<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Andrew Corporation
------------------------------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
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previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
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<PAGE> 2
ANDREW LOGO
- --------------------------------------------------------------------------------
ANDREW CORPORATION 10500 West 153rd Street
Orland Park, Illinois U.S.A. 60462
Phone (708) 349-3300
December 26, 1997
Dear Stockholder:
You are cordially invited to attend the next regular Andrew Corporation
Annual Meeting of Stockholders, to be held at 10:00 A.M., Tuesday, February 10,
1998 at the Drury Lane, Oakbrook Terrace, Illinois. A map showing the location
of the Drury Lane is on the back cover of this Proxy Statement.
This meeting will be our fiftieth annual stockholders meeting and our
eighteenth as a publicly owned company. You will have an opportunity to discuss
each item of business described in the Notice of Annual Meeting and Proxy
Statement and to ask questions about the Company and its operations.
To make certain your shares are represented at the meeting, whether or not
you plan to attend, please sign and return the enclosed proxy card, using the
envelope provided. If you attend the meeting, you may vote your shares in
person, even though you have previously signed and returned your proxy.
Sincerely,
FLOYD L. ENGLISH
Floyd L. English
Chairman, President and
Chief Executive Officer
<PAGE> 3
ANDREW CORPORATION
10500 WEST 153RD STREET
ORLAND PARK, ILLINOIS 60462
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 10, 1998
The Annual Meeting of Stockholders of Andrew Corporation will be held at
10:00 A.M., Tuesday, February 10, 1998, at the Drury Lane, Oakbrook Terrace,
Illinois, for the following purposes:
1. To elect six Directors for the ensuing year;
2. To approve a new Stock Option Plan for Non-Employee Directors;
3. To ratify the appointment of Ernst & Young as independent public
auditors for fiscal 1998; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The close of business on December 15, 1997 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the meeting and any adjournment thereof.
A copy of the Andrew Corporation Annual Report for the fiscal year ended
September 30, 1997 is being mailed to stockholders with this proxy statement.
By Order of the Board of Directors,
James F. Petelle
Secretary
December 26, 1997
------------------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, DATE AND SIGN
THE ACCOMPANYING PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE. IF YOU
ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON, EVEN THOUGH YOU HAVE
PREVIOUSLY SIGNED AND RETURNED YOUR PROXY.
<PAGE> 4
ANDREW CORPORATION
10500 WEST 153RD STREET
ORLAND PARK, ILLINOIS 60462
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD FEBRUARY 10, 1998
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Andrew Corporation (the "Company" or "Andrew") of
proxies to be voted at the Annual Meeting of Stockholders of the Company to be
held on February 10, 1998, at the Drury Lane, Oakbrook Terrace, Illinois, and at
any adjournment thereof. This proxy statement and the proxies solicited hereby
are first being sent or delivered to stockholders on or about December 26, 1997.
VOTING
A proxy may be revoked by a stockholder at any time prior to its use. If it
is signed properly by the stockholder and is not revoked, it will be voted at
the meeting. If a stockholder specifies how the proxy is to be voted with
respect to any of the proposals for which a choice is provided, the proxy will
be voted in accordance with such specifications. If a stockholder fails to so
specify with respect to such proposals, the proxy will be voted FOR items 1, 2
and 3.
Only stockholders of record at the close of business on December 15, 1997
will be entitled to vote at the meeting. The Common Stock of the Company, $.01
par value ("Common Stock"), is the only authorized class of stock, and as of
December 15, 1997, there were 88,501,808 shares of Common Stock of the Company
issued, outstanding and entitled to one vote each.
ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting to serve until the
earlier of the next Annual Meeting of Stockholders or until their respective
successors have been elected and qualified. Directors are elected by a plurality
of the votes of the shares of Common Stock present in person or represented by
proxy and entitled to vote at the Annual Meeting. Consequently, any shares not
voted (whether by abstention, broker non-vote or votes withheld) will have no
effect on the election of directors. If any nominee for election as director is
unable to serve, the persons named in the proxy may vote for another person in
accordance with their judgment. However, the Board of Directors does not
anticipate that any nominee will be unable to serve. All of the nominees have
served as directors of the Company since the last Annual Meeting of Stockholders
held February 11, 1997.
The names and ages of the nominees, their principal occupations or
employment during the past five years and other data regarding them as of
September 30, 1997, based upon information received from them, are as follows:
<PAGE> 5
NOMINEES FOR DIRECTORSHIPS
<TABLE>
<S> <C>
JOHN G. BOLLINGER, 62
(Director since 1984)
Dr. Bollinger has been Bascom Professor of Engineering and
Dean of the College of Engineering at the University of
Wisconsin at Madison since 1981. He is also a director of
Kohler Corporation and Marquette Electronics, Inc. Dr.
Bollinger is a member of the Audit and Compensation
Committees.
JON L. BOYES, 76
(Director since 1989)
Admiral Boyes, Ph.D., is an international telecommunications
consultant and Chairman of SAMA Corporation, a government
and military consulting firm principally in the area of
command, control and communication. He was President, Armed
Forces Communications and Electronics Association, for over
10 years and President of the National Science Center
Foundation. He had 34 years of experience in the Department
of Defense, serving on Navy, Joint and NATO staffs, and in
submarines and destroyers before retiring in 1977. Admiral
Boyes is Chairman of the Human Resources Committee and of
the Nominating Committee.
KENNETH J. DOUGLAS, 75
(Director since 1989)
Mr. Douglas retired in 1992 as Vice Chairman of the Board of
Dean Foods Company, a diversified food processing business,
having served as Vice Chairman since January 1988 and as
Chairman prior to that time since 1970. He is also a
director of Richardson Electronics, Ltd. and serves as
Chairman of the Board of West Suburban Hospital Medical
Center and Vice Chairman of Loyola University Health System.
Mr. Douglas is Chairman of the Compensation Committee and a
member of the Nominating and Human Resources Committees.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
FLOYD L. ENGLISH, 63
(Director since 1982)
Dr. English was elected Chairman of Andrew Corporation in
1994, having served as President and Chief Executive Officer
since 1983, and as President and Chief Operating Officer
since 1982. Dr. English joined Andrew in 1980 as Vice
President, Corporate Development and became Vice President,
U.S. Operations in February 1981. Dr. English is a member of
the boards of the Executives Club of Chicago, the
International Engineering Consortium, and the Illinois Math
and Science Academy.
JERE D. FLUNO, 56
(Director since 1996)
Mr. Fluno is Vice Chairman of W. W. Grainger, Inc., the
leading distributor of maintenance, repair and operating
supplies and related information in North America. He has
spent 28 years with Grainger in numerous positions, and has
been Vice Chairman since 1984. Mr. Fluno is a director of W.
W. Grainger, Inc., a governor of the Chicago Stock Exchange,
and a director of the Chicago Stock Exchange subsidiaries,
Midwest Clearing Corporation and Midwest Securities Trust
Company. He is a trustee of the Museum of Science and
Industry, a member of the University of Wisconsin School of
Business Dean's Advisory Board, and a director of the
University of Wisconsin Foundation, as well as other
not-for-profit boards. He is a member of the Audit and
Compensation Committees.
ORMAND J. WADE, 58
(Director since 1993)
Mr. Wade retired in 1992 as Vice Chairman of Ameritech
Corporation, a regional provider of telecommunications
services, a position he had held since 1989. He previously
served as president of Ameritech Bell Group since 1987 and
President and CEO of Illinois Bell from 1982-1987. Mr. Wade
began his career with AT&T in 1961, and first became a Vice-
President of AT&T in 1978. He is currently a director of
Illinois Tool Works Inc., Westell Technologies, Inc., and
Northwestern Memorial Hospital. Mr. Wade is also a trustee
of the University of Chicago. He is Chairman of the Audit
Committee and a member of the Nominating and Human Resources
Committees.
</TABLE>
3
<PAGE> 7
SECURITY OWNERSHIP
The following table sets forth information regarding ownership of the
Company's Common Stock as of September 30, 1997 by nominees for Directors, by
each of the named Executive Officers and by all Executive Officers and Directors
as a group:
<TABLE>
<CAPTION>
PERCENT OF CLASS
AMOUNT OF BENEFICIAL OWNERSHIP BENEFICIALLY OWNED
---------------------------------------------------------------- --------------------
DIRECT
--------------------------------------
NO. OF COMMON
SHARES EXERCISABLE STOCK
OWNED OPTIONS(1) EQUIVALENTS(2) INDIRECT(3) TOTAL DIRECT INDIRECT
------- ----------- -------------- ----------- --------- ------ --------
DIRECTORS
- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John G. Bollinger....... 7,250 86,063 -0- -0- 93,313 0.1% -0-
Jon L. Boyes............ 9,280 57,786 -0- -0- 67,066 * -0-
Kenneth J. Douglas...... 9,648 76,950 10,201 -0- 96,799 0.1% -0-
Jere D. Fluno........... 4,000 5,062 1,499 -0- 10,561 * -0-
Ormand J. Wade.......... 1,012 35,624 4,917 -0- 41,553 * -0-
NAMED EXECUTIVE OFFICERS
- ------------------------
Floyd L. English........ 149,646 131,625 -0- 4,981,595 5,262,866 0.3% 5.6%
Thomas E. Charlton...... 152,025 115,875 -0- 4,942,264 5,210,164 0.3% 5.5%
William R. Currer....... 41,605 25,799 -0- 4,942,264 5,009,668 * 5.5%
Charles R. Nicholas..... 84,930 63,750 -0- 4,942,264 5,090,944 0.2% 5.5%
John B. Scott........... 33,273 47,813 -0- 4,942,264 5,023,350 * 5.5%
All Executive Officers
and Directors as a
group (13 persons).... 628,884 680,191 16,617 4,981,595 6,267,956 1.5% 5.6%
</TABLE>
- ------------
*Less than .1% of class.
(1) Refers to the number of shares covered by options exercisable within 60 days
of September 30, 1997.
(2) Refers to the number of share equivalents held in the account of those
Directors who participate in the Director Fee-Deferral Plan described on the
following page.
(3) Indirectly owned shares include 4,942,264 shares owned by the Andrew Profit
Sharing Trust, of which Messrs. English, Charlton, Currer, Nicholas and
Scott are trustees, and as to which such individuals share voting and
investment powers. In the case of Dr. English, indirectly owned shares also
include 2,514 shares owned by his wife, 2,857 by his minor child and 33,960
by a charitable trust for which he shares voting control.
As of September 30, 1997, the following entity is known to be the
beneficial owner of more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ----------- --------
<S> <C> <C>
Andrew Profit Sharing Trust............................. 4,942,264 5.5%
10500 West 153rd Street
Orland Park, Illinois 60462
</TABLE>
4
<PAGE> 8
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Compensation, Human Resources
and Nominating Committees.
AUDIT COMMITTEE: The committee met three times during fiscal 1997. The
committee recommends the independent auditors to the Board and reviews and
approves the scope of the audit, the financial statements, the independent
auditors' letter of comments and management's responses thereto, and the fees
charged for audit and tax services and any special assignments.
COMPENSATION COMMITTEE: The committee met three times during fiscal 1997.
The committee establishes the compensation programs for officers of the Company
and reviews overall compensation and benefit programs of the Company. The
committee also administers and selects participants for the Management Incentive
Program, the Employee Retirement Benefit Restoration Plan and the Executive
Severance Benefit Plan, and administers the Employee Stock Purchase Plan.
HUMAN RESOURCES COMMITTEE: The committee met three times during fiscal
1997. The committee reviews management development and succession planning, and
identifies and recommends candidates for corporate officer positions.
NOMINATING COMMITTEE: This committee met four times during fiscal 1997.
This committee considers and makes recommendations regarding qualifications of
Directors and identifies and recommends candidates for membership on the Board.
Stockholders wishing to submit nominees for Director may do so in accordance
with the requirements described on p. 15 of this proxy statement under the
caption "Deadline for Stockholder Proposals."
DIRECTOR COMPENSATION
During fiscal 1997, the Board of Directors met on four occasions. All
Directors attended all of the meetings of the Board and of the committees on
which they sat. Andrew paid its non-employee directors an annual fee of $19,600,
a fee of $1,000 for each Board and each Committee meeting attended during fiscal
1997, and an additional $1,000 to the Committee Chairman for each Committee
meeting attended.
Under a plan adopted as of October 1, 1984, a non-employee Director may
defer up to 100% of director fees until he or she leaves the Board. In lieu of
cash payment, the Director is credited with equivalent shares equal to the value
of the Common Stock at the end of the quarter in which fees were deferred. When
the Director leaves the Board, the deferred amount will be paid in cash, based
on the then current value of the Common Stock. Such cash payment may be made
either in a lump sum or in equal annual installments over five years or less at
the Director's election. Three of the five outside Directors who served on the
Board during fiscal 1997 participated in the Plan by deferring some or all of
their director fees.
During the 1997 fiscal year, non-employee Directors participated in the
Andrew Corporation Stock Option Plan for Non-Employee Directors (the "Old
Plan"). Under the Old Plan, each eligible director was automatically granted an
option to purchase 12,000 shares of Common Stock at the Board of Directors'
meeting following the annual stockholders' meeting. After giving effect to the
three-for-two split in the Company's stock paid in March 1997, the options
granted in 1997 applied to 18,000 shares at an exercise price of $37.25 per
share. Beginning in the 1998 fiscal year, non-employee Directors will no longer
participate in the Old Plan. Instead, the Company has proposed the adoption of a
new Andrew Corporation Stock Option Plan for Non-Employee Directors as further
discussed herein under "Approval of Andrew Corporation Stock Option Plan for
Non-Employee Directors."
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company for the fiscal year ended September 30, 1997 and for the Company's two
previous fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------- ---------------------------------
AWARDS PAYOUTS
----------------------- -------
OTHER RESTRICTED SECURITIES
NAME AND ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS(1) COMPENSATION(2) AWARDS OPTIONS/ PAYOUTS COMPENSATION(3)
POSITION YEAR ($) ($) ($) ($) SARS(#) ($) ($)
--------- ---- ------- --------- --------------- ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Floyd L. English........ 1997 439,300 -0- 25,090 -0- 67,500 844,467 16,477
Chairman, President and 1996 422,400 852,254 11,065 -0- 101,250 -0- 18,588
Chief Executive Officer 1995 405,000 1,325,455 8,744 -0- 84,375 366,406 18,243
Thomas E. Charlton...... 1997 280,800 129,164 3,605 -0- 30,000 380,705 16,477
Group President, 1996 270,000 291,600 4,781 -0- 45,000 -0- 18,588
Communication Systems 1995 232,916 389,285 4,576 -0- 33,750 152,290 18,243
William R. Currer....... 1997 240,000 98,280 6,129 -0- 26,250 215,704 16,477
Group President, 1996 205,000 167,670 3,615 -0- 33,750 -0- 18,588
Communication Products 1995 163,917 105,000 3,371 -0- 11,813 80,366 18,243
Charles R. Nicholas..... 1997 270,000 118,503 3,356 -0- 30,000 337,932 16,477
Exec. Vice-President, 1996 241,980 320,720 2,650 -0- 45,000 -0- 18,588
Chief
Financial Officer 1995 212,160 396,530 4,126 -0- 33,750 148,853 18,243
John B. Scott........... 1997 233,000 107,617 556 -0- 22,500 317,632 16,477
Vice President, 1996 226,560 238,296 780 -0- 33,750 -0- 18,588
Corporate
R & D, Marketing and MIS 1995 220,080 288,525 1,574 -0- 33,750 156,079 18,243
</TABLE>
- ------------
(1) Annual bonus amounts are earned and accrued during the fiscal years
indicated and paid subsequent to the end of each fiscal year.
(2) Consists of the value of personal use of Company automobiles, an annual
Christmas bonus (in which all employees participate) based on years of
service and, in the case of Dr. English, tax-return preparation and
financial planning services provided at Company expense.
(3) These amounts represent contributions by the Company to the Andrew Profit
Sharing Trust on behalf of the named individuals.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information with respect to grants of options to
the Chief Executive Officer and the four other named executives in fiscal 1997.
As required by the Securities and Exchange Commission (the "SEC"), the
calculation of potential realizable values shown for such awards is based on
assumed annualized rates of stock price appreciation of 5% and 10% over the full
ten-year term of the options.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED POTENTIAL
OPTIONS TO EMPLOYEES EXERCISE PRICE/ EXPIRATION REALIZABLE VALUE
NAME GRANTED(#)(1) IN FY 96 SHARE($)(2) DATE 5% 10%
---- ------------- --------------- --------------- ---------- -------------------
<S> <C> <C> <C> <C> <C>
Floyd L. English.......... 67,500 10.2% 38.17 11/13/06 1,620,331/4,106,025
Thomas E. Charlton........ 30,000 4.5% 38.17 11/13/06 720,147/1,824,900
William R. Currer......... 26,250 4.0% 38.17 11/13/06 630,129/1,596,788
Charles R. Nicholas....... 30,000 4.5% 38.17 11/13/06 720,147/1,824,900
John B. Scott............. 22,500 3.4% 38.17 11/13/06 540,110/1,368,675
</TABLE>
- ------------
(1) These options reflect the March 1997 stock split and are exercisable as
follows: 25% on or after November 13, 1997; 50% on or after November 13,
1998; 75% on or after November 13, 1999; 100% on or after November 13, 2000
through November 13, 2006.
(2) Exercise price is based upon fair market value on the date of the award.
6
<PAGE> 10
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND OPTION VALUES AT SEPTEMBER 30, 1997
This table sets forth information regarding exercise of options during
fiscal year 1997 by the Chief Executive Officer and the other four named
executives. The "value realized" is based on the market price on the date of
exercise, while the "value of unexercised in-the-money options at September 30,
1997" is based on the market price on that date, which was $26.19.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ON VALUE OPTIONS AT SEPTEMBER 30, 1997(#) AT SEPTEMBER 30, 1997($)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- -------------------------------- -------------------------
<S> <C> <C> <C> <C>
Floyd L. English...... 62,438 1,993,612 25,312/241,313 173,577/1,843,048
Thomas E. Charlton.... 50,625 1,544,100 48,375/111,000 735,010/916,110
William R. Currer..... 41,175 1,314,557 0/67,088 0/393,750
Charles R. Nicholas... 37,125 1,182,093 11,250/111,000 77,147/916,110
John B. Scott......... 35,437 859,908 0/95,063 0/858,253
</TABLE>
LONG-TERM PERFORMANCE CASH AWARDS
The current long-term performance cash award program covers the Company's
three fiscal years 1997 through 1999. Certain executives of the Company are
eligible for target payouts ranging from 20% to 120% of their average annual
salary during the three- year period if long-term performance goals established
for the program are met. Performance goals for the current program include
aggregate, three-year (1997, 1998 and 1999) earnings per share and a specific
revenue target for fiscal 1999. In addition, minimum return on sales and return
on equity must both be met. No payments will be made if 75% of earnings per
share and revenue targets are not reached or if return on sales and return on
equity do not exceed the minimums. If maximum earnings per share and revenue are
achieved for the three-year period then payouts are limited to two times the
target bonus amounts. A range of estimated payouts which could be made early in
fiscal 2000 to the Chief Executive Officer and the other four named executives
is shown in the following table:
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
LONG-TERM INCENTIVE PLAN
TARGETED PERFORMANCE -------------------------------------------
NAME AWARD PERIOD THRESHOLD($) TARGET($) MAXIMUM($)
---- ---------------- -------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Floyd L. English............. 120% of Average Oct. 1, 1996 411,185 548,246 1,096,492
1997-1999 Salary Sept. 30, 1999
Thomas E. Charlton........... 80% of Average Oct. 1, 1996 175,220 233,626 467,252
1997-1999 Salary Sept. 30, 1999
William R. Currer............ 80% of Average Oct. 1, 1996 149,760 199,680 399,360
1997-1999 Salary Sept. 30, 1999
Charles R. Nicholas.......... 80% of Average Oct. 1, 1996 168,480 224,640 449,280
1997-1999 Salary Sept. 30, 1999
John B. Scott................ 80% of Average Oct. 1, 1996 146,016 194,688 389,376
1997-1999 Salary Sept. 30, 1999
</TABLE>
7
<PAGE> 11
EXECUTIVE SEVERANCE BENEFIT PLAN
The Company has an Executive Severance Benefit Plan (the "Severance Plan")
that provides benefits to certain key executives, as selected by the
Compensation Committee, in the event of termination of employment following a
change in control, as defined in the Severance Plan.
Upon termination of employment for any reason other than death, disability,
retirement or cause; or upon a resignation because of a material reduction in
compensation or duties, relocation requirements or breach of the plan within one
year of a change in control; the Company is obligated to pay each affected
participant an amount equivalent to the sum of: (i) 36 months of salary, bonus,
Company profit sharing and matching contributions; (ii) the aggregate spread
between the option price and fair market value of the Common Stock on the
severance date for all of the participant's outstanding stock options; and (iii)
up to 36 months of medical, life and similar insurance benefits. If termination
or resignation occurs more than one year after a change in control, the benefits
are reduced proportionately. If a participant terminates employment due to
death, disability, retirement or cause, or resigns for reasons other than those
described above within two years of a change in control, the Company is
obligated to pay the participant (or the participant's estate) one-half of the
amounts and rights referred to above. The Severance Plan also provides for
adjustment in benefits payable if any payment is considered an "excess parachute
payment" under the Internal Revenue Code.
If there had been a change in control and termination of employment, the
executives named in the Summary Compensation Table would have been entitled to
the following payments at September 30, 1997: Floyd L. English, $4,246,800;
Thomas E. Charlton, $1,777,500; William R. Currer, $983,600; Charles R.
Nicholas, $1,815,900; John B. Scott, $1,593,200.
In addition, the Company entered into an agreement in November, 1991
pursuant to which the Company would retain Mr. Scott as an advisor to the
Company for two years after his termination of employment for a retainer fee of
$100,000, a per diem rate of $500 and reimbursement of expenses.
EMPLOYEE RETIREMENT BENEFIT
RESTORATION PLAN
The Company has recently adopted an Employee Retirement Benefit Restoration
Plan (the "Restoration Plan"), which will provide additional retirement benefits
to certain senior executives, as selected by the Compensation Committee, whose
benefits from the Andrew Profit Sharing Trust may be reduced due to various
limitations imposed by the Internal Revenue Service. Benefits will begin
accruing under the Restoration Plan in fiscal year 1998.
In general, a senior executive participant in the Restoration Plan will not
be eligible to receive benefits under the Restoration Plan until the earlier of
the attainment of age 65 or his or her termination of employment with the
Company by reason of death, disability or retirement. In the event a participant
terminates employment with the Company prior to attaining age 65 other than by
reason of death, disability or retirement, he or she will forfeit any benefits
accrued under the Restoration Plan.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee ("Committee") of the Board of Directors
establishes the general compensation policies of the Company and establishes the
specific compensation plans, performance goals and compensation levels for
executive officers. The Committee also
8
<PAGE> 12
administers and selects participants for the Management Incentive Program, the
Employee Retirement Benefit Restoration Plan and the Executive Severance Benefit
Plan, and administers the Employee Stock Purchase Plan. The Committee is
composed of three independent, non-employee Directors who have no interlocking
relationships.
COMPENSATION PHILOSOPHY
The principal objective of the Committee's approach to executive
compensation is to align such compensation with stockholder value. The Committee
seeks to accomplish this objective by setting base salaries below the median for
similar positions at comparable companies, while linking the two remaining
variable components of cash compensation (annual bonus and long term performance
cash award) to aggressive performance factors which enhance stockholder value.
Stock options are used as a vehicle to further align long-term executive
performance with stockholder value. In this way, above-average total
compensation is achieved only for outstanding Company performance. The Committee
has used essentially this approach to executive compensation for at least the
last 10 years.
BASE SALARY
The Committee establishes the salary of the Chief Executive Officer ("CEO")
by comparison to the salaries of other CEOs of comparable companies. The
Committee's practice is to obtain salary data from its consultant which includes
data from a group of comparably-sized technology-based companies deemed similar
to Andrew, some (but not all) of which companies are members of the S&P
Communications Equipment Manufacturers Index used in the Performance Graph.
Using this information, the Committee established the CEO's salary for the last
three fiscal years below the median for companies perceived to be comparable to
Andrew. For fiscal 1997, the CEO was granted an increase in base salary of 4%.
For other executive officers, the Committee uses salary survey data
supplied by outside consultants on the same basis as the CEO, and establishes
base salaries that are below the median of salaries for persons holding
similarly-responsible positions at companies in the survey. In addition, the
Committee considers other factors including relative company performance, the
individual's past performance and his or her future potential.
ANNUAL BONUS
For a number of years, the CEO's annual cash bonus has been established as
a direct function of growth in the Company's earnings per share ("EPS") during
the most recent fiscal year. The Committee annually establishes a minimum target
for EPS, and the CEO's bonus for the fiscal year is a strict function of the
amount by which the minimum EPS target is exceeded during the fiscal year. For
fiscal 1997, EPS was $.96 after special charges. Since these earnings were below
the target, no annual bonus was paid to the CEO for 1997. For fiscal 1998 a
target and formula have again been established so that payment of the annual
bonus depends on achievement of a specified level of growth in EPS.
The annual cash bonus for executives other than the CEO is determined based
on three factors: (i) growth in the Company's EPS (using the same formula as for
the CEO); (ii) the operating results of the businesses or functions reporting to
the executive; and (iii) achievement of specified, measurable objectives related
to the executive's area of responsibilities.
LONG-TERM PERFORMANCE CASH AWARD
The long-term performance cash award program for senior executives of the
Company also is tied directly to objective measurements of performance with the
emphasis on long-term
9
<PAGE> 13
results. The most recent program covered fiscal years 1995 through 1997 with a
payment of $844,467 made to the CEO in December 1997. Sixty percent of the
target bonus was based on achievement of specified levels of growth in aggregate
three-year EPS (1995 through 1997). The remaining 40% was based on the
achievement of a specified sales goal in fiscal 1997. In each case, minimum,
target and maximum performance goals were established as described on p.7 to
qualify for the minimum, target and maximum long-term incentive payment,
respectively.
For the long-term performance cash award program covering fiscal years 1997
through 1999, 50% of the target bonus will be based on specified levels of
growth in aggregate three-year EPS. The other 50% will be determined by the
achievement of a specified sales goal in fiscal 1999. In addition to meeting
minimum EPS and sales goals, the Company must maintain a minimum average return
on equity and return on sales during the three-year period. Payments, if any,
under this program will likely be made in December 1999, subsequent to the close
of the Company's 1999 fiscal year.
OPTIONS
Stock options are an important component of the compensation package for
the CEO and other executives because they directly focus management's attention
on the interests of stockholders. The Committee makes periodic grants of stock
options to executive officers and other key employees to foster a commitment to
increasing long-term stockholder value. The Company's stock option plan does not
provide for re-pricing of options that are "under water" and the Company has
never re-priced any options after grant.
The Committee granted the CEO options on 67,500 shares at its meeting on
November 13, 1996. It granted options on 30,000 shares each to Mr. Charlton and
Mr. Nicholas, and granted options on 26,250 shares to Mr. Currer and 22,500
shares to Mr. Scott on that date. The Company's grants of options are always at
fair market value on the date of grant.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee believes that its compensation programs have been structured
in a manner to preserve full deductibility to the Company of executive
compensation for Federal Income Tax purposes.
<TABLE>
<S> <C>
Kenneth J. Douglas, Chairman John G. Bollinger,
Compensation Committee Member
Jere D. Fluno, Member
</TABLE>
10
<PAGE> 14
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for Andrew Corporation, the Standard & Poor's ("S&P") 500 Composite
Index and the S&P Communications Equipment Manufacturers Index. Since Andrew is
a company within the S&P 500 Stock Index, the SEC proxy rules require the use of
that Index. Under those rules, the second index used for comparison may be a
published industry or line-of-business index. In Andrew's case, the S&P
Communications Equipment Manufacturers Index (which includes Andrew
Corporation), shown below, is such an index.
The graph assumes $100 invested on September 30, 1992 in Andrew Common
Stock and $100 invested at that time in each of the S&P indices. The comparison
assumes that all dividends are reinvested.
<TABLE>
<CAPTION>
S&P
Communications
Measurement Period Andrew Equipment
(Fiscal Year Covered) Corporation S&P 500 Manufacturers
<S> <C> <C> <C>
9/92 100 100 100
9/93 220 113 116
9/94 430 117 135
9/95 786 152 224
9/96 962 183 248
9/97 758 257 382
</TABLE>
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------------------
9/92 9/93 9/94 9/95 9/96 9/97
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Andrew Corporation................................. 100 220 430 786 962 758
S&P 500............................................ 100 113 117 152 183 257
S&P Communications Equipment Manufacturers......... 100 116 135 224 248 382
</TABLE>
11
<PAGE> 15
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers of
Andrew during fiscal 1997, based on data furnished by them:
<TABLE>
<CAPTION>
NAME AGE POSITION SINCE
---- --- -------- -----
<S> <C> <C> <C>
Floyd L. English............ 63 Chairman, President and Chief Executive Officer 1994
Thomas E. Charlton.......... 61 Group President, Communication Systems 1996
William R. Currer........... 50 Group President, Communication Products 1996
Roger K. Fisher............. 59 Group President, Wireless Products 1996
Robert J. Hudzik............ 48 Vice President, Business Development 1996
Debra B. Huttenburg......... 40 Group President, Antenna Systems 1997
Charles R. Nicholas......... 51 Executive Vice President, Finance, Administration and 1995
CFO
John B. Scott............... 56 Vice President, Corporate R&D, Marketing and MIS 1995
</TABLE>
Except as discussed below, all of these officers of Andrew have held
executive positions with Andrew for more than five years.
Dr. English was elected Chairman in 1994, having served as President and
Chief Executive Officer since 1983, and as President and Chief Operating Officer
since 1982. Dr. English joined Andrew in 1980 as Vice President, Corporate
Development and became Vice President, U.S. Operations in February 1981.
Dr. Charlton became Group President, Communication Systems in June 1996,
having most recently served as Group President and Vice President, Communication
Products since 1992. He previously served as Vice President, Antenna Products
after first becoming a Vice President in 1986.
Mr. Currer became Group President, Communication Products in June 1996,
after having previously served as Vice President, Antenna Systems since 1992.
Mr. Currer joined the Company in 1991 as General Manager of Andrew's Earth
Station Antennas business unit.
Mr. Fisher became Group President, Wireless Products in May 1996, following
the acquisition by Andrew of The Antenna Company, where Mr. Fisher had served as
President since 1987.
Mr. Hudzik joined the Company as Vice President, Business Development in
July 1996. Mr. Hudzik was Director, Marketing and Sales, Network Services for
PTT Telecom of the Netherlands from January 1994 until July 1996. Previously,
Mr. Hudzik was Vice President, Marketing for Ameritech Services from 1990 to
1994 and held various other positions with Ameritech or the Bell System between
1968 and 1990.
Ms. Huttenburg became Group President, Antenna Systems in September, 1997,
after having previously served as Vice President, Antenna Systems since 1996.
Ms. Huttenburg joined Andrew Corporation in 1988 as Broadcast Accounts Manager,
and became Broadcast Systems Business Unit Manager in 1993.
Mr. Nicholas became Executive Vice President, Chief Financial Officer in
September 1995, having served as Vice President, Finance, Administration and CFO
since 1992, as Vice President and CFO since 1986 and as Vice President, Finance
since 1982. Mr. Nicholas joined Andrew in 1980 as Treasurer.
Mr. Scott became Vice President, Corporate R&D, Marketing and MIS in 1995,
having served as Group Vice President, Network Group and Corporate Marketing
since 1992 and Vice President, Network Products since 1987.
Officers serve at the pleasure of the Board or until their successors are
elected and qualified.
12
<PAGE> 16
SECTION 16(A) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that the
Company's executive officers, directors and 10% owners file reports of ownership
and changes of ownership of Company stock with the SEC and the Nasdaq Stock
Market National Market ("Nasdaq"). Based on a review of copies of such reports
provided to the Company during its fiscal year 1997, the Company believes that
all filing requirements were met during such year.
APPROVAL OF ANDREW CORPORATION
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
There will be presented to the meeting a proposal to approve the Andrew
Corporation Stock Option Plan for Non-Employee Directors (the "Plan"). At its
meeting on November 13, 1997, the Board of Directors approved the Plan and
recommended that it be submitted to the stockholders at the February 10, 1998
Annual Meeting for approval. Approval of the Plan requires an affirmative vote
by the holders of a majority of shares present in person or by proxy and
entitled to vote at the Annual Meeting.
The Plan replaces the Company's former option plan for non-employee
Directors. The former plan, which was substantially similar to the Plan, had
insufficient shares of Common Stock remaining available for issuance to satisfy
any additional option grants thereunder. The Board of Directors believes that
the Plan will encourage the highest level of director performance by providing
to eligible Directors an opportunity to acquire a proprietary interest in the
Company's success and progress through the purchase of shares of its Common
Stock. The Board of Directors also believes that the availability of annual
option grants pursuant to the Plan helps the Company attract, retain and
motivate its non-employee directors, whose skill, experience and efforts are
important to the continued success of the Company.
The following is a summary of the Plan.
Administration. The Plan is administered by the Chief Financial Officer of
the Company, or such other officer as may be designated by the Board of
Directors.
Principal Features. The Plan provides for the automatic grant to each
eligible Director, at the first meeting of the Board of Directors following each
annual meeting of stockholders of the Company, of a stock option to purchase
12,000 shares of the Company's Common Stock. Subject to adjustment in certain
events as described below, the total number of shares that may be purchased by
exercise of options under the Plan may not exceed 400,000. To be eligible for
grant of an option, a person must be an incumbent member of the Company's Board
of Directors on the date of grant who is not, and was not at any time within the
preceding three years, an officer or employee of the Company or any of its
subsidiaries. In addition, a new member of the Board will not qualify for a
grant until elected by stockholders. Shares of Common Stock purchased by
exercise of options may be authorized but unissued shares or shares held in
treasury. If an option expires or terminates without having been exercised in
full, the shares not purchased will be available for grant of other options.
The option exercise price per share of Common Stock for each option granted
under the Plan is fixed at 100% of Market Value (the average of the high and low
sale prices as reported on Nasdaq of a share of Common Stock on the date of
grant or on the next preceding business day, if the grant date is not a business
day). The term of each option is ten years from the date of grant. No option may
be exercised until the next annual meeting of stockholders. Following the next
annual meeting, each option becomes exercisable for 20% of the shares covered
thereby, and following each subsequent annual stockholders meeting, each option
becomes exercisable for an additional 20%, until the fifth annual meeting after
the option grant, at which time each
13
<PAGE> 17
option becomes fully exercisable. Payment of the option exercise price may be
made by cash or by delivery of shares of Common Stock of the Company of
equivalent Market Value on the exercise date, or partly in cash and partly in
shares. Options granted under the Plan may not be sold or otherwise disposed of
other than by will or under laws of descent and distribution, and may not be
exercised during the lifetime of the optionee except by the optionee or by an
immediate family member of the optionee to whom the optionee transfers his or
her rights under an option.
In the event of a tender offer or of an exchange offer (other than one made
by the Company) for shares of Common Stock, all unexercised options granted
under the Plan shall, whether or not then exercisable, become exercisable during
the thirty-day period following the first purchase of shares of Common Stock
pursuant to such tender offer or exchange offer, but not beyond the option
expiration date.
If an optionee ceases to be a Director of the Company for any reason other
than death, each option held by the optionee may be exercised by the optionee
within a period of five years following the date of cessation to the extent the
option would have been exercisable within such period had the optionee continued
to be a Director throughout the period. If the optionee dies during such five
year period, each option held by the optionee may be exercised by the legal
representative of the optionee's estate, or the person taking the option by will
or under the laws of descent or distribution, within the time remaining in the
five-year period or within a period of twelve months following the date of
death, whichever is longer, but only to the extent the option was exercisable by
the optionee at the time of death. If an optionee ceases to be a director by
reason of death, each option held by the optionee may be exercised by the legal
representative of the optionee's estate, or the person taking the option under
the laws of descent and distribution, within a period of twelve months following
the date of death, but only to the extent the option was exercisable by the
optionee at the time of death.
In the event of any stock dividend, stock split, combination of shares, or
other change in respect of the Common Stock of the Company, (i) the total number
of shares remaining available for grant of options under the Plan and the number
of shares covered by each outstanding option will be adjusted in proportion to
such change and (ii) the option exercise price per share under each outstanding
option will be adjusted so that the total consideration payable upon exercise
does not change. However, the annual grant of options on 12,000 shares will not
be adjusted in the event of a stock dividend, stock split, or similar change.
Termination; Amendments. The Board of Directors may suspend, terminate or
amend the Plan at any time, but no such action may affect an outstanding option.
Approval by stockholders is required, however, for any increase in the maximum
number of shares of Common Stock subject to the Plan.
Federal Tax Consequences. The automatic grant to each eligible Director of
a stock option will not result in taxable income to the Director or a tax
deduction for the Company. Upon exercise of an option, the Director generally
will realize ordinary income to the extent that the then fair market value of
the shares of Common Stock exceeds the option exercise price. The Company
generally will be entitled to a deduction in the same amount as the ordinary
income realized by the Director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
PLAN.
APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
Upon the recommendation of the Audit Committee and subject to ratification
by the stockholders, the Board of Directors appointed Ernst & Young, independent
public auditors, to serve for the fiscal year ending September 30, 1998.
14
<PAGE> 18
Ernst & Young has informed management that it will send representatives to
the annual meeting to make a statement, if they desire to do so, and that such
representatives will be available to answer any questions that might arise in
connection with Ernst & Young's audit of the Company and its subsidiaries.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
APPOINTMENT.
DEADLINE FOR STOCKHOLDER PROPOSALS
Stockholder proposals and nominations for directors intended for inclusion
in the Company's proxy statement relating to the next annual meeting (February
1999) must be received at the Company's offices (addressed to the attention of
the Secretary) not later than August 20, 1998. Any such proposal must comply
with Rule 14a-8 of Regulation 14A of the proxy rules of the Securities and
Exchange Commission. Under the Company's By-laws, proposals of stockholders not
intended for inclusion in the proxy statement, but intended to be raised at the
February 1999 annual meeting, must be received not later than September 20, 1998
and must set forth as to each matter the stockholder proposes to bring before
the meeting: (i) a brief description of the business desired to be brought
before the meeting; (ii) the name and address, as they appear on the Company's
stock records, of the stockholder proposing such business; (iii) the class and
number of shares of the Company that are beneficially owned by the stockholder;
and (iv) any interest of the stockholder in such business.
The Company will bear the cost of solicitation of proxies and will
reimburse brokers, custodians, nominees and fiduciaries for their reasonable
expenses in sending solicitation material to the beneficial owners of the
Company's shares. In addition to soliciting proxies through the mails, proxies
may also be solicited by officers and employees of the Company by telephone or
otherwise. The Company has also employed Morrow & Company, Inc., 345 Hudson St.,
New York, New York 10014, which will be paid approximately $6,500 in fees, plus
reasonable expenses, to solicit proxies on behalf of the Company.
15
<PAGE> 19
ANDREW CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
<TABLE>
<S><C>
For Withheld For All
All All Except nominee(s) written in below
___________________________
1. To elect six Directors for the ensuing year. / / / / / / ___________________________
Nominees: John G. Bollinger, Jon L. Boyes,
Kenneth J. Douglas, Floyd L. English,
Jere D. Fluno, and Ormand J. Wade.
For Against Abstain
2. To approve a new Stock Option Plan for / / / / / /
Non-Employee Directors.
For Against Abstain
3. To ratify the appointment of Ernst & / / / / / /
Young as independent public auditors
for fiscal 1998.
4. In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
________________________________________
(Signature)
________________________________________
(Signature)
Dated: _________________________ , 1998
IMPORTANT: Please sign your name or names exactly as shown hereon and date your proxy in the blank space provided above. For joint
accounts, each joint owner must sign. When signing as attorney, executor, administrator, trustee or guardian, please give your full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer.
- ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
</TABLE>
PROXY
ANDREW CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Stockholder of ANDREW CORPORATION appoints Floyd L. English and
James F. Petelle, or either of them, proxies, with full power of substitution,
to vote at the Annual Meeting of Stockholders of the Company to be held at the
Drury Lane, Oakbrook Terrace, Illinois at 10:00 A.M., Tuesday, February 10,
1998, and any adjournment or adjournments thereof, the shares of Common Stock
of ANDREW CORPORATION which the undersigned is entitled to vote, on all matters
that may properly come before the Meeting.
YOU ARE URGED TO CAST YOUR VOTE BY MARKING THE APPROPRIATE BOXES. PLEASE NOTE
THAT, UNLESS A CONTRARY DISPOSITION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ITEMS 1, 2 AND 3.
<PAGE> 1
EXHIBIT 99
THE ANDREW CORPORATION
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
As approved by the Board of Directors of
Andrew Corporation on November 13, 1997 and
submitted to the Stockholders of Andrew
Corporation on February 10, 1998.
<PAGE> 2
ANDREW CORPORATION
STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Name and Identity of the Plan. This instrument and the plan set forth
herein shall be known as the Andrew Corporation Stock Option Plan for
Non-Employee Directors (hereinafter called the "Plan").
2. Definitions. As used herein, the following terms shall have the
meanings indicated below, unless the context shall give a clear meaning to the
contrary:
(a) "Company" shall mean Andrew Corporation, a Delaware corporation.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Stockholders" shall mean the stockholders of the Company.
(d) "Eligible Director" shall mean a member of the Board who is not,
and has not at any time within the preceding three years, been an
officer or employee of the Company or any of its subsidiaries or
affiliates.
(e) "Administrator" shall mean the Chief Financial Officer of the
Company, or such other officer as may be designated by the Board.
(f) "Common Stock" shall mean the common stock, $.01 par value, of
the Company.
(g) "Market Value" shall mean the average of the high and low sale
prices of the Common Stock as reported on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system on the
date in question or, if such date is not a business day, on the next
preceding business day.
(h) "Option" shall mean an option granted under the Plan to an
Eligible Director for the purchase of shares of Common Stock.
(i) "Optionee" shall mean the recipient and holder of an Option.
As used herein, the singular shall include the plural and vice versa,
and words used in any gender shall include all genders, unless the context
shall give a clear meaning to the contrary.
3. Purpose of the Plan. The purpose of the Plan is to encourage the
highest level of director performance by providing to Eligible Directors the
opportunity to acquire a proprietary interest in the Company's success and
progress through the purchase of Common Stock.
4. Administration of the Plan. The Plan shall be administered by
the Administrator. Subject only to the express restrictions, limitations and
directions of other provisions of the Plan, the Administrator shall have sole,
absolute and full authority and power: (a) to interpret the Plan;
<PAGE> 3
(b) to establish, amend and rescind rules and regulations relating to the Plan;
and (c) to do such other things and make such other determinations, decisions
and interpretations as he deems necessary or advisable to carry out the
purposes of the Plan and its orderly administration. All actions,
determinations, decisions and interpretations taken and made by the
Administrator shall be final and conclusively binding on all persons
whomsoever.
5. Stock Subject to the Plan. The aggregate number of shares of Common
Stock which may be purchased by exercise of Options shall not exceed
400,000, subject to adjustment as provided in Section 7. Accordingly, at any
one time the total of the number of shares of Common Stock subject to
outstanding Options and the number of shares of Common Stock purchased by
exercise of Options shall not exceed 400,000, subject to such adjustment. If
any Option expires or terminates without having been exercised in full, the
unpurchased shares which were subject thereto, unless the term of the Plan has
expired or it has been terminated, shall become available for grant of other
Options. Shares purchased by exercise of Options may be authorized but
unissued shares or issued shares held in treasury.
6. Grant of Options. Each Eligible Director shall receive an automatic
Option grant on the date of the first meeting of the Board following
each annual meeting of Stockholders of the Company. The annual Option granted
to each Eligible Director shall be for 12,000 shares of Common Stock. No
Option shall be granted as provided for herein if the number of shares of
Common Stock then remaining available for grant is insufficient for full grant
of all Options to be granted on that date pursuant to the provisions of Section
5 and this Section 6.
7. Adjustment Provisions. In the event of any stock dividend, stock
split, combination of shares or other change in respect of the Common Stock,
(i) the aggregate number of shares of Common Stock then remaining available for
grant of Options under the Plan and the number of shares of Common Stock then
subject to each outstanding Option shall be adjusted in proportion to such
change in issued shares, and (ii) the option price under each then outstanding
Option shall be adjusted so that the total consideration payable to the Company
upon exercise of such Option shall not be changed by reason of such change in
the Common Stock. Notwithstanding the preceding sentence, the number of Option
shares to be granted in any year to each Eligible Director shall be 12,000, and
shall not be adjusted in accordance with this Section 7.
8. Term of Plan. The Plan shall remain in effect until terminated in
accordance with the provisions of Section 15.
9. Option Price Under an Option. The option price for each share of Common
Stock subject to an Option shall be 100% of its Market Value determined as of
the date of its grant.
10. Exercise of Options. No Option shall be exercisable during the first
12 months from and including its date of grant or later than 10 years
from its date of grant. On the date of each annual meeting of Stockholders
following the grant of an Option, such Option shall become exercisable for 20%
of the shares of Common Stock covered thereby, until the fifth annual meeting
of Stockholders following the grant of the Option, at which time such Option
shall become fully exercisable. The privilege shall be cumulative and, to the
extent exercisable at any time, shall be exercisable in whole or in part.
-2-
<PAGE> 4
In the event of a tender offer or of an exchange offer (other than one
made by the Company) for shares of Common Stock, all unexercised Options
granted under the Plan shall, whether or not then exercisable, become
exercisable during the 30-day period following the first purchase of shares of
Common Stock pursuant to such tender offer or exchange offer, but not beyond
the Option expiration date.
An Option shall be exercised by written notice thereof given by the
person entitled to exercise such Option to the Administrator. Said notice
shall state the date of grant of the Option, the number of shares of Common
Stock subject thereto and the number of shares of Common Stock with respect to
which the Option is exercised. No such notice which is inconsistent with any
provision of the option agreement or the Plan shall be effective. No such
notice shall be effective unless and until the Company, in the person of the
Administrator, is in receipt of full payment of the option price for the shares
of Common Stock in respect of which the Option is exercised. No right
(including, without limitation, the right to any dividend or to vote) with
respect to such shares of Common Stock shall accrue until after the date of the
stock certificate representing such shares.
Payment of the option price may be made in cash, by delivery of whole
shares of Common Stock equivalent in Market Value to the option price on the
date that the written notice of exercise is delivered by the Optionee or partly
in cash and partly in whole shares of Common Stock.
11. Non-transferability; Exceptions. Except as provided in this
Section 11, no Option may be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner other than by will or under the laws of descent
and distribution, and an Option may be exercised, during the lifetime of the
Optionee, only by such Optionee. Under such rules and procedures as the
Administrator may establish, an Optionee may transfer his Option to members of
his immediate family (i.e., children, grandchildren and spouse) or to one or
more trusts for the benefit of such family members or to partnerships in which
such family members are the only partners, provided that (i) the agreement, if
any, with respect to such Option, expressly so permits or is amended to so
permit, (ii) the Optionee does not receive any consideration for such transfer,
and (iii) the Optionee provides such documentation or information concerning
any such transfer or transferee as the Administrator may reasonably request.
Any Option held by any transferees shall be subject to the same terms and
conditions that applied immediately prior to its transfer. The Administrator
may also amend the agreements applicable to any outstanding Options to permit
such transfers. Any Option not granted pursuant to any agreement expressly
permitting its transfer or amended expressly to permit its transfer shall not
be transferable.
12. Termination of Directorship. If an Optionee ceases to be a director
of the Company for any reason other than his death, each Option then held by
him shall be exercisable by him within a period of five years following the
date he ceased to be a director. The Option will continue to vest within such
five-year period as if the Optionee had continued to be a director. In the
event the Optionee dies during such five-year period, each Option then held by
him shall be exercisable by the legal representative of his estate, or by the
person taking under him by will or under the laws of descent and distribution,
within the time remaining in the five-year period or within a period of 12
months following the date of death, whichever is longer, but only to the extent
that
-3-
<PAGE> 5
such Option was exercisable by the Optionee immediately prior to his death. In
the event an Optionee ceases to be a director by reason of his death, each
Option then held by him shall be exercisable by the legal representative of his
estate, or by the person taking under him by will or under the laws of descent
and distribution, within a period of 12 months following the date of death but
only to the extent that such Option was exercisable by the Optionee immediately
prior to his death. The foregoing provisions of this Section 12 shall in all
events be subject to the 10-year Option term described in Section 10.
13. Option Agreements. Each Option shall be evidenced by a written option
agreement signed by the Optionee and, on behalf of the company, by the
Administrator. The form of the option agreement shall be as provided by the
Administrator. Each option agreement by its own express terms shall set forth:
(i) the name of the Optionee, (ii) the date of the grant of the Option, (iii)
the number of shares of Common Stock subject thereto, and (iv) the option price
per share of Common Stock. Each option agreement shall otherwise set forth the
provisions of the Plan or incorporate the same therein by reference.
14. Conditions Upon Issuance of Shares. The Company shall have no obligation
to sell, issue or deliver any shares of Common Stock pursuant to any Option
or the exercise thereof if, in the opinion of counsel for the Company,
the sale, issuance or delivery of such shares of Common Stock would be in
violation of any provision of the Securities Act of 1933, as amended, or the
Securities and Exchange Act of 1934, as amended; any regulation or rule
promulgated under either of said acts; any regulation, rule or requirement of
any stock exchange upon which shares of Common Stock may then be listed; or any
other law, regulation, rule or requirement whatever which, in the opinion of
said counsel, may be applicable. In such circumstances, the Company shall be
without liability for the non-sale, non-issuance and non-delivery of such
shares, except for the return of any payment of the option price for such
shares made by the Optionee, or any person standing in his stead, to the
Company. Without assumption of or exposure to liability for failure of
accomplishment of the purpose, the Company nonetheless commits itself to a
standard of reasonable care and effort for the avoidance or cure of any
obstacle to the sale, issuance and delivery of shares hereunder. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant in writing at the time of such
exercise that the shares of Common Stock are being purchased only for
investment and without any present intention to sell or distribute such shares,
and may require that shares delivered upon exercise of an Option bear an
appropriate restrictive legend.
15. Suspension, Termination, Modification, and Amendment. The Board
shall have the power to suspend, terminate, revise or amend the Plan;
provided that suspension, termination, revision or amendment shall be without
effect on any Option previously granted and then outstanding; and further
provided that, except with the approval of Stockholders, the Board may not
increase the maximum number of shares of Common Stock subject to the Plan
(except with respect to adjustments under Section 7).
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