SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PRECISION STANDARD, INC.
(Name of Registrant as Specified in Its Charter)
GORSUCH KIRGIS L.L.C.
(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.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRECISION STANDARD, INC.
1225 17th Street, Suite 1800
Denver, Colorado 80202
(303) 292-6565
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1997
TO THE SHAREHOLDERS OF PRECISION STANDARD, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Precision Standard, Inc., a Colorado corporation (the "Company"), will be
held at the Westin Hotel Tabor Center, 1672 Lawrence, Denver, Colorado
80202, on Monday, May 12, 1997, at 10:00 a.m. Mountain Daylight Time, and
at any and all adjournments thereof, for the purpose of considering and
acting upon the following matters:
1. The election of five (5) Directors of the Company to serve until
the next Annual Meeting of Shareholders and until their successors have
been duly elected and qualified;
2. The ratification of the appointment of Arthur Andersen LLP as
the independent public accountants of the Company for the calendar year
ended December 31, 1996 and the calendar year ending December 31, 1997;
3. The approval of certain amendments to the Nonqualified Stock
Option Plan to conform with recent amendments to SEC Rule 16b-3, and to
permit greater flexibility in the administration of the Plan;
4. The approval of certain amendment to the Incentive Stock Option
and Appreciation Rights Plan to conform with recent amendments to SEC Rule
16b-3, and to permit greater flexibility in the administration of the
Plan; and
5. The transaction of such other business as properly may come
before the meeting or any adjournment thereof.
A Proxy Statement explaining the matters to be acted upon at the
meeting is enclosed. Please read it carefully.
Only holders of record of the $.0001 par value common stock of the
Company at the close of business on Friday, April 4, 1997, will be
entitled to notice of and to vote at the Meeting or at any adjournment or
adjournments thereof. The Proxies are being solicited by the Board of
Directors of the Company.
All Shareholders, whether or not they expect to attend the Annual
Meeting of Shareholders in person, are urged to sign and date the enclosed
Proxy and return it promptly in the enclosed postage-paid envelope which
requires no additional postage if mailed in the United States. The giving
of a Proxy will not affect your right to vote in person if you attend the
Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Denver, Colorado MATTHEW L. GOLD
April 14, 1997 PRESIDENT
<PAGE>
PRECISION STANDARD, INC.
1225 17th Street, Suite 1800
Denver, Colorado 80202
(303) 292-6565
-------------------------
PROXY STATEMENT
-------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 1997
GENERAL INFORMATION
The enclosed Proxy is solicited by and on behalf of the Board of
Directors of Precision Standard, Inc., a Colorado corporation (the
"Company"), for use at the Company's Annual Meeting of Shareholders (the
"Meeting") to be held at the Westin Hotel Tabor Center, 1672 Lawrence,
Denver, Colorado 80202, on Monday, May 12, 1997, at 10:00 a.m., Mountain
Daylight Time, and at any adjournment thereof. It is anticipated that
this Proxy Statement and the accompanying Proxy will be mailed to the
Company's Shareholders on or about April 14, 1997.
Any person signing and returning the enclosed Proxy may revoke it at
any time before it is voted by (i) giving a later dated written revocation
of Proxy to the Company, or (ii) providing a later dated amended Proxy to
the Company, or (iii) voting in person at the Meeting. The expense of
soliciting Proxies, including the cost of preparing, assembling and
mailing this Proxy material to Shareholders, will be borne by the Company.
It is anticipated that solicitations of Proxies for the Meeting will be
made only by use of the mails; however, the Company may use the services
of its Directors, Officers and employees to solicit Proxies personally or
by telephone, without additional salary or compensation to them.
Brokerage houses, custodians, nominees and fiduciaries will be requested
to forward the Proxy soliciting materials to the beneficial owners of the
Company's shares held of record by such persons, and the Company will
reimburse such persons for the reasonable out-of-pocket expenses incurred
by them in that connection.
All shares represented by valid Proxies will be voted in accordance
therewith at the Meeting.
SHARES OUTSTANDING AND VOTING RIGHTS
All voting rights are vested exclusively in the holders of the
Company's $.0001 par value common stock ("Common Stock"), with each share
entitled to one vote. Only Shareholders of record at the close of
business on Friday, April 4, 1997, are entitled to notice of and to vote
at the Meeting or any adjournment thereof. On April 4, 1997, the Company
had 12,523,896 shares of Common Stock outstanding, each share of which is
entitled to one vote on all matters to be voted upon at the Meeting,
including the election of Directors. Cumulative voting in the election of
Directors is not permitted.
A majority of the Company's outstanding Common Stock represented in
person or by Proxy and entitled to vote will constitute a quorum at the
Meeting.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of shares of
the Company's Common Stock owned beneficially, as of April 4, 1997, by any
person who is known to the Company to be the beneficial owner of 5% or
more of such Common Stock, and, in addition, by each Director and nominee
for Director of the Company, by certain named Executive Officers, and by
all Directors and Executive Officers of the Company as a group.
Information as to beneficial ownership is based upon statements furnished
to the Company by such persons. For purposes of this disclosure, the
amount of the Company's Common Stock beneficially owned is the aggregate
number of shares of the Common Stock outstanding on such date plus an
amount equal to the aggregate amount of Common Stock which could be issued
upon the exercise of stock options or warrants within 60 days of such
date.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL
NAME OF BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
Matthew L. Gold 8,836,630 shares 67.2%
1225 17th Street, Suite 1800 directly and
Denver, Colorado 80202 indirectly(1)
Donald C. Hannah 62,125 shares *
6400 East Cactus Wren Road directly(2)
Paradise Valley, Arizona 85253
Admiral George E. R. Kinnear II 110,425 shares *
20 RoaringRock Road directly(3)
York Harbor, Maine 03909
J. Ben Shapiro, Jr. 23,000 shares *
One Midtown Plaza, #1200 directly(4)
1360 Peachtree Street
Atlanta, Georgia 30309
General Thomas C. Richards 15,375 shares *
29688 Softwind Circle directly(5)
Fair Oaks Ranch, Texas 78015
Bank of America National 4,215,753 shares 25.2%
Trust and Savings Association directly(6)
555 S. Flower Street
Los Angeles, California 90071
All Directors and Executive 9,047,555 shares 68.1%
Officers as a Group directly and
(5 Persons)(7) indirectly(8)
</TABLE>
- - ------------------
(1) Includes 1,000,000 shares held by Arapahoe Capital Management, Inc.,
a corporation controlled by Mr. Gold. Includes options to purchase
620,000 shares. See "Executive Compensation."
(2) Consists of options to purchase 62,125 shares. See "Compensation of
Directors."
(3) Includes options to purchase 42,125 shares. See "Compensation of
Directors."
(4) Includes options to purchase 22,000 shares. See "Compensation of
Directors."
(5) Consists of options to purchase 15,375 shares. See "Compensation of
Directors."
(6) In March 1996, the Company renegotiated its Senior Subordinated Loan
which it had obtained from Bank of America in 1988 pursuant to which
the Company had granted to the Bank a warrant to purchase 4,215,753
shares of the Company's Common Stock. The warrant is now the subject
of a repurchase agreement over a period of six quarters ending
October 31, 1998. The Company has the right to repurchase the
warrant with cash or by the issuance of Common Stock with a value
equal to the difference between the approximate $0.24 warrant
exercise price and the fair market value of the Common Stock on
specified dates.
(8) Includes options to purchase 761,625 shares.
*Less than one percent.
CHANGE IN CONTROL
As far as is known to the Board of Directors or the management of the
Company, there are no arrangements, including any pledge by any person of
securities of the Company, the operation of which might, at a subsequent
date, result in a change in control of the Company.
ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the
five (5) nominees listed below. The Board's recommendation as nominees
includes all of the Directors elected at the last annual meeting of
Shareholders, except for Walter M. Moede who resigned as a Director
effective December 31, 1996. The five nominees, if elected, will hold
office until the next annual meeting of Shareholders and until their
successors are elected and qualified or until their earlier death,
resignation or removal. IT IS INTENDED THAT SHARES REPRESENTED BY PROXIES
IN THE ACCOMPANYING FORM WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES
NAMED BELOW UNLESS A CONTRARY DIRECTION IS INDICATED. If at the time of
the Meeting any of the nominees named below should be unable to serve,
which event is not expected to occur, the discretionary authority provided
in the Proxy will be exercised to vote for such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently
held by him, and the period during which he has served as a Director:
<TABLE>
<CAPTION>
ALL POSITIONS AND OFFICES PERIOD SERVED AS
NAME AGE HELD WITH THE COMPANY DIRECTOR OF THE COMPANY
<S> <C> <C> <C>
Matthew L. Gold 54 Chairman, President, Since 12/31/86
Chief Executive Officer
and Director
Donald C. Hannah 64 Director Since 2/15/91
Admiral George E.R.
Kinnear II 69 Director Since 3/2/93
J. Ben Shapiro,
Jr. 54 Director Since 12/12/94
General Thomas C.
Richards 67 Director Since 8/14/95
</TABLE>
Admiral George E. R. Kinnear II also serves as a Director of Compaq
Computer, a publicly held company engaged in the business of manufacturing
and marketing computers. Donald C. Hannah also serves as a Director of
Franchise Finance Company of America, a real estate investment trust
company, which is a publicly held company, and as a Director of Samoth
Capital, a merchant bank which is also a publicly held company. Except
for the foregoing, none of the nominees hold directorships in any other
company having a class of securities registered under the Securities
Exchange Act of 1934, as amended, or in any company registered as an
investment company under the Investment Company Act of 1940, as amended.
MEETINGS AND COMMITTEES OF THE BOARD
The Company has an Executive Committee which has as its primary
function director-level review and approval of non-routine matters of
significance during the periods between scheduled meetings of the Board of
Directors. During 1996 the Committee consisted of Matthew L. Gold, Walter
M. Moede and Admiral George E.R. Kinnear II. Mr. Moede resigned as a
member of the Board of Directors, and hence the Committee, as of December
31, 1996. The Committee held no meetings during the last calendar year.
The Company has an Audit Committee comprised of Matthew L. Gold,
Donald C. Hannah and J. Ben Shapiro, Jr., which oversees the accounting
controls for the Company. This Committee held two meetings during the
last calendar year, one of which was by unanimous written consent.
Pursuant to the requirements of the Company's Nasdaq National Market
agreement, a majority of the Audit Committee consists of outside
Directors.
The Company also has a Compensation Committee, which Committee makes
recommendations on executive compensation and selects those persons
eligible to receive grants of options and appreciation rights under the
Company's Incentive Stock Option and Appreciation Rights Plan and the
Nonqualified Stock Option Plan. The Committee is composed of Donald C.
Hannah, Admiral George E. R. Kinnear II and General Thomas C. Richards.
This Committee held six meetings during the last calendar year, three of
which were by unanimous written consent.
The Board of Directors held nine meetings during the last calendar
year, one of which was by unanimous consent. There were no incumbent
Directors who during the last fiscal year attended fewer than 75% of the
aggregate of all meetings of the Board and of all committees of the Board
on which he serves.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the names of all Directors and Executive Officers
of the Company, all positions and offices held by each such person, the
period during which he has served as such, and the principal occupations
and employment of such persons during the last five years:
MATTHEW L. GOLD. Mr. Gold has been Chairman, President and Chief
Executive Officer of the Company since January 1987. He has also been
Chairman of Pemco Aeroplex, Inc., Air International Incorporated and Space
Vector Corporation, wholly-owned subsidiaries of the Company, since
September 1988. He has also been President of the Company's subsidiaries,
Pemco Air Services System, Inc., Pemco Capital Corporation, Pemco Nacelle
Services, Inc. and Pemco World Air Services, Inc. since their inceptions
in November 1991, October 1992, January 1993 and April 1993, respectively.
From 1984 to 1986, he was President of Monarch Aviation, Inc., a company
primarily engaged in the business of modifying and maintaining large
transport aircraft, and later, Pemco Engineers, Inc., a company primarily
engaged in the business of manufacturing aircraft cargo systems, both of
which are predecessors of the Company.
DONALD C. HANNAH. Mr. Hannah was appointed as a member of the Board
of Directors in February 1991. He currently serves as Chairman and Chief
Executive Officer of U.S. Properties, Inc., a real estate acquisition and
marketing company, positions he has held since December 1992. Mr. Hannah
has been Chairman of the Board of Hannah Marine Corp. of Lemont, Illinois,
a marine transport company, since 1956. He serves on the Board of
Managers for American Bureau of Shipping, a classification society in the
marine industry, as Chairman of the Arizona Presidents Organization, and
as a Director of the Camper Clubs of America. He is also a Director of
two publicly traded companies, Franchise Finance Corporation of America, a
real estate investment trust company, and Samoth Capital Corporation, a
merchant bank.
GEORGE E. R. KINNEAR II. Admiral Kinnear was appointed as a member
of the Board of Directors in March 1993. He formed his own consulting
company, Kinnear & Associates, in January 1995. He was Chairman of the
Board and Chief Executive Officer of Energy Point, a gasoline servicing
company, from July 1992 until January 1995. He was Chairman of the Board
of The Retired Officers Association, a service company for retired
military officers, from October 1992 to October 1994. Prior to that time
he served briefly as Vice Chairman and Chief Executive Officer of New
England Digital, a computer company, from February 1992 to June 1992.
Admiral Kinnear was Executive Vice President and Interim President from
November 1988 to January 1992 of the University of New Hampshire. Before
that he was Senior Vice President and Vice President of Grumman Corp., an
aerospace company, from October 1982 to October 1988. He retired as a
four star Admiral from the U.S. Navy in September of 1982 after thirty-
seven years of service. Admiral Kinnear currently serves as a Director of
Compaq Computer, a publicly traded company which manufactures and markets
computers. He also serves as a Trustee of the Aerospace Corp., the Naval
Aviation Museum, the U.S. Navy Hermitage Foundation, the Strawbery Banke
Historical District, and the Center for the Study of the Presidency.
J. BEN SHAPIRO, JR. Mr. Shapiro was appointed as a member of the
Board of Directors in December 1994. He has been a partner at the law
firm of Shapiro Fussell Wedge Smotherman & Martin in Atlanta, Georgia
since its formation in October 1970.
THOMAS C. RICHARDS. General Richards was appointed as a member of
the Board of Directors in August 1995. He has been President of National
Security Industrial Association of Washington, D.C., a nonprofit
corporation, from September 1995 until March 1997. He served as a
consultant and as a member of the Board of Directors for each of First
American Bank of Bryan, Texas, Cubic Defense Systems of San Diego,
California and Mantech International of Fairfax, Virginia, the latter two
companies being involved in the aviation and defense industry, from
February 1992 to September 1995. Prior to that time, he was appointed by
the President as the Administrator of the Federal Aviation Administration
from May 1991 to January 1992, after having served on the Aviation
Security and Terrorism Commission which was formed by the President to
review the Pan Am 103 accident. General Richards retired as a four star
General from U.S. Air Force in November 1989 after 33 years of service,
the last three of which were spent commanding the day to day operations of
the U.S. European Command. He currently serves as a Trustee of the U.S.
Air Force Academy Falcon Foundation.
The Company's Executive Officers are elected by the Board of
Directors at the first meeting after each annual meeting of Shareholders,
and hold office until the next such meeting of Directors or their earlier
resignation or removal.
Other than the executive employment agreements with the Company's
Executive Officer, there is no arrangement or understanding between any
such Director or Executive Officer and any other person or persons
pursuant to which he was or is to be selected as a Director or Executive
Officer nor is there any family relationship between or among any of the
Company's Directors or Executive Officers. See "Executive Compensation -
Agreements with Executive Officers."
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the executive compensation of the
Company's Chief Executive Officer, together with the former Executive Vice
President, and Vice President-Corporate Development for each of the
Company's last three fiscal years:
<TABLE>
<CAPTION>
Annual Compensation
Other
Annual
Name and Salary Bonus Compensation
Principal Position Year ($) (1) ($) (2) ($) (3)
<S> <C> <C> <C> <C>
Matthew L. Gold, 1996 $506,500 $200,000 $ 0
CEO 1995 501,500 200,000 44,244(6)
1994 493,333 150,000 0
Walter M. Moede, 1996 $266,500 $100,000 $ 8,073(9)
Executive Vice 1995 262,500 100,000 33,802(6)
President (8) 1994 261,667 125,000 0
C. Fredrik Groth, 1996 $142,244 $ 5,000 $ 6,859(12)
Vice President 1995 131,200 20,000 0
Corporate(11) 1994 113,600 0 0
Development
</TABLE>
<TABLE>
<CAPTION>
Long-Term Compensation
Awards
Securities
Restricted Underlying
Name and Stock Options/
Principal Position Year Award(s) ($) SARs (#)(4)(5)
<S> <C> <C> <C>
Matthew L. Gold, CEO 1996 $ 0 220,000
1995 0 0
1994 150,000(7) 100,000
Walter M. Moede, 1996 $ 0 110,000
Executive Vice 1995 0 0
President(8) 1994 25,000(10) 50,000
C. Fredrik Groth, 1996 $ 0 0
Vice President 1995 0 2,500
Corporate(11) 1994 0 10,000
</TABLE>
(1) The salaries for Messrs. Gold and Moede include Directors' fees as
follows: 1996, $26,500 and $26,500, 1995, $21,500 and $22,500, and
1994, $30,000 and $30,000, respectively.
(2) The cash bonuses awarded to Messrs. Gold and Moede in 1995 and 1996
have not been paid. The 1994 bonuses were structured to consist of a
combination of restricted stock grants and cash which have been paid.
(3) None of the named Executive Officers received perquisites or other
personal benefits the aggregate annual amount of which was the lesser
of either $50,000 or 10% of the total of annual salary and bonus
reported for such Executive Officers.
(4) Of Mr. Gold's grant for 1996, options to purchase 128,015 shares were
incentive stock options/SARs and options to purchase 91,985 shares
were nonqualified stock options. Of Mr. Moede's grant for 1996, all
of the options to purchase shares were incentive stock options/SARs.
Options granted to Messrs. Gold and Moede for 1994 were nonqualified
stock options.
(5) All of Mr. Groth's grants were for nonqualified stock options.
(6) Messrs. Gold and Moede were reimbursed in the amounts shown for their
relocation expenses when the Company established executive offices in
Denver, Colorado in 1995.
(7) Mr. Gold's grant of 90,563 shares of restricted stock vested as to
one-eighth of the shares each quarter beginning January 1, 1995, all
of which are now vested. The Company does not expect to pay any
dividends on any shares in the forthcoming year.
(8) Mr. Moede resigned as Executive Vice President and Chief Financial
Officer and as a Director of the Company effective December 31, 1996.
(9) Consists of additional relocation expenses reimbursed to Mr. Moede
for when the Company established executive offices in Denver,
Colorado 1995.
(10) Mr. Moede's grant of 15,094 shares of restricted stock vested as to
one-eighth of the shares each quarter beginning January 1, 1995, all
of which are now vested. No dividends were paid on the stock during
the vesting period.
(11) Mr. Groth's position and title was changed in May 1996 to Group Vice
President - Aircraft Maintenance and Modification and he is no longer
considered an Executive Officer.
(12) Mr. Groth was reimbursed in the amount shown for his relocation
expenses when he was relocated by the Company from Denmark to Denver,
Colorado in May 1996.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth the information concerning individual
grants of stock options and appreciation rights during the last fiscal
year to each of the named Executive Officers:
<TABLE>
<CAPTION>
Individual Grants
Number of
Securities Percent of Total
Underlying Options/SARs Exercises
Options/ Granted to Or Base
SARs Employees in Price Expiration
Name Granted(#) Fiscal Year ($/Sh) Date
- - -----------------------------------------------------------------
<S> <C> <C> <C> <C>
M.L. Gold 100,000(1) 30.3% $1.89068 6-17-01
91,985(2) 27.9% 1.0469 12-11-06
28,015(1) 8.5% 1.1516 12-11-01
W.M. Moede 50,000(3) 15.2% $1.7188 6-17-06
60,000(3) 18.2% 1.0469 12-11-06
C.F. Groth 0 0% N/A N/A
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
for Option Term
Name 5%($) 10%($)
- - --------------------------------------------------------
<S> <C> <C>
M.L. Gold $30,299 $ 87,746
60,668 153,116
5,170 14,972
W.M. Moede $54,142 $136,645
39,573 99,874
C.F. Groth N/A N/A
</TABLE>
(1) Represents five-year incentive stock options in tandem with SARs.
(2) Represents ten-year nonqualified stock options in tandem with SARs.
(3) Represents ten-year incentive stock options in tandem with SARs which
expired March 31, 1997. See "Agreements with Executive Officers."
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning each exercise
of stock options during the last fiscal year by each of the named
Executive Officers and the fiscal year end value of unexercised options:
<TABLE>
<CAPTION
Number of Value of
Securities Unexercised
Underlying In-the-Money
Shares Unexercised Options/SARs
Acquired on Value Options/SARs at at Fiscal
Name Exercise (#) Realized ($) Fiscal Year-End (#) Year-End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <C> <C> <C> <C>
M.L. Gold 115,278 $51,155 620,000/0(1) $63,939/$0
W.M. Moede 0 $0 356,111/0(2) $75,901/$0
C.F. Groth 0 $0 21,347/29,722(3) $7,047/$352
</TABLE>
(1) Of Mr. Gold's options, exercisable options to purchase 327,985 shares
represent nonqualified stock options, and the remaining options are
incentive stock options granted in tandem with SARs. Options which
vested on January 1, 1997 are included as exercisable.
(2) All of Mr. Moede's options expired March 31, 1997. See "Agreements
with Executive Officers."
(3) All of Mr. Groth's options represent nonqualified stock options.
PENSION PLANS
All of the Executive Officers named above are eligible participants
in the Pemco Aeroplex, Inc. Pension Plan (the "Pension Plan"). The
following table sets forth the annual retirement benefits payable under
the Pension Plan upon retirement at age 65 based on an employee's assumed
average annual compensation for the five-year period preceding retirement
and assuming actual retirement on January 1, 1997. The Pension Plan is a
tax qualified defined benefit plan and is subject to certain maximum
benefit provisions. The retirement plan benefit formula is equal to (a)
plus (b):
(a) Earnings portion of formula
- 1% of the employee's final average compensation for the last
five years of benefit service not to exceed $150,000 for 1996,
less $6,600,
TIMES
- the employee's years of credited service (not to exceed 30
years),
PLUS
(b) $144 times the employee's years of credited service (not to exceed 30
years).
The compensation utilized for the Pension Plan formula benefit
includes base pay and does not consider bonuses.
<TABLE>
<CAPTION>
Remuneration Years of Service
15 20 25 30
- - --------------------------------------------------------------
<S> <C> <C> <C> <C>
$125,000 $19,920 $26,560 $33,200 $39,840
150,000 23,670 31,560 39,450 47,340
175,000 23,670 31,560 39,450 47,340
200,000 23,670 31,560 39,450 47,340
225,000 23,670 31,560 39,450 47,340
250,000 23,670 31,560 39,450 47,340
300,000 23,670 31,560 39,450 47,340
400,000 23,670 31,560 39,450 47,340
450,000 23,670 31,560 39,450 47,340
500,000 23,670 31,560 39,450 47,340
</TABLE>
Assumes: 1. Remuneration is latest 5-year average annual salary.
2. Retirement is at age 65 or later.
3. No joint and survivor option elected.
To date, none of the Executive Officers have earned a material level
of vested benefits under the Pension Plan.
Certain amendments to the tax laws reduced the amount of benefits
available to some of the Executive Officers under the Pension Plan in plan
years beginning after December 1993. In recognition of these changes, the
Compensation Committee has agreed to adopt a supplemental pension plan for
these Executive Officers to compensate them for the lost benefits under
the Pension Plan. It is expected that such a plan will be adopted in
1997.
401(K) PLAN
On November 2, 1990, the Board of Directors adopted a 401(k) Savings
Plan for employees of the Company and its subsidiaries effective October
1, 1990 (the "401(k) Plan"), which is qualified under Subsection 401(k) of
the Internal Revenue Code. All employees of the Company and its
subsidiaries who (i) are not covered by any collective bargaining
agreement, (ii) have attained age 21 and (iii) have completed one year of
service, may join the 401(k) Plan. The 401(k) Plan provides a method for
employees to choose between receiving all their compensation now or
deferring some pre-tax income by investing in the 401(k) Plan until
retirement. Deferred amounts representing up to 15% of compensation per
calendar year (not to exceed $9,500 in 1997) are deposited into the Plan
where they may earn income tax-free until distribution. Although the
401(k) Plan allows for matching contributions by the Company, none have
been made as of the date of this Proxy Statement. The 401(k) Plan
currently is administered by an Administrative Committee composed of four
employees of the Company who are not Executive Officers or Directors of
the Company. Directors who are not also employees of the Company are not
eligible to participate. Mr. Gold is a participant in the 401(k) Plan and
his amounts of deferred compensation are included in the Summary
Compensation Table set forth above.
PERFORMANCE GRAPH
Set forth below is a line graph and a table comparing the yearly
percentage change in the cumulative total shareholder returns on the
Company's Common Stock with the cumulative total returns of the Standard &
Poor's 500 Stock Index, Standard & Poor's Aerospace/Defense Stock Index
and Standard and Poor's Airline Stock Index as prepared by Standard &
Poor's Compustat - Custom Business Unit. While the Securities and
Exchange Commission's rules only require the Company to provide a
comparison to a broad equity market index (Standard & Poor's 500) and a
published industry line of business index (Standard & Poor's Aerospace),
the Company believes that it is helpful to provide shareholders with a
comparison to an index which reflects the business climate in which many
of the Company's customers operate (Standard & Poor's Airlines). The
Company's performance may be influenced by the airline industry and the
business environment surrounding such industry. The line graph and table
cover the five year period from January 1992 through December 1996 and
represents the total value of a $100 investment in each security/market
index on the last trading day of December, 1991. All dividends are
assumed to be reinvested.
COMPARATIVE FIVE YEAR TOTAL CUMULATIVE RETURNS
PRECISION STANDARD, S&P 500 INDEX,
S&P AEROSPACE/DEFENSE INDEX AND S&P AIRLINES INDEX
<TABLE>
<CAPTION>
Years Ending
Base
Period
Company/Index Dec91 Dec92 Dec93 Dec94 Dec95 Dec96
- - --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRECISION STANDARD,
INC. 100 199.83 757.58 336.70 168.35 231.48
S&P 500 INDEX 100 107.62 118.46 120.03 165.13 203.05
AEROSPACE/
DEFENSE-500 100 105.20 136.83 148.01 244.94 327.64
AIRLINES-500 100 89.34 93.81 65.46 95.59 104.80
</TABLE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of
Directors of Precision Standard, Inc. (the "Company") is composed of
outside directors who are not employees of the Company and who qualified
as "disinterested persons" under former Rule 16b-3 adopted under the
Securities Exchange Act of 1934. At the direction of the Board of
Directors, the Committee prepared the following report on April 2, 1997
for inclusion in this Proxy Statement to comply with the rules of the
Securities and Exchange Commission.
The Company's executive compensation program has been designed to
enable the Company to attract, motivate, and retain key senior management
by providing a fully competitive total compensation package based on
performance. It is intended to reward the key executive for long-term
strategic planning and management, enhancement of shareholder value and
improving Company performance compared to performance levels of comparable
companies in the industry. Of equal importance, it is designed to attract
and retain those key executives who are critical to the long-term success
and competitiveness of the Company.
The key components of the executive compensation program are: (1)
salary, which is based on the individual officer's level of responsibility
and comparisons to the executive positions in the Company, its
subsidiaries and comparable companies in the industry; (2) cash bonus
awards, which are based on individual performance and the performance of
the Company for the year, measured primarily, but not exclusively, in the
profitability of the Company; (3) equity incentive, in the form of stock
options, stock appreciation rights and stock grants, which are intended to
increase the motivation for the Company to improve its financial position
and long-term success as measured by the Company's share price and book
value per share; and (4) employment agreements, which are designed to
provide long-term security to the key executive in exchange for long-term
commitments and agreements not to enter into competition with the Company.
The overall objective of the program is to provide rewards to the key
executives commensurate with the benefits received by the shareholders
from the efforts of those executives.
Under this program, the Company has entered into a long-term
employment agreement with the Company's Chief Executive Officer, Matthew
L. Gold, effective June 1, 1993 and amended March 11, 1994. Pursuant to
the employment agreement, Mr. Gold's annual base salary was $480,000 in
1994. Because of the severe constraints on the Company's cash flow in
1995 and 1996, Mr. Gold's salary has not been increased since 1994
notwithstanding the requirement in his employment agreement that he
receive a minimum increase of 5% each year. In 1996, the Committee
resolved that the Company will pay, on a retroactive basis, all of the
salary increases required by Mr. Gold's employment agreement when the
Company's cash flow position is stronger.
The Committee acknowledges the extraordinary and successful efforts
of Mr. Gold and the other officers over the past two years in the face of
a number of critical situations for the Company, virtually none of which
were within those officers' control. These diligent efforts resulted in
the Company's receipt of $33.1 million in settlement proceeds from the
Company's Requests for Equitable Adjustment ("REAs") filed in respect of
certain of the costs it incurred on its KC-135 contract with the U.S.
Government and the subsequent paydown of $15 million of the Company's debt
to its primary lender, as well as a renegotiation of its agreements with
that lender. Accordingly, the Committee believes that Mr. Gold's efforts
in 1996 were once again extraordinary and of considerable value to the
Company and its shareholders.
In its April 17, 1996 report, the Committee noted that in light of
the Company's still limited cash flow and the negative financial results
reported by the Company in 1995, it had determined that it would not grant
cash bonuses at that time to the two executive officers on account of
their 1995 performance, notwithstanding the Committee's belief that such
performance had been exemplary and deserving of reward. The Committee
recognized that, because of the Company's cash flow problems in 1994 and
1995, other cash bonuses awarded to these officers had not yet been paid
or were structured to consist of a combination of restricted stock grants
and cash which had been only partially paid.
In light of the receipt of the $25 million in proceeds of the second
REA in October of 1996, however, the Committee concluded that the efforts
of Mr. Gold and Mr. Moede in obtaining this extraordinary benefit for the
Company should not remain unrewarded and granted to Messrs. Gold and Moede
cash bonuses of $200,000 and $100,000, respectively, on account of their
efforts in 1995 along with stock option grants of 220,000 shares to Mr.
Gold and 110,000 shares to Mr. Moede. Because the Company was then
suffering from diminished profitability and cash flow caused by the United
Auto Workers strike at the Company's Birmingham and Leeds facilities,
those 1995 bonuses have not yet been paid and the Committee deferred any
consideration of the cash bonus or stock option grant for Mr. Gold on
account of his efforts in 1996.
Dated: April 2, 1997 DONALD C. HANNAH
ADMIRAL GEORGE E.R. KINNEAR II
GENERAL THOMAS C. RICHARDS
COMPENSATION OF DIRECTORS
The Company currently has an arrangement whereby each Director earns
an annual retainer of $18,000, and $1,000 plus expenses for attendance at
each meeting of the Board of Directors and related activities. The
Directors also earn $1,000 plus expenses in connection with attendance at
each meeting of the Audit Committee, the Executive Committee and the
Compensation Committee, excepting when a Committee meets in conjunction
with a full Board meeting. Directors who are employees of the Company are
eligible to receive stock options under either of the Company's stock
option plans. Outside Directors are eligible to receive options under the
Company's Nonqualified Stock Option Plan (the "Nonqualified Plan") only.
Pursuant to the Nonqualified Plan, outside Directors receive fully
vested options on December 10 of each year. The number of shares subject
to options granted in any such year is equal to one share of Common Stock
for each two dollars of Director's base compensation (annual retainer plus
meeting fees for an assumed minimum of four meetings or, currently,
$22,000) paid to the Director during the calendar year in which the option
is granted.
In November 1990, the Board of Directors adopted a three-year
retirement benefit for the Directors of the Company, payable after they
retire or otherwise terminate their service as a Director of the Company.
In December 1993, the Board of Directors amended the retirement benefit.
Directors retiring from the Company after that date are entitled to
benefits as follows:
<TABLE>
<CAPTION>
UNDER FIVE FIVE OR MORE
RETIREMENT BENEFIT PAYABLE YEARS OF SERVICE YEARS OF SERVICE
<S> <C> <C>
- 1st Year $4,500 $9,000
- 2nd Year $3,000 $6,000
- 3rd Year $1,500 $3,000
</TABLE>
All current Directors, as well as two former Directors, Admiral
Wesley L. McDonald (who retired as a Director effective May 16, 1995) and
Walter M. Moede (who resigned as a Director effective December 31, 1996),
are currently entitled to or are eligible for benefits according to the
benefits schedule in effect at the time of such Director's retirement.
For purposes of entitlement to the benefits schedule shown above, Messrs.
Gold and Hannah have or are deemed to have five years of service. Upon
retirement, this benefit is paid to former Directors on a quarterly basis
for the three-year term of the benefit. The Board of Directors has
determined that Directors are asked to retire from the Board at age 70-1/2
years.
AGREEMENTS WITH EXECUTIVE OFFICERS
In 1993, the Company entered into employment agreements with each of
the individuals named in the Summary Compensation Table. Each of these
agreements includes payments to be received upon the voluntary or
involuntary termination of the Executive Officer's employment. The terms
and conditions of each of these agreements is described below.
Pursuant to an agreement effective June 1, 1993 and amended March 11,
1994, Mr. Gold is engaged as President, Chief Executive Officer and
Chairman of the Board for an initial term of five years commencing June 1,
1993. On each June 1 following 1993, the agreement is automatically
extended for an additional year unless the Company or Mr. Gold gives
notice more than ninety days before May 31 of such year. Because no such
notice was given in 1996, the agreement currently expires in 2001.
The agreement provides for an initial annual base salary of $440,000,
with the base salary for subsequent years to be determined by the Board of
Directors on the basis of merit and the Company's financial success and
progress, provided that the annual base salary in each year shall be at
least 5% higher than the previous year's annual base salary. Mr. Gold is
also entitled to bonuses as determined by the Board of Directors in its
sole discretion, and is entitled to vacation and other employee benefits
under the Company's employee benefit plans.
Under the agreement, Mr. Gold is entitled to various amounts on the
termination of his employment depending on the reasons for such
termination. Upon his death or disability Mr. Gold or his designated
beneficiary will be entitled to receive his then annual base salary for
the greater of two years or the remaining term of the agreement together
with any bonuses determined to be due and payable by the Board of
Directors. Upon Mr. Gold's voluntary or involuntary termination, he is
entitled to specified severance amounts. Upon voluntary termination
(i.e., resignation by Mr. Gold other than as a result of a change of
duties, compensation or benefits following a change in control of the
Company), Mr. Gold will be entitled to continue to receive his annual base
salary plus the average annual bonus awarded to him by the Board of
Directors during the three preceding years (the "Average Bonus") for a
period of one year. Upon involuntary termination (i.e. any termination
other than voluntary termination, termination by mutual agreement, or
termination as a result of death, disability or normal retirement), Mr.
Gold will be entitled to 2.99 times the sum of his then annual base salary
and the Average Bonus.
Pursuant to an agreement, effective June 1, 1993 and amended March
11, 1994, Mr. Moede was engaged as Executive Vice President and Chief
Financial Officer of the Company for an initial term of three years
commencing June 1, 1993. On each June 1 following 1993, the agreement was
automatically extended for an additional year unless the Company or Mr.
Moede gave notice more than ninety days before May 31 of such year. Mr.
Moede resigned as an Executive Officer and Director of the Company
effective December 31, 1996.
The agreement provided for an initial annual base salary of $220,000,
with the annual base salary for subsequent years to be determined by the
Board of Directors on the basis of merit and the Company's financial
success and progress, provided that the annual base salary in any
subsequent year would not be less than the initial base salary. Mr. Moede
was also entitled to bonuses as determined by the Board of Directors in
its sole discretion and was entitled to vacation and other employee
benefits under the Company's employee benefit plans.
Provisions of Mr. Moede's agreement regarding amounts payable upon
his death, disability or other termination of his employment with the
Company paralleled those of Mr. Gold's agreement described above.
Pursuant to the terms of his agreement, because Mr. Moede did not give six
months prior notice to the Company of his resignation, Mr. Moede was not
entitled to receive the benefits provided in his agreement for voluntary
termination. He is, however, entitled to receive the three year
retirement benefit for directors who have served for five or more years.
See "Compensation of Directors."
Pursuant to an agreement effective June 1, 1993, Mr. Groth was
engaged as Vice President - Corporate Development for an initial term of
three years commencing June 1, 1993. The agreement is automatically
extended for additional one-year periods unless the Company or Mr. Groth
gives notice more than ninety days before May 31, 1996 or May 31 of any
subsequent year for which the agreement has previously been extended.
Because no such notice was given in 1996, the agreement currently expires
in 1999.
The agreement with Mr. Groth provides for an initial annual base
salary of $100,000, with the annual base salary for subsequent years to be
determined by the Chief Executive Officer of the Company and approved by
the Board of Directors on the basis of merit and the Company's financial
success and progress, provided that the annual base salary in any
subsequent year of the agreement shall not be less than the initial base
salary. Mr. Groth is entitled to bonuses as determined by the Chief
Executive Officer and approved by the Board of Directors on the basis of
merit and the Company's financial success and progress, and is entitled to
vacation and other employee benefits under the Company's employee benefit
plans.
Under the employment agreement, Mr. Groth is entitled to various
amounts on the termination of his employment depending on the reasons for
such termination. Upon termination by reason of his death Mr. Groth's
designated beneficiary or his estate will be entitled to his annual base
salary for the greater of two years or the remaining term of the
agreement, together with any bonuses determined to be due and payable by
the Company's Board of Directors. Upon termination by reason of his
disability Mr. Groth will be entitled to his then annual base salary for
the greater of six months or the remaining term of the agreement together
with any bonuses which the Company's Chief Executive Officer with the
approval of the Board of Directors determines to be due and payable to Mr.
Groth. Upon Mr. Groth's voluntary termination Mr. Groth is entitled to a
lump sum payment of $1,000. In the case of Mr. Groth's involuntary
termination, Mr. Groth will be entitled to one times his annual base
salary.
In May of 1996, Mr. Groth was relocated by the Company from Denmark
to the Company's offices in Denver, Colorado and his title was changed to
Group Vice President - Commercial Aircraft Maintenance and Modification.
Although Mr. Groth's compensation continues to be governed by the
agreement described above, he is no longer considered an Executive Officer
of the Company.
Other than as described above, the Company has no compensation plan
or arrangement with any individual named in the Summary Compensation Table
above whereby the implementation of such plan or arrangement results or
would result from the resignation, retirement or other termination of that
individual's employment with the Company or from a change in control of
the Company.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company's Consolidated Tire subsidiary previously leased
warehouse and office facilities from Monarch Properties, a sole
proprietorship owned by Matthew L. Gold, the Company's Chairman, President
and Chief Executive Officer. This lease was cancelled in December 1990.
Although the lease was not due to expire until December 1992, Mr. Gold
agreed to accept $147,000 to cancel the remaining term, which amount
represented 80% of the present value of the remaining rental payments.
The Company paid $26,840 of this obligation in cash and reduced the amount
of indebtedness of Mr. Gold and Monarch Properties to the Company, as
described below. As additional consideration to the Company, Mr. Gold
also waived and released claims that he may have had against the Company
at that time for certain expenses or advances paid by him on behalf of the
Company.
Prior to the surrender and exchange of the Consolidated Tire
warehouse lease discussed above, Mr. Gold and Monarch Properties were
indebted to the Company in the amount of $132,947 and $167,037,
respectively. These debts had been incurred as a result of various
advances made by the Company, and were repayable in equal installments
over five years beginning in 1990. After the application of the remaining
$120,160 reduction attributable to the surrender of the Consolidated Tire
lease, the total debt was reduced to $179,824. In November of 1991, Pemco
Engineers, Inc. completed the 1988 sale of its Stanton, California
facility to Monarch Properties by delivering the September 26, 1988 deed
to Monarch Properties in exchange for a promise to pay $90,000. The
$90,000 sales price was the same as the purchase price paid by Pemco
Engineers in 1988 shortly before the September 26, 1988 deed to Monarch
Properties. As a result of this new obligation, the total indebtedness of
Monarch Properties and Mr. Gold to the Company and its subsidiaries
increased to $269,824 as of December 31, 1991. The obligation remains
outstanding as of the date hereof and the Company has no arrangement or
understanding with Mr. Gold as to the timing of any repayment thereof.
The Company has for the past several years owed Mr. Gold various amounts
as the result of cash bonuses which were granted by the Compensation
Committee but never paid. There are, however, no plans or agreements to
setoff the unpaid bonuses against Mr. Gold's obligations to the Company at
this time.
On April 16, 1996, Mr. Gold and the Company entered into a standby
financing commitment which provided for the extension by Mr. Gold of up to
$2.0 million in short-term advances upon demonstration of certain need
factors by the Company. The commitment contained cross default provisions
to the Company's principal loan agreements and required the payment by the
Company of a commitment fee of 2%, or $40,000 to Mr. Gold. No advances
were made by Mr. Gold under the commitment, which expired in January 1997.
The Company believed that Mr. Gold's willingness to extend the commitment
under the then existing circumstances was of significant value to the
Company and its business and that the consideration paid to Mr. Gold for
the commitment was no more than would have been paid in an arms length
transaction with an unaffiliated third party (if any such third party
transactions had been available, which the Company considered unlikely
under the circumstances).
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As a result of a desire to compare the quality, timeliness and price
of the auditing services of Coopers & Lybrand L.L.P. ("C&L"), which had
served as the Company's independent auditors since 1988, with its
competitors, in 1996 the Audit Committee directed the officers of the
Company to solicit bids from several public accounting firms. C&L
declined to submit a bid and informed the Company of its decision by
letter dated December 30, 1996.
The reports of C&L on the financial statements of the Company for
each of the two fiscal years in the period ended December 31, 1995 did not
contain any adverse opinion or disclaimer of opinion and were not
qualified or modified as to uncertainty, audit scope or accounting
principles.
In the opinion of management of the Company, the financial statements
contained in the Company's report on Form 10-Q for the third quarter of
1996 appropriately reflect all business transactions and all adjustment
necessary for a fair presentation of the financial position and the
results of operations of the Company for the periods presented.
During the Company's two audited fiscal years (1994 and 1995) and as
of December 30, 1996, the unaudited interim year (1996), there were no
"disagreements" (as that term is used in Item 304 of Regulation S-K)
between C&L and the Company on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.
In a report on Form 8-K dated December 30, 1996 filed with the
Securities and Exchange Commission ("SEC"), the Company authorized C&L to
respond fully to the inquiries of the Company's successor accountant and
requested that C&L provide the Company with a letter addressed to the SEC,
as required by Item 304(a)(3) of Regulation S-K, so that the Company could
file such letter with the SEC within ten business days after the filing of
its report.
On January 3, 1997, the Company provided a draft of the December 30,
1996 Form 8-K to C&L. The draft of the Form 8-K provided to C&L was
identical to the Form 8-K filed with the SEC on January 6, 1997 except
that the final (a copy of which was provided to C&L on January 6, 1997)
included as an additional exhibit a copy of the letter dated December 20,
1996 from Matthew L. Gold, the President of the Company, to C&L soliciting
a bid for the annual audit for the year ending December 31, 1996. C&L's
response to the Form 8-K was made in a letter dated January 3, 1997, in
which C&L stated that it agreed with the statements made in the Form 8-K.
On January 14, 1997, after review of the bids solicited from several
public accounting firms, the Audit Committee of the Board of Directors of
the Company approved the engagement of Arthur Andersen LLP as the
Company's independent auditors for the year ended December 31, 1996 and
for the year ending December 31, 1997.
At the direction of the Board of Directors, the ratification of the
appointment of Arthur Andersen LLP for the year ended December 31, 1996
and the year ending December 31, 1997 is being presented to the
Shareholders for approval at the Meeting. It is expected that a
representative of Arthur Andersen LLP will be present at the Meeting to
respond to appropriate questions, and will be given the opportunity to
make a statement if he so desires.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE CALENDAR YEAR ENDED DECEMBER 31, 1996 AND THE CALENDAR
YEAR ENDING DECEMBER 31, 1997.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND
THE NONQUALIFIED STOCK OPTION PLAN
The Nonqualified Stock Option Plan (the "NQSO Plan") was adopted by
the Company in September of 1989 and amended April 17, 1992, May 17, 1994
and May 29, 1996. It is now proposed to approve amendments to the NQSO
Plan to (i) eliminate the requirement that members of the Compensation
Committee administering the NQSO Plan be disinterested persons as had been
previously required by Rule 16b-3; (ii) while the Committee is expected to
continue to administer the NQSO Plan for the foreseeable future, permit
the Board of Directors to make grants of stock options or otherwise
administer the NQSO Plan if and to the extent such administration would be
consistent with applicable law; (iii) permit the Board of Directors or the
Committee administering the NQSO Plan to determine the fair market value
of the Company's Common Stock for purposes of the NQSO Plan by averaging
the price over a period of up to 90 days preceding the grant of any stock
option or stock appreciation right; (iv) permit the Board of Directors or
the committee administering the NQSO Plan to make discretionary awards to
non-employee Directors, to the extent consistent with applicable law; (v)
require shareholder approval of amendments to the NQSO Plan only if the
amendment would (A) increase the total number of shares of Common Stock
authorized for issuance pursuant to the NQSO Plan or (B) require
shareholder approval under applicable law; (vi) include in the amount
which may be loaned to participants exercising options the amount of any
tax liability incurred by them in connection with such exercise; and (vii)
give the Board of Directors or the Committee administering the NQSO Plan
the discretion to permit a participant to effect a net exercise of a stock
option without tendering shares of the Company's stock as payment for the
stock option.
The Company believes that these changes are important to provide
flexibility to the Compensation Committee in its administration of the
NQSO Plan, to encourage stock ownership by employees and management and to
permit the Compensation Committee and the Board of Directors to continue
to provide incentives to promote the financial success and progress of the
Company.
Below is a summary description of the NQSO Plan, as it is proposed to
be amended:
ADMINISTRATION
The Compensation Committee of the Board of Directors of the Company
administers the NQSO Plan. The Compensation Committee currently consists
of Messrs. Hannah, Kinnear and Richards. Subject to the terms of the NQSO
Plan, as amended, the Compensation Committee has the authority to
determine to whom stock options and stock appreciation rights will be
awarded, the number of shares covered by each such award, the exercise or
purchase price per share, the time or times at which stock options and
stock appreciation rights will be awarded, and other terms and provisions
governing the stock options and stock appreciation rights (including
whether stock options will have reload authorization). The Compensation
Committee also has the authority to determine the terms of stock grants,
including the number of shares of stock in each award and may impose
conditions on awards, such as a vesting schedule, which may differ from
one award to another. The interpretation or construction by the
Compensation Committee of the NQSO Plan or any stock options, stock
appreciation rights or stock grants awarded under it will be final.
Prior to the proposed amendments, all members of the Committee were
required to be "disinterested persons" as that term had been defined in
Rule 16b-3 under the Exchange Act. Insofar as Rule 16b-3 has been amended
to delete this requirement, the NQSO Plan is also proposed to be amended
to remove the requirement. In addition, the NQSO Plan is being amended to
permit the Board of Directors to administer the NQSO Plan if and to the
extent that such administration would be consistent with applicable law.
UNDERLYING SECURITIES
The securities underlying stock options, stock appreciation rights
and stock grants under the NQSO Plan are shares of the Company's Common
Stock. Pursuant to the NQSO Plan, the maximum number of shares of Common
Stock that may be issued will not exceed 1,500,000 shares. Pursuant to
the terms of the NQSO Plan, shares subject to stock options or stock
appreciation rights which for any reason expire or are terminated
unexercised as to such shares may again be the subject of an award under
the NQSO Plan. In addition, for purposes of calculating the maximum
number of shares which may be issued under the NQSO Plan, only shares
issued as a result of an exercise of stock appreciation rights are
counted. Similarly, only the net shares issued are counted when shares of
Common Stock are used as full or partial payment for shares issued upon
exercise of stock options.
The market value of the total shares authorized under the NQSO Plan
as of April 4, 1997 was $1,875,000.
ELIGIBLE EMPLOYEES AND OTHERS
Stock options, stock appreciation rights and stock grants may be
granted under the NQSO Plan to employees, officers, directors, consultants
and independent contractors of the Company. Stock options granted under
the NQSO Plan are not intended to be incentive stock options (within the
meaning of Section 422 of the Internal Revenue Code [the "Code"]). As of
December 31, 1996, the Company had approximately 101 employees and other
persons eligible to receive stock options, stock appreciation rights and
stock grants. Employees are eligible to receive stock options, stock
appreciation rights or stock grants for no more than an aggregated 750,000
shares each under the NQSO Plan.
The Compensation Committee determines the number of shares of the
Company's Common Stock covered by any award made to Executive Officers or
other employees under the NQSO Plan. The Committee's discretion in
granting awards to non-employee directors is limited. See "Stock Option
Grants to Outside Directors."
STOCK OPTION GRANTS TO OUTSIDE DIRECTORS
Without any action of the Committee, grants of stock options are made
once each calendar year on December 10 and such grants are for one option
to purchase a share of Common Stock for each two dollars of director's
compensation paid to the director during the calendar year of the grant
(annual retainer plus meeting fees for an assumed minimum of four meetings
- - -- currently $22,000). The exercise price for such stock options is the
fair market value determined in accordance with the NQSO Plan based on a
valuation period of 30 days. See "Stock Option Price and Duration" below.
Upon approval of the proposed amendments, the Committee would have
discretion in granting stock options, stock appreciation rights and stock
grants to non-employee directors, including members or the Committee, only
to the extent permitted by applicable law.
Prior to the proposed amendments, the exercise price for automatic
stock options was determined by reference to a single quoted price on the
date of grant and the Committee had no discretion in making awards to non-
employee directors.
STOCK OPTION PRICE AND DURATION
The exercise price per share of stock options granted by the
Compensation Committee under the NQSO Plan cannot be less than fifty
percent of the fair market value of the Common Stock on the date of grant.
The exercise price of stock options granted to officers and directors may
not be less than one hundred percent of the market price of the Company's
Common Stock on the date of grant.
Pursuant to the proposed amendments, "fair market value" means (a) if
there is an established market for the Company's Common Stock on a stock
exchange, in an over-the-counter market or otherwise, the mean of the
highest and lowest quoted selling prices on the valuation date, or (b) if
there were no such sales on the valuation date, then in accordance with
Treas. Reg. Sec. 10.2031-2 or successor regulations. Unless otherwise
specified by the Committee at the time of grant or in the NQSO Plan (as in
the case of automatic grants to Committee members), the valuation date for
purposes of determining fair market value is the date of grant. The
Committee may, however, specify in any grant of a stock option or stock
appreciation right that, instead of the date of the grant, the valuation
date shall be a valuation period of up to ninety (90) days preceding the
date of grant, and fair market value for purposes of such grant shall be
the average over the valuation period of the mean of the highest and
lowest quoted selling prices on each date on which sales were made in the
valuation period.
Prior to the proposed amendments, the fair market value referred to a
single quoted price on the date of grant.
The NQSO Plan requires that each stock option expire on the date
specified by the Compensation Committee, but not more than 10 years from
its date of grant.
EXERCISE OF STOCK OPTIONS AND PAYMENT FOR STOCK
Exercise of a stock option under the NQSO Plan is effected by a
written notice of exercise delivered to the Company at its principal
office together with payment for the shares in full in cash, or shares of
Common Stock, or a combination thereof. Payment may also be made by
delivery of notice and irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds to pay the
exercise price.
If the proposed amendments are approved, the Committee may, in its
discretion and subject to ratification by the entire Board of Directors,
loan one or more participants all or a portion of the exercise price,
together with the amount of any tax liability incurred by the participant
as a result of the exercise of the option, for up to three (3) years with
interest payable at the prime rate quoted in the WALL STREET JOURNAL on
the date of exercise. Non-employee directors may receive such loans for
the exercise of their options without Committee approval or Board
ratification. With respect to loans made to officers and directors of the
Company, approval of the amendments to the NQSO Plan, will be deemed to be
preapproval by, and/or prior notification of, the shareholders for all
loans permitted by, and subsequently made pursuant to, the NQSO Plan for
purposes of the Colorado Business Corporation Act. In addition, pursuant
to the amendments, the Committee or the Board of Directors may elect to
permit a participant to effect a net exercise of a stock option without
tendering shares of the Company's stock as payment for the stock option.
In such an event, the participant would be deemed to have paid for the
exercise of the option with shares of the Company's stock and would
receive from the Company a number of shares equal to the difference
between the shares that would have been tendered and the number of options
exercised.
Prior to the proposed amendments, a participant who desired to use
shares of the Company's stock in payment of the exercise price for the
stock option being exercised was required to tender a stock certificate
for the appropriate number of shares of the Company's stock sufficient to
pay the exercise price. Prior to the proposed amendments, net exercises
and loans were not expressly permitted.
RELOAD OPTIONS
The Compensation Committee may, concurrently with the award of stock
options, authorize "Reload Options". If a stock option is granted with
reload authorization and the stock option is exercised in whole or in part
by the delivery of shares of Common Stock, a Reload Option will
automatically be granted at the time of such exercise for the number of
shares delivered as payment of the exercise price. Any Reload Option
granted pursuant to such authorization will have an exercise price equal
to the fair market value on the date of exercise of the underlying stock
option and will be exercisable from six months after such date through the
remaining term of the underlying stock option. Reload Options are
exercisable in the same manner as the underlying stock option.
NONTRANSFERABILITY OF STOCK OPTIONS
No transfers of stock options are permitted, except that a stock
option may be transferred by will or by the laws of descent and
distribution.
STOCK APPRECIATION RIGHTS
A stock appreciation right entitles its holder to receive from the
Company, at the time of exercise, an amount equal to the excess of the
fair market value (at the date of exercise) of a share of Common Stock
over a specified price fixed by the Compensation Committee not less than
100 percent of the fair market value of a share of Common Stock on the
date of grant, multiplied by the number of shares as to which the holder
is exercising the stock appreciation right. The Compensation Committee
may, in granting stock appreciation rights, provide that such rights are
alternative to a specified stock option.
EXERCISE OF STOCK APPRECIATION RIGHTS
Exercise of a stock appreciation right under the NQSO Plan is
effected by written notice to the Company at any time prior to its stated
expiration, which can be no more than 10 years from the date of grant. If
the stock appreciation right is alternative to a stock option, the stock
option will be deemed canceled to the extent the stock appreciation right
is exercised.
STOCK GRANTS
A stock grant may be awarded with or without conditions, such as a
vesting schedule. A stock grant which is subject to conditions, such as a
vesting schedule, is not transferable or assignable and may not be
hypothecated. The Company may require employees and other recipients of
stock grants to submit to the Company an amount sufficient to pay
withholding taxes due under any state or federal law prior to delivery of
stock.
PLAN BENEFITS
Set forth below in tabular form are the benefits or amounts received
by or allocated to each of the named persons or groups under the NQSO Plan
to date. The Compensation Committee determines the number of stock
options, stock appreciation rights and stock grants which may be awarded
to employees, officers, directors, consultants and independent contractors
of the Company under the NQSO Plan. Because such number, if any, is
entirely in the discretion of the Compensation Committee, the future
benefits or amounts to be received by or allocated to those persons,
except for the outside directors, are not determinable. There are four
outside directors eligible to receive stock options through the provisions
for automatic grants to outside directors described above. See "Stock
Option Grants to Outside Directors."
<TABLE>
<CAPTION>
NQSO PLAN
NAME AND POSITION DOLLAR VALUE ($)(1) NUMBER OF SHARES
<S> <C> <C>
Matthew L. Gold, Chairman of the
Board, Chief Executive Officer
and President(2) -0- 327,985
Executive Officer Group (1 person)(3) -0- 327,985
Non-Executive Officer Director
Group (4 persons)(4) -0- 141,625
Nominee for Director Group (5 persons)(5) -0- 469,610
Associate of Director, Executive
Officer or Nominee Group (0 persons) -0- -0-
5% or More Recipient Group
(1 person)(3) -0- 327,895
Non-Executive Officer Employee
Group (101 persons) -0- 440,086
- - -----------------------
</TABLE>
(1) All options have been granted at not less than the fair market value
on the date of grant. The value to the grantee is solely dependent
on the increase in the stock price.
(2) Mr. Gold was granted 136,000 options in 1993, 100,000 options in 1994
and 91,985 options in 1996.
(3) Certain former Executive Officers have received options under the
NQSO Plan which have not been included in this table.
(4) Mr. Hannah was granted 9,000 options in 1991, 8,625 options in 1992,
11,500 options in 1994, and 11,000 options in each of 1995 and 1996.
Admiral Kinnear was granted 5,000 options in 1993 and 11,000 options
in each of 1994, 1995 and 1996. Mr. Shapiro was granted 11,000
options in each of 1995 and 1996. General Richards was granted 4,375
options in 1995 and 11,000 options in 1996.
(5) Includes Messrs. Gold, Hannah, Kinnear, Shapiro and Richards.
AMENDMENT, SUSPENSION AND TERMINATION
The Board or Compensation Committee may terminate or amend the NQSO
Plan in any respect at any time, except that, without the prior approval
of the shareholders, (a) the total number of shares that may be issued
under the NQSO Plan may not be increased; and (b) no change may be made
that would require shareholder approval under applicable law. No
amendment, suspension or termination of the NQSO Plan will, without the
consent of the person who has received a stock option, stock appreciation
right or stock grant subject to conditions, alter or impair any of that
person's stock options, stock appreciation rights or stock grants subject
to conditions or obligations under any stock option, stock appreciation
right or stock grant award prior to that amendment, suspension or
termination.
Prior to the proposed amendments, shareholder approval was also
required for any amendment which (a) would modify the minimum exercise
price of stock options, Reload Options and stock appreciation rights; (b)
expand the class of persons to whom stock options, stock appreciation
rights and stock grants may be awarded and (c) change the maximum number
of shares which may be subject to stock options, stock appreciation rights
and stock grants to each employee under the NQSO Plan. In addition, the
NQSO Plan previously included a limit on the number of amendments to the
formula grants for non-employee directors which was previously required
(as it applied to members of the Committee) under Rule 16b-3.
MISCELLANEOUS
The Company is not obligated to issue shares with respect to any
stock option, unless the exercise of the stock option and the issuance and
delivery of the shares complies with all relevant provisions of state and
federal law. If the outstanding shares of Common Stock are increased,
decreased, changed into or exchanged for a different number or kind of
shares or securities through merger, consolidation, combination, exchange
of shares, other reorganization, recapitalization, reclassification, stock
divided, stock split or reverse stock split, an appropriate and
proportionate adjustment in the maximum number and kind of shares as to
which stock options, stock appreciation rights or stock grants may be
awarded under the NQSO Plan will be made, together with a corresponding
adjustment to the number and kind of shares allocated to outstanding
unexercised stock options and stock appreciation rights. The Company is
entitled, in appropriate circumstance, to withhold the amount of any
withholding or other tax due in connection with the exercise of rights
under the NQSO Plan. No stock options, stock appreciation rights or stock
grants will be awarded under the NQSO Plan after July 10, 1999.
FEDERAL INCOME TAX CONSEQUENCES
All stock options granted under the NQSO Plan will be Nonqualified
Stock Options and will be taxed in accordance with Section 83 of the Code
and the Regulations issued thereunder. The following general rules are
applicable to United States holders of such Nonqualified Stock Options and
to the Company for Federal income tax purposes under existing law:
1. The optionee does not realize any taxable income upon the grant
of a Nonqualified Stock Option, and the Company is not allowed a business
expense deduction by reason of such grant.
2. The optionee will recognize ordinary compensation income at the
time of exercise of a Nonqualified Stock Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. The Company will require employees to
make appropriate arrangements for the withholding of taxes on this amount.
3. When the optionee sells the shares, he or she will recognize a
capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
shares (i.e., the exercise price plus the amount taxed to the optionee as
compensation income). If the optionee holds the shares for longer than
one year, this gain or loss will be a long-term capital gain or loss.
4. In general, the Company will be entitled to a tax deduction in
the year in which compensation income is recognized by the optionee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO
THE NONQUALIFIED STOCK OPTION PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND
THE INCENTIVE STOCK OPTION AND APPRECIATION RIGHTS PLAN
The Incentive Stock Option and Appreciation Rights Plan (the
"Incentive Plan") was adopted by the Company in September of 1989 and
amended April 17, 1992, May 17, 1994, and May 29, 1996. It is now
proposed to approve amendments to the Incentive Plan to (i) eliminate the
requirement that members of the Compensation Committee administering the
Incentive Plan be disinterested persons as had been previously required by
Rule 16b-3; (ii) while the Committee is expected to continue to administer
the Incentive Plan for the foreseeable future, permit the Board of
Directors to make grants of stock options or otherwise administer the
Incentive Plan if and to the extent such administration would be
consistent with applicable law; (iii) permit the Board of Directors or the
Committee administering the Incentive Plan to determine the fair market
value of the Company's Common Stock for purposes of the Incentive Plan by
averaging the price over a period of up to 90 days preceding the grant of
any stock option or stock appreciation right; (iv) require shareholder
approval of amendments to the Incentive Plan only if the amendment would
(A) increase the total number of shares of Common Stock authorized for
issuance pursuant to the Incentive Plan or (B) require shareholder
approval under applicable law; and (v) give the Board of Directors or the
Committee administering the Incentive Plan the discretion to permit a
participant to effect a net exercise of a stock option without tendering
shares of the Company's stock as payment for the stock option.
The Company believes that these changes are important to provide
flexibility to the Compensation Committee in its administration of the
Incentive Plan, to promote stock ownership among key employees and to
permit the Compensation Committee and the Board of Directors to continue
to provide incentives to present and future key employees to advance the
interests of the Company.
Below is a summary description of the Incentive Plan, as proposed to
be amended:
ADMINISTRATION
The Compensation Committee of the Board of Directors of the Company
administers the Incentive Plan. The Compensation Committee currently
consists of Messrs. Hannah, Kinnear and Richards. Subject to the terms of
the Incentive Plan, the Compensation Committee has the authority to
determine to whom stock options and/or stock appreciation rights will be
granted, the number of shares covered by each such grant, the exercise or
purchase price per share, the time or times at which stock options and/or
stock appreciation rights will be granted, and other terms and provisions
governing the stock options (including whether stock options will have
reload authorization). The interpretation or construction by the
Compensation Committee of the Incentive Plan or any stock option or stock
appreciation right granted under it will be final.
Prior to the proposed amendments, all members of the Committee were
required to be "disinterested persons" as that term had been defined in
Rule 16b-3 under the Exchange Act. Insofar as Rule 16b-3 has been amended
to delete this requirement, the Incentive Plan is also proposed to be
amended to remove the requirement. In addition, the Incentive Plan is
being amended to permit the Board of Directors to administer the Incentive
Plan if and to the extent that such administration would be consistent
with applicable law.
UNDERLYING SECURITIES
The securities underlying stock options and stock appreciation rights
under the Incentive Plan are shares of the Company's Common Stock.
Pursuant to the Incentive Plan, the maximum number of shares of Common
Stock that may be issued upon exercise or payment will not exceed
1,500,000 shares. Pursuant to the terms of the Incentive Plan, shares
subject to stock options which for any reason expire or are terminated
unexercised as to such shares may again be the subject of a grant under
the Incentive Plan. In addition, for purposes of calculating the maximum
number of shares which may be issued under the Incentive Plan, only shares
issued as a result of an exercise of stock appreciation rights are
counted. Similarly, only the net shares issued are counted when shares of
Common Stock are used as full or partial payment for shares issued upon
exercise of stock options.
The market value of the total shares authorized under the Incentive
Plan as of April 4, 1997 was $1,875,000.
ELIGIBLE EMPLOYEES AND OTHERS
Stock options and/or stock appreciation rights may be granted under
the Incentive Plan to key employees (within the meaning of Section
416(i)(1)(A) of the Code). Stock options granted under the Incentive
Plan, other than Reload Options (as described below), are incentive stock
options (within the meaning of Section 422 of the Code). As of December
31, 1996, the Company had approximately fifteen (15) key employees. In no
event may the aggregate fair market value (determined on the date of grant
of a stock option) of Common Stock for which incentive stock options
granted to any employee are exercisable for the first time by such
employee during any calendar year (under all qualified stock option plans
of the Company) exceed $100,000. Employees are eligible to receive stock
options for no more than an aggregated 750,000 shares each under the
Incentive Plan.
The Compensation Committee determines the number of shares of the
Company's Common Stock covered by any grant made to an Executive Officer
or other key employee under the Incentive Plan. Stock options may not be
granted under the Incentive Plan to non-employee Directors of the Company.
STOCK OPTION PRICE AND DURATION
The exercise price per share of stock options granted under the
Incentive Plan cannot be less than the fair market value of the Common
Stock on the date of grant, or, in the case of stock options granted to
employees holding more than 10 percent of the total combined voting power
of all classes of stock of the Company, 110 percent of the fair market
value of the Common Stock on the date of grant.
Pursuant to the proposed amendments, "fair market value" means (a) if
there is an established market for the Company's Common Stock on a stock
exchange, in an over-the-counter market or otherwise, the mean of the
highest and lowest quoted selling prices on the valuation date, or (b) if
there were no such sales on the valuation date, then in accordance with
Treas. Reg. Sec. 10.2031-2 or successor regulations. Unless otherwise
specified by the Committee at the time of grant or in the Incentive Plan
(as in the case of automatic grants to Committee members), the valuation
date for purposes of determining fair market value is the date of grant.
The Committee may, however, specify in any grant of a stock option or
stock appreciation right that, instead of the date of the grant, the
valuation date shall be a valuation period of up to ninety (90) days
preceding the date of grant, and fair market value for purposes of such
grant shall be the average over the valuation period of the mean of the
highest and lowest quoted selling prices on each date on which sales were
made in the valuation period.
Prior to the proposed amendments, fair market value referred to a
single quoted price on the date of grant.
The Incentive Plan requires that each stock option expire on the date
specified by the Compensation Committee, but not more than 10 years from
its date of grant. However, in the case of any stock option granted to an
employee owning more than 10 percent of the total combined voting power of
all classes of stock of the Company, such stock option will expire on the
date specified by the Compensation Committee, but not more than 5 years
from its date of grant.
EXERCISE OF STOCK OPTIONS AND PAYMENT FOR STOCK
Exercise of a stock option under the Incentive Plan is effected by a
written notice of exercise delivered to the Company at its principal
office together with payment for the shares in full in cash or by check
or, at the discretion of the Compensation Committee, through delivery of
shares of Common Stock having fair market value equal as of the date of
exercise to the cash exercise price of the stock option, or by delivery of
a combination of cash and Common Stock. If the proposed amendments are
approved, the Committee may, in its discretion and subject to ratification
by the entire Board of Directors, loan one or more participants all or a
portion of the exercise price for up to three (3) years with interest
payable at the prime rate quoted in the WALL STREET JOURNAL on the date of
exercise. In addition, the Committee or the Board of Directors may elect
to permit a participant to effect a net exercise of a stock option without
tendering shares of the Company's stock as payment for the stock option.
In such an event, the participant would be deemed to have paid for the
exercise of the stock option with shares of the Company's stock and would
receive from the Company a number of shares equal to the difference
between the shares that would have been tendered and the number of options
exercised. The Committee may also permit payment to be made by delivery
of notice and irrevocable instructions to a broker to promptly deliver to
the Company the amount of sale or loan proceeds to pay the exercise price.
Prior to the proposed amendments, a participant who desired to use
shares of the Company's stock in payment of the exercise price for the
stock option being exercised was required to tender a stock certificate
for the appropriate number of shares of the Company's stock sufficient to
pay the exercise price, and broker instructions were not expressly
permitted.
RELOAD OPTIONS
The Compensation Committee may, concurrently with the award of stock
options, authorize "Reload Options". If a stock option is granted with
reload authorization and the stock option is exercised in whole or in part
by the delivery of shares of Common Stock, a Reload Option will
automatically be granted at the time of such exercise for the number of
shares delivered as payment of the exercise price. Any Reload Option
granted pursuant to such authorization will have an exercise price equal
to the fair market value on the date of exercise of the underlying stock
option and will be exercisable from such date through the remaining term
of the underlying stock option. Reload Options are exercisable in the
same manner as the underlying stock option.
NONTRANSFERABILITY OF STOCK OPTIONS
No transfers of stock options are permitted, except that a stock
option may be transferred by will or by the laws of descent and
distribution.
STOCK APPRECIATION RIGHTS
A stock appreciation right entitles its holder to receive from the
Company, at the time of exercise, an amount equal to the excess of the
fair market value (at the date of exercise) of a share of Common Stock
over a specified price fixed by the Compensation Committee not less than
100 percent of the fair market value of a share of Common Stock on the
date of grant, multiplied by the number of shares as to which the holder
is exercising the stock appreciation right. The Compensation Committee
may, in granting stock appreciation rights, provide that such rights are
alternative to a specified stock option.
EXERCISE OF STOCK APPRECIATION RIGHTS
Exercise of a stock appreciation right under the Incentive Plan is
effected by written notice to the Company at any time prior to its stated
expiration, which will be no more than 10 years from the date of grant.
If the stock appreciation right is alternative to a stock option, the
stock option will be deemed canceled to the extent the stock appreciation
right is exercised.
PLAN BENEFITS
Set forth below in tabular form are the benefits or amounts to be
received by or allocated to each of the named persons or groups under the
Incentive Plan to date. The Compensation Committee determines the number
of stock options and stock appreciation rights which may be granted to key
employees under the Incentive Plan. Because such number, if any, is
entirely in the discretion of the Compensation Committee, the future
benefits or amounts to be received by or allocated to the key employees
are not determinable.
<TABLE>
<CAPTION>
INCENTIVE PLAN
NAME AND POSITION DOLLAR VALUE ($)(1)NUMBER OF SHARES
<S> <C> <C>
Matthew L. Gold, Chairman of the
Board, Chief Executive Officer
and President(2) -0- 407,293
Executive Officer Group (1 person)(3) -0- 407,293
Non-Executive Officer Director
Group (4 persons) -0- -0-
Nominee for Director Group (5 persons) -0- 407,293
Associate of Director, Executive
Officer or Nominee Group (0 persons) -0- -0-
5% or More Recipient Group
(1 person) -0- 407,293
Non-Executive Officer Employee
Group (15 persons) -0- -0-
</TABLE>
(1) All options have been granted at not less than the fair market value
on the date of grant. The value to the grantee is solely dependent
on the increase in the stock price.
(2) Mr. Gold exchanged 116,667 old options for 77,778 new options in
1991. He was granted 37,500 options in 1991, 100,000 options in
1992, 64,000 options in 1994 and 128,015 options in 1996.
(3) Certain former Executive Officers have received options under the
Incentive Plan which have not been included in this table.
AMENDMENT, SUSPENSION AND TERMINATION
The Board or Compensation Committee may suspend, terminate or amend
the Incentive Plan in any respect at any time, except that, without the
prior approval of the shareholders, (a) the total number of shares that
may be issued under the Incentive Plan may not be increased; and (b) no
change may be made that would require shareholder approval under
applicable law. No amendment, suspension or termination of the Incentive
Plan will, without the consent of the person who has received stock
options or stock appreciation rights, alter or impair any of that person's
rights or obligations under any stock option or stock appreciation right
granted prior to that amendment, suspension or termination.
Prior to the proposed amendments, shareholder approval was also
required for any amendment which would (a) extend the expiration date of
the Incentive Plan; (b) modify the method of determining the minimum
exercise price of stock options, Reload Options and stock appreciation
rights; (c) change the class of employees to whom stock options, stock
appreciation rights and stock grants may be awarded; and (d) increase the
maximum number of shares which may be subject to stock options, stock
appreciation rights and stock grants to each employee under the Incentive
Plan. To the extent that the same is required by law, including Section
422 of the Code and the Regulations thereunder, shareholder approval of
these matters will still continue to be required.
MISCELLANEOUS
The Company's obligation to permit the exercise of any stock option
or stock appreciation right is subject to the approval of any governmental
authority deemed by the Compensation Committee to be required in
connection with the sale or issuance of such shares. Adjustments in the
number and type of shares authorized by the Incentive Plan will be made by
the Compensation Committee in the event of a stock dividend, stock split,
or combination or other reduction in the number of issued shares in order
to prevent the dilution or enlargement of rights under stock options or
stock appreciation rights. Adjustments may also be made in the event of a
merger consolidation, reorganization, recapitalization sale or exchange of
substantially all assets or dissolution of the Company. The Company is
entitled, in appropriate circumstance, to withhold the amount of any
withholding or other tax due in connection with the exercise of rights
under the Incentive Plan. No stock option or stock appreciation right
will be granted under the Incentive Plan after July 10, 1999.
FEDERAL INCOME TAX CONSEQUENCES
A. Incentive Stock Options. The following general rules are
applicable for Federal income tax purposes under existing law to United
States employees of the Company who receive and exercise stock options
granted under the Incentive Plan that are intended to be Incentive Stock
Options ("ISOs"):
1. Generally, no taxable income results to the optionee upon the
grant of an ISO or upon the issuance of shares to him or her upon exercise
of the ISO.
2. No tax deduction is allowed to the Company upon either grant or
exercise of an ISO under the Incentive Plan.
3. If shares acquired upon exercise of an ISO are not disposed of
prior to the later of (i) two years following the date the stock option
was granted or (ii) one year following the date the shares are transferred
to the optionee pursuant to the exercise of the stock option, the
difference between the amount realized on any subsequent disposition of
the shares and the exercise price will generally be treated as long-term
gain or loss to the optionee.
4. If shares acquired upon exercise of an ISO are disposed of
before the expiration of one or both of the requisite holding periods (a
"disqualifying disposition"), then in most cases the lesser of (i) any
excess of the fair market value of the shares at the time of exercise of
the stock option over the exercise price or (ii) the actual gain on
disposition, will be treated as compensation to the optionee and will be
taxed as ordinary income in the year of such disposition.
5. In any year that an optionee recognizes compensation income on a
disqualifying disposition of shares acquired by exercising an ISO, the
Company will generally be entitled to a corresponding deduction for income
tax purposes.
6. Any excess of the amount realized by the optionee as the result
of a disqualifying disposition over the sum of (i) the exercise price and
(ii) the amount of ordinary income recognized under the above rules will
be treated as either long-term or short-term capital gain, depending upon
the time elapsed between receipt and disposition of such shares disposed
of.
7. The bargain element at the time of exercise of an ISO, i.e., the
amount by which the fair market value of the Common Stock acquired upon
exercise of the ISO exceeds the exercise price, may be taxable to the
optionee under the "alternative minimum tax" provisions of the Code.
B. Nonqualified Options. A Reload Option granted under the
Incentive Plan will be a Nonqualified Option and will be taxed in
accordance with Section 83 of the Code and the Regulations issued
thereunder. The following general rules are applicable to United States
holders of such stock options and to the Company for Federal income tax
purposes under existing law:
1. The optionee does not realize any taxable income upon the grant
of a Nonqualified Option, and the Company is not allowed a business
expense deduction by reason of such grant.
2. The optionee will recognize ordinary compensation income at the
time of exercise of a Nonqualified Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. The Company will require employees to
make appropriate arrangements for the withholding of taxes on this amount.
3. When the optionee sells the shares, he or she will recognize a
capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in the
shares (i.e., the exercise price plus the amount taxed to the optionee as
compensation income). If the optionee holds the shares for longer than
one year, this gain or loss will be a long-term capital gain or loss.
4. In general, the Company will be entitled to a tax deduction in
the year in which compensation income is recognized by the optionee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO
THE INCENTIVE STOCK OPTION AND APPRECIATION RIGHTS PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
OTHER BUSINESS
As of the date of this Proxy Statement, management of the Company was
not aware of any other matter to be presented at the meeting other than as
set forth herein. However, if any other matters are properly brought
before the Meeting, the shares represented by valid Proxies will be voted
with respect to such matters in accordance with the judgment of the
persons voting them.
Under Colorado law, unless otherwise provided in the Company's
Articles of Incorporation, for the election of directors, of the shares
represented in person or by proxy at the meeting and entitled to vote,
that number of candidates equalling the number of directors to be elected
having the highest number of votes cast in favor of their election, are
elected to the board of directors. For the ratification of the
independent public accountants and the amendments to the NQSO Plan and the
Incentive Plan, of the shares represented in person or by proxy at the
meeting and entitled to vote, the votes cast favoring the ratification and
approving the amendments to the NQSO Plan and the Incentive Plan must
exceed the votes opposing it. Abstentions and broker non-votes will be
counted for purposes of establishing a quorum only. Only those votes cast
for the election of directors and the proposals will be counted as votes
in favor or affirmative votes.
ANNUAL REPORT
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 accompanies this Proxy Statement. The audited financial
statements of the Company are included in such Form 10-K. Copies of the
exhibits to that Form 10-K are available from the Company upon written
request of a Shareholder and payment of the Company's out-of-pocket
expenses.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE ANNUAL MEETING TO BE HELD IN MAY 1998
Any proposal from a Shareholder intended to be presented at the
Company's Annual Meeting of Shareholders to be held in May 1998, must be
received at the offices of the Company, 1225 17th Street, Suite 1800,
Denver, Colorado 80202 no later than December 15, 1997, in order to be
included in the Company's proxy statement and proxy relating to that
meeting.
MATTHEW L. GOLD
PRESIDENT
Denver, Colorado
April 14, 1997
APPENDICES
PRECISION STANDARD, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Matthew L. Gold and Kathleen Page,
each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote as designated below, all the
shares of common stock of Precision Standard, Inc. held of record by the
undersigned on April 4, 1997, at the Annual Meeting of Shareholders to be
held on May 12, 1997 or any adjournment thereof.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below (except as marked to the
contrary)
[ ] WITHHOLD AUTHORITY to vote for all the nominees listed below
Matthew L. Gold General Thomas C. Richards
Donald C. Hannah J. Ben Shapiro, Jr.
Admiral George E.R. Kinnear II
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL
NOMINEE, CROSS OUT THAT NOMINEE'S NAME ABOVE.)
2. PROPOSAL TO RATIFY THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE CALENDAR YEAR
ENDED DECEMBER 31, 1996 AND THE CALENDAR YEAR ENDING DECEMBER 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO APPROVE CERTAIN AMENDMENTS TO THE NONQUALIFIED
STOCK OPTION PLAN TO CONFORM WITH RECENT AMENDMENTS TO SEC RULE 16B-3, AND
TO PERMIT GREATER FLEXIBILITY IN THE ADMINISTRATION OF THE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3 PROPOSAL TO APPROVE CERTAIN AMENDMENTS TO THE INCENTIVE STOCK
OPTION AND STOCK APPRECIATION RIGHTS PLAN TO CONFORM WITH RECENT
AMENDMENTS TO SEC RULE 16B-3, AND TO PERMIT GREATER FLEXIBILITY IN THE
ADMINISTRATION OF THE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. To transact such other business as may properly come before the
Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY IN RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT
THE TIME OF THE MAILING OF THE NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO
THE UNDERSIGNED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement furnished herewith.
Dated: , 1997
--------------------------------------------
--------------------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the name(s)
stenciled hereon. Executors, administrators,
trustees, guardians and attorneys should
indicate when signing. Attorneys should
submit powers of attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENCLOSED PRE-ADDRESSED
ENVELOPE. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING OR TO SUBMIT A LATER DATED REVOCATION OR
AMENDMENT TO THIS PROXY ON ANY OF THE ISSUES SET FORTH ABOVE.
APPENDICES
PRECISION STANDARD, INC.
NONQUALIFIED STOCK OPTION PLAN
March 29, 1996
As Amended April 1, 1997
Section 1. PURPOSE. The purpose of the PRECISION STANDARD, INC.
(the "Company") Nonqualified Stock Option Plan (the "Plan") is to provide
incentives for selected persons to promote the financial success and
progress of the Company by granting such persons awards ("Awards") of
incentives in the form of options to purchase shares of the Company's
Common Stock ("Options"), stock appreciation rights ("SARs"), and Common
Stock of the Company ("Stock Grants"). An Award may consist of one or a
combination of such incentives and may be made at any time or from time to
time.
Section 2. GENERAL PROVISIONS.
A. ADMINISTRATION. The Plan shall be administered by
the Compensation Committee, which shall be comprised of two or more
independent outside directors appointed by the Board of Directors (the
"Committee"). Notwithstanding the foregoing, if it would be consistent
with all applicable laws, including, without limitation, Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"), and the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations promulgated thereunder (including, without limitation,
the regulations relating to Section 162(m) of the Code), then the Plan may
be administered by the Board of Directors, and if so administered all
subsequent references to the Committee shall refer to the Board of
Directors. Any action of the Committee shall be taken by majority vote or
the unanimous written consent of the Committee members.
B. AUTHORITY OF THE COMMITTEE. Subject to other
provisions of the Plan, and with a view towards furtherance of its
purpose, the Committee shall have sole authority and absolute discretion:
1. to construe and interpret the Plan;
2. to define the terms used herein;
3. to prescribe, amend and rescind rules and
regulations relating to the Plan;
4. to determine the persons to whom Awards are
granted;
5. to determine the time or times at which Awards
shall be granted;
6. to determine the number of shares subject to
each Award;
7. to determine all of the other terms and
conditions of the Options, SARs, and Stock Grants awarded hereunder; and
8. to make all other determinations necessary or
advisable for the administration of the Plan and to do everything
necessary or appropriate to administer the Plan.
All decisions, determinations and interpretations made by the Committee
shall be binding and conclusive on all participants in the Plan and on
their legal representatives, heirs and beneficiaries.
C. MAXIMUM NUMBER OF SHARES SUBJECT TO THE PLAN. The
maximum aggregate number of shares of Common Stock subject to the Plan
shall be 1,500,000, subject to adjustment as provided in Section 2.G of
the Plan. The Common Stock subject to the Plan may be divided among the
various types of Awards as the Committee determines in its sole discretion
from time to time. For purposes of calculating the maximum number of
shares of Common Stock which may be issued under the Plan, (a) all shares
underlying an Option (including the shares, if any, withheld for tax
withholding requirements) shall be counted when cash is used as full
payment for shares issued upon exercise of the Option; (b) in the case of
net exercise of an Option, only the net shares issued (including the
shares, if any, withheld for tax withholding requirements) shall be
counted when shares of Common Stock are used as full or partial payment
for shares issued upon exercise of an Option; (c) all shares underlying an
SAR (including the shares, if any, withheld for tax withholding
requirements) shall be counted upon exercise of an SAR; and (d) all shares
issued pursuant to a Stock Grant (including the shares, if any, withheld
for tax withholding requirements) shall be counted when the shares are no
longer subject to any conditions, such as a vesting schedule, and
certificates representing such shares have been issued and delivered. If
any Options or SARs granted under the Plan expire or terminate for any
reason before they have been exercised, the shares subject to such Options
or SARs shall again be available under the Plan.
D. ELIGIBILITY AND PARTICIPATION. Subject to the terms
of the Plan, Awards may be granted to such employees, officers, directors,
consultants and independent contractors of the Company or any Parent,
Subsidiary or Affiliate of the Company, as defined below, as the Committee
may select from time to time in its sole discretion. Employees of the
Company are eligible to receive Awards for no more than an aggregate of
750,000 shares of the Company's Common Stock per employee under the Plan.
The Committee, in its sole discretion, shall determine the number of
shares of the Company's Common Stock covered by any Award made to
executive officers or other employees under the Plan. Grants to non-
employee directors of the Company may only be made pursuant to formula
grants in the manner and amounts set forth in Section 7 hereof, provided
that, if, and to the extent that, the Committee or the Board of Directors
could exercise authority to determine the amount, price and timing of
grants hereunder to its members, consistent with all applicable laws,
including, without limitation Rule 16b-3, grants to non-employee directors
may be made by the Committee or the Board of Directors as permitted by
law. A person may be granted more than one Award under the Plan. As used
in the Plan, the following terms shall have the following meanings:
1. "PARENT" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if,
at the time of the granting of an Award, each of such corporations other
than the Company owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in
such chain.
2. "SUBSIDIARY" means any corporation (other than
the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting of an Award, each of the corporations
other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
3. "AFFILIATE" means any corporation that directly,
or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, another corporation, where
"control" (including the terms "controlled by" and "under common control
with") means the possession, direct or indirect, of the power to cause the
direction of the management and policies of the corporation, whether
through the ownership of voting securities, by contract or otherwise.
4. "COMMON STOCK" means shares of the Company's
$.0001 par value common stock, or such other shares as are substituted
pursuant to Section 2.G hereof.
E. EFFECTIVE DATE OF PLAN. The Plan was adopted by the
Company in September 1989 and was amended April 17, 1992 and May 17, 1994.
On March 18, 1996, the Committee adopted the most recent amendments to the
Plan, which shall be submitted to the shareholders of the Company for
their approval and adoption at a meeting to be held on May 29, 1996, or at
any adjournment thereof. The shareholders shall be deemed to have
approved and adopted these most recent amendments to the Plan only if they
are approved and adopted at a meeting of the shareholders duly held by
vote taken in the manner required by the laws of the State of Colorado.
F. TERMINATION AND AMENDMENT OF PLAN. The Plan shall
terminate on July 10, 1999. No Options, SARs, or Stock Grants shall be
granted under the Plan after that date. Subject to the limitation
contained in Section 2.H of the Plan, the Board or the Committee may at
any time amend or revise the terms of the Plan, including the form and
substance of the Options, SARs, and Stock Grants granted hereunder,
provided that no such amendment or revision shall (i) increase the maximum
aggregate number of shares that may be issued pursuant to Awards granted
under the Plan, except as permitted under Section 2.G of the Plan; or (ii)
effect any change to the Plan which is required to be approved by
shareholders by law, including without limitation the regulations
promulgated under Section 162(m) of the Code.
G. ADJUSTMENTS. If the outstanding shares of Common
Stock are increased, decreased, changed into or exchanged for a different
number or kind of shares or securities through merger, consolidation,
combination, exchange of shares, reorganization, recapitalization,
reclassification, stock dividend, stock split or reverse stock split, an
appropriate and proportionate adjustment shall be made in the maximum
number and kind of shares as to which Options, SARs, and Stock Grants may
be granted under the Plan. A corresponding adjustment shall be made to
the number or kind of shares allocated to unexercised Options and SARs, or
portions thereof, and to unvested Options, SARs, and Stock Grants granted
prior to any such change. Any such adjustment in outstanding Options or
SARs shall be made without change in the aggregate purchase price
applicable to the unexercised portion of such Options or SARs, but with a
corresponding adjustment in the price for each share covered by the
Options or SARs.
H. PRIOR OPTIONS AND OBLIGATIONS. No amendment,
suspension or termination of the Plan shall, without the consent of the
person who has received an Award, alter or impair any of that person's
Options or obligations under any Award granted under the Plan prior to
that amendment, suspension or termination.
I. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the
exercise of any Option or SAR, or the receipt of any Stock Grant, granted
pursuant to the terms of the Plan, no person shall have any of the rights
or privileges of a shareholder of the Company with respect to any shares
of stock until certificates representing such shares have been issued and
delivered. No shares shall be required to be issued and delivered upon
exercise of any Option or SAR, or pursuant to a Stock Grant, until there
has been compliance with all of the requirements of law and of all
regulatory agencies having jurisdiction over the issuance and delivery of
the securities.
J. RESERVATION OF SHARES OF COMMON STOCK. During the
term of the Plan, the Company will at all times reserve and keep available
such number of shares of its Common Stock as shall be sufficient to
satisfy the requirements of the Plan. In addition, the Company will from
time to time, as is necessary to accomplish the purposes of the Plan, seek
or obtain from any regulatory agency having jurisdiction any requisite
authority in order to issue shares of common stock hereunder. The
inability of the Company to obtain from any regulatory agency having
jurisdiction the authority deemed by the Company's counsel to be necessary
to the lawful issuance of any Award or shares of its stock hereunder shall
relieve the Company of any and all liability with respect to the
nonissuance of the Award or the shares of Common Stock as to which the
requisite authority shall not have been obtained.
K. TAX WITHHOLDING. The exercise of any Option or SAR,
and the receipt of any Stock Grant, is subject to the condition that if at
any time the Company shall determine, in its discretion, that the
satisfaction of withholding tax or other withholding obligations under any
state or federal law is necessary or desirable as a condition of, or in
connection with, such exercise or delivery or purchase of shares pursuant
thereto, then in such event, the exercise of an Option or SAR, or the
receipt of a Stock Grant, shall not be effective unless such withholding
shall have been effected or obtained in a manner acceptable to the
Company.
L. FAIR MARKET VALUE. The "fair market value" of the
Common Stock means (a) if there is an established market for the Company's
Common Stock on a stock exchange, in an over-the-counter market or
otherwise, the mean of the highest and lowest quoted selling prices on the
valuation date, or (b) if there were no such sales on the valuation date,
then in accordance with Treasury Regulation Section 20.2031-2 or successor
regulations. With respect to the grant of Options or SARs, unless
otherwise specified by the Committee at the time of grant, or in the Plan
(as in the case of automatic grants to non-employee directors pursuant to
Section 7 hereof), the valuation date for purposes of determining fair
market value shall be the date of grant. The Committee may, however,
specify in any grant of an Option or SAR that, instead of the date of
grant, the valuation date shall be a valuation period of up to ninety (90)
days preceding the date of grant, and fair market value for purposes of
such grant shall be the average over the valuation period of the mean of
the highest and lowest quoted selling prices on each date on which sales
were made in the valuation period, provided, however, that if the
Committee fails to specify a valuation period and there were no sales on
the date of grant then fair market value shall be determined as if the
Committee had specified a thirty (30) day valuation period for such
determination, unless there is no established market for the Company's
Common Stock in which case determination of fair market value shall be in
accordance with clause (b) above.
Section 3. OPTIONS.
A. OPTION PRICE. The option price for shares acquired
pursuant to the exercise of any Option, in whole or in part, shall be
determined by the Committee at the time of the grant of the Option. Such
option price may be less than the fair market value of the Company's
Common Stock on the date of grant, but in no event shall the option price
be less than fifty percent (50%) of the fair market value of the Common
Stock on the date of grant. The foregoing notwithstanding, the option
price of Options granted to officers or directors shall be 100% of the
fair market value of the Company's Common Stock on the date of grant.
B. EXERCISE OF OPTIONS. Each Option shall be
exercisable in one or more installments during its term, and the right to
exercise may be cumulative, as determined by the Committee. No Option may
be exercised for a fraction of a share of Common Stock. The option price
shall be paid at the time of exercise of the Option in cash or shares of
the Company's Common Stock, or in a combination thereof. If permitted by
the Committee, payment may also be made by delivering a properly executed
notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds attributable to
the purchased shares needed to pay the exercise price. If any portion of
the purchase price at the time of exercise is paid in shares of Common
Stock, those shares shall be tendered at their fair market value on the
date of exercise. The Committee may also permit a participant to effect a
net exercise of an Option without tendering any shares of the Company's
Common Stock as payment for the Option. In such an event, the participant
will be deemed to have paid for the exercise of the Option with shares of
the Company's stock and shall receive from the Company a number of shares
equal to the difference between the shares that would have been tendered
and the number of Options exercised. The Committee may in its discretion
and subject to ratification by the entire Board of Directors, loan one or
more participants all or a porion of the exercise price, together with the
amount of any tax liability incurred by the participant as a result of the
exercise of the Option, for up to three (3) years with interest payable at
the prime rate quoted in the Wall Street Journal on the date of exercise.
Non-employee directors may receive such loans for the exercise of their
Options without Committee approval or Board ratification.
C. ACCELERATION OF OPTIONS. Notwithstanding the first
sentence of Section 3.B of the Plan, if the Company or its shareholders
enter into an agreement to dispose of all or substantially all of the
assets or stock of the Company by means of a sale, merger or other
reorganization, liquidation, or otherwise, any Option granted pursuant to
the Plan shall become immediately exercisable with respect to the full
number of shares subject to that Option during the period commencing as of
the date of the agreement to dispose of all or substantially all of the
assets or stock of the Company and ending when the disposition of assets
or stock contemplated by that agreement is consummated or the Option is
otherwise terminated in accordance with its provisions or the provisions
of the Plan, whichever occurs first; provided that no Option shall be
immediately exercisable under this Section on account of any agreement of
merger or other reorganization where the shareholders of the Company
immediately before the consummation of the transaction will own at least
50% of the total combined voting power of all classes of stock entitled to
vote of the surviving entity (whether the Company or some other entity)
immediately after the consummation of the transaction. In the event the
transaction contemplated by the agreement referred to in this Section is
not consummated, but rather is terminated, canceled or expires, the
Options granted pursuant to the Plan shall thereafter be treated as if
that agreement had never been entered into.
D. WRITTEN NOTICE REQUIRED. Any Option granted
pursuant to the Plan shall be exercised when written notice of that
exercise has been given to the Company at its principal office by the
person entitled to exercise the Option and full payment for the shares
with respect to which the Option is exercised has been received by the
Company.
Section 4. RELOAD OPTIONS. Concurrently with the award of Options
under the Plan, the Committee may authorize reload options ("Reload
Options") to purchase, for cash or shares, the number of shares of Common
Stock used to exercise the underlying Option.
A. RELOAD OPTION AMENDMENT. Each notice evidencing the
grant of an Option shall state whether the Committee has authorized Reload
Options with respect to the underlying Option. Upon the exercise of an
underlying Option, the Reload Option will be evidenced by an amendment to
the notice of grant of the underlying Option. Reload Options shall be
subject to the terms and conditions in the underlying option agreement and
shall be subject to the terms and conditions set forth in the Plan.
B. RELOAD OPTION PRICE. The option price per share of
Common Stock deliverable upon exercise of a Reload Option shall be the
fair market value of a share of Common Stock on the date of exercise of
the underlying Option.
C. TERM AND EXERCISE. Each Reload Option is fully
exercisable from the date of exercise of the underlying Option and shall
remain exercisable for the remaining term of the underlying Option.
Reload Options may be exercised in the same manner as the underlying
Options in accordance with the Plan.
D. TERMINATION OF EMPLOYMENT. No additional Reload
Options shall be granted to participants in the Plan when an Option or
Reload Option is exercised pursuant to the terms of the Plan following
termination of the participant's employment or the cessation of the
participant's service to the Company as a director, consultant or
independent contractor.
Section 5. STOCK APPRECIATION RIGHTS. The Committee may, from time
to time in its sole discretion, grant SARs in addition to or in
conjunction with Options granted hereunder, either at the time of the
grant of the Options or at any subsequent time during the term of the
Options. Subject to the terms of the Plan, the Committee shall determine
and designate the recipients of SARs, the dates SARs are granted, the
number of shares subject to SARs, the duration of each SAR, and whether
SARs are alternative to any previously or contemporaneously granted Option
or Reload Option ("Related Options"). SARs shall be subject to the terms
and conditions and evidenced by agreements in the form determined from
time to time by the Committee.
A. VALUE OF SARS. SARs shall entitle their holders to
receive a number of shares of the Company's Common Stock equal to (i) the
excess of the fair market value of a share of the Company's Common Stock
on the date of exercise over a specified price fixed by the Committee,
which price may not be less than 100% of the fair market value of a share
of Common Stock on the date of the grant, multiplied by (ii) the number of
shares as to which the holder is exercising the SAR.
B. DURATION. The term of an SAR granted as an
alternative to an Option will be the same as the term of its Related
Option; upon exercise of the SAR, the Related Option will terminate, and
upon exercise of the Related Option, the SAR will terminate. The term of
an SAR granted in addition to and separately from any Option shall be
specified by the Committee at the time such SAR is granted.
C. EXERCISE OF SARS. SARs may be exercised according
to their terms by providing written notice to the Company at any time
prior to the expiration of the SAR. No SAR may be exercised for a
fraction of a share of Common Stock. If the SAR is alternative to an
Option, the Related Option shall be deemed terminated to the extent the
SAR is exercised.
Section 6. STOCK GRANTS. The Committee may, from time to time in
its sole discretion, grant shares of the Company's Common Stock under the
Plan. Such Stock Grants may be awarded with or without conditions, such
as vesting schedules or performance requirements. Recipients of Stock
Grants will not be required to pay for the acquisition of the Company's
Common Stock but will be subject to tax consequences and resale
restrictions.
Section 7. GRANTS TO OUTSIDE DIRECTORS. Except as provided in
Section 2.D hereof, the Committee shall have no discretion to determine
the amount, price or timing of grants of Awards to directors who are not
employees of the Company. Grants of Awards hereunder to directors who are
not employees of the Company shall be granted on December 10 of each year
without further action by the Committee. Each such grant shall be for one
share of Common Stock for each two dollars of director's compensation to
include retainer plus four Board meetings paid to the director during the
calendar year, but not to include any additional compensation for
committee meetings attended not held in conjunction with Board meetings or
for additional Board meetings attended beyond four; such amount to be
reduced accordingly if less than four Board meetings attended. The
exercise price for Options granted to outside directors shall be 100% of
the fair market value of the Common Stock on the date of grant calculated
in accordance with Section 2.L hereof with a valuation period of thirty
(30) days. Each Option granted in accordance with this Section shall
include authorization for a Reload Option in accordance with Section 4 of
the Plan.
Section 8. TERMS AND CONDITIONS MAY DIFFER. The terms and
conditions of Awards granted under the Plan may differ as the Committee
shall in its discretion determine so long as all Awards satisfy the
requirements of the Plan.
Section 9. DURATION OF OPTIONS AND SARS. Each Option and each SAR
granted pursuant to the Plan shall expire on the date determined by the
Committee which shall be not later than ten years after the date of grant
and shall be subject to early termination as provided in the Plan.
Subject to the foregoing, Options granted to outside directors pursuant to
Section 7 hereof shall be fully vested on the date of grant and shall be
exercisable for a period of ten years.
Section 10. LIMITATIONS ON ACQUIRING VOTING STOCK. No Award may be
granted to persons who are not officers or directors of the Company if
such Award would cause that person to hold, beneficially or of record, in
excess of 5% of the outstanding voting stock of the Company.
Section 11. COMPLIANCE WITH SECURITIES LAWS. Shares of Common Stock
shall not be issued with respect to any Award granted under the Plan
unless the issuance and delivery of the shares pursuant thereto shall
comply with all relevant provisions of state and federal law, including
without limitation the Securities Act of 1933, as amended, the rules and
regulations promulgated thereunder and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. Further, each recipient of an Award hereunder shall consent
to the imposition of a legend on the certificate representing the shares
of Common Stock issued hereunder restricting the transferability of such
shares as required by law, the Award, or by the Plan.
Section 12. EMPLOYMENT. Each recipient of an Award, if requested by
the Committee, must agree in writing as a condition of the granting of his
or her Award, to remain in the employ of the Company or to remain as a
consultant to the Company, or any of its Subsidiaries, following the date
of the granting of that Award for a period or periods specified by the
Committee, which period(s) shall in no event exceed an aggregate of four
years. Nothing in the Plan or in any Award granted hereunder shall confer
upon any Award recipient any right to continued employment or retainer by
the Company or any of its Subsidiaries, or limit in any way the right of
the Company or any Subsidiary at any time to terminate or alter the terms
of that employment or consulting arrangement.
Section 13. RIGHTS UPON TERMINATION OF EMPLOYMENT, DIRECTOR,
CONSULTANT OR INDEPENDENT CONTRACTOR STATUS. If an Award recipient ceases
to be employed by the Company or ceases to serve as a director, consultant
or independent contractor of the Company, or any Subsidiary, for any
reason other than death or retirement, his or her Award shall terminate
one year from the date of the Award recipient ceases to be employed by or
serve as a director, consultant or independent contractor of the Company;
provided that the Committee may, in its discretion, allow Options and SARs
to remain exercisable (to the extent exercisable on the date of
termination of employment or retainer) for up to one additional year for
each year of service to the Company by the Award recipient (up to a
maximum of five years after the date of termination), unless the Option,
SAR, or the Plan otherwise provides for earlier termination; and provided
further that, for purposes of determining when a director no longer serves
the Company, the period during which post-retirement or similar benefits
are paid to the director by the Company shall be deemed to be continued
service.
Section 14. RIGHTS UPON DEATH. Except as otherwise limited by the
Committee at the time of the grant of an Option or SAR, if the recipient
dies while he or she is an employee, director or consultant of the Company
or any Subsidiary, his or her Options and SARs shall remain exercisable
for one year after the date of death, unless the Options, SARs, or the
Plan otherwise provide for earlier termination. During such exercise
period after death, Options and SARs may be fully exercised, to the
extent that they remain unexercised on the date of the recipient's death,
by the person or persons to whom the recipient's rights to the Options or
SARs shall pass by will or by laws of descent and distribution.
Section 15. WAIVER OF VESTING RESTRICTIONS IN THE EVENT OF
RETIREMENT. Notwithstanding any provision of the Plan, in the event an
Award recipient retires as an employee or director of the Company, or any
Subsidiary, the Committee shall have the discretion to waive any vesting
restrictions on the retiree's Options, SARs, or Stock Grants.
Section 16. AWARDS NOT TRANSFERABLE. Awards granted pursuant to the
Plan may not be sold, pledged, assigned or transferred in any manner
otherwise than by will or the laws of descent and distribution. During
the lifetime of the Award recipient, Options and SARs may only be
exercised by that recipient or by his or her guardian or legal
representative.
Section 17. REPORTS TO SHAREHOLDERS. Upon written request, the
Company shall furnish to each Award recipient a copy of its most recent
Form 10-K Annual Report and each quarterly report to shareholders issued
since the end of the Company's most recent fiscal year.
Adopted by the Board of Directors and approved by the shareholders of the
Company on September 8, 1989. Amended and restated on June 1, 1992 and
March 11, 1994. Further amended and restated on March 29, 1996, and
approved by the shareholders of the Company on May 29, 1996. Amended on
April 1, 1997 and proposed to be approved by the shareholders of the
Company on May 12, 1997.
PRECISION STANDARD, INC.
Matthew L. Gold, President
APPENDICES
PRECISION STANDARD, INC.
INCENTIVE STOCK OPTION AND APPRECIATION RIGHTS PLAN
March 11, 1994
As Amended April 1, 1997
1. PLAN. Options to purchase and appreciation rights for shares of
the Corporation's common stock may be granted in accordance with this Plan
to key employees (within the meaning of Section 416(i)(1)(A) of the Code)
of the Corporation and its Subsidiaries selected by the Committee.
2. DEFINITIONS. The "Code" means the Internal Revenue Code of
1986, as it may be amended from time to time.
The "Committee" means a committee which shall be comprised of
two or more independent outside directors designated by the Board of
Directors of the Corporation, provided that, if the Plan is administered
by the Board of Directors in accordance with Section 8 hereof, then
Committee shall mean the Board of Directors.
"Common Stock" means shares of the common stock, $.0001 par
value per share of the Corporation, or such other shares as are
substituted pursuant to paragraph 7(f).
The "Corporation" means Precision Standard, Inc.
The "fair market value" of the Common Stock means (a) if there
is an established market for the Corporation's Common Stock on a stock
exchange, in an over-the-counter market or otherwise, the mean of the
highest and lowest quoted selling prices on the valuation date; or (b) if
there were no such sales on the valuation date, then in accordance with
Treasury Regulation Section 20.2031-2 or successor regulations. Unless
otherwise specified by the Committee at the time of grant, the valuation
date for purposes of determining fair market value shall be the date of
grant. The Committee may, however, specify in any grant of an options or
stock appreciation right that, instead of the date of grant, the valuation
date shall be a valuation period of up to ninety (90) days preceding the
date of grant, and fair marker value for purposes of such grant shall be
the average over the valuation period of the mean of the highest and
lowest quoted selling prices on each date on which sales were made in the
valuation period, provided, however, that if the Committee fails to
specify a valuation period and there were no sales on the date of grant
then fair market value shall be determined as if the Committee had
specified a thirty (30) day valuation period for such determination,
unless there is no established market for the Corporation's Common Stock
in which case the determination of fair market value shall be in
accordance with clause (b) above.
"Subsidiary" means any corporation in which the Corporation
owns, directly or indirectly, stock possessing 50% or more of the total
combined voting power.
3. LIMITATION ON AGGREGATE SHARES. The number of shares of Common
Stock for which options and appreciation rights may be granted under this
Plan and which may be issued upon exercise or payment shall not exceed, in
the aggregate, 1,500,000 shares. For purposes of calculating the maximum
number of shares of Common Stock which may be issued under the plan, (a)
all shares issued (including the shares, if any, withheld for tax
withholding requirements) shall be counted when cash is used as full
payment for shares issued upon exercise of an option; (b) only the shares
issued (including the shares, if any, withheld for tax withholding
requirements) as a result of an exercise of appreciation rights shall be
counted; and (c) only the net shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when shares of
Common Stock are used as full or partial payment for shares issued upon
exercise of an option. If any options or appreciation rights expire
unexercised or are canceled, terminated or forfeited in any manner without
the issuance of Common Stock or payment, the shares for which the options
and appreciation rights were granted shall again be available under this
Plan. The 1,500,000 shares of Common Stock may be either authorized and
unissued shares, treasury shares, or a combination thereof.
4. OPTIONS. Options to be granted under this Plan shall be
incentive stock options (within the meaning of Section 422 of the Code).
Subject to the terms of this Plan, the Committee shall determine and
designate the recipients of options, the dates options are granted, the
number of shares of Common Stock subject to option, the options prices,
and the duration of options. The option price per share of Common Stock
shall be fixed by the Committee at not less than 100% of the fair market
value per share of Common Stock on the date of grant. Options may not be
granted to any employee who at the time the option is granted owns more
than 10% of the total combined voting power of all classes of stock of the
Corporation or of its parent or subsidiary except that options may be
granted to such persons if the option price is at least 110% of the fair
market value and the option by its terms is not exercisable more than five
years from the date it is granted. Employees of the Corporation will be
eligible to receive options for no more than an aggregate of 750,000
shares per employee under this Plan. To the extent required by the Code,
the aggregate fair market value (determined at the time the option is
granted) of the Common Stock for which incentive stock options are
exercisable for the first time by an option holder during any calendar
year (under all plans of the Corporation and its subsidiaries) shall not
exceed $100,000. Options granted under this Plan shall be subject to
terms and conditions and evidenced by agreements in the form determined
from time to time by the Committee and shall be subject to the terms and
conditions in paragraph 7.
a. TERM OF OPTIONS. No incentive stock option shall be
exercisable more than ten years after the date of grant. Subject to the
five-year limitation for 10% shareholders provided in paragraph 4, options
granted to employees who are directors of the Corporation shall be fully
vested on the date of grant and shall be exercisable for a period of ten
years.
b. EXERCISE OF OPTIONS. Options shall be exercised by written
notice to the Corporation (to the attention of the Corporate Secretary)
accompanied by payment in full of the option price. Payment of the option
price may be made, at the discretion of the optionee (i) in cash
(including check, bank draft, or money order), (ii) by delivery of Common
Stock (valued at the fair market value thereof on the date of exercise) or
(iii) by delivery of a combination of cash and Common Stock. The
Committee may, in its discretion and subject to ratification of the entire
Board of Directors, loan one or more participants all or a portion of the
exercise price for up to three (3) years with interest payable at the
prime rate quoted in the Wall Street Journal on the date of exercise.
The Committee my also permit a participant to effect a net
exercise of an option without tendering any shares of the Corporation's
stock as payment for the option. In such an event, the participant will
be deemed to have paid for the exercise of the option with shares of the
Corporation's stock and shall receive from the Corporation a number of
shares equal to the difference between the shares that would have been
tendered and the number of options exercised.
The Committee may also cause the Corporation to enter
arrangements with one or more licensed stock brokerage firms whereby
participants may exercise options without payment therefor but with
irrevocable orders to such brokerage firm to immediately sell the number
of shares necessary to pay the exercise price for the option and the
withholding taxes, if any, and then to transmit the proceeds from such
sales directly to the Corporation in satisfaction of such obligations.
The Committee may, in order to prevent any possible
violation of law, require the option price to be paid in cash. The right
to alternative methods of payment of the option price may be limited or
denied in any option agreement.
An option shall not be exercisable (i) after the expiration
of ten years from the date it is granted; (ii) unless the person
exercising the option has been, at all times, during the period beginning
with the date of grant of the option and ending on a date three months
prior to the date of exercise employed by the Corporation except that, in
the case of a disabled recipient the period is extended to twelve months
prior to the date of exercise and in the case of the death of a recipient,
within one year after the date of death (but in no event after the option
has expired).
5. RELOAD OPTIONS. Concurrently with the award of options to any
participant under this Plan, the Committee may authorize reload options to
purchase for cash or shares a number of shares of Common Stock. The
number of reload options shall equal the number of shares of Common Stock
used to exercise the underlying option. The grant of a reload option
shall be effective upon the exercise of the underlying option, through the
use of shares of Common Stock held by the optionee for at least 12 months.
Notwithstanding the fact that the underlying option is an incentive stock
option (within the meaning of Section 422 of the Code), a reload option is
not intended to qualify as an incentive stock option (within the meaning
of Section 422 of the Code).
a. RELOAD OPTION AMENDMENT. Each notice evidencing the grant
of an option shall state whether the Committee has authorized reload
options with respect to the underlying option. Upon the exercise of an
underlying option, the reload option will be evidenced by an amendment to
the notice of grant of the underlying option. Reload options shall be
subject to the terms and conditions in the underlying option agreement and
shall be subject to the terms and conditions in paragraph 7.
b. RELOAD OPTION PRICE. The option price per share of Common
Stock deliverable upon exercise of a reload option shall be the fair
market value of a share of Common Stock on the date of exercise of the
underlying option.
c. TERM AND EXERCISE. Each reload option is fully exercisable
from the date of exercise of the underlying option and shall remain
exercisable for the remaining option term of the underlying option.
Reload options may be exercised in the same manner as the underlying
options in accordance with paragraph 4(b).
d. TERMINATION OF EMPLOYMENT. No additional reload options
shall be granted to any participant under this Plan when an option or
reload option is exercised pursuant to the terms of this Plan following
termination of the participant's employment with the Corporation.
6. APPRECIATION RIGHTS. Subject to the terms of this Plan, the
Committee shall determine and designate the recipients of appreciation
rights, the dates appreciation rights are granted, the number of shares
subject to appreciation rights, the duration of appreciation rights, and
whether appreciation rights are alternative to any previously or
contemporaneously granted option or reload option (a "Related Option").
Employees of the Corporation will be eligible to receive appreciation
rights for no more than an aggregate of 750,000 shares per employee under
this Plan. Appreciation rights granted to employees who are directors
shall be fully vested on the date of grant and shall be exercisable for a
period of ten years. Appreciation rights shall be subject to the terms
and conditions and evidenced by agreements in the form determined from
time to time by the Committee and shall be subject to the terms and
conditions in paragraph 7.
a. NATURE OF APPRECIATION RIGHT. An appreciation right shall
entitle its holder to receive from the Corporation, at the time of its
exercise, an amount equal to the excess of the fair market value (at the
date of exercise) of a share of Common Stock over a specified price fixed
by the Committee which shall not be less than 100% of the fair market
value of a share of Common Stock on the date of grant) multiplied by the
number of shares as to which the holder is exercising the appreciation
right. For an appreciation right that is alternative to a Related Option,
the specified price shall be the option price. The amount payable to the
holder may be paid by the Corporation in Common Stock (valued at its fair
market value on the date of exercise), cash or a combination of both,
subject, in the case of cash or a combination of Common Stock and cash, to
the consent of the Committee.
b. EXERCISE. An appreciation right shall be exercised by
written notice to the Corporation (to the attention of the Corporate
Secretary) at any time prior to its stated expiration (which shall not be
more than ten years after the date of grant). If the appreciation right
is alternative to a Related Option, the Related Option shall be deemed
canceled to the extent the appreciation right is exercised.
7. ADDITIONAL PROVISIONS.
a. ADDITIONAL CONDITIONS. The Committee may at the time of
granting any option or appreciation right and at any time thereafter
impose additional conditions, provisions and limitations to the options or
appreciation rights which the Committee deems advisable, including, but
not limited to, limitations on the period within which the option or
appreciation right shall be exercisable and the maximum amount of
appreciation to be recognized with regard to any appreciation right.
b. LISTING, REGISTRATION, AND COMPLIANCE WITH LAWS AND
REGULATIONS. If the Committee determines, in its discretion, that the
listing, registration, or qualification of the shares subject to the
option or appreciation right upon any securities exchange or automated
quotation service or under any state or federal securities or other law or
regulation, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to or in connection with
the granting of an option or appreciation right or the issue or purchase
of shares thereunder, no option or appreciation right may be exercised or
paid in Common Stock in whole or in part unless the listing, registration,
qualification, consent or approval has been effected or obtained free of
any conditions not acceptable to the Committee. The holder of the option
or appreciation right will supply the Corporation with certificates,
representations, and information that the Corporation requests and shall
otherwise cooperate with the Corporation in obtaining the listing,
registration, qualification, consent or approval. In the case of officers
and other persons subject to Section 16(b) of the Securities Exchange Act
of 1934, the Committee may at any time impose any limitations upon the
exercise of an option or appreciation right which, in the Committee's
discretion, are necessary or desirable in order to comply with Section
16(b) and the rules and regulations thereunder. If the Corporation, as
part of an offering of securities or otherwise, finds it desirable,
because of federal or state regulatory requirements, to reduce the period
during which any options or appreciation rights may be exercised, the
Committee may, in its discretion and without the holders' consent, reduce
the holders' exercise period on not less than 15 days written notice to
the holders.
c. CASH PAYMENTS. Options and appreciation rights may, in the
Committee's discretion, provide that the holder, as soon as practicable
after the holder exercises the option or appreciation right in whole or in
part, will receive a cash payment in an amount that the Committee may
determine, but not more than: (i) in the case of an option exercise, the
excess of the fair market value of a share of Common Stock (on the date
the holder recognizes taxable income) over the option price multiplied by
the number of shares as to which the option is exercised, and (ii) in the
case of an appreciation rights exercise, the fair market value (on the
date or dates the holder recognizes taxable income) of the Common Stock
and other consideration issued to the holder.
d. NONTRANSFERABILITY. Options and appreciation rights may
not be transferred other than by will or the laws of descent and
distribution and, during the lifetime of the person to whom they are
granted, may be exercised only by such person, or such person's guardian
or legal representative.
e. ADJUSTMENT FOR CHANGE IN COMMON STOCK. In the event of a
stock dividend or stock split, or combination or other reduction in the
number of issued shares, the Committee shall, in order to prevent the
dilution or enlargement of rights under options or appreciation rights,
make adjustments in the number and type of shares authorized by this Plan,
the number and type of shares covered by, or for which payments are
measured, outstanding options and appreciation rights and the prices
specified therein that it determines to be appropriate and equitable. In
the event of a merger, consolidation, reorganization, recapitalization or
exchange of substantially all assets or dissolution of the Corporation,
the rights under options and appreciation rights outstanding under this
Plan will terminate, except to the extent and subject to such adjustments
as may be provided, in order to prevent the dilution or enlargement of
rights under options or appreciation rights, (i) by the Committee, (ii) in
the terms of the merger, consolidation, reorganization, recapitalization,
or plan for dissolution or sale or exchange of the assets, or (iii) in the
form of agreement covering any option or appreciation right.
8. ADMINISTRATION. This Plan shall be administered by the
Committee. The Committee shall have full power to construe and interpret
this Plan and options and appreciation rights granted under this Plan, to
establish and amend rules for its administration, to grant options and
appreciation rights under this Plan, and to correct any defect or omission
or reconcile any inconsistency in this Plan or in any option or
appreciation right to the extent the Committee deems desirable to carry
this Plan or any option or appreciation right into effect. The Committee
may, with the consent of the person entitled to exercise any outstanding
option or appreciation right, amend an option or appreciation right,
including reducing the exercise price of any option or appreciation right
to not less than the fair market value of the Common Stock at the time of
the amendment and extending the term thereof.
All actions taken and decisions made by the Committee pursuant
to this Plan shall be binding and conclusive on all persons interested in
this Plan. The Committee may from time to time authorize the Chairman of
the Board or the President of the Corporation to determine the dates on
which options or appreciation rights shall be granted to persons
designated by the Committee (other than officers or directors of the
Corporation or any subsidiary) for the number of shares as the Committee
shall have designated, at prices determined by or in a manner specified by
the Committee.
Notwithstanding the foregoing, if it would be consistent with
all applicable laws, including, without limitation, Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended ("Rule 16b-3") and
the Code and the regulations promulgated thereunder (including, without
limitation, the regulations relating to Section 162(m) of the Code) then
the Plan may be administered by the Board of Directors.
9. TERMINATION AND AMENDMENT. The Board of Directors or the
Committee at any time may suspend or terminate this Plan and make
additions or amendments that it deems advisable under this Plan, except
that they may not, without further approval by the Corporation's
stockholders, (a) increase the maximum number of shares for which options
or appreciation rights may be granted under this Plan, except pursuant to
paragraph 7(f) above, (b) effect any change to the Plan which is required
to be approved by shareholders by law, including without limitation, the
regulations promulgated under Sections 442 and 162(m) of the Code. No
option or appreciation rights shall be granted hereunder after July 10,
1999. No amendment, suspension or termination of this Plan shall, without
the consent of the person who has received an option or appreciation
right, alter or impair any of that person's rights or obligations under
any option or appreciation right granted under this Plan prior to such
amendment, suspension or termination.
10. TAXES. The Corporation shall be entitled, if necessary or
desirable, to withhold (or secure payment from the Plan participant in
lieu of withholding) the amount of any withholding or other tax due from
the Corporation for any amount payable and/or shares issuable under this
Plan, and the Corporation may defer payment or issuance unless indemnified
to its satisfaction.
11. SHAREHOLDER ADOPTION. This Amended and Restated Incentive Stock
Option and Appreciation Rights Plan (the "Amended and Restated Plan")
shall be submitted to the shareholders of the Corporation for their
approval and adoption at a meeting to be held on May 17, 1994, or at any
adjournment thereof. The shareholders shall be deemed to have approved
and adopted this Amended and Restated Plan only if it is approved and
adopted at a meeting of the shareholders duly held by vote taken in the
manner required by the laws of the State of Colorado.
Adopted by the Board of Directors and approved by the shareholders of
the Corporation on September 8, 1989. Amended and restated on June 1,
1992. Further amended and restated on March 11, 1994. Amended April 1,
1997 by the Compensation Committee and proposed to be amended by the
shareholders of the Company on May 12, 1997.
PRECISION STANDARD, INC.
Matthew L. Gold, President
APPENDICES
PRECISION STANDARD, INC.
INCENTIVE STOCK OPTION AND APPRECIATION RIGHTS PLAN
March 11, 1994
As Amended April 1, 1997
1. PLAN. Options to purchase and appreciation rights for shares of
the Corporation's common stock may be granted in accordance with this Plan
to key employees (within the meaning of Section 416(i)(1)(A) of the Code)
of the Corporation and its Subsidiaries selected by the Committee.
2. DEFINITIONS. The "Code" means the Internal Revenue Code of
1986, as it may be amended from time to time.
The "Committee" means a committee which shall be comprised of
two or more independent outside directors designated by the Board of
Directors of the Corporation, provided that, if the Plan is administered
by the Board of Directors in accordance with Section 8 hereof, then
Committee shall mean the Board of Directors.
"Common Stock" means shares of the common stock, $.0001 par
value per share of the Corporation, or such other shares as are
substituted pursuant to paragraph 7(f).
The "Corporation" means Precision Standard, Inc.
The "fair market value" of the Common Stock means (a) if there
is an established market for the Corporation's Common Stock on a stock
exchange, in an over-the-counter market or otherwise, the mean of the
highest and lowest quoted selling prices on the valuation date; or (b) if
there were no such sales on the valuation date, then in accordance with
Treasury Regulation Section 20.2031-2 or successor regulations. Unless
otherwise specified by the Committee at the time of grant, the valuation
date for purposes of determining fair market value shall be the date of
grant. The Committee may, however, specify in any grant of an options or
stock appreciation right that, instead of the date of grant, the valuation
date shall be a valuation period of up to ninety (90) days preceding the
date of grant, and fair marker value for purposes of such grant shall be
the average over the valuation period of the mean of the highest and
lowest quoted selling prices on each date on which sales were made in the
valuation period, provided, however, that if the Committee fails to
specify a valuation period and there were no sales on the date of grant
then fair market value shall be determined as if the Committee had
specified a thirty (30) day valuation period for such determination,
unless there is no established market for the Corporation's Common Stock
in which case the determination of fair market value shall be in
accordance with clause (b) above.
"Subsidiary" means any corporation in which the Corporation
owns, directly or indirectly, stock possessing 50% or more of the total
combined voting power.
3. LIMITATION ON AGGREGATE SHARES. The number of shares of Common
Stock for which options and appreciation rights may be granted under this
Plan and which may be issued upon exercise or payment shall not exceed, in
the aggregate, 1,500,000 shares. For purposes of calculating the maximum
number of shares of Common Stock which may be issued under the plan, (a)
all shares issued (including the shares, if any, withheld for tax
withholding requirements) shall be counted when cash is used as full
payment for shares issued upon exercise of an option; (b) only the shares
issued (including the shares, if any, withheld for tax withholding
requirements) as a result of an exercise of appreciation rights shall be
counted; and (c) only the net shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when shares of
Common Stock are used as full or partial payment for shares issued upon
exercise of an option. If any options or appreciation rights expire
unexercised or are canceled, terminated or forfeited in any manner without
the issuance of Common Stock or payment, the shares for which the options
and appreciation rights were granted shall again be available under this
Plan. The 1,500,000 shares of Common Stock may be either authorized and
unissued shares, treasury shares, or a combination thereof.
4. OPTIONS. Options to be granted under this Plan shall be
incentive stock options (within the meaning of Section 422 of the Code).
Subject to the terms of this Plan, the Committee shall determine and
designate the recipients of options, the dates options are granted, the
number of shares of Common Stock subject to option, the options prices,
and the duration of options. The option price per share of Common Stock
shall be fixed by the Committee at not less than 100% of the fair market
value per share of Common Stock on the date of grant. Options may not be
granted to any employee who at the time the option is granted owns more
than 10% of the total combined voting power of all classes of stock of the
Corporation or of its parent or subsidiary except that options may be
granted to such persons if the option price is at least 110% of the fair
market value and the option by its terms is not exercisable more than five
years from the date it is granted. Employees of the Corporation will be
eligible to receive options for no more than an aggregate of 750,000
shares per employee under this Plan. To the extent required by the Code,
the aggregate fair market value (determined at the time the option is
granted) of the Common Stock for which incentive stock options are
exercisable for the first time by an option holder during any calendar
year (under all plans of the Corporation and its subsidiaries) shall not
exceed $100,000. Options granted under this Plan shall be subject to
terms and conditions and evidenced by agreements in the form determined
from time to time by the Committee and shall be subject to the terms and
conditions in paragraph 7.
a. TERM OF OPTIONS. No incentive stock option shall be
exercisable more than ten years after the date of grant. Subject to the
five-year limitation for 10% shareholders provided in paragraph 4, options
granted to employees who are directors of the Corporation shall be fully
vested on the date of grant and shall be exercisable for a period of ten
years.
b. EXERCISE OF OPTIONS. Options shall be exercised by written
notice to the Corporation (to the attention of the Corporate Secretary)
accompanied by payment in full of the option price. Payment of the option
price may be made, at the discretion of the optionee (i) in cash
(including check, bank draft, or money order), (ii) by delivery of Common
Stock (valued at the fair market value thereof on the date of exercise) or
(iii) by delivery of a combination of cash and Common Stock. The
Committee may, in its discretion and subject to ratification of the entire
Board of Directors, loan one or more participants all or a portion of the
exercise price for up to three (3) years with interest payable at the
prime rate quoted in the Wall Street Journal on the date of exercise.
The Committee my also permit a participant to effect a net
exercise of an option without tendering any shares of the Corporation's
stock as payment for the option. In such an event, the participant will
be deemed to have paid for the exercise of the option with shares of the
Corporation's stock and shall receive from the Corporation a number of
shares equal to the difference between the shares that would have been
tendered and the number of options exercised.
The Committee may also cause the Corporation to enter
arrangements with one or more licensed stock brokerage firms whereby
participants may exercise options without payment therefor but with
irrevocable orders to such brokerage firm to immediately sell the number
of shares necessary to pay the exercise price for the option and the
withholding taxes, if any, and then to transmit the proceeds from such
sales directly to the Corporation in satisfaction of such obligations.
The Committee may, in order to prevent any possible
violation of law, require the option price to be paid in cash. The right
to alternative methods of payment of the option price may be limited or
denied in any option agreement.
An option shall not be exercisable (i) after the expiration
of ten years from the date it is granted; (ii) unless the person
exercising the option has been, at all times, during the period beginning
with the date of grant of the option and ending on a date three months
prior to the date of exercise employed by the Corporation except that, in
the case of a disabled recipient the period is extended to twelve months
prior to the date of exercise and in the case of the death of a recipient,
within one year after the date of death (but in no event after the option
has expired).
5. RELOAD OPTIONS. Concurrently with the award of options to any
participant under this Plan, the Committee may authorize reload options to
purchase for cash or shares a number of shares of Common Stock. The
number of reload options shall equal the number of shares of Common Stock
used to exercise the underlying option. The grant of a reload option
shall be effective upon the exercise of the underlying option, through the
use of shares of Common Stock held by the optionee for at least 12 months.
Notwithstanding the fact that the underlying option is an incentive stock
option (within the meaning of Section 422 of the Code), a reload option is
not intended to qualify as an incentive stock option (within the meaning
of Section 422 of the Code).
a. RELOAD OPTION AMENDMENT. Each notice evidencing the grant
of an option shall state whether the Committee has authorized reload
options with respect to the underlying option. Upon the exercise of an
underlying option, the reload option will be evidenced by an amendment to
the notice of grant of the underlying option. Reload options shall be
subject to the terms and conditions in the underlying option agreement and
shall be subject to the terms and conditions in paragraph 7.
b. RELOAD OPTION PRICE. The option price per share of Common
Stock deliverable upon exercise of a reload option shall be the fair
market value of a share of Common Stock on the date of exercise of the
underlying option.
c. TERM AND EXERCISE. Each reload option is fully exercisable
from the date of exercise of the underlying option and shall remain
exercisable for the remaining option term of the underlying option.
Reload options may be exercised in the same manner as the underlying
options in accordance with paragraph 4(b).
d. TERMINATION OF EMPLOYMENT. No additional reload options
shall be granted to any participant under this Plan when an option or
reload option is exercised pursuant to the terms of this Plan following
termination of the participant's employment with the Corporation.
6. APPRECIATION RIGHTS. Subject to the terms of this Plan, the
Committee shall determine and designate the recipients of appreciation
rights, the dates appreciation rights are granted, the number of shares
subject to appreciation rights, the duration of appreciation rights, and
whether appreciation rights are alternative to any previously or
contemporaneously granted option or reload option (a "Related Option").
Employees of the Corporation will be eligible to receive appreciation
rights for no more than an aggregate of 750,000 shares per employee under
this Plan. Appreciation rights granted to employees who are directors
shall be fully vested on the date of grant and shall be exercisable for a
period of ten years. Appreciation rights shall be subject to the terms
and conditions and evidenced by agreements in the form determined from
time to time by the Committee and shall be subject to the terms and
conditions in paragraph 7.
a. NATURE OF APPRECIATION RIGHT. An appreciation right shall
entitle its holder to receive from the Corporation, at the time of its
exercise, an amount equal to the excess of the fair market value (at the
date of exercise) of a share of Common Stock over a specified price fixed
by the Committee which shall not be less than 100% of the fair market
value of a share of Common Stock on the date of grant) multiplied by the
number of shares as to which the holder is exercising the appreciation
right. For an appreciation right that is alternative to a Related Option,
the specified price shall be the option price. The amount payable to the
holder may be paid by the Corporation in Common Stock (valued at its fair
market value on the date of exercise), cash or a combination of both,
subject, in the case of cash or a combination of Common Stock and cash, to
the consent of the Committee.
b. EXERCISE. An appreciation right shall be exercised by
written notice to the Corporation (to the attention of the Corporate
Secretary) at any time prior to its stated expiration (which shall not be
more than ten years after the date of grant). If the appreciation right
is alternative to a Related Option, the Related Option shall be deemed
canceled to the extent the appreciation right is exercised.
7. ADDITIONAL PROVISIONS.
a. ADDITIONAL CONDITIONS. The Committee may at the time of
granting any option or appreciation right and at any time thereafter
impose additional conditions, provisions and limitations to the options or
appreciation rights which the Committee deems advisable, including, but
not limited to, limitations on the period within which the option or
appreciation right shall be exercisable and the maximum amount of
appreciation to be recognized with regard to any appreciation right.
b. LISTING, REGISTRATION, AND COMPLIANCE WITH LAWS AND
REGULATIONS. If the Committee determines, in its discretion, that the
listing, registration, or qualification of the shares subject to the
option or appreciation right upon any securities exchange or automated
quotation service or under any state or federal securities or other law or
regulation, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to or in connection with
the granting of an option or appreciation right or the issue or purchase
of shares thereunder, no option or appreciation right may be exercised or
paid in Common Stock in whole or in part unless the listing, registration,
qualification, consent or approval has been effected or obtained free of
any conditions not acceptable to the Committee. The holder of the option
or appreciation right will supply the Corporation with certificates,
representations, and information that the Corporation requests and shall
otherwise cooperate with the Corporation in obtaining the listing,
registration, qualification, consent or approval. In the case of officers
and other persons subject to Section 16(b) of the Securities Exchange Act
of 1934, the Committee may at any time impose any limitations upon the
exercise of an option or appreciation right which, in the Committee's
discretion, are necessary or desirable in order to comply with Section
16(b) and the rules and regulations thereunder. If the Corporation, as
part of an offering of securities or otherwise, finds it desirable,
because of federal or state regulatory requirements, to reduce the period
during which any options or appreciation rights may be exercised, the
Committee may, in its discretion and without the holders' consent, reduce
the holders' exercise period on not less than 15 days written notice to
the holders.
c. CASH PAYMENTS. Options and appreciation rights may, in the
Committee's discretion, provide that the holder, as soon as practicable
after the holder exercises the option or appreciation right in whole or in
part, will receive a cash payment in an amount that the Committee may
determine, but not more than: (i) in the case of an option exercise, the
excess of the fair market value of a share of Common Stock (on the date
the holder recognizes taxable income) over the option price multiplied by
the number of shares as to which the option is exercised, and (ii) in the
case of an appreciation rights exercise, the fair market value (on the
date or dates the holder recognizes taxable income) of the Common Stock
and other consideration issued to the holder.
d. NONTRANSFERABILITY. Options and appreciation rights may
not be transferred other than by will or the laws of descent and
distribution and, during the lifetime of the person to whom they are
granted, may be exercised only by such person, or such person's guardian
or legal representative.
e. ADJUSTMENT FOR CHANGE IN COMMON STOCK. In the event of a
stock dividend or stock split, or combination or other reduction in the
number of issued shares, the Committee shall, in order to prevent the
dilution or enlargement of rights under options or appreciation rights,
make adjustments in the number and type of shares authorized by this Plan,
the number and type of shares covered by, or for which payments are
measured, outstanding options and appreciation rights and the prices
specified therein that it determines to be appropriate and equitable. In
the event of a merger, consolidation, reorganization, recapitalization or
exchange of substantially all assets or dissolution of the Corporation,
the rights under options and appreciation rights outstanding under this
Plan will terminate, except to the extent and subject to such adjustments
as may be provided, in order to prevent the dilution or enlargement of
rights under options or appreciation rights, (i) by the Committee, (ii) in
the terms of the merger, consolidation, reorganization, recapitalization,
or plan for dissolution or sale or exchange of the assets, or (iii) in the
form of agreement covering any option or appreciation right.
8. ADMINISTRATION. This Plan shall be administered by the
Committee. The Committee shall have full power to construe and interpret
this Plan and options and appreciation rights granted under this Plan, to
establish and amend rules for its administration, to grant options and
appreciation rights under this Plan, and to correct any defect or omission
or reconcile any inconsistency in this Plan or in any option or
appreciation right to the extent the Committee deems desirable to carry
this Plan or any option or appreciation right into effect. The Committee
may, with the consent of the person entitled to exercise any outstanding
option or appreciation right, amend an option or appreciation right,
including reducing the exercise price of any option or appreciation right
to not less than the fair market value of the Common Stock at the time of
the amendment and extending the term thereof.
All actions taken and decisions made by the Committee pursuant
to this Plan shall be binding and conclusive on all persons interested in
this Plan. The Committee may from time to time authorize the Chairman of
the Board or the President of the Corporation to determine the dates on
which options or appreciation rights shall be granted to persons
designated by the Committee (other than officers or directors of the
Corporation or any subsidiary) for the number of shares as the Committee
shall have designated, at prices determined by or in a manner specified by
the Committee.
Notwithstanding the foregoing, if it would be consistent with
all applicable laws, including, without limitation, Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended ("Rule 16b-3") and
the Code and the regulations promulgated thereunder (including, without
limitation, the regulations relating to Section 162(m) of the Code) then
the Plan may be administered by the Board of Directors.
9. TERMINATION AND AMENDMENT. The Board of Directors or the
Committee at any time may suspend or terminate this Plan and make
additions or amendments that it deems advisable under this Plan, except
that they may not, without further approval by the Corporation's
stockholders, (a) increase the maximum number of shares for which options
or appreciation rights may be granted under this Plan, except pursuant to
paragraph 7(f) above, (b) effect any change to the Plan which is required
to be approved by shareholders by law, including without limitation, the
regulations promulgated under Sections 442 and 162(m) of the Code. No
option or appreciation rights shall be granted hereunder after July 10,
1999. No amendment, suspension or termination of this Plan shall, without
the consent of the person who has received an option or appreciation
right, alter or impair any of that person's rights or obligations under
any option or appreciation right granted under this Plan prior to such
amendment, suspension or termination.
10. TAXES. The Corporation shall be entitled, if necessary or
desirable, to withhold (or secure payment from the Plan participant in
lieu of withholding) the amount of any withholding or other tax due from
the Corporation for any amount payable and/or shares issuable under this
Plan, and the Corporation may defer payment or issuance unless indemnified
to its satisfaction.
11. SHAREHOLDER ADOPTION. This Amended and Restated Incentive Stock
Option and Appreciation Rights Plan (the "Amended and Restated Plan")
shall be submitted to the shareholders of the Corporation for their
approval and adoption at a meeting to be held on May 17, 1994, or at any
adjournment thereof. The shareholders shall be deemed to have approved
and adopted this Amended and Restated Plan only if it is approved and
adopted at a meeting of the shareholders duly held by vote taken in the
manner required by the laws of the State of Colorado.
Adopted by the Board of Directors and approved by the shareholders of
the Corporation on September 8, 1989. Amended and restated on June 1,
1992. Further amended and restated on March 11, 1994. Amended April 1,
1997 by the Compensation Committee and proposed to be amended by the
shareholders of the Company on May 12, 1997.
PRECISION STANDARD, INC.
Matthew L. Gold, President
