UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
Lynch Interactive Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
- --------------------------------------------------------------------------------
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
SEC 1913 (3-99)
<PAGE>
LYNCH INTERACTIVE CORPORATION
401 Theodore Fremd Avenue
Rye, NY 10580
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 11, 2000
April 18, 2000
To the Shareholders of
Lynch Interactive Corporation
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Lynch
Interactive Corporation, an Indiana Corporation, will be held at the Greenwich
Public Library, 101 West Putnam Avenue, Greenwich, Connecticut on Thursday, May
11, 2000, at 3:00 p.m. for the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and
qualified.
2. To consider and vote on the 2000 Stock Option Plan.
3. To consider and vote on the Principal Executive Bonus Plan.
4. To transact such other business as may properly come before the Annual
Meeting or any adjournments thereof.
Information relating to the above matters is set forth in the attached
Proxy Statement. As fixed by the Board of Directors, only Shareholders of record
at the close of business of March 27, 2000 are entitled to receive notice of,
and to vote at, the Annual Meeting and any adjournments thereof.
The Board of Directors encourages all shareholders to personally attend
the annual meeting. Your vote is very important regardless of the number of
shares you own. Shareholders who do not expect to attend are requested to
promptly date, complete and return the enclosed proxy card in the enclosed
accompanying postage-paid envelope in order that their shares of common stock
may be represented at the annual meeting. Your cooperation is greatly
appreciated.
By Order of the Board of Directors
Robert A. Hurwich
Secretary
IMPORTANT: Your vote is important regardless of the number of shares you
own. Please date, sign and return your proxy promptly in the enclosed envelope.
Your cooperation is greatly appreciated.
<PAGE>
LYNCH INTERACTIVE CORPORATION
401 Theodore Fremd Avenue
Rye, NY 10580
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors of Lynch
Interactive Corporation (the "Corporation") in connection with the solicitation
of proxies for use at the Annual Meeting of Shareholders to be held at the
Greenwich Public Library, Greenwich, Connecticut on May 11, 2000, at 3:00 P.M.
and at any adjournments thereof. This Proxy Statement and the accompanying proxy
is first being mailed to shareholders on or about April 18, 2000.
Only shareholders of record at the close of business on March 27, 2000 are
entitled to notice of, and to vote at, the Annual Meeting. As of the close of
business on such date, 1,412,183 shares of the Corporation's common stock, par
value $.0001 (the "Common Stock"), were outstanding and eligible to vote. Each
share of Common Stock is entitled to one vote on each matter submitted to the
shareholders. Where a specific designation is given in the proxy, the proxy will
be voted in accordance with such designation. If no such designation is made,
the proxy will be voted FOR the nominees for director named below, FOR approval
of the 2000 Stock Option Plan and FOR approval of the Principal Executive Bonus
Plan, and in the discretion of the proxies with respect to any other matter that
is properly brought before the Annual Meeting. Any shareholder giving a proxy
may revoke it at any time before it is voted at the Annual Meeting by delivering
to the Secretary of the Corporation a written notice of revocation or duly
executed proxy bearing a later date or by appearing at the Annual Meeting and
revoking his or her proxy and voting in person.
An automated system administered by the Corporation's transfer agent
tabulates the votes. Pursuant to the Delaware General Corporation Law and the
By-laws of the Company, shares held by persons who abstain from voting on a
proposal will be counted in determining whether a quorum is present, but will
not be counted as voting either for or against such proposal. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
The Corporation was spun off (the "Spin Off") from Lynch Corporation on
September 1, 1999, and became a public company at that time.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting to serve until the
next Annual Meeting of Shareholders and until their respective successors are
elected. Except where authority to vote for directors has been withheld, it is
intended that the proxies received pursuant to this solicitation will be voted
FOR the nominees named below. If for any reason any nominee shall not be
available for election, such proxies will be voted in favor of the remainder of
those named and may be voted for substitute nominees in place of those who
decline to be candidates. Management, however, has no reason to expect that any
of the nominees will be unavailable for election.
The election of directors shall be determined by a plurality of the votes
cast.
All of the nominees had served as directors of Lynch Corporation and have
served as directors of the Corporation since the Spin Off on September 1, 1999.
The By-laws of the Corporation provide that Board of Directors shall consist of
no less than two and no more than nine members and that any vacancies on the
Board of Directors for whatever cause arising, including newly-created
directorships, may be filled by the remaining directors until the next meeting
of shareholders. Biographical summaries and ages as of April 1, 2000 of the
nominees are set forth below. Data with respect to the number of shares of the
Common Stock beneficially owned by each of them appears on pages 4 and 5 of this
Proxy Statement. All such information has been furnished to the Corporation by
the nominees.
<PAGE>
<TABLE>
<CAPTION>
Name: Age; Business Experience
And Principal Occupation Served as
For Last 5 Years; and Directorships in Director From
Public Corporations and Investment Companies
<S> <C>
Paul J. Evanson, 58
President (since 1995) of Florida Power & Light Co.; former President and Chief
Operating Officer of Lynch Corporation and former Chairman and President of
Spinnaker Industries, Inc., a subsidiary of Lynch Corporation; Director of FPL
Group, Inc. and Florida Power & Light Company .................................. 1999
John C. Ferrara, 48
Chief Financial Officer (since 1999) of SPACE.com, an internet start-up which
offers content, news, entertainment, information and education about space;
Executive Vice President and Chief Financial Officer (1998-January 1999) of
Golden Books Family Entertainment, Inc., a NASDAQ company which published,
licensed and marketed entertainment products and subsequently filed for
protection under the Bankruptcy Act in late February 1999 (and is now out); Vice
President and Chief Financial Officer (1989-1997) of Renaissance Communications
Corp., a NYSE company which owned and operated television broadcast stations;
from 1973-1989, various financial positions at The American Express Company,
National Broadcasting Company (NBC) and Deloitte & Touche; Director of Gabelli
Asset Management Inc. .......................................................... 1999
Mario J. Gabelli, 57
Chairman and Chief Executive Officer of the Corporation (since September 1999);
Chairman (since 1986), Chief Executive Officer (1986-January 2000) and Director
of Lynch Corporation; Chairman and Chief Executive Officer of Gabelli Group
Capital Partners (since 1980), a private company which makes investments for its
own account; Chairman and Chief Executive Officer of Gabelli Asset Management
Inc. (since 1999), a NYSE listed holding company for subsidiaries engaged in
various aspects of the securities business; Director/Trustee and/or President of
all registered investment companies managed by Gabelli Funds, LLC (since 1986);
Director of Spinnaker Industries, Inc.; Governor of the American Stock Exchange;
Overseer of Columbia University Graduate School of Business; Trustee of
Fairfield University, Roger Williams University, Bruce Museum, Winston Churchill
Foundation and E.L. Wigend Foundation; Chairman, Patron's Committee of
Immaculate Conception School; and former trustee of Fordham Preparatory School
and Dr. I. Fund Foundation ..................................................... 1999
David C. Mitchell, 58
President of the Telephone Group and member of the Board of Directors of
Rochester Telephone (now Global Crossing) until 1992; President and Chief
Executive Officer of Personal Sound Technologies, Inc., a development stage new
venture company bringing a technology hearing aid to market (1992-3); Advisor to
C-Tec Corporation from 1993 to its corporate reorganization in 1997; Director of
Commonwealth Telephone enterprises, Inc. (where he has also served as an
adviser), USN Communications, Inc.; HSBC (Rochester, NY Board), Finger Lakes
Long term Care Insurance Co. and IBS International Corp. (until September 1999) 1999
Salvatore Muoio, 40
Principal and Chief Investment Officer of S. Muoio & Co. LLC, a securities
advisory firm (since 1996); Securities Analyst and Vice President of Lazard
Freres & Co., L.L.C., an investment banking firm (1995-1996); Securities Analyst
at Gabelli & Company, Inc. (1985-1995) ......................................... 1999
Ralph R. Papitto, 73
Chairman and Chief Executive Officer of AFC Cable Systems, Inc., a manufacturer
and supplier of electrical distribution products (since 1993-1999); Founder,
Chairman and a Director of Nortek, Inc., a manufacturer of construction products
(1967-1993); Director of AFC Cable Systems, Inc., Lynch Corporation; Spinnaker
Industries, Inc. and Global Sports & Gaming.Com; Chairman of the Board of
Trustees of Roger Williams University .......................................... 1999
</TABLE>
<PAGE>
OPERATION OF BOARD OF DIRECTORS AND COMMITTEES
Since the Spin Off, there was one meeting of the Board of Directors
during 1999, and the Board acted once by unanimous written consent.
The Board of directors has established three standing committees, the
principal duties of which are described below:
Audit Committee: Recommends to the Board of Directors the appointment
of independent auditors; reviews annual financial reports to shareholders prior
to their publication; reviews the report by the independent auditors concerning
management procedures and policies; and determines whether the independent
auditors have received satisfactory access to the Corporation's financial
records and full cooperation of corporate personnel in connection with their
audit of the Corporation's records. Since the Spin Off, the Audit Committee met
once during 1999. The present members are Messrs. Ferrara (Chairman), Mitchell
and Muoio.
Executive Compensation and Benefits Committee: Develops and makes
recommendations to the Board of Directors with respect to the Corporation's
executive compensation policies; recommends to the Board of Directors the
compensation to be paid to executive officers; administers the Lynch Interactive
Corporation Bonus Plan, 401(k) Savings Plan, and Phantom Stock Plan, as
summarized on pages 8 through 12 of this Proxy Statement; and performs such
other duties as may be assigned to it by the Board of Directors. Since the Spin
Off, the Executive Compensation and Benefits Committee did not meet during 1999.
The present members are Messrs. Papitto (Chairman), and Evanson. A Committee
consisting of Messrs. Papitto and Ferrara deal with matters relating to the
Principal Executive Bonus Plan (being submitted to shareholders for approval).
Executive Committee: Exercises all the power and authority of the Board
of Directors, except as otherwise provided by Delaware law or by the By-laws of
the Corporation, in the management affairs of the Corporation during intervals
between meeting of the Board of Directors. Since the Spin Off, the Executive
Committee did not meet during 1999. The present members are Messrs. Gabelli
(Chairman), Evanson and Papitto.
The Corporation does not have a nominating committee. Nominations for
directors and officers of the Corporation are matters considered by the entire
Board of Directors.
COMPENSATION OF DIRECTORS
Directors, who are not otherwise employees, receive a monthly cash
retainer of $1,500, a fee of $2,000 for each in personam Board of Directors
Meeting and a fee of $1,000 for each telephonic board of Directors meeting
(which lasts for at least one hour) and each committee meeting the director
attends. In addition, a non-employee director serving as a committee chairman
receives an additional $2,000 annual cash retainer. A director who is an
employee of the Corporation is not compensated for services as a member of the
Board of Directors or any committee thereof. In addition, the Corporation
purchases accident and dismemberment insurance coverage of $100,000 for each
member of the Board of Directors and maintains a liability insurance policy
which provides for indemnification of each Director (and officer) against
certain liabilities which each may incur in his capacity as such.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 15, 2000, certain
information with respect to all persons known to the Corporation to each
beneficially own more than 5% of the Common Stock of the Corporation, which is
the only class of voting stock of the Corporation outstanding. The table also
sets forth information with respect to the Corporation's Common Stock
beneficially owned by the directors, by each of the executive officers named in
the Summary Compensation Table on page 6 of this Proxy Statement, and by all
directors and executive officers as a group. The number of shares beneficially
owned is determined under rules of the Securities and Exchange Commission, and
the information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares to
which a person has the sole or shared voting or investment power or any shares
which the person can acquire within 60 days (e.g., through exercise of stock
options or conversions of securities). Except as otherwise indicated, the
shareholders listed in the table have sole voting and investment powers with
respect to the Common Stock set forth in the table. The following information is
either reflected in Schedule 13Ds and 13Gs or Form 3s, Form 4s and Form 5s that
have been filed with the Securities and Exchange Commission or which has
otherwise been furnished to the Corporation.
<PAGE>
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Beneficial Owner* Of Beneficial Ownership Of Class
<S> <C> <C>
Dimensional Fund Advisors, Inc. ...... 80,400(1) 5.7%
Cascade Investment LLC ............... 294,118(2) 17.2%
Mario J. Gabelli ..................... 325,876(3) 23.1%
Paul J. Evanson ...................... 5,652 **
John C. Ferrara ...................... 1,414 **
David C. Mitchell .................... 400(4) **
Salvatore Muoio ...................... 852 **
Ralph R. Papitto ..................... 952 **
Robert E. Dolan ...................... 235(5) **
Robert A. Hurwich .................... 399(6) **
All Directors and Executive Officers . 335,780 23.8%
as a group (eight in total)
<FN>
* The address of each holder of more than 5% of the Common Stock is as
follows: Dimensional Fund Advisors - 1299 Ocean Avenue, Santa Monica, CA
90401; Cascade Investment LLC, 2365 Carillon Point, Kirkland, Washington
98033, and Mr. Gabelli - Corporate Center at Rye, Rye, NY 10580.
** Represents holdings of less than one percent.
(1) Because of its investment and/or voting power over shares of Common
Stock of the Corporation held in the accounts of its investment advisory
clients, Dimensional Fund Advisors, Inc., an investment adviser
("Dimensional"), is deemed to be the beneficial owner of 86,900 shares.
Dimensional disclaims beneficial ownership of all such shares.
(2) Cascade Investment LLC owns a $25,000,000 Convertible Promissory Note of
the Corporation convertible into Common Stock of the Corporation at the
rate of $85 principal amount of the Note for each share of Stock.
(3) Includes 252,376 shares of Common Stock owned directly by Mr. Gabelli
(including 3,462 held for the benefit of Mr. Gabelli under the
Corporation's 401(k) Savings Plan), 3,500 shares owned by a charitable
foundation of which Mr. Gabelli is a trustee and 70,000 shares owned by
a limited partnership in which Mr. Gabelli is the general partner and
has a 6% interest. Mr. Gabelli disclaims beneficial ownership of the
shares owned by the foundation and by the partnership, except for his
approximate 6% interest therein.
(4) 200 shares jointly owned with wife and sharing voting and investment
power.
(5) Includes 35 shares registered in the name of Mr. Dolan's children
with respect to which Mr. Dolan has voting and investment power.
(6) Held for the benefit of Mr. Hurwich under the Corporation's 401(k)
Savings Plan.
</FN>
</TABLE>
Morgan Group is an approximately 55% owned subsidiary of the Corporation
whose stock is traded on the American Stock Exchange (AMEX). As of April 1, 1999
Mr. Gabelli beneficially owns 10,000 shares (0.7%) of Morgan Group's Class A
Common Stock. He may also be deemed to be a beneficial owner of 155,900 shares
of Morgan Group's Class A Common Stock and 1,200,000 shares of Morgan Group's
Class B Common Stock owned by the Corporation, by virtue of his ownership of
approximately 23.1% of the shares of Common Stock of the Corporation. Mr.
Gabelli, however, specifically disclaims beneficial ownership of all shares of
Morgan Group stock held by the Corporation.
<PAGE>
EXECUTIVE COMPENSATION
At the time of the Spin Off on September 1, 1999, the Executive Officers
of Lynch Corporation became employees of Lynch Interactive Corporation (with the
substantially same salaries, bonus potential and other compensation arrangements
as were then in effect). At that time, they ceased to be employees of Lynch
Corporation although they remained the Executive Officers of Lynch Corporation.
Lynch Interactive began charging Lynch Corporation for the corporate services
provided by such Executive Officers (approximately 25% of their compensation
cost from September 1 to December 31, 1999).
The following tables set forth compensation received by the
Corporation's Chief Executive Officer and each of the other executive officers
of the Corporation for the last three fiscal years and certain information as to
stock options:
Prior to the Spin Off, such officers were, and continue to be, officers
of Lynch Corporation, and the information set forth under Executive Compensation
includes the compensation paid both prior to September 1, 1999 by Lynch
Corporation and after September 1, 1999 by the Corporation.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
<CAPTION>
Long Term
Compensation Awards
Stock
Underlying All Other
Name and Principal Position SARs2 Payments3 Compensation
Year Salary($) Bonus($)1 (#) ($) ($)4
<S> <C> <C> <C> <C> <C> <C>
Mario J. Gabelli .......... 1999 500,000 0 -- 1,868,998 0
Chief Executive Officer . 1998 500,000 0 -- -- 200
Chairman of the Board ... 1997 500,000 0 25,000 -- 200
Chairman of the Executive
Robert E. Dolan ........... 1999 250,000 75,000 -- 685,822 0
Chief Financial Officer(5) 1998 250,000 50,000 2,000 -- 200
1997 -- 0 4,000 - 200
Robert A. Hurwich ......... 1999 180,000 0 -- 345,722 0
Vice President-Admin- ... 1998 164,000 20,000 1,000 -- 200
istration, Secretary,...... 1997 156,000 0 1,500 -- 200
General Counsel
<FN>
(1) Bonuses earned in any fiscal year are generally paid during the following
fiscal year.
(2) Shares of Common Stock of Lynch Corporation at the time of grant underlying
Phantom Stock Plan awards.
(3) Represents payments by Lynch Interactive Corporation under the Phantom
Stock Plan of Lynch Corporation and Lynch Interactive in 2000 based upon
December 31, 1999, stock values. Does not include $483,039, $177,249 and
$89,351 paid by Lynch Corporation in 2000 based upon December 31, 1999
stock values to Messrs. Gabelli, Dolan and Hurwich, respectively.
(4) The compensation reported represents contributions made to the Lynch
Corporation 401(k) Savings Plan. The amount of perquisites, as determined
in accordance with the rules of the Securities and Exchange Commission
relating to Executive Compensation did not exceed the lesser of $50,000 or
10% of salary and bonus for 1999.
</FN>
</TABLE>
There were no grants of stock options or stock appreciation rights
during 1999, and the Phantom Stock Plan was terminated by the Board of Directors
of Lynch Interactive (See "Termination of Lynch Phantom Stock Plan" at page 10).
<PAGE>
<TABLE>
AGGREGATE OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<CAPTION>
SARs Number of Securities
Exercised Underlying Options/SARs at Value of Unexercised
(#) Value Fiscal Year-End In-the-Money Options/SARs at
(b) Realized (#) Fiscal Year-End (#)
Name ($) Exercisable/Unexercisable Exercisable/Unexercisable
(a) (c) (d) (e)
Mario J. Gabelli
<S> <C> <C> <C>
Chairman of the Board 25,000 1,868,998 None/None $0/$0
Robert E. Dolan Chief
Financial Officer 10,000 685,823 None/None $0/$0
Robert A. Hurwich
VP-Admin., Sec. & Gen.
Counsel 5,000 345,722 None/None $0/$0
<FN>
(1) Represents payments in 2000 by Lynch Interactive Corporation upon exercises
under the Phantom Stock Plan of Lynch Corporation and Lynch Interactive
based upon December 31, 1999 stock values. Does not include $483,039,
$177,249 and $89,351 paid by Lynch Corporation in 2000 based upon December
31, 1999 stock prices.
</FN>
</TABLE>
<TABLE>
Ten Year Option/SAR Amendments1
<CAPTION>
Length of
Number of Original Term
Securities Market Price Exercise Price New Remaining at
Underlying of Stock at at Time of Exercise Date of
Options/SARs Time of Amendment Price Amendment
Name Date Amended Amendment(2) (e) $ (g)
(a) (b) (c) (d) (f)
<S> <C> <C> <C> <C> <C> <C>
Mario J. Gabelli
Chairman of the Board 3/15/00 25,000 Units $155.00 $70.106(3) $70.106(3) 3/5/02
Robert E. Dolan
Chief Financial
Officer 3/15/00 10,000 Units $155.00 $70.19(3)(4) $70.18(2)(3) 2/2801-3/5/03(5)
Robert A. Hurwich
VP-Admin, Sec &
General Counsel 3/15/00 5,000 Units $155.00 $69.47(3)(4) $69.47(2)(3) 2/29/01-3/5/03(5)
<FN>
(1) As a result of the Interactive Spin Off, Lynch Interactive and Lynch
Corporation each decided to terminate the Phantom Stock Plan, including
outstanding units. The termination of the outstanding units prior to their
original expiration date required the consent of participants. The total
amount paid to each participant was calculated based upon the December 31,
1999 (i) Lynch Corporation stock price ($25.81), (ii) the Lynch Interactive
stock price ($99.875) and (iii) East/West Communications, Inc. stock price
($38.50). East/West was spun off by Lynch Corporation in December 1997 and
the Boards of Lynch Corporation and Lynch Interactive, in connection with
the termination of the outstanding units, agreed to add its value to that
of Lynch Corporation and Lynch Interactive stocks for units granted prior
to December 1997. To the extent necessary, the Boards of Directors also
waived the requirement (enacted retroactively in 1998 after the grants)
that the stock price double prior to exercise. It was further determined
that Lynch Interactive would pay 79.5% of the amount, and Lynch Corporation
would pay 20.5% of the amount. See "Termination of Lynch Phantom Stock
Plan" at page 10.
(2) Combined closing prices of Lynch Interactive and Lynch Corporation stock
prices on the American Stock Exchange on March 15, 2000.
(3) Combined exercise prices of Lynch Interactive and Lynch Corporation units.
(4) Average exercise price of units. Of the 8,000 units granted to Mr. Dolan
prior to the East/West spin off, 4,000 units had a grant price of $63.03
and 4,000 units had a grant price of $70.106, and the 2,000 units granted
after the East/West spin off had a grant price of $84.63. Of the 4,000
units granted to Mr. Hurwich prior to the East/West spin off, 2,500 units
had a grant price of $63.03, and 1,500 units had a grant price of $70.106,
and the 1,000 units granted after the East/West spin off had a grant price
of $84.63. The units only became exercisable if at any time during the term
the stock price exceeds two times the grant price.
(5) Of Mr. Dolan's 8,000 units granted prior to the East/West spin off, 4,000
expired February 28, 2001, and 4,000 expired March 5, 2002 and the 2,000
units granted after the East/West spin off expired on March 5, 2003. Of Mr.
Hurwich's 4,000 units granted prior to the East/West spin off, 2,500
expired February 28, 2001, and 1,500 expired March 5, 2002 and the 2,000
units granted after the East/West spin off expired on March 5, 2003.
</FN>
</TABLE>
EXECUTIVE COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Executive Compensation and Benefits Committee ("Committee") of the
Board of Directors is responsible for developing and making recommendations to
the Board of Directors with respect to the Corporation's executive compensation
policies and administering the various executive compensation plans. In
addition, the Committee recommends to the Board of Directors the annual
compensation to be paid to the Chief Executive Officer and each of the other
executive officers of the Corporation, as well as to other key employees. The
Committee is comprised of two independent, non-employee directors.
The objectives of the Corporation's executive compensation program are
to:
o Support the achievement of desired Corporation performance.
o Provide compensation that will attract and retain superior talent and
reward performance.
o Ensure that there is appropriate linkage between executive
compensation and the enhancement of shareholder value.
o Evaluate the effectiveness of the Corporation's incentives for key
executives.
The executive compensation program is designed to provide an overall
level of compensation opportunity that is competitive with companies of
comparable size, capitalization and complexity. Actual compensation levels,
however, may be greater or less than average competitive levels based upon
annual and long-term Company performance, as well as individual performance. The
Committee uses its discretion to recommend executive compensation at levels
warranted in its judgment by corporate and individual performance.
Executive Officer Compensation Program
The Corporation's executive officer compensation program is comprised of
base salary, cash bonus compensation, Lynch Interactive Corporation 401(k)
Savings Plan, and other benefits generally available to employees of the
Corporation. In 1996 Lynch Corporation adopted a Phantom Stock Plan applicable
to officers and employees of the Lynch Corporation.
Base Salary
Base salary levels for the Corporation's executive officers are intended
to be competitive. In recommending salaries the Committee also takes into
account individual experience and performance and specific issues relating to
the Corporation. A summary of the compensation awarded to the Chief Executive
Officer and the other executive officers is set forth in the "Summary
Compensation Table" on page 6 of this Proxy Statement. Salary increases for 1999
were based upon a variety of judgmental factors, including the individual
performances of the officers in 1998 and their anticipated contributions to the
Corporation in 1999, the increasing size and complexity of the Corporation and
the general financial and strategic performance of the Corporation. With respect
to Mr. Gabelli, the Committee determined again not to raise Mr. Gabelli's salary
of $500,000 per year.
Bonus Plan
The Corporation has in place a bonus plan that is based on an objective
measure of corporate performance and on subjective evaluation of individual
performance for its executive officers (other than the Principal Executive
Officer, i.e., Mr. Gabelli if the Principal Executive Bonus Plan is approved by
shareholders) and other key personnel. In general, the plan provides for an
annual bonus pool equal to 20% of the excess of (i) the consolidated pre-tax
profits of the Corporation for a calendar year less (ii) 25% of the
Corporation's average shareholders equity at the beginning of such year.
Shareholders' equity is the average of shareholders equity at the beginning of
the period and at the beginning of the two preceding years. The bonus pool would
also be reduced by amounts paid pursuant to the Principal Executive Bonus Plan
if approved. See next paragraph below. The Executive Compensation and Benefits
Committee in its discretion may take into consideration other factors and
circumstances in determining the amount of the bonus pool and awarding bonuses
such as progress toward achievement of strategic goals and qualitative aspects
of management performance. The total bonuses paid for 1998 and 1999 exceeded the
bonus formula because of the work by management in achieving strategic goals,
including investments in personal communications services, acquisitions and
financings. No bonuses were paid to executive officers for 1997. The breakdown
of the bonus pool is not based upon a formula but upon judgmental factors.
Mr. Gabelli is the sole participant in the Principal Executive Bonus
Plan of Lynch Corporation adopted by the Board of Directors and approved by
shareholders in 1997. The Principal Executive Bonus Plan is similar to the
regular Bonus Plan, except that it (i) specifies a Maximum Annual Bonus (as
defined therein) which is based on a maximum percentage (80%) of a specified
bonus pool and (ii) removes the discretion of the Committee to award annual
bonuses above the established Maximum Annual Bonus. The Plan is designed to
satisfy an exemption from Section 162(m) of the Internal Revenue Code, which
denies a deduction by an employer for certain compensation in excess of $1
million per year. No bonus was paid to Mr. Gabelli for 1997, 1998 or 1999 under
the Principal Executive Bonus Plan. The Committee determined that 1999 bonus
calculations would be made on the assumption that the Spin Off did not occur
until January 1, 2000. Lynch Interactive has adopted subject to shareholder
approval at the 2000 Annual Meeting of Shareholders a comparable plan (See
Principal Executive Bonus Plan at pages 16 to 19 below).
A summary of bonuses awarded to the Chief Executive Officer and certain
other executive officers is set forth in the "Summary Compensation Table" on
page 6 of this Proxy Statement.
Termination of the Lynch Phantom Stock Plan
In February 1996 Lynch Corporation adopted a Phantom Stock Plan pursuant
to which share units equivalent to one share of Common Stock of Lynch
Corporation could be awarded to officers and employees of Lynch Corporation. The
Lynch Corporation Committee was responsible for administering the Phantom Stock
Plan, including selection of the persons to be awarded share units and number of
units to be awarded. Under the terms of the Phantom Stock Plan such share units
are initially valued at a trailing average price of Lynch Corporation's Common
Stock (or such other price as the Committee determines), vest on the first
anniversary of the date of grant and may be exercised by the grantee at any time
after vesting and prior to the fifth anniversary of the date of Grant. Upon
exercise the grantee is entitled to the difference between the market price of
Lynch Corporation's Common Stock on the date of exercise and the award value,
multiplied by the number of share units granted, and Lynch Corporation may elect
to pay the award with Common Stock of Lynch Corporation for up to 100% of the
value. Seven thousand four hundred units were awarded in February 1996, of which
4,000 were awarded to Mr. Dolan and 2,500 were awarded to Mr. Hurwich at $63.03
per share unit. Thirty-one thousand, seven hundred units were awarded in March
1996, of which 25,000 were awarded to Mr. Gabelli, 4,000 were awarded to Mr.
Dolan and 1,500 were awarded to Mr. Hurwich, all at $70.106 per share unit.
Three thousand nine hundred units were awarded in March 1998, of which 2,000
were awarded to Mr. Dolan and 1,000 were awarded to Mr. Hurwich, all at $84.63
per share unit. The awards were discretionary and not based upon a formula but
were intended to give executive officers a substantially increased equity
equivalent interest in the Corporation as a continuing incentive. In 1998, the
Plan, as well as outstanding rights, was amended to provide that rights would
become exercisable only if at any time during the term thereof the stock price
exceed twice the base or grant price.
As a result of the Interactive Spin Off, an adjustment in the terms of
the outstanding units was required. The approach that was taken was to divide
each unit into two units, one representing one share of Lynch Corporation stock
and one representing one share of Lynch Interactive stock. This was considered
appropriate since, at least for the short term, the individuals holding those
units would provide services for both Lynch Corporation and Lynch Interactive.
The original grant prices were apportioned between the corresponding units based
on the relative market prices of the common stock of the two companies after the
spin off.
After further reflection, the Boards of Directors of Lynch Interactive
and Lynch Corporation each decided that the preferable course of action would be
to terminate the phantom stock plan, including outstanding units, and to start
with a clean slate in each company regarding an appropriate long term incentive
program. The companies operate in completely different industries and
competitive environments. Consequently, the business conditions and prospects
that existed in Lynch Corporation at the time the units were granted were
substantially different than they are today in either company. In the case of
Lynch Interactive particularly, there was concern that stock price fluctuations
over the remaining terms of the outstanding units could result in material
quarterly charges (and distortions) to reported earnings.
In order to terminate the outstanding units, the consent of the
employees holding those units was required and, in this connection, the future
appreciation potential of the units being relinquished had to be taken into
account. An agreement was reached, deemed by the Boards of Directors of both
Lynch Interactive and Lynch Corporation to be both fair and equitable to all of
the employees holding the units, as well as in the best interests of the
respective shareholders of both corporations. The agreement recognizes the fact
that the holders of the units created significant value for shareholders since
their issuance, as well as the manner in which that value was created,
specifically including the spin off to Lynch Corporation shareholders of both
the stock of East/West Communications, Inc. in December 1997, and the stock of
Lynch Interactive.
In calculating the payment the holders are to receive, they are treated
as holding only the original set of stock appreciation units issued to them by
Lynch Corporation, each with the original exercise price. The payment due under
each unit was determined by subtracting that exercise price from the total of
the market prices on December 31, 1999, of a share of (a) Lynch Corporation, (b)
Lynch Interactive, and (c) except for units granted after December 1997,
East/West Communications. To the extent necessary, the Boards of Directors of
both companies also waived the requirement (enacted retroactively in 1998, after
the grants) that the stock price exceed twice the exercise price before a unit
could be exercised.
Finally, the Boards of Directors of Lynch Interactive and Lynch
Corporation agreed that the total payments so determined would be paid 79.5% by
Lynch Interactive and 20.5% by Lynch Corporation. The allocation was based on
the relative market prices of the common stock of the two companies on December
31, 1999.
Lynch Interactive Corporation 401(k) Savings Plan
All employees of the Corporation and certain of its subsidiaries are
eligible to participate in the Lynch Interactive Corporation 401(k) Savings Plan
adopted after the Spin Off, after having completed one year of service (as
defined in the Plan) and having reached the age of 18.
The 401(k) Plan permits employees to make contributions by deferring a
portion of their compensation. Participating employees also share in
contributions made by their respective employers. The annual mandatory employer
contribution to each participant's account is equal to 25% of the first $800 of
the participant's contribution. In addition, the employer may make a
discretionary contribution of up to 75% of the first $800 of the participant's
contribution. No such discretionary contribution was made in 1998. A
participant's interest in both employee and employer contributions and earnings
thereupon are fully vested at all times.
Employee and employer contributions are invested in guaranteed
investment contracts, certain mutual funds or Common Stock of the Corporation,
as determined by the participants. With respect to the individuals listed in the
Summary Compensation Table, each of Messrs. Gabelli, Dolan, and Hurwich,
deferred $10,000 under the Lynch Corporation Plan during 1999, which amounts
have been included for each individual in the Summary Compensation Table.
Benefits
The Corporation provides medical life insurance and disability benefits
to the executive officers that are generally available to Corporation employees.
The amount of perquisites, as determined in accordance with the rules of the
Securities and Exchange Commission relating to executive compensation, did not
exceed 10% of salary and bonus for fiscal 1999.
Chief Executive Officer Compensation
The following table sets forth compensation received by Mr. Gabelli for
the last ten years as Chairman and Chief Executive Officer of Lynch Corporation
(including September 1 - December 31, 1999 from Lynch Interactive):
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ---- ---- ---- ----- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salary 90,000 90,000 150,000 150,000 150,000 325,000 500,000 500,000 500,000 500,000
Bonus 0 0 100,000 250,000 0 625,000 0 0 0 0
</TABLE>
Mr. Gabelli performs the usual functions of the chief executive officer of a
company and is particularly involved in the development of acquisition,
investment and financial strategies. After considering the substantial increase
in the size and scope of the Corporation, improved financial performance as
reflected by the increase in private market value as well as public market
value, and improved return on shareholder equity, the Lynch Corporation
Compensation Committee recognized that Mr. Gabelli's 1994 and prior years'
compensation was materially below that of chief executive officers of comparable
companies. Therefore, that Committee increased Mr. Gabelli's salary to $500,000
per year effective July 1, 1995, with no raise since then. Effective in 2000,
the $500,000 salary will be split, with $150,000 to be paid by the Corporation
and $350,000 to be paid by Lynch Interactive. 1999 was a year of strategic
accomplishments, including the Spin Off and the sale by Spinnaker of its tape
operations. However, 1999 was also a year of certain disappointments including
the profitability of certain manufacturing operations and The Morgan Group, Inc.
(part of the Interactive Spin Off). Mr. Gabelli made substantial contributions
to the Corporation's performance; however, no bonus was awarded to Mr. Gabelli
for 1999. In addition, that Committee recognizes the role of leadership,
particularly that of Mr. Gabelli, in developing existing businesses and in
making strategic acquisitions. In 1997, the Committee granted Mr. Gabelli 25,000
units under the Lynch Corporation's Phantom Stock Plan in 1997. See Termination
of the Lynch Phantom Stock Plan at page 10 and the Summary Compensation Table at
page 6 for amounts paid to Mr. Gabelli upon such termination. Previously, the
Corporation authorized the sale by the Corporation to Mr. Gabelli of $625,000 of
Common Stock in March 1996 (equal to Mr. Gabelli's 1995 bonus), which resulted
in the purchase of 10,373 shares, and in January 1994, the Corporation sold Mr.
Gabelli 100,000 shares at the then market price.
Ralph R. Papitto, Chairman of the Executive Compensation and Benefits Committee
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the Common
Stock of the Corporation for the period September 1, 1999 (the date the
Corporation's stock began trading publicly) through December 31, 1999 with the
cumulative total return over the same period on the broad market, as measured by
the American Stock Exchange Market Value Index, and on a peer group, as measured
by a composite index based on the total returns earned on the stock of the
publicly traded companies included in the Media General Financial Services
database under the two Standard Industrial Classification (SIC) codes within
which the Corporation conducts the bulk of its business operations: SIC Code
4813, Telephone Communications, except Radio Telephone (105 companies), and SIC
Code 4213, Trucking, except Local (52 companies). The data presented in the
graph assumes that $100 was invested in the Corporation's Common Stock and in
each of the indexes on September 1, 1999 and that all dividends were reinvested.
INVESTMENT OF $100 DOLLARS ON SEPTEMBER 1, 1999
WITH REINVESTMENT OF DIVIDENDS
COMPARISON OF CUMULATIVE TOTAL RETURN OF
COMPANY, PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
COMPANY/INDEX/MARKET 9/1/99 12/31/99
<S> <C> <C>
Lynch Interactive Corporation 100.00 192.07
Peer Group Index ............ 100.00 113.69
AMEX Market Index ........... 100.00 116.58
</TABLE>
The Industry Index Chosen was:
A Composite of SIC Codes - 4213 and 4813
The Broad Market Index Chosen was:
American Stock Exchange
<PAGE>
Item 2
APPROVAL OF THE LYNCH INTERACTIVE CORPORATION 2000
STOCK OPTION PLAN
Background
On March 9, 2000, the Board of Directors of the Corporation adopted
(subject to shareholder approval) the Lynch Interactive Corporation 2000 Stock
Option Plan (the "Plan"), which provides that the total number of shares of
Common Stock issuable pursuant to the Plan is 83,000. The following description
of the Plan is intended only as a summary and is qualified in its entirety by
reference to the Plan, which is an exhibit to this proxy statement.
Purpose
The purpose of the Plan is to enhance the profitability and value of
the Corporation for the benefit of its shareholders principally by enabling the
Corporation to offer employees and consultants of the Corporation and its
subsidiaries stock-based incentives in the Corporation in order to attract,
retain and reward such individuals and strengthen the mutuality of interest
between such individuals and the Corporation's shareholders.
Eligibility
All employees and consultants of the Corporation and its subsidiaries
of the Corporation designated by the board of directors to participate in the
Plan are eligible to receive options under the Plan.
Available Shares
Options covering a maximum of 83,000 shares of Common Stock may be
issued under the Plan. Options covering a maximum of 75,000 shares may be
granted to a single individual in any one fiscal year. These amounts are subject
to adjustment to reflect changes in the capital structure of the Corporation,
stock splits, recapitalizations, mergers and reorganizations. If an option
expires, terminates or is canceled, the unissued shares of Common Stock subject
to the option will again be available under the Plan.
Terms of Stock Options
Under the Plan, options granted to employees may be in the form of
incentive stock options or non-qualified stock options. Options granted to
consultants may only be non-qualified stock options. The committee that
administers the plan (see "Administration" below) (the "Committee") will
determine the number of shares subject to each option, the term of each option
(which may not exceed ten years or, in the case of an incentive stock option
granted to a ten percent shareholder, five years), the exercise price per share
of stock subject to each option, the vesting schedule (if any) and the other
material terms of the option. No incentive stock option may have an exercise
price less than 100% of the fair market value of the Common Stock at the time of
grant (or, in the case of an incentive stock option granted to a ten percent
shareholder, 110% of fair market value). The exercise price of a non-qualified
stock option will be determined by the Committee.
The option price upon exercise may be paid in cash, or, if so
determined by the Committee, in shares of Common Stock, by a reduction in the
number of shares of Common Stock issuable upon exercise of the option or by such
other method as the Committee determines. Options may be made exercisable in
installments, and the exercisability of options may be accelerated by the
Committee. The Committee may at any time offer to buy an option previously
granted on such terms and conditions as the Committee establishes. At the
discretion of the Committee, options may provide for "reloads" (i.e., a new
option is granted for the same number of shares as the number used by the holder
to pay the option price upon exercise).
Subject to limited exceptions, options are forfeited upon termination
of employment or service. Options are not assignable (except by will or the laws
of descent and distribution or the consent of the Committee).
Options may not be granted after the tenth anniversary of the Plan's
adoption, but options granted prior to that date may extend beyond that date.
<PAGE>
Change in Control
Unless otherwise determined by the Committee at the time of grant, upon
a Change in Control (as defined in the Plan), all options automatically will
become fully exercisable. However, unless otherwise determined by the Committee
at the time of grant, no acceleration of exercisability of an option will occur,
if the Committee determines prior to a Change in Control that the option will be
honored or assumed or new rights substituted immediately following the Change in
Control.
Amendments
The Plan may be amended by the board of directors, except that
shareholder approval of amendments will be required, among other things, to (i)
increase the maximum number of shares subject to options granted in any fiscal
year, (ii) change the classification of employees eligible to receive awards,
(iii) extend the maximum option period under the Plan or (iv) increase the
number of shares that may be issued under the Plan.
Administration
The Plan will be administered by a committee of the board (the
"Committee"), which will include two or more "non-employee" and "outside"
directors. However, with respect to option grants to non-employee directors and
any action under the Plan relating to options held by non-employee directors,
the Committee will consist of the entire board of directors. The Committee will
determine the individuals who will receive options and the terms of the options,
which will be reflected in written agreements with the holders.
Certain U.S. Federal Income Tax Consequences
Under current federal income tax laws, the grant of an incentive stock
option can be made solely to employees and generally has no income tax
consequences for the optionee or the Corporation. In general, no taxable income
results to the optionee upon the grant or exercise of an incentive stock option.
However, the amount by which the fair market value of the stock acquired
pursuant to the incentive stock option exceeds the exercise price is an
adjustment item for purposes of alternative minimum tax. If no disposition of
the shares is made within either two years from the date the incentive stock
option was granted or one year from the date of exercise of the incentive stock
option, any gain or loss realized upon disposition of the shares will be treated
as a long-term capital gain or loss to the optionee. The Corporation will not be
entitled to a tax deduction upon the exercise of an incentive stock option, nor
upon a subsequent disposition of the shares, unless the disposition occurs prior
to the expiration of the holding period described above. In general, if the
optionee does not satisfy these holding period requirements, any gain equal to
the difference between the exercise price and the fair market value of the stock
at exercise (or, if a lesser amount, the amount realized on disposition over the
exercise price) will constitute ordinary income. In the event of such a
disposition before the expiration of that holding period, the Corporation is
entitled to a deduction at that time equal to the amount of ordinary income
recognized by the optionee. Any gain in excess of the amount recognized by the
optionee as ordinary income would be taxed to the optionee as short-term or
long-term capital gain (depending on the applicable holding period).
In general, an optionee will realize no taxable income upon the grant
of a non-qualified option, and the Corporation generally will not receive a
deduction at the time of grant. Upon exercise of a non-qualified option, an
optionee generally will recognize ordinary income in an amount equal to the
excess of the fair market value of the stock on the date of exercise over the
exercise price. Upon a subsequent sale of the stock by the optionee, the
optionee will recognize short-term or long-term capital gain or loss, depending
upon his holding period for the stock. Subject to the possible application of
section 162(m) of the Internal Revenue Code, the Corporation will generally be
allowed a deduction equal to the amount recognized by the optionee as ordinary
income.
Any entitlement to a tax deduction on the part of the Corporation is
subject to applicable federal tax rules, including section 162(m) of the
Internal Revenue Code regarding a $1 million limitation on deductible
compensation. In addition, if the exercisability of an option is accelerated
because of a change in control, payments relating to the options, either alone
or together with certain other payments, may constitute parachute payments under
section 280G of the Internal Revenue Code, which may be subject to excise tax.
See the Summary Compensation Table on page 6, the Option/SAR Tables on
page 7 and the Executive Compensation and Benefits Committee Report on Executive
Compensation for additional information on compensations and employee benefit
plans.
THIS BOARD OF DIRECTORS (OTHER THAN MR. GABELLI WHO IS MAKING NO RECOMMENDATION)
RECOMMENDS A VOTE IN FAVOR OF APPROVAL OF THE PLAN.
Approval of Item 2 requires the affirmative vote of a majority of the
shares of Common Stock of the Corporation voting on the proposition, excluding
any abstentions. Mr. Gabelli has not indicated how he intends to vote shares
beneficially owned by him.
Item 3
APPROVAL OF THE PRINCIPAL EXECUTIVE BONUS PLAN
On March 9, 2000, the Board of Directors of the Corporation adopted,
subject to approval by the shareholders of the Corporation, the Principal
Executive Bonus Plan (the "Plan") to provide the chief executive officer of the
Corporation and, if so designated, certain other key employees with a
performance-based Annual Bonus (as defined below) for calendar years beginning
January 1, 2000. The Plan is similar to the Lynch Corporation's Principal
Executive Bonus Plan which has been in effect since 1997 except that the Plan
limits any participant (rather than the Chief Executive Officer) to 80% of the
Annual Bonus Pool (as described below) and is applicable to the chief executive
officer and certain other key corporate employees. For the 2000 calendar year,
only the chief executive officer is participating in the Plan, and he is not
eligible to participate in the existing bonus plan.
The Plan is designed to satisfy Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). Section 162(m) of the Code denies a
deduction by an employer for certain compensation in excess of $1 million per
year paid by a publicly held corporation to the chief executive officer and the
four other most highly compensated executive officers who are employed at the
end of the fiscal year. Certain compensation, including compensation paid based
on the achievement of preestablished performance goals, is excluded from this
deduction limit. For compensation to qualify for this exclusion, the material
terms pursuant to which the compensation is to be paid, including the
performance goals, must be disclosed to, and approved by, the shareholders in a
separate vote prior to the payment. Accordingly, the Plan is being submitted to
shareholders so that payments thereunder will be exempt under Section 162(m) of
the Code.
Administration
The Plan is administered by the Executive Compensation and Benefits
Committee, which is currently composed of two members of the Board of Directors
who qualify as "outside directors" under Section 162(m) of the Code (the
"Committee"). The Committee has the authority to designate the key employees
eligible to participate in the Plan (other than the chief executive officer),
establish Individual Bonus Pool Percentages (as defined below), determine
performance criteria, certify attainment of performance goals and other material
terms, to construe and interpret the Plan and make all other determinations
deemed necessary or advisable for the administration of the Plan.
Eligibility and Participation
The chief executive officer of the Company will participate in the Plan
during each calendar year automatically. In addition, the Committee may, in its
sole discretion, select other key executive officers or key employees of the
Company (including subsidiaries) to be eligible to participate in the Plan for
any calendar year.
Determination of Annual Bonus
Each participant's Annual Bonus under the Plan for each calendar year
will be equal to the participant's Individual Bonus Pool Percentage (as defined
below) multiplied by the achieved Annual Bonus Pool (as defined below) for the
respective calendar year. The Annual Bonus Pool is determined pursuant to an
objective formula or standard based on the attainment of preestablished
performance goals specified by the Committee. The Individual Bonus Pool
Percentage shall be determined by the Committee and be expressed as a percentage
of the Annual Bonus Pool for each calendar year. In no event may the total of
all participants' Individual Bonus Pool Percentages exceed one hundred percent
(100%) of the Annual Bonus Pool for any calendar year. Unless otherwise reduced
by the Committee, payment of a participant's Annual Bonus shall be made only if
and to the extent performance goals for the relevant calendar year are attained.
Performance Goals
The Committee generally has the authority to determine the performance
goals that will be in effect for each calendar year. The performance goals with
respect to the Annual Bonus Pool will be based on the attainment of certain
target levels of, or a percentage increase in, Pre-Tax Profits (as defined
below) in excess of certain target levels or percentages of Shareholders Equity
(as defined below). In addition, the Committee has the authority to incorporate
provisions in the performance goals allowing for adjustments in recognition of
unusual or non-recurring events affecting the Corporation or the financial
statements of the Corporation, or in response to changes in applicable laws,
regulations or accounting principles, to the extent permitted by Section 162(m)
of the Code.
Limits on Annual Bonus
Notwithstanding the attainment of performance goals, the Committee has
the discretion to reduce (but not increase) a participant's Annual Bonus under
the Plan for any calendar year, regardless of the degree of attainment of the
performance goals. In any event, the Maximum Annual Bonus permitted under the
Plan with respect to any calendar year may not exceed in the case of any
participant eighty percent (80%) of an amount equal to twenty percent (20%) of
the excess of (a) Pre-Tax Profits (as defined below) for such calendar year less
(b) twenty-five percent (25%) of Shareholders Equity (as defined below).
Pre-Tax Profits means income before income taxes (excluding any
provision for annual bonuses under the Plan and under the Bonus Plan applicable
to other corporate employees), minority interest (if any), extraordinary items
(if any), cumulative changes in accounting (if any) and discontinued operations
(if any) in the Corporation's Statement of Consolidated Income reported in its
annual financial statements adjusted by (i) minority interest effects on such
pre-tax profits; and (ii) pre-tax effect of income or loss associated with
discontinued operation net of minority interest effects. Shareholders Equity
means the average of shareholders equity at the beginning of the Plan Year and
at the beginning of the two preceding Plan Years, in each case as reported in
the Company's consolidated balance sheet in its annual financial statements
(restated as the result of the Spin Off).
Form and Payment of Annual Bonus
With respect to each participant, payment under the Plan will be made
in cash in an amount equal to the achieved Annual Bonus and may be made only
after attainment of the performance goals has been certified in writing by the
Committee. Unless otherwise determined by the Committee in its sole discretion,
each participant shall, to the extent the applicable performance goals with
respect to the Annual Bonus Pool are attained at the end of each calendar year,
have the right to receive payment of a prorated portion of such participant's
Annual Bonus under the Plan for any calendar year during which the participant's
employment with the corporation is terminated for any reason other than for
"cause" (as determined by the Committee in its sole discretion).
Amendment and Termination of Plan
The Committee may at any time and from time to time alter, amend,
suspend or terminate the Plan in whole or in part; provided, that no amendment
shall, without the prior approval of the shareholders of the Corporation in
accordance with the laws of the State of Delaware to the extent required under
Code Section 162(m): (i) materially alter the performance goals, (ii) increase
the Maximum Annual Bonus for any calendar year, (iii) change the class of
persons eligible to participate in this Plan, or (iv) implement any change to a
provision of the Plan requiring shareholder approval in order for the Plan to
continue to comply with the requirements of Section 162(m) of the Code.
Notwithstanding the foregoing, no amendment shall affect adversely any of the
rights of any participant, without such participant's consent, under the award
theretofore granted under the Plan.
2000 Performance Award
Only the chief executive officer of the Corporation is participating in
the Plan for calendar year 2000. On March 27, 2000, the Committee set for the
2000 calendar year the performance goals underlying the 2000 Annual Bonus Pool
and the Individual Bonus Pool Percentage for the chief executive officer. The
Committee determined that the 2000 Annual Bonus Pool amount, if any, will be
equal to twenty percent (20%) of the excess of (a) Pre-tax Profits of the
Corporation less (b) twenty-five percent (25%) of the Corporation's Shareholders
Equity. In addition, the Committee determined that the chief executive officer's
Individual Bonus Pool Percentage under the Plan will be equal to eighty percent
(80%) of the 2000 Annual Bonus Pool.
If the Plan had been in effect for 1999, neither Mr. Gabelli, the chief
executive officer of the Corporation, nor any other key employee, would have
received any annual bonus; however, for 2000 and future years the Plan could
result in substantial bonuses if Pre-Tax Profits increase substantially,
including as a result of a major business, and/or Shareholders Equity decreases
substantially.
Other Plans
Corporate executives and employees, other than the chief executive
officer, will continue to participate for the 2000 calendar year in the existing
bonus plan which permits the Corporation to use subjective factors, such as
progress towards achievement of strategic in goals and qualitative aspects of
management performance, in addition to the formula, in awarding bonuses.
See the Summary Compensation Table on page 6 the Option/SAR Tables on
page 7 and the Executive Compensation and Benefits Committee Report on Executive
Compensation for additional information on compensations and employee benefit
plans.
THE BOARD OF DIRECTORS (OTHER THAN MR. GABELLI WHO IS MAKING NO RECOMMENDATION)
RECOMMENDS A VOTE IN FAVOR OF APPROVAL OF THE PLAN.
Approval of this Item 3 requires the affirmative vote of a majority of
the shares of Common Stock of the Corporation voting on the proposition,
excluding any abstentions. Mr. Gabelli has not indicated how he intends to vote
the shares beneficially owned by him.
TRANSACTIONS WITH CERTAIN AFFILIATED PERSONS
Mr. Gabelli is affiliated with various entities which he directly or
indirectly controls and which are engaged in various aspects of the securities
business, such as an investment advisor to various institutional and individual
clients including registered investment companies and pension plans, as a
broker-dealer, and as managing general partner of various private investment
partnerships. During 1999, the Corporation and its subsidiaries engaged in
various transactions with certain of these entities and the amount of
commissions, fees, and other remuneration paid to such entities, excluding
reimbursement of certain expenses related to Mr. Gabelli's employment by the
Corporation (including approximately $69,000 reimbursement in connection with an
airplane in part owned by a subsidiary of Gabelli Group Capital Partners, Inc.
("Gabelli Partners"), was less than $60,000.
In March, 1997 and February 1998, Bal/Rivgam, L.L.C. and BCK/Rivgam,
L.L.C., in which affiliates of Gabelli Partners have a 49.9% interest, agreed to
pay the subsidiary a 5% net profits interest (after a capital charge) in
Bal/Rivgam and BCK/Rivgam, respectively, in return for certain services provided
or to be provided by the Corporation's subsidiary in connection with bidding on
and developing wireless communication service licenses and local multipoint
distribution services licenses. Mr. Gabelli is the majority owner of Gabelli
Partners and is its Chairman and Chief Executive Officer.
In 1998, the Lynch Corporation entered into a lease for approximately
5,000 square feet in a building in Rye, New York, recently purchased by an
affiliate of Mr. Gabelli. The lease runs through December, 2002, and provides
for rent at approximately $18.00 per square foot, per annum plus a minimum of
$2.50 per square foot per annum for electricity, subject to adjustment for
increases in tax and other operating expenses. The amount of the lease is
currently approximately $8,400 per month. Lynch Interactive became the primary
lessee of such lease at the Spin Off.
To assist the Corporation with the private placement of a $25 million
convertible promissory note to Cascade Investment LLC, Mr. Gabelli agreed to
give Cascade a one-time option to sell the Note to him at 105% of the principal
amount thereof on December 15, 2000, secured by a bank letter of credit. The
letter of credit is secured by securities deposited by Mr. Gabelli with the
bank. The Corporation agreed to reimburse the Chairman for the cost of the
letter of credit (approximately $160,000) plus his counsel fees in connection
with the option to sell agreement and obtaining the letter of credit.
In 1999, the Corporation agreed to pay Gabelli Securities, Inc. a fee
for services in connection with the acquisition of Central Scott Telephone
Company in July 1999, which is intended to be paid by transferring to Gabelli
Securities the stock of Lynch Capital Corporation, an in-house broker-dealer.
Lynch Capital recorded in 1999 revenues of $1,000 and a net loss of $20,000 and
will contain $40,000 in cash or equivalents at transfer.
INDEPENDENT AUDITORS
Representatives of Ernst & Young, the Corporation's auditors for 1999,
are expected to be available at the Annual Meeting with the opportunity to make
a statement if they desire to do so and to answer appropriate questions. The
Corporation has not yet selected a principal auditor for 2000.
SECTION 16(a) REPORTING
Section 16(a) of the Securities and Exchange Acts of 1934, as amended,
requires the Corporation's directors, executive officers and holders of more
than 10% of the Corporation's Common Stock to file with the Securities and
Exchange Commission and American Stock Exchange initial reports of ownership and
reports of changes in the ownership of Common Stock and other equity securities
of the Company. Such persons are required to furnish the Corporation with copies
of all Section 16(a) filings. Based solely on the Corporation's review of the
copies of such filings it has received and written representations of directors
and officers, the Corporation believes that during the fiscal year ended
December 31, 1999, its officers, directors, and 10% shareholders are in
compliance with all Section 16(a) filing requirements applicable to them.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 2000 Annual
Meeting of Shareholders must be received by the Office of the Secretary, Lynch
Corporation, 401 Theodore Fremd Avenue, Rye, NY 10580, by no later than December
20, 2000, for inclusion in the Corporation's proxy statement and form of proxy
relating to the 2001 Annual Meeting.
MISCELLANEOUS
The Board of Directors knows of no other matters which are likely to
come before the Annual Meeting. If any other matters should properly come before
the Annual Meeting, it is the intention of the persons named in the accompanying
form of proxy to vote on such matters in accordance with their best judgment.
The solicitation of proxies is made on behalf of the Board of Directors
of the Corporation, and the cost thereof will be borne by the Corporation. The
Corporation has employed the firm of Morrow & Co. Inc., 445 Park Avenue, 5th
Floor, New York, New York, 10022 to assist in this solicitation at a cost of
$3,500, plus out-of-pocket expenses. The Corporation will also reimburse
brokerage firms and nominees for their expenses in forwarding proxy material to
beneficial owners of the Common Stock of the Corporation. In addition, officers
and employees of the Corporation (none of whom will receive any compensation
therefor in addition to their regular compensation) may solicit proxies. The
solicitation will be made by mail and, in addition, may be made by telegrams and
personal interviews, and the telephone.
ANNUAL REPORT
The Corporation's Annual Report to Shareholders for the fiscal year
ended December 31, 1999, has been sent herewith to each shareholder. Such Annual
Report, however, is not to be regarded as part of the proxy soliciting material.
By Order of the Board of Directors
ROBERT A. HURWICH
Secretary
Dated: April 18, 2000
Exhibit to Proxy Statement
LYNCH INTERACTIVE CORPORATION
2000 Stock Option Plan
ARTICLE I.
PURPOSE
The purpose of this Lynch Interactive Corporation 2000 Stock Option
Plan (the "Plan"), is to enhance the profitability and value of Lynch
Interactive Corporation (the "Company") for the benefit of its shareholders by
enabling the Company to offer certain employees and Consultants (as defined
herein) of the Company and its Subsidiaries (as defined herein) stock based
incentives in the Company, thereby creating a means to raise the level of stock
ownership by employees and Consultants in order to attract, retain and reward
such individuals and strengthen the mutuality of interests between such
individuals and the Company's shareholders.
ARTICLE II.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1. "Board" shall mean the Board of Directors of the Company.
2.2. "Cause" shall mean, with respect to a Participant's Termination of
Relationship, unless otherwise determined by the Committee at grant,
willful misconduct in connection with the Participant's employment or
consultancy or willful failure to perform his or her employment or
consultancy responsibilities in the best interests of the Company
(including, without limitation, breach by the Participant of any provision
of any employment, nondisclosure, non-competition or other similar
agreement between the Participant and the Company), as determined by the
Committee, which determination shall be final, conclusive and binding.
2.3. "Change in Control" shall have the meaning set forth in Article VIII.
2.4. "Code" shall mean the Internal Revenue Code of 1986, as amended. Any
reference to any section of the Code shall also be a reference to any
successor provision.
2.5. "Committee" shall mean a committee or sub-committee of the Board appointed
from time to time by the Board or such committee, as the case may be, which
Committee shall include two or more directors who are non-employee
directors as
<PAGE>
defined in Rule 16b-3 (as defined herein) and outside directors as defined
under Section 162(m) of the Code (as defined herein). 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. 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.
2.6. "Common Stock" means the Common Stock, no par value per share, of the
Company.
2.7. "Consultant" means any advisor or consultant to the
Company or its Subsidiaries who is eligible pursuant to Article V to be
granted Options under this Plan.
2.8. "Disability" shall mean total and permanent disability, as defined in
Section 22(e)(3) of the Code.
2.9. "Effective Date" shall mean the effective date of the Plan as defined in
Article XII.
2.10. "Eligible Employee" shall mean the employees of the
Company and its Subsidiaries who are eligible pursuant to Article V to
be granted Options under this Plan.
2.11. "Exchange Act" shall mean the Securities Exchange Act of 1934.
2.12."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 (ii) if not traded on any such national securities exchange, as
quoted on an automated quotation system sponsored by the National
Association of Securities Dealers. If the Common Stock is not readily
tradable on a national securities exchange or any system sponsored by the
National Association of Securities Dealers, its Fair Market Value shall be
set in good faith by the Committee. For purposes of the grant of any
Option, the applicable date shall be the date for which the last sales
price is available at the time of grant.
2.13."Good Reason" shall mean, with respect to a Participant's Termination of
Relationship, (i) if there is an employment agreement between the Company
or a Subsidiary and the Participant in effect at the time of grant that
defines "good reason" (or words of like import) a termination that is or
would be deemed for "good reason" (or words of like import) as defined
under such employment agreement at the time of grant, (ii) if there is an
employment agreement between the Company or a Subsidiary and the
Participant in effect at the time of grant that does not define "good
reason" (or words of
<PAGE>
like import), a voluntary termination which is permitted under the terms of
such employment agreement and which is at least ninety (90) days after the
occurrence of an event which would be grounds for a termination by the
Company that is or would be deemed for "cause" (or words of like import) as
defined under such employment agreement at the time of grant, or (iii) if
there is no employment agreement between the Company or a Subsidiary and
the Participant in effect at the time of grant, a voluntary termination for
any reason upon two (2) weeks' prior written notice to the Company, which
is at least ninety (90) days after the occurrence of an event which would
be grounds for a Termination of Relationship by the Company for Cause
(without regard to any notice or cure period requirement).
2.14."Incentive Stock Option" shall mean any Stock Option awarded under this
Plan intended to be, and designated as, an "Incentive Stock Option" within
the meaning of Section 422 of the Code.
2.15."Non-Qualified Stock Option" shall mean any Stock Option awarded under
this Plan that is not an Incentive Stock Option.
2.16."Participant" shall mean the following persons to whom an Option has been
granted pursuant to this Plan: Eligible Employees and Consultants of the
Company or its Subsidiaries and non-employee directors of the Company.
2.17."Retirement" with respect to a Participant's Termination of Relationship
shall mean a Termination of Relationship without Cause from the Company
and/or a Subsidiary by a Participant who has attained (i) at least age
sixty-five (65); or (ii) such earlier date after age fifty-five (55) as
approved by the Committee with regard to such Participant. With respect to
a Participant's Termination of Directorship, Retirement shall mean the
failure to stand for reelection or the failure to be reelected after a
Participant has attained age sixty-five (65).
2.18."Rule 16b-3" shall mean Rule 16b-3 under Section 16(b) of the Exchange Act
as then in effect or any successor provisions.
2.19."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.
2.20. "Stock Option" or "Option" shall mean any option to
purchase shares of Common Stock granted to Eligible Employees,
Consultants or non-employee directors pursuant to Article VI.
2.21."Subsidiary" shall mean any corporation that is defined as a subsidiary
corporation in Section 424(f) of the Code.
<PAGE>
2.22."Ten Percent Shareholder" shall mean a person owning Common Stock of the
Company possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company as defined in Section 422 of
the Code.
2.23."Termination of Consultancy" shall mean (i) an individual is no longer
acting as a Consultant to the Company or a Subsidiary; or (ii) when an
entity which is retaining a Participant as a Consultant ceases to be a
Subsidiary, unless the Participant thereupon is retained as a Consultant by
the Company or another Subsidiary.
2.24."Termination of Employment" shall mean (i) 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 Subsidiaries; or (ii)
when an entity which is employing a Participant ceases to be a Subsidiary,
unless the Participant thereupon becomes employed by the Company or another
Subsidiary.
2.25."Termination of Relationship" shall mean a Termination of Employment or a
Termination of Consultancy, as applicable.
2.26."Transfer" or "Transferred" shall mean anticipate, alienate, attach, sell,
assign, pledge, encumber, charge or otherwise transfer.
2.27. "Withholding Election" shall have the meaning set forth in Section 11.4.
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 Stock Options,
pursuant to the terms of this Plan. In particular, the Committee shall have
the authority:
(a) to select the Eligible Employees and Consultants to whom Stock
Options may from time to time be granted hereunder;
(b) to determine whether and to what extent Stock Options are to be
granted hereunder to one or more Eligible Employees and
Consultants;
(c) to determine, in accordance with the terms of this Plan, the
number of shares of Common Stock to be covered by each Stock
Option granted to an Eligible Employee or Consultant;
<PAGE>
(d) to determine the terms and conditions, not inconsistent with the
terms of this Plan, of any Stock Option granted hereunder to an
Eligible Employee or Consultant (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, and the shares of Common Stock relating
thereto, based on such factors, if any, as the Committee shall
determine, in its sole discretion);
(e) to determine whether and under what circumstances a Stock Option
may be settled in cash and/or Common Stock under Subsection
6.3(d);
(f) 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 and
Consultants in order to exercise Options under the Plan; and
(g) to determine whether to require Eligible Employees or
Consultants, as a condition of the granting of any Option, to not
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. Subject to Article IX 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 Option granted 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, but only to the extent any such action would be
permitted under the applicable provisions of Rule 16b-3 (if any) and the
applicable provisions of Section 162(m) of the Code (if any). The Committee
may adopt special guidelines and provisions for persons who are residing
in, or subject to, the taxes of, countries other than the United States to
comply with applicable tax and securities laws. If and solely to the extent
applicable, this Plan is intended to comply with Rule 16b-3 and Section
162(m) of the Code and shall be limited, construed and interpreted in a
manner so as to comply therewith.
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, conclusive and binding on the Company
and all employees, directors, consultants and Participants and their
respective heirs, executors, administrators, successors and assigns.
3.5. Reliance on Counsel. The Company, the Board or the Committee may consult
with legal counsel, who may be counsel for the Company or other counsel,
with respect to its
<PAGE>
obligations or duties hereunder, or with respect to any action or
proceeding or any question of law, and shall not be liable with respect to
any action taken or omitted by it in good faith pursuant to the advice of
such counsel.
3.6. Procedures. If the Committee is appointed, the Board 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 it shall deem advisable. 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 decision or determination reduced to writing
and signed by all Committee members in accordance with the By-Laws of the
Company shall be fully 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.
3.7. Designation of Advisors -- 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 Stock Option 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, 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 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
officers, directors or members or former officers, directors or
members may have under applicable law or under the Certificate of
Incorporation or By-Laws of the Company or Subsidiary.
Notwithstanding anything else herein, this indemnification will
not apply to the actions or determinations
<PAGE>
made by an individual with regard to Stock Options 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 which may be issued under this Plan with respect to
which Stock Options may be granted shall not exceed 83,000
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. If any Stock Option granted under
this Plan expires, terminates or is canceled for any reason
without having been exercised in full or the Company
repurchases any Stock Option pursuant to Section 6.3(f), the
number of shares of Common Stock underlying the repurchased
Option, and/or the number of shares of Common Stock
underlying any unexercised Option shall again be available
for the purposes of Options under the Plan.
(b) Individual Participant Limitations. The maximum number of
shares of Common Stock subject to any Option which may be
granted under this Plan to each Participant shall not exceed
75,000 shares (subject to any increase or decrease pursuant
to Section 4.2) during each fiscal year of the Company.
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 shareholders 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 Subsidiary, any
issue of bonds, debentures, preferred or prior preference
stock ahead of or affecting Common Stock, the dissolution or
liquidation of the Company or Subsidiary, 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, distribution
with respect to its outstanding Common Stock or capital
stock other than Common Stock, sale or transfer of all or
part of its assets or business, reclassification of its
capital stock, or any similar change affecting the Company's
capital structure or business and the Committee determines
an adjustment is appropriate under
<PAGE>
the Plan, the number and kind of shares or other property
(including cash) to be issued upon exercise of an
outstanding Option and the purchase price thereof shall be
appropriately adjusted consistent with such change 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 shall be final,
conclusive and binding on the Company and all Participants
and employees and their respective heirs, executors,
administrators, successors and assigns.
(c) Fractional shares of Common Stock resulting from any
adjustment in Options pursuant to this Section 4 shall be
aggregated until, and eliminated at, the time of exercise by
rounding-down for fractions less than one-half (1/2) and
rounding-up for fractions equal to or greater than one-half
(1/2). No cash settlements shall be made with respect to
fractional shares eliminated by rounding. Notice of any
adjustment shall be given by the Committee to each
Participant whose Option 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 all or
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 discretion,
terminate all outstanding Options of Eligible Employees,
Consultants and non- employee directors, 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 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 (without regard to any
limitations on exercisability otherwise contained in the
Option Agreement) 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.
<PAGE>
ARTICLE V.
ELIGIBILITY
All employees and Consultants of the Company and its Subsidiaries are
eligible to be granted Stock Options under this Plan. Eligibility under this
Plan shall be determined by the Committee in its sole discretion.
ARTICLE VI.
STOCK OPTION GRANTS
6.1. Options. Each Stock Option granted hereunder shall be one of two types: (i)
an Incentive Stock Option intended to satisfy the requirements of Section
422 of the Code or (ii) a Non-Qualified Stock Option.
6.2. Grants. The Committee shall have the authority to grant to any Eligible
Employee one or more Incentive Stock Options, Non-Qualified Stock Options,
or both types of Stock Options. The Committee shall have the authority to
grant to any Consultant one or more Non-Qualified Stock Options. The Board
shall have the authority to grant to any non-employee director one or more
Non-Qualified Stock Options. To the extent that any Stock Option does not
qualify as an Incentive Stock Option (whether because of its provisions or
the time or manner of its exercise or otherwise), such Stock Option or the
portion thereof which does not qualify, shall constitute a separate
Non-Qualified Stock Option.
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) Option Price. The option price per share of Common Stock
purchasable under an Incentive Stock Option shall be
determined by the Committee at the time of grant but shall
not be less than 100% of the Fair Market Value of the share
of Common Stock at the time of grant; provided, however, if
an Incentive Stock Option is granted to a Ten Percent
Shareholder, the purchase price shall be no less than 110%
of the Fair Market Value of the Common Stock. The purchase
price of shares of Common Stock subject to a Non-Qualified
Stock Option shall be determined by the Committee.
(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,
provided, however, the term of an Incentive Stock Option
granted to a Ten Percent Shareholder may not exceed five (5)
years.
<PAGE>
(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
may waive such limitations on the exercisability at any time
at or after grant in whole or in part (including, without
limitation, that the Committee may waive the installment
exercise provisions or accelerate the time at which Options
may be exercised), based on such factors, if any, as the
Committee shall determine, in its sole discretion.
(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. Such notice shall be accompanied by payment in
full of the purchase price in such form, or such other
arrangement for the satisfaction of the purchase price, as
the Committee may accept. If and to the extent determined by
the Committee in its sole discretion at or after grant,
payment in full or in part may also be made in the form of
Common Stock withheld from the shares to be received on the
exercise of a Stock Option hereunder or Common Stock owned
by the Participant (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. No shares of Common
Stock shall be issued until payment, as provided herein,
therefor has been made or provided for and the Participant
shall have none of the rights of a holder of shares of
Common Stock until such shares of Common Stock have been
issued.
(e) Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of
grant) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by an
Eligible Employee during any calendar year under the Plan
and/or any other stock option plan of the Company or any
Subsidiary or parent corporation (within the meaning of
Section 424(e) of the Code) exceeds $100,000, such Options
shall be treated as Options which are not Incentive Stock
Options.
Should the foregoing provision not be necessary in order for
the Stock Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of the
shareholders of the Company.
(f) 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.
<PAGE>
(g) 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 or grant as is approved by the
Committee, and the Committee may modify, extend or renew
outstanding Options granted under the Plan (provided that
the rights of a Participant are not reduced without his
consent), or 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).
(h) 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
as the number of Options exercised, 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 Relationship. The following rules apply with regard to
Options upon the Termination of Relationship of a Participant:
(a) Termination by Reason of Death. If a Participant's
Termination of Relationship is by reason of death, any Stock
Option held by such Participant, unless otherwise determined
by the Committee at grant or, if no rights of the
Participant's estate are reduced, thereafter, 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 Relationship is by reason of Disability, any
Stock Option held by such Participant, unless otherwise
determined by the Committee at grant or, if no rights of the
Participant are reduced, thereafter, 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.
(c) Termination by Reason of Retirement. If a Participant's
Termination of Relationship is by reason of Retirement, any
Stock Option held by such Participant, unless otherwise
determined by the Committee at grant, or, if no rights of
the Participant are reduced, thereafter, shall be fully
vested and may thereafter be exercised by the Participant 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,
<PAGE>
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 (or such other period as the
Committee may specify at grant or, if no rights of the
Participant's estate are reduced, thereafter) 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 Relationship
is by involuntary termination without Cause or for Good
Reason, any Stock Option held by such Participant, unless
otherwise determined by the Committee at grant or, if no
rights of the Participant are reduced, thereafter, 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. If a Participant's
Termination of Relationship is voluntary but without Good
Reason and such Termination of Relationship occurs prior to,
or more than ninety (90) days after, the occurrence of an
event which would be grounds for Termination of Relationship
by the Company for Cause (without regard to any notice or
cure period requirements), any Stock Option held by such
Participant, unless otherwise determined by the Committee at
grant or, if no rights of the Participant are reduced,
thereafter, 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 of
Relationship, but in no event beyond the expiration of the
stated term of such Stock Option.
(f) Other Termination. Unless otherwise determined by the
Committee at grant or, if no rights of the Participant are
reduced, thereafter, if a Participant's Termination of
Relationship is for any reason other than death, Disability,
Retirement, Good Reason involuntary termination without
Cause or voluntary termination as provided in subsection (e)
above, any Stock Option held by such Participant shall
thereupon terminate and expire as of the date of
termination, provided that (unless the Committee determines
a different period upon grant or, if, no rights of the
Participant are reduced, thereafter) in the event such
termination is for Cause or is a voluntary termination
without Good Reason or voluntary resignation within ninety
(90) days after occurrence of an event which would be
grounds for Termination of Relationship 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 Relationship for Cause shall be deemed to
have terminated and expired upon occurrence of the event
which would be grounds for Termination of Relationship by
the Company for Cause.
<PAGE>
ARTICLE VII.
NON-TRANSFERABILITY
Without the consent of the Committee, no Stock Option shall be
Transferable by the Participant otherwise than by will or by the laws of descent
and distribution, and 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 Transferable in any
manner, and any attempt to Transfer any such Option shall be void, and no such
Option 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
Option, nor shall it be subject to attachment or legal process for or against
such person.
ARTICLE VIII.
CHANGE IN CONTROL PROVISIONS
8.1. 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, the Participant shall be entitled to the following benefits:
(a) Subject to paragraph (b) below, all outstanding Options of
Participants granted prior to the Change in Control shall be
fully vested and immediately exercisable in their entirety. The
Committee, in its sole discretion, may provide for the purchase
of any such Stock Options by the Company 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 8.1, 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 or Consultant hereunder or thereafter, no
acceleration of exercisability shall occur with respect to such
Option if the Committee reasonably determines in good faith,
prior to 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 such
Participant's employer (or the parent or a subsidiary of such
employer), or in the case of a Consultant, by the entity (or its
parent or subsidiary) which retains the Consultant, immediately
following the Change in Control, provided that any such
Alternative Option must meet the following criteria:
<PAGE>
(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).
For purposes of Incentive Stock Options, any assumed or
substituted Option shall comply with the requirements of Treasury
regulation ss. 1.425-1 (and any amendments thereto).
8.2. Change in Control. A "Change in Control" shall be deemed to have occurred:
(a) upon 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, any company owned,
directly or indirectly, by the shareholders of the Company
in substantially the same proportions as their ownership of
Common Stock of the Company), becoming the owner (as defined
in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the
Company's then outstanding securities (including, without
limitation, securities owned at the time of any increase in
ownership);
(b) during any period of two consecutive years, a change in the
composition of the Board of Directors of the Company such
that the individuals who, as of the date hereof, comprise
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, for purposes of this subsection that any individual
who becomes a member of an Incumbent Board subsequent to the
date hereof whose election, or nomination for election by
the Company's shareholders, was approved in advance or
contemporaneously with such election by a vote of at least a
majority of those individuals who are members of the
Incumbent Board (or deemed to be such pursuant to this
proviso) shall be considered as though such individual were
a member of the Incumbent Board; but, provided further, that
any such individual whose initial assumption of office
occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors
of the Company or actual or threatened tender offer for
shares of the Company or similar transaction or other
contest
<PAGE>
for corporate control (other than a tender offer by the
Company) shall not be so considered as a member of the
Incumbent Board;
(c) upon the merger or consolidation of the Company with any
other corporation (other than a parent or subsidiary
corporation within the meaning of Section 424(e) or 424(f)
of the Code, respectively), 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; or
(d) upon the shareholders' of the Company approval of a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets other than the sale 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.
ARTICLE IX.
TERMINATION OR AMENDMENT OF THE PLAN
9.1. 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, 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 Options 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 shareholders
of the Company, if and to the extent required by the applicable provisions
of Rule 16b-3 or under the applicable provisions of Section 162(m) of the
Code or, with regard to Incentive Stock Options, Section 422 of the Code,
no amendment may be made which 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
shareholder approval in order for the Plan to continue to comply with the
applicable provisions, if any, of Section 162(m) of the Code or, with
regard to Incentive Stock Options, Section 422 of the Code. In no event may
the Plan be amended without the approval of the shareholders of the Company
in accordance with the applicable laws or other requirements 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 shareholder 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.
<PAGE>
The Committee may amend the terms of any Option 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.
ARTICLE X.
UNFUNDED PLAN
10.1.Unfunded Status of Plan. This Plan is intended to constitute an "unfunded"
plan for incentive 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 XI.
GENERAL PROVISIONS
11.1.Legend. The Committee may require each person receiving shares of Common
Stock pursuant to the exercise of a Stock Option 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 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.
11.2.Other Plans. Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements
may be either generally applicable or applicable only in specific cases.
11.3.No Right to Employment/Consultancy. Neither this Plan nor the grant of any
Option hereunder shall give any Participant or other individual any right
with respect to continuance of employment or consultancy by the Company or
any Subsidiary, nor shall there be
<PAGE>
a limitation in any way on the right of the Company or any Subsidiary by
which an employee is employed or if a consultant, retained, to terminate
his employment or consultancy at any time.
11.4.Withholding of Taxes. The Company shall have the right, if necessary or
desirable (as determined by the Company), 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 withholding obligation with regard to any
Participant 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 instead
in cash by the Participant.
11.5. Listing and Other Conditions.
(a) 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 the
exercise of an Option 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
the exercise of an Option 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 shares of Common Stock, 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 11.5, any Option 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.
11.6.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 New York principles of conflict of laws).
<PAGE>
11.7.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.
11.8.Other Benefits. No Stock Option granted 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.
11.9.Costs. The Company shall bear all expenses included in administering this
Plan, including expenses of issuing Common Stock pursuant to the exercise
of any Options hereunder.
11.10. No Right to Same Benefits. The provisions of Options need not be the same
with respect to each Participant, and such Options to individual
Participants need not be the same in subsequent years.
11.11. 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.
11.12. 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 any applicable exemptive
condition under Rule 16b-3. To the extent applicable, 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. For purposes of this paragraph,
the Company shall be deemed publicly held when and if the Company has a
class of common equity securities registered under Section 12 of the
Exchange Act.
11.13. 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.
11.14. 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.
<PAGE>
ARTICLE XII.
EFFECTIVE DATE OF PLAN
The Plan shall take effect upon adoption by the Board, but the Plan
(and any grants of Options made prior to the shareholder approval mentioned
herein) shall be subject to the requisite approval of the shareholders of the
Company. In the absence of such approval, such Options shall be null and void.
ARTICLE XIII.
TERM OF PLAN
No Stock Option shall be granted pursuant to the Plan on or after the
tenth anniversary of the earlier of the date the Plan is adopted or the date of
shareholder approval, but Options granted prior to such tenth anniversary may
extend beyond that date.
ARTICLE XIV.
NAME OF PLAN
This Plan shall be known as the Lynch Interactive Corporation 2000
Stock Option Plan.
<PAGE>
NOT SENT TO SHAREHOLDERS WITH PROXY MATERIALS
LYNCH INTERACTIVE CORPORATION
PRINCIPAL EXECUTIVE BONUS PLAN
The purpose of this Plan is to provide certain Executive Officers of
the Lynch Interactive Corporation (the "Company") and certain other designated
key employees with an Annual Bonus (as defined below) that qualifies as
performance-based compensation under Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") or any successor section and the Treasury
regulations promulgated thereunder ("Section 162(m) of the Code"). Under the
Plan, certain Executive Officers and designated key employees of the Company may
participate in the Annual Bonus Pool (as defined below) if certain
preestablished performance goals are attained. This Plan is effective as of
January 1, 1997, subject to approval by the shareholders of the Company in
accordance with the laws of the State of Delaware.
1. Definitions. The following terms, as used herein, shall have the following
meanings:
(a) "Annual Bonus" shall mean, with respect to each Participant, the
product of the Participant's Individual Bonus Pool Percentage and the
achieved Annual Bonus Pool for any Plan Year.
(b) "Annual Bonus Pool" shall mean, with respect to each Plan Year, that
amount determined pursuant to an objective formula or standard that is
based on the attainment of preestablished performance goals specified
by the Committee in accordance with Section 4 hereof.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Committee" shall mean the Executive Compensation and Benefits
Committee of the Board, or such other committee of the Board comprised
solely of two (2) or more members who qualify as "outside directors"
within the meaning of Section 162(m) of the Code.
(e) "Individual Bonus Pool Percentage" shall mean, with respect to each
Participant, that percentage of the achieved Annual Bonus Pool, as
specified by the Committee in accordance with Section 4(b) hereof,
used to determine the Participant's Annual Bonus for any Plan Year.
(f) "Participant" shall mean the Chief Executive Officer of the Company
and any other key employee of the Company (including subsidiaries)
selected, in accordance with Section 3 hereof, to participate in the
Plan.
(g) "Plan Year" shall mean each calendar year during which the Plan is in
effect.
(h) "Pre-Tax Profits" shall mean the Company's income before income taxes,
(excluding any provision for annual bonuses under the Plan and under
the Bonus Plan applicable to other corporate employees), minority
interest (if any), extraordinary items (if any), cumulative changes in
accounting (if any) and discontinued operations (if any) contained in
the Statement of Consolidated Income in the Company's annual financial
statements adjusted by (i) the minority interest effects on such
pre-tax profits, and (ii) the pre-tax effect of income or loss
associated with discontinued operation net of minority interest
effects.
(i) "Shareholders Equity" shall mean the average of shareholders equity at
the beginning of the Plan Year and at the beginning of the two
preceding Plan Years, in each case as reported in the Company's
consolidated balance sheet in its annual financial statements (as
adjusted for the spin off by Lynch Corporation of the Company on
September 1, 1999).
2. Administration of the Plan. The Plan shall be administered by the
Committee. The Committee shall have exclusive and final authority in all
determinations and decisions affecting the Plan and each Participant. The
Committee shall also have the sole authority to interpret the Plan, to
designate eligible Participants in the Plan (other than the Chief Executive
Officer of the Company), to establish and revise rules and regulations
relating to the Plan, to delegate such responsibilities or duties as it
deems desirable, and to make any other determination that it believes
necessary or advisable for the administration of the Plan including, but
not limited to: (i) setting the performance criteria and the Individual
Bonus Pool Percentages within the Plan guidelines, and (ii) certifying
attainment of performance goals and other material terms. The Committee
shall have the authority in its sole discretion, subject to and not
inconsistent with the express provisions of the Plan, to incorporate
provisions in the performance goals allowing for adjustments in recognition
of unusual or non-recurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable laws,
regulations, or accounting principles; provided, that the Committee shall
have such authority solely to the extent permitted by Section 162(m) of the
Code. To the extent any provision of the Plan creates impermissible
discretion under Section 162(m) of the Code or would otherwise violate
Section 162(m) of the Code, such provision shall have no force or effect.
3. Eligibility and Participation.
(a) For each Plan Year, the Committee, in its sole discretion, may select
the Executive Officers and employees of the Company who are to
participate in the Plan from among the Executive Officers and key
employees of the Company.
(b) No person shall be entitled to an Annual Bonus under this Plan for any
Plan Year unless he or she is so designated as a Participant for that
Plan Year. The Committee may add 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
Section 162(m) of the Code.
4. Payment.
(a) With respect to each Participant, payment under the Plan will be made
in cash in an amount equal to the achieved Annual Bonus, as determined
by the Committee in its sole discretion for each Plan Year. Payment
with respect to a Plan Year shall be made only if and to the extent
the applicable performance goals upon which the Annual Bonus Pool is
based are attained. Notwithstanding anything else herein, the
Committee may, in its sole discretion, elect to pay any Participant an
amount that is less than (but in no event more than) his or her Annual
Bonus regardless of the degree of attainment of the performance goals
with respect to the Annual Bonus Pool.
(b) Not later than ninety (90) days after the commencement of each Plan
Year (or, in the event the period of service to which the performance
goal relates is shorter than a Plan Year, during such time period
required by Section 162(m) of the Code), the Committee shall establish
in writing all performance goals with respect to the Annual Bonus Pool
and the Individual Bonus Pool Percentages for each Participant for
such Plan Year. At the time the performance goals are established, the
Committee shall prescribe an objective formula or standard to
determine the amount of the Annual Bonus Pool which may be payable
based upon the degree of attainment of the performance goals during
the Plan Year. In no event may the total of the Individual Bonus Pool
Percentages for all Participants exceed one hundred percent (100%) of
the Annual Bonus Pool for any Plan Year.
(c) The performance goals with respect to the Annual Bonus Pool shall be
based on the attainment of certain target levels of, or a percentage
increase in, Pre-Tax Profits in excess of certain target levels or
percentages of Shareholders Equity. Notwithstanding the preceding
sentence, in no event shall any Participant's Annual Bonus for any
Plan Year exceed eighty percent (80%) of an amount equal to twenty
percent (20%) of the excess of (a) Pre-Tax Profits for such Plan Year
less (b) twenty-five percent (25%) of Shareholders Equity (the
"Maximum Annual Bonus"). Subject to Section 2 of the Plan regarding
certain adjustments, in connection with the establishment of the
performance goals, the performance criteria listed above for the
Company shall be determined in accordance with generally accepted
accounting principles consistently applied by the Company, but before
consideration of payments to be made pursuant to this Plan.
(d) Unless otherwise determined by the Committee in its sole discretion,
each Participant shall, to the extent the applicable performance goals
with respect to the Annual Bonus Pool are attained at the end of a
Plan Year, have the right to receive payment of a prorated portion of
such Participant's Annual Bonus under the Plan for any Plan Year
during which the Participant's employment with the Company is
terminated for any reason other than for "cause" (as determined by the
Committee in its sole discretion).
5. Time of Payment. Subject to Section 4 hereof, each Participant's Annual
Bonus under this Plan will be paid within a reasonable period after
performance goal achievements for the Plan Year have been finalized,
reviewed, approved, and certified in writing by the Committee.
6. Miscellaneous Provisions.
(a) Each Participant's rights and interests under the Plan may not be
sold, assigned, transferred, pledged or alienated.
(b) In the case of any Participant's death, payment, if any, under the
Plan shall be made to his designated beneficiary, or in the event no
beneficiary is designated or surviving, to the Participant's estate.
(c) Neither this Plan nor any action taken hereunder shall be construed as
giving any Participant the right to continue his employment with of
the Company.
(d) 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 made pursuant to the Plan.
(e) The Plan and any amendments thereto shall be construed, administered
and governed in all respects in accordance with the laws of the State
of Indiana (regardless of the law that might otherwise govern under
applicable principles of conflicts of law).
(f) The Plan is designed and intended to comply with Section 162(m) of the
Code with regard to awards made to each Participant and all provisions
hereof shall be limited, construed and interpreted in a manner to so
comply.
(g) The Board or the Committee may at any time and from time to time
alter, amend, suspend or terminate the Plan in whole or in part;
provided, that no amendment shall, without the prior approval of the
shareholders of the Company in accordance with the laws of the State
of Indiana to the extent required under Code Section 162(m): (i)
materially alter the performance goals as set forth in Section 4(c)
hereof, (ii) increase the Maximum Annual Bonus for any Plan Year,
(iii) change the class of persons eligible to participate in this
Plan, or (iv) implement any change to a provision of the Plan
requiring shareholder approval in order for the Plan to continue to
comply with the requirements of Code Section 162(m). Notwithstanding
the foregoing, no amendment shall affect adversely any of the rights
of any Participant, without such Participant's consent, under the
award theretofore granted under the Plan.
<PAGE>
LYNCH INTERACTIVE CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned shareholder of LYNCH INTERACTIVE CORPORATION (the
"Corporation") hereby appoints Robert E. Dolan and Robert A. Hurwich, or any one
of them (each with power to act alone and with power of substitution), Proxies
of the undersigned, with authority to vote at the Annual Meeting of Shareholders
of the Corporation to be held May 11, 2000 at 3:00 p.m., and at any adjournments
thereof, all the shares of Common Stock of the Corporation which the undersigned
would be entitled to vote if then personally present, upon the matters specified
below, and, in their discretion, upon such other matters that may properly come
before the Annual Meeting, and any adjournments thereof.
The shares represented by this Proxy shall be voted in accordance with
the instructions given by the shareholder, but if no instructions are given,
this Proxy will be voted FOR all of the nominees for Directors listed in Item 1,
FOR approval of the 2000 Stock Option Plan in Item 2, and FOR approval of the
Principal Executive Bonus Plan in Item 3 and, in the discretion of the Proxies,
with respect to any other matter that is properly brought before the Annual
Meeting.
(continued and to be signed on the reverse side)
<PAGE>
LYNCH INTERACTIVE CORPORATION
1. Election of Directors Duly Nominated:
FOR WITHHOLD Paul J. Evanson, John C. Ferrara, Mario J. Gabelli, David C.
Mitchell, Salvatore Muoio and Ralph R. Papitto. (INSTRUCTION: To withhold
authority to vote for one or more individual nominees, write such name or names
on the space provided below.)
2. Approval of the 2000 Stock Option Plan:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the Principal Executive Bonus Plan:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please sign exactly as your name appears on this Proxy. All
joint owners must sign. When acting as attorney, executor,
administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate
name by President or other authorized person. If a
partnership, please sign in full partnership name by
authorized person.
Dated:______________________________, 2000
_____________________________________(L.S.)
(Signature of Shareholder)
____________________________________(L.S.)
(Signature of Shareholder)
PLEASE DATE, SIGN AND MAIL THIS PROXY IN THE ENVELOPE
PROVIDED.
