TRANSFINANCIAL
[COMPANY LOGO - GRAY/GREEN]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 1998
The Annual Meeting of Shareholders of TransFinancial Holdings, Inc.
("TransFinancial" or "the Company"), a Delaware Corporation, will be held at the
Marriott Hotel, 10800 Metcalf Avenue, Overland Park, Kansas, on Monday, April
27, 1998, at 9:00 a.m., Central Time, for the following purposes:
1. To consider and act upon a proposal to approve the
TransFinancial Holdings, Inc. 1998 Long-Term Incentive Plan;
2. To consider and act upon a proposal to elect seven (7)
directors of TransFinancial;
3. To consider and act upon a proposal to ratify the
selection of Coopers & Lybrand L.L.P. as independent public
accountants for TransFinancial for 1998; and
4. To consider and act upon such other matters as may
properly come before the meeting and any adjournment
thereof.
The foregoing matters are more fully described in the accompanying Proxy
Statement.
Shareholders of record on the books of TransFinancial at the close of
business on March 13, 1998 will be entitled to receive notice of and to vote at
the meeting. A complete list of such Shareholders will be available for
examination at the principal executive offices of TransFinancial Holdings, Inc.
at 8245 Nieman Road, Suite 100, Lenexa, Kansas, by any Shareholder, for any
purpose germane to the Annual Meeting, for the 10 days immediately preceding the
Annual Meeting.
YOUR VOTE IS IMPORTANT. TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU
ARE REQUESTED TO PROMPTLY DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. Returning your proxy now will not interfere with your right
to attend the meeting or to vote your shares personally at the meeting, if you
wish to do so. The prompt return of your proxy may save TransFinancial
additional expenses of solicitation.
All Shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors
/s/ Mark A. Foltz
Mark A. Foltz,
Corporate Secretary
Lenexa, Kansas
March 13, 1998
TRANSFINANCIAL HOLDINGS, INC.
March 13, 1998
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 27, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of TransFinancial Holdings, Inc.
("TransFinancial" or "the Company") to be used at the 1998 Annual Meeting of
Shareholders of the Company ("Annual Meeting") which will be held at the
Marriott Hotel, 10800 Metcalf Avenue, Overland Park, Kansas, on Monday, April
27, 1998, at 9:00 a.m. Central Time, and any adjournment thereof. All costs of
the solicitation will be borne by the Company.
A copy of the Company's annual report for the fiscal year ended December
31, 1997, is enclosed herewith. Such report is not incorporated in this Proxy
Statement and is not to be deemed a part of the proxy solicitation material.
PROXIES AND VOTING
Shareholders of record at the close of business on March 13, 1998 are
entitled to one vote at the meeting for each share held. There were outstanding
on March 13, 1998, 6,030,937 shares of common stock, par value $.01 per share,
of the Company ("Common Stock"). Such shares have no cumulative voting rights.
The Company has no other class of stock outstanding.
Shareholders who execute proxies retain the right to revoke them at any
time before they are voted by giving to the Corporate Secretary of the Company
written notice of revocation bearing a date later than the proxy date, by
submission of a later-dated proxy or by revoking the proxy and voting in person
at the Annual Meeting. Attendance at the Annual Meeting will not in and of
itself constitute revocation of a proxy. Unless so revoked, proxies properly
executed and returned will be voted in accordance with the instructions given
therein or, if properly executed but no instructions are given, will be voted
for the approval of the 1998 Long-Term Incentive Plan, for the nominees for
director named herein and for ratification of the selection of the independent
public accountants.
Proxies submitted by Shareholders prior to the Annual Meeting will be
tabulated by the Company's transfer agent, UMB Bank, N.A. Votes cast and
proxies received at the Annual Meeting will be manually tabulated by an
inspector of election and the proxy count certified by the Company's transfer
agent will be adjusted accordingly. Abstentions and broker non-votes are each
counted for purposes of determining whether there is a quorum at the Annual
Meeting. Abstentions are counted in the tabulations of votes cast on proposals
presented to shareholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal presented to the Shareholders has been
approved.
The seven individuals receiving the greatest number of votes cast at the
meeting will be elected as directors of the Company. The affirmative vote of a
majority of the outstanding shares of common stock represented in person or by
proxy at the meeting is necessary for the approval of the 1998 Long-Term
Incentive Plan and for ratification of the selection of the independent public
accountants.
PROPOSAL 1
APPROVAL OF 1998 LONG-TERM INCENTIVE PLAN
The Board of Directors has adopted the TransFinancial Holdings, Inc. 1998
Long-Term Incentive Plan, subject to the approval of the shareholders of the
Company.
The purpose of the Plan is to further the earnings of the Company and its
subsidiaries by: (a) assisting the Company and its subsidiaries in attracting,
retaining and motivating officers, directors, employees and consultants of high
caliber and potential and (b) providing for the award of long-term incentives to
such officers, directors, employees and consultants.
The principal features of the Plan are summarized below. The summary is
qualified in its entirety by reference to the full text of the Plan set forth in
Exhibit A attached hereto.
Administration of the Plan
The Plan is to be administered by a committee (the "Committee") consisting
of two or more members of the Board of Directors of the Company ("Board")
appointed from time to time by the Board. Under the Plan, the Board may
bifurcate the powers of the Committee among one or more separate committees, or
retain all powers and duties of the Committee in a single committee. The Plan
provides that, except as otherwise determined by the Board, (a) if a Committee
is authorized to grant awards under the Plan ("Awards") or make determinations
with respect to any participant who is subject to Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended from time to time (the
"1934 Act"), each member of such Committee must be a "non-employee director"
within the meaning of Rule 16b-3, and (ii) if a Committee is authorized to grant
Awards or make determinations with respect to a "Covered Employee" under the
Plan, each member of such Committee must be an "outside director" within the
meaning of Section 162(m) ("Section 162(m)") of the Internal Revenue Code of
1986, as amended from time to time (the "Code"). The Plan authorizes the Board
in its discretion to exercise the powers and duties of the Committee under the
Plan at any time and from time to time. It is currently intended that the Plan
be administered by the Compensation Committee of the Board of Directors.
The Plan grants the Committee full and final power and authority to
administer and interpret the Plan, including without limitation the power and
authority to determine the eligible persons to whom Awards shall be made under
the Plan and the type or types of Awards to be granted to any eligible person
under the Plan. The Committee is authorized under the Plan to delegate to one
or more executive officers of the Company the power to make Awards to any
participant who is not subject to Rule 16b-3 or a "covered employee" under
Section 162(m).
Shares Subject to the Plan
600,000 shares of Common Stock, $.01 par value per share, of the Company
("Shares") are available for the grant of Awards under the Plan, subject to
appropriate adjustment by the Committee upon changes in capitalization and
certain other events as provided in the Plan. The Plan provides that if for any
reason any Award expires or lapses or is terminated, forfeited or cancelled, any
Shares subject to such Award, to the extent of such expiration, lapse,
termination, forfeiture or cancellation, shall again be available for award
under the Plan.
The closing price of the Company's Common Stock on March 13, 1998, as
reported by the Wall Street Journal, was $9.50 per Share.
Limits on Individual Awards
Subject to appropriate adjustment by the Committee upon changes in
capitalization and certain other events as provided in the Plan, (a) the maximum
number of Shares subject to stock options which may be granted in the aggregate
under the Plan in any calendar year to any participant is 50,000 Shares, (b) the
maximum number of Shares underlying stock appreciation rights which may be
granted in the aggregate under the Plan in any calendar year to any participant
is 50,000 Shares and (c) the maximum number of Shares subject to restricted
stock awards, performance share awards and other stock-based awards which may be
granted in the aggregate under the Plan in any calendar year to any Participant
is 50,000 Shares. In addition, the maximum amount of compensation payable in
respect of performance unit awards, cash in addition to an Award and dividend
equivalents that may be paid in the aggregate under the Plan in any calendar
year to any participant is $1,000,000.
Limit on Certain Types of Awards
The maximum number of Shares which may be issued in the aggregate with
respect to restricted stock awards under paragraph 8 of the Plan, performance
share awards under paragraph 9 of the Plan and other stock-based awards payable
in Shares under paragraph 10 of the Plan is 100,000 Shares, subject to
appropriate adjustment by the Committee upon changes in capitalization and
certain other events as provided in the Plan. Shares awarded pursuant to any
such Award shall not, to the extent such Award expires or lapses or is
terminated, surrendered, forfeited, cancelled, exercised or settled in a manner
that results in fewer Shares outstanding than were awarded pursuant to such
Award, be counted against the maximum number of Shares which may be issued
pursuant to this provision of the Plan.
Eligibility
All officers, directors, key employees and consultants of the Company and
its subsidiaries are eligible to receive Awards under the Plan. The Plan
defines key employees as employees determined by the Committee to be capable of
contributing significantly to the profitability and success of the Company and
its subsidiaries. The Plan provides that Incentive Stock Options may be granted
only to persons eligible to receive such options under the Code. The
approximate number of directors of the Company and its subsidiaries eligible to
receive Awards under the Plan is 10 and the approximate number of officers and
key employees of the Company and its subsidiaries eligible to receive Awards
under the Plan is 100.
Forms of Awards
Under the Plan, Awards may be made from time to time by the Committee in
the form of stock options to purchase Shares, stock appreciation rights,
performance units, performance shares, restricted stock, other stock-based
awards or any combination of the above. In addition, the Committee may provide
for cash payments to participants in addition to an Award, or loans to
participants in connection with all or any part of an Award, and may provide in
any Award the right to dividends or dividend equivalents.
Stock Options
The Committee is authorized under the Plan to grant stock options, which
may be incentive stock options ("Incentive Stock Options") or nonqualified stock
options ("Nonqualified Stock Options"). Subject to the provisions of the Plan,
the Committee is authorized to determine the terms and conditions of each stock
option granted by the Committee, provided that the term of a stock option shall
not be greater than ten (10) years and the exercise price per Share with respect
to any stock option shall not be less than the fair market value of a Share on
the date of grant, as determined by the Committee.
The Committee is authorized under the Plan to determine the form of payment
of the purchase price of the Shares with respect to which an option is
exercised, which may include without limitation (a) cash, (b) Shares at fair
market value, (c) the optionee's written request to the Company to reduce the
number of Shares otherwise issuable to the optionee upon the exercise of the
option by a number of Shares having a fair market value equal to such purchase
price, (d) a payment commitment of a financial institution or brokerage firm in
connection with the "cashless exercise" of an option, (e) any other lawful
consideration, including, without limitation, an Award or a note or other
commitment satisfactory to the Committee or (f) a combination of any of the
foregoing. The Committee may provide for circumstances under which a stock
option shall become immediately exercisable, in whole or in part, and may
accelerate the exercisability of any stock option under the Plan, in whole or in
part, at any time. The terms of any Incentive Stock Option must meet the
requirements of Section 422 of the Code.
Stock Appreciation Rights
The Committee is authorized under the Plan to grant stock appreciation
rights ("SARs"), which may be granted either in connection with a previously or
contemporaneously granted stock option or independently of a stock option. SARs
entitle the grantee to receive upon exercise thereof all or a portion of the
excess of (i) the fair market value at the time of exercise, as determined by
the Committee, of a specified number of Shares with respect to which the SAR is
exercised, over (ii) a specified price, which shall not be less than 100 percent
of the fair market value of the Shares at the time the SAR is granted, or, if
the SAR is granted in connection with a previously or contemporaneously issued
stock option, not less than the exercise price of the Shares subject to the
option.
Each SAR shall have such other terms and conditions as the Committee shall
determine, subject to the provisions of the Plan and provided that the term of
an SAR shall not be greater than ten (10) years. The Committee may provide in
an Award circumstances under which an SAR shall become immediately exercisable,
in whole or in part, and may accelerate the exercisability of any SAR, in whole
or in part, at any time. Upon exercise of an SAR, payment may be made in cash,
Shares at fair market value on the date of exercise, other Awards, other
property or any combination thereof, as the Committee may determine.
Restricted Stock Awards
The Committee is authorized under the Plan to grant restricted stock
awards, which consist of Shares free of any purchase price or for such purchase
price as may be established by the Committee, subject to forfeiture and subject
to such other terms and conditions (including attainment of performance
objectives) as may be determined by the Committee. Restricted stock awards will
be subject to such restrictions on transferability and other restrictions as the
Committee may impose. The Committee, in its discretion, may provide in an Award
circumstances under which restricted stock shall become immediately transferable
and nonforfeitable, or under which restricted stock shall be forfeited, and,
notwithstanding the foregoing, may accelerate the expiration of the restriction
period imposed on any restricted stock at any time.
Performance Units and Performance Shares
The Committee is authorized under the Plan to grant performance unit awards
and performance share awards, which entitle grantees to future payments based
upon the achievement of pre-established performance objectives. The Committee
is authorized under the Plan to determine the terms and conditions applicable to
each performance unit award and performance share award. Performance targets
established by the Committee may relate to financial and nonfinancial
performance goals, may relate to corporate, division, unit, individual or other
performance and may be established in terms of growth in gross revenue, earnings
per share, ratios of earnings to equity or assets, or such other measures or
standards as may be determined by the Committee in its discretion. The
Committee is authorized, at any time prior to payment of a performance unit or
performance share award, to adjust previously established performance targets or
other terms and conditions to reflect unforeseen events, including without
limitation, changes in laws, regulations or accounting practices, mergers,
acquisitions or divestitures or other extraordinary, unusual or non-recurring
items or events. Payment on performance unit and performance share awards may be
made in cash, Shares, other Awards, other property or any combination thereof,
as the Committee may determine.
Other Stock-Based Awards
The Committee is authorized under the Plan to grant other awards which are
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to Shares (including, without limitation,
securities or other instruments convertible into Shares). Subject to the terms
of the Plan, the Committee shall determine the terms and conditions of such
Awards. Such Awards may be paid in Shares, cash, other Awards, other property or
any combination thereof, as the Committee may determine. Such Awards may be
issued for no cash consideration, for such minimum consideration as may be
required by applicable law or for such other consideration as the Committee may
determine. Notwithstanding the provisions of the Plan relating to other stock-
based awards, any stock option to purchase Shares, SAR, restricted stock award
or performance share award which is granted under the Plan must comply with the
provisions of the Plan applicable to such Award.
Loans and Supplemental Cash Payments
The Committee is authorized under the Plan to provide for cash payments to
participants in addition to an Award, or loans to participants in connection
with all or any part of an Award. The Committee is authorized to determine the
terms and conditions of such loans and supplemental cash payments, provided that
with respect to supplemental cash payments, in no event may the amount of
payment exceed: (a) in the case of an option, the excess of the fair market
value of a Share on the date of exercise over the option price multiplied by the
number of Shares for which such option is exercised, or (b) in the case of an
SAR, performance unit award, performance share award, restricted stock award or
other stock-based award, the value of the Shares and other consideration issued
in payment of such Award.
Performance-Based Awards
Section 162(m) generally disallows a federal income tax deduction to any
publicly held corporation for compensation paid in excess of $1,000,000 in any
taxable year to certain executive officers of the Company, unless such
compensation qualifies as "qualified performance-based compensation." The Plan
authorizes the Committee to grant Awards in the form of "Performance-Based
Awards," which are designed to qualify as "qualified performance-based
compensation" under Section 162(m). Stock options and SARs granted with an
exercise price equal to the fair market value on the date of grant, as required
by the Plan, should qualify as "Performance-Based Awards" under the Plan,
provided that the other requirements of Section 162(m) are satisfied. For other
Awards under the Plan to qualify as "Performance-Based Awards," such Awards must
be conditioned upon the achievement of one or more performance goals as provided
in the Plan. The Plan requires that the performance goals be one or more of the
"Stockholder-Approved Performance Goals," which consist of approximately twenty
measurable performance objectives listed in Section 16(k) of the Plan.
The Plan provides with respect to Performance-Based Awards that, to the
extent required under Section 162(m), the Committee shall (i) establish in the
applicable agreement evidencing an Award ("Award Agreement") the specific
performance targets relative to the Stockholder-Approved Performance Goals which
must be attained before compensation under the Performance-Based Award becomes
payable, (ii) provide in the applicable Award Agreement the method for computing
the amount of compensation payable to the participant if the target or targets
are attained, and (iii) at the end of the relevant performance period and prior
to any payment of compensation, certify whether the applicable target or targets
were achieved and whether any other material terms were in fact satisfied. In
accordance with Section 162(m), the Plan limits the authority of the Board of
Directors and the Committee to exercise discretion with respect to any
Performance-Based Award or with respect to amendment or modification of certain
provisions of the Plan without stockholder approval.
Non-Employee Directors' Options
The Plan provides for the automatic grant of a Nonqualified Stock Option to
purchase 2,000 Shares (a "Formula Option") on the first stock trading day after
each annual meeting of shareholders of the Company, commencing with the year
1998, to each person who is serving as a director of the Company and is not an
employee of the Company or any subsidiary on such day ("Non-Employee Director").
Under the Plan, the option exercise price per Share under each Formula Option is
one hundred percent (100%) of the fair market value of the Shares on the date
the option is granted. Because such directors are currently entitled to receive
annual options to purchase 2,000 Shares under the 1992 Stock Incentive Plan of
the Company, each such director will be required to waive such director's right
to an option under the 1992 Stock Incentive Plan for a particular year in order
to receive a Formula Option for such year.
Each Formula Option becomes exercisable with respect to one-half of the
Shares subject to such option on the last day of the tenth full calendar month
following the date of grant and becomes exercisable in full on the last day of
the twenty-second full calendar month following the date of grant; provided
that, notwithstanding the foregoing, the Formula Option shall immediately become
exercisable in full upon (a) the occurrence of a Change of Control (as defined
in the Plan) during the Non-Employee Director's service as a director of the
Company, provided the Formula Option has been outstanding for at least one
hundred eighty (180) days at the time of such occurrence, (b) termination of the
Non-Employee Director's service as a director of the Company concurrently with a
Change of Control, provided the Formula Option has been outstanding for at least
one hundred eighty (180) days at the time of such termination, or
(c) termination of the Non-Employee Director's service as a director of the
Company due to the Non-Employee Director's (i) death, (ii) permanent and total
disability, or (iii) retirement at the end of a term of office, after completing
five (5) years of service as a director ("Retirement"). Each Formula Option
expires on the tenth anniversary of the date of grant, subject to earlier
termination one hundred eighty (180) days after the date a Non-Employee
Director's service as a director of the Company terminates for any reason. The
Committee is permitted under the Plan to grant Awards to any Non-Employee
Director in addition to Formula Options.
Adjustment Upon Certain Events
The Plan provides that if the Committee determines that any dividend or
distribution (whether in the form of cash, Shares, other securities or other
property), recapitalization, merger, consolidation, reorganization, spin-off or
split-up, reverse stock split, combination or exchange of Shares or other
transaction affects the Shares such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in such manner as it may deem equitable and without the
consent of any affected participant, adjust the number and kind of securities
which may be issued under the Plan, the number and kind of securities subject to
outstanding Awards and the exercise price of each outstanding stock option
granted under the Plan, and may make such other changes in outstanding Awards as
it deems equitable in its sole discretion. No such adjustment or action is
authorized to the extent that such adjustment or action would cause the Plan or
any outstanding Incentive Stock Option to violate Section 422 of the Code or
would cause any Performance-Based Award to fail to qualify as "qualified
performance-based compensation" under Section 162(m) of the Code and the
regulations promulgated thereunder.
Amendment of Awards
Subject to the terms and conditions of the Plan and any Award Agreement,
the Committee has the authority under the Plan to amend the terms of any
outstanding Award (including the applicable Award Agreement) in any manner,
provided, however, that the amended or modified terms are permitted by the Plan
as then in effect and provided, further, that if such amendment or modification,
taking into account any related action, materially and adversely affects a
participant's rights under an Award or an Award Agreement, the participant must
consent to the amendment. The Committee may not amend any outstanding Award or
Award Agreement relating to a Formula Option to the extent that such amendment
would cause the provisions of the Plan applicable to Formula Options and the
provisions of the Award or Award Agreement to fail to qualify as a "formula
plan" within the meaning of Rule 16b-3 under the 1934 Act.
Notwithstanding the foregoing, unless approved by the shareholders of the
Company in accordance with Delaware law, (a) the Committee may not amend the
terms of any outstanding Award relating to any stock option or SAR (including
the applicable Award Agreement) to reduce the exercise price per Share and (b)
no stock option or SAR may be cancelled and replaced with any Award or Awards
having a lower exercise price, provided that the Committee may make appropriate
adjustments to reflect changes in capitalization and other events as provided in
the Plan.
Termination of Employment or Consulting Arrangement
Except with respect to Formula Options, the Committee is authorized under
the Plan to determine the effect, if any, on an Award of the disability, death,
retirement or other termination of employment or services of a participant and
the extent to which, and the period during which, the participant or the
participant's legal representative, guardian or Beneficiary may receive payment
of an Award or exercise rights thereunder.
Change of Control
Except with respect to Formula Options and subject to the terms and
conditions of the Plan, the Committee is authorized under the Plan to include
such provisions in the terms of an Award or Award Agreement relating to a change
of control of the Company (as defined by the Committee) as the Committee
determines in its discretion.
Transferability of Awards
Except with respect to Formula Options, the Committee is permitted under
the Plan to make any Award transferable upon such terms and conditions and to
such extent as the Committee determines and to waive any restriction on
transferability, provided that Incentive Stock Options may be transferable only
to the extent permitted by the Code.
Effective Date and Duration of Plan
The Plan became effective upon its adoption by the Board of Directors on
February 17, 1998, provided that the Plan is approved by the shareholders of the
Company in accordance with Delaware law before the first anniversary of such
date, and provided that no payment on any Award may be made unless and until
such stockholder approval is obtained. Unless it is sooner terminated in
accordance with its terms, the Plan shall remain in effect until all Awards
under the Plan have been satisfied or have expired or otherwise terminated, but
no Incentive Stock Option shall be granted more than ten years after the date
the Plan was adopted by the Board of Directors.
Amendment and Termination of Plan
The Board may terminate, amend, modify or suspend the Plan at any time,
subject to such stockholder approval as the Board determines to be necessary or
desirable to comply with any tax, regulatory or other requirement, provided that
(a) the provisions of the Plan relating to the timing, amount and exercise price
of Formula Options may not be amended more than once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder, (b) except for
appropriate adjustments upon changes in capitalization and other events under
the Plan, the Board may not, unless such amendment is approved by the
shareholders of the Company in accordance with Delaware law, amend the Plan to
(i) increase the number of Shares available for the grant of Awards under the
Plan, (ii) increase the individual limits on Awards set forth in the Plan, (iii)
increase the maximum number of Shares which may be issued with respect to
restricted stock awards, performance share awards and other stock-based awards
granted under the Plan, (iv) decrease the minimum per Share exercise price of
stock options or the minimum per Share specified price for SARs granted under
the Plan, (v) increase the maximum term of stock options or SARs under the Plan
or (vi) change or modify the provisions of paragraph 15(j) of the Plan
restricting amendments of outstanding Awards and Award Agreements, and (c) if
any termination, modification, amendment or suspension of the Plan materially
and adversely affects the rights of any grantee under an Award previously
granted, the consent of such grantee is required. In addition, the Board is not
authorized to amend any provision of the Plan to the extent that such
authorization would cause any Performance-Based Award to fail to qualify as
"qualified performance-based compensation" under Section 162(m).
Possible Anti-Takeover Effect
The Plan is designed to provide long-term incentives to participants while
aligning the interests of such participants with those of the shareholders of
the Company. The Plan, however, could have an "anti-takeover" effect,
especially the provisions of the Plan which provide for acceleration of vesting
of Formula Options upon a Change of Control, which authorize the Committee to
include provisions relating to a change of control of the Company in the terms
of an Award or Award Agreement, and which authorize the Committee to accelerate
the vesting of certain Awards at any time. Although the implementation and
operation of the Plan may have an "anti-takeover" effect, the Plan was not
adopted by the Board of Directors for that purpose.
FEDERAL INCOME TAX CONSEQUENCES
Discussed below are certain federal income tax consequences relating to
Awards under the Plan, in the normal operation thereof, based on existing
Federal income tax laws and regulations. The description is not intended as a
complete summary of such laws or as a legal interpretation, and does not
describe state, local or foreign income or other tax consequences. Holders of
Awards under the Plan should consult their own tax advisers regarding the tax
consequences applicable to Awards under the Plan.
The Plan is not qualified under Section 401 of the Code and is not subject
to the provisions of the Employee Retirement Income Security Act of 1974.
Nonqualified Stock Options
In general, no income will be recognized by the grantee at the time a
Nonqualified Stock Option is granted by the Company. Upon exercise of a
Nonqualified Stock Option for cash, the grantee will generally recognize
ordinary income equal to the excess of the fair market value of the Shares
purchased as of the time of exercise over the exercise price. The Company will
be entitled to a federal income tax deduction at such time in the same amount as
is recognized as ordinary income by the grantee, subject to satisfying
applicable withholding requirements. If a grantee disposes of Shares acquired
upon the exercise of a Nonqualified Stock Option, the grantee will recognize
capital gain (or, under certain conditions, loss) in the year of such
disposition equal to the difference between any amount realized on the
disposition and the fair market value of the Shares on the date of exercise,
provided that the Shares were a capital asset in the hands of the grantee.
Incentive Stock Options
In general, a grantee does not recognize income at the time an Incentive
Stock Option is granted or at the time it is exercised. When Shares purchased
for cash pursuant to the exercise of an Incentive Stock Option are sold, and the
grantee has held the Shares for more than one year from the date of the transfer
of the Shares to the grantee and more than two years from the date on which the
Incentive Stock Option was granted, the grantee ordinarily will recognize
capital gain (or loss) equal to the difference between the sale price received
on the disposition of the Shares and the exercise price, as long as the Shares
are capital assets in the hands of the grantee. In the event of such an
exercise of an Incentive Stock Option, the amount by which the fair market value
of the Shares on the exercise date exceeds the option price will be an item of
adjustment for purposes of the "alternative minimum tax" imposed by the Code. In
the event of such an exercise, the Company will not be entitled to any federal
income tax deduction in connection with the grant or exercise of the Incentive
Stock Option or the sale of such Shares by the grantee.
If the grantee sells any of the Shares before the end of the one-year and
two-year periods described above, the Grantee will have made a "disqualifying
disposition" with respect to those Shares. In the event of a "disqualifying
disposition," the grantee generally will recognize ordinary income in the year
of the "disqualifying disposition" equal to the amount by which the lesser of
the fair market value of the Shares on the date of exercise or the amount
realized in the disqualifying disposition exceeds the exercise price. If the
amount realized in the "disqualifying disposition" exceeds the fair market value
of the Shares on the date of exercise, the excess will be taxable as capital
gain, if the Shares are capital assets in the hands of the grantee. At the time
of the disqualifying disposition, the Company may claim a federal income tax
deduction for the amount taxable to the grantee as ordinary income.
Stock Appreciation Rights
In general, a grantee will not recognize income at the time a stock
appreciation right is granted. Upon the exercise of a stock appreciation right,
the grantee generally will recognize ordinary income in an amount equal to the
amount of any cash (or the fair market value of any Shares or property) received
by the grantee. The Company will be entitled to a federal income tax deduction
of the same amount, subject to satisfying applicable withholding requirements.
Restricted Stock
In general, a grantee will not recognize taxable income upon the grant of a
restricted stock award. The grantee will generally not recognize ordinary
income until such time as the Shares become transferable or are otherwise no
longer subject to a substantial risk of forfeiture (as defined in the Code). At
such time, the grantee will recognize ordinary income equal to the fair market
value of such Shares minus the price, if any, paid by the grantee to purchase
such Shares. However, a grantee may elect not later than 30 days after the
issue date of the restricted stock to recognize ordinary income as of the issue
date. If such an election is made, the grantee will recognize ordinary income
in an amount equal to the fair market value of the Shares on such date minus the
price, if any, paid by the grantee to purchase such Shares. If such an election
is made, no additional taxable income will be recognized by the grantee at the
time the restrictions lapse. If Shares in respect of which such an election was
made are later forfeited, such forfeiture shall be treated as a sale or exchange
of the Shares, and the grantee will recognize capital gain or loss in the year
of such forfeiture equal to the difference between any amount realized on the
disposition and the amount previously recognized as ordinary income in
connection with the election, provided that the Shares are a capital asset in
the hands of the grantee.
The Company will be entitled to a deduction at the time when, and in the
amount that, the grantee recognizes ordinary income. If the grantee makes an
election as described above and Shares in respect of which such election was
made are later forfeited, the Company will be deemed to recognize ordinary
income equal to the amount of the deduction allowed to the Company at the time
of the election.
Performance Units and Performance Shares
In general, a grantee will not recognize any taxable income upon the grant
of a performance unit or performance share award. At the time the grantee
receives payment in respect of the performance units or performance shares, the
grantee generally will recognize ordinary income in an amount equal to the
amount of any cash (or the fair market value of any Shares or property) received
by the grantee. The Company will be entitled to a federal income tax deduction
of the same amount at the same time, subject to satisfying applicable
withholding requirements.
Other Stock-Based Awards
Depending upon the form of a stock-based award, the grantee generally will
recognize ordinary income at the time of the payment of the Award, in an amount
equal to the amount of any cash (or the fair market value of any Shares or
property) received by the grantee. However, if any such Shares or property
received are subject to certain restrictions on transfer or subject to a
substantial risk of forfeiture (as defined in the Code), the tax treatment of
such Shares or property shall generally be the same as that applicable to
restricted stock awards. The Company will be entitled to a deduction at the
time when, and in the amount that, the grantee recognizes ordinary income.
Section 162(m)
Section 162(m) of the Code generally limits to $1,000,000 per person the
amount the Company may deduct for compensation paid to certain executive
officers of the Company, unless such compensation qualifies as "qualified
performance-based compensation." The Company has attempted to structure the Plan
to permit the Committee in its discretion to grant Awards which qualify as
"qualified performance-based compensation" under Section 162(m), provided the
Plan is approved by the shareholders. The Committee is not required to grant
Awards which qualify under Section 162(m), and in its sole discretion may grant
Awards which do not qualify. In addition, because of uncertainty regarding the
application of Section 162(m) in certain circumstances, there can be no
assurance that compensation intended by the Company to satisfy the requirements
for deductibility under Section 162(m) will in fact satisfy such requirements.
Section 280G of the Code
Under certain circumstances, the accelerated vesting or exercise of options
or stock appreciation rights, or the accelerated lapse of restrictions with
respect to other Awards in connection with a change of control of the Company
may be deemed an "excess parachute payment" for purposes of the golden parachute
tax provisions of Section 280G of the Code. To the extent it is so considered,
the grantee may be subject to a 20% excise tax and the Company may be denied a
tax deduction.
NEW PLAN BENEFITS
As of the date of this Proxy Statement, the Committee has not granted any
Awards under the Plan and has not made any determination as to future grants of
Awards under the Plan. Except with respect to Formula Options, it is not
possible to predict the benefits or amounts that will be received by or
allocated to particular individuals or groups of individuals pursuant to the
Plan. The table below sets forth certain information concerning Formula Options
to be granted to Non-Employee Directors on the first stock trading day after the
1998 annual meeting of shareholders, subject to the election of such persons as
directors and approval of the Plan at such meeting.
1998 Long-Term Incentive Plan
Number of Shares
Name and Position Subject to Options
Non-Employee
Director Group(1) 10,000
(1) Includes the following nominees for director who would each receive a grant
of a stock option to acquire 2,000 Shares on the first stock trading day after
the 1998 annual meeting of shareholders: William D. Cox, J. Richard Devlin,
Harold C. Hill, Jr., Roy R. Laborde and Clark D. Stewart.
OTHER PLANS
The Company also administers the 1992 Incentive Stock Plan of the Company
("1992 Plan"). The 1992 Plan authorizes the grant of stock options for up to
500,000 shares of the common stock of the Company to directors, officers and key
employees. Options granted under the 1992 Plan may be either Incentive Stock
Options or Nonqualified Stock Options. Under the 1992 Plan, the purchase price
of the common stock subject to each option may not be less than 100 percent of
the fair market value of the common stock on the date of grant. As of March 13,
1998, of the 500,000 shares authorized under the Plan, 44,200 Shares had been
purchased upon exercise of outstanding stock options, 445,800 Shares were
subject to outstanding stock options and 10,000 shares were available for the
grant of additional stock options. Of the 445,800 Shares subject to outstanding
stock options, 293,650 Shares were subject to Incentive Stock Options and
152,150 Shares were subject to Non-Qualified Stock Options. With respect to
such outstanding stock options, the per Share exercise prices range from $2.41
to $9.79 per Share and the average per Share exercise price is $7.88 per Share.
There were also outstanding as of March 13, 1998 stock options to purchase
an aggregate of 20,000 Shares at an average exercise price of $8.16 per Share.
The stock options were granted in 1995 and 1996 pursuant to an employment
agreement entered into by the Company in connection with the acquisition of
Agency Premium Resource, Inc.
VOTE REQUIRED
Approval of the 1998 Long-Term Incentive Plan requires the affirmative vote
of the holders of a majority of the shares of Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote thereon.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE 1998 LONG-TERM INCENTIVE PLAN.
PROPOSAL 2
ELECTION OF DIRECTORS
Seven directors are to be elected at the Annual Meeting to serve until the
1999 Annual Meeting of the Shareholders of the Company or until their successors
are elected and qualified. Eleanor B. Schwartz is not standing for re-election
and is retiring after many years of service on the Board of Directors. In the
absence of contrary instructions, each proxy will be voted for the election of
the persons listed below. Clark D. Stewart was appointed as a director by the
Board of Directors at its meeting held November 8, 1997.
Each of the nominees has advised the Company that he can and will serve as
a director of the Company if elected. If for any reason any of the nominees
shall become unavailable for election, the persons named in the accompanying
proxy will vote for the other nominees and for a substitute nominee or nominees
if so designated by the Board of Directors. The following information is given
with respect to each nominee as of March 5, 1998.
Director
of the
Name, Principal Occupation and Company
other Directorships Age Since
William D. Cox 54 1991
Chairman of the Board of Directors since June 1997. Mr.
Cox has served as President of various family-owned,
commercial and residential construction and land
development companies in Wichita, Kansas, currently
Applewood Homes, Inc., from 1967 to the present.
Lawrence D. ("Larry") Crouse 57 1991
Vice President of the Company since September 5, 1991. He
has served as Vice Chairman of Crouse Cartage Company, a
wholly-owned subsidiary of the Company, since January
1997. He served as Chairman and Chief Executive Officer
of Crouse Cartage Company, from 1987 until December 1996.
J. Richard Devlin 47 1997
Executive Vice President, General Counsel and External
Affairs of Sprint Corporation ("Sprint"), a publicly
traded telecommunications company headquartered in
Westwood, Kansas, since 1989. Mr. Devlin also serves as
a member of Sprint's Executive Management Committee. Mr.
Devlin served as Vice President and General Counsel for
telephone operations for Sprint from 1987 to 1989. From
1972 to 1986, Mr. Devlin served as an attorney and in
various line and staff operations management positions
with AT&T.
Harold C. Hill, Jr. 62 1995
Retired as a partner of Arthur Andersen LLP in 1993. Mr.
Hill's 35 years of service with the firm included
responsibility as partner in charge of the
transportation, financial services and government
practices in Kansas City, as well as service as National
Technical Coordinator of that firm's trucking industry
practice group.
Roy R. Laborde 59 1991
Vice Chairman of the Board of Directors since June 1997.
Chairman of the Board of Directors from May 1992 to June
1997. President of Amboy Grain, Inc., Amboy, Minnesota,
since 1985; President and Chief Operating Officer for
Rapidan Grain & Feed, Rapidan, Minnesota, from 1968
through 1988 and has continued to merchandise grain for
that company.
Timothy P. O'Neil 41 1995
President and Chief Executive Officer of the Company
since May, 1995. From October, 1989, through May, 1995,
Mr. O'Neil served in various positions with the Company,
including, Senior Vice President, Vice President,
Treasurer and Director of Finance. Since March 1997, he
has also served as President and Chief Executive Officer
of Universal Premium Acceptance Corporation ("UPAC"), a
wholly-owned subsidiary of the Company. Mr. O'Neil has
also served as President, Chief Executive Officer, and
Chief Financial Officer and Treasurer of American Freight
System, Inc. ("AFS"), a wholly-owned subsidiary of the
Company, since July, 1991.
Clark D. Stewart 57 1997
President and Chief Executive Officer of Butler National
Corporation, a publicly-held company headquartered in
Olathe, Kansas, with holdings in aircraft modifications,
food distribution and gaming, since September 1989.
During the fiscal year ended December 31, 1997, the Board of Directors held
five (5) regular meetings. All directors attended 75 percent or more of the
total number of all meetings of the Board and of committees of which they were
members during 1997.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its Subsidiaries received
compensation of $8,000 per annum, plus $750 for each board meeting attended and
$750 for each committee meeting attended when held on a day on which they were
not compensated for attending another meeting, except the Chairman of the Board
who received $1,500 for each board meeting and committee meeting attended and
chairmen of Committees who received $1,000 for each committee meeting chaired.
Directors received $200 for telephonic meetings of either the board or its
committees. Directors were also reimbursed for reasonable travel and other
expenses incurred by them in performance of their duties as directors of the
Company. Directors who are not employees receive options to purchase 2,000
shares of Common Stock on the first stock trading day immediately following each
Annual Meeting of the Shareholders of the Company at which they are elected to
the Board of Directors, at market value on such date.
In addition, directors were compensated at the rate of $75 per hour for any
special assignments. No directors received compensation for special assignments
in 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires directors, executive officers and beneficial owners of
more than ten percent of the Common Stock to file initial reports of ownership
and reports of changes in ownership with the Securities and Exchange Commission
(the "SEC") and the American Stock Exchange, and to provide copies to the
Company. Based solely on a review of the copies of such reports provided to the
Company and written representations from the directors and executive officers,
the Company believes that all applicable Section 16(a) filing requirements have
been met, with the following exception: William D. Cox filed his Form 4 for the
month of September 1997, reporting a single transaction, 19 days late.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has standing Audit, Compensation and
Corporate Governance Committees.
Members of the Audit Committee are Harold C. Hill, Jr. (Chairman), J.
Richard Devlin and William D. Cox. The Audit Committee met three times during
the fiscal year ended December 31, 1997. The Audit Committee advises, reports
to and makes recommendations to the Board of Directors on (i) audit procedures
of the Company and its subsidiaries, (ii) general policy with regard to audit
matters, (iii) the financial and accounting controls of the Company and its
subsidiaries, (iv) nominating independent public accountants to conduct the
annual examination of the Company's financial statements, and (v) the results of
the examination performed by the independent public accountants.
Members of the Compensation Committee are William D. Cox (Chairman), J.
Richard Devlin and Eleanor B. Schwartz. The Compensation Committee met three
times during the fiscal year ended December 31, 1997. The Compensation
Committee (i) approves salaries and other compensation to be paid to the
officers of the Company, (ii) administers the 1992 Incentive Stock Plan and
makes recommendations for option grants under this plan, and (iii) reviews and
makes recommendations to the Board of Directors on any proposed employee benefit
plans and any proposed material changes to existing employee benefit plans for
the Company and its subsidiaries.
Members of the Corporate Governance Committee are Harold C. Hill, Jr.
(Chairman), William D. Cox and Roy R. Laborde. The Corporate Governance
Committee met seven times during the fiscal year ended December 31, 1997. The
Corporate Governance Committee advises, reports to and makes recommendations to
the Board of Directors on corporate governance issues, including nominations for
the Board of Directors of the Company. The Corporate Governance Committee will
consider candidates for the Board of Directors suggested by shareholders.
Shareholders desiring to suggest candidates for nomination at the 1999 Annual
Meeting should advise the Secretary of the Company in writing by November 19,
1998 and include sufficient biographical material to permit an appropriate
evaluation. The Corporate Governance Committee and the Board of Directors
continue to consider qualified candidates for the Board of Directors and may add
new members to the Board of the Directors before the 1999 Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE NOMINEES FOR DIRECTOR PRESENTED IN PROPOSAL 2.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
The Board of Directors, acting on the recommendation of its Audit
Committee, has selected Coopers & Lybrand L.L.P. as independent public
accountants for the Company for the 1998 fiscal year. Coopers & Lybrand L.L.P.
has served as independent public accountants for the Company since November,
1995.
Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting with an opportunity to make a statement, if they desire to do
so, and to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
PROPOSAL 3 TO RATIFY THE SELECTION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR THE COMPANY.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of March 13, 1998, unless
otherwise indicated, with respect to the beneficial ownership of the Company's
Common Stock by (a) persons known to the Company to be beneficial owners of 5%
or more of the outstanding Common Stock, (b) executive officers listed in the
Summary Compensation Table, (c) directors and nominees for director and (d) all
directors and executive officers of the Company as a group.
Amount and
Name of Beneficial Owners Nature of
(and address of beneficial owners Beneficial Percent
other than directors and nominees) Ownership(1) of
Class
Crouse Family (excluding Larry D. Crouse)
c/o Scudder Law Firm
411 South 13th Street
Suite 200
Lincoln, Nebraska 68508........................... 1,172,729 (2) 19.38%
TJS Partners, L.P.
TJS Management, L.P.
TJS Corporation
Thomas J. Salvatore
115 East Putnam Avenue
Greenwich, CT 06830.................................. 803,850 (3) 13.33%
Franklin Advisory Services
Charles B. Johnson
Rupert H. Johnson, Jr.
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, CA 94404................................. 606,000 (4) 10.05%
William D. Cox....................................... 52,500 (5) .87%
Larry D. Crouse...................................... 199,338 (6) 3.28%
J. Richard Devlin.................................... 2,000 (7) .03%
Harold C. Hill, Jr................................... 5,500 (8) .09%
Roy R. Laborde....................................... 166,465 (9) 2.76%
Timothy P. O'Neil.................................... 128,300 (10) 2.12%
Eleanor B. Schwartz.................................. 12,000 (5) .20%
Clark D. Stewart..................................... 1,000 .02%
David D. Taggart..................................... 7,000 (11) .12%
Directors and executive officers as a
group (11 persons, including the above)........... 578,903 (12) 9.42%
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares listed.
(2) The information contained herein is based upon information reported to
the Company by four children and fourteen grandchildren of Paul E. Crouse,
deceased, (excluding Larry Crouse). In a Schedule 13D dated September 5, 1991
("Schedule 13D")and an Amendment to Schedule 13D dated November 1, 1991
("Amendment"), none of the individual members of the Crouse Family claimed
sole or shared voting or investment power with respect to more than 5% of the
outstanding shares of Common Stock, although each member claimed beneficial
ownership of all 1,342,524 shares then owned by the Crouse Family. Each
member of the Crouse Family disclaimed membership in a group in the Schedule
13D. The Amendment also reported that the members of the Crouse Family,
other than Larry Crouse, have no plan for further acquisition of Common
Stock. The amount of shares listed in the above table does not include
199,338 shares beneficially owned by Larry Crouse, a director of the Company
and one of the members of the Crouse Family (see Footnote (6) below). Also
included are 19,400 shares subject to exercisable outstanding stock options.
(3) TJS Partners, L.P., a limited partnership (the "Partnership"), is the
direct beneficial owner of 741,350 shares as of February 28, 1998. TJS
Management, L.P., in its capacity as general partner of the Partnership, and
each of TJS Corporation and Thomas J. Salvatore as general partners of TJS
Management, L.P., may be deemed to beneficially own the shares owned by the
Partnership. Each of TJS Management, L.P., TJS Corporation and Mr.
Salvatore: (a) may be deemed to share with the Partnership the power to vote
and to direct the vote and to dispose and to direct the disposition of the
shares beneficially owned by the Partnership and (b) disclaims beneficial
ownership of such shares except to the extent of his or its pecuniary
interest therein. The information contained in this footnote was obtained
from a Schedule 13D/A, Amendment No. 4, dated March 11, 1998 filed by these
persons.
(4) The shares shown in the table are beneficially owned as of December 10,
1997 by one or more open or closed-end investment companies or other managed
accounts which are advised by Franklin Advisory Services, Inc. ("Franklin"),
a subsidiary of Franklin Resources, Inc. ("FRI"). Franklin has all
investment and/or voting power over the shares owned by such advisory clients
and may be deemed the beneficial owner of the shares shown in the table.
Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal Shareholders")
each own in excess of 10% of the outstanding common stock of FRI and are the
principal shareholders of FRI. FRI, the Principal Shareholders and Franklin
disclaim any economic interest or beneficial ownership in any of the shares.
The information contained in this footnote was obtained from the Schedule 13G
filed by these persons on December 10, 1997.
(5) Includes 11,000 shares subject to exercisable outstanding stock options.
(6) Includes 51,000 shares subject to exercisable outstanding stock options.
Mr. Crouse disclaims beneficial ownership of the shares owned by other
members of the Crouse family.
(7) Includes 1,000 shares subject to exercisable outstanding stock options.
(8) Includes 2,500 shares in the Francile Hill Revocable Trust. Both Mr.
Hill and Francile Hill are trustees and each has shared voting and investment
power. Also includes 3,000 shares subject to exercisable outstanding stock
options.
(9) Includes 9,150 shares subject to exercisable outstanding stock options
and 1,415 shares owned by and registered in the name of his wife, over which
they share voting power but Mrs. Laborde retains sole investment power.
(10)Includes 19,500 shares subject to exercisable outstanding stock options
and 32,800 shares owned by his wife, over which they hold shared voting and
investment power. Does not include 9,000 shares held in various irrevocable
trusts for the benefit of Mr. O'Neil's children and over which he has no
voting or investment power. Also does not include 23,860 shares to be
issued pursuant to deferred compensation arrangements over three years
following the termination of his employment.
(11)Represents 7,000 shares subject to exercisable outstanding stock options.
(12)Includes a total of 114,450 shares subject to exercisable outstanding
stock options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company did not engage in any individual transactions or series of
transactions with members of management or nominees for director during 1997 in
which the amount involved exceeded $60,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists exclusively of non-employee directors
appointed by resolution of the entire Board of Directors. William D. Cox has
been a non-employee Chairman of the Board of Directors since the 1997
Organization Meeting of the Board of Directors.
EXECUTIVE OFFICER COMPENSATION
BOARD COMPENSATION COMMITTEE REPORT
The responsibilities of the Compensation Committee ("Committee") include
approval of the salaries and other compensation paid to executive officers of
the Company. The Committee attempts to set executive officers' compensation at
levels which are fair and reasonable to the shareholders of the Company and
which will attract, motivate, retain and appropriately reward experienced
executive officers who contribute to the success of the Company and the returns
to its shareholders.
Due in part to the limited number of executive officers of the Company, the
Committee's compensation policies are subjective and informal. Executive
officers' compensation is approved by the Committee after a subjective review
which utilizes the business experience and knowledge of the Committee members.
Its decisions are not based upon any specific criteria or specific financial
performance measure. In determining compensation, the Committee considers a
number of factors, including the financial condition of the Company or the
subsidiary which employs the executive, such company's recent financial
performance, the past performance of the executive officer and the Company's
operating plans for the current year. The Committee generally includes some
form of incentive compensation in each compensation package, including stock
options, to link a portion of the executive's compensation with future
performance of the Company and/or the subsidiary which employs the executive.
In making recommendations for the grant of stock options, in addition to
considering the factors described above, the Committee considers the amount and
terms of options already held by each executive officer.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
Timothy P. O'Neil is President and Chief Executive Officer of the Company,
and also serves as President and Chief Executive Officer of UPAC and AFS, two
subsidiaries of the Company. The Committee's determination of Mr. O'Neil's
compensation for 1997 was based upon its subjective review of the factors
described above and its review of chief executive officer compensation of
selected publicly-held companies in the greater Kansas City area and the
compensation levels of CEO's of the Company's operating subsidiaries other than
UPAC and AFS. The Committee believes Mr. O'Neil's compensation is on the low
end of the range of compensation paid to CEO's of publicly held companies
reviewed.
The Committee's determination to recommend an option grant to Mr. O'Neil
was based upon its subjective review of the factors listed above and its desire
to provide an incentive component to Mr. O'Neil's compensation.
COMPENSATION OF OTHER EXECUTIVE OFFICERS
The Company has four executive officers in addition to Mr. O'Neil. Certain
of the compensation of one of the executive officers for 1997 was based upon the
terms of an employment agreement entered between the Company and the executive
officer at the time of the executive officer's hiring in 1995. The terms of the
employment agreement were determined based upon negotiation with the executive
officer, the executive officer's then current compensation level and the
compensation levels for comparable positions in the Company held by individuals
of similar background and experience.
With respect to base salary, the Committee approved increases in base
salary ranging from 3 - 9% for the four executive officers for 1997, based upon
the Committee's subjective and informal review of the factors described above.
Two of the executive officers were entitled to earn cash incentive compensation
during 1997. One of the officers was entitled to earn such compensation pursuant
to the employment agreement described above. With respect to the second
officer, the Committee continued an incentive compensation arrangement with such
officer that began in 1991. The arrangement provides for cash payments to the
executive officer based upon the average operating earnings for Crouse over a
five-year period. The Committee decided to continue the arrangement in 1997 at
the same level as previous years based upon its subjective review of the
executive officer's performance and the financial condition, recent performance
and 1997 operating plans of Crouse.
All four executive officers received stock option grants in 1997. All of
the options were Incentive Stock Options, except for one which was a Nonqualfied
Stock Option. Each option provides for a ten year term, subject to earlier
termination upon certain events, and an exercise price equal to the fair market
value of the common stock on the date of grant. The Committee granted options
to each of the executive officers in order to provide a long-term incentive to
such officers. The Committee determined the number of options to be granted to
each of the executive officers based upon its subjective and informal review of
the factors described above.
SECTION 162(M)
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended, regarding nondeductibility of annual
compensation in excess of $1,000,000. The Committee does not believe that
Section 162(m) will have any material impact upon the Company, given the current
cash compensation levels of executive officers of the Company, the number of
options granted to such officers and the treatment of such options under Section
162(m). The Committee believes that many of the options currently outstanding
are exempt from the deductibility limit under the transition provisions set
forth in the regulations under Section 162(m). It is the Committee's current
intention that options to be granted under the 1998 Long-Term Incentive Plan, if
approved by the shareholders, will qualify as performance-based compensation and
be exempt from the deductibility limits of Section 162(m). The Committee will
continue to evaluate the advisability of qualifying executive compensation for
deductibility under Section 162(m).
COMPENSATION COMMITTEE
William D. Cox, Chairman
J. Richard Devlin
Eleanor B. Schwartz
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG TRANSFINANCIAL HOLDINGS,
INC. COMMON STOCK, AMEX MARKET AND PEER GROUP
[Line Graph representing data points in table below]
Based on data furnished by Media General Financial Services, Richmond,
Virginia. Assumes $100 invested at the close of business at December 31, 1992 in
Company Common Stock, the Amex Market Index and the selected peer group. The
total return calculated assumes the reinvestment of any dividends. Numbers used
to prepare the above graph were:
<TABLE>
<CAPTION>
Year Ending December 31
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
TransFinancial 100.00 200.00 404.88 341.46 307.32 348.78
Peer Group 100.00 124.11 118.39 97.38 100.21 149.12
Amex Market Index 100.00 118.81 104.95 135.28 142.74 171.76
</TABLE>
The industry peer group ("Peer Group") consists of all predominantly less-
than-truckload motor carriers (or parent companies) publicly traded on any stock
exchange for the last five years (6 companies: Arkansas Best Corporation, Arnold
Industries, Inc., CNF Transportation, Inc., Old Dominion Freight Line, Inc.,
USFreightways, Inc., and Yellow Corporation). Each member of the peer group had
a much larger market capitalization than TransFinancial.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other Securities All
Annual Restricted Underlying Other
Name and Compen- Stock Options/ LTIP Compen-
Principal sation Award(s) SARs Payouts sation
Position Year Salary Bonus ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Timothy P. O'Neil, 1997 $160,680 -0- -0- -0- 20,000 -0- $ 25,000 (4)
President and Chief 1996 182,041 (1) -0- -0- -0- 20,000 -0- 14,075 (2)
Executive Officer 1995 180,084 (1) -0- -0- -0- 10,000 -0- 8,190 (2)
David D. Taggart, 1997 $123,278 $18,772 -0- -0- 10,000 -0- $ 10,000 (3)
Vice President of the
Company and Chief
Executive Officer
of Crouse
<FN>
(1) Includes $47,986 and $102,074 paid to the Company by AFS for 1996 and 1995, to reimburse the Company for Mr. O'Neil's services
as President and CEO of AFS.
(2) Amounts accrued in 1995 and 1996 under a non-qualified deferred compensation arrangement at 10 1/2% of Mr. O'Neil's
TransFinancial salary, in lieu of participation in a qualified retirement plan, payable in common stock of the company in three
annual installments after termination of employment.
(3) Pursuant to Mr. Taggart's employment agreement an interest free $50,000 loan secured by his personal residence is being
forgiven ratably over five years.
(4) Represents the annual insurance premium paid by the Company in 1997 with respect to a split-dollar life insurance policy for
the benefit of Timothy P. O'Neil. For a description of such arrangement see Employment Agreements.
</TABLE>
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Individual Grants Potential Realizable
Number of % of Total Value at Assumed Annual
Securities Options Exer- Rates of Stock Price
Underlying Granted to cise Expir- Appreciation for
Options Employees in Price ation Option Term
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
Timothy P. O'Neil(1) 20,000 18% $7.78 2/26/2007 $97,872 $ 248,026
David D. Taggart(1) 10,000 9% 7.78 2/26/2007 48,936 124,013
<FN>
(1) Grants are "Incentive Stock Options" under the Internal Revenue Code. The exercise prices equal the market value on the date of
grant. The options become exercisable ratably on February 26 of the years 1998 through 2002 and remain exercisable through
February 26, 2007.
</TABLE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares Value FY-End (#) FY-End ($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Timothy P. O'Neil -- $ -- 9,000/43,000 $8,938/$44,750
David D. Taggart -- -- 3,000/17,000 3,000/18,563
</TABLE>
EMPLOYMENT AGREEMENTS
The Company is a party to a Supplemental Benefit and Collateral Assignment
Split-Dollar Agreement with Timothy P. O'Neil, President and Chief Executive
Officer of the Company. Under the agreement, the Company has agreed to pay the
premiums on a life insurance policy insuring the life of Mr. O'Neil with an
initial death benefit of $532,968. Mr. O'Neil has the right under the agreement
to designate the beneficiaries to whom the death benefits under the policy shall
be payable. If Mr. O'Neil's employment is terminated by the Company with cause,
Mr. O'Neil's rights under the policy shall terminate. If Mr. O'Neil terminates
his employment, Mr. O'Neil will have no further rights under the policy except
that Mr. O'Neil will receive, for each period of twelve months from the date of
hire, an amount equal to 10% of the excess, if any, of the cash surrender value
of the policy over the aggregate cost of the policy incurred by the Company in
the payment of premiums. Upon the death of Mr. O'Neil, or the earlier surrender
or cancellation of the policy by him subsequent to his retirement, disability or
termination without cause, the Company is entitled to the lesser of the cash
surrender value of the policy and the amount of premiums paid by it, and Mr.
O'Neil is entitled to the remaining amounts payable upon such event under the
policy. Mr. O'Neil has the right to retire under the agreement upon completing
ten years of employment and reaching age 50.
The Company is a party to a Supplemental Benefit Agreement with David D.
Taggart, a Vice President of the Company and Chairman and Chief Executive
Officer of Crouse Cartage Company ("Crouse"). The agreement provides salary
continuation benefits in the event of death before age 65, supplemental
retirement benefits and pre-retirement death benefits. Under the agreement, if
Mr. Taggart remains a full-time officer of Crouse until age 65, the Company is
required to pay him (or his beneficiary in the event of death) $21,000 per year
for 15 years after his retirement. Mr. Taggart's entitlement to such
supplemental retirement benefit vests 10% per year of service and immediately
upon disability or a change of control of the Company or Course. The agreement
provides for partial payments of supplemental retirement benefits upon early
retirement or retirement at age 65 prior to full vesting of the retirement
benefits. The agreement provides that if Mr. Taggart's employment with Crouse
is terminated before his 65th birthday due to death, Mr. Taggart's beneficiary
shall receive $35,000 per year for 20 years. If Mr. Taggart dies before
retirement, the Company is also required to pay to his beneficiaries the sum of
$175,000 under the agreement.
The Company and Crouse Cartage Company are parties to an Employment
Agreement with David D. Taggart, a Vice President of the Company and Chairman
and Chief Executive Officer of Crouse. The Employment Agreement provides for
the employment at will of Mr. Taggart by Crouse. Under the Employment
Agreement, Mr. Taggart is entitled to (a) salary of $115,000 per year, subject
to increase by Crouse from time to time, (b) annual incentive compensation based
upon the consolidated net income of Crouse, not to 60% of Mr. Taggart's base
compensation for such year, (c) a $50,000 interest free home loan from the
Company to be forgiven in five equal annual installments, (d) a stock option to
purchase 5,000 shares of Common Stock of the Company at market value as of the
effective date of the Employment Agreement and (e) certain additional fringe and
other benefits, including supplemental retirement benefits as described above.
Under a separate agreement between the parties, Mr. Taggart is entitled to
certain additional payments upon termination of Mr. Taggart's employment after a
change of control of the Company or Crouse. Mr. Taggart is entitled to such
payments if, within two years after such a change of control, Mr. Taggart's
employment is terminated other than by Mr. Taggart for any reason other than
death, permanent disability, retirement or Good Cause (as defined in the
agreement), or is terminated by Mr. Taggart for Stated Cause (as defined in the
agreement). In such event, Mr. Taggart is entitled to the following: (i) 2.99
times Mr. Taggart's average annual compensation over the three most recent years
prior to the change of control, or such lesser period as Mr. Taggart shall have
been employed by Crouse, excluding any amount which would constitute and "excess
parachute payment" under Section 280G of the Code, (ii) immediate 100% vesting
of all incentive compensation provided or to be provided under the Employment
Agreement, (iii) all benefits to which he would have been entitled upon normal
retirement under the Supplemental Benefit Agreement described above and (iv)
three years participation in certain medical and life insurance plans of the
Company and Crouse.
SHAREHOLDER PROPOSALS
Any Shareholder proposal intended to be presented for action at the 1999
Annual Meeting of Shareholders of the Company must be received by the Corporate
Secretary of the Company at the Company's principal executive offices on or
before November 19, 1998, to be included in the Company's proxy material related
to that meeting.
MISCELLANEOUS
As of the date of this Proxy Statement, the Board of Directors knows of no
other matter to be presented for consideration at the Annual Meeting. If any
other matter should properly come before the meeting, it is intended that shares
represented by proxies in the accompanying form will be voted thereon in
accordance with the best judgment of the persons named in the proxies.
All expenses incurred in connection with this proxy solicitation will be
borne by the Company. In addition to solicitation of proxies by mail, proxies
may be solicited by the Company's directors, officers and other employees, by
personal interview, telephone and telegram. The Company will also request
brokers and other fiduciaries to forward solicitation materials to the
beneficial owners of shares held of record by them, and will pay all expenses in
connection therewith.
DATE: March 13, 1998
Mark A. Foltz
Corporate Secretary
EXHIBIT A
TRANSFINANCIAL HOLDINGS, INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE.
The purpose of the TransFinancial Holdings, Inc. 1998 Long-Term Incentive
Plan (the "Plan") is to further the earnings of TransFinancial Holdings, Inc.
("TransFinancial") and its subsidiaries (collectively the "Company") by:
(a) assisting the Company in attracting, retaining and motivating officers,
directors, employees and consultants of high caliber and potential and (b)
providing for the award of long-term incentives to such officers, directors,
employees and consultants. The Plan is not intended to be a Plan that is
subject to the Employee Retirement Income Security Act of 1974, as amended.
Certain capitalized terms used herein are defined in paragraph 16 below.
2. ADMINISTRATION.
(a) Committee. The Plan shall be administered by a committee (the
"Committee") consisting of two or more members of the Board of Directors of
TransFinancial (the "Board"). The members of the Committee shall be appointed
by and may be changed from time to time in the discretion of the Board. The
Board may, in its sole discretion, bifurcate the powers of the Committee among
one or more separate committees, or retain all powers and duties of the
Committee in a single committee; provided, however, that except as otherwise
determined by the Board, (i) if a Committee is authorized to grant Awards or
make determinations with respect to a Reporting Person, each member of such
Committee shall be a "non-employee director" within the meaning of Rule 16b-
3 under the 1934 Act, or any successor rule of similar import, and (ii) if a
Committee is authorized to grant Awards or make determinations with respect to a
Covered Employee, each member of such Committee shall be an "outside director"
within the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder.
(b) Authority. The Committee shall have full and final power and
authority to administer and interpret the Plan. In addition to such general
power and authority, and subject to the provisions of the Plan, the Committee
shall have full and final authority in its discretion to: (i) determine the
eligible persons to whom Awards shall be made under the Plan, (ii) determine the
type or types of Awards to be granted to each Participant hereunder, (iii)
determine the time or times when Awards shall be granted, (iv) determine the
terms and conditions of Awards and the terms and conditions of any agreement
evidencing an Award, (v) authorize the issuance of Shares pursuant to Awards
granted under the Plan, (vi) interpret, construe and administer the Plan and any
instrument or agreement relating to or evidencing an Award under the Plan, (vii)
establish, amend, suspend or waive rules and guidelines relating to the Plan and
Awards hereunder, (viii) correct any defect, supply any omission and reconcile
any inconsistency in the Plan and (ix) make any other determination or take any
other action that it deems necessary or desirable for administration of the Plan
or any Award hereunder. Decisions of the Committee shall be final, binding and
conclusive on all persons, including the Company and any Participant. The
Committee may hold meetings and otherwise take action in the manner permitted
under the applicable provisions of the Restated Certificate of Incorporation and
By-laws of the Company, resolutions of the Board and applicable law, as amended
from time to time. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award under the
Plan.
(c) Delegation of Authority. To the extent permitted by applicable
law, the Committee may delegate to one or more executive officers of the Company
the power to make Awards to Participants who are not Reporting Persons or
Covered Employees and to make all determinations under the Plan with respect to
such Participants, subject to such terms, conditions and limitations as the
Committee may establish in its sole discretion.
(d) Power and Authority of the Board of Directors. Notwithstanding
anything to the contrary contained herein, the Board of Directors may at any
time and from time to time, without any further action of the Committee,
exercise the powers and duties of the Committee under the Plan.
3. STOCK SUBJECT TO THE PLAN.
(a) Amount. The aggregate number of Shares which may be the subject
of or related to Awards under the Plan shall be 600,000 Shares, subject,
however, to adjustment as provided in subparagraph (b) hereof. Such Shares may
be authorized and unissued Shares or treasury Shares. If for any reason any
Award expires or lapses or is terminated, forfeited or canceled, any Shares
subject to such Award, to the extent of such expiration, lapse, termination,
forfeiture or cancellation, shall again be available for award under the Plan.
Notwithstanding the provisions of this subparagraph (a), no Shares shall again
be subject to Awards if such action would cause an Incentive Stock Option to
fail to qualify as an incentive stock option under Section 422 of the Code.
(b) Adjustment. In the event that the Committee determines that any
dividend or distribution (whether in the form of cash, Shares, other securities
or other property), recapitalization, merger, consolidation, reorganization,
spin-off or split-up, reverse stock split, combination or exchange of Shares or
other transaction affects the Shares such that an adjustment is determined by
the Committee to be appropriate in order to prevent dilution or enlargement of
the benefits or potential benefits intended to be made available under the Plan,
then the Committee may, in such manner as it may deem equitable and without the
consent of any affected Participant, adjust the number and kind of securities
which may be issued under the Plan, the number and kind of securities subject to
outstanding Awards and the exercise price of each outstanding stock option
granted under the Plan, and may make such other changes in outstanding Awards as
it deems equitable in its sole discretion. Fractional Shares resulting from any
such adjustments shall be eliminated. No adjustment or action under this
subparagraph (b) shall be authorized to the extent that such adjustment or
action would cause the Plan or any outstanding Incentive Stock Option to violate
Section 422 of the Code or would cause any Performance-Based Award to fail to
qualify as "qualified performance-based compensation" under Section 162(m) of
the Code and the regulations promulgated thereunder.
(c) Limit on Individual Grants. Subject to adjustment as provided in
subparagraph (b) hereof, (i) the maximum number of Shares subject to stock
options which may be granted in the aggregate under the Plan in any calendar
year to any Participant shall be 50,000 Shares, (ii) the maximum number of
Shares underlying stock appreciation rights which may be granted in the
aggregate under the Plan in any calendar year to any Participant shall be 50,000
Shares and (iii) the maximum number of Shares subject to restricted stock
awards, performance share awards and other stock-based awards which may be
granted under the Plan in any calendar year to any Participant shall be 50,000
Shares. In addition, the maximum amount of compensation payable in respect of
performance unit awards, cash in addition to an Award under paragraph 13 hereof
and dividend equivalents under paragraph 15(c) hereof that may be paid in the
aggregate under the Plan in any calendar year to any Participant shall be
$1,000,000. In all events, determinations under this subparagraph shall be made
in a manner that is consistent with Section 162(m) of the Code and the
regulations promulgated thereunder.
(d) Limit on Certain Types of Awards. The maximum number of Shares
which may be issued in the aggregate with respect to restricted stock awards
under paragraph 8 hereof, performance share awards under paragraph 9 hereof and
other stock-based awards payable in Shares pursuant to paragraph 10 hereof shall
be 100,000 Shares, subject to adjustment as provided in subparagraph (b) hereof,
provided that Shares awarded pursuant to any such Award shall not, to the extent
such Award expires or lapses or is terminated, surrendered, forfeited,
cancelled, exercised or settled in a manner that results in fewer Shares
outstanding than were awarded pursuant to such Award, be counted against the
maximum number of Shares which may be issued pursuant to this subparagraph 3(d).
4. ELIGIBILITY TO RECEIVE AWARDS.
All officers, directors, key employees and consultants of the Company are
eligible to be Participants in the Plan. As used herein, key employees are
employees determined by the Committee to be capable of contributing
significantly to the profitability and success of the Company. Incentive Stock
Options (as defined below) may be granted only to persons eligible to receive
such options under the Code.
5. FORM OF AWARDS.
Subject to the provisions of the Plan, Awards may be made from time to time
by the Committee in the form of stock options to purchase Shares, stock
appreciation rights, restricted stock, performance shares, performance units,
other stock-based awards as provided herein or any combination of the above.
Stock options may be options which are intended to qualify as incentive stock
options within the meaning of Section 422 of the Code or any successor provision
("Incentive Stock Options") or options which are not intended to so qualify
("Nonqualified Stock Options").
6. STOCK OPTIONS.
(a) Award. Subject to the provisions of the Plan, the Committee shall
determine the terms and conditions of each stock option granted by the
Committee, which may include without limitation: (i) the type of option
(Incentive Stock Option or Nonqualified Stock Option), (ii) the number of Shares
subject to the option, (iii) the time or times at which and/or the conditions
upon which the option shall become exercisable in whole or in part, (iv) the
term of the option, provided that the term of an option shall not be greater
than ten (10) years, and (v) the exercise price per Share, provided that the
exercise price per Share shall not be less than the fair market value of a Share
on the date of grant, as determined by the Committee (subject to subsequent
adjustment as provided in paragraph 3(b) hereof). The Committee, in its
discretion, may provide for circumstances under which the option shall become
immediately exercisable, in whole or in part, and, notwithstanding the
foregoing, may accelerate the exercisability of any option, in whole or in part,
at any time. A stock option granted under this Plan shall be an Incentive Stock
Option only if the stock option is designated as an Incentive Stock Option in
the Award Agreement.
(b) Payment for Shares. The Committee shall determine the form of
payment of the purchase price of the Shares with respect to which an option is
exercised, which may include without limitation (i) cash (which may include
personal checks, certified checks, cashier's checks or money orders), (ii)
Shares at fair market value, (iii) the optionee's written request to the Company
to reduce the number of Shares otherwise issuable to the optionee upon the
exercise of the option by a number of Shares having a fair market value equal to
such purchase price, (iv) a payment commitment of a financial institution or
brokerage firm in connection with the "cashless exercise" of an option, (v) any
other lawful consideration, including, without limitation, an Award or a note or
other commitment satisfactory to the Committee or (vi) a combination of any of
the foregoing.
(c) Incentive Stock Options. In the case of an Incentive Stock
Option, each Award shall contain such other terms, conditions and provisions as
the Committee determines to be necessary or desirable in order to qualify such
option as an Incentive Stock Option within the meaning of Section 422 of the
Code or any successor provision.
(d) Formula Options. The Committee shall not have any discretion
pursuant to this paragraph 6 with respect to Formula Options granted pursuant to
paragraph 11 hereof.
7. STOCK APPRECIATION RIGHTS.
(a) Award. Stock Appreciation Rights ("SARs") may be granted by the
Committee either in connection with a previously or contemporaneously granted
stock option or independently of a stock option. Subject to the provisions of
the Plan, the Committee shall determine the terms and conditions of each SAR.
SARs shall entitle the grantee, subject to such terms and conditions as may be
determined by the Committee, to receive upon exercise thereof all or a portion
of the excess of (i) the fair market value at the time of exercise, as
determined by the Committee, of a specified number of Shares with respect to
which the SAR is exercised, over (ii) a specified price which shall not be less
than 100 percent of the fair market value of the Shares at the time the SAR is
granted, or, if the SAR is granted in connection with a previously or
contemporaneously issued stock option, not less than the exercise price of the
Shares subject to the option.
(b) SARs Related to Stock Options. If an SAR is granted in relation
to a stock option, unless otherwise determined by the Committee, (i) the SAR
shall be exercisable only at such times, and by such persons, as the related
option is exercisable, (ii) the grantee's right to exercise the related option
shall be canceled if and to the extent that the Shares subject to the option are
used to calculate the amount to be received upon the exercise of the related SAR
and (iii) the grantee's right to exercise the related SAR shall be canceled if
and to the extent that the Shares subject to the SAR are purchased upon the
exercise of the related option, provided that an SAR granted with respect to
less than the full number of Shares covered by a related option shall not be
reduced until the related option has been exercised or has terminated with
respect to the number of Shares not covered by the SAR.
(c) Other Terms. Each SAR shall have such other terms and conditions
as the Committee shall determine in its sole discretion, provided that the term
of an SAR shall not be greater than ten (10) years. The Committee may, in its
discretion, provide in the Award circumstances under which the SARs shall become
immediately exercisable, in whole or in part, and may, notwithstanding the
foregoing, accelerate the exercisability of any SAR, in whole or in part, at any
time. Upon exercise of an SAR, payment shall be made in cash, Shares at fair
market value on the date of exercise, other Awards, other property or any
combination thereof, as the Committee may determine.
8. RESTRICTED STOCK AWARDS.
(a) Award. Restricted stock awards under the Plan shall consist of
Shares free of any purchase price or for such purchase price as may be
established by the Committee, subject to forfeiture, and subject to such other
terms and conditions (including attainment of performance objectives) as may be
determined by the Committee.
(b) Restriction Period. Restrictions shall be imposed for such
period or periods as may be determined by the Committee. The Committee shall
determine the terms and conditions upon which any restrictions upon restricted
stock awarded under the Plan shall expire, lapse, or be removed. The Committee,
in its discretion, may provide in the Award circumstances under which the
restricted stock shall become immediately transferable and nonforfeitable, or
under which the restricted stock shall be forfeited, and, notwithstanding the
foregoing, may accelerate the expiration of the restriction period imposed on
any restricted stock at any time.
(c) Restrictions Upon Transfer. Restricted stock and the right to
vote such restricted stock and to receive dividends thereon, may not be sold,
assigned, transferred, exchanged, pledged, hypothecated, or otherwise encumbered
during the restriction period applicable to such Shares, except to the extent
determined by the Committee. Notwithstanding the foregoing, and except as
otherwise provided in the Plan or determined by the Committee, the grantee of
the restricted stock shall have all of the other rights of a stockholder,
including, but not limited to, the right to receive dividends and the right to
vote such Shares. The Committee, in its discretion, may provide that any
dividends or distributions paid with respect to Shares subject to the unvested
portion of a restricted stock award will be subject to the same restrictions as
the Shares to which such dividends or distributions relate.
(d) Registration. Any restricted stock issued hereunder may be
evidenced in such manner as the Committee in its sole discretion may deem
appropriate, including without limitation, book-entry registration or issuance
of a stock certificate or certificates. In the event any certificate or
certificates are to be issued, the Committee, in its sole discretion, shall
determine when the certificate or certificates shall be delivered to the
grantee, may provide for the holding of such certificate or certificates in
escrow or in custody by the Company or its designee pending their delivery to
the grantee, and may provide for any appropriate legend to be borne by the
certificate or certificates.
9. PERFORMANCE UNITS AND PERFORMANCE SHARES.
Performance unit and performance share awards under the Plan shall entitle
grantees to future payments based upon the achievement of pre-established
performance objectives. Subject to the provisions of the Plan, the Committee
shall determine the terms and conditions applicable to each performance unit or
performance share award, which may include without limitation the following:
(a) one or more performance periods, (b) the initial value of each performance
unit subject to a performance unit award or the number of Shares subject to a
performance share award, (c) performance targets to be achieved during each
applicable performance period and (d) the terms of payment of performance unit
and performance share awards. Performance targets established by the Committee
may relate to financial and nonfinancial performance goals, may relate to
corporate, division, unit, individual or other performance and may be
established in terms of growth in gross revenue, earnings per share, ratios of
earnings to equity or assets, or such other measures or standards as may be
determined by the Committee in its discretion. Multiple targets may be used and
may have the same or different weighting, and they may relate to absolute
performance or relative performance. At any time prior to payment of a
performance unit or performance share award, the Committee may adjust previously
established performance targets or other terms and conditions to reflect
unforeseen events, including without limitation, changes in laws, regulations or
accounting practices, mergers, acquisitions or divestitures or other
extraordinary, unusual or non-recurring items or events. Payment on performance
unit and performance share awards may be made in cash, Shares, other Awards,
other property or any combination thereof, as the Committee may determine.
10. OTHER STOCK-BASED AWARDS.
The Committee may grant to Participants, either alone or in addition to
other Awards granted under the Plan, awards which are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or related to
Shares (including, without limitation, securities or other instruments
convertible into Shares). Subject to the terms of the Plan, the Committee shall
determine the terms and conditions of such Awards. Such Awards may be paid in
Shares, cash, other Awards, other property or any combination thereof, as the
Committee may determine. Such Awards may be issued for no cash consideration,
for such minimum consideration as may be required by applicable law or for such
other consideration as the Committee may determine. The form or forms of
consideration payable for Shares or other securities delivered pursuant to a
purchase right granted under this paragraph may include any form of
consideration specified in paragraph 6(b) hereof. The Committee may establish
certain performance criteria that may relate in whole or in part to receipt of
Awards hereunder. The provisions of this paragraph 10 notwithstanding, any
stock option to purchase Shares, SAR, restricted stock award or performance
share award granted under this Plan must comply with the provisions of this Plan
applicable to such Award.
11. NON-EMPLOYEE DIRECTORS' OPTIONS.
(a) Grant of Nonqualified Stock Options. On the first stock trading
day after each annual meeting of shareholders of TransFinancial commencing with
the year 1998, each person who is serving as a director of TransFinancial and is
not an employee of the Company on such day ("Non-Employee Director") shall
automatically receive a grant of a Nonqualified Stock Option to purchase 2,000
Shares (a "Formula Option").
(b) Option Price. The option exercise price to be paid by each such
Non-Employee Director for each Share purchased upon the exercise of such Formula
Option shall be one hundred percent (100%) of the fair market value of the
Shares on the date the option is granted. Fair market value for purposes of
this paragraph 11 shall be deemed to be the closing price of the Shares on the
American Stock Exchange as of the date the Formula Option is granted, as
reported in the Midwest Edition of the Wall Street Journal, provided that if the
Shares are not then listed on the American Stock Exchange, fair market value
shall be the Closing Price (as defined in paragraph 16) on such date.
(c) Vesting Schedule. Each Formula Option shall become exercisable
with respect to one-half of the Shares subject to such option on the last day of
the tenth full calendar month following the date of grant and shall become
exercisable in full on the last day of the twenty-second full calendar month
following the date of grant; provided that, notwithstanding the foregoing, the
Formula Option shall become exercisable in full upon (i) the occurrence of a
Change of Control (as defined in the form of Directors Stock Option Agreement
attached hereto as Exhibit I) during the Non-Employee Director's service as a
director of TransFinancial, provided the Formula Option has been outstanding for
at least one hundred eighty (180) days at the time of such occurrence, (ii)
termination of the Non-Employee Director's service as a director of
TransFinancial concurrently with a Change of Control, provided the Formula
Option has been outstanding for at least one hundred eighty (180) days at the
time of such termination, or (iii) termination of the Non-Employee Director's
service as a director of TransFinancial due to the Non-Employee Director's (A)
death, (B) permanent and total disability, or (C) retirement at the end of a
term of office, after completing five (5) years of service as a director
("Retirement").
(d) Term of Option. Each Formula Option shall expire on the tenth
anniversary of the date of grant, subject to earlier termination as provided in
this subparagraph. In the event that a Non-Employee Director's service as a
director of TransFinancial terminates for any reason, the Non-Employee Director
(or in the event of death the Non-Employee Director's Beneficiary) shall have
the right to exercise the Formula Option, to the extent the Formula Option was
exercisable at the time of such termination, at any time within one hundred
eighty (180) days after the date of termination of service, provided that in no
event may the Formula Option be exercised after the tenth anniversary of the
date of grant. Upon the earlier of the tenth anniversary of the date of grant
or the end of such 180 day period, the Formula Option shall expire.
(e) Payment for Shares. The option exercise price of the Shares with
respect to which a Formula Option is exercised shall be payable in full at the
time of exercise in (i) cash (which may include personal checks, certified
checks, cashier's checks or money orders), (ii) Shares at fair market value or
(iii) a combination of the foregoing. The fair market value of any Shares used
to pay any part of the exercise price shall be their fair market value, as
determined pursuant to subparagraph (b) hereof, on the date the Formula Option
is exercised. In lieu of delivering Shares, the optionee may provide an
affidavit regarding ownership of such Shares and receive the number of Shares
otherwise issuable to the optionee upon the exercise of the Formula Option, less
a number of Shares having a fair market value equal to such purchase price,
determined as provided in this subparagraph.
(f) Other Terms and Conditions. Each Formula Option granted to a
Non-Employee Director shall be subject to all of the other terms and conditions
set forth in the form of Directors Stock Option Agreement attached hereto as
Exhibit I.
(g) Additional Awards. Nothing in this paragraph 11 shall be deemed
to prevent the Committee from granting Awards to any Non-Employee Director in
addition to Formula Options.
(h) Committee Discretion. The Committee may exercise discretion with
respect to Formula Options only to the extent that the exercise of such
discretion shall not cause the provisions of this Plan applicable to Formula
Options to fail to qualify as a "formula plan" within the meaning of Rule 16b-3
under the 1934 Act.
12. PERFORMANCE-BASED AWARDS.
(a) Applicability. Awards granted and other compensation payable
under the Plan which are intended to qualify as Performance-Based Awards shall
be subject to the provisions of this paragraph 12. In the event of any conflict
between the provisions of this paragraph 12 and any other provisions of this
Plan, the provisions of this paragraph 12 shall prevail.
(b) Performance Goals. The specific performance goals for the
Performance-Based Awards granted under paragraphs 8, 9, 10, 13 and 15(c) hereof
shall be one or more Stockholder-Approved Performance Goals, as selected by the
Committee in its sole discretion. To the extent required under Section 162(m)
of the Code and the regulations promulgated thereunder, the Committee shall
(i) establish in the applicable Award Agreement the specific performance targets
relative to the Stockholder-Approved Performance Goals which must be attained
before compensation under the Performance-Based Award becomes payable, (ii)
provide in the applicable Award Agreement the method for computing the amount of
compensation payable to the Participant if the target or targets are attained,
and (iii) at the end of the relevant performance period and prior to any payment
of compensation, certify whether the applicable target or targets were achieved
and whether any other material terms were in fact satisfied. The specific
targets and the method for computing compensation shall be established within
the time period permitted under Section 162(m) of the Code and the regulations
promulgated thereunder. The Committee may reserve the right in any Award
Agreement covering a Performance-Based Award to reduce the amount payable at a
given level of performance. The Committee shall be precluded from increasing
the amount of compensation payable that would otherwise be due upon attainment
of a performance goal contained in a Performance-Based Award, to the extent
required under Section 162(m) of the Code and the regulations promulgated
thereunder for Performance-Based Awards to qualify as "qualified performance-
based compensation" under Section 162(m) of the Code.
(c) Modification of Performance Goals. Except where a modification
would cause a Performance-Based Award to no longer qualify as "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code, the Committee may in its discretion modify any performance goal or target
relating to a Performance-Based Award, in whole or in part, as the Committee
deems appropriate and equitable, subject to the provisions of paragraph 15(i)
hereof.
(d) Discretion; Compliance. Notwithstanding any other provision of
this Plan to the contrary, neither the Board nor the Committee shall be entitled
to exercise any discretion otherwise authorized under this Plan with respect to
any Performance-Based Award or with respect to the amendment or modification of
any provision of this Plan without stockholder approval, if the ability to
exercise such discretion (as opposed to the exercise of such discretion) would
cause any Performance-Based Award to fail to qualify as "qualified performance-
based compensation" under Section 162(m) of the Code. Notwithstanding any other
provision of this Plan to the contrary, the Plan shall be deemed to include such
additional limitations or requirements set forth in Section 162(m) of the Code
and the regulations and rulings promulgated thereunder which are required to be
included in the Plan in order for Performance-Based Awards to qualify as
"qualified performance-based compensation" under Section 162(m) of the Code, and
this Plan shall be deemed amended to the extent necessary to conform to such
limitations and requirements from time to time.
13. LOANS AND SUPPLEMENTAL CASH PAYMENTS.
The Committee in its sole discretion to further the purpose of the Plan may
provide for cash payments to individuals in addition to an Award, or loans to
individuals in connection with all or any part of an Award. Supplemental cash
payments shall be subject to such terms and conditions as shall be prescribed by
the Committee, provided that in no event shall the amount of payment exceed:
(a) In the case of an option, the excess of the fair market value of
a Share on the date of exercise over the option price multiplied by the number
of Shares for which such option is exercised, or
(b) In the case of an SAR, performance unit, performance share,
restricted stock or other stock-based award, the value of the Shares and other
consideration issued in payment of such Award.
Any loan shall be evidenced by a written loan agreement or other instrument in
such form and containing such terms and conditions (including, without
limitation, provisions for interest, payment schedules, collateral, forgiveness
or acceleration) as the Committee may prescribe from time to time.
14. GENERAL RESTRICTIONS.
Each Award under the Plan shall be subject to the requirement that if at
any time the Committee shall determine that (i) the listing, registration or
qualification of the Shares subject or related thereto upon any securities
exchange or under any state or federal law, or (ii) the consent or approval of
any regulatory body, or (iii) an agreement by the recipient of an Award with
respect to the disposition of Shares in order to satisfy the requirements of
federal or state securities laws, or (iv) the satisfaction of withholding tax or
other withholding liabilities is necessary or desirable as a condition of or in
connection with the granting of such Award or the issuance or purchase of Shares
thereunder, such Award shall not be consummated in whole or in part unless such
listing, registration, qualification, consent, approval, agreement, or
withholding shall have been effected or obtained. Any such restriction
affecting an Award shall not extend the time within which the Award may be
exercised; and none of the Company, its directors or officers or the Committee
shall have any obligation or liability to the grantee or to a Beneficiary with
respect to any Shares with respect to which an Award shall lapse or with respect
to which the grant, issuance or purchase of Shares shall not be effected,
because of any such restriction.
15. GENERAL PROVISIONS APPLICABLE TO AWARDS.
(a) Award Agreements. Each Award under the Plan shall be evidenced
by a written agreement entered into by and between TransFinancial and the
Participant ("Award Agreement"), containing such terms and conditions not
inconsistent with the provisions of the Plan as the Committee in its sole
discretion deems necessary or advisable, except as provided in paragraph 11 with
respect to Formula Options. Each Participant to whom an Award has been granted
shall agree that such Award shall be subject to all of the terms and conditions
of the Plan and the terms and provisions of the applicable Award Agreement. A
Participant shall have no rights with respect to any Award unless the
Participant shall have executed and delivered to the Company a copy of the Award
Agreement with respect to such Award.
(b) Committee Discretion. Each type of Award may be made alone, in
addition to or in relation to any other Award. Multiple Awards, multiple forms
of Awards, or combinations thereof may be evidenced by a single Award Agreement
or multiple Award Agreements, as determined by the Committee, except with
respect to Formula Options under paragraph 11 hereof. Successive Awards may be
granted to the same Participant whether or not any Awards previously granted to
such Participant remain outstanding. The Committee's determinations under the
Plan need not be uniform and may be made selectively among persons who receive,
or are eligible to receive, Awards under the Plan, whether or not such persons
are similarly situated. No person shall have any claim or right to be granted
an Award under the Plan.
(c) Dividends. In the discretion of the Committee, any Award under
the Plan may provide the Participant with dividends or dividend equivalents
payable in cash or property, currently or deferred, with or without interest,
except with respect to Formula Options under paragraph 11 hereof. Dividend
equivalents granted with respect to a stock option which is a Performance-Based
Award may not be made contingent upon exercise of the stock option, to the
extent prohibited by Section 162(m) of the Code and the regulations promulgated
thereunder with respect to qualified performance-based compensation.
(d) Termination of Employment or Consulting Arrangement. Except with
respect to Formula Options under paragraph 11 hereof, the Committee shall
determine the effect, if any, on an Award of the disability, death, retirement
or other termination of employment or services of a Participant and the extent
to which, and the period during which, the Participant or the Participant's
legal representative, guardian or Beneficiary may receive payment of an Award or
exercise rights thereunder.
(e) Change of Control. Except with respect to Formula Options under
paragraph 11 hereof and subject to the terms and conditions of the Plan, the
Committee may include such provisions in the terms of an Award or Award
Agreement relating to a change of control of the Company (as defined by the
Committee) as the Committee determines in its discretion. Such provisions may
include, without limitation, provisions which: (i) provide for the acceleration
of any time period relating to the exercise, realization, payment or term of the
Award, (ii) provide for payment to the Participant of cash or other property
with a fair market value, as determined by the Committee, equal to the amount
that would have been received upon the exercise or payment of the Award had the
Award been exercised or paid upon the change in control, (iii) adjust the terms
of the Award in a manner necessary to reflect the change in control or (iv)
require that the Award be assumed, or new rights substituted therefor, by
another entity.
(f) Transferability. Except with respect to Formula Options under
paragraph 11 hereof, in the discretion of the Committee, any Award may be made
transferable upon such terms and conditions and to such extent as the Committee
determines, provided that Incentive Stock Options may be transferable only to
the extent permitted by the Code. Except with respect to Formula Options under
paragraph 11 hereof, the Committee may in its discretion waive any restriction
on transferability, provided that Incentive Stock Options may be transferable
only to the extent permitted by the Code. Unless the Committee determines
otherwise, a Participant's rights and interest under any Award or any Award
Agreement may not be assigned or transferred in whole or in part, voluntarily or
involuntarily, including by operation of law, except by will, by the laws and
descent and distribution or pursuant to an effective Beneficiary designation.
(g) Withholding.
(i) Prior to the issuance or transfer of Shares or other
property under the Plan, the recipient shall remit to the Company an amount
sufficient to satisfy any Federal, state or local withholding tax
requirements. The recipient may satisfy the withholding requirement in
whole or in part by delivering Shares or electing to have the Company
withhold Shares having a value equal to the amount required to be withheld.
The value of such Shares shall be the fair market value, as determined by
the Committee, of the stock on the date that the amount of tax to be
withheld is determined (the Tax Date). Such Election must be made prior to
the Tax Date, must comply with all applicable securities law and other
legal requirements, as interpreted by the Committee, and may not be made
unless approved by the Committee, in its discretion.
(ii) Whenever payments to a Participant in respect of an Award
under the Plan are to be made in cash, such payments shall be net of the
amount necessary to satisfy any Federal, state or local withholding tax
requirements.
(h) Deferred or Installment Payments. The Committee may provide that
the issuance of Shares or the payment or transfer of cash or property upon the
settlement of Awards may be made in a single payment or transfer or in
installments, and may authorize the deferral of, or permit a Participant to
elect to defer, any such issuance, payment or transfer, all in accordance with
such rules, requirements, conditions and procedures as may be established by the
Committee. The Committee may also provide that any such installment or any such
deferred issuance, payment or transfer shall include the payment or crediting of
dividend equivalents, interest or earnings on deferred amounts. The provisions
of this subparagraph (h) shall not apply to Formula Options under paragraph 11
hereof.
(i) Amendment of Awards. Subject to the terms and conditions of the
Plan and any Award Agreement, the Committee will have the authority under the
Plan to amend or modify the terms of any outstanding Award (including the
applicable Award Agreement) in any manner, prospectively or retroactively,
including, without limitation, the authority to modify the number of shares or
other terms and conditions of an Award, extend the term of an Award, accelerate
the exercisability or vesting or otherwise terminate any restrictions relating
to an Award, convert an Incentive Stock Option to a Nonqualified Stock Option,
accept the surrender of any outstanding Award and authorize the grant of new
Awards in substitution for surrendered Awards; provided, however, that the
amended or modified terms are permitted by the Plan as then in effect and
provided, further, that if such amendment or modification, taking into account
any related action, materially and adversely affects a Participant's rights
under an Award or an Award Agreement, such Participant shall have consented to
such amendment or modification. Nothing in this subparagraph shall be deemed to
limit the Committee's authority to amend or modify any outstanding Award
pursuant to paragraph 3(b) of the Plan. The Committee may not amend any
outstanding Award or Award Agreement relating to a Formula Option to the extent
that such amendment would cause the provisions of this Plan applicable to
Formula Options and the provisions of the Award or Award Agreement to fail to
qualify as a "formula plan" within the meaning of Rule 16b-3 under the 1934 Act.
(j) Limitation on Amendment of Awards. Notwithstanding subparagraph
(i) hereof, unless approved by the shareholders of TransFinancial in accordance
with Delaware law, (i) the Committee shall not amend or modify the terms of any
outstanding Award relating to any stock option or SAR (including the applicable
Award Agreement) to reduce the exercise price per Share and (ii) no stock option
or SAR shall be cancelled and replaced with any Award or Awards having a lower
exercise price. Nothing in this subparagraph shall be deemed to limit the
Committee's authority to amend or modify any outstanding Award pursuant to
paragraph 3(b) hereof.
16. CERTAIN DEFINITIONS
(a) "1934 Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor law.
(b) "Award" means any award of stock options to purchase Shares,
stock appreciation rights, performance units, performance shares, restricted
stock, other stock-based awards as provided herein or any combination of the
above granted under the Plan.
(c) "Beneficiary" means the person or persons designated in writing
by the grantee of an Award as the grantee's Beneficiary with respect to such
Award; or, in the absence of an effective designation or if the designated
person or persons predecease the grantee, the grantee's Beneficiary shall be the
grantee's estate or the person or persons who acquire by bequest or inheritance
the grantee's rights in respect of an Award. In order to be effective, a
grantee's designation of a Beneficiary must be on file with the Committee before
the grantee's death, but any such designation may be revoked and a new
designation substituted therefor at any time before the grantee's death.
(d) "Closing Price" as of a particular day with respect to any
securities shall be the last sale price of such securities on the national
securities exchange on which such securities are listed and principally traded
or, if such securities are not listed on any national securities exchange, as
reported by NASDAQ, or, if not so reported by NASDAQ, the average of the closing
bid and asked quotations for such securities as reported by the National
Quotations Bureau Incorporated or similar organization selected by the
Committee, or, if on any such date such securities are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such securities selected by the
Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor law.
(f) "Covered Employee" means a "covered employee" for a particular
taxable year of the Company within the meaning of Section 162(m) of the Code and
the regulations promulgated thereunder or any Participant who the Committee
believes will be such a covered employee for a particular taxable year of the
Company, and who the Committee believes will have remuneration in excess of
$1,000,000 for such taxable year, as provided in Section 162(m) of the Code.
(g) "Participant" means any person selected to receive an Award
pursuant to the Plan.
(h) "Performance-Based Awards" means Awards and other compensation
payable under the Plan which the Committee from time to time determines are
intended to qualify as "qualified performance-based compensation" under Section
162(m) of the Code.
(i) "Reporting Person" means any person subject to Section 16 of the
1934 Act, or any successor rule.
(j) "Shares" means shares of Common Stock, $.01 par value per share,
of TransFinancial as constituted on the effective date of the Plan, and any
other shares into which such Common Stock shall thereafter be changed by reason
of any transaction described in paragraph 3(b) hereof.
(k) "Stockholder-Approved Performance Goals" means the measurable
performance objective or objectives established pursuant to this Plan for
Participants who have received grants of Performance-Based Awards described in
paragraph 12(b) hereof. To the extent permitted under Section 162(m) of the
Code and the regulations promulgated thereunder, Stockholder-Approved
Performance Goals may be described in terms of objectives related to the
performance of the Participant, TransFinancial, any subsidiary, or any division,
unit, department, region or function within TransFinancial or any subsidiary in
which the Participant is employed. Stockholder-Approved Performance Goals may
be made relative to the performance of other companies. To the extent permitted
under Section 162(m) of the Code and the regulations promulgated thereunder,
Stockholder-Approved Performance Goals applicable to any Performance-Based Award
shall be based on specified levels of or changes in one or more of the following
criteria: (i) cash flow, which may include net cash flow from operations, or net
cash flow from operations, financing and investing activities, (ii) earnings per
share, (iii) pre-tax income, (iv) net income, (v) return on sales, (vi) return
on equity, (vii) return on assets, (viii) return on capital, (ix) return on
investment, (x) revenue growth, (xi) market share, (xii) retained earnings,
(xiii) improved gross margins, (xiv) operating expense ratios, (xv) earnings
before interest, taxes, depreciation and amortization, (xvi) costs, (xvii) cost
reductions or savings, (xviii) debt reduction, (xix) selling, general and
administrative expenses and (xx) total return to shareholders (share
appreciation plus dividends).
17. MISCELLANEOUS.
(a) Rights of a Stockholder. Except as otherwise provided in
paragraph 8 hereof and subject to the provisions of the applicable Award
Agreement, the recipient of any Award under the Plan shall have no rights as a
stockholder with respect thereto unless and until certificates for Shares are
issued to such Participant, and the issuance of Shares shall confer no
retroactive right to dividends.
(b) Rights to Terminate Employment. Nothing in the Plan or in any
Award Agreement shall confer upon any person the right to continue in the
employment of the Company or affect any right which the Company may have to
terminate the employment of such person.
(c) Amendment and Termination of Plan. The Board may terminate,
amend, modify or suspend the Plan at any time, subject to such stockholder
approval as the Board determines to be necessary or desirable to comply with any
tax, regulatory or other requirement, provided that (i) in no event shall the
provisions relating to the timing, amount and exercise price of Formula Options
provided for in paragraph 11 of the Plan be amended more than once every six
months, other than to comport with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder, (ii) subject
to paragraph 3(b) hereof, the Board may not, unless such amendment is approved
by the shareholders of TransFinancial in accordance with Delaware law, amend the
Plan to (A) increase the number of Shares available for the grant of Awards
under the Plan pursuant to paragraph 3(a) hereof, (B) increase the maximum
individual limits on Awards set forth in paragraph 3(c) hereof, (C) increase the
maximum number of Shares which may be subject to restricted stock awards,
performance share awards and other stock-based awards pursuant to paragraph 3(d)
hereof, (D) decrease the minimum per Share exercise price of stock options or
the minimum per Share specified price for SARs under the Plan, (E) increase the
maximum term of stock options or SARs under the Plan or (F) change or modify the
provisions of paragraph 15(j) hereof. If any such termination, modification,
amendment or suspension of the Plan shall materially and adversely affect the
rights of any grantee or Beneficiary under an Award previously granted, the
consent of such grantee or Beneficiary shall be required, provided that it shall
be conclusively presumed that any adjustment pursuant to paragraph 3(b) hereof
does not materially and adversely affect any such right.
(d) Effect on Other Plans; Nature of Payments. Nothing contained in
this Plan shall prevent the Company from adopting other or additional
compensation arrangements or other benefit or incentive plans or shall affect
any Participant's eligibility to participate in any other such arrangement or
plan. Each grant of an Award and each issuance of Shares hereunder shall be in
consideration of services performed for the Company by the Participant receiving
the Award. Each such grant and issuance shall constitute a special incentive
payment to the Participant receiving the Award and shall not be taken into
account in computing the amount of salary or compensation of the Participant for
the purposes of determining any pension, retirement, death or other benefits
under (i) any pension, retirement, profit-sharing, bonus, life insurance or
other benefit plan of the Company or (ii) any agreement between the Company and
the Participant, except as such plan or agreement shall otherwise expressly
provide.
(e) Effective Date and Duration of Plan. The Plan shall become
effective when adopted by the Board, provided that the Plan is approved by the
shareholders of TransFinancial in accordance with Delaware law before the first
anniversary of the date the Plan is adopted by the Board, and provided, further,
that no payment on any Award shall be made unless and until such stockholder
approval is obtained. Unless it is sooner terminated in accordance with
subparagraph (c) hereof, the Plan shall remain in effect until all Awards under
the Plan have been satisfied or have expired or otherwise terminated, but no
Incentive Stock Option shall be granted more than ten years after the earlier of
the date the Plan is adopted by the Board or is approved by the shareholders of
TransFinancial.
(f) Unfunded Plan. The Plan shall be unfunded, except to the extent
otherwise provided in accordance with paragraph 8 hereof. Neither the Company
nor any affiliate shall be required to segregate any assets that may be
represented by Awards, and neither the Company nor any affiliate shall be deemed
to be a trustee of any amounts to be paid under any Award. Any liability of the
Company or any affiliate to pay any grantee or Beneficiary with respect to an
Award shall be based solely upon any contractual obligations created pursuant to
the provisions of the Plan, and no such obligations will be deemed to be secured
by a pledge of or encumbrance on any property of the Company or an affiliate.
(g) Governing Law. The Plan shall be governed by, and shall be
construed, enforced and administered in accordance with, the laws of the State
of Delaware, except to the extent that such laws may be superseded by any
Federal law.
Exhibit I
Form of Directors Stock Option Agreement
[Date]
[Name of Optionee]
[Address of Optionee]
Dear [Optionee]:
This Agreement is entered into pursuant to the TransFinancial Holdings, Inc.
1998 Long-Term Incentive Plan ("Plan"), a copy of which has been furnished to
you. This Agreement is subject to all of the terms and provisions of the Plan,
which are incorporated by reference. In the event of a conflict between this
Agreement and the Plan, the provisions of the Plan shall govern.
1. GRANT OF NONQUALIFIED STOCK OPTION. TransFinancial Holdings, Inc.
("TransFinancial") hereby grants to you a Nonqualified Stock Option ("Option")
to purchase from TransFinancial all or any part of an aggregate of Two Thousand
(2,000) shares of common stock, $.01 par value per share, of TransFinancial
("Shares") at the option exercise price specified below ("Option Price"),
subject to the terms and conditions of the Plan and this Agreement.
2. OPTION PRICE. The Option Price shall be Dollars ($ ) per
Share, such Option Price being the fair market value of the Shares on the date
hereof pursuant to the Plan, equal to the closing price of the Shares on the
American Stock Exchange on , the first stock trading day following
the annual meeting of the shareholders of TransFinancial, as reported
by The Wall Street Journal on .
3. EXERCISE OF OPTION.
a. Subject to all of the other terms and conditions set forth herein, the
Option may be exercised in respect of 1,000 Shares on and after
and may be exercised in respect of all of the Shares subject
to the Option on and after .
b. Notwithstanding the provisions of subparagraph (a) hereof, the Option
shall become exercisable in full upon (i) the occurrence of a Change of
Control (as hereinafter defined) during your service as a director of
TransFinancial, provided the Option has been outstanding for at least One
Hundred Eighty (180) days at the time of such occurrence, (ii) termination
of your service as a director of TransFinancial concurrently with a Change
of Control, provided the Option has been outstanding for at least One
Hundred Eighty (180) days at the time of such termination, or
(iii) termination of your service as a director of TransFinancial due to
your (A) death, (B) permanent and total disability, or (C) retirement at
the end of a term of office, after completing five (5) years of service as
a director ("Retirement").
c. Subject to all of the other terms and conditions set forth herein, you
shall have the right to exercise the Option in whole or in part from time
to time, provided that you may not exercise the Option with respect to a
fractional share or with respect to fewer than ten (10) Shares (or such
lesser number remaining unexercised). Except as otherwise provided herein,
this Option may not be exercised unless you are then a director of
TransFinancial.
4. TERM OF OPTION.
a. The Option shall expire at the close of business on (the
"Expiration Date"), subject to earlier termination as provided in this
Paragraph 4. In no event may the Option be exercised after the Expiration
Date.
b. If your service as a director of TransFinancial terminates for any
reason, you (or in the event of death your Beneficiary under the Plan)
shall have the right to exercise the Option, to the extent the Option was
exercisable at the time of such termination, at any time within One Hundred
Eighty (180) days after the date of termination of service, provided that
in no event may the Option be exercised after the Expiration Date. Upon
the earlier of the Expiration Date or the end of such 180 day period, the
Option shall expire.
5. METHOD OF EXERCISE OF OPTION. The Option may be exercised by delivering to
the Corporate Secretary of TransFinancial written notice of exercise and payment
of the Option Price. The written notice of exercise shall:
a. State the election to exercise the Option (or any part thereof), the
number of Shares in respect of which the Option is being exercised, the
person in whose name the stock certificate or certificates for such Shares
is to be registered, his or her address and Social Security Number (or, if
more than one, the names, addresses, and Social Security Numbers of such
persons); and
b. Be signed by the person or persons entitled to exercise the Option,
and, if the Option is being exercised by any person or persons other than
you, it shall be accompanied by proof satisfactory to counsel for
TransFinancial of the right of such person or persons to exercise the
Option.
6. PAYMENT OF OPTION PRICE.
a. Payment of Option Price shall be made in (i) cash (which may include
personal checks, certified checks, cashier's checks or money orders), (ii)
Shares owned by you for at least six months prior to the time of exercise
at fair market value or (iii) a combination of the foregoing. The fair
market value of any Shares used to pay any part of the exercise price shall
be their fair market value, as determined below. No fractional Shares
shall be accepted by TransFinancial, and if payment is to be made only in
Shares, the Shares shall be rounded to the next lowest whole number of
Shares, and you shall pay the amount equal to the fractional Share in cash
or by check. In lieu of delivering Shares, you may provide an affidavit
regarding ownership of such Shares and receive the number of Shares
otherwise issuable to the you upon the exercise of the Option, less a
number of Shares having a fair market value equal to such purchase price,
as determined below.
b. Fair market value for purposes of this paragraph 6 shall be deemed to
be the closing price of the Shares on the American Stock Exchange as of the
date the Option is exercised, as reported in the Midwest Edition of the
Wall Street Journal.
7. ISSUANCE OF SHARES. Upon the exercise of the Option in whole or in part
and upon satisfaction of the other terms and conditions of this Agreement and of
the Plan, TransFinancial will cause to be issued certificates for Shares
purchased pursuant to the Option. Shares to be issued to you shall be fully
paid and nonassessable, and will be either authorized and previously unissued
Shares or Shares held in the treasury of TransFinancial. It is understood that
you shall not have any of the rights of a shareholder with respect to such
Shares until such Shares are actually issued and registered in your name.
8. DEFINITION OF CHANGE OF CONTROL. A "Change of Control" shall be deemed
to have occurred if (a) any person (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended [the "1934 Act"]),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of TransFinancial, and other than a corporation owned directly or
indirectly by the shareholders of TransFinancial in substantially the same
proportions as their ownership of stock of TransFinancial, shall have become,
according to a public announcement or filing, the beneficial owner (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
TransFinancial representing thirty percent (30%) or more of the combined voting
power of TransFinancial's then outstanding voting securities; (b) a majority of
the members of the Board of Directors of TransFinancial (the "Board") ceases to
consist of Continuing Directors ("Continuing Directors" means (i) individuals
who were members of the Board on the date of grant of the Option or (ii)
individuals who subsequently become members of the Board if such individuals'
elections or nominations for election by TransFinancial's shareholders were
recommended or approved by a majority of the then Continuing Directors); (c) the
shareholders of TransFinancial approve a merger or consolidation of
TransFinancial with any other entity, other than a merger or consolidation which
would result in the voting securities of TransFinancial outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or the surviving
entity's parent) at least seventy percent (70%) of the combined voting power
represented by voting securities of TransFinancial, such surviving entity or
such parent, as the case may be, outstanding immediately after such merger or
consolidation, or (d) the shareholders of TransFinancial approve a plan of
complete liquidation of TransFinancial or an agreement for the sale or
disposition by TransFinancial of all or substantially all of TransFinancial's
assets, except a sale or disposition to any entity wholly-owned, directly or
indirectly, by TransFinancial. As used in this Paragraph 8, the parent of the
surviving entity shall mean an entity which owns, directly or indirectly, one
hundred percent (100%) of the outstanding voting securities of the surviving
entity.
9. NONTRANSFERABILITY OF OPTION. The Option may not be transferred by you
other than by will or by the laws of descent and distribution and may be
exercised during your lifetime only by you.
10. WAIVER OF OPTION. By entering into this Agreement, you hereby waive any
right which you may have to receive an annual grant under the 1992 Incentive
Stock Plan of TransFinancial of a "Directors Option" (as defined in that plan)
for the year .
11. NOTICES. Each notice relating to this Agreement shall be in writing and
delivered in person or by certified mail. Each notice shall be deemed to have
been given on the date it is received. Each notice to TransFinancial shall be
addressed to it at its principal office, at 8245 Nieman Road, Suite 100, Lenexa,
Kansas 66214, attention of the Corporate Secretary. Each notice to you or other
person or persons then entitled to exercise the Option shall be addressed to you
or such other person or persons at your address set forth in the heading of this
Agreement. Anyone to whom a notice may be given under this Agreement may
designate a new address by notice to that effect.
12. BENEFITS OF AGREEMENT. This Agreement shall inure to the benefit of, and
be binding upon, the respective heirs, executors, administrators, distributees
and successors of the parties hereto, except as otherwise specifically provided
herein.
13. RESOLUTION OF DISPUTES. Any dispute or disagreement which should arise
under, or as a result of, or in any way relate to, the interpretation,
construction or application of this Agreement or the Plan will be determined by
the Committee of the Board of Directors of TransFinancial administering the Plan
or this Agreement. Any determination made hereunder or under the Plan shall be
final, binding and conclusive for all purposes.
14. CONTINUATION AS DIRECTOR. Nothing in this Agreement or the Plan shall
confer upon you the right to continue as a director of TransFinancial or any of
its subsidiaries, or affect any right which TransFinancial or any of its
subsidiaries may have to terminate your service as a director.
15. MARKET RISKS. It is expressly understood and agreed that you assume all
risks incident to any change in the market value of the Shares subject to this
Option after the exercise of this Option in whole or in part.
16. GOVERNING LAW, ETC. This Agreement shall be construed and its provisions
enforced and administered in accordance with the laws of the State of Delaware
except to the extent that such laws may be superseded by any Federal law. This
Agreement may not be modified orally.
Please acknowledge your acceptance of this agreement by executing both copies;
retaining one copy for your files and returning the second copy to the Corporate
Secretary in Lenexa, Kansas.
Very truly yours,
President
ACCEPTED AND AGREED TO this
day of , .
TRANSFINANCIAL HOLDINGS, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
April 27, 1998
The undersigned hereby appoints Timothy P. O'Neil and Mark A. Foltz, and each
of them, as proxies for the undersigned at the Annual Meeting of Shareholders of
TransFinancial Holdings, Inc. at the Marriott Hotel, 10800 Metcalf Avenue,
Overland Park, Kansas, on Monday, April 27, 1998, at 9:00 A.M., and at any
adjournment, to vote the shares of stock the undersigned would be entitled to
vote, if personally present, upon the proposals, and any other matter brought
before the meeting, all as set forth in the March 13, 1998, Proxy Statement.
The Board of Directors recommends voting for Proposals 1, 2 and 3.
1. Approve the TransFinancial Holdings, Inc. 1998 Long-Term Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2.Authority granted to or withheld from proxies to vote for William D. Cox,
Lawrence D. Crouse, J. Richard Devlin, Harold C. Hill, Jr., Roy R. Laborde,
Timothy P. O'Neil and Clark D. Stewart as directors of TransFinancial (or a
substitute nominee or nominees designated by the Board of Directors if any of
them become unavailable).
[ ] FOR all nominees (unless exceptions are marked). [ ] WITHHOLD
AUTHORITY (for all nominees).
(To withhold authority to vote for individual nominees write such nominees
names in the space
provided below).
3. Ratify selection of Coopers & Lybrand L.L.P. as Independent Public
Accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(continued and to be signed and dated on the reverse side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED FOR PROPOSALS
1, 2 AND 3.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give
full title as such. If a corporation, please sign
in full corporate name by President or other
authorized officer. If a partnership, please sign
in partnership name by authorized person.
Dated:
(Signature)
(Signature if held jointly)
PLEASE MARK, SIGN AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE. THIS PROXY
IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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