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[LOGO]
December 28, 1999
Dear Fellow Stockholder:
The Annual Meeting of Stockholders of U.S. Industries, Inc. will be held on
February 3, 2000, beginning at 11 a.m., local time, at The Brunswick Hilton and
Towers, Three Tower Center Boulevard at Tower Center, at Exit 9, New Jersey
Turnpike, East Brunswick, New Jersey 08816.
Whether or not you plan to attend in person, it is important that your
shares be voted on matters that come before the meeting. You may specify your
choices by marking the enclosed proxy card and returning it promptly. If you
sign and return your proxy card without specifying your choices, it will be
understood that you wish to have your shares voted in accordance with the
directors' recommendations as set forth in the attached Proxy Statement.
Sincerely,
/s/ DAVID H. CLARKE
David H. Clarke
Chairman and Chief
Executive Officer
U.S. INDUSTRIES, INC. - 101 WOOD AVENUE SOUTH, P.O. BOX 169 - ISELIN, NJ
08830-0169 - PHONE 732-767-0700 - FAX 732-767-2222
<PAGE>
U.S. INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 3, 2000
Notice is hereby given that the 2000 Annual Meeting of Stockholders (the
"Annual Meeting") of U.S. Industries, Inc., a Delaware corporation (the
"Company"), will be held at The Brunswick Hilton and Towers, Three Tower Center
Boulevard at Tower Center, at Exit 9, New Jersey Turnpike, East Brunswick, New
Jersey 08816, on February 3, 2000, beginning at 11 a.m., local time, for the
following purposes:
1. To elect three directors in Class II, each for a term of three years;
2. To approve the U.S. Industries, Inc. 2000 Annual Performance Incentive
Plan;
3. To approve the U.S. Industries, Inc. 2000 Stock Option Plan;
4. To approve Amendment Number Two to the Amended U.S. Industries, Inc.
Stock Option Plan;
5. To approve Amendment Number Two to the U.S. Industries, Inc. Restricted
Stock Plan;
6. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for fiscal 2000; and
7. To consider any other matters that may properly come before the Meeting.
Only holders of record of the Company's common stock, par value $.01 per
share, at the close of business on December 10, 1999 will be entitled to notice
of and to vote at the Annual Meeting and any postponements or adjournments
thereof.
By Order of the Board of Directors,
George H. MacLean
SECRETARY
Iselin, New Jersey
December 28, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
<PAGE>
U.S. INDUSTRIES, INC.
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of U.S. Industries, Inc., a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders of the
Company (the "Annual Meeting") to be held at The Brunswick Hilton and Towers,
Three Tower Center Boulevard at Tower Center, at Exit 9, New Jersey Turnpike,
East Brunswick, New Jersey 08816, on February 3, 2000, at 11 a.m., local time,
and at any and all postponements or adjournments thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting.
This Proxy Statement, the Notice of Annual Meeting and the accompanying
proxy card are first being mailed to stockholders on or about December 30, 1999.
On June 11, 1998, USI Atlantic Corp. ("USI Atlantic"), a Company predecessor
then known as U.S. Industries, Inc., effected a merger with Zurn
Industries, Inc. ("Zurn"). To effect this transaction, the Company was formed as
a new holding company for USI Atlantic and Zurn, both of which became wholly-
owned subsidiaries of the Company. In connection therewith, the Company assumed
all of the equity plans of both USI Atlantic and Zurn and the Annual Performance
Incentive Plan and Long-Term Incentive Plan of USI Atlantic. References to the
Company will include the Company after the merger and USI Atlantic before the
merger unless the context otherwise requires.
VOTING
Only stockholders of record at the close of business on December 10, 1999
(the "Record Date") are entitled to notice of the Annual Meeting and to vote the
shares of common stock, par value $.01 per share, of the Company (the "Common
Stock") held by them on that date at the Annual Meeting or any postponements or
adjournments thereof. Each outstanding share entitles its holder to cast one
vote on each matter to be voted upon at the Annual Meeting. As of the Record
Date, 87,142,645 shares of Common Stock were outstanding.
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding on the Record Date will
constitute a quorum. The three nominees for director receiving a plurality of
the votes cast at the Annual Meeting in person or by proxy shall be elected. The
approval of each other proposal to be considered at the Annual Meeting requires
the affirmative vote of the holders of a majority of the shares present at the
Annual Meeting in person or by proxy. Both abstentions and broker non-votes will
count toward a quorum. Abstentions with respect to a given proposal (other than
the election of directors) will be counted as "against" it. Broker non-votes
with respect to a given proposal will not be counted as either "for" or
"against" it, but will reduce the number of shares needed for a majority
decision.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote for the election of the
slate of nominees proposed by the Board of Directors, for the U.S.
Industries, Inc. 2000 Annual Performance Incentive Plan, for the U.S.
Industries, Inc. 2000 Stock Option Plan, for Amendment Number Two to the Amended
U.S. Industries, Inc. Stock Option Plan, for Amendment Number Two to the U.S.
Industries, Inc. Restricted Stock Plan, for ratification of the appointment of
Ernst & Young LLP as the Company's independent accountants for fiscal 2000, and
as recommended by the Board of Directors with regard to all other matters or, if
no such recommendation is given, in their own discretion. Each stockholder may
revoke a previously granted proxy at any time before it is exercised by filing
with the Secretary of the Company a revoking instrument or a duly executed proxy
bearing a later date. The powers of the proxy holders will be suspended if the
person executing the proxy attends the Annual Meeting in person and so requests
in
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writing. Attendance at the Annual Meeting will not, in itself, constitute
revocation of a previously granted proxy.
The Company's Retirement Savings & Investment Plan (the "401(k) Plan") and
similar plans maintained by its subsidiaries ("Subsidiary 401(k) Plans") provide
that the trustees of each plan shall vote the number of shares of Common Stock
allocated to a participant's account as instructed by the participant and that
the trustees shall vote the number of shares for which no instructions are
received in the same proportion as those shares in the same plan for which
instructions have been received. Courts have held that trustees are required to
follow participants' instructions unless they determine that doing so would
breach their fiduciary responsibilities under the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). Voting instruction cards are being
mailed to all participants in the plans. If a participant also owns shares
outside these plans, the participant must return both the proxy card and the
voting instruction card as indicated on those cards. To be assured that the
trustees will receive voting instruction cards on a timely basis, cards must be
duly signed and received no later than January 19, 2000. The total number of
shares in the 401(k) Plan and Subsidiary 401(k) Plans as of September 30, 1999
(the latest date for which such information is available from all trustees)
represents approximately 2.37% of the shares of Common Stock outstanding on the
Record Date.
OWNERSHIP OF COMMON STOCK
CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to the beneficial ownership of
Common Stock by each person or group known by the Company, based upon filings
pursuant to Section 13(d) or (g) under the Securities Exchange Act of 1934 (the
"Exchange Act"), to own beneficially more than 5% of the outstanding Common
Stock as of the Record Date.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF PERCENT
OF BENEFICIAL OWNER SHARES OF CLASS
- ------------------- ---------- --------
<S> <C> <C>
Harris Associates L.P.(1)................................... 17,251,967 19.79%
Two North LaSalle Street, Suite 500
Chicago, Illinois 60602
AXA-UAP(2).................................................. 9,588,390 11.00%
23, Avenue Matigon
75008 Paris France;
Franklin Mutual Advisers, Inc. (3).......................... 7,809,350 8.9%
777 Mariners Island Blvd.
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
Iridian Asset Management LLC(4)............................. 5,039,688 5.78%
276 Post Road West
Westport, Connecticut 06880-4704
</TABLE>
- ------------------------
(1) According to a Schedule 13G filed on February 11, 1999 by Harris Associates,
L.P. and Harris Associates, Inc. (the sole general partner of Harris
Associates, L.P.) each of such filing persons may be deemed a beneficial
owner of 17,251,967 shares by reason of advisory and other relationships
with the persons who own the shares; the filing person has shared voting
power with respect to all such shares, sole dispositive power with respect
to 7,757,317 shares and shared dispositive power with respect to 9,494,650
shares.
(2) According to a Schedule 13G/A filed on December 10, 1999 by AXA Assurances
I.A.R.D. Mutuelle ("I.A.R.D."), AXA Assurances Vie Mutuelle ("AAVM"), AXA
Conseil Vie Assurance Mutuelle
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("ACVAM"), AXA Courtage Assurance Mutuelle ("ACAM"), AXA and AXA Financial,
Inc. ("AFI"): (a) each of I.A.R.D., AAVM, ACVAM, ACAM and AXA beneficially
owns 9,588,390 shares and has sole voting power with respect to 4,999,621
shares, shared voting power with respect to 4,056,400 shares, sole
dispositive power with respect to 7,873,981 shares and shared dispositive
power with respect to 1,714,409 shares (b) AFI beneficially owns 7,874,770
shares and has sole voting power with respect to 3,717,101 shares, shared
voting power with respect to 4,056,400 shares, sole dispositive power with
respect to 7,842,781 shares and shared dispositive power with respect to
31,989 shares and (c) the following subsidiaries of AFI beneficially own
shares: (i) Alliance Capital Management L.P. (6,865,781 shares, as to which
such entity exercises sole voting power with respect to 2,742,401 shares,
shared voting power with respect to 4,056,400 shares and sole dispositive
power with respect to all such shares), (ii) Donaldson, Lufkin & Jenrette
Securities Corporation (32,289 shares, as to which such entity exercises
sole dispositive power with respect to 300 shares and shared dispositive
power with respect to 31,989 shares), (iii) the Equitable Life Insurance
Society of the United States (111,400 shares, as to which such entity
exercises sole voting power and sole dispositive power with respect to all
such shares) and (iv) Wood, Struthers & Winthrop Management Corporation
(2,000 shares as to which such entity has sole dispositive power with
respect to all such shares).
(3) According to a Schedule 13G filed on January 27, 1999, Franklin Mutual
Advisers, Inc. ("FMAI"), a direct subsidiary of Franklin Resources, Inc.,
may be deemed beneficial owner of 7,809,350 shares by reason of advisory and
other relationships with the persons who own the shares. FMAI has sole
voting power and dispositive power with respect to all such shares.
(4) According to Schedule 13G filed on February 8, 1999, by Iridian Asset
Management LLC, LC Capital Management LLC ("LC"), CL Investors, Inc. ("CL"),
David L. Cohen ("Cohen") and Harold J. Levy ("Levy"), Cohen and Levy may be
deemed beneficial owners of 5,409,288 shares by reason of advisory and other
relationships with the persons who own the shares and each has shared voting
power and dispositive power with respect to all such shares. Iridian, LC and
CL may be deemed beneficial owners of 5,039,688 shares and each has shared
voting power and dispositive power with respect to all such shares.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of the Record Date by each director of the Company, each of the executive
officers named in the Summary Compensation Table included elsewhere herein and
all current directors and executive officers as a group. Each director or
executive officer has sole voting and investment power over the shares reported,
except as noted below.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME SHARES(1)(2)(3) OF CLASS
- ---- --------------- --------
<S> <C> <C>
Brian C. Beazer............................................. 74,262(4) *
John F. Bendik.............................................. 147,956 *
William E. Butler........................................... 22,595 *
David H. Clarke............................................. 1,706,087(5) 1.96
George H. MacLean........................................... 115,203 *
John J. McAtee, Jr.......................................... 79,467 *
Robert P. Noonan............................................ 52,756 *
James O'Leary............................................... 184,247 *
The Hon. Charles H. Price II................................ 44,179(6) *
John G. Raos................................................ 1,187,973(7) 1.36
Dorothy E. Sander........................................... 263,591 *
Sir Harry Solomon........................................... 100,467(8) *
Royall Victor III........................................... 35,967 *
Mark Vorder Bruegge......................................... 20,467 *
Robert R. Womack............................................ 468,077 *
All current directors and executive officers as a group (17
persons, including the foregoing)......................... 4,637,935 5.32
</TABLE>
- ------------------------
* Less than 1%.
(1) Includes restricted stock held by the following individuals and all current
directors and executive officers as a group, with respect to which such
persons have voting power but no investment power: Mr. Bendik--95,413
shares; Mr. Clarke--576,706 shares; Mr. MacLean--96,184 shares;
Mr. Noonan--27,500 shares; Mr. O'Leary--131,973 shares; Mr. Raos--396,970
shares; Ms. Sander--102,104 shares; Mr. Womack--88,398 shares; all current
directors and executive officers as a group--1,575,616 shares.
(2) Includes shares contributed as of September 30, 1999 (the latest practicable
date for such information) by the Company to match certain amounts invested
by the following individuals and all current directors and executive
officers as a group, in his or her 401(k) account, with respect to which
such persons have voting power but no investment power: Mr. Bendik--707
shares; Mr. Clarke--6,818 shares; Mr. MacLean--6,481 shares;
Mr. Noonan--679 shares; Mr. O'Leary--1,799 shares; Mr. Raos--6,693 shares;
Ms. Sander--6,239 shares; Mr. Womack--498 shares; all current directors and
executive officers as a group--47,526 shares.
(3) Includes shares which are subject to options exercisable within 60 days for
the following individuals and all current directors and executive officers
as a group: Mr. Beazer--18,750 shares; Mr. Bendik--44,062 shares;
Mr. Butler--14,950 shares; Mr. Clarke--809,502 shares; Mr. MacLean--12,538
shares; Mr. McAtee--20,250 shares; Mr. Noonan--22,855 shares;
Mr. O'Leary--30,464 shares; Mr. Price--20,250 shares; Mr. Raos--527,168
shares; Ms. Sander--119,363 shares; Sir Harry--20,250 shares;
Mr. Victor--20,250 shares; Mr. Vorder Bruegge--11,250 shares;
Mr. Womack--342,100 shares; all current directors and executive officers as
a group--2,084,302 shares.
(4) Includes 45,000 shares held in trust for Mr. Beazer's family, as to which he
has sole voting power and investment power.
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(5) Includes 2,611 shares held by one of Mr. Clarke's children and Mr. Clarke's
wife, as to which he disclaims beneficial ownership.
(6) Includes 750 shares held by the Charles H. and Carol Swanson Price
Foundation and 10,500 shares held in trusts for the benefit of family
members, in each case as to which Mr. Price has shared voting and investment
power but no pecuniary interest. Also includes 300 shares held by his wife,
as to which he disclaims beneficial ownership.
(7) Includes 14,972 shares held by Mr. Raos' wife and children as to which he
has no voting or investment power and disclaims beneficial ownership.
(8) Includes 25,500 shares held in trust for Sir Harry's family, as to which he
disclaims beneficial ownership, 25,500 shares held in trust for Sir Harry
and his wife, as to which he shares voting power and investment power, and
20,000 shares held by a holding company as to which he shares voting power
and investment power.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers to file initial reports of ownership and reports of changes
in ownership of the Company's Common Stock with the SEC. Directors and executive
officers are required to furnish the Company with copies of all Section 16(a)
forms that they file. Based upon a review of these filings, the Company believes
that its directors and executive officers were in compliance with these
requirements with respect to fiscal 1999.
ELECTION OF DIRECTORS
(ITEM A ON PROXY CARD)
The Board of Directors of the Company is divided into three classes, one
with four directors and two with three directors, with each class serving three
years. The term of office of directors in Class II expires at the Annual
Meeting. The Board of Directors proposes that the nominees described below, all
of whom are currently serving as Class II directors, be elected to Class II for
a new term of three years and until their successors are duly elected and
qualified. The Board of Directors has no reason to believe that any of the
nominees will not serve if elected, but if any of them should become unavailable
to serve as a director, and if the Board designates a substitute nominee, the
persons named as proxies will vote for the substitute nominee designated by the
Board.
Directors will be elected by a plurality of the votes cast at the Annual
Meeting. If elected, all nominees are expected to serve until the 2003 Annual
Meeting and until their successors are duly elected and qualified.
Set forth below is biographical information concerning each nominee as well
as each director whose term of office does not expire at the Annual Meeting.
NOMINEES FOR ELECTION AS DIRECTORS IN
CLASS II--TO SERVE UNTIL THE 2003 ANNUAL MEETING
William E. Butler, 68, has served as a director of the Company since
June 1998 and was a director of Zurn from November 1992 to June 1998.
Mr. Butler was a director, Chairman and Chief Executive Officer of the Eaton
Corporation (a global manufacturer of highly engineered products that serve
industrial, vehicle, construction and semiconductor markets), and is a director
of Applied Industrial Technologies, Inc., Ferro Corporation, The Goodyear
Tire & Rubber Company, Pitney-Bowes Inc. and Borg Warner Automotive Inc.
The Hon. Charles H. Price II, 68, has served as a director of the Company
since the spinoff of the Company's predecessor from Hanson PLC ("Hanson") in
May 1995 (the "Demerger"). Mr. Price served
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as Chairman, President and Chief Executive Officer of Ameribanc, Inc., a bank
holding company, from 1989 to 1992 and was Chairman of the Board of Mercantile
Bank of Kansas City from 1992 to 1996. He served as the U.S. Ambassador to
Belgium from 1981 to 1983 and the U.S. Ambassador to the Court of St. James's
from 1983 to 1989. He is a director of Texaco Inc. and The New York Times
Co. Inc.
Royall Victor III, 60, has served as a director of the Company since the
Demerger. Mr. Victor was Managing Director of Chase Securities, Inc.'s
Investment Banking Group from January 1994 until his retirement in July 1997. He
was a Managing Director of Chemical Banking Corporation's Investment Banking
Group during the balance of the past five years.
DIRECTORS CONTINUING IN OFFICE
CLASS I--TERM CONTINUES UNTIL THE 2002 ANNUAL MEETING
Brian C. Beazer, 64, has served as a director of the Company since
September 17, 1996. Mr. Beazer has served as Chairman of Beazer Homes
USA, Inc., which designs, builds and sells single family homes, since 1993.
John J. McAtee, Jr., 63, has served as a director of the Company since the
Demerger. Mr. McAtee has served as Chairman of McAtee & Co., L.L.C., a
transactional consulting firm, since July 1996. Mr. McAtee served as a Vice
Chairman of Smith Barney Inc., an investment banking firm, from 1990 until
July 1996 and previously was a partner in the law firm of Davis Polk & Wardwell.
He is a director of Laser Photonics, Inc.
John G. Raos, 50, has served as a director of the Company since the
Demerger. Mr. Raos was President and Chief Operating Officer of the Company from
the Demerger to September 15, 1999. He was President and Chief Operating Officer
of Hanson Industries, the U.S. arm of Hanson, from 1992 until the Demerger and a
director of Hanson from 1989 until the Demerger. Mr. Raos will resign as an
employee and a director of the Company on the spinoff (the "Spinoff") or other
disposition of USI Diversified.
CLASS III--TERM CONTINUES UNTIL THE 2001 ANNUAL MEETING
David H. Clarke, 58, has served as Chairman and Chief Executive Officer of
the Company since the Demerger. Mr. Clarke was Vice Chairman of Hanson from 1993
until the Demerger, Deputy Chairman and Chief Executive Officer of Hanson
Industries from 1992 until the Demerger and a director of Hanson from 1989 until
May 1996. Mr. Clarke is a director of Fiduciary Trust International, a public
company engaged in investment management and administration of assets for
individuals.
Sir Harry Solomon, 62, has served as a director of the Company since
June 8, 1995. Sir Harry is a founder and former Chairman of Hillsdown Holdings
plc, a U.K. food manufacturing company. He also serves as a director of a number
of companies including Frogmore Estates plc, Harveys Furnishing Plc and
Consolidated Land Investments Limited.
Mark Vorder Bruegge, 74, has served as a director of the Company since the
Demerger. He was a Director of First Commercial Bank of Memphis from
February 1997 to January 1999. He was Vice Chairman of United American Bank of
Memphis, Tennessee from February 1996 to February 1997 when it was purchased by
First Commercial Bank of Little Rock. He served as Chairman of United American
Bank from 1994 to February 1996 and as Vice Chairman of that company from 1985
to 1994.
Robert R. Womack, 62, has served as a director of the Company since
June 1998. He has also served as a director, Chairman and Chief Executive
Officer of Zurn since October 1994. Prior thereto, Mr. Womack was an independent
consultant, and is the former Vice Chairman and Chief Executive Officer of IMO
Industries, Inc. (a manufacturer of controls, pumps and engineered power
products) and a former director, President and Chief Operating Officer of
Ranco, Inc. Mr. Womack will resign as an employee and a director of Zurn
effective as of December 31, 1999.
8
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CORPORATE GOVERNANCE
DIRECTORS' REMUNERATION AND ATTENDANCE AT MEETINGS
Directors who are also full-time employees of the Company receive no
additional compensation for their services as directors. Each non-employee
director is entitled to an annual retainer of $25,000, which is payable wholly
in shares of Common Stock in four equal installments on the first business day
of each calendar quarter. For the Company's fiscal year ended October 2, 1999
("fiscal 1999"), the retainer was paid to each non-employee director by delivery
of 1,801 shares of Common Stock, based on the last reported sale price of the
Common Stock on the New York Stock Exchange (the "NYSE") on October 5, 1998 of
$13.875 per share, plus cash in lieu of a fractional share. Each non-employee
director is also entitled to an initial grant of 1,500 shares of Common Stock,
an initial grant of options to purchase 7,500 shares of Common Stock and an
annual grant of options to purchase 3,750 shares of Common Stock.
Each non-employee director is entitled to a fee of $1,500 payable in cash
for each Board or Committee meeting attended. The Company reimburses all
reasonable expenses incurred by both employee and non-employee directors in
connection with such meetings and pays the premiums on directors' and officers'
liability and travel accident insurance policies insuring both employee and
non-employee directors.
The Board held eight meetings in fiscal 1999. Each director attended at
least seventy-five percent of all meetings of the Board and Committees on which
such director served.
COMMITTEES OF THE BOARD
The Board has established four standing committees, an Executive Committee,
an Audit Committee, a Compensation Committee and a Nominating Committee, each of
which is briefly described below. The Board has also established a Special
Advisory Committee described below.
The Executive Committee has authority to act for the full Board between
Board meetings, except with respect to matters that may not be delegated to a
committee under Delaware law. The committee, which presently consists of
Messrs. Clarke (Chairman), Raos and Sir Harry, met once during fiscal 1999.
The Audit Committee is responsible for matters relating to accounting
policies and practices, financial reporting and internal controls. Its functions
include recommending to the Board the appointment of the Company's independent
accountants; reviewing with representatives of the independent accountants the
scope of the audit of the Company's financial statements, results of audits,
audit costs, recommendations with respect to internal controls and financial
matters and non-audit services; and periodically meeting with or receiving
reports from the Company's principal financial and accounting officers. The
committee, which presently consists of Messrs. Butler, McAtee and Victor
(Chairman), met five times during fiscal 1999.
The Compensation Committee sets the compensation of all executive officers
and administers the incentive plans for executive officers (including the making
of awards under such plans). The committee, which presently consists of
Messrs. Beazer, Price and Vorder Bruegge (Chairman), met six times during fiscal
1999.
The Nominating Committee is responsible for recommending nominees for the
Board and the committees of the Board. The Committee, which presently consists
of Messrs. Clarke, Sir Harry (Chairman) and Victor met four times during fiscal
1999.
The Special Advisory Committee, which was formed on March 31, 1999, is
responsible for reviewing and reporting to the Board with respect to the
Spinoff. The Committee, which presently consists of Messrs. Butler, McAtee,
Victor and Vorder Bruegge, met once during fiscal 1999.
9
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EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has delivered the following report:
EXECUTIVE OFFICER COMPENSATION
The philosophy of the Compensation Committee is that the Company's executive
compensation program should be an effective tool for fostering the creation of
stockholder value. While the Compensation Committee believes that the base
compensation of the Company's executive officers should be generally competitive
with that provided by public companies of comparable size, the Compensation
Committee believes strongly that a substantial portion of the executive
officers' compensation (both cash and non-cash elements) should be contingent
upon performance. Moreover, the Compensation Committee wishes to encourage
substantial equity ownership by the Company's executive officers so that
management's interests are closely aligned with the interests of stockholders.
BASE COMPENSATION
The minimum base compensation levels of the Company's executive officers and
certain other aspects of their compensation were originally established under
employment agreements. On December 1, 1999, the Compensation Committee awarded
the executive officers (other than the Chief Executive Officer) increases in
base salary for calendar year 2000 following a review of each executive
officer's individual performance during fiscal 1999. These merit increases
average approximately 4.32% for the group. Mr. Clarke declined to be considered
for any increase in base salary for the calendar year 2000 (as he had done for
all prior years). The Compensation Committee believes the base salaries to be
reasonable and appropriate in the context of the overall compensation program.
ANNUAL BONUS
Under the U.S. Industries, Inc. Annual Performance Incentive Plan, the
Compensation Committee determines the executive officers that are eligible for a
bonus under the plan for each fiscal year and the target levels (E.G., entry
level, a mid-point and a maximum level) for such bonuses. The bonus level
achieved for each fiscal year is determined based on the achievement of
pre-established performance targets selected by the Compensation Committee,
based on management's recommendations.
At a meeting on December 1, 1998, the Compensation Committee set, for fiscal
1999, performance targets for all participants and individual levels for
participation as a percentage of base pay (ranging from 55% to 100%, the "Bonus
Percentage") upon achievement of the targets, with reduced levels specified for
below full-target achievements that exceed minimum or entry level performance
targets set by the Compensation Committee and increased levels specified for
above full-target achievements which could result in bonuses under the plan
being awarded in the range of 0% to 150% of each participant's Bonus Percentage.
The Compensation Committee, based on management's recommendations, set
performance targets for fiscal 1999 based on the attainment of certain levels of
earnings per share from continuing operations ("Earnings Per Share Performance
Target"). In setting these performance targets and individual participation
levels, the Compensation Committee recognized that the Annual Performance
Incentive Plan provides for both an immediately payable annual award and an
additional amount (I.E., the Long Term Incentive Plan Award) equal to thirty
percent (30%) of the immediately payable annual award. The Long Term Incentive
Plan Award is credited to the executive officer's account under the U.S.
Industries, Inc. Long Term Incentive Plan (the "Long Term Incentive Plan") and
deferred under the terms of that Plan with interest measured based on the rate
of interest on thirty (30) year Treasury Bonds. The Compensation Committee gave
weight to the fact that distributions under the Long Term Incentive Plan are
generally conditioned upon an executive officer's continued employment with the
Company.
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At its meeting on December 1, 1999, the Compensation Committee certified
that the performance targets for the fiscal 1999 Earnings Per Share Performance
Target had been met at the level indicated below. The calculation of the level
of achievement of the Earnings Per Share Performance Target was confirmed in a
report by the Company's independent accountants. Based on the foregoing, the
Compensation Committee awarded the executive officers participating in the
Annual Performance Incentive Plan during fiscal 1999 eighty-seven and one-half
percent (87 1/2%) of their bonus target amount, consisting of the annual
Performance Bonus amount and an amount equal to thirty (30%) of the immediately
payable annual Performance Bonus amount, to be credited to the executive's
account under the Long Term Incentive Plan.
Also at its meeting on December 1, 1999, the Compensation Committee set
performance targets for all participants for fiscal 2000 and individual levels
for such participation as a percentage of base pay (ranging from 50% to 100%,
the "Bonus Percentage") upon achievement of the targets, with reduced levels
specified for below full-target achievements that exceed minimum or entry level
performance targets set by the Compensation Committee and increased levels
specified for above full-target achievements which could result in bonuses under
the plan being awarded in the range of 0% to 150% of each participant's Bonus
Percentage. The Compensation Committee, based on management's recommendations,
set performance targets for fiscal 2000 based on the attainment of certain
levels of earnings per share from continuing operations. In setting these
performance targets and individual participation levels, the Compensation
Committee considered the level of achievement of the fiscal 1999 performance
targets and recognized that the Annual Performance Incentive Plan provides for
both an immediately payable annual award and a Long Term Incentive Plan Award
equal to thirty percent (30%) of the immediately payable annual award. The
Compensation Committee gave weight to the fact that distributions under the Long
Term Incentive Plan are generally conditioned upon an executive officer's
continued employment with the Company.
In order to continue to ensure that the incentive compensation payable under
these programs qualifies as tax-deductible pursuant to the performance based
compensation exception of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), the Board is recommending approval of the U.S.
Industries, Inc. 2000 Annual Performance Incentive Plan (as described under the
"Approval of U.S. Industries, Inc. 2000 Annual Performance Incentive Plan"
below). No awards have been granted under such plan.
STOCK OPTIONS
Stock options have been granted by the Compensation Committee under the
Amended U.S. Industries, Inc. Stock Option Plan (the "Stock Option Plan") with
an exercise price equal to the fair market value of Common Stock on the date of
grant. Management makes recommendations to the Compensation Committee as to how
many options will be granted to eligible executives of the Company and its
subsidiaries. The Board is recommending approval of the U.S. Industries, Inc.
2000 Stock Option Plan (as described under "Approval of U.S. Industries, Inc.
2000 Stock Option Plan" below). No grants have been awarded under such plan. The
Board is also recommending approval of an amendment to the Stock Option Plan
eliminating the plan provision limiting Stock Option Plan awards and awards
granted under the U.S. Industries, Inc. Restricted Stock Plan (the "Restricted
Stock Plan") to 9.9% of the total number of shares of Common Stock issued and
outstanding (as described in more detail in the "Approval of Amendment Number
Two to the Amended U.S. Industries, Inc. Stock Option Plan" below)
RESTRICTED STOCK AND STOCK EQUIVALENT UNITS
Restricted Stock has been granted by the Compensation Committee under the
Restricted Stock Plan and restricted stock and stock equivalent units have been
granted under the Amended U.S. Industries, Inc. 1996 Employee Stock Plan
(formerly the Zurn Industries, Inc. 1996 Employee Stock Plan). Management makes
recommendations to the Compensation Committee as to how many shares of
restricted stock and
11
<PAGE>
stock equivalent events will be granted to eligible executives of the Company
and its subsidiaries. The stock equivalent units granted in fiscal 1999 were
replaced with an equal number of shares of restricted stock.
The Board is recommending an amendment to the Restricted Stock Plan
eliminating the 9.9% limit discussed above as it relates to restricted stock
plan awards (as described in more detail in the "Approval of Amendment Number
Two to the U.S. Industries, Inc. Restricted Stock Plan" below).
The Company generally has analyzed the particular type of benefit or award
and the rationale for granting such benefit or award in deciding whether it will
seek to qualify the benefit or award as performance-based compensation under
Section 162(m) of the Code and expects to continue to do so in the future.
Amounts awarded under the Annual Performance Incentive Plan, in which the
Chief Executive Officer and the Company's other executive officers participate,
as well as the portion of such awards deferred under the Company's Long Term
Incentive Plan, are based on performance factors determined by the Compensation
Committee that are intended to qualify such bonuses for the "performance-based
compensation" exception of Section 162(m) of the Code. It is also intended that
the stock options awarded under the Stock Option Plan will qualify for the
performance-based compensation exception of Section 162(m) of the Code. The
restricted stock awards are not intended to and may not qualify as
performance-based compensation under Section 162(m) of the Code.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
The compensation of the Chief Executive Officer is primarily based on the
employment agreement entered into with him. The Chief Executive Officer has
declined to accept any increase in his base compensation for calendar years
since 1996. In fiscal 1999, changes to the USI Supplemental Retirement Plan
("SRP") with respect to Mr. Clarke (as described in more detail under
"Employment Agreements" below) were approved by the Compensation Committee which
would increase certain of his benefits under the SRP in the event of a Change of
Control of the Company (as defined in his employment agreement).
The Chief Executive Officer has received restricted stock and stock options
as described in the Summary Compensation Table. The Compensation Committee
believes that these equity arrangements have created the desired mutuality of
interest between the Chief Executive Officer and the stockholders, as the
ultimate reward to the Chief Executive Officer from these equity arrangements
primarily will be based upon the success of the Company.
Respectfully submitted:
Mark Vorder Bruegge, Chairman
Brian C. Beazer
The Honorable Charles H. Price II
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the compensation
awarded to, earned by or paid to the Chief Executive Officer and the four other
most highly paid executive officers of the Company as well as to two other
persons who ceased to be executive officers prior to the end of the 1999 fiscal
year who are required to be included in the table (the "named executive
officers") for services rendered to the Company and its subsidiaries during
fiscal 1997, 1998 and 1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------------
NAME AND FISCAL OTHER ANNUAL RESTRICTED
PRINCIPAL POSITION (1) YEAR SALARY BONUS($)(2) COMPENSATION ($)(3) STOCK AWARDS($)(4)
- ---------------------------- -------- -------- ----------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
David H. Clarke............. 1999 750,000 656,250 196,875 510,000
Chairman of the Board and 1998 750,000 0 0 0
Chief Executive Officer 1997 750,000 750,000 225,000 943,375
John G. Raos................ 1999 500,000 437,500 131,250 351,250
President and Chief 1998 500,000 0 0 0
Operating Officer 1997 500,000 500,000 150,000 934,375
George H. MacLean........... 1999 298,800 185,588 55,676 365,500
Senior Vice President and 1998 282,150 0 0 0
General Counsel 1997 260,000 189,000 56,700 0
John F. Bendik.............. 1999 292,500 183,750 91,875 675,125
Chairman and Chief Executive 1998 257,500 0 0 539,266
Officer of USI Bath & 1997 190,000 143,000 42,900 836,719
Plumbing Products
James O'Leary............... 1999 243,417 286,344 85,903 1,078,250
Executive Vice President 1998 176,250 0 0 1,074,280
1997 146,250 82,500 24,750 0
Dorothy E. Sander........... 1999 241,375 149,450 44,835 675,125
Senior Vice President-- 1998 228,875 0 0 0
Administration 1997 210,875 129,000 38,700 0
Robert P. Noonan............ 1999 143,500 63,875 19,162 460,937
Corporate Controller 1998 127,000 0 0 0
1997 96,250 40,500 12,150 0
<CAPTION>
LONG TERM COMPENSATION
---------------------------
SECURITIES ALL OTHER
NAME AND UNDERLYING COMPENSATION
PRINCIPAL POSITION (1) OPTIONS(#) ($)(5)
- ---------------------------- ----------- -------------
<S> <C> <C>
David H. Clarke............. 255,000 11,227
Chairman of the Board and 0 14,250
Chief Executive Officer 0 14,201
John G. Raos................ 0 7,887
President and Chief 0 8,455
Operating Officer 0 8,405
George H. MacLean........... 20,000 12,740
Senior Vice President and 0 15,982
General Counsel 10,050 14,999
John F. Bendik.............. 100,000 6,892
Chairman and Chief Executive 0 6,164
Officer of USI Bath & 13,125 5,101
Plumbing Products
James O'Leary............... 125,000 5,802
Executive Vice President 0 5,363
7,500 5,170
Dorothy E. Sander........... 90,000 6,287
Senior Vice President-- 0 6,801
Administration 10,050 5,960
Robert P. Noonan............ 37,500 4,169
Corporate Controller 0 5,020
5,625 2,818
</TABLE>
- ------------------------------
(1) John G. Raos resigned as President and Chief Operating Officer of the
Company as of September 15, 1999. John F. Bendik resigned as Executive Vice
President of the Company on August 31, 1999. Mr. Bendik became Vice Chairman
and a senior executive of USI Plumbing & Bath Products, a group of all of
the subsidiaries and divisions of the Company in the plumbing and bath
products business ("USI Bath & Plumbing Products") on August 31, 1999 and
served in that capacity until October 4, 1999 when he became Chairman and
Chief Executive Officer of USI Bath & Plumbing Products. James O'Leary
became Executive Vice President of the Company on September 1, 1999;
previously he served in the capacity of Senior Vice President and Chief
Financial Officer.
(2) For fiscal 1997, bonuses were awarded by the Compensation Committee under
the Annual Performance Incentive Plan using a formula based on the
attainment of certain levels of pretax profits from continuing operations
and net long-term debt reduction. For fiscal 1998, no bonuses were awarded.
For fiscal 1999, bonuses were awarded by the Compensation Committee under
the Annual Performance Incentive Plan using a formula based on the
attainment of certain levels of earnings per share from continuing
operations.
(3) Amounts represent awards under the Long Term Incentive Plan, which will be
deferred in the participant's plan account. Annual distributions,
constituting 15% of each participant's account, will be made commencing on
December 15 of the fourth year following the initial award under the Long
Term Incentive Plan, contingent on continued employment, subject to
acceleration upon a Change in Control (as defined in the plan) and certain
other circumstances.
(4) Mr. Clarke was awarded 37,500 shares and 30,000 shares of restricted stock
under the Restricted Stock Plan (the "Restricted Stock") in fiscal 1997 and
fiscal 1999, respectively. Mr. Raos was awarded 37,500 shares and 20,000
shares of Restricted Stock in fiscal 1997 and fiscal 1999, respectively.
Mr. Bendik was awarded 22,500 shares, 20,741 shares and 16,000 shares of
Restricted Stock in fiscal 1997, fiscal 1998 and fiscal 1999, respectively,
and 25,000 Stock Equivalent Units in fiscal 1999. In accordance with
Mr. Bendik's Stock Equivalent Unit award agreement, Mr. Bendik's 25,000
Stock Equivalent Units were replaced with 25,000 shares of restricted stock.
Mr. MacLean was awarded 21,500 shares of Restricted Stock in 1999.
Mr. O'Leary was awarded 38,815 shares and 66,000 shares of Restricted Stock
in fiscal 1998 and fiscal 1999, respectively. In fiscal 1999, Ms. Sander and
Mr. Noonan were awarded 41,000 shares and 27,500 shares of Restricted Stock,
respectively. The values of the restricted stock are based upon the last
reported sale price of an unrestricted share of Common Stock on the NYSE on
the following dates of
13
<PAGE>
grants: Mr. Clarke--March 18, 1997 $24.921875 and November 13, 1998 $17.375;
Mr Raos--March 18, 1997 $24.421875 and May 18, 1999 ($17.5625);
Mr. Bendik--May 14, 1996 $15.50, August 14, 1997 $24.421875, December 2,
1997 ($26.1875), November 13, 1998 $17.375 and September 1, 1999 $16.9375;
Mr. MacLean--November 13, 1998 $17.375; Mr. O'Leary--December 2, 1997
($26.1875), March 27, 1998 ($28.50), November 13, 1998 ($17.375) and
September 1, 1999 ($16.9375); Ms. Sander--November 13, 1998 $17.375 and
September 1, 1999 $16.9375; and Mr. Noonan--November 13, 1998 $17.375 and
September 1, 1999 $16.9375. The shares of restricted stock vest seven years
after grant (except for the November 13, 1998 and May 18, 1999 grants which
vest on a three, five and seven year schedule), in each case subject to
acceleration upon the occurrence of a Change in Control (as defined in each
executive officer's employment agreement described under "Employment
Agreements" below), or the occurrence of certain other events and, in the
case of restricted stock (other than the November 13, 1998, the May 18,
1999, the September 1, 1999 grants), upon achievement of certain
preestablished performance goals and Compensation Committee approval.
Executive officers are entitled to receive dividends on their restricted
stock as and when cash dividends on the Common Stock are declared by the
Board. The aggregate number of shares of restricted stock and incentive
shares owned by the named executives and the market value of such shares,
each as of October 1, 1999, are as follows: Mr. Clarke--576,706 shares
($8,938,943); Mr. Raos--396,970 shares ($6,153,035); Mr. MacLean--96,184
shares ($1,490,852); Mr. Bendik--95,413 shares ($1,478,902);
Mr. O'Leary--131,973 shares ($2,045,582); Ms. Sander--102,104 shares
($1,582,612) and Mr. Noonan--27,500 shares ($426,250). The closing price of
the Common Stock ($15.50) on October 1, 1999, the last trading day of the
fiscal year, was used to determine "market value."
Effective on February 23, 1999, the Company adopted a Stock Ownership Tax
Loan Program. The primary purpose of the loan program is to make loans to
executives of the Company selected by the Compensation Committee to help
such executives pay the federal, state and local taxes that are due upon the
vesting of Restricted Stock, thereby encouraging them to retain the
Restricted Stock. The loan interest rate is the one year term borrowing rate
at which the Company may borrow from its principal lenders but in no event
may the interest rate be less than the applicable federal interest rate.
Messrs. Clarke, Raos and Ms. Sander are currently participating in the loan
program. The largest aggregate amount of indebtedness outstanding (including
accrued interest) at any time for the foregoing individuals during fiscal
1999 was $665,077, $718,272 and $309,600, respectively, and as of the date
of this proxy statement these amounts remain outstanding.
(5) The amounts shown in this column include the matching contributions made by
the Company to the accounts of the named executive officers pursuant to the
401(k) Plan, all of which is invested in Common Stock pursuant to the terms
of the plan, and the dollar value of insurance premiums paid by or on behalf
of the Company with respect to term life insurance benefits.
OPTION EXERCISES AND VALUES FOR FISCAL 1999
The following table sets forth, with respect to each of the named executive
officers, the number of share options exercised and the dollar value realized
from those exercises during the 1999 fiscal year and the total number and
aggregate dollar value of exercisable and non-exercisable stock options held on
October 2, 1999.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED
IN-THE-MONEY (#) OPTIONS ($)
UNEXERCISED OPTIONS VALUE EXERCISABLE/ EXERCISABLE/
SHARES ACQUIRED REALIZED UNEXERCISABLE UNEXERCISABLE
NAME ON EXERCISE (#) ($) AT 10/2/99 AT 10/2/99
- ---- ------------------- ------------ --------------------- -------------
<S> <C> <C> <C> <C>
David H. Clarke.................. 0 0 770,752/255,000 4,688,716/0
John G. Raos..................... 0 0 527,168/0 3,206,921/0
George H. MacLean................ 56,194 455,133 5,026/25,024 0/0
John F. Bendik................... 0 0 23,906/115,936 5,468/2,734
Dorothy E. Sander................ 0 0 100,601/95,024 645,131/0
James O'Leary.................... 0 0 9,839/128,750 53,757/0
Robert P. Noonan................. 0 0 12,824/41,438 62,238/5,813
</TABLE>
- ------------------------
(1) In accordance with the rules of the SEC, values are calculated by
subtracting the exercise price from the fair market value of the underlying
Common Stock. For purposes of the last column of this table, fair market
value is deemed to be $15.50 per share, the closing price of the Common
Stock reported for the NYSE Composite Transactions on October 1, 1999, the
last trading day of the fiscal year.
14
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN
The following graph compares the performances of the Company's Common Stock
with the performance of the Standard & Poor's 500 Composite Stock Price Index
(the "S&P 500 Index") and a peer group index over the period from June 1, 1995,
when regular way trading in the Common Stock commenced on the NYSE, through
October 1, 1999, the last trading day of the fiscal year. The graph assumes that
$100 was invested on June 1, 1995 in each of the Company's Common Stock, the S&P
500 Index and the peer group index, and that all dividends were reinvested into
additional shares of the same class of equity securities at the frequency with
which dividends are paid on such securities during the applicable fiscal year.
Because the Company is engaged in a wide variety of consumer, building
products and industrial businesses, the Company does not believe that any
published industry or line-of-business index accurately mirrors the Company's
businesses or weighs those businesses to match their relative contributions to
the Company's overall performance. Accordingly, the Company has created a
special peer group index consisting of diversified companies which, as a group,
are engaged in industry segments similar to those of the Company. The common
stocks of the following companies have been included in the Company's peer group
index: Allied Signal Inc., Coltec Industries (acquired by another company in
July 1999), Crane Co., Dover Corp., Newell Rubbermaid Inc. (formerly Newell
Co.), Textron Inc., Thomas Industries Inc., Trimas Corp. (acquired by another
company in February 1998) and Tyco International Ltd. The peer group weighs the
returns of each constituent company according to its stock market capitalization
at the beginning of each period for which a return is indicated.
TOTAL SHAREHOLDER RETURN
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS 02JUN99 JUN95 SEP95 DEC95 MAR96 JUN96 SEP96 DEC96 MAR97 JUN97 SEP97 DEC97 MAR98 JUN98
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U S INDUSTRIES INC 100 99.09 112.73 133.64 150.91 175.46 190.91 250.01 256.37 259.10 316.92 329.76 329.62 271.92
S&P 500 INDEX 100 102.11 110.22 116.86 123.13 128.66 132.63 143.69 147.54 173.30 186.28 191.63 218.36 225.57
PEER GROUP 100 104.78 109.20 114.58 133.52 137.34 149.63 160.93 171.46 208.05 218.72 219.70 253.40 266.01
<CAPTION>
DOLLARS SEP98 DEC98 MAR99 JUN99 SEP99
<S> <C> <C> <C> <C> <C>
U S INDUSTRIES INC 166.03 203.10 182.24 189.03 175.69
S&P 500 INDEX 203.13 246.40 258.67 276.90 259.61
PEER GROUP 227.38 286.84 288.17 352.93 353.84
</TABLE>
USI RETIREMENT PLAN
The USI Retirement Plan (the "Retirement Plan") provides pension benefits to
the Company's corporate office employees, including its executive officers.
Employees will become vested in their benefits under the Retirement Plan after
five years of service. Normal retirement is the later of age 65 or five years of
service; however, employees who work beyond their normal retirement age will
continue to accrue benefits.
15
<PAGE>
Under the Retirement Plan, the annual retirement benefits of the Company's
corporate office employees, including its executive officers, will equal the
greater of (i) the product of (a) 2.67% of an employee's Final Average Earnings
(which excludes, among other things, bonuses) minus 2% of such employee's Social
Security Benefit, multiplied by the number of years of Credited Service the
employee would have been credited with through his or her Normal Retirement Date
(to a maximum of 25) and (b) a fraction, the numerator of which is the actual
number of years of Credited Service through December 31, 1992 (the "Freeze
Date"), and the denominator of which is the number of years of Credited Service
the employee would have been credited with through his Normal Retirement Date
(the "Offset Formula"), and (ii) the sum of (a) 1.95% of an employee's Final
Average Earnings plus (b) .65% of that portion of the employee's Final Average
Earnings in excess of Covered Compensation, multiplied by the employee's years
of Credited Service (to a maximum of 25). Credited service for all corporate
office employees, including the Company's executive officers, includes years of
service under a predecessor Hanson plan. All defined terms have the same
meanings as in the Retirement Plan or as stated herein.
The following table shows the estimated annual retirement benefits that
would be payable under the Retirement Plan to the Company's corporate office
employees, including its executive officers, assuming retirement at age 65 on
the basis of a straight-life annuity. The table also includes benefits payable
under the the SRP, an unfunded supplemental retirement plan applicable to
certain executive officers of the Company, which is described below.
<TABLE>
<CAPTION>
FINAL YEARS OF SERVICE
AVERAGE --------------------------------------------------------------------------
EARNINGS 10 15 20 25 30 35 40
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 100,000............. $ 23,200 $ 34,800 $ 46,400 $ 58,000 $ 58,000 $ 58,000 $ 58,000
200,000............. 49,900 74,850 99,800 124,750 124,750 124,750 124,750
300,000............. 76,600 114,900 153,200 191,500 191,500 191,500 191,500
400,000............. 103,300 154,950 206,600 258,250 258,250 258,250 258,250
500,000............. 130,000 195,000 260,000 325,000 325,000 325,000 325,000
600,000............. 156,700 235,050 313,400 391,750 391,750 391,750 391,750
700,000............. 183,400 275,100 366,800 458,500 458,500 458,500 458,500
800,000............. 210,100 315,150 420,200 525,250 525,250 525,250 525,250
900,000............. 236,800 355,200 473,600 592,000 592,000 592,000 592,000
1,000,000............ 263,500 395,250 527,000 658,750 658,750 658,750 658,750
</TABLE>
The named executive officers have been credited with the following years of
service for purposes of benefit accrual (rounded to the nearest one-hundredth of
a year): Mr. Clarke--25 years; Mr. Raos--23.42 years;
Mr. MacLean--20.33 years; Mr. Bendik--3.83 years; Mr. O'Leary--6.42 years;
Ms. Sander--15.33 years and Mr. Noonan--4.42 years. Since the base salaries of
Messrs. Clarke and Raos were significantly reduced effective upon the Demerger,
their current accrued Final Average Earnings ($982,639 and $612,180,
respectively) exceed their annual compensation for fiscal 1999. Generally,
unless termination of employment follows a Change in Control (as defined in the
Retirement Plan), due to the restriction on benefit entitlements prior to age 60
under the SRP described below, the Final Average Earnings of each of
Messrs. Clarke and Raos would be limited to $160,000, the Retirement Plan limit,
if his employment terminated during the current fiscal year.
USI SUPPLEMENTAL RETIREMENT PLAN
The SRP is a non-qualified, unfunded, deferred compensation plan
administered by the Compensation Committee. In general terms, the purpose of the
SRP is to restore to certain executive officers of the Company any benefits in
excess of the benefits accrued under the Retirement Plan that would have accrued
under the Offset Formula without regard to the Freeze Date (to a maximum of
25 years of Credited Service). In addition, the SRP provides for benefits in
excess of the limitations on the amount of benefits accrued and compensation
taken into account in any given year imposed by Sections 415 and
16
<PAGE>
401(a)(17) of the Code, respectively, with respect to a qualified plan such as
the Retirement Plan. Under the SRP, a participant's annual benefit is equal to
66 2/3% of his or her Average Final Compensation less 50% of his or her Social
Security Benefit, multiplied by the number of years of Credited Service (to a
maximum of 25) divided by 25, less the Pension Offset. The normal form of
benefit under the SRP shall be a monthly annuity ceasing on the participant's
death. The optional benefit forms are the forms of benefit provided under the
Retirement Plan. Although Messrs. Clarke and Raos had declined to be considered
for increases in their respective base salaries for 1996 through 1999 calendar
years, under the terms of the SRP each executive was deemed to receive a salary
increase for purposes of the SRP for each of the years equal to the average
salary increase for officers employed in the Company's Iselin, New Jersey
office. For purposes of the SRP Messrs. Clarke and Raos are considered to have a
base salary for the 1996, 1997, 1998 and 1999 calendar years equal to $815,250,
$875,008, $952,009 and $1,014,746 and $543,500, $583,339, $634,672 and $676,497
respectively. Capitalized terms used in this paragraph have the meanings defined
for them in the SRP or in the Retirement Plan.
EMPLOYMENT AGREEMENTS
The following is a summary of the employment agreements between the Company
and each of the named executive officers.
The employment agreements provide for each named executive to serve in the
respective capacities indicated in the Summary Compensation Table above.
Mr. O'Leary's agreement was amended as of September 1, 1999 to reflect his
promotion to Executive Vice President. Mr. Raos ceased to be President and Chief
Operating Officer of the Company effective September 15, 1999.
Mr. Clarke's term of employment will expire at the end of the current three
year term and the term of employment for Messrs. O'Leary, MacLean and
Ms. Sander and Messrs. Bendik and Noonan will expire at the end of the current
two year terms. The term of each of the agreements is subject to automatic
extension for an additional three-year term in the case of Mr. Clarke and an
additional two-year term in the case of the other executives, unless either
party gives at least ninety (90) days prior written notice of non-extension or
the agreement is terminated earlier as discussed below. Mr. Raos' term of
employment will expire on his termination of employment or, if earlier, the
first to occur of certain events as described below.
The employment agreements provide that the Company will pay Messrs. Clarke,
Raos, O'Leary, Bendik and MacLean, Ms. Sander and Mr. Noonan base annual
salaries at a rate of not less than $750,000, $500,000, $385,000, $370,000,
$282,150, $233,500, and $136,000 respectively. As provided in the employment
agreements, each executive is eligible to receive an annual cash bonus, with a
target Bonus Percentage equal to at least 100% of base salary for
Messrs. Clarke and Raos, 85% of base salary for Mr. O'Leary, 80% of base salary
for Mr. Bendik, 70% of base salary for Mr. MacLean and Ms. Sander, and 50% of
base salary for Mr. Noonan, pursuant to the Annual Performance Incentive Plan or
a successor plan satisfying the requirements for the performance-based
compensation exception of Section 162(m) of the Code. The employment agreements
also entitle the executives to participate generally in all pension, retirement,
savings, welfare and other employee benefit plans and arrangements and fringe
benefits and perquisites maintained by the Company from time to time for senior
executives of a comparable level. Mr. MacLean's employment agreement provides
that the Company may change Mr. MacLean's title to Special Counsel at any time
after June 30, 2000 and prior to a Change in Control of the Company (as defined
in his employment agreement). Mr. MacLean's agreement provides that the 70%
minimum target Bonus Percentage shall not apply to the bonus for any fiscal year
or portion thereof after he becomes Special Counsel and provides for special
rules that apply to bonuses determined after a Change in Control of the Company
(as defined in his employment agreement).
The employment agreements provide that if the executive's employment with
the Company is terminated by reason of death or disability, the executive or his
legal representative will receive, in addition
17
<PAGE>
to accrued compensation, the prorated annual bonus of the executive based on the
target Bonus Percentage for the fiscal year of the executive's death or
disability, full accelerated vesting under all equity-based and long-term
incentive plans (or, in the case of Mr. Bendik, vesting only under all
non-equity-based long-term incentive plans and, in the case of Mr. Raos, vesting
in accordance with the long-term incentive and equity plans and programs of the
Company), payment of base salary on a monthly basis for a specified period
(twelve (12) months in the case of Messrs. Clarke and Raos, six (6) months in
the case of Messrs. O'Leary, Bendik and MacLean and Ms. Sander, and three
(3) months in the case of Mr. Noonan) and payment of spouse's and dependents'
COBRA coverage premiums for no more than three (3) years, subject in the case of
disability to offset against the base salary payment by the amount the executive
would receive under any long-term disability program maintained by the Company.
The employment agreement with Mr. Clarke provides that if Mr. Clarke's
employment with the Company is terminated (i) by the Company other than for
cause (as defined in his employment agreement) or due to a disability (as
defined in his employment agreement); (ii) by the executive for good reason (as
defined in his employment agreement); (iii) by the executive for any or no
reason within two (2) years after a Change in Control of the Company (as defined
in his employment agreement); or (iv) as a result of the Company giving notice
of nonextension at the end of any three-year term ((i) through (iv) referred to
herein collectively as "Severance Payment Events"), then Mr. Clarke shall be
entitled to receive, among other things (a) a lump sum within five (5) days
after such event equal to (i) three (3) times base salary, and (ii) three
(3) times the highest annual bonus paid or payable to Mr. Clarke by the Company
for any of the previous three (3) completed fiscal years, provided that if such
termination occurs on or after a Change in Control of the Company, Mr. Clarke
will instead receive three times the target Bonus Percentage specified in his
employment agreement, (b) accelerated full vesting under all outstanding
equity-based and long-term incentive plans, (c) three (3) years of additional
service and compensation credit for pension purposes, (d) three (3) years of the
maximum Company contribution under any type of qualified or nonqualified 401(k)
plan, (e) payment by the Company of the premiums for Mr. Clarke and his
dependents' health coverage for three (3) years (all such payments being
collectively referred to as the "Severance Payment") and (f) if such termination
occurs after a Change in Control of the Company and Mr. Clarke is married at the
time of the commencement of his benefits under the SRP his spousal death benefit
under the SRP shall be the survivor benefit under a joint and 60% annuity rather
than the survivor benefit under a joint and 50% annuity with no additional
actuarial adjustment as a result of such change (the "Special SRP Benefit
Treatment"). In addition, Mr. Clarke's employment agreement provides that if he
dies or becomes disabled after a Change in Control of the Company and is married
at the time of his death or disability, the Special SRP Benefit Treatment shall
apply. If after a Change in Control of the Company Mr. Clarke has not attained
the normal retirement date provided under the SRP as of the date of any
Severance Payment Event, Mr. Clarke will be deemed to have attained his normal
retirement age for purposes of the SRP and payments of amounts thereunder. In
addition, if the Severance Payment to Mr. Clarke under the employment agreement,
together with other amounts paid to Mr. Clarke, exceeds certain threshold
amounts and results from a change in ownership (as defined in
Section 280G(b)(2) of the Code), the employment agreement provides that
Mr. Clarke will receive an additional amount to cover the federal excise tax and
any interest or penalties with respect thereto on a "grossed up" basis. If
Mr. Clarke is terminated for cause or voluntarily resigns (which right
Mr. Clarke has on sixty (60) days' prior written notice to the Company),
Mr. Clarke will only receive accrued compensation and benefits as provided in
benefit plans, provided that in the event such voluntary resignation is after
age sixty-two (62) there will be certain additional vesting with regard to stock
options and restricted stock.
The employment agreements with Messrs. O'Leary and MacLean, Ms. Sander and
Mr. Noonan provide for substantially similar provisions on termination except
that the definitions of "cause" and "good reason" have differences that afford
the Company broader rights, the Severance Payment will be based on a two-time
rather than three-time multiple and, in certain limited instances, will be
subject to offset, there will be more limited vesting of stock options and
restricted stock and, in the case of Messrs. O'Leary and MacLean and
Ms. Sander, the executive may only resign and collect severance based purely on
the Change
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in Control of the Company during a 30-day window after the first anniversary of
the Change in Control of the Company. Mr. Noonan does not have the right to
resign and collect severance based purely on a Change in Control.
Mr. Bendik's agreement was amended as of August 31, 1999 to reflect his
change of position to (i) Vice Chairman and a senior executive of USI Bath &
Plumbing Products for the period beginning August 31, 1999 and ending
October 3, 1999 and (ii) Chairman and Chief Executive Officer of USI Bath &
Plumbing Products on and after October 4, 1999. Mr. Bendik's employment
agreement provides for substantially similar provisions as those of
Messrs. O'Leary and MacLean, Ms. Sander and Mr. Noonan, except that the
definition of Change in Control of the Company includes a Change in Control of
the USI Bath and Plumbing Products Company (as defined in his employment
agreement), Mr. Bendik is required to execute a release prior to receiving
severance payments and he is required to comply with certain provisions relating
to confidential information, non-competition and non-solicitation. In addition,
in the event of certain termination events, Mr. Bendik shall receive an
additional five (5) years of credited service under the SRP. In the event of a
spinoff of the USI Bath & Plumbing Products, where Mr. Bendik is not initially
the Chief Executive Officer of the spunoff entity (other than due to
Mr. Bendik's death or physical or mental incapacity), Mr. Bendik's employment
with the Company shall terminate without cause (as defined in his employment
agreement) and he shall be entitled to severance benefits as if a Change in
Control of the Company (as defined in his employment agreement) had occurred
immediately prior to such termination. Severance payments of base salary and
bonus shall be made by the Company to Mr. Bendik in a lump sum if his
termination occurs following a Change in Control of the Company or if his
termination occurs prior to a Change in Control of the Company, in twenty-four
(24) equal monthly installments following his date of termination.
The employment agreement for Mr. Raos provides for substantially similar
provisions as those of Mr. Clarke on a termination prior to the earliest of
(i) the Spinoff; (ii) the sale of 75% of the assets of the diversified segment
prior to the Spinoff (a "Sale Event") or (iii) if certain of the companies
subsidiaries are sold prior to a Spinoff or the Company publicly announces that
its Board has abandoned the Spinoff or a Spinoff does not occur prior to
September 30, 2000 (an "Abandoned Spinoff"). Mr. Raos' employment will terminate
on a Spinoff, a Sale Event or an Abandoned Spinoff. If Mr. Raos' employment is
terminated as the result of a Spinoff, Mr. Raos shall (i) vest in the unvested
shares of restricted Company common stock ("Company Restricted Stock") granted
to him in 1995, but forfeit all other unvested Company Restricted Stock and
(ii) vest in all his outstanding options to purchase Company common stock, but
the exercise period of such stock options shall only extend to the later of
January 15, 2000 or ninety (90) days after the termination event (the "Stock
Option Treatment"). Mr. Raos' benefit accruals and Company obligations under the
long-term incentive plan and the SRP, as well as any other employment related
entitlements shall be transferred to the spunoff entity and the Company shall
have no further liability with regard to such amounts and entitlements.
If Mr. Raos' employment is terminated as the result of a Sale Event or an
Abandoned Spinoff, Mr. Raos shall (i) vest in all of his Company Restricted
Stock; (ii) be entitled to the Stock Option Treatment; (iii) vest in his accrued
benefit under the SRP and it shall be paid out at retirement in accordance with
the terms of the SRP; and (iv) in the case of a Sale Event and provided
Mr. Raos delivers and does not revoke a release and cooperates with the Company
in connection with the Sale Event, be entitled to receive within thirty
(30) days after the Sale Event a lump sum incentive payment equal to $1,500,000.
In addition, on a Sale Event or Abandoned Spinoff Mr. Raos' benefit accruals
under the long-term incentive plan shall immediately vest and if the Abandoned
Spinoff occurs during fiscal 2000 and Mr. Raos delivers and does not revoke a
release, he shall be entitled to a pro rata fiscal 2000 bonus.
The employment agreements of each of the named executive officers also
provide for indemnification for actions in their corporate capacity, directors'
and officers' liability insurance and (except for Mr. Noonan) coverage in most
instances for legal fees incurred in enforcing their rights under their
respective employment agreements.
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APPROVAL OF U.S. INDUSTRIES, INC.
2000 ANNUAL PERFORMANCE INCENTIVE PLAN
(ITEM B ON PROXY CARD)
On December 1, 1999 the Board, subject to stockholder approval, adopted the
U.S. Industries, Inc. 2000 Annual Performance Incentive Plan (the "2000
Performance Incentive Plan"), a copy of which is annexed hereto as Exhibit A.
The following description of the 2000 Performance Incentive Plan is intended
only as a summary and is qualified in its entirety by reference to the 2000
Performance Incentive Plan.
The 2000 Performance Incentive Plan is designed, among other things, to
ensure that compensation which may be payable under the 2000 Performance
Incentive Plan to participants who are "covered employees" as defined in
Section 162(m) of the Code and the applicable Treasury regulations thereunder
will qualify as tax-deductible pursuant to the performance-based compensation
exception of Section 162(m) of the Code. Section 162(m) of the Code requires,
among other things, stockholder approval. Therefore, in accordance with this
requirement, the 2000 Performance Incentive Plan is being submitted to
stockholders for approval.
PURPOSE. The purpose of the 2000 Performance Incentive Plan is to attract,
retain and motivate key employees by providing cash performance awards to
designated executive employees of the Company or its subsidiaries. If approved
by stockholders, the 2000 Performance Incentive Plan will take effect for
Performance Awards (as defined below), if any, payable with respect to fiscal
years of the Company commencing with fiscal 2001.
ADMINISTRATION/ELIGIBLE EMPLOYEES. The 2000 Performance Incentive Plan will
be administered by the Compensation Committee, which currently is intended to be
composed of not less than two individuals who qualify as "outside directors"
under Section 162(m) of the Code, or another Committee of the Board satisfying
such requirement (the "Committee"). The Committee shall have authority, in its
sole discretion, to designate certain individuals from among the Company's or
its subsidiaries' executive employees as eligible to participate in the 2000
Performance Incentive Plan for specified performance periods.
PERFORMANCE AWARDS. Participants in the 2000 Performance Incentive Plan
shall be eligible to receive a performance award ("Performance Award") based on
attainment by the Company of specified performance goals which have been
established by the Committee. These performance goals will be based on one or
more of the following criteria selected by the Committee: (i) the attainment of
certain target levels of, or a specified increase in, the Company's enterprise
value or value creation targets; (ii) the attainment of certain target levels
of, or a percentage increase in, the Company's after-tax or pre-tax profits
including, without limitation, that attributable to the Company's continuing
and/or other operations, (iii) the attainment of certain target levels of, or a
specified increase in, the Company's operational cash flow, (iv) the attainment
of a certain level of reduction of, or other specified objectives with regard to
limiting the level of increase in all or a portion of bank debt or other of the
Company's long-term or short-term public or private debt or other similar
financial obligations of the Company, which may be calculated net of cash
balances and/or other offsets and adjustments as may be established by the
Committee, (v) the attainment of a specified percentage increase in earnings per
share or earnings per share from the Company's continuing operations, (vi) the
attainment of certain target levels of, or a specified percentage increase in,
the Company's net sales, revenues, net income or earnings before income tax or
other exclusions; (vii) the attainment of certain target levels of, or a
specified increase in, the Company's return on capital employed or return on
invested capital; (viii) the attainment of certain target levels of, or a
percentage increase in, the Company's after-tax or pre-tax return on stockholder
equity; (ix) the attainment of certain target levels in the fair market value of
the Company's shares of common stock; and (x) the growth in the value of an
investment in the Company's common stock assuming the reinvestment of dividends.
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In addition, such performance goals may be based upon the attainment by a
subsidiary, division or other operational unit of the Company of specified
levels of performance under one or more of the measures described above.
Further, the performance goals may be based upon the attainment by the Company
(or a subsidiary, division or other operational unit of the Company) of
specified levels of performance under one or more of the foregoing measures
relative to the performance of other corporations. To the extent, but only to
the extent, permitted under Section 162(m) of the Code (including, without
limitation, compliance with any requirements for stockholder approval), the
Committee may (i) designate additional business criteria upon which the
performance goals may be based, (ii) modify, amend or adjust the business
criteria specified in the 2000 Performance Incentive Plan or (iii) incorporate
in the performance goals provisions regarding changes in accounting methods,
corporate transactions (including, without limitation, dispositions or
acquisitions) and similar events or circumstances.
No participant may receive or be credited with a Performance Award based on
the achievement of performance goals for any performance period (which period
may be one to three years) that exceeds $2 million for each year during the
performance period. Performance periods may overlap and the payments in any one
year, as long as from different performance periods, may exceed such amount.
PAYMENT OF PERFORMANCE AWARDS. Performance Awards may be paid after the
Performance Period in which they are earned, as determined by the Committee but,
except to the extent permitted under Code Section 162(m) and as specifically
provided in the 2000 Performance Incentive Plan with regard to a Change in
Control of the Company (as defined in the 2000 Performance Incentive Plan) or
certain termination events, not before the Committee certifies in writing that
the applicable performance goals were satisfied. The Committee may defer payment
of any Performance Award and may place such additional conditions on payment
thereof as it shall determine. The Committee (i) may, in its sole discretion,
award a pro-rata bonus to any participant whose employment terminated during the
applicable performance period and (ii) shall be required to award at least a
pro-rata bonus through the date of a Change of Control to each participant who
was a participant at the time of a Change of Control.
Notwithstanding the attainment of performance goals, the Committee has the
discretion to reduce (but not increase) a Performance Award, except that the
Committee shall have no such discretion for the performance period in which a
Change of Control takes place, or during such performance period with regard to
the prior performance period if the awards for the prior performance period have
not been made by the time of the Change of Control, with regard to participants
at the time of the Change of Control. In addition, upon a Change of Control, the
Committee may in its sole discretion, subject to the limitations of
Section 162(m) of the Code, make an award (immediately payable) equal to a
pro-rata portion (through the date of the Change of Control) of the Performance
Award level payable upon achieving, but not surpassing, the target performance
goals for such performance period and, if it so elects, a corresponding long
term plan award (as discussed below). Any such payment shall be offset against
any other award made for such performance period under the 2000 Performance
Incentive Plan.
LONG TERM PLAN AWARDS. Unless otherwise determined by the Committee with
regard to any performance period, a participant who receives a Performance Award
shall be entitled to be credited (except as noted above) with a long term plan
award ("Long Term Incentive Plan Award") equal to 30% of his Performance Award,
provided that for any participant the credited amount of the Long Term Incentive
Plan Award does not exceed $600,000 for each year during a performance period
and that such Long Term Incentive Plan Award will thereafter (between the last
day of the fiscal year for which the award is made and the payment date) not
increase by an annual measuring factor greater than the rate of 30-year Treasury
bonds on the first business day of each fiscal year. The foregoing will not
limit the amount credited to a participant for any year so long as the amounts
are from different performance periods.
Long Term Incentive Plan Awards are allocated to unfunded bookkeeping
accounts maintained under the Long Term Incentive Plan or a successor plan,
retroactive to the end of the fiscal year for which they are awarded. A
participant shall have no right to receive payment of his Long Term Incentive
Plan Award
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until such participant is entitled to receive a distribution under the Long Term
Incentive Plan. If a participant terminates employment prior to Retirement Age
(as defined in the Long Term Incentive Plan) other than by reason of death or
disability, or is terminated for Cause (as defined in the Long Term Incentive
Plan), such participant will generally forfeit any remaining balance of his or
her account under the Long Term Incentive Plan.
AMENDMENT AND TERMINATION. The Board (or an authorized Committee thereof)
may, in its sole discretion, amend or terminate the 2000 Performance Incentive
Plan so long as such action does not adversely affect any rights or obligations
with respect to awards already outstanding under the 2000 Performance Incentive
Plan. However, without the prior approval of the Company's stockholders (to the
extent required under the performance-based compensation exception of
Section 162(m) of the Code), no amendment may increase the maximum amount per
performance period which can be awarded to any participant (except to the extent
permitted under Section 162(m) of the Code to substitute an approximately
equivalent rate in the event that the 30-year Treasury bond rate ceases to
exist), change the business criteria on which the performance goals are based,
change the class of eligible employees or make any other change that would
require stockholder approval under the exemption for performance-based
compensation under Section 162(m) of the Code.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE U.S. INDUSTRIES, INC. 2000 PERFORMANCE INCENTIVE PLAN.
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APPROVAL OF U.S. INDUSTRIES, INC.
2000 STOCK OPTION PLAN
(ITEM C ON PROXY CARD)
On December 1, 1999 the Board, subject to stockholder approval, adopted the
U.S. Industries, Inc. 2000 Stock Option Plan (the "Plan"), a copy of which is
annexed hereto as Exhibit B. The following description of the Plan is intended
only as a summary and is qualified in its entirety by reference to the Plan.
PURPOSE. The purpose of the Plan is to enhance the profitability and value
of the Company for the benefit of its stockholders by enabling the Company
(1) to offer employees of the Company and its affiliates, including prospective
employees (collectively referred to as "Eligible Employees"), stock options,
thereby creating a means to raise the level of stock ownership by employees in
order to attract, retain and reward such individuals and strengthen the
mutuality of interests between employees and the Company's stockholders, and
(2) to pay non-employee directors a portion of their current annual retainer fee
in the form of shares of Common Stock, and to make awards of Common Stock and
grants of stock options to non-employee directors thereby attracting, retaining
and rewarding such non-employee directors, and strengthening the mutuality of
interests between non-employee directors and the Company's stockholders.
ADMINISTRATION. The Plan will be administered and interpreted by the
Compensation Committee, which is currently intended to be composed of two or
more non-employee directors, each of whom is intended to be a "non-employee
director" as defined under Section 16(b) of the Exchange Act as then in effect
or any successor provisions ("Rule 16b-3") and an "outside director" as defined
under Code Section 162(m) (the "Committee"). Accordingly, such administration is
intended to satisfy the requirement for administration by non-employee directors
under Rule 16b-3 and the exemption for performance based compensation under
Section 162(m) of the Code, which requires administration by outside directors.
The Plan is to be interpreted in accordance with the requirements of Rule 16b-3
and the exemptions for performance based compensation under Section 162(m) of
the Code. With respect to awards to non-employee directors, the Plan will be
administered by the Board and references to the Committee below will be deemed
to refer to the Board. Awards under the Plan may not be made on or after the
tenth anniversary of approval thereof, but awards granted prior to such tenth
anniversary may extend beyond that date. Terms and conditions of awards may be
set forth in written grant agreements, the terms of which are consistent with
the terms of the Plan.
AVAILABLE SHARES. The aggregate number of shares of Common Stock that may
be subject to awards under the Plan shall not exceed 2,000,000 shares (subject
to increase or decrease in the case of certain changes in the Company's capital
structure or business). In general, upon termination, cancellation or expiration
of an award, the unissued shares of Common Stock subject to the award will again
be available for an award under the Plan. The maximum number of shares of Common
Stock subject to any stock option which may be granted under the Plan during any
fiscal year of the Company to any Eligible Employee shall not exceed $250,000
shares (subject to increase or decrease in the case of certain changes in the
Company's capital structure or business).
EMPLOYEE STOCK OPTIONS. The Committee shall have the authority, in its sole
discretion, to grant, pursuant to the terms of the Plan, stock options to
Eligible Employees that do not qualify as "incentive stock options" under
Section 422 of the Code. In particular, the Committee shall have the authority
to select the Eligible Employees to whom stock options may be granted and to
determine the terms and conditions of any stock option (including, but not
limited to, any restriction or limitation, any vesting schedule or acceleration
thereof, or any forfeiture provisions or waiver thereof regarding any stock
option) as the Committee shall determine, in its sole discretion.
The Committee shall determine the number of shares of Common Stock subject
to each stock option, the term of each stock option (which may not exceed ten
(10) years after the stock option is granted), the
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exercise price (which shall not be less than 100% of the fair market value of a
share of Common Stock at the time of grant), the time or times at which the
stock option may be exercised and the other material terms of each stock option.
Payment of the exercise price may be made (i) in cash or by check, bank draft or
money order, (ii) with Committee approval, through the delivery of irrevocable
instructions to a broker approved by the Committee to deliver promptly to the
Company an amount equal to the purchase price, or (iii) on such other terms and
conditions as may be acceptable to the Committee.
The Plan authorizes the Committee, if it decides in its sole discretion, to
permit "reloads" of stock options exercised, including, without limitation,
permitting reloads such that the same number of stock options are granted as the
number of shares used to pay for the exercise price of stock options or shares
used to pay withholding taxes. The Committee may also at any time offer to buy
out a recipient's stock option subject to such terms and conditions as the
Committee may determine.
Subject to limited post-employment exercise periods and vesting in certain
instances, both of which are within the discretion of the Committee, awards to a
participant under the Plan shall be forfeited upon any termination of
employment. Certain vesting and specific post-employment exercise periods are
contemplated under certain employment agreements with executives.
NON-EMPLOYEE DIRECTOR AWARDS. The Committee shall grant to each
non-employee director an initial award of 1,500 shares of Common Stock upon the
date the non-employee director begins service as a non-employee director of the
Board (even if previously an employee director) (representing a value of
$20,531.25 based on the last sales price of the Common Stock reported on the New
York Stock Exchange on December 15, 1999 of $13.6875 per share). Furthermore, as
payment of the current annual non-employee director's retainer ($25,000) on the
first business day of each calendar quarter in each fiscal year of the Company
commencing with the first calendar quarter after the effective date of the Plan,
each non-employee director shall receive an award of Common Stock pursuant to
the Plan calculated by dividing $6,250 by the fair market value of the Common
Stock on the first business day of the fiscal year.
Each non-employee director shall also be granted stock options to purchase
7,500 shares of Common Stock upon the date the non-employee director begins
service as a director on the Board. In addition, subject to the terms of the
Plan, an award of stock options to purchase 3,750 shares of Common Stock shall
be made initially on October 1, 2000 (the "Initial Grant Date") and on each
anniversary of the Initial Grant Date thereafter. The exercise price of a stock
option shall be 100% of the fair market value of such Common Stock at the time
of grant or, the par value of the Common Stock, whichever is greater.
Except as otherwise provided in the Plan, each stock option shall be
exercisable on or after six (6) months and one (1) day after the date of grant
if the director is then a director and if not previously exercised each stock
option shall expire upon the tenth anniversary of the date of grant. Upon
termination of a directorship for any reason other than Cause (as defined in the
Plan), all outstanding stock options then exercisable shall remain exercisable
for a three (3) year period commencing on the date of termination, provided that
such three (3) year period shall not extend beyond the stated term of such stock
options. Upon removal for Cause, failure to stand for reelection or failure to
be renominated for Cause, or if the Company obtains or discovers information
after termination of directorship that such participant had engaged in conduct
that would have justified a removal for Cause during such directorship, all
outstanding stock options shall immediately terminate and shall be null and
void. Notwithstanding the foregoing, all stock options granted and not
previously exercisable shall become fully exercisable immediately upon a
termination of directorship due to death.
Notwithstanding the foregoing, no stock option shall be granted to
non-employee directors if on the date of grant the Company has liquidated,
dissolved, merged or consolidated with another entity such that the Company is
not the surviving entity (unless the Plan has been assumed by such surviving
entity with respect to future grants).
CHANGE IN CONTROL. Unless determined otherwise by the Committee at the time
of grant, upon a Change in Control (as defined in the Plan), all outstanding
stock options of such participant (whether an
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Eligible Employee or non-employee director) granted prior to the Change in
Control shall be fully vested and immediately exercisable. However, unless
otherwise determined by the Committee at the time of grant, no acceleration of
exercisability shall occur with regard to certain stock options that the
Committee determines in good faith prior to a Change in Control will be honored
or assumed or new rights substituted therefor by a participant's employer
immediately following the Change in Control, unless the Committee determines
otherwise. Further, unless otherwise determined by the Committee at the time of
grant, if the transaction constituting a Change in Control is to be treated as a
"pooling of interests" for financial reporting purposes, then there shall be no
acceleration of vesting to the extent the Company's independent public
accountants determine in good faith that such acceleration would preclude
"pooling of interests" accounting.
In the event of a merger or consolidation in which the Company is not the
surviving corporation or in the event of a transaction that results in the
acquisition of substantially all of the Company's Common Stock or all of the
Company's assets, the Committee may elect to terminate all outstanding stock
options granted to Eligible Employees; provided, that during the period from
notification of such termination to the date of consummation of the relevant
transaction (which must be at least twenty (20) days) each such participant
shall have the right to exercise all of his or her stock options in full
(without regard to any restrictions on exercisability).
AMENDMENT AND TERMINATION. The Board may at any time, and from time to
time, amend, in whole or in part, any or all of the provisions of the Plan, or
suspend or terminate it entirely, retroactively or otherwise, except that unless
otherwise required by law or specifically provided in the Plan, the rights of a
participant with respect to awards granted prior to such amendment, suspension
or termination, may not be impaired without the consent of such participant. In
addition, without the approval of the stockholders of the Company, in accordance
with Delaware law, to the extent required under Code Section 162(m), no
amendment may be made which would: (i) increase the maximum individual
participant limitation as provided in the Plan, (ii) change the classification
of employees eligible to receive stock options under the Plan, (iii) extend the
maximum stock option term, or (iv) require stockholder approval in order for the
Plan to comply with the applicable provisions of Section 162(m) of the Code. The
Board may amend the provisions of the Plan applicable to non-employee director
awards to provide for additional or different awards to non-employee directors.
NONTRANSFERABILITY. Awards granted under the Plan generally shall not be
transferrable, except that the Committee may, in its sole discretion and subject
to certain limitations, permit the transfer of stock options at the time of
grant or thereafter to certain "family members" of the recipient.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The following discussion of the principal federal income tax consequences
with respect to stock options and non-employee director awards under the Plan
are based on statutory authority and judicial and administrative interpretations
as of the date of this Proxy Statement, which are subject to change at any time
(possibly with retroactive effect). The discussion is limited to the U.S.
federal income tax consequences to individuals who are citizens or residents of
the U.S., other than those individuals who are taxed on a residence basis in a
foreign country. The U.S. federal income tax law is technical and complex and
the discussion below represents only a general summary.
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION ONLY AND
DOES NOT PURPORT TO ADDRESS ALL THE TAX CONSIDERATIONS THAT MAY BE RELEVANT.
EACH RECIPIENT OF A GRANT IS URGED TO CONSULT HIS OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES TO SUCH GRANTEE OF THE GRANT AND THE DISPOSITION OF
COMMON STOCK.
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
STOCK OPTIONS. No income will be recognized by the recipient at the time of
the grant of a non-qualified stock option. On exercise of a stock option, the
amount by which the fair market value of the Common Stock on the date of
exercise exceeds the stock option exercise price will be taxable to the
recipient as ordinary income. The recipient's tax basis in the shares of Common
Stock received upon exercise of a stock option will be equal to the amount of
cash paid on exercise, plus the amount of ordinary income recognized as a result
of the receipt of such shares. The subsequent disposition of shares acquired
upon exercise of a stock option will ordinarily result in capital gain or loss.
A recipient who is an officer or director of the Company or a beneficial
owner of more than ten percent (10%) of any class of registered equity
securities of the Company should consult with his or her tax advisor as to
whether, as a result of Section 16(b) of the Exchange Act and the rules and
regulations thereunder, the timing of income recognition is deferred for any
period following the exercise of a stock option (the "Deferral Period"). If
there is a Deferral Period, absent a written election (pursuant to
Section 83(b) of the Code) filed with the Internal Revenue Service (the "IRS")
within thirty (30) days after the date of transfer of the shares of Common Stock
pursuant to the exercise of the stock option to include in income, as of the
transfer date, the excess (on such date) of the fair market value of such shares
over their exercise price, recognition of income by the recipient could, in
certain instances, be deferred until the expiration of the Deferral Period.
The ordinary income recognized with respect to the transfer of shares upon
exercise of a stock option under the Plan granted to an employee, but not a
non-employee director, will be subject to both wage withholding and employment
taxes.
The Company will be entitled, subject to the possible application of
Sections 162(m) or 280G of the Code as discussed below, to a deduction in
connection with the recipient's exercise of a stock option in an amount equal to
the ordinary income recognized by the recipient.
NON-EMPLOYEE DIRECTOR'S COMMON STOCK AWARDS. The fair market value of an
award of Common Stock will be includible in a non-employee director's income as
ordinary income at the time of the award, subject to the timely making of an
election under Section 83(b) of the Code, and will result in deferral of income
recognition to the extent that as a result of Section 16(b) of the Exchange Act
the timing of recognition is deferred for a period following the Award. The
recipient should consult with his or her tax advisor with regard to the extent
of such deferral. The Company will be entitled to a deduction for the value of
such award when the non-employee director recognizes income, but such amounts
are not subject to wage withholding or employment taxes by the Company.
PARACHUTE PAYMENTS. In the event that the payment of any award under the
Plan is accelerated because of a change in ownership (as defined in Code
Section 280G(b)(2)) and such payment of an award, either alone or together with
any other payments made to the recipient, constitute excess parachute payments
under Section 280G of the Code, then subject to certain exceptions, a portion of
such payments would be nondeductible to the Company and the recipient would be
subject to a 20% excise tax on such portion of the payment.
SECTION 162(m) OF THE CODE. Code Section 162(m) denies a deduction to any
publicly held corporation for compensation paid to "covered employees" in a
taxable year to the extent that such compensation exceeds $1,000,000. "Covered
employees" are a company's chief executive officer on the last day of the
taxable year and any other individual whose compensation is required to be
reported to stockholders under the Exchange Act by reason of being among the
four most highly compensated officers (other than the chief executive officer)
for the taxable year and who is employed on the last day of the taxable year.
Compensation paid under certain qualified performance-based compensation
arrangements, which (among other things) provide for compensation based on
preestablished performance goals established by a compensation committee that is
comprised solely of two or more "outside directors," is not considered in
determining whether a "covered employee's" compensation exceeds $1,000,000. It
is intended that stock
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options granted under the Plan, provided they are granted at fair market value,
will satisfy the requirements for the performance-based compensation exception
of Section 162(m) of the Code so that the awards will not be included in a
"covered employee's" compensation for the purposes of determining whether such
"covered employee's" compensation exceeds $1,000,000.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" APPROVAL
OF THE U.S. INDUSTRIES, INC. 2000 STOCK OPTION PLAN DESCRIBED ABOVE.
APPROVAL OF AMENDMENT NUMBER TWO TO THE AMENDED U.S.
INDUSTRIES, INC. STOCK OPTION PLAN
(ITEM D ON PROXY CARD)
The Board and the stockholders of the Company previously approved the Stock
Option Plan. The Stock Option Plan incorporates amendments effective on or
before June 11, 1998.
On February 6, 1997, the stockholders approved an amendment to the Stock
Option Plan revising the plan to provide that no award may be granted under the
Stock Option Plan that would cause the number of shares of Common Stock which
are (i) granted under the Stock Option Plan and subject to a Restriction Period
(as defined in the Stock Option Plan), (ii) granted under the Restricted Stock
Plan and subject to a Vesting Period (as defined in the Restricted Stock Plan)
or, (iii) in the case of a stock option granted under the Stock Option Plan,
subject to acquisition pursuant to exercise of an option, to exceed 9.9 percent
of the total number of shares of Common Stock issued and outstanding (assuming
full dilution for all outstanding awards and other equity convertible into
Common Stock) (the "9.9 Percent Limit").
During the twelve (12) month period preceding the date of this proxy
statement the Company has repurchased a significant number of shares of Common
Stock decreasing the total of outstanding shares of Common Stock. It is
contemplated that additional repurchases of Common Stock will be made by the
Company in the future. The recent reduction in shares of outstanding Common
Stock through the repurchases combined with the contemplated future repurchases
may prevent the Company from utilizing the remaining number of shares originally
authorized under the Stock Option Plan without violating the 9.9 Percent Limit.
Accordingly, on December 1, 1999 the Board approved, subject to stockholder
approval, an amendment to the Stock Option Plan which eliminates the 9.9 Percent
Limit ("Amendment Number Two"). Amendment Number Two revises the Stock Option
Plan to enable the Company to utilize the total number of shares originally
authorized under the plan, thus retaining the original share limitation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
AMENDMENT NUMBER TWO TO THE AMENDED U.S. INDUSTRIES, INC. STOCK OPTION PLAN.
APPROVAL OF AMENDMENT NUMBER TWO
TO THE U.S. INDUSTRIES, INC. RESTRICTED STOCK PLAN
(ITEM E ON PROXY CARD)
The Board and the stockholders of the Company previously approved the
Restricted Stock Plan. The Restricted Stock Plan incorporates amendments to the
plan effective on or before June 11, 1998.
For the reasons described above (under the "Approval of Amendment Number Two
to the Amended U.S. Industries, Inc. Stock Option Plan"), on December 1, 1999
the Board approved, subject to stockholder approval, an amendment to the
Restricted Stock Plan which eliminates the 9.9 Percent Limit as it applies to
awards issued under the Restricted Stock Plan. Amendment Number Two of the
Restricted Stock Plan enables the Company to utilize the total number of shares
originally authorized under the plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
AMENDMENT NUMBER TWO TO THE U.S. INDUSTRIES, INC. RESTRICTED STOCK PLAN.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM D ON PROXY CARD)
The Board of Directors, upon the recommendation of the Audit Committee, has
appointed the firm of Ernst & Young LLP as independent auditors to examine the
Company's financial statements for fiscal 2000. Ernst & Young LLP were the
Company's independent auditors for fiscal 1999. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" RATIFICATION OF SUCH APPOINTMENT. If
the stockholders do not ratify such appointment, it will be reconsidered by the
Board.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to questions.
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no business
that will be presented for consideration at the Annual Meeting other than the
items specifically identified in the Notice of Annual Meeting. Proxies in the
enclosed form will be voted in respect of any other business that is properly
brought before the Annual Meeting in accordance with the judgment of the person
or persons voting the proxies.
STOCKHOLDER PROPOSALS AND NOMINATIONS OF BOARD MEMBERS
If a stockholder intends to present a proposal for action at the 2001 Annual
Meeting and wishes to have such proposal considered for inclusion in the
Company's proxy materials in reliance on Rule 14a-8 under the Exchange Act, the
proposal must be submitted in writing and received by the Company by
September 6, 2000. Such proposals must also meet the other requirements of the
rules of the Securities and Exchange Commission relating to stockholders'
proposals.
The By-Laws establish an advance notice procedure with regard to certain
matters, including stockholder proposals and nominations of individuals for
election to the Board of Directors. In general, notice of a stockholder proposal
or a director nomination for an annual meeting must be received by the Company
60 days or more before the date of the annual meeting and must contain specified
information and conform to certain requirements, as set forth in the By-Laws.
Notice of a stockholder proposal or a director nomination for a special meeting
must be received by the Company no later than the 15th day following the day on
which notice of the date of a special meeting of stockholders was given. If the
presiding officer at any stockholders' meeting determines that a stockholder
proposal or director nomination was not made in accordance with the By-Laws, the
Company may disregard such proposal or nomination.
In addition, if a stockholder submits a proposal outside of Rule 14a-8 for
the 2001 Annual Meeting, and the proposal fails to comply with the advance
notice procedure prescribed by the By-Laws, then the Company's proxy may confer
discretionary authority on the persons being appointed as proxies on behalf of
management to vote on the proposal. Proposals and nominations should be
addressed to the Secretary of the Company, George H. MacLean, U.S.
Industries, Inc., 101 Wood Avenue South, P.O. Box 169, Iselin, New Jersey 08830.
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by the
Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing or personal conversations, or by telephone, telex or facsimile. The
Company will, upon request, reimburse brokerage firms and others for their
reasonable expenses in forwarding solicitation material to the beneficial owners
of Common Stock.
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THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
OCTOBER 2, 1999, INCLUDING FINANCIAL STATEMENTS, IS ENCLOSED HEREWITH. THE
COMPANY WILL FURNISH ANY EXHIBIT TO SUCH ANNUAL REPORT ON FORM 10-K UPON REQUEST
BY A STOCKHOLDER DIRECTED TO GEORGE H. MACLEAN, SECRETARY, U.S.
INDUSTRIES, INC., 101 WOOD AVENUE SOUTH, BOX 169, ISELIN, NEW JERSEY 08830, FOR
A FEE LIMITED TO THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBITS.
By Order of the Board of Directors,
George H. MacLean
SECRETARY
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EXHIBIT A
U.S. INDUSTRIES, INC.
2000 ANNUAL PERFORMANCE INCENTIVE PLAN
(EFFECTIVE AS OF OCTOBER 1, 2000)
1. PURPOSE
The purpose of this Plan is to attract, retain and motivate key employees by
providing cash performance awards to designated key employees of the Company or
its Subsidiaries. This Plan is effective for fiscal years of the Company
commencing on or after October 1, 2000, subject to approval by the stockholders
of the Company in accordance with the laws of the State of Delaware.
2. DEFINITIONS
Unless the context otherwise requires, the words which follow shall have the
following meaning:
(a) "Award"--shall mean the total annual performance award as determined
by aggregating any Performance Award and Long Term Incentive Plan
Award under the Plan; provided that for any Performance Period the
Committee may, in its sole discretion, define "Award" to mean only a
Performance Award.
(b) "Board"--shall mean the Board of Directors of the Company.
(c) "Change of Control of the Company"--shall have the meaning set forth
in Exhibit A hereto.
(d) "Code"--shall mean the Internal Revenue Code of 1986, as amended and
any successor thereto.
(e) "Code Section 162(m)"--shall mean the exception for performance based
compensation under Section 162(m) of the Code or any successor
section and the Treasury regulations promulgated thereunder.
(f) "Company"--shall mean U.S. Industries, Inc. and any successor by
merger, consolidation or otherwise.
(g) "Committee"--shall mean the Compensation Committee of the Board or
such other Committee of the Board that is appointed by the Board to
administer this Plan; it is intended that all of the members of any
such Committee shall satisfy the requirements to be outside
directors, as defined under Code Section 162(m).
(h) "Individual Target Award"--shall mean the targeted Performance Award
for a Performance Period as specified by the Committee in accordance
with Section 5 hereof.
(i) "Long Term Incentive Plan Award"--shall mean the amount, if any, paid
or payable under Section 7 hereof.
(j) "Participant"--shall mean an executive employee of the Company or any
Subsidiary selected, in accordance with Section 4 hereof, to be
eligible to receive an Award in accordance with this Plan.
(k) "Performance Award"--shall mean the amount paid or payable under
Section 6 hereof.
(l) "Performance Goals"--shall mean the objective performance goals,
formulas and standards described in Section 6 hereof.
(m) "Performance Period"--shall mean the period of one to three Plan
Years (as specified by the Committee) over which achievement of the
Performance Goals is to be measured.
(n) "Plan"--shall mean the U.S. Industries, Inc. 2000 Annual Performance
Incentive Plan.
(o) "Plan Year"--shall mean a fiscal year of the Company.
<PAGE>
(p) "Pro Rata"--shall mean a portion of an Award based on the number of
days worked during a Performance Period as compared to the total
number of days in the Performance Period.
(q) "Subsidiary"--shall mean any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.
3. ADMINISTRATION AND INTERPRETATION OF THE PLAN
The Plan shall be administered by the Committee. The Committee shall have
the exclusive authority and responsibility to: (i) interpret the Plan;
(ii) approve the designation of eligible Participants; (iii) set the performance
criteria for Awards within the Plan guidelines; (iv) determine whether a Long
Term Incentive Plan Award will be payable with respect to any Performance Award
to be earned for a Performance Period; (v) determine the timing and form of
amounts to be paid out under the Plan and the conditions for payment thereof;
(vi) certify attainment of Performance Goals and other material terms;
(vii) reduce Awards as provided herein; (viii) authorize the payment of all
benefits and expenses of the Plan as they become payable under the Plan;
(ix) adopt, amend and rescind rules and regulations relating to the Plan; and
(x) make all other determinations and take all other actions necessary or
desirable for the Plan's administration, including, without limitation,
correcting any defect, supplying any omission or reconciling any inconsistency
in this Plan in the manner and to the extent it shall deem necessary to carry
this Plan into effect, but only to the extent such action would be permitted
under Code Section 162(m).
Decisions of the Committee shall be made by a majority of its members. All
decisions of the Committee on any question concerning the selection of
Participants and the interpretation and administration of the Plan shall be
final, conclusive and binding upon all parties. The Committee may rely on
information, and consider recommendations, provided by the Board or the
executive officers of the Company. The Plan is intended to comply with Code
Section 162(m), and all provisions contained herein shall be limited, construed
and interpreted in a manner to so comply.
4. ELIGIBILITY AND PARTICIPATION
(a) For each Performance Period, the Committee shall select the employees of
the Company or its Subsidiaries who are to participate in the Plan from
among the executive employees of the Company or its Subsidiaries.
(b) No person shall be entitled to any Award under this Plan for a
Performance Period unless the individual is designated as a Participant
for the Performance Period. The Committee may add to or delete
individuals from the list of designated Participants at any time and from
time to time, in its sole discretion, subject to any limitations required
to comply with Code Section 162(m).
5. INDIVIDUAL TARGET AWARD
For each Participant for each Performance Period, the Committee may, in its
sole discretion, specify a targeted performance award. The Individual Target
Award may be expressed, at the Committee's sole discretion, as a fixed dollar
amount, a percentage of base pay, or an amount determined pursuant to an
objective formula or standard. The Committee's establishment of an Individual
Target Award for a Participant for a Performance Period shall not imply or
require that the same level Individual Target Award (if any such award is
established by the Committee for the relevant employee) be set for any
subsequent Performance Period. At the time the Performance Goals are established
(as provided in subsection 6.2 below), the Committee shall prescribe a formula
to be used to determine the percentages (which may be greater than one-hundred
percent (100%)) of an Individual Target Award that may be earned or payable
based upon the degree of attainment of the Performance Goals during the
Performance Period. Notwithstanding anything else herein, the Committee may, in
its sole discretion, elect to pay a Participant an amount that is less than the
Participant's Individual Target Award (or attained percentages thereof)
regardless of the degree of attainment of the Performance Goals; provided that
no such discretion
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to reduce an Award earned based on achievement of the applicable Performance
Goals shall be permitted for the Performance Period in which a Change of Control
of the Company occurs, or during such Performance Period with regard to the
prior Performance Period if the Awards for the prior Performance Period have not
been made by the time of the Change of Control of the Company, with regard to
individuals who were Participants at the time of the Change of Control of the
Company.
6. PERFORMANCE AWARD PROGRAM
6.1 PERFORMANCE AWARDS. Subject to the satisfaction of any conditions on
payment imposed by the Committee pursuant to Section 6.4 and Section 8 herein,
each Participant shall be eligible to receive up to the achieved percentage of
their Individual Target Award for such Performance Period (or, subject to the
last sentence of Section 5, such lesser amount as determined by the Committee in
its sole discretion) based upon the attainment of the objective Performance
Goals established pursuant to subsection 6.2 and the formula established
pursuant to Section 5. Except as specifically provided in Section 8, no
Performance Award shall be made to a Participant for a Performance Period unless
the minimum Performance Goals for such Performance Period are attained.
6.2 OBJECTIVE PERFORMANCE GOALS, FORMULAE OR STANDARDS. The Committee in
its sole discretion shall establish the objective performance goals, formulae or
standards and the Individual Target Award (if any) applicable to each
Participant or class of Participants for a Performance Period in writing prior
to the beginning of such Performance Period or at such later date as permitted
under Code Section 162(m) and while the outcome of the Performance Goals are
substantially uncertain. Such Performance Goals may incorporate, if and only to
the extent permitted under Code Section 162(m), provisions for disregarding (or
adjusting for) changes in accounting methods, corporate transactions (including,
without limitation, dispositions and acquisitions) and similar type events or
circumstances. To the extent any such provision would create impermissible
discretion under Code Section 162(m) or otherwise violate Code Section 162(m),
such provision shall be of no force or effect. The Performance Goals shall be
based on one or more of the following criteria: (i) the attainment of certain
target levels of, or a specified increase in, enterprise value or value creation
targets of the Company (or any subsidiary, division or other operational unit of
the Company), (ii) the attainment of certain target levels of, or a percentage
increase in after-tax or pre-tax profits of the Company, including without
limitation that attributable to continuing and/or other operations of the
Company (or in either case a subsidiary, division, or other operational unit of
the Company); (iii) the attainment of certain target levels of, or a specified
increase in, operational cash flow of the Company (or a subsidiary, division, or
other operational unit of the Company); (iv) the attainment of a certain level
of reduction of, or other specified objectives with regard to limiting the level
of increase in all or a portion of, the Company's bank debt or other long-term
or short-term public or private debt or other similar financial obligations of
the Company, which may be calculated net of cash balances and/or other offsets
and adjustments as may be established by the Committee; (v) the attainment of a
specified percentage increase in earnings per share or earnings per share from
continuing operations of the Company (or a subsidiary, division or other
operational unit of the Company); (vi) the attainment of certain target levels
of, or a specified percentage increase in, net sales, revenues, net income or
earnings before income tax or other exclusions of the Company (or a subsidiary,
division, or other operational unit of the Company); (vii) the attainment of
certain target levels of, or a specified increase in, return on capital employed
or return on invested capital of the Company (or any subsidiary, division or
other operational unit of the Company); (viii) the attainment of certain target
levels of, or a percentage increase in, after-tax or pre-tax return on
stockholder equity of the Company (or any subsidiary, division or other
operational unit of the Company); (ix) the attainment of certain target levels
in the fair market value of the shares of the Company's common stock; and
(x) the growth in the value of an investment in the Company's common stock
assuming the reinvestment of dividends.
In addition, the Performance Goals may be based upon the attainment of
specified levels of Company (or subsidiary, division or other operational unit
of the Company) performance under one or more of the
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measures described above relative to the performance of other corporations. To
the extent permitted under Code Section 162(m) (including, without limitation,
compliance with any requirements for stockholder approval) but only to that
extent, the Committee may: (i) designate additional business criteria on which
the Performance Goals may be based, or (ii) adjust, modify or amend the
aforementioned business criteria.
6.3 MAXIMUM PERFORMANCE AWARD. The maximum Performance Award payable to a
Participant (or credited to his account for future payment) based on achievement
of the Performance Goals for a Performance Period is $2,000,000 for each Plan
Year during the Performance Period. The foregoing shall not limit the amount
payable to a Participant in a Plan Year so long as the amounts are from
different Performance Periods.
6.4 PAYMENT DATE; COMMITTEE CERTIFICATION. The Performance Awards may be
paid at such time after the Performance Period in which they are earned, as
determined by the Committee but not before the Committee certifies in writing
that the Performance Goals specified pursuant to subsection 6.2 were, in fact,
satisfied (except to the extent permitted under Code Section 162(m) and provided
in Section 8 with regard to Change of Control of the Company, death or certain
other termination situations). The Committee shall use its best efforts to make
a determination with regard to satisfaction of the Performance Goals within two
and one-half (2 1/2) months after the end of each Performance Period. The
Committee may defer payment of any Performance Award and may place such
additional conditions on payment thereof as it shall determine.
6.5 CHANGE OF CONTROL. In the event of a Change of Control of the Company,
any unpaid portion of any Performance Award that has been earned and certified,
but is being deferred subject to payment conditions shall immediately fully vest
and be paid out (subject to the minimum reduction, if any, required to satisfy
the requirements of Code Section 162(m)).
7. LONG TERM INCENTIVE PLAN AWARD PROGRAM
7.1 LONG TERM INCENTIVE PLAN AWARD. Except as otherwise determined by the
Committee with regard to any Performance Period, each Participant who is
entitled to receive a Performance Award for a Performance Period shall, subject
to subsection 7.2 and Section 8, also be entitled to be credited with a Long
Term Incentive Plan Award in an amount equal to thirty percent (30%) of his
Performance Award.
7.2 ALLOCATION OF LONG TERM INCENTIVE PLAN AWARD. The Participant's Long
Term Incentive Plan Award for any Performance Period shall be allocated to the
unfunded bookkeeping account maintained for the Participant under the U.S.
Industries, Inc. Long Term Incentive Plan or any successor plan so long as such
plan provides for increase in value based only on either a reasonable rate of
interest or on one or more predetermined actual investments (whether or not
actually invested therein), such that the amount payable by the employer at the
later date will be based on the actual rate of return of a specific investment
(including any decrease as well as any increase in the value of an investment).
Such allocation shall be credited retroactively as of the end of the Performance
Period for which it is credited.
7.3 MAXIMUM LONG TERM INCENTIVE PLAN AWARD. The maximum amount of Long
Term Incentive Plan Awards that may, in accordance with subsection 7.1, be
allocated to a Participant for a Performance Period is $600,000 for each Plan
Year during the Performance Period and any such Long Term Incentive Plan Award
shall (between the date as of which such award is credited pursuant to
subsection 7.2 and the payment date) not increase by a measuring factor for each
fiscal year greater than the interest rate on thirty (30) year Treasury bonds on
the first business day of such fiscal year compounded annually. The foregoing
shall not limit the amount allocable to a Participant for any Plan Year so long
as the amounts are from different Performance Periods.
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<PAGE>
7.4 PAYMENT DATE. The Participant shall have no right to receive payment
of the Long Term Incentive Plan Awards until he has a right to receive such
amounts under the terms of the U.S. Industries, Inc. Long Term Incentive Plan or
a successor plan.
8. PARTIAL AWARDS
The Committee, in its sole and absolute discretion, may make a full or Pro
Rata Award to Participants for a Performance Period in circumstances that the
Committee deems appropriate including, but not limited to, a Participant's
death, disability, retirement or other termination of employment during such
Performance Period and the Committee shall be required to make at least a Pro
Rata Award through the date of a Change of Control of the Company to each
Participant who is a Participant at the time of such Change of Control. All such
Awards shall be based on achievements of the Performance Goals for the
Performance Period except that, to the extent permitted under Code
Section 162(m), in the case of death, disability or Change in Control of the
Company during the Performance Period (or such other termination situations as
permitted under Code Section 162(m)) an amount equal to or less than any
Individual Target Awards may be made by the Committee either during or after the
Performance Period without regard to actual achievement of the Performance
Goals. Furthermore, upon a Change of Control of the Company the Committee may,
in its sole discretion but only to the extent permitted under Code
Section 162(m), make an Award (payable immediately) equal to a Pro Rata portion
(through the date of the Change of Control of the Company) of the Individual
Target Award payable upon achieving, but not surpassing, the Performance Goals
for the relevant Performance Period; with, if so determined by the Committee, a
corresponding Long Term Incentive Plan Award. Any such immediate Pro Rata
payment and Long Term Incentive Plan Award shall be offset against any other
Award of the same types made for such Performance Period under this Plan.
9. NON-ASSIGNABILITY
No Award under this Plan or payment thereof nor any right or benefit under
this Plan shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance, garnishment, execution or levy of any kind or charge, and
any attempt to anticipate, alienate, sell, assign, pledge, encumber and to the
extent permitted by applicable law, charge, garnish, execute upon or levy upon
the same shall be void and shall not be recognized or given effect by the
Company.
10. NO RIGHT TO EMPLOYMENT
Nothing in the Plan or in any notice of award pursuant to the Plan shall
confer upon any person the right to continue in the employment of the Company or
one of its subsidiaries or affiliates nor affect the right of the Company or any
of its subsidiaries or affiliates to terminate the employment of any
Participant.
11. AMENDMENT OR TERMINATION
While the Company hopes to continue the Plan indefinitely, it reserves the
right in its Board (or a duly authorized committee thereof) to amend, suspend or
terminate the Plan or to adopt a new plan in place of this Plan at any time;
provided, that no such amendment shall, without the prior approval of the
stockholders of the Company in accordance with the laws of the State of Delaware
to the extent required under Code Section 162(m): (i) alter the Performance
Goals as set forth in Section 6.2; (ii) increase the maximum amounts set forth
in subsections 6.3 and 7.3 hereof, except to the extent permitted under Code
Section 162(m) to substitute an approximately equivalent rate in the event that
the thirty (30) year Treasury bond rate ceases to exist; (iii) change the class
of eligible employees set forth in Section 4(a); or (iv) implement any change to
a provision of the Plan requiring stockholder approval in order for the Plan to
continue to comply with the requirements of Code Section 162(m). Furthermore, no
amendment, suspension or termination shall, without the consent of the
Participant, alter or impair a Participant's right to receive payment of an
Award for a Performance Period otherwise payable hereunder.
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12. SEVERABILITY
In the event that any one or more of the provisions contained in the Plan
shall, for any reason, be held to be invalid, illegal or unenforceable, in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of the Plan and the Plan shall be construed as if such invalid,
illegal or unenforceable provisions had never been contained therein.
13. WITHHOLDING
The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it may have to withhold
federal, state or local income or other taxes incurred by reason of payments
pursuant to the Plan.
14. GOVERNING LAW
This Plan and any amendments thereto shall be construed, administered, and
governed in all respects in accordance with the laws of the State of Delaware
(regardless of the law that might otherwise govern under applicable principles
of conflict of laws).
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EXHIBIT A
Change in Control of the Company shall mean that one (1) of the following
have occurred:
(i) any "person" as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock, $.01 par value per share, of
the Company ("Common Stock")), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding securities;
(ii) during any period of two (2) consecutive years individuals who at
the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
paragraph (i), (iii), or (iv) of this section) whose election by the Board
or nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board;
(iii) a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than fifty
percent (50%) of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such merger
or consolidation; provided, however, that a merger or consolidation effected
to implement a recapitalization of the Company (or similar transaction) in
which no person acquires more than twenty-five percent (25%) of the combined
voting power of the Company's then outstanding securities shall not
constitute a Change in Control of the Company; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or the consummation of the sale or disposition by
the Company of all or substantially all of the Company's assets other than
(x) the sale or disposition of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or indirectly,
at least fifty percent (50%) or more of the combined voting power of the
outstanding voting securities of the Company at the time of the sale or
(y) pursuant to a spinoff type transaction, directly or indirectly, of such
assets to the stockholders of the Company.
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EXHIBIT B
U.S. INDUSTRIES, INC.
2000 STOCK OPTION PLAN
ARTICLE I.
PURPOSE
The purpose of this U.S. Industries, Inc. 2000 Stock Option Plan (the
"Plan") is to enhance the profitability and value of U.S. Industries, Inc. (the
"Company") for the benefit of its stockholders by enabling the Company (1) to
offer employees of the Company and its Affiliates, Stock Options, thereby
creating a means to raise the level of stock ownership by employees in order to
attract, retain and reward such individuals and strengthen the mutuality of
interests between employees and the Company's stockholders, and (2) to pay
Non-Employee Directors a portion of their current annual retainer fee in the
form of shares of Common Stock, and to make awards and grants of Common Stock
and Stock Options to Non-Employee Directors thereby attracting, retaining and
rewarding such Non-Employee Directors, and strengthening the mutuality of
interests between Non-Employee Directors and the Company's stockholders. The
Plan is effective as of the date set forth in Article XIII.
ARTICLE II.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1 "Acquisition Events" shall have the meaning set forth in
Section 4.2(d).
2.2 "Affiliate" shall mean other than the Company, (i) any corporation
in an unbroken chain of corporations beginning with the Company, or in the
event the Company is a Subsidiary, beginning with the Company's Parent,
which owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain; (ii) any corporation, trade or business
(including, without limitation, a partnership or limited liability company)
which is controlled fifty percent (50%) or more (whether by ownership of
stock, assets or an equivalent ownership interest or voting interest) by the
Company and/or its Affiliates; or (iii) any other entity, approved by the
Committee as an Affiliate under the Plan, in which the Company or any of its
Affiliates has a material equity interest.
2.3 "Award" shall mean an award of Stock Options under this Plan or
Common Stock solely as provided in Article VII. All Awards shall be
confirmed by, and subject to the terms of, a written agreement executed by
the Company and the Participant or in the discretion of the Committee, a
grant letter from the Company.
2.4 "Board" shall mean the Board of Directors of the Company.
2.5 "Cause" shall mean, with respect to a Participant's Termination of
Employment, (1) in the case where there is no employment agreement between
the Company or an Affiliate and the Participant in effect at the time of the
relevant grant or where there is an employment agreement in effect at such
time, but such agreement does not define cause (or words of like import),
termination due to a Participant's dishonesty, fraud, insubordination,
willful misconduct, refusal to perform services (for any reason other than
illness or incapacity) or materially unsatisfactory performance of his or
her duties for the Company or an Affiliate, as determined by the Committee
in its sole discretion; or (2) in the case where there is an employment
agreement between the Company or an Affiliate and the Participant in effect
at the time of grant that defines cause (or words of like import),
termination that is or would be deemed to be for cause (or words of like
import) as defined under such employment agreement at the time of grant, as
determined by the Committee in its sole discretion; provided, that any
definition that is effective under an employment agreement after a Change in
Control shall only be effective for purposes of this Plan after a Change in
Control. With
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respect to a Participant's Termination of Directorship, Cause shall mean an
act or a failure to act that constitutes "cause" for removal of a director
under applicable Delaware law.
2.6 "Change in Control" shall have the meaning set forth in Article IX.
2.7 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.8 "Committee" shall mean (a) with respect to the application of this
Plan to Eligible Employees a committee of the Board appointed from time to
time by the Board, which committee shall be intended to consist of two or
more Non-Employee Directors, each of whom shall be (i) to the extent
required by Rule 16b-3, a "non-employee director" as defined in Rule 16b-3
and (ii) to the extent required by Section 162(m) of the Code, an "outside
director" as defined under Section 162(m) of the Code and (b) with respect
to the application of this Plan to Non-Employee Directors, the Board.
Notwithstanding the foregoing, if and to the extent that no Committee exists
which has the authority to administer the Plan, the functions of the
Committee shall be exercised by the Board. If for any reason the appointed
Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of
the Code, such noncompliance with the requirements of Rule 16b-3 or
Section 162(m) of the Code shall not affect the validity of the awards,
grants, interpretations or other actions of the Committee.
2.9 "Common Stock" shall mean, subject to Article IV hereof, the common
stock, $.01 par value per share, of the Company.
2.10 "Company" shall mean U.S. Industries, Inc. and any successors and
assigns.
2.11 "Detrimental Activity" shall mean (i) the disclosure to anyone
outside the Company or its Affiliates, or the use in other than the
Company's or its Affiliate's business, without written authorization from
the Company, of any confidential information or proprietary information,
relating to the business of the Company or its Affiliates, acquired by a
Participant prior to the Participant's Termination of Employment;
(ii) activity while employed that results, or if known could result, in the
Participant's Termination of Employment that is classified by the Company as
a termination for cause; (iii) any attempt, directly or indirectly, to
solicit, induce or hire (or the identification for solicitation, inducement
or hiring of) any non-clerical employee of the Company or its Affiliates to
be employed by, or to perform services for, the Participant or any person or
entity with which the Participant is associated (including, but not limited
to, due to the Participant's employment by, consultancy for, equity interest
in, or creditor relationship with such person or entity) or any person or
entity from which the Participant receives direct or indirect compensation
or fees as a result of such solicitation, inducement or hire (or the
identification for solicitation, inducement or hire) without, in all cases,
written authorization from the Company; (iv) any attempt, directly or
indirectly, to solicit in a competitive manner any current or prospective
customer of the Company or its Affiliates without, in all cases, written
authorization from the Company; (v) the Participant's Disparagement, or
inducement of others to do so, of the Company or its Affiliates or their
past and present officers, directors, employees or products; (vi) without
written authorization from the Company, the rendering of services for any
organization, or engaging, directly or indirectly, in any business, which is
competitive with the Company or its Affiliates, or which organization or
business, or the rendering of services to such organization or business, is
otherwise prejudicial to or in conflict with the interests of the Company or
its Affiliates, provided however that competitive activities shall only be
those competitive with any business unit or Affiliate of the Company with
regard to which the Participant performed services at any time within the
two (2) years prior to the Termination of Employment of the Participant; or
(vii) any other conduct or act determined by the Committee, in its sole
discretion, to be injurious, detrimental or prejudicial to any interest of
the Company or its Affiliates. For purposes of subparagraphs (i), (iii),
(iv) and (vi) above, the Chief Executive Officer and the General Counsel of
the Company shall each have authority to provide the Participant with
written authorization to engage in the activities contemplated thereby and
no other person shall have authority to provide the Participant with such
authorization.
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2.12 "Disability" shall mean, with respect to a Participant's
Termination of Employment, (1) in the case where there is no employment
agreement between the Company or an Affiliate and the Participant in effect
at the time of the relevant grant, or where there is an employment agreement
in effect at such time, but such agreement does not define disability, total
and permanent disability, as defined in Section 22(e)(3) of the Code, as
determined by the Committee in its sole discretion; or (2) in the case where
there is an employment agreement between the Company or an Affiliate and the
Participant at the time of the relevant grant that defines disability,
disability as defined under such employment agreement at the time of grant,
as determined by the Committee in its sole discretion.
2.13 "Disparagement" shall mean making comments or statements to the
press, the Company's or its Affiliates' employees or any individual or
entity with whom the Company or its Affiliates has a business relationship
which would adversely affect in any manner: (i) the conduct of the business
of the Company or its Affiliates (including, without limitation, any
products or business plans or prospects), or (ii) the business reputation of
the Company or its Affiliates, or any of their products, or their past or
present officers, directors or employees.
2.14 "Effective Date" shall mean the effective date of the Plan as
defined in Article XIII.
2.15 "Eligible Employees" shall mean the employees of the Company and
its Affiliates, including Prospective Employees, who are eligible pursuant
to Article V to be granted Options under this Plan.
2.16 "Exchange Act" shall mean the Securities Exchange Act of 1934.
2.17 "Fair Market Value" for purposes of this Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the last sales price reported for
the Common Stock on the applicable date, (i) as reported by the principal
national securities exchange in the United States on which it is then traded
or The Nasdaq Stock Market, Inc., or (ii) if not traded on any such national
securities exchange or The Nasdaq Stock Market, Inc., as quoted on an
automated quotation system sponsored by the National Association of
Securities Dealers, Inc., or if the Common Stock shall not have been
reported or quoted on such date, on the first day prior thereto on which the
Common Stock was reported or quoted; provided, that the Committee may modify
the definition of Fair Market Value to reflect any changes in the trading
practices of any exchange on which the Common Stock is listed or traded. For
purposes of the grant of any Stock Option, the applicable date shall be the
day prior to the date on which the Option is granted. If the Common Stock is
not readily tradable on a national securities exchange, The Nasdaq Stock
Market, Inc. or any system sponsored by the National Association of
Securities Dealers, Inc., the method of determining Fair Market Value or the
Fair Market Value shall be set in good faith by the Committee on the advice
of a registered investment adviser (as defined under the Investment Advisers
Act of 1940).
2.18 "Good Reason" shall mean, with respect to a Participant's
Termination of Employment, (1) in the case where there is no employment
agreement between the Company or an Affiliate and the Participant in effect
at the time of the relevant grant, or where there is an employment agreement
in effect at such time, but such agreement does not define good reason (or
words of like import), a voluntary termination due to good reason, as the
Committee, in its sole discretion, decides to treat as a Good Reason
termination; or (2) in the case where there is an employment agreement
between the Company or an Affiliate and the Participant in effect at the
time of the relevant grant that defines good reason (or words of like
import), a termination due to good reason (or words of like import), as
defined in such employment agreement at the time of grant, as determined by
the Committee in its sole discretion; provided that any definition that is
effective under an employment agreement after a Change in Control shall only
be effective for purposes of this Plan after a Change in Control.
2.19 "Non-Employee Director" shall mean a director of the Company who is
not an active employee of the Company or an Affiliate.
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2.20 "Parent" shall mean any parent corporation of the Company within
the meaning of Section 424(e) of the Code.
2.21 "Participant" shall mean a person to whom an Award has been made
pursuant to this Plan.
2.22 "Prospective Employee" shall mean an individual who has committed
to become an employee of the Company or an Affiliate within sixty (60) days
from the date a Stock Option is to be granted to such individual.
2.23 "Retirement" shall mean Termination of Employment of a Participant
(other than a Termination of Employment for Cause or within ninety
(90) days after an event which would be grounds for a Termination of
Employment for Cause) who has attained (1) at least age sixty-five (65);
(2) at least age sixty-two (62) and performed ten (10) or more years of
service with the Company (or its predecessors) and/or an Affiliate; or
(3) such earlier date after age fifty-five (55) as approved by the Committee
with regard to such Participant.
2.24 "Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the
Exchange Act as then in effect or any successor provisions.
2.25 "Section 162(m) of the Code" shall mean the exception for
performance-based compensation under Section 162(m) of the Code and any
Treasury regulations thereunder.
2.26 "Stock Option" or "Option" shall mean any Option to purchase shares
of Common Stock granted to Eligible Employees pursuant to Article VI and
Non-Employee Directors pursuant to Article VII.
2.27 "Subsidiary" shall mean any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Code.
2.28 "Ten Percent Stockholder" shall mean a person owning stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company, its Subsidiaries or its Parent.
2.29 "Termination of Directorship" shall mean, with respect to a
Non-Employee Director, that the Non-Employee Director has ceased to be a
director of the Company.
2.30 "Termination of Employment," except as provided in the next
sentence, shall mean (1) a termination of service (for reasons other than a
military or personal leave of absence granted by the Company) of a
Participant from the Company and its Affiliates; or (2) an entity that is
employing a Participant has ceased to be an Affiliate, unless the
Participant thereupon becomes employed by the Company or another Affiliate.
The Committee may otherwise define Termination of Employment in the Award
agreement or, if no rights of a Participant are reduced, may otherwise
define Termination of Employment thereafter.
2.31 "Transfer" or "Transferred" shall mean anticipate, alienate,
attach, sell, assign, pledge, encumber, charge or otherwise transfer.
ARTICLE III.
ADMINISTRATION
3.1 THE COMMITTEE. The Plan shall be administered and interpreted by the
Committee.
3.2 AWARDS. The Committee shall have full authority to grant, pursuant to
the terms of this Plan, Stock Options to Eligible Employees. Common Stock and
Stock Options shall be granted to Non-Employee Directors pursuant to
Article VII. In particular, the Committee shall have the authority:
(a) to select the Eligible Employees to whom Options may from time to
time be granted hereunder;
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(b) to determine whether and to what extent Options are to be granted
hereunder to one or more Eligible Employees;
(c) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Option granted hereunder to an Eligible Employee
(including, but not limited to, the share price, any restriction or
limitation, any vesting schedule or acceleration thereof, or any forfeiture
restrictions or waiver thereof, regarding any Option, and the shares of
Common Stock relating thereto, based on such factors, if any, as the
Committee shall determine, in its sole discretion);
(d) to determine whether and under what circumstances a Stock Option may
be settled in cash or Common Stock;
(e) to determine whether, to what extent and under what circumstances to
provide loans (which shall be on a recourse basis and shall bear a
reasonable rate of interest) to Eligible Employees in order to purchase
shares of Common Stock under the Plan;
(f) to modify, extend or renew a Stock Option, subject to Sections 10.1
and 6.3(f) hereof; and
(g) to determine whether to require an Eligible Employee, as a condition
of the granting of an Option, not to sell or otherwise dispose of shares
acquired pursuant to the exercise of an Option for a period of time as
determined by the Committee, in its sole discretion, following the date of
the acquisition of such Option.
3.3 GUIDELINES.
(a) Subject to Article X hereof, the Committee shall have the authority
to adopt, alter and repeal such administrative rules, guidelines and
practices governing this Plan and perform all acts, including the delegation
of its administrative responsibilities, as it shall, from time to time, deem
advisable; to construe and interpret the terms and provisions of this Plan
and any Award issued under this Plan (and any agreements relating thereto);
and to otherwise supervise the administration of this Plan. The Committee
may correct any defect, supply any omission or reconcile any inconsistency
in this Plan or in any agreement relating thereto in the manner and to the
extent it shall deem necessary to carry this Plan into effect. To the extent
applicable, this Plan is intended to comply with the applicable requirements
of Rule 16b-3 and with regard to Options, the applicable provisions of
Section 162(m) of the Code and shall be limited, construed and interpreted
in a manner so as to comply therewith.
(b) Without limiting the foregoing, the Committee shall have the
authority to establish special guidelines, provisions and procedures
applicable to Awards granted to persons who are residing or employed in, or
subject to, the taxes of, countries other than the United States to
accommodate differences in applicable tax, securities or other local law.
The Committee may adopt supplements or amendments to the Plan to reflect the
specific requirements of local laws and procedures of non-United States
jurisdictions without affecting the terms of the Plan as then in effect for
any other purposes.
3.4 DECISIONS FINAL. Any decision, interpretation or other action made or
taken in good faith by or at the direction of the Company, the Board, or the
Committee (or any of its members) arising out of or in connection with the Plan
shall be within the absolute discretion of all and each of them, as the case may
be, and shall be final, binding and conclusive on the Company and all employees
and Participants and their respective heirs, executors, administrators,
successors and assigns.
3.5 PROCEDURES. If the Committee is appointed, the Board of Directors
shall designate one of the members of the Committee as chairman and the
Committee shall hold meetings, subject to the By-Laws of the Company, at such
times and places as the Committee shall deem advisable, including, without
limitation, by telephone conference or by written consent. A majority of the
Committee members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any
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decision or determination reduced to writing and signed by all the Committee
members in accordance with the By-Laws of the Company, shall be fully as
effective as if it had been made by a vote at a meeting duly called and held.
The Committee shall keep minutes of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
3.6 DESIGNATION OF CONSULTANTS/LIABILITY.
(a) The Committee may designate employees of the Company and
professional advisors to assist the Committee in the administration of the
Plan and may grant authority to employees to execute agreements or other
documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and agents
as it may deem desirable for the administration of the Plan and may rely
upon any opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. Expenses incurred by
the Committee or Board in the engagement of any such counsel, consultant or
agent shall be paid by the Company. The Committee, its members and any
person designated pursuant to paragraph (a) above shall not be liable for
any action or determination made in good faith with respect to the Plan. To
the maximum extent permitted by applicable law, no officer or former officer
of the Company or member or former member of the Committee or of the Board
shall be liable for any action or determination made in good faith with
respect to the Plan or any Award granted under it. To the maximum extent
permitted by applicable law and the Certificate of Incorporation and By-Laws
of the Company and to the extent not covered by insurance directly insuring
such person, each officer or former officer and member or former member of
the Committee or of the Board shall be indemnified and held harmless by the
Company against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including any sum paid
in settlement of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and to the
fullest extent permitted, arising out of any act or omission to act in
connection with the administration of the Plan, except to the extent arising
out of such officer's or former officer's, member's or former member's own
fraud or bad faith. Such indemnification shall be in addition to any rights
of indemnification the employee, officer, director or member or former
employee, officer, director or member may have under applicable law or under
the Certificate of Incorporation or By-Laws of the Company or any Affiliate.
Notwithstanding anything else herein, this indemnification will not apply to
the actions or determinations made by an individual with regard to Awards
granted to him or her under this Plan.
ARTICLE IV.
SHARE AND OTHER LIMITATIONS
4.1 SHARES.
(a) GENERAL LIMITATION. The aggregate number of shares of Common Stock
that may be the subject of Awards under this Plan shall not exceed 2,000,000
shares (subject to any increase or decrease pursuant to Section 4.2) which
may be either authorized and unissued Common Stock or Common Stock held in
or acquired for the treasury of the Company or both. If either (i) any
Option granted under this Plan expires, terminates or is canceled for any
reason without having been exercised in full or (ii) the Company repurchases
any Option pursuant to Section 6.3(e), the number of underlying shares of
Common Stock shall again be available for the purposes of Awards under the
Plan. In addition, if Common Stock has been exchanged by a Participant as
full or partial payment to the Company, or for required withholding, in
connection with the exercise of a Stock Option or the number of shares of
Common Stock otherwise deliverable has been reduced for withholding, the
number of shares of Common Stock exchanged as payment in connection with the
exercise or for withholding or reduced for withholding shall again be
available under the Plan.
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(b) INDIVIDUAL PARTICIPANT LIMITATIONS. The maximum number of shares
of Common Stock subject to any Option which may be granted under this Plan
during any fiscal year of the Company to any Eligible Employee shall not
exceed 250,000 shares (subject to any increase or decrease pursuant to
Section 4.2).
4.2 CHANGES.
(a) The existence of the Plan and the Options granted hereunder shall
not affect in any way the right or power of the Board or the stockholders of
the Company to make or authorize any adjustment, recapitalization,
reorganization or other change in the Company's capital structure or its
business, any merger or consolidation of the Company or its Affiliates, any
issue of bonds, debentures, preferred or prior preference stock ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or its
Affiliates, any sale or transfer of all or part of its assets or business or
any other corporate act or proceeding.
(b) In the event of any such change in the capital structure or business
of the Company by reason of any stock dividend or distribution, stock split
or reverse stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, non-cash
distribution with respect to its outstanding Common Stock of capital stock
other than Common Stock, reclassification of its capital stock, any sale or
transfer of all or part of the Company's assets or business, or any similar
change affecting the Company's capital structure or business and the
Committee determines in good faith that an adjustment is necessary or
appropriate under the Plan to prevent substantial dilution or enlargement of
the rights granted to, or available for, Participants under the Plan or as
otherwise necessary to reflect the change, then the aggregate number and
kind of shares which thereafter may be issued under this Plan, the number
and kind of shares or other property (including cash) to be issued upon
exercise of an outstanding Option granted under this Plan and the purchase
price thereof, and the number of shares of Common Stock to be awarded
pursuant to Article VII hereof and other Awards granted under this Plan
shall be appropriately adjusted consistent with such change, and such other
changes in the Awards may be made in such manner as the Committee may deem
equitable to prevent substantial dilution or enlargement of the rights
granted to, or available for, Participants under this Plan or as otherwise
necessary to reflect the change, and any such adjustment determined by the
Committee in good faith shall be binding and conclusive on the Company and
all Participants and employees and their respective heirs, executors,
administrators, successors and assigns. Except as provided in this
Section 4.2, a Participant shall have no rights by reason of any issue by
the Company of stock of any class or securities convertible into stock of
any class, any subdivision or consolidation of shares of stock of any class,
the payment of any stock dividend, any other increase or decrease in the
number of shares of stock of any class, any sale or transfer of all or part
of the Company's assets or business or any other change affecting the
Company's capital structure or business.
(c) Fractional shares of Common Stock resulting from any adjustment
pursuant to Section 4.2(a) or (b) shall be aggregated until, and eliminated,
by rounding down for fractions less than one-half and rounding up for
fractions equal to or greater than one-half. No fractional shares of Common
Stock shall be issued under the Plan. No cash settlements shall be made with
respect to any fractional shares of Common Stock eliminated by rounding.
Notice of any adjustment shall be given by the Committee to each Participant
whose Award has been adjusted and such adjustment (whether or not such
notice is given) shall be effective and binding for all purposes of the
Plan.
(d) In the event of a merger or consolidation in which the Company is
not the surviving entity or in the event of any transaction that results in
the acquisition of substantially all of the Company's outstanding Common
Stock by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all or
substantially all of the Company's assets (all of the foregoing being
referred to as "Acquisition Events"), then the Committee may, in its sole
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discretion, terminate all outstanding Options of each Participant effective
as of the date of the Acquisition Event, by delivering notice of termination
to each such Participant at least twenty (20) days prior to the date of
consummation of the Acquisition Event; provided, that, unless otherwise
determined at the time of grant, during the period from the date on which
such notice of termination is delivered to the consummation of the
Acquisition Event, each such Participant shall have the right to exercise in
full all of his or her Options that are then outstanding (whether vested or
not vested and without regard to any limitations on exercisability otherwise
contained in the Option) but contingent on occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event does not take place
within a specified period after giving such notice for any reason
whatsoever, the notice and exercise shall be null and void. If an
Acquisition Event occurs, to the extent the Committee does not terminate the
outstanding Options pursuant to this Section 4.2(d), then the provisions of
Section 4.2(b) shall apply.
4.3 MINIMUM PURCHASE PRICE. Notwithstanding any provision of this Plan to
the contrary, if authorized but previously unissued shares of Common Stock are
issued under this Plan, such shares shall not be issued for a consideration
which is less than par value.
ARTICLE V.
ELIGIBILITY
5.1 GENERAL ELIGIBILITY. All Eligible Employees of the Company and its
Affiliates shall be eligible for grants of Stock Options. Eligibility for the
grant of an Option and actual participation in this Plan shall be determined by
the Committee in its sole discretion.
5.2 NON-EMPLOYEE DIRECTORS. Non-Employee Directors shall be eligible for
Common Stock awards and Stock Option grants in accordance with Article VII of
the Plan.
ARTICLE VI.
EMPLOYEE STOCK OPTION GRANTS
6.1 OPTIONS. Options granted hereunder shall be non-qualified Options and
are not intended to be Incentive Stock Options that satisfy the requirements of
Section 422 of the Code. The terms of this Article VI shall only apply to
Options granted to Eligible Employees.
6.2 GRANTS. Subject to the provisions of Article V, the Committee shall
have the authority to grant to any Eligible Employee one or more Stock Options.
6.3 TERMS OF OPTIONS. Options granted under this Plan shall be subject to
the following terms and conditions, and, shall be in such form and contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem desirable:
(a) EXERCISE PRICE. The exercise price per share of Common Stock
purchasable under an Option shall be determined by the Committee but shall
not be less than 100% of the Fair Market Value of a share of Common Stock at
the time of grant.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten
(10) years after the date the Option is granted. Unless the Committee
determines otherwise at grant, all Options shall be subject to termination
by the Committee prior to a Change in Control if the Participant engages in
Detrimental Activity.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at grant. If the Committee provides, in its discretion, that any
Stock Option is exercisable subject to certain limitations (including,
without limitation, that it is exercisable only in installments or within
certain time periods), the Committee
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may waive limitations on the exercisability at any time at or after grant in
whole or in part (including, without limitation, waiver of the installment
exercise provisions or acceleration of the time at which Options may be
exercised), based on such factors, if any, as the Committee shall determine,
in its sole discretion provided, that, unless otherwise determined by the
Committee at grant, the grant shall provide that (i) as a condition of the
exercise of an Option prior to a Change in Control, the Participant shall be
required to certify at the time of exercise in a manner acceptable to the
Company that the Participant is in compliance with the terms and conditions
of the Plan and that the Participant has not engaged in, and does not intend
to engage in, any Detrimental Activity and (ii) in the event the Participant
engages in Detrimental Activity prior to, or during the one year period
after, any exercise of the Option but prior to a Change in Control, the
Company shall be entitled to recover from the Participant at any time within
two (2) years after such exercise but prior to a Change in Control, and the
Participant shall pay over to the Company, any gain realized as a result of
the exercise (whether at the time of exercise or thereafter). The vesting
and exercise of an Option granted to a Prospective Employee are conditioned
upon such individual actually becoming an Eligible Employee.
(d) METHOD OF EXERCISE. Subject to whatever installment exercise and
waiting period provisions apply under subsection (c) above, Stock Options
may be exercised in whole or in part at any time during the Option term, by
giving written notice of exercise to the Company specifying the number of
shares to be purchased accompanied by payment in full of the purchase price.
Such notice shall be accompanied by payment in full of the purchase price
(i) in cash or by check, bank draft or money order payable to the order of
Company; (ii) if the Common Stock is traded on a national securities
exchange, The Nasdaq Stock Market, Inc. or quoted on a national quotation
system sponsored by the National Association of Securities Dealers, Inc. and
the Committee authorizes this method of exercise, through the delivery of
irrevocable instructions to a broker approved by the Committee to deliver
promptly to the Company an amount equal to the purchase price; or (iii) on
such other terms and conditions as may be acceptable to the Committee (which
may include payment in full or part in the form of Common Stock owned by the
Participant for a period of at least six (6) months (and for which the
Participant has good title free and clear of any liens and encumbrances)
based on the Fair Market Value of the Common Stock on the payment date as
determined by the Committee or the surrender of vested Options owned by the
Participant). No shares of Common Stock shall be issued until payment, as
provided herein, therefor has been made or provided for.
(e) BUY OUT AND SETTLEMENT PROVISIONS. The Committee may at any time
on behalf of the Company offer to buy out an Option previously granted,
based on such terms and conditions as the Committee shall establish and
communicate to the Participant at the time that such offer is made.
(f) FORM, MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions and within the limitations of the Plan, an Option
shall be evidenced by such form of agreement as is approved by the
Committee, and the Committee may modify, extend or renew outstanding Options
granted under the Plan, and accept the surrender of outstanding Options (up
to the extent not theretofore exercised) and authorize the granting of new
Options in substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, an outstanding Option may not be modified to
reduce the exercise price thereof nor may a new Option at a lower price be
substituted for a surrendered Option, provided that (i) the foregoing shall
not apply to adjustments or substitutions in accordance with Section 4.2 and
(ii) if a Stock Option is modified, extended or renewed and thereby deemed
to be the issuance of a new Stock Option under the Code or the applicable
accounting rules, the exercise price of such Stock Option may continue to be
the original exercise price even if less than the Fair Market Value of the
Common Stock at the time of such modification, extension or renewal.
(g) OTHER TERMS AND CONDITIONS. Options may contain such other
provisions, which shall not be inconsistent with any of the foregoing terms
of the Plan, as the Committee shall deem appropriate including, without
limitation, permitting "reloads" such that the same number of Options are
granted
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as the number of shares used to pay for the exercise price of Options or
shares used to pay withholding taxes ("Reloads"). With respect to Reloads,
the exercise price of the new Stock Option shall be the Fair Market Value on
the date of the "reload" and the term of the Stock Option shall be the same
as the remaining term of the Options that are exercised, if applicable, or
such other exercise price and term as determined by the Committee.
6.4 TERMINATION OF EMPLOYMENT. The following rules apply with regard to
Options upon the Termination of Employment of a Participant, unless otherwise
determined by the Committee at grant or, if no rights of the Participant or in
the case of his death his estate are reduced, thereafter.
(a) TERMINATION BY REASON OF DEATH. If a Participant's Termination of
Employment is by reason of death, any Stock Option held by such Participant
may be exercised, to the extent exercisable at the Participant's death, by
the legal representative of the estate, at any time within a period of one
(1) year from the date of such death, but in no event beyond the expiration
of the stated term of such Stock Option.
(b) TERMINATION BY REASON OF DISABILITY. If a Participant's
Termination of Employment is by reason of Disability, any Stock Option held
by such Participant, may be exercised, to the extent exercisable at the
Participant's termination, by the Participant (or the legal representative
of the Participant's estate if the Participant dies after termination) at
any time within a period of one (1) year from the date of such termination,
but in no event beyond the expiration of the stated term of such Stock
Option provided, however, that, if the Participant dies within such exercise
period, any unexercised Stock Option held by such Participant shall
thereafter be exercisable, to the extent to which it was exercisable at the
time of death, for a period of one (1) year from the date of such death, but
in no event beyond the expiration of the stated term of such Stock Option.
(c) TERMINATION BY REASON OF RETIREMENT. If a Participant's
Termination of Employment is by reason of Retirement, any Stock Option held
by such Participant, may thereafter be exercised, to the extent exercisable
at Retirement, by the Participant at any time within a period of ninety
(90) days from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option; provided, however, that,
if the Participant dies within such exercise period, any unexercised Stock
Option held by such Participant shall thereafter be exercisable, to the
extent to which it was exercisable at the time of death, for a period of one
(1) year from the date of such death, but in no event beyond the expiration
of the stated term of such Stock Option.
(d) INVOLUNTARY TERMINATION WITHOUT CAUSE OR TERMINATION FOR GOOD
REASON. If a Participant's Termination of Employment is by involuntary
termination without Cause or for Good Reason, any Stock Option held by such
Participant, may be exercised, to the extent exercisable at termination, by
the Participant at any time within a period of ninety (90) days from the
date of such termination, but in no event beyond the expiration of the
stated term of such Stock Option.
(e) TERMINATION WITHOUT GOOD REASON OR BY MUTUAL AGREEMENT. If a
Participant's Termination of Employment is voluntary but without Good Reason
or by mutual agreement between the Participant or the Company and occurs
prior to, or more than ninety (90) days after, the occurrence of an event
which would be grounds for Termination of Employment by the Company for
Cause (without regard to any notice or cure period requirements), any Stock
Option held by such Participant, may be exercised, to the extent exercisable
at termination, by the Participant at any time within a period of thirty
(30) days from the date of such termination, but in no event beyond the
expiration of the stated term of such Stock Option.
(f) OTHER TERMINATION. In the event the termination is for Cause or is
a voluntary termination without Good Reason within ninety (90) days after
occurrence of an event which would be grounds for Termination of Employment
by the Company for Cause (without regard to any notice or cure period
requirement), any Stock Option held by the Participant at the time of
occurrence of the event which would be grounds for Termination of Employment
by the Company for Cause shall be deemed to have terminated and expired upon
occurrence of the event which would be grounds for Termination of Employment
by the Company for Cause.
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ARTICLE VII.
NON-EMPLOYEE DIRECTOR STOCK AWARDS AND STOCK OPTION GRANTS
7.1 COMMON STOCK AWARD FOR NON-EMPLOYEE DIRECTORS. An award of shares of
Common Stock shall be made under this Plan to each Non-Employee Director. Except
with respect to such award of shares of Common Stock and Stock Options granted
pursuant to this Article VII, no other Award under the Plan shall be made
available to or granted to Non-Employee Directors. Notwithstanding anything
contained herein to the contrary, the following provisions shall only apply to
the award of shares of Common Stock to Non-Employee Directors:
(a) INITIAL AWARD. A Non-Employee Director shall receive an award of
1,500 shares of Common Stock upon the date the Non-Employee Director begins
service as a Non-Employee Director on the Board (even if previously an
employee director).
(b) ANNUAL AWARDS. On the first business day of each calendar quarter
in each fiscal year of the Company, each Non-Employee Director who is a
director of the Company on such date shall receive an award of Common Stock
pursuant to the Plan calculated by dividing $6,250 by the Fair Market Value
of the Common Stock on the first business day of the fiscal year. In the
event that such quotient is other than a whole number of Common Stock, the
value of the fractional Common Stock shall be paid to the Non-Employee
Director in cash.
(c) PURCHASE PRICE. Subject to Section 4.3, the purchase price of a
share of Common Stock shall be zero to the extent permitted by applicable
law and, to the extent not so permitted, such purchase price shall be par
value.
(d) LEGEND. Each Non-Employee Director receiving shares of Common
Stock under this Article VII shall be issued a stock certificate in respect
of such shares of Common Stock. Such certificate shall be registered in the
name of such Non-Employee Director, and shall bear an appropriate legend, to
the extent required by applicable law as the Company may determine upon
advice of counsel, referring to the legal restrictions applicable to such
shares. An award of shares of Common Stock shall be subject to the
requirements of Section 12.1.
7.2 STOCK OPTIONS. The terms of this Section 7.2 shall apply only to
Options granted to Non-Employee Directors.
(a) Without further action by the Board or the stockholders of the
Company, each Non-Employee Director shall:
(i) subject to the terms of the Plan, be granted Options to purchase
7,500 shares of Common Stock upon the date the Non-Employee Director
begins service as a director on the Board (even if previously an employee
director); provided that if such date in any year is a date on which the
New York Stock Exchange is not open for trading, the grant shall be made
on the first day thereafter on which the New York Stock Exchange is open
for trading;
(ii) subject to the terms of the Plan, on each Annual Date of Grant
(as hereinafter defined) be automatically granted Options to purchase
3,750 shares of Common Stock; and
(iii) notwithstanding the foregoing provisions of Sections
7.2(a)(i) and 7.2(a)(ii), no such Option shall be granted if on the date
of grant the Company has liquidated, dissolved or merged or consolidated
with another entity in such a manner that it is not the surviving entity
(unless the Plan has been assumed by such surviving entity with regard to
future grants).
(b) ANNUAL DATE OF GRANT. Annual grants shall be made initially on
October 1, 2000 (the "Initial Grant Date") and on each anniversary of the
Initial Grant Date thereafter (the Initial Grant Date and each anniversary
of the Initial Grant Date thereafter being referred to as an "Annual Date of
Grant"); provided that if such date in any year is a date on which the New
York Stock Exchange is
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not open for trading, the grant shall be made on the first day thereafter on
which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, in the event no Fair Market Value can be determined pursuant to
the provisions hereof (without regard to the last sentence of
Section 2.17), no annual grant shall be made for such fiscal year.
(c) OPTION AGREEMENT. Stock Options granted under this Article VII
shall be non-qualified Options. Such Options shall be evidenced by Option
agreements or grants.
(d) TERMS OF OPTIONS:
(i) OPTION PRICE. The purchase price per share ("Purchase Price")
deliverable upon the exercise of an Option shall be 100% of the Fair
Market Value of such Common Stock at the time of the grant of the Option,
or the par value of the Common Stock, whichever is greater.
(ii) EXERCISABILITY. Except as otherwise provided herein, each
Option granted under this Plan shall be exercisable on or after six
(6) months and one (1) day after the date of grant if the director is
then a director.
(iii) METHOD FOR EXERCISE. A Non-Employee Director electing to
exercise one or more Options shall give written notice to the Company of
such election and of the number of Options he or she has elected to
exercise. Common Stock purchased pursuant to the exercise of Options
shall be paid for at the time of exercise in cash or by delivery of
unencumbered Common Stock owned by the Non-Employee Director for at least
six (6) months (or such longer period as required by applicable
accounting standards to avoid a charge to earnings) or a combination
thereof.
(e) EXPIRATION. Except as otherwise provided herein, if not previously
exercised each Option shall expire upon the tenth anniversary of the date of
the grant thereof.
(f) TERMINATION OF DIRECTORSHIP. The following rules apply with regard
to Options upon a Termination of Directorship:
(i) DEATH, DISABILITY OR OTHERWISE CEASING TO BE A DIRECTOR OTHER
THAN FOR CAUSE. Except as otherwise provided herein, upon the
Termination of Directorship, on account of Disability, death,
resignation, failure to stand for reelection or failure to be reelected
or otherwise other than as set forth in (ii) below, all outstanding
Options then exercisable and not exercised by the Participant prior to
such Termination of Directorship shall remain exercisable, to the extent
exercisable at the Termination of Directorship, by the Participant or, in
the case of death, by the Participant's estate or by the person given
authority to exercise such Options by his or her will or by operation of
law, for a three (3) year period commencing on the date of the
Termination of Directorship, provided that such three (3) year period
shall not extend beyond the stated term of such Options.
(ii) CAUSE. Upon removal, failure to stand for reelection or
failure to be renominated for Cause, or if the Company obtains or
discovers information after Termination of Directorship that such
Participant had engaged in conduct that would have justified a removal
for Cause during such directorship, all outstanding Options of such
Participant shall immediately terminate and shall be null and void.
(iii) ACCELERATION OF EXERCISABILITY UPON DEATH. All Options
granted and not previously exercisable shall become fully exercisable
immediately upon a Termination of Directorship due to death.
(iv) CANCELLATION OF OPTIONS. No Options that were not exercisable
during the period such persons serves as a director shall thereafter
become exercisable upon a Termination of Directorship for any reason or
no reason whatsoever, and such Options shall terminate and become null
and void upon a Termination of Directorship.
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7.3 CHANGES. The Awards to a Non-Employee Director shall be subject to
Sections 4.2(a), (b), (c) and (d) of the Plan and this Section 7.3.
Notwithstanding anything else herein, if the grants to be made under this
Article VII would violate the limitation set forth in Sections 4.1(a) and (b),
such grants shall be proportionately reduced to an amount that would not violate
such limitation and, subject to the next sentence, an additional make-up grant
of the portion of any Award that has not yet been granted shall be made on the
first day of the first month commencing at least twenty (20) days after such
limitation is no longer exceeded based on the Fair Market Value on such date.
Such make-up grant shall be made only to each director who is a Non-Employee
Director of the Company at the time of such make-up grant and shall be made in
an amount equal to the prior reduction. Notwithstanding the foregoing, in the
event no Fair Market Value can be determined pursuant to the provisions hereof
(without regard to the last sentence of Section 2.17) no grants of awards shall
be made pursuant to the provisions of this Article VII.
7.4 STOCKHOLDER APPROVAL. Notwithstanding anything contained herein to the
contrary, no Award shall be made pursuant to this Article VII prior to the date
on which the Plan is approved by the stockholders of the Company in accordance
with the requirements of the State of Delaware.
ARTICLE VIII.
NON-TRANSFERABILITY
8.1 NON-TRANSFERABILITY. Except as provided in the last sentence of this
Article VIII, no Award shall be Transferred by the Participant otherwise than by
will or by the laws of descent and distribution, all Stock Options shall be
exercisable, during the Participant's lifetime, only by the Participant, no
Stock Option shall, except as otherwise specifically provided by law or herein,
be Transferred in any manner, and any attempt to Transfer any such Stock Option
shall be void. No Award shall in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any person who shall be
entitled to such Award, nor shall it be subject to attachment or legal process
for or against such person. Notwithstanding the foregoing, the Committee may
determine at the time of grant or thereafter that an Option that is otherwise
not Transferable pursuant to this Article VIII is Transferable, in whole or in
part, to a "family member" as defined in Securities Act Form S-8 and under such
conditions as specified by the Committee.
ARTICLE IX.
CHANGE IN CONTROL PROVISIONS
9.1 BENEFITS. In the event of a Change in Control of the Company (as
defined below), except as otherwise provided by the Committee upon the grant of
an Option, a Participant shall be entitled to the following benefits:
(a) Subject to paragraph (b) below with regard to Options granted to
Eligible Employees and paragraph (c) below with regard to all Options, all
outstanding Stock Options of such Participant (whether an Eligible Employee
or Non-Employee Director) granted prior to the Change in Control shall be
fully vested and immediately exercisable in their entirety on the Change in
Control. The Committee, in its sole discretion, may provide for the purchase
of any such Stock Options by the Company or an Affiliate for an amount of
cash equal to the excess of the Change in Control price (as defined below)
of the shares of Common Stock covered by such Stock Options, over the
aggregate exercise price of such Stock Options. For purposes of this
Section 9.1, Change in Control price shall mean the higher of (i) the
highest price per share of Common Stock paid in any transaction related to a
Change in Control of the Company, or (ii) the highest Fair Market Value per
share of Common Stock at any time during the sixty (60) day period preceding
a Change in Control.
(b) Notwithstanding anything to the contrary herein, unless the
Committee provides otherwise at the time an Option is granted to an Eligible
Employee hereunder, no acceleration of exercisability shall occur with
respect to such Option if the Committee reasonably determines in good faith,
prior to
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the occurrence of the Change in Control, that the Options shall be honored
or assumed, or new rights substituted therefor (each such honored, assumed
or substituted option hereinafter called an "Alternative Option"), by a
Participant's employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control, provided that any such
Alternative Option must meet the following criteria:
(i) the Alternative Option must be based on stock which is traded on
an established securities market, or which will be so traded within
thirty (30) days of the Change in Control;
(ii) the Alternative Option must provide such Participant with rights
and entitlements substantially equivalent to or better than the rights,
terms and conditions applicable under such Option, including, but not
limited to, an identical or better exercise schedule; and
(iii) the Alternative Option must have economic value substantially
equivalent to the value of such Option (determined at the time of the
Change in Control).
(c) If the Company and the other party to a transaction constituting a
Change in Control agree that such transaction shall be treated as a "pooling
of interests" for financial reporting purposes, and if the transaction is in
fact so treated, then acceleration of exercisability or vesting shall not
occur to the extent the Company's independent public accountants determine
in good faith that such acceleration would preclude "pooling of interests"
accounting.
9.2 CHANGE IN CONTROL. A "Change in Control" shall be deemed to have
occurred upon:
(a) any "person" as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Common Stock of the
Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities;
(b) during any period of two (2) consecutive years, individuals who at
the beginning of such period constitute the Board of Directors, and any new
director (other than a director designated by a person who has entered into
an agreement with the Company to effect a transaction described in
paragraph (a), (c), or (d) of this section) whose election by the Board of
Directors or nomination for election by the Company's stockholders was
approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease
for any reason to constitute at least a majority of the Board of Directors;
(c) a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than fifty percent (50%) of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
provided, however, that a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than twenty-five percent (25%) of the combined voting power of
the Company's then outstanding securities shall not constitute a Change in
Control of the Company; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or the consummation of the sale or disposition by
the Company of all or substantially all of the Company's assets other than
(x) the sale or disposition of all or substantially all of the assets of the
Company to a person or persons who beneficially own, directly or indirectly,
at least fifty percent
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(50%) or more of the combined voting power of the outstanding voting
securities of the Company at the time of the sale or (y) pursuant to a
spinoff type transaction, directly or indirectly, of such assets to the
stockholders of the Company.
ARTICLE X.
TERMINATION OR AMENDMENT OF THE PLAN
10.1 TERMINATION OR AMENDMENT. Notwithstanding any other provision of this
Plan, the Board may at any time, and from time to time, amend, in whole or in
part, any or all of the provisions of the Plan (including any amendment deemed
necessary to ensure compliance with any regulatory requirement referred to in
Article XII), or suspend or terminate it entirely, retroactively or otherwise;
provided, however, that, unless otherwise required by law or specifically
provided herein, the rights of a Participant with respect to Awards granted
prior to such amendment, suspension or termination, may not be impaired without
the consent of such Participant and, provided further, without the approval of
the stockholders of the Company in accordance with the laws of the State of
Delaware, to the extent required by the applicable provisions of Section 162(m)
of the Code, no amendment may be made that would (i) increase the maximum
individual Participant limitations under Section 4.1(b); (ii) change the
classification of employees eligible to receive Options under this Plan;
(iii) extend the maximum option period under Section 6.3; or (iv) require
stockholder approval in order for the Plan to comply with the applicable
provisions of Section 162(m) of the Code. In no event may the Plan be amended
without the approval of the stockholders of the Company in accordance with the
applicable laws of the State of Delaware to increase the aggregate number of
shares of Common Stock that may be issued under the Plan or to make any other
amendment that would require stockholder approval under the rules of any
exchange or system on which the Company's securities are listed or traded at the
request of the Company.
The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Article IV above or as otherwise
specifically provided herein, no such amendment or other action by the Committee
shall impair the rights of any holder without the holder's consent.
The Board may at any time or from time to time amend Article VII of the Plan
to provide additional or different Awards to Non-Employee Directors or to effect
any other amendment deemed appropriate.
ARTICLE XI.
UNFUNDED PLAN
11.1 UNFUNDED STATUS OF PLAN. This Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments as to which a Participant has a fixed and vested interest but which are
not yet made to a Participant by the Company, nothing contained herein shall
give any such Participant any rights that are greater than those of a general
creditor of the Company.
ARTICLE XII.
GENERAL PROVISIONS
12.1 LEGEND. The Committee may require each person receiving shares
pursuant to an Award under the Plan to represent to and agree with the Company
in writing that the Participant is acquiring the shares without a view to
distribution thereof. In addition to any legend required by this Plan, the
certificates for such shares may include any legend which the Committee deems
appropriate to reflect any restrictions on Transfer.
All certificates for shares of Common Stock delivered under the Plan shall
be subject to such stock transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the
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Common Stock is then listed or any national securities association system upon
whose system the Common Stock is then quoted, any applicable Federal or state
securities law, and any applicable corporate law, and the Committee may cause a
legend or legends to be put on any such certificates to make appropriate
reference to such restrictions.
12.2 OTHER PLANS. Nothing contained in this Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
12.3 NO RIGHT TO EMPLOYMENT/DIRECTORSHIP. Neither this Plan nor the grant
of any Award hereunder shall give any Participant or other employee any right
with respect to continuance of employment by the Company or any Affiliate, nor
shall they be a limitation in any way on the right of the Company or any
Affiliate by which an employee is employed to terminate his employment at any
time. Neither this Plan nor the grant of any Award hereunder shall impose any
obligations on the Company to retain any Participant as a director nor shall it
impose on the part of any Participant to remain as a director of the Company.
12.4 WITHHOLDING OF TAXES. The Company shall have the right to deduct from
any payment to be made to a Participant, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld.
The Committee may permit any such statutorily required withholding
obligation with regard to any Eligible Employee to be satisfied by reducing the
number of shares of Common Stock otherwise deliverable or by delivering shares
of Common Stock already owned. Any fraction of a share of Common Stock required
to satisfy such tax obligations shall be disregarded and the amount due shall be
paid in cash by the Participant.
12.5 LISTING AND OTHER CONDITIONS.
(a) Unless otherwise determined by the Committee, as long as the Common
Stock is listed on a national securities exchange or system sponsored by a
national securities association, the issue of any shares of Common Stock
pursuant to an Award shall be conditioned upon such shares being listed on
such exchange or system. The Company shall have no obligation to issue such
shares unless and until such shares are so listed, and the right to exercise
any Option with respect to such shares shall be suspended until such listing
has been effected.
(b) If at any time counsel to the Company shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Award is or
may in the circumstances be unlawful or result in the imposition of excise
taxes on the Company under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such
sale or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended,
or otherwise with respect to Awards and the right to exercise any Option
shall be suspended until, in the opinion of said counsel, such sale or
delivery shall be lawful or will not result in the imposition of excise
taxes on the Company.
(c) Upon termination of any period of suspension under this
Section 12.5, any Award affected by such suspension which shall not then
have expired or terminated shall be reinstated as to all shares available
before such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension shall
extend the term of any Option.
(d) A Participant shall be required to supply the Company with any
certificates, representations and information that the Company requests and
otherwise cooperate with the Company in obtaining any listing, registration,
qualification, exemption, consent or approval the Company deems necessary or
appropriate.
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12.6 GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Delaware (regardless of the law that
might otherwise govern under applicable Delaware principles of conflict of
laws).
12.7 CONSTRUCTION. Wherever any words are used in this Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
12.8 OTHER BENEFITS. No Award payment under this Plan shall be deemed
compensation for purposes of computing benefits under any retirement plan of the
Company or its subsidiaries nor affect any benefits under any other benefit plan
now or subsequently in effect under which the availability or amount of benefits
is related to the level of compensation.
12.9 COSTS. The Company shall bear all expenses included in administering
this Plan, including expenses of issuing Common Stock pursuant to any Options
hereunder.
12.10 NO RIGHT TO SAME BENEFITS. The provisions of Awards need not be the
same with respect to each Participant, and such Awards to individual
Participants need not be the same in subsequent years.
12.11 DEATH/DISABILITY. The Committee may in its discretion require the
transferee of a Participant to supply it with written notice of the
Participant's death or Disability and to supply it with a copy of the will (in
the case of the Participant's death) or such other evidence as the Committee
deems necessary to establish the validity of the transfer of an Option. The
Committee may also require that the agreement of the transferee to be bound by
all of the terms and conditions of the Plan.
12.12 SECTION 16(B) OF THE EXCHANGE ACT. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with all exemptive conditions
under Rule 16b-3. The Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b) of the Exchange
Act, as it may deem necessary or proper for the administration and operation of
the Plan and the transaction of business thereunder.
12.13 SUCCESSOR AND ASSIGNS. The Plan shall be binding on all successors
and permitted assigns of a Participant, including, without limitation, the
estate of such Participant and the executor, administrator or trustee of such
estate.
12.14 SEVERABILITY OF PROVISIONS. If any provision of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and enforced
as if such provisions had not been included.
12.15 HEADINGS AND CAPTIONS. The headings and captions herein are provided
for reference and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
ARTICLE XIII.
EFFECTIVE DATE OF PLAN
The Plan shall become effective upon adoption by the Board, subject to the
approval of this Plan by the stockholders of the Company in accordance with the
requirements of the laws of the State of Delaware or such later date as provided
in the adopting resolution.
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ARTICLE XIV.
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the earlier of the date this Plan is adopted or the date of
stockholder approval, but Awards granted prior to such tenth anniversary may
extend beyond that date.
ARTICLE XV.
NAME OF PLAN
This Plan shall be known as the "U.S. Industries, Inc. 2000 Stock Option
Plan."
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