SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(6)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SUBURBAN LODGES OF AMERICA, INC.
----------------------------------------------
(Name of Registrant as Specified in its Charter)
N/A
---------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
[ ] (1) Title of each class of securities to which transaction applies:
N/A
---------------------------------------------------------------
(2) Aggregate number of class of securities to which transaction
applies:
N/A
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fees
was paid previously. Identify the previous filing by registration statement
number or the form or schedule and the date of its filing.
(1) Amount previously paid: N/A
---------------------------------------
(2) Form, Schedule or Registration Statement No.: N/A
-----------------
(3) Filing Party: N/A
-------------------------------------------------
(4) Date Filed: N/A
-------------------------------------------------
<PAGE>
SUBURBAN LODGES OF AMERICA, INC.
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 11, 1999
The Annual Meeting of Shareholders of Suburban Lodges of America, Inc.
(the "Company") will be held on May 11, 1999, at 10:00 a.m. at The Cobb
Galleria Centre, Room 117, Two Galleria Parkway N.W., Atlanta, GA 30339,
for the purposes of considering and voting upon the following matters, all
of which are described in the attached Proxy Statement:
1. The election of two directors whose terms will expire in 2002;
2. The amendment of the Company's Stock Option and Incentive
Award Plan to provide for an additional 250,000 shares which
may be issued thereunder; and
3. Such other matters as may properly come before the meeting or
any adjournment thereof.
Only shareholders of record at the close of business on March 15, 1999,
the record date fixed by the Board of Directors, will be entitled to notice
of and to vote at the meeting or any adjournment thereof.
A Proxy Statement and a Proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the Proxy promptly in the
enclosed business reply envelope. The proxy may be revoked at any time
prior to exercise, and if you attend the meeting, then you may, if you wish,
withdraw your Proxy at that time and vote in person.
By Order of the Board of Directors,
Kevin R. Pfannes
Secretary
April 8, 1999
________________________________________________________________________________
| |
| PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY/VOTING |
| INSTRUCTION CARD PROMPTLY SO THAT YOUR VOTE MAY BE RECORDED AT |
| THE MEETING IF YOU DO NOT ATTEND PERSONALLY. |
|______________________________________________________________________________|
<PAGE>
SUBURBAN LODGES OF AMERICA, INC.
300 Galleria Parkway
Suite 1200
Atlanta, Georgia 30339
PROXY STATEMENT
SHAREHOLDERS' MEETING
This Proxy Statement is furnished in connection with the solicitation
of Proxies by the Board of Directors of Suburban Lodges of America, Inc.
(the "Company") for use at the Annual Meeting of Shareholders of the Company
to be held at The Cobb Galleria Centre, Room 117, Two Galleria Parkway N.W.,
Atlanta, Georgia 30339 on May 11, 1999, at 10:00 a.m. and any adjournment
thereof, for the purposes set forth in the accompanying notice of the
meeting. It is anticipated that this Proxy Statement and the accompanying
Proxy will first be mailed to shareholders on or about April 8, 1999.
REVOCATION OF PROXIES
Any Proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the meeting and gives written notice of his or her
election to vote in person, without compliance with any other formalities.
In addition, any Proxy given pursuant to this solicitation may be revoked
prior to the meeting by delivering an instrument revoking it or a duly
executed Proxy bearing a later date to the Secretary of the Company. If the
Proxy is properly completed and returned by the shareholder and is not
revoked, it will be voted at the meeting in the manner specified thereon.
IF THE PROXY IS RETURNED BUT NO CHOICE IS SPECIFIED THEREON, IT WILL BE
VOTED "FOR" THE PERSONS NAMED BELOW AS THE NOMINEES FOR THE BOARD OF
DIRECTORS UNDER THE CAPTION "PROPOSAL NO. 1 ELECTION OF DIRECTORS" AND
"FOR" THE AMENDMENT TO THE COMPANY'S STOCK OPTION AND INCENTIVE AWARD PLAN
INCREASING THE NUMBER OF SHARES AUTHORIZED TO BE ISSUED THEREUNDER BY
250,000, TO A TOTAL OF 1,000,000, AS DESCRIBED BELOW UNDER "PROPOSAL NO. 2
AMENDMENT TO STOCK OPTION AND INCENTIVE AWARD PLAN."
COSTS OF SOLICITATION
The expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be paid by the Company. Copies of
solicitation materials may be furnished to banks, brokerage houses and other
custodians, nominees and fiduciaries for forwarding to beneficial owners of
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock"), and normal handling charges may be paid for such forwarding
service. In addition to solicitations by mail, directors and regular
employees of the Company may solicit Proxies in person or by telephone.
BENEFICIAL OWNERSHIP OF SECURITIES AND VOTING RIGHTS
There are 15,431,072 shares of Common Stock of the Company outstanding
and entitled to vote as of the record date, March 15, 1999. Holders of
Common Stock are entitled to one vote per share on all matters voted on by
shareholders, including the election of directors.
VOTING SECURITIES AND PRINCIPAL HOLDERS. The following table sets
forth certain information regarding the beneficial ownership of Common Stock
by (i) each director of the Company; (ii) each executive officer of the
Company; (iii) all directors and executive officers of the Company as a
group; and (iv) each person known to the Company to beneficially own more
than five percent (5%) of the outstanding Common Stock. Unless otherwise
indicated, all shares are owned directly and the indicated person has sole
1
<PAGE>
voting and dispositive power. The number of shares represents the number of
shares of Common Stock the person holds as of February 28, 1999, unless
otherwise indicated.
NAME OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER<F1> OWNED BENEFICIALLY OF CLASS<F7>
- ---------------------------------------- --------------------- -------------
David E. Krischer<F2> 2,825,437 18.2%
SAFECO Corporation<F3> 3,079,100 20.0%
Dan J. Berman<F4> 160,931 1.0%
Seth H. Christian<F4> 160,594 1.0%
Paul A. Criscillis, Jr. 2,000 *
Terry J. Feldman<F4> 33,500 *
G. Hunter Hilliard<F4><F5> 93,360 *
Peter S. Ordal 450 *
Kevin R. Pfannes<F4> 28,127 *
James R. Kuse<F6> 22,658 *
Michael McGovern<F6> 418,206 2.7%
John W. Spiegel<F6> 13,690 *
All Directors and Executive
Officers as a Group (eleven persons) 3,758,953 24.0%
__________________________________________________________________________
[FN]
* Represents less than one percent of the outstanding Common Stock.
<F1> Unless otherwise indicated, the address of the persons named
above is care of Suburban Lodges of America, Inc., 300
Galleria Parkway, Suite 1200, Atlanta, Georgia 30339.
<F2> Includes options to purchase 75,000 shares, which are
exercisable within 60 days of February 28, 1999, 117 shares
held in an individual retirement account for the benefit of
Mr. Krischer's spouse, 117 shares held in an individual
retirement account for the benefit of Mr. Krischer's
daughter, and 550,000 shares held by Parrotts Cove
Associates, L.P., a limited partnership of which Mr.
Krischer is the general partner.
<F3> SAFECO Corporation's address is SAFECO Plaza, Seattle,
Washington 98185. Share information is based on a Schedule
13G filed with the Securities and Exchange Commission on
February 11, 1999, in which shared voting power and shared
dispositive power as to 3,079,100 shares are reported.
SAFECO Asset Management Company, whose address is 601 Union
Street, Suite 2500, Seattle, Washington 98101 jointly
reports shared voting and dispositive power as to 2,871,400
(18.6%) of the shares. SAFECO Common Stock Trust, whose
address is 10865 Willows Rd NE, Redmond, Washington 98052,
jointly reports shared voting and dispositive power as to
1,848,600 (12.0%) of the shares. SAFECO Resource Series
Trust, whose address is 10865 Willows Rd NE, Redmond,
Washington 98052, jointly reports shared voting and
dispositive power as to 1,022,800 (6.6%) of the shares.
SAFECO Corp. and SAFECO Asset Management Company disclaim
beneficial ownership of the shares.
<F4> Includes options to purchase 25,000 shares, which are
exercisable within 60 days of February 28, 1999.
<F5> Includes 1,400 shares held by Mr. Hilliard's spouse.
<F6> Includes 615 shares of restricted Common Stock and options
to purchase 4,500 shares, which are exercisable within 60
days of February 28, 1999.
<F7> Based on shares of Common Stock outstanding on February 28,
1999, as adjusted for shares subject to options exercisable
within 60 days of February 28, 1999.
</FN>
2
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Articles of Incorporation and the Bylaws of the Company
provide that the Board of Directors shall consist of not less than two
but not more than nine directors. Currently, there are five
directors, three of whom are independent directors. The Board of
Directors is divided into three classes of directors serving staggered
three-year terms. Two directors are to be elected at the meeting for
a three-year term expiring in 2002. The Board has nominated Messrs.
David E. Krischer and Dan J. Berman for re-election to a three-year
term. After the re-election of Messrs. Krischer and Berman at the
meeting, the Company will have five directors, including the three
directors whose present terms currently extend beyond the meeting.
Information about Messrs. Krischer and Berman and the continuing
directors is set forth below.
Each Proxy executed and returned by a shareholder will be voted
as specified thereon by the shareholder. If no specification is made,
the Proxy will be voted for the re-election of Messrs. Krischer and
Berman. In the event that either of Messrs. Krischer or Berman
withdraws as a nominee or for any reason is not able to serve as a
director, the Proxy will be voted for such other person as may be
designated by the Board of Directors as a substitute nominee, but in
no event will the Proxy be voted for more than two nominees. Management
of the Company has no reason to believe that either of Messrs. Krischer
or Berman will not serve if elected.
Directors are elected by a plurality of the votes cast by the
holders of the shares entitled to vote in an election at a meeting at
which a quorum is present. A quorum is present when the holders of a
majority of the voting shares outstanding on the record date are
present at a meeting in person or by proxy. Abstentions and broker
non-votes will be included in determining whether a quorum is present
at a meeting, but will not have an effect on the outcome of a vote for
directors.
INFORMATION ABOUT THE NOMINEES AND THE CONTINUING DIRECTORS
The following information has been furnished by the nominees and
the continuing directors. Except as otherwise indicated, the nominees
and the continuing directors have been or were engaged in their present
or last principal employment, in the same or a similar position, for more
than five years.
NAME (AGE) INFORMATION ABOUT THE NOMINEES
NOMINEES FOR DIRECTOR WHOSE TERMS WILL EXPIRE IN 2002
David E. Krischer (50) Mr. Krischer formed the Company in 1987 to
develop a national chain of economy extended
stay hotels and has served as its President
and Chairman since inception. Mr. Krischer
has over 16 years of experience in real
estate development, has been involved in the
hospitality industry for more than 13 years
and currently is the Chairman of the
Extended Stay Lodging Council, a division of
the American Hotel & Motel Association.
Dan J. Berman (34) Mr. Berman joined the Company in September
1993 as its Vice President Franchising and
has been a director since March 1996. Prior
to joining the Company, Mr. Berman practiced
commercial law in New York City with the
firm Young and Young from September 1990 to
May 1993.
3
<PAGE>
NAME (AGE) INFORMATION ABOUT THE CONTINUING DIRECTORS
- ---------- ------------------------------------------
DIRECTOR WHOSE TERM EXPIRES IN 2000
- -----------------------------------
John W. Spiegel (58) Mr. Spiegel has been a director of the
Company since May 1996. Since 1985, Mr.
Spiegel has served as Executive Vice
President and Chief Financial Officer of
SunTrust Banks, Inc. He has also served as
Treasurer of Trust Company of Georgia since
1978 and is an officer and director of
various subsidiaries of SunTrust Banks, Inc.
Mr. Spiegel is also a member of the Board of
Directors of Rock-Tenn Company and
ContiFinancial Corporation.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
- ------------------------------------
James R. Kuse (68) Mr. Kuse has been a director of the Company
since May 1996. Since January 1985, he has
served as the Chairman of the Board of
Directors of Georgia Gulf Corporation. From
February 1989 through February 1991, Mr.
Kuse also served as the Chief Executive
Officer of Georgia Gulf Corporation.
Michael McGovern (55) Mr. McGovern has been a director of the
Company since May 1996. Since 1975, Mr.
McGovern has been the President and a
director of McGovern Enterprises, Inc., a
company that provides corporate, financial
and real estate advisory services throughout
the United States. Mr. McGovern also serves
as a director of Bentley Pharmaceuticals,
Inc.
BOARD COMMITTEES
There are two standing committees of the Board of Directors: the
Audit Committee and the Compensation Committee. The Company has no
standing nominating committee or other committee performing similar
functions.
AUDIT COMMITTEE. The Audit Committee consists of Messrs.
Krischer, Spiegel, and Kuse. The Audit Committee will make
recommendations concerning the engagement of independent public
accountants, review with the independent public accountants the plans
and results of the audit engagement, approve professional services
provided by the independent public accountants, review the
independence of the independent public accountants, consider the range
of audit and non-audit fees and review the adequacy of the Company's
internal accounting controls. The Audit Committee held one meeting
during 1998.
COMPENSATION COMMITTEE. The Compensation Committee consists of
Messrs. McGovern and Kuse. The Compensation Committee determines
compensation for the Company's executive officers and administers the
Company's 1996 Plan (as defined below). The Compensation Committee
met one time during 1998.
4<PAGE>
BOARD MEETINGS
During 1998, the Board of Directors held five meetings. Each of
the directors attended at least 80% of the Board meetings and meetings
of committees on which he served.
COMPENSATION OF DIRECTORS
The Company's non-employee directors receive directors' fees of
$1,250 per board meeting attended, and all Directors are reimbursed
for their out-of-pocket expenses incurred in connection with their
service on the Board of Directors. In addition, all non-employee
directors are entitled to participate in and receive non-cash
compensation through The Directors' Plan (as described below).
Messrs. Krischer and Berman receive no compensation for their service
on the Board of Directors other than reimbursement for their out-of-
pocket expenses incurred in connection with such service. There are
no fees for attendance at committee meetings held in conjunction with
Board meetings.
The Directors' Plan provides for the grant of options to purchase
Common Stock and the award of Common Stock to non-employee directors.
Provided that a director remains a director of the Company, he or she
is eligible to receive an annual grant of 1,500 options, exercisable
for ten years on the earlier of the first anniversary after the grant
or the date of the next annual meeting of shareholders. Options are
exercisable, for cash, Common Stock, acceptable cash equivalent or a
combination acceptable to the administrator of The Directors' Plan.
Options are generally non-transferable. At the first board meeting
following the annual meeting of shareholders, non-employee directors
are eligible to receive an award of 1,000 shares of Common Stock; or
if the value of such shares exceeds $10,000, the number of shares of
Common Stock with a fair market value of $10,000. A director is 100%
vested with respect to the Common Stock award on the earlier of the
first anniversary of the award or the date of the next annual meeting
of shareholders, provided that the director continues to serve as a
director after the annual meeting. A director has the right to vote
and to receive dividends with respect to the awarded stock, even if he
or she is not vested. In the event of a change of control, all
restricted stock (other than restricted stock granted within six
months of the change of control) shall vest and all options granted
under The Directors' Plan shall become exercisable.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
annual compensation for services in all capacities to the Company and
its predecessors paid during the last three fiscal years to the
Company's Chief Executive Officer and the other four most highly
compensated executive officers (with annual salary and bonus in excess
of $100,000). The Company has not entered into an employment
agreement with any of its officers or employees.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-----------------------------------------------------
Securities
Underlying
Name and Options/SARs All Other
Principal Position Year Salary Bonus (No. of Shares) Compensation <F1>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David E. Krischer............ 1998 $270,000 $100,000 75,000 $2,478
Chairman ofthe Board, 1997 $260,000 $1,158
Chief Executive 1996 $260,000 $121,000 150,000 $ 914
Officer and President
Kevin R. Pfannes............. 1998 $ 67,500 $158,000 25,000 $2,314
Vice President - 1997 $ 64,538 $ 90,000 $ 797
Development and
Secretary
Dan J. Berman................ 1998 $ 96,692 $ 56,639 25,000 $ 967
Vice President - 1997 $ 80,307 $ 31,165 $ 774
Franchising $ 304
Seth H. Christian............ 1998 $ 93,254 $ 42,500 25,000 $ 933
Vice President - 1997 $ 71,692 $ 42,000 $ 628
Operations
Terry J. Feldman............. 1998 $ 92,492 $ 42,000 25,000 $ 925
Vice President, Chief 1997 $ 71,385 $ 42,000 $ 628
Accounting Officer
and Treasurer
______________________
<FN>
<F1> The amounts shown in this column consist of contributions by the Company
to its 401(k) Savings Plan on behalf of the named executive officers.
</FN>
</TABLE>
OPTIONS GRANTED IN LAST YEAR
The following table summarizes certain information regarding stock options
granted during 1998 to the Company's executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF
SECURITIES TOTAL OPTIONS EXERCISE STOCK PRICE
UNDERLYING GRANTED TO OR BASE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM
NAME GRANTED<F1> YEAR ($/SH) DATE 5% 10%
---- ------- ---- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
David E. Krischer......... 75,000 9.3% $10.25 08/16/2008 $483,500 $1,225,200
Dan J. Berman............. 25,000 3.1% $10.25 08/16/2008 $161,200 $ 408,400
Seth H. Christian......... 25,000 3.1% $10.25 08/16/2008 $161,200 $ 408,400
Terry J. Feldman.......... 25,000 3.1% $10.25 08/16/2008 $161,200 $ 408,400
Kevin R. Pfannes.......... 25,000 3.1% $10.25 08/16/2008 $161,200 $ 408,400
____________________
<FN>
<F1> All of the options have a term of ten years and vest one-half annually beginning August 17, 1999.
</FN>
</TABLE>
6
<PAGE>
YEAR-END OPTION VALUES
The following table provides certain information about the year-end values
of stock options held at December 31, 1998, by the Company's executive officers
named in the Summary Compensation Table. No options were exercised by executive
officers during 1998.
<TABLE>
<CAPTION>
No. of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options
Fiscal Year End At Fiscal Year End (1)
----------------------------------- ------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
David E. Krischer . . . 75,000 150,000 0 0
Dan J. Berman . . . . . 25,000 50,000 0 0
Seth H. Christian . . . 25,000 50,000 0 0
Terry J. Feldman . . . 25,000 50,000 0 0
Kevin R. Pfannes . . . 25,000 50,000 0 0
__________________________
<FN>
<F1> None of the outstanding options held by these individuals
were in-the-money on December 31, 1998.
</FN>
</TABLE>
CHANGE IN CONTROL AGREEMENTS
In October 1998, each of the Company's eight executive officers entered
into substantially similar "change in control agreements" with the Company.
Pursuant to the agreements, the officer will immediately vest in all
unvested stock options in the event of a "Change in Control" (as defined in
the agreements). The agreements also provide for certain benefits in the
event of a termination of employment under certain circumstances in
connection with a Change in Control of the Company. In general, each
agreement provides benefits to the officer upon an "involuntary termination"
(essentially, termination without cause) or a "voluntary termination"
(essentially, resignation in the face of coercive tactics) occurring within
24 months after or six months prior to the date of a Change in Control.
Upon any such termination, subject to certain limitations, the officer will
be entitled to receive the following benefits: (i) three times the officer's
then-current salary, paid in a lump sum amount discounted to present value;
(ii) three times the officer's average annual bonus for the previous two
years, paid in a lump sum amount discounted to present value; (iii)
continuation of health and life insurance for three years; (iv) three times
the annual value of the Company's contribution to its 401(k) retirement plan
on the officer's behalf, paid as a lump sum amount discounted to present
value; and (v) payment of up to $25,000 for outplacement services. The
agreements place certain limits on the amounts an individual officer can
collect under the agreement. Each of the agreements is for a rolling three-
year term, such that the remaining term is always three years, provided that
each agreement automatically terminates on the officer's 65th birthday. The
Company may terminate any of such agreements upon three years' notice.
REPORT OF THE COMPENSATION COMMITTEE
The compensation of the Company's executive officers is generally
determined by the Compensation Committee of the Board of Directors. The
Compensation Committee, which consists of two directors who are not officers
or employees of the Company, also grants stock options to executive
officers. The following report with respect to certain compensation paid or
awarded to the Company's executive officers during 1998 is furnished by the
Compensation Committee.
GENERAL POLICIES
The Company's compensation program is intended to enable the Company to
attract, motivate, reward, and retain the management talent required to
achieve corporate objectives in a highly competitive industry, and thereby
increase shareholder value. It is the Company's policy to provide
incentives to its senior management to achieve both short-term and long-term
objectives. To attain these objectives, the Company's policy is to provide
a significant portion of executive compensation in the form of at-risk,
7
<PAGE>
incentive-based compensation, such as stock options. The Compensation
Committee believes that such a policy, which directly aligns the financial
interests of management with the financial interests of shareholders,
provides the proper incentives to attract, motivate, reward, and retain high
quality management. In determining the nature and amounts of compensation
for the Company's executive officers, the Compensation Committee takes into
account all factors that its considers relevant, including business
conditions, both in the lodging industry and generally, the Company's
performance in light of those conditions, the market rates of compensation
for executives of similar backgrounds and experience, and the performance of
the specific executive officer.
To the extent it is able to do so, the Compensation Committee considers
the anticipated tax treatment to the Company and to the executives of
various payments and benefits. No current or anticipated compensation
arrangements would be subject to the $1 million deductibility limitation of
Section 162(m) of the Internal Revenue Code.
CASH COMPENSATION
Cash compensation for executive officers consists of salary and cash
bonuses. Base salaries and cash bonuses for executive officers are
determined by a subjective assessment of responsibilities and position
within the Company, individual performance, and the Company's overall
performance.
STOCK OPTIONS
The Compensation Committee considers incentive compensation in the form
of stock options to be an integral and relatively large part of executive
compensation in particular and employee compensation generally. All options
granted (other than incentive stock options granted to a ten percent
shareholder) have an exercise price equal to the fair market value of the
Common Stock on the grant date.
Options are granted generally to executive officers upon commencement
of employment. Other option awards are made at the discretion of the
Compensation Committee. In exercising this discretion, the Compensation
Committee considers factors specific to each employee such as salary,
position, and responsibilities and the Company's performance with respect to
those factors such as the rate of the Company's development and growth,
revenue growth, and increases in the market value of the Company's Common
Stock. Option grants relating to recruiting and employment offers and
special circumstances are recommended by management.
CHIEF EXECUTIVE OFFICER COMPENSATION
David E. Krischer founded the Company in January 1987 and has been its
President and Chief Executive Officer since that time. Mr. Krischer's
annual compensation was determined by the Compensation Committee using the
same criteria that were used to determine compensation levels for other
corporate officers and was based on the Compensation Committee's assessment
of Mr. Krischer's overall performance and on information regarding
compensation paid by similar companies. His compensation has remained
substantially the same over the period since the Company conducted its
initial public offering (adjusted for differences in pay periods), except
that he declined the $100,000 bonus recommended by this committee for 1997.
The Compensation Committee believes that Mr. Krischer's experience,
dedication, and knowledge have been of vital importance to the successful
and ongoing growth of the operations of the Company. No specific weighting
was assigned to these factors.
James R. Kuse
Michael McGovern
8<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing cumulative total return among
the Company, the NASDAQ Stock Market-U.S. Index and Standard & Poor's
Corporation's Lodging-Hotel Index for the period beginning May 23, 1996 and
ending December 31, 1998.
<TABLE>
<CAPTION>
COMPARISON OF 31 MONTH CUMULATIVE TOTAL RETURN*
AMONG SUBURBAN LODGES OF AMERICA, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE S & P LODGING-HOTELS INDEX
----------1996---------- ----------1997---------- ----------1998----------
5/23 Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUBURBAN LODGES OF
AMERICA, INC. 100 136 124 94 106 124 155 78 93 89 39 48
NASDAQ STOCK
MARKET (U.S.) 100 100 103 108 103 121 142 133 156 160 145 187
S & P LODGING -
HOTELS 100 104 92 90 93 104 123 125 138 122 82 102
</TABLE>
*Assumes that the value of the investment in Company Common Stock was
$100 on May 23, 1996, and for each index was $100 on April 30, 1996,
and that all dividends were reinvested.
PROPOSAL NO. 2 - AMENDMENT TO STOCK OPTION AND INCENTIVE AWARD PLAN
GENERAL
The Company has had in effect, since May 23, 1996, its 1996 Stock
Option and Incentive Award Plan (hereafter referred to as the "Plan")
that authorizes the grant of options to purchase up to 750,000 shares
of the Company's Common Stock or limited stock appreciation rights to
officers of the Company. As of December 31, 1998, options to purchase
700,000 shares have been granted under the Plan. No limited stock
appreciation rights have been issued and no options have been exercised.
Accordingly, only 50,000 shares remain available for grant under this Plan.
9
<PAGE>
The Company believes that options will continue to be an important
element in attracting key executive employees, and in providing incentives
for the executives to remain with the Company and contribute to its
successful long-range performance.
Accordingly, the Board of Directors proposes that the shareholders
approve an amendment to the Plan that would increase by 250,000, to a
total of 1,000,000, the number of shares of Common Stock available for
the grant of options under the Plan. All other terms and conditions of
the Plan will remain as now in effect. The full text of the Plan, amended
as proposed here, is set forth as Appendix A to this Proxy Statement.
Section 162(m) of the Internal Revenue Code of 1986 limits the Company's
ability to deduct certain compensation (including compensation resulting
from the exercise of nonqualified stock options) in excess of $1,000,000
for any taxable year paid to its executive officers ("Section 162(m)").
There is an exception to the Section 162(m) limitation for "performance-
based compensation" that is paid pursuant to a plan which has been
disclosed to and approved by shareholders prior to payment of the
compensation. The Plan is designed to qualify for this performance-based
compensation exception.
SUMMARY OF THE PLAN
The Plan, which is administered by the Compensation Committee
(the "Administrator"), permits the grant, from time to time, of stock
options, stock awards, restricted stock awards, performance shares
awards and stock appreciation rights to employees who are selected by
the Administrator to participate in the Plan (the "Participants").
Both tax qualified incentive stock options ("ISOs") and nonqualified
stock options ("NQSOs") may be granted by the Administrator with a
term of up to ten years and an exercise price that cannot be less than
the share's fair market value on the date of the grant; PROVIDED,
HOWEVER, that the exercise price of an ISO granted to a shareholder
who holds more than 10% of the Company's Common Stock (a "Ten Percent
Shareholder") may not be less than 110% of the share's fair market
value on the date of the grant, and the ISOs granted to any Ten
Percent Shareholder may not be exercisable for a period in excess of
five years. No Participant may be granted options to purchase more
than 150,000 shares of Common Stock within a 12-month period.
Under current tax law, a holder of an ISO under the Plan does
not, as a general matter, realize taxable income upon the grant or
exercise thereof. (Depending upon the holder's income tax situation,
however, the exercise of an ISO may have alternative minimum tax
implications.) In general, a holder of an ISO will only recognize
gain at the time that Common Stock acquired through exercise of the
ISO is sold or otherwise disposed of. In that situation, the amount of
gain that the optionee must recognize is equal to the amount by which
the value of the Common Stock on the date of the sale or other
disposition exceeds the option price. If the optionee disposes of the
stock after the required holding period - that is, no earlier than a
date that is two years after the date of grant of the option and one
year after the date of exercise - the gain is capital gain income. If
disposition occurs prior to expiration of the holding period, the gain
is ordinary income, and the Company is entitled to a tax deduction
equal to the amount of income recognized by the optionee.
An optionee will not realize income when an NQSO is granted to
him or her. Upon exercise of such option, however, the optionee must
recognize ordinary income to the extent that the fair market value of
the Common Stock on the date the option is exercised exceeds the
option price. Any such gain is taxed in the same manner as ordinary
income in the year the option is exercised. Thereafter, any
additional gain recognized upon the disposition of the shares of stock
obtained by the exercise of an NQSO will be taxed at capital gains
rates, if the employee has held the shares of stock for at least one
year after the exercise of the NQSO. The Company will not experience
any tax consequences upon the grant of an NQSO, but will be entitled
to take an income tax deduction equal to the amount that the option
holder includes in income (if any) when the NQSO is exercised.
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Stock Appreciation Rights ("SARs") which may be granted under the
Plan entitle the Participant to receive an amount no greater than the
fair market value of the Company's Common Stock over the initial price
of the SAR (i.e., the fair market value of the Company's Common Stock
on the date of the grant of the SAR). The amount payable upon the
exercise of a SAR may be paid in cash, Common Stock, or any
combination of the two; PROVIDED, HOWEVER, that no Participant is
entitled to receive more than the excess of the fair market value of a
share of Common Stock on the date of exercise over the initial value
of the SAR. The maximum number of shares underlying SARs which can be
awarded during any 12-month period to any Participant is 150,000
shares. No Participant may be granted ISOs or related SARs which are
first exercisable in any calendar year for stock having an aggregate
fair market value that exceeds $100,000. A Participant has no rights
as a shareholder until the options are exercised.
In addition, the Administrator may, pursuant to the Plan, award
Common Stock to Participants which may be restricted until the
Participant fulfills certain conditions, such as continuing employment
with the Company or achieving certain objectives. The Plan also
provides for Performance Share Awards, which entitle the Participant
to receive a payment equal to the fair market value of a specified
number of shares of Common Stock if certain performance standards are
met. To the extent that performance shares are earned, the obligation
may be settled in cash, in Common Stock or by a combination of the
two. No more than 25,000 performance shares may be earned by a
Participant with respect to any performance period.
As of March 15, 1999, options for 700,000 shares of Common Stock
had been granted under the Plan, all of which were granted to
executive officers of the Company. Options granted to David E.
Krischer on May 22, 1996, covering 23,520 shares at an exercise price
of $18.70 per share have a term of five years and vest in equal
amounts after each of the first four years. Options covering an
additional 376,480 shares were granted on the same date. These
options have an exercise price of $17.00 per share and also vest over
four years, but they have a term of ten years. On August 17, 1998,
the Company granted options under the Plan covering 300,000 shares
with an exercise price of $10.25 per share. Options covering 200,000
of those shares vest as to one-half of the shares each year for the
first two years, and the remaining options covering 100,000 shares
vest in equal amounts over the first four years. The market value of
the stock underlying these options was $4,593,400 based on the closing
price of the Common Stock on March 15, 1999. No other forms of
incentives have been granted under the Plan.
RECOMMENDATION
The Board of Directors recommends that you vote "FOR" the
amendment of the Plan. Approval of the amendment requires the
affirmative vote of the majority of the total number of shares of
Common Stock that are represented and voted at the Annual Meeting.
CERTAIN TRANSACTIONS
In 1997, Suburban Franchise Systems, Inc., a wholly-owned
subsidiary of the Company, entered into a franchise agreement with
each of E.E.B. Lodging Systems, Inc. ("EEB") and E.E.B. Lodging
Systems II, Inc. ("EEBII"), for the development and ownership by each
of a Suburban Lodge hotel in Arlington, Texas. The Company, through
its subsidiaries, also entered into agreements with EEB and EEBII to
develop and manage the facilities. Prior to August 1, 1998, Michael
McGovern, a director of the Company, owned a one-third interest in
each of these entities and Michael Kuse, the son of James R. Kuse, a
director of the Company, owned a one-third interest in each of these
entities. On July 31, 1998, a subsidiary of the Company purchased all
of the outstanding stock of both EEB and EEBII for a cash purchase
price totaling $2.5 million. The Company's subsidiary also assumed
certain bank debt aggregating approximately $6.6 million. Prior to
the acquisitions, the Company's Board of Directors (excluding Messrs.
McGovern and Kuse) reviewed and approved the terms of the transaction
and concluded that such terms were fair and equitable, and as would
otherwise have been available to the Company under a similar
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transaction with independent third parties. During the period from
January 1 through July 31, 1998, the Company received franchise and
development fees totaling approximately $97,000 from EEB and EEBII.
During 1998, a subsidiary of the Company purchased for $200,000 a
one-fourth interest in L&M Suites I, Inc. ("L&M"), a Georgia corporation.
Also during 1998, L&M began construction of a Suburban Lodge Extra hotel
in Sandy Springs, Georgia. Michael McGovern, a director of the Company,
also owns a one-fourth interest in L&M. During 1998, the Company made a
$230,000 payment to Mr. McGovern for an option to purchase his interest
in L&M for a total purchase price of $300,000 less the amount paid for the
option.
INFORMATION CONCERNING THE COMPANY'S ACCOUNTANTS
Deloitte & Touche LLP ("Deloitte & Touche") was the principal
independent public accountant for the Company during the year ended
December 31, 1998. Representatives of Deloitte & Touche are expected
to be present at the Annual Meeting and will have an opportunity to
make a statement if they desire to do so and to respond to appropriate
questions.
The management of the Company plans to recommend to the Board of
Directors that Deloitte & Touche be selected to continue as the
accountant for the Company for the current year.
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of shareholders intended to be presented at the
Company's 2000 Annual Meeting must be received by December 13, 1999,
in order to be eligible for inclusion in the Company's Proxy Statement
and Proxies for that meeting. The Company must be notified of any
other shareholder proposal intended to be presented for action at the
meeting not later than February 23, 2000, or else proxies may be voted
on such proposal at the discretion of the person or persons holding
those proxies.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934,
each executive officer, director and beneficial owner of 10% or more
of the Company's Common Stock is required to file certain forms with
the Securities and Exchange Commission. A report of beneficial
ownership of the Company's Common Stock on Form 3 is due at the time
such person becomes subject to the reporting requirement and a report
on Form 4 or 5 must be filed to reflect changes in beneficial
ownership occurring thereafter. The Company believes that all filing
requirements applicable to its officers and directors were complied
with in a timely manner during 1998. The Company is not aware that
any holder of more than 10% of the Company's Common Stock has not
filed reports required under Section 16(a) on a timely basis.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
Management of the Company knows of no matters other than those
stated above that are to be brought before the meeting. If any other
matters should be presented for consideration and voting, however, it
is the intention of the persons named as proxies in the enclosed Proxy
to vote in accordance with their judgment as to what is in the best
interest of the Company.
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AVAILABLE INFORMATION
The Company has filed an Annual Report on Form 10-K with the
Securities and Exchange Commission. A copy of such Annual Report on
Form 10-K for the year ended December 31, 1998, including the
financial statements and the financial statement schedules, but
excluding exhibits, may be obtained, free of charge, upon written
request by any shareholder to: Suburban Lodges of America, Inc., 300
Galleria Parkway, Suite 1200, Atlanta, Georgia 30339, Attention: Paul
A. Criscillis, Jr., Chief Financial Officer.
SUBURBAN LODGES OF AMERICA, INC.
April 8, 1999
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APPENDIX A
SUBURBAN LODGES OF AMERICA, INC.
STOCK OPTION AND INCENTIVE AWARD PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 Establishment of the Plan Suburban Lodges of America, Inc.,
a Georgia corporation (hereinafter referred to as the "Company"),
hereby establishes a stock option and incentive award plan known as
the "Suburban Lodges of America, Inc. Stock Option and Incentive Award
Plan" (the "Plan"), as set forth in this document. The Plan permits
the grant of Incentive Stock Options, Nonqualified Stock Options,
Restricted Stock, Stock Awards, Performance Share Awards and Stock
Appreciation Rights.
The Plan shall become effective on the date it is approved by the
Company's shareholders and Board of Directors (the "Effective Date")
and shall remain in effect as provided in Section 1.3.
1.2 Purpose of the Plan. The purpose of the Plan is to secure
for the Company and its shareholders the benefits of the incentive
inherent in stock ownership in the Company by employees who are
largely responsible for its future growth and continued success. The
Plan promotes the success and enhances the value of the Company by
linking the personal interests of Participants (as defined below) to
those of the Company's shareholders, and by providing Participants
with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the
Company in its ability to motivate, attract and retain the services of
Participants upon whose judgment, interest and special effort the
successful conduct of its operation largely depends.
1.3 Duration of the Plan. The Plan shall commence on the
Effective Date, and shall remain in effect, subject to the right of
the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 14, until the day prior to the tenth (10th)
anniversary of the Effective Date.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Agreement" means an agreement entered into by each
Participant and the Company, setting forth the terms and provisions
applicable to Awards granted to Participants under this Plan.
(b) "Award" means, individually or collectively, a grant under
this Plan of Incentive Stock Options, Nonqualified Stock Options,
Restricted Stock, Stock Awards, Performance Share Awards or Stock
Appreciation Rights.
(c) "Beneficial Owner" or "Beneficial Ownership" shall have the
meaning ascribed to such term in Rule 13d-3 of the Exchange Act.
(d) "Board" or "Board of Directors" means the Board of Directors
of the Company.
(e) "Cause" means: (i) willful misconduct on the part of a
Participant that is materially detrimental to the Company; or (ii) the
conviction of a Participant for the commission of a felony. The
existence of "Cause" under either (i) or (ii) shall be determined by
the Committee. Notwithstanding the foregoing, if the Participant has
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entered into an employment agreement that is binding as of the date of
employment termination, and if such employment agreement defines
"Cause," and/or provides a means of determining whether "Cause"
exists, such definition of "Cause" and means of determining its
existence shall supersede this provision.
(f) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(g) "Committee" means the committee appointed by the Board to
administer the Plan with respect to grants of Awards, as specified in
Article 3. No member of the Committee shall at any time be eligible
to participate in or receive an award. Such members must also be
persons who satisfy the definition of outside director under Section
162(m) of the Code.
(h) "Common Stock" means the common stock of the Company, par
value $.01 per share.
(i) "Company" means Suburban Lodges of America, Inc., a Georgia
corporation, or any successor thereto as provided in Article 17.
(j) "Corresponding SAR" means an SAR that is granted in relation
to a particular Option and that can be exercised only upon the
surrender to the Company, unexercised, of that portion of the Option
to which the SAR relates.
(k) "Director" means any individual who is a member of the Board
of Directors of the Company.
(l) "Disability" shall have the meaning ascribed to such term in
the Company's long-term disability plan covering the Participant, or
in the absence of such plan, a meaning consistent with Section
22(e)(3) of the Code.
(m) "Employee" means any full-time, salaried employee of the
Company, or the Company's Subsidiaries. Directors who are not
otherwise employed by the Company or the Company's Subsidiaries shall
not be considered Employees eligible to receive Awards under this
Plan.
(n) "Effective Date" shall have the meaning ascribed to such
term in Section 1.1.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
(p) "Fair Market Value" shall be determined as follows:
(i) If, on the relevant date, the Shares are traded on a
national or regional securities exchange or on The Nasdaq Stock Market
("Nasdaq") and closing sale prices for the Shares are customarily
quoted, on the basis of the closing sale price on the principal
securities exchange on which the Shares may then be traded or, if
there is no such sale on the relevant date, then on the immediately
preceding day on which a sale was reported;
(ii) If, on the relevant date, the Shares are not listed on
any securities exchange or traded on Nasdaq, but nevertheless are
publicly traded and reported on Nasdaq without closing sale prices for
the Shares being customarily quoted, on the basis of the mean between
the closing bid and asked quotations in such other over-the-counter
market as reported by Nasdaq; but, if there are no bid and asked
quotations in the over-the-counter market as reported by Nasdaq on
that date, then the mean between the closing bid and asked quotations
in the over-the-counter market as reported by Nasdaq on the
immediately preceding day such bid and asked prices were quoted; and
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(iii) If, on the relevant date, the Shares are not
publicly traded as described in (i) or (ii), on the basis of the good
faith determination of the Committee.
(q) "Incentive Stock Option" or "ISO" means an option to
purchase Shares granted under Article 6 which is designated as an
Incentive Stock Option and is intended to meet the requirements of
Section 422 of the Code.
(r) "Initial Value" means, with respect to a Corresponding SAR,
the Option Price per share of the related Option, and with respect to
an SAR granted independently of an Option, the Fair Market Value of
one share of Common Stock on the date of grant.
(s) "Insider" shall mean an Employee who is, on the relevant
date, an officer or a director, or a ten percent (10%) beneficial
owner of any class of the Company's equity securities that is
registered pursuant to Section 12 of the Exchange Act or any successor
provision, as "officer" and "director" are defined under Section 16 of
the Exchange Act.
(t) "Named Executive Officer" means a Participant who, as of the
date of vesting and/or payout of an Award is one of the group of
"covered employees," as defined in the regulations promulgated under
Code Section 162(m), or any successor statute.
(u) "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares granted under Article 6, and which is not intended to
meet the requirements of Code Section 422.
(v) "Option" means an Incentive Stock Option or a Nonqualified
Stock Option.
(w) "Option Price" means the price at which a Share may be
purchased by a Participant pursuant to an Option, as determined by the
Committee. The Option Price may not be less than the Fair Market
Value of a Share on the date the Option is granted.
(x) "Participant" means an Employee who has been determined by
the Committee to contribute significantly to the profits or growth of
the Company and who has been granted an Award under the Plan which is
outstanding.
(y) "Performance Share Award" means an Award, which, in
accordance with and subject to an Agreement, will entitle the
Participant, or his estate or beneficiary in the event of the
Participant's death, to receive cash, Common Stock or a combination
thereof.
(z) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d)
thereof.
(aa) "Retirement" shall mean retiring from employment with the
Company or any Subsidiary upon attaining the age of 65.
(bb) "Restricted Stock" means an Award of Common Stock granted in
accordance with the terms of Article 8 and the other provisions of the
Plan, and is nontransferable and subject to a substantial risk of
forfeiture. Shares of Common Stock shall cease to be Restricted Stock
when, in accordance with the terms hereof and the applicable
Agreement, they become transferable and free of substantial risk of
forfeitures.
(cc) "SAR" means a stock appreciation right that entitles the
holder to receive, with respect to each share of Common Stock
encompassed by the exercise of such SAR, the amount determined by the
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Committee and specified in an Agreement. In the absence of such
specification, the holder shall be entitled to receive in cash, with
respect to each share of Common Stock encompassed by the exercise of
such SAR, the excess of the Fair Market Value on the date of exercise
over the Initial Value. References to "SARs" include both
Corresponding SARs and SARs granted independently of Options, unless
the context requires otherwise.
(dd) "Shares" means the shares of Common Stock of the Company.
(ee) "Stock Award" means a grant of Shares under Article 8 that
is not generally subject to restrictions and pursuant to which a
certificate for the Shares is transferred to the Employee.
(ff) "Subsidiary" means any corporation, partnership, joint
venture or other entity in which the Company has a fifty percent (50%)
or greater voting interest.
ARTICLE 3. ADMINISTRATION
3.1 The Committee. The Plan shall be administered by the
Compensation Committee of the Board, or by any other Committee
appointed by the Board that is granted authority to administer the
Plan, with such Committee consisting of not less than two (2)
Directors who meet the "disinterested administration" requirements of
Rule 16b-3 or any successor thereto under the Exchange Act. The
members of the Committee shall be appointed from time to time by, and
shall serve at the discretion of, the Board of Directors.
The Committee shall be comprised solely of Directors who are
eligible to administer the Plan pursuant to Rule 16b-3(c)(2) or any
successor thereto under the Exchange Act. However, if for any reason
any member of the Committee does not qualify to administer the Plan,
as contemplated by Rule 16b-3(c)(2) of the Exchange Act, the Board of
Directors may appoint a new Committee member who complies with Rule
16b-3(c)(2).
3.2 Authority of the Committee. Subject to the provisions of
the Plan, the Committee shall have full power to select the Employees
who are responsible for the future growth and success of the Company
who shall participate in the Plan (who may change from year to year);
determine the size and types of Awards; determine the terms and
conditions of Awards in a manner consistent with the Plan (including
conditions on the exercisability of all or a part of an Option or SAR,
restrictions on transferability and vesting provisions on Restricted
Stock or Performance Share Awards and the duration of the Awards);
construe and interpret the Plan and any agreement or instrument
entered into under the Plan; establish, amend or waive rules and
regulations for the Plan's administration; and (subject to the
provisions of Article 14) amend the terms and conditions of any
outstanding Award to the extent such terms and conditions are within
the discretion of the Committee as provided in the Plan, including
accelerating the time any Option or SAR may be exercised and
establishing different terms and conditions relating to the effect of
the termination of employment or other services to the Company.
Further, the Committee shall make all other determinations which may
be necessary or advisable in the Committee's opinion for the
administration of the Plan. All expenses of administering this Plan
shall be borne by the Company.
3.3 Decisions Binding. All determinations and decisions made by
the Committee pursuant to the provisions of the Plan and all related
orders and resolutions of the Board shall be final, conclusive and
binding on all Persons, including the Company, the shareholders,
Employees, Participants and their estates and beneficiaries.
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ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in
Section 4.3, the total number of Shares available for grant of Awards
under the Plan shall be an aggregate of one million (1,000,000)
Shares. These Shares may, in the discretion of the Company, be either
authorized but unissued Shares or Shares held as treasury shares,
including Shares purchased by the Company.
The following rules shall apply for purposes of the determination
of the number of Shares available for grant under the Plan:
(a) While an Option, SAR, Stock Award, Restricted Stock
Award or Performance Share Award is outstanding, it shall be counted
against the authorized pool of Shares, regardless of its vested
status.
(b) The grant of an Option, SAR, Stock Award, Restricted
Stock Award or Performance Share Award shall reduce the Shares
available for grant under the Plan by the number of Shares subject to
such Award.
4.2 Lapsed Awards. If any Award granted under this Plan is
canceled, terminates, expires or lapses for any reason, any Shares
subject to such Award shall again be available for the grant of an
Award under the Plan. However, in the event that prior to the Award's
cancellation, termination, expiration or lapse, the holder of the
Award at any time received one or more "benefits of ownership"
pursuant to such Award (as defined by the Securities and Exchange
Commission, pursuant to any rule or interpretation promulgated under
Section 16 of the Exchange Act), the Shares subject to such Award
shall not again be made available for regrant under the Plan.
4.3 Adjustments In Authorized Shares. In the event of any
change in corporate capitalization, such as a stock split, or a
corporate transaction, such as any merger, consolidation, separation,
including a spin-off, or other distribution of stock or property of
the Company, any reorganization (whether or not such reorganization
comes within the definition of such term in Code Section 368) or any
partial or complete liquidation of the Company, such adjustment shall
be made in the number and class of Shares which may be delivered under
the Plan, and in the number and class of and/or price of Shares
subject to outstanding Awards granted under the Plan, as may be
determined to be appropriate and equitable by the Committee, in its
sole discretion, to prevent dilution or enlargement of rights;
provided, however, that the number of Shares subject to any Award
shall always be a whole number and the Committee shall make such
adjustments as are necessary to insure Awards of whole Shares.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
Any key Employee of the Company, or of any Subsidiary, including
any such Employee who is also a director of the Company, or of any
Subsidiary, whose judgment, initiative and efforts contribute or may
be expected to contribute materially to the successful performance of
the Company or any Subsidiary shall be eligible to receive an Award
under the Plan. In determining the Employees to whom such an Award
shall be granted and the number of Shares which may be granted
pursuant to that Award, the Committee shall take into account the
duties of the respective Employees, his or her present and potential
contributions to the success of the Company or any Subsidiary, and
such other factors as the Committee shall deem relevant in connection
with accomplishing the purpose of the Plan. No person who is a member
of the Committee shall be eligible to be granted any Award under the
Plan.
ARTICLE 6. STOCK OPTIONS
6.1 Grant of Options. Subject to the terms and provisions of
the Plan, Options may be granted to Employees at any time and from
time to time as shall be determined by the Committee. The Committee
shall have discretion in determining the number of Shares subject to
Options granted to each Participant. An Option may be granted with or
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without a Corresponding SAR. No Participant may be granted ISOs
(under the Plan and all other incentive stock option plans of the
Company and any Subsidiary) which are first exercisable in any
calendar year for Common Stock having an aggregate Fair Market Value
(determined as of the date an Option is granted) that exceeds
$100,000. The preceding annual limit shall not apply to NQSOs. The
Committee may grant a Participant ISOs, NQSOs or a combination
thereof, and may vary such Awards among Participants. The maximum
number of Shares subject to Options which can be granted under the
Plan during any 12 month period to any Participant is 150,000 Shares.
6.2. Agreement. Each Option grant shall be evidenced by an
Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares to which the Option pertains and such
other provisions as the Committee shall determine. The Option
Agreement shall further specify whether the Award is intended to be an
ISO or an NQSO. Any portion of an Option that is not designated as an
ISO or otherwise fails or is not qualified as an ISO (even if
designated as an ISO) shall be a NQSO. If the Option is granted in
connection with a Corresponding SAR, the Agreement shall also specify
the terms that apply to the exercise of the Option and Corresponding
SAR.
6.3 Option Price. The Option Price for each grant of an ISO or
NQSO shall not be less than one hundred percent (100%) of the Fair
Market Value of a Share on the date the ISO is granted. In no event,
however, shall any Participant who, at any time would otherwise be
granted an Option, owns (within the meaning of Section 424(d) of the
Code) stock of the Company possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company
be eligible to receive an ISO at an Option Price less than one hundred
ten percent (110%) of the Fair Market Value of a share on the date the
ISO is granted.
6.4 Duration of Options. Each Option shall expire at such time
as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth
(10th) anniversary date of its grant; provided, further, however, that
any ISO granted to any Participant who at such time owns (within the
meaning of Section 424(d) of the Code) stock of the Company possessing
more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, shall be exercisable not later than
the fifth (5th) anniversary date of its grant.
6.5 Exercise of Options. Options granted under the Plan shall
be exercisable at such times and be subject to such restrictions and
conditions as the Committee shall in each instance approve, which need
not be the same for each grant or for each Participant. Each Option
shall be exercisable for such number of Shares and at such time or
times, including periodic installments, as may be determined by the
Committee at the time of the grant. Except as otherwise provided in
the Agreement and Article 13, the right to purchase Shares that are
exercisable in periodic installments shall be cumulative so that when
the right to purchase any Shares has accrued, such Shares or any part
thereof may be purchased at any time thereafter until the expiration
or termination of the Option. The exercise or partial exercise of
either an Option or its Corresponding SAR shall result in the
termination of the other to the extent of the number of Shares with
respect to which the Option or Corresponding SAR is exercised.
6.6 Payment. Options shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of
Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price upon
exercise of any Option shall be payable to the Company in full,
either: (a) in cash, (b) cash equivalent approved by the Committee,
(c) if approved by the Committee, by tendering previously acquired
Shares having an aggregate Fair Market Value at the time of exercise
equal to the total Option Price (provided that the Shares which are
tendered must have been held by the Participant for the period
required by law, if any, prior to their tender to satisfy the Option
Price), or (d) by a combination of (a), (b) and (c). The Committee
also may allow cashless exercises as permitted under Federal Reserve
Board's Regulation T, subject to applicable securities law
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restrictions, or by any other means which the Committee determines to
be consistent with the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the
Participant, in the Participant's name, Share certificates in an
appropriate amount based upon the number of Shares purchased under the
Option(s), and may place appropriate legends on the certificates
representing such Shares.
6.7 Termination of Employment Due to Death, Disability or
Retirement. Unless otherwise provided by the Committee in the
Agreement, the following rules shall apply in the event of the
Participant's termination of employment due to death, Disability or
Retirement:
(a) Termination by Death. In the event the Participant
dies while actively employed, all outstanding Options granted to that
Participant shall immediately vest and shall remain exercisable at any
time prior to their expiration date, or for one (1) year after the
date of death, whichever period is shorter, by (i) such person(s) as
shall have been named as the Participant's beneficiary, (ii) such
person(s) that have acquired the Participant's rights under such
Options by will or by the laws of descent and distribution, (iii) the
Participant's estate or representative of the Participant's estate, or
(iv) by a transferee of the Option who has acquired the Option in a
transaction that is permitted by Section 6.9.
(b) Termination by Disability. In the event the employment
of a Participant is terminated by reason of Disability, all
outstanding Options granted to that Participant shall immediately vest
as of the date the Committee determines the definition of Disability
to have been satisfied and shall remain exercisable at any time prior
to their expiration date, or for one (1) year after the date that the
Committee determines the definition of Disability to have been
satisfied, whichever period is shorter, by the Participant's duly
appointed guardian or other legal representative.
(c) Termination by Retirement. In the event the employment
of a Participant is terminated by reason of Retirement, all
outstanding Options granted to that Participant shall immediately vest
and shall remain exercisable at any time prior to their expiration
date, or for three (3) months after the effective date of Retirement,
whichever period is shorter.
(d) Employment Termination Followed by Death. In the event
that a Participant's employment terminates by reason of Disability or
Retirement, and within the exercise period following such termination
the Participant dies, then the remaining exercise period for
outstanding Options shall equal the longer of: (i) one (1) year
following death; or (ii) the remaining portion of the exercise period
which was triggered by the employment termination. Such Options shall
be exercisable by the persons specified in subsection (a) above.
6.8 Termination of Employment for Other Reasons. If the
employment of a Participant shall terminate for any reason other than
the reasons set forth in Section 6.7, all Options held by the
Participant which are not vested as of the effective date of his
employment termination shall be immediately forfeited to the Company
(and shall, subject to Section 4.2 hereof, once again become available
for grant under the Plan). However, the Committee, in its sole
discretion, shall have the right to immediately vest all or any
portion of such Options, subject to such terms as the Committee, in
its sole discretion, deems appropriate.
In the event an Employee's employment is terminated by the
Company for Cause, or such Employee voluntarily terminates his
employment, the Option rights under any then vested outstanding
Options shall terminate immediately upon termination of employment. If
the Employee's employment is terminated by the Company without Cause,
any Options vested as of such Employee's date of termination shall
remain exercisable at any time prior to their expiration date or for
three (3) months after such Employee's date of termination of
employment, whichever period is shorter.
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6.9 Limited Transferability. A Participant may transfer an
Option granted hereunder, including but not limited to transfers to
members of his or her Immediate Family (as defined below), to one or
more trusts for the benefit of such Immediate Family members, or to
one or more partnerships where such Immediate Family members are the
only partners, if (i) the Agreement evidencing such Option expressly
provides that the Option may be transferred, (ii) the Participant does
not receive any consideration in any form whatsoever for such
transfer, (iii) such transfer is permitted with respect to applicable
tax laws, and (iv) the Participant is an Insider, such transfer is
permitted under Rule 16b-3 of the Exchange Act as in effect from time
to time. Any Option so transferred shall continue to be subject to
the same terms and conditions in the hands of the transferee as were
applicable to said Option immediately prior to the transfer thereof.
Any reference in any such Agreement to the employment by or
performance of services for the Company by the Participant shall
continue to refer to the employment of, or performance by, the
transferring Participant. For purposes hereof, "Immediate Family"
shall mean the Participant and the Participant's spouse, children and
grandchildren. Any Option that is granted pursuant to any Agreement
that did not initially expressly allow the transfer of said Option and
that has not been amended to expressly permit such transfer, shall not
be transferable by the Participant otherwise than by will or by the
laws of descent and distribution and such Option thus shall be
exercisable in the Participant's lifetime only by the Participant.
6.10 Shareholder Rights. No Participant shall have any rights
as a shareholder with respect to Shares subject to his Option until
the issuance of such Shares to the Participant pursuant to the
exercise of such Option.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 Grants of SARs. The Committee shall designate Employees to
whom SARs are granted, and will specify the number of Shares of Common
Stock subject to each grant. An SAR may be granted with or without a
related Option. All SARs granted under this Plan shall be subject to
an Agreement in accordance with the terms of this Plan. A payment to
the Participant upon the exercise of a Corresponding SAR may not be
more than the difference between the Fair Market Value of the Shares
subject to the ISO on the date of grant and the Fair Market Value of
the Shares on the date of exercise of the Corresponding SAR. The
maximum number of Shares underlying SARs which can be awarded under
the Plan during any 12 month period to any Participant is 150,000
Shares.
7.2 Duration of SARs. The duration of an SAR shall be set forth
in the Agreement as determined by the Committee. An SAR that is
granted as a Corresponding SAR shall have the same duration as the
Option to which it relates. An SAR shall terminate due to the
Participant's termination of employment at the same time as the date
specified in Sections 6.7 and 6.8 with respect to Options, regardless
of whether the SAR was granted in connection with the grant of an
Option.
7.3 Exercise of SAR. An SAR may be exercised in whole at any
time or in part from time to time and at such times and in compliance
with such requirements as the Committee shall determine as set forth
in the Agreement; provided, however, that a Corresponding SAR that is
related to an Incentive Stock Option may be exercised only to the
extent that the related Option is exercisable and only when the Fair
Market Value exceeds the Option Price of the related ISO. An SAR
granted under this Plan may be exercised with respect to any number of
shares less than a full number of whole shares for which the SAR could
be exercised. A partial exercise of an SAR shall not affect the right
to exercise the SAR from time to time in accordance with this Plan and
the applicable Agreement with respect to the remaining shares subject
to the SAR. The exercise of either an Option or Corresponding SAR
shall result in the termination of the other to the extent of the
number of Shares with respect to which the Option or its Corresponding
SAR is exercised.
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7.4 Determination of Payment of Cash and/or Common Stock Upon
Exercise of SAR. At the Committee's discretion, the amount payable as
a result of the exercise of an SAR may be settled in cash, Common
Stock, or a combination of cash and Common Stock. A fractional share
shall not be deliverable upon the exercise of an SAR, but a cash
payment shall be made in lieu thereof.
7.5 Nontransferability. Each SAR granted under the Plan shall
be nontransferable except by will or by the laws of descent and
distribution. During the lifetime of the Participant to whom the SAR
is granted, the SAR may be exercised only by the Participant. No
right or interest of a Participant in any SAR shall be liable for, or
subject to any lien, obligation or liability of such Participant. A
Corresponding SAR shall be subject to the same restrictions on
transfer as the ISO to which it relates.
Notwithstanding the foregoing, a Participant may transfer an SAR
(other than a Corresponding SAR that relates to an Incentive Stock
Option) under the same rules and conditions as are set forth in
Section 6.9.
7.6 Shareholder Rights. No Participant shall have any rights as
a shareholder with respect to Shares subject to his SAR until the
issuance of Shares (if any) to the Participant pursuant to the
exercise of such SAR.
ARTICLE 8. RESTRICTED STOCK; STOCK AWARDS
8.1 Grants. The Committee may from time to time in its
discretion grant Restricted Stock and Stock Awards to Employees and
may determine the number of Shares of Restricted Stock or Stock Awards
to be granted. The Committee shall determine the terms and conditions
of, and the amount of payment, if any, to be made by the Employee for,
such Restricted Stock. A grant of Restricted Stock may, in addition
to other conditions, require the Employee to pay for such Shares of
Restricted Stock, but the Committee may establish a price below Fair
Market Value at which the Employee can purchase the Shares of
Restricted Stock. Each grant of Restricted Stock shall be evidenced
by an Agreement containing terms and conditions not inconsistent with
the Plan as the Committee shall determine to be appropriate in its
sole discretion.
8.2 Restricted Period; Lapse of Restrictions. At the time a
grant of Restricted Stock is made, the Committee shall establish a
period or periods of time (the "Restricted Period") applicable to such
grant which, unless the Committee otherwise provides, shall not be
less than one year. Subject to the other provisions of this Section
8, at the end of the Restricted Period all restrictions shall lapse
and the Restricted Stock shall vest in the Participant. At the time a
grant is made, the Committee may, in its discretion, prescribe
conditions for the incremental lapse of restrictions during the
Restricted Period and for the lapse or termination of restrictions
upon the occurrence of other conditions in addition to or other than
the expiration of the Restricted Period with respect to all or any
portion of the Restricted Stock. Such conditions may, but need not,
include without limitation:
(a) The death, Disability or Retirement of the Employee to
whom Restricted Stock is granted, or
(b) The occurrence of a Change in Control (as defined in
Section 13.2).
The Committee may also, in its discretion, shorten or terminate the
Restricted Period, or waive any conditions for the lapse or
termination of restrictions with respect to all or any portion of the
Restricted Stock at any time after the date the grant is made.
8.3 Rights of Holder; Limitations Thereon. Upon a grant of
Restricted Stock, a stock certificate (or certificates) representing
the number of Shares of Restricted Stock granted to the Employee shall be
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registered in the Employee's name and shall be held in custody by
the Company or a bank selected by the Committee for the Employee's
account. Following such registration, the Employee shall have the
rights and privileges of a shareholder as to such Restricted Stock,
including the right to receive dividends, if and when declared by the
Board of Directors, and to vote such Restricted Stock, except that the
right to receive cash dividends shall be the right to receive such
dividends either in cash currently or by payment in Restricted Stock,
as the Committee shall determine, and except further that, the
following restrictions shall apply:
(a) The Employee shall not be entitled to delivery of a
certificate until the expiration or termination of the Restricted
Period for the Shares represented by such certificate and the
satisfaction of any and all other conditions prescribed by the
Committee;
(b) None of the Shares of Restricted Stock may be sold,
transferred, assigned, pledged, or otherwise encumbered or disposed of
during the Restricted Period and until the satisfaction of any and all
other conditions prescribed by the Committee; and
(c) All of the Shares of Restricted Stock that have not
vested shall be forfeited and all rights of the Employee to such
Shares of Restricted Stock shall terminate without further obligation
on the part of the Company, unless the Employee has remained a full-
time employee of the Company or any of its Subsidiaries, until the
expiration or termination of the Restricted Period and the
satisfaction of any and all other conditions prescribed by the
Committee applicable to such Shares of Restricted Stock. Upon the
forfeiture of any shares of Restricted Stock, such forfeited Shares
shall be transferred to the Company without further action by the
Employee and shall, in accordance with Section 4.2, again be available
for grant under the Plan.
With respect to any Shares received as a result of adjustments
under Section 4.3 hereof and any Shares received with respect to cash
dividends declared on Restricted Stock, the Participant shall have the
same rights and privileges, and be subject to the same restrictions,
as are set forth in this Section 8.
8.4 Delivery of Unrestricted Shares. Upon the expiration or
termination of the Restricted Period for any Shares of Restricted
Stock and the satisfaction of any and all other conditions prescribed
by the Committee, the restrictions applicable to such Shares of
Restricted Stock shall lapse and a stock certificate for the number of
Shares of Restricted Stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions except any
that may be imposed by law, to the holder of the Restricted Stock.
The Company shall not be required to deliver any fractional Share but
will pay, in lieu thereof, the Fair Market Value (determined as of the
date the restrictions lapse) of such fractional share to the holder
thereof. Prior to or concurrently with the delivery of a certificate
for Restricted Stock, the holder shall be required to pay an amount
necessary to satisfy any applicable federal, state and local tax
requirements as set out in Article 15 below.
8.5 Nonassignability of Restricted Stock. Unless the Committee
provides otherwise in the Agreement, no grant of, nor any right or
interest of a Participant in or to, any Restricted Stock, or in any
instrument evidencing any grant of Restricted Stock under the Plan,
may be assigned, encumbered or transferred except, in the event of the
death of a Participant, by will or the laws of descent and
distribution.
ARTICLE 9. PERFORMANCE SHARE AWARDS
9.1 Award. The Committee may designate Employees to whom
Performance Shares Awards will be granted at any time and from time to
time for no consideration and specify the number of shares of Common
Stock covered by the Award. No more than 25,000 Performance Shares
may be earned by a Participant with respect to any performance period.
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9.2 Earning the Award. A Performance Share Award, or portion
thereof, will be earned, and the Participant will be entitled to
receive Common Stock, a cash payment or a combination thereof, only
upon the achievement by the Participant, the Company, or a Subsidiary
of such performance objectives as the Committee, in its discretion,
shall prescribe on the date of grant. By way of example and not
limitation, such performance objectives may be stated with respect to
earnings per share of Common Stock, the Company's return on assets, or
Fair Market Value. The determination as to whether such objectives
have been achieved shall be made by the Committee, and such
determination shall be conclusive; provided, however, that the period
in which such performance is measured shall be at least one year.
9.3 Payment. In the discretion of the Committee, the amount
payable when a Performance Share Award is earned may be settled in
cash, by the grant of Common Stock or a combination of cash and Common
Stock. The aggregate Fair Market Value of the Common Stock received
by the Participant pursuant to a Performance Share Award, together
with any cash paid to the Participant, shall be equal to the aggregate
Fair Market Value, on the date the Performance Shares are earned, of
the number of shares of Common Stock equal to each Performance Share
earned. A fractional share will not be deliverable when a Performance
Share Award is earned, but a cash payment will be made in lieu
thereof.
9.4 Shareholder Rights. No Participant shall have, as a result
of receiving a Performance Share Award, any rights as a shareholder
until and to the extent that the Performance Shares are earned and
Common Stock is transferred to such Participant. If the Agreement so
provides, a Participant may receive a cash payment equal to the
dividends that would have been payable with respect to the number of
shares of Common Stock covered by the Award between (a) the date that
the Performance Shares are awarded and (b) the date that a transfer of
Common Stock to the Participant, cash settlement, or combination
thereof is made pursuant to the Performance Share Award. A
Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of a Performance Share Award or the right to receive
Common Stock thereunder other than by will or the laws of descent and
distribution. After a Performance Share Award is earned and paid in
Common Stock, a Participant will have all the rights of a shareholder
with respect to the Common Stock so awarded.
ARTICLE 10. BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case
of his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the same Participant, shall be in a form prescribed by the Company and
shall be effective only when filed by the Participant, in writing,
with the Company during the Participant's lifetime. In the absence of
any such designation, benefits remaining unpaid at the Participant's
death shall be paid to the Participant's estate.
The spouse of a married Participant domiciled in a community
property jurisdiction shall join in any designation of a beneficiary
or beneficiaries other than the spouse.
ARTICLE 11. DEFERRALS
The Committee may permit a Participant to defer to another plan
or program such Participant's receipt of Shares that would otherwise
be due to such Participant by virtue of the exercise of an Option or
the vesting of Restricted Stock. If any such deferral election is
required or permitted, the Committee shall, in its sole discretion,
establish rules and procedures for such payment deferrals.
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ARTICLE 12. RIGHTS OF EMPLOYEES
12.1 Employment. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or a Subsidiary to terminate
any Participant's employment or engagement by the Company at any time,
nor confer upon any Participant any right to continue in the employ or
service of the Company or a Subsidiary. For purposes of the Plan,
transfer of employment of a Participant between the Company and any
one of its Subsidiaries (or between Subsidiaries) shall not be deemed
a termination of employment.
12.2 Participation. No Employee shall have the right to be
selected to receive an Award under this Plan, or, having been so
selected, to be selected to receive a future Award.
ARTICLE 13. CHANGE IN CONTROL
13.1 Occurrence. Upon the occurrence of a Change in Control (as
defined below), except as provided in the Agreement or unless
otherwise specifically prohibited by the terms of Article 18 hereof:
(a) Any and all Options and SARs granted hereunder shall
become fully vested and immediately exercisable;
(b) To the extent provided by the Committee in the Award,
all restrictions on a grant of Restricted Stock shall lapse and such
Restricted Stock shall be delivered to the Participant in accordance
with Section 8.4;
(c) Each Performance Share Award shall be deemed to be
earned in its entirety and converted into Common Stock as of the date
of a Change in Control, and shall be transferable and nonforfeitable;
and
(d) Subject to Article 14 hereof, the Committee shall have
the authority to make any modifications to the Awards as determined by
the Committee to be appropriate before the effective date of the
Change in Control.
13.2 Definition. For purposes of the Plan, a "Change in
Control" shall be deemed to have occurred if:
(a) An acquisition by any Person of Beneficial Ownership of
the shares of Common Stock of the Company then outstanding (the
"Company Common Stock Outstanding") or the voting securities of the
Company then outstanding entitled to vote generally in the election of
directors (the "Company Voting Securities Outstanding"), if such
acquisition of Beneficial Ownership results in the Person beneficially
owning (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) twenty-five percent (25%) or more of the Company Common
Stock Outstanding or twenty-five percent (25%) or more of the combined
voting power of the Company Voting Securities Outstanding; provided,
that immediately prior to such acquisition such Person was not a
direct or indirect Beneficial Owner of twenty-five percent (25%) or
more of the Company Common Stock Outstanding or twenty-five percent
(25%) or more of the combined voting power of Company Voting
Securities Outstanding, as the case may be; or
(b) The approval of the shareholders of the Company of a
reorganization, merger, consolidation, complete liquidation or
dissolution of the Company, the sale or disposition of all or
substantially all of the assets of the Company or similar corporate
transaction (in each case referred to in this Section 13.2 as a
"Corporate Transaction") or, if consummation of such Corporate
Transaction is subject, at the time of such approval by shareholders,
to the consent of any government or governmental agency, the obtaining
of such consent (either explicitly or implicitly); or
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(c) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section 13.2 that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of those individuals who are members of the Board and who were also
members of the Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were a member
of the Incumbent Board; but, provided, further, that any such
individual whose initial assumption of office occurs as a result of
either an actual or threatened election contest (as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act, including any successor to such Rule), or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board, shall not be so considered as a member of
the Incumbent Board.
Notwithstanding the provisions set forth in subsections
(a) and (b), the following shall not constitute a Change in Control
for purposes of this Plan: (1) any acquisition of shares of Common
Stock by, or consummation of a Corporate Transaction with, any
Subsidiary or any employee benefit plan (or related trust) sponsored
or maintained by the Company or an affiliate; or (2) any acquisition
of shares of Common Stock, or consummation of a Corporate Transaction,
following which more than fifty percent (50%) of, respectively, the
shares then outstanding of common stock of the corporation resulting
from such acquisition or Corporate Transaction and the combined voting
power of the voting securities then outstanding of such corporation
entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially
all of the individuals and entities who were Beneficial Owners,
respectively, of the Company Common Stock Outstanding and Company
Voting Securities Outstanding immediately prior to such acquisition or
Corporate Transaction in substantially the same proportions as their
ownership, immediately prior to such acquisition or Corporate
Transaction, of the Company Common Stock Outstanding and Company
Voting Securities Outstanding, as the case may be.
13.3 Limitation on Awards Notwithstanding any other provisions
of the Plan, if any Award under this Plan, either alone or together
with payments that a Participant has the right to receive from the
Company or a Subsidiary, would constitute a "parachute payment" (as
defined in Section 280G of the Code), all such payments shall be
reduced to the largest amount that will result in no portion being
subject to the excise tax imposed by Section 4999 of the Code.
ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION
14.1Amendment, Modification and Termination. The Board may, at
any time and from time to time, alter, amend, suspend or terminate the
Plan in whole or in part; provided, that, unless approved by the
holders of a majority of the total number of Shares of the Company
represented and voted at a meeting at which a quorum is present, no
amendment shall be made to the Plan if such amendment would (a)
materially modify the eligibility requirements provided in Article 5;
(b) increase the total number of Shares (except as provided in Section
4.3) which may be granted under the Plan, as provided in Section 4.1;
(c) extend the term of the Plan; or (d) amend the Plan in any other
manner which the Board, in its discretion, determines should become
effective only if approved by the shareholders even though such
shareholder approval is not expressly required by the Plan or by law.
No amendment which requires shareholder approval in order for the Plan
to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such
amendment shall be approved by the requisite vote of shareholders.
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14.2 Awards Previously Granted. No termination, amendment or
modification of the Plan shall adversely affect in any material way
any Award previously granted under the Plan, without the written
consent of the Participant holding such Award. The Committee shall,
with the written consent of the Participant holding such Award, have
the authority to cancel Awards outstanding and grant replacement
Awards therefor.
14.3 Compliance With Code Section 162(m). At all times when the
Committee determines that compliance with Code Section 162(m) is
desired, all Awards granted under this Plan shall comply with the
requirements of Code Section 162(m). In addition, in the event that
changes are made to Code Section 162(m) to permit greater flexibility
with respect to any Award or Awards under the Plan, the Committee may,
subject to this Article 14, make any adjustments it deem appropriate.
ARTICLE 15. WITHHOLDING
15.1 Tax Withholding. The Company shall have the power and the
right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state and local
taxes (including the Participant's FICA obligation) required by law to
be withheld with respect to any taxable event arising in connection
with an Award under this Plan.
15.2 Share Withholding. With respect to withholding required
upon the exercise of Options, or upon any other taxable event arising
as a result of Awards granted hereunder which are to be paid in the
form of Shares, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in
part, by having the Company withhold Shares having a Fair Market Value
on the date the tax is to be determined equal to the minimum statutory
total tax which could be imposed on the transaction. All elections
shall be irrevocable, made in writing, signed by the Participant, and
elections by Insiders shall additionally comply with all legal
requirements applicable to Share transactions by such Participants.
ARTICLE 16. INDEMNIFICATION
Each person who is or shall have been a member of the Committee,
or the Board, shall be indemnified and held harmless by the Company
against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by him or her in connection with
or resulting from any claim, action, suit or proceeding to which he or
she may be a party or in which he or she may be involved by reason of
any action taken or failure to act under the Plan and against and from
any and all amounts paid by him or her in settlement thereof, with the
Company's approval, or paid by him in satisfaction of any judgment in
any such action, suit or proceeding against him, provided he shall
give the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall be in
addition to any other rights of indemnification to which such persons
may be entitled under the Company's Articles of Incorporation or
Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
ARTICLE 17. SUCCESSORS
All obligations of the Company under the Plan, with respect to
Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a
direct or indirect purchase, merger, consolidation or otherwise, of
all or substantially all of the business and/or assets of the Company.
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ARTICLE 18. LEGAL CONSTRUCTION
18.1 Gender and Number. Except where otherwise indicated by the
context, any masculine term used herein also shall include the
feminine; the plural shall include the singular and the singular shall
include the plural.
18.2 Severability. In the event any provision of the Plan shall
be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the
Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
18.3 Requirements of Law. The granting of Awards and the
issuance of Shares under the Plan shall be subject to all applicable
laws, rules and regulations, and to such approvals by any governmental
agencies or national securities exchanges as may be required.
18.4 Regulatory Approvals and Listing. The Company shall not be
required to issue any certificate or certificates for Shares under the
Plan prior to (i) obtaining any approval from any governmental agency
which the Company shall, in its discretion, determine to be necessary
or advisable, (ii) the admission of such shares to listing on any
national securities exchange or Nasdaq on which the Company's Shares
may be listed, and (iii) the completion of any registration or other
qualification of such Shares under any state or federal law or ruling
or regulations of any governmental body which the Company shall, in
its sole discretion, determine to be necessary or advisable.
Notwithstanding any other provision set forth in the Plan, if
required by the then-current Section 16 of the Exchange Act, any
"derivative security" or "equity security" offered pursuant to the
Plan to any Insider may not be sold or transferred for at least six
(6) months after the date of grant of such Award. The terms "equity
security" and "derivative security" shall have the meanings ascribed
to them in the then-current Rule 16(a) under the Exchange Act.
18.5 Securities Law Compliance. With respect to Insiders,
transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provisions 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.
18.6 Governing Law. To the extent not preempted by Federal law,
the Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Georgia.
AS APPROVED BY THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
SUBURBAN LODGES OF AMERICA, INC. ON MARCH 26, 1996.
A-15
<PAGE>
COMMON STOCK
OF SUBURBAN LODGES OF AMERICA, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Dan J. Berman and John W.
Spiegel, or either of them, with power of substitution to each, the
proxies of the undersigned to vote all of the undersigned's shares of
the Common Stock of Suburban Lodges of America, Inc. at the Annual
Meeting of Shareholders of SUBURBAN LODGES OF AMERICA, INC. to be held
at 10:00 a.m. at The Cobb Galleria Centre, Room 117, Two Galleria
Parkway, NW, Atlanta, Georgia 30339, on May 11, 1999, and any
adjournment thereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" PROPOSAL NOS. 1 AND 2, AND,
UNLESS INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE
PROVIDED, THE PROXY WILL BE SO VOTED.
Proposal 1 -- Election of Directors Nominees: David E. Krischer
Dan J. Berman
FOR the nominees listed to the right WITHHOLD AUTHORITY WITHHOLD AUTHORITY
to vote for all to vote for an
nominees individual nominee,
__ __ Write name below:
|__| |__|
_________________
Proposal 2 Amendment to Stock Option and Incentive Award Plan
FOR AGAINST ABSTAIN
__ __ __
|__| |__| |__|
It is understood that this proxy confers discretionary authority in
respect to matters not known or determined at the time of the mailing
of the notice of the meeting to the undersigned.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders dated April 8, 1999 and the Proxy Statement
furnished therewith.
Dated and signed_____________________, 1999
____________________________________________
____________________________________________
(Signature should agree with the name(s) hereon. Executors,
administrators, trustees, guardians and attorneys should so indicate
when signing. For joint accounts, each owner should sign.
Corporations should sign their full corporate name by a duly
authorized officer.)
This proxy is revocable at or at any time prior to the meeting.
Please sign and return this proxy in the accompanying prepaid
envelope.
