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|
Filed by a party other than the registrant|_|
Check the appropriate box:
| | Preliminary proxy statement
|X| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
REORGANIZED CONSUMAT SYSTEMS, INC.
(Name of Registrant as Specified in Its Charter)
REORGANIZED CONSUMAT SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
|X| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14A-6(i)(2).
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4)and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
(4) Proposed maximum aggregate value of transaction:
|_| 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:
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
REORGANIZED CONSUMAT SYSTEMS, INC.
POST OFFICE BOX 9379 RICHMOND, VIRGINIA 23227
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 14, 1996
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Reorganized Consumat Systems,
Inc. (the "Company") will be held at the offices of the Company, 8407 Erle Road,
Mechanicsville, Virginia, on Friday, June 14, 1996, commencing at 10:00 a.m.
E.D.T., for the following purposes:
1. To elect a board of four directors to serve for the ensuing
year.
2. To act upon a proposal, previously approved by the Board of
Directors of the Company, to adopt an employee Stock Option
Plan.
3. To act upon a proposal, previously approved by the Board of
Directors of the Company, to adopt a Non-Employee Director
Stock Option Plan.
4. To ratify the selection of Parham, P.C., certified public
accountants, as auditors of the Company for the current fiscal
year.
5. To transact such other business as may properly come before
the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 30,
1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof.
The Company's Proxy Statement is submitted herewith. The Annual Report
for the fiscal year ended December 31, 1995, accompanies the Proxy Statement.
You are requested to complete, sign, date, and return the enclosed
Proxy promptly regardless of whether you expect to attend the meeting. A
self-addressed, stamped envelope is enclosed for your convenience.
If you are present at the meeting, you may vote in person even if you
have already sent in your proxy.
By Order of the Board of Directors
PATRICIA B. BRADLEY,
Corporate Secretary
May 10, 1996
<PAGE>
REORGANIZED CONSUMAT SYSTEMS, INC.
Post Office Box 9379
Richmond, Virginia 23227
PROXY STATEMENT
To Be Mailed on or about May 10, 1996, for
Annual Meeting of Shareholders To Be Held June 14, 1996
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Reorganized Consumat Systems, Inc. (the "Company"), for use at the
Annual Meeting of Shareholders of the Company to be held June 14, 1996, or any
adjournments thereof, for the purposes set forth in this Proxy Statement and the
attached Notice of Annual Meeting of Shareholders. If sufficient proxies are not
returned in response to this solicitation, supplementary solicitations also may
be made by mail or by telephone, telegraph or personal interview by directors,
officers and regular employees of the Company, none of whom will receive
additional compensation for these services. The Company reserves the right to
retain an outside proxy solicitation firm to assist in the solicitation of
proxies, but at this time does not have plans to do so. Costs of solicitation of
proxies will be borne by the Company, which will reimburse banks, brokerage
firms, and other custodians, nominees, and fiduciaries for reasonable
out-of-pocket expenses incurred by them in forwarding proxy materials to the
beneficial owners of shares held by them.
The shares represented by all properly executed proxies received by the
Corporate Secretary of the Company and not revoked as herein provided will be
voted as set forth herein unless the shareholder directs otherwise in the proxy,
in which event such shares will be voted in accordance with such directions. Any
proxy may be revoked at any time before the shares to which it relates are voted
either by written notice (which may be in the form of a substitute proxy
delivered to the Secretary of the meeting) or by attending the meeting and
voting in person.
VOTING SECURITIES AND RECORD DATE
The Board of Directors has fixed the close of business on April 30,
1996, as the record date for the determination of shareholders entitled to
notice of and to vote at the meeting and any adjournments thereof. Each holder
of record of the Company's common stock, issued effective March 12, 1996, and
having a $1.00 par value (the "Common Stock"), on the record date will be
entitled to one vote for each share then registered in his name with respect to
all matters to be considered at the meeting. As of the close of business on the
record date, 1,010,000 shares of Common Stock were outstanding and entitled to
vote at the meeting. Presence in person or by proxy of the holders of a majority
of the outstanding shares of Common Stock entitled to vote at the meeting will
constitute a quorum. Shares for which the holder has elected to abstain or to
withhold the proxies' authority to vote (including broker non-votes) on a matter
will count towards a quorum, but will have no effect on the action taken with
respect to such matter.
RECENT DEVELOPMENTS
Chapter 11 Reorganization
On October 6, 1995, the Company filed for Chapter 11 bankruptcy relief
in the United States Bankruptcy Court for the Eastern District of Virginia,
Richmond Division (the "Bankruptcy Court"). The Company filed with the
Bankruptcy Court a Second Amended Plan of Reorganization dated January 4, 1996.
On February 28, 1996, the Bankruptcy Court confirmed the Second Amended Plan of
Reorganization, as amended by a Modification to Second Amended Plan of
Reorganization dated February 27, 1996 (jointly, the "Reorganization Plan"). On
March 12, 1996 (the "Effective Date"), the Company was recapitalized and
commenced making the distributions required under the Reorganization Plan,
including distributions of cash and of the shares of Common Stock of the
Company. The Company was discharged under the Reorganization Plan of all of its
debts that existed as of the date of the commencement of its Chapter 11
bankruptcy proceeding.
Pursuant to the Reorganization Plan, the Company was recapitalized with
5,000,000 shares of Common Stock and 1,000,000 shares of preferred stock. A
total of 1,010,000 shares of Common Stock are now issued and outstanding. All
shares of the Company's old common stock and all other equity interests,
including all options, warrants or other agreements requiring the issuance of
equity in the Company, were cancelled under the Reorganization Plan.
The Company executed and delivered to Lighthouse Investments, L.L.C.
("Lighthouse"), a promissory note in the principal amount of $192,306.29. The
promissory note is payable by the Company with interest at a rate per annum of
ten percent (10%) in twelve (12) equal quarter-annual payments of principal and
interest beginning on March 31, 1996, and continuing on the last day of each
successive calendar quarter through December 31, 1998. The promissory note is
secured by the same collateral that secured Lighthouse's pre-bankruptcy claim
against the Company. Two of the principals of Lighthouse, Neil F. Vierson, III,
and Howard P. Harper, are former directors of the Company who served as
directors until March 12, 1996.
Creditors with allowed unsecured claims arising from supplies or
services provided to the Company before the commencement of the Company's
Chapter 11 bankruptcy proceeding received cash in an amount equal to fifty
percent (50%) of their allowed unsecured claims. Other creditors with allowed
unsecured claims received (a) the lesser of (i) cash in an amount equal to
twenty-five percent (25%) of their allowed unsecured claims or (ii) $60,000,
plus (b) their pro rata share of 150,000 shares of the Common Stock of the
Company.
Pursuant to the Reorganization Plan, the shares of the old common stock
of the Company were cancelled and all holders (or their assignees) of such
shares received a pro rata distribution of 500,000 shares of the Common Stock of
the Company. All other equity interests, including options, warrants and other
agreements requiring the issuance of equity interests of the Company, were
cancelled under the Reorganization Plan.
Assignees of Sirrom Capital Corporation ("Sirrom") purchased 260,000
shares of the Common Stock of the Company for a price of $39,000 ($0.15 per
share) pursuant to the Reorganization Plan. In addition, certain officers and
consultants of the Company consisting of Robert L. Massey, Robert S. Lee, Mark
E. Hills, James K. Fishback, and William O. Wiley each received 20,000 shares of
the Common Stock of the Company. The Reorganization Plan provides that the
Company may issue options, warrants or other agreements for the issuance of up
to 300,000 shares of the Common Stock of the Company. (See Proposals Two and
Three below).
On March 28, 1996, the Bankruptcy Court entered a Final Decree closing
the Company's Chapter 11 bankruptcy proceeding.
Sirrom Financing
In order to operate in its Chapter 11 bankruptcy proceeding and to
consummate the Reorganization Plan, the Company borrowed $1,500,000 from Sirrom
pursuant to the terms of Loan Agreements dated October 11, 1995, January 16,
1996, and March 12, 1996, and with the approval of the Bankruptcy Court. The
following is a summary of the principal terms and conditions of the Loan
Agreements:
Interest Rate. The loans bear interest at a rate of fourteen
percent (14%) per annum;
Stock Warrants. Sirrom received a warrant to purchase up to 32%
of the fully diluted shares of the Common Stock of the Company at
$0.01 per share; and
Collateral. The credit facility is secured by liens on all real
and personal property of the Company, including but not limited
to accounts receivable, inventory, equipment, and general
intangibles.
Management
As of the Effective Date and in accordance with the Reorganization
Plan, the management, control and operation of the Company became the general
responsibility of its initial Board of Directors consisting of Robert L. Massey,
Alexander Y. Hoff, and Peter T. Socha. Messrs. Massey and Hoff were directors of
the Company at the time the Company commenced its Chapter 11 bankruptcy
proceeding and at all times since. Mr. Socha is the Vice President and Chief
Credit Officer of Sirrom. Under the Plan, directors of the Company are to serve
until the first annual meeting of stockholders of the Company or their earlier
resignation or removal in accordance with the articles of incorporation or
bylaws of the Company. At a meeting of the Board of Directors on March 27, 1996,
Mr. Massey was elected as Chairman. At a meeting on April 12, 1996, the Board
elected James W. Bohlig as an additional director. Mr. Bohlig is an officer of
New England Waste Services, Inc., which is the owner of 107,318 shares
(approximately 10.63%) of the Common Stock of the Company.
Each of the officers of the Company immediately prior to the Effective
Date continued in his or her positions as the officers of the Company on and
after the Effective Date. In addition, at its first meeting held on March 27,
1996, the Board of Directors elected Robert S. Lee as Vice President. Set forth
below is the name, age, and position with the Company of each such officer:
Name and (Age) Position(s)
Robert L. Massey (61) Chairman, President, and Chief
Executive Officer
Patricia B. Bradley (53) Corporate Secretary
Mark E. Hills (36) Chief Financial Officer
Robert S. Lee (48) Vice President
Mr. Massey was elected Vice President of the Company in 1968 and was
elected President in March 1985, Executive Vice President and Chief Operating
Officer in 1991, and President and Chief Executive Officer in June 1992. Mr.
Massey also was elected as Chairman of the Board of Directors at the first
meeting of the new Board of Directors on March 27, 1996. He is a graduate of
Greenville College, Greenville, Illinois, and has more than 35 years experience
in finance and sales.
Ms. Bradley joined the Company in 1971 and has held various
administrative positions, including Human Resources Manager. She was elected
Corporate Secretary in 1992. Ms. Bradley has over 20 years of experience in
office administration and management.
Mr. Hills joined the Company as the Controller in early 1993, was
elected Treasurer in October 1993, and was elected Chief Financial Officer in
June 1995. Mr. Hills has over 15 years of experience in public accounting and
manufacturing management.
Mr. Lee joined the Company in 1986 as a project manager, was promoted
to plant operations manager in 1987, and was elected Vice President-Operations
in 1989. In 1996, Mr. Lee was elected Vice President.
PROPOSAL ONE -- ELECTION OF DIRECTORS
Nominees and Vote Required
The Company's Board of Directors presently consists of four directors,
each of whom is to serve until the first Annual Meeting of Shareholders or their
earlier resignation or removal in accordance with the articles of incorporation
or bylaws of the Company.
The Board of Directors has nominated three of the four directors as
nominees for re-election as directors and an additional nominee for election as
a director. The nominees are identified in the table below.
Each of the nominees has consented to his being named as a nominee in
this Proxy Statement and has agreed to serve if elected; provided, however, that
the nominee (who is not currently a director) has advised the Company that his
service as a director is conditioned on the Company having obtained a directors
and officers insurance policy with satisfactory coverage and effective as of the
date of his election. Each of the nominees has furnished to the Company the
information set forth in the table below with respect to his age and his
principal occupation or employment.
It is expected that each of these nominees will be able to serve, but
in the event that any such nominee is unable to serve for any reason (which
event is not now anticipated), the proxies reserve discretion to vote or refrain
from voting for a substitute nominee or nominees. Shareholders may withhold
authority to vote for any of the nominees on the accompanying proxy.
The Board of Directors recommends that Shareholders vote "FOR" the
nominees set forth below. The four nominees receiving the greatest number of
affirmative votes cast at the Annual Meeting will be elected.
<TABLE>
<CAPTION>
Name and (Age) Director Principal Occupation for Last Five Years
Since and Other Information
<S> <C> <C>
Robert L. Massey (61) 1971 Chairman of the Board, President, and
Chief Executive Officer of the Company
Alexander Y. Hoff (60) 1995 President of Yankee Engineering Company
James W. Bohlig (49) 1996 Senior Vice President and Chief Operating Officer of
Casella Waste Systems, Inc., and of New England
Waste Services, Inc.
D. Randolph Graham (45) n/a Vice President - Administration, Chief Financial Officer,
and Treasurer of Sterile Concepts Holdings, Inc.
</TABLE>
The current director who is not standing for re-election as a director
is Peter T. Socha who is the Vice President and Chief Credit Officer of Sirrom
Capital Corporation. Mr. Socha has been an officer of Sirrom Capital Corporation
since 1994 and became an initial director of the Company on March 12, 1996, in
accordance with the Company's Reorganization Plan. During the previous five
years, Mr. Socha was the President and Chief Operating Officer of Stewart Foods,
Inc. (1992 - 1994), and an investment banker with Quest Capital Corporation
(1991 - 1992).
Attendance
The Board of Directors held 18 meetings during the fiscal year ended
December 31, 1995. All directors attended seventy-five percent or more of the
meetings, including regularly scheduled and special meetings, and the meetings
of any committees of the Board on which they served, in each case that were held
in the past fiscal year during the periods in which they were directors or
served on such committees. Presently there are no standing committees of the
Board of Directors.
Director Compensation and Reimbursement
The Company reimburses the direct travel expenses of directors
associated with Board of Director activities. In 1995, the Company paid its
directors reimbursement expenses in the aggregate amount of $9,514.45. In
addition, the three non-employee directors of the Company received a total of
7,000 shares of the old common stock of the Company in 1995 as a fee for
attendance of the meetings of the Company's Board of Directors. The names of the
non-employee directors, the number of the shares of the old common stock of the
Company received by them in 1995, and the number of Board meetings attended by
them in 1995 are as follows:
Name of Director Shares Received Meetings Attended
Neil F. Vierson, III 3,000 18
Howard P. Harper 3,000 18
Alexander Y. Hoff 1,000 10
As described above, an initial Board of Directors was appointed as of March 12,
1996, pursuant to the Company's Reorganization Plan. Of the three non-employee
directors of the Company prior to March 12, 1996, only Mr. Hoff remains as a
director of the Company.
The two former non-employee directors, Messrs. Vierson and Harper,
owned respectively 9,633 and 39,500 shares of the old common stock of the
Company and now own respectively 3,473 and 14,243 shares of the new Common Stock
of the Company as a result of distributions made by the Company in accordance
with the Reorganization Plan. See "Principal Shareholders" below for the
disclosure of Mr. Hoff's beneficial ownership of shares of new Common Stock of
the Company.
In 1995, the Company did not grant to directors any options for the
purchase of shares of the old common stock of the Company pursuant to the 1993
Non-Employee Outside Directors Stock Option Plan or otherwise. The 1993
Non-Employee Outside Directors Stock Option Plan was rejected as part of the
Company's Chapter 11 plan and is no longer in existence.
Executive Compensation
Summary Compensation Table. The table below sets forth for the years ended
December 31, 1995, 1994, and 1993, the annual and long-term compensation for
services in all capacities to the Company and its subsidiaries for those persons
who at December 31, 1995, were the Company's executive officers whose salary and
bonus exceeded $100,000 for the year ending December 31, 1995 (the "Named
Executives").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
- ------------------------------- -------- ----------------------- -------------------------- --------------------------
Securities Underlying
Name and Principal Position Year Salary (1) Bonus Options/SARs(#) All Other Compensation
- --------------------------- ---- ------ ----- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
Robert L. Massey, 1995 118,269 -0- -0- (2)
President and Chief 1994 112,500 -0- -0-
Executive Officer 1993 122,115 -0- 50,000
</TABLE>
(1) Mr. Massey was entitled under his employment contract to receive a base
salary of $125,000 during each of the fiscal years ending December 31, 1995,
1994, and 1993. The amounts set forth in the above table reflect salary
reductions applicable to Mr. Massey in each of the fiscal years ending December
31, 1995, 1994, and 1993. The aggregate amount of such reductions formed a part
of Mr. Massey's claim against the Company in its Chapter 11 proceeding, which
claim was discharged pursuant to the Reorganization Plan.
(2) Substantially less than 10% of salary. See "Contracts with Executives"
immediately below.
Contracts with Executives
The Company and the Company's Chief Executive Officer, Mr. Massey, are
parties to an employment contract dated February 12, 1991. The employment
contract had an initial term of two years but is automatically renewed annually
unless notice of non-renewal is given by one of the parties. The employment
contract provides for an annual base salary of $125,000 and additional benefits.
As of December 31, 1995, Mr. Massey was indebted to the Company in the
amount of $38,000 as a result of a loan made to him in December 1985. The loan
does not bear interest and is to be repaid on demand out of future bonuses, when
declared, or otherwise one year following termination of employment with the
Company. No repayments were made against this loan in 1995 or 1994; however, the
outstanding balance of the loan has been reduced to $19,028.00 as a result of an
offset by Mr. Massey in an amount equal to the amount of the Company's
indebtedness to Mr. Massey which was discharged and not paid under the Plan.
Bonus Plan
The Company has a bonus plan which provides for the payment of periodic
bonuses to employees. Aggregate bonuses may not exceed 20% of annual pre-tax
earnings. For 1995 and 1994, the Company did not pay cash bonuses to its
officers.
Common Stock Options
At December 31, 1995, there were outstanding options under the 1993
Employee Stock Option Plan and the 1993 Non-Employee Directors Stock Option Plan
for the purchase of 150,000 shares of the old common stock of the Company at
prices ranging from $0.375 to $0.9375 per share. As described above, all
outstanding options were cancelled pursuant to the Reorganization Plan.
Principal Shareholders
Security Ownership Of Certain Beneficial Owners. The following table lists the
only persons known by the Company to be the beneficial owners of more than five
percent of the Common Stock of the Company as of April 12, 1996:
Amount
Name and Address of of Beneficial Percent
Beneficial Owner Ownership Of Class (approx.)
Alexander Y. Hoff 118,532 11.74%
1901 Lansdowne Road
Baltimore, Maryland 21227
New England Waste Services, Inc. 107,318 10.63%
P.O. Box 866
Rutland, Vermont 05702
Peter T. Socha 100,000 9.90%
1318 Jamestown Road
Suite 201
Williamsburg, Virginia 23185
Carter Kaplan Holdings, L.L.C. 100,000 9.90%
P.O. Box 344
629 East Main Street
Richmond, Virginia 23202
To the best of Company's knowledge, each of the above shareholders owns all such
shares directly, except for Mr. Hoff who directly owns 10,360 shares of the
Common Stock of the Company and whose company, Yankee Engineering Company, owns
108,172 shares of the Common Stock of the Company. Mr. Socha and his spouse,
Annabelle K. Socha, are the joint owners of all 100,000 shares of the Common
Stock of the Company listed above. As previously disclosed herein, Mr. Socha is
the Vice President and Chief Credit Officer of Sirrom Capital Corporation which
holds a warrant to purchase up to 32% of the fully diluted shares of the Common
Stock of the Company at a price of $0.01 per share.
Security Ownership Of Management. The following table sets forth the ownership,
if any, as of April 12,, 1996, of the shares of the Common Stock of the Company,
by each director (except for Messrs. Hoff and Socha who, because of their
beneficial ownership of more than five percent of the Common Stock of the
Company, are listed in the table immediately above), nominee for election as
director, and executive officer of the Company and by each other person who is
expected by the Company to make a significant contribution to the Company's
business:
Amount
Name and Address of of Beneficial Percent
Beneficial Owner Ownership Of Class (approx.)
Robert L. Massey 45,870 4.54%
216 Fulham Circle
Richmond, Virginia 23227
James W. Bohlig n/a (1) n/a
25 Greens Hill Lane
Rutland, Vermont 05702
D. Randolph Graham n/a n/a
10815 Weather Vane Road
Richmond, Virginia 23233
Mark E. Hills 32,560 3.22%
4805 Fort McHenry Pkwy.
Glen Allen, Virginia 23060
Patricia B. Bradley 2,860 0.28%
10940 Forest Trace Lane
Glen Allen, Virginia 23060
Robert S. Lee 35,829 3.55%
6015 Arbor View Terrace
Chester, Virginia 23831
James K. Fishback 28,705 2.84%
1617 Princeton Road
Richmond, Virginia 23227
All executive officers and
directors as a group (6 persons) 335,651 33.23%
(1) As disclosed previously herein, Mr. Bohlig is the Senior Vice President and
Chief Operating Officer of New England Waste Services, Inc., which owns 107,318
shares (approximately 10.63%) of the Common Stock of the Company.
Changes In Control. In connection with the financing provided by Sirrom Capital
Corporation and pursuant to the terms of a Stock Purchase Warrant dated March
12, 1996, the Company granted a warrant entitling Sirrom Capital Corporation to
purchase up to approximately 32% of the Common Stock of the Company on a fully
diluted basis at a price of $0.01 per share. The warrant is exerciseable
beginning on and after March 31, 1998, until April 30, 2001.
In addition, a change in control of the Company occurred on March 12,
1996, on which date the Company consummated the Reorganization Plan. As
explained above, all equity interests in the Company were cancelled, including,
without limitation, the 1,564,699 issued and outstanding shares of the old
common stock of the Company; however, in accordance with the Reorganization
Plan, the Company distributed a total of 500,000 shares of the new Common Stock
of the Company to or on account of the holders of the shares of the old common
stock of the Company. Also as explained above, certain of the creditors of the
Company received a total of 150,000 shares of the new Common Stock of the
Company in partial satisfaction of their claims against the Company.
Consequently, under the Reorganization Plan, a total of 510,000 shares of the
new Common Stock of the Company were distributed to or on account of the holders
of the old common stock of the Company and the holders of certain claims against
the Company.
In connection with the consummation of the Reorganization Plan,
Environmental Systems Company ("ENSCO"), the holder of approximately thirty-six
percent (36%) of the shares of the old common stock of the Company, assigned its
interest under the Reorganization Plan in 140,000 shares of the new Common Stock
of the Company and disclaimed its interest under the Reorganization Plan in
another 41,009 shares of the new Common Stock of the Company, which 41,009
shares were distributed by the Company to the other holders of the shares of the
old common stock of the Company on a pro rata basis. Also in connection with the
consummation of the Reorganization Plan, ENSCO and another creditor disclaimed
their interests under the Reorganization Plan as creditors of the Company to
receive approximately 38,734 shares of the new Common Stock of the Company,
which 38,734 shares were distributed by the Company to other creditors of the
Company on a pro rata basis.
PROPOSAL TWO -- APPROVAL OF THE 1996 STOCK OPTION PLAN
Introduction
On April 12, 1996, the Board of Directors approved, subject to
shareholder approval, the 1996 Stock Option Plan (the "1996 Plan") and directed
that it be submitted to shareholders for approval. The 1996 Plan replaces the
1993 Stock Option Plan, which has been terminated pursuant to the Company's
Reorganization Plan.
All options granted under the 1993 Stock Option Plan have been cancelled.
The 1996 Plan became effective April 12, 1996, subject to shareholder
approval. Unless sooner terminated by the Board of Directors, the 1996 Plan will
terminate on April 11, 2006. No incentive awards may be made under the 1996 Plan
after termination.
The 1996 Plan is intended to provide a means for selected key
management employees of the Company to increase their personal financial
interest in the Company, thereby stimulating their efforts on behalf of the
Company and its shareholders.
The principal features of the 1996 Plan are summarized below. The
summary is qualified by reference to the complete text of the 1996 Plan, which
is attached as Exhibit A.
General
The 1996 Plan reserves 200,000 shares of the new Common Stock of the
Company for issuance pursuant to incentive awards. Such incentive awards may be
in the form of stock options, stock appreciation rights, restricted stock,
incentive stock or tax offset rights (as described below). The issuance of all
such shares would result in a 16.5% dilution of the percentage ownership
interest of existing shareholders.
If an option is cancelled, terminates or lapses unexercised, any
unissued shares allocable to such option may be subjected again to an incentive
award. The committee described below is expressly authorized to make an award to
a participant conditioned upon the surrender for cancellation of an existing
incentive award granted under the 1996 Plan.
Adjustments will be made in the number and kind of shares which may be
issued under the 1996 Plan in the event of a future stock dividend, stock split
or similar change in the number of outstanding shares of Common Stock or the
future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of capital stock of the Company.
The Company may register the 1996 Plan under the Securities Act of 1933
after shareholder approval is received.
As of April 12, 1996, the market value of the securities underlying the
options available for issuance pursuant to the 1996 Plan was approximately
$250,000.
All present and future employees of the Company who hold positions with
management responsibilities are eligible to receive incentive awards under the
1996 Plan. The Company estimates that it has approximately eight such employees
(four of whom are officers).
Administration
The 1996 Plan will be administered by a committee comprised of at least
two directors of the Company who are not eligible to participate in the 1996
Plan or any similar plan of the Company. The committee has the power and
complete discretion to determine when to grant incentive awards, when eligible
employees will receive incentive awards, whether the award will be an option,
stock appreciation right, restricted stock or incentive stock, whether the award
will include a tax offset right, and the number of shares to be allocated to
each incentive award. The committee will impose conditions upon the exercise of
options and stock appreciation rights, upon the transfer of restricted stock,
and upon the right to receive incentive stock, and may impose such other
restrictions and requirements as it may deem appropriate, including reserving
the right for the Company to require shares issued pursuant to an incentive
award.
Stock Options
Options to purchase shares of Common Stock granted under the 1996 Plan
may be incentive stock options or nonstatutory stock options. Incentive stock
options qualify for favorable income tax treatment under section 422 of the
Internal Revenue Code (the "Code"), while nonstatutory stock options do not. The
option price of Common Stock covered by an incentive stock option may not be
less than 100% (or, in the case of an incentive stock option granted to a 10%
shareholder, 110%) of the fair market value of the Common Stock on the date of
the option grant. The option price of Common Stock covered by a nonstatutory
option may not be less than 85% of the fair market value of the Common Stock on
the date of grant.
The value of incentive stock options, based on the exercise price, that
first become exerciseable by a participant in any calendar year under the 1996
Plan or any other similar plan maintained by the Company, is limited to
$100,000.
Options may be exercised only at such times as may be specified by the
committee; provided, however, that incentive stock options may not be exercised
after the first to occur of (i) ten years (or, in the case of an incentive stock
option granted to a 10% shareholder, five years) from the date on which the
incentive stock option was granted, (ii) three months from the optionee's
termination of employment with the Company for reasons other than death or
disability, or (iii) one year from the optionee's termination of employment on
account of death or disability.
If the option so provides, an optionee exercising an option may pay the
purchase price in cash; by delivering a promissory note; by delivering or
causing to be withheld from the option shares, shares of common stock; or by
delivering an exercise notice together with irrevocable instructions to a broker
to promptly deliver to the Company the amount of sale or loan proceeds from the
option shares to pay the exercise price. The committee may, in its discretion,
provide in an option agreement that an employee who exercises an option by
delivering already owned shares of Common Stock will be granted a new option
equal in amount to the number of shares so delivered.
Stock Appreciation Rights
The committee may award stock appreciation rights with an option, or
the committee may subsequently award and attach stock appreciation rights to a
previously awarded nonstatutory option, and impose such conditions upon their
exercise as it deems appropriate. When the stock appreciation right is
exerciseable, the holder may exercise all or a portion of the stock appreciation
right by surrendering to the Company all or a portion of his related stock
options. The holder will receive in exchange an amount equal to the excess of
(i) the fair market value on the date of exercise of the Common Stock covered by
the surrendered portion of the related option over (ii) the exercise price of
the Common Stock under the related option. The committee may limit the amount
which can be received when a stock appreciation right is exercised. When a stock
appreciation right is exercised, the underlying option, to the extent
surrendered, will no longer be exerciseable. Similar, when an option is
exercised, any stock appreciation rights attached to the option will no longer
be exerciseable. The Company's obligation arising upon the exercise of a stock
appreciation right may be paid in Common Stock or in cash, or an any combination
of the two, as the committee may determine.
Stock appreciation rights may only be exercised when the underlying
option is exerciseable. There are further limitations on when an officer,
director or 10% shareholder of the Company (an "Insider"), may exercise a stock
appreciation right. In particular, Insiders may not exercise stock appreciation
rights within the first six months after they are granted and must generally
exercise the rights in brief window periods following quarterly earnings
releases.
Restricted Stock
Restricted stock issued pursuant to the 1996 Plan is subject to the
following general restrictions: (i) none of such shares may be sold,
transferred, pledged, or otherwise encumbered or disposed of until the
restrictions on such shares have lapsed or been removed under the provisions of
the 1996 Plan, and (ii) if a holder of restricted stock ceases to be employed by
the Company, he will forfeit any shares of restricted stock on which the
restrictions have not lapsed or been otherwise removed.
The committee will establish as to each share of restricted stock
issued under the 1996 Plan the terms and conditions upon which the restrictions
on such shares shall lapse. Such terms and conditions may include, without
limitation, the lapsing of such restrictions at the end of a specified period of
time, as a result of the disability, death or retirement of the participant. In
addition, the committee may at any time, in its sole discretion, accelerate the
time at which any or all restrictions will lapse or remove any and all such
restrictions.
Incentive Stock
The committee may establish performance programs with fixed goals and
designate key employees as eligible to receive incentive stock if the goals are
achieved. Incentive stock will only be issued in accordance with the program
established by the committee. More than one performance program may be
established by the committee and they may operate concurrently or for varied
periods of time and a participant may participate in more than one program at
the same time. A participant who is eligible to receive incentive stock under a
performance program has no rights as a shareholder until such incentive stock is
received.
Tax Offset Rights
The committee may, in its discretion, award tax offset rights in
conjunction with any incentive award. Tax offset rights entitle the participant
to receive an amount of cash from the Company sufficient to satisfy the income
and payroll taxes legally required to be withheld upon exercise of an option,
stock appreciation right or tax offset right, upon grant of incentive stock, or
upon the lapse of restrictions on restricted stock.
Transferability of Incentive Awards
Options, stock appreciation rights, tax offset rights, the right to
receive incentive stock under a performance program, and during the applicable
period of restriction, restricted stock may not be sold, transferred, pledged,
or otherwise disposed of, other than by will or by the laws of descent and
distribution. All rights granted to a participant under the 1996 Plan shall be
exercisable during his lifetime only by such participant, or his guardians or
legal representatives. Upon the death of a participant, his personal
representative or beneficiary may exercise his rights under the 1996 Plan.
Amendment of the 1996 Plan and Incentive Awards
The Board of Directors may amend the 1996 Plan in such respects as it
deems advisable; provided that the shareholders of the Company must approve any
amendment that would (i) materially increase the benefits accruing to
participants under the 1996 Plan, (ii) materially increase the number of shares
of Common Stock that may be issued under the 1996 Plan, or (iii) materially
modify the requirements of eligibility for participation in the 1996 Plan.
Incentive awards granted under the 1996 Plan may be amended with the consent of
the recipient so long as the amended award is consistent with the terms of the
1996 Plan.
Federal Income Tax Consequences
An employee will not incur federal income tax when he is granted an
option, stock appreciation right, tax offset right, or, in most cases and
depending on the restrictions imposed, restricted stock. Upon receipt of
incentive stock, an employee will recognize compensation income, which is
subject to income tax withholding by the Company, equal to the fair market value
of the shares of incentive stock on the date of transfer to the employee.
Upon exercise of a nonstatutory stock option or stock appreciation
right, an employee generally will recognize compensation income, which is
subject to income tax withholding by the Company, equal to the difference
between the fair market value of the Common Stock on the date of the exercise
and the option price. The committee has authority under the 1996 Plan to include
provisions allowing the employee to deliver Common Stock, or to elect to have
withheld a portion of the shares he would otherwise acquire upon exercise, to
cover his tax liabilities. The election will be effective only if approved by
the committee and made in compliance with other requirements set forth in the
1996 Plan. When an employee exercises an incentive stock option, he generally
will not recognize income, unless he is subject to the alternative minimum tax.
If the terms of an option permit, an employee may deliver shares of
Common Stock instead of cash to acquire shares under an option, without having
to recognize taxable gain (except in some cases with respect to "statutory
option stock") on any appreciation in value of the shares delivered. However, if
an employee delivers shares of "statutory option stock" in satisfaction of all,
or any part, of the exercise price under an incentive stock option, and if the
applicable holding periods of the "statutory option stock" have not been met
(two years from grant and one year from exercise), he will be considered to have
made a taxable disposition of the "statutory option stock." "Statutory option
stock" is stock required upon the exercise of incentive stock options.
In general, an employee who receives shares of restricted stock will
include in his gross income as compensation an amount equal to the fair market
value of the shares of restricted stock at the time the restrictions lapse or
are removed. Such amounts will be included in income in the tax year in which
such event occurs. The income recognized will be subject to income tax
withholding by the Company.
Upon exercise of a tax offset right, an employee generally will
recognize ordinary income, which is subject to income tax withholding by the
Company, equal to the amount of cash received.
The Company usually will be entitled to a business expense deduction,
except as explained below, at the time and in the amount that the recipient of
an incentive award recognizes ordinary compensation income in connection
therewith. As stated above, this usually occurs upon exercise of nonstatutory
options, stock appreciation rights or tax offset rights, upon the lapse or
removal of restrictions on restricted stock, and upon issuance of incentive
stock. Generally, the Company's deduction is contingent upon the Company's
meeting withholding tax requirements. No deduction is allowed in connection with
an incentive stock option, unless the employee disposes of Common Stock received
upon exercise in violation of the holding period requirements. For tax years
after December 31, 1996, the Company's right to a tax deduction for income
recognized in connection with incentive awards or the exercise of options by
executives whose total compensation is subject to the proxy disclosure rules
will depend upon whether the compensation of such executive in the aggregate
exceeds $1,000,000; if so, the excess over $1,000,000 will not be deductible.
This summary of the federal income tax consequences of nonstatutory
stock options, incentive stock options, stock appreciation rights, tax offset
rights, restricted stock and incentive stock does not purport to be complete.
There may also be state and local income taxes applicable to these transactions.
Holders of incentive awards should consult their own advisors with respect to
the application of the laws to them and to understand other tax consequences of
the awards including possible income deferral for Insiders (as defined),
alternative minimum tax rules, taxes on parachute payments and the tax
consequences of the sale of shares acquired under the 1996 Plan.
Vote Required
The Board of Directors recommends a vote "FOR" the proposed 1996 Plan.
Approval of the proposed 1996 Plan requires the affirmative vote of the holders
of a majority of the shares of Common Stock voting at the meeting.
PROPOSAL THREE -- APPROVAL OF THE 1996 NON-EMPLOYEE
DIRECTORS STOCK OPTION PLAN
Introduction
On April 12, 1996, the Board of Directors adopted, subject to
shareholder approval, the 1996 Non-Employee Directors Stock Option Plan (the
"1996 Outside Directors Plan"). The 1996 Outside Directors Plan replaces the
1993 Non-Employee Directors Stock Option Plan, which has been terminated
pursuant to the Company's Reorganization Plan. All options granted under the
1993 Non-Employee Directors Stock Option Plan have been cancelled.
The 1996 Outside Directors Plan is effective April 12, 1996, subject to
approval by the shareholders of the Company. The 1996 Outside Directors Plan
will terminate upon the earlier of (a) the adoption of a resolution of the Board
terminating the plan, or (b) April 11, 2006.
The purpose of the 1996 Outside Directors Plan is to encourage
ownership in the Company by non-employee members of the Board of Directors, in
order to promote long-term shareholder value and to provide non-employee members
of the Board of Directors with an incentive to continue as directors of the
Company.
The principal features of the 1996 Outside Directors Plan are
summarized below. This summary is qualified by reference to the complete text of
the 1996 Outside Directors Plan, which is attached as Exhibit B.
General
The 1996 Outside Directors Plan authorizes the granting of stock
options to purchase an aggregate maximum of 100,000 shares of the Company's
Common Stock to eligible members of the Company's Board of Directors. The
issuance of all such shares would result in a 9.0% dilution of the percentage
ownership interest of existing shareholders. Management anticipates that any
such dilution would occur over a number of years.
The Company may register the 1996 Outside Directors Plan under the
Securities Act of 1993 after shareholder approval is received.
As of April 12, 1996, the market value of the securities underlying the
options available for issuance pursuant to the 1996 Outside Directors Plan was
$125,000.
Eligibility
A director is eligible to receive an option under the 1996 Outside
Directors Plan if the director: (a) at any relevant time under the 1996 Outside
Directors Plan does not own or control, directly or indirectly, more than 5% of
the outstanding shares of the Company's Common Stock, and (b) is not otherwise
an employee of the Company or any subsidiary and was not an employee of the
Company or any subsidiary for a period of at least one year before the date of
grant of an option under the 1996 Outside Directors Plan. None of the four
current directors, therefore, presently qualify to receive options under the
1996 Outside Directors Plan.
Each eligible director of the Company on the effective date of the 1996
Outside Directors Plan will automatically receive an option to purchase 25,000
shares of the Common Stock. Each director newly elected by the Company's
stockholders or directors after the effective date of the 1996 Outside Directors
Plan who is eligible to be granted options thereunder on the date of his or her
initial election to the Board will automatically receive an option to receive
25,000 shares on the date of such initial election. No director will be entitled
to receive options for more than 25,000 shares of stock pursuant to the 1996
Outside Directors Plan. If at any time under the 1996 Outside Directors Plan
there are not sufficient shares available to fully permit the automatic option
grants described in this paragraph, the option grant will be reduced pro rata
(to zero if necessary) so as not to exceed the number of shares available.
An option may be exercised in full on the later of six months from the
date of grant of the option and six months from the date the 1996 Outside
Directors Plan is approved by shareholders. No option may be exercised (i)
before the 1996 Outside Directors Plan is approved by the shareholders of the
Company, (ii) after the expiration of ten years from the date the option is
granted and (iii) unless such optionee is a director of the Company or within
twelve months after the date he ceases to be a director.
The exercise price of each option granted under the 1996 Outside
Directors Plan will be 100% of the fair market value of the shares on the date
the option is granted.
Administration
The 1996 Outside Directors Plan will be administered by the Board.
Grants of stock options to eligible directors under the 1996 Outside Directors
Plan are automatic. However, the Board has certain powers vested in it by the
terms of the 1996 Outside Directors Plan including, without limitation, the
authority (within the limitations described therein) to prescribe the form of
the agreement embodying awards of stock options under the 1996 Outside Directors
Plan, to construe the plan, to determine all questions arising under the plan,
and to adopt and amend rules and regulations for the administration of the plan
as it may deem desirable. Any decision of the Board in the administration of the
1996 Outside Directors Plan will be final and conclusive. The Board may act only
by a majority of its members in office, except members thereof may authorize any
one or more of their number or any officer of the Company to execute and deliver
documents on behalf of the Board.
Transferability of Options
The rights of an optionee under the 1996 Outside Directors Plan may not
be assigned or transferred other than by will or the laws of descent and
distribution.
Amendment of the 1996 Outside Directors Plan
The Board may suspend or discontinue the 1996 Outside Directors Plan or
revise or amend the plan in any respect; provided, however, that without
approval of the Company's shareholders no revision or amendment may increase the
number of shares subject to the 1996 Outside Directors Plan or materially
increase the benefits accruing to participants under the plan.
Federal Income Tax Consequences
The 1996 Outside Directors Plan provides for the granting to
non-statutory options which do not qualify as incentive stock options under
section 422 of the Internal Revenue Code.
A director who receives an option under the 1996 Outside Directors Plan
will not be deemed to have received any income at the time the option is
granted; however, the director will recognize ordinary income in the year any
part of the option is exercised in an amount equal to the difference between the
exercised price of the shares purchased and the fair market value of such shares
on the exercise date. The Company will be entitled to a tax deduction in an
amount equal to the amount of ordinary income recognized by the optionee.
Special rules may apply if an optionee pays all or part of the exercise price of
a non-statutory option by tendering shares of the Common Stock.
This summary of Federal income tax consequences of nonstatutory stock
options does not purport to be complete, and is based upon interpretations of
existing laws, regulations and rulings which could be materially altered with
enactment of any new tax legislation. There may also be state and local income
taxes applicable to these transactions.
Vote Required
The Board of Directors recommends a vote "FOR" the proposed 1996
Outside Directors Plan. Approval of the proposed plan requires the affirmative
vote of a majority of the shares of Common Stock voting at the meeting.
PROPOSAL FOUR -- RATIFICATION OF SELECTION OF AUDITORS
Introduction and Proposal
Parham, P.C., independent certified public accountants, has been
selected by the Board of Directors as accountants and auditors for the Company
for the current fiscal year, subject to ratification by the shareholders. The
firm has no relationship with the Company except that it has served as its
independent accountants and auditors since December 1, 1994. Representatives of
Parham, P.C. are expected to be present at the Annual Meeting of Shareholders
and will have an opportunity to make a statement if they so desire and are
expected to be available to respond to appropriate questions from shareholders.
In the event the shareholders do not ratify the selection of Parham, P.C., the
selection of other accountants and auditors will be considered by the Board of
Directors.
Action by shareholders is not required by law in the selection of
independent auditors, but their selection is submitted by the Board of Directors
in order to give shareholders the final choice in the designation of independent
auditors.
The Board of Directors recommends a vote "FOR" the selection of Parham,
P.C. Ratification of the selection requires the affirmative vote of a majority
of shares of Common Stock voting at the meeting.
The Company's Audited Consolidated Financial Statements
The Company's Audited Consolidated Financial Statements are included in
the accompanying Annual Report to Shareholders, and are filed as part of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1995.
As previously reported, the Board of Directors of the Company accepted
the resignation of Coopers & Lybrand as the Company's auditors effective
December 1, 1994. Effective December 1, 1994, the Board of Directors approved
the engagement of Parham, P.C., as independent auditors of the Company for the
fiscal years ended December 31, 1995, and December 31, 1994. The shareholders of
the Company ratified the Company's engagement of Parham, P.C., at the Company's
annual meeting held on June 14, 1995.
The financial statements of the Company include the audit report of
Parham, P.C., on the financial statements of the fiscal years ended December 31,
1995, and December 31, 1994.
Parham, P.C.'s report on the financial statements of the Company for
the years ended December 31, 1995, and December 31, 1994, did not contain an
adverse opinion, disclaimer of opinion or a qualification or modification as to
certainty, audit scope or accounting principals, except that the report
contained an explanatory paragraph which questioned the ability of the Company
to continue as a going concern.
There were no disagreements between the Company and Parham, P.C., on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Parham, P.C., would have caused Parham, P.C. to make reference
to the subject matter of the disagreement(s) in connection with its reports, and
there have been no "reportable events" during such period as such term is
defined in Item 304(a) of Regulation S-B promulgated by the Securities and
Exchange Commission.
The Company furnished Parham, P.C., with a copy of the disclosure
contained in its Form 10-KSB and this Proxy Statement, and advised Parham, P.C.,
that if it believed that the statements made by the Company in response to Item
304(a) of Regulation S-B were incomplete or incorrect, the accountant could
present its views in a brief statement to be included in the Form 10-KSB and
this Proxy Statement. Parham, P.C., did not submit such statement of views to
the Company.
OTHER MATTERS
The Board of Directors knows of no other matters which will be brought
before the meeting. However, if any other matters are properly presented, or if
any question arises as to whether any matter has been properly presented and is
a proper subject for shareholder action, the persons named as proxies in the
accompanying proxy intend to vote the shares represented by such proxy in
accordance with their best judgment.
SHAREHOLDER PROPOSALS FOR 1997 MEETING
Proposals of shareholders intended to be presented at the 1997 annual
meeting must be received by the Company at its principal executive offices no
later than January 10, 1997, for inclusion in the Company's 1997 proxy
materials. Such proposals should meet the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
FURTHER INFORMATION
The Company will provide without charge to each person from whom a proxy
is solicited by the Board of Directors, upon the written request of any such
person, a copy of the Company's Annual Report on Form 10-KSB, including the
financial statements thereto, as filed with the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, for the
Company's fiscal year ended December 31, 1995. Such written requests should be
sent to the Corporate Secretary, Reorganized Consumat Systems, Inc., Post Office
Box 9379, Richmond, Virginia 23227.
By Order of the Board of Directors
PATRICIA B. BRADLEY
Corporate Secretary
May 10, 1995
PLEASE FILL IN, SIGN, DATE AND RETURN PROMPTLY THE ACCOMPANYING PROXY. IF YOU
ATTEND THE MEETING IN PERSON, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR OWN
SHARES.
<PAGE>
EXHIBIT A
REORGANIZED CONSUMAT SYSTEMS, INC.
1996 STOCK OPTION PLAN
(As Adopted April 12, 1996
Subject To Stockholder Aprroval)
1. Purpose. The purpose of this Reorganized Consumat Systems, Inc. 1996
Stock Option Plan (the "Plan") is to further the long term stability and
financial success of Reorganized Consumat Systems, Inc., (the "Company") by
attracting and retaining key employees through the use of stock incentives. It
is believed that ownership of Company Stock will stimulate the efforts of those
employees upon whose judgment and interest the Company is and will be largely
dependent for the successful conduct of its business. It is also believed that
Incentive Awards granted to such employees under this Plan will strengthen their
desire to remain with the Company and will further the identification of those
employees' interests with those of the Company's shareholders. The Plan is
intended to conform to the provisions of Securities and Exchange Commission Rule
16b-3.
2. Definitions. As used in the Plan, the following terms have
the meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as
amended.
(b) "Applicable Withholding Taxes" means the aggregate
amount of federal, state and local income and payroll taxes that the
Company is required to withhold in connection with any exercise of a
Nonstatutory Stock Option, Stock Appreciation Right, or Tax Offset
Right, any lapse of restrictions on Restricted Stock, or any grant of
Incentive Stock.
(c) "Board" means the board of directors of the Company.
(d) "Change of Control" means:
(i) The acquisition, other than from the Company, by
any individual, entity or group (within the meaning of Section
13(d)(3) or 14 (d)(2) of the Act), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Act)
of 20% or more of either the then outstanding shares of common
stock of the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors, but excluding for this
purpose, any such acquisition by the Company or any of its
subsidiaries, or any employee benefit plan (or related trust)
of the Company or its subsidiaries, or any corporation with
respect to which, following such acquisition, more than 50%
of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then
beneficially owned, directly or indirectly, by the individuals
and entities who were the beneficial owners, respectively, of
the common stock and voting securities of the Company
immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the then outstanding shares of common stock of
the Company or the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors, as the case may be; or
(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the "Incumbent
Board") cease for any reason to constitute at least a majority
of the Board, provided that any individual becoming a director
subsequent to the date hereof whose election or nomination for
election by the Company's shareholders was approved by a vote
of at least a majority of the directors comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office is in connection with an actual or threatened election
contest relating to the election of the Directors of the
Company (as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Act); or
(iii) Approval by the shareholders of the Company of
a reorganization, merger or consolidation, in each case, with
respect to which the individuals and entities who were the
respective beneficial owners of the common stock and voting
securities of the Company immediately prior to such
reorganization, merger or consolidation do not, following such
reorganization, merger or consolidation, beneficially own,
directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such
reorganization, merger or consolidation, or a complete
liquidation or dissolution of the Company or of its sale or
other disposition of all or substantially all of the assets of
the Company.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the committee appointed by the
Board as described under Section 16.
(g) "Company" means Reorganized Consumat Systems, Inc., a
Virginia corporation.
(h) "Company Stock" means Common Stock, $1.00 par
value, of the Company. If the par value of the Company Stock is
changed, or in the event of a change in the capital structure of
the Company (as provided in Section 15), the shares resulting from
such a change shall be deemed to be Company Stock within the meaning of
the Plan.
(i) "Date of Grant" means the date on which an Incentive Award
is granted by the Committee.
(j) "Disability" or "Disabled" means, as to an Incentive
Stock Option, a Disability within the meaning of Code section 22(e)(3).
As to all other Incentive Awards, the Committee shall determine
whether a Disability exists and such determination shall be
conclusive.
(k) "Fair Market Value" means, on any given date, the value of
a share of Company Stock based upon the average of the highest and
lowest reported sales prices per share of the Company Stock on such day
on the NASDAQ Bulletin Board (or, if there have been no transactions,
the average of the bid and asked prices).
(l) "Incentive Award" means, collectively, the award of
an Option, Stock Appreciation Right, Incentive Stock, or Restricted
Stock, or Tax Offset Right under the Plan.
(m) "Incentive Stock" means Company Stock awarded when
performance goals are achieved pursuant to an incentive program as
provided in Section 7.
(n) "Incentive Stock Option" means an Option intended to meet
the requirements of, and qualify for favorable federal income tax
treatment, under Code section 422.
(o) "Insider" means a person subject to Section 16(b) of
the Act.
(p) "Nonstatutory Stock Option" means an Option that does not
meet the requirements of Code section 422, or, even if meeting the
requirements of Code section 422, is not intended to be an Incentive
Stock Option and is so designated.
(q) "Option" means a right to purchase Company Stock granted
under the Plan, at a price determined in accordance with the Plan.
(r) "Parent" means, with respect to any corporation, a parent
of that corporation within the meaning of Code section 424(e).
(s) "Participant" means any employee who receives an
Incentive Award under the Plan.
(t) "Reload Feature" means a feature of an Option
described in a Participant's stock option agreement that authorizes the
automatic grant of a Reload Option in accordance with the provisions of
Section 10(d).
(u) "Reload Option" means an Option automatically granted to a
Participant equal to the number of shares of already owned Company
Stock delivered by the Participant to exercise an Option having a
Reload Feature.
(v) "Restricted Stock" means Company Stock awarded upon the
terms and subject to the restrictions set forth in Section 6.
(w) "Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under the Act. A reference in the Plan
to Rule 16b-3 shall include a reference to any corresponding rule (or
number redesignation) of any amendments to Rule 16b-3 enacted after the
effective date of the Plan's adoption.
(x) "Stock Appreciation Right" means a right to receive
amounts from the Company granted under the Plan.
(y) "Subsidiary" means, with respect to any corporation, a
subsidiary of that corporation within the meaning of Code section
424(f).
(z) "10% Shareholder" means a person who owns, directly or
indirectly, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Parent or
Subsidiary of the Company. Indirect ownership of stock shall be
determined in accordance with Code section 424(d).
(aa) "Tax Offset Right" means a right to receive amounts in
cash from the Company as described in Section 12 of the Plan.
(bb) "Window Period" means the period beginning on the
third business day and ending on the twelfth business day following the
release for publication of quarterly or annual summary statements of
the Company's sales and earnings. The release for publication shall be
deemed to have occurred if the specified financial data (i) appears on
a wire service, (ii) appears in a financial news service, (iii) appears
in a newspaper of general circulation, or (iv) is otherwise made
publicly available.
3. General. The following types of Incentive Awards may be granted
under the Plan: Options, Stock Appreciation Rights, Incentive Stock and
Restricted Stock. Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options.
4. Stock. Subject to Section 15 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of 200,000 shares of Company Stock,
which shall be authorized, but unissued shares. Shares allocable to Options or
portions thereof granted under the Plan that expire or otherwise terminate
unexercised may again be subjected to an Incentive Award under the Plan. For
purposes of determining the number of shares that are available for Incentive
Awards under the Plan, such number shall, to the extent permissible under Rule
16b-3, include the number of shares surrendered by an optionee or retained by
the Company in payment of Applicable Withholding Taxes.
5. Eligibility.
(a) All present and future employees who hold positions with management
responsibilities with the Company (or any Parent or Subsidiary of the Company,
whether now existing or hereafter created or acquired) shall be eligible to
receive Incentive Awards under the Plan. The Committee shall have the power and
complete discretion, as provided in Section 16, to select eligible employees to
receive Incentive Awards and to determine for each employee the terms and
conditions, the nature of the award and the number of shares to be allocated to
each employee as part of each Incentive Award.
(b) The grant of an Incentive Award shall not obligate the Company or
any Parent or Subsidiary of the Company to pay an employee any particular amount
of renumeration, to continue the employment of the employee after the grant or
to make further grants to the employee at any time thereafter.
6. Restricted Stock Awards.
(a) Whenever the Committee deems it appropriate to grant Restricted
Stock, notice shall be given to the Participant stating the number of shares of
Restricted Stock granted and the terms and conditions to which the Restricted
Stock is subject. This notice, when accepted in writing by the Participant shall
become an award agreement between the Company and the Participant and
certificates representing the shares shall be issued and delivered to the
Participant. Restricted Stock may be awarded by the Committee in its discretion
without cash consideration.
(b) Restricted Stock issued pursuant to the Plan shall be subject
to the following restrictions:
(i) No shares of Restricted Stock may be sold, assigned,
transferred or disposed of by an Insider within a six-month period
beginning on the Date of Grant, and Restricted Stock may not be
pledged, hypothecated or otherwise encumbered within a six-month
period beginning on the Date of Grant if such action would be treated
as a sale or disposition under Rule 16b-3.
(ii) No shares of Restricted Stock may be sold, assigned,
transferred, pledged, hypothecated, or otherwise encumbered or disposed
of until the restrictions on such shares as set forth in the
Participant's award agreement have lapsed or been removed pursuant to
paragraph (d) or (e) below.
(iii) if a Participant ceases to be employed by the Company or
a Parent or Subsidiary of the Company, the Participant shall forfeit to
the Company any shares of Restricted Stock on which the restrictions
have not lapsed or been removed pursuant to paragraph (d) or (e) below
on the date such Participant shall cease to be so employed. (c) Upon
the acceptance by a Participant of an award of Restricted Stock, such
Participant shall,
subject to the restrictions set forth in paragraph (b) above, have all the
rights of a shareholder with respect to such shares of Restricted Stock,
including, but not limited to, the right to vote such shares of Restricted Stock
and the right to receive all dividends and other distributions paid thereon.
Certificates representing Restricted Stock shall bear a legend referring to the
restrictions set forth in the Plan and the Participant's award agreement.
(d) The Committee shall establish as to each award of Restricted Stock
the terms and conditions upon which the restrictions set forth in paragraph (b)
above shall lapse. Such terms and conditions may include, without limitation,
the lapsing of such restrictions as a result of the Disability, death or
retirement of the Participant or the occurrence of a Change of Control.
(e) Notwithstanding the provisions of paragraphs (b)(ii) and (iii)
above, the Committee may at any time, in its sole discretion, accelerate the
time at which any or all restrictions will lapse or remove any and all such
restrictions.
(f) Each Participant shall agree at the time his Restricted Stock is
granted, and as a condition thereof, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment to the Company of, Applicable
Withholding Taxes. Until such amount had been paid or arrangements satisfactory
to the Company have been made, no stock certificate free of a legend reflecting
the restrictions set forth in paragraph (b) above shall be issued to such
Participant.
7. Incentive Stock Awards.
(a) Incentive Stock may be issued pursuant to the Plan in connection
with incentive programs established from time to time by the Committee when
performance criteria established by the Committee as part of the incentive
program have been achieved.
(b) Whenever the Committee deems it appropriate, the Committee may
establish an incentive program and notify Participants of their participation in
and the terms of the incentive program. More than one incentive program may be
established by the Committee and they may operate concurrently or for varied
periods of time and a Participant may be permitted to participate in more than
one incentive program at the same time. Incentive Stock will be issued only
subject to the incentive program and the Plan and consistent with meeting the
performance goals set by the Committee. A Participant in an incentive program
shall have no rights as a shareholder until Incentive Stock is issued. Incentive
Stock may be issued without cash consideration.
(c) A Participant's interest in an incentive program may not be
sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered.
(d) Each Participant shall agree as a condition of his participation in
an incentive program and the receipt of Incentive Stock, to pay to the Company,
or make arrangements satisfactory to the Company regarding the payment to the
Company of, Applicable Withholding Taxes. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no stock certificate
shall be issued to such Participant.
8. Stock Options.
(a) Whenever the Committee deems it appropriate to grant Options,
notice shall be given to the Participant stating the number of shares for which
Options are granted, the Option price per share, whether the Options are
Incentive Stock Options or Nonstatutory Stock Options, the extent to which Stock
Appreciation Rights are granted (as provided in Section 9), and the conditions
to which the grant and exercise of the Options are subject. This notice, when
duly accepted in writing by the Participant, shall become a stock option
agreement between the Company and the Participant.
(b) The exercise price of shares of Company Stock covered by an
Incentive Stock Option shall be not less than 100% of the Fair Market Value of
such shares on the Date of Grant; provided that if an Incentive Stock Option is
granted to a Participant who, at the time of the grant, is a 10% Shareholder,
then the exercise price of the shares covered by the Incentive Stock Option
shall be not less than 110% of the Fair Market Value of such shares on the Date
of Grant.
(c) The exercise price of shares covered by a Nonstatutory Stock Option
shall be not less than 85% of the Fair Market Value of such shares on the Date
of Grant.
(d) Options may be exercised in whole or in part at such times as may
be specified by the Committee in the Participant's stock option agreement;
provided that, the exercise provisions for Incentive Stock Options shall in all
events not be more liberal than the following provisions:
(i) No Incentive Stock Option may be exercised after the first
to occur of (x) ten years (or, in the case of an Incentive Stock Option
granted to a 10% Shareholder, five years) from the Date of Grant, (y)
three months following the date of the Participant's retirement or
termination of employment with the Company and its Parent and
Subsidiary corporations for reasons other than Disability or death, or
(z) one year following the date of the Participant's termination of
employment on account of Disability or death.
(ii) Except as otherwise provided in this paragraph, no
Incentive Stock Option may be exercised unless the Participant is
employed by the Company or a Parent or Subsidiary of the Company at the
time of the exercise and has been employed by the Company or a Parent
or Subsidiary of the Company at all times since the Date of Grant. If a
Participant's employment is terminated other than by reason of his
Disability or death at a time when the Participant holds an Incentive
Stock Option that is exercisable (in whole or in part), the Participant
may exercise any or all of the exercisable portion of the Incentive
Stock Option (to the extent exercisable on the date of termination)
within three months after the Participant's termination of employment.
If a Participant's employment is terminated by reason of his Disability
at a time when the Participant holds an Incentive Stock Option that is
exercisable (in whole or in part), the Participant may exercise any or
all of the exercisable portion of the Incentive Stock Option (to the
extent exercisable on the date of Disability) within one year after the
Participant's termination of employment. If a Participant's employment
is terminated by reason of his death at a time when the Participant
holds an Incentive Stock Option that is exercisable (in whole or in
part), the Incentive Stock Option may be exercised (to the extent
exercisable on the date of death) within one year after the
Participant's death by the person to whom the Participant's rights
under the Incentive Stock Option shall have passed by will or by the
laws of descent and distribution.
(iii) An Incentive Stock Option by its terms, shall be
exercisable in any calendar year only to the extent that the aggregate
Fair Market Value (determined at the Date of Grant) of the Company
Stock with respect to which Incentive Stock Options are exercisable for
the first time during the calendar year does not exceed $100,000 (the
"Limitation Amount"). Incentive Stock Options granted after 1986 under
the Plan and all other plans of the Company and any Parent or
Subsidiary of the Company shall be aggregated for purposes of
determining whether the Limitation Amount has been exceeded. The Board
may imposed such conditions as it deems appropriate on an Incentive
Stock Option to ensure that the foregoing requirement is met. If
Incentive Stock Options that first become exercisable in a calendar
year exceed the Limitation Amount, the excess Options will be treated
as Nonstatutory Stock Options to the extent permitted by law. (e)
Notwithstanding the foregoing, no Option shall be exercisable within
the first six months after
it is granted; provided that, this restriction shall not apply if the
Participant becomes Disabled or dies during the six-month period.
(f) The Committee may, in its discretion, grant Options that by their
terms become fully exercisable upon a Change of Control, notwithstanding other
conditions on exercisability in the stock option agreement.
9. Stock Appreciation Rights.
(a) Whenever the Committee deems it appropriate, Stock Appreciation
Rights may be granted in connection with all or any part of an Incentive Stock
Option. At the discretion of the Committee, Stock Appreciation Rights may also
be granted in connection with all or any part of a Nonstatutory Stock Option,
either concurrently with the grant of the Nonstatutory Stock Option or at any
time thereafter during the term of the Nonstatutory Stock Option. Stock
Appreciation Rights shall be evidenced in writing as part of the stock option
agreement to which they pertain. The following provisions apply to all Stock
Appreciation Rights that are granted in connection with Options:
(i) Stock Appreciation Rights shall entitle the Participant,
upon exercise of all or any part of the Stock Appreciation Rights, to
surrender to the Company unexercised that portion of the underlying
Option relating to the same number of shares of Company Stock as is
covered by the Stock Appreciation Rights (or the portion of the Stock
Appreciation Rights so exercised) and to receive in exchange from the
Company an amount equal to the excess of (x) the Fair Market Value on
the date of exercise of the Company Stock covered by the surrendered
portion of the underlying Option over (y) the exercise price of the
Company Stock covered by the surrendered portion of the underlying
Option. The Committee may limit the amount that the Participant will be
entitled to receive upon exercise of the Stock Appreciation Right.
(ii) Upon the exercise of a Stock Appreciation Right and
surrender of the related portion of the underlying Option, the Option,
to the extent surrendered, shall not thereafter be exercisable.
(iii) Subject to any further conditions upon exercise imposed
by the Board, a Stock Appreciation Right shall be exercisable only to
the extent that the related Option is exercisable, except that in no
event shall a Stock Appreciation Right held by an Insider be
exercisable within the first six months after it is awarded even though
the related Option is or becomes exercisable, and a Stock Appreciation
Right shall expire no later than the date on which the related Option
expires.
(iv) A Stock Appreciation Right may only be exercised at a
time when the Fair Market Value of the Company Stock covered by the
Stock Appreciation Right exceeds the exercise price of the Company
Stock covered by the underlying Option.
(b) The manner in which the Company's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by the
Committee and shall be set forth in the Participant's Option or the related
Stock Appreciation Rights agreement. The Committee may provide for payment in
Company Stock or cash, or a fixed combination of Company Stock or cash, or
the Committee may reserve the right to determine the manner of payment at the
time the Stock Appreciation Right is exercised. Shares of Company Stock
issued upon the exercise of a Stock Appreciation Right shall be valued at
their Fair Market Value on the date of exercise.
(c) An Insider may only exercise a Stock Appreciation Right during
a Window Period.
10. Method of Exercise of Options and Stock Appreciation Rights.
(a) Options and Stock Appreciation Rights may be exercised by the
Participant giving written notice of the exercise to the Company, stating the
number of shares the Participant has elected to purchase under the Option or the
number of Stock Appreciation Rights the Participant has elected to exercise.
In the case of the purchase of shares under an Option, such notice shall be
effective only if accompanied by the exercise price in full in cash;
provided that, if the terms of an Option so permit, the Participant may (i)
deliver, or cause to be withheld from the Option shares, shares of Company
Stock (valued at their Fair Market Value on the date of exercise) in
satisfaction of all or any part of the exercise price, (ii) deliver a
properly executed exercise notice together with irrevocable
instructions to a broker to deliver promptly to the Company, from the sale or
loan proceeds with respect to the sale of Company Stock or a loan secured by
Company Stock, the amount necessary to pay the exercise price and, if required
by the Committee, Applicable Withholding Taxes, or (iii) deliver an interest
bearing promissory note, payable to the Company, in payment of all or part of
the exercise price together with such collateral as may be required by the
Committee at the time of exercise. The interest rate under any such promissory
note shall be established by the Committee and shall be at least equal to the
minimum interest rate required at the time to avoid imputed interest under the
Code.
(b) The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option or Stock Appreciation Right any legend
deemed desirable by the Company's counsel to comply with federal or state
securities laws, and the Company may require a customary written indication of
the Participant's investment intent. Until the Participant has made any required
payment, including any Applicable Withholding Taxes, and has had issued a
certificate for the shares of Company Stock acquired, he shall possess no
shareholder rights with respect to the shares.
(c) As an alternative to making a cash payment to the Company to
satisfy Applicable Withholding Taxes, if the Option or Stock Appreciation Rights
agreement so provides, the Participant may, subject to the provisions set forth
below, elect to (i) deliver shares of already owned Company Stock or (ii) have
the Company retain that number of shares of Company Stock that would satisfy all
or a specified portion of the Applicable Withholding Taxes. The Committee shall
have sole discretion to approve or disapprove any such election. If the
Participant is an Insider, the following provisions apply to elections to
satisfy Applicable Withholding Taxes, to the extent required by Rule 16b-3:
(i) The Participant's election to have the Company retain from
the shares of Company Stock to be issued upon exercise of an Option of
Stock Appreciation Right the number of shares of Company Stock that
would satisfy Applicable Withholding Taxes must be made at least six
months after the Option or SAR was granted, and either:
(x) during a Window Period; or
(y) at least six months before the amount of
Applicable Withholding Taxes is calculated.
(ii) The Participant's election must be irrevocable.
(iii) Notwithstanding any of the foregoing provisions, the
manner and timing of elections may be varied from those provided, and
elections previously made as irrevocable may be revoked, if such
variance or revocation is permissible under Rule 16b-3.
(d) If a Participant exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock in payment of the exercise
price, the Committee shall grant to the Participant a Reload Option. The
Committee shall grant the Reload Option in the same manner as set forth in
paragraph 8(a). The Reload Option shall be subject to the following
restrictions:
(i) The exercise price of shares of Company Stock covered by a
Reload Option shall be not less than 100% of the Fair Market Value of
such shares on the Date of Grant of the Reload Option;
(ii) If and to the extent required by Rule 16b-3, a Reload
Option shall not be exercisable within the first six months after it is
granted; provided that this restriction shall not apply if the
Participant becomes Disabled or dies during the six-month period;
(iii) The Reload Option shall be subject to the same
restrictions on exercisability imposed on the underlying option
(possessing the Reload Feature) delivered unless the Committee
specifies different limitations;
(iv) The Reload Option shall not be exercisable until the
expiration of any retention holding period imposed on the disposition
of any shares of Company Stock covered by the underlying Option
(possessing the Reload Feature) delivered; and
(v) The Reload Option shall not have a Reload Feature.
The Committee may, in its discretion, cause the Company to place on any
certificate representing Company Stock issued to a Participant upon the exercise
of an underlying Option (possessing a Reload Feature as evidenced by the stock
option agreement for such Option) delivered pursuant to this subsection (d), a
legend restricting the sale or other disposition of such Company Stock.
(e) Notwithstanding anything herein to the contrary, Options and Stock
Appreciation Rights shall always be granted and exercised in such a manner as to
conform to the provisions of Rule 16b-3.
11. Nontransferability of Options and Stock Appreciation Rights.
Options and Stock Appreciation Rights by their terms, shall not be transferable
except by will or by the laws of descent and distribution or, if permitted by
Rule 16b-3, pursuant to a qualified domestic relations order (as defined in Code
section 414(p)) ("QDRO") and shall be exercisable, during the Participant's
lifetime, only by the Participant or, if permitted by Rule 16b-3, an alternative
payee under a QDRO, or by his guardian, duly authorized attorney-in-fact or
other legal representative.
12. Tax Offset Rights.
(a) Whenever the Committee deems it appropriate, Tax Offset Rights may
be granted in connection with Nonstatutory Stock Options, Stock Appreciation
Rights, Incentive Stock or Restricted Stock. Tax Offset Rights shall be
evidenced in writing as part of the award agreement to which they pertain.
(b) Tax Offset Rights shall entitle the Participant, upon exercise of
all or any part of Nonstatutory Stock Option, Stock Appreciation Right, or Tax
Offset Right, upon grant of Incentive Stock, or upon the lapse of restrictions
on Restricted Stock, to receive in cash from the Company an amount equal to or
approximating the Applicable Withholding Taxes.
(c) A Participant may exercise a Tax Offset Right by giving the
Committee written notice of exercise simultaneously with the exercise of a
Nonstatutory Stock Option or Stock Appreciation Right, the receipt of an award
of Incentive Stock or the lapse of restrictions on Restricted Stock. To the
extent exercised, the Tax Offset Right shall lapse.
(d) The Committee may limit the amount the Participant will be entitled
to receive in connection with a Tax Offset Right and may include any provisions
in a Tax Offset Right that the Committee deems appropriate to ensure that the
Tax Offset Right will not be characterized as an "equity security" or
"derivative security" for purposes of Section 16 of the Act and the rules and
regulations thereunder.
13. Effective Date of the Plan. This Plan shall be effective on April
12, 1996, and shall be submitted to the shareholders of the Company for
approval. Until (i) the Plan has been approved by the Company's shareholders,
and (ii) the requirements of any applicable State securities laws have been met,
no Restricted Stock shall be awarded, no Incentive Stock shall be issued and no
Option or Stock Appreciation Right shall be exercisable.
14. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on April 11, 2006. No
Incentive Awards shall be made under the Plan after its termination. The Board
may terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided that, if and to the extent required by the Code or Rule
16b-3, no change shall be made that increases the total number of shares of
Company Stock reserved for issuance pursuant to Incentive Awards granted under
the Plan (except pursuant to Section 15), materially modifies the requirements
as to eligibility for participation in the Plan, or materially increases the
benefits accruing to Participants under the Plan, or unless such change is
authorized by the shareholders of the Company. Notwithstanding the foregoing,
the Board may unilaterally amend the Plan and Incentive Awards as it deems
appropriate to ensure compliance with Rule 16b-3 and to cause Incentive Stock
Options to meet the requirements of the Code and regulations thereunder. Except
as provided in the preceding sentence, a termination or amendment of the Plan
shall not, without the consent of the Participant, adversely affect a
Participant's rights under an Incentive Award previously granted to him.
15. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company to
be subject to the Plan and to Options then outstanding or to be granted
thereunder, the maximum number of shares or securities which may be delivered
under the Plan, the exercise price and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination shall be binding on
all persons. If the adjustment would produce fractional shares with respect to
any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.
(b) If the Company is a party to a consolidation or a merger in which
the Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Committee may take such actions with respect to outstanding
Incentive Awards as the Committee deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the Committee
may take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.
16. Administration of the Plan. The Plan shall be administered by the
Committee, which shall consist of not less than two members of the Board, who
shall be appointed by the Board. Subject to paragraph (d) below, the Committee
shall be the Compensation Committee unless the Board shall appoint another
Committee to administer the Plan. The Committee shall have general authority to
impose any limitation or condition upon an Incentive Award the Committee deems
appropriate to achieve the objectives of the Incentive Award and the Plan and,
without limitation and in addition to powers set forth elsewhere in the Plan,
shall have the following specific authority:
(a) The Committee shall have the power and complete discretion
to determine (i) which eligible employees shall receive Incentive
Awards and the nature of each Incentive Award, (ii) the number of
shares of Company Stock to be covered by each Incentive Award, (iii)
whether Options shall be Incentive Stock Options or Nonstatutory Stock
Options, (iv) when, whether and to what extent Stock Appreciation
Rights shall be granted in connection with Options, (v) when, whether
and to what extent Tax Offset Rights shall be granted and the terms
thereof, (vi) the Fair Market Value of Company Stock, (vii) the time or
times when an Incentive Award shall be granted, (viii) whether an
Incentive Award shall become vested over a period of time and when it
shall be fully vested, (ix) when Options and Stock Appreciation Rights
may be exercised, (x) whether a Disability exists, (xi) the manner in
which payment will be made upon the exercise of Options or Stock
Appreciation Rights, (xii) conditions relating to the length of time
before disposition of Company Stock received upon the exercise of
Options or Stock Appreciation Rights is permitted, (xiii) whether to
approve a Participant's election (A) to deliver shares of already owned
Company Stock to satisfy Applicable Withholding Taxes or (B) to have
the Company withhold from the shares to be issued upon the exercise of
a Nonstatutory Stock Option or Stock Appreciation Right the number of
shares necessary to satisfy Applicable Withholding Taxes, (xiv) the
terms and conditions applicable to Restricted Stock Awards, (xv) the
terms and conditions on which restrictions upon Restricted Stock shall
lapse, (xvi) whether to accelerate the time at which any or all
restrictions with respect to Restricted Stock will lapse or be removed,
(xvii) notice provisions relating to the sale of Company Stock acquired
under the Plan, (xviii) the terms of incentive programs, performance
criteria and other factors relevant to the issuance of Incentive Stock,
and (xix) any additional requirements relating to Incentive Awards that
the Committee deems appropriate. Notwithstanding the foregoing, no
"tandem stock options" (where two stock options are issued together and
the exercise of one option affects the right to exercise the other
option) may be issued in connection with Incentive Stock Options. The
Committee shall have the power to amend the terms of previously granted
Incentive Awards so long as the terms as amended are consistent with
the terms of the Plan and provided that the consent of the Participant
is obtained with respect to any amendment that would be detrimental to
him, except that such consent will not be required if such amendment is
for the purpose of complying with Rule 16b-3 or any requirement of the
Code applicable to the Incentive Award.
(b) The Committee may adopt rules and regulations for carrying
out the Plan. The interpretation and construction of any provision of
the Plan by the Committee shall be final and conclusive. The Committee
may consult with counsel, who may be counsel to the Company, and shall
not incur any liability for any action taken in good faith in reliance
upon the advice of counsel.
(c) A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be taken by
a majority of the members present. Any action may be taken by a written
instrument signed by all of the members, and any action so taken shall
be fully effective as if it had been taken at a meeting.
(d) The Board from time to time may appoint members
previously appointed and may fill vacancies, however caused, in the
Committee. Insofar as it is necessary to satisfy the requirements of
Section 16(b) of the Act, (i) no member of the Committee shall be
granted or awarded equity securities pursuant to the Plan or any other
plan of the Company or any Parent or Subsidiary of the Company that
entitles participants to acquire stock, stock options or stock
appreciation rights of the Company or any Parent or Subsidiary of the
Company, and (ii) no person shall become a member of the Committee if,
within the preceding one-year period, the person shall have been
granted or awarded equity securities pursuant to such a plan; provided,
however, that the foregoing prohibitions on Committee membership shall
be subject to the exception set forth in clauses (A) through (D) of
Rule 16b-3(c)(2)(i) and (ii)).
17. Notice. All notices and other communications required or
permitted to be given under this Plan shall be in writing and shall be deemed
to have been duly given if delivered personally or mailed first class,
postage prepaid, as follows (a) if to the Company - at its principal business
address to the attention of the Treasurer; (b) if to any Participant - at the
last address of the Participant known to the sender at the time the notice or
other communication is sent.
18. Interpretation. The terms of this Plan are subject to all present
and future regulations and rulings of the Secretary of the Treasury or his
delegate relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or ruling,
then that provision of the Plan shall be void and of no effect. The terms of
this Plan shall be governed by the laws of the Commonwealth of Virginia.
19. Effective Date. This Plan shall be effective as of April 12,
1996.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this ____ day of April, 1996.
REORGANIZED CONSUMAT SYSTEMS, INC.
By:________________________________
Chairman, President, and
Chief Executive Officer
<PAGE>
EXHIBIT B
REORGANIZED CONSUMAT SYSTEMS, INC.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
(As Adopted April 12, 1996
Subject to Stockholder Approval)
1. Purpose
The purpose of this Reorganized Consumat Systems, Inc. 1996 Non-Employee
Directors Stock Option Plan (the "Plan") is to encourage ownership in the
Company by non-employee members of the Board in order to promote long-term
stockholder value and to provide non-employee members of the Board with an
incentive to continue as directors of the Company.
2. Definitions
As used in the Plan, the following terms have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Company" means Reorganized Consumat Systems, Inc., a
Virginia corporation.
(c) "Company Stock" means the Common Stock, $1.00 par value,
of the Company. If the par value of the Company Stock is changed, or in
the event of a change in the capital structure of the Company (as
provided in Section 12), the shares resulting from such change shall be
deemed to be Company Stock within the meaning of the Plan.
(d) "Date of Grant" means the date on which an Option is
automatically awarded pursuant to Section 7.
(e) "Effective Date" means April 12, 1996.
(f) "Eligible Director" means a director described in
Section 4 who has not been awarded an Option under the Plan.
(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(h) "Fair Market Value" means, on any given date, the value of
a share of Company Stock based upon the average of the highest and
lowest reported sales prices per share of the Company Stock on such day
on the NASDAQ Bulletin Board (or, if there have been no transactions,
the average of the bid and asked prices).
(i) "Insider" means a person subject to Section 16(b) of
the Exchange Act.
(j) "Option" means a right to purchase Company Stock
pursuant to the provisions of Section 7.
(k) "Subsidiary" means, with respect to any corporation, a
corporation more than 50% of whose voting shares are owned directly or
indirectly by the Company.
3. Administration
The Plan shall be administered by the Board. Options shall be granted
as described in Section 7. However, the Board shall have all powers vested in it
by the terms of the Plan, including, without limitation, the authority (within
the limitations described herein) to prescribe the form of the agreement
embodying the grant of Options under the Plan, to construe the Plan, to
determine all questions arising under the Plan, and to adopt and amend rules and
regulations for the administration of the Plan as it may deem desirable. Any
decision of the Board in the administration of the Plan, as described herein,
shall be binding and conclusive. The Board may act only by a majority of its
members in office, except that members thereof may authorize any one or more of
their number or any officer of the Company to execute and deliver documents on
behalf of the Board. No member of the Board shall be liable for anything done or
omitted to be done by him or any other member of the Board in connection with
the Plan, except for his own willful misconduct or as expressly provided by
statute.
4. Participation in the Plan
Each director of the Company who (a) does not own or control, directly
or indirectly, more than 5% of the outstanding shares of Company Stock, and (b)
is not otherwise an employee of the Company or any Subsidiary and was not an
employee of the Company or any Subsidiary for a period of at least one year
before the Date of Grant shall be eligible to participate in the Plan.
5. Stock Subject to the Plan
The maximum number of shares of Company Stock that may be issued upon
exercise of Options granted pursuant to the Plan shall be 100,000, subject to
adjustment as provided in Section 12. Shares allocable to Options or portions
thereof that expire or terminate unexercised may again be subject to an Option.
6. Non-Statutory Stock Options
All options granted under the Plan shall be non-statutory in nature and
shall not be entitled to special tax treatment under Internal Revenue Code
section 422.
7. Award, Terms, Conditions and Form of Options
Each Option shall be evidenced by a written agreement in such form as
the Board shall from time to time approve, which agreement shall comply with and
be subject to the following terms and conditions:
(a) Automatic Award of Option. Each Eligible Director on the
Effective Date shall automatically receive an Option to purchase 25,000
shares of Company Stock as of the Effective Date. After the Effective
Date, each director newly elected for the first time who is an Eligible
Director on the date of his election shall automatically receive an
Option to purchase 25,000 shares of Company Stock as of the date of
such election. If at any time there are not sufficient shares available
to fully permit the automatic Option grants described in this
paragraph, the Option grants shall be reduced pro rata (to zero if
necessary) so as not to exceed the number of shares available.
(b) Option Exercise Price. The Option exercise price
shall be the Fair Market Value of the shares of Company Stock subject
to such Option on the Date of Grant.
(c) Options Not Transferable. An Option shall not be
transferable by the optionee otherwise than by will, or by the laws of
descent and distribution, and shall be exercisable during the lifetime
of the optionee only by him. An Option transferred by will or by the
laws of descent and distribution may be exercised by the optionee's
estate, or the person to whom the rights under the Option shall have
passed by will or the laws of descent and distribution, within one year
of the date of the optionee's death (but not after the date described
in paragraph (d)(iii) below) to the extent the optionee could have
exercised the Option on the date of his death. No Option or interest
therein may be transferred, assigned, pledged or hypothecated by the
optionee during his lifetime, whether by operation of law or otherwise,
or be made subject to execution, attachment or similar process.
(d) Exercise of Options. The Option shall become exercisable
in full on the later of (i) six months from the Date of Grant, and (ii)
six months from the date of approval of the Plan by stockholders of the
Company; provided, however, that no Option may be exercised:
(i) before the Plan is approved by stockholders
of the Company;
(ii) unless at such time the optionee is a director,
except that he may exercise the Option within twelve months of
the date he ceases to be a director of the Company to the
extent the Option was exercisable on the date he ceases to be
a director;
(iii) after the expiration of ten (10) years from
the Date of Grant; and
(iv) except by written notice to the Company at its
principal office, stating the number of shares the optionee
has elected to purchase, accompanied by payment in cash and/or
by delivery to the Company of shares of Company Stock (valued
at Fair Market Value on the date of exercise) in the amount of
the full Option exercise price for the shares of Company Stock
being acquired thereunder.
8. Withholding
If the Company is required by law to withhold federal or state income
taxes when an Option is exercised, the Company shall have the right to retain or
sell without notice shares of Company Stock having a Fair Market Value
sufficient on such date or dates as may be determined by the Board (but not more
than five business days prior to the date on which such shares would otherwise
have been delivered) to cover the amount of any federal or state income tax
required to be withheld or otherwise deducted and paid with respect to the
exercise of the Option, remitting any balance to the optionee; provided,
however, that the optionee shall have the right to make other arrangements
satisfactory to the Company or to provide the Company with the funds to enable
it to pay such tax. Notwithstanding the foregoing, the Company shall not sell
shares of Company Stock if the optionee is an Insider and such sale would cause
the optionee to incur a liability under Section 16(b) of the Exchange Act.
9. Modification, Extension and Renewal of Options
The Board shall have the power to modify, extend or renew outstanding
Options and to authorize the grant of new Options in substitution therefor,
provided that any such action may not enhance the rights of the director without
stockholder approval or have the effect of altering, enhancing or impairing any
rights or obligations of any person under any Option previously granted without
the consent of the optionee.
10. Termination
The Plan shall terminate upon the earlier of:
(a) the adoption of a resolution of the Board terminating
the Plan; or
(b) April 11, 2006.
No termination of the Plan shall without his consent materially and adversely
affect any of the rights or obligations of any person under any Option
previously granted under the Plan.
11. Limitation of Rights
(a) No Right to Continue as a Director. Neither the Plan nor
the granting of an Option nor any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Company will retain any
person as a director for any period of time.
(b) No Stockholders Rights Under Options. An optionee shall
have no rights as a stockholder with respect to shares covered by his
Option until the date of exercise of the Option, and, except as
provided in Section 12, no adjustment will be made for dividends or
other rights for which the record date is before the date of such
exercise.
12. Changes in Capital Structure
(a) If the number of outstanding shares of Company Stock is
increased or decreased as a result of a subdivision or consolidation of
shares, the payment of a stock dividend, stock split, or any other
change in capitalization effected without receipt of consideration by
the Company (including, but not limited to, the creation or issuance to
stockholders generally of rights, options or warrants for the purchase
of common or preferred stock of the Company), the number and kind of
shares of stock or securities of the Company to be subject to the Plan
and to Options, the maximum number of shares or securities which may be
delivered under the Plan, and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be
binding and conclusive on all persons.
(b) If the Company is a party to a consolidation or a merger
in which the Company is not the surviving corporation, a transaction
that results in the acquisition of substantially all of the Company's
outstanding stock by a single person or entity, or a sale or transfer
of substantially all of the Company's assets, the Board may take such
actions with respect to outstanding unexercised Options as the Board
deems appropriate.
(c) Notwithstanding anything in the Plan to the contrary, the
Board may take the foregoing actions without the consent of any
optionee, and the Board's determination shall be conclusive and binding
on all persons for all purposes.
13. Amendment of the Plan
The Board (except as provided below) may suspend or discontinue the
Plan or revise or amend the Plan in any respect; provided, however, that without
approval of the stockholders no revision or amendment shall increase the number
of shares subject to the Plan (except as provided in Section 12) or materially
increase the benefits accruing to participants under the Plan. The Plan shall
not be amended more than once every six months; provided, however, that this
restriction shall not apply to an amendment required to comply with changes in
the Internal Revenue Code or the Employee Retirement Income Security Act of 1974
or regulations thereunder.
14. Notice
All notices and other communications required or permitted to be given
under this Plan shall be in writing and shall be deemed to have been duly given
if delivered personally or mailed first class, postage prepaid, as follows: (a)
if to the Company - at its principal business address to the attention of the
Chief Financial Officer; (b) if to any optionee - at the last address of the
optionee known to the sender at the time the notice or other communication is
sent.
15. Construction
The terms of this Plan shall be governed by the laws of the
Commonwealth of Virginia.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
____ day of April, 1996.
REORGANIZED CONSUMAT SYSTEMS, INC.
By:____________________________
Chairman, President, and
Chief Executive Officer
<PAGE>
REORGANIZED CONSUMAT SYSTEMS, INC.
This Proxy is solicited on behalf of the Board of Directors
The undersigned, revoking all prior proxies, hereby appoints James K.
Fishback, George P. Fultz, and Florence M. Hurt as proxies, and each or any of
them with full power of substitution, to represent the undersigned and vote, as
designated below, all the shares of Common Stock of Reorganized Consumat
Systems, Inc., held of record by the undersigned on April 30, 1996, at the
Annual Meeting of Shareholders to be held June 14, 1996, or any adjournment
thereof on each of the following matters:
<TABLE>
1. Election of Directors (Proposal One of the Proxy Statement).
<S> <C>
[ ] FOR all Nominees listed below [ ] WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for all nominees listed below)
</TABLE>
James W. Bohlig, D. Randolph Graham, Alexander Y. Hoff, and
Robert L. Massey.
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, print the name of the nominee in the space provided below.
- -------------------------------------------------------------------------------
2. To adopt the 1996 Stock Option Plan (as described in Proposal Two of
the Proxy Statement).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To adopt the 1996 Non-Employee Directors Stock Option Plan (as
described in Proposal Three of the Proxy Statement).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the selection by the Audit Committee of the Board of Directors of
Parham, P.C., independent certified public accountants, as auditors of the
Company for 1996 (Proposal Four of the proxy statement).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. The Board of Directors has not
been notified of any such matters.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned shareholder. If no direction is made, this proxy
will be voted "FOR" each proposal. All joint owners MUST sign.
Please sign exactly as your name appears on the reverse side of this
proxy card. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
DATED ______________________ ___________________________________
Signature
_____________________ ___________________________________
NUMBER OF SHARES Signature (if jointly owned)
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE.
