SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ ] PRELIMINARY PROXY STATEMENT
[X] DEFINITIVE PROXY STATEMENT
[ ] DEFINITIVE ADDITIONAL MATERIALS
[ ] SOLICITING MATERIAL PURSUANT TO SS.240.14A-11(C) OR SS.240.14A-12
KSW, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
JAMES OLIVIERO, ASSISTANT SECRETARY
--------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] $125 PER EXCHANGE ACT RULES 0-11(C)(1)(II), 14A-6(I), OR 14A-6(J)(2).
[ ] $500 PER EACH PARTY TO THE CONTROVERSY PURSUANT TO EXCHANGE ACT RULE
14A-6(I)(3).
[ ] FEE COMPUTED ON TABLE BELOW PER EXCHANGE ACT RULES 14A-6(I)(4) AND 0-11.
1) TITLE OF EACH CLASS OF SECURITIES TO WHICH TRANSACTION APPLIES:
______________________________________________________________
2) AGGREGATE NUMBER OF SECURITIES TO WHICH TRANSACTION APPLIES:
_______________________________________________________________
3) PER UNIT PRICE OR OTHER UNDERLYING VALUE OF TRANSACTION COMPUTED
PURSUANT TO EXCHANGE ACT RULE 0-11:_____________________________
4) PROPOSED MAXIMUM AGGREGATE VALUE OF TRANSACTION:________________
[ ] CHECK BOX IF ANY PART OF THE FEE IS OFFSET AS PROVIDED BY EXCHANGE ACT
RULE 0-11(A)(2) AND IDENTIFY THE FILING FOR WHICH THE OFFSETTING FEE
WAS PAID PREVIOUSLY. IDENTIFY THE PREVIOUS FILING BY REGISTRATION
STATEMENT NUMBER, OR THE FORM OR SCHEDULE AND THE DATE OF ITS FILING.
1) AMOUNT PREVIOUSLY PAID:___________________________________
2) FORM, SCHEDULE OR REGISTRATION STATEMENT NO.:_____________
3) FILING PARTY:_____________________________________________
4) DATE FILED: ______________________________________________
NOTES:
<PAGE>
KSW, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 27, 1996
Dear Fellow Stockholder:
The Annual Meeting of Stockholders of KSW, Inc., a Delaware corporation
(the "Company"), will be held on June 27, 1996 at 2:00 p.m., at the Crowne Plaza
Hotel at LaGuardia Airport, Queens, New York, for the following purposes:
1. To elect two Class I directors, each to serve for a term of three years
until his successor shall have been duly elected and qualified;
2. To approve the adoption by the Company's Board of Directors of the
amendment of the 1995 Stock Option Program of KSW, Inc.;
3. To ratify the appointment of Marden Harrison & Kreuter as independent
auditors of the Company for the year 1996; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on May 24, 1996 will be entitled
to vote at the meeting.
All Stockholders are cordially invited to attend the meeting in person. However,
to assure your representation at the meeting, you are urged to SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED, in order that as many
shares as possible may be represented at the meeting. Any stockholder attending
the meeting may vote in person even if he or she has returned a proxy card.
Sincerely,
/s/ James Oliviero
James Oliviero
Assistant Secretary
Long Island City, New York
Dated: May 24, 1996
<PAGE>
KSW, INC.
37-16 23RD STREET
LONG ISLAND CITY, NEW YORK 11101
(718) 361-6500
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 27, 1996
GENERAL INFORMATION
SOLICITATION OF PROXIES. The accompanying proxy is solicited by and on behalf of
the Board of Directors of KSW, Inc., a Delaware corporation (the "Company"), for
use at the annual meeting of stockholders (the "Meeting") to be held at the
Crowne Plaza Hotel at LaGuardia Airport, Queens, New York, on June 27, 1996, at
2:00 p.m., New York time, and at any and all adjournments thereof.
The cost of solicitation will be borne by the Company. The Company has retained
D.F. King & Co., Inc. to aid in the solicitation of proxies at a fee not
expected to exceed $2,000 plus reasonable expenses. The Company may use the
services of D.F. King & Co., Inc., its directors, officers and other regular
employees to solicit proxies personally or by telephone, and may request
brokers, fiduciaries, custodians and nominees to send proxies, proxy statements
and other material to their principals at the expense of the Company. This proxy
statement and the accompanying proxy are being sent to the stockholders of the
Company on or about May 24, 1996. The annual report of the Company for the year
1995 (which includes the Management's Discussion and Analysis of Financial
Condition and Results of Operations from the Company's Annual Report on Form
10-K) is enclosed herewith.
VOTING RIGHTS. Pursuant to the By-Laws, the Board of Directors has fixed the
time and date for the determination of stockholders entitled to notice of and to
vote at the meeting as of the close of business on May 24, 1996. Accordingly,
only stockholders of record on such date and at such time will be entitled to
vote at the meeting, notwithstanding any transfer of any stock on the books of
the Company thereafter.
At the close of business on May 24, 1996, the Company had outstanding 5,458,082
shares of Common Stock, $.01 par value per share (the "KSWI Common Stock"), each
of which entitled the holder to one vote. There were no issued shares held by
the Company in its treasury. The affirmative plurality of the shares represented
in person or by proxy at the meeting is required for the election of directors.
For all other matters, the affirmative vote of the holders of a majority of the
stock present in person or represented by proxy at the meeting and entitled to
vote on the subject matter and which has actually been voted is required for
approval. Proxies marked as abstaining (including proxies containing broker
non-votes) on any matter to be acted upon by stockholders will be treated as
present at the meeting for purposes of determining a quorum but will not be
counted as votes cast on such matters.
A proxy may be revoked by the stockholder at any time prior to its being voted.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivery to the Secretary of the Company
of a written notice of revocation or a duly executed proxy bearing a later date
or by attending the meeting and voting in person.
If a proxy is properly signed and is not revoked by the stockholder, the shares
it represents will be voted at the meeting in accordance with the instructions
of the stockholder. If the proxy is signed and returned without specifying
choices, the shares will be voted in favor of the election as directors of the
nominees listed on the following pages and in favor of Proposals (2) and (3).
Votes are tabulated at the annual meeting by inspectors of election.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS. Proposals of stockholders of the
Company that are intended to be presented by such stockholders at the Company's
1997 Annual Meeting of Stockholders must be received by the Company no later
than January 27, 1997 in order that they may be considered for inclusion in the
proxy statement and form of proxy relating to that meeting.
STOCK OWNERSHIP
The following table sets forth information relating to the beneficial
ownership of KSWI Common Stock by (i) those persons known to the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each of the
Company's directors, proposed directors and executive officers and (iii) all of
the Company's directors, proposed directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER Number of Percentage
SHARES OWNERSHIP
<S> <C> <C>
Susan Barnes 1,371,795(1) 25.0%
541 Loring
Los Angeles, CA 90024
Floyd Warkol 1,891,795(2) 34.7%
Meadow Lane
Purchase, NY 10577
Allen & Company 385,000(3) 7.0%
711 Fifth Avenue
New York, NY 10022
Burton Reyer 260,000 4.7%
17 Foxwood Road
Kings Point, NY 11024
All Executive officers 2,151,795 39.1%
and directors as a group
</TABLE>
As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of a security, or the sole or shared
investment power with respect to a security (i.e., the power to dispose, or
direct the disposition, of a security). Accordingly, they may include shares
owned by or for, among others, the wife, minor children or certain other
relatives of such individual, as well as other shares as to which the individual
has the right to acquire within 60 days after such date.
(1) Share quantities reflect that, after the distribution of the Company's
Common Stock on December 29, 1995 (the "Distribution"), Susan Barnes sold 59,500
shares of her Common Stock to Allen & Company, 25,500 shares to an Allen &
Company Managing Director and 111,163 shares to a consultant.
(2) Includes Susan Barnes' shares over which Mr. Warkol has an irrevocable
proxy. Includes 78,000 shares owned by Mr. Warkol's wife in trust for their
minor daughter, and 78,000 shares owned by Mr. Warkol's son. Mr. Warkol
disclaims beneficial ownership of these shares.
(3) Share quantities reflect 210,000 shares the Company issued and sold to Allen
& Company and 90,000 shares issued and sold to an Allen & Company Managing
Director. Susan Barnes sold 59,500 shares of her KSWI Common Stock to Allen &
Company and 25,500 shares to an Allen & Company Managing Director.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES
The Certificate of Incorporation of the Company provides that KSWI's business
shall be managed by a Board of Directors of not less than three and not more
than twelve, with the exact number fixed by the Board of Directors from time to
time. The Board of Directors of KSWI is divided into three classes: Class I,
Class II and Class III, with each class being as nearly equal in number as
possible. The directors in each class serve terms of three years each and until
their successors are elected and qualified.
The Board of Directors has unanimously nominated Armand P. D'Amato and Daniel
Spiegel for election as Class I directors of KSWI. Messrs. D'Amato and Spiegel
are currently directors of KSWI, appointed on December 28, 1995 and January 8,
1996, respectively, to fill vacancies created in connection with the Company's
recent distribution. Each of the nominees has consented to being named in this
Proxy Statement and to serve if elected. If any of the nominees become unable to
accept nomination or election, the persons named in the proxy may vote for a
substitute nominee selected by the Board of Directors. KSWI's management,
however, has no present reason to believe that any nominee listed below will be
unable to serve as director, if elected.
The By-Laws of KSWI permit nominations of candidates for election to the Board
of Directors to be made by the Board of Directors or by any stockholder entitled
to vote for the election of directors. Nominations made by stockholders (other
than by the Board of Directors) must be made in writing and delivered or mailed
to KSWI not less than 60 days prior to the date of a stockholders' meeting. Such
notice must include the same information, to the extent known to the notifying
stockholder, as that required to be stated by KSWI in its Proxy Statement with
respect to the nominees of the Board of Directors. Any nominations which are not
made in this manner or any votes cast at the Meeting for any candidate not duly
nominated may be disregarded by the chairman of the Meeting.
If a quorum is present and voting, the two nominees receiving the highest number
of votes will be elected to the Board of Directors. Abstentions and broker
non-votes are not counted in the election of directors.
NOMINEES
The following table sets forth certain information concerning the nominees for
election as Class I directors of KSWI and the continuing Class II and Class III
directors of KSWI.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR POSITION, OTHER DIRECTOR
NAME AGE DIRECTORSHIPS SINCE
NOMINEES AS CLASS I DIRECTORS
TO SERVE UNTIL 1999
<S> <C> <C> <C>
Armand P. D'Amato (1)......................... 52 Director 1995
Daniel Spiegel (2). . . . . . . . . . . . 71 Director 1996
CONTINUING AS CLASS II DIRECTOR
TO SERVE UNTIL 1997
Robert Brussel................................ 53 Chief Financial Officer and Director 1994
CONTINUING CLASS III DIRECTORS
TO SERVE UNTIL 1998
Floyd Warkol.................................. 48 Chairman of the Board of Directors, 1994
President and Chief Executive Officer
Burton Reyer.................................. 61 Executive Vice President, Secretary and 1994
Director
(1) Armand P. D'Amato owns options to acquire 20,000 shares of Common Stock.
(2) Daniel Spiegel owns options to acquire 20,000 shares of Common Stock.
</TABLE>
There is no family relationship between any director or executive officer of the
Company.
Mr. Armand P. D'Amato was appointed as an interim director in December 1995. He
is an attorney and since 1994 has been President of the Lloyd Group, Inc., a
consulting firm located in Long Island, New York. From 1976 to 1993, he was a
partner at the law firm of Forchelli, Schwartz, Minco and Carlino.
Mr. Daniel Spiegel was appointed as an interim director in January 1996. He
had been principally employed as Senior Vice President of Tishman Realty &
Construction Company, Inc. from 1970 until March 1995. He is presently a
consultant to various construction related companies.
Mr. Floyd Warkol has been principally employed as Chairman of the Board since
December 15, 1995 as President and Chief Executive Officer of KSWI and as
Chairman and Chief Executive Officer of its subsidiary KSW Mechanical since
January 1994. From February 1987 to January 1994, he was principally employed as
Chief Executive Officer of Kerby Saunders-Warkol, Inc.
Mr. Burton Reyer has been principally employed as Executive Vice President and
Secretary of KSWI since December 15, 1995 and as Vice President and Director of
KSWI and as President and Chief Operating Officer of its subsidiary KSW
Mechanical since January 1994. From December 1987 to January 1994, he was
principally employed as Chief Operating Officer of Kerby Saunders-Warkol, Inc.
Mr. Robert Brussel has been principally employed as Chief Financial Officer and
Director of KSWI and Chief Financial Officer of its subsidiary KSW Mechanical
since January 1994. From June 1988 to January 1994, he was principally employed
as Chief Financial Officer of Kerby Saunders-Warkol, Inc.
BOARD MEETINGS AND COMMITTEES
The Board of Directors has a Compensation Committee and an Audit Committee
comprised of non-employee directors. The functions of the Compensation Committee
include: study and analysis of and recommendations to the Board concerning
salaries, incentives and other forms of compensation for directors, officers and
other employees of the Company; and administrative oversight of various
incentive compensation and benefit plans. The functions of the Audit Committee
include: reviewing with independent auditors the plan and results of the
auditing engagement; reviewing the scope and results of the Company's procedures
for internal auditing; reviewing the independence of the auditors; considering
the range of audit and non-audit services; and reviewing the adequacy of the
Company's system of internal accounting controls.
The Board of Directors of the Company held a total of four meetings during 1995.
There were no meetings of the Audit Committee or of the Compensation Committee
as these were created in December 1995.
This is the Company's first Annual Meeting; however, in December 1995, two
directors, Messrs. Bernard Katz and Chaim Markheim, of the Company resigned from
the Board of Directors in connection with the Company's Distribution.
COMPENSATION OF DIRECTORS
During 1995, Directors of KSWI who are not employees of the Company
received no compensation. No fees were paid for attendance at Board Committee
meetings. During 1996, the Company anticipates paying its non-employee Directors
each an annual fee of $12,000.
EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ---------------------------- ---------------------
Securities
Name and Principal Fiscal Other Annual Restricted Underlying LTIP All Other
POSITION YEAR SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
- - ------------------ ------- ------ ----- ------------ ----------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Floyd Warkol 1995 $525,000 $250,000
President & Chief 1994 $500,000 0 $405,000(1) - - - $100,000
Executive Officer
Burton Reyer 1995 $287,500 $125,000
Vice President 1994 $275,000 0 $202,000(2)
Robert Brussel 1995 $125,000 $30,000
Chief Financial Officer 1994 $112,500 $25,000 $ 0
James Oliviero 1995 $125,000 $25,000
Director of Investor
Relations
- - --------------------------------------
(1) Represents the value of 6-2/3% of the outstanding KSWI Common Stock at
January 1994.
(2) Represents the value of 3-1/3% of the outstanding KSWI Common Stock at
January 1994.
</TABLE>
In January 1994, the Company issued an aggregate of 780,000 shares of
its Common Stock to Floyd Warkol and Burton Reyer for no consideration. Prior to
the Distribution, a stockholders's agreement provided that, if either officer
received a bona fide offer from a third party to purchase all of such shares, a
90% stockholder had an option to purchase the shares at a price equal to 25% of
the tangible book value of such shares. The Company determined the aggregate
value of the shares to be $607,000 based on the purchase price paid by the 90%
stockholder and a discount for minority ownership.
The Company and KSW Mechanical entered into a three-year employment
contract and a non-competition agreement with Mr. Warkol as of January 1, 1994.
The employment contract provides for base annual compensation of $500,000,
increasing by $25,000 per annum. Mr. Warkol is also entitled to medical
insurance, (disability insurance with payments equal to 60% of base
compensation,) a $1 million policy of life insurance payable as directed by the
employee (at a cost of $1,210 per year), $10,000 per year in club dues, and a
car and chauffeur and bonuses if, and when, declared by a two-thirds vote of the
Company's Board of Directors. Mr. Warkol is entitled to terminate his employment
for "good reason," i.e., a substantial change in the nature or status of his
responsibilities or the person to whom he reports, in which event he is entitled
to receive full pay and benefits for the remainder of the term of the contract.
The Company is not entitled to discharge Mr. Warkol for disability until he has
been disabled for 180 consecutive days. Mr. Warkol's estate is entitled to
two-months pay in the event of his death. Mr. Warkol has agreed that he will not
compete in the mechanical contracting business in the New York City metropolitan
area for the term of his employment contract and for two years thereafter.
The Company and KSW Mechanical entered into a three-year employment
contract and a non-competition agreement with Mr. Reyer as of January 1, 1994.
The employment contract provides for base annual compensation of $275,000,
increasing by $12,500 per annum. Mr. Reyer is entitled to medical insurance,
disability insurance with payments equal to 60% of base compensation, a $500,000
policy of life insurance payable as directed by the employee, $5,000 per year in
club dues and bonuses if, and when, declared by a two-thirds vote of the
Company's Board of Directors. Mr. Reyer is entitled to terminate his employment
for "good reason", i.e., a substantial change in the nature or status of his
responsibilities or the person to whom he reports, in which event he is entitled
to receive full pay and benefits for the remainder of the term of the contract.
The Company is not entitled to discharge Mr. Reyer for disability until he has
been disabled for 180 consecutive days. Mr. Reyer's estate is entitled to
two-months pay in the event of his death.
In December 1995, Mr. Warkol and Mr. Reyer agreed to extend their executive
employment agreements for an additional two years, under similar terms and
conditions. Messrs. Warkol and Reyer received salary increases of $25,000 in
each of the two years.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation Grant Date
INDIVIDUALS GRANTS FOR OPTION TERM VALUE
Number of Percent of Total
Securities Options/SARs
underlying Granted to Exercise of
option/SARs Employees in Base Price Expiration Grant Date
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($) PRESENT VALUE($)
- - ---------------------- ----------- ----------- ------ ---- ------ ------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Floyd Warkol
President and Chief
Executive Officer.... 300,000 49.2% $1.50 12/28/05 733,003 1,167,184 N/A
Burton Reyer
Vice President....... 150,000 24.6% $1.50 12/28/05 366,501 583,592 N/A
Robert Brussel
Chief Financial
Officer.............. 25,000 4.1% $1.50 12/28/05 61,084 97,265 N/A
James Oliviero
Assistant Secretary,
Director of Investor
Relations............ 20,000 3.0% $1.50 12/28/05 48,861 77,812 N/A
</TABLE>
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Options/SARs at Fiscal Options/SARs at
Year-End (#) Fiscal Year-End ($)
Shares Acquired Exercisable/ Exercisable/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- - ---- --------------- ------------------ ------------- -------------
<S> <C> <C> <C> <C>
Floyd Warkol 0 0 0/300,000 0/0
Burton Reyer 0 0 0/150,000 0/0
Robert Brussel 0 0 0/25,000 0/0
James Oliviero 0 0 0/20,000 0/0
</TABLE>
CERTAIN TRANSACTIONS
Susan Barnes, the owner of approximately 25% of KSWI's outstanding shares of
Common Stock, has granted to Mr. Warkol an irrevocable proxy to vote all of the
shares of KSWI Common Stock which were distributed to her, empowering Mr.
Warkol, as President of KSWI, to vote these shares to elect members of the
Company's Board of Directors and to vote in favor of or against any other
matters that come before the stockholders of the Company.
Susan Barnes irrevocably pledged 500,000 of the shares she received in the
Distribution to the Company. Approximately one-quarter of the pledged shares
will be released from the pledge over time.
Floyd Warkol, President of the Company and a foundation he controls jointly are
the landlord on the Company's lease in Bronx, New York. The lease payments on
such property were $103,000 for 1995.
INDEMNIFICATION
Pursuant to a Distribution Agreement and an Indemnification Agreement,
the Company indemnifies and holds Helionetics, Inc., a California corporation
("Helionetics"), its affiliates, successors and assigns and the officers,
directors, partners, employees, agents and representatives of any of them,
harmless from and against any and all assumed or contingent liabilities relating
to or arising in connection with the business of the Company as conducted on the
effective date of Distribution by Helionetics of its KSWI Common Stock to
Helionetics shareholders. If such indemnity is unavailable for any reason the
Company has agreed to contribute in respect of any such loss, claim, damage or
liability on an equitable basis.
The Distribution Agreement and an Indemnification Agreement further
provide that effective upon the Distribution, Helionetics will indemnify and
hold KSWI, its affiliates, successors and assigns and the officers, directors,
partners, employees, agents and representatives of any of them, harmless from
and against any and all liabilities arising under the Securities Act relating to
distribution of the KSWI Common Stock without registration under such act.
The Certificate of Incorporation provides that a director or officer of
the Company may be indemnified by the Company to the full extent permitted by
the Delaware General Corporation Law or any other applicable law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Section 16(a) of the Securities and Exchange Act of 1934 (the "Exchange
Act") requires the Company's executive officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. Executive officers, directors and greater than ten percent
stockholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on its review of the copies
of such forms received by it, or written representation from certain reporting
persons, the Company believes that all executive officers and directors of the
Company complied with all applicable filing requirements.
Susan Barnes, a beneficial owner of more than 10% of issued and
outstanding KSWI Common Stock, has failed to file on a timely basis, reports
required by Section 16(a) of the Securities Exchange Act, as amended, for the
year ended December 31, 1995.
In light of her beneficial ownership of the Company's common stock,
Susan Barnes should have filed a Form 3 upon the consummation of the
Distribution on December 29, 1995, to declare her ownership of 1,567,958 shares
of common stock. On January 2, 1996, Susan Barnes sold 111,163 shares of her
common stock to another party. On January 31, 1996, she sold 59,500 shares of
her common stock to Allen & Company and 25,500 shares of her common stock to an
Allen & Company Managing Director, Paul A. Gould. She has failed to file a Form
4 or a Form 5 to report these transactions.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Company's Compensation Committee was formed recently, on February
28, 1996, and played no part in compensation decisions for the year ended
December 31, 1995. The Compensation Committee has the responsibility for setting
the compensation paid to the Chief Executive Officer and for final approval of
the compensation paid to the other executive officers of the Company, approving
or disapproving the recommendation of the Chief Executive Officer as to such
compensation. The Compensation Committee, which is comprised of the two
non-employee Directors of the Company, determines the amount of shares and
exercise prices for any stock option grants under the Company's 1995 Stock
Option Plan, and the amount of the Company's matching contribution percentage
under the Company's Retirement Savings 401(k) Plan.
Stock Option and Other Equity Plan; Compensation of the Chief Executive Officer
The Committee endorses the view that the value of compensation paid to
its executive officers, and the Chief Executive Officer in particular, should be
closely linked to increases in the value of the Common Stock. Accordingly, the
Committee supports option awards under the Company's 1995 Stock Option Plan. A
substantial portion of the total compensation of the executive officers,
including the Chief Executive Officer, is wholly dependent on increases in the
value of the Common Stock.
The number of stock options granted to executive officers is not
determined by reference to any formulas but is determined by the Compensation
Committee's evaluation of the particular officer's ability to influence the
long-term growth and profitability of the Company. The Committee also considers
the Company's performance against certain of its competitors, its general
performance against internal goals established by management, and the
executive's relative contribution thereto.
This report is submitted by the members of the Compensation Committee.
Daniel Spiegel and Armand P. D'Amato are members of the Committee.
PERFORMANCE GRAPH
A performance graph is not being provided given that the Company's
Common Stock began publicly trading on the NASDAQ Electronic Bulletin Board on
February 1, 1996.
PROPOSAL NO. 2
AMENDMENT TO STOCK OPTION PLAN
The Company adopted the 1995 Stock Option Plan (the "Stock Option
Plan") on December 15, 1995, and the Stock Option Plan was approved by the
stockholders of the Company by unanimous written consent on December 15, 1995.
Initially, a total of 750,000 shares of Common Stock were reserved for issuance
under the Stock Option Plan. Since the adoption of the Stock Option Plan, the
Company has granted to eligible recipients options to purchase an aggregate of
610,000 shares of Common Stock (net of cancellations), leaving 140,000 shares
available for future options.
The Board of Directors believes that the Stock Option has proved to be
of substantial value in securing the continued service of employees and
Directors, in stimulating their efforts toward the continuing success of the
Company and in assisting the Company in recruiting qualified personnel.
Currently, however, the number of shares of Common Stock remaining available for
grants under the Stock Option Plan are insufficient to adequately provide for
grants in the future. Accordingly, on May 6, 1996, the Board of Directors of the
Company adopted, subject to the approval of the Company's Stockholders at the
Annual Meeting, an amendment to the Stock Option Plan (the "Amendment"), which
increases by 350,000 shares the aggregate number of shares of Common Stock of
the Company available for future options under the Stock Option Plan to 490,000
shares.
The following is a summary of the principal provisions of the 1995
Plan.
The Stock Option Plan is administered by the Board of Directors or a
Committee appointed by the Board of Directors (each herein called the
"Compensation Committee"). All key employees of, consultants to, and certain
non-employee Directors of the Company, as may be determined by the Compensation
Committee from time to time, are eligible to receive options under the Stock
Option Plan.
A total of 750,000 shares are authorized for issuance under the Stock
Option Plan. The Company granted options with respect to 610,000 shares at an
exercise price of $1.50 per share to certain eligible participants under the
Stock Option Plan (of which 535,000 were issued to officers and directors of the
Company and its subsidiaries). Pursuant to the Amendment, the 750,000 limit on
the number of shares of Common Stock would be increased to 1,100,000.
The exercise price of an incentive stock option and a non-qualified
stock option is fixed by the Compensation Committee on the date of grant;
however, the exercise price under an incentive stock option must be at least
equal to the fair market value of the KSWI Common Stock on the date of grant.
Stock options are exercisable for a duration determined by the
Compensation Committee, but in no event more than ten years after the date of
grant. Options shall be exercisable at such rate and times as may be fixed by
the Compensation Committee on the date of grant. The aggregate fair market value
(determined at the time the option is granted) of the KSWI Common Stock with
respect to which incentive stock options are exercisable for the first time by a
participant during any calendar year (under all stock option plans of the
Company and its subsidiaries) shall not exceed $100,000; to the extent that this
limitation is exceeded, such excess options shall be treated as non-qualified
stock options for purposes of the Stock Option Plan and the Internal Revenue
Code of 1986, as amended (the "Code").
At the time a stock option is granted, the Compensation Committee may,
in its sole discretion, designate whether the stock option is to be considered
an incentive stock option or non-qualified stock option plan. Stock options with
no such designation shall be deemed an incentive stock option to the extent that
the $100,000 limit described above is met.
Payment of the purchase price for shares acquired upon the exercise of
options may be made by any one or more of the following methods: in cash, by
check, by delivery to the Company of shares of KSWI Common Stock already owned
by the option holder, or by such other method as the Compensation Committee may
permit from time to time. However, a holder may not use previously owned shares
of KSWI Common Stock that were acquired pursuant to the Stock Option Plan, or
any other stock plan that may be maintained by the Company or its subsidiaries,
to pay the purchase price under an option, unless the holder has beneficially
owned such shares for at least six months.
Stock options become immediately exercisable in full upon the
retirement of the holder after reaching the age of 65, upon the disability or
death of the holder while in the employ of or service with the Company, upon a
Change of Control (as defined in the Stock Option Plan), or upon the occurrence
of such special circumstances as in the opinion of the Compensation Committee
merit special consideration. However, no options may be exercised earlier than
six months following the date of grant.
Stock options terminate at the end of the tenth business day following
the holder's termination of employment or service. This period is extended to
one year in the case of the disability or death of the holder, and in the case
of death, the stock option is exercisable by the holder's estate.
The options granted under the Stock Option Plan contain anti-dilution
provisions which will automatically adjust the number of shares subject to the
option in the event of a stock dividend, split-up, conversion, exchange,
re-classification or substitution. In the event of any other change in the
corporate structure or outstanding shares of KSWI Common Stock, the Compensation
Committee may make such equitable adjustments to the number of shares and the
class of shares available under the Stock Option Plan or to any outstanding
option as it shall deem appropriate to prevent dilution or enlargement of
rights.
The Company shall obtain such consideration for granting options under
the Stock Option Plan as the Compensation Committee in its discretion may
request.
Each option may be subject to provisions to assure that any exercise or
disposition of KSWI Common Stock will not violate the securities laws.
No option may be granted under the Stock Option Plan after December 15,
2005.
The Board of Directors or the Compensation Committee may at any time
withdraw or amend the Stock Option Plan and may, with the consent of the
affected holder of an outstanding options at any time withdraw or amend the
terms and conditions of outstanding options. Any amendment which would increase
the number of shares issuable pursuant to the Stock Option Plan or change the
class of individuals to whom options may be granted shall be subject to the
approval of the stockholders of the Company within one year of such amendment.
The Amendment to the Stock Option Plan is submitted for ratification by
Stockholders. Stockholders may vote for or against ratification of the
Amendment. Under Delaware law, the vote of a majority of the shares present and
voting at the meeting is required for approval. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" RATIFICATION OF THE AMENDMENT TO THE STOCK OPTION PLAN.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Marden Harrison & Kreuter,
certified public accountants, as the Company's independent auditors for the
fiscal year ending December 31, 1996, subject to ratification of such
appointment by the stockholders. In the event of a negative vote on
ratification, the Board of Directors will reconsider its selection.
Corbin & Wertz has conducted the audit of the financial statements of
KSW, Inc. and its subsidiary for the fiscal year ended December 31, 1995. The
Company's management was not involved in the selection of Corbin & Wertz which
were selected as independent auditor's by the Company's former corporate parent.
The Company did not have any disagreements with Corbin & Wertz nor did Corbin &
Wertz decline to stand for (re)-election.
It is expected that a representative of Corbin & Wertz will not be
present at the Annual Meeting of Stockholders.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF MARDEN, HARRISON & KREUTER AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE 1996 FISCAL YEAR.
OTHER MATTERS
The Company knows of no other matter so be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represented
as the Board of Directors may recommend.
STOCKHOLDERS PROPOSALS
The Company's By-Laws provide that a stockholder of the Company who
intends to nominate persons for election as Directors or introduce other
proposals from the floor of an Annual Meeting of Stockholders follow certain
notice and disclosure requirements.
The By-Laws provision requires a stockholder introducing a proposal at
an Annual Meeting to notify the Company of such intention not less than 60 days
prior to the date of the Annual Meeting. If the Company has given less than 75
days public notice of the date of the Annual Meeting, the stockholder must give
such notice so that it is received by the Company not later than 10 days after
the public notice is given or the Proxy Statement is mailed. The stockholder's
notice must give the information specified in the By-Laws, including information
about the stockholder making the proposal, the number of shares such stockholder
owns and any interest such stockholder may have in the subject of the proposal.
If such stockholder will be nominating persons for election as Directors,
certain information specified in the By-Laws must also be given about the
nominee and the nominee's interest in the Company.
ANNUAL REPORT
UPON WRITTEN REQUEST OF ANY STOCKHOLDER, A COPY OF KSWI'S ANNUAL REPORT
ON FORM 10-K FOR ITS FISCAL YEAR ENDED DECEMBER 31, 1995, INCLUDING A LIST OF
THE EXHIBITS THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 13a-1 UNDER THE SECURITIES & EXCHANGE ACT OF 1934,
MAY BE OBTAINED, WITHOUT CHARGE, FROM JAMES OLIVIERO, ASSISTANT SECRETARY, KSW,
INC., 37-16 23RD STREET, LONG ISLAND CITY, NEW YORK 11101. EACH REQUEST MUST SET
FORTH A GOOD FAITH REPRESENTATION THAT, AS OF THE RECORD DATE, THE PERSON MAKING
THE REQUEST WAS A BENEFICIAL OWNER OF KSWI'S COMMON STOCK ENTITLED TO VOTE AT
THE MEETING.
BY ORDER OF THE BOARD OF
DIRECTORS
/s/ James Oliviero
JAMES OLIVIERO
ASSISTANT SECRETARY
PLEASE REMEMBER TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOUR IMPORTANT VOTE WILL BE COUNTED AT
THE ANNUAL MEETING.
PROXY
KSW, INC.
ANNUAL MEETING OF STOCKHOLDERS, JUNE 27, 1996
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Floyd Warkol and Robert Brussel, or a
majority of those present and acting, or if only one is present, then that one,
proxies, with full power of substitution, to vote all shares of KSW, INC. which
the undersigned is entitled to vote at the Company's Annual Meeting to be held
at the Crowne Plaza Hotel at LaGuardia Airport, Queens, New York, on June 27,
1996, at 2:00 p.m., New York time, and at any adjournment thereof, hereby
ratifying all that said proxies or their substitutes may do by virtue hereof,
and the undersigned authorizes and instructs said proxies to vote as follows:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the to vote for all
contrary below) nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
NOMINEES FOR DIRECTOR FOR TERMS EXPIRING IN 1999:
ARMAND P. D'AMATO
DANIEL SPIEGEL
2. AMENDMENT TO THE 1995 STOCK OPTION PLAN: Check the appropriate box to
indicate the manner in which you direct the proxies to vote your shares:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. THE RATIFICATION OF THE APPOINTMENT OF MARDEN, HARRISON & KREUTER AS THE
COMPANY'S INDEPENDENT AUDITORS: Check the appropriate box to indicate the manner
in which you direct the proxies to vote your shares:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. In their discretion, upon any other matters which may properly come before
the meeting or any adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL
3.
Receipt of the Notice of Annual Meeting and Proxy Statement of the
Company preceding or accompanying the same is hereby acknowledged.
Dated ________________________, 1996
__________________________________
(Signature of Stockholder)
___________________________________
(Signature of Stockholder)
Your signature should appear the same
as your name appears hereon. If signing
as attorney, executor, administrator,
trustee or guardian, please indicate
the capacity in which signing. When
signing as joint tenants, all parties
to the joint tenancy must sign. When
the proxy is given by a corporation it
should be signed by and authorized
officer.
PLEASE DATE, SIGN AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
APPENDIX
AMENDED 1995 STOCK OPTION PLAN
OF
KSW, INC.
5. PURPOSE. The purpose of this Stock Option Plan is to advance the
interests of the Corporation by encouraging and enabling the acquisition of a
larger personal proprietary interest in the Corporation by key employees and
directors of, and consultants to, the Corporation and its Subsidiaries upon
whose judgment and keen interest the Corporation is largely dependent for the
successful conduct of its operations and by providing such key employees,
directors and consultants with incentives to put forth maximum efforts for the
success of the Corporation's business. It is anticipated that the acquisition of
such proprietary interest in the Corporation and such incentives will stimulate
the efforts of such key employees, directors and consultants on behalf of the
Corporation and its Subsidiaries and strengthen their desire to remain with the
Corporation and its Subsidiaries. It is also expected that such incentives and
the opportunity to acquire such a proprietary interest will enable the
Corporation and its Subsidiaries to attract desirable personnel.
6. DEFINITIONS. When used in this Plan, unless the context otherwise
requires:
(a) "Board of Directors" or "Board" shall mean the Board of
Directors of the Corporation, as constituted at any time.
(b) "Chairman of the Board" shall mean the person who at the time
shall be Chairman of the Board of Directors.
(c) "Committee" shall mean the Committee hereinafter described in
Section 3.
(d) "Corporation" shall mean KSW, Inc., a Delaware corporation.
(e) "Eligible Persons" shall mean those persons described in
Section 4 who are potential recipients of Options.
(f) "Fair Market Value" on a specified date shall mean the
closing price at which a Share is traded on the stock exchange, if
any, on which Shares are primarily traded or, if the Shares are not
then traded on a stock exchange, the closing price of a Share as
reported on the NASDAQ SmallCap Market or, if the Shares are not then
traded on the NASDAQ SmallCap Market, the average of the closing bid
and asked prices at which a Share is traded on the over-the-counter
market, but if no Shares were traded on such date, then on the last
previous date on which a Share was so traded, or, if none of the above
are applicable, the value of a Share as established by the Committee
for such date using any reasonable method of valuation.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Options" shall mean the Stock Options granted pursuant to
this Plan.
(i) "Plan" shall mean this 1995 Stock Option Plan of KSW, Inc.,
as adopted by the Board of Directors on December 15, 1995, and
approved by shareholders on December 15, 1995, as such Plan from time
to time may be amended.
(j) "President" shall mean the person who at the time shall be
the President of the Corporation.
(k) "Share" shall mean a share of common stock of the
Corporation.
(l) "Subsidiary" shall mean any corporation 50% or more of whose
stock having general voting power is owned by the Corporation, or by
another Subsidiary as herein defined, of the Corporation.
7. COMMITTEE. The Plan shall be administered by the Board of Directors or a
Committee appointed by the Board of Directors; provided however, that from and
after the effective date of the registration of the Corporation's Shares
pursuant to the Securities Exchange Act of 1934, as amended from time to time
(the "Exchange Act"), the Plan shall be administered by a Committee which shall
consist of two or more directors of the Corporation, each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3(c)(2) under the Exchange
Act. During such time as the Plan is administered by the Board of Directors, all
references herein to the Committee shall be deemed to refer to the Board of
Directors.
8. PARTICIPANTS. All key employees of, and consultants to, the Corporation
or a Subsidiary, as determined by the Committee, shall be eligible to receive
Options under the Plan. The parties to whom Options are granted under this Plan,
and the number of Shares subject to each such Option, shall be determined by the
Committee in its sole discretion, subject, however, to the terms and conditions
of this Plan. Employees to whom Options may be granted include key employees who
are also directors of the Corporation or a Subsidiary. Each director of the
Corporation who is not also an employee of the Corporation and/or its
Subsidiaries (hereinafter referred to as a "Non-Employee Director") shall be
eligible to receive Options in accordance with the provisions of Section 14
hereof.
9. SHARES. Subject to the provisions of Section 15 hereof, the Committee
may grant Options with respect to an aggregate of up to 1,100,000 Shares, all of
which Shares may be either Shares held in treasury or authorized but unissued
Shares. The maximum number of Shares which may be the subject of Options granted
to any individual in any calendar year shall not exceed 500,000 Shares. If the
Shares that would be issued or transferred pursuant to any Option are not issued
or transferred and cease to be issuable or transferable for any reason, the
number of Shares subject to such Option will no longer be charged against the
limitation provided for herein and may again be made subject to Options;
provided, that the counting of Shares subject to Options granted under the Plan
against the number of Shares available for further Options shall in all cases
conform to the requirements of Rule 16b-3 under the Exchange Act; and provided,
further, that with respect to any Option granted to any Eligible Person who is a
"covered employee" as defined in Section 162(m) of the Code and the regulations
promulgated thereunder that is canceled or repriced, the number of Shares
subject to such Option shall continue to count against the maximum number of
Shares which may be the subject of Options granted to such Eligible Person and
such maximum number of Shares shall be determined in accordance with Section
162(m) of the Code and the regulations promulgated.
10. GRANT OF OPTIONS. The number of any Options to be granted to any
Eligible Person shall be determined by the Committee in its sole discretion. At
the time an Option is granted, the Committee may, in its sole discretion,
designate whether such Option (a) is to be considered as an incentive stock
option within the meaning of Section 422 of the Code, or (b) is not to be
treated as an incentive stock option for purposes of this Plan and the Code. No
Option which is intended to qualify as an incentive stock option shall be
granted under this Plan to any individual who, at the time of such grant, is not
an employee of the Corporation or a Subsidiary.
Notwithstanding any other provision of this Plan to the contrary, to the
extent that the aggregate Fair Market Value (determined as of the date an Option
is granted) of the Shares with respect to which Options which are designated as
(or deemed to be) incentive stock options granted to an employee (and any
incentive stock options granted to such employee under any other incentive stock
option plan maintained by the Corporation or any Subsidiary that meets the
requirements of Section 422 of the Code) first become exercisable in any
calendar year exceeds $100,000, such Options shall be treated as Options which
are not incentive stock options. Options with respect to which no designation is
made by the Committee shall be deemed to be incentive stock options to the
extent that the $100,000 limitation described in the preceding sentence is met.
This paragraph shall be applied by taking Options into account in the order in
which they are granted.
Nothing herein contained shall be construed to prohibit the issuance of
Options at different times to the same person.
The form of an Option shall be determined from time to time by the
Committee. A certificate of Option signed by the Chairman of the Board or the
President or a Vice President of the Corporation, attested by the Treasurer or
an Assistant Treasurer, or Secretary or an Assistant Secretary of the
Corporation and bearing the seal of the Corporation affixed thereto, shall be
issued to each person to whom an Option is granted. The certificate of Option
for an Option shall be legended to indicate whether or not the Option is an
incentive stock option.
11. PURCHASE PRICE. The purchase price per Share for the Shares purchased
pursuant to the exercise of an Option shall be fixed by the Committee at the
time of grant of the Option; provided, however, that the purchase price per
Share for the Shares to be purchased pursuant to the exercise of an incentive
stock option shall not in any event be less than 100% of the Fair Market Value
of a Share on the date of grant of the Option.
12. DURATION OF OPTIONS. The duration of each Option shall be determined by
the Committee at the time of grant; provided, however, that the duration of any
Option shall not be more than ten years from the date upon which the Option is
granted.
13. TEN PERCENT STOCKHOLDERS. Notwithstanding any other provision of this
Plan to the contrary, no Option which is intended to qualify as an incentive
stock option may be granted under this Plan to any employee who, at the time the
Option is granted, owns Shares possessing more than 10 percent of the total
combined voting power or value of all classes of stock of the Corporation,
unless the exercise price under such Option is at least 110% of the Fair Market
Value of a Share on the date such Option is granted and the duration of such
Option is no more than five years.
14. EXERCISE OF OPTIONS. Except as otherwise provided herein, Options,
after the grant thereof, shall be exercisable by the holder at such rate and
times as may be fixed by the Committee at the time of grant. Notwithstanding the
foregoing, all or any part of any remaining unexercised Options granted to any
person may be exercised in the following circumstances (but in no event during
the six-month period commencing on the date granted): (a) subject to the
provisions of Section 13 hereof, immediately upon (but prior to the expiration
of the term of the Option) the holder's retirement from the Corporation and all
Subsidiaries on or after his 65th birthday, (b) subject to the provisions of
Section 13 hereof, upon the disability (to the extent and in a manner as shall
be determined by the Committee in its sole discretion) or death of the holder,
(c) upon a Change of Control (as hereinafter defined) while the holder is in the
employ or service of the Corporation or (d) upon the occurrence of such special
circumstance or event as in the opinion of the Committee merits special
consideration; provided, however, that the estate of the deceased holder of an
Option may exercise it prior to the expiration of the six-month period described
above.
For purposes of the Plan, "Change in Control" means the occurrence of any
of the following events:
(a) The Corporation is merged, consolidated, or reorganized into
or with another corporation or other legal entity, and as a result of
such merger, consolidation, or reorganization less than a majority of
the combined voting power of the then outstanding securities of such
corporation or entity immediately after such transaction are held in
the aggregate by the holders of the Voting Stock immediately prior to
such transaction;
(b) The Corporation sells or otherwise transfers all or
substantially all of its assets to another corporation or other legal
entity and, as a result of such sale or transfer, less than a majority
of the combined voting power of the then-outstanding securities of
such other corporation or entity immediately after such sale or
transfer is held in the aggregate by the holders of Voting Stock
immediately prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form, or report or item therein), each as
promulgated pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 30% or
more of the combined voting power of the Voting Stock;
(d) The Corporation files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form, or report or item therein) that a change in control of
the Corporation has occurred or will occur in the future pursuant to
any then-existing contract or transaction; or
(e) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Directors cease
for any reason to constitute at least a majority thereof; PROVIDED,
HOWEVER, that for purposes of this clause (e) each Director who is
first elected, or first nominated for election by the Corporation's
stockholders, by a vote of at least two-thirds of the Directors (or a
committee of the Board) then still in office who were Directors at the
beginning of any such period will be deemed to have been a Director at
the beginning of such period.
Notwithstanding the foregoing provisions of clauses (c) or (d) of this
paragraph, unless otherwise determined in a specific case by majority vote of
the Board, a "Change in Control" will not be deemed to have occurred for
purposes of such clauses (c) or (d) solely because (x) the Corporation, (y) an
entity in which the Corporation, directly or indirectly, beneficially owns 50%
or more of the voting securities (a "Subsidiary"), or (z) any employee stock
ownership plan or any other employee benefit plan of the Corporation or any
Subsidiary either files or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K, or
Schedule 14A (or any successor schedule, form, or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of 30% or otherwise, or because the Corporation reports
that a change in control of the Corporation has occurred or will occur in the
future by reason of such beneficial ownership.
An Option shall be exercised by the delivery of a written notice duly
signed by the holder thereof to such effect ("Exercise Notice"), together with
the Option certificate and the full purchase price of the Shares purchased
pursuant to the exercise of the Option, to the Chairman of the Board or an
officer of the Corporation appointed by the Chairman of the Board for the
purpose of receiving the same. Payment of the full purchase price shall be made
as follows: in cash or by check payable to the order of the Corporation; by
delivery to the Corporation of Shares which shall be valued at their Fair Market
Value on the date of exercise of the Option (provided, that a holder may not use
any Shares acquired pursuant to this Plan or any other plan maintained by the
Corporation or a Subsidiary unless the holder has beneficially owned such Shares
for at least six months); or by such other methods as the Committee may permit
from time to time.
Within a reasonable time after the exercise of an Option, the Corporation
shall cause to be delivered to the person entitled thereto, a certificate for
the Shares purchased pursuant to the exercise of the Option. If the Option shall
have been exercised with respect to less than all of the Shares subject to the
Option, the Corporation shall also cause to be delivered to the person entitled
thereto a new Option certificate in replacement of the certificate surrendered
at the time of the exercise of the Option, indicating the number of Shares with
respect to which the Option remains available for exercise, or the original
Option certificate shall be endorsed to give effect to the partial exercise
thereof.
Notwithstanding any other provision of the Plan or of any Option, no Option
granted pursuant to the Plan may be exercised at any time when the Option or the
granting or exercise thereof violates any law or governmental order or
regulation.
15. CONSIDERATION FOR OPTIONS. The Corporation shall obtain such
consideration for the grant of an Option as the Committee in its discretion may
determine.
16. NON-TRANSFERABILITY OF OPTIONS. Options and all other rights thereunder
shall be non-transferable or non-assignable by the holder thereof except to the
extent that the estate of a deceased holder of an Option may be permitted to
exercise them. Options may be exercised or surrendered during the holder's
lifetime only by the holder thereof.
17. TERMINATION OF EMPLOYMENT OR SERVICE. All or any part of any Option, to
the extent unexercised, shall terminate immediately, upon the cessation or
termination for any reason of the holder's employment by, or service with, the
Corporation or any Subsidiary, except that the holder shall have until the end
of the tenth business day following the cessation of his employment or service
with the Corporation or its Subsidiaries, and no longer, to exercise any
unexercised Option that he could have exercised on the day on which such
employment or service terminated; provided, that such exercise must be
accomplished prior to the expiration of the term of such Option. Notwithstanding
the foregoing, if the cessation of employment or service is due to retirement on
or after attaining the age of sixty-five (65) years, or to disability (to an
extent and in a manner as shall be determined in each case by the Committee in
its sole discretion) or to death, the holder or the representative of the estate
of a deceased holder shall have the privilege of exercising the Options which
are unexercised at the time of such retirement, or of such disability or death;
provided, however, that such exercise must be accomplished prior to the
expiration of the term of such Option and (a) within three months of the
holder's retirement or (b) within one year of the holder's disability or death,
as the case may be. If the employment or service of any holder of an Option with
the Corporation or a Subsidiary shall be terminated because of the holder's
violation of the duties of such employment or service with the Corporation or a
Subsidiary as he may from time to time have, the existence of which violation
shall be determined by the Committee in its sole discretion (which determination
by the Committee shall be conclusive) all unexercised Options of such holder
shall terminate immediately upon such termination of the holder's employment or
service with the Corporation and all Subsidiaries, and a holder of Options whose
employment or service with the Corporation and Subsidiaries is so terminated,
shall have no right after such termination to exercise any unexercised Option he
might have exercised prior to the termination of his employment or service with
the Corporation and Subsidiaries.
18. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Each Non-Employee Director
who is elected to the Board shall be granted an Option on the date of his or her
election. Each Option granted pursuant to the preceding sentence shall entitle
the Non-Employee Director to purchase 20,000 Shares at a purchase price per
share equal to the Fair Market Value of a Share on the date of grant. Each
Option granted pursuant to this Section 14 shall have a duration of ten years
from the date of grant and shall become exercisable cumulatively as to 33-1/3%
of the Shares on each of the first, second and third anniversaries of the date
of grant. Notwithstanding the preceding, all or any part of any remaining
unexercised Options granted pursuant to this Section 14 may be exercised (but in
no event during the six-month period commencing on the date of grant) in the
event of the holder's cessation of service as a member of the Board on or after
his 65th birthday, the holder's permanent disability (within the meaning of
Section 22(e)(3) of the Code), or the holder's death, during the period
beginning on the date of such event and ending three months after the holder's
cessation at or after age 65, or one year after the holder's disability or
death, as the case may be, but in no event after the expiration of the term of
the Option. All or any part of any remaining unexercised Options granted
pursuant to this Section 14 also may be exercised (but in no event during the
six-month period commencing on the date of grant) upon the occurrence of a
Change of Control while the holder is serving as a member of the Board. Any
Option granted pursuant to this Section 14, to the extent unexercised, shall
terminate immediately upon the holder's ceasing to serve as a member of the
Board (for reasons other than deciding to no longer serve as such at or after
age 65, permanent disability (within the meaning of Section 22(e)(3) of the
Code) or death), except that the holder shall have until the end of the tenth
business day following the cessation of such service to exercise any unexercised
Option that he could have exercised on the day on which such service terminated;
provided that such exercise must be accomplished prior to the expiration of the
term of such Option. Notwithstanding the preceding, if the service of any holder
of an Option granted pursuant to this Section 14 shall be terminated because of
the holder's (a) fraud or intentional misrepresentation, or (b) embezzlement,
misappropriation or conversion of assets or opportunities of the Corporation or
any Subsidiary, then all such unexercised Options of the holder shall terminate
immediately upon such termination of the holder's service.
Upon the exercise of any Option granted pursuant to this Section 14,
payment of the full purchase price shall be made in cash, by check payable to
the order of the Corporation, or by delivery to the Corporation of Shares which
shall be valued at their Fair Market Value on the date of exercise of the
Option; provided, however, that the holder may not use any Shares acquired
pursuant to an Option granted under this Plan or any other stock option plan
maintained by the Corporation or any subsidiary, unless the holder has
beneficially owned such Shares for at least six months.
No Incentive Award may be granted to a Non-Employee Director other than in
accordance with this Section 14. Notwithstanding any other provision of the Plan
to the contrary, the provisions of this Section 14 shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules and
regulations promulgated thereunder.
19. ADJUSTMENT PROVISION. If prior to the complete exercise of any Option
there shall be declared and paid a stock dividend upon the Shares or if the
Shares shall be split up, converted, exchanged, reclassified, or in any way
substituted for, then the Option, to the extent that it has not been exercised,
shall entitle the holder thereof upon the future exercise of the Option to such
number and kind of securities or cash or other property subject to the terms of
the Option to which he would have been entitled had he actually owned the Shares
subject to the unexercised portion of the Option at the time of the occurrence
of such stock dividend, split-up, conversion, exchange, reclassification or
substitution, and the aggregate purchase price upon the future exercise of the
Option shall be the same as if the originally optioned Shares were being
purchased thereunder.
Any fractional shares or securities issuable upon the exercise of the
Option as a result of such adjustment shall be payable in cash based upon the
Fair Market Value of such shares or securities at the time of such exercise. If
any such event should occur, the number of Shares with respect to which Options
remain to be issued, or with respect to which Options may be reissued, shall be
adjusted in a similar manner.
Notwithstanding any other provision of the Plan, in the event of a
recapitalization, merger, consolidation, rights offering, separation,
reorganization or liquidation, or any other change in the corporate structure or
outstanding shares, the Committee may make such equitable adjustments to the
number of Shares and the class of shares available hereunder or to any
outstanding Options as it shall deem appropriate to prevent dilution or
enlargement of rights.
20. ISSUANCE OF SHARES AND COMPLIANCE WITH SECURITIES ACT. The Corporation
may postpone the issuance and delivery of Shares pursuant to the grant or
exercise of any Option until (a) the admission of such Shares to listing on any
stock exchange on which Shares of the Corporation of the same class are then
listed, and (b) the completion of such registration or other qualification of
such Shares under any State or Federal law, rule or regulation as the
Corporation shall determine to be necessary or advisable. Any holder of an
Option shall make such representations and furnish such information as may, in
the opinion of counsel for the Corporation, be appropriate to permit the
Corporation, in the light of the then existence or non-existence with respect to
such Shares of an effective Registration Statement under the Securities Act of
1933, as from time to time amended (the "Securities Act"), to issue the Shares
in compliance with the provisions of the Securities Act or any comparable act.
The Corporation shall have the right, in its sole discretion, to legend any
Shares which may be issued pursuant to the grant or exercise of any Option, or
may issue stop transfer orders in respect thereof.
21. INCOME TAX WITHHOLDING. If the Corporation or a Subsidiary shall be
required to withhold any amounts by reason of any Federal, State or local tax
rules or regulations in respect of the issuance of Shares pursuant to the
exercise of any Option, the Corporation or the Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the holder
of such Option. In any event, the holder shall make available to the Corporation
or Subsidiary, promptly when requested by the Corporation or such Subsidiary,
sufficient funds to meet the requirements of such withholding; and the
Corporation or Subsidiary shall be entitled to take and authorize such steps as
it may deem advisable in order to have such funds made available to the
Corporation or Subsidiary out of any funds or property due or to become due to
the holder of such Option.
22. ADMINISTRATION AND AMENDMENT OF THE PLAN. Except as hereinafter
provided, the Board of Directors or the Committee may at any time withdraw or
from time to time amend the Plan as it relates to, and the terms and conditions
of, any Option not theretofore granted, and the Board of Directors or the
Committee, with the consent of the affected holder of an Option, may at any time
withdraw or from time to time amend the Plan as it relates to, and the terms and
conditions of, any outstanding Option. Notwithstanding the foregoing, any
amendment by the Board of Directors or the Committee which would increase the
number of Shares issuable under the Plan or to any individual or change the
class of Eligible Persons shall be subject to the approval of the shareholders
of the Corporation within one year of such amendment.
Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and Options shall be
final. The Committee may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the provisions of the Plan, as it may
deem advisable to make the Plan and Options effective or provide for their
administration, and may take such other action with regard to the Plan and
Options as it shall deem desirable to effectuate their purpose.
The Plan is intended to comply with Rule l6b-3 under the Exchange Act. Any
provision inconsistent with such Rule shall be inoperative and shall not affect
the validity of the Plan.
23. NO RIGHT OF EMPLOYMENT OR SERVICE. Nothing contained herein or in an
Option shall be construed to confer on any employee, consultant or director any
right to be continued in the employ or service of the Corporation or any
Subsidiary or derogate from any right of the Corporation and any Subsidiary to
retire, request the resignation of or discharge or otherwise cease its service
arrangement with any employee, consultant or director (without or with pay), at
any time, with or without cause.
24. FINAL ISSUANCE DATE. No Option shall be granted under the Plan after
December 15, 2005.
