| (1) | | Audit related fees consisted principally of fees for professional audit services rendered by KPMG LLP for the auditaudits of the Company’s annual financial statements for fiscal years 2002 and 2001 and fees billed for other services rendered by KPMG LLP.| | | 2002
| | 2001
| Audit fees | | $ | 637,728 | | $ | 364,800 | Audit related fees(1) | | $ | 17,000 | | $ | 335,733 | | | |
|
| |
|
| Audit and audit related fees | | $ | 654,728 | | $ | 700,533 | Tax fees(2) | | $ | 64,380 | | $ | 30,235 | All other fees | | $ | 0 | | $ | 0 | | | |
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| |
|
| Total fees | | $ | 719,108 | | $ | 730,768 | | | |
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| |
|
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(1) | | Audit related fees consisted principally of fees for audits of financial statements of employee benefit plans, business acquisitions and divestitures assistance, and accounting consultations and related services. |
| (2) | | Tax fees consisted of fees for tax consultation and tax compliance services. |
(2) | | Tax fees consisted of fees for tax consultation and tax compliance services. |
Pre-approval of Services by the External Auditor. The Audit Committee has adopted a policy for pre-approval of audit and permitted non-audit services by the Company’s external auditor. The Audit Committee will consider annually and, if appropriate, approve the provision of audit services by its external auditor and consider and, if appropriate, pre-approve the provision of certain defined audit and non-audit services. The Audit Committee will also consider on a case-by-case basis and, if appropriate, approve specific engagements that are not otherwise pre-approved. The Audit Committee pre-approved all audit, audit related and permitted non-audit services by the Company’s external auditors in 2003. Any proposed engagement that does not fit within the definition of a pre-approved service may be presented to the Audit Committee for consideration at its next regular meeting or, if earlier consideration is required, to the Audit Committee or one or more of its members. The member or members to whom such authority is delegated shall report any specific approval of services at its next regular meeting. The Audit Committee will regularly review summary reports detailing all services being provided to the Company by its external auditor. Financial Information Systems Design and Implementation Fees. There were no fees billed by the Company’s independent accountants for financial information systems design and implementation services. The Audit Committee has advised the Company that it has determined that the non-audit services rendered by the Company’s independent accountants during the Company’s most recent fiscal year are compatible with maintaining the independence of such accountants. PROPOSAL 1. ELECTION OF DIRECTORS INFORMATION ABOUT THE NOMINEES FOR DIRECTOR The names of the persons who have been nominated by the Board for election as Directors at the Annual Meeting are set forth below. There are no other nominees. All nominees have consented to serve as Directors if elected. If any nominee becomes unable to serve as a Director, the proxies will be voted by the proxy holders for a substitute person nominated by the Board, and authority to do so is included in the Proxy. The term of office of each nominee who is elected extends until the Annual Meeting of Shareholders in 2005 and until his or her successor is elected and qualified. James P. Roemer, 56, has been Chairman of the Board since January 1998 and has been a Director of the Company since February 1995. From January 2002 to January, 2003, Mr. Roemer also served as our Chief Executive Officer. From February 1997 to January 2003, he served as President and Chief Executive Officer of the Company. From February 1995 to February 1997 he served as President and Chief Operating Officer of the Company. Prior to that, he served as President and Chief Executive Officer of ProQuest Information and Learning Company from January 1994 to June 1995. Mr. Roemer joined ProQuest as Vice President and Bell & Howell Publishing Services Company as President and Chief Operating Officer in October 1991 and was promoted to President and Chief Executive Officer of Bell & Howell Publishing Services Company in September 1993. Prior to joining ProQuest, Mr. Roemer was President of the Michie Group, Mead Data Central from December 1989 to October 1991. From January 1982 to December 1989 he was Vice President and General Manager of Lexis, an on-line information service. From April 1981 to December 1982 he served as acting President of Mead Data Central. Mr. Roemer is also a director of Advent Software. Alan Aldworth,49, has been President and Chief Executive Officer of the Company since January 2003. In January 2002, he was elected President and Chief Operating Officer of ProQuest. Mr. Aldworth joined ProQuest as Vice President and Chief Financial Officer in October 2000. Prior to joining ProQuest, he spent 18 years at Tribune Company where he held a variety of senior financial management and general management positions, the most recent of which was as the General Manager of Tribune Education Company. David Bonderman, 61, has been a Director of the Company since December 1987. He is the founding Partner of Texas Pacific Group (a private investment company) and has been the Managing General Partner since December 1992. He is also a Director of the following public companies: Co-Star Group, Inc.; Continental Airlines, Inc.; Ducati Motor Holding S.p.A.; Gemplus International, SA; Seagate Technology; and Ryanair Holdings plc. David G. Brown, 47, has been a Director of the Company since January 1994. He has been the Managing Partner of Oak Hill Venture Partners since August 1999 and a Principal in Arbor Investors LLC since August 1995, Chief Financial Officer of Keystone, Inc. from September 1998 to February 2000, and a Vice President of Keystone, Inc. since August 1993. Prior to joining Keystone, Mr. Brown was a Vice President in the Corporate Finance Department of Salomon Brothers Inc. from August 1985 to July 1993. He is a Director of eGain Communications, Lattice Communications, Lightning Finance, MarketTools, Perfect Commerce, Sandial Networks, Sitara Networks and WOW Networks. Todd S. Nelson, 44, has been a director since January 4, 2004. He has been Chief Executive Officer of Apollo Group, Inc. since August 2001 and President since February 1998. Mr. Nelson joined Apollo Group in 1987 as Director of University of Phoenix’s Utah campus, became Executive Vice President of the University of Phoenix in 1989, and became Vice President of Apollo Group, Inc. in 1994. Prior to joining Apollo Group, he was General Manager, from 1985 to 1987, at Amembal and Isom, a management training company. From 1984 to 1985, Mr. Nelson was General Manager of Vickers & Company, a diversified holding company. From 1983 to 1984, he was a marketing director at Summa Corporation, a recreations properties company, as well as a faculty member at the University of Nevada at Las Vegas. Mr. Nelson is a director of Apollo Group, Inc. William E. Oberndorf, 50, has been a Director of the Company since July 1988. He has served as Managing Director of SPO Partners & Co. since March 1991. He is also a director of Rosewood Hotels and Resorts and a board member emeritus of Plum Creek Timber Company. Linda G. Roberts, 62, has been a director since January 4, 2004. Since leaving government in January 2001, Roberts has served as advisor, consultant, and board director in various organizations, including state and local governments, foundations, non-profit organizations, corporations and start-up companies. Prior to that, Dr. Roberts directed the U.S. Department of Education’s Office of Educational Technology from its inception in September 1993 to January 2001, and served as the Secretary of Education’s Special Advisor on Technology. From 1984 to 1993, she led the research on educational technology at the Congressional Office of Technology Assessment. Dr. Roberts also served as an advisor to the Children’s Television Workshop during the development of “Sesame Street” and “The Electric Company.” From 1981 to 1984, she served the U.S. Department of Education in the Office of Libraries and Learning Technologies and the Office of Educational Research and Improvement. Dr. Roberts is a Senior Advisor to Carnegie Learning, Inc., Classroom Connect, Apple Computer and several leading technology companies. She is a Trustee of the Board of the Sesame Workshop, and a Trustee of the Education Development Corporation. Dr. Roberts is also a director of Wireless Generation and Carnegie Learning, Inc. Gary L. Roubos, 67, has been a Director of the Company since February 1994. He was Chairman of the Board of Dover Corporation from August 1989 to May 1998 and was President from May 1977 to May 1993. He is also a Director of Dover Corporation and Omnicom Group, Inc. William J. White, 64, has been a Director of the Company since February 1990 and was Chairman of the Board from February 1990 to January 1998. He served as Chief Executive Officer of the Company from February 1990 to February 1997 and was President of the Company from February 1990 to February 1995. Since January 1998 he has been a Professor of Industrial Engineering and Management Science at Northwestern University. He is also a Director of Packaging Dynamics Corporation and Reader’s Digest Association, Inc. Shareholders are being requested at the Meeting to elect the nine nominees to serve as members of the Board for the ensuing year. The Board recommends a vote “FOR” approval of the Proposal. PROPOSAL 2. APPROVAL OF AMENDMENTS TO AND GRANTS UNDER THE 2003 PROQUEST STRATEGIC PERFORMANCE PLAN The 2003 ProQuest Strategic Performance Plan (the “Plan”) was approved by the Board of Directors in March 2003 and approved by the stockholders in May 2003. The purpose of the Plan is to increase stockholder value and maintain an entrepreneurial spirit within the Company by providing significant capital accumulation opportunities to the Company’s officers and other key employees. Proposed Amendments for Stockholder Approval. On March 5, 2004, the Board of Directors approved, subject to stockholder approval, an amendment to the Plan adding 1,900,000 shares to the share reserve and increasing the number of stock options that may be granted to a participant in a single calendar year from 500,000 to 1,200,000. When the Plan was initially approved in May 2003, no additional shares of Common Stock were reserved for issuance beyond what was then available under the Company’s 1995 Stock Plan and the ProQuest Company Non-Employee Director Plan. On February 4, 2004, the Compensation Committee of the Board of Directors (the “Committee”) granted options to acquire 2,329,500 shares of ProQuest Common Stock, subject to stockholder approval (the “Stock Options”). On March 5, 2004, the Board of Directors approved an amendment to the Plan providing the Committee additional flexibility to adjust outstanding awards for extraordinary corporate transactions consistent with established accounting principles subject to stockholder approval. Proposal 2 seeks stockholder approval of these amendments and the grant of the Stock Options. The Board of Directors believes that these amendments and the grant of the Stock Options are desirable to provide a long term incentive to its senior executive officers and to align management with shareholder interests. The Compensation Committee retained an independent third party compensation consultant to assist in the creation of the long term incentive program. The Committee considered a number of factors including market conditions, competitive compensation and others in the creation of the long term incentive program. Objectives for granting the Stock Options are to focus executives on value creation based on stock price performance and to facilitate long-term stock ownership. If the Company achieves an 8% CAGR (defined below) during the applicable periods, then the Stock Options will vest according to the chart set forth below. This 8% CAGR in the Company’s stock price and accelerated vesting will result in the executive’s total compensation being approximately in the fiftieth percentile range for executives in similar positions and responsibilities according to information provided by the consultant. If the CAGR in the Company’s stock price is 10% or more during the applicable periods, which equals a 25% improvement over the long term average, then the total compensation for the executives will be approximately in the seventy-fifth percentile range for similarly situated executives according to information provided by the consultant. If the CAGR in the Company’s stock price is 15% or more during the applicable periods, then the total compensation for the executives will be approximately in the ninetieth percentile range for similarly situated executives according to information provided by the consultant. The material terms of the Stock Options to senior executive officers and the proposed amendments being submitted for approval are summarized below. This summary is qualified in its entirety by reference to the complete text of the Plan, which is attached as Appendix B. Shares Available. As of March 31, 2004, there were 969,100 shares of Common Stock available for future grants under the Plan. This amount does not reflect the Stock Options granted by the Board in February 2004 and any shares granted but which are forfeited after March 31, 2004 under the Plan, the 1995 Stock Plan and the ProQuest Company Non-Employee Director Plan. If shares under a grant are not issued or transferred, those shares will again be available for inclusion in future grants. The proposed additional 1,900,000 shares to the Plan’s share reserve represent6.7% of the outstanding shares of Common Stock as of March 31, 2004. The closing price of the Common Stock on the New York Stock Exchange on March 31, 2004 was $29.17 per share. Administration and Eligibility. The Plan is administered by the Committee, which is comprised of non-employee directors. The Committee establishes the terms and conditions of awards granted under the Plan, subject to certain limitations in the Plan. All employees and directors of the Company or its subsidiaries may participate in the Plan. The selection of eligible participants is within the discretion of the Committee. Since the adoption of the Plan in May 2003, approximately 40% of the stock options granted have been issued to executive officers (not including the Stock Options granted by the Board in February 2004 which are being submitted for stockholder approval at the Annual Meeting), 4% have been issued to non-management Directors, with the remaining 56% being issued to other employees. Types of Awards. The Plan permits the Committee to grant stock options, stock appreciation rights, restricted stock, performance stock, performance units, annual management incentive awards and other stock or cash awards in accordance with the terms of the Plan. The Company intends to use the proposed additional 1,900,000 shares to cover a portion of the shares necessary for the Stock Options. The Plan requires that the option price shall not be less than the fair market value of Common Stock on the date of grant. Generally, the fair market value shall be the closing price of the Common Stock on the New York Stock Exchange. Payment for shares purchased upon exercise of a stock option must be made in full at the time of purchase. Stock options may be exercised in cash, by the transfer to the Company of shares owned by the Participant for at least six months on the date of transfer (or certification of such ownership) or in such other manner as may be authorized by the Committee. Participant Limit on Benefits. The Plan currently provides that no participant may receive in any calendar year stock options relating to more than 500,000 shares. The proposed amendment would increase this individual grant limit to 1,200,000. This amendment is required to allow for the Stock Option grant to Alan Aldworth discussed below. Long Term Incentive Stock Option Grants Subject to Stockholder Approval. On February 4, 2004, the Committee granted 2,329,500 nonqualified stock options under the Plan with an exercise price of $30.97 to the six members of the Company’s senior executive team identified in the table below. These Stock Options are hereby being submitted for stockholder approval. These Stock Options reflect the estimated number of stock options that would have been granted over the next five years to these executives. No reload option provision is provided as part of these grants. None of these six executives is planned to receive any additional stock options under the Plan for the next five years unless an executive takes on a substantial change in duties and responsibilities after the grant. These Stock Options are intended to serve as a long term incentive consistent with the Board’s desire to deliver sustainable stockholder value. These Stock Options will vest if the Company achieves stock price targets beginning after February 4, 2005 based on the compound annual growth rate of the Common Stock price (“CAGR”), as measured from $29.11, the average stock price during the fourth quarter of fiscal 2003. The stock price targets and performance goals have been selected to minimize the impact of daily stock price volatility and to incent executive performance throughout the performance cycle. If the CAGR is 8% or more before April 1, 2007, a total of 1,100,500 shares will be vested. If the CAGR is 8% or more before April 1, 2008, a total of 1,300,000 shares will be vested. If the CAGR is 8% or more before April 1, 2009 a total of 1,495,000 shares will be vested. If the CAGR is 10% or more before April 1, 2009, a total of 2,329,500 shares will be vested. A stock price target is attained if the rolling average of the Common Stock’s fair market value for ninety consecutive trading days is at least equal to the stock price target. In addition, a stock price target is attained if the per share value of the proceeds received by stockholders upon a Change in Control of the Company under Section 7(b) or 7(c) of the Plan (or the price per share to acquire control described in Section 7(a)(i) of the Plan, provided the option holder’s employment is subsequently terminated without cause by the Company or by the option holder for good reason) is at least equal to the stock price target. If none of the stock price targets are achieved, an optionholder will forfeit all Stock Options upon terminating employment with the Company and its subsidiaries before February 4, 2011. The Stock Option may vest separate from the stock price targets only if the optionholder remains employed with the Company or its subsidiaries until February 4, 2011. The option holders may only exercise one-third of their vested options on or after December 31, 2006, two-thirds of their vested options on or after December 31, 2007 and the remaining vested options on or after December 31, 2008, provided that they remain employed by the Company or its Subsidiaries on such dates. Option holders will continue to be able to exercise vested options that became exercisable during employment for a period of time after employment termination (other than for cause). The post employment termination period ranges from three months to three years depending on the circumstances of the option holder’s employment termination. In addition to vesting and exercisability requirements, shares of ProQuest common stock received upon exercise of these Stock Options shall be subject to a holding period requirement, subject to exceptions that may be authorized by the Compensation Committee. An option holder may not sell more than fifty percent of the shares acquired upon option exercise while employed by the Company and its Subsidiaries. All shares of stock used to meet tax withholding obligations and to exercise the Stock Options shall not be prohibited and shall be disregarded for purposes of the holding period requirement. The holding period requirement shall lapse in connection with a change of control. The following table outlines the stock price thresholds and the vesting schedule of the Stock Options. It also shows the stockholder value created at each target stock price as well as the percentage of value created that has been allocated to the senior executive management team in the form of Stock Options at the specified price targets. | | | | | | | | Stock Price
| | Options Vested
| | Shareholder Value Created(1)
| | % of Created Value Earned by Executives(2)
| | $36.67 | | 1,100,500 | | 214,271,651 | | 2.9 | % | $39.81 | | 1,300,000 | | 303,308,670 | | 3.8 | % | $42.77 | | 1,495,000 | | 387,212,381 | | 4.6 | % | $46.88 | | 2,329,500 | | 503,692,496 | | 7.4 | % |
| (1) | | Based on a constant 28,342,000 shares outstanding. To the Company’s independent accountants for financial information systems design and implementation services.The Audit Committee has advised the Companyextent that it has determined that the non-audit services rendered by the Company’s independent accountants during the Company’s most recent fiscal year are compatible with maintaining the independence of such accountants.
PROPOSAL 2. APPROVAL OF 2003 PROQUEST STRATEGIC PERFORMANCE PLAN
There will be presented to the meeting a proposal to adopt the 2003 ProQuest Strategic Performance Plan (the “Plan”). On March 5, 2003, the Board approved, subject to stockholder approval, the Plan. The Compensation Committee of the Board also reviewed and approved the Plan. Stockholder approval of the Plan also will permit the performance-based awards discussed below to qualify for deductibility under Section 162(m) of the Internal Revenue Code.
The Plan will replace the ProQuest Company 1995 Stock Option Plan and the ProQuest Company Non-Employee Directors Stock Option Plan. The number of options available under the Plan will not be greater than the number of options currently available under the ProQuest Company 1995 Stock Option Planoutstanding shares increases, more stockholder value is created and the ProQuest Company Non-Employee Directors Stock Option Plan.percentage of created value earned by the executives decreases.
|
| (2) | | Percentage of Created Value Earned by option holder if vesting is accelerated. |
The following table sets forth the Stock Options granted under the long term incentive plan. | | | A summaryName and Position
| | Number of the principal features of the 2003 Plan is provided below, but is qualified in its entirety by reference to the full text of the 2003 Plan that was filed electronically with this Proxy Statement with the Securities and Exchange Commission. Such text is not included in the printed version of this Proxy Statement. A copy of the 2003 Plan is available from the Company’s Secretary at the address on the cover of this document. The Plan:
provides more flexibility to the Compensation Committee to align stockholder interest with executive compensation;
establishes a single incentive plan for management and directors;
prohibits repricing of any options that would result in a charge to earnings;
provides more compensation alternatives which preserve deductibility under Section 162(m) of the Internal Revenue Code;
updates the ProQuest Company 1995 Stock Option Plan that was adopted nearly eight years ago;
provides additional compensation elements for executive compensation; and
restricts the number of options to any one participant in any one year to 500,000.
The Board of Directors continues to believe stock options and other stock-based incentives play an important role in retaining the services of outstanding personnel and in encouraging such employees to have a greater financial investment in the Company (although the Plan does not necessarily require them to hold for investment the stock received under the Plan). The Board of Directors also believe that the Plan’s provisions for performance-based awards are necessary to provide the Company with more flexibility in developing compensation structures that reward strong performances by employees.
General Information
Plan Administration and Eligibility.
The Plan will generally be administered by the Compensation Committee of the Board of Directors, which is comprised of non-employee Directors (the “Committee”). The Committee establishes the terms and conditions of awards granted under the Plan, subject to certain limitations in the Plan. Members of the Committee will satisfy requirements under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), The New York Stock Exchange and the Internal Revenue Service with respect to plans intending to be qualified under Section 162(m) of the Internal Revenue Code (“Section 162(m)”). The Board of Directors may establish a second committee that is not required to satisfy the Exchange Act, New York Stock Exchange and Internal Revenue Service rules set forth in the preceding sentence to administer the Plan with respect to participants who are not considered officers or directors of the Company. The Committee may also authorize the chief executive officer of the Company to grant benefits under the plan to employees who are not executive officers or directors of the Company.
All employees of the Company and its subsidiaries and all non-employee directors of the Company may participate in the Plan (“Participants”). As of March 28, 2003, there were approximately 100 individuals eligible to participate in the Plan.
No Participant may receive in any Plan year: (i) stock options relating to more than 500,000 shares; (ii) restricted stock that is subject to the attainment of Performance Criteria (as described below) relating to more than 500,000 shares; (iii) SARs relating to more than 500,000 shares; or (iv) performance shares relating to more than 200,000 shares. All of these limits are subject to the adjustment provisions discussed below. The maximum amount that may be earned under performance unit awards by any Participant who is a “covered employee” (as defined under Section 162(m)) in any calendar year may not exceed $1,000,000. The maximum amount payable under an annual management incentive award by any Participant that is intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) may not exceed $2,000,000.
Shares Available. The aggregate number of shares of Common Stock that may be issued or transferred to grantees under the Plan shall not exceed 969,100 shares in addition to any shares granted but subsequently forfeited under the
| Alan W. Aldworth Chief Executive Officer | | 1,118,000 | | | Ronald D. Klausner President, Information and Learning | | 440,000 | | | Andrew H. Wyszkowski President, ProQuest Company 1995 Stock Option Plan and the ProQuest Company Non-Employee Directors Plan. If there is a stock split, stock dividend or other relevant change affecting the Company’s shares, appropriate adjustmentsBusiness Solution | | 260,000 | | | will be made in the number of shares that may be issued or transferred in the future and in the number of shares and price of all outstanding grants made before such event. If shares under a grant are not issued or transferred, those shares would again be available for inclusion in future grants. If any award expires or its terminated, unexercised or settled in cash or in a manner that results in fewer shares outstanding than were initially awarded, then the shares which would have been issuable will again be available for award under the Plan. The 969,100 shares of Common Stock available under the Plan represents 3.5% percent of the currently outstanding shares of Common Stock of the Company as of March 28, 2003.
On March 28, 2003, the closing price of the Company’s Common Stock on the New York Stock Exchange was $20.67 per share.
Grants Under the Plan
Under the Plan, the Company expects to continue its efforts to use stock options as the Company’s most widely-used form of long-term incentive. The Plan will also permit the Committee to grant stock appreciation rights (“SARs”), restricted stock, performance stock, performance units, annual management incentive awards and other stock or cash awards in accordance with the terms of the Plan. Awards and grants under the Plan are referred to as “Benefits.”
Stock Option Grants.
The Committee may grant options qualifying as incentive stock options under the Internal Revenue Code and nonqualified stock options. The term of an option shall be fixed by the Committee, but shall not exceed ten years. The option price shall not be less than the fair market value of Common Stock on the date of grant. Generally, the fair market value shall be the closing price of the Common Stock on the New York Stock Exchange. Payment for shares purchased upon exercise of a stock option must be made in full at the time of purchase. Payment may be made in cash, by the transfer to the Company of shares owned by the Participant for at least six months on the date of transfer (or certification of such ownership) or in such other manner as may be authorized by the Committee.
Stock Appreciation Rights.
The Committee may grant SARs either singly or in combination with an underlying stock option granted under the Plan. The term of a SAR shall be fixed by the Committee but cannot exceed the option term, if issued in connection with an option, or ten years. SARs entitle the grantee to receive the same economic value that would have been derived from exercise of an option. Payment may be made in cash, in shares or a combination of both at the discretion of the Committee. It is anticipated that SARs primarily will be used in place of stock options, and any appreciation in value will be paid in cash.
Restricted Stock Grants.
Restricted stock consists of shares which are transferred or sold by the Company to a Participant, but are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the Participant. The Committee determines the eligible Participants to whom, and the time or times at which, grants of restricted stock will be made, the number of shares to be granted, the price to be paid, if any, the time or times within which the shares covered by such grants will be subject to forfeiture, the time or times at which the restrictions will terminate, and all other terms and conditions of the grants. Restrictions could include, but are not limited to, Performance Criteria (as described below), continuous service with the Company, the passage of time or other restrictions.
The grantee may not dispose of the shares prior to the expiration of the restriction period. During this period, the grantee would be entitled to vote the shares and, at the discretion of the Committee, receive dividends. Each certificate would bear a legend giving notice of the restrictions in the grant.
Performance Stock Awards.
Performance stock consists of a right of a Participant to receive shares of Common Stock at a future date in accordance with the terms of such grant and upon the attainment of Performance Criteria specified by the Committee. The award of performance stock to a Participant will not create any rights in such Participant as a stockholder of the Company until the issuance of Common Stock with respect to such award.
The Committee may adjust the number of performance stock awards notwithstanding satisfaction of performance goals, based upon further consideration of the Committee. In no event may the Committee increase the number of shares awarded upon satisfaction of performance goals for covered employees as defined under Section 162(m). The Committee may make a cash payment equal to the fair market value of shares issuable under the performance stock award in lieu of Common Stock.
Performance Units.
Performance units consist of a right to receive a payment in cash upon the attainment of Performance Criteria. The Committee may substitute actual shares of Common Stock for the cash payment otherwise required to be made pursuant to a performance unit award. In no event may the Committee increase the amount earned under a Performance Unit upon satisfaction of performance goals for covered employees as defined under Section 162(m). The maximum amount earned by a covered employee in any calendar year under a performance unit award cannot exceed $1,000,000.
Annual Management Incentive Awards.
The Committee has the authority to award management incentive bonuses to designated executive officers of the Company or any subsidiary. Annual management incentive bonuses shall consist of monetary payments earned upon achievement of certain performance goals as determined by the Committee. Any annual management incentive program award intended to satisfy the requirements for performance-based compensation under Section 162(m) shall not exceed $2,000,000 and shall be based upon Performance Criteria selected by the Committee within the first 90 days of the performance period.
Stock Awards.
The Committee may award shares of Common Stock to Participants without payment therefore as additional compensation for service to the Company or a subsidiary.
Cash Awards.
A cash award consists of a monetary payment made by the Company to an employee as additional compensation for his or her services to the Company or a subsidiary. A cash award may be made in tandem with another Benefit or may be made independently of any other Benefit. Cash awards may be subject to other terms and conditions, which may vary from time to time and among employees, as the Committee determines to be appropriate.
Performance Criteria.
Awards of restricted stock, performance stock, performance units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m), including, but not limited to, cash flow; cost; ratio of debt to debt plus equity; profit before tax; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; price of the Common Stock; return on net assets, equity, or stockholders’ equity; market share; or total return to stockholders (“Performance Criteria”).
Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company, and any Performance Criteria may be adjusted to include or exclude extraordinary items. Extraordinary items mean: (i) extraordinary, unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on the disposition of a business; (iii) changes in tax or accounting regulations or laws; or (iv) the effect of a merger or acquisition.
Amendment of the Plan.
Except as may be required for compliance with Rule 16b-3 under the Exchange Act and Section 162(m), the Board or the Committee has the right and power to amend the Plan, provided, however, that neither the Board nor the Committee may amend the Plan in a manner which would impair or adversely affect the rights of the holder of a Benefit without the holder’s consent. The Company will obtain stockholder approval if the amendment increases the number of shares reserved under the Plan, if the amendment increases the maximum amount of shares that may be subject to awards to a Participant in a year or if the Code or any other applicable statute, rule or regulation, including, but not limited to, those of any securities exchange, requires stockholder approval with respect to the Plan or the amendment.
Termination of the Plan.
The Plan may be terminated at any time by the Board. Termination will not in any manner impair or adversely affect any Benefit outstanding at the time of termination.
Committee’s Right to Modify Benefits.
Any Benefit granted may be converted, modified, forfeited, or canceled, in whole or in part, by the Committee if and to the extent permitted in the Plan, or applicable agreement entered into in connection with a Benefit grant or with the consent of the Participant to whom such Benefit was granted. If any amounts payable under the Plan are deemed to be excess parachute payments within the meaning of Section 280G(b)(1) of the Internal Revenue Code, then the Committee may authorize the Company to reimburse a Participant an amount equal to the excise taxes imposed on the Participant (after excluding federal, state and local tax, imposed on the Participant). Neither the Board nor the Committee may cancel any outstanding stock option for the purpose of reissuing the option to the Participant at a lower exercise price, or reduce the option price of an outstanding option.
Director Fees.
Nonemployee directors may receive their annual retainer payments and meeting fees in the form of stock options, restricted stock and/or stock units, as determined by the Board of Directors.
Change in Control.
Except as otherwise determined by the Committee at the time of grant, upon the occurrence of a Change in Control:
each stock option outstanding will immediately become exercisable in full for the remainder of its term;
the restrictions on all shares of restricted stock will be automatically terminated;
any Performance Criteria with respect to any performance stock award previously granted will be deemed to have been attained at target levels, and shares of Common Stock will be paid to the Participant in accordance with the terms and conditions set forth in the applicable agreement;
any Performance Criteria with respect to any performance units previously granted will be deemed to have been attained at target levels, and the cash will be paid to the Participant in accordance with the terms and conditions set forth in the applicable agreement;
each SAR will immediately become exercisable in full for the remainder of its term;
all management incentive awards will be paid out based on the consolidated operating earnings of the immediately preceding year, or such other method of payment as may be determined by the Committee (prior to the Change in Control); and
any terms and conditions with respect to other stock or cash awards previously granted under the Plan will be deemed to be fully satisfied and the other stock or cash awards will be paid out immediately to the Participants in accordance with the terms and conditions set forth in the applicable grant, award, or agreement relating to such Benefits.
For purposes of the Plan, the term “Change in Control” is defined as: (i) any change of control required to be disclosed under Schedule 14A of the Exchange Act; (ii) any person or group beneficially owns, directly or indirectly, securities of the Company representing 30 percent or more of the combined voting power of the outstanding securities of the Company (other than by the Company, or any employee benefit plan of the Company), and there is a change in the majority of the board in existence as of March 5, 2003 (the “Incumbent Board”), provided that any person becoming a director subsequent to March 5, 2003 whose election or nomination was approved by the majority of the Board shall be considered a member of the Incumbent Board, subject to certain exceptions; (iii) the consummation of certain mergers and consolidations involving the Company; (iv) the sale or other disposition of all or substantially all of the Company’s assets; (v) the approval by stockholders of a liquidation or dissolution of the Company; and (vii) a change the majority of the board in existence prior to the first public announcement relating to any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board of the Company), contested election or substantial stock accumulation.
Adjustments.
If there is any change in the Common Stock by reason of any stock split, or stock dividend, the number of shares available for Benefits, the maximum number of shares subject to an award in a calendar year, the number of shares subject to outstanding Benefits, and the price of each of the foregoing, as applicable, will be equitably adjusted by the Committee in its discretion.
Without affecting the number of shares reserved or available under the Plan, either the Board or the Committee may authorize the issuance or assumption of Benefits in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it deems appropriate.
In the event of any merger, consolidation, or reorganization in which the Company is not the continuing corporation, there shall be substituted on an equitable basis as determined by the Committee, for each share of common stock subject to a Benefit, the number and kind of shares of stock, other securities, cash, or other property to which holders of Common Stock of the Company are entitled pursuant to the transaction. Alternatively, the Plan provides for the acceleration of vesting and expiration of awards or the cash-out of awards in accordance with such a transaction.
Reusage.
If a stock option expires or is terminated, surrendered or canceled without having been fully exercised or if restricted stock, performance shares or SARs are forfeited or terminated without the issuance of all of the shares subject thereto, the shares covered by such Benefits (as long as such Benefits were issued under the Plan) will again be available for use under the Plan. Shares covered by a Benefit granted under the Plan will not be counted as used unless and until they are actually and unconditionally issued and delivered to a Participant. The number of shares which are transferred to the Company by a Participant to pay the exercise or purchase price of a Benefit will be subtracted from the number of shares issued with respect to such Benefit for the purpose of counting shares used. Shares withheld to pay withholding taxes in connection with the exercise or payment of a Benefit will not be counted as used. Shares covered by a Benefit granted under the Plan which is settled in cash will not be counted as used.
U.S. Federal Income Tax Consequences
The Company has been advised by counsel that the federal income tax consequences as they relate to Benefits are as follows:
Incentive Stock Options (“ISOs”).
An optionee does not generally recognize taxable income upon the grant or upon the exercise of an ISO. The exercise of an ISO may in some cases trigger liability for the alternative minimum tax. Upon the sale of ISO shares, the optionee recognizes income in an amount equal to the difference, if any, between the exercise price of the ISO shares and the fair market value of those shares on the date of sale. The income is taxed at long-term capital gains rates if the optionee has not disposed of the stock within two years after the date of the grant of the ISO and has held the shares for at least one year after the date of exercise and the Company is not entitled to a federal income tax deduction. The holding period requirements are waived when an optionee dies.
If an optionee sells ISO shares before having held them for at least one year after the date of exercise and two years after the date of grant, the optionee recognizes ordinary income to the extent of the lesser of: (i) the gain realized upon the sale; or (ii) the difference between the exercise price and the fair market value of the shares on the date of exercise. Any additional gain is treated as long-term or short-term capital gain depending upon how long the optionee has held the ISO shares prior to disposing of them. In the year of disposition, the Company receives a federal income tax deduction in an amount equal to the ordinary income which the optionee recognizes as a result of the disposition.
Non-Qualified Stock Options (“NSOs”).
An optionee does not recognize taxable income upon the grant of an NSO. Upon the exercise of such a stock option, the optionee recognizes ordinary income to the extent the fair market value of the shares received upon exercise of the NSO on the date of exercise exceeds the exercise price. The Company receives an income tax deduction in an amount equal to the ordinary income which the optionee recognizes upon the exercise of the stock option. If an optionee sells shares received upon the exercise of an NSO, the optionee recognizes capital gain income to the extent the sales proceeds exceed the fair market value of such shares on the date of exercise.
Restricted Stock.
A Participant who receives an award of restricted stock does not generally recognize taxable income at the time of the award or payment. Instead, the Participant recognizes ordinary income in the first taxable year in which his or her interest in the shares becomes either: (i) freely transferable; or (ii) no longer subject to substantial risk of forfeiture. On the date the restrictions lapse, the Participant includes in taxable income the fair market value of the shares less the cash, if any, paid for the shares. A Participant may elect to recognize income at the time he or she receives restricted stock in an amount equal to the fair market value of the restricted stock (less any cash paid for the shares) on the date of the award. The Company receives a compensation expense deduction in the taxable year in which restrictions lapse (or in the taxable year of the award if, at that time, the Participant had filed a timely election to accelerate recognition of income).
Other Benefits.
In the case of an exercise of an SAR or an award of performance stock, performance units, or Common Stock or cash, the Participant will generally recognize ordinary income in an amount equal to any cash received and the fair market value of any shares received on the date of payment or delivery. In that taxable year, the Company will receive a federal income tax deduction in an amount equal to the ordinary income which the Participant has recognized.
Million Dollar Deduction Limit.
The Company may not deduct compensation of more than $1,000,000 that is paid to an individual who, on the last day of the taxable year, is either the Company’s chief executive officer or is among one of the four other
most highly-compensated officers for that taxable year. The limitation on deductions does not apply to certain types of compensation, including qualified performance-based compensation. The Company believes that Benefits in the form of stock options, performance stock, performance units, SARs, performance-based restricted stock and cash payments under management incentive awards constitute qualified performance-based compensation and, as such, will be exempt from the $1,000,000 limitation on deductible compensation.
Other Information.
If approved by Company stockholders, the Plan will be effective on that date and will continue until terminated by the Board of Directors. Options are not assignable or transferable except for limited circumstances upon a grantee’s death, or pursuant to rules that may be adopted by the Committee. The Committee may establish rules and procedures to permit a grantee to defer recognition of income or gain for incentives under the Plan.
Employees who will participate in the Plan in the future and the amounts of their allotments are to be determined by the Committee subject to any restrictions outlined above. Since no such determinations have yet been made, it is not possible to state the terms of any individual options which may be issued under the Plan or the names or positions of, or respective amounts of the allotment to, any individuals who may participate. A new benefits table is not provided because no grants have been made under the Plan and all Benefits are discretionary.
Approval by Stockholders.
In order to be adopted, the Plan must be approved by the affirmative vote of a majority of the outstanding shares represented at the meeting and entitled to vote.
The Board recommends a vote “FOR” this Proposal.
PROPOSAL 3. RATIFICATION OF KPMG LLP AS AUDITORS
The Board of Directors shall appoint annually a firm of independent public accountants to serve as auditors and that such appointment is being submitted for ratification by the shareholders at the Annual Meeting. The Board has appointed KPMG LLP to act as auditors for the current year. This firm has served as ProQuest’s auditors since 1989. The Board of Directors recommends a vote for ratification of the selection of KPMG LLP as independent public accounts for 2003. Regardless of the vote of the shareholders, the Board’s decision to appoint KPMG LLP as the Company’s auditors for this year will not be changed, but the Board will consider the vote of the shareholders in selecting independent accounts to serve as the Company’s outside auditors in future years.
Shareholders are being requested at the meeting to approve the ratification of KPMG LLP as auditors. The Board recommends a vote “FOR” approval of the Proposal.
SHAREHOLDER PROPOSALS FOR 2004
Under the rules of the Securities and Exchange Commission, shareholder proposals submitted for ProQuest’s 2004 Proxy Statement must be received by ProQuest no later than the close of business on December 19, 2003, to be considered. Proposals should be addressed to Todd W. Buchardt
Senior Vice President, General Counsel and Secretary at ProQuest Company, 300 N. Zeeb Road, Ann Arbor, Michigan, 48103. For a shareholder to bring other business before the Annual Meeting, but not have it included in the proxy statement, timely notice must be submitted in writing, delivered or mailed by first-class mail, postage prepaid, to the office of the Company set forth in the preceding sentence no later than March 4, 2004. | | 170,500 | | | Kevin G. Gregory Senior Vice President, Chief Financial Officer | | 170,500 | | | Linda Longo-Kazanova Senior Vice President, Human Resources and Business Optimization | | 170,500 |
Amendment of the Plan. Except as may be required for compliance with Rule 16b-3 under the Exchange Act and Section 162(m), the Board or the Committee has the right and power to amend the Plan, provided, however, that neither the Board nor the Committee may amend the Plan in a manner which would impair or adversely affect the rights of the holder of a benefit without the holder’s consent. The Company must obtain stockholder approval if the amendment increases the number of shares reserved under the Plan, if the amendment increases the maximum amount of shares that may be subject to awards to a Participant in a year or if the Code or any other applicable statute, rule or regulation, including, but not limited to, those of any securities exchange, requires stockholder approval with respect to the Plan or the amendment. Committee’s Right to Modify Benefits. Any benefit granted may be converted, modified, forfeited, or canceled, in whole or in part, by the Committee if and to the extent permitted in the Plan, or applicable agreement entered into in connection with a grant or with the consent of the Participant to whom such Benefit was granted. If any amounts payable under the Plan are deemed to be excess parachute payments within the meaning of Section 280G(b)(1) of the Internal Revenue Code, then the Committee may authorize the Company to reimburse a Participant an amount equal to the excise taxes imposed on the Participant (after excluding federal, state and local tax, imposed on the Participant). Neither the Board nor the Committee may cancel any outstanding stock option for the purpose of reissuing the option to the Participant at a lower exercise price, or reduce the option price of an outstanding option. Proposed Amendment To Provisions On Adjustments. The number and class of shares available under the Plan and the terms of outstanding awards may be adjusted by the Committee to prevent dilution or enlargement of rights in the event of various changes in the capitalization of the Company. The proposed amendment clarifies that the Committee shall, as it deems appropriate and equitable, have the right to (1) proportionately adjust the number and types of shares of Common Stock (or other securities), exercise price, or performance standards of any or all benefits and (2) make provision for a cash payment or for substitution or exchange of any or all benefits, in connection with any extraordinary dividend or distribution, reclassification, recapitalization, stock split, reverse stock split, reorganization, merger, combination, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or securities of the Company, or similar, unusual or extraordinary corporate transaction or a sale of substantially all of the assets of the Company. Federal Tax Treatment. Under current law, a participant who is granted a nonqualified stock option will not have taxable income at the time of grant but will have taxable income at the time of exercise equal to the difference between the exercise price of the shares and the market value of the shares on the date of exercise. The Company is entitled to a tax deduction for the same amount so long as the nonqualified stock option is considered performance-based compensation under Section 162(m) of the Code. Limitation on the Company’s Deduction. Under Section 162(m) of the Code, the Company may not deduct otherwise deductible compensation paid to “Covered Employees” (i.e., generally, the Chief Executive Officer and the four highest compensated officers of the Company) to the extent that such compensation exceeds $1 million. An exception applies, however, for performance-based compensation if the terms under which such compensation is paid are approved by the Company’s stockholders and certain other requirements are satisfied. Although ProQuest intends that stock option awards under the Plan will satisfy the requirements to be considered performance-based compensation for purposes of Section 162(m) of the Code, there is no assurance such awards will satisfy such requirements, and, accordingly, Section 162(m) of the Code may limit the amount of deductions otherwise available to the Company (as described above) with respect to awards to “Covered Employees” under the Plan. The inclusion of the limits on individual stock option awards discussed above is intended to satisfy the requirements of Section 162(m) by establishing a maximum number of shares that may be represented by awards granted to any employee. Effect of Approval of the Proposed Amendments. Approval by the stockholders of the proposed amendments will permit the Committee to implement the long term incentive plan for the senior executive team. If the proposed amendments and the grant of Stock Options are not approved, the Stock Options made in February to senior executive officers will be cancelled. Approval of the Proposed Amendments. The affirmative vote of holders of a majority of the shares represented and entitled to vote at the meeting is required for approval of the amendment to the Plan and the grant of the Stock Options. Abstentions will count as a vote against the proposal, but broker non-votes and votes withheld will have no effect on the vote. The Board recommends a vote “FOR” this Proposal. SHAREHOLDER PROPOSALS FOR 2005 Under the rules of the Securities and Exchange Commission, shareholder proposals submitted for ProQuest’s 2004 Proxy Statement must be received by ProQuest no later than the close of business on December 19, 2004, to be considered. Proposals should be addressed to Todd W. Buchardt, Senior Vice President, General Counsel and Secretary at ProQuest Company, 300 N. Zeeb Road, Ann Arbor, Michigan, 48103. For a shareholder to bring other business before the Annual Meeting, but not have it included in the proxy statement, timely notice must be submitted in writing, delivered or mailed by first-class mail, postage prepaid, to the office of the Company set forth in the preceding sentence no later than March 4, 2005. The notice must identify the proposing shareholder and his/her address and contain a description of the proposed business and such other information as would be required to determine the appropriateness of including the proposal in the proxy statement. VOTING VOTING SECURITIES Shareholders of record at the close of business on March 31, 2004 will be eligible to vote at the meeting. The voting securities of ProQuest consist of its common stock, of which 28,466,769 were outstanding on March 31, 2004. Each share outstanding on the record date will be entitled to one vote. Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual share owner voting records is limited to the Independent Inspectors of Election (Bank Boston, c/o Boston EquiServe, L.P.) and certain employees of ProQuest and its agents who must acknowledge in writing their responsibility to comply with this policy of confidentiality. VOTE REQUIRED FOR APPROVAL The nominees for director receiving a plurality of the votes cast at the meeting in person or by proxy shall be elected. All other matters which may be presented at the meeting require the favorable vote of a majority of shares represented and voted at the meeting for approval. Withholding votes and broker non-votes will not be treated as votes cast. Therefore, withholding, will have no effect on the outcome of the election of directors but abstention will have the effect of a vote against all other proposals to be voted on at the meeting. Broker non-votes will have no effect on any vote at the meeting. MANNER FOR VOTING PROXIES The shares represented by all valid proxies received will be voted in the manner specified on the proxies. Where specific choices are not indicated, the shares represented by all valid proxies received will be voted “for” the nominees for director named earlier in this Proxy Statement. Although the Board knows of no matter other than the election of directors which may be presented at the meeting, should any other matter need to be acted upon at the meeting the persons named on the proxy card will vote in accordance with their judgement. VOTING ON THE INTERNET OR VIA TELEPHONE Again this year, registered holders (i.e., those stockholders who hold stock in their own names and whose shares are not held by a broker in a “street name” on their behalf, or whose shares are not held under the ProQuest Associate Stock Purchase Plan) will be able to vote their proxies over the Internet or by telephone.Specific Instructions for Voting on the Internet or by telephone are included on the Proxy Card. APPENDIX A PROQUEST COMPANY Charter of the Audit Committee of the Board of Directors VOTING SECURITIESI. | | Audit Committee Purpose |
The Audit Committee is appointed by the Board of Directors to assist the Board in fulfilling its oversight responsibilities. The Audit Committee’s primary duties and responsibilities are to: Oversee the Company’s accounting and financial reporting process and systems of internal controls regarding finance, accounting and legal compliance. Provide direct oversight of the Company’s internal audit function. Monitor the independence and performance of the Company’s independent auditors. Provide an avenue of communication among the independent auditors, management and the Board of Directors. The Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities and it has direct access to the independent auditors as well as anyone in the organization. The Audit Committee has the ability to retain, at the Company’s expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties. | II. | | Audit Committee Responsibilities and Duties |
Review Procedures Shareholders
| 1. | | Review and reassess the adequacy of recordthis Charter at least annually. Submit the close of business on March 28, 2003 will be eligible to vote at the meeting. The voting securities of ProQuest consist of its common stock, of which 28,042,137 were outstanding on March 28, 2003. Each share outstanding on the record date will be entitled to one vote.Individual votes of shareholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual share owner voting records is limited to the Independent Inspectors of Election (Bank Boston, c/o Boston EquiServe, L.P.) and certain employees of ProQuest and its agents who must acknowledge in writing their responsibility to comply with this policy of confidentiality.
VOTE REQUIRED FOR APPROVAL
The nominees for director receiving a plurality of the votes cast at the meeting in person or by proxy shall be elected. All other matters which may presented at the meeting require the favorable vote of a majority of shares represented and voted at the meeting for approval. Abstentions and broker non-votes will not be treated as votes cast. Therefore, abstentions, will have no effect on the outcome of the election of directors but will have the effect of a vote against all other proposals to be voted on at the meeting. Broker non-votes will have no effect on any vote at the meeting.
MANNER FOR VOTING PROXIES
The shares represented by all valid proxies received will be voted in the manner specified on the proxies. Where specific choices are not indicated, the shares represented by all valid proxies received will be voted “for” the nominees for director named earlier in this Proxy Statement.
Although the Board knows of no matter other than the election of directors which may be presented to the meeting, should any other matter need to be acted upon at the meeting the persons named on the proxy card will vote in accordance with their judgement.
VOTING ON THE INTERNET OR VIA TELEPHONE
Again this year, registered holders (i.e., those stockholders who hold stock in their own names and whose shares are not held by a broker in a “street name” on their behalf, or whose shares are not held under the ProQuest Associate Stock Purchase Plan) will be able to vote their proxies over the Internet or by telephone.Specific Instructions for Voting on the Internet or by telephone are included on the Proxy Card.
SOLICITATION OF PROXIES
Proxies may be solicited on behalf of the Board of Directors by mail, telephone, telegraph, or in person, and solicitation costs will be paid by ProQuest. Copies of proxy material and of the Form 10-K for 2002 will be supplied to brokers, dealers, banks, and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners.
APPENDIX A
Nominating and Governance Committee Charter
I. | | Director Nomination: The Committee will assist the Board in its composition in accordance with relevant law and NYSE listing rules. The Committee will: |
Lead the search for and identify individuals qualified to become members of the Board of Directors;
Develop and periodically review the qualifications profile for directors;
Recommendcharter to the Board of Directors nominees for the next annual meeting of Shareholders;
Make recommendations regarding director orientation, continuing education and compensation;
Consider management recommendations regarding the appropriate consultant to retain, if any, and the terms, conditions and fees for services; and
Authorize management to enter into a contract with the consultant based on terms and conditions approved by the Committee.
II. | | Corporate Governance Guidelines:The Committee will:approval. |
Develop | 2. | | Review with management and the independent auditors the Company’s annual audited financial results prior to filing Form 10K. Review will include discussion of significant issues regarding accounting principles, practices and judgements, critical accounting policies and Management Discussion and Analysis. |
Discuss with the independent auditors certain matters required to be communicated to the audit committee such as: The auditor’s responsibility under Generally Accepted Auditing Standards (GAAS); All critical accounting policies and practices to be used; Alternative treatments of financial information within Generally Accepted Accounting Principles (GAAP) that have been discussed with management and the ramifications of the use of such alternative disclosures and treatments and the treatment preferred by the independent audit firm; Management judgements, accounting estimates and materiality standards; Significant audit adjustments; Other information in documents containing audited financial statements and scope/level of disclosures; Disagreement with management – including accounting principles, scope of audit, disclosures; Consultation with other accountants by management; Major issues discussed with management; and Difficulties encountered in performing the audit. | 3. | | Review with management and the independent auditors the Company’s quarterly financial results prior to filing Form 10Q. Discuss any significant changes to the Company’s accounting principles and any items required to be communicated by the independent auditors. The Chair of the Committee may represent the entire Audit Committee for purposes of this review. |
| 4. | | In consultation with management and the independent auditors, assess the integrity of the Company’s financial reporting process and controls. Discuss significant financial risk exposures and the steps management has taken to monitor, control and report such exposures. Review significant findings prepared by the independent auditors together with management’s responses. |
Independent Auditors | 1. | | The independent auditors are ultimately accountable to the Audit Committee and the Board of Directors. The Audit Committee shall be solely responsible for the appointment and removal of the independent auditors. The Audit Committee shall review the independence and performance of the auditors, and annually recommend to the Board of Directors for its approval a setthe appointment of corporate governance guidelines.the independent auditors or approve any discharge of auditors when circumstances warrant. The Audit Committee shall reviewalso ensure proper audit partner rotation. |
| 2. | | Review the guidelines onindependent auditors audit plan – discuss scope, staffing, locations, reliance upon management and general audit approach. |
| 3. | | Prior approval of all audit and non-audit services to be performed by the independent auditors and to be paid to the independent auditors. |
| 4. | | On an annual basis, or more frequently if appropriate,the Committee should review and recommend changes as necessary;discuss with the independent auditors all significant relationships they have with the Company that could impair the auditors’ independence. |
Other Audit Committee Responsibilities Develop | 1. | | Review with management, the internal audit function, organization, responsibilities, plans, results, budget and recommendstaffing. |
| 2. | | Annually prepare a report to shareholders as required by the Securities and Exchange Commission. The report should be included in the Company’s annual proxy statement. |
| 3. | | Perform any other activities consistent with the Charter, the Company’s By-laws and governing law, as the Committee or the Board deems necessary or appropriate. |
| 4. | | Maintain minutes of meetings and periodically report to the Board of Directors on significant results of the foregoing activities. |
| 5. | | Establish, review and update periodically a Code of Ethical Conduct and ensure that management has established a system to enforce this Code. |
| 6. | | Annually evaluate the Committee’s performance and charter. |
| III. | | Audit Committee Composition |
The Audit Committee of the Board of Directors of ProQuest Company shall consist of at least three directors. Members of the Committee shall be appointed by the Board of Directors upon the recommendation of the Nominating and Governance Committee and may be removed by the Board of Directors in its discretion. All members of the Committee shall be independent directors under the standard proposed by the New York Stock Exchange, and shall also satisfy the New York Stock Exchange’s independence requirement for members of the Audit Committee. All members shall have sufficient financial experience and ability to enable them to discharge their responsibilities and at least one member shall be a financial expert. The Chairman of the Audit Committee shall be appointed by the Board of Directors. PROQUEST COMPANY Charter of the Compensation Committee of the Board of Directors The Compensation Committee (the “Committee”) will recommend, review and approve ProQuest Company compensation policies and programs as well as individual executive compensation to retain and attract associates who are needed for ensuring the competitiveness and long-term success of the business and will perform such other tasks as may be delegated to it by the Board of Directors. The Committee shall consist of at least three independent members of the Board of Directors. The Board will designate one member of the Committee as its chairperson. In the event of a tie vote on any issue, the chairperson’s vote shall decide the issue. The Committee shall meet at least two times a year and may from time to time seek outside expert advice to support its recommendations and decisions. The Committee has the following duties: To recommend, review, approve and establish performance criteria for compensation policies and programs; To review and approve CEO compensation and set performance criteria for compensation; To advise the Board of Directors on changes in Board compensation; To monitor the Company’s management resources, structure, succession planning, development and selection process and the performance of key executives; Approve and administer the Company’s 2003 Strategic Performance Plan and all other plans designed to provide compensation primarily for officers of the Company; To produce an annual report of the Committee on executive compensation for the Company’s annual Proxy Statement; To review and approve the remuneration proposals for executive compensation; To inform the Board of Directors about policies and programs as well as statistical comparisons of compensation levels with key competitors and market data; and To annually evaluate the Committee’s performance and charter. PROQUEST COMPANY CHARTER OF THE NOMINATING AND GOVERNANCE COMMITTEE OF THE BOARD OF DIRECTORS | I. | | Director Nomination: The Committee will assist the Board in its composition in accordance with relevant law and NYSE listing rules. The Committee will: |
Lead the search for and identify individuals qualified to become members of the Board of Directors; Develop and periodically review the qualifications profile for directors; Recommend to the Board of Directors nominees for the next annual meeting of Shareholders; Make recommendations regarding director orientation, continuing education and compensation; Consider management recommendations regarding the appropriate consultant to retain, if any, and the terms, conditions and fees for services; and Authorize management to enter into a contract with the consultant based on terms and conditions approved by the Committee. | II. | | Corporate Governance Guidelines:The Committee will: |
Consist of at least three independent members of the Board of Directors. The Board will designate one member of the Committee as its chairperson. In the event of a tie vote on any issue, the chairperson’s vote shall decide the issue. Meet at least two times a year and may from time to time seek outside expert advice to support its recommendations and decisions. Develop and recommend to the Board of Directors for its approval a set of corporate governance guidelines. The Committee shall review the guidelines on an annual basis, or more frequently if appropriate, and recommend changes as necessary; Develop and recommend to the Board of Directors for its approval an annual self-evaluation process of the Board and its committees. The Committee shall oversee the annual self-evaluation. | III. | | Committee Performance:The Committee will annually review its performance in accordance with relevant law and NYSE listing rules. |
| IV. | | Committee Resources and Evaluation:The Committee shall have the authority to retain any search firm or consultant engaged to assist in identifying director candidates, and to retain outside counsel and any other advisors as the Committee may deem appropriate in its sole discretion. |
The Committee shall have solethe authority to approve related feesretain any search firm or consultant engaged to assist in identifying director candidates, and to retain outside counsel and any other advisors as the Committee may deem appropriate in its sole discretion. |
The Committee shall have sole authority to approve related fees and retention terms. The Committee shall report its actions and recommendations to the Board after each committee meeting and shall conduct and present to the Board any annual performance evaluation of the Committee. The Committee shall review at least annually the adequacy of this charter and recommend any proposed changes to the Board for approval. APPENDIX B 2003 PROQUEST STRATEGIC PERFORMANCE PLAN ARTICLE I PURPOSE 1.1Purpose. The purposes of the 2003 ProQuest Strategic Performance Plan (the “Plan”) are (i) to encourage outstanding individuals to accept or continue employment with ProQuest Company (the “Company”) and its Subsidiaries or to serve as directors of the Company, (ii) to furnish maximum incentive to those persons to improve operations and increase profits and (iii) to strengthen the mutuality of interest between those persons and the Company’s stockholders by providing them stock options and other stock and cash incentives. ARTICLE II DEFINITIONS 2.1 “Board” shall mean the Board of Directors of the Company. 2.2 “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation. 2.3 “Committee” shall mean the Committee as defined in Section 3.1 hereof. 2.4 “Common Stock” shall mean the Common Stock (without par value) of the Company. 2.5 “Disability” shall mean a disability qualifying the participant to receive benefits under the Company’s or a Subsidiary’s long-term disability plan. Disability shall be deemed to occur on the date benefit payments begin. 2.6 “Fair Market Value” unless otherwise required by any applicable provision of the Code, or any regulations issued hereunder, shall mean as of any date the closing price of the Common Stock on the New York Stock Exchange Composite Transaction List as reported in the Wall Street Journal, Midwest Edition for such day or if the Common Stock was not traded on such day, then the next preceding day on which the Common Stock was traded. 2.7 “Incentive Stock Option” shall mean any stock option awarded under the Plan intended to be, and designated as, an incentive stock option within the meaning of Section 422 of the Code or any successor provision. 2.8 “Nonqualified Stock Option” shall mean any stock option awarded under the Plan that is not an Incentive Stock Option. 2.9 “Retirement” shall mean any termination of employment by an employee (other than by death or Disability) who is at least 55 years of age after at least 7 years of employment by the Company and/or a Subsidiary; or as otherwise determined by the Committee in its sole discretion. 2.10 “Subsidiary” shall mean any corporation (or partnership, joint venture or other enterprise) (i) of which the Company owns or controls, directly or indirectly, 50% or more of the outstanding shares of stock normally entitled to vote for the election of Directors (or comparable equity participations and voting power) or (ii) which the Company controls by contract or other means. “Control” means the power to direct or cause the direction of the management and policies of a corporation, partnership, joint venture or other enterprise. 2.11 “Termination of Employment” shall mean the termination of a participant’s employment with the Company or any Subsidiary. A Termination of Employment of a participant employed by a Subsidiary shall also be deemed to occur if the Subsidiary ceases to be a Subsidiary and the participant does not immediately thereafter become an employee of the Company or another Subsidiary. 2.12 “Transfer” shall mean anticipation, alienation, attachment, sale, assignment, pledge, encumbrance, charge or other disposition; and the terms “Transferred” or “Transferable” shall have corresponding meanings. ARTICLE III ADMINISTRATION 3.1The Committee. The Plan shall be administered by a committee (“Committee”) consisting of two or more directors of the Company appointed by the Board to satisfy such requirements as: (a) the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16-3 or its successor under the Securities Exchange Act of 1934 (the “1934 Act”); (b) the New York Stock Exchange may establish pursuant to its rule-making authority; and (c) the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended. The initial Committee shall be the Compensation Committee of the Board. The Board may also appoint a second committee comprised of one or more directors of the Company who need not satisfy the requirements set forth above to administer the Plan with respect to participants who are not considered officers or directors of the Company under Section 16 of the 1934 Act. The Committee may also authorize the Chief Executive Officer of the Company to select employees to participate in the Plan and to determine the number of option shares and other rights to be granted to such participants who are not considered officers under Section 16 of the 1934 Act. Any reference in the Plan to the Committee shall include the second committee or the Chief Executive Officer in the context of awards to such participants. 3.2Authority. The Committee shall have full power to select key employees to whom awards are granted; to determine the size and types of awards and their terms and conditions; to construe and interpret the Plan; to establish and amend the rules for the Plan administration; and to make all other determinations which may be necessary or advisable for the administration of the Plan. All determinations of the Committee shall be final and conclusive on all persons, including the Company, its stockholders and participants, and their estates and beneficiaries. ARTICLE IV PARTICIPANTS 4.1Participants. Participants may consist of all employees of the Company and its Subsidiaries and all non-employee directors of the Company. Designation of a participant in any year shall not require the Committee to designate that person to receive a benefit in any other year or to receive the same type or amount of benefit as granted to the participant in any other year or as granted to any other participant in any year. The Committee shall consider all factors that it deems relevant in selecting participants and in determining the type and amount of their respective benefits. ARTICLE V RESERVED SHARES 5.1Shares Available under the Plan. The number of shares of Common Stock available for awards under the Plan shall be the sum of the following amounts: (a) 969,100 shares; which includes 931,400 shares reserved under the Company’s 1995 Stock Option Plan as amended, but not subject to existing options and 37,700 shares reserved under the Company’s Non-Employee Directors Plan as amended, but not subject to existing options; (b) any shares of Common Stock subject to an award hereunder or under any prior stock incentive plan of the Company if there is a lapse, forfeiture, expiration or termination of any such award; (c) the number of shares of Common Stock exchanged by an optionee as full or partial payment to the Company of the exercise price under any stock option exercised under the Plan or any prior stock incentive plan of the Company; and (d) the number of shares of Common Stock retained by the Company pursuant to a Participant’s tax withholding election or exchanged by a participant to satisfy his or her tax withholding obligations as permitted by Section 11.5 hereof. All of these shares may be either authorized but unissued or reacquired shares. Under the Plan, no participant may receive in any calendar year (i) Stock Options relating to more than 500,000 shares, (ii) Restricted Stock that is subject to the attainment of Performance Goals of Section 6.9 hereof relating to more than 500,000 shares, (iii) Stock Appreciation Rights relating to more than 500,000 shares, or (iv) Performance Shares relating to more than 200,000 shares. The shares reserved for issuance and the limitations set forth above shall be subject to adjustment in accordance with Section 8.1 hereof. All of the available shares may, but need not, be issued pursuant to the exercise of incentive stock options. ARTICLE VI TYPES OF BENEFITS 6.1Types of Benefits. Benefits under the Plan shall consist of Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Stock, Performance Units, Annual Management Incentive Awards and Other Stock or Cash Awards, all as described below. 6.2Stock Options. Stock options (“Stock Options”) may be granted to participants, at any time as determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an Incentive Stock Option. The option price for each option shall be determined by the Committee but shall not be less than 100% of the Fair Market Value of the Company’s Common Stock on the date the option is granted. Each option shall expire at such time as the Committee shall determine at the time of grant. Options shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine; provided, however, that no option shall be exercisable later than the tenth anniversary of its grant. The option price, upon exercise of any option, shall be payable to the Company in full by: (a) cash payment or its equivalent, (b) tendering previously acquired shares (held for at least six months) having a fair market value at the time of exercise equal to the option price, (c) certification of ownership of such previously acquired shares, (d) delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to the Company, provided, however, that the Company shall not be obligated to issue the Common Stock to the participant or to the broker until it has received payment of the exercise price; and (e) such other methods of payment as the Committee, at its discretion, deems appropriate. In no event shall the Committee cancel any outstanding Stock Option for the purpose of reissuing the option to the participant at a lower exercise price or reduce the option price of an outstanding option without stockholder approval. 6.3Stock Appreciation Rights. Subject to the terms of the Plan, Stock Appreciation Rights (“SARs”) may be granted to participants at any time as determined by the Committee. An SAR may be granted in tandem with a Stock Option granted under this Plan or on a free-standing basis. The grant price of tandem SAR shall be equal to the option price of the related option. The grant price of a free-standing SAR shall be equal to the Fair Market Value of the Company’s Common Stock on the date of its grant. An SAR may be exercised upon such terms and conditions and for the term as the Committee in its sole discretion determines; provided, however, that the term shall not exceed the option term in the case of a tandem SAR or ten years in the case of a free standing SAR. Upon exercise of an SAR, the participant shall be entitled to receive payment from the Company in cash or stock, at the discretion of the Committee, in an amount determined by multiplying the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the grant price of the SAR by the number of shares with respect to which the SAR is exercised. 6.4Restricted Stock. Restricted Stock may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock shall be subject to such restrictions as the Committee determines, including, without limitation, any of the following: (a) a prohibition against Transfer of the shares of Restricted Stock for a specified period; or (b) a requirement that the holder of Restricted Stock forfeit (or in the case of shares sold to the participant resell to the Company at cost) such shares in the event of termination of employment during the period of restriction. (c) vesting on the basis of the Performance Goals set forth in Section 6.9. All restrictions shall expire at such times as the Committee shall specify. 6.5Performance Stock. The Committee shall designate the participants to whom long-term performance stock (“Performance Stock”) is to be awarded and determine the number of shares, the length of the performance period and the other terms and conditions of each such award. Each award of Performance Stock shall entitle the participant to a payment in the form of shares of Common Stock upon the attainment of performance goals and other terms and conditions specified by the Committee. Notwithstanding satisfaction of any performance goals, the number of shares issued under a Performance Stock award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the number of shares earned upon satisfaction of any Performance Goals by any participant who is a Covered Employee (as defined in Section 162(m) of the Code). The Committee may, in its discretion, make a cash payment equal to the Fair Market Value of shares of Common Stock otherwise required to be issued to a participant pursuant to a Performance Stock award. 6.6Performance Units. Subject to the terms of the Plan, the Committee shall designate the participants to whom long-term performance units (“Performance Units”) are to be awarded and determine the number of units and the terms and conditions of each such award. Each Performance Unit award shall entitle the participant to a payment in cash upon the attainment of Performance Goals and other terms and conditions specified by the Committee. Notwithstanding the satisfaction of any Performance Goals, the amount to be paid under a Performance Unit award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the amount earned under Performance Unit awards upon satisfaction of any performance goal by any participant who is a Covered Employee and the maximum amount earned under any such award by a Covered Employee in any calendar year may not exceed $1,000,000. The Committee may, in its discretion, substitute actual shares of Common Stock equal in Fair Market Value to the cash payment otherwise required to be made to a participant pursuant to a Performance Unit award. 6.7Annual Management Bonuses. The Committee may award annual management incentive program bonuses to Participants upon achievement of such terms and conditions as the Committee determines appropriate. Annual management incentive bonuses shall consist of monetary payments earned in whole or in part if certain performance goals established for a specified fiscal year are achieved during that year. Each year the Committee shall establish (a) the performance criteria and level of achievement related to these criteria upon which the amount of the award payment shall be based, (b) the timing of any payment earned by virtue of performance, (c) restrictions on the Transfer of the award prior to actual payment, (d) forfeiture provisions, and (e) such further terms and conditions, in each case not inconsistent with the Plan. The maximum amount payable to any Participant as an annual management incentive program award intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall not exceed $2,000,000. The Committee shall establish the performance criteria and level of achievement related to the criteria upon which the amount of any award payment shall be based. Notwithstanding anything to the contrary herein, the performance criteria for any annual management incentive bonus that is intended by the Committee to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall be a measure based solely on one or more Performance Criteria (as defined in 6.9 below) selected by the Committee and specified within the first 90 days of the performance period. The Committee shall certify the extent to which the Performance Criteria have been satisfied, and the amount payable as a result thereof, prior to payment of any bonus that is intended by the Committee to satisfy the requirements for “performance-based compensation” under Code Section 162 (m). 6.8Other Stock or Cash Awards. In addition to the incentives described in sections 6.2 through 6.7 above, the Committee may grant other incentives payable in cash or in Common Stock under the Plan as it determines to be in the best interests of the Company and subject to such other terms and conditions as it deems appropriate. 6.9Performance Goals. Awards of Restricted Stock, Performance Stock, Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Internal Revenue Code, including, but not limited to, cash flow; cost; ratio of debt to debt plus equity; profit before tax; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; price of Company Stock; return on net assets, equity or stockholders’ equity; market share; or total return to stockholders (“Performance Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company. Any Performance Criteria may include or exclude Extraordinary Items. “Extraordinary Items” shall mean (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) the impact of changes in tax or accounting regulations or laws, or (iv) the effect of a merger or acquisition. Performance Criteria shall be calculated in accordance with the Company’s financial statements, generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award which is consistently applied and identified in the audited financial statements, including footnotes, or the Management Discussion and Analysis section of the Company’s annual report. However, the Committee may not in any event increase the amount of compensation payable to a Covered Employee upon the attainment of a Performance Goal. 6.10Director Fees. A non-employee director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of Stock Options, Restricted Stock or Stock Units (as described in Section 11.6) or a combination thereof as determined by the Board. The number of shares of Stock Options, Restricted Stock or Stock Units to be granted to non-employee directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board and shall be subject to such terms and conditions as shall be determined by the Board. ARTICLE VII CHANGE IN CONTROL 7.1Change in Control. Except as otherwise determined by the Committee at the time of grant of an award, upon a Change in Control of the Company, all outstanding Stock Options and SARs shall become vested and exercisable; all restrictions on Restricted Stock shall lapse; all performance goals shall be deemed achieved at target levels and all other terms and conditions met; all Performance Stock shall be delivered; all Performance Units shall be paid out as promptly as practicable; all Annual Management Incentive Awards shall be paid out based on the consolidated operating earnings of the immediately preceding year or such other method of payment as may be determined by the Committee at the time of award or thereafter but prior to the Change in Control; and all Other Stock or Cash Awards shall be delivered or paid. A “Change in Control” shall mean: A Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (a) (i) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities (other than the Company or any employee benefit plan of the Company; and, for purposes of the Plan, no Change in Control shall be deemed to have occurred as a result of the “beneficial ownership,” or changes therein, of the Company’s securities by either of the foregoing), and, (ii) individuals who, as of March 5, 2003, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the stockholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the members of the Board, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) shall be considered as though such person were a member of the Incumbent Board, (b) there shall be consummated (i) any consolidation or merger of the Company pursuant to which shares of Common Stock would be converted into or exchanged for cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger have, directly or indirectly, at least a 50% ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than any such transaction with entities in which the holders of the Company Common Stock, directly or indirectly, have at least a 50% ownership interest, (c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (d) as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board), contested election or substantial stock accumulation (“Control Transaction”), the members of the Board immediately prior to the first public announcement relating to such Control Transaction shall thereafter cease to constitute a majority of the Board. The Change in Control Consequences shall apply to any stock options or other awards under the Plan held by an employee of a Subsidiary if: (a) any person or group becomes the beneficial owner, directly or indirectly of securities of the Subsidiary representing more than 50% of the combined voting power of the Subsidiary’s then outstanding securities; (b) the Subsidiary is combined by merger, share exchange, consolidation or otherwise with another corporation and as a result of such combination, less than 50% of the outstanding securities of the surviving or resulting corporation are owned by the Company; or (c) the Subsidiary sells, leases, or otherwise transfers all or substantially all of its properties or assets to an entity less than 50% of the outstanding securities of which are owned in aggregate by the Company. ARTICLE VIII ADJUSTMENT 8.1Adjustment Provisions. (a) If the Company shall at any time change the number of issued shares of Common Stock by stock dividend or stock split, the total number of shares reserved for issuance under the Plan, the maximum number of shares which may be made subject to an award in any calendar year, and the number of shares covered by each outstanding award and the price therefore, if any, shall be equitably adjusted by the Committee. (b) Without affecting the number of shares reserved or available hereunder the Board or the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate. (c) In the event of any merger, consolidation or reorganization of the Company with or into another corporation, other than a merger, consolidation or reorganization which does not result in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof, there shall be substituted, on an equitable basis as determined by the Committee in its discretion, for each share of Common Stock then subject to a benefit granted under the Plan, the number and kind of shares of stock, other securities, cash or other property to which holders of Common Stock of the Company will be entitled pursuant to the transaction. If any amounts payable to a participant pursuant to the Plan are deemed to be “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code, the Committee may authorize the Company to pay to such participant in addition to any amounts payable pursuant to the Plan an amount which — after all federal, state and local taxes imposed on the participant with respect to such amount are subtracted therefrom — is equal to the excise taxes imposed on such excess parachute payment pursuant to Section 4999 of the Code. ARTICLE IX NONTRANSFERABILITY 9.1Nontransferability. Each benefit granted under the Plan shall not be Transferable otherwise than by will or the laws of descent and distribution and each Stock Option and SAR shall be exercisable during the participant’s lifetime only by the participant or, in the event of Disability, by the participant’s personal representative. In the event of the death of a participant, exercise of any benefit or payment with respect to any benefit shall be made only by or to the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the benefit shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, at its discretion, the Committee may permit the Transfer of a Stock Option by the participant, subject to such terms and conditions as may be established by the Committee. ARTICLE X AMENDMENT AND TERMINATION 10.1 The terms and conditions applicable to any stock option or other award may be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. The Board may amend the Plan from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the participant’s consent. No amendment of the Plan shall be made without stockholder approval, if such amendment increases the number of shares of Common Stock reserved under the Plan or the maximum number of shares which may be subject to awards to any participant in any calendar year or if stockholder approval is otherwise required by law or regulation or stock exchange rule. ARTICLE XI GENERAL PROVISIONS 11.1Successor. All obligations of the Company under the Plan, with respect to awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 11.2Unfunded Status of Plan. This Plan is intended to be unfunded. With respect to any payments as to which a participant has a fixed and vested interest but which are not yet made to a participant by the Company, nothing contained herein shall give any such participant any rights that are greater than those of a general creditor of the Company. 11.3No Right to Employment. Neither this Plan nor the grant of any award hereunder shall give any participant or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time. 11.4No Assignment of Benefits. No award under the Plan shall, except as otherwise specifically provided hereunder or by law, be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. 11.5Taxes. The Company shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan after giving the person entitled to receive such payment or delivery notice as far in advance as practicable, and the Company may defer making payment or delivery as to any award if any such tax is payable until indemnified to its satisfaction. The Committee may, in its discretion and subject to such rules as it may adopt, permit a participant to pay all or a portion of any withholding taxes arising in connection with the exercise of a Nonqualified Stock Option or receipt of shares under any other Benefit, by electing to have the Company withhold shares having a Fair Market Value equal to the minimum amount required to be withheld. 11.6Deferral Arrangements. The Committee, in its sole discretion, may permit a participant to have: (a) amounts that otherwise would be paid to the participant as a result of the exercise or settlement of an award under the Plan credited to a deferred compensation account established for the participant by the Committee on the Company’s books of account; (b) shares of Common Stock that would otherwise be delivered to the participant as a result of the exercise or settlement of an award under the Plan (i) converted into an equal number of Stock Units (as described below) or (ii) converted into amounts credited to a deferred compensation account established for the participant by the Committee on the Company’s books of account (such amounts to be determined by reference to the Fair Market Value of such shares as of the date upon which they would otherwise have been delivered to the participant); or (c) shares of Common Stock held by a participant subject to restrictions transferred to the Company in exchange for an equal number of Stock Units subject to the same restrictions. A deferred compensation account established hereunder may be credited with interest or other forms of investment return as determined by the Committee. A participant for whom such an account is established or to whom Stock Units are issued shall have no rights other than those of a general creditor of the Company and such account or Stock Units shall represent an unfunded and unsecured obligation of the Company subject to the terms and conditions of the applicable agreement between the participant and the Company. Each Stock Unit shall represent an obligation of the Company to issue a share of Company Common Stock to the participant at an agreed-upon date in the future. Each Stock Unit shall be fully vested and carry with it the right to dividend equivalents. Such right will entitle the participant to be credited with an amount equal to any cash dividends the participant would have received had the participant owned a number of shares of common stock equal to the Stock Units. 11.7Effect of Merger or Reorganization. In the event that the Company is a party to a merger or other reorganization, the impact of the merger or other reorganization on outstanding awards shall be determined by the agreement of merger or reorganization. Such agreement shall provide for (a) continuation of the outstanding awards; (b) assumption of the outstanding awards by the surviving corporation or its parent or subsidiary; (c) substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding awards; (d) full exerciseability or vesting and accelerated expiration of the outstanding awards; or (e) settlement of the intrinsic value of the outstanding awards in cash or cash equivalents in connection with the cancellation of such awards. Such agreement shall not be required to treat all awards or all participants in the same manner. 11.8Governing Law. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (without regard to applicable Delaware principles of conflict of laws). ARTICLE XII EFFECTIVE DATE AND STOCKHOLDER APPROVAL The Plan was adopted by the Board of Directors on March 5th, 2003, subject to stockholder approval. The Plan and any benefits granted thereunder shall be null and void if stockholder approval is not obtained at the next annual meeting of stockholders. SOLICITATION OF PROXIES Proxies may be solicited on behalf of the Board of Directors by mail, telephone, telegraph, or in person, and solicitation costs will be paid by ProQuest. Copies of proxy material and of the 2003 Annual Report containing our Form 10-K for 2003 will be supplied to brokers, dealers, banks, and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners. ADVANCE REGISTRATION FORM The Committee shall report its actions and recommendations to the Board after each committee meeting and shall conduct and present to the Board any annual performance evaluation of the Committee.
The Committee shall review at least annually the adequacy of this charter and recommend any proposed changes to the Board for approval.
Annual MeetingRESERVED SHARES
5.1Shares Available under the Plan. The number of Shareholdersshares of Common Stock available for awards under the Plan shall be the sum of the following amounts: (a) 969,100 shares; which includes 931,400 shares reserved under the Company’s 1995 Stock Option Plan as amended, but not subject to existing options and 37,700 shares reserved under the Company’s Non-Employee Directors Plan as amended, but not subject to existing options; (b) any shares of Common Stock subject to an award hereunder or under any prior stock incentive plan of the Company if there is a lapse, forfeiture, expiration or termination of any such award; (c) the number of shares of Common Stock exchanged by an optionee as full or partial payment to the Company of the exercise price under any stock option exercised under the Plan or any prior stock incentive plan of the Company; and (d) the number of shares of Common Stock retained by the Company pursuant to a Participant’s tax withholding election or exchanged by a participant to satisfy his or her tax withholding obligations as permitted by Section 11.5 hereof. All of these shares may be either authorized but unissued or reacquired shares. Under the Plan, no participant may receive in any calendar year (i) Stock Options relating to more than 500,000 shares, (ii) Restricted Stock that is subject to the attainment of Performance Goals of Section 6.9 hereof relating to more than 500,000 shares, (iii) Stock Appreciation Rights relating to more than 500,000 shares, or (iv) Performance Shares relating to more than 200,000 shares. The shares reserved for issuance and the limitations set forth above shall be subject to adjustment in accordance with Section 8.1 hereof. All of the available shares may, but need not, be issued pursuant to the exercise of incentive stock options. ARTICLE VI 8:00 a.m.TYPES OF BENEFITS
6.1Types of Benefits. Benefits under the Plan shall consist of Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Stock, Performance Units, Annual Management Incentive Awards and Other Stock or Cash Awards, all as described below. 6.2Stock Options. Stock options (“Stock Options”) may be granted to participants, at any time as determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an Incentive Stock Option. The option price for each option shall be determined by the Committee but shall not be less than 100% of the Fair Market Value of the Company’s Common Stock on the date the option is granted. Each option shall expire at such time as the Committee shall determine at the time of grant. Options shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine; provided, however, that no option shall be exercisable later than the tenth anniversary of its grant. The option price, upon exercise of any option, shall be payable to the Company in full by: (a) cash payment or its equivalent, (b) tendering previously acquired shares (held for at least six months) having a fair market value at the time of exercise equal to the option price, (c) certification of ownership of such previously acquired shares, (d) delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to the Company, provided, however, that the Company shall not be obligated to issue the Common Stock to the participant or to the broker until it has received payment of the exercise price; and (e) such other methods of payment as the Committee, at its discretion, deems appropriate. In no event shall the Committee cancel any outstanding Stock Option for the purpose of reissuing the option to the participant at a lower exercise price or reduce the option price of an outstanding option without stockholder approval. 6.3Stock Appreciation Rights. Subject to the terms of the Plan, Stock Appreciation Rights (“SARs”) may be granted to participants at any time as determined by the Committee. An SAR may be granted in tandem with a Stock Option granted under this Plan or on a free-standing basis. The grant price of tandem SAR shall be equal to the option price of the related option. The grant price of a free-standing SAR shall be equal to the Fair Market Value of the Company’s Common Stock on the date of its grant. An SAR may be exercised upon such terms and conditions and for the term as the Committee in its sole discretion determines; provided, however, that the term shall not exceed the option term in the case of a tandem SAR or ten years in the case of a free standing SAR. Upon exercise of an SAR, the participant shall be entitled to receive payment from the Company in cash or stock, at the discretion of the Committee, in an amount determined by multiplying the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the grant price of the SAR by the number of shares with respect to which the SAR is exercised. 6.4Restricted Stock. Restricted Stock may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock shall be subject to such restrictions as the Committee determines, including, without limitation, any of the following: (a) a prohibition against Transfer of the shares of Restricted Stock for a specified period; or (b) a requirement that the holder of Restricted Stock forfeit (or in the case of shares sold to the participant resell to the Company at cost) such shares in the event of termination of employment during the period of restriction. (c) vesting on the basis of the Performance Goals set forth in Section 6.9. All restrictions shall expire at such times as the Committee shall specify. 6.5Performance Stock. The Committee shall designate the participants to whom long-term performance stock (“Performance Stock”) is to be awarded and determine the number of shares, the length of the performance period and the other terms and conditions of each such award. Each award of Performance Stock shall entitle the participant to a payment in the form of shares of Common Stock upon the attainment of performance goals and other terms and conditions specified by the Committee. Notwithstanding satisfaction of any performance goals, the number of shares issued under a Performance Stock award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the number of shares earned upon satisfaction of any Performance Goals by any participant who is a Covered Employee (as defined in Section 162(m) of the Code). The Committee may, in its discretion, make a cash payment equal to the Fair Market Value of shares of Common Stock otherwise required to be issued to a participant pursuant to a Performance Stock award. 6.6Performance Units. Subject to the terms of the Plan, the Committee shall designate the participants to whom long-term performance units (“Performance Units”) are to be awarded and determine the number of units and the terms and conditions of each such award. Each Performance Unit award shall entitle the participant to a payment in cash upon the attainment of Performance Goals and other terms and conditions specified by the Committee. Notwithstanding the satisfaction of any Performance Goals, the amount to be paid under a Performance Unit award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the amount earned under Performance Unit awards upon satisfaction of any performance goal by any participant who is a Covered Employee and the maximum amount earned under any such award by a Covered Employee in any calendar year may not exceed $1,000,000. The Committee may, in its discretion, substitute actual shares of Common Stock equal in Fair Market Value to the cash payment otherwise required to be made to a participant pursuant to a Performance Unit award. 6.7Annual Management Bonuses. The Committee may award annual management incentive program bonuses to Participants upon achievement of such terms and conditions as the Committee determines appropriate. Annual management incentive bonuses shall consist of monetary payments earned in whole or in part if certain performance goals established for a specified fiscal year are achieved during that year. Each year the Committee shall establish (a) the performance criteria and level of achievement related to these criteria upon which the amount of the award payment shall be based, (b) the timing of any payment earned by virtue of performance, (c) restrictions on the Transfer of the award prior to actual payment, (d) forfeiture provisions, and (e) such further terms and conditions, in each case not inconsistent with the Plan. The maximum amount payable to any Participant as an annual management incentive program award intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall not exceed $2,000,000. The Committee shall establish the performance criteria and level of achievement related to the criteria upon which the amount of any award payment shall be based. Notwithstanding anything to the contrary herein, the performance criteria for any annual management incentive bonus that is intended by the Committee to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall be a measure based solely on one or more Performance Criteria (as defined in 6.9 below) selected by the Committee and specified within the first 90 days of the performance period. The Committee shall certify the extent to which the Performance Criteria have been satisfied, and the amount payable as a result thereof, prior to payment of any bonus that is intended by the Committee to satisfy the requirements for “performance-based compensation” under Code Section 162 (m). 6.8Other Stock or Cash Awards. In addition to the incentives described in sections 6.2 through 6.7 above, the Committee may grant other incentives payable in cash or in Common Stock under the Plan as it determines to be in the best interests of the Company and subject to such other terms and conditions as it deems appropriate. 6.9Performance Goals. Awards of Restricted Stock, Performance Stock, Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Internal Revenue Code, including, but not limited to, cash flow; cost; ratio of debt to debt plus equity; profit before tax; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; price of Company Stock; return on net assets, equity or stockholders’ equity; market share; or total return to stockholders (“Performance Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company. Any Performance Criteria may include or exclude Extraordinary Items. “Extraordinary Items” shall mean (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) the impact of changes in tax or accounting regulations or laws, or (iv) the effect of a merger or acquisition. Performance Criteria shall be calculated in accordance with the Company’s financial statements, generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award which is consistently applied and identified in the audited financial statements, including footnotes, or the Management Discussion and Analysis section of the Company’s annual report. However, the Committee may not in any event increase the amount of compensation payable to a Covered Employee upon the attainment of a Performance Goal. 6.10Director Fees. A non-employee director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of Stock Options, Restricted Stock or Stock Units (as described in Section 11.6) or a combination thereof as determined by the Board. The number of shares of Stock Options, Restricted Stock or Stock Units to be granted to non-employee directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board and shall be subject to such terms and conditions as shall be determined by the Board. ARTICLE VII May 21,CHANGE IN CONTROL
7.1Change in Control. Except as otherwise determined by the Committee at the time of grant of an award, upon a Change in Control of the Company, all outstanding Stock Options and SARs shall become vested and exercisable; all restrictions on Restricted Stock shall lapse; all performance goals shall be deemed achieved at target levels and all other terms and conditions met; all Performance Stock shall be delivered; all Performance Units shall be paid out as promptly as practicable; all Annual Management Incentive Awards shall be paid out based on the consolidated operating earnings of the immediately preceding year or such other method of payment as may be determined by the Committee at the time of award or thereafter but prior to the Change in Control; and all Other Stock or Cash Awards shall be delivered or paid. A “Change in Control” shall mean: A Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (a) (i) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities (other than the Company or any employee benefit plan of the Company; and, for purposes of the Plan, no Change in Control shall be deemed to have occurred as a result of the “beneficial ownership,” or changes therein, of the Company’s securities by either of the foregoing), and, (ii) individuals who, as of March 5, 2003, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the stockholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the members of the Board, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) shall be considered as though such person were a member of the Incumbent Board, (b) there shall be consummated (i) any consolidation or merger of the Company pursuant to which shares of Common Stock would be converted into or exchanged for cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger have, directly or indirectly, at least a 50% ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than any such transaction with entities in which the holders of the Company Common Stock, directly or indirectly, have at least a 50% ownership interest, (c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (d) as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board), contested election or substantial stock accumulation (“Control Transaction”), the members of the Board immediately prior to the first public announcement relating to such Control Transaction shall thereafter cease to constitute a majority of the Board. The Change in Control Consequences shall apply to any stock options or other awards under the Plan held by an employee of a Subsidiary if: (a) any person or group becomes the beneficial owner, directly or indirectly of securities of the Subsidiary representing more than 50% of the combined voting power of the Subsidiary’s then outstanding securities; (b) the Subsidiary is combined by merger, share exchange, consolidation or otherwise with another corporation and as a result of such combination, less than 50% of the outstanding securities of the surviving or resulting corporation are owned by the Company; or (c) the Subsidiary sells, leases, or otherwise transfers all or substantially all of its properties or assets to an entity less than 50% of the outstanding securities of which are owned in aggregate by the Company. ARTICLE VIII ADJUSTMENT 8.1Adjustment Provisions. (a) If the Company shall at any time change the number of issued shares of Common Stock by stock dividend or stock split, the total number of shares reserved for issuance under the Plan, the maximum number of shares which may be made subject to an award in any calendar year, and the number of shares covered by each outstanding award and the price therefore, if any, shall be equitably adjusted by the Committee. (b) Without affecting the number of shares reserved or available hereunder the Board or the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate. (c) In the event of any merger, consolidation or reorganization of the Company with or into another corporation, other than a merger, consolidation or reorganization which does not result in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof, there shall be substituted, on an equitable basis as determined by the Committee in its discretion, for each share of Common Stock then subject to a benefit granted under the Plan, the number and kind of shares of stock, other securities, cash or other property to which holders of Common Stock of the Company will be entitled pursuant to the transaction. If any amounts payable to a participant pursuant to the Plan are deemed to be “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code, the Committee may authorize the Company to pay to such participant in addition to any amounts payable pursuant to the Plan an amount which — after all federal, state and local taxes imposed on the participant with respect to such amount are subtracted therefrom — is equal to the excise taxes imposed on such excess parachute payment pursuant to Section 4999 of the Code. ARTICLE IX NONTRANSFERABILITY 9.1Nontransferability. Each benefit granted under the Plan shall not be Transferable otherwise than by will or the laws of descent and distribution and each Stock Option and SAR shall be exercisable during the participant’s lifetime only by the participant or, in the event of Disability, by the participant’s personal representative. In the event of the death of a participant, exercise of any benefit or payment with respect to any benefit shall be made only by or to the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the benefit shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, at its discretion, the Committee may permit the Transfer of a Stock Option by the participant, subject to such terms and conditions as may be established by the Committee. ARTICLE X AMENDMENT AND TERMINATION 10.1 The terms and conditions applicable to any stock option or other award may be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. The Board may amend the Plan from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the participant’s consent. No amendment of the Plan shall be made without stockholder approval, if such amendment increases the number of shares of Common Stock reserved under the Plan or the maximum number of shares which may be subject to awards to any participant in any calendar year or if stockholder approval is otherwise required by law or regulation or stock exchange rule. ARTICLE XI GENERAL PROVISIONS 11.1Successor. All obligations of the Company under the Plan, with respect to awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 11.2Unfunded Status of Plan. This Plan is intended to be unfunded. With respect to any payments as to which a participant has a fixed and vested interest but which are not yet made to a participant by the Company, nothing contained herein shall give any such participant any rights that are greater than those of a general creditor of the Company. 11.3No Right to Employment. Neither this Plan nor the grant of any award hereunder shall give any participant or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time. 11.4No Assignment of Benefits. No award under the Plan shall, except as otherwise specifically provided hereunder or by law, be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. 11.5Taxes. The Company shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan after giving the person entitled to receive such payment or delivery notice as far in advance as practicable, and the Company may defer making payment or delivery as to any award if any such tax is payable until indemnified to its satisfaction. The Committee may, in its discretion and subject to such rules as it may adopt, permit a participant to pay all or a portion of any withholding taxes arising in connection with the exercise of a Nonqualified Stock Option or receipt of shares under any other Benefit, by electing to have the Company withhold shares having a Fair Market Value equal to the minimum amount required to be withheld. 11.6Deferral Arrangements. The Committee, in its sole discretion, may permit a participant to have: (a) amounts that otherwise would be paid to the participant as a result of the exercise or settlement of an award under the Plan credited to a deferred compensation account established for the participant by the Committee on the Company’s books of account; (b) shares of Common Stock that would otherwise be delivered to the participant as a result of the exercise or settlement of an award under the Plan (i) converted into an equal number of Stock Units (as described below) or (ii) converted into amounts credited to a deferred compensation account established for the participant by the Committee on the Company’s books of account (such amounts to be determined by reference to the Fair Market Value of such shares as of the date upon which they would otherwise have been delivered to the participant); or (c) shares of Common Stock held by a participant subject to restrictions transferred to the Company in exchange for an equal number of Stock Units subject to the same restrictions. A deferred compensation account established hereunder may be credited with interest or other forms of investment return as determined by the Committee. A participant for whom such an account is established or to whom Stock Units are issued shall have no rights other than those of a general creditor of the Company and such account or Stock Units shall represent an unfunded and unsecured obligation of the Company subject to the terms and conditions of the applicable agreement between the participant and the Company. Each Stock Unit shall represent an obligation of the Company to issue a share of Company Common Stock to the participant at an agreed-upon date in the future. Each Stock Unit shall be fully vested and carry with it the right to dividend equivalents. Such right will entitle the participant to be credited with an amount equal to any cash dividends the participant would have received had the participant owned a number of shares of common stock equal to the Stock Units. 11.7Effect of Merger or Reorganization. In the event that the Company is a party to a merger or other reorganization, the impact of the merger or other reorganization on outstanding awards shall be determined by the agreement of merger or reorganization. Such agreement shall provide for (a) continuation of the outstanding awards; (b) assumption of the outstanding awards by the surviving corporation or its parent or subsidiary; (c) substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding awards; (d) full exerciseability or vesting and accelerated expiration of the outstanding awards; or (e) settlement of the intrinsic value of the outstanding awards in cash or cash equivalents in connection with the cancellation of such awards. Such agreement shall not be required to treat all awards or all participants in the same manner. 11.8Governing Law. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (without regard to applicable Delaware principles of conflict of laws). ARTICLE XII EFFECTIVE DATE AND STOCKHOLDER APPROVAL The Ritz-Carlton Hotel,Plan was adopted by the Board of Directors on March 5th, 2003, subject to stockholder approval. The Plan and any benefits granted thereunder shall be null and void if stockholder approval is not obtained at the next annual meeting of stockholders. 600 Stockton Street, San Francisco, CaliforniaSOLICITATION OF PROXIES
CUT AT DOTTED LINEProxies may be solicited on behalf of the Board of Directors by mail, telephone, telegraph, or in person, and solicitation costs will be paid by ProQuest. Copies of proxy material and of the 2003 Annual Report containing our Form 10-K for 2003 will be supplied to brokers, dealers, banks, and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners.
ADVANCE REGISTRATION FORM Please send your completed and signed proxy form in the enclosed envelope. Include this Advance Registration Form in the envelope if you plan to attend the Annual Meeting of Shareholders on May 21, 2003.
Attendance at the Annual Meeting is limited to ProQuest Company shareholders or their named representative. We reserve the right to limit the number of representatives who may attend the Annual Meeting.
(PLEASE PRINT)
Shareholder:
Name:
Address:
(Admission card will be available at the Annual Meeting)
2003 PROQUEST STRATEGIC PERFORMANCE PLAN
ARTICLE I
PURPOSE
1.1Purpose. The purposes of the 2003 ProQuest Strategic Performance Plan (the “Plan”) are (i) to encourage outstanding individuals to accept or continue employment with ProQuest Company (the “Company”) and its Subsidiaries or to serve as directors of the Company, (ii) to furnish maximum incentive to those persons to improve operations and increase profits and (iii) to strengthen the mutuality of interest between those persons and the Company’s stockholders by providing them stock options and other stock and cash incentives.
ARTICLE II
DEFINITIONS
2.1 “Board” shall mean the Board of Directors of the Company.
2.2 “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation.
2.3 “Committee” shall mean the Committee as defined in Section 3.1 hereof.
2.4 “Common Stock” shall mean the Common Stock (without par value) of the Company.
2.5 “Disability” shall mean a disability qualifying the participant to receive benefits under the Company’s or a Subsidiary’s long-term disability plan. Disability shall be deemed to occur on the date benefit payments begin.
2.6 “Fair Market Value” unless otherwise required by any applicable provision of the Code, or any regulations issued hereunder, shall mean as of any date the closing price of the Common Stock on the New York Stock Exchange Composite Transaction List as reported in the Wall Street Journal, Midwest Edition for such day or if the Common Stock was not traded on such day, then the next preceding day on which the Common Stock was traded.
2.7 “Incentive Stock Option” shall mean any stock option awarded under the Plan intended to be, and designated as, an incentive stock option within the meaning of Section 422 of the Code or any successor provision.
2.8 “Nonqualified Stock Option” shall mean any stock option awarded under the Plan that is not an Incentive Stock Option.
2.9 “Retirement” shall mean any termination of employment by an employee (other than by death or Disability) who is at least 55 years of age after at least 7 years of
employment by the Company and/or a Subsidiary; or as otherwise determined by the Committee in its sole discretion.
2.10 “Subsidiary” shall mean any corporation (or partnership, joint venture or other enterprise) (i) of which the Company owns or controls, directly or indirectly, 50% or more of the outstanding shares of stock normally entitled to vote for the election of Directors (or comparable equity participations and voting power) or (ii) which the Company controls by contract or other means. “Control” means the power to direct or cause the direction of the management and policies of a corporation, partnership, joint venture or other enterprise.
2.11 “Termination of Employment” shall mean the termination of a participant’s employment with the Company or any Subsidiary. A Termination of Employment of a participant employed by a Subsidiary shall also be deemed to occur if the Subsidiary ceases to be a Subsidiary and the participant does not immediately thereafter become an employee of the Company or another Subsidiary.
2.12 “Transfer” shall mean anticipation, alienation, attachment, sale, assignment, pledge, encumbrance, charge or other disposition; and the terms “Transferred” or “Transferable” shall have corresponding meanings.
ARTICLE III
ADMINISTRATION
3.1 The Committee. The Plan shall be administered by a committee (“Committee”) consisting of two or more directors of the Company appointed by the Board to satisfy such requirements as:
(a) the Securities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16-3 or its successor under the Securities Exchange Act of 1934 (the “1934 Act”);
(b) the New York Stock Exchange may establish pursuant to its rule-making authority; and
(c) the Internal Revenue Service may establish for outside directors acting under plans intended to qualify for exemption under Section 162(m) of the Internal Revenue Code of 1986, as amended.
The initial Committee shall be the Compensation Committee of the Board.
The Board may also appoint a second committee comprised of one or more directors of the Company who need not satisfy the requirements set forth above to administer the Plan with respect to participants who are not considered officers or directors of the Company under Section 16 of the 1934 Act. The Committee may also authorize the Chief Executive Officer of the Company to select employees to participate in the Plan and to determine the number of option shares and other rights to be granted to
such participants who are not considered officers under Section 16 of the 1934 Act. Any reference in the Plan to the Committee shall include the second committee or the Chief Executive Officer in the context of awards to such participants.
3.2 Authority. The Committee shall have full power to select key employees to whom awards are granted; to determine the size and types of awards and their terms and conditions; to construe and interpret the Plan; to establish and amend the rules for the Plan administration; and to make all other determinations which may be necessary or advisable for the administration of the Plan. All determinations of the Committee shall be final and conclusive on all persons, including the Company, its stockholders and participants, and their estates and beneficiaries.
ARTICLE IV
PARTICIPANTS
4.1 Participants. Participants may consist of all employees of the Company and its Subsidiaries and all non-employee directors of the Company. Designation of a participant in any year shall not require the Committee to designate that person to receive a benefit in any other year or to receive the same type or amount of benefit as granted to the participant in any other year or as granted to any other participant in any year. The Committee shall consider all factors that it deems relevant in selecting participants and in determining the type and amount of their respective benefits.
ARTICLE V
RESERVED SHARES 5.1Shares Available under the PlanPlan.. The number of shares of Common Stock available for awards under the Plan shall be the sum of the following amounts: (a) 969,100 shares; which includes 931,400 shares reserved under the Company’s 1995 Stock Option Plan as amended, but not subject to existing options and 37,700 shares reserved under the Company’s Non-Employee Directors Plan as amended, but not subject to existing options; (b) any shares of Common Stock subject to an award hereunder or under any prior stock incentive plan of the Company if there is a lapse, forfeiture, expiration or termination of any such award; (c) the number of shares of Common Stock exchanged by an optionee as full or partial payment to the Company of the exercise price under any stock option exercised under the Plan or any prior stock incentive plan of the Company; and (d) the number of shares of Common Stock retained by the Company pursuant to a Participant’s tax withholding election or exchanged by a participant to satisfy his or her tax withholding obligations as permitted by Section 11.5 hereof. All of these shares may be either authorized but unissued or reacquired shares. Under the Plan, no participant may receive in any calendar year (i) Stock Options relating to more than 500,000 shares, (ii) Restricted Stock that is subject to the attainment of Performance Goals of Section 6.9 hereof relating to more than 500,000 shares, (iii) Stock Appreciation Rights relating to more than 500,000 shares, or (iv) Performance Shares relating to more than 200,000 shares. The shares reserved for issuance and the limitations set forth above shall be subject to adjustment in accordance with Section 8.1 hereof. All of the available shares may, but need not, be issued pursuant to the exercise of incentive stock options. ARTICLE VI TYPES OF BENEFITS 6.1Types of Benefits. Benefits under the Plan shall consist of Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Stock, Performance Units, Annual Management Incentive Awards and Other Stock or Cash Awards, all as described below. 6.2Stock OptionsOptions.. Stock options (“Stock Options”) may be granted to participants, at any time as determined by the Committee. The Committee shall determine the number of shares subject to each option and whether the option is an Incentive Stock Option. The option price for each option shall be determined by the Committee but shall not be less than 100% of the Fair Market Value of the Company’s Common Stock on the date the option is granted. Each option shall expire at such time as the Committee shall determine at the time of grant. Options shall be exercisable at such time and subject to such terms and conditions as the Committee shall determine; provided, however, that no option shall be exercisable later than the tenth anniversary of its grant. The option price, upon exercise of any option, shall be payable to the Company in full by: (a) cash payment or its equivalent, (b) tendering previously acquired shares (held for at least six months) having a fair market value at the time of exercise equal to the option price, (c) certification of ownership of such previously acquired shares, (d) delivery of a properly executed exercise notice, together with irrevocable instructions to a broker to promptly deliver to the Company the amount of sale proceeds from the option shares or loan proceeds to pay the exercise price and any withholding taxes due to the Company, provided, however, that the Company shall not be obligated to issue the Common Stock to the participant or to the broker until it has received payment of the exercise price; and (e) such other methods of payment as the Committee, at its discretion, deems appropriate. In no event shall the Committee cancel any outstanding Stock Option for the purpose of reissuing the option to the participant at a lower exercise price or reduce the option price of an outstanding option without stockholder approval. 6.3Stock Appreciation RightsRights.. Subject to the terms of the Plan, Stock Appreciation Rights (“SARs”) may be granted to participants at any time as determined by the Committee. An SAR may be granted in tandem with a Stock Option granted under this Plan or on a free-standing basis. The grant price of tandem SAR shall be equal to the option price of the related option. The grant price of a free-standing SAR shall be equal to the Fair Market Value of the Company’s Common Stock on the date of its grant. An SAR may be exercised upon such terms and conditions and for the term as the Committee in its sole discretion determines; provided, however, that the term shall not exceed the option term in the case of a tandem SAR or ten years in the case of a free standing SAR. Upon exercise of an SAR, the participant shall be entitled to receive payment from the Company in cash or stock, at the discretion of the Committee, in an amount determined by multiplying the excess of the Fair Market Value of a share of Common Stock on the date of exercise over the grant price of the SAR by the number of shares with respect to which the SAR is exercised. 6.4Restricted StockStock.. Restricted Stock may be awarded or sold to participants under such terms and conditions as shall be established by the Committee. Restricted Stock shall be subject to such restrictions as the Committee determines, including, without limitation, any of the following: (a) a prohibition against Transfer of the shares of Restricted Stock for a specified period; or (b) a requirement that the holder of Restricted Stock forfeit (or in the case of shares sold to the participant resell to the Company at cost) such shares in the event of termination of employment during the period of restriction. (c) vesting on the basis of the Performance Goals set forth in Section 6.9. All restrictions shall expire at such times as the Committee shall specify. 6.5Performance StockStock.. The Committee shall designate the participants to whom long-term performance stock (“Performance Stock”) is to be awarded and determine the number of shares, the length of the performance period and the other terms and conditions of each such award. Each award of Performance Stock shall entitle the participant to a payment in the form of shares of Common Stock upon the attainment of performance goals and other terms and conditions specified by the Committee. Notwithstanding satisfaction of any performance goals, the number of shares issued under a Performance Stock award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the number of shares earned upon satisfaction of any Performance Goals by any participant who is a Covered Employee (as defined in Section 162(m) of the Code). The Committee may, in its discretion, make a cash payment equal to the Fair Market Value of shares of Common Stock otherwise required to be issued to a participant pursuant to a Performance Stock award. 6.6 Performance UnitsPerformance Units.. Subject to the terms of the Plan, the Committee shall designate the participants to whom long-term performance units (“Performance Units”) are to be awarded and determine the number of units and the terms and conditions of each such award. Each Performance Unit award shall entitle the participant to a payment in cash upon the attainment of Performance Goals and other terms and conditions specified by the Committee. Notwithstanding the satisfaction of any Performance Goals, the amount to be paid under a Performance Unit award may be adjusted by the Committee on the basis of such further consideration as the Committee in its sole discretion shall determine. However, the Committee may not, in any event, increase the amount earned under Performance Unit awards upon satisfaction of any performance goal by any participant who is a Covered Employee and the maximum amount earned under any such award by a Covered Employee in any calendar year may not exceed $1,000,000. The Committee may, in its discretion, substitute actual shares of Common Stock equal in Fair Market Value to the cash payment otherwise required to be made to a participant pursuant to a Performance Unit award. 6.7Annual Management BonusesBonuses.. The Committee may award annual management incentive program bonuses to Participants upon achievement of such terms and conditions as the Committee determines appropriate. Annual management incentive bonuses shall consist of monetary payments earned in whole or in part if certain performance goals established for a specified fiscal year are achieved during that year. Each year the Committee shall establish (a) the performance criteria and level of achievement related to these criteria upon which the amount of the award payment shall be based, (b) the timing of any payment earned by virtue of performance, (c) restrictions on the Transfer of the award prior to actual payment, (d) forfeiture provisions, and (e) such further terms and conditions, in each case not inconsistent with the Plan. The maximum amount payable to any Participant as an annual management incentive program award intended to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall not exceed $2,000,000. The Committee shall establish the performance criteria and level of achievement related to the criteria upon which the amount of any award payment shall be based. Notwithstanding anything to the contrary herein, the performance criteria for any annual management incentive bonus that is intended by the Committee to satisfy the requirements for “performance-based compensation” under Code Section 162(m) shall be a measure based solely on one or more Performance Criteria (as defined in 6.9 below) selected by the Committee and specified within the first 90 days of the performance period. The Committee shall certify the extent to which the Performance Criteria have been satisfied, and the amount payable as a result thereof, prior to payment of any bonus that is intended by the Committee to satisfy the requirements for “performance-based compensation” under Code Section 162 (m). 6.8Other Stock or Cash AwardsAwards.. In addition to the incentives described in sections 6.2 through 6.7 above, the Committee may grant other incentives payable in cash or in Common Stock under the Plan as it determines to be in the best interests of the Company and subject to such other terms and conditions as it deems appropriate. 6.9Performance GoalsGoals.. Awards of Restricted Stock, Performance Stock, Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Internal Revenue Code, including, but not limited to, cash flow; cost; ratio of debt to debt plus equity; profit before tax; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings per share; operating earnings; economic value added; ratio of operating earnings to capital spending; free cash flow; net profit; net sales; price of Company Stock; return on net assets, equity or stockholders’ equity; market share; or total return to stockholders (“Performance Criteria”). Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company. Any Performance Criteria may include or exclude Extraordinary Items. “Extraordinary Items” shall mean (i) extraordinary, unusual and/or non-recurring items of gain or loss, (ii) gains or losses on the disposition of a business, (iii) the impact of changes in tax or accounting regulations or laws, or (iv) the effect of a merger or acquisition. Performance Criteria shall be calculated in accordance with the Company’s financial statements, generally accepted accounting principles, or under a methodology established by the Committee prior to the issuance of an award which is consistently applied and identified in the audited financial statements, including footnotes, or the Management Discussion and Analysis section of the Company’s annual report. However, the Committee may not in any event increase the amount of compensation payable to a Covered Employee upon the attainment of a Performance Goal. 6.10Director FeesFees.. A non-employee director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of Stock Options, Restricted Stock or Stock Units (as described in Section 11.6) or a combination thereof as determined by the Board. The number of shares of Stock Options, Restricted Stock or Stock Units to be granted to non-employee directors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board and shall be subject to such terms and conditions as shall be determined by the Board. ARTICLE VII CHANGE IN CONTROL 7.1Change in ControlControl.. Except as otherwise determined by the Committee at the time of grant of an award, upon a Change in Control of the Company, all outstanding Stock Options and SARs shall become vested and exercisable; all restrictions on Restricted Stock shall lapse; all performance goals shall be deemed achieved at target levels and all other terms and conditions met; all Performance Stock shall be delivered; all Performance Units shall be paid out as promptly as practicable; all Annual Management Incentive Awards shall be paid out based on the consolidated operating earnings of the immediately preceding year or such other method of payment as may be determined by the Committee at the time of award or thereafter but prior to the Change in Control; and all Other Stock or Cash Awards shall be delivered or paid. A “Change in Control” shall mean: A Change in Control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange Act whether or not the Company is then subject to such reporting requirement; provided that, without limitation, such a Change in Control shall be deemed to have occurred if: (a) (i) any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding securities (other than the Company or any employee benefit plan of the Company; and, for purposes of the Plan, no Change in Control shall be deemed to have occurred as a result of the “beneficial ownership,” or changes therein, of the Company’s securities by either of the foregoing), and, (ii) individuals who, as of March 5, 2003, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election, by the stockholders of the Company was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the members of the Board, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the 1934 Act) shall be considered as though such person were a member of the Incumbent Board, (b) there shall be consummated (i) any consolidation or merger of the Company pursuant to which shares of Common Stock would be converted into or exchanged for cash, securities or other property, other than a merger of the Company in which the holders of Common Stock immediately prior to the merger have, directly or indirectly, at least a 50% ownership interest in the outstanding common stock of the surviving corporation immediately after the merger, or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company other than any such transaction with entities in which the holders of the Company Common Stock, directly or indirectly, have at least a 50% ownership interest, (c) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company, or (d) as the result of, or in connection with, any cash tender offer, exchange offer, merger or other business combination, sale of assets, proxy or consent solicitation (other than by the Board), contested election or substantial stock accumulation (“Control Transaction”), the members of the Board immediately prior to the first public announcement relating to such Control Transaction shall thereafter cease to constitute a majority of the Board. The Change in Control Consequences shall apply to any stock options or other awards under the Plan held by an employee of a Subsidiary if: (a) any person or group becomes the beneficial owner, directly or indirectly of securities of the Subsidiary representing more than 50% of the combined voting power of the Subsidiary’s then outstanding securities; (b) the Subsidiary is combined by merger, share exchange, consolidation or otherwise with another corporation and as a result of such combination, less than 50% of the outstanding securities of the surviving or resulting corporation are owned by the Company; or (c) the Subsidiary sells, leases, or otherwise transfers all or substantially all of its properties or assets to an entity less than 50% of the outstanding securities of which are owned in aggregate by the Company. ARTICLE VIII ADJUSTMENT 8.1Adjustment ProvisionsProvisions.. (a) If the Company shall at any time change the number of issued shares of Common Stock by stock dividend or stock split, the total number of shares reserved for issuance under the Plan, the maximum number of shares which may be made subject to an award in any calendar year, and the number of shares covered by each outstanding award and the price therefore, if any, shall be equitably adjusted by the Committee. (b) Without affecting the number of shares reserved or available hereunder the Board or the Committee may authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate. (c) In the event of any merger, consolidation or reorganization of the Company with or into another corporation, other than a merger, consolidation or reorganization which does not result in the outstanding Common Stock being converted into or exchanged for different securities, cash or other property, or any combination thereof, there shall be substituted, on an equitable basis as determined by the Committee in its discretion, for each share of Common Stock then subject to a benefit granted under the Plan, the number and kind of shares of stock, other securities, cash or other property to which holders of Common Stock of the Company will be entitled pursuant to the transaction. If any amounts payable to a participant pursuant to the Plan are deemed to be “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code, the Committee may authorize the Company to pay to such participant in addition to any amounts payable pursuant to the Plan an amount which — after all federal, state and local taxes imposed on the participant with respect to such amount are subtracted therefrom — is equal to the excise taxes imposed on such excess parachute payment pursuant to Section 4999 of the Code. ARTICLE IX NONTRANSFERABILITY 9.1NontransferabilityNontransferability.. Each benefit granted under the Plan shall not be Transferable otherwise than by will or the laws of descent and distribution and each Stock Option and SAR shall be exercisable during the participant’s lifetime only by the participant or, in the event of Disability, by the participant’s personal representative. In the event of the death of a participant, exercise of any benefit or payment with respect to any benefit shall be made only by or to the executor or administrator of the estate of the deceased participant or the person or persons to whom the deceased participant’s rights under the benefit shall pass by will or the laws of descent and distribution. Notwithstanding the foregoing, at its discretion, the Committee may permit the Transfer of a Stock Option by the participant, subject to such terms and conditions as may be established by the Committee. ARTICLE X AMENDMENT AND TERMINATION 10.1 The terms and conditions applicable to any stock option or other award may be amended or modified by mutual agreement between the Company and the participant or such other persons as may then have an interest therein. The Board may amend the Plan from time to time or terminate the Plan at any time. However, no such action shall reduce the amount of any existing award or change the terms and conditions thereof without the participant’s consent. No amendment of the Plan shall be made without stockholder approval, if such amendment increases the number of shares of Common Stock reserved under the Plan or the maximum number of shares which may be subject to awards to any participant in any calendar year or if stockholder approval is otherwise required by law or regulation or stock exchange rule. ARTICLE XI GENERAL PROVISIONS 11.1SuccessorSuccessor.. All obligations of the Company under the Plan, with respect to awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. 11.2Unfunded Status of PlanPlan.. This Plan is intended to be unfunded. With respect to any payments as to which a participant has a fixed and vested interest but which are not yet made to a participant by the Company, nothing contained herein shall give any such participant any rights that are greater than those of a general creditor of the Company. 11.3No Right to EmploymentEmployment.. Neither this Plan nor the grant of any award hereunder shall give any participant or other employee any right with respect to continuance of employment by the Company or any Subsidiary, nor shall there be a limitation in any way on the right of the Company or any Subsidiary by which an employee is employed to terminate his or her employment at any time. 11.4No Assignment of BenefitsBenefits.. No award under the Plan shall, except as otherwise specifically provided hereunder or by law, be subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. 11.5TaxesTaxes.. The Company shall be entitled to withhold the amount of any tax attributable to any amounts payable or shares deliverable under the Plan after giving the person entitled to receive such payment or delivery notice as far in advance as practicable, and the Company may defer making payment or delivery as to any award if any such tax is payable until indemnified to its satisfaction. The Committee may, in its discretion and subject to such rules as it may adopt, permit a participant to pay all or a portion of any withholding taxes arising in connection with the exercise of a Nonqualified Stock Option or receipt of shares under any other Benefit, by electing to have the Company withhold shares having a Fair Market Value equal to the minimum amount required to be withheld. 11.6Deferral Arrangements. The Committee, in its sole discretion, may permit a participant to have: (a) amounts that otherwise would be paid to the participant as a result of the exercise or settlement of an award under the Plan credited to a deferred compensation account established for the participant by the Committee on the Company’s books of account; (b) shares of Common Stock that would otherwise be delivered to the participant as a result of the exercise or settlement of an award under the Plan (i) converted into an equal number of Stock Units (as described below) or (ii) converted into amounts credited to a deferred compensation account established for the participant by the Committee on the Company’s books of account (such amounts to be determined by reference to the Fair Market Value of such shares as of the date upon which they would otherwise have been delivered to the participant); or (c) shares of Common Stock held by a participant subject to restrictions transferred to the Company in exchange for an equal number of Stock Units subject to the same restrictions. A deferred compensation account established hereunder may be credited with interest or other forms of investment return as determined by the Committee. A participant for whom such an account is established or to whom Stock Units are issued shall have no rights other than those of a general creditor of the Company and such account or Stock Units shall represent an unfunded and unsecured obligation of the Company subject to the terms and conditions of the applicable agreement between the participant and the Company. Each Stock Unit shall represent an obligation of the Company to issue a share of Company Common Stock to the participant at an agreed-upon date in the future. Each Stock Unit shall be fully vested and carry with it the right to dividend equivalents. Such right will entitle the participant to be credited with an amount equal to any cash dividends the participant would have received had the participant owned a number of shares of common stock equal to the Stock Units. 11.7Effect of Merger or ReorganizationReorganization.. In the event that the Company is a party to a merger or other reorganization, the impact of the merger or other reorganization on outstanding awards shall be determined by the agreement of merger or reorganization. Such agreement shall provide for (a) continuation of the outstanding awards; (b) assumption of the outstanding awards by the surviving corporation or its parent or subsidiary; (c) substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding awards; (d) full exerciseability or vesting and accelerated expiration of the outstanding awards; or (e) settlement of the intrinsic value of the outstanding awards in cash or cash equivalents in connection with the cancellation of such awards. Such agreement shall not be required to treat all awards or all participants in the same manner. 11.8Governing LawLaw.. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (without regard to applicable Delaware principles of conflict of laws). ARTICLE XII EFFECTIVE DATE AND STOCKHOLDER APPROVAL The Plan was adopted by the Board of Directors on March 5th,5th, 2003, subject to stockholder approval. The Plan and any benefits granted thereunder shall be null and void if stockholder approval is not obtained at the next annual meeting of stockholders. SOLICITATION OF PROXIES Proxies may be solicited on behalf of the Board of Directors by mail, telephone, telegraph, or in person, and solicitation costs will be paid by ProQuest. Copies of proxy material and of the 2003 Annual Report containing our Form 10-K for 2003 will be supplied to brokers, dealers, banks, and voting trustees, or their nominees, for the purpose of soliciting proxies from beneficial owners. ADVANCE REGISTRATION FORM Annual Meeting of Shareholders 8:00 a.m. May 26, 2004 ProQuest Company, 300 N. Zeeb Road, Ann Arbor, Michigan CUT AT DOTTED LINE
ADVANCE REGISTRATION FORM Please send your completed and signed proxy form in the enclosed envelope. Include this Advance Registration Form in the envelope if you plan to attend the Annual Meeting of Shareholders on May 26, 2004. Attendance at the Annual Meeting is limited to ProQuest Company shareholders or their named representative. We reserve the right to limit the number of representatives who may attend the Annual Meeting. (PLEASE PRINT) Shareholder: Name: Address: (Admission card will be available at the Annual Meeting)
YOUR PROXY CARD IS ATTACHED BELOW Please read and follow the instructions carefully and detach and return your completed proxy card in the enclosed postage-paid envelope. DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL | |
PROXY PROQUEST COMPANY PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS ANNUAL MEETING OF SHAREHOLDERS MAY 21, 200326, 2004 The undersigned hereby constitutes and appoints David G. Brown and Gary L. Roubos, and each of them jointly and severally, proxies, with full power of substitution to vote all shares of Common Stock which the undersigned is entitled to vote at the Annual Meeting of Shareholders of ProQuest Company (the “Company”) to be held on May 21, 2003,26, 2004, at the Ritz-Carlton Hotel, 600 Stockton Street, San Francisco, California.headquarters of ProQuest Company, 300 N. Zeeb Road, Ann Arbor, Michigan. The undersigned acknowledges the receipt of Notice of the aforesaid Annual Meeting and Proxy Statement, each dated April 17, 2003,19, 2004, grants authority to any of said proxies, or their substitutes, to act in the absence of others, with all the powers which the undersigned would possess if personally present at such meeting, and hereby ratifies and confirms all that said proxies, or their substitutes, may lawfully do in the undersigned’s name, place and stead. The undersigned instructs said proxies, or either of them, to vote as set forth on the reverse side. | | | | | SEE REVERSE SIDE | | CONTINUED AND TO BE SIGNED ON REVERSE SIDE | | SEE REVERSE SIDE |
PROQUEST COMPANY C/O EQUISERVE TRUST COMPANY, N.A. P.O. BOX 8694 EDISON, NJ 08818-8694 Voter Control Number
Your vote is important. Please vote immediately. | | | | | | | | | | Vote-by-Internet | [LOGO]
| |  | | OR | | Vote-by-Telephone | [LOGO]Call toll-free
| 1-877-PRX-VOTE (1-877-779-8683) | | | |  | 1. Log on to the Internet and go to
http://www.proquestcompany.com | | OR
| | 1. Call toll-free
1-877-PRX-VOTE (1-877-779-8683)
| | | | | | 2. Enter your Voter Control Number listed above and
follow the easy steps outlined on the secured website.
| | | | 2. Enter your Voter Control Number listed
above and follow the easy recorded
instructions.
|
If you vote over the Internet or by telephone, please do not mail your card. DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL | | | | | | | | | | | | | | | | | ZPQUC1 | | x | | Please mark votes as in this example. | | | |  | | #PQU | | | | | | | | | |
x Please mark votes as in this example.
ALL PROXIES SIGNED AND RETURNED WILL BE VOTED OR NOT VOTED IN ACCORDANCE WITH YOUR INSTRUCTIONS, BUT THOSE WITH NO CHOICE SPECIFIED WILL BE VOTED “FOR” EACH OF THE NOMINEES FOR DIRECTOR NAMED BELOW. | | | | | | | | | | | | | | | | | | | | | | | | 1. | | Election of Directors. | | | | | | | | | | | | | | FOR | | AGAINST | | ABSTAIN | Nominees: (01) David Bonderman, (02) David G. Brown,
(03) Alan W. Aldworth, (04) William E. Oberndorf,
(05) James P. Roemer, (06) Gary L. Roubos,
(07) Todd S. Nelson, (08) Linda G. Roberts and
(09) William J. White. | | | | 2. | | Proposal to approve amendments to ProQuest Company’s 2003 Strategic Performance Plan. | | ¨ | | ¨ | | ¨ | | | | | | | | | | | | | | | FOR ALL NOMINEES | | ¨ | | ¨ | | AGAINSTWITHHELD
FROM ALL NOMINEES | | ABSTAIN
| | 3. | | On all other matters which may properly come before the meeting or any adjournment thereof. | 1. Election of Directors.
| | | | | | | | | | | | | | | | | | | | | | | | | Nominees: (01) David Bonderman, (02) David G. Brown, (03) Alan Aldworth, (04) William E. Oberndorf, (05) James P. Roemer, (06) Gary L. Roubos, (07) John H. Scully and (08) William J. White.¨ | | 2. Proposal to approve 2003
ProQuest Strategic
Performance Plan.
| | ¨
| | |
¨
| | ¨
| | FOR ALL
NOMINEES¨
| | WITHHELD FROM
ALL NOMINEES¨
| | 3. Proposal to ratify selection of
KPMG LLP as independent
auditors for the Company.
| | ¨
| | | ¨
| | ¨
| | ¨
For all nominee(s) except as written above | | | | 4. On all other matters which may properly come before the meeting
or any adjournment thereof.
| | | | | | | | | | | | | | | | | | MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | | ¨ | | | | | | | | | | | | | | | | | No Postage Required If This Proxy Is Returned In The Enclosed Envelope And Mailed In The United States. | | | | | | Please sign exactly as name appears hereon. Joint owners should each sign. Persons signing in a representative or fiduciary capacity should add their titles. | | | | | | Please sign below, date and return promptly. |
Signature: Date: Signature: Date:
| | | | | | | | | | Signature: | | Date: | | Signature: | | Date: | | |
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