<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the registrant/X/
Filed by a party other than the registrant/ /
Check the appropriate box:
/ /Preliminary
/ /Confidential for Use by the Commission Only (as permitted by Rule
14a-6(e)(2)
/X/Definitive proxy statement
/X/Definitive additional materials
/ /Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
KUHLMAN CORPORATION
(Name of Registrant as Specified in Its Charter)
RUDNICK & WOLFE
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/No fee required.
/ /Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Not Applicable
(2) Aggregate number of securities to which transactions applies:
Not Applicable
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:
Not Applicable
(4) Proposed maximum aggregate value of transaction:
Not Applicable
/ /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:
<PAGE>
KUHLMAN CORPORATION
3 SKIDAWAY VILLAGE SQUARE
SAVANNAH, GEORGIA 31411
March 24, 1997
DEAR STOCKHOLDER:
You are cordially invited to attend the annual meeting of stockholders of
Kuhlman Corporation ("Kuhlman") to be held at the Hyatt Regency Savannah, 2
West Bay Street, Savannah, Georgia 31401 on April 24, 1997, at 9:30 a.m.,
Savannah
time ("Annual Meeting").
The Kuhlman Annual Meeting will be held for the following purposes: (i) to
elect three directors; (ii) to vote on a proposed Long-Term Incentive Plan; and
(iii) to ratify the appointment of Arthur Andersen LLP as independent auditors
to conduct the annual examination of the financial statements of Kuhlman and
its subsidiaries for the current year.
Whether or not you plan to attend the Kuhlman Annual Meeting, please
complete, sign and date the accompanying proxy card and return it in the
enclosed prepaid envelope. You may revoke your proxy in the manner described in
the accompanying Proxy Statement at any time before it has been voted at the
Kuhlman Annual Meeting. If you attend the Kuhlman Annual Meeting, you may vote
in person even if you have previously returned your proxy card. Your prompt
cooperation will be greatly appreciated.
The 1996 Annual Report to stockholders of Kuhlman, including financial
statements, is furnished herewith.
Sincerely,
ROBERT S. JEPSON, JR.
/s/ Robert S. Jepson, Jr.
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
KUHLMAN CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders ("Annual
Meeting") of Kuhlman Corporation ("Kuhlman") will be held at the Hyatt Regency
Savannah, 2 West Bay Street, Savannah, Georgia 31401 on April 24, 1997, at 9:30
a.m., Savannah time, for the following purposes:
1. To elect three directors;
2. To consider and vote on the Kuhlman Corporation Long-Term Incentive
Plan ("Long-Term Incentive Plan");
3. To ratify the appointment of Arthur Andersen LLP as the independent
auditors for Kuhlman and its subsidiaries for the current year; and
4. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on February 28, 1997
will be entitled to notice of and to vote at the Annual Meeting.
By Order of the Board of
Directors,
RICHARD A. WALKER
SECRETARY
Savannah, Georgia
March 24, 1997
PLEASE DATE, SIGN AND RETURN YOUR KUHLMAN PROXY PROMPTLY IN THE
ENCLOSED, SELF-ADDRESSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
<PAGE>
KUHLMAN CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of Kuhlman
Corporation, a Delaware corporation ("Kuhlman"), in connection with the
solicitation of proxies on behalf of the Board of Directors of Kuhlman ("Board
of Directors") for use at the annual meeting of Kuhlman stockholders to be held
on April 24, 1997, and at any adjournment thereof ("Annual Meeting"). The
address of the principal executive offices of Kuhlman is 3 Skidaway Village
Square, Savannah, Georgia 31411.
The Annual Meeting has been called by the Board of Directors for the
following purposes: (i) to elect three directors; (ii) to vote on a proposed
Long-Term Incentive Plan, and (iii) to ratify the appointment of Arthur
Andersen LLP as Kuhlman's independent auditors for the current year ending
December
31, 1997. The Annual Meeting will be held on April 24, 1997, at 9:30 a.m.,
Savannah
time, at the Hyatt Regency Savannah, 2 West Bay Street, Savannah, Georgia
31401. Only stockholders of record of Kuhlman Common Stock at the close of
business on
February 28, 1997 will be entitled to notice of and to vote at the Annual
Meeting. Kuhlman had outstanding 13,753,367 shares of Kuhlman Common Stock as
of the close of business on February 28, 1997. There are no other
voting
securities outstanding. Each stockholder is entitled to one vote per
share for the
election of directors, as well as on each other proposal contained in the
notice of the
Annual Meeting. If the accompanying proxy form is signed and returned, the
shares represented thereby will be voted in accordance with any direction on
the proxy form, or in the absence of a direction as to any proposal, they will
be
voted FOR the proposal; and it is intended that they will be voted for the
nominees named herein, except to the extent authority to vote is withheld.
Stockholders may revoke their proxies at any time prior to the voting thereof
by giving written notice of such revocation to Kuhlman, by executing
and
delivering a proxy bearing a later date or by attending the Annual Meeting and
voting in
person.
The expenses of the solicitation will be paid by Kuhlman. In addition to
the use of the mails, proxies may be solicited by directors, officers, or
regular employees of Kuhlman in person, by telegraph or by telephone.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the shares of Kuhlman Common Stock held of record by such persons,
and Kuhlman will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith. Kuhlman has retained Georgeson & Company Inc. to assist
in the
solicitation of proxies. The fee of such firm is estimated to be $7,000, plus
reimbursement for out-of-pocket costs and expenses.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Kuhlman Common Stock is necessary to
constitute a quorum under Delaware law and the Bylaws of Kuhlman. Votes cast by
proxy or in person at the meeting will be tabulated by election inspectors
appointed for the meeting and will determine whether or not a quorum is
present. The election inspectors will treat abstentions and "broker non-votes"
(i.e.,
proxies of brokers who have limited authority to vote on specified proposals)
as shares that are present and entitled to vote for purposes of determining the
presence of a quorum at the meeting.
A plurality of the votes cast for the election of directors will be
required to elect Kuhlman directors at the meeting. In the absence of an
election contest, withholding authority to vote and broker non-votes with
respect to a nominee will have no effect on the election of such nominee.
Approval of the proposed Long-Term Incentive Plan requires the affirmative
vote of the holders of a majority of the Kuhlman Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting.
Kuhlman stockholders may mark the accompanying Kuhlman proxy to vote their
shares FOR or AGAINST or to ABSTAIN with respect to each proposal, except that
with respect to the election of directors, Kuhlman stockholders may either vote
FOR the nominees named herein or to WITHHOLD authority to vote for one or more
of such nominees. Abstentions (but not broker non-votes) will be considered
entitled to vote for purposes of the proposed Long-Term Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT KUHLMAN STOCKHOLDERS VOTE
"FOR" APPROVAL OF EACH NOMINEE FOR ELECTION OF DIRECTORS AND "FOR" EACH
PROPOSAL CONTAINED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS OF KUHLMAN.
The management of Kuhlman knows of no business other than that stated in
this Proxy Statement which will be presented for stockholder vote at the Annual
Meeting. If other business should properly come before such meeting, however,
the persons designated in the enclosed Kuhlman proxy will vote or refrain from
voting in respect thereof in accordance with the judgment of the persons voting
such proxies.
This Proxy Statement and the form of proxy for use at the Annual Meeting
are first being mailed to stockholders of Kuhlman on or about March 24, 1997.
The date of this Proxy Statement is March 24, 1997.
ELECTION OF KUHLMAN DIRECTORS
The Kuhlman Bylaws provide that the number of directors, as determined by
the Kuhlman Board of Directors, shall not be less than six nor more than
eleven. The Kuhlman Bylaws further provide that directors shall be divided into
three
classes serving staggered three year terms, with each class to be as nearly
equal in number as possible.
On August 9, 1996 the Board of Directors decreased the number of directors
by one to remove the vacancy on the Board of Directors caused by the July 15,
1996 resignation of John L. Marcellus, Jr., who had served as a director since
1982. The Board is grateful to Mr. Marcellus for his many years of dedicated
service to Kuhlman.
On February 18, 1997 the Board of Directors decreased the number of
directors by one to remove the vacancy on the Board of Directors caused by the
death of Robert D. Kilpatrick who had served as a director since 1993. Mr.
Kilpatrick passed away in January 1997. The entire board is saddened by his
passing and will miss his support.
The terms of Gary G. Dillon, William M. Kearns, Jr., and George J. Michel,
Jr. will expire at the Annual Meeting. The Board of Directors has nominated
Messrs. Dillon, Kearns and Michel for re-election as directors to serve until
the 2000 annual meeting of stockholders.
The proposed nominees for election as directors have indicated that they
are willing to be elected and serve as such and it is intended that the persons
named in the accompanying form of proxy will vote for the election of such
nominees, assuming authority to vote is granted. If, as a result of
circumstances not now known or foreseen, any of such nominees shall be
unavailable or unwilling to serve as a director, the Board of Directors may
select a substitute nominee and in that event the proxies will vote for the
person so selected. If a substitute nominee is not so selected, the proxies
will vote for the election of the remaining nominees. Directors are elected by
a
plurality of the votes cast at the meeting.
INFORMATION REGARDING KUHLMAN DIRECTORS, NOMINEES FOR
DIRECTORS OF KUHLMAN AND EXECUTIVE OFFICERS
The following information is furnished with respect to each person who is
currently a director of Kuhlman whose term of office will continue after the
Annual Meeting, as well as those persons who have been nominated for election
as a director, each of whom is currently a director of Kuhlman, and each
person
who is an executive officer of Kuhlman:
<TABLE>
<CAPTION>
Director of
Kuhlman
Name Age Since Position
<S> <C> <C> <C>
Curtis G. Anderson 55 1993 President, Chief Operating Officer and Director of
Kuhlman (3)
William E. Burch 72 1993 Director of Kuhlman (1)
Steve Cenko 71 1987 Director of Kuhlman (2)
Gary G. Dillon 62 1995 Chairman, President and Chief Executive Officer of
Schwitzer, Inc. and Director of Kuhlman (3)(4)
Alexander W. Dreyfoos, Jr. 65 1993 Director of Kuhlman (1)
Robert S. Jepson, Jr. 54 1993 Chairman of the Board, Chief Executive Officer and
Director of Kuhlman
William M. Kearns, Jr. 61 1993 Director of Kuhlman (1)(4)
George J. Michel, Jr. 65 1985 Director of Kuhlman (2)(3)(4)
General H. Norman
Schwarzkopf 62 1994 Director of Kuhlman (2)
</TABLE>
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Finance Committee.
(4) Nominated for election as a director.
The current terms of Messrs. Dillon, Kearns and Michel expire in 1997;
Messrs. Anderson, Burch, Dreyfoos and General Schwarzkopf, in 1998; and of
Messrs. Cenko and Jepson in 1999.
<TABLE>
<CAPTION>
Executive
Officer of
Kuhlman
Name Age Since Position
<S> <C> <C> <C>
Robert S. Jepson, Jr. 54 1993 Chairman of the Board and Chief Executive Officer
Curtis G. Anderson 55 1994 President and Chief Operating Officer
Gary G. Dillon 62 1995 Chairman, President and Chief Executive Officer of
Schwitzer, Inc.
Vernon J. Nagel 39 1993 Executive Vice President of Finance, Chief Financial
Officer and Treasurer
Richard A. Walker 45 1984 Executive Vice President, Chief Administrative Officer,
General Counsel and Secretary
</TABLE>
Mr. Anderson, who was elected President and Chief Operating Officer of
Kuhlman on April 26, 1994, and a director on September 8, 1993, founded and has
been, since 1986, Chairman of Anderson Capital Corporation, a private
investment company. Prior thereto, he spent 19 years in corporate and
investment banking,
including 14 years with Citibank and five years with The First National Bank of
Chicago where he served as Executive Vice President, Head of Financial Products
Department.
Mr. Burch served as counsel to the law firm of Lukins & Annis in Spokane,
Washington from 1984 to 1993. From 1981 to 1984, he served as Vice Chairman and
from 1975 to 1981, as President and Chief Executive Officer of Fred S. James &
Co. (insurance brokers). He has been a consultant from 1982 to the present and
currently serves as a director of Guy F. Atkinson Company of California.
Mr. Cenko has been a consultant from 1985 to the present. From 1980 to
1985 he served as President of Lamb Systems Group (engineering, manufacturing,
and
marketing of machine tools) and as a director and Executive Vice President of
Lamb Technicon Corporation (holding company).
Mr. Dillon is Chairman, President and Chief Executive Officer of
Schwitzer, Inc. Mr. Dillon has served in his present capacity since June, 1991,
having
served as President and Chief Executive Officer since April, 1989. Prior to
April, 1989 he served as President and Chief Executive Officer of Household
Manufacturing, Inc. Mr. Dillon is also a director of Household International,
Inc.
Mr. Dreyfoos is currently serving, and has served continuously since 1963,
as Chairman of the Board of Photo Electronics Corporation (investment
management). He also serves as a director of Florida Power & Light Company.
Mr. Jepson, who was elected President and Chief Executive Officer of
Kuhlman on February 10, 1993, and Chairman of the Board on June 9, 1993,
founded and was Chairman and Chief Executive Officer of The Jepson
Corporation from
1983 until its sale in 1989. The Jepson Corporation was a diversified
manufacturing
company listed on the New York Stock Exchange. Immediately preceding his
election as President and Chief Executive Officer of Kuhlman, Mr. Jepson was,
and is currently, Chairman and Chief Executive Officer of Jepson Associates,
Inc., a private investment company. Mr. Jepson currently serves as a director
of Savannah Foods & Industries, Inc.
Mr. Kearns is currently President of W.M. Kearns & Co., Inc. (private
investment company). He was associated with Lehman Brothers (investment
banking) and its predecessor firms for more than 33 years. From 1992 to 1994 he
was an
Advisory Director of Lehman Brothers and from 1969 through 1992 he was a
Managing Director of that firm. He also serves as a director of Selective
Insurance Group, Inc., Mountasia Entertainment International, Inc. and
Consolidated Delivery & Logistics, Inc. and as a trustee of EQ Advisors Trust
(Equitable Life Assurance Society of the United States).
Mr. Michel has been a private investor and consultant and Chairman of
Windstar International, Inc. (management consulting) from 1990 to the present.
Prior to 1990, he was Chairman of Stanadyne, Inc. (diversified manufacturer of
fabricated metal products) from 1985 to 1989, and Chief Executive Officer of
the same corporation from 1988 to 1989.
Mr. Nagel joined Kuhlman on April 5, 1993 and was elected Vice President
of Finance, Chief Financial Officer and Treasurer of Kuhlman on June 9, 1993
and
Executive Vice President of Finance on February 22, 1994. He was the Vice
President of Finance, Chief Financial Officer and Secretary of Stericycle, Inc.
(medical waste management) from 1990 until 1993. Prior thereto, Mr. Nagel
served as a Vice President of The Jepson Corporation from 1985 until 1990,
including
Chief Financial Officer from 1989 until 1990 and Controller from 1986 until
1989.
General Schwarzkopf is currently active as an author, lecturer and TV
consultant. He retired in August 1991 as a Four-Star General in the U.S. Army
after having served as Commander in Chief, United States Central Command,
Department of Defense, and Commander of Operations Desert Shield and Desert
Storm. He currently serves as a director of Borg-Warner Security Corporation,
The Washington Water Power Company, Remington Arms Company, Inc., and Home
Shopping Network, Inc.
Mr. Walker has served as an Executive Vice President or similar position
with Kuhlman, as well as General Counsel and Secretary, since 1991. He has
served as Chief Administrative Officer since 1994. From 1984 until 1991, Mr.
Walker served as Vice President, General Counsel and Secretary of Kuhlman.
Prior thereto, Mr. Walker was a partner in the law firm of Harness, Dickey &
Pierce.
Board of Directors and Committees
Kuhlman currently has standing Audit, Compensation, and Finance Committees
of the Board of Directors, and Steve Cenko continues to advise the Board of
Directors with respect to, and recommend individuals as, nominees for director
of Kuhlman.
The members of the Audit Committee are William E. Burch, Chairman,
Alexander W. Dreyfoos, Jr. and William M. Kearns, Jr. The Audit Committee,
which met twice during 1996, recommends the appointment, subject to approval by
the
Board of Directors and ratification by the stockholders, of Kuhlman's
independent auditors. The Committee meets with representatives of Kuhlman's
independent auditors to review the scope and effectiveness of the auditing
functions, makes appropriate reports and recommendations to the Board of
Directors, approves the fees to be paid to the independent auditors and
considers the effect of non-audit services on the independence of the
independent auditors.
The members of the Compensation Committee are George J. Michel, Jr.,
Chairman, Steve Cenko and General H. Norman Schwarzkopf. The Committee, which
met three times during 1996, reviews and establishes all forms of compensation,
including periodic adjustments, for officers and certain other key employees of
Kuhlman. This Committee also administers the stock option and stock
appreciation rights plans of Kuhlman and grants options and stock appreciation
rights
thereunder.
The Finance Committee is composed of George J. Michel, Jr., Chairman,
Curtis G. Anderson, and Gary G. Dillon. This Committee, which did not meet
during 1996, provides advice to the officers of Kuhlman as to the investment of
funds held by Kuhlman and as to capitalization and the financial resources
needed by Kuhlman to meet its short-term and long-term needs. The Committee
also reviews the investment policies and performance of the employee benefit
plans
of Kuhlman.
Four meetings of the Board of Directors were held during 1996. Each
director attended at least seventy-five percent of the aggregate of the total
number of meetings of the Board of Directors of Kuhlman held in 1996 during the
time that the person served as a director and the total number of meetings held
by all committees of the Board on which they served during the periods that
they served in 1996.
A stockholder of Kuhlman may nominate persons for election to the Board of
Directors of Kuhlman if such stockholder submits such nomination, together with
certain related information required by Kuhlman's Bylaws, in writing to the
Secretary of Kuhlman not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting of stockholders;
provided, that in the event the date of the annual meeting is advanced by more
than 30 days or delayed by more than 60 days from such anniversary date, the
nomination must be submitted not earlier than the 90th day prior to such annual
meeting and not later than the 60th day prior to such annual meeting or the
10th day following the date on which public announcement of the date of such
meeting
is first made.
Compensation of Directors
Non-employee directors receive an annual retainer of $24,000 which covers
all Board of Directors meetings, Committee meetings and consulting services
(however, additional payments for financial advisory services rendered to
Kuhlman by an affiliate of Mr. Kearns will also be made. See "Information
Regarding Kuhlman Directors, Nominees for Directors of Kuhlman and Executive
Officers -- Related Transactions.") In addition, under Kuhlman's Non-Employee
Directors Stock Plan which was approved by stockholders in 1993, non-employee
directors receive annually a number of shares of Kuhlman's Common Stock equal
to an aggregate Fair Market Value of $24,000 concurrent with the meeting of the
Board of Directors held each year after the Annual Meeting of Stockholders.
Fair Market Value is defined as the closing price of Kuhlman Common Stock on
the New
York Stock Exchange on the date of such directors' meeting or if there is no
such price published on such date, then the most recent preceding date on which
such price is published. Pursuant to such Plan, Messrs. Burch, Cenko, Dreyfoos,
Kearns, Michel and General Schwarzkopf each received 1,342 shares of Kuhlman
Common Stock as of April 25, 1996.
All non-employee directors are reimbursed for travel and other expenses
related to attendance at meetings and receive term life insurance and
accidental death and disability coverage in the amount of $50,000. The cost to
the
Corporation for this insurance coverage is $240 per year for each director.
During 1996, Kuhlman provided medical and dental insurance coverage to Messrs.
Burch, Dreyfoos, Kearns, Michel and General Schwarzkopf. The total
compensation, including insurance benefits, but excluding the stock referred
to above, paid
to each non-employee director during 1996 was as follows: William E.
Burch -- $34,964; Steve Cenko -- $24,240; Alexander W. Dreyfoos, Jr. --
$34,964; William M. Kearns, Jr. -- $34,964; George J. Michel, Jr. --
$34,964; and
General H. Norman Schwarzkopf -- $34,964. Pursuant to the Long-Term Incentive
Plan, and
subject to approval of such plan by the Stockholders, an option to purchase
2,000 shares of Kuhlman Common Stock is granted automatically to each
non-employee director of Kuhlman concurrent with the meeting of the Board of
Directors held each year following the Annual Meeting of Stockholders.
Additionally, under that plan, each non-employee director received, subject to
approval of such Plan by the Stockholders, an option to acquire 2,000 shares of
Kuhlman Common Stock immediately following adoption of such plan by the Board
of Directors, which adoption occurred on August 9, 1996.
Report of the Compensation Committee of the Kuhlman Board of Directors on
Executive Compensation
Kuhlman's executive compensation program is administered by the
Compensation Committee of the Kuhlman Board of Directors. The Compensation
Committee is composed entirely of non-employee directors of Kuhlman.
Overall Policy. The Compensation Committee determines the compensation of
the officers of Kuhlman, including the individuals named in the Summary
Compensation Table. The compensation of the corporation's Chief Executive
Officer is ratified by the Board of Directors. Kuhlman's compensation program
for officers is designed to be linked to corporate performance and to returns
to stockholders. To this end, Kuhlman has developed an overall compensation
strategy and specific compensation plans that tie a very significant portion of
executive compensation to Kuhlman's and the individual's success in meeting
specified performance objectives and to appreciation in Kuhlman's stock price.
In 1996, the specific performance objectives included improving earnings,
improving utilization of working capital, reducing overhead costs by improving
operating efficiencies, and continued implementation of an acquisition
strategy. Subjective discretionary factors were utilized in determining
cash bonus
awards, as well as other elements of officer compensation. The overall
objectives of
this strategy are to attract and retain the best possible executive talent, to
motivate these executives to achieve the objectives inherent in Kuhlman's
business strategy, to link executive and stockholder interests through
equity-based plans, and finally to provide a compensation package that
recognizes individual contributions as well as overall business results.
The key elements of Kuhlman's officer compensation program in 1996
consisted of base salary, annual bonus, stock options and cash-only stock
appreciation rights (SARs). The Compensation Committee's policies with respect
to each of these elements, including the bases for the compensation awarded to
Mr. Jepson, Kuhlman's Chairman and Chief Executive Officer, are discussed
below. In addition, while the elements of compensation described below are
considered
separately, the Compensation Committee takes into account the full compensation
package afforded by Kuhlman to the individual, including pension benefits,
severance plans, insurance and other benefits, as well as the programs
described below. The Compensation Committee retains the discretion to keep
individual
items of compensation constant so long as total compensation fairly reflects
overall corporate performance and individual achievement.
Base Salaries. Base salaries for new officers are initially determined
by evaluating the responsibilities of the position held and the experience of
the
individual, and by reference to the competitive marketplace for executive
talent, including a comparison of average and median base salaries for similar
positions at other comparable companies. Companies believed to be comparable
include similarly-sized (based on expected annual revenues of Kuhlman) basic
manufacturing companies, other than so-called "high technology" manufacturing
companies, as well as holding companies with subsidiaries involved in
manufacturing.
Annual salary adjustments are determined by evaluating the performance of
Kuhlman and of each officer versus various performance objectives, and also
take into account new responsibilities and subjective discretionary factors. In
the
case of officers with responsibility for a particular division or subsidiary (a
"Business Unit"), the financial results of that Business Unit are also
considered. The Compensation Committee, where appropriate, also considers
non-financial performance measures. These include increase in market share,
manufacturing efficiency gains, improvements in product quality and
improvements in relations with customers, suppliers and employees.
In arriving at Mr. Jepson's base salary amount for 1996, the Compensation
Committee took into account a comparison of average and median base salaries
and total cash compensation (base salary plus bonus) for chief executive
officers
of comparable manufacturing companies, as referred to above, and the assessment
by
the Compensation Committee of Mr. Jepson's individual performance expected in
1996 and beyond. The base salaries of each of Messrs. Anderson, Dillon, Nagel,
and Walker for 1996 were determined utilizing the same factors used in
determining Mr. Jepson's base salary.
Annual Bonus. Kuhlman officers are eligible for an annual cash bonus. As
in the case of base salary, the Compensation Committee may consider individual
non-financial performance measures and subjective discretionary factors
including significant accomplishments and/or increased responsibilities,
leadership, and, where appropriate, Business Unit and line item performance
measures (such as earnings, cash flow, and working capital management) in
determining bonuses. The Compensation Committee believed that the bonus paid to
Mr. Jepson for 1996 performance was justified in view of Mr. Jepson's
leadership of Kuhlman in 1996, which included improving Kuhlman's operating
earnings and
balance sheet. Mr. Jepson's bonus amount in 1996, as well as the bonuses
received in 1996 by Messrs. Anderson, Dillon, Nagel and Walker, were determined
on a discretionary basis, keeping in mind average and median total cash
compensation levels at comparable manufacturing companies, as referred to
above. In the case of Mr. Dillon, reference was also made to certain
performance
guidelines and plans used at Schwitzer (see "Executive Compensation and
Severance Agreements"). The Compensation Committee believed that the bonuses
paid to each of Messrs. Anderson, Dillon, Nagel and Walker were justified based
on each of said executive's individual performance in 1996.
Stock Options. Under Kuhlman's stock option plans, which were approved by
stockholders, stock options are granted to Kuhlman officers and other key
employees. Stock options are also designed to further align the interests of
officers with those of stockholders. The Compensation Committee sets guidelines
for the size of stock option awards based on factors similar to those used to
determine base salaries and annual bonuses, including corporate performance and
general competitive compensation practices regarding stock option awards. In
the event of poor corporate performance, the Compensation Committee can elect
not
to award options. The Committee also considers grants in previous years.
The
grants in 1996 took into account the desire on the part of the Compensation
Committee
to further align the officer's interests with those of Kuhlman stockholders.
Stock options are granted with an exercise price equal to the market price of
Kuhlman Common Stock on the date of grant. In 1996, Mr. Jepson and each of
Messrs. Anderson, Dillon, Nagel and Walker received options to purchase shares
of Kuhlman Common Stock.
Stock Appreciation Rights. Under the Kuhlman Corporation 1994 Stock
Appreciation Rights Plan (the "SAR Plan") adopted by the Board of Directors in
1994, SARs may be granted to Kuhlman officers and other key employees. The SARs
are automatically exercised on the fifth anniversary of grant and pay in cash
the difference between the price of Kuhlman Common Stock on the date of
exercise versus the price of such stock on the date of grant of the
SAR. The
Compensation Committee sets guidelines for the size of SAR grants based on
factors similar
to those used for stock options. During 1996, no SAR grants were made.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Code, enacted in 1993 and effective for fiscal years beginning on or after
January 1, 1994, generally disallows a tax deduction to public companies for
compensation over $1 million paid to a corporation's chief executive officer
and four other most highly compensated executive officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. Kuhlman currently intends to continue to review
the performance-based portion of the compensation of its executive officers in
view of this statute and regulations relating thereto.
Conclusion. Through the programs described above, a very significant
portion of Kuhlman's executive compensation is linked directly to corporate and
individual performance and stock price appreciation. In 1996, as in previous
years, a significant portion of Kuhlman officers' compensation consisted of
these variable performance-based elements. The Compensation Committee intends
to continue the policy of linking executive compensation to corporate
performance
and returns to stockholders, recognizing that the fluctuations of a business
cycle may from time to time result in an imbalance for a particular period.
Compensation Committee
George J. Michel, Jr., Chairman
Steve Cenko
General H. Norman Schwarzkopf
Executive Compensation
Summary Compensation Table. The following table sets forth certain
information regarding compensation paid during each of Kuhlman's last three
fiscal years to its Chief Executive Officer, and the four most highly
compensated persons serving as executive officers of Kuhlman ("Named
Executives") at December 31, 1996 whose salary and bonus for fiscal year 1996
exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards(2)
Annual Restricted
Compensation (1) Other Annual Stock
Name and Principal Position Year Salary Bonus (2) Compensation (3) Awards
<S> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr. 1996 $450,000 $525,000 $ -- $ --
Chairman of the Board and 1995 300,000 300,000 -- --
Chief Executive Officer 1994 300,000 -- -- --
Curtis G. Anderson (6) 1996 400,000 400,000 -- --
President and Chief 1995 300,000 300,000 -- --
Operating Officer 1994 204,282 -- -- 500,000(8)
Gary G. Dillon (7) 1996 420,000 400,000 8,067 --
Chairman, President and 1995 370,292 300,000 24,699 --
Chief Executive Officer 1994 -- -- -- --
of Schwitzer, Inc.
Vernon J. Nagel 1996 230,000 100,000 -- --
Executive Vice President of 1995 190,000 80,000 -- --
Finance, Chief Financial 1994 180,000 10,000 2,301 --
Officer and Treasurer
Richard A. Walker 1996 230,000 100,000 -- --
Executive Vice President, 1995 190,000 80,000 -- --
Chief Administrative Officer,1994 183,333 10,000 4,592 --
General Counsel and
Secretary
</TABLE>
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Options/SARS All Other
Name and Principal Position Year Granted(4) Compensation (5)
<S> <C> <C> <C>
Robert S. Jepson, Jr. 1996 100,000 $ 2,700
Chairman of the Board and 1995 100,000 4,584
Chief Executive Officer 1994 135,000 4,482
Curtis G. Anderson (6) 1996 50,000 3,825
President and Chief 1995 50,000 5,970
Operating Officer 1994 135,000 4,374
Gary G. Dillon (7) 1996 5,000 15,120
Chairman, President and 1995 9,615 1,489,444(9)
Chief Executive Officer 1994 -- --
of Schwitzer, Inc.
Vernon J. Nagel 1996 20,000 2,805
Executive Vice President of 1995 20,000 4,847
Finance, Chief Financial 1994 45,000 4,289
Officer and Treasurer
Richard A. Walker 1996 20,000 2,805
Executive Vice President, 1995 20,000 4,847
Chief Administrative Officer, 1994 30,000 4,526
General Counsel and
Secretary
</TABLE>
(1) The aggregate amount of perquisites and other personal benefits for any
named executive did not exceed $50,000 or 10% of the total of annual salary
and bonus for any such named executive, and is therefore not reflected in
the table.
(2) Excludes the performance units/shares awarded to each of the Named
Executives on August 8, 1996, which are subject to approval by stockholders
of the Long-Term Incentive Plan. See "Long-Term Incentive Plan -- Awards in
Last Fiscal Year" table.
(3) Represents amounts reimbursed during the referenced years for the payment
of taxes as to club fees and automobile allowance for Mr. Dillon and as
to
relocation expenses for Messrs. Nagel and Walker.
(4) Represents the number of option shares granted under Kuhlman's stock option
plans and stock appreciation rights granted under the SAR Plan.
(5) The amounts shown in this column include the following:
(a) Company contributions to the Kuhlman Electric Corporation ("Kuhlman
Electric") Savings Maximizer Plan ("Savings Maximizer Plan"), and, in
the case of Mr. Dillon, to the Schwitzer U.S. Inc. Supplemental Tax
Reduction Investment Plan ("Supplemental TRIP") (See "Savings and
Pension Plans" below). The amount of the contribution to the Savings
Maximizer Plan for 1996 was $0 for Mr. Jepson; $1,425 for Mr. Anderson;
$1,425 for Mr. Nagel; and $1,425 for Mr. Walker and the amount of the
contribution to the Supplemental TRIP in 1996 for Mr. Dillon was
$12,600.
(b) The dollar value of insurance premiums for group term life. The
amount of the payment for group term life insurance premiums for
1996 was $2,700 for Mr. Jepson; $2,400 for Mr. Anderson; $2,520 for
Mr. Dillon; $1,380 for Mr. Nagel; and $1,380 for Mr. Walker.
(6) On April 26, 1994, Curtis G. Anderson was named as President and Chief
Operating Officer of Kuhlman.
(7) On May 31, 1995 Spinner Acquisition Corp. ("Spinner"), a Delaware
corporation and a wholly owned subsidiary of Kuhlman, was merged (the
"Merger") with and into Schwitzer, Inc. ("Schwitzer") of which Mr. Dillon
was the Chairman, President and Chief Executive Officer, pursuant to an
Agreement and Plan of Merger dated as of February 25, 1995, among Kuhlman,
Spinner, and Schwitzer (the "Agreement"). The Merger became effective upon
the filing of a Certificate of Merger with the Delaware Secretary of State
on May 31, 1995 (the "Effective Time"). At the Effective Time, and pursuant
to the Agreement, each outstanding share of common stock of Schwitzer, par
value $.10 per share ("Schwitzer Common Stock"), was converted into 0.9615
share of Kuhlman Common Stock (the "Exchange Ratio"). The 1995 amounts for
Mr. Dillon, who also serves as Chairman, President and Chief Executive
Officer of Schwitzer U.S. Inc. ("Schwitzer U.S."), which is the principal
direct subsidiary of Schwitzer, include amounts earned before the Effective
Time of the Merger (May 31, 1995). In conjunction with the Merger,
outstanding stock options under the Schwitzer Long-Term Executive Incentive
Compensation Plan (the "1989 Plan") were converted into options to purchase
Kuhlman Common Stock in accordance with the Exchange Ratio. Options granted
to Mr. Dillon reflect the number of options granted to Mr. Dillon in the
stated years after giving effect to the terms of the Merger and application
of the Exchange Ratio.
(8) Consists of 28,169 shares of Kuhlman Common Stock valued at $17.75 per
share or approximately $500,000 in the aggregate on the date they were
issued to
Mr. Anderson as a signing incentive at the commencement of his employment
by Kuhlman. Based on the $19 3/8 closing price for Kuhlman Common Stock on
the
New York Stock Exchange on the last trading day of 1996, the value of the
28,169 shares at the end of 1996 was $545,774.37. These shares would have
had to have been returned to Kuhlman in the event Mr. Anderson left Kuhlman
within one year from the time of the issuance. Dividends are paid on such
shares when and as paid on other shares of Kuhlman Common Stock. Prior to
being named as President and Chief Operating Officer of Kuhlman, Mr.
Anderson served as a non-employee director of Kuhlman and received in 1994
total compensation of $12,672 for his services in that capacity.
(9) Includes the payment of $1,462,500 to Mr. Dillon pursuant to the Dillon
Agreement as defined below (see "Executive Compensation and Severance
Benefits").
Savings and Pension Plans
Kuhlman Electric Corporation Savings Maximizer Plan. Under the Kuhlman
Electric Corporation Savings Maximizer Plan ("Savings Maximizer Plan"),
participants contribute through payroll deductions amounts that vary from 1% to
16% of their compensation. Kuhlman or a participant's employer, as the case may
be, contributes to the Savings Maximizer Plan on behalf of each participant a
minimum amount equal to 15% of the participant's before-tax contributions,
which do not exceed 6% of the participant's compensation. Kuhlman Electric may
also
make a discretionary matching annual contribution to the Savings Maximizer
Plan, which when made for plan years after January 1, 1995 is divided equally
among
qualifying participants based on the number of calendar quarters during the
plan year that the participant made before-tax contributions. Each participant
is
immediately vested in all contributions made on his or her behalf.
Kuhlman Electric Salaried Employees' Pension Plan. The Salaried
Employees' Pension Plan maintained by Kuhlman Electric Corporation (the
"Kuhlman Electric
Pension Plan") covers certain hourly and all salaried employees employed by
Kuhlman Electric, certain salaried employees employed by the TRANS-PAK Spring
Assembly Division of Emtec Products Corporation, and the salaried employees of
Kuhlman.
The Kuhlman Electric Pension Plan provides for an individual account for
each participant and for a benefit based upon the value of such account,
subject to the minimum benefit and grandfathering provisions described below.
Commencing in 1987, the accounts of participants are credited annually with
an amount
equal to 3% of salary plus an additional 3% of salary in excess of one-quarter
of the
maximum amount of wages subject to FICA taxes. Accounts also are credited with
a guaranteed rate of interest. The accumulated account may be converted to an
annuity at retirement. The account of each individual who was a participant
prior to January 1, 1987 was also credited with an amount equal to the value of
such participant's accrued benefit as of December 31, 1986 determined under the
defined benefit formula then in effect.
A minimum pension of 1.2% of average compensation multiplied by credited
service (limited to 20 years) is payable if it would provide a larger benefit.
In addition, certain "grandfathering" provisions apply to avoid a loss of
benefits as a result of the transition to the revised benefit structure.
As of December 31, 1996, the estimated annual pension benefits payable
upon retirement at age 65 for certain of the individuals named in the Summary
Compensation Table are as follows: $21,570 for Mr. Jepson; $16,942 for
Mr. Anderson; $66,198 for Mr. Nagel; and $81,507 for Mr. Walker. These
estimates are based on the assumptions that the officer will remain in
Kuhlman's employ
until age 65 without an increase in pensionable compensation, there is no
increase in the FICA wage base or the limitations on benefits imposed by the
Internal Revenue Code, the annual guaranteed rate of interest credited by the
Kuhlman Electric Pension Plan to a participant's account is 4.0% for 1997 and
5.0% thereafter, and a 7.0% interest rate will be used when converting the
officer's projected account to an annuity.
Schwitzer U.S. Inc. Tax Reduction Investment Plan for Certain Salaried and
Exempt Employees ("TRIP") and Supplemental Tax Reduction Investment Plan
("Supplemental TRIP"). The TRIP is a deferred savings plan for eligible U.S.
employees of Schwitzer U.S. With certain exceptions, an employee of at least 21
years of age with three months of service (three years of service if under age
21) may contribute into the TRIP, on a pre-tax and after-tax basis, up to 15%
of the participant's cash compensation (subject to a maximum annual pre-tax
contribution by a participant of $9,500 for 1996 as adjusted for cost of living
increases) and invest such contributions in Kuhlman Common Stock or in several
other equity or income funds. Each participant's own pre-tax contributions are
matched by employer contributions at 50% up to a total of 3% of a participant's
compensation. Employer matching contributions are invested in Kuhlman Common
Stock. A participant is always vested in his pre-tax and after-tax
contributions. A graduated vesting schedule provides for partial vesting in
matching contributions on the basis of years of service, with a participant
becoming fully vested in such employer matching contributions after five years
of employment. A participant also becomes fully vested in matching
contributions upon attaining age 65, retirement upon age 55 with 10 years of
service,
disability or death. With certain exceptions, a participant's after-tax
contributions may be withdrawn, and employer matching contributions may be
withdrawn after five years of plan participation. A participant's pre-tax
contributions may not be withdrawn except for an immediate financial hardship,
or after attaining age 59 1/2. All contributions may be withdrawn upon
termination of employment. In addition, participants may obtain loans from
their TRIP accounts under certain circumstances.
Schwitzer U.S. has also established the Supplemental TRIP for those
participants in the TRIP who, as the result of certain restrictions imposed on
the TRIP under the Internal Revenue Code, are precluded from receiving from
Schwitzer U.S. the full amount of the employer matching contributions to which
such participants would otherwise be entitled. Schwitzer U.S. credits to an
account established for each participant under the Supplemental TRIP an amount
equal to the difference between 3% of the participant's annual compensation and
the amount of the matching contribution that Schwitzer U.S. was permitted to
make to the account of such participant under the TRIP. A participant in the
Supplemental TRIP becomes vested in the amounts credited to his or her account
in accordance with the vesting schedule applicable to the TRIP. Vested amounts
held in a participant's account under the Supplemental TRIP will be paid in a
lump sum to the participant or his or her spouse or designated beneficiary upon
termination of employment or at such time or in such other form or manner as
the Schwitzer U.S. Board of Directors in its sole discretion may determine.
The Schwitzer U.S. Inc. Pension Plan for Certain Salaried and Exempt
Employees ("Schwitzer Pension Plan"). The Schwitzer Pension Plan is a
non-contributory,
defined benefit plan for certain salaried employees. The amount of a
participant's pension benefits depends primarily on years of employment (up to
35 years), age
at retirement, and average annual compensation (salary plus certain
bonuses,
whether paid in cash or stock, and excluding matching contributions to the TRIP
or
Supplemental TRIP, moving expense reimbursements and automobile allowance) for
the 60 successive highest-paid months of the employee's last 120 months of
employment. The plan is integrated with Social Security to the extent allowed
by law. Participants become vested in their accrued pension benefits after five
years of service. Payment of vested pension benefits normally begins at age 65,
but an early retirement benefit at reduced levels may be paid if a participant
is at least 55 years of age with 10 years of service. Benefits that cannot be
paid under the Schwitzer Pension Plan due to restrictions imposed under the
Internal Revenue Code will be paid under the Supplemental Schwitzer Salaried
Pension Plan ("Supplemental Pension Plan"). The following table illustrates
the amount of the plan's annual pension benefits on a straight-life annuity
basis (including amounts payable under the Supplemental Pension Plan, where
applicable) for eligible employees retiring at age 65. Offsets for Social
Security payments and other offsets provided for in the plan are not reflected
in this table.
SCHWITZER PENSION PLAN TABLE
Years of Service
Remuneration 15 20 25 30 35
$100,000 $ 18,017 $ 24,023 $ 30,028 $ 36,034 $ 42,040
$200,000 $ 38,474 $ 51,299 $ 64,123 $ 76,948 $ 89,773
$300,000 $ 58,931 $ 78,575 $ 98,218 $117,862 $137,506
$400,000 $ 79,387 $105,849 $132,312 $158,774 $185,236
$500,000 $ 99,844 $133,125 $166,407 $199,688 $232,969
$600,000 $120,301 $160,401 $200,502 $240,602 $280,702
$700,000 $140,758 $187,677 $234,597 $281,516 $328,435
$800,000 $161,214 $214,952 $268,690 $322,428 $376,166
$900,000 $181,671 $242,228 $302,785 $363,342 $423,899
For purposes of determining the benefit under the Schwitzer Pension Plan,
the amount of covered compensation for 1996 for Mr. Dillon is equal to the
salary reported for 1996 plus the bonus reported for 1996 in the Summary
Compensation Table. The years of service for purposes of the Schwitzer Pension
Plan is 18 years for Mr. Dillon. In calculating credited years of service under
the Schwitzer Pension Plan, years of service with Household prior to the spin
off of Schwitzer by Household International, Inc. in 1989 have been taken into
account.
Executive Compensation and Severance Agreements. On February 22, 1994,
the Board of Directors of Kuhlman approved a severance policy applicable to
certain
executive officers designated by the Compensation Committee of the Kuhlman
Board of Directors. The severance policy supersedes any existing severance
arrangements with individual officers of Kuhlman. The severance policy provides
that if an executive officer's employment with Kuhlman is terminated by Kuhlman
for any reason other than the conviction of a felony involving Kuhlman, the
executive's base salary will be continued for a period of up to twenty-four
(24) months after such termination. Such officer will also be entitled during
the
same period to the continuation of certain benefits that such officer was
receiving at the time of termination, including, but not limited to, medical
and dental coverage, health and accident insurance, and disability and group
life
insurance. No continuation of salary and benefits are payable under the
severance policy if an executive officer dies, retires, or voluntarily
terminates employment with Kuhlman. Furthermore, under the severance policy,
salary and benefits payable under such severance policy will terminate if an
executive officer performs services for a competitor of Kuhlman and will be
reduced or eliminated entirely if services are performed for a non-competitor.
The severance policy will be administered by the Compensation Committee of the
Board of Directors of Kuhlman. As of January 1, 1997, the highest monthly
salary for the purpose of determining the severance pay for the Chief
Executive
Officer and the other three executives covered by the policy was as follows:
Mr.
Jepson -- $41,667; Mr. Anderson -- $35,417; Mr. Nagel -- $20,000; and Mr.
Walker -- $20,000. As of February 20, 1996, the severance policy was modified
by change of control agreements ("Control Agreements") entered into as of
February
20, 1996 between Kuhlman and each of the executive officers referred to in this
paragraph (Messrs. Jepson, Anderson, Nagel and Walker). The Control Agreements
are for an initial three year term and are automatically renewable each year
thereafter for an additional term of one year unless the Board of Directors
elects otherwise, and are designed to encourage the continuity of management in
view of the possibility of a change of control (as defined in the Control
Agreements). Under the Control Agreements, if a change of control occurs, each
executive would be entitled to receive, subject to the right of the Board of
Directors of Kuhlman to amend or waive any or all of Kuhlman's payment
obligations set forth in the Control Agreements at any time before a change of
control occurs, an aggregate amount equal to: (a) three times the executive's
current annual base salary, (b) three times the executive's highest annual cash
bonus of the past three years, (c) payment of the value of any stock options
and SARs held by the officer as determined under the Control Agreements, (d) an
adjustment of the amount paid to the executive pursuant to the Control
Agreements to cover any liability on the part of the executive for excise and
income taxes, and (e) continuation of benefits for three years under all of the
benefit plans of Kuhlman in effect on the date of the change of control.
Mr. Dillon and Schwitzer U.S. have been parties to an employment agreement
since 1989 which was last amended on February 25, 1995 (as so amended the
"Dillon Agreement"). The Dillon Agreement sets forth Mr. Dillon's entitlement
to an established annual salary (currently $440,000) as may be increased from
time
to time by the Board of Directors of Schwitzer U.S., with the oversight of the
Kuhlman Compensation Committee, and to benefits under the Schwitzer U.S.
benefit plans, and establishes an annual bonus awarded under Schwitzer's
Executive
Incentive Compensation Program ranging from 0% to 80% of his annual salary,
with a par rate equal to 50% of his annual salary, also with the oversight of
the
Kuhlman Compensation Committee. Under the Dillon Agreement, Mr. Dillon is also
entitled to 1,500 performance units under Schwitzer's Performance Unit Plan for
the period from January 1, 1995 through December 31, 1997. Pursuant to the
Dillon Agreement, Schwitzer U.S. paid Mr. Dillon a lump sum cash payment in the
amount
of three times his then annual salary and three times his then annual bonus at
par level at the Effective Time of the Merger. In addition, 75,000 phantom
stock units awarded to Mr. Dillon on October 18, 1994 by Schwitzer were
converted
into the right to receive an amount of cash equal to the value of 75,000 shares
of
Kuhlman Common Stock upon his termination of employment, subject to forfeiture
if Mr. Dillon's employment by Schwitzer U.S. is terminated prior to October 18,
1997. Schwitzer U.S. may terminate Mr. Dillon's employment at any time and Mr.
Dillon may resign such employment at any time. Under the Dillon Agreement, Mr.
Dillon will receive all pension, profit sharing, deferred compensation, medical
and life insurance benefits under Schwitzer U.S.'s benefit plans for a period
ending on the earlier of (a) 18 months after Mr. Dillon's termination or
resignation or (b) his 65th birthday.
Stock Option Plans. Currently there are options outstanding under
Kuhlman's 1983 Stock Option Plan ("1983 Plan"), 1986 Stock Option Plan ("1986
Plan"), 1989 Stock Option Plan ("1989 Plan") (formerly a Schwitzer plan) and
1994 Stock Option Plan ("1994 Plan") approved by stockholders. The Plans
provide for such options to be granted to officers and other key executive
employees of
Kuhlman and its subsidiaries at not less than 100% of the market value of
Kuhlman Common Stock (as defined in the Plans) at date of grant and with an
expiration no later than ten years from date of grant. Options may be granted
currently under the 1994 Plan. No new options may be granted under the 1983 or
1986 Plans, but the 1983 Plan and 1986 Plan continue as to outstanding stock
options. In conjunction with the Merger, the outstanding stock options under
the 1989 Plan were converted into options to purchase Kuhlman Common Stock in
accordance with the Exchange Ratio, which were granted to officers and key
employees of Schwitzer at the market value of shares of Schwitzer Common Stock
at the date of grant. Subsequent to the Merger, no additional options have been
or will be granted under the 1989 Plan.
Option/SAR Grants During 1996
The following table sets forth information on stock options and stock
appreciation rights granted during 1996 to the Named Executives.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable
Percent of Value
Total At Assumed Annual Rates
Number of Options/SARs of Stock Price
Securities Granted to Exercise Appreciation for
Underlying Employees or Base Option/
Options/SARs During Price Expiration SAR Term (2)
Name Granted 1996 (1) Per Share Date 5% 10%
Individual Grants
<S> <C> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr. 100,000(3) 32.3% $ 14.13 2/18/06 $890,190 $2,246,670
Curtis G. Anderson 50,000(3) 16.1% 14.13 2/18/06 445,095 1,123,335
Gary G. Dillon 5,000(3) 1.6% 14.13 2/18/06 44,510 112,333
Vernon J. Nagel 20,000(3) 6.5% 14.13 2/18/06 178,038 449,334
Richard A. Walker 20,000(3) 6.5% 14.13 2/18/06 178,038 449,334
</TABLE>
(1) Kuhlman granted options for an aggregate of 310,000 shares. The table does
not include options for 100,000 shares to Mr. Jepson, for 60,000 shares to
Mr. Anderson, for 10,000 shares to Mr. Dillon, for 40,000 shares to Mr.
Nagel, and for 40,000 shares to Mr. Walker, which were granted in 1997
under the Long-Term Incentive Plan, which shares are subject to the
approval by
stockholders of that plan.
(2) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that Kuhlman Common
Stock will appreciate in value from the date of grant to the end of the
option or SAR term at the annualized rates of 5% and 10% (total
appreciation of 63% and 159%), respectively, and therefore are not intended
to forecast
possible future appreciation, if any, in the price of Kuhlman Common Stock.
(3) These options were granted pursuant to the 1994 Plan which does not provide
for the grant of SARs. The exercise price may be paid by delivery of shares
of Kuhlman Common Stock already owned by the optionee. These options became
exercisable on October 25, 1996 as to Mr. Jepson and on August 19, 1996 as
to Messrs. Anderson, Dillon, Nagel and Walker.
Aggregated Option/SAR 1996 Year-End Option/SAR Values. The following
table sets forth the number and dollar value of options/SARs remaining
unexercised at
December 31, 1996 held by the Named Executives.
AGGREGATED OPTION EXERCISES IN 1996 AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
No. Of Securities Underlying Value of Unexercised In-
Shares Unexercised Options/SARs The-Money Options/SARs
Acquired on Value at December 31, 1996 at December 31, 1996
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr...... 0 $ 0 400,000 35,000 $ 1,899,000 $ 192,325
Curtis G. Anderson........ 0 0 200,000 35,000 874,644 192,325
Gary G. Dillon........ 3,250 6,741 168,896 14,902 1,972,434 160,693
Vernon J. Nagel........... 0 0 90,000 20,000 416,050 109,900
Richard A. Walker......... 0 0 127,582 20,000 922,982 109,900
</TABLE>
Long-Term Incentive Plans -- Awards in Last Fiscal Year. For a discussion
of awards in 1996 under the Long-Term Incentive Plan, which awards are subject
to the approval of such plan by the stockholders, see "Approval of the Kuhlman
Corporation Long-Term Incentive Plan."
Five-Year Cumulative Total Stockholder Return
The following indexed graph indicates the total return to Kuhlman's
stockholders for the past five years as compared to total return for the
Standard & Poor's 500 Composite Index and the Standard & Poor's Electrical
Equipment Index, assuming a common starting point of $100. Total stockholder
return for Kuhlman as well as for the Indexes are determined by adding (a) the
cumulative amount of dividends for a given year (assuming dividend
reinvestment) and (b) the difference between the share price at the beginning
and at the end
of the year, the sum of which is then divided by the share price at the
beginning of such year. The stock price performance shown on the graph below is
not necessarily indicative of future price performance.
CUMULATIVE TOTAL RETURN
Based on reinvestment of $100 beginning December 31, 1991
[PERFORMANCE GRAPH APPEARS HERE]
Dec-91 Dec-92 Dec-93 Dec-94 Dec-95 Dec-96
Kuhlman Corp. $100 $91 $114 $90 $98 $158
S&P 500 $100 $108 $118 $120 $165 $203
S&P Electrical $100 $110 $132 $134 $188 $254
Equipment Index
Related Transactions
Kuhlman entered into an agreement ("Kearns Agreement") dated as of August
1, 1994, with W.M. Kearns & Co., Inc., a corporation controlled by William M.
Kearns, Jr. ("Kearns & Co."), pursuant to which Kearns & Co. serves as a
non-exclusive financial advisor to Kuhlman on a part-time basis to assist
Kuhlman in developing corporate strategy and arranging acquisition, merger,
joint venture, investment or divestiture transactions for Kuhlman. Kearns & Co.
will give Kuhlman a "right of first refusal" on all such transactions of which
Kearns & Co. becomes aware which appear to fit Kuhlman's acquisition
guidelines. The Kearns Agreement had an original term of two years through
July 31, 1996.
On July 31, 1996, the parties extended the Kearns Agreement for an additional
year
(until July 31, 1997), reduced the cash advisory fee from $20,000 each month to
$10,416 each month, and further amended the agreement to provide for its
automatic extension on a year-to-year basis after July 31, 1997 (subject to
termination by Kuhlman at any time prior to the beginning of the next
succeeding one year period). During the term of the Kearns Agreement, as
amended, in
addition to paying the monthly cash advisory fee of $10,416, Kuhlman will
reimburse Kearns & Co. for reasonable out-of-pocket expenses directly related
to its activities under the Kearns Agreement in an amount not to exceed $1,000
per
month. In 1996, Kearns & Co. was paid $192,080 in cash advisory fees and
reimbursed for out-of-pocket expenses in the amount of approximately $3,650.
Principal Stockholders and Beneficial Ownership of Management of Kuhlman
Management
The following table sets forth, as of March 1, 1997, the number of shares
of Kuhlman Common Stock beneficially owned by each director, each of the Named
Executives and all directors and executive officers as a group as well as the
percent of class owned by such persons.
<TABLE>
<CAPTION>
Number of Shares (1)(2)(3) Percent of Class (4)
<S> <C> <C>
Curtis G. Anderson.......................... 263,284 1.9%
William E. Burch............................ 15,596(5) *
Steve Cenko................................. 20,635 *
Gary G. Dillon.............................. 254,014 1.8%
Alexander W. Dreyfoos, Jr................... 25,827 *
Robert S. Jepson, Jr........................ 576,694 4.1%
William M. Kearns, Jr....................... 20,000 *
George J. Michel, Jr........................ 26,864(5) *
Vernon J. Nagel............................. 92,469 *
H. Norman Schwarzkopf....................... 10,144 *
Richard A. Walker........................... 128,626 *
All Directors and Executive Officers as a
Group (11 Persons)........................ 1,434,153 9.7%
</TABLE>
* Less than one percent
(1) Includes shares in Kuhlman Electric's Employees' Stock Purchase Plan,
Kuhlman's Dividend Reinvestment Plan, the Savings Maximizer Plan, and as of
December 31, 1996, in the TRIP.
(2) Includes shares which the following persons have the right to acquire upon
the exercise of stock options as of March 1, 1997 or at any time within 60
days thereafter: Curtis G. Anderson -- 200,000 shares; Gary G.
Dillon -- 170,491 shares; Steve Cenko -- 12,359 shares; Robert S. Jepson,
Jr. -- 400,000 shares; George J. Michel, Jr. -- 12,359 shares; Vernon J.
Nagel -- 90,000 shares; and Richard A. Walker -- 123,392 shares.
(3) Excludes the following grants and awards under the Long-Term Incentive Plan
which are subject to approval by Stockholders of that plan: stock options
for 2,000 shares granted to each non-employee director on August 9, 1996;
performance units/shares awarded on August 8, 1996 as set forth in the
"Long-Term Incentive Plan -- Awards in Last Fiscal Year" table; and stock
options granted on February 17, 1997 for 60,000 shares to Curtis G.
Anderson; 10,000 shares to Gary G. Dillon; 100,000 shares to Robert S.
Jepson, Jr.; 40,000 shares to Vernon J. Nagel; and 40,000 shares to Richard
A. Walker.
(4) Each respective individual's shares included in note (2) were deemed to be
outstanding as of March 1, 1997 for the purpose of computing the percentage
applicable to the person owning such shares but were not deemed to be
outstanding for the purpose of computing the percent of class owned by any
other person. The total number of shares included in note (2) were deemed
to be outstanding for the purpose of computing the percent of class for all
directors and executive officers as a group.
(5) These numbers exclude 3,700 shares owned by spouses where beneficial
ownership is disclaimed.
Certain Beneficial Owners
The following table sets forth the only persons known by Kuhlman to own of
record or beneficially, as of March 1, 1997, five percent or more of the
outstanding Common Stock of Kuhlman.
<TABLE>
<CAPTION>
Name of Person Number of Shares Percent of Class
<S> <C> <C>
David L. Babson and Company Incorporated.......................... 723,691(1) 5.3%
One Memorial Drive
Cambridge, Massachusetts 02142-1300
The Prudential Insurance Company of America....................... 1,276,302(2) 9.3%
751 Broad Street
Newark, New Jersey 07102-3777
VGH Partners, L.L.C............................................. 709,900(3) 5.2%
Vinik Partners, L.P.
Vinik Asset Management, L.P.
Jeffrey N. Vinik
Michael S. Gordon
Mark D. Hostetter
Vinik Asset Management, L.L.C.
260 Franklin Street
Boston, Massachusetts 02110
</TABLE>
(1) Based solely on information set forth in a Schedule 13G dated February 7,
1997 filed with the Commission.
(2) Based solely on information set forth in a Schedule 13G dated January 27,
1997 filed with the Commission.
(3) Based solely on information set forth in a Schedule 13D dated February 24,
1997 filed with the Commission.
APPROVAL OF THE KUHLMAN CORPORATION
LONG-TERM INCENTIVE PLAN
The success of Kuhlman Corporation depends, in large measure, on its
ability to recruit and retain employees with outstanding ability and
experience. The Board of Directors also believes there is a need to align
stockholder and
employee interests by encouraging employee stock ownership and to motivate
employees with compensation conditioned upon achievement of Kuhlman's financial
goals. In order to accomplish these objectives, on August 9, 1996, the Board of
Directors adopted, subject to approval by the stockholders, the Kuhlman
Corporation Long-Term Incentive Plan (the "Long-Term Incentive Plan"). If
adopted by the stockholders, the Long-Term Incentive Plan will be effective as
of August 8, 1996. The adoption of the Long-Term Incentive Plan was recommended
to the Board by the Compensation Committee of the Board of Directors (the
"Committee"), which had approved the Long-Term Incentive Plan and made specific
performance awards at its meeting on August 8, 1996.
Summary Description of the Long-Term Incentive Plan
The Long-Term Incentive Plan will be administered by the Committee, which,
where intended to qualify awards under the Long-Term Incentive Plan for the
exception based on the performance of Kuhlman on a consolidated and/or business
unit level (the "Performance-Based Exception") under Section 162(m) of the
Internal Revenue Code of 1986 (the "Code"), will consist solely of outside
directors of Kuhlman.
Key employees of Kuhlman and its subsidiaries (including officers, whether
or not directors) are eligible to participate in the Long-Term Incentive Plan.
The Committee may award to eligible employees incentive and nonqualified stock
options, stock appreciation rights and restricted stock. As separately
described under "Performance Measures," the Committee may also grant awards to
eligible
employees with a value tied to specific performance goals and, after a
specified period, pay the value of those awards with Kuhlman Common Stock or
cash, or a
combination of the two. In addition, non-employee directors of Kuhlman are
eligible to participate in the Long-Term Incentive Plan, but only for the award
of nonqualified stock options as further described below.
Because the Long-Term Incentive Plan provides for broad discretion in
selecting participants and in making awards, the total number of persons who
will participate and the respective benefits to be accorded to them cannot be
determined at this time. However, on March 1, 1997, there were approximately
200 employees and six non-employee directors of Kuhlman who were expected to be
eligible to participate.
In calendar years 1997, 1998, and 1999, two and one-half percent of the
outstanding shares of Kuhlman Common Stock, par value $1.00 per share ("Kuhlman
Common Stock"), are authorized for issuance through the employee stock option,
stock appreciation rights, restricted stock and performance measures provisions
of the Long-Term Incentive Plan, plus an additional 300,000 shares are
authorized for issuance solely in connection with the performance measures
provisions of the plan, which shares were believed necessary in connection with
performance shares
to be granted in 1996. In addition, 100,000 shares of Kuhlman Common
Stock are authorized for issuance upon the exercise of options granted to
non-employee directors. Within the authorizations described above, the
following limits shall apply: no more than a total of 750,000 shares are
authorized for
issuance upon the exercise of incentive stock options granted to employees
under the plan, and no more than a total of 250,000 shares are
authorized for
issuance as restricted stock under the plan. Provisions in the Long-Term
Incentive Plan
permit the reuse or reissuance by the plan of shares of Kuhlman Common Stock
underlying canceled, expired, or forfeited awards of stock-based compensation.
In addition, shares available but not granted in any given year are available
for grant in subsequent years.
Stock Options -- Employees
The Committee will have discretion to award incentive stock options
("ISOs"), which are intended to comply with Section 422 of the Code, or
nonqualified stock options ("NQSOs"), which are not intended to comply with
Section 422 of the Code. The exercise price of each option issued under the
Long-Term Incentive Plan may not be less than the fair market value of the
underlying shares of Kuhlman Common Stock on the date of grant. The Committee
will have discretion to set certain additional limitations on option grants as
it deems appropriate.
Options granted to employees under the Long-Term Incentive Plan will
become exercisable and expire at such times as the Committee determines at the
time of
the grant; provided, however, that no option will be exercisable later than ten
years from the date of grant. Upon a change in control of Kuhlman, all options
will become immediately exercisable and remain exercisable throughout their
entire term.
Upon the exercise of an option granted to an employee under the Long-Term
Incentive Plan, the option price is payable in full to Kuhlman either: (a) in
cash or its equivalent; or (b) by tendering shares having a fair market value
at the time of exercise equal to the total option price; or (c) a combination
of
(a) and (b). The aggregate number of shares that may be granted upon exercise
of employee stock options, pursuant to any award granted in any one fiscal year
to
any one single employee, will be limited to 100,000 shares.
Stock Options -- Non-Employee Directors
An option to purchase 2,000 shares of Kuhlman Common Stock will be
automatically awarded to each non-employee director of Kuhlman concurrent with
the meeting of the Board of Directors held each year following the Annual
Meeting of Stockholders. Additionally, each non-employee director received,
subject to approval of the plan by the stockholders, an option to acquire 2,000
shares of Kuhlman Common Stock at a price per share of $16.25 immediately
following adoption of the plan by the Board of Directors, which adoption
occurred on August 9, 1996. The exercise price of each option granted under the
Long-Term Incentive Plan shall be the fair market value of the underlying
shares of Kuhlman Common Stock on the date of grant.
Options granted to non-employee directors under the Long-Term Incentive
Plan will become exercisable six months from the date of grant and expire 10
years from the date of grant. Upon a change in control, all options will become
immediately exercisable and remain exercisable throughout their entire term.
Upon the exercise of an option granted to a non-employee director under
the Long-Term Incentive Plan, the option price is payable in full to
Kuhlman
either: (a) in cash or its equivalent; or (b) by tendering shares having a fair
market
value at the time of exercise equal to the total option price; or (c) a
combination of (a) and (b).
Stock Appreciation Rights
The Committee may grant stock appreciation rights ("SARs") to employees
either alone (a "Freestanding SAR"), or in connection with the issuance of
stock options (a "Tandem SAR"). Upon the exercise of an SAR, the participant
will
receive payment from Kuhlman in an amount equal to the difference between the
fair market value of a share of Kuhlman Common Stock on the date of exercise
and the grant price of the SAR, multiplied by the number of shares with respect
to
which the SAR is exercised. The grant price of a Freestanding SAR will equal
the fair market value of a share of Kuhlman Common Stock on the date of
grant of
the SAR. The grant price of a Tandem SAR will equal the option price on the
related
option. The Committee has the right to provide that payment of the value of an
SAR may be made in cash, shares of Kuhlman Common Stock, or partly in cash and
partly in shares of Kuhlman Common Stock.
The Committee will have complete discretion in determining the number of
SARs granted to each employee and in determining the conditions pertaining to
such SARs, except that the aggregate number of shares that may be granted in
the form of SARs pursuant to any award granted in any one fiscal year to any
one
single executive officer will be limited to 50,000 shares. The term of an SAR
will be determined by the Committee, in its sole discretion; provided, however,
such term shall not exceed 10 years.
A Freestanding SAR may be exercised upon whatever terms and conditions the
Committee, in its sole discretion, specifies. A Tandem SAR may be exercised
only with respect to the shares of Kuhlman Common Stock for which its related
option
is then exercisable. The exercise of a Tandem SAR will result in cancellation
of the related option.
Restricted Stock
The Committee will also be authorized to award shares of restricted
Kuhlman Common Stock to employees under the Long-Term Incentive Plan upon
such terms
and conditions as it shall establish. The award agreement will specify, to the
extent applicable, the period(s) of restriction, the number of shares of
restricted Kuhlman Common Stock granted, the payment of a stipulated purchase
price per share, restrictions based upon achievement of specific performance
objectives and/or restrictions under applicable federal or state securities
laws. Although recipients will have the right to vote these shares from the
date of grant, they will not have the right to sell or otherwise transfer the
shares
during the applicable period of restriction or until earlier satisfaction of
other conditions imposed by the Committee in its sole discretion. The
Committee, in its discretion, will determine how dividends on restricted shares
are to be
paid.
Each award agreement for restricted stock will set forth the extent to
which the participant will have the right to retain unvested restricted stock
following termination of the participant's employment with Kuhlman. These
provisions will be determined in the sole discretion of the Committee, need not
be uniform among all shares of restricted stock issued pursuant to the
Long-Term Incentive Plan and may reflect distinctions based on reasons for
termination of
employment. Except in the case of terminations connected with a change in
control and terminations by reason of death or disability, the vesting of
restricted stock which is intended to qualify for the Performance-Based
Exception and which is held by "covered employees" under Section 162(m) shall
occur at the same time it otherwise would have, but for the employment
termination.
The aggregate grant of restricted stock granted in any one fiscal year to
any one executive officer is limited to 50,000 shares.
Performance Measures
The Committee may grant awards under the Long-Term Incentive Plan to
eligible employees, the value of which are based upon the attainment of certain
specified performance measures. The value of each performance-based award will
be determined solely upon the achievement of certain preestablished objective
performance goals during each performance period (the "Performance Period").
The duration of a Performance Period will be set by the Committee. A
new
Performance Period may begin every year, or at more frequent or less frequent
intervals, as
determined by the Committee. The number of performance-based awards granted to
an employee in any year will be determined by the Committee in its sole
discretion, except that the aggregate payout with respect to performance-based
awards in any one fiscal year to any one executive officer is limited to
the value of 100,000 shares at the beginning of the Performance Period.
The value of performance-based awards will be based on absolute measures
during a Performance Period. If the Committee determines that an award to an
executive officer is intended to comply with the Performance-Based Exception,
then financial measures selected by the Committee shall be based on one or more
of the following: economic value added, market share, operating profit,
revenue, share price, stock price growth, net income, return on equity,
earnings per
share, return on assets, total stockholder return, return on investment, debt
reduction, cash flow, working capital management, or customer service.
Following the end of a Performance Period, the Committee will determine
the value of the performance-based awards granted for the period based on the
attainment of the preestablished objective performance goals. The Committee
will also have discretion to reduce (but not to increase) the value of a
performance-based award.
Unless determined otherwise by the Committee, all performance units/shares
will be forfeited by the participant to the Company upon the termination of the
participant's employment with the Company. Additionally, the Committee may, in
its sole discretion, modify or cancel any performance-based award at any time.
Adjustments and Amendments
The Long-Term Incentive Plan provides for appropriate adjustments in the
number of shares of Kuhlman Common Stock subject to awards and available for
future awards in the event of changes in outstanding Kuhlman Common Stock by
reason of a merger, stock split or certain other events. In case of a pending
change of control of Kuhlman, outstanding options and stock appreciation rights
granted under the Long-Term Incentive Plan will become immediately exercisable
and will remain exercisable throughout their entire term, and restriction
periods and restrictions imposed on shares of restricted stock and performance
units/shares shall immediately lapse.
The Long-Term Incentive Plan may be modified or amended by the Board of
Directors at any time, provided that no such amendment shall adversely affect
any outstanding awards without the affected holder's consent.
Nontransferability
No derivative security (including, without limitation, options and stock
appreciation rights) granted pursuant to, and no right to payment under, the
Long-Term Incentive Plan will be assignable or transferable by a plan
participant except by will or by the laws of descent and distribution, and any
option or similar right will be exercisable during a participant's lifetime
only by the participant or by the participant's guardian or legal
representative.
These limitations may be waived by the Committee, subject to restrictions
imposed under the SEC's short-swing trading rules and federal tax requirements
relating to incentive stock options. In addition, in the case of NQSOs granted
to non-employee directors, the Committee will have the discretion to permit
transfers to members of the director's immediate family.
Duration of the Plan
The Long-Term Incentive Plan will remain in effect until all options and
rights granted thereunder have been satisfied or terminated pursuant to the
terms of the plan, and all Performance Periods for performance-based awards
granted thereunder have been completed. However, in no event will an award be
granted under the Long-Term Incentive Plan on or after August 7, 2006.
Indemnification
The Long-Term Incentive Plan provides for indemnification of each member
of the Committee and of the Board of Directors against any loss, cost,
liability,
or expense that may be imposed upon or reasonably incurred by him or her
arising out of 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 Long-Term Incentive Plan.
Federal Income Tax Consequences
In general, Kuhlman will receive an income tax deduction at the same time
and in the same amount which is taxable to the employee as ordinary income,
except as provided below under "Section 162(m)." To the extent a participant
realizes capital gains, as described below, Kuhlman will not be entitled to any
deduction for federal income tax purposes.
Options. With respect to ISOs, a Long-Term Incentive Plan participant will
not recognize income for federal income tax purposes at the time options are
granted or exercised. If the participant disposes of shares acquired by
exercise of an ISO either before the expiration of two years from the date the
options
are granted or within one year after the issuance of shares upon exercise of
the ISO (the "holding periods"), the participant will recognize in the year of
disposition: (a) ordinary income, to the extent that the lesser of either
(1) the fair market value of the shares on the date of option exercise
or (2) the amount realized on disposition, exceeds the option price; and (b)
capital gain, to the extent the amount realized on disposition exceeds the fair
market value of the shares on the date of option exercise. If the shares are
sold after expiration of the holding periods, the participant generally will
recognize capital gain or loss equal to the difference between the amount
realized on dispositions and the option price. Kuhlman will not be entitled to
a federal income tax deduction in connection with an exercised ISO meeting the
holding periods.
The Revenue Reconciliation Act of 1990 set a maximum tax rate on the net
capital gains of individuals, trusts and estates of 28%. Therefore, recognized
net long-term capital gains will be taxed at the lesser of (i) the highest
marginal tax rate applied to the individual's income for such taxable year or
(ii) 28%. Notwithstanding the foregoing capital gains treatment for ISO's, as
stated above, the amount by which the fair market value of the shares at the
time of exercise exceeds the exercise price will be treated as an adjustment to
taxable income for alternative minimum tax purposes. This adjustment to taxable
income may be significant to an optionee. The optionee may be entitled to a
credit against his or her regular tax liability in subsequent years for the
amount of alternative minimum tax liability incurred in the year of exercise
attributable to such adjustment. Moreover, solely for the purpose of
determining alternative minimum tax liability, the basis of the shares will be
increased by
the amount of such adjustment.
With respect to NQSOs, the participant will recognize no income upon grant
of the option, and, upon exercise, will recognize ordinary income to the extent
of the excess of the fair market value of the shares on the date of option
exercise over the amount paid by the participant for the shares. Upon a
subsequent disposition of the shares received under the option, the participant
generally will recognize capital gain or loss to the extent of the difference
between the fair market value of the shares at the time of exercise and the
amount realized on the disposition.
SARs. An SAR participant will not realize taxable income on the date of
grant nor will Kuhlman be entitled to a deduction at that time. A participant
who exercises an SAR will recognize ordinary income equal to the fair market
value of the shares and any cash received, and Kuhlman will be entitled to a
corresponding deduction for federal income tax purposes.
Restricted Stock. A participant holding restricted stock will, at the time
the shares vest, realize ordinary income in an amount equal to the fair market
value of the shares and any cash received at the time of vesting, and Kuhlman
will be entitled to a corresponding deduction for federal income tax purposes.
Dividends paid to the participant on the restricted stock during the
restriction period will generally be ordinary income to the participant and
deductible as
such by Kuhlman.
Section 162(m). Under Section 162(m) of the Code, compensation paid by
Kuhlman in excess of $1 million for any taxable year to "covered employees"
generally is deductible by Kuhlman or its affiliates for federal income tax
purposes if it is based on the performance of Kuhlman, is paid pursuant to a
plan approved by stockholders of Kuhlman and meets certain other requirements.
Generally, "covered employee" under Section 162(m) means the chief executive
officer and the four other highest paid executive officers of Kuhlman as of the
last day of the taxable year.
It is presently anticipated that the Committee will at all times consist
of "outside directors" as required for purposes of Section 162(m), and that the
Committee will take the effect of Section 162(m) into consideration in
structuring Long-Term Incentive Plan awards. Under the Long-Term Incentive
Plan, the Committee has been provided with the authority to award nondeductible
compensation under such circumstances as it deems appropriate.
New Plan Benefits
Generally, the benefits that will be received under the Long-Term
Incentive Plan by particular individuals or groups are not determinable at this
time. However, the
following awards have been approved by the Committee or are
provided for by the terms of the plan, subject to approval of the plan by the
Stockholders: (i) NQSOs to purchase an aggregate of 14,000 shares granted in
August 1996 to seven non-employee directors as a group; (ii) the annual
automatic grants to each non-employee director of NQSOs to purchase 2,000
shares; (iii) options to purchase an aggregate of 250,000 shares granted to
Messrs. Jepson, Anderson, Dillon, Nagel and Walker in February 1997; and (iv) a
performance award at the $27.00 target referred to in the "Long-Term Incentive
Plan -- Awards in Last Fiscal Year" table of 4,938 shares of stock (see
footnote (3) below the "Long-Term Incentive Plan -- Awards in Last Fiscal
Year" table)
and $66,667 to another executive of a subsidiary of Kuhlman. In addition, the
Committee awarded performance units on August 8, 1996 as follows:
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Shares, Units or
Other Rights(1) Performance of Other
$23.00 Target $27.00 Target Period Until Maturation
Name Shares(2) Cash Shares(3) Cash or Payment
<S> <C> <C> <C> <C> <C>
Robert S. Jepson, Jr...... 14,492 $166,667 12,345 $166,667 01/01/97-12/31/99
Curtis G. Anderson........ 14,492 166,667 12,345 166,667 01/01/97-12/31/99
Gary G. Dillon............ 10,869 125,000 9,259 125,000 01/01/97-12/31/99
Vernon J. Nagel........... 5,797 66,667 4,938 66,667 01/01/97-12/31/99
Richard A. Walker......... 5,797 66,667 4,938 66,667 01/01/97-12/31/99
Executive Group (the five
Named Executives above)... 51,447 591,668 43,825 591,668 01/01/97-12/31/99
Non-Executive Officer
Employee Group............ 53,623 616,667 45,679 616,667 01/01/97-12/31/99
</TABLE>
(1) Two installments of cash and stock as shown are payable on any date if the
average, over the 20 consecutive trading days during the performance period
shown ending on such date, of the mean between the highest and lowest sales
prices per share of Kuhlman Common Stock on the New York Stock Exchange is
at least $23.00 and $27.00, respectively.
(2) For the purpose of showing the number of shares to be awarded, a value per
share of $23.00 has been assumed for illustrative purposes only. The actual
number of shares awarded will depend on the price of Kuhlman Common Stock
on the day before the award is paid and will be determined by dividing such
share price into $333,333 for Messrs. Jepson and Anderson, $250,000 for Mr.
Dillon, and $133,333 for Messrs. Nagel and Walker.
(3) For the purpose of showing the number of shares to be awarded, a value per
share of $27.00 has been assumed for illustrative purposes only. The actual
number of shares awarded will depend on the price of Kuhlman Common Stock
on the day before the award is paid and will be determined by dividing such
share price into $333,333 for Messrs. Jepson and Anderson, $250,000 for Mr.
Dillon, and $133,333 for Messrs. Nagel and Walker.
At the time the Committee awarded the performance units at the $23.00 and
$27.00 target prices for Kuhlman Common Stock, Kuhlman Common Stock was trading
at approximately $16.00 per share. (The closing price on August 8, 1996 was
$16 1/8 per share.) During the time period when the Long-Term Incentive Plan
was being developed (from about mid-April 1996 through early August 1996),
Kuhlman
Common Stock traded in a range from about $13 3/4 to about $18 1/2 per share.
It was the opinion of the Committee at that time that if Kuhlman Common Stock
appreciated in value from approximately $17.00 per share to $27.00 per share,
the upper target set for the awards, that Kuhlman stockholder value would have
increased from $234.6 million to $372.6 million, or an increase of $138
million, based upon Kuhlman having approximately 13,800,000 shares outstanding
(fully
diluted). As an incentive for outstanding individual performance and a reward
for sustained improved corporate performance, an aggregate award pool of $7.25
million (two-thirds in Kuhlman Common Stock, one-third in cash) or 5.25% of the
increase in stockholder value noted above was to be provided to the
participants selected by the Committee.
In the event the $23.00 per share target is reached in accordance with the
terms of the awards, an aggregate payout of approximately $3.6 million
(two-thirds in Kuhlman Common Stock, one-third in cash) will be made to the
participants selected by the Committee starting within 90 days of achieving the
target. By virtue of achieving the $23.00 target, Kuhlman stockholder value
will have increased approximately $83 million. The payout to the selected
participants will be made in four equal quarterly installments (stock and
cash) with quarterly vesting occurring coincident with each quarterly
installment. In the event the $27.00 per share target is reached in accordance
with the terms of the awards, an aggregate payout of approximately $3.8 million
(two-thirds in Kuhlman Common Stock, one-third in cash) will be made to the
participants selected by the Committee starting within 90 days of achieving the
target. By virtue of achieving the $27.00 target, Kuhlman stockholder value
will have increased an additional approximately $55 million over the increase
in shareholder value already realized at the $23.00 target. The payout to the
selected participants will be made in four equal quarterly installments (stock
and cash) with quarterly vesting occurring coincident with each quarterly
installment. As noted in the plan description, the Committee may, in its sole
discretion, modify or cancel any award at any time.
On March 19, 1997, the closing sale price per share of Kuhlman Common
Stock on the New York Stock Exchange as reported in The Wall Street Journal was
$21 7/8.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
APPROVAL OF THE LONG-TERM INCENTIVE PLAN.
RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP BY KUHLMAN
Pursuant to a recommendation of the Audit Committee of the Board of
Directors, Arthur Andersen LLP has been re-appointed by the Board of Directors
to serve as the independent auditors for Kuhlman for the year ending December
31, 1997 subject to stockholder ratification at the Annual Meeting. A
representative of Arthur Andersen LLP will be present at the Annual Meeting,
will have the opportunity to make a statement if he desires to do so and will
be available to respond to appropriate questions by stockholders. If such
appointment is not ratified, the Board of Directors will appoint another firm
as Kuhlman's independent auditors for the year ending December 31, 1997.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder of Kuhlman intends to present at the 1998
Annual Meeting of Stockholders of Kuhlman must be received by Kuhlman at its
principal executive offices on or before November 24, 1997 to be eligible for
inclusion in Kuhlman's proxy statement and proxy form relating to such meeting.
By Order of the Board of Directors,
RICHARD A. WALKER
Secretary
A stockholder may receive, without charge, a copy of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 required
to be filed with the Securities and Exchange Commission by written request to
Richard A. Walker, Executive Vice President, Chief Administrative Officer,
General Counsel and Secretary, Kuhlman Corporation, 3 Skidaway Village Square,
Savannah, Georgia 31411.
<PAGE>
KUHLMAN CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
/
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" EACH
OF THE NOMINEES LISTED UNDER ITEM 1 AND "FOR" ITEMS 2 AND 3.
For Withheld For All Except
1. Election of Directors: Gary G. / / / / / /
Dillon, William M. Kearns, Jr., and
George J. Michel, Jr.
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below
and mark the oval "For All Except")
________________________________________________
For Against Abstain
2. Kuhlman Corporation Long-Term / / / / / /
Incentive Plan
For Against Abstain
3. Ratification of the selection of / / / / / /
Arthur Andersen LLP as independent auditors
for Kuhlman Corporation and its subsidiaries
for the year ending December 31, 1997.
4. Upon any other matter that may properly / / / / / /
come before the meeting.
Dated: ___________, 1997
Signature
Signature
NOTE: Please sign exactly as name appears hereon.
For joint accounts, both owners should sign. When
signing as executor, administrator, attorney, trustee
or guardian, etc. please sign your full title.
<PAGE>
PROXY KUHLMAN CORPORATION PROXY
PROXY FOR SHARES OF COMMON STOCK SOLICITED ON
BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON APRIL 24, 1997
The undersigned hereby appoints Robert S. Jepson, Jr., Curtis G. Anderson,
Vernon J. Nagel and
Richard A. Walker, and each of them, proxies with power of substitution and
revocation, acting by
majority of those present and voting, or if only one is present and voting then
that one, to vote, as
designated on the reverse side hereof, all of the shares of stock of KUHLMAN
CORPORATION
which the undersigned is entitled to vote, at the annual meeting of
stockholders to be held at the Hyatt
Regency Savannah, 2 West Bay Street, Savannah, Georgia on April 24, 1997, at
9:30 a.m., Savannah
time, and at any adjournment thereof, with all the powers the undersigned would
possess if present.
PLEASE VOTE SIGN AND DATE ON REVERSE SIDE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE. NO POSTAGE NEED BE AFFIXED IF MAILED IN THE
UNITED STATES.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH SPECIFICATIONS MADE. IF
NO CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR EACH OF THE
NOMINEES LISTED UNDER ITEM 1 AND FOR ITEMS 2 AND 3.
(Continued and to be signed on reverse side)
<PAGE>
Kuhlman Corporation
Long-Term Incentive Plan
Effective August 8, 1996
<PAGE>
Contents
Page
Article 1. Establishment, Objectives, and Duration 1
Article 2. Definitions 1
Article 3. Administration 5
Article 4. Shares Subject to the Plan and Maximum Awards 6
Article 5. Eligibility and Participation 7
Article 6. Employee Stock Options 7
Article 7. Nonemployee Director Stock Options 9
Article 8. Stock Appreciation Rights 11
Article 9. Restricted Stock 13
Article 10. Performance Units and Performance Shares 14
Article 11. Performance Measures 16
Article 12. Beneficiary Designation 16
Article 13. Deferrals 17
Article 14. Rights of Employees 17
Article 15. Change in Control 17
Article 16. Amendment, Modification, and Termination 18
Article 17. Withholding 19
Article 18. Indemnification 19
Article 19. Successors and Assigns 20
Article 20. Legal Construction 20
<PAGE>
Kuhlman Corporation Long-Term Incentive Plan
Article 1. Establishment, Objectives, and Duration
1.1.Establishment of the Plan. Kuhlman Corporation, a Delaware
corporation
(hereinafter referred to as the Company ), hereby establishes, subject to
approval by
the Company's stockholders at the Company's 1997 annual meeting of
stockholders,
an incentive compensation plan to be known as the Kuhlman Corporation
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.
The Plan shall become effective as of August 8, 1996 (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 15
hereof, until all Shares subject to it shall have been purchased or
acquired according
to the Plan's provisions. However, in no event may an Award be granted
under the
Plan on or after August 7, 2006.
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. Affiliate means any person who is, at the Effective Date,
controlling or
controlled by, or under common control with, the Company.
2.2. 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.
2.3. 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.
2.4. 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.
2.5. Board or Board of Directors means the Board of Directors
of
the Company.
2.6.A Change in Control of the Company shall have occurred if,
after the
Effective Date:
(a) Any Person (within the meaning of Section 13(d) of the
Exchange Act)
other than the Company or an Affiliate shall become the
Beneficial Owner,
directly or indirectly, of twenty percent (20%) or more of
the outstanding
Voting Stock (such Person's beneficial ownership to be
determined, in the
case of rights to acquire Voting Stock, pursuant to paragraph
(d) of Rule
13d-3 under the Exchange Act); or
(b) The stockholders of the Company shall approve: (i) the
dissolution of the
Company; or (ii) any sale, lease, exchange, or other transfer
of all or
substantially all of the assets of the Company to any Person
other than an
Affiliate; or (iii) a merger or consolidation of the Company
with or into any
Person other than an Affiliate.
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, or such other committee appointed by the
Board to
administer the Plan with respect to grants of Awards. Where appropriate to
qualify
Awards for the Performance-Based Exception, the Committee shall have a
minimum
of two (2) directors and shall consist solely of outside directors, as
required by Code
Section 162(m).
2.9. Company means Kuhlman Corporation, a Delaware corporation,
and
any successor or assign thereto as provided in Article 19 herein.
2.10. Director means any individual who is a member of the
Board of
Directors of Kuhlman Corporation.
2.11. Disability shall have the meaning ascribed to such term
in the discretion
of the Committee.
2.12. Effective Date shall have the meaning ascribed to such
term in Section
1.1 hereof.
2.13. Employee means any employee of the Company or its
Subsidiaries.
Directors who are not employed by the Company shall not be considered
Employees
under this Plan.
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, rounded, if necessary, the next full $.01 of the closing price, on
the New York
Stock Exchange Composite Tape, or if not listed on such exchange, any
other national
exchange on which the Shares are listed or included for quotation, if
applicable, on
which the Shares are 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 8 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 Articles 6 or 7 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 Articles 6 or 7 herein.
2.23. Option Price means the price at which a Share may be
purchased by a
Participant pursuant to an Option.
2.24. Participant means an Employee or Director who has
outstanding an
Award granted under the Plan.
2.25. Performance-Based Exception means the performance-based
exception
from the tax deductibility limitations of Code Section 162(m).
2.26. Performance Share means an Award granted to an Employee,
as
described in Article 10 herein.
2.27. Performance Unit means an Award granted to an Employee,
as
described in Article 10 herein.
2.28. 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.
2.29. Person means any individual, corporation, partnership,
joint venture,
association, joint-stock company, limited partnership, limited liability
company, trust,
unincorporated organization, government or agency or political subdivision
of any
government. When the context of this Plan so indicates, such term also has
the
meaning assigned to it in Section 13(d) of the Exchange Act.
2.30. Restricted Stock means an Award granted to an Employee
pursuant to
Article 9 herein.
2.31. Retirement shall have the meaning ascribed to such term
in the
discretion of the Committee.
2.32. Shares means the shares of the Company's common stock,
par value
$1.00 per share.
2.33. 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 8 herein.
2.34. Subsidiary means any corporation in which the Company
owns directly,
or indirectly through subsidiaries, at least fifty percent (50%) of the
total combined
voting power of all classes of stock, or any other entity (including, but
not limited to,
partnerships and joint ventures) in which the Company owns at least fifty
percent
(50%) of the combined equity thereof.
2.35. Tandem SAR means an SAR that is granted in connection
with a related
Option pursuant to Article 8 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).
2.36. Voting Stock means shares of capital stock of the Company
the holders
of which are entitled to vote for the election of directors of the
Company, but
excluding shares entitled to vote only upon the occurrence of a
contingency unless that
contingency shall have occurred.
Article 3. Administration
3.1.The Committee. The Plan shall be administered by the
Committee, or for
Awards that are not intended to comply with Code Section 162(m) by any
other
committee appointed by the Board to administer the Plan with respect to
the grant of
Awards. The members of the committee shall be appointed from time to time
by, and
shall serve at the discretion of, the Board of Directors.
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
Nonemployee
Directors 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 as they apply to Employees; establish, amend, or waive rules and
regulations
for the Plan's administration as they apply to Employees; and (subject to
the
provisions of Article 15 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 the Plan applies to Employees and Nonemployee Directors. As
permitted by
law, the Committee may delegate its authority as identified herein.
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, Directors, Employees, Participants, and their
estates and
beneficiaries.
<PAGE>
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 4.2 herein, there is hereby reserved for issuance
under the Plan
in each calendar year, commencing in calendar year 1997 through calendar
year 1999,
two and one-half percent (2.5%) of the outstanding Shares as of the first
business day
of each calendar year for Awards granted under Articles 6, 8, 9, and 10.
The Shares
available for grants of Awards under Articles 6, 8, 9, and 10 in any year
shall be
increased by the number of Shares available under the Plan in previous
years but not
covered by Awards granted under the Plan in those years, as well as any
Shares as to
which Awards granted under the Plan have lapsed, expired, terminated, or
been
canceled. Subject to adjustment as provided in Section 4.2 herein, there
is hereby
reserved for issuance, in addition to the Shares reserved for issuance
above, one
hundred thousand (100,000) and three hundred thousand (300,000) Shares
under
Articles 7 and 10 of the Plan, respectively. Subject to the authorizations
set forth
above, the number of Shares which may be granted to Employees under the
Plan in
the form of ISOs shall be limited to seven hundred fifty thousand
(750,000) and the
number of Shares which may be granted under the Plan in the form of
Restricted
Stock shall be limited to two hundred fifty thousand (250,000). The
Committee shall
determine the appropriate methodology for calculating the number of shares
issued
pursuant to the Plan.
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 one
hundred thousand
(100,000).
(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
fifty thousand
(50,000).
(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 fifty thousand (50,000) Shares.
<PAGE>
(d) Performance Shares/Performance Units: The maximum aggregate payout
with respect to Awards of Performance Shares or Performance
Units
granted in any one fiscal year to any one Participant shall
be the value of
one hundred thousand (100,000) Shares at the beginning of the
Performance
Period.
4.2.Adjustments in Authorized Shares. In the event of any change
in
corporate capitalization, such as a stock split, reverse 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) of the Company, such adjustment shall be made in the number and class
of
Shares which may be delivered under Section 4.1, in the number and class
of and/or
price of Shares subject to outstanding Awards granted under the Plan, and
in the
Award limits set forth in subsections 4.1(a) and 4.1(b), 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
Employees, including Employees who are members of the Board, and all
Directors.
5.2.Actual Participation. Subject to the provisions of the Plan,
the Committee
may, from time to time, select from all eligible Employees and Directors,
those to
whom Awards shall be granted and shall determine the nature and amount of
each
Award.
Article 6. Employee Stock Options
6.1.Grant of Options. Subject to the terms and provisions of the
Plan, Options
may be granted to Employees 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 under this Article 6 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 Award 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.
<PAGE>
6.3.Option Price. The Option Price for each grant of an Option under
this
Article 6 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 an Employee shall
expire at
such time as the Committee shall determine at the time of grant; provided,
however,
that no ISO shall be exercisable later than the tenth (10th) 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 Employee.
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, 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.
Subject to any governing rules or regulations, as soon as
practicable after receipt
of a written notification of exercise and full payment, the Company shall
deliver to
the Employee, in the Employee'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.
<PAGE>
6.8.Termination of Employment. Each Employee's Option Award Agreement
shall set forth the extent to which the Employee shall have the right to
exercise the
Option following termination of the Employee's employment with the
Company. Such
provisions shall be determined in the sole discretion of the Committee,
shall be
included in the Award Agreement entered into with each Employee, 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 an
Employee under
the Plan shall be exercisable during his or her lifetime only
by such
Employee.
(b) Nonqualified Stock Options. Except as otherwise provided in
an
Employee's Award Agreement, no NQSO granted under this
Article 6 may
be sold, or unless otherwise determined by the Committe,
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 an Employee's Award Agreement, all NQSOs granted to an
Employee
under this Article 6 shall be exercisable during his or her
lifetime only by
such Employee or by the Employee's guardian or legal
representative.
Article 7. Nonemployee Director Stock Options
7.1.Grant of Options. Subject to the terms and provisions of the
Plan, each
Nonemployee Director of the Company on August 9, 1996 shall receive a
grant of
NQSOs to acquire 2,000 shares as of such date, subject to approval of the
Plan by
stockholders. In addition, each Nonemployee Director shall receive
annually NQSOs
to acquire 2,000 Shares concurrent with the Board of Directors meeting
following the
Company's annual meeting of stockholders. If a Nonemployee Director begins
service
other than in connection with an annual meeting of stockholders, such
Nonemployee
Director shall receive a grant of NQSOs to acquire 2,000 Shares, which
grant shall be
prorated based on the length of time until the next annual meeting of
stockholders.
7.2.Award Agreement. Each NQSO grant under this Article 7 shall
be
evidenced by an Award Agreement that shall specify the Option Price, the
duration of
the NQSO, the number of Shares to which the Option pertains, and such
other
provisions as the Committee shall determine.
7.3.Option Price. The Option Price for each grant of an NQSO
under this
Article 7 shall be equal to one hundred percent (100%) of the Fair Market
Value of a
Share on the date the NQSO is granted.
7.4.Duration of Options. Each NQSO granted to a Nonemployee
Director
shall expire on the tenth (10th) anniversary date of its grant.
7.5.Exercise of Options. NQSOs granted under this Article 7 shall
become
exercisable six (6) months from the date of grant 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 Nonemployee Director.
7.6.Payment. Options granted under this Article 7 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 NQSO is to be exercised, accompanied by
full
payment for the Shares.
The Option Price upon exercise of any NQSO 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, 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.
Subject to any governing rules or regulations, as soon as
practicable after receipt
of a written notification of exercise and full payment, the Company shall
deliver to
the Nonemployee Director, in the Nonemployee Director's name, Share
certificates in
an appropriate amount based upon the number of Shares purchased under the
NQSO(s).
7.7.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 7 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.
<PAGE>
7.8.Termination of Service. Each Nonemployee Director's Option Award
Agreement shall set forth the extent to which the Nonemployee Director
shall have the
right to exercise the Option following termination of the Nonemployee
Director's
service with the Company. Such provisions shall be determined in the sole
discretion
of the Committee, shall be included in the Award Agreement entered into
with each
Nonemployee Director, need not be uniform among all Options issued
pursuant to this
Article 7, and may reflect distinctions based on the reasons for
termination of service.
7.9.Nontransferability of Options. No NQSO granted under this
Article 7 may
be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other
than by will or by the laws of descent and distribution. Notwithstanding
the foregoing,
the Committee may, in its sole discretion, permit a Nonemployee Director
to transfer
an NQSO to members of the Nonemployee Director's immediate family,
including
trusts for the benefit of such family members and partnerships in which
such family
members are the only partners, or to other persons or entities which are
approved in
advance by the Committee. Further, except as otherwise provided in a
Nonemployee
Director's Award Agreement, all NQSOs granted to a Nonemployee Director
under
this Article 7 shall be exercisable during his or her lifetime only by
such
Nonemployee Director.
Article 8. Stock Appreciation Rights
8.1.Grant of SARs. Subject to the terms and conditions of the
Plan, SARs may
be granted to Employees 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 Employee (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 equal 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.
8.2.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.
<PAGE>
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.
8.3.Exercise of Freestanding SARs. Freestanding SARs may be
exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes
upon them.
8.4.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.
8.5.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.
8.6.Payment of SAR Amount. Upon exercise of an SAR, an Employee
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 over 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.
8.7.Termination of Employment. Each SAR Award Agreement shall set
forth
the extent to which the Employee shall have the right to exercise the SAR
following
termination of the Employee'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 Employees, need not be
uniform
among all SARs issued pursuant to the Plan, and may reflect distinctions
based on the
reasons for termination of employment.
<PAGE>
8.8.Nontransferability of SARs. Except as otherwise provided in an
Employee'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 an Employee's Award Agreement, all SARs granted to an Employee under
the Plan
shall be exercisable during his or her lifetime only by such Employee.
Article 9. Restricted Stock
9.1.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 Employees in such amounts as the Committee shall determine.
9.2.Restricted Stock Agreement. Each Restricted Stock grant shall
be
evidenced by a Restricted Stock 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.
9.3.Transferability. Except as provided in this Article 9, 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
Award
Agreement. All rights with respect to the Restricted Stock granted to an
Employee
under the Plan shall be available during his or her lifetime only to such
Employee.
9.4.Other Restrictions. Subject to Article 11 herein, the
Committee shall
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 Employees 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 shall 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 9, Shares of
Restricted Stock covered
by each Restricted Stock grant made under the Plan shall become freely
transferable
by the Employee after the last day of the applicable Period of
Restriction.
9.5.Voting Rights. During the Period of Restriction, Employees
holding Shares
of Restricted Stock granted hereunder may exercise full voting rights with
respect to
those Shares.
9.6.Dividends and Other Distributions. During the Period of
Restriction,
Employees 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. Without limiting the generality of the preceding
sentence, if the
grant or vesting of Restricted Shares granted to a Named Executive Officer
is
designed to comply with the requirements of the Performance-Based
Exception, the
Committee may apply any restrictions it deems appropriate to the payment
of
dividends declared with respect to such Restricted Shares, such that the
dividends
and/or the Restricted Shares maintain eligibility for the
Performance-Based Exception.
9.7.Termination of Employment. Each Restricted Stock Award
Agreement
shall set forth the extent to which the Employee shall have the right to
receive
unvested Restricted Shares following termination of the Employee's
employment with
the Company. Such provisions shall be determined in the sole discretion of
the
Committee, shall be included in the Award Agreement entered into with each
Employee, 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 10. Performance Units and Performance Shares
10.1. Grant of Performance Units/Shares. Subject to the terms of
the Plan,
Performance Units and/or Performance Shares may be granted to Employees in
such
amounts and upon such terms, and at any time and from time to time, as
shall be
determined by the Committee.
10.2. 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
Employee. For purposes of this Article 10, the time period during which
the
performance goals must be met shall be called a Performance Period.
10.3. 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 Employee over the Performance
Period, to
be determined as a function of the extent to which the corresponding
performance
goals have been achieved.
10.4. Form and Timing of Payment of Performance Units/ Shares.
Unless
otherwise determined by the Committee, payment of earned Performance
Units/Shares
shall be made in a single lump sum 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.
At the discretion of the Committee, Employees 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 Employees (such dividends shall be subject to the
same accrual,
forfeiture, and payout restrictions as apply to dividends earned with
respect to Shares
of Restricted Stock, as set forth in Section 9.6 herein). In addition,
Employees may,
at the discretion of the Committee, be entitled to exercise their voting
rights with
respect to such Shares.
10.5. Termination of Employment. Unless determined otherwise by
the
Committee, in the event the employment of an Employee is terminated, all
Performance Units/Shares shall be forfeited by the Employee to the
Company.
10.6. Nontransferability. Except as otherwise provided in an
Employee'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 an
Employee's
Award Agreement, an Employee's rights under the Plan shall be exercisable
during
the Employee's lifetime only by the Employee or the Employee's legal
representative.
<PAGE>
Article 11. 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 11, 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 earnings per share, economic value
added,
market share, net income, operating profit, return on assets, return on
equity, return
on investment, revenue, share price, stock price growth, total stockholder
return, debt
reduction, cash flow, working capital management, or customer service.
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 increased (the
Committee
shall retain the discretion to modify or cancel such Awards at any time).
In the event that applicable tax and/or securities laws change to
permit Committee
discretion to alter the governing performance measures for the
Performance-Based
Exception 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 12. 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.
<PAGE>
Article 13. Deferrals
The Committee may permit or require 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. 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 14. Rights of Employees
14.1. 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.
14.2. 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 15. Change in Control
15.1. 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) Unless otherwise provided in the Award Agreement, the target
payout
opportunities attainable under all outstanding Awards of
Restricted Stock,
Performance Units and Performance Shares 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 in cash to Participants not more than
thirty (30) days
following the effective date of the Change in Control a pro
rata amount
based upon an assumed achievement of all relevant performance
goals.
<PAGE>
15.2. 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 15 may not be
terminated,
amended, or modified on or after the date of a Change in Control 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,
the Board of Directors, upon recommendation of the Committee, may
terminate,
amend, or modify this Article 15 at any time and from time to time prior
to the date
of a Change in Control.
Article 16. Amendment, Modification, and Termination
16.1. 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 no amendment which requires shareholder
approval in
order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act,
including any successor to such Rule, shall be effective unless such
amendment shall
be approved by the requisite vote of shareholders of the Company entitled
to vote
thereon.
The Plan, each Award and the grant and exercise
thereof, and the
obligation of the Company to sell and issue shares under the Plan shall be
subject to
all applicable laws, rules, regulations, and governmental and stockholder
approvals,
and the Committee may make such amendment or modification thereto as it
shall
deem necessary to comply with any such laws, rules, and regulations or to
obtain any
such approvals.
16.2. Adjustment of Awards Upon the Occurrence of Certain Unusual
or
Nonrecurring Events. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of
unusual or
nonrecurring events (including, without limitation, the events described
in Section 4.2
hereof) affecting the Company or the financial statements of the Company
or of
changes in applicable laws, regulations, or accounting principles,
whenever the
Committee determines that such adjustments are appropriate in order to
prevent
dilution or enlargement of the benefits or potential benefits intended to
be made
available under the Plan; provided that no such adjustment shall be
authorized to the
extent that such authority would be inconsistent with requirements of
Section 162(m)
of the Code.
16.3. 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.
<PAGE>
16.4. Compliance with Code Section 162(m). At all times when Code
Section
162(m) is applicable, all Awards to Named Executive Officers granted under
this Plan
shall comply with the requirements of Code Section 162(m). However, 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, except that an Award that is intended
to comply
with the requirements of Code Section 162(m) may not be amended in a
manner
inconsistent with the requirements of Code Section 162(m). In addition, in
the event
that changes are made to Code Section 162(m) to permit greater flexibility
with
respect to, and prior to the issuance of, any Award or Awards available
under the
Plan, the Committee may, subject to this Article 16, make any adjustments
it deems
appropriate.
Article 17. Withholding
17.1. 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.
17.2. 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 18. 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 judgment 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 19. Successors and Assigns
All obligations of the Company under the Plan with respect to
Awards granted
hereunder shall be binding on any successor to the Company or the
Company's
assigns, whether the existence of such successor or assign 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 20. Legal Construction
20.1. 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.
20.2. 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.
20.3. 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.
20.4. Securities 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.
20.5. 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.
