<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 11(c) or Rule 14a-12
MIDAS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF MIDAS, INC.
Date: Thursday, May 6, 1999
Time: 11:30 a.m., local time
Place: First Chicago Center
One First National Plaza
Dearborn and Madison Streets
Chicago, Illinois
Purposes:
. To elect two directors to terms of office expiring at the 2002 Annual
Meeting of Shareholders;
. To consider a proposal to approve our existing Stock Incentive Plan for
the purpose of maintaining tax deductibility under Section 162(m) of the
Internal Revenue Code;
. To consider a proposal to ratify the appointment of KPMG LLP as the
independent auditors of Midas for the fiscal year ending January 1, 2000;
and
. To conduct other business if properly raised.
Record Date: The close of business on March 19, 1999.
The matters to be acted upon at the Annual Meeting are described in the
accompanying Proxy Statement.
By Order of the Board of Directors
Robert H. Sorensen
Corporate Secretary
Chicago, Illinois
March 25, 1999
NOTE: In order to assure the presence of a quorum at the Annual Meeting,
please vote your shares via a toll-free telephone number or via the
Internet or complete, sign and date the enclosed proxy card and return
it promptly in the enclosed postage-paid envelope, even if you plan to
attend the Annual Meeting. By promptly voting, you will reduce the
expenses of this proxy solicitation. You may revoke your proxy at any
time before it is voted.
<PAGE>
Midas, Inc.
225 North Michigan Avenue, Chicago, Illinois 60601
March 25, 1999
Dear Shareholder:
It is our pleasure to invite you to attend the Annual Meeting of
Shareholders of Midas, Inc. to be held on Thursday, May 6, 1999, at 11:30
a.m., local time, in the First Chicago Center, One First National Plaza,
Dearborn and Madison Streets, Chicago, Illinois.
At the Annual Meeting, we will ask you to consider and vote upon the
election of two directors, a proposal to approve Midas' Stock Incentive Plan
and a proposal to ratify the appointment of KPMG LLP as the independent
auditors of Midas. We will also discuss Midas' performance and respond to your
questions.
The formal Notice of Annual Meeting and the Proxy Statement follow. Your
vote is important, regardless of the size of your holdings. Even if you plan
to attend the Annual Meeting, you may vote your shares via a toll-free
telephone number or via the Internet or you may complete, sign and date our
enclosed proxy card and return it in the enclosed postage-paid envelope.
Instructions regarding all three methods of voting are contained on the proxy
card. If you attend the Annual Meeting and prefer to vote in person, you may
do so.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Wendel H. Province
Wendel H. Province
Chairman and
Chief Executive
Officer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INFORMATION ABOUT MIDAS, INC............................................... 1
INFORMATION ABOUT THE ANNUAL MEETING....................................... 1
Information About Attending the Annual Meeting........................... 1
Information About this Proxy Statement................................... 1
Street Name Holders and Record Holders................................... 1
Matters to be Considered................................................. 2
How Record Holders Vote.................................................. 2
Information for Employees Who are Shareholders........................... 2
Quorum Requirement....................................................... 3
Non-Votes................................................................ 3
Information About the Vote Necessary for Action to be Taken.............. 3
Revocation of Proxies.................................................... 3
Other Matters............................................................ 3
PROPOSAL 1: ELECTION OF DIRECTORS.......................................... 4
Meetings and Committees of the Board..................................... 5
Compensation of Directors................................................ 6
PROPOSAL 2: APPROVAL OF EXISTING STOCK INCENTIVE PLAN TO MAINTAIN TAX
DEDUCTIBILITY............................................................. 7
PROPOSAL 3: APPOINTMENT OF INDEPENDENT AUDITORS............................ 11
BENEFICIAL OWNERSHIP OF COMMON STOCK....................................... 11
Section 16(a) Beneficial Ownership Reporting Compliance.................. 13
EXECUTIVE COMPENSATION AND OTHER INFORMATION............................... 13
Summary Compensation Table............................................... 13
Option Grants in Fiscal 1998............................................. 14
Option Exercises in Fiscal 1998 and Fiscal Year-End Option Values........ 15
Pension Plans............................................................ 15
Termination Benefits..................................................... 16
Agreement with Retired Executive Officer................................. 17
Report on Executive Compensation......................................... 17
Performance Graph........................................................ 20
CERTAIN TRANSACTIONS....................................................... 21
Distribution and Indemnity Agreement..................................... 21
Tax Sharing Agreement.................................................... 21
Other Transactions....................................................... 22
SHAREHOLDER PROPOSALS...................................................... 22
GENERAL.................................................................... 23
EXHIBIT A.................................................................. A-1
</TABLE>
<PAGE>
MIDAS, INC.
----------------
INFORMATION ABOUT MIDAS, INC.
Our principal executive office is located at 225 North Michigan Avenue,
Chicago, Illinois 60601. Our telephone number is (312) 565-7000. Our website
is located at www.midas.com on the Internet.
INFORMATION ABOUT THE ANNUAL MEETING
Information About Attending the Annual Meeting
Our Annual Meeting will be held on Thursday, May 6, 1999 at 11:30 a.m.,
local time, in the First Chicago Center, One First National Plaza, Dearborn
and Madison Streets, Chicago, Illinois. If you plan to attend the Annual
Meeting, please check the box on our proxy card and we will mail an admission
ticket to you. If your shares are held through a broker or its nominee and you
would like to attend the Annual Meeting, please write to Robert H. Sorensen,
Corporate Secretary, at our principal executive office. Please include a copy
of your brokerage account statement or a copy of a broker's proxy card (which
you may get from your broker), and we will mail an admission ticket to you.
Please bring your admission ticket with you.
Information About this Proxy Statement
We sent you our proxy materials because our Board of Directors is
soliciting your proxy to vote your shares of Common Stock at the Annual
Meeting. If you own Common Stock in more than one account, such as
individually and through one or more brokers, you may receive more than one
set of proxy materials. In order to vote all of your shares by proxy, you
should vote the shares in each different account as described below under
"Street Name Holders and Record Holders" and "How Record Holders Vote."
On March 25, 1999, we began mailing these proxy materials to all
shareholders of record at the close of business on March 19, 1999. On the
record date, there were 17,158,913 shares of Common Stock outstanding and
entitled to vote. Each share of Common Stock is entitled to one vote on each
matter submitted to shareholders at the Annual Meeting.
Street Name Holders and Record Holders
If you own shares through a broker, the registered holder of those shares
is the broker or its nominee. Such shares are often referred to as held in
"street name" and you, as the beneficial owner of those shares, do not appear
in Midas' stock register. For street name shares, there is a two-step process
for distributing our proxy materials and tabulating votes. Brokers inform
Midas how many of their clients own Common Stock in street name and the broker
forwards our proxy materials to those beneficial owners. If you receive our
proxy materials from your broker, you should vote your shares by following the
procedures specified by your broker. Shortly before the Annual Meeting, your
broker will tabulate the votes it has received and submit a proxy card to us
reflecting the aggregate votes of the street name holders. If you plan to
attend the Annual Meeting and vote your street name shares in person, you
should contact your broker to obtain a broker's proxy card and bring it and
your admission ticket to the Annual Meeting.
If you are the registered holder of shares, you are the record holder of
those shares and you should vote your shares as described below under "How
Record Holders Vote."
<PAGE>
Matters to be Considered
At the Annual Meeting, shareholders will:
. Elect two directors to terms of office expiring at the 2002 Annual
Meeting of Shareholders;
. Consider a proposal to approve our existing Stock Incentive Plan (the
"Plan") for the purpose of maintaining tax deductibility under Section
162(m) of the Internal Revenue Code;
. Consider a proposal to ratify the appointment of KPMG LLP as the
independent auditors of Midas for the fiscal year ending January 1, 2000;
and
. Transact any other business if properly raised.
How Record Holders Vote
You can vote in person at the Annual Meeting or by proxy. We recommend that
you vote by proxy even if you plan to attend the Annual Meeting. You can
always attend the Annual Meeting and revoke your proxy by voting in person.
There are three ways to vote by proxy:
. By Telephone--You can vote by touch tone telephone by calling toll-free
1-800-OK2-VOTE (1-800-652-8683), 24 hours a day, 7 days a week, and
following the instructions on our proxy card;
. By Internet--You can vote by Internet by going to the website
http://www.vote-by-net.com and following the instructions on our proxy
card; or
. By Mail--You can vote by mail by completing, signing, dating and mailing
our enclosed proxy card.
By giving us your proxy, you are authorizing the individuals named on our
proxy card (the proxies) to vote your shares in the manner you indicate. You
may (i) vote for the election of both of our director nominees, (ii) withhold
authority to vote for both of our director nominees or (iii) vote for the
election of one of our director nominees and withhold authority to vote for
our other nominee by so indicating on the proxy card. You may vote "FOR" or
"AGAINST" or "ABSTAIN" from voting on the proposal to approve the Plan and the
proposal to ratify the appointment of KPMG LLP as the independent auditors of
Midas.
If you sign and return our proxy card without indicating your instructions,
your shares will be voted FOR:
. The election of our two director nominees;
. Approval of the Plan; and
. Ratification of the appointment of KPMG LLP as the independent auditors
of Midas.
If your shares are held in street name and you plan to attend the Annual
Meeting and vote your shares in person, you should contact your broker to
obtain a broker's proxy card and bring it and your admission ticket to the
Annual Meeting.
Information for Employees Who are Shareholders
If you are one of our many employees who participates in the Midas Common
Stock fund under Midas' Retirement Savings Plan (the "Savings Plan"), you will
receive from the Savings Plan trustee a request for voting instructions with
respect to all of the shares allocated to your Savings Plan account. You are
entitled to direct the Savings Plan trustee how to vote your Savings Plan
shares. If you do not give voting instructions to the Savings Plan trustee
within the time specified by the Savings Plan trustee, your Savings Plan
shares will be voted by the Savings Plan trustee in the same proportion as
shares held by the Savings Plan trustee for which voting instructions have
been received.
2
<PAGE>
Quorum Requirement
A quorum is necessary to hold a valid meeting of shareholders. If
shareholders entitled to cast at least a majority of the shares entitled to
vote at the Annual Meeting are present in person or by proxy, a quorum will
exist. Shares owned by Midas are not voted and do not count for quorum
purposes. In order to assure the presence of a quorum at the Annual Meeting,
please vote your shares via the toll-free telephone number or via the Internet
or complete, sign and date our proxy card and return it promptly in the
enclosed postage-paid envelope, even if you plan to attend the Annual Meeting.
Abstentions are counted as present, and non-votes may be counted as present,
to establish a quorum.
Non-Votes
Non-votes occur when shares are specifically indicated as not being voted
as to a particular proposal. If you are the registered holder of shares, your
unvoted shares as to one or more proposals will not be counted as present at
the Annual Meeting as to those proposals, but will be considered present at
the Annual Meeting as to any proposal on which you vote and, in that case,
will count towards the presence of a quorum. If a quorum is present, your
unvoted shares as to the election of directors or another proposal will not
affect the outcome of the election of directors or whether that proposal is
approved or rejected.
If you own shares through a broker and do not vote, your broker, as the
registered holder of your shares, may represent your shares at the Annual
Meeting for the purpose of obtaining a quorum. However, if you do not instruct
your broker how to vote, your broker may vote your shares on most proposals,
but may specify that the broker is not voting your shares on certain other
proposals. These unvoted shares are called "broker non-votes." If a quorum is
present, broker non-votes as to a proposal will not affect whether that
proposal is approved or rejected.
Information About the Vote Necessary for Action to be Taken
If a quorum is present at the Annual Meeting, the two persons receiving the
greatest number of votes will be elected to serve as directors. As a result,
withholding authority to vote for a director nominee and non-votes with
respect to the election of directors will not affect the outcome of the
election of directors. If a quorum is present, approval of the Plan and
ratification of the appointment of KPMG LLP as the independent auditors of
Midas requires the affirmative vote of a majority of the shares of Common
Stock present in person or represented by proxy at the Annual Meeting and
entitled to vote on the proposal. Accordingly, abstentions with respect to
either proposal will be treated as votes against that proposal. Non-votes with
respect to either proposal will not affect whether that proposal is approved
or rejected.
Revocation of Proxies
If you are a registered holder of Common Stock, you may revoke your proxy
by giving written revocation to Midas' Corporate Secretary at any time before
your proxy is voted, by executing a later-dated proxy card which is voted at
the Annual Meeting or by attending the Annual Meeting and voting your shares
in person or through telephone or Internet voting. If your shares are held by
a broker, you must contact your broker to revoke your proxy.
Other Matters
The Board of Directors does not know of any other matter that will be
presented at the Annual Meeting other than the proposals discussed in this
Proxy Statement. Under our By-laws, generally no business besides the three
proposals discussed in this Proxy Statement may be transacted at the Annual
Meeting. However, if any other matter properly comes before the Annual
Meeting, your proxies will act on such matter in their discretion.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors is comprised of six members divided into three
classes, with one class of directors elected each year for a three-year term.
Five of our six directors are not Midas employees. Only independent directors
serve on the Audit and Finance Committee and Compensation Committee.
The terms of Thomas L. Bindley and Robert R. Schoeberl expire at the 1999
Annual Meeting. Messrs. Bindley and Schoeberl are now directors of Midas. If
either nominee fails to stand for election, the proxies named in our proxy
card currently intend to vote for a substitute nominee designated by the Board
of Directors. Alternatively, the Board of Directors may reduce the number of
directors to be elected at the Annual Meeting.
The following sets forth information as to each nominee for election at the
Annual Meeting and each director continuing in office.
Nominees for election at the Annual Meeting to terms expiring in 2002:
<TABLE>
<CAPTION>
Director
Name Since Age Principal Occupation and Directorships
---- -------- --- --------------------------------------------
<C> <C> <C> <S>
Thomas L. Bindley... 1998 55 Mr. Bindley is President of Bindley Capital
Corporation, a private investment and
consulting firm, which he founded in 1998.
From 1992 to 1998, Mr. Bindley served as
Executive Vice President and Chief Financial
Officer of Whitman Corporation, a producer
and distributor of Pepsi-Cola brand products
and a variety of other non-alcoholic
beverages. Prior to joining Whitman, Mr.
Bindley served in a similar capacity with
Square D Company from 1986 to 1991. During
the previous eight years, he held several
executive positions with McGraw Edison
Company, including Senior Vice President--
Finance and Vice President and Treasurer.
Mr. Bindley is a Director of the Lincoln
National Income Fund, Inc. and the Lincoln
National Convertible Securities Fund, Inc.
He also serves as a Director of Junior
Achievement of Chicago and as a member of
the Board of Visitors of the McDonough
School of Business at Georgetown University.
Mr. Bindley received his undergraduate
degree from Georgetown University in 1965
and an MBA degree from the Harvard Business
School in 1969.
Robert R. Schoeberl. 1998 63 Mr. Schoeberl retired in 1994 as Executive
Vice President and Member of the Executive
Committee of Montgomery Ward, a mass
retailer of consumer products. He was Senior
Vice President of Sales and Marketing at GNB
Automotive Batteries from 1982-1985. Mr.
Schoeberl also serves as a Director of Tire
& Battery Corporation and Lund Industries.
He is a member of the Board of Trustees at
Mount Mercy College and the Automotive
Foundation.
</TABLE>
The Board of Directors recommends a vote FOR each of our nominees for
Director.
4
<PAGE>
Directors whose present terms continue until 2000:
<TABLE>
<CAPTION>
Director
Name Since Age Principal Occupation and Directorships
---- -------- --- --------------------------------------------
<C> <C> <C> <S>
Herbert M. Baum..... 1998 62 Mr. Baum is President and Chief Operating
Officer of Hasbro, Inc. Hasbro designs,
manufactures and markets toys, games,
interactive software, puzzles and infant
products. Prior to joining Hasbro in January
1999, Mr. Baum was Chairman and Chief
Executive Officer of Quaker State
Corporation, a distributor and retailer of
automotive
lubricants, from 1993 to 1999. He was
employed by Campbell Soup Company from 1978
to 1993, where he served in various
positions, including Executive Vice
President and President, Campbell
North/South America. Mr. Baum also serves as
a director of Dial Corporation, Fleming
Companies, Inc., Hasbro Inc., Meredith
Corporation and Whitman Corporation. He is
past chairman of the Association of National
Advertisers, as well as a member of the
Board of Directors of the American Marketing
Association. Mr. Baum earned his BA degree
in Business Administration from Drake
University in 1958.
Jarobin Gilbert, Jr. 1998 53 Mr. Gilbert is President and Chief Executive
Officer of DBSS Group, Inc., a management,
planning and international trade advisory
firm. He is a director of Whitman
Corporation and Venator Group, Inc. He also
serves on the Board of Directors of the
American Council on Germany and the Valley
Agency for Youth. He is a permanent member
of the Council on Foreign Relations.
Directors whose present terms continue until 2001:
<CAPTION>
Director
Name Since Age Principal Occupation and Directorships
---- -------- --- --------------------------------------------
<C> <C> <C> <S>
Archie R. Dykes..... 1998 68 Dr. Dykes is Chairman of Capital City
Holdings, Inc., Nashville, Tennessee, a
venture capital organization. Dr. Dykes
served as Chairman and Chief Executive
Officer of the Security Benefit Group of
Companies from 1980 through 1987. He served
as Chancellor of the University of Kansas
from 1973 to 1980. Before that he was
Chancellor of the University of Tennessee.
Dr. Dykes is a director of Fleming
Companies, Inc., Hussmann International,
Inc., Whitman Corporation and the Employment
Corporation. He is also a member of the
Board of Trustees of the Kansas University
Endowment Association and the William Allen
White Foundation. He formerly served as Vice
Chairman of the Commission on the Operation
of the United States Senate and as a member
of the Executive Committee of the
Association of American Universities.
Wendel H. Province.. 1998 51 Mr. Province has served as Chairman and
Chief Executive Officer of Midas since
January 1998. He joined The Pep Boys--Manny,
Moe & Jack in 1989 as Senior Vice President
of Merchandising, eventually becoming
Executive Vice President and Chief Operating
Officer of Pep Boys. Mr. Province's entire
career has been in the automotive service
industry, having previously served as Senior
Vice President of Whitlock and Vice
President of Autozone.
</TABLE>
Meetings and Committees of the Board
The Board of Directors is responsible for the management of Midas. The
Board meets on a regular basis to review Midas' operations, strategic and
business plans, acquisitions and dispositions, and other significant
5
<PAGE>
developments affecting Midas, and to act on matters requiring approval of the
Board. The Board also holds special meetings when important matters require
Board action between scheduled meetings. Members of senior management are
regularly invited to Board meetings to discuss the progress of and future
plans relating to their areas of responsibility.
The Board of Directors met four times in 1998. All directors attended at
least 75% of the aggregate number of meetings of the Board and the Committees
on which that director served.
To facilitate independent director review, and to make the most effective
use of the directors' time and capabilities, the Board has established an
Executive Committee, Audit and Finance Committee and Compensation Committee.
None of the members of the Audit and Finance Committee or Compensation
Committee is, or has been, an employee of Midas. The following table sets
forth the membership of each committee.
<TABLE>
<CAPTION>
Audit and
Executive Finance Compensation
Name Committee Committee Committee
---- --------- --------- ------------
<S> <C> <C> <C>
Herbert M. Baum. X
Thomas L.
Bindley........ X X
Archie R. Dykes. X*
Jarobin Gilbert,
Jr............. X* X
Wendel H.
Province....... X*
Robert R.
Schoeberl...... X X
</TABLE>
- --------
*Chairperson
The Executive Committee acts, except as limited by applicable law, in lieu
of the full Board and between meetings of the Board. The Committee met three
times in 1998.
The Audit and Finance Committee reviews the audit report of Midas as
prepared by its independent auditors, recommends the selection of independent
auditors each year and reviews audit and any non-audit fees paid to the
independent auditors of Midas. The Committee reviews Midas' internal audit
reports and reports its findings and recommendations to the Board for
appropriate action. The Committee also supervises the financial affairs of
Midas. The Committee met two times in 1998.
The Compensation Committee is responsible for supervising the compensation
policies of Midas, administering employee incentive plans, reviewing officers'
salaries, approving significant changes in salaried employee benefits and
recommending to the Board such other forms of remuneration as it deems
appropriate. The Committee met two times in 1998.
The Board of Directors is responsible for considering nominations of
prospective Board members. The Board will consider nominees recommended by
other directors, shareholders and management who present for evaluation by the
Board appropriate data with respect to the suggested candidate, provided that
nominations by shareholders must be made in accordance with the By-Laws. See
"Shareholder Proposals."
Compensation of Directors
Directors who are not employees of Midas receive an annual retainer of
$20,000, plus $1,000 for each meeting of the Board of Directors and $1,000 for
each Board Committee meeting attended. The Chairperson of each Board Committee
is paid an additional $3,000 annual retainer. In 1998, each of these directors
was granted a ten-year option to purchase 1,000 shares of Common Stock with an
exercise price equal to the fair market value of the Common Stock on the date
of grant. Each option becomes exercisable in equal annual installments on each
of the first three anniversaries of the date of grant. In the event of a
Change in Control as defined in Midas' Stock Incentive Plan, each option
becomes fully exercisable or in certain cases will be cashed out by Midas.
6
<PAGE>
PROPOSAL 2
APPROVAL OF EXISTING STOCK INCENTIVE PLAN TO MAINTAIN TAX DEDUCTIBILITY
The Stock Incentive Plan (the "Plan") has been approved and adopted by the
Board of Directors as well as Whitman, the former sole shareholder of Midas.
The Plan became effective on January 30, 1998 when Whitman distributed (the
"Distribution") to its shareholders all of the outstanding shares of Common
Stock of Midas. As explained in the next paragraph, we are submitting the Plan
to shareholders for approval at the Annual Meeting for the purpose of
complying with the shareholder approval requirement of Section 162(m) of the
Code. If shareholders do not approve the Plan at the Annual Meeting, Midas may
not be able to deduct compensation payable under the Plan because of the
deduction limit of Section 162(m). Accordingly, the Board of Directors
recommends a vote FOR approval of the Plan. Unless otherwise instructed, the
proxy holders will vote any proxies received by them FOR approval of the Plan.
Exhibit A to this Proxy Statement contains the complete text of the Plan which
is summarized below.
Section 162(m) of the Internal Revenue Code generally limits to $1 million
the amount that Midas is allowed each year to deduct for the compensation paid
to Midas' chief executive officer and four most highly compensated executive
officers other than the chief executive officer. However, "qualified
performance-based compensation" is not subject to the $1 million deduction
limit. To qualify as performance-based compensation, the following
requirements must be satisfied: (i) the performance goals are determined by a
committee consisting solely of two or more "outside directors", (ii) the
material terms under which the compensation is to be paid, including the
performance goals, are approved by Midas' shareholders, and (iii) if
applicable, the committee certifies that the applicable performance goals were
satisfied before payment of any performance-based compensation is made. The
Compensation Committee, which administers the Plan, currently consists solely
of "outside directors" for purposes of Section 162(m) of the Code. Although
Whitman approved the Plan as Midas' then sole shareholder, regulations under
Section 162(m) require that Midas' public shareholders approve the Plan at the
Annual Meeting in order for compensation arising from Options, SARs,
Performance Awards and certain Restricted Stock Awards (each as defined below)
granted on or after the date of the Annual Meeting to constitute "qualified
performance-based compensation." If shareholders approve the Plan at the
Annual Meeting, certain compensation under the Plan, such as that payable with
respect to Options, SARS and Performance Awards granted after the Annual
Meeting, is not expected to be subject to the $1 million deduction limit, but
other compensation payable under the Plan, such as any Restricted Stock Award
which is not subject to a performance condition to vesting, would be subject
to such limit.
The Plan provides for the grant of stock options (with or without stock
appreciation rights ("SARs"), restricted stock awards ("Restricted Stock
Awards") and performance awards ("Performance Awards"). Stock options may be
either options that qualify under Section 422 of the Code ("Incentive
Options") or nonqualified stock options ("Nonqualified Options," and together
with Incentive Options, "Options"). Incentive Options may not be granted to
non-employee directors.
Eligibility. Options (with or without SARs), Restricted Stock Awards and
Performance Awards may be granted only to persons who are officers, other key
employees or directors of Midas or any of its subsidiaries within the meaning
of Section 424(f) of the Code ("subsidiaries"). As of March 19, 1999,
approximately 40 officers, other key employees and directors were eligible to
participate in the Plan.
Administration. Midas' Compensation Committee (the "Committee") administers
the Plan. Members of the Committee are appointed by the Board. The Committee
presently consists of Messrs. Dykes (Chairperson), Baum and Gilbert, none of
whom is an employee of Midas or a subsidiary. Each member of the Committee is
currently a "Non-Employee Director" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 and is an "outside director" within the
meaning of Section 162(m) of the Code.
The Committee has the authority to determine the individuals who receive
awards, the time or times when they shall receive them and the number of
shares subject to each award, and to make all other determinations necessary
or advisable for administering the Plan.
7
<PAGE>
Available Shares. As of March 19, 1999, 616,612 shares of Common Stock were
available under the Plan. The number of available shares is reduced by the
number of shares which become subject to awards which may be paid solely in
shares or in either shares or cash. To the extent (i) that an outstanding
Option expires or terminates unexercised or is canceled or forfeited (other
than in connection with the exercise of an SAR for Common Stock) or (ii) that
an outstanding Restricted Stock Award or outstanding Performance Award which
may be paid solely in shares or in either shares or cash expires or terminates
without vesting or is canceled or forfeited or (iii) shares are withheld or
delivered to satisfy withholding taxes, then the shares subject to such
expired, terminated, unexercised, canceled or forfeited portion of such
Option, Restricted Stock Award or Performance Award, or the shares so withheld
or delivered, will again be available under the Plan. In the event all or a
portion of an SAR is exercised, the number of shares subject to the related
Option (or portion thereof) will again be available for issuance under the
Plan, except to the extent that shares were actually issued upon exercise of
the SAR. The maximum number of shares with respect to which options, SARs or
Restricted Stock Awards may be granted during any calendar year to any person
is 500,000, subject to adjustment as described in the next paragraph.
In the event of a stock dividend, spin-off, split-up, recapitalization,
merger, consolidation, combination or exchange of shares or similar event, the
aggregate number and class of shares available under the Plan, and the number
and class of shares subject to awards will be appropriately adjusted by the
Committee.
Change in Control. Except as described in the next paragraph, in the event
of a "change in control" of Midas, as defined in the Plan, holders of awards
are entitled to certain accelerated cash payments. Holders have the right at
any time after a change in control to exercise their Options and will receive
from Midas an amount in cash equal to the difference between the fair market
value of the shares covered by such Options on the date of the change in
control and the exercise price. Holders of Restricted Stock Awards will
receive from Midas an amount in cash equal to the fair market value on the
date of the change in control of the Common Stock covered by such Awards.
Holders of Performance Awards for which the applicable Performance Period (as
defined below) has not expired will receive from Midas a pro rated amount in
cash. Holders of Performance Awards which have been earned but not yet paid
are entitled to receive an amount in cash equal to the value of the
Performance Awards.
Notwithstanding the prior paragraph, in the event of a change in control
involving a reorganization, merger or consolidation of Midas or other
disposition of all or substantially all of the assets of Midas or a
liquidation or dissolution of Midas, and in connection with which the holders
of Common Stock receive publicly traded shares of common stock: (i) each
Option and SAR will be exercisable in full; (ii) the Restriction Period (as
defined below) applicable to any Restricted Stock Award will lapse and any
other restrictions, terms or conditions will lapse and/or be deemed to be
satisfied at the maximum value or level; (iii) the performance measures
applicable to any Performance Award will be deemed to be satisfied at the
maximum value and (iv) there will be substituted for each share of Common
Stock remaining available under the Plan, whether or not then subject to an
outstanding award, the number and class of shares into which each outstanding
share of Common Stock is converted pursuant to such change in control. In the
event of any such substitution, the purchase price per share in the case of
any award will be appropriately adjusted by the Committee.
Amendments; Duration. The Board has the power to amend the Plan at any
time, except that shareholder approval is required to increase the maximum
number of shares available under the Plan or effect any change inconsistent
with Section 422 of the Code. The Plan may be terminated at any time by the
Board, except with respect to any awards then outstanding.
Stock Options. The Committee may grant Incentive Options and Nonqualified
Options (with or without SARs) to eligible officers, key employees or
directors. An Incentive Option may not be granted to any person who is not an
employee of Midas or any parent or subsidiary.
The purchase price per share under each Option is determined by the
Committee, except that the purchase price per share upon exercise of an
Incentive Option may not be less than 100% of the fair market value of the
8
<PAGE>
Common Stock at the time of grant. The period during which an Option may be
exercised is determined by the Committee, except that no Incentive Option may
be exercised later than ten years after its date of grant. An Option may be
exercised by giving written notice to Midas specifying the number of shares to
be purchased. The purchase price may be paid (i) in cash or (ii) by delivery
of previously-owned whole shares of Common Stock valued at their fair market
value on the date of exercise.
In general, in the event of the termination of employment or service of a
holder of an Option, each Option will be exercisable only to the extent
exercisable at the date of such termination and may thereafter be exercised at
any time within a period ranging from three months to one year after such
termination, and in no event after the date on which such Option would
otherwise terminate, except that (i) in the event of termination by reason of
retirement, each Nonqualified Option will be fully exercisable at any time up
to and including the date on which the Nonqualified Option would otherwise
terminate and (ii) that in the event of termination for cause or which is
voluntary on the part of the holder without Midas' written consent, each
Option will terminate.
Stock Appreciation Rights. The Committee may grant an SAR (concurrently
with the grant of the Option or, in the case of a Nonqualified Option which is
not intended to be qualified performance-based compensation under Section
162(m) of the Code, subsequent to such grant) to any person who is granted an
Option. SARs enable the holder to receive, in exchange for the surrender of
the portion of any Option that is exercisable on the date of such request,
shares of Common Stock, cash or a combination thereof, in the discretion of
the Committee, having an aggregate fair market value equal to the excess of
the fair market value of one share of Common Stock over the purchase price
specified in the Option, multiplied by the number of shares covered by the
portion of the Option which is surrendered. An SAR may be exercised (i) by
giving written notice to Midas specifying the number of SARs which are being
exercised and (ii) by surrendering to Midas any Options which are canceled by
reason of the exercise of the SAR.
Restricted Stock Awards. Restricted Stock Awards are grants of Common
Stock, the vesting of which is subject to a restriction period (the
"Restriction Period") established by the Committee. During the Restriction
Period, Midas retains custody of the shares subject to each grant, but the
holder of the Restricted Stock Award has the right (unless otherwise provided
in the Restricted Stock Award agreement) to vote such shares and to receive
dividends thereon. During the Restriction Period, the holder may not sell,
pledge or dispose of the shares.
A holder of a Restricted Stock Award will forfeit all of the shares subject
to the award if (i) the holder breaches a restriction or the terms and
conditions established by the Committee or (ii) except as may otherwise be
determined by the Committee, the holder fails to remain continuously in the
employ or service of Midas or a subsidiary at all times during the Restriction
Period.
Performance Awards. The Plan authorizes the grant of Performance Awards
under which a performance period (the "Performance Period") is established by
the Committee at the time of grant. Each Performance Award is assigned a
maximum value which is contingent upon future performance of Midas or a
subsidiary, division or department over the Performance Period. Performance
measures are determined by the Committee prior to the beginning of each
Performance Period but may be subject to later revisions to reflect
significant, unforeseen events or changes as the Committee deems appropriate.
After a Performance Period, the holder of a Performance Award is entitled
to receive payment of an amount, not exceeding the maximum assigned value,
based on the achievement of the performance measures, as determined by the
Committee. Payment of Performance Awards may be made wholly in cash, wholly in
shares or a combination thereof, in lump sum or in installments, and subject
to such vesting and other terms and conditions as determined by the Committee.
In the case of a Performance Award intended to be qualified performance-based
compensation under Section 162(m) of the Code, no payment may be made until
the Committee certifies in writing that the performance measures have been
achieved.
A Performance Award will terminate if the holder does not remain
continuously in the employ or service of Midas or a subsidiary at all times
during the Performance Period, except as may otherwise be determined by the
9
<PAGE>
Committee. In the event that a holder ceases to be an employee or director
after the Performance Period but prior to full payment of the Performance
Award, payment will be made in accordance with terms established by the
Committee. A holder of a Performance Award which is payable in installments of
Common Stock may not sell, pledge or dispose of such Common Stock until the
installments become due.
Performance Goals. The vesting or payment of Performance Awards and certain
Restricted Stock Awards will be subject to the satisfaction of certain
performance goals. The performance goals applicable to a particular award will
be determined by the Committee at the time of grant. At present, no such
awards are outstanding and, accordingly, no performance goals have been
designated by the Committee. Performance goals may be one or more of the
following: return on equity, sales and revenues, total shareholder return,
capitalization, earnings per share, net income, operating income, gross
margins, cost containment and reduction, and cash flow measures. If the
performance goal or goals applicable to a particular award are satisfied, the
amount of compensation would be determined as follows: (i) in the case of a
Performance Award, the amount of compensation would equal the fair market
value of any shares delivered and the amount of cash paid and (ii) in the case
of a Restricted Stock Award that is subject to one or more performance goals,
the amount of compensation would equal the number of shares subject to such
award multiplied by the value of a share of Common Stock on the date the award
vests.
Federal Tax Consequences. The following is a brief summary of certain U.S.
federal income tax consequences generally arising with respect to awards under
the Plan.
An Option holder will not recognize taxable income at the time an Option is
granted and Midas will not be entitled to a tax deduction at such time. An
Option holder will recognize compensation taxable as ordinary income (and
subject to income tax withholding for an employee) upon exercise of a
Nonqualified Option equal to the excess of the fair market value of the shares
purchased over their exercise price, and Midas will be entitled to a
corresponding deduction. An Option holder will not recognize income (except
for purposes of the alternative minimum tax) upon exercise of an Incentive
Option. If the shares acquired by exercise of an Incentive Option are held for
the longer of two years from the date the Incentive Option was granted and one
year from the date it was exercised, any gain or loss arising from a
subsequent disposition of such shares will be taxed as long-term capital gain
or loss, and Midas will not be entitled to any deduction. If, however, such
shares are disposed of within the above-described period, then in the year of
such disposition the Option holder will recognize compensation taxable as
ordinary income equal to the excess of the lesser of (i) the amount realized
upon such disposition and (ii) the fair market value of such shares on the
date of exercise over the exercise price, and Midas will be entitled to a
corresponding deduction.
A holder of SARs will not recognize taxable income at the time SARs are
granted and Midas will not be entitled to a tax deduction at such time. Upon
exercise, the holder will recognize compensation taxable as ordinary income
(and subject to income tax withholding for an employee) in an amount equal to
the fair market value of any shares delivered and the amount of cash paid by
Midas. This amount is deductible by Midas.
A holder of a Restricted Stock Award will not recognize taxable income at
the time the award is granted and Midas will not be entitled to a tax
deduction at such time, unless the holder makes an election to be taxed at
such time. If such election is not made, the holder will recognize
compensation taxable as ordinary income (and subject to income tax withholding
for an employee) at the time the restrictions lapse in an amount equal to the
excess of the fair market value of the shares at such time over the amount, if
any, paid for such shares. The amount of ordinary income recognized by making
the above-described election or upon the lapse of restrictions is deductible
by Midas, except to the extent the deduction limit of Section 162(m) of the
Code applies. In addition, a holder receiving dividends with respect to a
Restricted Stock Award for which the above-described election has not been
made and prior to the time the restrictions lapse will recognize compensation
taxable as ordinary income (and subject to income tax withholding for an
employee), rather than dividend income, in an amount equal to the dividends
paid and Midas will be entitled to a corresponding deduction, except to the
extent the deduction limit of Section 162(m) applies.
A holder of a Performance Award will not recognize taxable income at the
time a Performance Award is granted and Midas will not be entitled to a tax
deduction at such time. Upon the settlement of a Performance
10
<PAGE>
Award, the holder will recognize compensation taxable as ordinary income (and
subject to income tax withholding for an employee) in an amount equal to the
fair market value of any shares delivered and the amount of cash paid by
Midas. This amount is deductible by Midas, except to the extent the deduction
limit of Section 162(m) applies.
The following table shows information regarding Options granted prior to
March 20, 1999. As a result of the Distribution (and except for Mr. Moore),
all Whitman restricted stock awards and Whitman stock options that were
outstanding on January 30, 1998 were canceled and awards of restricted Common
Stock and options to purchase Common Stock were granted in substitution of the
Whitman awards. Such substitute awards are not reflected in the following
table, although Whitman restricted stock awards and Whitman stock options
granted during 1996 and 1997 are reflected in the Summary Compensation Table.
No determination has been made regarding any specific grants that may be made
after the date of this Proxy Statement. On March 19, 1999, the closing sale
price of Common Stock for New York Stock Exchange Composite Transactions was
$34.375 per share.
Stock Incentive Plan
<TABLE>
<CAPTION>
Number
Dollar of
Name and Position Value($) Units
- ----------------- -------- -------
<S> <C> <C>
Wendel H. Province, Chairman and CEO.......................... --(a) 423,636
R. Lee Barclay, Executive Vice President and Chief Financial
Officer...................................................... --(a) 61,364
James D. Hamrick, Senior Vice President--Merchandising........ --(a) 88,182
Terrence E. Reynolds, Senior Vice President and General
Manager--U.S. Operations..................................... --(a) 10,000
John A. Warzecha, Senior Vice President and General Manager--
Midas U.S. .................................................. --(a) 38,182
John R. Moore, Former President and CEO....................... -- --
All Executive Officers as a Group (11 persons)................ --(a) 916,565
All Non-Employee Directors as a Group (5 persons)............. --(a) 5,000
All Employees as a Group
(excluding Executive Officers)(10 persons)................... --(a) 117,500
</TABLE>
- --------
(a) The exercise price per share equals the fair market value of a share of
Common Stock on the date of grant. The general terms of each option are
described above under "Election of Directors--Compensation of Directors"
and "Executive Compensation and Other Information--Option Grants in Fiscal
1998."
The Board of Directors recommends a vote FOR approval of the Plan.
PROPOSAL 3
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed KPMG LLP, independent public
accountants, as the independent auditors of Midas for the fiscal year ending
January 1, 2000. KPMG LLP has been the independent auditors of Midas for more
than 20 years. We expect that a representative of KPMG LLP will attend the
Annual Meeting and will have an opportunity to make a statement and respond to
appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
appointment of KPMG LLP as the independent auditors of Midas for the fiscal
year ending January 1, 2000.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth the beneficial ownership of the Common Stock
on March 19, 1999 by each director of Midas, by each executive officer who is
named in the Summary Compensation Table and by all
11
<PAGE>
directors and executive officers of Midas as a group. The table also sets
forth the beneficial ownership of the Common Stock on December 31, 1998 by
each person known by Midas to be the beneficial owner of more than 5% of the
Common Stock. Each of the following persons has sole voting and investment
power with respect to the shares of Common Stock shown unless otherwise
indicated.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name Beneficial Ownership (a) of Class
---- ------------------------ --------
<S> <C> <C>
Herbert M. Baum.......... 1,353 *
Thomas L. Bindley........ 9,915 *
Archie R. Dykes.......... 941 *
Jarobin Gilbert, Jr...... 138 *
Wendel H. Province....... 201,263 1.2%
Robert R. Schoeberl...... 0 *
R. Lee Barclay........... 148,406 *
James D. Hamrick......... 34,849 *
Terrence E. Reynolds..... 60,797 *
John A. Warzecha......... 70,390 *
John R. Moore............ 44,427 *
All Directors and
Executive
Officers as a Group (16
persons)................ 783,994(b) 4.6
Southeastern Asset
Management, Inc.
6410 Poplar Avenue
Suite #900
Memphis, TN 38119....... 2,534,892(c) 14.8
Capital Research and
Management Company
333 South Hope Street
Los Angeles, CA 90071... 1,125,700(d) 6.6
</TABLE>
- --------
* Less than 1%.
(a) Includes shares which the named director or executive officer has the
right to acquire within 60 days after March 19, 1999 through the exercise
of stock options as follows: Mr. Province, 83,333 shares; Mr. Barclay,
98,683 shares; Mr. Hamrick, 16,667 shares; Mr. Reynolds, 51,661 shares;
and Mr. Warzecha, 41,692 shares.
(b) The number of shares shown as beneficially owned include 387,305 shares
which the directors and executive officers have the right to acquire
within 60 days after March 19, 1999 through the exercise of stock options,
12,029 shares subject to possible forfeiture under outstanding restricted
stock awards, and 52,583 shares representing the vested beneficial
interest of such persons under Midas' Retirement Savings Plan.
(c) Based upon Amendment No. 1 to Schedule 13G furnished to Midas,
Southeastern Asset Management, Inc., an investment adviser registered
under the Investment Advisers Act of 1940 ("Southeastern"), (i) shares
voting power as to all reported shares except that it has sole voting
power as to 198,826 shares and no voting power as to 2,666 shares and (ii)
shares dispositive power as to all reported shares except that it has sole
dispositive power as to 201,492 shares. The Amendment No. 1 to Schedule
13G was furnished jointly by Southeastern, Longleaf Partners Small-Cap
Fund, an investment company registered under the Investment Company Act,
and Mr. O. Mason Hawkins, Chairman of the Board and CEO of Southeastern.
(d) Based upon a Schedule 13G furnished to Midas, Capital Research and
Management Company, an investment adviser registered under the Investment
Advisers Act of 1940 ("CRMC"), has sole dispositive power as to all
reported shares and does not have any voting power as to reported shares.
The Schedule 13G was furnished jointly by CRMC and SMALLCAP World Fund,
Inc., an investment company registered under the Investment Company Act
("SWF"). SWF has sole voting power as to 1,097,000 shares and does not
have any dispositive power as to reported shares.
12
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires directors and
executive officers of Midas and persons who own more than ten percent of the
Common Stock to file with the Securities and Exchange Commission ("SEC")
initial reports of beneficial ownership and reports of changes in ownership of
Common Stock. Such directors, officers and ten percent shareholders are
required to furnish to Midas copies of all Section 16(a) reports that they
file.
To Midas' knowledge, based solely on a review of the copies of such reports
furnished to Midas and written representations that no other reports were
required during the fiscal year ended December 26, 1998, its directors,
executive officers (except that Bruce Hutchison did not file a timely Form 3)
and ten percent shareholders complied with all applicable Section 16(a) filing
requirements.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows annual and long-term compensation for Midas'
Chief Executive Officer, the four other most highly compensated executive
officers of Midas serving at the end of fiscal 1998 and the former Chief
Executive Officer of Midas. On January 30, 1998, Midas was spun-off (the
"Distribution") from Whitman Corporation ("Whitman") and became an
independent, publicly held company. References to restricted stock and stock
options for 1996 and 1997 relate to awards under Whitman's Stock Incentive
Plan.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards(a)
----------------------------------------- -------------------------
Restricted All Other
Fiscal Other Annual Stock Options/SARs Compensation
Name and Principal Position Year Salary($) Bonus($) Compensation($) Awards($)(b) (#) ($)(c)
- --------------------------- ------ --------- -------- --------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wendel H. Province
Chairman and CEO 1998 500,000 800,000 264,374(d) -- 423,636 26,250
R. Lee Barclay 1998 254,000 190,500 7,402 -- 61,364 17,700
Executive Vice President 1997 247,500 41,000 12,605 129,500 30,000 37,365
and Chief Financial Officer 1996 237,750 41,000 8,193 161,600 32,000 41,806
James D. Hamrick
Senior Vice President--
Merchandising 1998 175,000 105,016 183,560(e) -- 88,182 10,500
Terrence E. Reynolds
Senior Vice President 1998 233,000 100,714 3,587 -- 10,000 15,900
and General Manager-- 1997 224,822 32,000 8,193 90,188 17,000 23,151
U.S. Operations 1996 210,000 24,000 8,193 111,100 18,700 26,907
John A. Warzecha 1998 205,000 93,224 1,168 -- 38,182 14,280
Senior Vice President 1997 195,860 33,000 8,193 90,188 17,000 19,998
and General Manager-- Midas 1996 178,875 27,000 8,193 111,100 18,700 23,259
U.S.
John R. Moore 1998 31,250 -- 3,424 -- -- 300,000
Former President 1997 366,000 86,000 16,442 254,375 48,100 35,345
and CEO (f) 1996 352,000 100,000 16,182 315,625 53,000 43,976
</TABLE>
- --------
(a) As a result of the Distribution, all Whitman restricted stock awards and
Whitman stock options, including all restricted stock awards and stock
options for 1996 and 1997, that were outstanding on January 30, 1998
(except those held by Mr. Moore) were canceled and awards of restricted
Common Stock and options to purchase Common Stock were granted in
substitution of the Whitman awards. These substitute awards are not
reflected as compensation during 1998 in either the Summary Compensation
Table or under "Option Grants in Fiscal 1998."
13
<PAGE>
(b) The number of shares of restricted Common Stock and their market value
held by Messrs. Province, Barclay, Hamrick, Reynolds, Warzecha and Moore
at December 26, 1998, was as follows: Mr. Province, 0 shares; Mr. Barclay,
5,847 shares ($186,739); Mr. Hamrick, 0 shares; Mr. Reynolds, 4,054 shares
($129,475); Mr. Warzecha, 4,054 shares ($129,475); and Mr. Moore, 0
shares. Restricted shares vest ratably over a period of three years.
Dividend equivalents are paid on restricted stock at the times and in the
same amount as dividends paid to all shareholders.
(c) The amounts shown for All Other Compensation in 1998 are company matching
contributions under defined contribution plans. The total for Mr. Moore
includes only consulting fees paid under an agreement with Midas that
expired on January 31, 1999.
(d) Includes $84,886 for relocation expenses in connection with Mr. Province's
commencement of employment and $60,000 for a club membership pursuant to
Mr. Province's offer of employment.
(e) Includes $116,870 for relocation expenses in connection with Mr. Hamrick's
commencement of employment.
(f) Mr. Moore retired on January 31, 1998.
Option Grants in Fiscal 1998
The following table shows, for each of the executive officers named in the
Summary Compensation Table, options to purchase Common Stock granted during
fiscal 1998 under Midas' Stock Incentive Plan. No stock appreciation rights
were granted during 1998.
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Appreciation for Option
Underlying Granted to Term (d)
Options Employees Exercise Expiration ------------------------
Name Granted(#) in 1998 Price($/Sh) Date 5% ($) 10% ($)
- ---- ---------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Wendel H. Province...... 250,000(a) 24.2 16.25 1/30/08 2,555,000 6,475,000
60,000(b) 5.8 22.00 9/17/08 830,400 2,103,600
113,636(c) 11.0 22.00 9/17/99 125,000 249,999
R. Lee Barclay.......... 25,000(b) 2.4 22.00 9/17/08 346,000 876,500
36,364(c) 3.5 22.00 9/17/99 40,000 80,001
James D. Hamrick........ 50,000(a) 4.8 17.50 3/02/08 550,500 1,394,500
20,000(b) 1.9 22.00 9/17/08 276,800 701,200
18,182(c) 1.8 22.00 9/17/99 251,639 637,461
Terrence E. Reynolds.... 10,000(b) 1.0 22.00 9/17/08 138,400 350,600
John A. Warzecha........ 20,000(b) 1.9 22.00 9/17/08 276,800 701,200
18,182(c) 1.8 22.00 9/17/99 20,000 40,000
John R. Moore........... -- -- -- -- -- --
</TABLE>
- --------
(a) Option granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant. Option becomes exercisable in equal
annual installments on each of the first three anniversaries of the date
of grant. In the event of a change in control as defined in Midas' Stock
Incentive Plan, option becomes fully exercisable or in certain cases will
be cashed out by Midas.
(b) Option granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant. Option becomes exercisable in equal
annual installments on each of the first five anniversaries of the date of
grant. In the event of a change in control as defined in Midas' Stock
Incentive Plan, option becomes fully exercisable or in certain cases will
be cashed out by Midas.
(c) As described in the Report on Executive Compensation, a special one-time
option to purchase restricted stock was granted with an exercise price
equal to the fair market value of the Common Stock on the date of grant.
Option became exercisable and was exercised on March 17, 1999.
14
<PAGE>
(d) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the SEC and,
therefore, are not intended to forecast possible future appreciation, if
any, in the price of Common Stock. The calculations were based on the
exercise price per share and the term of the options.
Option Exercises in Fiscal 1998 and Fiscal Year-End Option Values
The following table shows information with respect to the executive
officers named in the Summary Compensation Table regarding the exercise of
options to purchase Common Stock during fiscal 1998 and unexercised options
held as of December 26, 1998.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money
Held at Options at
Shares December 26, 1998 December 26, 1998
Acquired on Value (#) ($)(a)
Name Exercise (#) Realized ($)(a) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ --------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Wendel H. Province...... -- -- 0/423,636 0/5,647,383
R. Lee Barclay.......... -- -- 65,627/110,414 1,148,390/1,445,101
James D. Hamrick........ -- -- 0/ 88,182 0/1,101,309
Terrence E. Reynolds.... -- -- 32,628/ 38,097 554,465/ 577,576
John A. Warzecha........ -- -- 22,659/ 66,279 393,844/ 857,635
John R. Moore........... -- -- --/-- --/--
</TABLE>
- --------
(a) Based on the closing price of the Common Stock ($31.9375) on December 24,
1998, as reported for New York Stock Exchange Composite Transactions.
Pension Plans
Midas maintains qualified, defined benefit pension plans and nonqualified
retirement plans paying benefits in optional forms elected by the employee
based upon percentage multipliers which are applied to covered compensation
and credited service. The benefit formula provides a normal retirement benefit
of 1% of covered compensation for each year of credited service (excluding
1989-1991), up to a maximum of 20 years. The benefit formula also includes
special minimum benefits based on credited service accrued through December
31, 1988, and covered compensation at retirement.
15
<PAGE>
The following table reflects future benefits, payable as life annuities upon
retirement, in terms of a range of amounts determined under the benefit formula
mentioned above, at representative periods of credited service. For Messrs.
Barclay, Reynolds and Warzecha the annual benefit will be reduced by $26,880,
$7,692 and $9,180, respectively, to reflect a lump sum payment in 1998 of the
present value of their then accrued benefit under the nonqualified portion of
the pension plan.
Projected Annual Pension
<TABLE>
<CAPTION>
Years of Credited Service (b)
Covered ----------------------------------
Compensation 20
(a) 5 10 15 or more
------------ ------- -------- -------- --------
<S> <C> <C> <C> <C>
$ 300,000............................ $15,000 $ 30,000 $ 45,000 $ 60,000
400,000............................ 20,000 40,000 60,000 80,000
500,000............................ 25,000 50,000 75,000 100,000
600,000............................ 30,000 60,000 90,000 120,000
700,000............................ 35,000 70,000 105,000 140,000
800,000............................ 40,000 80,000 120,000 160,000
900,000............................ 45,000 90,000 135,000 180,000
1,000,000............................ 50,000 100,000 150,000 200,000
1,100,000............................ 55,000 110,000 165,000 220,000
1,200,000............................ 60,000 120,000 180,000 240,000
</TABLE>
- --------
(a) Covered compensation includes salary and bonus, as shown in the Summary
Compensation Table, averaged over the five consecutive years in which such
compensation is the highest.
(b) As of December 31, 1998, Messrs. Province, Barclay, Hamrick, Reynolds and
Warzecha had 1, 18, 1, 10 and 20 years of credited service.
Mr. Moore retired on January 31, 1998. His annual benefit payable from the
Midas Pension Plan for Salaried Employees is $75,509 in the form of a 100%
joint and survivor benefit. Such benefit is not subject to deduction for social
security or other offset amounts. Mr. Moore also received a lump sum
distribution from the Executive Retirement Plan (non-qualified plan) in the
amount of $377,194, representing the equivalent of a straight life annual
benefit of $30,775.
Termination Benefits
Midas has entered into Change in Control Agreements (the "Change in Control
Agreements"), with Messrs. Province, Barclay, Hamrick, Reynolds, Warzecha and
certain other officers. The Change in Control Agreements were a result of a
determination by the Board that it was important and in the best interests of
Midas and its shareholders to ensure that, in the event of a possible change in
control of Midas, the stability and continuity of management would continue
unimpaired, free of the distractions incident to any such possible change in
control.
For purposes of the Change in Control Agreements, a "change in control"
includes (i) a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of Midas' assets, other than a
transaction in which the beneficial owners of the Common Stock prior to the
transaction own at least two-thirds of the voting securities of the corporation
resulting from such transaction, no person owns 25% or more of the voting
securities of the corporation resulting from such transaction and the members
of the Midas Board constitute at least a majority of the members of the board
of directors of the corporation resulting from such transaction, (ii) the
consummation of a plan of complete liquidation or dissolution of Midas, (iii)
the acquisition by any person or group of 25% or more of Midas' voting
securities, or (iv) persons who are directors of Midas on January 30, 1998 (or
their successors as approved by a majority of the members of the Midas Board)
cease to constitute a majority of the Midas Board.
16
<PAGE>
Benefits are payable under the Change in Control Agreements only if a change
in control has occurred and within three years thereafter the officer's
employment is terminated involuntarily without cause or voluntarily by the
officer for reasons such as demotion, relocation, loss of benefits or other
changes. The principal benefits to be provided to officers under the Change in
Control Agreements are (i) a lump sum payment equal to three years'
compensation (base salary and incentive compensation), and (ii) continued
participation in Midas' employee benefit programs or equivalent benefits for
three years following termination. The Change in Control Agreements provide
that, if separation payments thereunder, either alone or together with payments
under any other plan of Midas, would constitute a "parachute payment" as
defined in the Internal Revenue Code (the "Code") and subject the officer to
the excise tax imposed by Section 4999 of the Code, Midas will pay such tax and
any taxes on such payment.
The Change in Control Agreements are not employment agreements, and do not
impair the right of Midas to terminate the employment of the officer with or
without cause prior to a change in control, or, absent a potential or pending
change in control, the right of the officer to voluntarily terminate his
employment.
Agreement with Retired Executive Officer
Midas entered into a one-year consulting agreement with Mr. Moore that
expired on January 31, 1999. Mr. Moore was paid consulting fees of $300,000 and
the Company paid $3,424 in medical premiums during fiscal 1998, as reflected in
the Summary Compensation Table.
Report on Executive Compensation
The Compensation Committee (the "Committee") is comprised of three
independent directors of the Company. The Committee approves the compensation
for the executive officers of the Company named in the Summary Compensation
Table and other executive officers of the Company, except that the Committee
reviews and recommends to the Board of Directors for its approval the
compensation of Mr. Province. The Committee's responsibilities include
authorizing all salary increases for executive officers and direct reports to
the Chief Executive Officer, approving the formula, performance goals and
awards under the Annual Incentive Compensation Plan and the Stock Incentive
Plan, and reviewing salary policy for all of the company's salaried employees.
Actual and potential awards under the Company's programs and plans as well
as performance criteria vary in proportion to each executive officer's
accountability and responsibility for the performance of the Company with
respect to policy making and execution. The Company's salary policies and
executive compensation plans are expressly constituted to encourage and
reinforce individual and collective performance leading to increased
shareholder value. The Company's programs also seek to align short and long-
term executive compensation opportunities with the interests of shareholders.
The short-term incentive plan focuses on continuous improvement in annual
financial performance. The long-term program is designed to reward creation of
shareholder value through stock appreciation and dividend growth.
The Committee, with the assistance of independent outside compensation
consultants, recently assessed the consistency of the Company's executive
compensation programs with the Committee's guidelines, the Company's business
strategy and general market practices. The consultant's review, which was
issued to the Committee in September 1998, was based on a competitive analysis
of the Company's compensation practices to a comparison group of domestic
companies of similar size and engaged in similar lines of business. While not
identical to the peer group of companies used in the Performance Graph
contained in this Proxy Statement, this comparator group includes Pep Boys and
Autozone, both companies that compete for similar executive talent. The
compensation practices were also benchmarked against a much larger database of
companies in order to provide a broader representation of companies from which
the Company competes for executive talent. The consultant concluded that the
executive compensation program was consistent with the Committee's policy on
executive compensation set forth below. For the 1998 fiscal year, executive
compensation was comprised of base salary, bonus compensation under the
Company's Annual Incentive Plan and stock options under the Stock Incentive
Plan.
17
<PAGE>
Base Salary
Base salary ranges for executive officers, as well as all salaried employees
of Midas, are determined pursuant to a widely-used job evaluation system, which
the Company has had in place for some time. However, salary ranges are not
based exclusively on a formula; rather, the salary ranges are derived from each
position's required skills and responsibilities as compared to the average
salary level of like positions within comparable companies provided through
various relevant databases generated by outside compensation consultants. For
the named executive officers, the databases included the group of comparator
companies referenced above.
While the Company generally targets executive base salaries at the market
median (the 50th percentile) to establish the relevant salary ranges, the
Committee considers a number of criteria in establishing and adjusting the base
salary of a particular executive officer, involving, among other things,
individual performance, experience and longer term potential. The Committee
approves salary actions for approximately 30 key executive positions.
The performance of each executive officer is typically evaluated annually
following the close of the fiscal year so each executive's performance can be
assessed within the context of the Company's financial performance for the
year. Individual performance is evaluated based on the specific
responsibilities and accountabilities of the executive, the value of the
services provided, the executive's management skills and experiences, and the
individual contribution to the performance and profitability of the Company.
CEO Compensation
Mr. Province's salary was established pursuant to an offer of employment
just prior to the spin-off of the Company from Whitman Corporation in January
1998, and was consistent with what was deemed necessary and appropriate for a
proven executive to assume the position of Chairman and Chief Executive Officer
of the Company.
Annual Incentives
The executive officers named in the Summary Compensation Table, together
with approximately twenty-five additional executives participate in the Annual
Incentive Plan. The Annual Incentive Plan is administered by the Committee. The
Committee has the power to extend, amend or terminate the Annual Incentive Plan
and to approve or modify the incentive formula, performance measures and/or the
target and actual awards. Target amounts payable under the Annual Incentive
Plan are proportionate to each participant's accountability for the business
plans of the Company and are expressed as a percentage of base salary. The
amount of incentive compensation for any participant in the Annual Incentive
Plan is first dependent on funding the incentive pool based on achievement of
budgeted financial results by the Company. Actual incentive award payouts in
relationship to the target incentive are attributable to pre-established
financial and individual performance objectives. The 1998 incentive
compensation earned by Mr. Province was based on a combination of the plan
funding formula and discretionary determination by the Committee reflecting the
fact that the Company had substantially surpassed its objectives for the year.
Stock-Based Long-Term Incentives
The Company directly aligns the interests of management with those of its
shareholders through the Stock Incentive Plan and through the periodic grant of
stock options to its executives. General stock option grant guidelines have
been established based on competitive practices of similarly situated general
industry and other specialty retail companies, the executive's position, and
the ability to influence longer-term operating performance. In making grants of
stock options, the Committee considers the performance of the Company since the
last grant, the level of stock options previously granted to the executive, and
the performance of the executive.
18
<PAGE>
The Company's Stock Incentive Plan provides for the grant of non-qualified
and incentive stock options at exercise prices equal to the closing market
price on the date of grant. On September 17, 1998, the Committee approved a
grant of options to purchase shares for Messrs. Province (60,000 shares),
Barclay (25,000 shares), Warzecha (20,000 shares), Hamrick (20,000 shares) and
Reynolds (10,000 shares). Options granted to the Chief Executive Officer and
the other executives are generally exercisable for ten years, absent earlier
termination of employment. Outstanding options granted to executives prior to
September 17, 1998 provide for deferred vesting over three years and all
options granted on or after September 17, 1998 provide for deferred vesting
over five years to encourage retention of executives. The Stock Incentive Plan
provides executives of the Company with a significant interest in the creation
of shareholder value through long-term growth of the price of the Company's
Common Stock.
To support the Company's executive share ownership philosophy, and promote
actual ownership by the executive officers to further align their interests
with those of shareholders, the Committee recommended and approved on September
17, 1998 a special one-time option to facilitate the purchase of restricted
stock under an Executive Stock Ownership Program. In this regard, the Company
agreed to lend certain officers funds sufficient to exercise this option and
purchase restricted stock. These options have been exercised with the Company
lending the purchase price. Such loans provide for full recourse in the event
of default. The restrictions on the stock lapse after three years and the loan
must be paid in full within twelve months following the lapse in the
restrictions on the stock.
The Committee's current policy is that compensation payable to the Company's
named executive officers should generally meet the conditions required for full
deductibility under Section 162(m) of the Internal Revenue Code. However, tax
deductibility is only one criterion the Committee considers when establishing
compensation programs and strategy. The Stock Incentive Plan is structured with
the intention that compensation payable pursuant to this plan would qualify as
"performance based" compensation which is not subject to the $1 million
deductibility limit under Section 162(m).
This report is submitted by the Compensation Committee:
Archie R. Dykes, Chairman
Herbert M. Baum
Jarobin Gilbert, Jr.
19
<PAGE>
Performance Graph
The following performance graph compares Midas' cumulative total shareholder
return on the Common Stock from January 30, 1998 (the date of the Distribution)
to December 26, 1998 with the cumulative total return of Standard & Poor's 500
Stock Index ("S&P 500") and the Standard & Poor's Retail Specialty Index ("Peer
Group"), neither of which includes Midas. The companies in the Peer Group
include AutoZone Inc., Pep Boys, Staples Inc., Toys R Us Holding Cos. and
Venator Group Inc. These comparisons assume an initial investment of $100 and
the reinvestment of dividends.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
1/30/98 3/28/98 6/27/98 9/26/98 12/26/98
- ------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Midas 100.00 125.29 128.79 147.86 198.83
- ------------------------------------------------------
S&P 500 100.00 111.75 115.60 106.58 125.09
- ------------------------------------------------------
Peer Group 100.00 115.61 96.31 66.12 86.55
</TABLE>
20
<PAGE>
CERTAIN TRANSACTIONS
Distribution and Indemnity Agreement
Midas entered into a Distribution and Indemnity Agreement with Whitman
providing for, among other things, the principal corporate transactions
required to effect the Distribution and certain other agreements governing the
relationship between Midas and Whitman with respect to or as a result of the
Distribution. In January 1998, as part of the Distribution, Midas paid Whitman
$72.4 million to settle intercompany loans and advances and a $137.6 million
cash dividend. In 1998, Midas also paid $1.1 million to Whitman as Midas'
allocation from Whitman of Whitman's expenses to its operating subsidiaries
and $0.5 million to Whitman as interest on loans and advances from Whitman.
The Distribution Agreement also provides that (i) Whitman will indemnify
Midas against any liabilities arising out of the businesses conducted or to be
conducted by Whitman or any subsidiary of Whitman and any previously-owned
division, subsidiary or affiliate of Whitman (other than Midas); and (ii)
Midas will indemnify Whitman against any liabilities arising out of businesses
conducted or to be conducted by Midas or any subsidiary of Midas and any
previously-owned division, subsidiary or affiliate of Midas; provided,
however, that neither Midas nor Whitman will have any liability to each other
for taxes except as provided in the Tax Sharing Agreement. The indemnities
will be limited to the extent that the indemnitee receives insurance proceeds
or a tax benefit with respect to the claimed loss.
The Distribution Agreement provides that, except as otherwise set forth
therein or in the Tax Sharing Agreement, all costs and expenses arising on or
prior to January 30, 1998 in connection with the Distribution will be paid by
Whitman, other than (i) costs related to Midas' new financing arrangements, to
the listing of Midas' Common Stock on the New York Stock Exchange and to
printing new stock certificates, (ii) fees of rating agencies for rating
Midas' securities, (iii) one-third of the legal fees for the Distribution,
(iv) the accounting and audit fees related to the Distribution, (v) fees of
outside consultants retained by Midas and (vi) one-third of the cost of
printing and distributing Midas' Registration Statement on Form 10. Midas paid
$823,441 to Whitman in reimbursement of costs and expenses payable by Midas
pursuant to the Distribution Agreement.
In connection with certain employee compensation and benefit matters, the
Distribution Agreement provides that, with certain exceptions, Midas and its
subsidiaries will be responsible for all liabilities to, or under benefit
plans or programs with respect to, any current, former and future employee
(and their dependents and beneficiaries) of Midas or any of its subsidiaries
prior to, on and after the Distribution.
Tax Sharing Agreement
Midas will be included in the consolidated U.S. Federal income tax returns
of Whitman through and including January 30, 1998. Whitman had previously
entered into a Tax Allocation Agreement (the "Tax Allocation Agreement") with
Midas International Corporation, a subsidiary of Midas, with respect to U.S.
Federal income taxes. The Tax Allocation Agreement provided, among other
things, that if Midas International Corporation left the consolidated group,
such agreement would terminate and Midas International Corporation would not
be entitled to the value of any tax benefits that it may have made available
to the Whitman consolidated group while included in such group.
As part of the Distribution, Midas and Midas International Corporation
entered into an agreement with Whitman (the "Tax Sharing Agreement") which
replaced the Tax Allocation Agreement. The Tax Sharing Agreement provides that
in order to avoid adversely affecting the intended tax consequences of the
Distribution, Midas will not (i) cease to engage in an active trade or
business within the meaning of the Code, (ii) issue any shares of Midas'
stock, except for issuances of stock or stock options which do not, in the
aggregate, exceed 20% of the issued and outstanding Common Stock immediately
following the Distribution, (iii) purchase any shares of its stock other than
through stock purchases permitted by the tax ruling related to the
Distribution, (iv) liquidate or merge with any other corporation or transfer
substantially all of its assets to any other corporation, or (v) recommend to
its shareholders that they agree to an acquisition of their Common Stock by
another entity,
21
<PAGE>
unless either (a) an opinion is obtained from counsel to Midas which counsel
shall be satisfactory to Whitman, or (b) a supplemental ruling is obtained
from the Internal Revenue Service to the effect that such act or omission
would not adversely affect the U.S. Federal income tax consequences, as set
forth in the tax ruling, of the Distribution to any of Whitman, its
shareholders or Midas. Midas does not expect that these limitations will
significantly inhibit its activities or its ability to respond to
unanticipated developments. In addition, the Tax Sharing Agreement provides
that, if as a result of any transaction occurring after January 30, 1998
involving either the stock, assets or debt, or any combination thereof, of
Midas or any of its subsidiaries, the Distribution fails to qualify as tax-
free under Section 355 of the Code, Midas will indemnify Whitman for all
taxes, including penalties and interest, incurred by Whitman by reason of the
Distribution. The Tax Sharing Agreement further provides that if the
Distribution fails to qualify as tax-free under Section 355 of the Code as a
result of any transaction occurring on or before January 30, 1998 and
involving the stock, assets or debt, or any combination thereof, of Midas or
any of its subsidiaries, then Whitman, and not Midas, will be liable for such
taxes described above.
The Tax Sharing Agreement generally provides that Midas will be liable for
all Federal, state, local and foreign tax liabilities, including any such
liabilities resulting from the audit or other adjustment to previously filed
tax returns, which are attributable to Midas' businesses, and that Whitman
will be responsible for all such taxes attributable to the businesses retained
by Whitman.
Other Transactions
In connection with Midas' executive stock ownership guidelines, Messrs.
Province, Barclay, McEvoy, Warzecha, Hamrick, Hutchison, Sorensen and Klaisle
became indebted to Midas solely for the purpose of purchasing shares of Common
Stock. Each borrower is an executive officer of Midas and Mr. Province is also
Chairman of the Board. Each loan bears interest at 6% per annum and has a
four-year term that is accelerated no later than one month after a termination
of employment. Midas has agreed to waive interest that accrues while the
borrower is employed by Midas. The largest amounts outstanding since the
beginning of fiscal year 1998, and the amounts outstanding at March 19, 1999,
were $2,479,992 for Mr. Province (113,636 shares); $800,008 for Mr. Barclay
(36,364 shares); $800,009 for Mr. McEvoy (35,655 shares); and $400,004 for
each of Messrs. Warzecha, Hamrick, Hutchison, Sorensen and Klaisle (18,182
shares each).
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in Midas' proxy materials for the
2000 Annual Meeting of Shareholders, a shareholder proposal must be received
by the Corporate Secretary no later than December 3, 1999. In addition,
regardless of whether a shareholder proposal is set forth in this Proxy
Statement as a matter to be considered by shareholders, Midas' Bylaws
establish an advance notice procedure for shareholder proposals to be brought
before any annual meeting of shareholders, including proposed nominations of
persons for election to the Board of Directors. Shareholders at the 1999
Annual Meeting may consider a proposal or nomination brought by a shareholder
of record on March 19, 1999, who is entitled to vote at the 1999 Annual
Meeting and who has given the Corporate Secretary timely written notice, in
proper form, of the shareholder's proposal or nomination. A shareholder
proposal or nomination intended to be brought before the 1999 Annual Meeting
must have been received by the Corporate Secretary after the close of business
on February 6, 1999 and prior to the close of business on February 26, 1999.
The Corporate Secretary did not receive notice of any shareholder proposal or
nomination relating to the 1999 Annual Meeting. The 2000 Annual Meeting is
expected to be held on May 4, 2000. A shareholder proposal or nomination
intended to be brought before the 2000 Annual Meeting must be received by the
Corporate Secretary after the close of business on February 6, 2000 and prior
to the close of business on February 26, 2000. All proposals and nominations
should be addressed to Midas, Inc., 225 North Michigan Avenue, Chicago,
Illinois 60601, Attention: Corporate Secretary. After July 1, 1999, Midas'
address will be 1300 Arlington Heights Road, Itasca, Illinois 60143.
22
<PAGE>
GENERAL
Midas will bear the entire cost of soliciting proxies for the Annual
Meeting. Proxies will be solicited by mail, and may be solicited personally by
directors, officers or employees of Midas who will not receive special
compensation for such services. Midas will reimburse brokers, dealers, banks
and trustees, or their nominees, for reasonable expenses incurred by them in
forwarding proxy material to beneficial owners of shares of Common Stock.
Midas has also engaged Kissel-Blake to solicit proxies at a cost of
approximately $6,500.
We mailed a copy of Midas' 1998 Annual Report to Shareholders with this
Proxy Statement.
A copy of Midas' 1998 Annual Report on Form 10-K may be obtained without
charge upon written request to Midas, Inc., 225 North Michigan Avenue,
Chicago, Illinois 60601, Attention: Corporate Secretary. After July 1, 1999,
Midas' address will be 1300 Arlington Heights Road, Itasca, Illinois 60143. A
reasonable charge will be made for requested exhibits.
By Order of the Board of Directors
Robert H. Sorensen
Corporate Secretary
Chicago, Illinois
March 25, 1999
23
<PAGE>
MIDAS, INC.
----------------
STOCK INCENTIVE PLAN
(as adopted November 21, 1997)
1.Definitions
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time. Reference in the Plan to any section of the
Code shall be deemed to include any amendments or successor provision to
such section and any regulations under such section.
(b) "Committee" shall mean the Committee selected by the Board of
Directors as provided in Paragraph 4, consisting of two or more members of
the Board of Directors, each of whom shall be (i) a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Exchange Act, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code.
(c) "Common Stock" shall mean common stock of the Corporation, with par
value of $.001 per share.
(d) "Corporation" shall mean Midas, Inc., a Delaware corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the Performance
Award provisions of the Plan.
(i) "Plan" shall mean the Corporation's Stock Incentive Plan, as amended
from time to time.
(j) "Restricted Stock Award" shall mean an award of Common Stock granted
under the Restricted Stock Award provisions of the Plan.
(k) "Retirement" shall mean cessation of active employment or service
with the Corporation or a subsidiary pursuant to the Corporation's
retirement policies and programs.
(l) "SAR" shall mean a stock appreciation right which is issued in tandem
with, or by reference to, an Option, which entitles the Holder thereof to
receive, upon exercise of such SAR and surrender for cancellation of all or
a portion of such Option, shares of Common Stock, cash or a combination
thereof with an aggregate value equal to the excess of the fair market
value of one share of Common Stock on the date of exercise over the
purchase price specified in such Option, multiplied by the number of shares
of Common Stock subject to such Option, or portion thereof, which is
surrendered.
2.Purpose
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries, to serve as directors and to provide a means whereby those
persons upon whom the responsibilities of the successful administration and
management of the Corporation or its subsidiaries rest, and whose present and
potential contributions to the welfare of the Corporation or its subsidiaries
are of importance, can acquire and maintain stock ownership. Such persons
should thus have a greater than ordinary concern for the welfare of the
Corporation and/or its subsidiaries and would be expected to strengthen and
maintain a desire to remain in the employ or service of the Corporation or its
subsidiaries. It is a further purpose of the Plan to provide such persons with
additional incentive and reward opportunities designed to enhance the
profitable growth of the Corporation. So that the maximum incentive can be
provided each participant in the Plan by granting such participant an Option
or award best suited to such participant's circumstances, the Plan provides
for granting "incentive stock options" (as defined in Section 422 of the Code)
and nonqualified stock options (with or without SARs), Restricted Stock Awards
and Performance Awards, or any combination of the foregoing.
<PAGE>
3.Effective Date and Duration of the Plan
The Plan is subject to approval by Whitman Corporation ("Whitman"), the
sole shareholder of the Corporation, and shall become effective concurrently
with the distribution by Whitman to its shareholders of all of the outstanding
shares of Common Stock held by Whitman (the "Distribution"). The Plan may be
submitted at the 1999 annual meeting of the shareholders of the Corporation
for approval in accordance with Section 162(m) of the Code. The Plan shall
remain in effect until all Options granted under the Plan have been exercised,
all restrictions imposed upon Restricted Stock Awards have been eliminated and
all Performance Awards have been satisfied.
4.Administration
The members of the Committee shall be selected by the Board of Directors to
administer the Plan. A majority of the Committee shall constitute a quorum.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to receive Options
(with or without SARs), Restricted Stock Awards and Performance Awards, the
time or times when they shall receive them, whether an "incentive stock
option" under Section 422 of the Code or nonqualified option shall be granted,
the number of shares to be subject to each Option and Restricted Stock Award
and the value of each Performance Award. In making such determinations the
Committee shall take into account the nature of the services rendered by each
individual, such individual's present and potential contribution to the
Corporation's success, and such other factors as the Committee shall deem
relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and
Performance Award agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan and to determine the terms,
restrictions and provisions of the Option, Restricted Stock Award and
Performance Award agreements (which need not be identical) including such
terms, restrictions and provisions as shall be requisite in the judgment of
the Committee to cause certain Options to qualify as "incentive stock options"
under Section 422 of the Code, and to make all other determinations necessary
or advisable for administering the Plan. The Committee may, in its sole
discretion and for any reason at any time, subject to the requirements imposed
under Section 162(m) of the Code and regulations promulgated thereunder in the
case of an award intended to be qualified performance-based compensation, take
action such that (i) any or all outstanding Options shall become exercisable
in part or in full, (ii) all or some of the restrictions applicable to any
outstanding Restricted Stock Award shall lapse and (iii) all or a portion of
any outstanding Performance Award shall be satisfied. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any Option, Restricted Stock Award or Performance Award
agreement in the manner and to the extent it shall deem expedient to carry it
into effect, and it shall be the sole and final judge of such expediency. The
determinations of the Committee on matters referred to in this Paragraph 4
shall be conclusive.
The Committee shall act by majority action at a meeting, except that action
permitted to be taken at a meeting may be taken without a meeting if written
consent thereto is given by all members of the Committee.
5. Grants of Options, Restricted Stock Awards and Performance Awards; Shares
Subject to the Plan
The Committee may from time to time grant both "incentive stock options"
under Section 422 of the Code and nonqualified options to purchase shares of
Common Stock (with or without SARs), Restricted Stock Awards and Performance
Awards to one or more officers, key employees or directors determined by it to
be eligible for participation in accordance with the provisions of Paragraph 6
and providing for the issuance of such number of shares and, in the case of
Performance Awards, having such value as in the discretion of the Committee
may be fitting and proper. Subject to Paragraph 10, not more than 1,000,000
shares of Common Stock may be issued upon exercise of Options or SARs or
pursuant to Restricted Stock Awards or Performance Awards granted under the
Plan, plus the number of shares of Common Stock issued under Options or
Restricted Stock Awards
A-2
<PAGE>
substituted for options to purchase Common Stock or restricted stock awards of
Whitman in connection with the Distribution. Performance Awards which may be
exercised or paid only in cash shall not affect the number of shares of Common
Stock available for issuance under the Plan.
The Common Stock to be offered under the Plan pursuant to Options, SARs,
Restricted Stock Awards and Performance Awards may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and reacquired
by the Corporation.
The number of shares of Common Stock available for issuance under the Plan
shall be reduced by the sum of the aggregate number of shares of Common Stock
then subject to outstanding Options, Restricted Stock Awards and outstanding
Performance Awards which may be paid solely in shares of Common Stock or in
either shares of Common Stock or cash. To the extent (i) that an outstanding
Option expires or terminates unexercised or is canceled or forfeited (other
than in connection with the exercise of an SAR for Common Stock as set forth
in the immediately following sentence) or (ii) that an outstanding Restricted
Stock Award or outstanding Performance Award which may be paid solely in
shares of Common Stock or in either shares of Common Stock or cash expires or
terminates without vesting or is canceled or forfeited or (iii) shares of
Common Stock are withheld or delivered pursuant to the provisions on Share
Withholding set forth in Paragraph 11(A), then the shares of Common Stock
subject to such expired, terminated, unexercised, canceled or forfeited
portion of such Option, Restricted Stock Award or Performance Award, or the
shares of Common Stock so withheld or delivered, shall again be available for
issuance under the Plan. In the event all or a portion of an SAR is exercised,
the number of shares of Common Stock subject to the related Option (or portion
thereof) shall again be available for issuance under the Plan, except to the
extent that shares of Common Stock were actually issued upon exercise of the
SAR.
To the extent necessary for an award hereunder to be qualified performance-
based compensation under Section 162(m) of the Code and the rules and
regulations thereunder, the maximum number of shares of Common Stock with
respect to which Options, SARs or Restricted Stock Awards or a combination
thereof may be granted during any calendar year to any person shall be
200,000, subject to adjustment as provided in Paragraph 10. Grants of Options,
Restricted Stock Awards or Performance Awards that are canceled shall count
toward the maximum stated in the preceding sentence.
6. Eligibility
Options, Restricted Stock Awards and Performance Awards may be granted only
to persons who, at the time of the grant or award, are officers, other key
employees or directors of the Corporation or any of its present and future
subsidiaries within the meaning of Section 424(f) of the Code (herein called
subsidiaries). Options, Restricted Stock Awards or Performance Awards, or any
combination thereof, may be granted on more than one occasion to the same
person. A person who has received or is eligible to receive options to
purchase stock of any subsidiary of the Corporation or incentive awards from
any subsidiary of the Corporation will not, by reason thereof, be ineligible
to receive Options, Restricted Stock Awards or Performance Awards under the
Plan unless prohibited by the plan of such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an
agreement or understanding, expressed or implied, on the part of the
Corporation or its subsidiaries to employ any person for any specific period
of time.
7. Options and SARs
(A) Number of Shares. The Committee may, in its discretion, grant Options
to such eligible persons as may be selected by the Committee. With respect to
each Option, the Committee shall determine the number of shares subject to the
Option and the manner and the time of exercise of such Option. The Committee
shall make such other determinations which in its discretion appear to be
fitting and proper.
A-3
<PAGE>
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent with
the provisions of the Plan as the Committee from time to time shall approve,
including, without limitation, provisions to qualify certain Options as
"incentive stock options" under Section 422 of the Code. An incentive stock
option may not be granted to any person who is not an employee of the
Corporation or any parent or subsidiary (as defined in Section 424 of the
Code). Each incentive stock option shall be granted within ten years of the
earlier of the date the Plan is adopted by the Corporation's Board of
Directors and the date the Plan is approved by Whitman as the sole shareholder
of the Corporation. To the extent that the aggregate fair market value
(determined as of the date of grant) of shares of Common Stock with respect to
which Options designated as incentive stock options are exercisable for the
first time by a person during any calendar year exceeds the amount (currently
$100,000) established by the Code, such Options shall be deemed to be non-
qualified stock options.
(C) Option Price and Term of Option. The purchase price per share of the
Common Stock under each Option shall be determined by the Committee; provided,
however, that the purchase price per share of Common Stock purchasable upon
exercise of an incentive stock option shall not be less than 100% of the fair
market value of the Common Stock at the date such Option is granted; provided,
further, that if an incentive stock option shall be granted to any person who,
at the time such Option is granted, owns capital stock of the Corporation
possessing more than ten percent of the total combined voting power of all
classes of capital stock of the Corporation (or of any parent or subsidiary of
the Corporation) (a "Ten Percent Holder"), such purchase price shall be the
price (currently 110% of fair market value) required by the Code in order to
constitute an incentive stock option.
The period during which an Option may be exercised shall be determined by
the Committee; provided, however, that no incentive stock option shall be
exercised later than ten years after its date of grant; provided further, that
if an incentive stock option shall be granted to a Ten Percent Holder, such
option shall not be exercised later than five years after its date of grant.
The Committee shall determine whether an Option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time.
An exercisable Option, or portion thereof, may be exercised only with respect
to whole shares of Common Stock.
(D) Payment. An Option may be exercised by giving written notice to the
Corporation specifying the number of shares of Common Stock to be purchased
and accompanied by payment of the purchase price in full (or arrangement made
for such payment to the Corporation's satisfaction). As determined by the
Committee at the time of grant of an Option and set forth in the agreement
evidencing the Option, the purchase price may be paid (a) in cash or (b) by
delivery (either actual delivery or by attestation procedures established by
the Corporation) of previously-owned whole shares of Common Stock (for which
the holder has good title, free and clear of all liens and encumbrances and
which such holder either (i) has held for at least six months or (ii) has
purchased on the open market) valued at their fair market value on the date of
exercise. If applicable, a person exercising an Option shall surrender to the
Corporation any SARs which are canceled by reason of the exercise of such
Option.
(E) Termination of Employment or Service or Death of Holder. In the event
of any termination of the employment or service of a Holder with the
Corporation or one of its subsidiaries, other than by reason of death or, in
the case of a Holder of a nonqualified option, Retirement, the Holder may
(unless otherwise provided in the Option agreement) exercise each Option held
by such Holder at any time within three months (or one year if the Holder is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code) after such termination of employment or service, but only if and to the
extent such Option is exercisable at the date of such termination of
employment or service, and in no event after the date on which such Option
would otherwise terminate; provided, however, that if such termination of
employment or service is for cause or voluntary on the part of the Holder
without the written consent of the Corporation, any Option held by such Holder
under the Plan shall terminate unless otherwise provided in the Option
agreement.
In the event of the termination of employment or service of a Holder of a
nonqualified option by reason of Retirement, then each nonqualified option
held by the Holder shall be fully exercisable, and, subject to the
A-4
<PAGE>
following paragraph, such nonqualified option shall be exercisable by the
Holder at any time up to and including (but not after) the date on which the
nonqualified option would otherwise terminate (unless otherwise provided in
the Option Agreement).
In the event of the death of a Holder (i) while employed by or providing
service to the Corporation or one of its subsidiaries or after Retirement,
(ii) within three months after termination of the Holder's employment, other
than a termination by reason of permanent and total disability within the
meaning of Section 22(e)(3) of the Code, or (iii) within one year after
termination of the Holder's employment by reason of such disability, then each
Option held by such Holder may be exercised by the legatees of the Holder
under his last will, or by his personal representatives or distributees, at
any time within a period of nine months after the Holder's death, but only if
and to the extent such Option is exercisable at the date of death (unless
death occurs while the Holder is employed by or providing service to the
Corporation or one of its subsidiaries, in which case each Option held by the
Holder shall be fully exercisable), and in no event after the date on which
such Option would otherwise terminate.
(F) Privileges of the Holder as Shareholder. The Holder shall be entitled
to all the privileges and rights of a shareholder with respect only to such
shares of Common Stock as have been actually purchased under the Option and
registered in the Holder's name.
(G) SARs. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or, in the case of a nonqualified
option which is not intended to be qualified performance-based compensation
under Section 162(m) of the Code and the rules and regulations thereunder,
subsequent to such grant) to any Holder of any Option granted under the Plan
(or such Holder's legatees, personal representatives or distributees then
entitled to exercise such Option). An SAR may be exercised (i) by giving
written notice to the Corporation specifying the number of SARs which are
being exercised and (ii) by surrendering to the Corporation any Options which
are canceled by reason of the exercise of the SAR. An SAR shall be exercisable
upon such additional terms and conditions as may from time to time be
prescribed by the Committee. No fractional share shall be issued upon the
exercise of any SAR.
(H) Non-Transferability. Unless otherwise specified in the agreement
evidencing an Option or SAR, no Option or SAR hereunder shall be transferable
other than by will or the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Corporation. Except to the
extent permitted by the foregoing sentence, each Option or SAR may be
exercised during the Holder's lifetime only by the Holder or the Holder's
legal representative or similar person. Except as permitted by the second
preceding sentence, no Option or SAR hereunder shall be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether
by operation of law or otherwise) or be subject to execution, attachment or
similar process. Upon any attempt to so sell, transfer, assign, pledge,
hypothecate, encumber or otherwise dispose of any Option or SAR hereunder,
such Option or SAR and all rights thereunder shall immediately become null and
void.
8. Restricted Stock Awards
(A) Restriction Period to Be Established by the Committee. At the time of
the making of a Restricted Stock Award, the Committee shall establish a period
of time (the "Restriction Period") applicable to such award. The Committee may
establish different Restriction Periods from time to time and each Restricted
Stock Award may have a different Restriction Period, in the discretion of the
Committee.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to a
Restricted Stock Award, shall be represented by a stock certificate or book-
entry credits registered in the name of the Holder who receives the Restricted
Stock Award or a nominee for the benefit of the Holder. The Holder shall have
the right to receive dividends (or the cash equivalent thereof) during the
Restriction Period and shall also have the right to vote such Common Stock and
all other shareholder's rights (in each case unless otherwise provided in the
agreement evidencing the Restricted Stock Award), with the exception that (i)
the Holder shall not be entitled to delivery of the stock certificate (or the
removal of restrictions in the Corporation's books and records) until the
Restriction
A-5
<PAGE>
Period established by the Committee pursuant to Paragraph 8(A) shall have
expired, (ii) the Corporation shall retain custody of the stock certificate
during the Restriction Period, (iii) the Holder may not sell, transfer,
pledge, exchange, hypothecate or dispose of such Common Stock during the
Restriction Period, and (iv) a breach of restriction or breach of terms and
conditions established by the Committee pursuant to the Restricted Stock Award
shall cause a forfeiture of the Restricted Stock Award. If requested by the
Corporation, a Holder of a Restricted Stock Award shall deposit with the
Corporation stock powers or other instruments of assignment (including a power
of attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate by the Corporation, which would permit transfer to
the Corporation of all or a portion of the shares of Common Stock subject to
the Restricted Stock Award in the event such award is forfeited in whole or in
part. A distribution with respect to shares of Common Stock, other than a
distribution in cash, shall be subject to the same restrictions as the shares
of Common Stock with respect to which such distribution was made, unless
otherwise determined by the Committee. The Committee may, in addition,
prescribe additional restrictions, terms or conditions upon or to the
Restricted Stock Award in the manner prescribed by Paragraph 4. The Committee
may, in its sole discretion, also establish rules pertaining to the Restricted
Stock Award in the event of termination of employment or service (by
Retirement, disability, death or otherwise) of a Holder of such award prior to
the expiration of the Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to
time shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made by
the Committee whereby the Holder receives Common Stock subject to those terms,
conditions and restrictions established by the Committee but is not required
to make any payment for said Common Stock. The Committee may also establish
terms as to each Holder whereby such Holder, as a condition to the Restricted
Stock Award, is required to pay, in cash or other consideration, all (or any
lesser amount than all) of the fair market value of the Common Stock,
determined as of the date the Restricted Stock Award is made.
(E) Termination of Employment or Service or Death of Holder. A Restricted
Stock Award shall terminate for all purposes if the Holder does not remain
continuously in the employ or service of the Corporation or a subsidiary at
all times during the applicable Restriction Period, except as may otherwise be
determined by the Committee.
9. Performance Awards
(A) Performance Period. The Committee shall establish with respect to each
Performance Award a performance period over which the performance of the
Holder shall be measured. The performance period shall be established at the
time of such award.
(B) Performance Awards. Each Performance Award shall have a maximum value
established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an
eligible person contingent upon future performance of the Corporation and/or
the Corporation's subsidiary, division or department in which such person is
employed over the performance period. The Committee shall establish the
performance measures applicable to such performance. The performance measures
determined by the Committee shall be established prior to the beginning of
each performance period but, except as necessary to qualify a Performance
Award as "performance-based compensation" under Section 162(m) of the Code and
the rules and regulations thereunder, may be subject to such later revisions
to reflect significant, unforeseen events or changes, as the Committee shall
deem appropriate.
A-6
<PAGE>
(D) Award Criteria. In determining the value of Performance Awards, the
Committee shall take into account an eligible person's responsibility level,
performance, potential, cash compensation level, unexercised stock options,
other incentive awards and such other considerations as it deems appropriate.
Notwithstanding the preceding sentence, to the extent necessary for a
Performance Award to be qualified performance-based compensation under Section
162(m) of the Code and the rules and regulations thereunder, the performance
period shall be not less than three years and, if a Performance Award is
payable in shares of Common Stock, the maximum number of shares that may be
paid under the Performance Award during such performance period shall be
500,000 and, if a Performance Award is payable in cash, the maximum amount
that may be paid under the Performance Award during such performance period
shall be $10,000,000.
(E) Payment. Following the end of each performance period, the Holder of
each Performance Award shall be entitled to receive payment of an amount, not
exceeding the maximum value of the Performance Award, based on the achievement
of the performance measures for such performance period, as determined by the
Committee. Payment of Performance Awards may be made wholly in cash, wholly in
shares of Common Stock or a combination thereof, all at the discretion of the
Committee. Payment shall be made in a lump sum or in installments, and shall
be subject to such vesting and other terms and conditions as may be prescribed
by the Committee for such purpose. Notwithstanding anything contained herein
to the contrary, in the case of a Performance Award intended to be qualified
performance-based compensation under Section 162(m) and the rules and
regulations thereunder, no payment shall be made under any such Performance
Award until the Committee certifies in writing that the performance measures
for the performance period have in fact been achieved.
(F) Termination of Employment or Service or Death of Holder. A Performance
Award shall terminate for all purposes if the Holder does not remain
continuously in the employ or service of the Corporation or a subsidiary at
all times during the applicable performance period, except as may otherwise be
determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an employee
or director of the Corporation following the end of the applicable performance
period but prior to full payment according to the terms of the Performance
Award, payment shall be made in accordance with terms established by the
Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, one or more
stock certificates or book-entry credits registered in the name of the Holder
representing shares of Common Stock which would have been issuable to the
Holder of the Performance Award if such payment had been made in full on the
day following the end of the applicable performance period may be registered
in the name of such Holder, and during the period until such installment
becomes due such Holder shall have the right to receive dividends (or the cash
equivalent thereof) and shall also have the right to vote such Common Stock
and all other shareholder's rights (in each case unless otherwise provided in
the agreement evidencing the Performance Award), with the exception that (i)
the Holder shall not be entitled to delivery of any stock certificate until
the installment payable in shares becomes due, (ii) the Corporation shall
retain custody of any stock certificates until such time and (iii) the Holder
may not sell, transfer, pledge, exchange, hypothecate or dispose of such
Common Stock until such time. A distribution with respect to shares of Common
Stock payable in installments which has not become due, other than a
distribution in cash, shall be subject to the same restrictions as the shares
of Common Stock with respect to which such distribution was made, unless
otherwise determined by the Committee.
(H) Performance Award Agreements. Each Performance Award shall be evidenced
by an agreement in such form and containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve.
A-7
<PAGE>
10.Adjustments Upon Changes in Capitalization; Change in Control
(A) Notwithstanding any other provision of the Plan, each Option,
Restricted Stock Award or Performance Award agreement may contain such
provisions as the Committee shall determine to be appropriate for the
adjustment of (i) the number and class of shares or other consideration
subject to any Option or to be delivered pursuant to any Restricted Stock
Award or Performance Award and (ii) the Option or Restricted Stock Award
price, in the event of a stock dividend, spin-off, split-up, recapitalization,
merger, consolidation, combination or exchange of shares, or the like. In such
event, the maximum number and class of shares available under the Plan, and
the number and class of shares subject to Options, SARs, Restricted Stock
Awards or Performance Awards, shall be appropriately adjusted by the
Committee, whose determination shall be conclusive.
(B)(i) In the event of a "change in control" (as hereinafter defined)
pursuant to subparagraph (C)(i) or (ii) below, or in the event of a change in
control pursuant to subparagraph (C)(iii) or (iv) below in connection with
which the holders of Common Stock receive consideration other than shares of
common stock that are registered under Section 12 of the Exchange Act:
(1)(x) each Option granted under the Plan shall be exercisable in full,
(y) each Holder of an Option shall receive from the Corporation within 60
days after the change in control, in exchange for the surrender of the
Option or any portion thereof to the extent the Option is then exercisable
in accordance with clause (x), an amount in cash equal to the difference
between the fair market value (as determined by the Committee) on the date
of the change in control of the Common Stock covered by the Option or
portion thereof which is so surrendered and the purchase price of such
Common Stock under the Option and (z) each SAR shall be surrendered by the
Holder thereof and shall be canceled simultaneously with the cancellation
of the related Option;
(2) each Holder of a Restricted Stock Award shall receive from the
Corporation within 60 days after the change in control, in exchange for the
surrender of the Restricted Stock Award, an amount in cash equal to the
fair market value (as determined by the Committee) on the date of the
change in control of the Common Stock subject to the Restricted Stock
Award;
(3) each Holder of a Performance Award for which the performance period
has not expired shall receive from the Corporation within 60 days after the
change in control, in exchange for the surrender of the Performance Award,
an amount in cash equal to the product of the value of the Performance
Award and a fraction the numerator of which is the number of whole months
which have elapsed from the beginning of the performance period to the date
of the change in control and the denominator of which is the number of
whole months in the performance period; and
(4) each Holder of a Performance Award that has been earned but not yet
paid shall receive an amount in cash equal to the value of the Performance
Award.
(ii) Notwithstanding any other provision of the Plan or any agreement
relating to an Option, Restricted Stock Award or Performance Award, in the
event of a change change in control pursuant to subparagraph (C)(iii) or (iv)
below in connection with which the holders of Common Stock receive shares of
common stock that are registered under Section 12 of the Exchange Act:
(1) each Option and SAR granted under the Plan shall be exercisable in
full;
(2) the Restriction Period applicable to any outstanding Restricted
Stock Award shall lapse and, if applicable, any other restrictions, terms
or conditions shall lapse and/or be deemed to be satisfied at the maximum
value or level;
(3) the performance measures applicable to any outstanding Performance
Award shall be deemed to be satisfied at the maximum value; and
(4) there shall be substituted for each share of Common Stock remaining
available for issuance under the Plan, whether or not then subject to an
outstanding Option (and SAR), Restricted Stock Award or Performance Award,
the number and class of shares into which each outstanding share of Common
Stock
A-8
<PAGE>
shall be converted pursuant to such Change in Control. In the event of any
such substitution, the purchase price per share in the case of an Option
shall be appropriately adjusted by the Committee (whose determination shall
be conclusive), such adjustments to be made without any increase in the
aggregate purchase price.
(C) For purposes of this paragraph, the term "change in control" shall
mean:
(i) the acquisition by any individual, entity or group (a "Person"),
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 25% or more of either (x) the then
outstanding shares of common stock of the Corporation (the "Outstanding Common
Stock") or (y) the combined voting power of the then outstanding securities of
the Corporation entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following: (1) any
acquisition directly from the Corporation (excluding any acquisition resulting
from the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from
the Corporation), (2) any acquisition by the Corporation, (3) any acquisition
by an employee benefit plan (or related trust) sponsored or maintained by the
Corporation or any corporation controlled by the Corporation or (4) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (1), (2) and (3) of clause (iii) in this definition of change in
control;
(ii) individuals who, as of the effective date of the Plan, constitute the
Board of Directors of the Corporation (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided, however,
that any individual who becomes a director of the Corporation subsequent to
such effective date whose election, or nomination for election by the
Corporation's shareholders, was approved by the vote of at least a majority of
the directors then comprising the Incumbent Board shall be deemed a member of
the Incumbent Board; and provided further, that any individual who was
initially elected as a director of the Corporation as a result of an actual or
threatened election contest, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any Person
other than the Board of Directors shall not be deemed a member of the
Incumbent Board;
(iii) the consummation of a reorganization, merger or consolidation of the
Corporation or sale or other disposition of all or substantially all of the
assets of the Corporation (a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which (1) all or substantially all of the
individuals or entities who are the beneficial owners, respectively, of the
Outstanding Common Stock and the Outstanding Voting Securities immediately
prior to such Corporate Transaction will beneficially own, directly or
indirectly, more than 66b% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of such
corporation entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Corporation or all or substantially all of the
Corporation's assets either directly or indirectly) in substantially the same
proportions relative to each other as their ownership, immediately prior to
such Corporate Transaction, of the Outstanding Common Stock and the
Outstanding Voting Securities, as the case may be, (2) no Person (other than:
the Corporation; any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation; the corporation resulting from such Corporate Transaction; and
any Person which beneficially owned, immediately prior to such Corporate
Transaction, directly or indirectly, 25% or more of the Outstanding Common
Stock or the Outstanding Voting Securities, as the case may be) will
beneficially own, directly or indirectly, 25% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding
securities of such corporation entitled to vote generally in the election of
directors and (3) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction; or
(iv) the consummation of a plan of complete liquidation or dissolution of
the Corporation.
A-9
<PAGE>
(D) With respect to any Holder of an Option or SAR who is subject to
Section 16 of the Exchange Act, (i) notwithstanding the exercise periods set
forth in Paragraph 7(E) or as set forth pursuant to Paragraph 7(E) in any
agreement evidencing such Option or SAR and (ii) notwithstanding the
expiration date of the term of such Option or SAR, in the event the
Corporation is involved in a business combination which is intended to be
treated as a pooling of interests for financial accounting purposes (a
"Pooling Transaction") or pursuant to which such Holder receives a substitute
option to purchase securities of any entity, including an entity directly or
indirectly acquiring the Corporation, then each Option or SAR (or option or
stock appreciation right in substitution thereof) held by such Holder shall be
exercisable to the extent set forth in the agreement evidencing such Option or
SAR until and including the latest of (x) the expiration date of the term of
the Option or SAR or, in the event of such Holder's termination of employment
or service, the date determined pursuant to Paragraph 7(E), (y) the date which
is six months and ten business days after the consummation of such business
combination and (z) the date which is ten business days after the date of
expiration of any period during which such Holder may not dispose of a
security issued in the Pooling Transaction in order for the Pooling
Transaction to be accounted for as a pooling of interests.
11. Withholding Taxes
(A) If provided in the agreement evidencing an Option, SAR, Restricted
Stock Award or Performance Award, the Holder thereof may elect, by written
notice to the Corporation at the office of the Corporation designated for that
purpose, to pay through withholding by the Corporation all or a portion of the
estimated federal, state, local and other taxes arising from (1) the exercise
of an Option or SAR and (2) the vesting or distribution of shares of Common
Stock pursuant to a Restricted Stock Award or Performance Award (a) by having
the Corporation withhold shares of Common Stock or (b) by delivering
previously-owned shares (collectively, "Share Withholding"), in each case
being such number of shares of Common Stock as shall have a fair market value
equal to the amount of taxes to be withheld, rounded up to the nearest whole
share.
(B) A Share Withholding election shall be subject to disapproval by the
Corporation.
(C) If the date as of which the amount of tax to be withheld is determined
(the "Tax Date") is deferred until after the exercise of an Option or SAR, the
expiration of the Restriction Period applicable to a Restricted Stock Award or
the payment of a Performance Award, and if the Holder elects Share
Withholding, the Corporation shall issue to the Holder the full number of
shares of Common Stock, if any, resulting from such exercise, expiration or
payment and the Holder shall be unconditionally obligated to deliver to the
Corporation on the Tax Date such number of shares of Common Stock as shall
have an aggregate fair market value equal to the amount to be withheld on the
Tax Date, rounded up to the nearest whole share.
(D) The fair market value of shares of Common Stock used for payment of
taxes, as provided in this Paragraph 11, shall be the mean sale price per
share, as reported for New York Stock Exchange Composite Transactions, on the
Tax Date.
12. Termination of Plan
The Plan may be terminated at any time by the Board of Directors, except
with respect to any Options, SARs, Restricted Stock Awards or Performance
Awards then outstanding. The Corporation reserves the right to restrict, in
whole or in part, the exercise of any Options or SARs or the delivery of
Common Stock pursuant to any Restricted Stock Awards or Performance Awards
granted under the Plan until such time as:
(A) any legal requirements or regulations have been met relating to the
issuance of the shares covered thereby or to their registration under the
Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when issued
will be duly listed on the New York Stock Exchange, Inc.
A-10
<PAGE>
13. Amendment of the Plan
The Board of Directors may amend the Plan; provided, however, that without
approval of the shareholders the Board of Directors may not amend the Plan,
subject to Paragraph 10, to (a) increase the maximum number of shares which
may be issued on exercise of Options or SARs or pursuant to Restricted Stock
Awards or Performance Awards granted under the Plan or (b) effect any change
inconsistent with Section 422 of the Code.
14. Effect of the Plan
Neither the adoption of the Plan nor any action of the Board of Directors
or of the Committee shall be deemed to give any person any right to be granted
an Option, a right to a Restricted Stock Award or a right to a Performance
Award or any rights hereunder except as may be evidenced by an Option
agreement, Restricted Stock Award agreement or Performance Award agreement,
duly executed on behalf of the Corporation, and then only to the extent and on
the terms and conditions expressly set forth therein.
A-11
<PAGE>
COMMON STOCK PROXY
Midas, Inc.
225 North Michigan Avenue
Chicago, IL 60601
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
R. Lee Barclay and Robert H. Sorensen, or either of them (each with full power
of substitution), are hereby authorized to vote all the shares of Common Stock
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of Midas, Inc. to be held on May 6, 1999, and at
any adjournment thereof as specified on reverse side:
Election of Directors, Nominees: (change of address)
1. Thomas L. Bindley _____________________________________
2. Robert R. Schoeberl _____________________________________
_____________________________________
_____________________________________
(continued on reverse side)
<PAGE>
The shares represented by this proxy will be voted as herein directed, but if no
direction is given, the shares will be voted FOR proposals 1, 2 and 3. This
proxy revokes any proxy previously given.
1. ELECTION OF DIRECTORS
FOR WITHHELD For, except vote withheld from
the following nominee(s):
[_] [_] _________________________________________
2. Proposal to approve existing Stock Incentive Plan for the purpose of
maintaining tax deductibility under Section 162(m) of the Internal Revenue
Code.
[_] For [_] Against [_] Abstain
3. Proposal to ratify the appointment of KPMG LLP as the independent auditors of
Midas, Inc. for the fiscal year ending January 1, 2000.
[_] For [_] Against [_] Abstain
IN THEIR DISCRETION UPON SUCH OTHER BUSINESS AS MAY PROPERLY BE BROUGHT
BEFORE THE MEETING
[_] If you plan to attend the Annual Meeting,
please check the box and an admittance card
will be mailed to you
[_] Change of address on reverse side
IMPORTANT: Please sign exactly as your name(s)
appear to the left. Joint owners should each sign
personally. If you sign as agent or any other
capacity, please state the capacity in which you
sign.
_____________________________________________
_____________________________________________
Signature(s) Date
<PAGE>
Dear Shareholder:
Midas, Inc. encourages you to take advantage of new and convenient ways to vote
your shares. You can vote your shares via a toll-free telephone number or via
the Internet. This eliminates the need to return the proxy card.
To vote your shares by telephone or Internet, you must use the control number
printed on your proxy card. The series of numbers that appear in the box above
must be used to access the system.
1. To vote by telephone: Using a touch-tone telephone, call 1-800-OK2-VOTE
(1-800-652-8683), 24 hours a day, 7 days a week
2. To vote over the Internet: Go to the website http://www.vote-by-net.com
Your electronic vote authorizes the named proxies in the same manner as if you
marked, signed, dated and returned the proxy card.
If you choose to vote your shares electronically, there is no need for you to
mail back your proxy card.
Your vote is important. Thank you for voting.
