SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant|X|
Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14A-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OAKWOOD HOMES CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
OAKWOOD HOMES CORPORATION
P. O. BOX 27081, GREENSBORO, NORTH CAROLINA
27425-7081
NOTICE OF SUBSTITUTE ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 11, 1998
NOTICE is hereby given that the substitute Annual Meeting of
Shareholders of Oakwood Homes Corporation (the Company) will be held in the
Auditorium of the Joseph S. Koury Convention Center at the Four Seasons Holiday
Inn, 3121 High Point Road, Greensboro, North Carolina on Wednesday, February 11,
1998 at 2:00 P.M., Local Time, for the purpose of considering and acting upon
the following:
1. Election of three members to the Board of Directors for a term
of three years and until their successors are elected and
qualified and election of one member to the Board of Directors
for a term of two years and until his successor is elected and
qualified.
2. Approval of the 1997 Director Stock Option Plan.
3. Ratification of the selection of Price Waterhouse LLP as
independent public accountants for the fiscal year ending
September 30, 1998.
4. Any and all other matters that may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 12,
1997 as the record date for determining the shareholders entitled to notice of
and to vote at the meeting or any adjournment thereof and only holders of Common
Stock of the Company of record at such date will be entitled to notice thereof
and to vote thereat.
You are urged to attend the annual meeting in person but, if you are
unable to do so, the Board of Directors will appreciate the prompt return of the
enclosed proxy, dated and signed. The proxy may be revoked at any time before it
is exercised and will not be exercised if you attend the meeting and vote in
person.
By order of the Board of Directors.
NICHOLAS J. ST. GEORGE
President
Greensboro, North Carolina
January 5, 1998
<PAGE>
OAKWOOD HOMES CORPORATION
P. O. BOX 27081, GREENSBORO, NORTH CAROLINA 27425-7081
----------------------
PROXY STATEMENT
----------------------
GENERAL
This Proxy Statement and the accompanying proxy card are being
furnished to the shareholders of Oakwood Homes Corporation (the "Company")
commencing on or about January 5, 1998 in connection with the solicitation by
the Board of Directors of proxies to be used at the Substitute Annual Meeting of
Shareholders to be held at the Auditorium of the Joseph S. Koury Convention
Center at the Four Seasons Holiday Inn, 3121 High Point Road, Greensboro, North
Carolina on Wednesday, February 11, 1998 at 2:00 P.M., Local Time, and at any
adjournment thereof.
Solicitation other than by mail may be made personally and by telephone
by regularly employed officers and employees of the Company who will not be
additionally compensated therefor. The Company will request brokers, dealers,
banks or voting trustees, or their nominees, who hold stock in their names for
others or hold stock for others who have the right to give voting instructions,
to forward proxy material to their principals and request authority for the
execution of the proxy and will reimburse such persons for their reasonable
expenses in so doing. The total cost of soliciting proxies will be borne by the
Company.
Any proxy delivered in the accompanying form may be revoked by the
person executing the proxy at any time before the authority thereby granted is
exercised by filing an instrument revoking it or a duly executed proxy bearing a
later date with the Secretary of the Company or if the person executing the
proxy attends the meeting and elects to vote in person. If a choice is specified
in the proxy, shares represented thereby will be voted in accordance with such
choice. If no choice is made, the proxy will be voted FOR the action proposed.
The only matters to be considered at the meeting, so far as known to
the Board of Directors, are the matters set forth in the Notice of Substitute
Annual Meeting of Shareholders and routine matters incidental to the conduct of
the meeting. However, if any other matter should come before the meeting or any
adjournment thereof, it is the intention of the persons named in the
accompanying proxy or their substitutes to vote the proxy in accordance with
their best judgment on such matters.
Each shareholder present or represented and entitled to vote on a
matter at the meeting or any adjournment thereof will be entitled to one vote on
such matter for each share held by him of record at the close of business on
December 12, 1997, which is the record date for determining the shareholders
entitled to notice of and to vote at such meeting or any adjournment thereof.
The
1
<PAGE>
number of outstanding shares of the $.50 par value Common Stock of the Company
(the Common Stock) at the close of business on December 12, 1997 was 46,415,258
shares.
PRINCIPAL HOLDERS OF THE COMMON STOCK AND HOLDINGS OF MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the only persons known by the
Company to own beneficially more than 5% of the Common Stock:
Number of Shares
and Nature of Percentage of
Beneficial Shares
Name and Address Ownership Outstanding
FMR Corp. 3,862,200(1) 8.32%
82 Devonshire Street
Boston, MA 02109
MacKay-Shields Financial 2,343,300(2) 5.04%
Corporation
9 West 57th Street
New York, NY 10019
- -------------------------
(1) The information concerning beneficial ownership is derived from a
Schedule 13G dated August 8, 1997, filed by FMR Corp. jointly on behalf
of FMR Corp., Edward C. Johnson, Fidelity Management & Research Company
("Fidelity") and the Fidelity Magellan Fund ("Magellan"). At July 31,
1997, Magellan owned 3,719,200 of such shares. FMR Corp. has sole
voting power over 74,000 shares and sole dispositive power over all of
the shares. FMR Corp. does not have shared voting or dispositive power
over any of the shares. Fidelity carries out the voting of the shares
owned directly by various Fidelity funds under written guidelines
established by the funds' boards of trustees.
(2) The information concerning beneficial ownership is derived from a
Schedule 13G dated February 7, 1997. MacKay-Shields Financial
Corporation is a registered investment adviser, and has shared voting
and dispositive power with respect to such shares.
The following table sets forth as of December 12, 1997 certain
information with respect to the beneficial ownership of the Common Stock by Mr.
J. Michael Stidham, Executive Vice President--Sales of Oakwood Mobile Homes,
Inc., a wholly-owned subsidiary of the Company, and William G. Edwards,
Executive Vice President--Housing Operations, and by all directors and officers
as a group. Information as to the beneficial ownership of each director
individually (including executive officers who are also directors) is included
in the information on each director or nominee under the heading "Election of
Directors."
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<PAGE>
Number of Shares Percentage of
Name of Beneficial Owner Beneficially Owned Shares Outstanding1
- ------------------------ ------------------ -------------------
William G. Edwards 523,962(2) 1.13%
A. Steven Michael(3) 124,012(4) (5)
J. Michael Stidham 75,137(6) (5)
All directors and executive officers 2,350,667(7) 5.06%
as a group (19 persons)
- -------------------------
(1) Based on the number of shares outstanding plus options which are
presently exercisable or exercisable within 60 days.
(2) Includes 11,120 shares subject to an option which is presently
exercisable or exercisable within 60 days.
(3) Mr. Michael resigned as a director and executive officer on
September 30, 1997.
(4) Includes 7,546 shares subject to an option that is presently
exercisable or exercisable within 60 days.
(5) Less than 1%.
(6) Includes 61,750 shares subject to options which are presently
exercisable or exercisable within 60 days and 1,752 shares of
restricted stock.
(7) Includes 837,221 shares subject to options which are presently
exercisable or exercisable within 60 days and 238,368 shares of
restricted stock.
ELECTION OF DIRECTORS
The Board of Directors has 10 members and one vacancy. Four of the
directors' terms expire in 1998. The Board proposes to fill these positions at
the meeting with three nominees to serve, subject to the provisions of the
Bylaws, until the Annual Meeting of Shareholders in 2001 and until their
successors are duly elected and qualified and one nominee to serve, subject to
the provisions of the Bylaws, until the Annual Meeting of Shareholders in 2000
and until his successor is duly elected and qualified. There will be one vacancy
on the Board of Directors. The Board of Directors intends to leave this vacancy
open until the Board of Directors has identified an appropriate individual who
is willing to serve as a director. Directors are elected by a plurality of the
votes cast by the holders of shares entitled to vote in the election of
directors at a meeting at which a majority of the votes entitled to be cast is
present. Provided a majority is present, abstentions and shares not voted are
not taken into account in determining a plurality. It is the intention of the
persons named in the accompanying proxy to vote all proxies solicited by the
Board of Directors for the four nominees listed hereafter for terms expiring in
2001 and 2000, as the case may be, unless authority to vote for the nominees or
an individual nominee is withheld by a shareholder. If for any reason any
nominee shall not become a candidate for election as a director at
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<PAGE>
the meeting, an event not now anticipated, the proxies will be voted for the
four nominees including such substitutes as shall be designated by the Board of
Directors.
The nominees for election as directors to serve until 2001 were elected
to their present terms, which expire in 1998, at the Annual Meeting of
Shareholders held February 1, 1995:
<TABLE>
<CAPTION>
Number of Percentage
Shares of
Name and Beneficially Shares
Director Since Information About Director Owned1 Outstanding2
<S> <C> <C> <C>
Clarence W. Walker Partner, Kennedy Covington Lobdell & 104,436(3) 4
1971 Hickman, L.L.P., Attorneys at Law,
Charlotte, NC since 1961. He is 66
years old.
Dennis I. Meyer Partner, Baker & McKenzie, Attorneys at 83,796(5) 4
1983 Law, Washington, DC since 1965.
Director of United Financial Banking
Companies, Inc. (bank holding
company). He is 62 years old.
C. Michael Kilbourne Executive Vice President of the Company 154,074(6) 4
1995 since 1994 and Chief Financial Officer
of the Company since 1988; Vice President of
the Company, 1988-1994; Treasurer of the
Company, 1988-1992. He is 47 years old.
</TABLE>
The nominee for election as a director to serve until 2000 was elected
to his present term, which expires in 1998, by the Board of Directors at a
special meeting of the Board on November 19, 1997 to fill a vacancy on the
Board:
<TABLE>
<CAPTION>
Number of Percentage
Shares of
Name and Beneficially Shares
Director Since Information About Director Owned(1) Outstanding(2)
<S> <C> <C> <C>
Lanty L. Smith Chairman, The Greenwood Group, Inc., 10,000 4
1997 since 1992 and President and Chairman,
Precision Fabrics Group, Inc. since 1988
(textile companies). Director of First
Union Corporation. He is 55 years old.
</TABLE>
4
<PAGE>
The following members of the Board of Directors were elected to their
present terms, which expire in 1999, at the Annual Meeting of Shareholders held
January 31, 1996, with the exception of Mr. Schipke, who was elected to his
present term at the Annual Meeting of Shareholders held January 29, 1997:
<TABLE>
<CAPTION>
Number of Percentage
Shares of
Name and Beneficially Shares
Director Since Information About Director Owned(1) Outstanding(2)
<S> <C> <C> <C>
Nicholas J. St. George Chairman of the Company since 1996; 670,072(7) 1.53%
1972 President and Chief Executive Officer
of the Company since 1979. Director
of American Bankers Insurance Group,
Inc. and of Legg Mason, Incorporated.
He is 58 years old.
Sabin C. Streeter Private Investor and 29,428(8) (4)
1993 Executive-in-Residence at Columbia
University Graduate School of Business since
1997; Managing Director, Donaldson Lufkin &
Jenrette Securities Corporation (investment
banking firm), 1976-1997. Director of Middleby
Corporation, Parker-Hunter Incorporated and
FOTOBALL, Inc. He is 56 years old.
Roger W. Schipke Private Investor. Chairman of the 9,428(9) (4)
1996 Board and Chief Executive Officer,
Sunbeam Corporation (manufacturer of
consumer products), 1993-1996;
Chairman of the Board and Chief
Executive Officer, The Ryland Group,
Inc. (mortgage-banking and home
building), 1990-1993. Director of
Brunswick Corporation, Rouse
Corporation and Legg Mason,
Incorporated. He is 60 years old.
</TABLE>
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<PAGE>
The following members of the Board of Directors were elected to their
present terms, which expire in 2000, at the Annual Meeting of Shareholders held
January 29, 1997:
<TABLE>
<CAPTION>
Number of
Shares Percentage
Name and Beneficially of Shares
Director Since Information About Director Owned(1) Outstanding(2)
<S> <C> <C> <C>
Kermit G. Phillips, II Chairman of the Board, Phillips 233,016(10) (4)
1979 Management Group, Inc., Greensboro,
NC (real estate development and
management company) since 1974. He
is 63 years old.
H. Michael Weaver Private investor. Owner of Weaver 127,552(11) (4)
1991 Investment Company (real estate
investment) since 1968. He is 60
years old.
Francis T. Vincent, Private Investor. Commissioner of 23,428(12) (4)
Jr. Major League Baseball, 1989-1992.
1993 Director of Time-Warner Inc., General
Cigar Corporation and Westfield
Corporation. He is 59 years old.
</TABLE>
- ---------------------
(1) Common Stock ownership information is as of December 12, 1997.
(2) Based on the number of shares outstanding plus shares subject to
options held by the director or nominee which are presently exercisable
or exercisable within 60 days.
(3) Includes 64,548 shares subject to options which are presently
exercisable or exercisable within 60 days and 2,292 shares held by
Mr. Walker's wife.
(4) Less than 1%.
(5) Includes 64,548 shares subject to options which are presently
exercisable or exercisable within 60 days and 5,188 shares held by
Mr. Meyer's wife.
(6) Includes 118,042 shares subject to options which are presently
exercisable or exercisable within 60 days and 2,969 shares of
restricted stock.
(7) Includes 99,720 shares subject to options which are presently
exercisable or exercisable within 60 days and 222,126 shares of
restricted stock.
(8) Includes 21,428 shares subject to options which are presently
exercisable or exercisable within 60 days and 1,000 shares held by
Mr. Streeter's wife.
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<PAGE>
(9) Includes 6,428 shares subject to an option which is presently
exercisable or exercisable within 60 days.
(10) Includes 64,548 shares subject to options which are presently
exercisable or exercisable within 60 days.
(11) Includes 36,428 shares subject to options which are presently
exercisable or exercisable within 60 days and 4,000 shares held by
Mr. Weaver's wife.
(12) Includes 21,428 shares subject to options which are presently
exercisable or exercisable within 60 days.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee is composed of Kermit G. Phillips, II, Sabin C.
Streeter, Clarence W. Walker and H. Michael Weaver. This Committee is
responsible for recommending independent public accountants for the Company and
reviewing the Company's financial statements, audit reports, internal financial
controls and internal audit procedures. The Audit Committee met three times
during the year ended September 30, 1997.
The Compensation Committee is composed of Dennis I. Meyer, Francis T.
Vincent, Jr. and Roger W. Schipke. This Committee reviews and makes
recommendations and determinations with respect to the compensation of officers.
The Compensation Committee met five times during the fiscal year ended September
30, 1997.
The Board of Directors of the Company does not have a Nominating
Committee.
The Board of Directors met five times during the fiscal year ended
September 30, 1997. Each director attended more than 75% of the aggregate of the
number of meetings of the Board of Directors and the number of meetings of all
Committees on which he served.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the past, Weaver, Grubar & Black Company, a real estate broker of
which H. Michael Weaver is Chairman of the Board and principal shareholder, has
performed brokerage services for the Company in connection with the Company's
purchase and sale of certain properties.
The law firm of Kennedy Covington Lobdell & Hickman, L.L.P., of which
Clarence W. Walker is a partner, has served as counsel to the Company since
1971. It is expected that such firm will continue to serve as counsel to the
Company during the current fiscal year.
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE. The Compensation Committee (the "Committee") is
a standing committee of the Board of Directors composed of outside directors
qualified under Section 162(m) of the Internal Revenue Code. Mr. Vincent is the
Chairman. Messrs. Meyer and Schipke are the other members.
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<PAGE>
The Committee attempts to insure that the executive compensation
programs of the Company are developed, implemented and administered in a way
that supports the Company's objective of linking compensation to performance.
The Committee reviews and sets the base salaries for senior executives and
provides for annual and long-term incentive compensation of senior executives
under compensation plans that have received shareholder approval.
CORPORATE COMPENSATION PHILOSOPHY. The Committee believes that base
compensation should be at the minimum level necessary to enable the Company to
attract and retain the highly qualified executives it needs but that incentives
should be provided so that the executives can achieve total compensation
significantly in excess of those at comparable companies only if warranted by
operating results. The major portion of each executive's annual compensation
potential is provided through bonuses dependent on the accomplishment of annual
performance goals. Long-term incentives are provided through long-term cash
incentive awards and grants of stock options and restricted stock, which link
the interests of the Company's executives and shareholders.
DEDUCTIBILITY OF COMPENSATION. The Committee attempts to see that cash
compensation paid to executive officers is deductible for federal income tax
purposes. To that end the Committee and the Board of Directors presented for
shareholder approval in fiscal 1996 the Executive Incentive Compensation Plan
and the Key Employee Stock Plan. Many of the stock options granted by the
Committee are incentive stock options, and the Company receives no tax deduction
on the exercise of such options. The Committee believes that use of incentive
stock options can be important because upon exercise the executive will not need
to sell the underlying stock to pay taxes.
EXECUTIVE COMPENSATION. The Company's executive compensation program is
composed of three basic elements: (A) base salary; (B) annual incentive
opportunities to earn significant additional cash and restricted stock; and (C)
long-term opportunities in the form of stock options and incentive awards in the
form of cash and restricted stock based upon the Company's performance over
time.
Base Salary. Base salaries for fiscal 1997 increased an
average of 11.8% over fiscal 1996 for the Named Executive Officers (as defined
on page 11), excluding Mr. St. George. The Committee believes base salaries are
significantly lower than those for like positions in comparable companies.
Annual Incentive Compensation. The Committee establishes an
annual target bonus for each executive officer if a level of net earnings is
met. The target bonus diminishes if net earnings are less, and increases if net
earnings are greater. The executives eligible to participate and their
respective target bonuses are determined by the Committee based upon the
participant's level of responsibility and capacity to contribute to the
achievement of annual profit goals. The Committee attempts to set a target bonus
that will allow executives' annual cash compensation levels (base salary plus
incentive compensation) to significantly exceed the median annual cash
compensation levels at companies of comparable size if the Company achieves
significant increases in net earnings. At least 10% and up to 50% of the bonus,
at the election of the executive, is paid in restricted stock with a two or four
year vesting period issued at a discount of 20% or 30% of the fair market value
of the stock, with the discount increasing with the length of the vesting
period. The average bonuses received for fiscal 1997 by the Named Executive
Officers other than Mr. St. George were 31% lower than for fiscal 1996 because
the Company's net income grew at a lower rate in fiscal 1997.
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<PAGE>
Long Term Incentive Awards. The Committee provides long term
incentives in the form of stock options, restricted stock awards and
performance-based cash awards. The only long term awards provided to the Named
Executive Officers in fiscal 1997 under the Key Employee Stock Plan and
Executive Incentive Compensation Plan, were a stock option granted to Mr.
Stidham of 15,000 shares and a performance based cash and restricted stock award
to Mr. Edwards which will be paid in fiscal 1999. Mr. Edwards' award is similar
to awards granted to the other Named Executive Officers in fiscal 1996.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation for Mr. St.
George consists of the same three basic elements as for the Company's other
executive officers.
Base Salary. Mr. St. George's base salary was set for fiscal
1997 at $450,000, which represents no change from fiscal 1996. The Committee
believes Mr. St. George's base salary is substantially below the median base
salary of chief executive officers of companies of comparable size.
Annual Incentive Compensation. Mr. St. George's fiscal 1997
target bonus was significantly higher than any of the other executive officers,
reflecting Mr. St. George's level of responsibility. Mr. St. George's target
bonus was $385,000. Mr. St. George's bonus paid under the Executive Incentive
Compensation Plan was $963,655 for fiscal 1997, compared to $1,619,695 for
fiscal 1996 because the Company's net income grew at a lower rate in fiscal
1997. In addition, Mr. St. George received additional payments aggregating
$635,055, which represented the Company's income tax savings with respect to
nonqualified stock options exercised by Mr. St. George. Although the Committee
believes that this brings Mr. St. George's annual compensation to a level
significantly higher than the average annual compensation of chief executive
officers at comparable companies, the Committee believes that the performance of
the Company warrants this level of compensation.
Long Term Incentive Awards. Mr. St. George did not receive any
long term incentive awards in fiscal 1997 because Mr. St. George received
certain long term incentive awards in fiscal 1996.
Francis T. Vincent, Jr., Chairman
Dennis I. Meyer
Roger W. Schipke
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<PAGE>
SHAREHOLDER RETURN PERFORMANCE GRAPH
Presented below is a line graph comparing the yearly percentage change
in the Company's cumulative shareholder return on the Company's Common Stock
against the cumulative total return of the Standard & Poors ("S&P") 500 Index
and a peer group for the period commencing October 1, 1992 and ending September
30, 1997, covering the Company's last five fiscal years. The peer group consists
of the following publicly traded companies, all of which are engaged in aspects
of the manufactured housing industry: Cavalier Homes, Inc., Champion
Enterprises, Inc., Clayton Homes, Inc., Fleetwood Enterprises, Inc., Liberty
Homes, Inc., Schult Homes Corporation and Skyline Corporation.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG THE COMPANY, S&P 500 INDEX AND PEER GROUP
Total Cumulative Shareholder Return for Period Ending September 30, 1997
1992 1993 1994 1995 1996 1997
Oakwood Homes 100 174.01 168.71 237.46 366.11 383.66
Peer Group 100 144.25 153.64 176.79 250.62 256.72
S&P 500 100 112.94 117.14 151.86 182.63 256.41
This graph assumes that $100 was invested in the Company's Common Stock on
October 1, 1992 in the S&P 500 Index and in the peer group, and assumes
reinvestment of all dividends.
10
<PAGE>
EXECUTIVE COMPENSATION
The table below shows certain compensation information for the three
fiscal years ended September 30, 1997 concerning the Company's Chief Executive
Officer and the Company's other four most highly compensated executive officers
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
-----------------------------------------------------------------------------------------------
AWARDS PAYOUTS
SECURITIES
UNDERLYING ALL OTHER
OTHER ANNUAL RESTRICTED OPTIONS/ LTIP PAYOUTS COMPEN-
NAME AND FISCAL SALARY BONUS COMPENSATION STOCK AWARD(S) SARS ($) SATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($)(2)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Nicholas J. St.
George 1997 450,000 867,290 (3) 115,391(4) 96,366(5) 0 0 22,880
President and Chief 1996 450,000 1,133,787 (3) 70,924(4) 553,150(5)(6) 160,000/0 $7,565,230 7,071
Executive Officer 1995 450,000 712,250 -- 0 0 0 5,716
A. Steven Michael(7) 1997 255,000 450,540 (3) -- 50,060(5) 0 0 13,287
Executive Vice 1996 255,000 757,260 (3) -- 95,775(5) 90,000/0 $3,981,700 4,600
President 1995 255,000 370,000 -- 0 0 0 11,686
of the Company
C. Michael Kilbourne 1997 218,269 349,169(3) -- 38,797(5) 0 0 7,498
Executive Vice 1996 200,000 586,877(3) -- 74,225(5) 56,000/0 $2,553,780 3,129
President 1995 200,000 286,750 -- 0 0 0 4,730
of the Company
William G. Edwards 1997 185,539 270,108(3) -- 30,012(5) 0 0 6,510
Executive Vice 1996 165,442 347,612 -- 0 53,000/0 0 3,526
President-- 1995 143,000 619,638 -- 0 0 0 721
Housing Operations
J. Michael Stidham 1997 176,539 270,108(3) -- 30,012(5) 15,000/0 0 7,934
Executive Vice 1996 140,000 346,356(3) -- 43,800(5) 40,000/0 $1,167,050 5,192
President-- 1995 140,000 265,400 -- 0 0 0 8,085
Sales
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No Named Executive Officer has received personal benefits during the
listed years in excess of the lesser of $50,000 or 10% of annual salary
and bonus other than Mr. St. George.
(2) The components of the amounts shown in this column consist of Company
contributions under the Company's various retirement plans for Messrs.
St. George, Michael, Kilbourne, Edwards and Stidham, respectively, of
approximately $20,630, $8,609, $6,521, $6,035, and $5,846 for 1997,
$6,733, $1,676, $3,088, $3,526 and $4,191 for 1996, and $4,050, $8,356,
$4,440, $721 and $6,757 for 1995 and the interest accrued on deferred
compensation accounts that are considered by the Securities and Exchange
Commission to be at above-market rates in the amounts of $1,775, $4,203,
$502, $0, and $1,613 for accounts of Messrs. St. George, Michael,
Kilbourne, Edwards and Stidham, respectively, for 1997, $338, $2,924,
$41, $0 and $1,001 for the accounts of Messrs. St. George, Michael,
Kilbourne, Edwards and Stidham, respectively, for 1996, and $1,666,
$3,330, $290, $0 and
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<PAGE>
$1,328 for the accounts of Messrs. St. George, Michael, Kilbourne,
Edwards and Stidham, respectively, for 1995.
(3) Does not include the value of the portion of the bonus paid in shares of
restricted stock. See note 5 below.
(4) Includes $89,445 and $48,981 attributable to the cost of Company aircraft
for Mr. St. George's personal use for 1997 and 1996.
(5) Amount represents the dollar value of shares of restricted stock issued
to the Named Executive Officers as partial payment of their bonuses for
the fiscal year ended September 30, 1996. At September 30, 1997, Mr. St.
George held 222,126 shares of restricted stock with a value equal to
$6,302,525, Mr. Michael held 3,831 shares of restricted stock with a
value equal to $108,705, Mr. Kilbourne held 2,969 shares of restricted
stock with a value equal to $84,245, Mr. Edwards held no shares of
restricted stock and Mr. Stidham held 1,752 shares of restricted stock
with a value equal to $49,713, based on a closing price of the Common
Stock on the New York Stock Exchange of $28.375 on such date. The 10,848
shares of restricted stock to be issued to the Named Executive Officers
as partial payment of their bonuses for fiscal 1997 were not issued as of
September 30, 1997. Dividends will be paid on the shares of restricted
stock. Shares issued in partial payment of bonuses for fiscal 1996 will
vest on September 30, 1998; shares to be issued in partial payment of
bonuses for fiscal 1997 will vest on either September 30, 1999 or
September 30, 2001 at the election of the Named Executive Officer.
(6) Does not include the dollar value of 200,000 shares of restricted stock
issued to Mr. St. George in November 1995 which will vest in the year
2000. Dividends will be paid on the shares of restricted stock.
(7) Mr. Michael resigned as a director and Executive Vice President on
September 30, 1997.
12
<PAGE>
The table below sets forth the grant of stock options and SARs during the
fiscal year ended September 30, 1997 to each of the Named Executive Officers.
See "Compensation Committee Report" for additional information regarding this
grant.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR $/SHARE DATE 5%($) 10%($)
---- ----------- ----------- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Nicolas J. St. George 0(1) 0% -- -- -- --
A. Steven Michael 0(1) 0% -- -- -- --
C. Michael Kilbourne 0(1) 0% -- -- -- --
William G. Edwards 0(1) 0% -- -- -- --
J. Michael Stidham 15,000(1) 4.5% $20.375 04/28/2007 $192,544 $485,944
</TABLE>
- -------------------
(1) This option will fully vest in 1999 if the Company achieves a 15% return
on equity in the three-year period ending September 30, 1999. If return
on equity is below 15%, all or a portion of such option, depending on the
actual return on equity, will not vest until 2006.
The table below sets forth, on an aggregated basis, all exercises of
stock options or SARs during the fiscal year ended September 30, 1997 by each of
the Named Executive Officers and the 1997 fiscal year-end value of unexercised
options and SARs:
AGGREGATED OPTION/SAR EXERCISES IN THE 1997
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE (#) UNEXERCISABLE ($)
<S> <C> <C> <C> <C>
Nicholas J. St. George 162,572 $2,733,172 99,720/273,880 1,723,224/4,205,096
A. Steven Michael 201,843 $4,048,988 0/124,000 0/1,402,800
C. Michael Kilbourne 0 0 111,134/62,908 2,568,494/659,140
William G. Edwards 0 0 5,560/44,440 57,157/446,043
J. Michael Stidham 0 0 71,750/55,000 1,623,043/514,925
</TABLE>
The table below sets forth certain information regarding an award to
William G. Edwards, the only Named Executed Officer to receive an award under
the Company's Executive Incentive Compensation Plan (the "Award") during the
fiscal year ended September 30, 1997. The Award will be paid 50% in cash and 50%
in restricted shares of Common Stock. Mr. Edwards was assigned a percentage
participation, set forth in the table below, in an incentive compensation pool
13
<PAGE>
(the "Pool"). The amount of the Pool, to be determined following the fiscal year
ending September 30, 1998, will be equal to 10% of the amount by which the
Company's net income exceeds a 10% return on equity for the two fiscal years
ending September 30, 1998. There is no target minimum or maximum amount to be
paid. See "Compensation Committee Report" for additional information regarding
the Award.
LONG-TERM INCENTIVE PLAN
AWARDS IN LAST FISCAL YEAR
PERFORMANCE OR OTHER PERIOD
NAME UNTIL MATURATION OR PAYOUT % PARTICIPATION
William G. Edwards September 30, 1998 5%
COMPENSATION OF DIRECTORS
The directors of the Company who are not employees are paid an annual fee
of $34,000 plus $1,000 for each Board meeting attended, $1,500 for each
Committee meeting attended and not held on the same day as a Board meeting and
$500 for each Board meeting participated in by conference telephone. Committee
chairmen receive an additional $1,000 each quarter. Non-employee directors also
have received stock options under the Company's 1990 Director Stock Option Plan
under which each non-employee director was granted an option to purchase 15,000
shares of the Common Stock on each of July 30, 1992 and 1994 (as adjusted for
stock splits) and an option to purchase 6,428 shares of Common Stock on July 30,
1996 at an option price equal to the fair market value of the Common Stock on
such dates. See "Approval of 1997 Director Stock Option Plan" for information
regarding options that will be granted to non-employee directors in the event
the 1997 Director Stock Option Plan is approved by the shareholders at the 1998
Substitute Annual Meeting of Shareholders.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
The Company has entered into employment agreements with Messrs. St.
George and Kilbourne. The agreements provide that in the event of a change of
control of the Company, as defined in the agreements, before or on January 30,
2001, these executives will remain in the employ of the Company for two years
after such change of control. If the employment of an executive is terminated
within two years after such change of control for reason other than death,
disability or cause, as defined in the agreements, or if an executive resigns
during such time for good reason, as defined in the agreements, the executive is
entitled to a lump sum payment equal to two times his annual compensation. The
agreements are intended to provide key executives a greater sense of security,
assure their objectivity in analyzing any potential change in control and
preserve continuity of management in the event of a change in control.
The Company has entered into an Executive Disability Benefit Agreement
with Mr. St. George. Under the disability agreement, the Company will pay to Mr.
St. George his then current base salary for the first 180 days he is totally
disabled. After such time, he will be paid $23,942 per month in the event he is
determined to be totally disabled, subject to increase to reflect cost of living
adjustments, so long as he is totally disabled and under the age of 60. In no
event, however, will the Company be obligated under the disability agreement to
pay more than twice the amount of the payments the Company will receive pursuant
to disability income policies purchased by the Company to insure Mr. St. George.
14
<PAGE>
The Company has entered into Executive Retirement Benefit Employment
Agreements with Messrs. St. George, Kilbourne and Stidham. Pursuant to the
retirement agreements, these executives will receive monthly retirement benefit
payments for a period of fifteen years. The amount of such retirement payments
will vary according to the reason for the termination of the executive's
employment and the age of the executive at the time of termination. Mr. St.
George is entitled to payments if he retires after reaching age 55 and Messrs.
Kilbourne and Stidham after reaching age 60. The annual retirement benefit
payable upon retirement at age 65 to each of the Named Executive Officers is as
follows: $403,212 for Mr. St. George, $150,399 for Mr. Kilbourne and $158,351
for Mr. Stidham. The benefit amount decreases for each year the executive
retires before age 65. Retirement benefits will be paid to an executive if he
leaves the Company before the minimum retirement age as a result of a
termination without cause or a voluntary termination with the approval of the
Board of Directors or if an executive is terminated without his consent and
without cause after a change of control of the Company.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 (the Exchange
Act) requires the Company's directors and executive officers and persons who own
more than 10% of the Company's Common Stock to file with the SEC initial reports
of ownership and reports of changes in ownership of the Common Stock and other
equity securities. Officers, directors and greater than 10% shareholders are
required to furnish the Company with copies of all such reports they file. To
the Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the fiscal year ended September 30, 1997, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than 10% beneficial shareholders were complied with except that Mr. Phillips
failed to file three Forms 4 on a timely basis reporting an aggregate of four
transactions, Mr. Clarence W. Walker failed to file one Form 4 on a timely basis
reporting an aggregate of two transactions, Mr. Schipke failed to file one Form
4 on a timely basis reporting one transaction and Mr. Weaver failed to file one
Form 4 on a timely basis reporting one transaction.
APPROVAL OF 1997 DIRECTOR STOCK OPTION PLAN
GENERAL. On November 19, 1997, the Board of Directors adopted the
Company's 1997 Director Stock Option Plan (the "1997 Director Plan"), subject to
approval by the shareholders at the 1998 Substitute Annual Meeting of
Shareholders. The 1997 Director Plan is intended to provide Directors who are
not employees of the Company with a sense of proprietorship and personal
involvement in the development and financial success of the Company and to
encourage such Directors to remain with and to devote their best efforts to the
Company. The Company has no other plan pursuant to which non-employee directors
may currently be granted options or other incentive compensation.
The Board of Directors has reserved 180,000 shares of Common Stock
(approximately .004% of the shares of Common Stock outstanding at December 12,
1997) for issuance upon exercise of options granted under the 1997 Director
Plan. This number, as well as the number of shares issuable upon exercise of an
option, is subject to adjustment in the event of stock dividends and splits,
recapitalizations and similar transactions. If an option granted under the 1997
Director Plan expires or is terminated unexercised as to any shares covered
thereby, such shares shall thereafter be
15
<PAGE>
available for the granting of options under the 1997 Director Plan as if such
option had not been granted. The 1997 Director Plan will be administered by the
Board of Directors.
The only persons eligible to receive options under the 1997 Director Plan
are directors of the Company who are not regular employees of the Company or its
subsidiaries on the date of grant of the option. Under the 1997 Director Plan,
each eligible director will automatically be granted an option to purchase 6,000
shares of Common Stock on July 30, 1998, July 30, 2000 and July 30, 2002, each
subject to adjustment in the event of stock dividends and splits,
recapitalizations and similar transactions. If there are not sufficient
remaining shares reserved for any of such grants, the eligible directors will
receive an option for a pro rata number of the remaining shares reserved for
grant. There currently are seven Directors eligible to participate under the
1997 Director Plan.
The exercise price of options granted under the 1997 Director Plan will
be equal to the fair market value of the Common Stock on the applicable date of
grant. The market value of a share of Common Stock of the Company on December
12, 1997 was $30.3125.
An option granted under the 1997 Director Plan is not exercisable for six
months from the date of grant, and the term of an option cannot exceed ten
years. Upon the exercise of an option or portion thereof, the exercise price
must be paid in full in cash or in whole or in part in shares of the Company's
Common Stock, valued at their fair market value on the date of exercise. An
optionee's rights under all outstanding options will terminate three months
after termination of the optionee as a Director, unless such termination is due
to the optionee's death or disability, in which case the options will be
exercisable for a limited period of time thereafter. Transferability of options
granted under the 1997 Director Plan will be subject to such limitations as
determined by the Board of Directors at the time of grant.
The Board of Directors or the shareholders of the Company may terminate,
suspend or amend the 1997 Director Plan at any time, except no amendment may be
made by the Board of Directors without the approval of the shareholders if such
amendment would increase the number of shares of Common Stock authorized for
issuance pursuant to the 1997 Director Plan, change the class of individuals
eligible to receive options, decrease the minimum option price or withdraw the
administration of the Director Plan from the Board of Directors or a committee
of directors, none of whom is eligible to be allotted stock or to receive
options under the 1997 Director Plan.
If the 1997 Director Plan is approved, the Company intends to register
the shares issuable pursuant to the 1997 Director Plan under the Securities Act
of 1933.
FEDERAL INCOME TAX CONSEQUENCES. For federal income tax purposes, the
optionee will realize no taxable income when the option is granted. Upon the
exercise of an option granted under the 1997 Director Plan, the amount by which
the fair market value of the shares purchased pursuant to such exercise exceeds
the option price will be treated as compensation income received by the optionee
and the Company will receive an income tax deduction in the same amount. Upon
the subsequent disposition of shares received upon the exercise of an option,
generally any amount realized in excess of the optionee's basis (usually the
fair market value at the time the amount of compensation income was determined)
will be taxed as a capital gain and any amount realized which is less than the
optionee's basis will be treated as a capital loss.
APPROVAL OF 1997 DIRECTOR PLAN. The 1997 Director Plan will become
effective upon approval by the holders of a majority of the shares of Common
Stock present, represented and
16
<PAGE>
entitled to vote at the 1998 Substitute Annual Meeting of Shareholders.
Abstentions will have the effect of a negative vote. Broker non-votes will not
be counted in determining the number of shares represented and entitled to vote
at the Substitute Annual Meeting of Shareholders for purposes of approval of the
1997 Director Plan. The Board of Directors recommends a vote FOR approval of the
1997 Director Plan and proxies solicited by the Board of Directors will be so
voted unless shareholders specify otherwise.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP as independent
public accountants to examine the financial statements of the Company and its
subsidiaries for the fiscal year ending September 30, 1998. This selection is
being presented to the shareholders for their ratification at the Annual
Meeting.
The firm of Price Waterhouse LLP has examined the financial statements of
the Company since 1977. Representatives of Price Waterhouse LLP are expected to
be present at the Substitute Annual Meeting of Shareholders with an opportunity
to make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
The Board of Directors recommends a vote FOR ratification of the
selection of Price Waterhouse LLP as independent public accountants to examine
the financial statements of the Company and its subsidiaries for the fiscal year
ending September 30, 1998, and proxies solicited by the Board of Directors will
be so voted unless shareholders specify otherwise.
SHAREHOLDER PROPOSALS
Any proposal that a shareholder intends to present for action at the 1999
Annual Meeting of Shareholders, currently scheduled for February 3, 1999, must
be received by the Company no later than September 7, 1998 in order for the
proposal to be included in the proxy statement and form of proxy for the 1999
Annual Meeting of Shareholders. The proposal should be sent to Secretary,
Oakwood Homes Corporation, Box 27081, Greensboro, North Carolina 27425-7081.
17
<PAGE>
*******************************************************************************
APPENDIX
OAKWOOD HOMES CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR SUBSTITUTE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD FEBRUARY 11, 1998
The undersigned hereby appoints NICHOLAS J. ST. GEORGE and C. MICHAEL
KILBOURNE, and each or either of them proxies, with full power of substitution,
with the powers the undersigned would possess if personally present, to vote, as
designated below, all shares of the $.50 par value Common Stock of the
undersigned in Oakwood Homes Corporation at the Substitute Annual Meeting of
Shareholders to be held February 11, 1998, and at any adjournment thereof.
This proxy will be voted FOR the election of all nominees as directors
and FOR items 2 and 3 unless otherwise specified. The Board of Directors
recommends voting for on each item.
1. ELECTION OF DIRECTORS: Nominees are Clarence W. Walker, Dennis I. Meyer,
C. Michael Kilbourne and Lanty L. Smith.
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR all listed nominees (except do not vote for the [ ] WITHHOLD AUTHORITY to vote for the listed
nominee(s) whose name(s) I have written below) nominees
</TABLE>
- --------------------------------------------------------------------------------
2. APPROVAL OF 1997 DIRECTOR STOCK OPTION PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. RATIFICATION OF SELECTION OF PRICE WATERHOUSE LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse)
18
<PAGE>
In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Receipt of the Notice of Substitute Annual Meeting and accompanying Proxy
Statement is hereby acknowledged. This proxy will be voted as specified herein,
and, unless otherwise directed, will be voted FOR the election of all nominees
and FOR items 2 and 3.
Please date, sign exactly as printed below and return promptly in the
enclosed postage-paid envelope.
Dated: , 1998.
---------------------------------------------------
---------------------------------------------------
(When signing as attorney, executor, administrator,
trustee, guardian, etc., give title as such. If a
joint account, each joint owner should sign
personally.)
19
<PAGE>
OAKWOOD HOMES CORPORATION
1997 DIRECTOR STOCK OPTION PLAN
1. Purpose. This Plan is intended to provide directors who are not employees of
the Company a sense of proprietorship and personal involvement in the
development and financial success of the Company and to encourage such directors
to remain with and to devote their best efforts to the Company.
2. Definitions. Whenever used in the Plan, unless the context clearly
indicates otherwise, the following terms shall have the following meanings:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Board" or "Board of Directors" means the Board of Directors of the
Company.
(c) "Common Stock" means the Common Stock of the Company and any other
stock or securities resulting from the adjustment thereof or substitution
therefor as described in Paragraph 8 below.
(d) "Company" means Oakwood Homes Corporation, a North Carolina
corporation.
(e) "Director" means a member of the Company's Board of Directors who
is not a regular employee of the Company or its subsidiaries.
(f) "Disability" means the condition which results when an individual
has become permanently and totally disabled within the meaning of Section
72(m)(7) of the Internal Revenue Code of 1986, as amended.
(g) "Fair Market Value" with respect to a share of the Common Stock at
a particular time shall be that value as determined by the Board of Directors
which shall be (i) if such Common Stock is listed on a national securities
exchange or traded on the NASDAQ National Market System, the mean between the
highest price and the lowest price at which the Common Stock shall have been
sold regular way on a national securities exchange or the NASDAQ National Market
System on said date, or, if no sales occur on said date, then on the next
preceding date on which there were such sales of Common Stock, or (ii) if the
Common Stock shall not be listed on a national securities exchange or traded on
the NASDAQ National Market System, the mean between the bid and asked prices
last reported by the National Association of Securities Dealers, Inc. for the
over-the-counter market on said date or, if no bid and asked prices are reported
on said date, then on the next preceding date on which there were such
quotations, or (iii) if at any time quotations for the Common Stock shall not be
reported by the National Association of Securities Dealers, Inc. for the
over-the-counter market and the Common Stock shall not be listed on any national
securities exchange or traded on the NASDAQ National Market System, the fair
market value determined by the Board of Directors in such manner as the Board
may deem reasonable.
<PAGE>
(h) "Stock Option Agreement" means the written agreement between a
Director and the Company evidencing the grant of an option under the Plan and
setting forth the terms and conditions thereof.
3. Administration. The Plan shall be administered by the Board of
Directors. The Board shall have all of the powers necessary to enable it to
carry out its duties properly under the Plan, including but not limited to the
power and duty to construe and interpret the Plan and to determine all questions
that shall arise under the Plan, which interpretations and determinations shall
be conclusive and binding upon all persons. Subject to the express provisions of
the Plan, the Board may establish from time to time such regulations, provisions
and procedures which in its opinion may be advisable in the administration of
the Plan.
4. Eligibility; Option Grants. All Directors shall automatically be
granted options to purchase 6,000 shares (subject to adjustment or substitution
pursuant to Paragraph 8 hereof from the date hereof, irrespective of whether
such option has been granted) of the Common Stock on each of the following grant
dates:
July 30, 1998
July 30, 2000
July 30, 2002
; provided, however, that such automatic grants shall be made pro rata to all
Directors if on the date of a grant there shall not be a number of shares
sufficient to make all such grants.
5. Shares Available for Option. The Board of Directors shall reserve
for the purposes of the Plan, out of the authorized but unissued Common Stock or
out of shares of Common Stock held in the Company's treasury, or partly out of
each, as shall be determined by the Board of Directors, a total of 180,000
shares of Common Stock of the Company (subject to adjustment or substitution
pursuant to Paragraph 8 hereof). In the event that an option granted under the
Plan to any Director expires or is terminated unexercised as to any shares
covered thereby, such shares shall thereafter be available for the granting of
options under the Plan.
6. Option Price. The option price shall be the Fair Market Value of the
Common Stock on the date such option is granted.
7. Exercise of Options.
(a) Each option granted under the Plan by its terms shall require the
Director granted such option to remain available to serve as a Director of the
Company for six months from the date of the grant of such option before the
right to exercise any part of such option will accrue. A Director may thereafter
exercise any or all of such option until the expiration or termination of the
option; provided, that not less than 100 shares may be purchased at any one time
unless the number of shares purchased is the total number at such time
purchasable under the option. Subject to earlier termination as provided herein,
all options granted under this Plan shall expire ten years from the date of
grant thereof.
<PAGE>
(b) If an optionee shall cease to be a Director of the Company
otherwise than by such optionee's death or Disability, then, subject to
Subparagraph 7(a) hereof, the option shall be exercisable at any time prior to
the earlier of (i) the expiration date of such option or (ii) that date which is
three months from the date such optionee ceases to be a Director, such three
month period to include the date on which such termination occurs. If an
optionee ceases to be a Director of the Company as a result of such optionee's
death or Disability, then, subject to Subparagraph 7(a) hereof, the option shall
be exercisable at any time prior to the earlier of (i) the expiration date of
such option or (ii) that date which is one year from the date such optionee
ceases to be a Director. In the event of the death of an optionee, then, subject
to Subparagraph 7(a) hereof, such optionee's option shall be exercisable to the
extent herein otherwise provided by the executor or personal representative of
the optionee's estate or by any person who acquired the right to exercise such
option by bequest under the optionee's will or by inheritance.
(c) Except as otherwise provided in a Stock Option Agreement, the form
of which has been approved by the Board of Directors, each option granted under
the Plan by its terms shall not be transferable by the optionee otherwise than
by will or, if the optionee dies intestate, by the laws of descent and
distribution of the state of the optionee's domicile at the time of the
optionee's death, and such option shall be exercisable during such optionee's
lifetime only by such optionee.
(d) Each option shall be confirmed by a Stock Option Agreement executed
by the Company and by the person to whom such option is granted.
(e) The option price for each share of Common Stock purchased pursuant
to the exercise of each option shall, at the time of the exercise of the option,
be paid in full (i) in cash or (ii) in whole or in part in shares of Common
Stock valued at the Fair Market Value of such shares on the date of exercise.
Any shares of Common Stock accepted in payment of any part of the option price
shall not increase the number of shares of Common Stock otherwise available for
issuance under the Plan.
(f) To the extent that an option is not exercised within the period of
time prescribed therefor as set forth in the Plan, and the Stock Option
Agreement confirming such option, the option shall lapse and all rights of the
optionee thereunder shall terminate.
8. Adjustment of Number of Shares. In the event that a dividend shall
be declared upon the Common Stock payable in shares of Common Stock, the number
of shares of Common Stock then subject to any such option and the number of
shares reserved for issuance pursuant to the Plan but not yet covered by an
option shall be adjusted by adding to each such share the number of shares which
would be distributable thereon if such share had been outstanding on the date
fixed for determining the shareholders entitled to receive such stock dividend.
In the event that the outstanding shares of Common Stock shall be changed into
or exchanged for a different number or kind of shares of stock or other
securities of the Company or of another corporation, whether through
reorganization, recapitalization, stock split-up, combination of shares, merger
or consolidation, then there shall be substituted for each share of Common Stock
subject to any such option and for each share of Common Stock reserved for
issuance pursuant to the Plan but not yet covered by an option, the number and
kind of shares of stock or other securities
<PAGE>
into which each outstanding share of Common Stock shall be so changed or for
which each such share shall be exchanged. In the event there shall be any
change, other than as specified above in this Paragraph 8, in the number or kind
of outstanding shares of Common Stock or of any stock or other securities into
which such Common Stock shall have been changed or for which it shall have been
exchanged, then if the Board of Directors shall in its sole discretion determine
that such change equitably requires an adjustment in the number or kind of
shares theretofore reserved for issuance pursuant to the Plan but not yet
covered by an option and of the shares then subject to an option or options,
such adjustment shall be made by the Board of Directors and shall be effective
and binding for all purposes of the Plan and each Stock Option Agreement entered
into under the Plan. In the case of any such substitution or adjustment as
provided for in this Paragraph 8, the option price in each Stock Option
Agreement for each share covered thereby prior to such substitution or
adjustment shall be the option price for all shares of stock or other securities
which shall have been substituted for such share or to which such share shall
have been adjusted pursuant to this Paragraph 8. No adjustment or substitution
provided for in this Paragraph 8 shall require the Company in any Stock Option
Agreement to issue a fractional share and the total substitution or adjustment
with respect to each Stock Option Agreement shall be limited accordingly.
9. Amendment of Plan. The Board of Directors shall have the right to
amend, suspend or terminate the Plan at any time; provided that, except as and
to the extent authorized and permitted by Paragraph 8 above, no amendment shall
be made which shall (i) increase the total number of shares which may be issued
and sold pursuant to options granted under the Plan, (ii) decrease the minimum
option price, (iii) change the class of individuals eligible to receive options,
or (iv) withdraw the administration of the Plan from the Board of Directors or a
committee of the Board of Directors, none of whom is eligible to be allotted
stock or to receive options under the Plan, unless such amendment is made by or
with the approval of the holders of a majority of the then outstanding Common
Stock of the Company, by written consent or by vote in person or by proxy at a
duly held meeting of said shareholders.
10. Compliance with Law and Other Conditions. No shares shall be issued
pursuant to the exercise of any option granted under the Plan prior to
compliance by the Company, to the satisfaction of its counsel, with any
applicable laws.
11. Effective Date-and Duration of Plan. The effective date of the Plan
shall be the date of its adoption by the Board of Directors, which adoption
shall be subject to the approval of the Plan, either by written consent or by
vote, by the holders of a majority of the outstanding shares of Common Stock of
the Company present or represented by proxy at the next duly held meeting of the
shareholders. No options shall be exercisable until the Plan has been so
approved by the shareholders, and all options granted under the Plan shall be
void if shareholder approval is not so obtained.
<PAGE>
