and, prior to that, at AT&T. Mr. Zogas received
his BS in Electrical Engineering from Drexel University. He is co-holder of one
patent on multichip packaging issued in 1986.
Mark A. Finger joined the Company in August 1995 as Director of Human
Resources and became Vice President, Human Resources in December 1996. Prior to
joining the Company, Mr. Finger was employed by Rosemount Inc. and Fisher
Rosemount Systems Inc., from 1981 to 1995. Positions held at Rosemount include
Human Resources Manager, Staffing Manager, Senior Human Resources
Representative, Compensation and Benefits Specialist and Staffing Specialist.
Mr. Finger received his BS in Marketing from St. Cloud University.
6
<PAGE> 9
Ruben Reynoso-Mangin joined the Company in February 1997 as Vice President
of Manufacturing. Prior to joining the Company, Mr. Reynoso-Mangin was employed
by 3M Corporation from 1972 to 1997. Positions held at 3M Corporation include
Plant Manager, Plant Quality Manager, Technology Manager, and Product Manager.
Mr. Reynoso-Mangin received his BS in BSIE from the California State Polytechnic
University.
David G. Hugley joined the Company in 1991 as General Counsel and currently
also serves as Secretary of the Company. Mr. Hugley received his BBA and JD from
UT Austin and is a licensed attorney in Texas.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows the compensation
paid by the Company during the years ended December 31, 1996, 1995 and 1994 to
the Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company whose total salary and bonus exceeded $100,000
(collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL SECURITIES
COMPENSATION UNDERLYING
------------------ OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) (# OF SHARES) COMPENSATION(2)
- ---------------------------------------- ---- -------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Dr. James J. Truchard................... 1996 $195,797 $53,299(3) -- $ 5,000
Chairman of the Board and President 1995 195,797 29,291 -- 4,870
1994 195,797 20,441 2,421
Jeffrey L. Kodosky...................... 1996 $147,008 $38,516 -- $ 2,150
Vice President, Research and 1995 143,051 21,400 -- 1,862
Development 1994 141,354 14,757 -- 1,815
Carsten Thomsen......................... 1996 $149,260 $39,106 11,400 $ 4,728
Vice President, Engineering 1995 140,676 21,045 11,300 3,596
1994 132,456 38,099(4) -- 250
Peter Zogas, Jr......................... 1996 $128,352 $33,628 11,200 $ 4,764
Vice President, Sales 1995 149,290 14,559(5) 11,000 4,657
1994 94,319 7,725 -- 1,225
Joel B. Rollins......................... 1996 $115,529 $30,268 11,100 $ 3,699
Vice President, Finance and Treasurer 1995 98,066 14,671 10,900 2,906
1994 83,273 8,694 -- 167
</TABLE>
- ---------------
(1) Bonus amounts for 1996, 1995 and 1994 include bonus amounts paid in fiscal
1997, 1996 and 1995, respectively, for services rendered in fiscal 1996,
1995 and 1994, respectively.
(2) Represents Company contributions to the Company's 401(k) plan on behalf of
the Named Executive Officers and the full dollar value of premiums paid by
the Company for term life insurance on behalf of the Named Executive
Officers for 1996, 1995 and 1994. Messrs. Thomsen and Rollins did not
participate in the Company's 401(k) plan in 1994.
(3) Includes a non-cash bonus with a fair market value of $2,000 on the date
such bonus was paid.
(4) Includes a signing bonus of $23,310 paid to Mr. Thomsen in connection with
his joining the Company.
(5) Includes an award of $1,417 paid to Mr. Zogas upon his completion of ten
years of service with the Company.
7
<PAGE> 10
Option Grants in Last Fiscal Year. The following table sets forth each
grant of stock options made during the fiscal year ended December 31, 1996 to
each Named Executive Officer.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------- ANNUAL RATES OF
% OF TOTAL STOCK PRICE
OPTIONS APPRECIATION
GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES OR BASE EXPIRATION ---------------------
NAME GRANTED IN FY96 PRICE DATE 5%($) 10%($)
- ----------------------------- ------ ---------- ------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Dr. James J. Truchard........ -- -- -- -- -- --
Jeffrey L. Kodosky........... -- -- -- -- -- --
Carsten Thomsen.............. 1,400(2) 0.2% $ 20.00 3/20/06 $ 17,609 $ 44,625
10,000(3) 1.4% $ 20.00 3/20/06 $125,779 $318,748
Peter Zogas, Jr.............. 1,200(2) 0.2% $ 20.00 3/20/06 $ 15,093 $ 38,250
10,000(3) 1.4% $ 20.00 3/20/06 $125,779 $318,748
Joel B. Rollins.............. 1,100(2) 0.2% $ 20.00 3/20/06 $ 13,836 $ 35,062
10,000(3) 1.4% $ 20.00 3/20/06 $125,779 $318,748
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission ("SEC") and
therefore are not intended to forecast possible future appreciation, if any,
of the Company's stock price. The Company did not use an alternative formula
for a grant date valuation, as the Company does not believe that any formula
will determine with reasonable accuracy a present value based on future
unknown or volatile factors.
(2) These options vest as to 1/60th of the shares per month after the date of
grant.
(3) These options vest as to 1/120th of the shares per month after the date of
grant, subject to acceleration based upon Company financial performance.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth, for each of the Named Executive
Officers, the year-end value of unexercised options. No stock options were
exercised by any Named Executive Officer during the fiscal year ended December
31, 1996.
<TABLE>
<CAPTION>
VALUE(1) OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE MONEY
OPTIONS AT YEAR-END: OPTIONS AT YEAR-END:
----------------------------------- -----------------------------------
NAME EXERCISABLE(#) UNEXERCISABLE(#) EXERCISABLE($) UNEXERCISABLE($)
- -------------------------------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Dr. James J. Truchard........... -- -- -- --
Jeffrey L. Kodosky.............. -- -- -- --
Carsten Thomsen................. 5,027 17,673 $ 79,118 $255,433
Peter Zogas, Jr................. 4,749 17,051 $ 74,434 $245,466
Joel B. Rollins................. 4,837 17,163 $ 76,068 $247,883
</TABLE>
- ---------------
(1) Based on a fair market value of $32.00, which was the closing price of the
Company's Common Stock on December 31, 1996, as reported on the NASDAQ Stock
Market.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, the Compensation Committee initially consisted of Directors Gerald
T. Olson, Peter T. Flawn and Jim A. Smith. Mr. Smith resigned from the Board of
Directors and the Compensation Committee on June 10, 1996, and Mr. William C.
Nowlin, Jr. was appointed to the Compensation Committee on June 19, 1996. Mr.
Olson was an executive officer of the Company from 1980 to 1983. Dr. Truchard
may participate in the deliberations of the Compensation Committee with respect
to the compensation of the Company's executive officers.
8
<PAGE> 11
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership on Form 3 and
changes in ownership on Form 4 or Form 5 with the SEC. Such officers, directors
and 10% stockholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it, the Company believes that, during the
fiscal year ended December 31, 1996, all Section 16(a) filing requirements
applicable to its officers, directors and 10% stockholders were satisfied.
PERFORMANCE GRAPH
The following line graph compares the cumulative total return to
stockholders of the Company's Common Stock from March 13, 1995 (the date of the
Company's initial public offering) to December 31, 1996 to the cumulative total
return over such period of (i) The Nasdaq Composite Index and (ii) H&Q Total
Return Technology Index. The graph assumes that $100 was invested on March 13,
1995 in the Company's common stock at its initial public offering price of
$14.50 per share and in each of the other two indices and the reinvestment of
all dividends, if any.
The information contained in the Performance Graph shall not be deemed to
be "soliciting material" or to be "filed" with the SEC, nor shall such
information be incorporated by reference into any future filing under the
Securities Act of 1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), except to the extent that
the Company specifically incorporates it by reference into any such filing. The
graph is presented in accordance with SEC requirements. Stockholders are
cautioned against drawing any conclusions from the data contained therein, as
past results are not necessarily indicative of future performance.
PERFORMANCE GRAPH
H&Q
National NASDAQ Total Return
Measurement Instruments Composite Technology
Period Corporation Index Index
----------- ----------- --------- ------------
03/13/95 $100 $100 $100
12/31/95 $140 $131 $136
12/31/96 $221 $161 $163
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE REGARDING EXECUTIVE COMPENSATION
The Compensation Committee, comprised of directors Flawn, Nowlin and Olson,
is responsible for recommending to the Board of Directors the compensation
programs and levels of pay for executive officers. The Committee also advises
management on pay programs and levels for other employees. The Committee has
retained an independent compensation consulting firm to provide analyses of
competitive industry pay levels and practices, and to advise the Committee on
appropriate pay levels for the Company.
Compensation Philosophy and Objectives. The Company's basic philosophy is
to align executive compensation with increases in stockholder value through
growth in sales and operating profits. Primarily, this is accomplished through
the use of stock options, which provide compensation in direct proportion to
increases in stockholder value, and profit sharing. In addition, the Company
believes it is important to emphasize teamwork and active participation by all
employees. This is accomplished through providing options to essentially all
full-time, exempt employees, and through cash incentives, through which both
executives and employees receive cash bonuses based on company-wide financial
goals. Finally, it is the Company's philosophy that no special perquisites
should be provided to senior executives.
Executive Compensation Programs. The Company's executive compensation
programs consist of three principal elements: base salary, cash bonus and stock
options. The Company emphasizes incentive compensation in the form of stock
options and bonuses, rather than base salary. Accordingly, the Compensation
Committee has adopted a guideline that executives should be paid approximately
90% of competitive base salary levels. The Board of Directors sets the annual
base salary for executives after consideration of the recommendations of the
Compensation Committee. Prior to making its recommendations, the Compensation
Committee reviews historical compensation levels of the executives, evaluations
of past performance, assessments of expected future contributions of the
executives, competitive pay levels and programs provided by other comparable
companies, and pay practices in general industry. In making its determinations,
the Committee does not utilize any particular indices or formulae to arrive at
each executive's recommended pay level.
For many years, the Company has maintained a cash bonus plan under which
executive officers participate. In recent years, this plan provided for a target
incentive to be paid based on achieving pre-determined levels of revenue growth
and profitability. For fiscal 1996, 1995 and 1994 these goals were 40% revenue
growth and 18% operating profit as a percent of revenue, the same goals as for
all other employees. At the end of each year, actual results for the Company are
compared to these targets and executive bonuses are based on actual Company
performance in relation to these factors. If there is no growth or no
profitability, no cash bonuses are payable to executive officers. Individual
performance is not considered in determining the bonus of individual officers,
except for the Vice President, Sales, who is eligible for a separate sales
commission program. The growth and profitability performance measures were
approved by the Board of Directors.
Total compensation for executive officers also includes long-term
incentives in the form of stock options, which are generally provided through
initial stock option grants at the date of hire and periodic additional stock
option grants. Stock options are instrumental in promoting the alignment of
long-term interests between the Company's executive officers and stockholders
due to the fact that executives realize gains only if the stock price increases
over the fair market value at the date of grant and the executives exercise
their options. In determining the amount of such grants, the Committee evaluates
the job level of the executive, responsibilities of the executive, and
competitive practices in the industry. All options are granted at 100% of fair
market value at the date of grant. Options vest over a period of five years (in
the case of options awarded to all employees) to ten years, subject to
acceleration based on Company performance (in case of special option grants to
executives). The long-term value realized by executives through option exercises
can be directly linked to the enhancement of stockholder value.
10
<PAGE> 13
Chief Executive Officer Compensation. While the Board was highly pleased
with Dr. Truchard's performance in 1996, at his request, the Chief Executive
Officer's base salary was not changed during the fiscal year and he received no
stock options. Based on the same formula applied to other executive officers,
Dr. Truchard's bonus for 1996 was $53,299, based on the Company's revenue growth
of 21.8% and its profit percentage of 20.9%. Dr. Truchard is the Company's
largest stockholder with an ownership of 28.1% of the Company's stock.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), imposes a limit on tax deductions for annual compensation in excess of
one million dollars paid by a corporation to its chief executive officer and the
other four most highly compensated executive officers of a corporation. None of
the compensation paid by the Company in fiscal 1996 was subject to the
limitation on deductibility. The Compensation Committee will continue to assess
the impact of Section 162(m) of the Code on its compensation practices and
determine what further action, if any, is appropriate.
Respectfully Submitted,
DR. PETER T. FLAWN
GERALD T. OLSON
WILLIAM C. NOWLIN, JR.
11
<PAGE> 14
AMENDMENT TO THE 1994 INCENTIVE PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE THEREUNDER
GENERAL
The 1994 Incentive Plan (the "Incentive Plan") was adopted by the Board of
Directors in May 1994, and a total of 2,700,000 shares of Common Stock were
initially reserved for issuance thereunder. In March 1997, the Board of
Directors amended and restated the Incentive Plan.
The Board of Directors believes that the Incentive Plan is an important
factor in attracting and retaining personnel. The Incentive Plan provides for
the grant to eligible employees of (i) incentive stock options, (ii)
nonstatutory options, (iii) restricted stock awards and (iv) stock appreciation
rights. As of the Record Date, the Company had not granted any restricted stock
awards or stock appreciation rights under the Incentive Plan. At the Record
Date, options to purchase 23,373 shares of the Company's Common Stock had been
exercised, options to purchase 1,972,262 shares were outstanding, and 704,365
shares remained available for future sale or grant under the Incentive Plan.
PROPOSED AMENDMENT TO THE INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE
UNDER THE 1994 INCENTIVE PLAN
Stockholder approval is hereby being sought for an amendment approved by
the Board of Directors in March 1997, increasing the number of shares of Common
Stock reserved for issuance under the Incentive Plan by 2,100,000. If the
proposed amendment is approved, the total number of shares of Common Stock
reserved for issuance under the Incentive Plan will be 4,800,000.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the Company's Common
Stock represented and voting, in person or by proxy, and entitled to vote at the
Annual Meeting will be required to approve the amendment to the Incentive Plan.
Votes against are counted for purposes of determining the presence of absence of
a quorum for the transaction of business. Votes against are also counted for
purposes of determining the total number of votes required to pass the proposal
and whether such votes have been obtained.
While there is no definitive statutory of case law in Delaware as to the
proper treatment of abstentions in the counting of votes with respect to a
proposal such as the amendment to the Incentive Plan, the Company believes that
abstentions should be counted for purposes of determining both the presence or
absence of a quorum for the transaction of business and the total number of
shares present or represented and entitled to vote on the proposal. In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions on this proposal in this manner. In a 1988 Delaware case, Berlin v.
Emerald Partners, the Delaware Supreme Court held that, while broker non-votes
may be counted as present or represented for purposes of determining the
presence or absence of a quorum for the transaction of business, broker
non-votes may not be counted for purposes of determining the number of shares
entitled to vote with respect to the particular proposal for which authorization
to vote was withheld. Accordingly, broker non-votes with respect to this
proposal will not be considered shares entitled to vote and therefore will not
be counted in determining whether this proposal passes. THE BOARD OF DIRECTORS
RECOMMENDS VOTING "FOR" APPROVAL OF THE AMENDMENT TO THE INCENTIVE PLAN. THE
EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE AMENDMENT OF
THE INCENTIVE PLAN.
SUMMARY OF THE INCENTIVE PLAN, AS AMENDED
The essential features of the Incentive Plan are outlined below.
PURPOSE
The purpose of the Incentive Plan is to provide an incentive for key
employees and directors of the Company and its subsidiaries to aid the Company
in attracting able persons to enter the service of the
12
<PAGE> 15
Company and its subsidiaries, to extend to them the opportunity to acquire a
proprietary interest in the Company so that they will apply their best efforts
for the benefit of the Company and remain in the service of the Company or its
subsidiaries.
ADMINISTRATION
The Incentive Plan provides for administration by the Board of Directors of
the Company or by a committee of the Board. The Incentive Plan is currently
being administered by the Compensation Committee of the Board of Directors. No
member of the Board who is eligible to participate in the Incentive Plan may
vote on any award to be granted to himself. The interpretation and construction
of any provisions of the Incentive Plan by the Board shall be final and
conclusive. Members of the Board receive no compensation for their services in
connection with the administration of the Incentive Plan.
ELIGIBILITY
All employees, including officers and directors, and non-employee directors
of the Company or any of its designated subsidiaries are eligible to be granted
awards under the Incentive Plan. The Board of Directors or its committee selects
the award recipients and determines the number of shares to be subject to each
award. In making such determination, the duties and responsibilities of the
employee, the value of his services, his present and potential contribution to
the success of the Company, the anticipated number of years of future service
and other relevant factors are taken into account. There is a $100,000 limit on
the aggregate market value of shares subject to all incentive stock options
which are exercisable for the first time in any one calendar year.
As of the Record Date, 665 full-time employees (including officers and
directors) and 5 non-employee directors were eligible for grants under the
Incentive Plan.
STOCK OPTIONS
The terms of the options granted under the Incentive Plan are determined by
the Board of Directors or its committee. Each option granted under the Incentive
Plan is evidenced by a stock option agreement between the Company and the
employee or non-employee director to whom such option is granted and is subject
to the following additional terms and conditions:
Exercise of the Option. The Board of Directors or its committee determines
when options granted under the Incentive Plan may be exercised. In no event may
any incentive stock option be exercised more than ten years after the date of
grant. An option is exercised by giving written notice of exercise to the
Company, specifying the full number of shares of Common Stock to be purchased
and by tendering payment of the exercise price. Payment of the exercise price
may consist of cash or an equivalent means acceptable to the Board or its
committee, exchange of shares of the Company's Common Stock, sale or loan
proceeds to be obtained from the Common Stock to be purchased or any combination
of the foregoing.
Exercise Price. The exercise price of options granted under the Incentive
Plan is determined by the Board of Directors or its committee and may not be
less that 100% of the fair market value of the Common Stock on the date the
option is granted. The fair market value of the Common Stock is the closing
sales price on The Nasdaq Stock Market on the date of grant.
Termination of Employment. If the optionee's employment or association
with the Company terminates for any reason (other than death or disability), the
optionee may, but only for a period of up to the lesser of (i) the remainder of
the term of the option or (ii) the date set forth in the option agreement (but
in no event more than 90 days with respect to any incentive stock option),
following the date of such termination, exercise any option granted under the
Incentive Plan, but only to the extent such option was exercisable on the date
of termination. To the extent the option is not exercised within such period,
the option terminates, unless the optionee dies during such period.
Disability. In the event that an employee is unable to continue his
employment relationship with the Company as a result of his total and permanent
disability, all options that are not yet exercisable shall become
13
<PAGE> 16
exercisable and such option may be exercised for a period of 30 days following
the date of such termination by the optionee, his guardian of his legal
representative. To the extent the option is not exercised within such period,
the option terminates, unless the optionee dies during such period.
Death. If an optionee should die, all options that are not yet exercisable
shall become exercisable and such option may be exercised for a period of 30
days following the date of the optionee's death by the optionee's legal
representatives, heirs, legatees or distributees. To the extent the option is
not exercised within such period, the option terminates.
Non-transferability of Options. An option is non-transferable by the
optionee, other than by will or the laws of descent and distribution, and is
exercisable only by the optionee during the optionee's lifetime or, in the event
of disability, by the optionee, his guardian or legal representative or, in the
event of death, by the optionee's legal representatives, heirs, legatees or
distributees.
Other Provisions. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the Incentive Plan as may be
determined by the Board of Directors or its committee.
STOCK APPRECIATION RIGHTS
Although no stock appreciation rights ("SARs") have even been granted under
the Incentive Plan, the Board of Directors or its Committee may also grants
SARs, either in connection with the grant of options or independent of the grant
of options. SARs granted in connection with an option shall be subject to the
terms of the award agreement governing the related option. Upon exercise of an
SAR granted in connection with an option, the holder is entitled to receive an
amount of cash, Common Stock of the Company or any combination thereof (as
determined by the Board of Directors or its committee) equal in value to the
excess of the fair market value of the shares covered by the surrendered portion
of the related option on the date of exercise over the aggregate exercise price
of the shares covered by the surrendered portion of the related option.
Notwithstanding the foregoing, the Board or Directors or its committee may limit
the amount that may be paid to the optionee upon exercise of an SAR; provided,
however, that such limit shall not restrict the exercisability of the related
option. The exercise of an SAR will result in cancellation of the related
option, to the extent surrendered on exercise of the SAR. An SAR granted in
connection with an option shall be exercisable only when and to the extent that
the related option is exercisable and shall expire no later than the date on
which the related option expires.
SARs granted without related options entitle the holder, upon exercise of
the SAR, to receive an amount of cash, Common Stock of the Company or any
combination thereof (as determined by the Board or its committee) equal in value
to the excess of the fair market value of the shares covered by the exercised
portion of the SAR on the date of exercise over the fair market value of the
shares covered by the exercised portion of the SAR as of the date of grant of
the SAR; provided, however, that the Board of Directors or its committee may
limit the amount that may be paid to the holder upon exercise of the such SAR.
An SAR granted independent of options shall be exercisable, in whole or in part,
at such times as the Board of Directors or its committee shall determine.
RESTRICTED STOCK AWARDS
Although no restricted stock awards have ever been granted under the
Incentive Plan, the Board of Directors or its committee may also grant
restricted stock awards that grant or permit the holder to purchase shares of
restricted stock (i.e., stock that is nontransferable or subject to substantial
risk of forfeiture unless specific conditions are met). The Board of Directors
or its committee shall determine the terms of each restricted stock award,
including the number of shares of Common Stock that the holder is granted or
permitted to purchase thereunder and the restriction on transferability of such
shares. Shares of restricted stock granted or sold pursuant to a restricted
stock award may not be sold, transferred or otherwise alienated or hypothecated
until the restrictions on transferability are removed or expire. Conditions to
removal or expiration of the restrictions may include, but are not required to
be limited to, continuing employment or service as a director, officer, or key
employee or achievement of performance objectives described in the restricted
stock award agreement.
14
<PAGE> 17
The Board of Directors or its committee may require the Company to retain
physical custody of the certificates representing shares of restricted stock
during the restriction period and may require the holder of the award to enter
into an escrow agreement providing that the certificates representing restricted
stock granted or sold pursuant to a restricted stock award shall remain in the
physical custody of an escrow holder until all restrictions are removed or
expire. The Board of Directors or its committee may impose other conditions on
any shares granted or sold pursuant to a restricted stock award as it may deem
advisable, including restrictions to comply with applicable securities laws.
CHANGE OF CONTROL
In the event of a Change in Control as defined in the Incentive Plan, all
outstanding SARs and options shall immediately become fully vested and
exercisable in full and the restriction period of any restricted stock award
shall immediately be accelerated and the restrictions expire. The Board of
Directors or its committee may, in its discretion, provide in individual option
agreements that the holder of such option shall immediately be granted
corresponding SARs upon the occurrence of a Change in Control.
In the event of a Change in Control involving a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the holder of an award granted under the
Incentive Plan shall be entitled to receive in lieu of the shares of Common
Stock of the Company that such holder would otherwise be entitled to purchase or
receive, as appropriate for the form of award, the number of shares of Common
Stock, other securities, cash or property to which the number of shares
underlying the award would have been entitled in connection with such
restructuring (and, for options, at an aggregate exercise price equal to the
exercise price that would have been payable if the number of shares subject to
such option had been purchased on the exercise of the options immediately before
the consummation of the restructuring).
CAPITAL CHANGES
In the event any change is made in the Company's capitalization which
results in an exchange of Common Stock for a greater or lesser number of shares
without receipt of consideration, appropriate adjustment will be made in the
exercise price and in the number of shares subject to awards outstanding under
the Incentive Plan, as well as in the number of shares reserved for issuance
under the Incentive Plan.
AMENDMENT AND TERMINATION OF THE INCENTIVE PLAN
The Board of Directors may amend the Incentive Plan at any time or from
time to time or may terminate it without the approval of the stockholders,
provided, however, that stockholder approval is required for any amendment which
increases the number of shares which may be issued under the plan, materially
changes the standards of eligibility or materially increases the benefits which
may accrue to participants under the Incentive Plan. However, no action by the
Board of Directors or stockholders may alter or impair any award previously
granted under the Incentive Plan without the consent of the affected holder of
the award. The Incentive Plan will terminate in 2004.
PARTICIPATION OF OFFICERS AND DIRECTORS IN THE INCENTIVE PLAN
The grant of awards under the Incentive Plan to executive officers,
including the Named Executive Officers, is subject to the discretion of the
Compensation Committee. As of the date of this Proxy Statement, there has been
no determination by the Compensation Committee with respect to future awards
under the Incentive Plan. Accordingly, future awards are not determinable. The
table of option grants under "Executive Compensation -- Option Grants in Last
Fiscal Year" provides information with respect to the grant of options to the
Named Executive Officers during 1996. Information regarding options granted to
non-employee directors during 1996 pursuant to the Incentive Plan is set forth
under the heading "Election of Directors -- Board Compensation." See
"-- Eligibility." The following table sets forth additional information with
respect
15
<PAGE> 18
to options granted during 1996 to all current executive officers and directors
as a group and to all employees as a group:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
EXERCISE PRICE
IDENTITY OF GROUP OPTIONS GRANTED PER SHARE
- -------------------------------------------------------------- --------------- ----------------
<S> <C> <C>
All current executive officers and directors as a group....... 53,250 $20.08
All employees as a group...................................... 716,650 $20.38
</TABLE>
TAX INFORMATION
Stock Options. Options granted under the Incentive Plan may be either
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") or nonstatutory options An optionee who is
granted an incentive stock option will not recognize taxable income either at
the time the option is granted or upon its exercise, unless the exercise
subjects the optionee to the alternative minimum tax. The Company will not be
allowed a deduction for federal income tax purposes as a result of the exercise
of an incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange or the shares more than two years after
grant of the option and one year after exercising the option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the stock. A different timing rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director or 10% stockholder of the Company. The Company will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
All other options that do not qualify as incentive stock options are
referred to as "nonstatutory options." An optionee will not recognize any
taxable income at the time of grant of a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. In certain circumstances, where the shares are subject to a substantial
risk of forfeiture when acquired or where the optionee is also an officer,
director or 10% stockholder of the Company, the date of taxation may be deferred
unless the optionee files an election with the Internal Revenue Service under
Section 83(b) of the Code. Any taxable income recognized in connection with an
option exercise by an optionee who is also an employee of the Company will be
subject to tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sales price and the optionee's purchase
price, to the extent not recognized as ordinary income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period. The Company will be entitled to a tax deduction in the same
amount as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonstatutory option.
Stock Appreciation Rights. A recipient will not recognize any taxable
income in connection with the grant of an SAR. On exercise of an SAR for cash,
the recipient will generally recognize ordinary income in the year of exercise
in an amount equal to the difference between the exercise price (if any) of the
SAR and the fair market value of the SAR (computed with reference to the Common
Stock of the Company) at the time of exercise. If the recipient is an employee,
such amount will be subject to withholding by the Company. As a general rule,
the Company will be entitled to a tax deduction in the amount and at the time
the recipient recognized ordinary income with respect to the SAR. If the
recipient receives shares of Common Stock of the Company upon exercise of an
SAR, the tax consequences on purchase and sale of such shares will be the same
as those discussed above for nonqualified stock options. See "Special Rules
Applicable to Corporate Insiders."
Restricted Stock Awards. Restricted Stock Awards will generally be subject
to the tax consequences discussed above for nonqualified stock options.
16
<PAGE> 19
Special Rules Applicable to Corporate Insiders. In the case of an
individual who could be subject to suit under Section 16(b) of the Exchange Act
in the event he or she disposes of the shares acquired upon exercise of a stock
option, an SAR or a restricted stock award, such insider will not recognize
ordinary income at the time of exercise of the option or right. Instead, the
time of taxation and withholding requirements will be generally deferred until
the date that the insider would no longer be subject to suit upon disposition of
such shares. The insider will recognize ordinary income at that time in an
amount equal to the excess of the then fair market value of the shares over the
purchase price (if any). If the recipient is an employee, any amount included in
income will be subject to withholding by the Company. An insider can avoid this
deferral provision by filing a Section 83(b) election within 30 days after
exercise of the option or right.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND THE COMPANY UNDER THE INCENTIVE PLAN BASED UPON THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED. THIS SUMMARY DOES NOT PURPORT TO BE
COMPLETE AND DOES NOT DISCUSS THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR
COUNTRY OUTSIDE THE UNITED STATES IN WHICH A PARTICIPANT MAY RESIDE. IT IS
ADVISABLE THAT A PARTICIPANT CONTACT HIS OR HER OWN TAX ADVISOR CONCERNING THE
APPLICATION OF THESE TAX LAWS.
STOCK PRICE
The closing price of the Company's Common Stock on the Record Date, as
reported on the NASDAQ Stock Market, was $31.50.
17
<PAGE> 20
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Management has selected Price Waterhouse LLP, independent accountants to
audit the books, records and accounts of the Company for the current fiscal year
ending December 31, 1997. Price Waterhouse LLP has audited the Company's
financial statements since the fiscal year ended December 31, 1993.
The affirmative vote of the holders of a majority of the Company's Common
Stock represented and voting at the meeting will be required to approve and
ratify the Board's selection of Price Waterhouse LLP. THE BOARD OF DIRECTORS
RECOMMENDS VOTING "FOR" APPROVAL AND RATIFICATION OF SUCH SELECTION. In the
event of a negative vote on such ratification, the Board of Directors will
reconsider its selection.
A representative of Price Waterhouse LLP is expected to be available at the
Annual Meeting to make a statement if such representative desires to do so and
to respond to appropriate questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ DAVID G. HUGLEY
DAVID G. HUGLEY
Secretary
Austin, Texas
April 4, 1997
18
<PAGE> 21
1389-PS-97
<PAGE> 22
ANNEX A
NATIONAL INSTRUMENTS CORPORATION
1994 INCENTIVE PLAN
<PAGE> 23
TABLE OF CONTENTS
SCOPE AND PURPOSE OF PLAN....................................................1
SECTION 1. DEFINITIONS......................................................1
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN..............................8
2.1 Maximum Number of Shares...................................8
2.2 Limitation of Shares.......................................8
2.3 Description of Shares......................................9
2.4 Registration and Listing of Shares.........................9
SECTION 3. ADMINISTRATION OF THE PLAN......................................9
3.1 Committee..................................................9
3.2 Duration, Removal, Etc....................................11
3.3 Meetings and Actions of Committee.........................11
3.4 Committee's Powers........................................12
SECTION 4. ELIGIBILITY AND PARTICIPATION...................................12
4.1 Eligible Individuals......................................12
4.2 Grant of Awards...........................................12
4.3 Date of Grant.............................................13
4.4 Award Agreements..........................................13
4.5 Limitation for Incentive Options..........................13
4.6 No Right to Award.........................................13
4.7 Internal Revenue Code Section 162(m) Limitations..........14
SECTION 5. TERMS AND CONDITIONS OF OPTIONS................................14
5.1 Number of Shares..........................................14
5.2 Vesting...................................................14
5.3 Expiration of Options.....................................14
5.4 Exercise Price............................................15
5.5 Method of Exercise........................................15
5.6 Incentive Option Exercises................................15
5.7 Medium and Time of Payment................................15
5.8 Payment of Taxes..........................................16
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5.9 Limitation on Aggregate Value of Shares That May Become
First Exercisable During Any Calendar Year Under
an Incentive Option.......................................16
5.10 No Fractional Shares......................................16
5.11 Modification, Extension, and Renewal of Options...........17
5.12 Other Agreement Provisions................................17
SECTION 6. STOCK APPRECIATION RIGHTS.......................................17
6.1 Form of Right.............................................17
6.2 Rights Related to Options.................................18
6.3 Right Without Option......................................18
6.4 Limitations on Rights.....................................19
6.5 Payment of Rights.........................................19
6.6 Payment of Taxes..........................................19
6.7 Other Agreement Provisions................................19
SECTION 7. RESTRICTED STOCK AWARDS.........................................20
7.1 Restrictions..............................................20
7.2 Expiration of Restrictions................................20
7.3 Rights as Stockholder.....................................21
7.4 Payment of Taxes..........................................21
7.5 Other Agreement Provisions................................21
SECTION 8. [Intentionally Omitted].........................................21
SECTION 9. ADJUSTMENT PROVISIONS...........................................21
9.1 Adjustment of Awards and Authorized Stock.................21
9.2 Changes in Control........................................22
9.3 Restructuring Without Change in Control...................23
9.4 Notice of Restructuring...................................25
SECTION 10. ADDITIONAL PROVISIONS..........................................25
10.1 Termination of Status.....................................25
10.2 Death.....................................................25
10.3 Disability................................................25
10.4 Leave of Absence..........................................26
10.5 Transferability of Awards.................................26
10.6 Forfeiture and Restrictions on Transfer...................26
10.7 Delivery of Certificates of Stock.........................26
10.8 Conditions to Delivery of Stock...........................27
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10.9 [Intentionally Omitted]...................................27
10.10 Securities Act Legend.....................................27
10.11 Legend for Restrictions on Transfer.......................28
10.12 Rights as a Stockholder...................................28
10.13 Furnish Information.......................................28
10.14 Obligation to Exercise....................................28
10.15 Adjustments to Awards.....................................28
10.16 Remedies..................................................29
10.17 Information Confidential..................................29
10.18 Consideration.............................................29
SECTION 11. DURATION AND AMENDMENT OF PLAN.................................29
11.1 Duration..................................................29
11.2 Amendment.................................................29
SECTION 12. GENERAL........................................................30
12.1 Application of Funds......................................30
12.2 Right of the Corporation and Subsidiaries to Terminate
Employment................................................30
12.3 No Liability for Good Faith Determinations................30
12.4 Other Benefits............................................30
12.5 Exclusion From Pension and Profit-Sharing Compensation....30
12.6 Execution of Receipts and Releases........................31
12.7 Unfunded Plan.............................................31
12.8 No Guarantee of Interests.................................31
12.9 Payment of Expenses.......................................31
12.10 Corporation Records.......................................31
12.11 Information...............................................32
12.12 No Liability of Corporation...............................32
12.13 Corporation Action........................................32
12.14 Severability..............................................32
12.15 Notices...................................................32
12.16 Successors................................................33
12.17 Headings..................................................33
12.18 Governing Law.............................................33
12.19 Word Usage................................................33
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NATIONAL INSTRUMENTS CORPORATION
1994 INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
National Instruments Corporation, a Delaware corporation (the
"Corporation"), has adopted this 1994 Incentive Plan (the "Plan") to provide for
the granting of:
(a) Incentive Options (hereafter defined) to certain Key Employees
(hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key
Employees, Non-Employee Directors (hereafter defined) and
other persons;
(c) Restricted Stock Awards (hereafter defined) to certain Key
Employees and other persons; and
(d) Stock Appreciation Rights (hereafter defined) to certain Key
Employees and other persons.
The purpose of the Plan is to provide an incentive for Key Employees
and directors of the Corporation and its Subsidiaries (hereafter defined) to aid
the Corporation in attracting able persons to enter the service of the
Corporation and its Subsidiaries, to extend to them the opportunity to acquire a
proprietary interest in the Corporation so that they will apply their best
efforts for the benefit of the Corporation, and to remain in the service of the
Corporation or its Subsidiaries.
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person, the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of a Subsidiary of the Corporation or of a corporation owned directly or
indirectly by the stockholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation.
1.2 "Affiliate" means (a) any Person who is directly or indirectly the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person controlling, controlled by, or under common control with the
Corporation or any Person contemplated in clause (a) of this Subsection 1.2.
1.3 "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock
<PAGE> 27
exchange or quotation system on which the Common Stock is listed or quoted and
the applicable laws of any foreign country or jurisdiction where Options are, or
will be, granted under the Plan.
1.4 "Award" means the grant of any form of Option, Restricted Stock
Award, or Stock Appreciation Right under the Plan, whether granted individually,
in combination, or in tandem, to a Holder pursuant to the terms, conditions, and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.
1.5 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Award granted to that Holder.
1.6 "Board of Directors" means the board of directors of the
Corporation.
1.7 "Business Day" means any day that is a market trading day for the
National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ")
National Market System.
1.8 "Change in Control" means the event that is deemed to have occurred
if:
(a) any Acquiring Person is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing fifty percent
or more of the combined voting power of the then outstanding Voting
Securities of the Corporation; or
(b) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange
offer by any Acquiring Person for fifty percent or more of the
outstanding Voting Securities of the Corporation, and the Board of
Directors approves or fails to oppose that tender or exchange offer in
its statements in Schedule 14D-9 under the Exchange Act; or
(d) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or
partnership (or, if no such approval is required, the consummation of
such a merger or consolidation of the Corporation), other than a merger
or consolidation that would result in the ownership of Voting
Securities of the Corporation outstanding immediately before the
consummation thereof continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the
surviving entity or of a parent of the surviving entity) a majority of
the combined voting power of the Voting Securities of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or
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(e) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all the
Corporation's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a
liquidation, sale, or disposition of all or substantially all the
Corporation's assets in one transaction or a series of related
transactions to a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions
as their ownership of Stock of the Corporation.
Notwithstanding the foregoing, the merger of the Corporation's
predecessor with and into the Corporation in June 1994 shall not constitute a
Change in Control.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Committee" means the Committee designated by the Board of
Directors to administer this Plan as described under Section 3.
1.11 "Convertible Securities" means evidences of indebtedness, shares
of capital stock, or other securities that are convertible into or exchangeable
for shares of Stock, either immediately or upon the arrival of a specified date
or the happening of a specified event.
1.12 "Corporation" has the meaning given to it in the second paragraph
under "Scope and Purpose of Plan."
1.13 "Date of Grant" has the meaning given it in Subsection 4.3.
1.14 "Disability" has the meaning given it in Subsection 10.3.
1.15 "Disinterested Person" has the meaning given it in Rule
16b-3(c)(2)(i).
1.16 "Earnings" for any Fiscal Year shall mean the operating income of
the Corporation on a consolidated basis before taxes, interest, foreign currency
exchange gains or losses, other gains or losses and other extraordinary items
for such Fiscal Year. By way of example, Earnings for the Fiscal Year ended
December 31, 1993 were $17,300,000.
1.17 "Earnings Attainment" for any Fiscal Year means a fraction, the
numerator of which shall be the percentage which Earnings constitutes of Net
Sales for such Fiscal Year, and the denominator of which shall be 18%. In the
event that there shall be no Earnings for such Fiscal Year, the Earnings
Attainment for such Fiscal Year shall be zero. Notwithstanding the foregoing,
the Earnings Attainment for any Fiscal Year shall not exceed one. By way of
example, the Earnings Attainment for the Fiscal Year ended December 31, 1993 was
91/100.
1.18 "Effective Date" means May 9, 1994.
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1.19 "Eligible Individuals" means (a) Key Employees, (b) Non-Employee
Directors, and (c) any other Person that the Committee designates as eligible
for an Award (other than for Incentive Options) because the Person performs, or
has performed, valuable services for the Corporation or any of its Subsidiaries
(other than services in connection with the offer or sale of securities in a
capital-raising transaction) and the Committee determines that the Person has a
direct and significant effect on the financial development of the Corporation or
any of its Subsidiaries.
1.20 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.21 "Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
1.22 "Exercise Notice" has the meaning given it in Subsection 5.5.
1.23 "Exercise Price" has the meaning given it in Subsection 5.4.
1.24 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market Value,
then the last reported sale price, regular way, on the composite tape
of that exchange on the last Business Day before the date in question
or, if no such sale takes place on that Business Day, the average of
the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to unlisted trading
privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.23(a) and sales prices for shares of Stock of the same class in the
over-the-counter market are reported by the NASDAQ National Market
System (or such other system then in use) at the date of determining
the Fair Market Value, then the last reported sales price so reported
on the last Business Day before the date in question or, if no such
sale takes place on that Business Day, the average of the high bid and
low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.23(a) and sales prices for shares of Stock of the same class are not
reported by the NASDAQ National Market System (or a similar system then
in use) as provided in Subsection 1.23(b), and if bid and asked prices
for shares of Stock of the same class in the over-the-counter market
are reported by NASDAQ (or, if not so reported, by the National
Quotation Bureau Incorporated) at the date of determining the Fair
Market Value, then the
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average of the high bid and low asked prices on the last Business Day
before the date in question; or
(d) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.23(a) and sales prices or bid and asked prices therefor are not
reported by NASDAQ (or the National Quotation Bureau Incorporated) as
provided in Subsection 1.23(b) or Subsection 1.23(c) at the date of
determining the Fair Market Value, then the value determined in good
faith by the Committee, which determination shall be conclusive for all
purposes; or
(e) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges as provided in Subsection
1.23(a) or sales prices or bid and asked prices therefor are reported
by NASDAQ (or the National Quotation Bureau Incorporated) as provided
in Subsection 1.23(b) or Subsection 1.23(c) at the date of determining
the Fair Market Value, but the volume of trading is so low that the
Board of Directors determines in good faith that such prices are not
indicative of the fair value of the Stock, then the value determined in
good faith by the Committee, which determination shall be conclusive
for all purposes notwithstanding the provisions of Subsections 1.23(a),
(b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in
Subsection 9.3(d)(v), Fair Market Value shall have the meaning and shall be
determined as set forth above; provided, however, that the Committee, with
respect to any such redemption, shall have the right to determine that the Fair
Market Value for purposes of the redemption should be an amount measured by the
value of the shares of Stock, other securities, cash, or property otherwise
being received by holders of shares of Stock in connection with the
Restructuring and upon that determination the Committee shall have the power and
authority to determine Fair Market Value for purposes of the redemption based
upon the value of such shares of stock, other securities, cash, or property. Any
such determination by the Committee, as evidenced by a resolution of the
Committee, shall be conclusive for all purposes.
1.25 "Fiscal Year" means the fiscal year of the Corporation ending on
December 31 of each year.
1.26 "Holder" means an Eligible Individual to whom an outstanding Award
has been granted.
1.27 "Incumbent Board" means the individuals who, as of the Effective
Date, constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
stockholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.
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1.28 "Incentive Option" means an incentive stock option as defined
under Section 422 of the Code and regulations thereunder.
1.29 "Key Employee" means any Employee whom the Committee identifies as
having a direct and significant effect on the performance of the Corporation or
any of its Subsidiaries.
1.30 "Net Sales" for any Fiscal Year shall mean the net sales of the
Corporation on a consolidated basis for such Fiscal Year. By way of example, the
Net Sales for the Fiscal Years ended December 31, 1992 and 1993, respectively,
were $82,826,000 and $105,528,000.
1.31 "Non-Employee Director" means a director of the Corporation who
while a director is not an Employee.
1.32 "Nonstatutory Option" means a stock option that does not satisfy
the requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Award Agreement to be an option other than an
Incentive Option.
1.33 "Non-Surviving Event" means an event of Restructuring as described
in either Subsection 1.39(b) or Subsection 1.39(c).
1.34 "Normal Retirement" means the separation of the Holder from
employment with the Corporation and its Subsidiaries with the right to receive
an immediate benefit under a retirement plan approved by the Corporation. If no
such plan exists, Normal Retirement shall mean separation of the Holder from
employment with the Corporation and its Subsidiaries at age 62 or later.
1.35 "Option" means either an Incentive Option or a Nonstatutory
Option, or both.
1.36 "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
1.37 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person."
1.38 "Plan" means the Corporation's 1994 Incentive Plan, as it may be
amended from time to time.
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<PAGE> 32
1.39 "Restricted Stock" means Stock that is nontransferable or subject
to substantial risk of forfeiture until specific conditions are met.
1.40 "Restricted Stock Award" means the grant or purchase, on the terms
and conditions of Section 7 or that the Committee otherwise determines, of
Restricted Stock.
1.41 "Restructuring" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or
surviving entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged for stock or
other securities of any other Person or of the Corporation, cash, or
other property;
(b) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the
Corporation remaining the continuing or surviving entity of that merger
or consolidation but all or a part of the outstanding shares of Stock
are changed into or exchanged for stock or other securities of any
other Person or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation (whether by sale,
merger, consolidation, liquidation, or otherwise) to any Person,
whether effected as a single transaction or a series of related
transactions.
1.42 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act as adopted in Exchange Act Release No. 34-29131 (April 26, 1991), or any
successor rule, as it may be amended from time to time.
1.43 "Sales Attainment" for any Fiscal Year means a fraction, the
numerator of which shall equal the percentage increase in Net Sales for such
Fiscal Year over the Net Sales for the immediately preceding Fiscal Year, and
the denominator of which shall be 40%. In the event that there shall be no
increase in the Net Sales for such Fiscal Year from that of the immediately
preceding Fiscal Year, the Sales Attainment for such Fiscal Year shall be zero.
Notwithstanding the foregoing, in no event shall the Sales Attainment for any
Fiscal Year exceed one. By way of example, the Sales Attainment for the Fiscal
Year ended December 31, 1993 was 69/100.
1.44 "Securities Act" means the Securities Act of 1933 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
1.45 "Stock" means the common stock, par value $.01 per share, of the
Corporation or any other securities that are substituted for the Stock as
provided in Section 9.
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1.46 "Stock Appreciation Right" means the right to receive an amount
equal to the excess of the Fair Market Value of a share of Stock (as determined
on the date of exercise) over, as appropriate, the Exercise Price of a related
Option or the Fair Market Value of the Stock on the Date of Grant of the Stock
Appreciation Right.
1.47 "Subsidiary" means, with respect to any Person, any corporation,
or other entity of which a majority of the Voting Securities is owned, directly
or indirectly, by that Person.
1.48 "Total Shares" has the meaning given it in Subsection 9.2.
1.49 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of Subsection
2.2 and Section 9, the aggregate number of shares of Stock that may be issued or
transferred pursuant to Awards under the Plan shall be 4,800,000 shares.
2.2 Limitation of Shares. For purposes of the limitations specified in
Subsection 2.1, the following principles shall apply:
(a) the following shall count against and decrease the number
of shares of Stock that may be issued for purposes of Subsection 2.1:
(i) shares of Stock subject to outstanding Options, outstanding shares
of Restricted Stock, and shares subject to outstanding Stock
Appreciation Rights granted independent of Options (based on a good
faith estimate by the Corporation or the Committee of the maximum
number of shares for which the Stock Appreciation Right may be settled
(assuming payment in full in shares of Stock)), and (ii) in the case of
Options granted in tandem with Stock Appreciation Rights, the greater
of the number of shares of Stock that would be counted if one or the
other alone was outstanding (determined as described in clause (i)
above);
(b) the following shall be added back to the number of shares
of Stock that may be issued for purposes of Subsection 2.1: (i) shares
of Stock with respect to which Options, Stock Appreciation Rights
granted independent of Options, or Restricted Stock Awards expire, are
cancelled, or otherwise terminate without being exercised, converted,
or vested, as applicable, and (ii) in the case of Options granted in
tandem with Stock Appreciation Rights, shares of Stock as to which an
Option has been surrendered in connection with the exercise of a
related ("tandem") Stock Appreciation Right, to the extent the number
surrendered exceeds the number issued upon exercise of the Stock
Appreciation Right;
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(c) shares of Stock subject to Stock Appreciation Rights
granted independent of Options (calculated as provided in clause (a)
above) that are exercised and paid in cash shall be added back to the
number of shares of Stock that may be issued for purposes of Subsection
2.1;
(d) shares of Stock that are transferred by a Holder of an
Award (or withheld by the Corporation) as full or partial payment to
the Corporation of the purchase price of shares of Stock subject to an
Option or the Corporation's or any Subsidiary's tax withholding
obligations shall not be added back to the number of shares of Stock
that may be issued for purposes of Subsection 2.1 and shall not again
be subject to Awards; and
(e) if the number of shares of Stock counted against the
number of shares that may be issued for purposes of Subsection 2.1 is
based upon an estimate made by the Corporation or the Committee as
provided in clause (a) above and the actual number of shares of Stock
issued pursuant to the applicable Award is greater or less than the
estimated number, then, upon such issuance, the number of shares of
Stock that may be issued pursuant to Subsection 2.1 shall be further
reduced by the excess issuance or increased by the shortfall, as
applicable.
2.3 Description of Shares. The shares to be delivered under the Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 Registration and Listing of Shares. From time to time, the Board of
Directors and appropriate officers of the Corporation shall and are authorized
to take whatever actions are necessary to file required documents with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different
groups of Eligible Individuals.
(ii) Section 162(m). To the extent that the
Administrator determines it to be desirable to qualify Awards
granted hereunder as "performance-based compensation" within
the meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside directors"
within the meaning of Section 162(m) of the Code.
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<PAGE> 35
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the
transactions contemplated hereunder shall be structured to
satisfy the requirements for exemption under Rule 16b-3.
(iv) Other Administration. Other than as provided
above, the Plan shall be administered by (A) the Board or (B)
a Committee, which committee shall be constituted to satisfy
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Eligible Individuals to whom
Awards may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Award granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted
hereunder. Such terms and conditions include, but are not
limited to, the exercise price, the time or times when Awards
may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions,
and any restriction or limitation regarding any Award of the
shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion,
shall determine;
(vi) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option shall have declined
since the date the Option was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the
Plan and Awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and
regulations relating to sub-plans established for the purpose
of qualifying for preferred tax treatment under foreign tax
laws;
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<PAGE> 36
(x) to modify or amend each Award (subject to Section
11.2 of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options
longer than is otherwise provided for in the Plan;
(xi) to allow Award recipients to satisfy withholding
tax obligations by electing to have the Company withhold from
the Shares to be issued upon exercise of an Award that number
of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount
of tax to be withheld is to be determined. All elections by an
Award recipient to have Shares withheld for this purpose shall
be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an
Award previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and
binding on all Award recipients and any other holders of Awards.
3.2 Duration, Removal, Etc. The members of the Committee shall serve at
the discretion of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of the
Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Applicable Laws may require from time to time.
3.3 Meetings and Actions of Committee. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the Committee, a quorum for the transaction of business shall be
required and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided,
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however, that any decision or determination reduced to writing and signed by all
of the members of the Committee shall be as fully effective as if it had been
made at a meeting that was duly called and held. The Committee may make any
rules and regulations for the conduct of its business that are not inconsistent
with the provisions of the Plan, the Articles or Certificate of Incorporation of
the Corporation, and the by-laws of the Corporation, as the Committee may deem
advisable.
3.4 Committee's Powers. Subject to the express provisions of the Plan,
the Committee shall have the authority, in its sole and absolute discretion, to
(a) adopt, amend, and rescind administrative and interpretive rules and
regulations relating to the Plan; (b) determine the Eligible Individuals to
whom, and the time or times at which, Awards shall be granted; (c) determine the
amount of cash and the number of shares of Stock, Stock Appreciation Rights, or
Restricted Stock Awards, or any combination thereof, that shall be the subject
of each Award; (d) determine the terms and provisions of each Award Agreement
(which need not be identical), including provisions defining or otherwise
relating to (i) the term and the period or periods and extent of exercisability
of the Options, (ii) the extent to which the transferability of shares of Stock
issued or transferred pursuant to any Award is restricted, (iii) the effect of
termination of employment of the Holder on the Award, and (iv) the effect of
approved leaves of absence (consistent with any applicable regulations of the
Internal Revenue Service); (e) accelerate the time of exercisability of any
Option that has been granted; (f) construe the respective Award Agreements and
the Plan; (g) make determinations of the Fair Market Value of the Stock pursuant
to the Plan; (h) delegate its duties under the Plan to such agents as it may
appoint from time to time, provided that the Committee may not delegate its
duties with respect to making Awards to, or otherwise with respect to Awards
granted to, Eligible Individuals who are subject to Section 16(b) of the
Exchange Act; and (i) make all other determinations, perform all other acts, and
exercise all other powers and authority necessary or advisable for administering
the Plan, including the delegation of those ministerial acts and
responsibilities as the Committee deems appropriate. The Committee may correct
any defect, supply any omission, or reconcile any inconsistency in the Plan, in
any Award, or in any Award Agreement in the manner and to the extent it deems
necessary or desirable to carry the Plan into effect, and the Committee shall be
the sole and final judge of that necessity or desirability. The determinations
of the Committee on the matters referred to in this Subsection 3.4 shall be
final and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to the Plan
only to persons who are Eligible Individuals at the time of the grant thereof.
4.2 Grant of Awards. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares subject to each of the Awards and shall authorize and cause the
Corporation to grant Awards in accordance with those determinations.
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4.3 Date of Grant. The date on which the Committee completes all action
resolving to offer an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date on which
the Award covered by an Award Agreement is granted (the "Date of Grant"), even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed until a later time. In
no event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Award Agreement by the Corporation
and the Holder. Notwithstanding the above provisions of this Subsection 4.3, the
Date of Grant of an Award granted pursuant to Subsection 8.2(a) shall be the
Effective Date, the Date of Grant of an Award granted pursuant to Subsection
8.2(b) shall be the date on which the Holder's election to the Board of
Directors is effective, and the Date of Grant of an Award granted pursuant to
Subsection 8.2(c) shall be the date on which such Award is granted as provided
in such Subsection.
4.4 Award Agreements. Each Award granted under the Plan shall be
evidenced by an Award Agreement that is executed by the Corporation and the
Eligible Individual to whom the Award is granted and incorporating those terms
that the Committee shall deem necessary or desirable. More than one Award may be
granted under the Plan to the same Eligible Individual and be outstanding
concurrently. In the event an Eligible Individual is granted both one or more
Incentive Options and one or more Nonstatutory Options, those grants shall be
evidenced by separate Award Agreements, one for each of the Incentive Option
grants and one for each of the Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any provision
contained herein to the contrary, (a) a person shall not be eligible to receive
an Incentive Option unless he is an Employee of the Corporation or a corporate
Subsidiary (but not a partnership Subsidiary) and (b) a person shall not be
eligible to receive an Incentive Option if, immediately before the time the
Option is granted, that person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding stock of the Corporation or
a Subsidiary. Nevertheless, Subsection 4.5(b) shall not apply if, at the time
the Incentive Option is granted, the Exercise Price of the Incentive Option is
at least one hundred ten percent of Fair Market Value and the Incentive Option
is not, by its terms, exercisable after the expiration of five years from the
Date of Grant. An Employee shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
4.6 No Right to Award. The adoption of the Plan shall not be deemed to
give any Person a right to be granted an Award.
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4.7 Internal Revenue Code Section 162(m) Limitations. The following
limitations shall apply to grants of Options to Employees:
(a) No Employee shall be granted, in any fiscal year
of the Corporation, Options covering more than one hundred thousand (100,000)
Shares.
(b) In connection with his or her initial employment,
an Employee may be granted Options to purchase up to three hundred thousand
(300,000) Shares which shall not count against the limit set forth in Subsection
4.7(a) above.
(c) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Corporation's
capitalization as described in Subsections 9.1(a) and (b).
(d) If an Option is canceled in the same fiscal year
of the Corporation in which it was granted (other than in connection with a
transaction described in Section 9), the canceled Option will be counted against
the limit set forth in Subsection 4.7(a). For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 5 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Sections 9 and 10; provided, however, that the Committee may authorize an Award
Agreement that expressly contains terms and provisions that differ from the
terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of the
terms and provisions of Section 10 (other than Subsections 10.8 and 10.9).
5.1 Number of Shares. Each Award Agreement shall state the total number
of shares of Stock to which it relates.
5.2 Vesting. Each Award Agreement shall state the time or periods in
which, or the conditions upon satisfaction of which, the right to exercise the
Option or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Option shall vest at each such time, period, or
fulfillment of condition; provided, that one-sixtieth of the Shares initially
subject to each Option granted to a Non-Employee Director (rounded up or down to
the nearest share) shall vest on the last day of each month during the sixty
month period commencing in the month during which such Option was granted;
provided that the Optionee continues to serve as a Director on such dates. The
term of each Option granted to a Non-Employee director shall be ten years.
5.3 Expiration of Options. No Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Option; provided, however, that any portion of a
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Nonstatutory Option that pursuant to the terms of the Award Agreement under
which such Nonstatutory Option is granted shall not become exercisable until the
date which is the tenth anniversary of the Date of Grant of such Nonstatutory
Option may be exercisable for a period of 30 days following the date on which
such portion becomes exercisable.
5.4 Exercise Price. Each Award Agreement shall state the exercise price
per share of Stock (the "Exercise Price"); provided, however, that (i) the
exercise price per share of Stock subject to an Incentive Option shall not be
less than the greater of (a) the par value per share of the Stock or (b) 100% of
the Fair Market Value per share of the Stock on the Date of Grant of the Option,
and (ii) the exercise price per share of Stock subject to an option intended to
qualify as "performance-based compensation" within the meaning of Section 162(m)
of the Code shall not be less than 100% of the Fair Market Value per share of
the Stock on the Date of Grant of the Option.
5.5 Method of Exercise. The Option shall be exercisable only by written
notice of exercise (the "Exercise Notice") delivered to the Corporation during
the term of the Option, which notice shall (a) state the number of shares of
Stock with respect to which the Option is being exercised, (b) be signed by the
Holder of the Option or, if the Holder is dead or becomes affected by a
Disability, by the person authorized to exercise the Option pursuant to
Subsections 10.2 and 10.3, (c) be accompanied by the Exercise Price (as
specified in the Award Agreement and under Section 5.7 hereof) for all shares of
Stock for which the Option is being exercised, and (d) include such other
information, instruments, and documents as may be required to satisfy any other
condition to exercise contained in the Award Agreement. The Option shall not be
deemed to have been exercised unless all of the requirements of the preceding
provisions of this Subsection 5.5 have been satisfied.
5.6 Incentive Option Exercises. Except as otherwise provided in
Subsection 10.3, during the Holder's lifetime, only the Holder may exercise an
Incentive Option.
5.7 Medium and Time of Payment. The Exercise Price of an Option shall
be payable in full upon the exercise of the Option (a) in cash or by an
equivalent means acceptable to the Committee, (b) on the Committee's prior
consent, with shares of Stock owned by the Holder (including shares received
upon exercise of the Option or restricted shares already held by the Holder) and
having a Fair Market Value at least equal to the aggregate Exercise Price
payable in connection with such exercise, (c) by delivery of a properly executed
Exercise Notice together with such other documentation as the Corporation and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Corporation of the sale or loan proceeds required to pay the
Exercise Price, or (d) by any combination of clauses (a), (b) and (c). If the
Committee elects to accept shares of Stock in payment of all or any portion of
the Exercise Price, then (for purposes of payment of the Exercise Price) those
shares of Stock shall be deemed to have a cash value equal to their aggregate
Fair Market Value determined as of the date the certificate for such shares is
delivered to the Corporation. If the Committee elects to accept shares of
restricted Stock in payment of all or any portion of the Exercise Price, then an
equal number of shares issued pursuant to the exercise shall be restricted on
the same terms and for the restriction period remaining on the shares used for
payment.
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5.8 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Option or thereafter, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by exercising an Option. In connection with the exercise of an Option requiring
tax withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market Value as of the date of exercise; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of exercise or the date as of which the
shares of Stock issued in connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to the Corporation to
satisfy its tax withholding obligations. Holders who elect to use such a stock
withholding feature must make the election at the time and in the manner that
the Committee prescribes. The Committee may, at its sole option, deny any
Holder's request to satisfy withholding obligations through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate Fair
Market Value (as determined above) of any shares of Stock withheld or delivered
as payment of any tax withholding obligation is insufficient to discharge that
tax withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
5.9 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
otherwise provided in Subsection 9.3, with respect to any Incentive Option
granted under this Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or its Subsidiaries (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the Date of Grant
of the Incentive Option. For purposes of this Subsection 5.9, "predecessor
corporation" means (a) a corporation that was a party to a transaction described
in Section 424(a) of the Code (or which would be so described if a substitution
or assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the
Corporation or a predecessor corporation of any such corporations, or (c) a
predecessor corporation of any such corporations. Failure to comply with this
provision shall not impair the enforceability or exercisability of any Option,
but shall cause the excess amount of shares to be reclassified in accordance
with the Code.
5.10 No Fractional Shares. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of
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Stock, the Corporation shall pay to the Holder an amount in cash equal to the
same fraction (as the fractional Stock) of the Fair Market Value of a share of
Stock determined as of the date of the applicable Exercise Notice.
5.11 Modification, Extension, and Renewal of Options. Subject to the
terms and conditions of and within the limitations of the Plan, and any consent
required by the last sentence of this Subsection 5.11, the Committee may (a)
modify, extend, or renew outstanding Options granted under the Plan, (b) accept
the surrender of Options outstanding hereunder (to the extent not previously
exercised) and authorize the granting of new Options in substitution for
outstanding Options (to the extent not previously exercised), and (c) amend the
terms of an Incentive Option at any time to include provisions that have the
effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless,
without the consent of the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Subsection 5.11.
5.12 Other Agreement Provisions. The Award Agreements authorized under
the Plan shall contain such provisions in addition to those required by the Plan
(including without limitation restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Award Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be. Each Award Agreement relating to an Incentive Option
granted hereunder shall contain such limitations and restrictions upon the
exercise of the Incentive Option to which it relates as shall be necessary for
the Incentive Option to which such Award Agreement relates to constitute an
incentive stock option, as defined in Section 422 of the Code.
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall
comply with, and the related Award Agreements shall be deemed to include and be
subject to, the terms and conditions set forth in this Section 6 (to the extent
each term and condition applies to the form of Stock Appreciation Right) and
also the terms and conditions set forth in Sections 9 and 10; provided, however,
that the Committee may authorize an Award Agreement related to a Stock
Appreciation Right that expressly contains terms and provisions that differ from
the terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and any of
the terms and provisions of Section 10 (other than Subsection 10.9).
6.1 Form of Right. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) independent of an
Option.
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6.2 Rights Related to Options. A Stock Appreciation Right granted in
tandem with an Option shall require the Holder, upon exercise of the Stock
Appreciation Right, to surrender the related Option. Upon such exercise, the
Optionee shall receive payment of an amount computed pursuant to Subsection
6.2(b). The related Option shall then cease to be exercisable to the extent
surrendered. Stock Appreciation Rights granted in tandem with an Option shall be
subject to the terms of the Award Agreement governing the Option, which shall
comply with the following provisions in addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Subsection 10.8, a Stock
Appreciation Right granted in tandem with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to
the extent that the related Option is transferable.
(b) Value of Right. Upon the exercise of a Stock Appreciation
Right granted in tandem with an Option, the Holder shall be entitled to
receive payment from the Corporation of an amount determined by
Multiplying:
(i) The difference obtained by subtracting the
Exercise Price of a share of Stock specified in the related
Option from the Fair Market Value of a share of Stock on the
date of exercise of the Stock Appreciation Right, by
(ii) The number of shares as to which that Stock
Appreciation Right has been exercised.
6.3 Right Without Option. A Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the Committee and
set forth in the Award Agreement governing the Stock Appreciation Right, which
Award Agreement shall comply with the following provisions:
(a) Number of Shares. Each Award Agreement shall state the
total number of shares of Stock to which the Stock Appreciation Right
relates.
(b) Vesting. Each Award Agreement shall state the time or
periods in which the right to exercise the Stock Appreciation Right or
a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Stock Appreciation Right shall vest at
each such time or period.
(c) Expiration of Rights. Each Award Agreement shall state the
date at which the Stock Appreciation Rights shall expire if not
previously exercised.
(d) Value of Right. Each Stock Appreciation Right shall
entitle the Holder, upon exercise thereof, to receive payment of an
amount determined by multiplying:
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(i) The difference obtained by subtracting the Fair
Market Value of a share of Stock on the Date of Grant of the
Stock Appreciation Right from the Fair Market Value of a share
of Stock on the date of exercise of that Stock Appreciation
Right, by
(ii) The number of shares as to which the Stock
Appreciation Right has been exercised.
6.4 Limitations on Rights. Notwithstanding Subsections 6.2(b) and
6.3(d), the Committee may limit the amount payable upon exercise of a Stock
Appreciation Right. Any such limitation must be determined as of the Date of
Grant and be noted on the Award Agreement evidencing the Holder's Stock
Appreciation Right.
6.5 Payment of Rights. Payment of the amount determined under
Subsection 6.2(b) or 6.3(d) and Subsection 6.4 may be made, in the sole
discretion of the Committee unless specifically provided otherwise in the Award
Agreement, solely in whole shares of Stock valued at Fair Market Value on the
date of exercise of the Stock Appreciation Right, solely in cash, or in a
combination of cash and whole shares of Stock. If the Committee decides to make
full payment in shares of Stock and the amount payable results in a fractional
share, payment for the fractional share shall be made in cash.
6.6 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising a Stock Appreciation Right. In connection with the
exercise of a Stock Appreciation Right requiring tax withholding, a Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding obligations, which
tax withholding obligation is based on the shares' Fair Market Value as of the
later of the date of exercise or the date of which the shares of Stock issued in
connection with such exercise become includible in the income of the Holder; or
(c) deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency in the form of payment
requested by the Commission.
6.7 Other Agreement Provisions. The Award Agreements authorized
relating to Stock Appreciation Rights shall contain such provisions in addition
to those required by the Plan (including
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without limitation restrictions or the removal of restrictions upon the exercise
of the Stock Appreciation Right and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with
and be subject to, and the related Award Agreements shall be deemed to include,
the terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the Committee
may authorize an Award Agreement related to a Restricted Stock Award that
expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and the terms and
provisions set forth in Section 10 (other than Subsections 10.8 and 10.9).
7.1 Restrictions. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:
(a) Transferability. The shares may not be sold, transferred,
or otherwise alienated or hypothecated until the restrictions are
removed or expire.
(b) Conditions to Removal of Restrictions. Conditions to
removal or expiration of the restrictions may include, but are not
required to be limited to, continuing employment or service as a
director, officer, or Key Employee or achievement of performance
objectives described in the Award Agreement.
(c) Legend. Each certificate representing Restricted Stock
Awards granted pursuant to the Plan shall bear a legend making
appropriate reference to the restrictions imposed.
(d) Possession. The Committee may require the Corporation to
retain physical custody of the certificates representing Restricted
Stock Awards during the restriction period and may require the Holder
of the Award to execute stock powers in blank for those certificates
and deliver those stock powers to the Corporation, or the Committee may
require the Holder to enter into an escrow agreement providing that the
certificates representing Restricted Stock Awards granted or sold
pursuant to the Plan shall remain in the physical custody of an escrow
holder until all restrictions are removed or expire.
(e) Other Conditions. The Committee may impose other
conditions on any shares granted or sold as Restricted Stock Awards
pursuant to the Plan as it may deem advisable, including without
limitation (i) restrictions under the Securities Act or Exchange Act,
(ii) the requirements of any securities exchange upon which the shares
or shares of the same class are then listed, and (iii) any state
securities law applicable to the shares.
7.2 Expiration of Restrictions. The restrictions imposed in Subsection
7.1 on Restricted Stock Awards shall lapse as determined by the Committee and
set forth in the applicable Award Agreement, and the Corporation shall promptly
deliver to the Holder of the Restricted Stock Award a certificate
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representing the number of shares for which restrictions have lapsed, free of
any restrictive legend relating to the lapsed restrictions. Each Restricted
Stock Award may have a different restriction period as determined by the
Committee in its sole discretion. The Committee may, in its discretion,
prospectively reduce the restriction period applicable to a particular
Restricted Stock Award.
7.3 Rights as Stockholder. Subject to the provisions of Subsections 7.1
and 10.9, the Committee may, in its discretion, determine what rights, if any,
the Holder shall have with respect to the Restricted Stock Awards granted or
sold, including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
7.4 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation) the amount that the Committee
deems necessary to satisfy the Corporation's or its Subsidiary's current or
future obligation to withhold federal, state, or local income or other taxes
that the Holder incurs by reason of the Restricted Stock Award. The Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date on which tax withholding is to be made; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of issuance or the date as of which the
shares of Stock issued become includible in the income of the Holder; or (c)
deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency.
7.5 Other Agreement Provisions. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 8. [INTENTIONALLY OMITTED]
SECTION 9. ADJUSTMENT PROVISIONS
9.1 Adjustment of Awards and Authorized Stock. The terms of an Award
and the number of shares of Stock authorized pursuant to Subsection 2.1 and
Section 8 for issuance under the Plan shall be subject to adjustment from time
to time, in accordance with the following provisions, provided, however, that
the terms of such Subsection 2.1 already reflect the adjustment which would be
required
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as a result of the five-for-one stock dividend effected in January 1995 and, as
a consequence, no adjustment pursuant to this Section 9 as a result of such
dividend shall be required:
(a) If at any time, or from time to time, the Corporation
shall subdivide as a whole (by reclassification, by a Stock split, by
the issuance of a distribution on Stock payable in Stock, or otherwise)
the number of shares of Stock then outstanding into a greater number of
shares of Stock, then (i) the maximum number of shares of Stock
available for the Plan as provided in Subsection 2.1 shall be increased
proportionately, and the kind of shares or other securities available
for the Plan shall be appropriately adjusted, (ii) the number of shares
of Stock (or other kind of shares or securities) that may be acquired
under any Award shall be increased proportionately, and (iii) the price
(including Exercise Price) for each share of Stock (or other kind of
shares or securities) subject to then outstanding Awards shall be
reduced proportionately, without changing the aggregate purchase price
or value as to which outstanding Awards remain exercisable or subject
to restrictions.
(b) If at any time, or from time to time, the Corporation
shall consolidate as a whole (by reclassification, reverse Stock split,
or otherwise) the number of shares of Stock then outstanding into a
lesser number of shares of Stock, then (i) the maximum number of shares
of Stock available for the Plan as provided in Subsection 2.1 shall be
decreased proportionately, and the kind of shares or other securities
available for the Plan shall be appropriately adjusted, (ii) the number
of shares of Stock (or other kind of shares or securities) that may be
acquired under any Award shall be decreased proportionately, and (iii)
the price (including Exercise Price) for each share of Stock (or other
kind of shares or securities) subject to then outstanding Awards shall
be increased proportionately, without changing the aggregate purchase
price or value as to which outstanding Awards remain exercisable or
subject to restrictions.
(c) Whenever the number of shares of Stock subject to
outstanding Awards and the price for each share of Stock subject to
outstanding Awards are required to be adjusted as provided in this
Subsection 9.1, the Committee shall promptly prepare a notice setting
forth, in reasonable detail, the event requiring adjustment, the amount
of the adjustment, the method by which such adjustment was calculated,
and the change in price and the number of shares of Stock, other
securities, cash, or property purchasable subject to each Award after
giving effect to the adjustments. The Committee shall promptly give
each Holder such a notice.
(d) Adjustments under Subsections 9.1(a) and (b) shall be made
by the Committee, and its determination as to what adjustments shall be
made and the extent thereof shall be final, binding, and conclusive. No
fractional interest shall be issued under the Plan on account of any
such adjustments.
9.2 Changes in Control. Upon the occurrence of a Change in Control (a)
all outstanding Stock Appreciation Rights and Options shall immediately become
fully vested and exercisable in full, including that portion of any Stock
Appreciation Right or Option that pursuant to the terms and provisions of the
applicable Award Agreement had not yet become exercisable (the total number of
shares
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of Stock as to which a Stock Appreciation Right or Option is exercisable upon
the occurrence of a change in Control is referred to herein as the "Total
Shares"); and (b) the restriction period of any Restricted Stock Award shall
immediately be accelerated and the restrictions shall expire. Any Option
Agreement may (but need not) provide that, the Holder of such Option shall
immediately be granted corresponding Stock Appreciation Rights upon the
occurrence of a Change in Control. If a Change in Control involves a
Restructuring or occurs in connection with a series of related transactions
involving a Restructuring and if such Restructuring is in the form of a
Non-Surviving Event and as a part of such Restructuring shares of Stock, other
securities, cash, or property shall be issuable or deliverable in exchange for
Stock, then the Holder of an Award shall be entitled to purchase or receive (in
lieu of the Total Shares that the Holder would otherwise be entitled to purchase
or receive), as appropriate for the form of Award, the number of shares of
Stock, other securities, cash, or property to which that number of Total Shares
would have been entitled in connection with such Restructuring (and, for
Options, at an aggregate exercise price equal to the Exercise Price that would
have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the
Restructuring). Nothing in this Subsection 9.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change of
Control, or cause Holder to forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control.
9.3 Restructuring Without Change in Control. In the event a
Restructuring shall occur at any time while there is any outstanding Award
hereunder and that Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control, then:
(a) no outstanding Option or Stock Appreciation Right shall
immediately become fully vested and exercisable in full merely because
of the occurrence of the Restructuring;
(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock Award shall
not immediately be accelerated and the restrictions expire merely
because of the occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may (but
shall not be required to) cause the Corporation to take any one or more
of the following actions:
(i) accelerate in whole or in part the time of the
vesting and exercisability of any one or more of the
outstanding Stock Appreciation Rights and Options so as to
provide that those Stock Appreciation Rights and Options shall
be exercisable before, upon, or after the consummation of the
Restructuring;
(ii) grant each Holder of an Option corresponding
Stock Appreciation Rights;
(iii) accelerate in whole or in part the expiration
of some or all of the restrictions on any Restricted Stock
Award;
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(iv) if the Restructuring is in the form of a
Non-Surviving Event, cause the surviving entity to assume in
whole or in part any one or more of the outstanding Awards
upon such terms and provisions as the Committee deems
desirable; or
(v) redeem in whole or in part any one or more of the
outstanding Awards (whether or not then exercisable) in
consideration of a cash payment, as such payment may be
reduced for tax withholding obligations as contemplated in
Subsections 5.8, 6.6, or 7.4, as applicable, in an amount
equal to:
(A) for Options and Stock Appreciation
Rights granted in connection with Options, the excess
of (1) the Fair Market Value, determined as of the
date immediately preceding the consummation of the
Restructuring, of the aggregate number of shares of
Stock subject to the Award and as to which the Award
is being redeemed over (2) the Exercise Price for
that number of shares of Stock;
(B) for Stock Appreciation Rights not
granted in connection with an Option, the excess of
(1) the Fair Market Value, determined as of the date
immediately preceding the consummation of the
Restructuring, of the aggregate number of shares of
Stock subject to the Award and as to which the Award
is being redeemed over (2) the Fair Market Value of
that number of shares of Stock on the Date of Grant;
and
(C) for Restricted Stock Awards, the Fair
Market Value, determined as of the date immediately
preceding the consummation of the Restructuring, of
the aggregate number of shares of Stock subject to
the Award and as to which the Award is being
redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Subsection 9.3. In the event of any election
or action taken by the Corporation pursuant to this Subsection 9.3 that requires
the amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner affect the validity or enforceability of any
action taken by the Corporation and the Committee under this Subsection 9.3,
including without limitation any redemption of an Award as of the consummation
of a Restructuring. Any cash payment to be made by the Corporation pursuant to
this Subsection 9.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; provided, however,
that any such redemption shall be effective upon the consummation of the
Restructuring notwithstanding that the payment of the redemption price may occur
subsequent to the consummation. If all or any portion of an outstanding Award is
to be exercised or accelerated upon or after the consummation of a Restructuring
that does not occur in connection with a Change in Control and is in the form of
a Non-Surviving Event, and as a part
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of that Restructuring shares of stock, other securities, cash, or property shall
be issuable or deliverable in exchange for Stock, then the Holder of the Award
shall thereafter be entitled to purchase or receive (in lieu of the number of
shares of Stock that the Holder would otherwise be entitled to purchase or
receive) the number of shares of Stock, other securities, cash, or property to
which such number of shares of Stock would have been entitled in connection with
the Restructuring (and, for Options, upon payment of the aggregate exercise
price equal to the Exercise Price that would have been payable if that number of
Total Shares had been purchased on the exercise of the Option immediately before
the consummation of the Restructuring) and such Award shall be subject to
adjustments that shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 9.
9.4 Notice of Restructuring. The Corporation shall attempt to keep all
Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's stockholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 Termination of Status. If a Holder's employment, Non-Employee
Director or consulting relationship with the Corporation or any of its
Subsidiaries is terminated for any reason other than (a) that Holder's death or
(b) that Holder's Disability (hereafter defined), then any and all Awards held
by such Holder as of the date of the termination that are not yet exercisable
(or for which restrictions have not lapsed) shall become null and void as of the
date of such termination; provided, however, that the portion, if any, of such
Awards that are exercisable as of the date of termination shall be exercisable
for a period of the lesser of (a) the remainder of the term of the Award or (b)
the date which is set forth in the Award (but in no event more than 90 days
after the date of termination with respect to any Incentive Option). Any portion
of an Award not exercised upon the expiration of the lesser of the period
specified above shall be null and void unless the Holder dies during such
period, in which case the provisions of Subsection 10.2 shall govern. For
purposes of this Plan, a Holder's employment, Non-Employee Director or
consulting relationship shall not be deemed terminated as a result of a change
in the Holder's status from that of employee, Non-Employee Director or
consultant to that of any other of such relationships with the Corporation or
any of its Subsidiaries, and any Awards outstanding at the time of any such
change of status shall continue to remain in full force and effect.
10.2 Death. Upon the death of a Holder, any and all Awards held by the
Holder that are not yet exercisable (or for which restrictions have not lapsed)
as of the date of the Holder's death shall become exercisable as provided below
and any restrictions shall immediately lapse as of the date of death; provided,
however, that the Awards held by the Holder as of the date of death shall be
exercisable by that Holder's legal representatives, heirs, legatees, or
distributees for a period of 30 days following the date of the Holder's death.
Any portion of an Award not exercised upon the expiration of such period shall
be null and void. Except as expressly provided in this Subsection 10.2, no Award
held by a Holder shall be exercisable after the death of that Holder.
10.3 Disability. If a Holder's employment, Non-Employee Director or
consulting relationship is terminated by reason of the Holder's Disability, then
the portion, if any, of any and all Awards held by
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the Holder that are not yet exercisable (or for which restrictions have not
lapsed) as of the date of that termination for Disability shall become
exercisable as provided below and any restrictions shall immediately lapse as of
the date of termination; provided, however, that the Awards held by the Holder
as of the date of that termination shall be exercisable by the Holder, his
guardian or his legal representative for a period of 30 days following the date
of such termination. Any portion of an Award not exercised upon the expiration
of such period shall be null and void unless the Holder dies during such period,
in which event the provisions of Subsection 10.2 shall govern. "Disability"
shall have the meaning given it in the employment agreement of the Holder;
provided, however, that if that Holder has no employment agreement, "Disability"
shall mean, as determined by the Board of Directors in the sole discretion
exercised in good faith of the Board of Directors, a physical or mental
impairment of sufficient severity that either the Holder is unable to continue
performing the duties he performed before such impairment or the Holder's
condition entitles him to disability benefits under any insurance or employee
benefit plan of the Corporation or its Subsidiaries and that impairment or
condition is cited by the Corporation as the reason for termination of the
Holder's employment, Non-Employee Director or consulting relationship.
10.4 Leave of Absence. With respect to an Award, a Holder shall not
cease to be an Employee in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor, for any or all purposes
of the Plan and the Award Agreement of such Holder.
10.5 Transferability of Awards. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferable other than by will or the laws of descent
and distribution.
10.6 Forfeiture and Restrictions on Transfer. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement that the Holder render substantial
services to the Corporation or its Subsidiaries for a specified period of time.
The restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and stockholders
of the Corporation other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent holder of the shares of Stock
who is bound by that Award Agreement.
10.7 Delivery of Certificates of Stock. Subject to Subsection 10.8, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested, (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Subsection 6.5)
and upon receipt by the Corporation of any tax
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withholding as may be requested, and (c) restrictions have lapsed with respect
to a Restricted Stock Award and upon receipt by the Corporation of any tax
withholding as may be requested. The value of the shares of Stock or cash
transferable because of an Award under the Plan shall not bear any interest
owing to the passage of time, except as may be otherwise provided in an Award
Agreement. If a Holder is entitled to receive certificates representing Stock
received for more than one form of Award under the Plan, separate Stock
certificates shall be issued with respect to Incentive Options and Nonstatutory
Options.
10.8 Conditions to Delivery of Stock. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, the Corporation may, as a condition precedent to the exercise of such
Option or Stock Appreciation Right or vesting of any Restricted Stock Award,
require from the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the Holder's intentions with regard to the retention or
disposition of the shares of Stock being acquired pursuant to the Award and such
written covenants and agreements, if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the Corporation, may be necessary to
ensure that any disposition by that Holder (or in the event of the Holder's
death, his legal representatives, heirs, legatees, or distributees) will not
involve a violation of the Securities Act or any similar or superseding statute
or statutes, any other applicable state or federal statute or regulation, or any
rule of any applicable securities exchange or securities association, as then in
effect.
10.9 [Intentionally Omitted]
10.10 Securities Act Legend. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions (including, without limitation, restrictions required under any
Federal, state or foreign law), endorsed thereon and may not be immediately
transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
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This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.11 Legend for Restrictions on Transfer. Each certificate
representing shares issued to a Holder pursuant to an Award granted under the
Plan shall, if such shares are subject to any transfer restriction, including a
right of first refusal, provided for under this Plan or an Award Agreement, bear
a legend that complies with applicable law with respect to the restrictions on
transferability contained in this Subsection 10.11, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "NATIONAL INSTRUMENTS CORPORATION 1994 INCENTIVE PLAN" AS
ADOPTED BY NATIONAL INSTRUMENTS CORPORATION (THE "CORPORATION"), ON MAY
10, 1994, AND AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION AND THE
INITIAL HOLDER THEREOF DATED ________________, 199_, AND MAY NOT BE
TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED.
THE CORPORATION WILL FURNISH A COPY OF SUCH INSTRUMENT AND AGREEMENT TO
THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON REQUEST TO THE
CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR REGISTERED OFFICE.
10.12 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends, dividend equivalent rights and voting rights may be extended to and
made part of any Award denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The Committee
may also establish rules and procedures for the crediting of interest on
deferred cash payments and dividend equivalents for deferred payment denominated
in Stock or units of Stock.
10.13 Furnish Information. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
10.14 Obligation to Exercise. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.
10.15 Adjustments to Awards. Subject to the general limitations set
forth in Sections 5, 6, and 9, the Committee may make any adjustment in the
Exercise Price of, the number of shares subject to, or the terms of a
Nonstatutory Option or Stock Appreciation Right by canceling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock
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Appreciation Right. Such adjustment shall be made by amending, substituting, or
regranting an outstanding Nonstatutory Option or Stock Appreciation Right. Such
amendment, substitution, or regrant may result in terms and conditions that
differ from the terms and conditions of the original Nonstatutory Option or
Stock Appreciation Right. The Committee may not, however, impair the rights of
any Holder of previously granted Nonstatutory Options or Stock Appreciation
Rights without that Holder's consent. If such action is effected by amendment,
such amendment shall be deemed effective as of the Date of Grant of the amended
Award.
10.16 Remedies. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Award Agreement whether by an
action to enforce specific performance or for damages for its breach or
otherwise.
10.17 Information Confidential. As partial consideration for the
granting of each Award hereunder, the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax or financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention of the
Committee, it shall take into consideration that breach in determining whether
to recommend the grant of any future Award to that Holder, as a factor
mitigating against the advisability of granting any such future Award to that
Person.
10.18 Consideration. No Option or Stock Appreciation Right shall be
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
SECTION 11. DURATION AND AMENDMENT OF PLAN
11.1 Duration. No Awards may be granted hereunder after the date that
is ten years from the earlier of (a) the date the Plan is adopted by the Board
of Directors and (b) the date the Plan is approved by the stockholders of the
Corporation.
11.2 Amendment. The Board of Directors may, insofar as permitted by
law, with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever
and may amend any provision of the Plan or any Award Agreement to make the Plan
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the exemptions from that Section in the regulations thereunder. The Board of
Directors may also amend, modify, suspend, or terminate the Plan for the purpose
of meeting or addressing any changes in other legal requirements applicable to
the Corporation or the Plan or for any other purpose permitted by law. The Plan
may not be amended without the consent of the holders of a majority of the
shares of Stock then
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outstanding to (a) increase materially the aggregate number of shares of Stock
that may be issued under the Plan (except for adjustments pursuant to Section 9
hereof), (b) increase materially the benefits accruing to Eligible Individuals
under the Plan, or (c) modify materially the requirements about eligibility for
participation in the Plan; provided, however, that such amendments may be made
without the consent of stockholders of the Corporation if changes occur in law
or other legal requirements (including Rule 16b-3) that would permit such
changes.
SECTION 12. GENERAL
12.1 Application of Funds. The proceeds received by the Corporation
from the sale of shares pursuant to Awards may be used for any general corporate
purpose.
12.2 Right of the Corporation and Subsidiaries to Terminate Employment.
Nothing contained in the Plan, or in any Award Agreement, shall confer upon any
Holder the right to continue in the employ of the Corporation or any Subsidiary
or interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the Holder's employment at any time.
12.3 No Liability for Good Faith Determinations. Neither the members of
the Board of Directors nor any member of the Committee shall be liable for any
act, omission or determination taken or made in good faith with respect to the
Plan or any Award granted under it; and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
12.4 Other Benefits. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.
12.5 Exclusion From Pension and Profit-Sharing Compensation. By
acceptance of an Award (regardless of form), as applicable, each Holder shall be
deemed to have agreed that the Award is special incentive compensation that will
not be taken into account in any manner as salary, compensation, or bonus in
determining the amount of any payment under any pension, retirement, or other
employee
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benefit plan of the Corporation or any Subsidiary, unless any pension,
retirement, or other employee benefit plan of the Corporation or Subsidiary
expressly provides that such Award shall be so considered for purposes of
determining the amount of any payment under any such plan. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance coverage, if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering employees of the Corporation
or any Subsidiary.
12.6 Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 Unfunded Plan. Insofar as it provides for Awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Corporation shall not be required to segregate any assets that
may at any time be represented by cash, Stock, or rights thereto, nor shall the
Plan be construed as providing for such segregation, nor shall the Corporation
nor the Board of Directors nor the Committee be deemed to be a trustee of any
cash, Stock, or rights thereto to be granted under the Plan. Any liability of
the Corporation to any Holder with respect to a grant of cash, Stock, or rights
thereto under the Plan shall be based solely upon any contractual obligations
that may be created by the Plan and any Award Agreement; no such obligation of
the Corporation shall be deemed to be secured by any pledge or other encumbrance
on any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
12.8 No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.
12.9 Payment of Expenses. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
12.10 Corporation Records. Records of the Corporation or its
Subsidiaries regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by the
Committee to be incorrect.
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12.11 Information. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished all of the information or documentation which is necessary or required
by the Committee to perform its duties and functions under the Plan.
12.12 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to the Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
12.13 Corporation Action. Any action required of the Corporation shall
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
12.14 Severability. In the event that any provision of this Plan, or
the application hereof to any Person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable; and this Plan shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Plan; and the remaining provisions of this Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Plan. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Plan a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid, and
enforceable. If any of the terms or provisions of this Plan conflict with the
requirements of Section 422 of the Code (with respect to Incentive Options),
then those conflicting terms or provisions shall be deemed inoperative to the
extent they so conflict with the requirements of Section 422 of the Code and, in
lieu of such conflicting provision, there shall be added automatically as part
of this Plan a provision as similar in terms to such conflicting provision as
may be possible and not conflict with the requirements of Section 422 of the
Code. With respect to Incentive Options, if this Plan does not contain any
provision required to be included herein under Section 422 of the Code, that
provision shall be deemed to be incorporated herein with the same force and
effect as if that provision had been set out at length herein; provided,
however, that, to the extent any Option that is intended to qualify as an
Incentive Option cannot so qualify, that Option (to that extent) shall be deemed
a Nonstatutory Option for all purposes of the Plan.
12.15 Notices. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received by the Corporation
addressed to the attention of the Corporate Secretary at the Corporation's
office as specified in the applicable Award Agreement. The Corporation or a
Holder may change, at any time and from time to time, by written notice to the
other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any person entitled to notice hereunder may waive such notice.
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<PAGE> 58
12.16 Successors. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors and assigns and upon the Committee and its successors.
12.17 Headings. The titles and headings of Sections and Subsections are
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.18 Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Delaware, without giving effect to any conflict of law provisions
thereof, except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent that Delaware corporate law conflicts
with the contract law of such state, in which event Delaware corporate law shall
govern irrespective of any conflict of law laws. The obligation of the
Corporation to sell and deliver Stock hereunder is subject to applicable
federal, state and foreign laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Stock.
12.19 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
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ANNEX B
DETACH HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
NATIONAL INSTRUMENTS CORPORATION
1997 ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1997
P
The undersigned stockholder of NATIONAL INSTRUMENTS CORPORATION, a
R Delaware corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated April 4, 1997, and
O 1996 Annual Report to Stockholders and hereby appoints Dr. James J.
Truchard and William C. Nowlin, Jr., and each of them, proxies and
X attorneys-in-fact, with full power of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual
Y Meeting of Stockholders of NATIONAL INSTRUMENTS CORPORATION to be held on
May 13, 1997 at 9:00 a.m., local time, at the Holiday Inn Northwest Plaza,
8901 Business Park Drive, Austin, Texas 78730, and at any adjournments
thereof, and to vote all shares of Common Stock which the undersigned would
be entitled to vote if then and there personally present, on the matters
set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT OF THE
1994 INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES RESERVED FOR ISSUANCE, FOR
THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE MEETING.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 60
DETACH HERE
[X] Please mark
votes as in
this example.
1. ELECTION OF DIRECTORS:
Nominees: Dr. James J. Truchard, Jeffrey L. Kodosky,
Dr. Ben G. Streetman
FOR WITHHELD
/ / / /
MARK HERE
FOR ADDRESS
CHANGE AND
/ / NOTE BELOW / /
---------------------------------
(if you wish to withhold authority
to vote for any individual nominee,
please write that nominee's name on
the line above)
2. PROPOSAL TO APPROVE THE AMENDMENT TO FOR AGAINST ABSTAIN
THE 1994 INCENTIVE PLAN TO INCREASE / / / / / /
THE NUMBER OF SHARES RESERVED FOR
ISSUANCE THEREUNDER BY 2,100,000
SHARES TO 4,800,000 SHARES:
3. PROPOSAL TO RATIFY THE APPOINTMENT FOR AGAINST ABSTAIN
OF PRICE WATERHOUSE LLP AS THE / / / / / /
INDEPENDENT ACCOUNTANTS OF THE
COMPANY FOR FISCAL 1997:
4. TO TRANSACT SUCH OTHER BUSINESS, IN THEIR DISCRETION, AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
Either of such attorneys or substitutes should have and may exercise all of the
powers of said attorneys-in-fact hereunder.
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his, her or its name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.)
Signature: ________________ Date: _____ Signature: _______________ Date: ______
