SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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(c)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KATY INDUSTRIES, INC.
----------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
----------------------------------------------------
(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 transactions 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:
KATY INDUSTRIES, INC.
6300 S. Syracuse Way, Suite 300, Englewood, Colorado 80111
(303) 290-9300
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held
On May 19, 1998
To the Stockholders:
The Annual Meeting of Stockholders of Katy Industries, Inc. will be held at
The Metropolitan Club, 7800 E. Orchard Road, Greenwood Village, Colorado at
11:00 a.m. local time to consider and act upon the following matters:
1. The election of eleven members of the Board of Directors to serve
for a term of one year.
2. The adoption of a long-term performance incentive plan to be
known as the Katy Industries, Inc. 1997 Long-Term Incentive Plan
(the "Incentive Plan"), which upon approval would become effective
December 9, 1997 and will terminate ten years after its effective
date.
3. The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed April 3, 1998 as the record date for
determining stockholders entitled to be notified of and to vote at the meeting.
Whether or not you expect to attend the meeting, you are urged to read the
proxy statement, sign and date the enclosed proxy card and return it promptly
in the enclosed envelope.
By Order of the Board of Directors
/S/ Arthur R. Miller
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Arthur R. Miller
Secretary
April 14, 1998
THIS PAGE
INTENTIONALLY
LEFT BLANK
KATY INDUSTRIES, INC.
6300 S. Syracuse Way, Suite 300, Englewood, Colorado 80111
(303) 290-9300
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PROXY STATEMENT RELATING TO
ANNUAL MEETING OF STOCKHOLDERS
To Be Held
On May 19, 1998
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INTRODUCTION
This proxy statement is furnished in connection with the solicitation of
proxies in the accompanying form by the Board of Directors of Katy Industries,
Inc. ("Katy" or the "Company"), for the Annual Meeting of Stockholders to be
held on May 19, 1998 (the "Annual Meeting"). This proxy statement and
accompanying proxy card are being mailed to stockholders commencing on or about
April 14, 1998. The Annual Report to Stockholders for the year ended December
31, 1997 (the "Annual Report"), which includes audited financial statements of
Katy and its consolidated subsidiaries, accompanies this proxy statement.
PURPOSES OF THE ANNUAL MEETING
Election of Directors
Stockholders entitled to vote will be asked to consider and vote on the
election of eleven members of the Board of Directors to serve for a one-year
term. See "Solicitation and Voting Information" and "Election of Directors."
Adoption of 1997 Long-Term Incentive Plan
At the Annual Meeting, the Company's stockholders will be requested to
consider and act upon a proposal to adopt a long-term performance incentive
plan to be known as the Katy Industries, Inc. 1997 Long-Term Incentive Plan
(the "Incentive Plan"). On December 9, 1997, the Board of Directors adopted
the Incentive Plan, subject to approval by the Company's stockholders. The
Incentive Plan will have an effective date of December 9, 1997 if approved by
the Company's stockholders at the Annual Meeting and will terminate ten years
after its effective date. The purpose of the Incentive Plan is to optimize the
growth and profitability of the Company through incentives to employees which
are consistent with the Company's goals and which link the personal interests
of employees to those of the Company's stockholders. The Incentive Plan is
further intended to provide flexibility to the Company in its ability to
attract, motivate, and retain the services of employees and other individuals
who make significant contributions to the Company's success, and to allow such
persons to share in the success, of the Company.
Set forth below is a summary of certain important features of the Incentive
Plan. The summary is qualified in its entirety by reference to the full text
of the Incentive Plan attached as Appendix I to this Proxy Statement.
Administration
The Incentive Plan will be administered by the Board of Directors or a
committee of the Board (Such committee, or the Board acting in such capacity,
is hereinafter referred to as the "Committee"). Among other things, the
Committee will have the authority to select officers, employees, and other key
individuals who perform significant services for the Company to whom awards may
be granted ("Participants"), to determine the type of award as well as the
number of shares of the Company's Common Stock to be covered by each award, and
to determine the terms and conditions of such awards. The Committee also will
have the authority to adopt, alter, and repeal such administrative rules,
guidelines, and practices governing the Incentive Plan as it deems advisable,
to interpret the terms and provisions of the Incentive Plan and any awards
issued thereunder, and to otherwise supervise the administration of the
Incentive Plan. All decisions made by the Committee pursuant to the Incentive
Plan will be final and binding.
Eligibility
Officers, employees, and other key individuals who perform significant
services for the Company designated by the Committee are eligible to be granted
awards under the Incentive Plan.
Plan Features
The Incentive Plan authorizes the issuance of up to 875,000 shares of the
Company's Common Stock pursuant to the grant or exercise of stock options,
including incentive stock options ("ISOs"), nonqualified stock options, stock
appreciation rights ("SARs"), restricted stock, performance units or shares,
and other incentive awards; provided, however, that a minimum of 375,000 shares
must be granted in the form of SARs. In addition, the aggregate maximum number
of shares of restricted stock which may be granted pursuant to the Incentive
Plan shall be 250,000 shares. The maximum number of shares that may be granted
in the form of stock options or SARs, pursuant to any award granted in one
fiscal year to any one Participant shall be 250,000 respectively. Furthermore,
the maximum aggregate grant with respect to awards of restricted stock granted
in any one fiscal year to any one Participant shall be 100,000 shares. The
maximum aggregate payout (determined as of the end of the applicable
performance period) with respect to awards of performance units, performance
shares, cash bonus awards, or other incentive awards, shall not exceed the
value of 100,000 shares. The Incentive Plan also authorizes the creation of a
cash bonus award pool of $2,400,000.
The shares of Common Stock subject to grant under the Incentive Plan are to
be made available from authorized but unissued shares, from treasury shares,
reacquired shares, or any combination thereof. Awards may be granted for such
terms as the Committee may determine, except that the term of an option, or an
SAR, may not exceed ten years from its date of grant. No awards outstanding on
the termination date of the Incentive Plan shall be affected or impaired by
such termination. Awards will not be transferable, except by will and the laws
of descent and distribution. The Committee has broad authority to fix the terms
and conditions of individual award agreements with Participants.
As indicated above, several types of stock-based grants can be made under
the Incentive Plan. A summary of these grants is set forth below, along with
a brief description of cash bonus awards.
Stock Options. The Incentive Plan authorizes the Committee to grant options
to purchase the Company's Common Stock at an exercise price which cannot be
less than 100 percent of the fair market value of such stock on the date of
grant. The Incentive Plan permits optionees, with the approval of the
Committee, to pay the exercise price of options in cash, stock, or a
combination thereof, or by "cashless exercise" through a broker or the
Company. The term of options shall be determined by the Committee but shall not
be longer than ten years from the date of grant. The Committee will determine
the conditions under which options will become exercisable and the extent to
which they will be exercisable after the option holder's employment terminates.
Generally, options will remain exercisable for not more than one year after the
option holder's death or disability, not more than three years after the option
holder's retirement, and not more than 30 business days after the option
holder's employment terminates for any other reason. As noted above, options
may be granted either as ISOs or nonqualified options. The principal difference
between ISOs and nonqualified options is tax treatment. See "Federal Tax
Information" below.
SARs. The Incentive Plan authorizes the Committee to grant SARs in
conjunction with all or part of any stock option granted under the Incentive
Plan ("Tandem SARs"). In addition, SARs can be awarded separate from a grant
of options. An SAR entitles the holder to receive upon exercise the excess of
the fair market value of a share of Common Stock at the time of exercise over
the grant price, which cannot be less than 100 percent of the fair market value
of such stock on the date of grant. Such amount will be paid to the holder in
stock (valued at its fair market value on the date of exercise), cash, or a
combination thereof, as the Committee may determine. In the case of Tandem
SARs, because an SAR is an alternative to an option, the option will be
canceled to the extent that the SAR is exercised, and the SAR will be canceled
to the extent the option is exercised.
The Committee will determine the conditions under which SARs will become
exercisable and the extent to which they will be exercisable after the SAR
holder's employment terminates. Generally, SARs will remain exercisable for not
more than one year after the SAR holder's death, disability, or termination
without cause, not more than three years after the SAR holder's retirement, and
not more than 30 business days after the SAR holder's employment terminates for
any other reason.
Restricted Stock. The Incentive Plan authorizes the Committee to grant
restricted stock to Participants with such restriction periods as the Committee
may designate. The Committee may also provide at the time of grant that
restricted stock cannot vest unless specific performance goals are satisfied.
The provisions of restricted stock awards (including any applicable performance
goals) need not be the same with respect to each Participant. During the
restriction period, the stock certificates evidencing restricted shares may be
held by the Company. Restricted stock may not be sold, assigned, transferred,
pledged, or otherwise encumbered. Restricted stock may be subject to forfeiture
upon termination of employment, unless otherwise provided by the Committee in
an individual award agreement. Other than restrictions on transfer and any
other restrictions the Committee may impose, the Participant will have all the
rights of a holder of Common Stock, including dividend and voting rights, that
are the subject of the restricted stock award. The Company performance measures
which may be used for purposes of grants of restricted stock may be chosen from
among specified alternatives which include: return on assets, cash flow return
on investment, earnings before income taxes, stock price appreciation, total
stockholder return, and net earnings.
Performance Units or Shares. The Incentive Plan authorizes the Committee to
grant performance units or shares payable in cash or shares of the Company's
Common Stock, conditioned upon continued service and/or the attainment of
specific performance goals determined by the Committee during a performance
period. A performance period consists of a period of consecutive fiscal years
or portions thereof designated by the Committee over which performance goals
must be met. At the conclusion of a particular performance period, the
Committee will determine the number of performance units or shares granted to
a Participant that have been earned and will deliver to such Participant (i)
the number of shares of Common Stock equal to the number of performance units
or shares determined by the Committee to have been earned; and/or (ii) cash
equal to the fair market value of such units or shares. The Committee may, in
its discretion, permit Participants to defer the receipt of performance units
or shares, provided that the election to defer payment is made prior to the
commencement of the applicable performance period. The Company performance
measures which may be used for performance units or shares are the same as
those described above for restricted stock awards. In the event the
Participant's employment is terminated by reason of death, disability, or
retirement during a performance period, the Participant shall receive a
prorated payout of the performance share or unit determined by the Committee
in its sole discretion.
Cash Bonus Awards. The Incentive Plan authorizes the Committee to grant
discretionary bonuses, payable in cash, conditioned upon the attainment of
specific performance goals determined by the Committee during a performance
period. The performance measures which may be used for such awards are the same
as those described above for restricted stock awards.
Other Incentive Awards. The Incentive Plan also authorizes the Committee,
subject to the terms and provisions of the Incentive Plan, to grant other
incentive awards upon such terms as determined by the Committee. Such awards
shall specify applicable performance periods, performance goals, and such other
provisions as the Committee shall determine. The performance measures to be
used for such awards are the same as those described above for restricted stock
awards.
Amendment and Discontinuance
The Incentive Plan may be amended, altered, or discontinued by the Board of
Directors, but no amendment, alteration, or discontinuance may be made that
would adversely affect in any material way any award previously granted under
the Incentive Plan without the written consent of the Participant.
The Incentive Plan provides that in the event of any change in corporate
capitalization, such as a stock split, or a corporate transaction, such as any
merger, consolidation, separation, spin-off or other distribution of stock or
property, or any reorganization or partial or complete liquidation of the
Company, the Committee may make such adjustment in the aggregate number and
kind of shares reserved for issuance under the Incentive Plan, in the number,
kind, and option or grant price of shares subject to outstanding stock options
and SARs, and in the number and kind of shares subject to other outstanding
awards granted under the Incentive Plan as may be determined to be appropriate
by the Committee, in its sole discretion, to prevent dilution or enlargement
of rights. The Incentive Plan also provides that in the event of a Change in
Control of the Company, as defined below, (i) any SARs and stock options
outstanding as of the date of the Change in Control which are neither
exercisable or vested will become fully exercisable and vested (The payment
received upon the exercise of the SARs shall be equal to the excess of the fair
market value of a share of the Company's Common Stock on the date of exercise
over the grant date price multiplied by the number of SARs exercised); (ii) the
restrictions applicable to restricted stock will lapse and such restricted
stock will become free of all restrictions and fully vested; and (iii) all
performance units or shares will be considered to be fully earned and any other
restrictions will lapse, and such performance units or shares will be settled
in cash or stock, as applicable, within 30 days following the effective date
of the Change in Control. For purposes of subsection (iii), the payout of
awards subject to performance goals will be a pro rata portion of all targeted
award opportunities associated with such awards based on the number of complete
and partial calendar months with the performance period which had elapsed as
of the effective date of the Change in Control. The Committee will also have
the authority, subject to the limitations set forth in the Incentive Plan, to
make any modifications to awards as determined by the Committee to be
appropriate before the effective date of the Change in Control.
For purposes of the Incentive Plan, "Change in Control" of the Company
means, and shall be deemed to have occurred upon, any of the following events:
(a) any person (other than those persons in control of the Company as of the
effective date of the Incentive Plan, a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company) becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 30 percent or more of the combined voting power of the Company's
then outstanding securities; or (b) during any period of two (2) consecutive
years (not including any period prior to the effective date), the individuals
who at the beginning of such period constitute the Board of Directors (and any
new director, whose election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of the period or whose election or nomination
for election was so approved), cease for any reason to constitute a majority
thereof; or (c) the stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or disposition
of all or substantially all the Company's assets; or (iii) a merger,
consolidation, or reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or reorganization that would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent at least 50 percent of the combined voting
power of the voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or reorganization.
Federal Tax Information
The following discussion is intended only as a brief summary of the federal
income tax rules that are generally relevant to stock options, SARs, restricted
stock, performance units or shares, and cash awards. The following discussion
is based on federal income tax law and interpretational authorities as of the
date of this Proxy Statement, which are subject to change at any time.
Nonqualified Options and SARs. Upon the grant of a nonqualified option
(with or without an SAR), the optionee will not recognize any taxable income
and the Company will not be entitled to a deduction. Upon the exercise of such
an option or an SAR, the excess of the fair market value of the shares acquired
on the exercise of the option over the option price (the "Spread"), or the
consideration paid to the optionee upon exercise of the SAR, will constitute
compensation taxable to the optionee as ordinary income. In determining the
amount of the Spread or the amount of consideration paid to the optionee, the
fair market value of the stock on the date of exercise is used. The Company,
in computing its federal income tax, will generally be entitled to a deduction
in an amount equal to the compensation taxable to the optionee.
ISOs. An optionee will not recognize taxable income on the grant or
exercise of an ISO. However, the spread at exercise will constitute an item
includible in alternative minimum taxable income, and thereby may subject the
optionee to the alternative minimum tax. Such alternative minimum tax may be
payable even though the optionee receives no cash upon the exercise of the ISO
with which to pay such tax. Upon the disposition of shares of stock acquired
pursuant to the exercise of an ISO after the later of (a) two years from the
date of grant of the ISO or (b) one year after the exercise date (the "ISO
Holding Period"), the optionee will recognize long-term capital gain or loss,
as the case may be, measured by the difference between the stock's selling
price and the exercise price. The specific long-term capital gain rate which
applies depends on how long the Participant holds the stock following its
exercise. The Company is not entitled to any tax deduction by reason of the
grant or by reason of a disposition of stock received upon exercise of an ISO
if the ISO Holding Period is satisfied. If the ISO Holding Period is not met
(i.e., the optionee makes a "disqualifying disposition"), the optionee will
recognize compensation income equal to the difference between the exercise
price and the lower of (i) the fair market value of the stock at the date of
the option exercise or (ii) the sale price of the stock, and the Company will
be entitled to a deduction in the same amount. Any additional gain or loss
recognized on a disqualifying disposition of the shares will be characterized
as capital gain or loss.
Restricted Stock. A Participant who is granted restricted stock may elect
pursuant to Internal Revenue Code ("Code") Section 83(b) (a "Section 83(b)
election") to have the grant taxed as compensation income at the date of
receipt, with the result that any future appreciation (or depreciation) in the
value of the shares of stock granted will be taxed as a capital gain (or loss)
upon a subsequent sale of the shares. However, if the Participant does not make
a Section 83(b) election, then the grant will be taxed as compensation income
at the full fair market value on the date that the restrictions imposed on the
shares expire. Unless a Participant makes a Section 83(b) election, any
dividends paid on stock subject to the restrictions are compensation income to
the Participant and compensation expense to the Company. Subject to applicable
provisions of the Code and regulations thereunder, the Company will generally
be entitled to an income tax deduction for any compensation income taxed to the
Participant.
Performance Units or Shares. A Participant who has been granted a
performance unit or share will not realize taxable income until the applicable
performance period expires and the Participant is in receipt of the stock
subject to the award or an equivalent amount of cash, at which time the
Participant will recognize ordinary income equal to the full fair market value
of the shares delivered or the amount of cash paid. Subject to applicable
provisions of the Code and regulations thereunder, at such time the Company
generally will be allowed a corresponding tax deduction equal to the
compensation taxable to the award recipient.
Cash Awards. A Participant who is given a cash award will recognize taxable
income at the earlier that the Participant receives the cash or is deemed to
have constructively received it. The cash thus received will be ordinary income
to the Participant. Subject to applicable provisions of the Code and
regulations thereunder, at such time the Company generally will be allowed a
corresponding tax deduction equal to the compensation taxable to the award
recipient.
Subject to the approval of the Incentive Plan by the Company's
stockholders, during 1997 the Company granted the SARs set forth on the table
below. At this time, no other information is available with respect to
additional awards which may be granted under the Incentive Plan.
New Plan Benefits
1997 Long-Term Incentive Plan
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Name and Position Number of SARs(1)(2)
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John R. Prann, Jr. 89,457(3)
President and Chief Executive Officer 71,565(4)
Glenn W. Turcotte 44,728(3)
Executive Vice President and Chief Operating Officer 35,783(4)
Arthur R. Miller 44,728(3)
Executive Vice President, Corporate Development and General Counsel 35,783(4)
Stephen P. Nicholson 12,780(3)
Vice President, Finance and Chief Financial Officer 10,224(4)
Peter S. More 12,780(3)
Group Vice President, Finance 10,224(4)
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(1) SARs awarded pursuant to the Incentive Plan prior to the date hereof
and which are specifically subject to stockholder approval of the
Incentive Plan as provided herein.
(2) The exercise price of a SARs is 100% of the fair market value of a
share of stock on the date of grant. All SARs which have met the
performance goals below in footnote (3) or (4), as the case may be,
will expire December 9, 2007.
(3) SARs which become exercisable at any time after the earliest that (a)
up to and including July 22, 2001, the Company's average closing stock
price over a 45 calendar day period has equaled or exceeded $39.125 per
share; or (b) up to and including January 22, 2005, the Company's
average closing stock price over a 45 calendar day period has equaled
or exceeded $53.80 per share. In addition, in the event that goal (a)
above is met, only 50% of the SARs thus vested will be immediately
exercisable, with, 25% exercisable upon the first anniversary of the
performance vesting date, and 25% exercisable upon the second
anniversary of the performance vesting date.
(4) SARs which become exercisable at such time up to and including January
22, 2005 that the Company's average stock price over a 45 calendar year
period has equaled or exceeded $53.80 per share.
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In addition, a cash bonus pool of $2.4 million will be created subject to
stockholder approval of the Incentive Plan. Payment of any bonuses from this
pool is contingent upon the Participants meeting those performance conditions
as may be set by the Committee in its discretion. At present, participation in
this cash bonus pool has not been determined.
Other Business
Deloitte & Touche LLP served as independent auditors of the Company for the
calendar year ended December 31, 1997. On March 30, 1998, the Company
dismissed Deloitte & Touche LLP with the approval of the Audit Committee of the
Company's Board of Directors. Deloitte & Touche LLP has advised the Company
that it will not have a representative present at the Annual Meeting to make a
statement or to respond to questions.
The Audit Committee of the Board of Directors has not yet made a
recommendation to the Board of Directors with respect to the selection of
independent certified public accountants for the calendar year ending December
31, 1998.
Stockholders may also be asked to consider and act upon such other matters
as may properly come before the meeting or any adjournment thereof. As of the
date of this proxy statement, the Board of Directors is not aware of any other
matters that will be presented for action at the Annual Meeting other than
those matters described above.
SOLICITATION AND VOTING INFORMATION
Record Date; Outstanding Shares
Stockholders of record at the close of business on April 3, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
As of the Record Date, there were outstanding and entitled to vote 8,280,169
shares of the Company's Common Stock, $1.00 par value per share (the "Common
Stock").
Quorum and Voting
The presence in person or by proxy of holders of a majority of the
outstanding shares of Common Stock will constitute a quorum for the Annual
Meeting. Abstentions and "broker non-votes" will be treated as present in
determining whether the quorum requirement is satisfied. A "broker non-vote"
occurs when a broker holding shares for a beneficial owner votes on one
proposal pursuant to discretionary authority or instructions from the
beneficial owner, but does not vote on another proposal because the broker has
not received instructions from the beneficial owner and does not have
discretionary power.
Each share of Common Stock is entitled to one vote on each matter to come
before the Annual Meeting. With regard to the election of directors, votes may
be cast in favor or withheld. Directors will be elected by a plurality of the
shares present in person or by proxy and entitled to vote on the election of
directors. "Plurality" means that the individuals who receive the largest
number of votes cast are elected as directors up to the maximum number of
directors to be elected at the Annual Meeting. Consequently, any shares not
voted (whether by abstention, broker non-vote or withholding authority) have
no impact on the election of directors except to the extent the failure to vote
for an individual results in another individual receiving a larger number of
votes.
The other matters identified above which are to be voted upon by
stockholders at the Annual Meeting require for approval the affirmative vote
of the holders of a majority of the shares present and entitled to vote at the
meeting, provided a quorum is present. With respect to such other matters, a
stockholder may (i) vote "For" the matter, (ii) vote "Against" the matter or
(iii) "Abstain" from voting on the matter. A vote to abstain from voting on
such matter has the same effect as a vote against such matter. Broker non-
votes will be treated as shares which are not present and entitled to vote with
respect to such matters, although they will be counted for purposes of
determining a quorum as described above. Accordingly, broker non-votes will
not be counted in determining the required number of votes cast with respect
to a particular proposal and will have no effect on the outcome of the voting
on such proposal.
Proxies
All shares represented by effective proxies will be voted as specified
therein, or if no direction is indicated, they will be voted "For" the election
of directors nominated by the Board of Directors and "For" the proposal to
adopt the Incentive Plan. A stockholder executing and returning a proxy has
the power to revoke it by notice to the Secretary of the Company prior to the
Annual Meeting, by executing and returning a proxy bearing a later date or by
attending the Annual Meeting and voting in person.
Expenses of soliciting proxies will be borne by the Company. Solicitation
will be by mail except for any incidental solicitation by telephone, telegram
and personal calls by directors, officers and regular employees of the Company.
The Company will also reimburse brokers and certain other persons for their
charges and expenses in forwarding proxy materials to beneficial owners.
ELECTION OF DIRECTORS
Eleven directors are to be elected at the Annual Meeting, each to serve for
a one year term ending at the time of the 1999 Annual Meeting or until their
successors shall be duly elected and qualified. The persons named in the
accompanying proxy intend to vote the shares represented by the proxy for the
election of the following eleven nominees: William F. Andrews, Amelia M.
Carroll, Daniel B. Carroll, Wallace E. Carroll, Jr., Arthur R. Miller, William
H. Murphy, John R. Prann, Jr., Lutz R. Raettig, Charles W. Sahlman, Jacob
Saliba and Glenn W. Turcotte. All of the nominees are currently directors of
the Company. For information concerning these nominees for director, see
"Information Concerning Directors and Executive Officers", "Security Ownership
of Management" and "Security Ownership of Certain Beneficial Owners". All of
the nominees have indicated their willingness to serve as directors.
IT IS THE INTENTION OF THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY TO
VOTE "FOR" THE ELECTION OF THE ELEVEN NOMINEES FOR DIRECTOR INDICATED ABOVE.
IF ANY NOMINEE BECOMES UNAVAILABLE TO SERVE FOR ANY REASON, THE PROXY WILL BE
VOTED FOR A PERSON OR PERSONS TO BE SELECTED BY THE BOARD OF DIRECTORS.
PROXIES CANNOT BE VOTED FOR A NUMBER OF NOMINEES GREATER THAN THE ELEVEN
PERSONS NOMINATED BY THE BOARD OF DIRECTORS.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met seven times during 1997. Each director, other
than Lutz R. Raettig, then in office attended at least 75% of those meetings
and of the meetings of the committees of the Board of which he is a member.
The Company's By-laws provide for an Executive Committee to which the Board
of Directors has assigned all powers delegable by law. The Executive Committee
did not formally meet during 1997, but met informally throughout the year, held
numerous telephone conferences at intervals between meetings of the full Board
of Directors, and acted by unanimous consent without formal meetings. The
Executive Committee presently consists of Wallace E. Carroll, Jr., Chairman,
Arthur R. Miller, William H. Murphy, John R. Prann, Jr., Charles W. Sahlman and
Jacob Saliba. The Board of Directors also has an Audit Committee and a
Compensation Committee. The Audit Committee presently consists of William H.
Murphy, Chairman, Charles W. Sahlman and William F. Andrews. This Committee met
three times during 1997, met informally throughout the year, and held numerous
telephone conferences during 1997. The Audit Committee reviews the results of
the annual audit with the Company's independent auditors, reviews the scope and
adequacy of the Company's internal auditing procedures and its system of
internal controls, reviews the Company's financial statements, and reports its
findings and recommendations to the Board of Directors. The Compensation
Committee presently consists of Charles W. Sahlman, Chairman, William F.
Andrews and William H. Murphy. This Committee, which reviews current and
deferred compensation of all officers of the Company and for certain officers
and key employees of its subsidiaries, held three meetings, met informally
throughout the year, and held numerous telephone conferences during 1997. The
entire Board of Directors considers and selects nominees for director and does
not maintain a separate nominating committee. On January 17, 1996, Katy's
Board of Directors adopted an advance notice bylaw provision requiring
stockholder nominations of directors to be received by the Company not less
than 50 days nor more than 90 days prior to the annual meeting. The Company
received no such stockholder nominations for the 1998 Annual Meeting.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information as of April 3, 1998 with respect
to those persons who are presently executive officers, directors or nominees
for director of Katy. Each officer holds office until the next Annual Meeting
of Stockholders:
Principal Occupation Period of
and Business Service
Experience During Other as Katy
Name Age the Past Five Years Directorships Director
---- --- -------------------- ------------- ---------
William F. Andrews 66 1995 to present: Johnson 1991 to
Chairman of Schrader Controls present
Inc., a manufacturer Navistar
of automotive and Southern New
industrial valves England Tele-
1995 to present: communications
Chairman of Sewell Corporation
Fasteners, a Corrections Corp.
manufacturer of of America
apparel and Northwestern
industrial fasteners Steel & Wire Co.
1993 to 1995: Black Box Corp.
Chairman and CEO of Dayton Superior
Amdura Corp. and Corporation
Utica Corp.,
manufacturers of
metal shears, waste
balers, compactors,
and lifting equipment
1990 to 1993:
President and CEO of
UNR Industries, a
steel products firm
Amelia M. Carroll 56 1991 to present: 1996 to
Investor present
Daniel B. Carroll 62 1985 to present: ATP 1994 to
Vice President Sales Manufacturing, present
ATP Manufacturing, LLC
LLC, a manufacturer Newgrange, LLC
of molded poly-
urethane components
Wallace E. Carroll, Jr. 60 1992 to present: 1991 to
Chairman of CRL, present
Inc., a diversified
holding company
Arthur R. Miller 47 1997 to Present: Schon & Cie, AG 1988 to
Executive Vice present
President, Corporate
Development and
General Counsel
of Katy
1988 to 1997:
Partner with Holleb
& Coff, attorneys
at law
William H. Murphy 66 1992 to present: 1979 to
Retired present
1988 to 1992:
President of Katy
John R. Prann, Jr. 47 1993 to present: 1994 to
President and Chief present
Executive Officer
of Katy
1992 to 1994:
President of CRL,
Inc., a diversified
holding company
Lutz R. Raettig 55 1995 to present: Schon & Cie, AG 1991 to
Chairman, Management present
Board, Morgan Stanley
Bank AG, Frankfurt,
Germany
1988 to 1995:
Various executive
positions with
Commerzbank, AG,
Frankfurt, Germany
Charles W. Sahlman 71 1987 to present: 1972 to
President, Bee Gee present
Holding Company, Inc.,
a holding company for
subsidiaries engaged
in the harvesting and
processing of seafood
Jacob Saliba 84 1997 to present: Schon & Cie, AG 1968 to
Chairman of the Emerging Germany present
Board of Katy Fund
1993 to present:
Retired
1988 to 1993:
Chairman of the
Board and Chief
Executive Officer of
Katy
Glenn W. Turcotte 57 1998 to present: 1995 to
Executive Vice present
President and Chief
Operating Officer
of Katy
1992 to present:
Executive Vice
President of Katy
1983 to present:
President of Glit
Division of Hallmark
Holdings, Inc., a
subsidiary of Katy
OTHER EXECUTIVE OFFICERS:
Robert M. Baratta 68 1995 to present:
Executive Vice
President of Katy
1993 to 1995:
Vice President of Katy
1990 to present:
President of Katy
Seghers, Inc. and
Savannah Energy
Systems Company,
subsidiaries of Katy
Michael G. Gordono, Jr. 58 1996 to present:
Group Vice President,
Finance of Katy
1993 to 1996:
Vice President of Katy
1987 to 1993:
President of Beehive, Inc.,
a former subsidiary of Katy
Peter S. More 60 1996 to present:
Group Vice President,
Finance of Katy
1988 to 1996:
Vice President of Glit
Division of Hallmark
Holdings, Inc., a
subsidiary of Katy
Stephen P. Nicholson 45 1996 to present:
Vice President, Finance
and Chief Financial
Officer of Katy
1996:
Treasurer and Chief
Financial Officer of
Katy
1994 to 1995:
Vice President and
Chief Financial
Officer of Gerrity Oil
and Gas Corp.
1979 to 1994:
Various financial
positions of Total
Petroleum (N.A.) Ltd.,
most recently, Vice
President and Treasurer
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 3, 1998, the number of shares
of Common Stock of Katy beneficially owned by all directors individually, each
of the named executive officers listed in the "Summary of Cash and Certain
Other Compensation" table under the heading Executive Compensation and by all
directors and executive officers as a group. Unless otherwise indicated, the
nature of beneficial ownership is that of sole voting power and sole investment
power.
Amount and
Nature of Percent
Beneficial of
Name Ownership Class
---- ---------- -------
William F. Andrews 9,500 (1) *
Amelia M. Carroll 3,142,987 (1)(2)(3) 38.0%
Daniel B. Carroll 9,500 (1) *
Wallace E. Carroll, Jr. 3,151,671 (1)(2)(3) 38.1%
Arthur R. Miller 3,309,240 (2)(4) 40.0%
William H. Murphy 11,105 (1) *
John R. Prann, Jr. 78,147 *
Lutz R. Raettig 9,505 (1) *
Charles W. Sahlman 9,500 (1) *
Jacob Saliba 12,147 (1) *
Glenn W. Turcotte 39,718 *
Robert M. Baratta 25,240 *
Michael G. Gordono 13,623 *
Peter S. More 15,756 *
Stephen P. Nicholson 12,992 *
All directors and
executive officers of
Katy as a group (15 persons) 3,923,561 (1)(2) 47.4%
* Indicates 1% or less
(1) Includes currently exercisable nonqualified stock options to acquire 6,000
(4,000 for Amelia M. Carroll) shares granted to each nonemployee director
pursuant to the Katy Industries, Inc. Nonemployee Director Stock Option
Plan.
(2) Includes shares deemed beneficially owned by Wallace E. Carroll Jr., Amelia
M. Carroll, and Arthur R. Miller as a result of their position as trustees
of certain trusts for the benefit of members of the Wallace E. Carroll
family. (See Note 4 below and "Security Ownership of Certain Beneficial
Owners".) Amounts shown for Amelia M. Carroll, Wallace E. Carroll, Jr.,
and Arthur R. Miller reflect multiple counting of shares where more than
one of such persons is a trustee of a particular trust and is required to
report beneficial ownership of shares held by such trust. Amounts shown
for all directors and executive officers as a group do not, however,
reflect multiple counting of such shares.
(3) See notes (2) and (3) under "Security Ownership of Certain Beneficial
Owners" for information concerning the beneficial ownership of shares by
Wallace E. Carroll, Jr. and Amelia M. Carroll, respectively.
(4) Arthur R. Miller holds 22,554 shares directly and options to acquire 15,625
shares exercisable within 60 days. Mr. Miller is a trustee of trusts for
the benefit of Wallace E. Carroll, Jr. and his descendants holding 710,647
shares in the aggregate. Certain of such trusts are stockholders of CRL,
Inc. and may be deemed to beneficially own 2,073,436 shares held by CRL,
Inc. Mr. Miller is also a trustee of trusts for the benefit of Denis H.
Carroll and his descendants holding 424,921 shares in the aggregate. Mr.
Miller is also a trustee of trusts for the benefit of Lelia Carroll and her
descendants holding 60,000 shares in the aggregate. Mr. Miller is a co-
trustee of The Holden Foundation which holds 2,057 shares. Mr. Miller
disclaims beneficial ownership of all shares beneficially owned by the
trusts and foundation described above.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table and notes set forth as of April 3, 1998, certain
information regarding the beneficial ownership of those persons or entities,
including certain members of the family of Wallace E. Carroll, former Chairman
of the Board of Katy, since deceased (the "Carroll Family"), and related
persons and entities, who are known to be the beneficial owners of more than
five percent (5%) of the Common Stock of Katy. Reference should be made to the
notes below for a description of the nature of the beneficial ownership
reported in the table below.
Amount and Nature Percent
Name and Address of Beneficial of
Of Beneficial Owner Ownership Notes Class
------------------- ----------------- ----- -------
Wallace E. Carroll, Jr. and
the WEC Jr. Trusts
c/o CRL, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, CO 80111 3,151,671 (1)(2) 38.1%
Amelia M. Carroll and the
WEC Jr. Trusts
c/o CRL, Inc.
6300 S. Syracuse Way, Suite 300
Englewood, CO 80111 3,142,987 (1)(3) 38.0%
Denis H. Carroll and
the DHC Trusts
c/o CRL Industries, Inc.
2345 Waukegan Road,
Suite S-200
Bannockburn, IL 60015 455,952 (1)(4) 5.5%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401 513,300 (5) 6.2%
Gabelli Funds, Inc.
One Corporate Center
Rye, NY 10580-1434 1,541,700 (6) 18.6%
(1) Wallace E. Carroll, Jr., Denis H. Carroll, Barry J. Carroll and Lelia
Carroll are the four children of Wallace E. Carroll and Lelia H. Carroll.
Wallace E. Carroll, Jr. is a director of Katy. Daniel B. Carroll, who is
also a director of Katy, is the first cousin of each of the four children
of Wallace E. Carroll and Lelia H. Carroll. Amelia M. Carroll is a
Director of Katy and the spouse of Wallace E. Carroll, Jr. In February
1996, members of the Carroll Family completed a reorganization of their
jointly held family assets. The reorganization resulted in, among other
things, the individual reallocation of Katy shares formerly jointly held
by members of the Carroll Family. The amounts shown above for members of
the Carroll Family give effect to the reorganization. The amounts shown
above, except for Wallace E. Carroll, Jr. and Amelia M. Carroll who are
spouses, do not reflect any multiple counting of shares.
(2) Wallace E. Carroll, Jr. directly holds 315,444 shares and options to
acquire 6,000 shares. Wallace E. Carroll, Jr. is a trustee of trusts for
his benefit and his descendants (the "WEC Jr. Trusts") which collectively
hold 710,647 shares. Wallace E. Carroll, Jr. and certain of the WEC Jr.
Trusts own all of the outstanding shares of CRL, Inc. which holds 2,073,436
Katy shares. Wallace E. Carroll, Jr. also is a trustee of the Wallace
Foundation which holds 32,910 shares. Shares reported as beneficially
owned by Wallace E. Carroll, Jr. also include 9,234 shares and options to
acquire 4,000 shares directly owned by Mr. Carroll's wife, Amelia M.
Carroll.
(3) Amelia M. Carroll directly holds 9,234 shares and options to acquire 4,000
shares. Amelia M. Carroll is a trustee under the WEC Jr. Trusts. Wallace
E. Carroll, Jr. and certain of the WEC Jr. Trusts own all of the
outstanding shares of CRL, Inc. which holds 2,073,436 shares. Amelia M.
Carroll is also trustee of trusts for the benefit of Lelia Carroll and her
descendants holding 26,000 shares in the aggregate. Shares reported as
beneficially owned by Amelia M. Carroll also include 315,444 shares and
options to acquire 6,000 shares directly owned by Wallace E. Carroll, Jr.
(4) Denis H. Carroll holds 7,898 shares directly. Denis H. Carroll is a
trustee of trusts for his benefit and his descendants (the "DHC Trusts")
which collectively hold 424,921 shares. Denis H. Carroll is also the
general partner of the DHC Partnership Ltd., which holds 21,076 shares and
is a trustee of The Holden Foundation which holds 2,057 shares.
(5) Information obtained from Schedule 13G filed by Dimensional Fund Advisors,
Inc. For the calendar year 1997. All shares are held in portfolios of DFA
Investment Dimensions Group, Inc., a registered open-end investment
company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, all of which
Dimensional Fund Advisors Inc. serves as investment manager.
(6) Beneficial ownership is as reported on Schedule 13D dated June 24, 1997
filed by the Gabelli Funds, Inc. and related parties, modified by activity
through April 3, 1998.
Compliance with Section 16
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires Katy's directors, executive officers and persons who
beneficially own greater than 10% of Katy's Common Stock to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"), and copies of such reports with the New York Stock Exchange
and Katy. Based solely upon its review of copies of the Section 16 reports,
the Company believes that during its fiscal year ended December 31, 1997, all
of its directors, executive officers and greater than 10% beneficial owners
were in compliance with their Section 16 filing requirements.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table shows, for the years ending December 31, 1997, 1996 and
1995, the cash compensation paid by Katy and its subsidiaries, as well as
certain other compensation paid or accrued for those years, to Katy's current
Chief Executive Officer and the four other most highly compensated executive
officers (the "Named Executive Officers").
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Other Restricted Securities
Name and Annual Stock Underlying
Principal Position Year Salary Bonus(a) Compensation(b) Award Options
------------------ ---- ------ ----- ------------ ---------- ----------
John R. Prann, Jr. 1997 $360,000 $231,300 $53,680 $51,188 -
President and Chief 1996 315,000 274,050 38,887 - 42,000
Executive Officer 1995 275,400 165,000 31,012 - 43,000
Glenn W. Turcotte 1997 290,000 149,060 40,789 27,422 -
Executive Vice 1996 240,000 167,040 32,159 - 22,500
President and Chief 1995 215,000 103,200 20,850 - 23,000
Operating Officer
Robert M. Baratta 1997 235,000 105,691 40,506 20,109 -
Executive Vice 1996 200,000 121,800 40,678 - 16,500
President 1995 175,000 73,500 22,296 - 15,000
Stephen P. Nicholson 1997 160,000 71,960 24,724 11,876 -
Vice President, 1996 118,820 72,361 25,908 - 9,750
Finance and Chief
Financial Officer
Peter S. More 1997 142,500 54,934 22,793 11,876 -
Group Vice 1996 112,000 58,464 37,958 - 9,750
President, Finance 1995 106,000 12,428 5,448 - 6,500
</TABLE>
(a) Bonus for 1997 and 1996 for the Named Executive Officers were paid 75%
in cash and 25% in Common Stock. The Common Stock portion of the bonuses
was based on the average stock price ($18.50) on February 17, 1998 and
($13.6875) on February 20, 1997, respectively. Under this arrangement,
the following shares of Common Stock were granted in lieu of cash for
1997 and 1996: John R. Prann, Jr., 3,125 and 5,005 shares, respectively;
Glenn W. Turcotte, 2,014 and 3,050 shares, respectively; Robert M.
Baratta, 1,428 and 2,224 shares, respectively; Stephen P. Nicholson, 972
and 1,321 shares, respectively; and Peter S. More, 742 and 1,067 shares,
respectively.
(b) Included in 1997, 1996 and 1995 is the dollar value set aside for the
Katy Industries, Inc. Supplemental Retirement and Deferral Plan. For
Robert M. Baratta, Stephen P. Nicholson, and Peter S. More, the year 1996
also includes the dollar value of the difference between the price paid
for shares of Common Stock pursuant to the Katy Industries, Inc. 1994 Key
Employee and Director Stock Purchase Plan and the fair market value of
such shares on the date of purchase. Also included in 1997, 1996 and
1995 is non-cash compensation consisting of personal use of corporate
automobiles, club dues and medical expenses. To the extent used, such
benefits are treated as additional wages for withholding and income tax
purposes.
Option Grants Table
There were no individual grants of stock options during 1997 to the Named
Executive Officers.
Restricted Stock Grant Table
The following table sets forth information concerning individual grants of
restricted stock during 1997 to the Named Executive Officers.
% of Total Potential Realized
Securities Value at assumed
Number of Granted to Annual Rates of Stock
Securities Employees Price Appreciation
Name Granted (1) in Fiscal Year Through January 2, 2000(2)
---- ---------- -------------- -----------------------
5% 10%
--- ---
John R. Prann, Jr. 14,000 38.1% $275,655 $286,870
Glenn W. Turcotte 7,500 20.4 147,672 153,680
Robert M. Baratta 5,500 14.9 108,293 112,699
Stephen P. Nicholson 3,250 8.8 63,994 66,598
Peter S. More 3,250 8.8 63,994 66,598
(1) Restricted shares granted vest 25% per year commencing on the date of
grant.
(2) Stock which vested on January 2, 1997 and January 2, 1998 is valued at
$14.625 and $20.34375 per share, respectively. Stock which vests January
2, 1999 and January 2, 2000 is valued at assumed annual rates of stock
price appreciation of 5% and 10%.
The following table sets forth the value of in-the-money options at year
end. No options have been exercised as of December 31, 1997.
Aggregate Fiscal Year-End Option Values
---------------------------------------
Number of
Securities Value of
Underlying In-the-Money
Options at Options at
Year End Year End
---------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Name
----
John R. Prann, Jr. 32,000 53,000 $320,255 $471,140
Glenn W. Turcotte 17,125 28,375 171,353 252,184
Robert M. Baratta 11,625 19,875 114,576 173,852
Stephen P. Nicholson 2,438 7,312 17,513 52,540
Peter S. More 5,687 10,563 53,670 88,697
Supplemental Retirement and Deferral Plan
On April 21, 1995, the Board of Directors approved the Katy Industries,
Inc. Supplemental Retirement and Deferral Plan (the "Supplemental Plan").
Among other things, the Supplemental Plan allocated among select participants
a portion of a $2,500,000 retirement accrual recorded on the books of the
Company. The allocation was completed considering past service, salary at
December 31, 1994 and prior retirement benefits, with a stated minimum dollar
amount allocated to each participant. These prior service allocations earn
interest at a rate of 4% per year. In addition to the above, the Supplemental
Plan includes profit sharing, bonus and salary deferrals. The balances will
be paid out on the later of the participant's retirement or upon reaching age
sixty-two (62). At such time, the amount allocated to a participant will be
paid out in five (5) relatively equal annual installments. The entire
allocation is subject to a lump sum payout upon a participant's death or
permanent disability. Amounts included in the Supplemental Plan for each of
the Named Executive Officers as of December 31, 1997 are as follows: John R.
Prann, Jr., $171,027; Glenn W. Turcotte, $553,471; Robert M. Baratta, $366,325;
Stephen Nicholson, $18,286; and Peter S. More, $117,988.
Severance Agreements
On January 17, 1996, the Board of Directors adopted and approved a
compensation and benefits assurance program for six of Katy's key officers.
The program became effective January 1, 1996 and generally provides for
certain severance benefits following an involuntary termination without cause
that occurs within two years following a "Change in Control" of the Company
or following a deemed constructive termination that occurs within two years
following a "Change in Control" of the Company. A "Change in Control" is
defined as follows: (i) if any person (other than those persons in control on
the effective date) becomes the beneficial owner of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding shares; (ii) if during any period of two consecutive years,
individuals who, at the beginning of such period constitute the Board, cease
to constitute a majority thereof; or (iii) if the stockholders of the Company
approve (a) a plan of liquidation of the Company, (b) an agreement for the sale
or disposition of substantially all of the Company's assets, or (c) a merger,
consolidation, or reorganization of the Company. Severance benefits payable
include either three years base salary in the case of Tier I participants (John
R. Prann, Jr., Glenn W. Turcotte, Arthur R. Miller, and Robert M. Baratta) or
two years base salary in the case of Tier II participants (Michael G. Gordono,
Peter S. More, and Stephen P. Nicholson). Severance benefits also include a
lump sum payment of annual bonuses, continuation of health care benefits, three
years matching contributions under the Company's 401(k) savings plan (two years
in the case of Tier II participants), advancement of legal fees incurred in
enforcing rights under the program, out-placement assistance and a "gross-up"
payment for any excise tax payments due by the officer as a result of receipt
of the forgoing severance benefits.
Compensation of Directors
For 1997, Directors who were not employees of Katy or its subsidiaries
received an annual retainer of $9,000, an option to acquire 2,000 shares of
Katy Common Stock, and a stock grant of 500 shares of Katy Common Stock per
annum for service on the Board of Directors and up to $2,000 for attendance at
each meeting of the Board or a committee thereof. For 1998, Directors will
receive an annual retainer of $9,000, an option to acquire 2,000 shares of Katy
Common Stock, and a stock grant of 500 shares of Katy Common Stock per annum
and up to $2,000 for attendance at each meeting. Directors who are officers
are not separately compensated as directors.
On April 21, 1995, the Board of Directors adopted the Directors' Deferred
Compensation Plan effective June 1, 1995 (the "Directors' Deferred Compensation
Plan"). Pursuant to the Directors' Deferred Compensation Plan all directors'
fees, retainers and other compensation paid for services as a director may be
deferred until the respective director's attainment of age 62 or termination
of service as a director for any reason, whichever is later. Deferred amounts
may be invested in one or more investment alternatives offered by the Company.
Distributions of deferred amounts may be made at the election of the director
in lump sum or in five annual installments. Each director is given a thirty
(30) day period prior to the beginning of a plan year during which an election
must be made to participate in the Directors' Deferred Compensation Plan.
Under the Katy Industries, Inc. Nonemployee Director Stock Option Plan (the
"Directors' Stock Option Plan"), each individual who was a nonemployee
director on May 20, 1997, other than Arthur R. Miller, received an option to
purchase 2,000 shares of the Company's Common Stock at a price of $16.13 per
share. Under the terms of the Directors' Stock Option Plan, each nonemployee
director receives an annual grant of an option to acquire 2,000 shares on the
date immediately following the annual meeting. The exercise price is the fair
market value on the date of grant. These options are exercisable at any time
during a ten year period from the date of grant.
BOARD OF DIRECTORS' COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") presents the following report on executive compensation:
The Compensation Committee presently consists of Charles W. Sahlman,
Chairman, William F. Andrews and William H. Murphy. The Compensation
Committee makes decisions on executive officer compensation and reports its
decisions to the Board of Directors. The Compensation Committee also seeks
approval of the Board of Directors on all aspects of compensation for the Chief
Executive Officer ("CEO").
Compensation Philosophy
The goals of the Company's compensation program are to align the economic
interest of executive officers with those of stockholders, including Company
financial objectives and market performance. The Compensation Committee seeks
to adjust compensation levels, through competitive base salaries and bonus
payments, based on individual and Company performance. The Compensation
Committee reviews the executive compensation program annually in view of the
Company's annual strategic and financial objectives and performance.
Compensation Program Components
Annual compensation for the Company's CEO and executive officers, including
the Named Executive Officers consists of two primary elements, base salary and
annual cash bonuses. Salary and bonus levels reflect job responsibility,
seniority, Compensation Committee judgments of individual effort and
performance and the Company's financial and market performance, in light of the
competitive environment in which the Company operates.
Annual cash compensation is also influenced by the compensation practices
of comparable companies so that the Company remains reasonably competitive in
the market. While competitive pay practices are viewed as important, the
Compensation Committee believes that the most important considerations in
setting annual compensation are individual merit and the Company's financial
and market performance. In considering the Company's financial and market
performance, the Compensation Committee reviews, among other things, net
income, cash flow, working capital and revenues of the Company and share price
performance relative to comparable companies and historical performance.
In late 1994, the Company engaged an independent consulting firm to advise
the Company on executive compensation issues. Based in part upon
recommendations of the consultant, in April 1995, the Compensation Committee
approved, and the Board of Directors thereafter approved and adopted, three new
programs of compensation for key management. These programs include an Annual
Bonus Plan, a Long-Term Incentive Plan and a Supplemental Retirement and
Deferral Plan.
The Annual Bonus Plan, which was effective as of January 1, 1995,
establishes target bonus opportunities stated as a percentage of annual base
salary for recommended key employees each year, including the CEO and the Named
Executive Officers. If 100% of pre-established performance goals are met, the
target bonus opportunity will be achieved by the employee. A higher or lower
bonus can be earned if performance exceeds or falls short of targeted levels.
The performance goals for 1998 are based on two financial measures for each
division and for corporate: operating income (with a 60% weighting) and cash
flow (with a 40% weighting).
The Long-Term Incentive Plan allows the Compensation Committee to provide
equity-based compensation (including stock options, restricted stock awards and
stock appreciation rights) as a third element of the Company's annual
compensation program. The Compensation Committee believes the Long-Term
Incentive Plan enables the Company to more closely align management
compensation with stockholder interests.
The Supplemental Plan, among other things, allows participants to
voluntarily defer up to 100% of their annual bonus and up to 50% of their base
salary until retirement or employment termination. The Supplemental Plan
allows the Company to make a profit sharing allocation to all accounts of
participants in an aggregate amount equal to two percent (2%) of adjusted pre-
tax income, as determined by the Compensation Committee. Voluntary deferrals
and profit sharing allocations are invested at the election of the employee in
four investment alternatives offered by the Company.
Chief Executive Officer Compensation
John R. Prann, Jr. became President in April 1993 and CEO in December 1993.
Mr. Prann's salary and bonus for 1997 were based upon his experience and
qualifications, responsibilities, individual effort and performance and the
Company's performance. Mr. Prann's 1997 bonus was paid pursuant to the terms
of the Annual Bonus Plan as described above.
Summary
The Compensation Committee believes that the total compensation program for
executive officers of the Company is appropriately related to individual
performance and Katy's performance, including financial results of Katy and
stockholder value. The Compensation Committee monitors the executive
compensation of comparable companies and believes Katy's compensation program
is competitive and provides appropriate incentives for Katy's executive
officers to work towards continued improvement in Katy's overall performance.
Compensation Committee of the Board of Directors:
Charles W. Sahlman, Chairman
William F. Andrews
William H. Murphy
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following is a description of certain relationships that exist with
regard to certain members of the Compensation Committee and certain of Katy's
executive officers who also serve or served as executive officers of, or
transacted business with, Katy, its subsidiaries or certain related entities.
The current members of the Compensation Committee are Charles W. Sahlman,
William F. Andrews and William H. Murphy.
During 1997, Charles W. Sahlman served as President of Bee Gee Holdings,
Inc. ("Bee Gee") (a 39% owned Katy subsidiary). Mr. Sahlman is also a former
Executive Vice President of Katy.
William H. Murphy was President, Chief Operating Officer and Chief
Financial Officer of Katy through the year ended December 31, 1992.
John R. Prann, Jr., Katy's President and CEO, served as President of CRL,
Inc., which is wholly owned by Wallace E. Carroll, Jr. and the WEC Jr. Trusts,
until December 31, 1994 and as director of CRL until January 31, 1995. Wallace
E. Carroll, Jr., a director of Katy, also serves as Chairman and Vice President
of CRL.
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock with the cumulative
total return of the Russell 2000 and the cumulative total return of the S&P
Manufacturing Diversified for the fiscal years ending December 31, 1992 through
1997. The graph below assumes $100 invested on December 31, 1992.
Comparison Of 5-Year Cumulative Total Return
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
Katy Industries, Inc. 100 127 97 109 175 250
Russell 2000 100 119 117 150 175 214
S&P Manufacturing Diversified 100 121 126 177 244 290
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Arthur R. Miller, Executive Vice President, Corporate Development, General
Counsel and director of Katy, was a partner in the Chicago law firm of Holleb
& Coff until December 31, 1997. Holleb & Coff acted as counsel to Katy and its
subsidiaries during 1997. Arthur R. Miller, effective December 31, 1997, was
hired by Katy as Executive Vice President, Corporate Development and General
Counsel. During 1997, Katy paid $1,304,952 in legal fees to Holleb & Coff
which included fees for Mr. Miller's service as general counsel.
John R. Prann, Jr., the Company's President and CEO is a participant in the
Katy Industries, Inc. 1994 Key Employee and Director Stock Purchase Plan.
Pursuant to the terms of such plan, Mr. Prann obtained a loan from the Company
in the amount of $97,050 in connection with his purchase of shares of the
Company's Common Stock under the plan in September 1994. Such loan bears
interest at the applicable federal short-term rate, payable semi-annually and
adjusted semi-annually.
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as independent auditors of the Company for the
calendar year ended December 31, 1997. On March 30, 1998, the Company
dismissed Deloitte & Touche LLP as the Company's independent auditors. That
decision was approved by the Audit Committee of the Company's Board of
Directors. Deloitte & Touche LLP has advised the Company that it will not have
a representative present at the annual meeting to make a statement or to
respond to questions. The Audit Committee of the Board of Directors has not
yet made a recommendation to the Board of Directors with respect to the
selection of independent certified public accountants for the calendar year
ending December 31, 1998.
Deloitte & Touche LLP's reports on the consolidated financial statements for
the Company's fiscal years ended December 31, 1997, and December 31, 1996, did
not contain an adverse opinion or disclaimer of opinion, and were not modified
as to uncertainty, audit scope, or accounting principles.
Deloitte & Touche LLP has advised the Company that a disagreement occurred
between the Company's management and Deloitte & Touche LLP in connection with
the 1997 audit. During the 1997 audit, Deloitte & Touche LLP had a
disagreement over the accounting for and presentation of the Company's
Divestiture and Reorganization Plan that was approved by the Company's Board
of Directors on December 31, 1997, and announced on January 5, 1998. The
disagreement was resolved to the satisfaction of Deloitte & Touche LLP during
the December 31, 1997 audit of the consolidated financial statements. The
Audit Committee of the Board of Directors discussed the disagreement with
Deloitte & Touche LLP. Although the Company has not yet appointed a successor
public accountant, the Company has authorized Deloitte & Touche LLP to respond
fully to any inquiries concerning the foregoing by the successor public
accountant, once appointed.
OTHER MATTERS
As of the date of this proxy statement, the Board of Directors does not
know of any matters to be presented to the meeting other than the election of
directors and the ratification of the Incentive Plan. However, if other
matters come before the meeting, it is the intention of the persons named on
the accompanying proxy to vote on such matters in accordance with their best
judgment. On January 17, 1996, Katy's Board of Directors adopted an advance
notice bylaw provision requiring that stockholder proposals to be made at any
annual meeting be received by the Company not less than 50 days nor more than
90 days prior to the annual meeting. No such stockholder proposals were
received for the 1998 Annual Meeting.
PROPOSALS OF STOCKHOLDERS FOR 1999 ANNUAL MEETING
Proposals which stockholders intend to present for inclusion in the Proxy
Statement for the 1999 Annual Meeting of Stockholders must be received by the
Secretary of the Company at its executive offices, 6300 S. Syracuse Way, Suite
300, Englewood, Colorado 80111, not less than 50 days nor more than 90 days
prior to the 1999 Annual Meeting to be considered for inclusion in the proxy
materials for the 1999 Annual Meeting.
By Order of the Board of Directors
KATY INDUSTRIES, INC.
/S/ Arthur R. Miller
-----------------------
Arthur R. Miller
Secretary
April 14, 1998
EXHIBIT A
1997 Long-Term Incentive Plan
Katy Industries, Inc.
(Effective December 9, 1997)
Contents
- -----------------------------------------------------------------------------
Article 1. Establishment, Objectives, and Duration 21
Article 2. Definitions 21
Article 3. Administration 24
Article 4. Shares Subject to the Plan and Maximum Awards 24
Article 5. Eligibility and Participation 25
Article 6. Stock Options 25
Article 7. Stock Appreciation Rights 26
Article 8. Restricted Stock 27
Article 9. Performance Units and Performance Shares 28
Article 10. Cash Bonus Awards 29
Article 11. Other Incentive Awards 29
Article 12. Performance Measures 30
Article 13. Beneficiary Designation 30
Article 14. Deferrals 30
Article 15. Rights of Employees 30
Article 16. Change in Control 31
Article 17. Amendment, Modification, and Termination 31
Article 18. Withholding 32
Article 19. Financial Assistance 32
Article 20. Indemnification 32
Article 21. Successors 32
Article 22. Legal Construction 32
KATY INDUSTRIES, INC.
1997 Long-Term Incentive Plan
Article 1. Establishment, Objectives, and Duration
1.1 Establishment of the Plan. Katy Industries, Inc., a Delaware
corporation (hereinafter referred to as the "Company"), hereby establishes
an incentive compensation plan to be known as the "Katy Industries, Inc.
1997 Long-Term Incentive Plan" (hereinafter referred to as the "Plan"), as
set forth in this document. The Plan permits the grant of Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights, Restricted
Stock, Performance Shares and Performance Units, Cash Bonus Awards, and
Other Incentive Awards.
Subject to approval by the Company's stockholders, the Plan shall be
effective as of December 9, 1997 (the "Effective Date") and shall remain in
effect as provided in Section 1.3 hereof.
1.2 Objectives of the Plan. The objectives of the Plan are to optimize
the profitability and growth of the Company through incentives which are
consistent with the Company's goals and which link the personal interests of
Participants to those of the Company's stockholders; to provide Participants
with an incentive for excellence in individual performance; and to promote
teamwork among Participants.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants who
make significant contributions to the Company's success and to allow
Participants to share in the success of the Company.
1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Section 1.1 hereof, and shall remain in effect,
subject to the right of the Board of Directors to amend or terminate the
Plan at any time pursuant to Article 17 hereof, until all Shares subject to
it shall have been purchased or acquired according to the Plan' provisions.
However, in no event may an Award be granted under the Plan on or after
December 9, 2007.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below, and when the meaning is intended, the initial letter of the
word shall be capitalized:
2.1 "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares or
Performance Units, Cash Bonus Awards, or Other Incentive Awards.
2.2 "Award Agreement" means an agreement entered into by the Company
and each Participant setting forth the terms and provisions
applicable to Awards granted under this Plan.
2.3 "Beneficial Owner" or "Beneficial Ownership" shall have the
meaning ascribed to such term in Rule 13d-3 of the General Rules
and Regulations under the Exchange Act.
2.4 "Board" or "Board of Directors" means the Board of Directors of
the Company.
2.5 "Cash Bonus Awards" means cash bonuses granted pursuant to Article
10 herein.
2.6 "Change in Control" of the Company means, and shall be deemed to
have occurred upon, any of the following events:
(a) Any Person (other than those Persons in control of the Company
as of the Effective Date, or other than a trustee or other
fiduciary holding securities under an employee benefit plan of
the Company, or a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company)
becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing thirty percent (30%) or
more of the combined voting power of the Company's then
outstanding securities; or
(b) During any period of two (2) consecutive years (not including
any period prior to the Effective Date), individuals who at
the beginning of such period constitute the Board (and any new
Director, whose election by the Company's stockholders was
approved by a vote of at least two-thirds (2/3) of the
Directors then still in office who either were Directors at
the beginning of the period or whose election or nomination
for election was so approved), cease for any reason to
constitute a majority thereof; or
(c) The stockholders of the Company approve: (i) a plan of
complete liquidation of the Company; or (ii) an agreement for
the sale or disposition of all or substantially all the
Company's assets; or (iii) a merger, consolidation, or
reorganization of the Company with or involving any other
corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of
the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at
least fifty percent (50%) of the combined voting power of the
voting securities of the Company (or such surviving entity)
outstanding immediately after such merger, consolidation, or
reorganization.
However, in no event shall a "Change in Control" be deemed
to have occurred, with respect to a Participant, if the Participant
is part of a purchasing group which consummates the Change-in-
Control transaction. A Participant shall be deemed "part of a
purchasing group" for purposes of the preceding sentence if the
Participant is an equity participant in the purchasing company or
group (except for: (i) passive ownership of less than one percent
(1%) of the stock of the purchasing company; or (ii) ownership of
equity participation in the purchasing company or group which is
otherwise not significant, as determined prior to the Change in
Control by a majority of the nonemployee continuing Directors).
2.7 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.8 "Committee" means the Compensation Committee of the Board, as
specified in Article 3 herein.
2.9 "Company" means Katy Industries, Inc., a Delaware corporation,
and, subject to the Committee's discretion, where the context so
indicates, the Company's Subsidiaries, as well as any successor to
any of such entities as provided in Article 21 herein.
2.10 "Director" means any individual who is a member of the Board of
Directors of the Company.
2.11 "Disability" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Employee" means any nonunion employee of the Company. Nonemployee
Directors shall not be considered Employees under this Plan unless
specifically designated otherwise.
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor act thereto.
2.15 "Fair Market Value" shall be determined on the basis of the
closing sale price on the principal securities exchange on which
the Shares are publicly traded or, if there is no such sale on the
relevant date, then on the last previous day on which a sale was
reported.
2.16 "Freestanding SAR" means an SAR that is granted independently of
any Options, as described in Article 7 herein.
2.17 "Incentive Stock Option" or "ISO" means an option to purchase
Shares granted under Article 6 herein and which is designated as an
Incentive Stock Option and which is intended to meet the
requirements of Code Section 422.
2.18 "Insider" shall mean an individual who is, on the relevant date,
an officer, director or ten percent (10%) beneficial owner of any
class of the Company's equity securities that is registered
pursuant to Section 12 of the Exchange Act, all as defined under
Section 16 of the Exchange Act.
2.19 "Named Executive Officer" means a Participant who, as of the date
of vesting and/or payout of an Award, as applicable, is one of the
group of "covered employees", as defined in the regulations
promulgated under Code Section 162(m), or any successor statute.
2.20 "Nonemployee Director" means an individual who is a member of the
Board of Directors of the Company but who is not an Employee of the
Company.
2.21 "Nonqualified Stock Option" or "NQSO" means an option to
purchase Shares granted under Article 6 herein and which is not
intended to meet the requirements of Code Section 422.
2.22 "Option" means an Incentive Stock Option or a Nonqualified
Stock Option, as described in Article 6 herein.
2.23 "Option Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option.
2.24 "Other Incentive Award" means an award granted pursuant to Article
11 hereof.
2.25 "Participant" means any individual designated as a participant in
the Plan by the Committee in accordance with Section 5.1 and who
has an outstanding Award granted under the Plan.
2.26 "Performance-Based Exception" means the performance-based
exception from the tax deductibility limitations of Code Section
162(m).
2.27 "Performance Period" means the time period during which
performance goals must be achieved with respect to an Award, as
determined by the Committee.
2.28 "Performance Share" means an Award granted to a Participant, as
described in Article 9 herein.
2.29 "Performance Unit" means an Award granted to a Participant, as
described in Article 9 herein.
2.30 "Period of Restriction" means the period during which the transfer
of Shares of Restricted Stock is limited in some way (based on the
passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, at its
discretion), and the Shares are subject to a substantial risk of
forfeiture, as provided in Article 8 herein.
2.31 "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d)
thereof.
2.32 "Restricted Stock" means an Award granted to a Participant
pursuant to Article 8 herein.
2.33 "Retirement" means a voluntary termination of employment after age
fifty-five.
2.34 "Shares" means the shares of Common Stock, par value $1.00 per
share, of the Company.
2.35 "Stock Appreciation Right" or "SAR" means an Award, granted
alone or in connection with a related Option, designated as an SAR,
pursuant to the terms of Article 7 herein.
2.36 "Subsidiary" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Company has a majority
voting interest, and which the Committee designates as a
participating entity in the Plan.
2.37 "Tandem SAR" means an SAR that is granted in connection with a
related Option pursuant to Article 7 herein, the exercise of which
shall require forfeiture of the right to purchase a Share under the
related Option (and when a Share is purchased under the Option, the
Tandem SAR shall similarly be canceled).
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the Board, or by
any committee appointed by the Board. The Board may delegate to the
Committee any or all of the administration of the Plan. To the extent that
the Board has delegated to the Committee any authority and responsibility
under the Plan, all applicable references to the Board in the Plan shall be
to the Committee. To the extent that the Board has not delegated to the
Committee any authority and responsibility under the Plan, all applicable
references to the Committee in the Plan shall be to the Board. The Committee
shall have the authority to delegate administrative duties to officers or
Directors of the Company.
3.2 Authority of the Committee. Except as limited by law or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Employees
and other key individuals performing services for the Company who shall
participate in the Plan; determine the sizes and types of Awards; determine
the terms and conditions of Awards in a manner consistent with the Plan;
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; establish, amend, or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 17 herein)
amend the terms and conditions of any outstanding Award to the extent such
terms and conditions are within the discretion of the Committee as provided
in the Plan. Further, the Committee shall make all other determinations
which may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authority as identified
herein.
The Committee may act only by a majority of its members in office, except
that the members thereof may authorize any one or more of their members or
any officer of the Company to execute and deliver documents or to take any
other ministerial action on behalf of the Committee with respect to Awards
made or to be made to Plan Participants.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all
persons, including the Company, its stockholders, Employees, Participants,
and their estates and beneficiaries.
Article 4. Shares Subject to the Plan and Maximum Awards
4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.3 herein, the number of Shares hereby reserved for
issuance under the Plan shall be eight hundred and seventy-five thousand
(875,000); provided, however, that a minimum number of three hundred and
seventy-five thousand (375,000) Shares must be granted in the form of Stock
Appreciation Rights granted pursuant to Article 7 herein. In addition, the
aggregate maximum number of Shares of Restricted Stock which may be granted
pursuant to Article 8 shall be two hundred and fifty thousand (250,000).
Shares issued pursuant to the Plan may be either authorized unissued shares,
treasury shares, reacquired shares, or any combination thereof.
Unless and until the Committee determines that an Award to a Named
Executive Officer shall not be designed to comply with the Performance-Based
Exception, the following rules shall apply to grants of such Awards under
the Plan:
(a) Stock Options. The maximum aggregate number of Shares that may be
granted in the form of Stock Options, pursuant to any Award granted
in any one fiscal year to any one single Participant shall be two
hundred and fifty thousand (250,000).
(b) SARs. The maximum aggregate number of Shares that may be granted in
the form of Stock Appreciation Rights, pursuant to any Award
granted in any one fiscal year to any one single Participant shall
be two hundred and fifty thousand (250,000).
(c) Restricted Stock. The maximum aggregate grant with respect to
Awards of Restricted Stock granted in any one fiscal year to any
one Participant shall be one hundred thousand (100,000) Shares.
(d) Performance Shares/Performance Units/Cash Bonus Awards/Other
Incentive Awards. The maximum aggregate payout (determined as of
the end of the applicable performance period) with respect to
Awards of Performance Shares, Performance Units, Other Incentive
Awards, or Cash Bonus Awards granted in any one fiscal year to any
one Participant shall not exceed the value of one hundred thousand
(100,000) Shares.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem
SAR), any Shares subject to such Award again shall be available for the
grant of an Award under the Plan.
4.3 Adjustments in Authorized Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off, or
other distribution of stock or property of the Company, any reorganization
(whether or not such reorganization comes within the definition of such term
in Code Section 368) or any partial or complete liquidation of the Company,
such adjustment shall be made in the number and class of Shares which may be
delivered under Section 4.1 herein and in the number and class of and/or
price of Shares subject to outstanding Awards granted under the Plan, as may
be determined to be appropriate and equitable by the Committee, in its sole
discretion, to prevent dilution or enlargement of rights; provided, however,
that the number of Shares subject to any Award shall always be a whole
number.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in this Plan include
all officers, key employees of the Company and other key individuals
performing services for the Company, as determined by the Committee,
including Employees and other key individuals who are members of the Board
and Employees who reside in countries other than the United States of
America. Notwithstanding the foregoing, no person who is a Director and is
also a participant in any stock option plan of the Company exclusively for
Nonemployee Directors shall be eligible to participate in the Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees and
other key individuals performing services for the Company, those to whom
Awards shall be granted and shall determine the nature and amount of each
Award.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms,
and at any time and from time to time as shall be determined by the
Committee.
6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option,
the number of Shares to which the Option pertains, and such other provisions
as the Committee shall determine. The Option Agreement also shall specify
whether the Option is intended to be an ISO within the meaning of Code
Section 422, or an NQSO whose grant is intended not to fall under the
provisions of Code Section 422.
6.3 Option Price. The Option Price for each grant of an Option under
this Plan shall be at least equal to one hundred percent (100%) of the Fair
Market Value of a Share on the date the Option is granted.
6.4 Duration of Options. Each Option granted to a Participant shall
expire at such time as the Committee shall determine at the time of grant;
provided, however, that no Option shall be exercisable later than the tenth
anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same
for each grant or for each Participant.
6.6 Payment. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth
the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time
of exercise equal to the total Option Price (provided that the Shares which
are tendered must have been held by the Participant for at least six (6)
months prior to their tender to satisfy the Option Price), or (c) by a
combination of (a) and (b).
The Committee also may allow cashless exercise as permitted under Federal
Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of
exercise and full payment, the Company shall deliver to the Participant, in
the Participant's name, Share certificates in an appropriate amount based
upon the number of Shares purchased under the Option(s).
6.7 Restrictions on Share Transferability. The Committee may impose
such restrictions on any Shares acquired pursuant to the exercise of an
Option granted under this Article 6 as it may deem advisable, including,
without limitation, restrictions under applicable Federal securities laws,
under the requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky or state
securities laws applicable to such Shares.
6.8 Termination of Employment. Each Participant's Option Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment with the Company and/or its Subsidiaries. Such provisions shall
be determined in the sole discretion of the Committee, shall be included in
the Award Agreement entered into with each Participant, need not be uniform
among all Options issued pursuant to this Article 6, and may reflect
distinctions based on the reasons for termination of employment.
6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated
or hypothecated, other than by will or by the laws of descent
and distribution. Further, all ISOs granted to a Participant
under the Plan shall be exercisable during his or her lifetime
only by such Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this
Article 6 may be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated, other than by will or by
the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all
NQSOs granted to a Participant under this Article 6 shall be
exercisable during his or her lifetime only by such
Participant.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and conditions of the Plan,
SARs may be granted to Participants at any time and from time to time as
shall be determined by the Committee. The Committee may grant Freestanding
SARs, Tandem SARs, or any combination of these forms of SAR.
The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such SARs.
The grant price of a Freestanding SAR shall be at least equal to one
hundred percent (100%) of the Fair Market Value of a Share on the date of
grant of the SAR. The grant price of Tandem SARs shall equal the Option
Price of the related Option.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or
part of the Shares subject to the related Option upon the surrender of the
right to exercise the equivalent portion of the related Option. A Tandem SAR
may be exercised only with respect to the Shares for which its related
Option is then exercisable.
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem
SAR will expire no later than the expiration of the underlying ISO; (ii) the
value of the payout with respect to the Tandem SAR may be for no more than
one hundred percent (100%) of the difference between the Option Price of the
underlying ISO and the Fair Market Value of the Shares subject to the
underlying ISO at the time the Tandem SAR is exercised; and (iii) the Tandem
SAR may be exercised only when the Fair Market Value of the Shares subject
to the ISO exceeds the Option Price of the ISO.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon them.
7.4 SAR Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the grant price, the term of the SAR, and such
other provisions as the Committee shall determine.
7.5 Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed ten (10) years.
7.6 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall
be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the
date of exercise less the grant price; by
(b) The number of Shares with respect to which the SAR is
exercised.
At the discretion of the Committee, the payment upon SAR exercise may be
in cash, in Shares of equivalent value, or in some combination thereof.
7.7 Termination of Employment. Each SAR Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company
and/or its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all SARs issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment.
7.8 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
except as otherwise provided in a Participant's Award Agreement, all SARs
granted to a Participant under the Plan shall be exercisable during his or
her lifetime only by such Participant.
Article 8. Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares
of Restricted Stock to Participants in such amounts as the Committee shall
determine.
8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the Period(s) of
Restriction, the number of Shares of Restricted Stock granted, and such
other provisions as the Committee shall determine.
8.3 Transferability. Except as provided in this Article 8, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the
applicable Period of Restriction established by the Committee and specified
in the Restricted Stock Award Agreement, or upon earlier satisfaction of any
other conditions, as specified by the Committee in its sole discretion and
set forth in the Restricted Stock Agreement. All rights with respect to the
Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
8.4 Other Restrictions. Subject to Article 12 herein, the Committee may
impose such other conditions and/or restrictions on any Shares of Restricted
Stock granted pursuant to the Plan as it may deem advisable including,
without limitation, a requirement that Participants pay a stipulated
purchase price for each Share of Restricted Stock, restrictions based upon
the achievement of specific performance goals (Company-wide, divisional,
and/or individual), time-based restrictions on vesting following the
attainment of the performance goals, and/or restrictions under applicable
Federal or state securities laws.
The Company may retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8, Shares of Restricted
Stock covered by each Restricted Stock grant made under the Plan shall
become freely transferable by the Participant after the last day of the
applicable Period of Restriction.
8.5 Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full
voting rights with respect to those Shares.
8.6 Dividends and Other Distributions. During the Period of
Restriction, Participants holding Shares of Restricted Stock granted
hereunder may be credited with regular cash dividends paid with respect to
the underlying Shares while they are so held. The Committee may apply any
restrictions to the dividends that the Committee deems appropriate.
8.7 Termination of Employment. Each Restricted Stock Award Agreement
shall set forth the extent to which the Participant shall have the right to
receive unvested Restricted Shares following termination of the
Participant's employment with the Company and/or its Subsidiaries. Such
provisions shall be determined in the sole discretion of the Committee,
shall be included in the Award Agreement entered into with each Participant,
need not be uniform among all Shares of Restricted Stock issued pursuant to
the Plan, and may reflect distinctions based on the reasons for termination
of employment; provided, however that, except in the cases of terminations
connected with a Change in Control and terminations by reason of death or
Disability, the vesting of Shares of Restricted Stock which qualify for the
Performance-Based Exception and which are held by Named Executive Officers
shall occur at the time they otherwise would have, but for the employment
termination.
Article 9. Performance Units and Performance Shares
9.1 Grant of Performance Units/Shares. Subject to the terms of the
Plan, Performance Units and/or Performance Shares may be granted to
Participants in such amounts and upon such terms, and at any time and from
time to time, as shall be determined by the Committee.
9.2 Value of Performance Units/Shares. Each Performance Unit shall have
an initial value that is established by the Committee at the time of grant.
Each Performance Share shall have an initial value equal to the Fair Market
Value of a Share on the date of grant. The Committee shall set performance
goals in its discretion which, depending on the extent to which they are
met, will determine the number and/or value of Performance Units/Shares that
will be paid out to the Participant.
9.3 Earning of Performance Units/Shares. Subject to the terms of this
Plan, after the applicable Performance Period has ended, the holder of
Performance Units/Shares shall be entitled to receive payout on the number
and value of Performance Units/Shares earned by the Participant over the
Performance Period, to be determined as a function of the extent to which
the corresponding performance goals have been achieved.
9.4 Form and Timing of Payment of Performance Units/ Shares. Payment of
earned Performance Units/Shares shall be made in a single lump sum within
seventy-five (75) calendar days following the close of the applicable
Performance Period. Subject to the terms of this Plan, the Committee, in its
sole discretion, may pay earned Performance Units/Shares in the form of cash
or in Shares (or in a combination thereof) which have an aggregate Fair
Market Value equal to the value of the earned Performance Units/Shares at
the close of the applicable Performance Period. Such Shares may be granted
subject to any restrictions deemed appropriate by the Committee.
Prior to the beginning of each Performance Period, Participants may elect
to defer the receipt of Performance Unit/Share payout upon such terms as the
Committee deems appropriate.
At the discretion of the Committee, Participants may be entitled to
receive any dividends declared with respect to Shares which have been earned
in connection with grants of Performance Units and/or Performance Shares
which have been earned, but not yet distributed to Participants. In
addition, Participants may, at the discretion of the Committee, be entitled
to exercise their voting rights with respect to such Shares.
9.5 Termination of Employment Due to Death, Disability, or Retirement.
In the event the employment of a Participant is terminated by reason of
death, Disability, or Retirement during a Performance Period, the
Participant shall receive a prorated payout of the Performance Units/Shares.
The prorated payout shall be determined by the Committee, in its sole
discretion, shall be based upon the length of time that the Participant held
the Performance Units/Shares during the Performance Period, and shall
further be adjusted based on the achievement of the preestablished
performance goals.
Payment of earned Performance Units/Shares shall be made at the time
specified by the Committee in its sole discretion as set forth in the
Participant's Award Agreement. Notwithstanding the foregoing, with respect
to Covered Employees who retire during the Performance Period, payments
shall be made at the same time as payments are made to Participants who did
not terminate employment during the applicable Performance Period.
9.6 Termination of Employment for Other Reasons. In the event that a
Participant's employment terminates for any reason other than those reasons
set forth in Section 9.5 herein, all Performance Units/Shares shall be
forfeited by the Participant to the Company unless determined otherwise by
the Committee in its sole discretion as set forth in the Participant's Award
Agreement.
9.7 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Units/Shares may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, a Participant's
rights under the Plan shall be exercisable during the Participant's lifetime
only by the Participant or the Participant's legal representative.
Article 10. Cash Bonus Awards
10.1 Grant of Cash Bonus Awards. Subject to the terms and provisions of
the Plan, Cash Bonus Awards may be granted to Participants in such amount
upon such terms, and at any time and from time to time as shall be
determined by the Committee. The Cash Bonus Award pool established pursuant
to this Plan shall be two million four hundred thousand dollars
($2,400,000).
10.2 Form and Timing of Payment of Cash Bonus Awards. Payment of Cash
Bonus Awards shall be made in cash at such times as established by the
Committee subject to the terms of the Plan.
Article 11. Other Incentive Awards
11.1 Grant of Other Incentive Awards. Subject to the terms and
provisions of the Plan, Other Incentive Awards may be granted to
Participants in such amount, upon such terms, and at any time and from time
to time as shall be determined by the Committee.
11.2 Other Incentive Award Agreement. Each Other Incentive Award grant
shall be evidenced by an Award Agreement that shall specify the amount of
the Other Incentive Award granted, the terms and conditions applicable to
such grant, the applicable Performance Period and performance goals, and
such other provisions as the Committee shall determine, subject to the terms
and provisions of the Plan.
11.3 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Other Incentive Awards may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution.
11.4 Form and Timing of Payment of Other Incentive Awards. Payment of
Other Incentive Awards shall be made at such times and in such form, either
in cash or in Shares (or a combination thereof) as established by the
Committee subject to the terms of the Plan. Such Shares may be granted
subject to any restrictions deemed appropriate by the Committee. Without
limiting the generality of the foregoing, annual incentive awards may be
paid in the form of Other Incentive Awards (which may or may not be subject
to restrictions, at the discretion of the Committee).
Article 12. Performance Measures
Unless and until the Committee proposes for shareholder vote and
shareholders approve a change in the general performance measures set forth
in this Article 12, the attainment of which may determine the degree of
payout and/or vesting with respect to Awards to Named Executive Officers
which are designed to qualify for the Performance-Based Exception, the
performance measure(s) to be used for purposes of such grants shall be
chosen from among the following alternatives:
(a) Return on Assets ("ROA");
(b) Cash Flow Return on Investment ("CFROI");
(c) Earnings Before Interest and Taxes ("EBIT");
(d) Stock Price Appreciation;
(e) Total Shareholder Return; or
(f) Net Earnings.
The Committee shall have the discretion to adjust the determinations of
the degree of attainment of the preestablished performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception, and which are held by Named Executive Officers, may not be
adjusted upward (the Committee shall retain the discretion to adjust such
Awards downward).
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining shareholder approval of such changes, the Committee shall have
sole discretion to make such changes without obtaining shareholder approval.
In addition, in the event that the Committee determines that it is advisable
to grant Awards which shall not qualify for the Performance-Based Exception,
the Committee may make such grants without satisfying the requirements of
Code Section 162(m).
Article 13. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively)
to whom any benefit under the Plan is to be paid in case of his or her death
before he or she receives any or all of such benefit. Each such designation
shall revoke all prior designations by the same Participant, shall be in a
form prescribed by the Company, and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime.
In the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 14. Deferrals
The Committee may permit a Participant to defer such Participant's
receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant by virtue of the exercise of an Option
or SAR, the lapse or waiver of restrictions with respect to Restricted
Stock, or the satisfaction of any requirements or goals with respect to
Performance Units/Shares, Cash Bonus Awards, or Other Incentive Awards. If
any such deferral election is required or permitted, the Committee shall, in
its sole discretion, establish rules and procedures for such payment
deferrals.
Article 15. Rights of Employees
15.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the
employ of the Company.
For purposes of this Plan, a transfer of a Participant's employment between
the Company and a Subsidiary, or between Subsidiaries, shall not be deemed
to be a termination of employment. Upon such a transfer, the Committee may
make such adjustments to outstanding Awards as it deems appropriate to
reflect the changed reporting relationships.
15.2 Participation. No Employee shall have the right to be selected to
receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
Article 16. Change in Control
16.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or
by the rules and regulations of any governing governmental agencies or
national securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable
throughout their entire term.
(b) Any restriction periods and restrictions imposed on Restricted
Shares shall lapse.
(c) The target payout opportunities attainable under all
outstanding Awards of Performance Units and Performance Shares
and Other Incentive Awards, but not Cash Bonus Awards, shall
be deemed to have been fully earned for the entire Performance
Period(s) as of the effective date of the Change in Control.
The vesting of all Awards denominated in Shares shall be
accelerated as of the effective date of the Change in Control,
and there shall be paid out to Participants within thirty (30)
days following the effective date of the Change in Control a
pro rata number of shares based upon an assumed achievement of
all relevant targeted performance goals and upon the length of
time within the Performance Period which has elapsed prior to
the Change in Control. Awards denominated in cash shall be
paid pro rata to Participants in cash within thirty (30) days
following the effective date of the Change in Control, with
the proration determined as a function of the length of time
within the Performance Period which has elapsed prior to the
Change in Control, and based on an assumed achievement of all
relevant targeted performance goals. Subject to the approval
of the Committee, the Cash Bonus Awards may be deemed to have
been fully earned in the event of a Change in Control.
(d) Subject to Article 17 herein, the Committee shall have the
authority to make any modifications to the Awards as
determined by the Committee to be appropriate before the
effective date of the Change in Control.
16.2 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of this Plan or any Award
Agreement provision, the provisions of this Article 16 may not be
terminated, amended, or modified to affect adversely any Award theretofore
granted under the Plan without the prior written consent of the Participant
with respect to said Participant's outstanding Awards; provided, however,
that the Board, upon recommendation of the Committee, may terminate, amend,
or modify this Article 16 at any time and from time to time prior to the
date of a Change in Control to affect Awards not yet granted under the Plan.
Article 17. Amendment, Modification, and Termination
17.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole
or in part; provided, however, that unless the Board specifically provides
otherwise, any revision or amendment that would cause the Plan to fail to
comply with any requirement of applicable law, regulation, or rule if such
amendment were not approved by shareholders, shall not be effective unless
and until such approval of shareholders of the Company is obtained.
17.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any
Award previously granted under the Plan, without the written consent of the
Participant holding such Award.
17.3 Compliance with Code Section 162(m). At all times when Code Section
162(m) is applicable, all Awards granted under this Plan shall comply with
the requirements of Code Section 162(m); provided, however, that in the
event the Committee determines that such compliance is not desired with
respect to any Award or Awards available for grant under the Plan, then
compliance with Code Section 162(m) will not be required. In addition, in
the event that changes are made to Code Section 162(m) to permit greater
flexibility with respect to any Award or Awards available under the Plan,
the Committee may, subject to this Article 17, make any adjustments it deems
appropriate.
Article 18. Withholding
18.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an
amount sufficient to satisfy Federal, state, and local taxes, domestic or
foreign, required by law or regulation to be withheld with respect to any
taxable event arising as a result of this Plan.
18.2 Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted
Stock, or upon any other taxable event arising as a result of Awards granted
hereunder, Participants may elect, subject to the approval of the Committee,
to satisfy the withholding requirement, in whole or in part, by having the
Company withhold Shares having a Fair Market Value on the date the tax is to
be determined equal to the minimum statutory total tax which could be
imposed on the transaction. All such elections shall be irrevocable, made in
writing, signed by the Participant, and shall be subject to any restrictions
or limitations that the Committee, in its sole discretion, deems
appropriate.
Article 19. Financial Assistance
If the Committee determines that such action is advisable, the Company
may assist any person to whom an Award has been granted in obtaining
financing from the Company (or under any program of the Company approved
pursuant to applicable law), or from a bank or other third party, on such
terms as are determined by the Committee, and in such amount as is required
to accomplish the purposes of the Plan, including, but not limited to, to
permit the exercise of an Award, the participation therein, and/or the
payment of any taxes in respect thereof. Such assistance may take any form
that the Committee deems appropriate, including, but not limited to, a
direct loan from the Company, a guarantee of the obligation by the Company,
or the maintenance by the Company of deposits with such bank or third party.
Article 20. Indemnification
Each person who is or shall have been a member of the Committee, or of
the Board, shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by him or
her in settlement thereof, with the Company's approval, or paid by him or
her in satisfaction of any judgement in any such action, suit, or proceeding
against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same before he or
she undertakes to handle and defend it on his or her own behalf. The
foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Articles of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
Article 21. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all
of the business and/or assets of the Company.
Article 22. Legal Construction
22.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural
shall include the singular and the singular shall include the plural.
22.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
22.3 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
22.4 Securities Law and Tax Law Compliance. With respect to Insiders,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent
any provision of the plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee.
22.5 Stockholder Adoption. This Plan shall be submitted to the
stockholders of the Company, for their approval and adoption in accordance
with applicable law and Code Section 162(m). All Awards made hereunder prior
to stockholder approval shall be granted contingent upon such approval. If
this Plan is not so approved and adopted by stockholders, all Awards granted
hereunder shall be null and void.
22.6 Governing Law. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with
and governed by the laws of the State of Delaware.
