Fansteel
Number One Tantalum Place
North Chicago, Illinois 60064
Notice of Annual Meeting of Stockholders
April 19, 1999
March 17, 1999
To the Stockholders
of Fansteel Inc.:
Notice hereby is given that the Annual Meeting of Stockholders of Fansteel
Inc. will be held at The Hyatt Regency Greenwich, 1800 East Putnam Avenue, Old
Greenwich, Connecticut, on April 19, 1999, at 10:00 a.m., for the purposes of:
(1) Electing six Directors to serve until the next Annual Meeting of
Stockholders or until their successors are elected;
(2) Amending the 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,
1999; and
(4) Transacting such other business as may be brought before the meeting.
The Board of Directors has fixed the close of business on February 23, 1999,
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
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 (the "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 19, 1999.
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 before March
17, 1999. The cost of preparing, assembling and mailing the enclosed proxy
material will be paid by the Company.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
On February 23, 1999, 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 February 23, 1999, and the stock ownership of all the Officers and
Directors of the Company as a group as of that date are as follows:
Amount
Benefic-
Name and Address of ially Percent
Beneficial Owner Owned of Class
Estate of T. M. Evans 4,050,786 47.11%
T. M. Evans, Jr., and Putnam
Trust A Division of The Bank
of New York Executors of the
Estate of T. M. Evans
c/o Putnam Trust
10 Mason Street
Greenwich, CT 06830
FMR Corp. 800,000 9.3%
82 Devonshire Street
Boston, MA 02109
Dimensional Fund Advisors Inc. 611,651 7.11%
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
The TCW Group, Inc. 527,300 6.1%
865 South Figueroa Street
Los Angeles, CA 90017
All Officers and Directors as 102,500(1) 1.2%
a group (3 persons)
(1) Does not include 4,050,786 shares held by the Estate of T. M. Evans, of
which T. M. Evans, Jr., a director of the Company, is co-executor.
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 February 23, 1999.
Year in
Which
First Shares of
Became Common
Principal Business Director Stock Owned Percent
Experience of the Benefic- of
Name Age and Other Information Company ially Class
E. P. Evans 57 Mr. Evans manages 1976 0 0
personal business
interests and
investments. He was
elected a director of
the Company in
September 1997. Prior
to 1997, Mr. Evans
served as director
and Chairman of the
Board of Directors of
the Company from 1976
to 1983. He also
served as a director
of the Company from
1992 to 1995. He is a
director of HBD
Industries, Inc.
R. S. Evans 54 Mr. Evans is the 1992 0 0
Chairman and Chief
Executive Officer of
Crane Co. Until 1998
he was Chairman and
Chief Executive
Officer and a
director of Medusa
Corporation. Mr.
Evans is also a
director of Crane
Co., HBD Industries,
Inc. and Southdown
Corporation.
T. M. Evans, 61 Mr. Evans manages 1986 4,050,786 47.11%
Jr. personal business (1)
interests and
investments. He is a
director of HBD
Industries, Inc.
Year in
Which
First Shares of
Became Common
Principal Business Director Stock Owned Percent
Experience of the Benefic- of
Name Age and Other Information Company ially Class
P. J. Kalis 49 Mr. Kalis is a 1996 0 0
partner and Chairman
of the Management
Committee of the law
firm Kirkpatrick &
Lockhart, LLP.
J. S. Petrik 69 Mr. Petrik is a 1985 2,000 (2) less
retired Vice than
President and 0.1%
Director of Turner
Broadcasting System,
Inc. From 1992 to
1996 he was
Consultant, New
Technologies, Turner
Broadcasting System,
Inc. He is a
director of HBD
Industries, Inc.
G. L. 54 Mr. Tessitore has 1999 100,000 (3) 1.18%
Tessitore been Chairman of the
Board, President and
Chief Executive
Officer since January
26, 1999. From May
1997 until July 1998,
he was President and
a director of
Claricom, Inc., a
privately held
telecommunications
supplier. From April
1995 until December
1996, he served as
President and Chief
Executive Officer and
a director of Yale
International, Inc.
From March 1993 until
February 1995, he was
President of Breed
Technologies, Inc.
Each of the above-named persons has continuously served as a Director of the
Company since the year shown in the table except that E. P. Evans' most recent
term as a Director commenced in September 1997.
(1) Mr. T. M. Evans, Jr. is one of two co-executors of the Estate of his father,
T. M. Evans, Sr., deceased, which holds 4,050,786 shares of common stock of the
Company formerly owned by the decedent, he is the brother of E. P. Evans, and R.
S. Evans.
(2) Does not include 5,000 shares of common stock held by Diana J. Petrik, wife
of J. S. Petrik. Mr. Petrik disclaims any beneficial interest in the
above-mentioned shares.
(3) Restricted shares awarded by Board of Directors pursuant to Company's Long
Term Incentive Plan on January 26, 1999.
During 1998 there were seven Board meetings. Each Director attended at least
75% of the meetings of the Board. In addition, all members of the Audit
Committee and the Compensation and Nominating Committee attended all of the
meetings held.
Messrs. P. J. Kalis (Chairman), T. M. Evans, Jr., and J. S. Petrik were
members of the Audit Committee from January 1, 1998 through December 31, 1998.
The Committee held four meetings during the calendar year 1998. 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), P. J. Kalis and J. S. Petrik were members of
the Compensation and Nominating Committee from January 1, 1998 through December
31, 1998; Mr. E. P. Evans was a member from May 20, 1998 through December 31,
1998. The Committee held two meetings in 1998 and reviewed all matters relating
to executive compensation.
During 1998 the Company retained the law firm of Kirkpatrick & Lockhart LLP,
of which Mr. Kalis is a partner.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
Long-term All Other
Compensation Compensation
Annual Compensation Awards(1) (2)
Name & Principal Stock
Position Year Salary Bonus Other Options
William D. Jarosz (3) 1998 $243,062 $35,375 $24,137 32,000 $4,000
Chairman of the 1997 235,477 0 22,689 0 4,000
Board, President and 1996 212,653 40,000 24,181 0 5,316
Chief Executive
Officer
Michael J. Mocniak 1998 189,956 24,665 942 20,000 4,800
Vice President, 1997 184,108 0 1,399 0 4,801
General Counsel and 1996 178,423 30,000 1,399 0 6,253
Secretary
R. Michael McEntee 1998 183,924 24,665 1,912 20,000 4,800
Vice President and 1997 175,819 0 1,912 0 4,800
Chief Financial 1996 166,846 30,000 1,813 0 5,905
Officer
(1) Reported in number of shares.
(2) Amounts of All Other Compensation are amounts contributed or accrued for
fiscal years 1998, 1997 and 1996 under the Company's Savings and Profit Sharing
Plan.
(3) Mr. Jarosz resigned as Chairman of the Board, President and Chief Executive
Officer, and Gary L. Tessitore assumed those positions, effective January 26,
1999.
AGGREGATED OPTIONS IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
Number of Value of
Securities Unexercised
Underlying In-the-
Unexercised Money
Option at Options at
Shares FY-End (#) FY-End ($)
Name & Acquired on Value Exercisable Exercisable
Principal Exercise Realized /Unexercis- /Unexercis-
Position (#) ($) able able
William D. 0 0 0/32,000 $0/$0
Jarosz (1)
Michael J. 0 0 0/20,000 0/0
Mocniak
R. Michael 0 0 0/20,000 0/0
McEntee
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realized
Number of % of Total Value at Assumed
Securities Options Annual Rates of
Underlying Granted to Stock Price
Name & Options Employees Exercise Expira- Appreciation for
Principal Granted in Fiscal Price tion Option Term
Position (#) Year ($/Share) Date 5% 10%
William D. 32,000 18% $9.19 5/20/08 184,945 468,688
Jarosz (1)
Michael J. 20,000 11% $9.19 5/20/08 115,591 292,930
Mocniak
R. Michael 20,000 11% $9.19 5/20/08 115,591 292,930
McEntee
(1) Mr. Jarosz resigned as Chairman of the Board, President and Chief Executive
Officer, and Gary L. Tessitore assumed those positions effective January 26,
1999. Mr. Jarosz's options were forfeited upon his resignation.
PENSION PLAN TABLE
Years of Service
Remuner-
ation 15 20 25 30 35
$125,000 $32,138 $37,851 $43,564 $49,277 $54,989
150,000 38,888 45,851 52,814 59,777 66,739
175,000 40,508 47,771 55,034 62,297 69,559
200,000 40,508 47,771 55,034 62,297 69,559
225,000 40,508 47,771 55,034 62,297 69,559
250,000 40,508 47,771 55,034 62,297 69,559
300,000 40,508 47,771 55,034 62,297 69,559
400,000 40,508 47,771 55,034 62,297 69,559
500,000 40,508 47,771 55,034 62,297 69,559
The Fansteel Consolidated Employee Pension (the "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. G. L. Tessitore, M. J. Mocniak, and R. M.
McEntee have 0, 16, and 19 years of credited service, respectively, under the
Plan.
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.
All decisions regarding executive compensation are 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 COMPENSATION AND NOMINATING COMMITTEE ON
EXECUTIVE COMPENSATION
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 operations and maintaining sound,
conservative fiscal policies. The Company's compensation package for 1998
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 setting
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 were 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 the amount of time required to collect 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.
On January 23, 1996, the Committee approved a bonus plan in which the
executive officers participate. This new plan was designed to 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 are the Company's cost of capital,
return on capital, capital employed, and net operating profit after tax.
Under the current plan, the Committee determines the portion of an available
bonus pool which would be paid to executive officers. The total amount of the
available pool is 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 15% of
the difference. If the prior year's EVA was positive, the bonus pool will be
10% 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
* EVA is a registered trademark of Stern, Stewart & Co.
award format. As a result of unusual charges at the Wellman Dynamics operation
in 1997, Company earnings were negatively affected to the degree that bonuses
were not awarded to the executive officers in 1997. In 1998, however, the
Company's performance improved and bonuses were awarded to the officers in
accordance with the plan.
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
1998.
On January 27, 1998, the Board approved a long-term incentive plan, which was
ratified by the stockholders of the Company at the 1998 Annual Meeting. The
plan is designed to 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. On May 20, 1998, upon ratification of the long
term incentive plan the Committee recommended and the Board awarded Incentive
Stock Options made in accordance with Section 422 of the Internal Revenue Code.
In determining the number of options to award each executive officer, the
Committee considered compensation data compiled by Ernst & Young, LLP relating
to stock option grants for a peer group of organizations as reported in proxy
and other SEC filings. This peer group was engaged in metal fabrication and
tool and machinery manufacturing and are not necessarily the same peer group
used in the comparison of shareholder returns. The Black-Schole option pricing
model was used to calculate the present value of a stock option on the grant
date. That value was calculated to be $3.90 per option. The number of stock
options granted to each officer are: W. D. Jarosz, 32,000 (forfeited upon
resignation, as described subsequently in this report); M. J. Mocniak, 20,000;
and R. M. McEntee, 20,000. The options vest annually beginning May 20, 1999, in
increments of one-third of the total number of options granted. As a percentage
of base salary, the number of options was less than the average awarded by the
peer group for similar executive officer positions. A total of 175,000 options
were awarded to officers and employees of the Company in 1998, including the
72,000 awarded to the executive officers.
Chief Executive Officer Compensation. William D. Jarosz served as Chairman of
the Board, President and Chief Executive Officer in 1998. Mr. Jarosz became the
Chief Executive Officer in June of 1995. Mr. Jarosz received a modest salary
increase in 1998 of 3.5% which resulted in a salary level comparable to
businesses with similar revenues and earnings. Mr. Jarosz's base salary was
initially set at a level below that which his predecessor had been receiving,
and his salary was not increased in 1995 when he assumed the duties of Chief
Executive Officer. Mr. Jarosz's base salary was increased in April, 1996 by
31.4% based upon his performance and in order to bring his salary in line with
the criteria established by the Committee for the base salary for the Chairman
of the Board, President and Chief Executive Officer as described previously in
this Report. Mr. Jarosz received a bonus for 1996 based upon the attainment of
performance objectives as determined by the Committee in accordance with the
incentive compensation plan in effect at the time. As a result of unusual
charges at the Wellman Dynamics operation in 1997, Company earnings were
negatively affected to the degree that Mr. Jarosz did not qualify for incentive
compensation in accordance with the EVA-based incentive compensation plan. The
Company's performance improved in 1998 and Mr. Jarosz's incentive compensation
(EVA) plan account was credited with an amount determined in accordance with the
plan.
Mr. Jarosz resigned as Chairman of the Board, President and Chief Executive
Officer of the Company effective January 26, 1999. In connection with his
resignation, Mr. Jarosz entered into a letter agreement with the Company
providing for salary continuation and continued benefit plan participation for
Mr. Jarosz through June 30, 2000. The continued benefit plan participation will
cease if and when Mr. Jarosz commences other employment which provides
comparable benefits. He is also entitled to payment of the amount credited to
his account under the Company's incentive compensation (EVA) plan.
Other Matters. The Company does not anticipate that it will be affected in
the near future by Section 162(m) of the 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
E. P. Evans
P. J. Kalis
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 - Metals Fabrication 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.
PROPOSAL TO APPROVE THE AMENDMENT
OF THE LONG-TERM INCENTIVE PLAN
INTRODUCTION AND SUMMARY OF AMENDMENTS
Upon the recommendation of the Compensation and Nominating Committee (the
"Committee"), the Board of Directors has adopted, subject to stockholder
approval, amendments (the "Amendments") to the Long-Term Incentive Plan
("Incentive Plan") to (i) increase the total number of shares of Common Stock
which may be issued or delivered under the Incentive Plan by 400,000 shares to
an aggregate of 800,000 shares and (ii) increase to 450,000 shares the number of
shares of Common Stock in respect of which awards can be made under the
Incentive Plan to any participant in any calendar year.
The Company believes that these changes are necessary and appropriate in order
to ensure the continued availability of the Incentive Plan as an effective
vehicle for attracting and retaining key employees. In particular, the
Amendments are required in order to accommodate the grants to Mr. Tessitore of
stock options in respect of 300,000 shares of Common Stock and 100,000 shares of
restricted stock. Excluding these awards to Mr. Tessitore, the Company has
awarded 130,800 stock options pursuant to the Incentive Plan which have not been
forfeited.
The Incentive Plan was originally adopted by the Board of Directors on January
27, 1998 and approved by the stockholders on May 20, 1998. The Amendments were
approved by the Board on January 26, 1999. The material features of the
Incentive Plan, as changed by the Amendments, are summarized below, but this
summary is qualified in its entirety by the full text of the Incentive Plan
which appears as Exhibit A to this Proxy Statement. The provisions of the
Incentive Plan revised by the Ammendments are sections 1.2, 4.1 and 5.1.
SUMMARY OF THE INCENTIVE PLAN
Administration
The Incentive Plan is administered by the Committee. No member of the Committee
or other non-employee Director will be eligible to receive shares or other
awards under the Incentive Plan.
Amount of Stock
The Incentive Plan will provide for awards of up to 800,000 shares of Common
Stock, subject to anti-dilution adjustments upon the occurrence of significant
corporate events. The shares to be offered under the Incentive 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. No participant can receive awards under the Incentive Plan in
any calendar year in respect of more than 450,000 shares of Common Stock. As of
March 1, 1999, approximately 20 employees were eligible to participate in the
Incentive Plan.
Amendment or Termination
The Incentive 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 Incentive Plan will expire ten
years from its effective date.
Stock Option Component of the Incentive 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 share of 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. The closing price of the
Common Stock as reported on the New York Stock Exchange Composite Transactions
listing on March 1, 1999 was $5.3125 per share.
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 Incentive 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 Incentive 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 Incentive 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 original effective date of
the Incentive 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 shareholder beneficially owning in excess of 40% of the
Outstanding Common Stock on the effective date of the Incentive 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.
Federal Income Tax Consequences
The following is a summary of the principal federal income tax consequences of
Incentive 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 and the Company will not be entitled
to a tax deduction.
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' 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.
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
Incentive 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.
RECOMMENDATION
The Board, believing that the Company and its shareholders will benefit from the
Amendments to the Incentive Plan, hereby recommends a vote FOR the Amendments.
Approval of the Amendments 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 1999 Annual Meeting of Stockholders.
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, 1999. 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 21, 2000, the proposal must be submitted to the
Secretary of the Company by November 19, 1999.
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 1998. 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 February 23, 1999.
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,
G. L. Tessitore
Chairman of the Board, President
and Chief Executive Officer
March 17, 1999
EXHIBIT A
FANSTEEL INC.
1998 LONG-TERM INCENTIVE PLAN
(As Amended Effective January 26, 1999)
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.1 Purpose. The purpose of the Fansteel Inc. 1998 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.
1.2 Adoption and Term. The Plan was originally adopted by the Board of
Directors (the "Board") effective as of January 27, 1998, and approved by the
Company's shareholders. The Plan was amended by the Board effective January 26,
1999, 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 May 20, 2008.
ARTICLE II
DEFINITIONS
For the purpose of this Plan, capitalized terms shall have the following
meanings:
2.1 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.
2.2 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.
2.3 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.
2.4 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.
2.5 Board means the Board of Directors of the Company.
2.6 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 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.
2.7 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.
2.8 Committee means the Committee defined in Section 3.1.
2.9 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 6.2(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 any merger, reorganization, consolidation, share
exchange, transfer of assets or other transaction having similar effect
involving the Company.
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 5.1.
2.24 Performance Awards means Awards granted in accordance with Article
VIII.
2.25 Plan means the Fansteel Inc. 1998 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 6.1(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
3.1 Committee. The Plan shall be administered by the Compensation and
Nominating Committee of the Board ("Committee") 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, subject to compliance with applicable legal
requirements, 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. In
addition, the Board may exercise any of the authority conferred upon the
Committee hereunder. In the event of any such delegation of authority or
exercise of authority by the Board, references in the Plan to the Committee
shall be deemed to refer to the delegate of the Committee or the Board, as the
case may be.
ARTICLE IV
SHARES
4.1 Number of Shares Issuable. Subject to adjustments as provided in
Section 1.7, 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 authorized to be issued under the
Plan shall be 800,000 shares of Common Stock, which limit may be increased from
time to time in the future by action of the Board subject to Section 10.14(a).
4.2 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 7.2(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
5.1 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 450,000 shares of Common Stock in any calendar year.
ARTICLE VI
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
6.1 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 10.4 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.
6.2 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 6.2(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.
6.3 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 6.5.
(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 6.3(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.
(d) Extension of Exercise Time. In addition to the extensions
permitted under Section 6.3(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
6.3(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
6.3(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
6.3(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 6.3(e)(ii)). In no event, however, may
any Option or Stock Appreciation Right be exercised later than
the date described in Section 6.3(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 6.3(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 6.3(b)(i), (iii) or (iv),
whichever is earlier. Unless otherwise provided by the Committee
in accordance with Section 6.3(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.
6.4 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.
6.5 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 6.5 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
7.1 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 7.1(d), one or more share certificates,
registered in the name of the Participant, for an appropriate number of
shares as provided in Section 7.1(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 7.1 (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
7.1(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 7.3, the restrictions applicable to the Restricted Shares shall
lapse. As promptly as administratively feasible thereafter, subject to the
requirements of Section 10.5, 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.
7.2 Terms of Restricted Shares.
(a) Forfeiture of Restricted Shares. Subject to Sections 7.2(b) and
7.3, 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.
7.3 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 7.2(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
7.1(d).
ARTICLE VIII
PERFORMANCE AWARDS
8.1 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.
8.2 Terms of Performance Awards.
(a) Termination of Employment. Unless otherwise provided below or in
Section 8.3, 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 8.2 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 8.1(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.
8.3 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 8.1 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
9.1 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.
9.2 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
10.1 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 10.3, 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.
10.2 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.
10.3 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.
10.4 Limitation on Transfer. Except as provided in Section 7.1(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.
10.5 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 10.5(c)) in accordance with the
following rules:
(a) A Participant shall have the right to elect to meet his or her
withholding requirement with respect to an Award (i) by having the Company
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 or (ii) 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 7.1(d).
(b) 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.
10.6 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.
10.7 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,
the number and kind of shares available for Awards subsequently granted
under the Plan and the maximum number of shares in respect of which Awards
can be made to any Participant in any calendar year 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 an Option or receipt of any other Award to receive
(subject to any required action by stockholders), in lieu of the number of
shares of Common Stock receivable or exercisable pursuant to such Award
prior to such Merger, 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 of Common Stock equal to the number
of shares of Common Stock 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. In the event of a
Merger in which the Company is not the surviving corporation, the
surviving, continuing, successor or purchasing corporation, as the case may
be (the "Acquiring Corporation"), will either assume the Company's rights
and obligations under outstanding Award Agreements or substitute awards in
respect of the Acquiring Corporation's stock for outstanding Awards,
provided, however, that if the Acquiring Corporation does not assume or
substitute for such outstanding Awards, the Board shall provide prior to
the Merger that any unexercisable and/or unvested portion of the
outstanding Awards shall be immediately exercisable and vested as of a date
prior to such merger or consolidation, as the Board so determines. The
exercise and/or vesting of any Award that was permissible solely by reason
of this Section 9.7(b) shall be conditioned upon the consummation of the
Merger. Any Options which are neither assumed by the Acquiring Corporation
not exercised as of the date of the Merger shall terminate effective as of
the effective date of the Merger.
(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.
10.8 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.
10.9 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 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.
10.13 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.
10.14 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 the Code, unless such
compliance is no longer mandatory under 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.
