<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
STARMET CORPORATION
- ------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2) of
Schedule 14A.
/ / 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 by written 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:
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(4) Date Filed:
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<PAGE>
STARMET CORPORATION
NOTICE OF THE SPECIAL MEETING IN LIEU OF
THE ANNUAL MEETING OF STOCKHOLDERS
MARCH 18, 1998, 10:00 A.M.
You are hereby notified that the Special Meeting in lieu of the Annual
Meeting of Stockholders of Starmet Corporation (the "Company") will be held on
March 18, 1998 at 10:00 a.m. at the State Street Bank building, Enterprise Room,
225 Franklin Street, Boston, Massachusetts, to consider and act upon the
following matters:
1. To fix the number of directors of the Company at six (6) and to
elect six (6) directors for the ensuing year.
2. To adopt the Company's 1998 Stock Plan.
3. To ratify the action of the Board of Directors in appointing Arthur
Andersen LLP as auditors for the Company,
4. To transact such other business as may properly come before the
meeting.
Even if you plan to attend the meeting, please be sure to sign, date and
return the enclosed proxy in the enclosed envelope to:
Boston EquiServe
P. O. Box 8200
Boston, MA 02266-5523
Attention: Jennifer Donahue
Only stockholders of record on the books of the Company at the close of
business on January 21, 1998 will be entitled to receive notice of and vote at
this meeting.
By order of the Board of Directors,
Thomas A. Wooters, Clerk
February 24, 1998
IMPORTANT
IN ORDER TO SECURE A QUORUM AND TO AVOID THE EXPENSE OF SENDING FOLLOW-UP
LETTERS, PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. YOUR
COOPERATION IS GREATLY APPRECIATED.
<PAGE>
STARMET CORPORATION
2229 MAIN STREET
CONCORD, MA 01742
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
This proxy statement and the accompanying proxy card are being mailed on or
about February 24, 1998 to the holders of the common stock of Starmet
Corporation (the "Company"), as of record on January 21, 1998. The accompanying
proxy is solicited by the Board of Directors of the Company for use at the
Special Meeting in lieu of the Annual Meeting of Stockholders to be held on
March 18, 1998, and any adjournment or adjournments thereof (hereinafter called
the "Special Meeting"). The cost of solicitation of proxies will be borne by the
Company. Directors, officers and a few employees may assist in the solicitation
of proxies by mail, telephone, telegraph, and personal interview without
additional compensation.
When a proxy is returned properly signed, the shares represented thereby
will be voted by the proxies named in accordance with the stockholder's
directions. You are urged to specify your choices on the enclosed proxy card. If
the proxy is signed and returned without specifying choices, the shares will be
voted "FOR" proposals 1, 2 and 3 and in the discretion of the proxies as to
other matters that may properly come before the Special Meeting. Sending in a
proxy will not affect a stockholder's right to attend the Special Meeting and
vote in person. A proxy may be revoked by notice in writing delivered to the
Clerk of the Company at any time prior to its use or by voting in person at the
Special Meeting. A proxy may also be revoked by a later dated proxy. A
stockholder's attendance at the Special Meeting will not by itself revoke a
proxy.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed January 21, 1998 as the record date for the
Special Meeting. Only stockholders of record on the record date are entitled to
notice of and to vote at the Special Meeting. On the record date, there were
4,786,344 shares of Common Stock, $.10 par value (the "Common Stock"), of the
Company issued and outstanding, of which 3,036,746 shares are entitled to one
vote per share. The remaining 1,749,598 outstanding shares of Common Stock are
subject to the Massachusetts Control Share Acquisition Act and, as a result,
have no voting rights and would obtain voting rights only upon authorization
from a majority of stockholders other than the holders of such shares, officers
of the Company and those directors of the Company who are also employees. See
"Massachusetts Control Share Acquisition Act" elsewhere herein.
The Company's present By-laws provide that a quorum shall consist of the
representation in person or by proxy at the Special Meeting of stockholders
entitled to vote 51% of the votes that are entitled to be cast at the meeting.
"Broker non-votes" are shares held by brokers or nominees which are present in
person or represented by proxy, but which are not voted on a particular matter
because instructions have not been received from the beneficial owner. The
effect of abstentions and broker non-votes on matters to be brought before the
Special Meeting is discussed below.
The election of directors is by plurality of the votes cast at the Special
Meeting either in person or by proxy. The approval of a majority of the votes
properly cast at the Special Meeting, either in person or by proxy, is required
to approve proposals 2 and 3 and any other business which may properly be
brought before the Special Meeting or any adjournment thereof.
<PAGE>
With regard to the election of directors, votes may be left blank, cast in
favor or withheld; votes that are left blank will be counted in favor of the
election of the directors named on the proxy. Votes that are withheld will have
the effect of a negative vote. Abstentions may be specified on all proposals
other than the election of directors and will be counted as present for purposes
of the proposal on which the abstention is noted. Abstentions and broker
non-votes will have no effect on proposals 2 and 3. Abstentions will be counted
for the purpose of determining a quorum. Broker non-votes will not be counted in
determining a quorum for any proposal.
The Board of Directors and management of the Company deem the proposals
described herein to be in the best interest of the Company. The Board of
Directors recommends that the stockholders approve the proposals described
herein. Management intends to vote their shares of Common Stock in favor of each
proposal. See "Principal and Management Stockholders." For these purposes,
management includes all directors and executive officers.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
One of the purposes of the meeting is to elect six (6) directors to serve
until the next annual meeting of stockholders and until their successors shall
have been duly elected and qualified. It is intended that the proxies solicited
by the Board of Directors will be voted in favor of the six (6) nominees named
below, unless otherwise specified on the proxy card. All of the nominees are
currently members of the Board and each of the nominees has consented to be
named and to serve if elected. There are no family relationships between any
nominees, directors or executive officers of the Company.
The Board knows of no reason why any of the nominees will be unavailable or
unable to serve as a director, but in such event, proxies solicited hereby will
be voted for the election of another person or persons to be designated by the
Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
NOMINEES LISTED BELOW.
The following are summaries of the background and business experience and
descriptions of the principal occupations of the nominees:
<TABLE>
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT
NAME AGE AND PRIOR BUSINESS EXPERIENCE DIRECTOR SINCE
- --------------------------------------------- --- --------------------------------------------- ---------------
<S> <C> <C> <C>
George J. Matthews........................... 67 Chairman of the Board of Directors since 1972
1972. Chairman of Matthews Associates
Limited, which is engaged in the business of
investing in and providing management
consulting and assistance to small and medium
sized businesses, including the Company.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PRESENT PRINCIPAL EMPLOYMENT
NAME AGE AND PRIOR BUSINESS EXPERIENCE DIRECTOR SINCE
- --------------------------------------------- --- --------------------------------------------- ---------------
<S> <C> <C> <C>
Robert E. Quinn.............................. 44 President of the Company since December 1, 1994
1994 and Treasurer and Chief Executive
Officer since January 20, 1998. Prior to
becoming President, served as Vice President,
Sales for over five years. Elected as a
Director on November 17, 1994 to fill a
vacancy created by the enlargement of the
Board of Directors by vote of the Directors.
Wilson B. Tuffin............................. 66 Vice Chairman since November 1994. From 1972 1972
to November 30, 1994, President, Chief
Executive Officer, prior to 1978, also
Treasurer of the Company.
Kenneth A. Smith............................. 61 Professor of Chemical Engineering at 1985
Massachusetts Institute of Technology since
1971.
Frank H. Brenton............................. 72 Principal of Frank H. Brenton Associates, a 1986
business consulting firm. From 1984 to 1986,
Chairman of the Board of Directors of
Marshall's Incorporated, an off-price
retailer and division of Melville, Inc.
William J. Shea.............................. 50 From 1992 to 1997, Mr. Shea served as 1998
Vice-Chairman, Chief Financial Officer and
Treasurer of BankBoston, NA. Prior to joining
BankBoston, N.A. in 1992, Mr. Shea spent 19
years with Coopers & Lybrand, where he was a
Senior Partner and a member of Firm Council,
the partnership's governing body. Mr. Shea is
currently Chairman of the Board of Directors
of Centennial Technologies, Inc. and serves
on the Board of Directors of View Tech, Inc.
and Miros, Inc. He also serves on the Finance
Committee of Children's Hospital, the Board
of Trustees of Northeastern University, the
Board of Directors and Executive Committee of
the Boston Stock Exchange, and the Board of
Directors and Executive Committee of the
Greater Boston Chamber of Commerce.
</TABLE>
3
<PAGE>
INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met seven times during the fiscal year ended
September 30, 1997. There was no director who during the fiscal year attended
fewer than 75 percent of the aggregate of all board meetings and all meetings of
committees on which he served.
The Board of Directors has an Audit Committee which is reconstituted at the
first meeting of the Board following the annual meeting of stockholders. The
Audit Committee, which met two times during fiscal 1997, meets with the
Company's independent auditors and principal financial personnel to review the
scope and results of the annual audit and the Company's financial reports. The
Audit Committee also reviews the scope of audit and non-audit services performed
by the independent public accountants, and reviews the adequacy and
effectiveness of internal accounting controls. The present members of the Audit
Committee are Messrs. Brenton and Smith.
The Board of Directors has a Stock Option Committee which was formed during
fiscal 1997. The Stock Option Committee, which met once during fiscal 1997,
recommends to the Board of Directors for its approval the terms, amounts and
recipients of stock options under the Company's stock option plans. The present
members of the Stock Option Committee are Messrs. Matthews, Tuffin and Quinn.
The Board of Directors does not have standing committees on compensation or
nominations.
DIRECTOR COMPENSATION
Each outside director of the Company receives an annual fee of $15,000 and
is eligible to receive options under the Company's Directors' Stock Option Plan.
Messrs. Brenton and Smith, the Company's two non-employee directors during
fiscal 1997, were each granted options to purchase 3,000 shares of Common Stock
at an exercise price of $15.563 per share in fiscal year 1997.
The Company has entered into a management agreement with Matthews Associates
Limited, a Massachusetts corporation ("MAL"), of which George J. Matthews,
Director and Chairman of the Board of Directors of the Company, is sole owner.
The management agreement is described in the section titled "Executive
Agreements."
The Company entered into an employment and consulting agreement with Mr.
Tuffin in November 1994, which shall continue in force until February 1999.
Pursuant to such agreement, Mr. Tuffin receives annual compensation of $105,000
for his services as a consultant to the Company. Mr. Tuffin's duties include his
service as a director and Vice Chairman of the Board of Directors of the
Company. During the term of the agreement and for a period of two (2) years
after its expiration, or the termination of Mr. Tuffin's employment with the
Company, whichever occurs later, Mr. Tuffin may not compete directly or
indirectly with the Company within the continental United States.
4
<PAGE>
PRINCIPAL AND MANAGEMENT STOCKHOLDERS
The following table sets forth certain information as of January 21, 1998,
with respect to the Common Stock of the Company owned or deemed beneficially
owned as determined under the rules of the Securities and Exchange Commission,
directly or indirectly, by each stockholder known to the Company to own
beneficially more than 5% of the Company's Common Stock, by each director of the
Company, by each of the executive officers named in the Summary Compensation
Table, elsewhere herein, and by all directors and executive officers of the
Company and its subsidiaries as a group. In accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended, a person is deemed to be the
beneficial owner, for purposes of this table, of any shares of Common Stock of
the Company if he or she has or shares voting power or investment power with
respect to such security or has the right to acquire beneficial ownership at any
time within 60 days of January 21, 1998. As used herein "voting power" is the
power to vote or direct the voting of shares, and "investment power" is the
power to dispose of or direct the disposition of shares. Except as indicated in
the notes following the table below, each person named has sole voting and
investment power with respect to the shares listed as being beneficially owned
by such person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP PERCENT OWNED
- ----------------------------------------------- ---------------------- ---------------
<S> <C> <C>
Charles Alpert................................. 2,481,837(1)(2) 50.33%
Joseph Alpert
WIAF Investors Co.
466 Arbuckle Avenue
Lawrence, NY 11516
and
Melvin B. Chrein, M.D..........................
Meryl J. Chrein
Marshall J. Chrein
Michael Chrein
21 Copper Beech Lane
Lawrence, NY 11559
George J. Matthews............................. 415,764(3) 8.63%
Chairman of the Board of Directors,
Director & Consultant
c/o Matthews Associates Limited
100 Corporate Place
Peabody, MA 01960
Wilson B. Tuffin............................... 401,982(4) 8.39%
Vice Chairman and Director
23 Arlington Street
Acton, MA 01720
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP PERCENT OWNED
- ----------------------------------------------- ---------------------- ---------------
<S> <C> <C>
Dimensional Fund Advisors, Inc................. 338,000(5) 7.1%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
Robert E. Quinn................................ 85,479(6) 1.76%
President, CEO, Treasurer and Director
James M. Spiezio............................... 23,665(7) *
Vice President, Finance and
Administration
William T. Nachtrab............................ 16,999(8) *
Vice President, Technology
Kenneth A. Smith, Director..................... 14,000(9) *
Frank H. Brenton, Director..................... 14,000(9) *
Douglas F. Grotheer............................ 11,075(10) *
President of Starmet CMI Corporation
William J. Shea, Director...................... -- --
All directors and executive officers as a group
(13 persons)................................... 1,011,928(11) 20.35%
</TABLE>
- ------------------------
(1) Does not reflect the effect on voting rights of the Massachusetts Control
Share Acquisition Act. The Company is subject to Chapter 110D of the
Massachusetts General Laws which governs "control share acquisitions," which
are acquisitions of beneficial ownership of shares which would raise the
voting power of the acquiring person above any one of three thresholds:
one-fifth, one-third or one-half of the total voting power. All shares
acquired by the person making the control share acquisition within 90 days
before or after any such threshold is crossed obtain voting rights only upon
the authorization from a majority of the stockholders other than the person
acquiring such shares, officers of the Company and those directors of the
Company who also are employees. Based on certain filings made with the SEC,
the Company believes that certain control share acquisitions have occurred
and that the members of the group which effected such control share
acquisitions, namely WIAF Investors Co., Charles Alpert, Joseph Alpert,
Melvin B. Chrein, Meryl J. Chrein, Marshall J. Chrein and Michael Chrein
(collectively the "Investor Group") are the holders of 1,749,598 shares (the
"Affected Shares") which were acquired in control share acquisitions (within
the meaning of Chapter 110D) and accordingly will have no voting rights as
to the Affected Shares unless or until such voting rights are authorized as
described above.
(2) Derived from Schedules 13DA, dated October 3, 1994, submitted to the
Company. The seven persons named are described as a group in such Schedules
13DA. The persons named reported ownership of the following shares: WIAF
Investors Co. 1,724,856; Melvin B. Chrein 202,300; Meryl J. Chrein 245,500;
Charles Alpert 50,000; Joseph Alpert 50,000; Michael Chrein 16,200; and
Marshall J. Chrein 48,200. Each person reported sole voting and dispositive
power with respect to the shares owned by such person. Also includes 21,021,
79,435 and 2,325 shares which Melvin B. Chrein, WIAF Investors
6
<PAGE>
Co. and Marshall Chrein, respectively, have the right to acquire upon
conversion of outstanding 10% Convertible Subordinated Debentures and
27,000, 12,000 and 3,000 shares which Charles Alpert or nominee, Melvin B.
Chrein and Marshall J. Chrein, respectively, have the right to acquire under
outstanding Warrants.
(3) Includes (i) 13,334 shares which may be purchased upon the exercise of
currently exercisable options, (ii) 2,325 shares which may be acquired upon
the conversion of an outstanding 10% Convertible Subordinated Debenture,
(ii) 13,961 shares which Mr. Matthews' wife has the right to acquire upon
the conversion of an outstanding 10% Convertible Subordinated Debenture, as
to which Mr. Matthews disclaims beneficial ownership, and (iii) 990 shares
owned by Mr. Matthews' wife.
(4) Includes 6,666 shares which may be purchased upon the exercise of currently
exercisable options.
(5) The officers of Dimensional Fund Advisors, Inc. also serve as officers of
DFA Investment Dimensions Group, Inc. (the "Fund") and The DFA Investment
Trust Company (the "Trust"), each an open-end management investment company
registered under the Investment Company Act of 1940. In their capacity as
officers of the Fund and the Trust, these persons vote 128,600 shares which
are owned by the Fund and 13,000 shares which are owned by the Trust.
(6) Includes 63,333 shares which may be purchased upon the exercise of currently
exercisable options.
(7) Includes 21,665 shares which may be purchased upon the exercise of currently
exercisable options.
(8) Includes 14,999 shares which may be purchased upon the exercise of currently
exercisable options.
(9) Includes 8,000 shares which may be purchased upon the exercise of currently
exercisable options.
(10) Includes 9,001 shares which may be purchased upon the exercise of currently
exercisable options.
(11) See notes (3), (4), (6), (7), (8), (9) and (10) above. Also includes an
additional 24,664 shares which may be purchased upon the exercise of
currently exerciseable options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and stockholders who own more than 10% of the
outstanding common stock of the Company to file with the Securities and Exchange
Commission and NASDAQ reports of ownership and changes in ownership of voting
securities of the Company and to furnish copies of such reports to the Company.
To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company or written representations from certain persons that no
reports were required for those persons, all Section 16(a) filing requirements
were complied with, during the fiscal year ended September 30, 1997 except
Messrs. Quinn (a director and executive officer) and Spiezio (an executive
officer) each failed to timely report one grant of options on November 20, 1995
through inadvertence.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table and notes present the compensation provided by the
Company during the last three fiscal years to its chief executive officer and
the four most highly compensated executive officers of the Company (other than
the chief executive officer) who were serving as executive officers at the
Company's fiscal year end of September 30, 1997 (the "Named Executive
Officers").
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS
------------------------------------- ------------------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING
COMPEN- AWARD(S) OPTIONS/
NAME AND PRINCIPAL POSITION YEAR(1) SALARY ($) BONUS($) SATION($)(2) $ SARS (#)(3)
- ---------------------------------- ----------- ----------- ----------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
George J. Matthews 1997 350,000 -- -- -- --
Chairman of Board of 1996 350,000 -- -- -- --
Directors, CEO and 1995 350,000 -- -- -- 20,000
Treasurer (4)(5)
Robert E. Quinn 1997 200,000 15,000 -- -- 25,000
President (5)(6) 1996 173,769 -- -- -- 20,000
1995 151,673 200 35,000 -- 60,000
James M. Spiezio 1997 131,616 13,250 -- -- 8,000
Vice President, 1996 121,058 -- -- -- 10,000
Finance & 1995 113,270 10,930 -- -- 12,000
Administration
William T. Nachtrab 1997 131,616 9,050 -- -- 8,000
Vice President, 1996 114,849 -- -- -- --
Technology 1995 108,703 10,830 -- -- 12,000
Douglas F. Grotheer 1997 121,934 6,700 -- -- 5,000
President, Starmet 1996 100,252 -- -- -- --
CMI Corporation 1995 95,002 10,830 -- -- 5,000
<CAPTION>
PAYOUTS
-------------
LTIP ALL OTHER
PAYOUTS COMPEN-
NAME AND PRINCIPAL POSITION $ SATION($)
- ---------------------------------- ------------- -------------
<S> <C> <C>
George J. Matthews -- --
Chairman of Board of -- --
Directors, CEO and -- --
Treasurer (4)(5)
Robert E. Quinn -- --
President (5)(6) -- --
-- --
James M. Spiezio -- --
Vice President, -- --
Finance & -- --
Administration
William T. Nachtrab -- --
Vice President, -- --
Technology -- --
Douglas F. Grotheer -- --
President, Starmet -- --
CMI Corporation -- --
</TABLE>
- ------------------------
(1) The Company's fiscal year ends on September 30th of each year.
(2) Excludes perquisites in amounts less than the threshold level required for
reporting.
(3) Options have been adjusted to reflect Company's two for one stock dividend
paid on April 7, 1997.
(4) Mr. Matthews is assigned as a consultant to the Company pursuant to a
management agreement between Matthews Associates Limited and the Company.
All compensation under the agreement is paid by the Company to Matthews
Associates Limited. See "Executive Agreements."
(5) On January 20, 1998 Mr. Matthews resigned as Chief Executive Officer and
Treasurer of the Company and the Company elected Mr. Quinn as Chief
Executive Officer and Treasurer.
(6) Mr. Quinn's compensation for the fiscal year ended September 30, 1997 was
determined pursuant to his Employment Agreement. See "Executive Agreements."
8
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options granted
during the fiscal year ended September 30, 1997 by the Company to the Named
Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED TO STOCK PRICE
SECURITIES EMPLOYEES APPRECIATION FOR
UNDERLYING IN EXERCISE OR OPTION TERM(3)
OPTIONS FISCAL BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) YEAR(1) ($/SHARE)(2) DATE 5%($) 10%($)
- ------------------------------------ ----------- ----------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
George J. Matthews.................. -- -- -- -- -- --
Robert E. Quinn..................... 15,000(4) $ 15.563 8/5/2007 $ 146,812 $ 372,051
10,000(5) 20.8% 7.38 11/19/2006 46,412 117,618
James M. Spiezio.................... 4,000(4) 15.563 8/5/2007 39,150 99,214
4,000(5) 6.7% 7.38 11/19/2006 18,565 47,047
William T. Nachtrab................. 4,000(4) 15.563 8/5/2007 39,150 99,214
4,000(5) 6.7% 7.38 11/19/2006 18,565 47,047
Douglas F. Grotheer................. 3,000(4) 15.563 8/5/2007 29,362 74,410
2,000(5) 4.2% 7.38 11/19/2006 9,282 23,524
</TABLE>
- ------------------------
(1) Percentage is total percentage of all options granted to employee in fiscal
year 1997.
(2) The exercise price per share is the market price of the underlying Common
Stock on the date of grant. The exercise price reflects a 2-for-1 stock
dividend paid on April 7, 1997.
(3) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission of five percent and ten percent
compounded annually from the date the respective options were granted to
their expiration date. The gains shown are net of the option exercise price,
but do not include deductions for taxes of the options exercise price or
other expenses associated with the exercise. Actual gains, if any, are
dependent on the performance of the Common Stock and the date on which the
option is exercised. There can be no assurance that the amounts reflected
will be achieved.
(4) These options will vest in three equal annual installments on August 5th of
1998, 1999, and 2000.
(5) These options will vest in three equal annual installments on November 19th
of 1997, 1998, and 1999.
9
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth certain information concerning options
exercised during the fiscal year ended September 30, 1997 by the Named Executive
Officers, as well as the aggregate value of unexercised options held by such
executive officers at September 30, 1997. The Company has no outstanding stock
appreciation rights, either freestanding or in tandem with options.
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED
IN-THE-MONEY
NUMBER OF SECURITIES OPTIONS
UNDERLYING UNEXERCISED AT
SHARES OPTIONS AT FY-END (#) FY-END(2)
ACQUIRED ON VALUE (1) -------------------------- -----------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ----------------------------------------- ----------------- ----------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
George J. Matthews....................... 0 0 13,334 6,666 $ 148,274
Robert E. Quinn.......................... 0 0 46,667 58,333 509,003
James M. Spiezio......................... 0 0 16,333 18,667 193,679
William T. Nachtrab...................... 0 0 13,000 12,000 157,449
Douglas F. Grotheer...................... 0 0 8,334 6,666 83,324
<CAPTION>
NAME UNEXERCISABLE
- ----------------------------------------- -------------
<S> <C>
George J. Matthews....................... $ 74,126
Robert E. Quinn.......................... 487,202
James M. Spiezio......................... 162,599
William T. Nachtrab...................... 90,129
Douglas F. Grotheer...................... 43,327
</TABLE>
- ------------------------
(1) Value realized equals fair market value on the date of exercise, less the
exercise price, times the number of shares acquired, without deducting taxes
or commissions paid by employee.
(2) Value of unexercised options equals fair market value of the shares
underlying in-the-money options on September 30, 1997 (closing price of
Common Stock on September 30, 1997 was $17.25 per share), less the exercise
price, times the number of options outstanding. All such options were
"in-the-money" as of September 30, 1997.
PENSION PLAN TABLE
The following table sets forth the aggregate annual benefit payable upon
retirement at normal retirement age for each level of remuneration specified at
the listed years of service.
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------
30 OR
REMUNERATION 15 20 25 MORE
- --------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
$100,000.. 23,520 31,360 39,220 47,040
150,000.. 38,520 51,360 64,200 77,040
200,000.. 53,520 71,360 89,200 107,040
300,000.. 83,520 111,360 139,200 167,040
400,000.. 113,520 151,360 189,200 227,040
500,000.. 143,520 191,360 239,200 287,040
</TABLE>
The Company has a defined benefit plan (the "Pension Plan") designed to
provide retirement benefits for employees and ancillary benefits to their
beneficiaries, joint annuitants and spouses. All employees of the Company become
participants in the Pension Plan after attaining the later of age 21 or a year
of service with the Company. The Pension Plan provides retirement benefits based
on years of service and compensation. An employee's benefits under the Pension
Plan generally become fully vested after five years of
10
<PAGE>
service. At normal retirement (the later of age 65 and five years of Plan
participation), participants are entitled to a monthly benefit for the remainder
of their life in an amount equal to one-twelfth of the sum of their "Annual
Credits" for their last 30 years or lesser period of employment with the Company
and its predecessors. An employee's "Annual Credit" is 1.25% of the portion of
his annual compensation that is subject to Social Security tax and two percent
(2%) of the balance of his annual compensation. Participants with five years of
service are entitled to retirement at age 55, but the monthly benefit payable
under the Pension Plan is reduced by 0.5% for each month that early retirement
precedes normal retirement but not to less than $100 per month if the
Participant has ten or more years of service. The surviving spouse of a retiree
under the Plan is entitled to receive benefits equal to one-half the amount the
retiree had been receiving. Alternative benefit payments that are equivalent to
the benefit described above are also available to participants. Benefits payable
under the plan are not reduced by Social Security payments to the retiree.
Amounts shown assume benefits commence at age 65. Benefit amounts shown are
straight-life annuities. The Named Executive Officers have the following years
of credited service for pension plan purposes: Robert E. Quinn-22 years; Wilson
B. Tuffin-22 years; James M. Spiezio-12 years; William T. Nachtrab-8 years and
Douglas F. Grotheer-17 years. On February 1, 1995, Mr. Tuffin began to receive
benefit payments under the Pension Plan. Mr. Matthews does not participate in
the Pension Plan.
EXECUTIVE AGREEMENTS
EMPLOYMENT AGREEMENT WITH MR.QUINN
In October 1997, the Company entered into an amended employment agreement
with Mr. Quinn. Pursuant to the agreement, Mr. Quinn will receive initial
compensation at the annual rate of $200,000, subject to such annual increases
and bonuses as the Board of Directors may from time to time determine. The
agreement shall continue in force until February 28, 2002, unless terminated by
either party in accordance with its terms, and is subject to annual renewals as
described in the agreement. During the term of the agreement and for a period of
two (2) years after its expiration, or after the termination of Mr. Quinn's
employment with the Company, whichever occurs later, Mr. Quinn may not compete
directly or indirectly with the Company within the continental United States.
The Company shall require any successor to a majority of the Company's business
activities to assume its obligations under this agreement.
EMPLOYMENT AGREEMENTS WITH MESSRS. SPIEZIO, NACHTRAB, GROTHEER AND RAFTERY
In October 1997, the Company entered into employment agreements with Messrs.
Spiezio, Nachtrab, Grotheer and Kevin J. Raftery (each an "Executive"). Under
the terms of their respective agreements, Messrs. Spiezio, Nachtrab, Grotheer
and Raftery are entitled to an annual base salary of $142,000, $136,000,
$135,000, and $100,000 respectively, subject to such annual increases and
bonuses as the Board of Directors may from time to time determine. Each of the
agreements shall continue in force for an initial period of three (3) years,
unless such agreement is terminated by the Company or the Executive in
accordance with its terms. Annually, the Board of Directors, in its discretion,
may extend the term of each agreement for an additional year. During the term of
each agreement and for a period of eighteen (18) months after any termination of
employment, each Executive may neither i) compete directly or indirectly with
the Company within the continental United States nor ii) solicit any of the
Company's customers or employees. Each of the agreements may be terminated by
the Company prior to a change in control (as defined in the agreements) and upon
twelve months written notice.
11
<PAGE>
MANAGEMENT AGREEMENT WITH MATTHEWS ASSOCIATES LIMITED
Mr. Matthews served as the Company's Chief Executive Officer during fiscal
year 1997 and resigned from such position on January 20, 1998. The Company has
entered into a management agreement with Matthews Associates Limited, a
Massachusetts corporation ("MAL"), of which George J. Matthews, Director and
Chairman of the Board of Directors of the Company, is sole owner. The agreement
provides MAL with a minimum compensation of $350,000 per annum for services
performed under the agreement, including financial management advice,
representation of the Company before government regulatory bodies, a MAL
representative's (Mr. Matthews) service on the board and such other duties as
assigned by the Board of Directors. The agreement expires on February 28, 2002,
subject to annual renewals as described in the agreement. In the event of
termination of the management agreement by the Company, the Company is obligated
to pay to MAL all of the amounts due under the agreement for the remaining term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1997, the Board of Directors of
the Company was responsible for establishing executive compensation (other than
stock option compensation). Messrs. Quinn and Matthews participated in
deliberations of the Company's Board of Directors concerning executive officer
compensation. Neither participated in setting his own compensation. The Stock
Option Committee, which recommends to the Board of Directors for its approval
the terms, amounts and recipients of stock options under the Company's stock
option plans, consisted of Messrs. Matthews, Tuffin and Quinn during the fiscal
year ended September 30, 1997. No executive officer of the Company served as a
director or member of a compensation committee, or its equivalent, of another
entity, one of whose executive officers served as director of the Company.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT ON
COMPENSATION AND THE STOCK PERFORMANCE GRAPH CONTAINED ELSEWHERE HEREIN SHALL
NOT BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS NOR SHALL BE DEEMED TO BE
SOLICITING MATERIAL OR DEEMED FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED.
REPORT OF THE BOARD OF DIRECTORS AND STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
During the fiscal year ended September 30, 1997, the Board of Directors of
the Company was responsible for establishing and administering the policies
which govern annual compensation (other than stock option compensation) for the
Company's executive officers. The Stock Option Committee was responsible for
considering stock option compensation for the Company's executive officers.
12
<PAGE>
OVERVIEW
The Board of Directors has historically established levels of executive
compensation that provide for a base salary intended to allow the Company to
hire, motivate and retain qualified executive officers. From time to time, the
Board has also, on occasion, approved annual cash incentive bonuses based on the
Company's performance or on the performance of the executive in question. In
fiscal 1997, the Board approved cash incentive bonuses to certain executive
officers based on their performance. From time to time, the Stock Option
Committee recommends to the Board of Directors for its approval grants of stock
options to executive officers and key employees in order to bring the
stockholders' interests more sharply into the focus of such officers and
employees. In fiscal 1997, the Stock Option Committee recommended, and the Board
of Directors approved, the grant of stock options to certain of the Company's
employees and directors.
The Board of Directors establishes the annual salary and bonus of each of
the executive officers other than the Chief Executive Officer, based on the
recommendations made by the Chief Executive Officer. In determining the
recommendations for salary and bonus for each of the other executive officers,
the Chief Executive Officer considers each officer's individual performance,
attainment of individual goals and the contribution to the overall attainment of
the Company's goals.
STOCK OPTIONS AND OTHER COMPENSATION
Long-term incentive compensation for executive officers consists of stock
options granted under the Company's Stock Option Plans (the "Plans"). Executive
officers as well as other key employees of the Company participate in the Plans.
To continue to attract and maintain key employees, the Board of Directors has
approved and submitted to the Company's Stockholders for approval, the 1998
Stock Plan, for the granting of additional options in the future (See Proposal
2). The Company also believes that its Pension Plan is an attractive feature for
all employees.
BASIS FOR THE COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The compensation of Mr. Matthews, the Company's Chief Executive Officer
during fiscal 1997, was determined pursuant to a management agreement between
Matthews Associates Limited and the Company. All compensation under the
agreement is paid by the Company to Matthews Associates Limited. See "Executive
Agreements--Management Agreement with Matthews Associates Limited."
<TABLE>
<S> <C>
THE BOARD OF DIRECTORS STOCK OPTION COMMITTEE
George J. Matthews George J. Matthews
Robert E. Quinn Robert E. Quinn
Wilson B. Tuffin Wilson B. Tuffin
Kenneth A. Smith
Frank H. Brenton
</TABLE>
13
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
Set forth below is a line graph comparing the five-year cumulative total
return of the Company's Common Stock against the cumulative total return of the
NASDAQ Stock Market (U.S.) Index and the Dow Jones Aerospace and Defense Index.
Cumulative total return is measured assuming an initial investment of $100 and
reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG STARMET CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE DOW JONES AEROSPACE & DEFENSE INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
STARMET NASDAQ DOW JONES
<S> <C> <C> <C>
CORPORATION STOCK MARKET (U.S.) AEROSPACE & DEFENSE
9/92 $100 $100 $100
9/93 $110 $131 $137
9/94 $349 $132 $161
9/95 $202 $182 $257
9/96 $294 $216 $358
9/97 $634 $297 $450
</TABLE>
* $100 INVESTED ON 9/30/92 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
14
<PAGE>
PROPOSAL NO. 2--COMPANY'S 1998 STOCK PLAN
GENERAL. On February 20, 1998, the Board of Directors adopted the Company's
1998 Stock Plan (the "Plan") and 300,000 of the Company's common stock, $.10 par
value ("Common Stock"), were reserved for issuance thereunder as options to
employees, officers, directors and consultants of the Company. The Board of
Directors believes that the use of long-term stock incentives is the most
effective tool to motivate and retain key management, other employees,
non-employee directors and consultants of the Company and to provide such
persons with an additional incentive to promote the long-term interests and
financial success of the Company. The purpose of the Plan is to benefit the
Company through the retention and motivation of its employees by offering such
individuals an opportunity to become owners of the Common Stock of the Company
with an additional incentive to advance the best interests of the Company by
increasing their proprietary interest in the success of the Company.
The Plan provides for the granting of incentive stock options ("ISOs") which
are intended to meet the requirements of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), non-qualified stock options
("Non-Qualified Options") which do not meet the requirements of Section 422 of
the Code and opportunities to make direct purchases of the Company's Common
Stock ("Purchase Rights") and the making of awards of the Company's Common Stock
("Awards"). If any unexercised option granted pursuant to the Plan lapses or
terminates for any reason, the shares of Common Stock covered thereby are again
available for subsequent option grants under the Plan.
As of the mailing of this proxy, no options issued under the Plan have been
received or allocated.
ADMINISTRATION OF THE PLAN. The Plan will be administered by the Board of
Directors. The Board of Directors may delegate any or all of its powers under
the Plan to a Committee appointed by the Board of Directors. Subject to the
terms of the Plan, the Board of Directors determines the recipients to whom
options will be granted, the number of shares to be covered by such options and
the terms of such options.
STOCK OPTION FEATURES. The Board of Directors may, at its discretion,
select any eligible person to participate in the Plan. Non-Qualified Options and
Purchase Rights may be granted, and Awards may be made, to any director,
officer, employee or consultant of the Company. Only employees of the Company
are eligible to receive ISOs. As of January 21, 1998, there were approximately
235 persons eligible to receive options issued pursuant to the Plan. The number
of options granted to any eligible person is within the discretion of the Board
of Directors, subject to certain conditions concerning ISOs.
The aggregate fair market value (determined at the time of grant) of shares
issuable pursuant to ISOs which first become exercisable in any calendar year by
an employee may not exceed $100,000. ISOs may not be granted at less than the
fair market value of the Common Stock on the date of grant or 110% of fair
market value in the case of ISOs granted to any optionee holding 10% or more of
the total combined voting power of all classes of stock of the Company. On
February 17, 1998, the last reported sale price for the Company's Common Stock
on the Nasdaq National Market was $22.00 per share. In addition, no ISO is
exercisable after 10 years from the date on which it is granted, and in the case
of ISOs granted to an employee holding 10% or more of the total combined voting
power of all classes of stock of the Company, the term shall not exceed 5 years
from the date of grant.
Options issued under the Plan are exercisable only by the optionee during
the life of the optionee and, generally, are not transferable, except by will or
the laws of descent and distribution or as determined by the Board of Directors.
The Board of Directors shall determine the period of time during which an
15
<PAGE>
optionee may exercise an option following the termination of employment or
service to the Company subject to certain restrictions set forth below with
respect to ISOs. ISOs are generally only exercisable while an optionee is
employed by the Company, except that the Board of Directors may determine to
permit exercise within up to three months after termination of employment to the
extent such option has vested at the time of such termination. If an optionee
dies while employed by the Company or within three months of the termination of
his or her employment by the Company, such optionee's ISOs may be exercised up
to twelve months after his or her death. If an optionee is permanently disabled
during his or her employment by the Company, such optionee's options may be
exercised up to one year following termination of his or her employment due to
such disability.
The exercise price of options granted under the Plan is determined by the
Board of Directors on the date of grant, subject to the limitation that the
exercise price may not be less than par value. However, there are certain
pricing restrictions for ISOs as set forth above. The exercise price of options
granted under the Plan must be paid in full upon exercise in cash, by delivery
of shares of Common Stock already owned by the optionee, through the delivery of
an assignment to the Company of a sufficient amount of the proceeds from the
sale of the Common Stock acquired upon exercise of the option, by any other
means the Board of Directors deems acceptable, or a combination thereof.
In the event of a consolidation or merger or sale of all or substantially
all of the assets of the Company in which outstanding shares of Common Stock are
exchanged for securities, cash or other property of any other corporation or
business entity or in the event of a liquidation of the Company, the Board of
Directors of the Company, or the board of directors of any corporation assuming
the obligations of the Company may, in its discretion, take any one or more of
the following actions as to outstanding options: (i) provide that such options
shall be assumed, or equivalent options shall be substituted, by the acquiring
or succeeding corporation (or an affiliate thereof); (ii) upon written notice to
the optionees, provide that all unexercised options will terminate immediately
prior to the consummation of such transaction unless exercised by the optionee
within a specified period following the date of such notice; (iii) terminate all
options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such options (to the extent then exercisable)
over the exercise price thereof; (iv) terminate all options in exchange for the
right to participate in any stock option or other employee benefit plan of any
successor corporation (giving proper credit to an optionee for that portion of
an option which has otherwise vested or become exercisable); (v) in the event of
a merger under the terms of which holders of the Common Stock of the Company
will receive upon consummation thereof a cash payment for each share surrendered
in the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such outstanding options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding options in exchange for the
termination of such options; and (vi) provide that all or any outstanding
options shall become exercisable in full immediately prior to such event. The
foregoing actions are subject in all instances to the approval of the Board of
Directors and any accounting considerations for any acquisition which is
required to be treated as a "pooling of interests" transaction pursuant to the
Accounting Principles Board ("APB") Opinion No. 16, if any discretionary action
by the Board of Directors would otherwise preclude the Company from accounting
for any such transaction as a "pooling of interests" under APB Opinion No. 16.
In addition, the Board of Directors may, in an instrument evidencing an option,
Purchase Right or Award, provide for a result that is different from, or is more
advantageous to the grantee than, the actions permitted to be taken by the Board
of Directors, as described above upon the occurence of one of the events
described above or upon a change of control of the Company.
16
<PAGE>
In the event of a stock dividend, stock split or other change in corporate
structure or capitalization affecting the Common Stock, the number and kind of
shares of stock or securities of the Company to be subject to the Plan and the
options then outstanding or to be granted thereunder, and the option price, will
be appropriately and proportionately adjusted by the Board of Directors, whose
determination will be binding on all persons.
TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors may
terminate, modify or amend the Plan except that no amendment or modification for
which stockholder approval is required under Section 422 of the Code is
permissible without the approval of the stockholders of the Company. With
respect to ISOs, the Plan shall terminate on the earlier of (i) ten years from
the date of the Board of Directors' approval of the Plan or (ii) the date on
which all shares available for issuance under the Plan have been issued pursuant
to the exercise or cancellation of options granted under the Plan.
ACCOUNTING EFFECTS. Under current accounting rules, neither the grant nor
exercise of options under the Plan is expected to result in any charge to the
earnings of the Company. Options with variable exercise prices or at an exercise
price less the fair market value on the date of grant may result in charges to
earnings under certain circumstances.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary
of certain Federal income tax consequences of option grants and exercises under
the Plan based upon the Federal income tax laws in effect on the date hereof.
1. INCENTIVE STOCK OPTIONS. An employee receiving an ISO will not realize
taxable income upon the grant of the ISO or upon its timely exercise (but
exercise may subject an employee to alternative minimum tax as discussed below).
Exercise of an ISO will be timely if made during its term and if the employee
remains an employee of the Company or a subsidiary corporation at all times
during the period beginning on the date of grant of the ISO and ending on the
date of exercise or, pursuant to the terms of the employee's option agreement,
such option may be exercised up to three months after the option holder ceases
to be an employee of the Company (or one year before the date of exercise in the
case of a disabled employee). Exercise of an ISO will also be timely if made
within twelve months of the date of death (provided it is exercisable by its
terms) by the legal representative of an employee who dies while in the employ
of the Company or a subsidiary corporation. However, the Plan limits the right
of the legal representative of any participant to exercise an option to one year
following death. Upon a sale of the stock received upon exercise, except as
noted below, the employee will generally recognize long-term capital gain or
loss equal to the difference between the amount realized upon such sale and the
exercise price. The Company, under these circumstances, will not be entitled to
any Federal income tax deduction in connection with the exercise of the ISO or
the sale of such stock.
If the stock acquired pursuant to an exercise of an ISO is disposed of by
the employee prior to the expiration of two years from the date of grant or
within one year from the date such stock is issued to him or her upon exercise
(a "disqualifying disposition"), any gain realized by the employee generally
will be taxable at the time of such disqualifying disposition, as follows: (i)
at ordinary income rates to the extent of the difference between the exercise
price and the lesser of the fair market value of the stock on the date the ISO
is exercised (the value on a later date is likely to govern in case of an
employee whose sale of the stock at a profit could subject him or her to suit
under Section 16(b) of the Exchange Act) or the amount realized on such
disqualifying disposition, and (ii) if the stock is a capital asset of the
employee, as short-term or long-term capital gain to the extent of any excess of
the amount realized on such disqualifying disposition over the fair market value
of the stock on the date which governs the determination of the
17
<PAGE>
employee's ordinary income. In such case, the Company may claim a Federal income
tax deduction at the time of such disqualifying disposition for the amount
taxable to the employee as ordinary income. Any capital gain realized by the
employee will be long-term capital gain if the employee's holding period for the
stock at the time of disposition meets applicable holding period requirements
for long-term capital gains under the Code; otherwise, it will be short-term.
The amount by which the fair market value of the stock on the exercise date of
an ISO exceeds the exercise price will be an item of tax preference for purposes
of the alternative minimum tax imposed by the Code.
2. NON-QUALIFIED OPTIONS. In the case of Non-Qualified Options (and in the
case of an untimely exercise of an ISO), the employee will not be taxed upon
grant of any such option, but rather, at the time of exercise of such
Non-Qualified Options, the employee, except as noted below, will realize
ordinary income for Federal income tax purposes in an amount equal to the excess
of the fair market value of the shares purchased over the exercise price. The
Company will generally be entitled to a tax deduction at such time and in the
same amount that the employee realizes ordinary income. If stock so acquired is
later sold or exchanged, then the difference between the sales price and the
fair market value of such stock on the date of exercise of the option is
generally taxable as long-term or short-term capital gain or loss depending upon
whether the stock has been held for more than the applicable holding period for
long-term capital gains under the Code.
As stated above, generally income is realized by an employee upon exercise
of a Non-Qualified Option (or untimely exercise of an ISO). However, in the case
of such exercise of an option by an employee whose sale of shares at a profit
could subject the employee to suit under Section 16(b) of the Exchange Act,
realization of income is postponed so long as a sale of the shares would expose
the employee to such suit, unless the employee elects within 30 days after the
exercise to be taxed as of the exercise date in the manner described above.
Absent such election, such an employee will realize ordinary income at the time
a sale would no longer expose him or her to such suit in an amount equal to the
excess of the fair market value of the shares at that time over the exercise
price. That fair market value will also govern for purposes of the Company's
deduction and for determining the employee's gain or loss upon subsequent
disposition of the shares.
3. EXERCISE WITH SHARES. An employee who pays the exercise price of a
Non-Qualified Option, in whole or in part, by delivering shares of the Company's
Common Stock already owned by him or her will realize no gain or loss for
Federal income tax purposes on the shares surrendered, but otherwise will be
taxed according to the rules described above for Non-Qualified Options. (See
"Certain Federal Income Tax Consequences--2. Non-Qualified Options.") With
respect to shares acquired upon exercise which are equal in number to the shares
surrendered, the basis of such shares will be equal to the fair market value of
such shares on the date of exercise, and the holding period for such additional
shares will commence on the date the option is exercised.
When shares of the Company's Common Stock are surrendered upon exercise of
an ISO, (i) no gain or loss will be recognized as a result of the exchange, (ii)
a number of shares received which is equal to the number of shares surrendered
will have a basis equal to that of the shares surrendered, and (except for
purposes of determining whether a disposition will be a disqualifying
disposition) will have a holding period which includes the holding period of the
shares exchanged and (iii) the remaining shares received will have a zero basis
and will have a holding period which begins on the date of the exchange. If any
of the shares received are disposed of within two years of the date of grant of
the ISO or within one year after exercise, the shares with the lowest basis
(i.e., a zero basis) will be deemed to be disposed of first, and such
disposition will be a disqualifying disposition giving rise to ordinary income
as discussed above.
18
<PAGE>
The foregoing summary is not a complete description of the Federal income
tax aspects of the Plan. Moreover, the foregoing summary relates only to Federal
income tax; there may also be Federal estate and gift tax consequences
associated with the Plan, as well as foreign, state and local tax consequences.
THIS PROPOSAL HAS BEEN UNANIMOUSLY APPROVED BY THE BOARD OF DIRECTORS,
WHICH RECOMMENDS THAT STOCKHOLDERS VOTE FOR ITS ADOPTION.
PROPOSAL NO. 3--RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors of the Company has appointed Arthur Andersen LLP as
auditors of the Company for the fiscal year ending September 30, 1998 and has
further directed that management submit the selection of auditors for
ratification by the stockholders. Arthur Andersen LLP were the Company's
auditors for the fiscal year ended September 30, 1997.
Representatives of Arthur Andersen LLP are expected to be present at the
meeting, with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THIS PROPOSAL HAS BEEN UNANIMOUSLY APPROVED BY THE BOARD OF DIRECTORS, WHICH
RECOMMENDS THAT STOCKHOLDERS VOTE FOR ITS ADOPTION.
MASSACHUSETTS CONTROL SHARE ACQUISITION ACT
The Company is subject to Chapter 110D of the Massachusetts General Laws
which governs "control share acquisitions," which are acquisitions of beneficial
ownership of shares which would raise the voting power of the acquiring person
(1) above any one of three thresholds: one-fifth, one-third or one-half of the
total voting power. Each time one of these thresholds is crossed, all shares
acquired by the person making the control share acquisition within 90 days
before or after such threshold is crossed, obtain voting rights only upon the
authorization from a majority of the stockholders other than the person
acquiring such shares, officers of the Company and those directors of the
Company who also are employees.
Based on certain filings made with the SEC on Schedule 13D and certain
amendments thereto, the Company believes that certain control share acquisitions
have occurred and that the members of the group which effected such control
share acquisitions, namely WIAF Investors Co., Charles Alpert, Joseph Alpert,
Melvin B. Chrein, Meryl J. Chrein, Michael Chrein, and Marshall J. Chrein
(collectively the "Investor Group") are the holders of 1,749,598 shares (the
"Affected Shares") which were acquired in control share acquisitions (within the
meaning of Chapter 110D) and accordingly will have no voting rights unless or
- ------------------------
- ------------------------
(1) Under Chapter 110D, the term "person" includes any "associate" of such
person. An "associate" is defined to include: (a) a person who is in a
direct or indirect control relationship with the person; (b) any corporation
or organization in which the person is an officer, director or partner or
performs a similar function; (c) a beneficial owner of ten percent (10%) or
more of any class of equity securities of the person; (d) any trust or
estate in which the person has a beneficial interest not represented by
transferable shares or as to which the person serves as a trustee or in a
similar fiduciary capacity; or (e) any relative or spouse of the person (or
relative of the person's spouse) having the same residence as the person.
"Beneficial ownership" is defined as "the sole or shared power to dispose or
direct the disposition of shares or the sole or shared power to vote or
direct the voting of shares, whether such power is direct or indirect or
through any contract, arrangement, understanding, relationship or
otherwise."
19
<PAGE>
until such voting rights are authorized as described above. The members of the
Investor Group are authorized to deliver to the Company a control share
acquisition statement in accordance with the provisions of Section 3 of Chapter
110D and to demand that the Board of Directors of the Company call a special
meeting for the purpose of considering whether voting rights shall be authorized
for the Affected Shares. No control share acquisition statement has been
delivered to the Company and no such demand has been made. Accordingly, the
Company has not called such a special meeting and the question of authorization
of voting rights for the Affected Shares will not be considered at the Special
Meeting.
Pursuant to Section 7 of Chapter 110D, if the question of voting rights for
the Affected Shares is, at some later date, presented to the Company's
stockholders for their consideration, if voting rights are authorized for the
Affected Shares and it is determined that the person making a control share
acquisition has acquired beneficial ownership of shares that, when added to all
other shares of the Company beneficially owned by such person, entitles such
person to vote, or direct voting of, shares of the Company having a majority or
more of all voting power in the election of directors, each stockholder of
record of the Company other than the person making such control share
acquisition, who does not vote in favor of authorizing voting rights for the
shares acquired in such control share acquisition may demand payment for his
stock in an appraisal in accordance with the provisions of Section 86 to 98,
inclusive, of Chapter 156B of the Massachusetts General Laws. Such appraisal
rights would only become operative in the event that the members of the Investor
Group were to demand that the stockholders consider authorization of voting
rights for the Affected Shares and such authorization were granted. At this
time, because no control share acquisition statement has been delivered to the
Company, the Company has not determined whether a control share acquisition has
occurred which might result in such appraisal rights being available as
described above; however, the members of the Investor Group have made filings
with the SEC which indicate collective beneficial ownership of 50.33% of the
Company's outstanding shares.
The Company's stockholders, at a duly-constituted meeting, may also, by
amendment to the by-laws or the Articles of Organization, provide that the
provisions of Chapter 110D shall not apply to future control share acquisitions
of the Company. Management currently has no plans to propose such an amendment.
FINANCIAL STATEMENTS
Concurrent with the distribution of this proxy statement, stockholders as of
the record date of January 21, 1998 will receive a copy of the Company's 1997
Annual Report to Stockholders, including financial statements for the fiscal
year ended September 30, 1997. The financial statements of the Company contained
in the 1997 Annual Report are incorporated herein by reference.
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL MEETING
Any stockholder desiring to present a proposal for consideration at the
Company's 1999 annual meeting of stockholders, scheduled to be held on or about
February 17, 1999, and included in the Company's proxy statement, must submit
the proposal to the Company so that it is received at the executive offices of
the Company not later October 27, 1998. Any stockholder desiring to submit a
proposal should consult applicable regulations of the Securities and Exchange
Commission.
OTHER MATTERS
As of the date of this proxy statement, management of the Company knows of
no matter not specifically referred to above as to which any action is expected
to be taken at the meeting of stockholders.
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It is intended, however, that the persons named as proxies will vote the
proxies, insofar as the same are not instructed to the contrary, in regard to
such other matters and the transaction of such other business as may properly be
brought before the meeting, as seems to them to be in the best interests of the
Company and its stockholders.
FORM 10-K AVAILABLE
THE ANNUAL REPORT OF THE COMPANY FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K, WHICH INCLUDES CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES FOR THE COMPANY AND ITS SUBSIDIARIES, IS AVAILABLE
TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE VICE PRESIDENT,
FINANCE AND ADMINISTRATION OF THE COMPANY AT 2229 MAIN STREET, CONCORD,
MASSACHUSETTS 01742.
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APPENDIX A
STARMET CORPORATION
1998 STOCK PLAN
1. PURPOSE
The purpose of this plan (the "Plan") is to secure for Starmet Corporation
(the "Company") and its shareholders the benefits arising from capital stock
ownership by employees, officers and directors of, and consultants or advisors
to, the Company and its parent and subsidiary corporations who are expected to
contribute to the Company's future growth and success. Except where the context
otherwise requires, the term "Company" shall include the parent and all present
and future subsidiaries of the Company as defined in Sections 424(e) and 424(f)
of the Internal Revenue Code of 1986, as amended or replaced from time to time
(the "Code"). Those provisions of the Plan which make express reference to
Section 422 shall apply only to Incentive Stock Options (as that term is defined
in the Plan).
2. TYPE OF OPTIONS AND GRANTS; ADMINISTRATION
(a) TYPES OF OPTIONS. Options granted pursuant to the Plan shall be
authorized by action of the board of directors of the Company (the "Board of
Directors"), or the Committee, as defined below, and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code ("Non-Qualified Options").
(b) PURCHASE RIGHTS. Pursuant to the Plan, eligible persons may be provided
with opportunities to make direct purchases of the Company's common stock
("Purchase Rights"). Purchase Rights shall be authorized by action of the Board
of Directors or the Committee, as defined below.
(c) AWARDS. Pursuant to the Plan, eligible persons may be provided with
awards of the Company's common stock ("Awards"). Awards shall be authorized by
action of the Board of Directors or the Committee, as defined below.
(d) GRANTING OF AN OPTION, PURCHASE RIGHT OR AWARD. Options and Purchase
Rights may be granted, and Awards may be made, under the Plan at any time on or
after February 20, 1998 and prior to February 19, 2008. The date of grant of an
option or Purchase Right, or provision of an Award, under the Plan will be the
date specified by the Board of Directors at the time it grants an option or
Purchase Right, or provides an Award; provided, however, that such date shall
not be prior to the date on which the Board of Directors acts to approve the
grant.
(e) ADMINISTRATION.
(i) The Plan will be administered by the Board of Directors of the
Company, whose construction and interpretation of the terms and provisions
of the Plan shall be final and conclusive. The Board of Directors may in its
sole discretion (a) grant options to purchase shares of the Company's common
stock, $0.10 par value per share ("Common Stock"), and issue shares upon
exercise of such options as provided in the Plan, (b) grant Purchase Rights
and issue shares upon the exercise of such Purchase Rights, and (c) make
Awards and issue shares pursuant to such Awards. The Board shall have
authority, subject to the express provisions of the Plan, to construe the
respective option agreements and the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective option agreements, which need not be identical,
and to make all other determinations in the judgment of the Board of
Directors necessary or
<PAGE>
desirable for the administration of the Plan. The Board of Directors may
correct any defect or supply any omission or reconcile any inconsistency in
the Plan or in any option agreement, purchase agreement or other agreement
in the manner and to the extent it shall deem expedient to carry the Plan
into effect and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination under the Plan
made in good faith. The Board of Directors may, to the full extent permitted
by or consistent with applicable laws or regulations (including, without
limitation, applicable state law and Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule
("Rule 16b-3")), delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed all references to the Board of Directors in the
Plan shall mean and relate to such Committee.
(ii) COMMITTEE ACTION. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may determine.
Acts by a majority of the Committee, or acts reduced to or approved in writing
by a majority of the members of the Committee, shall be the valid acts of the
Committee. All references in this Plan to the Committee shall mean the Board if
no Committee has been appointed. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, fill
vacancies however caused, or remove all members of the Committee and thereafter
directly administer the Plan.
(iii) GRANT OF OPTIONS, PURCHASE RIGHTS AND AWARDS TO BOARD
MEMBERS. Options, or Purchase Rights may be granted, and Awards may be made, to
members of the Board consistent with the provisions of paragraph 2(e)(i) above,
if applicable. All grants of options and Purchase Rights, and provisions of
Awards, to members of the Board shall in all other respects be made in
accordance with the provisions of this Plan applicable to other eligible
persons. Consistent with the provisions of paragraph 2(e)(i) above, members of
the Board who are either (a) eligible for options, Purchase Rights or Awards
pursuant to the Plan or (b) have been granted options or Purchase Rights, or
provided with Awards, may vote on any matters affecting the administration of
the Plan or the grant of any options or Purchase Rights, or provision of any
Awards, pursuant to the Plan, except that no such member shall act upon the
granting to himself of options or Purchase Rights, or provision of Awards, but
any such member may be counted in determining the existence of a quorum at any
meeting of the Board during which action is taken with respect to the granting
to him of options or Purchase Rights, or provision of Awards.
(f) APPLICABILITY OF RULE 16B-3. Those provisions of the Plan which make
express reference to Rule 16b-3 shall apply only to such persons as are required
to file reports under Section 16(a) of the Exchange Act (a "Reporting Person").
3. ELIGIBILITY
(a) GENERAL. Options or Purchase Rights may be granted, and Awards may be
made, to persons who are, at the time of grant or award, employees, officers or
directors of, or consultants or advisors to, the Company; provided, that the
class of employees to whom Incentive Stock Options may be granted shall be
limited to employees of the Company eligible to receive Incentive Stock Options
under the Code. A person who has been granted an option, Purchase Right or Award
may, if he or she is otherwise eligible, be granted additional options, Purchase
Rights or Awards if the Board of Directors shall so determine.
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(b) GRANTS TO DIRECTORS AND OFFICERS. From and after the registration of
the Common Stock of the Company under the Exchange Act, an option, Purchase
Right or Award made to a director or an officer of the Company (as the terms
"director" and "officer" are defined for purposes of Rule 16b-3) shall satisfy
the following condition:
The timing of the grant, the exercise or purchase price of the option,
Purchase Right or Award and the number of shares subject to the option,
Purchase Right or Award shall be determined either (i) by the full Board of
Directors, or (ii) by a Committee that is composed solely of two or more
Non-Employee Directors (as hereinafter defined). For the purposes of the
Plan, a director shall be deemed to be a "Non-Employee Director" only if
such person qualifies as a "Non-Employee Director" within the meaning of
Rule 16b-3, as such term is interpreted from time to time.
4. STOCK SUBJECT TO PLAN
Subject to adjustment as provided in Section 15 below, the maximum number of
shares of Common Stock of the Company which may be issued and sold under the
Plan is three hundred thousand (300,000) shares. If an option, Purchase Right or
Award granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares subject to such option,
Purchase Right or Award shall again be available for subsequent grants under the
Plan. If shares issued upon exercise of an option, Purchase Right or Award under
the Plan are tendered to the Company in payment of the exercise price of an
option, Purchase Right or Award granted under the Plan, such tendered shares
shall again be available for subsequent grants under the Plan; provided, that in
no event shall (i) the total number of shares issued pursuant to the exercise of
Incentive Stock Options under the Plan, on a cumulative basis, exceed the
maximum number of shares authorized for issuance under the Plan exclusive of
shares made available for issuance pursuant to this sentence or (ii) the total
number of shares issued pursuant to the exercise of options, Purchase Rights or
Awards by Reporting Persons, on a cumulative basis, exceed the maximum number of
shares authorized for issuance under the Plan exclusive of shares made available
for issuance pursuant to this sentence.
5. FORMS OF AGREEMENTS
As a condition to the grant of an option, Purchase Right or Award under the
Plan, each recipient of an option, Purchase Right or Award shall execute an
option agreement, purchase agreement, stock restriction agreement or other
agreement in such form not inconsistent with the Plan as may be approved by the
Board of Directors. Such agreements may differ among recipients.
6. PURCHASE PRICE
(a) GENERAL. The purchase price per share of stock deliverable upon the
exercise of an option, Purchase Right or Award shall be determined by the Board
of Directors; provided, that in the case of an Incentive Stock Option, the
exercise price shall not be less than 100% of the fair market value of such
stock, as determined by the Board of Directors, at the time of grant of such
option, or less than 110% of such fair market value in the case of options
described in Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Options, Purchase Rights or Awards granted
under the Plan may provide for the payment of the exercise price by delivery of
cash or a check to the order of the Company in an amount equal to the exercise
price of such options, Purchase Rights or Awards, or, to the extent provided in
the applicable option agreement, (i) by delivery to the Company of shares of
Common Stock of
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the Company already owned by the recipient having a fair market value equal in
amount to the exercise price of the options, Purchase Rights or Awards being
exercised, (ii) at the discretion of the Board of Directors and consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of the Common Stock acquired
upon exercise of an option, Purchase Right or Award and an authorization to the
broker or selling agent to pay that amount to the Company, which sale shall be
at the participant's direction at the time of exercise, (iii) by any other means
(including, without limitation, by delivery of a promissory note of the
recipient payable on such terms as are specified by the Board of Directors)
which the Board of Directors determines are consistent with the purpose of the
Plan and with applicable laws and regulations (including, without limitation,
the provisions of Rule 16b-3 and Regulation T promulgated by the Federal Reserve
Board), or (iv) by any combination of such methods of payment. The fair market
value of any shares of the Company's Common Stock or other non-cash
consideration which may be delivered upon exercise of an option, Purchase Right
or Award shall be determined by the Board of Directors.
(c) DETERMINATION OF FAIR MARKET VALUE. If, at the time an option or
Purchase Right is granted, or an Award is provided, under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be equal to
the closing price on the day prior to the date of grant or, if the prices or
quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date
such option or Purchase Right is granted, or such Award is provided, and shall
mean (i) the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common Stock is
traded, if the Common Stock is then traded on a national securities exchange; or
(ii) the last reported sale price (on that date) of the Common Stock on the
Nasdaq Stock Market, if the Common Stock is not then traded on a national
securities exchange; or (iii) the average of the closing bid and asked prices
last quoted (on that date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the Nasdaq
Stock Market. However, if the Common Stock is not publicly traded at the time an
option or Purchase Right is granted, or an Award is provided, under the Plan,
"fair market value" shall be deemed to be the fair value of the Common Stock as
determined by the Board of Directors or Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Company's capital stock in
private transactions negotiated at arm's length.
7. EXERCISE PERIOD
Each option, Purchase Right or Award and all rights thereunder shall expire
on such date as shall be set forth in the applicable agreement, except that, in
the case of an Incentive Stock Option, such date shall not be later than ten
years after the date on which the option is granted and, in all cases, options
shall be subject to earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS, PURCHASE RIGHTS OR AWARDS
Each option, Purchase Right or Award granted under the Plan shall be
exercisable either in full or in installments at such time or times and during
such period as shall be set forth in the agreement evidencing such option,
Purchase Right or Award, subject to the provisions of the Plan.
9. NONTRANSFERABILITY OF OPTIONS
Incentive Stock Options, and all options granted to Reporting Persons, shall
not be assignable or transferable by the person to whom they are granted, either
voluntarily or by operation of law, except by
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will or the laws of descent and distribution, and, during the life of the
optionee, shall be exercisable only by the optionee; provided, that
Non-Qualified Options may be transferred pursuant to a qualified domestic
relations order (as defined in the Internal Revenue Code of 1986, as amended).
10. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER RELATIONSHIP
(a) Except as provided in Section 11(d), or in subsection (b) below, with
respect to Incentive Stock Options, and subject to the provisions of the Plan,
the Board of Directors shall determine the period of time during which a
recipient may exercise an option, Purchase Right or Award following (i) the
termination of the recipient's employment or other relationship with the Company
or (ii) the death or disability of the recipient. Such periods shall be set
forth in the agreement evidencing such option, Purchase Right or Award.
(b) Subject to Sections 11(d) and 25 below, if a grantee of an Incentive
Stock Option ceases to be employed by the Company other than by reason of death
or disability, as defined in Section 11(d), no further installments of his
Incentive Stock Options shall become exercisable, and his Incentive Stock
Options shall terminate no later than three (3) months from the date of
termination of his employment, but in no event later than on their specified
expiration dates, except to the extent that such Incentive Stock Options (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to Section 22. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed ninety (90) days or, if longer, any period
during which such grantee's right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Board of Directors
shall not be considered an interruption of employment under the Plan, provided
that such written approval contractually obligates the Company to continue the
employment of the grantee after the approved period of absence. Incentive Stock
Options granted under the Plan shall not be affected by any change of employment
within or among the Company, so long as the grantee continues to be an employee
of the Company. Nothing in the Plan shall be deemed to give any grantee of any
option, Purchase Right or Award the right to be retained in employment or other
service by the Company for any period of time.
11. INCENTIVE STOCK OPTIONS
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Shareholder. If any employee to whom an Incentive Stock Option
is to be granted under the Plan is, at the time of the grant of such option,
the owner of stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (after taking into account the
attribution of stock ownership rules of Section 424(d) of the Code), then
the following special provisions shall be applicable to the Incentive Stock
Option granted to such individual:
(i) The purchase price per share of the Common Stock subject to such
Incentive Stock Option shall not be less than 110% of the fair market
value of one share of Common Stock at the time of grant; and
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(ii) The option exercise period shall not exceed five years from the
date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide, options
granted to any employee under the Plan (and any other incentive stock option
plans of the Company) which are intended to constitute Incentive Stock Options
shall not constitute Incentive Stock Options to the extent that such options, in
the aggregate, become exercisable for the first time in any one calendar year
for shares of Common Stock with an aggregate fair market value (determined as of
the respective date or dates of grant) of more than $100,000.
(d) TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Company, except that:
(i) an Incentive Stock Option may, subject to Section 25 below, be
exercised within the period of three (3) months after the date the optionee
ceases to be an employee of the Company (or within such lesser period as may
be specified in the applicable option agreement); provided that the
agreement with respect to such option may designate a longer exercise period
and that the exercise after such three-month period shall be treated as the
exercise of a Non-Qualified Option under the Plan;
(ii) if the optionee dies while in the employ of the Company, or within
three (3) months after the optionee ceases to be such an employee, the
Incentive Stock Option may be exercised by the person to whom it is
transferred by will or the laws of descent and distribution within the
period of twelve (12) months after the date of death (or within such lesser
period as may be specified in the applicable option agreement); and
(iii) if the optionee becomes disabled while in the employ of the
Company, the Incentive Stock Option may be exercised within the period of
one year after the date the optionee ceases to be such an employee because
of such disability (or within such lesser period as may be specified in the
applicable option agreement). For the purposes of the Plan, the term
"disabled" or "disability" shall mean "permanent and total disability" as
defined in Section 22(e)(3) of the Code.
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Income Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions, no Incentive Stock Option may be exercised after its
expiration date.
12. ADDITIONAL PROVISIONS
(a) ADDITIONAL PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in agreements covering options,
Purchase Rights or Awards granted under the Plan, including without limitation
restrictions on transfer, repurchase rights, commitments to pay cash bonuses, to
make, arrange for or guaranty loans or to transfer other property to recipients
upon exercise of options, Purchase Rights or Awards, or such other provisions as
shall be determined by the Board of Directors; provided that such additional
provisions shall not be inconsistent with any other term or condition of the
Plan and such additional provisions shall not cause any Incentive Stock Option
granted under the Plan to fail to qualify as an Incentive Stock Option within
the meaning of Section 422 of the Code.
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(b) ACCELERATION, EXTENSION, ETC. Subject to any accounting considerations
with respect to "Accounting for Business Combinations" pursuant to Accounting
Principles Board Opinion No. 16, the Board of Directors may, in its sole
discretion, (i) accelerate the date or dates on which all or any particular
option, Purchase Right or Award granted under the Plan may be exercised or (ii)
extend the dates during which all, or any particular, option, Purchase Right or
Award granted under the Plan may be exercised; provided that no such extension
shall be permitted if it would cause the Plan to fail to comply with Section 422
of the Code or such option, Purchase Right or Award to fail to comply with Rule
16b-3.
13. GENERAL RESTRICTIONS
(a) INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option, Purchase Right or Award is granted, as a condition of exercising such
option, Purchase Right or Award, to give written assurances in substance and
form satisfactory to the Company to the effect that such person is acquiring the
Common Stock subject to the option, Purchase Right or Award for his or her own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws, or with covenants or representations made by the Company in
connection with any public offering of its Common Stock.
(b) COMPLIANCE WITH SECURITIES LAWS. Each option, Purchase Right or Award
shall be subject to the requirement that if, at any time, counsel to the Company
shall determine that the listing, registration or qualification of the shares
subject to such option, Purchase Right or Award upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
or regulatory body, or that the disclosure of non-public information or the
satisfaction of any other condition is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such option,
Purchase Right or Award may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration or qualification, or to
satisfy such condition.
(c) LOCK-UP. By accepting any option, Purchase Right or Award granted under
the Plan, each person thereby agrees that if the Company offers any of its
Common Stock for sale pursuant to a registration statement under the Securities
Act, such person will not, without the prior written consent of the Company,
offer, sell, contract to sell or otherwise dispose of, directly or indirectly,
any shares purchased upon exercise of any option, Purchase Right or Award
granted under the Plan for a period of 180 days after the effective date of such
registration statement.
14. RIGHTS AS A SHAREHOLDER
The holder of an option, Purchase Right or Award shall have no rights as a
shareholder with respect to any shares covered by the option, Purchase Right or
Award (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such shares) until the date of issue of a
stock certificate to him or her for such shares. No adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.
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15. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS
(a) GENERAL. If, through or as a result of any merger, consolidation, sale
of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding options, Purchase
Rights or Awards under the Plan, and (z) the price for each share subject to any
then outstanding options, Purchase Rights or Awards under the Plan, without
changing the aggregate purchase price as to which such options, Purchase Rights
or Awards remain exercisable. Notwithstanding the foregoing, no adjustment shall
be made pursuant to this Section 15 if such adjustment would cause the Plan to
fail to comply with Section 422 of the Code or any option, Purchase Right or
Award to fail to comply with Rule 16b-3.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this Section
15 will be made by the Board of Directors, whose determination as to what
adjustments, if any, will be made and the extent thereof will be final, binding
and conclusive. No fractional shares will be issued under the Plan on account of
any such adjustments.
16. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of all or
substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company may, in its discretion, take
any one or more of the following actions, as to outstanding options, Purchase
Rights or Awards: (i) provide that such options, Purchase Rights or Awards shall
be assumed, or equivalent options, Purchase Rights or Awards shall be
substituted, by the acquiring or succeeding corporation (or an affiliate
thereof), provided that any such options substituted for Incentive Stock Options
shall meet the requirements of Section 424(a) of the Code, (ii) upon written
notice to the recipient provide that all unexercised options, Purchase Rights or
Awards will terminate immediately prior to the consummation of such transaction
unless exercised by the recipient within a specified period following the date
of such notice, (iii) terminate all options, Purchase Rights and Awards in
exchange for a cash payment equal to the excess of the fair market value of the
shares subject to such options, Purchase Rights and Awards (to the extent then
exercisable) over the exercise price thereof, (iv) terminate all options,
Purchase Rights and Awards in exchange for the right to participate in any stock
option or other employee benefit plan of any successor corporation (giving
proper credit to any grantee of an option, Purchase Right or Award for that
portion of any option, Purchase Right and Award which has otherwise vested and
become exercisable prior to any such consolidation, merger or sale of all or
substantially all of the assets of the Company), (v) in the event of a merger
under the terms of which holders of the Common Stock of the Company will receive
upon consummation thereof a cash payment for each share surrendered in the
merger (the "Merger Price"), make or provide for a cash payment to the recipient
equal to the difference between (A) the Merger Price times the number of shares
of Common Stock subject to such
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outstanding options, Purchase Rights or Awards (to the extent then exercisable
at prices not in excess of the Merger Price) and (B) the aggregate exercise
price of all such outstanding options, Purchase Rights or Awards in exchange for
the termination of such options, Purchase Rights or Awards, or (vi) provide that
all or any portion of outstanding options, Purchase Rights or Awards shall
become exercisable in full immediately prior to such event. The foregoing
actions are subject in all instances to the approval of the Board of Directors
and any accounting considerations for any acquisition which is required to be
treated as a "pooling of interests" transaction pursuant to the Accounting
Principles Board ("APB") Opinion No. 16, if any discretionary action by the
Board of Directors would otherwise preclude the Company from accounting for any
such transaction as a "pooling of interests" under APB Opinion No. 16.
(b) SUBSTITUTE OPTIONS, PURCHASE RIGHTS OR AWARDS. The Company may grant
options, Purchase Rights or Awards under the Plan in substitution for options,
Purchase Rights or Awards held by employees of another corporation who become
employees of the Company, or a subsidiary of the Company, as the result of a
merger or consolidation of the employing corporation with the Company or a
subsidiary of the Company, or as a result of the acquisition by the Company, or
one of its subsidiaries, of property or stock of the employing corporation. The
Company may direct that substitute options, Purchase Rights or Awards be granted
on such terms and conditions as the Board of Directors considers appropriate in
the circumstances.
(c) PROVISIONS OF THIS SECTION 16 NOT IN LIMITATION OF SPECIFIC TERMS IN
OPTION, PURCHASE RIGHT OR AWARD INSTRUMENTS. Notwithstanding subparagraphs (a)
and (b) of this Section 16, in the event that an instrument evidencing an
option, Purchase Right or Award shall provide for a result that is more
favorable to the holder of such instrument than the actions permitted to be
taken by the Board of Directors pursuant to subparagraph (a) of this Section 16
upon the occurrence of any of the events set forth therein, such instrument
shall control. Without limiting the foregoing but subject to the last sentence
of subparagraph (a) of this Section 16, the Board of Directors may, in its
discretion, take any action that is more favorable to the holder of an option,
Purchase Right or Award than the provision which is provided in the instrument
evidencing such option, Purchase Right or Award.
17. MODIFICATION OF INCENTIVE STOCK OPTIONS
Notwithstanding the foregoing, any adjustments made pursuant to Sections 15
or 16 with respect to Incentive Stock Options shall be made only after the Board
of Directors, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such Incentive Stock
Options (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Board of Directors determines that such adjustments made with respect to
Incentive Stock Options would constitute a modification of such Incentive Stock
Options, it may, in its discretion, refrain from making such adjustments.
18. DISSOLUTION OR LIQUIDATION
Except as otherwise provided in Section 16, in the event of the proposed
dissolution or liquidation of the Company, each option, Purchase Right and Award
will terminate immediately prior to the consummation of such proposed action or
at such other time and subject to such other conditions as shall be determined
by the Board of Directors.
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19. ISSUANCES OF SECURITIES
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares subject to options, Purchase Rights or Awards. No
adjustments shall be made for dividends paid in cash or in property other than
securities of the Company.
20. FRACTIONAL SHARES
No fractional shares shall be issued under the Plan and the grantee of an
option, Purchase Right or Award shall receive from the Company cash in lieu of
the fair market value of such fractional shares.
21. CONDITIONS AND RESTRICTIONS
If any person or entity owning restricted Common Stock obtained by exercise
of an option, Purchase Right or Award made hereunder receives shares or
securities or cash in connection with a corporate transaction described in
Sections 15 or 16 above as a result of owning such restricted Common Stock, such
shares or securities or cash shall be subject to all of the conditions and
restrictions applicable to the restricted Common Stock with respect to which
such shares or securities or cash were issued, unless otherwise determined by
the Board of Directors.
22. CONVERSION OF INCENTIVE STOCK OPTIONS INTO NON-QUALIFIED OPTIONS;
TERMINATION OF INCENTIVE STOCK OPTIONS
The Board of Directors, at the written request or with the written consent
of any grantee of an Incentive Stock Option, may, in its discretion, take such
actions as may be necessary to convert such grantee's Incentive Stock Options
(or any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such Incentive Stock Options, regardless of whether the
grantee is an employee of the Company at the time of such conversion. Such
actions may include, but shall not be limited to, extending the exercise period
or reducing the exercise price of the appropriate installments of such Incentive
Stock Options. At the time of such conversion, the Board of Directors (with the
consent of the grantee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Board of Directors in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any grantee the right to have
such grantee's Incentive Stock Options converted into Non-Qualified Options, and
no such conversion shall occur until and unless the Board of Directors takes
appropriate action.
23. GOVERNMENTAL REGULATION
The Company's obligation to sell and deliver shares of the Common Stock
under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such shares.
24. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION
By accepting an Inventive Stock Option granted under the Plan, each grantee
of an Incentive Stock Option thereby agrees to notify the Company in writing
immediately after such grantee makes a
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Disqualifying Disposition of any Common Stock acquired pursuant to the exercise
of an Incentive Stock Option. Generally, a Disqualifying Disposition is any
disposition (including any sale) of such Common Stock occurring on or before the
later of the date (a) two years after the date the employee was granted the
Incentive Stock Option, or (b) one year after the date the employee acquired
Common Stock by exercising the Incentive Stock Option.
25. NO EXERCISE OF AN OPTION, PURCHASE RIGHT OR AWARD IF ENGAGEMENT OR
EMPLOYMENT TERMINATED FOR CAUSE
If the employment of a grantee of an option, Purchase Right or Award is
terminated by his voluntary resignation or by the Company for "Cause," any
option, Purchase Right or Award shall terminate on the date of such termination
and such option, Purchase Right or Award shall thereupon not be exercisable to
any extent whatsoever. "Cause" is conduct, as determined by the Board of
Directors, involving one or more of the following: (i) gross misconduct by the
grantee which is materially injurious to the Company; or (ii) the commission of
an act of embezzlement, fraud or deliberate disregard of the rules or policies
of the Company which results in material economic loss, damage or injury to the
Company; or (iii) the unauthorized disclosure of any trade secret or
confidential information of the Company or any third party who has a business
relationship with the Company or the violation of any noncompetition covenant or
assignment of inventions obligation with the Company; or (iv) the commission of
any act which induces any customer or prospective customer of the Company to
break a contract with the Company or to decline to do business with the Company;
or (v) the conviction of the grantee of a felony involving any financial
impropriety or which would materially interfere with the grantee's ability to
perform his or her services for the Company or otherwise be injurious to the
Company; or (vi) the failure of the grantee to perform in a material respect his
or her employment obligations without proper cause. In making such
determination, the Board of Directors shall act fairly and in utmost good faith.
For the purposes of this Section 25, termination of employment shall be deemed
to occur when the grantee receives notice that his employment is terminated.
26. NO SPECIAL EMPLOYMENT RIGHTS
Nothing contained in the Plan or in any options, Purchase Rights or Award
shall confer upon any recipient any right with respect to the continuation of
his or her employment by the Company or interfere in any way with the right of
the Company at any time to terminate such employment or to increase or decrease
the compensation of the recipient.
27. OTHER EMPLOYEE BENEFITS
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the exercise of an option, Purchase Right or Award or
the sale of shares received upon such exercise will not constitute compensation
with respect to which any other employee benefits of such employee are
determined, including, without limitation, benefits under any bonus, pension,
profit-sharing, life insurance or salary continuation plan, except as otherwise
specifically determined by the Board of Directors.
28. AMENDMENT OF THE PLAN
(a) The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect, except that if at any time the approval of the
shareholders of the Company is required under
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Section 422 of the Code or any successor provision with respect to Incentive
Stock Options the Board of Directors may not effect such modification or
amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall not,
without the consent of a recipient, affect his or her rights under an option,
Purchase Right or Award previously granted to him or her. With the consent of
the recipient affected, the Board of Directors may amend outstanding agreements
governing an option, Purchase Right or Award in a manner not inconsistent with
the Plan. The Board of Directors shall have the right to amend or modify (i) the
terms and provisions of the Plan and of any outstanding Incentive Stock Options
granted under the Plan to the extent necessary to qualify any or all such
options for such favorable federal income tax treatment (including deferral of
taxation upon exercise) as may be afforded incentive stock options under Section
422 of the Code and (ii) the terms and provisions of the Plan and of any
outstanding options, Purchase Rights or Awards to the extent necessary to
qualify any or all such options, Purchase Rights or Awards for an exemption
under Rule 16b-3.
29. WITHHOLDING
(a) The Company shall have the right, as a condition of option exercise or
share transfer, to require payment by the option holder to the Company or to
deduct from payments of any kind otherwise due to the option holder any federal,
state, local, or foreign taxes of any kind required by law to be withheld with
respect to any shares issued upon exercise of options, Purchase Rights or Awards
under the Plan or the subsequent transfer of any shares so issued. Subject to
the prior approval of the Company, which may be withheld by the Company in its
sole discretion, the recipient may elect to satisfy such obligations, in whole
or in part, (i) by causing the Company to withhold shares of Common Stock
otherwise issuable pursuant to the exercise of an option, Purchase Right or
Award or (ii) by delivering to the Company shares of Common Stock already owned
by the recipient. The shares so delivered or withheld shall have a fair market
value equal to such withholding obligation. The fair market value of the shares
used to satisfy such withholding obligation shall be determined by the Company
as of the date that the amount of tax to be withheld is to be determined. A
recipient who has made an election pursuant to this Section 29(a) may only
satisfy his or her withholding obligation with shares of Common Stock which are
not subject to any repurchase, forfeiture, unfulfilled vesting or other similar
requirements.
(b) Notwithstanding the foregoing, in the case of a Reporting Person, no
election to use shares for the payment of withholding taxes shall be effective
unless made in compliance with any applicable requirements of Rule 16b-3.
30. CANCELLATION AND NEW GRANT OF OPTIONS, PURCHASE RIGHTS OR AWARDS, ETC.
The Board of Directors shall have the authority to effect, at any time and
from time to time, with the consent of the affected recipients, (i) the
cancellation of any or all outstanding options, Purchase Rights or Awards under
the Plan and the grant in substitution therefor of new options, Purchase Rights
or Awards under the Plan covering the same or different numbers of shares of
Common Stock and having an exercise price per share which may be lower or higher
than the exercise price per share of the cancelled options, Purchase Rights or
Awards or (ii) the amendment of the terms of any and all outstanding options,
Purchase Rights or Awards under the Plan to provide an exercise price per share
which is higher or lower than the then-current exercise price per share of such
outstanding options, Purchase Rights or Awards.
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31. EFFECTIVE DATE AND DURATION OF THE PLAN
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months after the date of the Board's adoption of the Plan, no options
previously granted under the Plan shall be deemed to be Incentive Stock Options
and no Incentive Stock Options shall be granted thereafter. Amendments to the
Plan not requiring shareholder approval shall become effective when adopted by
the Board of Directors; amendments requiring shareholder approval (as provided
in Section 28) shall become effective when adopted by the Board of Directors,
but no Incentive Stock Option granted after the date of such amendment shall
become exercisable (to the extent that such amendment to the Plan was required
to enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such option to a particular option. Subject to this limitation, options,
Purchase Rights or Awards may be granted under the Plan at any time after the
effective date and before the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 16,
the Plan shall terminate, with respect to Incentive Stock Options only, upon the
earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption, by the Board of Directors, or (ii) the
date on which all shares available for issuance under the Plan shall have been
issued pursuant to the exercise or cancellation of options granted under the
Plan. Unless sooner terminated in accordance with Section 16, the Plan shall
terminate with respect to options, Purchase Rights or Awards which are not
Incentive Stock Options on the date specified in (ii) above. If the date of
termination is determined under (i) above, then options, Purchase Rights or
Awards outstanding on such date shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such options,
Purchase Rights or Awards.
32. PROVISION FOR FOREIGN PARTICIPANTS
The Board of Directors may, without amending the Plan, modify options,
Purchase Rights or Awards granted to participants who are foreign nationals or
employed outside the United States to recognize differences in laws, rules,
regulations or customs of such foreign jurisdictions with respect to tax,
securities, currency, employee benefit or other matters.
Adopted by the Board of Directors on February 20, 1998
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STARMET CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints George J. Matthews and Robert E. Quinn, or
either or them, as Proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and to vote, as designated below, all the
shares of Common Stock of Starmet Corporation held of record by the undersigned
on January 21, 1998, at the Special Meeting of Stockholders to be held on March
18, 1998, or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
"FOR" proposals 1, 2 and 3 and in the discretion of the Proxies on any other
matter which may be brought before the Special Meeting.
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PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED ENVELOPE.
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Please sign this proxy exactly as your name appears on the books of the
Corporation. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
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HAS YOUR ADDRESS CHANGED?
<PAGE>
/x/ PLEASE MARK VOTES AS IN THIS EXAMPLE
1) Election of Directors.
/ / For / / Withhold / / For All Except
George J. Matthews, Wilson B. Tuffin, Robert E. Quinn, Frank H. Brenton,
Kenneth A. Smith and William J. Shea.
If you do not wish your shares voted "For" a particular nominee, mark the
"For All Except" box and strike a line through that nominee's name.
Your shares will be voted for the remaining nominees(s).
2) To adopt the Company's 1998 Stock Plan.
/ / For / / Against / / Abstain
3) To ratify appointment of Arthur Anderson LLP as auditors for the Company.
/ / For / / Against / / Abstain
4) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Mark box at right if address change has / /
been noted on the reverse side of this card.
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Please be sure to sign and date this Proxy. Date
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Stockholder sign here Co-owner sign here
