<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
HON INDUSTRIES INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
HON INDUSTRIES INC.
414 EAST THIRD STREET - P.O. BOX 1109
MUSCATINE, IA 52761-7109
319/264-7400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE OWNERS OF COMMON STOCK
OF HON INDUSTRIES Inc.:
The 1997 Annual Meeting of Shareholders of HON INDUSTRIES Inc., an Iowa
corporation (the "Company"), will be held at the Holiday Inn, Highways 61 and
38 North, Muscatine, Iowa, on Tuesday, May 13, 1997, beginning at 10:30 a.m.,
in order:
1. To elect each of four Directors for a term of three years.
2. To consider and act on proposed amendments to and restatement of the
1995 Stock-Based Compensation Plan.
3. To consider and act on a proposed 1997 Equity Plan for Non-Employee
Directors.
4. To transact any other business that may properly be brought before the
meeting or any adjournment thereof.
The holders of record as of the close of business on March 14, 1997, of the
Company's Common Stock, par value $1.00 per share, are entitled to vote at the
meeting.
You are encouraged to attend the meeting. We want to keep you informed of
the Company's activities and progress.
BY ORDER OF THE BOARD OF DIRECTORS,
Jack D. Michaels
Chairman, President and Chief
Executive Officer
March 28, 1997
PLEASE MARK, SIGN, DATE, AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE
ENCLOSED POSTAGE PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING.
<PAGE>
HON INDUSTRIES INC.
414 EAST THIRD STREET
MUSCATINE, IOWA 52761
March 28, 1997
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 13, 1997
This Proxy Statement is furnished by and on behalf of the Board of Directors
of HON INDUSTRIES Inc. (the "Company" or "HON INDUSTRIES") in connection with
the solicitation of proxies for use at the annual meeting of shareholders of
the Company to be held on May 13, 1997, at the Holiday Inn in Muscatine, Iowa,
and at any adjournment or postponement thereof (the "Annual Meeting").
There were 29,693,916 shares of the Company's common stock, par value $1.00
per share (the "Common Stock") outstanding (the "outstanding Shares") as of
the close of business on March 14, 1997 ("Record Date"). This Proxy Statement
and the enclosed proxy card will be first mailed on or about March 28, 1997,
to the holders of Shares on the Record Date (the "Shareholders" or,
individually, "Shareholder"). Shareholders shall be entitled to cast one vote
per share for election of Directors and one vote per share on all other
matters.
A Shareholder who gives a proxy may revoke it at any time prior to its
exercise by filing with the Secretary a written revocation or a duly executed
proxy bearing a later date. The proxy will be suspended if the Shareholder
attends the meeting and elects to vote in person. Proxies that are signed but
unmarked will be voted as recommended by the Board of Directors.
The Company will treat abstentions and broker non-votes as present at the
Annual Meeting solely for purposes of determining whether or not a quorum
exists. Such non-votes will not be considered to be voting on the matters to
which they pertain and, thus, will not be counted in determining whether the
election of Directors, the amendment and restatement of the 1995 Stock-Based
Compensation Plan, or the 1997 Equity Plan for Non-Employee Directors (the
"Director Plan") have been approved by the requisite vote of Shareholders.
Except as described below, the affirmative vote of the holders of two-thirds
of the total outstanding Shares entitled to vote is required to adopt any
motion or resolution or to take any action at any meeting of Shareholders. The
affirmative vote of the holders of a majority of the total outstanding Shares
entitled to vote is required and will be sufficient to take any of the
following actions submitted to a vote of Shareholders: (1) any amendment to
the Company's Articles of Incorporation which has been approved or recommended
by the Board of Directors, other than certain such amendments that would
amend, limit or conflict with certain provisions governing shareholder voting
requirements and the Company's Board of Directors (including removal and
election); (2) the election of a class of Directors at any annual meeting of
shareholders if (a) at the annual meeting of shareholders in the third
preceding year, an election of such class was held but no Director of such
class was elected because no candidate received the requisite two-thirds vote,
and (b) the term of such class of Directors was extended for an additional
term of three years; and (3) any other motion, resolution or action which has
been approved or recommended by the Board of Directors of the Company (other
than any such motion, resolution or action regarding (a) the election or
removal of Directors, (b) any amendment to the Articles of Incorporation, (c)
any Corporate Combination (as defined in the Company's Articles of
Incorporation), (d) any partial or complete liquidation of the Company, (e)
any liquidating dividend or distribution, or (f) any dissolution of the
Company).
PROPOSAL NO. 1--ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, four Directors are each to be elected
to hold office for terms of three years and until their successors are elected
and shall qualify. The Board of Directors recommends the election of the four
nominees listed on the following page. The named proxies intend to vote for
the election of the four nominees. If, at the time of the meeting, any of such
nominees should be unable or decline to serve, the discretionary authority
provided in the proxy will be exercised to vote for a substitute or
substitutes, unless otherwise directed. The Board of Directors has no reason
to believe that any substitute nominee or nominees will be required.
<PAGE>
Set forth below is certain information furnished to the Company by each
nominee and each Director continuing in office after the Annual Meeting.
NOMINEES FOR ELECTION
<TABLE>
<CAPTION>
COMMON STOCK AS OF
MARCH 14, 1997
------------------------
PRINCIPAL OCCUPATION AMOUNT AND
AND BUSINESS NOMINATED NATURE OF PERCENT
EXPERIENCE DURING DIRECTOR FOR TERM BENEFICIAL OF
NOMINEES THE PAST FIVE YEARS AGE SINCE EXPIRING OWNERSHIP CLASS
-------- -------------------- --- -------- --------- ---------- -------
<C> <S> <C> <C> <C> <C> <C>
Robert W. Cox (1) Counsel, Baker & Mc- 59 1994 2000 2,457 *
Kenzie; Chairman of
the Policy Commit-
tee, 1992-94, Manag-
ing Partner and
Chairman of the Ex-
ecutive Committee
and the Strategic
Planning Committee,
1984-92, Baker & Mc-
Kenzie (an interna-
tional law firm).
Stanley M. Howe Chairman Emeritus, 73 1958 2000 1,908,837(2)(3) 6.43%
since 1996, Chair-
man, 1984-1996,
President, 1964-90,
CEO, 1979-91, HON
INDUSTRIES Inc.
Lee Liu (4) Chairman and CEO, 63 1990 2000 2,053(2) *
since Nov. 1996,
Chairman, President
and CEO, 1993-Nov.
1996, IES Industries
Inc.; Chairman and
CEO, since Nov.
1996, Chairman,
President and CEO,
Feb. 1996-Nov. 1996,
Chairman and CEO,
1994-Feb. 1996,
Chairman, President
and CEO, 1993-1994,
IES Utilities; Offi-
cer, 1990-93, vari-
ous affiliates or
predecessor compa-
nies to IES Indus-
tries Inc. and IES
Utilities (energy,
transportation, and
telecommunications).
Lorne R. Waxlax (5) Retired Executive 63 1994 2000 3,909 *
Vice President, Di-
versified Group, of
The Gillette Company
(marketer and manu-
facturer of personal
care and use prod-
ucts). Director of
various corpora-
tions.
</TABLE>
2
<PAGE>
INCUMBENT DIRECTORS
<TABLE>
<CAPTION>
COMMON STOCK AS OF
MARCH 14, 1997
------------------
PRINCIPAL OCCUPATION AMOUNT AND
AND BUSINESS NATURE OF PERCENT
EXPERIENCE DURING DIRECTOR TERM BENEFICIAL OF
CONTINUING DIRECTORS THE PAST FIVE YEARS AGE SINCE EXPIRES OWNERSHIP CLASS
-------------------- -------------------- --- -------- ------- ---------- -------
<C> <S> <C> <C> <C> <C> <C>
W. James Farrell (6) Chairman and CEO, 54 1988 1998 1,060 *
since Sept. 1995,
Director, since
Sept. 1995, Presi-
dent, 1994-95, Illi-
nois Tool Works Inc.
(ITW); Executive
Vice President and
President, 1983-94,
Specialty Mechanical
and Adhesive Prod-
ucts Group, ITW
(highly engineered
products and sys-
tems).
Jack D. Michaels (7) Chairman, President 59 1990 1998 82,342 *
and CEO, since 1996,
President and CEO,
1991-1996, Presi-
dent, 1990-91, HON
INDUSTRIES Inc.
Michael S. Plunkett (8) Senior Vice Presi- 59 1980 1998 6,422 *
dent, Engineering,
Technology & Human
Resources, since
1986, and Director,
1986-93, Deere &
Company (mobile
power machinery).
Herman J. Schmidt (9) Retired Vice Chair- 80 1980 1998 3,009 *
man of Mobil Oil
Corporation. Direc-
tor of various cor-
porations.
Robert L. Katz (10) President, since 71 1995 1999 3,611 *
1953, Robert L. Katz
and Associates (con-
sultants on corpo-
rate strategy);
President, Caltex
Investment Manage-
ment Co. (venture
capital firm).
Celeste C. Michalski Managing Director, 54 1993 1999 2,209 *
Finance, since Dec.
1996, Vice Presi-
dent-Collections--
Residence and Busi-
ness, Nov. 1995-Nov.
1996, and Managing
Director, Productiv-
ity and Process Im-
provement, July
1995-Nov. 1995,
Telecommunications
Group, NYNEX (tele-
communications, di-
rectory publishing,
and information de-
livery services);
and Assistant
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL COMMON STOCK AS OF
OCCUPATION MARCH 14, 1997
AND BUSINESS -------------------------
EXPERIENCE AMOUNT AND
DURING THE NATURE OF PERCENT
CONTINUING PAST FIVE DIRECTOR TERM BENEFICIAL OF
DIRECTORS YEARS AGE SINCE EXPIRES OWNERSHIP CLASS
---------- ------------- --- -------- ------- ---------- -------
<C> <S> <C> <C> <C> <C> <C>
Comptroller,
1994-June
1995, NYNEX;
Comptroller,
1993-94, New
York Tele-
phone, larg-
est operating
company of
NYNEX; Vice
President and
Controller,
1988-93,
GenCorp, Inc.
Richard H. Stanley Vice Chair- 64 1964 1999 2,224,240(2)(11) 7.49%
man, since
1979, HON IN-
DUSTRIES
Inc.; Presi-
dent, since
1986, SC Com-
panies, Inc.;
Chairman,
since 1984,
Stanley Con-
sultants,
Inc. (inter-
national en-
gineering,
architecture,
planning, and
management);
President,
since 1984,
and Chairman,
since 1995,
The Stanley
Foundation
(private op-
erating foun-
dation); Di-
rector, since
1996, Dover
Resources,
Inc., a sub-
sidiary of
Dover Corpo-
ration (di-
versified
manufacturer
of industrial
products).
</TABLE>
- --------
*Less than 1 percent.
NOTES
(1) Mr. Cox is also a director of Carey International, Inc.
(2) Figures include shares held by or for the benefit of certain family
members of Mr. Howe, 860,366; Mr. Liu, 1,050; and Mr. Stanley, 91,536.
Each Director disclaims "beneficial ownership" of such respective shares.
(3) Includes 198,669 shares owned by The Howe Foundation. Mr. Howe is
President of The Howe Foundation and, as such, shares voting and
dispositive powers as to shares held by such entity. Also includes 99,324
shares owned by the Charitable Lead Trust for the Benefit of Iowa State
University. Mr. Howe is Trustee of the trust and has sole voting and
dispositive powers as to shares held by such entity. Mr. Howe disclaims
"beneficial ownership" of such shares held by the Foundation and the
Trust.
(4) Mr. Liu is also a director of Eastman Chemical Company, Principal
Financial Group, and McLeod, Inc., each of which has a class of
securities registered with the Securities and Exchange Commission.
(5) Mr. Waxlax is also a director of Clean Harbors Inc. and Quaker State
Corporation, and is Chairman of Waban, Inc., each of which has a class of
securities registered with the Securities and Exchange Commission.
(6) Mr. Farrell is also a director of Morton International and Premark
International, each of which has a class of securities registered with
the Securities and Exchange Commission.
(7) Mr. Michaels is also a director of Huffy Corporation, which has a class
of securities registered with the Securities and Exchange Commission.
4
<PAGE>
(8) Mr. Plunkett is also a director of Bank One, Quad Cities, NA, which has a
class of securities registered with the Securities and Exchange
Commission.
(9) Mr. Schmidt is also a director of H.J. Heinz Co. and MAPCO Inc., each of
which has a class of securities registered with the Securities and
Exchange Commission.
(10) Dr. Katz is also a director of Newell Co., which has a class of
securities registered with the Securities and Exchange Commission. See
"Certain Relationships and Related Transactions" on page 7.
(11) Includes 8,072 shares beneficially and indirectly owned by Mr. Stanley as
co-trustee of the C. Maxwell Stanley and Elizabeth M. Stanley Real Estate
Trust. Also includes 1,995,052 shares owned by The Stanley Foundation and
14,088 shares owned by E & M Charities. Mr. Stanley is President and a
director of The Stanley Foundation and a director of E & M Charities and,
as such, shares voting and dispositive powers as to shares held by such
entities, of which he disclaims "beneficial ownership." See "Beneficial
Owners of Common Stock" on the following page.
BENEFICIAL OWNERS OF COMMON STOCK
The following table sets forth information known as of March 14, 1997, with
respect to any person who is known to the Company to be the beneficial owner
of more than 5 percent of the Company's Common Stock. The table also includes
any non-Director executive officers included in the Summary Compensation
Table. For information regarding Director stock ownership, see "Election of
Directors."
<TABLE>
<CAPTION>
NAME AND
ADDRESS OF
BENEFICIAL AMOUNT AND NATURE OF PERCENT
OWNER BENEFICIAL OWNERSHIP OF CLASS
---------- -------------------- --------
<S> <C> <C>
State Farm Insurance Companies................... 3,683,200 12.40%
One State Farm Plaza
Bloomington, Illinois 61701
Bandag, Incorporated............................. 2,395,000 8.07%
Bandag Center
Muscatine, Iowa 52761
The Stanley Foundation........................... 1,995,052(1) 6.72%
216 Sycamore Street
Muscatine, Iowa 52761
Stanley M. Howe.................................. 1,908,837(2) 6.43%
1124 Oakland Drive
Muscatine, Iowa 52761
Terrance L. and Loretta B. Mealy................. 1,656,064 5.58%
301 East Second Street
Muscatine, Iowa 52761
George J. Koenigsaecker III...................... 39,554 *
David C. Stuebe.................................. 1,483 *
R. Michael Derry................................. 5,419 *
All Directors and Officers as a Group............ 391,442(3) 1.32%
</TABLE>
- --------
*Less than 1 percent.
NOTES
(1) Richard H. Stanley, a Director of the Company, is President and a director
of The Stanley Foundation. As such, he shares voting and dispositive
powers regarding the shares owned by the Foundation, of which he disclaims
"beneficial ownership."
5
<PAGE>
(2) Includes 198,669 shares owned by The Howe Foundation. Mr. Howe, a Director
of the Company, is President of The Howe Foundation. As such, he shares
voting and dispositive powers regarding the shares owned by the
Foundation, of which he disclaims "beneficial ownership." Includes 99,324
shares owned by the Charitable Lead Trust for the Benefit of Iowa State
University. Mr. Howe is Trustee of the trust and has sole voting and
dispositive powers as to shares held by such entity, of which he disclaims
"beneficial ownership." Also includes shares held by or for the benefit of
certain family members of Mr. Howe, as to which such Director disclaims
"beneficial ownership." See Note (2) on page 4.
(3) After elimination of duplication caused by shared voting or dispositive
powers of certain stock listed in the above table. Includes shares held by
or for the benefit of certain family members of Messrs. Liu and Stanley,
respectively, as to which each such Director disclaims "beneficial
ownership." See Note (2) on page 4.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of Common Stock, and to furnish the Company with copies
of all such reports they file. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended December 28, 1996, all Section 16(a) filing requirements applicable to
its officers, Directors, and greater than ten percent beneficial owners were
complied with.
BOARD MEETINGS, COMMITTEES, AND FEES
The Board of Directors held four regular meetings and one special meeting
during the last fiscal year. The Board has three standing committees which
deal with audit matters, compensation, and nominations to the Board. Each
Director has attended at least 75 percent of all committee and Board meetings.
The Audit Committee consists of Richard H. Stanley, Celeste C. Michalski,
and Michael S. Plunkett, and it met four times during the last fiscal year.
The Committee recommends selection of independent auditors and verifies
auditors' performance, fees, and audit plans. The Committee also reviews the
annual financial statements, the auditors' management letter with both outside
auditors and management, the annual pension and profit-sharing audits,
nonaudit services provided by outside auditors, the Company's insurance
coverage, and any other financial matters as directed by the Board.
The Human Resources and Compensation Committee is comprised of Robert W.
Cox, W. James Farrell, and Lorne R. Waxlax, and it met six times during the
last fiscal year. The Committee reviews executive compensation, benefit
programs for all employees, management's recommendations on election of
officers, and human resources development.
The Public Policy and Corporate Governance Committee is comprised of Herman
J. Schmidt, Robert L. Katz, and Lee Liu, and it met four times during the last
fiscal year. The Committee monitors social accountability, recommends changes
in Board size, oversees committee jurisdiction and assignments, and proposes
nominees for election to the Board of Directors. The Committee will consider
candidates for Board membership recommended in writing by shareholders by the
deadline for shareholder proposals.
Each outside Director receives an annual retainer of $20,000, of which
$2,000 must be in the form of the Company' Common Stock. At the Directors
election, additional retainer fees may be taken in the form of Company Common
Stock. All shares of Company Common Stock issued in lieu of cash Director's
fees have heretofore been issued pursuant to the Company's 1995 Stock-Based
Compensation Plan. If the Director Plan is approved by the Shareholders,
shares of Company Common Stock issued in lieu of cash Director's fees will be
issued pursuant to the Director Plan. See "Approval of the 1997 Equity Plan
for Non-Employee Directors of
6
<PAGE>
HON INDUSTRIES Inc." on page 19. Each Director also receives $1,000 for each
regular or special Board meeting, $1,000 for each special committee meeting,
and $500 for each regular meeting of a committee of which the Director is a
member. Directors also receive an additional $1,000 for each meeting attended
if they are required to travel six hours or more on a round trip basis. Each
Director receives a $500 fee for each Board or committee meeting held by
telephone conference. Directors are also paid travel and related expenses for
meetings attended.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On November 15, 1995, Robert L. Katz and Associates, of which Dr. Katz is
President, entered into a one-year agreement with the Company to provide
certain consulting services for $5,000 per month. The agreement also provides
for reimbursement of travel expenses and other reasonable out-of-pocket costs
incurred on the Company's behalf and is automatically renewed each year unless
notice of cancellation is given no later than 90 days prior to the end of the
one-year term. The agreement has been renewed for 1997. In 1996, the Company
paid Robert L. Katz and Associates a total consulting fee of $60,000 for
services rendered.
REQUIRED VOTE
Approval of the election of the above nominees as Directors requires the
affirmative vote of the holders of two-thirds of the total outstanding Shares
entitled to vote at the Annual Meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE ELECTION OF
THE ABOVE NOMINEES AS DIRECTORS. PROXIES RECEIVED BY THE BOARD OF DIRECTORS
WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY
CHOICE.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to, earned by, or
paid to the Company's CEO and the other four most highly compensated executive
officers of the Company for the years indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
---------------------------- ---------------------
OTHER
NAME AND ANNUAL RESTRICTED ALL OTHER
PRINCIPAL FISCAL COMPEN- STOCK LTIP COMPEN-
POSITION YEAR SALARY(1) BONUS(2) SATION(3) AWARDS(4) PAYOUTS(5) SATION(6)
--------- ------ --------- -------- --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Jack D.
Michaels 1996 $448,333 $460,000 $10,852 $152,684 $135,879
Chairman, 1995 413,333 128,000 17,364 283,592 94,240
President and
CEO 1994 385,000 327,000 20,442 318,022 16,745
George J.
Koenigsaecker
III 1996 258,611 210,000 7,846 58,708
President, The 1995 235,405 69,000 8,452 51,163
HON Company 1994 227,000 150,000 18,390 15,937
David C.
Stuebe 1996 216,667 165,000 10,430 38,692
Vice President
and CFO 1995 206,668 100,000 900
1994 50,000 25,000 73,484 144
R. Michael
Derry 1996 177,700 82,000 11,122 173,613 36,380
Senior Vice
President, 1995 176,267 26,000 8,572 28,898
Human 1994 172,267 57,000 12,768 159,011 16,745
Resources and
Administration
A. Mosby
Harvey, Jr. 1996 170,333 80,000 8,880 27,890
Vice 1995 158,069 26,000 8,572 20,629
President,
General
Counsel and
Secretary 1994 142,801 50,000 5,080 5,602
</TABLE>
- --------
NOTES
(1) These figures and others on this Table include amounts deferred, if any,
in respect of fiscal 1996, 1995, and 1994 compensation but do not include
any interest that may have accrued on any deferred compensation under the
Company's Salary Deferral Plan. The Plan permits an executive to elect to
defer any combination
7
<PAGE>
of salary, bonus, or LTIP income. The Plan provides for interest to be paid
on any deferred amounts at an annual rate, compounded quarterly, equal to
one percent above the prime rate of The Northern Trust Company, Chicago,
Illinois, effective as of the first business day of the year.
(2) The figures for bonuses reflect the awards of executive bonuses for the
relevant fiscal years under the Company's Executive Bonus Plan. The
executive bonuses are payable in February following the fiscal year for
which they are earned, subject generally to a participant's continued
employment with the Company at the time of payment. Mr. Stuebe became
employed by the Company in fiscal 1994. The amounts included for Mr.
Stuebe reflect executive bonus payments of $25,000 and $100,000 for fiscal
1994 and 1995, respectively, that the Company agreed to pay in connection
with his acceptance of employment.
(3) The figures in this column reflect cash profit-sharing payments; one-time,
lump-sum salary payments; interest on LTIP Payouts; and relocation
expenses. In the 1996, 1995, and 1994 fiscal years, the Company made the
following payments under the Cash Profit-Sharing Plan: Mr. Michaels--
$8,880; $8,572; $9,368; Mr. Koenigsaecker--$7,846; $8,452; $9,450; Mr.
Stuebe--$8,880; $-0-; $-0-; Mr. Derry--$8,880; $8,572; $9,368; and Mr.
Harvey--$8,880; $8,572; $2,812. The Company's Cash Profit-Sharing Plan is
generally applicable to all members. Cash profit-sharing is earned on a
non-fiscal year cycle. One-time, lump-sum salary payments were made in
1994 in lieu of permanent salary increases, as follows: Mr. Michaels--
$7,500; Mr. Koenigsaecker--$8,940; Mr. Stuebe--$-0-; Mr. Derry--$3,400;
and Mr. Harvey--$1,400. Interest payments for fiscal years 1996, 1995 and
1994 on LTIP Payouts to Mr. Michaels were $1,972; $8,792 and $3,574,
respectively, and the interest payment to Mr. Derry for 1996 was $2,242.
The Company made taxable relocation expense reimbursements of $1,550; $-0-;
and $73,484 in the 1996, 1995, and 1994 fiscal years for Mr. Stuebe and
a reimbursement of $868 in the 1994 fiscal year for Mr. Harvey.
(4) In the 1995 and 1994 fiscal years, Mr. Koenigsaecker received $225 and
$1,031 in lieu of, but in rate and amount equal to, dividends on the
unvested portion of his 1992 restricted stock award, the final portion of
which vested in the 1995 fiscal year. No restricted stock awards to any
executive officer are currently outstanding.
(5) These payouts vested in the designated fiscal periods. See discussion of
Executive Long-Term Incentive Compensation Plan on page 11 hereof.
(6) Included are Company contributions to the HON Members Company Ownership
Plan and the HON INDUSTRIES Inc. Profit-Sharing Retirement Plan, as well
as the dollar value of Company-paid life insurance under the HON
INDUSTRIES Inc. Flexible Benefits Plan, all of which are generally
applicable to all members. The amounts paid under the HON Members Company
Ownership Plan in the 1996, 1995 and 1994 fiscal years were as follows:
Mr. Michaels--$2,976; $3,003; $3,007; Mr. Koenigsaecker--$2,976; $3,003;
$3,007; Mr. Stuebe--$2,976; $-0-; $-0-; Mr. Derry--$2,976; $3,003; $3,007;
and Mr. Harvey--$2,976; $3,003; and $964. The amounts paid under the HON
INDUSTRIES Inc. Profit-Sharing Retirement Plan in the 1996, 1995, and 1994
fiscal years were as follows: Mr. Michaels--$12,328; $11,645; $12,838; Mr.
Koenigsaecker--$11,138; $11,331; $12,582; Mr. Stuebe--$12,328; $-0-; $-0-;
Mr. Derry--$12,328; $11,645; $12,838; and Mr. Harvey--$12,328; $11,645;
$4,114. The dollar value of Company-paid life insurance under the HON
INDUSTRIES Inc. Flexible Benefits Plan in the 1996, 1995, and 1994 fiscal
years were as follows: Mr. Michaels--$900; $900; $900; Mr. Koenigsaecker--
$576; $576; $348; Mr. Stuebe--$900; $900; $144; Mr. Derry--$900; $900;
$900; and Mr. Harvey--$576; $547; $524. This column also includes amounts
equal to the value of Company Common Stock paid in respect of the 1996 and
1995 fiscal years under the Company's ERISA Supplemental Retirement Plan,
as follows: Mr. Michaels--$119,675; $78,692; Mr. Koenigsaecker--$44,018;
$36,253; Mr. Stuebe--$22,488; $-0-; Mr. Derry--$20,176; $13,350; and Mr.
Harvey--$12,010; $5,434. Under this Plan, certain executives receive
certain benefits in the form of Company Common Stock equal in value to
benefits they would have received under certain Company ERISA plans and
the Company's Cash Profit-Sharing Plan but for a $150,000 earnings cap.
The number of shares of Company Common Stock to be paid is determined by
dividing the value of such benefits by the average of the closing prices
of a share of the Company's Common Stock for each trading day of the last
calendar quarter of the most recent calendar year immediately preceding
the date of payment, with cash payable in lieu of any fractional share.
The Common Stock is issued under the Company's 1995 Stock-Based
Compensation Plan and may not be transferred while the recipient remains
employed by the Company.
8
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Performance Graph and the Report of the Human Resources and Compensation
Committee of the Board of Directors of the Company on Executive Compensation
shall not be incorporated by reference into any such filings.
PERFORMANCE GRAPH
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
S & P 500 INDEX, OFFICE FURNITURE INDUSTRY GROUP AND THE COMPANY
TOTAL RETURN
STOCK PRICE PLUS REINVESTED DIVIDENDS
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period HON OFFICE FURNITURE S&P
(Fiscal Year Covered) INDUSTRIES INDUSTRY GROUP 500 INDEX
- ------------------- ---------- ---------------- ---------
<S> <C> <C> <C>
Measurement Pt-
12/27/91 $100.00 $100.00 $100.00
FYE 12/31/92 $118.19 $116.89 $107.61
FYE 12/31/93 $142.89 $164.72 $118.41
FYE 12/30/94 $138.68 $141.01 $120.01
FYE 12/29/95 $122.58 $150.86 $164.95
FYE 12/27/96 $174.07 $231.79 $202.73
</TABLE>
- --------
* The Office Furniture Industry Group is a composite peer index constructed
by the Company and weighted by market capitalization, which includes the
following companies, but from which the Company has been excluded: Herman
Miller, Inc.; Kimball International, Inc.; La-Z-Boy Inc.; Shelby Williams
Industries, Inc. and TAB Products Company.
The total return assumes $100 invested in the Company's Common Stock on
December 27, 1991, and in each of the S & P 500 Index and Office Furniture
Industry Group Stocks on December 31, 1991. It includes reinvestment of
dividends and is based on the closing stock price on the last trading day of
the Company's fiscal year for the Company and the last trading day of December
for each corresponding year for both the S & P 500 Index and Office Furniture
Industry Group.
9
<PAGE>
The comparative performance of the Company's Common Stock against the
indexes as depicted in this graph is dependent on the price of stock at a
particular measurement point in time. Since individual stocks are more
volatile than broader stock indexes, the perceived comparative performance of
the Company's Common Stock may vary based on the strength or weakness of the
stock price at the new measurement point used in each future proxy statement
graph. For this reason, the Company does not believe that this graph should be
considered as the sole indicator of Company performance.
REPORT OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS OF THE COMPANY
ON EXECUTIVE COMPENSATION
OVERALL POLICY. The Company's executive compensation program is designed to
be linked to Company performance. To this end, the Company has developed an
overall compensation strategy and specific compensation plans that tie
executive compensation to the Company's success in meeting its business goals
and objectives.
The executive compensation strategy is designed to: (i) ensure the total
program will be able to attract, motivate, and retain executives of the
highest quality; (ii) relate total compensation to individual executive
performance and the performance of the business unit he or she manages; and
(iii) provide incentives for high levels of performance.
The Company also believes executive compensation should be subject to
independent review. All matters pertaining to executive compensation are
submitted to the outside Directors of the Board for approval following review
and recommendation by the Committee. The Committee is comprised of three
outside Directors, none of whom are current or former members of the Company.
There are no interlocking Board memberships between the Company and the
outside Directors. The Committee met six times during fiscal 1996.
Operating within the framework of a statement of duties and responsibilities
established by the Board of Directors, the Committee's role is to assure the
Company's: (1) compensation strategy is aligned with the long-term interest of
the shareholders; (2) compensation structure is fair and reasonable; and (3)
compensation reflects both Company and individual performance. In discharging
its responsibilities, the Committee utilizes broad-based, comparative
compensation surveys of the durable goods manufacturing industry developed by
independent professional organizations. The Committee believes that these
surveys provide a better basis for salary determination than the Peer Group in
the Performance Graph which omits key Company competitors that are privately
held.
In 1993, changes were made to the federal corporate income tax law that
limit the ability of public companies to deduct compensation in excess of $1
million paid annually to each of the chief executive officer and the other
four most highly paid compensated executive officers. There are exemptions
from this limit, including exemptions for compensation that is based on the
attainment of performance goals that are established by the Committee and
approved by the Company's shareholders. It is the Committee's policy to seek
to qualify executive compensation for deductibility where practicable and to
the extent that such policy is consistent with the Company's overall
objectives in attracting, motivating, and retaining its executives. The
Committee intends that awards of stock options and stock appreciation rights
("SARs") under the amended and restated 1995 Stock-Based Compensation Plan
("Restated Stock-Based Compensation Plan") will qualify for deductibility.
Finally, as it deems necessary, the Committee may consider the deferral of
payment of any nondeductible compensation to the chief executive officer and
the other four highest paid executives until the payment of such compensation
is determined to be tax deductible by the Company.
EXECUTIVE COMPENSATION PROGRAM. The Company's executive compensation program
consists of the following components:
10
<PAGE>
Base Salary. Base salaries are initially determined by evaluating the
responsibilities of a position, the experience of a candidate, his or her
prior compensation, and compensation for positions having similar scope and
accountability within the Company and comparable companies. In general, the
Company uses as a guide the middle range of base compensation in surveys of
the durable goods manufacturing industry. While some of the companies in the
peer group chosen for comparison of shareholder returns in the performance
graph on page 9 may be included in the surveys considered by the Committee in
setting executives' salaries, there is no set peer group against which those
salaries are measured. Instead, the Company reviews broader-based data for the
durable goods manufacturing industry and, when available, industry specific
data relative to a particular position. Salary reviews are conducted annually
for executive officers by considering an executive's performance, changes in
his or her responsibilities, and by reference to salary surveys for comparably
situated executives with companies of similar size in the durable goods
manufacturing industry.
Executive Bonus Plan. For fiscal 1996, there were 54 participants in the
Company's Executive Bonus Plan ("Bonus Plan"). Bonuses are normally awarded
annually based upon the Company's or an operating unit's prior fiscal year
performance. The goals of the Bonus Plan are to motivate and reward Company,
business unit, and individual accomplishments. Performance criteria include:
(i) return on assets/equity level and trend, (ii) market share level and
trend, (iii) significant actions and accomplishments which promote long-term
growth and profitability, (iv) achievement of annual strategic objectives, and
(v) pursuit and achievement of the Company's Vision Statement, which states:
HON INDUSTRIES SHALL BE PROFITABLE, BE ECONOMICALLY SOUND, PURSUE SOUND
GROWTH, BE A SUPPLIER OF QUALITY PRODUCTS AND SERVICES, BE A GOOD PLACE TO
WORK, AND BE A RESPONSIBLE CORPORATE CITIZEN. Primary among these performance
criteria are profitable sales growth, return on assets/equity, and achievement
of related strategic objectives. The Bonus Plan has been amended to provide
that in future years 50 percent of awards will be based upon Company
performance and 50 percent upon achievement of pre-set individual objectives.
The level of an individual award is determined by the potential impact an
executive has over the realization of Company profits and growth. The bonus
award for each fiscal year for a participant is determined by the Board of
Directors, or, to the extent delegated by the Board, by the Human Resources
and Compensation Committee of the Board.
For fiscal years prior to 1996, each award was paid in three installments
over three fiscal years: (1) the first installment was equal to one-half of
the award; and (2) the second and third installments were each equal to one-
fourth of the award. In order to earn and receive payment, the participant
must be employed with the Company through the date of payment. Bonuses are
awarded and paid in cash. In lieu of cash payments, executives may elect to
take shares of the Company's Common Stock pursuant to the terms of the
Restated Stock-Based Compensation Plan. The Bonus Plan has been amended to
provide that all existing installment payments will be paid in full to each
executive on or before March 1, 1997, and that in future years the full amount
of any award will be paid by March 1 of the next succeeding year.
Executive Long-Term Incentive Compensation Plan. There are currently 10
participants in the Company's Executive Long-Term Incentive Compensation Plan
("LTIP"), including operating company presidents and certain key corporate
officers. Its purpose is to focus the attention of senior executives on the
long-term financial performance of the Company and to strengthen the ability
of the Company to attract, motivate, and retain senior executives of high
caliber.
Awards made under the LTIP are in the form of rights to the appreciation,
over a five-year period (unless otherwise designated by the Board of
Directors) in the value of units of permanent capital of the Company and/or
one of its operating companies awarded to participants. Appreciation is
measured on a net cumulative basis over the award period. Under the LTIP,
permanent capital may be defined by the Board of Directors and generally means
total assets less current liabilities (excluding current portions of long-term
debt and capital lease obligations). Appreciation is defined as after-tax net
income exclusive of non-operating items such as gains and losses from sales of
assets and sales, transfers, or redemptions of permanent capital, and certain
other
11
<PAGE>
extraordinary and non-operating items. Each unit of permanent capital is equal
to one dollar. The size of an award is dependent upon the impact the executive
has on the long-term realization of Company and/or business unit sales and
profits. Maximum amounts are not specified, but are dependent upon the net
cumulative appreciation or net growth in the permanent capital of the relevant
business unit during the period, which is itself based on such business unit's
financial and business performance and is governed by such practical
limitations as the size of the market, the rigors of competition, and the
business unit's manufacturing capacity. The ultimate value of an award payout,
which is equal to the net cumulative appreciation, if any, on units of
permanent capital, is dependent on the financial performance of the Company
and/or the applicable business unit.
Rights to award payouts become vested, unless participant's employment has
been terminated previously, at the end of the award period or on death,
disability, retirement at age 62, or change in corporate control. Award
payouts are made in cash in three equal installments over three fiscal years
unless the Board of Directors approves a different payout schedule. In lieu of
payments, executives may elect to receive shares of the Company's Common Stock
pursuant to the terms of the 1995 Stock-Based Compensation Plan.
Restated Stock-Based Compensation Plan. If the Restated Stock-Based
Compensation Plan set forth in Proposal No. 2 is adopted by the Shareholders,
it will authorize, among other things, the grant of stock options and SARs to
participants, including the Company's executives. The grant of stock options
and SARs is intended to further the growth, development, and financial success
of the Company by providing additional incentives to key employees and assist
them to become owners of capital stock of the Company and thus to benefit
directly from its growth, development and financial success. Stock option
grants will also enable the Company to attract and retain the services of
executives considered essential to the long-range success of the Company by
providing them with a competitive compensation package and an opportunity to
become owners of capital stock of the Company.
CEO COMPENSATION. In determining Jack D. Michaels' compensation, the
Committee considers the Company's success in meeting its performance goals in
the areas of profitability, return on equity, sales growth, financial
soundness, member relations, and corporate citizenship, as well as the
assessment of the Committee and the Board of Directors of Mr. Michaels'
individual performance. The Committee also considers the compensation levels
of chief executive officers as shown by reputable independent surveys for
organizations of equivalent size in the durable goods manufacturing industry.
Overall, profitable sales growth, return on equity, and achievement of related
strategic business objectives are the primary measures of the CEO's
performance. This year the increase in Mr. Michaels salary also reflects his
election and additional duties as Chairman of the Company.
In the 1996 fiscal year, net sales reached $998,135,000 and net income and
earnings per share increased 65.7 percent and 67.4 percent, respectively, all
of which set new records for the Company. The Company's average return on
average shareholders equity was 29.1 percent in fiscal 1996 compared to 20.0
percent for fiscal 1995.
Under the Bonus Plan, Mr. Michaels received an award of $460,000 in respect
of fiscal 1996 compared to an award of $128,000 for fiscal 1995. The higher
award for 1996 reflected the record Company earnings and sales, the successful
attainment of other strategically important objectives, including the
acquisition of a hearth products company, and Mr. Michaels' leadership in
strategically positioning the Company for profitable growth in the future.
Human Resources and Compensation
Committee
Robert W. Cox, Chairperson
W. James Farrell
Lorne R. Waxlax
12
<PAGE>
PROPOSAL NO. 2--APPROVAL OF THE 1995 STOCK-BASED COMPENSATION PLAN (AS
AMENDED AND RESTATED EFFECTIVE MAY 13, 1997)
In November 1996, the Board of Directors unanimously approved and adopted,
subject to shareholder approval, amendments to and restatement of the HON
INDUSTRIES Inc. 1995 Stock-Based Compensation Plan. Among other things, the
Restated Stock-Based Compensation Plan permits, in addition to the awards
currently available under the 1995 Stock-Based Compensation Plan, the issuance
of (i) options to purchase shares of Common Stock in the form of incentive
stock options or non-statutory stock options and (ii) SARs in the form of
tandem SARs or free-standing SARs.
Under the Company's Articles of Incorporation, the affirmative vote of a
majority of the total outstanding Shares of Common Stock entitled to vote is
required for approval of the Restated Stock-Based Compensation Plan. The
following summary of the principal provisions of the 1995 Stock-Based
Compensation Plan and the amendments effected by the Restated Stock-Based
Compensation Plan is not intended to be exhaustive and is qualified in its
entirety by the terms of such plans. A copy of the Restated Stock-Based
Compensation Plan, marked to reflect changes from the 1995 Stock-Based
Compensation Plan, is set forth as Exhibit A to this Proxy Statement.
GENERAL DESCRIPTION OF THE 1995 STOCK-BASED COMPENSATION PLAN
The principal purposes of the 1995 Stock-Based Compensation Plan are to
provide incentives for key employees of the Company and its subsidiaries
through the grant or issuance of (i) bonus stock awards, (ii) restricted stock
awards and (iii) performance share awards. The 1995 Stock-Based Compensation
Plan also permits the Company's non-employee Directors to elect to receive all
or a portion of their annual retainers in the form of shares of Common Stock.
Thereby, the 1995 Stock-Based Compensation Plan seeks to (1) align the
interests of the Company's shareholders and recipients of awards under the
1995 Stock-Based Compensation Plan by increasing the proprietary interest of
such recipients in the Company's growth and success, (2) advance the interests
of the Company by attracting and retaining officers and other key employees
and well-qualified persons who are not officers or employees to serve as
directors of the Company, and (3) motivate such employees and non-employee
Directors to act in the long-term best interests of the Company's
shareholders.
Available Shares. Under the 1995 Stock-Based Compensation Plan, as of
January 1, 1995 and the first day of each subsequent calendar year during the
term of the 1995 Stock-Based Compensation Plan, one-half of one percent (.5%)
of the issued and outstanding shares of Common Stock, plus any shares
previously available under the 1995 Stock-Based Compensation Plan but not
subject to grants thereunder, are available in such calendar year for awards
to officers, other key employees, and non-employee directors. The number of
shares available under the 1995 Stock-Based Compensation Plan is subject to
adjustment in the event of a stock split, stock dividend, recapitalization,
reorganization, merger or other similar event or change in capitalization.
As of March 14, 1997, the closing price of the Company's Common Stock on the
Nasdaq Stock Market was $43.00 per share.
Change in Control. In the event of certain events constituting a "Change in
Control" (generally defined to include (i) acquisitions of 20 percent or more
of the Company's Common Stock; (ii) if two-thirds or more of the Company's
Board of Directors consists of persons who have not been approved by the
incumbent Board of Directors; (iii) if shareholders approve a liquidation or
dissolution of the Company; or (iv) a sale of substantially all of the
Company's assets or a merger or other similar transaction), all awards granted
under the 1995 Stock-Based Compensation Plan will be "cashed out" by the
Company, except, in the case of a merger or similar transaction in which the
shareholders receive publicly traded common stock, all awards will vest and
will represent a right to acquire the appropriate number of shares of common
stock received in the merger or similar transaction.
13
<PAGE>
Effective Date, Termination and Amendment. The 1995 Stock-Based Compensation
Plan became effective as of May 9, 1995, and will terminate ten years
thereafter, unless terminated earlier by the Board of Directors. The Board of
Directors may amend the 1995 Stock-Based Compensation Plan at any time except
that, without the approval of the shareholders of the Company, no amendment
may, among other things, (i) increase the number of shares of Common Stock
available under the 1995 Stock-Based Compensation Plan, or (ii) extend the
term of the 1995 Stock-Based Compensation Plan.
Bonus Stock and Restricted Stock Awards. The 1995 Stock-Based Compensation
Plan provides for the grant of (i) bonus stock awards, which are vested upon
grant, although they may be subject to limitations on transfer, and (ii)
restricted stock awards which are vested only upon satisfaction of certain
conditions and may not be transferred prior to the time the restrictions
lapse. Shares of restricted stock are non-transferable and, except to the
extent otherwise determined by the Human Resources and Compensation Committee
of the Board of Directors (the "Committee"), subject to forfeiture if the
holder does not remain continuously in the employment of the Company during
the restriction period. Unless otherwise determined by the Committee, the
holder of a restricted stock award has the same rights as a shareholder of the
Company, including the right to vote and receive dividends with respect to the
shares of restricted stock.
Performance Share Awards. The 1995 Stock-Based Compensation Plan also
provides for the grant of performance shares. Each performance share is a
right, contingent upon the attainment of performance measures within a
specified performance period, to receive a share of Common Stock, which may be
subject to restrictions, or the fair market value of such performance share in
cash. Prior to the settlement of a performance share award in shares of Common
Stock, the holder of such award has no rights as a shareholder of the Company
with respect to the shares of Common Stock subject to the award. Performance
shares are non-transferable and, except to the extent otherwise determined by
the Committee, subject to forfeiture if the specified performance measures are
not attained during the applicable performance period.
Grants of Shares to Non-Employee Directors. Each non-employee Director is
allowed to elect to receive shares of Common Stock with a fair market value
equal to all or a portion of the Director's then annual retainer for the
period commencing on the date of each annual meeting of the Company's
shareholders. Any such election must be made at least six months prior to its
effective date, and once made will be irrevocable.
RESTATED STOCK-BASED COMPENSATION PLAN
The Restated Stock-Based Compensation Plan effects certain amendments to the
1995 Stock-Based Compensation Plan, including the establishment of two new
categories of awards which may be granted under the Plan: (i) options to
purchase shares of Common Stock and (ii) SARs.
Stock Options. Stock options may be granted or issued in one of two forms:
(i) non-statutory stock options and (ii) incentive stock options. Each grant
or issuance will be set forth in a separate agreement with the person
receiving the award and will indicate the type, amount, terms and conditions
of the award, consistent with the terms of the Restated Stock-Based
Compensation Plan. The Committee will determine (i) the period during which an
option may be exercised; (ii) any performance measures which must be satisfied
as a condition to the grant or exercisability of an option; and (iii) whether
an option may be exercised in cumulative or non-cumulative installments and in
part or in full at any time.
An option may be exercised (i) by written notice to the Company specifying
the number of whole shares of Common Stock to be purchased and accompanied by
payment in full either (a) in cash; (b) by delivery of previously-owned whole
shares of Common Stock; (c) by authorizing the Company to withhold whole
shares of Common Stock which would otherwise be delivered as of the exercise
date; (d) in cash by a broker-dealer or (e) a combination of (a), (b) and (c),
in each case to the extent set forth in the agreement relating to the option;
(ii) if applicable, by surrendering to the Company any tandem SARs which are
canceled by reason of the exercise of the option; and (iii) by executing such
documents as the Company may reasonably request.
14
<PAGE>
Non-Statutory Stock Options. Non-statutory stock options provide for the
right to purchase Common Stock at a specified price which may not be less than
the fair market value of such stock on the date of grant of such option, and
usually will become exercisable (in the discretion of the Committee) in one or
more installments after the grant date.
Incentive Stock Options. Incentive stock options are designed to comply with
the provisions of the Internal Revenue Code (the "Code"), and will be subject
to restrictions contained in the Code, including exercise prices equal to at
least 100% of fair market value of the Common Stock on the grant date and a
ten-year restriction on their term. Incentive stock options granted to holders
of 10% or more of the Company's voting stock must have an exercise price equal
to at least 110% of fair market value of the Common Stock on the grant date
and cannot extend beyond five years. Incentive stock options that first become
exercisable in any year may not exceed $100,000 in value of underlying stock,
measured at the grant date, and any excess amount will be considered non-
statutory stock options. No incentive stock option may be exercised later than
ten years after its date of grant, or if granted to a ten percent beneficial
owner, later than five years thereafter.
Stock Appreciation Rights (SARs). SARs may be granted in one of two forms:
(i) free-standing SARs or (ii) tandem SARs. Each grant will be set forth in a
separate agreement with the person receiving the award and will indicate the
type, amount, terms and conditions (including vesting conditions) of the
award, consistent with the terms of the Restated Stock-Based Compensation
Plan. The Committee will determine (i) the period during which a SAR may be
exercised; (ii) any performance measures which must be satisfied as a
condition to the grant or exercisability of a SAR; and (iii) whether a SAR may
be exercised in cumulative or non-cumulative installments and in part or in
full at any time.
If a SAR is exercised for shares of restricted stock, a certificate
representing such restricted stock will be issued in accordance with the
provisions of the Restated Stock-Based Compensation Plan which relate to
restricted stock awards.
Free-Standing SARs. Free-standing SARs entitle the holder thereof to
receive, upon exercise, shares of Common Stock (which may be subject to
restrictions), cash or a combination thereof (as may be specified in the
agreement relating to an award of SARs) with an aggregate value equal to the
excess of the fair market value of one share of Common Stock on the date of
exercise over the base price of such SAR, multiplied by the number of SARs
which are exercised. The base price of a free-standing SAR will be set by the
Committee but may not be less than 100% of the fair market value of a share of
Common Stock on the date of grant of the SAR. A free-standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs being exercised and (ii) by executing such documents as the
Company may reasonably request.
Tandem SARs. Tandem SARs are granted in tandem with, or by reference to, an
option (including a non-statutory stock option granted prior to the date of
grant of the SAR), which entitles the holder thereof to receive, upon exercise
of such SAR and surrender for cancellation of all or a portion of such option,
shares of Common Stock (which may be subject to restrictions), cash or a
combination thereof (as may be specified in the agreement relating to an award
of SARs) with an aggregate value equal to the excess of the fair market value
of one share of Common Stock on the date of exercise over the base price of
such SAR, multiplied by the number of shares of Common Stock subject to such
option, or portion thereof, which is surrendered. Any tandem SAR related to an
incentive stock option must be granted at the same time as the related
incentive stock option is granted. The base price of a tandem SAR will be the
purchase price per share of Common Stock of the related option. No tandem SAR
may be exercised later than the expiration, cancellation, forfeiture or other
termination of the related option. A tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs being
exercised; (ii) by surrendering to the Company any options which are canceled
by reason of exercise of the tandem SAR; and (iii) by executing such documents
as the Company may reasonably request.
Administration. The Restated Stock-Based Compensation Plan is administered
by the Committee, which consists of not less than three directors, each of
whom must be (i) a "non-employee director" within the meaning of Rule 16b-3 of
the Securities Exchange Act of 1934 and (ii) an "outside director" within the
meaning of Section 162(m) of the Code.
15
<PAGE>
Subject to the express provisions of the Restated Stock-Based Compensation
Plan, and except for shares of Common Stock granted to non-employee Directors
in lieu of all or a portion of their annual retainers, the Committee has the
authority to select eligible officers and other key employees who will receive
awards and determine all of the terms and conditions of each award. To the
extent determined by the Committee, awards will be evidenced by a written
agreement containing such provisions not inconsistent with the Restated Stock-
Based Compensation Plan as the Committee deems appropriate. The Committee has
authority to prescribe rules and regulations for administering the Restated
Stock-Based Compensation Plan and to decide questions of interpretation or
application of any provision of the Restated Stock-Based Compensation Plan.
Except with respect to (i) the grant of an award to any person who is or is
likely (in the Committee's judgment) to become a "covered employee" within the
meaning of Section 162(m) of the Code or (ii) decisions related to
participation in the Plan by persons subject to Section 16 of the Securities
Exchange Act of 1934, the Committee may delegate some or all of its power and
authority to administer the Restated Stock-Based Compensation Plan to the
Chairman, President and Chief Executive Officer or other executive officer of
the Company.
Available Shares. The total number of shares of Common Stock available for
all grants of awards under the Restated Stock-Based Compensation Plan in any
calendar year is eighty-three hundredths of one percent (0.83%) of the issued
and outstanding Shares of Common Stock as of January 1 of each such year
beginning January 1, 1997, plus the number of shares which have become
available for grants of awards under the 1995 Stock-Based Compensation Plan or
the Restated Stock-Based Compensation Plan in any and all prior calendar
years, but which have not become subject to any award granted in any prior
year. The number of shares available under the Restated Stock-Based
Compensation Plan will be subject to adjustment in the event of a stock split,
stock dividend, recapitalization, reorganization, merger or other similar
event or change in capitalization.
Notwithstanding the foregoing, the maximum number of shares of Common Stock
available for grant of incentive stock options is 2,000,000. The maximum
number of shares of Common Stock with respect to which options or SARs or a
combination thereof may be granted during any calendar year to any person is
250,000.
Effective Date, Termination and Amendment. If approved by Shareholders, the
Restated Stock-Based Compensation Plan will become effective as of May 13,
1997 and will terminate ten years thereafter, unless terminated earlier by the
Board of Directors. Termination of the Restated Stock-Based Compensation Plan
will not affect the terms or conditions of any award granted prior to
termination. The Board of Directors may amend the Restated Stock-Based
Compensation Plan as it deems advisable, subject to any requirement of
shareholder approval required by applicable law, rule or regulation, including
Section 162(m) of the Code, but no amendment may be made without shareholder
approval if such amendment would (i) increase the maximum number of shares of
Common Stock available under the Restated Stock-Based Compensation Plan or
(ii) extend the term of the Restated Stock-Based Compensation Plan. No
amendment may impair the rights of a holder of an outstanding award without
the consent of such holder.
Awards may be made under the Restated Stock-Based Compensation Plan at any
time prior to its termination, but no award may be made later than 10 years
after the effective date of the Restated Stock-Based Compensation Plan. If the
Restated Stock-Based Compensation Plan is not approved by the Shareholders of
the Company, the Restated Stock-Based Compensation Plan and any awards
thereunder will be void and of no force or effect.
Change in Control. The Restated Stock-Based Compensation Plan provides that
in the event of a Change in Control pursuant to clauses (iii) or (iv) of the
definition of such term (described below), wherein the holders of Company
Common Stock receive shares of Common Stock that is registered under Section
12 of the Securities Exchange Act of 1934, (1) all outstanding options and
SARs immediately become exercisable in full; (2) the restriction period
applicable to any outstanding restricted stock lapses; (3) the performance
period applicable to any outstanding performance share lapses; (4) the
performance measures applicable to any outstanding restricted
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<PAGE>
stock award or performance share are deemed satisfied at the maximum level;
and (5) each share of Common Stock under the Restated Stock-Based Compensation
Plan will be substituted by the number and class of shares into which each
outstanding Share of Common Stock is converted pursuant to the Change in
Control. In the event of any such substitution, the purchase price per share
for options and the base price for SARs will be adjusted by the Committee. For
outstanding options and SARs, price adjustments may not increase the aggregate
purchase or base price.
The Restated Stock-Based Compensation Plan also provides that in the event
of a Change in Control pursuant to clauses (i) and (ii) of the definition of
such term, or a Change in Control pursuant to clauses (iii) or (iv) of the
same definition wherein the holders of Company Common Stock receive
consideration other than Common Stock that is registered under Section 12 of
the Securities Exchange Act of 1934, each outstanding award must be
surrendered to the Company for cancellation by the holder thereof, and the
holder will receive, within ten days of the Change in Control, a cash payment
from the Company in an amount equal to the number of shares of Company Common
Stock subject to the award multiplied by the greater of (a) the highest per
share price offered to the Company's shareholders in the Change in Control
transaction or (b) the fair market value of a share of Company Common Stock on
the date of the Change in Control, over the base or purchase price, whichever
is applicable, of the award. Any tandem SAR must be surrendered and canceled
simultaneously with the cancellation of the related option.
For purposes of the Restated Stock-Based Compensation Plan, a "Change in
Control" means the occurrence of any of the following events: (i) the
acquisition by any person of beneficial ownership of 20% or more of either (a)
the then outstanding Shares of Common Stock of the Company or (b) the combined
voting power of the then outstanding securities of the Company entitled to
vote generally in the election of Directors, excluding: (1) any acquisition
directly from the Company, (2) any acquisition by the Company, (3) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or a corporation controlled by the Company, or (4)
certain acquisitions exempted from clause (iii) of this definition; (ii) a
majority of the Board of Directors consists of persons who have not been
approved by the incumbent Board of Directors; (iii) consummation of a
reorganization, merger or consolidation or a sale or disposition of all or
substantially all of the assets of the Company (a "Business Combination")
unless (a) substantially all of the persons who were the beneficial owners of
the Company's stock before the Business Combination own, in substantially the
same proportions as their ownership of Company Common Stock prior to the
Business Combination, 50% or more of the stock of the resulting corporation;
(b) no person beneficially owns 20% or more of the resulting Company's stock
except to the extent that such ownership existed prior to the Business
Combination; and (c) at least a majority of the Board of Directors of the
resulting corporation were members of the Company's incumbent Board of
Directors at the time of the initial agreement, or action of the Board,
providing for the Business Combination; or (iv) approval by the shareholders
of the Company of a plan of complete liquidation or dissolution of the
Company.
TRANSFER RESTRICTIONS
The options, SARs and performance shares under the Restated Stock-Based
Compensation Plan may not be transferred under any circumstances, and any
attempted disposition thereof is null and void, except that such restrictions
on transferability do not prevent transfers by will or as otherwise permitted
under Rule 16b-3 under the Securities Exchange Act of 1934 as set forth in the
Agreement relating to the award of such options, SARs or performance shares.
Except to the extent permitted by the foregoing sentence, each option, SAR or
performance share may be exercised or settled during the holder's lifetime
only by the holder or the holder's legal representative.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief overview of the U.S. federal income tax
consequences generally arising with respect to awards under the Restated
Stock-Based Compensation Plan. This summary is not intended to be exhaustive
and does not describe state or local tax consequences.
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TAX CONSEQUENCES TO PARTICIPANTS
Non-Statutory Stock Options. In general: (i) no income will be recognized by
an optionee at the time a non-statutory stock option is granted; (ii) at the
time of exercise of a non-statutory stock option, ordinary income will be
recognized by the optionee in an amount equal to the difference between the
option price paid for the shares and the fair market value of the shares if
they are nonrestricted on the date of exercise; and (iii) at the time of sale
of shares acquired pursuant to the exercise of a non-statutory stock option,
any appreciation (or depreciation) in the value of the shares after the date
of exercise will be treated as either short-term or long-term capital gain (or
loss) depending on how long the shares have been held.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an incentive stock option. If shares of
Common Stock are issued to an optionee pursuant to the exercise of an
incentive stock option and no disqualifying disposition of the shares is made
by the optionee within two years after the date of grant or within one year
after the transfer of the shares to the optionee, then upon the sale of the
shares any amount realized in excess of the option price will be taxed to the
optionee as long-term capital gain and any loss sustained will be a long-term
capital loss.
If shares acquired upon the exercise of an incentive stock option are
disposed of prior to the expiration of either holding period described above,
the optionee generally will recognize ordinary income in the year of
disposition in an amount equal to any excess of the fair market value of the
shares at the time of exercise (or, if less, the amount realized on the
disposition of the shares if a sale or exchange) over the option price paid
for the shares. Any further gain (or loss) realized by the optionee generally
will be taxed as short-term or long-term capital gain (or loss) depending on
the holding period.
Stock Appreciation Rights. No income will be recognized by a participant in
connection with the grant of a SAR. When the SAR is exercised, the participant
normally will be required to include as ordinary taxable income in the year of
exercise an amount equal to the amount of cash, and the fair market value of
any nonrestricted shares of Common Stock, received pursuant to the exercise.
Restricted Stock. A participant receiving restricted stock will not
recognize taxable income at the time of the grant unless the participant makes
an election to be taxed at the time restricted stock is granted. If such
election is not made, the participant will recognize taxable income at the
time the restrictions lapse in an amount equal to the excess of the fair
market value of the shares at such time over the amount, if any, paid for such
shares. In addition, a participant receiving dividends with respect to
restricted stock for which the above-described election has not been made and
prior to the time the restrictions lapse will recognize taxable compensation,
rather than dividend income, in an amount equal to the dividends paid. Upon
disposition of such shares, any appreciation (or depreciation) in the value of
the shares after the date the restrictions lapsed will be taxed as either
short-term or long-term capital gain (or loss) depending on the holding
period. If a participant properly makes an election to be taxed at the time
the restricted stock is granted, the participant will recognize taxable income
on the date of grant equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such shares. The
participant will not recognize any income at the time the restrictions lapse.
Upon disposition of such shares, any appreciation (or depreciation) in the
value of the shares after the date the restricted shares were granted will be
taxed as either short-term or long-term capital gain (or loss) depending on
the holding period.
Bonus Stock. A participant receiving bonus stock, including the shares
awarded to non-employee directors, will recognize taxable income at the time
the bonus stock is awarded in an amount equal to the then fair market value of
such stock. Upon disposition of such stock, any appreciation (or depreciation)
in the value of the stock after the date the participant received the bonus
stock will be taxed as either short-term or long-term capital gain (or loss)
depending on the holding period.
Performance Shares. A participant receiving performance shares will not
recognize taxable income upon the grant of such shares. Upon the settlement of
performance shares, the participant will recognize ordinary income in an
amount equal to the fair market value of any shares delivered and any cash
paid by the Company. Upon disposition of such shares, any appreciation (or
depreciation) in the value of the shares after the date of the settlement of
the performance shares will be taxed as either short-term or long-term capital
gain (or loss) depending on the holding period.
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TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY
To the extent that an employee recognizes ordinary income in the
circumstances described above, the Company or the subsidiary for which the
employee performs services will be entitled to a corresponding deduction
provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is not an
"excess parachute payment" within the meaning of Section 280G of the Code and
is not disallowed by Section 162(m) of the Code.
1995 STOCK-BASED COMPENSATION PLAN BENEFITS DURING FISCAL 1996
The types of awards which may be granted in the future under the Restated
Stock-Based Compensation Plan are subject to the discretion of the Committee
and, therefore, cannot be determined. Awards granted in fiscal 1996 under the
1995 Stock-Based Compensation Plan are as follows:
1995 STOCK-BASED COMPENSATION PLAN BENEFITS
<TABLE>
<CAPTION>
1995 STOCK-BASED
COMPENSATION PLAN
--------------------------------
NAME AND POSITION DOLLAR VALUE ($) NUMBER OF UNITS
----------------- ---------------- ---------------
<S> <C> <C>
George J. Koenigsaecker, III
President, The HON Company.................... 141,147.42 2,222
Executive Officers as a Group................. 141,147.42 2,222
All Current Non-Executive Officers as a Group. 233,333.87 3,553
Each Nominee for Election as a Director:
Robert W. Cox............................... 14,943.62 528
Lee Liu..................................... 9,930.12 351
Lorne R. Waxlax............................. 19,916.75 704
Each Associate of any of the Above Listed
Persons...................................... -- --
Each Other Person Who Received/Will Receive 5%
of the Awards................................ -- --
All Employees, Including Non-Executive
Officers, as a Group......................... 374,481.29 5,775
</TABLE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE RESTATED STOCK-BASED COMPENSATION PLAN. PROXIES RECEIVED BY THE
BOARD OF DIRECTORS WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR
PROXIES A CONTRARY CHOICE.
PROPOSAL NO. 3--APPROVAL OF THE 1997 EQUITY PLAN FOR NON-EMPLOYEE DIRECTORS OF
HON INDUSTRIES INC.
In February 1997, the Board of Directors unanimously approved and adopted,
subject to shareholder approval, the 1997 Equity Plan for Non-Employee
Directors of HON INDUSTRIES Inc. (the "Director Plan"). The Director Plan
permits the Company to issue to non-employee directors of the Company ("Non-
Employee Directors") (i) options to purchase shares of Common Stock, (ii)
restricted stock of the Company and (iii) awards of Common Stock of the
Company. The Director Plan also permits Non-Employee Directors to elect to
receive all or a portion of their annual retainers and other compensation in
the form of shares of Common Stock.
Under the Company's Articles of Incorporation, the affirmative vote of a
majority of the total outstanding Shares of Common Stock is required for
approval of the Director Plan. The following summary of the principle
provisions of the Director Plan is not intended to be exhaustive and is
qualified in its entirety by the terms of such plan. A copy of the Director
Plan is set forth as Exhibit B to this Proxy Statement.
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<PAGE>
PURPOSES OF THE DIRECTOR PLAN
The principal purposes of the Director Plan are (i) to promote the growth
and long-term success of the Company by offering Non-Employee Directors the
ability to acquire Common Stock of the Company, (ii) to enable the Company to
attract and retain qualified persons to serve as Non-Employee Directors, which
services are considered essential to the long-term success of the Company, and
(iii) to provide Non-Employee Directors with the opportunity to invest certain
amounts of their compensation payable for services as a director in shares of
Common Stock.
AVAILABLE SHARES AND ADJUSTMENT
Subject to adjustment as described below, the number of shares of Common
Stock which may be issued or transferred under the Director Plan, plus the
number of shares of Common Stock covered by outstanding awards and not
forfeited under the Director Plan, may not in the aggregate exceed 200,000
shares, which may be shares of original issuance or shares held in treasury or
a combination thereof. If an option granted under the Director Plan lapses or
terminates before such option is exercised or if shares of restricted stock or
Common Stock granted under the Director Plan are forfeited, for any reason,
the shares covered thereby may again be made available under the Director
Plan.
The number, price and kinds of shares available under the Director Plan are
subject to adjustment by the Board of Directors in the event of a stock split,
stock dividend, recapitalization, reorganization, merger or other similar
event. The Company is not required to issue any fractional shares of Common
Stock pursuant to the Director Plan. The Board of Directors may provide for
the elimination of fractions, for the settlement thereof in cash or for such
other adjustments as contemplated by the Director Plan.
As of March 14, 1997, the closing price of the Company's Common Stock on the
Nasdaq Stock Market was $43.00 per share.
EFFECTIVE DATE, TERMINATION AND AMENDMENT
If approved by the Shareholders, the effective date of the Director Plan
will be February 12, 1997, the date of its adoption by the Board of Directors.
No further awards may be made under the Director Plan after the passage of 10
years from the date on which the Company's shareholders first approved the
Director Plan. If the Director Plan is not approved by the Shareholders of the
Company, the Director Plan and any awards thereunder will be void and of no
force or effect.
The Board of Directors may amend the Director Plan at any time except that,
without the approval of the shareholders of the Company, no amendment may,
among other things, increase the number of shares of Common Stock available
under the Director Plan except pursuant to the Board's adjustment authority
described above. No amendment may impair the rights of a holder of an
outstanding award under the Director Plan without the consent of such holder,
unless the award itself expressly provides otherwise.
ADMINISTRATION
The Director Plan will be administrated by the Board of Directors of the
Company. Subject to the terms of the Director Plan, the Board has the
authority to prescribe, interpret and revoke rules and regulations for
administering the Director Plan and to decide questions of interpretation or
application of any provision of the Director Plan or any agreements pursuant
to which awards are granted under such Plan. Awards granted under the Director
Plan need not be the same with respect to each holder of such awards.
The Board of Directors has the authority to delegate all or any part of its
authority under the Director Plan to any committee or subcommittee of not less
than two Directors appointed by the Board who are "non-employee directors"
within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934. The
majority of any such committee or subcommittee will constitute a quorum, and
the action of a majority of its members present at any meeting at which a
quorum is present, or acts unanimously approved in writing, will be deemed the
acts of such committee or subcommittee.
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<PAGE>
AWARDS UNDER THE DIRECTOR PLAN
Stock Options. The Director Plan permits the Board of Directors to authorize
awards of options to purchase shares of Common Stock to Non-Employee
Directors. Each option award will be set forth in an agreement with the Non-
Employee Director receiving the award and will indicate the terms and
conditions of the option award, consistent with the terms of the Director
Plan. The Board may determine the terms and conditions of such awards in
accordance with the following provisions: (i) each award must specify the
number of shares of Common Stock to which the option rights pertain; (ii) each
award must specify an option price per share of Common Stock, which price must
be equal to or greater than the market value per share on the date of award;
(iii) any award of option rights may provide for the deferred payment of the
option price from the proceeds of a sale through a broker of some or all of
the shares of Common Stock to which the exercise relates; and (iv) each award
must specify the form of consideration to be paid in satisfaction of the
option price and the manner of payment of such consideration, which may
include (a) cash, (b) nonforfeitable, nonrestricted shares of Common Stock,
which are already owned by the Non-Employee Director and have a value at the
time of exercise that is equal to the option price, (c) any other legal
consideration that the Board may deem appropriate, including, under certain
circumstances, shares of restricted stock which are already owned by the Non-
Employee Director (with the understanding that all of the shares received by
such Non-Employee Director upon exercise of the option rights that are paid
for by such restricted stock will be subject to the same restrictions as such
restricted stock), and (d) any combination of the foregoing.
Each option award shall provide conditions that must be achieved before the
option rights or installments thereof become exercisable, such as a certain
period of continuous service as a Non-Employee Director or performance
objectives, and any award may provide for the earlier exercise of the option
rights in the event of a change in control of the Company or other transaction
or event.
On or after the date of award of an option right under the Director Plan,
the Board may provide for the payment to the Director holding such option of
dividend equivalents thereon in cash or shares of Common Stock on a current,
deferred or contingent basis, or the Board may provide that any dividend
equivalents will be credited against the option price.
Successive awards of option rights may be made to the same Non-Employee
Director regardless of whether any option rights previously awarded to the
same Director remain unexercised. The term of an option right will be set by
the Board, but no option right may have a term of more than ten years from the
date of award.
Common Stock Grants and Restricted Stock. The Director Plan authorizes the
Board of Directors to award shares of Common Stock of the Company to a Non-
Employee Director in consideration and as additional compensation for services
performed for the Company (a "Common Stock Grant"). The Director Plan also
authorizes the Board of Directors to award shares of restricted stock to Non-
Employee Directors. Each Common Stock Grant and award of restricted stock will
be set forth in an agreement with the Non-Employee Director receiving the
award and will indicate the terms and conditions of the award, consistent with
the terms of the Director Plan. The Board may determine the terms and
conditions of such awards subject to the following provisions: (i) each Common
Stock Grant and award of restricted stock will constitute an immediate
transfer of the ownership of shares of Common Stock to the Non-Employee
Director in consideration of the performance of services, entitling the holder
thereof to dividend, voting and other ownership rights, subject to, in the
case of awards of restricted stock, the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to; (ii) each award of
restricted stock must provide that the shares of restricted stock covered
thereby are subject to a "substantial risk of forfeiture" within the meaning
of Section 83 of the Internal Revenue Code (the "Code") for a period to be
determined by the Board of Directors on the date of award, and may provide for
the termination of such risk of forfeiture upon the achievement of certain
performance objectives, in the event of a change in control of the Company, or
upon any other transaction or event; (iii) any Common Stock Grant and award of
restricted stock may be made in consideration of payment by the Non-Employee
Director of an amount that is less than the market value per share on the date
of award; (iv) any award of restricted stock may require that any or all
dividends or other distributions paid on the shares of restricted stock during
the period of such restrictions
21
<PAGE>
be automatically sequestered and reinvested on an immediate or deferred basis
in additional shares of Common Stock, which may be subject to the same
restrictions as the underlying award or such other restrictions as the Board
may determine; and (v) each award of restricted stock must provide, during the
period for which such substantial risk of forfeiture is to continue, and any
Common Stock Grant may provide, that the transferability of the shares of
Common Stock subject to such awards is prohibited or restricted in the manner
and to the extent prescribed by the Board on the date of award. Such
restrictions may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the shares of restricted stock
to a continuing substantial risk of forfeiture in the hands of any transferee.
On or after the date of any Common Stock Grant or award of restricted stock
under the Director Plan, the Board may provide for the payment of a cash award
intended to offset the amount of tax that the Non-Employee Director may incur
in connection with such Common Stock Grant or restricted stock, including,
without limitation, tax on the receipt of such cash award. The Board may also
provide in any individual stock grant agreement or restricted stock agreement
that the Company has the right to repurchase the restricted stock then subject
to restrictions under the restricted stock agreement, or the Common Stock
subject to the Common Stock Grant, immediately upon a termination in
directorship for any reason at a cash price per share equal to the cash price
paid by the stockholder for such restricted stock or Common Stock. In the
discretion of the Board, provision may be made that no such right of
repurchase will exist in the event of a termination of directorship without
cause or because of the stockholder's retirement, death or permanent and total
disability.
Unless otherwise directed by the Board, all certificates representing shares
of restricted stock, together with a stock power endorsed in blank by the Non-
Employee Director with respect to the shares of restricted stock, will be held
in custody by the Company until all restrictions thereon lapse.
Voluntary Shares. Each Non-Employee Director may elect, by filing a
participation agreement with the Secretary of the Company, to have up to 100
percent of his or her annual retainer and any other Non-Employee Director
compensation payable in cash paid by the Company in the form of shares of
Common Stock in lieu of a cash payment ("Voluntary Shares"). Except as the
Board may otherwise provide, a participation agreement must be filed as a one-
time election for the applicable accounting period. An accounting period is
the period beginning on the date after the Friday immediately preceding the
Company's annual meeting of shareholders (such Friday being the "Accounting
Date") and ending the next following Accounting Date (the "Accounting
Period"). Unless the Non-Employee Director revokes or changes such election by
filing a new participation agreement before the beginning of a subsequent
Accounting Period, such participation agreement will continue to apply for
each subsequent Accounting Period unless the Board of Directors provides
otherwise.
No later than 30 days following the earliest of (i) the end of an Accounting
Period or (ii) with respect to Voluntary Shares payable for service during an
Accounting Period in which a Non-Employee Director ceases to serve as a Non-
Employee Director, the date of such Director's termination of directorship,
the Company will issue to each Non-Employee Director who has made an election
to receive Voluntary Shares, a number of Voluntary Shares equal to (a) the
portion of such Director's compensation for such Accounting Period that such
Director has elected to receive as Voluntary Shares, divided by (b) the market
value per share of Common Stock on the date of issuance. To the extent that
the application of the foregoing formula would result in the issuance of
fractional shares of Common Stock, such fractional shares will be disregarded,
and the remaining amount of compensation will be paid in cash. The Company
will pay any and all fees and commissions incurred in connection with the
payment of the Voluntary Shares to a Non-Employee Director.
EFFECT OF THE DIRECTOR PLAN ON OTHER COMPANY PLANS
The Board of Directors may make any award or combination of awards
authorized under the Director Plan in exchange for the cancellation of an
award that was not made under the Director Plan. Except as described below,
the making of one or more awards to a Non-Employee Director under the Director
Plan does not preclude the making of awards to such Non-Employee Director
under any other stock option or incentive plan previously or subsequently
adopted by the Board. Moreover, the fact that a Non-Employee Director has
received one or more awards under the 1995 Stock-Based Compensation Plan or
under any other stock option or incentive plan of the Company does not
preclude such Non-Employee Director from receiving awards under the Director
Plan.
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<PAGE>
Upon approval of the Director Plan by the Shareholders of the Company,
Article V of the 1995 Stock-Based Compensation Plan, which allows a Non-
Employee Director of the Company to elect to receive shares of Common Stock
with a fair market value equal to all or a portion of the Director's then
annual retainer in lieu of all or a portion of such retainer, will be
discontinued. Any amounts remaining payable to Non-Employee Directors pursuant
to Article V of the 1995 Stock-Based Compensation Plan will, however, be paid
in accordance with its terms.
TRANSFER RESTRICTIONS
Except as may be the otherwise determined by the Board, awards under the
Director Plan may be transferred by a participating Non-Employee Director only
by will or the laws of descent and distribution and option rights may not be
exercised during a Director's lifetime except by the Director or, in the event
of the Director's legal incapacity, by his or her guardian or legal
representative acting in a fiduciary capacity on behalf of the Director under
state law and court supervision. The terms of any award made under the
Director Plan may provide for further transfer restrictions on transfer of the
shares of Common Stock subject to the award.
To the extent required to satisfy any condition to exemption available
pursuant to Rule 16b-3 of the Securities Exchange Act of 1934, any shares of
Common Stock which a Non-Employee Director elects to receive as Voluntary
Shares must be held by such Non-Employee Director for at least six months
following the date of such receipt.
EFFECT OF TERMINATION OF DIRECTORSHIPS
Notwithstanding any contrary provision of the Director Plan, in the event of
a termination of directorship by reason of death, disability, hardship or
other special circumstances of a Non-Employee Director who participates in the
Director Plan and who holds (i) an option right that is not immediately and
fully exercisable or (ii) any award as to which the substantial risk of
forfeiture or the prohibition or restriction on transfer has not lapsed, the
Board may, in its sole discretion, take any action that it deems equitable
under the circumstances or in the best interests of the Company, including,
without limitation, waiving or modifying any limitation or requirement with
respect to any award under the Director Plan.
If a Non-Employee Director becomes an employee of the Company while
continuing to serve as a Director, that fact will not impair the rights such
Director may have had under the Director Plan, including, without limitation,
the rights such Director may have under any award outstanding under the
Director Plan. Such Director will not, however, be eligible to receive any
further awards under the Director Plan.
WITHHOLDING TAX
To the extent, if any, that the Company is required to withhold federal,
state, local or foreign taxes in connection with any payment made or benefit
realized by a participating Non-Employee Director under the Director Plan, and
the amounts available to the Company for the withholding are insufficient, the
participating Non-Employee Director must, as a condition precedent to the
receipt of such payment or realization of such benefit, make arrangements
satisfactory to the Company for payment of the balance of any taxes required
to be withheld. At the Board's discretion, any such arrangements may include
relinquishment of a portion of any such payment or benefit. The Company and
any participating Non-Employee Director may also make similar arrangements
with respect to the payment of any taxes with respect to which withholding is
not required.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief overview of the U.S. federal income tax
consequences generally arising with respect to awards under the Director Plan.
This summary is not intended to be exhaustive and does not describe state or
local tax consequences.
23
<PAGE>
TAX CONSEQUENCES TO PARTICIPANTS
Stock Options. In general: (i) no income will be recognized by the optionee
at the time a stock option is granted; (ii) at the time of exercise of a stock
option, ordinary income will be recognized by the optionee in an amount equal
to the difference between the option price paid for the shares and the fair
market value of the shares if they are nonrestricted on the date of exercise;
and (iii) at the time of sale of shares acquired pursuant to the exercise of a
stock option, any appreciation (or depreciation) in the value of the shares
after the date of exercise will be treated as either short-term or long-term
capital gain (or loss) depending on how long the shares have been held.
Restricted Stock. A participant receiving restricted stock will not
recognize taxable income at the time of the grant unless the participant makes
an election to be taxed at the time restricted stock is granted. If such
election is not made, the participant will recognize taxable income at the
time the restrictions lapse in an amount equal to the excess of the fair
market value of the shares at such time over the amount, if any, paid for the
shares. In addition, a participant receiving dividends with respect to
restricted stock for which the above-described election has not been made and
prior to the time the restrictions lapse will recognize taxable compensation,
rather than dividend income, in an amount equal to the dividends paid. Upon
disposition of such shares, any appreciation (or depreciation) in the value of
the shares after the date the restrictions lapsed will be taxed as either
short-term or long-term capital gain (or loss) depending on the holding
period. If a participant properly makes an election to be taxed at the time
the restricted stock is granted, the participant will recognize taxable income
on the date of grant equal to the excess of the fair market value of the
shares at such time over the amount, if any, paid for such shares. The
participant will not recognize any income at the time the restrictions lapse.
Upon disposition of such shares, any appreciation (or depreciation) in the
value of the stock after the date the restricted shares were granted will be
taxed as either short-term or long-term capital gain (or loss) depending on
the holding period.
Common Stock Grants. A participant receiving a Common Stock Grant will
recognize taxable income upon the grant of such Common Stock in an amount
equal to the fair market value of any such Common Stock delivered by the
Company less the amount, if any, paid for such Common Stock. Upon disposition
of such Common Stock, any appreciation (or depreciation) in the value of the
shares after the date of grant will be taxed as either short-term or long-term
capital gain (or loss) depending on the holding period.
Voluntary Shares. A participant receiving voluntary shares will recognize
taxable income upon the grant of such shares in an amount equal to the fair
market value of any such shares delivered by the Company. Upon disposition of
such shares, any appreciation (or depreciation) in the value of the shares
after the date of grant will be taxed as either short-term or long-term
capital gain (or loss) depending on the holding period.
TAX CONSEQUENCES TO THE COMPANY
To the extent that a participant recognizes ordinary income in the
circumstances described above, the Company will be entitled to a corresponding
deduction to the extent that such a deduction is authorized under Section 162
of the Code.
DIRECTOR PLAN BENEFITS
The type and number of awards which may be granted in the future are subject
to the discretion of the Board of Directors and to the elections of Non-
Employee Directors and, therefore, cannot be determined with certainty. By way
of example, however, the following chart illustrates the number of shares that
will be granted to Non-Employee Directors pursuant to Common Share Grants
under the Director Plan during 1997, if the Director Plan is approved by the
Company's Shareholders. Furthermore, Directors have currently elected, under
the 1995 Stock-Based Compensation Plan, to receive various percentages ranging
between 10 and 100% of their annual retainers in the form of shares of the
Company's Common Stock.
24
<PAGE>
DIRECTOR PLAN BENEFITS
<TABLE>
<CAPTION>
DIRECTOR PLAN
-------------
DOLLAR NUMBER
VALUE OF
NAME ($)(1) SHARES
---- ------ ------
<S> <C> <C>
Robert W. Cox............................................... 12,900 300
W. James Farrell............................................ 12,900 300
Robert L. Katz.............................................. 12,900 300
Lee Liu..................................................... 12,900 300
Celeste C. Michalski........................................ 12,900 300
Michael S. Plunkett......................................... 12,900 300
Herman J. Schmidt........................................... 12,900 300
Richard H. Stanley.......................................... 12,900 300
Lorne R. Waxlax............................................. 12,900 300
</TABLE>
- --------
(1) The dollar value for the Company's Common Stock indicated in the table
above was the closing price of such Common Stock on the Nasdaq Stock
Market on March 14, 1997. Subject to changing market conditions, the
dollar value of such Common Stock on the date of grant to participating
Non-Employee Directors may be different than the value stated above.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR THE PROPOSAL TO
APPROVE THE DIRECTOR PLAN. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE
SO VOTED UNLESS SHAREHOLDERS SPECIFY IN THEIR PROXIES A CONTRARY CHOICE.
CHANGE IN CONTROL EMPLOYMENT AGREEMENTS
The Company has entered into change in control employment agreements with
corporate officers and certain other key employees. According to the
agreements, a change in control occurs when a third person or entity becomes
the beneficial owner of 20 percent or more of the Company's Common Stock or
more than one-third of the Company's Board of Directors is composed of persons
not recommended by at least three-fourths of the incumbent Board of Directors,
or upon the occurrence of certain business combinations involving the Company.
Upon a change in control, a two-year employment contract between the Company
and each such executive becomes effective, and all his or her benefits become
vested under Company plans. In addition, the executive becomes entitled to
certain benefits if, at any time within two years of the change in control,
any of the following occurs: (i) employment is terminated by the Company for
any reason other than cause or disability of the executive, or (ii) employment
is terminated by the executive for good reason, as such terms are defined in
the agreement. In such circumstances, the executive is entitled to receive his
or her annual salary through the date of termination, a bonus equal to the
average of the executive's annual bonuses for the prior two years prorated
based on the length of employment during the year in which termination occurs,
and a severance payment equal to two times the sum of (i) the executive's
annual base salary and (ii) the average of the executive's annual bonuses for
the prior two years. The executive will also be entitled to a continuation of
certain employee benefits for two years, or longer if comparable benefits are
not otherwise available to the executive. The executive will be entitled to
receive reimbursement for any legal fees and expenses, plus interest thereon,
that may be incurred in enforcing or defending his or her employment
agreement. All of the executive officers named in the Summary Compensation
Table have executed such agreements.
INDEPENDENT AUDITORS
Representatives of Arthur Andersen LLP, the Company's independent auditors,
are expected to be present at the Annual Meeting. They will have an
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
25
<PAGE>
DEADLINE FOR SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals by shareholders intended to be presented at the 1998 Annual
Meeting must be received at the Company's executive offices no later than
November 28, 1997, to be included in the proxy statement and proxy form.
OTHER MATTERS
The Board of Directors knows of no other matters that will be brought before
the Annual Meeting, but, if other matters properly come before the meeting, it
is intended that the persons named in the proxy will vote the proxy according
to their best judgment.
The entire cost of soliciting proxies for the Annual Meeting is paid by the
Company. No solicitation other than by mail is contemplated.
ON WRITTEN REQUEST TO THE UNDERSIGNED AT 414 EAST THIRD STREET, P.O. BOX
1109, MUSCATINE, IA 52761-7109, THE COMPANY WILL PROVIDE, WITHOUT CHARGE TO
ANY SHAREHOLDER, A COPY OF ITS ANNUAL REPORT ON FORM 10-K, INCLUDING FINANCIAL
STATEMENTS AND SCHEDULES, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FOR THE COMPANY'S MOST RECENT FISCAL YEAR.
- --Information set forth in this proxy statement is as of March 14, 1997,
unless otherwise noted.
Jack D. Michaels
Chairman, President and Chief
Executive Officer
March 28, 1997
THE ANNUAL REPORT TO SHAREHOLDERS OF THE COMPANY FOR THE FISCAL YEAR ENDED
DECEMBER 28, 1996, WHICH INCLUDES FINANCIAL STATEMENTS, IS BEING MAILED TO
SHAREHOLDERS OF THE COMPANY TOGETHER WITH THIS PROXY STATEMENT. THE ANNUAL
REPORT DOES NOT FORM ANY PART OF THE MATERIAL FOR THE SOLICITATION OF PROXIES.
26
<PAGE>
EXHIBIT A
HON INDUSTRIES INC.
1995 STOCK-BASED COMPENSATION PLAN
(AS AMENDED AND RESTATED EFFECTIVE MAY 13, 1997)(1)
I. INTRODUCTION
1.1 PURPOSES. The purposes of the 1995 Stock-Based Compensation Plan (the
"Plan") of HON INDUSTRIES Inc., (the "Company") and its subsidiaries from time
to time (individually a "Subsidiary" and collectively the "Subsidiaries") are
(i) to align the interests of the Company's shareholders and the recipients of
awards under this Plan by increasing the proprietary interest of such
recipients in the Company's growth and success, (ii) to advance the interests
of the Company by attracting and retaining officers and other key employees
and well-qualified persons who are not officers or employees of the Company
("Non-Employee Directors") for service as directors of the Company and (iii)
to motivate such employees and non-employee directors Non-Employee Directors
to act in the long-term best interests of the Company's shareholders. For
purposes of this Plan, references to employment by the Company shall also mean
employment by a Subsidiary.
1.2 CERTAIN DEFINITIONS.
"AGREEMENT" shall mean the written agreement evidencing an award hereunder
between the Company and the recipient of such award.
"BOARD" shall mean the Board of Directors of the Company.
"BONUS STOCK" shall mean shares of Common Stock which are not subject to a
Restriction Period or Performance Measures.
"BONUS STOCK AWARD" shall mean an award of Bonus Stock under this Plan.
"CHANGE IN CONTROL" shall have the meaning set forth in Section 5.8(b)
6.8(b).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the Committee designated by the Board, consisting of
three or more members of the Board, each of whom shall be (i) a "disinterested
person "Non-Employee Director" within the meaning of Rule 16b-3 under the
Exchange Act and (ii) an "outside director" within the meaning of Section
162(m) of the Code, subject to any transition rules applicable to the
definition of outside director.
"COMMON STOCK" shall mean the common stock, $1.00 par value per share, of
the Company.
"COMPANY" has the meaning specified in Section 1.1.
"DISABILITY" shall mean the inability of the holder of an award to perform
substantially such holder's duties and responsibilities for a continuous
period of at least six months, as determined solely by the Committee.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" shall mean the average of the high and low transaction
prices of a share of Common Stock as reported in the National Association of
Securities Dealers Automated Quotation National Market System on the date as
of which such value is being determined, or, if there are shall be no reported
transactions
- --------
(1)Deletions appear as overstruck text. Additions appear as underlined text
<PAGE>
for such date, on the next preceding date for which transactions were
reported; provided, however, that if Fair Market Value for any date cannot be
so determined, Fair Market Value shall be determined by the Committee by
whatever means or method as the Committee, in the good faith exercise of its
discretion, shall at such time deem appropriate.
"FREE-STANDING SAR" shall mean an SAR which is not issued in tandem with, or
by reference to, an option, which entitles the holder thereof to receive, upon
exercise, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.
"INCENTIVE STOCK OPTION" shall mean an option to purchase shares of Common
Stock that meets the requirements of Section 422 of the Code, or any successor
provision, which is intended by the Committee to constitute an incentive stock
option.
"INCUMBENT BOARD" shall have the meaning set forth in Section 5.8(b)(2)
6.8(b)(2) hereof.
"NON-EMPLOYEE DIRECTOR" shall mean except as applied to the definition of
Committee, any director of the Company who is not an officer or employee of
the Company or any Subsidiary.
"NON-STATUTORY STOCK OPTION" shall mean a stock option which is not an
Incentive Stock Option.
"PERFORMANCE MEASURES" shall mean, the criteria and objectives, established
by the Committee, which shall be satisfied or met (i) as a condition to the
exercisability of all or a portion of an option or SAR, (ii) as a condition to
the grant of a Stock Award or (iii) during the applicable Restriction Period
or Performance Period as a condition to the holder's receipt, in the case of a
Restricted Stock Award, of the shares of Common Stock subject to such award,
or, in the case of a Performance Share Award, of payment with respect to such
award. Such criteria and objectives may include, but are not limited to, the
attainment by a share of Common Stock of a specified Fair Market Value for a
specified period of time, earnings per share, return to stockholders
(including dividends), return on equity, earnings of the Company, revenues,
market share, cash flows flow or cost reduction goals, or any combination of
the foregoing and any other criteria and objectives established by the
Committee. In the sole discretion of the Committee, the Committee may amend or
adjust (upward and downward) the Performance Measures or other terms and
conditions of an outstanding award in recognition of unusual or nonrecurring
events affecting the Company or its financial statements or changes in law or
accounting principles.
"PERFORMANCE PERIOD" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"PERFORMANCE SHARE" shall mean a right, contingent upon the attainment of
specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu
of all or a portion thereof, the Fair Market Value of such Performance Share
in cash.
"PERFORMANCE SHARE AWARD" shall mean an award of Performance Shares under
this Plan.
"RESTRICTED STOCK" shall mean shares of Common Stock which are subject to a
Restriction Period.
"RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under this
Plan.
"RESTRICTION PERIOD" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"SAR" shall mean a stock appreciation right which may be a Free-Standing SAR
or a Tandem SAR.
"STOCK AWARD" shall mean a Restricted Stock Award or a Bonus Stock Award.
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<PAGE>
"TANDEM SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Statutory Stock Option granted prior
to the date of grant of the SAR), which entitles the holder thereof to
receive, upon exercise of such SAR and surrender for cancellation of all or a
portion of such option, shares of Common Stock (which may be Restricted
Stock), cash or a combination thereof with an aggregate value equal to the
excess of the Fair Market Value of one share of Common Stock on the date of
exercise over the base price of such SAR, multiplied by the number of shares
of Common Stock subject to such option, or portion thereof, which is
surrendered.
"TAX DATE" shall have the meaning set forth in Section 5.5. 6.5.
"TEN PERCENT HOLDER" shall have the meaning set forth in Section 2.1(a).
1.3 ADMINISTRATION. This Plan shall be administered by the Committee. Any
one or a combination of the following awards may be made under this Plan to
eligible officers and other key employees of the Company and its Subsidiaries:
(i) options to purchase shares of Common Stock in the form of Incentive Stock
Options or Non-Statutory Stock Options, (ii) SARs in the form of Tandem SARs
or Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or
Bonus Stock and (ii)(iv) Performance Shares. The Committee shall, subject to
the terms of this Plan, select eligible officers and other key employees for
participation in this Plan and determine the form, amount and timing of each
award to such persons and, if applicable, the number of shares of Common Stock
or, the number of SARs and the number of Performance Shares subject to such an
award, the exercise price or base price associated with the award, the time
and conditions of exercise or settlement of the award and all other terms and
conditions of the award, including, without limitation, the form of the
Agreement evidencing the award. The Committee shall, subject to the terms of
this Plan, interpret this Plan and the application thereof, establish rules
and regulations it deems necessary or desirable for the administration of this
Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such as limiting competitive employment or other
activities. All such interpretations, rules, regulations and conditions shall
be conclusive and binding on all parties.
The Committee may delegate some or all of its power and authority hereunder
to the President and Chief Executive Officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (i) the
grant of an award under this Plan to any person who is a "covered employee"
within the meaning of Section 162(m) of the Code or who, in the Committee's
judgment, is likely to be a covered employee at any time during the period an
award hereunder to such employee would be outstanding or (ii) the selection
for participation in this Plan of an officer or other person subject to
Section 16 of the Exchange Act or decisions concerning the timing, pricing or
amount of an award to such an officer or other person.
No member of the Board of Directors or Committee, and neither the President
and Chief Executive Officer nor any other executive officer to whom the
Committee delegates any of its power and authority hereunder, shall be liable
for any act, omission, interpretation, construction or determination made in
connection with this Plan in good faith, and the members of the Board of
Directors and the Committee and the President and Chief Executive Officer or
other executive officer shall be entitled to indemnification and reimbursement
by the Company in respect of any claim, loss, damage or expense (including
attorneys' fees) arising therefrom to the full extent permitted by law, except
as otherwise may be provided in the Company's Articles of Incorporation, By-
laws, and under any directors' and officers' liability insurance that may be
in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present or (ii) acts
approved in writing by a majority of the members of the Committee without a
meeting.
1.4 ELIGIBILITY. Participants in this Plan shall consist of such officers or
and other key employees of the Company and its Subsidiaries as the Committee
in its sole discretion may select from time to time. The Committee's selection
of a person to participate in this Plan at any time shall not require the
Committee to select
A-3
<PAGE>
such person to participate in this Plan at any other time. Non-Employee
Directors shall be eligible to participate in this Plan in accordance with
Article IV V.
1.5 SHARES AVAILABLE. Subject to adjustment as provided in Section 5.7 6.7,
the total number of shares of Common Stock available for all grants of awards
under this Plan in on any calendar year, shall be one-half eighty-three
hundredths of one percent (.5%)(0.83%) of the outstanding and issued Common
Stock as of January 1 of such year beginning January 1, 1995 1997, plus the
number of shares of Common Stock which shall have become available for grants
of awards under this Plan in any and all prior calendar years, but which shall
not have become subject to any award granted in any prior year.
Shares of Common Stock to be delivered under this Plan shall be made
available from authorized and unissued shares of Common Stock, or authorized
and issued shares of Common Stock reacquired and held as treasury shares or
otherwise or a combination thereof.
II. STOCK AWARDS
2.1 Notwithstanding the foregoing, the maximum number of shares of Common
Stock available for the grant of Incentive Stock Options shall be 2,000,000.
The maximum number of shares of Common Stock with respect to which options or
SARs or a combination thereof may be granted during any calendar year to any
person shall be 250,000, subject to adjustment as provided in Section 6.7.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 STOCK OPTIONS. The Committee may, in its discretion, grant options to
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee. Each option, or portion thereof, that is not an Incentive Stock
Option, shall be a Non-Statutory Stock Option. Each Incentive Stock Option
shall be granted within ten years of the effective date of this Plan. To the
extent that the aggregate Fair Market Value (determined as of the date of
grant) of shares of Common Stock with respect to which options designated as
Incentive Stock Options are exercisable for the first time by a participant
during any calendar year (under this Plan or any other plan of the Company, or
any parent or Subsidiary) exceeds the amount (currently $100,000) established
by the Code, such options shall constitute Non-Statutory Stock Options.
Options shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms
of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the
Committee; provided, however, that the purchase price per share of Common
Stock purchasable upon exercise of a Non-Statutory Stock Option shall not
be less than 100% of the Fair Market Value of a share of Common Stock on
the date of grant of such option and the purchase price per share of Common
Stock purchasable upon exercise of an Incentive Stock Option shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the
date of grant of such option; provided further, that if an Incentive Stock
Option shall be granted to any person who, at the time such option is
granted, owns capital stock possessing more than ten percent of the total
combined voting power of all classes of capital stock of the Company (or of
any parent or Subsidiary) (a "Ten Percent Holder"), the purchase price per
share of Common Stock shall be the price (currently 110% of Fair Market
Value) required by the Code in order to constitute an Incentive Stock
Option.
(b) Option Period and Exercisability. The period during which an option
may be exercised shall be determined by the Committee; provided, however,
that no Incentive Stock Option shall be exercised later than ten years
after its date of grant; provided further, that if an Incentive Stock
Option shall be granted to a Ten Percent Holder, such option shall not be
exercised later than five years after its date of grant. The Committee may,
in its discretion, establish Performance Measures which shall be satisfied
or met as a condition to the grant of an option or to the exercisability of
all or a portion of an option. The Committee shall determine whether an
option shall become exercisable in cumulative or non-cumulative
installments and in part or in full at any time. An exercisable option, or
portion thereof, may be exercised only with respect to whole shares of
Common Stock.
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<PAGE>
(c) Method of Exercise. An option may be exercised (i) by giving written
notice to the Company specifying the number of whole shares of Common Stock
to be purchased and accompanied by payment therefor in full (or arrangement
made for such payment to the Company's satisfaction) either (A) in cash,
(B) by delivery of previously owned whole shares of Common Stock (which the
optionee has held for at least six months prior to delivery of such shares
and for which the optionee has good title, free and clear of all liens and
encumbrances) having a Fair Market Value, determined as of the date of
exercise, equal to the aggregate purchase price payable by reason of such
exercise, (C) by authorizing the Company to withhold whole shares of Common
Stock which would otherwise be delivered upon exercise of the option having
a Fair Market Value, determined as of the date of exercise, equal to the
aggregate purchase price payable by reason of such exercise, (D) in cash by
a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (E) a combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement relating
to the option, (ii) if applicable, by surrendering to the Company any
Tandem SARs which are canceled by reason of the exercise of the option and
(iii) by executing such documents as the Company may reasonably request.
The Committee may require that the method of making such payment be in
compliance with Section 16 and the rules and regulations thereunder. Any
fraction of a share of Common Stock which would be required to pay such
purchase price shall
be disregarded and the remaining amount due shall be paid in cash by the
optionee. No certificate representing Common Stock shall be delivered until
the full purchase price therefor has been paid.
2.2 STOCK APPRECIATION RIGHTS. The Committee may, in its discretion, grant
SARs to such eligible persons as may be selected by the Committee. The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or
a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms
of this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an award
shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such
Incentive Stock Option is granted. The base price of a Tandem SAR shall be
the purchase price per share of Common Stock of the related option. The
base price of a Free-Standing SAR shall be determined by the Committee;
provided, however, that such base price shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant of such
SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a
combination thereof. The period for the exercise of an SAR shall be
determined by the Committee; provided, however, that no Tandem SAR shall be
exercised later than the expiration, cancellation, forfeiture or other
termination of the related option. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a
condition to the grant of an SAR or to the exercisability of all or a
portion of an SAR. The Committee shall determine whether an SAR may be
exercised in cumulative or non-cumulative installments and in part or in
full at any time. An exercisable SAR, or portion thereof, may be exercised,
in the case of a Tandem SAR, only with respect to whole shares of Common
Stock and, in the case of a Free-Standing SAR, only with respect to a whole
number of SARs. If an SAR is exercised for shares of Restricted Stock, a
certificate or certificates representing such Restricted Stock shall be
issued in accordance with Section 3.2(c) and the holder of such Restricted
Stock shall have such rights of a stockholder of the Company as determined
pursuant to Section 3.2(d). Prior to the exercise of an SAR for shares of
Common Stock, including Restricted Stock, the holder of such SAR shall have
no rights as a stockholder of the Company with respect to the shares of
Common Stock subject to such SAR and shall have rights as a stockholder of
the Company in accordance with Section 6.10.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
cancelled by reason of the exercise of the Tandem SAR and (iii) by
executing such
A-5
<PAGE>
documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such
documents as the Company may reasonably request.
2.3 TERMINATION OF EMPLOYMENT. Subject to Section 6.8, all of the terms
relating to the exercise, cancellation or other disposition of an option or
SAR upon a termination of employment with the Company of the holder of such
option or SAR, as the case may be, whether by reason of Disability,
retirement, death or other termination, shall be determined by the Committee.
Such determination shall be made at the time of the grant of such option or
SAR, as the case may be, and shall be specified in the Agreement relating to
such option or SAR.
III. STOCK AWARDS
3.1 STOCK AWARDS. The Committee may, in its discretion, grant Stock Awards
to such eligible persons as may be selected by the Committee. The Agreement
relating to a Stock Award shall specify whether the Stock Award is a
Restricted Stock Award or Bonus Stock Award.
Stock Awards may be made in satisfaction of the Company's obligations under
the Company's Cash Bonus Plan, its Long Term Incentive Plan or any other Plan
of a similar nature that may be adopted by the Company.
2.2 3.2 TERMS OF STOCK AWARDS. Stock Awards shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee
shall deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Bonus Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a
Restricted Stock Award shall be determined by the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted Stock
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of
the shares of Common Stock subject to such award (i) if specified
Performance Measures are satisfied or met during the specified Restriction
Period or (ii) if the holder of such award remains continuously in the
employment of the Company during the specified Restricted Restriction
Period and for the forfeiture of the shares of Common Stock subject to such
award (x) if specified Performance Measures are not satisfied or met during
the specified Restriction Period or (y) if the holder of such award does
not remain continuously in the employment of the Company during the
specified Restriction Period.
Bonus Stock Awards shall not be subject to any Performance Measures or
Restriction Periods.
Notwithstanding the foregoing, Bonus Stock Awards may be subject to
restrictions on sale or transfer as the Committee may determine.
(c) Share Certificates. During the Restriction Period, a certificate or
certificates representing a Restricted Stock Award shall may be registered
in the holder's name and may bear a legend, in addition to any legend which
may be required pursuant to Section 5.6 6.6, indicating that the ownership
of the shares of Common Stock represented by such certificate is subject to
the restrictions, terms and conditions of this Plan and the Agreement
relating to the Restricted Stock Award. During any period for which a Bonus
Stock Award is subject to any restriction on sale or transfer, a
certificate or certificates representing such award shall be registered in
the holder's name and may bear a legend, in addition to any legend required
pursuant to Section 5.6, indicating that the ownership of the shares
represented by such certificate is subject to such restrictions. All such
certificates shall be deposited with the Company, together with stock
powers or other instruments of assignment (including a power of attorney),
each endorsed in blank with a guarantee of signature if deemed necessary or
appropriate by the Company, which would permit transfer to the Company
A-6
<PAGE>
of all or a portion of the shares of Common Stock subject to the Restricted
Stock Award in the event such award is forfeited in whole or in part. Upon
termination of any applicable Restriction Period (and the satisfaction or
attainment of applicable Performance Measures), upon the expiration of any
restriction on sale applicable to a Bonus Stock Award or upon the grant of
a Bonus Stock Award not subject to any restrictions, in each case subject
to the Company's right to require payment of any taxes in accordance with
Section 5.5 6.5, a certificate or certificates evidencing ownership of the
requisite number of shares of Common Stock shall be delivered to the holder
of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise set
forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such
award shall have all rights as a shareholder stockholder of the Company,
including, but not limited to, voting rights, the right to receive
dividends and the right to participate in any capital adjustment applicable
to all holders of Common Stock; provided, however, that a distribution with
respect to shares of Common Stock, other than a distribution in cash, shall
be deposited with the Company and shall be subject to the same restrictions
as the shares of Common Stock with respect to which such distribution was
made.
2.3 3.3 TERMINATION OF EMPLOYMENT. Subject to Section 5.8, 6.8, all of the
terms relating to the satisfaction of Performance Measures and the termination
of the Restriction Period relating to a Restricted Stock Award, or any
cancellation or forfeiture of such Restricted Stock Award upon a termination
of employment with the Company of the holder of such Restricted Stock Award,
whether by reason of Disability, retirement, death or other termination, shall
be set forth in the Agreement relating to such Restricted Stock Award.
III IV. PERFORMANCE SHARE AWARDS
3.1 4.1 PERFORMANCE SHARE AWARDS. The Committee may, in its discretion,
grant Performance Share Awards to such eligible persons as may be selected by
the Committee.
3.2 4.2 TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards shall be
subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number of
Performance Shares subject to any award and the Performance Measures and
Performance Period applicable to such award shall be determined by the
Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance Share
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of
such award, if specified Performance Measures are satisfied or met during
the specified Performance Period, and for the forfeiture of such award, if
specified Performance Measures are not satisfied or met during the
specified Performance Period.
(c) Settlement of Vested Performance Share Awards. The Agreement relating
to a Performance Share Award (i) shall specify whether such award may be
settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder
thereof shall be entitled to receive, on a current or deferred basis,
dividend equivalents, and, if determined by the Committee, interest on any
deferred dividend equivalents, with respect to the number of shares of
Common Stock subject to such award. If a Performance Share Award is settled
in shares of Restricted Stock, a certificate or certificates representing
such Restricted Stock shall be issued in accordance with Section 2.2(c)
3.2(c) and the holder of such Restricted Stock shall have such rights of a
shareholder stockholder of the Company as determined pursuant to Section
2.2(d) 3.2(d). Prior to the settlement of a Performance Share Award in
shares of Common Stock, including Restricted Stock, the holder of such
award shall have no rights as a shareholder stockholder of the Company with
respect to the shares of Common Stock subject to such award.
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3.3 4.3 TERMINATION OF EMPLOYMENT. Subject to Section 5.8, 6.8, all of the
terms relating to the satisfaction of Performance Measures and the termination
of the Performance Period relating to a Performance Share Award, or any
cancellation or forfeiture of such Performance Share Award upon a termination
of employment with the Company of the holder of such Performance Share Award,
whether by reason of Disability, retirement, death or other termination, shall
be set forth in the Agreement relating to such Performance Share Award.
IV V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
4.1 5.1 ELIGIBILITY. Each Non-Employee Director shall be eligible to elect
to receive shares of Common Stock in accordance with this Article IV V.
4.2 5.2 TIME AND MANNER OF ELECTION. At least six (6) 6 (six) months prior
to the date of any annual meeting of shareholders of the Corporation Company
during the term of this Plan, Non-Employee Directors may file with the
Committee or its designee a written election to receive shares of Common Stock
in lieu of all or a portion of such Non-Employee Director's future annual
retainer, paid quarterly, exclusive of meeting or committee fees.
Notwithstanding the foregoing, an election made by (i) a Non-Employee Director
in respect of the annual retainer payable for the period beginning on the date
of the 1995 annual meeting of the shareholders of the Company or (ii) an
individual who becomes a Non-Employee Director on a date less than six months
prior to any annual meeting of shareholders, shall become effective on the
first business day that is six months after the date ("Effective Date") Date")
such Non-Employee Director files such election, and such election shall be
applicable only to the portion of such Non-Employee Director's annual retainer
determined by multiplying such annual retainer by a fraction, the numerator of
which is the number of calendar days from and including the Effective Date to
and including the last day for which such Annual Retainer is payable and the
denominator is 365. An election pursuant to this Section, once made, shall be
irrevocable in respect to the annual retainer for which made.
The shares Shares to be issued pursuant to this Section shall be issued on
each date on which an installment of the Non-Employee Director's annual
retainer would otherwise be payable in cash. The number of such shares to be
issued shall be determined by dividing the amount of the then payable
installment of the annual retainer subject to an election under this Section
by the Fair Market Value of a share of Common Stock on such date. Any fraction
of a share shall be disregarded and the remaining amount of the annual
retainer shall be paid in cash.
V. VI. GENERAL
5.1 6.1 EFFECTIVE DATE AND TERM OF PLAN. This Plan shall be submitted to the
shareholders stockholders of the Company for approval and, if approved by the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at the 1995 1997 annual meeting of shareholders
stockholders, shall become effective on the date of such approval. This Plan
shall terminate 10 years after its effective date unless terminated earlier by
the Board. Termination of this Plan shall not affect the terms or conditions
of any award granted prior to termination.
Awards hereunder may be made at any time prior to the termination of this
Plan, provided that no award may be made later than 10 years after the
effective date of this Plan. In the event that this Plan is not approved by
the shareholders stockholders of the Company, this Plan and any awards
hereunder shall be void and of no force or effect.
5.2 6.2 AMENDMENTS. The Board may amend this Plan as it shall deem
advisable, subject to any requirement of shareholder stockholder approval
required by applicable law, rule or regulation including Rule 16b-3 under the
Exchange Act and Section 162(m) of the Code; provided, however, that no
amendment shall be made without shareholder stockholder approval if such
amendment would (a) increase the maximum number of
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shares of Common Stock available for issuance under this Plan (subject to
Section 5.7) 6.7), or (b) extend the term of this Plan; provided further that,
subject to Section 6.7. No amendment may impair the rights of a holder of an
outstanding award without the consent of such holder.
5.3 6.3 AGREEMENT. Each award under this Plan shall be evidenced by an
Agreement setting forth the terms and conditions applicable to such award. No
award shall be valid until an Agreement is executed by the Company and the
recipient of such award and, upon execution by each party and delivery of the
Agreement to the Company, such award shall be effective as of the effective
date set forth in the Agreement.
5.4 6.4 NON-TRANSFERABILITY OF STOCK OPTIONS, SARS AND PERFORMANCE SHARES.
No Performance Share, and to the extent provided pursuant to Section 2.2(c),
no Bonus Stock Award, option, SAR or Performance Share shall be transferable
other than (i) by will, the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company or (ii) as
otherwise permitted under Rule 16b-3 under the Exchange Act as set forth in
the Agreement relating to such award. Each such award may be settled during
the participant's Except to the extent permitted by the foregoing sentence,
each option, SAR or Performance Share may be exercised or settled during the
holder's lifetime only by the holder or the holder's legal representative or
similar person. Except as to the extent permitted by the second preceding
sentence, no such award option, SAR or Performance Share may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so sell, transfer, assign,
pledge, hypothecate, encumber or otherwise dispose of any option, SAR or
Performance Share, such award, it and all rights thereunder shall immediately
become null and void.
5.5 6.5 TAX WITHHOLDING. The Company shall have the right to require, prior
to the issuance or delivery of any shares of Common Stock or the payment of
any cash pursuant to an award made hereunder, payment by the holder of such
award of any Federal, state, local or other taxes which may be required to be
withheld or paid in connection with such award. An Agreement may provide that
(i) the Company shall withhold whole shares of Common Stock which would
otherwise be delivered to a holder, having an aggregate Fair Market Value
determined as of the date the obligation to withhold or pay taxes arises in
connection with an award (the "Tax Date"), or withhold an amount of cash which
would otherwise be payable to a holder, in the amount necessary to satisfy any
such obligation or (ii) the holder may satisfy any such obligation by any of
the following means: (A) a cash payment to the Company, (B) delivery to the
Company of previously owned whole shares of Common Stock (which the holder has
held for at least six months prior to the delivery of such shares and for
which the holder has good title, free and clear of all liens and encumbrances)
having an aggregate Fair Market Value, determined as of the Tax Date, equal to
the amount necessary to satisfy any such obligation, (C) authorizing the
Company to withhold whole shares of Common Stock which would otherwise be
delivered having an aggregate Fair Market Value, determined as of the Tax
Date, or withhold an amount of cash which would otherwise be payable to a
holder, equal to the amount necessary to satisfy any such obligation, or (D)
(D) in the case of the exercise of an option, a cash payment by a broker-
dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C), in
each case to the extent set forth in the Agreement relating to the award;
provided, however, that the Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (B)-(D)(E) and that in the case of a
holder who is subject to Section 16 of the Exchange Act, the Company may
require that the method of satisfying such an obligation be in compliance with
Section 16 and the rules and regulations thereunder. An Agreement may provide
for shares of Common Stock to be delivered or withheld having an aggregate
Fair Market Value in excess of the minimum amount required to be withheld, but
not in excess of the amount determined by applying the holder's maximum
marginal tax rate. Any fraction of a share of Common Stock which would be
required to satisfy such an obligation shall be disregarded and the remaining
amount due shall be paid in cash by the holder.
5.6 6.6 RESTRICTIONS ON SHARES. Each award made hereunder shall be subject
to the requirement that if at any time the Company determines that the
listing, registration or qualification of the shares of Common Stock subject
to such award upon any securities exchange or under any law, or the consent or
approval of any governmental body, or the taking of any other action is
necessary or desirable as a condition of, or in connection with, the delivery
of shares thereunder, such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not
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acceptable to the Company. The Company may require that certificates
evidencing shares of Common Stock delivered pursuant to any award made
hereunder bear a legend indicating that the sale, transfer or other
disposition thereof by the holder is prohibited except in compliance with the
Securities Act of 1933, as amended, and the rules and regulations thereunder.
5.7 6.7 ADJUSTMENT. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular
cash dividend, the number and class of securities available under this Plan,
the number and class of securities subject to each outstanding option and the
purchase price per security, the terms of each outstanding SAR, the number and
class of securities subject to each outstanding Stock Award, and the terms of
each outstanding Performance Share shall be appropriately adjusted by the
Committee, such adjustments to be made in the case of outstanding options and
SARs without an increase in the aggregate purchase price or base price. The
decision of the Committee regarding any such adjustment shall be final,
binding and conclusive. If any such adjustment would result in a fractional
security being (i) available under this Plan, such fractional security shall
be disregarded, or (ii) subject to an award under this Plan, the Company shall
pay the holder of such award, in connection with the first vesting, exercise
or settlement of such award, in whole or in part, occurring after such
adjustment, an amount in cash determined by multiplying (i) the fraction of
such security (rounded to the nearest hundredth) by (ii) the excess, if any,
of (A) the Fair Market Value on the vesting, exercise or settlement date over
(B) the exercise or base price, if any, of such award.
5.8 6.8 CHANGE IN CONTROL.
(a)(1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of Common
Stock common stock that are registered under Section 12 of the Exchange
Act, (i) all outstanding options and SARS shall immediately become
exercisable in full, (ii) the Restriction Period applicable to any
outstanding Restricted Stock Award shall lapse, (ii)(iii) the Performance
Period applicable to any outstanding Performance Share shall lapse,
(iii)(iv) the Performance Measures applicable to any outstanding Restricted
Stock Award (if any) and to any outstanding Performance Share shall be
deemed to be satisfied at the maximum level, (iv) any other restrictions on
sale or transferability shall terminate and (v) there shall be substituted
for each share of Common Stock available under this Plan, whether or not
then subject to an outstanding award, the number and class of shares into
which each outstanding share of Common Stock shall be converted pursuant to
such Change in Control. In the event of any such substitution, the purchase
price per share in the case of an option and the base price in the case of
an SAR shall be appropriately adjusted by the Committee, such adjustments
to be made in the case of outstanding options and SARs without an increase
in the aggregate purchase price or base price.
(2) Notwithstanding any provision in this Plan or any Agreement, in the
event of a Change in Control pursuant to Section (b)(1) or (2) below, or in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration
other than shares of Common Stock common stock that are registered under
Section 12 of the Exchange Act, each outstanding award shall be surrendered
to the Company by the holder thereof, and each such award shall immediately
be cancelled by the Company, and the holder shall receive, within ten days
of the occurrence of a Change in Control pursuant to Section (b)(1) or (2)
below or within ten days of the approval of the shareholders stockholders
of the Company contemplated by Section (b)(3) or (4) below, a cash payment
from the Company in an amount equal to, (i) in the case of an option, the
number of shares of Common Stock then subject to such option, multiplied by
the excess, if any, of the greater of (A) the highest per share price
offered to stockholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a share of
Common Stock on the date of occurrence of the Change in Control, over the
purchase price per share of Common Stock subject to the option, (ii) in the
case of a Free-Standing SAR, the number of shares of Common Stock then
subject to such SAR, multiplied by the excess, if any, of the greater of
(A) the highest per share price offered to stockholders of the Company in
any transaction
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whereby the Change in Control takes place or (B) the Fair Market Value of a
share of Common Stock on the date of occurrence of the Change in Control,
over the base price of the SAR, (iii) in the case of a Restricted Stock
Award or Performance Share Award, the number of shares of Common Stock or
the number of Performance Shares, as the case may be, then subject to such
award, multiplied by the greater of (A) the highest per share price offered
to shareholders stockholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a share of
Common Stock on the date of occurrence of the Change in Control. In the
event of a Change in Control, each Tandem SAR shall be surrendered by the
holder thereof and shall be cancelled simultaneously with the cancellation
of the related option. The Company may, but is not required to, cooperate
with any person who is subject to Section 16 of the Exchange Act to assure
that any cash payment in accordance with the foregoing to such person is
made in compliance with Section 16 and the rules and regulations
thereunder.
(b) "Change in Control" shall mean:
(1) the acquisition by any individual, entity or group ((a "Person"),
including any "person" within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) (a "Person") Exchange Act, of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act),
of 20% or more of either (i) the then outstanding shares of Common
Stock common stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the
election of Directors directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(1), the following acquisitions shall not constitute a Change of
Control: (i) excluding, however, the following: (A) any acquisition
directly from the Company, (ii) (excluding any acquisition resulting
from the exercise of an exercise, conversion or exchange privilege
unless the security being so exercised, converted or exchanged was
acquired directly from the Company), (B) any acquisition by the
Company, (iii)(C) any acquisition by any an employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (iv)(D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (3) of this Section 5.8(b); 6.8(b); or
(2) individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at
least two-thirds a majority of the such Board; provided,however, that
any individual becoming a Director who becomes a director of the
Company subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders stockholders, was approved by a
the vote of at least three-quarters a majority of the Directors
directors then comprising the Incumbent Board shall be considered as
though such individual were deemed a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs; and provided further, that any individual
who was initially elected as a director of the Company as a result of
an actual or threatened election contest with respect to the election
or removal of Directors or, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act, or any other actual
or threatened solicitation of proxies or consents by or on behalf of a
any Person other than the Board shall not be deemed a member of the
Incumbent Board; or
(3) consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially substantial all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50 percent 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
directors, as the case may be, of the corporation resulting from such
Business Combination (including, without limitation, a corporation
which as a result of such
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transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially in the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and the Outstanding Company Voting Securities, as
the case may be, (ii) no Person (excluding any corporation resulting
from such Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20 percent or
more of, respectively, the then outstanding shares of Common Stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination, and (iii) at least a majority of the members
of the Board board of Directors directors of the corporation resulting
from such Business Combination were members of the Incumbent incumbent
Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or
(4) approval by the shareholders stockholders of the Company of a
plan of complete liquidation or dissolution of the Company.
5.9 6.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT. No person shall have any
right to participate in this Plan. Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment by
the Company, any Subsidiary or any affiliate of the Company or affect in any
manner the right of the Company, any Subsidiary or any affiliate of the
Company to terminate the employment of any person at any time without
liability hereunder.
5.10 6.10 RIGHTS AS SHAREHOLDER STOCKHOLDER. No person shall have any right
as a shareholder stockholder of the Company with respect to any shares of
Common Stock or other equity security of the Company which is subject to an
award hereunder unless and until such person becomes a shareholder stockholder
of record with respect to such shares of Common Stock or equity security.
5.11 6.11 GOVERNING LAW. This Plan, each award hereunder and the related
Agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United
States, shall be governed by the laws of the State of Iowa and construed in
accordance therewith without giving effect to principles of conflicts of laws.
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EXHIBIT B
1997 EQUITY PLAN FOR NON-EMPLOYEE
DIRECTORS OF HON INDUSTRIES INC.
1. PURPOSE. The purposes of the Plan are (1) to promote the growth and long-
term success of HON INDUSTRIES Inc., an Iowa corporation (the "Company"), by
offering Non-Employee Directors the ability to acquire Common Stock of the
Company, (2) to enable the Company to attract and retain qualified persons to
serve as Non-Employee Directors, which services are considered essential to
the long-term success of the Company, by offering them an opportunity to own
Common Stock of the Company, and (3) to provide Non-Employee Directors with
the opportunity to invest certain amounts of their compensation payable for
services as a Director in shares of Common Stock.
2. DEFINITIONS. In addition to the other terms defined elsewhere herein,
wherever the following terms are used in this Plan with initial capital
letters, they shall have the meanings specified below, unless the context
clearly indicates otherwise.
"1995 PLAN" shall mean the HON INDUSTRIES Inc. Stock-Based Compensation
Plan, as amended and restated effective May 13, 1997.
"ACCOUNTING DATE" shall mean the Friday immediately preceding the Company's
annual meeting of shareholders.
"ACCOUNTING PERIOD" shall mean the period beginning on the date immediately
following an Accounting Date and ending the next following Accounting Date.
"AWARD" shall mean an award of an Option Right, Restricted Stock or Common
Stock Grant under this Plan.
"BOARD" shall mean the Board of Directors of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"COMMON STOCK" shall mean the Common Stock, $1.00 par value, of the Company,
and any security into which such Common Stock may be converted or for which
such Common Stock may be exchanged by reason of any transaction or event of
the type described in Section 8 of this Plan.
"COMMON STOCK GRANT" shall mean Common Stock, other than Restricted Stock,
awarded pursuant to Section 5 of this Plan.
"COMPANY" shall have the meaning set forth in Section 1, and shall include
its successors.
"DATE OF AWARD" shall mean the date specified by the Board on which an Award
shall become effective, which shall not be earlier than the date on which the
Board takes action with respect thereto.
"EMPLOYEE" shall mean any officer or other employee of the Company or of any
corporation which is then a Subsidiary.
"FEES" means the Retainer and other Non-Employee Director compensation
payable in cash.
"MARKET VALUE PER SHARE" shall mean either (a) the average of the high and
low transaction prices of a share of Common Stock as reported in the National
Association of Securities Dealers Automated Quotation National Market System
("NASDAQ") on the date as of which such value is being determined, or, if
there are no reported transactions for such date, on the next preceding date
for which transactions were reported, as published in the Midwest Edition of
The Wall Street Journal, or (b) if there is no reporting of transactions on
NASDAQ, the fair market value of a share of Common Stock as determined by the
Board from time to time.
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"NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is not an
Employee.
"OPTIONEE" shall mean a Non-Employee Director to whom an Option Right is
awarded under this Plan.
"OPTION PRICE" shall mean the purchase price payable upon the exercise of an
Option Right.
"OPTION RIGHT" shall mean the right to purchase shares of Common Stock from
the Company upon the exercise of an option awarded hereunder.
"PARTICIPANT" shall mean a Non-Employee Director (or a person who has agreed
to commence serving in such capacity) who is selected by the Board to receive
Awards under this Plan or who has elected to receive Voluntary Shares.
"PARTICIPATION AGREEMENT" means the agreement submitted by a Non-Employee
Director to the Secretary of the Company pursuant to which a Non-Employee
Director may elect to receive all or any portion of his Fees in the form of
Voluntary Shares for a specified period in the future.
"PERFORMANCE OBJECTIVES" shall mean the performance objectives that may be
established by the Board pursuant to this Plan for Participants who have
received Awards.
"PLAN" shall mean the 1997 Equity Plan for Non-Employee Directors of HON
INDUSTRIES Inc. as set forth herein, as the same may be amended or restated
from time to time.
"RESTRICTED STOCK" shall mean Common Stock awarded pursuant to Section 5 of
this Plan as to which neither the substantial risk of forfeiture nor the
restrictions on transfer referred to in Section 5 hereof have expired.
"RESTRICTED STOCKHOLDER" shall mean a Non-Employee Director to whom
Restricted Stock has been awarded under this Plan.
"RETAINER" shall mean the portion of a Non-Employee Director's annual
compensation that is payable without regard to number of board or committee
meetings attended or committee positions.
"RULE 16B-3" shall mean Rule 16b-3 under the Securities Exchange Act of
1934, or any successor rule.
"SUBSIDIARY" shall mean any corporation, partnership, joint venture, limited
liability company, unincorporated association or other entity (each, an
"Entity") in an unbroken chain of Entities beginning with the Company if each
of the Entities other than the last Entity in the unbroken chain then owns
stock or other interests possessing 50 percent or more of the total combined
voting power of all classes of stock or other interests in one of the other
Entities in such chain.
"TERMINATION OF DIRECTORSHIP" shall mean the time when a Participant ceases
to be a Director for any reason, including, without limitation, a termination
by resignation, removal, failure to be elected or reelected, death or
retirement.
"VOLUNTARY SHARES" shall have the meaning set forth in Section 6(a).
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 8 of this Plan, the number of shares of Common Stock issued or
transferred, plus the number of shares of Common Stock covered by outstanding
Awards and not forfeited under this Plan, shall not in the aggregate exceed
200,000 shares, which may be shares of original issuance or shares held in
treasury or a combination thereof. If an Option Right lapses or terminates
before such Option is exercised or shares of Restricted Stock or Common Stock
Grants are forfeited, for any reason, the shares covered thereby may again be
made subject to Awards or Voluntary Shares under this Plan.
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4. OPTION RIGHTS. The Board may from time to time authorize Awards to
Participants of Options to purchase shares of Common Stock upon such terms and
conditions as the Board may determine in accordance with the following
provisions:
(a) Each Award shall specify the number of shares of Common Stock to
which the Option Rights pertains.
(b) Each Award of Option Rights shall specify an Option Price per share
of Common Stock, which shall be equal to or greater than the Market Value
per Share on the Date of Award.
(c) Each Award of Option Rights shall specify the form of consideration
to be paid in satisfaction of the Option Price and the manner of payment of
such consideration, which may include (i) cash in the form of currency or
check or other cash equivalent acceptable to the Company, (ii)
nonforfeitable, nonrestricted shares of Common Stock, which are already
owned by the Optionee and have a value at the time of exercise that is
equal to the Option Price, (iii) any other legal consideration that the
Board may deem appropriate, including (without limitation) any form of
consideration authorized under Section 4(d) below, on such basis as the
Board may determine in accordance with this Plan, and (iv) any combination
of the foregoing.
(d) On or after the Date of Award of any Option Right, the Board may
determine that payment of the Option Price may also be made in whole or in
part in the form of shares of Restricted Stock or other shares of Common
Stock that are subject to risk of forfeiture or restrictions on transfer.
Unless otherwise determined by the Board on or after the Date of Award,
whenever any Option Price is paid in whole or in part by means of any of
the forms of consideration specified in this Section 4(d), the shares of
Common Stock received by the Optionee upon the exercise of the Option Right
shall be subject to the same risks of forfeiture or restrictions on
transfer as those that applied to the consideration surrendered by the
Optionee; provided, however, that such risks of forfeiture and restrictions
on transfer shall apply only to the same number of shares of Common Stock
received by the Optionee as applied to the forfeitable or restricted shares
of Common Stock surrendered by the Optionee.
(e) Any Award of Option Rights may provide for the deferred payment of
the Option Price from the proceeds of sale through a broker of some or all
of the shares of Common Stock to which the exercise relates.
(f) Successive Awards may be made to the same Participant regardless of
whether any Option Rights previously awarded to the Participant remain
unexercised.
(g) Each Award shall specify the period or periods of continuous service
as a Non-Employee Director by the Optionee that are necessary or
Performance Objectives that must be achieved before the Option Rights or
installments thereof shall become exercisable, and any Award may provide
for the earlier exercise of the Option Rights in the event of a change in
control of the Company or other transaction or event.
(h) On or after the Date of Award of any Option Right, the Board may
provide for the payment to the Optionee of dividend equivalents thereon in
cash or shares of Common Stock on a current, deferred or contingent basis,
or the Board may provide that any dividend equivalents shall be credited
against the Option Price.
(i) The term of an Option Right shall be set by the Board; provided,
however, that no Option Right awarded pursuant to this Section 4 may have a
term of more than 10 years from the Date of Award.
(j) Each Award of an Option Right shall be evidenced by a written Stock
Option Agreement, which shall be executed on behalf of the Company by any
officer thereof and delivered to and accepted by the Optionee and shall
contain such terms and provisions as the Board may determine consistent
with this Plan.
5. COMMON STOCK GRANTS AND RESTRICTED STOCK. The Board may also authorize
Awards to Participants of Common Stock Grants and Restricted Stock upon such
terms and conditions as the Board may determine in accordance with the following
provisions:
(a) A Common Stock Grant consists of the transfer by the Company to a
Participant of shares of Common Stock in consideration and as additional
compensation for services performed for the Company. Each Award of Common
Stock Grants and Restricted Stock shall constitute an immediate transfer of
the
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ownership of shares of Common Stock to the Participant in consideration of
the performance of services, entitling such Participant to dividend, voting
and other ownership rights, subject to, in the case of Awards of Restricted
Stock, the substantial risk of forfeiture and restrictions on transfer
hereinafter referred to.
(b) Each Award of Restricted Stock shall provide that the shares of
Restricted Stock covered thereby shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Board on the Date of Award, and may provide for the
termination of such risk of forfeiture upon the achievement of certain
Performance Objectives, in the event of a change in control of the Company,
or upon any other transaction or event.
(c) Each Award of Restricted Stock shall provide during the period for
which such substantial risk of forfeiture is to continue, and any Award of
Common Stock Grants may provide, that the transferability of the shares of
Common Stock subject to such Awards shall be prohibited or restricted in
the manner and to the extent prescribed by the Board on the Date of Award.
Such restrictions may include, without limitation, rights of repurchase or
first refusal in the Company or provisions subjecting the shares of
Restricted Stock to a continuing substantial risk of forfeiture in the
hands of any transferee.
(d) Any Award of a Common Stock Grant or Restricted Stock may be made in
consideration of payment by the Participant of an amount that is less than
the Market Value per Share on the Date of Award.
(e) Any Award of Restricted Stock may require that any or all dividends
or other distributions paid on the shares of Restricted Stock during the
period of such restrictions be automatically sequestered and reinvested on
an immediate or deferred basis in additional shares of Common Stock, which
may be subject to the same restrictions as the underlying award or such
other restrictions as the Board may determine.
(f) Each Award of a Common Stock Grant and Restricted Stock shall be
evidenced by a Stock Grant Agreement or Restricted Stock Agreement (as the
case may be), which shall be executed on behalf of the Company by any
officer thereof and delivered to and accepted by the Participant and shall
contain such terms and provisions as the Board may determine consistent
with this Plan. Unless otherwise directed by the Board, all certificates
representing shares of Restricted Stock, together with a stock power
endorsed in blank by the Participant with respect to the shares of
Restricted Stock, shall be held in custody by the Company until all
restrictions thereon lapse.
(g) The Board may provide, at or after the Date of Award of any Common
Stock Grant or Restricted Stock, for the payment of a cash award intended
to offset the amount of tax that the Participant may incur in connection
with such Common Stock Grant or Restricted Stock, including, without
limitation, tax on the receipt of such cash award.
(h) The Board may provide in any individual Stock Grant Agreement or
Restricted Stock Agreement that the Company shall have the right to
repurchase the Restricted Stock then subject to restrictions under the
Restricted Stock Agreement, or the Common Stock subject to the Common Stock
Grant, immediately upon a Termination of Directorship for any reason at a
cash price per share equal to the cash price paid by the Participants for
such Restricted Stock or Common Stock. In the discretion of the Board,
provision may be made that no such right of repurchase shall exist in the
event of a Termination of Directorship without cause or because of the
Participant's retirement, death or permanent and total disability.
6. VOLUNTARY SHARES. Each Non-Employee Director shall be eligible to elect
to receive shares of Common Stock in accordance with the following provisions:
(a) Prior to the commencement of any Accounting Period (or by such other
date as may be specified by the Board), a Participant may elect, by the
filing of a Participation Agreement, to have up to 100 percent of his or
her Fees paid by the Company in the form of shares of Common Stock in lieu
of a cash payment (the "Voluntary Shares"). Such Participation Agreement
must, except as the Board may otherwise provide, be filed as a one-time
election for the applicable Accounting Period. Unless the Director revokes
or changes such election by filing a new Participation Agreement by the due
date therefor specified in this Section 6(a), such election shall apply to
a Participant's Fees for each subsequent Accounting Period. Once an
election has been terminated, another election may not be made effective
until the commencement of the next subsequent full Accounting Period unless
the Board shall have otherwise provided.
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(b) No later than 30 days following the earlier of (x) the end of an
Accounting Period, or (y) with respect to Voluntary Shares payable for
service during an Accounting Period in which a Director ceases to serve as
a Director, the date of such Director's Termination of Directorship, the
Company shall issue to each Participant who has made an election under
Section 6(a), a number of Voluntary Shares for the prior Accounting Period
equal to (i) the portion of such Director's Fees for such Accounting Period
that such Director has elected to receive as Voluntary Shares, divided by
(ii) the Market Value per Share on the date of issuance. To the extent that
the application of the foregoing formula would result in the issuance of
fractional shares of Common Stock, any such fractional shares shall be
disregarded, and the remaining amount of Fees shall be paid in cash. The
Company shall pay any and all fees and commissions incurred in connection
with the payment of the Voluntary Shares to a Director.
7. TRANSFERABILITY.
(a) Except as may be otherwise determined by the Board, Awards under this
Plan may be transferred by a Participant only by will or the laws of
descent and distribution and Option Rights may not be exercised during a
Participant's lifetime except by the Participant or, in the event of the
Participant's legal incapacity, by his or her guardian or legal
representative acting in a fiduciary capacity on behalf of the Participant
under state law and court supervision.
(b) Any Award made under this Plan may provide that all or any part of
the shares of Common Stock that are to be issued or transferred by the
Company upon the exercise of Option Rights, or are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 5 of this Plan, shall be subject to further restrictions upon
transfer.
(c) To the extent required to satisfy any condition to exemption
available pursuant to Rule 16b-3, Voluntary Shares acquired by a
Participant shall be held by the Participant for a period of at least six
months following the date of such acquisition.
8. ADJUSTMENTS. The Board may make or provide for such adjustments in the
(a) number of shares of Common Stock covered by outstanding Awards or subject
to elections to receive Voluntary Shares, (b) prices per share applicable to
Option Rights, and (c) kind of shares (including, without limitation, shares
of another issuer) covered thereby, as the Board in its sole discretion may in
good faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Participants that otherwise would result from (x)
any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, (y) any merger,
consolidation, spin-off, split-off, split-up, reorganization, partial or
complete liquidation or other distribution of assets, or issuance of rights or
warrants to purchase securities or (z) any other corporate transaction or
event having an effect similar to any of the foregoing. In the event of any
such transaction or event, the Board may provide in substitution for any or
all outstanding Awards or Voluntary Shares to be issued under this Plan such
alternative consideration as it may in good faith determine to be equitable
under the circumstances and may require in connection therewith the surrender
of all Awards so replaced. The Board may also make or provide for such
adjustments in the numbers and kind of shares specified in Section 3 of this
Plan as the Board may in good faith determine to be appropriate in order to
reflect any transaction or event described in this Section 8.
9. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Board may provide
for the elimination of fractions, for the settlement thereof in cash or for
such other adjustments contemplated by Section 6(b) of this Plan.
10. WITHHOLDING TAXES. To the extent, if any, that the Company is required
to withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Company for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or
the realization of any such benefit that the Participant or such other person
make arrangements satisfactory to the Company for payment of the balance of
any taxes required to be withheld. At the discretion of the Board, any such
arrangements may include relinquishment of a portion of any such
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payment or benefit. The Company and any Participant or such other person may
also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
11. CERTAIN TERMINATIONS OF DIRECTORSHIPS.
(a) Notwithstanding any other provision of this Plan to the contrary, in
the event of Termination of Directorship by reason of death or disability,
or in the event of hardship or other special circumstances, of a
Participant who holds an Option Right that is not immediately and fully
exercisable or any Award as to which the substantial risk of forfeiture or
the prohibition or restriction on transfer has not lapsed, the Board may in
its sole discretion take any action that it deems to be equitable under the
circumstances or in the best interests of the Company, including, without
limitation, waiving or modifying any limitation or requirement with respect
to any Award under this Plan.
(b) If a Non-Employee Director becomes an Employee while continuing to
serve as a Director, that fact alone shall not result in a Termination of
Directorship or otherwise impair the rights such Director may have under
this Plan, including, without limitation, the rights such Director may have
under any Award outstanding under this Plan, but such Director shall no
longer be eligible to receive any further Awards under this Plan.
12. ADMINISTRATION.
(a) ADMINISTRATION BY THE BOARD; DELEGATION. This Plan shall be
administered by the Board, which may from time to time delegate all or any
part of its authority under this Plan to a committee or subcommittee of not
less than two Directors appointed by the Board who are "non-employee
directors" within the meaning of that term as defined in Rule 16b-3. To the
extent of any delegation by the Board under this Plan, references in this
Plan to the Board shall also refer to the applicable committee or
subcommittee. The majority of any such committee or subcommittee shall
constitute a quorum, and the action of a majority of its members present at
any meeting at which a quorum is present, or acts unanimously approved in
writing, shall be the acts of such committee or subcommittee.
(b) ADMINISTRATIVE POWERS. The Board shall have the power to interpret
this Plan, the Option Rights, the Common Stock Grants, the Restricted Stock
and elections to receive Voluntary Shares, and the agreements pursuant to
which the Option Rights, the Common Stock Grants, Restricted Stock and
Voluntary Shares are awarded and issued (including Participation
Agreements), and to adopt such rules for the administration, interpretation
and application of this Plan and such agreements as are consistent
therewith and to interpret, amend or revoke any such rules. Any Award under
this Plan need not be the same with respect to each Optionee or Restricted
Stockholder.
(c) PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS. All expenses and
liabilities which members of the Board incur in connection with the
administration of this Plan shall be borne by the Company. The Board may
employ attorneys, consultants, accountants, appraisers, brokers or other
persons. The Board, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any
such persons. All actions taken and all interpretations and determinations
made by the Board in good faith shall be final and binding upon all
Participants, the Company and all other interested persons. No members of
the Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan, or any Option,
Common Stock Grant, Restricted Stock or Voluntary Shares, and all members
of the Board shall be fully protected by the Company in respect of any such
action, determination or interpretation.
13. AMENDMENT, SUSPENSION, TERMINATION AND OTHER MATTERS.
(a) This Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board.
However, without further approval of the stockholders of the Company, no
action of the Board may, except as provided in Section 8 of this Plan,
increase the limits imposed in Section 3 on the maximum number of shares of
Common Stock which may be issued under this Plan, and no action of the
Board may be taken that would otherwise require stockholder approval as a
matter
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<PAGE>
of applicable law or the rules of any U.S. stock exchange, including
NASDAQ, on which the Common Stock may be listed for trading or authorized
for quotation. No amendment, suspension or termination of this Plan shall,
without the consent of the holder of an Award, alter or impair any rights
or obligations under any Award theretofore granted, unless the Award itself
otherwise expressly so provides.
(b) The Board may make under this Plan any Award or combination of Awards
authorized under this Plan in exchange for the cancellation of an Award
that was not made under this Plan.
(c) Except as provided in Section 13(d) of this Plan, the making of one
or more Awards to a Non-Employee Director under this Plan shall not
preclude the making of Awards to such Non-Employee Director under any other
stock option or incentive plan previously or subsequently adopted by the
Board, nor shall the fact that a Non-Employee Director has received one or
more awards under the 1995 Plan or under any other stock option or
incentive plan of the Company preclude such Non-Employee Director from
receiving awards under this Plan.
(d) Upon approval of this Plan by the shareholders of the Company,
Article V of the 1995 Plan shall be discontinued, except that any amounts
remaining payable to Non-Employee Directors pursuant to Article V of the
1995 Plan shall be paid in accordance with its terms.
14. TERMINATION OF THE PLAN. No further awards shall be made under this Plan
after the passage of 10 years from the date on which this Plan is first
approved by the shareholders of the Company.
15. EFFECTIVE DATE. The effective date of this Plan shall be the date of its
adoption by the Board of Directors. This Plan and all Awards granted hereunder
and any elections to receive Voluntary Shares effected prior to the
shareholder approval hereinafter mentioned shall be void and of no further
force and effect unless this Plan shall have been approved at a meeting of
shareholders of the Company called for such purpose by the affirmative vote of
a majority of the shares of Common Stock represented in person or by proxy.
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<PAGE>
HON INDUSTRIES INC.
COMMON STOCK PROXY SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING OF
SHAREHOLDERS ON MAY 13, 1997.
The undersigned acknowledges receipt of a Notice of Annual Meeting and Proxy
Statement dated March 28, 1997, and appoints Jack D. Michaels and Richard H.
Stanley, or either of them, with full power of substitution, as the proxies and
attorneys of the undersigned, to vote all shares of common stock, par value
$1.00 per share, of HON INDUSTRIES Inc. which the undersigned is entitled to
vote at the annual meeting of shareholders of HON INDUSTRIES Inc. to be held at
Muscatine, Iowa, on May 13, 1997, at 10:30 a.m. and any adjournment thereof.
The proxies are directed to vote as checked on the reverse side on the
following matters or otherwise in their discretion.
PROPOSAL NO. 1--ELECTION OF DIRECTORS--NOMINEES: For three-year terms: Robert
W. Cox, Stanley M. Howe, Lee Liu, and Lorne R. Waxlax
PROPOSAL NO. 2--APPROVAL OF THE 1995 STOCK-BASED COMPENSATION PLAN (AS AMENDED
AND RESTATED).
PROPOSAL NO. 3--APPROVAL OF THE 1997 EQUITY PLAN FOR NON-EMPLOYEE DIRECTORS.
The Board of Directors knows of no other matters that may properly be, or that
are likely to be, brought before the meeting. However, if any other matters are
properly brought before the meeting or any adjournment thereof, the proxies
will vote on such matters in their discretion.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND
RETURN THIS CARD.
- -------------------------------------------------------------------------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS SPECIFICALLY DIRECTED
HEREIN. IF NO DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE PROPOSALS.
PROPOSAL NO. 1--ELECTION OF DIRECTORS (SEE REVERSE)
For [_] Withheld [_]
PROPOSAL NO. 2--APPROVAL OF AMENDED AND RESTATED 1995 STOCK-BASED
COMPENSATION PLAN
For [_] Withheld [_]
PROPOSAL NO. 3--APPROVAL OF 1997 EQUITY PLAN FOR NON-EMPLOYEE DIRECTORS
For [_] Withheld [_]
For, except vote withheld from the following nominee(s):
-------------------------------------------------------
PLEASE DATE, SIGN, AND MAIL IN ENCLOSED RETURN ENVELOPE.
Dated _______________________, 1997
------------------------------------------------
------------------------------------------------
Signature(s) of Shareholder(s)
[_] Individual [_] Corporation [_] Partnership
[_] Other ______________________________________
(Please date this proxy and sign exactly as your
name or names appear hereon. If you sign as
attorney, executor, administrator, trustee,
guardian, custodian, or corporate official,
please give your full title in such capacity.)
