CARVER CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Tuesday, May 16, 1995
To the Shareholders of CARVER CORPORATION:
Notice is hereby given that the Annual Meeting of Shareholders of
CARVER CORPORATION (the "Company") will be held at 4:00 p.m.
local time on Tuesday, May 16, 1995 at Carver Corporation,
20121 - 48th Avenue W., Lynnwood, Washington 98036, for the
following purposes:
(1) To elect five directors to serve until the next annual
meeting of shareholders or until their successors are elected and
qualified.
(2) To consider and vote upon a proposal to approve the adoption
of the Company's 1995 Stock Option Plan, as described in the
accompanying Proxy Statement.
(3) To consider and vote upon a proposal to approve the adoption
of the Company's 1995 Stock Bonus Plan, as described in the
accompanying Proxy Statement.
(4) To transact such other business as may properly come before
the meeting.
Shareholders of record on the books of the Company at the close
of business on April 3, 1995 are entitled to notice of and to
vote at the meeting and any adjournments thereof.
By order of the Board of Directors
John P. World
Secretary
Lynnwood, Washington
April 14, 1995
IMPORTANT NOTICE
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
STAMPED AND ADDRESSED ENVELOPE. THE GIVING OF THE PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE AT THE MEETING IF THE PROXY IS REVOKED
AS SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
CARVER CORPORATION
20121 - 48th Avenue West
P.O. Box 1237
Lynnwood, Washington 98046-1237
PROXY STATEMENT
This proxy statement and the accompanying form of proxy are
furnished in connection with the solicitation of proxies by the
Board of Directors of Carver Corporation (the "Company") for use
at the Annual Meeting of Shareholders to be held on Tuesday, May
16, 1995, at 4:00 P.M. local time, and at any adjournments
thereof. Only shareholders of record on the books of the Company
at the close of business on April 3, 1995 (the "Record Date") are
entitled to notice of and to vote at the meeting. Management
anticipates that these proxy solicitation materials and a copy of
the Company's 1995 Annual Report to Shareholders will be mailed
to shareholders on or about April 14, 1995.
If the accompanying form of proxy is properly executed and
returned, the shares represented thereby will be voted in
accordance with the instructions specified thereon. In the
absence of instructions to the contrary, such shares will be
voted for all of the nominees for election to the Board of
Directors listed in this Proxy Statement and named in the form of
proxy and for each proposal described in this Proxy Statement and
listed on the form of proxy.
Any shareholder executing a proxy has the power to revoke it at
any time prior to the voting thereof on any matter (without,
however, affecting any vote taken prior to such revocation) by
(1) delivering written notice to the Secretary of the Company
prior to the voting at the meeting, (2) executing and delivering
to the Company another proxy dated as of a later date, or
(3) voting in person at the meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The only voting securities of the Company are shares of common
stock, par value $.01 per share (the "Common Stock"), each of
which is entitled to one vote. At the Record Date, there were
issued and outstanding 3,678,674 shares of Common Stock of the
Company. The presence in person or by proxy of holders of record
of a majority of the outstanding shares of Common Stock is
required to constitute a quorum for the transaction of business
at the meeting. Under Washington law and the Company's Articles
of Incorporation, if a quorum is present, (1) the five nominees
for election to the Board of Directors who receive the greatest
number of affirmative votes cast at the Annual Meeting shall be
elected directors, and (2) the proposals to approve the adoption
of the Company's 1995 Stock Option Plan and the Company's 1995
Stock Bonus Plan will be approved if each proposal receives the
affirmative vote of the holder of a majority of the shares of
Common Stock present in person or represented by proxy at the
meeting, and entitled to vote on the proposal. Shares of Common
Stock underlying abstentions and broker non-votes will be
considered present at the Annual Meeting for purpose of
calculating a quorum and will have no effect on the election of
directors. An abstention from voting on the proposals to approve
the adoption of the Company's 1995 Stock Option Plan and/or the
1995 Stock Bonus Plan will have the effect of a vote "Against"
the proposal. Broker non-votes will have no effect on such
proposals since such non-votes are not considered "shares
entitled to vote" on such proposals.
The Company's Common Stock is traded on the over-the-counter
NASDAQ National Market System. The last sale price for the
Common Stock of the Company as reported by NASDAQ on March 30,
1995 was $2.625.
The following table provides information, as of March 28, 1995,
except as set forth below, with respect to each shareholder known
by the Company to be the beneficial owner of five percent or more
of its outstanding Common Stock. Except as noted in the table,
each such person has sole voting and investment powers with
respect to the shares shown.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name and Address Beneficial Outstanding
Ownership Shares
<S> <C> <C>
Robert W. & Diana R. Carver 719,080 (1) 19.5
330 Avenue "A"
Snohomish, WA 98290
Dimensional Fund Advisors, Inc. 264,400 (2) 7.2
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Paul E. Sackett, Jr. 252,851 (3) 6.9
Sackett & Company
555 California St., Suite 4490
San Francisco, CA 94104
Tweedy, Browne Company L.P. 247,500 (4) 6.7
TBK Partners, L.P.
Vanderbilt Partners, L.P.
52 Vanderbilt Avenue
New York, NY 10017
_______________________________
(1) Includes 10,000 shares subject to sale under a vested stock
option granted by Robert W. and Diana R. Carver to Thomas C.
Graham, a director of the Company.
(2) The information shown is based upon a Schedule 13G filed by
Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, with the Securities and Exchange Commission
(the "Commission") dated February 9, 1994. According to the 13G
(i) Dimensional claims sole voting power with respect to 154,800
shares and sole dispositive power of 264,400 shares owned by
Dimensional; (ii) persons who are officers of Dimensional, as
officers of DFA Investment Dimensions Group, Inc. (the "Fund"),
an open ended investment company, claim sole voting power with
respect to 95,900 shares owned by the Fund; (iii) persons who are
officers of Dimensional, as officers of The Investment Trust
Company (the "Trust"), an open ended investment company, claim
sole voting power with respect to 13,700 shares owned by the
Trust; (iv) these securities represent securities owned by a
variety of investment advisory clients; and (v) Dimensional
disclaims beneficial ownership of all 264,400 shares.
(3) The information shown is based on Amendment Number 1 to
Schedule 13G filed by Paul E. Sackett, Jr., d/b/a/ Sackett &
Company, a registered investment advisor, with the Commission
dated February 1, 1995. According to the 13G, Sackett & Company
is deemed to be the beneficial owner of these securities pursuant
to separate arrangements whereby Sackett & Company acts as
investment advisor to certain persons. Each such person has the
right to receive or the power to direct the receipt of dividends
from, or the proceeds from the sale of, the securities.
(4) The information shown is based on a Schedule 13D filed by
Tweedy, Browne Company L.P. ("TBC"), TBK Partners, L.P. ("TBK")
and Vanderbilt Partners, L.P. ("Vanderbilt") with the Commission
dated September 13, 1993. According to the 13D (i) shares
beneficially owned by TBC, a registered broker-dealer and
investment advisor, are held in the accounts of various
customers; (ii) TBK and Vanderbilt are each private investment
partnerships; (iii) each of Messrs. Christopher H. Browne,
William H. Browne, James M. Clark, Jr. and John D. Spears serve
as general partners of each of TBC, TBK and Vanderbilt with Mr.
Thomas P. Knapp acting as an additional general partner of TBK;
(iv) the general partners of each of TBC, TBK and Vanderbilt may
be deemed to have shared power to vote and dispose of shares
beneficially owned by the respective partnerships; (v) TBC may be
deemed to be the beneficial owner of 217,500 shares, over which
TBC claims sole voting power with respect to 182,500 shares and
shared dispositive power over 217,500 shares; (vi) TBK
beneficially owns directly 20,000 shares; (vii) Vanderbilt
beneficially owns directly 10,000 shares; and (viii) each of TBC,
TBK and Vanderbilt disclaim beneficial ownership of shares held
by the others.
</TABLE>
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees
A Board of Directors consisting of five directors will be elected
at the Annual Meeting to hold office for a term of one year or
until their successors are elected and qualified. The Board of
Directors has unanimously approved the nominees named below, all
of whom are members of the current Board of Directors. Unless
otherwise instructed, it is the intention of the persons named in
the accompanying form of proxy to vote shares represented by
properly executed proxies for the five nominees of the Board of
Directors named below. Although the Board of Directors
anticipates that all of the nominees will be available to serve
as directors of the Company, should any one or more of them not
accept the nomination, or otherwise be unwilling or unable to
serve, it is intended that the proxies will be voted for the
election of a substitute nominee or nominees designated by the
Board of Directors.
The table below lists the names and ages of the nominees and the
amount and nature of the beneficial ownership of Common Stock of
the nominees, the executives named in the Summary Compensation
Table, and all directors and executive officers as a group on
March 29, 1995. Except as noted in the table, each such person
has sole voting and investment powers with respect to the shares
shown.
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Outstanding
Name Age Ownership Shares
<S> <C> <C> <C>
Robert A. Fulton 54 138,250(1) 3.8
Thomas C. Graham 56 35,648(2) 1.0
Walter C. Howe 61 11,750(3) *
John F. Vynne 50 15,750(3) *
Stephen M. Williams 45 57,500(4) 1.6
All current directors
and executive officers
as a group (8 persons) 332,524(5) 9.0
_________________
* Less than 1%.
(1) Includes options to purchase 71,250 shares exercisable within
60 days.
(2) Includes options to purchase 11,250 shares exercisable within
60 days and 10,000 shares subject to a vested stock option
granted to Mr. Graham by Robert W. and Diana R. Carver.
(3) Includes options to purchase 11,250 shares granted by the
Company exercisable within 60 days.
(4) Includes 163,029 shares subject to options granted by the
Company exercisable within 60 days.
(5) Includes 246,029 shares subject to options exercisable within
60 days.
</TABLE>
Robert A. Fulton has been the Company's President and Chief
Executive Officer since October 1993 and a director of the
Company since March 1992. Mr. Fulton was the Company's Chief
Operating Officer and Executive Vice President from June to
October 1993. Since early 1991, Mr. Fulton has been a private
investor and acts as a consultant for computer software
developers. From early 1986 until December 1990, Mr. Fulton was
the President and Chief Executive Officer of Generic Software,
Inc., a developer of computer assisted design and drafting
software.
Thomas C. Graham has been a director of the Company since March
1991. From March 1992 to September 23, 1993, Mr. Graham served
as the Company's President and Chief Executive Officer. As a
consultant to the Company, he acted as the Company's Executive
Vice President from November 1991 through February 1992. Since
1970, he has been President of Pacific SBG Inc., which provides
business counseling and operating management services. He is
also a principal in Evergreen Services Corporation, a commercial
landscape management company. Mr. Graham serves as a director of
several companies, including Lone Wolf Corporation, a local area
network and multi-media operating systems company. From 1987 to
early 1991, Mr. Graham was Executive Vice President of Alaska
Diesel Electric, Inc./Alaska Marine Engine, Inc., a manufacturer
of diesel engines and generators primarily for marine markets.
Walter C. Howe was elected to the Board of Directors in March
1992. Since September 1990, Mr. Howe has been President of The
Washington Roundtable, a forum of representatives from the
Pacific Northwest which studies and takes positions on economic,
educational and environmental public policy issues for the State
of Washington. For the sixteen years prior to that time, Mr.
Howe was employed by The Weyerhaeuser Company, most recently as
its Vice President of Environmental, Energy and Government
Affairs.
John F. Vynne became a director of the Company in December 1991.
For the past six years, Mr. Vynne has been the President (and
sole shareholder) of Thunderbird Pacific Corporation, a Redmond,
Washington based manufacturer of electronic instruments and
software used in the mining industry. From 1986 through 1987,
Mr. Vynne was the President of Vehicle Systems Inc., a wholly
owned subsidiary of Caterpillar Corporation, which manufactured
electronic instrumentation for use in off highway vehicles and
equipment.
Stephen M. Williams has been the Company's Executive Vice
President and Chief Operation Officer and a Director since
February 1995. Mr. Williams was the Company's Vice President and
General Manager - Consumer Products Division from August 1994.
Prior to that time, Mr. Williams was the Vice President of
International Operations of Onkyo Corporation, a manufacturer and
distributor of high fidelity audio equipment from 1993 to August
1994. From 1987 to 1993, Mr. Williams was Vice President of
Cybex, a division of Lumex Corporation, where he was responsible
for marketing, sales, engineering and product development of the
Cybex fitness equipment division.
BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held twelve meetings during the
fiscal year ended December 31, 1994. Each current director
attended at least 90% of the meetings of the Board and of the
Committees of the Board on which he served that were held during
1994. The Board of Directors has standing Audit and Compensation
Committees. The Board of Directors does not have a standing
Nominating Committee.
The Audit Committee currently consists of Messrs. Graham, Howe
and Vynne and meets with the Company's internal financial staff
and the Company's independent public accountants to review the
scope and findings of the annual audit. The Audit Committee also
periodically meets with the Company's Vice President of Finance
to review her activities and to discuss the adequacy of the
Company's internal accounting controls. The Audit Committee held
four meetings during 1994.
The Compensation Committee currently consists of Messrs. Graham,
Howe, and Vynne and considers and acts upon management's
recommendations to the Board of Directors regarding salaries,
bonuses and other forms of compensation for the Company's
executive officers. The Compensation Committee also administered
the Company's 1985 Incentive Stock Option Plan (the "ISOP"), and
1985 Non-Qualified Stock Option Plan (the "Directors' Plan"), and
administers the Company's 1995 Stock Option Plan (the "Option
Plan"), the Company's 1995 Stock Bonus Plan (the "Stock Bonus
Plan"), the Robert A. Fulton Stock Option Agreement (the "Fulton
Agreement"), the Stephen M. Williams Stock Option Agreement (the
"Williams Agreement"), the Employee Stock Purchase Plan and Stock
Appreciation Rights Plan. The Compensation Committee held three
meetings during 1994.
DIRECTORS' COMPENSATION
Employee directors receive no additional compensation for service
on the Board of Directors or its committees. Each director who
is not an employee of the Company receives an annual fee of
$6,000, paid in quarterly installments, plus $450 for each Board
and Committee meeting attended. The Chairman of each Committee
receives an additional $100 for each meeting attended. If the
Stock Bonus Plan is approved by the Shareholders of the Company,
each non-employee director will be awarded annually 1,000 shares
of the Company's Common Stock in quarterly installments of 250
shares. (See Proposal 3 - The 1995 Stock Bonus Plan, below.)
Non-employee directors are also eligible to receive option grants
pursuant to the Company's 1995 Stock Option Plan, if such Plan is
approved by the Shareholders. (See Proposal 2 -The 1995 Stock
Option Plan, below.)
Each current director, who was elected prior to 1995, received an
option to acquire 16,250 shares of the Company's Common Stock
under the Company's 1985 Non-Qualified Stock Option Plan (the
"Directors' Plan"). The Directors' Plan terminated on March 29,
1995 and provided for the automatic grant of an option to acquire
16,250 shares of the Company's Common Stock to each director who
is not also an employee of the Company upon his or her election
as a director of the Company. The exercise price for such option
is equal to the last sale price of the Company's Common Stock on
the date of his or her election ("Date of Grant"). The duration
of an option is nine years and 364 days from the Date of Grant.
3,125 shares granted in each option vest on the Date of Grant,
and 3,125, 5,000 and 5,000 shares vest upon the completion of 18,
36 and 54 consecutive months of service, respectively, as a
director of the Company. The Directors' Plan further provides
that vesting of options outstanding at least one year prior to
the below described events will be accelerated and shall become
immediately exercisable, as follows: (i) upon accumulation by any
person or group (other than a broker, bank or trust company
holding any class of voting equity securities of the Company for
the account of customers) of beneficial ownership of 25% or more
of any class of the Company's voting equity securities; or (ii)
upon the occurrence of certain events leading to a change in
control such as a tender or exchange offer or upon approval by
the Company's shareholders of certain mergers or similar events
(an "Acceleration Event").
EXECUTIVE COMPENSATION
The following table shows compensation paid by the Company for
services rendered during the fiscal years ended December 31,
1994, 1993 and 1992, respectively, to each person who was Chief
Executive Officer during fiscal year 1994. No other executive
officer's salary and bonus exceeded $100,000 in 1994.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
____________ ____________
Number of
Securities
Name and Underlying All Other
Principal Salary Bonus Options Compensation
Position Year $ $ (#) ($)
<S> <C> <C> <C> <C> <C>
Robert A. Fulton 1994 $100,000 0 100,000 (1) $623 (2)
President & CEO 1993 13,040(3) 0 50,000 $ 83 (2)
1992 -- - (4) --
___________________
(1) Represents performance based options granted under the
Company's 1985 Incentive Stock Option Plan (the "ISOP") which
vest upon the Company's achievement of certain performance
objectives in 1994 and 1995. The Company's failure to achieve
the 1994 performance objectives resulted in the forfeiture of
options to purchase 40,000 shares by Mr Fulton. The ISOP
terminated on January 18, 1995 without affecting outstanding
options.
(2) Represents Company paid term life insurance premium.
(3) Mr. Fulton became the Company's President and Chief
Executive Officer on October 5, 1993. From June to October 1993,
Mr. Fulton served as the Company's Chief Operating Officer and
Executive Vice President. His salary under all positions held in
1993 was paid at an annual rate of $24,000.
(4) Excludes options to acquire 16,250 shares of Common Stock
granted pursuant to the Directors' Plan prior to appointment as
an executive officer of the Company.
</TABLE>
The following table summarizes the number and terms of stock
option granted in 1994 to the person named in the Summary
Compensation Table. Options were granted without tandem SARs.
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Potential
Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation
Individual Grants for Option Term (1)
____________________________________________ _______________________
% of Total
Number of Options
Securities granted to
Underlying Employees
Options in Exercise Expir-
Granted Fiscal Price ation
Name # Year ($/Sh) Date 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Robert A.
Fulton, 100,000(2) 40% $2.75 3/9/04 $173,000 $438,000
President & CEO
(1) The potential realizable value is based on the assumption
that the price of the Common Stock appreciates at the annual rate
shown (compounded annually) from the date of grant until the end
of the ten year option term. Actual realizable value, if any, on
stock option exercises is dependent on the future performance of
the Common Stock and overall market conditions, as well as the
option holder's continued employment through the vesting period.
(2) Represents options granted pursuant to the ISOP which vest
upon the Company's achievement of certain performance objectives
in 1994 and 1995. The Company's failure to achieve the 1994
performance objectives resulted in the forfeiture of options to
purchase 40,000 shares by Mr Fulton. The ISOP terminated on
January 18, 1995 without affecting outstanding options. The
option expires on the earlier of (i) ten years from the date of
grant, (ii) the expiration of ninety days following the date of
the termination of Mr. Fulton's employment, or (iii) one year
from the date of death or disability of the optionee. Shares may
be acquired under the ISOP by delivery of the exercise price in
cash or surrender of previously held shares. Upon an
Acceleration Event (as defined above), options granted accelerate
and become immediately exercisable.
</TABLE>
The following table provides information with respect to option
exercises during the year ended December 31, 1994 by the person
named in the Summary Compensation Table and the number and value
of unexercised options held at December 31, 1994.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the Money
Options at Options at
Shares Dec. 31, Dec. 31,
Acquired Value 1994 (#) 1004 ($)
on Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable(1)
<S> <C> <C> <C> <C>
Robert A.
Fulton, 0 N/A 61,250/65,000 $37,500/0
President
& CEO
(1) Calculation based on the closing price of the Company's
Common Stock on December 30, 1994 less the exercise price,
multiplied by the number of in-the-money options held. There is
no guarantee that if and when these options are exercised they
will have this value.
</TABLE>
CHANGE IN CONTROL PLAN
In a series of meetings between March 11 and 25, 1995, the
Compensation Committee of the Company's Board of Directors
adopted a Change in Control Severance and Incentive Plan pursuant
to which certain key employees of the Company will be granted
severance payments if their employment is terminated or they
resign for good reason in connection with a change in control of
the Company or certain equity investments in the Company, and
pursuant to which they will be granted cash payments and will
receive accelerated vesting of options to purchase Common Stock
following certain equity investments in the Company. The plan
does not provide for any severance payment to Robert A. Fulton,
the Company's Chief Executive Officer. The plan does provide
that Mr. Fulton will receive a minimum of $30,000 cash and
accelerated vesting of an option to purchase 15,000 shares of
Common Stock following the consummation of any of the following
control events: (i) a merger of the Company, sale of all or
substantially all of the assets of the Company, or a tender offer
for the Company's shares which results in value to the Company or
its shareholders of $3.50 per share; or (ii) an investment in
equity securities of the Company resulting in gross proceeds to
the Company of at least $3,000,000 at a price not less than $3.50
per share of Common Stock or Common Stock equivalent. If the
benefits to the Company or its shareholders resulting from a
change in control or equity investment exceed the foregoing
amounts and/or entail significant additional benefits to the
Company or its shareholders, the Compensation Committee of the
Board of Directors, in its discretion, may increase the amount of
benefits payable to Mr. Fulton to not more $80,000 cash and the
accelerated vesting of options to purchase 30,000 shares of
Common Stock.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee
The Compensation Committee of the Board of Directors (the
"Committee") is currently comprised of three independent outside
directors. The Committee is responsible for administering the
Company's ISOP, Directors' Plan, Fulton Stock Option Agreement,
Williams Stock Option Agreement, the 1995 Stock Option Plan, the
Stock Bonus Plan, Stock Appreciation Rights Plan and Employee
Stock Purchase Plan. The Company's overall executive
compensation program is established and administered by the
Committee.
Compensation Philosophy
The philosophy underlying the development and administration of
the Company's annual and long-term compensation plans is to align
the interests of executive management with those of the
shareholders. Key elements of this philosophy are:
1. Establishing compensation plans which deliver pay
commensurate with Company performance, as measured by operating,
financial and strategic objectives.
2. Providing significant equity-based incentives for executives
to ensure that they are motivated over the long-term to respond
to the Company's business challenges and opportunities as owners
rather than just as employees.
3. Rewarding executives if shareholders receive an above-average
return on their investment over the long-term.
Compensation Forms
Executive compensation consists primarily of (i) base salary,
(ii) annual incentive bonus compensation and (iii) long-term
incentives in the form of stock options. Base salary is
determined on approximately March 1 of each year or at the
commencement of the executive's employment with the Company.
Bonuses and stock options are usually determined during the first
quarter after the end of the fiscal year to allow the Committee
to take into account Company and individual performance in
determining these elements of executive compensation. The
Company also has an employee stock purchase plan which enables
all employees, including executives, to purchase shares of the
Company's stock at discounted prices and obtain a financial stake
in the future success of the Company. Stock options may also be
granted to non-executive employees of the Company.
In developing executive compensation packages, the Committee
considers an appropriate blend of the above-mentioned forms of
compensation to be competitive generally and to provide
meaningful incentives to the executives on both a short and long-
term basis. Historically, the Committee has set salary levels
below the median of those paid by other companies in the
electronics industry to persons with comparable responsibilities
as identified in the American Electronics Association salary
surveys. This is done with the objective of giving variable
compensation tied to financial performance greater weight than
fixed base salary.
The annual bonus plan is a discretionary vehicle by which
executives can earn additional cash and/or equity compensation
depending on individual and Company performance relative to
certain annual objectives. In making such discretionary awards,
the Committee considers with respect to each executive, certain
criteria including the Company's operating, financial and
strategic goals (e.g. net sales, margin levels, expense control,
earnings per share, operating income, cash flow, technology
acquisition and product development).
The Company's long-term incentive program consists primarily of
grants of stock options pursuant to the ISOP. Grants under the
ISOP were made at exercise prices equal to or exceeding the fair
market value of the underlying Common Stock on the date of grant,
thereby aligning a significant portion of executive compensation
with shareholder interests. Executives receive value from their
options only if the Company's Common Stock appreciates over the
long-term. The Company encourages its officers to acquire shares
of its Common Stock.
CEO AND EXECUTIVE COMPENSATION
Salary
The Chief Executive Officer's salary for 1994 was determined in
accordance with the Company's compensation philosophy and
objectives, as set forth above. When Mr. Fulton was employed by
the Company as its President and Chief Executive Officer in
October 1993, his compensation was not changed from the level set
in June when he was appointed Chief Operating Officer and
Executive Vice President. In determining the salary of Mr.
Fulton, as CEO, the Committee also considered a salary level
sufficient to encourage Mr. Fulton to accept employment with the
Company, as its Chief Executive Officer, historical salary levels
of former chief executives of the Company, the Company's current
financial position, and Mr. Fulton's desire to be compensated at
a lower level. Subsequent to year-end, and in keeping with the
agreement in principle between Mr. Fulton and the Company, the
Committee increased Mr. Fulton's annual salary to $100,000
effective January 1, 1994.
In March 1994, the salary levels for the Company's executives
were reviewed, and, were, after adjustment to reflect cost of
living increases, determined to be equitable when compared to the
salaries of other Company executives, considering the nature and
scope of their duties and responsibilities and the Company's
performance.
Annual Bonus
During 1994, the Company failed to achieve all of its operating
and financial goals which were a combination of sales levels,
margins, operating income, expense levels and earnings per share.
No annual bonuses were awarded to the Company's Chief Executive
Officer or other executive officers for 1994.
Stock Options
In 1994, options to purchase an aggregate of 250,000 shares of
the Company's stock were granted to two executives, inclusive of
Mr. Fulton. In 1994, all options granted to executives were at
or above the market price of the Company's Common Stock on the
date of grant. Vesting schedules and exercise prices of the
options granted were designed to motivate the Company's
executives to achieve goals which would build shareholder value
over the next several years.
The material terms of the award of stock options to Mr. Fulton in
1994 are discussed elsewhere in the Proxy Statement. In making
that award, the Committee considered the following in determining
the number of shares and the vesting schedule: grants made to
other executives of the Company; grants made to other C.E.O's of
the Company; an appropriate incentive to encourage Mr. Fulton to
continue his employment with the Company; and an adequate
incentive for Mr. Fulton to initiate, pursue and realize goals
and plans which, if successful, would build shareholder value.
These stock options vest on the achievement by the Company of
certain performance goals during 1994 and 1995. The goals
include: specified increases in gross margins, cash, return on
investment, and earnings per share and specified reductions in
inventory. Since the Company failed to achieve all of its goals
in 1994, options to purchase 40,000 shares have been forfeited
under this grant to
Mr. Fulton.
Under the Omnibus Budget Reconciliation Act of 1993, beginning in
1994, the federal income tax deduction for certain types of
compensation paid to the chief executive officer and four other
most highly compensated officers of publicly held companies is
limited to $1 million per officer per fiscal year unless such
compensation meets certain requirements. The Compensation
Committee is aware of this limitation and believes that, except
possibly in the event of exercise of a significant number of
options by an executive officer following a dramatic increase in
the share price of the Company's Common Stock, no compensation
paid by the Company during 1995 will exceed the $1 million
limitation.
Compensation Committee:
Thomas C. Graham, Chairman
Walter C. Howe
John F. Vynne
Performance Graph
The following graph shows for the periods indicated a comparison
of the cumulative total shareholder return on the Company's
Common Stock, Standard & Poors' Composite Index, and the Center
for Research and Security Prices ("CRSP") Index for NASDAQ
Electronic Components Stocks.
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
AMONG CARVER CORPORATION, S&P 500 INDEX AND
NASDAQ ELECTRONIC COMPONENTS STOCKS
<CAPTION>
Measurement Period Carver S&P 500 NASDAQ
(Fiscal Year Covered) Corporation Index Electronic
Components
Stocks
<S> <C> <C> <C>
Measurement Pt-12/29/89 $100 $100 $100
FYE 12/31/90 $ 50.000 $ 96.769 $ 97.042
FYE 12/31/91 $ 47.500 $126.452 $138.193
FYE 12/31/92 $ 50.000 $136.158 $215.897
FYE 12/31/93 $ 58.750 $149.224 $296.495
FYE 12/30/94 $ 57.500 $151.220 $328.140
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely upon its review of Forms 3, 4 and 5 and any
amendments thereto furnished to the Company pursuant to Section
16 of the Securities and Exchange Act of 1934, as amended, all
such Forms were filed on a timely basis except for a late filing
by Robert W. and Diana R. Carver of a Form 4 relating to the sale
by them of 35,000 shares of the Company's Common Stock in
September 1994.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain of the Company's amplifiers and receivers employ Magnetic
Field Amplifier technology pursuant to a nonexclusive license
negotiated in March 1985 between Robert W. Carver and Diana R.
Carver and the Company relating to the use of three patents
currently owned by the Carvers (the "License Agreement"). The
License Agreement requires the Company to make royalty payments
to Mr. and Mrs. Carver on products containing Magnetic Field
Amplifier technology. Such royalties amounted to $56,800 in
1994.
On March 9, 1994, Robert W. Carver filed a lawsuit against the
Company in the United States District Court for the Western
District of Washington at Seattle, claiming, among other things,
that the Company failed to provide accurate and/or complete
reports and underpaid royalties under the License Agreement. Mr.
Carver alleged that the underpayment exceeded $667,000, including
accrued interest. Mr. Carver sought a declaratory judgment that
certain products of the Company were covered by the patents,
damages in an amount to be determined at trial, but not less than
$667,000 plus interest, attorneys' fees and costs.
On March 11, 1994, the Company filed a lawsuit against Mr. and
Mrs. Carver seeking, among other things, a determination of which
of the Company's products were covered by Mr. and Mrs. Carver's
patents and the amount of any over or underpaid royalties. The
Company's complaint also sought a preliminary injunction to
prevent Mr. and Mrs. Carver from terminating the License
Agreement pending resolution of the issues.
The Company believes the circuitry covered by only one of the
patents under the License Agreement is used by the Company in
certain of its amplifiers and receivers (the "Covered Products").
Mr. and Mrs. Carver contended that many more of the Company's
products incorporate technology covered by a second patent
covered by the License Agreement (the "Disputed Products").
Mr. Carver contended and the Company agreed that it underpaid
royalties to Mr. and Mrs. Carver on Covered Products from May
1985 through December 1993 due to a variety of errors made in
calculating royalties payable. However, during the same period,
the Company had paid royalties to Mr. and Mrs. Carver on products
which are not subject to the License Agreement, including certain
of the Disputed Products. Mr. and Mrs. Carver alleged that the
net underpayment exceeds $667,000. The Company believes that it
has overpaid royalties in excess of the net amount of $200,000,
and that it was entitled to a refund of its overpayment or a
credit toward future royalties.
Another issue raised in the suits was the status of the
employment agreement between Mr. Carver and the Company dated
April 4, 1985 (the "Employment Agreement"). The initial term of
the Employment Agreement was five years ending on March 31, 1990,
but the Employment Agreement also provides that it will
automatically renew for successive three year terms unless one
party gives the other six months notice of its intent not to
renew. The Employment Agreement contains a covenant of Mr.
Carver that he will not engage in certain competitive activities
for a period of two years following termination of the agreement
by Mr. Carver or by the Company for cause.
Early in 1994, Mr. Carver advised the Company of his position
that he had given written notice to the Company that the
Employment Agreement would not be renewed more than six months
prior to March 31, 1990 and, accordingly, that the Employment
Agreement had expired on March 31, 1990, and that the post-
termination noncompetition period provided for by that agreement
ended on March 31, 1992. In his lawsuit against the Company, Mr.
Carver also sought a declaratory judgment that the non-
competition period has terminated. The Company denied that it
received notification from Mr. Carver that he did not wish to
renew the Employment Agreement prior to February 1994 and
maintained that the noncompetition period ends on June 6, 1996.
On December 9, 1994, the Company and Mr. and Mrs. Carver executed
a settlement agreement (the "Settlement Agreement") which:
- - - Provided for the dismissal of the lawsuit between the Company
and Mr. and Mrs. Carver;
- - - Confirmed that the Company had license rights to certain
amplifier technology owned by Mr. and Mrs. Carver;
- - - Granted the Company a fully paid up license on certain disputed
technology;
- - - Provided that the Company would pay to Mr. and Mrs. Carver
$300,000, without interest, in monthly installments over four
years beginning in January 1995;
- - - Limited Mr. Carver's right to produce electronic audio products
to a certain maximum number of units with a certain minimum
manufacturer's suggested retail and dealer price for a limited
time; and
- - - Contained a mutual release of claims.
PROPOSAL 2 - APPROVAL OF THE 1995 STOCK OPTION PLAN
At the Annual Meeting, the shareholders of the Company will be
asked to approve the adoption of the Carver Corporation 1995
Stock Option Plan (the "Plan") as described below. The Plan was
adopted by the Company's Board of Directors on February 15, 1995,
subject to approval of the Plan by the Company's shareholders.
The Board of Directors believes that the Plan will contribute to
the Company's ability to attract and retain the services of key
employees and non-employee directors and will more closely align
the interests of such persons with those of shareholders by
giving such persons a greater proprietary interest in the
Company.
Description of the 1995 Stock Option Plane
The following description of the Plan is qualified in its
entirety by reference to the full text of the Plan, a copy of
which is attached to this Proxy Statement as Exhibit A.
General; Eligibility. The Plan provides for the discretionary
grant of incentive stock options ("ISOs") within the meaning of
section 422 of the Internal Revenue Code, to employees,
discretionary grant of nonqualified stock options ("NQSOs") to
employees, consultants and such other persons as the Plan
Administrator (as defined below) may select, and
nondiscretionary, annual grants of NQSOs to the Company's non-
employee directors. See "Federal Income Tax Consequences" below
for information concerning the tax treatment of ISOs and NQSOs.
Non-employee directors are not eligible to receive discretionary
grants of options. The Company currently has three non-employee
directors and approximately 143 employees.
If approved by shareholders, the Plan will provide for the grant
of ISOs from time to time until February 14, 2005 and for the
grant of NQSOs from time to time until the Plan is terminated by
the Board of Directors in its discretion. Options granted under
the Plan may extend beyond the Plan's termination date and the
terms and conditions of the Plan will continue to apply to such
options. All options granted under the Plan prior to shareholder
approval of the Plan are granted subject to receipt of such
approval.
The Plan provides for the grant of options to purchase an
aggregate of 360,000 shares of Common Stock. Of these shares,
60,000 shares are reserved for issuance pursuant to the exercise
of options granted to non-employee directors. No person is
eligible to receive in any fiscal year options to purchase more
than 50,000 shares of Common Stock. The number of shares
available under the Plan, the foregoing individual limit, the
amount of shares underlying outstanding options and the amount of
shares underlying prospective grants of options to the Company's
non-employee directors are all subject to adjustment in the event
of a share dividend, stock split, or other change in the
Company's capital structure.
Administration. The Plan is administered by the Compensation
Committee (the "Plan Administrator") of the Company's Board of
Directors. The Plan Administrator determines the officers, key
employees and other persons to whom options will be granted, the
exercise prices, the number of shares covered by each grant and
all other terms and conditions of the grants. However, the Plan
Administrator may not exercise discretion with respect to the
amount or timing of grants to non-employee directors or determine
which non-employee directors will receive grants under the Plan.
Under the terms of the Plan, the Compensation Committee may
delegate to one or more executive officers the authority to grant
options to employees who are not subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") with respect
to the Common Stock. The Plan is not subject to any of the
provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and is not qualified under section
401(a) of the Internal Revenue Code.
Exercise Price. The exercise price of ISOs must be equal to or
greater than the fair market value of the Common Stock on the
date of grant (110% of the fair market value in the case of
employees who hold 10% or more of the voting power of the Common
Stock). Except with respect to NQSOs granted to non-employee
directors, the option price of NQSOs may be less than the fair
market value of the Common Stock on the date of grant.
Duration. Options may be granted for varying periods not to
exceed ten years from the date of grant (five years in the case
of ISOs granted to employees who hold more than 10% of the voting
power of the Common Stock). Typically, options granted under the
Plan expire ten years from the date of grant.
Exercise of Options. Options may be exercised only while the
holder is in the employ of the Company or a subsidiary, within 90
days after the date of termination of employment (other than for
cause, death or disability), or within one year after termination
of employment due to the death or disability of the optionee.
During the optionee's lifetime, an option is exercisable only by
the optionee. Options granted to persons other than non-employee
directors terminate concurrently with the termination of the
optionee's employment for cause. Options are not transferable
except upon the death of the optionee or pursuant to a qualified
domestic relations order as defined under the Internal Revenue
Code or Title I of ERISA. Terminated or expired options become
available for future grants.
Unless otherwise specified a the time of grant, options granted
under the Plan become exercisable with respect to 25%, 50%, 75%
and 100% of the shares covered by the option on the first,
second, third and fourth anniversaries of the date of grant,
respectively. The Plan authorizes the administrator thereof to
accelerate the vesting of any option at any time.
The Plan Administrator may condition the exercisability of any
option (other than an option granted to a non-employee director)
upon the achievement of one or more performance objectives.
Performance objectives may be expressed in terms of one or more
of the following: return on equity, return on assets, share
price, market share, sales, earnings per share, costs, net
earnings, net worth, inventories, cash and cash equivalents,
gross margin or the Company's performance relative to its
internal business plan. Performance objectives may be in respect
of the performance of the Company as a whole (whether on a
consolidated or unconsolidated basis), a related corporation, or
a subdivision, operating unit, product or product line of either
of the foregoing. Performance objectives may be absolute or
relative and may be expressed in terms of a progression or a
range.
At the date of exercise, the holder may pay the full option price
in cash or may satisfy the purchase price by complying with one
of the following mechanisms: (i) by surrendering shares of
Common Stock previously held by the option holder; (ii) by having
the Company withhold shares of Common Stock otherwise issuable
upon exercise of the option; (iii) by delivering a properly
executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price; or (iv) by complying
with any other payment mechanism approved by the Plan
Administrator. Any shares of Common Stock surrendered or
withheld will be valued at their fair market value on the date of
exercise.
Formula Grants to Non-Employee Directors. For so long as shares
of Common Stock are available under the Plan, each director shall
automatically receive (i) an NQSO to purchase 2,500 shares of
Common Stock upon the director's initial election to the Board of
Directors, and (ii) an identical option each May thereafter,
provided that the director was a non-employee director on the
previous December 31. In addition, each non-employee director
holding office on the date of approval of the Plan by the
Company's shareholders shall receive an NQSO (a "Recognition
Option") to purchase up to the number of shares of Common Stock
equal to the product of (x) 2,500, multiplied by (y) the number
of complete years of continuous service of such person as a non-
employee director. Options (other than Recognition Options) vest
and become exercisable as follows: forty percent (40%) on the
date of grant; thirty percent (30%) on the first anniversary of
the date of grant; and thirty percent (30%) on the second
anniversary of the date of grant. Recognition Options vest
according to the same schedule but assuming that the Recognition
Options had been granted in annual increments of 2,500 shares
beginning in May of each of the calendar years following the
optionee's initial election to the Board of Directors.
Change in Control Provision. The Plan provides that outstanding
options will become immediately vested and fully exercisable for
the periods indicated: (i) for a period of 45 days beginning on
the day on which any person or group (with certain exceptions)
becomes the beneficial owner of 25% or more of the Company's
Common Stock, unless such accumulation is previously approved by
a disinterested majority of the Board; (ii) beginning on the date
that a tender or exchange offer by any person (with certain
exceptions is first published or sent or given, and continuing
for so long as such offer remains open, unless, upon consummation
thereof, such person would be the beneficial owner of less than
30% of the shares of Common Stock then outstanding, unless such
tender offer is approved by a disinterested majority of the
Board; or (iii) for a period of 20 days beginning on the day on
which the shareholders of the Company (or, if later, approval by
the shareholders of a third party) duly approve any merger,
consolidation, reorganization or other transaction providing for
the conversion or exchange of more than 50% of the outstanding
shares of Common Stock into securities of a third party, or cash,
or property, or a combination of any of the foregoing.
New Plan Benefits
Except for those options which have been granted subject to
shareholder approval of the Plan, the benefits or amounts that
will be received by or allocated to employees of the Company
(including the Company's executive officers or other highly-
compensated employees) under the Plan are not determinable at
this time, because grants of options to such persons will be made
at the discretion of the Plan Administrator and may be based on
factors which are presently unknown.
Set forth below is information as of March 30, 1995 regarding the
number of stock options that have been granted under the Plan, or
to the persons and groups identified in the table subject to
shareholder approval of the Plan.
<TABLE>
<CAPTION>
Number of Shares
Underlying Options
Granted Subject to
Name and Principal Position Value($)(1) Shareholder Approval
<S> <C> <C>
Robert A. Fulton
President and CEO N/A 0
Executive Officers as a
group (6 persons) $10,625 85,000
Directors who are not
Executive Officers
as of group (3 Persons) $ 3,125 25,000
Thomas C. Graham
Nominee for Director $ 1,250 10,000
Walter C. Howe
Nominee for Director $ 937 7,500
John F. Vynne
Nominee for Director $ 938 7,500
Employees (other than
Executive Officers) as
a group (11 persons) $12,125 97,000
____________________
(1) Dollar value has been calculated by multiplying the number of
shares of Common Stock underlying each option by the difference
between the per share exercise price of such option and the
closing sale price of the Common Stock on March 30, 1995, which
was $2.625 as reported by the NASDAQ National Market System.
</TABLE>
Federal Income Tax Consequences
ISOs granted under the Plan are intended to qualify as "incentive
stock options" for federal income tax purposes. Under federal
income tax law currently in effect, the optionee will recognize
no income upon grant or exercise of the ISO. Federal income tax
upon any gain resulting from exercise of an ISO is deferred until
the optioned shares are sold by the optionee. The gain resulting
from the exercise of an ISO is included in the alternative
minimum taxable income of the optionee and may, under certain
conditions, be taxed under the alternative minimum tax.
If an employee exercises an ISO and does not dispose of any of
the optioned shares within two years following the date of grant
and within one year following the date of exercise, then any gain
upon subsequent disposition will be treated as long-term capital
gain for federal income tax purposes. If an employee disposes of
shares acquired upon exercise of an ISO before the expiration of
either the one-year or the two-year holding period, any amount
realized will be taxable for federal income tax purposes as
ordinary income in the year of such disqualifying disposition to
the extent that the lesser of the fair market value of the shares
on the exercise date or the fair market value of the shares on
the date of disposition exceeds the exercise price.
The Company will not be allowed any deduction for federal income
tax purposes either at the time of the grant or exercise of an
ISO. Upon any disqualifying disposition by an employee, the
Company will generally be entitled to a deduction to the extent
the employee realizes ordinary income.
NQSOs granted under the Plan are intended to be "nonqualified
stock options" for federal income tax purposes. Under federal
income tax law presently in effect, no income is realized by the
grantee of an NQSO until the option is exercised. At the time of
exercise of an NQSO, the optionee will realize ordinary income,
and the Company will generally be entitled to a deduction, in the
amount by which the market value of the shares subject to the
option at the time of exercise exceeds the exercise price (the
"Option Spread Amount"). The Company's deduction is conditioned
upon withholding the appropriate percentage of the Option Spread
Amount. Upon sale of shares acquired upon exercise of an NQSO,
the excess of the amount realized from the sale over the market
value of the shares on the date of exercise will constitute
long-term capital gain if the shares have been held for the
required holding period.
Section 162(m) of the Internal Revenue Code, as adopted in 1993,
limits to $1,000,000 per person the amount that the Company may
deduct for compensation paid to any of its most highly
compensated executive officers in any year after 1993. Under
proposed regulations, "qualified performance-based compensation"
will not be subject to the $1,000,000 limit. Compensation
payable through the exercise of a stock option will qualify as
"qualified performance-based compensation" if the option and the
plan meet certain requirements. One such requirement is that the
plan contain a per-employee limit on the number of shares as to
which options may be granted during any specific period. Other
requirements are that the option be granted by a committee of at
least two "outside" directors and that the exercise price of the
option be not less than fair market value of the Common Stock on
the date of grant or be exercisable only upon the achievement of
predetermined performance objectives. Although the Company has
generally drafted the Plan to comply with the requirements of the
"qualified performance-based compensation" exception to Code
Section 162(m), the Plan may be administered by a committee of
directors that are not all "outside" directors as defined in the
regulations promulgated under Code 162(m). Nonetheless, the
Board of Directors believes it is unlikely that in the near term
any officer of the Company will receive compensation in an amount
sufficient to trigger the application of Code Section 162(m).
Recommendation
The affirmative vote by the holders of at least a majority of the
shares of Common Stock present in person or represented by proxy
at the 1995 Annual Meeting and entitled to vote on the proposal
is required for approval of the Plan. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF THE PLAN.
Unless instructed otherwise, it is the intention of the persons
named in the accompanying form of proxy to vote shares
represented by properly executed proxies in favor of approval of
the Plan.
PROPOSAL 3 - APPROVAL OF THE 1995 STOCK BONUS PLAN
At the Annual Meeting, the shareholders of the Company will be
asked to approve the adoption of the Carver Corporation 1995
Stock Bonus Plan (the "Stock Bonus Plan"), as described below.
On February 15, 1995 the Board of Directors adopted the Stock
Bonus Plan, subject to the approval of the shareholders at the
Annual Meeting.
Description of the Stock Bonus Plan
The essential features of the Stock Bonus Plan are outlined
below. The following description of the Stock Bonus Plan is
qualified in its entirety by reference to the full text of such
plan, a copy of which is attached to this Proxy Statement as
Exhibit B.
Purposes. The purposes of the Stock Bonus Plan are to reward
directors, valued key employees and consultants of the Company
for their services to the Company, to enable such persons to
acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the
shareholders of the Company, and to serve as an aid and
inducement in the hiring of new employees.
Nature of the Plan; Eligibility. The Stock Bonus Plan provides
for the discretionary grant by the Company of restricted or
unrestricted stock bonuses ("Bonuses" or individually a "Bonus")
to employees and other persons selected by the Plan Administrator
(as defined below), and for the non-discretionary grant of
unrestricted Bonuses to non-employee directors of the Company.
Grants to non-employee directors are intended to comply with the
"formula award" provisions of Rule 16b-3 ("Rule 16b-3) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Company currently has three non-employee directors and
approximately 143 employees. The terms and conditions of any
Bonus will be set forth in an agreement (the "Bonus Agreement")
between the Company and the person receiving the Bonus (the
"Grantee").
Administration. The Board of Directors of the Company (the
"Board") has the general power to administer the Stock Bonus
Plan, but has delegated such power to the Compensation Committee
(the "Plan Administrator"). Subject to certain limitations, the
Plan Administrator may delegate to one or more executive officers
of the Company authority to grant and administer Bonuses to
persons who are not subject to Section 16 of the Exchange Act
with respect to Common Stock. The Plan Administrator has the
power, subject to the provisions of the Stock Bonus Plan, to
select the employees and other persons to whom Bonuses may be
granted and to determine the type, amount, terms and conditions
of each Bonus, based upon factors determined by the Plan
Administrator. The Plan Administrator may also adopt, alter and
repeal rules, guidelines and practices governing the Plan, the
Bonuses and Bonus Agreements, and otherwise supervise the
administration of the Plan. However, the Plan Administrator may
not exercise discretion with respect to the amount and timing of
grants to non-employee directors or determine which non-employee
directors will receive grants under the Stock Bonus Plan.
Term. The Stock Bonus Plan is effective as of February 15, 1995.
However, until the Stock Bonus Plan is approved by the
shareholders of the Company, no Bonus may be granted under the
Stock Bonus Plan to any non-employee director or other person
(collectively, "Insiders") subject to Section 16 of the Exchange
Act with respect to the Common Stock. No Bonus may be granted
under the Stock Bonus Plan on or after February 15, 2005, or
until the Stock Bonus Plan is terminated by the Board in its sole
discretion.
Stock Subject to the Plan. In each year during the term of the
Stock Bonus Plan, the Plan Administrator may grant Bonuses of
Common Stock aggregating not more than one percent (1%) of the
number of shares of Common Stock issued and outstanding on April
3, 1995, the record date for the Annual Meeting, in the case of
1995, and on each subsequent January 1 for each subsequent year.
Whenever a Bonus is granted, the shares issuable pursuant to the
Bonus (the "Bonus Shares") are counted against the total number
of shares that may be issued in the year of grant. However, if
Bonus Shares are forfeited by the Grantee, the number of Bonus
Shares so forfeited will again become available for the grant of
other Bonuses.
Individual Limitation. The Company may not grant Bonuses
covering in the aggregate more than 100,000 shares of Common
Stock to any one Grantee during each calendar year of the term of
the Stock Bonus Plan.
Grant of Bonuses. The Plan Administrator may grant Bonuses
covering shares of restricted Common Stock ("Restricted Bonus
Shares") or unrestricted Common Stock ("Unrestricted Bonus
Shares"). Bonus Shares shall be issued without payment by the
Grantees of any consideration. The grant of any Bonus (other
than a Bonus granted to a non-employee director) may be
contingent upon the achievement of specified performance goals or
other criteria or factors. Non-employee directors of the Company
will receive Bonuses under the Stock Bonus Plan as described
below under "Non-Employee Directors."
Provisions applicable to Restricted Bonus Shares. During the
restriction period set by the Plan Administrator, commencing
with, and not exceeding 10 years from, the grant date, the
Grantee will not be entitled to sell, assign, transfer, pledge or
otherwise encumber Restricted Bonus Shares. Within these limits,
the Plan Administrator may provide for the lapse of such
restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on service, performance
or such other factors or criteria as the Plan Administrator may
determine. Termination of the Grantee's employment during the
restriction period will result in forfeiture of all shares then
subject to restriction unless otherwise provided in the Bonus
Agreement or determined by the Plan Administrator. Pending
expiration of the restricted period or termination of the
Grantee's employment, the Grantee may vote Restricted Bonus
Shares. Unless otherwise determined by the Plan Administrator,
all dividends on Restricted Bonus Shares payable in cash will be
paid to the Grantee in cash, and dividends payable in Common
Stock will be paid in the form of Restricted Bonus Shares.
Tax Withholding. Unless the Plan Administrator permits
otherwise, the Grantee must pay to the Company in cash all
federal, state, local and foreign withholding taxes that the Plan
Administrator determines to result from the issuance of or lapse
of restrictions on Bonus Shares or otherwise in connection with
Bonus Shares. The Plan Administrator may authorize a Grantee to
make an election (i) to deliver to the Company appropriate loan
documents under the terms set forth in the Plan, (ii) to tender
to the Company previously-owned shares of Common Stock or (iii)
to have Bonus Shares withheld by the Company on behalf of the
Grantee, to pay the amount of tax that the Plan Administrator
determines is required to be withheld by the Company. Any shares
of Common Stock so withheld or tendered will be valued at their
fair market value by the Plan Administrator as of the date they
are withheld or tendered. The value of the shares withheld or
tendered may not exceed the required federal, state, local and
foreign withholding tax obligations as computed by the Company.
In addition, the Plan Administrator may provide for any other
payment mechanism in its discretion.
Right of Repurchase. At the option of the Plan Administrator,
the Bonus Shares to be delivered pursuant to a Bonus under the
Plan may be subject to a right of repurchase by the Company upon
termination of employment, subject to terms and conditions set
forth in the Bonus Agreement.
Adjustments. Upon any change in the Company's capitalization,
such as a merger, reorganization, consolidation,
recapitalization, stock dividend or stock split, the number of
total shares reserved for grants under the Stock Bonus Plan shall
be automatically adjusted and the number of Bonus Shares subject
to any outstanding Bonus may be adjusted by the Plan
Administrator in its discretion.
The Plan Administrator may also (except with respect to grants to
non-employee directors) adjust performance goals and measurements
applicable to Bonuses (i) to take into account changes in law and
accounting and tax rules, (ii) to reflect the inclusion and
exclusion of extraordinary or unusual items, events or
circumstances in order to avoid windfalls or hardships, and (iii)
to reflect any material changes in business conditions.
Waiver by the Plan Administrator. In the event of hardship or
special circumstances of a Grantee, the Plan Administrator may,
except with respect to non-employee directors, waive any or all
restrictions, conditions, vesting or forfeiture with respect to
any Bonus granted to that Grantee.
Non-Employee Directors. Four times per year following
shareholder approval of the Stock Bonus Plan, provided that
shares are available for grant under the plan, each non-employee
director of the Company will receive an Unrestricted Bonus for
250 Bonus Shares for service as a director during the then most
recently completed calendar quarter. Any director who did not
serve for the entire quarter shall receive a pro-rated number of
Bonus Shares.
ERISA, Internal Revenue Code. The Stock Bonus Plan is not
subject to the Employee Retirement Income Security Act of 1974
("ERISA") and is not qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
Amendment of Plan. The Plan Administrator may modify, amend or
terminate the Stock Bonus Plan, but no such modification,
amendment or termination may reduce the benefits afforded to a
Grantee under a previously outstanding Bonus without the consent
of such Grantee.
New Plan Benefits
The benefits or amounts that will be received by or allocated to
employees of the Company (including the Company's executive
officers or other highly-compensated employees) under the Stock
Bonus Plan are not determinable at this time, because grants of
Bonus Shares to such persons will be made at the discretion of
the Plan Administrator and may be based on factors which are
presently unknown.
The dollar value of Bonuses to non-employee directors will depend
upon the value of the Bonus Shares on the respective dates of the
grants. If the Bonuses had been granted in 1994, the total
dollar value of the Bonuses to all current non-employee directors
would have been $7,781.
Federal Income Tax Consequences
A Grantee will generally have ordinary income subject to
withholding taxes (and the Company will be entitled to a
corresponding deduction) upon the grant of an Unrestricted Bonus
in the amount of the fair market value of the stock at the time
of the grant.
A Grantee should not have taxable income upon the grant of a
Restricted Bonus but would have taxable income upon the lapse of
any restrictions. A Grantee receiving a Restricted Bonus,
however, may make an election to be taxed at the time of the
grant on the fair market value of the stock on the grant date, in
which case the lapse of any restrictions will not be a taxable
event.
If shares are held at least one year after the date the Grantee
has taxable income from acquiring them, then upon the sale of the
shares the employee will have long-term capital gain or loss
equal to the difference between the sale price and the fair
market value of the shares on the date income is recognized.
Under current federal income tax law, long-term capital gain is
taxable at a maximum stated rate of 28%, while ordinary income is
taxable at a maximum stated rate of 39.6%. In the case of both
capital gains and ordinary income, the effective rate of tax may
be higher because of various phase-out and recapture provisions.
Recommendation
The affirmative vote of the holders of at least a majority of the
shares of Common Stock present in person or represented by proxy
at the Annual Meeting is required for approval of the Stock Bonus
Plan. THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE STOCK BONUS PLAN. Unless instructed
otherwise, it is the intention of the persons named in the
accompanying form of proxy to vote shares represented by properly
executed proxies in favor of approval of the Stock Bonus Plan.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Moss Adams to continue as
its independent accountants and to examine the financial
statements of Carver Corporation for the current year.
Representatives of Moss Adams are expected to be present at the
Annual Meeting with the opportunity to make a statement, if they
desire to do so, and will be available to respond to appropriate
questions.
OTHER BUSINESS
As of the date of this proxy statement, management knows of no
other business which will be presented for action at the Annual
Meeting. If any other business requiring a vote of the
shareholders should come before the meeting, the persons
designated as proxies will vote or refrain from voting in
accordance with their best judgment.
SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURE FOR THE 1996 ANNUAL
MEETING OF SHAREHOLDERS
The Company's Bylaws provide that advance notice of nominations
for the election of directors at a meeting of shareholders must
be delivered to or mailed and received by the Company ninety (90)
days prior to the date one year from the date of the immediately
preceding annual meeting of shareholders or, in the case of a
special meeting of shareholders to elect directors, the close of
business on the 10th day following the date on which notice of
such meeting is first given to shareholders. The Bylaws also
provide that advance notice of proposals to be brought before an
annual meeting by a shareholder must be submitted in writing and
delivered to or mailed and received by the Company not later than
ninety (90) days prior to the date one year from the date of the
immediately preceding annual meeting of shareholders. Each
notice of a nomination or proposal of business must contain,
among other things, (i) the name and address of the shareholder
who intends to make the nomination or proposal; (ii) a
representation that the shareholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice or to vote at the
meeting for the proposal; (iii) a description of all arrangements
or understandings between the shareholder and each nominee and
any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by
the shareholder and any material interest of such shareholder in
any proposal to be submitted to the meeting; and (iv) such other
information regarding each nominee or proposal as would be
required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission.
Shareholder proposals to be presented at the 1996 Annual Meeting
of Shareholders must be received by the Secretary at the
Company's executive offices by December 15, 1995, in order to be
included in the Company's proxy statement and form of proxy
relating to that meeting.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K filed with the
Commission for the year ended December 31, 1994 is available to
shareholders without charge upon written request to Carver
Corporation, P.O. Box 1237, Lynnwood, Washington 98046,
Attention: Sandra L. Jenkins.
SOLICITATION OF PROXIES
The form of proxy accompanying this proxy statement is solicited
by the Board of Directors of the Company. Proxies may be
solicited by officers, directors, and regular supervisory and
executive employees of the Company, none of whom will receive any
additional compensation for their services. The Company will pay
persons holding shares of Common Stock in their names or in the
names of nominees, but not owning such shares beneficially, such
as brokerage houses, banks, and other fiduciaries, for the
expense of forwarding soliciting materials to their principals.
All costs of solicitation of proxies will be paid by the Company.
By order of the Board of Directors
John P. World
Secretary
Lynnwood, Washington
April 14, 1995
PROXY
CARVER CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Robert A. Fulton and John P.
World, or either of them, as proxies, each with the power to
appoint his substitute, and hereby authorize them to represent
and to vote all shares of common stock of Carver Corporation
which the undersigned would be entitled to vote if personally
present at the annual meeting of shareholders to be held on May
16, 1995, or any adjournment thereof, as directed herein, and in
their discretion, to vote upon such other matters as may properly
come before the meeting.
1. For Election of the following Directors: R. Fulton,
T. Graham, W. Howe, J. Vynne and S. Williams
[ ] Vote FOR all nominees listed above (except as marked to the
contrary below) (INSTRUCTION: To withhold authority to vote for
any individual nominee, print that nominee's name on the space
provided below.)
______________________________________________________________
[ ] WITHHOLD authority to vote for all nominees named above.
2. Approval of the adoption of the Company's 1995 Stock Option
Plan, as described in the accompanying Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the adoption of the Company's 1995 Stock Bonus
Plan, as described in the accompanying Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
(Continued, and to be signed on the other side)
This proxy when properly executed will be voted in the manner
directed herein by the undersigned shareholder. For the purposes
stated in the accompanying proxy statement, management recommends
a vote FOR each of the proposals referred to hereon; if no
specification is made, a vote FOR all said nominees and FOR
approval of said proposals will be entered.
The undersigned hereby revokes any proxy or proxies heretofore
given for such shares and ratifies all that said proxies or their
substitutes may lawfully do by virtue hereof.
Please sign exactly as name appears below.
_________________________________________
When shares are held jointly, both persons should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by
authorized person. Please mark, sign, date and return the proxy
card promptly using the enclosed envelope.
Dated ____________________________________, 1995
Signature ______________________________________
Signature if held jointly ______________________
Please mark, sign, date and return the proxy card promptly using
the enclosed envelope
EXHIBIT A
CARVER CORPORATION
1995 STOCK OPTION PLAN
This 1995 Stock option Plan (the "Plan") provides for the grant
of options to acquire shares of common stock, $.01 par value (the
"Common Stock"), of Carver Corporation, a Washington corporation
(the "Company"). Stock options granted under this Plan that
qualify under Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), are referred to in this Plan as
"Incentive Stock Options." Incentive Stock Options and stock
options that do not qualify under Section 422 of the Code ("Non-
Qualified Stock Options") granted under this Plan are referred to
as "Options."
1. PURPOSES. The purposes of this Plan are to retain the
services of directors, valued key employees and consultants of
the Company and such other persons as the Plan Administrator
shall select in accordance with Section 3 below, to encourage
such persons to acquire a greater proprietary interest in the
Company, thereby strengthening their incentive to achieve the
objectives of the shareholders of the Company, and to serve as an
aid and inducement in the hiring of new employees and to provide
an equity incentive to directors, consultants and other persons
selected by the Plan Administrator.
2. ADMINISTRATION. This Plan shall be administered by the Board
of Directors of the Company (the "Board") if each director is a
"disinterested person" (as defined below). If all directors are
not independent directors, the Plan shall be administered by a
committee designated by the Board and composed of two (2) or more
members of the Board, which committee (the "Committee") may be an
executive, compensation or other committee, including a separate
committee especially created for this purpose. The term
"disinterested person" shall have the meaning assigned to it
under Rule 16b-3 (as amended from time to time) promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any successor rule or regulatory requirement (the
"Rule"). The Committee shall have the powers and authority
vested in the Board hereunder (including the power and authority
to interpret any provision of this Plan or of any Option). The
members of any such Committee shall serve at the pleasure of the
Board. A majority of the members of the Committee shall
constitute a quorum, and all actions of the Committee shall be
taken by a majority of the members present. Any action may be
taken by a written instrument signed by all of the members of the
Committee and any action so taken shall be fully effective as if
it had been taken at a meeting. The Board, or any committee
thereof appointed to administer the Plan, is referred to herein
as the "Plan Administrator."
Subject to the provisions of this Plan, and with a view to
effecting its purpose, the Plan Administrator shall have sole
authority, in its absolute discretion, to (a) construe and
interpret this Plan; (b) define the terms used in this Plan; (c)
prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or
reconcile any inconsistency in this Plan; (e) grant Options under
this Plan (other than pursuant to Section 6); (f) determine the
individuals to whom Options shall be granted under this Plan and
whether the Option is an Incentive Stock Option or a Non-
Qualified Stock Option; (g) determine the time or times at which
Options shall be granted under this Plan; (h) determine the
number of shares of Common Stock subject to each Option, the
exercise price of each Option, the duration of each Option and
the times at which each Option shall become exercisable; (i)
determine all other terms and conditions of Options; and (j) make
all other determinations necessary or advisable for the
administration of this Plan. All decisions, determinations and
interpretations made by the Plan Administrator shall be binding
and conclusive on all participants in this Plan and on their
legal representatives, heirs and beneficiaries.
The Plan Administrator shall have no authority, discretion or
power to select the persons who will receive Options under
Section 6 hereof or to set the number of shares to be covered by
such Options, the exercise price of such Options, the timing of
the grant of such Options or the period within which such Options
may be exercised.
The Board or the Committee may delegate to one or more executive
officers of the Company the authority to grant Options under this
Plan to employees of the Company who, on the Date of Grant, are
not subject to Section 16(b) of the Exchange Act with respect to
the Common Stock ("Non-Insiders"), and in connection therewith
the authority to determine: (a) the number of shares of Common
Stock subject to such Option; (b) the duration of the Option; (c)
the vesting schedule for determining the times at which such
Option shall become exercisable; and (d) all other terms and
conditions of such Options. The exercise price for any Option
granted by action of an executive officer or officers pursuant to
such delegation of authority shall not be less than the fair
market value per share of the Common Stock on the Date of Grant.
Unless expressly approved in advance by the Board or the
Committee, such delegation of authority shall not include the
authority to accelerate the vesting, extend the period for
exercise or otherwise alter the terms of outstanding Options.
The term "Plan Administrator" when used in any provision of this
Plan other than Sections 2, 5(m), 5(n) and 12 shall be deemed to
refer to the Board or the Committee, as the case may be, and an
executive officer who has been authorized to grant Options
pursuant hereto, insofar as such provision may be applied to Non-
Insiders and Options granted to Non-Insiders.
3. ELIGIBILITY. Incentive Stock Options may be granted to any
individual who, at the time the Option is granted, is an employee
of the Company or any Related Corporation (as defined below),
including employees who are directors of the Company
("Employees"). Non-Qualified Stock Options may be granted to
Employees and to such other persons as the Plan Administrator
shall select. Options shall be granted hereunder to directors
who are not employees of the Company or any related Corporation,
but solely on the terms and conditions set forth in Section 6
hereof. Options may be granted in substitution for outstanding
Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other
reorganization between such other corporation and the Company or
any subsidiary of the Company. Options also may be granted in
exchange for outstanding Options. No person shall be eligible to
receive in any fiscal year Options to purchase more than 50,000
shares of Common Stock (subject to adjustment as set forth in
Section 5(m) hereof). Any person to whom an Option is granted
under this Plan is referred to as an "Optionee." Any person who
is the owner of an Option is referred to as a "Holder."
As used in this Plan, the term "Related Corporation," shall mean
any corporation (other than the Company) that is a "Parent
Corporation" of the Company or "Subsidiary Corporation" of the
Company, as those terms are defined in Sections 424(e) and
424(f), respectively, of the Code (or any successor provisions),
and the regulations thereunder (as amended from time to time).
4. STOCK. The Plan Administrator is authorized to grant Options
to acquire up to a total of 360,000 shares of the Company's
authorized but unissued, or reacquired, Common Stock. The number
of shares with respect to which Options may be granted hereunder
is subject to adjustment as set forth in Section 5(m) hereof. Of
these 360,000 shares, 60,000 shares are available exclusively for
grant to certain directors of the Company under Section 6 hereof,
subject to adjustment in as set forth in Section 5(m). In the
event that any outstanding Option expires or is terminated for
any reason, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an
Option to the same Optionee or to a different person eligible
under Section 3 of this Plan; provided however, that any canceled
Options will be counted against the maximum number of shares with
respect to which Options may be granted to any particular person
as set forth in Section 3 hereof.
5. TERMS AND CONDITIONS OF OPTIONS. Each Option granted under
this Plan shall be evidenced by a written agreement approved by
the Plan Administrator (the "Agreement"). Agreements may contain
such provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options
also shall comply with the following requirements:
(a) Number of Shares and Type of Option. Each Agreement shall
state the number of shares of Common Stock to which it pertains
and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action
to the contrary by the Plan Administrator in connection with the
grant of an Option, all Options shall be Non-Qualified Stock
Options. The aggregate fair market value (determined at the Date
of Grant, as defined below) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by the
Optionee during any calendar year (granted under this Plan and
all other Incentive Stock Option plans of the Company, a Related
Corporation or a predecessor corporation) shall not exceed
$100,000, or such other limit as may be prescribed by the Code as
it may be amended from time to time. Any portion of an Option
which exceeds the annual limit shall not be void but rather shall
be a Non-Qualified Stock Option.
(b) Date of Grant. Each Agreement shall state the date the Plan
Administrator has deemed to be the effective date of the Option
for purposes of this Plan (the "Date of Grant").
(c) Option Price. Each Agreement shall state the price per
share of Common Stock at which it is exercisable. The exercise
price shall be fixed by the Plan Administrator at whatever price
the Plan Administrator may determine in the exercise of its sole
discretion; provided that the per share exercise price for an
Incentive Stock Option shall not be less than the fair market
value per share of the Common Stock at the Date of Grant as
determined by the Plan Administrator in good faith; provided
further, that with respect to Incentive Stock Options granted to
greater-than-10 percent (>10%) shareholders of the Company (as
determined with reference to Section 424(d) of the Code), the
exercise price per share shall not be less than 110 percent
(110%) of the fair market value per share of the Common Stock at
the Date of Grant as determined by the Plan Administrator in good
faith; and, provided further, that Options granted in
substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of
property or stock or other reorganization involving such other
corporation and the Company or any subsidiary of the Company may
be granted with an exercise price equal to the exercise price for
the substituted option of the other corporation, subject to any
adjustment consistent with the terms of the transaction pursuant
to which the substitution is to occur.
(d) Duration of Options. At the time of the grant of the
Option, the Plan Administrator shall designate, subject to
paragraph 5(g) below, the expiration date of the Option, which
date shall not be later than 10 years from the Date of Grant in
the case of Incentive Stock Options; provided, that the
expiration date of any Incentive Stock Option granted to a
greater-than-10 percent (>10%) shareholder of the Company (as
determined with reference to Section 424(d) of the Code) shall
not be later than five years from the Date of Grant. In the
absence of action to the contrary by the Plan Administrator in
connection with the grant of a particular Option, and except in
the case of Incentive Stock Options as described above, all
Options granted under this Section 5 shall expire ten (10) years
from the Date of Grant.
(e) Vesting Schedule. No Option shall be exercisable until it
has vested. The vesting schedule for each Option shall be
specified by the Plan Administrator at the time of grant of the
Option prior to the provision of services with respect to which
such Option is granted; provided, that if no vesting schedule is
specified at the time of grant, the Option shall vest according
to the following schedule:
Number of Years Percentage of Total
Following Date of Grant Option Vested
One 25%
Two 50%
Three 75%
Four 100%
The Plan Administrator may specify a vesting schedule for all or
any portion of an Option based on the achievement of performance
objectives established in advance of the commencement by the
Optionee of services related to the achievement of the
performance objectives. Performance objectives shall be
expressed in terms of one or more of the following: return on
equity, return on assets, share price, market share, sales,
earnings per share, costs, net earnings, net worth, inventories,
cash and cash equivalents, gross margin or the Company's
performance relative to its internal business plan. Performance
objectives may be in respect of the performance of the Company as
a whole (whether on a consolidated or unconsolidated basis), a
Related Corporation, or a subdivision, operating unit, product or
product line of either of the foregoing. Performance objectives
may be absolute or relative and may be expressed in terms of a
progression or a range. An option which is exercisable (in whole
or in part) upon the achievement of one or more performance
objectives may be exercised only following written notice to the
Optionee and the Company by the Plan Administrator that the
performance objective has been achieved.
(f) Acceleration of Vesting. The vesting of one or more
outstanding Options may be accelerated by the Plan Administrator
at such times and in such amounts as it shall determine in its
sole discretion. The vesting of Options also shall be
accelerated under the circumstances described in Sections 5(m)
and 5(n) below.
(g) Term of Option. Vested Options shall terminate, to the
extent not previously exercised, upon the occurrence of the first
of the following events: (i) the expiration of the Option, as
designated by the Plan Administrator in accordance with Section
5(d) above; (ii) the date of an Optionee's termination of
employment or contractual relationship with the Company or any
Related Corporation for cause (as determined in the sole
discretion of the Plan Administrator); (iii) the expiration of
ninety (90) days from the date of an Optionee's termination of
employment or contractual relationship with the Company or any
Related Corporation for any reason whatsoever other than cause,
death or Disability (as defined below) unless, the exercise
period is extended by the Plan Administrator until a date not
later than the expiration date of the Option; or (iv) the
expiration of one year from (A) the date of death of the Optionee
or (B) cessation of an Optionee's employment or contractual
relationship by reason of Disability (as defined below) unless,
the exercise period is extended by the Plan Administrator until a
date not later than the expiration date of the Option. If an
Optionee's employment or contractual relationship is terminated
by death, any Option held by the Optionee shall be exercisable
only by the person or persons to whom such Optionee's rights
under such Option shall pass by the Optionee's will or by the
laws of descent and distribution of the state or county of the
Optionee's domicile at the time of death. For purposes of the
Plan, unless otherwise defined in the Agreement, "Disability"
shall mean any physical, mental or other health condition which
substantially impairs the Optionee's ability to perform his or
her assigned duties for one hundred twenty (120) days or more in
any two hundred forty (240) day period or that can be expected to
result in death. The Plan Administrator shall determine whether
an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a
determination of Disability, the Plan Administrator shall, for
purposes of the Plan, determine the date of an Optionee's
termination of employment or contractual relationship.
Unless accelerated in accordance with Section 5(f) above,
unvested Options shall terminate immediately upon termination of
employment of the Optionee by the Company for any reason
whatsoever, including death or Disability. For purposes of this
Plan, transfer of employment between or among the Company and/or
any Related Corporation shall not be deemed to constitute a
termination of employment with the Company or any Related
Corporation. For purposes of this subsection with respect to
Incentive Stock Options, employment shall be deemed to continue
while the Optionee is on military leave, sick leave or other bona
fide leave of absence (as determined by the Plan Administrator).
The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless
the Optionee's re-employment rights are guaranteed by statute or
by contract.
(h) Exercise of Options. Options shall be exercisable, either
all or in part, at any time after vesting, until termination;
provided, however, that any Optionee who is subject to the
reporting and liability provisions of Section 16 of the Exchange
Act with respect to the Common Stock shall be precluded from
selling or transferring any Common Stock or other security
underlying an Option during the six (6) months immediately
following the grant of that Option. If less than all of the
shares included in the vested portion of any Option are
purchased, the remainder may be purchased at any subsequent time
prior to the expiration of the Option term. No portion of any
Option for less than one hundred (100) shares (as adjusted
pursuant to Section 5(m) below) may be exercised; provided, that
if the vested portion of any Option is less than one hundred
(100) shares, it may be exercised with respect to all shares for
which it is vested. Only whole shares may be issued pursuant to
an Option, and to the extent that an Option covers less than one
(1) share, it is unexercisable.
Options or portions thereof may be exercised by giving written
notice to the Company, which notice shall specify the number of
shares to be purchased, and be accompanied by payment in the
amount of the aggregate exercise price for the Common Stock so
purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue,
transfer or deliver a certificate of Common Stock to the Holder
of any Option, until provision has been made by the Holder, to
the satisfaction of the Company, for the payment of the aggregate
exercise price for all shares for which the Option shall have
been exercised and for satisfaction of any tax withholding
obligations associated with such exercise. During the lifetime
of an Optionee, Options are exercisable only by the Optionee or a
transferee who takes title to the Option in the manner permitted
by Subsection 5(k) hereof.
(i) Payment upon Exercise of Option. Upon the exercise of any
Option, the aggregate exercise price shall be paid to the Company
in cash or by certified or cashier's check. In addition, the
Holder may pay for all or any portion of the aggregate exercise
price by complying with one or more of the following
alternatives:
(1) by delivering to the Company shares of Common Stock
previously held by such Holder, or by the Company withholding
shares of Common Stock otherwise deliverable pursuant to exercise
of the Option, which shares of Common Stock received or withheld
shall have a fair market value at the date of exercise (as
determined by the Plan Administrator) equal to the aggregate
exercise price to be paid by the Optionee upon such exercise;
(2) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to
the Company the amount of sale or loan proceeds to pay the
exercise price; or
(3) by complying with any other payment mechanism approved by
the Plan Administrator at the time of exercise.
(j) Rights as a Shareholder. A Holder shall have no rights as a
shareholder with respect to any shares covered by an Option until
such Holder becomes a record holder of such shares, irrespective
of whether such Holder has given notice of exercise. Subject to
the provisions of Sections 5(m) and 5(n) hereof, no rights shall
accrue to a Holder and no adjustments shall be made on account of
dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights declared on,
or created in, the Common Stock for which the record date is
prior to the date the Holder becomes a record holder of the
shares of Common Stock covered by the Option, irrespective of
whether such Holder has given notice of exercise.
(k) Transfer of Option. Options granted under this Plan and the
rights and privileges conferred by this Plan may not be
transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or (except in the
case of an Incentive Stock Option) pursuant to a qualified
domestic relations order, and shall not be subject to execution,
attachment or similar process; provided however, that any
Agreement may provide or be amended to provide that the Option to
which it relates is transferrable without payment of
consideration to immediate family members of the Optionee or to
trusts or partnerships established exclusively for the benefit of
the Optionee and the Optionee's immediate family members. Upon
any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of any Option or of any right or privilege conferred by
this Plan contrary to the provisions hereof, or upon the sale,
levy or any attachment or similar process upon the rights and
privileges conferred by this Plan, such Option shall thereupon
terminate and become null and void.
(l) Securities Regulation and Tax Withholding. (1) Shares
shall not be issued with respect to an Option unless the exercise
of such Option and the issuance and delivery of such shares shall
comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities
Exchange Act of 1933, as amended, the Exchange Act, the rules and
regulations thereunder and the requirements of any stock exchange
upon which such shares may then be listed, and such issuance
shall be further subject to the approval of counsel for the
Company with respect to such compliance, including the
availability of an exemption from registration for the issuance
and sale of such shares. The inability of the Company to obtain
from any regulatory body the authority deemed by the Company to
be necessary for the lawful issuance and sale of any shares under
this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this
Plan, shall relieve the Company of any liability with respect to
the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan
Administrator may require the Holder to represent and warrant in
writing at the time of such exercise that the shares are being
purchased only for investment and without any then-present
intention to sell or distribute such shares. At the option of
the Plan Administrator, a stop-transfer order against such shares
may be placed on the stock books and records of the Company, and
a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel is provided
stating that such transfer is not in violation of any applicable
law or regulation, may be stamped on the certificates
representing such shares in order to assure an exemption from
registration. The Plan Administrator also may require such other
documentation as may from time to time be necessary to comply
with federal and state securities laws. THE COMPANY HAS NO
OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF
STOCK ISSUABLE UPON THE EXERCISE OF OPTIONS.
(2) The Holder shall pay to the Company by certified or
cashier's check, promptly upon exercise of an Option or, if
later, the date that the amount of such obligations becomes
determinable, all applicable federal, state, local and foreign
withholding taxes that the Plan Administrator, in its discretion,
determines to result upon exercise of an Option or from a
transfer or other disposition of shares of Common Stock acquired
upon exercise of an Option or otherwise related to an Option or
shares of Common Stock acquired in connection with an Option.
Upon approval of the Plan Administrator, a Holder may satisfy
such obligation by complying with one or more of the following
alternatives selected by the Plan Administrator:
(A) by delivering to the Company shares of Common Stock
previously held by such Holder or by the Company withholding
shares of Common Stock otherwise deliverable pursuant to the
exercise of the Option, which shares of Common Stock received or
withheld shall have a fair market value at the date of exercise
(as determined by the Plan Administrator) equal to the tax
obligation to be paid by the Optionee upon such exercise;
provided that if the Holder is an Insider or if beneficial
ownership of the shares issuable upon exercise of the Option is
attributable to an Insider pursuant to the regulations under
Section 16 of the Exchange Act, the Holder will have executed, by
a date not later than six (6) months prior to the date of
exercise, an irrevocable election to satisfy its obligations
under this Paragraph 2 through the Company withholding shares of
Common Stock otherwise deliverable pursuant to the exercise of
the Option;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Holder borrows funds from the Company
to pay the withholding taxes due under this Paragraph 2, with
such repayment terms as the Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved by
the Plan Administrator from time to time.
(3) The issuance, transfer or delivery of certificates of Common
Stock pursuant to the exercise of Options may be delayed, at the
discretion of the Plan Administrator, until the Plan
Administrator is satisfied that the applicable requirements of
the federal and state securities laws and the withholding
provisions of the Code have been met.
(m) Stock Dividend, Reorganization or Liquidation. (1) If (i)
the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor
provision) or any "corporate transaction" described in the
regulations thereunder; (ii) the Company shall declare a dividend
payable in, or shall subdivide or combine, its Common Stock or
(iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, with respect to each
outstanding Option, proportionately adjust the number of shares
of Common Stock subject to such Option and/or the exercise price
per share so as to preserve the rights of the Holder
substantially proportionate to the rights of the Holder prior to
such event, and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock
subject to outstanding Options, the number of shares available
under Section 4 of this Plan and the number of shares of Common
Stock underlying Options to be granted pursuant to Section 6
hereof shall automatically be increased or decreased, as the case
may be, proportionately, without further action on the part of
the Plan Administrator, the Company, the Company's shareholders,
or any Holder.
(2) If the Company shall at any time declare an extraordinary
dividend with respect to the Common Stock, whether payable in
cash or other property, the Plan Administrator may, in the
exercise of its sole discretion and with respect to each
outstanding Option, proportionately adjust the number of shares
of Common Stock subject to such Option and/or adjust the exercise
price per share so as to preserve the rights of the Holder
substantially proportionate to the rights of the Holder prior to
such event, and to the extent that such action shall include an
increase or decrease in the number of shares of Common Stock
subject to outstanding Options, the number of shares available
under Section 4 of this Plan and the number of shares of Common
Stock underlying Options to be granted pursuant to Section 6
hereof shall automatically be increased or decreased, as the case
may be, proportionately, without further action on the part of
the Plan Administrator, the Company, the Company's shareholders,
or any Holder.
(3) If the Company is liquidated or dissolved, the Plan
Administrator may allow the Holders of any outstanding Options to
exercise all or any part of the unvested portion of the Options
held by them; provided, however, that such Options must be
exercised prior to the effective date of such liquidation or
dissolution. If the Holders do not exercise their Options prior
to such effective date, each outstanding Option shall terminate
as of the effective date of the liquidation or dissolution.
(4) The foregoing adjustments in the shares subject to Options
shall be made by the Plan Administrator, or by any successor
administrator of this Plan, or by the applicable terms of any
assumption or substitution document.
(5) The grant of an Option shall not affect in any way the right
or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure,
to merge, consolidate or dissolve, to liquidate or to sell or
transfer all or any part of its business or assets.
(n) Change in Control. (1) Any and all Options that are
outstanding under the Plan at the time of occurrence of any of
the events described in Subparagraphs (A), (B), (C) and (D) below
(an "Eligible Option") shall become immediately vested and fully
exercisable for the periods indicated (each such exercise period
referred to as an "Acceleration Window"):
(A) For a period of forty-five (45) days beginning on the day on
which any Person together with all Affiliates and Associates (as
such terms are defined below) of such Person shall become the
Beneficial Owner (as defined below) of twenty-five percent (25%)
or more of the shares of Common Stock then outstanding, but shall
not include the Corporation, any subsidiary of the Corporation,
any employee benefit plan of the Corporation or of any subsidiary
of the Corporation, or any Person or entity organized, appointed
or established by the Corporation for or pursuant to the terms of
any such employee benefit plan;
(B) Beginning on the date that a tender or exchange offer for
Common Stock by any Person (other than the Corporation, any
subsidiary of the Corporation, any employee benefit plan of the
Corporation or of any subsidiary of the Corporation, or any
Person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of any such employee
benefit plan) is first published or sent or given within the
meaning of Rule 14d-2 under the Exchange Act and continuing so
long as such offer remains open (including any extensions or
renewals of such offer), unless by the terms of such offer the
offeror, upon consummation thereof, would be the Beneficial Owner
of less than thirty percent (30%) of the shares of Common Stock
then outstanding;
(C) For a period of twenty (20) days beginning on the day on
which the shareholders of the Corporation (or, if later, approval
by the shareholders of any Person) duly approve any merger,
consolidation, reorganization or other transaction providing for
the conversion or exchange of more than fifty percent (50%) of
the outstanding shares of Common Stock into securities of any
Person, or cash, or property, or a combination of any of the
foregoing; or
(D) For a period of twenty (20) days beginning on the day on
which, at any meeting of the shareholders of the Company
involving a contest for the election of directors, individuals
constituting a majority of the Board of Directors who were not
the Board of Director's nominees for election immediately prior
to the meeting are elected; provided, however, that with respect
to the events specified in Subparagraphs (A), (B) and (C) above,
such accelerated vesting shall not occur if the event that would
otherwise trigger the accelerated vesting of Eligible Options has
received the prior approval of a majority of all of the directors
of the Corporation, excluding for such purposes the votes of
directors who are directors or officers of, or have a material
financial interest in any Person (other than the Corporation) who
is a party to the event specified in Subparagraph (A), (B) or (C)
above which otherwise would trigger acceleration of vesting and
provided, further, that no Option which is to be converted into
an option to purchase shares of Exchange Stock as stated at item
(3) below shall be accelerated pursuant to this Section 5(n).
(2) The exercisability of any Eligible Option which remains
unexercised following expiration of an Acceleration Window shall
be governed by the vesting schedule and other terms of the
Agreement representing such Option.
(3) If the shareholders of the Corporation receive shares of
capital stock of another Person ("Exchange Stock") in exchange
for or in place of shares of Common Stock in any transaction
involving any merger, consolidation, reorganization or other
transaction providing for the conversion or exchange of all or
substantially all outstanding shares of Common Stock into
Exchange Stock, then at the closing of such transaction all
Options granted hereunder shall be converted into options to
purchase shares of Exchange Stock unless the Corporation (by the
affirmative vote of a majority of all of the directors of the
Corporation, excluding for such purposes the votes of directors
who are directors or officers of, or have a material financial
interest in the Person issuing the Exchange Stock and any
Affiliate of such Person), in its sole discretion, determines
that any or all such Options granted hereunder shall not be so
converted but instead shall terminate. The amount and price of
converted Options shall be determined by adjusting the amount and
price of the Options granted hereunder in the same proportion as
used for determining the shares of Exchange Stock the holders of
the Common Stock received in such merger, consolidation,
reorganization or other transaction. Unless altered by the Plan
Administrator, the vesting schedule set forth in the Option
Agreement shall continue to apply to the Options granted for
Exchange Stock.
For the purposes of this Subsection 5(n): (i) "Person" shall
include any individual, firm, corporation, partnership or other
entity; (ii) "Affiliate" and "Associate" shall have the meanings
assigned to them in Rule 12b-2 under the Exchange Act; and (iii)
"Beneficial Owner" shall have the meaning assigned to it in Rule
16a-1 under the Exchange Act.
6. NON-EMPLOYEE DIRECTORS. Directors who are not also employees
of the Company ("Non-Employee Directors") shall be eligible to
receive options under the Plan only in accordance with the terms
and conditions of this Section 6.
(a) Number of Shares and Date of Grant. Concurrent with
election to the Board of Directors, and so long as shares are
available for grant pursuant to Section 4, each Non-Employee
Director shall automatically receive an option to purchase 2,500
shares of Common Stock, subject to adjustment as set forth in
Section 5(m) hereof. Every first Wednesday in May for so long as
shares are available for grant pursuant to Section 4, each Non-
Employee Director who was a director of the Company as of
December 31 of the immediately preceding year shall receive an
additional option to purchase 2,500 shares of Common Stock,
subject to adjustment as set forth in Section 5(m) hereof. In
addition, each Non-Employee Director holding office on the date
of approval of this Plan by the Company's shareholders shall
receive an option (a "Recognition Option") to purchase up to the
number of shares of Common Stock equal to the product of (x)
2,500, multiplied by (y) the number of complete years of
continuous service of such person as a Non-Employee Director,
subject to adjustment as set forth in Section 5(m) hereof.
Options granted pursuant to this Section 6 shall be Non-Qualified
Stock Options.
(b) Option Price. The exercise price of Options granted under
this Section 6 shall be the fair market value of the Company's
Common Stock on the Date of Grant. For the purposes of this
Section, the term "fair market value" on any given day means:
(i) if the Common Stock is listed on a national securities
exchange, the average of the high and low prices of the Common
Stock of the Company on such exchange; or (ii) if the Common
Stock is quoted in the over-the-counter securities market, the
last sale price of the Common Stock as quoted by NASDAQ National
Market System or, if the Common Stock is not quoted in the
National Market System, the mean between the closing bid and
asked prices of Common Stock as quoted by NASDAQ.
(c) Vesting. In order to ensure that the Company will receive
the benefits contemplated in exchange for the Options, no Option
granted under this Section 6 shall be exercisable until it has
vested. Options (other than Recognition Options) shall vest and
become exercisable as follows: forty percent (40%) on the Date
of Grant; thirty percent (30%) on the first anniversary of the
Date of Grant; and thirty percent (30%) on the second anniversary
of the Date of Grant. Recognition Options shall vest according
to the same schedule but assuming that the Recognition Options
had been granted in annual increments of 2,500 shares beginning
on the first Wednesday in May of each of the calendar years
following the Optionee's initial election to the Board of
Directors.
(d) Term of Option. Options shall terminate, to the extent not
previously exercised, upon the occurrence of the first of the
following events:
(i) ten (10) years from the Date of Grant;
(ii) the expiration of ninety (90) days from the date of
Optionee's termination as a Director of the Company for any
reason other than death or Disability (as defined below); or
(iii) the expiration of one (1) year from the date of death of
Optionee or the cessation of Optionee's service as a Director by
reason of Disability (as defined below).
For purposes of this Section 6, unless otherwise defined in the
Agreement, "Disability" shall mean any physical, mental or other
health condition which substantially impairs the Optionee's
ability to perform his or her duties as a director of the Company
for one hundred twenty (120) days or more in any two hundred
forty (240) day period or that can be expected to result in
death.
(e) Other Terms. Except as otherwise provided in this Section
6, all Options granted to Non-Employee Directors shall be subject
to the provisions of the Plan, including Section 5.
(f) Amendments. The provisions of this Section 6 shall not be
amended more than once every six (6) months, other than to
comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
7. EFFECTIVE DATE; TERM. This Plan shall be effective as of
February 15, 1995. Incentive Stock Options may be granted by the
Plan Administrator from time to time thereafter until February
14, 2005. Non-Qualified Stock Options may be granted until this
Plan is terminated by the Board in its sole discretion.
Termination of this Plan shall not terminate any Option granted
prior to such termination. Any Options granted by the Plan
Administrator prior to the approval of this Plan by the
shareholders of the Company shall be granted subject to
ratification of this Plan by the shareholders of the Company
within twelve (12) months after this Plan is adopted by the
Board. The Plan Administrator may require any shareholder
approval that it considers necessary for the Company to comply
with or to avail the Company and/or the Optionees of the benefits
of any securities, tax, market listing or other administrative or
regulatory requirement. If such shareholder ratification is
sought within twelve (12) months after this Plan is adopted by
the Board and such shareholder ratification is not obtained, each
and every Option granted under this Plan shall be null and void
and shall convey no rights to the Holder thereof.
8. NO OBLIGATIONS TO EXERCISE OPTION. The grant of an Option
shall impose no obligation upon the Optionee to exercise such
Option.
9. NO RIGHT TO OPTIONS OR TO EMPLOYMENT. Except for the grant
of options pursuant to Section 6 hereof, whether or not any
Options are to be granted under this Plan shall be exclusively
within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person
any right to participate under this Plan. The grant of an Option
shall in no way constitute any form of agreement or understanding
binding on the Company or any Related Company, express or
implied, that the Company or any Related Company will employ or
contract with an Optionee for any length of time, nor shall it
interfere in any way with the Company's or, where applicable, a
Related Company's right to terminate Optionee's employment at any
time, which right is hereby reserved.
10. APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Common Stock issued upon the exercise of Options
shall be used for general corporate purposes, unless otherwise
directed by the Board.
11. INDEMNIFICATION OF PLAN ADMINISTRATOR. In addition to all
other rights of indemnification they may have as members of the
Board, members of the Plan Administrator shall be indemnified by
the Company for all reasonable expenses and liabilities of any
type or nature, including attorneys' fees, incurred in connection
with any action, suit or proceeding to which they or any of them
are a party by reason of, or in connection with, this Plan or any
Option granted under this Plan, and against all amounts paid by
them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company),
except to the extent that such expenses relate to matters for
which it is adjudged that such Plan Administrator member is
liable for willful misconduct; provided, that within fifteen (15)
days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall,
in writing, notify the Company of such action, suit or
proceeding, so that the Company may have the opportunity to make
appropriate arrangements to prosecute or defend the same.
12. AMENDMENT OF PLAN. Except as set forth in Section 6 hereof,
the Plan Administrator may, at any time, modify, amend or
terminate this Plan or modify or amend Options granted under this
Plan, including, without limitation, such modifications or
amendments as are necessary to maintain compliance with
applicable statutes, rules or regulations; provided however, no
amendment with respect to an outstanding Option which has the
effect of reducing the benefits afforded to the Holder thereof
shall be made over the objection of such Holder; further
provided, that the events triggering acceleration of vesting of
outstanding Options may be modified, expanded or eliminated
without the consent of Holders. The Plan Administrator may
condition the effectiveness of any such amendment on the receipt
of shareholder approval at such time and in such manner as the
Plan Administrator may consider necessary for the Company to
comply with or to avail the Company and/or the Optionees of the
benefits of any securities, tax, market listing or other
administrative or regulatory requirement. Without limiting the
generality of the foregoing, the Plan Administrator may modify
grants to persons who are eligible to receive Options under this
Plan who are foreign nationals or employed outside the United
States to recognize differences in local law, tax policy or
custom.
Date Approved by Board of Directors of Company: February 15,
1995.
Date Approved by Shareholders of Company: ___________________
EXHIBIT B
CARVER CORPORATION
1995 STOCK BONUS PLAN
This 1995 Stock Bonus Plan (the "Plan") provides for the grant of
bonuses consisting of shares of common stock, $.01 par value (the
"Common Stock"), of Carver Corporation, a Washington corporation
(the "Company"). Bonuses granted under this plan shall be
Restricted Bonuses or Unrestricted Bonuses as defined in Section
5(a) of the Plan.
1. PURPOSES. The purposes of this Plan are to reward directors,
valued key employees and consultants of the Company and such
other persons as the Plan Administrator shall select in
accordance with Section 3 below for their services to the
Company, to enable such persons to acquire a greater proprietary
interest in the Company, thereby strengthening their incentive to
achieve the objectives of the shareholders of the Company, and to
serve as an aid and inducement in the hiring of new employees.
2. ADMINISTRATION. This Plan shall be administered by the Board
of Directors of the Company (the "Board") if each director is a
"disinterested person" (as defined below). If all directors are
not disinterested persons, the Plan shall be administered by a
committee designated by the Board and composed of two (2) or more
members of the Board who are disinterested persons, which
committee (the "Committee") may be an executive, compensation or
other committee, including a separate committee especially
created for this purpose. "Disinterested person" shall have the
meaning assigned to it under Rule 16b-3 (as amended from time to
time) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), or any successor rule or regulatory
requirement ("Rule 16b-3"). The Committee shall have the powers
and authority vested in the Board hereunder (including the power
and authority to interpret any provision of this Plan or of any
Bonus). The members of any such Committee shall serve at the
pleasure of the Board. A majority of the members of the
Committee shall constitute a quorum, and all actions of the
Committee shall be taken by a majority of the members present.
Any action may be taken by a written instrument signed by all of
the members of the Committee and any action so taken shall be
fully effective as if it had been taken at a meeting. The Board,
or any committee thereof appointed to administer the Plan, is
referred to herein as the "Plan Administrator".
Subject to the provisions of this Plan, and with a view to
effecting its purpose, the Plan Administrator shall have sole
authority, in its absolute discretion, to (a) construe and
interpret this Plan; (b) define the terms used in this Plan; (c)
prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or
reconcile any inconsistency in this Plan; (e) determine the
individuals to whom Bonuses shall be granted under this Plan and
whether the Bonus shall be a Restricted Bonus or an Unrestricted
Bonus; (f) determine the time or times at which Bonuses shall be
granted under this Plan; (g) determine the number of shares of
Common Stock covered by each Bonus; (h) determine all other terms
and conditions of Bonuses; and (i) make all other determinations
necessary or advisable for the administration of this Plan. All
decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants
in this Plan and on their legal representatives, heirs and bene-
ficiaries.
The Plan Administrator shall have no authority, discretion or
power to award bonuses hereunder to directors of the Company.
Benefits for such persons shall accrue solely in accordance with
Section 6 hereof.
The Board or the Committee may delegate to one or more executive
officers of the Company the authority to grant Bonuses under this
Plan to employees of the Company who, on the Date of Grant, are
not subject to Section 16(b) of the Exchange Act with respect to
the Common Stock ("Non-Insiders"), and in connection therewith
the authority to determine the number of shares of Common Stock
covered by such Bonus and all other terms and conditions of such
Bonuses. Unless expressly approved in advance by the Board or
the Committee, such delegation of authority shall not include the
authority to alter the terms of outstanding Bonuses. The term
"Plan Administrator" when used in any provision of this Plan
other than Sections 2 and 12 shall be deemed to refer to the
Board or the Committee, as the case may be, and an executive
officer who has been authorized to grant Bonuses pursuant hereto,
insofar as such provision may be applied to Non-Insiders and
Bonuses granted to Non-Insiders.
3. ELIGIBILITY. Bonuses may be granted to any individual who,
at the time the Bonus is granted, is an employee of the Company
or any Related Corporation (as defined below), including
employees who are directors of the Company ("Employees"), and to
such other persons as the Plan Administrator shall select.
Bonuses shall be granted hereunder to directors who are not
employees of the Company or any Related Corporation, but solely
on the terms and conditions set forth in Section 6 hereof.
During each calendar year of the term of the Plan, no person
shall be eligible to receive Bonuses covering more than 100,000
shares of Common Stock (subject to adjustment in the event of a
stock split, stock dividend, recapitalization, reorganization or
similar event). Any person to whom a Bonus is granted under this
Plan is referred to as a "Grantee".
As used in this Plan, the term "Related Corporation", shall mean
any corporation (other than the Company) that is a "Parent
Corporation" of the Company or "Subsidiary Corporation" of the
Company, as those terms are defined in Sections 424(e) and
424(f), respectively, of the Internal Revenue Code of 1986, as
amended (or any successor provisions) (the "Code"), and the
regulations thereunder (as amended from time to time).
4. STOCK. In each year during the term of the Plan, the Plan
Administrator is authorized to grant Bonuses to acquire an amount
of shares of the Company's authorized but unissued, or
reacquired, Common Stock equal in amount to one percent (1%) of
the number of issued and outstanding shares of Common Stock on
the record date for the meeting of shareholders of the Company at
which this Plan is approved, in the case of 1995, and on
January 1 of each year thereafter. The number of shares with
respect to which Bonuses may be granted in each year hereunder is
subject to adjustment in the event of a stock split, stock
dividend, recapitalization, reorganization or similar event. In
the event that any outstanding Bonus is forfeited for any reason,
the shares of Common Stock allocable to the forfeited portion of
such Bonus may again be subject to a Bonus to the same Grantee or
to a different person eligible under Section 3 of this Plan.
Shares of Common Stock granted to a Grantee pursuant to a Bonus
are referred to herein as "Bonus Shares".
5. TERMS AND CONDITIONS OF BONUSES. (a) Grant of Bonus. The
Plan Administrator may grant to a Grantee (i) Bonus Shares
subject to the restrictions described in Section 5(c) hereof
(such grant a "Restricted Bonus" and such shares "Restricted
Bonus Shares"); or (ii) Bonus Shares which are not subject to the
restrictions described in Section 5(c) hereof (such grant an
"Unrestricted Bonus" and such shares "Unrestricted Bonus
Shares"). The Grantee shall pay no consideration for Restricted
Bonus Shares or Unrestricted Bonus Shares.
(b) Bonus Agreement. As soon as practicable after the date of a
Bonus grant, the Company and the Grantee shall enter into a
written agreement (a "Bonus Agreement") identifying the date of
grant, and specifying the terms and conditions of the Bonus. Any
Bonus under this Plan shall be governed by the terms of the Plan
and the applicable Bonus Agreement.
(c) Restricted Bonus Shares. (i) Restrictions. Subject to the
provisions of the Plan and the Bonus Agreement, during the period
(the "Restriction Period"), if any, set by the Plan Administrator
at the time of award of the Bonus (the "Date of Grant"),
commencing with, and not exceeding ten (10) years from, the Date
of Grant, the Grantee shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber Restricted Bonus Shares.
Within these limits, the Plan Administrator may provide for the
lapse of such restrictions in installments and may accelerate or
waive such restrictions, in whole or in part, based on service,
performance or such other factors or criteria as the Plan
Administrator may determine.
(ii) Dividends on Restricted Bonus Shares. Unless otherwise
determined by the Plan Administrator, with respect to dividends
on Restricted Bonus Shares, dividends payable in cash shall be
paid to the Grantee and dividends payable in Common Stock shall
be paid in the form of Restricted Bonus Shares. The payment of
share dividends in additional Restricted Bonus Shares shall only
be permissible if sufficient shares of Common Stock are available
under Section 4 for such reinvestment.
(iii) Termination. Except to the extent otherwise provided in
the Bonus Agreement and pursuant to Section 5(c)(i), in the event
the Grantee ceases to be, for any reason, employed by, or a
consultant to, the Company or a Related Corporation (such event a
"Termination") during the Restriction Period, all Restricted
Bonus Shares then subject to restriction shall be forfeited by
the Grantee.
(iv) Escrow and Voting of Restricted Bonus Shares. As soon as
practicable following the Grant Date, the appropriate officers of
the Company shall prepare, issue and deliver certificate(s)
representing Restricted Bonus Shares to the Chief Financial
Officer or General Counsel of the Company (the "Administrative
Executive") to be held by such person in accordance with this
paragraph. Any grant of Restricted Bonus Shares under this Plan
shall be made conditioned on the Grantee's delivery to the
Administrative Executive of stock power(s) duly transferring
ownership of the Restricted Bonus Shares to the Company. The
Administrative Executive shall deliver the share certificate(s)
and stock power(s) to the Grantee only following the receipt of
written certification from the Plan Administrator that the
Restricted Period relating to the Restricted Bonus Shares has
expired. Pending the delivery of share certificates representing
Restricted Bonus Shares to the Grantee as provided in this
paragraph 5(c)(iv) or the forfeiture of such shares as provided
in paragraph 5(c)(iii), the Grantee shall be entitled to vote
such shares.
(d) Performance Goals. Any Bonus may be granted either alone or
in addition to other Bonuses granted under the Plan. The Plan
Administrator may condition the grant of any Bonus upon the
attainment of specified performance goals or such other factors
or criteria, including continued employment or consulting, as the
Plan Administrator shall determine. Performance objectives may
vary from Grantee to Grantee and among groups of Grantees and
shall be based upon such Company, subsidiary, group or division
factors or criteria as the Plan Administrator may deem
appropriate, including, but not limited to, earnings per share or
return on equity. The other provisions of Bonuses also need not
be the same with respect to each recipient. Unless specified
otherwise in the Plan or by the Plan Administrator, the date of
grant of a Bonus shall be the date of action by the Plan
Administrator to grant the Bonus.
(e) Right of Repurchase. At the option of the Plan
Administrator, Bonus Shares issued under this Plan may be subject
to a right of repurchase in favor of the Company upon Termination
(as defined in Section 5(c)(iii) hereof) of the Grantee. The
terms and conditions of such right of repurchase, if any, shall
be set forth in the Bonus Agreement.
(f) Securities Regulation and Tax Withholding. (i) Bonus
Shares shall not be issued with respect to a Bonus, unless the
grant of such Bonus and the issuance and delivery of such Bonus
Shares shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities
laws, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations thereunder and the requirements of any
stock exchange or quotation system upon which such Bonus Shares
may then be listed or quoted, and such issuance shall be further
subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption
from registration for the issuance of such Bonus Shares. The
inability of the Company to obtain from any regulatory body the
authority deemed by the Company to be necessary for the lawful
issuance of any Bonus Shares under this Plan, or the
unavailability of an exemption from registration for the issuance
of any Bonus Shares under this Plan, shall relieve the Company of
any liability with respect to the non-issuance of such Bonus
Shares.
As a condition to the issuance of Bonus Shares, the Plan
Administrator may require the Grantee to represent and warrant in
writing at the time of such issuance that such Bonus Shares are
being acquired only for investment and without any then-present
intention to sell or distribute such Bonus Shares. At the option
of the Plan Administrator, a stop-transfer order against such
Bonus Shares may be placed on the stock books and records of the
Company, and a legend indicating that the Bonus Shares may not be
pledged, sold or otherwise transferred, unless an opinion of
counsel is provided stating that such transfer is not in
violation of any applicable law or regulation, may be stamped on
the certificates representing such Bonus Shares in order to
assure an exemption from registration. The Plan Administrator
also may require such other documentation as may from time to
time be necessary to comply with federal and state securities
laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE REGISTRATION OF
BONUS SHARES.
(ii) The Grantee shall pay to the Company by certified or
cashier's check, promptly upon grant of a Bonus or, if later, the
date that the amount of such obligations becomes determinable (in
either case, the "Tax Date"), all applicable federal, state,
local and foreign withholding taxes that the Plan Administrator,
in its discretion, determines to result upon grant of a Bonus,
lapse of restrictions on transfer of Restricted Bonus Shares,
transfer or other disposition of Bonus Shares or otherwise
related to a Bonus or Bonus Shares. Upon approval of the Plan
Administrator, a Grantee may satisfy such obligation by complying
with one or more of the following alternatives selected by the
Plan Administrator:
(A) by delivering to the Company shares of Common Stock
previously held by such Grantee or by the Company withholding
Bonus Shares otherwise issuable pursuant to the Bonus, which have
a fair market value at the Tax Date (as determined by the Plan
Administrator) equal to the tax obligation to be paid by the
Grantee on such Tax Date; provided, that if the Grantee is an
Insider or if beneficial ownership of Bonus Shares is
attributable to an Insider pursuant to the regulations under
Section 16 of the Exchange Act, the Grantee will have executed,
by a date not later than six (6) months prior to the Tax Date, an
irrevocable election to satisfy its obligations under this
Paragraph (ii) through the Company withholding shares of Common
Stock otherwise deliverable pursuant to the Bonus;
(B) by executing appropriate loan documents approved by the Plan
Administrator by which the Grantee borrows funds from the Company
to pay the withholding taxes due under this Paragraph (ii), with
such repayment terms as the Plan Administrator shall select; or
(C) by complying with any other payment mechanism approved by
the Plan Administrator from time to time.
(iii) The issuance, transfer or delivery of certificates
representing Bonus Shares may be delayed, at the discretion of
the Plan Administrator, until the Plan Administrator is satisfied
that the applicable requirements of the federal and state
securities laws and the withholding provisions of the Internal
Revenue Code have been met.
(g) Adjustment of Bonuses; Waivers. The Plan Administrator may
adjust the restrictions, performance goals and measurements
applicable to Bonuses (i) to take into account changes in law and
accounting and tax rules; (ii) to make such adjustments as the
Plan Administrator deems necessary or appropriate to reflect the
inclusion or exclusion of the impact of extraordinary or unusual
items, events or circumstances in order to avoid windfalls or
hardships; and (iii) to make such adjustments as the Plan
Administrator deems necessary or appropriate to reflect any
material changes in business conditions. In the event of
hardship or other special circumstances of a Grantee and
otherwise in its discretion, the Plan Administrator may waive in
whole or in part any or all restrictions, conditions, vesting or
forfeiture with respect to any Bonus granted to such Grantee.
The provisions of this Section 5(g) shall not apply to Bonuses
granted under Section 6 hereof.
(h) Non-Competition. The Plan Administrator, in addition to any
other requirement it may impose, may condition any discretionary
adjustment or waiver pursuant Section 5(g) hereof upon a
Grantee's agreement to (i) not engage in any business or activity
competitive with any business or activity conducted by the
Company; and (ii) be available for consultations at the request
of the Company's management, all on such terms and conditions
(including conditions in addition to (i) and (ii)) as the Plan
Administrator may determine.
(i) Rights as Shareholder. Unless the Plan or the Plan
Administrator expressly specifies otherwise, a Grantee shall have
no rights as a shareholder with respect to any Bonus Shares until
the issuance (as evidenced by the appropriate entry on the books
of the Company or a duly authorized transfer agent) of a
certificate representing the Bonus Shares. Subject to Sections 4
and 5(c)(ii), no adjustment shall be made for dividends or other
rights for which the record date is prior to the date the
certificate is issued.
(j) Beneficiary Designation. The Plan Administrator, in its
discretion, may establish procedures for a Grantee to designate a
beneficiary to whom any Bonus Shares issuable or amounts payable
in the event of the Grantee's death are to be issued or paid.
(k) Transfer Limitation on Stock. In addition to any other
transfer restrictions which may be imposed under the Plan or any
Bonus Agreement, a Grantee who is an Insider may not sell or
otherwise transfer, in whole or in part, any Bonus Shares prior
to the six-month anniversary of the issuance of such Bonus
Shares, unless the Plan Administrator determines that the
foregoing provisions are not necessary to make the transaction
exempt from Section 16(b) of the Exchange Act pursuant to Rule
16b-3.
6. NON-EMPLOYEE DIRECTORS. Directors who are not also employees
of the Company ("Non-Employee Directors") shall be eligible to
receive Bonuses under the Plan only in accordance with the terms
and conditions of this Section 6.
On each February 15, May 15, August 15 and November 15, following
shareholder approval of this Plan and for so long thereafter as
shares are available for grant pursuant to Section 4, each person
who served as a Non-Employee Director during the then most
recently completed calendar quarter shall receive 250 Bonus
Shares. Any person who served as a Non-Employee Director for
less than the entire quarter shall receive a pro-rated number of
Bonus Shares based on the number of days of service as a Non-
Employee Director during such quarter.
7. EFFECTIVE DATE; TERM. This Plan shall be effective as of
February 15, 1995. Bonuses may be granted by the Plan
Administrator from time to time thereafter until February 15,
2005, or until this Plan is terminated by the Board in its sole
discretion. Termination of this Plan shall not terminate any
Bonus granted prior to such termination. No Bonuses shall be
granted hereunder to directors of the Company pursuant to Section
6 hereof or to Insiders prior to the approval of this Plan by the
shareholders of the Company. The Plan Administrator may require
any shareholder approval that it considers necessary for the
Company to comply with or to avail the Company and/or the
Optionees of the benefits of any securities, tax, market listing
or other administrative or regulatory requirement.
8. NO OBLIGATIONS TO ACCEPT BONUS SHARES. The grant of an Bonus
shall impose no obligation upon the Grantee to receive Bonus
Shares.
9. NO RIGHT TO BONUSES OR TO EMPLOYMENT. Except for the grant
of Bonuses pursuant to Section 6 hereof, whether or not any
Bonuses are to be granted under this Plan shall be exclusively
within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person
any right to participate under this Plan. The grant of a Bonus
shall in no way constitute any form of agreement or understanding
binding on the Company or any Related Corporation, express or
implied, that the Company or any Related Corporation will employ
or contract with a Grantee for any length of time, nor shall it
interfere in any way with the Company's or, where applicable, a
Related Corporation's right to terminate a Grantee's employment
at any time, which right is hereby reserved.
10. RULE 16b-3. With respect to Insiders, transactions under
this Plan are intended to comply with the applicable conditions
of Rule 16b-3. To the extent any provision of this Plan or
action by the Plan Administrator fails to so comply, it shall be
adjusted to comply with Rule 16b-3 to the extent permitted by law
and deemed advisable by the Plan Administrator. It shall be the
responsibility of Insiders and not of the Company or the Plan
Administrator, to comply with the requirements of Section 16 of
the Exchange Act; and neither the Company nor the Plan
Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of
Rule 16b-3, or if any Insider incurs any liability under Section
16 of the Exchange Act.
11. INDEMNIFICATION OF PLAN ADMINISTRATOR. In addition to all
other rights of indemnification they may have as members of the
Board, members of the Plan Administrator shall be indemnified by
the Company for all reasonable expenses and liabilities of any
type or nature, including attorneys' fees, incurred in connection
with any action, suit or proceeding to which they or any of them
are a party by reason of, or in connection with, this Plan or any
Bonus granted under this Plan, and against all amounts paid by
them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company),
except to the extent that such expenses relate to matters for
which it is adjudged that such Plan Administrator member is
liable for willful misconduct; provided, that within fifteen (15)
days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall,
in writing, notify the Company of such action, suit or
proceeding, so that the Company may have the opportunity to make
appropriate arrangements to prosecute or defend the same.
12. AMENDMENT OF PLAN. Except as set forth in Section 6 hereof,
the Plan Administrator may, at any time, modify, amend or
terminate this Plan or modify or amend Bonuses granted under this
Plan, including, without limitation, such modifications or
amendments as are necessary to maintain compliance with
applicable statutes, rules or regulations; provided, however, no
amendment with respect to an outstanding Bonus which has the
effect of reducing the benefits afforded to the Grantee thereof
shall be made over the objection of such Grantee. The Plan
Administrator may condition the effectiveness of any such
amendment on the receipt of shareholder approval at such time and
in such manner as the Plan Administrator may consider necessary
for the Company to comply with or to avail the Company and/or the
Optionees of the benefits of any securities, tax, market listing
or other administrative or regulatory requirement. Without
limiting the generality of the foregoing, the Plan Administrator
may modify grants to persons who are eligible to receive Bonuses
under this Plan who are foreign nationals or employed outside the
United States to recognize differences in local law, tax policy
or custom.
13. UNFUNDED STATUS OF PLAN. The Plan shall constitute an
"unfunded" plan for incentive compensation. The Plan
Administrator may authorize the creation of trusts or
arrangements to meet the obligations created under the Plan to
deliver Stock or make payments; provided, however, that unless
the Plan Administrator otherwise determines, the existence of
such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan.
Date Approved by Board of Directors of Company: February 15,
1995.
Date Approved by Shareholders of Company: _______________.
