<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by 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 Materials Pursuant to (S) 240.14a-11(c) or (S)240.14a-12
Polyphase Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Polyphase Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/1/ Set forth amount on which the filing is calculated and state how it was
determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[POLYPHASE CORPORATION LETTERHEAD]
January 29, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Polyphase Corporation (the "Company"), which will be held at the Company's
executive offices located at 16885 Dallas Parkway, Dallas, Texas 75248 on
February 27, 1996 at 10:00 a.m. Central Time.
At the Annual Meeting, you will be asked to consider and vote upon the
following: (1) the election of six directors to hold office until the next
annual election of directors by stockholders or until their respective
successors shall have been duly elected and shall have qualified; (2) a proposal
to approve an amendment to the 1994 Employee Stock Option Plan for Polyphase
Corporation (the "1994 Employee Plan") to increase the number of shares of
common stock authorized and reserved for issuance upon exercise of stock options
granted pursuant to the 1994 Employee Plan by 500,000 shares; and (3) the
transaction of any and all other business that may properly come before the
meeting or any adjournment(s) thereof.
Whether or not you plan to attend the meeting, please date, sign, and
return the enclosed proxy for your shares of stock in the enclosed prepaid
envelope. Your cooperation in returning your executed proxy promptly is
appreciated. If you do attend the meeting, you may vote in person, which will
effectively revoke any proxy previously submitted.
Sincerely,
Paul A. Tanner
Chairman of the Board and
Chief Executive Officer
<PAGE>
POLYPHASE CORPORATION
16885 Dallas Parkway
Dallas, Texas 75248
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 27, 1996
To the Stockholders of Polyphase Corporation:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders (the
"Annual Meeting") of Polyphase Corporation, a Nevada corporation (the
"Company"), will be held at the Company's principal executive offices located at
16885 Dallas Parkway, Dallas, Texas 75248 on the 27th day of February, 1996, at
10:00 a.m. (Dallas, Texas time) for the following purposes:
1. To elect six (6) directors of the Company to hold office until the
next annual election of directors by stockholders or until their respective
successors shall have been duly elected and shall have qualified;
2. To consider and act upon a proposal to approve an amendment to the
1994 Employee Stock Option Plan for Polyphase Corporation (the "1994
Employee Plan") to increase the number of shares of common stock, par value
$.01 per share (the "Common Stock), authorized and reserved for issuance
upon exercise of stock options granted pursuant to the 1994 Employee Plan
by 500,000 shares; and
3. To transact any and all other business that may properly come
before the Annual Meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on January 22, 1996
as the record date (the "Record Date") for the determination of stockholders
entitled to notice of and to vote at the Annual Meeting or any adjournment(s)
thereof. Only stockholders of record at the close of business on the Record
Date are entitled to notice of and to vote at the Annual Meeting. The stock
transfer books will not be closed. A list of stockholders entitled to vote at
the Annual Meeting will be available for examination at the offices of the
Company for ten (10) days prior to the Annual Meeting.
You are cordially invited to attend the Annual Meeting; whether or not you
expect to attend the meeting in person, however, you are urged to mark, sign,
date, and mail the enclosed form of proxy promptly so that your shares of stock
may be represented and voted in accordance with your wishes and in order that
the presence of a quorum may be assured at the meeting. Your proxy will be
returned to you if you should be present at the Annual Meeting and should
request its return in the manner provided for revocation of proxies on the
initial page of the enclosed proxy statement.
BY ORDER OF THE BOARD OF DIRECTORS
Don E. McMillen, Secretary
January 29, 1996
Dallas, Texas
<PAGE>
POLYPHASE CORPORATION
16885 Dallas Parkway
Dallas, Texas 75248
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 27, 1996
________________________
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying proxy is solicited by the Board of Directors on behalf of
Polyphase Corporation, a Nevada corporation (the "Company"), to be voted at the
1996 Annual Meeting of Stockholders of the Company (the "Annual Meeting") to be
held on February 27, 1996, at the time and place and for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders (the "Notice") and
at any adjournment(s) thereof. When proxies in the accompanying form are
properly executed and received, the shares represented thereby will be voted at
the Annual Meeting in accordance with the directions noted thereon; if no
direction is indicated, such shares will be voted for the election of the
nominees under Proposal 1, in favor of the proposal specified in Proposal 2, and
in the discretion of the named proxies with respect to any matters properly
presented under Proposal 3.
Management does not intend to present any business at the Annual Meeting
for a vote other than Proposal 1 and Proposal 2 and has no information that
others will do so. If other matters requiring a vote of the stockholders
properly come before the Annual Meeting, it is the intention of the persons
named in the accompanying form of proxy to vote the shares represented by the
proxies held by them in accordance with their judgment on such matters.
The executive offices of the Company are located at, and the mailing
address of the Company is, 16885 Dallas Parkway, Dallas, Texas 75248.
This proxy statement (the "Proxy Statement") and accompanying proxy are
being mailed on or about January 29, 1996. The Company's Annual Report covering
the fiscal year ended September 30, 1995 is enclosed herewith, but does not form
any part of the materials for solicitation of proxies.
Any stockholder of the Company giving a proxy has the unconditional right
to revoke his proxy at any time prior to the voting thereof either in person at
the Annual Meeting, by delivering a duly executed proxy bearing a later date, or
by giving written notice of revocation to the Company addressed to Don E.
McMillen, Secretary, Polyphase Corporation, 16885 Dallas Parkway, Dallas, Texas
75248; no such revocation shall be effective, however, until such notice of
revocation has been received by the Company at or prior to the Annual Meeting.
In addition to the solicitation of proxies by use of the mail, officers and
regular employees of the Company may solicit the return of proxies, either by
mail, telephone, telegraph or through personal contact. Such officers and
employees will not be additionally compensated but will be reimbursed for out-
of-pocket expenses. Brokerage houses and other custodians, nominees, and
fiduciaries will, in connection with shares of Common Stock registered in their
names, be requested to forward solicitation material to the beneficial owners of
such shares of Common Stock.
The cost of preparing, printing, assembling, and mailing the Annual Report,
the Notice, this Proxy Statement, and the enclosed form of proxy, as well as the
cost of forwarding solicitation materials to the beneficial owners of shares of
Common Stock and other costs of solicitation, are to be borne by the Company.
<PAGE>
QUORUM AND VOTING
The record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting was the close of business on January 22, 1996
(the "Record Date"). On the Record Date, there were 13,121,966 shares of Common
Stock issued and outstanding.
Each holder of Common Stock as of the Record Date is entitled to one vote
on all matters to be acted upon at the Annual Meeting and neither the Company's
Articles of Incorporation nor its Bylaws allow for cumulative voting rights.
The presence, in person or by proxy, of the holders of a majority of the issued
and outstanding Common Stock entitled to vote at the meeting is necessary to
constitute a quorum to transact business. If a quorum is not present or
represented at the Annual Meeting, the stockholders entitled to vote thereat,
present in person or by proxy, may adjourn the Annual Meeting from time to time
without notice or other announcement until a quorum is present or represented.
Assuming the presence of a quorum, the affirmative vote of the holders of a
plurality of the shares of Common Stock voting at the meeting is required for
the election of each of the nominees for director and the affirmative vote of
the holders of a majority of the shares of Common Stock present in person or
represented by proxy and entitled to vote is required to approve the amendment
to the 1994 Employee Plan. Abstentions and broker non-votes are each included
in the determination of the number of shares present for determining a quorum,
but will have no effect on the outcome of Proposal 1 or Proposal 2.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of Common Stock as of the Record Date by each person or group who
owned, to the Company's knowledge, more than five percent of the Common Stock,
each nominee and each of the Company's directors, each of the Named Executive
Officers (as defined in "Executive Compensation"), and all of the Company's
directors and executive officers as a group.
<TABLE>
<CAPTION>
Percent
Amount and Nature of of
Name Beneficial Ownership (1) Class (1)
- ---------------------------------------- ------------------------ ---------
<S> <C> <C>
Paul A. Tanner.......................... 510,720 (2) 3.8%
James Rudis............................. 557,400 (3) 4.1
Michael F. Buck......................... 100,000 (4) *
George R. Schrader...................... 50,000 (5) *
Paul A. Tanner, Jr...................... 2,054,500 (6) 15.4
Harold Estes (7)........................ 2,000,000 15.2
The Pyrenees Group (8).................. 4,109,000 30.2
Tanner Family Trust (9)................. 821,800 6.0
Elizabeth Carter Children's
Foundation (10)........................ 1,232,700 9.1
Wayne H. Creasy (11).................... 821,800 6.0
Merrill Lynch (12)...................... 1,007,965 7.1
All directors and executive officers as
a group (6 persons).................... 1,570,070 (13) 11.2
</TABLE>
- ----------------
* Less than 1%.
(1) Except as noted, to the knowledge of the Company, the persons and entities
named in the table have sole investment power and sole voting power as to
all shares of Common Stock for which they are identified as being the
beneficial owners. Information as to beneficial ownership has been
furnished to the Company by such persons. Such presentation is based on
13,121,966 shares of Common Stock outstanding as of the Record Date.
(2) Includes 328,720 shares that Mr. Paul A. Tanner may be deemed to
beneficially own as an 8% owner of the Pyrenees Group (see footnote 8
below). Does not include 1,232,700 shares that Mr. Paul A. Tanner may be
deemed to beneficially own as a member of the board of trustees of the
Elizabeth Carter Children's Foundation (the "Foundation"), a foundation
formed to construct and operate a non-profit home for children (see
footnote 10 below), and also does not include the remaining 3,780,280
shares of the Pyrenees Group (that Mr. Paul A. Tanner does not own as an 8%
owner), which Mr. Paul A. Tanner may be deemed to beneficially own because
he is the president and the sole director of the Pyrenees Group.
3
<PAGE>
(3) Includes 146,500 shares that could be purchased pursuant to the exercise of
stock options exercisable within 60 days subsequent to the Record Date.
Also includes 410,900 shares that Mr. Rudis may be deemed to beneficially
own as a 10% owner of the Pyrenees Group. See footnote 8 below.
(4) Includes 100,000 shares that could be purchased pursuant to the exercise of
stock options exercisable within 60 days subsequent to the Record Date.
(5) Includes 50,000 shares that could be purchased pursuant to the exercise of
stock options exercisable within 60 days subsequent to the date hereof.
(6) Includes 1,232,700 shares that Mr. Paul A. Tanner, Jr. may be deemed to
beneficially own as a member of the board of trustees of the Foundation.
See footnote 10. Also includes 821,800 shares that Mr. Paul A. Tanner, Jr.
may be deemed to beneficially own as the trustee of the Tanner Family
Trust. See footnote 9.
(7) Mr. Estes' address is 3409 South Medford, Lufkin, Texas 75901.
(8) The address of the Pyrenees Group is 2 Kelvingate Court, Dallas, Texas
75225. The Pyrenees Group, a Nevada corporation, is owned by Paul A.
Tanner (8%), James Rudis (10%), William E. Shatley (5%), Wayne H. Creasy
(20%), Lefferts L. Mabie, Jr. (3%), the Tanner Family Trust (20%), the
Foundation (30%), and four other investors (1% each). Mr. Paul A. Tanner,
the sole member of the Board of Directors of the Pyrenees Group, has sole
voting and dispositive power with respect to the shares shown. This figure
of 4,109,000 shares includes options to purchase 475,000 shares of Series E
Preferred Stock, which, if and when issued, would be convertible by the
Pyrenees Group into 475,000 shares of Common Stock. See "Certain
Transactions--The Pyrenees Option."
(9) Includes 821,800 shares that the Tanner Family Trust may be deemed to
beneficially own as a 20% stockholder in the Pyrenees Group. See footnote
8. The address of the Tanner Family Trust is 16885 Dallas Parkway, Dallas,
Texas 75248. Mr. Paul A. Tanner, Jr., the trustee of the Tanner Family
Trust, is the adult son of Mr. Paul A. Tanner, the Chairman of the Board,
President, and Chief Executive Officer of the Company. Unless otherwise
indicated, all references herein to "Mr. Tanner" shall mean Mr. Paul A.
Tanner.
(10) Includes 1,232,700 shares that may be deemed to be beneficially owned by
the Foundation as a 30% stockholder in the Pyrenees Group. The address of
the Foundation is 9909 Inwood Road, Dallas, Texas 75220. The Foundation
was formed to construct and operate a non-profit home for children. The
shares of the Pyrenees Group owned by the Foundation are voted by the board
of trustees of the Foundation, of which Mr. Paul A. Tanner and Mr. Paul A.
Tanner, Jr. are each members.
(11) Includes 821,800 shares that Mr. Creasy may be deemed to beneficially own
as a 20% stockholder in the Pyrenees Group. The address of Mr. Creasy is
3225 South Norwood, Tulsa, Oklahoma 74135.
(12) For purposes of the table above, Merrill Lynch consists of Merrill Lynch
World Income Fund, Inc. ("MLW") and Convertible Holdings, Inc. ("CH"). The
address of MLW and CH is c/o Merrill Lynch Asset Management, 800 Scudders
Mill Road, Plainsboro, New Jersey 08536. This figure consists of 1,007,965
shares of Common Stock into which certain of the Company's bonds held by
Merrill Lynch are convertible within 60 days of the Record Date. Such
figure is subject to adjustment as specified in the indenture governing the
terms of such bonds.
(13) Includes 328,720 shares that may be deemed to be beneficially owned by Mr.
Paul A. Tanner due to his 8% ownership of the Pyrenees Group, but does not
include 1,232,700 shares that Mr. Paul A. Tanner may be deemed to
beneficially own as a trustee of the Foundation or the remaining 3,780,280
shares held by the Pyrenees Group (that Mr. Paul A. Tanner does not own as
an 8% owner), which Mr. Paul A. Tanner
4
<PAGE>
may be deemed to beneficially own because he is the president and the sole
director of the Pyrenees Group (see footnotes 2 and 8 hereto). Includes
443,000 shares that could be purchased pursuant to the exercise of stock
options exercisable within 60 days subsequent to the Record Date. Also
includes 410,900 shares that may be deemed to be beneficially owned by Mr.
Rudis as a 10% owner of the Pyrenees Group, and 205,450 shares that may be
deemed to be beneficially owned by Mr. William E. Shatley, an executive
officer of the Company, as a 5% owner of the Pyrenees Group.
ELECTION OF DIRECTORS
(Proposal 1)
The Bylaws of the Company provide that the number of directors that shall
constitute the whole board shall be not less than one (1) nor more than nine
(9). The number of directors presently comprising the Board of Directors is four
(4), but the Board of Directors has resolved to increase the size of the Board
of Directors to six (6).
Nominees
Unless otherwise directed in the enclosed proxy, it is the intention of the
persons named in such proxy to nominate and to vote the shares represented by
such proxy for the election of the following named nominees for the office of
director of the Company, to hold office until the next annual meeting of
stockholders or until their respective successors shall have been duly elected
and shall have qualified. Except for Harold Estes and Paul A. Tanner, Jr., each
of the nominees is presently a director of the Company.
Information regarding each nominee is set forth in the table and text
below:
<TABLE>
<CAPTION>
Year First
Elected Present
Nominee Age Director Office(s) Held
------- --- ---------- --------------
<S> <C> <C> <C>
Paul A. Tanner 65 1992 Chairman of the Board, President
and Chief Executive Officer
James Rudis 46 1992 Executive Vice President and
Director
Michael F. Buck 56 1989 Director
George R. Schrader 64 1994 Director
Paul A. Tanner, Jr. 42 N/A Vice President of Letronix, Inc.
Harold Estes 55 N/A President of Texas Timberjack, Inc.
</TABLE>
Paul A. Tanner was elected to the Board of Directors on December 21, 1992
and has served as Chairman of the Board, President and Chief Executive Officer
since December 29, 1992. He served as Chief Financial Officer and Chief
Accounting Officer from December 29, 1992 until March 2, 1994. He has been a
licensed Texas Real Estate Broker for over 30 years and is President of
Southland Resources, Inc., a private investment firm. Since 1956, Mr. Tanner has
been the owner and Chief Executive Officer of several companies engaged in oil
and gas development, real estate development, computer manufacturing and the
national distribution of office and telecommunications products.
James Rudis was elected to the Board of Directors in December 1992 and has
served as Executive Vice President of the Company since March 2, 1994. He is
President of Quorum Corporation, a private consulting firm involved in
acquisitions and market development and has held that position since September
1984. From 1970 until
5
<PAGE>
1984, he held various executive positions in CIT Financial Corporation,
including that of Vice President and Regional Manager of that company's
Commercial Finance Division.
Michael F. Buck is President of Mimation Co., an operations and materials
consulting firm. From August 1990 to August 1994, Mr. Buck served as Vice
President of Bath Iron Works, Inc., a company engaged in building Aegis Class
cruisers and destroyers for the United States Navy. From August 1989 to August
1990, Mr. Buck was a Vice President of Sabreliner Corporation, a company engaged
in building, maintaining and overhauling executive jet aircraft. From March 1986
to August 1989, Mr. Buck was Vice President and Director of Procurement for
International Telephone and Telegraph. He became a director of the Company in
December 1989.
George R. Schrader was appointed as a director in March 1994 to fill a
vacancy on the Board of Directors. He is currently a named member of Schrader &
Cline, LLC, a financial and governmental management consulting firm. From 1983
to 1993, he was a principal of Schrader Investment Company, whose activities
paralleled those of Schrader & Cline, LLC. Mr. Schrader's additional experience
includes 10 years as City Manager for the city of Dallas, Texas and a total of
nine years experience as City Manager for the Texas cities of Mesquite and
Ennis.
Paul A. Tanner, Jr. has served as a Vice President of the Company's wholly
owned subsidiary Letronix, Inc. since October 1993. From February 1990 to
October 1993, he served as Vice President of Southland Resources, Inc., a
private investment firm controlled by Paul A. Tanner.
Harold Estes is the President of Texas Timberjack, Inc. ("TTI"), a wholly
owned subsidiary of the Company. TTI is a distributor of industrial and
commercial timber and logging equipment with locations in Lufkin, Cleveland and
Jasper, Texas. Mr. Estes has been President of TTI since 1984, when he acquired
TTI from Eaton Corporation.
The Board of Directors does not contemplate that any of the above-named
nominees for director will refuse or be unable to accept election as a director
of the Company, or be unable to serve as a director of the Company. Should any
of them become unavailable for nomination or election or refuse to be nominated
or to accept election as a director of the Company, then the persons named in
the enclosed form of proxy intend to vote the shares represented in such proxy
for the election of such other person or persons as may be nominated or
designated by the Board of Directors. Other than as disclosed above, no nominee
is related by blood, marriage, or adoption to another nominee or to any
executive officer of the Company or its subsidiaries or affiliates.
Assuming the presence of a quorum, each of the nominees for director of the
Company requires for his election the approval of the holders of a plurality of
the shares of Common Stock represented and voting at the Annual Meeting.
Meetings of the Board of Directors and its Committees
The Board has standing Executive, Compensation and Audit Review Committees.
The Compensation Committee is comprised of Messrs. Buck and Schrader. During
fiscal 1995, the Compensation Committee met two times. The Compensation
Committee (i) administers the Company's employee stock option plans and approves
the granting of stock options and (ii) reviews and approves compensation for
officers.
The Executive Committee is composed of Messrs. Tanner and Rudis. During
fiscal 1995, the Executive Committee met sixteen times. Except as restricted
under Nevada law, the Executive Committee possesses all of the powers and
authority of the Board of Directors between meetings of the Board of Directors.
The Audit Review Committee is composed of Messrs. Buck and Schrader. During
fiscal 1995, the Audit Review Committee met two times. Its functions are to (i)
recommend the appointment of independent accountants; (ii) review the
arrangements for and scope of the audit by independent accountants; (iii)
consider the adequacy of
6
<PAGE>
the system of internal controls and review any proposed corrective actions; and
(iv) review and monitor the Company's policies regarding business ethics and
conflicts of interest.
The full Board of Directors did not formally meet during fiscal 1995;
however, on seven occasions during fiscal 1995 various matters were approved by
unanimous written consent of the Board of Directors. No director attended fewer
than 75% of the total number of meetings of the Committees on which such
director served.
Director Compensation
Directors who are also employees of the Company receive no additional
compensation for services as directors. Nonemployee directors receive an annual
fee of $1,000 and are also reimbursed for all expenses incident to their service
on the Board of Directors.
In March 1994, Mr. Schrader was granted options to purchase 50,000 shares
of Common Stock. These options are exercisable at $5.25 per share (the fair
market value at the date of grant), in whole or in part, and expire in March
1999.
Executive Officers
The table and text below set forth the name, age, current position, and the
principal occupation during the last five years of Mr. William E. Shatley. Mr.
Shatley is an executive officer of the Company. Information with respect to the
Company's two other executive officers, Messrs. Tanner and Rudis, is set forth
above under the caption "--Nominees."
<TABLE>
<CAPTION>
Name Age Current Position
---- --- ----------------
<S> <C> <C>
William E. Shatley 49 Senior Vice President and Treasurer
</TABLE>
William E. Shatley was named as Senior Vice President and Treasurer of the
Company in March 1994. He joined the Company in an executive capacity in October
1993, having previously served the Company on an advisory basis since the
relocation of the Company's corporate offices to Texas in 1992. Mr. Shatley, a
Certified Public Accountant since 1970, previously conducted his own consulting
and accounting practice (1982-1993), after having served as Vice President and
Chief Financial Officer of Datotek, Inc., a manufacturer of electronic
communications security equipment (1977-1982) and in an executive capacity with
Arthur Andersen & Co. (1968-1977).
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, officers and persons who own
more than 10% of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission (the "Commission") and the American Stock Exchange, Inc. Directors,
officers and greater than 10% beneficial owners are required by applicable
regulations to furnish the Company with copies of all forms they file with the
Commission pursuant to Section 16(a).
Based solely upon a review of the copies of the forms furnished to the
Company, the Company believes that during fiscal 1995 all filing requirements
applicable to its directors, executive officers and greater than 10 percent
beneficial owners were satisfied with the exception that (i) Messrs. Tanner,
Rudis and Shatley, the Pyrenees Group, and the Foundation failed to report
eleven (11) transactions each, which were reported on respective Forms 5 that
were each filed late and (ii) Mr. Estes failed to report one (1) transaction,
which was reported on a Form 5 that was filed late.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for fiscal 1995, 1994 and 1993 the
compensation awarded or paid to Mr. Paul A. Tanner, the Company's Chairman of
the Board, President and Chief Executive Officer, and Mr. James Rudis, the
Company's Executive Vice President (collectively, the "Named Executive
Officers"). Other than as indicated in the table below, no executive officer of
the Company received salary plus bonus in excess of $100,000 for the fiscal year
ended September 30, 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------ ----------------
Name and Principal Fiscal Other Annual All Other
Position Year Salary Bonus Compensation Options/SARs (#) Compensation
- ----------------------------- -------- --------- ----- ------------ ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Paul A. Tanner............... 1995 $ 187,200 $ 0 $ --(1) 0 $ 0
President, Chief 1994 $ 166,200 $ 0 $ --(1) 0 $ 0
Executive Officer and 1993(2) $ 0 $ 0 $ 2,431(3) 182,000 $ 0
Director
James Rudis.................. 1995 $ 115,200 $ 0 $ --(1) 0 $ 0
Executive Vice 1994 $ 96,300 $ 0 $ --(1) 0 $ 0
President and Director 1993(4) $ 0 $ 0 $ 1,924(3) 146,500 $ 0
</TABLE>
____________________
(1) Mr. Tanner and Mr. Rudis each received certain perquisites and other
personal benefits from the Company during fiscal 1994 and 1995. These
perquisites and other personal benefits, however, did not equal or exceed
10% of Mr. Tanner's or Mr. Rudis', as the case may be, salary and bonus
during fiscal 1994 or 1995.
(2) Mr. Tanner was elected President, Chief Executive Officer and Chief
Financial Officer upon the resignation of the Company's previous Chief
Executive Officer and Chief Financial Officer in December 1992. No salary
or bonus was paid to Mr. Tanner during the 10 months of fiscal 1993 in
which he served as President, Chief Executive Officer and Chief Financial
Officer of the Company.
(3) This amount represents the estimated cost to the Company of incidental
personal use of a Company-furnished automobile.
(4) Mr. Rudis became a director in December 1992 and was named Executive Vice
President in March 1994. No salary or bonus has paid to Mr. Rudis during
fiscal 1993.
8
<PAGE>
The following table discloses for each of the Named Executive Officers the
values of their options at September 30, 1995. During the year ended September
30, 1995, no executive officers exercised stock options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
SEPTEMBER 30, 1995 OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options/SARs In-The-Money
at September 30, 1995(#) Options/SARs
------------------------ at September 30, 1995($)(1)
---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Paul A. Tanner -- -- $ -- $ --
James Rudis..... 146,500 -- $ 393,719 $ --
</TABLE>
- --------------
(1) Based on $3.4375 per share of Common Stock, which was the closing price
per share of Common Stock on September 30, 1995 on the AMEX as reported by
The Wall Street Journal
9
<PAGE>
Compensation Committee Report on Executive Compensation
The Board of Directors has established a Compensation Committee to review
and approve the compensation levels of executive officers of the Company,
evaluate the performance of the executive officers, consider senior management
succession issues and any related matters for the Company. The Compensation
Committee is charged with reviewing with the Board of Directors in detail all
aspects of cash compensation for the executive officers of the Company. Stock
option compensation for the executive officers is also considered by the
Compensation Committee.
The philosophy of the Company's compensation program is to employ, retain
and reward executives capable of leading the Company in achieving its business
objectives. These objectives include preserving a strong financial posture,
increasing the assets of the Company, positioning the Company's assets and
business operations in geographic markets and industry segments offering long
term growth opportunities, enhancing shareholder value and ensuring the survival
of the Company. The accomplishment of these objectives is measured against
conditions prevalent in the industries within which the Company operates. In
recent years these conditions reflect a highly competitive market environment
and rapidly changing regional, geographic and overall industry market
conditions.
The available forms of executive compensation include base salary, cash
bonus awards and incentive stock options. Performance of the Company is a key
consideration (to the extent that such performance can fairly be attributed or
related to such executive's performance), as well as the nature of each
executive's responsibilities and capabilities. The Company's compensation
policy recognizes, however, that stock price performance is only one measure of
performance and, given industry business conditions and the long term strategic
direction and goals of the Company, it may not necessarily be the best current
measure of executive performance. Therefore, the Company's compensation policy
also gives consideration to the Company's achievement of specified business
objectives when determining executive officer compensation. Compensation paid
to executive officers is based upon a Company-wide salary structure consistent
for each position relative to its authority and responsibility compared to
industry peers.
Based on comparative industry data, and after due consideration to the
factors mentioned above, the Compensation Committee set Mr. Tanner's salary at
$187,200 for fiscal 1995. The Compensation Committee anticipates that it will
formally meet in the near future to consider and set Mr. Tanner's compensation
for fiscal 1996. Preceding such meeting, however, Mr. Tanner continues to
receive a base salary of $187,200. The Company did not pay any cash bonuses to
Mr. Tanner for fiscal 1995 and does not expect to pay any cash bonuses to Mr.
Tanner for fiscal 1996.
The Compensation Committee believes that the compensation of the Company's
other executive officers was reasonably related to the performance of the
Company and those individuals during fiscal 1995.
COMPENSATION COMMITTEE
Michael F. Buck
George R. Schrader
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is an officer or employee of the
Company or any of its subsidiaries or had any relationship requiring disclosure
pursuant to Item 404 of Commission Regulation S-K. No executive officer of the
Company served as a member of the Compensation Committee (or other board
committee performing similar functions or, in the absence of any such committee,
the entire board of directors) of another corporation, one of whose executive
officers served on the Compensation Committee. No executive officers of the
Company served as a director of another corporation, one of whose executive
officers served on the Compensation Committee. No executive officer of the
Company served as a member of the Compensation Committee (or other board
committee performing equivalent functions or, in the absence of any such
committee, the entire board of directors) of another corporation, one of whose
executive officers served as a director of the Company.
10
<PAGE>
Common Stock Performance Graph
The following performance graph compares the five-year cumulative return of
the Common Stock with that of a Board Market Index (American Stock Exchange) and
a Published Industry Index (MG Industry Group 341--Multi-Industry Companies).
Each index assumes $100 invested at September 30, 1990, and is calculated
assuming quarterly reinvestment of dividends and quarterly weighting by market
capitalization.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
Polyphase Corporation, Broad Market Index and Industry Index
(Performance Results Through 9/30/95)
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
September 30, September 30, September 30, September 30, September 30, September 30,
Fiscal Year Ending 1990 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Polyphase Corporation 100.00 666.67 100.00 966.67 1533.33 916.67
- -------------------------------------------------------------------------------------------------------------------
Industry Index 100.00 117.20 128.91 159.40 159.92 198.48
- -------------------------------------------------------------------------------------------------------------------
Broad Market Index 100.00 119.92 125.15 146.91 149.73 180.41
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE
INDIVIDUALS NOMINATED FOR ELECTION AS A DIRECTOR.
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Pyrenees Option
In October 1992, the Company's Board of Directors authorized the issuance
to the Pyrenees Group, or its assigns, options to purchase up to 1,000,000
shares of convertible preferred stock for $10 per share. The options were
issued subject to approval by the Company's stockholders and were approved and
ratified at the Company's annual meeting held May 31, 1994. The Pyrenees Group,
a private investment firm in which certain executive officers of the Company are
affiliated and have ownership positions, was granted these options as
consideration for the sale to the Company of its collected due diligence
materials for acquisitions the Pyrenees Group was contemplating, which were to
be used by the Company in its own previously announced acquisition program. The
options, covering Series A, B, C, D and E Preferred Stock, are summarized as
follows:
<TABLE>
<CAPTION>
Preferred Conversion Common
Series Shares Price Shares
------ --------- ---------- ------
<S> <C> <C> <C>
A 125,000 $ .50 2,500,000
B 100,000 1.00 1,000,000
C 100,000 2.00 500,000
D 200,000 4.00 500,000
E 475,000 10.00 475,000
--------- ---------
1,000,000 4,975,000
========= =========
</TABLE>
In fiscal 1994, the Pyrenees Group exercised options with respect to the
Series A and Series B Preferred Stock through the issuance of two 7% demand
notes in an aggregate amount of $2,250,000, collateralized by the shares issued;
such notes were reflected as a reduction in the stockholders' equity accounts in
the consolidated balance sheet as of September 30, 1994. In fiscal 1995, the
Pyrenees Group exercised the Series C option through an additional demand note
bearing interest at 7% and collateralized by the shares issued. On May 5, 1995
in conjunction with the acquisition of Overhill Farms, Pyrenees paid $4,000,000
to IBM Foods, Inc. on the Company's behalf. Of this amount, $2,992,000
represented repayment of the 7% notes with the excess, $1,008,000, representing
a temporary advance by Pyrenees to the Company. This amount plus other payments
made by Pyrenees Group resulted in a temporary advance of $1,153,000 at
September 30, 1995. Subsequent to September 30, 1995, the Company, after
repayment by the Company of the $1,153,000 mentioned above, made additional cash
advances to Pyrenees Group amounting to $1,514,500. During fiscal 1995, the
Pyrenees Group converted Series A, B and C Preferred Stock into Common Stock.
Subsequent to September 30, 1995, Pyrenees Group exercised the Series D option
through an additional 7% note in the amount of $2,000,000; such preferred shares
were then converted into Common Stock.
The Company recognized a non-recurring, non-cash charge for the fair value
of the options as of the date of approval by the stockholders. The fair value
of the options, as determined by an independent valuation firm, amounted to
$1,400,000; such amount was recorded as a non-cash charge against income with a
corresponding credit to paid-in-capital.
Other Transactions
During the year ended September 30, 1993, the Company had purchases of
inventories for resale amounting to $474,000 from a company controlled by Mr.
Tanner. During the fiscal year ended September 30, 1994, because the Company
elected not to fully develop the business for which these inventories were
originally purchased, Mr. Tanner agreed to repurchase the unsold balance of
inventories, at no gain or loss to the Company, in consideration of a 7%
12
<PAGE>
promissory note in the amount of $369,350, which was payable on September 30,
1995. This note, together with accrued interest, was refinanced in connection
with the issuance of the promissory note described below.
During fiscal 1994, the Company made aggregate non-interest bearing cash
advances to Mr. Tanner in the amount of approximately $282,000. At September
30, 1994, Mr. Tanner had repaid $150,000 of such advances. During fiscal 1995,
following the repayment of the unpaid 1994 advances, additional advances
amounting to approximately $63,000 were made to Mr. Tanner, which were unpaid at
September 30, 1995. Subsequent to September 30, 1995, additional amounts were
advanced to or on behalf of Mr. Tanner which aggregated approximately $1.5
million. Effective December 8, 1995, the unpaid balance of the 7% promissory
note (plus interest) referred to in the preceding paragraph plus such unpaid
advances were refinanced by Mr. Tanner through the issuance of a 12% demand note
in the principal amount of $2,000,872.
Other assets of the Company at September 30, 1995, include an insurance
premium receivable of $432,006, representing insurance premiums paid by TTI on
behalf of Harold Estes, President and former owner of TTI.
In connection with the acquisition of TTI on June 24, 1994, the Company
recorded a note to Estes in the amount of $9,737,719 with interest at 8% due
October 31, 1994 and collateralized by all the capital stock of TTI. As of the
maturity date, the Company and the seller entered into an agreement providing
for the modification, extension and renewal of the note, whereby the note in the
amount of $10,000,000 was to bear interest at 12% and mature on October 31,
1995. As of October 31, 1995, the seller further extended and modified the note
whereby the note currently having a principal balance of $11,200,000 bears
interest at 17.5% and matures on February 29, 1996. The Company anticipates
that it will be required to refinance this note payable into a long-term
facility and is presently in negotiations with potential lenders. The note
holder has no recourse to any of the assets or capital stock of the Company or
any of its other subsidiaries and no cross-default provisions exist between this
note agreement and any other Company debt.
The Company and PLY Stadium Partners, Inc., an entity presently owned by
Mr. Tanner ("Stadium Partners"), have reached an agreement in principal whereby
the Company is to manage a project to develop and build a domed, multi-purpose
sports, entertainment and convention facility in Las Vegas, Nevada. Although
the ultimate terms have yet to be finalized, it is currently anticipated that
the Company will receive a monthly management fee and a percentage of all
proceeds from seat and suite sales, sponsorship sales and revenues related to
stadium naming rights, concession rights sales and event activities. In
addition, the Company has provided 4,000,000 of debt to Stadium Partners, which
is convertible into a 14% equity interest in Stadium Partners.
PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES
SUBJECT TO THE 1994 EMPLOYEE PLAN
(PROPOSAL 2)
General
On December 15, 1995, the Board of Directors approved, subject to
stockholder approval, a proposal to amend the 1994 Employee Plan to increase the
number of shares of the Company's Common Stock available for issuance under the
1994 Employee Plan from 500,000 to 1,000,000.
If approved by the stockholders at the Annual Meeting, the first sentence
of Section 3 of the 1994 Employee Plan will be amended to provide as follows:
"The Company may grant to Eligible Persons from time to time
Options to purchase an aggregate of up to 1,000,000 Shares
from Shares held in the Company's treasury or from authorized
and unissued Shares."
13
<PAGE>
The remaining language of Section 3 will not be charged and the only effect
of the amendment will be to increase the number of shares of Common Stock
issuable upon the exercise of stock options granted under the 1994 Employee
Plan.
Over recent years, the Company's operations have grown substantially and
rapidly. As a result, the Company now has many more employees and consultants
than it did even in May 1994 when the 1994 Employee Plan was originally approved
by the stockholders. The proposed amendment will provide the Company with the
ability to issue options to members of its expanded employee and consultant base
and will enable the Company to continue the purpose of the 1994 Employee Plan by
providing additional incentives to attract and retain qualified and competent
employees and consultants, upon whose judgment the success of the Company is
largely dependent.
Stockholder approval is required by Rule 16b-3 promulgated by the
Commission under the Exchange Act and the rules of the American Stock Exchange,
Inc. Approval of the amendment by the stockholders of the Company is advisable
in order for the 1994 Employee Plan to continue to comply with Rule 16b-3. Rule
16b-3 provides an exemption from the operation of the "short-swing profit"
recovery provisions of Section 16(b) of the Exchange Act, with respect to the
acquisition of stock options, transactions relating to stock appreciation rights
and the use of already owned shares of Common Stock as payment for the exercise
price of stock options.
The Company has previously registered the 500,000 shares currently issuable
under the 1994 Employee Plan under the Securities Act of 1933, as amended (the
"Act"). The Company intends to register the 500,000 additional shares of Common
Stock issuable under this amendment under the Act, assuming the stockholders
approve the proposal to increase the number of available shares.
Since participation in the 1994 Employee Plan is voluntary and is generally
open to all employees (see --"Eligibility and Participation"), it is not
possible at this time to indicate the number, names or positions of employees
who receive options or the number of shares for which options will be granted to
any employee under the 1994 Employee Plan. The 1994 Employee Plan is not
subject to the qualification requirements of Section 401 of the Code, nor is the
1994 Employee Plan subject to any provisions of ERISA.
Purpose
The purpose of the 1994 Employee Plan is to advance the interest of the
Company by providing additional incentives to attract and retain qualified and
competent employees and consultants, upon whose efforts and judgment the success
of the Company (including its subsidiaries) is largely dependent, through the
encouragement of stock ownership in the Company by such persons. Unless the
context otherwise requires, references to the Company in this discussion of the
1994 Employee Plan shall mean the Company and any corporation wherein the
Company owns, directly or indirectly, 50% or more of the total combined voting
power (a "Subsidiary").
Eligibility
Those persons who are either (i) employees of the Company, (ii) under
written contract (a "Consulting Contract") to provide consulting services to the
Company (a "Consultant"), or (iii) directors of a Subsidiary, are eligible to
participate in the 1994 Employee Plan; provided, however, that directors of the
Company who are not employees of the Company are not eligible to participate in
the 1994 Employee Plan. As of the date of this Proxy Statement, substantially
all of the Company's full-time employees were eligible for 1994 Employee
Options.
Types of Options
The 1994 Employee Plan authorizes (i) the granting of incentive stock
options ("1994 Incentive Options") to purchase Common Stock to eligible persons,
(ii) the granting of nonqualified stock options ("1994 Nonqualified Options") to
purchase Common Stock to eligible persons and (iii) the use of already owned
Common Stock as full or partial payment for the exercise price of options
granted under the 1994 Employee Plan. Unless the context otherwise requires,
the term "1994 Employee Option" includes both 1994 Incentive Options and 1994
Nonqualified Options.
14
<PAGE>
Administration
The 1994 Employee Plan is currently administered by the Compensation
Committee of the Board of Directors (the "1994 Employee Plan Administrator").
The 1994 Employee Plan Administrator consists of two (2) members of the Board of
Directors, each of whom is a disinterested person.
Shares of Common Stock Subject to the 1994 Employee Plan
Assuming approval of this Proposal 2, a total of 1,000,000 shares of Common
Stock (subject to adjustment as discussed below) will have been reserved for
sale upon exercise of 1994 Employee Options granted under the 1994 Employee
Plan. No 1994 Employee Options have been granted.
Exercise Price of 1994 Employee Options
The 1994 Incentive Options may not be granted with an exercise price per
share that is less than the fair market value of the Common Stock at the date of
grant. The 1994 Nonqualified Options may be granted with any exercise price
determined by the 1994 Employee Plan Administrator.
Payment of Exercise Price
The exercise price of a 1994 Employee Option may be paid in cash, by
certified or cashier's check, by money order, by personal check or by delivery
of already owned shares of Common Stock having a fair market value equal to the
exercise price, or by delivery of a combination of cash and already owned shares
of Common Stock; provided, however, that if the optionee acquired such stock
directly or indirectly from the Company, he shall have owned such stock to be
surrendered for six months prior to tendering such stock for the exercise of a
1994 Employee Option.
Special Provisions for 1994 Incentive Stock Options
An eligible employee may receive more than one 1994 Incentive Option, but
the maximum aggregate fair market value of the Common Stock (determined when the
1994 Incentive Option is granted) with respect to which 1994 Incentive Options
are first exercisable by such employee in any calendar year cannot exceed
$100,000. In addition, no 1994 Incentive Option may be granted to an employee
owning directly or indirectly stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company unless the exercise
price is set at not less than 110% of the fair market value of the shares
subject to such 1994 Incentive Stock Option on the date of grant and such 1994
Incentive Option expires not later than five (5) years from the date of grant.
Awards of 1994 Nonqualified Options are not subject to these special
limitations.
Nontransferability of 1994 Employee Options
No 1994 Employee Option granted under the 1994 Employee Plan is assignable
or transferable, otherwise than by will or by laws of descent and distribution.
During the lifetime of an optionee, his 1994 Employee Option is exercisable only
by him or his guardian or legal representative.
Exercisability of 1994 Employee Options
The 1994 Employee Plan Administrator, in its sole discretion, may limit the
optionee's right to exercise all or any portion of a 1994 Employee Option until
one or more dates subsequent to the date of grant. The 1994 Employee Plan
Administrator also has the right, exercisable in its sole discretion, to
accelerate the date on which all or any portion of a 1994 Employee Option may be
exercised.
15
<PAGE>
The 1994 Employee Plan provides that 30 days prior to certain major
corporate events such as, among other things, certain changes in control,
mergers or sales of substantially all of the assets of the Company (a "Major
Corporate Event"), each 1994 Employee Option shall immediately become
exercisable in full.
Expiration of 1994 Employee Options
The expiration date of a 1994 Employee Option is determined by the 1994
Employee Plan Administrator at the time of the grant, but in no event may a 1994
Employee Option be exercisable after the expiration of 10 years from the date of
grant of the 1994 Employee Option.
If terminated for cause, all rights of an optionee under the 1994 Employee
Plan cease and the 1994 Employee Options granted to such optionee become null
and void for all purposes. The 1994 Employee Plan further provides that in most
instances a 1994 Employee Option must be exercised by the optionee within 30
days after the termination of the Consulting Contract between such optionee and
the company or termination of the optionee's employment with the Company, as the
case may be (for any reason other than termination for cause, mental or physical
disability or death), if and to the extent such 1994 Employee Option was
exercisable on the date of such termination. If the optionee is not otherwise
employed by or a Consultant to the Company, his 1994 Employee Option must be
exercised within 30 days of the date he ceases to be a director of a Subsidiary.
Generally, if an optionee's employment or Consulting Contract is terminated
due to mental or physical disability, the optionee will have the right to
exercise the 1994 Employee Option (to the extent otherwise exercisable on the
date of termination) for a period of one year from the date on which the
optionee suffers the mental or physical disability. If an optionee dies while
actively employed by, or providing consulting services under a Consulting
Contract to, the company, the 1994 Employee Option may be exercised (to the
extent otherwise exercisable on the date of death) within one year of the date
of the optionee's death by the optionee's legal representative or legatee.
As described above, a 1994 Employee Option becomes exercisable in full 30
days prior to a Major Corporate Event. In anticipation of a Major Corporate
Event, however, the 1994 Employee Plan Administrator may, after notice to the
optionee, cancel the optionee's 1994 Employee Options on the consummation of the
Major Corporate Event. The optionee, in any event, will have the opportunity to
exercise his 1994 Employee Options in full prior to such Major Corporate Event.
Adjustments
The 1994 Employee Plan provides for adjustments to the number of shares
under which 1994 Employee Options may be granted, to the number of shares
subject to outstanding 1994 Employee Options and to the exercise price of such
outstanding 1994 Employee Options in the event of a declaration of a stock
dividend or any recapitalization resulting in a stock split-up, combination or
exchange of shares of Common Stock.
Certain Federal Income Tax Consequences
Grants of 1994 Employee Options
Under current tax laws, the grant of a 1994 Employee Option will not be a
taxable event to the recipient optionee and the Company will not be entitled to
a deduction with respect to such grant.
Exercise of 1994 Nonqualified Options and Subsequent Sale of Stock
Upon the exercise of a 1994 Nonqualified Option, an optionee will recognize
ordinary income at the time of exercise equal to the excess of the then fair
market value of the shares of Common Stock received over the exercise price.
The taxable income recognized upon exercise of a 1994 Nonqualified Option will
be treated as compensation income subject to withholding and the Company will be
entitled to deduct as a compensation expense an amount equal to the ordinary
income an optionee recognizes with respect to such exercise. When Common Stock
received upon the
16
<PAGE>
exercise of a 1994 Nonqualified Option subsequently is sold or exchanged in a
taxable transaction, the holder thereof generally will recognize capital gain
(or loss) equal to the difference between the total amount realized and the fair
market value of the Common Stock on the date of exercise; the character of such
gain or loss as long-term or short-term capital gain or loss will depend upon
the holding period of the shares following exercise.
Exercise of 1994 Incentive Options and Subsequent Sale of Stock
The exercise of a 1994 Incentive Option will not be taxable to the
optionee, and the Company will not be entitled to any deduction with respect to
such exercise. However, to qualify for this favorable tax treatment of
incentive stock options under the Internal Revenue Code (the "Code"), the
optionee may not dispose of the shares of Common Stock acquired upon the
exercise of a 1994 Incentive Option until after the later of two years following
the date of grant or one year following the date of exercise. The surrender of
shares of Common Stock acquired upon the exercise of a 1994 Incentive Option in
payment of the exercise price of a 1994 Employee Option within the required
holding period for incentive stock options under the Code will be a
disqualifying disposition of the surrendered shares. Upon any subsequent
taxable disposition of shares of Common Stock received upon exercise of a
qualifying 1994 Incentive Option, the optionee generally will recognize long-
term or short-term capital gain (or loss) equal to the difference between the
total amount realized and the exercise price of the 1994 Employee Option.
If a 1994 Employee Option that was intended to be an incentive stock option
under the Code does not qualify for favorable incentive stock option treatment
under the Code due to the failure to satisfy the holding period requirements,
the optionee may recognize ordinary income in the year of the disqualifying
disposition. Provided the amount realized in the disqualifying disposition
exceeds the exercise price, the ordinary income an optionee shall recognize in
the year of a disqualifying disposition shall be the lower of (i) the excess of
the amount realized over the exercise price or (ii) excess of the fair market
value of the Common Stock at the time of the exercise over the exercise price.
In addition, the optionee shall recognize capital gain on the disqualifying
disposition in the amount, if any, by which the amount realized in the
disqualifying disposition exceeds the fair market value of the Common Stock at
the time of the exercise. Such capital gain shall be taxable as long-term or
short-term capital gain, depending on the optionee's holding period for such
shares.
Notwithstanding the favorable tax treatment of 1994 Incentive Options for
regular tax purposes, as described above, for alternative minimum tax purposes,
a 1994 Incentive Option is generally treated in the same manner as a 1994
Nonqualified Option. Accordingly, an optionee must generally include in
alternative minimum taxable income for the year in which a 1994 Incentive Option
is exercised the excess of the fair market value on the date of exercise of the
shares of Common Stock received over the exercise price. If, however, an
optionee disposes of shares of Common Stock acquired upon the exercise of a 1994
Incentive Option in the same calendar year as the exercise, only an amount equal
to the optionee's ordinary income for regular tax purposes with respect to such
disqualifying disposition will be recognized for the optionee's calculation of
alternative minimum taxable income in such calendar year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT TO THE 1994
EMPLOYEE PLAN.
17
<PAGE>
OTHER MATTERS
(Proposal 3)
At the time this Proxy Statement was published, the Board of Directors knew
of no other matters constituting a proper subject for action by the stockholders
which would be presented at the Annual Meeting. However, if any matters
properly come before the Annual Meeting, it is the intention of the persons
named in the enclosed proxy card to vote the shares represented by said proxies
in accordance with their judgement on such matters.
INDEPENDENT ACCOUNTANTS
The Company's independent accountants for fiscal 1994 were Price Waterhouse
LLP ("Price Waterhouse"). Price Waterhouse resigned as the principal
accountants for the Company on May 8, 1995. None of the reports of Price
Waterhouse on the financial statements of the Company for either of fiscal 1993
or 1994 contained an adverse opinion or a disclaimer of opinion, or were
qualified as to uncertainty, audit scope, or accounting principles. During the
Company's two most recent fiscal years and the subsequent interim period
preceding such resignation, there were no disagreements with Price Waterhouse on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures.
On May 31, 1995, Ernst & Young LLP ("Ernst & Young") was engaged as
principal accountants for the Company to, among other things, audit the
financial statements of the Company for fiscal 1995. The selection of Ernst &
Young was made by the Board of Directors upon recommendation of the Audit Review
Committee. Prior to its engagement, the Company did not consult with Ernst &
Young on either the application of accounting principles to a completed or
proposed specific transaction, or the type of audit opinion that might be
rendered on the Company's financial statements. A representative of Ernst &
Young is expected to be present at the Annual Meeting and such representative
will have the opportunity to make a statement if he desires and will be
available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholders of the Company who intend to present a proposal for action at
the 1997 Annual Meeting of Stockholders of the Company must notify the Company's
management of such intention by notice received at the Company's principal
executive offices no later than September 27, 1996.
BY ORDER OF THE BOARD OF DIRECTORS
PAUL A. TANNER
Chairman of the Board and
Chief Executive Officer
January 29, 1996
Dallas, Texas
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. STOCKHOLDERS, WHO DO
NOT EXPECT TO ATTEND THE ANNUAL MEETING AND WISH THEIR STOCK TO BE VOTED, ARE
URGED TO DATE, SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED SELF-
ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
18
<PAGE>
1994 EMPLOYEE STOCK OPTION PLAN
FOR
POLYPHASE CORPORATION
Section 1. Purpose. The purpose of this 1994 Employee Stock Option Plan
for Polyphase Corporation is to advance the interests of Polyphase Corporation,
a Pennsylvania corporation (the "Company"), by providing an additional incentive
to attract and retain qualified and competent employees and consultants for the
Company and its subsidiaries, upon whose efforts and judgment the success of the
Company is largely dependent, through the encouragement of stock ownership in
the Company by such persons.
Section 2. Definitions. As used herein, the follo wing terms shall have
the meaning indicated:
(a) "Act" shall mean the Securities Exchange Act of 1934, as
amended.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Business Day" shall mean (i) if the Shares trade on a
national exchange, any day that the national exchange on which the Shares
trade is open or (ii) if the Shares do not trade on a national exchange,
any day that commercial banks in the City of New York are open.
(d) "Commission" shall mean the Securities and Exchange
Commission.
(e) "Committee" shall mean the Compensation Committee of the
Board or other committee, if any, appointed by the Board pursuant to
Section 14 hereof.
(f) "Company" shall mean Polyphase Corporation, a Pennsylvania
corporation.
(g) "Date of Grant" shall mean the date on which the Committee
takes formal action to grant an Option to an Eligible Person, provided it
is followed, as soon as reasonably possible, by written notice to the
Eligible Person of the grant.
(h) "Director" shall mean a member of the Board.
(i) "Disinterested Person" shall mean a person who, at the time
he acts on the granting of any Option, is not eligible, and within one
year prior thereto has not been eligible, to receive Shares or stock
options or other rights convertible into Shares under the Plan or any
other plan of the Company, except participations in other plans of the
Company as allowed pursuant to rule 16b-3(c)(i) that do not disqualify
such person from being a disinterested person.
(j) "Eligible Person(s)" shall mean those persons who are (i)
under written contract (a "Consulting Contract") with the Company or a
Subsidiary to provide consulting services to the Company or a Subsidiary
(a "Consultant"), (ii) Employees or (iii) members of the Board of
Directors of any Subsidiary, but excluding Directors who are not
Employees.
(k) "Employee(s)" shall mean those persons who are employees of
the Company or who are employees of any Subsidiary.
(l) "Fair Market Value" shall mean:
(i) If Shares are listed on a national securities
exchange at the date of determining the Fair Market Value,
<PAGE>
(A) The mean of the high and low sales price on
such exchange on the date of reference as reported in
any newspaper of general circulation, or
(B) If the Shares shall not have traded on such
exchange on such date, the mean of the high and low
sales price on such exchange on the next day prior
thereto on which the Shares were so traded as reported
in any newspaper of general circulation; or
(ii) If Shares shall not be listed as provided in
Subsection 2(l)(i), a value determined by any fair and
reasonable means prescribed by the Committee.
(m) "Incentive Stock Option" shall mean an option that is an
incentive stock option as defined in Section 422 of the Internal Revenue
Code.
(n) "Internal Revenue Code" or "Code" shall mean the Internal
Revenue Code of 1986, as it now exists or may be amended from time to
time.
(o) "Nonqualified Stock Option" or "Nonincentive Stock Option"
shall mean an option that is not an incentive stock option as defined in
Section 422 of the Internal Revenue Code.
(p) "Option" (when capitalized) shall mean any option granted
under this Plan.
(q) "Optionee" shall mean a person to whom an Option is granted
or any successor to the rights of such Option under this Plan by reason of
the death of such person.
(r) "Plan" shall mean this 1994 Employee Stock Option Plan for
Polyphase Corporation.
(s) "Share(s)" shall mean a share or shares of the Common Stock,
no par value per share, of the Company.
(t) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company
if, at the time of the granting of the Option, each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
Section 3. Shares and Options.
(a) The Company may grant to Eligible Persons from time to time Options to
purchase an aggregate of up to five hundred thousand (500,000) Shares from
Shares held in the Company's treasury or from authorized and unissued Shares.
If any Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares. An Option granted hereunder shall be either an Incentive Stock
Option or a Nonqualified Stock Option as determined by the Committee at the Date
of Grant of such Option and shall clearly state whether it is an Incentive Stock
Option or a Nonqualified Stock Option. Incentive Stock Options may only be
granted to persons who are Employees.
(b) The aggregate Fair Market Value (determined at the Date of Grant of the
Option) of the Shares with respect to which any Incentive Stock Option is
exercisable for the first time by an Optionee during any calendar year under the
Plan and all such plans of the Company and any parent and subsidiary of the
Company (as defined in Section 425 of the Code) shall not exceed $100,000.
Section 4. Conditions for Grant of Options.
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(a) Each Option shall be evidenced by an option agreement that may contain
any term deemed necessary or desirable by the Committee, provided such terms are
not inconsistent with this Plan or any applicable law. Optionees shall be those
persons selected by the Committee from Eligible Persons. Any person who files
with the Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.
(b) In granting Options, the Committee shall take into consideration the
contribution the person has made or may make to the success of the Company or
its Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may from time to time
in granting Options under the Plan prescribe such other terms and conditions
concerning such Options as it deems appropriate, including, without limitation,
relating an Option to achievement of specific goals established by the Committee
or the continued employment of the Optionee for a specified period of time,
provided that such terms and conditions are not more favorable to an Optionee
than those expressly permitted herein.
(c) The Committee in its sole discretion shall determine in each case
whether periods of military or government service shall constitute a
continuation of employment for the purposes of this Plan or any Option.
Section 5. Exercise Price. The exercise price per Share of any Option
shall be any price determined by the Committee; provided, however, that the
exercise price for any Incentive Stock Option shall not be less than one hundred
percent (100%) of the Fair Market Value per Share on the Date of Grant.
Section 6. Exercise of Options. An Option shall be deemed exercised when
(i) the Company has received written notice of such exercise in accordance with
the terms of the Option, (ii) full payment of the aggregate exercise price of
the Shares as to which the Option is exercised has been made, and (iii)
arrangements that are satisfactory to the Committee in its sole discretion have
been made for the Optionee's payment to the Company of the amount, if any, that
the Committee determines to be necessary for the Company or a Subsidiary to
withhold in accordance with applicable federal or state income tax withholding
requirements. Unless further limited by the Committee in any Option, the
exercise price of any Shares purchased shall be paid solely in cash, by
certified or cashier's check, by money order, by personal check or with Shares
(but with Shares only if permitted by an Option agreement or otherwise permitted
by the Committee in its sole discretion at the time of exercise and provided
that if the Optionee acquired such stock to be surrendered directly or
indirectly from the Company, he shall have owned such stock for six months prior
to using such stock to exercise an Option) or by a combination of the above. If
the exercise price is paid in whole or in part with Shares, the value of the
Shares surrendered shall be their Fair Market Value on the date received by the
Company.
Section 7. Exercisability of Options.
(a) Any Option shall become exercisable in such amounts and at such
intervals as the Committee shall provide in any Option, except as otherwise
provided in this Section 7; provided in each case that the Option has not
expired on the date of exercise.
(b) The expiration date of an Option shall be determined by the Committee
at the Date of Grant, but in no event shall an Option be exercisable after the
expiration of ten (10) years from the Date of Grant.
(c) An Option shall not be exercisable prior to the six-month anniversary
of its Date of Grant.
(d) The Committee may in its sole discretion accelerate the date on which
any Option may be exercised.
(e) On the date thirty (30) days prior to any occurrence described in
Subsections (7)(e)(i), (ii) or (iii), but only where such anticipated occurrence
actually takes place, notwithstanding the exercise schedule in an Option,
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<PAGE>
each Option shall immediately become exercisable in full where there (i) is any
transaction (which shall include a series of transactions occurring within 60
days or occurring pursuant to a plan) that has the result that shareholders of
the Company immediately before such transaction cease to own at least 51% of (x)
the voting stock of the Company or (y) of any entity that results from the
participation of the Company in a reorganization, consolidation, merger,
liquidation or any other form of corporate transaction; (ii) is a merger,
consolidation, reorganization, liquidation or dissolution in which the Company
does not survive; (iii) is a sale, lease, exchange or other disposition of all
or substantially all the property and assets of the Company.
(f) Notwithstanding any provisions hereof to the contrary, if any Option
is accelerated under Subsection 7(d) or (e), the portion of such Option that may
be exercised to acquire Shares that the Optionee would not be entitled to
acquire but for such acceleration (the "Acceleration Shares"), is limited to
that number of Acceleration Shares that can be acquired without causing the
Optionee to have an "excess parachute payment" as determined under Section 280G
of the Code, determined by taking into account all of the Optionee's "parachute
payments" determined under Section 280G of the Code. If as a result of this
Subsection 7(f), the Optionee may not acquire all of the Acceleration Shares,
then the Acceleration Shares that the Optionee may acquire shall be the last
shares that the Optionee would have been entitled to acquire had this Option not
been accelerated.
Section 8. Termination of Option Period.
(a) Unless otherwise provided in any Option, the unexercised portion of an
Option shall automatically and without notice terminate and become null and void
at the time of the earliest to occur of the following:
(i) except as provided in Subsection 8(a)(iii), thirty (30) days
after the date that Optionee ceases to be employed by the Company or a
Subsidiary or ceases to be a Consultant to the Company or a Subsidiary, as
the case may be, regardless of the reason therefor other than as a result
of such termination by reason of (x) death, (y) mental or physical
disability of Optionee as determined by a medical doctor satisfactory to
the Committee or (z) termination of Optionee's employment or Consulting
Contract, as the case may be, with the Company or a Subsidiary for cause;
(ii) except as provided in Subsection 8(a)(iii), one (1) year after
the date on which the Optionee suffers a mental or physical disability as
determined by a medical doctor satisfactory to the Committee;
(iii) (y) one (1) year after the date that Optionee ceases to be a
Consultant to or ceases to be employed by, as the case may be, the Company
or a Subsidiary, by reason of death of the Optionee, or (z) six (6) months
after the date on which the Optionee shall die, if the Optionee's death
shall occur during the thirty-day period described in Subsection 8(a)(i) or
the one-year period described in Subsection 8(a)(ii);
(iv) the date that Optionee ceases to be a Consultant to or ceases
to be employed by, as the case may be, the Company or a Subsidiary as a
result of a termination for cause;
(v) with respect to Options held by a person who is a member of the
Board of Directors of a Subsidiary who is not also an Employee or
Consultant, thirty (30) days after the date that Optionee ceases to be a
member of such Board of Directors; and
(vi) the tenth (10th) anniversary of the Date of Grant of the
Option.
(b) If provided in an Option, the Committee in its sole discretion may, by
giving written notice (a "Cancellation Notice") cancel, effective upon the date
of the consummation of any of the transactions described in Subsection 7(e), all
or any portion of such Option that remains unexercised on such date. Such
Cancellation Notice
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<PAGE>
shall be given a reasonable period of time (but not less than 15 days) prior to
the proposed date of such cancellation, and may be given either before or after
shareholder approval of such transaction.
Section 9. Adjustment of Shares.
(a) If at any time while the Plan is in effect or unexercised Options are
outstanding, there shall be any increase or decrease in the number of issued and
outstanding Shares through the declaration of a stock dividend or through any
recapitalization resulting in a stock split-up, combination or exchange of
Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum number of
Shares then subject to being optioned under the Plan, so that the same
proportion of the Company's issued and outstanding Shares shall continue to
be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of Shares and
the exercise price per Share thereof then subject to outstanding Options,
so that the same proportion of the Company's issued and outstanding Shares
shall remain subject to purchase at the same aggregate exercise price.
(b) The Committee may change the terms of Options outstanding under this
Plan, with respect to the exercise price or the number of Shares subject to the
Options, or both, when, in the Committee's sole discretion, such adjustments
become appropriate by reason of any corporate transaction.
(c) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to the number of Shares reserved for issuance under the
Plan or the number of or exercise price of Shares then subject to outstanding
Options granted under the Plan.
(d) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (1) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (2) any merger or consolidation of
the Company; (3) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (4) the dissolution or liquidation of the Company; (5) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (6) any other corporate act or proceeding, whether of a similar
character or otherwise.
Section 10. Transferability of Options. Each Option shall provide that
such Option shall not be transferrable by the Optionee otherwise than by will or
the laws of descent and distribution and that so long as an Optionee lives, only
such Optionee or his guardian or legal representative shall have the right to
exercise such Option.
Section 11. Issuance of Shares. No person shall be, or have any of the
rights or privileges of, a shareholder of the Company with respect to any of the
Shares subject to an Option unless and until certificates representing such
Shares shall have been issued and delivered to such person. As a condition of
any transfer of the certificate for Shares, the Committee may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of the Plan, the agreement evidencing the
Option or any law or regulation including, but not limited to, the following:
(i) A representation, warranty or agreement by the Optionee to the
Company at the time any Option is exercised that he or she is acquiring the
Shares to be issued to him or her for investment and not with a view to, or
for sale in connection with, the distribution of any such Shares; and
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<PAGE>
(ii) A representation, warranty or agreement to be bound by any
legends that are, in the opinion of the Committee, necessary or appropriate
to comply with the provisions of any securities laws deemed by the
Committee to be applicable to the issuance of the Shares and are endorsed
upon the Share certificates.
Section 12. Options for 10% Shareholder. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly (or indirectly through attribution under
Section 425(d) of the Code) at the Date of Grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (or of
its parent or subsidiary [as defined in Section 425 of the Internal Revenue
Code] at the Date of Grant) unless the exercise price of such Incentive Stock
Option is at least 110% of the Fair Market Value of the Shares subject to such
Incentive Stock Option on the Date of Grant, and the period during which the
Incentive Stock Option may be exercised does not exceed five (5) years from the
Date of Grant.
Section 13. Nonqualified Stock Options. Nonqualified Stock Options may
be granted hereunder and shall be subject to all terms and provisions hereof
except that each such Nonqualified Stock Option (i) must be clearly designated
as a Nonqualified Stock Option; (ii) may be granted for Shares in excess of the
limits contained in Subsection 3(b) of this Plan; and (iii) shall not be subject
to Section 12 of this Plan. If both Incentive Stock Options and Nonqualified
Stock Options are granted to an Optionee, the right to exercise, to the full
extent thereof, Options of either type shall not be contingent in whole or in
part upon the exercise of, or failure to exercise, Options of the other type.
Section 14. Administration of the Plan.
(a) The Plan shall be administered by the Compensation Committee of the
Board or other committee thereof as appointed by the Board (herein called the
"Committee") consisting of not less than two (2) members of the Board all of
whom are Disinterested Persons. Except for the powers set forth in Section 17,
the Committee shall have all of the powers of the Board with respect to the
Plan. Any member of the Committee may be removed at any time, with or without
cause, by resolution of the Board and any vacancy occurring in the membership of
the Committee may be filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of the Plan. The determinations and the
interpretation and construction of any provision of the Plan by the Committee
shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting or
(ii) without a meeting by the written approval of a majority of the members of
the Committee.
(d) Subject to the express provisions of this Plan, the Committee shall
have the authority, in its sole and absolute discretion (i) to adopt, amend, and
rescind administrative and interpretive rules and regulations relating to this
Plan or any Option; (ii) to construe the terms of this Plan or any Option; (iii)
as provided in Subsection 9(a), upon certain events to make appropriate
adjustments to the exercise price and number of Shares subject to this Plan and
Option; and (iv) to make all other determinations and perform all other acts
necessary or advisable for administering this Plan, including the delegation of
such ministerial acts and responsibilities as the Committee deems appropriate.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in this Plan or any Option in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency. The Committee shall have full discretion to make all
determinations on the matters referred to in this Subsection 14(d), and such
determinations shall be final, binding and conclusive.
6
<PAGE>
Section 15. Government Regulations.
This Plan, Options and the obligations of the Company to sell and deliver
Shares under any Options, shall be subject to all applicable laws, rules and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
Section 16. Miscellaneous.
(a) The proceeds received by the Company from the sale of Shares pursuant
to an Option shall be used for general corporate purposes.
(b) The grant of an Option shall be in addition to any other compensation
paid to the Optionee or other stock option plans of the Company or other
benefits with respect to Optionee's position with the Company or its
Subsidiaries. The grant of an Option shall not confer upon the Optionee the
right to continue as an Employee or Consultant, or interfere in any way with the
rights of the Company to terminate his or her status as an Employee or
Consultant.
(c) Neither the members of the Board nor any member of the Committee shall
be liable for any act, omission, or determination taken or made in good faith
with respect to this Plan or any Option, and members of the Board and the
Committee shall, in addition to all other rights of indemnification and
reimbursement, be entitled to indemnification and reimbursement by the Company
in respect of any claim, loss, damage, or expense (including attorneys' fees,
the costs of settling any suit, provided such settlement is approved by
independent legal counsel selected by the Company, and amounts paid in
satisfaction of a judgment, except a judgment based on a finding of bad faith)
arising from such claim, loss, damage, or expense to the full extent permitted
by law and under any directors' and officers' liability or similar insurance
coverage that may from time to time be in effect.
(d) Any issuance or transfer of Shares to an Optionee, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
of this Plan or the applicable Option, shall, to the extent thereof, be in full
satisfaction of all claims of such persons under the Plan. The Committee may
require any Optionee, legal representative, heir, legatee or distributee as a
condition precedent to such payment or issuance or transfer of Shares, to
execute a release and receipt for such payment or issuance or transfer of Shares
in such form as it shall determine.
(e) Neither the Committee nor the Company guarantees Shares from loss or
depreciation.
(f) All expenses incident to the administration, termination, or
protection of this Plan or any Option, including, but not limited to, legal and
accounting fees, shall be paid by the Company; provided, however, the Company
may recover any and all damages, fees, expenses and costs arising out of any
actions taken by the Company to enforce its rights under this Plan or any
Option.
(g) Records of the Company shall be conclusive for all purposes under this
Plan or any Option, unless determined by the Committee to be incorrect.
(h) The Company shall, upon request or as may be specifically required
under this Plan or any Option, furnish or cause to be furnished all of the
information or documentation that is necessary or required by the Committee to
perform its duties and functions under this Plan or any Option.
(i) The Company assumes no liability to any Optionee or his legal
representatives, heirs, legatees or distributees for any act of, or failure to
act on the part of, the Committee.
(j) Any action required of the Company or the Committee relating to this
Plan or any Option shall be by resolution of its Board, the Committee or by a
person authorized to act by resolution of the Board or the Committee.
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<PAGE>
(k) If any provision of this Plan or any Option is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions of this Plan or any Option, but such provision shall be
fully severable, and the Plan or Option, as applicable, shall be construed and
enforced as if the illegal or invalid provision had never been included in the
Plan or Option, as applicable.
(l) Whenever any notice is required or permitted under this Plan, such
notice must be in writing and personally delivered or sent by mail or delivery
by a nationally recognized courier service. Any notice required or permitted to
be delivered under this Option shall be deemed to be delivered on the date on
which it is personally delivered, or, if mailed, whether actually received or
not, on the third Business Day after it is deposited in the United States mail,
certified or registered, postage prepaid, addressed to the person who is to
receive it at the address that such person has previously specified by written
notice delivered in accordance with this Subsection 16(l) or, if by courier,
seventy-two (72) hours after it is sent, addressed as described in this
Subsection 16(l). The Company or the Optionee may change, at any time and from
time to time, by written notice to the other, the address that it or he had
previously specified for receiving notices. Until changed in accordance with
this Option, the Company and the Optionee shall specify as its and his address
for receiving notices the address set forth in this Option pertaining to the
Shares to which such notice relates.
(m) Any person entitled to notice under this Plan may waive such notice.
(n) This Option shall be binding upon the Optionee, his legal
representatives, heirs, legatees and distributees upon the Company, its
successors, and assigns, and upon the Board, the Committee and its successors.
(o) The titles and headings of Sections are included for convenience of
reference only and are not to be considered in construction of this Plan's
provisions.
(p) All questions arising with respect to the provisions of this Plan
shall be determined by application of the laws of the State of Texas except to
the extent Texas law is preempted by federal law or Pennsylvania corporate law
that is controlling. The obligation of the Company to sell and deliver Shares
under this Plan is subject to applicable laws and to the approval of any
governmental authority required in connection with the authorization, issuance,
sale, or delivery of such Shares.
(q) Words used in the masculine shall apply to the feminine where
applicable, and wherever the context of this Option dictates, the plural shall
be read as the singular and the singular as the plural.
Section 17. Amendment and Discontinuation of the Plan. The Committee may
from time to time amend, suspend or terminate the Plan or any Option; provided,
however, that, except to the extent provided in Section 9, no such amendment
may, without approval by the shareholders of the Company, (a) increase the
number of Shares reserved for Options or change the class of employees eligible
to receive Options, (b) permit the granting of Options that expire beyond the
maximum 10-year period described in Subsection 7(b), or (c) extend the
termination date of the Plan as set forth in Section 18; and provided, further,
that, except to the extent provided in Section 8, no amendment or suspension of
the Plan or any Option issued hereunder shall, except as specifically permitted
in any Option, substantially impair any Option previously granted to any
Optionee without the consent of such Optionee.
Section 18. Effective Date and Termination Date. The effective date of
the Plan is the date set forth below, on which the date the Board adopted this
Plan; provided, however, if the Plan is not approved by the shareholders of the
Company within twelve (12) months after the effective date then, in such event,
the Plan and all Options granted pursuant to the Plan shall be null and void.
The Plan shall terminate on the tenth anniversary of the effective date.
8
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ADOPTED BY THE BOARD: MARCH 3, 1994
EFFECTIVE DATE: MARCH 3, 1994
RATIFIED BY THE SHAREHOLDERS: MAY 31, 1994
Executed to evidence the 1994 Employee Stock Option Plan of Polyphase
Corporation adopted by the Board on March 3, 1994 and the Shareholders on May
31, 1994.
POLYPHASE CORPORATION
By:/s/ Paul A. Tanner
------------------------------------
Name: Paul A. Tanner
Title: President
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PROXY
POLYPHASE CORPORATION
16885 DALLAS PARKWAY
DALLAS, TEXAS 75248
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul A. Tanner and James Rudis, and each of
them, as proxies, each with the power to appoint his substitute, and hereby
authorizes them to represent and vote, as designated below, all of the shares
of the common stock of Polyphase Corporation (the "Company"), held of record by
the undersigned on January 22, 1996 at the Annual Meeting of Stockholders of
the Company to be held on February 27, 1996 and any adjournment(s) thereof.
THIS PROXY, WHEN PROPERLY EXECUTED AND DATED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES UNDER PROPOSAL 1, IN
FAVOR OF THE PROPOSAL SPECIFIED IN PROPOSAL 2, AND THE PROXIES WILL USE THEIR
DISCRETION WITH RESPECT TO ANY MATTERS REFERRED TO IN PROPOSAL 3.
-------------
(TO BE DATED AND SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
X PLEASE MARK
YOUR VOTES
AS IN
THIS EXAMPLE.
WITHHOLD AUTHORITY
to vote for all nominees
FOR listed below FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS [_] [_] 2. Proposal to amend [_] [_] [_]
FOR all nominees listed the 1994 Employee Stock
(except as marked to the contary below) Option Plan for
Polyphase Corporation to
increase the number of shares
- -------------------- of Common Stock authorized and
reserved for issuance upon
NOMINEES: Paul A. Tanner, exercise of stock options
Michael F. Buck, granted pursuant to such plan
James Rudis, by 500,000 shares.
George R. Schrader,
Harold Estes and 3. In their discretion,[_] [_] [_]
Paul A. Tanner, Jr. the proxies are authorized
to vote upon such other
business as may properly
come before the meeting.
THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF
DIRECTORS. THIS PROXY WILL BE
VOTED AS DIRECTED. IN THE
ABSENCE OF DIRECTION, THIS
PROXY WILL BE VOTED FOR THE
FIVE NOMINEES FOR ELECTION, AND
FOR PROPOSALS 2 AND 3.
STOCKHOLDERS ARE URGED TO DATE,
MARK, SIGN AND RETURN THIS
PROXY PROMPTLY IN THE ENVELOPE
PROVIDED, WHICH REQUIRES NO
POSTAGE IF MAILED WITHIN THE
UNITED STATES.
SIGNATURE(S) ________________________________________ DATE ______________, 1996
NOTE: Please sign exactly as name or names appear on stock certificate (as
indicated hereon).
