SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
FAB INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
FAB INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
-----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
FAB INDUSTRIES, INC.
200 Madison Avenue
New York, New York 10016
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 1, 1997
--------------------
TO: THE STOCKHOLDERS OF FAB INDUSTRIES, INC.
Please take notice that the Annual Meeting of Stockholders of Fab
Industries, Inc. (the "Company"), will be held at the principal office of the
Company, 200 Madison Avenue, New York, New York 10016, on Thursday, May 1, 1997
at 10:15 a.m. for the following purposes:
1. To elect two (2) directors to Class III of the Company's
Board of Directors.
2. To approve the Fab Industries, Inc. 1997 Stock Incentive
Plan.
3. To transact such other business as may properly come before
the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on March 13,
1997 as the record date for the purpose of determining the stockholders entitled
to notice of, and to vote at, the meeting. A list of the stockholders entitled
to vote at the meeting will be open to the examination of any stockholder of the
Company for any purpose germane to the meeting during ordinary business hours,
at the offices of the Company, 200 Madison Avenue, New York, New York, for the
10-day period prior to the meeting.
You are requested, whether or not you plan to be present at the
meeting, to mark, date, sign and return promptly the accompanying proxy in the
enclosed envelope to which no postage need be affixed if mailed in the United
States. You may revoke your proxy for any reason at any time prior to the voting
thereof, and if you attend the meeting in person you may withdraw the proxy and
vote your own shares.
By Order of the Board of Directors
/s/ SHERMAN S. LAWRENCE,
------------------------
Secretary
Dated: March 31, 1997
<PAGE>
ANNUAL MEETING OF STOCKHOLDERS
OF
FAB INDUSTRIES, INC.
200 Madison Avenue
New York, New York 10016
----------------------
PROXY STATEMENT
----------------------
The proxy accompanying this Proxy Statement is solicited by the Board
of Directors of Fab Industries, Inc. (the "Company"), for use at the Annual
Meeting of Stockholders to be held at the principal office of the Company, 200
Madison Avenue, New York, New York 10016, on Thursday, May 1, 1997 at 10:15
a.m., and at any adjournment or adjournments thereof. All proxies in the
accompanying form which are properly executed and duly returned will be voted in
accordance with the instructions specified therein. If no instructions are
given, such proxies will be voted (i) FOR the election of the nominees named
below under the caption "Election of Directors," (ii) FOR the proposal to
approve the Fab Industries, Inc. 1997 Stock Incentive Plan, and (iii) in the
discretion of the proxies named on the proxy card with respect to any other
matters properly brought before the Annual Meeting. The proxy may be revoked at
any time prior to its exercise by written notice to the Company, by submission
of another proxy bearing a later date, or by voting in person at the meeting.
The approximate date of mailing of this Proxy Statement and the accompanying
proxy to stockholders is March 31, 1997.
VOTING SECURITIES---RECORD DATE
Only holders of the Company's common stock, $.20 par value (the "Common
Stock"), of record at the close of business on March 13, 1997 (the "Record
Date"), will be entitled to notice of and to vote at the meeting or any
adjournment or adjournments thereof. On that date, 5,751,055 shares of Common
Stock were issued and outstanding. Each outstanding share entitles the holder
thereof to one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the Record
Date (except as noted below) as to the shares of Common Stock beneficially owned
by each person known by the Company to be the beneficial owner of more than five
percent of the outstanding Common Stock.
Name and Address of Number of Shares Percent
Beneficial Owner Beneficially Owned(1) of Class
- ---------------- --------------------- --------
Samson Bitensky(2)......................... 1,558,131(3) 27.09%
200 Madison Avenue
New York, New York 10016
Quest Advisory Corp.,
Quest Management Company and
Charles M. Royce(4)........................ 636,872(4) 11.06% (4)
1414 Avenue of the Americas
New York, New York 10019
Franklin Resources, Inc.,
Franklin Mutual Advisers, Inc.,
Charles B. Johnson and
Rupert H. Johnson, Jr.(5).................. 524,800(5) 9.1%(5)
777 Mariners Island Blvd.
San Mateo, California 94404
T. Rowe Price Associates, Inc. and
T. Rowe Price Small Cap Fund, Inc.(6)...... 323,800(6) 5.6%(6)
100 E. Pratt Street
Baltimore, Maryland 21202
- ----------------------------
(1) Except as otherwise indicated below, each of the persons listed in the
table owns the shares of Common Stock opposite his or its name and has sole
voting and dispositive power with respect to such shares of Common Stock.
<PAGE>
(2) Under rules and regulations of the Securities and Exchange Commission (the
"Commission"), Mr. Bitensky may be deemed a "control person" of the
Company.
(3) Includes 88,000 shares of Common Stock owned by the Halina and Samson
Bitensky Foundation, Inc., 89,996 shares of Common Stock owned by Mr.
Bitensky's spouse and 356 shares allocated to Mr. Bitensky pursuant to the
Company's Employee Stock Ownership Plan (the "ESOP"). Mr. Bitensky
disclaims beneficial ownership of the shares owned by his spouse and does
not have dispositive power with respect to the ESOP shares.
(4) Quest Advisory Corp., a New York corporation ("Quest"), Quest Management
Company, a Connecticut general partnership ("QMC"), and Charles M. Royce
comprise a group under Rule 13d-1(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Quest beneficially owns and has sole
voting power and sole dispositive power with respect to 610,372 shares of
Common Stock and QMC beneficially owns and has sole voting power and sole
dispositive power with respect to 26,500 shares of Common Stock shown in
the table above. Charles M. Royce is an individual who may be deemed a
"control person" of Quest and QMC. Mr. Royce disclaims beneficial ownership
of the shares held by Quest and QMC. This information is derived from
Quest's Schedule 13G, as amended, dated February 3, 1997, filed with the
Commission.
(5) Franklin Mutual Adviser, Inc., a Delaware corporation ("FMA"), is an
investment advisory subsidiary of Franklin Resources, Inc., a Delaware
corporation ("Franklin"). FMA may be deemed to be the beneficial owner of
the securities for purposes of Rule 13d-3 under the Exchange Act. Charles
B. Johnson and Rupert H. Johnson, Jr. (collectively, the "Principal
Shareholders"), each own in excess of 10% of the outstanding common stock
of Franklin. Franklin, FMA and the Principal Shareholders disclaim any
economic interest or beneficial ownership in any of the securities. Certain
of the shares shown in the table above were previously reported under the
name of Heine Securities Corporation, certain of whose assets and
liabilities were acquired by FMA on November 1, 1996. This information is
derived from Franklin's Schedule 13-G, as amended, dated February 12, 1997,
filed with the Commission.
(6) T. Rowe Price Associates, Inc., a Maryland corporation ("Price
Associates"), serves as investment adviser to T. Rowe Price Small Cap Fund,
Inc., a Maryland corporation ("Price Fund"), with power to direct
investments and/or sole power to vote the securities. For purposes of the
reporting requirements of the Exchange Act, Price Associates is deemed to
be a beneficial owner of the shares shown in the table above. Price
Associates expressly disclaims any beneficial ownership in any of the
securities. This information is derived from Price Associates' Schedule
13-G, as amended, dated February 14, 1997, filed with the Commission.
2
<PAGE>
The following table sets forth certain information as of the Record
Date as to the Common Stock beneficially owned by the Company's directors (of
which Messrs. Bitensky and Lawrence constitute the nominees for Class III
directors), the Chief Executive Officer of the Company, the other three
executive officers identified in the Summary Compensation Table set forth herein
and the directors and executive officers of the Company as a group.
Shares of Common Percent
Stock Beneficially of
Name of Owned on the Outstanding
Beneficial Owner Record Date(1) Common Stock
Samson Bitensky........................... 1,558,131(2) 27.09%
Sherman S. Lawrence....................... 7,750 *
Richard Marlin............................ 0 0
Oscar R. Kunreuther....................... 400 *
Louis Feil................................ 4,000 *
Lawrence H. Bober......................... 332 *
Stanley August............................ 51,754(3) *
David A. Miller........................... 4,409(4) *
Steven Myers.............................. 96,054(3)(5) 1.66%
All directors and officers as a
group (9 persons)....................... 1,722,830(2)(5)(6) 29.73%
- -------------
* Less than 1%
(1) Except as otherwise indicated below, and except for 356, 954, 409 and 820
shares allocated respectively to Messrs. Bitensky, August, Miller and Myers
pursuant to the Company's ESOP, each of the persons listed in the table
owns the shares of Common Stock opposite his name and has sole voting and
dispositive power with respect to the shares of Common Stock indicated as
being beneficially owned by him.
(2) See footnote 3 to the first table set forth above under the heading
"Security Ownership of Certain Beneficial Owners and Management" with
respect to beneficial ownership of these shares.
(3) Includes 20,000 shares of Common Stock deemed to be beneficially owned by
reason of the right to acquire such shares within 60 days of the Record
Date.
(4) Includes 4,000 shares of Common Stock deemed to be beneficially owned by
reason of the right to acquire such shares within 60 days of the Record
Date.
(5) Includes 48,370 shares of Common Stock owned by Beth B. Myers; 3,332 shares
owned by Jessica C. Myers in a custodial account under control of Beth B.
Myers; and 2,000 shares owned by Allison R. Myers in a custodial account
under the control of Beth B. Myers. Beth B. Myers is the daughter of Mr.
Bitensky, President and Chief Executive Officer of the Company, and the
spouse of Steven Myers, an officer of the Company. Jessica C. Myers and
Allison R. Myers are the minor daughters of Mr. and Mrs. Myers. Mr. Myers
disclaims beneficial ownership of the shares owned by his spouse and minor
daughters.
(6) Includes 44,000 shares of Common Stock deemed to be beneficially owned by
directors and executive officers of the Company by reason of their right to
acquire such shares within 60 days of the Record Date.
Compliance with the Securities Exchange Act. The Company's executive
officers and directors are required under the Exchange Act to file reports of
ownership and changes in ownership of Common Stock with the Commission and the
American Stock Exchange. To the Company's knowledge, based solely on review of
the copies of such reports furnished to the Company, all Section 16(a) filing
requirements during the fiscal year ended November 30, 1996 have been complied
with.
3
<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
At the 1997 Annual Meeting of Stockholders, two directors are to be
elected to Class III of the Company's Board of Directors for a term of three
years. Unless a proxy shall specify that it is not to be voted for a director,
it is intended that the shares represented by each duly executed and returned
proxy will be voted in favor of the election as directors of Mr. Samson Bitensky
and Mr. Sherman S. Lawrence to Class III. Messrs. Bitensky and Lawrence are at
present directors of the Company. Messrs. Bitensky and Lawrence were most
recently elected at the 1994 Annual Meeting of Stockholders.
The Class III directors elected will hold office until the 2000 Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualify. If any of such nominees is not a candidate for election at the
meeting, an event which the Board of Directors does not anticipate, the proxies
will be voted for a substitute nominee. The Board of Directors recommends a vote
FOR the election of each of the nominees for Class III.
<TABLE>
<CAPTION>
Principal Occupation Director
Name Age and Company Office(1) Since
- ---- --- --------------------- -----
NOMINEES FOR ELECTION TO CLASS III OF THE BOARD OF DIRECTORS:
<S> <C> <C> <C>
Samson Bitensky 77 Chairman of the Board of 1966
Directors, President and Chief
Executive Officer of the Company(2)
Sherman S. Lawrence 78 Attorney; Secretary of 1966
the Company(2)(3)
CONTINUING MEMBERS OF THE BOARD OF DIRECTORS:
Class I---Term expires at the 1998 Annual Meeting of Stockholders:
Oscar R. Kunreuther 76 Certified Public Accountant; 1991
Associated with the
Radix Organization, Inc.(4)
Richard Marlin 63 Attorney, member of the law 1995
firm of Kramer, Levin, Naftalis
& Frankel(5)
Class II---Term expires at the 1999 Annual Meeting of Stockholders:
Louis Feil 83 Real estate investment(2) 1966-1983
1984
Lawrence H. Bober 72 Retired, Vice Chairman 1979
of the Board, First New
York Bank for Business and
First New York Business
Bank Corp.(6)
</TABLE>
- -------------
(1) Unless otherwise indicated, directors' principal occupations have been
their respective principal occupation for at least five years.
(2) Member of the Executive Committee.
(3) The Company has retained since 1966, and proposes to retain in the current
fiscal year, Mr. Sherman S. Lawrence to render legal services. The Company
made payments aggregating $70,000 to Mr. Lawrence in respect of legal
services rendered to the Company and its subsidiaries during the fiscal
year ended November 30, 1996.
(4) Mr. Oscar R. Kunreuther was a partner in BDO Seidman, LLP, Certified Public
Accountants and predecessor firms in excess of five years, until his
retirement on June 30, 1987. Since then he has been associated with Radix
Organization, Inc., a private merchant banking firm.
(5) Since 1979, Mr. Richard Marlin has been a member of the law firm of Kramer,
Levin, Naftalis & Frankel ("Kramer Levin"). The Company has retained Kramer
Levin to render legal services since 1995.
(6) Mr. Lawrence H. Bober is a retired Vice Chairman of the Board of First New
York Business Bank Corp. ("FNYBBC") and of First New York Bank for Business
(formerly, The First Women's Bank), a commercial bank and wholly-owned
subsidiary of FNYBBC (the "Bank"), where he served from January 1988 until
January 1991. On November 13, 1992, the Federal Deposit Insurance
Corporation was appointed as receiver for the Bank. Prior to 1988 and for
more than five years, Mr. Bober was a Senior Vice President of
Manufacturers Hanover Trust Company, a commercial bank.
4
<PAGE>
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Company has an audit committee (the "Audit Committee") composed of
Mr. Kunreuther as Chairman and Messrs. Bober, Lawrence and Marlin, whose purpose
is to receive and review the recommendations of the independent auditors, review
the audited consolidated financial statements, meet periodically with the
independent auditors and Company personnel with respect to the adequacy of
internal accounting controls and review the Company's accounting policies. The
Audit Committee held three meetings during the Company's past fiscal year.
The Company has a finance committee composed of Messrs. Bitensky, Bober
and Feil, whose purpose is to discuss proper investments for corporate funds.
There were no formal meetings of this committee held during the Company's past
fiscal year.
The Company has a stock option committee (the "Stock Option Committee")
composed of Messrs. Bitensky, Feil and Lawrence, whose purpose is to make
recommendations concerning the grant of options pursuant to the Company's stock
option plan. The Stock Option Committee held two meetings during the Company's
past fiscal year.
The Company established a compensation committee (the "Compensation
Committee") on October 4, 1993, which is composed of Messrs. Bober and Feil. The
Compensation Committee is charged with making recommendations regarding the
compensation of senior management personnel and setting performance goals. The
Compensation Committee held one meeting during the past fiscal year.
The Company does not have a nominating committee.
During the Company's past fiscal year, the Board of Directors held four
meetings. No member of the Board of Directors attended fewer than 75% of the
aggregate of (i) the number of meetings of the Board of Directors, and (ii) the
number of meetings of committees of the Board of Directors (during the periods
he served on such committees).
During 1996, the Company paid a fee of $10,000 per annum to Messrs.
Feil, Kunreuther and Bober and $7,500 to each other director who was not a
full-time employee. No additional fee is paid for service on committees of the
Board of Directors.
5
<PAGE>
EXECUTIVE COMPENSATION
The Summary Compensation Table shown below sets forth certain
information concerning the annual and long-term compensation for services in all
capacities to the Company for the 1996, 1995 and 1994 fiscal years, of those
persons who were (i) the Chief Executive Officer during fiscal 1996 and (ii) the
other three executive officers of the Company at the fiscal year ended November
30, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation All Other
------------------- ---------
Name and Principal Position Year Salary ($)(1) Bonus ($)(2) Compensation ($)(3)
- --------------------------- ---- ------------- ------------ -------------------
<S> <C> <C> <C> <C>
Samson Bitensky 1996 350,000 417,840 11,700
President and Chief 1995 350,000 464,400 13,810
Executive Officer 1994 350,000 815,120 20,341
Stanley August 1996 230,000 80,000 12,074
Vice President 1995 228,749 100,000 13,810
1994 215,000 140,000 19,358
David A. Miller 1996 108,125 35,000 8,068
Vice President-Finance 1995 87,083 35,000 6,928
and Treasurer 1994 82,083 30,000 7,905
Steven Myers 1996 160,000 78,000 11,967
Vice President 1995 159,166 90,000 13,810
1994 150,000 110,000 15,318
</TABLE>
- -------------
(1) Includes compensation deferred pursuant to the Company's qualified 401K
Money Option Savings Plan.
(2) The amounts set forth for Mr. Bitensky represent incentive compensation
paid to Mr. Bitensky pursuant to his current and prior employment
agreements as more fully discussed below under "Report of the Compensation
Committee on Executive Compensation."
(3) Represents the amount of the Company's contribution under its Non-Qualified
Executive Retirement Plan for Messrs. Bitensky, August and Myers and Fab
Industries, Inc. Profit Sharing Plan for Mr. Miller and the amount
contributed by the Company to its Employee Stock Ownership Plan for shares
allocated during each year to the account of the applicable officer.
The table below sets forth certain information concerning stock options
grants made during the last fiscal year to the Chief Executive Officer and the
other three executives of the Company. In addition, in accordance with SEC
disclosure rules, the hypothetical gains, or "options spreads," for each option
grant are shown based on compound annual rates of stock price appreciation of 5%
and 10% from the grant date to the expiration date. The assumed rates of growth
are prescribed by the SEC and are for illustrative purposes only; they are not
intended to predict future stock prices, which will depend upon market
conditions and the Company's future performance and prospects. All options were
issued under the Company's Stock Option Plan.
<TABLE>
<CAPTION>
OPTIONS GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term (2)
Individual Grants (1)
------------------------------------------------------------------------- -----------------------
Number of
Securities % of Total Options
Underlying Granted to
Options Employees in Last Exercise Price Expiration
Granted (#) Fiscal Year (3) ($/Share) Date 5% ($) 10% ($)
----------- --------------- --------- ---- ------ -------
Name
<S> <C> <C> <C> <C> <C> <C>
David A. Miller..... 10,000 20% $27.25 4/02/06 $171,400 $434,300
</TABLE>
- ------------------
(1) Options become exercisable in five installments with 20% becoming
exercisable on the date of grant and 20% in each of the next four years.
(2) Assumes that the stock price on the grant date ($27.25 on April 2, 1996)
has grown, as indicated, at (a) 5% per annum over the term of the option to
$44.39 or (b) 10% per annum over the term of the option to $70.68.
(3) During the last fiscal year, the Company granted to seven employees options
to purchase an aggregate of 50,000 shares. All grants were made at exercise
prices equal to the market price on the date of grant.
6
<PAGE>
The table below sets forth certain information at November 30, 1996
with respect to unexercised options to purchase shares of Common Stock under the
Company's Stock Option Plan held by the Chief Executive Officer of the Company
and the other three executive officers of the Company.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
Shares Number of Securities Value of Unexercised in-the-
Acquired on Value Underlying Unexercised Money Options at Fiscal
Name Exercise (#) Realized ($) Options at Fiscal Year-End (#) Year-End ($)(1)
---- ------------ ------------ ------------------------------ ---------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Samson Bitensky..... -- -- -- -- -- --
Stanley August...... -- -- 20,000 -- 226,200 --
David A. Miller..... -- -- 4,000 8,000 22,620 --
Steven Myers........ -- -- 20,000 -- 226,620 --
</TABLE>
- ------------------
(1) Based on the closing sale price on the American Stock Exchange of the
Company's Common Stock on November 29, 1996.
1990 EXECUTIVE RETIREMENT PLAN
A trusteed non-qualified Executive Retirement Plan was adopted by the
Company effective November 30, 1990. Its purpose is to provide benefits to those
key employees who are not participating in the Company's Profit-Sharing Plan.
The plan is administered by a committee appointed by the Board of Directors who,
prior to the first day of the plan year, designate those key employees who will
be covered by the plan.
1987 STOCK OPTION PLAN
The 1987 Stock Option Plan (the "1987 Plan"), adopted on June 1, 1987
and amended March 15, 1988, February 28, 1989 and May 7, 1992, was approved by
the stockholders of the Company on May 5, 1988. Under the 1987 Plan, options to
purchase shares of Common Stock are designated at the time of grant as either
"incentive stock options" ("ISOs"), which are intended to qualify under Section
422A of the Internal Revenue Code of 1986, as amended, or options which do not
so qualify ("NQSOs"). Under the 1987 Plan, ISOs may be granted to employees,
including employees who are also officers or directors of the Company. NQSOs may
be granted to employees, officers or directors of the Company, whether or not
such directors are employees of the Company. An aggregate of 650,000 shares of
Common Stock were reserved for issuance pursuant to options granted or to be
granted under the 1987 Plan and 119,800 shares remain available for issuance as
of the Record Date.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective as of November 25, 1991, the Company established the Fab
Industries, Inc., Employee Stock Ownership Plan (the "ESOP"). All full-time
employees are eligible to participate upon the completion of one year of
service. On December 18, 1991, the ESOP purchased 340,000 shares of Common Stock
from Samson Bitensky, the Chairman of the Board and President of the Company,
for $34.875 per share, which represented approximately 5.5% of the Company's
then outstanding Common Stock. The Company loaned the sum of $11,857,500 to the
ESOP to enable it to purchase such shares. The loan is payable by the ESOP in 15
equal annual installments plus interest at prime adjusted periodically.
Participants are not required or permitted to make contributions to the
ESOP. The only contributions to the ESOP are made by the Company which is
obligated to make contributions sufficient to pay the principal amount of the
loan and interest accrued thereon. Dividends on the shares of Common Stock
acquired by the ESOP are utilized to repay the loan from the Company. The shares
of Common Stock acquired by the ESOP are allocated among the participants on the
basis of their relative compensation (as defined in the ESOP).
7
<PAGE>
Voting rights attach to the allocated shares and to a participant's percentage
of unallocated or unvoted shares, according to a formula detailed in the plan.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
The graph set forth below compares the yearly percentage change and the
cumulative total shareholder return on the Company's Common Stock against the
cumulative total return on the American Stock Exchange Market Value index and a
peer group comprised of those public companies whose business activities fall
within the same standard industrial classification code as the Company for the
period commencing December 1, 1991 and ending November 30, 1996. This graph
assumes a $100.00 investment in the Company's Common Stock and in each index on
December 1, 1991 and that all dividends paid by companies in each index were
reinvested.
[The Performance Graph is being filed in tabular form
pursuant to Item 304(d) of Regulation S-T.]
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
Fab Industries, Inc. $100 $ 95.66 $109.80 $102.47 $ 97.23 $ 90.72
Peer Group -
SIC Code 225 $100 $155.57 $124.86 $113.63 $ 93.84 $132.88
Broad Market Index -
American Stock Exchange $100 $107.61 $124.17 $118.18 $148.50 $160.19
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
It has been the policy of the Company to tie a significant portion of
executive compensation to corporate performance. For all principal executives,
the key elements of compensation are (i) base salary and (ii) annual bonus and,
for the principal executives other than Mr. Bitensky, (iii) long-term incentive
opportunities in the form of restricted stock and stock options. For all of the
principal executives, significant portions of total compensation are based on
performance (as opposed to base salaries and benefits).
Mr. Bitensky is one of the founders of the Company. He owns
approximately 1,558,000 shares of Common Stock constituting approximately 27% of
the total amount outstanding. Accordingly, his interest is very much aligned
with the interest of all stockholders and the Company has not considered it
sensible to relate Mr. Bitensky's compensation to the Company's performance
through long-term stock incentives such as restricted stock or stock options.
Instead, Mr. Bitensky's compensation is tied to Company performance through the
use of incentive compensation. The members of the Compensation Committee believe
that Mr. Bitensky continues to be significantly responsible for the Company's
success.
Mr. Bitensky entered into an employment agreement with the Company
effective April 1, 1993, pursuant to which he is to perform the duties of its
President and Chief Executive Officer. The agreement expires March 31, 1998,
subject to automatic successive one year renewals unless either party terminates
on notice given not less than six months prior to the then expiration date. The
agreement provides for an annual base salary of $350,000, or such greater amount
as the Board of Directors may from time to time determine, and incentive
compensation if the Company's annual pre-tax income exceeds $10,000,000 equal to
3% of the Company's annual pre-tax income up to $11,000,000 and 4% of such
pre-tax income in excess of $11,000,000. In the event of disability as defined
in the employment agreement, compensation at the above rate is payable for the
first year, and at one half such rate for the second year of such disability.
Upon termination of full-time employment, Mr. Bitensky will be retained to
provide advisory and consulting services for a period of five years for a fee of
$250,000 per annum. In the event of the death of Mr. Bitensky while employed or
providing consulting services, an amount equal to the average one year total
annual compensation paid to Mr. Bitensky, based upon the three most recent
full-time employment years, is payable to his beneficiaries over a five year
period.
In the event of Mr. Bitensky's death while employed or within two years
after termination of employment, the agreement provides an option to Mr.
Bitensky's estate, exercisable during the period of six months after the
appointment of Mr. Bitensky's personal representative, to sell to the Company
such number of shares of Common Stock as may be purchased with an amount equal
to (i) the lesser of (A) $7,000,000 or (B) 10% of the Company's net worth at the
end of the fiscal year immediately prior to Mr. Bitensky's death, plus (ii) such
amount as may be purchased with the proceeds of life insurance which the Company
may purchase from time to time on Mr. Bitensky's life. Currently the Company
maintains several life insurance policies on Mr. Bitensky's life providing for
the payment of an aggregate of $3,000,000 for such purpose. The purchase price
of shares purchased pursuant to the option is the market price per share
increased by an amount equal to one-half of the amount by which the book value
per share exceeds the market price per share.
As indicated above, the key elements of the compensation payable to the
three principal executives other than the President are base salary, annual
bonus and long-term incentives in the form of restricted stock and stock
options. In general, significant portions of total compensation are performance
based.
Adjustment of base salaries involves considerations of competitive
data, assessment of performance, position tenure and internal comparability. The
base salaries of the three executives are considered to be average by industry
standards and are adjusted modestly, the primary focus being on total
compensation. Executives are eligible to receive annual cash bonuses based on a
review of the Company's performance during the year for which such a bonus is
payable. 1996 was not as profitable as 1995 and it was deemed appropriate that
bonuses to the executives be decreased and, accordingly, other than for Mr.
Miller, who was appointed Vice President - Finance and Treasurer during fiscal
year 1996, the cash bonuses for 1996 were less than those paid in 1995.
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The Company's stock option and restricted stock programs are designed
to align the interests of the executives with those of the stockholders at
large. Options are granted with exercise prices equal to market on the grant
date and vest, generally, over a period of five years. This approach is designed
to provide incentives for the creation of stockholder values over the long term
since the full benefit of the option cannot be realized unless price
appreciation occurs over a number of years and the executive is rewarded only to
the extent that stockholders at large have benefited. The Company's restricted
stock program contemplates the grant of shares of Common Stock which the
recipient may not sell or otherwise dispose of until an applicable restriction
period lapses and which are forfeited if the recipient terminates employment
prior to the lapsing of the restriction period.
The Company does not issue options or grant restricted stock on any
fixed basis, preferring to maintain a flexible program. Other than for Mr.
Miller, no options were issued or grants made to executives in 1996. Currently
outstanding options were issued to Messrs. August, Myers and Miller in 1990.
Restricted stock grants, related in amount to salary and bonus, were made to
Messrs. August and Myers in 1991. The restricted shares granted vested as to 40%
in two years with an additional 20% vesting in each of the next three years. As
of fiscal 1996 year-end, all restricted shares granted have fully vested, and
there are no restricted shares outstanding.
The foregoing Report of the Compensation Committee on Executive
Compensation shall not be deemed to be incorporated by reference into any filing
of the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates such information by reference.
Lawrence H. Bober
Louis Feil
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PROPOSAL 2 -- APPROVAL OF FAB INDUSTRIES, INC.
1997 STOCK INCENTIVE PLAN
There will be presented to the 1997 Annual Meeting a proposal to
approve the Fab Industries, Inc. 1997 Stock Incentive Plan (the "1997 Plan").
The 1997 Plan was adopted by the Board of Directors on February 27, 1997,
subject to stockholder approval. The purpose of the 1997 Plan is to attract and
retain qualified persons as employees and members of management to the Company
so as to maintain and enhance the Company's long-term performance.
The following summary of the 1997 Plan is qualified in its entirety by
reference to the full text of the 1997 Plan, which is set forth in the attached
Exhibit A.
GENERAL
The 1997 Plan provides for the issuance of a total of up to 175,000
authorized and unissued shares of Common Stock, treasury shares and/or shares
acquired by the Company for the purposes of the 1997 Plan. Awards under the 1997
Plan may be made in the form of (i) incentive stock options, (ii) nonqualified
stock options, (iii) stock appreciation rights, (iv) dividend equivalent rights,
(v) restricted stock, (vi) restricted stock units and (vii) other stock-based
awards. Awards may be made to any director, officer and other employee of the
Company and its subsidiaries, and to such consultants to the Company, as the
Stock Option Committee shall in its discretion select (collectively, "key
persons").
Stock options and stock appreciation rights covering no more than
50,000 shares of Common Stock may be granted to any one employee of the Company
during any one-year period. In the event of a stock dividend, stock split,
recapitalization or the like, the Stock Option Committee will equitably adjust
the aggregate number of shares subject to the 1997 Plan, the number of shares
subject to each outstanding award, and the exercise price of each outstanding
option.
In general, the 1997 Plan will be administered by the Stock Option
Committee, composed of not less than two directors, but the Board of Directors
may grant awards and assume all of the powers of the Stock Option Committee. To
the extent required for compliance with Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), all actions
relating to awards to persons subject to Section 16 of the Exchange Act shall be
taken by the Board of Directors unless each person who serves on the Stock
Option Committee is a "non-employee director" within the meaning of Rule 16b-3
promulgated under the Exchange Act. To the extent required for compensation
realized from awards under the 1997 Plan to be deductible by the Company
pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), the members of the Stock Option Committee shall be "outside directors"
within the meaning of Section 162(m) of the Code. The Board of Directors,
however, reserves the right to grant awards that might fail to satisfy the
requirements for deductibility under Section 162(m) of the Code. The Stock
Option Committee is authorized to construe, interpret and implement the 1997
Plan, to select the key persons to whom awards will be granted, to determine the
terms and provisions of such awards, and to amend outstanding awards. The
determinations of the Stock Option Committee are made in its sole discretion and
are conclusive. The Stock Option Committee presently consists of Messrs.
Bitensky, Feil and Lawrence.
GRANTS UNDER THE 1997 PLAN
Stock Options. Each stock option granted under the 1997 Plan will be
exercisable during the period fixed by the Stock Option Committee; however, no
incentive stock option shall be exercisable more than ten years after the date
of grant. Unless the Stock Option Committee expressly provides otherwise, an
option will become exercisable as to 20% of the shares subject thereto on each
of the first through fifth anniversaries of the grant. The purchase price per
share payable upon the exercise of an option (the "option purchase price") will
be established by the Stock Option Committee, provided that the option exercise
price of an incentive stock option shall not be less than 100% of the fair
market value of a share of the Common Stock on the date of grant. The option
exercise price is payable in cash, or by surrender of shares of Common Stock
acquired at least six months prior to the option exercise date and having a fair
market value on the date of the exercise
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equal to part or all of the option exercise price, or by such other payment
method as the Stock Option Committee may prescribe.
Stock Appreciation Rights. Stock appreciation rights may be granted in
connection with all or any part of, or independently of, any option granted
under the 1997 Plan. Generally, no stock appreciation right will be exercisable
at a time when any option to which it relates is not exercisable. The grantee of
a stock appreciation right has the right to surrender the stock appreciation
right and to receive from the Company an amount equal to the aggregate
appreciation (over the exercise price of such right, or over the option exercise
price if the stock appreciation right is granted in connection with an option)
in the shares of Common Stock in respect of which such stock appreciation right
is being exercised. Payment due upon exercise of a stock appreciation right may
be in cash, in Common Stock, or partly in each, as determined by the Stock
Option Committee in its discretion.
Dividend Equivalent Rights. The Stock Option Committee may include in
any award a dividend equivalent right entitling the grantee to receive amounts
equal to the ordinary dividends that would be paid, during the time such award
is outstanding and unexercised, on the shares of Common Stock covered by such
award if the such shares were then outstanding. The Stock Option Committee shall
determine whether such payments may be made in cash, in shares of Common Stock
or in another form, whether they shall be conditioned upon the exercise of the
award to which they relate, and such other terms and conditions as the Stock
Option Committee shall deem appropriate.
Restricted Stock. The Stock Option Committee may grant restricted
shares of Common Stock to such key persons, in such amounts, and subject to such
terms and conditions (which may depend upon or be related to performance goals
and other conditions) as the Stock Option Committee shall determine in its
discretion. Certificates for the shares of Common Stock covered by a restricted
stock award will remain in the possession of the Company until such shares are
free of restrictions. Subject to the applicable restrictions, the grantee has
the rights of a stockholder with respect to the restricted stock.
Restricted Stock Units. The Stock Option Committee may grant restricted
stock units to such key persons, in such amounts, and subject to such terms and
conditions as the Stock Option Committee shall determine in its discretion. At
the time of grant, the Stock Option Committee shall specify the date or dates on
which the restricted stock units shall become fully vested and nonforfeitable.
On the maturity date, the grantee shall be entitled to one unrestricted, fully
transferable share of Common Stock for each restricted stock unit scheduled to
be paid out on such date. The purchase price, if any, to be paid by the grantee
for such shares of Common Stock will be determined by the Stock Option
Committee.
Other Stock-Based Awards. The Board may authorize other types of
stock-based awards, which the Stock Option Committee may grant to such key
persons, in such amounts and subject to such terms and conditions as the Stock
Option Committee shall determine in its sole discretion.
No award or right granted to any person under the 1997 Plan shall be
assignable or transferable other than by will or by laws of descent and
distribution.
OTHER FEATURES OF THE 1997 PLAN
Unless sooner terminated by the Board of Directors, the provisions of
the 1997 Plan with respect to the grant of incentive stock options shall
terminate on February 26, 2007. All awards made under the 1997 Plan prior to its
termination shall remain in effect until they are satisfied or terminated. The
Board of Directors may, without stockholder approval, suspend, discontinue,
revise or amend the 1997 Plan at any time or from time to time; provided,
however, that stockholder approval shall be obtained for any amendment for which
such approval is required by Section 422 of the Code or under other applicable
law.
In the event of a merger or consolidation of the Company with or into
any other corporation or entity, outstanding awards shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Stock Option
Committee, determines, in the exercise of its sole discretion, to accelerate the
date on which an award becomes exercisable
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or fully vested. In the absence of an assumption or substitution of awards,
awards shall, to the extent not exercised, terminate as of the date of the
closing of the merger.
RIGHT OF RECAPTURE
If at any time within one year after the date on which a participant
exercises an option or stock appreciation right, or on which restricted stock
vests, or which is the maturity date of a restricted stock unit, or on which
income is realized by a participant in connection with any other stock-based
award (each of which event is a "Realization Event"), the participant is
terminated for cause or engages in any activity determined in the discretion of
the Stock Option Committee to be in competition with any activity of the
Company, or otherwise inimical, contrary or harmful to the interests of the
Company, then any gain realized by the participant from the Realization Event
shall be paid by the participant to the Company.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1997 PLAN
The description of Federal tax consequences set forth below is
necessarily general in nature and does not purport to be complete.
There are generally no Federal tax consequences either to the optionee
or the Company upon the grant of a stock option. On exercise of an incentive
stock option, the optionee will not recognize any income, and the Company will
not be entitled to a deduction for tax purposes, although such exercise may give
rise to liability for the optionee under the alternative minimum tax provisions
of the Code. However, if the optionee disposes of shares acquired upon exercise
of an incentive stock option within two years of the date of grant or one year
of the date of exercise, the optionee will recognize compensation income, and
the Company will be entitled to a deduction for tax purposes in the same amount,
equal to the excess of the fair market value of the shares of Common Stock on
the date of exercise over the option exercise price (or the gain on sale, if
less); the remainder of the gain to the optionee will be treated as capital
gain. Otherwise, the Company will not be entitled to any deduction for tax
purposes upon disposition of such shares, and the entire gain for the optionee
will be treated as a capital gain. On the exercise of a nonqualified stock
option, the amount by which the fair market value of the Common Stock on the
date of exercise exceeds the option exercise price will generally be taxable to
the optionee as compensation income, and will generally be deductible for tax
purposes by the Company. The disposition of shares of Common Stock acquired upon
exercise of a non-qualified stock option will generally result in a capital gain
or loss for the optionee, but will have no tax consequences for the Company.
The grant of a stock appreciation right, a dividend equivalent right,
restricted stock or a restricted stock unit generally will not result in income
for the grantee or in a tax deduction for the Company. Upon the settlement of
such a right or unit and upon the vesting of restricted stock, the grantee will
recognize ordinary income equal to the fair market value of any shares of Common
Stock and/or any cash received, and the Company will be entitled to a tax
deduction in the same amount. With respect to an award of restricted stock the
grantee may elect to recognize ordinary income equal to the fair market value of
the shares less any amount paid for them at the time of grant, and the Company
will be entitled to a tax deduction in the same amount. Dividends paid on
forfeitable restricted shares are treated as compensation for Federal tax
purposes. A grant of unrestricted shares of Common Stock will result in income
for the grantee, and a tax deduction for the Company, generally equal to the
fair market value of such shares less any amount paid for them.
Limitations on the Company's Compensation Deduction. Section 162(m) of
the Code limits the deduction which the Company may take for otherwise
deductible compensation payable to certain executive officers to the extent that
compensation paid to such officers for a year exceeds $1 million, unless such
compensation meets certain criteria. Although the Company believes that
compensation realized from stock options and stock appreciation rights granted
under the 1997 Plan generally will satisfy the requirements of Section 162(m) of
the Code, there is no assurance such awards will satisfy such requirements. In
addition, because other awards under the 1997 Plan will generally not meet the
requirements of Section 162(m) of the Code, the deduction attributable to any
compensation realized under any such awards to the affected executive officers
may be limited under Section 162(m) of the Code.
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VOTING ON PROPOSAL
The affirmative vote of the holders of a majority of the shares of
Common Stock present in person or by proxy at the Annual Meeting and entitled to
vote thereon is required for approval of the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1997
PLAN.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of BDO Seidman, LLP, Certified Public Accountants, 330 Madison
Avenue, New York, New York, served as the Company's independent public
accountants for its fiscal year ended November 30, 1996. No independent public
accountant has been formally selected by the Company for the current fiscal
year. In keeping with the Company's policy, formal selection of the Company's
independent public accountants will be considered by the Company's newly-elected
Board of Directors at the Annual Meeting of Directors to be held immediately
following the Company's Annual Meeting of Stockholders on Thursday, May 1, 1997.
Representatives of BDO Seidman are expected to be present at the Company's 1997
Annual Meeting of Stockholders and available to respond to appropriate questions
from stockholders. Such representatives will also be accorded an opportunity to
make a statement at such time should they desire to do so.
VOTING PROCEDURES
Pursuant to Commission rules, a designated blank space is provided on
the proxy card to withhold authority to vote for one or more nominees for
director for Class III. Votes withheld in connection with the election of one or
more directors will not be counted in determining the votes cast and will have
no effect on the vote.
Under the rules of the National Association of Securities Dealers,
brokers who hold shares in street name for customers have the authority to vote
on certain items when they have not received instructions from beneficial
owners. Under the General Corporation Law of the State of Delaware, a broker
non-vote will have no effect on the outcome of the election of directors.
GENERAL
The solicitation of proxies in the accompanying form is made by the
Board of Directors and the cost thereof will be borne by the Company. In
addition to the solicitation of proxies by use of the mails, some of the
officers, directors and other employees of the Company may also solicit proxies
personally or by mail, telephone or telegraph, but they will not receive
additional compensation for such services. Brokerage firms, custodians, banks,
trustees, nominees or other fiduciaries holding shares of Common Stock in their
names will be requested by the Company to forward proxy materials to their
principals and will be reimbursed for their reasonable out-of-pocket expenses in
such connection.
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other matters to be presented for action, but if any other matters
properly come before the meeting, it is intended that the persons voting the
accompanying proxy will vote the shares represented thereby in accordance with
their best judgment.
It is important that proxies be returned promptly. Therefore, whether
or not you plan to attend the meeting in person, you are urged to mark, date,
execute and return your proxy in the enclosed envelope, to which no postage need
be affixed if mailed in the United States. The proxy may be revoked at any time
before it is exercised. If you attend the meeting in person you may withdraw the
proxy and vote your own shares.
STOCKHOLDER PROPOSALS
Stockholder proposals in respect of matters to be acted upon at the
Company's 1998 Annual Meeting of Stockholders should be received by the Company
on or before November 29, 1997 in order that they may be considered for
inclusion in the Company's proxy materials.
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THE COMPANY WILL PROVIDE WITHOUT A CHARGE A COPY OF ITS ANNUAL REPORT
ON FORM 10-K FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1996, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULE THERETO, TO EACH OF THE COMPANY'S STOCKHOLDERS OF RECORD
ON MARCH 13, 1997, AND EACH BENEFICIAL STOCKHOLDER ON THAT DATE, UPON RECEIPT OF
A WRITTEN REQUEST THEREFOR MAILED TO THE COMPANY'S OFFICES, 200 MADISON AVENUE,
NEW YORK, NEW YORK 10016, ATTENTION: SECRETARY. IN THE EVENT THAT EXHIBITS TO
SUCH FORM 10-K ARE REQUESTED, A FEE WILL BE CHARGED FOR REPRODUCTION OF SUCH
EXHIBITS. REQUESTS FROM BENEFICIAL STOCKHOLDERS MUST SET FORTH A GOOD FAITH
REPRESENTATION AS TO SUCH OWNERSHIP ON MARCH 13, 1997.
By Order of the Board of Directors,
/s/ SHERMAN S. LAWRENCE,
------------------------
Secretary
Dated: March 31, 1997
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EXHIBIT A
FAB INDUSTRIES, INC.
1997 STOCK INCENTIVE PLAN
<PAGE>
Table of Contents
Page
ARTICLE I
GENERAL
1.1 Purpose........................................................ 1
1.2 Administration................................................. 1
1.3 Persons Eligible for Awards.................................... 1
1.4 Types of Awards Under Plan..................................... 1
1.5 Shares Available for Awards.................................... 2
1.6 Definitions of Certain Terms................................... 2
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards................................... 3
2.2 No Rights as a Shareholder..................................... 3
2.3 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights........................ 4
2.4 Exercise of Options and Stock Appreciation
Rights....................................................... 5
2.5 Termination of Employment; Death............................... 5
2.6 Grant of Restricted Stock...................................... 6
2.7 Grant of Restricted Stock Units................................ 6
2.8 Other Stock-Based Awards....................................... 7
2.9 Grant of Dividend Equivalent Rights............................ 7
2.10 Right of Recapture............................................. 7
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification
of Awards.................................................... 8
3.2 Tax Withholding................................................ 8
3.3 Nonassignability............................................... 8
3.4 Requirement of Notification of Election
Under Section 83(b) of the Code.............................. 8
3.5 Requirement of Notification Upon
Disqualifying Disposition Under
Section 421(b) of the Code................................... 9
3.6 Right of Discharge Reserved.................................... 9
3.7 Nature of Payments............................................. 9
3.8 Non-Uniform Determinations..................................... 9
3.9 Other Payments or Awards....................................... 9
3.10 Dissolution, Liquidation, Merger............................... 9
3.11 Section Headings............................................... 10
3.12 Effective Date and Term of Plan................................ 10
3.13 Governing Law.................................................. 10
-i-
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ARTICLE I
GENERAL
1.1 Purpose
The purpose of the Fab Industries, Inc. 1997 Stock Incentive Plan (the
"Plan") is to provide for officers, other employees and directors of, and
consultants to, Fab Industries, Inc. (the "Company") and its subsidiaries an
incentive (a) to enter into and remain in the service of the Company, (b) to
enhance the long-term performance of the Company, and (c) to acquire a
proprietary interest in the success of the Company.
1.2 Administration
1.2.1 Subject to Section 1.2.6, the Plan shall be administered by the
Stock Option Committee (the "Committee") of the board of directors of the
Company (the "Board"), which shall consist of not less than two directors. The
members of the Committee shall be appointed by, and serve at the pleasure of,
the Board. To the extent required for transactions under the Plan to qualify for
the exemptions available under Rule 16b-3 ("Rule 16b-3") promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to persons subject to Section 16 of the 1934 Act shall be taken by the Board
unless each person who serves on the Committee is a "non-employee director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of "non-employee directors". To
the extent required for compensation realized from awards under the Plan to be
deductible by the Company pursuant to section 162(m) of the Internal Revenue
Code of 1986 (the "Code"), the members of the Committee shall be "outside
directors" within the meaning of section 162(m).
1.2.2 The Committee shall have the authority (a) to exercise all of the
powers granted to it under the Plan, (b) to construe, interpret and implement
the Plan and any Plan Agreements executed pursuant to Section 2.1, (c) to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules governing its own operations, (d) to make all determinations
necessary or advisable in administering the Plan, (e) to correct any defect,
supply any omission and reconcile any inconsistency in the Plan, and (f) to
amend the Plan to reflect changes in applicable law.
1.2.3 Actions of the Committee shall be taken by the vote of a majority
of its members. Any action may be taken by a written instrument signed by a
majority of the Committee members, and action so taken shall be fully as
effective as if it had been taken by a vote at a meeting.
1.2.4 The determination of the Committee on all matters relating to the
Plan or any Plan Agreement shall be final, binding and conclusive.
1.2.5 No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
1.2.6 Notwithstanding anything to the contrary contained herein: (a)
until the Board shall appoint the members of the Committee, the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time, grant awards or resolve to administer the Plan. In
either of the foregoing events, the Board shall have all of the authority and
responsibility granted to the Committee herein.
1.3 Persons Eligible for Awards
Awards under the Plan may be made to such directors, officers and other
employees of the Company and its subsidiaries (including prospective employees
conditioned on their becoming employees), and to such consultants to the Company
and its subsidiaries (collectively, "key persons") as the Committee shall in its
discretion select.
1.4 Types of Awards Under Plan
Awards may be made under the Plan in the form of (a) incentive stock
options (within the meaning of section 422 of the Code), (b) nonqualified stock
options, (c) stock appreciation rights, (d) dividend
(1)
<PAGE>
equivalent rights, (e) restricted stock, (f) restricted stock units and (g)
other stock-based awards, all as more fully set forth in Article II. The term
"award" means any of the foregoing. No incentive stock option may be granted to
a person who is not an employee of the Company on the date of grant.
1.5 Shares Available for Awards
1.5.1 The total number of shares of common stock of the Company,
par value $ .20 per share ("Common Stock"), which may be transferred pursuant to
awards granted under the Plan shall not exceed 175,000 shares. Such shares may
be authorized but unissued Common Stock or authorized and issued Common Stock
held in the Company's treasury or acquired by the Company for the purposes of
the Plan. The Committee may direct that any stock certificate evidencing shares
issued pursuant to the Plan shall bear a legend setting forth such restrictions
on transferability as may apply to such shares pursuant to the Plan.
1.5.2 The total number of shares of Common Stock with respect to
which stock options and stock appreciation rights may be granted to any one
employee of the Company or a subsidiary during any one-year period shall not
exceed 50,000.
1.5.3 Subject to any required action by the shareholders of the
Company, the number of shares of Common Stock covered by each outstanding award,
the number of shares available for awards, the number of shares that may be
subject to awards to any one employee, and the price per share of Common Stock
covered by each such outstanding award shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an award.
After any adjustment made pursuant to this Section 1.5.3, the number of shares
subject to each outstanding award shall be rounded to the nearest whole number.
1.5.4 Except as provided in this Section 1.5 and in Section
2.3.8, there shall be no limit on the number or the value of the shares of
Common Stock that may be subject to awards to any individual under the Plan.
1.6 Definitions of Certain Terms
1.6.1 The "Fair Market Value" of a share of Common Stock on any
day shall be determined as follows.
(a) If the principal market for the Common Stock (the "Market")
is a national securities exchange or the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market, the last sale
price or, if no reported sales take place on the applicable date, the average of
the high bid and low asked price of Common Stock as reported for such Market on
such date ("average price") or, if no such average price can be determined on
such date, the most recent reported sale price within the preceding ten (10)
business days, or if no such sale shall have occurred, on the next preceding day
on which the average price can be determined, provided that such determination
can be made with respect to the ten (10) business days preceding the applicable
date;
(b) If the Market is the NASDAQ National List, the NASDAQ
Supplemental List or another market, the average of the high bid and low asked
price for Common Stock on the applicable date (the "average price"), or, if no
such average price can be determined on such date, the most recent reported sale
price within the preceding ten (10) business days, or, if no such sale shall
have occurred, on the next preceding day on which the average price can be
determined, provided that such determination can be made with respect to the ten
(10) business days preceding the applicable date; or,
(c) In the event that neither paragraph (a) nor (b) shall apply,
the Fair Market Value of a share of Common Stock on any day shall be determined
in good faith by the Committee.
(2)
<PAGE>
1.6.2 The term "incentive stock option" means an option that is
intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Code, as now constituted or subsequently amended, or
pursuant to a successor provision of the Code, and which is so designated in the
applicable Plan Agreement. Any option that is not specifically designated as an
incentive stock option shall under no circumstances be considered an incentive
stock option. Any option that is not an incentive stock option is referred to
herein as a "nonqualified stock option."
1.6.3 The term "employment" means, in the case of a grantee of an
award under the Plan who is not an employee of the Company, the grantee's
association with the Company or a subsidiary as a director, consultant or
otherwise.
1.6.4 A grantee shall be deemed to have a "termination of
employment" upon ceasing to be employed by the Company and all of its
subsidiaries or by a corporation assuming awards in a transaction to which
section 425(a) of the Code applies. The Committee may in its discretion
determine (a) whether any leave of absence constitutes a termination of
employment for purposes of the Plan, (b) the impact, if any, of any such leave
of absence on awards theretofore made under the Plan, and (c) when a change in a
non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether the termination of a grantee's employment is a dismissal for
cause and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.
1.6.5 The term "cause," when used in connection with termination
of a grantee's employment, shall have the meaning set forth in any
then-effective employment agreement between the grantee and the Company or a
subsidiary thereof. In the absence of such an employment agreement provision,
"cause" means: (a) conviction of any crime (whether or not involving the
Company) constituting a felony in the jurisdiction involved; (b) engaging in any
substantiated act involving moral turpitude; (c) engaging in any act which, in
each case, subjects, or if generally known would subject, the Company to public
ridicule or embarrassment; (d) material violation of the Company's policies,
including, without limitation, those relating to sexual harassment or the
disclosure or misuse of confidential information; (e) serious neglect or
misconduct in the performance of the grantee's duties for the Company or a
subsidiary or willful or repeated failure or refusal to perform such duties; in
each case as determined by the Committee, which determination shall be final,
binding and conclusive.
ARTICLE II
AWARDS UNDER THE PLAN
2.1 Agreements Evidencing Awards
Each award granted under the Plan (except an award of
unrestricted stock) shall be evidenced by a written agreement ("Plan Agreement")
which shall contain such provisions as the Committee in its discretion deems
necessary or desirable. By accepting an award pursuant to the Plan, a grantee
thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable Plan Agreement.
2.2 No Rights as a Shareholder
No grantee of an option or stock appreciation right (or other
person having the right to exercise such award) shall have any of the rights of
a shareholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such shares. Except as
otherwise provided in Section 1.5.3, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash, securities or other property) for which the record date is prior to the
date such stock certificate is issued.
(3)
<PAGE>
2.3 Grant of Stock Options, Stock Appreciation
Rights and Dividend Equivalent Rights
2.3.1 The Committee may grant incentive stock options and
nonqualified stock options (collectively, "options") to purchase shares of
Common Stock from the Company, to such key persons, in such amounts and subject
to such terms and conditions, as the Committee shall determine in its
discretion, subject to the provisions of the Plan.
2.3.2 The Committee may grant stock appreciation rights to such
key persons, in such amounts and subject to such terms and conditions, as the
Committee shall determine in its discretion, subject to the provisions of the
Plan. Stock appreciation rights may be granted in connection with all or any
part of, or independently of, any option granted under the Plan. A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection with an incentive stock option may be granted only at the
time of grant of such option.
2.3.3 The grantee of a stock appreciation right shall have the
right, subject to the terms of the Plan and the applicable Plan Agreement, to
receive from the Company an amount equal to (a) the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over (b) the exercise price of such right as set forth in the
Plan Agreement (or over the option exercise price if the stock appreciation
right is granted in connection with an option), multiplied by (c) the number of
shares with respect to which the stock appreciation right is exercised. Payment
upon exercise of a stock appreciation right shall be in cash or in shares of
Common Stock (valued at their Fair Market Value on the date of exercise of the
stock appreciation right) or both, all as the Committee shall determine in its
discretion. Upon the exercise of a stock appreciation right granted in
connection with an option, the number of shares subject to the option shall be
correspondingly reduced by the number of shares with respect to which the stock
appreciation right is exercised. Upon the exercise of an option in connection
with which a stock appreciation right has been granted, the number of shares
subject to the stock appreciation right shall be correspondingly reduced by the
number of shares with respect to which the option is exercised.
2.3.4 Each Plan Agreement with respect to an option shall set
forth the amount (the "option exercise price") payable by the grantee to the
Company upon exercise of the option evidenced thereby. The option exercise price
per share shall be determined by the Committee in its discretion; provided,
however, that the option exercise price of an incentive stock option shall be at
least 100% of the Fair Market Value of a share of Common Stock on the date the
option is granted, and provided further that in no event shall the option
exercise price be less than the par value of a share of Common Stock.
2.3.5 Each Plan Agreement with respect to an option or stock
appreciation right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined by the Committee in its discretion; provided, however, that no
incentive stock option (or a stock appreciation right granted in connection with
an incentive stock option) shall be exercisable more than 10 years after the
date of grant.
2.3.6 The Committee may in its discretion include in any Plan
Agreement with respect to an option (the "original option") a provision that an
additional option (the "additional option") shall be granted to any grantee who,
pursuant to Section 2.4.3(b), delivers shares of Common Stock in partial or full
payment of the exercise price of the original option. The additional option
shall be for a number of shares of Common Stock equal to the number thus
delivered, shall have an exercise price equal to the Fair Market Value of a
share of Common Stock on the date of exercise of the original option, and shall
have an expiration date no later than the expiration date of the original
option. In the event that a Plan Agreement provides for the grant of an
additional option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common
Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.4.3(b) in payment of such exercise price shall have been held for at
least six months.
(4)
<PAGE>
2.3.7 To the extent that the aggregate Fair Market Value
(determined as of the time the option is granted) of the stock with respect to
which incentive stock options granted under this Plan and all other plans of the
Company and any subsidiary are first exercisable by any employee during any
calendar year shall exceed the maximum limit (currently, $100,000), if any,
imposed from time to time under section 422 of the Code, such options shall be
treated as nonqualified stock options.
2.3.8 Notwithstanding the provisions of Sections 2.3.4 and 2.3.5,
to the extent required under section 422 of the Code, an incentive stock option
may not be granted under the Plan to an individual who, at the time the option
is granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of his employer corporation or of its parent or
subsidiary corporations (as such ownership may be determined for purposes of
section 422(b)(6) of the Code) unless (a) at the time such incentive stock
option is granted the option exercise price is at least 110% of the Fair Market
Value of the shares subject thereto and (b) the incentive stock option by its
terms is not exercisable after the expiration of 5 years from the date it is
granted.
2.4 Exercise of Options and Stock Appreciation Rights
Subject to the provisions of this Article II, each option or
stock appreciation right granted under the Plan shall be exercisable as follows:
2.4.1 Unless the applicable Plan Agreement otherwise provides, an
option or stock appreciation right shall become exercisable in five
substantially equal installments, on each of the first, second, third, fourth
and fifth anniversaries of the date of grant, and each installment, once it
becomes exercisable, shall remain exercisable until expiration, cancellation or
termination of the award.
2.4.2 Unless the applicable Plan Agreement otherwise provides, an
option or stock appreciation right may be exercised from time to time as to all
or part of the shares as to which such award is then exercisable (but, in any
event, only for whole shares). A stock appreciation right granted in connection
with an option may be exercised at any time when, and to the same extent that,
the related option may be exercised. An option or stock appreciation right shall
be exercised by the filing of a written notice with the Company, on such form
and in such manner as the Committee shall prescribe.
2.4.3 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) unless the
applicable Plan Agreement provides otherwise, by delivery of shares of Common
Stock acquired at least six months prior to the option exercise date and having
a Fair Market Value (determined as of the exercise date) equal to all or part of
the option exercise price and a certified or official bank check (or the
equivalent thereof acceptable to the Company) for any remaining portion of the
full option exercise price; or (c) at the discretion of the Committee and to the
extent permitted by law, by such other provision as the Committee may from time
to time prescribe.
2.4.4 Promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock
appreciation right for which payment will be made partly or entirely in shares,
the Company shall, subject to the provisions of Section 3.2 (relating to certain
tax withholding requirements), deliver to the grantee or to such other person as
may then have the right to exercise the award, a certificate or certificates for
the shares of Common Stock for which the award has been exercised. If the method
of payment employed upon option exercise so requires, and if applicable law
permits, an optionee may direct the Company to deliver the certificate(s) to the
optionee's stockbroker.
2.5 Termination of Employment; Death
2.5.1 Except to the extent otherwise provided in Section 2.5.2 or
2.5.3 or in the applicable Plan Agreement, all options and stock appreciation
rights not theretofore exercised shall terminate upon termination of the
grantee's employment for any reason (including death).
(5)
<PAGE>
2.5.2 If a grantee's employment terminates for any reason other
than dismissal for cause, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the award
on the date of employment termination; and (b) exercise must occur within 90
days after employment terminates, except that this 90 day period may be
increased to one year in the discretion of the Committee, but in no event after
the expiration date of the award as set forth in the Plan Agreement.
2.5.3 Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient shall be bound by all the terms and
conditions of the Plan and the applicable Plan Agreement which would have
applied to the grantee including, without limitation, the provisions of Sections
3.3 and 3.7 hereof.
2.6 Grant of Restricted Stock
2.6.1 The Committee may grant restricted shares of Common Stock
to such key persons, in such amounts, and subject to such terms and conditions
as the Committee shall determine in its discretion, subject to the provisions of
the Plan. Restricted stock awards may be made independently of or in connection
with any other award under the Plan. A grantee of a restricted stock award shall
have no rights with respect to such award unless such grantee accepts the award
within such period as the Committee shall specify by executing a Plan Agreement
in such form as the Committee shall determine and, if the Committee shall so
require, makes payment to the Company by certified or official bank check (or
the equivalent thereof acceptable to the Company) in such amount as the
Committee may determine.
2.6.2 Promptly after a grantee accepts a restricted stock award,
the Company shall issue in the grantee's name a certificate or certificates for
the shares of Common Stock covered by the award. Upon the issuance of such
certificate(s), the grantee shall have the rights of a shareholder with respect
to the restricted stock, subject to the nontransferability restrictions and
Company repurchase rights described in Sections 2.6.4 and 2.6.5 and to such
other restrictions and conditions as the Committee in its discretion may include
in the applicable Plan Agreement.
2.6.3 Unless the Committee shall otherwise determine, any
certificate issued evidencing shares of restricted stock shall remain in the
possession of the Company until such shares are free of any restrictions
specified in the applicable Plan Agreement.
2.6.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable Plan Agreement. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other conditions)
on which the nontransferability of the restricted stock shall lapse. Unless the
applicable Plan Agreement provides otherwise, additional shares of Common Stock
or other property distributed to the grantee in respect of shares of restricted
stock, as dividends or otherwise, shall be subject to the same restrictions
applicable to such restricted stock.
2.6.5 During the 90 days following termination of the grantee's
employment for any reason, the Company shall have the right to require the
return of any shares to which restrictions on transferability apply, in exchange
for which the Company shall repay to the grantee (or the grantee's estate) any
amount paid by the grantee for such shares.
2.7 Grant of Restricted Stock Units
2.7.1 The Committee may grant awards of restricted stock units to
such key persons, in such amounts, and subject to such terms and conditions as
the Committee shall determine in its discretion, subject to the provisions of
the Plan. Restricted stock units may be awarded independently of or in
connection with any other award under the Plan.
(6)
<PAGE>
2.7.2 At the time of grant, the Committee shall specify the date
or dates on which the restricted stock units shall become fully vested and
nonforfeitable, and may specify such conditions to vesting as it deems
appropriate. In the event of the termination of the grantee's employment by the
Company and its subsidiaries for any reason, restricted stock units that have
not become nonforfeit- able shall be forfeited and cancelled. The Committee at
any time may accelerate vesting dates and otherwise waive or amend any
conditions of an award of restricted stock units.
2.7.3 At the time of grant, the Committee shall specify the
maturity date applicable to each grant of restricted stock units, which may be
determined at the election of the grantee. Such date may be later than the
vesting date or dates of the award. On the maturity date, the Company shall
transfer to the grantee one unrestricted, fully transferable share of Common
Stock for each restricted stock unit scheduled to be paid out on such date and
not previously forfeited. The Committee shall specify the purchase price, if
any, to be paid by the grantee to the Company for such shares of Common Stock.
2.8 Other Stock-Based Awards
The Board may authorize other types of stock-based awards
(including the grant of unrestricted shares), which the Committee may grant to
such key persons, and in such amounts and subject to such terms and conditions,
as the Committee shall in its discretion determine, subject to the provisions of
the Plan. Such awards may entail the transfer of actual shares of Common Stock
to Plan participants, or payment in cash or otherwise of amounts based on the
value of shares of Common Stock.
2.9 Grant of Dividend Equivalent Rights
The Committee may in its discretion include in the Plan Agreement
with respect to any award a dividend equivalent right entitling the grantee to
receive amounts equal to the ordinary dividends that would be paid, during the
time such award is outstanding and unexercised, on the shares of Common Stock
covered by such award if such shares were then outstanding. In the event such a
provision is included in a Plan Agreement, the Committee shall determine whether
such payments shall be made in cash, in shares of Common Stock or in another
form, whether they shall be conditioned upon the exercise of the award to which
they relate, the time or times at which they shall be made, and such other terms
and conditions as the Committee shall deem appropriate.
2.10 Right of Recapture
2.10.1 If at any time within one year after the date on which a
participant exercises an option or stock appreciation right, or on which
restricted stock vests, or which is the maturity date of restricted stock units,
or on which income is realized by a participant in connection with any other
stock-based award (each of which events is a "Realization Event"), the
participant (a) is terminated for cause or (b) engages in any activity
determined in the discretion of the Committee to be in competition with any
activity of the Company, or otherwise inimical, contrary or harmful to the
interests of the Company (including, but not limited to, accepting employment
with or serving as a consultant, adviser or in any other capacity to an entity
that is in competition with or acting against the interests of the Company),
then any gain ("Gain") realized by the participant from the Realization Event
shall be paid by the participant to the Company upon notice from the Company.
Such Gain shall be determined as of the date of the Realization Event, without
regard to any subsequent change in the Fair Market Value of a share of Common
Stock. The Company shall have the right to offset such Gain against any amounts
otherwise owed to the participant by the Company (whether as wages, vacation
pay, or pursuant to any benefit plan or other compensatory arrangement).
(7)
<PAGE>
ARTICLE III
MISCELLANEOUS
3.1 Amendment of the Plan; Modification of Awards
3.1.1 The Board may from time to time suspend, discontinue,
revise or amend the Plan in any respect whatsoever, except that no such
amendment shall materially impair any rights or materially increase any
obligations under any award theretofore made under the Plan without the consent
of the grantee (or, after the grantee's death, the person having the right to
exercise the award). For purposes of this Section 3.1, any action of the Board
or the Committee that alters or affects the tax treatment of any award shall not
be considered to materially impair any rights of any grantee.
3.1.2 Shareholder approval of any amendment shall be obtained to
the extent necessary to comply with section 422 of the Code (relating to
incentive stock options) or other applicable law or regulation.
3.1.3 The Committee may amend any outstanding Plan Agreement,
including, without limitation, by amendment which would accelerate the time or
times at which the award becomes unrestricted or may be exercised, or waive or
amend any goals, restrictions or conditions set forth in the Agreement. However,
any such amendment (other than an amendment pursuant to Section 3.10, relating
to dissolution, liquidation or merger of the Company) that materially impairs
the rights or materially increases the obligations of a grantee under an
outstanding award shall be made only with the consent of the grantee (or, upon
the grantee's death, the person having the right to exercise the award).
3.2 Tax Withholding
3.2.1 As a condition to the receipt of any shares of Common Stock
pursuant to any award or the lifting of restrictions on any award, or in
connection with any other event that gives rise to a federal or other
governmental tax withholding obligation on the part of the Company relating to
an award (including, without limitation, FICA tax), the Company shall be
entitled to require that the grantee remit to the Company an amount sufficient
in the opinion of the Company to satisfy such withholding obligation.
3.2.2 If the event giving rise to the withholding obligation is a
transfer of shares of Common Stock, then, unless otherwise specified in the
applicable Plan Agreement, the grantee may satisfy the withholding obligation
imposed under Section 3.2.1 by electing to have the Company withhold shares of
Common Stock having a Fair Market Value equal to the amount of tax to be
withheld. For this purpose, Fair Market Value shall be determined as of the date
on which the amount of tax to be withheld is determined (and any fractional
share amount shall be settled in cash).
3.3 Nonassignability
Except to the extent otherwise provided in the applicable Plan
Agreement, no award or right granted to any person under the Plan shall be
assignable or transferable other than by will or by the laws of descent and
distribution, and all such awards and rights shall be exercisable during the
life of the grantee only by the grantee or the grantee's legal representative.
3.4 Requirement of Notification of
Election Under Section 83(b) of the Code
If any grantee shall, in connection with the acquisition of
shares of Common Stock under the Plan, make the election permitted under section
83(b) of the Code (that is, an election to include in gross income in the year
of transfer the amounts specified in section 83(b)), such grantee shall notify
the Company of such election within 10 days of filing notice of the election
with the Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under the authority of Code section
83(b).
(8)
<PAGE>
3.5 Requirement of Notification Upon Disqualifying
Disposition Under Section 421(b) of the Code
If any grantee shall make any disposition of shares of Common
Stock issued pursuant to the exercise of an incentive stock option under the
circumstances described in section 421(b) of the Code (relating to certain
disqualifying dispositions), such grantee shall notify the Company of such
disposition within 10 days thereof.
3.6 Right of Discharge Reserved
Nothing in the Plan or in any Plan Agreement shall confer upon
any grantee the right to continue in the employ of the Company or affect any
right which the Company may have to terminate such employment.
3.7 Nature of Payments
3.7.1 Any and all grants of awards and issuances of shares of
Common Stock under the Plan shall be in consideration of services performed for
the Company by the grantee.
3.7.2 All such grants and issuances shall constitute a special
incentive payment to the grantee and shall not be taken into account in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement, profit-sharing, bonus,
life insurance or other benefit plan of the Company or under any agreement
between the Company and the grantee, unless such plan or agreement specifically
provides otherwise.
3.8 Non-Uniform Determinations
The Committee's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Plan agreements, as
to (a) the persons to receive awards under the Plan, (b) the terms and
provisions of awards under the Plan, and (c) the treatment of leaves of absence
pursuant to Section 1.6.4.
3.9 Other Payments or Awards
Nothing contained in the Plan shall be deemed in any way to limit
or restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.
3.10 Dissolution, Liquidation, Merger
3.10.1 In the event of the proposed dissolution or liquidation of
the Company, all outstanding awards will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, accelerate the date on which any award becomes exercisable or fully
vested and/or declare that any award shall terminate as of a specified date.
3.10.2 In the event of a merger or consolidation ("Merger") of
the Company with or into any other corporation or entity ("Corporation"),
outstanding awards shall be assumed or an equivalent option or right shall be
substituted by such successor Corporation or a parent or subsidiary of such
successor Corporation, unless the Committee determines, in the exercise of its
sole discretion, to accelerate the date on which an award becomes exercisable or
fully vested. In the absence of an assumption or substitution of awards, awards
shall, to the extent not exercised, terminate as of the date of the closing of
the Merger. For the purposes of this Section 3.10.2, an award shall be
considered assumed if, for every share of Common Stock subject thereto
immediately prior to the merger, the grantee has the right, following the
Merger, to acquire the consideration received in the merger transaction by
holders of shares of Common Stock (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares); provided, however, that if such consideration received
in the Merger was not solely common stock of
(9)
<PAGE>
the successor Corporation or its parent, the Committee may, with the consent of
the successor Corporation and the participant, provide for the consideration to
be acquired pursuant to the award, for each share of Common Stock subject
thereto, to be solely common stock of the successor Corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the Merger. For purposes hereof, the term "Merger" shall include
any transaction in which another corporation acquires all of the issued and
outstanding Common Stock of the Company.
3.11 Section Headings
The section headings contained herein are for the purpose of
convenience only and are not intended to define or limit the contents of the
sections.
3.12 Effective Date and Term of Plan
3.12.1 The Plan was adopted by the Board on February 27, 1997,
subject to approval by the Company's shareholders. All awards under the Plan
prior to such shareholder approval are subject in their entirety to such
approval. If such approval is not obtained prior to the first anniversary of the
date of adoption of the Plan, the Plan and all awards thereunder shall terminate
on that date.
3.12.2 Unless sooner terminated by the Board, the provisions of
the Plan respecting the grant of incentive stock options shall terminate on the
day before the tenth anniversary of the adoption of the Plan by the Board, and
no incentive stock option awards shall thereafter be made under the Plan. All
awards made under the Plan prior to its termination shall remain in effect until
such awards have been satisfied or terminated in accordance with the terms and
provisions of the Plan and the applicable Plan Agreements.
3.13 Governing Law
All rights and obligations under the Plan shall be construed and
interpreted in accordance with the laws of the State of Delaware, without giving
effect to principles of conflict of laws.
(10)
<PAGE>
Appendix A
FAB INDUSTRIES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 1, 1997
This Proxy Solicited on Behalf of the Board of Directors
THE UNDERSIGNED, revoking all previous proxies, hereby appoints DAVID
A. MILLER and SHERMAN S. LAWRENCE, or either of them, attorneys and proxies with
power of substitution, for and in the name, place and stead of the undersigned,
and with all the powers the undersigned would possess if personally present, to
vote as instructed below all of the shares of Common Stock of FAB INDUSTRIES,
INC. (the "Company"), which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company, to be held on Thursday, May 1, 1997 at
10:15 A.M., at the principal office of the Company, 200 Madison Avenue, New
York, New York 10016, and at any adjournment or adjournments thereof. The shares
represented by this Proxy will be voted as indicated below upon the following
matters, as more fully described in the Proxy Statement.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN. IF NO SUCH INSTRUCTIONS ARE GIVEN, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED IN FAVOR OF THE NOMINEES FOR DIRECTORS AND FOR ITEM 2.
(See reverse side)
<PAGE>
Please mark your |X|
vote as indicated in
this example
1. Election of Two (2) Directors to Class III (Instructions: To withhold
authority to vote for any
FOR ALL WITHHOLD individual Class III nominee
NOMINEES LISTED AUTHORITY strike a line through the
(Except as marked to vote for all nominee's name in the text
to the contrary) nominees listed below.)
To Class III of the Board of
Directors (to hold office
until the 2000 Annual Meeting
of Stockholders):
|_| |_| Samson Bitensky,
Sherman S. Lawrence
2. Approval of Fab Industries, Inc. 1997 Stock Incentive Plan
FOR AGAINST ABSTAIN
|_| |_| |_|
3. In their discretion, upon such other
business as may properly come before
the meeting.
Dated:___________________________, 1997
________________________________________
Signature
________________________________________
Signature
Note: Please sign exactly as your name
or names appear hereon. Joint owners
should each sign personally. When
signing as executor, administrator,
corporation officer, attorney, agent,
trustee or guardian, etc., please add
your full title to your signature.
Note: Please date, mark (in blue or
black ink), sign and mail this
Proxy in the envelope provided
for this purpose. No postage is
required for mailing in the
United States.
