SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 | |
| | Preliminary Proxy Statement
|X| Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Calton, Inc.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
Calton, Inc.
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or
14a-6(i)(2).
| | $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
| | Fee computed on table below per Exchange Act Rules 14a(6)(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
| | 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>
CALTON, INC.
500 CRAIG ROAD
MANALAPAN, NEW JERSEY 07726-8790
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 23, 1996
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TO THE SHAREHOLDERS OF CALTON, INC.
The Annual Meeting of the Shareholders of CALTON, INC. (the "Company") will
be held on Tuesday, April 23, 1996 at the Company's offices at 500 Craig Road,
Manalapan, New Jersey at 11:00 a.m., local time, for the following purposes:
1. To elect four directors, each to hold office until the next Annual
Meeting of Shareholders or until a successor is elected and qualifies.
2. To consider and act upon a proposal to adopt the Company's 1996
Equity Incentive Plan.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Holders of Common Stock of record at the close of business on March
11, 1996, are entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
Robert A. Fourniadis
Secretary
Manalapan, New Jersey
March 19, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU ARE UNABLE TO DO
SO, PLEASE MARK, SIGN AND DATE THE ACCOMPANYING PROXY AND MAIL IT AT ONCE IN THE
ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE
APPRECIATED.
<PAGE>
CALTON, INC.
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement is furnished to the holders of Calton, Inc. (the
"Company" or "Calton") Common Stock, $.01 par value ("Common Stock"), in
connection with the solicitation of proxies for use at the annual meeting of
shareholders to be held on April 23, 1996, and at any adjournment thereof (the
"meeting" or "annual meeting"), pursuant to the accompanying Notice of Annual
Meeting of Shareholders. Holders of Common Stock are referred to herein
collectively as the "shareholders." Forms of proxies for use at the meeting are
also enclosed. The Company anticipates mailing this Proxy Statement to its
shareholders on or about March 19, 1996. The executive offices of the Company
are located at 500 Craig Road, Manalapan, New Jersey 07726-8790.
Shareholders may revoke the authority granted by their execution of proxies
at any time before the effective exercise of proxies by filing written notice of
such revocation with the secretary of the meeting. Presence at the meeting does
not of itself revoke the proxy; however, a vote cast at the meeting by written
ballot will revoke the proxy. All shares represented by executed and unrevoked
proxies will be voted in accordance with the specifications therein. Proxies
submitted without specification will be voted IN FAVOR OF the election of the
nominees for director named herein and FOR the proposal to adopt the Company's
1996 Equity Incentive Plan (the "Equity Incentive Plan" or the "Plan").
Management is not aware at the date hereof of any matters to be presented at the
meeting other than the matters described hereinabove, but, if any other matter
is properly presented, the persons named in the proxy will vote thereon
according to their best judgment.
Proxies for use at the meeting are being solicited by the Board of
Directors of the Company. The cost of preparing, assembling and mailing the
proxy material is to be borne by the Company. It is not anticipated that any
compensation will be paid for soliciting proxies, and the Company does not
intend to employ specially engaged personnel of the Company or other paid
solicitors in the solicitation of proxies. It is contemplated that proxies will
be solicited principally through the mail, but directors, officers and employees
of the Company may, without additional compensation, solicit proxies personally
or by telephone, facsimile transmission, telegraph or special letter.
VOTING SECURITIES
The voting securities entitled to vote at the meeting consist of shares of
Common Stock, with each share entitling its owner to one vote on an equal basis.
On March 11, 1996, the number of outstanding shares of Common Stock was
26,445,378. Only shareholders of record on the books of the Company at the close
of business on March 11, 1996 will be entitled to vote at the meeting. The
holders of a majority of the outstanding shares of Common Stock, present in
person or by proxy, will constitute a quorum at the meeting. The affirmative
vote of a plurality of the shares of Common Stock present in person or
represented by proxy and entitled to vote, is required for the election of
directors. The proxy card provides space for a shareholder to withhold votes for
any or all nominees for the Board of Directors. The proposal to approve the
adoption of the Equity Incentive Plan must be approved by a majority of the
votes cast at the annual meeting on such proposal by the holders of Common
Stock.
All votes will be tabulated by the inspector of election appointed at the
meeting who will separately tabulate affirmative votes, negative votes,
authority withheld for any nominee for Director, abstentions and broker
non-votes. Authority withheld will be counted toward the tabulation of the votes
cast on the election of Directors and will have the same effect as a negative
vote. Under New Jersey law, any proxy submitted and containing an abstention or
broker non-vote will not be counted as a vote cast on any matter to which it
relates, except that, solely for purposes of determining whether the proposal to
adopt the Equity Incentive Plan has been approved by the Company's shareholders
in compliance with the voting standards of Rule 16b-3 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), any proxy containing an abstention
with respect to the proposal to approve the Equity Incentive Plan and any shares
present at the meeting that are voted as an abstention on such proposal will be
counted toward the tabulation of the votes cast on the proposal which will have
the same effect as a negative vote.
<PAGE>
Abstentions and broker non-votes will be counted for purposes of determining
whether a quorum is present at the annual meeting.
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to each person who,
as of March 11, 1996, is known by the Company to be the beneficial owner (as
defined in Rule 13d-3 ("Rule 13d-3") of the Exchange Act) of more than five
percent (5%) of the Company's Common Stock. Except as set forth in the footnotes
to the table, the shareholders have sole voting and investment power over such
shares:
Amount and Percent
Nature of of
Name of Beneficial Owner Beneficial Ownership Class
------------------------ -------------------- ------
Anthony J. Caldarone ................ 6,924,781(1) 26.2%
Joyce P. Caldarone .................. 4,266,781(2) 16.1%
Apollo Homes Partners, L.P. (3) ..... 2,658,000(4) 10.1%
Frederick J. Jaindl (5) ............. 1,616,700 6.1%
Goldman Sachs & Co. (6) ............. 1,344,600 5.1%
(1) Includes an aggregate of 1,395,209 shares held by Joyce P. Caldarone, Mr.
Caldarone's wife, as to which shares he disclaims any beneficial interest,
and 2,658,000 shares held by Apollo Homes Partners, L.P. ("Apollo Homes"),
which Mr. Caldarone has the right to vote in the election of directors
pursuant to a proxy granted to him by Apollo Homes. In addition, under the
terms of a stock purchase agreement between Mr. Caldarone and Apollo Homes,
Mr. Caldarone was granted certain rights of first offer with respect to the
shares of Calton Common Stock owned by Apollo. The agreement also grants
Apollo certain "tag-along rights" to sell shares of Calton Common Stock in
the event of, and along with, certain transfers of Common Stock made by Mr.
and/or Mrs. Caldarone, and contains provisions requiring (a) Apollo, under
certain circumstances, to sell the Common Stock owned by it in the event
that Mr. and Mrs. Caldarone sell all of the securities of the Company that
they own and (b) Mr. and Mrs. Caldarone to offer to Apollo, under certain
circumstances, the opportunity to purchase a pro rata portion of additional
securities acquired by Mr. and/or Mrs. Caldarone from the Company. The
6,924,781 shares reflected in the above table do not include 320,000 shares
subject to options which will become immediately exercisable if the
proposal to adopt the Equity Incentive Plan is approved by the shareholders
of the Company.
(2) Includes an aggregate of 2,871,572 shares held by Anthony J. Caldarone,
Mrs. Caldarone's husband, as to which shares she disclaims any beneficial
interest.
(3) The sole general partner of Apollo Homes is AIF II, L.P., a Delaware
limited partnership. The managing general partner of AIF II, L.P. is Apollo
Advisors, whose principal offices are located at Two Manhattanville Road,
Purchase, New York 10577. Apollo Capital Management, Inc. ("ACM") is the
general partner of Apollo Advisors. Shareholdings information is based upon
Apollo Homes' Schedule 13D, as amended to November 21, 1995.
(4) See note 1 above for a description of certain rights granted by Apollo
Homes to Anthony J. Caldarone with respect to these shares.
(5) Such holder maintains an address at c/o Jaindl Farms, 3150 Coffeetown Road,
Orefield, Pennsylvania 12609. Shareholdings information is based upon the
Schedule 13D of such holder dated July 28, 1995.
(6) The principal offices of such shareholder are located at 85 Broad Street,
New York, New York 10004. Shareholdings information is based upon the
Schedule 13D, as amended to April 28, 1995, of Goldman Sachs & Co., the
direct owner, and The Goldman Sachs Group, L.P., which indicates that each
of such entities is a beneficial owner of such shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information, as of March 11, 1996, with
respect to the beneficial ownership (as defined in Rule 13d-3) of the Company's
Common Stock by each director and nominee for director, each of the Named
Officers (as defined in the section captioned "Executive Compensation") who is
currently an officer of the
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Company and by all directors and executive officers as a group. Except as set
forth in the footnotes to the table, the shareholders have sole voting and
investment power over such shares.
<TABLE>
<CAPTION>
Amount and Percent
Nature of of
Name of Beneficial Owner Beneficial Ownership Class
------------------------ -------------------- ------
<S> <C> <C>
Anthony J. Caldarone ........................................... 6,924,781(1) 26.2%
J. Ernest Brophy ............................................... 13,770 (2)
Mark N. Fessel ................................................. -- --
Frank Cavell Smith, Jr. ........................................ -- --
Robert A. Fourniadis ........................................... 105,277(3) (2)
Bradley A. Little .............................................. 99,863(4) (2)
All Directors and Executive Officers as a Group
(6 persons) (1), (3) and (4) ................................. 7,143,391 26.8%
</TABLE>
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(1) Includes an aggregate of 1,395,209 shares held by Joyce P. Caldarone, Mr.
Caldarone's wife, as to which shares he disclaims any beneficial interest,
and 2,658,000 shares held by Apollo Homes which Mr. Caldarone has the right
to vote in the election of directors pursuant to a proxy granted to him by
Apollo Homes. See note 1 to the table presented under the caption
"Principal Shareholders". Does not include options with respect to 320,000
shares which will become immediately exercisable if the proposal to adopt
the Equity Incentive Plan is approved by the shareholders of the Company.
(2) Shares beneficially owned do not exceed 1% of the Company's outstanding
Common Stock.
(3) Includes 86,667 shares subject to currently exercisable options granted
under the Company's Amended and Restated Non-Qualified Stock Option Plan
(the "Option Plan") and 18,610 shares held through the Company's 401(k)
Plan.
(4) Includes 86,667 shares subject to currently exercisable options granted
under the Option Plan and 13,196 shares held through the Company's 401(k)
Plan.
ELECTION OF DIRECTORS
The Company's By-laws provide that the Board of Directors shall consist of
not fewer than three nor more than fifteen members. The Board of Directors has
fixed the number of directors at four. Each of the individuals named below, who
has been nominated for election as a director by the Board of Directors, is
currently a member of the Board of Directors of the Company.
It is the intention of the persons named in the accompanying proxy to vote,
unless otherwise instructed, in favor of the election as directors of the four
nominees named hereinafter. Each director will hold office until the next annual
meeting of shareholders or until a successor is elected and qualifies.
If any of the nominees should be unable to serve, the proxies will be voted
for the election of such other person or persons as shall be determined by the
persons named in the proxy in accordance with their judgment. The Company is not
aware of any reason why any of the nominees, if elected, would be unable to
serve as a director.
NOMINEES
The nominees, their ages and present principal occupations or employment
are as follows:
Nominee Age
------- ---
Anthony J. Caldarone ...................................... 58
J. Ernest Brophy .......................................... 71
Mark N. Fessel ............................................ 39
Frank Cavell Smith, Jr. ................................... 50
Mr. Brophy, a self-employed attorney and certified public accountant
specializing in tax consultation to clients engaged in the construction
business, was reappointed as a Director of Calton in November 1995, having
served in
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such capacity from March 1983 through November 1985 and from April 1986 until
through May 1993 when the Company and certain of its subsidiaries consummated a
joint plan of reorganization under Chapter 11 of the United States Bankruptcy
Code (the "Plan of Reorganization"). Since 1992 Mr. Brophy has served as Chief
Financial Officer and a director of Hurdy-Gurdy International, Inc., a company
that markets sorbet products.
Mr. Caldarone was reappointed as Chairman, President, Chief Executive
Officer and a Director of Calton in November 1995, having previously served in
such capacities from the inception of the Company in 1981 through May 1993 when
the Company consummated the Plan of Reorganization. From June 1993 through
October 1995,Mr. Caldarone served as a Director of the Company.
Mr. Fessel was designated as a Director of Calton by the holders of a
majority in outstanding principal amount of the Company's 12-5/8% Subordinated
Notes (the "Subordinated Notes") pursuant to the Plan of Reorganization in May
1993. Since 1985, Mr. Fessel has owned and operated a real estate company and
has acted as principal in numerous commercial and residential real estate
developments throughout the northeast. In 1984, Mr. Fessel served as the Vice
President of Acquisitions of the Meredith Organization, a nationally recognized
real estate developer.
Mr. Smith was designated as a Director of Calton by the holders of a
majority in outstanding principal amount of Subordinated Notes pursuant to the
Plan of Reorganization in May 1993. Since 1990, Mr. Smith has been associated
with the M&G Companies as a Senior Consultant responsible for corporate real
estate consulting activities. From 1977 to 1990, Mr. Smith served as a Real
Estate Consultant and Real Estate Development Manager for The Spaulding Co.,
Inc. Mr. Smith also is an adjunct faculty member at Boston University and a
member of the Board of Trustees of Shelter, Inc.
MEETINGS OF THE BOARD OF DIRECTORS; COMMITTEES
During the fiscal year ended November 30, 1995, the Board of Directors held
seven meetings. During fiscal 1995, each member of the Company's current Board
of Directors attended 75% or more of the meetings of the Board of Directors and
meetings of the committees on which he served. See the section captioned
"Directors' Compensation" for a discussion of fees paid by the Company to its
directors for their services as such.
During fiscal 1995, the Board of Directors had three standing committees:
the Audit Committee, the Compensation Committee and the Executive Committee.
The Audit Committee currently consists of Mr. Brophy and Mr. Smith. The
functions performed by the Audit Committee are, among other things, to recommend
to the Board of Directors the auditors to be engaged as the Company's
independent public accountants, to review the proposed plan and scope for the
annual audit and the results of such audit when completed, to review the
services rendered by the auditors and the fees charged for such services, to
determine the effect, if any, on the independent public accountants'
independence of the performance of any non-audit services and to review the
plan, scope and results of the Company's internal audit operations. During
fiscal 1995, the Audit Committee held two meetings.
Messrs. Fessel and Smith are members of the Compensation Committee. The
Compensation Committee reviews and approves compensation for executive employees
of the Company on a periodic basis, subject to approval of the Board, and
administers the Company's Incentive Compensation Plan, Amended and Restated 1993
Non-Qualified Stock Option Plan and severance policy for the Company's senior
executives. The Compensation Committee will administer the Equity Incentive Plan
if the proposal to adopt such plan is approved by the shareholders of the
Company. Two meetings of the Compensation Committee were held during fiscal year
1995.
The Executive Committee, which was disbanded in December 1995, was
authorized, during the intervals between Board meetings and when the Board was
not otherwise in session, to exercise all powers of the Board in the management
of the Company which could be lawfully delegated to it by the Board. During
fiscal 1995, the Executive Committee held four meetings.
4
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to the Company and its
subsidiaries for the fiscal years ended November 30, 1995, 1994 and 1993, of the
Chief Executive Officer of the Company and the other executive officers of the
Company who earned salary and bonuses in fiscal 1995 in excess of $100,000
(collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------------------- ------------
Award
------------
Securities
Name and Other Annual Underlying All Other
Principal Position(1) Year Salary($)(2) Bonus($)(3) Compensation Options (#) Compensation($)(4)(5)
- -------------------- ---- ------------ ----------- ------------ ----------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Caldarone 1995 $ 7,692 -- -- 500,000(6) $ 240
Chairman, Chief 1994 -- -- -- -- --
Executive Officer 1993 131,731 -- $20,406(8) -- 452,201
and President (7)
Douglas T. Noakes 1995 291,000 -- -- 684,564(9) 587,121(10)(11)
Former Chief 1994 270,000 170,000 -- 120,000 36,347
Executive Officer and 1993 245,000 155,000 91,556(12) 564,564 450
President
Bradley A. Little 1995 137,917 -- -- 185,000(13) 14,004(14)
Senior Vice President- 1994 126,250 100,000 -- 60,000 11,922
Finance and Treasurer 1993 110,667 70,000 -- 100,000 4,255
Robert A. Fourniadis 1995 120,417 -- -- 185,000(13) 13,812(14)
Senior Vice President- 1994 108,333 90,000 -- 60,000 11,470
Legal and Secretary 1993 90,667 60,000 -- 100,000 3,706
</TABLE>
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(1) Each of the individuals named in the above table served as an officer of
the Company's wholly owned subsidiary, Calton Homes, Inc. ("Calton Homes"),
during all or a portion of the three years ended November 30, 1995. All
cash compensation included in the above table was paid or accrued by Calton
Homes.
(2) Includes amounts paid to officers of the Company for services rendered to
Talcon, L.P. in fiscal 1993 as follows: Mr. Little--$17,000; and Mr.
Fourniadis--$4,000. All such amounts were reimbursed to Calton by Talcon,
L.P. through the issuance of Class A Limited Partnership Interests in
Talcon, L.P. See "Talcon, L.P. Transactions."
(3) Represents amounts accrued in fiscal 1994 and fiscal 1993 and payable in
the subsequent fiscal year to the Named Officers pursuant to the Company's
Incentive Compensation Plan (the "Incentive Plan"). No Incentive Plan
Awards were made with respect to fiscal 1995. The Incentive Plan provides
for an incentive compensation pool equal to ten percent (10%) of the
Company's annual pre-tax income, subject to certain adjustments to pre-tax
income that may be made by the Compensation Committee to remove the effect
of events or transactions not in the ordinary course of the Company's
operations. No such adjustments were made for the fiscal years 1994 or
1993, and the incentive compensation pools for such years were $656,000 in
fiscal 1994 (of which $620,000 was awarded) and $475,000 in fiscal 1993
(all of which was awarded). Key operations and senior corporate management
employees (the "Eligible Employees") of the Company and its subsidiaries
are eligible for participation in the Incentive Plan. The Eligible
Employees are determined each fiscal year by the Compensation Committee
based on the recommendations of the President and Chief Executive Officer
of the Company. An Eligible Employee may not receive a distribution from
the incentive compensation pool for any fiscal year that exceeds the lesser
of twenty percent (20%) of the available incentive compensation pool or one
hundred percent (100%) of the Eligible Employee's base salary for such
fiscal year, unless otherwise provided in the Eligible Employee's
employment agreement with the Company. The Compensation Committee
ultimately determines the percentage, if any, of the incentive compensation
pool for a fiscal year to be awarded to an Eligible Employee.
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<PAGE>
(4) Includes amounts contributed by the Company under its 401(k) Plan (the
"401(k) Plan"). All full-time employees who have completed more than one
year of service with the Company are eligible to participate in the 401(k)
Plan which allows eligible employees to save up to 18% of their pre-tax
compensation (subject to a maximum amount per year established annually
pursuant to the Internal Revenue Code of 1986, as amended) through a
payroll deduction. Subject to the discretion of its Board of Directors, the
Company may make matching contributions to the 401(k) Plan in the form of
cash or Common Stock. The Company's matching contribution for fiscal 1995
was made primarily in Common Stock and the Company anticipates that its
matching contribution for the next fiscal year will be made in the form of
Common Stock. Amounts contributed by the Company to the accounts of the
Named Officers for fiscal 1995 (including the dollar value of contributions
made in the form of Common Stock) were as follows: Mr. Noakes--$6,930; Mr.
Little--$6,930; and Mr. Fourniadis--$7,100.
(5) Includes the reimbursement by the Company of automobile expenses in fiscal
1995 as follows: Mr.Caldarone--$240; Mr. Noakes--$5,500; Mr.
Little--$6,000; and Mr. Fourniadis--$6,000.
(6) Represents options to purchase Common Stock which were granted to Mr.
Caldarone effective January 31, 1996 pursuant to his employment agreement
with the Company and subject to the approval of the Equity Incentive Plan
by the shareholders of the Company.
(7) Mr. Caldarone was reappointed Chairman, President and Chief Executive
Officer of the Company on November 21, 1995 having previously served in
such capacities from the Company's inception until June 1993.
(8) Includes the reimbursement by the Company of automobile expenses of $714.
Also includes reimbursement by the Company of medical and dental expenses
paid on behalf of Mr. Caldarone and members of his immediate family in the
aggregate amount of $19,692.
(9) Represents shares of Common Stock underlying options granted in respect of
services rendered in prior fiscal years which were repriced by the Company
during fiscal 1995.
(10) Includes compensation payable pursuant to a severance agreement entered
into by the Company and Mr. Noakes in connection with the termination of
his employment effective November 21, 1995. Such amount includes (i) a
$350,000 severance payment, (ii) $155,140 representing the dollar value of
benefits of premiums paid under a whole life insurance policy (the
"Insurance Policy") insuring the life of Mr. Noakes, (iii) $18,000 of bonus
compensation and (iv) $25,221 payable in respect of accrued and unused
vacation pay. As required under the terms of such agreement, all such
amounts were paid in January 1996. The Company is entitled to recover all
premiums paid in respect of the Insurance Policy from the death benefit or
cash surrender value of the policy. Under the terms of the severance
agreement, the Company is required to pay the cost of COBRA benefits for
Mr. Noakes for a period of 18 months following the termination of his
employment.
(11) Includes $26,330 which represents the dollar value of benefits of premiums
paid (other than in connection with the termination of Mr. Noakes'
employment) under the Insurance Policy purchased by the Company in
accordance with the terms of Mr. Noakes' employment agreement.
(12) Includes $85,556 paid by the Company to Mr. Noakes for relocation expenses
incurred in fiscal 1993.
(13) Represents 25,000 shares underlying options granted in January 1996 for
services rendered in fiscal 1995 and 160,000 shares underlying options
granted in respect of prior fiscal years which were repriced in 1995.
(14) Includes cost of premiums paid by the Company under a program which
provides officers of the Company with additional life insurance
(supplementing the coverage available under the Company's group life
insurance plan) as follows: Mr. Little--$1,074; and Mr. Fourniadis--$712.
DIRECTORS' COMPENSATION
Members of the Board of Directors who are not full time employees of Calton
were each entitled in fiscal 1995 to annual compensation of $20,000 for service
as a director. Calton paid or accrued a total of $142,000 in director fees to
members of the Board of Directors during fiscal year 1995. Directors are
reimbursed for travel expenses incurred in connection with attendance at Board
and committee meetings. Directors who are not full time employees are paid a
participation fee of $1,000 for each committee meeting attended. If the proposal
to adopt the Equity Incentive Plan is approved by the Company's shareholders,
each non-employee director who has attended 75% or more of the Board
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meetings and meetings of the committees on which he serves during the prior year
will be awarded options to purchase 10,000 shares of the Company's Common Stock
each time such director is reelected to the Board of Directors.
EMPLOYMENT AGREEMENT WITH CHIEF EXECUTIVE OFFICER
Effective November 21, 1995, the Company entered into an Employment
Agreement (the "Employment Agreement") with Anthony J. Caldarone, Chairman,
President and Chief Executive Officer of the Company. The term of the Employment
Agreement will end on November 30, 1998; provided, that such term will be
automatically extended annually for periods of one (1) year unless a notice of
non-extension is issued by the Company or Mr. Caldarone. Pursuant to the
Employment Agreement, Mr. Caldarone will receive a minimum annual salary of
$250,000 ("Base Compensation") which may be increased by the Board or a
committee thereof. Mr. Caldarone is entitled to participate in any bonus
compensation or benefit plan or arrangement provided by the Company to its
employees or senior level executives, including the Company's Incentive Plan.
Under the Employment Agreement, Mr. Caldarone may be awarded up to thirty
percent (30%) of the Incentive Plan's designated incentive compensation for any
fiscal year and, subject to such limitation, is entitled to not less than
one-half of the average percentage that all awards to other Eligible
Participants are of the respective Eligible Participants' base salary for the
relevant fiscal year. Mr. Caldarone is entitled to be reimbursed by the Company
for certain automobile expenses. The Employment Agreement provides for the grant
of options to purchase 500,000 shares of Common Stock to Mr. Caldarone. The
grant of such options, which became effective January 31, 1996, is subject to
the approval of the proposal to adopt the Equity Incentive Plan by the
shareholders of the Company.
If the Employment Agreement is terminated by reason of Mr. Caldarone's
death, the Company is obliged to reimburse Mr. Caldarone's designated
beneficiaries the cost of COBRA benefits, other than long-term disability
coverage, for a period of 18 months following the date of death. If the
Employment Agreement is terminated by reason of Mr. Caldarone's disability, Mr.
Caldarone will be entitled to receive a lump sum cash payment equal to one
years' Base Compensation (the "Severance Compensation") from the Company as well
as the cost of COBRA benefits, other than long-term disability, for him and his
family for a period of 18 months following the date of termination, and continue
to participate in any group life insurance or supplemental life insurance
program of the Company then in effect for a period of 18 months following the
date of termination (collectively, the "Severance Benefits"). The Company may
terminate the Employment Agreement for just cause in the event Mr. Caldarone is
convicted of a felony in connection with his duties as an officer of the
Company, if the commission of such felony resulted in a personal financial
benefit to Mr. Caldarone. Upon termination for just cause by the Company, Mr.
Caldarone is not entitled to receive any Severance Compensation or Severance
Benefits. If the Company terminates the Employment Agreement without just cause,
Mr. Caldarone is entitled to the Severance Compensation and Severance Benefits.
If the Company terminates the Employment Agreement by issuing a notice of
non-extension, Mr. Caldarone is entitled to receive a lump sum cash payment
equal to one years' Base Compensation as well as the Severance Benefits. Mr.
Caldarone may terminate the Employment Agreement for just cause and receive
Severance Compensation and Severance Benefits, if (i) the Board fails to
re-elect him as each of Chairman, President and Chief Executive Officer of the
Company, (ii) the Board significantly reduces the nature and scope of his
authorities, powers, duties and functions, (iii) the Company breaches any
material covenant of the Employment Agreement, or (iv) the Company consents to
Mr. Caldarone's retirement. If Mr. Caldarone terminates the Employment Agreement
without just cause or by issuing a notice of non-extension, he is not entitled
to the Severance Compensation or Severance Benefits. After the date of
termination of Mr. Caldarone' employment for any of the reasons specified herein
and in the Employment Agreement, Mr. Caldarone will not receive any further
salary payments under the Employment Agreement.
For the term of the Employment Agreement and for a period of twelve (12)
months following termination ofMr. Caldarone' employment, other than for just
cause by the Company or without just cause by Mr. Caldarone, Mr. Caldarone is
restricted from competing with the Company in certain regions in which the
Company is actively engaged in business.
SEVERANCE POLICY AND CHANGE IN CONTROL ARRANGEMENTS FOR SENIOR EXECUTIVES
The Company has established a severance compensation policy for senior
level executives who have been employed by the Company for more than one year
(the "Severance Policy"). To become eligible to participate in the Severance
Policy, a senior level executive must be selected by the Company's Compensation
Committee and
7
<PAGE>
approved by the Board of Directors ("Eligible Participants"). Under the
Severance Policy, an Eligible Participant whose employment is terminated is
entitled to receive one month's base salary for each year employed by the
Company, pro rated for any partial year, but in no event less than six month's
base salary; provided, however, that the Eligible Participants who were
designated to participate in the Severance Policy in August 1993 (Mr. Little
and Mr. Fourniadis) are entitled to receive twelve month's base salary. In
addition, the Company will pay all amounts required to be paid by the Eligible
Participants to continue insurance coverage under COBRA for a period of time
equal to the number of months on which the severance compensation is based. The
severance compensation for Eligible Participants who are parties to employment
agreements will be governed by the terms of such agreements. Eligible
Participants who resign voluntarily or who are terminated for cause (as defined
in the Severance Policy) will not be eligible for severance compensation.
Under the terms of certain agreements approved by the Board of Directors of
the Company in May 1995, each of Douglas T. Noakes, the former President and
Chief Executive Officer of the Company, Bradley A. Little and Robert A.
Fourniadis will be entitled to be paid the amount, if any, by which $150,000
($200,000 in the case of Mr. Noakes) exceeds the value of the stock options held
by such officer and granted prior to December 31, 1995 in the event of (i) a
merger, consolidation, recapitalization or other reorganization in which Calton
is not the surviving entity or in which the Company is the surviving entity and
which results in the Company's shareholders immediately prior to the transaction
not holding securities representing 65% or more of the voting power of the
Company's outstanding securities, (ii) a sale of substantially all of the
Company's assets, (iii) a change in control of the Company which results in a
person or group of affiliated persons owning in excess of 35% of the voting
power of the Company's outstanding voting securities, prior to May 1996 (or such
a transaction or change of control involves a party from whom it received a
written offer or entered into a letter of intent prior to May 1996). Under the
terms of these agreements, the amount payable to the officer will be
proportionately adjusted if the officer exercises any options prior to an event
which triggers the Company's payment obligation.
OPTION GRANTS
Shown below is further information with respect to grants of stock options
to the Named Officers by the Company which are reflected in the Summary
Compensation Table set forth under the caption "Executive Compensation."
<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------------- Potential Realizable
Number of Percent Value at Assumed
Securities of Total Annual Rates of Stock
Under- Options Price Appreciation for
lying Granted to Exercise or Option Term
Options Employees in Base Price Expiration ----------------------
Name Granted(#) Fiscal Year ($/Sh) Date(1) 5%($) 10%($)
---- ---------- ----------- ---------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Caldarone .... 500,000(1) 27.6% $.34375 1/30/2001 $27,547 $ 82,641
Douglas T. Noakes ....... 684,564(2) 37.8% .50 11/21/1998 77,065 139,870
Bradley A. Little ....... 25,000(3) 1.4% .3125 1/30/2006 4,913 12,450
100,000(4) 5.5% .50 7/23/2005 24,798 59,859
60,000(5) 3.3% .50 1/25/2005 18,285 46,042
Robert A. Fourniadis .... 25,000(3) 1.4% .3125 1/30/2006 4,913 12,450
100,000(4) 5.5% .50 7/23/2005 24,798 59,859
60,000(5) 3.3% .50 1/25/2005 18,285 46,042
</TABLE>
- ------------
(1) Represents shares of Common Stock underlying options granted to Mr.
Caldarone effective January 31, 1996 and subject to the approval of the
shareholders of the Company of the proposal to adopt the Equity Incentive
Plan. If the shareholders of the Company approve the proposal to adopt the
Equity Incentive Plan, options with respect to 320,000 shares will become
immediately exercisable, and options with respect to the remaining 180,000
shares will become exercisable on January 31, 1997.
(2) Represents shares of Common Stock underlying options which were repriced in
1995. Each of such options is immediately exercisable.
8
<PAGE>
(3) Represents shares of Common Stock underlying options granted in January
1996 for services rendered in fiscal 1995. The options are exercisable
cumulatively in three equal annual installments commencing on the first
anniversary of the date of grant.
(4) Represents shares of Common Stock underlying options which were granted in
July 1993 and repriced in April 1995. The options are exercisable
cumulatively in three equal annual installments commencing on the first
anniversary of the original date of grant.
(5) Represents shares of Common Stock underlying options which were granted in
January 1995 for services rendered in fiscal 1994 and repriced in April
1995. The options are exercisable cumulatively in three equal annual
installments commencing on the first anniversary of the original date of
grant.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
Shown below is information with respect to unexercised options to purchase
the Company's Common Stock held by the Named Officers at November 30, 1995. On
such date, the exercise price of each of such options exceeded the closing price
of the Company's Common Stock on the American Stock Exchange ($.4375 per share).
Number of Securities Underlying
Unexercised Options Held At
FY-End (#)(1)
-----------------------------
Name Exercisable / Unexercisable
---- ----------- -------------
Anthony J. Caldarone .......... -- --
Douglas T. Noakes ............. 684,564 --
Bradley A. Little ............. 86,667 73,333
Robert A. Fourniadis .......... 86,667 73,333
- ----------
(1) Does not include options granted to the Named Officers in January 1996. See
the table presented under the section captioned "Option Grants."
REPORT ON OPTION REPRICING
On April 18, 1995, the Board of Directors of the Company determined that
the stock options issued under the Amended and Restated 1993 Non-Qualified Stock
Option Plan had an exercise price which was consistently higher than the average
market price of the Company's Common Stock. The Board concluded that such stock
options were not providing the desired incentive to those employees of the
Company who the Board believed were making and who were expected to continue to
make substantial contributions to the successful growth of the Company's
business. Accordingly, the Board approved an adjustment in the exercise price of
options with respect to 1,087,064 shares of the Company's Common Stock to the
last reported sales price of the Company's Common Stock on the American Stock
Exchange on April 17, 1995 ($.50). The repriced options retained their original
vesting status; however, the expiration dates were extended by an additional
five (5) years. The Board believes that the repricing of such options will cause
such options to, once again, provide employees of the Company with an
opportunity for increased equity ownership and a meaningful incentive to remain
in the employment of the Company for the long term. Certain of the Named
Officers of the Company were among those employees who had stock options
repriced.
BOARD OF DIRECTORS
Anthony J. Caldarone
J. Ernest Brophy
Mark N. Fessel
Frank Cavell Smith, Jr.
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<PAGE>
Shown below is information with respect to all repricings of options held
by any executive officer of the Company during the ten fiscal years ended
November 30, 1995. Except as indicated in the notes to the table set forth
below, information with respect to the market price of the Common Stock reflects
the last sale price of the Company's Common Stock on the date of the repricing.
TEN-YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
Length of
Number of Original
Securities Market Price Option Term
Underlying of Stock at Exercise Price Remaining
Options Time of at Time of at Date of
Repriced Repricing or Repricing or New Exercise Repricing
Name Date or Amended($) Amendment($) Amendment($) Price($) Amendment
---- ---- ------------- ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Douglas T. Noakes 4/18/95 564,564 $ .50 $1.53 $ .50 8 yr 1 mo
Former Chief 4/18/95 120,000 .50 .72 .50 9 yr 9 mo
Executive Officer 5/28/93(1) 564,564 1.75(1)(2) .50(1)(3) 1.53 12 yr 1 mo
and President
Bradley A. Little 4/18/95 60,000 .50 .72 .50 9 yr 9 mo
Senior Vice 4/18/95 100,000 .50 1.94 .50 8 yr 3 mo
President--Finance
and Treasurer
Robert A. Fourniadis 4/18/95 60,000 .50 .72 .50 9 yr 9 mo
Senior Vice 4/18/95 100,000 .50 1.94 .50 8 yr 3 mo
President--Legal
and Secretary 1/31/90 20,000(3) .75(3)(4) 1.79(3) (5) 4 yr 3 mo
Peter M. Pizza 1/31/90 30,000(3) .75(3)(4) 2.62(3) .75(3)(6) (6)
Former Senior
Vice President
and Treasurer
</TABLE>
- ----------
(1) For purposes of this Option Repricing Table, the date of repricing of
options granted to Mr. Noakes in 1992 is deemed to be May 28, 1993, the
date the Plan of Reorganization was consummated and the options were
approved by the Board of Directors.
(2) Represents the arithmetic average of the highest and lowest sales prices of
the Company's Common Stock on the American Stock Exchange on June 2, 1993,
the date the Common Stock issued in connection with the Plan of
Reorganization began trading on the American Stock Exchange, as reported in
the Wall Street Journal.
(3) Does not reflect a 20 for 1 reverse split effected pursuant to the Plan of
Reorganization
(4) Represents the last sales price of the Company's Common Stock on the New
York Stock Exchange on the date the adjustment to the exercise price of the
options was made.
(5) The per share exercise price was adjusted to $.75 if exercised prior to
June 30, 1990, $.77 if exercised prior to September 30, 1990, $.79 if
exercised prior to December 31, 1990, and $.81 if exercised prior to March
31, 1991.
(6) Options were exercised and the purchase price was paid with a promissory
note issued by the optionee. Thereafter, the per share purchase price was
reduced to $.75 and a corresponding reduction was made to the amount of the
note.
10
<PAGE>
CORPORATE PERFORMANCE
Set forth below are two performance graphs. The initial graph compares the
percentage change in the cumulative total shareholder return on the Common Stock
of the Company for the period from June 2, 1993, the date the Common Stock
issued in connection with the consummation of the Plan of Reorganization began
trading on the American Stock Exchange, to November 30, 1995, with the
cumulative total return on the American Stock Exchange Market Value Index and a
peer group index(1) over the same period (assuming the investment of $100 in the
Company's Common Stock, the American Stock Exchange Market Value Index and the
peer group index on June 2, 1993 and that all dividends were reinvested). The
second graph compares the yearly percentage change in the cumulative total
shareholder return on the Common Stock of the Company for the period from
November 30, 1990 to March 10, 1993, the last day of trading of the Common Stock
on the New York Stock Exchange, with the cumulative total return on the New York
Stock Exchange Market Value Index and the peer group index(1) over the same
period (assuming the investment of $100 in the Company's Common Stock, the New
York Stock Exchange Market Value Index and the peer group index on November 30,
1990 and that all dividends were reinvested).
Graphical Representation of data table below.
(The following tabular information is a description, pursuant to Rule
304 of Regulation S-T, of a graph contained in the paper format of this Proxy
Statement being sent to Shareowners.)
Calton Peer Amex
Inc. Group Index Market Index
------- ----------- ------------
6/3/93 ...... 100.00 100.00 100.00
11/30/93 ...... 112.50 113.74 107.30
11/30/94 ...... 46.88 68.16 102.13
11/30/95 ...... 21.88 102.13 128.32
- ----------
(1) The peer group selected by the Company is comprised, for the most part, of
companies in the homebuilding industry that are of the same or similar size
as the Company and compete in some or all of the same markets as the
Company in recent years. The homebuilding companies in the peer group are:
Hovnanian Enterprises, Inc., Toll Brothers, Inc., Lennar Corp., Oriole
Homes Corp., Pulte Home Corp. and Continental Homes Holding Corp. The peer
group selected for the Company's 1995 Proxy Statement was identical to the
group identified above.
11
<PAGE>
Graphical Representation of data table below.
(The following tabular information is a description, pursuant to Rule 304
of Regulation S-T, of a graph contained in the paper format of this Proxy
Statement being sent to Shareowners.)
Calton Peer NYSE
Inc. Group Index Market Index
------- ----------- ------------
1990 ...... 100.00 100.00 100.00
1991 ...... 66.61 244.77 120.08
1992 ...... 66.61 407.00 137.82
1993 ...... 62.47 483.39 142.42
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee (the "Compensation Committee" or "Committee")
currently consists of Mark N. Fessel and Frank Cavell Smith, Jr. During fiscal
1995, Mr. William L. Mack served as a member of the Compensation Committee until
his resignation as a director in November 1995.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation.
The Compensation Committee is currently comprised of independent,
non-employee directors. It is charged with the responsibility of reviewing and
approving the compensation of the Company's officers and administration of the
Company's Incentive Plan, Amended and Restated 1993 Non-Qualified Stock Option
Plan (the "1993 Option Plan") and severance policy for the Company's senior
executives. The Compensation Committee will also administer the Equity Incentive
Plan if the proposal to adopt such plan is approved by the shareholders of the
Company.
The Committee has determined that the Company's policies for compensation,
including base compensation, incentive compensation and benefits, should be
guided by the marketplace. Noting the cyclical nature of the homebuilding
industry and the importance of controlling fixed costs, the Committee has
determined that the blend of base salary and incentive compensation offered to
the Company's executive officers should emphasize performance based incentive
compensation over base salary compensation. To accomplish the Committee's
compensation objectives for the Company and to attract, motivate and retain key
executives for the management and long term success of the Company, the Company
has developed compensation programs which provide executive officers a base
salary and the opportunity to earn additional compensation based on the profits
and overall success of the Company. Compensation programs include salary and
incentive plans.
The Company's executive compensation programs have three principal
components: base salary, incentive compensation awards and stock option grants.
Factors considered when determining the base salary for an officer of
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<PAGE>
the Company include the position of the officer, the amount of responsibility
associated with such position, past performance of such responsibilities,
dedication to the pursuit of achieving individual and Company goals and the
overall results of the Company. The Committee believes that the base salaries of
the Company's executive officers are generally below or similar to the amounts
paid to comparable officers at other companies of the same or similar size and
business as the Company, including, for the most part, the companies contained
in the peer group selected by the Company in preparation of the performance
graphs presented herein, and, therefore, incentive compensation in the form of
awards under the Incentive Plan and stock option grants are key components of
the total compensation paid or awarded to officers of Calton. The type and
amount of incentive compensation is a function of the performance of both
Company and individual participants in the particular plan. For example, the
Company's Incentive Plan is a cash based plan directly linked to the Company's
financial performance while the 1993 Option Plan (and Equity Incentive Plan, if
approved by the Company's shareholders) provides a method whereby the officers
can share in the long-term growth and success of the Company. The Committee
believes these components collectively provide an appropriate relationship
between an executive's compensation and the Company's financial performance.
The Compensation Committee reviews the performance of the Chief Executive
Officer and other officers of the Company annually. The Compensation Committee
makes recommendations to the Board with respect to salaries and determines
awards to be made under the Incentive Plan. The Compensation Committee also
determines recipients of, and the number of shares to be covered by, options
granted under the Option Plan to all employees, including officers. Incentive
compensation and stock option grants for executive officers are determined by
evaluating the performance of the individuals reviewed, their contributions to
the performance of the Company, their responsibilities, experience and
potential, their period of service at current salary and compensation practices
for comparable positions at other companies. Financial results, nonfinancial
measures and the Chief Executive Officer's evaluation of other executive
officers are considered.
In view of the increased responsibilities assumed by Mr. Noakes upon his
election as Chief Executive Officer and President of the Company in June 1993
and his performance in that capacity subsequent to his election, the Company
entered into a new Employment Agreement with Mr. Noakes in January 1994 which
provided for a base salary of $275,000 per annum. The amount of base salary
payable to Mr. Noakes pursuant to the Employment Agreement was subject to review
by the Board and could be increased by the Board based upon the performance of
the Chief Executive Officer. In January 1995, the Committee reviewed Mr. Noakes'
salary, considering comparative data for compensation for CEO positions, the
performance of the Company in fiscal 1994 as compared to its competitors and Mr.
Noakes' effectiveness in leading the Company to profitability during its first
full fiscal year following the consummation of its Plan of Reorganization. Based
upon this information and the performance of the Company in general, the
Committee determined to increase Mr. Noakes' base salary by $30,000 per year. In
addition, Mr. Noakes was awarded 27.4% of the incentive compensation available
under the Incentive Plan, which amounted to $170,000. The total amount of the
incentive compensation available for participants in the Incentive Plan for
fiscal 1994 was $656,000 (of which $620,000 was awarded). Mr. Noakes was also
granted options to purchase 120,000 shares of Common stock under the Option
Plan, which represented 38.4% of the awards made under the 1993 Option Plan
in January 1995.
Following the resignation of Mr. Noakes in November 1995, the Board of
Directors appointed Anthony J. Caldarone as Chairman, President and Chief
Executive Officer of the Company. Mr. Caldarone had previously served in such
capacity from the inception of the Company in 1981 to June 1993. In connection
with the appointment of Mr. Caldarone as Chairman, President and Chief Executive
Officer, the Board approved an employment agreement between the Company and Mr.
Caldarone which provides for a minimum base salary of $250,000 per year and,
subject to the approval of the proposal to adopt the Equity Incentive Plan by
the shareholders of the Company, options to purchase 500,000 shares of Calton
Common Stock at a price of $.34375 per share (110% of the trading price of the
Common Stock on the date of grant). In approving the employment agreement and
the compensation payable thereunder, the Board considered the compensation paid
to chief executive officers of similarly situated companies, as well as Mr.
Caldarone's qualifications and prior experience in serving in such capacity. See
"Employment Agreement with Chief Executive Officer" for a more detailed
description of the terms of the employment agreement between the Company and Mr.
Caldarone.
In 1993, the Internal Revenue Code of 1986, as amended (the "Code"), was
amended to add Section 162(m). Section 162(m) places a limit of $1,000,000 on
the amount of compensation that may be deducted by the Company in
13
<PAGE>
any year with respect to certain of the Company's highest paid executives.
Certain performance based compensation that has been approved by shareholders is
not subject to the deduction limit. The Company believes that compensation paid
to its officers under all of its compensation plans, except the Incentive Plan,
will qualify as performance based compensation, and will therefore be exempt
from the $1,000,000 deduction limit.
COMPENSATION COMMITTEE
Mark N. Fessel
Frank Cavell Smith, Jr.
TALCON, L.P. TRANSACTIONS
In fiscal 1987, the Company formed Talcon, L.P., a Delaware limited
partnership ("Talcon" or the "Partnership"), to acquire the Company's interests
in certain joint ventures and certain assets of an unconsolidated subsidiary
corporation of the Company engaged primarily in land and residential housing
development. The Company's wholly owned subsidiary, Calton Capital, Inc., served
as the sole general partner (the "General Partner") of Talcon. Certain of the
officers of Calton are or were officers and/or directors of the General Partner.
In January 1994, the General Partner determined that it was no longer in the
best interest of Talcon and its partners to continue the Partnership's business
and declared a dissolution of the Partnership. During 1993 and 1994, Calton
loaned an aggregate of $1 million to Talcon. Due to uncertainty of collection,
the Company subsequently provided a reserve with respect to all amounts owed to
it by Talcon and wrote off its entire equity investment in Talcon. In 1995, in
connection with its dissolution and liquidation, Talcon paid Calton $890,000 in
full satisfaction of its debt obligations.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
Each of FMR Corp. and Goldman, Sachs & Co. is, or was during fiscal 1995,
the beneficial owner of more than 5% of the Company's Common Stock, and each is,
or was during 1995 affiliated with one or more different lenders under the
Company's Amended Credit Agreement (the "Amended Credit Agreement"). These
institutions and/or their affiliates collectively held up to a 45% interest in
amounts outstanding under the Amended Credit Agreement, which totalled
approximately $45 million at November 30, 1995. Apollo Homes Partners, L.P.,
which as of March 11, 1996 owned approximately 10.1% of the Company's
outstanding Common Stock, has a financial advisory relationship with an
institution which was a lender under the Amended Credit Agreement during fiscal
1995. Until it assigned its interest under the Amended Credit Agreement in 1995,
this lender held a 15% interest in the amount outstanding under the Amended
Credit Agreement. See "Principal Shareholders."
PROPOSAL TO APPROVE THE COMPANY'S 1996 EQUITY INCENTIVE PLAN
INTRODUCTION. Effective January 31, 1996, the Board of Directors adopted
the Equity Incentive Plan, subject to the approval of the plan by the
shareholders of the Company. The Equity Incentive Plan will provide for the
granting of stock options to eligible participants and permit directors of the
Company to receive director fees in the form of Common Stock. The Board of
Directors believes that the Equity Incentive Plan can be an effective means of
attracting, motivating and retaining key employees and directors. In addition,
the Board believes that the Equity Incentive Plan will provide a method whereby
key employees and directors can share in the long-term growth of the Company.
The aggregate number of shares of Common Stock reserved for issuance under
the Equity Incentive Plan is 2,000,000 shares. The summary of the Equity
Incentive Plan set forth below is qualified by reference to the full text
thereof which is attached hereto as Appendix A.
ADMINISTRATION. The Equity Incentive Plan will be administered by the
Compensation Committee of the Board of Directors. The Compensation Committee
will have the power to interpret the Equity Incentive Plan, to prescribe, amend
and rescind rules and regulations relating to the plan, to determine the terms
and prices at which options will be granted under the plan and to determine the
employees of the Company who will be selected as participants in the plan.
EFFECTIVE DATE AND TERM OF PLAN. If approved by the Company's shareholders,
the Equity Incentive Plan will be deemed effective on January 31, 1996. The
Equity Incentive Plan will terminate ten (10) years after the effective
14
<PAGE>
date of the Plan. No stock option may be granted under the Equity Incentive Plan
after the termination date, but options previously granted may extend beyond
such date.
ELIGIBILITY. The Committee may grant options under the Equity Incentive
Plan to employees of the Company or any subsidiary of the Company, including
employees who are members of the Board of Directors, and to employees of a
corporation or noncorporate entity which the Company or a subsidiary has agreed
to acquire. Non-employee directors of the Company are eligible to receive
options under the Formula Award provision (as described below) which provides
for the grant of a fixed number of options to directors upon their election or
reelection to the Board. Directors of the Company may also elect to receive
Common Stock under the Equity Incentive Plan in lieu of cash director fees.
STOCK OPTIONS. Both "incentive stock options," as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), (referred to herein
as "Incentive Stock Options") and non-incentive stock options ("Non-Qualified
Options") may be granted under the Equity Incentive Plan. The exercise price of
an option granted under the Equity Incentive Plan may not be less than the fair
market value (110% of fair market value in the case of an Incentive Stock Option
granted to a ten percent (10%) shareholder) of a share of Common Stock on the
date of grant. Options granted under the Equity Incentive Plan are
non-transferable and will be exercisable on the date or dates specified by the
Compensation Committee.
The Equity Incentive Plan contains the following limits on the number of
options which may be granted to certain individual participants and to each
participant of certain classes of participants therein during the term of the
Equity Incentive Plan: (i) the Chief Executive Officer of the Company may be
granted options for no more than fifty percent (50%) of all shares of Common
Stock reserved for issuance under the Equity Incentive Plan; and (ii) each
participant in the class "Other Eligible Participants" may be granted options
for no more than thirty-five percent (35%) of all shares of Common Stock
reserved for issuance under the Option Plan.
Payment for shares as to which an option is exercised may be made in cash,
in Common Stock of the Company owned by the option holder for a period not less
than six (6) months and having a Fair Market Value (as defined) on the date
preceding the date of exercise equal to the aggregate option exercise price, or
in a combination of cash and Common Stock. Alternatively, in the case of a
Non-Qualified Stock Option held for a period of not less than six (6) months, an
option holder may sell, or have sold on his or her behalf, in an open market
transaction on the date of exercise, a number of shares subject to the options
being exercised which will yield cash proceeds equal to the aggregate exercise
price (the "Exercise Sell Method"). Further, with respect to a Non-Qualified
Option which has been owned and held for six (6) months or more, the Equity
Incentive Plan provides that an option holder may elect to exercise the option
and sell, or have sold on his or her behalf, in an open market transaction on
the date of exercise, the number of shares subject to the option being exercised
which will yield cash proceeds equal to the sum of the aggregate exercise price
plus fifty percent (50%) of the difference between the aggregate sales price of
the Common Stock underlying the exercised option and the aggregate exercise
price of the exercised option (the "Appreciation Rights Election"). Pursuant to
the Appreciation Rights Election, the option holder will be entitled to be paid
fifty percent (50%) of the difference between the aggregate sales price and the
aggregate option exercise price in cash and be paid the other fifty percent
(50%) in shares of Common Stock; provided, however, that the Committee, in its
sole discretion, may determine that such payments may be in all cash, all shares
of Common Stock, or any other combination thereof.
In the event of a merger, consolidation, recapitalization or other
reorganization in which Calton is not the surviving entity, or a sale of all or
substantially all of Calton's assets, the Equity Incentive Plan provides for the
acceleration of vesting of each participant's options and the immediate exercise
of such options. Alternatively, a participant may require the Board of Directors
of Calton to specifically provide that the surviving entity will grant
substitute options in exchange for the participant's options; provided, that if
a participant selects this alternative, the Company can elect to repurchase all
of the participant's options. In the event of a tender offer or Change in
Control (as defined in the Equity Incentive Plan and which includes (i) any
transaction in which a person or group of related persons acquires 35% or more
of the Company's outstanding voting stock, and (ii) any merger or other
reorganization which results in the Company's shareholders immediately prior to
the transaction holding less than 65% of the Company's outstanding Common Stock
after the transaction), all options granted to a participant will become fully
and immediately exercisable; provided, that subject to any prohibitions or
limitations contained in any other agreements to which the Company is a party, a
participant may elect to have the Company repurchase such options at a
15
<PAGE>
price equal to the difference between the fair market value of the shares
underlying the options and the aggregate exercise price of the options.
FORMULA AWARDS. Each time an individual who is not an employee of the
Company or a subsidiary of the Company is elected or reelected as a director of
the Company, the director will receive Non-Qualified Stock options to acquire
10,000 shares of the Company's Common Stock. Each such option (a "Formula
Option") shall (i) have a per share exercise price equal to the fair market
value of the Common Stock on the date of such grant, (ii) have a term of five
years and (iii) become exercisable on the first anniversary of the date of
grant. In order for a non-employee director to receive a Formula Option, such
director must have attended 75% of all Board meetings and 75% of all meetings of
the Board committee(s) of which the director was a member held during the prior
12 months while such director was a member of the Board and committee(s).
DIRECTORS' FEES. Directors of the Company may elect to receive all or a
portion of their annual retainer fee and meeting fees in the form of the
Company's Common Stock provided that they give to the Company six months written
notice of an irrevocable election to receive payment in such form. The election
will be effective for a six month period. Shares of Common Stock having an
aggregate fair market value equal to the aggregate amount of Board fees being
paid in stock will be issued to a director who elects to receive fees in the
form of stock no later than 15 business days following the date of payment of
the Board fees by the Company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE EQUITY INCENTIVE PLAN. The
following description of certain Federal income tax consequences of the Equity
Incentive Plan is based upon current statutes, regulations and interpretations
and does not include State or local income tax consequences applicable to a
person who receives a stock option or acquires Common Stock under the Equity
Incentive Plan.
Neither the option holder or the Company incurs any Federal income tax
consequences as a result of the grant of an Incentive Stock Option or a
Non-Qualified Option under the Equity Incentive Plan, nor will the Company be
entitled to a tax deduction as a result of the grant.
The exercise of an Incentive Stock Option will not result in income for the
employee exercising the option if the employee does not dispose of the shares of
Common Stock acquired within two years of the date of grant of the option and
one year after the transfer of the shares of Common Stock upon exercise, and if
the employee is an employee of the Company or a subsidiary of the Company from
the date of grant until three months from the date of exercise. If these
requirements are met, the basis of the shares of Common Stock would be the
exercise price. Any gain related to the subsequent disposition of the shares of
Common Stock would be taxed to the employee as long-term capital gain and the
Company would not be entitled to any deduction. The excess of the market value
on the date of exercise over the exercise price is an item of tax preference,
potentially subject to the alternative minimum tax.
If an employee should dispose of the shares of Common Stock acquired upon
the exercise of an Incentive Stock Option prior to the expiration of either of
the designated holding periods (a "disqualifying disposition"), the employee
would recognize ordinary income and the Company would be entitled to a business
deduction in an amount equal to the lesser of the fair market value of the
shares of Common Stock on the exercise date minus the option exercise price or
the amount realized on disposition minus the option exercise price.
No income tax deduction will be allowed to the Corporation with respect to
shares of Common Stock purchased by a participant through the exercise of an
Incentive Stock Option, provided there is no "disqualifying disposition" as
described above. In the event of a "disqualifying disposition," the Company is
entitled to a tax deduction equal to the amount of ordinary income recognized by
the participant.
When a Non-Qualified Option is exercised, the participant will generally be
deemed to have received an amount of ordinary income equal to the excess of the
fair market value of the shares of Common Stock purchased on the date of
exercise over the exercise price. The disposition of shares acquired upon
exercise of a Non-Qualified Option will generally result in a capital gain or
loss for the optionee, but will have no tax consequences for the Company. Such
capital gain or loss will be long-term gain or loss if the sale occurs more than
one year after the date of exercise and short-term capital gain or loss if the
sale occurs one year or less after the date of exercise.
The Company will be entitled to a deduction for Federal income tax purposes
at the same time and in the same amount that the holder of an option recognizes
ordinary income, to the extent that such income is considered reasonable
compensation under the Code. The Company will not, however, be entitled to a
deduction with respect to any payment that constitutes an "excess parachute
payment" pursuant to Section 280G of the Code and does not
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qualify as reasonable compensation pursuant to that Section. Such payments will
also subject a participant in the Plan to a 28% excise tax.
Directors who elect to receive Common Stock in lieu of cash director fees
will recognize ordinary income and the Company will be entitled to a
corresponding deduction equal to the fair market value of the Common Stock on
the date the director fees are paid.
For tax purposes, Section 162(m) of the Code limits the Company's deduction
for compensation paid to or accrued for each of the Company's Named Officers to
$1,000,000 per annum. Certain types of compensation which qualify as
performance-based compensation are not subject to the $1,000,000 limit on
deductibility. The Company believes that compensation recognized by a Named
Officer upon the exercise of an option granted pursuant to the Equity Incentive
Plan will qualify as performance-based compensation, and will therefore be
exempt from the $1,000,000 deduction limit.
The following table sets forth information as of March 11, 1996 with
respect to the number of options granted under the Equity Incentive Plan. Such
options were granted subject to obtaining the approval of the proposal to adopt
the Equity Incentive Plan by the shareholders of the Company.
EQUITY INCENTIVE PLAN
Name and Position Number of Options
----------------- -----------------
Anthony J. Caldarone
Chairman, President and
Chief Executive Officer ............... 500,000(1)
- ----------
(1) If the proposal to approve the Equity Incentive Plan is approved by the
shareholders of the Company, options will become exercisable as follows:
options with respect to 320,000 shares will become immediately exercisable
and options with respect to the remaining 180,000 shares will become
exercisable on January 30, 1997. Each of such options has an exercise price
of $.34375.
The number and value of stock options and shares of Common Stock that will
be received by any person in the future under the Equity Incentive Plan cannot
be determined at this time.
VOTE REQUIRED. Approval by the Company's shareholders of the proposal to
adopt the Equity Incentive Plan requires the affirmative vote of a majority of
the votes cast at the annual meeting by the holders of Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
COMPANY'S 1996 EQUITY INCENTIVE PLAN.
ANNUAL REPORT
The annual report to shareholders for the fiscal year ended November 30,
1995 accompanies this Proxy Statement. Coopers & Lybrand has audited the
financial statements of the Company for the three fiscal years ended November
30, 1995, which financial statements are contained in the annual report to
shareholders. Such annual report, including the audited financial statements
contained therein, is not incorporated in this Proxy Statement and is not deemed
to be a part of the proxy soliciting material.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Selection of the independent public accountants for the Company is made by
the Board of Directors. On October 25, 1995, the Company's Board of Directors
approved the engagement of Coopers & Lybrand to serve as the Company's
independent public accountants for fiscal 1995. Coopers & Lybrand has served as
the Company's auditors since 1988. The Board of Directors has not yet met to
select the Company's independent public accountants for the current fiscal year.
As previously stated under the caption "Election of Directors," the
Company's Board of Directors has an Audit Committee consisting of outside
directors, and the present members of the committee are Mr. Brophy and Mr.
Smith.
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A representative of Coopers & Lybrand will be present at the meeting and will
have an opportunity to make a statement if the representative desires to do so.
Said representative will also be available to respond to appropriate questions
from shareholders of the Company.
SHAREHOLDER PROPOSALS
Shareholder proposals for presentation at the Company's next annual meeting
must be received by the Company at its principal executive offices for inclusion
in its proxy statement and form of proxy relating to that meeting no later than
November 16, 1996. The Company's by-laws contain certain procedures which must
be followed in connection with shareholder proposals.
THE MANAGEMENT OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS VOTE IN
FAVOR FOR THE NOMINEES TO THE BOARD OF DIRECTORS AND FOR THE PROPOSAL TO APPROVE
THE COMPANY'S 1996 EQUITY INCENTIVE PLAN.
THE COMPANY SUBMITS TO THE SECURITIES AND EXCHANGE COMMISSION AN ANNUAL
REPORT ON FORM 10-K. COPIES OF THE REPORT WILL BE FURNISHED WITHOUT CHARGE UPON
WRITTEN REQUEST RECEIVED FROM ANY HOLDER OF RECORD OR BENEFICIAL OWNER OF SHARES
OF COMMON STOCK OF THE COMPANY. REQUESTS SHOULD BE DIRECTED TO SHAREHOLDER
RELATIONS, CALTON, INC., 500 CRAIG ROAD, MANALAPAN, NEW JERSEY 07726-8790.
ALL SHAREHOLDERS ARE URGED TO MARK, SIGN, DATE AND SEND IN THEIR PROXIES IN
THE ENCLOSED ENVELOPE WITHOUT DELAY TO MIDLANTIC NATIONAL BANK, P.O. BOX 600,
CORPORATE TRUST DEPARTMENT, 499 THORNALL STREET, EDISON, NEW JERSEY 08818.
PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.
Robert A. Fourniadis
Secretary
March 19, 1996
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APPENDIX A
CALTON, INC.
1996 EQUITY INCENTIVE PLAN
1. Definitions.
In this Plan, the following definitions apply:
1.01. "Appreciation Rights Election" means the method of exercising an
Option pursuant to which shares of Common Stock subject to the Option are sold
to cover the payment to the Company of the Option's aggregate exercise price and
the payment of fifty percent (50%) of the Appreciated Value in cash to the
Participant, with the Participant receiving the remaining fifty percent (50%) of
the amount of the Appreciated Value in shares of Common Stock (as such
proportion may be adjusted by the Committee pursuant to Section 10 of the Plan).
1.02. "Appreciated Value" means an amount equal to the difference between
the aggregate fair market value of the shares of Common Stock subject to the
Option and the aggregate exercise price of the Option on the date of exercise.
For purposes of this definition, fair market value of the shares of the Common
Stock shall be the price at which such shares are sold on the date of exercise.
1.03. "Board" means the Board of Directors of the Company.
1.04. "Change in Control" means (a) an event or series of events by which
any "person" (as such term is defined in Section 2(2) of the Securities Act of
1933, as amended), or any affiliate of such Person (when applied to any Person,
an affiliate shall mean any other Person directly or indirectly controlling,
controlled by, or under common control with that Person), or Persons and
affiliates of such Persons acting in concert, shall, whether in a single
transaction or a series of related transactions, acquire directly or indirectly
an amount of the Company's voting stock representing thirty-five percent (35%)
or more of the total voting power of the outstanding voting securities of the
Company having the right under ordinary circumstances to vote in an election of
the Board, or (b) the consummation of a merger, reorganization or
recapitalization in which the Company is the surviving entity, and in which,
after the consummation of the transaction, the shareholders of the Company
immediately prior to the consummation of the transaction shall not continue to
beneficially own securities representing sixty-five percent (65%) or more of the
total voting power of the outstanding voting securities of the Company having
the right under ordinary circumstances to vote in an election of the Board.
1.05. "Code" means the Internal Revenue Code of 1986, as amended, and the
rule and regulations promulgated thereunder.
1.06. "Committee" means the Compensation Committee of the Board, all of the
members of which shall be "disinterested persons" as defined in Rule
16b-3(c)(2)(i) under the Securities Exchange Act of 1934, as amended, or any
similar successor rule, and "outside directors" as defined in proposed rule
1.162-27(e)(3) under the Code or any final or similar successor rule.
1.07. "Company" means Calton, Inc.
1.08. "Corporate Transaction" means a transaction such as a merger (other
than a merger intended solely to change the Company's jurisdiction of
incorporation), consolidation, reorganization, recapitalization, or sale of all
or substantially all of the Company's assets (other than a sale of assets to a
Subsidiary or other affiliated entity of the Company).
1.09. "Director" shall mean a member of the Company's Board.
1.10. "Exercise Sell" means the method of exercising an Option pursuant to
which shares of Common Stock subject to the Option are sold to cover payment of
the Option's aggregate exercise price.
1.11. "Fair Market Value" means the arithmetic average of the highest and
lowest sales prices of the Common Stock reported by the American Stock Exchange
on a particular date, or if there is no sale on such date, then the average of
such high and low sales prices on the last previous date on which a sale of the
Common Stock is reported.
1.12. "Incentive Stock Option" means an option granted under the Plan that
qualifies as an incentive stock option under Section 422 of the Code and that
the Committee designates as such when granting the option.
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1.13. "Just Cause" shall mean: (i) a Participant's conviction for a felony
or for fraud; (ii) a Participant engaging in any conduct, by way of act or
omission, which in the opinion of the Board has the potential to cause, or does
cause, a material adverse effect on the Company's business; (iii) a Participant
failing to return from authorized leave from the Company; (iv) a Participant
being found to be under the influence of, or to have distributed, any illegal
narcotic substance while on the Company's premises, including any project site
of the Company; (v) a Participant acting dishonestly or committing theft of
Company property; or (vi) the work performance of a Participant failing to meet
Company standards.
1.14. "Nonqualified Stock Option" means an Option granted under the Plan
that is not an Incentive Stock Option and that the Committee designates as such
when granting the Option, or an Option granted under the Plan that does not
qualify as an Incentive Stock Option.
1.15. "Option" means an option to purchase shares of Common Stock granted
under the Plan in accordance with the terms of the Plan and related Option
Agreement, if any.
1.16. "Option Agreement" means a written agreement which the Committee may
authorize the Company to enter into with a Participant in order to implement a
grant of an Option by the Committee.
1.17. "Participant" means an employee of the Company or a Director to whom
an Option has been granted.
1.18. "Plan" means the Calton, Inc. 1996 Equity Incentive Plan.
1.19. "Subsidiary" means a corporation in which the Company owns a majority
of the total combined voting power of all classes of stock, either directly or
through one or more other Subsidiaries.
1.20. "Tax Withholding Amount" means the amount, if any, which, upon the
exercise of an Option or an election by a Participant under Section 83(b) of the
Code, the Company or a Subsidiary may be required to withhold in order to obtain
a federal and/or state income tax deduction, such amount which shall be paid to
the Company by the Participant.
1.21. "Tender Offer" means a tender offer for fifty percent (50%) or more
of the Company's voting stock regardless of whether or not the Company will
continue as a separate entity upon the consummation of the Tender Offer.
2. Purpose.
The purpose of this Plan is to advance the interests of the shareholders of
the Company by enhancing the ability of the Company to (i) induce certain
employees, who are in a position to make significant contributions to the
Company and its Subsidiaries, to remain in the employ of the Company and its
Subsidiaries; (ii) attract and retain new employees who can make significant
contributions to the success of the Company and its Subsidiaries; (iii) attract
and retain the services of experienced and knowledgeable Directors; and (iv)
more closely align the interests of such employees and Directors with the
Company's shareholders and to encourage such employees and Directors to take
into account the long-term interests of the Company by securing or increasing on
reasonable terms their stock ownership in the Company. The Plan will also serve
as a vehicle for the issuance of registered shares of Common Stock to any
Director who elects to receive the annual retainer fee, Board meeting fees and
Board committee fees in the form of shares of Common Stock as provided for in
Section 17 of this Plan.
3. Shares Subject to Plan.
The aggregate number of shares of Common Stock reserved for issuance under
the Plan shall be two million (2,000,000), subject to any adjustment pursuant to
Section 11 herein. The shares of Common Stock to be issued under the Plan upon
the exercise of an Option shall be made available either from authorized but
unissued shares of the Company's Common Stock or from shares of the Company's
Common Stock held by the Company as treasury shares, including shares of Common
Stock acquired by the Company in open market and private transactions.
The shares of Common Stock issued under the Plan shall be subject to the
terms and conditions specified in the Plan and related Option Agreements, if
any, and to such other terms and conditions as the Committee may provide. If any
Option expires or terminates for any reason without having been exercised in
full, a new Option may thereafter be granted to acquire the unpurchased shares
of Common Stock subject to such expired or terminated Option.
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4. Administration.
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have complete authority, in its
discretion, to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of any
related Option Agreements, to determine the employees of the Company and its
Subsidiaries who will be selected as Participants under the Plan, to determine
the terms and prices at which Options shall be granted, the number of shares of
Common Stock to be subject to each Option, the periods during which each Option
shall be exercisable, whether such Option shall be an Incentive Stock Option or
a Nonqualified Stock Option, and to make all other determinations necessary or
advisable for the administration of the Plan. In making such determinations, the
Committee may take into account the nature of the services rendered by the
Participants to the Company and its Subsidiaries, their present and potential
contributions to the success of the Company and its Subsidiaries and such other
factors as the Committee, in its discretion, shall deem relevant.
The Committee's determination of the matters referred to herein shall be
final and conclusive. Any dispute or disagreement which may arise under or as a
result of or with respect to any Option shall be determined by the Committee, in
its sole discretion, and any interpretations by the Committee of the terms of
any Option shall be final, binding and conclusive.
No member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan. In addition to such other rights of
indemnification as they may have as members of the Board or as members of the
Committee, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorney's fees, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, in which any Committee
member may be a party by reason of any action taken or failure to act in
connection with the Plan or any Option granted under the Plan, and against all
amounts reasonably paid by them in settlement thereof or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, if such
Committee member acted in good faith and in a manner which the member believed
to be in, and not opposed to, the best interests of the Company and its
shareholders.
5. Eligibility.
The Committee may grant Options under the Plan to (a) employees of the
Company or a Subsidiary, including employees who are members of the Board, and
(b) employees of a corporation or noncorporate entity which has been acquired by
the Company or a Subsidiary, who hold options with respect to the stock or other
equity interests of such corporation or noncorporate entity which the Company or
a Subsidiary has agreed to assume. Nonqualified Stock Options shall be granted
to non-employee Directors as formula awards pursuant to the terms set forth in
Section 18 of this Plan. Further, the Committee can authorize the issuance of
shares of Common Stock to any member of the Board who has elected to receive the
annual retainer fee for serving on the Board, Board meeting fees or Board
committee fees in the form of shares of the Company's Common Stock as provided
for in Section 17 of this Plan.
6. Option Price.
The exercise price of an Option shall be equal to the Fair Market Value of
the Common Stock on the date of grant; provided, however, that (i) with respect
to a Participant who owns more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company, the option price of an
Incentive Stock Option granted to such Participant shall not be less than one
hundred and ten percent (110%) of the Fair Market Value of the Common Stock on
the date of grant, and (ii) with respect to any Option repriced by the
Committee, the exercise price shall be equal to the Fair Market Value of the
Common Stock on the date such Option is repriced.
7. Option Term.
Except as otherwise provided in Section 18 hereof, an Option shall be
granted for such term as the Committee shall determine, not in excess of ten
(10) years from the date of grant thereof; provided, however, that a Participant
who owns more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company may not be granted an Incentive Stock Option
with a term greater than five (5) years from the date of grant.
8. Limitation on Amount of Options Granted.
The Chief Executive Officer of the Company, may not be granted Options for
more than fifty percent (50%) of all shares of Common Stock reserved for
issuance under the Plan. Each other Participant under the Plan may not be
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granted options for more than thirty-five percent (35%) of all shares of Common
Stock reserved for issuance under the Plan.
9. Exercise of Options.
Except as otherwise provided in Sections 11, 12 and 18 hereof, and except
as otherwise provided below with respect to an Incentive Stock Option, upon
granting an Option, the Committee shall determine the date or dates on which
such Option shall become exercisable. The Options and the shares issuable upon
the exercise of such Options may be subject to such conditions and forfeiture
provisions as the Committee may determine, including, but not limited to, the
achievement of business objectives and individual, division and Company
performance. To the extent exercisable, an Option may be exercised either in
whole at any time or in part from time to time. With respect to an Incentive
Stock Option granted to a Participant, the Fair Market Value of the shares of
Common Stock on the date of grant which are exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000.
10. Methods of Exercise and Payment of Option Price.
An Option may be exercised only by a written notice of intent to exercise
such Option with respect to a specific number of shares of Common Stock subject
to such Option and payment to the Company of the aggregate amount of the
exercise price for the number of shares of Common Stock so specified in the
notice. Payment of the Option's exercise price can be made in cash, by cashier's
check or certified bank check, in kind by the delivery of shares of Common Stock
having a Fair Market Value on the date preceding the date of exercise equal to
the portion of the option price so paid and which have been owned and held by
the Participant for a period not less than six (6) months. Upon receipt of
written notice evidencing a Participant's intent to exercise an Option, or an
election by a Participant under Section 83(b) of the Code, the Company will
inform the Participant of the Amount of the Tax Withholding Amount, if any,
which the Participant shall be required to remit to the Company before the
shares of Common Stock will be issued to the Participant.
With respect to Nonqualified Stock Options granted under the Plan and held
by the Participant for six (6) months or longer, a Participant can also pay all
or part of any such Option's exercise price pursuant to the Exercise Sell or
Appreciation Rights Election methods; provided, however, that if a Participant
chooses to pay all or part of the exercise price pursuant to the Appreciation
Rights Election method, the Committee shall have the sole discretion to
determine the form in which payment of the Appreciated Value will be made to the
Participant, including all cash, all shares of Common Stock or any other
combination thereof. Fractional shares will not be issued to a Participant who
exercises an Option pursuant to the Appreciation Rights Election method. The
value of any fractional shares shall be paid in cash to the Participants.
The shares of Common Stock to be sold in order to pay (i) the exercise
price under the Exercise Sell method, or (ii) the exercise price and amount of
the cash payment of the Appreciated Value under the Appreciation Rights Election
method shall be sold by or on behalf of the Participant in an open market
transaction on the date of exercise and the Participant shall not be liable for
any cost of such sale. If a Participant elects to exercise an Option pursuant to
the Exercise Sell or Appreciation Rights Election method, then the Tax
Withholding Amount, if any, shall, in the Participant's discretion, also be
covered by the sale of shares of Common Stock subject to the Option being
exercised. The Participant shall be entitled to receive any remaining proceeds
from the sale of shares of Common Stock which are not applied against the
exercise price and Tax Withholding Amount under the Exercise Sell method, or the
exercise price, cash portion of the Appreciated Value and the Tax Withholding
Amount under the Appreciation Rights Election method.
11. Adjustment of Shares.
11.01. In the event there is any change in the capital stock of the Company
pursuant to a stock split, share combination, stock dividend or Corporate
Transaction in which the Company is the surviving entity, except as otherwise
provided in Subsection 11.02 below, each outstanding Option shall apply to the
securities to which a holder of the number of shares of Common Stock subject to
an Option shall be entitled to receive in connection with any such transaction.
The Committee shall also have the discretion to make any other changes to an
Option, including, without limitation, additional changes in the number or
character of the shares of Common Stock subject to an Option, or in the exercise
price of an Option, in order to protect such Option from dilution or diminution
in value upon the occurrence of any of the above transactions.
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11.02. In the event of a Corporate Transaction in which the Company is not
the surviving entity, or a Corporate Transaction in which the Company is the
surviving entity and in which the outstanding shares of Common Stock shall be,
pursuant to the operation of law or terms of the Corporate Transaction, changed
into or exchanged for securities of another corporation, interests in a
noncorporate entity, other property (including cash), or any combination of the
foregoing, a Participant can elect within thirty (30) days of receipt of notice
of such Corporate Transaction to accelerate all unvested Options and exercise
them or any part thereof. The Participant's exercise of any Options and the
issuance of shares of Common Stock to the Participant in connection with any
such Corporate Transaction shall be conditioned upon the consummation of the
Corporate Transaction; provided, however, that such condition shall not preclude
the Participant from receiving, with respect to the shares of Common Stock
issuable upon the exercise of such Option, the consideration issuable or payable
in respect of the shares of Common Stock pursuant to such Corporate Transaction.
If, in exercising a Nonqualified Stock Option as a result of a Corporate
Transaction, the Exercise Sell or Appreciation Rights Election method is not
available to a Participant for any reason including, without limitation, the
absence of a trading market for the Common Stock on the date of consummation of
the Corporate Transaction, the Participant shall be entitled to receive, without
the payment of consideration, the number of shares of Common Stock issuable upon
exercise of the Option less the number of shares having an aggregate Fair Market
Value equal to the aggregate exercise price on the date the election to exercise
the Option is made by the Participant.
Alternatively, within ten (10) days of receiving notice of the Company's
decision to enter into any such Corporate Transaction, a Participant may provide
the Company with written notice that the Board shall provide that the surviving
entity will grant the Participant substitute options to purchase securities of
the surviving entity in exchange for the Participant's Options. The underlying
securities of such substitute options shall have a fair market value equal to
the highest aggregate Fair Market Value of all shares of Common Stock subject to
the Participant's Options, whether exercisable or not, for the period commencing
with the date of the public announcement of the Corporate Transaction and ending
with the effective date of the Corporate Transaction. The substitute options
shall be issued with an aggregate exercise price equal to the aggregate exercise
price of the shares of Common Stock subject to the Participant's Options and
with terms and conditions comparable to the terms and conditions of the Plan and
any related Option Agreement.
However, if a Participant elects to have the Board provide substitute
options, the Board, in its discretion, may elect, within ten (10) days of
receiving notice from the Participant, to repurchase all of the Participant's
Options, whether exercisable or not, within sixty (60) days of the effective
date of the Corporate Transaction. The amount paid the Participant for the
repurchase of the Participant's Options shall be equal to the difference between
the highest aggregate Fair Market Value of the shares of Common Stock subject to
the Participant's Options for the period commencing with the date of public
announcement of the Corporate Transaction and ending with the effective date of
the Corporate Transaction and the aggregate exercise price of the Participant's
Options. This repurchase right can also be exercised by the surviving entity.
If the Board notifies a Participant of its decision to exercise this
repurchase right, then a Participant shall be entitled to elect to exercise all
of the Participant's Options during the remainder of the thirty (30) day period
from the receipt of notice of the Corporate Transaction as described in the
first paragraph of this Subsection 11.02.
11.03. In the event of a Tender Offer, all of a Participant's Options shall
become immediately exercisable, and may be exercised at any time prior to the
expiration date of such Options. Alternatively, within ten (10) days of
receiving notice of the commencement of a Tender Offer, the Participant can
provide the Company with written notice that the Company shall repurchase all of
the Participant's Options, whether exercisable or not, for an amount equal to
the difference between the highest aggregate Fair Market Value of the shares of
Common Stock subject to the Participant's Options for the period commencing with
the date of public announcement of the Tender Offer and ending with the
effective date of the Tender Offer and the aggregate exercise price of the
Participant's Options. The Company's obligation to repurchase the Participant's
Options shall be subject to any restriction, limitation, or prohibition
contained in any agreement to which the Company is a party.
11.04. In the event of a Change in Control, all of a Participant's Options
shall become immediately exercisable and may be exercised at any time prior to
the expiration dates of such Options. Alternatively, within ten (10) days of
receipt of notice from the Company of a Change in Control, such notice which
shall be furnished promptly upon the Company receiving notice thereof, the
Participant can provide the Company with written notice that the Company shall
repurchase all of the Participant's Options, whether exercisable or not, for an
amount equal to the difference
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between the aggregate Fair Market Value of the shares of Common Stock subject to
the Participant's Options on the date of the Change in Control and the aggregate
exercise price of the Participant's Options. The Company's obligation to
repurchase the Participant's Options shall be subject to any restriction,
limitation or prohibition contained in any agreement to which the Company is a
party.
11.05. In the event of the dissolution or liquidation of the Company
(except a dissolution or liquidation relating to a sale of assets or other
reorganization of the Company referred to in Subsection 11.02 of this Section),
all outstanding Options under the Plan shall terminate as of a date fixed by the
Committee; provided, however, that not less than thirty (30) days written notice
of the date so fixed shall be given to each Participant, and each such
Participant shall have the right during such period to exercise all of the
Participant's outstanding Options, whether exercisable or not.
11.06. Notwithstanding the exercise provisions in Subsections 11.01-11.05
of this Section 11, if the Company's legal counsel should determine that an
extension of time for the exercise of any Option is necessary in order to allow
the Participant to acquire the shares of Common Stock subject to the option in
compliance with federal and state securities laws, the Committee shall extend
said time of exercise for whatever additional period of time is necessary, in
counsel's judgment, to allow such compliance. In the event the treatment of any
Incentive Stock Option under Subsections 11.01-11.05 of this Section 11 could
be determined to be a disqualifying disposition with respect to the favorable
tax consequences of Incentive Stock Options under Sections 421 and 422 of the
Code, the Company shall promptly notify each Participant as to whether or not
the desired treatment of the Participant's Incentive Stock Options could result
in a disqualifying disposition and the effect thereof.
12. Death, Disability, Retirement and Termination.
12.01. In the event the employment relationship between the Participant and
the Company or any of its Subsidiaries is terminated by reason of the
Participant's death or "disability" (as such term is defined in Section 22(e)(3)
of the Code), all of the Participant's Options shall become immediately
exercisable. The Participant, or the Participant's designated beneficiary or
estate, shall have two (2) years from such date of termination to exercise all
or any part of a Nonqualified Stock Option, and one (1) year from such date of
termination to exercise all or any part of an Incentive Stock Option.
12.02. If a Participant resigns as an employee from the Company or any
Subsidiary, the Participant shall have one (1) year for a Nonqualified Stock
Option, or three (3) months for an Incentive Stock Option, from such date of
termination to exercise all or any part of such Option which is fully vested on
or before the date of termination.
12.03. In the event a Participant, who has been employed by the Company or
a Subsidiary for one (1) year or more, is terminated by the Company for any
reason other than for Just Cause, each Option, or any part thereof, scheduled to
vest on the succeeding anniversary date of the grant of the Option following the
date of termination shall become immediately exercisable, and the Participant
shall have two (2) years from the date of termination to exercise all or any
part of a Nonqualified Stock Option, or three (3) months from such date of
termination to exercise all of any part of an Incentive Stock Option. For any
Participant who has been employed by the Company or a Subsidiary for less than
one (1) year, the Participant shall have thirty (30) days, or seven (7) months
(except for an Incentive Stock Option) if the Participant is an officer,
Director or more than ten percent (10%) beneficial owner of the Company, from
the date of such termination in which to exercise all or part of those Options
which is fully vested on or before such date of termination.
12.04. If the Participant is terminated by the Company for Just Cause, the
Participant shall have thirty (30) days, or seven (7) months (except for an
Incentive Stock Option) if such Participant is an officer, Director or ten
percent (10%) beneficial owner of the Company, from the date of termination to
exercise all or part of those Options which is fully vested on or before the
date of termination.
12.05. With respect to Nonqualified Stock Options granted to non-employee
Directors as formula awards pursuant to Section 18 of this Plan, upon the death
or "disability" (as such term is defined in Section 22(e)(3) of the Code) of the
Director, the Director, or the Director's designated beneficiary or Estate,
shall have two (2) years from the date of death or disability to exercise all or
any part of a Nonqualified Stock Option. If a non-employee Director resigns from
the Board or does not stand for reelection to the Board, or, if a non-employee
Director is removed from the Board for any reason, including if the Director is
not reelected to the Board by the shareholders, the Director shall have ninety
(90) days from the date on which the Director ceases to be a member of the Board
to exercise any portion
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<PAGE>
of a Nonqualified Stock Option which is fully vested on or before such date the
Director ceases to be a member of the Board.
13. Non-Transferability of Option.
No Option shall be transferable (including pledged or encumbered) by a
Participant otherwise than by will or by the laws of descent and distribution,
and each Option shall be exercisable during a Participant's lifetime only by the
Participant.
14. Amendments and Discontinuance.
Except as provided for in Section 18 of this Plan with respect to the
formula award provisions, the Board may amend, suspend, discontinue, or
terminate the Plan, subject to shareholder approval if so required by any
applicable federal or state securities laws, tax laws or corporate statute. No
action of the Board, however, may, without the consent of a Participant alter or
impair any Option previously granted to the Participant under the Plan.
15. Successors and Assigns.
The provisions of the Plan shall be binding upon all successors and assigns
of any Participant acquiring shares of Common Stock under the Plan, including,
without limitation, the estate of any such Participant and the executors,
administrators or trustees of such estate, and any receiver, trustee in
bankruptcy or representative of the creditors of any such Participant.
16. Effective Date and Termination Date of the Plan.
The Plan shall be effective as of January 31, 1996, and shall terminate on
January 30, 2006. No Options shall be granted under the Plan subsequent to such
date. Options granted on or before the termination date shall remain exercisable
after the termination of the Plan in accordance with their respective terms.
17. Director's Fees.
Subject to the limitation contained in Section 3 of this Plan on the number
of shares of Common Stock which may be issued pursuant to this Plan, any member
of the Board who provides written notice to the Company shall be entitled to
receive all or a portion of the member's annual board retainer fee, Board
meeting fees, and Board committee fees in the form of shares of the Company's
Common Stock. Any member of the Board who desires to receive all or any part of
such Board fees in shares of Common Stock must provide the Company with written
notice of the member's irrevocable election (an "Election") to receive payment
of Board fees in this form. An Election shall become effective six (6) months
from the date made by a Participant, and payment of Board fees during the six
(6) month period (an "Election Period") commencing with the effective date of
the Election shall be made in the form of shares of Common Stock. An Election
may be made by a director for any six (6) month period following an Election
Period (a "Succeeding Period") provided that written notice of an irrevocable
election to receive payment in the form of Common Stock is received by the
Company no later than six (6) months prior to the effective date of the
Succeeding Period.
Shares of Common Stock with an aggregate Fair Market Value, on the date
preceding the date of payment of Board fees, equal to the aggregate amount of
such Board fees shall be issued to the Board member no later than fifteen (15)
business days following the date of payment of such Board fees by the Company.
18. Formula Awards. Each time an individual, who is not an employee of the
Company or any Subsidiary, is elected or reelected as a Director by the
shareholders of the Company, the Director shall receive, on such date of
election or reelection as the case may be, a grant of Nonqualified Stock Options
to acquire ten thousand (10,000) shares of Common Stock, and each such Option
shall have a per share exercise price equal to the Fair Market Value of the
Common Stock on such date of grant. Each Nonqualified Stock Option granted to a
non-employee Director pursuant to this Section 18 shall have a term of five (5)
years from the date of grant and shall vest and become fully exercisable on the
first anniversary of such date of grant. In order for a non-employee Director to
be granted the Nonqualified Stock Options upon reelection to the Board, the
Director must have attended seventy-five percent (75%) of all Board meetings and
seventy-five percent (75%) of all Board committee meetings, of which the
Director is a member, called and held during the previous twelve (12) months
while such Director was a member of the Board
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<PAGE>
and committee(s). The provisions of this Section 18 of the Plan shall not be
amended more than once every six (6) months, other than to comport with changes
in the Internal Revenue Code of 1986, as amended, the Employee Retirement Income
Security Act of 1974, or the rules thereunder.
19. Miscellaneous.
19.01. Any and all funds held by the Company under the Plan may be used for
any corporate purpose.
19.02. Nothing contained in the Plan, any Option Agreement executed in
connection with the Plan, or any Option granted under the Plan, shall confer
upon a Participant any right to be continued in the employment of the Company or
any Subsidiary, or interfere in any way with the right of the Company or its
Subsidiaries to terminate the employment relationship at any time.
19.03. No Options may be granted nor may Common Stock be purchased under
this Plan until the Company has taken all actions then required to comply with
the Securities Act of 1933, as amended, and any other applicable state
securities laws and any exchange on which the Common Stock may be listed.
19.04. The Company shall take any reasonable and appropriate action which
is necessary, including, without limitation, the filing of a Form S-8
Registration Statement with the Securities and Exchange Commission, to effect
the registration of the shares of Common Stock reserved for issuance under this
Plan under the Securities Act of 1933, as amended.
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<PAGE>
P
R
O
X
Y
CALTON, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 1996
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF CALTON, INC.
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and
appoints Anthony J. Caldarone and Robert A. Fourniadis and each of them, the
true and lawful attorneys, agents and proxies of the undersigned, with full
power of substitution, to vote with respect to all the shares of Common Stock of
CALTON, INC., standing in the name of the undersigned at the close of business
on March 11, 1996, at the annual meeting of shareholders to be held at the
Company's offices at 500 Craig Road, Manalapan, New Jersey and at any and all
adjournments thereof, with all powers that the undersigned would possess if
personally present and especially (but without limiting the general
authorization and power hereby given) to vote as indicated on the reverse side
hereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED, AND
IF NO INSTRUCTIONS TO THE CONTRARY ARE INDICATED, WILL BE VOTED IN FAVOR OF EACH
ITEM.
COMMON STOCK
SEE REVERSE
SIDE
(This proxy is continued from the reverse side)
Please mark your
[X] votes as in this
example.
1. ELECTION OF DIRECTORS: Anthony J. Caldarone, J. Ernest Brophy, Mark N.
Fessel and Frank Cavell Smith, Jr.
FOR WITHHELD
[ ] [ ]
For, except vote withheld from the following nominee(s):
________________________________________________________
________________________________________________________
2. To approve a proposal to adopt the Company's 1996 Equity Incentive Plan.
FOR WITHHELD ABSTAIN
[ ] [ ] [ ]
3. In their discretion upon such other matters as may properly come before the
meeting or any adjournment or adjournments thereof.
Dated:_____________________________ , 1996
__________________________________________
__________________________________________
IMPORTANT: Please sign exactly as name
appears at the left. Each joint owner
should sign. Executors, administrators,
trustees, etc. should give full title.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
