[GRAPHIC OMITTED]
THE FORTRESS GROUP, INC.
1921 Gallows Road, Suite 730, Vienna, Virginia 22182
--------------------
Notice of Annual Meeting of Stockholders
To Be Held on Wednesday, May 21, 1997
--------------------
The Annual Meeting of Stockholders of The Fortress Group, Inc. (the
"Company") will be held on May 21, 1997 at The Sheraton New York Hotel & Towers,
811 Seventh Avenue at 52nd Street, New York, New York 10019, at 8:00 a.m., local
time, to consider and act upon the following matters:
1. To elect eleven directors to serve for the ensuing year.
2. To approve an increase in the aggregate number of shares of
Common Stock authorized for issuance under the Company's 1996
Stock Incentive Plan by 550,000 shares.
3. To approve the Company's Employee Stock Purchase Plan, as
adopted by the Company's Board of Directors, to provide
employees of the Company and its subsidiaries who participate
in such plan with an opportunity to purchase Common Stock
through payroll deductions.
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 April 9, 1997 will
be entitled to notice of and to vote at the meeting or any adjournment thereof.
All stockholders are cordially invited to attend the meeting.
By Order of the Board of Directors,
JAMES J. MARTELL, JR., President
and Chief Executive Officer
Vienna, Virginia
April 18, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FOLLOW
THE INSTRUCTIONS ON THE ENCLOSED PROXY IN ORDER TO ENSURE
REPRESENTATION OF YOUR SHARES AT THE MEETING.
<PAGE>
THE FORTRESS GROUP, INC.
1921 Gallows Road, Suite 730
Vienna, Virginia 22182
--------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 21, 1997
General Information
The Annual Meeting of Shareholders of The Fortress Group, Inc. (the
"Company") will be held at the Sheraton New York Hotel & Towers, 811 Seventh
Avenue at 52nd Street, New York, New York, on Wednesday, May 21, 1997 at 8:00
a.m., Eastern Daylight Time, for the purposes set forth in the accompanying
Notice of Annual Meeting of Shareholders. The approximate mailing date for this
proxy statement and proxy is April 18, 1997.
It is important that your shares be represented at the meeting. If it
is impossible for you to attend the meeting, please sign and date the enclosed
proxy and return it in the envelope provided. The proxy is solicited by the
Board of Directors of the Company. Shares represented by valid proxies in the
enclosed form will be voted if received in time for the Annual Meeting. Expenses
in connection with the solicitation of proxies will be borne by the Company and
may include requests by mail and personal contact by its directors, officers and
employees. The Company will reimburse brokers or other nominees for their
expenses in forwarding proxy materials to principals. Any person giving a proxy
has the power to revoke it any time before it is voted. The giving of the
enclosed proxy does not preclude the right to vote in person at the meeting,
should the shareholder giving the proxy so desire. The proxy may be revoked at
any time prior to its exercise by notice of revocation in writing sent to the
Secretary of the Company, by presenting to the Company a later-dated proxy card
executed by the person executing the prior proxy card or by attending the
meeting and voting in person.
Shares of Common Stock represented by properly executed proxy cards
received by the Company in time for the meeting will be voted in accordance with
the choices specified in the proxies. Abstentions and broker non-votes (proxies
that do not indicate that brokers or nominees have received instructions from
the beneficial owner of shares) will be counted for purposes of determining the
presence or absence of a quorum for the transaction of business. Abstentions are
counted in tabulating the total number of votes cast on proposals presented to
shareholders, whereas broker non-votes are not counted for purposes of
determining the total number of votes cast.
Voting Securities and Principal Holders
Only holders of record of shares of the Company's Common Stock, $.01
par value (the "Common Stock"), at the close of business on April 9, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting or
at any adjournment or adjournments of the Annual Meeting. Each
1
<PAGE>
share of Common Stock has one vote. On the Record Date, there were issued and
outstanding 11,764,309 shares of Common Stock.
The following table sets forth information with respect to persons
known to the Company to be the beneficial owners of more than five percent of
the outstanding Common Stock:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Percent of Outstanding
Name and Address Amount and Nature share of Common Stock
of Beneficial Owner of Beneficial Ownership as of Record Date
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
J. Christopher Stuhmer
9500 Hillwood Drive, Suite 200
Las Vegas, NV 89134 1,691,227 14.4%
Robert Short
534 Commons Drive
Golden, CO 80401 1,556,546 13.2%
Thomas Buffington
8716 Mopac Expressway, Suite 100
Austin, TX 78759 948,949 8.1%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202 (a) 752,500 6.4%
Charles F. Smith
P.O. Box 9672
McLean, VA 22102 686,748 5.8%
J. Marshall Coleman
1921 Gallows Road, Suite 730
Vienna, VA 22182 651,585 5.5%
James J. Martell, Jr.
1921 Gallows Road, Suite 730
Vienna, VA 22182 631,923 5.4%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(a) This information is based on a Schedule 13G dated February 12, 1997 which
was filed by Heartland Advisors, Inc. According to such Schedule 13G,
Heartland Advisors, Inc. has sole voting power over 747,500 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors, persons who own more than
ten percent of a registered class of the Company's equity securities and certain
entities associated with the foregoing ("Reporting Persons") to file reports of
ownership and changes in ownership of Forms 3, 4 and 5 with the Securities and
Exchange
2
<PAGE>
Commission (the "SEC"). These Reporting Persons are required by SEC regulation
to furnish the Company with copies of all Forms 3, 4 and 5 they file with the
SEC. Based solely upon its review of Forms 3, 4 and 5 and any amendments thereto
furnished to the Company, all of such forms were filed on a timely basis by
reporting persons during 1996 except for the inadvertent late filing of an
Initial Statement of Beneficial Ownership of Securities by Mr. Shutzer, the
inadvertent late filing of a monthly reporting form representing 3 transactions
by Mr. Smith, and the inadvertent late filing of a monthly reporting form
representing one transaction by Mr. Short.
I. ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist
of eleven directors who shall be elected annually by the shareholders. The
following persons are proposed as directors of the Company to hold office until
the next Annual Meeting of Shareholders and until their respective successors
have been duly elected and qualified. In the event that any of the nominees for
directors should become unavailable, it is intended that the shares represented
by the proxies will be voted for such substitute nominees as may be nominated by
the Board of Directors, unless the number of directors constituting the full
Board of Directors is reduced. The Company has no reason to believe, however,
that any of the nominees is, or will be, unavailable to serve as a director.
The following information is furnished with respect to each nominee for
election as a director, and with respect to each executive officer of the
Company named in the Summary Compensation Table below:
<TABLE>
<CAPTION>
Percentage of
Shares of Outstanding
Stock of the Shares of the
Company Company's
Beneficially Common Stock
Owned Beneficially Year First
Positions and Offices as of the Owned as of the Became
Name Age with the Company Record Date Record Date A Director
---- --- ---------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Nominees for Election as Directors
J. Marshall Coleman 54 Chairman of the Board of the Company 651,585 5.5% 1996
James J. Martell, Jr. 46 President, Chief Executive Officer 631,923 5.4% 1995
and Director
Thomas B. Buffington 52 Chief Operating Officer and Director 948,949 8.1% 1996
Robert Short 51 Director and President of The Genesee 1,556,546 13.2% 1996
Company
J. Christopher Stuhmer 40 Director and President of Christopher 1,691,227 14.4% 1996
Homes, Inc.
Lawrence J. Witek 44 Director, Executive Vice President and 457,628 3.9% 1996
Chief Operating Officer of Solaris
Development Corporation
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Mark L. Fine 52 Director 3,000(a) * 1996
Edward J. Mathias 55 Director 13,000 * 1997
Steven D. Rivers 48 Director 3,000(a) * 1996
William A. Shutzer 50 Director 8,000(a) * 1996
Charles F. Smith 53 Director 686,748 5.8% 1995
Other Executive Officers
Jamie M. Pirrello 38 Chief Financial Officer 44,850 *
</TABLE>
- ------------------------------
* Less than 1%
(a) Includes 3,000 shares that Messrs. Fine, Shutzer and Rivers have the right
to acquire pursuant to the Company's Stock Option Plan.
Other Information Relating To Directors
The following is a brief description of the business experience during
the last five years of each nominee to the Board of Directors.
Mr. Coleman has been Chairman of the Board of the Company since May
1996. Prior to assuming this position, Mr. Coleman was an attorney with
Katten Muchin & Zavis, a national law firm, and was the Managing
Partner of its Washington office from 1994 until April 1996. From 1985
until 1992, Mr. Coleman was an attorney at the Washington, D.C. firm of
Arent Fox Kintner Plotkin and Kahn. Mr. Coleman was Attorney General of
Virginia from 1978 to 1982. From 1986 to 1993, Mr. Coleman was a
director of NVR, a publicly traded homebuilding company.
Mr. Martell has been President and Chief Executive Officer of the
Company since June 1995 and has more than 10 years in the homebuilding
industry. Since 1992, Mr. Martell has been an advisor and consultant to
various companies in the homebuilding and technology industries. From
1991 to 1992, Mr. Martell served as Managing Director of Investment
Banking at Credit International Bank as well as a member of its board
of directors.
Mr. Buffington became a director of the Company in March 1996 and
served as the President of Buffington Homes, Inc. from 1987 to January
1997. Mr. Buffington was appointed Chief Operating Officer in January
1997.
Mr. Short became a director of the Company in March 1996 and has served
as the President and Chief Executive Officer of The Genesee Company
since 1980.
Mr. Stuhmer became a director of the Company in March 1996 and has
served as the President of Christopher Homes, Inc. since 1987.
4
<PAGE>
Mr. Witek became a director of the Company in March 1996 and has served
as the Chief Operating Officer of Sunstar Homes since 1987.
Mr. Fine became a director for the Company in April 1996 and currently
is the President of Mark L. Fine & Associates, a development company
formed in June 1994. Mr. Fine has more than 20 years of experience in
the building industry and led the development of Las Vegas' two largest
master-planned communities. From June 1990 to June 1994, Mr. Fine
served as the President of Summerlin, a division of Howard Hughes
Corporation.
Mr. Mathias has been a Managing Director of The Carlyle Group, a
Washington, D.C. merchant banking firm, since January 1994. Previously,
Mr. Mathias was with T. Rowe Price Associates, Inc. where he served on
its board of directors and was a member of its Management committee for
over ten years. In addition, he is a director of U.S. Office Products
Company and Sirrom Capital.
Mr. Rivers became a director of the Company in April 1996 and from 1991
to the present has been a broker with A.G. Edwards & Sons, Inc., an
investment firm, in Austin, Texas. Since July 1995, Mr. Rivers has
served as a Director for the Lower Colorado River Authority in Austin,
Texas and he currently serves as the Chairman of such Authority's Audit
Committee.
Mr. Shutzer is an Executive Vice President and the head of the
investment banking division at Furman Selz, LLC, an international
investment banking, financial services and securities firm
headquartered in New York. Mr. Shutzer is a member of the operating
committee and is also a member of the board of directors. He is head of
the investment banking operating committee and a member of the firm's
commitment committee. Mr. Shutzer joined Furman Selz in 1994 after
spending 21 years in the investment banking division at Lehman
Brothers. He is on the board of directors of Tiffany & Co.
Mr. Smith is a founder of the Company and has been a director since
June 1995. For the past 25 years, Mr. Smith served as Chief Financial
Officer, Senior Vice President and Treasurer of I & K Productions,
Inc., a privately held entertainment holding company. I & K
Productions, Inc. owns Ringling Brothers Barnum & Bailey Combined
Shows, Inc., Ice Follies, Holiday On Ice and other entertainment and
merchandising operations.
Committees of the Board of Directors
Audit Committee
The Audit Committee is responsible for assuring the accuracy and
consistency of financial reporting and accounting practices by the Company and
its subsidiaries. The Audit Committee is responsible for (i) retaining, and
evaluating the performance of, the Company's independent auditors; (ii)
approving the Company's annual audit plan; (iii) reviewing reports of the
independent auditors concerning the adequacy of financial controls,
responsiveness of management, quality of systems and other related subjects;
(iv) monitoring compliance with the Company's policies and procedures; and (v)
when requested, reviewing proposed transactions between the Company and its
"affiliates" (e.g., officers, directors and significant stockholders) to
determine the fairness and reasonableness of the transactions.
5
<PAGE>
Compensation Committee
The Compensation Committee is responsible for the oversight and
administration of the Company's executive compensation structure, and is
responsible for (i) establishing the overall compensation policies for the
Company; (ii) determining the compensation of the Company's senior executives;
(iii) approving the Company's Incentive Compensation Plan and all other long- or
short-term incentive compensation plans; (iv) assuring that the Company's
compensation plans and policies are competitive with the market and in
compliance with applicable SEC and Internal Revenue Service regulations; and (v)
reporting on the Company's compensation practices in each year's proxy
statement.
Nominating Committee
The Nominating Committee is responsible for recruiting and nominating
candidates for the Board of Directors as well as re-nominating existing
directors. Prior to each annual meeting of stockholders, the Nominating
Committee reports to the Board of Directors regarding its nominees and the
background and an evaluation of each candidate. The Committee may also advise
the Board of Directors with respect to matters of Company philosophy, diversity,
composition and related matters.
The current members of the above-referenced committees are (a) Audit
Committee - Messrs. Smith, Fine, and Rivers; (b) Compensation Committee -
Messrs. Shutzer, Fine and Rivers; and (c) Nominating Committee - Messrs. Rivers,
Shutzer and Fine. Committee membership is determined on an annual basis and will
be modified following the next annual meeting.
Stockholders' Agreement
Each of the owners of the four founding builders prior to the initial
public offering, (Buffington Homes, Christopher Homes, The Genesee Company and
Sunstar Homes), (the "Founding Builders") and each of the pre-initial public
offering stockholders of the Company, Messrs. Coleman, Martell, Smith, Pirrello
and certain other persons ("Existing Stockholders") entered into an agreement
(the "Stockholders' Agreement") with respect to nominating and electing
Directors to the Board of Directors. Pursuant to the Stockholders' Agreement,
the Existing Stockholders and the Founding Builders have agreed to elect one
director each from the four Founding Builders and four directors nominated by
the Existing Stockholders in each of the Annual Stockholders' Meetings for
fiscal years 1996, 1997, 1998 and 1999; in each of the Annual Stockholders'
meetings for fiscal years 1996 and 1997 the Existing Stockholders and the
Founding Builders have agreed to elect two independent directors nominated by
the Founding Builders and one independent director nominated by the Existing
Stockholders. Each of the parties to the Stockholders' Agreement has agreed to
vote its Common Stock in order to cause the nominees of the Founding Builder's
Owners and the Existing Stockholders nominated for election to be elected to the
Board of Directors. The Stockholders' Agreement will terminate immediately
following the Company's Annual Meeting of Stockholders relating to fiscal year
1999 (but occurring in fiscal year 2000). By virtue of the Stockholders
Agreement, the election of the nominees to the Board of Directors at the Annual
Meeting is assured.
6
<PAGE>
II. PROPOSAL TO AUTHORIZE AN INCREASE IN THE COMMON STOCK
SUBJECT TO THE COMPANY'S 1996 STOCK INCENTIVE PLAN
The 1996 Stock Incentive Plan (the "1996 Plan") currently authorizes
the grant of options to purchase a maximum of 575,000 shares of Common Stock,
subject to adjustment for stock splits and similar capital changes. Assuming
that all such options were granted and exercised, the shares would constitute
approximately 5% of the outstanding Common Stock.
Proposed Amendment
The Company believes that equity participation by its key employees is
an important element in its overall compensation program. In furtherance of this
goal, the Company has adopted the 1996 Plan.
Of the 575,000 shares subject to the 1996 Plan, as of December 31,
1996, options for the purchase of a total of 316,800 shares at a weighted
average exercise price of $8.92 per share were outstanding. As of December 31,
1996, approximately 228 employees were participating in the 1996 Plan. In order
to continue its policy of providing equity participation to the Company's
employees and to provide availability for the issuance of options in connection
with the Company's acquisitions, the Board of Directors proposes that the 1996
Plan be amended to increase the shares of Common Stock available for grant under
the 1996 Plan from 575,000 shares to 1,125,000 shares.
The purpose of the 1996 Plan is to enable non-employee directors,
officers, key employees and consultants of the Company to participate in the
Company's future and to enable the Company to attract and retain these persons
by offering them proprietary interests in the Company. The 1996 Plan is
administered by the Compensation Committee. The 1996 Plan authorizes the
issuance of up to 575,000 shares of Common Stock pursuant to the grant or
exercise of stock options, stock appreciation rights, restricted stock or
deferred stock (generally, "Awards"). Options granted to certain senior
executives, management and other employees will vest over varied periods which
will be determined at the time such options are granted. Directors who are not
employees of the Company or any affiliate ("Non-Employee Directors") are
automatically granted options to purchase 3,000 shares on the date of each
annual stockholder's meeting, beginning in 1996. Such options shall be granted
at fair market value on the date of grant. On April 15, 1996, the closing price
for the Common Stock on the Nasdaq National Market was $5.25 per share.
Stock Options may be either "incentive stock options" (within the
meaning of Section 422 of the Internal Revenue Code) or nonstatutory options.
The exercise price per share purchasable under option shall be determined at the
time of grant by the Compensation Committee. Generally, participants will be
given ten years in which to exercise a stock option, or a shorter period once a
participant terminates employment. Payment may be made in cash or in the form of
unrestricted shares the participant already owns. At the Company's option it may
provide a participant with a loan or guarantee of a loan for the exercise price
of an option. The right to exercise an option may be conditioned upon the
completion of a period of service or other conditions.
Stock Appreciation Rights ("SARs") entitle a participant to receive an
amount in cash, shares or both, equal in value to (i) the excess of the fair
market value of one share over the exercise price per share specified in the
related stock option multiplied by (ii) the number of shares to which the SAR
relates. The right to exercise a SAR may be conditioned upon the completion of a
period of service or other conditions. Generally, participants will be given ten
years in which to exercise a SAR, or a shorter period once a participant
terminates employment.
7
<PAGE>
Shares of Restricted Stock may also be awarded under the 1996 Plan,
which requires the completion of a period of service or the attainment of
specified performance goals by the participant or the Company or a subsidiary,
division or department of the Company or such other criteria as the Compensation
Committee may determine. Upon a participant's Termination of Employment (as
defined in the 1996 Plan), the restricted stock still subject to restriction
generally will be forfeited by the participant. The Compensation Committee may
waive these restrictions in the event of hardship or other special
circumstances.
Deferred Stock is stock that can be awarded to a participant in the
future, at a specified time and under specified conditions. The Compensation
Committee will determine the participants to whom, and the time or times at
which, any deferred stock shall be awarded, the number of shares of deferred
stock to be awarded to any participant, the duration, the period during which
and the conditions under which receipt of the shares will be deferred and any
other terms and conditions of the Award. At the expiration of the deferral
period, the Compensation Committee may elect to deliver such shares to the
participant for the shares covered by the deferred stock Award.
Amendments and Modifications. The 1996 Plan, as adopted, is not limited
as to its duration. The Board of Directors may amend, alter, or discontinue the
1996 Plan, subject to certain limits.
Change in Control. In the event of a Change in Control of the Company
(as defined in the Plan):
(1) any SARs and stock options outstanding as of the date of
such Change in Control which are not then exercisable and vested will
become fully exercisable and vested to the full extent of the original
grant; and
(2) the restrictions and deferral limitations applicable to any
shares of restricted stock and deferred stock will lapse, and such
shares of restricted stock and deferred stock will become free of all
restrictions and become fully vested and transferable to the full
extent of the original grant.
A Change in Control includes any transaction which would result in any
person owning, directly or indirectly, 50% or more of the outstanding Common
Stock or the voting power of the Company; certain changes in the members of the
Board of Directors; certain corporate transactions (such as a merger); and the
sale of substantially all of the Company's assets.
As of December 31, 1996, there were 258,200 shares available for
issuance under the 1996 Plan. The Board of Directors has determined that the
1996 Plan should be amended to authorize the issuance of an additional 550,000
shares. The Board of Directors believes that the additional shares will be
sufficient to meet foreseeable demand for the next several years.
The Board of Directors recommends that stockholders vote FOR the
adoption of the proposal.
III. PROPOSAL TO APPROVE THE COMPANY'S EMPLOYEE
STOCK PURCHASE PLAN
The Employee Stock Purchase Plan (the "Purchase Plan") promotes the
Company's goal of increasing equity participation by the Company's employees.
The Company believes that participation
8
<PAGE>
in the Purchase Plan by all employees fosters commitment and more closely aligns
compensation with stockholder objectives by focusing employees on stockholder
return.
The Purchase Plan authorizes the grant of rights to purchase a maximum
of 500,000 shares of Common Stock (subject to adjustment for stock splits and
similar capital changes) to eligible employees. Each employee of the Company or
of a subsidiary of the Company (excluding certain part-time employees) on the
date of grant of a right is eligible to participate in the Purchase Plan. Any
employee who immediately after the grant of a right is determined to own 5% or
more of the Common Stock, however, would not be eligible to participate. The
Purchase Plan is administered by the Compensation Committee.
The Board of Directors adopted the Purchase Plan at a meeting held on
November 13, 1996. Rights to purchase shares under the purchase plan may be
granted at any time, or from time to time as determined by the Compensation
Committee. As of March 31, 1997, no rights have been granted under the Purchase
Plan. The Board of Directors may at any time amend or terminate the Purchase
Plan except that no such amendment may be made without the approval of the
Company's stockholders to the extent such approval is required by law or
agreement, or without the consent of the participants if such amendment would
impair the rights of a participant under an option theretofor granted.
Eligible employees may purchase shares of Common Stock through
accumulation of payroll deductions at a purchase price which shall not be less
than the lesser of 85% or the fair market value of the Common Stock on the
applicable grant date or 85% of the fair market value on the applicable exercise
date.
A copy of the Purchase Plan is included as an addendum to this proxy.
The Board of Directors recommends that stockholders vote FOR the
adoption of the Purchase Plan.
IV. COMPENSATION
Compensation of Executive Officers and Directors
Summary Compensation Table
The following table sets forth information for the fiscal year ended
December 31, 1996 concerning the compensation of the Company's Chief Executive
Officer and each of the Company's other executive officers whose total annual
salary and bonus exceeded $100,000.
9
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Shares All Other
Name and Underlying LTIP Compen-
Principal Position Salary ($) Bonus ($) Options (#) Payouts ($) sation ($)
------------------ ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
James J. Martell, Jr., President 166,667 225,490(1) -0- -0- 75,078(2)
and Chief Executive Officer
Thomas B. Buffington, Chief 306,250 161,350 100,000 -0- -0-
Operating Officer
Jamie M. Pirrello, Chief 106,667 112,745(1) -0- -0- 36,000(2)
Financial Officer
Brian J. McGregor, Former 121,875 -0- -0- -0- 75,000(2)
Chief Operating Officer
</TABLE>
- -------------------
1) Of the bonus paid to Mr. Martell and Mr. Pirrello, 20% was paid in
the form of Common Stock, valued at $6.00 per share.
2) Except for Mr. Martell, the entire amount of other compensation
represents payment for consulting services prior to the Company's
initial public offering. Mr. Martell's total includes the above and
an auto allowance in the amount of $3,078.
Stock Options
The Company's Employee Stock Option Plan provides for the grant of
options with respect to the Common Stock. The table below sets forth
information on option grants in fiscal 1996 to the named executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Percent of Total
Options Granted to
Options Employees in Fiscal Exercise Expiration Grant Date Present
Name Granted (1) Year Price Date Value (2)
---- ----------- ---- ----- ---- ---------
<S> <C> <C> <C> <C> <C>
James J. Martell, Jr. 0 0 0 0 0
Thomas B. Buffington 100,000 28.4% $6.00 12/23/06 $229,000
Jamie M. Pirrello 0 0 0 0 0
Brian J. McGregor 0 0 0 0 0
</TABLE>
- ----------------------
1) All options vest 50% one year from the date of grant and the
remaining on the second anniversary of the date of grant.
2) The grant date present values are calculated based on the
Black-Scholes model. The assumptions used in the calculations
include an expected volatility of .30, a risk free rate of return of
6.138%, a dividend yield of .017% and a time to exercise of five
years.
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<PAGE>
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth information concerning each exercise of
stock options during the fiscal year ended December 31, 1996 by each of the
executive officers named in the Summary Compensation Table above and the value
of unexercised options held by such persons as of December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Shares Underlying Value of Unexercised
Shares Unexercised Options at In-the-Money
Acquired FY-End (#) Options at FY-End ($)
on Value ---------- ---------------------
Name Exercise (#) Realized ($) (Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Martell, Jr. -0- -0- -0- -0- -0- -0-
Thomas B. Buffington -0- -0- -0- 100,000 -0- -0-
Jamie M. Pirrello -0- -0- -0- -0- -0- -0-
Brian J. McGregor -0- -0- -0- -0- -0- -0-
</TABLE>
Employment Agreements
Messrs. Martell and Pirrello have employment agreements with the
Company, effective April 15, 1996, and expiring in the year 2000. The agreements
automatically renew for successive one-year periods, following the initial term,
unless either the Company or employee provides written notice of its intent to
terminate. The agreements provide for various benefits including a base salary
of $350,000 and $180,000, respectively. The agreements also provide for
additional bonus compensation under the Company bonus program, which is tied to
operational results.
Under an agreement with Mr. Buffington, which was effective April 15,
1996 for a period of three years, Mr. Buffington was to be paid a salary of
$250,000 annually as President of the Company's subsidiary. In his capacity as
Chief Operating Officer, Mr. Buffington is paid an annual salary of $350,000 and
is eligible for additional bonus compensation under the Company bonus plan.
Messrs. Martell, Buffington and Pirrello may be terminated for "cause"
as defined in the agreements, or without cause. If terminated for cause, the
termination will be effective upon receipt of proper notice by the employee. If
Messrs. Martell, Buffington or Pirrello are terminated for other than cause, the
employee shall be entitled to his base salary for the remainder of the agreement
term as well as a pro-rata share of his bonus, as determined by the Board of
Directors.
Compensation of Directors
Under the Company's standard arrangements, each non-employee director
of the Company receives an annual director's fee of $20,000, payable $5,000 each
quarter, and $1,000 for attendance at Board meetings. All directors are
reimbursed for out-of-pocket expenses incurred to attend meetings. Employee
directors of the Company do not receive any additional compensation for services
as a director.
11
<PAGE>
Compensation Committee Interlocks and Insider Participation
None of the Compensation Committee members are or were officers or
employees of the Company or any of its subsidiaries.
REPORT OF THE COMPENSATION COMMITTEE
Board Compensation Committee Report on Executive Compensation
General. The Compensation Committee's compensation philosophy relative
to the Company's executive officers is to provide a compensation program
that is intended to attract and retain qualified executives for the Company
and to provide them with incentive to achieve Company goals and increase
shareholder value. This philosophy is implemented by establishing salaries,
cash and stock bonuses, and stock option programs.
Salaries. The Compensation Committee's policy is to provide salaries
that are competitive with those of similar executive officers in similar
companies. The Compensation Committee determines comparable salaries
through Company research and the research of consultants concerning the
salaries paid by the Company's competitors.
Bonuses. The Compensation Committee's policy is to provide a
significant portion of executive officers' total compensation through
annual bonuses as incentives to achieve the Company's financial and
operational goals and increase shareholder value. The Company's bonus
arrangements for its executive officers are intended to make a major
portion of each executive officer's compensation dependent on the Company's
overall performance.
Stock Options. The Compensation Committee's policy is to award stock
options to the Company's officers in amounts reflecting the participant's
position and ability to influence the Company's overall performance.
Options are intended to provide participants with an increased incentive to
make contributions to the long-term performance and growth of the Company,
to join the interests of participants with the interests of shareholders of
the Company, and to attract and retain qualified employees. The
Compensation Committee's policy has generally been to grant options with a
term of 10 years (in certain cases, with portions exercisable over shorter
periods) to provide a long-term incentive, and to fix the exercise price of
the options at the fair market value of the underlying shares on the date
of grant. Such options only have value if the price of the underlying
shares increases above the exercise price.
The only stock options granted to executive officers of the Company in
1996 were options for 100,000 shares, with a strike price of $6.00 per
share, issued to Thomas Buffington in December 1996.
1996 Compensation Decisions Regarding the President and Chief Executive
Officer. Compensation paid to Mr. Martell was in accordance with his
employment agreement which was negotiated prior to the Company's initial
public offering and creation of the Compensation
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Committee. The bonus paid to Mr. Martell was based on the company's overall
financial performance, in accordance with a previously established policy.
COMPENSATION COMMITTEE
William A. Shutzer
Mark L. Fine
Steven D. Rivers
Comparative Stock Performance
The graph below compares cumulative total stockholder return on the
Common Stock during the period from May 16, 1996 (the date on which the Common
Stock commenced trading) with the cumulative total return over the same period
of (ii) the Standard & Poor's 500 Index and (ii) a peer group of publicly-traded
companies selected by the Company for purposes of this comparison (the "Peer
Group")*. This graph assumes the investment of $100 at the close of trading on
May 16, 1996 in the Common Stock, the Standard & Poor's 500 Index and the Peer
Group and assumes reinvestment of dividends. Measurement points are at May 16,
1996, June 30, 1996, September 30, 1996 and December 31, 1996.
COMPARATIVE TOTAL RETURNS
The Fortress Group, Inc., Standard & Poor's 500, Peer
Group (Performance results from 5/16/96 through 12/31/96)
[GRAPHIC OMITTED]
Source: Zacks Investment Research, Inc.
- ---------------------------------
* The peer group includes the following companies: Beazer Homes USA, Inc., DR
Horton, Inc., Engle Homes, Inc., Kaufman and Broad Home Corporation, Lennar
Corporation, Pulte Corporation, Toll Brothers, Inc., Zaring Homes, Inc., M/I
Schottenstein Homes, Inc., Centex Corporation, Continental Homes, Hovnanian
Enterprises, Inc., M.D.C. Holdings, Inc., The Ryland Group, Inc. and U.S.
Home Corporation.
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V. CERTAIN TRANSACTIONS
The Company's Genesee subsidiary leases its administrative office space
from Genesee Holdings Corporation, of which Mr. Short is the president. In 1996,
the Company made lease payments of $108,960 to Genesee Holdings Corporation. The
Company's Christopher Homes subsidiary leases its administrative office space
from Towne Center L.P. Mr. Stuhmer is the president and sole shareholder of the
general partner of this partnership. In 1996, the Company made lease payments of
$149,728 to Towne Center L.P. The Company's Solaris subsidiary leased its
administrative office space from Square LD, LLC, of which Mr. Witek is a
partner. On September 5, 1996, Square LD, LLC sold the building to an unrelated
party. Until that time, Sunstar made lease payments of $57,833 in 1996. The
Company believes that the above referenced leases are at market rates.
In July of 1996, the Company sold its Genesee Custom Homes division to
Mr. Short, a director of the Company. The sale price was $4.9 million, and the
Company took back a one-year note at 12% in the amount of $4.1 million. The note
which is due in July 1997 and is extendible for six months at the borrower's
option, carried a balance of $3.3 million at December 31, 1996.
The Company also has a note receivable bearing interest at 13.75% from
another director, Mr. Stuhmer, for approximately $460,000, net of accrued
interest, which is secured by that director's shares in the Company.
Pursuant to an agreement with Commonwealth Homes, Inc., a company owned
by Mr. Coleman, the Company paid $311,311 for consulting services on merger and
acquisitions issues.
Also during 1996, the Company paid fees for legal services to Katten
Muchin & Zavis. Mr. Coleman was the former managing partner of Katten Muchin &
Zavis' Washington D.C. office.
During 1996, the Company paid fees to Furman Selz related to
underwriting the Company's initial public offering. Mr. Shutzer, who was not a
director of the Company at the time of the offering, is a director of Furman
Selz.
VI. OTHER MATTERS
Relationship With Independent Accountants
Price Waterhouse LLP is the independent accountant for the Company and
its subsidiaries and has reported on the Company's consolidated financial
statements included in the Annual Report of the Company which accompanies this
proxy statement. The Company's independent accountant is appointed by the Board
of Directors. The Board of Directors has reappointed Price Waterhouse LLP as
independent accountant for the year ending December 31, 1997.
Representatives of Price Waterhouse LLP are expected to be present at
the Annual Meeting of Shareholders and will have the opportunity to make a
statement at the meeting if they desire to do so. The representatives will also
be available to respond to appropriate questions.
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Other Proposals
Neither the Company nor the members of its Board of Directors intend to
bring before the Annual Meeting any matters other than those set forth in the
Notice of Annual Meeting of Shareholders, and they have no present knowledge
that nay other matters will be presented for action at the meeting by others. If
any other matters properly come before such meeting, however, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment.
By Order of the Board of Directors
JAMES J. MARTELL, JR.
PRESIDENT
Dated: April 18, 1997
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ADDENDUM
THE FORTRESS GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
Effective January 1, 1997
<PAGE>
THE FORTRESS GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
TABLE OF CONTENTS
ARTICLE I ESTABLISHMENT 1
1.1 Purpose 1
ARTICLE 11 DEFINITIONS 1
2.1 "Account" 1
2.2 "Agreement" or "Option Agreement" 1
2.3 "Beneficiary 1
2.4 "Board of Directors" or "Board" 2
2.5 "Cause" 2
2.6 "Change in Control" 2
2.7 "Code" or "Internal Revenue Code" 3
2.8 "Commission" 3
2.9 "Committee" 4
2.10 "Common Stock" 4
2.11 "Company" 4
2.12 "Continuous Service" 4
2.13 "Contribution Rate" 4
2.14 "Disability" 4
2.15 "Effective Date" 4
2.16 'Eligible Employee" 4
2.17 "Exercise Date" 5
2.18 "Exchange Act" 5
2.19 "Fair Market Value" 5
2.20 "Grant Date" 5
2.21 "Option Period" 6
2.22 "Option Price" 6
2.23 "Participant" 6
2.24 "Plan" 6
2.25 "Plan Year" 6
2.26 "Representative" 6
2.27 "Retirement" 6
2.28 "Rule 16b-3" 7
2.29 "Securities Act" 7
2.30 "Stock Option" or "Option" 7
2.31 "Subsidiary" 7
<PAGE>
2.32 "Termination of Employment" 7
ARTICLE III ADMINISTRATION 7
3.1 Committee Structure and Authority 7
ARTICLE IV STOCK SUBJECT TO PLAN 10
4.1 Number of Shares 10
4.2 Release of Shares 10
4.3 Restrictions on Shares 10
4.4 Stockholder Rights 11
4.5 Anti-Dilution 11
4.6 Custodian 11
ARTICLE V ELIGIBILITY 12
5.1 Eligibility 12
5.2 Grant of Options 12
5.3 Option Period 12
5.4 Option Price 12
5.5 Contribution Rate 13
5.6 Purchase of Shares 13
5.7 Cancellation of Options 14
5.8 Terminated Employees 14
5.9 Deceased Employees 14
5.10 Disabled or Retired Employees 15
5.11 Limitations 15
5.12 Nonassignability 15
ARTICLE VI MISCELLANEOUS 15
6.1 Amendments and Termination 15
6.2 Unfunded Status of Plan 16
6.3 General Provisions 16
6.4 Mitigation of Excise Tax 18
6.5 Rights with Respect to Continuance of Employment 18
6.6 Options in Substitution for Options Granted by Other 18
Corporations
6.7 Delay 19
6.8 Headings 19
6.9 Severability 19
6.10 Successors and Assigns 19
6.11 Entire Agreement 19
<PAGE>
ARTICLE I
ESTABLISHMENT
1.1 Purpose.
The Fortress Group, Inc. Employee Stock Purchase Plan ("Plan") is hereby
established by The Fortress Group, Inc. ("Company"). The purpose of the Plan is
to promote the overall financial objectives of the Company's stockholders by
motivating those persons participating in the Plan to achieve long-term growth
in stockholder equity. The Plan and the grant of awards thereunder is expressly
conditioned upon the Plan's approval by the stockholders of the Company, and if
such approval is not obtained then the Plan and any Option granted thereunder
shall be null and void ab initio. The Plan is intended as an "employee stock
purchase plan" within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended, and Options granted hereunder are intended to constitute
options granted under such a plan, and the Plan and all actions taken in
connection with the Plan shall be constructed consistently with such intent. The
Plan is adopted effective as of January 1, 1997.
ARTICLE II
DEFINITION
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Account" shall mean the bookkeeping account established on behalf
of a Participant to which shall be credited all contributions paid for the
purpose of purchasing Common Stock under the Plan, and to which shall be charged
all purchases of Common Stock pursuant to the Plan. The Company shall have
custody of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or
collectively, any enrollment, subscription and withholding agreement entered
into pursuant to the Plan. An Agreement shall be the authorization of the
Company or a Subsidiary to withhold from payroll amounts to be applied to
purchase Common Stock.
2.3 "Beneficiary" means the person or entity which has been designated
by a Participant in his or her most recent written beneficiary designation filed
with the Committee to receive the benefits specified under the Plan upon such
Participant's death or to which Options or other rights are transferred if and
to the extent permitted hereunder (and only to the extent consistent with the
plan's being described in Section 423 of the Code). If, upon a Participant's
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death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the person or entity entitled by will or the
laws of descent and distribution to receive such benefits.
2.4 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.5 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the Participant's employment under the written
agreement or arrangement between the Participant and the Company or a Subsidiary
for "cause" as defined in such agreement or arrangement, or in the event there
is no such agreement or arrangement or the agreement or arrangement does not
define the term "cause" or a substantially equivalent term, then Cause means (a)
any act or failure to act deemed to constitute cause under the Company's
established practices, policies or guidelines applicable to the Participant or
(b) the Participant's act or omission constituting gross misconduct with respect
to the Company or an Affiliate in any material respect.
2.6 "Change in Control" shall be deemed to have occurred upon the first
to occur of the following:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of fifty percent (50%) or more of either (1) the
then-outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (2) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(a), the following acquisitions shall not constitute a Change of
Control: (1) any acquisition directly from the Company, (2) any
acquisition by the Company, (3) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, (4) any acquisition by any
corporation pursuant to a transaction which complies with clauses (1),
(2) and (3) of subsection (c) or (5) any acquisition by the Participant
or a Person of which the Participant is an affiliate.
(b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the
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election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board;
(c) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of
the Company (a "Business Combination"), in each case, unless, following
such Business Combination, (1) the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
fifty percent (50%) of, respectively, the then-outstanding shares of
common stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (2) no Person (excluding any corporation resulting from
such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, thirty-five
percent (35%) or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such Business
Combination, or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (3) at least a majority of
the members of the board of directors of the corporation resulting from
such Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination provided that any
Business Combination initiated or controlled by the Participant in a
capacity other than as an officer of the Company or as a director of the
Company shall not be regarded as a Change of Control for purposes of
this Agreement; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
2.7 "Code" or "Internal Revenue Code" means the Internal Revenue Code of
1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any successor thereto.
2.8 "Commission" means the Securities and Exchange Commission or any
successor agency.
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2.9 "Committee" means the Compensation Committee of the Board or such
other Board committee as may be designated by the Board to administer the Plan.
2.10 "Common Stock" means the shares of the regular voting Common Stock,
$.01 par value per share, of the Company, whether presently or hereafter issued,
and any other stock or security resulting from adjustment thereof as described
hereinafter or the common stock of any successor to the Company which is
designated for the purpose of the Plan.
2.11 "Company" means The Fortress Group, Inc., a Delaware corporation,
and includes any successor or assignee corporation or corporations into which
the Company may be merged, changed or consolidated; any corporation for whose
securities all or substantially all of the securities of the Company shall be
exchanged; and any assignee of or successor to all or substantially all of the
assets of the Company.
2.12 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary (but only since the date
such entity became a Subsidiary) from the most recent date of hire to the date
of Termination of Employment for any reason. The Committee may provide rules
from time to time regarding the calculation of Continuous Service and the method
for crediting such service.
2.13 "Contribution Rate" means the rate determined under Section 5.5.
2.14 "Disability" means a mental or physical injury or illness that
entitles the Participant to receive benefits under the long-term disability plan
of the Company or a Subsidiary of the Company, or if the Participant is not
covered by such a plan, a mental or physical injury or illness that renders a
Participant totally and permanently incapable of performing the Participant's
duties for the Company or a Subsidiary of the Company. Notwithstanding the
foregoing, a Disability shall not qualify under this Plan if it is the result of
(i) a willfully self-inflicted injury or willfully self-induced sickness; or
(ii) an injury or disease contracted, suffered, or incurred while participating
in a criminal offense. The determination of Disability shall be made by the
Committee, in its sole discretion. The determination of Disability for purposes
of this Plan shall not be construed to be an admission of disability for any
other purpose.
2.15 "Effective Date" means January 1, 1997.
2.16 "Eligible Employee" means each current, common law employee of the
Company or a Subsidiary (if the Company has extended participation to the
employees of a Subsidiary) on a Grant Date, except that the Committee in its
sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of
Continuous Service established by the Committee (but not to exceed 2
years).
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(b) any employee whose customary employment is 20 hours or less
per week;
(c) any employee whose customary employment is for not more than
5 months in any calendar year; and
(d) any employee who is a highly compensated employee of the
Company or Subsidiary within the meaning of Section 414(q) of the Code.
As of the Effective Date and unless and until amended by the Committee,
employees described in Section 2.16(b) and (c) are excluded as Eligible
Employees. Any period of service described in this Section may be decreased in
the discretion of the Committee. Any employee who would directly or indirectly
own or hold (applying the rules of Section 424(d) of the Code to determine stock
ownership) immediately following the grant of an Option hereunder an aggregate
of five percent (5%) or more of the total combined voting power or value of all
outstanding shares of all classes of stock of the Company or any Subsidiary is
excluded as an Eligible Employee.
2.17 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock and unless otherwise specified by the Committee shall be
December 31, 1997 and the December 31 of each calendar year thereafter. The
Committee may accelerate an Exercise Date in order to satisfy the employment
period requirement of Section 423(a)(2), and the date of a Change in Control
shall be an Exercise Date.
2.18 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the Commission thereunder.
2.19 "Fair Market Value" means the fair market value of Common Stock as
determined by the Committee or under procedures established by the Committee.
Unless otherwise determined by the Committee, the Fair Market Value per share of
Common Stock as of any given date shall be the closing sale price per share
reported on a consolidated basis for stock listed on the principal stock
exchange or market on which Common Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported.
2.20 "Grant Date" means the date or dates established by the Committee
on which one or more Options are granted pursuant to the Plan. The Committee may
determine for any period that there shall be no Grant Date, in which case no
Options shall be granted for that period. The terms and conditions of any Option
granted on a particular Grant Date shall be independent of and have no effect on
the terms and conditions of any Option granted on another Grant Date.
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2.21 "Option Period" means the period beginning on the day next
following an Exercise Date and ending on the next following Exercise Date, as
determined by the Committee, subject to the limitations of Section 5.3.
2.22 "Option Price" means the price at which the Common Stock granted as
of a specific Grant Date may be purchased under an Option. The price shall be
subject to the limitation set forth in Section 5.4.
2.23 "Participant" means a person who satisfies the eligibility
conditions of Article V and to whom an Option has been granted by the Committee
under the Plan, and in the event a Representative is appointed for a Participant
or another person becomes a Representative, then the term "Participant" shall
mean such Representative, to the extent consistent with Section 423 of the Code.
The term shall also include a trust for the benefit of the Participant, the
Participant's parents, spouse or descendants, or a custodian under a uniform
gifts to minors act or similar statute for the benefit of the Participant's
descendants, to the extent permitted by the Committee and not inconsistent with
an intended application of Rule 16b-3, the intent to comply with Section 423 of
the Code and the use of Commission Form S-8 (or the Committee's waiver of such).
Notwithstanding the foregoing, the term "Termination of Employment shall mean
the Termination of Employment of the person to whom the Award was originally
granted.
2.24 "Plan" means The Fortress Group, Inc. Employee Stock Purchase Plan,
as herein set forth and as may be amended from time to time.
2.25 "Plan Year" means the period beginning January 1, 1997 and
continuing through December 31, 1997 and each calendar year beginning
thereafter. The Committee may at any time in its discretion designate another
period as the Plan Year.
2.26 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of the
Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or (d)
any person to whom an Option or shares of Common Stock have been transferred
with the permission of the Committee or by operation of law; provided that only
one of the foregoing shall be the Representative at any point in time as
determined under applicable law and recognized by the Committee.
2.27 "Retirement" means the Participant's Termination of Employment
after attaining either the normal retirement age or the early retirement age
as defined in the principal (as determined by the Committee) tax-qualified
plan of the Company, if the Participant is covered by such a plan, and if the
Participant is not covered by such a plan, then age sixty-five (65), or age
fifty-five (55) with the accrual of ten (10) years of service.
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2.28 "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Commission under
Section 16 of the Exchange Act.
2.29 "Securities Act"' means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
2.30 "Stock Option" or "Option" means the right to purchase the number
of shares of Common Stock specified by the Plan at a price and for a term
fixed by the Plan, and subject to such other limitations and restrictions as
the Plan and the Committee may impose.
2.31 "Subsidiary" means any company as currently defined in Section
424(f) of the Code. Unless otherwise indicated the term "Company" shall
hereinafter be deemed to include all Subsidiaries of the Company having
employees to which the Company has extended participation in the Plan.
2.32 "Termination of Employment" means the occurrence of any act or
event, whether pursuant to an employment agreement or otherwise, that actually
or effectively causes or results in the person's ceasing, for whatever reason,
to be an employee of the Company, including, without limitation, death,
Disability, dismissal, severance at the election of the Participant,
Retirement, or severance as a result of the discontinuance, liquidation, sale
or transfer by the Company of all businesses owned or operated by the Company.
A transfer of employment from the Company to a Subsidiary, or from a
Subsidiary to the Company, will not be a Termination of Employment, unless
expressly determined by the Committee. A Termination of Employment shall occur
for an employee who is employed by a Subsidiary of the Company if the
Subsidiary shall cease to be a Subsidiary and the Participant shall not
immediately thereafter become an employee of the Company or a Subsidiary of
the Company.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATIQN
3.1 Committee Structure and Authority. The Plan shall be administered by
the Committee. A majority of the Committee shall constitute a quorum at any
meeting thereof (including by telephone conference) and the acts of a majority
of the members present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for purposes of
this Plan. The Committee may authorize any one or more of its members or an
officer of the Company to execute and deliver documents on behalf of the
Committee. A member of the Committee shall not exercise any discretion
respecting himself or herself under the Plan. The Board shall have the authority
to remove, replace or fill any
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vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
Board. The Committee may allocate among one or more of its members, or may
delegate to one or more of its agents, such duties and responsibilities as it
determines.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) to select those persons to whom Options may be granted from
time to time;
(b) to determine whether and to what extent Options are to be
granted hereunder;
(c) to determine the number of shares of Common Stock available
as of any Grant date;
(d) to determine any Grant Date, Exercise Date and Option
Period, and provide for all aspects of payroll deduction,
suspension or withdrawal;
(e) to determine the number of shares of Common Stock to be
covered by each Option;
(f) to determine the terms and conditions of any Option granted
hereunder (including, but not limited to, the Option Price,
the Option Period, any exercise restriction or limitation
and any exercise acceleration or forfeiture regarding any
Option and the shares of Common Stock relating thereto);
(g) to adjust the terms and conditions, at any time or from
time to time, of any Option, subject to the limitations of
Section 6.1;
(h) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an
Option shall be deferred;
(i) to determine under what circumstances an Option may be
settled in cash or Common Stock;
(j) to provide for the forms of Agreement to be utilized in
connection with this Plan;
(k) to determine whether a Participant has a Disability or
reached Retirement;
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(1) to interpret and make a final determination with respect to
the remaining number of shares of Common Stock available
under the Plan;
(m) to determine what securities law requirements are
applicable to the Plan, Options and the issuance of shares
of Common Stock, and to require of a Participant that
appropriate action be taken with respect to such
requirements;
(n) to cancel, with the consent of the Participant or as
otherwise provided in the Plan or an Agreement, outstanding
Options;
(o) to require as a condition of the exercise of an Option or
the issuance or transfer of a certificate of Common Stock,
the withholding from a Participant of the amount of any
Federal, state or local taxes as may be necessary in order
for the Company or any other entity to obtain a deduction
or as may be otherwise required by law;
(p) to determine whether and with what effect an individual has
incurred a Termination of Employment;
(q) to determine whether the Company or any other person has a
right or obligation to purchase Common Stock from a
Participant and, if so, the terms and conditions on which
such Common Stock is to be purchased;
(r) to determine the restrictions or limitations on the
transfer of Common Stock or Options;
(s) to determine whether an Option is to be adjusted, modified
or purchased, or is to become fully exercisable, under the
Plan or the terms of an Agreement;
(t) to determine the permissible methods of Option exercise and
payment;
(u) to adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of
this Plan; and
(v) to appoint and compensate agents, counsel, auditors or
other specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Option issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The
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Committee's policies and procedures may differ with respect to Options granted
at different times or to different Participants. Any determination made by the
Committee pursuant to the provisions of the Plan shall be made in its sole
discretion, and in the case of any determination relating to an Option, may be
made at the time of the grant of the Option or, unless in contravention of any
express term of the Plan or an Agreement, at any time thereafter. All decisions
made by the Committee pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company and Participants. Any
determination shall not be subject to de novo review if challenged in court.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Options under the Plan shall be 500,000 shares of Common Stock
authorized for issuance on the Effective Date. Such shares shall consist of
authorized and unissued shares or treasury shares.
4.2 Release of Shares. The Committee shall in its sole discretion
determine the number of shares of Common Stock available under the Plan, and may
include, in its sole discretion, any shares of Common Stock that cease to be
subject to an Option or are forfeited, any shares subject to an Option that
terminates without issuance of shares of Common Stock being made to a
Participant, or any shares (whether or not restricted) of Common Stock that are
received by the Company in connection with the exercise of an Option, including
the satisfaction of tax withholding.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option shall be subject to the terms and conditions specified herein and
to such other terms, conditions and restrictions as the Committee in its
discretion may determine or provide in the Option Agreement with respect to such
Option. The Company shall not be required to issue or deliver any certificates
for shares of Common Stock, cash or other property prior to (i) the listing of
such shares on any stock exchange (or other public market) on which the Common
Stock may then be listed (or regularly traded), (ii) the completion of any
registration or qualification of such shares under Federal or state law, or any
ruling or regulation of any government body which the Committee determines to be
necessary or advisable, and (iii) the satisfaction of any applicable withholding
obligation in order for the Company to obtain a deduction with respect to the
exercise of an Option. The Company may cause any certificate for any shares of
Common Stock to be delivered to be properly marked with a legend or other
notation reflecting the limitations on transfer of such Common Stock as provided
in this Plan or as the Committee may otherwise require. The Committee may
require any person exercising an Option to make such representations and furnish
such information as it may consider appropriate in connection with the issuance
or delivery of the shares of Common Stock in
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compliance with applicable law or otherwise. Fractional shares shall not be
delivered, but shall be rounded to the next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a stockholder
as to shares of Common Stock subject to an Option until, after proper exercise
of the Option or other action required, such shares shall have been recorded on
the Company's official stockholder records as having been issued and
transferred. Subject to Section 4.3, upon exercise of the Option or any portion
thereof, the Company shall issue the shares of Common Stock at such time as
determined by the Committee, and the Participant will not be treated as a
stockholder for any purpose whatsoever prior to such issuance. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to the date such shares are recorded as issued and transferred in the
Company's official stockholder records, except as provided in an Agreement.
4.5 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, merger, recapitalization or other
change in the capital structure of the Company, corporate separation or division
of the Company (including, but not limited to, a split-up, spin-off, split-off
or distribution to Company stockholders other than a normal cash dividend), sale
by the Company of all or a substantial portion of its assets (measured on either
a stand-alone or consolidated basis), reorganization, reclassification, rights
offering, partial or complete liquidation or any other corporate transaction,
Company share offering or other event involving the Company and having an effect
similar to any of the foregoing, then the Committee may adjust or substitute, as
the case may be, the number of shares of Common Stock available for Options
under the Plan, the number of shares of Common Stock covered by outstanding
Options, the exercise price per share of outstanding Options, the Exercise Date,
and any other characteristics or terms of the Options as the Committee shall
deem necessary or appropriate to reflect equitably the effects of such changes
to the Participants; provided, however, that any fractional share resulting from
such adjustment shall be eliminated by rounding to the next lower whole number
of shares with appropriate payment for such fractional share as shall reasonably
be determined by the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan may
be delivered to and held in the custody of such investment or financial firm as
shall be appointed by the Committee. The custodian may hold in nominee or street
name certificates for shares purchased pursuant to the Plan, and may commingle
shares in its custody pursuant to the Plan in a single account without
identification as to individual Participants. By appropriate instructions to the
custodian on forms to be provided for the purpose, a Participant may from time
to time obtain (a) transfer into the Participant's own name or into the name of
the Participant and another individual of all or part of the whole shares held
by the custodian for the Participant's account; (b) transfer of all or part of
the whole shares held for the Participant's account by the custodian to a
regular individual brokerage account in the Participant's own name or in the
name of the Participant and another individual, either with the firm then acting
as custodian or with another firm, or (c) sell all or part of the whole shares
held by the custodian for the Participant's account at the market price at the
time the order is executed and
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in the Plan, and upon receipt of instructions from the Participant, the shares
held by the custodian for the account of the Participant will be transferred to
the Participant in accordance with (a) above, transferred to a brokerage account
in accordance with (b) above, or sold in accordance with (c), above.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participation the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company or Eligible
Employees of a Subsidiary to whom the Company has extended participation on a
Grant Date.
5.2 Grant of Options. The Committee shall have authority to grant
Options under the Plan at any time or from time to time to all Eligible
Employees as of a Grant Date. (To the extent an Option is granted to any
Eligible Employee of an entity on a relevant date, all Eligible Employees of the
entity shall be granted an Option to the extent required by law.) An Option
shall entitle the Participant to receive shares of Common Stock at the
conclusion of the Option Period, subject to the Participant's satisfaction in
full of any conditions, restrictions or limitations imposed in accordance with
the Plan or an Agreement, including without limitation, payment of the Option
Price. Each Option granted under this Plan shall be evidenced by an Agreement,
in a form approved by the Committee, which shall embody the terms and conditions
of such Option and which shall be subject to the express terms and conditions
set forth in this Plan and to such other terms and conditions as the Committee
may deem appropriate. The grant and exercise of Options hereunder shall be
subject to all applicable Federal, state and local laws, rules and regulations
and to such approvals by any governmental or regulatory agencies as may be
required. As of any Grant Date, each Eligible Employee shall be granted Options
with the same rights and privileges as the Options granted to each other
Eligible Employee on that Grant Date, except the amount of the Common Stock
which may be purchased by any Participant under any Option may bear a uniform
relationship to the total compensation, or the basic or regular rate of
compensation (as determined by the Committee), of all Eligible Employees on that
Grant Date, and the Option may establish a maximum amount of Common Stock which
may be purchased.
5.3 Option Period. Each Agreement shall specify the period for which the
Option thereunder is granted, which shall be determined by the Committee. In no
event shall the Option Period extend beyond the period permitted under Section
423(b)(7) of the Code.
5.4 Option Price. Subject to the limits stated herein, the Option Price
per share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to
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any Exercise Date, the Option Price shall not be less than the lesser of (a)
eighty-five percent (85%) of the Fair Market Value of a share of Common Stock
(averaged over such period as the Committee may determine and as permitted by
law) on the applicable Grant Date and (b) eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock (averaged over such period as the
Committee may determine and as permitted by law) on the applicable Exercise
Date. The Committee reserves the right to increase the Option Price by the value
of any accretion to the amounts credited to an Account if the Participant is
credited with such accretion regardless of the method of accounting for such
accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate,
the Participant shall file an Agreement with the Committee within the time
period designated by the Committee. The Committee may provide that the Agreement
shall specify the percentage or amount of the Participant's compensation (as
defined by the Committee) determined by the Participant to be deducted each pay
period. Such amount shall be credited to the Account and shall be the
Participant's Contribution Rate. Such deductions shall begin as of the first
regularly scheduled payroll date on or after the later of the Grant Date and the
date specified by the Committee. Unless otherwise determined by the Committee,
Participants may not make separate cash payments outside payroll deductions
under the Plan, except that, in the event of a Change in Control, the Committee
may permit each Participant to make a single sum payment with respect to the
Option before the Exercise Date equal to the amount the Participant would have
contributed as determined by the Committee for the payroll periods remaining to
the Exercise Date. The Committee may establish minimum and maximum percentages
or amounts to be contributed and a date by when any Agreement must be filed with
the Committee. Unless otherwise permitted by the Committee, such contributions
will be held in the general funds of the Company, and no interest shall accrue
on any amounts held under this Plan, unless expressly determined by the
Committee, and any separate accounting shall not limit the Company's use of the
funds. If payroll deductions are made by a Subsidiary, that corporation will
promptly remit the amount of the deduction to the Company. A Participant's
Contribution Rate, once established, shall remain in effect until the next
following Grant Date unless and until contributions are suspended or fully
discontinued in order to comply with Section 401 (k) of the Code or for such
other reasons as the Committee in its sole discretion may determine, or if the
Participant shall request suspension or discontinuance. If a Participant
requests to suspend payroll deductions the Participant may do so at such times
and in such manner as the Committee may permit, and previously deducted amounts
shall be retained until the Exercise Date. A Participant who has suspended
contributions (1) will receive any shares of Common Stock as of the Exercise
Date and (2) may recommence payroll deductions at such time, if at all, as
determined by the Committee. If a Participant requests to cancel and totally
discontinue payroll deductions, the Participant may do so by providing written
notice to the Committee, and there shall be paid to the Participant the value of
the Participant's Account at such time as the Committee directs and the
Participant shall not receive any shares of Common Stock as of the Exercise
Date.
5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and
5.11, on each Exercise Date, a Participant who has previously executed an
Agreement with respect to a
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specific Grant Date and made one or more payments described in Section 5.5 shall
be deemed to have exercised the Option to the extent of the value of the
Account, and shall be deemed to have purchased such number of full shares of
Common Stock as equals the value of the Account, subject to the limits of
Sections 423(b)(3) and 423(b)(8) of the Code and the number of shares available
as of the Exercise Date and proportionably allocable to other Participants for
that Grant Date. The number of shares of Common Stock to be purchased as of any
Exercise Date shall be determined by dividing the Option Price per share of the
Common Stock into the Account value and the value of the shares so purchased
shall be charged to the Account. Any value remaining in an Account of the
Participant shall be retained by the Plan as an initial value credited to the
Account of the Participant if there is an effective Agreement respecting the
Participant on the Grant Date immediately following the Exercise Date, or if
there is not an effective Agreement regarding the Participant in the Grant Date
immediately following the Exercise Date, then the remaining value shall be
returned at such time as determined by the Committee to the Participant and not
applied to purchase Common Stock. Certificates of Common Stock purchased
hereunder may be held by the custodian as provided in Section 4.6. The Committee
may determine and designate that any Common Stock issued to the Participant who
is subject to reporting under Section 16 of the Exchange Act must be held for
six (6) months to the extent required by law to avoid liability under the
Exchange Act. The Committee may amend the Plan or any Agreement or provide in
operation for Participants to dispose of shares of Common Stock received upon
the Exercise Date on or immediately thereafter (which time may include any
period during which the Option is held). If the total number of shares to be
purchased as of any Exercise Date by all Participants exceeds the number of
shares authorized and remaining available under this Plan or made available by
the Committee as to any Exercise Date, a pro rata allocation of the available
shares will be made among all Participants authorizing such payroll deductions
based on the amount of their respective payroll deductions through the Exercise
Date. Any cash remaining will be returned to Participants.
5.7 Cancellation of Options. Except as otherwise provided in an
Agreement an Option shall cease to be exercisable and shall be cancelled on or
after the expiration of the Option Period.
5.8 Terminated Employee. Except as otherwise provided by the Committee
or in an Agreement, any Participant who incurs a Termination of Employment for
any reason, except death, Disability or Retirement, during the Option Period
shall cease to be a Participant, the Option of the Participant shall be null and
void on the date of the Termination of Employment without notice to the
Participant and the balance of the Account of the Participant shall be
distributed to the Participant at such time as the Committee determines.
5.9 Deceased Employees. If a Participant shall die during an Option
Period while an Eligible Employee, no further contributions by deduction from
regularly scheduled payments on behalf of the deceased Participant shall be
made, except that unless otherwise determined by the Committee, the
Representative of such Participant may make a single sum payment with respect to
the Option of the Participant at any time on or before the Exercise Date equal
to the amount the Participant would have contributed as determined by the
Committee for the payroll
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periods remaining to the Exercise Date. The Representative of such Participant
may at any time prior to the Exercise Date request a distribution of the Account
of the Participant. If the Representative does not request a distribution, the
balance accumulated in the deceased Participant's Account shall be used to
purchase shares of Common Stock on the Exercise Date.
5.10 Disabled or Retired Employees. If a Participant incurs a
Termination of Employment due to Disability, or if a Participant incurs a
Termination of Employment due to Retirement, during an Option Period, no further
contributions by deduction from regularly scheduled payments on behalf of the
disabled or retired Participant shall be made, except that unless otherwise
determined by the Committee, the Participant may make a single sum payment with
respect to the Option of the Participant at any time on or before the Exercise
Date equal to the amount the Participant would have contributed as determined by
the Committee for the payroll periods remaining to the Exercise Date. The
Participant may at any time prior to the Exercise Date request a distribution of
the Account. If the Participant does not request a distribution of the Account,
the balance accumulated in the disabled or retired Participant's Account shall
be used to purchase shares of Common Stock on the Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in
no event may a Participant (i) purchase under the Plan during any Plan Year
Common Stock having a fair market value (determined at the Grant Date) of more
than $25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after the Option is granted, five percent (5%) or
more of the total voting power or value of all classes of stock of the Company.
Subject to the foregoing, as of any Grant Date a Participant may not receive an
Option to purchase a number of shares of Common Stock in excess of the maximum
number of shares of Common Stock determined by the Committee, and in the absence
of a determination, the maximum number shall be determined by dividing $25,000
by the lowest closing price of the Common Stock as reported on the principal
exchange or market on which the Common Stock was traded during the 12-month
period ending immediately prior to the Grant Date.
5.12 Nonassignability. Except as provided herein or in an Agreement, no
Option or interest therein shall be transferable by a Participant other than by
will or by the laws of descent and distribution, and all Options shall be
exercisable during the Participant's lifetime only by the Participant or, if
consistent with Section 423 of the Code, by designation of a Beneficiary upon
the death of the Participant.
ARTICLE VI
MISCELLANEOUS
6.1 Amendments and Termination. The Board may amend, alter, or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
under an Option theretofore granted without the Participant's consent, except
such an amendment made to cause the Plan to qualify for the exemption
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provided by Rule 16b-3 or as a Plan described in Section 423 of the Code. In
addition, no amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by law or agreement.
The Committee may amend the Plan at any time subject to the same
limitations on its right to amend the Plan as apply to the Board as described in
the preceding paragraph, and any such amendment shall be subject to the approval
or rejection of the Board.
The Committee may amend the terms of any Option theretofore granted,
prospectively or retroactively, but no such amendment shall impair the rights of
any Participant without the Participant's consent, except such an amendment made
to cause the Plan or Option to qualify for the exemption provided by Rule 16b-3
or to qualify as an Option under Section 423 of the Code.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules, as
well as other developments and to grant Options which qualify for beneficial
treatment under such rules without stockholder approval. Notwithstanding
anything to the contrary herein, if any right or action under this Plan or an
Agreement would cause a transaction to be ineligible for pooling of interests
accounting that would, but for the right or action, be eligible for such
accounting treatment, the Committee may modify or adjust the right or action so
that pooling of interest accounting is available.
6.2 Unfunded Status of Plan. It is intended that the Plan be an
"unfunded" plan for incentive and deferred compensation. The Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such
trusts or other arrangements is consistent with the "unfunded" status of the
Plan.
6.3 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Option to represent to and
agree with the Company in writing that such person is acquiring the
shares without a view to the distribution thereof. The certificates for
such shares may include any legend which the Committee deems appropriate
to reflect any restrictions on transfer.
(b) Impact on other Compensation. Nothing contained in the Plan
shall prevent the Company from adopting other or additional compensation
arrangements for its employees.
(c) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for
Federal income tax purposes with
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respect to any Option, the Participant shall pay to the Company (or
other entity identified by the Committee), or make arrangements
satisfactory to the Company or other entity identified by the Committee
regarding the payment of, any Federal, state, local or foreign taxes of
any kind required by law to be withheld with respect to such amount
required in order for the Company to obtain a current deduction. Unless
otherwise determined by the Committee, withholding obligations may be
settled with Common Stock, including Common Stock that is part of the
Option that gives rise to the withholding requirement, provided that any
applicable requirements under Section 16 of the Exchange Act are
satisfied. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company shall, to
the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the Participant. If the Participant
disposes of shares of Common Stock acquired pursuant to an Option in any
transaction considered to be a disqualifying transaction under the Code,
the Participant must give the Company written notice of such transfer
and the Company shall have the right to deduct any taxes required by law
to be withheld from any amounts otherwise payable to the Participant.
(d) Representative. The Committee shall establish such
procedures it deems appropriate for a Participant to designate a
Representative to who many amounts payable in the event of the
Participant's death are to be paid.
(e) Controlling Law. The Plan and all Options made and actions
taken thereunder shall be governed by and construed in accordance with
the laws of the State of Delaware (other than its law respecting choice
of law). The Plan shall be construed to comply with all applicable law,
and to avoid liability to the Company or a Participant, including,
without limitation, liability under Section 16(b) of the Exchange Act.
(f) Offset. Any amounts owed to the Company by a Participant of
whatever nature may be offset by the Company from the value of any
shares of Common Stock, cash or other thing of value under the Plan or
an Agreement to be transferred to the Participant, and no shares of
Common Stock, cash or other thing of value under the Plan or an
Agreement shall be transferred unless and until all disputes of any type
between the Company and the Participant have been fully and finally
resolved and the Participant has waived all claims to such against the
Company.
(g) Fail Safe. With respect to persons subject to Section 16 of
the Exchange Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3. To the extent any
provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated herein, such
provision (other than one relating to eligibility requirements or the
price and amount of Options) shall be deemed to be incorporated by
reference into the Plan with respect to Participants subject to Section
16.
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(h) Capitalization. The grant of an Award shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business
or assets.
6.4 Mitigation of Excise Tax. Subject to any agreement between the
Participant and the Company, if any payment or right accruing to a Participant
under this Plan (without the application of this Section 6.4), either alone or
together with other payments or rights accruing to the Participant from the
Company ("Total Payments") would constitute a "parachute payment" (as defined in
Section 28OG of the Code and regulations thereunder), such payment or right
shall be reduced to the largest amount or greatest right that will result in no
portion of the amount payable or right accruing under the Plan being subject to
an excise tax under Section 4999 of the Code or being disallowed as a deduction
under Section 28OG of the Code. The determination of whether any reduction in
the rights or payments under this Plan is to apply shall be made by the
Committee in good faith after consultation with the Participant, and such
determination shall be conclusive and binding on the Participant. The
Participant shall cooperate in good faith with the Committee in making such
determination and providing the necessary information for this purpose. The
foregoing provisions of this Section 6.4 shall apply with respect to any person
only if after reduction for any applicable Federal excise tax imposed by Section
4999 of the Code and Federal income tax imposed by the Code, the Total Payments
accruing to such person would be less than the amount of the Total Payments as
reduced, if applicable, under the foregoing provisions of the Plan and after
reduction for only Federal income taxes.
6.5 Rights with Respect to Continuance of Employment. The Plan does not,
directly or indirectly, create any absolute right for the benefit of any
Employee or class of Employees to purchase any Common Stock under the Plan.
Nothing contained herein shall be deemed to alter the relationship between the
Company and a Participant, or the contractual relationship between a Participant
and the Company if there is a written contract regarding such relationship.
Nothing contained herein shall be construed to constitute a contract of
employment between the Company and a Participant. The Company and each of the
Participants continue to have the right to terminate this employment
relationship at any time for any reason, except as provided in a written
contract. The Company shall have no obligation to retain the Participant in its
employ or service as a result of this Plan. There shall be no inference as to
the length of employment or service hereby, and the Company reserves the same
rights to terminate the Participant's employment or service as existed prior to
the individual becoming a Participant in this Plan.
6.6 Options in Substitution for Options Granted by Other Corporations.
Options may be granted under the Plan from time to time in substitution for
awards in respect of other plans of other entities. The terms and conditions of
the Options so granted may vary from the terms and conditions set forth in this
Plan at the time of such grant as the majority of the
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members of the Committee may deem appropriate to conform, in whole or in part,
to the provisions of the awards in substitution for which they are granted.
6.7 Delay. Any time period provided for under the Plan or an Agreement,
to the extent necessary to avoid the imposition of liability, shall be suspended
or delayed during the period a Participant would be subject to liability under
Section 16 of the Exchange Act, but not by more than six (6) months and one (1)
day. The Company shall have the right to suspend or delay any time period for an
action described in the Plan or an Agreement if the Committee shall determine
that the action may constitute a violation of any law or result in liability
under any law -to the Company or a stockholder of the Company until such time as
the action required or permitted shall not constitute a violation of law or
result in liability to the Company or a stockholder of the Company. The
Committee shall have the discretion to suspend the application of the provisions
of the Plan required solely to comply with Rule 16b-3 if the Committee shall
determine that Rule 16b-3 does not apply to the Plan and may amend the Plan's
provisions or operations to reduce obligations imposed by Rule 16b-3 if Rule
16b-3 is amended to reduce obligations imposed on the Plan and its operations.
6.8 Headings. The headings contained in the Plan are for reference
purposes only and shall not affect the meaning or interpretation of the Plan.
6.9 Severability. If any provision of the Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and the Plan shall be construed as if
such invalid or unenforceable provision were omitted.
6.10 Successors and Assigns. The Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon or insure to the benefit of the Participant's heirs, legal
representatives and successors.
6.11 Entire Agreement. The Plan and an Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of the Agreement shall control.
Executed effective as of January 1, 1997.
THE FORTRESS GROUP, INC.
By: /s/ James J. Martell, Jr.
----------------------------------
James J. Martell, Jr.
Chief Executive Officer
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FOR WITHHOLD FOR ALL EXCEPT
/ / / / / /
1. Election of Directors:
J. Marshall Coleman Mark L. Fine
James J. Martell, Jr. Edward J. Mathias
Thomas B. Buffington Steven D. Rivers
Robert Short William A. Shutzer
J. Christopher Stuhmer Charles F. Smith
Lawrence J. Witek
NOTE: If you do not wish your shares voted "For" a particular nominee, mark
the "For All Except" box and strike a line through the nominee's name. Your
shares will be voted for the remaining nominee.
FOR AGAINST WITHHOLD
/ / / / / /
2. Proposal to increase the number of shares available under the Company's 1996
Stock Incentive Plan
/ / / / / /
3. Proposal to approve Employee Stock Purchase Plan.
4. In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting.
Mark box at right if an address change or comment has been noted on the reverse
side of this card. / /
The undersigned hereby acknowledges receipt of the notice of said Annual Meeting
of Shareholders, the proxy statement relating thereto and the Annual Report for
1996.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such stock, and hereby ratifies and confirms all that said attorneys and
proxies, or other substitutes, may do by virtue hereof. If only one attorney and
proxy shall be present and acting, then that one shall have and may exercise all
the powers of said attorneys and proxies.
The signature of shareholder should correspond exactly with the name stenciled
hereon. Joint owners should sign individually. When signing as attorney,
executor, administrator, trustee or guardian, please give your full title as
such.
- --------------------------------------------------------------------------------
Shareholder Sign Here Date Co-Owner Sign here Date
<PAGE>
THE FORTRESS GROUP, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF THE FORTRESS GROUP
ANNUAL MEETING OF SHAREHOLDERS--MAY 21, 1997
James J. Martell, Jr. and J. Marshall Coleman, and each of them, are hereby
authorized to represent and vote the stock of the undersigned at the Annual
Meeting of Shareholders to be held May 21, 1997, and at any adjournment or
adjournments thereof.
The shares represented by this proxy will be voted in accordance with
specifications made herein. If no specifications are made, this proxy will be
voted FOR the election of the nominees for director listed on the reverse side
of this proxy card, FOR the proposal to increase the number of shares available
under the Company's 1996 Stock Incentive Plan, and FOR the proposal to approve
the Company's Employee Stock Purchase Plan.
PLEASE VOTE, DATE AND SIGN ON REVERSE
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
Please sign exactly as your name appears on
this proxy. When signing as attorney, executor,
administrator, trustee, or guardian, please give
your full title. If shares are held jointly, each
holder should sign.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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