Document:

Exhibit 4.1

 

AMENDMENT
NO. 1 TO AMENDED AND RESTATED RIGHTS AGREEMENT

 

This Amendment No. 1 to
Amended and Restated Rights Agreement is made as of May 25, 2010 by and
between ANALYSTS INTERNATIONAL CORPORATION, a Minnesota corporation (the “Company”),
and WELLS FARGO BANK, N.A. (the “Rights Agent”).  Capitalized terms used herein and not
otherwise defined shall have the meaning given to them in the Amended Rights
Agreement (as defined below).

 

Whereas, as of February 27,
2008 the Board of Directors of the Company and the Rights Agent entered into an
Amended and Restated Rights Agreement (the “Amended Rights Agreement”).

 

Whereas, on February 11,
2010, the Company’s Board of Directors declared a 1-for-5 reverse stock split
(the “Reverse Stock Split”) of the Company’s common shares to all holders of
record effective February 26, 2010. 
The Reverse Stock Split was implemented by an amendment to the Company’s
Articles of Incorporation which was filed with the Minnesota Secretary of State
on February 26, 2010.

 

Whereas, following the
Reverse Stock Split, the Company’s total authorized number of shares was
reduced to from 120,000,000 to 24,000,000 common shares and the par value of
ten cents ($0.10) per share remained unchanged. All fractional shares were
rounded down such that any shareholder that would otherwise be entitled to
receive a fractional share would be entitled to a payment of the fair market
value of the fractional share in cash. 
The Reverse Stock Split also resulted in proportionate adjustments under
the Amended Rights Plan in (a) the number of Rights outstanding under the
Amended Rights Plan, (b) the number of shares issuable under the Amended
Rights Plan on the exercise of such Rights, and (c) the Purchase Price.

 

Whereas, in accordance with Section 27
of the Amended Rights Agreement, the Company wishes to amend certain provisions
of the Amended Rights Agreement, as the Company deems necessary and desirable,
as hereinafter set forth; and

 

Whereas, in accordance with Section 27
of the Amended Rights Agreement, the Company and the Rights Agent wish to
evidence such amendments in a writing signed by the Company and the Rights
Agent.

 

Accordingly, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereby amend the Amended Rights Agreement as follows:

 

1.                                               Section 7(b) of the Amended Rights
Agreement shall be deleted in its entirety and replaced with the following in
lieu thereof:

 

(b)              The Purchase Price for each Common Share
pursuant to the exercise of a Right shall initially be $30.00, shall be subject
to adjustment from time to time as provided in Sections 11 and 13 hereof and
shall be payable in lawful money of the United States of America in accordance
with paragraph (c) below.

 

2.                                               Section 12 of the Amended Rights Agreement
shall be deleted in its entirety and replaced with the following in lieu
thereof:

 

Section 12.  Certificate of Adjusted Price or Number of
Shares.  Whenever an adjustment is
made as provided in Sections 11 and 13 hereof, the Company shall promptly (a) prepare
a certificate setting forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) file with the Right Agent and with 

 

1

 

each transfer agent of the
Common Shares a copy of such certificate and (c) make the disclosures
required under the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder by the United States Securities and Exchange
Commission.

 

3.                                               Section 25(a) of the Amended Rights
Agreement shall be deleted in its entirety and replaced with the following in
lieu thereof:

 

(a) 
Notice of Certain Events.  In case the Company shall propose (i) to
pay any dividend payable in stock of any class to the holders of its Common
Shares or to make any other distribution to the holders of its Common Shares
(other than a regular quarterly cash dividend) or (ii) to offer to the
holders of its Common Shares rights or warrants to subscribe for or to purchase
any additional Common Shares or shares of stock of any class or any other
securities, rights or options or (iii) to effect any reclassification of
its Common Shares (other than a reclassification involving only the combination
or subdivision of outstanding Common Shares) or (iv) to effect any consolidation
or merger into or with, or to effect any sale or other transfer (or to permit
one or more of its Subsidiaries to effect any sale or other transfer), in one
or more transactions, of 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to, any other Person or (v) to
effect the liquidation, dissolution or winding-up of the Company or (vi) to
declare or pay any dividend on the Common Shares payable in Common Shares or to
effect a subdivision, combination or consolidation of the Common Shares (by
reclassification or otherwise than by payment of dividends in Common Shares)
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, or distribution of rights or warrants, or the date on which
such reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Shares, if any such date is to be fixed,
and such notice shall be so given in the case of any action covered by clause (i) or
(ii) above at least 20 days prior to the record date for determining
holders of the Common Shares for purposes of such action, and in the case of
any such other action, at least 20 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Common Shares, whichever shall be the earlier.

 

4.                                               Exhibit A to the Amended Rights
Agreement shall be deleted in its entirety and replaced with Exhibit A
(Amended) attached hereto and made a part hereof.

 

5.                                               Exhibit B to the Amended Rights
Agreement shall be deleted in its entirety and replaced with Exhibit B
(Amended) attached hereto and made a part hereof.

 

6.                                               The Rights Agent hereby confirms that this
Amendment No. 1 satisfies the requirement, set forth in Section 27 of
the Amended Rights Agreement, that a certificate be delivered to the Rights
Agent in respect of a proposed amendment to the Amended Rights Agreement.

 

Except as expressly modified
and amended in this Amendment No. 1 to Amended and Restated Rights
Agreement, all other provisions of the Amended and Restated Rights Agreement
dated as of February 27, 2008 shall remain in full force and effect and
unchanged.  In the event of any ambiguity or conflict between this
Amendment No. 1 and any of the terms, conditions or other provisions of
the Amended and Restated Rights Agreement,  the terms and
conditions of this Amendment No. 1 shall control and govern.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment No. 1 to be duly 

 

2

 

executed and their
respective corporate seals to be hereunto affixed and attested, all as of the
day and year first above written.

 

 

	
  Attest:

  	
   

  	
  ANALYSTS INTERNATIONAL
  CORPORATION

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/
  Robert E. Woods

  	
   

  	
  By

  	
  /s/ A.
  Borgstrom

  
	
   

  	
  Secretary

  	
   

  	
   

  	
  Chief Executive Officer and
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
  WELLS FARGO BANK,

  
	
   

  	
   

  	
  NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
  By

  	
  /s/
  Jenni L. Leno

  	
   

  	
  By

  	
  /s/ Steven
  J. Hall

  
	
   

  	
  Assistant
  Secretary

  	
   

  	
  Title

  	
  Vice
  President

  

 

3

 

Exhibit A (Amended)

 

FORM OF
RIGHT CERTIFICATE

 

	
  Certificate No. R-

  	
   

  	
                                      Rights

  

 

 

NOT
EXERCISABLE AFTER FEBRUARY 27, 2018 OR EARLIER IF REDEMPTION OCCURS.  THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SECTION 11(a)(ii) AND
SECTION 13 OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS OR ANY SUBSEQUENT HOLDER OF SUCH-RIGHTS MAY BECOME NULL
AND VOID.  IF THE RIGHTS REPRESENTED BY
THIS RIGHT CERTIFICATE WERE ISSUED TO A PERSON WHO WAS AN ACQUIRING PERSON OR
AN AFFILIATE OR AN ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT), THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 11(a)(ii) AND
SECTION 13 OF THE RIGHTS AGREEMENT.

 

Right
Certificate

 

ANALYSTS
INTERNATIONAL CORPORATION

 

This certifies that
                    ,
or registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms, provisions
and conditions of the Rights Agreement, dated as of June 16, 1989, as
amended and restated as of February 27, 2008 and as thereafter amended as
of May 25, 2010 (collectively, the “Amended Rights Agreement”),
between ANALYSTS INTERNATIONAL CORPORATION, a Minnesota corporation (the “Company”),
and WELLS FARGO BANK, N.A., (the “Rights Agent”), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Amended Rights Agreement) and prior to 5:00 P.M. (Minneapolis time) on February 27,
2018 at the principal offices of the Rights Agent, or at the office of its
successor as Rights Agent, one fully paid nonassessable Common Share, $0.10 par
value (the “Common Shares”), of the Company, at a purchase price of $30.00
per one Common Share (the “Purchase Price”), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase
duly executed.  The number of Rights evidenced
by this Right Certificate (and the number of Common Shares which may be
purchased upon exercise hereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of February 27, 2008,
based on the Common Shares as constituted at such date.

 

As provided in the Amended
Rights Agreement, the Purchase Price and the number of Common Shares which may
be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.

 

This Right Certificate is
subject to all of the terms, provisions and conditions of the Amended Rights
Agreement, which terms, provisions and conditions are hereby incorporated
herein by reference and made a part hereof and to which Amended Rights
Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates.  Copies of the Amended Rights Agreement are on
file at the principal executive offices of the Company and the offices of the
Rights Agent.

 

This Right Certificate, with
or without other Right Certificates, upon surrender at the principal offices of
the Rights Agent, may be exchanged for another Right Certificate or Right
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of Common Shares as the Rights evidenced by
the Right Certificate or Right Certificates surrendered shall have entitled
such holder to purchase.  If this Right
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Right Certificate or Right Certificates for the
number of whole Rights not exercised.

 

4

 

Subject to the provisions of
the Amended Rights Agreement, the Rights evidenced by this Right Certificate
may, but are not required to, be redeemed by the Company at a redemption price
of $0.001 per Right.

 

No fractional Common Shares
will be issued upon the exercise of any Right or Rights evidenced hereby, but
in lieu thereof a cash payment will be made, as provided in the Amended Rights
Agreement.

 

No holder of this Right
Certificate shall be entitled to vote or receive dividends or be deemed for any
purpose the holder of the Common Shares or of any other securities of the Company
which may at any time be issuable on the exercise hereof, nor shall anything
contained in the Amended Rights Agreement or herein be construed to confer upon
the holder hereof, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Amended Rights Agreement), or to
receive dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Right Certificate shall have been exercised as provided in
the Amended Rights Agreement.

 

This Right Certificate shall
not be valid or obligatory for any purpose until it shall have been
countersigned by the Rights Agent.

 

WITNESS the facsimile
signatures of the proper officers of the Company and its corporate seal.  Dated as of
                    ,
20    .

 

	
  Attest:

  	
   

  	
  ANALYSTS INTERNATIONAL
  CORPORATION

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  
	
   

  	
  Secretary

  	
   

  	
   

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  WELLS FARGO BANK, N.A.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
   

  
	
  Authorized Signature

  

 

5

 

Form of Reverse Side of Right Certificate

 

FORM OF
ASSIGNMENT

 

(To be
executed by the registered holder if such holder desires to transfer the Right
Certificate.)

 

	
  FOR VALUE RECEIVED

  	
   

  
	
   

  
	
  hereby sells, assigns
  and transfers unto

  	
   

  
	
   

  	
   

  
	
   

  
	
  (Please print
  name and address of transferee)

  
	
   

  
	
   

  
	
  this Right Certificate, together with all right,
  title and interest therein, and does hereby irrevocably constitute and
  appoint
                      
  Attorney, to transfer the within Right Certificate on the books of the within-named
  Company, with full power of substitution.

  
			

 

	
  Dated:                                    ,
  20    

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

 

Signature
Medallion Guaranteed:

 

Your signature must be
medallion guaranteed by an eligible guarantor institution (Commercial Bank, Trust
Company, Securities Broker/Dealer, Credit Union or Savings Association)
participating in a Medallion program approved by the Securities Transfer
Association Inc.

	
   

  	
   

  

 

The undersigned hereby
certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Amended Rights Agreement).

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

6

 

Form of
Reverse Side of Right Certificate — continued

 

FORM OF
ELECTION TO PURCHASE

 

(To be executed by
the registered holder if such holder desires to exercise the Right
Certificate.)

 

To:                            ANALYSTS INTERNATIONAL CORPORATION

 

The undersigned hereby
irrevocably elects to exercise
                    
Rights represented by this Right Certificate to purchase the Common Shares
issuable upon the exercise of such Rights and requests that certificates for
such Common Shares be issued in the name of:

 

	
  Please insert social security or other identifying
  number

  	
   

  
	
   

  
	
   

  
	
  (Please print
  name and address)

  
	
   

  
	
   

  
	
  If such number of
  Rights shall not be all the Rights evidenced by this Right Certificate, a new
  Right Certificate for the balance remaining of such Rights shall be
  registered in the name of and delivered to:

  
	
   

  
	
  Please insert social security or other identifying
  number

  	
   

  
	
   

  	
   

  
	
   

  
	
  (Please print
  name and address)

  

 

	
  Dated:                                    ,
  20   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

 

Signature Medallion Guaranteed:

 

Your signature must be
medallion guaranteed by an eligible guarantor institution (Commercial Bank,
Trust Company, Securities Broker/Dealer, Credit Union or Savings Association)
participating in a Medallion program approved by the Securities Transfer
Association Inc.

	
   

  	
   

  

 

The undersigned hereby
certifies that the Rights evidenced by this Right Certificate are not
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof
(as defined in the Amended Rights Agreement).

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

7

 

Form of Reverse Side of Right Certificate —
continued

 

NOTICE

 

The signatures in the
foregoing Forms of Assignment and Election must correspond to the name as
written upon the face of this Right Certificate in every particular, without
alteration or enlargement or any change whatsoever.

 

In the event the
certification set forth above in the Forms of Assignment and Election is not
completed, the Company will deem the beneficial owner of the Rights evidenced
by this Right Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Amended Rights Agreement) and, in the case of an
Assignment, will affix a legend to that effect on any Right Certificates issued
in exchange for this Right Certificate.

 

8

 

Exhibit B
(Amended)

 

SUMMARY
OF RIGHTS TO PURCHASE COMMON SHARES

 

On June 15, 1989,
the Board of Directors of ANALYSTS INTERNATIONAL CORPORATION (the “Company”)
declared a dividend of one common share purchase right (a “Right”) for
each outstanding share of the Common Shares, $0.10 par value (the “Common
Shares”), of the Company. The dividend was payable on June 30, 1989 to
the shareholders of record on that date. As amended, each Right entitles the
registered holder to purchase from the Company one Common Share of the Company,
at a price of $30.00 per Common Share (the “Purchase Price”), subject to
adjustment. The description and terms of the Rights are set forth in the
Amended and Restated Rights Agreement dated as of February 27, 2008, as
thereafter amended as of May 25, 2010, between the Company and WELLS FARGO
BANK, N.A. (the “Rights Agent”). The Amended and Restated Rights
Agreement dated as of February 27, 2008, as thereafter amended as of May 25,
2010, is referred to in this Exhibit B (Amended) as the “Amended Rights
Agreement.”

 

Until the earlier to
occur of (i) 10 days following a public announcement that a person or
group of affiliated or associated persons (an “Acquiring Person”)
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding Common Shares or (ii) 10 days following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 15% or more of such outstanding Common Shares
(the earlier of such dates being called the “Distribution Date”), the
Rights will be evidenced, with respect to any of the Common Share certificates
outstanding as of June 30, 1989, by such Common Share certificate with a
copy of this Summary of Rights attached thereto.

 

The Amended Rights
Agreement provides that, until the Distribution Date, the Rights will be
transferred with and only with the Common Shares. Until the Distribution Date
(or earlier redemption or expiration of the Rights), new Common Share
certificates issued after June 30, 1989 upon transfer or new issuance of
the Common Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Distribution Date (or earlier redemption or expiration of
the Rights), the surrender for transfer of any certificates for Common Shares,
outstanding as of, or after, June 30, 1989, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute the
transfer of the Rights associated with the Common Shares represented by such
certificate. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (“Right Certificates”) will be mailed
to holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Right Certificates alone will evidence the
Rights.

 

The Rights are not
exercisable until the Distribution Date. The Rights will expire on February 27,
2018 (the “Final Expiration Date”), unless the Final Expiration Date is
extended or unless the Rights are earlier redeemed by the Company, in each case
as described below.

 

The Purchase Price
payable, and the number of Common Shares or other securities or property
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of the Common Shares, (ii) upon
the grant to holders of the Common Shares of certain rights or warrants to
subscribe for or purchase Common Shares at a price, or securities convertible
into Common Shares with a conversion price, less than the then current market
price of the Common Shares or (iii) upon the distribution to holders of
the Common Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Common Shares) or of subscription rights or warrants (other than
those referred to above).

 

The number of outstanding
Rights and the number of Common Shares issuable upon exercise of each Right are
also subject to adjustment in the event of a stock split of the Common Shares
or a stock dividend on the Common Shares payable in Common Shares or
subdivisions, combinations or consolidations of the Common Shares, occurring,
in any such case, prior to the Distribution Date.

 

9

 

Common Shares purchasable
upon exercise of the Rights will be identical to other Common Shares of the
Company.

 

In the event that the
Company is acquired in a merger or other business combination transaction or
50% or more of its consolidated assets or earning power is sold, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. Subject to redemption or exchange, in the event
that any person becomes an Acquiring Person, proper provision will be made so
that each holder of a Right, other than Rights that are beneficially owned by
the Acquiring Person (which will thereafter be void), will thereafter have the
right to receive upon exercise that number of Common Shares having a market
value of two times the then current exercise price of the Right.

 

At any time after the
acquisition by a person or group of affiliated or associated persons of
beneficial ownership of 15% or more of the outstanding Common Shares and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Shares, the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such person or group which have become void), in
whole or in part, at an exchange ratio of one Common Share (or of a share of a
class or series of the Company’s preferred stock having equivalent rights,
preferences and privileges, or cash), per Right (subject to adjustment).

 

With certain exceptions,
no adjustment in the Purchase Price will be required until cumulative
adjustments require an adjustment of at least 1% in such Purchase Price. No
fractional Common Shares will be issued and, in lieu thereof, an adjustment in
cash will be made based on the market price of the Common Shares on the last
trading date prior to the date of exercise.

 

At any time until 10 days
after public announcement that a person or group of affiliated or associated
persons has acquired beneficial ownership of 15% or more of the outstanding
Common Shares, the Board of Directors of the Company may redeem the Rights in
whole, but not in part, at a price of $.001 per Right (the “Redemption Price”).
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Board of Directors in its sole discretion may
establish.

 

The terms of the Rights
may be amended by the Board of Directors of the Company without the consent of
the holders of the Rights, including an amendment to lower the threshold for
exercisability of the Rights from 15% to not less than the greater of (i) any
percentage greater than the largest percentage of the outstanding Common Shares
then known to the Company to be beneficially owned by any person or group of
affiliated or associated persons and (ii) 10%; except that from and after
the date there is an Acquiring Person, no such amendment may adversely affect
the interests of the holders of the Rights.

 

Until a Right is
exercised, the holder thereof, as such, will have no rights as a shareholder of
the Company, including, without limitation, the right to vote or to receive
dividends.

 

The Rights have certain
anti-takeover effects. The Rights will cause substantial dilution to a person
or group that attempts to acquire the Company on terms not approved by the Company’s
Board of Directors, except pursuant to an offer conditioned on a substantial
number of Rights being acquired. The Rights should not interfere with any
merger or other business combination approved by the Board of Directors since
the Rights may be redeemed by the Company at the Redemption Price prior to or
on 10 days after the time that a person or group has acquired beneficial
ownership of 15% or more of the Common Shares.

 

The Amended Rights
Agreement, specifying the terms of the Rights and including the form of Right
Certificate, is available from the Company upon request and at no charge. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Amended Rights Agreement, which
is hereby incorporated herein by reference.

 

10

 

# # # # #

 

11Exhibit 10.1

 

Proposal 3. Amendment and Reapproval of the Stock
Incentive Plan

 

Summary of the Proposal

 

The
company has maintained the Stock Incentive Plan since it was approved by
stockholders in 1998. We refer to the Stock Incentive Plan, as amended and in
effect before the 2010 annual meeting, as the “Existing Plan.” On March 17
and March 26, 2010, the board of directors, based on the recommendation of
the Compensation Committee of the board (the “Committee”), authorized the
adoption, subject to stockholder approval, of amendments to the Existing Plan.
We use the term the “Plan” to refer to the Existing Plan after amending it to
give effect to the proposed amendments. We are asking you to approve the Plan,
which includes the following amendments to the Existing Plan:

 

·                  an increase by
4,353,084 of the number of shares authorized for issuance under the Plan;

 

·                  additions to
broaden the performance goals contained in the Plan and conform them to the
performance goals contained in our Annual Incentive Plan;

 

·                  adding provisions
to clarify that (i) shares tendered or withheld to cover the exercise
price of options or taxes associated with an award and (ii) shares
purchased on the open market with the proceeds from option exercises will not
be available again for future grants;

 

·                  adding
provisions to clarify that the total number of shares subject to stock-settled
stock appreciation rights or net-settled options will count against the share
authorization regardless of the number of shares issued upon settlement;

 

·                  increasing the
maximum amounts of awards under the Plan to the amounts reflected in the
description of the Plan below;

 

·                  providing that
a full-value award of one share after our 2010 annual meeting will reduce the
shares available for future awards by two shares;

 

·                  providing a
10-year maximum term for nonqualified options (the company has only issued
options with 10-year terms throughout the life of the Existing Plan);

 

·                  adding
provisions which prohibit the cancellation of underwater options or stock
appreciation rights in exchange for cash and prohibit reducing the minimum
purchase price of a share of common stock subject to a stock appreciation
right;

 

·                  adding a
prohibition of the grant of dividends or dividend equivalents with respect to
options and stock appreciation rights (the company has never provided for
dividends or dividend equivalents payable with respect to options or stock
appreciation rights);

 

·                  adding a “net
exercise” provision whereby the company would withhold shares sufficient to
cover the exercise price of an option as an alternative means of paying the
exercise price;

 

·                  eliminating the
current provision that any common stock tendered to satisfy the aggregate
purchase price in connection with the exercise of an option must have been held
by the recipient for at least six months prior to such tender if acquired under
the Plan (or any other 

 

58

 

compensation plan maintained by the company) or must have been
purchased in the open market;

 

·                  clarifying that
discretion to deem that performance measures have been satisfied will be
limited to the maximum or any lower level instead of the maximum or any other
level;

 

·                  eliminating a
provision that requires separate approval for share withholding for taxes;

 

·                  amending the
provision concerning a change in control resulting from a reorganization,
merger or consolidation of the company or sale or other disposition of all or
substantially all of the assets of the company or the consummation of a plan of
complete liquidation or dissolution of the company, in each case in which
holders of the company’s common stock receive consideration other than shares
of common stock of a public company as the consideration for their shares of
our common stock, to provide that cash payments on account of awards under the
Plan will not be made until within ten days of the consummation of the change
in control instead of within ten days of stockholder approval of the
transaction resulting in a change in control; and

 

·                  other changes
to respond to changes in law or practice since 1998 such as permitting delivery
of signed award agreements by participants to the company by facsimile or
e-mail and clarifying that the Committee is not authorized to make payments
with respect to awards intended to qualify as “qualified performance-based
compensation” in connection with retirement if applicable performance goals
have not been satisfied.

 

The
board and the Compensation Committee believe that the proposed changes to the
Existing Plan accomplished by the adoption of the Plan would be in the best
interests of the company.

 

The
following table provides the number of shares subject to outstanding awards and
the number of shares available for future grants under company plans and programs
as of March 1, 2010.

 

	
  Number of Stock Options Outstanding

  	
   

  	
  5,409,085

  	
   

  
	
  Weighted Average Exercise Price

  	
   

  	
  $

  	
  26.28

  	
   

  
	
  Weighted Average Remaining Term (in years)

  	
   

  	
  6.7

  	
   

  
	
  Number of Full-Value Awards Outstanding:

  	
   

  	
   

  	
   

  
	
  Number of Full-Value Awards (restricted shares,
  restricted stock units, performance shares, and phantom stock units)

  	
   

  	
  953,479

  	
   

  
	
  Number of Shares Remaining Available for Future Grant:

  	
   

  	
   

  	
   

  
	
  Stock Incentive Plan (the “Existing Plan”)

  	
   

  	
  1,346,916

  	
   

  
	
  Deferred Compensation Plan for Outside Directors
  and Supplemental Executive Retirement Plan (“Non-Shareholder Approved Plans”)

  	
   

  	
  453,610

  	
   

  
	
  Common Shares Outstanding (as of March 22, 2010)

  	
   

  	
  75,257,677

  	
   

  
					

 

There
are no other shares remaining available for grant under any other company plans
or programs except as identified in the table above. If the Proposal to amend
the Existing Plan is approved, the total number of shares of common stock
available for new awards will be increased by 4,353,084 shares to a total of
5,700,000 shares (subject to adjustment in the event of a stock split, stock
dividend, recapitalization, merger, spin-off or other similar change or event
involving the company).

 

Description of the Plan and Performance Goals

 

Purpose of the Plan.  The purpose of the Plan is to promote the
long-term financial success of the company by (i) attracting and retaining
executive personnel of outstanding ability; (ii) strengthening the company’s
capability to develop, maintain and direct a competent management team; (iii) motivating
executive personnel by means of performance-related incentives to achieve
longer-range performance goals; (iv) providing incentive compensation
opportunities which are competitive with those of other major corporations; (v) enabling
such executive personnel to participate in the long-term growth and 

 

59

 

financial success of the
company through increased stock ownership and (vi) serving as a mechanism
to compensate outside directors. Under the Plan, the company may grant a
variety of different stock-based awards including nonqualified stock options,
incentive stock options, stock appreciation rights, restricted stock,
restricted stock units, bonus stock and performance shares.

 

The
Plan has been designed to meet the requirements of Section 162(m) of
the Internal Revenue Code regarding deductibility of executive compensation. Section 162(m) generally
limits to $1 million the amount that a publicly held corporation is
allowed to deduct each year for the compensation paid to each of its named
executive officers. However, “qualified performance-based compensation” is not
subject to the $1 million deduction limit. To qualify as qualified
performance-based compensation, certain criteria must be satisfied and the
material terms under which the compensation is to be paid, including the
performance goals, must be disclosed to, and approved by a separate majority
vote of, stockholders before the compensation is paid. If approved by the
company’s stockholders, the Plan will enable the Committee to continue to grant
awards under the Plan that will be exempt from the deduction limits of Section 162(m) of
the Internal Revenue Code.

 

The
material features of the Plan are summarized below. The following summary of
the Plan is qualified in its entirety by reference to the full text of the
Plan, which is included as Appendix B to this Proxy Statement.

 

Administration.  The Compensation Committee is the Committee
responsible for administration of the Plan. Members of the Compensation
Committee do not serve for fixed periods but may be appointed or removed at any
time by the board. The Plan provides that the Committee administering the Plan
(the “Committee”) will consist of two or more members of the board, each of
whom shall be (i) a “Non-Employee Director” within the meaning of Rule 16b-3
under the Exchange Act, (ii) an “outside director” within the meaning of Section 162(m) of
the Internal Revenue Code and (iii) an “Independent Director” within the
meaning of the rules of the New York Stock Exchange. Subject to the
express provisions of the Plan, the Committee has the authority to select
eligible directors, officers and other key management employees of the company
and its subsidiaries for participation in the Plan and determine all of the
terms and conditions of each grant and award.

 

Eligibility and Participation.  All non-employee directors of the company and
all salaried employees of the company and its affiliates will be eligible to
receive awards under the Plan at the discretion of the Committee. The company
currently has nine non-employee directors, and the company and its affiliates
currently have approximately 3,000 employees eligible to participate in the
Plan. Generally, awards have been limited to the company’s nine outside
directors, each of its nine officers and approximately 130 other management
employees. The benefits or amounts that will be received by any of the
participants are indeterminable at this time. Each grant and award will be
evidenced by a written agreement containing such provisions not inconsistent
with the Plan as the Committee shall approve. The Committee also has the
authority to establish rules and regulations for administration of the
Plan and to decide questions of interpretation of any provisions of the Plan.
All such rules, regulations, interpretations and conditions will be conclusive
and binding on all parties. In addition and subject to compliance with Section 157
of the Delaware General Corporation Law, the Committee may authorize one or
more executive officers of the company to make certain awards under the Plan to
employees who are not directors or executive officers.

 

Available Shares.  As of March 1, 2010, there were
6,240,654 shares of common stock subject to outstanding awards issued under the
Existing Plan including 831,569 shares subject to full-value awards (restricted
stock, restricted stock units and performance shares) and 1,346,916 shares
available for new awards. If the Proposal to amend the Existing Plan is
approved, the total number of shares of common stock available for new awards
will be increased by 4,353,084 to a total of 5,700,000 (subject to adjustment
in the event of a stock split, stock dividend, recapitalization, merger,
spin-off or other similar change or event involving the company). On March 1,
2010, the closing price of a share of the 

 

60

 

common stock on the New York
Stock Exchange was $33.76. Under the Existing Plan, we reduced the number of
shares available for future awards by one share for each share that is subject
to a stock option or stock appreciation right under the Plan and each other
award granted prior to May 18, 2005 and by 2.5 for all other awards
granted after May 18, 2005 and prior to May 19, 2010. Under the Plan
we will continue to reduce the number of shares available for future awards by
one share for each share that is subject to a stock option or stock
appreciation right under the Plan and for all other awards granted after May 19,
2010 we will reduce the number of shares available for future awards by 2.0.
For example, if we issue 100 shares of restricted stock after May 19,
2010, we will reduce the number of shares available for new awards by 200, and
if we grant someone 100 stock options or stock appreciation rights to be
settled in stock, we will reduce the number of shares available by 100. We will
not reduce the number of shares available if an award can only be settled in
cash or to the extent that an award that can be settled in either stock or cash
is settled in cash.

 

If
an award expires, terminates, is cancelled or forfeited, the shares subject to
that award will be available for future awards. Shares of common stock subject
to an award under the Plan may not be made available for issuance under the
Plan if such shares are: (i) shares that were subject to a stock-settled
stock appreciation right and were not issued as a result of the net settlement
or net exercise of such stock appreciation right, (ii) shares used to pay
the exercise price of an incentive stock option or non-statutory stock option, (iii) shares
delivered to or withheld by the company to pay withholding taxes related to an
award under the Plan or (iv) shares repurchased on the open market with
the proceeds of an option exercise.

 

Shares
of common stock issued in accordance with the Plan will be made available from
authorized and unissued shares of common stock, or authorized and issued shares
of common stock reacquired and held as treasury shares or otherwise, or a
combination thereof.

 

To
the extent required by Section 162(m) of the Internal Revenue Code
and the rules and regulations thereunder, the maximum number of shares of
common stock with respect to which options or stock awards or performance share
awards or a combination thereof may be granted during any calendar year to any
person will be 500,000, subject to adjustment as provided in the Plan.

 

Awards
under the Plan are to be evidenced by written agreements containing the terms
and conditions of the awards. Award agreements are subject to amendment, including
unilateral amendment by the company (with the approval of the Committee) unless
the amendments adversely affect the participant.

 

Change in Control.  In the event of certain acquisitions of 20%
or more of the common stock, a change in a majority of the board, a
reorganization, merger or consolidation or sale or disposition of all or
substantially all of the assets of the company (unless, among other conditions,
the company’s stockholders receive 50% or more of the stock of the surviving
company) or a liquidation or dissolution of the company, all outstanding awards
will be surrendered to the company in exchange for a cash payment except, in
the case of a merger or similar transaction in which the stockholders receive
publicly traded common stock, all outstanding options and stock appreciation
rights immediately will become exercisable in full, all other awards
immediately will vest, all performance periods will lapse, each performance
period will be deemed satisfied at the target level and each option, stock
appreciation right and other award will represent a right to acquire the
appropriate number of shares of common stock received in the merger or similar
transaction.

 

Effective Date, Termination and Amendment.  The Existing Plan became effective as of January 1,
1998 and will terminate on May 1, 2020, unless terminated earlier by the
board. The board may amend the Plan at any time, subject to any requirement of
stockholder approval required by applicable law, rule or regulation and
provided that no amendment may be made without stockholder approval if such
amendment would (i) increase the maximum number of shares of common stock
available under the Plan, (ii) effect any change inconsistent with Section 422
of the Internal Revenue Code, (iii) extend the 

 

61

 

term of the Plan or (iv) reduce
the minimum purchase price of a share of common stock subject to an option.

 

No Repricing.  Without limiting its ability to make
adjustments in connection with stock splits and similar changes in the company’s
capital structure as described below, the company may not, without stockholder
approval, amend or replace any previously granted option or stock appreciation
right in a transaction that constitutes a repricing under the rules of the
New York Stock Exchange, will not cancel an option or stock appreciation right
that has an exercise price which is greater than the fair market value of the
underlying common stock in exchange for stock, cash or other consideration and
will not cancel an option or stock appreciation right that has an exercise
price which is greater than the fair market value of the underlying common
stock and regrant such option or stock appreciation right with a lower exercise
price or base price.

 

Minimum Vesting for Full-Value Awards.  Awards of restricted stock, restricted stock
units and performance shares which vest on the basis of the recipient’s
continued employment with or provision of services to the company may not
provide for vesting that is any more rapid than annual pro rata vesting over a
three-year period and any restricted stock, restricted stock units and
performance shares which vest on the attainment of performance goals must
provide for a performance period of at least 12 months; provided that
vesting may be shortened in the case of disability, death, retirement, or a
change in control and provided further that up to five percent of the shares
available for new awards are not subject to these limitations.

 

Stock Options and Stock Appreciation Rights — General.  The Committee may grant to eligible
participants options to purchase shares of common stock which are either
nonqualified stock options or incentive stock options within the meaning of Section 422
of the Internal Revenue Code. The Committee also may grant stock appreciation
rights either independently of, or in tandem with, stock options. The exercise
of a stock appreciation right entitles the holder to receive shares of common
stock (which may be restricted stock), cash or a combination thereof with a
value equal to the difference between the fair market value of the common stock
on the exercise date and the base price of the stock appreciation right.

 

The
Committee will determine the terms of each option and stock appreciation right,
including the number and exercise price or base price of the shares subject to
the option or stock appreciation right, the term of the option or stock
appreciation right and the conditions to the exercisability of the option or
stock appreciation right. Upon exercise of an option, the purchase price must
be paid (i) in cash, (ii) by delivery of certain previously acquired
shares of common stock, (iii) by delivery of cash in an amount of the
aggregate purchase price payable by reason of the exercise by a broker-dealer
acceptable to the company to whom the optionee has submitted an irrevocable
notice of exercise, (iv) by authorizing the company to withhold whole
shares of common stock which would otherwise be delivered having an aggregate
fair market value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise or (v) by a
combination of cash and delivery of certain previously acquired shares.

 

Shares
of common stock to be delivered or withheld may not have an aggregate Fair
Market Value (as defined in the Plan), determined as of the date of delivery or
withholding, in excess of the amount determined by applying the minimum
statutory withholding rate.

 

Nonqualified Stock Options and Stock Appreciation Rights.  The exercise price of a nonqualified stock
option and the base price of a stock appreciation right will not be less than
100% of the fair market value of the common stock on the date of grant,
provided that the base price of a stock appreciation right granted in tandem
with an option will be the exercise price of the related option.

 

62

 

No
nonqualified stock option will be exercisable more than ten years after its
date of grant. Unless otherwise provided in the applicable award agreement, the
period for the exercise of a nonqualified stock option or stock appreciation
right following termination of employment will be as described herein. In the
event of termination of employment (1) by reason of (i) death, or (ii) retirement
on or after age 55 with a minimum of ten years of employment with or service to
the company, or (iii) permanent disability or (2) for any reason
within two years following a Change in Control, each nonqualified stock option
and stock appreciation right will be exercisable for the remainder of the
option period or stock appreciation right period as stated under the terms of
the award agreement, but only to the extent that the option or stock
appreciation right was exercisable at the date of such termination of
employment. In the event of termination of employment for any other reason,
each nonqualified stock option and stock appreciation right will remain
exercisable, to the extent that the option or stock appreciation right was
exercisable at the date of the termination of employment, for a period of
90 days after the termination of employment, but in no event after the
expiration of the option or stock appreciation right. If an employee is
terminated for Cause (as such term is defined in the Plan), his or her rights
under all options and stock appreciation rights will terminate on the date of
the termination.

 

Incentive Stock Options.  The exercise price of an incentive stock
option will not be less than the fair market value of the common stock on the
date of grant of such option, unless the recipient of the incentive stock
option owns greater than ten percent of the voting power of all shares of
capital stock of the company (a “ten percent holder”), in which case the option
exercise price will be the price required by the Internal Revenue Code,
currently 110% of fair market value.

 

No
incentive stock option will be exercisable more than ten years after its date
of grant, unless the recipient of the incentive stock option is a ten percent
holder, in which case the option will be exercisable for no more than five
years after its date of grant. Subject to the limit on the total number of
shares that may be subject to awards under the Plan, the maximum number of
shares of common stock that may be issued after May 19, 2010 in the form
of incentive stock options granted under the Plan is 5,700,000 shares.

 

Unless
otherwise provided in the applicable award agreement, the period for the
exercise of an incentive stock option following termination of employment will
be as described herein. In the event of a termination of employment by reason
of permanent and total disability (as defined in Section 22(e)(3) of
the Internal Revenue Code), incentive stock options will be exercisable only to
the extent the options were exercisable on the effective date of the optionee’s
termination of employment for a period of no more than one year after the
termination (or such shorter period as determined by the Committee), but in no
event after the expiration of the incentive stock option. In the event of a
termination of employment by reason of death, incentive stock options will be
exercisable only to the extent the options were exercisable on the effective
date of the termination for a period of three years after the date of death,
but in no event after the expiration of the incentive stock option. In the
event an employee is terminated for Cause (as defined in the Plan), any
incentive stock options held by such individual will terminate on the date of
the termination of employment. In the event of a termination of employment for
any other reason, incentive stock options will be exercisable to the extent
exercisable on the date of termination for a period of 90 days after the
termination, but in no event after the expiration of the incentive stock
option. If the holder of an incentive stock option dies during the specified
periods following termination of employment by reason of permanent and total
disability or for any other reason (except a termination of employment which is
for Cause), each incentive stock option will be exercisable only to the extent
the option was exercisable on the date of the holder’s death, and may
thereafter be exercised for a period of no more than three years but in no
event after expiration of the incentive stock option.

 

Bonus Stock Awards, Restricted Stock Awards and Restricted
Stock Unit Awards.  The Plan
provides for the grant of (i) bonus stock awards, which are vested upon
grant, (ii) restricted stock awards and 

 

63

 

(iii) restricted stock
unit awards. An award of restricted stock or of a restricted stock unit may be
subject to specified performance measures for the applicable restriction
period. Shares of restricted stock and restricted stock units will be
non-transferable. Shares of restricted stock and restricted stock units other
than those issued as payment of all or a portion of non-employee directors’
retainers will be subject to forfeiture if the holder does not remain
continuously in the employment of the company during the restriction period
and, if the restricted stock or restricted stock unit is subject to performance
measures, if the performance measures are not attained during the restriction
period. However, unless otherwise set forth in the award agreement, upon a
termination of employment by reason of retirement on or after age 55 (with a
minimum of ten years of employment with or service to the company), disability,
death or for any reason within two years following a change in control or under
other circumstances as the Committee deems appropriate, will result in the
restricted stock or restricted stock units becoming vested in such amount as
the Committee determines to be appropriate. Unless otherwise set forth in the
award agreement, in the event of termination of employment for any other
reason, the portion of a restricted stock award or restricted stock unit award
which is then subject to a restriction period will be forfeited and canceled by
the company. Unless otherwise set forth in the award agreement, the holder of a
restricted stock award will have all of the rights as a stockholder of the
company, including the right to vote and receive dividends with respect to the
shares of common stock subject to the award. Prior to settlement, the holder of
a restricted stock unit award will have no rights as a stockholder of the
company with respect to the shares of common stock subject to the award, except
that the Committee may grant dividend equivalents with respect to the shares of
common stock subject to the award.

 

Performance Share Awards.  The Plan also provides for the grant of
performance share awards. Each performance share is a right, contingent upon
the attainment of performance measures within a specified performance period,
to receive one share of common stock, which may be restricted stock, or the
fair market value of such performance share in cash. Prior to the settlement of
a performance share award in shares of common stock, the holder of the award
will have no rights as a stockholder of the company with respect to the shares
of common stock subject to the award. Performance shares will be
non-transferable and subject to forfeiture if the specified performance
measures are not attained during the applicable performance period; provided,
however, that unless otherwise set forth in the award agreement, termination of
employment (1) by reason of (i) death, or (ii) retirement on or
after age 55 with a minimum of ten years of employment with or service to the
company or (iii) permanent disability or (2) for any reason within
two years following a Change in Control or (3) under certain other
circumstances as the Committee deems appropriate, will result in the
performance share award becoming vested in such amount as the Committee may
determine, provided that the Committee is not authorized to make payments with
respect to awards intended to qualify as “qualified performance-based
compensation” in connection with retirement if applicable performance goals
have not been satisfied. Unless otherwise set forth in the award agreement, in
the event of termination of employment for any other reason, the portion of a
performance share award which is then subject to a performance period will be
forfeited and canceled by the company.

 

Performance Goals.  Under the Plan, the vesting or payment of
performance shares will and the vesting or payment of other awards, including
awards of options, stock appreciation rights, restricted stock or restricted
stock units may be subject to the satisfaction of performance goals. All
officers and other key employees are eligible to be selected by the Committee
to receive such awards. The performance goals applicable to a particular award
will be determined by the Committee at the time of grant of the award. Under
the Plan, such performance goals may be based on one or more of the following
business criteria, determined with respect to the performance of the company as
a whole, or, where determined to be appropriate by the Committee, with respect
to the performance of one or more divisions or groups within the company, or
with respect to the performance of individual participants:

 

·                  net sales;

 

64

 

·                  pretax income
before allocation of corporate overhead and bonus;

 

·                  budget;

 

·                  earnings per
share;

 

·                  net income;

 

·                  return on
stockholders’ equity;

 

·                  return on
assets;

 

·                  return on
capital employed;

 

·                  attainment of
strategic and operational initiatives;

 

·                  appreciation in
and/or maintenance of the price of the common stock or any other publicly
traded securities of the company;

 

·                  market share;

 

·                  gross profits;

 

·                  earnings before
interest and taxes;

 

·                  earnings before
interest, taxes, depreciation and amortization;

 

·                  economic value-added
models;

 

·                  comparisons
with various stock market indices;

 

·                  increase in
number of customers and/or reductions in costs;

 

·                  total
stockholder return (based on the change in the price of a share of the company’s
common stock and dividends paid);

 

·                  operating
income; and

 

·                  cash flows
(including, but not limited to, operating cash flow, free cash flow, cash flow
return on equity and cash flow return on investment)

 

for the applicable
performance period. If the performance goal or goals applicable to a particular
award are satisfied, the amount of compensation would be determined as
described below. In the case of a performance share award, the amount of compensation
would equal the number of performance shares subject to the award multiplied by
(i) the closing sale price of a share of common stock on the New York
Stock Exchange at the time the performance shares vest, or (ii) if such
performance shares are settled in shares of restricted stock, the value of a
share of common stock at the time such restricted stock vests. In the case of
restricted stock awards or restricted stock unit awards which are subject to
one or more performance goals, the amount of compensation would equal the
number of shares of restricted stock or restricted stock units subject to the
award multiplied by the value of a share of common stock at the time the
restricted stock or restricted stock unit vests. Income with respect to other
awards will be as described below under the heading “Federal Tax
Considerations.” Payments of cash, shares of common stock or any combination
thereof to any participant in respect of the settlement of a performance share
award for any performance period may not exceed $12,000,000, with respect to
the cash payment for such award and also may not exceed 400,000 shares of
common stock, with respect to the common stock payment for such award.

 

65

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