SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
[ X ] Filed by the registrant
[ ] Filed by a party other than the registrant
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
ENVIRONMENT ONE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ X ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(4) and 0-11.
<PAGE>
[E-One Letterhead/Logo]
April 26, 1996
To Our Shareholders:
You are invited to attend the 1996 Annual Meeting to be held on
Thursday, May 23, 1996 at The Desmond located at 660 Albany-Shaker Road, Albany,
New York at 2:00 P.M. For directions, please refer to map on page __.
The Annual Meeting will begin with a review of Company operations over
the past year, followed by discussions and voting on the issues set forth in the
accompanying Notice of Annual Meeting and Proxy Statement and other business
matters properly brought before the meeting.
Whether or not you plan to attend the meeting, your shares will be
represented at the meeting by promptly completing, signing, dating and returning
your proxy form in the enclosed envelope.
Sincerely,
Stephen V. Ardia
Chairman of the Board
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<PAGE>
ENVIRONMENT ONE CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To the Shareholders of Environment One Corporation:
At the direction of the Board of Directors, notice is hereby given that
the Annual Meeting of Shareholders of Environment One Corporation, a New York
Corporation, will be held on May 23, 1996 at The Desmond located at 660
Albany-Shaker Road, Albany, New York at 2:00 P.M. local time, for the purpose of
considering and voting upon the following matters, all of which are more
completely set forth in the accompanying Proxy Statement:
1. To set the number of directors to be elected at seven and to
elect directors.
2. The approval of 1996 Long Term Incentive Plan.
3. The approval of 1996 Incentive Plan for Non-employee
Directors.
4. The approval of amendments to Certificate of Incorporation
providing for a staggered Board of Directors and related
matters.
In addition, any other business which may be properly brought before
the Meeting or any adjournment thereof may be considered.
April 26, 1996 Edward J. Grogan
Schenectady, New York Corporate Secretary
YOUR VOTE IS IMPORTANT
YOU ARE URGED TO DATE, SIGN AND PROMPTLY RETURN YOUR PROXY SO THAT YOUR SHARES
MAY BE VOTED AND TO ASSURE THE PRESENCE OF A QUORUM. RETURNING YOUR PROXY DOES
NOT AFFECT YOUR RIGHT TO CHANGE YOUR VOTE OR VOTE IN PERSON IN THE EVENT YOU
ATTEND THE MEETING.
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<PAGE>
ENVIRONMENT ONE CORPORATION
2773 Balltown Road
Schenectady, New York 12309-1090
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PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS, May 23, 1996
VOTING RIGHTS AND PROXIES
The enclosed proxy, for use only at the Annual Meeting of
Shareholders to be held May 23, 1996 and any and all adjournments or
postponements thereof (the "Meeting"), is solicited on behalf of the Board of
Directors of the Corporation. Such solicitation is being made by mail and may
also be made in person or by telephone, fax, or telegraph by officers, directors
and regular employees of the Corporation (none of whom shall receive any special
compensation therefor). The cost of solicitation of proxies will be borne by the
Corporation.
Any Shareholder executing a proxy retains the right to revoke
it any time prior to its use by giving written notice of revocation to the
Secretary of the Corporation, by executing and delivering to the Secretary of
the Corporation a proxy bearing a later date, or by appearing at the Annual
Meeting and voting in person.
Unless otherwise specified, all properly executed proxies
received by the Corporation will be voted FOR the election of directors as
nominated and listed in Item 1 and FOR Items 2, 3 and 4 as set forth on the
proxy. All items to be voted on at the Meeting are independent of each other and
can be approved or disapproved by shareholders regardless of whether other Items
are approved or disapproved.
A copy of the Corporation's Annual Report for the year ended
December 31, 1995 has been mailed previously to all shareholders entitled to
vote at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Corporation had 4,115,709 shares of common stock, par
value $.10 per share, outstanding as of April 4, 1996, the record date for the
Meeting. Each outstanding share of common stock is entitled to one vote.
Shareholders entitled to vote at the Meeting or to execute proxies are
shareholders of record at the close of business on April 4, 1996. The following
table sets forth as of the record date the ownership of common stock by any
person who is known by the Corporation to be the beneficial owner of more than
five percent of common stock and by all directors and executive officers of the
Corporation as a group.
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<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percent of Class
------------------- ----------------------- ----------------
<S> <C> <C>
Angelo Dounoucos 232,198 (a) 5.6%
720 St. Davids Lane
Schenectady, NY 12309
Robert and Ardis James 479,634 (b) 11.7%
Foundation
80 Ludlow Drive
Chappaqua, NY 10514
Cenith Partners L.P. 401,510 (c) 9.8%
50 Rowes Wharf
Boston, MA 02110
All directors and executive 1,328,430 (a) 32.0% (a)
officers as a group
</TABLE>
- ------------------
(a) Includes 26,000 shares issuable upon exercise of currently exercisable
stock options and 60,000 shares held jointly with his wife.
(b) Includes 43,400 shares held in custodian accounts for his children and
334 shares held by Robert G. James.
(c) Includes 5,000 shares held by Stephen G. Rabinovitz, sole general
partner of Cenith Partners LP.
ITEM 1: NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS AND INFORMATION WITH RESPECT TO
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors proposes to set the number of directors
of the Corporation to be elected at 7 and proposes the election of the nominees
listed below at the Annual Meeting. Each of the nominees is presently a director
of the Corporation and has indicated he is willing to continue as a director.
Unless otherwise instructed on the proxy, the individuals named as proxies will
vote for the election of the following nominees. If any nominee should become
unavailable for any reason, proxies may be voted for a successor nominee
designated by the Board of Directors.
If the Staggered Board Amendments set forth in Item 4 are
approved, the nominees set forth below will be placed in three classes as set
forth in Item 4 on page ___.
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<PAGE>
The information furnished below is for each nominee for
election as a director.
<TABLE>
<CAPTION>
Common Stock Owned Percentage of
Principal Occupation Director Beneficially As of Outstanding
Name and Age During Last Five Years Since April 4, 1996 (a)(c)(d) Shares
------------ ---------------------- ----- ----------------------- ------
<S> <C> <C> <C> <C>
Walter W. Aker Former Corporate Secretary Dec 1968 182,694 (c) 4.4%
Age 77 E/One Corporation
John L. Allen Financial Consultant May 1993 1,000 (b)
Age 52 Heidrick & Struggles
Stephen V. Ardia Chairman of the Board May 1995 77,700 (d) 1.9%
Age 54 E/One Corporation
Angelo Dounoucos President and Chief May 1988 232,198 (c) (d) 5.6%
Age 63 Executive Officer
E/One Corporation
Lars G. Grenback President of Svensk May 1993 150,200 (c) 3.6%
Age 52 Kommunalteknik AB
Robert G. James President & Managing May 1984 479,634 (c) 11.7%
Age 71 Partner of Enterprise Asset
Management, Inc.
Rolf E. Soderstrom Management Consultant May 1991 10,000 0.2%
Age 63
</TABLE>
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(a) Includes all shares for which named individual possessed sole or shared
voting or investment power, even if beneficial ownership has been
disclaimed as to any of these shares by the named individual.
(b) Percentage is less than one percent.
(c) The listed amounts include shares as to which certain directors are
beneficial owners but not the sole beneficial owner as follows: Mr.
Aker's wife holds 15,000 shares; Mr. Dounoucos holds 60,000 shares
jointly with his wife; Mr. Grenback is President of Svensk
Kommunalteknik AB which holds 150,000 shares; 435,900 shares are held
by the Robert and Ardis James Foundation and 43,400 shares are held in
custodian accounts for Mr. James' children; and Mr. Soderstrom holds
his shares jointly with his wife.
(d) Includes shares which the individuals presently have the right to
acquire through exercise of stock options issued by the Corporation as
follows: Mr. Ardia - 50,000 shares, Mr. Dounoucos - 26,000 shares.
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<PAGE>
Walter W. Aker, one of the original founders, served as a Director since 1968
and as Vice President and Director of the Company from 1968 to 1975 and 1982 to
1993. He was Corporate Secretary from 1976 to 1993.
John L. Allen is the Managing Partner for the Financial Services Practice, North
America for Heidrick & Struggles, Inc., a global executive search firm. He is
located in the Boston, Massachusetts office and is also a Director of the firm.
Prior to his joining the firm in 1991, he had 24 years in banking including
nearly thirteen as a Chief Executive Officer of Amoskeag Bank Shares, Inc. and
Key Bank of Southeastern New York. He has a Bachelor of Science degree in
Business Administration from Rochester Institute of Technology, a Master of
Public Administration from the Graduate School of Public Affairs, SUNY Albany,
and is a graduate of the Harvard Business School Program for Management
Development.
Stephen V. Ardia, received an M.B.A. from Rutgers University and a B.S. from the
U.S. Merchant Marine Academy. After working with Goulds Pumps Inc since 1965 he
became their President in 1985. He retired in 1994 joining Environment/One
Corporation as Chairman of the Board in May 1995. He presently serves as a
member of the Board of Directors of Blue Cross/Blue Shield of Rochester and
MaxTec Holdings of Dallas, Texas.
Angelo Dounoucos, one of the original founders, he was Vice President and a
Director of Environment One Corporation from 1969 to 1976 when he resigned and
rejoined the Corporation in 1986 after eight years as a Project Marketing
Manager at the General Electric Corporation Research and Development Center. He
returned to Environment One as Vice President of Marketing and was elected
President in 1989 and Chief Executive Officer in 1990. Mr. Dounoucos is
currently President and Chief Executive Officer.
Lars G. Grenback received his Bachelor of Economics and Business Administration
degree from Uppsala University, Sweden in 1969 and his University Certificate in
Marketing, Advertising and Public Relations in 1970. Since 1975, he has been
working with the Low Pressure Sewer System in the Scandinavian countries, from
1980 as President of Svensk Kommunalteknik AB.
Robert G. James received his BS degree from Northwestern University, his Masters
Degree in 1948 and his Ph.D. in Economics from the Harvard Graduate School of
Arts and Science in 1952. He was a Vice President of Mobil Oil Company. Since
1970, he has been President and Managing Partner of Enterprise Asset Management,
Inc. He is also a Certified Public Accountant.
Rolf E. Soderstrom received his BS - Electrical Engineering degree from Tufts
University and his Masters of Science-Engineering Management degree from
Northeastern University. He has thirty five years of line management experience
as Vice President of Motorola, Executive Vice President of Codex Corporation and
Assistant General Manager of the Systems Division of the Foxboro Company. Mr.
Soderstrom is President of the TCS Group, a management consulting firm; Vice
President of Meta Media, a software company; a Managing Director of the Nassau
Group, a private investment banking company; and a Director of Walpole
Massachusetts Cooperative Bank.
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<PAGE>
Board Committees, Compensation and Meetings
The Board of Directors held five meetings during the year
ended December 31, 1995. During this period, each Director attended at least
seventy five percent of the aggregate of the total number of meetings of the
Board and meetings of Board committees on which he served with the exception of
Dr. Mohnen who was on an overseas assignment. Among its standing committees, the
Board has an Audit Committee, Executive Committee, and Human Resource Committee.
The Audit Committee meets once a year and serves as the
Board's direct liaison with the Corporation's independent auditors, reviewing
and discussing the auditors' annual internal control recommendations and making
such other inquiries and recommendations as it deems necessary. The Audit
Committee consists of Stephen V. Ardia, Walter W. Aker and Frank W. Van Luik,
Jr.
The Executive Committee currently consists of Stephen V.
Ardia, Angelo Dounoucos, John L. Allen, Robert G. James, and Frank W. Van Luik,
Jr. The Executive Committee meets on call and has authority to act on most
matters during the intervals between Board Meetings. The Executive Committee met
two times during the fiscal year.
The Human Resource Committee met three times during the fiscal
year. The Human Resource Committee reviews and makes recommendations to the
Board regarding compensation matters, adjustments in compensation for officers
and employees, and employee benefit matters. Currently, the committee consists
of John L. Allen, Stephen V. Ardia, Volker A.
Mohnen and Rolf E. Soderstrom.
Directors who are not employees of the Corporation are
compensated by a directors fee of $1,000 per meeting attended and $1,000 for
each committee meeting attended. Directors who are officers or employees of the
Corporation receive no compensation for attendance at Board or Committee
meetings.
Stephen V. Ardia was appointed Chairman of the Board on May
25, 1995. In consideration for active service as Chairman, Mr. Ardia was granted
15,000 shares of common stock and granted a stock option for 100,000 shares at
the market value of the stock at the time of Mr. Ardia's appointment. The stock
options vest in equal parts with 50% exercisable on the date of grant and 50%
exercisable at the beginning of the following year. Mr. Ardia is also entitled
to an additional stock option of 25,000 shares at the beginning of his second
year as Chairman and 25,000 shares at the beginning of his third year as
Chairman, subject to the same vesting schedule and exercise price as the initial
stock option grant. All stock options become fully vested in the event of a
change of control of the Corporation. Mr. Ardia's responsibilities shall be
consistent with the bylaws of the Corporation and goals established by the Board
of Directors, and as a member of the Board he is subject to re-election by the
shareholders.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning
compensation paid by the Corporation to persons who were at December 31, 1995,
(i) the chief executive officer and (ii) the other most highly compensated
executive officers whose annual salary and bonus exceeded $100,000.
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<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards
-------------------------------- Other ----------------------
Name Annual
and Comp- Options/
Principal Salary Bonus ensation SARs
Position Year ($) ($) (1) ($) (#)
-------- ---- ----- ------- ----- ---
<S> <C> <C> <C> <C> <C>
A. Dounoucos 1995 100,000 96,498 0 15,000
President & 1994 100,000 8,525 0 10,000
CEO 1993 97,500 0 0 10,000
</TABLE>
(1) Represents amounts earned for performance in the year reported although
such amounts are not determined or paid until the following fiscal
year.
Option/SAR Grants in Last Fiscal Year
The following table provides further information on grants of
stock options pursuant to the Corporation's Amended and Restated Stock Option
Plan in fiscal year 1995 for the named executives in the Summary Compensation
Table on page __.
<TABLE>
<CAPTION>
% of Total
Options/SARS
Granted to Exercise or
Options/SARS Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
---- ----------- ----------- ------ ----
<S> <C> <C> <C> <C>
A. Dounoucos 15,000 30.9% 3.00 5/25/2005
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Value
The following table provides information for the named
executive officers with respect to (i) stock options exercised in fiscal year
1995, (ii) the number of stock options held at the end of fiscal year 1995, and
(iii) the value of in-the-money stock options at the end of fiscal year 1995.
-8-
<PAGE>
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised Number In-the-Money
Shares Options/SARs Options/SARs
Acquired Value at FY-End (#) at FY-End ($)
On Exercise Realized -------------------------------- -------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
A. Dounoucos 13,600 61,268 26,000 36,200 99,930 82,282
</TABLE>
Employment Agreements
The Corporation has a severance agreement with Angelo
Dounoucos which provides for severance compensation of one year's salary at the
higher amount of $100,000 or salary in effect at the time of termination plus an
incentive bonus prorated for the applicable period of the year of termination.
Mr. Dounoucos would also receive coverage of medical benefits in effect at that
time for a period of one year. Severance benefits are payable upon termination
of employment by the Board of Directors or any successor ownership or management
group, as a result of shareholder initiated action, or upon termination of
employment by executive due to unilateral changes in the executive's position,
compensation, or location of work. The severance arrangement does not apply to a
voluntary retirement or voluntary termination of employment by executive.
Pursuant to the agreement, Mr. Dounoucos is prohibited from having any
association with a competitor or potential competitor of the Corporation for a
period of two years following his departure from the Corporation in any
capacity.
ITEM 2: APPROVAL OF THE 1996 LONG TERM
INCENTIVE COMPENSATION PROGRAM
On December 18, 1995, the Board of Directors adopted the Environment
One Corporation 1996 Long Term Incentive Plan (the "Incentive Plan"), subject to
approval by the shareholders at the 1996 Annual Meeting. The purpose of the
Incentive Plan is to promote the interests of the Corporation by providing a
comprehensive equity-based incentive compensation program designed to enable the
Corporation to attract, retain, and reward key employees through performance
based incentives. To the extent that current and future officers (and other key
employees) have an equity interest in the Corporation, the interests of such
employees will be more closely associated with the interests of shareholders.
Further, equity-based incentives can be used to reinforce the relationship
between shareholder gains and employee compensation.
Adoption of the Incentive Plan has been recommended by the Human
Resource Committee and the Board of Directors. The only plan under which the
Corporation may currently grant equity-based awards to key employees is the
Corporation's Amended and Restated Stock Option Plan which has been in effect
since 1972. The proposed Incentive Plan is intended to be effective January 1,
1996, subject to shareholder approval, and will replace the Amended and Restated
Stock Option Plan as the primary method to provide equity-based incentives to
employees.
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<PAGE>
The Human Resource Committee believes an equity-based incentive plan is
an integral component of the Corporation's compensation program. Accordingly,
the Board of Directors believes that adoption of the proposed Incentive Plan is
necessary if the Corporation is to be able to continue to attract, retain, and
motivate highly qualified and talented individuals. The Incentive Plan will
provide the Corporation with greater flexibility in structuring incentives for
key employees than was available under the old Plan, including the availability
of incentive stock options, restricted stock awards, and stock appreciation
rights.
The following is a summary of the material provisions of the Incentive
Plan. This summary is qualified in its entirety by reference to the entire text
of the Incentive Plan, a copy of which may be obtained by contacting the
Corporation.
General Features Of The Incentive Plan
The Incentive Plan empowers the Corporation to award or grant,
from time to time, to officers, directors, and other key employees of the
Corporation (i) Incentive Stock Options within the meaning of Section 422 of the
Internal Revenue Code, (ii) Non-Qualified Stock Options, (iii) Stock
Appreciation Rights, and (iv) Restricted Stock (further described below) and any
combination of such awards. The Incentive Plan is designed to provide the
Corporation with flexibility in the grant of equity-based incentive compensation
to achieve the overall goals of the Plan. The Incentive Plan shall expire on
December 31, 2005 if not earlier terminated by the Board of Directors.
The Incentive Plan will be administered by a committee appointed by the
Board of Directors (the "Committee"), which shall consist of not less than three
disinterested directors of the Corporation. Members of the Committee are not
eligible to participate in the Incentive Plan. The Committee has the authority
to select participants from those employees eligible under the Plan, to
establish the terms and conditions of any awards, to authorize awards under the
Plan, and to interpret and construe any provision of the Plan.
Officers, directors and key employees of the Corporation and its
subsidiaries, shall be eligible to participate in the Incentive Plan.
Participants, who may receive awards under the Plan, shall be selected by the
Committee based upon such factors as the participant's past and potential
contributions to the success, profitability, and growth of the Corporation. No
determinations have yet been made as to any awards that may be granted under the
Plan to specific individuals. Whether an award may be exercised after a
participant's termination of employment shall be determined by the Committee,
subject to limits set forth below with respect to different types of awards
under the Plan.
Subject to adjustments noted below, 300,000 shares of Common Stock will
be available for issuance over the 10 year term of the Incentive Plan
(approximately 7% of the shares of Common Stock outstanding as of December 31,
1995), to be divided among the various components of the Incentive Plan in such
manner as the Committee shall determine. Shares of Common Stock issued under the
Plan may be newly issued shares, treasury shares, or any combination thereof.
Such maximum number of shares is subject to adjustment in the event of a
reorganization, stock split, stock dividend, combination of shares, merger,
consolidation or other recapitalization of the Corporation.
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<PAGE>
No award granted under the Incentive Plan, and no right or interest
therein, shall be assignable or transferable by a participant, except that
option rights may be transferred by will or the laws of descent and
distribution. The Board of Directors may amend or terminate the Incentive Plan
at any time, except that the Board of Directors may not, without approval by the
shareholders, make any amendment that would (i) increase the number of available
shares under the Plan, or (ii) change the definition of "eligible employees"
under the Plan.
Stock Options. Options designated as Incentive Stock Options
within the meaning of Section 422 of the Internal Revenue Code may be granted
under the Incentive Plan. The exercise price of an Incentive Stock Option shall
be at least 100% of the fair market value of the Common Stock on the date of
grant. Thus, an employee who is granted an Incentive Stock Option must pay a
price per share upon exercising the option which is at least equal to the fair
market price of a share at the time the option was granted. On December 31,
1995, the closing price of a share of Common Stock was $5.38. The number of
shares of Common Stock in respect of which Incentive Stock Options are first
exercisable by any optionee during any calendar year shall not have a fair
market value (determined at the date of grant) in excess of $ 100,000. Incentive
Stock Options shall be exercisable for such period or periods not in excess of
10 years after the date of grant as shall be determined by the Committee, except
that no Incentive Stock Option shall be exercisable earlier than one year
following the date the option is granted. Non-Qualified Stock Options may also
be granted under the Incentive Plan and will be exercisable for such period or
periods and at such price as the Committee shall determine.
The Committee shall have the authority, in its discretion, to
accelerate the time at which a stock option becomes exercisable, provided that
no Incentive Stock Option shall be exercisable earlier than one year following
the date the option is granted. If an option holder's employment is terminated
within one year following a change of control for any reason other than death or
disability, all stock options held by that optionee shall become exercisable
automatically as of the later of the date of termination or one year after the
date the option was granted and shall remain exercisable until the end of the
exercise period provided in the original grant of the stock option.
Stock options shall be exercisable only upon the payment in full to the
Corporation of the entire option exercise price (i) in cash, (ii) by the
transfer to the Corporation of shares of the Common Stock (at the fair market
value thereof on the date of exercise), or (iii) by a combination of such
methods of payment. Payment may not be made with Common Stock issued by
Corporation upon exercise of an option under the Plan or other stock option plan
unless the Common Stock has been held for at least one year.
Each grant of stock options shall be evidenced by an agreement between
the Corporation and optionee and shall contain such terms and provisions,
consistent with the Incentive Plan, as the Committee may approve.
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<PAGE>
Stock Appreciation Rights. Under the Incentive Plan, the Committee may
authorize the surrender of all or a portion of an option right in exchange for
which the optionee will receive a Stock Appreciation Right ("SAR"). An SAR will
entitle the holder to receive an amount payable in cash, Common Stock (valued at
the fair market value on the date of exercise), or a combination thereof (as
determined by the Committee) up to the excess of the fair market value of a
share of the Common Stock on the date of exercise over the option exercise price
per share of such shares, multiplied by the number of shares as to which the
holder is exercising the SAR. To the extent an option right is surrendered in
exchange for an SAR, such option is canceled. Conversely, if the optionee elects
to exercise the option, the right to receive the related SAR is canceled to the
extent the option is exercised.
Restricted Stock. An award of Restricted Stock consists of a specified
number of shares of Common Stock that are transferred to a participant and
subject to forfeiture to the Corporation under such conditions and for such
periods of time as the Committee may determine. A participant may vote and
receive dividends on the shares of Restricted Stock awarded, but may not sell,
assign, transfer, pledge or otherwise encumber such shares of Restricted Stock
during the forfeiture period. Certificates for Restricted Stock shall bear a
legend specifying the restrictions and conditions which will cause forfeiture of
the stock. The Committee may also require that the Restricted Stock be held in
escrow until all restrictions and events of forfeiture have lapsed.
If a participant's employment terminates for any reason except death or
disability prior to the expiration of the forfeiture period, all of the
participant's Restricted Stock not already vested will be forfeited and
surrendered to the Corporation. If a participant dies or terminates employment
because of a disability prior to the expiration of the forfeiture period, the
forfeiture period shall lapse on the date of death or date of disability
provided that such date is at least four years following the date of the award.
If a participant's employment is terminated within one year following a change
of control for any reason other than death or disability, any remaining
forfeiture period shall automatically expire on the date employment is
terminated. Notwithstanding the foregoing, the Committee shall have the
authority to accelerate the time at which any or all restrictions applying to
the Restricted Stock shall lapse.
Federal Income Tax Consequences
The anticipated federal income tax consequences relating to the
different types of awards under the Incentive Plan are as described below.
Upon Grant of Options and SARs. An optionee will not recognize any
taxable income at the time a stock option or related SAR is granted and the
Corporation will not be entitled to a federal income tax deduction at that time.
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<PAGE>
Incentive Stock Options. No ordinary income will be recognized by the
holder of an Incentive Stock Option at the time of exercise. The excess of the
fair market value of the shares at the time of exercise over the aggregate
option price will be an adjustment to alternative minimum taxable income for
purposes of the federal "alternative minimum tax" at the date of exercise. If
the optionee holds the shares for the greater of two years after the date the
option was granted and one year after the acquisition of such shares, the
difference between the aggregate option price and the amount realized upon
disposition of the shares will constitute a long term capital gain or loss, as
the case may be, and the Corporation will not be entitled to a federal income
tax deduction. If the shares are disposed of in a sale, exchange or other
"disqualifying disposition" within two years after the date of grant or within
one year after date of exercise, the optionee will realize taxable ordinary
income in an amount equal to the excess of the fair market value of the shares
purchased at a time of exercise over the aggregate option price (the bargain
purchase element) and the Corporation will be entitled to a federal income tax
deduction equal to such amount. The amount of any gain in excess of the bargain
purchase element realized upon a "disqualifying disposition" will be recognized
as capital gain to the holder. The Corporation will not be entitled to a federal
income tax deduction for the capital gain amount.
Non-Qualified Stock Options. Upon the exercise of a Non-Qualified Stock
Option, ordinary income will be recognized by the holder in an amount equal to
the excess of the fair market value of the shares purchased at the time of such
exercise over the aggregate option price. The Corporation will be entitled to a
corresponding federal income tax deduction. Upon any subsequent sale of the
shares, the optionee will generally recognize a taxable capital gain or loss
based upon the difference between the per share fair market value at the time of
exercise and the per share selling price at the time of the subsequent sale of
the shares.
Retroactive Stock Appreciation Rights. Upon the exercise of an SAR, the
holder will realize ordinary income on the amount of cash received and/or the
then current fair market value of the shares of Common Stock acquired and the
Corporation will be entitled to a corresponding federal income tax deduction.
The holder's basis in any shares of Common Stock acquired will be equal to the
amount of ordinary income which he or she recognized. Upon any subsequent
disposition of acquired shares, any gain or loss realized will be a capital gain
or loss.
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Restricted Stock. Unless a participant makes the election described
below, a participant receiving a grant of Restricted Stock will not recognize
income and the Corporation will not be allowed a deduction at the time such
shares of Restricted Stock are granted. While the restrictions on the shares are
in effect, a participant will recognize ordinary income equal to the amount of
any dividends received. When the restrictions on the shares are removed or
lapse, the excess of fair market value of the shares will be ordinary income to
the participant and will be allowed as a deduction for federal income tax
purposes to the Corporation. Upon disposition of the shares, the gain or loss
realized by the participant will be taxable as capital gain or loss. However, by
filing a Section 83(b) election with the Internal Revenue Service within 30 days
after the date of grant, a participant's ordinary income will be determined as
of the date of grant. In such a case, the amount of ordinary income recognized
by such a participant and deductible by the Corporation will be equal to the
excess of the fair market value of the shares as of the date of grant over the
amount paid, if any, by the participant for the shares. If such election is made
and a participant thereafter forfeits his or her stock, no deduction will be
allowed for the amount previously included in such participant's income.
Vote Required For Approval
The affirmative vote of a majority of the shares of common stock
voting, in person or by proxy, at the Annual Meeting is required for approval of
the Incentive Plan.
The Board of Directors recommends that shareholders vote "FOR" this
proposal.
ITEM 3: APPROVAL OF THE 1996 INCENTIVE PLAN
FOR NON-EMPLOYEE DIRECTORS
On December 18, 1995, the Board of Directors adopted the 1996 Incentive
Plan for Non- Employee Directors (the "1996 Directors Plan"), subject to
approval by the shareholders at the 1996 Annual Meeting.
This Plan will replace the provisions of the Amended and Restated Stock
Option Plan that permitted grants of nonstatutory options to non-employee
directors. Similar to the 1996 Long Term Incentive Plan for employees, the
purpose of the 1996 Directors Plan is to increase the ownership interest in the
Corporation of non-employee directors and to provide further incentives to serve
as a director of the Corporation. Adoption of the 1996 Directors Plan has been
recommended by the Human Resource Committee and the Board of Directors as a way
to further align the interests directors and shareholders by reinforcing the
relationship between shareholder gains and director financial interests.
The following is a summary of the material provisions of the 1996
Directors Plan. This summary is qualified in its entirety by reference to the
entire text of the Plan, a copy of which may be obtained by contacting the
Corporation.
Description of the Plan
Upon approval by the shareholders, the 1996 Directors Plan will become
effective. The 1996 Directors Plan will continue until the later of May 31, 2005
or the day after the 2005 Annual Meeting of Shareholders, unless earlier
terminated.
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Under the terms of the 1996 Directors Plan, up to 100,000 shares of the
Corporation's common stock will be available for issuance under the Plan. The
Plan provides for an annual formula-based grant of non-qualified stock options
to eligible directors with the exercise price of the options being set at the
fair market value of the stock on the date the option is granted. Only directors
of the Corporation who are not employees of the Corporation or any affiliate of
the Corporation will be granted options under the 1996 Plan. There are currently
seven such directors.
The 1996 Directors Plan provides that during the time period beginning
June 1, 1996, and ending the later of 2005 Annual Meeting of Shareholders or May
31, 2005, and subject to the limitation on the number of shares subject to the
plan, on the third Tuesday of December of each year, each current non-employee
director shall be granted an option to purchase the number of shares of common
stock represented by the fair market value on the grant date which, when rounded
to the nearest multiple of ten, equals the greater of (i) $10,000 or (ii) the
average directors cash compensation payable by the Corporation to non-employee
and non-officer directors for the current fiscal year. The first grant shall be
made on December 17, 1996 contingent upon approval of the Plan by the
Shareholders at the 1996 Annual Meeting.
The purchase price per share of common stock for which each option is
exercisable shall be equal to the fair market value per share of common stock on
the date the option is granted, which shall be the closing per-share price of
the common stock based upon its consolidated trading as generally reported for
NASDAQ listed stocks. Each option granted under the Plan will become exercisable
in total one year after the date of grant of the option. Each option granted
under the Plan shall expire ten years from the date of the grant, and shall be
subject to earlier termination as provided in the Plan. The optionee cannot
transfer or assign the option other than by will or the laws of descent and
distribution, or pursuant to a qualified domestic relations order.
No federal income tax consequences are incurred by the Corporation or
the optionee at the time of the grant. At the time of exercise, the optionee
will recognize income in the amount of the difference between the option price
and the value of the stock on the date of exercise, and the Corporation will be
entitled to a corresponding deduction for federal income tax purposes in an
equal amount, upon compliance with any requisite income tax withholding
provisions. Upon sale of the stock, the optionee will realize gain or loss equal
to the difference between the selling price of the stock and its fair market
value on the date of exercise.
The Board of Directors may not amend the provisions of the Plan
regarding the amount of shares covered by options granted to directors, the
exercise price of options, or the timing of option grants, more than once within
any six-month period, except to comply with changes in applicable law. Subject
to the foregoing, the Plan may be amended without shareholder approval to the
extent permitted by applicable law. Currently, regulations issued under Section
16 of the Securities Exchange Act of 1934 would require shareholder approval of
any amendment that would: materially increase the benefits accruing to
participants under the Plan; materially increase the number of shares that may
be issued under the Plan; or materially modify the requirements as to
eligibility for participation in the Plan.
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Plan Benefits; Votes Required for Approval
Based on the market price of $5.50 per share on December 18, 1995, the
1996 Directors Plan will result in the issuance of options to purchase, at
market price on the date of grant, a total of approximately 1,820 shares of
common stock to non-employee directors for each year of the Plan.
The affirmative vote of a majority of the shares of common stock
voting, in person or by proxy, at the Annual Meeting is required for approval of
the 1996 Directors Plan.
The Board of Directors recommends a vote "FOR" this proposal.
ITEM 4: APPROVAL OF STAGGERED BOARD OF DIRECTORS
AND OTHER MATTERS RELATING TO DIRECTORS
This item is to approve amendments to Article Fourth of the
Corporation's Certificate of Incorporation (together with conforming amendments
to Article III, Section 1 of the Corporation's Bylaws) (the "Staggered Board
Amendments"). The Staggered Board Amendments would (1) classify the Board of
Directors into three classes as nearly equal in number as possible, each of
which, after an interim arrangement, will serve for three years with one class
being elected each year; (2) provide that directors may be removed by
shareholders only for cause and only with the approval of holders of eighty
percent (80%) of the outstanding shares; (3) provide that the number of
directors constituting the Board of Directors shall be not less than six and not
more than eleven and shall be set by the Board of Directors from time to time;
and (4) provide that the Staggered Board Amendments to the Certificate of
Incorporation and Bylaws may be amended or repealed only by an affirmative vote
of 75% of the outstanding shares.
Under existing provisions of the Corporation's Restated Certificate and
Bylaws, directors of the Corporation are elected annually for terms of one year
and may be removed from office with or without cause by the vote of the holders
of a majority of the common stock. The Bylaws currently provide that the number
of directors shall be not less than six (6) nor more than eleven (11), as
determined by the shareholders at each annual meeting, and that vacancies on the
Board of Directors occurring by reason of the removal of directors without cause
may be filled by a majority of the shareholders.
Staggered Board
The Staggered Board Amendments will divide the directors into three
approximately equal classes. The directors of each class will serve three-year
terms and the term of one class will expire each year.
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To implement the staggered Board, the Staggered Board Amendments would
permit Class I, Class II and Class III directors initially to be elected at the
1996 Annual Meeting for terms of one year, two years and three years,
respectively. See Proposal; "Election of Directors", above. If the staggered
Board Amendments are adopted, Class I directors elected at the 1996 Annual
Meeting will hold office until the 1997 annual meeting; Class II directors
elected at the meeting will hold office until the 1998 annual meeting; and Class
III directors elected at the meeting would hold office until the 1999 annual
meeting; and, in each case, until their successors are duly elected and
qualified or until earlier death, resignation or removal. At each annual meeting
commencing with the 1997 annual meeting, directors elected to succeed those in
the class whose terms then expire will be elected for three-year terms so that
the terms of one class of directors will expire each year. Thus, after 1996,
shareholders will elect only one-third of the directors at each annual meeting.
Each director will serve until a successor is elected and qualified or until
earlier death, resignation or removal.
For information regarding the nominees for election to the Board of
Directors at the 1996 Annual Meeting see Item 1 "Election of Directors", above.
The class of directors in which each director will initially serve if the
Staggered Board Amendments are approved is as follows: Class I - W. Aker, and L.
Grenback; Class II - R. Soderstrom and A. Dounoncos; and Class III - J. Allen,
R. James, and S. Ardia.
Advantages of a Staggered Board. The Board of Directors believes that
dividing the directors into three classes is advantageous to the Corporation and
its shareholders because by providing that directors will serve three-year terms
rather than one-year terms, the likelihood of continuity and stability in the
policies formulated by the Board will be enhanced. While management has not
experienced any problems with continuity in the past, it wishes to ensure that
this experience will continue and believes that the staggered election of
directors will promote continuity because only one-third of the directors will
be subject to election each year.
The amendment would significantly extend the time required to make any
change in control of the Board and will tend to discourage any hostile takeover
bid for the Corporation. Presently, a change in control of the Board can be made
by the holders of a majority of the Corporation's shares at a single annual
meeting. Under the proposed amendment, it will take at least two annual meetings
for such shareholders to make a change in control of the Board, since only a
minority of the directors will be elected at each meeting. Staggered terms would
guarantee that approximately two-thirds of the directors, or more, at any one
time have at least one year's experience as directors of the Corporation.
Disadvantages of a Staggered Board. The amendment will make it more
difficult for shareholders to change the composition of the Board even if
shareholders believe such a change would be desirable. Also, because of the
additional time required to change control of the Board, the amendment will tend
to perpetuate incumbent management. Since the amendment will increase the amount
of time required for a takeover bidder to obtain control of the Corporation
without the cooperation of the Board, even if the takeover bidder were to
acquire a majority of the Corporation's outstanding stock, it will tend to
discourage certain tender offers, perhaps including some tender offers which
shareholders might feel would be in their best interests. As a result,
shareholders may be deprived of opportunities to sell some or all of their
shares in a tender offer. Tender offers for control usually involve a purchase
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price higher than the current market price and may involve a bidding contest
between competing takeover bidders. The amendment could also discourage open
market purchases by a potential takeover bidder. Such purchases could
temporarily increase the market price of the Corporation's stock, enabling
shareholders to sell their shares at a price higher than that which would
otherwise prevail. In addition, the amendments could decrease the market price
of the Corporation's common stock by making the stock less attractive to persons
who invest in securities in anticipation of an increase in price if a takeover
attempt develops.
Size of Board, Removal of Directors, and Amendments
The proposed amendment to the Certificate provides that the number of
directors which shall constitute the entire Board shall be not less than six (6)
nor more than eleven (11), and shall be fixed from time to time by resolution
adopted by the Board of Directors; that directors may be removed from office by
shareholders only for cause and only by the affirmative vote of holders of
eighty percent (80%) of the Corporation's common stock and that the Staggered
Board Amendments may be amended or repealed only by an affirmative vote of 75%
of the outstanding shares.
Advantages of Provisions Concerning Removal of Directors and
Amendments. The primary purpose of these amendments is to preclude the removal
of any director or directors by a takeover bidder or otherwise, unless removal
is warranted for reasons other than control of the Board. For a takeover bidder
to obtain effective control of the Corporation, it presently would need to
control at least a majority of the Board votes. One popular method for a
takeover bidder to obtain control is to acquire a majority of the outstanding
shares of a company through a tender offer or open market purchases and to use
that voting power to remove the existing directors and replace them with persons
chosen by the takeover bidder. Requiring cause in order to remove a director
would defeat this strategy, thereby encouraging potential takeover bidders to
obtain the cooperation of the existing Board before attempting a takeover. Under
this amendment, directors can still be removed but only by a vote of eighty
percent (80%) of the shareholders at an annual meeting or a special meeting of
the shareholders called by a majority of the Board of Directors for such
purpose, and only for cause. The proposal is not being made as a result of any
prior effort to remove a director. The Staggered Board Amendments can only be
amended or repealed by a vote of 75% of the outstanding shares to prevent a
takeover bidder or other entity from eliminating the protections of the
Staggered Board Amendments by a majority vote in the course of a takeover
attempt. The Board believes this 75% vote requirement is an essential part of
the protection provided by the Staggered Board Amendments. These amendments are
consistent with, and supportive of, the concept of a staggered board in that
they tend to moderate the pace of change in the Board of Directors. The Board
believes that the amendments will properly condition a director's continued
service upon his ability to serve rather than his position relative to a
dominant shareholder.
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Disadvantages to Provisions Concerning Removal of Directors. The
amendment will make the removal of any director more difficult, even if such
removal is believed by the shareholders to be in their best interests, and will
eliminate the shareholder's ability to remove a director at will. Since the
amendment will make the removal of directors more difficult, it will increase
the directors' security in their positions and, since the Board has the power to
retain and discharge management, could perpetuate incumbent management.
The proposed amendment permits removal of directors only for "cause."
While what constitutes "cause" has not been conclusively established by the New
York courts, actions such as embezzlement, disclosure of trade secrets, or other
violations of fiduciary duty have been found to constitute cause for removal.
Courts have indicated that the desire to take over management of a company or
the failure to cooperate in management's plans for a company do not constitute
cause for removal. One effect of the proposed amendment may be to make it more
difficult for the holders of a majority of the shares of the Corporation to
remove directors, should they deem it to be in their best interests to do so.
The proposed amendment would render more difficult, and may discourage, an
attempt to acquire control of the Corporation without the approval of the
Corporation's management. Shareholders should recognize that the amendment will
make more difficult the removal of a director in circumstances which do not
constitute a takeover attempt and where, in the opinion of the holders of a
majority of the Corporation's outstanding shares, cause for such removal may
exist. Moreover, the proposed amendment may have the effect of delaying an
ultimate change in existing management which might be desired by a majority of
the shareholders.
Effect of the Staggered Board Amendments
The adoption of the Staggered Board Amendments would make more
difficult or discourage a proxy contest or the assumption of control by a holder
of a substantial block of the Corporation's common stock or the removal of
incumbent directors or the change of control of the Board and could thus have
the effect of entrenching incumbent management. At the same time, the Staggered
Board Amendments would serve to ensure that the Board and management, if
confronted by a surprise proposal from a third party who has acquired a block of
the Corporation's common stock, will have sufficient time to review the proposal
and appropriate alternatives to the proposal and to attempt to negotiate a
better transaction, if possible, for the shareholders.
The Staggered Board Amendments are being presented to shareholders for
their adoption as a single proposal. As discussed above, the Board of Directors
believes the Staggered Board Amendments, taken together, would, if adopted,
effectively reduce the possibility that a third party could effect a sudden or
surprise change in majority control of the Corporation's Board of directors
without the support of the incumbent Board.
The Board of Directors of the Corporation believes that if a takeover
bidder were to purchase a significant or controlling interest in the
Corporation, its ability to remove the Corporation's directors and obtain
control of the Board and thereby to remove the Corporation's management would
severely curtail the Corporation's ability to negotiate effectively with such
purchaser. The threat of obtaining control of the Board would deprive the Board
of the time and information necessary to evaluate the proposal or transaction,
to study alternative proposals and to help ensure that the best price is
obtained in any transaction involving the Corporation which may ultimately be
undertaken.
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The proposed amendments are intended to encourage persons seeking to
acquire control of the Corporation to initiate such an acquisition through
arms-length negotiations with the Corporation's management and Board of
Directors. Such amendments, if they are adopted, could also have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Corporation, even though such an attempt might be
beneficial to the Corporation and its shareholders. In addition, since the
amendments may discourage accumulations of large blocks of the Corporation's
stock, adoption of the amendments could tend to reduce the temporary
fluctuations in the market price of the Corporation's common stock which are
caused by such accumulations. Accordingly, shareholders could be deprived of
certain opportunities to sell their shares at a temporarily higher market price.
The Board of Directors is asking shareholders to consider and adopt the
Staggered Board Amendments in order to discourage undesirable forced
transactions, described above, which involve an actual or threatened change of
control of the Corporation. The proposed amendments are designed to make it more
difficult and time-consuming to change majority control of the Board and thus to
reduce the vulnerability of the Corporation to an unsolicited takeover proposal,
particularly a proposal that does not contemplate the acquisition of all of the
Corporation's outstanding shares, or an unsolicited proposal for the
restructuring or sale of all or part of the Corporation. The Board believes that
adoption by shareholders of the Staggered Board Amendments will serve to
encourage any person intending to attempt such a takeover or restructuring to
first try to negotiate with the Board and management of the Corporation and that
the Board and management will therefore be better able to protect the interest
of all shareholders.
Vote Required for Approval
The affirmative vote, in person or by proxy, of a majority of the
shares of common stock outstanding is required for approval of the Staggered
Board Amendments.
The Board of Directors recommends that shareholders vote "FOR" this
proposal.
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP, Independent Certified Public
Accountants, was retained by the Corporation at the direction of the Board of
Directors, in accordance with the recommendation of its Audit Committee. The
independent auditors have audited the financial statements of the Corporation
for fiscal year 1995 and performed such other nonaudit services as the Board
requested. KPMG Peat Marwick LLP, as independent auditors, will have
representatives at the Annual Meeting who will have an opportunity to make a
statement and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
If a shareholder proposal is to be considered by the
Corporation for inclusion in the Corporations's 1997 Proxy Statement, it must be
received by the Secretary of the Corporation at 2773 Balltown Road, Schenectady,
New York 12309-1090 no later than December 31, 1996. Any shareholder proposal
must be timely submitted and meet the other requirements established by the
Securities and Exchange Commission in order to be considered for inclusion in
the Corporation's Proxy Statement for the Corporation's 1997 Annual Meeting.
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OTHER MATTERS
The Board of Directors is not aware of any other matters that
may come before the Meeting. The proxies named in the enclosed proxy card are,
however, given discretionary authority to act on any other matters that may
properly come before the Meeting.
By Order of the Board of Directors
Edward J. Grogan
Corporate Secretary
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Form of Proxy
PROXY FOR 1996 ANNUAL MEETING OF
ENVIRONMENT ONE CORPORATION
This Proxy Is Solicited by the Board of Directors.
The undersigned hereby appoints __________________,
__________________, and ___________________ as Proxies, each with power to
appoint his or her substitute, and hereby authorizes them to represent and to
vote, as designated below, all shares of common stock of Environment One
Corporation held of record by the undersigned on April 4, 1996 at the Annual
Meeting of Shareholders to be held May 23, 1996 and at all adjourned or
postponed sessions thereof:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS 1 THROUGH 4.
1. The election of seven directors to hold office for staggered terms or, if
Item 4 is not approved, to elect seven directors to hold office until the next
annual meeting of shareholders.
|_| FOR all nominees listed below
(Except as marked to the contrary below)
|_| WITHHOLD AUTHORITY to vote
for all nominees listed below
W. W. Aker, J. L. Allen, S. V. Ardia, A. Dounoucos, L. G. Grenback, R. G. James,
and R. E. Soderstrom.
INSTRUCTION: To withhold authority to vote for any individual nominee cross out
the nominee's name.
2. Approval of 1996 long-term incentive compensation plan.
FOR |_| AGAINST |_| ABSTAIN |_|
3. Approval of the 1996 incentive plan for non-employee directors.
FOR |_| AGAINST |_| ABSTAIN |_|
4. Approval of staggered Board of Directors and related matters.
FOR |_| AGAINST |_| ABSTAIN |_|
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In their discretion, the proxies are authorized to vote on any other
business that may properly come before the Annual Meeting or any adjournment
thereof.
This proxy, when properly executed, shall be voted as directed above.
In the absence of specific direction, a properly executed proxy will be voted
"For" items 1 through 4.
Dated: _______________________________ , 1996
Signature: __________________________________
Signature: __________________________________
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as executor, administrator, trustee or
guardian, please give full title. If a corporation, please sign in full
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE ACT PROMPTLY - SIGN, DATE AND MAIL YOUR PROXY CARD TODAY
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ENVIRONMENT ONE CORPORATION
1996 INCENTIVE PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose. The purpose of the 1996 Incentive Plan for
Non-Employee Directors (the Plan) of Environment One Corporation (the Company)
is to increase the ownership interest in the Company of non-employee Directors
whose services are considered essential to the Company's continued progress and
to provide a further incentive to serve as a Director of the Company.
2. Administration. The Plan shall be administered by a
committee (the Committee) appointed by the Board, consisting of not less than a
sufficient number of disinterested members of the Board so as to qualify the
Committee to administer the Plan as contemplated by Rule 16b-3 promulgated by
the Securities and Exchange Commission pursuant to the Securities and Exchange
Act of 1934 (Exchange Act), or any successor or replacement rule adopted by the
Commission (Rule 16b-3). Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan, to establish, amend, and rescind any
rules and regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan; provided, however,
that the Committee shall have no discretion with respect to the eligibility or
selection of Directors to receive options under the Plan, the number of shares
of stock subject to any such options granted under the Plan, or the purchase
price thereunder, the vesting period, or the timing of option grants, and
provided further that the Committee shall not have the authority to take any
action which would result in the loss of eligibility of awards granted under the
Plan for the formula based exemption under Rule 16b-3 (c)(2)(ii) (A) of the
Exchange Act. The determination of the Committee in the administration of the
Plan, as described herein, shall be final and conclusive and binding upon all
persons including, without limitation, the Company, its Stockholders and persons
granted options under the Plan. The secretary of the Company shall be authorized
to implement the Plan in accordance with its terms and to take such actions of a
ministerial nature as shall be necessary to effectuate the intent and purposes
thereof.
3. Participation in the Plan. All Directors of the Company who
are not employees of the Company or any affiliate of the Company (Non-Employee
Directors) shall participate in the Plan.
4. Shares Subject to the Plan. Subject to adjustment as
provided in Section 7, an aggregate of 100,000 shares of Company Common Stock
(Stock) shall be available for issuance upon the exercise of options granted
under the Plan. The shares of Stock deliverable upon the exercise of options may
be made available from authorized but unissued shares or shares reacquired by
the Company, including shares purchased in the open market or in private
transactions. If any option granted under the Plan shall expire or terminate for
any reason without having been exercised in full, the shares subject to, but not
delivered under, such option shall again become available for the grant of other
options under the Plan. However, in the event that prior to the termination,
expiration, or lapse of the option grant, the holder of the option grant at any
time received one or more benefits of ownership pursuant to such grant (as
defined by the Securities and Exchange Commission, pursuant to any rule or
interpretation promulgated under Section 16 of the Exchange Act), the shares
subject to such grant shall not be made available for regrant under the Plan. No
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shares deliverable to the Company in full or partial payment of the purchase
price payable pursuant to paragraph 6(f) shall become available for the grant of
other options under the Plan.
5. Non-Statutory Stock Options. All options granted under the
Plan shall be non- statutory options not intended to qualify under Section 422
of the Internal Revenue Code of 1986, as amended.
6. Terms, Conditions, and Form of Options. Each option granted
under this Plan shall be evidenced by a written agreement in such form as the
Committee shall from time-to-time approve, which agreements shall comply with
and be subject to the following terms and conditions:
(a) Option Grant Dates. During the time period
beginning June 1, 1996, and ending the later of the 2005 Annual Meeting of
Stockholders or May 31, 2005, and subject to the limitation on the number of
shares subject to the Plan, on the third Tuesday of December of each year, each
current Non-Employee Director shall be granted an option to purchase the number
of shares of Stock represented by the fair market value on the grant date
(consistent with method used in paragraph 6(b)) which, when rounded to the
nearest multiple of ten, equals the greater of (i) $10,000 or (ii) the average
individual directors' cash compensation payable by the Company to non-employee
and non-officer directors for the current fiscal year. The first grant shall be
made on December 17, 1996 contingent upon approval of the Plan by the
Stockholders at the 1996 Annual Meeting of Stockholders.
(b) Purchase Price. The purchase price per share of
Stock for which each option is exercisable shall be one hundred percent (100%)
of the fair market value per share of Stock on the date the option is granted,
which shall be the closing per-share price of the Stock based upon its
consolidated trading as generally reported for NASDAQ listed stocks.
(c) Exercisability and Term of Options. Each option
granted under the Plan will become exercisable in total one (1) year after the
date of grant of the option. Each option granted under the Plan shall expire ten
(10) years from the date of the grant, and shall be subject to earlier
termination as hereinafter provided.
(d) Termination of Service. In the event of the
termination of service by the holder of any option for reasons other than those
set forth in paragraph (e) hereof, the then outstanding options of such holder
may be exercised within one (1) year after such termination only to the extent
that they were exercisable on the date of such termination, or on their stated
expiration date, whichever occurs first.
(e) Retirement, Disability or Death. In the event of
termination of service by the holder of any option by reason of retirement from
the Board, total and permanent disability (defined below), or death, each of the
then outstanding options of such holder will mature immediately and become
exercisable in accordance with paragraph (c) above and the holder (or legal
representative) may exercise the options at any time within two (2) years after
such retirement, disability, or death but in no event after the expiration date
of the term of the option. However, if the holder dies following termination of
service on the Board by reason of retirement or total and permanent disability,
such options shall only be exercisable for one (1) year after the holders death
or two (2) years after retirement or termination for total and permanent
disability, whichever is longer, or until the expiration date of the term of the
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option, if earlier. For purposes of this Plan, the term total and permanent
disability shall mean the inability to perform usual Board of Director duties
for the Company due to a medical condition that is expected to last for one (1)
year or more as certified by a statement by a qualified outside physician;
provided that no such determination shall be made if the determination may cause
the Plan to fail to comply with the formula award exception for grants of
options to Directors, as set forth in Rule 16b-3(c) (ii) (A) of the Exchange
Act.
(f) Payment. Options may be exercised only upon
written notice of exercise and payment to the Company in full of the purchase
price of the shares to be delivered. Such payment shall be made in cash or in
Stock which has been held for six (6) months, or in a combination of cash and
Stock which has been held for six (6) months. The sum of the cash and the fair
market value of such Stock shall be at least equal to the aggregate purchase
price of the share to be delivered.
7. Adjustment Upon Changes in Stock. If there shall be any
change in the Stock subject to the Plan or to any option granted thereunder
through merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, exchange of stock or other change in the corporate structure of the
Company, appropriate adjustments shall be made in the aggregate number and kind
of shares or other securities or property subject to the Plan, and the number
and kind of shares or other securities or property subject to outstanding and to
subsequent option grants and in the purchase price of outstanding options to
reflect such changes; provided that no such adjustment shall be made if the
adjustment may cause the Plan to fail to comply with the formula award exception
for grants of options to Directors, as set forth in Rule 16b-3(c)(2)(ii) (A) of
the Exchange Act.
8. Options Non-Assignable and Non-Transferable. Each option
and all rights thereunder shall be non-assignable and non-transferable other
than by will or the laws of descent and distribution or pursuant to the
requirements of a Qualified Domestic Relations Order and shall be exercisable
during the holders lifetime only by the holder or the holders guardian or legal
representative.
9. Limitation of Rights.
(a) No Right to Continue as a Director. Neither the
Plan, nor the granting of an option nor any other action taken pursuant to the
Plan, shall constitute or be evidence of any agreement or understanding, express
or implied, that the Director has a right to continue as a Director for any
period of time, or at any particular rate of compensation.
(b) No Stockholders Rights for Options. An optionee
shall have no rights as a Stockholder with respect to the shares covered by
options granted hereunder until the date of the issuance of a stock certificate
therefore, and no adjustment will be made for dividends or other rights for
which the record date is prior to the date such certificate is issued.
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10. Effective Date and Duration of Plan. The Plan shall become
effective immediately following approval by the Stockholders at the 1996 Annual
Meeting of Stockholders. The period during which option grants shall be made
under the Plan shall terminate on the day following the later of the 2005 Annual
Meeting of Stockholders or May 31, 2005 (unless the Plan is extended or
terminated at an earlier date by Stockholders) but such termination shall not
affect the terms of any then outstanding options.
11. General Provisions.
(a) Notice. Any written notice to the Company
required by any of the provisions of this Plan shall be addressed to the
Secretary of the Company and shall become effective when it is received.
(b) Use of Proceeds. Proceeds from the sale of Stock
pursuant to options granted under the Plan shall constitute general funds of the
Company.
(c) Fractional Shares. No fractional shares of Stock
shall be issued pursuant to options granted hereunder, but in lieu thereof, the
cash value of such fraction shall be paid.
(d) Change in Control. Notwithstanding the provisions
of paragraph 6(c) herein, in the event of a Change of Control (as defined in the
Environment One Corporation's 1996 Incentive Compensation Plan) during the term
of one or more options, each such option which is outstanding as of the
effective date of the Change of Control shall, effective as of the effective
date of such Change of Control, become exercisable with respect to all
unexercised shares of stock thereunder for the remainder of its term.
(e) Successors. All obligations of the Company under
the Plan, with respect to options granted hereunder, shall be binding on any
successor to the Company, whether the existence of such successor is the result
of a direct or indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the business and/or assets of the Company.
(f) Amendment, Modification, and Termination. Subject
to the terms set forth in this paragraph, the Board may terminate, amend, or
modify the Plan at any time and from time to time; provided, however, that the
provisions set forth in the Plan regarding the amount of securities to be
awarded to Directors, the price of securities awarded to Directors, and the
timing of grants of options to Directors, may not be amended more than once
within any six (6) month period, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act of 1974 as
amended from time to time, or the rules thereunder.
(g) Governing Law. The validity, construction, and
effect of the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of New York.
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ENVIRONMENT|ONE CORPORATION
1996 INCENTIVE COMPENSATION PLAN
1. Preamble. Effective as of May 1, 1991, the Board of Directors of
Environment|One Corporation adopted the Environment|One Corporation Amended and
Restated Stock Option Plan ("1991 Plan"). The 1991 Plan provided for the
granting of stock options to directors, officers and other key employees of the
Company.
This document sets forth the terms of the Environment|One
Corporation 1996 Incentive Compensation Plan ("1996 Plan"), which shall become
effective as of January 1, 1996, contingent upon the approval of the 1996 Plan
by the shareholders of Environment|One Corporation. Options and other rights
granted prior to January 1, 1996 pursuant to the 1991 Plan shall remain subject
to the terms of the 1991 Plan and any implementing agreements. Options and other
rights described in this 1996 Plan document shall be granted after December 31,
1995 only in accordance with the terms of this 1996 Plan document.
2. Purpose. The purpose of the 1996 Plan is to promote the interests of
the Company by providing current and future directors, officers and key
employees with an equity or equity- based interest in the Company, so that the
interests of such individuals will be closely associated with the interests of
shareholders by reinforcing the relationship between shareholder gains and
individual compensation. Pursuant to this 1996 Plan, eligible individuals may
receive (a) Incentive Stock Options, (b) Non-Statutory Stock Options, (c) Stock
Appreciation Rights, and/or (d) Restricted Stock Awards.
3. Eligibility. Directors, officers and key employees of the Company or
its Subsidiaries shall be eligible to participate in the 1996 Plan. Participants
shall be selected by the Committee based upon such factors as the eligible
individual's past and potential contributions to the success, profitability, and
growth of the Company.
4. Definitions. As used in this 1996 Plan,
(a) "Board of Directors" shall mean the Board of Directors of
the Company.
(b) "Committee" shall mean the committee appointed by the
Board of Directors to administer the 1996 Plan in accordance with Paragraph 15.
(c) "Common Stock" shall mean the Common Stock, par value
$0.10 per share, of the Company.
(d) "Company " shall mean Environment|One Corporation.
(e) "Disinterested Director" shall mean a member of the Board
of Directors who has not, at any time within one year prior to the member's
participating in the administration of the 1996 Plan, received stock, stock
options, stock appreciation rights or any other equity security of the Company
pursuant to the 1996 Plan or any other plan of the Company or its affili ates.
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(f) "Eligible Individuals" shall mean persons described in
Paragraph 3; provided that only employees of the Company shall be eligible for
grants of Incentive Stock Options.
(g) "Incentive Stock Option" shall mean the right granted to
an Eligible Individual to purchase Common Stock under this 1996 Plan, the grant,
exercise and disposition of which are intended to comply with, and to be
governed by, Internal Revenue Code Section 422.
(h) "Market Value per Share" shall mean, at any date, the fair
market value per share of the shares of Common Stock, as determined in good
faith by the Committee.
(i) "Non-Statutory Stock Option" shall mean the right granted
to an Eligible Individual to purchase Common Stock under this 1996 Plan, the
grant, exercise and disposition of which are not intended to be subject to the
requirements and limitations of Internal Revenue Code Section 422.
(j) "Optionee" shall mean the Eligible Individual to whom an
Option Right is granted pursuant to an agreement evidencing an outstanding
Incentive Stock Option or Non- Statutory Stock Option.
(k) "Option Right" shall mean the right to purchase a share of
Common Stock upon exercise of an outstanding Incentive Stock Option or
Non-Statutory Stock Option.
(l) "Restricted Stock Award" shall mean an award of Common
Stock to an Eligible Individual that is subject to the restrictions described in
Paragraph 10 and subject to tax under Internal Revenue Code Section 83.
(m) "Stock Appreciation Right" or "SAR" shall mean an Eligible
Individual's right to receive a payment described in Paragraph 9.
(n) "Subsidiary" shall mean any corporation in which (at the
time of determination) the Company owns or controls, directly or indirectly, 50
percent or more of the total combined voting power of all classes of stock
issued by the corporation.
5. Shares Available Under the 1996 Plan.
(a) The shares of Common Stock which may be made the subject
of rights or awards granted pursuant to this 1996 Plan may be treasury shares or
shares of original issue or a combination of the foregoing.
(b) Subject to adjustments in accordance with Paragraph 12 of
this 1996 Plan, the maximum number of shares of Common Stock that may be the
subject of Option Rights, Stock Appreciation Rights or Restricted Stock Awards
granted pursuant to this 1996 Plan shall be 300,000 shares of Common Stock which
are made available by virtue of this 1996 Plan.
6. Grants of Option Rights Generally. The Committee may, from time to
time and upon such terms and conditions as it may determine, authorize the grant
of Option Rights to Eli gible Individuals. Each such grant may utilize any or
all of the shares of Common Stock authorized under this 1996 Plan and shall be
subject to all of the limitations, contained in the following provisions:
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(a) Each grant shall specify whether it is intended as a grant
of Incentive Stock Options or Non-Statutory Stock Options.
(b) Each grant shall specify the number of shares of Common
Stock to which it pertains.
(c) Successive grants may be made to the same Eligible
Individual whether or not any Option Rights previously granted to such Eligible
Individual remain unexercised.
(d) Upon exercise of an Option Right, the entire option price
shall be payable (i) in cash, (ii) by the transfer to the Company by the
Optionee of shares of Common Stock with a value (Market Value per Share times
the number of shares) equal to the total option price, or (iii) by a combination
of such methods of payment. Payment may not be made with Common Stock issued to
the Optionee by the Company upon his or her prior exercise of an option under
this 1996 Plan or any other option plan unless the Common Stock received upon
that prior exercise shall have been held by the Optionee for at least one year.
(e) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by any officer designated by the
Committee for this purpose and delivered to and accepted by the Eligible
Individual and shall contain such terms and provisions, consistent with this
1996 Plan, as the Committee may approve.
7. Special Rules for Grants of Incentive Stock Options.
(a) Each grant of Incentive Stock Options shall specify an
option price per share not less than the Market Value per Share on the date the
Option Right is granted; provided that, if an Incentive Stock Option is granted
to any Eligible Individual who, immediately after such option is granted, is
considered to own stock possessing more than ten percent of the combined voting
power of all classes of stock of the Company, or any of its subsidiaries, then
the option price per share shall be not less than 110 percent of the Market
Value per Share on the date of the grant of the option, and such option may be
exercised only within five years of the date of the grant.
(b) The duration of each Incentive Stock Option by its terms
shall be not more than ten years from the date the option is granted as
specified by the Committee.
(c) The Committee shall establish the time or times within the
option period when the Incentive Stock Option may be exercised in whole or in
such parts as may be specified from time to time by the Committee, except that
Incentive Stock Options shall not be exercisable earlier than one year, nor
later than 10 years, following the date the option is granted. The date of grant
of each Option Right shall be the date of its authorization by the Committee.
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(d) Except as provided in Paragraph 13, or as may be provided
by the Committee at the time of grant, (i) in the event of the Optionee's
termination of employment due to any cause, including death or retirement,
rights to exercise Incentive Stock Options shall cease, except for those which
are exercisable as of the date of termination, and (ii) rights that are
exercisable as of the date of termination shall remain exercisable for a period
of three months following a termination of employment for any cause other than
death or disability, and for a period of one year following a termination due to
death or disability. However, no Incentive Stock Option shall, in any event, be
exercised after the expiration of ten years from the date such option is
granted, or such earlier date as may specified in the option.
(e) No Incentive Stock Options shall be granted hereunder to
any Optionee that would allow the aggregate fair market (determined at the time
the option is granted) of the stock subject of all post-1986 incentive stock
options, including the Incentive Stock Option in question, which such Optionee
may exercise for the first time during any calendar year, to exceed $100,000.
The term "post-1986 incentive stock options" shall mean all rights, which are
intended to be "incentive stock options" under the Internal Revenue Code,
granted on or after January 1, 1987 under any stock option plan of the Company
or its Subsidiaries. If the Company shall ever be deemed to have a "parent," as
such term is used for purposes of Section 422 of the Internal Revenue Code, then
rights intended to be "incentive stock options" under the Internal Revenue Code,
granted after January 1, 1987 under such parent's stock option plans, shall be
included with the terms of the definition of "post-1986 incentive stock
options".
8. Special Rules for Grants of Non-Statutory Stock Options.
(a) Except as provided in Paragraph 13, or as may be provided
by the Committee at the time of grant, (i) in the event of the Optionee's
termination of employment due to retirement, death or disability, rights to
exercise Non-Statutory Stock Options that are exercisable as of the date of
termination shall remain exercisable for two years following termination, (ii)
in the event of the Optionee's termination of employment due to any other
reason, the rights to exercise Non-Statutory Stock Options that are exercisable
as of the date of termination shall remain exercisable for one year following
termination, and (iii) the right to exercise Non-Statutory Stock Options that
are not exercisable as of the date of termination shall be forfeited.
Notwithstanding the foregoing, the Committee may, at any time, extend the time
within which a Non-Statutory Stock Option may be exercised.
(b) The Company shall not issue stock certificates to an
Optionee who exercises a Non-Statutory Stock Option, unless payment of the
required lawful withholding taxes has been made to the Company by check, payroll
deduction or other arrangements satisfactory to the Committee.
9. Stock Appreciation Rights.
(a) The Committee may, from time to time, authorize the grant
of Stock Appreciation Rights (SARs) to Eligible Individuals. The Committee may
grant SARs in "tandem" with Option Rights, independent of Option Rights, or in
any combination of these forms of SARs. The Committee shall have complete
discretion in determining the number of SARs granted and in determining the
terms and conditions pertaining to such SARs; provided, however, that in no
event shall any SAR become exercisable within the first six (6) months of its
grant nor shall any SAR be granted for a term of more than ten (10) years.
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<PAGE>
(b) SARs granted in "tandem" with Option Rights may be
exercised for all or part of the shares of Common Stock subject to the related
Option Right upon the surrender of the right to exercise the equivalent portion
of the related Option Right. A "tandem" SAR may be exercised only with respect
to the Shares for which its related Option Right is then exercisable.
Notwithstanding any other provision of this 1996 Plan to the contrary, with
respect to an SAR granted in "tandem" with an Incentive Stock Option:
(i) the SAR will expire no later than the
expiration of the underlying Incentive Stock
Option;
(ii) the value of the payout with respect to the
SAR may be for no more than one hundred
percent (100%) of the difference between the
option price of the underlying Incentive
Stock Option and the fair market value of
the shares subject to the underlying
Incentive Stock Option at the time the SAR
is exercised; and
(iii) the SAR may be exercised only when the fair
market value of the shares subject to the
Incentive Stock Option exceeds the option
price of the Incentive Stock Option.
(c) Each SAR grant shall be evidenced by a written agreement
that shall contain such terms and conditions as the Committee shall determine.
(d) Upon exercise of an SAR, a Participant shall be entitled
to receive payment from the Company in an amount determined by multiplying:
(i) The excess (if any) of the Market Value per
Share on the date of exercise over the
Market Value per Share on the date of the
SAR was granted; by
(ii) The number of shares of Common Stock with
respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon exercise of an SAR may be
in cash, in shares of Common Stock of equivalent value, or in some combination
thereof.
(e) Each SAR award agreement shall set forth the rights of the
Participant following termination of the Participant's employment with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee and shall be included in the award agreement entered
into with Participants, and need not be uniform among all SARs issued pursuant
to this 1996 Plan, and may reflect distinctions based on the reasons for
termination of employment.
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10. Restricted Stock Awards.
(a) Shares of Common Stock granted pursuant to a Restricted
Stock Award issued under the 1996 Plan (except as otherwise provided in the 1996
Plan) shall not be sold, exchanged, transferred, assigned, pledged,
hypothecated, or otherwise disposed of, for the period of time determined by the
Committee in its absolute direction (the "Forfeiture Period"). Except as
provided in Paragraph 13, or as may be provided by the Committee at the time of
grant, if the recipient's employment with the Company or any of its Subsidiaries
terminates prior to the expiration of the Forfeiture Period for any reason other
than death or disability, the recipient shall, on the date employment
terminates, forfeit and surrender to the Company the number of shares of Common
Stock with respect to which the Forfeiture Period has not expired as of the date
employment terminates. If Common Stock is forfeited, dividends paid on those
shares during the Forfeiture Period may be retained by the recipient.
(b) Upon each grant of a Restricted Stock Award, the Committee
shall fix the Forfeiture Period. Each certificate of Common Stock issued
pursuant to the Restricted Stock Award shall bear a legend to reflect the
Forfeiture Period until the Forfeiture Period expires. As a condition to
issuance of Common Stock to an Eligible Individual, the Committee may require
the Eligible Individual to enter into an agreement providing for the Forfeiture
Period and such other terms and conditions that it prescribes, including, but
not limited to, a provision that Common Stock issued to the Eligible Individual
shall be held by an escrow agent until the Forfeiture Period lapses. The
Committee also may require a written representation by the Eligible Individual
that he or she is acquiring the shares for investment.
(c) When the Forfeiture Period with respect to shares of
Common Stock lapses, a certificate for such shares shall be issued, free of any
escrow; such certificate shall not bear a legend relating to the Forfeiture
Period.
(d) Each Eligible Individual shall agree, at the time he or
she receives a Restricted Stock Award and as a condition thereof, to pay or make
arrangements satisfactory to the Committee regarding the payment to the Company
of any federal, state or local taxes of any kind required by law to be withheld
with respect to any award or with respect to the lapse of any restrictions on
shares of restricted Common Stock awarded under this 1996 Plan, or the waiver of
any forfeiture hereunder, and also shall agree that the Company may, to the
extent permitted by law, deduct such taxes from any payments of any kind due or
to become due to such recipient from the Company, sell by public or private
sale, with ten days notice or such longer notice as may be required by
applicable law, a sufficient number of shares of Common Stock so awarded in
order to cover all or part of the amount required to be withheld, or pursue any
other remedy of law or in equity. In the event that the recipient of shares of
Common Stock under this 1996 Plan shall fail to pay to the Company all such
federal, state and local taxes, or to make arrangements satisfactory to the
Committee regarding the payment of such taxes, the shares to which such taxes
relate shall be forfeited and returned to the Company.
(e) The Committee shall have the authority at any time to
accelerate the time at which any or all or the restrictions set forth in this
1996 Plan with respect to any or all shares of restricted Common Stock awarded
hereunder shall lapse.
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(f) If an Eligible Individual dies, or terminates employment
with the Company because of disability, before the expiration of a Forfeiture
Period, the Forfeiture Period on any Common Stock owned by the Eligible
Individual shall lapse on the date of death, or on the date that employment
terminates because of disability, provided such date is not less than four years
subsequent to the date of the award. If the date of death or disability is
within four years of the date of the award, the Committee, in its sole
discretion, can waive the Forfeiture Period as to any or all of the stock.
11. Transferability. No Option Right shall be transferable by an
Optionee other than by will or the laws of descent and distribution. Option
Rights shall be exercisable during the Optionee's lifetime only by the Optionee.
Other rights granted pursuant to this 1996 Plan also shall not be subject to
assignment, alienation, lien, transfer, sale or exchange.
12. Adjustments. The Committee may make or provide for such adjustments
in the maximum numbers of shares of Common Stock specified in Paragraph 5 of
this 1996 Plan, in the numbers of shares of Common Stock covered by other rights
granted hereunder, and in the prices per share applicable under all such rights,
as the Committee in its sole discretion, exercised in good faith, may determine
is equitably required to prevent dilution or enlargement of the rights of
Eligible Individuals that otherwise would result from any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, merger, consolidation, spin-off, reorganization,
partial or complete liquidation, issuance of rights or warrants to purchase
securities, or any other transaction or event having an effect similar to any of
the foregoing.
13. Change of Control.
(a) Notwithstanding any other term or provision of this 1996
Plan, in the event the employment of an Eligible Individual is terminated, for
any reason other than death or disability, within one year following a "Change
of Control" (as defined in (b) below):
(i) all Option Rights granted to the Eligible
Individual under this 1996 Plan prior to the
date of termination, but not exercisable as
of such date, shall become exercisable
automatically as of the later of the date of
termination or one year after the date the
Option Right was granted;
(ii) any Option Right that is exercisable as of
the date of termination, or that becomes
exercisable pursuant to (i) above, shall
remain exercisable until the end of the
exercise period provided in the original
grant of the Option Right (determined
without regard to the Eligible Individual's
termination of employment); and
(iii) any Forfeiture Period (with respect to a
Restricted Stock Award) that shall be
unexpired as of the date of termination
shall expire automatically as of such date.
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(b) For purposes of this 1996 Plan, a "Change of Control"
shall be deemed to have occurred if:
(i) any "person," including a "group" as
determined in accordance with the Section
13(d)(3) of the Securities Exchange Act of
1934 ("Exchange Act"), is or becomes the
beneficial owner, directly or indirectly, of
securities of the Company representing 30
percent or more of the combined voting power
of the Company's then outstanding
securities;
(ii) as a result of, or in connection with, any
tender offer or exchange offer, merger or
other business combination (a
"Transaction"), the persons who were
directors of the Company before the
Transaction shall cease to constitute a
majority of the Board of Directors of the
Company or any successor to the Company;
(iii) the Company is merged or consolidated with
another corporation and as a result of the
merger or consolidation less than 70 percent
of the outstanding voting securities of the
surviving or resulting corporation shall
then be owned in the aggregate by the former
stockholders of the Company, other than (A)
affiliates within the meaning of the
Exchange Act, or (B) any party to the merger
or consolidation;
(iv) a tender offer or exchange offer is made and
consummated for the ownership of securities
of the Company representing 30 percent or
more of the combined voting power of the
Company's then outstanding voting
securities; or
(v) the Company transfers substantially all of
its assets to another corporation which is
not controlled by the Company.
14. Fractional Shares. The Company shall not be required to issue any
fractional share of Common Stock pursuant to this 1996 Plan. The Committee may
provide for the elimination of fractions or for the settlement of fractions in
cash.
15. Administration of the 1996 Plan.
(a) This 1996 Plan shall be administered by the Committee,
which shall consist of not less than three Disinterested Directors. No right
shall be granted under this 1996 Plan to any member of the Committee so long as
membership continues.
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(b) The Committee shall have the power to interpret and
construe any provision of this 1996 Plan. The interpretation and construction by
the Committee of any provision of this 1996 Plan or of any agreement evidencing
the grant of rights hereunder, and any determination by the Committee pursuant
to any provision of this 1996 Plan or of any such agreement, shall be final and
binding. No member of the Committee shall be liable for any such action or
determination made in good faith.
(c) Notwithstanding any other provision of this 1996 Plan, the
Committee may impose such conditions on the exercise of any right granted
hereunder (including, without limitation, the right of the Committee to limit
the time of exercise to specified periods) as may be required to satisfy the
requirements of Section 16 (or any successor rule) of the Securities Exchange
Act of 1934, as may be amended from time to time, or any successor statute. For
example, the ability of an Eligible Individual who is an "insider" to exercise
SAR's for cash will be limited to the period that begins on the third business
day following the date of public release of the Company's quarterly sales and
earnings information, and ends on the twelfth business day following the date of
public release of such information. However, if the Committee determines that
the Eligible Individual is not an "insider", or if the securities laws change to
permit greater freedom of exercise of SAR's, then the Committee may permit
exercise at any point in time, to the extent the SAR's are otherwise exercisable
under the Plan.
16. Amendments, Termination, Etc.
(a) This 1996 Plan may be amended from time to time by
resolutions of the Board of Directors, provided that no such amendment shall (i)
increase the maximum numbers of shares of Common Stock specified in Paragraph 5
of this 1996 Plan (except that adjustments authorized by Paragraph 12 of this
1996 Plan shall not be limited by this provision), or (ii) change the definition
of "Eligible Individuals", without further approval by the stockholders of the
Company.
(b) The Committee may, with the concurrence of the affected
Optionee, cancel any agreement evidencing Option Rights granted under this 1996
Plan. In the event of such cancellation, the Committee may authorize the
granting of new Option Rights (which may or may not cover the same number of
shares which had been the subject of the prior agreement) in such manner, at
such option price and subject to the same terms and conditions as, under this
1996 Plan, would have been applicable had the canceled Option Rights not been
granted.
(c) In the case of any Option Right not immediately
exercisable in full, the Committee in its discretion may accelerate the time at
which the Option Right may be exercised, subject to the limitation described in
Paragraph 7(c).
(d) Notwithstanding any other provision of the 1996 Plan to
the contrary, (i) the 1996 Plan may be terminated at any time by resolutions of
the Board of Directors, and (ii) no rights shall be granted pursuant to this
1996 Plan after December 31, 2006.
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