SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ x ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for use of the
Commission only (as permitted
[ x ] Definitive proxy statement by Rule 14a-6(e)(2)).
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
DRIVER-HARRIS COMPANY
Payment of filing fee (check the appropriate box):
[ x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies;
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
DRIVER-HARRIS COMPANY
308 MIDDLESEX STREET
HARRISON, NEW JERSEY 07029
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 26, 1999
TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of Driver-Harris Company will be held
at the office of the Company, 308 Middlesex Street, Harrison, New Jersey, on
Wednesday, May 26, 1999 at 11:00 A.M., for the following purposes:
1. to elect four directors;
2. to approve and adopt the 1999 Driver-Harris Company Incentive Stock Option
Plan;
3. to transact any and all other business that may properly come before the
meeting.
The transfer books will not be closed for the Annual Meeting. Only
stockholders of record at the close of business on April 23, 1999 will be
entitled to vote at the meeting.
All stockholders are cordially invited to attend the Annual Meeting in
person. It is important that your stock be represented at this meeting.
You are urged to mark, sign and date the enclosed proxy and return it as
promptly as possible in the postage pre-paid envelope enclosed for that
purpose whether or not you are able to attend.
By Order of the Board of Directors:
Lavinia Z. Emery
Secretary
Harrison, New Jersey
April 28, 1999
<PAGE>
DRIVER-HARRIS COMPANY
(Incorporated in New Jersey)
P R O X Y S T A T E M E N T
Annual Meeting of Stockholders to be held May 26, 1999
SOLICITATION AND REVOCABILITY OF PROXY
The accompanying proxy is solicited by order of the Board of Directors of
Driver-Harris Company, 308 Middlesex Street, Harrison, New Jersey 07029, for
use at the Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held on May 26, 1999 and any adjournment thereof. This
Proxy Statement and the enclosed form of proxy are first being mailed to
stockholders of this Company on or about April 28, 1999.
Execution of the Proxy will not in any way affect the stockholder's right
to attend the meeting and vote in person. In addition, a proxy may be
revoked by a stockholder at any time prior to being voted by giving written
notice of such revocation to the Secretary of the Annual Meeting, or by
filing with the Secretary another proxy bearing a later date.
The Company will bear the cost of solicitation of proxies and will reimburse
persons holding stock in their names or those of their nominees for their
expenses in sending soliciting material to their principals. In addition to
the solicitation of proxies by use of the mails, proxies may also be
solicited by regularly engaged employees of the Company by telephone,
facsimile, cable and personal interview. It is not expected that
any solicitation will be made by specially engaged employees of the Company
or other paid solicitors.
VOTING SECURITIES
Only stockholders of record at the close of business on April 23, 1999 will
be entitled to vote at the Annual Meeting. The Company has only one class of
voting securities currently outstanding, its common stock, $.83 1/3 par value
(the "Common Stock") per share, of which 1,366,083 shares were outstanding on
April 23, 1999, the record date. Each stockholder is entitled to one vote
for each share of Common Stock held by him. The presence, in person or by
proxy, of the holders of a majority of the outstanding shares is required
for a quorum.
Under New Jersey Law, abstentions and broker non-votes (as hereinafter
defined) are counted as present for the purpose of determining the presence
or absence of a quorum for the transaction of business but otherwise do not
count. The approval of a specified percentage of shares voted at the
meeting, as set forth above, is required to approve a proposal and thus,
abstentions and broker non-votes have no effect on the outcome of the vote.
A "broker non-vote" refers to shares represented at the Meeting in
person or by Proxy by a broker or nominee where such broker or nominee (i)
has not received voting instructions on a particular matter from the
beneficial owner or persons entitled to vote; and (ii) the broker or nominee
does not have the discretionary voting power on such matter.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Ownership of shares of the Company's Common Stock by certain beneficial
owners as of March 22, 1999:
<TABLE>
Name and Address Amount and Nature of Percent of
Of Beneficial Owner Beneficial Ownership Class
<S> <C> <C>
Estate of Frank L. Driver Jr. 64,172* 4.6
c/o David A. Driver, Executor
10 High Street
Bristol, RI 02809
Estate of Frank L. Driver III 66,662** 4.8
33 Birdseye Glen
Verona, NJ
Frank L. Driver IV 106,540*** 7.6
100 Warren Street
Jersey City, NJ
</TABLE>
_____________________________
* All shares held of record and beneficially. As an executor of the Estate
of Frank L. Driver Jr., David A. Driver, Chairman of Driver-Harris Company,
holds voting rights to such shares.
** All shares held of record. Does not include 24,154 shares held by Corinne
F.Driver, his surviving spouse and the mother of Frank L. Driver IV, who
disclaims any beneficial interest in these shares. As an executor of the
Estate of Frank L. Driver III, Frank L. Driver IV, Director and President,
holds voting rights to such shares.
*** Includes 45,000 shares under options pursuant to the Driver-Harris
Employee Incentive Stock Option Plan, granted in 1990, 1991 and 1992, which
are fully exercisable and 8,014 shares held in the Driver-Harris Staff 401-K
Benefit account.
(b) Security ownership of management as of March 22, 1999:
<TABLE>
Amount and Nature of Percent of
Title of Class Beneficial Class
Ownership
Driver-Harris Company
<S> <C> <C>
Common Stock 312,144* 22.3%
</TABLE>
<PAGE>
* Includes 45,000 shares under options pursuant to the Driver-Harris Employee
Incentive Stock Option Plan and 8,014 shares held in the Driver-Harris Staff
401-K Benefit account.
(c) Management is not aware of any arrangement which may result in a change in
control of the Company.
ELECTION OF DIRECTORS
Four directors are to be elected at the Annual Meeting to hold office until
the next annual meeting of the stockholders and until their respective
successors shall be elected and qualified.
All duly executed proxies will be voted for the election of the four nominees
named below unless, as is not anticipated, any one of the nominees is unable
or declines to serve, in which case such proxies will be voted for the
balance of the nominees and for substitute nominees, unless the Board deems
it advisable to amend the By-Laws so as to decrease the number of directors
to be elected. Directors shall be elected by a plurality of the votes cast.
All nominees are presently directors of the Company.
The following table summarizes the principal occupations and business
experience during the past five years, as well as certain other information
as of March 22,1999, for each nominee:
<TABLE>
Principal Occupation Company Common % of
During Last Five Stock Outstanding
Years and other Director Beneficially Common
Name Age Directorships Since Owned (1) Stock
<S> <C> <S> <C> <C> <C>
Ralph T. Bartlett
74 Certified Public
Accountant. 1985 3,100 *
Until 1984, a
partner of Deloitte
Haskins & Sells (now Deloitte
& Touche), NY.
H. L. Biggerstaff
72 Retired. Until
1988, President 1980 4,150 *
Arwood Die Casting Division
of Arwood Corp.
David A. Driver
60 Chairman of the
Board of Directors 1977 42,750 3.1
of the Company.
President, Atlantic
Alloys Inc.
Frank L. Driver IV
38 President and
Chief Executive
Officer 1993 106,540** 7.6
of the Company.
</TABLE>
* Denotes less than 1% of the outstanding Common Stock.
** Includes 45,000 shares under current exercisable stock options pursuant to
the Driver-Harris Employee Incentive Stock Option Plan and 8,014 shares
included in the Driver-Harris Staff 401-K Benefit account.
<PAGE>
(1) On March 22, 1999 all directors of the Company as a group (4) owned
beneficially 287,374 shares or 20.6% of the outstanding Common Stock. This
amount includes 45,000 shares under currently exercisable stock options
granted to Frank L. Driver IV pursuant to the Driver-Harris Employee
Incentive Stock Option Plan. Also, Frank L. Driver IV is an executor of the
Estate of Frank L. Driver III, his father, which owns 66,662 shares or 4.8%
of the outstanding common stock. In addition, David A. Driver is an
executor of the Estate of Frank L. Driver Jr., his father, which owns 64,172
shares or 4.6% of the outstanding Common Stock.
The Company has an Audit Committee and a Compensation Committee, it does
not have a Nominating Committee. The Audit Committee, which held two meetings
during 1998, is responsible for the Company's audit and financial controls.
Messrs. Ralph T. Bartlett, H. L. Biggerstaff and David A. Driver are members
of the Audit Committee.
The Compensation Committee met in March of 1998. Messrs. Ralph T. Bartlett,
H. L. Biggerstaff and David A. Driver are members of the Committee.
The Board of Directors held six meetings during 1998. The Board of Directors
recommends that Stockholders vote FOR the nominees for the Board of Directors.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term
Annual Compensation
Compensation Awards
Securities Underlying All Other
Name and Principal Position Year Salary Options/SARs Compensation (a)
($) (#) ($)
Frank L. Driver IV,
<S> <C> <C> <C> <C> <S>
President 1998 90,000 0 6,231 (b)
and Chief Executive
Officer 1997 90,000 0 9,000
1996 100,500 0 10,731
</TABLE>
(a) Amount represents the Company's portion of contributions to a 401(k) plan.
(b) A portion of his compensation has been accrued.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
None.
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
<TABLE>
Number of
Securities Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)
------------- ---------------
Shares Acquired Exercisable (E) Exercisable (E)
Name On Exercise(#) Unexercisable (U) Unexerciseable(U)
Exercisable options:
<S> <C> <C> <S>
Frank L. Driver IV None 45,000 (E) -----
</TABLE>
PENSION PLANS
On November 21, 1986, the Company entered into a pension agreement with
Frank L. Driver III, under which Mr. Driver or his spouse would receive an
annual payment of $50,000 for a period of fifteen years after Mr. Driver's
retirement or death. On November 20, 1995, the Board of Directors approved
changing the period to twenty years and the addition of a contingent payment
to this agreement whereby in years where the profit of the Company exceeds
$500,000 before income taxes and before this payment, the $50,000 amount will
be supplemented by an amount based on a formula encompassing total
retirement payments, adjusted annually for the Consumer Price Index.
This pension is now payable to Corinne F. Driver, spouse of Frank L. Driver
III, deceased. In 1997, $21,072 was paid as an additional retirement
payment to Corinne F.Driver. No additional payments were made for 1998.
COMPENSATION OF DIRECTORS
During 1998, each Director, with the exception of Frank L. Driver IV, was
paid an annual retainer of $6,000, plus $600 per Board of Directors Meeting
and $400 per Audit or Compensation Committee Meeting. In addition, in 1998,
each non-executive Director received 750 shares of Common Stock, valued at
$10.00 per share for a total of $7,500.
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
COMPENSATION DECISIONS
The Company has a Compensation Committee of its Board of Directors. Mr.
David A. Driver, a member of the Committee is an uncle of Frank L. Driver IV,
President and Chief Executive Officer.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Board's Compensation Committee reviews the compensation of the executive
officers of the Company annually.
<PAGE>
The Company's salary policy is to pay a "competitive salary" plus an
incentive bonus based on profit performance in relation to prior years and
in relation to annual budget profit targets. The Compensation Committee may
also take into consideration other factors including dedication to the job,
external factors beyond the control of management, etc. An incentive bonus
of 300 shares each of Common Stock was paid in 1998 to Thomas J. Carey,
Timothy S. Driver and Lavinia Z. Emery.
Compensation Committee
David A. Driver Ralph T. Bartlett H. L. Biggerstaff
CUMULATIVE TOTAL SHAREHOLDER RETURN FIVE-YEAR
COMPARISON
The following table compares the yearly percentage change in the cumulative
total shareholder return, on Driver-Harris (DRH) common stock, with that of
the cumulative total return of Standard & Poor's Smallcap 600 Index and a
Standard & Poor's Industry Index of companies, for a five-year measurement
period beginning December 31, 1993 and ending on December 31, 1998.
<TABLE>
Base
Period
Dec.93 Dec.94 Dec.95 Dec.96 Dec.97 Dec.98
<S> <C> <C> <C> <C> <C> <C>
Driver-Harris Company $100.00 $ 69.49 $ 79.66 $119.48 $138.98 $ 49.15
S&P Smallcap 600 Index 100.00 95.23 123.76 150.14 188.56 186.10
Metal Fabricators-Small 100.00 104.13 144.49 153.03 193.62 135.94
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David A. Driver, Chairman of the Company is the uncle of Frank L. Driver IV,
President.
In 1994, the Company restructured its operations and among other things,
became the owner of a fifty percent interest of HAI Holding Company Inc. and
indirectly of Harrison Alloys Inc. (Harrison). In conjunction with this
transaction, Messrs. F. L. Driver III and IV entered into consulting
agreements with Harrison for a five-year period under which each would
receive compensation of $25,000 per year. However, since September 1996,
Frank L. Driver IV received no compensation from Harrison.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's Officers and Directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission and the American Stock Exchange. Officers, directors and greater
than ten-percent shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company,
or written representations that no Forms 5 were required, the Company
believes that during 1998 all Section 16(a) filing requirements applicable
to its officers, directors and greater than ten-percent shareholders were
complied with.
PROPOSAL TO APPROVE THE 1999 INCENTIVE STOCK OPTION PLAN
On March 22, 1999, the Board of Directors adopted, subject to approval by
the stockholders of the Company at this Annual Meeting, the 1999 Driver-
Harris Company Incentive Stock Option Plan (the "1999 Stock Option Plan").
The 1999 Stock Option Plan provides for the grant of stock options intended
to qualify as "incentive stock options" under Section 422A of the Internal
Revenue Code of 1986, as amended as provided for by the Economic Recovery
Tax Act of 1981. As of March 22, 1999, 200,000 shares of stock were
reserved for issuance under the 1999 Stock Option Plan.
No shares have been granted under this Plan and it is not anticipated
that any shares will be granted under this Plan before July 1, 1999.
Approval of the 1999 Stock Option Plan requires the affirmative vote of a
majority of the votes cast at the meeting. The following summarizes the
principal provisions of the 1999 Stock Option Plan.
Administration
The 1999 Stock Option Plan will be administered by the Compensation
Committee of the Board of Directors. Amendments to the Plan may be made from
time to time by the Committee with the approval of the Board of Directors.
The Committee will determine those persons to whom options will be granted
and the number of shares to be included in each option.
Shares Available for Options
The shares to be sold pursuant to the exercise of options granted under the
1999 Stock Option Plan shall be unissued or reacquired shares of Common Stock
of the Company not to exceed in the aggregate 200,000 shares, subject to
adjustment in the event of any stock split or stock dividend of the Company.
Eligibility
Any Director, Officer, consultant or key employee of the Company or of any
of its subsidiaries who in the opinion of the Compensation Committee is
deemed to be a key contributor to the success of the Company will be
eligible to receive stock options under the 1999 Stock Option Plan. The
Compensation Committee of the Board is authorized to select the persons to
whom options would be granted, the number of shares subject to each option,
the option price and other terms of the option. The maximum number of
shares that may be issued in any year to any individual employed by the
Company is limited to 20,000 shares.
Terms of Options
1. The option price may not be less than 100% of the fair market value of the
Common Stock at the time the option is granted. In the case of incentive
stock options granted to any holder or the date of grant of more than 10% of
the total combined voting power of all classes of stock of the Company, the
option price must be at least 110% of the fair market value of the shares
subject to option on the date of grant.
2. The options may be exercised no later than ten years after the date of
grant.
3. No option will be exercisable if the grantee has outstanding any
previously granted incentive stock options.
Federal Income Tax Consequences and Accounting Treatment
Options granted under the 1999 Stock Option Plan are intended to meet the
requirements of "incentive stock options" within the meaning of Section 422A
of the Internal Revenue Code. Upon grant or exercise the optionee will not
realize taxable income and the Company will not be entitled to a deduction.
While there is no charge to income on grant or exercise, earnings-per-share
calculations will reflect any potential dilutive effects of issue of these
additional shares upon exercise.
Long-term capital gain will be realized by the holder at the time of sale
more than one year after the date of exercise. If the holder disposes of
stock purchased upon exercise of an incentive stock option prior to that
time (less than one year after exercise or less than two years after the
date of grant of the option), the sale will be considered a
disqualifying disposition. For federal income tax purposes the holder
will be considered to have ordinary income for the difference between the
option price and the fair market value on date of exercise (or sale price,
if lower) and a short-term capital gain on such a sale for any amount in
excess of the fair market value at the date of exercise. The Board
of Directors believes that the benefits of stockholder approval and
adoption of the 1999 Stock Option Plan re desirable to the Company and will
assist in effectuating the objectives of the Company. Accordingly, the
Board urges that Stockholders vote FOR approval and adoption of the 1999
Stock Option Plan.
INDEPENDENT AUDITORS
The principal independent auditors of the Company for the year ended December
31, 1998 were Ernst & Young LLP, who have been appointed by the Board to act
in that capacity again in 1999. Services rendered by Ernst & Young LLP
included an audit of the Company's consolidated financial statements and the
report thereon, meetings with the Audit Committee and consultation in
connection with various accounting and audit related matters.
A representative of Ernst & Young LLP is expected to be present at the Annual
Meeting with the opportunity to make a statement if he so desires and to
respond to appropriate questions.
<PAGE>
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 Annual Meeting
must be received by the Company on or before January 17, 2000 to be
considered for inclusion in the Company's proxy statement and form of proxy
relative to the meeting. Such proposals should be sent to Lavinia Z. Emery,
Secretary, Driver-Harris Company, 308 Middlesex Street, Harrison, New Jersey
07029.
OTHER MATTERS
Management is not aware of any matters, other than those referred to above,
that may come before the Annual Meeting. If any other matters are properly
presented at the Annual Meeting for action, it is intended that the persons
named in the proxies will have discretionary authority to vote on such
matters.
Enclosed herewith is the 1998 Annual Report of the Company, including
financial statements for the year ended December 31, 1998. The Annual Report
does not form part of the material for solicitation of proxies.
The Company's 1998 Annual Report on Form 10-K, including financial
statements and schedules thereto, but excluding exhibits, as filed with the
Securities and Exchange Commission, may be obtained without charge by any
stockholder upon written request to Lavinia Z. Emery, Secretary, Driver-
Harris Company.
By Order of the Board of Directors
Harrison, New Jersey Lavinia Z. Emery
April 28, 1999 Secretary
<PAGE>
EXHIBIT A
Driver-Harris Company
1999 Incentive Stock Option Plan
1. Purpose. The purpose of the Driver-Harris Incentive Stock Option Plan
(the "Option Plan") is to advance the interest of Driver-Harris Company
("DH") or any subsidiary that now exists or hereafter is organized or
acquired by DH (DH and such subsidiaries collectively referred to as the
"Company") by inducing persons of outstanding ability and potential to join
and remain in the employ of DH, by encouraging and enabling such individuals
to acquire a proprietary interest in DH and as well as to provide incentives
for consultants and key Officers, Directors and employees to promote the
success of the Company. The provisions of the Option Plan are intended to
satisfy the requirements of Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as now or hereafter construed,
interpreted and applied by regulations, rulings and cases, and shall be
interpreted in a manner consistent with the requirements thereof.
2. Definitions. As used in this Option Plan, the following words and
phrases shall have the meanings indicated:
(a) "Board" means the Board of Directors of DH.
(b) "Cause" means (1) any act of fraud or intentional misrepresentation,
or (2) any act of embezzlement, misappropriation or conversion of
assets or opportunities of the Company or any direct or indirect
majority-owned subsidiary of the Company, or (3) the conviction of the
Grantee for any felony.
(c) "Change of Control" means an event in which:
(i) any "person", as such term is used in Sections 13(d) and 14(d) of the
Exchange Act (other than (1) the Company, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or (3) any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of Common Stock), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing a majority of the
combined voting power of the Company's then outstanding voting
securities;
(ii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
<PAGE>
voting securities of the surviving or parent entity) more than 50% of
the combined voting power of the voting securities of the Company or
such surviving or parent entity outstanding immediately after such
merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in
which no person acquired a majority of the combined voting power of
the Company's then outstanding securities; or
(iii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (or
any transaction having a similar effect).
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the committee appointed by the Board to administer the
Plan.
(f) "Common Stock" means the common stock, par value $.83 1/3, of DH.
(g) "Disability" means the Grantee's inability to perform the Grantee's
customary services by reason of any medically determinable physical or
mental impairment that can be expected to result in death or that has
lasted or can be expected to last for a continuous period of not less
than twelve (12) months.
(h) "Fair Market Value" per share as of a particular date means the last
reported sale price of the Common Stock regular way on such day or, in
case no such reported sale take place on such day, the average of the
reported closing bid and asked prices regular way on such day, in
either case on the American Stock Exchange.
(i) "Grantee" means an officer, Director, consultant or key employee who has
been granted an Option under the Option Plan.
(j) "Option" means a grant to a Grantee of an option to purchase shares of
Common Stock.
(k) "Stock Grant" means a grant to a Grantee of shares of Common Stock.
(l) "Trading Day" means, with respect to the Common Stock, each Monday,
Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are not traded on the exchange or market on which the Common
Stock is traded.
3. Administration. The Option Plan shall be administered by the
Compensation Committee of the Board, and is intended to satisfy the
provisions of Rule 16b-3 under the Exchange Act or any successor thereof.
The Committee shall have the powers vested in it by the terms of the
Option Plan, such powers to include the authority to determine those persons
to whom options will be granted and the number of shares to be the subject of
each such option and to prescribe the form of the agreements embodying awards
of Options and Common Stock made under the Option Plan. The Committee shall,
subject to and not inconsistent with the express provisions of the Option
Plan, have the authority to administer the Option Plan and to exercise all
the powers and authorities either specifically granted to it under the Option
Plan or necessary or advisable in the administration of the Option Plan,
including, without limitation, the authority to prescribe, amend and rescind
rules and regulations relating to the Option Plan; and to make all other
determinations deemed necessary or advisable for the administration
of the Option Plan.
<PAGE>
The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee
or any person to whom it has delegated duties as aforesaid may employ one or
more persons to render advice with respect to any responsibility the
Committee or such person may have under the Option Plan.
The Board shall fill all vacancies, however caused, in the Committee, may
from time to time appoint additional members to the Committee, and may at
any time remove one or more Committee members and substitute others. One
member of the Committee shall be selected by the Board as chairman. The
Committee shall hold its meetings at such times and places as it shall deem
advisable. All determinations of the Committee shall be made by a majority
of its members either present in person or participating by conference
telephone at any meeting or by written consent. The
Committee may appoint a secretary and make such rules and regulations for the
conduct of its business as it shall deem advisable, and shall keep minutes of
its meetings.
No member of the Board or Committee shall be liable for any action taken or
determination made in good faith with respect to the Option Plan or any
Option or Common Stock granted hereunder.
4. Eligibility. All Directors, officers, consultants and key employees of
the Company and any of its subsidiaries shall be eligible to receive grants
of options in accordance with the terms of this Option Plan.
5. Common Stock Subject to the Option Plan. The stock subject to grants
of Options shall be shares of Common Stock. Such shares may, in whole or
part, be authorized but unissued shares or shares that shall have been or
that may be reacquired by DH. The maximum number of shares of Common Stock
as to which grants of stock or Options may be granted under the Option Plan
shall not exceed 200,000. The limitation established by the preceding
sentence shall be subject to adjustment as provided in Section 7(h) hereof.
In the event that any outstanding Option under the Option Plan should for any
reason expire, be canceled or be terminated without having been exercised in
full, the shares of Common Stock allocable to the unexercised portion of
such Option shall (unless the Option Plan shall have been terminated) become
available for subsequent grants of Options under the Option Plan.
<PAGE>
6. Grants of Common Stock Options. Common stock Options shall be granted
in the following manner:
The Committee shall be authorized at any of its regularly scheduled Committee
meetings, to recommend to the Board, for approval at its next regularly
scheduled Board meeting, grants of Common Stock Options to eligible
Directors, officers, consultants and key employees.
7. Terms and Conditions of Options. Each Option granted pursuant to the
Option Plan shall be evidenced by a written agreement (the "Agreement")
between DH and the Grantee in such form as the Committee shall prescribe
from time to time, which Agreement shall comply with and be subject to the
following terms and conditions:
(a) Type of Option. The Option Plan is intended to qualify as an incentive
stock option plan pursuant to Section 422A of the Code, as the same shall
exist on the date of the approval of the Option Plan by the Board.
(b) Option Price. The price of each Option granted under the Option Plan
shall be equal to one-hundred percent (100%) of the Fair Market Value of the
shares of Common Stock subject to such Option on the date of grant thereof.
The price shall be subject to adjustment as provided in Section 7(h) hereof.
(c) Medium and Time Of Payment. The price shall be paid in full, at the
time of exercise, to DH by bank check or cash.
(d) Term and Exercise of Options. Options granted under the Option Plan
shall be exercisable as to thirty-three and one-third percent (33 1/3%) of
the shares subject thereto on the date of grant and shall become exercisable
as to an additional thirty-three and one-third percent (33 1/3%) of the
shares subject thereto on each of the first and second anniversaries of such
date of grant provided the Grantee continues to be associated with the
Company in a manner satisfactory by the Committee on each of such dates.
An Option shall be exercisable for a period of ten (10) years from the date
of grant of such Option; provided, however, that the exercise period shall be
subject to earlier termination as provided in Sections 7(e) and 7(f) hereof.
An Option may be exercised, as to any or all full shares of Common Stock as
to which the Option has become exercisable, at any time prior to expiration;
provided that, in no case may an Option be exercised as to less than one
hundred (100) shares of Common Stock at any one time (or the remaining
shares covered by the Option if less than one hundred (100) shares of Common
Stock). An Option shall be exercised by the delivery by the holder thereof,
of written notice of such exercise to DH at its principal office (attention
of the Secretary). No Option shall be exercisable while there is
outstanding (within the meaning of Section 422A(c)(7) of the Code) any
incentive stock option which was granted, before the granting of such Option,
to such individual to purchase Stock in the Company or in a corporation
which (at the time of granting of such earlier Option) is a parent or
subsidiary corporation of the Company, or is a predecessor corporation of
any of such corporations.
<PAGE>
(e) Termination. In the event that the service of the Grantee shall
terminate (other than by reason of retirement, death or disability), all
Options of such Grantee that are exercisable at the time of such termination
may, unless earlier terminated in accordance with their terms, be exercised
within six months after such termination; provided, however, that if the
service of a Grantee shall terminate for Cause, all Options theretofore
granted to such Grantee, shall, to the extent not theretofore exercised,
terminate immediately upon such termination of employment. Nothing in the
Option Plan or in any Agreement shall confer upon an individual any right to
continue in service with the Company or interfere in any way with the right
of the Company to terminate such service.
(f) Retirement, Death or Disability of Grantee. If a Grantee shall die
while in service of the Company or within three (3) months after the
termination of such Grantee's service, other than for Cause, or if the
Grantee's service shall terminate by reason of disability or retirement, all
Options theretofore granted to such Grantee (to the extent otherwise
exercisable at the time of death or termination of service) may, unless
earlier terminated in accordance with their terms, be exercised by the
Grantee or by the Grantee's estate or by a person who acquired the right to
exercise such Option by bequest or inheritance or otherwise by reason of the
retirement, death or disability of the Grantee, at any time within six months
after the date of retirement, death or disability of the
Grantee.
(g) Non-transferability of Options. Options granted under the Option Plan
shall not be transferable otherwise than by will or by the laws of descent
and distribution, and Options may be exercised, during the lifetime of the
Grantee, only by the Grantee or by his or her guardian or legal
representative.
(h) Effect of Certain Changes. In the event of any extraordinary dividend,
stock dividend, recapitalization, merger, consolidation, stock split,
warrant or rights issuance, or combination or exchange of such shares, or
other similar transactions, the number of shares of Common Stock available
for awards, the number of such shares covered by outstanding awards, and
the price per share of Options shall be equitably adjusted by the Committee
to reflect such event and preserve the value of such awards; provided,
however, that any fractional shares resulting from such adjustment shall be
eliminated. If, while unexercised Options remain outstanding under the
Option Plan, there is a change in control of DH, all Options shall be
exercisable in full, whether or not otherwise exercisable. In the event of
a change in the common stock of DH as presently constituted, which is
limited to a change of all of its authorized shares with par value into the
same number of shares with a different par value or without par value, the
shares resulting from any such change shall be deemed to be the Common Stock
within the meaning of the Option Plan. To the extent that the foregoing
adjustments relate to stock or securities of DH, such adjustments shall be
made by the Committee, whose determination in that respect shall be final,
binding and conclusive. Except as heretofore expressly provided in this
Section 7(h), the Grantee shall have no rights by reason of any subdivision
or consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in
<PAGE>
the number of shares of stock of any class or by reason of any dissolution,
liquidation, merger or spin-off of assets or stock of another corporation;
and any issue by DH of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
price of shares of common stock subject to the Option. The grant of an
Option pursuant to the Option Plan shall not affect in any way the right or
power of DH to make adjustments, reclassifications, reorganizations or
changes of its capital or business structures or to merge or to consolidate
or to dissolve, liquidate or sell, or transfer all or part of its business
or assets.
(i) Rights as a Stockholder. A Grantee or a transferee of an Option shall
have no rights as a stockholder with respect to any shares covered by the
Option until the date of the issuance of a stock certificate to him or her
for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distribution of other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 7(h) hereof.
(j) Non-qualified Stock Options. Nothing contained in the Plan shall be
deemed to preclude the Company from issuing Options which do not qualify as
incentive stock options pursuant to Section 422A of the Code, provided, that
the Company shall identify clearly any such non-qualifying Option as such,
shall keep separate records with respect to any such Option, and shall inform
any Optionee receiving such Option of such fact.
(k) Other Provisions. Except as specifically determined by the Committee,
the Option Plan and the Agreements authorized thereunder shall contain such
other provisions, including, without limitation, the imposition of
restrictions upon the exercise of an Option, as shall be required to cause
the Option Plan to at all times comply with the requirements of Rule 16b-3
under the Exchange Act or any successor thereof.
8. Agreement by Grantee Regarding Withholding Taxes. If the Committee shall
so require, as a condition of exercise, each Grantee shall agree that the
Company may defer making payment of or delivery of any benefits under the
Option Plan until satisfactory arrangements have been made for the payment
of any tax attributable to any amounts payable with respect to Common Stock
granted under the Option Plan. The Company is authorized to take any action
as the Committee may deem advisable to enable the Company and the Grantee
to satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any award under the Option Plan. This authority
shall include authority to withhold or receive stock or other
property and to make cash payments in respect thereof in satisfaction of
the Grantee's tax obligations.
9. Amendment and Termination of the Option Plan. The Board at any time and
from time to time may suspend, terminate, modify or amend the Option Plan;
provided, however, that the Option Plan shall not be amended more than once
during any six (6) month period other than to comply with changes in the
Code, the Employee Retirement Income Security Act of 1974, as amended, or
the rules or regulations thereunder. Except as provided in Section 7 hereof,
no suspension, termination, modification or amendment of the Option Plan may
adversely affect any Option previously granted, without the express written
consent of the Grantee.
10. Approval by Stockholders. The Option Plan shall be subject to the
approval of the Stockholders of DH by the affirmative vote of a majority of
the votes cast by holders of Common Stock represented at the 1999 Annual
Meeting of Stockholders of DH and entitled to vote thereon. In the event
such stockholder approval is not received at the 1999 Annual Meeting of
Stockholders or any adjournment thereof, then upon such event, the Option
Plan and all rights hereunder shall immediately terminate, no
Grantee (or any permitted transferee thereof) shall have any remaining
rights under the Option Plan and any Agreement entered into in connection
herewith shall become null and void.
11. Effect of Headings. The section and subsection headings contained
herein are for convenience only and shall not effect the construction hereof.
12. Governing Law. The Option Plan and all determinations made and action
taken pursuant hereto shall be governed by the laws of the State of New
Jersey without giving effect to conflict of laws principles thereof.
13. Effective Date of Option Plan. The Option Plan shall be effective on
July 1, 1999 provided the Option Plan has received the approval of the
Shareholders of DH as provided in Section 10 hereof, and shall terminate on
the tenth anniversary thereof, unless sooner terminated in accordance with
Section 9 hereof. No Options or Common Stock may be granted under the
Option Plan on or after June 30, 2009 but Options theretofore granted may
extend beyond such date.
14. Federal Income Tax Consequences. The following is a brief summary of the
federal income tax consequences of transactions under the Plan based on
federal income tax laws in effect on the date of this Proxy Statement. This
summary is not intended to be exhaustive and does not address all matters
which may be relevant to a particular Grantee based on his or her specific
circumstances. The summary addresses only current federal income tax law and
expressly does not discuss the income tax laws of any state, municipality,
or non-U.S. taxing jurisdiction or gift, estate or other tax laws. The
Company advises all Grantees to consult their own tax advisors
concerning the tax implications of option grants and exercises and the
disposition of stock acquired upon such exercises under the Plan. Options
granted under the Plan may be either incentive stock options, which (subject
to certain reporting requirements and application of the general business
test) qualify for the special tax treatment provided by Section 422 of the
Code, or non-qualified stock options.
<PAGE>
15. Incentive Stock Options. Upon the grant of an incentive stock option,
the Grantee will recognize no income. The Grantee generally will incur no
tax liability upon the exercise. The Company will not be allowed a
deduction for federal income tax purposes as a result of the grant or
exercise of an incentive stock option. Upon the sale or exchange of the
shares acquired as a result of the exercise of an incentive stock option
more than two years after the
date of the grant of the option and more than one year after the date of
exercise of the option by the Grantee, any gain will be treated as
a long-term capital gain. If both of these holding periods are not
satisfied, the Grantee will recognize compensation which will be taxable in
the year of exercise in an amount equal to the excess of the lower of the
fair market value of the common stock on the date of the option exercise or
the amount realized on the disposition. The Company will be entitled to a
deduction in the same amount as the ordinary income
recognized by the Grantee. Any gain or loss recognized on a disposition of
the shares prior to completion of both of the above holding periods in excess
of the amount treated as ordinary income will be characterized as long-term
capital gain if the sale occurs more than one year after exercise of the
option or as short-term capital gain if the sale is made earlier.
16. Non-qualified Stock Options. All options which do not qualify as
incentive stock options are referred to as non-qualified stock options. No
income is realized by the Grantee at the time the non-qualified stock option
is granted. The grantee realizes ordinary income in the year of exercise
equal to the difference in the fair market value of the shares on the date
of exercise and the exercise price. The Company is generally
entitled to a deduction equal to the amount of ordinary income taxed to the
Grantee. Upon the disposition of the shares acquired by the exercise of the
option, appreciation (or loss) occurring after the date of exercise is
treated as long- or short-term capital gain (or loss) depending on the
Grantee's holding period for the shares.
17. Alternative Minimum Tax. The exercise of an incentive stock option may
subject the Grantee to the alternative minimum tax under Section 55 of the
Code. The alternative minimum tax is calculated by applying a tax rate of
26% to alternative minimum taxable income of joint filers up to $175,000
($87,500 for married taxpayers filing separately) and 28% to alternative
minimum taxable income above that amount. Alternative minimum taxable
income is equal to (i) taxable income adjusted for certain items, plus (ii)
items of tax preference less (iii) an exemption amount of $45,000 for joint
returns, $33,750 for unmarried individual returns and $22,500 in the case of
married taxpayers filing separately (which exemption amounts
are phased out for upper income taxpayers). Alternative minimum tax will be
due if the tax determined under the foregoing formula exceeds the regular
tax of the taxpayer for the year.
<PAGE>
DRIVER-HARRIS COMPANY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
For Annual Meeting to be held on May 26, 1999 at 11:00 a.m.
The undersigned hereby appoints, Frank L. Driver IV and David A. Driver and
each or either of them, attorneys with powers the undersigned would possess
if personally present to vote all stock of the undersigned in Driver-Harris
Company at the Annual Meeting of its stockholders, to be held May 26, 1999
and at any adjournment thereof:
(1) For the election of four directors, namely:
Messrs: Ralph T. Bartlett, H. L. Biggerstaff, David A. Driver and
Frank L. Driver IV
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR AN
INDIVIDUAL NOMINEE, BUT NOT ALL NOMINEES, PLACE A LINE
THROUGH THE NOMINEE'S NAME.
(2) Approval of 1999 Driver-Harris Company Incentive Stock Option Plan;
(3) Any upon such other matters which may properly come before the meeting.
_______________________________
Dated: __________________ 1999 _______________________________
Please sign exactly as name appears on
record. If joint account, each joint owner
must sign.
[ ] Kindly check this box if planning to attend the Annual Meeting.
