<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule
14a-12
[ ] Confidential, for Use of the Commission Only (as Permitted
by Rule 14a-6(e)(2))
THE COLONEL'S INTERNATIONAL, INC.
_________________________________________________________________________
(Name of Registrant as Specified in Its Charter)
_________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
_________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
________________________________________________________________
(5) Total fee paid:
________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of its
filing.
<PAGE>
(1) Amount previously paid:
_________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
_________________________________________________________________
(3) Filing party:
_________________________________________________________________
(4) Date filed:
_________________________________________________________________
<PAGE>
THE COLONEL'S INTERNATIONAL, INC.
620 SOUTH PLATT ROAD
MILAN, MICHIGAN 48160
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
________________________________________________________________________
The annual meeting of shareholders of The Colonel's International,
Inc. (the "Company") will be held at the Company's offices at 620 South
Platt Road, Milan, Michigan 48160, on Tuesday, April 22, 1997, at
10:00 a.m. local time, for the following purposes:
1. To elect seven Directors to the Board of Directors.
2. To consider and approve certain amendments to the Company's 1995
Long-Term Incentive Plan, including increasing the number of
shares of Common Stock available for issuance under this plan
from 3,000,000 to 4,000,000.
3. To consider and approve the Company's 1997 Stock Option and
Restricted Stock Plan for Selected Non-Employees.
4. To confirm the appointment of Deloitte & Touche LLP as the
independent auditors of the Company.
5. To transact any other business that may properly come before
the meeting.
Shareholders of record at the close of business on March 3, 1997 are
entitled to notice of and to vote at the meeting and any adjournment of the
meeting. The following Proxy Statement and enclosed form of proxy are
being furnished to holders of the Company's Common Stock on and after April
9, 1997.
By Order of the Board of Directors,
/s/ Michael J. McCloskey
Michael J. McCloskey
Vice-Chairman and Chief Executive Officer
April 9, 1997
It is important that your shares be represented at the
meeting. Even if you expect to attend the meeting,
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY.
<PAGE>
[THE COLONEL'S LOGO]
ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1997
PROXY STATEMENT
This Proxy Statement and the enclosed proxy are being furnished to the
holders of Common Stock, $0.01 par value, of The Colonel's International,
Inc. (the "Company") on and after April 9, 1997 in connection with the
solicitation by the Company's Board of Directors of proxies for use at the
annual meeting of shareholders to be held on April 22, 1997, and at any
adjournment of that meeting. The annual meeting will be held at the
Company's offices at 620 South Platt Road, Milan, Michigan 48160, at 10:00
a.m. local time.
The purpose of the annual meeting is to consider and vote upon: (1)
the election of seven Directors to the Board of Directors; (2) certain
amendments to the Company's 1995 Long-Term Incentive Plan, including
increasing the number of shares of Common Stock available for issuance
under this plan from 3,000,000 to 4,000,000; (3) the adoption of the
Company's 1997 Stock Option and Restricted Stock Plan for Selected
Non-Employees; and (4) the confirmation of Deloitte & Touche LLP as the
Company's independent auditors.
If a proxy in the form distributed by the Company is properly executed
and returned to the Company, the shares represented by that proxy will be
voted at the annual meeting of shareholders and at any adjournment of that
meeting. If a shareholder specifies a choice, the proxy will be voted as
specified. If no choice is specified, the shares represented by the proxy
will be voted for the election of all nominees of the Board of Directors
named in this Proxy Statement and for the approval of the other three
proposals to be presented at the meeting. The Company's management does
not know of any other matter to be presented at the annual meeting. If
other matters are presented, all shares represented by the proxy will be
voted in accordance with the judgment of the persons named as proxies with
respect to those other matters.
A proxy may be revoked at any time prior to its exercise by written
notice delivered to the Secretary of the Company. A proxy may also be
revoked by attending and voting at the annual meeting.
Solicitation of proxies will be made initially by mail. Directors,
officers and employees of the Company may also solicit proxies in person or
by telephone without additional compensation. In addition, proxies may be
solicited by nominees and other fiduciaries who may mail material to or
<PAGE>
otherwise communicate with the beneficial owners of shares held by them.
All expenses of solicitation of proxies will be paid by the Company.
ELECTION OF DIRECTORS
The Board of Directors has nominated the following seven persons for
reelection to the Company's Board of Directors:
NOMINEES
Patsy L. Williamson
Michael J. McCloskey
Mark D. Stevens
Ben C. Parr
John M. Darcy
J. Daniel Frisina
Donald R. Gorman
It is the intent of the persons named in the accompanying proxy to
vote for the election of the seven nominees listed above. The proposed
nominees are willing to be elected and to serve. In the event that any
nominee is unable to serve or is otherwise unavailable for election, which
is not contemplated, the incumbent Directors may or may not select a
substitute nominee. If a substitute nominee is selected, all proxies will
be voted for the person so selected. If a substitute nominee is not
selected, all proxies will be voted for the election of the remaining
nominees. Proxies will not be voted for a greater number of persons than
the number of nominees named.
A plurality of the shares represented in person or by proxy and voting
at the meeting is required to elect Directors. For the purpose of counting
votes on the election of Directors, abstentions, broker non-votes and other
shares not voted will not be counted as shares voted, and the number of
shares for which a plurality is required will be reduced by the number of
shares not voted.
The shares represented by proxies received from the Company's
shareholders will be voted FOR election of the Board's nominees for
Directors unless instructions to withhold a vote for any nominee are
specified in the proxy. The Company has been informed by the holders of
approximately 97.5% of the shares entitled to vote that they intend to vote
in favor of the Board's nominees.
Certain biographical information concerning the nominees listed above
is set forth below under the heading "Board of Directors."
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS
2
<PAGE>
APPROVAL OF AMENDMENTS TO
THE 1995 LONG-TERM INCENTIVE PLAN
The Company's Board of Directors believes that the Company's long-term
interests will best be advanced by aligning the interests of its key
business leaders and employees with the interests of its shareholders.
Therefore, to attract and retain Directors, officers and other key
management employees of exceptional abilities, and in recognition of the
significant and extraordinary contributions to the long-term performance
and growth of the Company made by these individuals, on February 27, 1995,
the Board of Directors adopted The Colonel's International, Inc. 1995 Long-
Term Incentive Plan (the "LTIP"). The LTIP was subsequently approved by
the shareholders of the Company.
Since its inception through the end of fiscal year 1996, the only
Incentive Awards (defined below) made under the LTIP have been automatic
grants of stock options to Messrs. Frisina and Gans, as described below
(see "Ownership of Common Stock"). However, as discussed below (see
"Board of Directors"), in February 1997, the Company appointed Mr.
McCloskey as a Director, the Vice-Chairman of the Board and the Chief
Executive Officer. In order to attract and retain Mr. McCloskey in these
positions, the Board of Directors granted Mr. McCloskey options to acquire
up to 1,000,000 shares of Common Stock under the LTIP, as more fully
described in "Ownership of Common Stock." Also, the Company's Board of
Directors granted to each non-employee Director of the Company options to
acquire up to 5,000 shares of Common Stock under the LTIP. See "Ownership
of Common Stock."
In order to permit the Company to receive federal tax deductions for
certain incentive awards issued under the LTIP, the Board of Directors
determined that the LTIP should be amended to provide the Company with the
opportunity to issue incentive awards that may be deemed performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). To this end, the Board of Directors approved the
following amendments to the LTIP:
- Section 2.5 of the Plan was amended to read as follows:
"Committee" means the Compensation Committee of the Board or such
other committee as the Board shall designate to administer the
Plan. The Committee shall consist of at least two members of the
Board and all of its members shall be "non-employee directors" as
defined in Rule 16b-3 issued under the [Exchange] Act. The
Board, in its discretion, may also require that members of the
Committee be "outside directors" as defined in the rules
promulgated pursuant to Section 162(m) of the Code.
This amendment was adopted to (a) reflect certain changes in the rules
under Section 16 of the Securities Exchange Act of 1934, as amended (the
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<PAGE>
"Exchange Act"), and (b) ensure that all Compensation Committee members met
applicable requirements of Section 162(m) of the Code. Prior to its
amendment, this section of the LTIP had read:
"Committee" means the Compensation Committee of the Board or such
other committee as the Board shall designate to administer the
Plan. The Committee shall consist of at least two members of the
Board, and all of its members shall be "disinterested persons" as
defined in Rule 16b-3 under the [Exchange] Act.
- Section 4.1 of the Plan was amended to read as follows:
4.1 NUMBER OF SHARES. Subject to adjustment as provided
in subsection 4.2 of the Plan, a maximum of 4,000,000 shares of
Common Stock shall be available for Incentive Awards under the
Plan. Such shares shall be authorized and may be either
unissued or treasury shares.
Section 4.1 previously provided that a maximum of 3,000,000 shares of
Common Stock would be available for issuance under the Plan. This
amendment was intended to allow the Company to award greater amounts of
Incentive Awards under the Plan.
- Section 5.3 of the LTIP was amended to read as follows:
5.3 STOCK OPTION PRICE. The per share Stock Option price
shall be determined by the Committee, but shall be a price that
is equal to or greater than one hundred percent (100%) of the
Market Value on the date of grant.
This amendment was adopted to reflect certain changes in the Code.
Previously, this section had read:
The per share Stock Option price shall be determined by the
Committee, but shall be a price that is equal to or higher than
the par value of the Company's Common Stock; provided, however,
that the per share Stock Option price for any shares designated
as incentive stock options shall be equal to or greater than one
hundred percent (100%) of the Market Value on the date of grant.
- New Section 5.8 of the LTIP was added (and former Section 5.8 was
renumbered as Section 5.9):
5.8 LIMITS ON GRANTS. No Participant shall be granted,
during any calendar year, Options to purchase more than 1,000,000
shares of Common Stock, subject to adjustment as provided in
subsection 4.2 of the Plan. The purpose of this subsection 5.8
is to ensure that the Plan provides performance based
compensation under Section 162(m) of the Code. This subsection
5.8 shall be interpreted or amended to achieve that purpose.
4
<PAGE>
The Board of Directors directed that these amendments be presented to
the Company's shareholders for their approval at the 1997 annual meeting of
shareholders. If shareholder approval is not received, the foregoing
amendments will not be made to the LTIP. Furthermore, if new Section 5.8
is not approved by the shareholders, then the Company will make no further
grants to officers and Directors under the LTIP. The Board of Directors
believes that the adoption and implementation of the foregoing amendments
to the LTIP are now advisable to help enable the Company to attract and
retain Directors and executive officers of the Company.
The LTIP has primarily been used to grant stock options. However, the
LTIP also permits grants of restricted stock, stock awards, stock
appreciation rights and tax benefit rights if determined to be desirable to
advance the purposes of the LTIP. These grants and awards are referred to
as "Incentive Awards." By combining in a single plan many types of
incentives commonly used in long-term incentive compensation programs, the
LTIP provides significant flexibility to the Compensation Committee of the
Board of Directors to tailor specific long-term incentives that would best
promote the objectives of the LTIP, and in turn promote the interests of
the Company's shareholders.
The following is a summary of the principal features of the LTIP, as
amended. The summary is qualified in its entirety by reference to the
terms of the LTIP, the complete text of which (including the foregoing
amendments) is attached as Appendix A to this Proxy Statement.
Persons eligible to receive Incentive Awards under the LTIP (with
certain limitations discussed below) include Directors (currently eight
persons), corporate officers (currently three additional persons) and
other key employees (currently no other persons) of the Company. A maximum
of 4,000,000 shares of Common Stock (subject to certain antidilution
adjustments) is available for Incentive Awards under the LTIP. Of the
4,000,000 shares authorized for Incentive Awards under the LTIP, only one-
half can be awarded as restricted stock. Shares issued under the LTIP are
authorized and unissued. Because Directors, officers and key employees of
the Company and its subsidiaries may receive awards under the LTIP, they
may be deemed to have an interest in the LTIP. The LTIP is not qualified
under Section 401(a) of the Code and is not subject to the Employee
Retirement Income Security Act of 1974, as amended.
The LTIP is administered by the Compensation Committee, which is
currently comprised of three non-employee Directors (as defined in Rule
16b-3 under the Exchange Act), none of whom participates or is eligible to
participate in any long-term incentive plan of the Company or its
subsidiaries, except for nondiscretionary stock option grants based upon a
specified formula, and each of whom must be an "outside director" as defined
in the rules issued pursuant to Section 162(m) of the Code (unless the
Board of Directors, in its discretion, determines otherwise). The
Compensation Committee makes determinations, subject to the terms of the
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LTIP, as to the persons to receive Incentive Awards, the amount of
Incentive Awards to be granted to each person, the terms of each grant and
all other determinations necessary or advisable for administration of the
LTIP. The Compensation Committee can amend the terms of Incentive Awards
granted under the LTIP from time to time in a manner consistent with the
LTIP; provided, however, that no amendment may be effective relating to a
particular Incentive Award without the consent of the relevant participant,
except to the extent the amendment operated solely to the benefit of that
participant.
Under the LTIP, participants can be granted stock options. Certain
stock options that can be granted to employees under the LTIP may qualify
as incentive stock options as defined in Section 422(b) of the Code. Other
stock options, including all stock options that are granted to Directors
who are not employees, would not be incentive stock options within the
meaning of the Code. Stock options can be granted at any time prior to the
termination of the LTIP according to its terms or by action of the
Compensation Committee.
Upon a grant, the Compensation Committee sets forth the terms of
individual grants of stock options in stock option agreements, which
agreements contain such terms and conditions, consistent with the
provisions of the LTIP, as the Compensation Committee determines to be
appropriate. These restrictions may include vesting requirements to
encourage long-term ownership of shares. The Company receives no
consideration upon the award of options. The option price per share is
determined by the Compensation Committee and is a price equal to or higher
than the "market value" of the Company's Common Stock on the date of grant.
"Market value" means the last reported sales price of shares of the
Company's Common Stock as reported on the NASDAQ SmallCap Market on the
date of grant, or if no shares were traded on that date, the last preceding
date on which shares were traded. On March 20, 1997, the last reported
sales price of Common Stock on the NASDAQ SmallCap Market was $8.00 per
share.
When exercising all or a portion of an option, a participant can pay
the exercise price with cash or, with the consent of the Compensation
Committee, shares of Common Stock or other consideration substantially
equivalent to cash. If shares of Common Stock are used to pay the exercise
price and the Compensation Committee consents, a participant may use the
value of shares received upon exercise for further exercises in a single
transaction, permitting a participant to fully exercise an option with a
relatively small initial cash or stock payment. The Compensation Committee
can also authorize payment of all or a portion of the option price in the
form of a promissory note or installments on such terms as the Compensation
Committee approves. The Board of Directors can restrict or suspend the
power of the Compensation Committee to permit such loans and can require
that adequate security be provided.
6
<PAGE>
In addition to the options that can be granted in the discretion of
the Compensation Committee, the LTIP provides that stock options will be
automatically granted to each nonemployee director on March 1 and September
1 of each year. The LTIP provides that the Directors eligible to receive
automatic options will receive options to purchase 500 shares on September
1, 1995. (This grant did not occur.) For each automatic grant after
September 1, 1995, the number of shares subject to the grant will equal
105% of the number of shares subject to the previous automatic grant under
the LTIP, with the result rounded up or down to the nearest five-share
increment (for example, options for 105% of 500 shares were granted on
March 1, 1996; options for 105% of that figure were granted on September 1,
1996, and so on). To date, Messrs. Frisina and Gans have each received
options to acquire 2,155 shares of Common Stock under the automatic grant
provisions. In addition, Mrs. Williamson, Mr. Parr, Mr. Darcy and Mr.
Gorman received options to acquire 550 shares upon their appointment as
Directors and an additional 580 shares under the automatic grant
provisions on March 1, 1997.
Stock options granted to nonemployee Directors will not qualify as
incentive stock options. The exercise price of each option awarded to a
nonemployee director will be 100% of the market value at the date of grant.
A nonemployee Director may pay the exercise price in cash or stock and
would have 10 years after the date of grant to exercise each option. The
LTIP provides that any new Director who would be eligible to receive an
automatic grant and is elected or appointed other than on a grant date
would receive an option on the date of his or her election or appointment
for the number of shares granted to nonemployee Directors in the previous
grant under the LTIP. The option price for an option awarded to a new
Director under this provision is the market value of Common Stock as of the
date of his or her appointment or the date of the prior grant, whichever is
higher.
Although the term of each stock option is determined by the
Compensation Committee, no stock option may be exercisable under the LTIP
after the expiration of 10 years from the date it is granted. Options
generally are exercisable for limited periods of time in the event an
option holder is terminated from employment with the Company or its
subsidiaries without cause, dies or becomes disabled. If an option holder
is terminated for cause, the option holder forfeits all rights to exercise
any outstanding options. Options granted to participants under the LTIP
cannot be transferred except by will or by the laws of descent and
distribution, or in certain other circumstances. The LTIP limits the number
of options that can be granted to any individual participant under the LTIP
in any one calendar year to options to purchase 1,000,000 shares (subject
to certain antidilution provisions). Also, semiannual grants to each
nonemployee Director are limited to the formula as provided in the LTIP.
But see note 3 to the table contained in "Ownership of Common Stock."
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<PAGE>
Because the number of participants and the market value of the
Company's Common Stock on the grant date cannot presently be determined,
the benefits or amounts that will be received by participants under the
LTIP are not determinable. However, the chart set forth below shows the
number of options that have been granted to the following persons or groups
of persons as of the date of this Proxy Statement:
<TABLE>
NEW PLAN BENEFITS
1995 LONG-TERM INCENTIVE PLAN
<CAPTION>
DOLLAR VALUE AT NUMBER OF SECURITIES
GROUP MARCH 20, 1997<F1> UNDERLYING OPTIONS
<S> <C> <C>
Michael J. McCloskey $1,500,000 1,000,000
Executives as a Group <F2> $1,525,000 1,017,000
Non-Executive Director Group <F3> $ 51,775 37,830
Non-Executive Officer Employee
Group <F4> $ 18,900 12,600
___________________________
<FN>
<F1> The dollar value of a stock option is determined by calculating the
spread between the exercise price of the option and the current value
of the Company's Common Stock as of March 20, 1997, regardless of
whether the option is exercisable on that date.
<F2> This group consists of the following persons: Michael J. McCloskey,
Mark D. Stevens, Richard S. Schoenfeldt, William H. Singleterry and
Gary M. Moore.
<F3> This group consists of the following persons: Patsy L. Williamson, Ben
C. Parr, John M. Darcy, J. Daniel Frisina, Donald R. Gorman and Ted M.
Gans.
<F4> This group consists of the following persons: Louis Simko, Ludwig
Rupff, Terry Shier, Brian Williamson, John Carpenter, Lisa Alexander
and Dennis Bills, all of whom are employed either by the Company or
The Colonel's, Inc.
</FN>
</TABLE>
Under current federal income tax laws, no income would be realized
when an option is granted pursuant to the LTIP. A participant exercising
an incentive stock option would not recognize income at the time of the
exercise. The difference between the market value and the exercise price
would, however, be a tax preference item for the purpose of calculating
alternative minimum tax. Upon sale of the stock, so long as the
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participant held the stock for at least one year after the exercise of the
option and at least two years after the grant of the option, the
participant's basis would equal the option price, and the participant would
pay tax on the difference between the sale price and the option price as
capital gain, in which case the Company would not be entitled to any
deduction for compensation income. If, prior to the expiration of either
of the above holding periods, the participant sold shares acquired under an
incentive stock option, the tax deferral would be lost, and the participant
would recognize compensation income equal to the difference between the
option price and the fair market value of the shares sold at the time of
exercise, but not more than the maximum amount that would not result in a
loss on the disposition (generally the difference between the option price
and the price at which the shares are sold). The Company would then
receive a corresponding deduction for federal income tax purposes.
Additional gains, if any, would be recognized by the participant as short-
or long-term capital gain.
If a participant exercised stock options that were not incentive stock
options, the participant would recognize compensation income in the year of
exercise equal to the difference between the stock option price and the
fair market value of the shares on the date of exercise. The Company would
receive a corresponding deduction for federal income tax purposes. The
optionee's tax basis in the shares acquired would be increased by the
amount of compensation income recognized. Sale of the stock after exercise
would result in recognition of short- or long-term capital gain or loss.
In addition to the authority to grant stock options under the LTIP,
the LTIP allows the Compensation Committee to award restricted stock.
Restricted stock is subject to such terms and conditions, consistent with
the provisions of the LTIP, as the Compensation Committee from time to time
determines. As with stock option grants, the Compensation Committee sets
forth the terms of individual awards of restricted stock in restricted
stock agreements. Unlike stock options, however, no more than one-half of
the 4,000,000 shares available for Incentive Awards under the LTIP can be
awarded as restricted stock. Unless the Compensation Committee provides
otherwise in a restricted stock agreement, if a participant's employment is
terminated during the restricted period set by the Compensation Committee
for any reason other than death, disability, retirement (as defined in the
LTIP) or termination for cause, the participant's restricted stock is
entirely forfeited. If the participant's employment is terminated during
the restricted period by reason of death, disability or retirement, the
restrictions on the participant's shares terminate automatically with
respect to that number of shares (rounded to the nearest whole number)
equal to the total number of shares of restricted stock awarded to the
participant multiplied by the percentage of the total restricted period
that had elapsed since the date of grant. All remaining shares are
forfeited and returned to the Company, unless the Compensation Committee
provides otherwise. If the participant's employment is terminated for
cause, the participant forfeits all stock then subject to restrictions.
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Without Compensation Committee authorization, a recipient of
restricted stock cannot sell, exchange, transfer, pledge, assign or
otherwise dispose of such stock other than to the Company or by will or the
laws of descent or distribution. In addition, the Compensation Committee
can impose other restrictions on shares of restricted stock. However,
holders of restricted stock enjoy all other rights of shareholders with
respect to restricted stock, including the right to vote restricted shares
at shareholders' meetings and the right to receive all dividends paid with
respect to restricted stock. Any securities received by a holder of
restricted stock pursuant to a stock dividend, stock split,
recapitalization or reorganization are subject to the same terms,
conditions and restrictions applicable to the restricted stock for which
such shares are received.
Generally, a participant does not recognize income upon the award of
restricted stock. However, a participant is required to recognize
compensation income on the value of restricted stock at the time the
restricted stock vests (when the restrictions lapse). At the time the
participant recognizes this compensation income, the Company is entitled to
a corresponding deduction for federal income tax purposes. If restricted
stock is forfeited by a participant, the participant does not recognize
income and the Company would not receive a deduction. Prior to the lapse
of restrictions, dividends paid on restricted stock would be reported as
compensation income to the participant and the Company would receive a
corresponding deduction.
A participant can, within 30 days after the date of an award of
restricted stock, elect to report compensation income for the tax year in
which the award of restricted stock occurred. If the participant makes
such an election, the amount of compensation income is the value of the
restricted stock at the time of the award. Any later appreciation in the
value of the restricted stock would be treated as capital gain and realized
only upon the sale of the restricted stock. Dividends received after such
an election is made are taxable as dividends and not treated as additional
compensation income. If, however, restricted stock is forfeited after the
participant makes an election as described above, the participant would not
be allowed any deduction for the amount earlier taken into income. Upon
the sale of restricted stock, a participant realizes capital gain (or loss)
in the amount of the difference between the sale price and the value of the
stock previously reported by the participant as compensation income.
The LTIP also permits the Compensation Committee to grant tax benefit
rights, which are subject to such terms and conditions as the Compensation
Committee determines to be appropriate. A tax benefit right is a cash
payment received by a participant upon exercise of a stock option. The
amount of the payment may not exceed the amount determined by multiplying
the ordinary income realized by the participant (and deductible by the
Company) upon exercise of stock options that are not incentive stock
options, or upon a disqualifying disposition of an incentive stock option,
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by the maximum federal income tax rate (including any surtax or similar
charge or assessment) for corporations plus the applicable state and local
tax imposed on the exercise of the stock option or disqualifying
disposition. Unless the Compensation Committee provides otherwise, the net
amount of a tax benefit right, subject to withholding, can be used to pay a
portion of the stock option price. Tax benefit rights can be issued with
respect to stock options granted not only under the LTIP but also with
respect to existing or future stock options awarded under any other plan of
the Company that has been approved by the stockholders as of the date of
the LTIP.
The LTIP permits the Compensation Committee to grant stock
appreciation rights. A stock appreciation right is an award that allows
the participant to receive the appreciation value of the Company's Common
Stock without actually owning shares in the Company. The appreciation
value is equal to the excess of the market value of the shares at the time
of exercise less the option price of those shares. The participant
receives payment in cash, shares of Common Stock or some combination of the
two. For payments made in shares of Common Stock, the shares would be
valued as of the date of surrender of the stock appreciation right. The
LTIP provides that stock appreciation rights must be related to a
particular option. A stock appreciation right can be granted at the same
time or after the option to which the right is related. The stock
appreciation right, therefore, can provide the participant with the capital
necessary to exercise a stock option.
Finally, the LTIP gives the Compensation Committee authority to make
stock awards. A stock award is an award of the Company's Common Stock that
is subject to terms and conditions determined by the Compensation Committee
at the time of the award. Stock award recipients generally have all
voting, dividend, liquidation and other rights with respect to shares of
Common Stock received upon becoming the holder of record of the Common
Stock. However, the Compensation Committee can impose restrictions on the
assignment or transfer of Common Stock awarded under a stock award.
Whenever Incentive Awards are made under the LTIP, the Company can
withhold from any cash otherwise payable to the participant or require the
participant to remit to the Company an amount sufficient to satisfy all
applicable federal, state and local withholding taxes. Withholding can be
satisfied by withholding shares of the Company's Common Stock to be
received upon exercise or by delivery to the Company of previously owned
shares of the Company's Common Stock.
The Board of Directors can terminate the LTIP at any time and can
from time to time amend the LTIP as it deems proper and in the best
interests of the Company, provided that without shareholder approval no
such amendment can: (i) materially increase either the benefits to
participants under the LTIP or the number of shares that can be issued
under the LTIP; (ii) materially modify eligibility requirements; (iii)
11
<PAGE>
modify the formula grant provisions with respect to automatic grants to
nonemployee Directors more than once in any six-month period; or (iv)
impair any outstanding Incentive Award without the consent of the
participant, except according to the terms of the Incentive Award. The
LTIP will terminate in November 2005. No award can be made under the LTIP
after that date.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE PROPOSAL
The affirmative vote of the holders of a majority of shares of Common
Stock present in person or by proxy and voting on this proposal is required
to approve the foregoing amendments to the LTIP. The Company has been
informed by the holders of approximately 97.5% of the Common Stock that
they intend to vote in favor of these amendments. For purposes of counting
votes on this proposal, abstentions will effectively be treated as votes
against the proposal and broker non-votes will not be counted as voted on
this proposal, and the number of shares of which a majority is required
will be reduced by the number of broker non-votes. The Board of Directors
has determined that the amendments to the LTIP are in the best interests of
the Company and its shareholders. The shares represented by proxies
received from shareholders will be voted FOR approval of the amendments to
the LTIP unless a vote against such approval or to abstain from voting is
specifically indicated in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE AMENDMENTS TO THE
1995 LONG-TERM INCENTIVE PLAN
APPROVAL OF THE 1997 STOCK OPTION AND RESTRICTED STOCK
PLAN FOR SELECTED NON-EMPLOYEES
The Board of Directors believes that the Company's long-term interests
will best be advanced by aligning the interests of certain key outside
persons that provide services to the Company and/or its subsidiaries with
the interests of the Company's shareholders. Therefore, on February 21,
1997, the Board of Directors adopted, subject to shareholder approval, The
Colonel's International, Inc. 1997 Stock Option and Restricted Stock Plan
for Selected Non-Employees (the "Non-Employee Plan"). The Non-Employee
Plan is intended to provide certain persons who are not employees of the
Company or any of its subsidiaries ("Selected Non-Employees") with the
right to receive or purchase the Common Stock of the Company so as to join
their interests with the interests of the Company and its shareholders
through an increased opportunity for stock ownership. The Board of
Directors believes that the adoption and implementation of the Non-Employee
Plan is now advisable to make additional shares available for stock option
grants and restricted stock awards.
The Board of Directors contemplates that the Non-Employee Plan would
primarily be used to grant stock options. However, the Non-Employee Plan
12
<PAGE>
would also permit grants of restricted stock if determined to be desirable
to advance the purposes of the Non-Employee Plan. These grants and awards
are referred to as "Incentive Awards." By combining in a single plan two
different types of incentives commonly used in long-term incentive
compensation programs, it is intended that the Non-Employee Plan would
provide a degree of flexibility to the Compensation Committee of the Board
of Directors to tailor specific long-term incentives that would best
promote the objectives of the Non-Employee Plan, and in turn promote the
interests of the Company's shareholders.
The following is a summary of the principal features of the Non-Employee
Plan. The summary is qualified in its entirety by reference to
the terms of the Non-Employee Plan, the complete text of which is attached
as Appendix B to this Proxy Statement.
Persons eligible to receive Incentive Awards under the Non-Employee
Plan ("participants") consist solely of "Selected Non-Employees," who are
individuals not employed by the Company or any of its subsidiaries but who
provide services to the Company or its subsidiaries and who the Board of
Directors or the Compensation Committee determines are eligible to
participate in the Non-Employee Plan. No officers or Directors of the
Company or its subsidiaries would be eligible to participate in the Non-
Employee Plan.
A maximum of 200,000 shares of Common Stock (subject to certain
antidilution adjustments) would be available for Incentive Awards under the
Non-Employee Plan. The Non-Employee Plan would not be qualified under
Section 401(a) of the Code and would not be subject to the Employee
Retirement Income Security Act of 1974, as amended.
The Non-Employee Plan would be administered by the Compensation
Committee. The Compensation Committee would make determinations, subject
to the terms of the Non-Employee Plan, as to the persons to receive
Incentive Awards, the amount of Incentive Awards to be granted to each
person, the terms of each grant and all other determinations necessary or
advisable for administration of the Non-Employee Plan. The Compensation
Committee could amend the terms of Incentive Awards granted under the
Non-Employee Plan from time to time in a manner consistent with the Non-
Employee Plan; provided, however, that no amendment could be effective
relating to a particular Incentive Award without the consent of the
relevant participant, except to the extent the amendment operated solely to
the benefit of the participant.
Under the Non-Employee Plan, participants could be granted stock
options. A stock option is the right to purchase a specified number of
shares of stock issued by the Company for a stated price at specified
times. None of the stock options that could be granted under the Non-
Employee Plan may qualify as incentive stock options as defined in Section
422(b) of the Code.
13
<PAGE>
The Compensation Committee would set forth the terms of individual
grants of stock options in stock option agreements, which agreements would
contain such terms and conditions, consistent with the provisions of the
Non-Employee Plan, as the Compensation Committee determined to be
appropriate. These restrictions may include vesting requirements to
encourage long-term ownership of shares. The Company will receive no
consideration upon the award of options. The option price per share would
be determined by the Compensation Committee and would be a price equal to
or higher than the "market value" of the Company's Common Stock on the date
of grant. "Market value" means the last reported sales price of shares of
Common Stock as reported on the NASDAQ SmallCap Market on the date of
grant, or if no shares were traded on that date, the last preceding date on
which shares were traded. On March 20, 1997, the last reported sales price
of Common Stock was $8.00 per share. When exercising all or a portion of
an option, a participant could pay the exercise price with cash or, with
the consent of the Compensation Committee, shares of Common Stock or other
consideration substantially equivalent to cash. If shares of Common Stock
are used to pay the exercise price and the Compensation Committee consents,
a participant may use the value of shares received upon exercise for
further exercises in a single transaction, permitting a participant to
fully exercise an option with a relatively small initial cash or stock
payment. The Compensation Committee could also authorize payment of all or
a portion of the option price in the form of a promissory note or
installments on such terms as the Compensation Committee approved. The
Board of Directors could restrict or suspend the power of the Compensation
Committee to permit such loans and could require that adequate security be
provided.
Although the term of each stock option would be determined by the
Compensation Committee, no stock option would be exercisable under the
Non-Employee Plan after the expiration of 10 years from the date it was
granted. If the participant ceases to be a participant for any reason
other than death or disability, the options issued to that participant
would no longer be exercisable. If the participant dies or becomes
disabled, the options would be exercisable for a period of three months
from the date of the death or disability (but only to the extent that the
options could have been exercised in that period, unless the Compensation
Committee consents or the stock option agreement provides otherwise).
Options granted to participants under the Non-Employee Plan could not
be transferred except by will or by the laws of descent and distribution.
There is no specified limit on the number of options that could be granted
to any individual participant under the Non-Employee Plan, except that a
maximum of 30,000 shares of Common Stock are available for issuance in any
one year.
In addition to the authority to grant stock options under the Non-
Employee Plan, the Non-Employee Plan would allow the Compensation Committee
to award restricted stock. Restricted stock would be subject to such terms
14
<PAGE>
and conditions, consistent with the provisions of the Non-Employee Plan, as
the Compensation Committee from time to time determines. As with stock
option grants, the Compensation Committee would set forth the terms of
individual awards of restricted stock in restricted stock agreements. If a
participant enters into competition with the Company or any of its
subsidiaries or ceases to be a Selected Non-Employee for any reason other
than death or disability, then any shares of restricted stock still subject
to restrictions are automatically forfeited and returned to the Company.
If the participant ceases to be a Selected Non-Employee because of death or
disability, then the restricted stock vests at that time and can be
transferred free of restrictions (but only in compliance with federal and
state securities laws).
Without Compensation Committee authorization, a recipient of
restricted stock could not sell, exchange, transfer, pledge, assign or
otherwise dispose of such stock other than to the Company or by will or the
laws of descent or distribution. In addition, the Compensation Committee
could impose other restrictions on shares of restricted stock. However,
holders of restricted stock would enjoy all other rights of shareholders
with respect to restricted stock, including the right to vote restricted
shares at shareholders' meetings and the right to receive all dividends
paid with respect to restricted stock. Any securities received by a holder
of restricted stock pursuant to a stock dividend, stock split,
recapitalization or reorganization would be subject to the same terms,
conditions and restrictions applicable to the restricted stock for which
such shares are received.
The Non-Employee Plan would take effect as of February 20, 1997,
assuming shareholder approval of the Non-Employee Plan at the Company's
1997 annual meeting of shareholders. Unless earlier terminated by the
Board of Directors, the Non-Employee Plan would terminate on February 19,
2007. No Incentive Awards would be granted after that date.
The Board of Directors could terminate the Non-Employee Plan at any
time, and could from time to time amend the Non-Employee Plan as it deemed
proper and in the best interests of the Company, provided that without
shareholder approval no such amendment could: (a) materially increase
either the benefits to participants under the Non-Employee Plan or the
number of shares that could be issued under the Non-Employee Plan; (b)
materially modify eligibility requirements; (c) reduce the option exercise
price; or (d) impair any outstanding Incentive Award without the consent of
the participant, except according to the terms of the Incentive Award.
No officers, Directors or employees of the Company or its subsidiaries
are eligible to become participants in the Non-Employee Plan. The Company
intends to register shares covered by the Non-Employee Plan under the
Securities Act of 1933 before any Incentive Award would vest or become
exercisable.
15
<PAGE>
On February 21, 1997, the Compensation Committee determined that 12
individuals were eligible to become participants in the Non-Employee Plan.
None of these persons are officers or Directors of the Company or any of
its subsidiaries. The Compensation Committee then granted options to these
12 individuals for 200 to 250 shares of Common Stock each. Because the
Company adopted the Non-Employee Plan subject to shareholder approval, the
foregoing option grants will be rescinded if shareholder approval is not
obtained.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE PROPOSAL
The affirmative vote of the holders of a majority of shares of the
Company's Common Stock present in person or by proxy and voting on this
proposal is required to approve the Non-Employee Plan. The Company has
been informed by the holders of approximately 97.5% of the Common Stock
that they intend to vote in favor of approval of the Non-Employee Plan.
For purposes of counting votes on this proposal, abstentions will
effectively be treated as votes against the proposal and broker non-votes
will not be counted as voted on this proposal, and the number of shares of
which a majority is required will be reduced by the number of broker non-
votes. The Board of Directors has determined that the Non-Employee Plan is
in the best interests of the Company and its shareholders. The shares
represented by proxies received from shareholders will be voted FOR
approval of the adoption of the Non-Employee Plan unless a vote against
such approval or to abstain from voting is specifically indicated in the
proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THE 1997 STOCK OPTION AND RESTRICTED
STOCK PLAN FOR SELECTED NON-EMPLOYEES
VOTING SECURITIES
Holders of record of Common Stock, at the close of business on March
3, 1997, will be entitled to notice of and to vote at the annual meeting
and any adjournment of the meeting. As of March 3, 1997, there were
24,177,805 shares of Common Stock outstanding, each having one vote on each
matter presented for shareholder action. Shares cannot be voted unless the
shareholder is present at the meeting or represented by proxy.
OWNERSHIP OF COMMON STOCK
The following table contains information with respect to ownership of
Common Stock by all Directors, all nominees for election as Directors,
executive officers, all Directors and executive officers as a group and by
each person known to the Company to own beneficially more than five percent
16
<PAGE>
of the Company's outstanding Common Stock. The content of this table is
based upon information supplied by the Company's officers, Directors and
nominees for election as Directors, and represents the Company's
understanding of circumstances in existence as of March 3, 1997. The
business addresses of all persons set forth in the following table are the
same as the Company's address: 620 South Platt Road, Milan, Michigan 48160.
<TABLE>
<CAPTION>
BENEFICIAL OWNER SHARES OWNED PERCENT OF CLASS
<S> <C> <C>
Donald J. Williamson <F1> 23,567,080 97.47%
Patsy L. Williamson <F1>, <F4> 23,567,080 97.47%
Michael J. McCloskey <F2> 0 <F*>
Mark D. Stevens 700 <F*>
Ben C. Parr <F3>, <F4> 0 <F*>
Donald R. Gorman <F3>, <F4> 2,150 <F*>
John M. Darcy <F3>, <F4> 0 <F*>
J. Daniel Frisina <F3>, <F4> 1,075 <F*>
Ted M. Gans <F3>, <F4> 1,075 <F*>
Richard L. Roe <F5> 195 <F*>
Richard S. Schoenfeldt <F6> 0 <F*>
William H. Singleterry <F6> 0 <F*>
Gary M. Moore <F6> 0 <F*>
Directors and Officers as 25,570,125 97.49%
a Group <F7>
_______________________________________
<FN>
<F*> Does not exceed 1%.
<F1> In the mergers by which Brainerd International, Inc. merged with and
into the Company and by which The Colonel's, Inc. became a wholly
owned subsidiary of the Company, a total of 23,500,000 shares of
Common Stock in the Company were issued to Donald J. Williamson and
Patsy L. Williamson proportionate to their ownership of shares of
common stock of The Colonel's, Inc. Because they are married, each is
deemed to be the beneficial owner of all of the stock owned by both of
them. Mrs. Williamson also has options to acquire 6,130 shares of
Common Stock. However, because these options are not exercisable
within 60 days of the date of this Proxy Statement, these 6,130 shares
are not deemed "beneficially owned" by her at this time.
<F2> Mr. McCloskey has been granted options to acquire up to 1,000,000
shares of Common Stock, as more fully described below. See "Executive
Compensation--Long-Term Incentive Awards." However, because these
stock options are not exercisable by Mr. McCloskey within 60 days of
the date of this Proxy Statement, these shares are not considered
"beneficially owned" by Mr. McCloskey at the present time.
17
<PAGE>
<F3> In February 1997, the Company's Board of Directors granted each
non-employee Director of the Company (Mrs. Williamson, Mr. Parr, Mr.
Gorman, Mr. Darcy, Mr. Frisina and Mr. Gans) options to acquire up to
5,000 shares of Common Stock, as more fully described below. See
"Executive Compensation--Long-Term Incentive Awards." However,
because these stock options are not exercisable by these persons
within 60 days of the date of this Proxy Statement, these shares are
not considered "beneficially owned" by these persons at the present
time. These grants were pursuant to Section 12 of the LTIP, which
allows the formula grant provisions for nonemployee Directors to be
amended no more than once in any six-month period.
<F4> Under the Company's 1995 Long-Term Incentive Plan, Messrs. Frisina
and Gans were automatically granted options to acquire shares of
Common Stock on March 1, 1996 (525 shares each), September 1, 1996
(550 shares each), and March 1, 1997 (580 shares each). Messrs.
Gans and Frisina would only be able to exercise these options with
respect to 1,575 shares of Common Stock each, as of the date of this
Proxy Statement or within 60 days thereafter. Automatic grants were
also made on March 1, 1997 for 580 shares each to the Company's
other nonemployee directors: Mr. Darcy, Mr. Parr, Mr. Gorman and
Mrs. Williamson. Furthermore, Messrs. Darcy, Parr, Gorman and Mrs.
Williamson received options to purchase 550 shares of Common Stock
upon their appointment as Directors, pursuant to the automatic grant
provisions of the LTIP.
<F5> Mr. Roe resigned as a Director of the Company effective October 11,
1996. Mr. Roe continues to work for Brainerd International Raceway,
Inc., a subsidiary of the Company.
<F6> On February 20, 1997, Messrs. Schoenfeldt and Singleterry were each
granted options to acquire up to 5,000 shares of Common Stock and Mr.
Moore was granted options to acquire up to 2,000 shares of Common
Stock. Because these stock options are not exercisable within 60
days of the date of this Proxy Statement, these shares are not
considered "beneficially owned" by these persons at the present
time.
<F7> Excludes the currently-exercisable options held by Messrs. Frisina
and Gans. See Note 4 above.
</FN>
</TABLE>
BOARD OF DIRECTORS
The Company's Board of Directors currently consists of eight members,
seven of which are standing for reelection. The members of the Company's
Board of Directors are (in alphabetical order): John M. Darcy, J. Daniel
18
<PAGE>
Frisina, Ted M. Gans, Donald R. Gorman, Michael J. McCloskey, Ben C. Parr,
Mark D. Stevens and Patsy L. Williamson.
On February 20, 1997, the Company's Board of Directors, which at that
time consisted of Lisa K. Alexander, J. Daniel Frisina, Ted M. Gans, Gary
M. Moore and Donald J. Williamson, increased the size of the Board of
Directors from six (6) to eleven (11) and appointed Messrs. Darcy, Gorman,
McCloskey, Parr and Stevens and Mrs. Williamson to the Board. Thereafter,
Mrs. Alexander and Messrs. Moore and Williamson resigned from the Board.
Mr. Williamson also resigned as Chief Executive Officer and President of
the Company. Thereafter, the Board of Directors appointed Mr. McCloskey as
Chief Executive Officer and Mr. Stevens as President.
These actions were taken for several reasons, one of which was to
attract and retain Mr. McCloskey as the Chief Executive Officer of the
Company and Mr. Stevens as the President of the Company. As discussed
below, Mr. McCloskey has extensive experience in the finance and operations
of businesses and Mr. Stevens has extensive experience in the automotive
dealership industry. The Company believes that the new composition of the
Board brings experience and knowledge from several of the industry groups
with which the Company does business and will help facilitate the Company's
long-term growth strategies. An additional reason was to increase the
number of non-employee Directors of the Company.
Under the Company's Bylaws, the Board of Directors may increase the
number of Directors, so long as the total number of Directors is between
five (5) and fifteen (15) members. Directors who are appointed to newly
created Directorships hold office until the next annual meeting, at which
they would stand for reelection. Because Messrs. Darcy, Gorman, McCloskey,
Parr and Stevens and Mrs. Williamson were appointed to newly created
Directorships, they all must stand for reelection at the annual meeting of
shareholders. In addition, Mr. Frisina is standing for reelection because
his present term as a Director expires at the annual meeting of
shareholders.
The Company's Board of Directors is classified into three groups, only
one of which stands for reelection at each annual meeting of shareholders.
Thus, Directors are elected to three-year terms. Because of the influx of
new Directors, the Board of Directors was required to determine the class
of each new Director, subject to the requirement that the three classes of
Directors be as nearly equal in number as possible. The Board has
determined that the following directors standing for reelection will be
placed in the following classes:
<TABLE>
<CAPTION>
NOMINEE YEAR TERM EXPIRES
<S> <C> <C>
Michael J. McCloskey 2000
Mark D. Stevens 2000
John M. Darcy 2000
19
<PAGE>
J. Daniel Frisina 1999
Ben C. Parr 1999
Patsy L. Williamson 1998
Donald R. Gorman 1998
</TABLE>
In addition, Mr. Gans, the only Director not currently standing for
reelection, is serving a term that will expire at the annual meeting of
shareholders in 1998.
NOMINEES FOR DIRECTORS -- TERMS EXPIRING IN 2000
MICHAEL J. MCCLOSKEY (45). On February 20, 1997, Michael J. McCloskey
was appointed a Director, the Vice-Chairman of the Board and the Chief
Executive Officer of the Company. Mr. McCloskey was a founding partner of
Stone Pine Capital, a merchant bank involved in the acquisition and
operation of operating and financial services businesses. Prior to
founding Stone Pine Capital, and from 1988 to 1994, Mr. McCloskey was a
Senior Vice President and the Director of the Private Finance Group of
Paine Webber, Inc. From 1983 to 1988, Mr. McCloskey was a Vice President
with E.F. Hutton. Mr. McCloskey has experience with turn-around
situations, bankruptcy proceedings and other work-out environments, as well
as experience in creating new business units from concept to
implementation. Prior to joining E.F. Hutton, Mr. McCloskey was a
practicing attorney specializing in corporate, tax and securities law. Mr.
McCloskey serves on the Executive Committee and the Nominating Committee of
the Board of Directors.
MARK D. STEVENS (54). On February 20, 1997, Mark D. Stevens was
appointed a Director and the President of the Company. Mr. Stevens is
currently the General Manager of Patsy L. Williamson Buick-GMC, Inc., an
automotive dealership company wholly owned by Patsy L. Williamson (who is
also standing for reelection to the Board of Directors), a position he has
held since 1993. From 1986 to 1996, Mr. Stevens served as the Sales
Manager for Blain Buick-GMC Truck, Inc. Mr. Stevens also serves as the
Secretary of various automotive dealerships owned by Patsy L. Williamson.
Mr. Stevens serves on the Executive Committee and the Nominating Committee
of the Board of Directors.
JOHN M. DARCY (51). On February 21, 1997, John M. Darcy was appointed
a Director of the Company. Mr. Darcy was a Group General Manager and
Corporate Vice President at Carnation/Nestle, where he was responsible for
three operating divisions representing $1.8 billion in revenue, eight
manufacturing facilities and 1,400 employees. Prior to that, Mr. Darcy was
the chief marketing officer of Pillsbury's grocery products businesses.
Additionally, Mr. Darcy was President and Chief Operating Officer of Avis
Enterprises, an investment company with interests in automobile dealerships
and rental agencies, sporting goods, electronics and real estate. Most
recently, Mr. Darcy built two successful start-up companies in the
agricultural and specialty food chemical arenas. Mr. Darcy serves on the
20
<PAGE>
Executive Committee and the Compensation Committee of the Board of
Directors.
NOMINEES FOR DIRECTORS--TERMS EXPIRING IN 1999
J. DANIEL FRISINA (48). Mr. Frisina is a Director of the Company, a
Director of The Colonel's, Inc. and a Director of Brainerd International
Raceway, Inc. Mr. Frisina's principal occupation is Director of Global
Development for Cheng Hong Legion Co., Ltd. where he has previously served
as a consultant (since 1992). He is also the Chairman of the Board of the
Autobody Parts Association, a consulting group retained by various
Taiwanese manufacturing companies. He served as President of The
Colonel's, Inc. from 1989 through 1991. Prior to the Merger, he served as
Treasurer and Chief Financial Officer of Brainerd International, Inc., the
Company's predecessor, during 1995. Mr. Frisina serves on the Company's
Audit Committee.
BEN C. PARR (66). On February 20, 1997, Ben C. Parr was appointed a
Director of the Company. Mr. Parr was formerly the Director of Research
for the State Farm Insurance Companies and was a motivating party in the
creation of the Certified Automotive Part Association, which is a nonprofit
organization established in 1987 to develop and oversee a testing and
inspection program certifying the quality of parts used for automobile body
repairs. Mr. Parr serves on the Nominating Committee, the Compensation
Committee and the Audit Committee of the Board of Directors.
NOMINEES FOR DIRECTORS--TERMS EXPIRING IN 1998
PATSY L. WILLIAMSON (64). On February 20, 1997, Patsy L. Williamson
was appointed a Director and the Chairwoman of the Board of the Company.
Mrs. Williamson's principal occupation is as the owner and operator of
several automobile dealerships in Michigan. Mrs. Williamson is the wife of
Donald J. Williamson, who, until February 20, 1997, was the Chairman,
President and Chief Executive Officer of the Company. Mrs. Williamson is
also a significant shareholder of the Company. See "Ownership of Common
Stock."
DONALD R. GORMAN (65). On February 20, 1997, Mr. Gorman was
appointed as a Director of the Company. Mr. Gorman is the owner and
President of P.G. Products, Inc., of Cincinnati, Ohio, which is one of the
Company's major customers. Mr. Gorman serves on the Audit Committee of the
Board of Directors.
INCUMBENT DIRECTOR--TERM EXPIRING IN 1998
TED M. GANS (61). Mr. Gans is a Director of the Company. He serves
on the Compensation Committee of the Board of Directors. Mr. Gans's
principal occupation since 1965 has been as the President and Director of
Ted M. Gans, P.C., a law firm in Bloomfield Hills, Michigan, of which he is
21
<PAGE>
the sole owner. Mr. Gans also serves as a Director of Williamson Lincoln
Mercury, Inc.; Williamson Chrysler Plymouth Dodge, Inc.; Blain Buick-GMC
Truck, Inc.; and Williamson Chevrolet-Geo Cadillac, Inc. All four of these
companies are 100-percent owned by Patsy L. Williamson, a nominee for
re-election to the Board. Mr. Gans's term as a Director of the Company
expires in 1998.
BOARD COMMITTEES AND MEETINGS
The Company's Board of Directors has four standing committees: the
Executive Committee, the Nominating Committee, the Compensation Committee
and the Audit Committee. In February 1997, the Stock Option Committee was
merged with the Compensation Committee. Each member of the Committees
described below is also a Director of the Company.
The Executive Committee has the full power of the Board in the
management of the business and affairs of the Company, except the power to
change the membership of or to fill vacancies in the Board of Directors or
the Executive Committee; the power to amend, add to, rescind or repeal the
Bylaws of the Company; or any other powers that, under Michigan law, may
not be delegated to it by the Board of Directors. The Executive Committee
exists for the purpose of acting on behalf of the Board where Board action
is required between regularly scheduled meetings or where it would be
impracticable to convene special Board meetings. In February 1997, the
Company's Board of Directors appointed Messrs. McCloskey, Stevens, Darcy
and Gans to the Executive Committee. The Executive Committee did not meet
in 1996.
The Nominating Committee exists for the purpose of developing and
recommending to the Board of Directors criteria for the selection of
candidates for Director, seeking out and receiving suggestions concerning
possible candidates, reviewing and evaluating the qualifications of
possible candidates and recommending to the Board of Directors candidates
for vacancies occurring from time to time and for the slate of Directors to
be proposed on behalf of the Board of Directors at annual meetings of
shareholders. In February 1997, the Company's Board of Directors appointed
Messrs. McCloskey, Stevens and Parr to the Nominating Committee. The
Nominating Committee did not meet in 1996.
The Compensation Committee is responsible for establishing the
compensation of the executive officers of the Company and its subsidiaries.
In April 1996, the Board of Directors appointed Messrs. Frisina and Gans to
the Compensation Committee. However, in February 1997, the Board appointed
Messrs. Parr and Darcy to replace Mr. Frisina on the Compensation
Committee. This Committee thus currently consists of Messrs. Darcy, Gans
and Parr. The Compensation Committee met three times in 1996.
22
<PAGE>
The Audit Committee reviews audit plans submitted by the independent
auditors with respect to the scope of procedures that will be performed and
the fee that will be charged. The Audit Committee also reviews the results
of the independent audit each year, including any associated
recommendations on internal controls. It is additionally intended that the
Audit Committee will meet periodically with the Company's internal auditor.
In April 1996, the Board of Directors appointed Messrs. Frisina and Gans to
the Audit Committee. However, in February 1997, the Board of Directors
appointed Messrs. Parr and Gorman to replace Mr. Gans on this Committee.
Currently, this Committee consists of Messrs. Frisina, Gorman and Parr.
The Audit Committee met two times in 1996.
The Stock Option Committee was responsible for the administration and
award of stock options and restricted stock under the Company's stock
plans, including the LTIP. In April 1996, the Board of Directors appointed
J. Daniel Frisina and Ted M. Gans, both of whom are Directors of the
Company, to the Stock Option Committee. In February 1997, the Board of
Directors consolidated the Stock Option Committee into the Compensation
Committee.
The Company's Board of Directors met three times in 1996. Each of the
Directors of the Company attended 75% or more of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total
number of meetings held by all committees of the Board of Directors on
which he or she served (during the periods that he or she served).
COMPENSATION OF DIRECTORS
No compensation was paid to any Director of the Company for services
rendered in such capacity during the fiscal year ended December 31, 1996.
Directors of the Company who are not employees of the Company may be
reimbursed for expenses incurred in attending meetings of the Board of
Directors.
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS. As mentioned above, Mr. McCloskey is the Chief
Executive Officer of the Company and Mr. Stevens is the President of the
Company. Three additional executive officers of the Company are:
RICHARD S. SCHOENFELDT (41). Mr. Schoenfeldt is Vice President-Finance,
Chief Financial Officer, Treasurer and Assistant Secretary of the
Company. Since 1994, he has served as Controller and Chief Financial
Officer of The Colonel's. From 1991 through 1994, he was Controller
of The Colonel's and from 1987 through 1991 he was Operations Manager
of The Colonel's Plastics Division. From 1980 to 1986, he served as the
Director of Operations for Alcolite Products, Inc., an OEM plastic injection
molding, blow molding and thermoforming manufacturer.
23
<PAGE>
WILLIAM H. SINGLETERRY (52). Mr. Singleterry is the Vice President of
Development of the Company. He also serves as President of The Colonel's
Truck Accessories, Inc., a subsidiary of the Company. Since 1991, Mr.
Singleterry has served as the Director of Operations for the Bumper
Division of The Colonel's, Inc. Prior to that, he was the Regional Sales
Manager. From 1982 to 1989, he served as General Manager for Auto Body
Connection, a bumper manufacturer and distributor.
GARY M. MOORE (47). Mr. Moore is the Secretary of the Company, a
position to which he was appointed on February 20, 1997. Mr. Moore was a
Director of the Company, but resigned that position on the same date. Mr.
Moore also serves as a Director of Brainerd International Raceway, Inc., as
Director of Operations for Brainerd International Raceway and as a sales
consultant for The Colonel's, Inc. From 1987 until 1996, Mr. Moore's
principal occupation was the position of National Sales & Accounts Manager
for Tremco Division of B.F. Goodrich. From April through November 1995,
Mr. Moore served as Chairman of the Board and Chief Executive Officer of
Brainerd International, Inc., the Company's predecessor.
COMPENSATION SUMMARY
The following Summary Compensation Table shows certain information
concerning the compensation earned during each of the three fiscal years in
the period ended December 31, 1996, of the Chief Executive Officer of the
Company during the last completed fiscal year. Because no executive
officers other than the Chief Executive Officer were compensated in excess
of $100,000 for their services as officers of the Company and/or its
subsidiaries during the 1996 fiscal year, the Chief Executive Officer is
the only person appearing in the following table.
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<CAPTION>
OTHER
NAME AND ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
<S> <C> <C> <C> <C>
Donald J. Williamson 1996 $ 510,000<F1> $ 0<F1> $ 6,841<F1>
Chairman of the Board, 1995 $ 520,000<F1> $ 0<F1> $ 3,478<F1>
President, Chief Executive 1994 $ 526,550<F2> $ 200,000<F2> $ 3,731<F2>
Officer and Director<F3>
____________________________
<FN>
<F1> Amounts reported include amounts paid by the Company for Mr.
Williamson's services as President and Chief Executive Officer as well
as by The Colonel's, Inc. for Mr. Williamson's services as Chairman of
24
<PAGE>
the Board, Chief Executive Officer, Treasurer and Secretary and by
Brainerd International Raceway, Inc. for Mr. Williamson's services as
Chairman of the Board, Secretary and Treasurer.
<F2> Amounts reported as Mr. Williamson's compensation for the 1994 fiscal
year only cover amounts for his services as an executive officer and
Director of The Colonel's, Inc., then wholly owned by Mr. Williamson
and his wife. Mr. Williamson was paid no compensation by Brainerd
International, Inc. (as predecessor of the Company) during 1994.
<F3> Mr. Williamson served in these positions during fiscal 1996, but
resigned from them effective February 20, 1997.
</FN>
</TABLE>
____________________________
LONG-TERM INCENTIVE AWARDS
Pursuant to the Company's LTIP, the Company may award cash and shares
of restricted stock to plan participants conditioned upon the achievement
of certain corporate performance goals over a three-year performance
period. During fiscal 1996, Messrs. Frisina and Gans, as non-employee
Directors of the Company, received automatic stock option grants covering
a total of 1,075 shares of Common Stock each. No other Directors or
executive officers of the Company received awards under the LTIP during
fiscal 1996.
However, in February 1997 Mr. McCloskey was granted options to acquire
up to 1,000,000 shares of Common Stock. These options vest and become
exercisable in increments of 200,000 shares of Common Stock on each of the
following dates: February 17, 1998; February 17, 1999; February 17, 2000;
February 17, 2001; and February 17, 2002. These options must be exercised
(if at all) not later than February 20, 2004. The option exercise price is
$6.50 per share of Common Stock. The Board of Directors granted these
options to Mr. McCloskey to attract and retain Mr. McCloskey as a Director
and the Chief Executive Officer of the Company.
Also in February 1997, each Director of the Company received an option
to acquire 5,000 shares of Common Stock at an exercise price of $6.50 per
share. See note 3 to "Ownership of Common Stock."
PENSION PLAN
The Company does not have a pension plan, a defined benefit plan or an
actuarial plan.
25
<PAGE>
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company does not have any employment agreements, termination-of-
employment agreements or change-in-control agreements with any executive
officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1996, Messrs. Frisina and Gans were the members of
the Compensation Committee of the Board of Directors. No other Directors
or executive officers of the Company took part in deliberations concerning
the compensation of executive officers of the Company during fiscal 1996.
Neither Mr. Frisina nor Mr. Gans has any employment relationship with the
Company or any of its subsidiaries. Mr. Gans is a Director of the Company
and practices law with Ted M. Gans, P.C. During the past year, the Company
and The Colonel's, Inc. retained Ted M. Gans, P.C. for certain legal
services and it is anticipated that the Company and/or The Colonel's, Inc.
may retain Ted M. Gans, P.C. to render certain legal services during the
current year.
INVOLVEMENT OF DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
IN CERTAIN LEGAL PROCEEDINGS.
The Company does not believe that any of its Directors, executive
officers, promoters or control persons are involved in legal proceedings
within the meaning of Item 401(f) of Securities and Exchange Commission
Regulation S-K.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
on the Company's Common Stock to the NASDAQ Domestic Index and an index of
peer companies that produce automobile replacement parts, assuming an
investment of $100.00 at the beginning of the period indicated. Because
the Company's Common Stock has been traded on the NASDAQ SmallCap Market
only since January 2, 1996, the graph covers only the period from January 2,
1996, to the end of fiscal year 1996.
The NASDAQ Domestic Index is a broad equity market index consisting of
certain domestic traded on the NASDAQ Stock Market. The index of peer
companies was constructed by the Company and includes the companies listed
in the footnote to the graph below. In constructing the peer index, the
return of each peer group company was weighted according to its respective
stock market capitalization at the beginning of each period indicated.
Cumulative total shareholder return is measured by dividing: (i) the sum of
(a) the cumulative amount of dividends for the measurement period, assuming
dividend reinvestment, and (b) the difference between the share price at
26
<PAGE>
the end and the beginning of the measurement period; by (ii) the share
price at the beginning of the measurement period.
COMPARISON OF FIVE YEAR CUMULATIVE
TOTAL SHAREHOLDER RETURN
[STOCK PERFORMANCE GRAPH]
(1) The index of peer companies consists of Boyds Wheels, Inc.; Deflecta-
Shield Corp.; Echlin Inc.; Edelbrock Corporation; Exide Corporation;
Federal Mogul Corp.; Genuine Parts Company; JPE, Inc.; Motorcar Parts
& Accessories, Inc.; OEA, Inc.; R & B Inc.; SPX Corp.; Standard Motor
Products, Inc.; Stant Corp.; and Thompson PBE, Inc.
The dollar values for total shareholder return plotted in the graph
above are shown in the table below:
<TABLE>
<CAPTION>
NASDAQ PEER
JANUARY 1, THE COMPANY DOMESTIC INDEX INDEX
<S> <C> <C> <C> <C>
1996 100.00 100.00 100.00
1997 69.23 122.96 108.23
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In April 1996, the Board of Directors appointed Messrs. Frisina and
Gans to the Compensation Committee. However, in February 1997, the Board
appointed Messrs. Parr and Darcy to replace Mr. Frisina on the Compensation
Committee. This Committee thus currently consists of Messrs. Darcy, Gans
and Parr.
The basic compensation philosophy of the Company is to provide
competitive salaries. The Company's executive compensation policies are
designed to achieve two primary objectives:
27
<PAGE>
- Attract and retain well-qualified executives who will lead the
Company and achieve and inspire superior performance;
- Provide incentives for the achievement of long-term financial
goals.
Executive compensation consists primarily of two components: base
salary and benefits; and amounts paid (if any) under the Company's Long-
Term Incentive Plan (the "LTIP"). Each component of compensation is
designed to accomplish one or both of the compensation objectives.
The participation of specific executive officers and other key
employees in the Company's LTIP is recommended by the Board's Compensation
Committee and all recommendations (including the level of participation)
are reviewed, modified (to the extent appropriate) and approved by the
Board.
BASE SALARY
To attract and retain well-qualified executives, it is the
Compensation Committee's policy to establish base salaries at levels and
provide benefit packages that are considered to be competitive. Base
salaries of executive officers are determined by the Board of Directors on
an individual basis. In determining the base salary for an executive
officer, the Compensation Committee will recommend to the full Board for
approval a base salary for the officer determined by the Compensation
Committee taking into consideration factors including: (1) the individual's
performance, (2) the individual's contributions to the Company's success,
(3) the level and scope of the individual's responsibilities, (4) the
individual's tenure with the Company and in his or her position and (5) pay
practices for similar positions by comparable companies.
LONG-TERM INCENTIVE PLAN
The LTIP is used primarily to grant stock options. However, the LTIP
also permits grants of restricted stock, stock awards, stock appreciation
rights and tax benefit rights if determined to be desirable to advance the
purposes of the LTIP. These grants and awards are referred to as
"Incentive Awards." By combining in a single plan many types of incentives
commonly used in long-term incentive compensation programs, the LTIP
provides significant flexibility to the Compensation Committee to tailor
specific long-term incentives that would best promote the objectives of the
LTIP and in turn promote the interests of the Company's shareholders.
Directors, executive officers and other key employees of the Company
and its subsidiaries will be eligible to receive Incentive Awards under the
LTIP. A maximum of 4,000,000 shares of Common Stock (subject to certain
antidilution adjustments) are available for Incentive Awards under the
28
<PAGE>
LTIP (assuming shareholder approval of certain amendments to the LTIP). Of
the 4,000,000 shares authorized for Incentive Awards under the LTIP, only
one-half can be awarded as restricted stock.
The LTIP is administered by the Compensation Committee, which is
comprised of three non-employee Directors, none of whom participates or is
eligible to participate in any long-term incentive plan of the Company or
its subsidiaries, except for nondiscretionary stock option grants based
upon a specified formula, and if the Board so determines, each of whom must
be an "outside director" as defined in the rules issued pursuant to Section
162(m) of the Internal Revenue Code. The Compensation Committee will make
determinations, subject to the terms of the LTIP, as to the persons to
receive Incentive Awards, the amount of Incentive Awards to be granted to
each person, the terms of each grant and all other determinations
necessary or advisable for administration of the LTIP.
The LTIP was approved by the shareholders of Brainerd International,
Inc., the Company's predecessor, on November 21, 1995. During fiscal 1996,
Messrs. Frisina and Gans, as non-employee Directors of the Company,
received automatic stock option grants covering a total of 1,075 shares
of Common Stock each. In February 1997, the Company's Board of Directors
granted non-employee Directors (which are Mrs. Williamson, Mr. Parr, Mr.
Gorman, Mr. Darcy, Mr. Frisina and Mr. Gans) each options to acquire up to
5,000 shares of the Company's Common Stock. The Board of Directors
believes that these grants were helpful in attracting these persons to
become Directors of the Company. These options vest and become exercisable
on August 20, 1997, and must be exercised (if at all) no later than
February 20, 2007. The option exercise price is $6.50 per share of Common
Stock. (See also note 3 to "Ownership of Common Stock.")
CHIEF EXECUTIVE OFFICER
During 1996, Mr. Williamson was paid a total of $510,000 in salary for
his services as Chairman of the Board, Chief Executive Officer and
President of the Company, as well as for certain positions with the
Company's subsidiaries. During 1997, the Compensation Committee intends to
base its compensation determinations for Mr. McCloskey, the Company's new
Chief Executive Officer, upon the policies and objectives discussed above.
SECTION 162(M)
Section 162(m) of the Code provides that publicly held corporations
may not deduct compensation paid to certain executive officers in excess of
$1 million annually, with certain exemptions. The Company has examined its
executive compensation policies in light of Section 162(m) and the
regulations adopted by the Internal Revenue Service to implement that
section. It is not expected that any portion of the Company's deduction
for employee remuneration will be disallowed in 1997 or in future years by
reason of actions expected to be taken in 1997.
29
<PAGE>
Respectfully submitted,
John M. Darcy
Ted M. Gans
Ben C. Parr
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and its subsidiaries are certain transactions with related
parties which are summarized below.
LEASE OF MILAN, MICHIGAN FACILITY AND OWOSSO, MICHIGAN FACILITY. In
June of 1993, The Colonel's, Inc. began leasing its Milan, Michigan,
facility from 620 Platt Road, LLC. Donald J. Williamson and Patsy L.
Williamson are the sole members of 620 Platt Road, LLC. Rent expense to
The Colonel's, Inc. for the Milan facility was $840,000 for the year ending
December 31, 1996. The Colonel's Truck Accessories, Inc. leases its
Owosso, Michigan facility from 620 Platt Road, LLC. Rent expense on this
lease was $160,000 for the year ending December 31, 1996.
WILLIAMSON BUICK-GMC, INC. Patsy L. Williamson owns all of the
outstanding capital stock of Williamson Buick-GMC, Inc. (formerly Blain
Buick-GMC Truck, Inc.) ("Buick"). Buick is an automobile dealership
located in Flint, Michigan. The Colonel's, Inc. engages in certain
transactions with Buick, including the purchase of automobiles, parts, and
automotive service and the lease of certain property from which rental
income is earned. During 1996, purchases of automobiles, parts, and
services by The Colonel's, Inc. from Buick were in the amount of $280,310.
The Company collected $15,598 in interest from a note that was paid off in
1996. The Truck Accessory Division of The Colonel's Truck Accessories,
Inc. sold $51,198 worth of bedliners to Buick in 1996.
TRANSACTIONS WITH DIRECTORS. Ted M. Gans is a Director of the Company
and practices law with Ted M. Gans, P.C. During the past year, The
Colonel's, Inc. retained Ted M. Gans, P.C. for certain legal services and
it is anticipated that the Company and/or The Colonel's, Inc. may retain
Ted M. Gans, P.C. to render certain legal services during the current year.
J. Daniel Frisina is Director of Global Development for Cheng Hong Legion
Co., Ltd., which sells among other products, automotive body replacement
parts to The Colonel's, Inc. as well as to other customers in the
automotive crash parts industry.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's Directors, officers and persons who own more than
30
<PAGE>
10% of the Company's Common Stock to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and NASDAQ.
Directors, officers and greater than 10% beneficial owners are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, no Director, officer or
beneficial owner of more than 10% of the Company's outstanding Common Stock
failed to file on a timely basis any report required by Section 16(a) of
the Exchange Act with respect to the year ended December 31, 1996.
SELECTION OF AUDITORS
Subject to the approval of shareholders, the Board of Directors has
reappointed the firm of Deloitte & Touche LLP as independent auditors of
the Company for the current fiscal year.
Deloitte & Touche LLP has audited the financial statements of the
Company and its subsidiaries for the fiscal year ended December 31, 1996.
Representatives of Deloitte & Touche LLP are expected to be present at the
annual meeting, will have an opportunity to make a statement if they so
desire to do so and are expected to be available to respond to appropriate
questions from shareholders.
The affirmative vote of the holders of a majority of shares of the
Company's Common Stock present in person or by proxy is required to confirm
the appointment of auditors. The shares represented by proxies received
from the Company's shareholders will be voted FOR the proposal unless a
vote against the proposal is specifically indicated in the proxy. For
purposes of counting votes on this proposal, abstentions and broker non-
votes will effectively be counted as votes against the proposal. The
Company has been informed by the holders of approximately 97.5% of the
shares entitled to vote that they intend to vote in favor of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR RATIFICATION
OF THE REAPPOINTMENT OF DELOITTE & TOUCHE LLP
SHAREHOLDER PROPOSALS
Proposals of shareholders must be received by the Company no later
than December 10, 1997 to be considered for inclusion in the Company's
proxy statement for its 1998 annual meeting of shareholders. Shareholder
proposals should be made in accordance with Securities and Exchange
Commission Rule 14a-8 and should be addressed to the attention of the
Secretary of the Company, 620 South Platt Road, Milan, Michigan 48160.
31
<PAGE>
By Order of the Board of Directors,
/s/ Michael J. McCloskey
Michael J. McCloskey
Vice-Chairman and Chief Executive Officer
April 9, 1997
32
<PAGE>
APPENDIX A
THE COLONEL'S INTERNATIONAL, INC.
1995 LONG-TERM INCENTIVE PLAN
SECTION 1
ESTABLISHMENT OF PLAN; PURPOSE OF PLAN
1.1 ESTABLISHMENT OF PLAN. The Colonel's International, Inc.,
hereby establishes the 1995 LONG-TERM INCENTIVE PLAN (the "Plan") for its
corporate, divisional, and Subsidiary directors, officers, and other key
employees. The Plan permits the grant and award of Stock Options, Stock
Appreciation Rights, Restricted Stock, Stock Awards, and Tax Benefit
Rights.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to provide
directors, officers, and key management employees of the Company, its
divisions, and its Subsidiaries with an increased incentive to make
significant and extraordinary contributions to the long-term performance
and growth of the Company and its Subsidiaries, to join the interests of
directors, officers, and key employees with the interests of the Company's
stockholders through the opportunity for increased stock ownership, and to
attract and retain officers and key employees of exceptional ability. The
Plan is further intended to provide flexibility to the Company in
structuring long-term incentive compensation to best promote the foregoing
objectives.
SECTION 2
DEFINITIONS
The following words have the following meanings unless a
different meaning is plainly required by the context:
2.1 "Act" means the Securities Exchange Act of 1934, as amended.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Change in Control" means (a) the sale, lease, exchange, or other
transfer of substantially all of the Company's assets (in one
transaction or in a series of related transactions) to, or the
merger or consolidation of the Company with, a corporation that
is not controlled by the Company; or (b) a change in control of
the Company of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A
A-1
<PAGE>
promulgated under the Act; PROVIDED THAT, without limitation,
such a change in control shall be deemed to have occurred if (i)
any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Act), other than a Subsidiary or any employee benefit plan
of the Company or a Subsidiary or any entity holding Common Stock
pursuant to the terms of any such employee benefit plan, is or
becomes the beneficial owner (as defined in Rule 13(d)-3 under
the Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting
power of the Company's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at
the beginning of such period constitute the Board cease for any
reason to constitute at least a majority of the Board, unless the
election, or nomination for election by the Company's
shareholders, of each new director was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
were directors at the beginning of the period.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the Compensation Committee of the Board or such
other committee as the Board shall designate to administer the
Plan. The Committee shall consist of at least two members of the
Board and all of its members shall be "non-employee directors" as
defined in Rule 16b-3 issued under the Act. The Board, in its
discretion, may also require that members of the Committee be
"outside directors" as defined in the rules promulgated pursuant
to Section 162(m) of the Code.
2.6 "Common Stock" means the Common Stock of the Company, par value
$0.01 per share.
2.7 "The Company" means The Colonel's International, Inc., a Michigan
corporation, and its successors and assigns.
2.8 "Incentive Award" means the award or grant of a Stock Option,
Stock Appreciation Right, Restricted Stock, Stock Award, or Tax
Benefit Right to a Participant pursuant to the Plan.
2.9 "Market Value" of any security on any given date means: (a) if
the security is listed for trading on one or more national
securities exchanges (including the NASDAQ National Market
System), the last reported sales price on the principal such
exchange on the date in question, or if such security shall not
have been traded on such principal exchange on such date, the
last reported sales price on such principal exchange on the first
day prior thereto on which such security was so traded; or (b) if
the security is not listed for trading on a national securities
exchange (including the NASDAQ National Market System) but is
A-2
<PAGE>
traded in the over-the-counter market, the mean of highest and
lowest bid prices for such security on the date in question, or
if there are no such bid prices on the first day prior thereto on
which such prices existed; or (c) if neither (a) nor (b) is
applicable, the value as determined by any means deemed fair and
reasonable by the Committee, which determination shall be final
and binding on all parties.
2.10 "Participant" means a corporate director or officer, divisional
officer, or other key employee of the Company, its divisions, or
its Subsidiaries who the Committee determines is eligible to
participate in the Plan and who is designated to be granted an
Incentive Award under the Plan.
2.11 "Restricted Period" means the period of time during which
Restricted Stock awarded under the Plan is subject to
restrictions. The Restricted Period may differ among
Participants and may have different expiration dates with respect
to shares of Common Stock covered by the same Incentive Award.
2.12 "Restricted Stock" means Common Stock awarded to a Participant
pursuant to Section 6 of the Plan.
2.13 "Retirement" means the voluntary termination of all employment
and service as a director with the Company by a Participant after
the Participant has attained 60 years of age, or age 55 with at
least five years of service, or such other age as shall be
determined by the Committee in its sole discretion or as
otherwise may be set forth in the Incentive Award agreement or
other grant document with respect to a Participant and a
particular Incentive Award.
2.14 "Stock Appreciation Right" means a right granted in connection
with a Stock Option pursuant to Section 8 of the Plan.
2.15 "Stock Award" means an award of Common Stock awarded to a
Participant pursuant to Section 7 of the Plan.
2.16 "Stock Option" means the right to purchase Common Stock at a
stated price for a specified period of time. For purposes of the
Plan, a Stock Option may be either an incentive stock option
within the meaning of Section 422(b) of the Code or a
nonqualified stock option, and the option shall be interpreted in
accordance with such intention as stated in the applicable Stock
Option Agreement.
2.17 "Subsidiary" means any corporation or other entity of which fifty
percent (50%) or more of the outstanding voting stock or voting
A-3
<PAGE>
ownership interest is directly or indirectly owned or controlled
by the Company or by one or more Subsidiaries of the Company.
2.18 "Tax Benefit Right" means any right granted to a Participant
pursuant to Section 9 of the Plan.
SECTION 3
ADMINISTRATION
3.1 POWER AND AUTHORITY. The Committee shall have full power and
authority to interpret the provisions of the Plan, and shall have full
power and authority to supervise the administration of the Plan. All
determinations, interpretations, and selections made by the Committee
regarding the Plan shall be final and conclusive. The Committee shall hold
its meetings at such times and places as it deems advisable. Action may be
taken by a written instrument signed by a majority of the members of the
Committee, and any action so taken shall be fully as effective as if it had
been taken at a meeting duly called and held. The Committee shall make
such rules and regulations for the conduct of its business as it deems
advisable. The members of the Committee shall not be paid any additional
fees for their services.
3.2 GRANTS OR AWARDS TO PARTICIPANTS. In accordance with and subject
to the provisions of the Plan, the Committee shall have the authority to
determine all provisions of Incentive Awards as the Committee may deem
necessary or desirable and as are consistent with the terms of the Plan,
including, without limitation, the following: (a) the employees who shall
be selected as Participants; (b) the nature and extent of the Incentive
Awards to be made to each employee (including the number of shares of
Common Stock to be subject to each Incentive Award, any exercise price, the
manner in which an Incentive Award will vest or become exercisable, and the
form of payment for the Incentive Award); (c) the time or times when
Incentive Awards will be granted to employees; (d) the duration of each
Incentive Award; and (e) the restrictions and other conditions to which
payment or vesting of Incentive Awards may be subject.
3.3 AMENDMENTS OR MODIFICATIONS OF AWARDS. The Committee shall have
the authority to amend or modify the terms of any outstanding Incentive
Award granted to an employee Participant in any manner, provided that the
amended or modified terms are not prohibited by the Plan as then in effect,
including, without limitation, the authority to: (a) modify the number of
shares or other terms and conditions of an Incentive Award; (b) extend the
term of an Incentive Award; (c) accelerate the exercisability or vesting or
otherwise terminate any restrictions relating to an Incentive Award; (d)
accept the surrender of any outstanding Incentive Award; or (e) to the
extent not previously exercised or vested, authorize the grant of new
Incentive Awards in substitution for surrendered Incentive Awards.
A-4
<PAGE>
Modification of options granted to nonemployee directors may be made only
as necessary or desirable to comply with securities or income tax law. No
such amendment or modification shall become effective without consent of
the Participant except to the extent that such amendment operates solely to
the benefit of the Participant.
3.4 INDEMNIFICATION OF COMMITTEE MEMBERS. Each person who is or
shall have been a member of the Committee shall be indemnified and held
harmless by the Company from and against any cost, liability, or expense
imposed or incurred in connection with such person's or the Committee's
taking or failing to take any action under the Plan. Each such person
shall be justified in relying on information furnished in connection with
the Plan's administration by any appropriate person or persons.
3.5 INCENTIVE AWARDS FOR NONEMPLOYEE DIRECTORS. Directors who are
not also employees shall receive nondiscretionary Stock Options awarded
automatically under the terms of subsection 5.5, and shall not receive
other Incentive Awards.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
subsection 4.2 of the Plan, a maximum of 4,000,000 shares of Common Stock
shall be available for Incentive Awards under the Plan. Such shares shall
be authorized and may be either unissued or treasury shares.
4.2 ADJUSTMENTS. If the number of shares of Common Stock outstanding
changes by reason of a stock dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares, or any other change
in the corporate structure or shares of the Company, the number and kind of
securities subject to and reserved under the Plan, together with applicable
exercise prices, shall be appropriately adjusted. No fractional shares
shall be issued pursuant to the Plan, and any fractional shares resulting
from adjustments shall be eliminated from the respective Incentive Awards,
with an appropriate cash adjustment for the value of any Incentive Awards
eliminated. If an Incentive Award is cancelled, surrendered, modified,
exchanged for a substitute Incentive Award, or expires or terminates during
the term of the Plan but prior to the exercise or vesting of the Incentive
Award in full, the shares subject to but not delivered under such Incentive
Award shall be available for other Incentive Awards.
A-5
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SECTION 5
STOCK OPTIONS
5.1 GRANT. A Participant may be granted one or more Stock Options
under the Plan. Stock Options shall be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. In addition, the
Committee may vary, among Participants and among Stock Options granted to
the same Participant, any and all of the terms and conditions of the Stock
Options granted under the Plan. The Committee shall have complete
discretion in determining the number of Stock Options granted to each
Participant. The Committee may designate whether or not a Stock Option is
to be considered an incentive stock option as defined in Section 422(b) of
the Code.
5.2 STOCK OPTION AGREEMENTS. Stock Options shall be evidenced by
Stock Option agreements containing such terms and conditions, consistent
with the provisions of the Plan, as the Committee shall from time to time
determine. Stock Options shall be subject to the terms and conditions set
forth in this Section 5.
5.3 STOCK OPTION PRICE. The per share Stock Option price shall be
determined by the Committee, but shall be a price that is equal to or
greater than one hundred percent (100%) of the Market Value on the date of
grant.
5.4 MEDIUM AND TIME OF PAYMENT. The exercise price for each share
purchased pursuant to a Stock Option granted under the Plan shall be
payable in cash or, if the Committee consents, in shares of Common Stock
(including Common Stock to be received upon a simultaneous exercise) or
other consideration substantially equivalent to cash. The time and terms
of payment may be amended with the consent of a Participant before or after
exercise of a Stock Option, but such amendment shall not reduce the Stock
Option price. The Committee may from time to time authorize payment of all
or a portion of the Stock Option price in the form of a promissory note or
installments according to such terms as the Committee may approve. The
Board may restrict or suspend the power of the Committee to permit such
loans and may require that adequate security be provided.
5.5 STOCK OPTIONS GRANTED TO NONEMPLOYEE DIRECTORS.
(a) AUTOMATIC GRANTS. Options shall be granted to
nonemployee Directors on March 1 and September 1 of each year,
and no discretionary options shall be granted to such Directors
under the Plan. The number of shares subject to options granted
on September 1, 1995, shall be 500 shares. The number of shares
to be subject to options granted on each succeeding option date
during the term of the Plan thereafter shall be 105% of the
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previous period's grant, with the result rounded up or down to
the nearest 5 share increment. This provision for automatic
grants shall be effective when there are insufficient shares
available for such automatic grants under prior Company stock
option plans.
(b) PRICE AND TERMS. The price shall be 100% of the Market
Value as of the date of the grant and may be paid in cash or
shares of Common Stock. The term shall be ten years.
(c) NEW DIRECTORS. Any new nonemployee Director elected or
appointed other than on a grant date shall receive, as of the
date of his or her election or appointment, an option for the
number of shares granted to a nonemployee Director as of the
previous grant date. The option price for such new Director
shall be the higher of the market value as of the date of grant
or the market value as of the prior grant date.
5.6 LIMITS ON EXERCISABILITY. Stock Options shall be exercisable for
such periods as may be fixed by the Committee, not to exceed 10 years from
the date of grant. At the time of the exercise of a Stock Option, the
holder of the Stock Option, if requested by the Committee, must represent
to the Company that the shares are being acquired for investment and not
with a view to the distribution thereof. The Committee may in its
discretion require a Participant to continue the Participant's service with
the Company and its Subsidiaries for a certain length of time prior to a
Stock Option becoming exercisable and may eliminate such delayed vesting
provisions. No Stock Option issued to directors and employees subject to
Section 16 of the Act shall be exercisable during the first six months of
its term.
5.7 RESTRICTIONS ON TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents or
unless the Stock Option agreement or grant provide otherwise:
(i) no Stock Options granted under the Plan may be sold,
exchanged, transferred, pledged, assigned, or otherwise alienated
or hypothecated except by will or the laws of descent and
distribution; and (ii) all Stock Options granted to a Participant
shall be exercisable during the Participant's lifetime only by
such Participant, his guardian, or legal representative.
(b) OTHER RESTRICTIONS. The Committee may impose other
restrictions on any shares of Common Stock acquired pursuant to
the exercise of a Stock Option under the Plan as the Committee
deems advisable, including, without limitation, restrictions
under applicable federal or state securities laws.
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5.8 LIMITS ON GRANTS. No Participant shall be granted, during any
calendar year, Options to purchase more than 1,000,000 shares of Common
Stock, subject to adjustment as provided in subsection 4.2 of the Plan.
The purpose of this subsection 5.8 is to ensure that the Plan provides
performance based compensation under Section 162(m) of the Code. This
subsection 5.8 shall be interpreted or amended to achieve that purpose.
5.9 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP.
(a) GENERAL. If a Participant ceases to be employed by or
a director of the Company or one of its Subsidiaries for any
reason other than the Participant's death, disability,
Retirement, or termination for cause, the Participant may
exercise his Stock Options only for a period of three months
after such termination of employment or director status, but only
to the extent the Participant was entitled to exercise the Stock
Options on the date of termination, unless the Committee
otherwise consents or the terms of the Stock Option agreement or
grant provide otherwise. For purposes of the Plan, the following
shall not be deemed a termination of employment or officer
status: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing
by the Company, for military service or for any other purpose
approved by the Company if the period of such leave does not
exceed 90 days; (iii) a leave of absence in excess of 90 days,
duly authorized in writing by the Company, provided that the
employee's right to reemployment is guaranteed either by statute
or contract; or (iv) a termination of employment with continued
service as a director.
(b) DEATH. If a Participant dies either while an employee
or director of the Company or one of its Subsidiaries or after
the termination of employment other than for cause but during the
time when the Participant could have exercised a Stock Option
under the Plan, the Stock Option issued to such Participant shall
be exercisable by the personal representative of such Participant
or other successor to the interest of the Participant for one
year after the Participant's death, but only to the extent that
the Participant was entitled to exercise the Stock Option on the
date of death or termination of employment or directorship,
whichever first occurred, unless the Committee otherwise consents
or the terms of the Stock Option agreement or grant provide
otherwise.
(c) DISABILITY. If a Participant ceases to be an employee
or director of the Company or one of its Subsidiaries due to the
Participant's disability, the Participant may exercise a Stock
Option for a period of one year following such termination of
employment or directorship, but only to the extent that the
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Participant was entitled to exercise the Stock Option on the date
of such event, unless the Committee otherwise consents or the
terms of the Stock Option agreement or grant provide otherwise.
(d) PARTICIPANT RETIREMENT. If a Participant Retires as an
employee or director of the Company or one of its Subsidiaries,
any Stock Option granted under the Plan may be exercised during
the remaining term of the Stock Option, unless the terms of the
Stock Option agreement or grant provide otherwise.
(e) TERMINATION FOR CAUSE. If a Participant is terminated
for cause, the Participant shall have no further right to
exercise any Stock Option previously granted.
SECTION 6
RESTRICTED STOCK
6.1 GRANT. A Participant may be granted Restricted Stock under the
Plan. Restricted Stock shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined by
the Committee in its sole discretion. The Committee may impose such
restrictions or conditions, consistent with the provisions of the Plan, to
the vesting of Restricted Stock as it deems appropriate. No more than one-
half of the total shares available for Incentive Awards under the Plan
shall be awarded in the form of Restricted Stock. Forfeited Restricted
Stock shall again become available for awards of Restricted Stock.
6.2 RESTRICTED STOCK AGREEMENTS. Awards of Restricted Stock shall be
evidenced by Restricted Stock agreements containing such terms and
conditions, consistent with the provisions of the Plan, as the Committee
shall from time to time determine. Unless a Restricted Stock agreement
provides otherwise, Restricted Stock Awards shall be subject to the terms
and conditions set forth in this Section 6.
6.3 TERMINATION OF EMPLOYMENT OR OFFICER STATUS.
(a) GENERAL. In the event of termination of employment
during the Restricted Period for any reason other than death,
disability, Retirement, or termination for cause, then any shares
of Restricted Stock still subject to restrictions at the date of
such termination shall automatically be forfeited and returned to
the Company; PROVIDED, HOWEVER, that in the event of a voluntary
or involuntary termination of the employment of a Participant by
the Company, the Committee may, in its sole discretion, waive the
automatic forfeiture of any or all such shares of Restricted
Stock and/or may add such new restrictions to such shares of
Restricted Stock as it deems appropriate. For purposes of the
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Plan, the following shall not be deemed a termination of
employment: (i) a transfer of an employee from the Company to any
Subsidiary; (ii) a leave of absence, duly authorized in writing
by the Company, for military service or for any other purpose
approved by the Company if the period of such leave does not
exceed 90 days; (iii) a leave of absence in excess of 90 days,
duly authorized in writing by the Company, provided that the
employee's right to reemployment is guaranteed either by statute
or contract; and (iv) a termination of employment with continued
service as a director.
(b) DEATH, RETIREMENT, OR DISABILITY. Unless the Committee
otherwise consents or unless the terms of the Restricted Stock
agreement or grant provide otherwise, in the event a Participant
terminates his or her employment with the Company because of
death, disability, or Retirement during the Restricted Period,
the restrictions applicable to the shares of Restricted Stock
shall terminate automatically with respect to that number of
shares (rounded to the nearest whole number) equal to the total
number of shares of Restricted Stock granted to such Participant
multiplied by the number of full months that have elapsed since
the date of grant divided by the maximum number of full months of
the Restricted Period. All remaining shares shall be forfeited
and returned to the Company; PROVIDED, HOWEVER, that the
Committee may, in its sole discretion, waive the restrictions
remaining on any or all such remaining shares of Restricted Stock
either before or after the death, disability, or Retirement of
the Participant.
(c) TERMINATION FOR CAUSE. If a Participant's employment
is terminated for cause, the Participant shall have no further
right to exercise or receive any Restricted Stock, and all
Restricted Stock still subject to restrictions at the date of
such termination shall automatically be forfeited and returned to
the Company.
6.4 RESTRICTIONS ON TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents or
unless the terms of the Restricted Stock agreement or grant
provide otherwise: (i) shares of Restricted Stock shall not be
sold, exchanged, transferred, pledged, assigned, or otherwise
alienated or hypothecated during the Restricted Period except by
will or the laws of descent and distribution; and (ii) all rights
with respect to Restricted Stock granted to a Participant under
the Plan shall be exercisable during the Participant's lifetime
only by such Participant, his or her guardian, or legal
representative.
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(b) OTHER RESTRICTIONS. The Committee may impose other
restrictions on any shares of Common Stock acquired pursuant to
an award of Restricted Stock under the Plan as the Committee
deems advisable, including, without limitation, restrictions
under applicable federal or state securities laws.
6.5 LEGENDING OF RESTRICTED STOCK. Any certificates evidencing
shares of Restricted Stock awarded pursuant to the Plan shall bear the
following legend:
The shares represented by this certificate were issued
subject to certain restrictions under The Colonel's International,
Inc. 1995 LONG-TERM INCENTIVE PLAN (the "Plan"). A copy of the
Plan is on file in the office of the Secretary of the Company.
This certificate is held subject to the terms and conditions
contained in a restricted stock agreement that includes a
prohibition against the sale or transfer of the stock represented
by this certificate except in compliance with that agreement, and
that provides for forfeiture upon certain events.
6.6 REPRESENTATIONS AND WARRANTIES. A Participant who is awarded
Restricted Stock shall represent and warrant that the Participant is
acquiring the Restricted Stock for the Participant's own account and
investment and without any intention to resell or redistribute the
Restricted Stock. The Participant shall agree not to resell or distribute
such Restricted Stock after the Restricted Period except upon such
conditions as the Company may reasonably specify to ensure compliance with
federal and state securities laws.
6.7 RIGHTS AS A STOCKHOLDER. A Participant shall have all voting,
dividend, liquidation, and other rights with respect to Restricted Stock
held of record by such Participant as if the Participant held unrestricted
Common Stock; PROVIDED, HOWEVER, that the unvested portion of any award of
Restricted Stock shall be subject to any restrictions on transferability or
risks of forfeiture imposed pursuant to subsections 6.1 and 6.4 of the
Plan. Unless the Committee otherwise determines or unless the terms of the
Restricted Stock agreement or grant provide otherwise, any noncash
dividends or distributions paid with respect to shares of unvested
Restricted Stock shall be subject to the same restrictions as the shares to
which such dividends or distributions relate.
SECTION 7
STOCK AWARDS
7.1 GRANT. A Participant may be granted one or more Stock Awards
under the Plan in lieu of, or as payment for, the rights of a Participant
under any other compensation plan, policy, or program of the Company or its
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Subsidiaries. Stock Awards shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by
the Committee in its sole discretion.
7.2 RIGHTS AS A STOCKHOLDER. A Participant shall have all voting,
dividend, liquidation, and other rights with respect to shares of Common
Stock issued to the Participant as a Stock Award under this Section 7 upon
the Participant becoming the holder of record of the Common Stock granted
pursuant to such Stock Awards; PROVIDED, HOWEVER, that the Committee may
impose such restrictions on the assignment or transfer of Common Stock
awarded pursuant to a Stock Award as it deems appropriate.
SECTION 8
STOCK APPRECIATION RIGHTS
8.1 GRANT. The Committee may grant Stock Appreciation Rights to
individuals granted related options under the Plan.
8.2 RESTRICTIONS. A Stock Appreciation Right may be granted
simultaneously with or subsequent to the option to which the right is
related, but each Stock Appreciation Right must relate to a particular
option. In exchange for the surrender in whole or in part of the right to
exercise the related option to purchase shares of Common Stock, the
exercise of a Stock Appreciation Right shall entitle a Plan participant to
an amount equal to the appreciation in value of the shares covered by the
related option surrendered. Such appreciation in value shall be equal to
the excess of the market value of such shares at the time of the exercise
of the Stock Appreciation Right over the option price of such shares.
Stock Appreciation Rights may be exercised only when the related option
could be exercised and only when the market price of the stock subject to
the option exceeds the exercise price of the option. Neither a Stock
Appreciation Right nor any related stock option issued to officers and
directors subject to Section 16 of the Securities and Exchange Act of 1934
shall be exercisable during the first six months of the terms of the
respective right or option.
8.3 PAYMENT. Upon the exercise of a Stock Appreciation Right,
payment by the Company may be made in cash, in shares of Common Stock, or
partly in cash and partly in shares of Common Stock. The Committee shall
have sole discretion to determine the form of payment made upon the
exercise of a Stock Appreciation Right. If payment is made in shares of
Common Stock, such shares shall be valued at their market value as of the
date of surrender of the right to exercise the option. When an
appreciation right is exercised pursuant to an option, the shares subject
to the underlying option shall no longer be available for grant of
Incentive Awards under the Plan.
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SECTION 9
TAX BENEFIT RIGHTS
9.1 GRANT. A Participant may be granted Tax Benefit Rights under the
Plan to encourage a Participant to exercise Stock Options and provide
certain tax benefits to the Company. A Tax Benefit Right entitles a
Participant to receive from the Company or a Subsidiary a cash payment not
to exceed the amount calculated by multiplying the ordinary income, if any,
realized by the Participant for federal tax purposes as a result of the
exercise of a nonqualified stock option, or the disqualifying disposition
of shares acquired under an incentive stock option, by the maximum federal
income tax rate (including any surtax or similar charge or assessment) for
corporations, plus the applicable state and local tax imposed on the
exercise of the Stock Option or the disqualifying disposition.
9.2 RESTRICTIONS. A Tax Benefit Right may be granted only with
respect to a stock option issued and outstanding or to be issued under the
Plan or any other plan of the Company or its Subsidiaries that has been
approved by the shareholders as of the date of the Plan and may be granted
concurrently with or after the grant of the stock option. Such rights with
respect to outstanding stock options shall be issued only with the consent
of the Participant if the effect would be to disqualify an incentive stock
option, change the date of grant or the exercise price, or otherwise impair
the Participant's existing stock options. A stock option to which a Tax
Benefit Right has been attached shall not be exercisable by a director,
officer or employee subject to Section 16 of the Act for a period of six
months from the date of the grant of the Tax Benefit Right.
9.3 TERMS AND CONDITIONS. The Committee shall determine the terms
and conditions of any Tax Benefit Rights granted and the Participants to
whom such rights will be granted with respect to stock options under the
Plan or any other plan of the Company. The Committee may amend, cancel,
limit the term of, or limit the amount payable under a Tax Benefit Right at
any time prior to the exercise of the related stock option, unless
otherwise provided under the terms of the Tax Benefit Right. The net
amount of a Tax Benefit Right, subject to withholding, may be used to pay a
portion of the stock option price, unless otherwise provided by the
Committee.
SECTION 10
CHANGE IN CONTROL
10.1 ACCELERATION OF VESTING. If a Change in Control of the Company
shall occur, then, unless the Committee or the Board otherwise determines
with respect to one or more Incentive Awards, without action by the
Committee or the Board (a) all outstanding Stock Options shall become
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immediately exercisable in full and shall remain exercisable during the
remaining term thereof, regardless of whether the Participants to whom such
Stock Options have been granted remain in the employ or service of the
Company or any Subsidiary; and (b) all other outstanding Incentive Awards
shall become immediately fully vested and nonforfeitable.
10.2 CASH PAYMENT FOR STOCK OPTIONS. If a Change in Control of the
Company shall occur, then the Committee, in its sole discretion, and
without the consent of any Participant affected thereby, may determine that
some or all Participants holding outstanding Stock Options shall receive,
with respect to some or all of the shares of Common Stock subject to such
Stock Options, as of the effective date of any such Change in Control of
the Company, cash in an amount equal to the greater of the excess of (a)
the highest sales price of the shares on the NASDAQ Market System (or other
public exchange upon which the Company's stock is then traded) on the date
immediately prior to the effective date of such Change in Control of the
Company or (b) the highest price per share actually paid in connection with
any Change in Control of the Company over the exercise price per share of
such Stock Options.
10.3 LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding
anything in subsection 10.1 or 10.2 to the contrary, if, with respect to a
Participant, the acceleration of the vesting of an Incentive Award as
provided in subsection 10.1 or the payment of cash in exchange for all or
part of a Stock Option as provided in subsection 10.2 (which acceleration
or payment could be deemed a "payment" within the meaning of Section
280G(b)(2) of the Code), together with any other payments that such
Participant has the right to receive from the Company or any corporation
that is a member of an "affiliated group" (as defined in Section 1504(a) of
the Code without regard to Section 1504(b) of the Code) of which the
Company is a member, would constitute a "parachute payment" (as defined in
Section 280G(b)(2) of the Code), then the payments to such Participant
pursuant to subsection 10.1 or 10.2 shall be reduced to the largest amount
as will result in no portion of such payments being subject to the excise
tax imposed by Section 4999 of the Code.
SECTION 11
GENERAL PROVISIONS
11.1 NO RIGHTS TO AWARDS. No Participant or other person shall have
any claim to be granted any Incentive Award under the Plan, and there is no
obligation of uniformity of treatment of Participants or holders or
beneficiaries of Incentive Awards under the Plan. The terms and conditions
of Incentive Awards of the same type and the determination of the Committee
to grant a waiver or modification of any Incentive Award and the terms and
conditions thereof need not be the same with respect to each Participant.
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11.2 WITHHOLDING. The Company or a Subsidiary shall be entitled to
(a) withhold and deduct from future wages of a Participant (or from other
amounts that may be due and owing to a Participant from the Company or a
Subsidiary), or make other arrangements for the collection of, all legally
required amounts necessary to satisfy any and all federal, state, and local
withholding and employment-related tax requirements attributable to an
Incentive Award, including, without limitation, the grant, exercise, or
vesting of, or payment of dividends with respect to, an Incentive Award or
a disqualifying disposition of Common Stock received upon exercise of an
incentive stock option; or (b) require a Participant promptly to remit the
amount of such withholding to the Company before taking any action with
respect to an Incentive Award. Unless the Committee determines otherwise,
withholding may be satisfied by withholding Common Stock to be received
upon exercise or by delivery to the Company of previously owned Common
Stock. The Company may establish such rules and procedures concerning
timing of any withholding election as it deems appropriate to comply with
Rule 16b-3 under the Act.
11.3 COMPLIANCE WITH LAWS; LISTING AND REGISTRATION OF SHARES. All
Incentive Awards granted under the Plan (and all issuances of Common Stock
or other securities under the Plan) shall be subject to all applicable
laws, rules, and regulations, and to the requirement that if at any time
the Committee shall determine, in its discretion, that the listing,
registration, or qualification of the shares covered thereby upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the grant of such Incentive Award or
the issue or purchase of shares thereunder, such Incentive Award may not be
exercised in whole or in part, or the restrictions on such Incentive Award
shall not lapse, unless and until such listing, registration,
qualification, consent, or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
11.4 LIMIT ON PLAN AWARDS. No Participant shall be eligible to
receive Incentive Awards under the Plan which in the aggregate constitute
more than 25% of the total Incentive Awards granted under the Plan.
11.5 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements,
including the grant of stock options and other stock-based awards, and such
arrangements may be either generally applicable or applicable only in
specific cases.
11.6 NO RIGHT TO EMPLOYMENT. The grant of an Incentive Award shall
not be construed as giving a Participant the right to be retained in the
employ of the Company or any Subsidiary. The Company or any Subsidiary may
at any time dismiss a Participant from employment, free from any liability
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or any claim under the Plan, unless otherwise expressly provided in the
Plan or in any written agreement with a Participant.
11.7 GOVERNING LAW. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Michigan and applicable federal
law.
11.8 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining provisions of the Plan, and the Plan shall be
construed and enforced as if the illegal or invalid provision had not been
included.
SECTION 12
TERMINATION AND AMENDMENT
The Board may terminate the Plan at any time, or may from time to
time amend the Plan as it deems proper and in the best interests of the
Company, provided that without stockholder approval no such amendment may:
(a) materially increase either the benefits to Participants under the Plan
or the number of shares that may be issued under the Plan; (b) materially
modify the eligibility requirements; (c) modify the formula grant
provisions of subsection 5.5 with respect to nonemployee directors more
than once in any six month period, or (d) impair any outstanding Incentive
Award without the consent of the Participant, except according to the terms
of the Plan or the Incentive Award. No termination, amendment, or
modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written
consent of the Participant holding such Incentive Award unless such
amendment or modification operates solely to the benefit of the
Participant.
SECTION 13
EFFECTIVE DATE AND DURATION OF THE PLAN
This Plan shall take effect upon approval by the shareholders at
the 1995 Annual Meeting of Shareholders or any adjournment thereof or at a
Special Meeting of Shareholders. Unless earlier terminated by the Board of
Directors, the Plan shall terminate on November 21, 2005. No Incentive
Award shall be granted under the Plan after such date.
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APPENDIX B
THE COLONEL'S INTERNATIONAL, INC.
1997 STOCK OPTION AND RESTRICTED STOCK
PLAN FOR SELECTED NON-EMPLOYEES
SECTION 1
ESTABLISHMENT OF PLAN; PURPOSE OF PLAN
1.1 ESTABLISHMENT OF PLAN. The Colonel's International, Inc. hereby
establishes the 1997 Stock Option and Restricted Stock Plan for Selected
Non-Employees (the "Plan"). The Plan permits the grant or award of Options
and Restricted Stock to certain persons who are not employees of the
Company or any of its subsidiaries but who provide services to the Company
or its subsidiaries in the production, manufacture, development, marketing
or sale of their products.
1.2 PURPOSE OF PLAN. The purpose of the Plan is to provide Selected
Non-Employees with the right to receive or purchase the Common Stock of the
Company so as to join their interests with the interests of the Company and
its shareholders through an increased opportunity for stock ownership.
SECTION 2
DEFINITIONS
The following words have the following meanings unless a different
meaning is plainly required by the context:
2.1 "Act" means the Securities Exchange Act of 1934, as amended.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Committee" means the Compensation Committee of the Board or such
other committee as the Board shall designate to administer the
Plan. The Committee shall consist of at least two members of the
Board and all of its members shall be "non-employee directors" as
defined in Rule 16b-3 issued under the Act. The Board, in its
discretion, may also require that members of the Committee be
"outside directors" as defined in the rules promulgated pursuant
to Section 162(m) of the Code.
2.5 "Common Stock" means the common stock, $0.01 par value, of the
Company.
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2.6 "Company" means The Colonel's International, Inc., a Michigan
corporation.
2.7 "Competition" means participation, directly or indirectly, in the
ownership, management, financing or control of any business that
is the same as or similar to the present or future businesses of
the Company or its parent or any Subsidiary. Such participation
could be by way of employment, consulting services, directorship
or officership. Ownership of less than five percent (5%) of the
shares of any corporation whose shares are traded publicly on any
national or regional stock exchange or over the counter shall not
be deemed Competition.
2.8 "Incentive Award" means the award or grant of an Option or
Restricted Stock to a Participant under the Plan.
2.9 "Market Value" of any security on any given date means: (a) if
the security is listed for trading on The NASDAQ Stock Market or
one or more national securities exchanges, the last reported
sales price on the date in question, or if such security shall
not have been traded on such principal exchange on such date, the
last reported sales price on the first day prior thereto on which
such security was so traded; or (b) if the security is not so
listed for trading but is traded in the over-the-counter market,
the mean of highest bid and lowest asked prices for such security
on the date in question, or if there are no such bid and asked
prices for such security on such date, the mean of the highest
bid and lowest asked prices on the first day prior thereto on
which such prices existed; or (c) if neither (a) nor (b) is
applicable, the value as determined by any means deemed fair and
reasonable by the Committee, which determination shall be final
and binding on all parties.
2.10 "Option" means the right to purchase Common Stock at a stated
price for a specified period of time. For purposes of the Plan,
an Option may not be an incentive stock option within the meaning
of Section 422(b) of the Code.
2.11 "Participant" means a Selected Non-Employee who the Board of
Directors or the Committee determines is eligible to participate
in the Plan and who is designated to be granted an Incentive
Award under the Plan.
2.12 "Restricted Period" means the period of time during which
Restricted Stock awarded under the Plan is subject to
restrictions. The Restricted Period may differ among
Participants and may have different expiration dates with respect
to shares of Common Stock covered by the same Incentive Award.
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2.13 "Restricted Stock" means Common Stock awarded to a Participant
under Section 6 of the Plan.
2.14 "Selected Non-Employee" means an individual not employed by the
Colonel's International, Inc. or any of its subsidiaries who
provides services to the Company or its subsidiaries in the
production, manufacture, development, marketing or sale of their
products and who has been deemed by the Board of Directors as a
Selected Non-Employee. The Board of Directors shall determine
the persons deemed to be Selected Non-Employees or the standard
or method used to determine the persons to be considered Selected
Non-Employees.
2.15 "Subsidiary" means any corporation of which a majority of the
outstanding voting stock is directly or indirectly owned or
controlled by the Company, or by one or more Subsidiaries.
SECTION 3
ADMINISTRATION
3.1 POWER AND AUTHORITY. The Committee shall administer the Plan,
shall have full power and authority to interpret the provisions of the
Plan, and shall have full power and authority to supervise the
administration of the Plan. All determinations, interpretations and
selections made by the Committee regarding the Plan shall be final and
conclusive. The Committee shall hold its meetings at such times and places
as it deems advisable. 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 as effective as if it had been taken at a meeting duly called and
held. The Committee shall make such rules and regulations for the conduct
of its business as it deems advisable. The members of the Committee shall
not be paid any additional fees for their services.
3.2 GRANTS OR AWARDS TO PARTICIPANTS. In accordance with and subject
to the provisions of the Plan, the Committee shall have the authority to:
determine whether and when Incentive Awards will be granted, the persons or
entities to be granted Incentive Awards, the amount of Incentive Awards to
be granted to each person and the terms of the Incentive Awards to be
granted; vary and amend vesting schedules, if any; and waive any
restrictions or conditions applicable to any Incentive Award. Incentive
Awards shall be granted or awarded by the Committee, and Incentive Awards
may be amended by the Committee consistent with the Plan, provided that no
such amendment may become effective without the consent of the Participant,
except to the extent that the amendment operates solely to the benefit of
the Participant.
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3.3 INDEMNIFICATION OF COMMITTEE MEMBERS. Each person who is or
shall have been a member of the Committee shall be indemnified and held
harmless by the Company from and against any cost, liability or expense
imposed or incurred in connection with such person's or the Committee's
taking or failing to take any action under the Plan. Each such person
shall be justified in relying upon information furnished in connection
with the Plan's administration by any appropriate person or persons.
SECTION 4
SHARES SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
subsection 4.2 of the Plan, a maximum of 200,000 shares of Common Stock
shall be available for Incentive Awards under the Plan, with a maximum of
30,000 shares available for issuance in any one year. Such shares shall
be authorized and unissued shares.
4.2 ADJUSTMENTS. If the number of shares of Common Stock outstanding
changes by reason of a stock dividend, stock split, recapitalization,
merger, consolidation, combination, exchange of shares or any other change
in the corporate structure or shares of the Company, the aggregate number
and class of shares available for grants or awards under the Plan, together
with the Option prices, shall be appropriately adjusted. No fractional
shares shall be issued pursuant to the Plan, and any fractional shares
resulting from adjustments shall be eliminated from the respective
Incentive Award, with an appropriate cash adjustment for the value of any
Incentive Awards eliminated. If an Incentive Award is canceled,
surrendered, modified, expired or terminated during the term of the Plan
but prior to the exercise or vesting of the Incentive Award in full, the
shares subject to but not delivered under such Incentive Award shall be
available for other Incentive Awards.
SECTION 5
OPTIONS
5.1 GRANT. A Participant may be granted one or more Options under
the Plan. Options shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined
by the Committee in its sole discretion. The Committee may vary, among
Participants and among Options granted to the same Participant, any and all
of the terms and conditions of the Options granted under the Plan. The
Committee shall have complete discretion in determining the number of
Options granted to each Participant.
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<PAGE>
5.2 OPTION AGREEMENTS. Each Option shall be evidenced by an Option
agreement containing such terms and conditions, consistent with the
provisions of the Plan, as the Committee from time to time determines.
Option agreements may be amended by the Committee consistent with the Plan,
but no such amendment shall be effective as to a Participant without the
Participant's consent unless the amendment operates solely to the benefit
of the Participant.
5.3 OPTION PRICE. The per share Option price shall not be less than
the Market Value on the date of grant. The date of grant of an Option
shall be the date the Option is authorized by the Committee or such future
date specified by the Committee as the date for issuing the Option.
5.4 MEDIUM AND TIME OF PAYMENT. The exercise price for each share
purchased pursuant to an Option granted under the Plan shall be payable in
cash or, if the Committee consents, in shares of Common Stock (including
Common Stock to be received upon a simultaneous exercise). The time and
terms of payment may be amended with the consent of the Participant before
or after exercise of the Option, but such amendment shall not reduce the
Option price. The Committee may from time to time authorize payment of all
or a portion of the Option price in the form of a promissory note or
installments according to such terms as the Committee may approve. The
Board may restrict or suspend the power of the Committee to permit such
loans and may require that adequate security be provided.
5.5 LIMITS ON EXERCISABILITY. Options shall be exercisable for such
periods as may be fixed by the Committee, not to exceed ten years from the
grant date. At the time of the exercise of an Option, the holder of the
Option, if requested by the Committee, must represent to the Company that
the shares are being acquired for investment and not with a view to the
distribution thereof. The Committee may also vary, among Participants and
among Options granted to the same Participant, any and all of the terms and
conditions of Options granted under the Plan.
5.6 TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents or
unless the terms of the Option agreement provide otherwise, no
Option granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, other than by
will or by the laws of descent and distribution if the
participant is a natural person. In addition, all Options
granted to a Participant during the Participant's lifetime shall
be exercisable during the Participant's lifetime only by such
Participant, his guardian, or legal representative.
(b) OTHER RESTRICTIONS. The Committee may impose such
restrictions on any shares of Common Stock acquired pursuant to
the exercise of an Option under the Plan as it deems advisable,
B-5
<PAGE>
including, without limitation, restrictions under applicable
federal or state securities laws.
5.7 RESTRICTIONS ON EXERCISE.
(a) GENERAL. The Committee may impose such restrictions
as it deems appropriate on the Participant's right to exercise any
Options granted. Such restrictions shall be specified in the
Option Agreement entered into with the Participant under Section
5.2.
(b) SPECIFIC RESTRICTIONS. Notwithstanding the Committee's
right to impose additional restrictions under Section 5.7(a), the
following restrictions shall also apply:
(i) If the Participant ceases to be a Selected Non-
Employee for any reason other than death or disability, the
Option issued to such Participant shall no longer be
exercisable. If a Participant dies or becomes disabled,
the Option shall be exercisable by the Participant or
personal representative for a period of three months after
the date the Participant ceases to be a Selected Non-
Employee, but only to the extent that the Participant was
entitled to exercise the Option on the date the Participant
ceases to be a Selected Non-Employee unless the Option
agreement provides otherwise or the Committee otherwise
consents;
(ii) If the Committee determines that the Participant
has entered into Competition with the Company or any of its
Subsidiaries, the Participant's right to exercise any
outstanding Options shall terminate as of that date of entry
into Competition. The Committee shall have sole discretion in
making such determination.
SECTION 6
RESTRICTED STOCK
6.1 GRANT. A Participant may be granted Restricted Stock under the
Plan. Restricted Stock shall be subject to such terms and conditions,
consistent with the other provisions of the Plan, as shall be determined by
the Committee in its sole discretion. Restricted Stock shall be awarded on
the condition that the Participant continues to perform certain services or
meets certain requirements as provided by the Committee in the Restricted
Stock Agreement.
B-6
<PAGE>
6.2 RESTRICTED STOCK AGREEMENTS. Each award of Restricted Stock
shall be evidenced by a Restricted Stock Agreement containing such terms
and conditions, consistent with the provisions of the Plan, as the
Committee from time to time determines. Restricted Stock Agreements may be
amended by the Committee consistent with the Plan, but no such amendment
shall be effective as to a Participant without the Participant's consent
unless the amendment operated solely for the benefit of the Participant.
6.3 TERMINATION OF SELECTED NON-EMPLOYEE STATUS. In addition to any
restrictions that the Committee may impose on the award of Restricted Stock
the following restrictions shall apply:
(a) COMPETITION. If the Committee determines that the
Participant has entered into Competition with the Company or any
of its Subsidiaries or ceases to be a Selected Non-Employee for
any reason other than by reason of death or disability, then any
shares of Restricted Stock still subject to restrictions on the
date of such determination shall automatically be forfeited and
returned to the Company.
(b) DEATH OR DISABILITY. Unless the terms of the
Restricted Stock Agreement or grant provide otherwise, in the
event a Participant is no longer a Selected Non-Employee because
of death or disability during the Restricted Period, the
Participant's right to all of the Participant's Restricted Stock
shall vest as of the date of death or disability, and the
Participant's Restricted Stock may be transferred free of any
restrictions under the Plan, except any restrictions as the
Company may reasonably specify to ensure compliance with federal
and state securities laws.
6.4 RESTRICTIONS ON TRANSFERABILITY.
(a) GENERAL. Unless the Committee otherwise consents or
unless the terms of the Restricted Stock Agreement provide
otherwise, shares of Restricted Stock shall not be sold,
exchanged, transferred, pledged or otherwise disposed of by a
Participant during the Restricted Period other than to the
Company pursuant to subsection 6.3 or 6.4(b) or by will or the
laws of descent and distribution.
(b) SURRENDER TO THE COMPANY. If any sale, exchange,
transfer, pledge or other disposition, voluntary or involuntary,
of Restricted Stock that has not vested shall be made or
attempted during the Restricted Period, except as provided above
in subsections 6.3 and 6.4(b), the Participant's right to the
Restricted Stock shall immediately cease and terminate, and the
Participant shall promptly surrender to the Company all such
Restricted Stock in the Participant's possession.
B-7
<PAGE>
(c) OTHER RESTRICTIONS. The Committee may impose other
restrictions on any shares of Common Stock acquired pursuant to
an award of Restricted Stock as the Committee deems advisable,
including, without limitation, restrictions under applicable
federal or state securities laws.
6.5 RIGHTS AS A SHAREHOLDER. During the Restricted Period, a
Participant shall have all rights of a shareholder with respect to his
Restricted Stock, including (a) the right to vote any shares at
shareholders' meetings; (b) the right to receive, without restriction, all
cash dividends paid with respect to such Restricted Stock; and (c) the
right to participate with respect to such Restricted Stock in any stock
dividend, stock split, recapitalization or other adjustment in the Common
Stock of the Company or any merger, consolidation or other reorganization
involving an increase or decrease or adjustment in the Common Stock of the
Company. Any new, additional or different shares or other security
received by the Participant pursuant to any such stock dividend, stock
split, recapitalization or reorganization shall be subject to the same
terms, conditions and restrictions as those relating to the Restricted
Stock for which such shares were received.
6.6 DEPOSIT OF CERTIFICATES; LEGENDING OF RESTRICTED STOCK.
(a) DEPOSIT OF CERTIFICATES. Any certificates evidencing
shares of Restricted Stock awarded pursuant to the Plan shall be
registered in the name of the relevant Participant and deposited,
together with a stock power endorsed in blank, with the Company.
In the discretion of the Committee, any such certificates may be
deposited in a bank designated by the Committee or delivered to
the Participant. Certificates for shares of Restricted Stock
that have vested shall be delivered to the Participant upon
request within a reasonable period of time. The Participant
shall sign all documents necessary or appropriate to facilitate
such delivery.
(b) LEGEND. Any certificates evidencing shares of
Restricted Stock awarded pursuant to the Plan shall bear the
following legend:
The shares represented by this certificate are held
subject to the terms and conditions contained in a
restricted stock agreement that includes a prohibition
against the sale or transfer of the stock represented
by this certificate except in compliance with that
agreement, and that provides for forfeiture upon
certain events. A copy of that Agreement is on file in
the office of the Secretary of The Colonel's
International, Inc.
B-8
<PAGE>
6.7 REPRESENTATIONS AND WARRANTIES. A Participant who is awarded
Restricted Stock shall represent and warrant that the Participant is
acquiring the Restricted Stock for the Participant's own account and
investment and without any intention to resell or redistribute the
Restricted Stock. The Participant shall agree not to resell or
redistribute such Restricted Stock after the Restricted Period except upon
such conditions as the Company may reasonably specify to ensure compliance
with federal and state securities laws.
SECTION 7
GENERAL PROVISIONS
7.1 NO RIGHTS TO AWARDS. No Participant or other person shall have
any claim to be granted any Incentive Award, and there is no obligation of
uniformity of treatment of Participants or holders or beneficiaries of
Incentive Awards. The terms and conditions of the Incentive Awards of the
same type and the determination of the Committee to grant a waiver or
modification of any Incentive Award and the terms and conditions thereof
need not be the same with respect to each Participant.
7.2 COMPLIANCE WITH LAWS; LISTING AND REGISTRATION OF SHARES. All
Incentive Awards granted under the Plan (and all issuances of Common Stock
or other securities under the Plan) shall be subject to applicable laws,
rules and regulations, and to the requirement that if at any time the
Committee determines, in its sole discretion, that the listing,
registration or qualification of the shares covered thereby upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of such Incentive Award
or the issue or purchase of shares thereunder, such Incentive Award may not
be exercised in whole or in part, or the restrictions on such Incentive
Award shall not lapse, unless and until such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
7.3 NO LIMIT ON OTHER COMPENSATION ARRANGEMENTS. Nothing contained
in the Plan shall prevent the Company or any Subsidiary from adopting or
continuing in effect other or additional compensation arrangements,
including the grant of options and other stock-based awards, and such
arrangements may be either generally applicable or applicable only in
specific cases.
7.4 GOVERNING LAW. The validity, construction and effect of the Plan
and any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Michigan and applicable federal
law.
B-9
<PAGE>
7.5 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
SECTION 8
EFFECTIVE DATE AND DURATION OF THE PLAN
This Plan shall take effect February 20, 1997, subject to approval by
the shareholders at the 1997 Annual Meeting of Shareholders, or any
adjournment thereof or at a special meeting of shareholders. Unless
earlier terminated by the Board of Directors, the Plan shall terminate on
February 19, 2007. No Incentive Award shall be granted under this Plan
after such date.
SECTION 9
TERMINATION AND AMENDMENT
The Board may terminate the Plan at any time, or may from time to time
amend the Plan as it deems proper and in the best interests of the Company,
provided that without shareholder approval no such amendment may
(a) materially increase either the benefits to Participants under the Plan
or the number of shares that may be issued under the Plan; (b) materially
modify the eligibility requirements; (c) reduce the Option price (except
pursuant to adjustments under subsection 4.2); or (d) impair any
outstanding Incentive Award without the consent of the Participant, except
according to the terms of the Incentive Award. No termination, amendment,
or modification of the Plan shall become effective with respect to any
Incentive Award previously granted under the Plan without the prior written
consent of the Participant holding such Incentive Award unless such
amendment or modification operates solely to the benefit of the
Participant.
B-10<PAGE>
<PAGE>
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE
REVOCABLE PROXY
THE COLONEL'S INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder hereby appoints Michael J. McCloskey and
Richard S. Schoenfeldt, and each of them, each with full power of
substitution, proxies to represent the shareholder listed on the reverse
side of this Proxy and to vote all shares of Common Stock of The Colonel's
International, Inc. that the shareholder would be entitled to vote on all
matters which come before the Annual Meeting of Shareholders to be held at
the offices of The Colonel's International, Inc., 620 South Platt Road,
Milan, Michigan 48160, on Tuesday, April 22, 1997, at 10 a.m. local time,
and any adjournment of that meeting.
[ ]
IMPORTANT -- Please sign exactly as your name(s) appears on this Proxy.
When signing on behalf of a corporation, partnership, estate or trust,
indicate title or capacity of person signing. IF SHARES ARE HELD JOINTLY,
EACH HOLDER SHOULD SIGN
[Date ]
[Signature of Shareholder(s) ]
1. ELECTION OF DIRECTORS
Nominees: Patsy L. Williamson, Michael J. McCloskey, Mark D. Stevens,
Ben C. Parr, John M. Darcy, J. Daniel Frisina, and Donald R. Gorman
FOR [ ] WITHHOLD [ ] FOR ALL EXCEPT [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE THROUGH THAT NOMINEE'S NAME IN THE LIST ABOVE.)
Your Board of Directors Recommends that You Vote FOR ALL NOMINEES
<PAGE>
2. Proposal to approve the amendments to The Colonel's International,
Inc. 1995 Long-Term Incentive Plan
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Your Board of Directors Recommends that You Vote FOR this Proposal
3. Proposal to approve the 1997 Stock Option and Restricted Stock Plan
for Selected Non-Employees
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Your Board of Directors Recommends that You Vote FOR this Proposal
4. Proposal to ratify the appointment of Deloitte & Touche LLP as
independent auditors for the current fiscal year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
Your Board of Directors Recommends that You Vote FOR this Proposal
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES NAMED ON THIS PROXY
AS DIRECTORS AND FOR APPROVAL OF EACH PROPOSAL IDENTIFIED ON THIS PROXY. THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE PROXIES
ON ANY OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
- --------------------------------------------------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
THE COLONEL'S INTERNATIONAL, INC.
c/o Registrar and Transfer Company
10 Commerce Drive
Cranford, New Jersey 07016-3572
