<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [ ] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
A. T. Cross Company
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than 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:
- --------------------------------------------------------------------------------
<PAGE> 2
[A.T. Cross Company Logo]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 23, 1998
TO THE STOCKHOLDERS OF A.T. CROSS COMPANY:
Notice is hereby given that the annual meeting of stockholders of A.T.
Cross Company (the "Company") will be held on Thursday, April 23, 1998 at 10:00
a.m. at the offices of the Company, One Albion Road, Lincoln, Rhode Island
02865, for the following purposes:
1. Fixing the number of directors at nine, of which three shall be Class A
directors and six shall be Class B directors (by holders of Class A and Class B
common stock voting together as a single class).
2. Electing three Class A directors (by holders of Class A common stock
only) and six Class B directors (by holders of Class B common stock only) to
hold office until the next annual meeting of stockholders or until their
successors are duly elected and qualified.
3. Appointing independent public accountants to audit the Company's books
and accounts for the year ending December 31, 1998 (by holders of Class B common
stock only).
4. Approving the adoption of the Company's Omnibus Incentive Plan (by
holders of Class A and Class B common stock voting together as a single class).
5. Transacting such other and further business as may properly come before
said meeting upon which the holders of Class A common stock or Class B common
stock, respectively, are entitled to vote.
The stock transfer books will not be closed. The close of business on
February 27, 1998 has been fixed as the record date for determining stockholders
entitled to vote at the annual meeting or any adjournment thereof, and only
holders of record of Class A common stock or Class B common stock as of that
time are entitled to receive notice of and to vote at said meeting or any
adjournment thereof.
By order of the Board of Directors
/s/ Tina C. Benik
-----------------------------
Tina C. Benik
Corporate Secretary
March 20, 1998
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT AS PROMPTLY AS
POSSIBLE. IF YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE
USED.
<PAGE> 3
[A.T. CROSS LOGO]
ONE ALBION ROAD
LINCOLN, RHODE ISLAND 02865
PROXY STATEMENT
FOR ANNUAL STOCKHOLDERS' MEETING
APRIL 23, 1998
This statement is furnished in connection with the accompanying proxy
which is solicited by the Board of Directors of A.T. Cross Company (the
"Company") from holders of Class A common stock of the Company for use at the
annual meeting to be held April 23, 1998. Any stockholder giving a proxy may
revoke the same prior to its exercise by filing a later proxy with the Company,
by attending the meeting and voting in person, or by giving notice in writing or
in person to the Corporate Secretary. If not revoked, the persons named in the
accompanying proxy will vote such proxy in the manner specified therein and, in
the discretion of the persons named, for or against any matter upon which
holders of Class A common stock are entitled to vote which properly comes before
the meeting and which has been omitted from the proxy and proxy statement. The
cost of solicitation of proxies, including the cost of reimbursing brokerage
houses and other custodians, nominees or fiduciaries for forwarding proxies and
proxy statements to their principals, will be borne by the Company. Solicitation
may be made in person or by telephone or telegraph by officers or regular
employees of the Company, who will not receive additional compensation therefor.
In addition, the Company has retained Georgeson & Co., New York, N.Y., to aid in
the solicitation of proxies. The charges of such firm, estimated at $5,500,
excluding expenses, will be paid by the Company. This proxy statement and the
enclosed form of proxy are expected to be sent to stockholders on or about March
20, 1998.
A copy of the Company's annual report for the year 1997 containing
financial statements for the year ended December 31, 1997 is also enclosed, but
is not to be considered a part of the proxy soliciting material.
As of February 27, 1998 the Company had outstanding 14,703,513 shares
of Class A common stock and 1,804,800 shares of Class B common stock. Only
stockholders of record at the close of business on that date are entitled to
vote at the annual meeting. Stockholders shall be entitled to one vote for each
share held on the foregoing record date with respect to matters on which shares
of that class are eligible to vote.
STOCKHOLDERS' PROPOSALS
Any proposal of a stockholder intended to be presented at the next
annual meeting of the Company, scheduled to be held April 22, 1999, must be
received by the Company's Corporate Secretary not later than November 20, 1998
for inclusion in the proxy statement and form of proxy relating to that meeting.
VOTING RIGHTS
Holders of Class A common stock have the right to elect one-third of
the number of directors from time to time fixed by the holders of Class A and
Class B common stock voting together as a single class; provided, however, that
if the total number of directors is not evenly divisible by three, then the
holders of Class A common stock have the right to elect that number of directors
which is the nearest whole number when the total number of directors is divided
by three. Holders of Class B common stock have the right to elect the remaining
directors. It is proposed that the number of directors for the ensuing year be
fixed at nine (see "ELECTION OF DIRECTORS"), and if this proposal is adopted,
holders of Class A common stock will have the right to elect three directors.
In addition, holders of Class A and Class B common stock vote together
as a single class:
a) For the reservation in the future of shares to be issued pursuant
to options granted or to be granted to directors, officers or
employees; and
b) With respect to the acquisition of assets or shares of any other
company if:
(1) An officer, director or holder of ten percent or more of
either Class A or Class B common stock has an interest in the
transaction;
1
<PAGE> 4
(2) The transaction would, in the reasonable judgment of the
Board of Directors, presently or potentially increase by
nineteen and one-half percent or more the aggregate of the
Class A or Class B common stock outstanding immediately prior
to such transaction; or
(3) The transaction would involve the issuance of any Class A or
Class B common stock and in the reasonable judgment of the
Board of Directors the value of the consideration furnished
by the Company is nineteen and one-half percent or more of
the aggregate market value of all Class A and Class B common
stock outstanding immediately prior to such transaction.
Notwithstanding the foregoing, if the consummation of any transaction
described above would, with respect to either the Class A common stock or the
Class B common stock, result in a change in the designations, preferences,
limitations or relative rights of the shares of such class or have certain other
effects as specified in the Company's articles, the holders of Class A and Class
B common stock vote as separate classes on such transaction.
Except as stated above or otherwise required by law, all voting power
is vested in the holders of Class B common stock so long as any shares of Class
B common stock are outstanding.
VOTING PROCEDURES
The numbers of Class A and Class B directors will be fixed by vote of the
holders of a majority of the Class A and Class B shares present at the annual
meeting in person or represented by proxy, voting as a single class. The Class A
directors will be elected in each case by vote of the holders of a majority of
the Class A shares present or represented at the meeting, and the Class B
directors will be similarly elected by the holders of a majority of the Class B
shares.
Shares represented by proxies which are marked "abstain" with respect to
fixing the number of directors and approving the Omnibus Incentive Plan,
"authority withheld" with respect to the election of any particular nominee for
director, or to deny discretionary authority on any other matters will be
counted as shares present and entitled to vote, and accordingly any such marking
of a proxy will have the same effect as a vote against the proposal to which it
relates.
Under the rules of the American Stock Exchange, on which the Class A shares
are listed, brokers who hold Class A shares in street name have the authority to
vote such shares on certain items, including fixing the number of and electing
directors, unless they have received instructions from the beneficial owners to
the contrary, in which case the shares are to be voted or the votes relating
thereto withheld, as directed by the beneficial owners. Such rules also provide
that brokers may not vote shares held in street name on certain other matters
without specific instructions from their customers. Shares subject to such
"broker non-votes" will not be treated as shares entitled to vote on the matters
to which they relate and will have no effect on the outcome of the voting on
such matters. It is not presently anticipated that any matter which might be the
subject of a "broker non-vote" will come before the annual meeting.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The stockholders listed below were beneficial owners of more than 5% of the
outstanding Class A or Class B common stock of the Company at the close of
business February 27, 1998, insofar as the Company is aware. The beneficial
owners exercise sole voting and investment power over their shares unless
otherwise indicated.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
PERCENT
NAME AND ADDRESS AMOUNT AND NATURE OF OF TITLE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2)(3) CLASS CLASS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford R. Boss 1,857,874 (including 480,000 as co-trustee of W. Russell Boss, 12.52% A
11982 Lost TreeWay Jr. Trust A; 585,000 as co-trustee of W. Russell Boss, Jr. Trust
North Palm Beach, B; and 500,000 as co-trustee of W. Russell Boss, Jr. Trust C)
FL 33408
Bradford R. Boss 1,804,800 (902,400 as co-trustee of W. Russell Boss, Jr. Trust A; 100.0 B
and 902,400 as co-trustee of W. Russell Boss, Jr. Trust B)
Russell A. Boss 1,868,328 (including 480,000 as co-trustee of W. Russell Boss, 12.59 A
40 Peaked Rock Lane Jr. Trust A; 585,000 as co-trustee of W. Russell Boss, Jr. Trust
Narragansett, RI B; and 500,000 as co-trustee of W. Russell Boss, Jr. Trust C)
02882
Russell A. Boss 1,804,800 (902,400 as co-trustee of W. Russell Boss, Jr. Trust A; 100.0 B
and 902,400 as co-trustee of W. Russell Boss, Jr. Trust B)
Edwin G. Torrance 486,477 (including 480,000 as co-trustee of W. Russell Boss, Jr. 3.31 A
129 Nayatt Road Trust A)
Barrington, RI
02806
Edwin G. Torrance 902,400, as co-trustee of W. Russell Boss, Jr. Trust A 50.0 B
Noel M. Field, Jr. 585,100 (including 585,000 as co-trustee of W. Russell Boss, Jr. 3.98 A
50 Sakonnet Point Trust B)
Road
Little Compton, RI
02837
Noel M. Field, Jr. 902,400 as co-trustee of W. Russell Boss, Jr. Trust B 50.0 B
Fleet Financial 1,241,016 (including 1,121,844 as to which Fleet Financial Group, 8.44 A
Group, Inc. Inc. has sole voting power; 12,325 as to which it has shared
One Federal Street voting power; 1,092,225 as to which it has sole investment power;
Boston, MA 02110 and 135,466 as to which it has shared investment power)
Travelers Group Inc.,
through its wholly
owned subsidiary
Salomon Smith Barney
Holdings Inc.
388 Greenwich 916,260, as to which Travelers Group Inc. has shared voting and 6.23 A
Street investment power
New York, NY 10013
Galal P. Doss 1,815,000 12.34 A
P.O. Box 45
Tenth of Ramadan
Egypt
</TABLE>
(1) Includes Class A shares subject to options exercisable within 60 days, as
follows: Mr. B. Boss - 137,019; Mr. R. Boss - 137,019; and Mr. Torrance -
977.
(2) Includes restricted Class A shares as to which the holder has sole voting
power but no investment power during the restricted period, as follows: Mr.
B. Boss - 2,059; and Mr. R. Boss - 2,984.
(3) There is shared voting and investment power with respect to all shares held
by a co-trustee of W. Russell Boss, Jr. Trust A, W. Russell Boss, Jr. Trust
B, and W. Russell Boss, Jr. Trust C.
- --------------------------------------------------------------------------------
Bradford R. Boss and Russell A. Boss are, together with Edwin G. Torrance,
the co-trustees of Trust A referred to above; they are, together with Noel M.
Field, Jr., the co-trustees of Trust B referred to above; and they are, together
with Fleet National Bank, the co-trustees of Trust C referred to above. The
co-trustees of each trust jointly exercise investment and voting powers with
respect to the assets of the trust.
The Class B shares held by Trusts A and B are convertible into Class A
shares on a share-for-share basis at any time. If the Class B shares were all
converted into Class A shares, Bradford R. Boss and Russell A. Boss would be the
beneficial owners of 22.00% and 22.07%, respectively, of the outstanding Class A
shares.
If the Class B shares held by Trust A were so converted, Edwin G. Torrance
would be the beneficial owner of 8.9% of the outstanding Class A shares, and if
the Class B shares held by Trust B were so converted, Noel M. Field, Jr. would
be the beneficial owner of 9.53% of the outstanding Class A shares.
3
<PAGE> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table reflects as of February 27, 1998, insofar as the
Company is aware, the beneficial ownership of shares of common stock of the
Company by directors, nominees, and officers. The beneficial owners exercise
sole voting and investment power over their shares unless otherwise indicated.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
PERCENT
AMOUNT AND NATURE OF OF TITLE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2)(3) CLASS CLASS
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bradford R. Boss 1,857,874 (including 480,000 as co-trustee of W. Russell Boss, 12.52% A
Jr. Trust A; 585,000 as co-trustee of W. Russell Boss, Jr. Trust
B; and 500,000 as co-trustee of W. Russell Boss, Jr. Trust C)
Bradford R. Boss 1,804,800 (902,400 as co-trustee of W. Russell Boss, Jr. Trust A; 100.0 B
and 902,400 as co-trustee of W. Russell Boss, Jr. Trust B)
Russell A. Boss 1,868,328 (including 480,000 as co-trustee of W. Russell Boss, 12.59 A
Jr. Trust A; 585,000 as co-trustee of W. Russell Boss, Jr. Trust
B; and 500,000 as co-trustee of W. Russell Boss, Jr. Trust C)
Russell A. Boss 1,804,800 (902,400 as co-trustee of W. Russell Boss, Jr. Trust B; 100.0 B
and 902,400 as co-trustee of W. Russell Boss, Jr. Trust A)
John E. Buckley 210,069 1.41 A
Bernard V. Buonanno, Jr. 8,852 * A
H. Frederick 8,282 * A
Krimendahl II
Thomas C. McDermott 5,108 * A
Terrence Murray 15,208(4) * A
James C. Tappan 5,355 * A
Edwin G. Torrance 486,477 (including 480,000 as co-trustee of W. Russell Boss, Jr. 3.31 A
Trust A)
Edwin G. Torrance 902,400 (as co-trustee of W. Russell Boss, Jr. Trust A) 50.0 B
Steven T. Henick 2,767 * A
John T. Ruggieri 8,262 * A
All directors and 2,486,711 (including 527,524 shares subject to options exer- 16.33 A
executive officers as a cisable within 60 days; 29,888 shares of restricted stock as to
group (21 persons) which there is sole voting power but no investment power during
the restricted period; and 1,565,000 held under trusts as to
which there is shared voting and investment power)
All directors and 1,804,800 100.0 B
executive officers
as a group (3 persons)
</TABLE>
(1) Includes Class A shares subject to options exercisable within 60 days, as
follows: Mr. B. Boss - 137,019; Mr. R. Boss - 137,019; Mr. Buckley -
183,752; Mr. Buonanno - 8,352; Mr. Krimendahl - 8,282; Mr. McDermott -
4,858; Mr. Murray - 8,208; Mr. Tappan - 2,355; Mr. Torrance - 977;
Mr. Henick - 2,667; and Mr. Ruggieri - 7,500.
(2) Includes restricted Class A shares as to which the holder has sole voting
power but no investment power during the restricted period, as follows: Mr.
B. Boss - 2,059; Mr. R. Boss - 2,984; Mr. Buckley - 2,667; and Mr. Ruggieri
- 584.
(3) There is shared voting and investment power with respect to all shares held
by a co-trustee of W. Russell Boss, Jr. Trust A, W. Russell Boss, Jr. Trust
B and W. Russell Boss, Jr. Trust C.
(4) Excludes shares held by Fleet Financial Group, Inc. in various fiduciary
capacities.
* Less than 1%
The Class B common stock is convertible share for share into Class A common
stock at any time.
- --------------------------------------------------------------------------------
4
<PAGE> 7
ELECTION OF DIRECTORS
It is proposed to fix the number of directors at nine, of which three will
be designated "Class A Directors" and six will be designated "Class B
Directors". It is also proposed to elect three Class A directors (by holders of
Class A common stock only) and six Class B directors (by holders of Class B
common stock only) to hold office until the next annual meeting of stockholders
or until their successors are duly elected and qualified. Proxies will be voted
for the nominees set forth below unless authorization to do so is withheld. All
nominees except Mr. van Dam are currently directors of the Company. Should any
nominee become unavailable for any reason to accept nomination or election as a
director, the persons named in the proxy will vote for the election of such
other person or persons as management may recommend unless the stockholders vote
to reduce the authorized number of directors. The terms of all directors will
expire when their successors are duly elected at the annual meeting of
stockholders scheduled to be held April 22, 1999. The following tables reflect
information as of December 31, 1997.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NOMINEE AGE DURING PAST FIVE YEARS SINCE OTHER DIRECTORSHIPS(1)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A DIRECTORS
Terrence Murray 58 Chairman and Chief Executive Of- 1982 Fleet Financial Group, Inc.;
ficer, Fleet Financial Group, Inc. Allmerica Financial Corporation;
(diversified financial services CVS Corporation
corporation).(2)
Andries van Dam 59 Professor of Computer Science, --
Brown University
James C. Tappan 62 Group Vice President and Director, 1994 Pragma Providence Fund
General Foods Corporation (prior
to June 1988); President, Tappan
Capital Partners (since June 1988;
equity investment firm).(3)
CLASS B DIRECTORS
Bradford R. Boss 64 Chairman of the Board and, to 1960 Fleet Financial Group, Inc.
April 1993, Chief Executive
Officer(4) (5)
Russell A. Boss 59 President and, to April 1993, 1962 Eastern Utilities Associates;
Chief Operating Officer; Brown & Sharpe Manufacturing Co.
thereafter President and Chief
Executive Officer(4)(5)(6)
John E. Buckley 57 Executive Vice President to April 1980
1993; thereafter Executive Vice
President and Chief Operating
Officer.(4)
Bernard V. 59 Chairman (to 1989) and Director, 1986 Old Stone Corporation
Buonanno, Jr. Old Fox, Inc., manufacturer of
fertilizers and other agricultural
products; counsel (1988 to 1990)
and thereafter partner, Edwards &
Angell, Providence, RI,
attorneys-at-law.(2)(6)(7)
Edwin G. Torrance 65 Partner, Hinckley, Allen & Snyder, 1995
Providence, RI, attorneys-at-law
(retired July 1996).(3)(8)
H. Frederick Krimendahl II 69 Limited Partner, The Goldman Sachs 1972
Group L.P.; Chairman (since March
1992) Petrus Partners Ltd., New
York, N.Y.(2)
</TABLE>
- --------------------------------------------------------------------------------
See footnotes on page 6.
5
<PAGE> 8
The Board of Directors has an Audit Committee, consisting of Messrs.
McDermott, Tappan and Torrance, and a Compensation Committee, consisting of
Messrs. Murray, Buonanno and Krimendahl.
The Audit Committee has responsibility for overseeing the establishment and
maintenance of an effective financial control environment, for overseeing the
procedures for evaluating the system of internal accounting control, and for
evaluating audit performance. The Compensation Committee has responsibility for
developing, overseeing and implementing the overall compensation policy for the
Company including, subject to full Board approval, the implementation of an
incentive compensation plan for the Company.
During 1997 The Board of Directors held five meetings, the Audit Committee
held four meetings and the Compensation Committee held two meetings.
The Board does not have a nominating committee.
(1) Includes only companies with a class of securities registered pursuant
to Section 12 or subject to the requirements of Section 15(d) of the
Securities Exchange Act of 1934 and any company registered as an
investment company under the Investment Company Act of 1940.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
(4) Member of Executive Committee.
(5) Bradford R. Boss and Russell A. Boss are brothers.
(6) Russell A. Boss and Bernard V. Buonanno, Jr. are cousins by marriage.
(7) Edwards & Angell performed legal services for the Company in 1997 and
is expected to perform legal services for the Company in 1998.
(8) Hinckley, Allen & Snyder performed legal services for the Company
during 1997 and is expected to perform legal services for the Company
in 1998.
6
<PAGE> 9
DIRECTOR COMPENSATION
Members of the Company's Board of Directors were compensated for their
services during 1997 at the rate of $15,000 per annum, plus $1,000 for each
Board meeting attended. During 1997, the Board of Directors held five meetings.
In addition, members of the Audit and Compensation Committees received $500
($750 in the case of the committee chairmen) for each committee meeting
attended.
Directors also automatically participate in the Company's Non-Qualified
Stock Option Plan under a formula fixing the number of shares which are the
subject of annual option grants as the number derived by dividing, in each case,
the compensation paid to a director for his service to the Company as a director
during the preceding calendar year by the mean between the high and low trading
prices for the Company's Class A common stock on the last trading day of such
year. Options under the non-qualified plan are granted with exercise prices
equal to the fair market value of the Class A common stock on the date of grant.
During 1997, each director received options to purchase 1,740 shares under this
plan with the exception of Mr. McDermott, who received options to purchase 1,653
shares. The exercise price for all options was $9.6875 per share.
REPORT TO STOCKHOLDERS ON
COMPENSATION MATTERS
The 1997 compensation of the Chairman, the President and Chief Executive
Officer, and the Executive Vice President and Chief Operating Officer of the
Company (the "three named officers") was established by the members of the
Compensation Committee of the Board of Directors. None of the three directors
comprising the Compensation Committee is an employee of the Company, although
Mr. Buonanno is a cousin by marriage to the President and Chief Executive
Officer. The compensation of the remaining executive officers of the Company was
recommended by the three named officers, with input from the Company's Director
of Compensation, Benefits and International Human Resources, and approved by the
Compensation Committee.
The elements of compensation for each executive officer consist of base
pay, annual incentive bonus and long-term incentives. The compensation of each
executive officer was based on three primary factors:
-- The performance of the executive in meeting key strategic objectives,
including increasing stockholder value.
-- The external competitiveness of the Company's pay levels with those of
other manufacturing companies with similar revenues and scope of
operations.
-- The internal pay equity that exists among individual executives and
other Company employees.
The Compensation Committee is privy to external compensation data through
the Company's participation in, and analysis of, periodic compensation surveys
conducted by independent consulting firms and associations, including but not
limited to Towers-Perrin and Hewitt Associates, which report on compensation
paid to other executives at companies of similar size. These companies, which
include various manufacturing companies with sales volumes generally less than
$500 million, are not represented in the peer group index used in the
Performance Graph on page 14. The peer group index is limited by the low number
of publicly traded writing instrument companies. The Compensation Committee
believes the larger sample size of the compensation surveys provides more
meaningful comparisons. There are approximately 350 companies in the various
survey groups. This number is subject to occasional change from year to year.
The Compensation Committee extrapolated the survey information using a
combination of single and multiple regression analyses. Factors used in the
regression analyses included, but were not limited to, corporate sales, company
assets, stockholders' equity, return on equity, board membership, and years of
service. In addition, the Compensation Committee also utilized the survey data
to gauge the Company's competitive position with other companies with respect to
bonus and stock option grants.
The Compensation Committee also reviewed its standing against other
companies in a survey that compares a number of financial performance criteria.
The survey ranks participating companies on one- and five-year returns on
assets, equity and capital. It also ranks their one-year return on sales and
common stock appreciation plus yield.
The Board has reviewed the Company's exposure with respect to qualifying
executive officer compensation for deduction under Section 162(m) of the
Internal Revenue Code. The Board has deferred adopting a policy on this issue as
it does not expect compensation to reach relevant levels in the near future.
7
<PAGE> 10
The following is a more specific discussion of each compensation component:
BASE SALARY:
The Compensation Committee targets its base pay for the Chief Executive
Officer, the Chairman and the Chief Operating Officer at the 50th to 65th
percentile of executive officers of manufacturing organizations of approximately
the same size (less than $500 million in annual sales) and scope of operations
as the Company. Based on survey data, the Compensation Committee believes the
base pay for its executives has been within this range for the last several
years.
In considering a 1997 base salary adjustment for the three named officers,
the Compensation Committee reviewed the survey results of the base salary of
similar level officers in the survey groups referred to above and noted each
officer's base salary was at or above the 50th percentile. The Committee took
further note of the generally modest base salary increase figures being forecast
for other companies' chief executive officer and chief operating officer
positions for the forthcoming year. In light of this information and taking into
consideration the financial results of the Company as of early December 1996,
the Committee voted to maintain the base salaries at their present level for the
three named officers. The remaining two highest paid executive officers as of
December 1996 likewise received no adjustment to base salary for 1997. (The
three named officers, together with the remaining two highest paid officers, are
referred to as the "five named officers.") The Committee noted that its
executive compensation percentile targets for base salary would still be met
even without an adjustment to the officers' salaries based on amounts paid to
similar level executives of companies included in the comparative survey groups.
The current Chief Financial Officer, who was promoted to his position in March
1997 and as a result became one of the five named officers, received salary
adjustments in 1997 to achieve a competitive pay standard.
BONUS:
Bonus payments to executives for 1997 performance were again governed by
the Executive Compensation Program approved by the Compensation Committee to
cover the period 1995-1997. The annual incentive payments to eligible executives
are designed to provide rewards based on substantially improved Company
profitability from year to year as measured by the amount of increase in writing
instrument operating income before taxes (OIBT). Also factored into the formula
is a measure of the Company's effective use of capital.
Under the Program, the OIBT benchmarks for 1997 were increased
significantly over 1996. Based on this formula and the resulting OIBT, it was
highly unlikely the OIBT benchmarks could be attained. As a result, the
Compensation Committee voted to approve a one year Addendum Plan as an overlay
to the existing Executive Compensation Program in order to provide incentive to
management to improve Company profitability in 1997. Opportunities for bonuses
under the Addendum Plan were significantly reduced compared to the original
Program. Based on the Addendum Plan formula, four of the five named officers
failed to earn a bonus for 1997 performance. The Chief Financial Officer was
awarded a bonus of $21,750.
The Company analyzes its total cash compensation (base salary plus bonus)
in relation to other similarly sized companies and targets the 75th percentile
as a competitive norm when the maximum bonus percentage is earned. Applying the
most recent survey data available to the Company (April 1997), the total cash
compensation for the five named officers as a group was well below the 50th
percentile compared to other companies included in the survey.
LONG-TERM INCENTIVES:
The Company has relied upon grants under incentive and non-qualified stock
option plans to provide key officers and managers with an ownership position in
the Company to create a long-term incentive to increase shareholder value.
As part of a three year (1995-1997) Executive Compensation Program, the
Compensation Committee granted stock options in December 1994 under an amended
non-qualified stock option plan which was subject to shareholder approval at the
annual meeting held in April 1995. This grant provided options for shares
approximately equal to the number of shares that would historically have been
granted over a three year period and provided for a three year cliff vesting
provision. The option price of this grant ($15.1875), along with all other
grants made previously, were significantly above the current market price by
mid-year 1997.
8
<PAGE> 11
In the interests of retaining key management talent and of providing
appropriate incentives to increase shareholder value, the Compensation Committee
recommended two actions to the Board of Directors.
First, a new grant was made to the Executive Compensation Group, including
the five named officers, on September 15, 1997 at the then fair market price of
$9.69. The options granted to the five named officers were as follows: Messrs.
Boss: 20,000 shares each; Mr. Buckley: 30,000 shares; Mr. Henick: 8,000 shares;
and Mr. Ruggieri: 15,000 shares. The grants to Messrs. B. Boss and R. Boss had
an exercise price of $10.66, 10% higher than the then current market value of
$9.69 as required by the Incentive Stock Option Plan. The grants to Messrs.
Buckley, Henick and Ruggieri had an exercise price equal to the $9.69 market
value. All the grants provided for incremental vesting with one-third of the
grant immediately vesting and the remaining two-thirds vesting equally over the
next two years.
The second action taken by the Committee regarding long term compensation
was to address the issue of the significant number of stock options previously
granted that were well in excess of the current market price, thereby providing
minimal incentive to key employees. Taking into consideration the recommendation
of the Company's external compensation consultants that this action was in the
best interests of the shareholders, the Compensation Committee voted to approve
a repricing strategy for the Executive Group employees exclusive of the three
most highly paid executives: Messrs. Boss and Buckley. The repricing option
program utilized the Black-Scholes valuation formula to ascertain the current
value of the previously issued options. Under this program, option holders had
the choice of canceling all option grants awarded between and including the
years 1990 through 1995 in exchange for receiving a substantially reduced number
of new options at the current market price. The number of new options generally
approximated a 30% to 40% reduction from the original number of options. The new
grant was for a 10 year term and all options would vest one year from the grant
date.
The repricing offer to the eligible executive group employees was made in
mid-December 1997. Eligible employees were required to make their decision by
December 30, 1997. Of the 57 United States and International executives eligible
to participate, 53 chose to cancel their old grants and receive the new grant
with fewer options at the current market price. Of the five named officers,
Messrs. Boss and Buckley were ineligible for the program and Mr. Henick and Mr.
Ruggieri chose to participate. See the "Report on Repricing of Options" on pages
12 and 13 for additional information.
In addition to the option plans, a Performance Cash Plan was implemented in
1995 to cover the three year period from 1995-1997. The Plan provided the
opportunity for a one-time cash bonus to be paid to each qualifying executive,
including the five named officers, if the Company met or exceeded certain
significant three-year cumulative compounded OIBT growth goals. At the end of
1997, it was determined that the Company had not achieved the OIBT growth
required to trigger a payout.
The foregoing report is presented by the following:
1997 COMPENSATION COMMITTEE
Bernard V. Buonanno, Jr.
H. Frederick Krimendahl II
Terrence Murray, Chairman
9
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
Company's Chief Executive Officer and the four other most highly compensated
executive officers during the last three completed fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------------------
-------------------------------------------- NUMBER OF
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) AWARDS(3) OPTIONS COMPENSATION
------------------ ---- --------- -------- --------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Russell A. Boss 1997 $433,000 $ -- $4,320 $ -- 21,740(4) $ 5,349(5)
President and 1996 430,233 -- 4,320 -- 1,283(6) 22,732
Chief Executive Officer 1995 413,833 216,884 4,320 45,327 1,485(6) 18,806
Bradford R. Boss 1997 305,000 -- 4,320 -- 21,740(4) 5,860(7)
Chairman 1996 303,067 -- 4,320 -- 1,283(6) 17,820
1995 291,583 149,646 4,320 31,275 1,485(6) 14,996
John E. Buckley 1997 389,000 -- 4,320 -- 31,740(4) 4,750(8)
Executive Vice President 1996 386,567 -- 4,320 -- 1,283(6) 20,292
Chief Operating Officer 1995 372,000 193,875 4,320 40,519 1,485(6) 16,767
Steven T. Henick, 1997 206,500 -- 17,001(9) -- 65,903 4,750(8)
Vice President, 1996 206,500 -- 3,600 -- -- 13,591
International 1995 204,583 81,833 10,406(9) 17,103 -- 11,720
Marketing and Sales
John T. Ruggieri 1997 145,207 21,750 3,600 -- 40,265 4,656(8)
Senior Vice President, 1996 113,917 10,000 3,600 -- -- 9,035
Treasurer, Chief Financial 1995 106,132 42,453 3,600 8,872 16,000 8,044
Officer
</TABLE>
- --------------------------------------------------------------------------------
(1) Messrs. R. Boss, B. Boss and Buckley's salary includes director fees of
$20,000 for 1997, $19,900 for 1996 and $19,500 for 1995.
(2) Amounts listed under Other Annual Compensation consist of tax
reimbursement payments made to the named individuals relating to amounts
paid to these individuals as car allowances, except as otherwise noted.
(3) Annual incentive awards which exceeded target award levels were paid in
1995 in restricted Class A common stock under the A. T. Cross Company
Restricted Stock Plan. The restricted stock awards provide that
restrictions as to 50% of the restricted shares will lapse when writing
instrument OIBT equals $25 million and restrictions on the balance of the
shares will lapse when writing instrument OIBT is double the OIBT attained
in 1994. If the specified OIBT levels have not been achieved by December
31, 1999, all shares then subject to restrictions will be forfeited.
Termination of employment other than by reason of death or disability will
also result in forfeiture of any shares subject to restrictions. The
number and year-end value of the shares awarded for 1995, based on the
December 31, 1997 closing market price of the Company's unrestricted Class
A common stock of $10.4375 are: Mr. R. Boss, 2,984 shares and $31,146, Mr.
B. Boss, 2,059 shares and $21,491, Mr. Buckley, 2,667 shares and $27,837,
Mr. Henick, 1,126 shares and $11,753, and Mr. Ruggieri, 584 shares and
$6,096. Dividends will be paid on the shares of restricted stock if and to
the extent paid on the Class A and Class B common stock. No restricted
stock awards were earned for 1996 or 1997.
(4) Number of securities shown includes 1,740 shares underlying formula option
received as a director of the Company pursuant to the Company's
Non-Qualified Stock Option Plan.
(5) Mr. Boss's All Other Compensation for 1997 consists of 401(k)
contributions ($4,750) and split dollar life insurance premiums ($599).
(6) Shares underlying formula option received as a director of the Company
pursuant to the Company's Non-Qualified Stock Option Plan.
(7) Mr. Boss's All Other Compensation for 1997 consists of 401(k)
contributions ($4,750) and split dollar life insurance premiums ($1,110).
(8) Messrs. Buckley, Henick and Ruggieri's All Other Compensation for 1997
consists of 401(k) contributions ($4,750, $4,750 and $4,656,
respectively).
(9) Mr. Henick's Other Annual Compensation includes a tax gross-up payment
related to reimbursement of relocation expenses ($13,401 for 1997 and
$6,806 for 1995).
10
<PAGE> 13
STOCK OPTIONS
The following tables set forth, as to the Chief Executive Officer and the
four most highly compensated other executive officers of the Company,
information with respect to stock option grants in 1997, options exercised
during 1997 and year-end values of unexercised options. No options were
exercised by these officers in 1997. The Company does not currently grant any
stock appreciation rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
AT ASSUMED ANNUAL
RATES
OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR THE OPTION TERM
- -------------------------------------------------------------------------------- -------------------
NUMBER PERCENTAGE
OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES PRICE EXPIRATION
NAME GRANTED IN 1997(1) PER SHARE DATE(2) 5% 10%
- ---------------------- ------- ----- ------ ------------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bradford R. Boss 1,740(3) 0.21% $ 9.69 October 1, 2007 $ 10,601 $ 26,865
20,000 2.47% $10.66 September 15, 2002 $ 34,155 $ 98,911
Russell A. Boss 1,740(3) 0.21% $ 9.69 October 1, 2007 $ 10,601 $ 26,865
20,000 2.47% $10.66 September 15, 2002 $ 34,155 $ 98,911
John E. Buckley 1,740(3) 0.21% $ 9.69 October 1, 2007 $ 10,601 $ 26,865
30,000 3.71% $ 9.69 September 15, 2007 $182,773 $463,181
Steven T. Henick 8,000 0.99% $ 9.69 September 15, 2007 $ 48,739 $123,515
57,903(4) 7.15% $ 9.97 December 9, 2007 $363,011 $919,941
John T. Ruggieri 15,000 1.85% $ 9.69 September 15, 2007 $ 91,386 $231,591
25,265(4) 3.12% $ 9.97 December 9, 2007 $158,394 $401,401
</TABLE>
- ---------------
(1) For purposes of this table, the total number of options granted to employees
in 1997 was 809,406, including 15,573 options granted to the Company's
directors under the formula provisions of the Company's Non-Qualified Stock
Option Plan.
(2) Subject to earlier termination in the event of termination of the grantee's
office.
(3) These options were received as a director of the Company under the formula
provisions of the Company's Non-Qualified Stock Option Plan, further
described herein under "Director Compensation."
(4) These options were issued in connection with the repricing described herein
under "Report of the Compensation Committee on Repricing of Options."
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bradford R. Boss 97,019 55,073 $ 0 $ 1,305
Russell A. Boss 97,019 55,073 $ 0 $ 1,305
John E. Buckley 103,752 101,740 $7,500 $16,305
Steven T. Henick 2,667 63,236 $2,000 $31,142
John T. Ruggieri 7,500 35,265 $3,750 $19,343
</TABLE>
- ---------------
(1) Based on the mean between the high and low trading prices of the Class A
common stock on December 31, 1997 ($10.4375) minus the exercise price.
11
<PAGE> 14
REPORT ON REPRICING OF OPTIONS
The following table sets forth information relating to the repricing of
options held by any executive officer of the Company since January 1, 1988. The
number of securities underlying the new options granted to each executive
officer to replace the cancelled repriced options was 30% to 40% less than the
original number of securities underlying the repriced options. See the "Report
of the Compensation Committee on Repricing of Options" below for additional
information.
<TABLE>
<CAPTION>
TEN YEAR OPTION REPRICINGS
---------------------------------------------------------------------------------------
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF STOCK EXERCISE PRICE ORIGINAL OPTION
UNDERLYING AT TIME OF AT TIME NEW EXERCISE TERM REMAINING
OPTIONS REPRICING OF REPRICING PRICE AT DATE
NAME DATE REPRICED ($) ($) ($) OF REPRICING
---- ---- ---------- -------------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
David J. Arthur......................... 12/9/97 2,000 $9.97 14.91 $9.97 6 yrs. 7 mos.
Vice President, Engineering 12,000 15.19 7 yrs. 5 mos.
and PCG Operations
Joseph V. Bassi......................... 12/9/97 600 $9.97 20.38 $9.97 2 yrs. 11 mos.
Finance Director 700 24.81 4 yrs.
2,000 19.56 5 yrs. 2 mos.
5,000 12.09 5 yrs. 10 mos.
2,000 13.89 6 yrs. 4 mos.
5,000 15.19 7 yrs. 5 mos.
Tina C. Benik........................... 12/9/97 600 $9.97 20.38 $9.97 2 yrs. 11 mos.
Vice President, Legal, Corporate 1,000 24.81 4 yrs.
Secretary and General Counsel 1,000 17.61 5 yrs. 2 mos.
4,000 19.56 5 yrs. 2 mos.
12,500 12.09 5 yrs. 10 mos.
2,000 13.89 6 yrs. 4 mos.
5,000 15.44 6 yrs. 4 mos.
16,000 15.19 7 yrs. 5 mos.
Joseph F. Eastman....................... 12/9/97 3,000 $9.97 20.38 $9.97 2 yrs. 11 mos.
Vice President, Human Resources 2,250 24.81 4 yrs.
3,500 17.61 5 yrs. 2 mos.
4,000 19.56 5 yrs. 2 mos.
18,500 12.09 5 yrs. 10 mos.
2,000 13.89 6 yrs. 4 mos.
5,000 15.44 6 yrs. 4 mos.
16,000 15.19 7 yrs. 5 mos.
Steven T. Henick........................ 12/9/97 25,000 $9.97 12.09 $9.97 6 yrs.
Vice President, International 13,000 13.89 6 yrs. 4 mos.
Marketing and Sales 5,000 15.44 6 yrs. 4 mos.
35,000 15.19 7 yrs. 5 mos.
Stephen Perreault....................... 12/9/97 15,000 $9.97 16.13 $9.97 8 yrs.
Vice President, Manufacturing
David A. Rogers......................... 12/9/97 3,000 $9.97 20.38 $9.97 2 yrs. 11 mos.
Vice President, U.S. Sales and Marketing 2,250 24.81 4 yrs.
3,500 17.61 5 yrs. 2 mos.
4,000 19.56 5 yrs. 2 mos.
5,000 12.09 5 yrs. 10 mos.
4,000 15.44 6 yrs. 4 mos.
15,000 15.19 7 yrs. 5 mos.
John T. Ruggieri........................ 12/9/97 1,500 $9.97 20.38 $9.97 2 yrs. 11 mos.
Senior Vice President, Treasurer and
Chief Financial Officer 1,250 24.81 4 yrs.
1,000 17.61 5 yrs. 2 mos.
4,000 19.56 5 yrs. 2 mos.
10,000 12.09 5 yrs. 10 mos.
5,000 15.44 6 yrs. 4 mos.
16,000 15.19 7 yrs. 5 mos.
Gary S. Simpson......................... 12/9/97 400 $9.97 20.38 $9.97 2 yrs. 11 mos.
Corporate Controller 400 24.81 4 yrs.
1,000 19.56 5 yrs. 2 mos.
2,500 12.09 5 yrs. 10 mos.
3,000 13.89 6 yrs. 4 mos.
5,000 15.19 7 yrs. 5 mos.
</TABLE>
12
<PAGE> 15
REPORT OF THE COMPENSATION COMMITTEE
ON REPRICING OF OPTIONS
In December 1997, the Compensation Committee considered the options held by
the Company's key management and the fact that a decline in the price of the
Class A common stock of the Company had resulted in a substantive number of
stock options granted pursuant to both the Company's Incentive Stock Option Plan
and the Non-Qualified Stock Option Plan having exercise prices well above the
recent trading prices of the Class A common stock, thereby substantially
impairing the effectiveness of such options as performance incentives.
In view of this decline, the Committee determined that (i) the Company's
success in the future would depend in large part on its ability to retain a
number of its highly skilled technical and managerial personnel; (ii)
competition for such personnel would be intense; (iii) the loss of key employees
could have a significant adverse impact on the Company's business; and (iv) it
would be important and cost-effective to provide equity incentives to key
employees and certain executive officers of the Company to improve the Company's
performance and the value of the Company for its stockholders. The Committee
recognized that an exchange of existing options with exercise prices higher than
fair market value for options granted at fair market value, albeit for fewer
number of shares subject to options, would restore incentives to key employees
because of the increased potential for appreciation. The Committee also
recognized that it could require the new options to be subject to new vesting
restrictions so that optionees participating in the exchange would have
incentives to remain with the Company. Considering these factors, the Committee
determined it to be in the best interests of the Company and its stockholders to
restore the incentives for key employees and certain executive officers to
remain as employees of the Company by granting replacement stock options under
the Non-Qualified Stock Option Plan at the optionee's election, with restarted
vesting and exercise prices equal to the then current market value.
Accordingly, on December 9, 1997 the Committee approved an offer to certain
key employees of the Company, including certain executive officers (but
excluding the Chairman, the Chief Executive Officer and the Chief Operating
Officer) to exchange outstanding options with exercise prices above the then
current market price for new options with an exercise price equal to the current
market price ("New Options"). All New Options terminate no later than ten (10)
years from the date of the grant. Optionees who participated in the exchange
received a lower exercise price in exchange for the cancellation of the holder's
exchanged options and forfeiture of accrued vesting on the exchanged options. In
addition, optionees who participated in the exchange received a lesser number of
New Options than the number of options surrendered for cancellation. The offer
to exchange options was made on December 9, 1997 and eligible optionees had to
accept the offer by December 30, 1997. Options for 724,100 shares with exercise
prices ranging from $12.09 to $24.81 were exchanged for options for 477,001
shares at an exercise price of $9.97, the fair market value of the Company's
Class A common stock on December 9, 1997.
See "Report to Stockholders on Compensation Matters -- Long-Term
Incentives" for further information concerning the repricing.
1997 COMPENSATION COMMITTEE
Bernard V. Buonanno, Jr.
H. Frederick Krimendahl II
Terrence Murray, Chairman
13
<PAGE> 16
PERFORMANCE GRAPH
The following graph compares the market performance of the Company's Class
A common stock to the American Stock Exchange Market Value Index and Peer Group
Index over the Company's last five fiscal years. The graph assumes that the
value of the investment in the Company's Class A common stock and each index was
$100 at December 31, 1992 and that all dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
PEER AMEX
MEASUREMENT PERIOD A.T. CROSS GROUP MARKET
(FISCAL YEAR COVERED) COMPANY INDEX INDEX
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 83.29 92.43 118.81
1994 78.20 86.50 104.95
1995 90.62 113.28 135.28
1996 73.03 106.50 142.74
1997 66.54 124.13 171.76
</TABLE>
On a worldwide basis, A. T. Cross Company is the only major manufacturer of
quality writing instruments that is not either privately held or part of a
consolidated group. Therefore, relative performance data for the Company's
primary competition is not readily available. The peer group included in this
performance graph represents three publicly-traded companies (Hunt Manufacturing
Company; Pentech International, Inc.; A.T. CROSS Company) based in the United
States and included in Standard Industrial Classification (SIC) Code 3951 "Pens,
Mechanical Pencils and Parts."
14
<PAGE> 17
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
REMUNERATION 15 20 25 30 35
------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 25,000 $ 6,000 $ 8,000 $ 10,000 $ 10,000 $ 10,000
50,000 12,000 16,000 20,000 20,000 20,000
75,000 18,000 24,000 30,000 30,000 30,000
100,000 24,000 32,000 40,000 40,000 40,000
150,000 36,000 48,000 60,000 60,000 60,000
200,000 48,000 64,000 80,000 80,000 80,000
300,000 72,000 96,000 120,000 120,000 120,000
400,000 96,000 128,000 160,000 160,000 160,000
500,000 120,000 160,000 200,000 200,000 200,000
</TABLE>
- --------------------------------------------------------------------------------
The Company maintains a non-contributory qualified retirement plan for the
benefit of its employees, including the individuals named in the Summary
Compensation Table. In addition, participants in the plan whose retirement
benefits would exceed amounts permitted under the Internal Revenue Code
participate in a non-qualified excess retirement plan which provides a
supplemental unfunded benefit equal to the amount of any benefit that would have
been payable under the qualified retirement plan but for certain limitations
under the Internal Revenue Code. The benefits set forth in the Pension Plan
Table reflect the aggregate of the benefits under both the qualified and
non-qualified plans. In each case, the indicated benefit will be reduced by the
individual's social security credit. The qualified plan and the non-qualified
plan are collectively referred to as the "Plan".
Covered compensation under the Plan includes base salary, cash bonuses,
overtime pay, and amounts contributed by the employee to the A.T. Cross Savings
Plan maintained by the Company under Section 401(k) of the Internal Revenue
Code. The Salary and Bonus columns of the Summary Compensation Table set forth
previously, less director fees, reflect all covered compensation of executive
officers for 1997.
As of December 31, 1997, each of the individuals named in the Summary
Compensation Table was credited with fourteen years of service under the Plan
with the exception of Steven T. Henick, who was credited with four years of
service.
The amounts payable shown in the above Table are based on the following
assumptions:
(i) The individual shall have retired at the normal retirement age of
65,
(ii) "Average pay" is the highest average of the covered compensation
paid to such individual over five consecutive years preceding retirement,
and
(iii) Benefits are paid in the form of a straight-life annuity. Payment
options for spousal benefits are available.
15
<PAGE> 18
APPROVAL OF THE OMNIBUS INCENTIVE PLAN
On February 10, 1998, the Board of Directors adopted the Company's Omnibus
Incentive Plan (the "Omnibus Plan") subject to shareholder approval at the
Annual Meeting of Stockholders. The Omnibus Plan is designed to replace the
Company's Non-Qualified Stock Option Plan and Incentive Stock Option Plan. The
Incentive Stock Option Plan expired on February 4, 1998. The Omnibus Plan
permits the Compensation Committee to make various long-term incentive awards,
generally equity based, to officers and key employees of the Company from one
pool of reserved shares. The Board of Directors believes that an omnibus plan
that includes various kinds of awards (as described below) will provide
increased flexibility to the Compensation Committee in determining what vehicle
is best suited at any particular time to act as a long-term incentive. Further,
the purpose of the Omnibus Plan is to provide selected eligible employees of the
Company and its subsidiaries an opportunity to participate in the Company's
future by offering them long-term performance-based and other incentives and
equity interests in the Company so as to attract, retain, and motivate
management personnel.
As of February 27, 1998, there were approximately 600,000 shares of Class A
common stock available for the grant of options under the Non-Qualified Stock
Option Plan and the Incentive Stock Option Plan, which shares, if the Omnibus
Plan is approved by the shareholders, will be made available for grant under the
Omnibus Plan. In addition, the Board has recommended that the number of shares
available for the grant of Awards under the Omnibus Plan on and after December
31, 1997 be increased by 200,000 shares of Class A common stock, for a total
number of approximately 800,000 shares of Class A common stock available for
award under the Omnibus Plan.
SUMMARY OF THE OMNIBUS INCENTIVE PLAN
A summary of the terms and provisions of the Omnibus Plan is set forth
below and is qualified in its entirety by reference to the full text of the
Omnibus Plan set forth as Exhibit A to the Proxy Statement. Capitalized terms
used and not otherwise defined in this summary have the meaning ascribed to them
in the Omnibus Plan.
The Omnibus Plan is administered by the Compensation Committee. So long as
it acts consistently with the express provisions of the Omnibus Plan, the
Compensation Committee has the authority to (a) determine the persons to whom
Awards shall be granted; (b) determine the size of and to grant Awards; (c)
determine the terms and conditions applicable to Awards; (d) determine the terms
and provisions of Award Agreements; (e) interpret the Omnibus Plan, and (f)
prescribe, amend and rescind rules and regulations relating to the Omnibus Plan.
The Board may suspend, terminate, modify or amend the Omnibus Plan at any
time without shareholder approval except to the extent that shareholder approval
is required by law, exchange requirements, the Company's Articles of
Incorporation or by-laws. The Board may not, however, without the consent of the
Employee to whom an Award was previously granted, adversely affect the rights of
that Employee under the Award.
The Omnibus Plan provides for grants to eligible Employees of Awards
including but not limited to (a) options to purchase shares of Common Shares
("Options") consisting of (i) Incentive Stock Options at not less than the full
market value on the date of grant (except in the case of a shareholder
possessing more than 10% of the total combined voting power of all classes of
Company stock, in which case the exercise price shall be not less than 110% of
the fair market value on the date of grant); (ii) Non-qualified Stock Options at
an exercise price determined by the Compensation Committee; (b) Stock
Appreciation Rights (either Tandem or Freestanding) which are rights to receive
an amount equal to the increase, between the date of grant and the date of
exercise, in the fair market value of the number of shares of Common Shares
subject to the Stock Appreciation Right; (c) shares of Restricted Stock which
are Common Shares granted to an Employee but which have certain conditions
attached to them which must be satisfied in order for the Employee to have
unencumbered rights to the Restricted Stock; and (d) Performance Awards which
are Awards in Common Shares or cash and which may be awarded based on the extent
to which the Employee achieves selected performance objectives over a specified
period of time. All material terms of such Awards shall be determined by the
Compensation Committee. At the discretion of the Compensation Committee, in the
event of a Change in Control, certain Awards may vest immediately.
Pursuant to the terms of the Omnibus Plan, at the discretion of the
Compensation Committee, Awards may be granted to Employees of the Company or its
Affiliates, including directors of the Company, except that non-employee
directors are only eligible to receive Non-Qualified Stock Options under an
automatic formula
16
<PAGE> 19
award as set forth in Paragraph 6(f) of the Omnibus Plan. (That automatic
formula award is identical in terms to the formula award contained in the
Non-Qualified Stock Option Plan. During 1997, the formula under the
Non-Qualified Stock Option Plan entitled each director (including employee
directors) to receive options to purchase 1,740 shares, with the exception of
Mr. McDermott who received options to purchase 1,653 shares in accordance with
the formula. All options have an exercise price of $9.6875 per share.) The
approximate number of persons eligible to receive Awards under the Plan is 60.
Unless earlier terminated by the Board of Directors, the Omnibus Plan
continues indefinitely, except that no Incentive Stock Option shall be granted
more than 10 years after the Effective Date. The market value of the stock on
February 27, 1998 was $10.9375.
TAX CONSEQUENCES OF OPTION AWARDS
No income is recognized by an optionee when an incentive stock option is
granted or exercised. If the stock obtained upon exercise is sold more than one
year after exercise and two years after grant, the difference between the option
price and the amount realized on the sale is taxable to the optionee as
long-term capital gain. The Company is not entitled to a deduction as a result
of the grant or exercise of an incentive stock option or the sale of the stock
acquired upon exercise if the stock is held by the optionee for the requisite
periods.
If, however, the stock acquired upon exercise of an incentive stock option
is sold less than one year after exercise or less than two years after grant,
the lesser of (i) the difference between the fair market value on the date of
exercise and the option price or (ii) the difference between the amount realized
on the sale and the option price is taxable to the optionee as ordinary income
and the Company is entitled to a corresponding deduction. The excess of the
amount realized on the sale over the fair market value on the date of exercise,
if any, is taxable as long-term or short-term capital gain, depending on the
length of time the stock is held.
The excess of the fair market value of the stock over the option price on
the date of exercise of an incentive stock option will increase the optionee's
alternative minimum taxable income, which, in certain instances, may result in
the optionee's being subject to the alternative minimum tax.
There will be no federal income tax consequences to either the optionee or
the Company on the grant of a non-qualified option. Upon the exercise of a
non-qualified option, the optionee has taxable ordinary income equal to the
excess of the fair market value of the shares of stock received on the exercise
date (or the date on which any substantial risk of forfeiture lapses) over the
option price of the shares. The Company will be entitled to a federal income tax
deduction in an amount equal to such excess. Upon a subsequent sale or taxable
exchange of shares acquired upon exercise of an option, an optionee will
recognize long-term or short-term capital gain or loss equal to the difference
between the amount realized on the sale and the tax basis of such shares.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE OMNIBUS
INCENTIVE PLAN AS SET FORTH IN EXHIBIT A TO THE PROXY STATEMENT, AND THE
ENCLOSED PROXY WILL BE VOTED IN FAVOR THEREOF UNLESS THE PROXY SPECIFICALLY
INDICATES OTHERWISE.
17
<PAGE> 20
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER
PARTICIPATION
As indicated under "Report to Stockholders on Compensation Matters" at page
7 above, the 1997 compensation of Messrs. Bradford R. Boss, Russell A. Boss and
John E. Buckley, all of whom are members of the Board of Directors of the
Company, was fixed by the Compensation Committee. The Compensation Committee is
comprised of Terrence Murray, H. Frederick Krimendahl II, and Bernard V.
Buonanno, Jr. The compensation of the remaining executive officers of the
Company was recommended by the Messrs. Boss and Mr. Buckley and approved by the
Compensation Committee.
Bradford R. Boss is a member of the compensation committee of the board of
directors of Fleet Financial Group, Inc. Terrence Murray, a director of the
Company, is Chairman, President and Chief Executive Officer of Fleet Financial
Group, Inc. and is Chairman of the Company's Compensation Committee.
APPROVAL OF INDEPENDENT
PUBLIC ACCOUNTANTS
At the annual meeting, holders of Class B common stock will appoint
auditors to examine the financial statements of the Company and its subsidiaries
for the year 1998. Deloitte & Touche LLP has been nominated by the Board of
Directors as such auditors. One or more representatives of Deloitte & Touche LLP
plan to attend the annual meeting and will be afforded the opportunity to make a
statement and answer questions.
At a meeting held on July 11, 1996 the Audit Committee recommended and
the Board of Directors approved the engagement of Deloitte & Touche LLP as its
independent auditors for the year ending December 31, 1996 to replace the firm
of Ernst & Young LLP, who were dismissed as auditors of the Company effective
July 11, 1996. The appointment of Deloitte & Touche LLP as the Company's
independent accountants for 1996 was effective upon the dismissal of Ernst &
Young LLP, subject to the approval of the Company's Class B shareholders which
was obtained on July 11, 1996. The reports of Ernst & Young LLP on the Company's
financial statements for the past two years did not contain an adverse opinion
or a disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope, or accounting principles. In connection with the audits of the
Company's financial statements for each of the two years ended December 31,
1995, there were no disagreements with Ernst & Young LLP on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope and procedures which, if not resolved to the satisfaction of Ernst & Young
LLP, would have caused Ernst & Young LLP to make reference to the matter in its
report.
At least twice a year the Audit Committee reviews and approves the
services that may be provided by its auditors during the year, considers the
effect that performing such services might have on audit independence, and
approves guidelines under which management may engage the auditors to perform
non-audit services. It also reviews the services performed to see that they are
consistent with its guidelines.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than 10 percent of
the Company's Class A common stock ("Insiders"), to file with the Securities and
Exchange Commission and the American Stock Exchange reports of ownership and
changes in ownership of such stock. Insiders are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) reports they file. Based solely on a review of the copies of such
reports furnished to the Company, the Company believes that during 1997 its
Insiders complied with all applicable Section 16(a) filing requirements except
that Edwin G. Torrance, a director, inadvertently failed to include 800 Class A
common shares purchased in September 1997 on his Form 4 and Galal P. Doss, a
greater than 10 percent shareholder, inadvertently failed to file on a timely
basis a Form 3 reflecting his greater than 10% ownership, and a Form 4,
reflecting additional purchases.
OTHER MATTERS
The Board of Directors and management know of no matter of business to
be brought before the meeting which is not referred to above. However, if other
business upon which holders of Class A common stock are entitled to vote shall
properly come before the meeting, it is the intention of the persons named in
the enclosed proxy or any substitute to vote said proxy in accordance with their
best judgment.
IMPORTANT
NO MATTER HOW SMALL YOUR HOLDINGS, YOU ARE RESPECTFULLY REQUESTED TO
SIGN, DATE, AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED, PREPAID ENVELOPE AT
YOUR EARLIEST CONVENIENCE.
Tina C. Benik
Corporate Secretary
Dated: March 20, 1998
18
<PAGE> 21
EXHIBIT A
A. T. CROSS COMPANY
OMNIBUS INCENTIVE PLAN
EFFECTIVE APRIL 23, 1998
1. Purpose
The purpose of the A. T. Cross Company Omnibus Incentive Plan (the "Omnibus
Plan") is to attract and retain the best available talent and encourage the
highest level of performance by employees and other persons who perform services
for A. T. Cross Company (the "Company"). By affording eligible persons the
opportunity to acquire proprietary interests in the Company and by providing
them incentives to put forth maximum efforts for the success of the Company's
business, the Omnibus Plan is intended to serve the best interests of the
Company and its stockholders.
2. Definitions
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company, and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.
"Award" shall mean any Option, Stock Appreciation Right, Restricted Stock
Award, Performance Award or other Stock-Based Award.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean (i) a change in the beneficial ownership (as
defined in Rule 16(a)-(1)(a)(ii)) of more than fifty percent (50%) of the Class
B common stock of the Company, or (ii) approval by Company stockholders of a
consolidation or merger in which the Company will not be the surviving
corporation, or the sale of substantially all of the Company's assets.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Compensation Committee of the Board or such
other committee consisting of not less than two Board members designated by the
Board to administer the Omnibus Plan.
"Common Shares" shall mean shares of the Class A common stock, $ 1.00 par
value, of the Company.
"Company" shall mean A. T. Cross Company, a Rhode Island corporation.
"Effective Date" means April 23, 1998.
"Employee" shall mean an employee of the Company or of any Affiliate, or a
Director of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of the Common Shares shall mean the average of the high
and low prices of the Common Shares as reported by the American Stock Exchange,
or the Fair Market Value of any other property or other item being valued as
determined by the Committee in its sole discretion.
"Freestanding Right" shall mean a Stock Appreciation Right awarded by the
Committee pursuant to Paragraph 7 of the Omnibus Plan other than in connection
with an Option.
"Incentive Stock Option" shall mean the right to purchase Common Shares
from the Company that is granted under Section 6 of the Omnibus Plan and that is
intended to meet the requirements of Section 422 of the Code or any successor
provision thereto.
"Insider" shall mean, at any time, an individual who is an officer,
director, or 10% shareholder of the Company within the meaning of Exchange Act
Rule 16a-1(f) as promulgated and interpreted by the SEC under the Exchange Act,
or any successor rule or regulation thereto as in effect from time to time.
"Non-Qualified Stock Option" shall mean a right to purchase Common Shares
from the Company that is granted under Section 6 of the Omnibus Plan and that is
not intended to be an Incentive Stock Option.
<PAGE> 22
"Omnibus Plan" shall mean this A. T. Cross Company Omnibus Incentive Plan.
"Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option.
"Other Stock-Based Award" shall mean any right granted under Section 10 of
the Plan.
"Participant" shall mean any Employee selected by the Committee to receive
an Award under the Plan.
"Performance Award" shall mean any right granted under Section 9 of the
Plan.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Qualified Domestic Relations Order" shall mean a domestic relations order
meeting such requirements as the Committee shall determine in its sole
discretion.
"Restricted Period" shall mean the period during which Restricted Stock and
Restricted Stock Units may be forfeited to the Company.
"Restricted Stock" shall mean Common Shares granted under Paragraph 8 of
the Omnibus Plan.
"Restricted Stock Unit" shall mean any unit granted under Paragraph 8 of
the Omnibus Plan.
"Rule 16(a)-(1)(a)(ii)" shall mean Rule 16(a)-(1)(a)(ii) as promulgated and
interpreted by the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated and interpreted by the
SEC under the Exchange Act, or any successor rule or regulation thereto as in
effect from time to time.
"Stock Appreciation Right" shall mean any Tandem Right or Freestanding
Right granted under Paragraph 7 of the Omnibus Plan.
"Tandem Right" shall mean a Stock Appreciation Right awarded by the
Committee in connection with an Option pursuant to Paragraph 7 of the Omnibus
Plan.
"Total Disability" shall mean a determination by the Committee that the
Employee is unable to perform the duties required of him or her by the Company
as a result of any physical or mental condition as set forth in the Company's
Long Term Total Disability Program.
3. Scope and Duration
Awards under the Omnibus Plan may be granted in the form of Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Shares, Restricted Stock Units, Performance Awards or Other Stock-Based Awards.
The maximum aggregate number of Common Shares as to which Awards may be granted
from time to time under the Omnibus Plan is 800,000 shares, subject to
adjustment as provided in Paragraph 14. The Common Shares available may be in
whole or in part, as the Board shall from time to time determine, authorized but
unissued shares or issued shares re-acquired by the Company. Unless otherwise
provided by the Committee, Common Shares covered by expired, terminated or
forfeited Awards, Awards which are settled for cash or consideration other than
the delivery of Common Shares, or Common Shares which are used to exercise any
Award or to satisfy the withholding tax liabilities of any Award will be
available for subsequent awards under the Omnibus Plan. No Incentive Stock
Option shall be granted more than 10 years after the Effective Date.
4. Administration
The Omnibus Plan shall be administered by the Committee. The Committee
shall have plenary authority in its discretion, subject to and not inconsistent
with the express provisions of the Omnibus Plan, to grant Awards, to determine
the terms and conditions applicable to Awards, to determine the persons to whom,
and the time or times at which, Awards shall be granted and the number of Common
Shares to be covered by each grant; to determine the terms and provisions of the
Award Agreements entered into in connection with Awards under the Omnibus Plan;
to interpret the Omnibus Plan; to prescribe, amend and rescind rules and
regulations relating to the Omnibus Plan; and to make all other determinations
provided for in the Omnibus Plan, or deemed necessary or advisable for the
administration of the Omnibus Plan. To the extent permissible by law, the
Committee may delegate to one or more of its members or to one or more agents
such
A-2
<PAGE> 23
administrative duties as it may deem advisable, and the Committee or any person
to whom it has delegated duties as aforesaid may employ one or more persons to
render advice with respect to any responsibility the Committee or such person
may have under the Omnibus Plan.
5. Eligibility; Factors to be Considered in Granting Awards
Subject to the discretion of the Committee, Awards may be granted to any
Employee of the Company or its Affiliates, or a director of the Company, except
that a non-employee director shall not be granted an Incentive Stock Option. In
determining the Employees to whom Awards shall be granted and the number of
Common Shares or units to be covered by each Award, the Committee shall take
into account the nature of the Employee's duties, the present and potential
contributions to the success of the Company, and such other factors as it shall
deem relevant in connection with accomplishing the purposes of the Omnibus Plan.
A director of the Company who is not also an employee of the Company will not be
eligible to receive an Award except as provided in Paragraph 6(f).
No award of Incentive Stock Options shall result in the aggregate Fair
Market Value (determined as of the date of grant) of Common Shares with respect
to which Incentive Stock Options are exercisable for the first time by any
Employee during any calendar year being in excess of $100,000. No Employee shall
be granted Awards covering more than 200,000 Common Shares in any two-year
period.
6. Stock Options
(a) Exercise Price
The purchase price of the Common Shares covered by each Option shall be
determined by the Committee, but in the case of an Incentive Stock Option shall
not be less than 100% of the Fair Market Value (110% in the case of a
shareholder possessing more than 10% of the total combined voting power of all
classes of Company stock) of the Common Shares on the date the Option is
granted, or if there are no sales on such date, on the next preceding day on
which there were sales.
(b) Terms of Options
The term of each Incentive Stock Option granted under the Omnibus Plan
shall not be more than 10 years (5 years in the case of a shareholder possessing
more than 10% of the total combined voting power of all classes of Company
stock) from the date of grant, but shall otherwise be such period of time as the
Committee shall determine, subject to earlier termination as provided in
Paragraphs 11 and 12. The term of each Non-Qualified Stock Option granted under
the Omnibus Plan shall be such period of time as the Committee shall determine,
subject to earlier termination as provided in Paragraphs 11 and 12.
(c) Exercise of Options
(i) Subject to the provisions provided herein, an Option granted under
the Omnibus Plan shall become vested as determined by the Committee. The
Committee may, in its discretion, determine as a condition of any Option,
that all or a stated percentage of the Option shall become exercisable, in
installments or otherwise, only after the completion of a specified service
requirement, or the satisfaction or occurrence of other conditions. The
Board of Directors may also, in its discretion, accelerate the
exercisability of any Option at any time and provide in any Award Agreement
that the Option shall become immediately exercisable as to all Common
Shares remaining subject to the Option upon a Change in Control.
(ii) An Option may be exercised at any time or from time to time
(subject, in the case of an Incentive Stock Option, to such restrictions as
may be imposed by the Code), as to any or all full shares as to which the
Option has become exercisable. Notwithstanding the foregoing provision, no
Option may be exercised without the prior consent of the Committee by an
Insider until the expiration of six months from the date of the grant of
the Option.
(iii) Except as provided in Paragraphs 11, 12 and 13, no Option may be
exercised at any time unless the holder thereof is then an Employee of the
Company or one of its Affiliates.
A-3
<PAGE> 24
(d) Payment
The purchase price of the Common Shares as to which an Option is exercised
shall be paid in full at the time of exercise. Payment may be made (i) in cash,
which may be paid by check, or other instrument acceptable to the Company, (ii)
with the consent of the Committee, the Chief Executive Officer or the Chief
Operating Officer, in Common Shares valued at the Fair Market Value on the date
prior to exercise, or if there were no sales on such date, on the next preceding
day on which there were sales, (iii) with the consent of the Committee, and
subject to such terms and conditions as it may determine, by surrender of
outstanding Awards under the Omnibus Plan, or (iv) any combination of the above.
In addition, any amount necessary to satisfy applicable federal, state or local
tax requirements shall be paid promptly upon notification of the amount due. The
Committee, the Chief Executive Officer or the Chief Operating Officer, may
permit such amount to be paid in Common Shares previously owned by the Employee,
or a portion of the Common Shares that otherwise would be distributed to such
Employee upon exercise of the Option, or a combination of cash and such Common
Shares.
(e) Change in Control
In the event of a Change in Control while any Option remains outstanding,
unless the Board of Directors determines or the terms of any Award Agreement
provide otherwise, all Options shall become immediately exercisable, and shall
expire as of the effective date of any such Change in Control. In lieu of
delivering all or any portion of the Common Shares as to which an Option has
been exercised within sixty (60) days of a Change in Control, the Board of
Directors may elect to pay each Optionee, not later than the effective date of
any such transaction, an amount in cash equal to the excess of the Fair Market
Value of the Common Shares the Optionee would have received upon exercise of the
Option over the aggregate exercise price.
(f) Grants to Directors
On October 1 of each year, or if such day shall not be a trading day on the
American Stock Exchange or such other principal stock exchange on which the
Common Shares shall be listed for trading at the time, on the next such trading
day, a Non-Qualified Stock Option for the purchase of Common Shares shall,
without further action of the Board or the Committee, be granted automatically
to each member of the Board. The number of shares which shall be the subject of
an option granted to a director pursuant to this paragraph shall be derived by
dividing (i) the compensation paid or payable to such director for his or her
services to the Company in his or her capacity as director during the next
preceding calendar year by (ii) the mean between the high and low trading prices
on the American Stock Exchange or such other principal stock exchange referred
to above, for one Common Share on the last business day of such next preceding
calendar year, or if no Common Shares shall have been traded on such day, on the
next previous day on which such Common Shares shall have been traded. The term
of each such option shall be ten (10) years. The purchase price per share with
respect to an option granted pursuant to this Paragraph 6(f) shall be the mean
between the high and the low trading pries of the Company's Class A common stock
on the date that such option is granted, or, if no shares of such common stock
shall have been traded on such date, on the next previous date on which shares
of such common stock shall have been traded. No option granted to a director
hereunder may be exercised in whole or in part prior to the first anniversary of
the day of such grant.
7. Stock Appreciation Rights
(a) Awards
The Committee may award Stock Appreciation Rights to Employees of the
Company or any of its Affiliates. Stock Appreciation Rights may be either Tandem
Rights or Freestanding Rights. Tandem Rights may be awarded either at the time
the Option is granted or at any time prior to the exercise of the Option.
(b) Terms and Conditions
(i) Each Tandem Right shall be subject to the same terms and conditions
as the related Option and shall be exercisable only to the extent the
Option is exercisable.
(ii) The price per share specified in a Freestanding Right shall be
determined by the Committee, but in no event shall be less than the Fair
Market Value of the Common Shares as of the date of grant. The term of each
Freestanding Right shall be such period of time as the Committee shall
determine. Subject to the provisions of the Omnibus Plan, each Freestanding
Right shall become vested as determined by the
A-4
<PAGE> 25
Committee. Prior to becoming 100% vested, each Freestanding Right shall
become exercisable, in installments or otherwise, as the Committee shall
determine. The Board of Directors may also, in its discretion, accelerate
the exercisability of any Freestanding Right at any time, including a
Change in Control.
(c) Exercise
(i) Upon exercise of a Stock Appreciation Right (subject, in the case of
a Tandem Right, to the surrender of the related Option or any unexercised
portion thereof which the Employee determines to surrender for this
purpose), the Employee shall be entitled to receive, subject to the
provisions of the Omnibus Plan and such rules and regulations as from time
to time may be established by the Committee, a payment having an aggregate
value equal to (A) the excess of (i) the Fair Market Value on the exercise
date of one Common Share over (ii) the Option price per share, in the case
of a Tandem Right, or the price per share specified in the terms of a
Freestanding Right, times (B) the number of Common Shares with respect to
which the Stock Appreciation Right shall have been exercised.
(ii) Upon exercise of a Tandem Right, the number of Common Shares
subject to exercise under the related Option shall automatically be reduced
by the number of Common Shares represented by the Option or portion thereof
surrendered.
(iii) A Tandem Right related to an Incentive Stock Option may only be
exercised if the Fair Market Value of a Common Share on the exercise date
exceeds the Option price.
(d) Payments
(i) The payment described in subparagraph (c)(i) above shall be made in
the form of cash, Common Shares, or a combination thereof, as elected by
the Employee, provided that the Committee shall have sole discretion to
consent to or disapprove the election of an officer or director to receive
all or part of a payment in cash.
(ii) If upon exercise of a Stock Appreciation Right the Employee is to
receive a portion of the payment in Common Shares, the number of shares
received shall be determined by dividing such portion by the Fair Market
Value of a share on the exercise date. The number of Common Shares received
may not exceed the number of Common Shares covered by any Option or portion
thereof surrendered. Cash will be paid in lieu of any fractional share.
(iii) Whether payments to Employees upon exercise of Tandem Rights or
Freestanding Rights are made in cash, Common Shares or a combination
thereof, the Committee shall have sole discretion as to timing of the
payments, whether in one lump sum or in annual installments or otherwise
deferred, which deferred payments may in the Committee's sole discretion
(i) bear amounts equivalent to interest or cash dividends, (ii) be treated
as invested in the manner from time to time determined by the Committee,
with dividends or other income thereon being deemed to have been so
reinvested, or (iii) for the convenience of the Company, contributed to a
trust, which may be revocable by the Company or subject to the claims of
its creditors, for investment in the manner from time to time determined by
the Committee and set forth in the instrument creating such trust, all as
the Committee shall determine.
(iv) No payment will be required from the Employee upon exercise of a
Stock Appreciation Right, except that any amount necessary to satisfy
applicable federal, state or local tax requirements shall be withheld or
paid promptly upon notification of the amount due and prior to or
concurrently with delivery of cash or a certificate representing shares.
The Committee may permit such amount to be paid in (i) Common Shares
previously owned by the Employee, (ii) a portion of the Common Shares that
otherwise would be distributed to such Employee upon exercise of the right,
or (iii) a combination of cash and Common Shares.
8. Restricted Stock or Restricted Stock Units
(a) Awards
Restricted Stock or Restricted Stock Units may be awarded by the Committee
in its sole discretion. At the time an award of Restricted Stock or Restricted
Stock Units is made, the Committee shall (i) establish a Restricted Period
applicable to such award, (ii) prescribe conditions for the lapse, including
incremental
A-5
<PAGE> 26
lapse, of restrictions during the Restricted Period, or for the lapse or
termination of restrictions upon the satisfaction or occurrence of other
conditions in addition to or other than the expiration of the Restricted Period,
including a Change in Control, and (iii) determine all other terms and
conditions of such award, including voting and dividend or dividend equivalent
rights.
(b) Restrictions on Transfer
Upon the grant of Restricted Stock, a stock certificate representing the
number of Common Shares equal to the number of Restricted Stock granted to an
Employee shall be registered in the Employee's name but shall be held in custody
by the Company for the Employee's account. The Employee shall not be entitled to
delivery of the certificate or to sell, transfer, assign, pledge or otherwise
encumber the Restricted Stock until the expiration of the Restricted Period and
the satisfaction of any other conditions prescribed by the Committee. Upon the
forfeiture of any Restricted Stock, such forfeited Restricted Stock shall be
transferred to the Company without further action by the Employee.
(c) Delivery of Shares
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Committee or at such
earlier time as provided for in Paragraph 12, a stock certificate for the number
of Common Shares with respect to which the restrictions have lapsed, or one
Common Share for each Restricted Stock Unit with respect to which the
restrictions have lapsed, shall be delivered, free of all such restrictions,
except any that may be imposed by law, to the Employee or the Employee's
beneficiary or estate, as the case may be. Fractional shares will be paid in
cash.
(d) Payment
No payment will be required from the Employee upon the issuance or delivery
of any Common Shares, except that any amount necessary to satisfy applicable
federal, state or local tax requirements shall be withheld or paid promptly upon
notification of the amount due and prior to or concurrently with the issuance or
delivery of a certificate representing such shares. The Committee may permit
such amount to be paid in (i) Common Shares previously owned by the Employee,
(ii) a portion of the Common Shares that otherwise would be distributed to such
Employee upon the lapse of the restrictions applicable to the Restricted Stock
or Restricted Stock Units, or (iii) a combination of cash and Common Shares.
9. Performance Awards
(a) Grant
Performance Awards may be granted to any Employee by the Committee in its
sole discretion. A Performance Award shall consist of a right that is (i)
denominated in cash or Common Shares, (ii) valued, as determined by the
Committee, in accordance with the achievement of such performance goals during
such performance periods as the Committee shall establish, and (iii) payable at
such time and in such form as the Committee shall determine.
(b) Terms and Conditions
Subject to the terms of the Plan and any applicable Award Agreement, the
Committee shall determine (i) the performance goals to be achieved during any
performance period, (ii) the length of any performance period, (iii) the amount
of any Performance Award, (iv) the amount and kind of any payment or transfer to
be made pursuant to any Performance Award, and (v) all other terms and
conditions of any Performance Award, including the consequences of death,
Disability, termination of employment and Change in Control.
(c) Payment of Performance Awards
Performance Awards may be paid in a lump sum or in installments following
the close of the performance period or, in accordance with procedures
established by the Committee, on a current or deferred basis.
10. Other Stock-Based Awards
The Committee shall have authority to grant to eligible Employees an "Other
Stock-Based Award", which shall consist of any right that is an Award of Common
Shares or an Award denominated or payable in, valued in whole or in part by
reference to, or otherwise based on or related to, Common Shares (including,
without
A-6
<PAGE> 27
limitation, securities convertible into Common Shares), as deemed by the
Committee to be consistent with the purposes of the Omnibus Plan, other than an
Award described in Paragraphs 6 through 9 above.
11. Termination of Employment
Unless otherwise determined by the Committee, and subject to such
restrictions as may be imposed by the Code in the case of any Incentive Stock
Options, in the event that the employment or service of an Employee to whom an
Option or Stock Appreciation Right has been granted under the Omnibus Plan shall
be terminated for any reason (except as set forth in Paragraph 12), such Option
or Stock Appreciation Right may, subject to the provisions of the Omnibus Plan,
be exercised, to the extent that the Employee was entitled to do so at the
termination of his employment or service, at any time within six months after
such termination, or in the case of Incentive Stock Options at any time within
ninety (90) days after such termination; provided, however, that any Option or
Stock Appreciation Right held by an Employee whose employment is terminated for
"cause" as determined by the Committee shall terminate immediately.
Unless otherwise determined by the Committee, if an Employee to whom
Restricted Shares or Restricted Stock Units have been granted ceases to be an
Employee prior to the end of the Restricted Period and the satisfaction of any
other conditions prescribed by the Committee for any reason other than death or
Total Disability, the Employee shall immediately forfeit all Restricted Shares
and Restricted Stock Units.
12. Death or Total Disability of Employee
Unless otherwise determined by the Committee, if an Employee to whom an
Award has been granted under the Omnibus Plan shall die or suffer a Disability
while employed by the Company, such Option or Stock Appreciation Right may be
exercised, to the extent it was exercisable at the date of termination, at any
time within six months after the date of the Employee's death or Total
Disability, but in no case later than the date on which the Option or Stock
Appreciation Right otherwise terminates.
13. Non-Transferability of Awards
Awards granted under the Omnibus Plan shall not be transferable other than
by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by Section 414(p) of the Code except to the
extent provided in any Award Agreement and permitted under applicable law.
14. Adjustment upon Changes in Capitalization, etc.
(i) The existence of outstanding Options or other Awards shall not
affect in any way the right or ability of the Company or its shareholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of
bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Shares or the rights hereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of
its assets or business or substantially all of the outstanding stock of the
Company, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(ii) If the Company shall effect a subdivision, consolidation or
reclassification of the Common Shares or other capital readjustment or
recapitalization, the payment of a stock dividend, or other increase or
reduction in the number of the Common Shares outstanding, without receiving
compensation therefor in money, services or property, then the number,
class, and per share price of Common Shares which are then the subject of
outstanding options hereunder shall be appropriately adjusted in such a
manner as to entitle Employees to receive, for the same aggregate cash
consideration, if applicable, the same total number and class of shares as
they would have received as a result of the event requiring the adjustment
had they owned the underlying Common Shares.
(iii) Except as hereinbefore expressly provided, the issue by the
Company of shares of stock of any class, for cash or property, or for labor
or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Common Shares then subject to outstanding options.
A-7
<PAGE> 28
15. Effective Date
The Omnibus Plan shall be effective as of April 23, 1998, provided that the
adoption of the Omnibus Plan shall have been approved by the stockholders of the
Company. The Committee may, in its discretion, grant Awards under the Omnibus
Plan, the grant, exercise or payment of which shall be expressly subject to the
conditions that, to the extent required at the time of grant, exercise or
payment, (i) if the Company deems it necessary or desirable, a Registration
Statement under the Securities Act of 1933 with respect to such Common Shares
shall be effective, and (ii) any requisite approval or consent of any
governmental authority of any kind having jurisdiction over Awards granted under
the Omnibus Plan shall be obtained.
16. Termination and Amendment
The Board may suspend, terminate, modify or amend the Omnibus Plan at any
time without shareholder approval except as may be required by applicable laws,
regulations, exchange requirements, the Company's Articles of Incorporation or
By-laws. If the Omnibus Plan is terminated, the terms of the Omnibus Plan shall,
notwithstanding such termination, continue to apply to Awards granted prior to
such termination. In addition, no suspension, termination, modification or
amendment of the Omnibus Plan may, without the consent of the Employee to whom
an Award shall theretofore have been granted, adversely affect the rights of
such Employee under such Award.
17. Miscellaneous
(a) Written Agreements
Each Award hereunder shall be evidenced by an Award Agreement which shall
contain such restrictions, terms and conditions as the Committee may require.
(b) No Right to Employment
Nothing in the Omnibus Plan or in any Award granted pursuant to the Omnibus
Plan shall confer upon any Employee any right to continue in the employ of the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any such subsidiary to terminate such employment at any time.
(c) Governing Law
The validity, construction, and effect of the Omnibus Plan and any rules
and regulations relating to the Plan and any Award Agreement shall be determined
in accordance with the laws of the State of Rhode Island without resort to such
State's conflict of laws rules.
(d) Severability
If any provision of the Omnibus Plan or any Award is or becomes or is
deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any
Employee or Award, or would disqualify the Omnibus Plan or any Award under any
law or regulations deemed applicable, or the compliance with which is deemed
desirable, including any accounting rules or regulations, by the Committee, such
provision shall be construed or deemed amended to conform to the applicable
laws, rules or regulations, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Omnibus Plan or the Award, such provision shall be stricken as to such
jurisdiction, Employee or Award and the remainder of the Omnibus Plan and any
such Award shall remain in full force and effect.
(e) Other Laws
The Committee may refuse to issue or transfer any Common Shares or other
consideration under an Award if, acting in its sole discretion, it determines
that the issuance or transfer of such Common Shares or such other consideration
might violate any applicable law or regulation or entitle the Company to recover
the same under Section 16(b) of the Exchange Act, and any payment tendered to
the Company by an Employee, other holder or beneficiary in connection with the
exercise of such Award shall be promptly refunded to the relevant Employee,
holder, or beneficiary.
A-8
<PAGE> 29
4890-PS-98
<PAGE> 30
DETACH HERE
PROXY
A.T. CROSS COMPANY
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE COMPANY'S BOARD OF DIRECTORS
The undersigned holder of Class A common stock of A.T. Cross Company does
hereby constitute and appoint Bradford R. Boss, Russell A. Boss, and Edwin G.
Torrance, or any one of them as attorneys and proxies of the undersigned, with
full power of substitution for, and in the name and stead of, the undersigned to
appear and vote all shares of Class A common stock of A.T. Cross Company held of
record in the name of the undersigned at the annual meeting of A.T. Cross
Company to be held at the offices of the Company, One Albion Road, Lincoln,
Rhode Island 02865 on Thursday, April 23, 1998 at 10:00 A.M. and at any and all
adjournments thereof as designated.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2 AND 3.
-----------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
-----------
<PAGE> 31
DETACH HERE
- --- PLEASE MARK
x VOTES AS IN
- --- THIS EXAMPLE.
<TABLE>
<CAPTION>
<S> <C> <C>
1. NUMBER OF DIRECTORS: 2. ELECTION OF CLASS A DIRECTORS: 3. APPROVAL OF OMNIBUS
Fixing the number of Class A Nominees: Terrence Murray, James C. Tappan, INCENTIVE PLAN
directors at three and Class B Andries van Dam
directors at six.
FOR AGAINST ABSTAIN FOR WITHHELD FOR AGAINST ABSTAIN
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
------- 4. OTHER BUSINESS:
In their discretion, the proxies
------- -------------------------- are authorized to vote upon such other
For all nominees except as noted business as may properly come before said
on the line above meeting or any adjournment thereof upon
which Class A common stockholders are
entitled to vote.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT -------
-------
Please date, sign and mail promptly in the enclosed envelope. This
proxy will not be used if you attend the meeting in person and so
request.
Important: Please sign exactly as your name or names appear hereon.
When signing as attorney, executor, administrator, trustee, guardian,
or in any other representative capacity, give full title as such.
Corporate stockholders sign with full corporate name by a duly
authorized officer. If a partnership, sign in partnership name by
authorized person.
Signature: Date: Signature: Date:
------------------- ------------ --------------------- -------------
</TABLE>
