-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R6XQlYp++2Pvy8u2DWE7Ehqbrj1SGF/VN/w9QsOcsnCfxvSTtdMNuBAlYw3rKiGn xDurUxmOdcolya1OjTxqAA== 0000931763-96-000249.txt : 19960717 0000931763-96-000249.hdr.sgml : 19960717 ACCESSION NUMBER: 0000931763-96-000249 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960723 FILED AS OF DATE: 19960610 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CATALINA MARKETING CORP/DE CENTRAL INDEX KEY: 0000883977 STANDARD INDUSTRIAL CLASSIFICATION: 7311 IRS NUMBER: 330499007 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-11008 FILM NUMBER: 96579110 BUSINESS ADDRESS: STREET 1: 11300 9TH ST NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716 BUSINESS PHONE: 8135795000 MAIL ADDRESS: STREET 1: 11300 9TH STREET NORTH CITY: ST PETERSBURG STATE: FL ZIP: 33716-2329 PRE 14A 1 PRELIMINARY PROXY SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [x] PRELIMINARY COPY ---------------- Filed by a Party other than the Registrant [ ] Check the appropriate box: [x] Preliminary Proxy Statement [ ] Confidential, for use of the Commission Only (as permitted by Rule 14a- 6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12 Catalina Marketing Corporation ................................................................................ (Name of Registrant as Specified In Its Charter) Catalina Marketing Corporation ................................................................................ (Name of Person(s) Filing Proxy Statement) Payment of Filing Fee (Check the appropriate box): [x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a- 6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: ......................................................................... 2) Aggregate number of securities to which transaction applies: ......................................................................... 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ......................................................................... 4) Proposed maximum aggregate value of transaction: ......................................................................... 5) Total fee paid: ......................................................................... [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ......................................................................... 2) Form, Schedule or Registration No.: ......................................................................... 3) Filing Party: ......................................................................... 4) Date Filed: ......................................................................... [LOGO APPREARS HERE] NOTICE OF ANNUAL MEETING TO BE HELD ON JULY 23, 1996 ---------------- NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of CATALINA MARKETING CORPORATION, a Delaware corporation (herein called the "Company"), will be held at the Hyatt Regency Westshore, 6200 Courtney Campbell Causeway, Tampa, Florida 33607 on Tuesday, July 23, 1996 at 9:00 AM (the "Annual Meeting") for the following purposes: 1. To elect four Class II Directors; 2. To approve an amendment to the Company's 1992 Director Stock Grant Plan to provide for the grant of 1,000 shares of Common Stock to each director upon election or reelection to the Board of Directors and an amendment to the 1992 Director Stock Grant Plan permitting deferral of stock grants under the terms of the Company's Deferred Compensation Plan; 3. To approve various amendments to the Company's Deferred Compensation Plan to, among other things, (i) permit participants to defer up to 50% of their bonus or commissions for investment in the Plan's Common Stock account, (ii) permit the deferral by directors of director fees for investment in the Plan's Common Stock account and (iii) permit the deferral of stock granted to directors under the 1992 Director Stock Grant Plan and the deposit of that stock into the Plan's Common Stock account; 4. To approve an amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000 from 30,000,000; 5. To ratify and approve the Company's independent public accountants for fiscal 1997; and 6. To consider and act upon any other matters which may properly come before the Annual Meeting and any adjournment thereof. In accordance with the provisions of the Company's Bylaws, the Board of Directors has fixed the close of business on June 3, 1996 as the record date for the determination of the holders of Common Stock entitled to notice of and to vote at the Annual Meeting. A list of stockholders entitled to vote at the Annual Meeting will be open for examination by any stockholder for any purpose germane to the meeting during ordinary business hours for a period of 10 days prior to the Annual Meeting at the offices of the Company, 11300 9th Street North, St. Petersburg, Florida 33716, and will also be available for examination at the Annual Meeting until its adjournment. YOUR ATTENTION IS DIRECTED TO THE ACCOMPANYING PROXY STATEMENT. WE INVITE ALL STOCKHOLDERS TO ATTEND THE ANNUAL MEETING. TO ENSURE THAT YOUR SHARES WILL BE VOTED AT THE ANNUAL MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE IN PERSON, EVEN THOUGH YOU HAVE SENT IN YOUR PROXY. By Order of the Board of Directors, /s/ George W. Off ------------------------------------ George W. Off President and Chief Executive Officer St. Petersburg, Florida June 21, 1996 IMPORTANT: Whether or not you plan to attend the meeting, you are requested to complete and promptly return the enclosed proxy in the envelope provided. PROXY STATEMENT CATALINA MARKETING CORPORATION 11300 9TH STREET NORTH ST. PETERSBURG, FLORIDA 33716 ---------------- ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JULY 23, 1996 ---------------- SOLICITATION AND REVOCATION OF PROXIES The enclosed proxy is solicited by and on behalf of the Board of Directors of CATALINA MARKETING CORPORATION, a Delaware corporation (the "Company"), for use at the Company's 1996 Annual Meeting of Stockholders to be held on Tuesday, July 23, 1996 at 9:00 AM at the Hyatt Regency Westshore, 6200 Courtney Campbell Causeway, Tampa, Florida, and at any and all adjournments thereof (the "Annual Meeting"), for the purposes set forth in the accompanying Notice of Annual Meeting. Any stockholder has the power to revoke his or her proxy at any time before it is voted. A proxy may be revoked by delivering written notice of revocation to the Company at its principal office, 11300 9th Street North, St. Petersburg, Florida 33716, Attention: Corporate Secretary, by a subsequent proxy executed by the person executing the prior proxy and presented at the meeting, or by attendance at the Annual Meeting and voting in person by the person executing the proxy. In addition to solicitation by mail, officers, directors and regular employees of the Company, who will receive no additional compensation for their services, may solicit proxies by mail, telegraph or personal calls. The Company may, but does not currently plan to, engage a proxy solicitation firm in connection with the solicitation of proxies. The expense of any such engagement is not expected to exceed $10,000. All costs of solicitation will be borne by the Company. The Company has requested brokers and nominees who hold stock in their name to furnish this proxy material to their customers and the Company will reimburse such brokers and nominees for their related out-of-pocket expenses. This Proxy Statement of the Company will be mailed on or about June 21, 1996 to each stockholder of record as of the close of business on June 3, 1996. VOTING AT THE MEETING The Company had 9,784,227 shares of Common Stock, par value $.01 per share (the "Common Stock"), outstanding as of June 3, 1996. Holders of record of shares of the Common Stock at the close of business on June 3, 1996 will be entitled to notice of and to vote at the Annual Meeting and will be entitled to one vote for each such share so held of record. NOMINATION AND ELECTION OF DIRECTORS (PROPOSAL 1) The persons named in the enclosed proxy will vote FOR the four nominees named below under "Nominees for Directors" as the four Class II Directors, unless instructed otherwise in the proxy. The persons receiving the greatest number of votes, up to the number of directors to be elected, shall be the persons elected as Class II Directors. Shares represented by proxies which are marked "withhold authority" will have the same effect as a vote against the nominees. Each Class II Director is to hold office until the 1999 Annual Meeting of Stockholders and until his or her respective successor is duly qualified and elected. The names and certain information concerning the persons to be nominated to become directors by the Board of Directors at the Annual Meeting are set forth below. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW UNDER "NOMINEES FOR DIRECTORS". It is intended that shares represented by the proxies will be voted FOR the election to the Board of Directors of the persons named below unless authority to vote for nominees has been withheld in the proxy. Although each of the persons nominated has consented to serve as a director if elected and your Board of Directors has no reason to believe that any of the nominees will be unable to serve as a director, if any nominee withdraws or otherwise becomes unavailable to serve, the persons named as proxies will vote for any substitute nominee designated by the Board of Directors. The following information regarding the Company's directors (including the nominees) and executive officers is relevant to your consideration of the slate proposed by your Board of Directors. DIRECTORS AND EXECUTIVE OFFICERS The current directors, executive officers of the Company and nominees for director are as follows: Tommy D. Greer.............. 64 Chairman of the Board George W. Off............... 49 Chief Executive Officer, President and Director Karl J. Maggard............. 52 Executive Vice President, Marketing Executive Vice President, Sales and President, Daniel D. Granger........... 47 Catalina Marketing Services Division Executive Vice President, Retail and Corporate Joseph A. Lillis, III....... 49 Development Senior Vice President and Chief Philip B. Livingston........ 39 Financial Officer Frank H. Barker............. 65 Director Frederick W. Beinecke....... 53 Director Patrick W. Collins.......... 67 Director Stephen I. D'Agostino....... 62 Director Thomas G. Mendell........... 49 Director Helene Monat................ 49 Director Thomas W. Smith............. 68 Director Michael B. Wilson........... 59 Director
The Board of Directors is divided into three classes, with each class holding office for staggered three year terms. The terms of Class I Directors Frank H. Barker, Patrick W. Collins and George W. Off expire in 1998, the terms of Class II Directors Frederick W. Beinecke, Tommy D. Greer, Helene Monat and Thomas W. Smith expire in 1996 and the terms of Class III Directors Stephen I. D'Agostino, Thomas G. Mendell and Michael B. Wilson expire in 1997. All executive officers of the Company are chosen by the Board of Directors and serve at the Board's discretion. No family relationships exist between any of the officers or directors of the Company. ATTENDANCE AT MEETINGS AND BOARD COMMITTEES During the fiscal year ended March 31, 1996, the Board of Directors held a total of five meetings. All members of the Board of Directors attended more than 75% of the meetings of the Board and of the committees of which he or she was a member. The standing committees of the Board of Directors are the Compensation Committee, the Director Grant Plan Committee, the Audit Committee and the Nominating Committee. The Compensation Committee, which met on five occasions in fiscal 1996, is responsible for: (i) reviewing and recommending to the Board of Directors an integrated compensation and incentive program for all levels of management; (ii) reviewing, approving and recommending to the Board of Directors other employee compensation plans; and, (iii) reviewing and approving compensation plans for members of the Board of Directors. In addition, the Compensation Committee is responsible for: (a) granting options to purchase Company 2 stock pursuant to the Company's 1989 Stock Option Plan; (b) determining the number of shares subject to options granted and the exercise price per share; and (c) administering such plan pursuant to its terms. Also, the Compensation Committee has full and exclusive discretionary authority to (1) construe, interpret and apply the terms of the Company's Employee Payroll Deduction Stock Purchase Plan; (2) determine eligibility and adjudicate all disputed claims under such Plan; and (3) administer such Plan in accordance with its terms. The Committee currently consists of Frederick W. Beinecke as Chairman, Patrick W. Collins, Thomas G. Mendell and Michael B. Wilson. The Director Grant Plan Committee, which met on two occasions in fiscal 1996, is responsible for administering the 1992 Director Grant Plan pursuant to its terms. The Committee currently consists of Tommy D. Greer as Chairman and George W. Off. The Audit Committee, which met on two occasions in fiscal 1996, is responsible for: (i) reviewing the Company's financial results and the scope and results of audits; (ii) evaluating the Company's system of internal controls and meeting with independent auditors and appropriate Company financial and auditing personnel concerning the Company's system of internal controls; (iii) recommending to the Board of Directors the appointment of the independent auditors; and (iv) evaluating the Company's financial reporting activities and the accounting standards and principles followed. The Committee currently consists of Stephen I. D'Agostino as Chairman, Frank H. Barker and Thomas W. Smith. The Nominating Committee, which met on one occasion in fiscal 1996, is responsible for recommending qualified candidates for election as directors of the Company, including the slate of directors which the Board of Directors proposes for election by stockholders at each annual meeting, and for making recommendations to the Board of Directors concerning the structure and membership of the committees of the Board of Directors. In carrying out its functions in regard to Board membership, the Committee will consider nominees recommended by stockholders upon written submission of pertinent data to the attention of the Corporate Secretary. Such data should include complete information as to the identity of the proposed nominee, including name, address, present and prior business and/or professional affiliations, education and experience, particular field or fields of expertise, and the reasons why, in the opinion of the recommending stockholder, the proposed nominee is qualified and suited to be a director of the Company as well as what particular contribution to the success of the Company such person could be expected to make. The Committee currently consists of Stephen I. D'Agostino as Chairman, Frederick W. Beinecke, Tommy D. Greer and George W. Off. NOMINEES FOR DIRECTORS The following four persons will be placed in nomination for election to the Board of Directors as Class II Directors. The shares represented by the proxy cards returned will be voted FOR the election of these nominees unless otherwise stated in the proxy. Frederick W. Beinecke was elected as a director of the Company in January 1993, and also served as a director of the Company from 1985 until January 1990. He has been the President of Antaeus Enterprises, Inc. (a venture capital and marketable securities investment company) since 1982. Mr. Beinecke is also a director of several private companies. Tommy D. Greer was the Company's Chief Executive Officer from January 1992 until July 1994, after serving as its President and Chief Operating Officer from January 1989 to January 1992. Mr. Greer has been a director of the Company since April 1989 and currently serves as Chairman. Before joining the Company, Mr. Greer had been retired. Prior to retirement Mr. Greer spent 25 years at Texize Chemicals Company, a household products manufacturer, where he was responsible for conceptualizing and marketing many popular cleaning products, including Fantastik Spray Cleaner, Spray & Wash, K2R and Glass Plus. Mr. Greer was President of Texize from 1969 to 1975. Helene Monat was elected as a director of the Company in October 1992. From July 1992 until April 1996, Ms. Monat served as the Company's Executive Vice President, Sales. From February 1995 until April 1996, she served as President of Catalina Marketing Services, a business unit of the Company. She was Senior Vice President, Sales from April 1990 until July 1992 and Vice President, Sales East prior to that time. 3 Thomas W. Smith was elected as a director of the Company in July 1994. Mr. Smith founded and has been President of Prescott Investors, Inc., an investment advisory firm, since 1973. Mr. Smith is on the board of directors of MacDermid, Inc., a distributor of specialty chemicals. OTHER DIRECTORS AND EXECUTIVE OFFICERS Frank H. Barker, who was elected as a director of the Company in January 1996, was, until his retirement in January 1996, Corporate Vice President responsible for public relations and government affairs and Company Group Chairman responsible for the ophthalmic business and the health promotion/disease prevention business of Johnson & Johnson. Prior to his retirement, Mr. Barker had been employed by Johnson & Johnson for more than twenty five years. Patrick W. Collins, who was elected as a director of the Company in July 1995, was, until his retirement in March 1994, the Vice Chairman and Chief Operating Officer of Ralphs Grocery Company, and a director of Ralphs from 1988 until March 1994. Prior to his most recent position, Mr. Collins was Ralphs' President from February 1976 until March 1994. Mr. Collins is also a director of First Stratford Capital Group, Inc. Stephen I. D'Agostino was elected as a director of the Company in February 1988. Mr. D'Agostino is a consumer marketing consultant and was Chairman of Lord Capital Corporation, an investment bank, from January 1989 to December 1991, Chairman of Texas State Optical Corp., an optical stores franchiser, from August 1990 to December 1991. Mr. D'Agostino is a director of Super Value Stores, Inc., a grocery wholesaler, as well as Kyser Industrial Corp., a manufacturer of certain equipment for trucks and refrigerators for supermarkets and food service organizations. Daniel D. Granger became Executive Vice President, Sales of the Company and President of Catalina Marketing Services, a business unit of the Company, in January 1996. Prior to such time, Mr. Granger had been employed with the Company for eight years, most recently serving as Chief Executive Officer and President of Catalina Electronic Clearing Services, a business unit of the Company. Joseph A. Lillis, III joined the Company as Executive Vice President, Retail and Corporate Development in January 1996. From January 1994 to January 1996, Mr. Lillis served as Senior Vice President and General Manager of Hanes Licensed Products for Sara Lee Corporation. Prior to joining Sara Lee, Mr. Lillis served as Senior Vice President and Group Vice President of Advo, Inc., a direct mail services provider. Philip B. Livingston joined the Company as Senior Vice President and Chief Financial Officer in October 1995. From 1993 to 1995 he was Vice President and Chief Financial Officer of Celestial Seasonings, Inc., a manufacturer of specialty tea. From 1989 to 1993 he was Vice President and Chief Financial Officer of Kenetech Corporation, an independent energy company. From 1985 to 1989 he held various financial management positions for Genentech, Inc., a manufacturer of pharmaceutical products. Mr. Livingston is a certified public accountant. Karl J. Maggard has been the Company's Executive Vice President, Marketing since June 1994. Prior to June 1994, Mr. Maggard spent 10 years with Tropicana Products, Inc. as Senior Vice President of Sales and Chairman of the Strategic Planning Committee. Thomas G. Mendell was elected as a director of the Company in January 1990. Mr. Mendell is a partner of The Beacon Group, a merchant banking firm. Prior to joining The Beacon Group in 1994, Mr. Mendell was a partner of Goldman, Sachs & Co., which he joined in 1974. George W. Off, one of the Company's founders, became the President and Chief Executive Officer in July 1994. Prior to that, Mr. Off was President and Chief Operating Officer since October 1992, after serving as its Executive Vice President from April 1990 to October 1992. Mr. Off was re-elected as a director of the Company in October 1992 after serving in that capacity from 1983 until January 1990. Michael B. Wilson was elected as a director of the Company in January 1993. He was Vice President, Sales and Marketing, Consumer and Commercial Paper Products, for Georgia-Pacific Corporation until his retirement in September 1992. Mr. Wilson also serves on the board of Worldtex, Inc., a covered yarn manufacturer. 4 SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth as of March 31, 1996, certain information regarding the ownership of Common Stock of each person known by the Company to be the beneficial owner of more than five percent of the outstanding shares of the Company's Common Stock, each of its directors and executive officers, and all directors and executive officers as a group.
SHARES BENEFICIALLY OWNED (1) OFFICERS, DIRECTORS AND ----------------------- 5 PERCENT STOCKHOLDERS NUMBER PERCENT ----------------------- ------------ ---------- T. Rowe Price Associates (2)....................... 925,000 9.5% 100 E. Pratt Street Baltimore, MD 21202 The Prudential Insurance Company of America (3).... 860,500 8.8% Prudential Plaza Newark, NJ 07102 Jennison Associates Capital Corp................... 857,000 8.8% 466 Lexington Avenue New York, NY 10017 Thomas W. Smith (4)................................ 529,312 5.4% 323 Railroad Avenue Greenwich, CT 06830 Antaeus Enterprises, Inc. (5)...................... 533,397 5.5% 420 Lexington Avenue, Suite 3020 New York, NY 10170 Frank H. Barker.................................... 834 * Frederick W. Beinecke (5).......................... 582,640 6.0% Patrick W. Collins................................. 1,221 * Stephen I. D'Agostino (6).......................... 36,980 * Daniel D. Granger.................................. 39,512 * Tommy D. Greer (7)................................. 84,067 * Joseph A. Lillis, III.............................. 0 * Philip B. Livingston............................... 0 * Karl J. Maggard.................................... 15,106 * Thomas G. Mendell.................................. 5,780 * Helene Monat (8)................................... 75,686 * George W. Off...................................... 147,456 1.5% Michael B. Wilson.................................. 2,599 * All directors and executive officers as a group (14 1,521,193 15.3% persons)..........................................
- - -------- * Amount represents less than 1% of the Company's Common Stock. (1) Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission, and includes generally voting power or investment power with respect to securities. Shares of Common Stock subject to options currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage ownership of the person holding the options but are not deemed outstanding for computing the percentage ownership of any other person. Such shares are included for Messrs. Granger--20,500, Greer--36,250, Maggard--15,000 and Off--77,750 and Ms. Monat--44,700, all of which options are exercisable within 60 days of March 31, 1996. (2) These securities are owned by various individual and institutional investors for which T. Rowe Price Associates, Inc. ("Price Associates") serves as investment adviser with power to direct investments and/or shared power to vote the securities. For purposes of the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Price Associates is deemed to be a beneficial owner of such securities; however, Price Associates expressly disclaims that it is, in fact, the beneficial owner of such securities. 5 (3) The Prudential Insurance Company of America ("Prudential") has direct or indirect voting and/or investment discretion with respect to these securities which are held for the benefit of clients by Prudential's separate accounts, internally managed accounts, registered investment companies, subsidiaries and/or other affiliates. For purposes of the reporting requirements of the Exchange Act, Prudential is deemed to be a beneficial owner of such securities; however, Prudential expressly disclaims that it is, in fact, the beneficial owner of such securities. (4) Shares listed for Mr. Thomas W. Smith, a director of the Company, include 50,442 shares owned directly by Mr. Smith, 221,000 shares held by Idoya Partners, a limited partnership of which Mr. Smith is general partner, 209,500 shares held by Prescott Associates, a limited partnership of which Mr. Smith is general partner, 12,200 shares held by Prescott International Partners, a limited partnership of which Mr. Smith is general partner, 2,000 held by Mr. Smith's wife, 7,600 shares held in accounts for Mr. Smith's children over which he has trading authority, 15,000 shares held by Prescott Investors profit sharing account of which Mr. Smith is trustee, and 11,570 shares held by trusts in which Mr. Smith is the trustee. (5) Frederick W. Beinecke, a director of the Company, is the President and a director of Antaeus Enterprises, Inc. ("Antaeus"). The shares listed for Mr. Beinecke include 21,743 shares owned directly by him, 27,500 shares held by a trust for his benefit, and 533,397 shares held by Antaeus. Antaeus and Mr. Beinecke may be deemed to be part of a group, together with a trust, that beneficially owns 582,640 shares constituting approximately 6% of the Company's outstanding shares. Antaeus, Mr. Beinecke, and such trust disclaim membership in such a group. Except for the shares owned directly by each of them, Antaeus and Mr. Beinecke disclaim beneficial ownership of all such shares. (6) Shares listed for Mr. D'Agostino include 950 shares held in an IRA account by his wife. Mr. D'Agostino disclaims beneficial ownership of such shares. (7) Shares listed for Mr. Greer include 4,285 shares held by his wife, as to which Mr. Greer disclaims beneficial ownership. (8) Shares listed for Ms. Monat include 189 shares held in a trust account for the benefit of her minor child. Ms. Monat disclaims beneficial ownership of such shares. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934 Section 16(a) of the Exchange Act requires the Company's executive officers, directors and 10% stockholders to file reports regarding initial ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Executive officers, directors and 10% stockholders are required by Securities Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file. The Company's information regarding compliance with Section 16(a) is based solely on a review of the copies of such reports furnished to the Company by the Company's executive officers, directors and 10% stockholders. The Company is not aware of any noncompliance with the requirements of Section 16(a) to file reports during the Company's last fiscal year, other than as reported below. The following persons filed forms late during the 1996 fiscal year: Frank H. Barker (one occasion), Daniel D. Granger (two occasions), Helene Monat (one occasion), George W. Off (one occasion) and Joseph A. Lillis, III (one occasion). Further, the following recipients of stock grants under the 1992 Director Grant Plan failed to file reports disclosing the full amount of such grants due to a misunderstanding of the application of reporting requirements to grants that vest over a period of time: Patrick W. Collins, Frank H. Barker, Stephen I. D'Agostino, Michael B. Wilson and Thomas G. Mendell. 6 AMENDMENTS TO 1992 DIRECTOR STOCK GRANT PLAN (PROPOSAL 2) The Board has approved amendments to the Company's 1992 Director Stock Grant Plan (the "Director Grant Plan"), effective July 25, 1995, subject to the approval of the Company's stockholders. The affirmative vote of a majority of the outstanding shares present or represented and entitled to vote at the Annual Meeting will be required to approve this proposal. The persons named in the enclosed proxy will vote shares represented by proxies returned to the Company FOR the proposal unless instructed otherwise in the proxy. Shares represented by proxies which are marked "abstain" will have the same effect as a vote against this proposal. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE DIRECTOR GRANT PLAN. AMENDMENTS REQUIRING STOCKHOLDER APPROVAL Amendment to Calculation of Shares Granted Upon Election or Reelection. Section 6(b) of the Director Grant Plan provides for a grant of shares of Common Stock to each outside director as of the day that such director takes office following the election or reelection of such director by the stockholders or by the Board of Directors, as provided in the Company's Bylaws. Previously, assuming a three-year term upon the election of an eligible director, each grant included the number of shares obtained by dividing $30,000 by the Fair Market Value (as defined in the Director Grant Plan) of the shares on the effective date of the grant. This formula was reduced pro rata for any term to which an eligible director was elected, which term was expected to be less than three years. In order to simplify the operation of the Director Grant Plan and to increase the number of shares awarded to the outside directors upon their election or reelection, the Board of Directors believed that it was in the best interest of the Company to amend Section 6(b) to provide that upon each election or reelection of a director such director will receive an aggregate of 1,000 shares of Common Stock (or, if the Stock Split Dividend described in Proposal 4 is effected, 2,000 shares) in lieu of the number derived from the formula described above. This amendment eliminated the necessity of determining the fair market value of the Company's Common Stock in calculating the number of shares each director receives. Subject to approval by the stockholders, Section 6(b) has been revised to read in its entirety as follows: Award of Grants. A Grant shall be awarded to each Director as of the day that such Director takes office following the election or reelection of such Director by the stockholders or by the Board, as permitted in the Corporation's Bylaws, in partial consideration for the fulfillment by such Director of such Director's duties as a director of the Corporation. Subject to the availability of Shares as specified in Section 5 of the Plan, each Grant awarded on or after July 25, 1995 shall include an aggregate of one thousand (1,000) Shares (subject to adjustments in accordance with the provisions of Section 8 hereof) as of the effective date of the Grant, as determined by the Administrator; provided, however, that if the term (the "Term of Directorship") for which the Director has been elected is not a full three-year term, the number of Shares subject to a Grant shall be the number of Shares calculated as set forth above, multiplied by a fraction, the numerator of which is the number of full months during which the Grantee shall serve as director following the award of the Grant and until the next annual meeting of stockholders (the "Annual Meeting of Stockholders") at which the class of directors to which the Grantee belongs is to be elected (assuming for purposes of this calculation that the Annual Meeting Date (as hereinafter defined) is July 31 of such fiscal year), and the denominator of which is thirty-six (36), rounded up to the nearest whole number of Shares. Deferral of Grant. The Board has also proposed that the Director Grant Plan be amended, effective as of the date of the Annual Meeting, to provide that directors may defer the receipt of stock granted pursuant to Section 6(b) and deposit the value of such stock as stock units into an account created under the Company's Deferred Compensation Plan. Once deposited under the terms of the Deferred Compensation Plan, neither the value of such deposit nor such stock may be withdrawn until the director's retirement, termination or death in 7 accordance with the terms of the Deferred Compensation Plan. If receipt of such stock is deferred, the director will thereby be able to defer taxable income on the value of such stock until it is distributed pursuant to the terms of the Deferred Compensation Plan. To effect this Amendment, a new Section 6(i) would be added to the Director Grant Plan and would read in its entirety as follows: Deferral of Grant. Prior to his or her election or reelection to the Board of Directors, each Director may elect to defer, in accordance with the terms of the Corporation's Deferred Compensation Plan, all or a portion of the Grant he or she shall receive if elected or reelected, pursuant to Section 6(b). In such case, no shares will be issued to the Director and a credit will be made to the Common Stock unit account maintained for such Director under the Deferred Compensation Plan in a number of units equal to the number of shares deferred on the date of Grant. REASONS FOR AMENDMENTS The proposed amendment to change the formula for grant awards was adopted by the Board of Directors for two reasons. First, the Board desired to simplify the operation of the Director Grant Plan. Secondly, when the Director Grant Plan was adopted (October 27, 1992), the fair market value of the Common Stock on the New York Stock Exchange was $33.50 per share. As of July 24, 1995, the day before the amendment was adopted by the Board, the closing price of the Common Stock on the New York Stock Exchange was $55.50 per share and the closing price of the Common Stock on June 3, 1996 was $78.00 per share. With this increase in the value of the Common Stock, the number of shares subject to grants has decreased due to the formula described above. This decrease was viewed as an unacceptable consequence of the increase in stock price. Therefore, to increase the benefits to directors and to counteract the effect of the increase in stock value, the Board of Directors proposed an amendment to the Plan to change the method in which grants are calculated, as set forth herein. By guaranteeing outside directors a meaningful number of shares of Common Stock of the Company upon election or reelection, the Plan provides a valuable incentive to directors to continue in service to the Company. The proposed amendment regarding the deferral of grants was adopted by the Board of Directors to further increase the value of director compensation without materially increasing the cost to the Company. By deferring grants, directors will be able to defer taxable income on the value of a grant. Further, by creating an incentive for directors to hold their stock for the long term, in the form of units under the Deferred Compensation Plan, the amendment further aligns directors' interests with the interests of the stockholders of the Company. SUMMARY OF THE DIRECTOR GRANT PLAN The Director Grant Plan is intended to provide incentive to outside directors of the Company, to encourage proprietary interest in the Company by the Company's directors, and to attract new outside directors with outstanding qualifications. The availability of stock grants is an important feature of the Company's ability to attract and retain qualified directors. Eligibility. The "Grantees" who are awarded grants under the Director Grant Plan are the outside (non-employee) directors, duly elected to the board by the Company's stockholders or otherwise in accordance with the Company's Bylaws, and all outside (non-employee) directors appointed to fill a vacancy or a newly created directorship position on the Board. The Company currently has eight outside (non-employee) directors who are eligible to participate in the Director Grant Plan. Administration. The Director Grant Plan is administered, in the discretion of the Board from time to time, by the Board or by a committee appointed by the Board (the "Director Grant Plan Committee"). The Director Grant Plan Committee must consist of not less than two members of the Board. The Board or such Director Grant Plan Committee administering the Director Grant Plan (the "Director Grant Plan Administrator") has the authority to (i) construe and interpret the Director Grant Plan; (ii) define the terms used in the Director Grant Plan; (iii) prescribe, amend and rescind rules and regulations relating to the administration of the Director Grant Plan; and (iv) make all other determinations necessary or advisable for the administration of the Director 8 Grant Plan. The Director Grant Plan Committee has been appointed by the board to administer the Director Grant Plan. The members of the Director Grant Plan Committee are Tommy D. Greer as Chairman and George W. Off. Shares Available For Grants Under the Plan. The stock subject to grants awarded under the Director Grant Plan are shares of authorized but unissued or reacquired shares of Common Stock. The aggregate number of shares which were initially available for grants under the Director Grant Plan was 50,000, and there are currently 43,707 shares available for future grants under the Director Grant Plan. The aggregate number of shares covered by the Director Grant Plan and the number of shares covered by each grant will be proportionately adjusted as a result of any stock split, stock dividend, combination of shares or any other similar change (including the Stock Split Dividend described in Proposal 4). Shares subject to any outstanding grants which are forfeited for any reason are returned to the Company in accordance with the Director Grant Plan and the shares so forfeited may again be subject to grants. Participants; Award of Grants. The Grantees consist exclusively of outside (non-employee) directors of the Company. However, no director is eligible to receive a grant if and to the extent that such director is prohibited from personally accepting or benefitting from a grant due to such director's affiliation with a business organization. Such directors will, instead, receive $10,000 per year in cash, in quarterly installments, for each year during the term of their directorships. All outside directors are currently eligible to receive stock benefits under the Director Grant Plan. Grants are evidenced by written stock grant agreements in such form as the Director Grant Plan Administrator shall from time to time determine. A grant is awarded to each Grantee as of the day that such Grantee takes office following the election or reelection of such Grantee by the stockholders or by the Board, as provided in the Company's Bylaws, in partial consideration for the fulfillment by such Grantee of such Grantee's duties as a director of the Company. Prior to the amendment to the Director Grant Plan being proposed for approval by the stockholders, assuming a three-year term upon the election of an eligible director, each grant included the number of shares obtained by dividing $30,000 by the Fair Market Value (as defined in the Director Grant Plan) of the shares on the effective date of the grant. This formula was reduced pro rata for any term to which an eligible director was elected, which term was expected to be less than three years. For example, if a Grantee's term was expected to be eighteen months, the Fair Market Value of the Shares to be awarded was $15,000. Pursuant to the amendment, this formula has been changed such that each director will receive, upon election or reelection for any three-year term, a grant of 1,000 shares (or 2,000 shares as adjusted for the Stock Split Dividend). The number of shares granted will be reduced pro rata for any term of less than three years in length. Although not required to do so, the Company has registered the award of shares pursuant to the Director Grant Plan under the Securities Act of 1933, as amended. 9 Grants Awarded Since Inception of the Director Grant Plan. Following final approval of the Director Grant Plan by the Board on January 26, 1993, grants have been awarded to Grantees who currently serve as directors pursuant to the terms of the Director Grant Plan as follows: GRANTS UNDER THE DIRECTOR GRANT PLAN
AGGREGATE FAIR NUMBER OF MONTHS DATE CLASS OF MARKET VALUE ON EXPECTED IN TERM NUMBER OF DIRECTOR OF GRANT DIRECTOR(1) DATE OF GRANT FOLLOWING GRANT SHARES IN GRANT -------- -------- ----------- --------------- ---------------- --------------- Frederick W. Beinecke... 1/26/93 II $ 5,031 6 125 Stephen I. D'Agostino... 1/26/93(2) III 23,345 18 580 Michael B. Wilson....... 1/26/93 III 15,013 18 373 Frederick W. Beinecke... 7/27/93 II 30,000 36 780 Thomas G. Mendell....... 4/01/94(3) III 3,333 4 73 Stephen I. D'Agostino... 7/26/94 III 30,000 36 663 Thomas G. Mendell....... 7/26/94 III 30,000 36 663 Michael B. Wilson....... 7/26/94 III 30,000 36 663 Thomas W. Smith......... 7/26/94 II 20,000 24 442 Patrick W. Collins...... 7/26/94 I 10,000 12 221 Patrick W. Collins...... 7/25/95 I 55,380 36 1,000(4) Frank H. Barker......... 1/23/96 I 54,353 30 834(5)
- - -------- (1) The terms of Class I Directors expire at the time of the 1998 Annual Meeting of Stockholders, the terms of the Class II Directors expire at the time of the 1996 Annual Meeting of Stockholders and the terms of the Class III Directors expire at the time of the 1997 Annual Meeting of Stockholders. (2) This grant was deemed granted upon ratification of certain changes to the Director Grant Plan on January 26, 1993 but was awarded in a manner to provide a benefit based on the Fair Market Value ($34.50 per share) on the date of adoption (October 27, 1992) of the Director Grant Plan. Based on such Fair Market Value, the benefit to Mr. D'Agostino was approximately $20,000. (3) Prior to April 1994, Mr. Mendell was not eligible to receive grants under the Director Grant Plan due to his affiliation with a business organization which prohibited his receiving benefits under the Director Grant Plan. However, prior to the end of the Company's 1994 fiscal year, Mr. Mendell terminated his relationship with such business organization and thus became eligible to receive grants under the Director Grant Plan. Accordingly, on April 1, 1994, Mr. Mendell received a grant of 73 shares to cover the four month period until the 1994 Annual Stockholders Meeting. (4) As noted, the amendment being presented for approval by stockholders was effective July 25, 1995, the date of the 1995 Annual Stockholder Meeting. Therefore, subject to stockholder approval, Mr. Collins, who was elected as a director at such meeting, received a grant of 1,000 shares. (5) For the same reasons disclosed with respect to Mr. Collins in footnote 4 above, Mr. Barker received a grant of 834 shares on January 23, 1996, the date of his election to the Board of Directors, which represents a grant of 1,000 shares reduced to reflect the fact that he was expected to serve a term of 30 months following the date of grant. If the nominees for election as directors being considered at the Annual Meeting are elected by the stockholders and the proposed amendments to the Director Grant Plan are approved, then Mr. Beinecke, Ms. Monat and Mr. Smith will each receive grants of 1,000 shares. The fair market value of the Shares on June 3, 1996 was $78.00 per share. If this is the fair market value on the date of the Annual Meeting, then each grant will have an aggregate value of $78,000. Vesting. Shares included in grants are subject to the vesting provisions set forth in the Director Grant Plan. Shares which have vested according to the formula described herein are considered "Vested Shares" and 10 shares which have not so vested are considered "Non-Vested Shares." The shares included in each grant vest on each successive Annual Meeting date (the "Annual Meeting Date") following the effective date of the grant. The number of shares subject to a grant which become Vested Shares as of each Annual Meeting Date is calculated by multiplying the number of shares included in the grant by a fraction, the numerator of which is equal to the number of months which have elapsed since the later of (i) the election or reelection of such Grantee (i.e., the effective date of the grant) or (ii) the last Annual Meeting Date, and the denominator of which is the number of full months during which the Grantee serves as director following the award of the grant and until the next Annual Meeting Date at which the class of directors to which the Grantee belongs is to be elected (assuming for purposes of this calculation that the Annual Meeting Date is July 31 of such fiscal year). A Grantee may not assign, sell, pledge, hypothecate or otherwise transfer any grant or any Non-Vested Shares. If a Grantee ceases to be a director for any reason or no reason, including upon death or disability, removal (with or without cause) or resignation, the grant will be automatically terminated immediately upon the effective date of such cessation and all shares included in the grant which are Non-Vested Shares as of the effective date of such cessation, will be forfeited automatically and will, effective immediately upon such cessation, be returned to the status of authorized shares to be issued pursuant to grants under the Director Grant Plan. A Grantee will have all rights as a stockholder with respect to all shares included in the grant, regardless of whether the shares awarded are Vested Shares or Non-Vested Shares, including, without limitation, the right to vote any such shares and the right to receive dividends. Change of Control. Upon the occurrence of a change of control of the Company (i.e., a sale of all or substantially all of the Company's assets, a merger of the Company with another entity where the Company is not the surviving corporation or the consolidation of the Company with another Company) (a "Forfeiture Event"), the Director Grant Plan will terminate. Unless such Forfeiture Event occurs within thirty days following the date of an Annual Meeting of Stockholders, any shares of Common Stock which would have become Vested Shares at the next succeeding Annual Meeting of Stockholders shall become vested and all other Non-Vested Shares will be forfeited. If a Forfeiture Event occurs within such thirty-day period, all Non-Vested Shares will be forfeited. Amendment and Termination. Grants may be awarded pursuant to the Director Grant Plan until the expiration of the Director Grant Plan on October 27, 2002. The Board may, from time to time, with respect to any shares at the time not subject to grants, suspend or discontinue the Director Grant Plan or revise or amend it in any respect whatsoever, provided that the Board may not revise or amend the Director Grant Plan more than once every six months (other than to conform with changes in certain laws), and provided further that no amendment or revision may adversely affect, without the affected Grantee's written consent, the rights of any Grantee to whom shares have been issued pursuant to the Director Grant Plan. In addition, without the approval of the Company's stockholders, no such revision or amendment may: 1.Materially increase the benefits accruing to Grantees under the Director Grant Plan; 2.Increase the number of Shares which may be issued under the Director Grant Plan; or 3. Change the designation in the Director Grant Plan with respect to the classes of persons eligible to receive Grants. Federal Income Tax Consequences. The following discussion is intended only as a general summary of the federal income tax consequences to Grantees and the Company with respect to the Director Grant Plan. The discussion is based on current laws which are subject to change at any time or which may be interpreted differently. The discussion does not address tax consequences under the laws of any state, local or foreign jurisdiction, nor does it address federal and state estate, inheritance and gift taxes, and the tax treatment of each Grantee will depend in part upon such Grantee's particular tax situation. 11 In general, a Grantee will not recognize income upon receipt of shares pursuant to a grant. However, upon vesting of a Grantee's shares, a Grantee will recognize compensation income (and receive basis in such shares) in an amount equal to the fair market value of the Vested Shares determined on the vesting date, and the Company will be entitled to a compensation deduction equal to such amount. Alternatively, no later than 30 days after a grant of shares, a Grantee may make an election under Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"). In such case, the Grantee will recognize compensation income in the taxable year of the grant (and receive a basis) equal to the fair market value of such shares determined on the date of grant, and the Company will be entitled to a compensation deduction equal to such amount. In general, under either alternative, a Grantee will recognize capital gain or loss upon the subsequent disposition of the shares. Unless a Grantee makes an election under Section 83(b) of the Code, as described above, amounts paid to a Grantee as dividends with respect to such shares prior to the date that a Grantee's shares vest under the Director Grant Plan will be treated for federal income tax purposes as compensation income (taxable at ordinary income rates) for which the Company will be entitled to a compensation deduction with respect to such amounts. However, upon the vesting of a Grantee's shares (or a Grantee's making of a timely Code Section 83(b) election), amounts paid to a Grantee as dividends will be treated as dividends for federal income tax purposes for which the Company will not be entitled to a deduction with respect to such amounts. Assuming approval of the proposed amendments, if a Grantee elects under the Company's Deferred Compensation Plan to defer the receipt of shares pursuant to a grant, the Grantee will not be taxed at the time of such election or upon vesting of the grant. Rather, upon the receipt of shares from the Deferred Compensation Plan upon death, disability or retirement, tax will be due on the then value of the shares distributed. The taxable value of such shares will be treated as ordinary compensation income to the Grantee and the Company will be entitled to a corresponding compensation deduction. AMENDMENTS TO DEFERRED COMPENSATION PLAN (PROPOSAL 3) The Board has approved an amendment and restatement of the Company's Deferred Compensation Plan (the "Deferred Compensation Plan"), effective as of July 1, 1996, certain of which amendments are subject to the approval of the Company's stockholders. The affirmative vote of a majority of the outstanding shares present or represented and entitled to vote at the Annual Meeting will be required to approve this proposal. The persons named in the enclosed proxy will vote shares represented by proxies returned to the Company FOR the proposal unless instructed otherwise in the proxy. Shares represented by proxies which are marked "abstain" will have the same effect as a vote against this proposal. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE THE AMENDMENTS TO THE DEFERRED COMPENSATION PLAN. AMENDMENTS REQUIRING STOCKHOLDER APPROVAL Deferral by Participants of Bonus or Commissions. The Deferred Compensation Plan currently permits eligible employees to defer up to 100% of their regular salary, bonus, commission, or any special compensation received during any Deferred Compensation Plan year. Such deferred compensation is deposited in a Deferred Compensation Account maintained by the Plan Administrator, as defined below, in the name of the participant. Such deferred compensation bears interest quarterly at a rate determined by the Plan Administrator in its sole discretion, which rate is determined by reference to the average rate earned by the Company's 401(k) plan, but in no event may exceed the prime rate as reported by the Wall Street Journal plus one percent (1%). Subject to stockholder approval, the Board of Directors has amended the deferral provisions of the Deferred Compensation Plan to permit eligible participants to elect that a portion of their deferred compensation equal to up to fifty percent (50%) of each participant's annual bonus or commissions be deposited into a Common Stock 12 Account maintained under the Deferred Compensation Plan on such participant's behalf. Deposits into the Common Stock Account during any one year pursuant to this amendment are subject to a maximum amount of $100,000 per participant. Amounts deferred are credited to the participant's Common Stock Account in a number of hypothetical stock units equal to the dollar amount of the deferral divided by the fair market value of the Common Stock (defined as the closing price on the New York Stock Exchange of the Common Stock on the date in question) on the five business days preceding the payment date for the bonus or commission deferred. As noted, amounts deferred by eligible participants are credited to units denominated in shares of Common Stock, but no shares of Common Stock will be issued until the participants receive the related payments in accordance with the Deferred Compensation Plan. Upon retirement, termination of employment, or death, a participant or his or her beneficiary will receive shares of Common Stock equal to the number of units in his or her Common Stock Account. Such Common Stock would be distributed in the same manner as other distributions under the Deferred Compensation Plan, either in a lump sum or installments payable over ten years. Deferral of Directors Fees. In addition to the amounts currently deferrable pursuant to the Deferred Compensation Plan by employees of the Company, the Board of Directors has amended the Deferred Compensation Plan, subject to stockholder approval, to permit independent directors of the Company to participate. Directors may defer up to one hundred percent (100%) of the cash meeting fees paid to them for service to the Company. Any such director fees deferred may be invested in the Common Stock Account maintained on behalf of each director as described above. No directors fees deferred and invested in Common Stock units will be subject to matching by the Company. Deferral of Stock Grants Made Under The Director Grant Plan. Upon election and reelection, each independent director receives a grant of stock in accordance with the terms of Director Grant Plan, as more fully described under Proposal 2. Subject to stockholder approval, the Board of Directors has amended the Deferred Compensation Plan to permit stock grants to be deferred and converted into stock units credited to the Common Stock Account maintained by the Plan Administrator on behalf of each director. For each share of Common Stock otherwise to be included in a grant under the Director Grant Plan, the director's Common Stock Account under the Deferred Compensation Plan will be credited with one stock unit. In order to defer a stock grant, each eligible director must elect deferral prior to the annual stockholders meeting at which his or her election or reelection to the Board of Directors of the Company will be considered. Amounts deferred and placed in the director's Common Stock Account are subject to the vesting schedule set forth in the Director Grant Plan as more fully described under Proposal 2. By deferral of stock grants, directors may postpone taxation with respect to the value of such stock grant which would otherwise be taxable to him or her upon vesting. Revocability of Elections. Subject to certain unforeseeable financial emergency revocations permitted by the Deferred Compensation Plan, the elections described above relating to the deferral of bonus or commissions shall be irrevocable after the beginning of the Deferred Compensation Plan year. In the case of director fees, the deferral election shall be irrevocable upon the commencement of the meeting with respect to which such election is made. Deferrals with respect to stock grants cannot be modified or amended once the applicable stockholder meeting has commenced. Any such deferral election will continue until revoked or modified in writing, which revocation or modification shall only apply to compensation payable to the participant after the end of the Deferred Compensation Plan year or for subsequent Board of Directors or annual stockholder meetings. In addition to the above, with respect to executive officers and directors subject to Section 16 of the Exchange Act, and to the extent required by such section, executive officers or directors making an election to deposit bonus, compensation, or directors fees into Common Stock Accounts (but not stock grants) must make an irrevocable election at least six months in advance of the effective date of the transaction. Adjustments to Common Stock Accounts. Upon the payment of dividends on the Company's Common Stock, each participant's Common Stock Account will be increased by the addition of units reflecting the value of such dividend. Appropriate adjustments will also be made to reflect any stock split, stock dividend, combination of shares or any other similar change relating to the Common Stock. 13 REASONS FOR AMENDMENTS The Board of Directors has adopted the amendments to the Deferred Compensation Plan described herein to enhance the effectiveness of the Deferred Compensation Plan in attracting and retaining individuals of outstanding abilities and specialized skills. The Board of Directors believes that by permitting employees to invest certain of their deferred compensation in units of Common Stock of the Company which will then be held for the remainder of their employment with the Company, the Deferred Compensation Plan will serve to provide additional incentives to such employees as stockholders of the Company. By amending the Deferred Compensation Plan to permit directors to defer compensation, the Board of Directors believes that they will provide additional valuable benefits to such directors by allowing them to save for their own retirement by deferring a portion of their income. Further, by providing executive officers and directors with means of deferring taxation on a portion of their income, the Company will enhance the value of such income to such employees and directors without material additional expense to the Company. As a result, the Company believes that the Deferred Compensation Plan as amended will enable the Company to better attract and retain individuals with outstanding abilities and specialized skills. In addition, it is deemed to be in the best interest of the Company and its stockholders to align the interests of the Company's directors and officers, whenever possible, with the interests of the Company's stockholders. SUMMARY OF THE DEFERRED COMPENSATION PLAN In addition to the amendments being proposed to the stockholders for approval at the Annual Meeting, the Deferred Compensation Plan has also been amended by approval of the Board of Directors, effective as of July 1, 1996, in several ways which are not subject to stockholder approval. The following is a description of the Deferred Compensation Plan, as so amended. General. The Company has maintained a deferred compensation plan for all employees with a title of Vice President or a more senior title since January 1992. The original deferred compensation plan was amended and restated by the Company and has been in effect, as amended, since January 1995. As currently in effect, the Deferred Compensation Plan permits the deferral of all or any part of a participant's regular salary, bonus, commission or special compensation during the Deferred Compensation Plan year. Such deferred amounts are invested in a Deferred Compensation Account, bearing interest as described above, maintained by the Deferred Compensation Plan Administrator in the name of each participant. Effective July 1, 1996, deferred amounts may be invested at the direction of the employee in a variety of investment funds substantially similar to the funds available under the Company's 401(k) plan. The Plan Administrator will be under no obligation to follow the participant's directions. Under the Deferred Compensation Plan, Messrs. Off, Greer, Maggard and Granger and Ms. Monat deferred aggregate compensation of $114,505, $19,383, $15,986, $9,052 and $217,863, respectively, during fiscal year 1996, and $152,983, $0, $14,950, $25,310 and $209,274, respectively, during fiscal year 1995. Plan Administrator; Eligible Participants. The Deferred Compensation Plan is currently administered by the Company (the "Plan Administrator"). The Company currently intends to appoint the committee that administers the 401(k) plan as Plan Administrator, effective July 1, 1996. The Plan Administrator has complete control and discretion to manage the operation and administration of the Deferred Compensation Plan, including without limitation, the power to (i) determine all questions relating to the eligibility of employees to participate or continue to participate in the Deferred Compensation Plan; (ii) maintain all records and books of account necessary for the administration of the Deferred Compensation Plan; (iii) interpret the provisions of the Deferred Compensation Plan and make and publish such interpretive or procedural rules as are not inconsistent with the Deferred Compensation Plan; (iv) compute, certify and arrange for the payment of benefits to which any participant or beneficiary is entitled; (v) process claims for benefits under the Deferred Compensation Plan; (vi) engage agents and professionals to assist in carrying out its duties; and (vii) develop and maintain such instruments as may be deemed necessary from time to time by the Plan Administrator to facilitate payment of benefits under the Deferred Compensation Plan. The Deferred Compensation Plan provides that the Plan 14 Administrator, in its sole discretion, shall determine those employees of the Company or certain related entities eligible to participate in the Deferred Compensation Plan. In accordance with current guidelines developed by the Plan Administrator, all employees of the Company with the title of Vice President or any more senior title are eligible to participate in the Deferred Compensation Plan. If the proposed amendments are approved, eligible participants will be expanded to include independent directors of the Company. Deferral of Option Profit Upon Exercise of Non-Qualified Stock Options. Effective July 1, 1996, participants in the Company's 1989 Stock Option Plan (the "Option Plan") may defer the Option Profit, as defined below, otherwise payable to the participant in shares of Common Stock upon the stock for stock exercise, described below, of non-qualified stock options under the Option Plan by filing an election form with the Plan Administrator at least one year prior to the date on which the non-qualified stock option vests. With respect to non-qualified stock options that are vested as of July 1, 1996 or will become vested before July 1, 1997, participants may elect on or before August 30, 1996 to defer the Option Profit received upon exercise thereof. Any such Option Profit deferred will be credited to the deferring participant's Common Stock Account and will be represented by stock units in a number determined by dividing the Option Profit by the fair market value of the Common Stock on the date of exercise of the non-qualified stock option. A conforming amendment has been made to the Option Plan to permit the deferral of the Option Profit. For purposes of the Deferred Compensation Plan, the "Option Profit" is defined as the amount (not less than zero) by which the fair market value of the shares of Common Stock subject to a non-qualified stock option on the date of the participant's exercise of such option exceeds the aggregate exercise price of such option. A stock for stock exercise eligible for Option Profit deferral is effected under the Deferred Compensation Plan by the optionee paying the exercise price of an option by delivering to the Company shares of Common Stock owned by the optionee for at least six months prior to exercise, in good form for transfer, having a fair market value as of the date of exercise equal to the aggregate exercise price of the subject option. Following the deferral transaction, the previously owned shares continue to be owned by the participant outside of the Deferred Compensation Plan. Company Contributions. The Company credits each participant, excluding directors, with a matching contribution based upon his compensation deferral as follows: the first two percent (2%) of salary deferred pursuant to the Deferred Compensation Plan is matched at a rate of one hundred percent (100%) and the next two percent (2%) of salary deferred is matched at the rate of twenty-five percent (25%). Any additional compensation deferred under the Deferred Compensation Plan does not entitle the participant to a matching contribution. All matching contributions are deposited in a Matching Contribution Account maintained for each participant and are invested in the same manner as Deferred Compensation Accounts. Further, as of each Deferred Compensation Plan year, the Company may, in its sole discretion, credit participants with a discretionary contribution in an amount to be determined by the Company. Vesting. A participant's vested interest in matching contributions is equal to a percentage based on such participant's numbers of years of service. Effective July 1, 1996, vesting will occur ratably in annual installments of twenty percent (20%) per year to one hundred percent (100%) after five years of service. Prior to such date, matching contributions vested fully after two years of service. Loans. Participants may borrow up to the lesser of 50% of their account balance under the Deferred Compensation Plan (excluding the value of their Common Stock Account) or $100,000. A maximum of two loans per participant not exceeding in the aggregate the above limits may be outstanding at any one time. Any such loans will be secured by the remaining balance of the participant's account. Distributions under Deferred Compensation Plan. Subject to certain unforeseen emergency provisions, no amounts deferred may be distributed until the participant's termination of employment with the Company or any related employer or death. Distributions shall be made either in a series of annual installments (not to exceed ten) or a lump sum, as selected by the participant pursuant to an advance election. If a participant dies before receiving all benefits of the Deferred Compensation Plan, all unpaid amounts shall be paid to the beneficiary or 15 beneficiaries designated by the participant to receive such benefits. If a participant's employment is terminated for reasons other than retirement on or after the participant's normal retirement date, as defined by the Deferred Compensation Plan, the participant's disability or death, such participant shall receive the balance of his Deferred Compensation Account and the vested portion of his Matching Contribution Account and any discretionary contributions made by the Company on his behalf. Upon attaining normal retirement age or termination for disability or death, the participant shall be one hundred percent (100%) vested in all matching and discretionary contributions made under the Deferred Compensation Plan. Change in Control. If a participant's employment is terminated other than for Cause (as defined in the Deferred Compensation Plan) during the two years following a Change in Control of the Company (also as defined in the Deferred Compensation Plan), the participant's accounts under the Deferred Compensation Plan will become fully vested. Upon the occurrence of a Change in Control of the Company, no amendments may be made to the Deferred Compensation Plan which would be adverse to the participants. Should a Change in Control occur, the Deferred Compensation Plan's administration and claims procedure will be handled by an independent third party instead of the Company or its duly appointed administrative committee. Immediately prior to a Change in Control units held in Common Stock Accounts will be converted into actual shares of Common Stock and contributed to the trust, described below. In addition to the above, the right to amend the Deferred Compensation Plan following a Change in Control of the Company will be given to the participants acting by majority vote rather than the Company. Section 16 and Amendments. The Deferred Compensation Plan following the adoption of the proposed amendments is intended to comply with Rule 16b-3 ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), so that purchases of shares of the Deferred Compensation Plan will be exempt from the short-swing prohibitions set forth in Section 16(b) of the Exchange Act. Subject to certain limitations, the Company's Board of Directors may amend the Deferred Compensation Plan from time to time. Under Rule 16b-3, as presently in effect, stockholder approval is required for any amendment to the Deferred Compensation Plan which would increase materially the number of shares issuable to executive officers or directors under the Deferred Compensation Plan, increase materially the Company stock benefits which may be provided under the Deferred Compensation Plan to executive officers or directors or modify materially the eligibility requirements for participation in Company stock funds by executive officers and directors in the Deferred Compensation Plan. In addition, no amendment may significantly reduce the value of a participant's vested accounts. Rabbi Trust. It is intended that the Deferred Compensation Plan be deemed unfunded for federal tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"). All accounts established under the Deferred Compensation Plan have been maintained merely as bookkeeping accounts and amounts credited to the participants' accounts have been the general assets of the Company subject to the claims of the Company's general creditors until such amounts are distributed to the participants. Effective July 1, 1996, the Company has amended the Plan to establish a trust fund to hold the assets of the Deferred Compensation Plan for the benefit of participants. Following establishment of such trust, the Company intends to make contributions to the trust equal to the amounts of deferred compensation (along with all matching contributions), including amounts equal to all compensation deferred, all matching amounts and earnings on accounts to date under the Deferred Compensation Plan. Although such amounts will be deposited into the trust, the Deferred Compensation Plan will continue to be unfunded for tax and ERISA purposes because the assets of the trust will remain subject to the claims of the Company's general creditors in the event of insolvency. Notwithstanding the above, prior to a Change in Control, participants' Common Stock Accounts will not be held in the trust. Such accounts will merely be bookkeeping accounts on the records of the Company. Immediately prior to a Change in Control, units in Common Stock Accounts will be converted into actual shares of Common Stock and contributed to the trust. Further, in the event of a Change in Control of the Company, assets will be deposited in the trust equal to the liabilities under the Deferred Compensation Plan if not already so deposited and its administration will be handled by an independent third party instead of the Company. To fully fund the trust as of June 3, 1996, the Company would be required to deposit assets with a value of approximately 16 $3,660,000 into the trust. Such deposit will be made from the general cash reserves of the Company and will not have a material adverse effect on the financial position of the Company. Federal Income Tax Considerations. The Deferred Compensation Plan is intended to be administered as a non-qualified deferred compensation plan for a select group of management or highly compensated employees. It is also intended that amounts deferred and earnings accrued under the Deferred Compensation Plan are not recognized as income for federal tax purposes until such contributions or earnings are actually distributed or withdrawn from the Deferred Compensation Plan. The Company is not entitled to a compensation expense deduction for amounts deferred under the Deferred Compensation Plan and will be required to pay income tax on all earnings on amounts held in the Deferred Compensation Plan which accrue under the Deferred Compensation Plan while such amounts remain in the Deferred Compensation Plan. Upon distribution or withdrawal of any such amounts, the respective participant will be subject to income tax on such amounts and the Company will receive a compensation expense deduction in the amount of the withdrawal or distribution. AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK (PROPOSAL 4) The Board of Directors has approved an amendment to Article Fourth of the Company's Restated Certificate of Incorporation (the "Certificate of Incorporation"), subject to the approval of the Company's stockholders, to increase the number of authorized shares of Common Stock of the Company to 50,000,000 from 30,000,000. The affirmative vote of a majority of the outstanding shares entitled to vote thereon at the Annual Meeting will be required to approve this proposal. The persons name in the enclosed proxy will vote the shares represented by proxies returned to the Company FOR the proposal unless instructed otherwise in the proxy. Shares represented by proxies which are marked "abstain" will have the same effect as a vote against this proposal. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION. The following resolution relating to an amendment to the Certificate of Incorporation will be introduced at the Annual Meeting for the purpose described below: RESOLVED, the existing paragraph A of Article Fourth of the Certificate of Incorporation is amended in the following respects: Paragraph A is amended to read in its entirety as follows: A. The Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock," respectively. The number of shares of Common Stock authorized to be issued is 50,000,000, par value $.01 per share, and the number of shares of Preferred Stock authorized to be issued is 5,000,000, par value $.01 per share. Currently, the Company has 30,000,000 shares of Common Stock authorized. As of June 3, 1996, there were outstanding 9,784,227 shares of Common Stock of the Company. In addition, on the same date, (i) 1,578,900 shares of Common Stock were reserved and available for issuance upon the exercise of options granted or which may be granted under the Company's 1989 Stock Option Plan, (ii) 43,707 shares of Common Stock were reserved and available for issuance upon grants of shares pursuant to the Director Grant Plan, (iii) 133,342 shares of Common Stock were reserved and available for issuance pursuant to the Company's Employee Payroll Deduction Stock Purchase Plan and (iv) 10,000 shares of Common Stock were reserved pursuant to various other obligations of the Company. Therefore, as of such date, the Company had only 18,449,824 shares of authorized Common Stock remaining for future issuance which were not standing reserved for a specific purpose. Effective June 5, 1996, the Board of Directors approved a two-for-one split of the Common Stock, to be effected in the form of a stock dividend (the "Stock Split Dividend"). The Stock Split Dividend will be paid on 17 July 15, 1996 to holders of record of the Common Stock on June 24, 1996. Upon payment of the Stock Split Dividend, each holder of record of Common Stock on June 24, 1996 will receive one additional share of Common Stock for each share of Common Stock held on such date. Following the Stock Split Dividend, the number of shares subject to outstanding stock options, the number of shares reserved for issuance under the Company's 1989 Stock Option Plan, the number of shares issuable to directors under the Director Grant Plan, the number of shares reserved for issuance under the Employee Payroll Deduction Stock Purchase Plan and the number of shares reserved for issuance for other purposes will be proportionately increased to reflect the Stock Split Dividend. In addition, the exercise price of outstanding stock options will be proportionately reduced, in accordance with the terms of the 1989 Stock Option Plan. Also, the number of shares subject to grants pursuant to the Director Grant Plan will be doubled such that, for example, assuming adoption of the amendment to such plan described in Proposal 2, upon election or reelection of an outside director for a three-year term, the director will receive a grant of 2,000 (instead of 1,000) shares under the Director Grant Plan. As a result, following the Stock Split Dividend the Company will have only 6,899,648 shares of authorized Common Stock remaining for future issuance which will not be standing reserved for a specific purpose. The Board of Directors of the Company believes that it is in the best interest of the Company and its stockholders that there be a greater number of authorized and unissued shares available to give the Company the flexibility it needs to conduct its business and accommodate future growth. The proposed increase in authorized shares of Common Stock is desirable to enhance the Company's flexibility in structuring its future capitalization, to meet financing needs for expansion and growth and for other corporate purposes which the Board may deem desirable. The Board of Directors believes that if the Stock Split Dividend is effected without an increase in authorized Common Stock, the remaining available unissued shares would not provide sufficient flexibility for corporate action in the future. The purpose of the proposed increase in the number of shares of authorized Common Stock is to ensure that additional shares of Common Stock will be available, if needed, for issuance in connection with any future transactions approved by the Board of Directors, including, among others, future stock splits, stock dividends, acquisitions, financings and other corporate purposes. The Board of Directors believes that the availability of the additional shares of Common Stock for such purposes without delay or the necessity for a special stockholders meeting (except as may be required by applicable law or regulatory authorities or by the policies, rules and regulations of the New York Stock Exchange or any other stock exchange on which the Company's securities may then be listed) will be beneficial to the Company by providing it with the flexibility required to consider and promptly respond to future business opportunities and needs as they arise. If the proposed amendment is approved by the stockholders, no future authorization for the issuance of newly authorized Common Stock will be solicited prior to such issuance (except as may be required by applicable law or regulatory authorities or by the policies, rules or regulations of the New York Stock Exchange or any other stock exchange on which the Company's securities may then be listed). Other than as described above with respect to shares reserved for issuance for specific purposes and with respect to the Stock Split Dividend, the Company has no current plans to issue additional shares of Common Stock. It is possible that shares of Common Stock may be issued at a time and under circumstances which may increase or decrease earnings per share and increase or decrease the book value per share of shares presently held. Further, although the proposed increase in authorized shares of Common Stock is not proposed for the purpose of any anti-takeover effect, the issuance of additional shares of Common Stock authorized pursuant thereto may have an anti-takeover effect and may delay or prevent a tender offer or takeover attempt that a stockholder may consider in its best interest, including those attempts that might result in a premium over the market price of shares held by such stockholder. The proposed amendment will enable the Board of Directors to issue shares of Common stock to third parties which could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise. 18 In addition to the above matters, the proposed amendment is intended to clarify a clerical matter relating to the Company's Certificate of Incorporation as currently in effect. Specifically, the Certificate of Incorporation has not formally been amended to eliminate the reference in that document to shares of Series A Preferred Stock and Series D Preferred Stock, both of which series were outstanding prior to the Company's initial public offering which closed in March 1992. In connection with such initial public offering, all such shares of Series A Preferred Stock and Series D Preferred Stock outstanding (being 936,475 shares in the aggregate) were converted into Common Stock and no shares of either such series have been, or are contemplated to be, reissued. The Company has taken the position that these shares are not, in fact, available for reissuance, but the Delaware Secretary of State continues to record such shares as authorized. Therefore, the Board of Directors of the Company has authorized the filing of an amendment to the Certificate of Incorporation to eliminate any reference to either of such series. The proposed amendment to the Certificate of Incorporation would make clear that the only shares of Preferred Stock which are authorized are the 5,000,000 shares of "undesignated" Preferred Stock which the Company has reported as authorized, with none outstanding, since the completion of its initial public offering. The Board of Directors of the Company is authorized pursuant to the Certificate of Incorporation to provide for the issuance of such Preferred Stock in series, to establish the number of shares to be included in each such series and the designations, preferences and relative, participating, optional, conversion and other special rights, and qualifications, limitations or restrictions, of such shares without further action of the stockholders of the Company. Such authority of the Board of Directors includes, but is not limited to, fixing the number of shares constituting any series or the distinct designation thereof, the rate and nature (whether participating or cumulative) of any dividends payable on shares of Preferred Stock, the voting rights of such shares, the conversion or redemption features of any such shares, and the rights of such shares in the event of liquidation, dissolution or winding up of the Company. The Company has no current plans to issue any shares of Preferred Stock. THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS (PROPOSAL 5) The Board of Directors has selected Arthur Andersen LLP to audit the financial statements of the Company for the year ended March 31, 1997. Arthur Andersen LLP has audited the Company's financial statements since 1985. The persons named in the enclosed proxy will vote shares represented by proxies returned to the Company FOR the proposal unless instructed otherwise in the proxy. YOUR BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE PROPOSAL TO RATIFY AND APPROVE THE SELECTION OF THE ACCOUNTING FIRM ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR FISCAL 1997. A representative of Arthur Andersen LLP will be present at the Annual Meeting to respond to any questions and to make a statement on behalf of his firm, if he so desires. TRANSACTION OF OTHER BUSINESS As of the date of this Proxy Statement, the Board of Directors is not aware of any matters other than those set forth herein and in the Notice of Annual Meeting that will come before the meeting. Should any other matters arise requiring the vote of stockholders, it is intended that proxies will be voted in respect thereto in accordance with the best judgment of the person or persons voting the proxies. 19 REPORT OF THE COMPENSATION COMMITTEE The Compensation Committee of the Board of Directors is composed of Messrs. Beinecke as Chairman, Collins, Mendell and Wilson, all of whom are independent directors. The Committee is responsible to the Board and indirectly to stockholders for assuring that: 1. The Company's human resource policies are effective in attracting, retaining and developing outstanding executive talent; 2. The Company has succession plans for senior management positions; 3. The Company's total compensation program supports the Company's business goals and strategies, reinforces desired corporate behaviors, and properly recognizes performance; and 4. The Company's compensation levels are internally equitable and externally competitive. The Committee sets compensation policies designed to maintain a strong relationship between performance and rewards, to align the interests of the executive officers with those of the stockholders and to actively encourage ownership of the Company's Common Stock. The Committee's actions with regard to executive officers who are members of the Board are subject to Board approval. EXECUTIVE COMPENSATION POLICY The Company's compensation program is designed to attract, motivate, reward and retain the management talent required to achieve aggressive corporate growth and profitability objectives, and thereby increase stockholder value. It is the Company's policy to provide conservatively competitive base salaries to attract and retain highly capable managers, attractive annual incentive bonuses to encourage and reward achievement of the Company's annual growth and profitability goals, and significant equity opportunities to align the interests of management with those of stockholders. Because of the unique position the Company occupies within its market sector, there are few peer companies with which the Company can compare its management compensation. Consequently, the Compensation Committee does not rely on competitive surveys to set management compensation levels. However, the Compensation Committee does review the executive compensation levels in other publicly held growth companies in related and other industries, and obtains advice from independent consultants as to the Company's pay practices and levels. The tax deductibility of a senior executive's compensation is limited to $1 million a year unless such compensation is "performance based" or meets other exemptions under the Code. It is the Company's policy to structure and administer its compensation program for executives to maximize the tax deductibility of executive compensation for the benefit of its stockholders whenever appropriate. EXECUTIVE COMPENSATION PROGRAM The principal elements of the executive compensation program are base salary, annual incentive bonuses and stock options. Key management personnel receive each element of compensation in various combinations, with the portion of total compensation provided by annual incentive bonuses and stock options increasing at higher management levels. BASE SALARIES The Compensation Committee reviews the salaries paid to the Company's executive officers and considers increases based on several factors, including competitive compensation data, individual performance, internal 20 relationships and the performance and prospects of the Company. Base salaries for executive officers were increased effective May 1, 1996 by an average of 5%. ANNUAL INCENTIVE BONUSES Annual incentive bonuses are awarded to the Company's senior management under the annual management incentive plan. Bonuses are set as a maximum percentage of salary by management level and are earned based on individual and Company performance in relation to financial and non-financial objectives set by the Compensation Committee. Bonus maximums range from 20% of salary up to 80% of salary. The objectives for senior management are recommended by the Chief Executive Officer and approved by the Compensation Committee. Cash payments under the annual management incentive plan ranged from 13% to 58% of individual employee's salary for fiscal 1996. Bonuses for fiscal year 1996 were less than bonuses paid for fiscal year 1995. The Compensation Committee set very aggressive goals for the management of the Company for fiscal year 1996, which goals were substantially, although not fully, achieved. Examples of the Company's strong performance include an 18.5% increase in revenues and a 29.2% increase in earnings per share for fiscal 1996 as compared to fiscal 1995. In light of such positive results, the Compensation Committee deemed it appropriate to award substantial bonuses to the Company's senior management, although not as large as those awarded the year before. STOCK OPTIONS Annual stock option grants are recommended by the Chief Executive Officer and are reviewed and approved by the Compensation Committee. Grants are based on several factors, including an evaluation of individual performance, tenure with the Company and management level. Special grants are considered to attract experienced managers to join the Company. The Compensation Committee believes that employee stock options are highly important to retain key employees and in aligning employee interests with the stockholders' interests. COMMITTEE DECISIONS AFFECTING CHIEF EXECUTIVE OFFICER'S COMPENSATION FOR FISCAL 1997 Mr. Off's base salary was increased by the Compensation Committee to $262,500 effective on May 1, 1996, a 5% increase over the prior year. Mr. Off's salary level was determined based on his performance and contribution to the Company's performance as evaluated by the Compensation Committee. The CEO's bonus for fiscal 1996 was determined by the Compensation Committee based on specific financial and non-financial performance goals. Mr. Off's incentive bonus of $145,000 for fiscal 1996, 58% of his salary, was based upon the Compensation Committee's evaluation of his performance and contribution to the Company's achievements in fiscal 1996, in which increases in revenues, net income and earnings per share were 18.5%, 27.8% and 29.2%, respectively, over the prior year. In relation to this performance, Mr. Off's annual compensation for fiscal 1996 (salary paid and bonus earned) was 2.6% higher than his annual compensation for the prior year. In addition, the Compensation Committee granted 25,000 stock options to Mr. Off for fiscal 1996. RESPECTFULLY SUBMITTED, Frederick W. Beinecke Patrick W. Collins Thomas G. Mendell Michael B. Wilson 21 SUMMARY COMPENSATION TABLE
SHARES OF COMMON STOCK FISCAL UNDERLYING ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY(A)($) BONUS($) OPTIONS GRANTED COMPENSATION(B) - - --------------------------- ------ ------------ -------- --------------- --------------- George W. Off 1996 248,630 145,000 25,000 50,676 President, Chief Executive 1995 229,100 154,421 20,000 22,172 Officer and Director 1994 200,676 108,792 -- 74,905 Tommy D. Greer 1996 250,016 120,000 -- 20,394 Chairman of the Board 1995 248,150 145,609 72,500 6,000 1994 224,521 144,488 -- 63,747 Helene Monat (c) 1996 222,385 102,873 18,800 74,143 Executive Vice President, 1995 197,560 128,128 20,000 7,600 Sales, and Director 1994 173,669 100,000 -- 1,132 Karl Maggard 1996 204,005 60,000 -- 10,385 Executive Vice President, 1995 163,500 93,600 75,000 3,563 Marketing Daniel D. Granger (c) 1996 195,100 115,000 -- 45,225 Executive Vice President, 1995 185,329 84,873 -- 23,748 Sales, and President, Catalina 1994 150,568 68,640 -- 44,490 Marketing Services Division
- - -------- (a) Salary includes all before-tax contributions by the employee to the Company's Deferred Compensation Plan. (b) Other compensation includes Company matching contributions and all earnings (vested and non-vested) contributed by the Company under the Company's Deferred Compensation Plan and reimbursement for moving expenses associated with the corporate headquarters relocation to St. Petersburg, Florida. (c) Effective April 19, 1996, Helene Monat tendered her resignation as an Executive Vice President and employee of the Company. Ms. Monat will continue as a consultant to the Company, and has consented to her nomination for reelection for director at the Annual Meeting. Daniel D. Granger became an Executive Vice President of the Company effective January 23, 1996 in anticipation of Ms. Monat's resignation. OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK % OF TOTAL PRICE APPRECIATION OPTION FOR OPTION TERM($)(B) OPTIONS GRANTED TO EXERCISE EXPIRATION ---------------------- GRANTED(A) EMPLOYEES PRICE($) DATE 5% 10% ---------- ---------- -------- ---------- ---------- ----------- George W. Off (CEO)..... 25,000 6.6% 46.25 5/1/00 70,271 169,287 Tommy D. Greer.......... -- -- -- -- -- -- Helene Monat............ 18,800 5.0% 46.25 5/1/00 52,844 127,303 Karl J. Maggard......... -- -- -- -- -- -- Daniel D. Granger....... -- -- -- -- -- --
- - -------- (a) Options granted generally become exercisable at the rate of 25% per year, commencing one year after the date of grant, except for options associated with a new hire which generally become exercisable at the rate of 20% per year, and are subject to early termination in certain instances relating to termination of employment. (b) Potential Realizable Values is based on the assumption that the market price of the stock appreciates at the stated rate, compounded annually, from the date of grant to the expiration of the option. These values are 22 calculated based on requirements promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future stock price appreciation. OPTION EXERCISES AND YEAR END VALUE TABLE
AT FISCAL YEAR END --------------------------------------------------- NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED SHARES OPTIONS IN-THE-MONTH OPIONS($)(A) ACQUIRED VALUE ------------------------- ------------------------- ON EXERCISE RELIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ----------- ---------- ----------- ------------- ----------- ------------- George W. Off (CEO)..... 7,500 412,500 66,500 58,750 3,248,654 2,200,139 Tommy D. Greer.......... -- -- 18,125 54,375 626,444 1,879,335 Helene Monat............ 30,622 1,473,609 35,000 43,800(b) 1,438,436 1,526,634(b) Karl Maggard............ -- -- 15,000 60,000 469,687 1,878,750 Daniel D. Granger....... 9,425 448,866 20,500 6,250 914,280 263,671
- - -------- (a) The closing price of the Company's Common Stock was $78.13 per share on March 29, 1996, the last business day of the fiscal year. (b) Effective with her resignation as an employee of the Company, Ms. Monat forfeited options relating to 34,100 of such shares, which were not then exercisable. COMMON STOCK PRICE PERFORMANCE GRAPH The following graph compares the Company's cumulative total return to stockholders since its Initial Public Offering on March 26, 1992 with that of the New York Stock Exchange Index and a peer group consisting of those public companies traded on an exchange and listed under the Standard Industry Classification (S.I.C.) Code 731--Advertising. 23 [GRAPH APPEARS HERE] COMPARISON(1) OF CUMULATIVE TOTAL RETURN AMONG CATALINA MARKETING CORPORATION, NYSE MARKET INDEX AND PEER GROUP INDEX(2). Catalina NYSE Market Peer Measurement period Marketing Valuation Group (Fiscal year Covered) Group Index Index - - --------------------- --------- ------------ ----- Measurement PT - 03/26/92 $100 $100 $100 FYE 3/31/92 $143 $100 $100 FYE 3/31/93 $198 $115 $120 FYE 3/31/94 $225 $119 $134 FYE 3/31/95 $248 $133 $134 FYE 3/31/96 $391 $173 $251 Assumes $100 invested on March 26, 1992, in Catalina Marketing Corporation, the New York Stock Exchange and the peer group defined. Historical results are not necessarily indicative of future performance. - - -------- (1) Based on the Company's Initial Public Offering price of $20.00. However, it should be noted that the closing price of the Company's Common Stock on the first day of trading on the New York Stock Exchange, March 27, 1992, was $28.00. (2) The peer group index is made up of the following securities: Ackerly Communication, Inc., Advanced Promotion Technologies, Inc., All American Communications, Inc., 4 Kids Entertainment, Greenstone Roberts Advertising, Inc., Heritage Media Corporation, Grey Advertising, Inc., Interpublic Group of Companies, Inc., Omnicom Group, Saatchi & Saatchi Plc., Site-Based Media, Inc., and WPP Group Plc. NON-EMPLOYEE DIRECTOR COMPENSATION In addition to grants made pursuant to the Company's 1992 Director Stock Grant Plan, non-employee directors receive $1,500 per day for each one day meeting attended in person, including committee meetings. The Chairman of each committee receives $3,000 annually. Also, non-employee directors receive a fee of $300 for each telephonic Board or committee meeting of less than one hour, or a fee of $1,500 for such telephonic meetings which are in excess of one hour. All expenses in connection with attendance at such meetings are paid by the Company. 24 FUTURE STOCKHOLDER PROPOSALS The Company must receive at its principal office appearing on the front page of this Proxy Statement before February 21, 1997, any proposal which a stockholder wishes to submit to the 1997 Annual Meeting of Stockholders, if the proposal is to be considered by the Board of Directors for inclusion in the proxy materials for that annual meeting. Please return your proxy as soon as possible. Unless a quorum consisting of a majority of the outstanding shares entitled to vote is represented at the meeting, no business can be transacted. Therefore, please be sure to date and sign your proxy exactly as your name appears on your stock certificate and return it in the enclosed prepaid return envelope. Please act promptly to ensure that you will be represented at this important meeting. THE COMPANY WILL PROVIDE WITHOUT CHARGE, ON THE WRITTEN REQUEST OF ANY BENEFICIAL OWNER OF SHARES ENTITLED TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS, A COPY WITHOUT EXHIBITS OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED MARCH 31, 1996. REQUESTS SHOULD BE MAILED TO THE SECRETARY, CATALINA MARKETING CORPORATION, 11300 9TH STREET NORTH, ST. PETERSBURG, FLORIDA 33716. THE ANNUAL REPORT ON FORM 10-K IS NOT SOLICITING MATERIAL AND IS NOT INCORPORATED IN THIS DOCUMENT BY REFERENCE. By Order of the Board of Directors /s/ George W. Off ----------------------------------- George W. Off President and Chief Executive Officer June 21, 1996 25 EX-99.1 2 DIRECTOR STOCK GRANT PLAN Final, As Amended 6/6/96 CATALINA MARKETING CORPORATION ------------------------------ 1992 DIRECTOR STOCK GRANT PLAN ------------------------------ 1. PURPOSE. ------- The Plan is intended to provide incentive to outside directors of the Corporation, to encourage proprietary interest in the Corporation, and to attract new outside directors with outstanding qualifications. 2. DEFINITIONS. ----------- Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates otherwise. (a) "Act" shall mean the Securities Act of 1933, as amended. --- (b) "Administrator" shall mean the Board or the Committee, whichever shall ------------- be administering the Plan from time to time in the discretion of the Board, as described in Section 4(a) of the Plan. (c) "Annual Meeting Date" shall have the meaning assigned to it in Section ------------------- 6(e) hereof. (d) "Board" shall mean the Board of Directors of the Corporation. ----- (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. ---- (f) "Committee" shall mean the committee appointed by the Board in --------- accordance with Section 4(a) of the Plan. (g) "Common Stock" shall mean the Common Stock, par value $.01 per share, ------------ of the Corporation. (h) "Corporation" shall mean Catalina Marketing Corporation, a Delaware ----------- corporation. -1- (i) "Directors" shall mean, collectively, all outside (non-employee) --------- directors, duly elected to the Board by the Corporation's stockholders or otherwise in accordance with the Corporation's Bylaws, and all outside (non- employee) directors appointed to fill a vacancy or a newly created directorship position of the Board. (j) "Disability" shall mean the condition of a Director who is unable to ---------- substantially fulfill his responsibilities as a member of the Board by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. (k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended. (l) "Fair Market Value" shall mean the value of one (1) Share of Common ----------------- Stock, determined as follows, without regard to any restriction other than a restriction which, by its terms, will never lapse: (i) If the Shares are traded on an exchange or the National Market System (the "NMS") of the National Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), the last sale price as reported for composite transactions on the date of valuation or, if no sales occurred on that date, then the average of the highest bid and lowest asked prices on such exchange or the NMS at the end of the day on such date; (ii) If the Shares are not traded on an exchange or the NMS but are otherwise traded over-the-counter, the average of the highest bid and lowest asked prices quoted in the NASDAQ system as of the close of business on the date of valuation, or, if on such day such security is not quoted in the NASDAQ system, the average of the representative bid and asked prices on such date in the domestic over-the-counter market as reported by the National Quotation Bureau, Inc., or any similar successor organization; and (iii) If neither (i) nor (ii) applies, the fair market value as determined by the Administrator in good faith. Such determination shall be conclusive and binding on all persons. -2- (m) "Grant" shall mean any stock award granted pursuant to the Plan. ----- (n) "Grantee" shall mean a Director who has received a Grant pursuant to ------- Section 4(b) hereof. (o) "Plan" shall mean this Catalina Marketing Corporation 1992 Director ---- Stock Grant Plan, as it may be amended from time to time. (p) "Share" shall mean one (1) share of Common Stock, adjusted in ----- accordance with Section 8 of the Plan (if applicable). (q) "Term of Directorship" shall have the meaning assigned to it in Section -------------------- 6(b) hereof. (r) "Transition Grants" shall have the meaning assigned to it in Section ----------------- 6(c) hereof. (s) "Valuation Date" shall have the meaning assigned to it in Section 6(c) -------------- hereof. (t) "Vested Shares" and "Non-Vested Shares" shall have the meanings ------------- ----------------- assigned to such terms in Section 6(e) hereof. 3. EFFECTIVE DATE. -------------- The Plan was adopted by the Board effective October 27, 1992, subject to the approval of the Corporation's stockholders pursuant to Section 12 hereof. 4. ADMINISTRATION AND ELIGIBILITY. ------------------------------ (a) Administrator. The Plan shall be administered, in the discretion of ------------- the Board from time to time, by the Board or by the Committee. The Committee shall be appointed by the Board and shall consist of not less than two (2) members of the Board. The Board may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, however caused, shall be filled by the Board. The Board shall appoint one of the members of the Committee as Chairman. The Administrator shall hold meetings at such times and places as it may determine. Acts of a majority of the Administrator at a meeting at which a quorum is present, or acts reduced to or approved in writing by unanimous consent of the members of the Administrator, shall be the valid acts of the Administrator. -3- The Administrator shall maintain a list of the Directors who have been awarded Grants, and determine the number of Shares granted to each Director in accordance with Section 6(b) hereof. Subject to the express provisions of the Plan, the Administrator shall have the authority to construe and interpret the Plan and to define the terms used in the Plan, to prescribe, amend and rescind rules and regulations relating to the administration of the Plan, and to make all other determinations necessary or advisable for the administration of the Plan. The interpretation and construction by the Administrator of any provisions of the Plan or of any Grant granted thereunder shall be final. No member of the Administrator shall be liable for any action or determination made in good faith with respect to the Plan or any Grant awarded thereunder. (b) Participation. The Grantees shall consist exclusively of Directors of ------------- the Corporation; provided, however, that no Director shall be eligible to be a -------- ------- Grantee if and to the extent that such Director is prohibited from personally accepting or benefiting from a Grant hereunder due to such Director's affiliation with a business organization; provided further, however, that if at -------- ------- ------- any time a Director who has not been eligible under the Plan due to the immediately preceding proviso becomes eligible to participate, such Director shall be treated as having been elected to a term of less than three years at the time such Director becomes so eligible, and at such time shall receive a Grant as though such Director had been elected at such time, pursuant to Section 6(b) of the Plan. If a Director is not eligible to be a Grantee due to the first proviso of the immediately preceding sentence, then such Director shall be entitled to cash compensation of $10,000 per year during the Term of Directorship, with such compensation to be paid on a quarterly basis or as otherwise directed by the Administrator. 5. STOCK. ----- The stock subject to Grants awarded under the Plan shall be Shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number of Shares which may be issued upon exercise of Grants under the Plan shall not exceed fifty thousand (50,000), subject to the occurrence of any of the events specified in Section 8 hereof. The number of Shares subject to additional Grants at any time shall not exceed the number of Shares remaining available for issuance under the Plan. In the event that any Shares subject to any outstanding grants for any reason -4- are forfeited and returned to the Corporation in accordance with Section 6(f) of the Plan, the Shares so forfeited may again be subject to Grants. 6. TERMS AND CONDITIONS OF GRANTS. ------------------------------ (a) Stock Grant Agreements. Grants shall be evidenced by written stock ---------------------- grant agreements in such form as the Administrator shall from time to time determine. Such agreements need not be identical but shall comply with and be subject to the terms and conditions set forth below. (b) Award of Grants. A Grant shall be awarded to each Director as of the --------------- day that such Director takes office following the election or re-election of such Director by the stockholders or by the Board, as permitted in the Corporation's Bylaws, in partial consideration for the fulfillment by such Director of such Director's duties as a director of the Corporation. Subject to the availability of Shares as specified in Section 5 of the Plan, each Grant shall include AN AGGREGATE OF ONE THOUSAND (1,000) SHARES (SUBJECT TO ADJUSTMENTS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8 HEREOF)/*/ as of the effective date of the Grant, as determined by the Administrator/*/; provided, however, that if the term (the "Term of Directorship") for which the - - -------- ------- Director has been elected is not a full three-year term, the number of Shares subject to a Grant shall be the number of Shares calculated as set forth above, multiplied by a fraction, the numerator of which is the number of full months during which the Grantee shall serve as director following the award of the Grant and until the next annual meeting of stockholders (the "Annual Meeting of Stockholders") at which the class of directors to which the Grantee belongs is to be elected (assuming for purposes of this calculation that the Annual Meeting Date (as hereinafter defined) is July 31 of such fiscal year), and the denominator of which is thirty-six (36), rounded up to the nearest whole number of Shares. (c) Grants Upon Adoption of Plan. Notwith-standing any provision to the ---------------------------- contrary herein, upon the final ratification of the Plan by the Board, and subject to the approval by stockholders as contemplated by Section 12 of the Plan, all persons who were Directors upon the - - ---------------------- /*/ The language appearing in bold-face herein was adopted and certain other language deleted by the Board on July 25, 1995 and approved by the stockholders on ______________, 1996. -5- adoption by the Board of the Plan (October 27, 1992) (the "Valuation Date") will receive Grants ("Transition Grants") effective upon the date of such final ratification calculated as follows: (i) Class I Directors shall receive Grants which shall include the number of Shares obtained by dividing $30,000 by the Fair Market Value as of the Valuation Date, as determined by the Administrator, rounded up to the nearest whole number of Shares; (ii) Class II Directors shall receive Grants which shall include one-third (1/3) of the number of Shares to be received by Class I Directors, rounded up to the nearest whole number of Shares; and (iii) Class III Directors shall receive Grants which shall include two-thirds (2/3) of the number of Shares to be received by Class II Directors, rounded up to the nearest whole number of Shares. (d) Number of Shares. Each Grant shall state the number of Shares to which ---------------- it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 8 hereof. (e) Vesting. Shares included in Grants shall be subject to the vesting ------- provisions herein set forth. Shares which have vested according to the schedule set forth below shall be considered "Vested Shares" and Shares which have not so vested shall be considered "Non-Vested Shares." The Shares included in each Grant shall vest on the date of each successive Annual Meeting of Stockholders of the Corporation (the "Annual Meeting Date") following the effective date of the Grant. The number of Shares subject to a Grant which shall become Vested Shares as of each Annual Meeting Date shall be calculated by multiplying the number of Shares included in the Grant by a fraction, the numerator of which is equal to the number of months which have elapsed since the later of (i) the election or re-election of such Director or (ii) the last Annual Meeting Date, and the denominator of which is the number of full months during which the Grantee shall serve as director following the award of the Grant and until the next Annual Meeting of Stockholders at which the class of directors to which the Grantee belongs is to be elected (assuming for purposes of this calculation that the Annual Meeting Date is July 31 of such fiscal year); provided, however, in -------- ------- the case of Transition Grants, Directors shall be deemed to have -6- completed twelve (12) months of service as a Director on the Annual Meeting Date. If no Annual Meeting of Stockholders shall have occurred in any fiscal year on or before July 31 of such fiscal year, then unless the Board shall have adopted a resolution adopting an alternative date, July 31 shall be considered to be the Annual Meeting Date. (f) Restrictions on Non-Vested Shares. A Grantee may not assign, sell, --------------------------------- pledge, hypothecate or otherwise transfer any Grant or any Non-Vested Shares. If a Grantee ceases to be a Director for any reason or no reason, including upon death or Disability, removal (with or without cause) or resignation, the Grant shall be automatically terminated immediately upon the effective date of such cessation and all Shares included in Grants which are Non-Vested Shares as of the effective date of such cessation, shall be forfeited automatically and shall, effective immediately upon such cessation, be returned to the status of authorized to be issued pursuant to Grants under the Plan. In the discretion of the Administrator, the Corporation may devise any mechanism reasonable for the purpose of enforcing the restrictions and limitations on Non-Vested Shares. In the absence of any other such mechanism, the Corporation may retain possession of any certificates representing Non-Vested Shares, but shall cause certificates representing Shares which have become Vested Shares registered in the name of the Grantee to be delivered to the Grantee entitled to the same promptly following the time at which such Shares become Vested Shares as herein described. (g) Rights as a Stockholder. Except as provided in Section 6(f) of the ----------------------- Plan, a Grantee shall have and enjoy all rights as a stockholder with respect to all Shares included in the Grant, regardless of whether the Shares awarded are Vested or Non-Vested, including, without limitation, the right to vote any such Shares, the right to receive all communications addressed by the Corporation to its stockholders, and the right to receive dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights as provided in the Certificate of Incorporation or Bylaws of the Corporation. Notwithstanding any provision hereof, a Director may not transfer any Shares received pursuant to a Grant for a period of six (6) months immediately following the effective date of the Grant. (h) Payment of Taxes; Related Matters. In the event the Corporation --------------------------------- determines it is required to -7- withhold state, local or Federal income tax as a result of the grant of a Grant or the vesting of any Shares subject to a Grant, the Corporation may require a Grantee to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. Payment of such withholding requirements may be made, in the discretion of the Administrator, (i) in cash, (ii) by delivery of Shares registered in the name of the Grantee, or by the Corporation not issuing such number of Shares subject to the Grant having a Fair Market Value at the effective date of the Grant or the date of such vesting equal to the amount to be withheld, or (iii) any combination of (i) and (ii) above. An election under the preceding sentence may only be made during the period beginning on the third business day following the date of release of quarterly and annual summary statements of sales and earnings as provided by Rule 16b- 3(e)(3)(iii) (or Rule 16b-3(e)(3) following the scheduled amendment of Rule 16b- 3) of the Securities and Exchange Commission and ending on the twelfth business day following such date and only if such period occurs before the date the Corporation requires payment of the withholding tax. The election need not be made during the ten-day window if (a) it is made at least six (6) months prior to the date of the Grant or (b) counsel to the Corporation determines that compliance with such requirement is unnecessary. THE STOCK GRANT AGREEMENTS SHALL APPRISE THE GRANTEE OF THE TAX CONSEQUENCES TO THE GRANTEE OF SECTION 83 OF THE CODE (INCLUDING THE TAX CONSEQUENCES TO THE GRANTEE OF FILING OF AN ELECTION PURSUANT TO SECTION 83(b) OF THE CODE), AND SHALL ALLOCATE THE RESPONSIBILITY FOR RECEIVING APPROPRIATE ADVICE WITH RESPECT THERETO TO THE GRANTEE. (I) DEFERRAL OF GRANT. PRIOR TO HIS OR HER ELECTION OR RE-ELECTION TO THE ----------------- BOARD OF DIRECTORS, EACH DIRECTOR MAY ELECT TO DEFER, IN ACCORDANCE WITH THE TERMS OF THE CORPORATION'S DEFERRED COMPENSATION PLAN, ALL OR A PORTION OF THE GRANT HE OR SHE SHALL RECEIVE IF ELECTED OR RE-ELECTED, PURSUANT TO SECTION 6(B). IN SUCH CASE, NO SHARES WILL BE ISSUED TO THE DIRECTOR AND A CREDIT WILL BE MADE TO THE COMMON STOCK UNIT ACCOUNT MAINTAINED FOR SUCH DIRECTOR UNDER THE DEFERRED COMPENSATION PLAN IN A NUMBER OF UNITS EQUAL TO THE NUMBER OF SHARES DEFERRED ON THE DATE OF GRANT./**/ - - ---------- /**/ The language appearing in bold-face herein was adopted by the Board of Directors on April 30, 1996 and approved by the stockholders on ________, 1996. -8- (j) Other Provisions. The stock grant agreements authorized under the Plan ---------------- may contain such other provisions not inconsistent with the terms of the Plan (including, without limitation, restrictions upon the transfer of Shares of stock following the award of the Grant) as the Administrator shall deem advisable. 7. TERM OF PLAN. ------------ Grants may be awarded pursuant to the Plan until the expiration of the Plan on October 27, 2002. 8. RECAPITALIZATIONS AND OTHER TRANSACTIONS. ---------------------------------------- Subject to any required action by stockholders, the aggregate number of Shares covered by the Plan as provided in Section 5 hereof and the number of Shares covered by each Grant shall be proportionately adjusted for any increase or decrease in the number of issued Shares resulting from a stock split, stock dividend (but only of Common Stock), combination of shares or any other change, by reclassification, reorganization, redesignation, recapitalization or otherwise, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Corporation. If any such adjustment results in a fractional share, such fraction shall be disregarded. Subject to any required action by stockholders, if the Corporation shall merge with another corporation and the Corporation is the surviving corporation in such merger and under the terms of such merger the shares of Common Stock outstanding immediately prior to the merger remain outstanding and unchanged, each outstanding Grant shall continue to apply to the Shares subject thereto, and any Shares awarded pursuant to a Grant prior to a merger, which have yet to fully vest in accordance with the schedule set forth in Section 6(e) of the Plan, shall continue to be subject to the same vesting schedule. In addition, in the event of a merger where the Corporation is the surviving corporation, each outstanding Grant shall also pertain and apply to any additional securities and other property, if any, to which a holder of the number of Shares subject to the Grant would have been entitled as a result of the merger. If the Corporation sells all, or substantially all, of its assets, or the Corporation merges (other than a merger of the type described in the immediately preceding sentence) or consolidates with another corporation (SUCH EVENT BEING A -9- "FORFEITURE EVENT,")/***/, this Plan and each outstanding Grant shall terminate and each Non-Vested Share awarded hereunder pursuant to a Grant shall be forfeited; PROVIDED, HOWEVER, THAT UNLESS THE CONSUMMATION OF THE FORFEITURE -------- ------- EVENT TAKES PLACE WITHIN THIRTY (30) DAYS FOLLOWING AN ANNUAL MEETING DATE, IN THE EVENT OF A FORFEITURE EVENT, ANY SHARES THAT WOULD HAVE BECOME VESTED SHARES AT THE NEXT SUCCEEDING ANNUAL MEETING DATE FOLLOWING THE CONSUMMATION OF THE FORFEITURE EVENT SHALL BE VESTED SHARES UPON AND FOR A PERIOD OF THIRTY (30) DAYS PRECEDING THE CONSUMMATION OF THE FORFEITURE EVENT, BUT CONTINGENT UPON THE CONSUMMATION OF THE FORFEITURE EVENT./***/ A dissolution or liquidation of the Corporation, other than a dissolution or liquidation immediately following a sale of all or substantially all of the assets of the Corporation, which shall be governed by the immediately preceding sentence, shall also cause this Plan and each Grant hereunder to terminate and each Non-Vested Share under any Grant to be forfeited. To the extent that the foregoing adjustments relate to securities of the Corporation, such adjustments shall be made by the Administrator, whose determination shall be conclusive and binding on all persons. Except as expressly provided in this Section, the Grantee shall have no rights by reason of any subdivision or consolidation of shares of stock of any class, the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to a Grant. The award of a Grant pursuant to the Plan shall not affect in any way the right or power of the Corporation to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. - - --------------- /***/ The language appearing in bold-face herein was adopted by the Board on April 19, 1994 and approved by the stockholders on July 26, 1994. -10- 9. SECURITIES LAW REQUIREMENTS. --------------------------- (a) Legality of Issuance. No Shares shall be issued upon the award of any -------------------- Grant unless and until the Corporation has determined that: (i) it and the Grantee have taken all actions required to register the award of the Shares under the Act, or to perfect an exemption from the registration requirements thereof; (ii) any applicable listing requirement of any stock exchange on which the Common Stock is listed has been satisfied; and (iii) any other applicable provision of state or Federal law has been satisfied. (b) Restrictions on Transfer; Representations of Grantee; Legends. ------------------------------------------------------------- Regardless of whether the award of Shares under the Plan has been registered under the Act or has been registered or qualified under the securities laws of any state, the Corporation may impose restrictions upon the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Corporation and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Act, the securities laws of any state or any other law. In the event that the award of Shares under the Plan is not registered under the Act but an exemption is available which requires an investment representation or other representation, each Grantee shall be required to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, and to make such other representations as are deemed necessary or appropriate by the Corporation and its counsel. Stock certificates evidencing Shares acquired under the Plan pursuant to an unregistered transaction shall bear the following restrictive legend (or similar legend in the discretion of the Administrator) and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law: -11- "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION AND MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM AND CONTENT TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT." Any determination by the Corporation and its counsel in connection with any of the matters set forth in this Section shall be conclusive and binding on all persons. (c) Registration or Qualification of Securities. The Corporation may, but ------------------------------------------- shall not be obligated to, register or qualify the award of Shares pursuant to the Plan under the Act or any other applicable law. The Corporation shall not be obligated to take any affirmative action in order to cause the award of Shares under the Plan to comply with any law. (d) Exchange of Certificates. If, in the opinion of the Corporation and ------------------------ its counsel, any legend placed on a stock certificate representing Shares awarded under the Plan is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but without such legend. 10. INFORMATION TO GRANTEES. ----------------------- The Corporation shall provide each Grantee on an annual or other periodic basis financial and other information regarding the Corporation. The Corporation may provide this information to each Grantee in any manner reasonably calculated to insure receipt of the information by each Grantee. -12- 11. AMENDMENT OF THE PLAN. --------------------- The Board may, from time to time, with respect to any Shares at the time not subject to Grants, suspend or discontinue the Plan or revise or amend it in any respect whatsoever, provided that the Board shall not revise or amend the -------- Plan more than once every six (6) months (other than to comport with changes in the Code or the Employee Retirement Income Security Act, or the rules or regulations thereunder), and provided, further, that no amendment or revision -------- ------- shall adversely affect, without the affected Grantee's written consent, the rights of any Grantee to whom the Shares have been issued pursuant to the Plan. In addition, without the approval of the Corporation's stockholders, no such revision or amendment shall: (a) Materially increase the benefits accruing to the Grantees under the Plan; (b) Increase the number of Shares which may be issued under the Plan; (c) Change the designation in Section 4 hereof with respect to the classes of persons eligible to receive Grants; (d) Modify the Plan such that it fails to meet the requirements of Rule 16b-3 of the Securities and Exchange Commission for the exemption of the acquisition, cancellation, expiration or surrender of Grants from the operation of Section 16(b) of the Exchange Act; or (e) Amend this Section to defeat its purpose. 12. APPROVAL OF STOCKHOLDERS. ------------------------ The Plan shall be subject to approval by the affirmative vote of the holders of a majority of the outstanding shares present or represented and entitled to vote at the first annual meeting of stockholders of the Corporation following the adoption of the Plan, and in no event later than October 27, 1993. Following the adoption of the Plan by the Board on October 27, 1992, but prior to stockholder approval, Grants may be awarded to Directors duly elected or appointed to serve on the Board of the Corporation, pending stockholder approval, and upon such approval by the stockholders, the actions of the Administrator by which the Grants were awarded shall be -13- ratified. Any amendment described in Section 11 shall also be subject to approval by the Corporation's stockholders. 13. EXECUTION. --------- To record the adoption of the Plan by the Board on October 27, 1992, the Corporation has caused its authorized officers to affix the corporate name and seal hereto. CATALINA MARKETING CORPORATION By /s/ Tommy D. Greer --------------------------------- Tommy D. Greer, Chairman By /s/ Barry A. Brooks --------------------------------- Barry A. Brooks, Secretary [Seal] -14- EX-99.2 3 DEFERRED COMPENSATION PLAN CATALINA MARKETING CORPORATION DEFERRED COMPENSATION PLAN EFFECTIVE JULY 1, 1996 TABLE OF CONTENTS ----------------- Page ---- ARTICLE I Definitions............................. 3 1.1 "Account or Accounts"................... 3 1.2 "Annual Meeting"........................ 3 1.3 "Annual Meeting Year"................... 3 1.4 "Beneficiary"........................... 3 1.5 "Beneficiary Designation Form".......... 4 1.6 "Board"................................. 4 1.7 "Bonus"................................. 4 1.8 "Cause"................................. 4 1.9 "Change in Control"..................... 4 1.10 "Claimant".............................. 5 1.11 "Code".................................. 5 1.12 "Common Stock".......................... 5 1.13 "Committee"............................. 5 1.14 "Company"............................... 5 1.15 "Deferral".............................. 5 1.16 "Director".............................. 6 1.17 "Director Fees"......................... 6 1.18 "Disability"............................ 6 1.19 "Dividend".............................. 6 1.20 "Earnings".............................. 6 1.21 "Effective Date"........................ 6 1.22 "Election Form"......................... 6 1.23 "Employee".............................. 7 1.24 "ERISA"................................. 7 1.25 "Exchange Act".......................... 7 1.26 "Fair Market Value"..................... 7 1.27 "Non-Qualified Stock Option"............ 7 1.28 "Normal Retirement Date"................ 7 1.29 "Option Profit"......................... 7 1.30 "Participant"........................... 7 1.31 "Plan".................................. 8 1.32 "Plan Administrator".................... 8 1.33 "Plan Agreement"........................ 8 1.34 "Plan Rules"............................ 8 1.35 "Plan Year"............................. 8 1.36 "Related Employer"...................... 8 1.37 "Rule 16b-3"............................ 8 1.38 "Salary"................................ 8 1.39 "Stock Grants".......................... 8 1.40 "Stock Units"........................... 9 1.41 "Termination of Employment"............. 9 1.42 "Trust"................................. 9 -i- Page ---- 1.43 "Unforeseeable Financial Emergency"..... 9 1.44 "Valuation Date"........................ 9 1.45 "Vested"................................ 9 1.46 "Year of Service"....................... 9 ARTICLE II Eligibility and Participation........... 9 2.1 Selection............................... 9 2.2 Participation........................... 10 ARTICLE III Deferral Elections...................... 10 3.1 Cash Deferral Amount.................... 10 3.2 Elections to Defer Cash................. 10 3.3 Stock Grants Deferrals.................. 11 3.4 Stock Grants Elections.................. 11 3.5 Option Profit Deferrals................. 11 3.6 Option Profit Elections................. 11 3.7 Withholding of Deferral Amounts......... 11 3.8 Irrevocable Elections................... 12 3.9 Unforeseeable Financial Emergency....... 12 3.10 Election Forms.......................... 12 ARTICLE IV Common Stock Account.................... 12 4.1 Deferral Amounts........................ 12 4.2 Credited Amounts........................ 12 4.3 Irrevocable Choice...................... 13 4.4 Elections by Certain Officers and Directors........................... 13 ARTICLE V Company Matching Contributions.......... 13 5.1 Matching Contributions.................. 13 5.2 Discretionary Contributions............. 14 5.3 Limitations............................. 14 ARTICLE VI Participant Accounts and Investment of Deferred Amounts........................ 14 6.1 Deferred Compensation Account........... 14 6.2 Common Stock Account.................... 14 6.3 Matching Contribution Account........... 15 6.4 Discretionary Contribution Account...... 15 6.5 Earnings................................ 15 6.6 Investment.............................. 15 6.7 Valuation of Accounts................... 16 -ii- Page ---- 6.8 Statement of Accounts.................. 16 ARTICLE VII In Service Distributions............... 17 7.1 Distributions for Unforeseeable Financial Emergencies................... 17 7.2 Withdrawal Election..................... 17 ARTICLE VIII Loans................................... 16 8.1 Loans to Participants................... 16 ARTICLE IX Distributions Following Termination of Employment.............................. 19 9.1 Distribution............................ 19 9.2 Elections............................... 19 9.3 Time for Payment........................ 19 9.4 Small Payments.......................... 19 9.5 Cashout of Installment Payments......... 20 9.6 Form of Payment......................... 20 9.7 Restrictions on Common Stock............ 20 ARTICLE X Distributions Following Death........... 20 10.1 Death While Employed by Employer Group.. 20 10.2 Death After Termination of Employment... 21 10.3 Lump Sum Election....................... 21 10.4 Form of Payment......................... 21 10.5 Restrictions on Common Stock............ 21 ARTICLE XI Beneficiary Designation................. 22 11.1 Beneficiary............................. 22 11.2 Beneficiary Designation; Change; Spousal Consent......................... 22 11.3 No Beneficiary Designation.............. 22 11.4 Doubt as to Beneficiary................. 22 ARTICLE XII Vesting................................. 23 12.1 Vesting Schedules....................... 23 12.2 Deferred Compensation Account........... 23 12.3 Vesting Schedule for Pre-January 1, 1997 Additions to the Matching Contribution and -iii- Page ---- Discretionary Contribution Accounts.............. 23 12.4 Vesting Schedule for Additions to the Matching Contribution and Discretionary Contribution Accounts on or after January 1, 1997............. 23 12.5 Accelerated Vesting.............................. 23 12.6 Forfeitures Upon Termination of Employment....... 24 ARTICLE XIII Administration................................... 24 13.1 Plan Administrator............................... 24 13.2 Committee........................................ 25 13.3 Plan Administrator's Authority................... 25 ARTICLE XIV Amendment and Termination........................ 25 14.1 Amendments....................................... 25 14.2 Termination of Plan.............................. 25 14.3 Following a Change in Control.................... 26 ARTICLE XV Claims Procedures................................ 26 15.1 Presentation of Claim............................ 26 15.2 Notification of Decision......................... 26 15.3 Review of a Denied Claim......................... 27 15.4 Arbitration...................................... 27 15.5 Legal Action..................................... 28 15.6 Following a Change in Control.................... 28 ARTICLE XVI Trust............................................ 28 16.1 Establishment of Trust........................... 28 16.2 Interrelationship of the Plan and the Trust...... 28 ARTICLE XVII Miscellaneous.................................... 28 17.1 Unsecured General Creditor/Unfunded Plan......... 28 17.2 Payments to Minors and Incompetents.............. 29 17.3 Plan Not a Contract of Employment................ 29 17.4 No Interest In Assets............................ 29 17.5 Recordkeeping.................................... 29 17.6 Notice........................................... 29 -iv- Page ---- 17.7 Successors............................................ 30 17.8 Spouse's Interest..................................... 30 17.9 Taxes and Withholding................................. 30 17.10 Legal Fees to Enforce Rights After Change in Control.. 30 17.11 Court Order........................................... 31 17.12 Furnishing Information................................ 31 17.13 Non-Alienation of Benefits............................ 31 17.14 Governing Law......................................... 31 17.15 Section 16............................................ 31 17.16 Liability Limited..................................... 32 -v- CATALINA MARKETING CORPORATION DEFERRED COMPENSATION PLAN EFFECTIVE JULY 1, 1996 PURPOSE Catalina Marketing Corporation (the "Company") hereby amends and restates the Catalina Marketing Corporation Deferred Compensation Plan (the "Plan") effective as of July 1, 1996. The Plan was originally effective as of January 1, 1992. The Plan has been established for the benefit of a select group of management personnel and directors to ensure that the overall effectiveness of the Company's and its Related Employers' compensation program will attract, retain and motivate qualified individuals. The Plan is intended to provide certain key employees and directors who substantially contribute to the success of the Company and its Related Employers the opportunity to defer the receipt of compensation. The Plan is a non-qualified deferred compensation plan and is designed to permit select employees and directors of the Company to defer a portion of their compensation to provide retirement, death and disability benefits. The Company intends to match participants' contributions. The Company intends to make contributions to the Catalina Marketing Corporation Deferred Compensation Trust (the "Trust") in amounts necessary to fund the benefits provided in the Plan. The assets of the Trust shall be general assets of the Company and shall be subject to the claims of the general creditors of the Company. While the Company intends to continue the Plan, it reserves the right to terminate the Plan, in whole or in part, at any time. Benefits under the Plan shall at all times be subject to the claims of the Company's general creditors. Therefore, neither participation in the Plan nor eligibility therefore shall entitle any employee or director to have the Plan or any of its provisions continued for his or her benefit in the future. The Plan systematically operates to defer the income of employees and directors for periods extending to -2- termination of employment or beyond, and therefore, is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Accordingly, federal law shall govern this Plan. However, the Plan is not intended to qualify under Section 401(a) of the Internal Revenue Code and similar provisions of state law. Finally, the Plan is unfunded and is maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, and therefore, is exempt from the participation, vesting, funding and fiduciary responsibility requirements of parts 2, 3 and 4 of Title I of ERISA. ARTICLE I --------- DEFINITIONS ----------- For purposes hereof, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings: 1.1 "ACCOUNT OR ACCOUNTS" shall mean, with respect to a Participant other than a Director, the (i) the Deferred Compensation Account, (ii) Common Stock Account, (iii) Matching Contribution Account and (iv) Discretionary Contribution Account established pursuant to Article VI and, with respect to a Participant who is a Director, the (i) Deferred Compensation Account and (ii) Common Stock Account. These Accounts shall be bookkeeping entries only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant pursuant to this Plan. The Deferred Compensation and Common Stock Accounts shall be fully vested at all times and the Matching Contribution Account and the Discretionary Contribution Account shall vest in accordance with Article XII. 1.2 "ANNUAL MEETING" shall mean the annual meeting of the Company's stockholders. 1.3 "ANNUAL MEETING YEAR" shall mean the one year period beginning on the date of an Annual Meeting. 1.4 "BENEFICIARY" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article XI to receive benefits under this Plan upon the death of a Participant. -3- 1.5 "BENEFICIARY DESIGNATION FORM" shall mean the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries, which shall be substantially in the form set forth in Exhibit "A". 1.6 "BOARD" shall mean the Board of Directors of the Company. 1.7 "BONUS" shall mean bonuses and commissions paid in the calendar year in question to a Participant for employment services rendered to the Company, before reduction for compensation contributed to or deferred under any Company benefit plan. 1.8 "CAUSE" shall mean the following (i) the Participant's refusal to follow written, lawful directions or his or her material failure to perform his or her duties, in either case, after the Participant has been given notice and a reasonable opportunity to cure his or her default; (ii) the Participant's material failure to comply with Company policies, such as those set forth in the Catalina Marketing Corporation Handbook, as amended from time to time, and any confidentiality agreement executed by the Participant and the Company; or (iii) the Participant's engaging in conduct which is or may be unlawful or disreputable, to the possible detriment of the Company, any of its affiliates, or the Participant's own reputation. 1.9 "CHANGE IN CONTROL" shall mean a change in control of the Company, which shall be deemed to have occurred if the conditions set forth in any one of the following four paragraphs shall have been satisfied: (i) any corporation, person, other entity or group, (other than the trustee of any qualified retirement plan maintained by the Company) becomes the "beneficial owner" (as defined in Rule 13(d)-3 of the Exchange Act), directly or indirectly, of securities representing twenty five percent (25%) or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of twenty-four consecutive months, individuals who at the beginning of such consecutive twenty-four month period constitute the Board cease for any reason (other than retirement upon reaching normal retirement age, disability or -4- death) to constitute at least a majority thereof, unless the election or the nomination for election by the Company's shareholders of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such twenty- four month period; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 80% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the shareholders of the Company approve a plan or complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company's assets; (iv) there shall occur a transaction or series of transactions which the Board shall determine to have the effect of a Change in Control. 1.10 "CLAIMANT" shall have the meaning set forth in Section 15.1, below. 1.11 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time. 1.12 "COMMON STOCK" shall mean the Common Stock, par value $0.01 of the Company or any security of the Company issued in substitution, exchange or lieu thereof. 1.13 "COMMITTEE" shall mean the administrative committee appointed to manage and administer the Plan in accordance with the provisions of Article XIII. 1.14 "COMPANY" shall mean Catalina Marketing Corporation and its successors. 1.15 "DEFERRAL" shall mean the Salary, Bonus and Director Fees that a Participant defers in accordance with Article III for the deferral period in question. -5- 1.16 "DIRECTOR" shall mean a member of the Board. 1.17 "DIRECTOR FEES" shall mean cash meeting fees paid to Directors for services to the Company. 1.18 "DISABILITY" shall mean a period of disability that commences while a Participant is employed by the Company or a Related Employer and during which the Participant qualifies for benefits under a long-term disability plan of the Company or the Related Employer, or, if the Participant does not participate in such a plan, a period of disability during which the Participant would have qualified for benefits under such a plan, as determined in the sole discretion of the Plan Administrator, had the Participant been a participant in such a plan. A Disability shall be deemed to have occurred on the date on which it is determined that the Participant qualifies (or would have qualified) for such benefits. The significance under this Plan of a Participant suffering a Disability is that the Participant (i) shall be deemed to have had a Termination of Employment, which shall cause his or her Account to be distributed pursuant to Article IX and (ii) the Participant's Account shall become fully Vested pursuant to Article XII. 1.19 "DIVIDEND" shall mean a dividend declared and paid by the Company on the Common Stock. 1.20 "EARNINGS" shall mean the amount credited to a Participant's Account based on the earnings attained by the Trustee on the investment of the amounts held by the Trust, and any amount credited to the Common Stock Account pursuant to Section 6.2 which is attributable to a Dividend. Until distributed to the Participant, Earnings are solely the property of the Company and shall be subject to the rights of the Company's general creditors. 1.21 "EFFECTIVE DATE" of the Plan shall mean, as amended and restated, July 1, 1996, and with respect to Article IV and Sections 3.3, 3.4, 3.5 and 3.6, July 1, 1996 subject to approval by the Company's shareholders at the 1996 Annual Meeting. 1.22 "ELECTION FORM" shall mean the form established from time to time by the Plan Administrator that a Participant completes, signs and returns to the Plan Administrator to make a deferral election under the Plan, which shall be substantially in the form of the Agreement -6- set forth in Exhibit "B" for an Employee and Exhibit "C" for a Director. 1.23 "EMPLOYEE" shall mean an individual who renders services to the Company or a Related Employer as a common law employee (I.E., a person whose ---- wages from the Company are subject to federal income tax withholding). 1.24 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. 1.25 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor statute. 1.26 "FAIR MARKET VALUE" shall mean the closing price on the New York Stock Exchange - Composite Tape of the Common Stock on the date(s) in question, or, if the Common Stock shall not have been traded on any such date(s), the closing price on the New York Stock Exchange - Composite Tape on the first day prior thereto on which the Common Stock was so traded or if the Common Stock is not traded on the New York Stock Exchange, such other amount as may be determined by the Committee by any fair and reasonable means. Fair Market Value determined by the Committee in good faith shall be final, binding and conclusive on all parties. 1.27 "NON-QUALIFIED STOCK OPTION" shall mean an award to purchase shares of Common Stock that is not an incentive stock option under Section 422 of the Code and is granted pursuant to the provisions of any of the Company's stock option plans which grant the optionee the ability to elect to defer the Spread under this Plan. 1.28 "NORMAL RETIREMENT DATE" shall mean the date a Participant attains age 65. 1.29 "OPTION PROFIT" shall mean the amount (not less than zero) by which the Fair Market Value of a share of Common Stock subject to the Non- Qualified Stock Option on the date of the Participant's exercise of the Non- Qualified Stock Option exceeds the exercise price of a Non-Qualified Stock Option. 1.30 "PARTICIPANT" shall mean any Employee or Director who is covered by this Plan as provided in Article II. -7- 1.31 "PLAN" shall mean the Catalina Marketing Corporation Deferred Compensation Plan hereby created and as it may be amended form time to time. 1.32 "PLAN ADMINISTRATOR" shall mean the Committee or Plan Administrator, if appointed pursuant to Section 13.2. 1.33 "PLAN AGREEMENT" shall mean a written agreement, as amended from time to time, which is entered into by and between the Company and a Participant, which shall be substantially in the form of the Agreement set forth in Exhibit "D". Each such Agreement incorporates the Plan by reference and each such Agreement is hereby incorporated into the Plan by reference with respect to the Participant who is a party thereto. 1.34 "PLAN RULES" shall mean rules adopted by the Company in accordance with Section 13.1(g) for the administration, interpretation or application of the Plan. See Exhibit "E" for details on Plan Rules. 1.35 "PLAN YEAR" shall mean the 12-month period ending on December 31. 1.36 "RELATED EMPLOYER" shall mean an affiliate (and its successors) of the Company, related to the Company in the manner described in Sections 414(b) or (c) of the Code, that the Plan Administrator in its sole discretion allows to participate in the Plan. 1.37 "RULE 16B-3" shall mean Rule 16b-3 of the General Rules and Regulations of the Exchange Act (or any successor rule or regulation). 1.38 "SALARY" shall mean base salary paid in the calendar year in question to a Participant for services rendered to the Company, before reduction for compensation contributed to or deferred under any Company benefit plan. In no event shall severance benefits of any type be taken into account in computing a Participant's Salary. 1.39 "STOCK GRANTS" shall mean an award of Common Stock granted to a Director pursuant to the 1992 Director Stock Grant Plan or any successor plan that allows the Director to elect to defer the receipt of the stock grant under this Plan. -8- 1.40 "STOCK UNITS" shall mean units in the Plan each of which represent a share of Common Stock. 1.41 "TERMINATION OF EMPLOYMENT" shall mean a Participant's cessation of employment or service with the Company or a Related Employer voluntarily or involuntarily, for any reason other than death. 1.42 "TRUST" shall mean the one (1) or more grantor, or "rabbi", trusts, within the meaning of Code Section 671 that may be established between the Company and the trustee (or trustees) named therein. Despite the existence of such a trust, this Plan is technically an unfunded plan for tax purposes and for purposes of Title I of ERISA. 1.43 "UNFORESEEABLE FINANCIAL EMERGENCY" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) other such extraordinary and unforeseeable circumstances, all as determined in the sole discretion of the Plan Administrator. 1.44 "VALUATION DATE" shall mean any date for which the balance to the credit of the Account maintained for a Participant is determined. 1.45 "VESTED" shall mean nonforfeitable. 1.46 "YEAR OF SERVICE" shall mean the 12-consecutive month period beginning with a Participant's date of hire by the Company or a Related Employer, or in the case of a Director, the date he or she was appointed to the Board, and each 12-consecutive month period that begins with the anniversary date of the Participant's date of hire or Board appointment. ARTICLE II ---------- ELIGIBILITY AND PARTICIPATION ----------------------------- 2.1 SELECTION. Participation in the Plan shall be limited to (i) a --------- select group of management or highly compensated Employees and (ii) the Directors. From the -9- select group of Employees, the Plan Administrator, in its sole discretion, shall determine those Employees eligible to participate in the Plan. Accordingly, an Employee who, in the opinion of the Plan Administrator based upon its then current guidelines, has contributed significantly to the growth and successful operations of the Company or a Related Employer and who meets any additional criteria for eligibility that the Plan Administrator, in its sole discretion, may adopt from time to time, will be eligible to become a Participant. 2.2 PARTICIPATION. Once a selected Employee or Director has filed ------------- with the Plan Administrator (within the time it requires) an executed copy of the Plan Agreement prescribed by the Plan Administrator, the Employee or Director shall become a Participant on the latest of the date set forth in the Plan Agreement, the date on which his or her Plan Agreement is filed with the Plan Administrator or the date upon which a deferral is first credited to his or her Account. ARTICLE III ----------- DEFERRAL ELECTIONS ------------------ 3.1 CASH DEFERRAL AMOUNT. A Participant may elect to defer all or -------------------- any part of his or her anticipated Salary, Bonus and Director Fees. 3.2 ELECTIONS TO DEFER CASH. In connection with a Participant's ----------------------- commencement of participation in the Plan, the Participant may make a deferral election by delivering to the Plan Administrator a completed and signed Election Form at the same time the Participant files his or her completed and signed Plan Agreement with the Plan Administrator. Thereafter, if the Participant wishes to commence or discontinue making a Deferral, or to change the amount of his or her Deferral, the Participant must file a new Election Form with the Plan Administrator 30 days before the beginning of the (a) Plan Year for changes to the Deferral of a Participant's Bonus, (b) calendar quarter (i.e. January 1, April 1, July 1 or October 1) for changes to the Deferral of a Participant's Salary, or (c) Board meeting or Board committee meeting with respect to which the election is made for changes to the Deferral of Director Fees, which shall supersede any prior Election Form. -10- 3.3 STOCK GRANTS DEFERRALS. A Director may elect to defer all or any ---------------------- part of his or her anticipated Stock Grants. 3.4 STOCK GRANTS ELECTIONS. A Director may commence or discontinue ---------------------- making a Stock Grants deferral, or change the amount of his or her deferral by filing an Election Form with the Plan Administrator prior to any Annual Meeting at which his or her election or reelection to the Board will be considered (at which the Stock Grant would be made), which shall supersede any prior Election Form. Elections to defer Stock Grants shall be effective only with respect to Stock Grants made to a Director following the Effective Date. Notwithstanding anything to the contrary contained in this Section, a Stock Grants deferral and election shall be subject to any additional requirements, such as vesting, imposed by the plan under which the Stock Grant is granted to the Director. 3.5 OPTION PROFIT DEFERRALS. A Participant may elect to defer all ----------------------- or any part of his or her Option Profit on the exercise of a Non-Qualified Stock Option, but only if the Participant paid the exercise price of the Non-Qualified Stock Option with Common Stock that, as of the date of exercise, the Participant had held for at least six months. 3.6 OPTION PROFIT ELECTIONS. A Participant may make an Option ----------------------- Profit deferral by filing an Election Form with the Plan Administrator at least one year prior to the date the Non-Qualified Stock Option vests. With respect to Non-Qualified Stock Options that are vested as of the Effective Date or will become vested within one year after the Effective Date, a Participant may make an Option Profit deferral within sixty days of the Effective Date. Notwithstanding anything to the contrary contained in this Section, an Option Profit deferral and election shall be subject to any additional requirements imposed by the plan under which the Non-Qualified Stock Option is granted to the Participant. 3.7 WITHHOLDING OF DEFERRAL AMOUNTS. A Participant's deferrals ------------------------------- shall be withheld as specified in the Participant's Election Form, subject to any rules established by the Plan Administrator limiting or prescribing how deferrals are to be withheld, such as rules requiring that deferrals first be made out of commission or incentive compensation. -11- 3.8 IRREVOCABLE ELECTIONS. Except as provided in Section 3.9, any --------------------- election by a Participant pursuant to Section 3.1 shall be irrevocable for any Plan Year or Annual Meeting Year once the Plan Year or Annual Meeting Year has begun. Any deferral election will continue until revoked or modified in a writing delivered by the Participant to the Plan Administrator, which revocation or modification shall only apply to compensation payable to the Participant after the end of the Plan Year or Annual Meeting Year in which such election is delivered to the Plan Administrator. Except as provided in Section 3.9, any election by a Participant made pursuant to Sections 3.3 and 3.5 shall be irrevocable. 3.9 UNFORESEEABLE FINANCIAL EMERGENCY. If a Participant suffers an --------------------------------- Unforeseeable Financial Emergency, the Participant will be permitted to revoke his deferral election for the remainder of the Plan Year in which it is determined by the Plan Administrator that the Unforeseeable Financial Emergency has occurred. 3.10 ELECTION FORMS. Any election by a Participant under this -------------- Article shall be made on an Election Form (the terms of which are incorporated herein by reference). ARTICLE IV ---------- COMMON STOCK ACCOUNT -------------------- 4.1 DEFERRAL AMOUNTS. The amount of deferrals made pursuant to ---------------- Article III which may be credited to the Common Stock Account will be determined in the sole discretion of the Plan Administrator in accordance with Plan Rules it establishes. Unless modified by subsequent Plan Rules, a Participant may elect to defer up to 50% of his or her Bonus (not to exceed $100,000 in any Plan Year) and a Director may elect to defer up to 100% of his or her Director Fees into the Common Stock Account. Unless modified by subsequent Plan Rules, the entire amount of the Stock Grants and the Option Profit subject to a Participant's deferral election shall be credited to the Common Stock Account. 4.2 CREDITED AMOUNTS. The Participant's Common Stock Account will ---------------- be credited with a number of Stock Units equal to the following amounts: -12- Bonus the amount of the Bonus deferral divided by the average Fair Market Value on the five business days preceding the date the Participant's Bonus is otherwise payable Director the amount of the Director Fees Fees deferral divided by the Fair Market Value on the five business days preceding the date the Director Fees are otherwise payable Stock the number of shares of Common Stock deferred by a Grants Participant from a Stock Grants award when the shares are otherwise payable (I.E., on the date of vesting) ---- Option the amount of the Option Profit Profit deferral divided by the Fair Market Value on the date of exercise of the Non-Qualified Stock Option The amounts shall be credited on the date the Bonus, Director Fees, Stock Grants and Option Profit would otherwise be payable to the Participant. 4.3 IRREVOCABLE CHOICE. Amounts credited to the Common Stock ------------------ Account will remain in this Account until distribution is made to the Participant or Beneficiary pursuant to this Plan. 4.4 ELECTIONS BY CERTAIN OFFICERS AND DIRECTORS. With respect to ------------------------------------------- persons subject to Section 16 of the Exchange Act, and to the extent required by such section, such individuals must make any election under this Article pursuant to an irrevocable election at least six (6) months in advance of the effective date of the transaction. ARTICLE V --------- COMPANY MATCHING CONTRIBUTIONS ------------------------------ 5.1 MATCHING CONTRIBUTIONS. The Company will credit each ---------------------- Participant's Matching Contribution Account with a matching contribution based upon his Salary and Bonus deferrals, as follows: -13- PERCENTAGE OF COMPENSATION DEFERRED MATCHING PERCENTAGE ----------------------------------- ------------------- The first 2% of Salary and 100% Bonus The next 2% of Salary 25% and Bonus In no event shall a matching contribution be made with respect to a Participant's deferral amount that exceeds 4% of his or her Salary and Bonus. 5.2 DISCRETIONARY CONTRIBUTIONS. As of each Plan Year, the Company --------------------------- may, in its sole discretion, credit a Participant's Discretionary Contribution Account with a discretionary contribution in an amount to be determined by the Company in its sole discretion. 5.3 LIMITATIONS. Matching contributions shall not be made on ----------- deferrals of Option Profit, Stock Grants or Director Fees. ARTICLE VI ---------- PARTICIPANT ACCOUNTS AND INVESTMENT OF DEFERRED AMOUNTS ------------------------------------------------------- 6.1 DEFERRED COMPENSATION ACCOUNT. Deferrals pursuant to this Plan ----------------------------- shall be recorded by the Plan Administrator in a Deferred Compensation Account maintained in the name of the Participant. The Deferred Compensation Account shall be credited with all amounts that have been deferred by the Participant during the Plan Year, plus Earnings and such account shall be charged from time to time with all amounts that are distributed to the Participant. 6.2 COMMON STOCK ACCOUNT. -------------------- (a) Deferrals made pursuant to Article IV and Sections 3.3, 3.4, 3.5 and 3.6 shall be recorded by the Plan Administrator in the Common Stock Account which shall be invested solely in Stock Units. The Common Stock Account shall be credited with all amounts that have been deferred by the Participant and Earnings thereon. In addition, in the event the Company declares and pays a Dividend, the Common Stock Account shall be credited with a number of Stock Units equal to (a) the amount of the Dividend paid on the number of shares of Common Stock equal to the number of Stock Units in the Participant's Vested Common Stock -14- Account, divided by (b) the Fair Market Value of the Common Stock on the date the Dividend is declared. Finally, the Common Stock Account shall be charged from time to time with all amounts that are distributed to the Participant. (b) In the event of any change in the outstanding shares of Common Stock by reason of an issuance of additional shares, recapitalization, reclassification, reorganization, stock split, reverse stock split, combination of shares, stock dividend or similar transaction, the Committee shall proportionately adjust, in an equitable manner, the number of Stock Units in each Participant's Common Stock Account. The foregoing adjustment shall be made in a manner that will cause the relationship between the aggregate appreciation in outstanding Common Stock and earnings per share of the Company and the increase in value of each Stock Unit in the Common Stock Account to remain unchanged as a result of the applicable transaction. 6.3 MATCHING CONTRIBUTION ACCOUNT. Company matching contributions ----------------------------- credited to a Participant pursuant to this Plan shall be recorded by the Plan Administrator in a Matching Contribution Account maintained in the name of the Participant. The Matching Contribution Account shall be credited with all amounts that have been contributed by the Company during the Plan Year and such account shall be charged from time to time with all amounts that are distributed to the Participant. 6.4 DISCRETIONARY CONTRIBUTION ACCOUNT. Company discretionary ---------------------------------- contributions, if any, credited to a Participant pursuant to this Plan shall be recorded by the Plan Administrator in a Discretionary Contribution Account maintained in the name of the Participant. The Discretionary Contribution Account shall be credited with all amounts that have been contributed by the Company during the Plan Year and such account shall be charged from time to time with all amounts that are distributed to the Participant. 6.5 EARNINGS. A Participant's Account shall be credited with -------- Earnings daily, except that additional Stock Units credited to the Common Stock Account attributable to a Dividend (pursuant to Section 6.2) shall be credited on the date the Dividend is paid. 6.6 INVESTMENT. The Plan Administrator may permit a Participant ---------- (or Beneficiary) to have the right to -15- direct the investment of all or any part of the Trust allocable to his or her Accounts, excluding amounts credited to the Participant's Common Stock Account, provided that such amounts are currently available for investment purposes subject to the Plan Administrator's final determination. Such directions to invest are subject to all of the following: (a) All directions to invest must be made in writing, or in accordance with procedures established by the Plan Administrator for telephone direction. (b) All directions to invest are limited to investment options selected by the Plan Administrator. (c) All directions to invest are subject to the approval of the Plan Administrator. (d) All interest and other income earned on investments directed by the Participant shall be accumulated and added to the principal for the Participant's benefit. (e) The Plan Administrator and Trustee shall not be responsible for any loss incurred as the result of the Participant's direction to invest. 6.7 VALUATION OF ACCOUNTS. As of each Valuation Date, a --------------------- Participant's Account shall consist of the balance of the Participant's Account as of the last preceding Valuation Date, plus the Participant's deferrals and contributions by the Company credited to the Account, plus Earnings on the Account, minus the amount of any distributions made since the immediately preceding Valuation Date. 6.8 STATEMENT OF ACCOUNTS. The Plan Administrator shall submit to --------------------- each Participant, within ninety (90) days after the close of each Plan Year and at such other time as determined by the Plan Administrator, a statement setting forth the balance to the credit of the Account maintained for a Participant. -16- ARTICLE VII ----------- IN SERVICE DISTRIBUTIONS ------------------------ 7.1 DISTRIBUTIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If the ----------------------------------------------------- Participant experiences an Unforeseeable Financial Emergency, the Participant may, with the approval of the Plan Administrator, receive a partial or full distribution from the Plan of the Vested amounts in his or her Accounts. The distribution shall not exceed the lesser of the Vested balance then credited to the Participant's Account or the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. 7.2 WITHDRAWAL ELECTION. A Participant may at any time elect to ------------------- withdraw all of the balance then credited to his or her Account, less a ten (10) percent withdrawal penalty. Thereafter, the Participant shall never again be eligible to participate in the Plan. ARTICLE VIII ------------ LOANS ----- 8.1 LOANS TO PARTICIPANTS --------------------- (a) The Plan Administrator shall have the investment management discretion to direct the Trustee to loan money to Participants. Each such loan shall be treated as an investment of the borrower's Account. (A former Employee who still has an Account under the Plan or a Beneficiary who is entitled to future benefits because of the death of a Participant, shall not be entitled to borrow from the Plan.) (b) The Plan Administrator shall establish Plan Rules governing loan procedures. These Rules may limit the number of loans a Participant may receive, require payment of loan processing fees by the Participant (either directly or out of his or her Vested Account) or establish any other requirements the Plan Administrator determines to be necessary or desirable. A Participant who wishes to borrow money from the Plan shall file a written loan application with the Plan Administrator in accordance with these Plan Rules. The Plan Administrator, in its sole discretion, shall approve or deny the loan. The Plan Administrator may deny a loan application if it believes that the loan would not be repaid (e.g., if the borrower has failed to repay a - - -17- prior loan on time) or for any other reason if denial would be in the best interests of the Plan or the Participant. The Plan Administrator shall exercise its discretion in a uniform and nondiscriminatory manner. No loan shall be granted unless the following requirements are met: (i) No more than two loans shall be outstanding at any time; (ii) No loan shall be made if the loan amount, when aggregated with the amount of any outstanding loan, would exceed the lesser of $100,000 or fifty percent of the Vested portion of the Participant's Account, excluding the Participant's Common Stock Account; (iii) The loan shall bear a reasonable rate of interest not in excess of that permitted by law; (iv) Except as otherwise authorized by the Plan Administrator, interest and principal on a loan must be repaid through payroll deduction in installments not less frequently than quarterly over a specified period not to exceed five years (including renewals, extensions and refinancing); and (v) The loan shall be documented by such notes, evidences of indebtedness and other instruments executed by the Participant which the Plan Administrator in its discretion requires. (c) Each loan from the Plan shall be secured by the borrowing Participant's interest in the Plan. (d) A loan shall be in default if the Participant fails to make any payment when due or if there occurs such other circumstances as may be prescribed by Plan Rule. A loan which is in default shall, at the Plan Administrator's election, become immediately due and payable and shall be subject to the execution provisions of subsection (f). (e) If a Participant's Employment terminates or the Plan terminates before he or she has repaid a loan, the loan, at the Plan Administrator's election, shall become immediately due and shall be repaid out of the Participant's Vested Account which secures the loan and that Account shall be reduced accordingly. -18- (f) If a Participant's loan is in default for 120 consecutive days and the Participant's Employment has not terminated, the loan shall be satisfied to the extent possible from the Participant's Vested Account which secures the loan and the Account shall be reduced accordingly. In addition, the Participant shall be assessed a penalty of ten (10) percent of the outstanding balance of the defaulted loan as of the date the penalty is assessed. Unless the defaulting Participant satisfies the penalty by paying it directly to the Company, the defaulting Participant's Vested Account shall be reduced by the amount of the penalty, in which case the penalty shall be paid to the Company directly or used to reduce the Company's obligation to make matching contributions under Section 5.1, at the Company's option. ARTICLE IX ---------- DISTRIBUTIONS FOLLOWING TERMINATION OF EMPLOYMENT ------------------------------------------------- 9.1 DISTRIBUTION. Upon Termination of Employment, a Participant's ------------ Vested Account shall be distributed in accordance with this Article. 9.2 ELECTIONS. A Participant, on his or her initial Election Form, --------- shall elect to receive distributions following Termination of Employment in a lump sum or in installment payments, not more frequently than quarterly, over a period of not more than ten years. A Participant may change this election on any subsequent Election Form filed at least one (1) year prior to the Participant's Termination of Employment; if made within one (1) year of Termination of Employment, such a new election shall be invalid. 9.3 TIME FOR PAYMENT. The lump sum payment shall be made, or ---------------- installment payments shall commence, no later than sixty (60) days after the Participant's Termination of Employment and any annual payment thereafter shall be made during each subsequent January. If installment payments are being made, the first benefit payment to a Participant shall be prorated by multiplying it by a fraction, the numerator of which is the number of days which remain in the calendar year following the Participant's Termination of Employment and the denominator of which is three hundred sixty-five (365). 9.4 SMALL PAYMENTS. The minimum annual installment payment shall -------------- be $5,000 (before withholding of -19- taxes). If annual installment payments to a Participant would be less than this amount, the Participant's Account shall be distributed over the longest installment period available under Section 9.2 under which the annual payment would be at least $5,000 (before withholding of taxes) or, if no such period exists, in a lump sum. 9.5 CASHOUT OF INSTALLMENT PAYMENTS. A Participant who has elected ------------------------------- to receive installment payments may, at the time installments are to commence or thereafter, elect to receive, in lieu of any future installment payments, a lump sum payment of the balance then credited to his or her Account, less a ten (10) percent early withdrawal penalty. The ten (10) percent early withdrawal penalty shall be used to reduce the Company's obligation to make matching contributions under Section 5.1. 9.6 FORM OF PAYMENT. All payments made pursuant to this Article --------------- shall be made in cash, except that distributions made from the Common Stock Account shall be made in Common Stock. 9.7 RESTRICTIONS ON COMMON STOCK. Common Stock distributions ---------------------------- pursuant to this Article shall only be distributed to a Participant upon delivery to the Company of such representations and warranties as the Company deems necessary or advisable with respect to the investment intent of the Participant as required by the Securities Act of 1933, as amended, and any other federal or state securities laws. The Company shall not be required to distribute shares of Common Stock to a Participant before such shares become listed for trading on any stock exchange on which the Common Stock may then be listed, if any, and the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation, as the Plan Administrator shall determine to be necessary or advisable. ARTICLE X --------- DISTRIBUTIONS FOLLOWING DEATH ----------------------------- 10.1 DEATH WHILE EMPLOYED BY EMPLOYER GROUP. If a Participant dies -------------------------------------- while employed by the Company or a Related Employer, the Participant's Beneficiary shall receive the Participant's Account in the form of death benefit payments elected by the Participant on his or her -20- last Election Form. The Participant may elect to have such payments made in a lump sum or in installment payments over a period of not more than ten years. The minimum annual installment payment shall be $5,000 (before withholding of taxes). If annual installment payments to a Beneficiary would be less than this amount, the Participant's Account shall be distributed over the longest installment period available under this Section under which the annual payment would be at least $5,000 (before withholding of taxes) or, if no such period exists, in a lump sum. Death benefit payments shall commence within sixty (60) days after the date the Plan Administrator is provided with proof of the Participant's death satisfactory to it. 10.2 DEATH AFTER TERMINATION OF EMPLOYMENT. If a Participant dies ------------------------------------- after Termination of Employment but before his or her Account has been fully distributed, unpaid amounts due under Article 9 shall be paid to the Participant's Beneficiary in the same amount and at the same time as they would have been paid to the Participant. 10.3 LUMP SUM ELECTION. While a Beneficiary may not select the ----------------- manner of payment, if requested by a Beneficiary and allowed in the sole discretion of the Plan Administrator, the Beneficiary shall be paid a lump sum calculated in accordance with Section 9.5 but without the ten (10) percent early withdrawal penalty. 10.4 FORM OF PAYMENT. All payments made pursuant to this Article --------------- shall be made in cash, except that distributions made from the Common Stock Account shall be made in Common Stock. 10.5 RESTRICTIONS ON COMMON STOCK. Common Stock distributions ---------------------------- pursuant to this Article shall only be distributed to a Participant upon delivery to the Company of such representations and warranties as the Company deems necessary or advisable with respect to the investment intent of the Participant as required by the Securities Act of 1933, as amended, and any other federal or state securities laws. The Company shall not be required to distribute shares of Common Stock to a Participant before such shares become listed for trading on any stock exchange on which the Common Stock may then be listed, if any, and the completion of such registration or other qualification of such shares under any state or federal law, rule or regulation, as the Plan Administrator shall determine to be necessary or advisable. -21- ARTICLE XI ---------- BENEFICIARY DESIGNATION ----------------------- 11.1 BENEFICIARY. Each Participant shall have the right, at any ----------- time, to designate his or her Beneficiary (both primary as well as contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the beneficiary designated under any other plan in which the Participant participates. 11.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A ------------------------------------------------ Participant shall designate his or her Beneficiary by completing and signing the Beneficiary Designation Form, and returning it to the Plan Administrator or its designated agent. A Participant shall have the right to change a Beneficiary by completing and signing a new Beneficiary Designation Form, or such other form approved by the Plan Administrator, and filing it with the Plan Administrator. If the Participant names someone other than his or her spouse as a Beneficiary, a spousal consent, in the form designated by the Plan Administrator, must be signed by that Participant's spouse and returned to the Plan Administrator. Upon the acceptance by the Plan Administrator of a new Beneficiary Designation Form, all Beneficiary designations previously filed shall be canceled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Participant and accepted by the Plan Administrator prior to his or her death. 11.3 NO BENEFICIARY DESIGNATION. If a Participant fails to -------------------------- designate a Beneficiary as provided in Sections 11.1 and 11.2 above or, if all designated Beneficiaries predecease the Participant or die prior to complete distribution of the Participant's benefits, then the Participant's designated Beneficiary shall be deemed to be his or her surviving spouse or, if none the Participant's estate. 11.4 DOUBT AS TO BENEFICIARY. If the Plan Administrator has any ----------------------- doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Plan Administrator shall have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Plan Administrator's satisfaction. -22- ARTICLE XII ----------- VESTING ------- 12.1 VESTING SCHEDULES. A Participant shall become vested in his or ----------------- her Accounts in accordance with the Vesting Schedules described in this Article. 12.2 DEFERRED COMPENSATION ACCOUNT. All Deferred Compensation ----------------------------- Common Stock Accounts shall be fully Vested at all times. 12.3 VESTING SCHEDULE FOR PRE-JANUARY 1, 1997 ADDITIONS TO THE --------------------------------------------------------- MATCHING CONTRIBUTION AND DISCRETIONARY CONTRIBUTION ACCOUNTS. The Vested - - ------------------------------------------------------------- portion of a Participant's Matching Contribution and Discretionary Contribution Accounts with respect to additions made to these accounts prior to January 1, 1997 shall be the percentage of such Account shown on the following table: YEARS OF SERVICE VESTED PERCENTAGE ------------------- ------------------ Less than one year 0% 1 25% 2 (or more) 100% 12.4 VESTING SCHEDULE FOR ADDITIONS TO THE ------------------------------------- MATCHING CONTRIBUTION AND DISCRETIONARY CONTRIBUTION ACCOUNTS ON OR AFTER - - ------------------------------------------------------------------------- JANUARY 1, 1997. The Vested portion of a Participant's Matching Contribution and - - ---------------- Discretionary Contribution Accounts with respect to additions made to these accounts on or after January 1, 1997 shall be the percentage of such Account shown on the following table: YEARS OF SERVICE VESTED PERCENTAGE ------------------ ----------------- Less than one year 0% 1 20% 2 40% 3 60% 4 80% 5 (or more) 100% 12.5 ACCELERATED VESTING. A Participant's Matching Contribution and ------------------- Discretionary Contribution Accounts shall become fully Vested upon the earliest to occur of: -23- (a) the individual's attaining Normal Retirement Age while employed by the Company or a Related Employer, (b) the individual's death (or presumed death) while employed by the Company or a Related Employer, (c) the individual's suffering a Disability while employed by the Company or a Related Employer, and (d) the individual's Termination of Employment other than for Cause during the two (2) years following a Change in Control. 12.6 FORFEITURES UPON TERMINATION OF EMPLOYMENT. The unvested ------------------------------------------ portion of the Accounts of a Participant whose employment terminates shall be forfeited on the date of his or her Termination of Employment. Forfeitures shall be used to reduce the Company's obligation to make matching contributions under Section 5.1. ARTICLE XIII ------------ ADMINISTRATION -------------- 13.1 PLAN ADMINISTRATOR. Except as provided in Section 15.6, the ------------------ Plan Administrator shall have complete control and discretion to manage the operation and administration of the Plan. Not in limitation, but in amplification of the foregoing, the Plan Administrator shall have the following powers: (a) To determine all questions relating to the eligibility of Employees to participate or continue to participate; (b) To maintain all records and books of account necessary for the administration of the Plan; (c) To interpret the provisions of the Plan and to make and to publish such interpretive or procedural rules as are not inconsistent with the Plan and applicable law; (d) To compute, certify and arrange for the payment of benefits to which any Participant or beneficiary is entitled; -24- (e) To process claims for benefits under the Plan by Participants or beneficiaries; (f) To engage agents and professionals to assist the Plan Administrator in carrying out its duties under this Plan; (g) To adopt or modify Plan Rules for the regulation or application of the Plan (see Exhibit E); such Rules may establish administrative procedures or requirements which modify the terms of this Plan but Plan Rules shall not substantially alter significant requirements or provisions of the Plan; and (h) To develop and maintain such instruments as may be deemed necessary from time to time by the Plan Administrator to facilitate payment of benefits under the Plan. 13.2 COMMITTEE. The Plan Administrator may designate a committee to --------- administer the Plan and perform the duties required of the Plan Administrator hereunder. 13.3 PLAN ADMINISTRATOR'S AUTHORITY. The Plan Administrator may ------------------------------ consult with Company officers, legal and financial advisers to the Company and others, but nevertheless the Plan Administrator shall have the full authority and discretion to act, and the Plan Administrator's actions shall be final and conclusive on all parties. ARTICLE XIV ----------- AMENDMENT AND TERMINATION ------------------------- 14.1 AMENDMENTS. The Company reserves the right to amend the Plan ---------- prospectively or retroactively, at any time. No amendment shall significantly reduce the value of a Participant's Vested Account prior to such amendment. 14.2 TERMINATION OF PLAN. The Company shall have the right at any ------------------- time to declare the Plan terminated completely as to it or as to any of its divisions, facilities, operational units or job classifications. Upon termination of the Plan, the Company may, but shall not be required, to accelerate distribution of the amounts in each Participant's Vested Account. -25- 14.3 FOLLOWING A CHANGE IN CONTROL. Upon the occurrence of a Change ----------------------------- in Control, this Plan no longer shall be subject to alteration, amendment, change, suspension, substitution, deletion, revocation or termination in any manner adverse to the Participants and Beneficiaries. In addition, if required by the terms of a Trust, upon a potential change in control (as defined in such Trust), the Company shall cause a number of shares of Common Stock to be registered in the name of the Trust equal to the aggregate number of Stock Units held in all Participant Accounts under the Plan. Further, for each Participant's Common Stock Account, the number of Stock Units shall be converted to an equal number of shares of Common Stock, with fractional Stock Units being converted to cash. ARTICLE XV ---------- CLAIMS PROCEDURES ----------------- 15.1 PRESENTATION OF CLAIM. If any person (a "Claimant") does not --------------------- believe that he or she will receive the benefits to which the person is entitled or believes that fiduciaries of the Plan have breached their duties or that the Plan is not being operated properly or that his or her legal rights have been or are being violated with respect to the Plan, the Claimant must file a formal claim with the Plan Administrator under the procedures set forth in this Article. The procedures in this Article shall apply to all claims that any person has with respect to the Plan, including claims against fiduciaries and former fiduciaries, unless the Plan Administrator determines, in its sole discretion, that it does not have the power to grant, in substance, all relief reasonably being sought by the Claimant. A claims official appointed by the Plan Administrator shall, within a reasonable time, consider the claim and shall issue his or her determination thereon in writing. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred-eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. 15.2 NOTIFICATION OF DECISION. Written notice of the disposition of ------------------------ a claim shall be furnished to the Claimant within thirty (30) days after the claim is filed with the Plan Administrator. In the event the claim is -26- denied, the reasons for the denial shall be specifically set forth in writing, pertinent provisions of the Plan shall be cited and, where appropriate, an explanation as to how the claim can be perfected will be provided. 15.3 REVIEW OF A DENIED CLAIM. Within ninety (90) days after ------------------------ receiving a notice from the Plan Administrator that a claim has been denied in whole or in part, a Claimant may appeal the denial of his or her claim by filing a written statement of the Claimant's position with the review official designated by the Plan Administrator. The review official shall schedule and give the Claimant an opportunity for a full and fair hearing before the review official of the issue within thirty (30) days after the appeal is requested. The review official's decision following such hearing shall be made within thirty (30) days and shall be communicated in writing to the Claimant. 15.4 ARBITRATION. If a Claimant's claim described in Section 15.1 ----------- (an "Arbitrable Dispute") is denied pursuant to Section 15.3, the Claimant's only further recourse shall be to submit the claim to final and binding arbitration in the County of Pinellas, State of Florida, before an experienced employment arbitrator selected in accordance with the Employment Dispute Resolution Rules of the American Arbitration Association. Except as otherwise provided in Section 16.11, each party shall pay the fees of their respective attorneys, the expenses of their witnesses and any other expenses connected with the arbitration, but all other costs of the arbitration, including the fees of the arbitrator, cost of any record or transcript of the arbitration, administrative fees and other fees and costs shall be paid in equal shares by each party (or, if applicable, each group of parties) to the arbitration. Except as otherwise provided in Section 16.11, in any dispute involving a Claimant or the trustee of a Trust in which the Claimant or the trustee prevails, the Company shall reimburse the Claimant's or the trustee's reasonable attorneys fees and related expenses. Arbitration in this manner shall be the exclusive remedy for any Arbitrable Dispute. The arbitrator's decision or award shall be fully enforceable and subject to an entry of judgement by a court of competent jurisdiction. Should any party attempt to resolve an Arbitrable Dispute by any method other than arbitration pursuant to this Section, the responding party shall be entitled to recover from the initiating party all damages, expenses and attorneys fees incurred as a result. -27- 15.5 LEGAL ACTION. Prior to a Change in Control, except to enforce ------------ an arbitrator's award, no actions may be brought by a Claimant in any court with respect to an Arbitrable Dispute. 15.6 FOLLOWING A CHANGE IN CONTROL. Upon the occurrence of a Change ----------------------------- in Control, an independent party selected by the Committee prior to a Change in Control shall assume all duties and responsibilities of the Plan Administrator under this Article and actions may be brought by a Claimant in any appropriate court with respect to an Arbitrable Dispute. ARTICLE XVI ----------- TRUST ----- 16.1 ESTABLISHMENT OF TRUST. The Company may establish a Trust and ---------------------- shall at least annually transfer over to the Trust such assets, if any, as the Plan Administrator, in its sole discretion, determines to be appropriate. The assets of the Trust shall be considered part of the general assets of the Company subject to the claims of its general creditors. 16.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of ------------------------------------------- the Plan and the Plan Agreement shall govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of any Trust shall govern the rights of the Participant and the creditors of the Company to the assets transferred to such Trust. The Company shall at all times remain liable to carry out its obligations under the Plan. The Company's obligations under the Plan shall be deemed satisfied to the extent met with assets distributed pursuant to the terms of the Trust. ARTICLE XVII ------------ MISCELLANEOUS ------------- 17.1 UNSECURED GENERAL CREDITOR/UNFUNDED PLAN. The Plan constitutes ---------------------------------------- an unsecured promise by the Company or a Related Employer to pay benefits in the future and the Participants employed by the Company shall have the status of general unsecured creditors of the Company and Participants employed by a Related Employer. The Plan is -28- unfunded for Federal tax purposes and for purposes of Title I of ERISA. All amounts credited to the Participants' accounts will remain the general assets of the Company and shall remain subject to the claims of the Company's and the Related Employers' general creditors until such amounts are distributed to the Participants. 17.2 PAYMENTS TO MINORS AND INCOMPETENTS. If the Plan Administrator ----------------------------------- receives satisfactory evidence that a person who is entitled to receive any benefit under the Plan, at the time such benefit becomes available, is a minor or is physically unable or mentally incompetent to receive such benefit and to give a valid release therefor, and that another person or an institution is then maintaining or has custody of such person, and that no guardian committee, or other representative of the estate of such person shall have been duly appointed, the Plan Administrator may authorize payment of such benefit otherwise payable to such person to such other person or institution; and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit. 17.3 PLAN NOT A CONTRACT OF EMPLOYMENT. The Plan shall not be --------------------------------- deemed to constitute a contract between the Company and any Participant, nor to be consideration for the employment of any Participant. Nothing in the Plan shall give a Participant the right to be retained in the employ of the Company; all Participants shall remain subject to discharge or discipline as Employees to the same extent as if the Plan had not been adopted. 17.4 NO INTEREST IN ASSETS. Nothing contained in the Plan shall be --------------------- deemed to give any Participant any equity or other interest in the assets, business or affairs of the Company or a Related Employer. No Participant in the Plan shall have a security interest in assets of the Company used to make contributions or pay benefits. 17.5 RECORDKEEPING. Appropriate records shall be maintained for the ------------- purpose of the Plan by the officers and Employees of the Company at the Company's expense and subject to the supervision and control of the Plan Administrator. 17.6 NOTICE. Any notice or filing required or permitted to be given ------ to the Plan Administrator under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail or by telefax (with a hard copy sent by mail), to the address or telefax number -29- shown below (or such other address or telefax number specified in notice given pursuant to this Section): Chief Financial Officer Catalina Marketing Corporation 11300 9th Street North St. Petersburg, Florida 33716 Telefax: 813-579-5297 Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Any notice or filing required or permitted to be given to a Participant under this Plan shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Participant. 17.7 SUCCESSORS. The provisions of this Plan shall bind and inure ---------- to the benefit of the Company and its successors and assigns and the Participant, his or her Beneficiary and their permitted successors and assigns. 17.8 SPOUSE'S INTEREST. The interest in the benefits hereunder of a ----------------- spouse of a Participant who has predeceased the Participant shall automatically pass to the Participant and shall not be transferable by such spouse in any manner, including but not limited to such spouse's will, nor shall such interest pass under the laws of intestate succession. 17.9 TAXES AND WITHHOLDING. For each Plan Year in which Deferrals --------------------- are being withheld, the Company shall ratably withhold from that portion of the Participant's Salary and Bonus that is not being deferred, the Participant's share of FICA and other employment taxes on the deferral. If necessary, the Plan Administrator shall reduce a Participant's Deferrals in order to comply with this Section. The Company (or the trustee of the Trust) shall withhold from benefits distributed under the Plan all federal, state and local income, employment and other taxes required to be withheld by applicable law. 17.10 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. After a ---------------------------------------------------- Change in Control, if any person or entity has failed to comply (or is threatening not to comply) with any of its obligations under the Plan, any Trust or any related agreement, or takes or threatens to take any action to deny, diminish or to recover from any -30- Participant the benefits intended to be provided thereunder, the Company shall reimburse the Participant for reasonable attorneys fees and related costs incurred in the successful pursuance or defense of the Participant's rights. If the Participant does not prevail, attorneys fees shall also be payable under the preceding sentence to the extent the Participant had reasonable justification for retaining counsel, but only to the extent that the scope of such representation was reasonable. 17.11 COURT ORDER. The Plan Administrator is authorized to make any ----------- payments directed by court order in any action in which the Plan or the Plan Administrator has been named as a party. 17.12 FURNISHING INFORMATION. A Participant will cooperate with the ---------------------- Company by furnishing any and all information requested by the Company and take such other actions as may be requested in order to facilitate the administration of the Plan and the payment of benefits hereunder, including but not limited to taking such physical examinations as the Company may deem necessary. 17.13 NON-ALIENATION OF BENEFITS. No benefit under the Plan shall be -------------------------- subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any attempt to do so shall be void. No benefit under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of the person entitled to any such benefit, except as specifically provided in the Plan, then such benefits shall cease and terminate at the discretion of the Plan Administrator. The Plan Administrator may then hold or apply the same or any part thereof to or for the benefit of such person or any dependent or beneficiary of such person in such manner and proportions as it shall deem proper. 17.14 GOVERNING LAW. Except to the extent preempted by ERISA, this ------------- Plan shall be construed in accordance with the laws of Florida without regard to its conflicts of laws principles. 17.15 SECTION 16. With respect to persons subject to Section 16 of ---------- the Exchange Act, transactions under this Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision under the Plan or action by the Committee fails to so comply, it shall be -31- deemed null and void to the extent permitted by law and deemed advisable by the Committee. 17.16 LIABILITY LIMITED. In administering the Plan neither the Plan ----------------- Administrator nor any officer, Director or Employee thereof, shall be liable for any act or omission performed or omitted, as the case may be, by such person with respect to the Plan; provided, that the foregoing shall not relieve any person of liability for gross negligence, fraud or bad faith. The Plan Administrator, its officers, Directors and Employees shall be entitled to rely conclusively on all tables, valuations, certificates, opinions and reports that shall be furnished by any actuary, accountant, trustee, insurance company, consultant, counsel or other expert who shall be employed or engaged by the Plan Administrator in good faith. IN WITNESS WHEREOF, the Company has caused this amended and restated Plan to be executed by its duly authorized officers on this _____ day of __________________, 1996. CATALINA MARKETING CORPORATION By___________________________ -32- EX-99.3 4 FORM OF PROXY - - ------------------------------------------------------------------------------- PROXY CATALINA MARKETING CORPORATION ANNUAL MEETING OF STOCKHOLDERS--JULY 23, 1996 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, having received the Notice of Annual Meeting of Stockholders and the Proxy Statement furnished therewith hereby appoints George W. Off and Barry A. Brooks as Proxies, each with the power to appoint his/her substitute, and hereby authorizes each of them to represent and to vote, as designated below, all the shares of Common Stock of Catalina Marketing Corporation (the "Company") held of record by the undersigned on June 3, 1996, at the Annual Meeting of Stockholders to be held at the Hyatt Regency Westshore, 6200 Courtney Campbell Causeway, Tampa, Florida 33607 on Tuesday, July 23, 1996 and at any adjournment or postponement thereof. 1. ELECTION OF CLASS II [_] FOR ALL nominees listed [_] WITHHOLD AUTHORITY DIRECTORS below (except as indicated to vote for all to the contrary below) nominees listed below Frederick W. Beinecke, Tommy D. Greer, Helene Monat and Thomas W. Smith INSTRUCTION: To withhold authority to vote for an individual nominee, write the nominee's name in the space provided: - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- 2. PROPOSAL TO AMEND the Company's 1992 Director Stock Grant Plan. [_] FOR [_] AGAINST [_] ABSTAIN 3. PROPOSAL TO AMEND the Company's Deferred Compensation Plan. [_] FOR [_] AGAINST [_] ABSTAIN 4. PROPOSAL TO AMEND the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock to 50,000,000 from 30,000,000. [_] FOR [_] AGAINST [_] ABSTAIN 5. PROPOSAL TO RATIFY and approve the selection of Arthur Andersen LLP as the Company's independent public accountants. [_] FOR [_] AGAINST [_] ABSTAIN 6. At their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES LISTED ABOVE, AND FOR EACH OTHER PROPOSAL LISTED ABOVE. All other proxies heretofore given by the undersigned to vote shares of stock of Catalina Marketing Corporation, which the undersigned would be entitled to vote if personally present at the Annual Meeting or any adjournment or postponement thereof, is hereby expressly revoked. Dated: _____________________________ ------------------------------------ (Print Name) ------------------------------------ (Signature) Please mark, sign, date and return the proxy card promptly using the enclosed envelope. Joint owners should each sign. Attorneys, execu- tors, administrators, trustees, guardians or corporation officers should give full title. - - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----