Fansteel Inc.
Number One Tantalum Place
North Chicago, Illinois 60064
Notice of Annual Meeting of Stockholders
April 24, 1996
March 22, 1996
To the Stockholders
of Fansteel Inc.:
Notice hereby is given that the Annual Meeting of Stockholders of Fansteel
Inc. will be held at The Sheraton Stamford Hotel, 1 First Stamford Place,
Stamford, Connecticut, on April 24, 1996, at 11:00 a.m., Eastern Daylight Time,
for the purposes of:
(1) Electing six Directors to serve until the next Annual
Meeting of Stockholders or until their successors are
elected;
(2) Adopting a Long-Term Incentive Compensation Plan;
(3) Ratifying the appointment of Ernst & Young LLP, Certified
Public Accountants, as auditors of the Company for the year
ending December 31, 1996; and
(4) Transacting such other business as may be brought before the
meeting.
The Board of Directors has fixed the close of business on March 1, 1996, as
the record date for the determination of stockholders entitled to notice of and
to vote at said meeting.
A list of the stockholders entitled to vote at the Annual Meeting will be open
to the examination of any stockholder for at least ten days prior to the Annual
Meeting at Number One Tantalum Place, North Chicago, Illinois 60064 for any
purpose germane to such meeting, during ordinary business hours.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED
SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES.
By order of the Board of Directors,
Michael J. Mocniak
Secretary
Fansteel Inc.
Number One Tantalum Place
North Chicago, Illinois 60064
Proxy Statement
SOLICITATION OF PROXIES
This statement is furnished in connection with the solicitation of Proxies on
behalf of the Board of Directors ("Board") of Fansteel Inc. (the "Company") to
be voted at the Annual Meeting of Stockholders, including any and all
adjournments thereof, to be held on April 24, 1996.
If the enclosed Proxy is executed and returned it will be voted in accordance
with the specifications thereon, and if there are no specifications thereon, it
will be voted in accordance with the proposals recommended by the Board. The
only business which the Board intends to present, or knows that others will
present, at the Annual Meeting, is specified in the accompanying notice of the
meeting. If, however, any other matters properly come before the meeting for
action, it is intended that the persons named in the enclosed form of Proxy will
vote the same in accordance with their best judgment on such matters.
The enclosed Proxy may be revoked at any time insofar as it has not been
exercised.
The enclosed proxy material is being mailed to stockholders on or about March
22, 1996. The cost of preparing, assembling and mailing the enclosed proxy
material will be paid by the Company.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On March 1, 1996, the record date for determination of stockholders entitled
to notice of and to vote at said Annual Meeting, the Company had outstanding
8,598,858 shares of Common Stock, each of which is entitled to one vote.
The persons owning beneficially 5% or more of the Company's outstanding Common
Stock as of March 1, 1996, and the stock ownership of all the Officers and
Directors of the Company as a group as of that date are as follows:
Amount
Name and Address of Beneficially Percent
Beneficial Owner Owned of Class
T. M. Evans 4,050,786 47.11%(1)
500 Round Hill Road
Greenwich, CT 06831
R. B. Haave Associates, Inc. 801,000 9.32%
270 Madison Avenue
New York, NY 10016
Dimensional Fund Advisers Inc. 610,300 7.10%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
All Officers and Directors as a group 25,488 .20%
(4 persons)
(1) These shares do not reflect 15,116 shares the beneficial ownership of which
is held on behalf of B. B. Evans, wife of T. M. Evans.
NOMINEES FOR ELECTION AS DIRECTORS
Unless the stockholder has exercised the right to withhold such vote for any
nominee, the persons named in the enclosed Proxy will vote in favor of the
election of all of the six nominees named below as Directors to serve until the
next Annual Meeting of Stockholders or until their successors are elected. If,
as a result of circumstances not known or unforeseen, any nominee shall be
unavailable to serve as a Director, Proxies will be voted for the election of
such other person or persons as the Board may select. The following table sets
forth pertinent information with respect to such nominees, including their
principal business experience and shares of the Company's Common Stock
beneficially owned by them, directly or indirectly, on March 1, 1996.
Year in
Which
First
Became Shares of
Principal Business Director Common
Experience ofthe Stock Owned Percent
Name Age and Other Information Company Beneficially of Class
B. B. Evans 72 Mrs. Evans is a 1983 15,116(1) 0.18%
Director of HBD
Industries, Inc.
R. S. Evans 52 Chairman of the 1992 - -
Board and Chief
Executive Officer
of Crane Co. and
Medusa Corporation
for the past five
years, and a
Director of HBD
Industries, Inc.
He is a son of T.M.
Evans.
T. M. Evans, 58 Mr. Evans was a 1986 - -
Jr. partner of Bregman,
Surnamer, Weissman
& Co. He has
engaged in personal
investments since
1988. Mr. Evans is
a Director of HBD
Industries, Inc.
He is a son of T.
M. Evans.
W. D. Jarosz 43 Mr. Jarosz is and 1995 - -
has been President
and Chief Executive
Officer of the
Company since June,
1995 and was
President and Chief
Operating Officer
from February, 1995
to June, 1995.
From December, 1992
to February, 1995,
Mr. Jarosz managed
the Company's
Plantsville, CT
operation and prior
to December, 1992,
he held the
position of General
Manager at a number
of companies within
HBD Industries,
Inc.
Year in
Which
First
Became Shares of
Principal Business Director Common
Experience ofthe Stock Owned Percent
Name Age and Other Information Company Beneficially of Class
J. S. Petrik 66 Mr. Petrik is Vice 1985 2,000 less than
President and 0.1%
Director, Retired,
Turner Broadcasting
System, Inc. From
1992 to 1995 he was
Consultant, New
Technologies,
Turner Broadcasting
System, Inc. Prior
to 1988 and until
1992, he was
Chairman of Turner
Program Services,
Vice President of
Syndication and
Licensing and a
member of the Board
of Directors of
Turner Broadcasting
System, Inc.
C. J. Queenan, 65 Mr. Queenan is a 1982 7,872 less than
Jr. senior counsel of 0.1%
the law firm of
Kirkpatrick &
Lockhart LLP. Mr.
Queenan is also a
Director of
Allegheny Ludlum
Corporation, Crane
Co., and Medusa
Corporation.
Each of the above-named persons has continuously served as a Director of the
Company since the year shown in the table.
(1) Does not include 4,050,786 shares of Common Stock held by T. M. Evans,
husband of B. B. Evans. Mrs. Evans disclaims any beneficial interest
in the above mentioned shares.
During 1995 there were six Board meetings. Each Board member attended at
least 75% of the meetings of the Board except Mr. E. P. Evans, who resigned from
the Board of Directors in November, 1995, and Mr. T. M. Evans, Jr., who attended
67% of all Board meetings. In addition, each member of the Audit Committee
attended all of the meetings of the Audit Committee, except Mr. T. M. Evans,
Jr., who attended 33 1/3%.
Messrs. C. J. Queenan, Jr. (Chairman), T. M. Evans, Jr., and J. S. Petrik were
members of the Audit Committee from January 1, 1995 through December 31, 1995.
The Committee held three meetings during the year 1995. The Committee reviews
the scope and results of the audit and proposes appointment of the auditors
subject to the approval of the Board and ratification of the stockholders. The
Committee also reviews the Company's system of internal controls and procedures
with the auditors and the rendering of non-audit services by the auditors.
Messrs. R. S. Evans (Chairman), J. S. Petrik, and C. J. Queenan are members of
the Compensation and Nominating Committee which was established on January 26,
1993. The Committee held one meeting in 1995. The Committee reviews all
matters relating to executive compensation.
During 1995 the Company retained the law firm of Kirkpatrick & Lockhart, of
which firm Mr. Queenan is Senior Counsel.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
Long-term All Other
Annual Compensation Compensation Compensation
Awards (2)
Securities
Name & Principal Underlying
Position Year Salary Bonus Other SAR's (1)
Keith R. Garrity 1995 $130,846 $ 0 $12,600 $ 0 $2,713
Chairman of the 1994 252,001 50,000 25,876 0 7,223
Board, Chief 1993 248,759 0 23,498 0 3,777
Executive Officer
and President
(Deceased)
William D. Jarosz 1995 164,366 40,000 3,002 0 2,799
President and 1994 80,366 0 454 0 6,060
Chief Executive 1993 75,001 0 388 0 0
Officer
Michael J. Mocniak 1995 169,077 30,000 880 0 2,821
Vice President, 1994 150,508 19,000 717 0 4,314
Secretary and 1993 137,757 0 377 0 2,147
General Counsel
R. Michael McEntee 1995 154,077 30,000 1,883 0 2,596
Vice President 1994 135,878 19,000 1,800 0 3,894
and Chief 1993 125,915 0 1,095 0 1,970
Financial Officer
(1) Reported in number of units.
(2) Amounts of All Other Compensation are amounts contributed or accrued for
fiscal years 1995, 1994 and 1993 under the Company's Savings and Profit
Sharing Plans.
12/31/95 SAR VALUES
Number of
Unexercised
SAR's at
12/31/95(#)
Exercisable/
Name Unexercisable(1)
Keith R. Garrity -/-
William D. Jarosz -/-
Michael J. Mocniak 1,000/-
R. Michael McEntee 8,000/-
There were no in-the-money SAR's at December 31, 1995 as the fair market value
of the Company's common stock on December 31, 1995 did not exceed the base price
of the shares underlying the stock appreciation rights.
PENSION PLAN TABLE
YEARS OF SERVICE
Remuneration 15 20 25 30 35
$125,000 $32,406 $38,208 $44,009 $49,811 $55,613
150,000 39,156 46,208 53,259 60,311 67,363
175,000 41,856 49,408 56,959 64,511 72,063
200,000 44,556 52,608 60,659 68,711 76,763
225,000 47,256 55,808 64,359 72,911 81,463
250,000 48,049 56,748 65,447 74,146 82,845
300,000 48,049 56,748 65,447 74,146 82,845
400,000 48,049 56,748 65,447 74,146 82,845
500,000 48,049 56,748 65,447 74,146 82,845
The Fansteel Consolidated Employee Pension ("Plan") provides benefits to the
executive officers of the Company as well as salaried and hourly employees. The
annual benefit is calculated using the employee's salary, overtime pay,
commissions and bonus payments as covered compensation. This covered
compensation is essentially identical to the compensation reported in the
Summary Compensation Table.
The Plan provides benefits upon retirement at age 65 based upon years of
service and compensation. Messrs. W.D. Jarosz, M.J. Mocniak, and R.M. McEntee
have 2, 13, and 16 years of credited service, respectively, under the Plan. Mr.
Garrity died in June of 1995 with forty years of credited service.
Annual pension benefits payable under the Plan, at age 65, based on an annuity
for ten years certain and for life thereafter, are equal to 1.8% of the
employee's average annual compensation for each of his first 15 years of
credited service, plus 1.0% of his average annual compensation for each year of
credited service after the 15th year less .325% of the lesser of the employee's
average compensation for the three years prior to retirement or the average of
the taxable wage basis under the Social Security Act for each calendar year
during the 35-year period ending with the year the employee attains Social
Security retirement age multiplied by the lesser of the employee's actual years
of credited service or 35. The amounts in the table have been reduced by the
offset.
The standard arrangement with the Directors provides for Directors' fees in
the amount of $20,000 per year, $500 per board meeting attended, $1,000 per
committee meeting attended, and $3,000 per year for serving as a committee
chairman.
Prior to the formation of the Compensation and Nominating Committee on January
26, 1993, all decisions regarding executive compensation were made by the entire
Board. Any officer and employee of the Company who was a member of the Board
participated in deliberations of the Board during the last completed fiscal year
concerning executive officer compensation.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Compensation and Nominating Committee of the Company reviews all matters
relating to executive compensation and reports its actions and recommendations
to the Board of Directors.
The Company's policy on executive officer compensation is to provide
compensation which enables the Company to attract and retain a highly qualified
complement of executive officers who will enhance shareholder value by
optimizing the profitability of the Company's manufacturing operations and
maintaining sound, conservative fiscal policies. The Company's compensation
package for 1995 consisted of three parts: base salary, a potential annual
bonus and equity-related compensation.
Base Salary. Base salaries are set near the median for similarly-sized
businesses competing in the same or similar industries as the Company. The
sources of comparisons are publications dealing with executive compensation.
The information reported in those publications does not usually reveal the
identity of the companies which are the subject of the reports. The companies
which are the basis of that information, accordingly, are not necessarily those
which comprise the peer group for comparison of shareholder returns. By pegging
salaries at a median level, the Company believes that it can attract and retain
the caliber of executive officer desired.
Incentive Compensation. During 1995 and previous years, annual bonuses were
specifically related to corporate performance as evaluated by the Committee.
The factors that have been considered in determining whether a bonus would be
paid and, if so, in what amount, were the Company's income before taxes,
inventory turns, return on investment and speed of collection of accounts
receivable. These incentive compensation criteria were designed to maximize the
return to the Company's shareholders while maintaining liquidity for expanding
existing businesses or acquiring new ventures. In determining the bonuses of
the executive officers other than the Chief Executive Officer, additional
factors such as the relative performance of the particular officer's area of
functional responsibility and the individual officer's past performance and
future potential were considered. For 1995, as reported in the accompanying
Summary Compensation Table, bonuses were awarded to executive officers of the
Company because the performance targets were attained.
On January 23, 1996, the Committee approved a bonus plan for 1996 in which the
executive officers will participate. This new plan will strengthen the
performance-related nature of the Company's incentive compensation program by
providing a more formal and objective plan structure and tying incentive pay
more closely to performance measures that closely reflect stockholders'
interests. The plan is based upon improvement in economic value added (EVA).
EVA is the difference between the return on capital and the cost of that capital
multiplied by the amount of capital invested. The key factors utilized in
calculating bonuses under the new plan will be the Company's cost of capital,
return on capital, capital employed, and net operating profit after tax.
Under the new plan, the Committee will determine the portion of an available
bonus pool which would be paid to executive officers. The total amount of the
available pool will be calculated by comparing the current year's EVA with the
prior year's EVA. If the prior year's EVA was negative, the bonus pool will be
25% of the difference. If the prior year's EVA was positive, the bonus pool
will be 15% of the difference plus 6% of any positive EVA. The portion of the
bonus pool awarded by the Committee to an executive officer will be added to an
accrual account for such executive officer and one-third of the account balance
will be paid out in cash to him. The accrual account balance can be reduced for
years in which there is a decline in EVA. The Committee will determine each
executive officer's award from the bonus pool based upon his relative
performance for the year as well as his relative performance compared to the
other officers. The Committee has the discretion to adjust the awards during
the initial years of the plan to prevent any material discrepancies from awards
under the prior bonus award format.
Equity-Related Compensation. The Board of Directors established the Stock
Appreciation Rights Plan (the "SAR Plan") in 1989. The Company utilizes stock
appreciation rights for executive officers to provide longer-term performance-
related incentives that link their rewards directly to shareholder gains.
Awards under that SAR Plan are designed to provide officers and key employees
with the long-term incentive to continue and increase their efforts to improve
the operating results of the Company and thereby the value of the common stock.
No stock appreciation rights were granted to any officer or employee in 1995.
On February 18, 1996, the Board approved a long-term incentive plan (the
"Incentive Plan"), subject to the approval of the stockholders of the Company at
the 1996 Annual Meeting. The Incentive Plan will enable the Company to offer
competitive equity-based compensation packages to executives, provide the
Company flexibility in designing equity-based compensation programs to suit
current needs and offer a vehicle for providing long-term, performance-based
compensation to supplement the Company's existing programs.
All executive officers and key employees of the Company and its subsidiaries
are eligible to participate under the plan pursuant to which the Committee may
grant Incentive Stock Options, non-qualified stock options, or combinations
thereof, Stock Appreciation Rights, restricted shares and performance awards. A
detailed summary of the plan is set forth in this Proxy Statement under the
section entitled "Long-Term Incentive Plan." The Committee is responsible for
administering the plan. At this time, however, no criteria for granting awards
have been developed, nor have any awards to any officers or key employees been
granted.
Chief Executive Officer Compensation. William D. Jarosz was elected President
and Chief Operating Officer of the Company in February 1995. In those
capacities, he replaced Keith R. Garrity who had become seriously ill. Mr.
Garrity remained as Chairman of the Board until his death in June 1995, at which
time Mr. Jarosz was elected President and Chief Executive Officer.
Mr. Garrity's base salary was not increased in 1995. Mr. Jarosz's base salary
was initially set at a level below that which Mr. Garrity had been receiving,
and his salary was not increased in 1995. Mr. Jarosz received a bonus for 1995
based upon the attainment of performance objectives for the year, as determined
by the Committee.
On February 16, 1995, the Board of Directors authorized the establishment of a
Supplemental Retirement Income Plan solely for the purpose of providing benefits
for Mr. Garrity to compensate for the impact of Internal Revenue Code
limitations on the benefits payable to Mr. Garrity under the Fansteel
Consolidated Employees' Pension Plan. At the time, Mr. Garrity was Chairman of
the Board and Chief Executive Officer of the Company. The Board of Directors
made the decision to establish the Supplemental Plan because of Mr. Garrity's
lengthy service and dedicated efforts on behalf of the Corporation so that he
and his spouse would receive pension payments in the amounts originally
envisaged by the Fansteel Consolidated Employees' Pension Plan prior to
limitations subsequently imposed by the Internal Revenue Code of 1986, as
amended. The Supplemental Retirement benefit of $2,208.66 per month commenced
in June 1995 upon Mr. Garrity's death and is payable for life to his surviving
spouse.
Other Matters. On January 15, 1996, the Board of Directors directed that the
Company enter into a Change in Control Agreement with each of the three
executive officers which provides appropriate protections to such executives in
the event of a change in control of the Company. Such Agreements are intended
to ensure that the Company be able to receive and rely upon the advice of key
executives with respect to a possible change in control without concern that
they may be distracted by the personal uncertainties and risks created by the
possibility of a change in control. A detailed summary of the Change in Control
Agreements is set forth in this Proxy Statement in the section entitled "Change
in Control Agreement."
The Company does not anticipate that it will be affected in the near future by
Section 162(m) of the Internal Revenue Code, which imposes an annual limit of
$1,000,000 per person on the federal income tax deduction for executive
compensation. If the Company should determine that this limitation might impact
the Company, the Company would likely take the necessary steps to bring its
compensation programs into compliance with Section 162(m) so that non-
deductibility would be avoided.
R. S. Evans, Chairman of the Committee
C. J. Queenan, Jr.
J. S. Petrik
The Company compares its total shareholder return in the following performance
graph with the MG Industry Group 012 - Aerospace Components as well as the MG
Industry Group 301 - Metals Fabrication. The Company began comparing its
shareholder returns in 1994 with MG Industry Group 301 - Metal Fabrications as a
better measure of the overall business of the Company and because of the reduced
concentration of the Company's sales in the aerospace components market in 1994
as compared to previous years.
Note: Performance graph submitted in paper format under cover of Form SE.
THE 1996 LONG-TERM INCENTIVE COMPENSATION PLAN
The following summary of the 1996 Long-Term Incentive Compensation Plan (the
"1996 Plan") is qualified in its entirety by reference to the complete text of
the 1996 Plan which appears as Exhibit A to this Proxy Statement.
ADMINISTRATION
The 1996 Plan will be administered by the Compensation and Nominating
Committee (the "Committee"). No member of the Committee or other non-employee
Director will be eligible to receive shares or other awards under the 1996 Plan.
AMOUNT OF STOCK
The 1996 Plan will provide for awards of up to 400,000 shares of Common Stock,
subject to anti-dilution adjustments upon the occurrence of significant
corporate events. The shares to be offered under the 1996 Plan will be either
authorized and unissued shares or issued shares which have been reacquired by
the Company.
ELIGIBILITY AND PARTICIPATION
All officers and key employees of the Company or any subsidiary will be
eligible to participate, including officers who are also Directors of the
Company or its subsidiaries. The Committee may also grant awards to
non-employees who, in the judgment of the Committee, render significant service
to the Company or any of its subsidiaries. As of the date hereof, the Committee
has made no determination as to the particular officers and key employees to
whom long-term incentive benefits under the 1996 Plan will be awarded, the type
of incentive compensation under the 1996 Plan which will be awarded or the
number of share benefits which any person will be awarded. No participant can
receive awards under the 1996 Plan in any calendar year in respect of more than
100,000 shares of Common Stock.
AMENDMENT OR TERMINATION
The 1996 Plan has no fixed expiration date. The Committee will establish
expiration and exercise dates on an award-by-award basis. However, for the
purpose of awarding incentive stock options under Section 422 of the Internal
Revenue Code ("Incentive Stock Options"), the 1996 Plan will expire ten years
from its effective date.
STOCK OPTION COMPONENT OF THE 1996 PLAN
The Committee may grant to a participant non-qualified stock options,
Incentive Stock Options or a combination thereof. The terms and conditions of
stock option grants including the quantity, price, waiting periods, and other
conditions on exercise will be determined by the Committee. Incentive Stock
Option grants are made in accordance with Section 422 of the Code.
The exercise price for stock options will be determined by the Committee at
its discretion, provided that the exercise price for each Incentive Stock Option
is at least equal to 100% of the fair market value of a Common Stock on the date
when the stock option is granted. Generally, no stock option may be exercised
prior to six months from the date of grant.
Upon a participant's termination of employment for any reason, any stock
options which were not exercisable on the participant's termination date will
expire. In the case of a participant who retires from the Company and continues
to render significant services to the Company after retirement, the Committee,
at its discretion, may permit the period during which the participant continues
to render such services to the Company to count toward the participant's vesting
requirement with respect to stock options that were not exercisable at the time
of the participant's termination of employment.
Upon a participant's termination of employment for reasons other than death,
disability or normal retirement, stock options which were exercisable on the
participant's termination date will expire three months from the date of
termination, unless the right to exercise the options is extended by the
Committee at its discretion. In general, upon a participant's termination by
reason of death, disability or normal retirement, stock options which were
exercisable on the participant's termination date may continue to be exercised
by the participant (or the participant's beneficiary) for a period of five years
from the date of the participant's termination of employment.
Subject to the Committee's discretion, payment for Common Stock on the
exercise of stock options may be made in cash, Common Stock, a combination of
cash and Common Stock or in any other form of consideration acceptable to the
Committee (including one or more "cashless" exercise forms).
The Committee has the discretion to cause the Company to assist a participant
in exercising stock options by lending sufficient cash to the participant or by
guaranteeing a participant's bank loan. In such event, the Company would hold
the shares acquired upon exercise of the option as security for repayment of the
loan.
STOCK APPRECIATION RIGHT COMPONENT OF THE 1996 PLAN
Stock Appreciation Rights ("SARs") may be granted by the Committee to a
participant either separate from or in tandem with non-qualified stock options
or Incentive Stock Options. SARs may be granted at the time of the stock option
grant or, with respect to non-qualified stock options, at any time prior to the
exercise of the stock option. A SAR entitles the participant to receive, upon
its exercise, a payment equal to (i) the difference between the SAR exercise
price and the fair market value of a share of Common Stock on the exercise date,
times (ii) the number of shares of Common Stock with respect to which the SAR is
exercised. Upon exercise of a SAR with respect to Common Stock, the number of
shares of Common Stock covered by the SAR's related stock option, if any, are
correspondingly reduced.
SARs granted in tandem with options are generally governed by the same terms
and conditions as govern the related stock option and may only be exercised to
the extent the related stock option is exercisable. However, SARs which are
granted in tandem with previously granted non-qualified stock options cannot be
exercised prior to six months from the date of grant of the SAR.
The exercise price of a SAR is determined by the Committee, but in the case of
SARs granted in tandem with stock options, may not be less than the exercise
price of the related stock option. Upon exercise of a SAR, payment will be made
in cash or Common Stock, or a combination thereof, as determined at the
discretion of the Committee.
RESTRICTED SHARE COMPONENT OF THE 1996 PLAN
The Committee may award to a participant shares of Common Stock subject to
specified restrictions ("Restricted Shares"). The Restricted Shares are subject
to forfeiture if the participant does not meet certain conditions such as
continued employment over a specified forfeiture period (the "Forfeiture
Period") and/or the attainment of specified performance targets over the
Forfeiture Period. The terms and conditions of Restricted Share awards are
determined by the Committee, provided that, unless otherwise determined by the
Board, the specified Forfeiture Period may not be less than one year.
Participants who have been awarded Restricted Shares will have all of the
rights of a holder of outstanding Common Stock, including the right to vote such
shares and to receive dividends. During the Forfeiture Period, the Restricted
Shares are nontransferable and may be held in custody by the Company or its
designated agent, or if the certificate is properly legended, by the
participant. Upon the lapse or release of all restrictions, an unrestricted
certificate will be provided to the participant.
The Committee, at its sole discretion, may waive all restrictions with respect
to a Restricted Share award under certain circumstances (including the death,
disability, or retirement of a participant, or a material change in
circumstances arising after the date of grant) subject to such terms and
conditions as it deems appropriate.
PERFORMANCE AWARD COMPONENT OF THE 1996 PLAN
The Committee may grant performance awards to participants under such terms
and conditions as the Committee deems appropriate. A performance award entitles
a participant to receive a payment from the Company, the amount of which is
based upon the attainment of predetermined performance targets over a specified
award period. Performance awards may be made in conjunction with Restricted
Share awards. Performance awards may be paid in cash, Common Stock or a
combination thereof, as determined by the Committee.
Award periods will be established at the discretion of the Committee. The
performance targets will also be determined by the Committee and may, but need
not include specified levels of earnings per share, return on investment, return
on shareholders' equity and/or such other goals related to the Company's or the
individual's performance as are deemed appropriate by the Committee. When
circumstances occur which cause predetermined performance targets to be an
inappropriate measure of achievement, the Committee, at its discretion, may
adjust the performance targets.
If the minimum performance targets established by the Committee are not met,
no payment will be made to the participant. If the performance targets are
fully achieved, 100% of the performance award will be paid to the participant.
The Committee may also provide for payment of up to 150% of a performance award
for achievement which exceeds the performance targets.
If a participant terminates employment prior to the end of an award period,
the participant generally will forfeit all rights to any performance award,
unless otherwise provided by the Committee. The Committee, at its discretion,
may determine to pay all or any portion of a performance award to a participant
who has terminated employment prior to the end of an award period under certain
circumstances (including death, disability, retirement or a material change in
circumstances arising after the date of grant), provided that the participant
completed at least one year of employment following the grant of the award.
OTHER AWARDS
The Committee is authorized to grant any other cash awards, Common Stock
awards or other types of awards which are valued in whole or in part by
reference to the value of Common Stock. The terms and conditions of such awards
and the participants eligible for such awards will be determined by the
Committee at its discretion.
CHANGE IN CONTROL
In general, events which constitute a change in control ("Change in
Control") include: (i) acquisition by a person, other than the Company, one of
its subsidiaries or a Company benefit plan, of 30% or more of the Common Stock;
(ii) the individuals who constitute the Board as of the effective date of the
1996 Plan (the "Incumbent Board") no longer constitute at least a majority of
the Board without prior approval by a majority vote of the Incumbent Board or by
a stockholder beneficially owning in excess of 40% of the Outstanding Common
Stock on the effective date of the 1996 Plan and at the date of such nomination
or election; (iii) approval by the shareholders of the Company of a
reorganization, merger or consolidation; or (iv) approval by the shareholders of
the Company of a complete liquidation or dissolution of the Company or sale or
other disposition of 60% or more by value of the assets of the Company.
In the event of a Change in Control, stock options and SARs immediately become
exercisable, the restrictions on all Restricted Shares lapse and all performance
awards immediately become payable.
TAX CONSEQUENCES
The following is a summary of the principal federal income tax consequences of
1996 Plan benefits under present tax law. The summary is not intended to be
exhaustive and, among other things, does not describe state, local or foreign
tax consequences.
STOCK OPTIONS. No tax is incurred by the participant (or expense deductible
by the Company) upon the grant of a nonqualified stock option. At the time of
exercise of such an option, the difference between the exercise price and the
fair market value of Common Stock will constitute ordinary income to the
participant. The Company will be allowed a deduction equal to the amount of
ordinary income recognized by the participant. In the case of Incentive Stock
Options, although no income is recognized upon exercise and the Company is not
entitled to a deduction, the excess of the fair market value of Common Stock on
the date of exercise over the exercise price is counted in determining the
participant's alternative minimum taxable income. If the participant does not
dispose of the shares acquired on the exercise of an Incentive Stock Option
within one year after their receipt (and within two years after the grant of the
stock option), gain or loss recognized on the disposition of the shares will be
treated as long-term capital gain or loss.
In the event of an earlier disposition, the participant may recognize ordinary
income, to the extent of the excess of the fair market value of the Common Stock
on the date of exercise over the exercise price, and capital gain, to the extent
of the excess of the amount realized on the sale of the Common Stock over the
optionee's basis in the Common Stock (generally, the exercise price plus any
ordinary income paid with respect to such earlier disposition) and the Company
will be entitled to a deduction, equal to the amount of ordinary income
recognized by the participant, when recognized by the participant. Whether the
capital gain recognized is long-term or short-term will depend upon whether the
one-year capital gain holding period has been met.
SARS. The participant will not recognize any income at the time of grant of a
SAR. Upon the exercise of a SAR, the cash and the value of any Common Stock
received will constitute ordinary income to the participant. The Company will
be entitled to a deduction in the amount of such income at the time of exercise.
RESTRICTED SHARES. A participant will normally not recognize taxable income
upon an award of Restricted Shares, and the Company will not be entitled to a
deduction until the lapse of the restrictions. Upon lapse of restrictions, the
participant will then recognize ordinary taxable income in an amount equal to
the fair market value of the Common Stock as to which the restrictions have
lapsed, and the Company will be entitled to a deduction in the same amount.
However, a participant may elect under Section 83(b) of the Internal Revenue
Code to recognize taxable ordinary income in the year the Restricted Shares are
awarded in an amount equal to the fair market value of the shares at that time,
determined without regard to the restrictions. In such event, the Company will
then be entitled to a deduction in the same amount. Any gain or loss
subsequently recognized by the participant will be a capital gain or loss. If,
after making a Section 83(b) election, any Restricted Shares are forfeited, or
if the fair market value at vesting is lower than the amount on which the
participant was taxed, the participant cannot then claim a tax deduction for the
loss.
PERFORMANCE AWARDS AND OTHER STOCK-BASED AWARDS. Normally, a participant will
not recognize taxable income upon the award of such grants. Subsequently, when
the conditions and requirements for the grants have been satisfied and the
payment determined, any cash received and the fair market value of any Common
Stock received will constitute ordinary income to the participant. The Company
will also then be entitled to a deduction in the same amount.
ALL AWARDS. The Committee has discretion as to any award under the 1996 Plan
to award a participant a separate cash amount at exercise, vesting or lapse of
restrictions to meet mandatory tax withholding obligations or reimburse for any
individual taxes paid.
BENEFITS UNDER THE 1996 PLAN. No awards have been granted to date under the
1996 Plan and the benefits to be received under the 1996 Plan by any particular
person are not determinable at this time.
RECOMMENDATION
The Board, believing that the Company and its shareholders will benefit from
the adoption of the 1996 Plan, hereby recommends a vote FOR the 1996 Plan, as
set forth in Exhibit A, which will be submitted to the stockholders for approval
at the Annual Meeting of Stockholders on April 24, 1996.
Approval of the 1996 Plan requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock present either in person or
by proxy and entitled to vote at the 1996 Annual Meeting of Stockholders.
CHANGE IN CONTROL AGREEMENT
On January 15, 1996, the Board of Directors approved a Change in Control
Agreement (the "Agreement" or "Agreements") with each of the three current
officers named in the summary compensation table. The purpose of the Agreement
is to reenforce and encourage the officers to maintain objectivity and a high
level of attention to their duties without distraction from the possibility of a
change in control. These Agreements provide that each officer is entitled to
certain benefits (the "Severance Benefits") in the event that a change in
control of the Company, as that term is defined in the Agreement and summarized
below, shall occur and within two years after the change in control either of
the following shall occur: (i) an involuntary termination of the officer's
employment with the Company without Cause as that term is defined in the
Agreements and summarized below; or (ii) a voluntary termination of the
officer's employment with the Company for Good Reason, as that term is defined
in the Agreements and summarized below.
The Severance Benefits include: (i) a lump sum severance payment within
thirty days of the effective date of termination equal to 2.99 times the sum of
his annual salary and average bonus; (ii) a payment equal to the officer's
unpaid salary, accrued but unused vacation pay and earned but unpaid bonuses,
all other cash entitlements through the effective date of termination and (iii)
an amount equal to the aggregate amount of matching contributions that would be
credited to the officer under the Fansteel Savings and Profit Sharing Plan (the
"Plan") for the three years following the effective date of termination. In
addition, for a period of eighteen months, the Company must continue to provide
all welfare benefits, including medical, dental, vision, life and disability
benefits pursuant to plans under which the officer and/or his family were
entitled to participate at the same levels and same costs to the officer as
existed at the date of the change in control.
If tax counsel selected by the Company and reasonably acceptable to the
officer determines that any portion of any payment under the Agreement would
constitute an "excess parachute payment" as defined in the Internal Revenue
Code, then the payments to be made to the officer shall be reduced (but not
below zero) such that the value of the aggregate payments that the officer is
entitled to receive under the Agreement and any other agreement, plan or program
of the Company, shall be one dollar ($1.00) less than the maximum amount of
payments which the officer may receive without becoming subject to the tax
imposed by Section 4999 of the Internal Revenue Code.
Under the Agreements, certain terms are defined which are summarized as
follows: Change in control is deemed to occur upon (i) the acquisition (other
than from the Company) by any person or group of 30% or more of the outstanding
common stock or voting securities of the Company, other than by a Company
benefit plan or where the acquiror has substantially similar ownership as the
Company; (ii) a significant change in the Company's Board of Directors not
approved by the incumbent Board or a stockholder owning in excess of 40% of the
Company's common stock on the date of the agreement; (iii) shareholder approval
of certain significant reorganizations, mergers and similar transactions
involving the Company; or (iv) shareholder approval of a complete liquidation or
dissolution of the Company or the sale of 60% or more by value of the Company's
assets. Cause includes: (i) conviction or plea of no contest to a felony or a
misdemeanor involving moral turpitude; (ii) dishonesty or breach of trust by the
officer which is injurious to the Company; or (iii) wilful misconduct by the
officer in the performance of his duties. The term Good Reason includes: (i) a
material reduction in the officer's duties, authorities and responsibilities;
(ii) a relocation of the officer's place of work by more than 35 miles; (iii) a
material reduction of the officer's compensation or benefits; or (iv) failure to
obtain a successor's assumption of the Company's obligations under the Agreement
or a purported termination of the officer not in accordance with the Agreement.
SELECTION OF AUDITORS
The Board, upon recommendation of the Audit Committee, favors ratification of
the appointment of Ernst & Young LLP, Certified Public Accountants, as auditors
for the Company for the year ending December 31, 1996. Representatives of Ernst
& Young LLP are expected to attend the meeting; they will be given the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions.
STOCKHOLDER PROPOSALS
In the event a stockholder desires to make a proposal for the Company's Annual
Meeting scheduled for April 16, 1997, the proposal must be submitted to the
Secretary of the Company by November 21, 1996.
FORM 10-K ANNUAL REPORTS
The Company will furnish to any stockholder upon request and without charge a
copy of the Company's Annual Report on Form 10-K for the year 1995. Requests
for said Report must be in writing and directed to the attention of the
Secretary of the Company at the address set forth in the Notice of Meeting
immediately preceding this Proxy Statement, and must contain a representation by
the person requesting said Report that such person was the beneficial owner of
securities of the Company on March 1, 1996.
Stockholders who do not expect to attend the meeting in person are urged to
vote, date, sign and return the enclosed Proxy in the enclosed self-addressed
envelope, which requires no postage if mailed in the United States.
By order of the Board of Directors,
W. D. Jarosz
President and Chief Executive Officer
March 22, 1996
EXHIBIT A
FANSTEEL INC.
1996 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the Fansteel Inc. 1996 Long-Term Incentive
Plan (hereinafter referred to as the "Plan") is to assist in attracting and
retaining highly competent employees and to act as an incentive in motivating
selected officers and other key employees of the Company and its Subsidiaries to
achieve long-term corporate objectives.
1.02 ADOPTION AND TERM. The Plan has been approved by the Board of
Directors (the "Board") effective as of February 20, 1996, but is subject to the
approval of the Company's shareholders. The Plan shall remain in effect until
terminated by action of the Board; provided, however, that no Incentive Stock
Option may be granted hereunder after April 24, 2006.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, capitalized terms shall have the following
meanings:
2.01 AWARD means any one or a combination of Non-Qualified Stock Options or
Incentive Stock Options described in Article VI, Stock Appreciation Rights
described in Article VI, Restricted Shares described in Article VII, Performance
Awards described in Article VIII, Awards of cash or any other Award made under
the terms of the Plan.
2.02 AWARD AGREEMENT means a written agreement between the Company and a
Participant or a written acknowledgment from the Company to a Participant
specifically setting forth the terms and conditions of an Award granted under
the Plan.
2.03 AWARD PERIOD means, with respect to an Award, the period of time set
forth in the Award Agreement during which specified target performance goals
must be achieved or other conditions set forth in the Award Agreement must be
satisfied.
2.04 BENEFICIARY means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Company or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and the Award Agreement upon the Participant's death.
2.05 BOARD means the Board of Directors of the Company.
2.06 CHANGE IN CONTROL means, and shall be deemed to have occurred upon the
occurrence of, any one of the following events:
(a) The acquisition in one or more transactions, other than from
the Company, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of either (i) 30% or more of the outstanding Common
Stock of the Company (the "Outstanding Common Stock") or 30% or more
of the Company Voting Securities; provided, however, that the
following shall not constitute a Change in Control: any acquisition by
(1) the Company or any of its subsidiaries, any employee benefit plan
(or related trust) sponsored or maintained by the Company or any of
its subsidiaries, or (2) any corporation with respect to which,
following such acquisition, more than 70% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Common Stock and
Company Voting Securities immediately prior to such acquisition in
substantially the same proportion as their ownership, immediately
prior to such acquisition, of the Outstanding Common Stock and Company
Voting Securities, as the case may be; or
(b) Individuals who constitute the Board as of the effective date
of this Plan (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however, that
any individual becoming a director subsequent to the date of this
Agreement whose election or nomination for election by the Company was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board or was approved by a stockholder
beneficially owning in excess of 40% of the Outstanding Common Stock
at the date hereof and at the date of such nomination or election
(unless such nomination or election (i) was at the request of an
unrelated third party who has taken steps reasonably calculated to
effect a Change in Control, or (ii) otherwise arose in connection with
or in anticipation of the Change in Control) shall be considered as
though such individual were a member of the Incumbent Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, unless, following such
reorganization, merger or consolidation, all or substantially all of
the individuals and entities who were the respective beneficial owners
of the Outstanding Common Stock and Company Voting Securities
immediately prior to such reorganization, merger or consolidation,
following such reorganization, merger or consolidation beneficially
own, directly or indirectly, more than 70% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities immediately
prior to such reorganization, merger or consolidation, as the case may
be; or
(d) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) a sale or other
disposition of 60% or more by value of the assets of the Company other
than to a corporation with respect to which, following such sale or
disposition, more than 70% of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors is then owned beneficially, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Company Voting Securities immediately
prior to such sale or disposition in substantially the same proportion
as their ownership of the Outstanding Common Stock and Company Voting
Securities, as the case may be, immediately prior to such sale or
disposition.
2.07 CODE means the Internal Revenue Code of 1986, as amended. References
to a section of the Code shall include that section and any comparable section
or sections of any future legislation that amends, supplements or supersedes
said section
2.08 COMMITTEE means the Committee defined in Section 3.01.
2.09 COMPANY means Fansteel Inc., a Delaware corporation, and its
successors.
2.10 COMMON STOCK means Common Stock of the Company, par value $2.50 per
share.
2.11 COMPANY VOTING SECURITIES means the combined voting power of all
outstanding voting securities of the Company entitled to vote generally in the
election of directors to the Board.
2.12 DATE OF GRANT means the date designated by the Committee as the date
as of which it grants an Award, which shall not be earlier than the date on
which the Committee approves the granting of such Award
2.13 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.14 EXERCISE PRICE means, with respect to a Stock Appreciation Right, the
amount established by the Committee in the Award Agreement which is to be
subtracted from the Fair Market Value on the date of exercise in order to
determine the amount of the payment to be made to the Participant, as further
described in Section 6.02(b).
2.15 FAIR MARKET VALUE means, on any date, the average of the high and low
quoted sales prices of a share of Common Stock, as reported on the Composite
Tape for New York Stock Exchange Listed Companies, on such date or, if there
were no sales on such date, on the last date preceding such date on which a sale
was reported.
2.16 INCENTIVE STOCK OPTION means a stock option within the meaning of
Section 422 of the Code.
2.17 MERGER means the Merger defined in Section 2.06(c).
2.18 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.19 NORMAL RETIREMENT DATE means the date designated as the normal
retirement date under a pension plan or arrangement of the Company or one of its
Subsidiaries in which the Participant participates.
2.20 OPTIONS means all Non-Qualified Stock Options and Incentive Stock
Options granted at any time under the Plan.
2.21 OTHER RETIREMENT DATE means a date earlier than a Participant's Normal
Retirement Date which is specifically designated by the Committee to be the date
upon which a Participant retires for purposes of this Plan.
2.22 OUTSTANDING COMMON STOCK means, at any time, the issued and
outstanding shares of Common Stock.
2.23 PARTICIPANT means a person designated to receive an Award under the
Plan in accordance with Section 5.01.
2.24 PERFORMANCE AWARDS means Awards granted in accordance with
Article VIII.
2.25 PLAN means the Fansteel Inc. 1996 Long-Term Incentive Plan as
described herein, as the same may be amended from time to time.
2.26 PURCHASE PRICE, with respect to Options, shall have the meaning set
forth in Section 6.01 (b).
2.27 RESTRICTED SHARES means Common Stock subject to restrictions imposed
in connection with Awards granted under Article VII.
2.28 RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission under Section 16 of the Exchange Act, as the same may be amended from
time to time, and any successor rule.
2.29 STOCK APPRECIATION RIGHTS means Awards granted in accordance with
Article VI.
2.30 SUBSIDIARY means a subsidiary of the Company within the meaning of
Section 424(f) of the Code
2.31 TERMINATION OF EMPLOYMENT means the voluntary or involuntary
termination of a Participant's employment with the Company or a Subsidiary for
any reason, including death, disability, retirement or as the result of the
divestiture of the Participant's employer or any similar transaction in which
the Participant's employer ceases to be the Company or one of its Subsidiaries.
Whether entering military or other government service shall constitute
Termination of Employment, or whether a Termination of Employment shall occur as
a result of disability, shall be determined in each case by the Committee in its
sole discretion.
ARTICLE III
ADMINISTRATION
3.01 COMMITTEE. The Plan shall be administered by the Compensation and
Nominating Committee of the Board ("Committee") (If at any time the Committee
ceases to exist or if at any time the Committee shall not comply with the
disinterested administration requirements of Rule 16b-3, the Board shall select
a committee to administer the Plan comprised of not less than two members of the
Board who are disinterested under the requirements of Rule 16b-3). The
Committee shall have exclusive and final authority in each determination,
interpretation or other action affecting the Plan and its Participants. The
Committee shall have the sole discretionary authority to interpret the Plan, to
establish and modify administrative rules for the Plan, to impose such
conditions and restrictions on Awards as it determines appropriate, to cancel
Awards (including those made pursuant to other plans of the Company) and to
substitute new Options for previously awarded Options which, at the time of such
substitution, have an exercise price in excess of the Fair Market Value of the
underlying Common Stock (including options granted under other incentive
compensation programs of the Company) with the consent of the recipient, and to
take such steps in connection with the Plan and Awards granted hereunder as it
may deem necessary or advisable. The Committee may, with respect to
Participants who are not subject to Section 16(b) of the Exchange Act, delegate
such of its powers and authority under the Plan as it deems appropriate to
designated officers or employees of the Company.
ARTICLE IV
SHARES
4.01 NUMBER OF SHARES ISSUABLE. Subject to adjustments as provided in
Section 10.07, the shares to be offered under the Plan shall be authorized and
unissued Common Stock, or issued Common Stock which shall have been reacquired
by the Company. The total number of shares initially authorized to be issued
under the Plan shall be 400,000 shares of Common Stock, which limit may be
increased from time to time in the future by action of the Board subject to
Section 10.15(a).
4.02 SHARES SUBJECT TO TERMINATED AWARDS. Common Stock covered by any
unexercised portions of terminated Options (including canceled Options) granted
under Article VI, Common Stock forfeited as provided in Section 7.02(a) and
Common Stock subject to any Awards which are otherwise surrendered by the
Participant may again be subject to new Awards under the Plan. Common Stock
subject to Options, or portions thereof, which have been surrendered in
connection with the exercise of Stock Appreciation Rights shall not be available
for subsequent Awards under the Plan, but Common Stock issued in payment of such
Stock Appreciation Rights shall not be charged against the number of shares of
Common Stock available for the grant of Awards hereunder.
ARTICLE V
PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall be such
officers and other key employees of the Company and its Subsidiaries, whether or
not members of the Board, as the Committee, in its sole discretion, may
designate from time to time. The Committee's designation of a Participant in
any year shall not require the Committee to designate such person to receive
Awards or grants in any other year. The designation of a Participant to receive
awards or grants under one portion of the Plan does not require the Committee to
include such Participant under other portions of the Plan. The Committee shall
consider such factors as it deems pertinent in selecting Participants and in
determining the type and amount of their respective Awards. Notwithstanding any
provision herein to the contrary, the Committee may grant Awards under the Plan
to non-employees who, in the judgment of the Committee, render significant
services to the Company or any of its Subsidiaries, on such terms and conditions
as the Committee deems appropriate and consistent with the intent of the Plan.
During the term of this Plan, no participant shall be granted awards in respect
of more than 100,000 shares of Common Stock in any calendar year.
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.01 OPTION AWARDS.
(a) The Committee may grant, to such Participants as the
Committee may select, Options entitling the Participant to purchase
shares of Common Stock from the Company in such number, at such price,
and on such terms and subject to such conditions, not inconsistent
with the terms of this Plan, as may be established by the Committee.
The terms of any Option granted under this Plan shall be set forth in
an Award Agreement.
(b) PURCHASE PRICE OF OPTIONS. The Purchase Price of each share
of Common Stock which may be purchased upon exercise of any Option
granted under the Plan shall be determined by the Committee; provided,
however, that the Purchase Price of the Common Stock purchased
pursuant to Options designated by the Committee as Incentive Stock
Options shall be equal to or greater than the Fair Market Value on the
Date of Grant as required under Section 422 of the Code. The
Committee shall have the discretion to provide, in any Award Agreement
related to an Option granted under the Plan, for a loan from the
Company to a Participant of a cash amount, or a guaranty by the
Company of payment by such Participant to a third party of a cash
amount loaned by such party to such Participant sufficient to allow
such Participant to purchase the Common Stock under such Option, with
the Company retaining such Common Stock, or a portion thereof, as
security until such loan is repaid or such guaranty expires.
(c) DESIGNATION OF INCENTIVE STOCK OPTIONS. Except as otherwise
expressly provided in the Plan, the Committee may designate, at the
time of the grant of each Option, the Option as an Incentive Stock
Option under Section 422 of the Code
(i) INCENTIVE STOCK OPTION SHARE LIMITATION. No Participant
may be granted Incentive Stock Options under the Plan (or any
other plans of the Company and its Subsidiaries) which would
result in shares with an aggregate Fair Market Value (measured on
the Date of Grant) of more than $100,000 first becoming
exercisable in any one calendar year.
(ii) OTHER INCENTIVE STOCK OPTION TERMS. Whenever possible,
each provision in the Plan and in every Option granted under this
Plan which is designated by the Committee as an Incentive Stock
Option shall be interpreted in such a manner as to entitle the
Option to the tax treatment afforded by Section 422 of the Code.
If any provision of this Plan or any Option designated by the
Committee as an Incentive Stock Option shall be held not to
comply with requirements necessary to entitle such Option to such
tax treatment, then (A) such provision shall be deemed to have
contained from the outset such language as shall be necessary to
entitle the Option to the tax treatment afforded under
Section 422 of the Code, and (B) all other provisions of this
Plan and the Award Agreement relating to such Option shall remain
in full force and effect. If any Award Agreement covering an
Option designated by the Committee to be an Incentive Stock
Option under this Plan shall not explicitly include any terms
required to entitle such Incentive Stock Option to the tax
treatment afforded by Section 422 of the Code, all such terms
shall be deemed implicit in the designation of such Option and
the Option shall be deemed to have been granted subject to all
such terms.
(d) RIGHTS AS A SHAREHOLDER. A Participant or a transferee of an
Option pursuant to Section 10.04 shall have no rights as a shareholder
with respect to Common Stock covered by an Option until the
Participant or transferee shall have become the holder of record of
any such shares, and no adjustment shall be made for dividends in cash
or other property or distributions or other rights with respect to any
such Common Stock for which the record date is prior to the date on
which the Participant or a transferee of the Option shall have become
the holder of record of any such shares covered by the Option;
provided, however, that Participants are entitled to share adjustments
to reflect capital changes under Section 10.07.
6.02 STOCK APPRECIATION RIGHTS.
(a) STOCK APPRECIATION RIGHT AWARDS. The Committee is authorized
to grant to any Participant one or more Stock Appreciation Rights.
Such Stock Appreciation Rights may be granted either independent of or
in tandem with Options granted to the same Participant. Stock
Appreciation Rights granted in tandem with Options may be granted
simultaneously with, or, in the case of Non-Qualified Stock Options,
subsequent to, the grant to such Participant of the related Option;
provided, however, that: (i) any Option covering any share of Common
Stock shall expire and not be exercisable upon the exercise of any
Stock Appreciation Right with respect to the same share, (ii) any
Stock Appreciation Right covering any share of Common Stock shall
expire and not be exercisable upon the exercise of any related Option
with respect to the same share, and (iii) an Option and Stock
Appreciation Right covering the same share of Common Stock may not be
exercised simultaneously. Upon exercise of a Stock Appreciation Right
with respect to a share of Common Stock, the Participant shall be
entitled to receive an amount equal to the excess, if any, of (A) the
Fair Market Value of a share of Common Stock on the date of exercise
over (B) the Exercise Price of such Stock Appreciation Right
established in the Award Agreement, which amount shall be payable as
provided in Section 6.02(c).
(b) EXERCISE PRICE. The Exercise Price established under any
Stock Appreciation Right granted under this Plan shall be determined
by the Committee, but in the case of Stock Appreciation Rights granted
in tandem with Options shall not be less than the Purchase Price of
the related Option. Upon exercise of Stock Appreciation Rights, the
number of shares subject to exercise under any related Option shall
automatically be reduced by the number of shares of Common Stock
represented by the Option or portion thereof which are surrendered as
a result of the exercise of such Stock Appreciation Rights.
(c) PAYMENT OF INCREMENTAL VALUE. Any payment which may become
due from the Company by reason of a Participant's exercise of a Stock
Appreciation Right may be paid to the Participant as determined by the
Committee (i) all in cash, (ii) all in Common Stock, or (iii) in any
combination of cash and Common Stock. In the event that all or a
portion of the payment is made in Common Stock, the number of shares
of Common Stock delivered in satisfaction of such payment shall be
determined by dividing the amount of such payment or portion thereof
by the Fair Market Value on the Exercise Date. No fractional share of
Common Stock shall be issued to make any payment in respect of Stock
Appreciation Rights; if any fractional share would be issuable, the
combination of cash and Common Stock payable to the Participant shall
be adjusted as directed by the Committee to avoid the issuance of any
fractional share.
6.03 TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
(a) CONDITIONS ON EXERCISE. An Award Agreement with respect to
Options or Stock Appreciation Rights may contain such waiting periods,
exercise dates and restrictions on exercise (including, but not
limited to, periodic installments) as may be determined by the
Committee at the time of grant. No Option or Stock Appreciation Right
may be exercised in whole or in part prior to six months from the Date
of Grant thereof, except as set forth in Section 6.05.
(b) DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options
and Stock Appreciation Rights shall terminate after the first to occur
of the following events:
(i) Expiration of the Option or Stock Appreciation Right as
provided in the Award Agreement; or
(ii) Termination of the Award as provided in
Section 6.03(e), following the Participant's Termination of
Employment; or
(iii) In the case of an Incentive Stock Option, ten years
from the Date of Grant; or
(iv) Solely in the case of a Stock Appreciation Right
granted in tandem with an Option, upon the expiration of the
related Option.
(c) ACCELERATION OF EXERCISE TIME. The Committee, in its sole
discretion, shall have the right (but shall not in any case be
obligated), exercisable at any time after the Date of Grant, to permit
purchase of Common Stock subject to any Option or Stock Appreciation
Right prior to the time such Option or Stock Appreciation Right would
otherwise become exercisable under the terms of the Award Agreement;
provided, however, that, in the case of Participants subject to
Section 16(b) of the Exchange Act, in no event may there be an
acceleration of exercise to a date prior to six months from the Date
of Grant.
(d) EXTENSION OF EXERCISE TIME. In addition to the extensions
permitted under Section 6.03(e) in the event of Termination of
Employment, the Committee, in its sole discretion, shall have the
right (but shall not in any case be obligated), exercisable on or at
any time after the Date of Grant, to permit any Option or Stock
Appreciation Right granted under this Plan to be exercised after its
expiration date described in Section 6.03(e), subject, however, to the
limitations described in Section 6.03(b)(i), (iii), and (iv).
(e) EXERCISE OF OPTIONS OR STOCK APPRECIATION RIGHTS UPON
TERMINATION OF EMPLOYMENT.
(i) TERMINATION OF VESTED OPTIONS AND STOCK
APPRECIATION RIGHTS UPON TERMINATION OF EMPLOYMENT.
(a) TERMINATION. In the event of Termination of
Employment of a Participant other than by reason of
death, disability or retirement on the Participant's
Normal Retirement Date, to the extent the right to
exercise the Option or Stock Appreciation Right has
accrued at the date of Termination of Employment, the
right of the Participant to exercise the Option or
Stock Appreciation Right under the Plan shall terminate
three months after the date of such Termination of
Employment, unless otherwise provided by the Committee
in accordance with Section 6.03(d).
(b) DISABILITY OR RETIREMENT. Upon a Participant's
Termination of Employment by reason of disability or
retirement on or after the Participant's Normal Retirement
Date, a Participant may, within five years after the
Termination of Employment, exercise all or a part of his or
her Options which were exercisable upon such Termination of
Employment (or which became exercisable at a later date
pursuant to Section 6.03(e)(ii)), and may, within six months
after Termination of Employment, exercise all or a part of
his or her Stock Appreciation Rights which he or she was
entitled to exercise upon Termination of Employment (or
which became exercisable at a later date pursuant to
Section 6.03(e)(ii)). In no event, however, may any Option
or Stock Appreciation Right be exercised later than the date
described in Section 6.03(b)(i), (iii) or (iv).
(c) DEATH. In the event of the death of a Participant
while employed by the Company or a Subsidiary or within the
additional period of time from the date of the Participant's
Termination of Employment and prior to the expiration of the
Option or Stock Appreciation Right as permitted in Section
6.03(e)(i)(B) above, to the extent the right to exercise the
Option or Stock Appreciation Right accrued as of the date of
such Termination of Employment and did not expire during
such additional period and prior to the Participant's death,
the right of the Participant's Beneficiary to exercise the
Option under the Plan shall expire upon the expiration of
five years from the date of the Participant's death (but in
no event more than five years from the date of the
Participant's Termination of Employment by reason of
disability or retirement) or on the date of expiration of
the Option determined pursuant to Section 6.03(b)(i), (iii)
or (iv), whichever is earlier. Unless otherwise provided by
the Committee in accordance with Section 6.03(d), Stock
Appreciation Rights shall expire three months after the
Participant's death.
(ii) TERMINATION OF UNVESTED OPTIONS OR STOCK APPRECIATION
RIGHTS UPON TERMINATION OF EMPLOYMENT. To the extent the right
to exercise an Option or a Stock Appreciation Right, or any
portion thereof, has not accrued as of the date of Termination of
Employment, such right shall expire at the date of such
Termination of Employment. Notwithstanding the foregoing, the
Committee, within its discretion and under such terms as it deems
appropriate, may permit a Participant who terminates employment
on the Participant's Normal Retirement Date or Other Retirement
Date and who will continue to render significant services to the
Company or one of its Subsidiaries after his or her Termination
of Employment, to continue vesting in his or her Options and
Stock Appreciation Rights during the period in which the
individual continues to render such services.
6.04 EXERCISE PROCEDURES. Each Option and Stock Appreciation Right granted
under the Plan shall be exercised by written notice to the Company which must be
received by the officer or employee of the Company designated in the Award
Agreement on or before the expiration date of the Award. The Purchase Price of
shares purchased upon exercise of an Option granted under the Plan shall be paid
in full in cash by the Participant pursuant to the Award Agreement; provided,
however, that the Committee may (but shall not be required to) permit payment to
be made by delivery to the Company of either (a) Common Stock (which may include
Restricted Shares or shares issued in connection with the exercise of the
Option, subject to such rules as the Committee deems appropriate) or (b) any
combination of cash and Common Stock, or (c) such other consideration as the
Committee deems appropriate and in compliance with applicable law (including
payment in accordance with a cashless exercise program under which, if so
instructed by the Participant, Common Stock may be issued directly to the
Participant's broker or dealer upon receipt of a written notice of exercise from
the Participant). In the event that any Common Stock shall be transferred to
the Company to satisfy all or any part of the Purchase Price, the part of the
Purchase Price deemed to have been satisfied by such transfer of Common Stock
shall be equal to the product derived by multiplying the Fair Market Value as of
the date of exercise times the number of shares of Common Stock transferred to
the Company. The Participant may not transfer to the Company in satisfaction of
the Purchase Price any fractional share of Common Stock. Any part of the
Purchase Price paid in cash upon the exercise of any Option shall be added to
the general funds of the Company and may be used for any proper corporate
purpose. Unless the Committee shall otherwise determine, any Common Stock
transferred to the Company as payment of all or part of the Purchase Price upon
the exercise of any Option shall be held as treasury shares.
6.05 CHANGE IN CONTROL. In the event of a Change in Control, all Options
outstanding on the date of such Change in Control, and all Stock Appreciation
Rights shall become immediately and fully exercisable. The provisions of this
Section 6.05 shall not be applicable to any Options or Stock Appreciation Rights
granted to a Participant if any Change in Control results from such
Participant's beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of Common Stock or Company Voting Securities.
ARTICLE VII
RESTRICTED SHARES
7.01 RESTRICTED SHARE AWARDS. The Committee may grant to any Participant
an Award of Common Stock in such number of shares, and on such terms, conditions
and restrictions (whether based on performance standards, periods of service or
otherwise) as the Committee shall establish. The terms of any Restricted Share
Award granted under this Plan shall be set forth in an Award Agreement which
shall contain provisions determined by the Committee and not inconsistent with
this Plan
(a) ISSUANCE OF RESTRICTED SHARES. As soon as practicable after the
Date of Grant of a Restricted Share Award by the Committee, the Company
shall cause to be transferred on the books of the Company, or its agent,
Common Stock, registered on behalf of the Participant, evidencing the
Restricted shares covered by the Award, but subject to forfeiture to the
Company as of the Date of Grant if an Award Agreement with respect to the
Restricted Shares covered by the Award is not duly executed by the
Participant and timely returned to the Company. All Common Stock covered
by Awards under this Article VII shall be subject to the restrictions terms
and conditions contained in the Plan and the Award Agreement entered into
by the Participant. Until the lapse or release of all restrictions
applicable to an Award of Restricted Shares the share certificates
representing such Restricted Shares may be held in custody by the Company,
its designee, or, if the certificates bear a restrictive legend, by the
Participant. Upon the lapse or release of all restrictions with respect to
an Award as described in Section 7.01(d), one or more share certificates,
registered in the name of the Participant, for an appropriate number of
shares as provided in Section 7.01 (d), free of any restrictions set forth
in the Plan and the Award Agreement shall be delivered to the Participant.
(b) SHAREHOLDER RIGHTS. Beginning on the Date of Grant of the
Restricted Share Award and subject to execution of the Award Agreement as
provided in Section 7.01 (a), the Participant shall become a shareholder of
the Company with respect to all shares subject to the Award Agreement and
shall have all of the rights of a shareholder, including, but not limited
to, the right to vote such shares and the right to receive dividends;
provided, however, that any Common Stock distributed as a dividend or
otherwise with respect to any Restricted Shares as to which the
restrictions have not yet lapsed, shall be subject to the same restrictions
as such Restricted Shares and held or restricted as provided in
Section 7.01(a).
(c) RESTRICTION ON TRANSFERABILITY. None of the Restricted Shares may
be assigned or transferred (other than by will or the laws of descent and
distribution, or to an inter vivos trust with respect to which the
Participant is treated as the owner under Sections 671 through 677 of the
Code), pledged or sold prior to lapse of the restrictions applicable
thereto.
(d) DELIVERY OF SHARES UPON VESTING. Upon expiration or earlier
termination of the forfeiture period without a forfeiture and the
satisfaction of or release from any other conditions prescribed by the
Committee, or at such earlier time as provided under the provisions of
Section 7.03, the restrictions applicable to the Restricted Shares shall
lapse. As promptly as administratively feasible thereafter, subject to the
requirements of Section 10.05, the Company shall deliver to the Participant
or, in case of the Participant's death, to the Participant's Beneficiary,
one or more share certificates for the appropriate number of shares of
Common Stock, free of all such restrictions, except for any restrictions
that may be imposed by law.
7.02 TERMS OF RESTRICTED SHARES.
(a) FORFEITURE OF RESTRICTED SHARES. Subject to Sections 7.02(b) and
7.03, all Restricted Shares shall be forfeited and returned to the Company
and all rights of the Participant with respect to such Restricted Shares
shall terminate unless the Participant continues in the service of the
Company or a Subsidiary as an employee until the expiration of the
forfeiture period for such Restricted Shares and satisfies any and all
other conditions set forth in the Award Agreement. The Committee shall
determine the forfeiture period (which may, but need not, lapse in
installments) and any other terms and conditions applicable with respect to
any Restricted Share Award, provided that, unless otherwise authorized by
the Board, such forfeiture period shall not be less than one year from the
Date of Grant.
(b) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything contained
in this Article VII to the contrary, the Committee may, in its sole
discretion, waive the forfeiture period and any other conditions set forth
in any Award Agreement under appropriate circumstances (including the
death, disability or retirement of the Participant or a material change in
circumstances arising after the date of an Award) and subject to such terms
and conditions (including forfeiture of a proportionate number of the
Restricted Shares) as the Committee shall deem appropriate, provided that
the Participant shall at that time have completed at least one year of
employment after the Date of Grant. Waiver of the forfeiture period and
any other conditions set forth in an Award Agreement prior to the
Participant's completion of one year of employment after the Date of Grant
may only be accomplished through action of the Board.
7.03 CHANGE IN CONTROL. In the event of a Change in Control, and
irrespective of whether or not the one-year period following the date of the
Restricted Share Award required under the provisions of Section 7.02(a) has been
met, all restrictions applicable to the Restricted Share Award shall terminate
fully and the Participant shall immediately have the right to the delivery of
share certificate or certificates for such shares in accordance with
Section 7.01(d).
ARTICLE VIII
PERFORMANCE AWARDS
8.01 PERFORMANCE AWARDS.
(a) AWARD PERIODS AND CALCULATIONS OF POTENTIAL INCENTIVE AMOUNTS.
The Committee may grant Performance Awards to Participants. A Performance
Award shall consist of the right to receive a payment (measured by the Fair
Market Value of a specified number of shares of Common Stock, increases in
such Fair Market Value during the Award Period or a fixed cash amount)
contingent upon the extent to which certain predetermined performance
targets have been met during an Award Period. Performance Awards may be
made in conjunction with, or in addition to, Restricted Share Awards made
under Article VII The Award Period shall be one or more calendar years as
determined by the Committee. The Committee, in its discretion and under
such terms as it deems appropriate, may permit newly eligible employees,
such as those who are promoted or newly hired, to receive Performance
Awards after an Award Period has commenced.
(b) PERFORMANCE TARGETS. The performance targets may include
specified levels of earnings per share, return on investment, return on
shareholder equity and/or such other goals related to the performance of
the Company or the performance of a Participant as may be established by
the Committee in its discretion. The performance targets established by
the Committee may vary for different Award Periods and need not be the same
for each Participant receiving a Performance Award in an Award Period. The
Committee, in its discretion, but only under extraordinary circumstances as
determined by the Committee, may change any prior determination of
performance targets for any Award Period at any time prior to the final
determination of the Award when events or transactions occur to cause the
performance targets to be an inappropriate measure of achievement.
(c) EARNING PERFORMANCE AWARDS. The Committee at the Date of Grant
shall prescribe a formula to determine the percentage of the Performance
Award to be earned based upon the degree of attainment of performance
targets. In the event the minimum performance targets established by the
Committee are not achieved, no payment shall be made to the Participant.
In the event the performance targets are fully achieved, 100% of the
Performance Award shall be paid to the Participant. The Committee may
provide for grants up to a maximum of 150% of Performance Awards for
achievement exceeding performance targets.
(d) PAYMENT OF EARNED PERFORMANCE AWARDS. Payments of earned
Performance Awards shall be made in cash or Common Stock, or a combination
of cash and Common Stock, in the discretion of the Committee. Payment
normally will be made as soon as is practicable following the end of an
Award Period; provided, however, that the Committee may permit deferral of
the payment of all or a portion of a Performance Award payable in cash upon
the request of the Participant timely made in accordance with rules
prescribed by the Committee. Deferred amounts may generate earnings for
the Participant under the conditions of a separate agreement providing for
such as approved by the Committee and executed by the Participant. The
Committee, in its sole discretion, may also define such other conditions of
payment of earned Performance Awards as it may deem desirable in carrying
out the purposes of the Plan.
8.02 TERMS OF PERFORMANCE AWARDS.
(a) TERMINATION OF EMPLOYMENT. Unless otherwise provided below or in
Section 8.03, in the case of a Participant's Termination of Employment
prior to the end of an Award Period, the Participant will not have earned
any Performance Awards
(b) RETIREMENT. If a Participant's Termination of Employment is
because of retirement on a Normal Retirement Date or Other Retirement Date
prior to the end of an Award Period, the Participant will not be paid any
Performance Awards, unless the Committee, in its sole and exclusive
discretion, determines that an Award should be paid. In such a case, the
Participant shall be entitled to receive a pro-rata portion of his or her
Award as determined under Subsection (d).
(c) DEATH OR DISABILITY. If a Participant's Termination of Employment
is due to death or disability (as determined in the sole and exclusive
discretion of the Committee) following at least one year of participation
in any Award Period, but prior to the end of an Award Period, the
Participant or the Participant's personal representative shall be entitled
to receive a pro-rata share of his or her Award as determined under
Subsection (d).
(d) PRO-RATA PAYMENT. The amount of any payment made to a Participant
whose employment is terminated by retirement, death or disability (under
circumstances described in Subsections (b) and (c)) will be the amount
determined by multiplying the amount of the Performance Award which would
have been earned, determined at the end of the Award Period, had such
employment not been terminated, by a fraction, the numerator of which is
the number of whole months such Participant was employed during the Award
Period, and the denominator of which is the total number of months of the
Award Period. Any such payment made to a Participant whose employment is
terminated prior to the end of an Award Period under this Section 8.02
shall be made at the end of the respective Award Period, unless otherwise
determined by the Committee in its sole discretion. Any partial payment
previously made or credited to a deferred account for the benefit of a
Participant as provided under Section 8.01(d) of the Plan shall be
subtracted from the amount otherwise determined as payable as provided in
this Section.
(e) OTHER EVENTS. Notwithstanding anything to the contrary in this
Article VIII, the Committee may, in its sole and exclusive discretion,
determine to pay all or any portion of a Performance Award to a Participant
who has terminated employment prior to the end of an Award Period under
certain circumstances (including the death, disability or retirement of the
Participant or a material change in circumstances arising after the Date of
Grant) and subject to such terms and conditions as the Committee shall deem
appropriate, provided that the Participant shall have completed at his or
her Termination of Employment at least one year of employment after the
Date of Grant.
8.03 CHANGE IN CONTROL. In the event of a Change in Control, and
irrespective of whether or not the one-year period following the date of the
Performance Award required under the provisions of Section 8.01 has been met,
all Performance Awards for all Award Periods shall immediately become fully
payable to all Participants and shall be paid to Participants within 30 days
after such Change in Control.
ARTICLE IX
OTHER AWARDS
9.01 GRANT OF OTHER AWARDS. Other Awards of cash, Awards of Common Stock,
or Awards valued in whole or in part by reference to, or otherwise based on
Common Stock, may be granted either alone or in addition to or in conjunction
with other Awards under the Plan. Subject to the provisions of the Plan, the
Committee shall have sole and complete authority to determine the persons to
whom and the time or times at which such Awards shall be made, the number of
shares of Common Stock to be granted pursuant to such Awards, and all other
conditions of the Awards. Any such Award shall be confirmed by an Award
Agreement executed by the Committee and the Participant, which Award Agreement
shall contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of this Plan with respect to such Award.
9.02 TERMS OF OTHER AWARDS. In addition to the terms and conditions
specified in the Award Agreement, Awards made pursuant to this Article IX shall
be subject to the following:
(a) Any Common Stock subject to Awards made under this Article IX may
not be sold, assigned, transferred, pledged or otherwise encumbered prior
to the date on which the shares are issued, or, if later, the date on which
any applicable restriction, performance or deferral period lapses; and
(b) If specified by the Committee in the Award Agreement, the
recipient of an Award under this Article IX shall be entitled to receive,
currently or on a deferred basis, interest or dividends or dividend
equivalents with respect to the Common Stock or other securities covered by
the Award; and
(c) The Award Agreement with respect to any Award shall contain
provisions dealing with the disposition of such Award in the event of a
Termination of Employment prior to the exercise, realization or payment of
such Award, whether such termination occurs because of retirement,
disability, death or other reason, with such provisions to take account of
the specific nature and purpose of the Award.
ARTICLE X
TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
10.01 PLAN PROVISIONS CONTROL AWARD TERMS. The terms of the Plan shall
govern all Awards granted under the Plan, and in no event shall the Committee
have the power to grant any Award under the Plan which is contrary to any of the
provisions of the Plan. In the event any provision of any Award granted under
the Plan shall conflict with any term in the Plan as constituted on the Date of
Grant of such Award, the term in the Plan as constituted on the Date of Grant of
such Award shall control. Except as provided in Section 10.03, the terms of any
Award granted under the Plan may not be changed after the Date of Grant of such
Award so as to materially decrease the value of the Award without the express
written approval of the holder.
10.02 AWARD AGREEMENT. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or received any other Award acknowledgment authorized by the Committee
expressly granting the Award to such person and containing provisions setting
forth the terms of the Award.
10.03 MODIFICATION OF AWARD AFTER GRANT. No Award granted under the Plan
to a Participant may be modified (unless such modification does not materially
decrease the value of the Award) after the Date of Grant except by express
written agreement between the Company and the Participant, provided that any
such change (a) shall not be inconsistent with the terms of the Plan, and
(b) shall be approved by the Committee. No modifications may be made to any
Awards granted to a Participant while the Participant is subject to
Section 16(b) of the Exchange Act except in compliance with Rule 16b-3.
10.04 LIMITATION ON TRANSFER. Except as provided in Section 7.01(c) in the
case of Restricted Shares, a Participant's rights and interest under the Plan
may not be assigned or transferred other than by will or the laws of descent and
distribution, and during the lifetime of a Participant, only the Participant
personally (or the Participant's personal representative) may exercise rights
under the Plan. The Participant's Beneficiary may exercise the Participant's
rights to the extent they are exercisable under the Plan following the death of
the Participant.
10.05 TAXES. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in
lieu of withholding) the amount of any withholding or other tax required by law
to be withheld or paid by the Company with respect to any amount payable and/or
shares issuable under such Participant's Award, or with respect to any income
recognized upon a disqualifying disposition of shares received pursuant to the
exercise of an Incentive Stock Option, and the Company may defer payment or
issuance of the cash or shares upon exercise or vesting of an Award unless
indemnified to its satisfaction against any liability for any such tax. The
amount of such withholding or tax payment shall be determined by the Committee
and shall be payable by the Participant at the time of issuance or payment
(except as otherwise payable under Section 10.05(c)) in accordance with the
following rules:
(a) Unless otherwise provided by the Committee, with respect to
Participants who are subject to the provisions of Section 16(b) of the
Exchange Act on the date on which the withholding requirements apply, the
Company shall withhold from such Award the appropriate number of shares of
Common Stock, rounded up to the next whole share, whose Fair Market Value
is equal to such amount, or, in the case of a cash payment, the amount of
cash, as is determined by the Company to be sufficient to satisfy
applicable tax withholding requirements.
(b) With respect to Participants who are not subject to the provisions
of Section 16(b) of the Exchange Act on the date on which the withholding
requirements apply, the Participants shall have the right to elect to meet
his or her withholding requirement through the method described in
Subsection (a) above or by direct payment to the Company of the amount of
any taxes required to be withheld with respect to such Award; provided
however, that the payment of withholding requirements with respect to
Restricted Share Awards shall be governed solely by the provisions of
Section 7.01(d).
(c) If permitted under applicable federal income tax laws, a
Participant may elect to be taxed in the year in which an Award is made.
If the Participant makes such an election, the Participant shall promptly
notify the Company in writing and shall provide the Company with a copy of
the executed election form as filed with the Internal Revenue Service by no
later than thirty days from the Date of Grant. Promptly following such
notification, the Participant shall pay directly to the Company the cash
amount determined by the Company to be sufficient to satisfy applicable
federal, state or local withholding tax requirements.
(d) The Committee shall have the discretion as to any Award, to cause
the Company to pay to tax authorities for the benefit of any Participant,
or to reimburse such Participant for the individual taxes which are due on
the grant, exercise or vesting of any share Award, or the lapse of any
restriction on any share Award (whether by reason of a Participant s filing
of an election under Section 83(b) of the Code or otherwise), including,
but not limited to, Federal income tax, state income tax, local income tax
and excise tax under Section 4999 of the Code, as well as for any such
taxes as may be imposed upon such tax payment or reimbursement.
10.06 SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Committee and
the holder approve.
10.07 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(a) RECAPITALIZATION. The number and kind of shares subject to
outstanding Awards, the Purchase Price or Exercise Price for such shares,
and the number and kind of shares available for Awards subsequently granted
under the Plan shall be appropriately adjusted to reflect any stock
dividend, stock split, combination or exchange of shares, merger,
consolidation or other change in capitalization with a similar substantive
effect upon the Plan or the Awards granted under the Plan. The Committee
shall have the power and sole discretion to determine the amount of the
adjustment to be made in each case.
(b) MERGER. After any Merger in which the Company is the surviving
corporation, each Participant shall, at no additional cost, be entitled
upon any exercise of all Option or receipt of other Award to receive
(subject to any required action by shareholders, in lieu of the number of
shares of Common Stock receivable or exercisable pursuant to such Award,
the number and class of shares or other securities to which such
Participant would have been entitled pursuant to the terms of the Merger
if, at the time of the Merger, such Participant had been the holder of
record of a number of shares equal to the number of shares receivable or
exercisable pursuant to such Award. Comparable rights shall accrue to each
Participant in the event of successive Mergers of the character described
above.
(c) OPTIONS TO PURCHASE SHARES OR STOCK OF ACQUIRED COMPANIES. After
any Merger in which the Company or a Subsidiary shall be a surviving
corporation, the Committee may grant substituted options under the
provisions of the Plan, pursuant to Section 424 of the Code, replacing old
options granted under a plan of another party to the Merger whose shares or
stock subject to the old options may no longer be issued following the
Merger. The foregoing adjustments and manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustments may provide for the elimination of any
fractional shares which might otherwise become subject to any Options.
10.08 NO RIGHT TO EMPLOYMENT. No employee or other person shall have any
claim of right to be granted an Award under this Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any employee any right to be
retained in the employ of the Company or any of its Subsidiaries.
10.09 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Payments received by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any pension, group insurance or other benefit
plan applicable to the Participant which is maintained by the Company or any of
its Subsidiaries, except as may be provided under the terms of such plans or
determined by the Board.
10.10 GOVERNING LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of the State of Delaware and construed in
accordance therewith.
10.11 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Committee, or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
10.12 COMPLIANCE WITH RULE 16B-3. It is intended that the Plan be applied
and administered in compliance with Rule 16b-3. If any provision of the Plan
would be in violation of Rule 16b-3 if applied as written, such provision shall
not have effect as written and shall be given effect so as to comply with Rule
16b-3, as determined by the Committee. The Board is authorized to amend the
Plan and to make any such modifications to Award Agreements to comply with Rule
16b-3, as it may be amended from time to time, and to make any other such
amendments or modifications as it deems necessary or appropriate to better
accomplish the purposes of the Plan in light of any amendments made to Rule
16b-3.
10.13 CAPTIONS. The captions (i.e., all Section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions have been
used in the Plan.
10.14 SEVERABILITY. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of the Plan or any Award at any time granted under the Plan shall be held to be
prohibited by or invalid under applicable law, then (a) such provision shall be
deemed amended to accomplish the objectives of the provision as originally
written to the fullest extent permitted by law and (b) all other provisions of
the Plan and every other Award at any time granted under the Plan shall remain
in full force and effect.
10.15 AMENDMENT AND TERMINATION.
(a) AMENDMENT. The Board shall have complete power and authority to
amend the Plan at any time and to add any other share award or other
incentive compensation programs to the Plan as it deems necessary or
appropriate and no approval by the shareholders of the Company or by any
other person, committee or entity of any kind shall he required to make any
amendment; provided, however, that the Board shall not, without the
requisite affirmative approval of shareholders of the Company, make any
amendment which requires shareholder approval under Rule 16b-3 or the Code,
unless such compliance is no longer mandatory under Rule 16b-3, the Code or
under any other applicable law or rule of any stock exchange which lists
Common Stock or Company Voting Securities. No termination or amendment of
the Plan may, without the consent of the Participant to whom any Award
shall theretofore have been granted under the Plan, adversely affect the
right of such individual under such Award. For the purposes of this
section, an amendment to the Plan shall be deemed to have the affirmative
approval of the shareholders of the Company if such amendment shall have
been submitted for a vote by the shareholders at a duly called and
constituted meeting of such shareholders at which a quorum is present and a
majority of the votes cast with respect to such amendment at such meeting
shall have been cast in favor of such amendment.
(b) TERMINATION. The Board shall have the right and the power to
terminate the Plan at any time. No Award shall be granted under the Plan
after the termination of the Plan, but the termination of the Plan shall
not have any other effect and any Award outstanding at the time of the
termination of the Plan may be exercised after termination of the Plan at
any time prior to the expiration date of such Award to the same extent such
Award would have been exercisable had the Plan not terminated.
