<PAGE>
(212) 278-1535
October 15, 1996
BY FEDERAL EXPRESS AND BY EDGAR (ELECTRONIC FILING)
- - ---------------------------------------------------
Securities and Exchange Commission
450 Fifth Street, N.W.
Judiciary Plaza
Washington, D.C. 20549
Re: Emons Transportation Group, Inc.
Proxy Statement
--------------------------------------
Ladies and Gentlemen:
On behalf of our client, Emons Transportation Group, Inc., a Delaware
corporation (the "Company"), we are filing electronically, pursuant to Rule
14a-6(b) under the Securities Exchange Act of 1934 (the "Act"), one copy of the
definitive proxy statement ("Proxy Statement") to be furnished to stockholders
of the Company in connection with the annual meeting of stockholders to be held
on November 20, 1996. It is expected that the definitive proxy materials were
mailed to stockholders on or about October 15, 1996. A courtesy copy of the
Proxy Statement and forms of proxy have been forwarded to you by overnight mail
on the date hereof.
In connection with the filing of the preliminary proxy statement with
the Staff on September 23, 1996, the filing fee in the amount of $125.00 was
wired to the account of the Securities and Exchange Commission at Mellon Bank in
Pittsburgh, Pennsylvania on Friday, September 20, 1996, under the Reference:
Emons Transportation Group, Inc., CIK = 32666.
Please acknowledge receipt of the Proxy Statement (i) electronically
to R.R. Donnelley Financial Services on Compuserve to account number:
71111,1443, and (ii) by time stamping a copy
<PAGE>
Securities and Exchange Commission
October 15, 1996
Page 2
of this letter and returning it to me in the stamped, return-addressed envelope
enclosed herewith.
Upon the Staff's request, we will promptly supply additional copies of
the Proxy Statement. Please direct your comments or questions with respect to
the enclosed materials to the undersigned at (212) 278-1535.
Very truly yours,
/s/ Wendy Ferber
Wendy Ferber
Enclosures
cc: Office of Filer Support, U.S. Securities
and Exchange Commission (with enclosures)
Mr. Robert Grossman (w/o enclosures)
Mr. Scott F. Ziegler (w/o enclosures)
Michael W. Stamm, Esq. (with enclosures)
<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrants [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Emons Transportation Group, Inc.
(Name of Registrant as Specified In Its Charter)
Emons Transportation Group, Inc.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(1), or 14a-6(i)(2)
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed pursuant to Exchange Act Rules 14a-6(i)(4) and 0-11.
[X] Fee paid previously with preliminary materials.
- - ----------------
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
EMONS TRANSPORTATION GROUP, INC.
96 South George Street
York, Pennsylvania 17401
-------------------
NOTICE OF 1996 ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD NOVEMBER 20, 1996
-----------------
TO THE STOCKHOLDERS OF EMONS TRANSPORTATION GROUP, INC.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders of
Emons Transportation Group, Inc. (the "Company") will be held on Wednesday,
November 20, 1996, at 9:00 a.m., local time, in The Yorktowne Hotel, 48 East
Market Street, York, Pennsylvania 17401, for the following purposes:
(1) To elect five directors of the Company to serve for the
ensuing year and until their successors are elected and qualified;
(2) To ratify the adoption of the 1996 Stock Option Plan;
(3) To amend the Certificate of Incorporation of the Company to
increase the authorized number of shares of Common Stock of the Company from
eleven million to fifteen million;
(4) To ratify the appointment of Arthur Andersen LLP as
independent public accountants to examine the financial statements of the
Company for its 1997 fiscal year; and
(5) To transact such other business as may properly come before
the meeting or any adjournments thereof.
Provision is made on the enclosed proxy card(s) for your direction as
to the matters set forth as items 1 through 4 above.
Only holders of the Company's Common Stock and $.14 Series A Cumulative
Convertible Preferred Stock of record at the close of business on October 1,
1996 are entitled to receive notice of and to vote at the Annual Meeting of
Stockholders and at all adjournments thereof.
A copy of the Company's Annual Report to Stockholders for the year
ended June 30, 1996 is enclosed herewith.
Whether or not you plan to attend the meeting in person, you are urged
to fill out, sign and mail promptly the enclosed proxy in the accompanying
envelope on which no postage is required if mailed in the United States.
By Order of the Board of Directors
---------------------------------------
Scott F. Ziegler
Secretary
York, Pennsylvania
October 15, 1996
<PAGE>
EMONS TRANSPORTATION GROUP, INC.
96 South George Street
York, Pennsylvania 17401
Dear Stockholder:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Stockholders to be held at 9:00 a.m., on November 20, 1996
in The Yorktowne Hotel, 48 East Market Street, York, Pennsylvania 17401 (the
"Meeting").
I look forward to greeting you personally. The accompanying Proxy
Statement describes the matters to be acted on at the Meeting, and I urge you to
read it carefully.
At the Meeting, in addition to the election of five directors and the
appointment of Arthur Andersen LLP as independent public accountants, your Board
of Directors is recommending the approval of an amendment of the Certificate of
Incorporation of Emons Transportation Group, Inc. to increase the authorized
number of shares of Common Stock of the Company from eleven million to fifteen
million and ratification of the 1996 Stock Option Plan. Your Board of Directors
believes that ratification of the approval of the amendment to the Company's
Certificate of Incorporation and the 1996 Stock Option Plan are in the best
interests of all stockholders and has unanimously recommended that you vote
"FOR" both proposals.
It is important that your shares be represented at the Meeting
regardless of the number of shares you may hold. In order for your vote to be
counted, you must sign, date and return the enclosed proxy card or attend the
meeting in person. I urge you to sign and return the enclosed proxy card
promptly.
Sincerely,
Robert Grossman
Chairman
and Chief Executive Officer
York, Pennsylvania
October 15, 1996
<PAGE>
EMONS TRANSPORTATION GROUP, INC.
96 South George Street
York, Pennsylvania 17401
--------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 20, 1996
--------------------
SOLICITATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (sometimes hereinafter referred to as the
"Board") of Emons Transportation Group, Inc. (the "Company"), to be voted at the
annual meeting of stockholders to be held on November 20, 1996 (the "Meeting"),
at 9:00 a.m., local time, in The Yorktowne Hotel, 48 East Market Street, York,
Pennsylvania 17401, and at any postponement or adjournments thereof, for the
purposes set forth in the foregoing notice of the Meeting. This Proxy Statement
and the enclosed proxy are being sent to stockholders commencing on or about
October 15, 1996.
Solicitation will be primarily by mail but may also be made by personal
interview or by telephone, in each case by officers and regular employees of the
Company who will not be additionally compensated therefor. The Company will
request persons such as brokers, nominees and fiduciaries, holding stock in
their names for others, or holding stock for others who have the right to give
voting instructions, to forward proxy material to their principals and request
authority for the execution of the proxy. The total cost of soliciting proxies
will be borne by the Company.
VOTING
Holders of record at the close of business on October 1, 1996 (the
"Record Date") of Common Stock, par value $.01 per share, of the Company
("Common Stock") and $.14 Series A Cumulative Convertible Preferred Stock of the
Company ("Convertible Preferred Stock") will be entitled to vote at the Meeting.
On the Record Date, there were 5,742,689 shares of Common Stock and
1,680,230 shares of Convertible Preferred Stock outstanding. Each share of
Common Stock and Convertible Preferred Stock outstanding on the Record Date will
be entitled to one vote at the Meeting, with the Common Stock and Convertible
Preferred Stock voting together as a single class. Holders of Common Stock and
Convertible Preferred Stock are not entitled to cumulate their votes on any
matter to be considered at the Meeting. The presence at the Meeting, in person
or by proxy, of the holders of a majority of the total number of shares of
Common Stock and Convertible Preferred Stock outstanding on the Record Date
constitutes a quorum for the transaction of business by such holders at the
Meeting.
-1-
<PAGE>
At the Meeting, abstentions and broker non-votes (as hereinafter
defined) will be counted as present for the purpose of determining the presence
of a quorum. For the purpose of computing the vote required for approval of
matters to be voted on at the Meeting, shares held by stockholders who abstain
from voting will be treated as being "present" and "entitled to vote" on the
matter and, thus, an abstention has the same legal effect as a vote against the
matter, except that abstentions will have no effect on the election of directors
of the Company. However, in the case of a broker non-vote as to a particular
matter, such shares will not be treated as "present" and "entitled to vote" on
the matter and, thus, a broker non-vote will have no effect on the outcome of
the vote on the matter, except that, in the case of any matter which requires
the affirmative vote of a majority of the outstanding stock entitled to vote, a
broker non-vote will have the same legal effect as a vote against the matter. A
"broker non-vote" refers to shares represented at the Meeting in person or by
proxy by a broker or nominee where such broker or nominee (i) has not received
voting instructions on a particular matter from the beneficial owners or persons
entitled to vote and (ii) the broker or nominee does not have the discretionary
voting power on such matter.
The holder of 2,835,432 shares of Common Stock and 1,204,890 shares of
Convertible Preferred Stock (or approximately 49% and 72% of the outstanding
Common Stock and Convertible Preferred Stock, respectively, entitled to vote at
the Meeting) has advised the Company that it intends to vote such shares, in
person or by proxy, proportionally in accordance with the votes cast by the
other holders of the outstanding Common Stock and Convertible Preferred Stock.
The holder holds such shares as escrow agent for holders of claims and interests
in Emons Industries, Inc., a direct wholly-owned subsidiary of the Company
("Industries"), pursuant to the Second Amended and Restated Joint Plan of
Reorganization of Industries and ET Railcar Corporation dated November 10, 1986,
and in such capacity has the right to vote such shares. See "PRINCIPAL
STOCKHOLDERS".
Proxies in the enclosed form are solicited by the Board of Directors of
the Company in order to provide every stockholder an opportunity to vote on all
matters scheduled to come before the Meeting, whether or not the stockholder
attends in person. If proxies in the enclosed form are properly executed and
returned, the shares represented thereby will be voted at the Meeting in
accordance with the stockholder's directions. In the absence of specific
directions, properly executed proxies will be voted "FOR" the election of five
directors, "FOR" the 1996 Stock Option Plan, "FOR" the Amendment to the
Certificate of Incorporation of the Company to increase the authorized number of
shares of Common Stock and "FOR" the ratification of the appointment of Arthur
Andersen LLP as independent public accountants. A stockholder who submits a
proxy may revoke it at any time prior to the voting of the proxy by written
notice to the Secretary of the Company or by attending the meeting and voting
such stockholder's shares in person.
ELECTION OF DIRECTORS
The by-laws of the Company provide that the number of directors of the
Company shall be determined by the Board of Directors. The Board has set the
number of directors at five. The directors are to be elected at the Meeting by
the holders of Common Stock and Convertible Preferred Stock, to hold office
until their successors have been elected and qualified. It is intended that,
unless authorization to do so is withheld, the proxies will be voted "FOR" the
election of the nominees named below. All of the nominees are now directors of
the Company. Each nominee has consented to be named in this Proxy Statement and
to serve as a director if elected. However, if any nominee shall become unable
to stand for election as a director at the Meeting, an event not now anticipated
by the Board, the proxy will be voted for a substitute designated by the Board.
The nominees are listed on the following pages with brief statements of
their principal occupations and other information. Four of the nominees for
director named below were elected by the stockholders to their present terms as
directors at the annual meeting in 1995 and one was elected by the Board on
March 20, 1996.
-2-
<PAGE>
<TABLE>
<CAPTION>
Principal Director
Nominee Age Occupation Since*
------- --- ---------- -------
<S> <C> <C> <C>
Robert Grossman 55 Chairman of the Board 1972
and Chief Executive Officer
of the Company
Kimberly A. Madigan 40 Principal of Chambers, 1995
Conlon & Hartwell
Robert J. Smallacombe 63 President and Chief Executive Officer of 1983
Executive Advisory Group Ltd.
Alfred P. Smith 42 President and Chief 1992
Operating Officer of the Company,
President of the Maryland
and Pennsylvania Railroad Company and
Yorkrail, Inc., President and Chief
Operating Officer of the St. Lawrence
& Atlantic Railroad Company and Maine
Intermodal Transportation, Inc.
Dean H. Wise 42 Partner at Carlisle, Fagan, Gaskins & 1996
Wise, Inc.
</TABLE>
* Dates set forth in this column include periods served as director of
Industries prior to the creation of the Company in 1986.
Robert Grossman. Mr. Grossman, who devotes all of his business time to
the Affairs of the Company, has been a Director and the Chairman of the Board
and Chief Executive Officer of the Company since its inception in December, 1986
and was President of the Company until September, 1996. He is now, and for more
than five years has been, the Chairman of the Board, President, or Chief
Executive Officer of each direct or indirect wholly-owned subsidiary of the
Company. Mr. Grossman has held various offices with the Company and its
subsidiaries since 1971.
Kimberly A. Madigan. Ms. Madigan has been a Principal of Chambers,
Conlon & Hartwell, a company which consults on transportation and government
relations issues, since December, 1993. Ms. Madigan was a member of the National
Mediation Board, which directs the actions and policies of the government agency
charged with the administration of the Railway Labor Act, from August, 1990 to
July, 1992 and Chairman of the National Mediation Board from July, 1992 to
December, 1993.
Robert J. Smallacombe. Mr. Smallacombe has been President and Chief
Executive Officer of Executive Advisory Group Ltd., a consulting and management
services firm, since March, 1986. Since June 1, 1996, Mr. Smallacombe has served
as a Director for Northstar Rehabilitation, Inc., located in Indiana,
Pennsylvania, and Chairman of its Audit Committee. Mr. Smallacombe has been a
Director of Allied Devices Corporation, located in Baldwin, New York, since
July, 1996. He was President and Chief Operating Officer of O'Brien
Environmental Energy, Inc., from September, 1994 to May, 1996. On September 28,
1994, O'Brien Environmental Energy, Inc., filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code with the
United States Bankruptcy Court for the District of New Jersey. From February,
1993 to May, 1994 Mr. Smallacombe was Chief Executive Officer of Cardinal
Publishing, a publisher of church bulletins.
-3-
<PAGE>
Alfred P. Smith. Mr. Smith has been the President and Chief Operating
Officer of the Company since September, 1996 and the President of the Maryland
and Pennsylvania Railroad Company since January, 1987 and Yorkrail, Inc. since
December, 1987. Mr. Smith has been the President and/or Chief Operating Officer
of Maine Intermodal Transportation, Inc. since 1994 and St. Lawrence & Atlantic
Railroad Company since May, 1989. Mr. Smith was Executive Vice President of the
Company from September, 1992 to September, 1996 and was Vice President of the
Company from January, 1987 to September, 1992. Mr. Smith joined the Company in
1981 and holds various offices with other subsidiaries of the Company.
Dean H. Wise. Mr. Wise has been a Partner since April, 1995, with
Carlisle, Fagan, Gaskins & Wise, Inc., a management consulting firm based in
Concord, Massachusetts specializing in transportation and logistics services.
Mr. Wise held various positions, most recently as Vice President, at Mercer
Management Consulting, Inc., a management consulting firm, from July, 1983,
until March, 1995.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has three standing committees: an Audit
Committee, a Management Compensation Committee and an Executive Committee.
Audit Committee. The Audit Committee is charged with recommending
appointment of the independent auditors, consulting with the independent
auditors and reviewing the results of internal audits, independent audits, and
the audit report with the independent auditors engaged by the Company. Further,
the Audit Committee is empowered to make independent investigations and
inquiries into all financial reporting or other financial matters of the
Company, as it deems necessary. The members of the Audit Committee are Kimberly
A. Madigan, Robert J. Smallacombe and Dean H. Wise, who replaced Sanders D.
Newman.
Management Compensation Committee. The Management Compensation
Committee reviews, and recommends to the Board of Directors, the compensation of
executive officers of the Company and reviews and recommends to the Board of
Directors the adoption of any compensation plans in which officers are eligible
to participate. The Management Compensation Committee also administers the
Company's 1986 Stock Option Plan, Incentive Compensation Plan and 1991
Restricted Stock Plan. The members of the Management Compensation Committee are
Kimberly A. Madigan, Robert J. Smallacombe and Dean H. Wise, who replaced
Sanders D. Newman.
Executive Committee. The Executive Committee has general authority
over the supervision and direction of the finances and business of the Company
and has the power and authority of the Board of Directors, except as limited by
the Company's Certificate of Incorporation, in the management of the business
and affairs of the Company between meetings of the Board of Directors. The
members of the Executive Committee are Robert Grossman, Alfred P. Smith and
Kimberly A. Madigan.
During the fiscal year ended June 30, 1996, the Board of Directors of
the Company held four regularly scheduled meetings and one by unanimous written
consent. The Management Compensation Committee held three meetings, and the
Audit Committee held two meetings. The Executive Committee held no meetings.
Each director who is standing for re-election attended 100% of the aggregate
number of meetings of the Board of Directors and of the committees of the Board
on which they served.
The Company currently pays each director who is not a full-time
employee of the Company a yearly retainer of $10,000 and a fee of $500 for each
Board meeting attended or committee meeting attended which is not held on the
same day as a Board meeting. A fee of $250 is paid to each director who is not a
full-time employee for each telephonic Board meeting attended and for each
committee meeting held the same day as a meeting of the Board.
-4-
<PAGE>
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Principal Position with the Company
---- --- -----------------------------------
<S> <C> <C>
Robert Grossman 55 Chairman and Chief Executive Officer of the Company and
Chairman or President of each of its direct and indirect wholly-
owned subsidiaries
Scott F. Ziegler 40 Vice President - Finance, Controller and Secretary of the Company
and Vice President, Controller and Secretary of each of its direct
and indirect wholly-owned subsidiaries
Alfred P. Smith 42 President and Chief Operating Officer of the Company, President
of the Maryland and Pennsylvania Railroad Company and Yorkrail,
Inc. President and Chief Operating Officer of St. Lawrence &
Atlantic Railroad Company and Maine Intermodal Transportation,
Inc.
Steven H. Hill 42 Vice President of the Company, Vice President and Chief
Operating Officer of Maryland and Pennsylvania Railroad
Company, Yorkrail, Inc., and Emons Logistics Services, Inc.
Matthew C. Jacobson 35 Vice President of the Company, Maine Intermodal Transportation,
Inc. and St. Lawrence & Atlantic Railroad Company
</TABLE>
Robert Grossman. For information regarding Mr. Grossman, see "ELECTION
OF DIRECTORS," above.
Scott F. Ziegler. Mr. Ziegler has been Vice President - Finance,
Controller and Secretary of the Company since September, 1996 and was Vice
President, Controller and Secretary from January, 1993 until September, 1996.
Mr. Ziegler was the Director of Finance of Master Power, Inc., a power tools
manufacturing company, from December, 1987 to January, 1993. Mr. Ziegler is also
Vice President, Controller and Secretary of each of the Company's subsidiaries.
Alfred P. Smith. For information regarding Mr. Smith, see "ELECTION OF
DIRECTORS," above.
Steven H. Hill. Mr. Hill has been a Vice President of the Company
since September 1, 1994. He also has been Vice President since September 1, 1994
and Chief Operating Officer since November 16, 1994 of each of Maryland and
Pennsylvania Railroad Company, Emons Logistics Services, Inc. and Yorkrail, Inc.
Mr. Hill was Vice President, Sales and Marketing for the Company from November,
1993 until August, 1994 and for Emons Railroad Group from January, 1993 until
October, 1993. Mr. Hill was Assistant Vice President, Sales and Marketing for
the Emons Railroad Group from November, 1991 until December, 1992. Mr. Hill was
the Corporate Traffic Manager for P.H. Glatfelter Company where he managed
transportation activities for three paper manufacturing facilities from January,
1985 through October, 1991.
Matthew C. Jacobson. Mr. Jacobson has been a Vice President of the
Company since September, 1996 and has been Vice President of Maine Intermodal
Transportation, Inc. and St. Lawrence & Atlantic Railroad Company since May 1,
1996. Mr. Jacobson was an International Sales Manager of an affiliate of Sea-
Land Service, Inc. from August, 1995 to April, 1996. Mr. Jacobson was a Market
Manager from August, 1992 until December, 1993 and an Account Manager from
December, 1993 to August, 1995 of CSX Transportation, Inc. Mr. Jacobson was a
pilot, and most recently an instructor pilot, for the United States Air Force
from August, 1984 until February, 1993.
The term of office of each officer expires at the first meeting of
directors of the Company following the Meeting.
-5-
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation
earned in each of the Company's last three fiscal years by the Chief Executive
Officer and the only other executive officer of the Company or its subsidiaries,
whose cash compensation exceeded $100,000 during the fiscal year ended June 30,
1996 (a "Named Executive Officer").
<TABLE>
<CAPTION>
---------------------------------------------
Long Term Compensation
---------------------------------------------
Annual Compensation Awards Payouts
- - -----------------------------------------------------------------------------------------------------------------------------------
Restricted Securities All Other
Other Annual Stock Underlying LTIP Compen-
Name and Fiscal Compensation Award(s) Options/ Payouts sation ($)
Principal Position Year Salary ($) Bonus ($) ($) ($) /2/ SARs(#) ($)
- - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert Grossman, 1996 212,000 18,716 /3/
Chairman and
Chief Executive
Officer 1995 212,000 26,747 25,000 17,222
1994 212,000 14,479
- - -----------------------------------------------------------------------------------------------------------------------------------
Alfred P. Smith, 1996 129,600 30,222 /1/ 1,249 /4/
President and 1995 127,200 24,201 35,717 25,000 919
Chief Operating
Officer 1994 127,200 4,983
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Of this amount, $21,466 relates to the reimbursement for relocation
expenses of Mr. Smith to Maine to manage the New England business unit and
$8,756 relates to an automobile allowance from the Company.
/2/ As of October 1, 1996, Robert Grossman had 50,000 vested and 75,000
unvested shares of Restricted Common Stock. As of October 1, 1996, Alfred P.
Smith had 40,000 vested and 60,000 unvested shares of Restricted Common Stock.
Based on an average of the closing bid and ask price on June 28, 1996, the
unvested shares of Restricted Common Stock were valued at $2.00 per share.
/3/ During the fiscal year ended 1996, the Company paid a $5,137 disability
insurance premium, $5,413 of life insurance premiums and $270 of group life
insurance premiums on behalf of Mr. Grossman. In that same period, Mr. Grossman
received a $7,896 automobile allowance from the Company.
/4/ During the fiscal year ended 1996, the Company paid a $460 disability
insurance premium, $687 of life insurance premiums and $102 of group life
insurance premiums on behalf of Mr. Smith.
No stock appreciation rights were granted to a Named Executive Officer
by the Company or its subsidiaries during the fiscal year ended June 30, 1996.
No options were granted to a Named Executive Officer by the Company and
none were exercised by a Named Executive Officer during the fiscal year ended
June 30, 1996.
No awards were made to a Named Executive Officer of the Company or its
subsidiaries pursuant to a long-term incentive plan during the fiscal year ended
June 30, 1996.
-6-
<PAGE>
Employment and Termination Agreements
On May 26, 1994, the Company entered into an amendment to the amended
and restated employment agreement with Mr. Grossman to employ him as the
Company's Chairman of the Board and Chief Executive Officer for a term
commencing on December 31, 1994 and ending December 31, 1999, which term shall
be extended for additional one year terms unless sixty (60) days' prior written
notice of termination is given by Mr. Grossman or the Company. Pursuant to the
terms of his employment agreement, if Mr. Grossman's employment is terminated
other than for due cause, death or disability, he shall be entitled to a payment
equal to twenty-four months' base salary at a rate equal to the highest
annualized rate in effect during the six months prior to such termination. The
Company shall also continue Mr. Grossman's health, disability and life insurance
benefits and car allowance for twenty-four months after such termination. A
change in control of the Company or constructive demotion of Mr. Grossman by the
Company may constitute a termination under his employment agreement.
On May 26, 1994, the Company entered into an amendment to an agreement
with Mr. Smith commencing on December 31, 1994, and ending December 31, 1999,
which term shall be extended for additional one year terms unless sixty (60)
days' prior written notice of termination is given by Mr. Smith or the Company.
Pursuant to the terms of his agreement, if any involuntary termination of Mr.
Smith's employment occurs (other than for due cause) the Company shall pay to
Mr. Smith an amount equal to twelve months' base salary (exclusive of bonuses
and benefits) at a rate equal to the highest annualized rate in effect during
the six consecutive month period immediately prior to termination. Mr. Smith
will be entitled to the continuation of his health, disability and life
insurance benefits for the twelve-month period following termination. In the
event that Mr. Smith terminates his employment after a change in control of the
Company and subsequent constructive demotion by the Company, he will be entitled
under his agreement to treat such termination as an involuntary termination. The
Company retains the right to terminate the employment of Mr. Smith at any time
for any reason it deems appropriate.
-7-
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information concerning beneficial
ownership of the Company's equity securities as of October 1, 1996, by each
director individually and all eight directors and executive officers as a group.
No director or executive officer of the Company owns any shares of Convertible
Preferred Stock. Each non-employee director and each executive officer of the
Company has been granted options to purchase Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Name of Beneficial Owner Beneficial Ownership of Class
- - -------------- ------------------------ -------------------- --------
<S> <C> <C> <C>
Common Stock Robert Grossman 332,320 /1/ 5.68%
Common Stock Kimberly A. Madigan 5,000 /2/ *
Common Stock Robert J. Smallacombe 42,500 /3/ *
Common Stock Alfred P. Smith 156,250 /4/ 2.70%
Common Stock Dean H. Wise 1,000 /5/ *
Common Stock All directors and officers 691,070 /6/ 11.62%
as a group, (8 persons)
</TABLE>
None of the officers and directors of the Company engaged in securities
transactions for which they have failed to file, or failed to file on a timely
basis, Forms 4 or 5 with the Securities and Exchange Commission.
None of the current officers and directors of the Company failed to
file, or failed to file on a timely basis, a Form 3 with the Securities and
Exchange Commission stating that they have assumed the responsibilities of such
respective office.
- - -------------------
* Percentage of shares beneficially owned does not exceed one percent of
Common Stock outstanding.
/1/ Includes (i) 1,000 shares owned by Mr. Grossman's wife, as to which Mr.
Grossman disclaims beneficial ownership; (ii) 75,000 shares of Restricted Common
Stock which have not vested as of October 1, 1996 and are subject to risk of
forfeiture; and (iii) currently exercisable options to purchase 30,000 shares of
Common Stock at a price of $.906 per share and 75,000 shares of Common Stock at
a price of $1.0625 per share. Does not include unvested options to purchase
20,000 shares of Common Stock at a price of $.906 per share and 225,000 shares
of Common Stock at a price of $1.0625 per share.
/2/ Includes currently exercisable options to purchase 5,000 shares of Common
Stock at a price of $2.4375 per share. Does not include unvested options to
purchase 10,000 shares of Common Stock at a price of $2.4375 per shares and
unvested options to purchase 10,000 shares of Common Stock at a price of $1.3750
per share.
/3/ Includes currently exercisable options to purchase 7,500 shares of Common
Stock at a price of $.906 per share and 5,000 shares of Common Stock at a price
of $1.0625 per share. Does not include unvested options to purchase 2,500 shares
of Common Stock at a price of $.906 per share and 10,000 shares of Common Stock
at a price of $1.0625 per share.
/4/ Includes (i) 60,000 shares of Restricted Common Stock which have not vested
as of October 1, 1996 and are subject to risk of forfeiture, and (ii) currently
exercisable options to purchase 15,000 shares of Common Stock at a price of
$.906 per share and 31,250 shares of Common Stock at a price of $1.0625 per
share. Does not include unvested options to purchase 10,000 shares of Common
Stock at a price of $.906 per share and 93,750 shares of Common Stock at a price
of $1.0625 per share.
-8-
<PAGE>
/5/ On March 20, 1996, Mr. Wise was granted an option to purchase 15,000 shares
of Common Stock at a price of $1.6875 per share.
/6/ See notes 1 through 5 above. Includes 21,000 shares of vested Restricted
Common Stock as of October 1, 1996, 84,000 shares of unvested Restricted Common
Stock as of October 1, 1996, currently exercisable options to purchase 24,000
shares of Common Stock at a price of $.8125 per share, 4,000 shares of Common
Stock at a price of $1.00 per share and 10,000 shares of Common Stock at a price
of $1.0625 per share, held by three officers not named above. Does not include
unvested options to purchase 16,000 shares of Common Stock at an exercise price
of $.8125 per share, 6,000 shares of Common Stock at a price of $1.00 per share,
40,000 shares of Common Stock at a price of $1.0625 per share and 15,000 shares
of Common Stock at $1.25 per share, held by three officers not named above.
-9-
<PAGE>
PRINCIPAL STOCKHOLDERS OF THE COMPANY
The following table sets forth certain information regarding ownership
of the Company's equity securities as of October 1, 1996 by each person who is
known to the Company to own beneficially more than 5% of its voting securities:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
- - -------------- ------------------ ----------------- --------
<S> <C> <C> <C>
Common Stock IBJ Schroder Bank & 2,835,432 /1/ 49.37%
Trust Company
One State Street
New York, New York 10004
Convertible Preferred IBJ Schroder Bank & 1,204,890 /1/ 71.71%
Stock Trust Company
One State Street
New York, New York 10004
Common Stock Robert Grossman 332,320 5.68%
96 South George Street
York, Pennsylvania 17401
Common Stock Michael J. Blake 287,500 5.01%
412 South Fourth Street
Suite 1200
Minneapolis, Minnesota 17401
</TABLE>
- - --------------
/1/ The Shares owned of record by IBJ Schroder Bank & Trust Company are owned
by it in its capacity as escrow agent (the "Escrow Agent") acting for and on
behalf of certain holders of claims and interests in Industries, pursuant to the
Second Amended and Restated Joint Plan of Reorganization of Industries and ET
Railcar Corporation dated November 10, 1986, which shares shall be distributed
on a quarterly basis pro rata to holders of certain allowed claims under the
Plan. The Escrow Agent, as record owner of those shares, has the power to vote
those shares and has expressed its intention to vote such shares, in person or
by proxy, proportionally in accordance with the votes cast on each matter by the
other holders of the outstanding Common Stock and Convertible Preferred Stock.
The number of shares of Common Stock or Convertible Preferred Stock to be
distributed to any one holder of claims depends upon the resolution of certain
contingent liabilities of Industries. It is not possible to determine at this
time either the manner in which those contingent liabilities will be resolved or
the resulting disposition of the shares of Common Stock or Convertible Preferred
Stock currently held by the Escrow Agent. The Company knows of no individual
holder, other than the Escrow Agent, Robert Grossman and Michael J. Blake who
beneficially owns more than 5% of the Common Stock or Convertible Preferred
Stock.
To the knowledge of the Company, none of the beneficial owners of more than 10%
of the Company's equity securities engaged in securities transactions for which
they have failed to file, or failed to file on a timely basis, Forms 4 or 5 with
the Securities and Exchange Commission.
-10-
<PAGE>
1996 STOCK OPTION PLAN
The 1996 Stock Option Plan is being submitted for ratification by the
stockholders of the Company.
The 1996 Option Plan
--------------------
At a meeting on September 18, 1996, the Board of Directors of the
Company approved, subject to stockholder ratification, the 1996 Stock Option
Plan (the "Plan"). A copy of the Plan is attached as Exhibit A to this Proxy
Statement. Set forth below is a summary of the principal terms of the Plan,
which should be reviewed carefully by stockholders prior to voting on this
proposal. This summary is not complete and is qualified in its entirety by
reference to the Plan.
The Company's 1986 Stock Option Plan expires on December 31, 1996. If
ratified by the stockholders at the Meeting, the proposed Plan will become
effective upon such expiration. The Plan is intended to attract, retain, and
provide incentives to key employees of the Company by offering them an
opportunity to acquire or increase a proprietary interest in the Company.
Options under the Plan may be granted to existing officers and other key
executives or operational employees of the Company and its parents or
subsidiaries, whether or not such persons are also directors of the Company.
Options may also be granted under the Plan to persons who become officers or key
executives or operational employees as a condition to receiving such options. No
directors of the Company will be eligible to receive options under the Plan
unless they are also full-time salaried officers or key executives or
operational employees of the Company or one of its parents or subsidiaries.
The Plan provides that the Company may grant options for the purchase
of up to 500,000 shares of Common Stock (subject to adjustment in the event of
stock dividends, stock splits, recapitalizations, mergers, reorganizations, and
other events affecting the capitalization of the Company). Limited rights may be
granted simultaneously and in connection with certain options. The Company will
receive no cash payment in connection with the grant of options or rights
thereunder.
The Plan is administered by the Management Compensation Committee of
the Board of Directors (the "Committee"). The Committee has authority under the
Plan to designate the persons to whom options and rights will be granted, and,
subject to the various provisions of the Plan, to fix the number of shares to be
subject to such options and rights and the other terms and conditions of such
options. Under the Plan, the Committee may grant incentive stock options
("Incentive Options") or options which do not qualify as incentive stock options
under Section 422 of the Internal Revenue Code of 1986, as amended ("Non-
Incentive Options"). A member of the Committee cannot receive options under the
Plan and cannot serve on the Committee if he was eligible to participate in any
employee benefit plan of the Company within the year prior to his appointment.
The Committee has full power to construe and interpret the Plan and to establish
rules for its administration. The Committee's determinations are final, binding
and conclusive upon all persons.
All options granted under the Plan are subject to the following terms:
* The option must be evidenced by a written agreement between
the Company and the option holder.
* Each option shall state the number of shares that may be
purchased upon exercise of such option and no option shall
permit the purchase or issuance of fractional shares.
* The exercise price of the option must be not less than 100% of
the fair market value of the Company's Common Stock at the
date of grant. However, if the person to whom the option is
granted owns, at the time the option is granted, stock
possessing more than 10% of the total combined voting power of
all classes of stock of the Company or a parent or subsidiary
of the Company, then the price per share shall be not less
than 110% of the fair market value of the Company's stock at
the date of grant.
-11-
<PAGE>
* Options granted under the Plan shall become exercisable at
such time or times and into such amounts of the Company's
Common Stock for which any such options are granted as may be
determined by the Company's Compensation Committee in its sole
discretion, subject to the terms and conditions of the Plan.
Notwithstanding the preceding sentence, the Compensation
Committee may provide that, except as otherwise provided in
the Plan, an option may not be exercised in any year for more
than a certain percentage of the Company's Common Stock
issuable thereunder, conditioned upon the option holder's
continued employment by the Company or a parent or subsidiary
of the Company.
* No option granted under the Plan may be exercised for fewer
than 100 shares of Common Stock at a time (or the remaining
shares then issuable under the option, if less than 100).
* If an option holder's employment by the Company or a parent or
subsidiary terminates for any reason other than death,
disability or cause, prior to an option's stated expiration
date, then the option will expire on the earlier of (i) the
stated expiration date, or (ii) three months after the date
that the option holder's employment terminates or, if
employment terminates because of death or disability, one year
after the date employment terminates. The option can be
exercised during such post-employment period only for the
amount of stock for which it was exercisable when employment
terminated. If a holder is discharged for cause, all rights
under such holder's options or other rights granted under the
Plan shall expire upon termination of employment.
* The exercise price payable upon the exercise of an option
granted under the Plan must be paid in cash upon exercise or,
if the Committee has so designated when it granted the option,
by delivering other Common Stock of the Company having an
aggregate fair market value equal to the exercise price or by
delivering a combination of cash and Common Stock.
Incentive Options granted under the Plan will be subject to the
following terms, in addition to the terms described above which are applicable
to all options granted under the Plan:
* An option holder cannot transfer an Incentive Option granted
under the Plan except by his will or the laws of intestacy.
* During an option holder's life, only the option holder can
exercise an Incentive Option.
* The aggregate fair market value (determined at the time of
grant) of the shares of Common Stock subject to all Incentive
Options granted to any one person under the Plan (or any other
plan of the Company and its subsidiaries and parents) which
are exercisable for the first time in any calendar year cannot
exceed $100,000.
* Each Incentive Option granted under the Plan will in most
cases expire ten years after the date of its grant. However,
if the holder at the time the option was granted owned stock
possessing more than 10% of the total combined voting power of
all equity securities of the Company or a parent or
subsidiary, then the option will expire five years after the
date of its grant.
Non-Incentive Options granted pursuant to the Plan shall be subject to
the following terms in addition to the terms described above which are
applicable to all options granted under the Plan:
* Each Non-Incentive Option will expire ten years and one month
after the date such option is granted.
If the Company is dissolved or liquidated, or enters into a merger,
reorganization, consolidation or other transaction where neither it nor a parent
or subsidiary is the surviving corporation, or if the Company sells all or
substantially all of the assets of the Company other than to a parent or
subsidiary of the Company, or if a tender
-12-
<PAGE>
offer is made for the Company's Common Stock or if during any twelve-month
period a majority of the directors of the Board of the Company are replaced with
newly elected individuals, or such existing directors cease to constitute a
majority of the Board of Directors of the Company (unless such new directors
were nominated by the management of the Company) (each of the foregoing being
referred to hereinafter as an "Extraordinary Transaction"), or if after December
31, 1996 any person previously unaffiliated with the Company other than as a
stockholder acquires voting shares of the Company in any twelve-month period
such that such person holds, directly or indirectly, voting stock representing
25% or more of the then current ordinary voting power of the Company's stock or
stock of a parent of the Company (a "Substantial Change in Ownership"), then,
effective upon the Board of Directors' approval of the Extraordinary Transaction
(other than a tender offer), the commencement of a tender offer or the
occurrence of a Substantial Change in Ownership, all outstanding options granted
under the Plan will become immediately exercisable in full regardless of the
terms of the options. If an option is not exercised or surrendered prior to
consummation of the Extraordinary Transaction, then the option will terminate
upon such consummation unless the successor corporation in such transaction
agrees to assume the option or to provide a substitute option on substantially
similar terms. The Board of Directors believes that these provisions for
acceleration and surrender will enhance the incentive features of the options
granted under the Plan, primarily by permitting the option holders to
participate in an Extraordinary Transaction rather than lose the benefits of
their options.
The Committee is authorized to grant certain additional rights to
eligible employees simultaneous with the grant of any option. In the event of
the Board of Director's approval of an Extraordinary Transaction or the
occurrence of a Substantial Change in Ownership, and if in the opinion of
counsel to the Company any profit realized by an officer of the Company upon the
disposition of Option Stock would inure to the Company's benefit pursuant to
Section 16(b) of the Securities Exchange Act of 1934, as amended, such officer
may upon the consummation of such Extraordinary Transaction or promptly after
such Substantial Change in Ownership surrender to the Company any then
outstanding options (in connection with which a right has been granted) granted
under the Plan in exchange for consideration, payable in cash, equal to (i) the
positive difference of the Transaction Price (as defined below) minus the price
per share of option stock payable pursuant to the applicable option agreement
upon the exercise of the option, multiplied by (ii) the number of shares of
option stock subject to the unexercised portion of the surrender option (in
connection with which a right has been granted). "Transaction Price" shall mean
the aggregate of the amount of cash and the fair market value of other
consideration which would be receivable (i) on the date on which an officer
would dispose of option stock in the applicable Extraordinary Transaction for
each share of option stock, or (ii) if such option stock was sold at the highest
price on the date on which an officer would dispose of option stock after the
effective date of a Substantial Change in Ownership.
Options granted under the Plan and the shares of Common Stock subject
to such options are not currently registered under the Securities Act of 1933,
as amended, on the ground that the grant of options and issuance of shares of
Common Stock upon exercise are exempt as transactions by an issuer not involving
a public offering.
The Plan will expire ten years after the date of its adoption by the
Board of Directors. No option may be granted under the Plan after that date.
Under the terms of the Plan, the Board of Directors may amend the Plan
at any time so long as any amendment does not affect outstanding options or
adversely affect the Plan's qualification under the Internal Revenue Code of
1986, as amended (the "Code"). The Board of Directors must obtain the
affirmative vote of a majority of all issued and outstanding shares of Common
Stock in order to (i) increase the total number of shares of Common Stock for
which incentive stock options may be granted and outstanding under the Plan in
the aggregate or to any one person, (ii) change the minimum exercise price per
share payable upon exercise of options under the Plan (iii) change the
designation of the class of persons eligible to receive options under the Plan,
(iv) permit any member of the Committee to receive an option under the Plan; (v)
permit an option to be exercised earlier than one year after it is granted, (vi)
extend the termination date of the Plan, or (vii) take any other action with
respect to the Plan which under the Code would be deemed the adoption of a new
plan.
-13-
<PAGE>
The Plan is being submitted for stockholder approval in order to meet
certain requirements of the Code with respect to the granting of Incentive
Options. In addition, stockholder approval is required in order to comply with
the conditions of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended. This Rule makes it possible, among other things, for officers to
surrender for credit, at current fair market value, shares of previously
purchased Common Stock in payment of the option exercise price and to receive
cash upon surrender of options without incurring "short-swing profit" liability
under such Act. The Board believes that this feature substantially enhances the
incentive compensation benefits of the Incentive Options.
Federal Income Tax Consequences
-------------------------------
a. Incentive Options
-----------------
Except as described below, neither the granting nor the exercise of an
Incentive Option under the Plan will result in recognition of income or loss to
the grantee of the option for Federal income tax purposes. If the option holder
retains ownership of Common Stock issued upon exercise of an Incentive Option
for at least two years from the grant of the option and one year after the stock
was transferred to the option holder pursuant to the exercise and at all times
during the period beginning on the date of the granting of the option and ending
on the day three months before the date of exercise, the option holder was an
employee of the Company or a parent or subsidiary of the Company, or a
corporation or parent or subsidiary of such corporation issuing or assuming such
option in a transaction to which Section 424(a) of the Code applies, then the
option holder will be entitled to long-term capital gain treatment on any gain
from the subsequent sale of the Common Stock. The basis of the Common Stock will
be its exercise price. Any gain from the subsequent sale of stock issued upon
exercise of an Incentive Option or loss (measured by the difference between the
amount realized on disposition and the basis) will be a long-term capital gain
or loss. Generally, the Company will not be entitled to any deduction in
connection with the grant or exercise of incentive stock options under the Plan
or the sale of Common Stock issued upon exercise of such options.
If an option holder does not satisfy the holding period for Common
Stock acquired upon exercise of an incentive stock option, any gain realized
upon the disposition of such Common Stock will be taxed as ordinary income for
Federal income tax purposes to the extent of the difference between the option
exercise price and the lesser of (i) the fair market value of the Common Stock
on the date the option was exercised and (ii) the amount realized upon
disposition of the Common Stock. Any amount realized by the option holder in
excess of such difference will be either long-term or short-term capital gain,
depending on the holding period for the Common Stock. The Company will be
entitled to a deduction equal to the amount of ordinary income recognized by the
option holder.
If an option holder exercises an Incentive Option granted under the
Plan by delivering Common Stock which was acquired upon the prior exercise of an
incentive stock option and which had not been held for the required holding
period, then the option holder would recognize ordinary income from the
disposition of such previously acquired Common Stock. The amount of ordinary
income would be determined in the same manner as in the case of any premature
disposition of stock received under an incentive stock option, as described
above, and the Company would be entitled to a deduction in the amount of such
ordinary income. If the Common Stock delivered to pay the exercise price upon
exercise of an incentive stock option had not been acquired upon the prior
exercise of an incentive stock option, or if it has been acquired upon exercise
of an Incentive Option and held for the required period, then the option holder
would not recognize any income or gain from such delivery. In such event, the
basis and holding period of the number of shares of Common Stock received which
equals the number of shares of Common Stock tendered will carry over to such
shares received, and any excess shares of Common Stock received will have a zero
basis and a new holding period (which will be subject to the one-year and two-
year holding period rules described above).
-14-
<PAGE>
b. Non-Incentive Options
---------------------
Employees who have been granted Non-Incentive Options will not
recognize income for Federal income tax purposes at the time the options are
granted. Upon exercise of a Non-Incentive Option for cash, in general, a holder
will recognize ordinary income for Federal income tax purposes to the extent of
any excess of the fair market value of the Company's Common Stock received upon
exercise over the exercise price of such Common Stock. Notwithstanding this
rule, directors and officers of the Company who are subject to Section 16-b of
the Securities Exchange Act of 1934, as amended, are subject to special tax
rules relating to the receipt of shares upon the exercise of Non-Incentive
Options. The Company will be entitled to a deduction in the amount which the
holder recognizes as ordinary income provided that Federal Tax is withheld on
the amount included in income.
When an employee exercises a Non-Incentive Option by delivering Common
Stock, the employee will generally recognize ordinary income to the extent of
the fair market value of the excess of the number of shares received on exercise
over the number of shares of Common Stock tendered on exercise (as well as
ordinary income in connection with the disposition of any Common Stock tendered
as a result of a prior exercise of an Incentive Option for which the holding
periods described above were not yet met).
The basis and holding period of the number of shares received equal to
the number of shares of Common Stock tendered (assuming no shares failing to
meet the one-year and two-year holding periods described above for stock
acquired on exercise of an Incentive Option are used) will be carried over and
any excess shares received will have a new holding period and a fair market
value basis.
The Company will be entitled to a deduction equal to any ordinary
income recognized by the option holder.
The approval of the Plan requires the affirmative vote of a majority of
the votes cast at the Meeting by holders of the Company's Common Stock and
Convertible Preferred Stock, voting together as a single class, entitled to
vote.
The Board of Directors recommends a vote "FOR" the Plan.
-15-
<PAGE>
PROPOSAL TO AMEND THE
CERTIFICATE OF INCORPORATION TO CHANGE THE CAPITALIZATION
The Company's Certificate of Incorporation provides that the total
number of shares of Common Stock that the Company is authorized to issue is
11,000,000 shares. As of October 1, 1996, the Company had (i) 5,742,689 shares
of Common Stock outstanding, (ii) 713,500 shares of Common Stock reserved for
issuance upon the exercise of outstanding options, and (iii) 220,000 shares of
Common Stock reserved for issuance upon the exercise of outstanding warrants. In
order to ensure that the Company will have sufficient authorized shares of
Common Stock for issuance (i) upon exercise of options that may be granted under
the 1996 Stock Option Plan, (ii) as awards that may be made under the restricted
stock plan, (iii) upon conversion of the Convertible Preferred Stock to Common
Stock, and (iv) in connection with possible future transactions by the Company,
the Board has unanimously approved and recommends to the stockholders that they
consider and approve an amendment to the Company's Certificate of Incorporation
increasing the Company's authorized Common Stock from 11,000,000 shares of
Common Stock to 15,000,000 shares of Common Stock. If the proposed amendment is
approved, clause number 1 of Article Fourth of the Company's Certificate of
Incorporation would be amended to read as follows:
"FOURTH: Number of Shares.
----------------
1. The total number of shares of capital stock which
the Corporation shall have authority to issue is Eighteen
Million (18,000,000) shares, consisting of Fifteen Million
(15,000,000) shares of Common Stock, par value $.01 per share
(the "Common Stock") and Three Million (3,000,000) shares of
Preferred Stock, par value $.01 (the "Preferred Stock") per
share."
The adoption of an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock will
result in an increase in the number of authorized but unissued shares of Common
Stock that will be available for issuance by the Company's Board without
stockholder approval. In addition, the future issuance by the Company of Common
Stock may have the effect of delaying or preventing a change of control of the
Company without further action by the stockholders.
The Company has no current plans to issue any shares of Common Stock
other than the issuances upon the exercise of outstanding options, the exercise
of the Company's warrants or the conversion of the Convertible Preferred Stock
to Common Stock. The Board of Directors believes that an increase in the number
of authorized shares of Common Stock may enhance the Company's flexibility in
connection with possible future actions, such as use in employee benefit plans,
stock splits, stock dividends, financings, corporate mergers, acquisitions of
property, and other general corporate purposes. Having such authorized capital
stock available for issuance in the future will allow additional shares of
Common Stock to be issued without the expense and delay of a special meeting of
stockholders. Eliminating that delay may better enable the Company to engage in
financial transactions and acquisitions which take full advantage of changing
market conditions. The Company is not presently engaged in any negotiations
concerning the issuance of any shares of additional authorized Common Stock, and
there are no present arrangements, understandings or plans concerning the
issuance of such shares.
An affirmative vote by the holders of not less than a majority of the
issued and outstanding shares of Common Stock is required for adoption of this
proposal to amend the Certificate of Incorporation to increase the number of
authorized shares of Common Stock. If the proposal is approved, a Certificate of
Amendment amending the Certificate of Incorporation will be filed in the Office
of the Secretary of State of the State of Delaware as promptly as practicable
thereafter and the increased authorized Common Stock will become effective on
the close of business on the date of such filing.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
-16-
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected the firm of Arthur Andersen LLP as its
independent public accountants to audit the books and accounts of the Company
for the 1997 fiscal year.
Although the appointment of independent public accountants is not
required to be ratified by the stockholders, the Board of Directors believes
that the stockholders should participate in the selection of the independent
public accountants through the ratification process. If such ratification is not
obtained, the Board will consider the appointment of other independent public
accountants for the following year.
A representative of Arthur Andersen LLP is expected to be present at
the Meeting and to have the opportunity to make a statement and to be available
to respond to appropriate questions from stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP.
-17-
<PAGE>
PROPOSALS AND NOMINATIONS BY STOCKHOLDERS
Pursuant to the by-laws of the Company, the Secretary of the Company
must be advised in writing of prospective nominations for election to the Board
of Directors at the Meeting not less than thirty days before the date fixed for
such Meeting.
Proposals of stockholders intended to be presented at the 1997 Annual
Meeting of Stockholders of the Company must be received by the Company for
inclusion in the Company's Proxy Statement and form(s) of proxy relating to such
Meeting no later than June 13, 1997. In order to curtail controversy as to the
date on which a proposal was received by the Company, proponents should submit
their proposals by Certified Mail Return Receipt Requested. Timely receipt of a
stockholder's proposal, however, will satisfy only one of various requirements
for inclusion in the Company's proxy materials.
DISCRETIONARY AUTHORITY
It is not intended to bring before the Meeting any matters except the
election of directors, the ratification of the appointment of Arthur Andersen
LLP as independent public accountants, the ratification of the 1996 Stock Option
Plan and the amendment of the Certificate of Incorporation of the Company.
Management is not aware at this time of any other matters to be presented for
action. If, however, any other matters properly come before the Meeting, the
persons named as proxies in the enclosed form of proxy intend to vote in
accordance with their judgment on the matters presented.
OTHER MATTERS
On written request, the Company will promptly provide without charge to
each record or beneficial holder of the Company's Common Stock or Convertible
Preferred Stock as of the Record Date, a copy of the Company's Annual Report on
Form 10-K for the year ended June 30, 1996, as filed with the Securities and
Exchange Commission. Requests should be addressed to Investor Relations, Emons
Transportation Group, Inc., 96 South George Street, York, Pennsylvania 17401.
By Order of the Board of Directors
-----------------------------------
Scott F. Ziegler
Secretary
October 15, 1996
-18-
<PAGE>
EXHIBIT A
EMONS TRANSPORTATION GROUP, INC.
A DELAWARE CORPORATION
1996 STOCK OPTION PLAN
1. PURPOSE
This 1996 Stock Option Plan, as amended, (the "Plan") is
intended to enable Emons Transportation Group, Inc. ("Emons") and its
subsidiaries and affiliates to attract, retain, and provide incentives to
employees by offering them an opportunity to acquire a proprietary interest in
Emons. It is intended that options granted pursuant to Paragraph 5 of the Plan
shall constitute and qualify as incentive stock options ("Incentive Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). It is further intended that the options granted pursuant
to Paragraph 6 of the Plan shall constitute non-incentive stock options
("Non-Incentive Options", together with the Incentive Options being sometimes
hereinafter referred to as "Options"). It is additionally intended that limited
rights may be granted pursuant to Paragraph 8 of the Plan simultaneously and in
connection with certain Options (the "Rights").
2. ADMINISTRATION OF THE PLAN
Subject to the terms and provisions of the Plan, the Plan
shall be administered by the Management Compensation Committee of the Board of
Directors of Emons (the "Committee") which shall consist of three or more
directors or such fewer number of directors as may be permitted by the By-Laws
of Emons and applicable law. While serving on the Committee, no member of the
Committee shall be eligible to receive an Option or Right under the Plan or any
other plan of Emons or any of its Parents and Subsidiaries (as hereinafter
defined) which entitles participants therein to acquire stock, stock Options, or
stock appreciation rights of Emons or any of its Parents or Subsidiaries. No
person shall serve on the Committee if within one year prior to commencing such
service such person was eligible to participate in the Plan or any of such other
plans. Membership on the Committee, however, shall not adversely affect any
rights or options granted to such person prior to being appointed to the
Committee.
The Committee shall from time to time designate from among the
Eligible Employees (as hereinafter defined) the persons whom the Committee in
its discretion recommends to receive Options and Rights under the Plan. The
Committee may issue, subject to the terms and provisions of the Plan, Incentive
or Non-Incentive Options, or both, to Eligible Employees. Subject to the terms
and provisions of this Plan, the Committee shall indicate the number of shares
of Option Stock (as hereinafter defined) to be subject to such Options and
Rights and the other terms and conditions of such Options and Rights. In
designating the persons to whom Options and Rights should be granted under the
Plan and in determining the number of shares and other terms and conditions of
such Options (including under what conditions any Rights granted may be
exercised), the Committee shall take into account the duties of the person, his
past, present, and potential future contributions to the business of Emons and
its Parents and Subsidiaries (as hereinafter defined), and such other factors as
the Committee shall deem relevant. For the purposes of the Plan, the terms
"Parent" and "Subsidiary" shall have the meanings given the terms "parent
corporation" and "subsidiary corporation," respectively, by Section 424 of the
Code.
The Committee shall have the authority to interpret and
administer the Plan as it may deem advisable and to make determinations which
shall be final, binding and conclusive upon all persons (including without
limitation, officers, employees and stockholders of Emons and any Parents and
Subsidiaries of Emons). No member of the Board of Directors or the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option or Right granted under it.
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3. ELIGIBILITY
Every person who now or hereafter becomes an officer or
employee (whether or not a director) of Emons or any Parent or Subsidiary of
Emons, including any person who as a condition to the grant of an Option or
Right under the Plan becomes an officer or employee, shall be eligible to
receive an Option or Right under the Plan by designation of the Committee. Such
persons are referred to herein collectively as the "Eligible Employees". No
person shall be disqualified from receiving an Option or Right under the Plan
solely because such person already holds an option to purchase securities of
Emons or of a Parent or Subsidiary of Emons, or stock appreciation rights with
respect to any such securities, whether granted pursuant to the Plan or
otherwise. No director of Emons or a Parent or Subsidiary of Emons shall be
eligible to receive an Option or Right under the Plan unless such director is
also a full-time salaried officer or employee of such corporation.
4. STOCK SUBJECT TO OPTIONS
The stock subject to the Plan (the "Option Stock") shall be
shares of Emons' Common Stock, $.01 par value (the "Common Stock"). The Option
Stock may be authorized but unissued shares of Common Stock or Common Stock held
in the treasury of Emons from time to time. Subject to adjustment in accordance
with Paragraph 10 of the Plan, the aggregate number of shares of Common Stock
which may be issued or issuable under Options outstanding at any one point in
time shall not exceed 500,000 shares. If an Option or Right together with any
related right granted under the Plan shall expire or terminate for any reason
without having been exercised in full, the unpurchased Option Stock under such
expired or terminated Option shall (unless the Plan has been terminated) be
added to the shares otherwise available to be issued under Options granted under
the Plan.
The Board of Directors is hereby authorized by certificate of
amendment of the certificate of incorporation of Emons under Section 242 of the
General Business Corporation Laws of the State of Delaware (or any successor
provision of law) to increase from time to time the number of authorized shares
of Common Stock to such number as will be sufficient, when added to the
previously authorized but unissued shares of Common Stock, to satisfy any
obligation to issue shares of Common Stock upon the exercise of Options granted
under the Plan.
5. TERMS AND CONDITIONS OF INCENTIVE OPTIONS
Each Incentive Option granted under the Plan shall be
evidenced by a written option agreement, in such form as the Committee shall
approve, to be executed by an authorized officer of Emons and by the person
designated by the Committee to receive the Option. The option agreement shall
contain the following terms and conditions, the applicable terms and conditions
set forth in Paragraph 7, and such other terms and conditions, not inconsistent
with the Plan, as the Committee in its sole discretion shall deem necessary or
desirable:
(a) Number of Shares. Each Incentive Option shall state
the total number of shares of Option Stock that may be purchased upon exercise
of the Incentive Option in accordance with its terms. No Incentive Option shall
permit the purchase or issuance of fractional shares.
(b) Price. Each Incentive Option shall state the price per
share of Option Stock payable upon any full or partial exercise of such
Incentive Option. Such price per share shall not be less than 100% of the fair
market value (as hereinafter defined) of a share of Option Stock at the time the
Incentive Option is granted, provided, that, if the person to whom the Incentive
Option is granted owns, at the time the Incentive Option is granted, stock
possessing more than 10% of the total combined voting power of all classes of
stock of Emons or a Parent or Subsidiary of Emons, then the price per share
shall not be less than 110% of the fair market value (as
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hereinafter defined) of a share of Option Stock at the time the Incentive Option
is granted. For purposes of this and other paragraphs of the Plan, "fair market
value" of a share of stock shall be the mean of the closing dealer "bid" and
"ask" prices for a share of such stock in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ") for the day for which fair market value is being determined,
or, if such stock is listed on a recognized stock exchange or exchanges, the
"fair market value" of a share of such stock shall be the highest closing price
of such stock on such exchange or exchanges on the day for which fair market
value is being determined. If no price is reported by NASDAQ or such exchange or
exchanges for the day for which fair market value is being determined, then the
"fair market value" of a share of such stock shall be the mean of the closing
dealer "bid" and "ask" prices or the highest closing price, as the case may be,
on the next preceding day for which such prices were reported. If the price of
the Option Stock is not regularly reported by the NASDAQ or if such stock is not
listed on any recognized stock exchange, fair market value of a share of stock
shall be the mean of the "bid" and "ask" prices for a share of such stock quoted
by the National Quotation Bureau quoted for the day for which fair market value
is being determined, or, if no such quote is available, on the most recent
preceding day for which fair market value is being determined or, if no such
quote is available on the most recent succeeding day for which fair market is
being determined or, if no such quote is available, fair market value will be
determined by the Committee which determination shall be final and binding on
all parties. Subject to the foregoing provisions of this subparagraph, the
Committee, in fixing the price per share of the Option Stock under an Incentive
Option, shall have full authority and discretion and be fully protected in doing
so. In determining stock ownership for purposes of the second sentence of this
subparagraph, a person will be considered the owner of stock in accordance with
the provisions of Section 424 of the Code (or any successor provision of law)
and will be deemed to have exercised all then outstanding stock options granted
to him to acquire the stock of Emons or a Parent or Subsidiary of Emons, whether
or not such stock options were granted under the Plan.
(c) Transferability and Right to Exercise. Each Incentive
Option granted under the Plan shall provide by its terms that (i) it cannot be
transferred by the person to whom granted otherwise than by will or the laws of
descent and distribution and (ii) during the lifetime of the person to whom
granted, the Incentive Option is exercisable only by such person.
(d) Limitation on Incentive Options to One Person in any
Calendar Year. The maximum amount of stock for which the Committee may grant to
any one Eligible Employee Incentive Options which first became exercisable in
any one calendar year under the Plan and all other plans of Emons and its
Parents and Subsidiaries shall be the number of shares of stock the aggregate
fair market value of which (determined as of the time each option is granted)
equals $100,000.
(e) Limitation on Time to Exercise Incentive Option.
Notwithstanding Paragraph 7(a) and any other provisions of the Plan to the
contrary, and subject to the further limitation set forth in the next succeeding
sentence of this subparagraph, each Incentive Option granted under the Plan
shall provide by its terms that it may not be exercised after ten years after
the date such Incentive Option is granted. If the person to whom an Incentive
Option is granted under the Plan owns, at the time the Incentive Option is
granted, stock possessing more than 10% of the total combined voting power of
all classes of stock of Emons or a Parent or Subsidiary of Emons, then the
Incentive Option granted under the Plan shall provide by its terms that it may
not be exercised after five years after the date such Incentive Option is
granted.
6. TERMS AND CONDITIONS OF NON-INCENTIVE OPTIONS
Each Non-Incentive Option granted under the Plan shall be
evidenced by a written option agreement, in such form as the Committee shall
approve, to be executed by an authorized officer of Emons and by the person
designated by the Committee to receive the Non-Incentive Option. The option
agreement shall contain the following terms and conditions, the applicable terms
and conditions set forth in Paragraph 7, and such other terms and conditions,
not inconsistent with the Plan, as the Committee in its sole discretion shall
deem necessary or desirable:
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(a) Number of Shares. Each Non-Incentive Option shall state
the total number of shares of Option Stock that may be purchased upon exercise
of the Non-Incentive Option in accordance with its terms. No Non-Incentive
Option shall permit the purchase or issuance of fractional shares.
(b) Price. Each Non-Incentive Option shall state the price per
share of Option Stock payable upon any full or partial exercise of such
Non-Incentive Option. Such price per share shall not be less than 100% of the
fair market value (as defined in Paragraph 5) of a share of Option Stock at the
time the Non-Incentive Option is granted. Subject to the foregoing provision of
this subparagraph, the Committee, in fixing the price per share of the Option
Stock under a Non-Incentive Option, shall have full authority and discretion and
be fully protected in doing so.
(c) Limitation on Time to Exercise Non-Incentive Option.
Notwithstanding Paragraph 7(a) and any other provisions of the Plan to the
contrary, each Non-Incentive Option granted under the Plan shall provide by its
terms that it may not be exercised after ten years and one month after the date
such Non-Incentive Option is granted.
7. GENERAL TERMS AND CONDITIONS OF OPTIONS
(a) Time of Exercise. Except as otherwise provided in
Paragraph 7 of the Plan, Options granted under the Plan shall become exercisable
at such time or times and into such amounts of Option Stock for which any such
Options are granted as may be determined by the Committee in its sole
discretion, subject to the terms and conditions of the Plan. Notwithstanding the
preceding sentence, the Committee may provide that, except as otherwise provided
in Paragraph 10 of the Plan, an Option may not be exercised in any year for more
than a certain percentage of the Option Stock issuable thereunder, conditioned
upon the Option holder's continued employment by Emons or a Parent or Subsidiary
of Emons. However, no Option granted under the Plan may be exercisable for less
than 100 shares of Option Stock at a time (or the remaining shares then issuable
under the Option, if less than 100).
(b) Termination of Employment. Each Option and Right granted
under the Plan shall provide that, if the Option or Right holder's employment by
Emons or a Parent or Subsidiary of Emons shall terminate for any reason other
than death, disability or cause, Options and Rights shall be exercisable only as
to those shares of Option Stock which were immediately purchasable by him at the
date of termination, in which case, notwithstanding any other provision of the
option agreement, the Option or Right shall expire on the earlier of (i) its
stated expiration date or (ii) a day three months after the date that the Option
or Right holder's employment terminates, or, if the employment terminates
because the Option or Right holder's death or disability, a day one year after
the date the employment terminates. If an employee is discharged for cause, all
rights under his Options or Rights shall expire upon termination. From the
termination of the Option or Right holder's employment until the Option's or
Right's expiration on the date specified by the preceding sentences, the Option
or Right may be exercised only to the extent and for the number of shares for
which the Option or Right could have been exercised on the date employment
terminated. Notwithstanding any provision of the Plan or an option agreement to
the contrary, the purchase price for Option Stock issued upon the exercise of an
Option after the termination of the Option holder's employment may only be paid
in full upon exercise and in cash or by certified check. For purposes of this
Plan, an individual shall be considered disabled if he is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
12 months. An individual shall not be considered to be disabled unless he
furnishes proof of the existence thereof in such form and manner, and at such
times, as the Committee may require.
(c) Method of Exercise. Subject to the terms and conditions of
the applicable option agreement, an Option may be exercised by delivering
written notice to Emons at its then principal office. Such notice shall be
signed by the person entitled to exercise the Option under the terms of the Plan
and shall state (i) the election to exercise the Option, (ii) the number of
shares of Option Stock in respect of which it is being
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exercised, and (iii) if the Option provides alternative methods of paying the
purchase price for the shares of Option Stock, the method of payment to be
utilized in connection with such exercise.
(d) Payment of the Purchase Price. Except as otherwise
permitted by this subparagraph, the purchase price of Option Stock shall be
payable in full in cash or by check upon an exercise of an Option granted under
the Plan and shall be delivered with the written notice of exercise. If the
Committee in its sole discretion deems it necessary or advisable to further the
purposes of the Plan, the purchase price may also be payable, at the election of
the Option holder, by one or more of the following methods:
i) by delivering with the notice of exercise
certificates for stock of Emons having an aggregate
fair market value (as determined pursuant to
Paragraph 5(b)), as of the date the notice is
received by Emons, equal to the purchase price of the
Option Stock for which the Option is being exercised,
or
ii) by delivering any combination of cash or check
and certificates for stock of Emons equal in the
aggregate to the purchase price of the Option Stock
for which the Option is being exercised.
(e) Securities Act Representations. Each option agreement
entered into pursuant to the Plan shall provide that, if counsel to Emons shall
deem it necessary, the Option holder shall deliver a certificate to Emons, in
connection with each exercise of the Option, stating that he or she is
purchasing the Option Stock for investment purposes only and not with a view to
the distribution thereof and containing such other provisions as counsel to
Emons shall deem necessary or appropriate.
(f) Certificates for Option Stock. Each Option shall provide
that certificates for Option Stock for which an Option has been exercised shall
not be issued until receipt of full payment of the purchase price for such
Option Stock. Shares of Option Stock, and the certificates therefor, shall be
issued in the name of the person who is entitled at the time to exercise the
Option, or, if such person is the original Option holder and so elects, in the
name of such person and another person as joint tenants with rights of
survivorship.
(g) Legend. If deemed necessary or appropriate by Emons and
its counsel, each certificate representing the shares of Option Stock issuable
upon exercise of the Options may be stamped or otherwise imprinted with a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND NEITHER
THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED,
SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR SUCH LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT AND SUCH LAWS, WHICH, IN
THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO COUNSEL FOR
THIS CORPORATION, IS AVAILABLE.
(h) Conditions to Grant. The Committee may grant Options under
the Plan which by their terms provide that the grant of the Options will only
become effective upon the satisfaction of certain specified conditions. For
example, the Committee may grant an Option to a person whom the Committee
believes will be an employee of Emons or a Parent or Subsidiary of Emons, which
grant does not become effective until such person becomes an employee of such
corporation.
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8. RIGHTS
(a) Grant of Rights. The Committee may grant Rights to
Eligible Employees from time to time, subject to the terms and conditions, if
any, as the Committee may determine are necessary and appropriate,
simultaneously with the grant of any Option with respect to any or all shares of
Option Stock covered by any such Option.
(b) Terms of Rights. Effective upon the Board of Directors'
approval of an Extraordinary Transaction (as defined in Paragraph 10), other
than a tender offer, the commencement of a tender offer, or the occurrence of a
Substantial Change in Ownership (as defined in Paragraph 10), and if, in the
opinion of counsel to Emons, any profit which would be realized by an officer of
Emons upon the disposition of Option Stock in connection with such Extraordinary
Transaction or in connection with the disposition of Option Stock at the time of
a Substantial Change of Ownership would inure to Emons pursuant to Section 16(b)
of the Securities Exchange Act of 1934, as amended, then such officer may, at
any time prior to the consummation of the Extraordinary Transaction (which, in
the case of a tender offer, shall be the date when the tendered shares which are
to be accepted has been determined), or promptly after such Substantial Change
in Ownership, surrender to Emons any then outstanding Option (in connection with
which a Right has been granted) granted under the Plan and held by such officer
in exchange for consideration, payable in cash, equal to (i) the positive
difference of the Transaction Price (as hereinafter defined) minus the price per
share of Option Stock payable pursuant to the applicable option agreement upon
the exercise of the Option, multiplied by (ii) the number of shares of Option
Stock subject to the unexercised portion of the surrendered Option (in
connection with which a Right has been granted). "Transaction Price" shall mean
the aggregate of the amount of cash and the fair market value of other
consideration which would be receivable: (i) on the date on which an officer
would dispose of Option Stock in the applicable Extraordinary Transaction for
each share of Option Stock; or (ii) if such Option Stock was sold at the highest
price on the date on which an officer would dispose of Option Stock after the
effective date of a Substantial Change in Ownership.
(c) Time of Exercise. In no event shall a Right be exercisable
in whole or in part before the expiration of six months from the date of grant
of such Right.
9. TIME OF GRANT
Emons shall not be deemed to have completed all action
necessary to offer an Option under the Plan until an option agreement meeting
the requirements of the Plan has been duly executed and delivered by an
authorized officer of Emons and the Eligible Employee to whom such Option is
granted. Notwithstanding the preceding sentence, if an option agreement provides
that the grant of the Option is effective only upon the satisfaction of one or
more conditions, other than stockholder approval of the Plan or an amendment
thereto, then the time such Option is granted shall be the date all such
conditions have been satisfied. If the grant of the Option is effective only
upon the approval by Emons' stockholders of the Plan or an amendment thereto,
and such approval is obtained, then the date of grant of the Option shall be
determined as if the Option had not been subject to such approval.
10. ADJUSTMENTS FOR CAPITAL CHANGES
Subject to any required action by the stockholders of Emons,
if at any time while one or more Options granted under the Plan are outstanding,
the outstanding shares of Common Stock are increased or decreased or changed
into or exchanged for a different number or kind of shares of Emons or a Parent
or Subsidiary of Emons through stock dividend, stock split, reverse stock split,
stock combination, reclassification, reorganization, merger, or consolidation,
the Committee shall equitably adjust the number, kind, and purchase price of the
shares subject to the then unexercised portion of each Option so that the Option
holder shall be entitled to purchase, of the same aggregate purchase price then
payable under the Option with respect to the then
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unexercised portion, the number of shares which the Option holder would have
received, as a result of the capital change, for the shares of Common Stock that
he would have acquired by exercising the unexercised portion of the Option
immediately prior to such capital change.
If the Board of Directors of Emons approves or authorizes the
dissolution or liquidation of Emons, or the reorganization, merger or
consolidation of Emons with one or more corporations as a result of which
neither Emons nor a Parent or Subsidiary of Emons is the surviving corporation,
or the sale of all or substantially all the assets of Emons other than to a
Parent or Subsidiary of Emons, or if a tender offer for the Common Stock (or any
other capital stock of Emons or a Parent or Subsidiary of Emons for which all
the Common Stock has heretofore been exchanged or into which it has been changed
(the "Recapitalized Stock")) shall commence, or, if during any twelve month
period, a majority of the directors of the Board of Directors of Emons are
replaced with newly elected individuals, or such existing directors cease to
constitute a majority of the Board of Directors of Emons, unless such new
directors were nominated by the management of Emons, (each of the foregoing
being referred to hereinafter as an "Extraordinary Transaction"), or, if, after
the adoption of the Plan, any individual, corporation, other entity or any group
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended), which is unaffiliated with Emons or a Parent or Subsidiary of Emons
other than as a stockholder of Emons, acquires, directly or indirectly, within
any twelve-month period shares of the Common Stock or any class of Recapitalized
Stock with full voting rights (excluding any shares issued in any acquisition or
reorganization in which Emons is the surviving corporation or in control of the
surviving corporation and any shares issued by Emons in a public or private
offering), such that such individual, corporation, other entity or group
becomes, directly or indirectly, after the adoption of the Plan, the holder of
Common Stock or such Recapitalized Stock representing 25 percent or more of the
then current ordinary voting power of Emons' stock or a Parent's stock (a
"Substantial Change in Ownership"), then, effective upon the Board of Directors'
approval of the Extraordinary Transaction (other than a tender offer), the
commencement of the tender offer, or the occurrence of the Substantial Change in
Ownership, as the case may be, the time when each then outstanding Option
granted under the Plan may be exercised shall automatically be accelerated so
that each holder thereof may exercise his or her Options in full or in any part
prior to the consummation of the Extraordinary Transaction or promptly after a
Substantial Change in Ownership. For the purposes of determining if a
Substantial Change in Ownership has occurred, an individual, corporation, other
entity or group, other than any acquiring individual, corporation, entity or
group, shall not be deemed to hold any Common Stock or Recapitalized Stock
issuable upon the conversion of any convertible securities of Emons or a Parent
or Subsidiary of Emons or upon the exercise of any Option or warrant for or
other right to purchase Common Stock or Recapitalized Stock unless such Common
Stock or Recapitalized Stock has actually been issued upon conversion or
exercise. Where any Option, the exercise date of which has been accelerated
pursuant to this paragraph, is thereafter exercised, the purchase price for the
Option Stock issued upon such exercise may be paid in any manner and upon the
terms permitted by the applicable option agreement. If, in connection with any
dissolution, liquidation, reorganization, merger or consolidation any of which
is deemed to be an Extraordinary Transaction, any outstanding Option is not
exercised or surrendered as provided herein prior to the consummation of the
Extraordinary Transaction then each such Option shall terminate upon the
consummation of the Extraordinary Transaction unless provision is made in
connection with such Extraordinary Transaction for the assumption of the
unexercised portion of such outstanding Option by, or the substitution for such
unexercised portion of the Option of a new Option granting the right to purchase
stock of, the surviving corporation in such Extraordinary Transaction, or a
Parent or Subsidiary of the surviving corporation, with appropriate adjustments
as to number and kind of shares and prices.
The Committee's determination as to adjustments to be made
pursuant to this paragraph 10 shall be final, binding and conclusive. No
fractional shares of any stock of Emons shall be issued or issuable under any
Option as a result of any adjustment pursuant to this paragraph. Any fractional
share which would otherwise become subject to an Option shall be eliminated.
Except as provided expressly in the Plan: (i) no holders of an
Option granted under the Plan shall acquire any rights by reason of the
negotiation or consummation of any transaction which might give rise to an
adjustment, acceleration or surrender right pursuant to this paragraph; (ii) any
such transaction shall not in any manner affect, or give rise to an adjustment
with respect to, the number or price of shares of Option Stock
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subject to an Option granted under the Plan; and (iii) the grant or existence of
an Option under the Plan shall not in any manner affect the ability of Emons or
a Parent or Subsidiary of Emons to enter into any such transaction.
11. RIGHTS AS A STOCKHOLDER
No holder of an Option granted under the Plan shall have any
rights as a stockholder with respect to any shares of Option Stock subject to
such Option until the date a stock certificate for any such shares is issued to
such holder.
12. REGISTRATION
Nothing in the Plan shall be construed to require Emons to
register the Option Stock or any other shares of its stock under the Securities
Act of 1933, as amended, or under any applicable state securities or Blue Sky
law.
13. STATUS OF OPTION STOCK
Upon the issuance of shares of Option Stock in accordance with
the Plan and the applicable option agreement, such shares shall be validly
issued. Upon the payment in full of the purchase price of such shares of Option
Stock, such shares shall be fully paid and non-assessable.
14. NO OBLIGATION TO EXERCISE OPTION
The grant of an Option shall impose no obligation on the
Option holder to exercise the Option.
15. ELIGIBILITY FOR OTHER PLANS
The fact that a person is eligible to receive, or has
received, an Option under the Plan shall not affect his eligibility to
participate in any other Option or incentive plan now or hereafter instituted or
maintained by Emons or a Parent or Subsidiary of Emons.
16. USE OF PROCEEDS
The proceeds received by Emons from the sale of Option Stock
pursuant to any Option granted under the Plan may be used for general corporate
purposes.
17. AMENDMENTS TO THE PLAN
The Board of directors of Emons may from time to time, to the
extent permitted by applicable law, amend, suspend, or discontinue the Plan,
provided, however, that the Board may not take any action which would affect
outstanding Options or any unexercised rights under outstanding Options, except
to the extent permitted expressly by the Plan, or which would result in the
failure of outstanding Incentive Options to meet the requirements for incentive
stock options under Section 422 of the Code. In addition, except as provided in
paragraph 10 of the Plan, the Board may not, without the approval of the
stockholders of Emons entitled to vote thereon:
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(a) increase the total number of shares for which Options
may be granted under the Plan in the aggregate or to any one person;
(b) change the minimum purchase price for shares subject
to Option;
(c) change the designation of the class of persons
eligible to receive Options under the Plan;
(d) permit any member of the Committee to receive an
Option under the Plan;
(e) permit an Option to be exercised earlier than one
year after it is granted;
(f) extend the termination date of the Plan; or
(g) take any other action with respect to the Plan which
under the Code would be deemed the adoption of a new plan.
18. TERM OF THE PLAN
The Plan shall terminate ten years after the Plan is adopted
by the Board of Directors, and no Option may be granted under the Plan after
such termination.
19. APPROVAL BY STOCKHOLDERS
The Plan shall become effective upon the authorization of the
Plan at a meeting of stockholders by the vote of the holders of a majority of
all outstanding shares of Emons entitled to vote on the matter. Any Options
granted under the Plan prior to such approval by the stockholders shall be
granted subject to such approval, and such approval shall be deemed a condition
to the effectiveness of the grant of such Option.
20. PLAN, OPTIONS AND RIGHTS SUBJECT TO APPLICABLE LAW
The Plan and all Options and Rights granted pursuant to it are
subject to all applicable laws, rules and regulations of governmental
authorities. Notwithstanding any provisions of the Plan or any option agreement
to the contrary, no Option holder shall be entitled to exercise his Option, or
Right or any other right under the applicable option agreement, and Emons shall
not be obligated to issue any shares of Option Stock to such holder or to take
any other action under the applicable option agreement, if such exercise,
issuance or other action would constitute a violation of any law, rule, or
regulation of a governmental authority applicable to the Option holder or Emons
or of any order, judicial decision, or material agreement to which Emons is a
party or by which it is bound. The Plan will be administered in accordance with
and governed by the laws of the State of Delaware.
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