IMPORTANT
YOUR PROXY CARD IS BELOW
To control the cost and excess distribution of our annual report and proxy
materials, you may have shares from multiple sources combined on this proxy
card. Here is a key to assist you in understanding which sources are
represented by this proxy card.
COM - Shares held in your shareholder account at Bank of Boston
Employee shareholders may also have:
RES - Restricted shares held in your restricted stock account at Bank of Boston
TSP - Shares held in the Tandy Stock Plan
Note: A separate proxy card will be sent for shares you hold in the Tandy Fund.
Please follow these steps:
1. Clearly mark your voting selection on the reverse side.
2. Sign and date your card on the reverse side.
3. Detach and return in the enclosed postage-paid envelope.
TANDY CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 15, 1997
The undersigned hereby appoints John V. Roach, Jack L. Messman, Thomas G.
Plaskett and John A. Wilson, and each or any of them, attorneys and proxies of
the undersigned, with full power of substitution, to vote all the shares of
common stock of the Corporation held by the undersigned at the Annual Meeting
of Stockholders of Tandy Corporation at Fort Worth, Texas on May 15, 1997, or
any adjournment thereof, as indicated on this proxy, and in their discretion on
any other matters which may properly come before the meeting. if no directions
are given, this Proxy will be voted 'FOR' Items 1 and 2.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS, JUST
SIGN ON THE REVERSE SIDE - NO BOXES NEED TO BE CHECKED.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
SEE REVERSE SIDE
[ x ] Please mark
votes as in
the example.
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR:
1. Election of Directors 2. Adoption of the Tandy
Nominees: James I. Cash, Corporation 1997 Incentive
Jr., Lewis F. Kornfeld, Jr., Stock Plan.
Jack L. Messman, William G.
Morton, Jr., Thomas G.
Plaskett, John V. Roach,
Leonard H. Roberts, Alfred J.
Stein, William E. Tucker,
John A. Wilson
[ ] FOR [ ] WITHHELD [ ] FOR [ ] AGAINST [ ] ABSTAIN
ALL FROM ALL
NOMINEES NOMINEES
[ ]
For all nominees except those written on line above
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
Please Sign Exactly an Your Name Appears on This Proxy,
Date and Promptly Return This Proxy in the Enclosed
Envelope.
Signature: Date: Signature: Date:
TANDY CORPORATION
1800 One Tandy Center
Fort Worth, Texas 76102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 15, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Tandy
Corporation will be held at the Worthington Hotel, 200 West Second Street, Fort
Worth, Texas 76102, on Thursday, May 15, 1997, at 10:00 a.m. for the following
purposes:
(1)To elect directors to serve for the ensuing year and until their
respective successors are elected;
(2)To adopt the Tandy Corporation 1997 Incentive Stock Plan; and
(3)To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
The transfer books will not be closed. The date fixed by the Board of
Directors as the record date for the determination of the stockholders entitled
to notice of, and to vote at, said Annual Meeting or any adjournment or
adjournments thereof is the close of business on March 18, 1997.
By Order of the Board of Directors
HERSCHEL C. WINN
Senior Vice President
Fort Worth, Texas and Secretary
March 28, 1997
IF YOU ARE UNABLE TO ATTEND THE MEETING IN PERSON, MANAGEMENT ASKS THAT YOU SIGN
AND DATE THE ENCLOSED PROXY AND MAIL IT AT ONCE IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. A PROXY IS REVOCABLE AT ANY
TIME PRIOR TO BEING VOTED AT THE MEETING BY (A) FILING WITH THE COMPANY, AT OR
BEFORE THE ANNUAL MEETING, A WRITTEN NOTICE OF REVOCATION BEARING A LATER DATE
THAN THE PROXY, (B) DULY EXECUTING A SUBSEQUENT PROXY RELATING TO THE SAME
VOTING SECURITIES AND DELIVERING IT TO THE COMPANY AT OR BEFORE THE ANNUAL
MEETING OR (C) ATTENDING THE ANNUAL MEETING, FILING A WRITTEN REVOCATION OF
PROXY AND VOTING IN PERSON (ATTENDANCE AT THE ANNUAL MEETING AND VOTING WILL NOT
IN AND OF ITSELF CONSTITUTE A REVOCATION OF A PROXY).
(THIS PAGE INTENTIONALLY LEFT BLANK)
30
1
PROXY STATEMENT
TANDY CORPORATION
1800 One Tandy Center
Fort Worth, Texas 76102
ANNUAL MEETING OF STOCKHOLDERS OF TANDY CORPORATION
TO BE HELD ON THURSDAY, MAY 15, 1997
This Proxy Statement is being furnished to stockholders of Tandy Corporation,
a Delaware corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors of the Company (the "Board") from holders of
record of the Company's voting securities as of the close of business on March
18, 1997 (the "Annual Meeting Record Date"), for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held on Thursday, May
15, 1997, at 10:00 a.m. (Central Daylight Savings Time) at the Worthington
Hotel, 200 West Second Street, Fort Worth, Texas 76102, and at any adjournment
or postponement thereof. This Proxy Statement is first being mailed to the
holders of the Company's voting securities on or about March 28, 1997.
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, holders of shares of Company securities entitled to
vote at the Annual Meeting will be asked to consider and to vote upon the
following matters:
(i) the election of 10 directors of the Company to serve until the next
annual meeting of stockholders or until their successors are elected;
(ii) the adoption of the Tandy Corporation 1997 Incentive Stock Plan (see
"Tandy Corporation 1997 Incentive Stock Plan"); and
(iii) such other business as may properly come before the meeting.
The Board unanimously recommends a vote FOR the Election of the Board's
nominees for election as directors of the Company and has unanimously approved
and determined to be advisable the adoption of the Tandy Corporation 1997
Incentive Stock Plan and unanimously recommends that holders of the Company's
voting securities vote FOR the Tandy Corporation 1997 Incentive Stock Plan. As
of the date of this Proxy Statement, the Board knows of no other business to
come before the Annual Meeting.
VOTING RIGHTS AND PROXY INFORMATION
Only holders of record of shares of the Company's Common Stock and the
Company's Series B TESOP Convertible Preferred Stock (the "TESOP Stock") as of
the Annual Meeting Record Date will be entitled to notice of, and to vote at,
the Annual Meeting or any adjournment or postponement thereof. The holders of
shares of Company Common Stock are entitled to one vote per share (a "Common
Stock Vote") on any matter which may properly come before the Annual Meeting.
The holders of TESOP Stock are entitled to 21.768 Common Stock Votes per share.
As of the Annual Meeting Record Date, the total number of Common Stock Votes
represented by the voting securities of the Company entitled to vote were
57,976,875. Specifically, there were 56,166,586 shares of Company Common Stock
outstanding, representing 56,166,586 Common Stock Votes; and 83,162 shares of
TESOP Stock outstanding, representing 1,810,289 Common Stock
Votes.
As of the Annual Meeting Record Date, a total of 83,162 shares of TESOP Stock
were held in the Tandy Fund. Each participant in the Tandy Fund is entitled to
direct the Tandy Fund Trustee with respect to the voting of the TESOP Stock
allocated to his or her account. If a participant does not direct the Tandy Fund
Trustee with respect to the voting of the TESOP Stock, the Trustee will vote
such securities, in the same proportion as other participants who have directed
the Trustee with respect to allocated shares. The Trustee will also vote all
unallocated TESOP Stock held by the Tandy Fund in such proportion. Also, as of
the Annual Meeting Record Date a total of 1,006,000 shares of Restricted Company
Common Stock were held by RadioShack and Computer City Store Managers. Each
holder is entitled to vote each share of Restricted Company Common Stock.
The presence, either in person or by properly executed proxy, of the holders
of a majority of the Common Stock Votes as of the Annual Meeting Record Date is
necessary to constitute a quorum at the Annual Meeting. Shares held by holders
who are either present in person or represented by proxy who abstain will be
treated as present for quorum purposes on all matters.
The affirmative vote of at least a majority of the Common Stock Votes
entitled to vote and represented in person or by properly executed proxy at the
Annual Meeting is required to approve the adoption of the Tandy Corporation 1997
Incentive Stock Plan.
The affirmative vote of a plurality of the Common Stock Votes entitled to
vote and represented in person or by properly executed proxy at the Annual
Meeting is required to approve the election of each of the Company's nominees
for election as a director. With respect to the election of directors, shares
that abstain will be included in the vote total as withholds (i.e., votes
against the Company's nominees for election).
The affirmative vote of a majority of the Common Stock Votes entitled to vote
and represented in person or by properly executed proxy at the Annual Meeting is
required, for all matters other than the election of directors. For purposes of
determining whether a proposal has received a majority vote, abstentions will be
included in the vote total, with the result that an abstention will have the
same effect as a negative vote. For purposes of determining whether a proposal
has received a majority vote, in instances where brokers are prohibited from
exercising discretionary authority for beneficial holders of Company Common
Stock who have not returned a proxy (so-called "broker non-votes"), those shares
will not be included in the vote totals and, therefore, will have no effect on
the outcome of the vote.
All voting securities that are represented at the Annual Meeting by properly
executed proxies received by the Corporate Secretary prior to or at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions indicated in such proxies. If no instructions are indicated,
such proxies will be voted FOR the election of the Board's nominees for election
as directors of the Company, and FOR approval of the Tandy Corporation 1997
Incentive Stock Plan.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Company, at or before the Annual Meeting, a written notice of
revocation bearing a later date than the proxy; (ii) duly executing a subsequent
proxy relating to the same voting securities and delivering it to the Company at
or before the Annual Meeting; or (iii) attending the Annual Meeting, filing a
written revocation of proxy and voting in person (attendance at the Annual
Meeting and voting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy or subsequent proxies should be
received by mail or hand delivered to Tandy Corporation, Attention: Ms. Jana
Freundlich, Assistant Secretary, 100 Throckmorton Street, Suite 1700, Fort
Worth, Texas 76102-2818.
The Company will bear the cost of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodian nominees and fiduciaries to supply proxy material to the beneficial
owners of Company Common Stock, Restricted Company Common Stock and TESOP Stock,
and will reimburse them for their expenses in so doing. In addition, the Company
may engage D.F. King & Co., Inc., for a fee anticipated not to exceed $2,800
plus out-of-pocket expenses, to provide proxy solicitation services. Certain
directors, officers and other employees of the Company, not specially employed
for this purpose, may solicit proxies, without additional remuneration therefor,
by personal interview, mail, telephone, facsimile or other electronic means.
NO APPRAISAL RIGHTS
Stockholders of the Company will not be entitled to appraisal rights under
Delaware corporation law in connection with the vote on the nominees for
directors or the vote on the Tandy Corporation 1997 Incentive Stock Plan.
NOMINEES FOR ELECTION OF COMPANY DIRECTORS
Ten persons have been nominated for election as directors of the Company at
the Annual Meeting. All of these nominees are now serving on the Board and all
were previously elected by the stockholders except Mr. Roberts, who was elected
by the Board of Directors March 1, 1997. It is the intention of the persons
named in the accompanying form of proxy card to vote for the nominees for
election as directors of the Company listed below unless authority to so vote is
withheld. All nominees have indicated their willingness to serve for the ensuing
term. If any nominee is unable or should decline to serve as a director at the
date of the Annual Meeting, it is the intention of the persons named in the
proxy card to vote for such other person or persons as they in their discretion
shall determine.
The nominees for directors of the Company are listed below:
A Director
Name, Age, and Business Experience Continuously
During the Last Five Years Since
James I. Cash, Jr. (49) 1989
Professor, Harvard University Graduate School
of Business Administration.
Lewis F. Kornfeld, Jr. (80) 1975
Retired Vice Chairman, Tandy Corporation,
and Retired President, RadioShack Division.
Jack L. Messman (57) 1993
Chairman and Chief Executive Officer, Union
Pacific Resources Group Inc. (Independent oil and
gas producer), since October 1996; President and
Chief Executive Officer of Union Pacific Resources
Group Inc. (independent oil and gas producer) since
May 1995 and President and Chief Executive Officer,
Union Pacific Resources Company since 1991.
William G. Morton, Jr. (60) 1987
Chairman and Chief Executive Officer,
Boston Stock Exchange, Inc.
Thomas G. Plaskett (53) 1986
Chairman, NeoStar Retail Group , Inc. (a consumer
software retailer), since September 1996; Chairman,
Greyhound Lines, Inc. (transportation company), since
March 1995; Business Consultant, since
November 1991; interim President and Chief Executive
Officer, Greyhound Lines, Inc., August 1994 to
November 1994; Chairman, Pan Am Corporation
(a holding company for aviation business), January
1988 to January 1992.
John V. Roach (58) 1980
Chairman and Chief Executive Officer,
Tandy Corporation; President, Tandy
Corporation until January 1996.
Leonard H. Roberts (48) 1997
President, Tandy Corporation since January 1996;
President, RadioShack Division since July 1993;
Chairman and Chief Executive Officer, Shoney's Inc.
(restaurant chain) July 1989 to January 1993.
Alfred J. Stein (64) 1981
Chairman and Chief Executive Officer,
VLSI Technology, Inc. (manufacturer
of semiconductors).
William E. Tucker (64) 1985
Chancellor, Texas Christian University
John A. Wilson (75) 1974
Retired Chairman, President and
Chief Executive Officer, Color Tile, Inc.
(home improvement company).
INFORMATION CONCERNING THE BOARD AND ITS COMMITTEES
The Board held five meetings during 1996.
The current Audit Committee members are Messrs. Cash, Plaskett (Chairman),
Tucker and Wilson. The functions of this Committee include: reviewing the
engagement of the independent accountants, the scope and timing of the audit and
certain non-audit services to be rendered by the independent accountants;
reviewing with the independent accountants and management the Company's policies
and procedures with respect to internal auditing, accounting and financial
controls; and reviewing the report of the independent accountants upon
completion of its audit. This Committee met three times during 1996.
The current Executive Committee members are Messrs. Kornfeld, Messman, Roach,
Stein, and Wilson (Chairman). This Committee has the authority to exercise all
of the powers of the full Board with certain exceptions relating to major
corporate matters. This Committee is available to review with members of
management certain areas of the Company's operations and to act in an emergency
or on routine matters when it is impractical to assemble the entire Board for a
meeting. This Committee met five times during 1996.
The current Organization and Compensation Committee members are Messrs. Cash,
Messman (Chairman), Morton and Plaskett. The principal functions of this
Committee are to review and make recommendations to the Board concerning
compensation plans, appointments and promotions to official positions, and
corporate structure. This Committee also makes grants of stock options to
Executive Officers and other employees. This Committee met five times during
1996.
The current Nominating Committee members are Messrs. Kornfeld, Morton, Stein
(Chairman) and Tucker. This Committee reviews and makes recommendations to the
Board with respect to candidates for directors of the Company, compensation of
Board members and assignment of directors to committees of the Board. It also
reviews and approves or denies requests by corporate officers to serve on the
boards of outside companies. This Committee met three times during 1996.
Stockholders who wish to nominate persons for election as directors at the 1998
Annual Meeting, which is now scheduled to be held on May 21, 1998, must give
notice of their intention to make a nomination in writing to the Secretary of
the Company on or before February 14, 1998. Each notice shall set forth: (a) the
name and address of the stockholder who intends to make the nomination and the
name and address of the person or persons to be nominated; (b) a representation
that the stockholder is a holder of record of stock of the Corporation entitled
to vote at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission as then in
effect; and (e) the consent of each nominee to serve as director of the
Corporation if so elected.
Mrs. Donna R. Ecton served on the Audit and Nominating Committees until her
resignation from the Board of Directors on August 6, 1996. Mr. Jesse L.
Upchurch served on the Organization and Compensation and Nominating
Committees until his resignation from the Board of Directors on January 15,
1997. All nominees for director attended more than 75% of the meetings of
the Board and committees, collectively, of which they were a member.
Certain of the Company's directors serve on the boards of directors of other
publicly held companies as follows: Mr. Cash serves on the boards of Cambridge
Technology Partners, Inc.; Knight Ridder, Inc.; State Street Boston Corporation;
Chubb Corporation and WinStar Communications, Inc.; Mr. Messman serves on the
boards of Novell, Inc.; Safeguard Scientifics, Inc.; Union Pacific Resources
Group Inc.; US Data Corporation and Cambridge Technology Partners, Inc.; Mr.
Morton serves on the boards of 13 funds managed by Morgan Stanley Asset
Management, Inc.; Mr. Plaskett serves on the boards of Greyhound Lines, Inc.;
Smart & Final Inc. and NeoStar Retail Group, Inc.; Messrs. Roach and Tucker
serve on the board of Justin Industries, Inc.; Mr. Stein serves on the boards of
VLSI Technology, Inc. and Applied Materials, Inc. On September 16, 1996, NeoStar
Retail Group Inc. ("NeoStar") filed for protection under the Federal bankruptcy
laws. In connection with a plan of reorganization, Mr. Plaskett was named
Chairman of NeoStar.
DIRECTORS COMPENSATION
Under the Tandy Corporation 1993 Incentive Stock Plan (the "1993 ISP"),
directors of the Company who are not full-time employees of the Company or its
subsidiaries are paid an annual retainer of $24,000, payable quarterly. Each
non-employee director also has the right to file a six month irrevocable
election to have 50% or 100% of this annual retainer fee paid in shares of
Company Common Stock. Each committee chairman receives an additional $2,500 per
year. Expenses of attendance at meetings are paid by the Company. Non-employee
directors receive an additional $750 for each Board meeting attended in person
and $500 for each committee meeting attended in person if held more than 24
hours before or after a board meeting. When attendance is by telephone, these
meeting fees are reduced to $250.
Also under 1993 ISP, which commenced in September 1993 and was amended May 18,
1995, each director automatically is granted non-qualified stock options to
purchase 4,000 shares of Company Common Stock on the first trading day in
September of each year that he or she serves as a director. Each new director
also receives a one time grant of an option to purchase Company Common Stock for
5,000 shares on the date they attend their first Board meeting. In 1996, each
non-employee director received an option grant of 4,000 shares on September 1,
1996. The option exercise price is set at the fair market value (as defined in
the 1993 ISP) of a share of Company Common Stock on the first trading day
immediately preceding the date of grant. The options vest in three equal
increments on the first, second and third annual anniversaries of the date of
grant.
Under the proposed Tandy Corporation 1997 Incentive Stock Plan (the "1997
ISP") if approved by the stockholders, each director will receive options to
purchase 4,000 shares of Company Common Stock during every year that he or she
serves as director. Each new director will also receive a one-time grant of an
option to purchase Company Common Stock for 5,000 shares on the date he or she
attends his or her first Board meeting. The option exercise price will be set at
the fair market value (as defined in the 1997 ISP) of a share of Company Common
Stock on the first trading day immediately preceding the date of grant. The
options will vest in three equal increments on the first, second and third
annual anniversaries of the date of grant. These new option grants will commence
upon the decision of the Organization and Compensation Committee of the Board.
No annual grant of 4,000 shares or one time grant of 5,000 shares will be made
under both the 1993 ISP and 1997 ISP in the same year, but the Committee may
elect from which of the plans (1993 ISP or 1997 ISP) to issue options.
Directors Special Compensation Plan. The Company has established a
compensation plan for non-employee directors providing for the payment of
benefits following retirement, death or total disability while serving as a
director (the "Directors Plan"). To qualify for these benefits, the director
must have attained 60 years of age and served as a non-employee director for 60
consecutive months immediately preceding retirement, death or total disability.
A retired director agrees to perform consulting services to the Board, its
committees and the Company without additional compensation during the period in
which benefits are received.
The Directors Plan provides that, upon retirement or total disability, an
eligible director is paid two-thirds of the annual director's fee for the lesser
of 10 years or the number of years (or partial years) a non-employee director
has continuously served as a non-employee director preceding his or her
retirement, death or disability. For retirement, death or total disability
occurring at ages 73, 74 and 75, the benefit is reduced by 33-1/3%, 66-2/3% and
100%, respectively. For retirement, death or total disability occurring after
age 72, but before age 73, or between ages 73 and 74 or between ages 74 and 75,
the director will receive a proportionate amount of the reduced payment that
would be due on his or her next birthday. Upon death, the director's beneficiary
is paid the aggregate amount remaining due in a lump sum.
Directors agree that during the time they are receiving benefits, and for one
year after the cessation of payment of benefits, they shall not engage in any
activity that is in competition with the Company. A non-employee director who,
by reason of past employment with the Company, is receiving benefits under the
Salary Continuation Plan for Executive Employees of Tandy Corporation and
Subsidiaries or the Officers Deferred Compensation Plan (see "Retirement
Compensation") does not receive any payments under the Directors Plan until all
benefits under such other plans have been paid in full.
The Directors Plan may be terminated by the Company at any time in its
entirety or as to any director. Notwithstanding any such termination, a
non-employee director qualified to receive benefits as of the date of
termination is entitled to receive benefits earned as of the date of
termination, unless the non-employee ceased to be a director for reasons
involving fraudulent or dishonest conduct or an indictment for a felony
involving moral turpitude.
Deferred Compensation Plan for Directors. The Company has a deferred
compensation plan for non-employee directors whereby such directors may elect to
defer payment of all or a specified part of the fees payable for services
rendered to or on behalf of the Company. Under the plan, all deferred fees and
interest are held in the general funds of the Company and are credited to such
director's account. Interest is credited at the end of each quarter based on the
balance in the account at the end of the quarter at the rate of 1% below the
prime rate as published by The Chase Manhattan Bank in effect from time to time
during the quarter. The director may elect to receive deferred fees either in a
lump sum on a date specified by him or her, in substantially equal annual
installments not exceeding ten payments or if no election is made by the
director, then in a lump sum payment 60 days after he or she ceases to be a
director. Upon a change in control of the Company, a director will receive any
deferred fees in a lump sum.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
OF COMPANY VOTING SECURITIES
The following table sets forth, as of the Annual Meeting Record Date, certain
information with respect to the beneficial ownership of the Company's voting
securities by (i) each current director of the Company, (ii) each of the five
most highly compensated current Executive Officers of the Company for the year
ended December 31, 1996, (iii) the Company's current directors and officers as a
group and (iv) persons known to the Company to own beneficially more than 5% of
any class of the Company's voting securities, except for the Tandy Fund Trustee,
which holds 100% of the outstanding TESOP Stock for the benefit of Tandy Fund
participants:
Amount
Beneficially Percent
Title of Name and Title Owned of Class
Class (8)
- ------------- --------------------------- ------------- -----------
Common Stock James I. Cash, Jr., Director 10,205(1) .0176
Common Stock Lewis F. Kornfeld, Jr.,Director 17,999(1) .0310
Common Stock Jack L. Messman, Director 8,261(1) .0142
Common Stock William G. Morton, Jr., Director 9,999(1) .0172
Common Stock Thomas G. Plaskett,Director 9,999(1) .0172
Common Stock John V. Roach, Chairman 506,847(2) .8742
and Chief Executive Officer
Common Stock Leonard H. Roberts, 88,131(2) .1520
President and President,
RadioShack Division
Common Stock Alfred J. Stein, Director 9,705(1) .0167
Common Stock William E. Tucker,Director 15,705(1) .0271
Common Stock John A. Wilson, Director 157,999(1)(3) .2725
Common Stock Dwain H. Hughes, Senior 44,710(2) .0771
Vice President and Chief
Financial Officer
Common Stock Robert M. McClure, Senior 90,918(2) .1568
Vice President - Tandy
Retail Services
Common Stock Herschel C. Winn, Senior 161,880(2) .2792
Vice President and Secretary
Common Stock Directors and Executive 1,292,263(3)(4) 2.2289
Officers as a group(20 people)
Common Stock Trimark Financial Corporation 2,883,000(5) 4.8864(5)
Common Stock Mellon Bank Corporation 2,819,000(6) 4.8623(6)
Common Stock FMR Corp. 5,213,894(7) 8.9931(7)
(1) Included in the shares beneficially owned for each of the non-employee
directors indicated are 7,999 shares of Company Common Stock, except for Messrs.
Kornfeld, Morton and Wilson who hold 6,999 shares of Company Common Stock,
subject to currently exercisable options under the Tandy Corporation 1993
Incentive Stock Plan. Each director disclaims beneficial ownership of the shares
of Company Common Stock subject to currently exercisable options.
(2) The amount beneficially owned includes the following shares and the listed
individuals have sole voting and investment power over the shares shown except
as follows: (a) Mr. Roach disclaims beneficial ownership of 40.770 shares of
TESOP Stock held by the Tandy Fund Trustee, 16,042 shares of Company Common
Stock held in the Tandy Employees Supplemental Stock Program ("SUP"), 9,053
shares of Company Common Stock held by the Tandy Fund Trustee, 8,000 shares of
restricted Company Common Stock, which are forfeitable, granted under the 1993
ISP, and 371,950 shares of Company Common Stock subject to currently exercisable
options; (b) Mr. Roberts disclaims beneficial ownership of 8.504 shares of TESOP
Stock held by the Tandy Fund Trustee, 3,882 shares of Company Common Stock held
in the SUP, 237 shares of Company Common Stock held by the Tandy Fund Trustee,
5,334 shares of restricted Company Common Stock, which are forfeitable, granted
under the 1993 ISP, and 61,470 shares of Company Common Stock subject to
currently exercisable options; (c) Mr. Hughes disclaims beneficial ownership of
15.140 shares of TESOP Stock held by the Tandy Fund Trustee, 2,040 shares of
Company Common Stock held in the SUP, 2,203 shares of Company Common Stock held
by the Tandy Fund Trustee, 2,334 shares of restricted Company Common Stock,
which are forfeitable, granted under the 1993 ISP, 30,953 shares of Company
Common Stock subject to currently exercisable options, and 200 shares of Company
Common Stock held for the benefit of his children under the Uniform Gifts to
Minors Act; (d) Mr. McClure disclaims beneficial ownership of 31.196 shares of
TESOP Stock held by the Tandy Fund Trustee, 4,121 shares of Company Common Stock
held in the SUP, 3,317 shares of Company Common Stock held by the Tandy Fund
Trustee, 1,000 shares of restricted Company Common Stock, which are forfeitable,
granted under the 1993 ISP, and 74,022 shares of Company Common Stock subject to
currently exercisable options; and (e) Mr. Winn disclaims beneficial ownership
of 31.787 shares of TESOP Stock held by the Tandy Fund Trustee, 4,813 shares of
Company Common Stock held in the SUP, 6,088 shares of Company Common Stock held
by the Tandy Fund Trustee, 1,000 shares of restricted Company Common Stock,
which are forfeitable, granted under the 1993 ISP, and 112,963 shares of Company
Common Stock subject to currently exercisable options. All shares held in the
SUP are held for the benefit of the participants and such shares are voted by
the SUP trustee pursuant to the New York Stock Exchange ("NYSE") rules.
(3) All non employee directors have sole voting and investment power over
the shares shown except for Messrs. Kornfeld and Wilson. Mr. Kornfeld
disclaims beneficial ownership of 5,900 shares of Company Common Stock owned
by a trust of which he is the sole beneficiary. Mr. Wilson disclaims
beneficial ownership of 150,000 shares of Company Common Stock held in a
trust of which he is the trustee.
(4) Includes shares beneficially owned by the 12 persons currently serving as
Executive Officers of the Company as of the Annual Meeting Record Date: 818,291
shares of Company Common Stock subject to currently exercisable options; 1,523
shares of Company Common Stock held in the Tandy Stock Plan (formerly the Tandy
Corporation Stock Purchase Program ("SPP")); 201.843 shares of TESOP Stock held
in the Tandy Fund; 26,827 shares of Company Common Stock held in the Tandy Fund;
38,753 shares of Common Stock held in the SUP which shares are voted by the SUP
trustee pursuant to NYSE rules; and 200 shares of Company Common Stock owned by
relatives over which an Executive Officer disclaims beneficial ownership. The
aggregate share numbers contained in this footnote include the numbers
identified in Footnote (1) above. This number also includes 60,992 shares of
Company Common Stock subject to currently exercisable options held by the
Directors indicated in footnote (1) and the shares indicated in Footnote (3)
above. (5) According to Amendment No. 3 to Form 13G dated February 12, 1996,
Trimark Financial Corporation, an investment management company located at One
First Canadian Place, Suite 5600, P.O. Box 487, Toronto, Ontario, Canada M5X
1E5, holds sole voting and dispositive power over 2,833,000 shares of Company
Common Stock.
(6) According to Amendment No. 2 to Form 13G dated January 18, 1996, Mellon Bank
Corporation, a holding corporation organized under the laws of the United
States, located at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258, holds
sole voting power over 2,193,000 shares, shared voting power over 89,000 shares,
sole dispositive power over 2,505,000 shares and shared dispositive power over
295,000 shares of Company Common Stock.
(7) According to Amendment No. 2 to Form 13G dated February 13, 1997, FMR Corp.,
an investment management corporation organized under the laws of the
Commonwealth of Massachusetts, located at 82 Devonshire Street, Boston,
Massachusetts 02109, holds sole voting power over 562,084 shares and sole
dispositive power over 5,213,894 shares of Company Common Stock.
(8) No director or Executive Officer beneficially owns Company Common Stock or
TESOP Stock in excess of 1% of all of such class of securities issued and
outstanding.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
Executive Officers and all persons holding 10% or more of Company Common Stock
are required to report their ownership of the Company's securities and any
changes in that ownership to the Securities and Exchange Commission and the
NYSE. Specific due dates for these reports have been established and the Company
is required to report in this Proxy Statement any failure to file by these dates
during the year ended December 31, 1996. All of these filing requirements were
satisfied by the Company's present directors and Executive Officers.
EXECUTIVE COMPENSATION
The following table reflects the cash and non-cash compensation attributable
to the Chief Executive Officer of the Company and the four other most highly
compensated Executive Officers of the Company for the year ending December 31,
1996.
Annual Compensation Long-Term Compensation
(1)
(a) (b) (c) (d) (e) (g) (i)
Name and Other Annual Stock All Other
Principal Fiscal Salary Bonus Compensation Options Compensation
Position Year ($) ($) ($)(2) ($)(4) (#)(3)
John V. Roach 1996 770,000 0 0 75,000 115,919
CEO, and 1995 735,000 183,339 498,000 85,000 132,603
Chairman 1994 700,000 350,028 0 65,000 158,858
Leonard H. Roberts 1996 550,000 0 0 60,000 69,135
President, and 1995 500,000 197,693 332,000 50,000 63,309
President, 1994 500,000 314,291 0 36,000 35,265
RadioShack Division
Dwain H. Hughes 1996 240,000 0 0 15,950 33,616
Senior Vice 1995 200,000 49,888 145,250 14,500 28,250
President and CFO 1994 124,900 50,061 0 5,000 28,051
Robert M. McClure 1996 309,000 0 13,200 31,141
Senior Vice 1995 300,000 43,200 62,250 12,000 42,602
President 1994 300,000 60,023 0 12,000 55,875
Herschel C. Winn 1996 321,000 0 0 20,000 52,988
Sr. V.P. and 1995 300,500 131,249 62,250 19,000 50,001
Secretary 1994 278,300 111,370 0 17,000 62,719
(1) Other than restricted stock awards (see #2 below) for the years shown, the
named Executive Officers did not receive any annual compensation not properly
categorized as salary or bonus, except for certain perquisites and other
personal benefits. The amounts for perquisites and other personal benefits for
the named Executive Officers are not shown because the aggregate amount of such
compensation, if any, for each of the named Executive Officers during the fiscal
year shown does not exceed the lesser of $50,000 or 10% of total salary and
bonus reported for such officer.
(2) Messrs. Roach, Roberts, Hughes, McClure and Winn were granted awards of
restricted stock on January 2, 1996 attributable to their calendar year 1995
performance. Therefore the awards are reported as compensation in 1995. The
closing price of a share of Company Common Stock at the end of the last
completed fiscal year (1995) prior to the date of grant was $41.50 per share.
The awards, granted under the 1993 ISP, were 12,000 shares to Mr. Roach, 8,000
shares to Mr. Roberts, 3,500 shares to Mr. Hughes, and 1,500 shares each to
Messrs. McClure and Winn.
(3) Includes all options granted during the year under the 1993 ISP, regardless
of whether the options are incentive stock options ("ISOs") or non-statutory
stock options ("NSOs"). No stock appreciation rights were granted with these
options in 1996.
(4) Includes the Company's contributions allocated to the accounts of the
Executive Officers participating in the following employee benefit plans: the
Tandy Stock Plan, Tandy Fund, and the SUP. The applicable amounts allocated in
1996 to the named Executive Officers in the Tandy Stock Plan, Tandy Fund and SUP
are $54,970, $5,726 and $55,223 for Mr. Roach; $21,736, $5,319 and $42,081 for
Mr. Roberts; $17,188, $4,385 and $12,043 for Mr. Hughes; $20,893, $2,193 and
$8,055 for Mr. McClure; and $25,973, $4,941 and $22,084 for Mr. Winn,
respectively. Amounts do not include amounts payable in the event of a change in
control of the Company. See "Change in Control Protections."
OPTION GRANTS IN THE LAST YEAR
During the year ended December 31, 1996, options were granted to the
following Executive Officers named in the Executive Compensation table. The
potential value of such options at the specified rates of appreciation is shown
in the table below. The Company's 1985 Stock Option Plan (the "1985 SOP") did
not provide for the grant of stock appreciation rights. The 1993 ISP provides
for the grant of restricted stock awards and stock appreciation rights; however,
no stock appreciation rights were granted in 1996. Restricted stock awards were
authorized in 1995 and granted on January 2, 1996.
Potential realizable Value
at Assumed Annual Rates (2)
---------------------------
(a) (b) (c) (d) (e) (f) (g)
% of Total Exercise
Name and Options Options Granted or Base
Type of Granted to Employees Price Expiration 5% 10%
Option (1) (#) During the Year ($/Share) Date ($) ($)
- ---------- --- --------------- --------- ---- --- ---
John V. 75,000 17.93 $40.1875 10/18/2006 $1,895,528 $4,803,638
Roach
Leonard H. 60,000 14.35 40.1875 10/18/2006 1,516,422 3,842,910
Roberts
Dwain H. 15,950 3.81 40.1875 10/18/2006 403,116 1,021,574
Hughes
Robert M. 13,200 3.15 40.1875 10/18/2006 333,613 845,440
McClure
Herschel C. 20,000 4.78 40.1875 10/18/2006 505,474 1,280,970
Winn
(1) All options shown were granted under the 1993 ISP. Generally, no options can
be exercised during the 12-month period following the date of grant. ISOs become
exercisable as to one-third of the amount of shares on each of the next two
annual anniversaries after the date of grant with full vesting on the third
annual anniversary date. NSOs become exercisable as to one-fifth of the amount
of shares subject to the options on each of the next four annual anniversaries
after the date of grant with full vesting on the fifth annual anniversary date.
For persons who continue to serve as employees of the Company, ISOs and NSOs
expire 10 years from the date of grant under the 1993 ISP. All options were
granted at fair market value on the date of grant. The exercise price and any
tax withholding may be paid by cash or delivery of already owned shares and
cash.
(2) The potential gains reported above are net of the option exercise price, but
before taxes associated with the exercise. If these gains are achieved, the
value of the Company's Common Stock would likewise be increased 5% or 10%,
respectively. These gains are calculated based on the stated assumed rates of
appreciation each year over the life of the option. Actual gains, if any, on
stock option exercises are dependent on the future performance of Company Common
Stock, overall market conditions, as well as the option-holder's continued
employment through the option expiration date. The amounts reflected in the
table may not necessarily be achieved.
OPTION EXERCISES IN THE LAST YEAR AND YEAR-END OPTION VALUES
The following table summarizes individual option exercises during the year
ended December 31, 1996, by each of the named Executive Officers and the
year-end value of the unexercised options. These options were periodically
granted between 1985 and 1996.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Value of
Unexercised Unexercised
Shares Options at In-The-Money
Acquired Year End Options at
on Value (#) Year-End
Name Exercise Realized ($)(1)
(#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------- --------- ----------- -------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
John V. Roach 27,538 $ 87,437 371,950 200,050 $3,229,223 $527,649
Leonard H.Roberts 0 0 61,470 134,530 347,773 430,582
Dwain H.Hughes 0 0 30,953 28,497 255,282 71,596
Robert M.McClure 83,741 1,795,808 74,022 32,450 304,052 115,653
Herschel C.Winn 8,915 26,867 112,963 48,050 1,048,620 144,541
<FN>
(1) For purposes of calculating whether an option was "In-The-Money", this chart
uses the December 31, 1996, fair market value for Company Common Stock of
$44.63.
</FN>
</TABLE>
RETIREMENT COMPENSATION
The Plans. Under the Salary Continuation Plan for Executive Employees of Tandy
Corporation and Subsidiaries ("SCP") established in 1979 and the Officers
Deferred Compensation Plan ("DCP") established in 1986 (hereinafter collectively
the "Plans"), the Insurance Committee of the Board may select full-time
executive employees for participation therein. As of December 31, 1996, a total
of 38 executive employees of the Company were participants in one or both of the
Plans. The Plans generally provide for the payment of reduced benefits following
a participant's early retirement between the ages of 55 and 65, full benefits
between the ages of 65 and 70, reduced benefits between the ages of 70 and 75,
or for payment of a death benefit to the participant's designated beneficiary in
the event of death prior to age 75 during employment. One Executive Officer was
a participant under a plan called the Special Compensation Plan No. 1 ("SPC1")
and is similar to the DCP except that the SPC1 provides for vesting at 100% at
age 65. Another Executive employee was a participant under a plan called the
Special Compensation Plan No. 2 ("SPC2") and is similar to the DCP except that
the SPC2 provides for vesting at the 75% level at age 60 and early retirement
commencing at age 60 instead of age 55 as provided in the DCP. All sums due
under the Plans are payable in 120 equal monthly installments to the participant
or, in the event of death, to his beneficiary. The payments are general
obligations of the Company that are funded in part by life insurance policies
owned by the Company which name the Company as beneficiary.
Under the Plans, the Insurance Committee determines an amount designated
herein as the "Retirement Compensation Amount" for each participant. The amount
established by the Insurance Committee does not necessarily bear any
relationship to the participant's present compensation, final compensation or
years of service. As of December 31, 1996, the benefit payable to participants
upon retirement or death during employment is a function of the "Retirement
Compensation Amount" and the age of the participant at death or retirement, as
set out in the following table:
RetirementCompensation Annual Benefit
Amount Age at Date of Retirement or Death
-------------------- ----------------------------------------------
55 (1) 65 to 70 71 (2) 75 (2)
------ -------- ------ ------
$ 212,500 $106,250 $212,500 $170,000 $0
225,000 112,500 225,000 180,000 0
237,500 118,750 237,500 190,000 0
487,500 243,750 487,500 390,000 0
650,000 325,000 650,000 520,000 0
(1)Proportionately increases from 50% to 100% between age 55 and age 65.
(2)Proportionately decreases from 100% to 0% between age 70 and age 75.
The Retirement Compensation Amount at death, during employment or retirement
at age 65 for the Executive Officers listed in the Executive Compensation table
at December 31, 1996, would have been as follows:
SCP DCP Total
--- --- -----
John V. Roach $ 300,000 $350,000 $650,000
Leonard H.Roberts 0 487,500 487,500
Dwain H. Hughes 0 212,500 212,500
Robert M.McClure 75,000 150,000 225,000
Herschel C. Winn 125,000 112,500 237,500
Special Provisions of the SCP. The SCP provides for payments to be made to
certain executive employees in the event of their voluntary or involuntary
termination of employment following a Change of Control, as defined in a 1984
letter of amendment to the SCP. In the event that the Company experiences a
Change of Control, each executive employee who is subject to such letter
amendment becomes immediately vested at the age 65 benefit level for a period of
three years and if his or her employment with the Company ceases, whether
voluntarily or involuntarily, during this three year period, he or she will
receive payments equal to the annual retirement benefit at age 65. Payment is
made in 120 equal monthly installments to the participant or to his or her
beneficiary.
Special Provisions of the DCP. The DCP provides that for one year following
the occurrence of a Change in Control, as defined in the DCP, it shall not be
terminated or amended in any way, nor shall the manner in which the DCP is
administered be changed in any way which adversely affects the rights of
participants or beneficiaries in the DCP. Upon a Change in Control the
provisions of the DCP provide that any benefit due under the DCP shall be (1)
offset by any outstanding loan of the participant, and (2) forfeited if the
participant engages in any activity that is in competition with the Company.
Additionally, in the event of a Change in Control, each participant in the DCP
becomes immediately vested at the age 65 benefit level and if the participant's
employment is terminated for any reason following a Change in Control, the
Company must make a lump-sum payment equal to the present value of the age 65
benefit level discounted for interest only at the Pension Benefit Guaranty
Company's Immediate Annuity Rate used to value benefits for single-employer
plans terminating on the date that the participant's employment was terminated.
CHANGE IN CONTROL PROTECTIONS
In addition to the change in control protections contained in the DCP and
SCP, as described above in "Retirement Compensation," the Company has
implemented the following additional change in control protections.
Bonus Guarantee Letter Agreements. The Company currently has letter
agreements (the "Bonus Guarantee Letter Agreements") with all of the Executive
Officers named in the Executive Compensation table, which provide that, if they
are employed by the Company on the date of a "Change in Control" (as defined in
the Bonus Guarantee Letter Agreements), then for the fiscal year during which a
Change in Control occurs (the "Change in Control Year") they will receive an
annual bonus following a Change in Control at least equal to the highest annual
bonus paid or payable to them in respect of any of the three full fiscal years
ended prior to a Change in Control (i) for the Change in Control Year, provided
the Executive Officer remains in the employment of the Company on the last day
of the Change in Control Year, and (ii) for the fiscal year ended prior to a
Change in Control if the amount of their annual bonus for such year has not yet
been determined at the time of the Change in Control. The Bonus Guarantee Letter
Agreements have an initial term of 24 months, subject to automatic successive
one-year extensions unless written notice not to extend is given by the Company
within 90 days prior to any extension. At December 31, 1996, the Company had
issued similar bonus guarantee letters to approximately 176 other officers and
employees of the Company providing that in the event of a Change in Control,
each such employee would receive a minimum annual bonus following a Change in
Control as provided for in such bonus guarantee letters. Assuming a Change in
Control occurred on the date of this Proxy Statement; that all of the named
Executive Officers were still employed on that date; and that the named
Executive Officers' employment had terminated on that date, it is estimated that
the minimum bonuses payable under the Bonus Guarantee Letter Agreements would be
$350,028 for Mr. Roach, $314,291 for Mr. Roberts, $50,061 for Mr. Hughes,
$60,023 for Mr. McClure, and $131,249 for Mr. Winn.
Benefit Protections. The Board has included change in control protections in
the Tandy Fund, SUP, Tandy Stock Plan, DCP, Post Retirement Death Benefit Plan
("DBP"), 1985 SOP, 1993 ISP and several other plans. The DCP and SCP change in
control provisions are described above. The Tandy Fund provides that for a
period of one year following a "Change in Control," as defined in such plan, the
plan may not be terminated or amended in any way that would adversely affect the
computation or amount of, or entitlement to, the benefits under the plan. The
SUP and Tandy Stock Plan contain similar protections, and also provide that in
the event of a "Change in Control," as defined in such plans, the Company may
not reduce the level of its contributions to the SUP and Tandy Stock Plan in
effect immediately prior to the Change in Control. The Tandy Stock Plan
additionally provides that in the event of a Change in Control or a tender
offer, other than an issuer tender offer, the Company shall distribute to each
participant in the Tandy Stock Plan all Company Common Stock held by the Company
which was credited to the participant's account under the Tandy Stock Plan. The
change in control provisions of the 1985 SOP and 1993 ISP provide that all
outstanding options become immediately vested and exercisable in the event of a
"Change in Control", as defined in such plans. All of the foregoing are referred
to herein as the "Benefit Protections."
Termination Protection Agreements. As of December 31, 1996, the Company has
entered into Termination Protection Agreements ("Agreements") with all of the
Executive Officers named in the Executive Compensation table and four other
employees (collectively, the "Executives"). The Agreements (all of which are
substantially similar) have an initial term of two years which is automatically
extended for successive one-year periods unless terminated by either party. If
the employment of any of the Executives is terminated (with certain exceptions)
within 24 months following a "Change in Control", as defined in the Agreements,
or in certain other instances in connection with a Change in Control, the
Executives will be entitled to receive certain cash payments (amounts equal to
two times current annual salary and the amount of the bonus guarantee under the
Bonus Guarantee Letter Agreement and an amount equal to the contributions that
the Company would have made to the Tandy Stock Plan, Tandy Fund and SUP over a
24-month period assuming the foregoing salary and bonus guarantee were used to
calculate the Company's contributions), as well as the continuation of fringe
benefits (including life insurance, disability, medical, dental and
hospitalization benefits) for a period of up to 24 months. Additionally, all
restrictions on any outstanding incentive awards will lapse and such awards will
become fully vested, all outstanding stock options will become fully vested and
immediately exercisable, and the Company will be required to purchase for cash,
on demand, any shares of unrestricted stock and shares purchased upon the
exercise of options at the then per-share fair market value.
The Agreements also provide that the Company shall make an additional
"Gross-Up Payment" (as defined in the Agreements) to the Executives to offset
fully the effect of any excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), on any payment made to any of the
Executives arising out of or in connection with the employment of any of the
Executives. In addition, the Company will pay all legal fees and related
expenses incurred by any of the Executives arising out of employment of any of
the Executives or termination of employment under certain circumstances.
Payments Upon A Change In Control. Assuming a Change in Control occurred on
the date of this Proxy Statement; that all of the named Executive Officers were
still employed on that date; and that the named Executive Officers' employment
had terminated on that date, the approximate cash payment that would have been
made by virtue of all change in control protections implemented by the Company
(not including the Gross-Up Payments) to Messrs. Roach, Roberts, Hughes, McClure
and Winn would have been $2,240,000, $1,936,071, $709,253, $814,657, and
$1,011,274 respectively. The amount of the Gross-Up Payment, if any, to be paid
may be substantial and will depend upon numerous factors, including the price
per share of Company Common Stock and the extent, if any, that payments or
benefits made to the Executives constitute "excess parachute payments" within
the meaning of Section 280G of the Code.
Rabbi Trust. In connection with the Benefit Protections, Bonus Guarantee
Letter Agreements, the Agreements, and several other plans and agreements, the
Company is authorized to enter into a Rabbi Trust, which is intended to be a
grantor trust under Section 671 of the Code. The Rabbi Trust may be funded by
the Company at any time but is required to be funded upon a "Threatened Change
in Control" or upon a "Change in Control" (as such terms are defined in the
Rabbi Trust) in an amount sufficient to provide for the payment of all benefits
provided under the Agreements, the Bonus Guarantee Letter Agreements, the DCP
and the DBP. The Rabbi Trust will also provide funds for litigation on behalf of
the participants in such plans to the extent necessary to ensure their rights
thereunder. The Rabbi Trust will be a trust of which the Company, for tax
purposes, is the beneficiary and the trust assets, as assets of the Company,
will be subject to the claims of the Company's creditors in the event of the
Company's bankruptcy or insolvency.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Organization and Compensation Committee (hereafter the
"Committee") at December 31, 1996, were Jack L. Messman (Chairman), James I.
Cash, Jr., William G. Morton, Thomas G. Plaskett, and Jesse L. Upchurch. No
member of the Committee was an officer or employee of the Company or its
subsidiaries during the year ended December 31, 1996, and none was formerly an
officer of the Company or any of its subsidiaries, except that Mr. Wilson was
President of the Company from 1974 to 1975 and a Vice President of the Company
from 1969 until 1974. Mr. Wilson resigned in 1975 upon the completion of the
spin-off by the Company of Tandycrafts, Inc. In addition, no Executive Officer
of the Company serves on the board of directors or the compensation committee of
another entity where a Committee member is employed. During 1996 the Company
purchased software in the amount of approximately $526,000 from Novell, Inc., of
which Mr. Messman is currently a director, and was the President and CEO from
1981 to 1983. Mr. Jesse L. Upchurch served on the Organization and Compensation
Committee until his resignation from the Board of Directors on January 15, 1997.
PERFORMANCE GRAPH
The graph below compares the cumulative total stockholder return on Company
Common Stock against the cumulative total return on the S&P Corporate-500 Stock
Index and the S&P Retail Composite Stock Index (assuming $100 was invested on
December 31, 1991, in Company Common Stock and in the stocks comprising the S&P
Corporate-500 Stock Index and the S&P Retail Composite Stock Index and also
assuming the reinvestment of all dividends). The S&P Retail Composite Stock
Index includes the Company.
The historical stock price performance of Company Common Stock shown on the
graph below is not necessarily indicative of future price performance.
Any general statement incorporating by reference this proxy statement into
any filing under the Securities Act of 1933 or the Securities Exchange Act of
1934 shall not be deemed to incorporate by reference this graph and this graph
shall not otherwise be deemed filed under such acts. The Company may, however,
specifically incorporate this graph by reference in filings under such acts.
Proxy Graph Coordinates - EDGAR Filer
Dec. 91 Dec. 92 Dec. 93 Dec. 94 Dec. 95 Dec. 96
------- ------- ------- ------- ------- -------
Tandy Corp. $100.00 $105.288 $178.208 $182.827 $154.039 $166.285
S&P 500 $100.00 $107.608 $118.405 $120.013 $164.951 $202.724
S&P Retail
Stores
Composite Index $100.00 $118.466 $112.879 $103.568 $117.367 $138.307
ORGANIZATION AND COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Organization and Compensation Committee (the "Committee") is appointed by
the Board of Directors and is composed entirely of outside directors. The
Committee is responsible for reviewing and recommending compensation policies
and programs to the Company's Board of Directors, as well as recommending
compensation awards for the Company's senior executives, including the Chief
Executive Officer. It makes decisions with respect to and grants awards under
the Company's 1993 ISP. It will also be responsible for granting awards under
the 1997 ISP if this plan is approved by the stockholders. The following report
outlines the Committee's recent action, its philosophy and policies relative to
executive compensation, and the basis for specific compensation awards to the
Chief Executive Officer attributable to 1996.
Changes in Compensation Policies. In 1995 and again in 1996, the Committee
reviewed compensation practices at similar companies to determine what would
constitute competitive levels of compensation for officers and key employees. It
took into account the relative size of the other companies as well as the nature
of their businesses. The Committee continues to move the base salaries toward
the competitive median. The list of similar retailing and electronics companies
that were surveyed by the Committee was reviewed by a nationally recognized
compensation and benefits firm in conjunction with the Committee. The basis of
the selection was a subjective determination of the public companies that are
similar to the Company (the "Peer Group"). Some, but not all, of these companies
are included in the S&P Retail Composite Index that is charted in the
Performance Graph included in this Proxy Statement.
Compensation Philosophy and Overall Objectives. The Committee believes that
the overall objective of the executive compensation program should be to
encourage and reward enhancement of stockholder value, which is best
accomplished by linking the financial interests of the Company's key executives
closely to the financial interests of the Company's stockholders. Further, the
Committee believes that the Company's overall executive compensation program
should be a balanced plan that will: (1) motivate executives toward effective
long-term management of the Company through prudent use of stock programs that
focus management attention on increasing stockholder value; (2) reward effective
ongoing management of Company operations through annual performance incentives
tied to increased levels of Company and business unit performance; and (3)
attract and retain key executives through competitive salary and incentive
plans.
Base Salary. The Company's executive compensation program is designed to
include a competitive base salary and an annual bonus tied to appropriate
performance goals and objectives. The amounts of base salary increases in
January 1996 and 1997, were based on a review of pay practices of similar
companies, as well as the Executive Officers' past performance and an assessment
of his or her ability to contribute to the Company's progress. The Committee
expects that increases in future years will be based on the same factors.
Following the review of base salaries in similar Companies the Committee
continued to increase executive salaries to competitive levels.
Annual Incentive Bonus. In general, the Company's 1996 bonus program for five
named Executive Officers were based on the following objective criteria. The
1996 bonus program for the Chief Executive Officer ("CEO") and all other named
Executive Officers were based on a formula that relied on objective performance
measures: the increase in the Company's operating income (before income taxes)
over the previous year; the increase in the Company's earnings per share over
the previous year; the increase in the Company's share price during 1996 over
1995's share price; and the Company's stock price performance in relation to a
peer group of other companies. Under the formula, improvements in operating
income (before income taxes) receive the most weight and earnings per share
receives more weight than stock price performance. This peer group of other
companies is the same group of retail companies previously selected by the
Committee whose common stock performance is included in the performance graph
included in this Proxy Statement. See "Performance Graph". One of the named
Executive Officers other than CEO had one additional objective and one
subjective measure which qualified him for an additional bonus if the department
which reported to him attained certain targeted levels of performance. The
fourth and fifth named Executive Officers had one additional performance measure
that took into account operating income (before income taxes) of the division(s)
for which they were responsible.
The bonus formulas for four named Executive Officers including the CEO is
subject to a maximum equal to 100% of the Officer's base salary, while the bonus
formula for the other named Executive Officer is 80% of his base salary. Under
this formula program, there are no guaranteed bonuses. In the case of all of the
named Executive Officers, the objective measures in the formula bonus program
were required to exceed specified thresholds before any formula bonus was
payable. This did not occur, therefore no 1996 bonuses were awarded, earned by,
or paid to any of the named Executive Officers.
Long Term Incentives. In 1996 the Committee granted an aggregate of 418,250
stock options to 61 employees under the 1993 ISP, including all of the named
Executive Officers. The amount of options granted to particular officers was
determined by the Committee based on its evaluation of the individual's
performance following consultation with the Chief Executive Officer. Restricted
stock awards relating to 1995 for 26,500 shares were granted to the named
Executive Officers under the 1993 ISP and vest as to one-third of the shares on
each of the first three annual anniversary dates following the January 2, 1996
grant date.
The 1993 ISP also permits the Company to grant other stock-based awards, such
as performance shares and stock appreciation rights, in amounts determined by
the Committee, subject to the restrictions under the 1993 ISP. The Committee
believes that stock options and other awards, such as restricted stock grants,
are very important in motivating and rewarding creation of long-term shareholder
value.
The Committee has in the past and intends to award stock options and
restricted stock awards periodically based on continuing progress of the Company
and improvements in individual performance.
In an effort to continue to strengthen the close alignment of the interests
of the Company's management and employees with those of the stockholders, the
Committee and the full Board have recommended that the Company's stockholders
approve and adopt the 1997 ISP. Under this plan, which is similar to the 1993
ISP, the Company would be able to grant various types of awards, including
options, performance units and restricted stock, to eligible participants in
amounts to be determined by the Committee, subject to the restrictions set forth
in the plan. See "Tandy Corporation 1997 Incentive Stock Plan."
Compensation of the Chief Executive Officer. For the year ending December 31,
1996, the compensation of the Chief Executive Officer was determined under the
compensation plan approved by the Board of Directors in December 1995 and by the
shareholders on May 18, 1995. The bonus factors utilized were increases in
earnings per share over the prior year, stock price performance exceeding the
stock price performance of the peer group, the average stock price performance
for 1996 exceeding the average stock price performance for 1995, and the
Company's 1996 income before taxes exceeding the prior year income before taxes.
Mr. Roach was not paid any bonus attributable to 1996 based on these factors and
has not been awarded any additional restricted stock in 1997. Mr. Roach was paid
a base salary of $770,000 for the year 1996 and will be paid the same base
salary in 1997. The Committee awarded a total of 75,000 stock options to Mr.
Roach in October 1996 at the same time other executives received stock options,
which amount was less than awarded in 1995. The award was based on the
Committee's subjective assessment of the Company's performance and after
reviewing competitive data from the outside compensation consultant.
Compliance with Section 162(m). In general, it is the Committee's policy to
structure the compensation paid to the Chairman and CEO so that it will qualify
for deductibility under Section 162(m) of the Internal Revenue Code. Also,
subject to stockholder approval, the Committee designated a maximum number of
options and awards that may be awarded to any one individual under the 1997 ISP,
in order to qualify for deductibility under Section 162(m). In appropriate
circumstances, however, when necessary to achieve its overall objective of
rewarding effective management, the Committee may approve compensation packages
which include payments that may not be deductible under Section 162(m).
Organization and Compensation Committee
Jack L. Messman, Chairman James I. Cash, Jr.
William G. Morton Thomas G. Plaskett
CERTAIN TRANSACTIONS WITH MANAGEMENT AND OTHERS
During the year ended December 31, 1996, the Company paid approximately
$345,022 to Texas Christian University ("TCU"), of which Dr. Tucker is the
Chancellor, for administering the Tandy Technology Scholars Program, and for
various seminars, advertisements, tickets, and contributions through the
Company's matching gifts program and donations. Dr. Cash resigned from the Board
of Trustees of TCU in March 1996. Mr. Roach is Chairman of the Board of Trustees
of TCU. During the year ended December 31, 1996, the Company purchased software
in the amount of approximately $526,000 from Novell, Inc., of which Mr. Messman
is a director.
It is the opinion of management that the terms obtained by the Company in
each of the above transactions are as favorable as those which might have been
obtained by other parties.
TANDY CORPORATION 1997 INCENTIVE STOCK PLAN
The Board believes that the adoption of a 1997 Incentive Stock Plan, which
would provide stock options, stock appreciation rights, and other awards plans
will enable the Company to continue to provide eligible employees and directors
an incentive and reward for exceptional managerial talent and encourage them to
promote the best interest of the Company. On February 28, 1997 the Board adopted
the 1997 ISP, subject to the approval of the 1997 ISP by the stockholders at the
Annual Meeting. The 1997 ISP is similar to the 1993 ISP approved by the
stockholders of the Company in 1993 and 1995. A summary of the material
provisions of the 1997 ISP is provided below; however, it does not purport to be
complete and is qualified in its entirety by the terms of the 1997 ISP, the
complete text of which is attached to this Proxy Statement as Annex A.
The adoption of the 1997 ISP is necessary because in an effort to increase
retail store managers compensation and to retain well trained store management,
the Company granted as of February 1, 1997, under the 1993 ISP an aggregate of
approximately 1,020,600 restricted stock awards of 200 shares each to
approximately 4,907 RadioShack Store Managers and 400 shares each to 98 Computer
City Store Managers. These shares vest on February 1, 2002, and earlier if
certain events occur. The vesting terms are: (i) If managers are employed as a
store manager or higher position by the Company after February 1, 1999 and the
Company Common Stock for 20 consecutive trading days closes at $67 5/8 or more
(which would represent an approximately 50% increase in Company Common Stock
value from its value on January 31, 1997) the stock will vest at that time, and
otherwise, (ii) the shares will vest on February 1, 2002 if the managers are
employed as store managers or a higher position of the Company at that time. The
Company, as of February 1, 1997, also granted an aggregate of 185,250 stock
options of 750 shares each to RadioShack District Sales Managers, 1,500 shares
each to RadioShack Regional Sales Managers, and 1,000 shares each to Computer
City Sales Managers. These grants will, in the Company's judgment, leave the
1993 ISP with an insufficient number of shares for future awards to provide
incentive for key employees. The adoption of the 1997 ISP is also in the best
interest of the Company in order that the interests of the key employees remain
aligned with the interests of the stockholders.
The 1997 ISP provides for the administration of its provisions by the Board
of Directors through the Organization and Compensation Committee of the Board
(the "Committee"). The Committee consists solely of directors who constitute
both "Non Employee Directors" within the meaning of Rule 16b-3 and "Outside
Directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986. A total of 2,750,000 shares of Company Common Stock or approximately 4.90%
of the total number of shares of Company Common Stock entitled to vote will be
reserved for issuance pursuant to Awards (as hereinafter defined), or the
exercise of options granted under the 1997 ISP. One of the requirements, in
order to secure a federal income tax deduction under Section 162(m) of the
Internal Revenue Code, specifies that limitations as to the maximum number of
Options and Awards be placed in the 1997 ISP. The 1997 ISP provides that (i) the
maximum number of shares of Company Common Stock that an Eligible Employee may
receive in any calendar year in respect of Options and Awards (other than Awards
described in clause (ii) below) may not exceed 250,000 shares, and (ii) the
maximum dollar amount of cash or the fair market value of shares of Company
Common Stock that any Eligible Employee may receive in any calendar year in
respect of Performance Units denominated in dollars may not exceed $1,500,000.
Such shares may be either authorized and unissued shares or issued shares
reacquired by the Company and held in treasury. It is contemplated that the
shares authorized for issuance under the 1997 ISP either as an Award or upon the
exercise of any option will be registered with the Securities and Exchange
Commission shortly after stockholder approval has been received for the 1997
ISP.
Awards made under the 1997 ISP are made at the discretion of the Committee,
and future grants are not yet determinable. Thus, it is not possible to predict
the benefits or amounts that will be received by or allocated to particular
individuals or groups of employees in 1997 or thereafter. However, according to
present estimates approximately 70 officers, key employees and directors might
be considered for grants. All of the Company's officers, including the Executive
Officers named in the Summary Compensation Table, will be eligible to be
considered for grants. In addition, employees at the retail store manager level
and retail field management might also be considered for grants.
The 1997 ISP permits the grant of either incentive stock options pursuant to
Section 422 of the Internal Revenue Code of 1986, as amended ("ISOs") or options
which are not ISOs, nonstatutory stock options ("NSOs")(sometimes hereafter
collectively referred to as "Options"), to the category of persons identified
above.
On the first business day in September of each year, each nonemployee
director of the Company will, unless a grant is made at that time under the 1993
ISP, receive an NSO for 4,000 shares of Company Common Stock ("Director
Option"). New directors, upon election or appointment will, unless a grant is
made at the that time under the 1993 ISP, receive a one-time grant of 5,000
shares. The exercise price for each Director Option is 100% of the fair market
value of the Company Common Stock on the day preceding the date of grant. The
Director Option will vest as to one-third of the shares of Company Common Stock
granted on each of the first three annual anniversary dates after the date of
grant. If a director retires, dies, or becomes disabled, Director Options, will
be fully vested for all shares of Company Common Stock covered by the Director
Option. The fully vested Director Option must be exercised within three years of
the director's termination on account of retirement, death or disability. An
unexercised Director Option expires 10 years after the date of grant.
The 1997 ISP also provides that Directors may elect to receive 50% or 100% of
their annual retainer fee in Company Common Stock payable in advance on June 1
of each year at its fair market value on the date immediately preceding the date
of payment.
The first grant of Director Options will be made on the first business day of
September of each year, as provided for in the 1997 ISP. These grants and
retainer fee payments in Company Common Stock under the 1997 ISP will be subject
to approval of the 1997 ISP by stockholders at the Annual Meeting. It is
anticipated that these option grants will be issued annually commencing on
September 1, 1998. However, no annual grant of 4,000 shares, one time grant of
5,000 shares or retainer fee payments will be made under both the 1993 and 1997
ISP in the same year.
No ISO shall be granted by the Committee to anyone who is not an employee of
the Company or one of its subsidiaries on the date of grant. An NSO may be
granted to key employees, officers, executive officers and other eligible
persons, as described in the 1997 ISP. No Option may be transferred by the
person to whom the Option is granted (the "Optionee") except by the laws of
descent and distribution. During the life of the Optionee an Option may only be
exercised by the Optionee or his or her legal representative. The exercise price
of shares under an Option (other than a Director Option) shall be determined by
the Committee and set forth in the Option agreement with the Optionee, provided
however that the exercise price for an ISO shall not be less than 100% of the
fair market value of a share of Company Common Stock on the date of grant (110%
in the case of a 10% or more stockholder of Company Common Stock) and for an NSO
shall not be less than 100% of the fair market value of a share of Company
Common Stock on the date of grant.
Subject to the terms of the 1997 ISP, the Committee may modify outstanding
employee options or accept surrender of outstanding employee options and grant
new options; however, no modification or substitution of new options to an
employee may result in an option price that is lower than the option price of
the originally issued option. Notwithstanding the foregoing, no modification of
an employee Option shall adversely alter or impair any rights or obligations
under the Option agreement without the Grantee's consent. Similarly no
modification of an outstanding Director Option or substitution of a new Director
Option to a Director may result in an option price that is lower than the option
price of the originally issued Director Option.
Options shall be for such terms as shall be specified by the Committee,
except that the termination date for any Option shall not exceed 10 years from
the date of grant (five years in the case of an ISO granted to a 10% or more
stockholder of Company Common Stock). Options (other than Director Options)
shall become exercisable in such installments, which need not be equal, and at
such times as may be designated by the Committee and set forth in the Option
agreement. Subject to the discretion of the Committee in the case of Options
other than Director Options, payments for shares issuable upon the exercise of
an Option may be made in the form of cash, common stock at fair market value on
the date preceding the date of exercise or any combination thereof. Unless an
agreement evidencing options provides otherwise, in the event of a "Change in
Control", as defined in the 1997 ISP, all Options outstanding shall be
immediately and fully exercisable, and within 60 days after such Change in
Control any Option or any portion thereof not yet exercised may be surrendered
to the Company for cancellation and a cash payment if such agreement so
provides.
The Committee may, either alone or in connection with the grant of an Option,
grant to Eligible Employees (as defined in the 1997 ISP) Stock Appreciation
Rights ("SARs") in accordance with the 1997 ISP, the terms and conditions of
which shall be set forth in the applicable grant agreement between the Company
and the grantee. If granted in connection with an Option, an SAR shall cover the
same shares of Company Common Stock covered by the Option (or such lesser number
of shares as the Committee may determine) and shall be subject to the same terms
and conditions as the related Option.
An SAR granted in connection with an Option shall be exercisable at such time
or times and only to the extent that the related Option is exercisable, and will
not be transferable except to the extent the related Option may be transferable.
An SAR granted in connection with an ISO shall be exercisable only if the fair
market value of a share of Company Common Stock on the date of exercise exceeds
the purchase price specified in the related ISO agreement. Upon the exercise of
an SAR related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the fair market value of a share of
Company Common Stock on the date preceding the date of exercise of such SAR over
the per share purchase price under the related Option, by (B) the number of
shares as to which such SAR is being exercised. Notwithstanding the foregoing,
the Committee may limit in any manner the amount payable with respect to any SAR
by including such a limit in the agreement evidencing the SAR at the time it is
granted.
Upon the exercise of an SAR granted in connection with an Option, the Option
shall be canceled to the extent of the number of shares as to which the SAR is
exercised, and upon the exercise of an Option granted in connection with an SAR
or the surrender of such Option, the SAR shall be canceled to the extent of the
number of shares as to which the Option is exercised or surrendered.
The Committee may grant to Eligible Employees SARs unrelated to Options. SARs
unrelated to Options shall contain such terms and conditions as to
exercisability vesting and duration as the Committee shall determine, but in no
event shall they have a term of greater than ten (10) years. Upon exercise of an
SAR unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the fair market value of a share of
Company Common Stock on the date preceding the date of exercise of such SAR over
the fair market value of a share on the date the SAR was granted, by (B) the
number of shares as to which the SAR is being exercised. Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with respect
to any SAR by including such a limit in the agreement evidencing the SAR at the
time it is granted.
The amount payable upon exercise of an SAR may be made in the discretion of
the Committee, solely in whole shares of Company Common Stock in a number
determined at their fair market value on the date preceding the date of exercise
of the SAR, or solely in cash, or in a combination of cash and shares. If the
Committee decides to make full payment in shares and the amount payable results
in a fractional share, payment for the fractional share will be made in cash.
Subject to the terms of the 1997 ISP, the Committee may modify outstanding
grants of SARs or accept the surrender of outstanding grants of SARs (to the
extent not exercised) and grant new SARs in substitution for them, however no
surrender or modification of an SAR, whether or not related to an option, may
result in the fair market value of the underlying security (either the per share
purchase price under the related Option or the per share fair market value of
Company Common Stock under the unrelated Options) that is lower than the fair
market value of same at the time of the grant of the SAR. Notwithstanding the
foregoing, no modification of an SAR shall adversely alter or impair any rights
or obligations under the SAR agreement without the Grantee's consent.
Unless an agreement evidencing an SAR provides otherwise, in the event of a
Change in Control, subject to the foregoing restrictions, all SARs shall become
immediately and fully exercisable within 60 days after a Change in Control and
SARs unrelated to an Option may be exercised for a cash payment if such
agreement so provides.
Awards under the 1997 ISP may also be in the form of restricted stock grants
or performance units or performing shares (hereafter collectively referred to as
"Awards"). Each agreement related to an Award shall contain such restrictions,
terms and conditions as the Committee may, in its sole discretion, determine.
The Committee may require that an appropriate legend be placed on any restricted
securities issued.
The Committee in its discretion may grant Awards of restricted shares of
Company Common Stock to an employee. Restricted shares may either be held in
escrow in the name of the employee or credited to a book account in the name of
the employee until such time as all restrictions lapse or the Award is
terminated. Until all restrictions on restricted shares of Company Common Stock
issued under the 1997 ISP have lapsed, such shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the employee. At the time of grant,
the Committee shall determine whether or not, in the event of a Change in
Control all restrictions should immediately lapse, and if so the shares would
then become immediately vested in the employee upon a Change in Control.
Dividends paid on restricted stock shall be either paid to the employee or
deferred and retained in escrow or book account until such time as all
restrictions on the shares lapse. The Committee may provide that any deferred
dividends be reinvested in additional restricted shares of Company Common Stock.
Upon the lapse of all restrictions, such shares and any dividends accrued, with
interest on said dividends, shall be delivered to the employee free of all
restrictions.
The Committee in its discretion may grant Awards of performance units or
performance shares to an employee which will be payable upon the attainment of
specified performance objectives dureing a specified period of time. The
specified objectives may be expressed in terms of (i) earnings per share of
Company Common Stock, (ii) pre-tax profits, (iii) net earnings or net worth,
(iv) return on equity or assets, (v) stock price, or any combination of the
foregoing for the Company, a subsidiary or a division thereof as may be
applicable. Performance units may be denominated in shares of stock or a
specified dollar amount and are contingent upon attainment of the specified
performance objective(s) within the specified period of time. A performance unit
represents the right to receive payment of (i) the specified dollar amount in
the case of a cash Award, (ii) in the case of a share-denominated performance
unit the fair market value of a share of Company Common Stock on the date the
performance unit was granted, the date the performance unit became vested or any
other date specified by the Committee, or (iii) a percentage of the amount
described in clauses (i) or (ii) depending on the level of performance objective
attainment (which may be greater than 100% of such amount but may not exceed any
maximum amount placed on the Award by the Committee). Payment of performance
unit Awards will be made within 60 days of the last date of the performance
cycle (the period over which the performance objectives are designated to be
met) in which the Award vested (because the performance objectives were met).
Payment of a performance unit Award may be made entirely in shares of Company
Common Stock valued at their market value as of the last day of the performance
cycle, or such other date specified by the Committee, entirely in cash, or in
such combination of shares of the Company's Common Stock and cash as the
Committee may in its discretion determine at the time of payment. Any
performance unit payment in the form of shares may be in the form of restricted
shares in which case the provisions relating to restricted shares described
above shall be complied with and an appropriate agreement entered into between
the employee and the Company.
Performance shares are awarded in the form of shares of Company Common Stock.
The Committee will determine the total number of performance shares subject to
an Award and the time or times at which the performance shares will be issued to
the grantee at the time the Award is made. In addition, the Committee will
determine (a) the time or times at which the awarded but not issued performance
shares shall be issued to the grantee and (b) the time or times at which awarded
and issued performance shares shall become vested in or forfeited by the
grantee, in either case based upon the Company's attainment of specified
performance objectives within the specified period of time. At the time the
award of performance shares is made, the Committee may determine that dividends
be paid or deferred on the issued performance shares and, if deferred, whether
such dividends will be reinvested in shares of Company Common Stock. Deferred
dividends (together with any interest accrued thereon) will be paid upon the
lapsing of restrictions on performance shares or forfeited upon the forfeiture
of performance shares.
Upon a Change in Control, (x) a percentage of performance units, as
determined by the Committee at the time of grant of the performance units, will
become vested and the Grantee will be entitled to receive cash payment in an
amount that was determined by the Committee at the time of the grant of such
performance units and as set forth in the agreement, and (y) with respect to
performance shares, all restrictions shall lapse on a percentage of the
performance shares, as determined by the Committee at the time the performance
shares are granted. In addition, the agreements evidencing the grant of
performance shares and performance units shall contain provisions for the
treatment of such Awards (or portions thereof) which do not become vested as a
result of a Change in Control, including, without limitation, provision for the
adjustment of applicable performance objectives.
The 1997 ISP provides that the Company may deduct from any distribution the
amount equal to all federal, state and local income taxes or other amounts as
may be required by law to be withheld with respect to any Option, SAR or Award.
If an Optionee or employee will experience a taxable event in connection with
the receipt of shares pursuant to an Option and/or SAR exercise or payment of an
Award, the Optionee or employee shall pay the amount of the withholding taxes to
the Company prior to the issuance or release from escrow of such shares. Subject
to the consent of the Committee, an Optionee or an employee may elect to have
shares withheld from any distribution in satisfaction of his withholding
obligations.
For Federal income tax purposes, an Optionee will not be subject to the tax
at the time an Option or SAR is granted. Generally, an Optionee will not
recognize income upon the exercise of an ISO. If the Common Stock is held for a
period of more than one year after the date of exercise, and two years from the
date of grant, the gain, if any, on the sale is a long term capital gain. If the
stock is sold within one year after the date of exercise and two years from the
date of grant, the lesser of the excess of (a) the fair market value at the date
of sale over the exercise price, or (b) the fair market value at the date of
exercise over the exercise price, is ordinary income at the date of sale. The
remainder of the gain, if any, will be capital gain at the date of sale. The
Company will be entitled to a business expense deduction to the extent the
Optionee recognizes ordinary income.
The exercise of an NSO or SAR increases an Optionee's ordinary taxable income
and such income will be reported by the Company on a Form W-2 for Eligible
Employees and on a Form 1099 for non employee directors. Income recognition is
the difference between the exercise price and the fair market value of the
shares at the date of exercise. This income is ordinary income and the employee
Optionee is required to remit FICA or Federal income taxes to the Company prior
to the receipt of shares. Non employee director Optionees are not required to
remit FICA to the Company. If the Company complies with the applicable income
reporting requirements, it will be entitled to a business expense deduction in
the same amount and at the same time as an Optionee recognizes ordinary income
in connection with the exercise of an NSO or SAR.
Certain Federal income Tax Consequences Relating
to Awards Under the 1997 ISP
Section 162(m) of the Internal Revenue Code generally disallows a federal
income tax deduction to any publicly-held corporation for compensation paid in
excess of $1 million in any taxable year to the chief executive officer or any
of the four other most highly compensated executive officers who are employed by
the Company on the last day of the taxable year, but does not disallow a
deduction for qualified "performance-based compensation," the material terms of
which are disclosed to and approved by stockholders. The Company has structured
the 1997 ISP with the intention that compensation resulting from awards of
Options, Stock Appreciation Rights, Performance Shares and Performance Units may
qualify as "performance-based compensation" and would be deductible. To qualify,
the Company is seeking stockholder approval of the 1997 ISP and will not grant
Options or Awards thereunder if such stockholder approval is not obtained.
The 1997 ISP provides for the adjustment of the Options or Awards in the
event of a Change in Capitalization, as defined in the 1997 ISP. The amount of
said adjustment is to be determined conclusively by the Committee. Likewise, in
the event of certain liquidations, dissolutions or mergers, the 1997 ISP and the
Options and Awards issued thereunder shall continue in effect with respect to
the terms of the individual agreements and each Optionee and employee shall be
entitled to receive in respect to each share subject to any outstanding Option
or Award, upon exercise of the Option or payment of the Award, the same number
and kind of stock, securities, cash, property or other consideration that each
holder of a share was entitled to receive in the dissolution, liquidation or
merger.
The 1997 ISP also provided for individual limits as to the maximum number,
and dollar amount of Options and Awards that may be granted to any employee in
any one calendar year.
The 1997 ISP shall terminate on the tenth annual anniversary of the day
preceding the date of its adoption by the Board and no Option or Award shall be
granted under the 1997 ISP thereafter. The Board may in its discretion
terminate, amend, modify or suspend the 1997 ISP, except that any such action
shall have no effect on an Award or Option already outstanding, and provided to
the extent necessary under applicable law no amendment shall be effective unless
approved by the stockholders of the Company in accordance with applicable law
and regulations.
The per share closing price of the Company's Common Stock on March 18,
1997, as reported on the New York Stock Exchange Composite Tape, was $51.875.
The affirmative vote of a majority of the Common Stock votes entitled to vote
and present in person or proxy at the Annual Meeting is required for the
adoption of the 1997 ISP.
The Board recommends a vote FOR the adoption of the 1997 ISP.
INDEPENDENT ACCOUNTANTS
The Board has selected Price Waterhouse, which has audited the Company's
books annually since 1899, as independent accountants for 1997. Representatives
of Price Waterhouse are expected to be present at the Annual Meeting with an
opportunity to make a statement and/or respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
In order for proposals of stockholders to be considered for inclusion in the
proxy statement for the 1998 Annual Meeting of Stockholders of the Company,
which is now scheduled to be held on May 21, 1998, such proposals must be
received by the Secretary of the Company by November 26, 1997.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31, 1996,
is being mailed to stockholders with this Proxy Statement. Stockholders who do
not receive a copy of such Annual Report may obtain a copy without charge by
writing or calling Shareholder Services, Tandy Corporation, 100 Throckmorton
Street, Suite 1700, Fort Worth, Texas 76102-2818, telephone number
817-390-3022.
OTHER MATTERS
As of the date of this Proxy Statement, management of the Company has no
knowledge of any other business to be presented to the meeting. If other
business is properly brought before the meeting, the persons named in the Proxy
will vote according to their discretion.
TANDY CORPORATION
Fort Worth, Texas
March 28, 1997
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25
ANNEX A
1
TANDY CORPORATION
1997 INCENTIVE STOCK PLAN
(includes Directors)
1. Purpose.
The purpose of this Plan is to strengthen Tandy Corporation (the
"Company") by providing an incentive to its Eligible Employees (as hereinafter
defined), and directors and thereby encouraging them to devote their abilities
and industry to the success of the Company's business enterprise. It is intended
that this purpose be achieved by extending to, Eligible Employees of the Company
and its subsidiaries and to Eligible Directors an added long-term incentive for
high levels of performance and unusual efforts through the grant of Incentive
Stock Options, Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Performance Units and Performance Shares (as each term is hereinafter
defined).
2. Definitions.
For purposes of the Plan:
2.1 "Adjusted Fair Market Value" means, in the event of a Change in
Control, the greater of (i) the highest price per Share paid to holders of the
Shares in any transaction (or series of transactions) constituting or resulting
in a Change in Control or (ii) the highest Fair Market Value of a Share during
the ninety (90) day period ending on the date of a Change in Control.
2.2 "Agreement" means the written agreement between the Company and an
Optionee or Grantee evidencing the grant of an Option or Award and setting forth
the terms and conditions thereof.
2.3 "Award" means a grant of Restricted Stock, a Stock Appreciation Right,
a Performance Award or any or all of them.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Cause" means the commission of an act of fraud or intentional
misrepresentation or an act of embezzlement, misappropriation or conversion of
assets or opportunities of the Company or any Subsidiary.
2.6 "Change in Capitalization" means any increase or reduction in the
number of Shares, or any change (including, but not limited to, a change in
value) in the Shares or exchange of Shares for a different number or kind of
shares or other securities of the Company, by reason of a reclassification,
recapitalization, merger, consolidation, reorganization, spin-off, split-up,
issuance of warrants or rights or debentures, stock dividend, stock split or
reverse stock split, cash dividend, property dividend, combination or exchange
of shares, repurchase of shares, change in corporate structure or otherwise.
2.7 A "Change in Control" shall mean the occurrence during the term of the
Plan and during the term of any Option issued under the Plan of:
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by any
"Person" (as the term person is used for purposes of Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "1934 Act"))
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of fifteen percent
(15%) or more of the combined voting power of the Company's then
outstanding Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control. A "Non-Control
Acquisition" shall mean an acquisition by (i) an employee benefit plan (or
a trust forming a part thereof) maintained by (A) the Company or (B) any
corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or
indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (ii) the Company or its Subsidiaries, or (iii) any Person
in connection with a "Non-Control Transaction" (as hereinafter defined).
(b) The individuals who, as of March 1, 1997, are members of
the Board (the "Incumbent Board"), cease for any reason to constitute at
least two-thirds of the Board; provided, however, that if the election, or
nomination for election by the Company's stockholders, of any new director
was approved by a vote of at least two-thirds of the Incumbent Board, such
new director shall, for purposes of this Plan, be considered as a member
of the Incumbent Board; provided further, however, that no individual
shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under the 1934
Act) or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board (a "Proxy Contest")
including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest; or
(c) Approval by stockholders of the Company of:
(i) A merger, consolidation or reorganization involving
the Company, unless
(A) the stockholders of the Company, immediately before
such merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least sixty percent (60%) of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately before such
merger, consolidation or reorganization,
(B) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at least
two-thirds of the members of the board of directors of the Surviving
Corporation,
(C) no Person other than the Company, any Subsidiary,
any employee benefit plan (or any trust forming a part thereof)
maintained by the Company, the Surviving Corporation, or any
Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of fifteen
percent (15%) or more of the then outstanding Voting Securities has
Beneficial Ownership of fifteen percent (15%) or more of the
combined voting power of the Surviving Corporation's then
outstanding voting securities, and
(D) a transaction described in clauses (A) through (C)
shall herein be referred to as a "Non-Control Transaction";
(ii) A complete liquidation or dissolution of the Company;
or
(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other than a
transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
then outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
2.8 "Code" means the Internal Revenue Code of 1986, as amended.
2.9 "Committee" means a committee of the Board consisting of at least two
(2) members, all of who are Disinterested Directors appointed by the Board to
administer the Plan and to perform the functions set forth herein.
2.10 "Company" means Tandy Corporation, a Delaware Corporation.
2.11 "Director Option" means an Option granted pursuant to Section 5.
2.12 "Disability" means a physical or mental infirmity which impairs
the Optionee's ability to perform substantially his or her duties for a period
of one hundred eighty (180) consecutive days.
2.13 "Disinterested Director" means a director of the Company who is both
a "Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange
Act, and a "Outside Director" within the meaning of Section 162(m) of the Code.
2.14 "Division" means any of the operating units or divisions of the
Company.
2.15 "Eligible Employee" means any officer or other key employee or
consultant or advisor of the Company or a Subsidiary designated by the Committee
as eligible to receive Options or Awards subject to the conditions set forth
herein.
2.16 "Eligible Director" means a director of the Company who is not an
employee at the time of grant of the Company or any Subsidiary.
2.17 "Employee Option" means an Option granted pursuant to Section 6.
2.18 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.19 "Fair Market Value" on any date means the average of the high and low
sales prices of the Shares on such date on the principal national securities
exchange on which such Shares are listed or admitted to trading, or if such
Shares are not so listed or admitted to trading, the arithmetic mean of the per
Share closing bid price and per Share closing asked price on such date as quoted
on the National Association of Securities Dealers Automated Quotation System or
such other market in which such prices are regularly quoted, or, if there have
been no published bid or asked quotations with respect to Shares on such date,
the Fair Market Value shall be the value established by the Board in good faith
and, in the case of an Incentive Stock Option, in accordance with Section 422 of
the Code.
2.20 "Grantee" means a person to whom an Award has been granted under the
Plan.
2.21 "Incentive Stock Option" means an Option satisfying the requirements
of Section 422 of the Code and designated by the Committee as an Incentive Stock
Option.
2.22 "93 ISP" means the Tandy Corporation 1993 Incentive Stock
Plan.
2.23 "Nonqualified Stock Option" means an Option which is not an Incentive
Stock Option.
2.24 "Option" means a Employee Option, a Director Option, or either or
both of them.
2.25 "Optionee" means a person to whom an Option has been granted under
the Plan.
2.26 "Parent" means any corporation which is a parent corporation (within
the meaning of Section 424(e) of the Code) with respect to the Company.
2.27 "Performance Awards" means Performance Units, Performance Shares or
either or both of them.
2.28 "Performance Cycle" means the time period specified by the Committee
at the time a Performance Award is granted during which the performance of the
Company, a Subsidiary or a Division will be measured.
2.29 "Performance Shares" means Shares issued or transferred to an
Eligible Employee under Section 10.
2.30 "Performance Unit" means Performance Units granted to an Eligible
Employee under Section 10.
2.31 "Plan or 97 ISP" means the Tandy Corporation 1997 Incentive Stock
Plan.
2.32 "Restricted Stock" means Shares issued or transferred to an Eligible
Employee pursuant to Section 9.
2.33 "Retirement" means termination of service as a Director under
circumstances entitling the Director to a retirement benefit under the Company's
Directors Special Compensation Plan.
2.34 "Stock Appreciation Right" means a right to receive all or some
portion of the increase in the value of the Shares as provided in Section 8.
2.35 "Shares" means the common stock, par value $1.00 per share, of
the Company.
2.36 "Subsidiary" means any corporation which is a subsidiary corporation
(within the meaning of Section 424(f) of the Code) with respect to the Company.
2.37 "Successor Corporation" means a corporation, or a parent or
subsidiary thereof within the meaning of Section 424(a) of the Code, which
issues or assumes a stock option in a transaction to which Section 424(a) of the
Code applies.
2.38 "Ten-Percent Stockholder" means an Eligible Employee, who, at the
time an Incentive Stock Option is to be granted to him or her, owns (within the
meaning of Section 422(b)(6) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
or of a Parent or a Subsidiary.
3. Administration.
3.1 The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. No member of the Committee shall be liable for any action, failure to act,
determination or interpretation made in good faith with respect to this Plan or
any transaction hereunder, except for liability arising from his or her own
willful misfeasance, gross negligence or reckless disregard of his or her
duties. The Company hereby agrees to indemnify each member of the Committee for
all costs and expenses and, to the extent permitted by applicable law, any
liability incurred in connection with defending against, responding to,
negotiation for the settlement of or otherwise dealing with any claim, cause of
action or dispute of any kind arising in connection with any actions in
administering this Plan or in authorizing or denying authorization to any
transaction hereunder.
3.2 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time to:
(a) determine those individuals to whom Employee Options shall be
granted under the Plan and the number of Incentive Stock Options and/or
Nonqualified Stock Options to be granted to each Eligible Employee and to
prescribe the terms and conditions (which need not be identical) of each
Employee Option, including the purchase price per Share subject to each Employee
Option, and make any amendment or modification to any Agreement consistent with
the terms of the Plan; and
(b) select those Eligible Employees to whom Awards shall be granted
under the Plan and to determine the number of Stock Appreciation Rights,
Performance Units, Performance Shares, and/or Shares of Restricted Stock to be
granted pursuant to each Award, the terms and conditions of each Award,
including the restrictions or performance criteria relating to such Performance
Units or Performance Shares, the maximum value of each Performance Unit and
Performance Share and make any amendment or modification to any Agreement
consistent with the terms of the Plan.
3.3 Subject to the express terms and conditions set forth herein, the
Committee shall have the power from time to time:
(a) to construe and interpret the Plan and the Options and Awards
granted thereunder and to establish, amend and revoke rules and regulations for
the administration of the Plan, including, but not limited to, correcting any
defect or supplying any omission, or reconciling any inconsistency in the Plan
or in any Agreement, in the manner and to the extent it shall deem necessary or
advisable to make the Plan fully effective, and all decisions and determinations
by the Committee in the exercise of this power shall be final, binding and
conclusive upon the Company, its Subsidiaries, the Optionees and Grantees and
all other persons having any interest therein;
(b) to determine the duration and purposes for leaves of absence
which may be granted to an Optionee or Grantee on an individual basis without
constituting a termination of employment or service for purposes of the Plan;
(c) to exercise its discretion with respect to the powers and
rights granted to it as set forth in the Plan; and
(d) generally, to exercise such powers and to perform such acts as
are deemed necessary or advisable to promote the best interests of the Company
with respect to the Plan.
3.4 During any calendar year, (i) no Eligible Employee may be granted
Options and Awards (other than Awards described in clause (ii) below) in the
aggregate in respect of more than 250,000 Shares and (ii) the maximum dollar
amount of cash or the Fair Market Value of Shares that any Eligible Employee may
receive in any calendar year in respect of Performance Units denominated in
dollars may not exceed $1,500,000.
4. Stock Subject to the Plan.
4.1 The maximum number of Shares that may be made the subject of Options
and Awards granted under the Plan is 2,750,000. Upon a Change in Capitalization
the maximum number of Shares shall be adjusted in number and kind pursuant to
Section 12. The Company shall reserve for the purposes of the Plan, out of its
authorized but unissued Shares or out of Shares held in the Company's treasury,
or partly out of each, such number of Shares as shall be determined by the
Board.
4.2 Upon the granting of an Option or an Award, the number of Shares
available under Section 4.1 for the granting of further Options and Awards shall
be reduced as follows:
(a) In connection with the granting of an Option or an Award (other
than the granting of a Performance Unit denominated in dollars), the number of
Shares shall be reduced by the number of Shares in respect of which the Option
or Award is granted or denominated.
(b) In connection with the granting of a Performance Unit
denominated in dollars, the number of Shares shall be reduced by an amount equal
to the quotient of (i) the dollar amount in which the Performance Unit is
denominated, divided by (ii) the Fair Market Value of a Share on the date the
Performance Unit is granted.
4.3 Whenever any outstanding Option or Award or portion thereof expires,
is canceled or is otherwise terminated for any reason without having been
exercised or payment having been made in respect of the entire Option or Award,
the Shares allocable to the expired, canceled or otherwise terminated portion of
the Option or Award may again be the subject of Options or Awards granted
hereunder.
5. Director Plans.
5A. Option Grants to Eligible Directors.
5A.1 Annual Grant. Subject to the provisions of Section 5C. hereof,
Director Options shall be granted to each Eligible Director on the first trading
day of September of each year the Plan is in effect and Director options under
the 93 ISP are no longer available for grant to such Directors or any one of
them, as the case maybe. Each Director Option granted shall be in respect of
4,000 Shares. The purchase price of each Director Option shall be as provided in
Section 5A.3 and such Options shall be evidenced by an Agreement containing such
other terms and conditions not inconsistent with the provisions of this Plan as
determined by the Board; provided, however, that such terms shall not vary the
timing of awards of Director Options, including provisions dealing with
forfeiture or termination of such Director Options, and further such terms may
not provide for a modification of a Director Option and the grant of new
Director Option in substitution for them which results in a Purchase Price (as
defined in Section 5A.3 hereof) that is lower than the Purchase Price of the
originally issued Director Option until authorized by the shareholders of the
Corporation.
5A.2 One Time Grant. Subject to the Provisions of Section 5C. hereof, each
newly appointed or elected Eligible Director who has not previously received a
one-time grant under the 93 ISP or hereunder, shall be granted an option on the
date the Eligible Director attends his or her first Company Board meeting. Each
Director Option granted under this section shall be in respect of 5,000 Shares.
The purchase price of each Director Option shall be as provided in Section 5A.3
and such Options shall be evidenced by an Agreement containing such other terms
and conditions not inconsistent with the provisions of this Plan as determined
by the Board; provided, however, that such terms shall not vary the timing of
awards of Director Options, including provisions dealing with forfeiture or
termination of such Director Options.
5A.3 Purchase Price. The purchase price for Shares under each Director
Option shall be equal to 100% of the Fair Market Value of such Shares on the
trading date immediately preceding the date of grant.
5A.4 Vesting. Subject to Section 7.4, each Director Option shall become
exercisable with respect to one third (1/3) of the Shares subject thereto
effective as of each of the first, second and third annual anniversaries of the
grant date; provided, however, that the Optionee continues to serve as a
Director as of such dates. Notwithstanding the foregoing, if a Director's
service terminates by reason of his death, Disability or Retirement, all
Director Options then held by the Director shall be fully vested.
5A.5 Duration. Each Director Option shall terminate on the date which is
the tenth annual anniversary of the grant date, unless terminated earlier as
follows:
(a) If an Optionee's service as a Director terminates for any reason
other than Retirement, Disability, death or Cause, the Optionee may, for a
period of three (3) months after such termination, exercise his or her Option to
the extent, and only to the extent, that such Option or portion thereof was
vested and exercisable as of the date the Optionee's service as a Director
terminated, after which time the Option shall automatically terminate in full.
(b) If an Optionee's service as a Director terminates by reason of
the Optionee's Retirement or by resignation or removal from the Board due to
Disability, the Optionee may, for a period of three (3) years after such
termination, exercise his or her Option to the extent, and only to the extent
that such Option or portion thereof was vested and exercisable, as of the date
the Optionee's service as a Director terminated, after which time the Option
shall automatically terminate in full.
(c) If an Optionee's service as a Director terminates for Cause, the
Option granted to the Optionee hereunder shall immediately terminate in full and
no rights thereunder may be exercised.
(d) If an Optionee dies while a Director or within three (3) months
after termination of service as a Director as described in clause (a) of this
Section 5A.5, or within three (3) years after termination of service as a
Director as described in clause (b) of this Section 5A.5, the Option granted to
the Optionee may be exercised at any time within 12 months after the Optionee's
death by the person or persons to whom such rights under the Option shall pass
by will, or by the laws of descent or distribution, after which time the Option
shall terminate in full.
5B. Stock Purchase for Director Retainer Fees.
5B.1 Election to Participate.
(a) Initial Year Election. Each Eligible Director may participate in
this Section 5B by filing an election to participate with the Company Secretary
(the "Initial Year Election") at any time following his or her appointment or
election. An Initial Year Election shall become effective with respect to the
Eligible Director's retainer fees payable to him or her under the Eligible
Director compensation plan in respect of each calendar month commencing with the
first calendar month commencing after the receipt of the Initial Year Election
by the Company Secretary and ending the subsequent May 31. An Eligible Director
may, pursuant to an Initial Year Election, participate in this Section 5B only
at either a 50% or 100% level and may not change his or her level of
participation except as provided in Section 5B.1 (b) below.
(b) Annual Election. Each Eligible Director may, prior to May 1 of
any year, elect to participate (or cease to participate ) or change his or her
level of participation in this Section 5B (an "Annual Election"). An Annual
Election shall become effective with respect to the Eligible Director's retainer
fees payable to him or her under the Eligible Director compensation plan in
respect of the year commencing on June 1 next subsequent to the receipt of the
Annual Election by the Company Secretary and shall continue for subsequent years
unless changed pursuant to this Section 5B.1 (b). An Eligible Director may,
pursuant to an Annual Election, participate in this Section 5B only at either a
50% or 100% level and may not change his or her level of participation except as
provided in this Section 5B.1(b).
5B.2 Payment in Stock.
(a) For the period commencing on the effective date of a Eligible
Director's Initial Year Election through the next subsequent May 31, (i) Shares
will be issued to each Eligible Director participating at the 100% level having
a Fair Market Value (as of the first trading day immediately preceding the date
of issuance) equal to the Eligible Director's annual retainer divided by twelve
(12), then multiplied by the number of calendar months from the effective date
of the Initial Year Election through the next subsequent May 31; and (ii) Shares
will be issued to each Eligible Director participating at the 50% level
according to the calculation in clause (i) of this Section 5B.2 (a) but reduced
by one-half. Shares will be issued as of the effective date of the Initial Year
Election.
(b) For each year commencing on June 1 in respect of which an
Eligible Director has elected to participate in this Section 5B pursuant to an
Annual Election, (i) Shares will be issued to each Eligible Director
participating at the 100% level having a Fair Market Value (as of the first
trading day immediately preceding the date of issuance) equal to the Eligible
Director's annual retainer; and (ii) Shares will be issued to each Eligible
Director participating in this section 5B at the 50% level according to the
calculation in clause (i) of this Section 5B.2(b) but reduced by one-half.
Shares will be issued as of June 1.
(c) The issuance of Shares to an Eligible director participating in
this Section 5B shall represent payment in advance of, and shall be in lieu of,
50% or 100%, as applicable, of the Eligible Director's annual retainer for the
period in respect of which the Initial Year Election or the Annual Election is
in effect.
5B.3 Distribution. Shares will be distributed to the Eligible Director as
soon as practicable after issuance. No fractional Share will be issued to any
Eligible Director. Any amount not used for the acquisition of a Share will be
paid to the Eligible Director in cash.
5C. Director Option Grants under the 93 ISP and the Plan
5C.1 No Duplication. Notwithstanding any provision in this Plan to the
contrary, no Director Option shall be granted to any Eligible Director pursuant
to Section 5A of this Plan on any day if such Director is granted an option
pursuant to Section 5A of the 93 ISP on such day. In addition, no Shares shall
be issued pursuant to Section 5B of this Plan in respect of an Eligible
Director's retainer fees if Shares are or will be issued pursuant to Section 5B
of the 93 ISP in respect of such retainer fees.
6. Option Grants for Eligible Employees.
6.1 Authority of Committee. Subject to the provisions of the Plan and to
Section 4.1 above, the Committee shall have full and final authority to select
those Eligible Employees who will receive Options (each an "Employee Option"),
the terms and conditions of which shall be set forth in an Agreement; provided,
however, that no person shall receive any Incentive Stock Options unless he or
she is an employee of the Company, a Parent or a Subsidiary at the time the
Incentive Stock Option is granted.
6.2 Purchase Price. The purchase price or the manner in which the purchase
price is to be determined for Shares under each Employee Option shall be
determined by the Committee and set forth in the Agreement; provided, however,
that the purchase price per Share under each Incentive Stock Option shall not be
less than 100% of the Fair Market Value of a Share on the date the Incentive
Stock Option is granted (110% in the case of an Incentive Stock Option granted
to a Ten-Percent Stockholder) and the purchase price per Share under each
Nonqualified Stock Option shall not be less than the Fair Market Value of a
Share on the date the Nonqualified Stock Option is granted.
6.3 Maximum Duration. Employee Options granted hereunder shall be for such
term as the Committee shall determine, provided that an Incentive Stock Option
shall not be exercisable after the expiration of ten (10) years from the date it
is granted (five (5) years in the case of an Incentive Stock Option granted to a
Ten-Percent Stockholder) and a Nonqualified Stock Option shall not be
exercisable after the expiration of ten (10) years from the date it is granted.
The Committee may, subsequent to the granting of any Employee Option, extend the
term thereof but in no event shall the term as so extended exceed the maximum
term provided for in the preceding sentence.
6.4 Vesting. Subject to Section 7.4 hereof, each Employee Option shall
become exercisable in such installments (which need not be equal) and at such
times as may be designated by the Committee and set forth in the Agreement. To
the extent not exercised, installments shall accumulate and be exercisable, in
whole or in part, at any time after becoming exercisable, but not later than the
date the Employee Option expires. The Committee may accelerate the
exercisability of any Option or portion thereof at any time.
6.5 Modification or Substitution. The Committee may, in its discretion,
modify outstanding Employee Options or accept the surrender of outstanding
Employee Options (to the extent not exercised) and grant new Options in
substitution for them. Notwithstanding the foregoing, (i) no modification of an
Employee Option shall adversely alter or impair any rights or obligations under
the Employee Option without the Optionee's consent, and (ii) no modification or
surrender of an outstanding option and the grant of new options in substitution
for them which results in a purchase price (as defined in Section 6.2 hereof)
that is lower than the purchase price of the originally issued Option shall be
effective until authorized by the shareholders of the Corporation.
7. Terms and Conditions Applicable to All Options.
7.1 Transferability. Unless otherwise provided by the Committee, no Option
granted hereunder shall be transferable by the Optionee to whom granted
otherwise than by will or the laws of descent and distribution, and an Option
may be exercised during the lifetime of such Optionee only by the Optionee or
his or her guardian or legal representative. The terms of such Option shall be
final, binding and conclusive upon the beneficiaries, executors, administrators,
heirs and successors of the Optionee.
7.2 Method of Exercise. The exercise of an Option shall be made only by a
written notice delivered in person or by mail to the Secretary of the Company at
the Company's principal executive office, specifying the number of Shares to be
purchased and accompanied by payment therefor and otherwise in accordance with
the Agreement pursuant to which the Option was granted. The purchase price for
any Shares purchased pursuant to the exercise of an Option shall be paid in full
upon such exercise by any one or a combination of the following: (i) cash or
(ii) transferring Shares to the Company upon such terms and conditions as
determined by the Committee. Notwithstanding the foregoing, the Committee shall
have discretion to determine at the time of grant of each Employee Option or at
any later date (up to and including the date of exercise) the form of payment
acceptable in respect of the exercise of such Employee Option. The written
notice pursuant to this Section 7.2 may also provide instructions from the
Optionee to the Company that upon receipt of the purchase price in cash from the
Optionee's broker or dealer, that has been approved by the Company, designated
as such on the written notice, in payment for any Shares purchased pursuant to
the exercise of an Option, the Company shall issue such Shares directly to the
designated broker or dealer that has been approved by the Company. Any Shares
transferred to the Company as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the day preceding the date of
exercise of such Option. If requested by the Committee, the Optionee shall
deliver the Agreement evidencing the Option to the Secretary of the Company who
shall endorse thereon a notation of such exercise and return such Agreement to
the Optionee. No fractional Shares (or cash in lieu thereof) shall be issued
upon exercise of an Option and the number of Shares that may be purchased upon
exercise shall be rounded to the nearest number of whole Shares.
7.3 Rights of Optionees. No Optionee shall be deemed for any purpose to be
the owner of any Shares subject to any Option unless and until (i) the Option
shall have been exercised pursuant to the terms thereof, (ii) the Company shall
have issued and delivered the Shares to the Optionee or his designated broker or
dealer that has been approved by the Company and (iii) the Optionee's name or
the name of his designated broker or dealer that has been approved by the
Company shall have been entered as a stockholder of record on the books of the
Company. Thereupon, the Optionee shall have full voting, dividend and other
ownership rights with respect to such Shares.
7.4 Effect of Change in Control. Notwithstanding anything contained in the
Plan to the contrary, unless an Agreement evidencing an Option provides
otherwise, in the event of a Change in control the Option shall become
immediately and fully exercisable. In addition, an Agreement evidencing an
Option may provide that the Optionee will be permitted to surrender for
cancellation within sixty (60) days after such Change in Control, the Option or
portion of the Option to the extent not yet exercised and the Optionee will be
entitled to receive a cash payment in an amount equal to the excess, if any, of
(x) (A) in the case of a Nonqualified Stock Option, the greater of (1) the Fair
Market Value, on the date preceding the date of surrender, of the Shares subject
to the Option or portion thereof surrendered or (2) the Adjusted Fair Market
Value of the Shares subject to the Option or portion thereof surrendered or (B)
in the case of an Incentive Stock Option, the Fair Market Value, on the date
preceding the date of surrender, of the Shares subject to the Option or portion
thereof surrendered, over (y) the aggregate purchase price for such Shares under
the Option or portion thereof surrendered. In the event an Optionee's employment
with, or service as a Director of, the Company terminates following a Change in
Control, each Option held by the Optionee that was exercisable as of the date of
termination of the Optionee's employment or service shall remain exercisable for
a period ending not before the earlier of (A) the first annual anniversary of
the termination of the Optionee's employment or service or (B) the expiration of
the stated term of the Option.
8. Stock Appreciation Rights. The Committee may, in its discretion, either
alone or in connection with the grant of an Option, grant to Eligible Employees,
Stock Appreciation Rights in accordance with the Plan and the terms and
conditions of which shall be set forth in an Agreement. If granted in connection
with an Option, a Stock Appreciation Right shall cover the same Shares covered
by the Option (or such lesser number of Shares as the Committee may determine)
and shall, except as provided in this Section 8, be subject to the same terms
and conditions as the related Option.
8.1 Time of Grant. A Stock Appreciation Right may be granted (i) at any
time if unrelated to an Option, or (ii) if related to an Option, either at the
time of grant, or at any time thereafter during the term of the Option.
8.2 Stock Appreciation Right Related to an Option.
(a) Exercise. Subject to Section 8.6, a Stock Appreciation Right
granted in connection with an Option shall be exercisable at such time or times
and only to the extent that the related Option is exercisable, and will not be
transferable except to the extent the related Option may be transferable. A
Stock Appreciation Right granted in connection with an Incentive Stock Option
shall be exercisable only if the Fair Market Value of a Share on the date of
exercise exceeds the purchase price specified in the related Incentive Stock
Option Agreement.
(b) Amount Payable. Upon the exercise of a Stock Appreciation Right
related to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a Share on
the date preceding the date of exercise of such Stock Appreciation Right over
the per Share purchase price under the related Option, by (B) the number of
Shares as to which such Stock Appreciation Right is being exercised.
Notwithstanding the foregoing, the Committee may limit in any manner the amount
payable with respect to any Stock Appreciation Right by including such a limit
in the Agreement evidencing the Stock Appreciation Right at the time it is
granted.
(c) Treatment of Related Options and Stock Appreciation Rights Upon
Exercise. Upon the exercise of a Stock Appreciation Right granted in connection
with an Option, the Option shall be canceled to the extent of the number of
Shares as to which the Stock Appreciation Right is exercised, and upon the
exercise of an Option granted in connection with a Stock Appreciation Right or
the surrender of such Option, the Stock Appreciation Right shall be canceled to
the extent of the number of Shares as to which the Option is exercised or
surrendered.
8.3 Stock Appreciation Right Unrelated to an Option. The Committee may
grant to Eligible Employees Stock Appreciation Rights unrelated to Options.
Stock Appreciation Rights unrelated to Options shall contain such terms and
conditions as to exercisability, vesting and duration as the Committee shall
determine, but in no event shall they have a term of greater than ten (10)
years. Upon exercise of a Stock Appreciation Right unrelated to an Option, the
Grantee shall be entitled to receive an amount determined by multiplying (A) the
excess of the Fair Market Value of a Share on the date preceding the date of
exercise of such Stock Appreciation Right over the Fair Market Value of a Share
on the date the Stock Appreciation Right was granted (the "Base Price") , by (B)
the number of Shares as to which the Stock Appreciation Right is being
exercised. Notwithstanding the foregoing, the Committee may limit in any manner
the amount payable with respect to any Stock Appreciation Right by including
such a limit in the Agreement evidencing the Stock Appreciation Right at the
time it is granted.
8.4 Method of Exercise. Stock Appreciation Rights shall be exercised by a
Grantee only by a written notice delivered in person or by mail to the Corporate
Secretary or the President of the Company at the Company's principal executive
office, specifying the number of Shares with respect to which the Stock
Appreciation Right is being exercised. If requested by the Committee, the
Grantee shall deliver the Agreement evidencing the Stock Appreciation Right
being exercised and the Agreement evidencing any related Option to the Corporate
Secretary or President of the Company who shall endorse thereon a notation of
such exercise and return such Agreement to the Grantee.
8.5 Form of Payment. Payment of the amount determined under Sections
8.2(b) or 8.3 may be made in the discretion of the Committee, solely in whole
Shares in a number determined at their Fair Market Value on the date preceding
the date of exercise of the Stock Appreciation Right, or solely in cash, or in a
combination of cash and Shares. If the Committee decides to make full payment in
Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.
8.6 Modification or Substitution. Subject to the terms of the Plan, the
Committee may modify outstanding Awards of Stock Appreciation Rights or accept
the surrender of outstanding Awards of Stock Appreciation Rights (to the extent
not exercised) and grant new Awards in substitution for them. Notwithstanding
the foregoing, (i) no modification of an Award shall adversely alter or impair
any rights or obligations under the Agreement without the Grantee's consent, and
(ii) no modification or surrender of an outstanding Award of Stock Appreciation
Rights and the grant of new Awards in substitution for them, which results (in
the case of Stock Appreciation Right related to Option) in a purchase price that
is lower than the purchase price specified in the related Incentive Stock Option
Agreement, and (in the case of Stock Appreciation Rights unrelated to Options)
results in a lower Base Price of a Share than that which existed on the date the
Stock Appreciation Right unrelated to Options was granted shall be effective
until authorized by the shareholders of the Corporation.
8.7 Effect of Change in Control. Notwithstanding anything contained in
this Plan to the contrary, unless an Agreement evidencing a Stock Appreciation
Right provides otherwise, in the event of a Change in Control, all Stock
Appreciation Rights shall become immediately and fully exercisable.
Notwithstanding Sections 8.3 and 8.5, an Agreement evidencing a Stock
Appreciation Right may provide that upon the exercise of a Stock Appreciation
Right unrelated to an Option or any portion thereof during the sixty (60) day
period following a Change in Control, the amount payable shall be in cash and
shall be an amount equal to the excess, if any, of (A) the greater of (x) the
Fair Market Value, on the date preceding the date of exercise, of the Shares
subject to Stock Appreciation Right or portion thereof exercised and (y) the
Adjusted Fair Market Value, on the date preceding the date of exercise, of the
Shares over (B) the aggregate Fair Market Value, on the date the Stock
Appreciation Right was granted, of the Shares subject to the Stock Appreciation
Right or portion thereof exercised. In the event a Grantee's employment with the
Company terminates following a Change in Control, each Stock Appreciation Right
held by the Grantee that was exercisable as of the date of termination of the
Grantee's employment shall remain exercisable for a period ending not before the
earlier of the first annual anniversary of (A) the termination of the Grantee's
employment or (B) the expiration of the stated term of the Stock Appreciation
Right.
9. Restricted Stock.
9.1 Grant. The Committee may grant to Eligible Employees and Directors,
Awards of Restricted Stock, and may issue Shares of Restricted Stock in payment
in respect of vested Performance Units (as hereinafter provided in Section
10.2), which shall be evidenced by an Agreement between the Company and the
Grantee. Each Agreement shall contain such restrictions, terms and conditions as
the Committee may, in its discretion, determine and (without limiting the
generality of the foregoing) such Agreements may require that an appropriate
legend be placed on Share certificates. Awards of Restricted Stock shall be
subject to the terms and provisions set forth below in this Section 9.
9.2 Rights of Grantee. Shares of Restricted Stock granted pursuant to an
Award hereunder may either be issued in the name of the Grantee as soon as
reasonably practicable after the Award is granted or credited in a separate book
account in the Grantee's name maintained for that purpose provided that the
Grantee has executed an Agreement evidencing the Award, and, in the discretion
of the Committee, appropriate blank stock powers, an escrow agreement and any
other documents which the Committee may require as a condition to the issuance
of such Shares. If a Grantee shall fail to execute the Agreement evidencing a
Restricted Stock Award, and, in the discretion of the Committee, appropriate
blank stock powers, an escrow agreement and any other documents which the
Committee may require within the time period prescribed by the Committee at the
time the Award is granted, the Award shall be null and void. At the discretion
of the Committee, Shares issued in connection with a Restricted Stock Award
shall be deposited together with the stock powers with an escrow agent (which
may be the Company) designated by the Committee. The Committee shall have the
full and final authority to determine, upon delivery of the Shares to the escrow
agent, or the establishment of a book account in the name of the Grantee, as the
case may be, whether or not the Grantee shall have all of the rights of a
stockholder with respect to such Shares, including the right to vote the Shares
and to receive all dividends or other distributions paid or made with respect to
the Shares.
9.3 Transferability. Unless otherwise provided by the Committee, until any
restrictions upon the Shares of Restricted Stock awarded to a Grantee shall have
lapsed in the manner set forth in Section 9.4, such Shares shall not be sold,
transferred or otherwise disposed of and shall not be pledged or otherwise
hypothecated, nor shall they be delivered to the Grantee.
9.4 Lapse of Restrictions.
(a) Generally. Restrictions upon Shares of Restricted Stock awarded
hereunder shall lapse at such time or times and on such terms and conditions as
the Committee may determine, which restrictions shall be set forth in the
Agreement evidencing the Award.
(b) Effect of Change in Control. Notwithstanding anything contained
in the Plan, unless the Agreement evidencing the Award provides to the contrary,
in the event of a Change in Control, all restrictions upon any Shares of
Restricted Stock shall lapse immediately and all such Shares shall become fully
vested in the Grantee.
9.5 Modification or Substitution. Subject to the terms of the Plan, the
Committee may modify outstanding Awards of Restricted Stock or accept the
surrender of outstanding Shares of Restricted Stock (to the extent the
restrictions on such Shares have not yet lapsed) and grant new Awards in
substitution for them. Notwithstanding the foregoing, no modification of an
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent.
9.6 Treatment of Dividends. At the time the Award of Shares of Restricted
Stock is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on such Shares by the Company shall be (i) deferred until the lapsing of
the restrictions imposed upon such Shares and (ii) held by the Company for the
account of the Grantee until such time. In the event that dividends are to be
deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Shares of
Restricted Stock) or held in cash. If deferred dividends are to be held in cash,
there may be credited at the end of each year (or portion thereof) interest on
the amount of the account at the beginning of the year at a rate per annum as
the Committee, in its discretion, may determine. Payment of deferred dividends
in respect of Shares of Restricted Stock (whether held in cash or as additional
Shares of Restricted Stock), together with interest accrued thereon, if any,
shall be made upon the lapsing of restrictions imposed on the Shares in respect
of which deferred dividends were paid, and any dividends deferred (together with
any interest accrued thereon) in respect of any Shares of Restricted Stock shall
be forfeited upon the forfeiture of such Shares.
9.7 Delivery of Shares. Upon the lapse of the restrictions on Shares of
Restricted Stock, the Committee shall cause a stock certificate to be delivered
to the Grantee with respect to such Shares, free of all restrictions hereunder.
10. Performance Awards.
10.1 Performance Objectives.
(a) Performance objectives for Performance Awards may be expressed
in terms of (i) earnings per Share, (ii) pre-tax profits, (iii) net earnings or
net worth, (iv) return on equity or assets, (v) price of Shares, or (vi) any
combination of the foregoing, for the Company, Subsidiary or Division thereof,
as may be applicable. Performance objectives may be in respect of the
performance of the Company and its Subsidiaries (which may be on a consolidated
basis), a Subsidiary or a Division. Performance objectives may be absolute or
relative and may be expressed in terms of a progression within a specified
range. The performance objectives with respect to a Performance Cycle shall be
established in writing by the Committee by the earlier of (i) the date on which
a quarter of the Performance Cycle has elapsed or (ii) the date which is ninety
(90) days after the commencement of the Performance Cycle, and in any event
while the performance relating to the performance objectives remains
substantially uncertain.
(b) Determination of Performance. Prior to the vesting, payment,
settlement or lapsing of any restrictions with respect to any Performance Award
made to a Grantee who is subject to Section 162(m) of the Code, the Committee
shall certify in writing that the applicable performance objectives have been
satisfied.
10.2 Performance Units. The Committee, in its discretion, may grant Awards
of Performance Units to Eligible Employees, the terms and conditions of which
shall be set forth in an Agreement between the Company and the Grantee.
Performance Units may be denominated in Shares or a specified dollar amount and,
contingent upon the attainment of specified performance objectives within the
Performance Cycle, represent the right to receive payment as provided in Section
10.2(b) of (i) in the case of Share-denominated Performance Units, the Fair
Market Value of a Share on the date the Performance Unit was granted, the date
the Performance Unit became vested or any other date specified by the Committee,
(ii) in the case of dollar-denominated Performance Units, the specified dollar
amount or (iii) a percentage (which may be more than 100%) of the amount
described in clause (i) or (ii) depending on the level of performance objective
attainment; provided, however, that the Committee may at the time a Performance
Unit is granted, specify a maximum amount payable in respect of a vested
Performance Unit. Each Agreement shall specify the number of the Performance
Units to which it relates, the performance objectives which must be satisfied in
order for the Performance Units to vest and the Performance Cycle within which
such objectives must be satisfied.
(a) Vesting and Forfeiture. Subject to Sections 10.1 (b) and 10.4,
Grantee shall become vested with respect to the Performance Units to the extent
that the performance objectives set forth in the Agreement are satisfied for the
Performance Cycle.
(b) Payment of Awards. Subject to Section 10.1 (b), payment to
Grantees in respect of vested Performance Units shall be made within sixty (60)
days after the last day of the Performance Cycle to which such Award relates
unless the Agreement evidencing the Award provides for the deferral of payment,
in which event the terms and conditions of the deferral shall be set forth in
the Agreement. Subject to Section 10.4, such payments may be made entirely in
Shares valued at their Fair Market Value as of the last day of the applicable
Performance Cycle or such other date specified by the Committee, entirely in
cash, or in such combination of Shares and cash as the Committee in its
discretion, shall determine at any time prior to such payment; provided,
however, that if the Committee in its discretion determines to make such payment
entirely or partially in Shares of Restricted Stock, the Committee must
determine the extent to which such payment will be in Shares of Restricted Stock
and the terms of such Restricted Stock at the time the Award is granted.
10.3 Performance Shares. The Committee, in its discretion, may grant
Awards of Performance Shares to Eligible Employees, the terms and conditions of
which shall be set forth in an Agreement between the Company and the Grantee.
Each Agreement may require that an appropriate legend be placed on Share
certificates. Awards of Performance Shares shall be subject to the following
terms and provisions:
(a) Rights of Grantee. The Committee shall provide at the time an
Award of Performance Shares is made, either the time or times at which the
actual Shares represented by such Award shall be issued in the name of the
Grantee or whether a separate book account in the name of the Grantee should be
maintained and credited with the Performance Shares represented by such Award;
provided, however, that no Performance Shares shall be issued or credited to any
such book account until the Grantee has executed an Agreement evidencing the
Award, and, in the discretion of the Committee, the appropriate blank stock
powers, an escrow agreement and any other documents which the Committee may
require as a condition to the issuance of such Performance Shares. If a Grantee
shall fail to execute the Agreement evidencing an Award of Performance Shares,
and, in the discretion of the Committee, the appropriate blank stock powers, an
escrow agreement and any other documents which the Committee may require within
the time period prescribed by the Committee at the time the Award is granted,
the Award shall be null and void. At the discretion of the Committee, Shares
issued in connection with an Award of Performance Shares shall be deposited
together with the stock powers with an escrow agent (which may be the Company)
designated by the Committee. Except as restricted by the terms of the Agreement,
upon delivery of the Shares to the escrow agent, or the establishment of a book
account in the name of Grantee, as the case may be, the Grantee shall have, in
the discretion of the Committee, all of the rights of a stockholder with respect
to such Shares, including the right to vote the Shares and to receive all
dividends or other distributions paid or made with respect to the Shares.
(b) Transferability. Unless otherwise provided by the Committee
until any restrictions upon the Performance Shares awarded to a Grantee shall
have lapsed in the manner set forth in Sections 10.3(c) or 10.4, such
Performance Shares shall not be sold, transferred or otherwise disposed of and
shall not be pledged or otherwise hypothecated, nor shall they be delivered to
the Grantee. The Committee may also impose such other restrictions and
conditions on the Performance Shares, if any, as it deems appropriate.
(c) Lapse of Restrictions. Subject to Section 10.4, restrictions
upon Performance Shares awarded hereunder shall lapse and such Performance
Shares shall become vested at such time or times and on such terms, conditions
and satisfaction of performance objectives as the Committee may, in its
discretion, determine at the time an Award is granted.
(d) Treatment of Dividends. At the time the Award of Performance
Shares is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividends, or a specified portion thereof, declared or
paid on actual Shares represented by such Award which have been issued by the
Company to the Grantee shall be (i) deferred until the lapsing of the
restrictions imposed upon such Performance Shares and (ii) held by the Company
for the account of the Grantee until such time. In the event that dividends are
to be deferred, the Committee shall determine whether such dividends are to be
reinvested in shares of Stock (which shall be held as additional Performance
Shares) or held in cash. If deferred dividends are to be held in cash, there may
be credited at the end of each year (or portion thereof) interest on the amount
of the account at the beginning of the year at a rate per annum as the
Committee, in its discretion, may determine. Payment of deferred dividends in
respect of Performance Shares (whether held in cash or in additional Performance
Shares), together with interest accrued thereon, if any, shall be made upon the
lapsing of restrictions imposed on the Performance Shares in respect of which
the deferred dividends were paid, and any dividends deferred (together with any
interest accrued thereon) in respect of any Performance Shares shall be
forfeited upon the forfeiture of such Performance Shares.
(e) Delivery of Shares. Upon the lapse of the restrictions on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Shares, free of
all restrictions hereunder.
10.4 Effect of Change in Control. Notwithstanding anything contained
in the Plan or any Agreement to the contrary, in the event of a Change in
Control:
(a) With respect to the Performance Units, the Grantee shall (i)
become vested in a percentage of Performance Units as determined by the
Committee at the time of the Award of such Performance Units and as set forth in
the Agreement and (ii) be entitled to receive in respect of all Performance
Units which become vested as a result of a Change in Control, a cash payment
within ten (10) days after such Change in Control in an amount as determined by
the Committee at the time of the Award of such Performance Unit and as set forth
in the Agreement.
(b) With respect to the Performance Shares, all restrictions shall
lapse immediately on all or a portion of the Performance Shares as determined by
the Committee at the time of the Award of such Performance Shares and as set
forth in the Agreement.
(c) The Agreements evidencing Performance Shares and Performance
Units shall provide for the treatment of such Awards (or portions thereof) which
do not become vested as the result of a Change in Control, including, but not
limited to, provisions for the adjustment of applicable performance objectives.
10.5 Transferability. Unless otherwise provided by the Committee no
Performance Awards shall be transferable by the Grantee otherwise than by will
or the laws of descent and distribution.
10.6 Modification or Substitution. Subject to the terms of the Plan, the
Committee may modify outstanding Performance Awards or accept the surrender of
outstanding Performance Awards and grant new Performance Awards in substitution
for them. Notwithstanding the foregoing, (i) no modification of a Performance
Award shall adversely alter or impair any rights or obligations under the
Agreement without the Grantee's consent, and (ii) no modification or surrender
of an outstanding Performance Award and grant of new Performance Awards in
substitution for them can have the effect of increasing the value to be granted
to an Eligible Employee for comparable performance unless and until authorized
by the shareholders of the Corporation.
11. Effect of a Termination of Employment. The Agreement evidencing the
grant of each Employee Option and each Award shall set forth the terms and
conditions applicable to such Employee Option or Award upon a termination or
change in the status of the employment of the Optionee or Grantee by the
Company, a Subsidiary or a Division (including a termination or change by reason
of the sale of a Subsidiary or a Division), as the Committee may, in its
discretion, determine at the time the Employee Option or Award is granted or
thereafter.
12. Adjustment Upon Changes in Capitalization.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to the (i) maximum
number and class of Shares or other stock or securities with respect to which
Options or Awards may be granted under the Plan, (ii) the number and class of
Shares or other stock or securities which are subject to Director Options
issuable under Section 5; and (iii) the number and class of Shares or other
stock or securities which are subject to outstanding Options or Awards granted
under the Plan, and the purchase price therefor, if applicable; and (iv) the
maximum number and class of Shares or other stock or securities with respect to
which Options or Awards may be granted to any Eligible Employee.
(b) Any such adjustment in the Shares or other stock or securities
subject to outstanding Incentive Stock Options (including any adjustments in the
purchase price) shall be made in such manner as not to constitute a modification
as defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
(c) Any stock adjustment in the Shares or other stock or securities
subject to outstanding Director Options (including any adjustments in the
purchase price) shall be made only to the extent necessary to maintain the
proportionate interest of the Optionee and preserve, without exceeding, the
value of such Director Option.
(d) If, by reason of a Change in Capitalization, a Grantee of an
Award shall be entitled to, or an Optionee shall be entitled to exercise an
Option with respect to, new, additional or different shares of stock or
securities, such new additional or different shares shall thereupon be subject
to all of the conditions, restrictions and performance criteria which were
applicable to the Shares subject to the Award or Option, as the case may be,
prior to such Change in Capitalization.
13. Effect of Certain Transactions. Subject to Sections 7.4, 8.7, 9.4(b)
and 10.4, in the event of (i) the liquidation or dissolution of the Company or
(ii) a merger or consolidation of the Company (a "Transaction"), the Plan and
the Options and Awards issued hereunder shall continue in effect in accordance
with their respective terms and each Optionee and Grantee shall be entitled to
receive in respect of each Share subject to any outstanding Options or Awards,
as the case may be, upon exercise of any Option or payment or transfer in
respect of any Award, the same number and kind of stock, securities, cash,
property, or other consideration that each holder of a Share was entitled to
receive in the Transaction in respect of a Share.
14. Termination and Amendment of the Plan. The Plan shall terminate on the
day preceding the tenth annual anniversary of the date of its adoption by the
Board and no Option or Award may be granted thereafter. The Board may sooner
terminate the Plan and the Board may at any time and from time to time amend,
modify or suspend the Plan; provided, however, that:
(a) No such amendment, modification, suspension or termination shall
impair or adversely alter any Options or Awards therefore granted under the
Plan, except with the consent of the Optionee or Grantee, nor shall any
amendment, modification, suspension or termination deprive any Optionee or
Grantee of any Shares which he or she may have acquired through or as a result
of the Plan;
(b) To the extent necessary under applicable law, no amendment shall
be effective unless approved by the stockholders of the Company in accordance
with applicable law and regulations.
(c) The provisions of Section 5 shall not be amended more often than
once every six (6) months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder.
15. Non-Exclusivity of the Plan. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangements or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
16. Limitation of Liability. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing
in the Plan shall be construed to:
(i) give any person any right to be granted an Option or Award other
than at the sole discretion of the Committee;
(ii) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(iii) limit in any way the right of the Company or any Subsidiary to
terminate the employment of any person at any time; or
(iv) be evidence of any agreement or understanding, expressed or implied,
that the Company will employ any person at any particular rate of compensation
or for any particular period of time.
17. Regulations and Other Approvals; Governing Law.
17.1 Except as to matters of federal law, this Plan and the rights of all
persons claiming hereunder shall be construed and determined in accordance with
the laws of the State of Texas without giving effect to conflict of laws
principles.
17.2 The obligation of the Company to sell or deliver Shares with respect
to Options and Awards granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
17.3 The Plan is intended to comply with Rule 16b-3 promulgated under the
Exchange Act and Section 162 (m) of the Code, and the Committee shall interpret
and administer the provisions of the Plan or any Agreement in a manner
consistent therewith. Any provisions inconsistent with such Rule and Section
162(m) of the Code shall be inoperative and shall not affect the validity of the
Plan.
17.4 The Board may make such changes as may be necessary or appropriate to
comply with the rules and regulations of any government authority, or to obtain
for Eligible Employees granted Incentive Stock Options the tax benefits under
the applicable provisions of the Code and regulations promulgated thereunder.
17.5 Each Option and Award is subject to the requirement that, if at any
time the Committee determines, in its discretion, that the listing, registration
or qualification of Shares issuable pursuant to the Plan is required by any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or Award or the
issuance of Shares, no Options or Awards shall be granted or payment made or
Shares issued, in whole or in part, unless listing, registration, qualification,
consent or approval has been effected or obtained free of any conditions as
acceptable to the Committee.
17.6 Notwithstanding anything contained in the Plan or any Agreement to
the contrary, in the event that the disposition of Shares acquired pursuant to
the Plan is not covered by a then current registration statement under the
Securities Act of 1933, as amended, and is not otherwise exempt from such
registration, such Shares shall be restricted against transfer to the extent
required by the Securities Act of 1933, as amended, and Rule 144 or other
regulations thereunder. The Committee may require any individual receiving
Shares pursuant to an Option or Award granted under the Plan, as a condition
precedent to receipt of such Shares, to represent and warrant to the Company in
writing that the Shares acquired by such individual are acquired without a view
to any distribution thereof and will not be sold or transferred other than
pursuant to an effective registration thereof under said Act or pursuant to an
exemption applicable under the Securities Act of 1933, as amended, or the rules
and regulations promulgated thereunder. The certificates evidencing any of such
Shares shall be appropriately amended to reflect their status as restricted
securities as aforesaid.
18. Pooling Transactions. Notwithstanding anything contained in the Plan
or any Agreement to the contrary, in the event of a Change in Control which is
also intended to constitute a pooling transaction under the Code, the Committee
shall take such actions, if any, as are specifically recommended by an
independent accounting firm retained by the Company to the extent reasonable
necessary in order to assure that the pooling transaction will qualify as such,
including but not limited to (i) deferring the vesting, exercise, payment,
settlement or lapsing of restrictions with respect to any Option or Award, (ii)
providing that the payment or settlement in respect of any Option or Award be
made in the form of cash, Shares or securities of a successor or acquirer of the
Company, or a combination of the foregoing, and (iii) providing for the
extension of the term of any Option or Award to the extent necessary to
accommodate the foregoing, but not beyond the maximum term permitted for any
Option or Award.
19. Miscellaneous.
19.1 Multiple Agreements. The terms of each Option or Award may differ
from other Options or Awards granted under the Plan at the same time, or at some
other time. The Committee may also grant more than one Option or Award to a
given Eligible Employee during the term of the Plan, either in addition to, or
in substitution for, one or more Options or Awards previously granted to that
Eligible Employee.
19.2 Withholding of Taxes. (a) The Company shall have the right to deduct
from any distribution of cash to any Director, Optionee or Grantee, an amount
equal to the federal, state and local income taxes and other amounts as may be
required by law to be withheld (the "Withholding Taxes") with respect to the
receipt of any retainer fee, Option or Award. If a Director, Optionee or Grantee
is to experience a taxable event in connection with the receipt of Shares
pursuant to a payment in stock, Option exercise or payment of an Award (a
"Taxable Event"), the Director, Optionee or Grantee shall pay the Withholding
Taxes to the Company prior to the issuance, or release from escrow, of such
Shares. In satisfaction of the obligation to pay Withholding Taxes to the
Company, the Director, Optionee or Grantee may make a written election (the "Tax
Election"), which may be accepted or rejected in the discretion of the Committee
or Company Secretary, as applicable, to have withheld a portion of the Shares
then issuable to him or her having an aggregate Fair Market Value, on the date
preceding the date of such issuance, equal to the Withholding Taxes. The
Committee may, by the adoption of rules or otherwise, (i) modify the provisions
of this Section 19.2 (other than as regards Director Options) or impose such
other restrictions or limitations on Tax Elections as may be necessary to ensure
that the Tax Elections will be exempt transactions under Section 16(b) of the
Exchange Act, and (ii) permit Tax Elections to be made at such other times and
subject to such other conditions as the Committee determines will constitute
exempt transactions under Section 16(b) of the Exchange Act.
(b) If an Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to the exercise of an Incentive Stock
Option within the two-year period commencing on the day after the date of the
grant or within the one-year period commencing on the day after the date of
transfer of such Share or Shares to the Optionee pursuant to such exercise, the
Optionee shall, within ten (10) days of such disposition, notify the Company
thereof, by delivery of written notice to the Company at its principal executive
office.
(c) The Committee shall have the authority, at the time of grant of
an Employee Option or Award under the Plan or at any time thereafter, to award
tax bonuses to designated Optionees or Grantees, to be paid upon their exercise
of Employee Options or payment in respect of Awards granted hereunder. The
amount of any such payments shall be determined by the Committee. The Committee
shall have full authority in its absolute discretion to determine the amount of
any such tax bonus and the terms and conditions affecting the vesting and
payment thereof.
20. Effective Date. The effective date of the Plan shall be May 31, 1997,
after the date of its adoption by the Board, and the approval by the affirmative
vote of the holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting of stockholders duly held in
accordance with the applicable laws of the State of Delaware within 12 months of
such adoption.
