PRIME CAPITAL CORPORATION
O'Hare International Center
10275 West Higgins Road
Rosemont, Illinois 60018
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
July 2, 1997
To the Stockholders of
PRIME CAPITAL CORPORATION:
The Annual Meeting of Stockholders (the "Annual Meeting") of
Prime Capital Corporation, a Delaware corporation (the
"Company"), will be held on July 2, 1997, at 11:30 o'clock a.m.
(C.S.T.), at O'Hare International Conference Center, 10275 West
Higgins Road, Rosemont, Illinois 60018 for the following
purposes:
1. To elect a Board of Directors to serve for the ensuing year.
2. To consider and act upon a proposal to approve the Company's
1997 Stock Option Plan.
3. To consider and act upon a proposal to amend the Company's
1987 Stock Option Plan.
4. To consider and act upon a proposal to ratify the selection
by the Board of Directors of KPMG Peat Marwick, LLP as auditors
of the Company for the current fiscal year.
5. To act upon any and all matters incident to any of the
foregoing and transact such other business as may properly be
brought before the meeting or any adjournments thereof.
Only stockholders of record at the close of business on May
21 1997, will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournments thereof.
All stockholders of record on that date are entitled to be
present and to vote at the Annual Meeting and are cordially
invited to attend the Annual Meeting. If you plan to attend, you
may obtain an admittance card by completing the enclosed
reservation form and returning it with your proxy. Stockholders
are urged, whether or not they plan to attend the Annual Meeting,
to mark, date and sign the enclosed proxy and return it promptly
in the accompanying envelope. If you attend the Annual Meeting
and vote by ballot at the Annual Meeting, you can revoke your
proxy at that time and your vote at the Annual Meeting will be
counted.
By Order of the Board of Directors
Suzanne M. Jackson
Secretary
Rosemont, Illinois
June 2, 1997
PRIME CAPITAL CORPORATION
O'Hare International Center
10275 West Higgins Road
Rosemont, IL 60018
PROXY STATEMENT FOR ANNUAL MEETING
July 2, 1997
INTRODUCTION
Solicitation, Voting and Revocation of Proxies
This Proxy Statement is furnished in connection with the
solicitation by, and on behalf of, the Board of Directors of
Prime Capital Corporation (the "Company") of proxies to be voted
at the Annual Meeting of Stockholders (the "Annual Meeting") of
the Company on July 2, 1997, and at any adjournment or
adjournments thereof. This Proxy Statement and the accompanying
proxy card are being mailed to stockholders on or about June 2,
1997. The Annual Meeting is called for the purposes stated in
the accompanying Notice of Annual Meeting of Stockholders (the
"Notice") which are to (i) elect a board of directors, (ii)
approve the Company's 1997 Stock Option Plan, (iii) approve an
amendment to the Company's 1987 Stock Option Plan, and (iv)
ratify the selection of auditors. If a proxy is properly signed
and is not revoked by the stockholder, the shares represented
thereby will be voted by the Proxy Committee in accordance with
the stockholder's directions. Stockholders are urged to specify
their choices by marking the appropriate boxes on the enclosed
proxy card. If no choice has been specified, the shares will be
voted by the Proxy Committee "FOR" the election of management's
slate of directors, approval of the Company's 1997 Stock Option
Plan, approval of the amendment to the Company's 1987 Stock
Option Plan, and the ratification of KPMG Peat Marwick LLP as
auditors of the Company for the current fiscal year. The Proxy
Committee presently consists of James A. Friedman, Leander W.
Jennings, Mark P. Bischoff, William D. Smithburg and Robert T.
Youngquist. Proxy cards also confer upon the Proxy Committee
discretionary authority to vote the shares represented thereby on
any matter which is not known at this time but may be presented
for action at the meeting. The Company does not know of any
other matters that will be presented at the Annual Meeting. If
any other matter comes before the Annual Meeting, or any of its
adjournments, however, the members of the Proxy Committee will
vote in accordance with their best judgment.
A proxy may be revoked at any time before it is exercised by
voting in person at the Annual Meeting or by a later proxy, or by
written notice of revocation bearing a later date which is
delivered to the Secretary of the Company at or prior to the
Annual Meeting.
Cost and Manner of Solicitation
The Company will bear the cost of the solicitation of
proxies, including the charges and expenses of brokerage firms
and other custodians, nominees, and fiduciaries for forwarding
proxy materials to beneficial owners of the Company's stock.
Solicitations will be made primarily by mail, but certain
directors, officers or regular employees of the Company may
solicit proxies in person or by telephone or telegram without
special compensation.
Available Reports: Incorporation by Reference
This Proxy Statement is accompanied by a copy of the
Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1996. That report includes financial statements for
the year ended December 31, 1996 audited by KPMG Peat Marwick
LLP, the Company's independent accountants. The Annual Report to
the Stockholders is furnished for information only and no part
thereof is incorporated by reference in this Proxy Statement.
UPON WRITTEN REQUEST OF ANY STOCKHOLDER, THE COMPANY WILL
PROVIDE, WITHOUT CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-
KSB; WITHOUT EXHIBITS, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MARCH 27, 1997. THE EXHIBITS THERETO WILL BE
AVAILABLE AT A CHARGE OF $.20 PER PAGE. REQUESTS SHOULD BE
ADDRESSED TO THE COMPANY IN CARE OF INVESTOR RELATIONS, PRIME
CAPITAL CORPORATION, O'HARE INTERNATIONAL CENTER, 10275 W.
HIGGINS ROAD, ROSEMONT, ILLINOIS 60018. ALSO AVAILABLE IS THE
COMPANY'S FIRST QUARTER REPORT ON FORM 10-QSB AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1997.
Voting Securities
The Board of Directors has fixed the close of business on
May 21, 1997 as the record date for determining stockholders
entitled to notice of, and to vote at, the Annual Meeting. The
voting securities issued and outstanding on the record date
consist of 4,292,165 shares of the Company's common stock, $.05
par value ("common stock"), each share of which is entitled to
one vote.
Proposal 1
ELECTION OF DIRECTORS
Voting for Directors
A Board of five Directors will be elected at the 1997 Annual
Meeting. All Directors are elected annually and hold office
until the next annual meeting of stockholders or until their
successors have been elected and qualified.
The persons named below have been nominated by the Board for
election as Directors. Messrs. Friedman, Bischoff, Jennings,
Smithburg and Youngquist have served as Director since the
respective dates set forth below. The Board has no reason to
anticipate that any nominee will decline or be unable to serve.
In the event that any nominee does decline or is unable to serve,
proxies may be voted for the election of a substitute nominee or
may be voted for a lesser number of Directors. In the absence of
instructions to the contrary, proxies will be voted for the
election of the Directors named below.
The Board of Directors recommends a vote "FOR" the election
of the nominees for Directors.
Certain information concerning the nominees is set forth below.
Name Principal Occupation During Past Age Director
Five Years and Other Information Since
James A. President and Chief Executive 51 1978
Friedman Officer of the Company or its
predecessor since November 1978.
Leander W. President of Jennings & 68 1986
Jennings Associates since September 1986;
Managing Partner, Chicago Office
of KPMG Peat Marwick LLP from
January 1977 to February 1985;
Director of A.O. Smith
Corporation, Alberto Culver
Corporation, Fruit of the Loom
Corporation, and Teppco Partners
L.P..
William D. Chairman of The Quaker Oats 58 1986
Smithburg Company since 1983 and Chief
Executive Officer thereof since
1981; Director of The Quaker
Oats Company, Abbott
Laboratories, The Northern Trust
Corporation and Corning Glass
Works.
Robert R. Practicing Orthodontist and 48 1978
Youngquist owner of Robert R. Youngquist
D.D.S. D.D.S., Ltd. during the past six
years.
Mark P. Senior Partner of Bischoff, 50 1996
Bischoff Maurides & Swabowski, Ltd. since
1988; Secretary of the Board
of Directors and General Counsel
of the Company since 1986.
The Board of Directors
The Company's business is managed under the direction of the
Board of Directors. During 1996, the Board of Directors held 5
regular meetings. The standard Committees of the Board are the
Executive Committee, the Audit Committee, and the Compensation
and Stock Option Committee. The Board does not have a standing
Nominating Committee. All Directors attended all meetings of the
Board of Directors and meetings held by all committees of the
Board on which the Director served during the period that the
Director served.
Committees of the Board of Directors
The Executive Committee exercises all the powers and
authority of the Board of Directors in the management of the
business and affairs of the Company during the intervals between
meetings of the Board, subject to the restrictions set forth in
the By-Laws. The members of the Executive Committee are: James
A. Friedman (Chairman), Leander W. Jennings and William D.
Smithburg. The Executive Committee met 6 times during 1996.
The Audit Committee has the general responsibility for
establishing and maintaining communications with the Company's
internal and independent accountants, reviewing the methods used
and examinations made by the auditors in connection with the
Company's published financial statements and reviewing with the
auditors the Company's financial and operating controls. The
members of the Audit Committee are: Leander W. Jennings
(Chairman), Mark P. Bischoff, and William D. Smithburg. The
Audit Committee met once during 1996.
The Compensation and Stock Option Committee oversees the
Company's compensation and benefit policies and programs,
including the administration of the Company's 1987 Stock Option
Plan (the "1987 Plan"). The Committee also has general
responsibility for the Company's personnel and compensation
matters. The Committee presently consists of the following
Directors of the Company: Mark P. Bischoff, William D. Smithburg,
and Robert R. Youngquist. The Committee met 9 times during 1996.
Proposal 2
APPROVAL OF 1997 STOCK OPTION PLAN
The Purpose of the 1997 Stock Option Plan (the "1997 Plan")
is to provide the Company and its subsidiaries with a means of
retaining, attracting and increasing the incentive of their
directors and certain key employees through rewards based upon
the ownership and performance of the common stock of the Company.
An aggregate of 750,000 shares of the Company's common stock will
be reserved for issuance pursuant to the exercise of options
under the 1997 Plan, 185,566 of which shall be derived from the
1987 Plan.
The following table summarizes the source of the options
transferred from the 1987 Plan to the 1997 Plan:
1984 Incentive Stock Option Plan (ISO) 200,000
1986 Non-Qualified Plan 15,000
1987 Stock Option Plan 85,000
Additional Shares authorized in August 1994 200,000
Additional Shares authorized in August 1996 250,000
Total shares available 750,000
Less:
Options exercised through March 31, 1997 17,934
Shares under option as of March 31,1997 546,500
Options available for grant as of March
31,1997 185,566
The following table summarizes the ownership of options
under the 1987 Plan as of March 31, 1997:
Outstanding Options
Options Exercisable
John W. Altergott 135,000 101,500
Robert C. Benson 50,000 8,250
Joseph H. Rinehart 50,000 0
Executive Officers as a Group (a) 235,000 109,750
Non-Executive Employees as a 161,500 76,720
Group (b)
All Employees as a Group (c) 396,500 186,470
All Directors as a Group (d) 150,000 50,000
Total Shares under option as of 546,500 236,470
March 31, 1997
(a) 3 persons
(b) 17 persons
(c) 20 persons
(d) 4 persons
A copy of the 1997 Plan is attached as Exhibit A to this
Proxy Statement. A brief description of the 1997 Plan is
provided below and is qualified in its entirety by reference to
said Exhibit.
Grant of Options: Administration
The Board of Directors may grant options to purchase shares
of the Company's common stock at the times and prices provided
for in the agreements granting the options, subject to the terms
of the 1997 Plan, to key employees and Directors of the Company
or its subsidiaries. The maximum number of shares for which an
option may be granted to an employee during any calendar year
shall not exceed 200,000 shares. As of May 19, 1997, the market
value of the Company's common stock was $7.25 per share.
The 1997 Plan shall be administered by the Board of
Directors. The Board shall select eligible persons for
participation and determine the number of shares to be subject to
option, the per share option price, the time and conditions of
exercise, the vesting rights of the optionee, the repurchase
rights of the Company, and all other terms and conditions of the
options not specified in the 1997 Plan. The Board shall
interpret the provisions of the 1997 Plan, may prescribe rules
for its operation, and any such interpretation or rule will be
final and conclusive as to all parties. The Board may delegate
the responsibility for the administration of the 1997 Plan to the
Compensation and Stock Option Committee (the "Committee").
The Chief Executive Officer of the Company is authorized to
grant options to non-employee directors of the Company in such
amounts and at such times as he shall deem appropriate.
Terms and Exercise of Options
The option price per share of common stock for options
granted under the 1997 Plan shall be determined by the Board, but
shall not be less than 50% of the fair market value of the common
stock at the time of grant. The maximum period of time during
which options granted under the 1997 Plan may be exercisable is
ten years from the date of grant.
An optionee may exercise options granted under the 1997 Plan
for a period of 30 days following, in the case of an optionee who
is an employee, termination of the optionee's employment (12
months if termination of employment is due to total and permanent
disability), or, in the case of an optionee who is a non-employee
Director, the time the optionee ceases to be a Director of the
Company (12 months if he ceases to be a Director due to total and
permanent disability) to the same extent that the optionee might
have exercised such option at the time of such termination of
employment or the time he ceased to be a Director, as the case
may be, provided that, to the extent that the Company shall have
the right to repurchase certain shares on termination of
employment or directorship, the Company shall not be required to
issue shares pursuant to an exercise of an option after
termination of employment or directorship. Options shall not be
transferable, except that options may be exercised by the
executor, administrator or personal representative of a deceased
optionee for a period of not longer than one year after the death
of such optionee at such time and to such extent that the
optionee, had he lived, would have been entitled to exercise such
option.
Each option granted pursuant to the 1997 Plan will be
evidenced by a written agreement (the "Option Agreement") between
the Company and the optionee, which agreement shall specify the
exercise price and the terms and conditions of the option.
Subject to the terms of the Option Agreement, options granted
pursuant to the 1997 Plan may be exercised from time to time in
whole or in part. Payment for the options exercised shall be
either in cash or, with the consent of the Board, shares of
common stock of the Company with a value equal to or less than
the total option price, plus cash in the amount, if any, by which
the total option price exceeds the value of such shares of common
stock.
Repurchase of Shares
Each Option Agreement shall state whether the options
granted thereunder shall be subject to repurchase by the Company
and the terms of such repurchase. Each grant which is subject to
repurchase shall provide that if an optionee's employment by the
Company terminates within a specified time after a grant of an
option to such optionee under the 1997 Plan or, in the case of an
optionee who is a non-employee Director, if such optionee ceases
to be a Director of the Company within a specified time after a
grant of an option to the optionee under the 1997 Plan, or in any
case if such optionee attempts to dispose of shares issued upon
exercise of such options other than as allowed under the 1997
Plan, then the Company shall have the right in its sole
discretion to repurchase from such optionee at the option price a
number of the shares issued pursuant to such grant depending upon
the number of years elapsed since the grant of the option. In
the event of (i) a merger in which the Company is not the
continuing or surviving entity (or a reverse or reverse
subsidiary merger or consolidation in which the Company is, in
effect, acquired by another corporation), other than a merger
which effects only a change in the jurisdiction of incorporation
of the Company, (ii) an acquisition of all or substantially all
of the Company's assets by another entity which then conducts the
business of the Company, or (iii) a transfer of more than 50% of
the voting power of the Company in one transaction or a series of
related transactions (each of which events shall hereinafter be
called a "major corporate transaction"), the right of repurchase
shall cease to be effective as to the effective date of such
transaction, except to the extent expressly provided in the
Option Agreement.
Amendment or Termination of the Plan
The Board may from time to time in its discretion amend or
modify the Plan without the approval of the stockholders of the
Company, except as such stockholder approval shall be required
(a) to permit the grant of Awards under, and transaction in Stock
pursuant to the Plan to be exempt from liability under Section
16(b) of the 1934 Act or (b) to comply with the listing
requirements of any national securities exchange on which are
listed any of the Company's equity securities, (c) to increase
the maximum number of shares available for issuance under this
Plan, (d) to change the maximum number of shares that may be
subject to options granted to any optionee under this Plan, (e)
to change the designation of persons eligible to receive options
under this Plan, (f) to change the purchase price at which shares
may be sold pursuant to options granted under this Plan, or (g)
to change the rights or obligations of the Company with respect
to the right of repurchase. Notwithstanding the foregoing, the
provisions regarding the selection of directors for participation
in and the amount, the price or the timing of, Non-Employee
Director Options shall not be amended more than once every six
(6) months, other than to comport with changes in the Internal
Revenue Code of 1986, the Employee Retirement Income Security Act
or the rules thereunder. No termination, suspension or amendment
of the Plan shall, without the consent of the holder of an
existing option affected thereby, adversely affect his rights
under such option. The power of the Board and/or the Committee
to construe and administer any options granted under the Plan
prior to the termination or suspension of the Plan nevertheless
shall continue after such termination or during such suspension.
Tax Consequences
The recipient of a non-statutory stock option with no
readily ascertainable fair market value is not generally taxed
upon the grant of the non-statutory stock option for the
performance of services. At the time the option is exercised,
the holder of the non-statutory stock option is generally taxed
at ordinary income tax rates on an amount equal to the excess of
the fair market value of the shares at the time of exercise over
the amount paid for such shares.
Upon exercise of a non-statutory stock option by individuals
who are subject to Section 16(b) of the Securities and Exchange
Act of 1934, the recognition of ordinary income is deferred to
the date upon which such stock may first be sold without
incurring Section 16(b) liability (generally six months after
exercise). However, if the stock received on exercise of the
option is subject to a substantial risk of forfeiture, then the
optionee will be taxed at the time the risk of forfeiture lapses
at ordinary income rates on an amount equal to the excess of the
then fair market value of the stock over the exercise price.
Alternatively, the optionee of such restricted stock may elect
within 30 days of the exercise of the option to be taxed at the
time of exercise as if the restrictions or risk of forfeiture did
not exist. If an optionee elects to be taxed at the time of
exercise and subsequently forfeits the optionee's shares, the
optionee's loss deduction will be limited to the excess of the
amount the optionee paid for the stock plus compensation income
recognized over the amount the optionee receives for the stock
upon forfeiture.
The Company will be allowed a deduction equal to the amount
of compensation income on which the optionee is taxed (subject to
the test of reasonable compensation). Any such compensation
income taxable to an optionee who is also an employee is subject
to income, Social Security and Medicare tax withholding rules and
the payment of unemployment taxes by the Company. Any
appreciation or depreciation in the value of shares after the
date on which the optionee's ordinary compensation income is
determined will be treated as long term or short term capital
gain or loss depending on whether the shares are held for more
than twelve months.
Approval of the 1997 Stock Option Plan requires the
affirmative vote of the holders of a majority of the shares of
the Company entitled to vote at the Annual Meeting.
The Board of Directors favors a vote "FOR" approval of the
1997 Stock Option Plan and proxies solicited by the Board of
Directors will be so voted unless stockholders specify on their
proxy card a contrary choice.
Proposal 3
Amendment to the 1987 Stock Option Plan
There will be presented at the meeting a proposal to amend
the 1987 Plan (effective as of December 1, 1996) to delete the
provision in Section 2 of the 1987 Plan restricting the amount of
shares of common stock subject to options granted to directors of
the Company to 25,000 shares (the "Amendment"). In December
1996, the Company granted William D. Smithburg and Leander W.
Jennings options to purchase an additional 25,000 shares of
common stock each, subject to the approval of the shareholders of
this Amendment. The Company wishes to continue to retain and
reward directors who have provided outstanding service to the
Company. Directors Smithburg and Jennings have each served as
directors of the Company since 1986.
The affirmative votes of a majority of the outstanding
shares of common stock are required for approval of the
Amendment.
The Board of Directors favors a vote "FOR" approval of the
proposed amendment to the 1987 Plan and proxies solicited by the
Board of Directors will be so voted unless stockholders specify
on their proxy card a contrary choice.
Proposal 4
SELECTION OF INDEPENDENT ACCOUNTANTS FOR FISCAL YEAR ENDING
DECEMBER 31, 1997
The Board of Directors has selected the firm of KPMG Peat
Marwick LLP, independent accountants, to audit the accounts of
the Corporation for its fiscal year ended December 31, 1997. The
Corporation has been advised that neither that firm nor any of
its partners has any other relationship, direct or indirect, with
the Corporation or its subsidiaries.
It is expected that a representative of KPMG Peat Marwick
LLP will be present at the Annual Meeting with an opportunity to
make a statement, if he desires to do so, and available to
respond to appropriate questions.
The Board of Directors recommends a vote "FOR" this
proposal.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows all the cash compensation paid or
to be paid by the Company or any of its subsidiaries, as well as
certain other compensation paid or accrued, during the fiscal
years indicated, to the President and Chief Executive Officer,
and the three highest paid executive officers of the Company
whose compensation was at least $100,000 for the last fiscal year
in all capacities in which they served:
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Awards
Compensation
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Year Salary Bonus Other Option
Principal ($) ($) Annual /SAR
Position Comp-
ensa-
tion
($)
James A. 1996 286,050
Friedman, 1995 288,000
President and 1994 357,000 3,625
Chief
Executive
Officer
Robert C. 1996 109,720 20,100 25,000
Benson
Senior Vice
President
John W. 1996 97,500 195,849 50,000
Altergott
Senior Vice
President
(f) There were no restricted stock awards
(h) There were no LTIP Payouts
(I) There was no other compensation
Options/SAR Grants in Last Fiscal Year
Individual
Grants
(a) (b) (c) (d) (e)
Name Options % of Total Exercise or Expiration
Granted Options Granted Base Price Date
(#) to Employees in ($/Sh)
Fiscal Year
Robert C. 25,000 13% $5.50 August 9,
Benson 2006
Joseph H. 50,000 26% 5.38 June 24,
Rinehart 2006
John W. 50,000 26% 1.88 January 3,
Altergott 2006
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
(a) (b) (c) (d) (e)
Name Shares Value Number of Value of
Acquired on Realized Unexercised Unexercised
Exercise ($) Options at FY- In-the-Money
(#) End (#) Options at FY-
End ($)
Exercisable/ Exercisable/
Unexercisable Unexercisable
Robert C. - - 8,250/41,750 $34,568/
Benson $70,182
John W. 2,000 $9,500 85,000/50,000 435,325/
Altergott 168,500
Joseph H. - - 0/50,000 0 / 0
Rinehart
Director's Compensation
Each Director of the Company who is not an Executive Officer
receives an annual retainer of $10,000 plus a fee of $500 for
attendance at each meeting of the Board. In addition, members of
the Committees of the Board who are not Executive Officers
receive a fee of $300 for each Committee meeting attended.
Directors of the Company who are also Executive Officers receive
no compensation for rendering services as a Director except for
reimbursement of out-of-pocket expenses.
Compensation Pursuant to Plans
The Company has adopted the 1984 Incentive Stock Option Plan
(the "ISO Plan"), the 1986 Non-Qualified Stock Option Plan (the
"Non-Qualified Plan") and the 1987 Plan. All descriptions of the
various plans are qualified in their entirety by reference to the
actual Plan documents which are available for examination.
The ISO Plan is administered by a committee of not less than
two Directors of the Board (the "Committee"). The Board must
select the members of the Committee from among those Directors
who are ineligible to participate in, and who have not within the
year preceding appointment to the Committee been eligible to
participate in, the ISO Plan or any other stock option plan of
the Company. The ISO Plan empowered the Committee to grant
incentive stock options to "key employees" of the Company and its
subsidiaries to purchase shares of the Company's common stock at
any time prior to the approval of the 1987 Plan. Subject to
certain limitations, the ISO Plan empowered the Committee to
determine the persons to whom options were granted, the number of
shares to be covered by each option, the option price per share
(which must have been at lease equal to 100% of the fair market
value of the common stock of the Company on the date the option
is granted) and all other terms and conditions of the option and
its exercise. Termination of an optionee's employment with the
Company or its subsidiaries results in the termination of all
options held by such optionee which were not exercisable at the
time of such termination of employment. All options granted under
the ISO Plan are non-assignable and non-transferable other than
by will or the laws of descent or distribution.
The Non-Qualified Plan empowered the Board of Directors for
a period of 10 years commencing on March 26, 1986, to grant non-
qualified stock options to purchase shares of the Company's
common stock to Directors of the Company who are not Officers or
employees of the Company or its subsidiaries and to key employees
who are not Directors of the Company. On March 26, 1986, the
Board of Directors delegated the responsibility for the
administration of the Non-Qualified Plan to the Committee.
Subject to the provisions of the Non-Qualified Plan, the
Committee determined the persons to whom options are granted, the
number of shares subject to each option, the exercise price of
each option and all other terms and conditions of exercise.
Pursuant to an amendment adopted on May 1, 1986, options must
have been granted at not less than 85% of the current fair market
value of the shares of common stock. Each option granted under
the Non-Qualified Plan was and is immediately exercisable in
full. A portion of the shares purchased upon exercise of an
option granted under the Non-Qualified Plan was and is
immediately exercisable in full. A portion of the shares
purchased upon exercise of an option granted under the Non-
Qualified Plan may, however, be subject to repurchase by the
Company at the option price if the optionee ceases to be an
employee or a Director, as the case may be, of the Company within
five years after the date of grant of the option. Such
repurchase option lapses pro-rata over such period and lapses
entirely where certain transactions involving the Company have
occurred. Options are not transferable, except that options may
be exercised by the executor, administrator or personal
representative of a deceased optionee for a period of not longer
than one year after the death of such optionee at such time and
to such extent that the optionee, had he lived, would have been
entitled to exercise such option.
The 1987 Plan was adopted by the Board of Directors on March
24, 1987 and was approved by the stockholders on May 27, 1987.
An aggregate of 300,000 shares of the Company's common stock was
initially reserved for issuance pursuant to the exercise of
options under the 1987 Plan, 200,000 of which were transferred
from the ISO Plan and 15,000 of which were transferred from the
Non-Qualified Plan.
On August 31, 1994 the stockholders approved an additional
200,000 shares of the Company's common stock be reserved for
issuance pursuant to the exercise of options under the 1987 Plan.
On August 21, 1996 the stockholders approved an additional
250,000 shares of the Company's common stock be reserved for
issuance pursuant to the exercise of options under the 1987 Plan.
On April 30, 1997, the Board of Directors approved an amendment
to the 1987 Plan extending the Plan until May 27, 1998.
The Board of Directors may grant options to purchase shares
of the Company's common stock at times and prices provided for in
the agreements granting the options, subject to the terms of the
1987 Plan, to key employees (who are not Directors of the
Company) and Directors (who are not Officers or employees of the
Company or its subsidiaries) of the Company or its subsidiaries.
Only key employees are eligible to receive incentive stock
options. Key employees and Directors are eligible to receive non-
qualified options. All options are subject to the specific terms
and conditions evidenced by written agreements between the
Company and the optionee. The maximum number of shares for which
an option may be granted to any one key employee (who is not a
Director of the Company) is not limited other than in the
discretion of the Board.
An optionee may exercise options granted under the 1987 Plan
for a period of three months following, in the case of an
optionee who is an employee, termination of the optionee's
employment (12 months if termination of employment is due to
total and permanent disability), or, in the case of an optionee
who is a non-employee Director, the time the optionee ceases to
be a Director of the Company (12 months if he ceases to be a
Director due to total and permanent disability) to the same
extent that the optionee might have exercised such option at the
time of such termination of employment or the time he ceased to
be a Director, as the case may be. The Company shall have the
right to repurchase certain shares on termination of employment
or directorship. Options shall not be transferable, except that
options may be exercised by the executor, administrator or
personal representative of a deceased optionee for a period of
not longer than one year after the death of such optionee at such
time and to such extent that the optionee, had he lived, would
have been entitled to exercise such option.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Current Ownership
The following table sets forth certain information as of
December 31, 1996 with respect to the beneficial ownership of the
Company's common stock by each stockholder or group known by the
Company to be the beneficial owner of more than 5% of its
outstanding common stock, by each Director, and by all Executive
Officers and Directors as a group. The information is based, in
part, on data furnished by such Executive Officers, Directors and
stockholders. The address of each holder of more than 5% of the
Company's common stock other than First Financial Fund, Inc. and
Wellington Management Company is O'Hare International Center,
10275 West Higgins Road, Rosemont, Illinois 60018. The address
for Wellington Management Company is 75 State Street, Boston,
Massachusetts 02109. First Financial Fund, Inc.'s address is One
Seaport Plaza, 25th Floor, New York, New York 10292.
Error! Bookmark not Amount and Nature
defined.Name of of Beneficial Percent of
Beneficial Owner Ownership Class
James A. Friedman (1) 2,198,375 48.6%
Leander W. Jennings (2) 27,100 *
Mark P. Bischoff 10,000 *
William D. Smithburg 27,000 *
(2)
Robert R. Youngquist, 20,000 *
D.D.S. (3)
Robert C. Benson (2) 8,250 *
John W. Altergott (2) 92,000 2.0%
First Financial Fund, 330,000 7.30%
Inc. (4)
All Executive Officers 2,836,600 62.79%
and Directors as a
group (8 persons) (2)
* Less than 1%
(1) Includes 459,975.67 shares owned by a trust for the benefit
of Mr. Friedman's children for which Mr. Friedman disclaims
beneficial ownership. The named trustee of the trust is Mark P.
Bischoff.
(2) Includes outstanding options which are currently exercisable
with respect to the following named individuals or groups:
Messrs. Jennings, 25,000 shares; Smithburg, 25,000 shares;
Benson, 8,250 shares; Altergott, 85,000 shares. All Executive
Officers and Directors as a group, 143,250 shares.
(3) Includes 15,000 shares held in a pension plan of which Dr.
Youngquist is a fiduciary and for which Dr. Youngquist disclaims
beneficial ownership.
(4) According to Schedules 13G filed with the Securities and
Exchange Commission on January 24, 1997 First Financial Fund,
Inc., an investment company, is the beneficial owner of such
shares, and Wellington Management Company, its investment
advisor, may also be deemed to be a beneficial owner of those
shares.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no family relationships among the Directors and
Executive Officers of the Company.
In September 1991, James A. Friedman purchased one lease and
the underlying telecommunications equipment from the Company for
a price of approximately $350,000, made up of cash and an
assumption of the debt secured by those assets. The transaction
was approved by the Company's outside directors in accordance
with the Company's policy of related party transactions. The
Company originally purchased the equipment for approximately
$456,000 and entered into this lease in February, 1990. At the
date of the sale to Mr. Friedman, the assets were carried on the
Company's books at approximately $373,000. There were no
proceeds received by Mr. Friedman on this lease in 1994. $27,511
was received by Mr. Friedman in 1995 and $223,749 was received by
Mr. Friedman in 1996 on this transaction.
OTHER MATTERS
The Board of Directors does not intend to bring any other
matters before the meeting and is not informed of any other
business which others may bring before the meeting. However, if
any other matter should properly come before the meeting or any
adjournment thereof, it is the intention of the persons named in
the accompanying Proxy to vote on such matters as they, in their
discretion, may determine.
DEADLINE FOR SHAREHOLDER PROPOSALS
Stockholder proposals intended to be presented at the next
Annual Meeting must be received by the Company, in writing, no
later than January 31, 1998, in order to be considered for
inclusion in the Proxy Statement and proxy for the Company's 1997
Annual Meeting. Any such proposal should be sent to the
attention of the Secretary of the Company at O'Hare International
Center, 10275 West Higgins Road, Rosemont, IL 60018.
ALL SHAREHOLDERS ARE URGED TO MARK, SIGN, DATE AND PROMPTLY
RETURN THE ENCLOSED PROXY CARD.
By Order of the Board of Directors
Suzanne M. Jackson
Secretary
Rosemont, Illinois
June 2, 1997
EXHIBIT A
PRIME CAPITAL CORPORATION
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this Plan, which shall be known as
the Prime Capital Corporation 1997 Stock Option Plan (the
"Plan"), is to provide Prime Capital Corporation (the "Company")
and its subsidiaries with a means of retaining, attracting and
increasing the incentive of their directors and certain key
employees through rewards based upon the ownership and
performance of the common stock of the Company. Toward that
end, the Board of Directors of the Company (the "Board") may
grant options to purchase shares of common stock of the Company
on terms and conditions not inconsistent with this Plan to (i)
directors of the Company or its subsidiaries and (ii) key
employees of the Company.
The Plan shall supersede and replace the Company's existing
stock option plans, including the 1984 Incentive Plan which was
adopted by the Board of Directors on December 20, 1984, and
approved by the Company's stockholders on December 20, 1984, the
1986 Plan which was adopted by the Board of Directors and
approved by the Company's stockholders on March 11, 1986, the
1987 Plan which was approved by the Board of Directors on March
24, 1987 and approved by the Company's stockholders on May 27,
1987, as modified by the amendments approved by the shareholders
in August 1994 and August 1996 (the "Former Plans"). No
additional stock options shall be granted under the Former Plans,
provided, however, that the Former Plans shall still be deemed to
be outstanding for the purpose of determining the terms and
conditions of any options granted under the Former Plans. Any
unexercised options granted under the Former Plans that expire or
are otherwise terminated pursuant to the terms of the respective
Former Plans shall be immediately made available for the grant of
new options under this Plan. Such available options shall be in
addition to the limitations set forth in Section 4 below.
2. Effective Date. The Plan is effective as of the date of
approval by the Board of Directors, subject to the approval of
the Plan by the holders of at least a majority of the outstanding
shares of Prime Capital Corporation common stock present, or
represented, and entitled to vote at the 1997 Annual Meeting of
Stockholders. Awards may be made under the Plan on and after its
effective date, subject to stockholder approval of the Plan as
provided above. In the event such approval of the stockholders
is not obtained, all awards granted under the Plan shall be null
and void.
3. Administration of the Plan. The Board will appoint a Stock
Option Committee (the "Committee) of no less than two directors
to periodically review the performance of the employees and
agents of the Company and its subsidiaries and to recommend to
the Board the names of those to be granted options (hereinafter
"Optionee") and the number of shares to be covered by the option
or options to be granted. The Committee shall be composed of
individuals selected in a manner that complies with Rule 16b-3 of
the Securities Exchange Act of 1934, as amended ("Rule 16b-3").
No options may be granted by the Committee to anyone who on the
date of grant is not an active employee (including employees who
are officers). The Committee may conduct its meeting in person
or by telephone. The Committee is also authorized to interpret
any rules, regulations, forms, notices, agreements and
modifications relating to the Plan, and to make all other
determinations and take all other actions which it deems
necessary or advisable for administration of the Plan.
The Chief Executive Officer of the Company shall be authorized
to grant options in such amounts and at such times as he shall
deem appropriate to non-employee directors of the Company. It is
intended that no grant to a non-employee director shall preclude
such director from being "disinterested" for purposes of Rule 16b-
3.
4. Shares Subject to the Plan and Limitations on Options to be
Granted. Except as provided in Section 1, the total number of
shares of common stock, par value $.05 per share, which may be
issued upon exercise of options granted under this Plan shall not
exceed 185,566. Shares of common stock which are repurchased
under Section 10 hereof or which are covered by an option granted
pursuant to this Plan that expires unexercised in whole or in
part, is surrendered, or is otherwise terminated prior to its
exercise shall again be available for the grant of new options
under this Plan.
Shares of common stock issued under this Plan may be authorized
and unissued shares of common stock, treasury stock or a
combination thereof, except that 185,566 of the shares eligible
for grant hereunder shall be derived from shares under the
Company's 1987 Stock Option Plan, including the August 1994 and
August 1996 amendments thereto.
5. Eligibility. All employees and directors are eligible to
receive the grant of options under this Plan. The maximum number
of shares for which an option may be granted to an employee shall
not be limited other than in the discretion of the Board of
Directors, provided, however, that the maximum number of shares
that may be granted to any individual employee during any
calendar year under the Plan shall not exceed 200,000 shares.
6. Terms of Options. Each option granted under this Plan shall
be evidenced by a written agreement (an "Option Agreement")
between the Company and the optionee which shall contain such
provisions as the Board in each instance shall deem to be
appropriate and not inconsistent with any of the express
provisions of this Plan applicable thereto or any of the
resolutions relating to the Plan adopted by the Board. Subject
to the provisions of this Plan, each such Option Agreement shall
identify the options granted thereunder are intended to be non-
qualified. Options granted under this Plan shall be exercisable
at such times and in such installments after the date of grant as
shall be set forth in the agreements pursuant to which such
options are granted. The per share option price shall be
specified in the Option Agreement, provided such price shall not
be less than fifty percent (50%) of the fair market value (as
hereinafter defined) of a share of common stock of the Company on
the date the option is granted. An option issued pursuant to
this Plan shall in no event be exercisable for more than ten
years after the date of grant, at which time such option shall
expire and terminate. Subject to such limitation and to Section
7 herein, an optionee may exercise options granted under this
Plan for a period of thirty (30) days following, in the case of
an optionee who is an employee, termination of the optionee's
employment (12 months if termination of employment is due to
total and permanent disability), or, in the case of a non-
employee director, the time the optionee ceases to be a director
of the Company (12 months if he ceases to be a director due to
total and permanent disability), to the same extent, but only to
such extent, that the optionee might have exercised such option
at the time of such termination of employment or the time he
ceased to be a director, as the case may be, provided that, to
the extent that the Company shall have the right to repurchase
options as provided in Section 10 hereof, the Company shall not
be required to issue shares pursuant to an exercise of an option
after termination of employment or the optionee ceases to be a
director of the Company. Options shall not be assignable or
transferable, except that options may be exercised by the
executor, administrator or personal representative of a deceased
optionee for a period of not longer than one year after the death
of such optionee at such time and to such extent that the
optionee, had he lived, would have been entitled to exercise such
options.
For purposes of this Plan, "fair market value" of a share of
common stock of the Company on any day shall be (a) if the
principal market for the common stock is a national securities
exchange, the average of the highest and lowest sales price per
share of common stock on such day as reported by such exchange or
on a composite tape reflecting transactions on such exchange, (b)
if the principal market for the common stock is not a national
securities exchange and the common stock is quoted on the
National Association of Securities Dealers Automated Quotations
System ("NASDAQ"), and (i) if the actual sales price information
is available with respect to the common stock, the average of the
highest and lowest sales prices per share of Common Stock on such
day on NASDAQ, or (ii) if such information is not available, the
average of the highest bid and lowest asked prices per share of
common stock on such day on NASDAQ, or (c) if the principal
market for the common stock is not a national securities exchange
and the common stock is not quoted on NASDAQ, the average of the
highest bid and lowest asked prices per share of common stock on
such day as reported on the NASDAQ OTC Bulletin Board Service or
by National Quotation Bureau, Incorporated or a comparable
service; provided, however, that if clauses (a), (b) and (c) of
this Paragraph are all inapplicable, or if no trades have been
made or no quotes are available for such day, the fair market
value of the Common Stock of the Company shall be determined by
the Board by any method consistent with applicable regulations
adopted by the Treasury Department relating to stock options.
7. Termination of Relationship. Except as may otherwise be
expressly provided in the applicable option agreement, any holder
of an option whose employment with the Company (and its
subsidiaries) has terminated for any reason may exercise such
option to the extent exercisable on the date of such termination,
at any time within the thirty (30) days after the date of
termination, but not thereafter and in no event after the date
the option would otherwise have expired, provided, however, that
if such relationship was terminated either (a) for cause or (b)
without the consent of the Company (other than as a result of the
death or disability of the holder), the option shall terminate
immediately.
8. Exercise of Options. Subject to the terms of the Option
Agreement, any option granted under the 1997 Plan may be
exercised from time to time in whole or in part, by the
participant, or by a legatee or legatees of such option under
such participant's last will, or by such participant's executors
by delivering to the Company at its main office (attention Chief
Financial Officer) written notice of the number of shares with
respect to which the option is being exercised accompanied by
full payment to the Company of the purchase price of the shares
being purchased. Payment for the options exercised shall be
either in (i) cash or check, bank draft or money order payable to
the order of Prime Capital Corporation (collectively, "cash"), or
(ii) with the consent of the Board, shares of common stock of the
Company (valued as of the date of the notice of exercise) with a
value equal to or less than the total option price, plus cash in
the amount, if any, by which the total option price exceeds the
value of such shares of common stock. In the case of payment in
stock, such payment shall be made by delivery of the necessary
share certificates, with executed stock powers attached, to the
Chief Financial Officer of the Company or, if such certificates
have not yet been delivered to the optionee, by written notice to
the Chief Financial Officer of the Company, requesting that the
shares represented by such certificates be applied toward
payments hereinabove.
9. Vesting. Vesting will be determined by the Committee per
each Option Agreement. Any shares not vested prior to the
termination of the Optionee's employ will be forfeited and shall
again become available for the granting of options under the
Plan.
10. Repurchase of Shares on Termination of Employment or
Directorship and Restrictions on Shares. Shares issued upon
exercise of options under this Plan shall not be sold,
transferred, assigned, pledged, or otherwise encumbered, except
by will or by the laws of descent and distribution, at a time at
which they are (1) subject either to the Company's right to
repurchase the shares or to a requirement that the Company
repurchase such shares, as set forth in this Section 10
(collectively the "right to repurchase"), or to other
restrictions on disposition of the shares as the Board shall
impose pursuant to the terms of the Option Agreement or (2)
pledged as collateral for any loan from the Company.
Each Option Agreement shall state whether the shares granted
thereunder shall be subject to the right of the Company to
repurchase such shares and the terms and conditions of such
repurchase. In the event that the Company shall have the right
of repurchase, then the following terms and provisions of this
Section shall apply.
If an optionee's employment by the Company terminates within a
specified period after a grant of an option to such optionee
under this Plan or, in the case of an optionee who is a non-
employee director, if such optionee ceases to be a director of
the Company within a specified period after a grant of an option
to the optionee under the Plan, or in any case if such optionee
attempts to dispose of shares issued upon exercise of such
options other than as allowed under this Plan, the Company shall
have the right in its sole discretion to repurchase from such
optionee at the option price a number of the shares issued
pursuant to such grant up to but not exceeding the number of
shares originally subject to such grant multiplied by the
applicable percentage established by the Board in the Option
Agreement which corresponds to the number of years since such
grant.
The Board may, in its discretion but consistently within the
intent of the foregoing, prescribe such repurchase periods as it
shall from time to time determine.
In the event of (i) a merger in which the Company is not the
continuing or surviving entity (or a reverse subsidiary merger or
consolidation in which the Company is, in effect, acquired by
another corporation), other than a merger which effects only a
change in the jurisdiction of incorporation of the Company, (ii)
an acquisition of all or substantially all of the Company's
assets by another entity which then conducts the business of the
Company, or (iii) a transfer of more than 50% of the voting power
of the Company in one transaction or a series of related
transactions (each of which events shall hereinafter be called a
"major corporate transaction"), the right of repurchase contained
in this Section 10 shall cease to be effective as of the
effective date of such transaction, except to the extent
expressly provided in the Option Agreement.
The right of repurchase shall be determined separately for
each separate grant of options to such optionee and may be
exercised by the Company by means of a refusal to issue shares
with respect to options exercised pursuant to Section 8 hereof
after such termination of employment or after the optionee ceases
to be a director of the Company, as the case may be, to the
extent that such shares would have been subject to such right of
repurchase if such options had been exercised prior to such
termination or such cessation. The Company may assign the right
of repurchase arising under this Section 10 with respect to any
share of common stock to any party.
Each Option Agreement shall provide for enforcement of the
restrictions and the right of repurchase set forth in this
Section 10. In aid of such enforcement, the optionee shall,
immediately upon receipt of the certificate or certificates for
shares issued pursuant to exercise of options issued under this
Plan, deposit such certificate or certificates together with a
stock power or other instrument of transfer, appropriately
endorsed in blank, in escrow under a deposit agreement containing
such terms and conditions as the Board shall approve with an
escrow agent designated pursuant to such agreement, the expenses
of such escrow to be borne by the Company.
The right of repurchase shall be exercised by (1) written
notice to such escrow agent and to the owner of the shares being
repurchased within three months after the time of the optionee's
termination of employment or the time that the optionee ceases to
be a director of the Company, as the case may be, or, in any
case, the time that the Company receives written notice from the
Director or key employee of the proposed transfer or sale of
shares, and (2) payment by the Company to the optionee or his
legal representative of the amount due pursuant to such exercise
of the right of repurchase, provided that notice of exercise of
the right of repurchase by means of a refusal to issue shares
pursuant to options outstanding at the time of termination of the
optionee's employment or the time that optionee ceases to be a
director of the Company, as the case may be, may be made within
three months after the Company's receipt of written notice of the
exercise of such options from the optionee. Payment for
repurchase of such shares may be made by cancellation of a
corresponding amount of any note given to the Company by the
optionee or, in the event the outstanding balance of such note is
equal to the amount of the payment, by returning such note to the
optionee or his legal representative. The optionee whose shares
are repurchased shall forthwith return such shares to the
Company. The terms and conditions of this Section 10 shall be
binding on the heirs, executors or personal representatives of
the optionee, as the case may be.
11. Necessary Approvals. Each option granted under this Plan
shall be subject to the requirement that if at any time the Board
shall determine, in its discretion, that either the consent or
approval of any governmental authority or the listing,
registration or qualification of the shares subject to such
option upon any securities exchange or under any state or federal
law is necessary or desirable as a condition of, or in connection
with, the issuance or purchase of shares under such option, such
option may not be exercised in whole or in part and shares
thereunder may not be delivered, as the case may be, unless such
listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not
acceptable to the Board. Any option may be exercised only in
accordance with the provisions of all applicable laws.
12. Adjustments for Changes in Capitalization or Corporation
Reorganizations. Appropriate adjustments shall be made by the
Board in the maximum number and kind of shares to be issued under
this Plan to give effect to any stock splits, stock dividends and
other relevant changes in capitalization occurring after the
effective date of this Plan. If the Company shall effect a
merger, consolidation or other reorganization (other than a major
corporate transaction described in Section 10 hereof, to which
this Section 12 shall have no application), pursuant to which the
outstanding shares of common stock of the Company shall be
exchanged for other shares or securities of the Company or of
another corporation which is a party to such merger,
consolidation or other reorganization, the Company shall provide
in any agreement or plan which it enters into or adopts to effect
any such merger, consolidation or other reorganization that (1)
any holder of restricted shares of the Company issued pursuant to
this Plan shall receive in such transaction with respect to such
shares subject to substantially the same restrictions on
transferability as apply to such restricted shares, the kind and
number of shares or other securities of the Company or such other
corporation which are issuable to the owner of a like number of
unrestricted shares of the Company, and (2) any optionee under
this Plan shall have the right to purchase, at the aggregate
option price provided for in his Option Agreement and on the same
terms and conditions, the kind and number of shares or other
securities of the Company or such other corporation which would
have been issuable to him in respect of the number of shares of
common stock of the Company which were subject to such option
immediately prior to the effective date of such merger,
consolidation or other reorganization if such shares had been
then owned by him.
Any adjustment required as a result of the foregoing
provisions of this Section 12 shall be effected in such manner
that the difference between the aggregate fair market value of
the shares or other securities subject to the option immediately
after giving effect to such adjustment and the aggregate option
price of such shares or other securities shall be substantially
equal to (but shall not be more than) the difference between the
aggregate fair market value of the shares subject to such option
immediately prior to such adjustment and the aggregate option
price of such shares. Any adjustment made under this Section 12
shall be determined by the Board.
13. Amendment of the Plan. The Board may from time to time in
its discretion amend or modify the Plan without the approval of
the stockholders of the Company, except as such stockholder
approval shall be required (a) to permit the grant of Awards
under, and transaction in Stock pursuant to the Plan to be exempt
from liability under Section 16(b) of the 1934 Act or (b) to
comply with the listing requirements of any national securities
exchange on which are listed any of the Company's equity
securities, (c) to increase the maximum number of shares
available for issuance under this Plan, (d) to change the maximum
number of shares that may be subject to options granted to any
optionee under this Plan, (e) to change the designation of
persons eligible to receive options under this Plan, (f) to
change the purchase price at which shares may be sold pursuant to
options granted under this Plan, or (g) to change the rights or
obligations of the Company with respect to the right of
repurchase. Notwithstanding the foregoing, the provisions
regarding the selection of directors for participation in and the
amount, the price or the timing of, Non-Employee Director Options
shall not be amended more than once every six (6) months, other
than to comport with changes in the Internal Revenue Code of
1986, the Employee Retirement Income Security Act or the rules
thereunder. No termination, suspension or amendment of the Plan
shall, without the consent of the holder of an existing option
affected thereby, adversely affect his rights under such option.
The power of the Board and/or Committee to construe and
administer any options granted under the Plan prior to the
termination or suspension of the Plan nevertheless shall continue
after such termination or during such suspension.
14. Substitutions and Assumptions of Options of Certain
Constituent Corporation. Anything in this Plan to the contrary
notwithstanding, the Board of Directors may, without further
approval by the shareholders, substitute new options for prior
options of a Constituent Corporation or assume the prior options
of such Constituent Corporation.
15. Securities Law Restrictions. No securities shall be issued
under this Plan unless the Committee shall be satisfied that the
issuance will be in compliance with applicable federal and state
securities laws. Further, the Committee may require certain
investment (or other) representations and undertakings in
connection with the issuance of securities in connection with the
Plan in order to comply with applicable law.
16. Indemnification. To the maximum extent permitted by law,
the Company shall indemnify each member of the committee and the
Board, as well as any other employee of the Company with duties
under this Plan, against expenses (including any amount paid in
settlement) reasonably incurred by the individual in connection
with any claims against the individual by reason of the
performance of the individual's duties under this Plan, unless
the losses are due to the individual's gross negligence or lack
of good faith. The Company will have the right to select counsel
and to control the prosecution or defense of the suit. The
Company will not be required to indemnify any person for any
amount incurred through any settlement unless the Company
consents in writing to the settlement.
17. Governing Law. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and
construed in accordance with, the laws of the State of Delaware,
without regard to conflict of law provisions.
