SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential for Use of the Commission Only (as permitted by Rule 14a-6(e)
(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S 240.14a-11(c) or S 240.14a-12
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
(Name of Registrant as Specified in Its Charter)
-----------------------------------------
(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) (4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed.
<PAGE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 1999
To the Stockholders of Environmental Products & Technologies Corporation:
Notice is hereby given that the Annual Meeting of the Stockholders of
Environmental Products & Technologies Corporation ("EPTC") will be held at the
Radisson Hotel, 30100 Agoura Road, Agoura Hills, California 91301
(818/707-1220), on Monday, April 19, 1999, at 3:00pm Pacific Time, for the
purposes discussed in the following pages and which are made part of this
Notice:
1. To elect three directors to serve for one year each, until the
next Annual Meeting of Stockholders and until his or her successor
is elected and shall qualify;
2. To approve EPTC's 1999 Stock Incentive Plan;
3. To approve EPTC's 1999 Incentive Compensation Plan;
4. To approve EPTC's 1999 Non-employee Director Restricted Stock Plan;
5. To approve the Board of Directors' selection of Clumeck, Stern,
Phillips & Schenkelberg as EPTC's independent public accountants
for its fiscal year ending September 30, 1999; and
6. To consider and act upon any other matters that properly may come
before the meeting or any adjournment thereof.
EPTC's Board of Directors has fixed the close of business on March 20,
1999, as the record date for the determination of stockholders having the right
to receive notice of, and to vote at, the Annual Meeting of Stockholders and any
adjournment thereof. A list of such stockholders will be available for
examination by a stockholder for any purpose germane to the meeting during
ordinary business hours at the offices of EPTC at 5380 N. Sterling Center Drive,
Westlake Village, California 91361, during the ten days prior to the Meeting.
You are requested to date, sign, and return the enclosed Proxy, which
is solicited by the Board of Directors of EPTC and will be voted as indicated in
the accompanying Proxy Statement and Proxy. Your vote is important. Please sign
and date the enclosed Proxy and return it promptly in the enclosed return
envelope whether or not you expect to attend the Meeting. The giving of your
proxy as requested hereby will not affect your right to vote in person should
you decide to attend the Annual Meeting. The return envelope requires no postage
if mailed in the United States. If mailed elsewhere, appropriate postage must be
affixed. Your proxy is revocable at any time before the Annual Meeting.
By Order of the Board of Directors,
Marvin Mears
Chairman
Westlake Village, California
March 20, 1999
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
5380 N. STERLING CENTER DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91361-4612
818/865-2205
<PAGE>
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
5380 N. STERLING CENTER DRIVE
WESTLAKE VILLAGE, CALIFORNIA 91361-4612
818/865-2205
----------------------
PROXY STATEMENT
----------------------
ANNUAL MEETING OF STOCKHOLDERS
Solicitation, Exercise and Revocability of Proxy
The enclosed proxy is solicited by the Board of Directors of EPTC for use in
voting at the Annual Meeting of Stockholders to be held at the Radisson Hotel,
30100 Agoura Road, Agoura Hills, California 91301 (818/707-1220), on Monday,
April 19, 1999, at 3:00pm Pacific Time, and at any postponement or adjournment
thereof, for the purposes set forth in the attached notice. When proxies are
properly dated, executed, and returned, the shares they represent will be voted
at the Annual Meeting in accordance with the instructions of the stockholder
completing the proxy. If no specific instructions are given, the shares will be
voted FOR (i) the election of the nominees for directors set forth herein; (ii)
approval of the 1999 Stock Incentive Plan; (iii) approval of the 1999 Incentive
Compensation Plan; (iv) approval of the 1999 Non-employee Director Restricted
Stock Plan; (v) ratification of the selection of Clumeck, Stern, Phillips &
Schenkelberg as the independent auditors of EPTC; and (vi) to consider and act
upon any other matters that properly may come before the meeting or any
adjournment thereof. A stockholder giving a proxy has the power to revoke it at
any time prior to its exercise by voting in person at the Annual Meeting, by
giving written notice to EPTC's Secretary prior to the Annual Meeting or by
giving a later-dated proxy.
The presence at the meeting, in person or by proxy, of stockholders holding in
the aggregate a majority of the outstanding shares of EPTC's Common Stock
entitled to vote shall constitute a quorum for the transaction of business. EPTC
does not have cumulative voting for directors; a plurality of the votes properly
cast for the election of directors by the stockholders attending the meeting, in
person or by proxy, will elect directors to office. A majority of votes properly
cast upon any question presented for consideration and stockholder action at the
meeting, other than the election of directors, shall decide the question.
Abstentions and broker non-votes will be counted for purposes of establishing a
quorum, but will not count as votes cast for the election of directors or any
other questions and accordingly will have no effect. Votes cast by stockholders
who attend and vote in person or by proxy at the Annual Meeting will be counted
by inspectors to be appointed by EPTC.
Cost of Solicitation
The cost of soliciting proxies will be borne by EPTC.
Voting/
The close of business on March 20, 1999, has been fixed as the record date for
determining the stockholders entitled to notice of, and to vote at, the Annual
Meeting. Each share shall be entitled to one vote on all matters. As of the
record date there were ______________ shares of EPTC's common stock outstanding
and entitled to vote. For a description of the principal stockholders of EPTC,
see "Directors and Executive Officers" and "Security Ownership of Certain
Beneficial Owners and Management" below.
This Proxy Statement and the enclosed Proxy are being furnished to stockholders
on or about March 23, 1999. EPTC's principal executive offices are located at:
5380 N. Sterling Center Drive, Westlake Village, California 91361-4612, and its
telephone number at those offices is: (818) 865-2205.
<PAGE>
Company Stock Price Performance
The stock price performance graph below is required by the SEC and shall not be
deemed to be incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933,
as amended, or under the Securities Exchanged Act of 1934, as amended, except to
the extent that EPTC specifically incorporates this information by reference,
and shall not otherwise be deemed soliciting material or filed under such Acts.
The graph below compares the cumulative total stockholder return on the Common
Stock of EPTC from the last day of the first month of trading of EPTC's Common
Stock upon EPTC's initial public offering (June 30, 1997) to January 31, 1999
with the cumulative total return on the Nasdaq Stock Market, US and Foreign
Market Index and the Computer and Data Processing Index (assuming the investment
of $100 in EPTC's Common Stock and in each of the indexes on June 30, 1997, and
reinvestment of all dividends).
[GRAPH OMITTED]
The above graph was plotted using the following data:
<TABLE>
<CAPTION>
Fidelity Select
Environmental Products & Technologies Corporation Wilshire Small Cap Index Environmental Services
------------------------------------------------- ------------------------ ----------------------
Market Price Invested Value Market Price Invested Value Market Price Invested Value
------------ -------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
9/30/97 $2.5000 $100.00 635 $100.00 $16.60 $100.00
12/31/97 2.4375 97.50 595 93.70 17.25 103.92
3/31/98 10.0625 402.50 675 106.30 16.20 97.59
6/30/98 7.5625 302.50 645 101.57 13.05 78.61
9/30/98 5.5000 220.00 490 77.16 13.75 82.83
12/31/98 3.2500 130.00 580 91.34 12.80 77.11
2/26/99 7.2500 290.00 572 90.08 12.60 75.90
</TABLE>
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
EPTC's Bylaws provide that the number of Directors shall be determined from time
to time by the stockholders or the Board of Directors, but that there shall be
no less than one. Presently EPTC's Board of Directors consists of one member. We
now have three nominees proposed as directors, the existing director and two
unaffiliated director nominees. Each director elected at the Annual Meeting will
hold office until a successor is elected and qualified, or until the Director
resigns, is removed, or becomes disqualified. Unless marked otherwise, proxies
received will be voted FOR the election of each of the nominees named below. If
any such person is unable or unwilling to serve as a Director at the date of the
Annual Meeting or any postponement or adjournment thereof, the proxies may be
voted for a substitute nominee designated by the proxy holders or by the present
Board of Directors to fill such vacancy, or for the balance of those nominees
named without nomination of a substitute, or the size of the Board may be
reduced accordingly. The Board of Directors has no reason to believe that any of
the nominees for Director will be unwilling or unable to serve if elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH NOMINEE DIRECTOR
Directors and Executive Officers
The nominees for Director to be voted upon at the Annual Meeting are
Marvin Mears, Charles Vance, and Gerald Nordstrom. Biographical and other
relevant information about each nominee is included below.
R. Marvin Mears has been the President, Chief Executive Officer and a
director of EPTC since December 1994. From March 1993 to November 1994, Mr.
Mears was President of Combined Assets, Inc., a privately-held consulting
company. From January 1991 to February 1993, Mears was the President of
Corporate Capital Resources, Inc. and prior thereto, from November 1986 to
January 1991, Mears was the Vice President - Corporate Development and a member
of the Valuation Committee of Corporate Capital Resources, Inc., a
publicly-traded venture capital company that specialized in early-stage and
start-up companies. Mr. Mears also currently serves on the Board of Directors of
Chatsworth Products Inc., a privately-held company engaged in manufacturing
hardware for computer networks, and Robert T. Dorris and Associates, a
privately-held company that provides employee assistance programs to large
corporations.
Charles M. Vance, Ph.D., has focused his teaching, consulting, and
research within organizations in the United States and abroad on training and
management development, organization change and development, strategic
management, and human resource management. His past and current clients include
several profit and non-profit organizations, large and small, including Hughes
Space & Communications Corp., Texaco, Mattel, Arthur Andersen & Co., Los Angeles
Times, Los Angeles Archdiocese, U.S. Department of Labor, Air Louvers & Samson
Industries, American Management Association, Syracuse Savings Bank, Mead
Corporation, ARCO, Dermalogica, Borg-Warner Corporation, University of Southern
California, the Catholic University of Uruguay, Communications Engineering
Limited of Hong Kong, and the Academy for International Education of Bonn,
Germany. Vance has delivered numerous presentations at academic and practitioner
association meetings, and has published widely in such journals as Journal of
Management Education, Training and Development Journal, Journal of Business
Ethics, Journal of Management Development, Advances in Competitiveness Research,
Management International Review, and Human Relations. His book, Mastering
Management Education, was published in 1993 by Sage Publications. He is
presently a section editor for the Journal of Management Inquiry. Vance has been
affiliated with several colleges and universities, including Harvard, University
of Southern California, Syracuse University, Pepperdine University, California
School for Professional Psychology, and Ithaca College. His present
undergraduate, MBA, and executive education responsibilities as Professor of
Management at Loyola Marymount University in Los Angeles cover strategic human
resource management, performance management, international management, and
organizational training and development.
Gerald G. Nordstrom, has nearly 40 years in agribusiness, from farm
management to food production, and in four companies as an owner or principal.
Since 1983, he has been President and CEO of Actagro, Inc., a specialty
fertilizer company with operations in six states, taking the company from the
ground floor to a 7.5 million dollar a year operation. For Actagro, he directed
<PAGE>
sales, operations, marketing and credit activities. He created and developed
trademarks and co-developed patented plant nutrition technology that achieved
worldwide recognition. He performed scientific research, analysis, and product
creation. Prior to Actagro, Nordstrom managed a 3,000-acre row crop farm, with
100 employees, turning it into a profitable farming operation, managing all
land, financial, and technical operations. Earlier, Nordstrom spent 12 years in
several positions for the Spreckels Sugar Division of Amstar Corporation, in
strategic partnering relations; salary and benefits administration; raw product
budget; contract acreage and technical assistance in sugarbeet supply, and
participated in the corporate executive development program. Nordstrom is a
graduate of University of California, Berkeley, in Business Management and
Agricultural Economics. Subsequent education included Agricultural Financial
Management at University of California, and Management Development Program at
Golden Gate University. Nordstrom's numerous affiliations include fertilizer
associations, sugarbeet associations, and general agribusiness.
Board of Directors Meetings, Committees and Compensation
All Directors hold office until the next annual meeting of the
stockholders of EPTC and until their successors have been elected and qualified.
There have been five meetings in the past fiscal year. The officers of EPTC are
elected annually and serve at the pleasure of the Board of Directors. No
executive officer or director of EPTC has a family relationship with any other
executive officer or director of EPTC.
The Director was not compensated for his services as Director during
the year ended September 30, 1998, although EPTC's policy is to reimburse
Directors for their out-of-pocket expenses incurred in connection with their
services as Directors.
Employment and Consulting Agreements and Other Compensation Agreements
During the fiscal years ended September 30, 1998, September 30, 1997,
and September 30, 1996, the total compensation paid to EPTC's Chief Executive
Officer, Marvin Mears, was zero. No options or warrants or similar rights to
acquire securities of EPTC were granted to executive officers or the director of
EPTC during the year and no options, warrants, or similar rights to acquire
securities of EPTC were held by such persons at the September 30, 1998 date. No
executive officer of EPTC received annual compensation of $100,000 or more
during the fiscal year ended September 30, 1998.
EPTC entered into a four-year employment agreement with Marvin Mears,
effective as of April 15, 1998 (the "Mears Employment Agreement"). The Mears
Employment Agreement provides, among other things, that EPTC shall pay and/or
provide to Mr. Mears: (i) a fixed annual salary of $96,000 in year one, $120,000
in year two, $144,000 in year three, and $168,000 in year four, payable in each
case in equal bi-monthly installments; (ii) all fringe benefits which EPTC or
any subsidiary may make available from time-to-time for persons with comparable
positions and responsibilities; (iii) medical group insurance coverage or
equivalent coverage for Mr. Mears and his dependents, which coverage shall
commence on December 31, 1998 and continue throughout the term of employment;
(iv) reimbursement for reasonable and necessary business expenses incurred by
Mr. Mears in the course of his duties as Chief Executive Officer of EPTC; and
(v) $750.00 per month as an automobile allowance. EPTC may terminate Mr. Mears'
employment "for cause" provided EPTC provides Mr. Mears with 30 days notice and
an opportunity to cure any alleged breach or violation of the agreement.
Further, Mr. Mears may be terminated if he commits gross negligence in the
performance of his duties under the agreement or breaches his fiduciary duties
to EPTC. If Mr. Mears is disabled to a degree that he is unable to fulfill his
duties, then EPTC will pay his full salary for the first 12 months of his
disability, 75% of salary for the second 12 months, and 50% of salary for the
next 24 months; provided, however, that any such disability payment will cease
on April 14, 2002, regardless of when any such disability commenced. If Mr.
Mears is terminated without cause upon a change of control, all of the Mr.
Mears' converted stock options will immediately vest, and Mr. Mears will also be
entitled to receive $250,000 and an amount of money sufficient to allow him to
exercise all unexercised options and to pay any taxes due therefor.
Pursuant to a letter agreement (the "SPC Agreement") dated January 22,
1998, EPTC retained the services of Strategic Planning Consultants, Inc. ("SPC")
pursuant to which SPC has agreed to provide EPTC with general business
consulting services, including without limitation, strategic planning and
analyzing EPTC's capital structure. The SPC Agreement is for a period of 360
days from January 22, 1998. In consideration for entering into the SPC
Agreement, EPTC agreed to provide to the principals of SPC warrants to purchase
300,000 shares of EPTC's Common Stock at an exercise price of $2.00 per share,
the underlying shares of which are being registered under the Registration
<PAGE>
Statement of EPTC. In addition, EPTC has agreed to pay SPC $3,000 per month for
a period of 24 months and to reimburse SPC for pre-approved expenses. SPC's
services include consulting to management on strategic planning, acquisitions,
corporate structure, and management compensation.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of EPTC's Common Stock as of February 26, 1999 by each
director and executive officer of EPTC, each person known to EPTC to be the
beneficial owner of more than 5% of the outstanding Common Stock, and all
directors and executive officers of EPTC as a group.
<TABLE>
<CAPTION>
Name and Shares of Common Stock Percentage
Address of Owner1 Beneficially Owner2 of Class
----------------- ------------------- --------
<S> <C> <C>
Marvin Mears 3,688,412 43.05
Morris L. Lerner 582,000 6.56
Joel G. Wadman 50,000 0.58
All Executive Officers and
Directors as a Group (2 persons) 4,270,412 49.61
</TABLE>
Certain Transactions
EPTC has an employment agreement with Marvin Mears. See "Employment and
Consulting Agreements and Other Compensation Agreements."
On November 13, 1997, Morris Lerner, formerly a director and secretary
of EPTC, borrowed $12,115.88 from EPTC (the "Lerner Note"). The Lerner Note
bears interest at the rate of 9% per annum and matures on November 12, 1999.
On November 1, 1995, a company controlled by Marvin Mears, the Chief
Executive Officer, President, and a director of EPTC, issued a note to EPTC in
the original principal amount of $35,000 (the "Mears Note"). The Mears Note
bears interest at the rate of 9% per annum and matures on November 1, 1998.
Interest has not been paid on the Mears Note and, as of September 30, 1997,
accrued interest on the Mears Note totaled $4,329. The Mears Note was repaid and
on July 29, 1998, Mr. Mears borrowed $32,797.66 from EPTC which, when netted
against accounts owing to Mr. Mears left a note receivable from Mr. Mears of
$19,515. This note matures on July 29, 2001, and bears interest at 9% per annum.
In August 1996, in satisfaction for acquiring odor control application
technology from Ronald Knudsen, formerly a Manager of Product Development of
EPTC, EPTC issued to Mr. Knudsen a promisory note in the original principal
amount of $125,000 (the "Knudsen Note"). The Knudsen Note bears interest at the
rate of 12% per annum and matures on August 1, 1998. The Knudsen Note contains
an acceleration clause that requires full principal and interest payments within
ten business days of the completion of a secondary offering to the public of at
least $3,000,000. The Knudsen Note has been repaid in full resulting in an
extraordinary gain on the extinguishment of debt.
In September 1998, EPTC loaned $135,000 to SPC. The loan is
collateralized by marketable securities. Interest accrues at 12% per year.
Principal and interest are due by February 17, 1999.
An officer of SPC is a stockholder of EPTC. SPC rendered consulting
services to EPTC in the amount of $84,186 for 1998.
- --------
1 The address of each such person is 5380 N. Sterling Center Drive, Westlake
Village, California 91361-4612.
2 Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of Common Stock subject to
options held by that person that are currently exercisable, or become
exercisable within 60 days from the date hereof, are deemed outstanding.
However, such shares are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Percentage ownership is based on
8,567,146 shares of Common Stock outstanding as of February 26, 1999.
<PAGE>
In May 1998, a stockholder of Lifeline Enterprises became an employee
of EPTC. Cash payments to Lifeline for research and development for 1998
amounted to $168,211. In December 1997, $131,250 was charged to research and
development for the fair market value of 100,000 shares of EPTC stock to
Lifeline. In addition, EPTC has committed to the issuance of an additional
370,000 shares of EPTC stock to Lifeline.
PROPOSAL 2
APPROVAL OF EPTC'S 1999 STOCK OPTION PLAN
The second item to be acted upon at the Annual Meeting is a proposal to approve
the Environmental Products & Technologies Corporation 1999 Stock Incentive Plan
(the "1999 SIP"), a copy of which is included as Appendix A to this Proxy
Statement.
REASONS FOR SEEKING APPROVAL
Since 1996, the Company has had in place a Stock Option Plan (the "1996 Plan")
pursuant to which it could grant options to purchase Company stock to Company
employees. While the Company intends to continue to grant options to employees
consistent with past practice under the existing plan, the Board of Directors
believes it is appropriate, in the context of a company in the research and
development phase, to provide similar compensation to key non-employee
consultants to the Company. In addition, the ability to provide other forms of
stock-based compensation, such as restricted stock and stock appreciation
rights, may be necessary to assure that compensation provided to the Company's
employees and consultants is competitive with that paid by other members of the
industry to their employees and consultants. The 1999 SIP provides both of these
alternatives, neither of which were contemplated under the 1996 Plan. In order
to qualify certain stock options granted to employees and Incentive Stock
Options (see "ISOs" below), and in order to assure that the Company can deduct
amounts paid to certain employees under the 1999 SIP (see "$1,000,000 DEDUCTION
LIMIT" below), it is necessary to include specific provisions in the 1999 SIP
and to obtain shareholder approval thereof.
SUMMARY DESCRIPTION OF THE SIP
The 1999 SIP authorizes the grant of a wide variety of awards, including
incentive stock options ("ISOs"), non-qualified stock options ("NQSOs"), stock
appreciation rights ("SARs"), limited stock appreciation rights ("Limited
Rights"), Restricted Stock, and Other Stock Interests. ISOs and NQSOs are both
stock options, allowing the recipient to purchase a fixed number of shares of
Common Stock for a fixed price; ISOs enable the recipient to enjoy a special tax
treatment upon exercise which is not available to holders of NQSOs. An SAR is
the right to receive stock, cash, or other property equal in value to the
difference between the base price of the SAR and the market price of the
Company's Common Stock on the exercise date. Limited Rights are a special kind
of cash-only SARs which are exercisable only for a limited time after the
occurrence of certain takeover events relating to the Company. Restricted Stock
is Common Stock which is issued subject to transfer restrictions and possible
forfeiture events. Other Stock Interests include any other compensatory
arrangement devised by the SIP's administrative committee which involves Common
Stock.
Because the Company is in the research and development phase and in the process
of hiring and contracting with employees and consultants, it is not current
possible to determine the number of individuals which may be eligible to receive
awards under the 1999 SIP. Non-employee directors are ineligible for awards.
The 1999 SIP is administered by the Board's Compensation Committee (the
"Committee"), which consists entirely of directors who are not employees of the
Company. Within the limits of the Plan, the Committee determines when and to
whom awards are granted, the types of award granted, the number of shares
subject to each award, the award's exercise or base price (as applicable) and
duration, when awards become exercisable, non-forfeitable, or otherwise vested,
and other terms and conditions which the Committee deems appropriate.
The 1999 SIP authorizes the issuance of 720,000 shares of the Company's Common
Stock pursuant to awards. In addition, no more than 50,000 shares per calendar
year may underlie awards granted to any one person. Appropriate adjustments in
these share limits and in the terms of outstanding awards are required for stock
splits and similar events. The authority to make new grants of awards under the
SIP will expire on April 20, 2009.
The option price of options and the base price of SARs and Limited Rights
generally cannot be less than 100% of the market value of the Company's Common
Stock on the grant date. Optionees may pay the option price in cash or with the
Company's Common Stock, including (if permitted by the Committee) shares
otherwise issuable in connection with the exercise. The Company may loan the
option price to optionees (to the extent allowed by law). The Committee has
authority to permit withholding taxes related to exercises or vesting to be paid
with Common Stock. The Committee may accelerate vesting of awards at any time in
its discretion. The 1999 SIP provides for automatic vesting of awards upon death
or disability of a recipient, or upon the occurrence of certain takeover events
relating to the Company. Automatic vesting also occurs upon retirement of the
recipient, except for Restricted Stock and Other Stock Interests. In the
Committee's discretion, award agreements may provide that awards are forfeited
if the recipient takes any action prohibited by the award agreement, or if
certain events occur or fail to occur.
The 1999 SIP may be amended by the Board of Directors at any time. Certain
amendments which increase the number of authorized shares, increase the maximum
number of shares which may be awarded to any person in any calendar year, change
the class of eligible employees, or withdraw the authority of the Committee to
administer the 1999 SIP, must be approved by the Company's shareholders.
PURPOSES OF THE 1999 SIP
The Board of Directors believes that the Company's long-term success is
dependent upon its ability to attract and retain outstanding individuals and to
motivate them to exert their best efforts on behalf of the Company's interests,
and that stock awards are an important part of the Company's incentive
compensation of its key employees and consultants. Stock based awards align
employees' and consultants' interests directly with those of the shareholders,
since the value of the awards is directly linked to the market price of the
Company's stock.
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
ISOs
An optionee does not realize taxable income, and the Company is not entitled to
a deduction, on the grant or exercise of an ISO.
If an optionee holds the shares acquired ("ISO Shares") for at least one year
from the exercise date and two years from the grant date (the "Required Holding
Periods"), the optionee's gain or loss upon a sale will be long-term capital
gain or loss equal to the difference between the amount realized on the sale and
the optionee's basis in the ISO Shares. The Company will not be entitled to a
deduction.
If an optionee disposes of the ISO Shares without satisfying the Required
Holding Periods, the "disqualifying disposition" will give rise to ordinary
income on that date equal to the excess of the fair market value of the ISO
Shares on the exercise date (or generally, the sale price if less) over the
option price. The Company will ordinarily be entitled to a deduction at the same
time equal to the amount of the ordinary income resulting from a disqualifying
disposition.
An optionee does recognize income for alternative minimum tax ("AMT") purposes
upon exercise of an ISO, unless there is a disqualifying disposition in the year
of exercise. The amount of income is the amount by which the fair market value
of the shares received exceeds the option price. AMT gain or loss is equal to
the excess of the amount realized over the AMT basis, which will include the AMT
income on exercise. For the Company's AMT purposes, ISO grant, exercise and sale
are treated in the same manner as for regular income tax purposes.
NQSOs, SARs, AND LIMITED RIGHTS
An optionee does not realize taxable income on the grant of an NQSO or SAR, but
does realize ordinary income on the exercise date. The amount of income in the
case of any NQSO exercise is the amount by which the fair market value the
shares received exceeds the option price. The amount of income in the case of an
SAR exercise is the amount of cash received plus the fair market value of any
shares received.
The Company will ordinarily be entitled to a deduction on the exercise date
equal to the ordinary income realized by the optionee from the exercise of NQSOs
or SARs.
The discussion with respect to SARs above also applies to Limited Rights.
RESTRICTED STOCK
A recipient of Restricted Stock generally does not recognize income, and the
Company generally is not entitled to a deduction, at the time of grant. Instead,
the recipient recognizes compensation income, and the Company is entitled to a
deduction, on the date on which vesting occurs ("Vesting Date"). The Recipient's
holding period will begin on the Vesting Date. The amount of income recognized
and the amount of the Company's deduction will equal the fair market value of
the vested Restricted Stock on the Vesting Date.
Any dividends on the Restricted Stock paid to the recipient prior to the Vesting
Date will be includible in the recipient's income as compensation and deductible
as such by the Company.
A recipient may, in some circumstances, elect to accelerate the time of
inclusion in income to the grant date rather than waiting until the Vesting
Date. If the election is made, the recipient recognizes compensation income at
the time of grant in the amount of the fair market value of an equal number of
unrestricted shares of Common Stock; the Company is entitled to a deduction in
the same amount at the same time.
PARACHUTE PAYMENTS
Options, SARs, Limited Rights and Restricted Stock provide for accelerated
exercisability and vesting upon a change in ownership or control of the Company,
which may cause certain amounts to be characterized as parachute payments. An
employee generally is deemed to have received a "parachute payment" in the
amount of compensation that is contingent upon an ownership change if such
compensation exceeds, in the aggregate, three times the employee's base amount,
which is generally the employee's average annual compensation for the five
preceding years. An employee's "excess parachute payment" is the excess of the
employee's total parachute payments over such base amount. An employee will be
subject to a 20% excise tax on, and the Company will be denied a deduction for,
any excess parachute payment.
$1,000,000 DEDUCTION LIMIT
The Company is not allowed a deduction for compensation paid to certain
executive officers ("Covered Employees") in excess of $1,000,000 each in any
taxable year, except to the extent such excess constitutes performance-based
compensation. Compensation from the Company's stock options will constitute
performance-based compensation if the 1999 SIP is approved by the Company's
shareholders.
<PAGE>
Compensation from Restricted Stock may not be performance-based and, therefore,
will not be deductible by the Company to the extent total non-performance-based
compensation paid to a Covered Employee in any year exceeds $1,000,000.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ITEM 2.
<PAGE>
PROPOSAL 3
APPROVAL OF EPTC'S 1999 INCENTIVE COMPENSATION PLAN
The third item to be acted upon at the Annual Meeting is a proposal to approve
the Environmental Products & Technologies Corporation 1999 Incentive
Compensation Plan (the "Bonus Plan"), a copy of which is included as Appendix B
to this Proxy Statement.
REASONS FOR SEEKING APPROVAL AND PURPOSES OF THE BONUS PLAN
The Company desires to pay cash bonuses to key employees and consultants who
contribute significantly to its financial success, including the executive
officers named in the proxy statement's Summary Compensation Table for that year
("Covered Employees"). Such bonuses may be awarded for each year by the Board's
Compensation Committee based upon its assessment at the end of that year of
several factors, including overall Company performance for the year, individual
performance, the compensation practices of competitors, and the relationship of
total executive compensation to certain target levels. The purpose of the Bonus
Plan is to provide a framework for the granting of cash bonuses to top
executives. The adoption of a written plan at this time and the inclusion in the
Bonus Plan of certain provisions are intended to ensure that all bonuses paid to
Covered Employees under the Plan qualify as performance-based compensation under
Section 162(m) of the Internal Revenue Code, thereby ensuring that the Company
will not be prevented from deducting bonuses payable under the Bonus Plan.
SUMMARY DESCRIPTION OF THE BONUS PLAN
The following is a description of the major provisions of the Bonus Plan:
Administration by Committee. The Bonus Plan must be administered by a committee
comprised solely of two or more outside directors of the Company. (The committee
is referred to herein as the "Committee.") The Compensation Committee is
presently serving as the Committee for the Bonus Plan.
Bonus and Award Programs. The Bonus Plan authorizes the Committee to establish
programs ("Bonus Programs") which allow payment of cash bonuses ("Bonuses") to
Participants based on pre-established minimum performance goal(s) for designated
Performance Periods (as defined in the Bonus Plan).
Eligibility and Participation. All key employees of and consultants to the
Company and of its affiliates ("Eligible Individuals") are eligible to
participate in the Bonus Plan. Because the Company is in the research and
development phase and in the process of hiring and contracting with employees
and consultants, it is not currently possible to determine the number of
individuals which may be eligible to receive awards under the Bonus Plan. For
each Bonus Program, the Committee will designate as Participants in the Program
one or more Eligible Individuals; the Committee will also designate those
Participants who are or may become Covered Employees for the applicable
Performance Period.
Performance Periods. Each Bonus program will apply with respect to a designated
Performance Period, which will be a fiscal year of the Company or such shorter
period as the Committee may determine. Each Bonus Program must be established in
writing prior to the expiration of any prescribed time period for the
pre-establishment of performance goals under Section 162(m) of the Code.
Performance Criteria and Goals. The Committee will establish one or more
objective, pre-established minimum performance goals (which may be Company-wide
or specific to an affiliate, division, product and/or geographic area) for each
Bonus Program. Minimum performance goals must be based on one or more of the
following criteria: sales, earnings, earnings per share, return on equity,
return on assets, cash flow, market share, stock price, costs and productivity.
No Covered Employee will receive any Bonus if the relevant minimum performance
goal is not met.
Amounts of Bonuses. For each Bonus Program, the Committee must establish one or
more formulas or standards for determining the amounts of Bonuses which may be
paid to Participants. The Bonus paid to any Covered Employee for any year cannot
exceed $750,000. The Committee has the discretion to establish the amount of any
Bonus payable to any Participant other than a Covered Employee. The Committee
may only reduce and may not increase the amounts payable to Covered Employees
below the formula or standard amount to reflect individual performance and/or
unanticipated factors (in either case, "Committee Discretion").
Amendment and Termination. The Board may amend the Bonus Plan from time to time.
However, no amendments may be made to the Bonus Plan which would change the
class of employees eligible to receive Bonuses, the performance criteria upon
which minimum performance goals may be based, or the maximum amount of Bonuses
which may be paid to a Covered Employee in a year, without shareholder approval.
The Committee may amend the Bonus Plan in any way if the Committee determines
that such amendment may be made without shareholder approval and without
jeopardizing qualification of Bonuses to Covered Employees as performance-based
compensation under Section 162(m) of the Code.
Acceleration Events. Upon a Change in Control of the Company (as defined in the
Bonus Plan), all Bonuses would become immediately payable in cash, with any
uncompleted Performance Period deemed ended and appropriate adjustments made to
minimum performance goals and formulas to reflect the shortening of such
Performance Period. The Committee would not be permitted to exercise Committee
Discretion to reduce the amounts of Bonuses payable to any Participant and could
make no amendments adverse to any Participant without that Participant's
consent.
<PAGE>
Federal Income Tax Consequences. Each Participant in the Bonus Plan will realize
ordinary income equal to the amount of any Bonuses received in the year of
payment, and, with the possible exception of Bonuses paid upon a Change in
Control, the Company will receive a deduction for the amount constituting
ordinary income to all Participants in the Bonus Plan.
ESTIMATE OF BENEFITS
The amounts that will be awarded to Participants under the Bonus Plan are not
currently determinable.
VOTE REQUIRED
The affirmative vote of a majority of the shares of common stock that are
actually voted (and have the power to vote) at the annual meeting is required
for approval of the Bonus Plan, as described in this proxy statement. The Board
recommends a vote FOR item 3.
<PAGE>
PROPOSAL 4
APPROVAL OF EPTC'S 1999 NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PLAN
The fourth item to be acted upon at the Annual Meeting is a proposal to approve
the Environmental Products & Technologies Corporation 1999 Non-Employee Director
Restricted Stock Plan (the "1999 DRSP"), a copy of which is included as Appendix
C to this Proxy Statement.
REASONS FOR SEEKING APPROVAL
The Board of Directors has adopted, subject to approval of the Company's
shareholders, the 1999 DRSP. The purpose of the 1999 DRSP is to further align
the interests of Directors and shareholders in enhancing the value of the
Company. The 1999 DRSP is also expected to assist in attracting and retaining
qualified individuals to serve as Directors. The 1999 DRSP permits the grant of
Restricted Stock to non-employee Directors first elected to the Board on or
after April 20, 1999.
SUMMARY DESCRIPTION OF THE 1999 DRSP
The 1999 DRSP authorizes the grant of up to eighty thousand shares of Restricted
Stock to non-employee Directors of the Company. Restricted Stock is common stock
of the Company which is issued subject to transfer restrictions and possible
forfeiture events.
Each individual who is first elected or appointed as a Director on or after the
effective date of the 1999 DRSP may receive shares of Restricted Stock upon such
individual's election or appointment as a Director of the Company. Shares of
Restricted Stock awarded to Directors are non-transferrable and forfeitable
until such shares vest. Vesting occurs upon the earliest of (1) five years after
the date of the award, (2) a Change of Control, as defined in the 1999 DRSP, or
(3) the death or permanent disability of the Director. Directors shall receive
any dividends attributable to Restricted Stock prior to vesting.
The 1999 DRSP is administered by the Chairman of the Board of Directors, who is
not eligible to receive grants of Restricted Stock under the 1999 DRSP. The
Board may amend or terminate the 1999 DRSP from time to time. However, no such
action may affect a non-employee Director's rights in awards without the
Director's consent. Without approval of shareholders, no such action shall
increase the aggregate number of shares available under the plan, or cause any
change in the application of Rule 16b-3 to the 1999 DRSP.
FEDERAL INCOME TAX CONSEQUENCES
A Director who receives shares of Restricted Stock generally does not recognize
income, and the Company generally is not entitled to a deduction, at the time of
grant. Instead, the Director recognizes compensation income, and the Company is
entitled to a deduction, on the vesting date. The Director's holding period will
begin on the vesting date. The amount of income recognized and the amount of the
Company's deduction will equal the fair market value of the vested Restricted
Stock on the vesting date.
Any dividends on the Restricted Stock paid to the Director prior to the vesting
date will be includible in the Director's income as compensation and deductible
as such by the Company.
A Director may, in some circumstances, elect to accelerate the time of inclusion
and income to the grant date rather than waiting until the vesting date. If the
election is made the Director recognizes compensation income at the time of
grant in the amount of the fair market value of an equal number of unrestricted
shares of Company stock; the Company is entitled to a deduction in the same
amount at the same time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 4.
<PAGE>
PROPOSAL 5
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of EPTC has selected Clumeck, Stern, Phillips &
Schenkelberg, as the independent public accountant to audit the financial
statements of EPTC and its subsidiaries for the fiscal year ending September 30,
1999.
At the Annual Meeting, stockholders will be asked to ratify the
selection by the Board of Directors of Clumeck, Stern, Phillips & Schenkelberg
as EPTC's independent accountant.
Approval of Proposal 5 requires the affirmative vote of a majority of
the shares of Common Stock present and voting at a meeting if a quorum is
present.
THE BOARD RECOMMENDS STOCKHOLDER APPROVAL
OF THE SELECTION OF AUDITORS
Representatives of Clumeck, Stern, Phillips & Schenkelberg are expected
to attend the 1999 Annual Meeting and will have an opportunity to make a
statement if they desire to do so, and they will be available to answer
appropriate questions from stockholders.
<PAGE>
Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires EPTC's
officers and directors, and persons who beneficially own more than ten percent
of a registered class of EPTC's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors, and greater-than-ten-percent stockholders are required by regulation
of the Securities and Exchange Commission to furnish EPTC with copies of all
Section 16(a) forms which they file.
Based solely upon a review of the forms and amendments thereto
furnished to EPTC under Rule 16a-3(e) during the fiscal year ended September 30,
1998, and with respect to such year, as well as certain representations of the
officers and directors specified by such rule, EPTC believes that all reports
required to be filed pursuant to Section 16(a) were filed.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of EPTC
does not intend to present and has not been informed that any other person
intends to present a matter for action at the 1999 Annual Meeting other than as
set forth herein and in the Notice of Annual Meeting. If any other matter
properly comes before the meeting, it is intended that the holders of proxies
will act in accordance with their best judgment.
The accompanying proxy is being solicited on behalf of the Board of
Directors of EPTC. In addition to the solicitation of proxies by mail, certain
of the officers and employees of EPTC, without extra compensation, may solicit
proxies personally or by telephone, and, if deemed necessary, third party
solicitation agents may be engaged by EPTC to solicit proxies by means of
telephone, facsimile, or telegram, although no such third party has been engaged
by EPTC as of the date hereof. EPTC will also request brokerage houses,
nominees, custodians, and fiduciaries to forward soliciting materials to the
beneficial owners of Common Stock held of record and will reimburse such persons
for forwarding such material. The cost of this solicitation of proxies will be
borne by EPTC.
ANNUAL REPORT
Copies of EPTC's Annual Report on Form 10-KSB (including financial
statements and financial statement schedules) for fiscal year ending September
30, 1998, and Form 10-QSB for Quarter ended December 31, 1998, filed with the
Securities and Exchange Commission, are included with the proxy.
<PAGE>
STOCKHOLDER PROPOSALS
EPTC must receive any stockholder proposal intended to be considered
for inclusion in the proxy statement for presentation in connection with the
2000 Annual Meeting of Stockholders by September 27, 1999. The proposal must be
in accordance with the provisions of Rule 14a-8 promulgated by the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). EPTC suggests that any such request be submitted by
certified mail - return receipt requested. The Board of Directors will review
any proposal received by September 27, 1999, and determine whether it is a
proper proposal to present to the 2000 Annual Meeting. If EPTC elects to move
the date of the 2000 Annual Meeting more than 30 days from the date of the 1999
Annual Meeting, such proposals must be received by a reasonable time prior to
such meeting.
The enclosed Proxy is furnished for you to specify your choices with
respect to the matters referred to in the accompanying notice and described in
this Proxy Statement. If you wish to vote in accordance with the Board's
recommendations, merely sign, date, and return the Proxy in the enclosed
envelope, which requires no postage if mailed in the United States. A prompt
return of your Proxy will be appreciated.
By Order of the Board of Directors,
Marvin Mears, Chairman
<PAGE>
PROXY
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Marvin Mears as Proxy, with full power of
substitution, and hereby authorizes him to represent and vote, as designated
below, all shares of Common Stock of EPTC held of record by the undersigned as
March 20, 1999, at the Annual Meeting of Stockholders to be held at the Radisson
Hotel, 30100 Agoura Road, Agoura Hills, California 91301 (818/707-1220), on
Monday, April 19, 1999, at 3:00pm Pacific Time, or at any postponement or
adjournment thereof.
1. Election of Directors:
FOR WITHHOLD AS TO ALL FOR ALL EXCEPT
|_| |_| |_|
INSTRUCTIONS: IF YOU CHECK THE "FOR ALL EXCEPT" CIRCLE ABOVE, INDICATE THE
NOMINEE(S) AS TO WHICH YOU DESIRE TO WITHHOLD AUTHORITY BY STRIKING A LINE
THROUGH SUCH NOMINEE(S) NAME IN THE LIST BELOW.
Marvin Mears Charles Vance Gerald Nordstrom
2. To adopt EPTC's 1999 Stock Incentive Plan:
FOR AGAINST ABSTAIN
|_| |_| |_|
3. To adopt EPTC's 1999 Incentive Compensation Plan:
FOR AGAINST ABSTAIN
|_| |_| |_|
4. To adopt EPTC's 1999 Non-employee Director Restricted Stock Plan:
FOR AGAINST ABSTAIN
|_| |_| |_|
5. To approve and ratify the selection of Clumeck, Stern, Phillips &
Schenkelberg as EPTC's independent public accountant:
FOR AGAINST ABSTAIN
|_| |_| |_|
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4, and 5.
DATE:
-------------------- -------------------------------------------------
Signature
-------------------------------------------------
Signature of co-tenant holder, if any
PLEASE SIGN EXACTLY AS THE SHARES ARE ISSUED. WHEN CO-TENANTS HOLD SHARES, BOTH
SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL
CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED PERSON. PLEASE DATE, SIGN, AND
RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
Exhibit A
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
1999 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE
The purpose of the Plan is to attract, retain, motivate and reward
employees of and consultants to the Company and its subsidiaries and affiliates
with stock-related compensation arrangements.
SECTION 2. MAXIMUM NUMBER OF SHARES.
(a) The maximum number of shares of Stock which may be issued
pursuant to Awards under the Plan, and the maximum number of shares for which
ISOs may be granted under the Plan, shall be 720,000 shares, subject to
adjustment as provided in Section 11. For this purpose:
(i) The number of shares underlying an Award shall be
counted against the Plan maximum ("used") at the time of grant; shares
underlying alternative Awards shall be counted only once.
(ii) When an Award is payable in cash and the amount of such
cash is based on the value of a number of shares of Stock which is determinable
at the time of grant, that determinable number of shares shall be deemed to
underlie that Award for purposes of the Plan. If the amount of such cash,
including any cash provided pursuant to Section 15 below, in effect is
calculated by applying a percentage to the Fair Market Value of a certain number
of shares of Stock, if such percentage is determinable at the date of grant, and
if such determinable percentage in effect exceeds 100%, the Committee shall
determine at the time of grant the number of shares which is deemed to underlie
such Award.
(iii) If the number of shares underlying an Award is not
determinable at the time of grant, the Committee shall determine at the time of
grant a number of shares which is deemed to underlie such Award; that number may
be adjusted after grant as the Committee deems appropriate.
(iv) Shares which underlie Awards that (in whole or part)
expire, terminate, are forfeited, or otherwise become non-payable, or which are
recaptured by the Company in connection with a Forfeiture event, may be re-used
in new grants to the extent of such expiration, termination, Forfeiture,
non-payability, or recapture.
(b) Notwithstanding any other provisions of the Plan, the maximum
number of shares underlying Awards that may be granted to any Eligible
Individual during any calendar year shall be 50,000, subject to adjustment as
provided in Section 11.
(c) In its discretion, the Company may issue treasury shares or
authorized but previously unissued shares.
SECTION 3. ELIGIBILITY.
Officers and management employees of, and key outside consultants
to, the Company and/or its subsidiaries or affiliates shall be eligible to
receive Awards under the Plan; provided, however, that ISOs may only be granted
to employees of the Company or its subsidiaries. No member of the Committee
shall be eligible to receive Awards under the Plan.
SECTION 4. GENERAL PROVISIONS RELATING TO AWARDS.
(a) Subject to the limitations in the Plan, the Committee may
cause the Company to grant Awards to such Eligible Individuals, at such times,
of such types, in such amounts, for such periods, becoming exercisable at such
times, with such features, with such option prices, purchase prices or base
prices, and subject to such other terms, conditions, and restrictions as the
Committee deems appropriate. Each Award shall be evidenced by a written Award
Agreement between the Company and the Recipient. In granting an Award, the
Committee may take into account any factor it deems appropriate and consistent
with the purpose of the Plan.
(b) Except as otherwise provided in the Plan, one or more Awards
may be granted separately or as alternatives to each other. If Awards are
alternatives to each other:
(i) the exercise of all or part of one automatically shall
cause an immediate equal and corresponding termination of the other; and
(ii) unless the Award Agreement or the Committee expressly
permits otherwise, alternative Awards which are transferable may be transferred
only as a unit, and alternative Awards which are exercisable must be exercisable
by the same person or persons.
(c) All or any portion of any payment to a Recipient, whether in
cash or shares of Stock, may be deferred to a later date if and as provided in
the Award Agreement. Deferrals may be for such periods and upon such terms and
conditions (including the provision of interest, dividend equivalents, or other
return on such amounts) as the Committee may determine. The Committee may
structure Award Agreements so that the imposition of income and other taxes on
Recipients is deferred in whole or part.
<PAGE>
(d) Award Agreements may contain any provision approved by the
Committee relating to the period for exercise or vesting after termination of
employment or termination of status as an outside consultant. The determination
as to whether a termination has occurred shall be made by the Committee in its
sole discretion, provided, however, that, with respect to employees who receive
ISOs, the determination as to what constitutes a termination of employment shall
be made in a manner consistent with applicable provisions of Sections 421-424 of
the Code and the Regulations thereunder.
(e) Award Agreements may, in the discretion of the Committee,
contain a provision permitting a Recipient to designate the person who may
exercise or receive an Award upon the Recipient's death, either by will or by
appropriate notice to the Company.
(f) A Recipient shall have none of the rights of a shareholder
with respect to shares of Stock covered by his or her Award until shares are
issued in his or her name.
(g) The Committee may provide in Award Agreements, except for ISOs
and SARs which are alternatives to ISOs, that Awards are transferable.
Transferability may be subject to such conditions and limitations as the
Committee deems appropriate. Except to the extent otherwise expressly set forth
in the Award Agreement, Awards shall not be transferable other than by will or
the laws of descent and distribution, and (if exercise is required) shall be
exercisable during the Recipient's lifetime only by the Recipient or his or her
guardian or legal representative. This paragraph shall not apply to Restricted
Stock after it vests.
SECTION 5. OPTIONS AND SARs.
(a) Except as provided in Section 11 (b), the option price per
share of Options or the base price of SARs shall not be less than Fair Market
Value per share of Stock on the Options' or the SARs' grant date, nor less than
the par value of a share of Stock, except that SARs which are alternatives to
Options but which are granted at a later time may have a base price equal to the
option price even though the base price is less than Fair Market Value on the
date the SARs are granted.
(b) The grant of Options and their related Option Agreement must
clearly identify the Options as either ISOs or as NQSOs.
(c) If Options, SARs, and/or Limited Rights are granted as
alternatives to each other: (i) the option prices and the base prices (as
applicable) shall be equal, (ii) SARs and/or Limited Rights which are
alternatives to ISOs may be granted only at the same time the ISOs are granted,
and (iii) SARs which are alternatives to Options, and Limited Rights which are
alternatives to Options or SARs, shall expire or terminate at the same time as
the Options or SARs to which they are alternatives. I
(d) In the case of SARs, the Award Agreement may specify the form
of payment or may provide that the form is to be determined at a later date, and
may require the satisfaction of any rules or conditions in connection with
receiving payment in any particular form. If the Recipient is a Reporting Person
at the time of grant or during the SARs' term and is given an election to
receive cash in full or partial settlement of SARs, the Committee shall have
sole discretion to approve or disapprove such election at any time after it is
made.
SECTION 6. LIMITED RIGHTS.
(a) The Committee shall have authority to grant limited stock
appreciation rights ("Limited Rights") to any Recipient of any Options or SARs
granted under the Plan (the "Related Award") with respect to all or some of the
shares of Stock which underlie such Related Award. Limited Rights shall not be
granted separately, but shall be granted only as alternatives to their Related
Award. Limited Rights may be granted either at the time of grant of the Related
Award or (except in the case of ISOs) at any time thereafter during its term.
Limited Rights shall be exercisable or payable at such times, payable in such
amounts, and subject to such other terms, conditions, and restrictions as the
Committee deems appropriate.
(b) The Committee shall place on any Limited Rights granted to a
Reporting Person such restrictions as may be required by Rule 16b-3 at the time
of grant, and shall amend the Plan accordingly to the extent required by Rule
16b-3. The Committee shall place on any Limited Rights for which the Related
Award is ISOs such restrictions as may be required by the Code at the time of
grant, and shall amend the Plan accordingly to the extent required by the Code.
SECTION 7. RESTRICTED STOCK.
(a) "Restricted Stock" means Stock issued to a Recipient which is
subject to transfer restrictions prior to vesting and is subject to forfeiture
upon the happening of such events or such conditions or upon the failure to
satisfy such rules, requirements and conditions as the Committee specifies in
the Award Agreement. Stock issued in connection with an Award Agreement is not
Restricted Stock unless so designated in the Award Agreement or in a rule or
resolution of the Committee. When Restricted Stock vests, it ceases to be
Restricted Stock for purposes of the Plan.
(b) The certificate representing the shares of Restricted Stock
issued in the name of the Recipient may be held by the Company and/or may have a
legend placed upon it to the effect that the shares represented by it are
<PAGE>
subject to, and may not be transferred except in accordance with the Plan and
the Award Agreement relating to such shares. Dividends relating to shares of
Restricted Stock may be paid to the Recipient or held by the Company for the
Recipient's benefit, as the Committee may provide in the Award Agreement; if
held by the Company, the Committee may require that the Company pay interest or
other return to the Recipient on any cash dividends at such rate(s) and time(s)
as the Committee provides in the Award Agreement.
(c) If the Recipient of Restricted Stock is a Reporting Person on
the grant date, at least one of the following requirements shall be satisfied:
(i) the Award is a stock bonus granted for no consideration
(other than services rendered or to be rendered);
(ii) the Award is a stock bonus granted for the minimum
amount of consideration (other then services) required by applicable corporate
law, which amount in no event exceeds 10% of the Fair Market Value of a share of
Stock on the payment date, and which amount is paid to the Company within 60
days after the grant date;
(iii) the Award consists of Options which are payable in
Restricted Stock; or
(iv) the Award is an Other Stock Interest which is payable
in Restricted Stock and which either is granted in conformity with (i) or (ii)
above, or constitutes an option or similar right (including a stock appreciation
right) or any other type of derivative security for the purposes of Rule 16b-3.
This paragraph (c) shall apply to a grant only when required by Rule 16b-3 at
the time and under the circumstances of the grant.
SECTION 8. OTHER STOCK INTERESTS.
"Other Stock Interest" means any compensatory arrangement not
inconsistent with the Plan which is established by the Committee and which might
(a) involve the issuance of Stock to an Eligible Individual or (b) involve or be
treated as involving the acquisition or disposition of an equity security of the
Company for purposes of Section 16 of the Act. Other Stock Interests are not
limited to any specific form or structure. Without limiting the above, Other
Stock Interests may include stock bonuses, deferred stock, variable priced stock
options, performance shares, phantom stock, and convertible securities, and may
be granted in connection with or apart from other compensation programs or plans
or other types of Awards under the Plan. In connection with the grant of Other
Stock Interests, the Committee may provide for payment to the Recipient of
amounts equal to dividends which would have been paid had Stock actually been
issued to the Recipient. In addition, Other Stock Interests may provide for
payment of cash or other property in lieu of Stock or other securities of the
Company. The Committee shall place on any Other Stock Interest granted to a
Reporting Person such restrictions as may be required by Rule 16b-3 at the time
of grant, and shall amend the Plan accordingly to the extent required by Rule
16b-3.
SECTION 9. STOCK ISSUANCE, PAYMENT, AND WITHHOLDING.
(a) If an Award contemplates the payment of a purchase price
(including the option price of Options), the Recipient may pay the purchase
price in cash, Stock (including shares of previously-owned Stock, or Stock
issuable in connection with the Award), or other property, to the extent
permitted or required by the Award Agreement or the Committee from time to time.
The Committee may permit deemed or constructive transfers of shares in lieu of
actual transfer and physical delivery of certificates. Except to the extent
prohibited by applicable law, the Committee or its delegate may take any
necessary or appropriate steps in order to facilitate the payment of any such
purchase price. Without limiting the foregoing, the Committee may allow the
Recipient to defer payment of such purchase price, or may cause the Company to
loan the purchase price to the Recipient or to guaranty that any shares to be
issued will be delivered to a broker or lender in order to allow the Recipient
to borrow the purchase price. The Committee may require satisfaction of any
rules or conditions in connection with paying the purchase price at any
particular time, in any particular form, or with the Company's assistance.
(b) If shares used to pay any such purchase price are subject to
any prior restrictions imposed in connection with any plan of the Company
(including the Plan), an equal number of the shares of Stock purchased shall be
made subject to such prior restrictions in addition to any further restrictions
imposed on such purchased shares by the terms of the Award Agreement or Plan.
(c) When the obligation arises to collect and pay Required
Withholding Taxes, the Recipient shall promptly reimburse the Company or
Employer (as required by the Committee or Company) for the amount of such
Required Withholding Taxes in cash, unless the Award Agreement or the Committee
permits or requires payment in another form. In the discretion of the Committee
or its delegate and at the Recipient's request, the Committee or its delegate
may cause the Company or Employer to pay to the appropriate taxing authority
Withholding Taxes in excess of Required Withholding Taxes on behalf of a
Recipient, which shall be reimbursed by the Recipient. In the Award Agreement or
otherwise, the Committee may allow a Recipient to reimburse the Company or
Employer for payment of Withholding Taxes with shares of Stock or other
property. The Committee may require the satisfaction of any rules or conditions
in connection with any non-cash payment of Withholding Taxes. If a Recipient is
a Reporting Person at the time of grant or during the Award's term and is given
an election to pay any Withholding Taxes with Stock, the Committee shall have
sole discretion to approve or disapprove such election at any time after the
election is made.
<PAGE>
SECTION 10. FORFEITURES.
(a) The Committee may include in any Award Agreement any
provisions relating to forfeitures of Awards that it deems appropriate. Such
forfeiture provisions may include, among others, prohibitions on competing with
the Company and its subsidiaries and affiliates and other detrimental conduct.
Forfeiture provisions for one Award type may differ from those for another type,
and also may differ among Awards of the same type. As used in the Plan, a
"forfeiture" of an Award includes the recapture of economic benefits derived
from an Award, as well as the forfeiture of an Award itself; however, the
Committee may define the term more narrowly in specific Award Agreements or
contexts.
(b) Award Agreements may provide for any forfeiture provision to
terminate or be waived upon an Acceleration Date. In its discretion, the
Committee may provide in any Award Agreement for the termination of any
forfeiture provision upon the happening of any specified event, and may
terminate or waive any forfeiture provision by action taken after grant.
SECTION 11. ADJUSTMENTS AND ACQUISITIONS.
In the event of (i) any change in the outstanding shares of Stock
by reason of any stock split, combination of shares, stock dividend,
reorganization, merger, consolidation, or other corporate change having a
similar effect, (ii) any separation of the Company including a spin-off or other
distribution of stock or property by the Company, or (iii) any distribution to
shareholders generally other than a normal dividend, the Committee shall make
such equitable adjustments to the Plan and to outstanding Awards as it shall
deem appropriate in order to prevent the dilution or enlargement of (A) the
Awards which may be granted, (B) the shares of Stock which may be issued, (C)
the economic value of outstanding Awards or (D) the limitations imposed by
Section 2(b) of the Plan, provided, however, that the Committee shall not make
any adjustment which would constitute or result in an increase in the aggregate
number of Shares available under the Plan, or the annual limit on the number of
Awards which may be granted to an Eligible Individual under Section 2(b) of the
Plan, requiring shareholder approval under Section 162(m) of the Code. Any such
determination by the Committee shall be conclusive and binding on all concerned.
SECTION 12. ACCELERATION.
(a) An "Acceleration Date" occurs when any of the following events
occur:
(i) any Person (as defined herein) becomes the beneficial
owner directly or indirectly (within the meaning of Rule 13d-3 under the Act) of
more than forty percent (40%) of the Company's then outstanding voting
securities (measured on the basis of voting power), provided, however, that
shares issued or distributed by the Company in connection with the acquisition
of another company or business from such Person shall be counted as being
outstanding, but otherwise shall be ignored in determining the percentage
beneficially owned by such Person;
(ii) the shareholders of the Company approve a definitive
agreement of merger or consolidation with any other corporation or business
entity, other than (x) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least forty percent (40%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than forty percent (40%)
of the combined voting power of the Company's then outstanding securities;
(iii) a change occurs in the composition of the Board of
Directors during any period of twenty-four consecutive months such that
individuals who at the beginning of such period were members of the Board of
Directors cease for any reason to constitute at least a majority thereof, unless
the election of each new director was approved by a vote of at least two-thirds
of the directors still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved; or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all the Company's assets.
For purposes of this paragraph, "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof; however, a Person shall not include (aa) the Company or any of its
subsidiaries, (bb) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its subsidiaries, (cc) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (dd) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of Stock.
(b) If an Acceleration Date occurs while Awards remain outstanding
under the Plan, then all Awards shall "vest," which means:
(i) all Options and SARs shall become fully exercisable; and
<PAGE>
(ii) all shares of Restricted Stock shall become
nonforfeitable and freely transferable (except for
such restrictions as may be imposed by the Securities Act of 1933, as amended,
or applicable state securities laws), and all conditions to unrestricted
ownership provided in their Award Agreements which have not previously been
satisfied shall lapse.
In the case of Other Stock Interests, the term "vest" shall have
that meaning given it by the Committee at the time of grant.
(c) Except to the extent prohibited by Rule 16b-3 in the case of
Reporting Persons, the Committee may accelerate the date on which any Award or
Stock or property issued pursuant to an Award shall vest and may remove any
restrictions on such Award at any time after grant and for any reason the
Committee deems appropriate.
(d) All Awards, and all shares of Stock or property issued
pursuant to an Award, shall automatically vest upon a termination of employment
caused by the death, Disability, or (except for Restricted Stock and Other Stock
Interests) retirement of the Recipient. The Committee may determine the
circumstances under which a Recipient is deemed to have retired.
SECTION 13. ADMINISTRATION.
(a) The Plan shall be administered by the Compensation Committee
of the Board, or another committee appointed by the Board from time-to-time,
consisting of two or more persons, each of whom at all times shall be a member
of the Board and none of whom shall be an officer or employee of the Company or
any of its subsidiaries at the time of service. Committee members shall not be
eligible for selection to receive Awards under the Plan.
(b) During any time when one or more Committee members may not be
qualified to serve under Rule 16b-3 or Section 162(m) of the Code, the Committee
may form a sub-Committee from among its qualifying members to act, in lieu of
the full Committee, with respect to all or any specified category of Awards
granted to all or any specified group of Recipients, and may take other actions
deemed appropriate and convenient to prevent, control, minimize, or eliminate
any adverse effects of such potential disqualification. At the Committee's
request or on its own motion, the Board may ratify or approve grants, or any
terms of any grants, made by the Committee or a sub-Committee during any time
that any member of the Committee may not be qualified to approve such grants or
terms under Rule 16b-3.
(c) A majority of the members of the Committee shall constitute a
quorum. The acts of a majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority of the members of
the Committee, shall be the acts of the Committee. The Committee may meet in
person, by telephone or television conference, or in any other manner permitted
by applicable law. From time to time the Committee may adopt, amend, and rescind
such rules and regulations for carrying out the Plan and implementing Award
Agreements, and the Committee may take such action in the administration of the
Plan, as it deems proper. The interpretation of any provisions of the Plan by
the Committee shall be final and conclusive unless otherwise determined by the
Board.
SECTION 14. AMENDMENT, TERMINATION, SHAREHOLDER APPROVAL.
(a) The Board may amend or terminate the Plan at any time, except
that without the approval of the Company's shareholders, no amendment shall (i)
increase the maximum number of shares issuable under the Plan, (ii) change the
class of persons eligible to be Recipients, (iii) change the annual limit on
Awards which may be granted to an Eligible Individual provided in Section 2(b),
(iv) withdraw the authority of the Committee to administer the Plan, or (v)
change the provisions of this Section 14(a).
(b) The Committee may amend the Plan from time to time to the
extent necessary to (i) comply with Rule 16b-3 and, to the extent it deems
appropriate, (ii) prevent benefits under the Plan from constituting "applicable
employee remuneration" within the meaning of Section 162(m) of the Code.
(c) No Awards may be granted under the Plan after April 20, 2009.
(d) The approval by shareholders described in this Section shall
consist of the approving vote of the holders of a majority of the outstanding
shares of Stock present (in person or by proxy) at a meeting of the shareholders
at which a quorum is present, unless a greater vote is required by the Company's
charter or by-laws, by the Board, by the Company's principal stock exchange, or
by applicable law (including Rule 16b-3 or Section 162(m) of the Code).
SECTION 15. ADDITIONAL PAYMENTS.
The Committee may grant a Recipient the right to receive
additional compensation in cash or other property (in addition to any cash or
other property payable under the terms of the Award itself) upon the exercise of
Options, SARs, or exercisable Other Stock Interests, or the vesting of
Restricted Stock or non-exercisable Other Stock Interests, provided that (i) in
the case of ISOs such compensation is includible in income under Sections 61 and
83 of the Code at the time of such exercise or vesting and (ii) no such right
may be granted in connection with any SARs or Limited Rights which are
alternatives to ISOs.
<PAGE>
SECTION 16. DEFINITIONS.
(a) "Acceleration Date" has the meaning given in Section 12(a).
(b) "Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(c) "Award" means a grant of NQSOs, SARs, Limited Rights,
Restricted Stock or Other Stock Interests.
(d) "Award Agreement" means the written agreement referred to in
Section 4(a) between the Company and the Recipient evidencing an Award.
(e) "Board" means the Board of Directors of the Company.
(f) "Code" means the U.S. Internal Revenue Code as in effect
from time to time.
(g) "Committee" means the Compensation Committee described in
Section 13 hereof.
(h) "Company" means Environmental Products & Technologies
Corporation and its successors.
(i) "Disability" means the condition of being "disabled" within
the meaning of Section 422(c)(6) of the Code or any successor provision.
(j) "Eligible Individual" means a person who is eligible to
receive an Award under Section 3 of the Plan.
(k) "Employer" means the Company, the subsidiary, or the
affiliate which employs the Recipient.
(1) "Fair Market Value" of Stock on a given date means (i) the
average of the highest and lowest selling prices per share of Stock reported on
the National Association of Securities Dealers and Automated Quotation System
("NASDAQ") or similar quotation service for such date, (ii) if Stock is not
listed on the NASDAQ, the average of the highest and lowest selling prices per
share of Stock as reported for such date on the principal stock exchange or
quotation system in the U.S. on which Stock is listed or quoted (as determined
by the Committee), or (iii) if neither of the preceding clauses is applicable,
the value per share determined by the Committee in a manner consistent with the
Treasury Regulations under Section 2031 of the Internal Revenue Code. If no sale
of Stock occurs on such date, but there were sales reported within a reasonable
period both before and after such date, the weighted average of the means
between the highest and lowest selling prices on the nearest date before and the
nearest date after such date shall be used, with the average to be weighted
inversely by the respective numbers of trading days between the selling dates
and such date. "Fair Market Value" of Restricted Stock is the same as the Fair
Market Value of any other Stock.
(m) "Forfeiture" has the meaning given in Section 10(a).
(n) "ISO" or "Incentive Stock Option" means an option to
purchase one share of Stock for a specified option price which is designated by
the Committee as an "Incentive Stock Option" and which qualifies as an
"incentive stock option" under Section 422 (or any successor provision) of the
Code.
(o) "Limited Right" has the meaning given in Section 6.
(p) "NQSO" or "Non-Qualified Stock Option" means an option to
purchase one share of Stock for a specified option price which is designated by
the Committee as a "Non-Qualified Stock Option," or which is designated by the
Committee as an ISO but which ceases to qualify as an ISO.
(q) "Option" means an ISO or NQSO.
(r) "Option Agreement" means an Award Agreement which evidences
a grant of Options.
(s) "Optionee" means a person to whom Options are granted
pursuant to the Plan.
(t) "Other Stock Interest" has the meaning given in Section 8.
(u) "Plan" means Environmental Products & Technologies
Corporation 1999 Stock Incentive Plan, as amended from time to time.
(v) "Recipient" means an Eligible Individual to whom an Award is
granted pursuant to the Plan.
<PAGE>
(w) "Reporting Person," as of a given date, means a Recipient
who would be required to report a purchase or sale of Stock occurring on such
date to the Securities and Exchange Commission pursuant to Section 16(a) of the
Act and the rules and regulations thereunder.
(x) "Restricted Stock" has the meaning given in Section 7.
(y) "Rule 16b-3" means Rule 16b-3 (as amended from time to time)
promulgated by the Securities and Exchange Commission under the Act, and any
successor thereto.
(z) "SAR" means a stock appreciation right, which is a right to
receive cash, Stock, or other property having a value on the date the SAR is
exercised equal to (i) the excess of the Fair Market Value of one share of Stock
on the exercise date over (ii) the base price of the SAR. The term "SAR" does
not include a Limited Right.
(aa) "Stock" means shares of the common stock of the Company, par
value $0.01 per share, or such other class or kind of shares or other securities
as may be applicable under Section 11. The term "Stock" shall include shares of
Restricted Stock unless expressly provided otherwise in the Plan or an Award
Agreement.
(bb) "Vest" has the meaning given in Section 12(b).
(cc) "Withholding Taxes" means, in connection with an Award, (i)
the total amount of Federal and state income taxes, social security taxes, and
other taxes which the Employer of the Recipient is required to withhold
("Required Withholding Taxes") plus (ii) any other such taxes which the
Employer, in its sole discretion, withholds at the request of the Recipient.
SECTION 17. MISCELLANEOUS.
(a) The Plan shall become effective as of April 20, 1999.
(b) Except as required by law, amounts payable under the Plan
shall not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary.
(c) Nothing contained in the Plan shall prohibit the Company
from granting other performance awards to employees and consultants (including
Eligible Individuals) under such conditions, and in such form and manner, as it
sees fit. The adoption of the Plan does not preclude the adoption of any other
bonus or incentive plan for employees or consultants.
(d) Subject to the provisions of applicable federal law, the
Plan shall be administered, construed and in forced according to the laws of the
State of Delaware.
(e) The invalidity of any particular clause, provision or
covenant herein shall not invalidate all or any part of the remainder of the
Plan but such remainder shall be and remain valid in all respects as fully as
the law will permit.
(f) Each provision of the Plan and any Option Agreement relating
to ISOs shall be construed so that all ISOs shall be "incentive stock options"
as defined in Section 422 of the Code or any statutory provision that may
replace Section 422, and any provisions thereof which cannot be so construed
shall be disregarded. Except as provided in Section 10, no discretion granted or
allowed to the Committee under the Plan shall apply to ISOs after their grant
except to the extent the related Option Agreement shall so provide.
Notwithstanding the foregoing, nothing shall prohibit an amendment to or action
regarding outstanding ISOs which would cause them to cease to qualify as ISOs,
so long as the Company and the Optionee shall consent to such amendment or
action.
(g) Notwithstanding any other provision in the Plan, the
Committee shall not act with respect to any Reporting Person in a manner which
would contravene any requirement of Rule 16b-3 as in effect at the time of such
action, without the knowing consent of such Reporting Person.
(h) Nothing in the Plan or any Award Agreement shall confer on
any person an expectation to continue in the employ of his or her Employer, or
shall interfere in any manner with the absolute right of the Employer to change
or terminate such person's employment at any time for any reason or for no
reason.
<PAGE>
Exhibit B
ENVIRONMENTAL PRODUCTS & TECHNOLOGIES CORPORATION
1999 INCENTIVE COMPENSATION PLAN
SECTION 1. ESTABLISHMENT OF THE PLAN.
Environmental Products & Technologies Corporation does hereby adopt the
Environmental Products & Technologies Corporation 1999 Incentive Compensation
Plan set forth herein for the purpose of attracting, motivating and rewarding
key employees of and consultants to the Company with qualified performance-based
compensation.
SECTION 2. BONUS PROGRAMS.
The Committee shall have the authority to establish one or more Programs
pursuant to which Bonuses may be paid to one or more Participants.
SECTION 3. PERFORMANCE.
For each Program, the Committee shall set forth a Performance Period over which
performance will be measured to determine whether and in what amounts to pay
Bonuses to Participants. Each Program must be established in writing prior to
the expiration of any prescribed time period for the pre-establishment of
performance goals under Section 162(m) of the Code.
SECTION 4. ELIGIBILITY, PARTICIPATION AND COVERED EMPLOYEES.
Key employees of and consultants to the Company and its Affiliates shall be
Eligible Individuals for each Program, the Committee shall designate as
Participants in each Program one or more Eligible Individuals. Each Program
shall also set forth those individuals the Committee believes may be or become
covered employees as that term is defined in Section 162(m) of the Code
("Covered Employees") for the applicable Performance Period.
SECTION 5. PERFORMANCE CRITERIA AND GOALS.
All Bonuses shall be based upon one or more of the following criteria, which may
be Company-wide or specific to an affiliate, division, product, geographic area
and/or Participant: sales, earnings, earnings per share, return on equity,
return on assets, cash flow, market share, stock price, costs and productivity.
For each Program and each Participant, the Committee shall designate one or more
objective performance goals based upon one or more of the criteria listed above
("Performance Goals"). No Bonus shall be paid to any Covered Employee if the
applicable Performance Goal(s) are not satisfied.
SECTION 6. AMOUNT OF BONUS.
For each Program, the Committee shall designate an objective formula or standard
for determining the dollar amount of each Participant's Bonus. In no event shall
the total amount of Bonuses paid to any Covered Employee in any year exceed
$750,000. Except with respect to Bonuses payable to Covered Employees, and
notwithstanding failure to satisfy the applicable Performance Goal(s), the
Committee shall have the discretion to increase or reduce the amount of any
Participant's Bonus above or below the standard or formula amount to reflect
individual performance and/or unanticipated factors; the Committee may only
reduce the amount of any Bonuses payable to Covered Employees below the standard
or formula amount to reflect individual performance and/or unanticipated
factors.
SECTION 7. PAYMENT OF BONUSES.
After the close of each Performance Period, the Committee shall certify in
writing the achievement of the Performance Goal(s) and the amount of any Bonuses
payable to Covered Employees under the applicable formula(s) or standard(s); no
Bonuses shall be paid to Covered Employees prior to such certification. All or
part of the Bonuses payable to Participants who are not Covered Employees may be
paid prior to the end of a Performance Period on an estimated basis, subject to
adjustment in the discretion of the Committee. No Bonuses shall be paid under
this Plan to Covered Employees until the Plan has received shareholder approval
as required by Section 162(m) of the Code. Subject to the foregoing, the timing
of payment of all Bonuses to both Covered Employees and Participants who are not
Covered Employees shall be within the sole discretion of the Committee. The
Company shall withhold from any amount payable under the Plan all taxes required
to be withheld by any federal, state or local government.
SECTION 8. ADMINISTRATION BY COMMITTEE.
The Plan shall be administered by a Committee established by the Board. The
Committee shall be comprised of at least two outside directors of the Company as
that term is defined for purposes of Section 162(m) of the Code. The Committee
shall have full power and authority to administer and interpret the Plan and to
adopt such rules, regulations, agreements, guidelines and instruments for the
administration of the Plan and for the conduct of its business as the Committee
deems necessary or advisable.
SECTION 9. CHANGE IN CONTROL.
9.1. Change in Control Defined. For purposes of this Plan, a "Change in
Control" shall occur if:
(a) Any Person becomes the beneficial owner directly or
indirectly (within the meaning of Rule 13d-3 of the Exchange Act) of more than
forty percent (40%) of the Company's then outstanding voting securities
(measured on the basis of voting power);
<PAGE>
(b) The shareholders of the Company approve a definitive
agreement to merge or consolidate the Company with any other corporation, other
than an agreement providing for (i) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit plan
of the Company, at least forty percent (40%) of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation or (ii) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person acquires more than forty percent (40%) of the combined voting
power of the Company's then outstanding securities;
(c) A change occurs in the composition of the Board during
any period of twenty-four consecutive months such that individuals who at the
beginning of such period were members of the Board cease for any reason to
constitute at least a majority thereof, unless the election of each new director
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved; or
(d) The shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
For purposes of this paragraph, "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d);
however a Person shall not include (w) the Company or any of its subsidiaries,
(x) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any of its subsidiaries, (y) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (z) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Company stock.
9.2 Acceleration Upon Change in Control. On the date a Change in
Control occurs, notwithstanding anything else to the contrary herein, (i) all
Bonuses with respect to a completed Performance Period shall be immediately
payable in cash, (ii) with respect to the current Performance Period, such
Performance Period shall be deemed to have ended and the applicable Performance
Goal(s) and formula(s) or standard(s) shall be appropriately adjusted to reflect
the length of such Performance Period in comparison to the originally
established Performance Period, and all Bonuses for such Performance Period
shall be immediately payable in cash on a pro-rated basis, (iii) the Committee
shall not have the discretion provided in Section 6 to reduce the amount of any
Participant's Bonus below the amount which would otherwise have been payable to
the Participant under the applicable formula or standard and under this Section
9, and (iv) the provisions of this Section 9 may not be amended adversely to any
Participant without the written consent of the Participant. If by reason of this
Section 9 an excise or other special tax ("Excise Tax") is imposed on any
payment under the Plan (a "Required Payment"), the amount of each Required
Payment shall be increased by an amount which, after payment of income taxes,
payroll taxes and Excise Tax thereon, will equal such Excise Tax on the Required
Payment; provided, however, that the total amount paid to any Covered Employee
shall not exceed the maximum set forth in Section 6 unless exceeding such
maximum, or a provision allowing Bonuses to exceed such maximum, would not
jeopardize qualification of all Bonuses to Covered Employees under the Plan as
performance-based compensation under Section 162(m) of the Code.
SECTION 10. AMENDMENT AND TERMINATION.
The Board reserves the right to amend or terminate the Plan in whole or in part
at any time. Unless otherwise prohibited by applicable law, any amendment
required to conform to Section 162(m) of the Code may be made by the Committee.
No amendment may be made to the class of individuals constituting Eligible
Individuals under Section 4, the performance criteria under Section 5 or the
maximum Bonus payable to any Covered Employee under Section 6 without
shareholder approval. The Committee may amend the Plan in any way if the
Committee determines that such amendment may be made without shareholder
approval and without jeopardizing qualification of Bonuses to Covered Employees
as performance-based compensation under Section 162(m) of the Code.
SECTION 11. MISCELLANEOUS.
11.1 Effective Date. The Plan shall become effective as of April
20, 1999.
11.2 No Guarantee of Employment or Compensation. The Plan shall
not restrict the Company or any Affiliate from discharging an Eligible
Individual from employment or any consulting arrangement, restrict any Eligible
Individual from resigning from such employment or consulting arrangement, or
restrict the Company or any Affiliate from increasing or decreasing the
compensation of any Eligible Individual.
11.3 Claims. Except in the case of a Change of Control, no person
shall have any claim to any Bonus. There is no obligation for uniformity of
treatment of Eligible Individuals.
11.4 No Alienation. Except as required by law, amounts payable
under the Plan shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution,
or levy of any kind, either voluntary or involuntary.
11.5 Other Incentive Plans. Nothing contained in the Plan shall
prohibit the Company from granting other performance awards to employees and
consultants (including Eligible Individuals) under such conditions, and in such
form and manner, as it sees fit. The adoption of the Plan does not preclude the
adoption of any other bonus or incentive plan for employees or consultants.
<PAGE>
11.6 Governing Law. Subject to the provisions of applicable
federal law, the Plan shall be administered, construed and enforced according to
the laws of the State of Delaware.
11.7 Severability. The invalidity of any particular clause,
provision or covenant herein shall not invalidate all or any part of the
remainder of the Plan, but such remainder shall be and remain valid in all
respects as fully as the law will permit.
SECTION 12. DEFINITIONS.
12.1 Affiliate. Any entity in which the Company has a substantial
direct or indirect equity interest.
12.2 Board. The Board of Directors of the Company.
12.3 Bonus. The amount payable to any participant with respect to
a program.
12.4 Change in Control. A Change in Control as that term is
defined in Section 9.
12.5 Code. The Internal Revenue Code of 1986, as amended, and the
regulations and interpretations promulgated thereunder.
12.6 Committee. The Committee described in Section 8.
12.7 Company. Environmental Products & Technologies Corporation.
12.8 Covered Employee. A Covered Employee as that term is defined
in Section 4.
12.9 Eligible Individual. A person who is eligible to participate
in the Plan in accordance with Section 4.
12.10 Exchange Act. The Securities Exchange Act of 1934, as
amended, and the regulations and interpretations promulgated thereunder.
12.11 Participant. An Eligible Individual who is designated as a
Participant in a Program pursuant to Section 4.
12.12 Performance Goal. A Performance Goal as defined in Section
5.
12.13 Performance Period. A fiscal year of the Company or such
shorter period as the Committee may designate in accordance with Section 3 with
respect to which Bonuses may be paid under a Program.
12.14 Plan. The Environmental Products & Technologies Corporation
1999 Incentive Compensation Plan, as amended from time to time.
12.15 Program. A Bonus Program established by the Committee which
designates the Participants, the Covered Employees, a Performance Period,
Performance Goals, and formulas or standards for determining the amounts of
Bonuses payable under the Plan.
<PAGE>
Exhibit C
ENVIRONMENTAL PRODUCTS AND TECHNOLOGIES CORPORATION
1999 NON-EMPLOYEE DIRECTOR RESTRICTED STOCK PLAN
SECTION 1. ESTABLISHMENT OF THE PLAN.
Environmental Products & Technologies Corporation does hereby adopt the
Environmental Products & Technologies Corporation 1999 Non-Employee Director
Restricted Stock Plan set forth herein to provide for the Award of Restricted
Shares to Directors of the Company for the purpose of aligning the interests of
the Directors with those of the shareholders of the Company, thereby promoting
the long-term success and growth of the Company.
SECTION 2. SHARES SUBJECT TO PLAN.
(a) Maximum Number of Shares. The maximum number of Shares which
may be issued under the Plan shall be Eighty Thousand (80,000) Shares, subject
to adjustment as provided in Section 2(b) below. For this purpose:
(i) The number of Shares of Restricted Stock shall be
counted against the Plan maximum ("used") at the time of the Award.
(ii) Shares of Restricted Stock which are forfeited may be
re-used in new Awards to the extent of such forfeiture.
(iii) In its discretion, the Company may issue treasury
shares of authorized but previously unissued shares.
(b) Adjustments. In the event of (i) any change in the outstanding
Shares by reason of any stock split, combination of shares, stock dividend,
reorganization, merger, consolidation, or other corporate change having a
similar effect, (ii) any separation of the Company including a spin-off or other
distribution of stock or property by the Company, or (iii) any distribution to
shareholders generally other than a normal dividend, the number of Shares that
may be issued under the Plan shall automatically be adjusted so that the
proportionate interest of the Directors shall be maintained as before the
occurrence of such event. Such adjustment shall be conclusive and binding for
all purposes with respect to the Plan.
SECTION 3. ELIGIBILITY.
Each Director who is first elected or appointed as a Director on or after the
Effective Date of the Plan shall be eligible to receive Awards of Restricted
Stock under the Plan.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO RESTRICTED STOCK.
(a) Awards. Each individual who is first elected or appointed to
the Board as a Director on or after the Effective Date of the Plan may, in the
discretion of the Administrator, receive an Award of Restricted Stock upon such
election or appointment.
(b) Restrictions. Shares of Restricted Stock may not be assigned,
exchanged, pledged, sold, transferred or otherwise disposed of by a Director,
except to the Company, and shall be subject to forfeiture as herein provided
until the earliest to occur of the following (each a "Vesting Event"): (1) the
fifth anniversary of the date of the award, (2) a Change of Control, as
hereinafter defined), or (3) the death or permanent disability of the Director.
Any purported transfer in violation of the provisions of this paragraph shall be
null and void, and the purported transferee shall obtain no rights with respect
to such Restricted Stock. For purposes of this Section 4(b), "Change of Control"
shall mean the occurrence of any of the following events:
(i) any Person (as defined herein) becomes the beneficial
owner directly or indirectly (within the meaning of Rule 13d-3 under the Act) of
more than forty percent (40%) of the Company's then outstanding voting
securities (measured on the basis of voting power), provided, however, that
shares issued or distributed by the Company in connection with the acquisition
of another company or business from such Person shall be counted as being
outstanding, but otherwise shall be ignored in determining the percentage
beneficially owned by such Person;
(ii) the shareholders of the Company approve a definitive
agreement of merger or consolidation with any other corporation or business
entity, other than (x) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least forty percent (40%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (y) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than forty percent (40%)
of the combined voting power of the Company's then outstanding securities;
(iii) a change occurs in the composition of the Board of
Directors during any period of twenty-four consecutive months such that
individuals who at the beginning of such period were members of the Board of
Directors cease for any reason to constitute at least a majority thereof, unless
the election of each new director was approved by a vote of at least two-thirds
<PAGE>
of the directors still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved; or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or an agreement for the sale
or disposition by the Company of all or substantially all the Company's assets.
For purposes of this paragraph, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in
Sections 13(d) and 14(d) thereof; however, a Person shall not include (aa) the
Company or any of its subsidiaries, (bb) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (cc) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (dd) a corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of Stock.
(c) Forfeitures. All Shares of Restricted Stock shall be forfeited
by a Director who is terminated before a Vesting Event; provided, however, that
if service is terminated by the Company without cause before the fifth
anniversary of the date of an Award, then that number of Shares of Restricted
Stock which bears the same ratio to the total number of Shares of Restricted
Stock as the number of full months from the date of the award to the date of
termination of such service bears to sixty (60) shall become freely transferable
and nonforfeitable, and the balance of the Shares of Restricted Stock shall be
forfeited to the Company.
(d) Issuance of Certificates. The certificate representing the
Shares of Restricted Stock issued in the name of the Director may be held by the
Company and/or may have a legend placed upon it to the effect that the Shares
represented by it are subject to, and may not be transferred except in
accordance with the Plan. Any dividends relating to Shares of Restricted Stock
shall be paid to the Director.
(e) to the extent the Company is required to withhold Federal,
state or local taxes in connection with the Award or vesting of Restricted Stock
or the payment of dividends with respect thereto, it shall be a condition to the
receipt of any shares of Restricted Stock or dividends with respect thereto that
the Director make arrangements satisfactory to the Company for the payment of
the balance of such taxes required to be withheld, which arrangements may
include relinquishment of some or all of the Restricted Stock or dividends.
SECTION 5. ADMINISTRATION, AMENDMENT AND TERMINATION.
(a) Administration by Administrator. The Plan shall be
administered by the Administrator. The Administrator shall have such powers as
may be necessary to discharge its duties hereunder. The Administrator may, from
time to time, employ, appoint or delegate to an agent or agents (who may be an
officer or officers of the Company) and delegate to them such administrative
duties as it sees fit, and may from time to time consult with legal counsel who
may be counsel to the Company. The Administrator shall have no power to add to,
subtract from or modify any of the terms of the Plan, or change or add to any
benefits provided under the Plan, or to waive or fail to apply any requirements
of eligibility for a benefit under the Plan. The Administrator shall not be
eligible to receive Awards of Restricted Stock. All decisions and determinations
by the Administrator shall be final and binding on all parties. The
Administrator shall not be liable for any such action taken or determination
made in good faith. All elections, notices and directions under the Plan by a
Director shall be made on such forms as the Administrator shall prescribe.
(b) Amendment and Termination. The Board may alter or amend this
Plan from time to time or may terminate the Plan in its entirety; provided,
however, that no such action shall, without the consent of a Director, affect
the rights in any Award made to such Director; and further provided, that,
without further approval by the shareholders of the Company, no such action
shall increase the total number of Shares available for issuance under the Plan
or cause any change in the application of Rule 16b-3 to this Plan.
SECTION 6. MISCELLANEOUS.
(a) Rule 16b-3. This Plan is intended to comply with Rule 16b-3 as
in effect on the effective date hereof. The Board may make such other changes in
the terms or operation of the Plan as may then be necessary or appropriate to
comply with such Rule. Notwithstanding any other provision in the Plan, the
Administrator shall not act in a manner which would contravene any requirement
of Rule 16b-3 as in effect at the time of such action, without the knowing
consent of any Director affected thereby.
(b) Effective Date. The Plan shall become effective as of April
20, 1999.
(c) No Alienation. Except as required by law, amounts payable
under the Plan shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution,
or levy of any kind, either voluntary or involuntary.
(d) Applicable Law. Subject to the provisions of applicable
federal law, the Plan shall be administered, construed and in forced according
to the laws of the State of Delaware.
(e) Severability. The invalidity of any particular clause,
provision or covenant herein shall not invalidate all or any part of the
remainder of the Plan but such remainder shall be and remain valid in all
respects as fully as the law will permit.
<PAGE>
(f) No Guarantee of Position. Nothing in the Plan or any award of
Restricted Stock shall confer on any person an expectation to continue his or
her position as a Director, or shall interfere in any manner with the absolute
right of the Company to change or terminate such person's position at any time
for any reason or for no reason.
SECTION 7. DEFINITIONS.
(a) Administrator. The Chairman of the Board of Directors.
(b) Award. A grant of Restricted Stock.
(c) Board. The Board of Directors of the Company.
(d) Code. The Internal Revenue Code of 1986, as amended.
(e) Company. Environmental Products & Technologies Corporation.
(f) Director. An individual duly elected or chosen as a Director of
the Company who is not also an employee of the Company or any of its
subsidiaries.
(g) Plan. The Environmental Products & Technologies Corporation 1999
Non-Employee Director Restricted Stock Plan.
(h) Restricted Stock. Shares of Company stock awarded to a Director
pursuant to Section 4 as to which neither the substantial risk of forfeiture nor
the restrictions on transfer referred to in Section 4 have expired.
(i) Rule 16b-3. Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (or any successor rule to the same effect), as in effect from time
to time.
(j) Shares. The Company's fully paid, non-assessable common stock, par
value $0.01 per share.
