SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-5374
VARLEN CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 13-2651100
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
55 Shuman Boulevard, P.O. Box 3089
Naperville, Illinois 60566-7089
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (630)420-0400
Indicate by check whether the registrant (1) has filed all
reports required to be filed by Section 13 or
15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
At December 1, 1998, approximately 16,987,410 shares, par value
$.10 per share, of common stock of the Registrant were
outstanding.
<PAGE>
PART I. FINANCIAL STATEMENTS
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
October 31, January 31,
1998 1998
<S> <C> <C>
Assets
Cash and cash equivalents 22,241 6,206
Accounts receivable, less
allowance for doubtful 87,667 70,972
accounts of $1,422 and $1,808
Inventories:
Raw materials 20,907 22,343
Work in process 21,447 19,094
Finished goods 15,607 17,360
57,961 58,797
Deferred and refundable income taxes 7,156 7,268
Other current assets 8,705 6,924
Total current assets 183,730 150,167
Property, plant, and equipment 242,552 216,532
Less: accumulated depreciation 106,000 92,352
136,552 124,180
Goodwill and other intangible assets, net 140,335 140,675
Investments and other assets 3,158 4,079
463,775 419,101
Liabilities and Stockholders' Equity
Current maturities of long-term debt 180 195
Accounts payable 45,892 33,026
Accrued expenses 42,939 38,763
Income taxes payable 6,392 4,159
Total current liabilities 95,403 76,143
Long-term debt 100,714 104,715
Deferred income taxes 14,256 14,679
Other liabilities 24,416 24,772
Common stock (note 6) 1,694 1,332
Other stockholders' equity (note 6) 227,292 197,460
463,775 419,101
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
(In Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Net sales 164,554 135,830 481,568 385,276
Cost of sales 121,713 101,948 355,719 291,592
Gross profit 42,841 33,882 125,849 93,684
Selling, general and
administrative expenses 22,517 19,153 65,995 53,966
Interest expense, net 1,592 1,191 4,887 7,356
Earnings before income
taxes 18,732 13,538 54,967 32,362
Income taxes 7,889 5,863 23,361 14,240
Net earnings 10,843 7,675 31,606 18,122
Earnings per share
(notes 6 and 7):
Basic 0.64 0.51 1.88 1.48
Diluted 0.63 0.41 1.82 1.11
Weighted average number
of shares outstanding
- basic (notes 6 and 7) 16,933 14,970 16,819 12,214
Weighted average number
of shares outstanding
- diluted (notes 6 and 7) 17,325 17,306 17,324 17,153
Dividends per common share
(note 6) 0.05 0.05 0.14 0.14
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
VARLEN CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Nine Months Ended
October 31, November 1,
1998 1997
<S> <C> <C>
Increase (Decrease in Cash)
Cash flows from operating activities:
Net earnings 31,606 18,122
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation 14,759 14,312
Amortization 4,151 5,344
Deferred income taxes 508 309
Change in assets and liabilities
net of effects from purchased
and sold businesses:
Accounts receivable, net (16,002) (11,446)
Inventories 1,601 (1,653)
Refundable income taxes 170 2,497
Other current assets (1,722) (2,412)
Accounts payable 11,431 8,663
Accrued expenses (1,241) (2,424)
Income taxes payable 2,194 2,204
Other noncurrent assets 1,184 (3,114)
Other noncurrent liabilities (409) 2,194
Total adjustments 16,624 14,474
Net cash provided by operating
activities 48,230 32,596
Cash flows from investing
activities:
Fixed asset expenditures (26,783) (14,398)
Cost of purchased business,
net of cash acquired --- (5,844)
Purchases of long-term
investments (1,425) ---
Disposals and other changes
in property, plant and equipment 382 1,252
Net cash used in investing
activities (27,826) (18,990)
Cash flows from financing
activities:
Proceeds from debt 1,026 64
Payments of debt (4,105) (10,895)
Issuance of common stock
under option plans 724 792
Cash received on stock
subscriptions 182 238
Cash dividends paid (2,433) (1,841)
Net cash used in financing
activities (4,606) (11,642)
Effect of exchange rate
changes on cash 237 (151)
Net increase in cash and
cash equivalents 16,035 1,813
Cash and cash equivalents at
beginning of year 6,206 3,133
Cash and cash equivalents at
end of period 22,241 4,946
<FN>
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. The unaudited condensed consolidated financial statements of
Varlen Corporation (the "Company") included herein have been
prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. In the opinion of the
Company, all adjustments which are considered necessary for
a fair presentation of the results for the interim periods
presented and the balance sheet at October 31, 1998 have
been made. These financial statements, which are condensed
and do not include all disclosures included in annual
financial statements, should be read in conjunction with the
consolidated financial statements and notes thereto
incorporated into the Company's latest Annual Report on Form
10-K.
2. Debenture Conversion:
In September 1997, the Company completed the call of its
6.5% Convertible Subordinated Debentures Due 2003.
Substantially all of the debentures were voluntarily
converted into approximately 5,728,000 shares (after
restatement for the 1998 5 for 4 stock split) of Common
Stock of the Company including conversions occurring just
prior to the call for redemption.
3. Supplemental Cash Flow Information
(in thousands):
<TABLE>
<CAPTION>
Nine Months Ended
October 31, November 1,
1998 1997
<S> <C> <C>
Cash paid during the
year-to-date period for:
Interest 4,675 8,075
Income taxes (net) 21,481 8,929
</TABLE>
4. Business Segment Information
(in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales:
Transportation products 155,720 126,982 453,049 359,347
Petroleum analyzers 8,834 8,848 28,519 25,929
164,554 135,830 481,568 385,276
Operating profits (1):
Transportation products 22,346 15,984 64,821 42,437
Petroleum analyzers 420 896 2,582 3,156
22,766 16,880 67,403 45,593
(1)Before interest and general corporate expenses.
</TABLE>
5. Acquisitions:
In October 1997, the Company purchased the railroad
divisions of Ringfeder GmbH located in Germany and Hanacke
Zelzarny a Perovny, a.s. located in the Czech Republic.
These entities are suppliers of the Company's German railcar
cushioning device maker Karl Georg Bahntechnik GmbH which
was purchased effective in December 1996. In November 1997,
the Company purchased the Petrospec product line of portable
laboratory and process petroleum analyzers from Boston
Advanced Technologies, Inc., for which it had been the
exclusive worldwide distributor of these products. These
acquisitions were financed with cash on hand and through the
Company's existing credit facility.
The acquisitions have been accounted for by the purchase
method of accounting with the excess of the purchase price
over the fair value of net assets acquired amortized over a
period of 15 to 40 years. The operating results of the
businesses acquired have been included in the accompanying
condensed consolidated results of operations from the
respective dates of acquisition.
6. Stockholders' Equity:
On September 28, 1998, the Company's Board of Directors
declared a five-for-four stock split in the form of a stock
dividend payable on November 17, 1998, to stockholders of
record on October 30, 1998. The dividend resulted in the
issuance of approximately 3.4 million new shares of Common
Stock. On September 29, 1997, the Company's Board of
Directors declared a three-for-two stock split in the form
of a stock dividend payable on November 18, 1997, to
stockholders of record on October 31, 1997. The dividend
resulted in the issuance of approximately 5.5 million new
shares (after restatement for the 1998 five-for-four stock
split) of Common Stock. All share and per share amounts
reflect these stock dividends and the new presentation of
earnings per share.
At the beginning of fiscal 1998, the Company adopted the
Financial Accounting Standards Board Standard No. 130,
"Reporting Comprehensive Income." This Standard expands
current disclosures and had no impact on the Company's
reported financial position, results of operations or cash
flows. Comprehensive income for the second quarter and year-
to-date periods presented is comprised of net earnings
adjusted for unrealized currency translation gains and
losses. Comprehensive income for the three months ended
October 31, 1998 and November 1, 1997 was $13,059 and
$8,209, respectively, and for the nine months ended October
31, 1998 and November 1, 1997 was $34,124 and $16,169,
respectively.
7. Computation of Earnings Per Share
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31, November 1, October 31, November 1,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net earnings - basic 10,843 7,675 31,606 18,122
(Increase)/decrease
in interest expense,
net of income taxes,
for the assumed
conversion of the
convertible debentures --- (471) --- 900
Adjusted net earnings
- diluted 10,843 7,204 31,606 19,022
Average shares
outstanding - basic 16,933 14,970 16,819 12,214
Diluted effect of
stock options 392 699 505 683
Convertible debentures --- 1,637 --- 4,256
Average shares
outstanding - diluted 17,325 17,306 17,324 17,153
Basic earnings per share 0.64 0.51 1.88 1.48
Diluted earnings per share 0.63 0.41 1.82 1.11
</TABLE>
8. New Accounting Standard:
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which revises standards on accounting for
derivative instruments and hedging transactions. This
standard is effective beginning in the Company's 2000 fiscal
year. This statement may not be retroactively applied to
prior financial statements. The impact of the adoption of
SFAS No. 133 has not been fully determined.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTH PERIOD
ENDED OCTOBER 31, 1998
Overview
The Company designs, manufactures, and markets
transportation products (Transportation Products segment) and
petroleum analysis equipment (Petroleum Analyzer segment). The
demand for the Company's products is affected by domestic as well
as international economic conditions. The Company's
manufacturing operations have a significant fixed cost component.
Accordingly, during periods of changing product demand the
profitability of many of the Company's operations may change
proportionately more than revenues of such operations.
Results of Operations
The Company's sales in the nine months ended October 31,
1998, were $481.6 million or 25.0% more than the $385.3 million
achieved in the first nine months of 1997. For the third quarter
of 1998, sales were $164.6 million, up 21.1% from sales of $135.8
million in the comparable 1997 period. Sales increased in the
Transportation Products segment in both quarter and year-to-date
periods, and sales in the Petroleum Analyzer segment increased in
the year-to-date period although were even with the prior year
for the third quarter period.
Net earnings for the first nine months of 1998 increased
74.4% to $31.6 million compared to $18.1 million in 1997's first
three quarters. Diluted earnings per share for the first nine
months in 1998 were $1.82, which compared to $1.11 per diluted
share in the comparable 1997 period. During the third quarter
ended October 31, 1998, net earnings increased to $10.8 million
from $7.7 million in the same 1997 quarter. Diluted earnings per
share were $.63 for the third quarter of 1998 compared to $.41
per share on a diluted basis in the equivalent 1997 period. On
November 17, 1998, a five-for-four stock split in the form of a
stock dividend was paid to shareholders of record as of October
30, 1998. All per share amounts have been restated to reflect
this transaction. In the quarter and nine-month period ended
October 31, 1998, operating profit increased in the
Transportation Products segment and declined in the Petroleum
Analyzer segment.
On a business segment basis, revenues in the Transportation
Products segment for the quarter and nine months ended October
31, 1998, were $155.7 million and $453.0 million, respectively,
as compared to $127.0 million and $359.3 million in the
comparable prior year periods. During the 1998 year-to-date
period, sales increased in all three transportation end market
operations. Operating profit in the first nine months of 1998
was $64.8 million (14.3% of segment sales), up 52.7% from $42.4
million (11.8% of segment sales) in the prior year period. In
the 1998 third quarter, operating profit increased 39.8% to $22.3
million (14.4% of segment sales) compared to $16.0 million (12.6%
of segment sales) in the comparable 1997 quarter. Operating
profit increased by a greater percentage than did sales in both
1998 periods at all three transportation end market operations.
Sales to the heavy-duty truck and trailer industry were
higher in the 1998 periods than in the prior year reflecting
higher industry production, new products, and increased content
per truck at several customers. The Company's increase in sales
continued to be greater than the industry's due to sales to
existing customers for new products and sales to new customers
for existing products. Sales to the automotive industry
increased in the 1998 periods as a result of higher sales volumes
of certain products, including the Means one-way clutch for which
production began in July 1997. Sales of railroad products were
positively affected in both 1998 periods by high levels of
industry production, which stimulated sales of freightcar and
locomotive components. In addition, acquisitions made in late
1997 had a positive impact on railroad products revenues. In all
core transportation end markets, profits were up more than sales
due to cost reductions as well as higher plant throughput.
Sales in the Petroleum Analyzer segment for the quarter and
nine months ended October 31, 1998, were $8.8 million and $28.5
million, respectively, compared to $8.8 million and $25.9 million
in the 1997 periods. Revenues in this business in the third
quarter of 1998 did not increase as low oil prices and reduced
demand in Asia resulted in customers deferring capital spending.
Operating profit for the Petroleum Analyzer segment for the first
nine months of 1998 decreased to $2.6 million (9.1% of segment
sales) compared to $3.2 million (12.2% of segment sales) in the
prior year's period. For the 1998 third quarter, operating
profit decreased to $.4 million (4.8% of segment sales) compared
to $.9 million (10.1% of segment sales) in the prior year's
quarter. Despite a softening of revenues in the third quarter of
1998, the Company continued to invest in new product development
and its distribution network resulting in the decline in earnings
in both 1998 periods compared to the prior-year equivalent
periods.
Consolidated gross margin in the first nine months increased
to 26.1% in 1998 from 24.3% in 1997, and during the third quarter
consolidated gross margin increased from 24.9% in 1997 to 26.0%
in 1998. The gross margin percentage increased in both segments
in the current nine-month period, but in the third quarter of
1998 it increased at the Transportation Products segment while
declining in the Petroleum Analyzer segment. Gross margin in the
Transportation Products segment continued to reflect the effects
of higher sales and resultant plant throughput efficiencies.
Selling, general, and administrative expenses of $66.0
million or 13.7% of sales in the first nine months of 1998
compared to $54.0 million or 14.0% of sales in the comparable
1997 period. During the third quarter of 1998, selling, general,
and administrative expenses were $22.5 million or 13.7% of sales
compared to $19.2 million or 14.1% of sales in the prior year's
comparable period. As a percentage of sales, selling, general,
and administrative expenses in the Transportation Products
segment were lower in both 1998 periods compared to 1997,
demonstrating leverage obtained from the large sales increase.
At the Petroleum Analyzer segment, higher distribution and
product development costs resulted in increased expenditures in
both 1998 periods in dollars and as a percent of sales.
Net interest expense for the quarter and nine months ended
October 31, 1998, was $1.6 million and $4.9 million,
respectively, compared to $1.2 million and $7.4 million for the
prior year's comparable periods. During the third quarter of
1997, the Company converted substantially all of its 6 1/2%
convertible subordinated debentures into equity. As a result,
previously accrued interest of $.8 million was reversed at the
date of conversion and no further convertible subordinated debt
interest accrued. On a year-to-date basis, net interest expense
decreased reflecting lower levels of debt in 1998 as a result of
the 1997 conversion and scheduled term loan payments.
Income taxes were provided at an effective rate during the
third quarter and first nine months of 1998 of 42.1% and 42.5%
compared to 43.3% and 44.0%, respectively, in both the comparable
1997 periods. The higher than statutory federal rate reflects
non-deductible goodwill amortization and state income taxes.
Capital Resources and Liquidity
During the third quarter and nine-month period ended October
31, 1998, the Company generated $12.7 and $48.2 million,
respectively, of cash from operating activities. As of October
31, 1998, the Company's working capital was $88.3 million, total
assets were $463.8 million, total debt excluding current portion
was $100.7 million and stockholders' equity was $229.0 million.
Investing activities during the third quarter and nine-month
period ended October 31, 1998, included capital expenditures of
$9.6 million and $26.8 million, respectively. These capital
expenditures were primarily for machinery and equipment to
support new products and to improve operating efficiency. To
support its investing activities, the Company has a term loan and
revolving credit agreement, which was entered into in 1996 and
expires on July 19, 2002. The term loan portion of this facility
($96 million) was used to finance a large acquisition in 1996.
The $80.0 million revolving credit facility will be used by the
Company as the principal source of acquisition funding. The
Company believes that internally generated funds will be
sufficient to satisfy its anticipated working capital needs,
capital expenditures, and scheduled debt repayments. As of
October 31, 1998, the Company had approximately $14.2 million of
non-cancelable commitments for the acquisition of capital
equipment.
Year 2000
General: The Year 2000 problem concerns the inability of
information systems or embedded computer chips to properly
recognize and process date-sensitive information beyond January
1, 2000. The Company's top management recognizes the importance
of the Year 2000 issue and has given it a high priority. Since
the Company operates its businesses in a decentralized manner,
each business unit has been required to develop a Year 2000 plan
to become fully compliant. The Company's approach to conduct its
Year 2000 project includes the key steps of planning, assessment,
remediation, implementation, testing, and contingency planning.
In addition, the Company has utilized its internal audit
resources to monitor the progress of the Year 2000 project.
Overall, the Company believes that the project is proceeding on
schedule and that all appropriate actions have or will be taken
to maintain business continuity.
Readiness: The Company's Year 2000 project has focused on
eight risk areas as noted in the table below:
<TABLE>
<CAPTION>
Risk Areas Technologies / Systems
<S> <C>
Business Computer Financial, human resource, purchasing,
Systems engineering, manufacturing, sales and
marketing systems
Manufacturing, Manufacturing execution systems, shop
Warehousing, Servicing floor controls (PLC's, CNC/NC, robots,
Equipment assembly line systems, cell controllers)
Technical Workstations, mainframes, servers,
Infrastructure operating systems, voice, data, video
(local & long distance, WAN's, LAN's)
End-User Computing Personal computers
Customers, Agents, Systems which interface to other
Suppliers, Service customers including the after-market
Providers buyers and other OEM's; EDI interfaces
Environmental Fire, security, electrical power control,
Operations emission and waste controls, automatic
lighting
Dedicated R&D Test CAD/CAE/CAM systems, third party
Facilities analytical systems for engineering;
research and development technologies,
product testing
The Organization's Computer hardware and software utilized
Products in the organization's products
</TABLE>
Within these risk areas, the Company's business units are
currently at varying stages of readiness and are primarily
working through the remediation, implementation and testing
stages. Business systems are being updated through a combination
of approaches including modification, version upgrading, and
replacement. Other equipment with embedded chips or processors
is being evaluated with the assistance of the equipment
manufacturers. Those systems and processes considered most
critical to maintaining business continuity are being given
priority. The Company believes that its Year 2000 project is
currently about 70% complete with each business unit at 50% or
greater. The business units will be completing their respective
projects at various dates with the latest slated for September
1999.
Another component of the Year 2000 project is the readiness
of key third parties that conduct business with the Company.
Efforts have been taken to reasonably assess their readiness
through questionnaires, interviews and other means. The Company
believes that it has completed 80% of this third party assessment
and evaluation process.
Costs: It is currently estimated that the total cost of the
Company's Year 2000 compliance project will approximate
$1,900,000 (cumulative over several years) and will be funded
with cash flows from operations. Of this amount, the Company
expects to spend approximately $1,160,000 from 10/31/98 through
the end of the project. Both of these cost amounts include
certain hardware and software costs associated with the
replacement of systems that will be capitalized. In total, these
costs are not expected to be substantially different from the
normal costs typically incurred for system development,
enhancement and implementation. While some external assistance
has been utilized throughout this project, the work has primarily
been performed using internal resources.
Risk Assessment / Contingency Planning: At this time, the
Company believes its most reasonably likely worst case scenario
would include (i) a key material vendor or service provider could
experience problems with delivery of materials, components, or
services; and (ii) the failure of infrastructure services
provided by government agencies and other third parties (e.g.
electricity, phone, transportation, Internet services, etc.).
As noted above, the Company is evaluating the Year 2000
compliance status of its key third party vendors to identify
potential risks for contingency planning purposes. As of this
date, the Company's contingency planning has been limited since
the focus has been on the assessment, remediation,
implementation, and testing phases. The Company anticipates that
appropriate contingency plans will be prepared throughout 1999 as
determined to be necessary.
The estimates and conclusions of this Year 2000 discussion
contain forward-looking statements and are based on management's
best estimates of future events. Risks to completing the project
include the ability to discover and correct Year 2000 problems,
the continued availability of certain internal and external
resources, and the ability of suppliers and customers to bring
their systems into compliance. These and other unforeseen
factors could have a material adverse effect on results of
operations or the Company's financial condition.
Other Matters
At the beginning of fiscal 1998, the Company adopted the
Financial Accounting Standards Board Standard No. 130, "Reporting
Comprehensive Income." This Standard expands current disclosures
and had no impact on the Company's reported financial position,
results of operations, or cash flows.
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging
Activities," which revises standards on accounting for derivative
instruments and hedging transactions. This standard is effective
beginning in the Company's 2000 fiscal year. The impact of the
adoption of SFAS No. 133 has not been fully determined.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 3(ii) By-Laws of Varlen Corporation as amended
through November 20, 1998.
Exhibit 4(a) Amendment No. 1 of Rights Agreement.
Exhibit 10(c) Varlen Corporation 1989 Incentive
Stock Option Plan as amended through November 20, 1998.
Exhibit 10(i) Varlen Corporation 1993 Incentive
Stock Option Plan as amended through November 20, 1998.
Exhibit 10(r) Varlen Corporation 1998 Long-Term
Equity Incentive Plan as amended through November 20, 1998.
Exhibit 27 Financial Data Schedule.
(b) Reports on form 8-K.
None.
<PAGE>
Safe Harbor Provision
This Quarterly Report contains outlook and other forward-looking
statements which are not historical facts. These forward-looking
statements are based upon certain assumptions about a number of
important factors. While the Company believes that its
assumptions are reasonable, it cautions that there are inherent
difficulties in predicting these factors, that they are subject
to change at any time and that any such change could cause actual
events and the Company's actual results to differ materially from
those predicted or projected in its forward-looking statements.
Among the factors that could cause actual results to differ
materially are: the growth and size of the markets in which the
Company operates; the demand for the products of the Company and
those that incorporate Company products and other market
acceptance risks; the presence in the Company's market of
competitors with greater financial resources, and the impact of
competitive products and pricing; actual product purchases under
existing purchase agreements and the loss of any significant
customers; general market conditions; the ability of the Company
to develop new products; capacity and supply constraints or
difficulties; the ability of the Company to maintain and improve
the productivity and efficiency of operation and reduce costs;
availability of resources; the results of the Company's financing
efforts; the effect of the Company's accounting policies; and the
effects of general economic, trade, legal, social and economic
conditions. In addition, from time to time the Company may
engage in certain extraordinary transactions, such as a
significant acquisition, which could also cause actual events and
the Company's actual results to differ materially from those
predicted or projected in its forward-looking statements. Other
risk factors may be detailed from time to time in the Company's
Securities and Exchange Commission filings. The Company assumes
no obligation to update its forward-looking statements or advise
of changes in the assumptions and factors on which they are
based.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Varlen Corporation
(Registrant)
December 8, 1998 By: /s/ Richard A. Nunemaker
Richard A. Nunemaker
Vice President, Finance and
Chief Financial Officer
(Principal Financial Officer
and Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
3(ii) By-Laws of Varlen Corporation as amended
through November 20, 1998. 17
4(a) Amendment No. 1 of Rights Agreement. 40
10(c) Varlen Corporation 1989 Incentive Stock Option
Plan as amended through November 20, 1998. 43
10(i) Varlen Corporation 1993 Incentive Stock Option
Plan as amended through November 20, 1998. 55
10(r) Varlen Corporation 1998 Long-Term Equity
Incentive Plan as amended through
November 20, 1998. 63
27 Financial Data Schedule. 79
As amended through
November 20, 1998
BY-LAWS
OF
VARLEN CORPORATION
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. Subject to change by
resolution of the Board of Directors, the annual meeting of the
stockholders of the Corporation for the purpose of electing
directors and for the transaction of such other business as may
be brought before the meeting shall be held on the fourth Tuesday
in May of each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding day not a legal holiday.
The meeting may be held at such time and such place within or
without the State of Delaware as shall be fixed by the Board of
Directors and stated in the notice of the meeting.
SECTION 2. Special Meetings. Special meetings of the
stockholders may be called at any time by the Board of Directors,
by the Chairman of the Board or by the President of the
Corporation. Special meetings shall be held on the date and at
the time and place either within or without the State of Delaware
specified in the notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise
expressly required by law or the Certificate of Incorporation of
the Corporation, written notice stating the place and time of the
meeting, and in the case of a special meeting, the purpose or
purposes of such meeting, shall be given by the Secretary to each
stockholder entitled to vote thereat at his address as it appears
on the records of the Corporation not less than ten nor more than
fifty days prior to the meeting. No business other than that
stated in the notice shall be transacted at any special meeting.
Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall attend such meeting in person
or by proxy; and if any stockholder shall, in person or by
attorney thereunto duly authorized, in writing or by telegraph,
cable or wireless, waive notice of any meeting, whether before or
after such meeting be held, the notice thereof need not be given
to him. Notice of any adjourned meeting of stockholders need not
be given except as provided in SECTION 4 of this ARTICLE 1.
SECTION 4. Quorum. Subject to the provisions of law in
respect of the vote that shall be required for a specific action,
the number of shares the holders of which shall be present or
represented by proxy at any meeting of stockholders in order to
constitute a quorum for the transaction of any business shall be
a majority of all the shares issued and outstanding and entitled
to vote at such meeting.
At any meeting of stockholders, whether or not there
shall be a quorum present, the holders of a majority of shares
voting at the meeting, whether present in person at the meeting
or represented by proxy at the meeting, may adjourn the meeting
from time to time without notice other than by announcement at
the meeting of the time and place of the adjourned meeting,
except that a new notice must be sent out if the adjournment is
for more than thirty days, or if a new record date for voting is
fixed. At any adjourned meeting at which a quorum shall be
present, any business may be transacted which might have been
transacted at the meeting as originally called.
SECTION 5. Organization. The Chairman of the Board,
or in his absence or nonelection the President, or in the absence
of both the foregoing officers the Executive Vice President, or
in the absence of any of the foregoing officers a Vice President,
shall call meetings of the stockholders to order, and shall act
as Chairman of such meetings. In the absence of the Chairman of
the Board, the President, the Executive Vice President or a Vice
President, the holders of a majority in number of the shares of
the capital stock of the Corporation present in person or
represented by proxy and entitled to vote at such meeting shall
elect a Chairman, who may be the Secretary of the Corporation.
The Secretary of the Corporation shall act as secretary of all
meetings of the stockholders; but in the absence of the
Secretary, the Chairman may appoint any person to act as
secretary of the meeting.
SECTION 6. Voting. Each stockholder shall, except as
otherwise provided by law or by the Certificate of Incorporation,
at every meeting of the stockholders be entitled to one vote in
person or by proxy for each share of capital stock entitled to
vote held by such stockholder, but no proxy shall be voted after
three years from its date, unless said proxy provides for a
longer period. Upon the demand of any stockholder, the vote for
directors and the vote upon any matter before the meeting shall
be by ballot. Except as otherwise provided by law or by the
Certificate of Incorporation or by these By-laws, all elections
for directors shall be decided by plurality vote; all other
matters shall be decided by votes cast thereon.
A complete list of the stockholders entitled to vote at
any meeting of stockholders, arranged in alphabetical order, with
the address of each, and the number of shares held by each, shall
be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which
place shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held. The
list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by
any stockholder who is present.
SECTION 7. Inspectors of Election. The Board of
Directors may at any time appoint two or more persons to serve as
Inspectors of Election at the next succeeding annual meeting of
stockholders or at any other meeting or meetings, and the Board
of Directors may at any time fill any vacancy in the office of
Inspector. If the Board of Directors fails to appoint
Inspectors, or if any Inspector appointed be absent or refuse to
act, or if his office becomes vacant and be not filled by the
Board of Directors, the Chairman of any meeting of the
stockholders may appoint one or more temporary Inspectors for
such meeting. All proxies shall be filed with the Inspectors of
Election of the meeting before being voted upon.
SECTION 8. Consent of Stockholders in Lieu of Meeting.
(A) Any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of the
stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing,
setting for the action so taken, shall be signed by the holders
of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at
a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by
delivery to its registered office in Delaware, its principal
place of business, or an officer or agent of the Corporation
having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's
registered office shall be made by hand or by certified or
registered mail, return receipt request.
(B) Every written consent shall bear the date of
signature of each stockholder who signs the consent and no
written consent shall be effective to take the corporate action
referred to therein unless, within sixty (60) days of the date
the earliest dated consent is delivered to the Corporation, a
written consent or consents signed by a sufficient number of
holders to take action are delivered to the Corporation in the
manner prescribed in paragraph (C) of this Section.
(C) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing
without a meeting, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days
after the date upon which the resolution fixing the record date
is adopted by the Board of Directors. Any stockholder of record
seeking to have the stockholders authorize or take corporate
action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date.
The Board of Directors shall promptly, but in all events within
ten (10) days after the date on which such a request is received,
adopt a resolution fixing the record date. If no record date has
been fixed by the Board of Directors within ten (10) days of the
date on which such a request is received, the record date for
determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the Board
of Directors is required by applicable law, shall be the first
date on which a signed written consent setting forth the action
taken or proposed to be taken is delivered to the Corporation in
accordance with paragraphs (A) and (B) of this Section. If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law,
the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting shall be at the
close of business on the date on which the Board of Directors
adopts the resolution taking such prior action.
(D) Within five (5) business days after receipt of the
earliest dated consent delivered to the Corporation in the manner
provided in this Section, the Corporation, shall retain
nationally recognized independent inspectors of elections for the
purposes of performing a ministerial review of the validity of
consents and any revocations thereof. The cost of retaining
inspectors of election shall be borne by the Corporation.
(E) At any time that stockholders soliciting consents
in writing to corporate action have a good faith belief that the
requisite number of valid and unrevoked consents to authorize or
take the action specified has been received by them, the consents
shall be delivered by the soliciting stockholders of the
Corporation's registered office in the State of Delaware or
principal place of business or to the Secretary of the
Corporation, together with a certificate stating their belief
that the requisite number of valid and unrevoked consents has
been received as of a specific date, which date shall be
identified in the certificate. In the event that delivery shall
be made to the Corporation's registered office in Delaware, such
delivery shall be made by hand or by certified or registered
mail, return receipt requested. Upon receipt of such consents,
the Corporation shall cause the consents to be delivered promptly
to the inspectors of election. The Corporation also shall
deliver promptly to the inspectors of election any revocations of
consents in its possession, custody or control as of the time of
receipt of the consents.
(F) As promptly as practicable after the consents and
revocations are received by them, the inspectors of election
shall issue a preliminary report to the Corporation stating: (i)
the number of shares represented by valid and unrevoked consents;
(ii) the number of shares represented by invalid consents; (iii)
the number of shares represented by invalid revocations; and (iv)
the number of shares entitled to submit consents as of the record
date. Unless the Corporation and the soliciting stockholders
agree to a shorter or longer period, the Corporation and the
soliciting stockholders shall have five (5) days to review the
consents and revocations and to advise the inspectors and the
opposing party in writing as to whether they intend to challenge
the preliminary report. If no timely written notice of an
intention to challenge the preliminary report is received, the
inspectors shall certify the preliminary report (as corrected or
modified by virtue or the detection by the inspectors of clerical
errors) as their final report and deliver it to the Corporation.
If the Corporation or the soliciting stockholders give timely
written notice of an intention to challenge the preliminary
report, a challenge session shall be scheduled by the inspectors
as promptly as practicable. A transcript of the challenge
session shall be recorded by a certified court reporter.
Following completion of the challenge session, the inspectors
shall issue as promptly as practicable their final report and
deliver it to the Corporation. A copy of the final report shall
be included in the book in which the proceedings of meetings of
stockholders are required.
(G) The Corporation shall give prompt notice to the
stockholders of the results of any consent solicitation or the
taking of corporate action without a meeting by less than
unanimous written consent.
(H) This Section shall in no way impair or diminish
the right of any stockholder or director, or any officer whose
title to office is contested, to contest the validity of any
consent or revocation thereof, or to take any other action with
respect thereto.
SECTION 9. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board
of Directors of the Corporation and the proposal of business to
be considered by the stockholders may be made at an annual
meeting of stockholders (a) pursuant to the Corporation's notice
of meeting delivered pursuant to Article I, Section 3 of these by-
laws, (b) by or at the direction of the Chairman of the Board of
Directors or (c) by any stockholder of the Corporation who is
entitled to vote at the meeting, who complied with the notice
procedures set forth in clauses (2) and (3) of this paragraph (A)
of this by-law and who was a stockholder of record at the time
such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to
clause (c) of paragraph (A)(1) of this by-law, the stockholder
must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices
of the Corporation not less than forty-five nor more than sixty-five
days prior to the first anniversary of the date of mailing
of the Corporation's proxy statement with respect to the
preceding year's annual meeting; provided, however, that in the
event that the date of mailing is advanced by more than twenty
days, or delayed by more than seventy days, from such anniversary
date, notice by the stockholder to be timely must be so delivered
not earlier than the sixty-fifth day prior to such mailing date
and not later than the close of business on the later of the
forty-fifth day prior to such mailing or the tenth day following
the day on which public announcement of the date of such meetings
is first made. Such stockholder's notice shall set forth (a) as
to each person whom the stockholder proposes to nominate for
election or re-election as a director all information relating to
such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including
such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected;
(b) as to any other business desired to be brought before the
meeting, the reasons for conducting such business at the meeting
and any material interest in such business of such stockholder
and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or
proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and or record by such stockholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this by-law to the contrary, in the event
that the number of directors to be elected to the Board of
Directors of the Corporation is increased and there is no public
announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by
the Corporation at least eighty days prior to the first
anniversary of the preceding year's annual meeting, a
stockholder's notice required by this by-law shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to
the Secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made
by the Corporation.
(B) Special Meetings of Stockholders.
Only such business shall be conducted at a special
meeting of stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting pursuant
to Article I, Section 3 of these by-laws. Nominations of persons
for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board of Directors or (b) by any stockholder of
the Corporation who is entitled to vote at the meeting, who
complies with the notice procedures set forth in this by-law and
who is a stockholder of record at the time such notice is
delivered to the Secretary of the Corporation. Nominations by
stockholders of persons for election to the Board of Directors
may be made at such a special meeting of stockholders if the
stockholder's notice as required by paragraph (A)(2) of this by-law
shall be delivered to the Secretary at the principal
executive offices of the Corporation not earlier than the
ninetieth day prior to such special meeting and not later than
the close of business on the later of the seventieth day prior to
such special meeting or the tenth day following the day on which
public announcement is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to
be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a
new time period for the giving of a stockholder's notice as
described above.
(C) General.
(1) Only persons who are nominated in accordance with
the procedures set forth in this by-law shall be eligible to
service as director and only such business shall be conducted at
a meeting of stockholders as shall have been brought before the
meeting in accordance with the procedures set forth in this by-law.
Except as otherwise provided by law, the Certificate of
Incorporation or these by-laws, the chairman of the meeting shall
have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this by-law and, if
any proposed nomination or business is not compliance with this
by-law, to declare that such defective proposal or nomination
shall be disregarded.
(2) For purposes of this by-law, "public announcement"
shall mean disclosure in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news
service or in a document publicly filed by the Corporation with
the Securities and Exchange Commission pursuant to Section 13, 14
or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
by-law, a stockholder shall also comply with all applicable
requirements of the Exchange Act and the rules and regulations
thereunder with respect to the matters set forth in this by-law.
Nothing in this by-law shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The property, affairs and
business of the Corporation shall be managed by the Board of
Directors.
SECTION 2. Number, Qualification and Term of Office.
The number of directors shall be such as the Board of Directors
may by resolution direct, but not less than three nor more than
nine, except that where all the stock of the Corporation is owned
beneficially and of record by either one or two stockholders, the
number of directors may be less than three, but not less than the
number of stockholders. Directors need not be stockholders.
Each director shall hold office for the term for which he is
appointed or elected and until his successor shall have been
elected and shall qualify, or until his death or until he shall
resign or shall have been removed in the manner hereinafter
provided. Directors need not be elected by ballot, except upon
demand of any stockholder.
SECTION 3. Quorum and Manner of Action. Except as
otherwise provided by statute or these By-laws, one-half of the
whole Board of Directors (but not less than two) shall be
required to constitute a quorum for the transaction of business
at any meeting, and the act of a majority of the directors
present and voting at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a
quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum be had. Notice of any
adjourned meeting need not be given. The directors shall act
only as a board and individual directors shall have no power as
such.
SECTION 4. Place of Meeting, etc. The Board of
Directors may hold its meetings, have one or more offices, and
keep the books and records of the Corporation, at such place or
places within or without the State of Delaware as the Board may
from time to time determine or as shall be specified or fixed in
the respective notices or waivers of notice thereof.
SECTION 5. Regular Meetings. A regular meeting of the
Board of Directors shall be held as soon as practicable after
each annual meeting of stockholders, for the election of officers
and the transaction of other business, and other regular meetings
of said Board shall be held at such times and places as said
Board shall direct. No notice shall be required for any regular
meeting of the Board of Directors but a copy of every resolution
fixing or changing the time or place of regular meetings shall be
mailed to every director at least three days before the first
meeting held in pursuance thereof.
SECTION 6. Special Meetings. Special meetings of the
Board of Directors may be called by the Chairman of the Board,
the President, the Executive Vice President, a Vice President or
any two Directors. The Secretary or an Assistant Secretary shall
give notice of the time and place of each special meeting by
mailing a written notice of the same to each Director at his last
known post office address at least two days before the meeting or
by causing the same to be delivered personally or to be
transmitted by telegraph, cable, wireless, telephone or verbally
at least twenty-four hours before the meeting to each Director.
SECTION 7. Action by Consent. Any action required or
permitted to be taken at any meeting of the Board or of any
committee thereof may be taken without a meeting, if prior to
such action a written consent thereto is signed by all members of
the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of proceedings of the
Board or committee.
SECTION 8. Organization. At each meeting of the Board
of Directors, the Chairman of the Board, or in his absence or
nonelection the President, or in the absence of both of the
foregoing officers a director chosen by a majority of the
directors, shall act as Chairman. The Secretary, or in his
absence an Assistant Secretary, or in the absence of both the
Secretary and Assistant Secretaries any person appointed by the
Chairman, shall act as Secretary of the meeting.
SECTION 9. Resignations. Any director of the
Corporation may resign at any time by giving written notice to
the Board of Directors or to the President or to the Secretary of
the Corporation. The resignation of any directors shall take
effect at the time specified therein, and unless otherwise
specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
SECTION 10. Removal of Directors. Any director may be
removed, either with or without cause, at any time by the
affirmative vote of a majority in interest of the holders of
record of the stock having voting power at a special meeting of
the stockholders called for the purpose; and the vacancy in the
Board caused by any such removal may be filled by the
stockholders at such meeting.
SECTION 11. Vacancies. Subject to the rights of the
holders of any series of Preferred Stock, or any other series or
class of stock as set forth in the Certificate of Incorporation,
to elect additional directors under specified circumstances, and
unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification,
removal from office or other cause, and newly created
directorships resulting from any increase in the authorized
number of directors, may be filled only by the affirmative vote
of a majority of the remaining directors, though less than a
quorum of the Board of Directors, and directors so chosen shall
hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which
they have been elected expires and until such director's
successor shall have been duly elected and qualified.
SECTION 12. Compensation of Directors. Directors
shall receive such sum for their services and expenses as may be
directed by resolution of the Board; provided that nothing herein
contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees
may be allowed like compensation of their services and expenses.
SECTION 13. Committees. By resolution or resolutions
passed by a majority of the whole Board at any meeting of the
Board of Directors, the directors may designate one or more
committees, each committee to consist of two or more directors,
which, to the extent provided in said resolution or resolutions,
shall have and may exercise the powers of the Board of Directors
in the management of the business and affairs of the Corporation,
including the power and authority to authorize the seal of the
Corporation to be affixed to all papers which may require it, to
declare dividends and to authorize the issuance of shares of
capital stock of the Corporation. Further, the Board of
Directors may designate one or more directors as alternate
members of a committee who may replace an absent or disqualified
member at any meeting.
SECTION 14. Executive Committee. The Board of
Directors, by the affirmative vote of a majority of the members
of the Board at the time in office, may appoint an Executive
Committee, each of such members to be a director. The number of
members of the Executive Committee shall be such as the Board of
Directors by resolution directs, but not less than three nor more
than nine. The Executive Committee, except as limited from time
to time by the Board of Directors, shall have and may exercise,
during the intervals between the meetings of the directors, all
of the powers vested in the Board or committees generally, except
to change the membership of the Executive Committee; provided,
however, that in the absence or disqualification of any member of
the Executive Committee, the member or members thereof present at
any meeting and not disqualified from voting, whether or not he
or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the
place of any such absent of disqualified member. The Executive
Committee shall have power to authorize the seal of the
Corporation to be affixed to all papers which may require it, to
declare dividends and to authorize the issuance of shares of
capital stock of the Corporation. The Board shall have the power
at any time to fill vacancies in, to change the membership of, or
to dissolve, the Executive Committee. The Executive Committee
may make rules for the conduct of its business and may appoint
such committees and assistants as it shall from time to time deem
necessary. One-third of the Executive Committee, but not less
than two, shall constitute a quorum for the transaction of
business. Regular meetings of the Executive Committee shall be
held at such times as the said Executive Committee shall from
time to time by resolution determine. No notice shall be
required for any regular meeting of the Executive Committee but a
copy of every resolution fixing or changing the time or place of
regular meetings shall be mailed to every member of the Executive
Committee at least three days before the first meeting held in
pursuance thereof. Special meetings of the Executive Committee
may be called by the Chairman of the Executive Committee or the
Secretary of the Executive Committee, or any two members thereof.
The Secretary of the Corporation or the Secretary of the
Executive Committee shall give notice of the time and place of
each Special Meeting by mail at least two days before such
meeting or by telegraph, cable, wireless, telephone or verbally
at least 24 hours before the meeting to each member of the
Executive Committee.
SECTION 15. Audit Committee. The audit committee
shall consist solely of directors who are independent of
management. The audit committee shall assist the board in
fulfilling its fiduciary responsibilities by reviewing the
financial information, the systems of internal controls which
management and the board of directors have established, and the
audit process. To accomplish the foregoing, the audit committee
shall help directors discharge their responsibilities especially
for accountability; provide communication between directors and
external and internal auditors; ensure the external and internal
auditors' independence; and maintain the credibility and
objectivity of financial reports.
SECTION 16. Compensation Committee. The
compensation committee shall consist solely of directors who are
independent of management. The compensation committee shall
review and recommend to the board of directors policies,
practices and procedures relating to the compensation of the
Corporation's executive officers and operating unit presidents
and the establishment and administration of the Corporation's
stock options plan, stock purchase plans and employee benefit
plans.
SECTION 17. Nominating and Organization Committee.
The nominating and organization committee shall assist and advise
the board of directors in connection with board membership, board
committee structure, membership and CEO succession. The
nominating and organization committee shall evaluate and
recommend to the board of directors candidates for election or re-
election as directors.
ARTICLE III
Officers
SECTION 1. Number. The officers of the Corporation
shall be a President, a Treasurer, and a Secretary. In addition,
the Board may elect one or more Executive Vice Presidents, one or
more Vice Presidents, and such other officers as may be appointed
in accordance with the provisions of SECTION 3 of this ARTICLE.
Any number of offices may be held by the same person. The board
may elect a Chairman of the Board and/or Senior Chairman. Such
Chairman of the Board or Senior Chairman shall not be an officer
of the Corporation unless such person holds another officer
position of the Corporation. The Chief Executive Officer of the
Corporation shall be either the Chairman of the Board or the
President, as determined by the Board.
SECTION 2. Election, Term of Office and
Qualifications. The officers shall be elected annually by the
Board of Directors at their first meeting after each annual
meeting of the stockholders of the Corporation. Each officer,
except such officers as may be appointed in accordance with the
provisions of SECTION 3 of this ARTICLE, shall hold office until
his successor shall have been duly elected and qualified in his
stead, or until his death or until he shall have resigned or
shall have become disqualified or shall have been removed in the
manner hereinafter provided. The Chairman of the Board shall be
chosen from among the directors.
SECTION 3. Subordinate Officers. The Board of
Directors or the President may from time to time appoint such
other officers, including one or more Assistant Treasurers and
one or more Assistant Secretaries, and such agents and employees
of the Corporation as may be deemed necessary or desirable. Such
officers, agents and employees shall hold office for such period
and upon such terms and conditions, have such authority and
perform such duties as in these By-laws provided or as the Board
of Directors or the President may from time to time prescribe.
The Board of Directors or the President may from time to time
authorize any officer to appoint and remove agents and employees
and to prescribe the powers and duties thereof.
SECTION 4. Removal. Any officer may be removed either
with or without cause, by the vote of a majority of the whole
Board of Directors at a special meeting called for the purpose,
or except in case of any officer elected by the Board of
Directors, by any committee or superior officer upon whom the
power of removal may be conferred by the Board of Directors or by
these By-laws.
SECTION 5. Resignations. Any officer may resign at
any time by giving written notice to the Board of Directors or to
the President or to the Secretary. Any such resignation shall
take effect at the date of receipt of such notice or at any later
time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make
it effective.
SECTION 6. Vacancies. A vacancy in any office because
of death, resignation, removal, disqualification or any other
cause shall be filled for the unexpired portion of the term in
the manner prescribed in these By-laws for regular election or
appointment to such office.
SECTION 7. The Chairman of the Board and Senior
Chairman.
(A) The Chairman of the Board shall perform all duties
incidental to his or her office which may be required by law and
all such other duties as are properly required of him or her by
the Board of Directors. Except where by law the signature of the
President is required, the Chairman of the Board shall possess
the same power as the President to sign all certificates,
contracts, and other instruments of the Corporation which may be
authorized by the Board of Directors.
(B) The Chairman of the Board shall preside at all
meetings of the stockholders and of the Board of Directors. The
Chairman shall make reports to the Board of Directors and the
stockholders, and shall perform all such other duties as are
properly required of him or her by the Board of Directors. The
Chairman shall see that all orders and resolutions of the Board
of Directors and of any committee thereof are carried into
effect.
(C) In the event the Chairman of the Board is unable
to serve, the Senior Chairman in addition to serving as lead
outside director shall fulfill the duties and responsibilities
and have such powers and authority of the Chairman of the Board
as set forth in these By-laws.
SECTION 8. The President. The President shall have
general direction of the affairs of the Corporation and general
supervision over its several officers, subject, however, to the
control of the Board of Directors and, if the Chairman of the
Board be the Chief Executive Officer of the Corporation, the
Chairman of the Board. The President shall at each annual
meeting and from time to time report to the stockholders and to
the Board of Directors all matters within his knowledge which the
interest of the Corporation require to be brought to their
notice; may sign with the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary any and all certificates
of stock of the Corporation; in the absence of the Chairman of
the Board, shall preside at all meetings of the stockholders;
shall sign and execute in the name of the Corporation all
contracts, or other instruments authorized by the Board of
Directors, except in cases where the signing and execution
thereof shall be expressly declared or permitted by the Board or
by these By-laws to some other officer or agent of the
Corporation; and, in general, shall perform all duties incident
to the office of President and such other duties as from time to
time may be assigned to him by the Board of Directors or as are
presented by these By-laws.
SECTION 9. The Executive Vice President. The
Executive Vice President, if one be elected, shall at the request
of the President, or in his absence or disability, except as
otherwise provided herein, perform the duties of the President,
and, when so acting, shall have all the powers of, and be subject
to all of the restrictions upon, the President; in the absence of
the Chairman of the Board and the President, shall preside at all
meetings of the stockholders; may sign with the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary
any or all certificates of stock of the Corporation; and shall
perform such duties and have such powers as from time to time may
be assigned to him by the President or the Board of Directors or
prescribed by these By-laws.
SECTION 10. The Vice Presidents. Each Vice President
shall have such powers and shall perform such duties as may from
time to time be assigned to him by the Board of Directors or by
the President. A Vice President may also sign with the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant
Secretary certificates of stock of the Corporation.
SECTION 11. The Secretary. The Secretary shall keep
or cause to be kept in books provided for the purpose the minutes
of the meetings of the stockholders, of the Board of Directors
and of any committee when so required; shall see that all notices
are duly given in accordance with the provisions of these By-laws
and as required by law; shall be custodian of the records and of
the seal of the Corporation and see that the seal is affixed to
all documents, the execution of which on behalf of the
Corporation under its seal is duly authorized in accordance with
the provisions of these By-laws; shall keep or cause to be kept,
a register of the post office address of each stockholder; may
sign with the President, the Executive Vice President or Vice
President certificates of stock of the Corporation; and, in
general, the Secretary shall perform all duties incident to the
office of Secretary and such other duties as may, from time to
time, be assigned to him by the Board of Directors, or by the
President.
SECTION 12. Assistant Secretaries. At the request of
the Secretary, or in his absence or disability, the Assistant
Secretaries shall perform the duties of the Secretary and, when
so acting, shall have all the powers of, and be subject to all
the restrictions upon, the Secretary. The Assistant Secretaries
shall perform such other duties as from time to time may be
assigned to them by the President, the Secretary or the Board of
Directors.
SECTION 13. The Treasurer. The Treasurer shall have
charge and custody of, and be responsible for, all funds and
securities of the Corporation, and deposit all such funds in the
name of the Corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the
provisions of these By-laws; at all reasonable times exhibit his
books of account and records, and cause to be exhibited the books
of accounts and records of any corporation controlled by the
Corporation, to any of the directors of the Corporation upon
application during business hours at the office of the
Corporation, or such other corporation, where such books and
records are kept; render a statement of the condition of the
finances of the Corporation at all regular meetings of the Board
of Directors and a full financial report at the annual meeting of
the stockholders; if called upon to do so, receive, and give
receipts for, moneys due and payable to the Corporation from any
source whatsoever; may sign with the President, the Executive
Vice President or Vice President certificates of stock of the
Corporation; and, in general, perform all the duties incident to
the office of Treasurer and such other duties as from time to
time may be assigned to him by the Board of Directors.
SECTION 14. Assistant Treasurers. At the request of
the Treasurer, or in his absence or disability, the Assistant
Treasurers shall perform the duties of the Treasurer, and, when
so acting, shall have all the powers of, and be subject to all
the restrictions upon, the Treasurer. The Assistant Treasurers
shall perform such duties as from time to time may be assigned to
them by the President, the Treasurer or the Board of Directors.
SECTION 15. Salaries. The salaries of the officers
shall be fixed from time to time by the Board of Directors. No
officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the Corporation.
ARTICLE IV
Contracts, Checks, Drafts, Bank Accounts, Etc.
SECTION 1. Contracts, etc., How Executed. The Board
of Directors, except as in these By-laws otherwise provided, may
authorize any officer or officers, employee or employees or agent
or agents of the Corporation to enter into any contract or
execute and deliver any instrument in the name of and on behalf
of the Corporation, and such authority may be general or confined
to specific instances; and, unless so authorized by the Board of
Directors or by any committee or by these By-laws, no officer,
employee or agent shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit
or to render it liable pecuniarily for any purpose or to any
amount.
SECTION 2. Checks, Drafts, etc. All checks, drafts or
other orders for the payment of money, notes, or other evidences
of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, employee or employees or
agent or agents of the Corporation as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 3. Deposits. All funds of the Corporation
shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies or other depositaries
as the Board of Directors may from time to time designate, or as
may be designated by any officer or officers, employee or
employees or agent or agents of the Corporation to whom such
power may be delegated by the Board of Directors, and for the
purpose of such deposit, any officer or officers, employee or
employees or agent or agents of the Corporation as shall from
time to time be determined by resolution of the Board of
Directors may endorse, assign and deliver checks, drafts and
other orders for the payment of money which are payable to the
order of the Corporation.
SECTION 4. General and Special Bank Accounts. The
Board of Directors may from time to time authorize the opening
and keeping with such banks, trust companies or other
depositaries as it may designate of general and special bank
accounts, and may make such special rules and regulations with
respect thereto, not inconsistent with the provisions of these By-laws,
as it may deem expedient.
SECTION 5. Proxies. Except as otherwise in these By-laws
or in the Certificate of Incorporation of the Corporation
provided, and unless otherwise provided by resolution of the
Board of Directors, the President may from time to time appoint
an attorney or attorneys, or agent or agents, of the Corporation,
in the name and on behalf of the Corporation, to cast the votes
which the Corporation may be entitled to cast as a stockholder or
otherwise in any other corporation any of whose stock or other
securities may be held by the Corporation, at meetings of the
holders of the stock or other securities of such other
corporation, or to consent in writing to any action by such other
corporation, and may instruct the person or persons so appointed
as to the manner of casting such votes or giving such consent,
and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise,
all such written proxies or other instruments as he may deem
necessary or proper in the premises.
ARTICLE V
Shares and Their Transfer
SECTION 1. Certificates of Stock. Certificates for
shares of the capital stock of the Corporation shall be in such
form not inconsistent with law as shall be approved by the Board
of Directors. They shall be numbered in order of their issue,
and shall be signed by the President, the Executive Vice
President or Vice President and the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the
Corporation, and the seal of the Corporation shall be affixed
thereto, provided that where any such certificate is signed by a
transfer agent or an assistant transfer agent or by a transfer
clerk acting on behalf of the Corporation and by a registrar, if
any, the signatures of any such President, Executive Vice
President, Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary and the seal of the Corporation
upon such certificate may be facsimiles. In case of any officer
or officers who shall have signed, or whose facsimile signature
or signatures shall have been used on any such certificate or
certificates, shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise,
before such certificate or certificates shall have been delivered
by the Corporation, such certificate or certificates may
nevertheless be adopted by the Corporation and be issued and
delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature shall
have been used thereon had not ceased to be such officer or
officers of the Corporation.
SECTION 2. Transfer of Stock. Transfers of shares of
the capital stock of the Corporation shall be made only on the
books of the Corporation by the holder thereof, or by his
attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary of the Corporation, or a
transfer agent of the Corporation, if any, and on surrender of
the certificate or certificates for such shares properly
endorsed. A person in whose name shares of stock stand on the
books of the Corporation shall be deemed the owner thereof as
regards the Corporation, and the Corporation shall not be bound
to recognize any equitable or other claim to, or interest in,
such shares on the part of any other person, whether or not it
shall have express or other notice thereof, except as otherwise
provided by the laws of Delaware; provided that whenever any
transfer of shares shall be made for collateral security, and not
absolutely, such fact, if known to the Secretary or to said
transfer agent, shall be so expressed in the entry of transfer.
SECTION 3. Addresses of Stockholders. Each
stockholder shall designate to the Secretary of the Corporation
an address at which notices of meetings and all other corporate
notices may be served or mailed to him, and if any stockholder
shall fail to designate such address, corporate notices may be
served upon him by mail directed to him at his last known post
office address.
SECTION 4. Lost, Destroyed and Mutilated Certificates.
The holder of any stock issued by the Corporation shall
immediately notify the Corporation of any loss, destruction or
mutilation of the certificate therefor, or failing to receive a
certificate of stock issued by the Corporation, and the Board of
Directors or the Secretary of the Corporation may, in its or his
discretion, cause to be issued to him a new certificate or
certificates of stock, upon compliance with such rules,
regulations and/or procedure as may be prescribed or have been
prescribed by the Board of Directors with respect to the issuance
of new certificates in lieu of such lost, destroyed or mutilated
certificate or certificates of stock issued by the Corporation
which are not received.
SECTION 5. Transfer Agent and Registrar; Regulations.
The Corporation shall, if and whenever the Board of Directors
shall so determine, maintain one or more transfer offices or
agencies, each in the charge of a transfer agent designated by
the Board of Directors, where the shares of the capital stock of
the Corporation shall be directly transferable, and also one or
more registry offices, each in the charge of a registrar
designated by the Board of Directors, where such shares of stock
shall be registered, and no certificate for shares of the capital
stock of the Corporation, in respect of which a Registrar and/or
Transfer Agent shall have been designated, shall be valid unless
countersigned by such Transfer Agent and registered by such
Registrar, if any. The Board of Directors shall also make such
additional rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates
for shares of the capital stock of the Corporation.
ARTICLE VI
Seal
The Board of Directors shall provide a suitable seal
containing the name of the Corporation, which seal shall be in
the charge of the Secretary and which may be used by causing it
or a facsimile thereof to be impressed or affixed or reproduced
or otherwise. If and when so directed by the Board of Directors,
a duplicate of the seal may be kept and be used by any officer of
the Corporation designated by the Board.
ARTICLE VII
Miscellaneous Provisions
SECTION 1. Fiscal Year. The fiscal year of the
Corporation shall end on January 31 of each year unless otherwise
provided by the Board of Directors of the Corporation.
SECTION 2. Waivers of Notice. Whenever any notice
whatever is required to be given by law, or under the provisions
of the Certificate of Incorporation or of these By-laws, a waiver
thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein,
shall be deemed equivalent thereto.
SECTION 3. Qualifying in Foreign Jurisdictions. The
directors shall have the power at any time and from time to time
to take or cause to be taken any and all measures which they may
deem necessary for qualification to do business as a foreign
corporation in any one or more foreign jurisdictions and for
withdrawal therefrom.
SECTION 4. Indemnification.
(A) Right to Indemnification.
The Corporation shall indemnify and hold harmless, to
the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person (an "Indemnitee")
who was or is made or is threatened to be made a party or is
otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceed
ing"), by reason of the fact that he, or a person for whom he is
the legal representative, is or was a director or officer of the
Corporation or, while a director or officer of the Corporation,
is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of
a partnership, joint venture, trust, enterprise or nonprofit
entity, including service with respect to employee benefit plans,
against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred by such Indemnitee.
Notwithstanding the preceding sentence, except as otherwise
provided in Section 4(C) hereof, the Corporation shall be
required to indemnify an Indemnitee in connection with a
proceeding (or part thereof) commenced by such Indemnitee only if
the commencement of such proceeding (or part thereof) by the
Indemnitee was authorized by the Board of Directors of the
Corporation.
(B) Prepayment of Expenses.
The Corporation shall pay the expenses (including
attorneys' fees) incurred by an Indemnitee in defending any
proceeding in advance of its final disposition, provided, final
disposition of the proceeding shall be made only upon receipt of
an undertaking by the Indemnitee to repay all amounts advanced if
it should be ultimately determined that the Indemnitee is not
entitled to be indemnified under this Section 4 or otherwise.
(C) Claims.
If a claim for indemnification or payment of expenses
under this Section 4 is not paid in full within sixty days after
a written claim therefor by the Indemnitee has been received by
the Corporation, the Indemnitee may file suit to recover the
unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting
such claim. In any such action the Corporation shall have the
burden of proving that the Indemnitee is not entitled to the
requested indemnification or payment of expenses under applicable
law.
(D) Nonexclusivity of Rights.
The rights conferred on any Indemnitee by this Section
4 shall not be exclusive of any other rights which such
Indemnitee may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, these by-laws,
agreement, vote of stockholders or disinterested directors or
otherwise.
(E) Other Sources.
The Corporation's obligation, if any, to indemnify or
to advance expenses to any Indemnitee who was or is serving at
its request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, enterprise or
nonprofit entity shall be reduced by any amount such Indemnitee
may collect as indemnification or advancement of expenses from
such other corporation, partnership, joint venture, trust,
enterprise or nonprofit enterprise.
(F) Amendment or Repeal.
Any repeal or modification of the foregoing provisions
of this Section 4 shall not adversely affect any right or
protection hereunder of any Indemnitee in respect of any act or
omission occurring prior to the time of such repeal or
modification.
(G) Other Indemnification and Prepayment of Expenses.
This Section 4 shall not limit the right of the
Corporation, to the extent and in the manner permitted by law, to
indemnify and to advance expenses to persons other than
Indemnitees when and as authorized by appropriate corporate
action.
ARTICLE VIII
Amendments
All By-laws of the Corporation shall be subject to
alteration or repeal, and new By-laws not inconsistent with any
provision of the Certificate of Incorporation of the Corporation
or any provision of law may be made, either by the affirmative
vote of the holders of record of a majority of the outstanding
stock of the Corporation entitled to vote in respect thereof,
given at an annual meeting or at any special meeting, provided
that notice of the proposed alteration or repeal or of the
proposed new By-laws be included in the notice of such meeting,
or by the Board of Directors at any regular or special meeting.
AMENDMENT NO. 1 OF RIGHTS AGREEMENT
THIS AMENDMENT (this "Amendment") of the Rights Agreement
(as defined below) is made and entered into as of the 28TH day of
September, 1998, by and between VARLEN CORPORATION, a Delaware
corporation (the "Company"), and HARRIS TRUST AND SAVINGS BANK
(the "Rights Agent").
RECITALS:
WHEREAS the parties hereto previously entered into a Rights
Agreement, dated as of June 17, 1996, between the Company and the
Rights Agent; and
WHEREAS each of the Company and the Rights Agent desire to
amend the Rights Agreement as set forth below.
NOW, THEREFORE, the undersigned, in consideration of the
premises, covenants and agreements contained herein and in the
Rights Agreement, and other good, sufficient and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, do hereby agree as follows:
1. Amendment. The first sentence of Section 7(b) of the
Rights Agreement is hereby amended and restated in its entirety to read
as follows:
"The Purchase Price shall be $90 for each one one-thousandth
of share of Preferred Stock purchasable upon exercise of a Right."
2. Binding Effect. This Amendment shall be binding upon,
and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
3. Execution in Counterparts. This Amendment may be
executed in counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same instrument.
4. Rights Agreement in Effect. Except as hereby amended, the
Rights Agreement shall remain in full force and effect.
5. Governing Law. This Amendment shall be governed by,
and interpreted in accordance with, the laws of the State of
Delaware, without regard to principles of conflict of laws.
IN WITNESS WHEREOF the parties hereto have caused this
Amendment to be duly executed as of the day and year first-above
written.
VARLEN CORPORATION
By: /s/Richard L. Wellek
Richard L. Wellek
Chairman and CEO
HARRIS TRUST AND SAVINGS BANK
By: /s/Simone A. Harris
Simone A. Harris
Trust Officer
VARLEN CORPORATION
1989 INCENTIVE STOCK OPTION PLAN
(as amended on November 20, 1998)
ARTICLE I
PURPOSE
SECTION 1: Statement of Policy. The Board of
Directors of VARLEN CORPORATION believes that the maximum
advantage to the Corporation can be secured by establishing as
close an identity as is feasible between the interests of the
Corporation and its Subsidiaries, and those of its or their
respective employees. The Board believes that it would be in the
best interests of the Corporation to adopt a 1989 Incentive Stock
Option Plan which will provide for the granting of both Incentive
Stock Options (as defined in Section 2 of this Plan) and Non-
Qualified Stock Options (as defined in Section 2 of this Plan)
and which will serve the function of providing a closer
identification of certain employees with the Corporation.
Furthermore it will serve to retain these employees in the
service of the Corporation or its Subsidiaries and to induce new
executives and other key employees to become associated with the
Corporation or its Subsidiaries. It is the intent of the Board
that the grant of such Incentive Stock Options and Non-Qualified
Stock Options shall be in addition to any other compensation
granted. It is for the accomplishment of these several objectives
that this Plan is formulated and adopted.
SECTION 2: Definitions. When used in this Plan, unless
the context otherwise requires:
(a) Affiliate. "Affiliate" shall mean any
individual, corporation, partnership, association, joint-
stock company trust, unincorporated association or other
entity (other than the Corporation) that directly, or
indirectly through one or more intermediaries, controls, or
is controlled by, or is under common control with the
Corporation.
(b) Code. "Code" shall mean the United States
Internal Revenue Code of 1986, as amended from time to time,
or any statutes succeeding thereto.
(c) Committee. "Committee" shall mean the
Compensation Committee hereinafter described in Section 3 of
this Plan.
(d) Common Stock. "Common Stock" and "Stock" shall
each mean the Common Stock of the Corporation of the par
value of $.10 per share.
(e) Corporation. "Corporation" shall mean VARLEN
CORPORATION, a Delaware corporation.
(f) Directors. "Directors" and "Board of Directors"
shall each mean the Board of Directors if the Corporation as
constituted from time to time.
(g) Disinterested Person. "Disinterested Person"
shall mean an individual who is not at the time he exercises
discretion in administering this Plan eligible and has not
at any time within one (1) year prior thereto been eligible
for selection as a person to whom stock options may be
granted pursuant to this Plan or to whom stock may be
allocated or to whom stock options or stock appreciation
rights may be granted pursuant to any other plan of the
Corporation or any of its Affiliates entitling the
participants therein to acquire stock, stock options or
stock appreciation rights of the Corporation or any of its
Affiliates.
(h) Exchange Act. "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated pursuant thereto.
(i) Incentive Stock Options. "Incentive Stock
Options" shall mean options which meet the requirements for
Incentive Stock Options in Section 422A of the Code.
(j) Non-Qualified Stock Options. "Non-Qualified Stock
Options" shall mean stock options which do not meet the
requirements for Incentive Stock Options, as defined in
Paragraph (i) of this Section 2, and stock options which do
meet such requirements but which the Committee designates as
Non-Qualified Stock Options.
(k) Option Agreement. "Option Agreement" shall mean
each Agreement referred to in Section 12 of this Plan
between the Corporation and any person to whom an option is
granted.
(l) Optionees. "Optionees" shall mean those persons
who receive Options under this Plan.
(m) Options. "Options" shall mean options granted
under this Plan.
(n) Plan. "Plan" shall mean this 1989 Incentive
Stock Option Plan adopted by the Board of Directors, as such
Plan from time to time may be amended as herein provided.
(o) Securities Act. "Securities Act" shall mean the
Securities Act of 1933, as amended, and the rules and
regulations promulgated pursuant thereto.
(p) Subsidiary. "Subsidiary" shall mean any
corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation if each
of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
ARTICLE II
ADMINISTRATION
SECTION 3: Committee.
(a) This Plan shall be administered by a Compensation
Committee, or any other successor committee appointed by the
Board of Directors, which shall consist of such number (not less
than three) of directors as the Board of Directors shall
determine, all of whom shall be Disinterested Persons. The
Committee shall have plenary authority in its discretion, but
subject to the express provisions of this Plan, (i) to determine
the key employees to whom and the time or times at which Options
shall be granted, the number of shares to be covered by each
Option, and whether an Option shall be an Incentive Stock Option
or a Non-Qualified Stock Option; (ii) to interpret this Plan and
to prescribe, amend and rescind the rules and regulations
relating to it; (iii) to determine the terms and provisions of
the respective Option Agreements (which need not be identical),
including without limitation such terms and provisions as may be
requisite in the judgment of the Committee (A) to cause the grant
of the Options, and the issuance of Common Stock upon exercise of
the Options, pursuant to this Plan to comply with the Securities
Act and the applicable rules and regulations thereunder,
including, without limitation, to cause this Plan and the Options
and Common Stock to be registered on Form S-8 promulgated
thereunder, or any other appropriate form, (B) to provide for the
reimbursement of the Corporation for taxes paid or advanced in
respect of the grant to employees of Options or the issuance of
Common Stock upon exercise of Options under this Plan and (C) to
set forth the form of restrictive legends, if any, to be placed
on certificates representing shares of Common Stock to be issued
pursuant to Options relating to obligations of the holders under,
or to provide notice of the applicability to such Common Stock
of, the Federal and State securities laws and the Code; and (iv)
to make all other determinations deemed necessary or advisable
for the administration of this Plan.
(b) Paragraph (a) of this Section 3 notwithstanding,
the authority vested in the Committee to administer this Plan may
be exercised by the Board of Directors as a whole acting in
accordance with the By-laws of the Corporation if, and only if,
at the time such authority is exercised: (i) all members of the
Board of Directors are Disinterested Persons, (ii) a majority of
the members of the Board of Directors and a majority of directors
acting on Plan matters are Disinterested Persons or (iii) the
Corporation is not the issuer of any "equity security" (as such
term is defined in the Exchange Act) subject to the registration
requirements of Section 12 of the Exchange Act.
SECTION 4: Vacancies. If a member of the Committee
for any reason shall cease to serve, the vacancy may be filled by
the Board of Directors.
SECTION 5: Removal. Any member of the Committee may
be removed at any time, with or without cause, by the Board of
Directors.
SECTION 6: Chairman. The Board of Directors or the
Committee may select one of the members of the Committee as its
Chairman.
SECTION 7: Meetings. The Committee shall hold its
meetings at such times and places as it shall deem advisable. A
majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of
its members. Any decision or determination reduced to writing and
signed by all the members of the Committee shall be fully as
effective as if it had been made by the affirmative vote of a
majority of its members at a meeting duly called and held. The
Committee may appoint a Secretary, shall keep minutes of its
meetings and shall make such rules and regulations for the
conduct of its business as it shall deem advisable.
ARTICLE III
OPTIONS
SECTION 8: Shares Available. The Committee may, but
shall not be required to, allocate in accordance with this Plan
both Incentive Stock Options and Non-Qualified Stock Options to
purchase not more than, in the aggregate, 200,000 shares of the
Common Stock. Such shares may be authorized and unissued shares
or issued shares held in the Corporation's treasury. Such 200,000
shares shall be computed prior to any adjustment resulting from
stock dividends, split-ups, reorganization, or other
substitutions of securities for the present Common Stock of the
Corporation and upon the occurrence of any of the foregoing, the
aggregate number of shares available for allocation in accordance
with this Plan shall be appropriately and equitably adjusted in a
manner similar to that set forth in Section 25 hereof to make
available for issuance under this Plan the number of shares of
Common Stock which would have been available had allocation of an
aggregate of 200,000 shares been made immediately prior to such
event.
SECTION 9: Time for Granting of Options. Options may
be granted by the Committee pursuant to this Plan from time to
time for a period beginning May 1, 1989 and ending April 30,
1999. Nothing herein shall be construed to prohibit the granting
of Options at different times to the same persons.
SECTION 10: Persons Eligible. Persons eligible to
receive Options shall be such key employees (which term as used
herein includes, without limitation, officers) of the Corporation
and its Subsidiaries as the Committee in its sole discretion may
select. However, a director of the Corporation or of a Subsidiary
who is not also an employee of the Corporation or one of its
Subsidiaries shall not be eligible to receive Options.
SECTION 11: Number of Shares to be Optioned and Nature
of Option. Subject to Section 10 of this Plan, the total number
of shares to be optioned to any eligible person and whether an
Option shall be an Incentive Stock Option or a Non-Qualified
Stock Option shall be determined by the Committee in its sole
discretion.
SECTION 12: Form of Option Agreements. An Option
Agreement signed by the President, the Senior Vice President or a
Vice President of the Corporation, and attested by the Treasurer
or Assistant Treasurer or Secretary or Assistant Secretary of the
Corporation, shall be issued to each person to whom an Option is
granted. The form and provisions of each Option Agreement shall
be determined by the Committee in accordance with the terms of
this Plan. If any employee does not execute an Option Agreement
in the form prescribed by the Committee within the later of (a)
thirty (30) days from the grant thereof or (b) ten (10) days
after the receipt from the Corporation of an Option Agreement for
execution, the action of the Committee with respect to the Option
granted to such employee shall be of no further force or effect.
SECTION 13: Duration of Options. The duration of each
Option shall be for such time as the Committee, in its sole
discretion, may fix upon the occasion of granting an Option;
provided, however, an Option, whether an Incentive Stock Option
or a Non-Qualified Stock Option, by its terms will not under any
circumstances be exercisable more than ten (10) years (or such
shorter period, if any, as may be necessary to comply with the
requirements of state securities laws) from the date such Option
is granted, except that, to the extent provided in Section 18 of
this Plan, a Non-Qualified Stock Option shall be exercisable for
a maximum of one (1) year following the death of an Optionee, or
the date on which he is determined to have a permanent physical
or mental disability, regardless of its original term.
SECTION 14: Assignability of Options. Options and all
rights thereunder shall by their terms be non-assignable and non-
transferable by the holder of the option otherwise than by will
or the laws of descent and distribution, and shall be exercisable
during the lifetime of the holder only by the holder or his
guardian or legal representative. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of any
Option contrary to the provisions of this Plan and any levy or
any other attachment or similar process upon an Option shall be
null and void and without effect, and the Board of Directors may,
in its discretion, upon the happening of any such event,
terminate the Option forthwith. Nothing contained herein shall
be deemed inconsistent with the provisions hereinafter set forth
pertaining to the exercise of an Option by the estate of a
deceased holder.
SECTION 15: Option Price. The option price of the
Stock subject to an Incentive Stock Option shall not be less than
the fair market value of the Stock at the time the Incentive
Stock Option is granted. The option price of the Stock subject to
a Non-Qualified Stock Option shall not be less than fifty percent
(50%) of the fair market value of the Stock at the time such Non-
Qualified Stock Option is granted; provided, however, that if
such option price is less than the fair market value of the Stock
at the time such Non-Qualified Stock Option is granted, the
option price shall not be less than the book value of the Stock
at the time such Non-Qualified Stock Option is granted as
determined by the Committee. For the purposes of this Section
15, the "fair market value" of the Stock shall be its fair market
value determined as of the business day prior to the date of
grant of the Option by the Committee in its good faith
discretion.
ARTICLE IV
EXERCISE OF OPTIONS
SECTION 16: Terms of Exercise.
(a) Each Option shall be exercisable in whole or in
part as set forth in the Option Agreement; provided, however,
that no Option shall be exercised as to less than twenty-five
(25) shares of Common Stock at any one time, unless the balance
subject thereto at the time is less than twenty-five (25) shares
of Common Stock.
(b) Although each Option Agreement may contain
provisions providing for the exercisability of various portions
of the Option granted thereunder at different time periods, each
Option shall be exercisable prior to its expiration in accordance
with the provisions of this Plan to the full extent thereof
simultaneously with or at any time after:
(i) the sale by the Corporation of substantially all of its
assets;
(ii) the occurrence of one of the following events if,
immediately following such event, a majority of the members
of the Board of Directors consists of persons who were not
members of the Board of Directors immediately prior to the
date of such event:
(A) the sale of fifty percent (50%) or more of the
outstanding shares of Common Stock of the Corporation in a
single transaction,
(B) the consummation of a tender offer (by a party
other than the Corporation) for more than fifty percent
(50%) of the outstanding shares of Common Stock of the
Corporation, or
(C) the consummation of a merger or consolidation involving the
Corporation; or
(iii) an election of new members of the Board of Directors
if immediately following such election a majority of the
members of the Board of Directors consists of persons who
were not nominated by management to stand for election as
directors in such election.
(c) Notwithstanding the provisions of Section 16(b) of
this Plan, in the event of a merger or consolidation in which the
Corporation is a party but not the surviving corporation, at the
discretion of the Committee, each Option shall either become
fully exercisable with respect to all shares of Common Stock
subject to such Option immediately prior to (but subject to) the
consummation of the merger or consolidation, and shall remain so
until the expiration of the Option or as otherwise provided in
Section 18 of this Plan, or the agreement with respect to such
merger or consolidation shall include a provision that would
automatically amend such Option to enable the Optionee, had such
Option been exercised in full immediately prior to the
effectiveness of such merger or consolidation, to acquire the
same merger consideration in respect of the shares of Common
Stock issued upon exercise of the Option as a holder of Common
Stock of the Corporation immediately prior to such merger or
consolidation would have been entitled to receive.
SECTION 17: Termination of Employment. In the event
of the termination for any reason of the employment of an
Optionee (other than as provided in Section 18 of this Plan), all
Options granted to such Optionee which have not been exercised by
him prior to the time of such termination shall be then
terminated and thereafter may not be exercised. Options granted
under this Plan, however, shall not be affected by any change of
employment so long as the holder of the Option continues to be an
employee of the Corporation or a Subsidiary of the Corporation.
SECTION 18: Death, Disability, Retirement or
Termination of Employment with Consent. As used herein, an
Optionee's employment with the Corporation shall be deemed to
have been terminated "with consent" if the Corporation or a
Subsidiary has provided its express written consent to the
exercise of the Optionee's options following such termination.
Notwithstanding the provisions of Section 17 of this Plan,
Options granted to an Optionee may be exercised as follows:
(a)In the event of the termination of the optionee's
employment with consent, then such Optionee's Option may be
exercised, regardless of tax consequences, to the extent then
exercisable as provided in the Option Agreement applicable to
such Option (or, if so determined by the Committee in its sole
discretion, up to the full extent thereof) at any time (i) within
90 days following such termination if exercise by such Optionee
during such period would not violate Section 16(b) of the
Exchange Act, or (ii) within 190 days following such termination
if exercise by such Optionee within 90 days following such
termination would violate Section 16(b) of the Exchange Act, but
in any event not thereafter.
(b) In the event of the termination of the Optionee's
employment resulting from the Optionee's retirement under one or
more of the Corporation's retirement plans including, without
limitation, any early retirement permitted under such plans, then
such Optionee's Options may be exercised, regardless of tax
consequences, to the full extent thereof at any time (i) within
90 days following such termination if exercise by such Optionee
during such period would not violate Section 16(b) of the
Exchange Act, or (ii) within 190 days following such termination
if exercise by such Optionee within 90 days following such
termination would violate Section 16(b) of the Exchange Act, but
in any event not thereafter, or (iii) at such later date as
determined in the discretion of the Committee.
(c) In the event of the death or the permanent
physical or mental disability (as such disability shall be
determined by a physician selected by the Corporation) of the
Optionee either (i) while employed by the Corporation or a
Subsidiary, or (ii) (with respect to a Non-Qualified Stock Option
only) while eligible to exercise his Option pursuant to Section
18(a) or (b) of this Plan following the termination of his
employment, then such Optionee's Option may be exercised, to the
full extent thereof, at any time within one (1) year following
the Optionee's death or such determination of physical or mental
disability, by the Optionee, the executors or administrators of
the Optionee or by any person who shall have acquired the Option
from the Optionee by bequest or inheritance.
(d) Notwithstanding the foregoing provisions, in no
event may an Option be exercised subsequent to the expiration of
its term, except that a Non-Qualified Stock Option shall be
exercisable, to the extent provided in Section 18(c) of this
Plan, for a maximum of one (1) year following the death of an
Optionee, or the date on which he is determined to have a
permanent physical or mental disability, regardless of its
original term.
SECTION 19: How Exercisable.
(a) An Option shall be exercisable by delivery of a
duly signed notice in writing to such effect and the full
purchase price of the Stock purchased pursuant to the exercise of
the Option to the Treasurer of the Corporation or to any other
officer of the Corporation appointed by the Committee for the
purpose of receiving the same; provided, however, that no Option
issued pursuant to this Plan may be exercised at any time when
the Option or the granting or the exercise thereof violates any
law or governmental order or regulation. Delivery of the full
purchase price shall be satisfied either: (i) by payment in cash
of the full purchase price, (ii) by tender of such number of
shares of Common Stock owned either (x) by the Optionee prior to
exercise of the Option or (y) with the consent of the Committee,
by the Optionee as a result of the exercise of the Option, as is
equal in value (such value to be the fair market value of such
Stock, determined as of the business day prior to the date of
exercise of the Option by the Committee in its good faith
discretion) to the full purchase price or (iii) by delivery of
any combination of cash and such shares of Common Stock (valued
as set forth above) which, in the aggregate, is equal in value to
the full purchase price, subject to compliance with applicable
securities laws.
(b) An Option shall also be exercisable by Optionees
(to the extent such exercise would not violate Section 16(b) of
the Exchange Act) by delivery of a duly signed notice in writing
to such effect (the "Exercise Notice") which shall include
irrevocable instructions to the Corporation to deliver the stock
certificates issuable in respect of such option exercise directly
to a broker named therein which has agreed to participate in a
"cashless" exercise on behalf of the Optionee. In connection
therewith, the Corporation shall acknowledge and, notwithstanding
the provisions of Section 20 hereof, forward a copy of the
Exercise Notice to such broker and the Corporation shall be
authorized and entitled to deliver such stock certificates
directly to such broker against receipt of the exercise price and
any withholding taxes due in respect of such option exercise. The
Committee shall have the right to adopt such rules and
regulations with respect to the provisions of this paragraph as
it deems appropriate.
(c) In addition, the Committee shall have the right to
require a cash payment upon the exercise of any option in
connection with any obligation of the Corporation or a Subsidiary
of the Corporation to withhold Federal, state or local taxes (a
"Withholding Obligation"). An Optionee may irrevocably elect (the
"Election"), subject to approval or disapproval by the Committee
or the Board of Directors and subject to the right of the
Committee or the Board of Directors to revoke its advance
approval, to satisfy any Withholding Obligation in connection
with the exercise of the option granted to him by tender of such
number of shares of the Corporation's Common Stock (valued as set
forth above) owned either (x) by such Optionee prior to exercise
of the Option or (y) with the consent of the Committee, by the
Optionee as a result of the exercise of the Option, or a
combination of such Common Stock (valued as set forth above) and
cash, which has a value equal to the full amount of the
Withholding Obligation, subject to compliance with applicable
securities law; provided, however, if required to permit
compliance with Section 16(b) of the Exchange Act, that (i) the
Election is made either (A) no later than six (6) months prior to
the date on which exercise of such Option becomes taxable to the
Optionee (the "Tax Recognition Date"), (B) during the ten-day
period beginning on the third business day following, and ending
on the twelfth business day following, the date of release for
publication of the Corporation's quarterly or annual summary
statements of sales and earnings, or (C) during such other period
as may be instead provided in Rule l6b-3(e)(3)(iii) promulgated
pursuant to the Exchange Act (or any successor rule) and (ii) the
Election shall not be available with respect to such Option to
any extent during the first six (6) months of the term thereof,
except in the event death or disability of the Optionee occurs
prior to the expiration of such six-month period. If the Tax
Recognition Date with respect to the exercise of a Non-Qualified
Stock Option will be a date other than the date on which the
Option is exercised, then (A) the Committee with the cooperation
of the Optionee shall estimate in good faith the amount of the
Withholding Obligation (the "Estimated Amount"), (B) the optionee
shall deliver (in conformity with any applicable Election) to the
Corporation, on the date the Optionee exercises the Option, cash,
such number of shares of Common Stock (valued as set forth above)
or such combination of cash and Common Stock (valued as set forth
above) as is equal in value to the Estimated Amount, (C) the
Committee shall notify the Optionee in writing, within fifteen
(15) days after the Tax Recognition Date with respect to the
exercise of the Option of the amount of income recognized by the
optionee and of the date which is the Tax Recognition Date, (D)
promptly after providing such notice, the Corporation shall
deliver to the Optionee (using the same method of payment as was
used with respect to payment of the Estimated Amount and in
conformity with any applicable Election) either (1) cash, shares
of the Corporation's Common Stock or a combination of cash and
shares of the Corporation's Common Stock as is equal in value to
the amount, if any, by which the Estimated Amount exceeds the
actual Withholding Obligation, or (2) written notice of the
amount, if any, by which such actual Withholding Obligation
exceeds the Estimated Amount, or (3) written notice that the
Estimated Amount and the amount of such actual Withholding
Obligation are equal, (E) the Optionee shall deliver (in
conformity with any applicable Election) to the Corporation
within fifteen (15) days after the date of the notice, if any,
described in the preceding clause (D) (2) above, cash, shares of
the Corporation's Common Stock or a combination of cash and
shares of such Common Stock as is equal in value to the excess
amount specified in such notice, and (F) the value of any shares
of the Corporation's Common Stock delivered by the Corporation or
the Optionee pursuant to the preceding clauses (D) or (E) shall
be the fair market value of such shares, determined, as of the
business day immediately prior to the Tax Recognition Date, by
the Committee in its good faith discretion.
(d) Whenever all or any portion of (i) the purchase
price payable upon exercise of an Option or (ii) the Withholding
Obligation of the Corporation or a Subsidiary of the Corporation
is paid by the delivery of shares of the Corporation's Common
Stock, tender of such shares shall be accompanied by a duly
executed stock power and by payment of the requisite stock
transfer tax, if any. The Committee may also require the
Optionee to make such representations as to his title, authority
to transfer such title and any other facts as it may deem
appropriate.
SECTION 20: Issuance of Shares. Within a reasonable
time after the exercise of an Option in accordance with its
terms, the Corporation shall cause to be delivered to the
purchaser a certificate for the shares of Stock purchased
pursuant to the exercise of the Option.
SECTION 21: Stockholder Rights of Optionee. No person
entitled to exercise any Option granted under this Plan shall
have any rights or privileges of a stockholder of the Corporation
in respect of any shares issuable upon exercise of such Option
until certificates representing such shares shall have been
issued and delivered.
SECTION 22: Termination of Options. Any Option not
exercised within the period fixed for its exercise in Section 13
of this Plan and this Article IV shall terminate and become null
and void.
SECTION 23: Unexercised Options. Stock covered by
Options which have terminated in accordance with the provision of
this Plan, to the extent to which such Options have not been
exercised, may be treated by the Committee as Stock which is
eligible for other and further granting of Options in accordance
with the terms of this Plan.
ARTICLE V
NOT AN EMPLOYMENT CONTRACT
SECTION 24: Not an Employment Contract. Nothing in
this Plan or in any Option granted pursuant to this Plan shall
confer on an individual any right to continue in the employ of
the Corporation or any Subsidiary or interfere in any way with
the right of the Corporation or such Subsidiary at any time to
terminate or modify the terms or conditions of the employment of
the holder of the Option.
ARTICLE VI
RECAPITALIZATION, MERGER,
CONSOLIDATION AND REORGANIZATION
SECTION 25: Change in Common Stock.
(a) Appropriate and equitable adjustment shall be
made in the number of shares of Common Stock subject to each
outstanding Option, or the option prices or both, in the event of
any changes in the outstanding Common Stock by reason of Stock
dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, sales or exchanges of assets,
combinations or exchanges of shares or offerings of subscription
rights, it being the purpose of this provision to insure that an
Option shall be adjusted to give the Optionee, upon exercise of
his Option, rights equivalent to the rights of a person who had
held shares of Common Stock in the amount subject to the Option
at the time the Option is granted. In applying this provision, an
adjustment shall be made for any changes occurring after May 1,
1989, the effective date of this Plan.
(b) In the event of a change in the Common Stock of
the Corporation as presently constituted, which is limited to a
change of the par value status of any or all of its authorized
shares, the shares resulting from any such change shall be deemed
to be Common Stock or Stock within the meaning of this Plan.
(c) To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such
adjustments shall be made by the Committee, whose determination
in that respect shall be final, binding and conclusive.
SECTION 26: Dissolution or Liquidation. A dissolution
or liquidation of the Corporation shall cause each outstanding
Option to terminate except as provided in any Option Agreement.
SECTION 27: Rights of Optionees and the Corporation.
(a) Except as hereinbefore expressly provided in this
Article VI, an Optionee shall have no rights by reason of any
subdivision or consolidation of shares of stock of any class or
the payment of any stock dividend or any other increase or
decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger, or consolidation
or spinoff of assets or stock of another corporation, and any
issue by the Corporation of shares of stock of any class or
securities convertible into shares of stock of any class shall
not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock
subject to any Option.
(b) The grant of an Option pursuant to this Plan shall
not affect in any way the right or power of the Corporation to
make adjustments, reclassifications, reorganizations or changes
in its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell or transfer all or
any part of its business or assets.
SECTION 28: Compliance With Securities Act. The
Corporation may postpone the issuance and delivery of shares upon
any exercise of any Option until (a) the admission of such shares
to listing on any stock exchange on which shares of the
Corporation of the same class are then listed and the completion
of such registration or other qualification of such shares under
any state or Federal law, rule or regulation as the Corporation
shall determine to be necessary or advisable, (b) insofar as any
local Blue Sky law might affect the issuance of such shares,
either the local Blue Sky Commission shall have ruled or counsel
to the Corporation shall have advised that the issue is not
subject to such local law or that such shares shall have been
qualified under such law, (c) counsel to the Corporation shall
have advised either that the issuance of such shares does not
require registration under any Federal securities act or that any
such registration as may be required shall be effective as of the
time of issuance of such shares, (d) the employee to whom the
Option is granted shall have represented and agreed in writing
that any shares purchased pursuant to the Option are being
purchased for investment and not with a view to the distribution
or resale thereof; provided, however, that an Optionee making
such representation and agreement may be released by the
Corporation at its discretion from such representation and
agreement upon the shares being registered or qualified in such
manner as may be legally required at any time, and (e) the
Committee shall have been advised by counsel that all applicable
legal requirements pertaining to the issuance of such shares,
including any requirements of the Securities Act, have been
complied with. Any person exercising an option shall make such
representations and furnish such information as may be
appropriate to permit the Corporation, in the light of the then
existence or nonexistence of an effective Registration Statement
under the Securities Act, with respect to such shares, to issue
the shares in compliance with the provisions of that or any
comparable law. The Corporation shall not have any liability
with respect to any Option the exercise of which is prevented by
the provisions of this Section 28.
ARTICLE VII
AMENDMENT, TERMINATION AND INTERPRETATION
SECTION 29: Amendment and Termination. This Plan
shall terminate on April 30, 1999. The Board of Directors or the
Committee may at any time prior to that date terminate or from
time to time amend this Plan and the terms and conditions thereof
as to Stock which is not then the subject matter of Options
granted pursuant to the terms of this Plan; and the Board of
Directors or the Committee, with the written consent of the
affected holders of any Options granted pursuant to this Plan,
may at any time terminate or from time to time amend this Plan
and the terms and conditions of this Plan as it regards any such
Options held by any such consenting Optionees; provided, however,
that if required by law or by the applicable provisions of the
securities exchange upon which the Common Stock is listed, such
amendments shall be conditioned upon obtaining the approval of
the stockholders of the Corporation.
SECTION 30: Interpretation: A determination of the
Committee as to any question which may arise with respect to the
interpretation of the provisions of this Plan and of any Option
or Option Agreement shall be final.
SECTION 31: Rules and Regulations. The Committee may
authorize and establish such rules, regulations and revisions
thereof not inconsistent with the provisions of this Plan as it
may determine advisable to make this Plan and the Options
effective and provide for their administration, and may take such
other actions with regard to this Plan and the Options as it
shall deem desirable to effect their purposes.
SECTION 32: Evidence of Each Option. The Committee
may include in each agreement or document it may issue to the
holder of any Option, evidencing the existence of such Option
given or granted pursuant to the terms of this Plan, the text of
this Plan by reference thereto in such certificate or document;
and in such event, all the terms of this Plan as it may exist and
as it may be amended from time to time shall be deemed included
in such certificate or document with the same force and effect as
though this Plan were set forth in its entirety in such agreement
or document.
ARTICLE VIII
EFFECTIVENESS
SECTION 33: Effectiveness of Plan. This Plan shall
become effective on May 1, 1989, subject, however, to approval by
the stockholders of the Corporation.
ARTICLE IX
MISCELLANEOUS
SECTION 34: Substituted Options. Subject to the
limitation in Section 8 of this Plan on total shares available
for Options, Options to purchase shares of the Corporation's
Common Stock may be granted under this Plan on terms and
conditions which differ from or conflict with the terms and
conditions set forth herein, provided that such Options are
granted in substitution for outstanding options held by persons
who have become employees of the Corporation or any of its
Subsidiaries by reason of a corporate merger, consolidation,
acquisition of property or capital stock, separation,
reorganization or liquidation occurring after the date of
adoption of this Plan.
Nothing contained in this Plan shall be construed to
limit the authority of the Corporation to exercise its corporate
rights and powers, including, but not by way of limitation, the
right of the Corporation to grant or assume options for proper
corporate purposes other than under this Plan with respect to any
employee or other person, firm, corporation or association.
1
VARLEN CORPORATION
1993 INCENTIVE STOCK OPTION PLAN
(as amended November 20, 1998)
1. Purpose. The purpose of this Plan is to advance the
interests of Varlen Corporation by providing an opportunity to
selected key employees of the Company and its Subsidiaries to
purchase shares of Common Stock through the exercise of options
granted pursuant to this Plan, which may be either Incentive
Options or Nonqualified Options. By encouraging such stock
ownership, the Company seeks to establish as close an identity as
feasible between the interests of the Company and its
Subsidiaries and those of such key employees and also seeks to
attract, retain, motivate and reward employees of superior
ability, training and experience.
2. Definitions.
(1) Board means the Board of Directors of the Company.
(2) Code means the Internal Revenue Code of 1986 and
regulations thereunder, as amended from time to time.
(3) Committee means the committee appointed by the
Board responsible for administering the Plan in accordance
with Section 5.
(4) Common Stock means the common stock of the
Company, par value $.10 per share.
(5) Company means Varlen Corporation, a Delaware
corporation.
(6) Director means each individual who is serving as a
member of the Board as of the time of reference.
(7) Disinterested Person means a person who qualifies
as such under Rule 16b-3(c)(2)(i) under Section 16 of the
Exchange Act, or any successor definition adopted by the
Securities and Exchange Commission, which generally is
defined as a Director who is not, during the one year prior
to service as a member of the Committee, or during such
service, granted or awarded equity securities pursuant to
the Plan or any other plan of the Company or its affiliates,
except that participation in a formula plan, participation
in an ongoing securities acquisition plan, or an election to
receive an annual retainer fee in either cash or an
equivalent amount of securities, or partly in each, shall
not disqualify a Director from being a Disinterested Person.
(8) Employee means an employee of the Company or any
Subsidiary within the meaning of Code Section 3401(c); "key
employee" means an executive, administrative or managerial
Employee who is determined by the Committee to be eligible
to be granted Options under the Plan.
(9) Exchange Act means the Securities Exchange Act of
1934 and the rules and regulations promulgated pursuant
thereto, as amended from time to time.
(10) Incentive Option means a stock option intended to
qualify as an "incentive stock option" within the meaning of
Code Section 422 and designated as such.
(11) Nonqualified Option means a stock option not
intended to be an Incentive Option and designated as a
nonqualified stock option, the federal income tax treatment
of which is determined generally under Code Section 83.
(12) Option means either an Incentive Option or a
Nonqualified Option granted pursuant to this Plan.
(13) Plan means this Varlen Corporation 1993 Incentive
Stock Option Plan as set forth herein, and as amended from
time to time.
(14) Securities Act means the Securities Act of 1933
and rules and regulations promulgated pursuant thereto, as
amended from time to time.
(15) Subsidiary means a "subsidiary" of the Company
within the meaning of Code Section 424(f), which generally
is defined as any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company
if, at the relevant time, each of the corporations other
than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in the
chain.
3. Effective Date. This Plan was approved and adopted by
the Board on March 29, 1993. The effective date of the Plan shall
be May 25, 1993, the date of the annual meeting of stockholders
of the Company, so long as the Plan is approved by the
stockholders of the Company on said date.
4. Stock Subject to Plan. The maximum aggregate number of
shares of Common Stock that may be made subject to Options
granted hereunder is 150,000 shares, which number shall be
adjusted in accordance with Section 8 in the event of any change
in the Company's capital structure. Shares of Common Stock issued
pursuant to the Plan may consist, in whole or in part, of either
authorized and unissued shares or issued shares held in the
Company's treasury. Any shares subject to an Option that for any
reason expires or is terminated unexercised as to such shares may
again be the subject of an Option under the Plan.
5. Administration. The Plan shall be administered by a
Committee appointed by the Board consisting of not fewer than two
individuals who are Directors, who are not Employees, and who are
Disinterested Persons. The Board shall have the discretion to
remove and appoint members of the Committee from time to time.
The Committee shall have full power and discretion, subject to
the express provisions of the Plan, (i) to determine the key
Employees to whom Options are to be granted, the time or times at
which Options are to be granted, the number of shares of Common
Stock to be made subject to each Option, whether each Option is
to be an Incentive Option or a Nonqualified Option, the exercise
price per share under each Option, and the maximum term of each
Option; (ii) to interpret and construe the Plan and to prescribe,
amend and rescind rules and regulations for its administration;
(iii) to determine the terms and provisions of each option
agreement evidencing an Option; and (iv) to make all other
determinations the Committee deems necessary or advisable for
administering the Plan. All decisions of the Committee shall be
made by a majority of its members, which shall constitute a
quorum, and shall be reflected in minutes of its meetings.
6. Eligibility. Options may be granted to such Employees
who are key employees as the Committee selects a Director who is
not an Employee is not eligible to receive Options pursuant to
this Plan.
7. Terms and Conditions of Options. Options granted
pursuant to the Plan shall be evidenced by stock option
agreements in such form and containing such terms and conditions
as the Committee shall determine. If an Employee to whom an
Option is granted does not execute an option agreement evidencing
that Option in the form prescribed by the Committee within the
later of (i) thirty days from the date of grant of the Option or
(ii) ten days after the Employee's receipt of an option agreement
from the Company, the Option shall be void and of no further
force or effect. Each option agreement evidencing an Option shall
contain among its terms and conditions the following:
(1) Price. Subject to the conditions on Incentive Options
contained in Section 8(2), if applicable, the purchase price per
share of Common Stock payable upon the exercise of each Option
granted hereunder shall be as determined by the Committee in its
discretion but shall not be less than the fair market value of
the Common Stock on the day the Option is granted if an Incentive
Option, and, if a Nonqualified Option, not less than 85% of the
fair market value of the Common Stock on the day the Option is
granted or, if greater, the book value of the Common Stock on
that date. The fair market value of Common Stock shall be as
determined by the Committee in its discretion in accordance with
any applicable laws or rules.
(2) Number of Shares and Kind of Option. Each option
agreement shall specify the number of shares to which it pertains
and shall specify whether the Option is a Nonqualified Option or
an Incentive Option.
(3) Terms of Exercise. Subject to the conditions on Incentive
Options contained in Section 8(2), if applicable, and to Section
10, each Option shall be exercisable for the full amount or for
any part thereof and at such intervals or in such installments as
the Committee may determine at the time it grants such Option;
provided, however, that (i) no Option shall be exercised as to
fewer than 25 shares of Common Stock or, if less, the total
number of shares of Common Stock remaining unexercised under the
Option, and (ii) no Option shall be exercisable with respect to
any shares earlier than six months from the date the Option is
granted or later than ten years after the date the Option is
granted, except to the extent permitted in the event of the death
or disability of the holder of a Nonqualified Option under
Section 7(7).
(4) Notice of Exercise and Payment. An Option shall be
exercisable only by delivery of a written notice to the Company's
Treasurer, or any other officer of the Company the Committee
designates to receive such notices, specifying the number of
shares of Common Stock for which the Option is being exercised.
If the shares of Common Stock acquired upon exercise of an Option
are not at the time of exercise effectively registered under the
Securities Act, the optionee shall provide to the Company, as a
condition to the optionee's exercise of the Option, a letter, in
form and substance satisfactory to the Company, to the effect
that the shares are being purchased for the optionee's own
account for investment and not with a view to distribution or
resale, and to such other effects as the Company deems necessary
or appropriate to comply with federal and applicable state
securities laws. Payment shall be made in full at the time the
Option is exercised. Payment shall be made by:
(i) cash;
(ii) delivery and assignment to the Company of shares of
Common Stock owned by the optionee;
(iii) a combination of (i) and (ii); or
(iv) delivery of a written exercise notice, including
irrevocable instructions to the Company to deliver the stock
certificates issuable upon exercise of the Option directly
to a broker named in the notice that has agreed to
participate in a "cashless" exercise on behalf of the
optionee.
Upon the optionee's satisfaction of all conditions required for
the exercise of the Option and payment in full of the purchase
price for the shares being acquired, the Company shall, within a
reasonable period of time following such exercise, deliver a
certificate representing the shares of Common Stock so acquired;
provided, that the Company may postpone issuance and delivery of
shares upon any exercise of an Option to the extent necessary or advisable
to comply with applicable exchange listing requirements, National
Association of Securities Dealers, Inc. ("NASD") requirements, or
federal or state securities laws.
(5) Withholding Taxes. The Company's obligation to deliver
shares of Common Stock upon exercise of an Option, in whole or in
part, shall be subject to the optionee's satisfaction of all
applicable federal, state and local tax withholding obligations.
(6) Nontransferability of Option. No Option shall be
transferable by the optionee otherwise than by will or the laws
of descent and distribution and shall be exercisable during the
optionee's lifetime only by the optionee (or the optionee's
guardian or legal representative).
(7) Termination of Options. Each option agreement
evidencing an Option shall contain provisions for the termination
of the Option if the optionee ceases for any reason to be an
Employee, which provisions shall be no more favorable to the
optionee than the following:
(i) Termination With Consent. If the optionee ceases
to be an Employee and the Company or Subsidiary that is the
Employee's primary employer at the time of termination
consents in writing to the optionee's exercise of an Option
following such termination, then the optionee may, at any
time within a period of 90 days following the date of such
termination, exercise such Option to the extent that the
Option was exercisable on the date the optionee ceased to be
an Employee;
(ii) Retirement. If the optionee ceases to be an
Employee by reason of retirement under one or more of the
Company's (or Subsidiary's) retirement plans including,
without limitation, early retirement, then the optionee may,
at any time within a period of 90 days following the date of
such termination or at such later date as determined in the
discretion of the Committee, exercise each Option held by
the optionee on such date to the full extent of the Option;
(iii) Death or Disability. In the event of the
Optionee's death or disability (within the meaning of Code
Section 22(e)(3)) either (x) while an Employee or (y) with
respect only to Nonqualified Options, while eligible to
exercise a Nonqualified Option under Subsections 7(7)(i) or
(ii) above, then the optionee (or the optionee's legal
representative, executor, administrator, or person acquiring
an Option by bequest or inheritance) may, at any time within
a period of one year following the date of the optionee's
death or commencement of disability, exercise each Option
held by the optionee on such date to the full extent of the
Option; and
(iv) Other Termination. If the optionee ceases to be
an Employee for any reason other than those enumerated in
Subsections 7(7)(i) through (iii) above, each Option granted
to the optionee to the extent outstanding on the date of
such termination of employment, shall terminate immediately
on such termination of employment and may not be exercised
thereafter: provided, however, that no Option may be exercised to any
extent by anyone after the date of expiration of the
Option's term, except that a Nonqualified Option shall
remain exercisable as provided in Subsection 7(7)(iii)
regardless of the Option's term.
(8) Legends. Any restriction on transfer of shares of
Common Stock provided in this Plan or in the option agreement
evidencing any Option shall be noted or referred to conspicuously
on each certificate evidencing such shares.
8. Restrictions on Incentive Options. Incentive Options (but
not Nonqualified Options) granted under this Plan shall be subject to
the following restrictions:
(1) Limitation on Number of Shares. The aggregate
fair market value, determined as of the date an Incentive
Option is granted, of the shares with respect to which
Incentive Options are exercisable for the first time by an
Employee during any calendar year shall not exceed $100,000.
If an Incentive Option is granted pursuant to which the
aggregate fair market value of shares with respect to which
it first becomes exercisable in any calendar year by an
Employee exceeds the aforementioned $100,000 limitation, the
portion of such Option which is in excess of the $100,000
limitation shall be treated as a Nonqualified Option
pursuant to Code Section 422(d)(1). In the event that an
Employee is eligible to participate in any other stock
option plan of the Company or a Subsidiary which is also
intended to comply with the provisions of Code Section 422,
the $100,000 limitation shall apply to the aggregate number
of shares for which Incentive Options may be granted under
all such plans.
(2) 10% Stockholder. If an Employee to whom an
Incentive Option is granted pursuant to the provisions of
the Plan is on the date of grant the owner of stock (as
determined under Code Section 424(d)) possessing more than
10% of the total combined voting power of all classes of
stock of the Company or a Subsidiary, then the following
special provisions shall be applicable to the Incentive
Option granted to such individual:
(i) The Option price per share subject to such
Incentive Option shall not be less than 110% of the
fair market value of one share on the date of grant; and
(ii) The Incentive Option shall not have a term in
excess of five (5) years from its date of grant.
9. Adjustment for Changes in Capitalization. Appropriate and
equitable adjustment shall be made in the maximum number of
shares of Common Stock subject to the Plan under Section 4 and,
subject to Section 10, in the number, kind and option price of
shares of Common Stock subject to then outstanding Options to
give effect to any changes in the outstanding Common Stock by
reason of any stock dividend, stock split, stock combination,
merger, consolidation, reorganization, recapitalization or any
other change in the capital structure of the Company affecting
the Common Stock after the effective date of the Plan.
10. Change in Control; Merger, Etc.
(1) Change in Control. Upon the occurrence of any of
the events listed below, all outstanding Incentive Options
and Nonqualified Options held by all optionees pursuant to
this Plan shall become immediately exercisable in full. The
events are as follows:
(i) The sale by the Company of all or
substantially all of its assets;
(ii) Any of the following events if, immediately
following such event, a majority of the Directors
consists of persons who were not Directors immediately
prior to the date of such event:
(a) the sale of 50% or more of the
outstanding shares of Common Stock of the Company
in a single transaction;
(b) the consummation of a tender offer (by a
party other than the Company) for more than 50% of
the outstanding shares of Common Stock of the Company; or
(c) subject to Section 10(2) below, the
consummation of a merger or consolidation
involving the Company; or
(iii) An election of new Directors if immediately
following such election a majority of the Directors
consists of persons who were not nominated by
management to stand for election as Directors in such
election.
(2) Where Company Does Not Survive. In the event of a
merger or consolidation to which the Company is a party but
is not the surviving company, the Committee in its
discretion may vote to negate and give no effect to the
acceleration of Options pursuant to Section 10(l)(ii)(c),
but only if and to the extent that an executed agreement of
merger or consolidation provides that the optionee holding
such an Option shall receive the same merger consideration
as the optionee would have received as a stockholder of the
Company had the exercisability of the Option been
accelerated in accordance with Section 10(l)(ii)(c) and had
the optionee, immediately prior to the merger or
consolidation, exercised the Option for the full number of
shares subject thereto, paid the exercise price in full, and
satisfied all other conditions for the exercise of the
Option.
(3) Liquidation or Dissolution. The provisions of
Section 9 and Subsections 10(l) and (2) shall not cause any Option to
terminate other than in accordance with other applicable provisions
of the Plan. However, in the event of the liquidation or dissolution
of the Company, each outstanding Option shall terminate,
except to the extent otherwise specifically provided in the option
agreement evidencing the Option.
11. Rights of Optionees. No Employee shall have a right to be
granted an Option or, having received an Option, a right again to
be granted an Option. An optionee shall have no rights as a
stockholder with respect to any shares of Common Stock covered by
his or her Option until the date the Option has been exercised
and the full purchase price for such shares has been received by
the Company. Nothing in this Plan or in any Option granted
pursuant to the Plan shall confer on any individual any right to
continue in the employ of the Company or any Subsidiary or
interfere in any way with the right of the Company or any
Subsidiary to terminate or modify the terms or conditions of the
employment of the Option holder.
12. Amendment and Termination of the Plan. Unless sooner
terminated by the Board, the Plan shall terminate, so that no
Options may be granted pursuant to it thereafter, on March 28,
2003. The Board may at any time amend, suspend or terminate the
Plan in its discretion without further action on the part of the
stockholders of the Company, except that:
(1) no such amendment, suspension or termination
of the Plan shall adversely affect or impair any then
outstanding Option without the consent of the optionee
holding the Option; and
(2) any such amendment, suspension or termination
that requires approval by the stockholders of the
Company to comply with applicable provisions of the
Code, rules promulgated pursuant to Section 16 of the
Exchange Act, applicable state law or NASD or exchange
listing requirements shall be subject to approval by
the stockholders of the Company within the applicable
time period prescribed thereunder, and shall be null
and void if such approval is not obtained.
VARLEN CORPORATION
1998 LONG-TERM EQUITY INCENTIVE PLAN
(as amended November 20, 1998)
1. Purpose.
This plan shall be known as the Varlen Corporation 1998
Long-Term Equity Incentive Plan (the "Plan"). The purpose of the
Plan shall be to promote the long-term growth and profitability
of Varlen Corporation (the "Company") and its Subsidiaries by (i)
providing certain directors, officers and other employees of, and
certain other individuals who perform significant services for,
the Company and its Subsidiaries with incentives to maximize
stockholder value and otherwise contribute to the success of the
Company and (ii) enabling the Company to attract, retain and
reward the best available persons for positions of substantial
responsibility. Grants of incentive or nonqualified stock
options, stock appreciation rights ("SARs"), either alone or in
tandem with options, restricted stock, performance awards, or any
combination of the foregoing may be made under the Plan.
2. Definitions.
(a) "Board of Directors" and "Board" mean the
board of directors of Varlen Corporation.
(b) "Cause" means the occurrence of one of the
following events:
(i) Conviction of a felony or any crime or
offense lesser than a felony involving the property of the
Company or a Subsidiary; or
(ii) Conduct that has caused demonstrable and
serious injury to the Company or a Subsidiary, monetary or
otherwise; or
(iii) Willful refusal to perform, or
substantial disregard of, duties properly assigned, as determined
by the Company; or
(iv) Breach of duty of loyalty to the Company or a
Subsidiary or other act of fraud or dishonesty with respect to
the Company or a Subsidiary.
(c) "Change in Control" means the occurrence of
one of the following events:
(i) if any "person" or "group" as those terms are
used in Sections 13(d) and 14(d) of the Exchange Act, other than
an Exempt Person, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more
of the combined voting power of the Company's then outstanding
securities; or
(ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the
Board and any new directors whose election by
the Board or nomination for election by the Company's
stockholders was approved by at least two-thirds of the directors
then still in office who either were directors at the beginning
of the period or whose election was previously so approved, cease
for any reason to constitute a majority thereof; or
(iii) the stockholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than a merger or consolidation (A) which would
result in all or a portion of 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) more than 50% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such
merger or consolidation or (B) following which the Company's
chief executive officer and directors retain their positions with
the surviving entity (and constitute at least a majority of the
surviving entity's board of directors); or
(iv) the stockholders 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 the Company's assets, other than a sale to an Exempt Person.
(d) "Code" means the Internal Revenue Code of 1986,
as amended.
(e) "Committee" means the Compensation Committee of
the Board, which shall consist solely of two or more members of
the Board, or a subcommittee thereof consisting solely of two or
more members of the full Committee, as appointed by the Board.
(f) "Common Stock" means the common stock, par value
$.10 per share, of the Company, and any other shares into which
such stock may be changed by reason of a recapitalization,
reorganization, merger, consolidation or any other change in the
corporate structure or capital stock of the Company.
(g) "Competition" is deemed to occur if a person whose
employment with the Company or its Subsidiaries has terminated
obtains a position as a full-time or part-time employee of, as a
member of the board of directors of, or as a consultant or
advisor with or to, or acquires an ownership interest in excess
of 5% of, a corporation, partnership, firm or other entity that
engages in any of the businesses of the Company or any Subsidiary
with which the person was involved in a management role at any
time during his or her last five years of employment with or
other service for the Company or any Subsidiaries.
(h) "Disability" means a disability that would entitle
an eligible participant to payment of monthly disability payments
under any Company disability plan or as otherwise determined by
the Committee.
(i) "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(j) "Exempt Person" means any employee benefit plan of
the Company or a trustee or other administrator or
fiduciary holding securities under an employee benefit plan of
the Company.
(k) "Fair Market Value" of a share of Common Stock of
the Company means, as of the date in question, the officially-
quoted closing selling price of the stock (or if no selling price
is quoted, the bid price) on the principal securities exchange on
which the Common Stock is then listed for trading (including for
this purpose the Nasdaq National Market) (the "Market") for the
immediately preceding trading day or, if the Common Stock is not
then listed or quoted in the Market, the Fair Market Value shall
be the fair value of the Common Stock determined in good faith by
the Committee; provided, however, that when shares received upon
exercise of an option are immediately sold in the open market,
the net sale price received may be used to determine the Fair
Market Value of any shares used to pay the exercise price or
withholding taxes and to compute the withholding taxes.
(l) "Incentive Stock Option" means an option
conforming to the requirements of Section 422 of the Code and any
successor thereto.
(m) "Non-Employee Director" has the meaning given to
such term in Rule 16b-3 under the Exchange Act.
(n) "Nonqualified Stock Option" means any stock option
other than an Incentive Stock Option.
(o) "Other Company Securities" mean securities of the
Company other than Common Stock, which may include, without
limitation, unbundled stock units or components thereof,
debentures, preferred stock, warrants and securities convertible
into or exchangeable for Common Stock or other property.
(p) "Retirement" means retirement as defined under any
Company pension plan or retirement program or termination of
one's employment on retirement with the approval of the
Committee.
(q) "Subsidiary" means a corporation or other entity
of which outstanding shares or ownership interests representing
50% or more of the combined voting power of such corporation or
other entity entitled to elect the management thereof, or such
lesser percentage as may be approved by the Committee, are owned
directly or indirectly by the Company.
3. Administration.
The Plan shall be administered by the Committee;
provided that the Board may, in its discretion, at any time and
from time to time, resolve to administer the Plan, in which case
the term "Committee" shall be deemed to mean the Board for all
purposes herein. The Committee shall consist of at least two
directors. Subject to the provisions of the Plan, the Committee
shall be authorized to (i) select persons to participate in the
Plan, (ii) determine the form and substance of grants made under
the Plan to each participant, and the conditions and
restrictions, if any, subject to which such grants will be made,
(iii) modify the terms of grants made under the Plan, (iv)
interpret the Plan and grants made thereunder, (v) make any
adjustments necessary or desirable in connection with grants made
under the Plan to eligible participants located outside the
United States and (vi) adopt, amend, or rescind such rules and
regulations, and make such other determinations, for carrying out
the Plan as it may deem appropriate. Decisions of the Committee
on all matters relating to the Plan shall be in the Committee's
sole discretion and shall be conclusive and binding on all
parties. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be
determined in accordance with applicable federal and state laws
and rules and regulations promulgated pursuant thereto. No
member of the Committee and no officer of the Company shall be
liable for any action taken or omitted to be taken by such
member, by any other member of the Committee or by any officer of
the Company in connection with the performance of duties under
the Plan, except for such person's own willful misconduct or as
expressly provided by statute.
The expenses of the Plan shall be borne by the Company.
The Plan shall not be required to establish any special or
separate fund or make any other segregation of assets to assume
the payment of any award under the Plan, and rights to the
payment of such awards shall be no greater than the rights of the
Company's general creditors.
4. Shares Available for the Plan.
Subject to adjustments as provided in Section 15, an
aggregate of 500,000 shares of Common Stock (the "Shares") may be
issued pursuant to the Plan. Such Shares may be in whole or in
part authorized and unissued, or shares which are held by the
Company as treasury shares. If any grant under the Plan expires
or terminates unexercised, becomes unexercisable or is forfeited
as to any Shares, such unpurchased or forfeited Shares shall
thereafter be available for further grants under the Plan unless,
in the case of options granted under the Plan, related SARs are
exercised.
Without limiting the generality of the foregoing
provisions of this Section 4 or the generality of the provisions
of Sections 3, 6 or 17 or any other section of this Plan, the
Committee may, at any time or from time to time, and on such
terms and conditions (that are consistent with and not in
contravention of the other provisions of this Plan) as the
Committee may, in its sole discretion, determine, enter into
agreements (or take other actions with respect to the options)
for new options containing terms (including exercise prices) more
(or less) favorable than the outstanding options.
5. Participation.
Participation in the Plan shall be limited to those
directors (including Non-Employee Directors) and officers
(including non-employee officers) of, and employees and other
individuals performing significant services for (including non-
employees to whom offers of employment have been extended by),
the Company and its Subsidiaries, in each case as selected by the
Committee (including participants located outside the United
States). Nothing in the Plan or in any grant thereunder shall
confer any right on a participant to continue in the employ of,
or the performance of services for the Company or shall interfere
in any way with the right of the Company to terminate the
employment or performance of services of a participant at any
time. By accepting any award under the Plan, each participant
and each person claiming under or through him or her shall be
conclusively deemed to have indicated his or her acceptance and
ratification of, and consent to, any action taken under the Plan
by the Company, the Board or the Committee.
Incentive Stock Options or Nonqualified Stock Options,
SARs , alone or in tandem with options, restricted stock awards,
performance awards, or any combination thereof, may be granted to
such persons and for such number of Shares as the Committee shall
determine (such individuals to whom grants are made being
sometimes herein called "optionees" or "grantees," as the case
may be). Determinations made by the Committee under the Plan need
not be uniform and may be made selectively among eligible
individuals under the Plan, whether or not such individuals are
similarly situated. A grant of any type made hereunder in any
one year to an eligible participant shall neither guarantee nor
preclude a further grant of that or any other type to such
participant in that year or subsequent years.
6. Incentive and Nonqualified Options.
The Committee may from time to time grant to eligible
participants Incentive Stock Options, Nonqualified Stock Options,
or any combination thereof; provided that the Committee may grant
Incentive Stock Options only to eligible employees of the Company
or its subsidiaries (as defined for this purpose in Section
424(f) of the Code). In any one calendar year, the Committee
shall not grant to any one participant options or SARs to
purchase a number of shares of Common Stock in excess of 10% of
the total number of shares authorized under the Plan. The
options granted shall take such form as the Committee shall
determine, subject to the following terms and conditions.
It is the Company's intent that Nonqualified Stock
Options granted under the Plan not be classified as Incentive
Stock Options, that Incentive Stock Options be consistent with
and contain or be deemed to contain all provisions required under
Section 422 of the Code and any successor thereto, and that any
ambiguities in construction be interpreted in order to effectuate
such intent. If an Incentive Stock Option granted under the Plan
does not qualify as such for any reason, then to the extent of
such nonqualification, the stock option represented thereby shall
be regarded as a Nonqualified Stock Option duly granted under the
Plan, provided that such stock option otherwise meets the Plan's
requirements for Nonqualified Stock Options.
(a) Price. The price per Share deliverable upon the
exercise of each option ("exercise price") shall be established
by the Committee, except that in the case of the grant of any
option, the exercise price may not be less than 100% of the Fair
Market Value of a share of Common Stock as of the date of grant
of the option, and in the case of the grant of any Incentive
Stock Option to an employee who, at the time of the grant, owns
more than 10% of the total combined voting power of all classes
of stock of the Company or any of its Subsidiaries, the exercise
price may not be less that 110% of the Fair Market Value of a
share of Common Stock as of the date of grant of the option, in
each case unless otherwise permitted by Section 422 of the Code.
(b) Payment. Options may be exercised, in whole or in
part, upon payment of the exercise price of the Shares
to be acquired. Unless otherwise determined by the Committee,
payment shall be made (i) in cash (including check, bank draft or
money order), (ii) by delivery of outstanding shares of Common
Stock with a Fair Market Value on the date of exercise equal to
the aggregate exercise price payable with respect to the options'
exercise, (iii) by simultaneous sale through a broker reasonably
acceptable to the Committee of Shares acquired on exercise, as
permitted under Regulation T of the Federal Reserve Board, (iv)
by authorizing the Company to withhold from issuance a number of
Shares issuable upon exercise of the options which, when
multiplied by the Fair Market Value of a share of Common Stock on
the date of exercise is equal to the aggregate exercise price
payable with respect to the options so exercised or (v) by any
combination of the foregoing. Options may also be exercised upon
payment of the exercise price of the Shares to be acquired by
delivery of the optionee's promissory note, but only to the
extent specifically approved by and in accordance with the
policies of the Committee.
In the event a grantee elects to pay the exercise price
payable with respect to an option pursuant to clause (ii) above,
(A) only a whole number of share(s) of Common Stock (and not
fractional shares of Common Stock) may be tendered in payment,
(B) such grantee must present evidence acceptable to the Company
that he or she has owned any such shares of Common Stock tendered
in payment of the exercise price (and that such tendered shares
of Common Stock have not been subject to any substantial risk of
forfeiture) for at least six months prior to the date of
exercise, and (C) Common Stock must be delivered to the Company.
Delivery for this purpose may, at the election of the grantee, be
made either by (A) physical delivery of the certificate(s) for
all such shares of Common Stock tendered in payment of the price,
accompanied by duly executed instruments of transfer in a form
acceptable to the Company, or (B) direction to the grantee's
broker to transfer, by book entry, such shares of Common Stock
from a brokerage account of the grantee to a brokerage account
specified by the Company. When payment of the exercise price is
made by delivery of Common Stock, the difference, if any, between
the aggregate exercise price payable with respect to the option
being exercised and the Fair Market Value of the share(s) of
Common Stock tendered in payment (plus any applicable taxes)
shall be paid in cash. No grantee may tender shares of Common
Stock having a Fair Market Value exceeding the aggregate exercise
price payable with respect to the option being exercised (plus
any applicable taxes).
In the event a grantee elects to pay the exercise price
payable with respect to an option pursuant to clause (iv) above,
(A) only a whole number of Share(s) (and not fractional Shares)
may be withheld in payment and (B) such grantee must present
evidence acceptable to the Company that he or she has owned a
number of shares of Common Stock at least equal to the number of
Shares to be withheld in payment of the exercise price (and that
such owned shares of Common Stock have not been subject to any
substantial risk of forfeiture) for at least six months prior to
the date of exercise. When payment of the exercise price is made
by withholding of Shares, the difference, if any, between the
aggregate exercise price payable with respect to the option
being exercised and the Fair Market Value of the Share(s)
withheld in payment (plus any applicable taxes) shall be paid in
cash. No grantee may authorize the withholding of
Shares having a Fair Market Value exceeding the aggregate
exercise price payable with respect to the option being exercised
(plus any applicable taxes). Any withheld Shares shall no longer
be issuable under such option.
(c) Terms of Options. The term during which each
option may be exercised shall be determined by the Committee,
but, except as otherwise provided herein, in no event shall an
option be exercisable in whole or in part, in the case of a
Nonqualified Stock Option or an Incentive Stock Option (other
than as described below), more than ten years from the date it is
granted or, in the case of an Incentive Stock Option granted to
an employee who at the time of the grant owns more than 10% of
the total combined voting power of all classes of stock of the
Company or any of its Subsidiaries, if required by the Code, more
than five years from the date it is granted. All rights to
purchase Shares pursuant to an option shall, unless sooner
terminated, expire at the date designated by the Committee. The
Committee shall determine the date on which each option shall
become exercisable and may provide that an option shall become
exercisable in installments. The Shares constituting each
installment may be purchased in whole or in part at any time
after such installment becomes exercisable, subject to such
minimum exercise requirements as may be designated by the
Committee. Unless otherwise provided herein or in the terms of
the related grant, an optionee may exercise an option only if he
or she is, and has continuously since the date the option was
granted, been a director, officer or employee of, or performed
other services for, the Company or a Subsidiary. Prior to the
exercise of an option and delivery of the Shares represented
thereby, the optionee shall have no rights as a stockholder with
respect to any Shares covered by such outstanding option
(including any dividend or voting rights).
(d) Limitations on Grants. If required by the Code,
the aggregate Fair Market Value (determined as of the grant date)
of Shares for which an Incentive Stock Option is exercisable for
the first time during any calendar year under all equity
incentive plans of the Company and its Subsidiaries (as defined
in Section 422 of the Code) may not exceed $100,000.
(e) Termination; Change in Control.
(i) If a participant ceases to be a director,
officer or employee of, or to perform other services for, the
Company and any Subsidiary due to death or Disability, all of the
participant's options and SARs shall become fully vested and
exercisable and shall remain so for a period of one year from the
date of such death or Disability, but in no event after the
expiration date of the options or SARs. Notwithstanding the
foregoing, if the Disability giving rise to the termination of
employment is not within the meaning of Section 422(e)(3) of the
Code, Incentive Stock Options not exercised by such participant
within 90 days after the date of termination of employment will
cease to qualify as Incentive Stock Options and will be treated
as Nonqualified Stock Options under the Plan if required to be so
treated under the Code.
(ii) If a participant ceases to be a director,
officer or employee of, or to perform other services for, the
Company and any Subsidiary upon the occurrence of his or her
Retirement, all of theparticipant's options and SARs which are then
vested shall remainexercisable for 90 days after the date of Retirement
or at such later date as determined in the discretion of the Committee,
but in no event after the expiration date of the options or SARs,
provided that the participant does not engage in Competition
during such 90-day period unless he or she receives written
consent to do so from the Committee. Upon the occurrence of such
Retirement, all of the participant's options and SARs which are
not yet vested shall become fully vested and exercisable only at
the discretion of, and on the terms prescribed by, the Committee.
(iii) If a participant ceases to be a director,
officer or employee of, or to perform other services for, the
Company or a Subsidiary due to Cause, all of the participant's
options and SARs shall be forfeited immediately upon such
cessation, whether or not then exercisable.
(iv) Unless otherwise determined by the Committee,
if a participant ceases to be a director, officer or employee of,
or to otherwise perform services for, the Company or a Subsidiary
for any reason other than death, Disability, Retirement or Cause,
(A) all of the participant's options and SARs that were
exercisable on the date of such cessation shall remain
exercisable for, and shall otherwise terminate at the end of, a
period of 90 days after the date of such cessation, but in no
event after the expiration date of the options or SARs, provided
that the participant does not engage in Competition during such
90day period unless he or she receives written consent to do so
from the Committee and (B) all of the participant's options and
SARs that were not exercisable on the date of such cessation
shall be forfeited immediately upon such cessation.
(v) Unless the Committee decides to otherwise
provide for the accelerated vesting of all options and SARs in
the event of a Change in Control, if there is a Change in Control
of the Company and participant is terminated from being a
director, officer or employee of, or from performing other
services for, the Company or any Subsidiary within one year
following such Change in Control, all of the participant's
options and SARs shall become fully vested and exercisable
immediately upon the date of such cessation and shall remain so
for a period of one year from the date of such cessation, but in
no event after the expiration date of the options or SARs.
Notwithstanding the foregoing, Incentive Stock Options not
exercised by such participant within 90 days after the date of
termination of employment will cease to qualify as Incentive
Stock Options and will be treated as Nonqualified Stock Options
under the Plan if required to be so treated under the Code.
(f) Grant of Reload Options. The Committee may
provide (either at the time of grant or exercise of an option),
in its discretion, for the grant to a grantee who exercises all
or any portion of an option ("Exercised Options") and who pays
all or part of such exercise price with shares of Common Stock,
of an additional option (a "Reload Option") for a number of
shares of Common Stock equal to the sum (the "Reload Number") of
the number of shares of Common Stock tendered or withheld in
payment of such exercise price for the Exercised Options plus, if
so provided by the Committee, the number of shares of Common
Stock, if any, tendered or withheld by the grantee or withheld by
the Company in connection with the exercise of the Exercised
Options to satisfy any federal, state or local tax withholding
requirements. The terms of each Reload Option, including the
date of its expiration and the terms and conditions of its
exercisability and transferability, shall be the same as the
terms of the Exercised Option to which it relates, except that
(i) the grant date for each Reload Option shall be the date of
exercise of the Exercised Option to which it relates and (ii) the
exercise price for each Reload Option shall be the Fair Market
Value of the Common Stock on the grant date of the Reload Option.
7. Stock Appreciation Rights.
The Committee shall have the authority to grant SARs
under this Plan, either alone or to any optionee in tandem with
options (either at the time of grant of the related option or
thereafter by amendment to an outstanding option). SARs shall be
subject to such terms and conditions as the Committee may
specify.
No SAR may be exercised unless the Fair Market Value of
a share of Common Stock of the Company on the date of exercise
exceeds the exercise price of the SAR or, in the case of SARs
granted in tandem with options, any options to which the SARs
correspond. Prior to the exercise of the SAR and delivery of the
cash and/or Shares represented thereby, the participant shall
have no rights as a stockholder with respect to Shares covered by
such outstanding SAR (including any dividend or voting rights).
SARs granted in tandem with options shall be
exercisable only when, to the extent and on the conditions that
any related option is exercisable. The exercise of an option
shall result in an immediate forfeiture of any related SAR to the
extent the option is exercised, and the exercise of an SAR shall
cause an immediate forfeiture of any related option to the extent
the SAR is exercised.
Upon the exercise of an SAR, the participant shall be
entitled to a distribution in an amount equal to the difference
between the Fair Market Value of a share of Common Stock on the
date of exercise and the exercise price of the SAR or, in the
case of SARs granted in tandem with options, any option to which
the SAR is related, multiplied by the number of Shares as to
which the SAR is exercised. The Committee shall decide whether
such distribution shall be in cash, in Shares having a Fair
Market Value equal to such amount, in Other Company Securities
having a Fair Market Value equal to such amount or in a
combination thereof.
All SARs will be exercised automatically on the last
day prior to the expiration date of the SAR or, in the case of
SARs granted in tandem with options, any related option, so long
as the Fair Market Value of a share of Common Stock on that date
exceeds the exercise price of the SAR or any related option, as
applicable. An SAR granted in tandem with options shall expire
at the same time as any related option expires and shall be
transferable only when, and under the same conditions as, any
related option is transferable.
8. Restricted Stock.
The Committee may at any time and from time to time
grant Shares of restricted stock under the Plan to such
participants and in such amounts as it determines. Each grant of
restricted stock shall specify the applicable restrictions on
such Shares, the duration of such restrictions (which shall be at
least six months except as otherwise provided in the third
paragraph of this Section 8), and the time or times at which such
restrictions shall lapse with respect to all or a specified
number of Shares that are part of the grant.
The participant will be required to pay the
Company the aggregate par value of any Shares of restricted stock
(or such larger amount as the Board may determine to constitute
capital under Section 154 of the Delaware General Corporation
Law, as amended) within ten days of the date of grant, unless
such Shares of restricted stock are treasury shares. Unless
otherwise determined by the Committee, certificates representing
Shares of restricted stock granted under the Plan will be held in
escrow by the Company on the participant's behalf during any
period of restriction thereon and will bear an appropriate legend
specifying the applicable restrictions thereon, and the
participant will be required to execute a blank stock power
therefor. Except as otherwise provided by the Committee, during
such period of restriction the participant shall have all of the
rights of a holder of Common Stock, including but not limited to
the rights to receive dividends and to vote, and any stock or
other securities received as a distribution with respect to such
participant's restricted stock shall be subject to the same
restrictions as then in effect for the restricted stock.
Unless the Committee decides to otherwise provide for
the lapse of all restrictions in the event of a Change in
Control, if there is a Change in Control and participant is
terminated from being a director, officer or employee of, or from
performing other services for, the Company and any Subsidiary
within one year following such Change in Control or at such time
as a participant ceases to be a director, officer or employee of,
or to otherwise perform services for, the Company and its
Subsidiaries due to death or Disability during any period of
restriction, all restrictions on Shares granted to such
participant shall lapse. Except as otherwise provided by the
Committee, at such time as a participant ceases to be a director,
officer or employee of, or to otherwise perform services for, the
Company or its Subsidiaries for any other reason, all Shares of
restricted stock granted to such participant on which the
restrictions have not lapsed or do not thereupon lapse shall be
immediately forfeited to the Company. Upon the occurrence of
Retirement prior to the end of any period of restriction, the
Committee, at its discretion, may allow such restrictions to
lapse.
9. Performance Awards.
Performance awards may be granted to participants at
any time and from time to time as determined by the Committee.
The Committee shall have complete discretion in determining the
size and composition of performance awards so granted to a
participant and the appropriate period over which performance is
to be measured (a "performance cycle"). Performance awards may
include (i) specific dollar-value
target awards (ii) performance units, the value of each such unit
being determined by the Committee at the time of issuance, and/or
(iii) performance Shares, the value of each such Share being
equal to the Fair Market Value of a share of Common Stock.
The value of each performance award may be fixed or it
may be permitted to fluctuate based on a performance factor
(e.g., return on equity) selected by the Committee.
The Committee shall establish performance goals and
objectives for each performance cycle on the basis of such
criteria and objectives as the Committee may select from time to
time, including, without limitation, the performance of the
participant, the Company, one or more of its Subsidiaries or
divisions or any combination of the foregoing. During any
performance cycle, the Committee shall have the authority to
adjust the performance goals, objectives and/or cycle duration
for such cycle for such reasons as it deems equitable.
The Committee shall determine the portion of each
performance award that is earned by a participant on the basis of
the Company's performance over the performance cycle in relation
to the performance goals for such cycle. The earned portion of a
performance award may be paid out in Shares, cash, Other Company
Securities, or any combination thereof, as the Committee may
determine.
A participant must be a director, officer or employee
of, or otherwise perform services for, the Company or its
Subsidiaries at the end of the performance cycle in order to be
entitled to payment of a performance award issued in respect of
such cycle; provided, however, that, except as otherwise
determined by the Committee, if a participant ceases to be a
director, officer or employee of, or to otherwise perform
services for, the Company and its Subsidiaries upon his or her
death, Retirement, or Disability prior to the end of the
performance cycle, the participant shall earn a proportionate
portion of the performance award based upon the elapsed portion
of the performance cycle and the Company's performance over that
portion of such cycle.
If there is a Change in Control and participant is
terminated from being a director, officer or employee of, or from
performing other services for, the Company or any Subsidiary
within one year following such Change in Control, a participant
shall earn no less than the proportionate portion of the
performance award that the participant would have earned if the
performance cycle(s) had terminated as of the date of such
cessation following the Change in Control.
10. Withholding Taxes.
(a) Participant Election. Unless otherwise determined
by the Committee, a participant may elect to deliver shares of
Common Stock (or have the Company withhold shares acquired upon
exercise of an option or SAR or deliverable upon grant or vesting
of restricted stock, as the case may be) to satisfy, in whole or
in part, the amount the Company is required to withhold for taxes
in connection with the exercise of an option or SAR or the
delivery of restricted stock upon grant or vesting, as the case
may be. Such election must be made on or before the date the
amount of tax to be withheld is determined. Once made, the
election
shall be irrevocable. The fair market value of the shares to be
withheld or delivered will be the Fair Market Value as of the
date the amount of tax to be withheld is determined. In the event
a participant elects to deliver shares of Common Stock pursuant
to this Section 10(a), such delivery must be made subject to the
conditions and pursuant to the procedures set forth in Section
6(b) with respect to the delivery of Common Stock in payment of
the exercise price of options.
(b) Company Requirement. The Company may require, as
a condition to any grant or exercise under the Plan or to the
delivery of certificates for Shares issued hereunder, that the
grantee make provision for the payment to the Company, either
pursuant to Section 10(a) or this Section 10(b), of any federal,
state or local taxes of any kind required by law to be withheld
with respect to any grant or any delivery of Shares. The
Company, to the extent permitted or required by law, shall have
the right to deduct from any payment of any kind (including
salary or bonus) otherwise due to a grantee, an amount equal to
any federal, state or local taxes of any kind required by law to
be withheld with respect to any grant or to the delivery of
Shares under the Plan, or to retain or sell without notice a
sufficient number of the Shares to be issued to such grantee to
cover any such taxes, the payment of which has not otherwise been
provided for in accordance with the terms of the Plan, provided
that the Company shall not sell any such Shares if such sale
would be considered a sale by such grantee for purposes of
Section 16 of the Exchange Act that is not exempt from matching
thereunder.
11. Written Agreement; Vesting.
Each employee to whom a grant is made under the Plan
shall enter into a written agreement with the Company that shall
contain such provisions, including without limitation vesting
requirements, consistent with the provisions of the Plan, as may
be approved by the Committee. Unless the Committee determines
otherwise and except as otherwise provided in Sections 6, 7, 8
and 9 in connection with a Change in Control or certain
occurrences of termination, no grant under this Plan may be
exercised, and no restrictions relating thereto may lapse, within
six months of the date such grant is made.
12. Transferability.
Unless the Committee determines otherwise, no option,
SAR, performance award, or restricted stock granted under the
Plan shall be transferable by a participant otherwise than by
will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code.
Unless the Committee determines otherwise, an option, SAR, or
performance award may be exercised only by the optionee or
grantee thereof or his guardian or legal representative; provided
that Incentive Stock Options may be exercised by such guardian or
legal representative only if permitted by the Code and any
regulations promulgated thereunder.
13. Listing, Registration and Qualification.
If the Committee determines that the listing,
registration or qualification upon any securities exchange or
under any law of Shares subject to any option, SAR,
performance award or restricted stock grant is necessary or
desirable as a condition of, or in connection with, the granting
of same or the issue or purchase of Shares thereunder, no such
option or SAR may be exercised in whole or in part, no such
performance award may be paid out and no Shares may be issued
unless such listing, registration or qualification is effected
free of any conditions not acceptable to the Committee.
It is the intent of the Company that the Plan comply in
all respects with Section 162(m) of the Code, that awards made
hereunder comply in all respects with Rule 16b-3 under the
Exchange Act, that any ambiguities or inconsistencies in
construction of the Plan be interpreted to give effect to such
intention and that if any provision of the Plan is found not to
be in compliance with Section 162(m), such provision shall be
deemed null and void to the extent required to permit the Plan to
comply with Section 162(m), as the case may be.
14. Transfer of Employee.
The transfer of an employee from the Company to a
Subsidiary, from a Subsidiary to the Company, or from one
Subsidiary to another shall not be considered a termination of
employment; nor shall it be considered a termination of
employment if an employee is placed on military or sick leave or
such other leave of absence which is considered by the Committee
as continuing intact the employment relationship.
15. Adjustments.
In the event of a reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger,
consolidation, distribution of assets, or any other change in the
corporate structure or shares of the Company, the Committee shall
make such adjustment as it deems appropriate in the number and
kind of Shares or other property reserved for issuance under the
Plan, in the number and kind of Shares or other property covered
by grants previously made under the Plan, and in the exercise
price of outstanding options and SARs. Any such adjustment shall
be final, conclusive and binding for all purposes of the Plan. In
the event of any merger, consolidation or other reorganization in
which the Company is not the surviving or continuing corporation
or in which a Change in Control is to occur, all of the Company's
obligations regarding options, SARs performance awards, and
restricted stock that were granted hereunder and that are
outstanding on the date of such event shall, on such terms as may
be approved by the Committee prior to such event, be assumed by
the surviving or continuing corporation or canceled in exchange
for property (including cash).
Without limitation of the foregoing, in connection with
any transaction of the type specified by clause (iii) of the
definition of a Change in Control in Section 2(c), the Committee
may, in its discretion, (i) cancel any or all outstanding options
under the Plan in consideration for payment to the holders
thereof of an amount equal to the portion of the consideration
that would have been payable to such holders pursuant to such
transaction if their options had been fully exercised immediately
prior to such transaction, less the aggregate exercise price that
would have been payable therefor, or (ii) if the amount that
would have been payable to the option holders pursuant to such
transaction if the vested portion of their options had been fully
exercised immediately prior thereto would be less than the
aggregate exercise price that would have been payable therefor,
cancel any or all such options for no consideration or payment of
any kind. Payment of any amount payable pursuant to the
preceding sentence may be made in cash or, in the event that the
consideration to be received in such transaction includes
securities or other property, in cash and/or securities or other
property in the Committee's discretion.
16. Termination and Modification of the Plan.
The Board of Directors or the Committee, without
approval of the stockholders, may modify or terminate the Plan,
except that no modification shall become effective without prior
approval of the stockholders of the Company if stockholder
approval would be required for continued compliance with the
performance-based compensation exception of Section 162(m) of the
Code or any listing requirement of the principal stock exchange
on which the Common Stock is then listed.
17. Amendment or Substitution of Awards under the Plan.
The terms of any outstanding award under the Plan may
be amended from time to time by the Committee in its discretion
in any manner that it deems appropriate (including, but not
limited to, acceleration of the date of exercise of any award
and/or payments thereunder or of the date of lapse of
restrictions on Shares); provided that, (i) notwithstanding
anything to the contrary contained herein, the Committee may not,
at any time, lower the exercise price of any option that is
outstanding pursuant to the Plan as of such time without first
obtaining the affirmative vote of a majority of the shares of
Common Stock then issued and outstanding and (ii) except as
otherwise provided in Section 15, no such amendment shall
adversely affect in a material manner any right of a participant
under the award without his or her written consent. The
Committee may, in its discretion, permit holders of awards under
the Plan to surrender outstanding awards in order to exercise or
realize rights under other awards, or in exchange for the grant
of new awards, or require holders of awards to surrender
outstanding awards as a condition precedent to the grant of new
awards under the Plan.
18. Commencement Date; Termination Date.
The date of commencement of the Plan shall be June 1,
1998, subject to approval by the shareholders of the Company.
The Plan may terminate upon the adoption of a resolution of the
Board terminating the Plan, in which event termination of the
Plan shall not materially and adversely affect any of the rights
or obligations of any person, without his consent, under any
grant of options or other incentives theretofore granted under
the Plan.
19. Governing Law. The Plan shall be governed by the corporate
laws of the State of Delaware, without giving effect to any
choice of law provisions.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the third quarter
1998 10-Q and is qualified in its entirety by references to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> OCT-31-1998
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<RECEIVABLES> 89,089
<ALLOWANCES> 1,422
<INVENTORY> 57,961
<CURRENT-ASSETS> 183,730
<PP&E> 242,552
<DEPRECIATION> 106,000
<TOTAL-ASSETS> 463,775
<CURRENT-LIABILITIES> 95,403
<BONDS> 100,714
0
0
<COMMON> 1,694
<OTHER-SE> 227,292
<TOTAL-LIABILITY-AND-EQUITY> 463,775
<SALES> 481,568
<TOTAL-REVENUES> 481,568
<CGS> 355,719
<TOTAL-COSTS> 355,719
<OTHER-EXPENSES> 65,995
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,567
<INCOME-PRETAX> 54,967
<INCOME-TAX> 23,361
<INCOME-CONTINUING> 31,606
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</TABLE>
