<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement (Revised)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
THE CHERRY CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
THE CHERRY CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/ / Fee paid with Preliminary Filing
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
/ / 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:*
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how it
was determined.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
MN
THE CHERRY CORPORATION
3600 SUNSET AVENUE
WAUKEGAN, ILLINOIS 60087
708-662-9200
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 15, 1995
-----------------
To the Stockholders of
The Cherry Corporation:
Notice is hereby given that the annual meeting of stockholders of THE
CHERRY CORPORATION, a Delaware corporation, will be held at its corporate
offices, 3600 Sunset Avenue, Waukegan, Illinois, on Thursday, June 15, 1995,
at 4:00 p.m. local time, for the following purposes:
1. To elect seven directors of the Corporation to hold office for the
ensuing year.
2. To consider and act upon a proposal to approve the 1995 Stock Incentive
Plan.
3. To consider and act upon a proposal to approve the 1995 Nonemployee
Director Stock Option Plan.
4. To consider and transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 28, 1995,
as the record date for determination of the holders of shares of the
Corporation's outstanding Class B Common Stock entitled to notice of and to
vote at the annual meeting of stockholders. Each holder of Class B Common
Stock is entitled to one vote per share on all matters to be voted on at the
Annual Meeting.
By Order of the Board of Directors
[SIG]
DAN A. KING
SECRETARY
May 19, 1995
PLEASE DATE, SIGN AND MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED WHICH
REQUIRES NO POSTAGE FOR MAILING IN THE UNITED STATES. A PROMPT RESPONSE IS
HELPFUL, AND YOUR COOPERATION WILL BE APPRECIATED.
<PAGE>
THE CHERRY CORPORATION
3600 SUNSET AVENUE
WAUKEGAN, ILLINOIS 60087
708-662-9200
-------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 15, 1995
-----------------
VOTING INFORMATION
This Proxy Statement is being mailed to stockholders of The Cherry
Corporation (the "Company") on or about May 19, 1995, and is furnished in
connection with the Board of Directors' solicitation of proxies for the annual
meeting of stockholders to be held on June 15, 1995, for the purpose of
considering and acting upon the matters specified in the Notice of Annual
Meeting of Stockholders accompanying this Proxy Statement. If the form of proxy
which accompanies this Proxy Statement is executed and returned, it may be
revoked by the person giving it at any time prior to the voting thereof by
written notice to the Secretary, by delivery of a later dated proxy or by
requesting to vote in person at the meeting. Without extra compensation, certain
directors, officers and employees of the Company may make additional
solicitations in person or by telephone or telegraph. Expenses incurred in the
solicitation of proxies, including postage, printing and handling, and actual
expenses incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding documents to beneficial owners, will be paid by the Company.
The Company has two classes of common stock. They are Class A Common Stock,
par value $1.00 per share ("Class A Common Stock"), and Class B Common Stock,
par value $1.00 per share ("Class B Common Stock"). The holders of Class B
Common Stock are entitled to one vote per share upon each matter submitted to
the vote of the stockholders at this annual meeting. The holders of Class A
Common Stock will have no voting rights at this annual meeting.
For purposes of the meeting, a quorum means a majority of the outstanding
shares of Class B Common Stock. As of the close of business on April 28, 1995,
the record date for stockholders entitled to vote at the annual meeting, there
were outstanding 4,712,341 shares of Class B Common Stock, entitled to one vote
each. In determining whether a quorum exists at the meeting, all shares
represented in person or by proxy will be counted. A stockholder may, with
respect to the election of directors, (i) vote for the election of all named
director nominees, (ii) withhold authority to vote for all named director
nominees or (iii) vote for the election of all named director nominees other
than any nominee with respect to whom the stockholder withholds authority to
vote by so indicating in the appropriate space in the proxy. With respect to the
proposals to approve the 1995 Stock Incentive Plan and the 1995 Nonemployee
Director Stock Option Plan, a stockholder may (i) vote for the proposal, (ii)
vote against the proposal or (iii) abstain from voting. Proxies properly
executed and received by the Company prior to the meeting and not revoked will
be voted as directed therein on all matters presented at the meeting. In the
absence of a specific direction from the stockholder, proxies will be voted for
the election of all named director nominees, each to hold office until the next
annual meeting of stockholders or until his successor is duly elected and
qualified, and for the proposals to approve the stock plans.
Proxies relating to "street name" shares that are voted by brokers on some
but not all of the matters will be treated as shares present for purposes of
determining the presence of a quorum on all matters, but will be treated as
shares entitled to vote only as indicated below ("broker non-votes"). The
affirmative vote of the holders of a majority of the shares present in person or
by proxy at the meeting and entitled to vote is required in the election of
directors and with respect to the proposals for the stock plans. Withholding
authority to vote for a director nominee will in effect count as a vote against
the director nominee. Broker non-votes will have no effect on any proposal at
this annual meeting.
<PAGE>
The Board of Directors knows of no other matter which may come up for action
at the meeting. However, if any other matter properly comes before the meeting,
the persons named in the proxy form enclosed will vote in accordance with their
judgment upon such matter.
Stockholders wishing to include proposals in the Company's proxy statement
and form of proxy for the 1996 annual meeting must submit such proposals so that
they are received by the Secretary of the Company at its Waukegan address by no
later than January 22, 1996.
The Annual Report to stockholders for the fiscal year ended February 28,
1995, accompanies this Proxy Statement. Additional copies of the Annual Report
may be obtained by writing to the Secretary of the Company.
STOCK OWNERSHIP INFORMATION
The table below sets forth certain information as of April 28, 1995 with
respect to each person known by the Company to be the beneficial owner of more
than five percent of the outstanding shares of both classes of stock, each
director, each executive officer shown in the Summary Compensation Table and all
executive officers and directors as a group. Except as set forth below, the
address for such person or group is the Company's Waukegan office.
<TABLE>
<CAPTION>
CLASS A -- NONVOTING CLASS B -- VOTING
----------------------------------- -----------------------------------
NUMBER OF SHARES PERCENT OF NUMBER OF SHARES PERCENT OF
BENEFICIALLY RESPECTIVE BENEFICIALLY RESPECTIVE
NAME OWNED CLASS OWNED CLASS
- -------------------------------------------- -------------------- ------------- -------------------- -------------
<S> <C> <C> <C> <C>
Peter B. Cherry............................. 2,764,485(a)(b)(c) 36.5% 2,766,985(a)(b)(c) 58.5%
FMR Corporation............................. 664,100 8.8 624,200 13.2
82 Devonshire Street
Boston, MA 02109
Robert B. McDermott......................... 20,000 * 21,000 *
Alfred S. Budnick........................... 15,708 (c) * 16,188 (c) *
Grant T. Hollett, Jr........................ 12,750 (c) * 13,010 (c) *
Klaus D. Lauterbach......................... 11,256 (c) * 11,256 (c) *
Dan A. King................................. 8,747 (c) * 9,247 (c) *
Walter L. Cherry............................ 2,522 (c) * 2,522 (c) *
Thomas L. Martin, Jr........................ 2,200 * 2,200 *
Charles W. Denny............................ 1,000 * -- --
Peter A. Guglielmi.......................... -- -- -- --
All Executive Officers and Directors
as a Group (10 persons)................... 2,838,668 (c) 37.5 2,842,408 (c) 60.1
<FN>
- ---------
* Less than 1%
(a) The table includes 397,727 shares of Class A and Class B Common Stock held
by trusts for the benefit of Catherine C. Moore, of which Peter B. Cherry
and Virgina B. Cherry (his mother) are trustees with the power to vote the
Common Stock and to make dispositions. Mrs. Cherry and Mr. Cherry disclaim
beneficial ownership.
(b) The table includes 47,911 shares of Class A and Class B Common Stock held
by Mr. Cherry's wife as trustee for their children, as to which shares Mr.
Cherry disclaims beneficial ownership.
(c) The total number of shares of Class A Common Stock of the Company for
officers and directors includes shares held under options exercisable
within 60 days as follows: Walter L. Cherry, 2,000; Peter B. Cherry, 2,000;
Alfred S. Budnick, 4,500; Grant T. Hollett, Jr., 4,834; Dan A. King, 3,334
and Klaus D. Lauterbach, 317.
The total number of shares of Class B Common Stock of the Company for
officers and directors includes shares held under options exercisable
within 60 days as follows: Walter L. Cherry, 2,000; Peter B. Cherry, 2,000;
Alfred S. Budnick, 4,500; Grant T. Hollett, Jr., 4,834; Dan A. King, 3,334
and Klaus D. Lauterbach, 317.
</TABLE>
2
<PAGE>
ELECTION OF DIRECTORS
At the annual meeting of stockholders, seven directors, constituting the
entire Board of Directors of the Company, are to be elected to hold office until
the next annual meeting of stockholders or until their successors are duly
elected and qualified. Unless otherwise indicated on the proxy form, it is
intended that the proxies will be voted for the nominees listed below. It is
expected that these nominees will serve, but, if for any unforeseen cause any
such nominee should decline or be unable to serve, the proxies will be voted to
fill any vacancy so arising in accordance with the discretionary authority of
the persons named in the proxies unless otherwise indicated on the proxy form.
NOMINEES
The following information concerning the nominees has been furnished by the
nominees:
<TABLE>
<CAPTION>
FIRST
PRINCIPAL OCCUPATION YEAR
DURING LAST FIVE YEARS ELECTED
NAME AGE AND OTHER DIRECTORSHIPS DIRECTOR
- --------------------------- ----------- -------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Peter B. Cherry............ 47 Chairman of the Board (1992) and President, 1982 and Chief Executive 1977
Officer, 1986.
Walter L. Cherry........... 78 Development Engineer as of January 10, 1992, formerly Chairman of 1953
the Board and (prior to 1986) Chief Executive Officer.
Alfred S. Budnick.......... 57 Vice President of the Company and President of Cherry Semiconductor 1977
Corporation.
Thomas L. Martin, Jr....... 73 President Emeritus of Illinois Institute of Technology. 1979
Robert B. McDermott........ 67 Consultant, formerly partner, law firm of McDermott, Will & Emery; 1982
Mr. McDermott is also a director of Maynard Oil Company.
Peter A. Guglielmi......... 52 Director, Tellabs Inc. (voice and data communications equipment 1993
manufacturer) and President, Tellabs International, Inc. (1993),
and Chief Financial Officer, Tellabs, Inc. (1988).
Charles W. Denny........... 59 President and Chief Executive Officer, Schneider North America 1993
(1992) and President and Chief Operating Officer, Square D Company
(electrical distribution and industrial control products
manufacturer) (1992) and (prior to 1992) Executive Vice President.
Mr. Denny is also a director of Woodhead Industries, Inc.
<FN>
- ------------------------
Because of his equity interest in the Company, Mr. Peter B. Cherry may be
deemed a "control person" as that term is used under regulations of the
Securities and Exchange Commission.
</TABLE>
3
<PAGE>
COMPENSATION
The following table sets forth the cash and noncash compensation for each of
the last three fiscal years awarded to or earned by the Chief Executive Officer
and the four other most highly compensated executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
---------------
NUMBER OF
SHARES
UNDERLYING
ANNUAL COMPENSATION (1) STOCK ALL OTHER
--------------------------------- OPTIONS (3) COMPENSATION (2)
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (#) ($)
- --------------------------------------------- --------- ---------- ---------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
Peter B. Cherry 1995 $ 348,508 $ 80,000 -- $ 7,659
Chairman of the Board 1994 301,111 50,000 -- 10,743
and President 1993 228,711 -- -- 6,659
Alfred S. Budnick 1995 216,300 203,518 -- 5,835
Vice President of the Company 1994 206,250 126,920 -- 7,356
and President of a Subsidiary 1993 192,506 89,408 1,000 6,665
Klaus D. Lauterbach 1995 346,071 48,566 -- --
Vice President of the Company 1994 286,527 23,728 -- --
and General Manager of a 1993 282,911 33,843 950 --
Subsidiary
Grant T. Hollett, Jr. 1995 243,023 28,100 -- 7,662
Vice President of the Company 1994 216,273 66,200 -- 9,314
and President of a Division 1993 201,639 61,176 1,500 5,754
Dan A. King 1995 148,294 41,325 -- 7,035
Treasurer, Secretary and 1994 128,579 31,100 -- 5,362
Corporate Controller 1993 106,817 21,600 1,000 3,056
<FN>
- ---------
(1) Table excludes perquisites as amounts received do not exceed the lesser of
$50,000 or 10% of any of the named officers salary and bonus.
(2) Represents Company contributions under 401(k) and profit sharing plans.
(3) The Company did not grant any stock options in fiscal 1995.
</TABLE>
4
<PAGE>
The following table sets forth certain information with respect to options
exercised by the Chief Executive Officer and the four most highly compensated
executive officers of the Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES (2)
<TABLE>
<CAPTION>
NUMBER OF
SHARES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
VALUE OPTIONS AT MONEY OPTIONS AT
REALIZED FY-END (#) FY-END ($)
SHARES ACQUIRED ($) EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) (1) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------------------------- ----------------- ----------- ------------- -------------------
<S> <C> <C> <C> <C>
Peter B. Cherry...................... 0 $ 0 2,000/0 $44,500/$0
Alfred S. Budnick.................... 4,500 92,250 4,167/333 $90,838/$5,161
Klaus D. Lauterbach.................. 1,317 27,255 0/317 $ 0/$4,913
Grant T. Hollett, Jr................. 0 0 4,334/500 $92,182/$7,750
Dan A. King.......................... 0 0 3,000/334 $64,005/$5,177
<FN>
- ---------
(1) Value is calculated based on the difference between the option exercise
price and the closing market price of the Common Stock on the date of
exercise or end of fiscal 1995 multiplied by the applicable number of
shares.
(2) Pursuant to the anti-dilution provisions of The Cherry Corporation's 1982
Stock Option Plan, upon the Company's stock dividend effected on July 14,
1994, all options outstanding with respect to shares of Common Stock held
by the above executive officers became exercisable for the same number of
shares of Class B Common Stock and an equivalent number of shares of Class
A Common stock for no additional consideration.
</TABLE>
BOARD OF DIRECTORS
The Board of Directors held four meetings in fiscal 1995. All directors were
present for all the meetings. Non-employee directors are paid an annual fee of
$15,000, plus $1,500 for each meeting they attend. Employee directors receive no
compensation as such.
The Board of Directors has an Audit Committee and a Compensation Committee,
each composed of all of the non-employee directors. The Committee Chairman
receives $1,500 and the other members receive $500 for each meeting held. The
Audit Committee held two meetings and the Compensation Committee held three
meetings in fiscal 1995. The Board has no Nominating Committee.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL AGREEMENTS
Pursuant to an agreement dated May 26, 1992 between Cherry Semiconductor
Corporation (CSC) and Mr. Budnick, CSC has agreed to compensate Mr. Budnick if
he is terminated within 5 years subsequent to a change in control of CSC. The
agreement provides for a payment of between one to three times Mr. Budnick's
annual salary depending upon the amount of time which has lapsed subsequent to
the change in control. In general, a change of control occurs if CSC is sold.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for the
Company's executive compensation policies. It annually determines the
compensation to be paid to the executive officers of the Company. The Committee
is composed of outside directors.
OVERVIEW AND PHILOSOPHY
The executive compensation program is intended to provide overall levels of
compensation for the executive officers which are competitive for the industries
and the geographic areas within which they operate, the individual's experience,
and contribution to the long-run success of the Company. The Russell
5
<PAGE>
3000 (see Performance Graph) includes companies that operate in the industries
which the Committee considers. The Compensation Committee believes that services
of great value to the Company and its stockholders can be rendered in periods of
business adversity as well as in good times. The Committee believes that its
task of determining fair and competitive compensation is ultimately judgmental,
even though formulas are used to some extent as described below.
The program is composed of base salary, annual incentive compensation, and
other benefits generally available to all employees. As of February 28, 1995,
incentive stock options on 106,800 shares of the Company's stock were
outstanding but no options were granted during the fiscal year then ended.
BASE SALARY
The base salary for each executive is established to be competitive with
companies in the industries and geographic areas in which the Company competes.
Surveys from outside firms and consultants are used to help determine what is
competitive. In making annual adjustments to base salary, the Committee also
considers the individual's attainment of personal management objectives which
are ordinarily established at the beginning of the year, as well as any other
information which may be available as to the value of the particular
individual's past and prospective future services to the Company. This
information includes comments and performance evaluations by the Company's Chief
Executive Officer. The Committee considers all such data; it does not prescribe
the relative weight to be given to any particular component of such data.
ANNUAL INCENTIVE COMPENSATION
Annual incentive compensation is largely determined by formulas in different
plans for each subsidiary or division of the Company. In all cases a major
component is dependent upon the subsidiary's or division's earnings. That
portion of the annual incentive not determined by formula is set by measuring
achievement of financial goals -- such as cash flow, working capital management,
and capital expenditures -- and other goals which ordinarily are established at
the beginning of the year.
LONG-TERM INCENTIVES
Incentive stock options were granted to executives in earlier years (but not
in fiscal 1995) because they directly relate the executive's earnings to the
stock price appreciation realized by the Company's stockholders over the option
period. Stock options also provide executives the opportunity to acquire an
ownership interest in the Company. The number of shares covered by each
executive's option was determined by factors similar to those considered in
establishing base salary.
The capability to grant new incentive stock options under the Stock Option
Plan expired in June 1992. As a result, the Committee may grant only
non-qualified stock options. No such options were granted in fiscal 1995. To
keep pace with changing developments in management compensation and make the
Company competitive with those companies that offer stock incentives to key
management employees, the Company is seeking stockholder approval of a new stock
incentive plan. See pages 9-11 for more information concerning this plan.
In general, the Committee has believed that stock options should form an
important but secondary part of an executive's total compensation package,
partly because the price of the Company's stock may be subject, during the term
of the option, to competitive and other factors over which a particular
executive may have little or no control.
OTHER
Other benefits are generally those available to all other employees in the
Company, or a subsidiary, as appropriate. Together with perquisites, these
benefits did not exceed 10% of any executive's combined salary and bonus in
fiscal 1995.
COMPENSATION FOR THE PRESIDENT (CHIEF EXECUTIVE OFFICER)
The Committee applies the same standards in establishing the compensation of
the Company's Chief Executive Officer as are used for other executives. However,
there are several procedural differences. The Chief Executive Officer does not
participate in setting the amount and nature of his compensation. Peter
6
<PAGE>
Cherry received a cash bonus of $80,000 based on the Company's performance in
fiscal year 1995 and his individual contribution to the Company. The bonus was
determined in its discretion by the Committee. In arriving at its decision, the
Committee considered the Company's earnings before interest and taxes as a
percent of average investment for the year, Mr. Cherry's work in the development
of competitive strategies for the Company's business and his personal
leadership. No specific weight was assigned to any of these elements.
The Committee does not expect that Section 162(m) of the Internal Revenue
Code will limit the deductibility of compensation expected to be paid by the
Company in the foreseeable future.
This report is submitted by the Compensation Committee of the Board of
Directors:
Robert B. McDermott, Chairman
Charles W. Denny
Peter A. Guglielmi
Thomas L. Martin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert McDermott was formerly a partner in the law firm of McDermott, Will &
Emery which provides legal services to the Company on a regular basis.
Walter L. Cherry, a Director of the Company, is an employee of the Company
and received $106,000 in fiscal 1995 for his services as an employee.
7
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in the
Company's cumulative total stockholder return on its Common Stock with the
cumulative total return of the Russell 3000 and the Russell 3000 Electrical
Equipment Industry indices for the period of five years commencing March 1, 1990
and ending February 28, 1995.
[CHART]
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
The Cherry Corporation 100.0 73.6 133.1 388.8 348.5 431.3
Russell 3000 100.0 113.6 135.4 149.9 164.5 174.3
Russell 3000 Electrical Equipment Industry 100.0 111.3 134.6 152.8 166.0 186.1
<FN>
- ---------
(1) On March 1, 1990, the only publicly-traded equity security of the Company
was The Cherry Corporation Common Stock ("Prior Common Stock"). Effective
July 12, 1994, the Prior Common Stock was reclassified into Class B Common
Stock and effective July 14, 1994, a 100% stock dividend of Class A Common
Stock was paid to the holders of the Prior Common Stock. For periods in
which more than one class of common stock was outstanding, performance data
is based upon a weighted average of the return of each class.
(2) The Company has selected the Russell 3000 Electrical Equipment Industry as
one comparison of total stockholder return. The Company is included in this
industry index and believes that it provides a comparison as prescribed by
the Securities and Exchange Commission requirements. This industry index is
only computed quarterly on a calendar year basis and therefore the indices
shown above for this industry are as of March 31 of the respective years.
Although the Company's total return is based upon its fiscal year end of
the last day of February, it believes that any difference that may result
is not material.
(3) The stock price performance shown on the graph above is not necessarily
indicative of future price performance.
</TABLE>
8
<PAGE>
PROPOSAL TO APPROVE THE CHERRY CORPORATION
1995 STOCK INCENTIVE PLAN
BACKGROUND
The Board of Directors is proposing for stockholder approval The Cherry
Corporation 1995 Stock Incentive Plan (the "Plan"). The purpose of the Plan is
to enable the Company to offer officers and other key employees of the Company
and its subsidiaries performance-based incentives and other equity interests in
the Company, thereby attracting, retaining and rewarding such employees and
strengthening the mutuality of interests between such employees and the
Company's stockholders. Reference should be made to Exhibit A for a complete
statement of the provisions of the Plan which are summarized below.
In structuring the Plan, the Board of Directors sought to provide for a
variety of awards that could be flexibly administered to carry out the purposes
of the Plan. This authority will permit the Company to keep pace with changing
developments in management compensation and make the Company competitive with
those companies that offer creative incentives to attract and keep key
management employees. The flexibility of the Plan will allow the Company to
respond to changing circumstances such as changes in tax laws, accounting rules,
securities regulations and other rules regarding benefit plans. The Plan grants
the administrators discretion in establishing the terms and restrictions deemed
appropriate for particular awards as circumstances warrant.
SHARES AVAILABLE
The Plan makes available for awards 900,000 shares of Class A Common Stock,
plus all shares remaining under the Company's 1982 Stock Option Plan
(approximately 131,000 shares). All of such shares may, but need not, be issued
pursuant to the exercise of incentive stock options. The maximum number of
shares which may be awarded to any participant in any year during the term of
the Plan is 90,000 shares. If there is a lapse, expiration, termination or
cancellation of any option or right prior to the issuance of shares or the
payment of the cash equivalent thereunder, or if shares are issued and
thereafter are reacquired by the Company pursuant to rights reserved upon
issuance thereof, those shares may again be used for new awards under the Plan.
ADMINISTRATION
The Plan provides for administration by a committee (the "Committee"), to be
comprised of either the Compensation Committee of the Board or another committee
designated by the Board. Among the Committee's powers are the authority to
interpret the Plan, establish rules and regulations for its operation, select
officers and other key employees of the Company and its subsidiaries to receive
awards, and determine the form, amount and other terms and conditions of awards.
The Committee also has the power to modify or waive restrictions on awards, to
amend awards and to grant extensions and accelerations of awards.
ELIGIBILITY OF PARTICIPATION
Officers and other key employees of the Company or any of its subsidiaries
are eligible to participate in the Plan. The selection of participants from
eligible employees is within the discretion of the Committee. The number of
employees who are eligible to participate in the Plan on a regular basis is
approximately 75 but initially on the start up of the Plan the number is
estimated to be 200.
TYPES OF AWARDS
The Plan provides for the grant of any or all of the following types of
awards: (1) stock options, including incentive stock options and non-qualified
stock options; (2) stock appreciation rights; and (3) stock awards, including
restricted stock. Awards may be granted singly, in combination, or in tandem as
determined by the Committee.
STOCK OPTIONS
Under the Plan, the Committee may grant awards in the form of options to
purchase shares of the Class A Common Stock. The Committee will, with regard to
each stock option, determine the number of shares subject to the option, the
manner and time of the option's exercise and vesting, and the exercise price per
share of stock subject to the option. The exercise price of a stock option will
not be less than 100 percent
9
<PAGE>
of the fair market value of the Class A Common Stock on the date the option is
granted. The option price may, at the discretion of the Committee, be paid by a
participant in cash, shares of Class A or Class B Common Stock owned by the
participant for at least six months, or a combination thereof or such other
consideration as the Committee may deem appropriate.
STOCK APPRECIATION RIGHTS (SARS)
The Plan authorizes the Committee to grant an SAR either in tandem with a
stock option or independent of a stock option. An SAR is a right to receive a
payment equal to the appreciation in market value of a stated number of shares
of Class A Common Stock from the exercise price to the market value on the date
of its exercise.
A tandem SAR may be granted either at the time of the grant of the related
stock option or at any time thereafter during the term of the stock option. Upon
the exercise of a stock option as to some or all of the shares covered by the
award, the related tandem SAR will be cancelled automatically to the extent of
the number of shares acquired through the stock option exercise.
STOCK AWARDS
The Plan authorizes the Committee to grant awards in the form of restricted
or unrestricted shares of Class A Common Stock. Such awards will be subject to
such terms, conditions, restrictions, and/or limitations, if any, as the
Committee deems appropriate including, but not by way of limitation,
restrictions on transferability, continued employment and performance goals
established by the Committee over a designated period of time. No more than
180,000 shares may be issued as stock awards not based on performance goals
during the term of the Plan.
OTHER TERMS OF AWARDS
The Plan provides that awards shall not be transferable otherwise than by
will or the laws of descent and distribution. The Committee shall determine the
treatment to be afforded to a participant in the event of termination of
employment for any reason including death, disability or retirement.
Notwithstanding the foregoing, the Committee may permit the transferability of
an award by a participant to members of the participant's immediate family or
trusts or family partnerships for the benefit of such person.
Upon the grant of any award, the Committee may, by way of an award notice or
otherwise, establish such other terms, conditions, restrictions and/or
limitations covering the grant of the award as are not inconsistent with the
Plan. No award of an incentive stock option shall be made more than ten years
after the date of adoption of the plan by the Board of Directors May 2, 1995.
The Board of Directors reserves the right to amend, suspend or discontinue the
Plan at any time, subject to the rights of participants with respect to any
outstanding awards.
The Plan contains provisions for equitable adjustment of awards in the event
of a merger, consolidation, or reorganization, or issuance of shares by the
Company without new consideration.
FEDERAL TAX TREATMENT
Under current law, the following are U.S. federal income tax consequences
generally arising with respect to awards under the Plan.
A participant who is granted an incentive stock option does not recognize
any taxable income at the time of the grant or at the time of exercise.
Similarly, the Company is not entitled to any deduction at the time of grant or
at the time of exercise. If the participant makes no disposition of the shares
acquired pursuant to an incentive stock option before the later of two years
from the date of grant and one year from the date of exercise, any gain or loss
realized on a subsequent disposition of the shares will be treated as a
long-term capital gain or loss. Under such circumstances, the Company will not
be entitled to any deduction for federal income tax purposes.
A participant who is granted a non-qualified stock option will not have
taxable income at the time of grant, but will have taxable income at the time of
exercise equal to the difference between the exercise price of the shares and
the market value of the shares on the date of exercise. The Company is entitled
to a tax deduction for the same amount.
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The grant of an SAR will produce no U.S. federal tax consequences for the
participant of the Company. The exercise of an SAR results in taxable income to
the participant, equal to the difference between the exercise price of the
shares and the market price of the shares on the date of exercise, and a
corresponding tax deduction to the Company.
A participant who has been granted an award of restricted shares of Class A
Common Stock will not realize taxable income at the time of the grant, and the
Company will not be entitled to a tax deduction at the time of the grant, unless
the participant makes an election to be taxed at the time of the award. When the
restrictions lapse, the participant will recognize taxable income in an amount
equal to the excess of the fair market value of the shares at such time over the
amount, if any, paid for such shares. The Company will be entitled to a
corresponding tax deduction.
The grant of an unrestricted stock award will produce immediate tax
consequences for both the participant and the Company. The participant will be
treated as having received taxable compensation in an amount equal to the then
fair market value of the Class A Common Stock awarded. The Company will receive
a corresponding tax deduction.
OTHER INFORMATION
No awards have been granted under the Plan. The awards to be granted under
the Plan in fiscal 1996 are not determinable. No stock options were granted to
employees (including the executive officers named under "Executive
Compensation") in fiscal 1995 under the Company's 1982 Stock Option Plan.
As of May 15, 1995, the closing price of the Company's Class A Common Stock
was $13.50.
The affirmative vote of holders of a majority of the shares represented and
entitled to vote at the meeting is required for approval of the Plan.
Abstentions will count as a vote against the proposal, but broker nonvotes will
have no effect.
The Board of Directors recommends a vote "FOR" approval of The Cherry
Corporation 1995 Stock Incentive Plan.
PROPOSAL TO APPROVE THE CHERRY CORPORATION
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
BACKGROUND
The Board of Directors is proposing for stockholder approval The Cherry
Corporation 1995 Nonemployee Director Stock Plan (the "Plan"). The purpose of
the Plan is to enable the Company to attract and retain outstanding individuals
to serve as members of the Board of Directors by providing such persons
opportunities to acquire shares of Class A Common Stock of the Company, thereby
strengthening the mutuality of interests between such persons and the Company's
stockholders. Reference should be made to Exhibit B for a complete statement of
the provisions of the Plan which are summarized below.
DESCRIPTION OF PLAN
The Plan reserves 100,000 shares of Class A Common Stock for automatic
grants of nonqualified stock options to members of the Board of Directors who
are not officers or employees of the Company or its subsidiaries (a "Nonemployee
Director"). The Board of Directors is responsible for the Plan's implementation
but may not exercise any discretion concerning its administration. Subject to
approval of the Plan by the stockholders of the Company, each Nonemployee
Director in office on adjournment of the Annual Meeting, that is June 15, 1995,
will automatically receive a nonqualified stock option to purchase the number of
whole shares of Class A Common Stock equal to the amount of the Nonemployee
Director's annual retainer ($15,000) divided by the fair market value of a share
of Class A Common Stock on June 15, 1995. Thereafter, each Nonemployee Director
in office on adjournment of each subsequent annual meeting of stockholders will
receive a stock option using the formula described above except that the fair
market value of a share of Class A Common Stock will be determined on the date
of such subsequent annual meeting.
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OTHER TERMS OF OPTION GRANTS
Each option is granted for a term of ten years and becomes exercisable
one-third on the first anniversary of grant and one-third on each anniversary
thereafter. The Option Price may be paid in cash or by delivery of Class A or
Class B Common Stock owned by the Nonemployee Director for at least six months
valued at fair market value on the date of exercise. For all purposes, fair
market value is defined as the closing price of the Class A or Class B Common
Stock, as the case may be, as reported on NASDAQ National Market System (or such
other consolidated transaction reporting system on which such Common Stock is
primarily traded) for such day, or if such Common Stock was not traded on such
day, then the next preceding day on which the stock was traded, all as reported
by such source as the Board of Directors may select.
No option granted under the Plan shall be transferable by a Nonemployee
Director, otherwise than by will or, if the Nonemployee Director dies intestate,
by the laws of descent and distribution. All options shall be exercisable during
the Nonemployee Director's lifetime only by the Nonemployee Director or his
legal representative. Notwithstanding the foregoing, an option will
automatically become transferable to the Nonemployee Director's immediate family
or trusts or family partnerships for the benefit of such persons if and to the
extent the Securities and Exchange Commission removes the transferability
restrictions from its rules. In the event of a Nonemployee Director's death or
retirement prior to the exercise of any options which were then exercisable,
such options may be exercised within one year after the Nonemployee Director's
death or within two years after such person's retirement.
The Board of Directors of the Company may suspend or terminate the Plan at
any time. The Board of Directors may also amend the Plan from time to time in
such respects as the Board of Directors may deem advisable. No such amendment
shall be made, however, that would disqualify the Plan, or any other plan of the
Company intended to be so qualified, from the exemption provided by Rule 16b-3
under the Securities Exchange Act of 1934.
The Plan contains provisions for automatic adjustment of awards in the event
of a merger, consolidation, or reorganization, or issuance of shares by the
Company without new consideration.
FEDERAL TAX TREATMENT
The options granted under the Plan will not qualify for the special tax
treatment accorded to "incentive stock options" under Section 422 of the
Internal Revenue Code. Although a Nonemployee Director will not recognize income
at the time of the grant of the option, he will recognize ordinary income upon
the exercise of an option in an amount equal to the excess of the fair market
value of the stock on the date of exercise of the option over the amount of cash
paid for the stock.
As a result of the optionee's exercise of an option, the Company will be
entitled to deduct as compensation an amount equal to the amount included in the
optionee's gross income. The Company's deduction will be taken in the Company's
taxable year in which the option is exercised.
OTHER INFORMATION
If all nominees are elected at the 1995 Annual Meeting, there will be four
Nonemployee Directors who will automatically receive stock options under the
Plan. Using the closing price set forth below, each director will receive an
option for 1,111 shares (a total of 4,444) of Class A Common Stock.
As of May 15, 1995, the closing price of the Company's Class A Common Stock
was $13.50.
The affirmative vote of holders of a majority of the shares represented and
entitled to vote at the meeting is required for approval of the Plan.
Abstentions will count as a vote against the proposal, but broker nonvotes will
have no effect.
The Board of Directors recommends a vote "FOR" approval of The Cherry
Corporation 1995 Nonemployee Director Stock Option Plan.
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ACCOUNTING INFORMATION
Selection of the independent auditors is made by the Board of Directors upon
consultation with the Audit Committee. The Company's independent auditors for
the fiscal year ended February 28, 1995 were Arthur Andersen LLP. The Board of
Directors will vote upon the selection of auditors for the current fiscal year
at a future Board meeting. Arthur Andersen LLP is expected to have
representatives at the annual meeting of stockholders who will be available to
respond to appropriate questions at that time and have an opportunity to make a
statement if they desire to do so.
By Order of the Board of Directors
DAN A. KING
SECRETARY
May 19, 1995
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EXHIBIT A
THE CHERRY CORPORATION
1995 STOCK INCENTIVE PLAN
1. PURPOSE. The Cherry Corporation, a Delaware corporation (the
"Company"), hereby adopts the 1995 Stock Incentive Plan (the "Plan"). The
purpose of the Plan is to enable the Company to offer officers and other key
employees of the Company and its subsidiaries performance-based incentives and
other equity interests in the Company, thereby attracting, retaining and
rewarding such employees and strengthening the mutuality of interest between the
employees and the Company's stockholders.
2. ADMINISTRATION. The Plan shall be administered by a committee (the
"Committee") which shall be the Compensation Committee of the Board of Directors
or another committee consisting of not less than two directors of the Company
appointed by the Board of Directors, none of whom shall be eligible to
participate in the Plan and all of whom shall qualify as disinterested persons
within the meaning of Securities and Exchange Commission Rule 16b-3 or any
successor regulation. The Committee may delegate to the Chief Executive Officer
of the Company the administration of benefits granted to non-officer
participants.
3. ELIGIBILITY. Benefits under the Plan shall be granted only to officers
and other key employees of the Company and its subsidiaries selected initially
and from time-to-time thereafter by the Committee on the basis of the special
importance of their services in the management, development and operations of
the Company and its subsidiaries. For these purposes, any corporation,
partnership or other entity in which the Company has a significant financial
interest may qualify as a subsidiary.
4. BENEFITS. The benefits awarded under the Plan shall consist of (a)
stock options, (b) stock appreciation rights, and (c) stock awards.
5. SHARES RESERVED. There is hereby reserved for issuance under the Plan
an aggregate of 900,000 shares of Class A Common Stock of the Company which may
be authorized but unissued or treasury shares plus any shares of Class A Common
Stock remaining under the Company's 1982 Stock Option Plan. All of such shares
may, but need not, be issued pursuant to the exercise of incentive stock
options. The maximum number of shares which may be awarded to any participant in
any fiscal year during the term of the Plan is 90,000 shares. No more than
180,000 shares may be issued as stock awards during the term of the Plan. If
there is a lapse, expiration, termination or cancellation of any option prior to
the issuance of shares thereunder or if shares are issued and thereafter are
reacquired by the Company pursuant to rights reserved upon issuance thereof,
those shares may again be used for new awards under the Plan.
6. STOCK OPTIONS. Stock options shall consist of options to purchase
shares of Class A Common Stock of the Company and shall be either incentive
stock options (within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, or any successor legislation) or non-qualified stock options
as determined by the Committee. The option price shall be not less than 100% of
the fair market value of the shares on the date the option is granted and the
price may be paid by check or, in the discretion of the Committee, by the
delivery (or certification of ownership) of shares of Class A or Class B Common
Stock of the Company then owned by the participant. The Committee may also allow
exercise by any other means (including cashless exercise as permitted under
Federal Reserve Board's Regulation T) which the Committee determines to be
consistent with the Plan's purpose and applicable law.
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; provided,
however, that no stock option shall be exercisable prior to six months after the
option grant date nor later than ten years after the grant date. In the event of
termination of employment, all stock options shall terminate at such times and
upon such conditions as the Committee shall, in its discretion, set forth in
such options at the date of grant. The aggregate fair market value (determined
as of the time the option is granted) of the shares of Class A Common Stock with
respect to which incentive stock options are exercisable for the first time by a
participant during any calendar year (under all option plans of the Company and
its subsidiaries) shall not exceed $100,000. The Committee may provide, either
at the time of grant or subsequently, that a stock option include the right to
acquire a
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replacement stock option upon exercise of the original stock option (in whole or
in part) prior to termination of employment of the participant and through
payment of the exercise price in shares of Class A or Class B Common Stock. The
terms and conditions of a replacement option shall be determined by the
Committee in its sole discretion.
7. STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted to
the holder of any stock option granted hereunder. In addition, stock
appreciation rights may be granted independently of and without relation to
options. Each stock appreciation right shall be subject to such terms and
conditions consistent with the Plan as the Committee shall impose from time to
time, including the following:
(a) A stock appreciation right may be granted with respect to a stock
option at the time of its grant or at any time thereafter up to six months
prior to its expiration.
(b) Each stock appreciation right will entitle the holder to elect to
receive the appreciation in the fair market value of the shares subject
thereto up to the date the right is exercised. In the case of a right issued
in relation to a stock option, such appreciation shall be measured from not
less than the option price and in the case of a right issued independently
of any stock option, such appreciation shall be measured from not less than
the fair market value of the Class A Common Stock on the date the right is
granted. Payment of such appreciation shall be made in cash or in Class A
Common Stock, or a combination thereof, as set forth in the award, but no
stock appreciation right shall entitle the holder to receive, upon exercise
thereof, more than the number of shares of Class A Common Stock (or cash of
equal value) with respect to which the right is granted.
(c) Each stock appreciation right will be exercisable at the times and
to the extent set forth therein, but no stock appreciation right may be
exercisable prior to six months after the grant date nor later than ten
years after the grant date. Exercise of a stock appreciation right shall
reduce the number of shares issuable under the Plan (and the related option,
if any) by the number of shares with respect to which the right is
exercised; provided, however, that the exercise of any stock appreciation
right granted independently of an option for cash only shall not reduce the
number of shares issuable under the Plan.
8. STOCK AWARDS. Stock awards will consist of Class A Common Stock
transferred to participants without other payment therefor as additional
compensation for their services to the Company or one of its subsidiaries. A
stock award shall be subject to such terms and conditions as the Committee
determines appropriate including, without limitation, restrictions on the sale
or other disposition of such shares, the right of the Company to reacquire such
shares upon termination of the participant's employment within specified periods
and conditions requiring that the shares be earned in whole or in part upon the
achievement of performance goals established by the Committee over a designated
period of time. The goals established by the Committee may include earnings per
share, total return on stockholder equity, or such other goals as may be
established by the Committee in its discretion.
9. NONTRANSFERABILITY. Stock options and other benefits granted under the
Plan shall not be transferable other than by will or the laws of descent and
distribution and each stock option and stock appreciation right shall be
exercisable during the participant's lifetime only by the participant or the
participant's guardian or legal representative. Notwithstanding the foregoing,
at the discretion of the Committee, an award of a benefit may permit the
transfer of the benefit by the participant solely to members of the
participant's immediate family or trusts or family partnerships for the benefit
of such persons subject to such terms and conditions as may be established by
the Committee.
10. OTHER PROVISIONS. The award of any benefit under the Plan may also be
subject to other provisions (whether or not applicable to the benefit awarded to
any other participant) as the Committee determines appropriate, including such
provisions as may be required to comply with federal or state securities laws
and stock exchange requirements and understandings or conditions as to the
participant's employment.
11. FAIR MARKET VALUE. The fair market value of the Company's Class A
Common Stock at any time shall be determined in such manner as the Committee may
deem equitable or as required by applicable law or regulation.
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12. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued shares
of Class A Common Stock without new consideration to the Company (such as by
stock dividend or stock split), the total number of shares reserved for
issuance under the Plan and the number of shares covered by each outstanding
benefit shall be adjusted so that the aggregate consideration payable to the
Company, if any, shall not be changed.
(b) Notwithstanding any other provision of the Plan, and without
affecting the number of shares reserved or available hereunder, the Board of
Directors may authorize the issuance or assumption of benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
(c) In the event of any merger, consolidation or reorganization of the
Company with any other corporation, there shall be substituted, on an
equitable basis as determined by the Committee, for each share of Class A
Common Stock then reserved for issuance under the Plan and for each share of
Class A Common Stock then subject to a benefit granted under the Plan, the
number and kind of shares of stock, other securities, cash or other property
to which holders of Class A Common Stock of the Company will be entitled
pursuant to the transaction.
13. TAXES. The Company shall be entitled to withhold the amount of any tax
attributable to any shares deliverable under the Plan after giving the person
entitled to receive the shares notice as far in advance as practicable and the
Company may defer making delivery as to any benefit if any such tax is payable
until indemnified to its satisfaction. The Committee may, in its discretion and
subject to rules which it may adopt, permit a participant to pay all or a
portion of the taxes arising in connection with any benefit under the Plan by
electing to have the Company withhold shares of Class A Common Stock from the
shares otherwise deliverable to the participant, having a fair market value
equal to the amount to be withheld.
14. TERM OF PROGRAM; AMENDMENT, MODIFICATION OR CANCELLATION OF
BENEFITS. The Plan shall continue in effect until terminated by the Board
pursuant to Section 15; provided, however, that no incentive stock option shall
be granted more than ten years after the date of the adoption of the Plan by the
Board. The terms and conditions applicable to any benefits granted hereunder may
at any time be amended or cancelled by mutual agreement between the Committee
and the participant or any other persons as may then have an interest therein
and may be unilaterally modified by the Committee whenever such modification is
deemed necessary to protect the Company or its stockholders.
15. AMENDMENT OR DISCONTINUATION OF PLAN. The Board of Directors may amend
the Plan at any time, provided that no such amendment shall be effective unless
approved within 12 months after the date of the adoption of such amendment by
the affirmative vote of a majority of the stockholders entitled to vote if such
stockholder approval is required for the Plan to continue to comply with the
requirements of Securities and Exchange Commission Rule 16b-3. The Board of
Directors may suspend the Plan or discontinue the Plan at any time; provided,
however, that no such action shall adversely affect any outstanding benefit.
16. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of Directors
on May 2, 1995, subject to stockholder approval. The Plan and any benefits
granted thereunder shall be null and void if stockholder approval is not
obtained at the next annual meeting of stockholders.
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EXHIBIT B
THE CHERRY CORPORATION
1995 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The Cherry Corporation, a Delaware corporation (the
"Company"), hereby adopts the 1995 Nonemployee Director Stock Option Plan (the
"Plan"). The purpose of the Plan is to attract and retain outstanding
individuals to serve as members of the Board of Directors of the Company by
providing such persons opportunities to acquire shares of the Class A Common
Stock of the Company (the "Class A Common Stock") thereby strengthening the
mutuality of interest between such persons and the Company's stockholders.
2. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance
under the Plan an aggregate of 100,000 shares of Class A Common Stock, which may
be authorized but unissued or treasury shares. If there is a lapse, expiration,
termination or cancellation of any option granted under this Plan, all unissued
shares subject to or reserved for such option may again be used for new options
granted under this Plan.
3. PARTICIPATION. Participation in this Plan is limited to members of the
Board of Directors who are not salaried officers or employees of the Company or
any of its direct or indirect subsidiaries (a "Nonemployee Director" or
"Participant").
4. OPTIONS TO BE GRANTED UNDER THE PLAN. Effective on the date of each
annual meeting of the stockholders of the Company ("Annual Meeting") commencing
with the Annual Meeting in 1995, each Nonemployee Director in office on
adjournment of the meeting will automatically be awarded a nonqualified stock
option (the "option") to purchase the number of whole shares of Class A Common
Stock equal to the amount of the Nonemployee Director's retainer divided by the
Fair Market Value of a share of Class A Common Stock on the date of grant. For
purposes of this Section 4, retainer means the annual retainer to be paid by the
Company to a Nonemployee Director for the ensuing year with respect to such
person's service on the Board of Directors, exclusive of fees relating to such
person's attendance at Board and committee meetings.
5. OPTION EXERCISE PRICE. Each option granted under this Plan shall be
exercisable at an option price equal to the Fair Market Value of the Class A
Common Stock on the date of the Annual Meeting.
6. LIMITATIONS ON EXERCISE. Any option granted under this Plan may be
exercised (in accordance with Section 7 hereof) in whole or in part, from time
to time after the date granted, subject to the following limitations:
(a) No option granted hereunder may be exercised during the first year
following the date such option was granted. Thereafter, each option may be
exercised: (i) on or after the first anniversary of the date the option was
granted, for up to one-third (1/3) of the shares covered by the option; (ii)
on or after the second anniversary of the date the option was granted, for
an additional one-third (1/3) of such shares; and (iii) on or after the
third anniversary of the date the option was granted, for all shares covered
by the option.
(b) Notwithstanding the limitations of Section 6(a) above, any option
granted under this Plan shall become fully exercisable upon the death of the
Nonemployee Director while serving on the Board or upon the retirement of
the Nonemployee Director if such death or retirement occurs on or after the
first anniversary of the date such option was issued. For these purposes,
"retirement" means a Nonemployee Director's termination of service as a
member of the Board after age 70 or at any time with the consent of the
Board.
(c) Any option granted under this Plan may not be exercised: (i) more
than six months after termination of any Nonemployee Director's service as a
member of the Board for any reason other than death or retirement (and then
only to the extent that the Nonemployee Director could have exercised such
option on the date of termination); or (ii) more than twenty-four months
after a Nonemployee Director's retirement from the Board; or (iii) more than
twelve months after death of a Nonemployee Director, if death occurs while
the option is exercisable; provided, however, that no option granted
hereunder may be exercised more than ten years from the date the option is
granted.
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7. METHOD AND TIME OF EXERCISE; DELIVERY OF CERTIFICATES. Any option
granted under this Plan shall be deemed exercised on the date written notice of
exercise is received by the Chief Financial Officer of the Company at the
Company's corporate headquarters. Such notice shall be accompanied by: (i) a
check
payable to the Company for the purchase price of the shares to be purchased; or
(ii) delivery (or certification of ownership) of shares of Class A or Class B
Common Stock owned for at least six months whose Fair Market Value on the date
of exercise equals the purchase price of the shares to be purchased; or (iii)
any combination of the foregoing. A Participant may also use cashless exercise
as permitted under Federal Reserve Board's Regulation T.
8. NONTRANSFERABILITY. Any option granted under this Plan shall not be
transferable other than by will or the laws of descent and distribution, and
shall be exercisable, during the Participant's lifetime, only by the Participant
or the Participant's guardian or legal representative. If a Nonemployee Director
dies during the option period, any option granted to such Participant may be
exercised by his estate or the person to whom
the option passes by will or the laws of descent and distribution, but only in
accordance with Section 6 above. Notwithstanding the foregoing, an option will
automatically become transferable to the Participant's immediate family or
trusts or family partnerships for the benefit of such persons if and to the
extent the Securities and Exchange Commission specifically removes the
transferability restrictions from Securities and Exchange Commission Rule 16b-3
("Rule 16b-3").
9. OTHER PROVISIONS; SECURITIES REGISTRATION. The grant of any option
under the Plan may also be subject to other provisions as counsel to the Company
deems appropriate, including, without limitation, such provisions as may be
appropriate to comply with federal or state securities laws and stock listing
requirements.
10. DEFINITION OF FAIR MARKET VALUE. The term "Fair Market Value" shall
mean, as of any date, the closing price of the Class A or Class B Common Stock,
as the case may be, as reported on NASDAQ National Market System (or such other
consolidated transaction reporting system on which such Common Stock is
primarily traded) for such day, or if such Common Stock was not traded on such
day, then the next preceding day on which the stock was traded, all as reported
by such source as the Board of Directors may select.
11. ADJUSTMENT PROVISIONS. If the Company shall at any time change the
number of issued shares of Class A Common Stock without new consideration to the
Company (such as by stock dividend or stock split), the total number of shares
reserved for issuance under this Plan and the number of shares covered by each
outstanding option shall be automatically adjusted so that the aggregate
consideration payable to the Company and the value of each option shall not be
changed. If, during the term of any option granted under this Plan, the Class A
Common Stock of the Company shall be changed into another kind of stock,
securities, cash or other property whether as a result of reorganization, sale,
merger, consolidation, or other similar transaction, the Board of Directors
shall cause adequate provision to be made whereby the Participants shall
thereafter be entitled to receive, upon the due exercise of any outstanding
options, the stock, securities, cash or other property the Participants would
have been entitled to receive immediately prior to the effective date of any
such transaction for shares of Class A Common Stock which could have been
acquired through the exercise of such options.
12. AMENDMENT OR DISCONTINUATION OF PLAN. The Board of Directors may amend
the Plan at any time or suspend or discontinue the Plan at any time, but no such
action shall adversely affect any outstanding option; provided that this Plan
may not be amended more frequently than once every six months and no amendment
shall be adopted which would result in any Nonemployee Director losing his or
her status as a "disinterested" administrator under Rule 16b-3 with respect to
any employee benefit plan of the Company or result in the Plan losing its status
as a protected plan under Rule 16b-3.
13. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of Directors
on May 2, 1995, subject to stockholder approval. The Plan and any benefits
granted thereunder shall be null and void if stockholder approval is not
obtained at the next annual meeting of stockholders.
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The undersigned hereby appoints Walter L. Cherry and Peter B. Cherry,
and each of them, as proxies, each with full power of substitution, to
represent and to vote, as designated below, all of the undersigned's Class B
Common Stock in The Cherry Corporation at the annual meeting of stockholders
of The Cherry Corporation to be held on Thursday, June 15, 1995, and at any
adjournment thereof, with the same authority as if the undersigned were
personally present.
1. Election of [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY to
Directors below (except as marked vote for all nominees
to the contrary) listed below
Walter L. Cherry, Peter B. Cherry, Alfred S. Budnick, Thomas L. Martin, Jr.,
Robert B. McDermott, Peter A. Guglielmi, Charles W. Denny
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
_____________________________________________________________________________
2. Approval of 1995 Stock Incentive Plan. [ ] FOR [ ] AGAINST [ ]ABSTAIN
_____________________________________________________________________________
3. Approval of 1995 Nonemployee Director
Stock Option Plan. [ ] FOR [ ] AGAINST [ ]ABSTAIN
_____________________________________________________________________________
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1, PROPOSAL 2 AND PROPOSAL 3.
(Please date and sign on reverse side.)
<PAGE>
THE CHERRY CORPORATION PROXY
3600 SUNSET AVENUE, WAUKEGAN, ILLINOIS 60087
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
THE UNDERSIGNED HEREBY REVOKES ANY PROXY HERETOFORE GIVEN AND ACKNOWLEDGES
RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE ANNUAL MEETING.
(IF THE STOCK IS REGISTERED IN THE NAME
OF MORE THAN ONE PERSON, THE PROXY
SHOULD BE SIGNED BY ALL NAMED HOLDERS.
IF SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE, GUARDIAN,
CORPORATE OFFICIAL, ETC., PLEASE GIVE
FULL TITLE AS SUCH.)
____________________________(Signature)
DATED:___________________________, 1995
____________________________(Signature)
