<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
GTS DURATEK, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
GTS DURATEK, INC.
10100 Old Columbia Road
Columbia, Maryland 21046
________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 16, 2000
To the Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders of GTS
Duratek, Inc. (the "Company") will be held at the Company's principal executive
offices at 10100 Old Columbia Road, Columbia, Maryland 21046 on the 16th day of
May, 2000 at 10:30 a.m., Eastern Daylight Savings Time, for the following
purposes:
1. To elect six Directors of the Company to serve until the next Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualify.
2. To approve the GTS Duratek, Inc. 1999 Stock Option and Incentive Plan.
3. To approve the appointment of KPMG LLP, independent certified public
accountants, as the Company's independent auditors for the year ending
December 31, 2000.
4. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
Holders of record of Common Stock and 8% Cumulative Convertible Redeemable
Preferred Stock as of the close of business on March 17, 2000 are entitled to
receive notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors
Diane R. Brown
Secretary
Columbia, Maryland
April 14, 2000
Whether or not you expect to be present at the Annual Meeting of
Stockholders, please fill in, date and sign the enclosed Proxy and return it
promptly in the enclosed return envelope.
<PAGE>
GTS DURATEK, INC.
10100 Old Columbia Road
Columbia, Maryland 21046
_______
Columbia, Maryland April 14, 2000
PROXY STATEMENT
The accompanying Proxy is solicited by and on behalf of the Board of
Directors of GTS Duratek, Inc., a Delaware corporation (the "Company"), for use
at the Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Company's principal executive offices at 10100 Old Columbia Road, Columbia,
Maryland 21046 on the 16th day of May, 2000 at 10:30 a.m. Eastern Daylight
Savings Time, and at any adjournments thereof. The approximate date on which
this Proxy Statement and the accompanying Proxy were first given or sent to
security holders was April 14, 2000.
Each Proxy executed and returned by a stockholder may be revoked at any
time thereafter, by written notice to that effect to the Company, attention of
the Secretary, prior to the Annual Meeting, or in person to the Chairman of, or
the Inspectors of Election at, the Annual Meeting, or by the execution and
return of a later-dated Proxy, except as to any matter voted upon prior to such
revocation.
The Proxies in the accompanying form will be voted in accordance with the
specifications made thereon and where no specifications are given, such Proxies
will be voted FOR the nominees for election as directors named herein, FOR the
approval of the GTS Duratek, Inc. 1999 Stock Option and Incentive Plan, and FOR
the approval of the appointment of KPMG LLP as the Company's independent
auditors. In the discretion of the proxy holders, the Proxies will also be voted
FOR or AGAINST such other matters as may properly come before the meeting. The
management of the Company is not aware that any other matters are to be
presented for action at the meeting.
The terms of the Company's 8% Cumulative Convertible Redeemable Preferred
Stock, par value $.01 per share (the "Convertible Preferred Stock"), provide
that the holders thereof, voting as a separate class, shall have the right to
elect a majority of the Company's Board of Directors so long at The Carlyle
Group and its affiliates ("Carlyle") own shares of capital stock having 20% or
more of the votes that may be cast at annual or special meetings of
stockholders. The remaining directors shall be elected by the vote of the
holders of the Company's common stock, par value $.01 per share (the "Common
Stock"), and the Convertible Preferred Stock, voting together as a single class.
With respect to the election of the majority of the Board of Directors by the
holders of the Convertible Preferred Stock, voting as a separate class, such
directors shall be elected by a plurality of the votes cast by the holders of
shares of Convertible Preferred Stock present in person or represented by proxy
at the Annual Meeting. In the election of the remaining directors by the holders
of the Common Stock and the Convertible Preferred Stock, voting together as a
single class, such directors shall be elected by a plurality of the votes cast
by the holders of shares of Common Stock and Convertible Preferred Stock present
in person or represented by proxy at the Annual Meeting. For purposes of the
election of directors, abstentions and broker non-votes are not considered to be
votes cast and do not affect the plurality vote required for directors. On this
matter, abstentions and broker non-votes will have the same effect as a vote
against the proposal. On all other matters, including the approval of the
Company's 1999 Stock Option and Incentive Plan and the approval of the
appointment of the Company's independent auditors, a majority of the votes cast
at the meeting, with a quorum present, is required to approve the matter.
Accordingly, abstentions and broker non-votes will not be considered to be votes
cast and will have no effect on the outcome of the matter.
The solicitation of proxies generally will be by mail and by directors,
officers, and regular employees of the Company. In some instances, solicitation
may be made by telephone or other means. All costs incurred in connection with
the solicitation of proxies will be borne by the Company. Arrangements may be
made with brokers and other custodians, nominees and fiduciaries to send proxies
and proxy material to their principals, and the Company may reimburse them for
reasonable out-of-pocket and clerical expenses in forwarding such materials.
<PAGE>
VOTING SECURITIES
The Board of Directors has fixed the close of business on March 17, 2000 as
the record date for the determination of stockholders entitled to receive notice
of and to vote at the Annual Meeting. The issued and outstanding capital stock
of the Company on March 17, 2000 consisted of 13,422,459 shares of Common Stock
and 157,577 shares of Convertible Preferred Stock. For all matters, each share
of Common Stock is entitled to one vote, except that in the election of
directors, each share of Common Stock is entitled to cast one vote for each
director to be elected; cumulative voting is not permitted. For all matters in
which the holders of shares of Convertible Preferred Stock vote with the holders
of the Common Stock as a single class, each share of Convertible Preferred Stock
entitles the holder thereof to cast the number of votes equal to the number of
votes which could be cast in such vote by a holder of the number of the shares
of Common Stock into which such share of Convertible Preferred Stock is
convertible. The current number of shares of Common Stock into which each share
of Convertible Preferred Stock is convertible is 33-1/3, based on a conversion
price of $3.00. Accordingly, the outstanding shares of Convertible Preferred
Stock represent 5,252,567 votes in the aggregate when voting with the shares of
Common Stock as a single class. A quorum of the stockholders is constituted by
the presence, in person or by proxy, of holders of record of voting stock,
representing a majority of the number of votes entitled to be cast.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The terms of the Convertible Preferred Stock provide that the holders of a
majority of the Convertible Preferred Stock have the right to elect a majority
of the Company's Board of Directors so long as Carlyle owns shares of capital
stock having 20% or more of the votes that may be cast at annual or special
meetings of stockholders. Carlyle beneficially owns 145,162 shares of
Convertible Preferred Stock outstanding and 3,101,551 shares of Common Stock
outstanding, or an aggregate of 42.5% of the outstanding voting securities of
the Company, excluding the effects of all other convertible securities and
employee stock options. Accordingly, Carlyle has the ability, through its stock
ownership and the terms of the Convertible Preferred Stock, to elect a majority
of the Company's Board of Directors and effectively control the Company.
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<PAGE>
The following table sets forth, at March 17, 2000, the amount and
percentage of the Company's outstanding Common Stock and Convertible Preferred
Stock beneficially owned by each director and nominee for director, each
executive officer named in the Summary Compensation Table, all directors and
officers as a group and all persons, to the knowledge of the Company,
beneficially owning more than five percent (5%) of the Company's Common Stock or
Convertible Preferred Stock.
<TABLE>
<CAPTION>
Common Stock Convertible Preferred Stock
---------------------------------------- ----------------------------------------
Number of Percent of Class Number of Percent of Class
Shares Outstanding Shares Outstanding
------ ----------- ------ -----------
<S> <C> <C> <C> <C>
Daniel A. D'Aniello 3,101,551(1) 23.1% 145,162(1) 92.1%
Robert E. Prince 145,920(2) 1.1% - -
Earle C. Williams 8,200 * - -
Admiral James D. Watkins 900 * - -
George V. McGowan 3,500 * - -
Dr. Francis J. Harvey 7,000 * - -
Robert F. Shawver 41,150(2) * - -
C. Paul Deltete 90,800(2) * - -
Leslie M. Hill 27,250(2) * - -
Ian S. Howard 5,750(2) * - -
Directors & Executive Officers
As a Group (13 persons) 3,441,649(3) 25.3% 145,162 92.1%
Name and Address of Other 5%
Holders of Common or
Convertible Preferred Stock
- ---------------------------
The Carlyle Group 3,101,551(4) 23.1% 145,162 92.1%
1001 Pennsylvania Avenue, NW
Washington, DC 20004-2505
BNFL, Inc. 1,381,575(5) 9.3% - -
9302 Lee Highway, Ste. 950
Fairfax, VA 22031
The Capital Research and 891,100 6.6% - -
Management Companies
333 South Hope Street
Los Angeles, CA 90071
Soros Capital Offshore 198,773 1.5% 9,308 5.9%
Partners LDC
C/o Coutts & Co. Limited
West Bay Road, George Town
Grand Cayman, Cayman Islands
British West Indies
</TABLE>
* The number of shares owned is less than one percent of the outstanding
shares of Common Stock.
(1) Mr. D'Aniello is a Managing Director of Carlyle and, as a result, may be
deemed to beneficially own the shares of Common Stock and Convertible Preferred
Stock beneficially owned by Carlyle. However, Mr. D'Aniello disclaims beneficial
ownership of such shares.
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<PAGE>
(2) Includes options to purchase 69,620, 22,850, 78,000, 19,250, and 5,750 of
Common Stock for Messrs. Prince, Shawver, Deltete, Hill, and Howard,
respectively, which are exercisable within 60 days. Of the options for Mr.
Prince, 102,600 were awarded under the GTS Duratek, Inc. 1999 Stock Option and
Incentive Plan which is subject to stockholders approval.
(3) Includes 205,220 shares that may be issued upon the exercise of options
outstanding and beneficially owned by the executive officers and directors as a
group.
(4) Does not include shares of Common Stock issuable upon conversion of the
Convertible Preferred Stock. The shares of Convertible Preferred Stock are
convertible into 4,838,733 shares of Common Stock. Assuming the conversion of
the Convertible Preferred Stock into Common Stock, Carlyle would own 7,940,284
shares of Common Stock or 42.5% of the Common Stock. In all instances, the
shares are owned by partnerships sponsored and controlled by Carlyle.
(5) Represents shares of Common Stock issuable upon the conversion of the
convertible debenture issued by the Company to BNFL Inc. on November 7, 1995 for
$10.0 million.
PROPOSAL I
ELECTION OF DIRECTORS
Six directors will be elected at the meeting to hold office until the next
Annual Meeting of Stockholders and until their respective successors are duly
elected and qualify. It is intended that the Proxies will be voted for the
following nominees, but the holders of the Proxies reserve discretion to cast
votes for individuals other than the nominees for director named below in the
event of the unavailability of any such nominee. The Company has no reason to
believe that any of the nominees will become unavailable for election. Set forth
below are the names of the nominees, age, position with the Company, the year in
which first elected a director of the Company, principal occupation and certain
other information concerning each of the nominees.
The terms of the Convertible Preferred Stock provide that the holders
thereof voting as a separate class, have the right to elect a majority of the
Company's Board of Directors so long as Carlyle owns shares of capital stock
having 20% or more of the votes that may be cast at annual or special meetings
of stockholders. Messrs. D'Aniello, Williams, and Harvey are the designees of
the holders of the Convertible Preferred Stock to the Company's Board of
Directors. The remaining directors shall be elected by the vote of the holders
of the Common Stock and the Convertible Preferred Stock voting together as a
single class.
The holders of the Convertible Preferred Stock have the right to designate
one additional director to the Company's Board of Directors to fill the vacancy
resulting from the fact that Mr. J. A. Brothers, one of the Convertible
Preferred Stock designees, declined to stand for reelection, due to his
retirement, at the Annual Meeting. Following the Annual Meeting, this vacancy
shall be filled by the holders of the Convertible Preferred Stock, voting as a
separate class, and such additional member of the Company's Board of Directors
shall serve on the Company's Board of Directors until the next Annual Meeting of
Stockholders and until his or her successor is duly elected and qualified. As of
the date hereof, the holders of the Convertible Preferred Stock have not
identified a person to fill this vacancy on the Company's Board of Directors.
Convertible Preferred Stock Designees
Daniel A. D'Aniello, 53, has been Chairman of the Board and a director of
the Company since January 1995. He has been a Managing Director and a founding
partner of The Carlyle Group, a Washington, D.C. based private merchant bank,
since 1987. Mr. D'Aniello was Vice President, Finance and Development for
Marriott Corporation, a hospitality company, from 1981 to 1987. He currently
serves on the Board of Directors for Baker & Taylor, Inc., IT Group, Inc.,
Pharmaceutical Research Associates and Gemini Air Cargo, Inc. Mr. D'Aniello is a
magna cum
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<PAGE>
laude graduate of Syracuse University, where he was a member of Beta Gamma
Sigma, and a graduate of the Harvard Business School, where he was a Teagle
Foundation Fellow.
Earle C. Williams, 70, has been a director of the Company since January
1995. He served on the Board of Directors of BDM International, Inc., an
information technology consulting firm, from 1972 until 1997 and was the
President and Chief Executive Officer of that company from 1972 until 1992. Mr.
Williams also serves on the Board of Directors of Parsons Corporation and BTG,
Inc.
Dr. Francis J. Harvey, 56, has been director since January 1999. Dr. Harvey
is the former Chief Operating Officer of Westinghouse Electric Corporation's
Industries and Technology Group. Dr. Harvey held various professional,
management and executive positions within Westinghouse from 1969 to 1997. Dr.
Harvey earned his doctorate in Metallurgy and Material Sciences from the
University of Pennsylvania and his Bachelor of Science at the University of
Notre Dame in Metallurgy Engineering and Material Science. Mr. Harvey currently
serves as a director of IT Group, Inc.; Powerize.com; Art Metropolis.com; ILT
Corp.; and Kulman Electric Corp. He is also a member of the Board of Regents of
Santa Clara University.
Remaining Nominees
Admiral James D. Watkins, 73, has been a director of the Company since
April 1997. Admiral Watkins has been the President of the Joint Oceanographic
Institutions, Inc. since 1993 and President of the Consortium for Oceanographic
Research and Education since 1994. Admiral Watkins was appointed Chief of Naval
Operations in 1982 by President Reagan and served as Secretary of Energy under
President Bush from 1989 to 1993. Admiral Watkins, a graduate of the U.S. Naval
Academy, also has a Masters in Mechanical Engineering from the U.S. Naval
Postgraduate School. Admiral Watkins currently serves as a director of IT Group,
Inc.
George V. McGowan, 72, has been a director of the Company since April 1997.
Mr. McGowan served as Chairman of the Board and Chief Executive Officer of
Baltimore Gas and Electric Company and Chairman of the Board of Constellation
Holdings, Inc., from 1988 to 1992. Mr. McGowan currently serves as a director of
Baltimore Gas and Electric Company and Scientech, Inc. Mr. McGowan has a
Bachelor of Science in Mechanical Engineering from the University of Maryland.
Mr. McGowan currently serves as Chairman of the Executive Committee of Baltimore
Gas and Electric and is a member of its Committee on Nuclear Power.
Robert E. Prince, 53, has been President and Chief Executive Officer of the
Company since 1990 and a director since 1991. He founded General Technical
Services, Inc., the predecessor to the Company, in October 1984 and was
President and Chief Executive Officer from 1987 to 1990. Mr. Prince, a graduate
of the U.S. Naval Academy, served as an officer on nuclear submarines. He also
has a Masters in Business Administration from the Wharton School of Finance of
the University of Pennsylvania. Mr. Prince is a certified naval nuclear
engineer.
Information Regarding the Board of Directors and Certain Committees
During 1999, there were nine meetings of the Board of Directors of the
Company. Each director attended at least 75% of the combined total number of
meetings of the Board and the Board committees of which he was a member. The
Board of Directors of the Company has an Executive Committee, Compensation
Committee and Audit Committee.
The Executive Committee, currently consisting of Daniel A. D'Aniello,
Chairman, and Robert E. Prince, meets on call and has authority to act on most
matters during the intervals between Board meetings. The Executive Committee met
twice during 1999.
The Compensation Committee, currently consisting of Dr. Francis Harvey,
Chairman, Admiral James D. Watkins and Daniel A. D'Aniello, establishes the
compensation for the executive officers of the Company, generally reviews
benefits and compensation for all of the Company's officers and administers the
Company's stock option plan. The Compensation Committee met three times in 1999.
The Audit Committee, currently consisting of Earle C. Williams, Chairman,
and George V. McGowan, reviews the internal controls of the Company and the
objectivity of its financial reporting. It meets with appropriate
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<PAGE>
Company financial personnel and the Company's independent certified public
accountants in connection with these reviews. This committee recommends to the
Board of Directors the appointment of the independent certified public
accountants, subject to the ratification by the stockholders at the Annual
Meeting, to serve as auditors for the following year in examining the corporate
accounts of the Company. The Audit Committee met four times in 1999.
Compensation of Directors
For 1999, Admiral Watkins and Messrs. McGowan, Williams, Brothers, and
Harvey each received a total of $20,000 for their service on the Board of
Directors and the board committees on which they serve. No other director
received any compensation for his service on the Board of Directors or any
committees thereof during 1999.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth certain information concerning the
compensation for the last three completed fiscal years of the chief executive
officer and the next four most highly compensated executive officers of the
Company. No stock appreciation rights ("SARs") were granted during 1999 nor
have any SARs been granted at any time in prior years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation(1) Awards
-----------------------------------------------------------------------
Securities
Restricted Underlying All
Stock Options Other
Name and Principal Award(s) Granted Compensation
Position Year Salary $ Bonus $ ($)(2) (#)(3) ($)(4)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Prince 1999 222,000 51,127 698,849 323,100 5,111
President and 1998 214,533 30,500 - 10,000 4,946
Chief Executive Officer 1997 209,000 60,697 - 10,000 4,750
Robert F. Shawver 1999 161,500 27,754 209,248 103,000 5,186
Executive Vice President 1998 156,130 16,500 - 7,000 4,974
and Chief Financial Officer 1997 150,850 32,810 - 5,000 4,750
C. Paul Deltete(5) 1999 150,000 25,453 - 10,000 5,090
Senior Vice President 1998 139,415 15,000 - 22,000 4,840
1997 134,700 29,297 - 15,000 4,664
Leslie M. Hill(5) 1999 150,000 25,953 10,000 3,667
Senior Vice President 1998 144,900 15,500 - 37,000 1,167
1997 92,147 30,450 - 20,000 -
Ian S. Howard(5) 1999 106,000 16,921 - 10,000 3,561
Vice President 1998 101,012 9,500 - 17,000 3,180
</TABLE>
(1) No executive officer named above received any perquisites and other
personal benefits the aggregate amount of which exceeded the lesser of
either $50,000 or 10% of the total annual salary and bonus reported for
1999 in the Summary Compensation Table.
(2) Represents 121,539 and 36,391 restricted stock units granted to each of
Messrs. Prince and Shawver, respectively on November 2, 1999. The closing
price of the Company's Common Stock on the date of the
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<PAGE>
grant was $5.75. The restricted stock units vest ratably over a four year
period, with 20% vesting on January 2, 2000 and on each of the next four
anniversaries thereof. At December 31, 1999, the value of the restricted
stock units for Messrs. Prince and Shawver were $957,120 and $286,579,
respectively based on the Company's Common Stock on that date of $7.875 per
share. The restricted stock units do not have voting rights or the right to
receive dividends. The restricted stock units were granted to Messrs.
Prince and Shawver under the GTS Duratek, Inc. 1999 Stock Option and
Incentive Plan and are subject to stockholder approval at the Annual
Meeting. See "Compensation Committee Report on Executive Compensation -
Additional Options Granted to Messrs. Prince and Shawver" and "Stockholder
Approval of the 1999 Stock Option and Incentive Plan."
(3) Includes options to purchase Common Stock that were granted on May 10,
1999. Also includes 310,600 and 93,000 options to purchase Common Stock
that were granted on November 2, 1999 to Messrs. Prince and Shawver,
respectively. Of the 310,600 options granted to Mr. Prince, 102,600
options were granted pursuant to the GTS Duratek, Inc. 1999 Stock Option
and Incentive Plan and are subject to stockholder approval at the Annual
Meeting. See "Compensation Committee Report on Executive Compensation -
Additional Options Granted to Messrs. Prince and Shawver" and "Stockholder
Approval of the 1999 Stock Option and Incentive Plan.
(4) Consists of Company matching contributions to the Company's 401(k) Savings
Plan.
(5) Mr. Deltete joined the Company January 16, 1996 and Mr. Hill joined the
Company May 1, 1997. Mr. Howard became an executive officer in 1998.
Options Granted in Last Fiscal Year
The following table sets forth certain information relating to options
granted in 1999 to purchase shares of Common Stock of the Company.
<TABLE>
<CAPTION>
Number of Potential Realizable Value at
Securities Percent of Exercise Assumed Annual Rates of Stock
Underlying Total Options or Base Price Appreciation for
Options Granted in Price per Expiration Option Term (2)*
----------------
Name Granted (#) Fiscal Year Share (1) Date 5% 10%
- ---- ----------- ----------- --------- ---- --- ---
<S> <C> <C> <C> <C> <C> <C>
Robert E. Prince 12,500 2.4% $5.875 5/10/04 $ 20,313 $ 44,813
310,600 58.5% $5.750 11/02/09(3) $1,123,751 $2,846,344
Robert F. Shawver 10,000 1.9% $5.875 5/10/04 $ 16,250 $ 35,850
93,000 17.5% $5.750 11/02/09(4) $ 336,474 $ 852,254
C. Paul Deltete 10,000 1.9% $5.875 5/10/04 $ 16,250 $ 38,850
Leslie M. Hill 10,000 1.9% $5.875 5/10/04 $ 16,250 $ 38,850
Ian S. Howard 10,000 1.9% $5.875 5/10/04 $ 16,250 $ 38,850
</TABLE>
* The 5% and 10% assumed rates of stock appreciation used to calculate
potential gains to optionees are mandated by the rules of the Securities and
Exchange Commission.
(1) Options were granted at 100% of fair market value on the date of the grant.
(2) These dollar amounts are the result of calculations of assumed annual rates
of stock price appreciation from the dates of the grant of the option
awards to the date of the expiration of such options of 5% and 10%, the two
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<PAGE>
assumed rates being required under the rules of the Securities and Exchange
Commission. Based on these assumed annual rates of stock price
appreciation of 5% and 10%, the Company's stock price at May 10, 2004 is
projected to be $7.50 and $9.46, respectively, and the Company's stock
price at November 2, 2009 is projected to be $9.37 and $14.91,
respectively. These assumptions are not intended to forecast future
appreciation of the Company's stock price. Indeed, the Company's stock
price may increase or decrease in value over the time period set forth
above. The potential realizable value computation does not take into
account federal or state income tax consequences of option exercises or
sales of appreciated stock.
(3) Represents 208,000 options granted pursuant to the GTS Duratek, Inc. Stock
Option Plan (as amended) and 102,600 options granted pursuant to the GTS
Duratek, Inc. 1999 Stock Option and Incentive Plan, which is subject to
stockholder approval. The options vest ratably over a four year period
with 20% vesting on January 2, 2000 and on each of the next four
anniversaries thereof. See "Compensation Committee Report on Executive
Compensation."
(4) Represents 93,000 options granted pursuant to the GTS Duratek, Inc. Stock
Option Plan (as amended). The options vest ratably over a four year period
with 20% vesting on January 2, 2000 and on each of the next four
anniversaries thereof. See "Compensation Committee Report on Executive
Compensation."
Aggregated Option Exercises and Fiscal Year-End Option Value Table
The following table sets forth certain information concerning the exercise
of stock options, the number of unexercised options and the value of unexercised
options at the end of 1999 for the executive officers whose compensation is
reported in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES
DURING 1999 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of Unexercised
Unexercised Options In the Money Options
at December 31, at December 31,
Shares Acquired on Value 1999 Exercisable / 1999(1) Exercisable
Name Exercise (#) Realized ($) Unexercisable / Unexercisable
---- ------------ ------------ ------------- ---------------
<S> <C> <C> <C> <C>
Robert E. Prince - - 69,620/273,480 $132,005/$553,020
Robert F. Shawver - - 22,850/92,150 $ 39,525/$178,100
C. Paul Deltete - - 78,000/34,000 $ 8,906/$46,719
Leslie M. Hill - - 19,250/47,750 $ 17,813/$73,438
Ian S. Howard - - 5,750/24,250 $ 8,906/$46,719
</TABLE>
(1) Calculated based on the closing price of the Company's Common Stock
($7.875) as reported by the Nasdaq National Market on December 31, 1999. An
"In-the-Money" option is an option for which the option price of the
underlying stock is less than the market price at December 31, 1999, and
all of the value shown reflects stock price appreciation since the granting
of the option.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
The Company has entered into employment agreements with Messrs. Prince,
Shawver, Deltete, Hill and Howard. Under the terms of the employment agreement
between the Company and Mr. Prince, he will hold the
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<PAGE>
offices of President, Chief Executive Officer and will serve as a member of the
Board of Directors. As compensation for his services, Mr. Prince will receive an
initial base salary of $200,000 per annum. The employment agreement between the
Company and Mr. Shawver provides that he will hold the offices of Executive Vice
President and Chief Financial Officer and will receive an initial base salary of
$140,000 per annum. Under the terms of the employment agreement between the
Company and Mr. Deltete, he will hold the office of Senior Vice President of
Operations and will receive an initial base salary of $130,000 per annum. Under
the terms of the agreement between the Company and Mr. Hill, which was executed
in April 2000, he will hold the office of Group Vice President and will receive
an initial base salary of $170,000 per annum beginning with the year 2000. Under
the terms of the agreement between the Company and Mr. Howard, he will hold the
office of Vice President and will receive an initial base salary of $105,000 per
annum. Increases in the base salary of Messrs. Prince, Shawver, Deltete, Hill
and Howard may be upwardly adjusted by the Compensation Committee in its
discretion. The employment agreements also provide that the Compensation
Committee shall consider in good faith the amount of bonus which each may
receive and the amount of such bonus shall be determined with reference to the
performance of each executive and the performance and results of operations of
the Company.
The agreements may be terminated by the Company (i) upon the long-term
disability of the employee, (ii) upon the employee's death, (iii) for cause or
for good reason (each as defined in the agreements), or (iv) upon six months
notice to the employee. Messrs. Prince or Shawver may terminate their
employment agreements under certain circumstances upon six months notice. If
the agreements are not terminated, they shall terminate upon the third
anniversary from the date of the agreements, provided that if neither party has
given notice to the other not to extend the agreement, such employment
agreements will be automatically extended, on a day-by-day basis, to a date
which is six months after the date on which a notice not to extend is first
given. Neither the Company nor Messrs. Prince, Shawver or Deltete have provided
a notice not to continue their respective employment agreements. Accordingly,
the employment agreements for Messrs. Prince, Shawver and Deltete are continuing
on a day-to-day basis until six months after either party to each such agreement
provides a notice not to extend the agreement. The initial term of Mr. Hill's
employment agreement expires in May of 2000 and Mr. Howard's employment
agreement is scheduled to expire in December 2001.
Under the terms of these agreements, if the employee is terminated for good
reason or without cause upon the discretion of the Company or the employee
resigns with justification, the Company shall pay to the employee all
compensation, at the rate then in effect, through the date of such termination,
the base salary of the employee, then in effect, for a period of one year from
the date of termination and will maintain certain employee benefits for a period
of one year from the date of termination.
The employment agreements also contain certain non-competition provisions
prohibiting the employees, for certain periods of time, from engaging in, or
being employed by, businesses that derive revenues from vitrification or
remediation of any form of waste or derive revenues from the remediation of any
form of waste that then accounts for at least ten percent (10%) of the revenues
of the Company's technology group, irrespective of the remediation technology
being used.
Compensation Committee Report on Executive Compensation
The Compensation Committee is responsible for establishing the compensation
for the executive officers of the Company, reviewing benefits and compensation
for all of the Company's officers and administering the Company's stock option
plans. The Compensation Committee's executive compensation policies are
designed to enhance the financial performance of the Company, and thus
stockholder value, by significantly aligning the financial interest of the key
executives with those of stockholders. The Compensation Committee reviews the
financial performance of the Company and increases to stockholder value annually
and adjusts the compensation of key executives based on the improvements
achieved.
During 1997, the Company adopted an Executive Compensation Plan in order to
formalize the determination of the annual compensation of the Company's
executive officers. The purpose of the plan is to attract, retain and motivate
key management employees and to align the financial interests of the Company's
executive officers with those of the Company's stockholders. Under the plan,
the executive officers' compensation is structured in such a way so that a
meaningful portion is "at risk," with annual and long-term incentives intended
to provide between 20% and 40% of total compensation. All Vice Presidents and
above are eligible to participate in the Executive
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<PAGE>
Compensation Plan and for 1999 the eligible participants consisted only of the
executive officers named in the Summary Compensation Table. The Executive
Compensation Plan is administered and all salary and bonuses are at the sole
discretion of the Compensation Committee.
The Executive Compensation Plan consists of three components of
compensation: base salary, annual cash performance bonus and long-term stock
option grants. The base salary and any raises for the Company's Chief Executive
Officer are determined by the Compensation Committee. The base salary and raises
for the other executive officers are determined by the Chief Executive Officer.
The annual cash performance bonus is designed to reward executive officers for
their contributions to corporate and business unit objectives, and for
individual performance. The bonus is expressed as a percentage of the executive
officer's base salary for such fiscal year. The amount of the bonus earned by
each executive officer, as a percentage of the executive officer's base salary,
is dependent upon the performance of the Company during the fiscal year as
compared to budgeted amounts. The specific factors examined include the
Company's operating profit, free cash flow, earnings per share and a specific
personal objective for each executive officer. The first three factors are each
weighted 30% with the personal objective criteria weighted 10% in determining
the amount of the annual cash performance bonus. In addition to salary and cash
bonus, the Compensation Committee can award options to purchase shares of the
Company's Common Stock. Although the Compensation Committee has a guideline to
award an aggregate of 30,000 to 40,000 options to the participants in the
Executive Compensation Plan, all option awards are at the sole discretion of the
Compensation Committee.
The Company has certain broad-based employee benefit plans in which all
employees, including the named executive officers, are permitted to participate
on the same terms and conditions relating to eligibility and subject to the same
limitations on amounts that may be contributed. In 1999, the Company also made
a matching contribution for those participants to the Company's 401(k) Savings
Plan.
Mr. Prince's 1999 Compensation. Mr. Prince's 1999 compensation was
determined pursuant to the terms of the Executive Compensation Plan and
consistent with the terms of his employment agreement with the Company. Mr.
Prince's base salary for 1999 was $222,000. Mr. Prince received an annual cash
performance bonus of $51,127 for 1999, based upon the Company exceeding its
budget for operating income, and for satisfying his personal objective. In
considering whether Mr. Prince satisfied his personal objective, the
Compensation Committee considered the integration and improvement in operations
of the Bear Creek Facility, the acquisition of F.W. Hake Associates, the award
of the Connecticut Yankee decommissioning contract. The Compensation Committee
awarded Mr. Prince options to purchase 12,500 shares of the Company's Common
Stock. See also "Additional Options Granted to Messrs. Prince and Shawver" and
"Senior Executive Long-Term Performance Award Plan."
Compensation of other Executive Officers and Employees. The compensation of
the other executive officers of the Company named in the Summary Compensation
Table was determined consistent with the terms of the Executive Compensation
Plan, including the fact that the Company exceeded its budget for operating
income, and taking into account individual performance. In addition, the
Compensation Committee awarded to each of Messrs. Shawver, Deltete, Hill, and
Howard options to purchase 10,000 shares of the Company's Common Stock. See also
"Additional Options Granted to Messrs. Prince and Shawver."
The Compensation Committee continuously reviews the compensation policies
of the Company to attract, retain and provide appropriate incentives for the
highest quality professional personnel in order to maintain the Company's
competitive position in the environmental technology and services industries,
and thereby seek to provide for the long-term success of the Company and the
interests of its stockholders.
Additional Options Granted to Messrs. Prince and Shawver. During 1999, the
Compensation Committee approved a plan whereby each of Messrs. Prince and
Shawver would agree not to exercise their 310,600 and 93,000 outstanding
options, respectively, which were set to expire on December 13, 1999 in exchange
for the issuance to each of them of new options to purchase the same number of
shares at the current fair market value of the Company's Common Stock and
restricted stock units having a value on the date of the award equal to the
aggregate spread between the fair market value of the Company's Common Stock and
the exercise price of the options that were due to expire. The number of
restricted stock units was calculated by dividing the aggregate spread on the
expiring options by the fair market value of the Company's Common Stock on the
date of the award. The restricted stock units confer upon Messrs. Prince and
Shawver the right to receive shares of the Company's Common Stock as
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<PAGE>
they vest, subject to forfeiture in the event of termination of employment prior
to vesting. The restricted stock units, as well as the stock options, vest
ratably over a four year period with 20% vesting on January 2, 2000 and on each
of the next four anniversaries thereof.
The Compensation Committee believes that meaningful equity investment in
the Company is a significant factor in its ability to attract, retain and
motivate management and key employees which are critical to the Company's
success. By entering into the arrangement described above with each of Messrs.
Prince and Shawver, the Compensation Committee believes that it is maximizing
the equity participation of Messrs. Prince and Shawver in the Company and
thereby providing greater alignment of financial interests and greater incentive
to those executive officers through increased stock ownership in the Company.
In addition, the Compensation Committee believes that Messrs. Prince and
Shawver should have the opportunity to realize the intended benefit of the
options previously awarded to them. The Compensation Committee believes that
recent stock price levels do not reflect the significantly improved operating
and financial performance of the Company since the original date of the option
grants. These performance improvements were largely due to the efforts of
Messrs. Prince and Shawver. Accordingly, through the arrangement described
above, the Compensation Committee is seeking to provide these officers an
opportunity to realize the benefits originally intended for them in a way that
is tied solely to future increases in the price of the Company's stock, which
benefits all of the Company's stockholders and aligns their interests with the
Company's stockholders. Additionally, the fact that the restricted stock units,
which were intended to represent the spread on the expiring options, vest over
time, should further serve to secure the long-term commitment of Messrs. Prince
and Shawver to the Company.
Senior Executive Long-Term Performance Award Plan. In addition, during 1999,
the Company adopted a ten-year Senior Executive Long-Term Performance Award Plan
in order to formalize a program whereby the Company, upon the achievement of
certain performance criteria, could make awards to Messrs. Prince and Shawver
for the purpose of reducing their outstanding advances from the Company. The
Company made the advances to Messrs. Prince and Shawver in order to enable them
to exercise certain options and retain the underlying stock, evidencing the
long-term commitment of these senior managers to the Company. The plan is
administered by the Compensation Committee. The criteria for awards under this
plan is determined by the Compensation Committee, but is based upon performance
achievement by Messrs. Prince and Shawver that creates, or is likely to create,
long-term sustainable increases in stockholder value. The purpose of the plan
is to align key members of senior management with the financial interests of the
Company by focusing on the achievement of key strategic initiatives that could
have the effect of creating long-term sustainable increases to stockholder
value. This plan is separate from the Executive Compensation Plan which is
intended to recognize the achievement of annual financial performance targets.
Compensation Deductibility Policy. Under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and applicable Treasury
regulations, no tax deduction is allowed for annual compensation in excess of $1
million paid to the five most highly compensated executive officers.
Performance-based compensation that has been approved by stockholders, however,
is excluded from the $1 million limit if, among other requirements, the
compensation is payable only upon attainment of pre-established, objective
performance goals and the board committee that establishes such goals consists
only of "outside directors" as defined for purposes of Section 162(m). All of
the members of the Compensation Committee qualify as "outside directors." The
Compensation Committee intends to maximize the extent of tax deductibility of
executive compensation under the provisions of Section 162(m) so long as doing
so is compatible with its determinations as to the most appropriate methods and
approaches for the design and delivery of compensation to executive officers of
the Company.
Francis J. Harvey (Chairman)
Admiral James D. Watkins
Daniel A. D'Aniello
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<PAGE>
Compensation Committee Interlocks and Insider Participation
During 1999, Mr. Harvey, Admiral Watkins and Mr. D'Aniello served as
members of the Compensation Committee. No director or executive officer of the
Company is a director or executive officer of any other corporation that has a
director or executive officer who is also a director or a board committee member
of the Company.
Performance Graph
As part of the proxy statement disclosure requirements mandated by the
Securities and Exchange Commission, the Company is required to provide a five-
year comparison of the cumulative total stockholder return on its Common Stock
with that of a broad equity market index and either a published industry index
or a company-constructed peer group index. The following graph compares the
performance of the Company's Common Stock for the periods indicated with the
performance of the CRSP Index for the Nasdaq Stock Market (non-financial) and
the Pollution Control Industry Group compiled by Research Data Group (which
includes all companies with primary SIC codes 4950, 4953 and 4955 whose stock
has been publicly-traded for all of 1999). The comparison assumes $100 was
invested on December 31, 1994 in the Company's Common Stock and in each of the
foregoing indices and the reinvestment of dividends.
COMPARSION OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG GTS DURATEK, INC., THE NASDAQ NON-FINANCIAL INDEX, AND
THE DOW JONES POLLUTION CONTROL/WASTE MANAGEMENT INDEX
[GRAPH APPEAR HERE]
<TABLE>
<CAPTION>
12/94 12/95 12/96 12/97 12/98 12/99
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
GTS DURATEK, INC. 100.00 356.25 325.00 337.50 123.44 196.88
- ----------------------------------------------------------------------------------------------------------------------------
NASDAQ NON-FINANCIAL 100.00 139.26 169.16 198.09 290.32 451.76
- ----------------------------------------------------------------------------------------------------------------------------
DOW JONES POLLUTION 100.00 112.31 120.21 130.02 141.09 70.75
CONTROL/WASTE MANAGEMENT
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* $100 INVESTED ON 12/31/94 IN STOCK OR INDEX -- INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
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<PAGE>
CERTAIN TRANSACTIONS
On November 7, 1995, the Company and BNFL Inc. ("BNFL") entered into a
strategic alliance to jointly pursue up to five major United States Department
of Energy ("DOE") waste treatment projects. The terms of the strategic alliance
provide that BNFL pays to the Company a fee of $1.0 million each time the two
companies agree to exclusively pursue a waste treatment project together. To
date, the Company and BNFL have agreed to jointly pursue three major DOE
environmental remediation projects and have been jointly awarded two projects,
the Hanford Tank Waste Remediation System Project and the Idaho Advanced Mixed
Waste Treatment Project. As part of the strategic alliance, BNFL invested $10.0
million in the Company in the form of a convertible debenture. The debenture
accrues non-cash interest during the first five years at the one-year London
Interbank Offered Rate (LIBOR) and is convertible at the option of BNFL into
1,381,575 shares of the Company's Common stock prior to November 7, 2000. If
the debenture is not converted or extended, the Company must repay principal and
installments over the five-year period beginning on November 8, 2000. BNFL also
agreed to provide the Company with research and development funding of at least
$500,000 per year over the next five years. The two parties will mutually agree
on how the Company will retain the rights to the vitrification processes that it
develops through this funding. The Company has agreed as part of the strategic
alliance to sublicense its radioactive waste vitrification technologies to BNFL
for use only in the United Kingdom. In addition, BNFL has funded $17 million to
design, construct, own and operate a pilot DuraMelter at the Company's
headquarters. See "Security Ownership of Certain Beneficial Owners and
Management."
The Company has advanced loans to Mr. Prince, President and Chief Executive
Officer, and Mr. Shawver, Executive Vice President and Chief Financial Officer.
The loans bear interest at market rates and are due by December 31, 2000. At
December 31, 1999, the balance of the loans were $463,000 and $312,000 for
Messrs. Prince and Shawver, respectively. See "Compensation Committee Report on
Executive Compensation."
Proposal II
Stockholder Approval of 1999 Stock Option and Incentive Plan
This section provides a summary of the terms of the Company's 1999 Stock
Option and Incentive Plan and the proposal to approve the plan.
The Board approved the 1999 Stock Option and Incentive Plan on November 2,
1999 (the "Plan") subject to approval from the Company's stockholders at this
meeting. The Company is asking its stockholders to approve the 1999 Stock
Option and Incentive Plan as the Company believes that approval of the Plan is
essential to its continued success. The purpose of the 1999 Stock Option and
Incentive Plan is to attract and to encourage the continued employment and
service of, and maximum efforts by, officers, key employees and other key
individuals by offering those persons an opportunity to acquire or increase a
direct proprietary interest in the operations and future success of the Company.
In the judgment of the Board of Directors, an initial or increased grant under
the 1999 Stock Option and Incentive Plan will be a valuable incentive and will
serve to the ultimate benefit of stockholders by aligning more closely the
interests of 1999 Stock Option and Incentive Plan participants with those of the
stockholders.
The maximum number of shares of Common Stock available for issuance under the
Plan is 5,000,000. At March 17, 2000, there were 4,739,470 shares of Common
Stock available for grant under the 1999 Stock Option and Incentive Plan. On
March 17, 2000, the closing price of the Company's Common Stock was $9.688 per
share. There are currently two participants in the 1999 Stock Option and
Incentive Plan. Because participation and the types of awards under the 1999
Stock Option and Incentive Plan are subject to the discretion of the
Compensation Committee, the benefits or amounts that will be received by any
participant or groups of participants if the 1999 Stock Option and Incentive
Plan is approved are not currently determinable, other than as disclosed herein.
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<PAGE>
The affirmative vote of a majority of the shares present, in person or by
proxy, and entitled to vote at the Annual Meeting is required to approve the
1999 Stock Option and Incentive Plan. Unless otherwise indicated, properly
executed proxies will be voted in favor of Proposal II to approve the 1999 Stock
Option and Incentive Plan.
The Board recommends that stockholders vote "FOR" the adoption of the 1999
Stock Option and Incentive Plan.
Description of the Plan
A description of the provisions of the 1999 Stock Option and Incentive Plan
is set forth below. This summary is qualified in its entirety by the detailed
provisions of the 1999 Stock Option and Incentive Plan, a copy of which is
attached as Exhibit A to this proxy statement.
---------
Administration. The 1999 Stock Option and Incentive Plan is administered by
the Compensation Committee. Subject to the terms of the Plan, the Compensation
Committee may select participants to receive awards, determine the types of
awards and terms and conditions of awards, and interpret provisions of the Plan.
The term of each stock option is fixed by the Compensation Committee and may not
exceed 10 years from the date of grant. The Compensation Committee generally
determines at what time or times each option may be exercised, but after
retirement, death, disability or termination of employment, the time during
which options may be exercised is respectively, three years after the date of
retirement, one year after the death of the Grantee, one year after Grantee's
termination of employment due to a disability, and within ninety days following
Grantee's termination of employment. No option may be exercised after the
options expiration date. Options may be made exercisable in installments. The
exercisability of options may be accelerated by the Compensation Committee.
The Board of Directors may terminate or amend the Plan at any time and
for any reason. However, amendments will be submitted for stockholder approval
to the extent required by the Internal Revenue Code or other applicable laws.
Eligibility. Awards may be made under the Plan to employees of or
consultants to the Company or any of its subsidiaries, including such employee
who is an officer or director of the Company or of any subsidiary, and to any
other individual whose participation in the Plan is determined to be in the best
interests of the Company by the Board of Directors.
Options. The 1999 Stock Option and Incentive Plan permits the granting
of options to purchase shares of Common Stock intended to qualify as incentive
stock options under the Internal Revenue Code and stock options that do not
qualify as incentive stock options.
The exercise price of each stock option may not be less than 100% of the
fair market value of the Company's Common Stock on the date of grant. In the
case of certain 10% stockholders who receive incentive stock options, the
exercise price may not be less than 110% of the fair market value of the
Company's Common Stock on the date of grant. An exception to these requirements
is made for options that the Company grants in substitution for options held by
employees of companies that the Company acquires. In such a case the exercise
price is adjusted to preserve the economic value of the employee's stock option
from his or her former employer.
Other Awards. The Compensation Committee may also award:
. shares of Common Stock subject to restrictions.
. deferred stock, credited as deferred stock units, but ultimately payable
in the form of unrestricted shares of Common Stock in accordance with the
participant's deferral election.
. common stock units subject to restrictions.
. shares of Common Stock at no cost or for a purchase price determined by
the Compensation Committee which are free from any restrictions under the 1999
Stock Option and Incentive Plan. Unrestricted shares
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<PAGE>
of Common Stock may be issued to participants in recognition of past services or
other valid consideration, and may be issued in lieu of cash compensation to be
paid to participants.
. dividend equivalent rights entitling the recipient to receive credits for
dividends that would be paid if the recipient had held a specified number of
shares of Common Stock.
. a right to receive a number of shares or, in the discretion of the
Compensation Committee, an amount in cash or a combination of shares and cash,
based on the increase in the fair market value of the shares underlying the
right during a stated period specified by the Compensation Committee.
. a right to receive a number of shares, subject to the attainment of
specified performance goals (summarized in the next paragraph and detailed
below).
. performance and annual incentive awards, ultimately payable in stock or
cash, as determined by the Compensation Committee. The Compensation Committee
may grant multi-year and annual incentive awards subject to achievement of
specified goals. The Compensation Committee may specify the amount of the
incentive award as a percentage of these business criteria, a percentage in
excess of a threshold amount or as another amount which need not bear a strictly
mathematical relationship to these business criteria. The Compensation
Committee may modify, amend or adjust the terms of each award and performance
goal. Awards to individuals who are covered under Section 162(m) of the
Internal Revenue Code, or who the Compensation Committee designates as likely to
be covered in the future must comply with the requirement that payments to such
employees qualify as performance-based compensation under Section 162(m) of the
Internal Revenue Code. In modifying, amending or adjusting the terms of an
award to covered employees (or likely covered employees), the Compensation
Committee may not take any action with respect to the employee that would cause
any payment to the employee to fail to qualify as performance-based compensation
under Section 162(m) of the Internal Revenue Code.
Effect of Certain Corporate Transactions. Certain change of control
transactions involving the Company, such as a sale of the Company, may cause
awards granted under the 1999 Stock Option and Incentive Plan to vest, unless
the awards are continued or substituted for in connection with the change of
control transaction.
Adjustments for Stock Dividends and Similar Events. The Compensation
Committee will make appropriate adjustments in outstanding awards and the number
of shares available for issuance under the 1999 Stock Option and Incentive Plan,
including the individual limitations on awards, to reflect Common Stock
dividends, stock splits and other similar events.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the Internal
Revenue Code limits publicly-held companies such as the Company to an annual
deduction for federal income tax purposes of $1,000,000 for compensation paid to
their chief executive officer and the four highest compensated executive
officers (other than the chief executive officer) determined at the end of each
year (the "covered employees"). However, performance-based compensation is
excluded from this limitation. The 1999 Stock Option and Incentive Plan is
designed to permit the Compensation Committee to grant awards that qualify as
performance-based for purposes of satisfying the conditions of Section 162(m).
To qualify as performance-based:
i. the compensation must be paid solely on account of the
attainment of one or more preestablished, objective performance goals;
ii. the performance goal under which compensation is paid must
be established by a compensation committee comprised solely of two or more
directors who qualify as outside directors for purposes of the exception;
iii. the material terms under which the compensation is to be
paid must be disclosed to and subsequently approved by stockholders of the
corporation before payment is made in a separate vote; and
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<PAGE>
iv. the compensation committee must certify in writing before
payment of the compensation that the performance goals and any other material
terms were in fact satisfied.
In the case of compensation attributable to stock options, the performance
goal requirement (summarized in (i) above) is deemed satisfied, and the
certification requirement (summarized in (iv) above) is inapplicable, if the
grant or award is made by the compensation committee; the plan under which the
option is granted states the maximum number of shares with respect to which
options may be granted during a specified period to an employee; and under the
terms of the option, the amount of compensation is based solely on an increase
in the value of the stock after the date of grant.
One or more of the following business criteria, on a consolidated basis,
and/or with respect to specified subsidiaries or business units (except with
respect to the total stockholder return and earnings per share criteria), are
used exclusively by the Compensation Committee in establishing performance
goals:
. total stockholder return;
. such total stockholder return as compared to total return (on a comparable
basis) of a publicly available index such as, but not limited to, the
Standard & Poor's 500 Stock Index;
. net income;
. pretax earnings;
. earnings before interest expense, taxes, depreciation and amortization;
. pretax operating earnings after interest expense and before bonuses, service
fees, and extraordinary or special items;
. operating margin;
. earnings per share;
. return on equity;
. return on capital;
. return on investment;
. operating earnings;
. working capital;
. ratio of debt to stockholders' equity; and
. business growth or expansion as measured by increases in backlog or revenues.
Under the Internal Revenue Code, a director is an "outside director" if he or
she is not a current employee of the corporation; is not a former employee who
receives compensation for prior services (other than under a qualified
retirement plan); has not been an officer of the corporation; and does not
receive, directly or indirectly (including amounts paid to an entity that
employs the director or in which the director has at least a five percent
ownership interest), remuneration from the corporation in any capacity other
than as a director.
The maximum number of shares subject to options that can be awarded under the
1999 Stock Option and Incentive Plan to any person is 1,250,000. The maximum
number of shares that can be awarded under the 1999 Stock Option and Incentive
Plan to any person, other than pursuant to an option, is 250,000. The maximum
amount that may be earned as an annual incentive award or other cash award in
any fiscal year by any one person is $1 million and the maximum amount that may
be earned as a performance award or other cash award in respect of a performance
period by any one person is $3 million.
Awards Under the Plan
Under the Plan, the Compensation Committee granted 102,600 options to
purchase Common Stock at an exercise price of $5.750 to Mr. Prince, President
and Chief Executive Officer of the Company, in 1999. The Compensation Committee
also granted Messrs. Prince and Shawver 121,539 and 36,391 restricted stock
units, respectively, on November 2, 1999. See "Executive Officer Compensation."
The grant of options and restricted stock units under the Plan to Messrs. Prince
and Shawver are subject to stockholder approval of the Plan. In the event that
the stockholders fail to approve the Plan, any awards made under the Plan,
including the awards to Messrs. Prince and Shawver, shall be null and void and
of no effect. Because awards granted under the Plan are subject to the
discretion of the Compensation Committee, the benefits or amounts that will be
received by participants under the Plan are not currently determinable, other
than as disclosed herein.
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<PAGE>
Federal Income Tax Consequences
Incentive Stock Options. The grant of an option will not be a taxable event
for the grantee or for the Company. A grantee will not recognize taxable income
upon exercise of an incentive stock option (except that the alternative minimum
tax may apply), and any gain realized upon a disposition of the Company's Common
Stock received pursuant to the exercise of an incentive stock option will be
taxed as long-term capital gain if the grantee holds the shares for at least two
years after the date of grant and for one year after the date of exercise (the
"holding period requirement"). The Company will not be entitled to any business
expense deduction with respect to the exercise of an incentive stock option,
except as discussed below.
For the exercise of an option to qualify for the foregoing tax treatment,
the grantee generally must be an employee of the Company or any subsidiary from
the date the option is granted through a date within three months before the
date of exercise of the option.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the grantee will recognize ordinary income upon the
disposition of the Common Stock in an amount generally equal to the excess of
the fair market value of the Common Stock at the time the option was exercised
over the option exercise price (but not in excess of the gain realized on the
sale). The balance of the realized gain, if any, will be capital gain. The
Company will be allowed a business expense deduction to the extent the grantee
recognizes ordinary income, subject to the Company's compliance with Section
162(m) of the Internal Revenue Code and to certain reporting requirements.
Non-Qualified Options. The grant of an option will not be a taxable event
for the grantee or the Company. Upon exercising a non-qualified option, a
grantee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the Common Stock on the
date of exercise. Upon a subsequent sale or exchange of shares acquired
pursuant to the exercise of a non-qualified option, the grantee will have
taxable gain or loss, measured by the difference between the amount realized on
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
If the Company complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, the Company will be
entitled to a business expense deduction in the same amount and generally at the
same time as the grantee recognizes ordinary income.
Restricted Stock. A grantee who is awarded restricted stock will not
recognize any taxable income for federal income tax purposes in the year of the
award, provided that the shares of Common Stock are subject to restrictions
(that is, the restricted stock is nontransferable and subject to a substantial
risk of forfeiture). However, the grantee may elect under Section 83(b) of the
Internal Revenue Code to recognize compensation income in the year of the award
in an amount equal to the fair market value of the Common Stock on the date of
the award, determined without regard to the restrictions. If the grantee does
not make such a Section 83(b) election, the fair market value of the Common
Stock on the date the restrictions lapse will be treated as compensation income
to the grantee and will be taxable in the year the restrictions lapse. The
Company generally will be entitled to a deduction for compensation paid in the
same amount treated as compensation income to the grantee in the year the
grantee is taxed on the income.
Deferred Common Stock. There are no immediate tax consequences of
receiving an award of deferred common stock under the 1999 Stock Option and
Incentive Plan. A grantee who is awarded deferred common stock will be required
to recognize ordinary income in an amount equal to the fair market value of
shares issued to such grantee at the distribution date(s) under the deferral
election, reduced by the amount, if any, paid for such shares. The Company
generally will be entitled to a deduction for compensation paid in the same
amount treated as compensation income to the grantee in the year the grantee is
taxed on the income.
Restricted Stock Units. There are no immediate tax consequences of
receiving an award of restricted common stock units under the 1999 Stock Option
and Incentive Plan. A grantee who is awarded restricted common stock units will
be required to recognize ordinary income in an amount equal to the fair market
value of shares
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<PAGE>
issued to such grantee at the end of the restriction period or, if later, the
payment date. The Company generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
Unrestricted Common Stock. Participants who are awarded unrestricted
common stock will be required to recognize ordinary income in an amount equal to
the fair market value of the shares on the date of the award, reduced by the
amount, if any, paid for such shares. The Company generally will be entitled to
a deduction for compensation paid in the same amount treated as compensation
income to the grantee in the year the grantee is taxed on the income.
Dividend Equivalent Rights. Participants who receive dividend equivalent
rights will be required to recognize ordinary income in an amount distributed to
the grantee pursuant to the award. We generally will be entitled to a deduction
for compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
Stock Appreciation Rights. There are no immediate tax consequences of
receiving an award of stock appreciation rights under the 1999 Stock Option and
Incentive Plan. Upon exercising a stock appreciation right, a grantee will
recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the common stock on the date of
exercise. If the Company complies with applicable reporting requirements and
with the restrictions of Section 162(m) of the Internal Revenue Code, the
Company will be entitled to a business expense deduction in the same amount and
generally at the same time as the grantee recognizes ordinary income.
Performance Share Awards. There are no immediate tax consequences of
receiving an award of performance shares under the 1999 Stock Option and
Incentive Plan. A grantee who is awarded performance shares will be required to
recognize ordinary income in an amount equal to the fair market value of shares
issued to such grantee pursuant to the award, reduced by the amount, if any,
paid for such shares. The Company generally will be entitled to a deduction for
compensation paid in the same amount treated as compensation income to the
grantee in the year the grantee is taxed on the income.
Upon a grantee's disposition of performance shares, any gain realized in
excess of the amount reported as ordinary income will be reportable by the
grantee as a capital gain, and any loss will be reportable as a capital loss.
Capital gain or loss will be long-term if the grantee has held the shares for at
least one year. Otherwise, the capital gain or loss will be short-term.
Performance and Annual Incentive Awards. The award of a performance or
annual incentive award will have no federal income tax consequences for the
Company or for the grantee. The payment of the award is taxable to a grantee as
ordinary income. If the Company complies with applicable reporting requirements
and with the restrictions of Section 162(m) of the Internal Revenue Code, the
Company will be entitled to a business expense deduction in the same amount and
generally at the same time as the grantee recognizes ordinary income.
PROPOSAL III
APPROVAL OF SELECTION OF KPMG LLP AS AUDITORS
The Board of Directors has selected KPMG LLP to audit the accounts of the
Company for the year ending December 31, 2000. KPMG LLP has no financial
interest in the Company and neither it nor any member or employee of the firm
has had any connection with the Company in the capacity of promoter,
underwriter, voting trustee, director, officer or employee. KPMG LLP has
audited the accounts of the Company since 1987. The Delaware General
Corporation Law does not require the approval of the selection of auditors by
the Company's stockholders, but in view of the importance of the financial
statements to the stockholders, the Board of Directors deems it desirable that
they pass upon its selection of auditors. In the event the stockholders
disapprove the selection, the Board of Directors will consider the selection of
other auditors.
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The Board of Directors recommends that you vote in favor of this Proposal III
in view of the familiarity of KPMG LLP with the Company's financial and other
affairs acquired during its previous service as auditors for the Company.
A representative of KPMG LLP is expected to be present at the Annual Meeting,
with the opportunity to make a statement if he desires to do so, and is expected
to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2001 annual meeting of
stockholders must be received by the Company for inclusion in the Company's
proxy statement and proxy relating to that meeting no later than December 18,
2000 and must otherwise be in compliance with applicable Securities and Exchange
Commission regulations.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters to be
presented for action at the meeting other than that mentioned above. However,
if any matters properly come before the meeting, it is intended that the persons
named in the accompanying proxy will vote on such other matters in accordance
with their judgment of the best interests of the Company.
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Exhibit A
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GTS DURATEK, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
A-1
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
1. PURPOSE.................................................................................... A-5
2. DEFINITIONS................................................................................ A-5
3. ADMINISTRATION OF THE PLAN................................................................. A-8
3.1. Board............................................................................... A-8
3.2. Committee........................................................................... A-8
3.3. Awards.............................................................................. A-9
3.4. No Liability........................................................................ A-9
4. STOCK SUBJECT TO THE PLAN.................................................................. A-9
5. EFFECTIVE DATE AND TERM OF THE PLAN........................................................ A-9
5.1. Effective Date...................................................................... A-9
5.2. Term................................................................................ A-10
6. OPTION GRANTS.............................................................................. A-10
6.1. Company or Subsidiary Employees; Service Providers; Other Persons................... A-10
6.2. Successive Awards................................................................... A-10
6.3. Reload Options...................................................................... A-10
7. LIMITATIONS ON GRANTS...................................................................... A-10
7.1. Limitation on Shares of Stock Subject to Awards and Cash Awards..................... A-10
7.2. Limitations on Incentive Stock Options.............................................. A-11
8. AWARD AGREEMENT............................................................................ A-11
9. OPTION PRICE............................................................................... A-11
10. VESTING, TERM AND EXERCISE OF OPTIONS...................................................... A-11
10.1. Vesting and Option Period........................................................... A-11
10.2. Term................................................................................ A-12
10.3. Acceleration........................................................................ A-12
10.4. Termination of Employment or Other Relationship..................................... A-12
10.5. Rights in the Event of Death........................................................ A-12
10.6. Rights in the Event of Disability................................................... A-13
10.7. Rights in the Event of Retirement................................................... A-13
10.8. Limitations on Exercise of Option................................................... A-13
10.9. Method of Exercise.................................................................. A-13
10.10. Delivery of Stock Certificates...................................................... A-14
11. STOCK APPRECIATION RIGHTS.................................................................. A-14
11.1. Right to Payment.................................................................... A-14
11.2. Other Terms......................................................................... A-14
12. TRANSFERABILITY OF OPTIONS................................................................. A-14
12.1. Transferability of Options.......................................................... A-14
12.2. Family Transfers.................................................................... A-15
</TABLE>
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<TABLE>
<S> <C>
13. RESTRICTED STOCK........................................................................... A-15
13.1. Grant of Restricted Stock or
Restricted Stock Units............................................................. A-15
13.2. Restrictions....................................................................... A-15
13.3. Restricted Stock Certificates...................................................... A-15
13.4. Rights of Holders of Restricted Stock.............................................. A-16
13.5. Rights of Holders of Restricted Stock Units........................................ A-16
13.6. Termination of Employment or Other Relationship.................................... A-16
13.7. Rights in the Event of Death....................................................... A-16
13.8. Rights in the Event of Disability.................................................. A-16
13.9. Rights in the Event of Retirement.................................................. A-17
13.10. Delivery of Stock and Payment Therefor............................................. A-17
14. DEFERRED STOCK AWARDS...................................................................... A-17
14.1. Nature of Deferred Stock Awards.................................................... A-17
14.2. Election to Receive Deferred Stock Awards in Lieu of Compensation.................. A-17
14.3. Rights as a Stockholder............................................................ A-18
14.4. Restrictions....................................................................... A-18
14.5. Termination........................................................................ A-18
15. UNRESTRICTED STOCK AWARDS.................................................................. A-18
15.1. Grant or Sale of Unrestricted Stock................................................ A-18
16. PERFORMANCE STOCK AWARDS................................................................... A-18
16.1. Nature of Performance Stock Awards................................................. A-18
16.2. Rights as a Stockholder............................................................ A-19
16.3. Termination........................................................................ A-19
16.4. Acceleration, Waiver, Etc.......................................................... A-19
17. DIVIDEND EQUIVALENT RIGHTS................................................................. A-19
17.1. Dividend Equivalent Rights......................................................... A-19
17.2. Interest Equivalents............................................................... A-20
17.3. Termination........................................................................ A-20
18. CERTAIN PROVISIONS APPLICABLE TO AWARDS.................................................... A-20
18.1. Stand-Alone, Additional, Tandem, and Substitute Awards............................. A-20
18.2. Term of Awards..................................................................... A-20
18.3. Form and Timing of Payment Under Awards; Deferrals................................. A-20
18.4. Performance and Annual Incentive Awards............................................ A-21
18.4.1. Performance Conditions..................................................... A-21
18.4.2. Performance Awards Granted to Designated Covered Employees................. A-21
18.4.3. Annual Incentive Awards Granted to Designated Covered Employees............ A-23
18.4.4. Written Determinations..................................................... A-24
18.4.5. Status of Section 18.4.3 and Section 18.4.2
Awards Under Code Section 162(m)........................................... A-24
</TABLE>
A-3
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<TABLE>
<S> <C>
19. PARACHUTE LIMITATIONS...................................................................... A-24
20. REQUIREMENTS OF LAW........................................................................ A-25
20.1. General.............................................................................. A-25
20.2. Rule 16b-3........................................................................... A-25
21. AMENDMENT AND TERMINATION OF THE PLAN...................................................... A-26
22. EFFECT OF CHANGES IN CAPITALIZATION........................................................ A-26
22.1. Changes in Stock..................................................................... A-26
22.2. Reorganization in Which the Company Is the Surviving Entity and in Which No
Change in Control Occurs............................................................. A-26
22.3. Reorganization, Sale of Assets or Sale
of Stock Which Involves a Change in Control.......................................... A-27
22.4. Adjustments.......................................................................... A-27
22.5. No Limitations on Company............................................................ A-27
23. POOLING.................................................................................... A-27
24. DISCLAIMER OF RIGHTS....................................................................... A-28
25. NONEXCLUSIVITY OF THE PLAN................................................................. A-28
26. WITHHOLDING TAXES.......................................................................... A-28
27. CAPTIONS................................................................................... A-29
28. OTHER PROVISIONS........................................................................... A-29
29. NUMBER AND GENDER.......................................................................... A-29
30. SEVERABILITY............................................................................... A-29
31. GOVERNING LAW.............................................................................. A-29
</TABLE>
A-4
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GTS DURATEK, INC.
1999 STOCK OPTION AND INCENTIVE PLAN
GTS Duratek, Inc., a Delaware corporation (the "Company"), sets forth herein
the terms of the Company's 1999 Stock Option and Incentive Plan (the "Plan") as
follows:
1. PURPOSE
The purpose of the Plan is to enhance the Company's ability to attract,
retain, and compensate highly qualified officers, key employees, and other
persons, and to motivate such officers, key employees, and other persons to
serve the Company and its affiliates (as defined herein) and to expend maximum
effort to improve the business results and earnings of the Company, by providing
to such officers, key employees and other persons an opportunity to acquire or
increase a direct proprietary interest in the operations and future success of
the Company and with other financial incentives. To this end, the Plan provides
for the grant of stock options, stock appreciation rights, restricted stock,
restricted stock units, deferred stock awards, unrestricted stock awards,
performance stock awards, dividend equivalent rights, performance awards and
annual incentive awards in accordance with the terms hereof. Stock options
granted under the Plan may be non-qualified stock options or incentive stock
options, as provided herein.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including Award
Agreements), the following definitions shall apply:
2.1 "affiliate" of, or person "affiliated" with, a person means any
company or other trade or business that controls, is controlled by or is under
common control with such person within the meaning of Rule 405 of Regulation C
under the Securities Act.
2.2 "Annual Incentive Award" means a conditional right granted to a
Grantee under Section 18.4.4 hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
2.3 "Award" means a grant of an Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Deferred Stock, Unrestricted Stock,
Performance Stock, Dividend Equivalent Rights, Performance or Annual Incentive
Awards under the Plan.
2.4 "Award Agreement" means the stock option agreement, stock appreciation
rights agreement, restricted stock agreement, restricted stock unit agreement,
deferred stock award agreement, unrestricted stock award agreement, performance
stock award agreement, dividend equivalent rights agreement, performance award
agreement, annual incentive award agreement or other written agreement between
the Company and a Grantee that evidences and sets out the terms and conditions
of an Award.
2.5 "Benefit Arrangement" shall have the meaning set forth in Section 19
hereof.
2.6 "Board" means the Board of Directors of the Company.
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2.7 Change in Control" means, unless otherwise provided in an individual
Award Agreement, a merger, consolidation, or reorganization of the Company with
one or more other entities in which the Company is not the surviving entity, a
sale of substantially all of the assets of the Company to another entity, or any
transaction (including, without limitation, a merger or reorganization in which
the Company is the surviving entity) approved by the Board that results in any
person or entity (or person or entities acting as a group or otherwise in
concert), owning fifty percent (50%) or more of the combined voting power of all
classes of securities of the Company.
2.8 "Code" means the Internal Revenue Code of 1986, as now in effect or as
hereafter amended.
2.9 "Committee" means a committee of, and designated from time to time by
resolution of, the Board, which shall consist of no fewer than two members of
the Board, none of whom shall be an officer or other salaried employee of the
Company or any member of the affiliated group which includes the Company within
the meaning of Section 1502 of the Code.
2.10 "Company" means GTS Duratek, Inc.
2.11 "Covered Employee" means a Grantee who is a Covered Employee within
the meaning of Section 162(m)(3) of the Code.
2.12 "Deferred Stock" means a right, granted to a Grantee under Section 14
hereof, to receive Stock, cash or a combination thereof at the end of a
specified deferral period.
2.13 "Dividend Equivalent" means a right, granted to a Grantee under
Section 17 hereof, to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.
2.14 "Effective Date" means November 2, 1999, the date on which the Plan
was adopted by the Board.
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as now in
effect or as hereafter amended.
2.16 "Family Member" means a person who is a spouse, child, stepchild,
grandchild, parent, stepparent, grandparent, sibling, niece, nephew, mother-in-
law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-
law, including adoptive relationships, of the Grantee, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons have more than fifty percent of the beneficial interest, a foundation in
which these persons (or the Grantee) control the management of assets, and any
other entity in which these persons (or the Grantee) own more than fifty percent
of the voting interests.
2.17 "Fair Market Value" means the value of a share of Stock, determined as
follows: if on the Grant Date or other determination date the Stock is listed
on an established national or regional stock exchange, is admitted to quotation
on the NASDAQ National Market, or is publicly traded on an established
securities market, the Fair Market Value of a share of Stock shall be the
closing price of the Stock on such exchange or in such market (the highest such
closing price if there is more than one such exchange or market) on the Grant
Date or such other determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the highest bid and
lowest asked prices or between the high
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and low sale prices on such trading day) or, if no sale of Stock is reported for
such trading day, on the next preceding day on which any sale shall have been
reported. If the Stock is not listed on such an exchange, quoted on such system
or traded on such a market, Fair Market Value shall be the value of the Stock as
determined by the Board in good faith.
2.18 "Grant Date" means, as determined by the Board or authorized
Committee, (i) the date as of which the Board or such Committee approves an
Award, (ii) the date on which the recipient of such Award first became an
employee of or otherwise entered into a relationship with the Company or an
affiliate of the Company or (iii) such other date as may be specified by the
Board or such Committee.
2.19 "Grantee" means a person who receives or holds a grant of an Option,
Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Deferred
Stock, Unrestricted Stock, Performance Stock, Performance or Annual Incentive
Awards, or Dividend Equivalent Rights under the Plan.
2.20 "Incentive Stock Option" means an "incentive stock option" within the
meaning of Section 422 of the Code, or the corresponding provision of any
subsequently enacted tax statute, as amended from time to time.
2.21 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.22 "Option Period" means the period during which Options may be exercised
as set forth in Section 10 hereof.
2.23 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.24 "Other Agreement" shall have the meaning set forth in Section 19
hereof.
2.25 "Outside Director" means a member of the Board who is not an officer
or employee of the Company.
2.26 "Performance Stock Award" means Awards granted pursuant to Section 16.
2.27 "Plan" means this GTS Duratek, Inc. 1999 Stock Option and Incentive
Plan.
2.28 "Reporting Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.
2.29 "Restricted Period" means the period during which Restricted Stock or
Restricted Stock Units are subject to restrictions or conditions pursuant to
Section 13.2 hereof.
2.30 "Restricted Stock" means shares of Stock, awarded to a Grantee
pursuant to Section 13 hereof, that are subject to restrictions and to a risk of
forfeiture.
2.31 "Restricted Stock Unit" means a unit awarded to a Grantee pursuant to
Section 13 hereof, which represents a conditional right to receive a share of
Stock in the future, and which is subject to restrictions and to a risk of
forfeiture.
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2.32 "Retirement" means termination of employment with the Company after
obtainment of age 60 and with 5 or more years of service with the Company.
2.33 "Securities Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.34 "Service Provider" means a consultant or adviser to the Company, a
manager of the Company's properties or affairs, or other similar service
provider or affiliate of the Company, and employees of any of the foregoing, as
such persons may be designated from time to time by the Board pursuant to
Section 6 hereof.
2.35 "Stock" means the common stock, par value $.01 per share, of the
Company.
2.36 "Stock Appreciation Rights" or "SAR" means a right granted to a
Grantee under Section 11 hereof .
2.37 "Subsidiary" means any "subsidiary corporation" of the Company within
the meaning of Section 424(f) of the Code.
2.38 "Termination Date" shall be the date upon which an Option shall
terminate or expire, as set forth in Section 10.2 hereof.
2.39 "Unrestricted Stock Award" means any Award granted pursuant to Section
15.
3. ADMINISTRATION OF THE PLAN
3.1. Board.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the Company's certificate of
incorporation and by-laws and applicable law. The Board shall have full power
and authority to take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement, and shall have
full power and authority to take all such other actions and make all such other
determinations not inconsistent with the specific terms and provisions of the
Plan that the Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions and
determinations shall be by the affirmative vote of a majority of the members of
the Board present at a meeting or by unanimous consent of the Board executed in
writing in accordance with the Company's certificate of incorporation and by-
laws and applicable law. The interpretation and construction by the Board of
any provision of the Plan, any Award or any Award Agreement shall be final and
conclusive. As permitted by law, the Board may delegate its authority under the
Plan to a member of the Board of Directors or to an executive officer of the
Company.
3.2. Committee.
The Board from time to time may delegate to a Committee such powers and
authorities related to the administration and implementation of the Plan, as set
forth in Section 3.1 above and in other applicable provisions, as the Board
shall determine, consistent with the certificate of incorporation and by-laws of
the Company and applicable law. In the event that the Plan, any Award or any
Award
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Agreement entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken or such
determination may be made by the Committee if the power and authority to do so
has been delegated to the Committee by the Board as provided for in this
Section. Unless otherwise expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and conclusive. As
permitted by law, the Committee may delegate its authority under the Plan to a
member of the Board of Directors or an executive officer of the Company.
3.3. Awards.
Subject to the other terms and conditions of the Plan, the Board shall have
full and final authority (i) to designate Grantees, (ii) to determine the type
or types of Awards to be made to a Grantee, (iii) to determine the number of
shares of Stock to be subject to an Award, (iv) to establish the terms and
conditions of each Award (including, but not limited to, the exercise price of
any Option, the nature and duration of any restriction or condition (or
provision for lapse thereof) relating to the vesting, exercise, transfer, or
forfeiture of an Award or the shares of Stock subject thereto, and any terms or
conditions that may be necessary to qualify Options as Incentive Stock Options),
(v) to prescribe the form of each Award Agreement evidencing an Award, and (vi)
to amend, modify, or supplement the terms of any outstanding Award. Such
authority specifically includes the authority, in order to effectuate the
purposes of the Plan but without amending the Plan, to modify Awards to eligible
individuals who are foreign nationals or are individuals who are employed
outside the United States to recognize differences in local law, tax policy, or
custom. As a condition to any subsequent Award, the Board shall have the right,
at its discretion, to require Grantees to return to the Company Awards
previously made under the Plan. Subject to the terms and conditions of the
Plan, any such new Award shall be upon such terms and conditions as are
specified by the Board at the time the new Award is made.
3.4. No Liability.
No member of the Board or of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any Award or
Award Agreement.
4. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 0 hereof, the number of shares
of Stock available for issuance under the Plan shall be five million
(5,000,000), no more than one million (1,000,000) of which may be issued
pursuant to awards of other than Options. Stock issued or to be issued under
the Plan shall be authorized but unissued shares. If any shares covered by an
Award are not purchased or are forfeited, or if an Award otherwise terminates
without delivery of any Stock subject thereto, then the number of shares of
Stock counted against the aggregate number of shares available under the Plan
with respect to such Award shall, to the extent of any such forfeiture or
termination, again be available for making Awards under the Plan.
5. EFFECTIVE DATE AND TERM OF THE PLAN
5.1. Effective Date.
The Plan shall be effective as of the Effective Date, subject to approval
of the Plan within one year of the Effective Date, by a majority of the votes
cast on the proposal at a meeting of shareholders, provided that the total votes
cast represent a majority of all shares entitled to vote. Upon approval of the
Plan by the
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shareholders of the Company as set forth above, all Awards made under the Plan
on or after the Effective Date shall be fully effective as if the shareholders
of the Company had approved the Plan on the Effective Date. If the shareholders
fail to approve the Plan within one year after the Effective Date, any Awards
made hereunder shall be null and void and of no effect.
5.2. Term.
The Plan has no termination date; however, no Incentive Stock Option may be
granted on or after the tenth anniversary of the Effective Date.
6. OPTION GRANTS
6.1. Company or Subsidiary Employees; Service Providers; Other Persons
Subject to Section 7, Awards may be made under the Plan to: (i) any
employee of, or a Service Provider to, the Company or of any Subsidiary,
including any such employee who is an officer or director of the Company or of
any Subsidiary, as the Board shall determine and designate from time to time,
and (ii) any other individual whose participation in the Plan is determined to
be in the best interests of the Company by the Board.
6.2. Successive Awards.
An eligible person may receive more than one Award, subject to such
restrictions as are provided herein.
6.3. Reload Options.
At the discretion of the Board and subject to such restrictions, terms and
conditions as the Board may establish, Options granted under the Plan may
include a "reload" feature pursuant to which a Grantee exercising an Option by
the delivery of a number of shares of Stock in accordance with Section 10.9
hereof would automatically be granted an additional Option (with an exercise
price equal to the Fair Market Value of the Stock on the date the additional
Option is granted and with such other terms as the Board may provide) to
purchase that number of shares of Stock equal to the number delivered to
exercise the original Option with an Option term equal to the remainder of the
original Option term unless the Board otherwise determines in the Option Award
Agreement for the original grant.
7. LIMITATIONS ON GRANTS
7.1. Limitation on Shares of Stock Subject to Awards and Cash Awards.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, the maximum number of shares of Stock
subject to Options that can be awarded under the Plan to any person eligible for
an Award under Section 6 hereof is one million two hundred fifty thousand
(1,250,000). During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act, the maximum number of shares
that can be awarded under the Plan, other than pursuant to an Option to any
person eligible for an Award under Section 6 hereof is two hundred fifty
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thousand (250,000). The maximum amount that may be earned as an Annual
Incentive Award or other cash Award in any fiscal year by any one Grantee shall
be $1,000,000 and the maximum amount that may be earned as a Performance Award
or other cash Award in respect of a performance period by any one Grantee shall
be $3,000,000.
7.2. Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only (i) if the
Grantee of such Option is an employee of the Company or any Subsidiary of the
Company; (ii) to the extent specifically provided in the related Award
Agreement; and (iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of Stock with
respect to which all Incentive Stock Options held by such Grantee become
exercisable for the first time during any calendar year (under the Plan and all
other plans of the Grantee's employer and its affiliates) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
8. AWARD AGREEMENT
Each Award granted pursuant to the Plan shall be evidenced by an Award
Agreement, to be executed by the Company and by the Grantee, in such form or
forms as the Board shall from time to time determine. Award Agreements granted
from time to time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award Agreement evidencing
an Award of Options shall specify whether such Options are intended to be non-
qualified stock options or Incentive Stock Options, and in the absence of such
specification such options shall be deemed non-qualified stock options.
9. OPTION PRICE
The Option Price of each Option shall be fixed by the Board and stated in
the Award Agreement evidencing such Option. The Option Price shall be the
aggregate Fair Market Value on the Grant Date of the shares of Stock subject to
the Option; provided, however, that in the event that a Grantee would otherwise
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be ineligible to receive an Incentive Stock Option by reason of the provisions
of Sections 422(b)(6) and 424(d) of the Code (relating to ownership of more than
ten percent of the Company's outstanding Stock), the Option Price of an Option
granted to such Grantee that is intended to be an Incentive Stock Option shall
be not less than the greater of the par value of a share of Stock or 110 percent
of the Fair Market Value of a share of Stock on the Grant Date. In no case
shall the Option Price of any Option be less than the par value of a share of
Stock.
10. VESTING, TERM AND EXERCISE OF OPTIONS
10.1. Vesting and Option Period.
Subject to Sections 10.2 and 22.3 hereof, each Option granted under the
Plan shall become exercisable at such times and under such conditions as shall
be determined by the Board and stated in the Award Agreement. For purposes of
this Section 10.1, fractional numbers of shares of Stock subject to an Option
shall be rounded down to the next nearest whole number. The period during which
any Option shall be exercisable shall constitute the "Option Period" with
respect to such Option.
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10.2. Term.
Each Option granted under the Plan shall terminate, and all rights to
purchase shares of Stock thereunder shall cease, upon the expiration of ten
years from the date such Option is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option (the
"Termination Date"); provided, however, that in the event that the Grantee would
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otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to ownership
of more than ten percent of the outstanding Stock), an Option granted to such
Grantee that is intended to be an Incentive Stock Option shall not be
exercisable after the expiration of five years from its Grant Date.
10.3. Acceleration.
Any limitation on the exercise of an Option contained in any Award
Agreement may be rescinded, modified or waived by the Board, in its sole
discretion, at any time and from time to time after the Grant Date of such
Option, so as to accelerate the time at which the Option may be exercised.
Notwithstanding any other provision of the Plan, no Option shall be exercisable
in whole or in part prior to the date the Plan is approved by the shareholders
of the Company as provided in Section 5.1 hereof.
10.4. Termination of Employment or Other Relationship.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of the Grantee's (i) death, (ii) or "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code), or
(iii) Retirement, any Option or portion thereof held by such Grantee that has
not vested in accordance with the provisions of Section 10.1 hereof shall
terminate immediately, and any Option or portion thereof that has vested in
accordance with the provisions of Section 10.1 hereof but has not been exercised
shall terminate at the close of business on the 90th day following the Grantee's
termination of employment or other relationship, unless the Board, in its
discretion, extends the period during which the Option may be exercised (which
period may not be extended beyond the original term of the Option). Upon
termination of an Option or portion thereof, the Grantee shall have no further
right to purchase shares of Stock pursuant to such Option or portion thereof.
Whether a leave of absence or leave on military or government service shall
constitute a termination of employment or other relationship for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive. For purposes of the Plan, a termination of employment, service or
other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.
10.5. Rights in the Event of Death.
If a Grantee dies while employed by or providing services to the Company,
all Options granted to such Grantee shall fully vest on the date of death, and
the executors or Boards or legatees or distributees of such Grantee's estate
shall have the right, at any time within one year after the date of such
Grantee's death (or such longer period as the Board, in its discretion, may
determine prior to the expiration of such one-year period) and prior to
termination of the Option pursuant to Section 10.2 above, to exercise any Option
held by such Grantee at the date of such Grantee's death.
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10.6. Rights in the Event of Disability.
Unless otherwise stated in the applicable Award Agreement, if a Grantee
terminates employment or other relationship with the Company by reason of the
"permanent and total disability" (within the meaning of Section 22(e)(3) of the
Code) of such Grantee, such Grantee's Options shall continue to vest, and shall
be exercisable to the extent that they are vested, for a period of one year
after such termination of employment or service (or such longer period as the
Board, in its discretion, may determine prior to the expiration of such one-year
period), subject to earlier termination of the Option as provided in Section
10.2 above. Whether a termination of employment or service is to be considered
by reason of "permanent and total disability" for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.
10.7. Rights in the Event of Retirement.
Unless otherwise stated in the applicable Award Agreement, if a Grantee
terminates employment with the Company due to his or her Retirement, such
Grantee's Options shall continue to vest, and shall be exercisable to the extent
they are vested for a period of three years after such Retirement (or such
longer period as the Board, in its discretion, may determine prior to the
expiration of such three-year period), subject to earlier termination of the
Option as provided in Section 10.2 above.
10.8. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may any Option
be exercised, in whole or in part, prior to the date the Plan is approved by the
shareholders of the Company as provided herein, or after ten years following the
date upon which the Option is granted, or after the occurrence of an event
referred to in Section 0 hereof which results in termination of the Option.
10.9. Method of Exercise.
An Option that is exercisable may be exercised by the Grantee's delivery to
the Company of written notice of exercise on any business day, at the Company's
principal office, addressed to the attention of the Board. Such notice shall
specify the number of shares of Stock with respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised. The minimum number of shares of
Stock with respect to which an Option may be exercised, in whole or in part, at
any time shall be the lesser of (i) 100 shares or such lesser number set forth
in the applicable Award Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise. Payment of the
Option Price for the shares purchased pursuant to the exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the tender to the
Company of shares of Stock, which shares, if acquired from the Company, shall
have been held for at least six months and which shall be valued, for purposes
of determining the extent to which the Option Price has been paid thereby, at
their Fair Market Value on the date of exercise; or (iii) by a combination of
the methods described in (i) and (ii). The Board may provide, by inclusion of
appropriate language in an Award Agreement, that payment in full of the Option
Price need not accompany the written notice of exercise provided that the notice
of exercise directs that the certificate or certificates for the shares of Stock
for which the Option is exercised be delivered to a licensed broker acceptable
to the Company as the agent for the individual exercising the Option and, at the
time such certificate or certificates are delivered, the broker tenders to the
Company cash (or cash equivalents acceptable to the Company) equal to the Option
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Price for the shares of Stock purchased pursuant to the exercise of the Option
plus the amount (if any) of federal and/or other taxes which the Company may in
its judgment, be required to withhold with respect to the exercise of the
Option. An attempt to exercise any Option granted hereunder other than as set
forth above shall be invalid and of no force and effect. Unless otherwise
stated in the applicable Award Agreement, an individual holding or exercising an
Option shall have none of the rights of a shareholder (for example, the right to
receive cash or dividend payments or distributions attributable to the subject
shares of Stock or to direct the voting of the subject shares of Stock ) until
the shares of Stock covered thereby are fully paid and issued to him. Except as
provided in Section 0 hereof, no adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date of
such issuance.
10.10. Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the payment in
full of the Option Price, such Grantee shall be entitled to the issuance of a
stock certificate or certificates evidencing his or her ownership of the shares
of Stock subject to the Option.
11. STOCK APPRECIATION RIGHTS
The Board is authorized to grant SARs to Grantees on the following terms
and conditions:
11.1. Right to Payment.
A SAR shall confer on the Grantee to whom it is granted a right to receive,
upon exercise thereof, the excess of (A) the Fair Market Value of one share of
Stock on the date of exercise over (B) the grant price of the SAR as determined
by the Board. The grant price of an SAR shall not be less than the Fair Market
Value of a share of Stock on the date of grant except as provided in Section
18.1.
11.2. Other Terms.
The Board shall determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be exercised in whole
or in part (including based on achievement of performance goals and/or future
service requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of employment or upon other conditions,
the method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Grantees, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR. SARs may
be either freestanding or in tandem with other Awards.
12. TRANSFERABILITY OF OPTIONS
12.1. Transferability of Options.
Except as provided in Section 12.2, during the lifetime of a Grantee, only
the Grantee (or, in the event of legal incapacity or incompetency, the Grantee's
guardian or legal representative) may exercise an Option. Except as provided in
Section 12.2, no Option shall be assignable or transferable by the Grantee to
whom it is granted, other than by will or the laws of descent and distribution.
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12.2. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of an Option which is not an Incentive
Stock Option to any Family Member. For the purpose of this Section 12.2, a "not
for value" transfer is a transfer which is (i) a gift, (ii) a transfer under a
domestic relations order in settlement of marital property rights; or (iii) a
transfer to an entity in which more than fifty percent of the voting interests
are owned by Family Members (or the Grantee) in exchange for an interest in that
entity. Following a transfer under this Section 12.2, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer. Subsequent transfers of transferred Options are
prohibited except to Family Members of the original Grantee in accordance with
this Section 12.2 or by will or the laws of descent and distribution. The
events of termination of employment or other relationship of Section 10.4 hereof
shall continue to be applied with respect to the original Grantee, following
which the Option shall be exercisable by the transferee only to the extent, and
for the periods specified in Sections 10.4, 10.5, 10.6 or 10.7.
13. RESTRICTED STOCK
13.1. Grant of Restricted Stock or Restricted Stock Units.
The Board may from time to time grant Restricted Stock or Restricted Stock
Units to persons eligible to receive Awards under Section 6 hereof, subject to
such restrictions, conditions and other terms as the Board may determine.
13.2. Restrictions.
At the time a grant of Restricted Stock or Restricted Stock Units is made,
the Board shall establish a period of time (the "Restricted Period") applicable
to such Restricted Stock or Restricted Stock Units. Each Award of Restricted
Stock or Restricted Stock Units may be subject to a different Restricted Period.
The Board may, in its sole discretion, at the time a grant of Restricted Stock
or Restricted Stock Units is made, prescribe restrictions in addition to or
other than the expiration of the Restricted Period, including the satisfaction
of corporate or individual performance objectives, which may be applicable to
all or any portion of the Restricted Stock or Restricted Stock Units in
accordance with Section 18.4.1 and 18.4.2. Neither Restricted Stock nor
Restricted Stock Units may be sold, transferred, assigned, pledged or otherwise
encumbered or disposed of during the Restricted Period or prior to the
satisfaction of any other restrictions prescribed by the Board with respect to
such Restricted Stock or Restricted Stock Units.
13.3. Restricted Stock Certificates.
The Company shall issue, in the name of each Grantee to whom Restricted
Stock has been granted, stock certificates representing the total number of
shares of Restricted Stock granted to the Grantee, as soon as reasonably
practicable after the Grant Date. The Board may provide in an Award Agreement
that either (i) the Secretary of the Company shall hold such certificates for
the Grantee's benefit until such time as the Restricted Stock is forfeited to
the Company or the restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that such certificates shall bear a
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legend or legends that complies with the applicable securities laws and
regulations and makes appropriate reference to the restrictions imposed under
the Plan and the Award Agreement.
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13.4. Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock shall have the right to vote such Stock and the right to
receive any dividends declared or paid with respect to such Stock. The Board
may provide that any dividends paid on Restricted Stock must be reinvested in
shares of Stock, which may or may not be subject to the same vesting conditions
and restrictions applicable to such Restricted Stock. All distributions, if
any, received by a Grantee with respect to Restricted Stock as a result of any
stock split, stock dividend, combination of shares, or other similar transaction
shall be subject to the restrictions applicable to the original Grant.
13.5. Rights of Holders of Restricted Stock Units.
Unless the Board otherwise provides in an Award Agreement, holders of
Restricted Stock Units shall have no rights as stockholders of the Company. The
Board may provide in an Award Agreement evidencing a grant of Restricted Stock
Units that the holder of such Restricted Stock Units shall be entitled to
receive, upon the Company's payment of a cash dividend on its outstanding Stock,
a cash payment for each Restricted Stock Unit held equal to the per-share
dividend paid on the Stock. Such Award Agreement may also provide that such
cash payment will be deemed reinvested in additional Restricted Stock Units at a
price per unit equal to the Fair Market Value of a share of Stock on the date
that such dividend is paid.
13.6. Termination of Employment or Other Relationship.
Upon the termination of a Grantee's employment or other relationship with
the Company other than by reason of death or "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code), any Restricted Stock or
Restricted Stock Units held by such Grantee that has not vested, or with respect
to which all applicable restrictions and conditions have not lapsed, shall
immediately be deemed forfeited, unless the Board, in its discretion, determines
otherwise. Upon forfeiture of Restricted Stock or Restricted Stock Units, the
Grantee shall have no further rights with respect to such Grant, including but
not limited to any right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock or Restricted Stock Units.
Whether a leave of absence or leave on military or government service shall
constitute a termination of employment or other relationship for purposes of the
Plan shall be determined by the Board, which determination shall be final and
conclusive. For purposes of the Plan, a termination of employment, service or
other relationship shall not be deemed to occur if the Grantee is immediately
thereafter a director of the Company.
13.7. Rights in the Event of Death.
Unless otherwise provided in the Award Agreement, if a Grantee dies while
employed by the Company, all Restricted Stock or Restricted Stock Units granted
to such Grantee shall fully vest on the date of death, and the shares of Stock
represented thereby shall be deliverable in accordance with the terms of the
Plan to the executors, administrators, legatees or distributees of the Grantee's
estate.
13.8. Rights in the Event of Disability.
Unless otherwise provided in the Award Agreement, if a Grantee terminates
employment or other relationship with the Company by reason of the "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code) of
such Grantee, such Grantee's Restricted Stock or Restricted Stock Units shall
continue to vest in accordance with the applicable Award Agreement for a period
of one year after
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such termination of employment or service (or such longer period as the Board,
in its discretion, may determine prior to the expiration of such one-year
period), subject to the earlier forfeiture of such Restricted Stock or
Restricted Stock Units in accordance with the terms of the applicable Award
Agreement. Whether a termination of employment or service is to be considered by
reason of "permanent and total disability" for purposes of the Plan shall be
determined by the Board, which determination shall be final and conclusive.
13.9. Rights in the Event of Retirement.
Unless otherwise provided in the Award Agreement, if a Grantee terminates
employment with the Company due to his or her Retirement, such Grantee's
Restricted Stock or Restricted Stock Units shall continue to vest in accordance
with the applicable Award Agreement for a period of three years after such
Retirement (or such longer period as the Board, in its discretion, may determine
prior to the expiration of such three-year period), subject to the earlier
forfeiture of such Restricted Stock or Restricted Stock Units in accordance with
the terms of the applicable Award Agreement.
13.10. Delivery of Stock and Payment Therefor.
Upon the expiration or termination of the Restricted Period and the
satisfaction of any other conditions prescribed by the Board, the restrictions
applicable to shares of Restricted Stock or Restricted Stock Units shall lapse,
and, unless otherwise provided in the Award Agreement, upon payment by the
Grantee to the Company, in cash or by check, of the aggregate par value of the
shares of Stock represented by such Restricted Stock or Restricted Stock Units
(or such other higher purchase price determined by the Board), a stock
certificate for such shares shall be delivered, free of all such restrictions,
to the Grantee or the Grantee's beneficiary or estate, as the case may be.
14. DEFERRED STOCK AWARDS
14.1. Nature of Deferred Stock Awards.
A Deferred Stock Award is an Award of phantom stock units to a Grantee,
subject to restrictions and conditions as the Board may determine at the time of
grant. Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Deferred Stock Award is contingent on the Grantee
executing the Deferred Stock Award Agreement. The terms and conditions of each
such agreement shall be determined by the Board, and such terms and conditions
may differ among individual Awards and Grantees. At the end of the deferral
period, the Deferred Stock Award, to the extent vested, shall be paid to the
Grantee in the form of shares of Stock.
14.2. Election to Receive Deferred Stock Awards in Lieu of Compensation.
The Board may, in its sole discretion, permit a Grantee to elect to receive
a portion of the cash compensation or Restricted Stock Award otherwise due to
such Grantee in the form of a Deferred Stock Award. Any such election shall be
made in writing and shall be delivered to the Company no later than the date
specified by the Board and in accordance with rules and procedures established
by the Board. The Board shall have the sole right to determine whether and
under what circumstances to permit such elections and to impose such limitations
and other terms and conditions thereon as the Board deems appropriate.
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14.3. Rights as a Stockholder.
During the deferral period, a Grantee shall have no rights as a
Stockholder; provided, however, that the Grantee may be credited with Dividend
Equivalent Rights with respect to the phantom Stock units underlying his
Deferred Stock Award, subject to such terms and conditions as the Board may
determine.
14.4. Restrictions.
A Deferred Stock Award may not be sold, assigned, transferred, pledged or
otherwise encumbered or disposed of during the deferral period.
14.5. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement or, in writing after the Award Agreement is issued, a Grantee's right
in all Deferred Stock Awards that have not vested shall automatically terminate
upon the Grantee's termination of employment or other relationship with the
Company for any reason.
15. UNRESTRICTED STOCK AWARDS
15.1. Grant or Sale of Unrestricted Stock.
The Board may, in its sole discretion, grant (or sell at par value or such
other higher purchase price determined by the Board) an Unrestricted Stock Award
to any Grantee pursuant to which such Grantee may receive shares of Stock free
of any restrictions ("Unrestricted Stock") under the Plan. Unrestricted Stock
Awards may be granted or sold as described in the preceding sentence in respect
of past services or other valid consideration, or in lieu of any cash
compensation due to such Grantee.
16. PERFORMANCE STOCK AWARDS
16.1. Nature of Performance Stock Awards.
A Performance Stock Award is an Award entitling the recipient to acquire
shares of Stock upon the attainment of specified performance goals. The Board
may make Performance Stock Awards independent of or in connection with the
granting of any other Award under the Plan. The Board in its sole discretion
shall determine whether and to whom Performance Stock Awards shall be made, the
performance goals applicable under each such Award, the periods during which
performance is to be measured, and all other limitations and conditions
applicable to the awarded Performance Stock; provided, however, that the Board
may rely on the performance goals and other standards applicable to other
performance unit plans of the Company in setting the standards for Performance
Stock Awards under the Plan.
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16.2. Rights as a Stockholder.
A Grantee receiving a Performance Stock Award shall have the rights of a
Stockholder only as to shares actually received by the Grantee under the Plan
and not with respect to shares subject to the Award but not actually received by
the Grantee. A Grantee shall be entitled to receive a Stock certificate
evidencing the acquisition of Stock under a Performance Stock Award only upon
satisfaction of all conditions specified in the written instrument evidencing
the Performance Stock Award (or in a performance plan adopted by the Board).
16.3. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement in writing after the Award Agreement is issued, a Grantee's rights in
all Performance Stock Awards shall automatically terminate upon the Grantee's
termination of employment or other relationship with the Company and its
Subsidiaries for any reason.
16.4. Acceleration, Waiver, Etc.
At any time prior to the Grantee's termination of employment (or other
business relationship) by the Company and its Subsidiaries, the Board may in its
sole discretion accelerate, waive or amend any or all of the goals, restrictions
or conditions imposed under any Performance Stock Award.
17. DIVIDEND EQUIVALENT RIGHTS
17.1. Dividend Equivalent Rights.
A Dividend Equivalent Right is an Award entitling the recipient to receive
credits based on cash distributions that would have been paid on the shares of
Stock specified in the Dividend Equivalent Right (or other award to which it
relates) if such shares had been issued to and held by the recipient. A
Dividend Equivalent Right may be granted hereunder to any Grantee as a component
of another Award or as a freestanding award. The terms and conditions of
Dividend Equivalent Rights shall be specified in the grant. Dividend
Equivalents credited to the holder of a Dividend Equivalent Right may be paid
currently or may be deemed to be reinvested in additional shares of Stock, which
may thereafter accrue additional equivalents. Any such reinvestment shall be at
Fair Market Value on the date of reinvestment. Dividend Equivalent Rights may
be settled in cash or Stock or a combination thereof, in a single installment or
installments, all determined in the sole discretion of the Board. A Dividend
Equivalent Right granted as a component of another Award may provide that such
Dividend Equivalent Right shall be settled upon exercise, settlement, or payment
of, or lapse of restrictions on, such other award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same
conditions as such other award. A Dividend Equivalent Right granted as a
component of another Award may also contain terms and conditions different from
such other award.
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17.2. Interest Equivalents.
Any Award under this Plan that is settled in whole or in part in cash on a
deferred basis may provide in the grant for interest equivalents to be credited
with respect to such cash payment. Interest equivalents may be compounded and
shall be paid upon such terms and conditions as may be specified by the grant.
17.3. Termination.
Except as may otherwise be provided by the Board either in the Award
Agreement or in writing after the Award Agreement is issued, a Grantee's rights
in all Dividend Equivalent Rights or interest equivalents shall automatically
terminate upon the Grantee's termination of employment or other relationship
with the Company and its Subsidiaries for any reason.
18. CERTAIN PROVISIONS APPLICABLE TO AWARDS
18.1. Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any Subsidiary, or any business entity to be acquired by the Company or
a Subsidiary, or any other right of a Grantee to receive payment from the
Company or any Subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award, the Board shall require the surrender of such other
Award in consideration for the grant of the new Award. In addition, Awards may
be granted in lieu of cash compensation, including in lieu of cash amounts
payable under other plans of the Company or any Subsidiary, in which the value
of Stock subject to the Award is equivalent in value to the cash compensation
(for example, Deferred Stock or Restricted Stock), or in which the exercise
price, grant price or purchase price of the Award in the nature of a right that
may be exercised is equal to the Fair Market Value of the underlying Stock minus
the value of the cash compensation surrendered (for example, Options granted
with an exercise price "discounted" by the amount of the cash compensation
surrendered).
18.2. Term of Awards.
The term of each Award shall be for such period as may be determined by the
Board; provided that in no event shall the term of any Option or SAR exceed a
period of ten years (or such shorter term as may be required in respect of an
ISO under Section 422 of the Code).
18.3. Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award Agreement,
payments to be made by the Company or a Subsidiary upon the exercise of an
Option or other Award or settlement of an Award may be made in such forms as the
Board shall determine, including, without limitation, cash, Stock,
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other Awards or other property, and may be made in a single payment or transfer,
in installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Board or upon occurrence of one or more specified
events. Installment or deferred payments may be required by the Board or
permitted at the election of the Grantee on terms and conditions established by
the Board. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
18.4. Performance and Annual Incentive Awards
18.4.1. Performance Conditions.
The right of a Grantee to exercise or receive a grant or settlement of
any Award, and the timing thereof, may be subject to such performance conditions
as may be specified by the Board. The Board may use such business criteria and
other measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 18.4.2 and 18.4.4 hereof in the case of a Performance Award or
Annual Incentive Award intended to qualify under Code Section 162(m). If and to
the extent required under Code Section 162(m), any power or authority relating
to a Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.
18.4.2. Performance Awards Granted to Designated Covered Employees.
If and to the extent that the Committee determines that a Performance
Award to be granted to a Grantee who is designated by the Committee as likely to
be a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 18.4.2.
(i) Performance Goals Generally. The performance goals for
such Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to each of
such criteria, as specified by the Committee consistent with this
Section 18.4.2. Performance goals shall be objective and shall
otherwise meet the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels of
performance targeted by the Committee result in the achievement of
performance goals being "substantially uncertain." The Committee may
determine that such Performance Awards shall be granted, exercised
and/or settled upon achievement of any one performance goal or that
two or more of the performance goals must be achieved as a condition
to grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to any one
Grantee or to different Grantees.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis, and/or
specified subsidiaries or business units of the Company (except with
respect to the total stockholder return and earnings per share
criteria), shall be used exclusively by the Committee in establishing
A-21
<PAGE>
performance goals for such Performance Awards: (1) total stockholder
return; (2) such total stockholder return as compared to total return
(on a comparable basis) of a publicly available index such as, but not
limited to, the Standard & Poor's 500 Stock Index; (3) net income; (4)
pretax earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings after
interest expense and before bonuses, service fees, and extraordinary
or special items; (7) operating margin; (8) earnings per share; (9)
return on equity; (10) return on capital; (11) return on investment;
(12) operating earnings; (13) working capital; (14) ratio of debt to
stockholders' equity; and (15) business growth or expansion as
measured by increases in backlog or revenues. One or more of the
foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to
a Covered Employee under Section 18.4.4 hereof that are intended to
qualify as "performance-based compensation" under Code Section 162(m).
(iii) Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect of
such Performance Awards shall be measured over a performance period of
up to ten years, as specified by the Committee. Performance goals
shall be established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such
other date as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring Company performance in connection with Performance
Awards. The amount of such Performance Award pool shall be based upon
the achievement of a performance goal or goals based on one or more of
the business criteria set forth in Section 18.4.2(ii) hereof during
the given performance period, as specified by the Committee in
accordance with Section 18.4.2(iii) hereof. The Committee may specify
the amount of the Performance Award pool as a percentage of any of
such business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
18.4.3. (v) Settlement of Performance Awards; Other Terms.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or
forfeited in the event of termination of employment by the
Grantee prior to the end of a performance period or settlement of
Performance Awards.
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<PAGE>
18.4.4. Annual Incentive Awards Granted to Designated Covered
Employees.
If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to a Grantee who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Annual Incentive Award shall be contingent upon achievement
of preestablished performance goals and other terms set forth in this Section
18.4.4.
(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in connection with
Annual Incentive Awards. The amount of such Annual Incentive Award
pool shall be based upon the achievement of a performance goal or
goals based on one or more of the business criteria set forth in
Section 18.4.2(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section 18.4.2(iii)
hereof. The Committee may specify the amount of the Annual Incentive
Award pool as a percentage of any such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount which
need not bear a strictly mathematical relationship to such business
criteria.
(ii) Potential Annual Incentive Awards. Not later than the
end of the 90th day of each fiscal year, or at such other date as may
be required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 18.4.4(i) hereof or
as individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section 162(m),
the amount potentially payable shall be based upon the achievement of
a performance goal or goals based on one or more of the business
criteria set forth in Section 18.4.2(ii) hereof in the given
performance year, as specified by the Committee; in other cases, such
amount shall be based on such criteria as shall be established by the
Committee. In all cases, the maximum Annual Incentive Award of any
Grantee shall be subject to the limitation set forth in Section 7.1
hereof.
(iii) Payout of Annual Incentive Awards. After the end of
each fiscal year, the Committee shall determine the amount, if any, of
(A) the Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Award payable to each Grantee in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Grantee. The Committee may, in its
discretion, determine that the amount payable to any Grantee as an
Annual Incentive Award shall be reduced from the amount of his or her
potential Annual Incentive Award, including a determination to make no
Award whatsoever. The Committee shall specify the circumstances in
which an Annual Incentive Award shall be paid or forfeited in the
event of termination of employment by the Grantee prior to the end of
a fiscal year or settlement of such Annual Incentive Award.
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<PAGE>
18.4.5. Written Determinations.
All determinations by the Committee as to the establishment of
performance goals, the amount of any Performance Award pool or potential
individual Performance Awards and as to the achievement of performance goals
relating to Performance Awards under Section 18.4.2, and the amount of any
Annual Incentive Award pool or potential individual Annual Incentive Awards and
the amount of final Annual Incentive Awards under Section 18.4.4, shall be made
in writing in the case of any Award intended to qualify under Code Section
162(m). To the extent required to comply with Code Section 162(m), the
Committee may delegate any responsibility relating to such Performance Awards or
Annual Incentive Awards.
18.4.6. Status of Section 18.4.4 and Section 18.4.2 Awards Under
Code Section 162(m).
It is the intent of the Company that Performance Awards and Annual
Incentive Awards under Section 18.4.2 and Section 18.4.4 hereof granted to
persons who are designated by the Committee as likely to be Covered Employees
within the meaning of Code Section 162(m) and regulations thereunder shall, if
so designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Section 18.4.2 and Section 18.4.4,
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Grantee will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan or any agreement relating to such Performance Awards
or Annual Incentive Awards does not comply or is inconsistent with the
requirements of Code Section 162(m) or regulations thereunder, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements.
19. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other agreement,
contract, or understanding heretofore or hereafter entered into by a Grantee
with the Company or any Subsidiary, except an agreement, contract, or
understanding hereafter entered into that expressly modifies or excludes
application of this paragraph (an "Other Agreement"), and notwithstanding any
formal or informal plan or other arrangement for the direct or indirect
provision of compensation to the Grantee (including groups or classes of
Grantees or beneficiaries of which the Grantee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or for
the Grantee (a "Benefit Arrangement"), if the Grantee is a "disqualified
individual," as defined in Section 280G(c) of the Code, any Option, Restricted
Stock or Restricted Stock Unit held by that Grantee and any right to receive any
payment or other benefit under this Plan shall not become exercisable or vested
(i) to the extent that such right to exercise, vesting, payment, or benefit,
taking into account all other rights, payments, or benefits to or for the
Grantee under this Plan, all Other Agreements, and all Benefit Arrangements,
would cause any payment or benefit to the Grantee under this Plan to be
considered a "parachute payment" within the meaning of Section 280G(b)(2)
A-24
<PAGE>
of the Code as then in effect (a "Parachute Payment") and (ii) if, as a result
---
of receiving a Parachute Payment, the aggregate after-tax amounts received by
the Grantee from the Company under this Plan, all Other Agreements, and all
Benefit Arrangements would be less than the maximum after-tax amount that could
be received by the Grantee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Grantee under any Other
Agreement or any Benefit Arrangement would cause the Grantee to be considered to
have received a Parachute Payment under this Plan that would have the effect of
decreasing the after-tax amount received by the Grantee as described in clause
(ii) of the preceding sentence, then the Grantee shall have the right, in the
Grantee's sole discretion, to designate those rights, payments, or benefits
under this Plan, any Other Agreements, and any Benefit Arrangements that should
be reduced or eliminated so as to avoid having the payment or benefit to the
Grantee under this Plan be deemed to be a Parachute Payment.
20. REQUIREMENTS OF LAW
20.1. General.
The Company shall not be required to sell or issue any shares of Stock
under any Award if the sale or issuance of such shares would constitute a
violation by the Grantee, any other individual exercising an Option, or the
Company of any provision of any law or regulation of any governmental authority,
including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing, registration or qualification of any shares subject to an Award
upon any securities exchange or under any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares hereunder, no shares of Stock may be issued or sold to the
Grantee or any other individual exercising an Option pursuant to such Award
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Company,
and any delay caused thereby shall in no way affect the date of termination of
the Award. Specifically, in connection with the Securities Act, upon the
exercise of any Option or the delivery of any shares of Stock underlying an
Award, unless a registration statement under such Act is in effect with respect
to the shares of Stock covered by such Award, the Company shall not be required
to sell or issue such shares unless the Board has received evidence satisfactory
to it that the Grantee or any other individual exercising an Option may acquire
such shares pursuant to an exemption from registration under the Securities Act.
Any determination in this connection by the Board shall be final, binding, and
conclusive. The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Securities Act. The Company shall not
be obligated to take any affirmative action in order to cause the exercise of an
Option or the issuance of shares of Stock pursuant to the Plan to comply with
any law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable until
the shares of Stock covered by such Option are registered or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction apply) shall be deemed conditioned upon the effectiveness
of such registration or the availability of such an exemption.
20.2. Rule 16b-3.
During any time when the Company has a class of equity security registered
under Section 12 of the Exchange Act, it is the intent of the Company that
Awards pursuant to the Plan and the exercise of Options granted hereunder will
qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the
extent that any provision of the Plan or action by the Board does not comply
with the requirements of Rule
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<PAGE>
16b-3, it shall be deemed inoperative to the extent permitted by law and deemed
advisable by the Board, and shall not affect the validity of the Plan. In the
event that Rule 16b-3 is revised or replaced, the Board may exercise its
discretion to modify this Plan in any respect necessary to satisfy the
requirements of, or to take advantage of any features of, the revised exemption
or its replacement.
21. AMENDMENT AND TERMINATION OF THE PLAN
The Board may, at any time and from time to time, amend, suspend, or
terminate the Plan as to any shares of Stock as to which Awards have not been
made; provided, however, that the Board shall not, without approval of the
-------- -------
Company's shareholders, amend the Plan such that it does not comply with the
Code. The Company may retain the right in an Award Agreement to cause a
forfeiture of the gain realized by a Grantee on account of the Grantee taking
actions in "competition with the Company," as defined in the applicable Award
Agreement. Furthermore, the Company may annul an Award if the Grantee is an
employee of the Company or an affiliate and is terminated "for cause" as defined
in the applicable Award Agreement. Except as permitted under this Section 21 or
Section 0 hereof, no amendment, suspension, or termination of the Plan shall,
without the consent of the Grantee, alter or impair rights or obligations under
any Award theretofore awarded under the Plan.
22. EFFECT OF CHANGES IN CAPITALIZATION
22.1. Changes in Stock.
If the number of outstanding shares of Stock is increased or decreased or
the shares of Stock are changed into or exchanged for a different number or kind
of shares or other securities of the Company on account of any recapitalization,
reclassification, stock split, reverse split, combination of shares, exchange of
shares, stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration by
the Company occurring after the Effective Date, the number and kinds of shares
for which grants of Options and other Awards may be made under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the
number and kind of shares for which Awards are outstanding shall be adjusted
proportionately and accordingly so that the proportionate interest of the
Grantee immediately following such event shall, to the extent practicable, be
the same as immediately before such event. Any such adjustment in outstanding
Options shall not change the aggregate Option Price payable with respect to
shares that are subject to the unexercised portion of an Option outstanding but
shall include a corresponding proportionate adjustment in the Option Price per
share.
22.2. Reorganization in Which the Company Is the Surviving Entity and in
Which No Change in Control Occurs.
Subject to Section 22.3 hereof, if the Company shall be the surviving
entity in any reorganization, merger, or consolidation of the Company with one
or more other entities in which no Change in Control Occurs, any Option
theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option would have been entitled immediately following such reorganization,
merger, or consolidation, with a corresponding proportionate adjustment of the
Option Price per share so that the aggregate Option Price thereafter shall be
the same as the aggregate Option Price of the shares remaining subject to the
Option immediately prior to such reorganization, merger, or consolidation.
Subject to any contrary language in an Award Agreement evidencing an Award, any
restrictions applicable to such Award shall apply as well to any replacement
shares received by the Grantee as a result of the reorganization, merger or
consolidation.
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<PAGE>
22.3. Reorganization, Sale of Assets or Sale of Stock Which Involves a
Change in Control.
(a) Subject to Section 22.3(b), upon the dissolution or liquidation of
the Company or upon any transaction that results in a Change in Control, (i) all
outstanding shares subject to Awards shall be deemed to have vested, and all
restrictions and conditions applicable to such shares subject to Awards shall be
deemed to have lapsed, immediately prior to the occurrence of such event, and
(ii) all Options outstanding hereunder shall become immediately exercisable for
a period of fifteen days immediately prior to the scheduled consummation of the
event. Any exercise of an Option during such fifteen-day period shall be
conditioned upon the consummation of the event and shall be effective only
immediately before the consummation of the event. Upon consummation of any such
event, the Plan and all outstanding but unexercised Options shall terminate.
The Board shall send written notice of an event that will result in such a
termination to all individuals who hold Options not later than the time at which
the Company gives notice thereof to its shareholders.
(b) Section 22.3(a) shall not apply to the extent provision is made
in writing in connection with a transaction described in Section
22.3(a) for the assumption of such Options theretofore granted,
or for the substitution for such Options of new options covering
the stock of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds
of shares or units and exercise prices, in which event the Plan
and Options theretofore granted shall continue in the manner and
under the terms so provided.
22.4. Adjustments.
Adjustments under this Section 0 related to shares of Stock or securities
of the Company shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. No fractional shares or other securities
shall be issued pursuant to any such adjustment, and any fractions resulting
from any such adjustment shall be eliminated in each case by rounding downward
to the nearest whole share.
22.5. No Limitations on Company.
The making of Awards pursuant to the Plan shall not affect or limit in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations, or changes of its capital or business structure or to merge,
consolidate, dissolve, or liquidate, or to sell or transfer all or any part of
its business or assets.
23. POOLING
In the event any provision of the Plan or the Award Agreement would prevent
the use of pooling of interests accounting in a corporate transaction involving
the Company and such transaction is contingent upon pooling of interests
accounting, then that provision shall be deemed amended or revoked to the extent
required to preserve such pooling of interests. The Company may require in an
Award Agreement that a Grantee who receives an Award under the Plan shall, upon
advice from the Company, take (or refrain from taking, as appropriate) all
actions necessary or desirable to ensure that pooling of interests accounting is
available.
A-27
<PAGE>
24. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Award or Award Agreement shall be
construed to confer upon any individual the right to remain in the employ or
service of the Company or any affiliate, or to interfere in any way with any
contractual or other right or authority of the Company either to increase or
decrease the compensation or other payments to any individual at any time, or to
terminate any employment or other relationship between any individual and the
Company. In addition, notwithstanding anything contained in the Plan to the
contrary, unless otherwise stated in the applicable Award Agreement, no Award
granted under the Plan shall be affected by any change of duties or position of
the Grantee, so long as such Grantee continues to be a director, officer,
consultant or employee of the Company. The obligation of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to
require the Company to transfer any amounts to a third party trustee or
otherwise hold any amounts in trust or escrow for payment to any Grantee or
beneficiary under the terms of the Plan. No Grantee shall have any of the
rights of a shareholder with respect to the shares of Stock subject to an Option
except to the extent the certificates for such shares of Stock shall have been
issued upon the exercise of the Option.
25. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
shareholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or specifically to a particular
individual or particular individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
26. WITHHOLDING TAXES
The Company or a Subsidiary, as the case may be, shall have the right to
deduct from payments of any kind otherwise due to a Grantee any Federal, state,
or local taxes of any kind required by law to be withheld with respect to the
vesting of or other lapse of restrictions applicable to an Award or upon the
issuance of any shares of Stock upon the exercise of an Option or pursuant to an
Award. At the time of such vesting, lapse, or exercise, the Grantee shall pay
to the Company or the Subsidiary, as the case may be, any amount that the
Company or the Subsidiary may reasonably determine to be necessary to satisfy
such withholding obligation. Subject to the prior approval of the Company or
the Subsidiary, which may be withheld by the Company or the Subsidiary, as the
case may be, in its sole discretion, the Grantee may elect to satisfy such
obligations, in whole or in part, (i) by causing the Company or the Subsidiary
to withhold shares of Stock otherwise issuable to the Grantee or (ii) by
delivering to the Company or the Subsidiary shares of Stock already owned by the
Grantee. The shares of Stock so delivered or withheld shall have an aggregate
Fair Market Value equal to such withholding obligations. The Fair Market Value
of the shares of Stock used to satisfy such withholding obligation shall be
determined by the Company or the Subsidiary as of the date that the amount of
tax to be withheld is to be determined. A Grantee who has made an election
pursuant to this Section 26 may satisfy his or her withholding obligation only
with shares of Stock that are not subject to any repurchase, forfeiture,
unfulfilled vesting, or other similar requirements.
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<PAGE>
27. CAPTIONS
The use of captions in this Plan or any Award Agreement is for the
convenience of reference only and shall not affect the meaning of any provision
of the Plan or such Award Agreement.
28. OTHER PROVISIONS
Each Award granted under the Plan may contain such other terms and
conditions not inconsistent with the Plan as may be determined by the Board, in
its sole discretion.
29. NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, etc.,
as the context requires.
30. SEVERABILITY
If any provision of the Plan or any Award Agreement shall be determined to
be illegal or unenforceable by any court of law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.
31. GOVERNING LAW
The validity and construction of this Plan and the instruments evidencing
the Awards granted hereunder shall be governed by the laws of the State of
Delaware (without giving effect to the choice of law provisions thereof).
A-29
<PAGE>
PROXY GTS DURATEK, INC. PROXY
10100 Old Columbia Road
Columbia, Maryland 21046
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR COMMON STOCKHOLDERS
-----------------------------
Revoking any such prior appointment, the undersigned hereby appoints Robert E.
Prince and Daniel A. D'Aniello and each of them, attorneys and agents, with
power of substitution, to vote as Proxy for the undersigned, as herein stated,
at the Annual Meeting of Stockholders of GTS Duratek, Inc., to be held at 10100
Old Columbia Road, Columbia, Maryland 21046 on Tuesday, May 16, 2000, at 10:30
a.m., and at any adjournments thereof, with respect to the number of shares the
undersigned would be entitled to vote if personally present.
The Proxy when properly executed will be voted FOR the election of Directors,
FOR the approval of the GTS Duratek, Inc. 1999 Stock Option and Incentive Plan,
FOR the appointment of KPMG LLP as auditors, and on any other matters in
accordance with the discretion of the named attorneys and agents, if no
instructions to the contrary are indicated on the reverse side hereof.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
<PAGE>
GTS DURATEK, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<CAPTION>
[ ]
<S> <C> <C> <C>
1. ELECTION For Withhold For All
Nominees: 01-Admiral James D. Watkins, All All Except For Against Abstain
02-George V. McGowan and [_] [_] [_] 3. Appointment of KPMG LLP [_] [_] [_]
03-Robert E. Prince. as auditors of the
Company for the year
ending December 31, 2000.
_____________________________________________ 4. Upon any other matters which may
(Write the name of Exception Nominee(s) in properly come before the
the space above) For Against Abstain meeting or any
[_] [_] [_] adjournment thereof.
2. To approve the GTS Duratek, Inc. 1999 Stock Option and
Incentive Plan. The undersigned hereby acknowledges receipt of a copy
of the Company's 1999 Annual Report and Notice of
Annual Meeting and Proxy Statement relating to such
Annual Meeting.
Dated: _________________________, 2000
_____________________________________________________
(Signature)
_____________________________________________________
(Signature)
Please mark, date and sign as your name appears above
and return in the enclosed envelope. If acting as
executor, administrator, trustee, guardian, etc., you
should so indicate when signing. If the signer is a
corporation, please sign the full corporate name by
duly authorized officer. If shares are held jointly
each shareholder named should sign.
The Board of Directors Recommends a vote "FOR" all nominees in Item 1 and "FOR"
Items 2 and 3.
- ------------------------------------------------------------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
</TABLE>
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE>
GTS DURATEK, INC.
10100 Old Columbia Road
Columbia, Maryland 21046
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR PREFERRED STOCKHOLDERS
--------------------------------
Revoking any such prior appointment, the undersigned hereby appoints Robert
E. Prince and Daniel A. D'Aniello and each of them, attorneys and agents, with
power of substitution to vote as Proxy for the undersigned, as herein stated, at
the Annual Meeting of Stockholders of GTS Duratek, Inc., to be held at 10100 Old
Columbia Road, Columbia, Maryland 21046 on Tuesday, May 16, 2000 at 10:30 a.m.
and at any adjournments thereof, with respect to the number of shares the
undersigned would be entitled to vote if personally present.
The Board of Directors Recommends a vote "FOR" all nominees in Items 1 and 2 and
"FOR" Items 3 and 4.
1. ELECTION of the following Nominees as Directors: Daniel A. D'Aniello,
Earle C. Williams, and Dr. Francis J. Harvey.
[ ] FOR all nominees
[ ] WITHHOLD AUTHORITY to vote for all Nominees
[ ] WITHHOLD AUTHORITY to vote for the following Nominees only: (Write the name
of the Nominees in the space below.
- --------------------------------------------------------------------------------
2. ELECTION of the following Nominees as Directors: Admiral James D. Watkins,
George V. McGowan and Robert E. Prince
[ ] FOR all nominees
[ ] WITHHOLD AUTHORITY to vote for all Nominees
[ ] WITHHOLD AUTHORITY to vote for the following Nominees only: (Write the name
of the Nominees in the space below.
- --------------------------------------------------------------------------------
3. To approve the GTS Duratek, Inc. 1999 Stock Option and Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
4. Appointment of KPMG LLP as auditors of the Company for the year ending
December 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- --------------------------------------------------------------------------------
5. Upon any other matters which may properly come before the meeting or any
adjournment thereof.
<PAGE>
The proxy when properly executed will be voted FOR the election of Directors,
FOR the approval of the GTS Duratek, Inc. 1999 Stock and Incentive Plan, FOR the
appointment of KPMG LLP as auditors, and on any other matters in accordance with
the descretion of the named attorneys and agents, if no instructions to the
contrary are indicated on the reverse side hereof.
The undersigned hereby acknowledges receipt of a copy of the Company's 1999
Annual Report and Notice of Annual Meeting and Proxy Statement relating to such
Annual Meeting.
x...............................................................................
(Signature)
x...............................................................................
(Signature)
Date:...........................................................................
Please mark, date and sign as your name appears above and return. If acting as
executor, administrator, trustee, guardian, etc., you should so indicate when
signing. If shares are held jointly each shareholder name should sign.
