QUIPP, INC.
ANNUAL MEETING OF SHAREHOLDERS - MAY 14, 1996
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints RALPH M. BRANCA, JACK D. FINLEY and LOUIS D.
KIPP, with full power of substitution, proxies of the undersigned to represent
the undersigned and to vote all shares of Common Stock of Quipp, Inc. which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of Quipp, Inc. to be held at the Company offices at 4800
NW 157 Street, Miami, Florida, 33014, at 10:00 AM, EDT on May 14, 1996 and at
any adjournment thereof, subject to the directions indicated below.
1. Election of Directors:
Nominees are: Ralph M. Branca, Richard H. Campbell, Jack D. Finley,
Cristina H. Kepner, Louis D. Kipp and William L. Rose.
[ ] FOR all nominees listed above
[ ] WITHHOLD AUTHORITY to vote for nominees
[ ] WITHHOLD AUTHORITY to vote for nominees indicated on the line
immediately below
2. Proposal to amend the Articles of Incorporation
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to adopt the Quipp, Inc. 1996 Equity Compensation Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants for 1996.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Note: THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE
5. To vote on such other matters that may properly come before the meeting.
If no directions are given, the shares will be voted FOR the election of the
listed nominees for director and FOR the proposal to amend the Articles of
Incorporation, FOR the proposal to approve the Quipp, Inc. 1996 Equity
Compensation Plan and FOR the ratification of KPMG Peat Marwick LLP. This Proxy
also delegates discretionary authority to vote with respect to any other matters
that may properly come before the meeting or any adjournment or postponement
thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF QUIPP, INC.
Date: _______________________,1996 _________________________________
Signature
_________________________________
Signature
NOTE: Please sign this proxy exactly as name(s) appear hereon.
When signing as attorney-in-fact, executor, administrator, trustee,
or guardian, please add your title as such, and if signed as a
corporation, please sign with full corporate name by duly authorized
officer or officers and affix the corporate seal. Where stock is issued
in the name of two or more persons, all such persons should sign.
SCHEDULE 14A INFORMATION
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:
[X] 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 Rule 14a-11(c) or Rule 14a-12
QUIPP, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(j)(2) or Item
22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Dated Filed:
QUIPP, INC.
4800 NW 157 STREET
MIAMI, FLORIDA 33014
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 14, 1996
To the Shareholders of Quipp, Inc.:
Notice is hereby given that the 1996 Annual Meeting of Shareholders of Quipp,
Inc. (the "Company") will be held at its corporate offices at 4800 NW 157
Street, Miami, Florida on May 14, 1996 at 10:00 A.M. Eastern Daylight Time, for
the following purposes:
(1) To elect six members of the Board of Directors to serve for the
ensuing year and until their respective successors have been duly elected and
qualified.
(2) To vote upon a proposal to amend the Company s Articles of
Incorporation to increase the number of shares of Common Stock that the Company
is authorized to issue to 8,000,000 shares.
(3) To vote upon a proposal to approve the Quipp, Inc. 1996 Equity
Compensation Plan.
(4) To ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants to examine the financial statements of the Company for 1996,
and
(5) To act upon such other matters that may properly be presented at the
Meeting or any adjournment or postponement thereof.
The close of business on April 8, 1996 has been fixed as the record date for the
meeting. Only shareholders of record at that time are entitled to notice of and
to vote at the meeting or any adjournment thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached proxy statement for further information with
respect to the business to be conducted at the meeting. The Board of Directors
urges you to sign, date and return promptly the enclosed form of proxy. The
return of the enclosed proxy will not affect your right to vote in person if you
do attend the Meeting.
Miami, Florida By Order of the Board of Directors
April 22,1996
Alan Singer
Secretary
TO ASSURE PROPER REPRESENTATION AT THE MEETING, ALL SHAREHOLDERS ARE EARNESTLY
REQUESTED TO FILL IN AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ACCOMPANYING POSTAGE-PAID ENVELOPE.
QUIPP, INC.
4800 NW 157 STREET
MIAMI, FLORIDA 33014
PROXY STATEMENT
This Proxy Statement is furnished to the holders of Common Stock (the "Common
Stock") of Quipp, Inc. (the "Company"), a Florida corporation, in connection
with the solicitation of proxies by the Company's Board of Directors for use at
the 1996 Annual Meeting of Shareholders (the "Meeting") to be held at the
Company's corporate offices at 4800 NW 157 Street, Miami, Florida on May 14,
1996 at 10:00 A.M., Eastern Daylight Time, and at any adjournment or
postponement thereof.
This Proxy Statement, the foregoing notice and the enclosed proxy are being sent
to shareholders on or about April 22, 1996. The shareholders of record at the
close of business on April 8, 1996 (the "Record Date") are entitled to notice
of, and to vote at the Meeting.
If the enclosed proxy is properly executed and returned in time for voting, the
shares of Common Stock represented thereby will be voted as indicated in such
proxy. In the absence of instructions, proxies will be voted FOR the election
of the nominees of the Board of Directors, FOR the proposal to amend the
Company s Articles of Incorporation, FOR the proposal to approve the Quipp, Inc.
1996 Equity Compensation Plan and FOR ratification of the appointment of KPMG
Peat Marwick LLP as the Company's independent public accountants for 1996.
Proxies will extend to, and will be voted at any adjourned or postponed session
of the Meeting. The Board of Directors is not aware of any matters to come
before the Meeting other than those described in this Proxy Statement. If any
other matters properly come before the Meeting, the persons named in the
enclosed proxy will vote such proxy in accordance with their best judgment with
respect to such matters. At any time before it is exercised, a proxy may be
revoked by a shareholder by delivering a duly executed proxy bearing a later
date, by notice to the Secretary of the Company in writing at the address set
forth above or by voting by ballot at the Meeting.
VOTING SECURITIES AND SECURITY OWNERSHIP
General
On April 8, 1996, there were outstanding 1,634,465 shares of Common Stock, $.01
par value (the "Common Stock"), which constitutes the only class of voting
securities of the Company. Holders of Common Stock are entitled to one vote per
share, exercisable in person or by proxy, at all meetings of shareholders. The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of Common Stock of the Company is required to constitute a quorum in
order to transact business at the Meeting.
Directors are elected by a plurality of votes cast. Generally, under Florida
law, action on a matter, other than the election of directors, is approved if
the votes cast on the subject matter favoring the action exceed the votes cast
opposing the action. Accordingly, abstentions will have no effect on the vote.
In addition, where brokers are prohibited from exercising discretionary
authority in voting shares for beneficial owners who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will not
be included in vote totals.
Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information concerning ownership of the
Common Stock of the Company as of March 8, 1996 by (a) each shareholder known by
the Company to beneficially own more than five percent of the Common Stock, (b)
each director and each nominee for election as a director of the Company, (c)
each executive officer of the Company and (d) all directors and executive
officers of the Company as a group. Except as otherwise noted, each person
listed below, either alone or together with such person's family, had sole
voting and investment power with respect to the shares listed next to such
person's name. This table does not include shares underlying stock options
granted under the Quipp, Inc. 1996 Equity Compensation Plan, which is subject
to shareholder approval. See Proposal to Adopt Quipp, Inc. 1996 Equity
Compensation Plan .
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class
Louis D. Kipp (1) 101,705 6.2%
Jack D. Finley 44,875 2.7%
William L. Rose 10,550 *
Ralph M. Branca 2,000 *
Richard H. Campbell 0 *
Cristina H. Kepner (2) 3,000 *
Kenneth G. Langone (3) 146,500 9.0%
James E. Pruitt (4) 103,706 6.3%
All directors and officers
as a group 412,336 25.2%
* Less than 1 %
(1) The address of Mr. Kipp is Quipp, Inc., 4800 NW 157 Street, Miami, Florida
33014.
(2) Does not include shares held by Invemed Associates, Inc. (see Note 3).
Ms. Kepner is Executive Vice President of Invemed Associates, Inc.
(3) Includes 45,400 shares held by Invemed Associates, Inc. Mr. Langone is
the President of Invemed Associates, Inc. and 81 % owner of its corporate
parent. The address of Mr. Langone is Invemed Associates, Inc., 375 Park Avenue,
New York, New York 10152.
(4) The address of Mr. Pruitt is 2960 North Riverside Drive, Indiatlantic, FL
32903.
ELECTION OF DIRECTORS
Nominees for Election
At the Meeting, the shareholders will elect six directors to hold office until
the Annual Meeting of Shareholders in 1997 and until their respective
successors are duly elected and qualified. Unless contrary instructions are
given, the shares represented by a properly executed proxy will be voted "FOR"
the election of the following nominees: Ralph M. Branca, Richard H. Campbell,
Jack D. Finley, Cristina H. Kepner, Louis D. Kipp, and William L. Rose. All of
the nominees, except Mr. Campbell, are currently members of the Board of
Directors of the Company.
The Board of Directors believes that all the nominees will be able to serve as
directors. If any nominee is unable to serve, the persons named in the enclosed
proxy will vote the shares they represent for the election of such other persons
as the Board of Directors may recommend, unless the Board of Directors reduces
the number of directors.
Set forth below is certain information concerning the nominees for
election as directors:
Name Age Position with the
Company
Ralph M. Branca 60 Director
Richard H. Campbell 60 ---------
Jack D. Finley 68 Director
Cristina H. Kepner 49 Director
Louis D. Kipp 64 Treasurer and
Director
William L. Rose 70 Director
Mr. Branca has been President and Chief Executive Officer of the Company since
May 1995 and a director of the Company since July 1991. He has also been
president of RMB Associates, a business consulting firm that he owns, since
November 1989. Prior to November 1989, he was employed by Emhart Corporation,
where he held numerous positions, the most recent of which was Corporate Vice
President of Operations.
Mr. Campbell has been President of Seacoast Consulting, a private business
consulting firm, since August 1994. He was Group Vice President of the
Commercial and Outdoor Products Group of Textron, Inc. from March 1992 to August
1994. From 1989 to March 1992 he was Group Vice President of Black and Decker
Corporation and also served as President of that company s Hardware and Home
Improvement Group. Prior to that time, he was Executive Vice President of
Emhart Corporation and President of that company s Consumer Sector Group until
the company was acquired by the Black and Decker Corporation.
Mr. Finley has been a director of the Company since July 1989. He has been an
independent business investor and advisor since 1986. From 1968 to 1986, he
served in various capacities with Eikonix Corporation, a developer and producer
of color scanners, which he co-founded. He was Executive Vice-President and,
subsequently, Chairman of the Board of Eikonix Corporation until the company was
sold to Eastman Kodak Company in 1985.
Ms. Kepner has been a director of the Company since January 1995. She has been
Executive Vice President of Invemed Associates, Inc., an investment banking
firm, since February 1978. Ms. Kepner is also a director of NeoPath, Inc.
Mr. Kipp has been President of Quipp Systems, Inc., since July 1987, Treasurer
of the Company since October 1990, and a director of the Company since July
1995. He also served previously as a director of the Company from August 1987
to January 1995. Mr. Kipp was President and Treasurer of the Company from
August 1983 to July 1987.
Mr. Rose has been a director of the Company since it commenced operations in
August 1983. From July 1982 to June 1991, he was President and Chairman of the
Board of Technit, Inc., a supplier of EMI shielding for the electronics
industry. Since 1991, he has remained a director of Technit, Inc. and also
serves as director of Armtex, Inc., a textile manufacturer.
Meetings and Committees of the Board of Directors
The Board of Directors held five meetings during 1995. The Board has an Audit
Committee and a Compensation Committee, whose members also perform the function
of a nominating committee.
The Audit Committee is currently comprised of Messrs. Finley and Rose and James
E. Pruitt, who is not standing for reelection. The principal functions of the
Audit Committee are to recommend to the Board of Directors the engagement of the
independent auditors and to review with the auditors the plan and results of the
audit engagement and the adequacy of the Company's system of internal accounting
controls. The Audit Committee met four times during 1995.
The Compensation Committee is currently comprised of Messrs. Finley and Rose and
Ms. Kepner. The principal functions of the Compensation Committee are to
recommend to the Board of Directors the salary, bonus and other benefits of
members of senior management, to review new executive compensation plans, to
administer certain of the Company's benefit plans and to recommend to the Board
of Directors nominees for election to the Board of Directors and the
compensation of the directors. The Compensation Committee met three times
during 1995.
Compensation of Directors
The Company currently pays each non-employee director a fee of $ 1,200 for
attendance at each meeting of the Board of Directors ($400 if the director
participates by telephone) and $200 for each meeting of a Board committee.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation paid
or accrued by the Company during the years ended December 31, 1995, 1994 and
1993 with respect to the Company's only executive officers during the year ended
December 31, 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Other Annual All Other
Position Year Salary Bonus Compensation(l) Compensation(2)
<S> <C> <C> <C> <C> <C>
Louis D. Kipp, 1995 $110,000 $51,780 $ --- $1,494
Vice President and 1994 $110,657 $ 4,007 $ --- $1,078
Chief Operating Officer 1993 $108,000 $ 5,000 $ 2,200(4) $1,130
Ralph M. Branca, 1995 $ 30,000 $ --- $ --- $ ---
Chief Executive Officer
and President(3)
James E. Pruitt, 1995 $ 5,400 $46,677 $ --- $ ---
Chief Executive 1994 $109,776 $ 4,007 $12,088 $1,056
Officer and President(5) 1993 $130,100 $ 5,000 $ 0 $1,340
<FN>
(1) In accordance with Securities and Exchange Commission regulations,
perquisites and other personal benefits are included for any year in which they
amounted to more than 10% of the executive officer s total salary and bonus.
(2) Constitutes amount contributed by the Company, for the benefit of the
executive officers, to the Company's Employee Savings and Investment Plan.
(3) Mr. Branca was elected President and Chief Executive Officer in May 1995.
(4) Constitutes the purchase of an automobile utilized by Mr. Kipp for
business and personal purposes, as well as related insurance and other costs.
(5) Mr. Pruitt resigned as Chief Executive Officer and President effective
May 1995.
</TABLE>
Option Exercises
The following table sets forth certain information regarding stock options
exercised by the Company s executive officers during 1995. At December 31,
1995, none of the Company s executive officers held any stock options:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
Shares Acquired
on Value
Name Exercise Realized ($) (1)
Ralph M. Branca ----- -----
Louis D. Kipp 25,000 $218,750
James E. Pruitt 100,000 $842,500
(1) Based on the closing price of the Company s Common Stock on dates of
exercise.<PAGE>
Employment Agreement
Pursuant to an Employment Agreement dated as of May 1, 1995 with Mr. Kipp,
Quipp Systems, Inc. ("Quipp Systems") has agreed to employ Mr. Kipp through
April 30, 1997 at a salary of $110,000 per year, plus any additional
compensation granted by the Board of Directors of Quipp Systems. In addition,
Quipp Systems agreed to pay an incentive bonus to Mr. Kipp pursuant to the
Company's Executive Incentive Compensation Plan in an amount to be set by the
Board of Directors of the Company or a Committee of the Board of Directors.
The Employment Agreement provides that if Mr. Kipp voluntarily terminates his
employment with Quipp Systems, then Quipp Systems will continue Mr. Kipp's
health insurance coverage for either 24 months (if Mr. Kipp terminates his
employment before reaching age 65), or for a period of 60 months (if Mr. Kipp
terminates his employment after reaching age 65), provided Mr. Kipp pays 100
percent of the cost of such health insurance coverage, but in no event more than
the premium for any similarly situated full-time employee. Any insurance
provided by Quipp Systems shall be subordinated to any other health insurance
for which Mr. Kipp is eligible, subject to reimbursement of certain Medicare
premiums.
In the event there is an "involuntary termination" of Mr. Kipp during the term
of the employment agreement, Quipp Systems will pay to Mr. Kipp his salary
through the termination date of the Employment Agreement or one year's annual
salary, whichever is greater. In addition, Quipp Systems will continue Mr.
Kipp's health insurance coverage (including family coverage) until Mr. Kipp's
70th birthday on terms similar to those described above. In addition, in the
event of an "involuntary termination," options to purchase Company shares held
by Mr. Kipp will become immediately exercisable.
Under the Employment Agreement, an "involuntary termination" will be deemed to
have occurred in the event that (i) Quipp Systems terminates Mr. Kipp's
employment for any reason other than fraud, conviction of a crime involving
moral turpitude, willful misconduct or gross negligence in the performance of
his duties or responsibilities under the agreement or (ii) if Mr. Kipp
voluntarily terminates employment with Quipp Systems within 90 days of his
demotion, change in duties, reduction in compensation, or relocation more than
50 miles of the principal place of business of Quipp Systems.
In the event of a termination upon a "Change of Control" (as defined in the
Agreement) the Company will pay to Mr. Kipp an amount equal to three times his
base salary in effect either immediately prior to the Change of Control or
immediately prior to his termination following a Change of Control, whichever is
higher, subject to certain limitations. Moreover, the Company will continue Mr.
Kipp's health insurance on the same terms as would be applicable in the event of
an "involuntary termination." In addition, upon a Change of Control, any
options to purchase Company shares held by Mr. Kipp will become immediately
exercisable.
PROPOSAL TO AMEND THE COMPANY'S
ARTICLES OF INCORPORATION TO INCREASE
THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors is recommending to the shareholders of the Company a
proposed amendment to Article III of the Company's Articles of Incorporation
that would increase the number of authorized shares of the Common Stock of the
Company from 3,000,000 shares to 8,000,000 shares.
On April 8, 1996 there were 1,634,465 shares of Common Stock issued and
outstanding. Additionally, if the Quipp, Inc. 1996 Equity Compensation Plan is
approved, 400,000 shares will be reserved for issuance under that plan.
Adoption of this proposal would permit the Company's Board of Directors, without
further approval of the Company's shareholders, except as may be required by
Florida law or under Nasdaq National Market designation criteria to issue
additional shares of the Company's Common Stock, from time to time as the Board
of Directors may determine, for such consideration as the Board of Directors
establishes.
The Board of Directors believes that the availability of additional shares of
Common Stock would provide flexibility in structuring possible acquisition of
other businesses, enable the Company to raise additional equity capital, if and
when needed, and allow the Board of Directors, at its discretion, to declare
stock splits or stock dividends in the future. The Company has no present
arrangements or understandings with respect to possible acquisitions,
financings, stock splits or dividends requiring the availability of additional
authorized Common Stock.
Although the Board of Directors would only authorize the issuance of additional
shares of Common Stock based on its judgment as to the best interests of the
Company and its shareholders, the issuance of additional authorized shares could
have the effect of dilution of the voting power or book value per share of the
outstanding shares of Common Stock. The Board of Directors (if consistent with
its fiduciary responsibilities) may also issue shares to deter future attempts
to gain control over the Company.
If the proposed amendment is approved, the Common Stock would remain the only
authorized class of Company securities if the proposal is approved.
If the proposed amendment is approved, the text of Article III of the Company's
Articles of Incorporation will be as follows:
"The aggregate number of shares which this corporation shall have
authority to issue is 8,000,000 shares of Common Stock, $.01 par value."
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE PROPOSAL TO AMEND THE
COMPANY'S ARTICLES OF INCORPORATION.
APPROVAL OF QUIPP, INC. 1996 EQUITY COMPENSATION PLAN
At the Meeting, there will be presented to the shareholders a proposal to
approve the adoption of the Quipp, Inc. 1996 Equity Compensation Plan (the
"Equity Compensation Plan"). The Equity Compensation Plan was adopted by the
Board of Directors on March 15, 1996, subject to shareholder approval. The
Company believes that the Equity Compensation Plan will be an incentive to the
participants to contribute materially to the growth of the Company, thereby
benefitting the Company's shareholders, and will align the economic interests of
the participants with those of the shareholders.
The Equity Compensation Plan provides for (i) grants of stock options ("Stock
Options") and stock-based awards ("Awards") to employees of the Company and its
subsidiary and certain consultants and advisors, (ii) grants of Stock Options to
non-employee members of the Board of Directors of the Company ("Non-employee
directors") and (iii) grants of Restricted Stock ("Restricted Stock Grants") to
employees of the Company and its subsidiary. If the Company has additional
subsidiaries in the future, the Equity Compensation Plan will apply to employees
of, and certain consultants and advisors to, such subsidiaries.
The Equity Compensation Plan will replace the Quipp, Inc. 1990 Incentive Stock
Option Plan (the "1990 Plan"). Under the 1990 Plan, 100,000 shares of Common
Stock remain available for grant. The 1990 Plan will be terminated, and such
shares will not be issued under the 1990 Plan, if the Equity Compensation Plan
is approved.
The key provisions of the Equity Compensation Plan are as follows:
General. The Equity Compensation Plan authorizes up to 400,000 shares of Common
Stock for issuance pursuant to the terms of the Equity Compensation Plan,
subject to adjustment in certain circumstances as discussed below. If and to
the extent Stock Options granted under the Equity Compensation Plan terminate,
expire or are canceled without being exercised, or if any shares of restricted
stock are forfeited, the shares subject to such Stock Option or Restricted Stock
Grant will become available again for purposes of the Equity Compensation Plan
(in the case of a Restricted Stock Grant, regardless of whether such grant
provided voting or dividend rights to the participant). No Grantee may receive
grants of Stock Options, Restricted Stock Grants or Awards for more than an
aggregate of 100,000 shares of Common Stock during the term of the Equity
Compensation Plan.
Administration of the Equity Compensation Plan. The Equity Compensation Plan
provides that is to be administered and interpreted by the Board of Directors or
a committee of not less than two persons appointed by the Board of Directors
from among its members, each of whom must be an "outside director" as defined by
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
The Board or such committee is hereinafter referred to as the "Committee." The
Compensation Committee of the Board of Directors will initially serve as the
Committee. Except as set forth in the Equity Compensation Plan with respect to
Non-employee directors, the Committee has the sole authority to determine (i)
persons to whom Stock Options or Restricted Stock Grants (collectively,
"Grants") or Awards may be granted under the Equity Compensation Plan, (ii) the
type, size and other terms and conditions of each Grant or Award, (iii) the time
when the Grants or Awards will be made and (iv) any other matters arising under
the Equity Compensation Plan.
The Committee will have full power and authority to administer and interpret the
Equity Compensation Plan, to make factual determinations and to adopt or amend
such rules, regulations, agreements and instruments for implementing the Equity
Compensation Plan and for conduct of its business as it deems necessary or
advisable, in its sole discretion.
Grants and Awards. All Grants and Awards are subject to the terms and
conditions set forth in the Equity Compensation Plan and to those other terms
and conditions consistent with the Equity Compensation Plan as the Committee
deems appropriate and as are specified in writing by the Committee to the
designated participant (the "Grant Letter"). The Committee must approve the
form and provisions of each Grant Letter. Grants and Awards under the Equity
Compensation Plan need not be uniform among other recipients of the same type of
Grant or Award.
Eligibility for Participation. The Compensation Committee is responsible for
designating employees of the Company and its subsidiary and consultants and
advisors of the Company, who are eligible to participate in the Equity
Compensation Plan. As of March 23, 1996, approximately 123 employees were
eligible for Grants or Awards under the Equity Compensation Plan. The
Compensation Committee is authorized to select the persons to receive Grants or
Awards (the "Grantees") from among those eligible and to determine the number of
shares of Common Stock that are subject to each Grant or Award. To be eligible,
consultants and advisors must render bona fide services and such services must
not be in connection with the offer or sale of securities in a capital raising
transaction. In addition, Non-employee directors may receive Grants of Stock
Options only as described below under "Formula Grants to Non-employee
Directors." Such grants of Stock Options to Non-employee directors are referred
to below as "Formula Grants."
Stock Options. The Committee may grant Stock Options intended to qualify as
incentive stock options ("ISOs") within the meaning of section 422 of the Code
or so-called "non-qualified stock options" that are not intended to so qualify
("NQSOs") or any combination of ISOs or NQSOs. Only employees of the Company or
its subsidiary may receive ISOs.
The Committee fixes the option price per share at the date of Grant. The option
price per share of any ISO or NQSO granted under the Equity Compensation Plan
may not be less than the fair market value of an underlying share of Common
Stock on the date of grant. However, if the Grantee of an ISO is a person who
holds more than 10% of the combined voting power of all classes of outstanding
stock of the Company, the option price per share of an ISO must be at least 110%
of the fair market value of a share of Common Stock on the date of grant. To
the extent that the aggregate fair market value of shares of Common Stock,
determined on the date of grant, with respect to which ISOs granted under the
Equity Compensation Plan and any other plan become exercisable for the first
time by a Grantee during any calendar year exceeds $100,000, such ISOs, to the
extent of such excess, must be treated as NQSOs. Currently, the measure of fair
market value of a share of Company Common Stock on a particular date is the
closing sale price of a share of Common Stock as reported on the Nasdaq National
Market on that date. On April 5, 1996, the closing price per share of the
Company's Common Stock, as reported on Nasdaq, was $12.00.
The Committee determines the term of each Stock Option, which may not exceed ten
years from the date of grant or, if the Grantee of an ISO is a person who holds
more than 10% of the combined voting power of all classes of outstanding stock
of the Company, five years from the date of grant. The vesting period for Stock
Options, if any, will be as determined by the Committee, in its sole
discretion, and specified in the Grant Letter. The Committee, in its sole
discretion, may accelerate the exercisability of any Stock Option, other than a
Stock Option subject to a Formula Grant to a Non-employee director and then held
by a Non-employee director. A Grantee may exercise a Stock Option by delivering
notice of exercise to the Committee with accompanying payment of the option
price. The Grantee may pay the option price in cash, or, with the approval of
the Committee, by delivering shares of Common Stock already owned by the Grantee
for the period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and having a fair market value on the date of
exercise equal to the option price or with a combination of cash and shares of
Common Stock or (except with respect to Formula Grants held by Non-employee
directors) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board ("Regulation T Payment"). Non-employee directors
who receive Formula Grants may make Regulation T payments with respect to the
Stock Options underlying the Formula Grants. The Grantee must pay, at the time
of exercise, the option price and the amount of any federal, state or local
withholding tax due in connection with such Stock Option exercise.
Formula Grants to Non-employee Directors. Under the Equity Compensation Plan,
each Non-employee director who was a member of the Board of Directors on March
15, 1996 and was not previously an employee of the Company, or its subsidiary,
received an NQSO to purchase 5,000 shares of Common Stock. In addition each
Non-employee director who first becomes a member of the Board of Directors after
March 15, 1996 and who was not previously an employee of the Company or its
subsidiary will automatically receive a Grant of an NQSO to purchase 5,000
shares of Common Stock immediately upon his or her becoming a member of the
Board of Directors. In addition, beginning with the 1997 Annual Meeting of
Shareholders, each Non-employee director in office immediately after the annual
election of directors (excluding any directors first elected at such meeting)
will automatically receive, immediately after such election, a Grant of an NQSO
to purchase 5,000 shares of Common Stock. Stock Options granted to Non-employee
directors will have a per share exercise price equal to the fair market value of
a share of Common Stock on the date of grant and will be fully exercisable on
the date of grant. Stock Options granted to Non-employee directors will have a
term of ten years from the date of grant, subject to earlier termination as
described below under "Termination of Stock Options as a Result of Termination
of Employment, Disability or Death." Three Non-employee directors each were
automatically granted Stock Options to purchase 5,000 shares of Common Stock on
March 15, 1996, at an exercise price of $12.1875 per share and, if he is elected
to the Board of Directors at the meeting, Mr. Campbell will automatically
receive a Stock Option to purchase 5,000 shares of Common Stock. It is
anticipated that four Non-employee directors will be entitled to receive annual
grants of such Stock Options after the Meeting.
Termination of Stock Options as a Result of Termination of Employment,
Disability or Death. If a Grantee ceases to serve as an employee, director,
consultant or advisor to the Company or its subsidiary for any reason other than
disability, death or termination for cause, such person's Stock Option will
terminate 90 days following the date on which he or she ceases to serve. If
such person's service ceases due to the person becoming disabled within the
meaning of Section 22(e)(3) of the Code, such person's Stock Option will
terminate one year following the date on which he or she ceases to serve. In
the event of the death of such person, while providing such service or within
three months after he or she ceases to serve, such person's personal
representative may exercise the Stock Option until one year from the date of
death. If such person's service ceases due to termination by the Company for
cause (as defined in the Equity Compensation Plan), such person's Stock Options
will terminate immediately. However, in each case described above (except with
respect to Formula Grant, held by Non-employee director), the Committee may
specify a different termination date, but in any event no later than the date of
expiration of the option term.
Restrictions on Transferability of Stock Options. Subject to the exceptions set
forth in the following sentence, no Stock Option granted under the Equity
Compensation Plan may be transferred, except by will or the laws of descent and
distribution. However, (i) an NQSO may be transferred pursuant to a "qualified
domestic relations order," within the meaning of Sections 401(a)(13) and 414(p)
of the Code or of Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and (ii) the Committee may provide, in a Grant
Letter, that a Grantee my transfer Stock Options to his or her children,
grandchildren or spouse or to one or more trusts for the benefit of such family
members or to partnerships in which such family members are the only partners,
provided that the Grantee receives no consideration for the transfer and the
Grant Letters relating to the transferred Stock Options continue to be subject
to the same terms and conditions that were applicable immediately prior to such
transfer.
Restricted Stock Grants. The Committee may issue shares of Common Stock to a
participant under a Restricted Stock Grant for no consideration unless otherwise
required by law. The Grant Letter relating to a Restricted Stock Grant will
provide for a period during which the Grant will remain subject to certain
restrictions, including restrictions on transferability (the "Restriction
Period"). During the Restriction Period, a Grantee may not sell, assign,
transfer, pledge or otherwise dispose of the shares of Common Stock to which
such Restriction Period applies, except as provided by the Committee. If so
determined by the Committee, a Grantee may have voting rights and the right to
receive dividends during the Restricted Period with regard to the Restricted
Stock Grant. If a Grantee's employment terminates during the Restriction
Period, the Restricted Stock Grant will terminate with respect to all shares of
Common Stock covered by the Grant as to which the restriction has not lapsed,
and those shares of Common Stock will be forfeited by the Grantee. All
restrictions imposed under the Restricted Stock Grant lapse upon the expiration
of the applicable Restriction Period. In addition, the Compensation Committee
may determine as to any or all Restricted Grants that all restrictions will
lapse under such circumstances as it deems appropriate.
Stock-Based Awards. Subject to limitations of applicable law, the Committee may
grant to participants other than Non-employee directors Awards of Company Common
Stock purely as a "bonus" and not subject to any restrictions or conditions.
Amendment and Termination of the Equity Compensation Plan. The Board of
Directors may amend or terminate the Equity Compensation Plan at any time.
Nevertheless, the Board of Directors may not, without obtaining shareholder
approval, change the class of individuals eligible to receive an ISO, or
increase the maximum number of shares as to which Grants or Awards may be made
under the Equity Compensation Plan or the individual limit for any single
participant. In addition, provisions of the Equity Compensation Plan relating
to Formula Grants to Non-employee Directors may not be amended more than once
every six months, other than to comport with changes in the Code or ERISA.
The Equity Compensation Plan will terminate on March 14, 2006 unless terminated
earlier by the Board of Directors or extended by the Board of Directors with
approval of the shareholders. The Equity Compensation Plan will become null
and void unless approved by shareholders prior to March 15, 1997.
Amendment and Termination of Outstanding Grants. A termination or amendment of
the Equity Compensation Plan that occurs after a Grant is made will not result
in the termination or amendment of the Grant unless the Grantee consents;
provided, however, that the Committee may revoke any Grant if it is contrary to
applicable law, or modify a Grant to bring it into compliance with valid and
mandatory government regulation. The termination of the Equity Compensation
Plan will not impair the power and authority of the Committee with respect to
outstanding Grants.
Adjustment Provisions. If there is any change in the number or kind of shares
of Common Stock outstanding by reason of a stock dividend, a recapitalization,
stock split, or combination or exchange of such shares, or merger,
reorganization or consolidation of the Company, reclassification or change in
the par value or similar event, or if the value of outstanding shares of Common
Stock is substantially reduced due to the Company's payment of an extraordinary
dividend or distribution, the number of shares of Common Stock available for
Grants and Awards, the individual limit for any single participant, and the
number of shares and price per share subject to outstanding Stock Options, will
be proportionately adjusted by the Compensation Committee to reflect any
increase or decrease in the number or kind of issued shares of Common Stock.
Change of Control Provisions. In the event of a "Change of Control," all
outstanding Stock Options will be immediately exercisable and all restrictions
on Restricted Stock Grants will lapse, unless the Committee determines
otherwise. The Committee may make such determination up to 30 days following
the Change of Control, provided that the Committee is comprised of the same
members as served on the Committee immediately prior to such Change of Control;
however, the Committee cannot make such a determination with respect to Stock
Options subject to Formula Grants and held by Non-employee directors.
Under the Equity Compensation Plan, a "Change of Control" will be deemed to have
occurred upon the earliest to occur of the following events: (i) the date the
shareholders of the Company (or the Board of Directors, if shareholder action is
not required) approve a plan or other arrangement pursuant to which the Company
will be dissolved or liquidated, or (ii) the date the shareholders of the
Company (or the Board of Directors, if shareholder action is not required)
approve a definitive agreement to sell or otherwise dispose of substantially all
of the assets of the Company, or (iii) subject to certain exceptions, the date
the shareholders of the Company (or the Board of Directors, if shareholder
action is not required) and the shareholders of the other constituent
corporation (or its board of directors, if shareholder action is not required)
have approved a definitive agreement to merge or consolidate the Company with or
into such other corporation, or (iv) the date any entity, person or group,
within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended, (other than the Company or an employee benefit
plan (or related trust) sponsored or maintained by the Company) becomes the
beneficial owner of, or obtains voting control over, securities of the Company
having at least 20 percent of the combined voting power of outstanding
securities of the Company in the election of directors, or (v) the first day
after the date shareholders of the Company approve the Equity Compensation Plan
when directors are elected such that a majority of the members of the Board of
Directors will have been members of the Board of Directors for less than two
years, unless the election or nomination for election of each new director who
was not a director at the beginning of such two year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
Federal Tax Consequences. There are no federal income tax consequences to
Grantees or to the Company upon the grant of an NQSO under the Equity
Compensation Plan. Upon the exercise of NQSOs, a Grantee will recognize
ordinary compensation income in an amount equal to the excess of the fair market
value of the shares of Common Stock at the time of exercise over the exercise
price of the NQSO, and the Company generally will be entitled to a corresponding
federal income tax deduction. Upon the sale of shares of Common Stock acquired
by exercise of an NQSO, a Grantee will have a capital gain or loss (long-term or
short-term depending upon the length of time the shares of Common Stock were
held) in an amount equal to the difference between the amount realized upon the
sale and the Grantee's adjusted tax basis in the shares of Common Stock (the
exercise price plus the amount of ordinary income recognized by the Grantee at
the time of exercise of the NQSO).
A Grantee of an ISO will not recognize taxable income for purposes of the
regular income tax, upon either the grant or exercise of the ISO. A Grantee who
disposes of the shares of Common Stock acquired upon exercise of an ISO after
two years from the date the ISO was granted and after one year from the date
such shares were transferred to him will recognize long-term capital gain or
loss in the amount of the difference between the amount realized on the sale and
the option price (or the Grantee's other tax basis in the shares), and the
Company will not be entitled to any tax deduction by reason of the grant or
exercise of the ISO. As a general rule, if a Grantee disposes of the shares of
Common Stock acquired upon exercise of an ISO before satisfying both holding
period requirements (a "disqualifying disposition"), his or her gain recognized
on such a disposition will be taxed as ordinary income to the extent of the
difference between the fair market value of such shares on the date of exercise
and the option price, and the Company will be entitled to a deduction in that
amount. The gain, if any, in excess of the amount recognized as ordinary income
on such a disqualifying disposition will be long-term or short-term capital
gain, depending upon the length of time the Grantee held his or her shares of
Common Stock prior to the disposition.
A Grantee normally will not recognize taxable income upon receiving a Restricted
Stock Grant, and the Company will not be entitled to a deduction, until such
Common Stock is transferable by the Grantee or no longer subject to a
substantial risk of forfeiture for federal tax purposes, whichever occurs
earlier. When the Common Stock is either transferable or is no longer subject
to a substantial risk of forfeiture, the Grantee will recognize ordinary
compensation income in an amount equal to the fair market value of the Common
Stock subject to the Restricted Stock Grant (less any amounts paid for such
shares) at that time, and the Company will be entitled to a deduction in the
same amount. A Grantee may, however, elect to recognize ordinary compensation
income in the year the Restricted Stock Grant is awarded in an amount equal to
the fair market value of the Common Stock (less any amounts paid for such
shares) at that time, determined without regard to the restrictions. In such
event, the Company will be entitled to a deduction in the same year, provided
the Company complies with the applicable withholding requirements for federal
tax purposes. Any gain or loss recognized by the Grantee upon subsequent
disposition of the Common Stock will be capital gain or loss. If, after making
the election, any Common Stock subject to a Restricted Stock Grant is forfeited,
or if the market value declines during the Restriction Period, the Grantee is
not entitled to any tax deduction or tax refund.
A Grantee will recognize taxable income upon grant of an Award in an amount
equal to the fair market value of the Common Stock subject to the Award at that
time, and the Company will be entitled to a deduction in the same amount.
Section 162(m). Under Section 162(m) of the Code, the Company may be precluded
from claiming a federal income tax deduction for total remuneration in excess of
$1,000,000 paid to the chief executive officer or to any of the other four most
highly compensated officers in any one year. Total remuneration would include
amounts received upon the exercise of Stock Options granted under the Equity
Compensation Plan, the value of shares of Common Stock received when the shares
of Restricted Stock became transferable (or such other time when income is
recognized) and the value of shares of Common Stock when an Award is granted.
An exception does exist, however, for "performance-based compensation,"
including amounts received upon the exercise of Stock Options pursuant to a plan
approved by shareholders that meets certain requirements. The Equity
Compensation Plan, when approved by shareholders, is intended to make grants of
Stock Options thereunder meet the requirements of "performance-based
compensation." Restricted Stock Grants and Awards of Common Stock generally
will not qualify as "performance-based compensation."
New Plan Benefits Table. As noted above, each Non-employee director who was not
formerly an employee of the Company or its subsidiary received a Stock Option to
purchase 5,000 shares of Common Stock on March 15, 1996, and Mr. Campbell will
receive a Stock Option to purchase 5,000 shares if elected to the Board of
Directors. In addition, the Committee has authorized the grant to Ralph M.
Branca, President of the Company, of Stock Options to purchase 40,000 shares of
Common Stock and to Louis D. Kipp, President of Quipp Systems, Inc. and
Treasurer of the Company, of Stock Options to purchase 60,000 shares of Common
Stock. The following table sets forth certain information with regard to grants
of Stock Options to the persons and classes of persons named in the table. All
of such Stock Options were or will be granted subject to shareholder approval of
the Equity Compensation Plan.
NEW PLAN BENEFITS
Quipp, Inc. 1996 Equity Compensation Plan
Number of Shares
Name and Position Subject to Stock Options(1)
Ralph M. Branca, President 40,000(2)
Louis D. Kipp, President 60,000(3)
of Quipp Systems Inc. and
Treasurer of the Company
Executive Group 100,000(4)
Non-Executive Director Group 20,000(5)
(1) The exercise price per share (except with respect to 15,000 shares
subject to Stock Options granted to the Non-Executive Director Group) will
be equal to the fair market value of a share of Common Stock on the date
of shareholder approval, if the Equity Compensation Plan is approved by
the shareholders. The Stock Options granted to the Non-Executive Director
Group with respect to 15,000 shares have an exercise price of $12.1875 per
share. The table does not reflect the grant of Stock Options to purchase
3,000 shares to a non-executive officer who is not an employee of the
Company.
(2) Mr. Branca's Stock Options will be immediately exercisable with
respect to 10,000 shares of Common Stock and will be exercisable with
respect to an additional 10,000 shares on each of the first three
anniversaries of the date of grant.
(3) Mr. Kipp's Stock Options will be immediately exercisable with respect
to 24,000 shares of Common Stock and will be exercisable with respect to
an additional 12,000 shares on each of the first three anniversaries of
the date of grant.
(4) Represents shares underlying Stock Options granted to Messrs. Branca
and Kipp.
(5) Includes 15,000 shares granted to the Non-employee directors on March
15, 1996 and 5,000 shares to be granted to Mr. Campbell if he is elected
to the Board of Directors at the Meeting.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE PROPOSAL TO ADOPT THE EQUITY
COMPENSATION PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of KPMG Peat Marwick LLP as the
independent public accountants to examine the financial statements of the
Company for 1996. In accordance with the resolution of the Board of Directors,
this selection will be presented to the shareholders for ratification at the
Meeting. The firm of KPMG Peat Marwick LLP has audited the Company's financial
statements annually since 1983. If the shareholders do not ratify the
appointment of KPMG Peat Marwick LLP, the selection of independent public
accountants will be reconsidered by the Board of Directors.
A representative of KPMG Peat Marwick LLP is expected to be present at the
Meeting and will have an opportunity to make a statement if he or she desires to
do so and will also be available to respond to appropriate questions raised at
the meeting.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR THE RATIFICATION OF THE
APPOINTMENT OF KMPG PEAT MARWICK LLP.
OTHER MATTERS
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and beneficial owners of more than ten percent of the
Company's Common Stock to file reports of ownership and changes in ownership
with the Securities and Exchange Commission ("SEC"). The Company believes that
all filings required to be made during 1995 were made on a timely basis, except
for one report filed by Mr. Kipp with respect to the sale of shares that was
filed subsequent to the applicable due date.
SHAREHOLDER PROPOSALS
Any shareholder proposal to be presented at the 1997 Annual Meeting of
Shareholders must be received by the Company on or before January 2, 1997 in
order to be included in the proxy statement relating to the Meeting.
SOLICITATION OF PROXIES
The expense of solicitation of proxies for the meeting will be paid by the
Company. In addition to the mailing of the proxy material, such solicitation
may be made in person or by telephone or telecopy by directors, officers or
regular employees of the Company.
April 22, 1996
April 22, 1996
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Quipp, Inc.
Ladies and Gentlemen:
Pursuant to Rule 14a-6(b) under the Securities and Exchange Act of 1934, we are
transmitting a definitive copy of the proxy statement and form of proxy relating
to the Quipp, Inc. 1996 Annual Meeting of Shareholders. No fee has been
submitted in connection with this filing because a fee was paid in connection
with the filing of preliminary proxy materials.
Very truly yours,
Quipp, Inc.
By: __________________________________
Mary Johnson, Principal Accounting Officer
QUIPP, INC. 1996 EQUITY COMPENSATION PLAN
The purpose of the Quipp, Inc, 1996 Equity Compensation Plan (the
"Plan") is (i) to provide designated officers (including officers who are also
directors), and other employees of Quipp, Inc. and its subsidiaries (within the
meaning specified in Section 424(f) of the Code) (hereinafter collectively
referred to as the "Company"), members of the Board who are not employed in any
capacity by the Company ("Non-Employee Directors") and consultants and advisors
to the Company ("Key Advisors") with certain rights to acquire common stock of
the Company, and (ii) to provide for the grant of incentive stock options and
nonqualified stock options. The Company believes that the Plan will be an
incentive to the participants to contribute materially to the growth of the
Company, thereby benefitting the Company's shareholders, and will align the
economic interests of the participants with those of the shareholders.
i. Administration<PAGE>
Subject to the provisions of Section 6, the Plan shall be administered
and interpreted by the Board of Directors or by a committee consisting of not
less than two persons appointed by the Board of Directors of the Company from
among its members who are Non-Employee Directors of the Company, all of whom are
"outside directors" as defined under section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code") and related Treasury regulations. The Board of
Directors, in such administrative capacity or, if appointed, such Committee,
(either of which are hereinafter referred to as the "Committee"), subject to the
provisions of Section 6, shall have the sole authority to determine (i) the
individuals to whom options and awards shall be granted under the Plan, (ii) the
type, size and terms of the grants or awards to be made to each such individual,
(iii) the time when the grants or awards will be made and (iv) any other matters
arising under the Plan. The Committee shall have full power and authority to
administer and interpret the Plan, to make factual determinations and to adopt
or amend such rules, regulations, agreements and instruments for implementing
the Plan and for conduct of its business as it deems necessary or advisable, in
its sole discretion. The Committee's interpretations of the Plan and all
determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all persons having any interests in
the Plan or in any awards granted hereunder.
ii. Grants and Awards
Incentives under the Plan shall consist of incentive stock options,
nonqualified stock options, restricted stock grants (hereinafter collectively
referred to as "Grants") and stock bonus awards ("Awards"). All Grants and
Awards shall be subject to the terms and conditions set forth herein and to
those other terms and conditions consistent with this Plan as the Committee
deems appropriate and as are specified in writing by the Committee to the
employee, Key Advisor or Non-Employee Director (the "Grant Letter"). The
Committee shall approve the form and provisions of each Grant Letter. Grants
and/or Awards under a particular Section of the Plan need not be uniform as
among the employees or Key Advisors and Grants and/or Awards under two or more
Sections of the Plan may be combined in one instrument. Grants to Non-Employee
Directors shall be governed by Section 6.
iii. Shares Subject to the Plan
(a) Subject to the adjustment specified below, the aggregate
number of shares of common stock, $.01 par value, of the Company ("Company
Stock") that may be issued or transferred under the Plan is 400,000 shares. The
maximum aggregate number of shares of Company Stock that shall be subject to
options restricted stock grants or stock bonus awards under the Plan to any
single individual during the term of the Plan shall be 100,000 shares. The
shares may be authorized but unissued shares of Company Stock or treasury shares
of Company Stock, including, without limitation, shares repurchased by the
Company on the open market. If and to the extent options granted under the Plan
terminate, expire, or cancel without having been exercised, or if any shares of
restricted stock are forfeited (regardless of whether any voting rights are
exercised, dividends received, or any other rights were vested in the
Participant prior to forfeiture), the shares subject to such option or
comprising such restricted stock shall again be available for purposes of the
Plan.
(b) If there is any change in the number or kind of shares of
Company Stock outstanding by reason of a stock dividend, recapitalization, stock
split, or combination or exchange of such shares, or a merger, reorganization or
consolidation of the Company, reclassification or change in par value or by
reason of any other extraordinary or unusual event affecting the outstanding
Company Stock as a class without the Company's receipt of consideration or if
the value of outstanding Shares of Company Stock is substantially reduced due to
the Company's payment of an extraordinary dividend or distribution, the maximum
number of shares of Company Stock available for Grants or Awards, the maximum
number of shares of Company Stock for which any one individual participating in
the Plan may receive Grants and Awards over the term of the Plan, and the number
of shares and price per share subject to outstanding Stock Options shall be
proportionately adjusted by the Committee to reflect any increase or decrease in
the number or kind of issued shares of Company Stock to preclude, to the extent
practicable, the enlargement or dilution of rights and benefits under such
Grants or Awards; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated. During the Restriction Period (as defined
in Section 7(a)), shares of the Company Stock subject to the Restricted Stock
Grant (as defined in the introductory clause of Section 7) shall be deemed to be
outstanding, and the number and kind of such shares shall be adjusted in the
same manner as other outstanding shares of Company Stock as a result of any of
the events that would cause the operation of the provisions of this Section
3(b). The adjustments determined by the Committee shall be final, binding and
conclusive. As used herein, the term "Company Stock" shall include any other
kind of Company securities issued in respect of Company Stock pursuant to the
events set forth in this Section 3(b).
iv. Eligibility for Participation
Officers and other employees of the Company, Key Advisors designated by
the Committee and Non-Employee Directors shall be eligible to participate in the
Plan (hereinafter referred to individually as the "Participant" and collectively
as the "Participants"). The Committee shall select the individuals (other than
Non-Employee Directors) to receive Grants and Awards (the "Grantees") from among
the Participants and determine the number of shares of Company Stock subject to
a particular Grant or Award in such manner as the Committee determines;
provided, however, that Key Advisors must render bona fide services and such
services must not be in connection with the offer or sale of securities in a
capital-raising transaction; and provided further, that Non-Employee Directors
may receive only Nonqualified Stock Options (as defined below) pursuant to
Section 6 hereof.
v. Granting of Options
(a) Number of Shares. The Committee shall grant to each Grantee a
number of stock options as the Committee shall determine.
(b) Type of Option and Price. The Committee may grant options
qualifying as incentive stock options within the meaning of Section 422 of the
Code ("Incentive Stock Options") or stock options which are not intended to so
qualify ("Nonqualified Stock Options") or any combination of Incentive Stock
Options and Nonqualified Stock Options (hereinafter referred to collectively as
"Stock Options") in accordance with the terms and conditions set forth herein;
provided, however, that Key Advisors shall not be eligible to receive grants of
Incentive Stock Options and Non-Employee Directors may receive only Nonqualified
Stock Options pursuant to Section 6 hereof.
The purchase price of Company Stock subject to an Incentive Stock
Option or a Nonqualified Stock Option shall be at least equal to the "Fair
Market Value" of a share of such Company Stock on the date such Stock Option is
granted. The Fair Market Value per share shall be, if the principal trading
market for the Company Stock is a national securities exchange or the Gnostic
National Market, the last reported sale price thereof on the relevant date or
the latest preceding date upon which a sale was reported, or, if the Company
Stock is not principally traded on such exchange or market, the mean between the
last reported "bid" and "asked" prices thereof on the relevant date, as reported
on Gnostic or, if not so reported, as reported by the National Daily Quotation
Bureau, Inc. or as reported in a customary financial reporting service, as
applicable and as the Committee determines. If the Company Stock is not subject
to reported transactions or "bid" or "ask" quotations as set forth above, the
Fair Market Value per share shall be as determined by the Committee.
(c) Term. The Committee shall determine the option term of each
Stock Option. The term shall not exceed ten years from the date of grant.
(d) Exercisability of Options. Subject to Section 6, Stock
Options shall become exercisable in accordance with the terms and conditions
determined by the Committee, in its sole discretion, and specified in the Grant
Letter. The Committee, in its sole discretion, may accelerate the
exercisability of any or all outstanding Stock Options, other than stock options
granted pursuant to Section 6 and held by a Participant who is then a Non-
Employee Director, at any time and for any reason. In addition, all outstanding
Stock Options including stock options granted pursuant to Section 6, shall
become immediately exercisable upon a Change in Control (as defined herein)
unless the Committee, in its sole discretion, determines not to accelerate such
Stock Options upon a Change in Control (the Committee shall not make such a
determination in connection with Stock Options granted pursuant to Section 6
held by a Participant who is then a Non-Employee Director). The Committee may
make such determination prior to the Change in Control or, provided that the
Committee making such determination following a Change in Control is comprised
of the same members as those on the Committee immediately prior to such Change
in Control, within thirty (30) days following such Change in Control.
(e) Manner of Exercise. A Grantee may exercise a Stock Option, in
whole or in part, by delivering a notice of exercise to the Committee with
accompanying payment of the option price. Such notice may instruct the Company
to deliver shares of Company Stock due upon the exercise of the Stock Option to
any registered broker or dealer designated by the Company ("Designated Broker")
in lieu of delivery to the Grantee. Such instructions must designate the
account into which the shares are to be deposited. The Grantee may tender this
notice of exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
(f) Termination of Employment, Disability or Death.
(1) In the event the Grantee ceases to be an employee or director
of the Company or Key Advisor for any reason other than disability, death or a
termination for cause by the Company, any Stock Option which is otherwise
exercisable by the Grantee shall terminate unless exercised within ninety days
of the date on which he ceases to be an employee or Key Advisor (or, except with
respect to Stock Options granted pursuant to Section 6 and held by persons who
are then Non-Employee Directors, within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the option term.
(2) In the event the Grantee ceases to be an employee or director
of the Company or a Key Advisor because he is disabled within the meaning of
section 22(e)(3) of the Code, any Stock Option which is otherwise exercisable by
the Grantee shall terminate unless exercised within one year of the date on
which he ceases to be an employee, director or Key Advisor (or, except with
respect to Stock Options granted pursuant to Section 6 and held by persons who
are then Non-Employee Directors, within such other period of time as may be
specified by the Committee), but in any event no later than the date of
expiration of the option term.
(3) In the event of the death of the Grantee while he is an
employee, director or Key Advisor of the Company or within not more than three
months of the date on which he ceases to be an employee, director or Key Advisor
(or, except with respect to Stock Options granted pursuant to Section 6 and held
by persons who are then Non-Employee Directors, within such other period of time
as may be specified in by the Committee), any Stock Option which was otherwise
exercisable by the Grantee at the date of death may be exercised by his personal
representative at any time prior to the expiration of one year from the date of
death (or, except with respect to Stock Options granted pursuant to Section 6
and held by persons who are then Non-Employee Directors, within such other
period of time as may be specified in by the Committee), but in any event no
later than the date of expiration of the option term.
(4) In the event the Grantee ceases to be an employee or director
of the Company or Key Advisor on account of a termination for "Cause" by the
Company, any Stock Option held by the Grantee shall terminate as of the date he
ceases to be an employee or Key Advisor (or, except with respect to Stock
Options granted pursuant to Section 6 and held by persons who are then Non-
Employee Directors, as the Committee may otherwise provide) but in any event no
later than the date of expiration of the option term. "Cause" shall mean (I)
with respect to Grantees other than Non-Employee Directors, except to the extent
otherwise provided in a Grantee's Grant Letter, a finding by the Committee,
after full consideration of the facts presented on behalf of both the Company
and the Grantee, that the Grantee has breached his or her employment or service
contract with the Company, or has been engaged in disloyalty to the Company,
including, without limitation, fraud, embezzlement, theft, commission of a
felony or proven dishonesty in the course of his or her employment or service,
or has disclosed trade secrets or confidential information of the Company, (ii)
with respect to Non-Employee Directors, the date the Grantee's directorship is
terminated, if the directorship is terminated on account of (A) any act of
fraud, intentional misrepresentation, embezzlement or theft, (B) commission of a
felony or disclosure of trade secrets or confidential information of the
Company. In such event, in addition to the immediate termination of the Option,
the Grantee shall automatically forfeit all Option Shares for any exercised
portion of an Option for which the Company has not yet delivered the share
certificates upon refund by the Company of the Option Price.
(g) Satisfaction of Option Price. The Grantee shall pay the
option price in cash or, with the approval of the Committee, by delivering
shares of Company Stock already owned by the Grantee for the period necessary to
avoid a charge to the Company's earnings for financial reporting purposes and
having a fair market value on the date of exercise equal to the option price or
with a combination of cash and shares, or (except with respect to Stock Options
granted pursuant to Section 6 and held by persons who are then Non-Employee
Directors) by such other mode of payment as the Committee may approve, including
payment through a broker in accordance with procedures permitted by Regulation T
of the Federal Reserve Board or any successor regulation of the agency then
responsible for administering margin regulations pertaining to securities
brokers ("Regulation T"). Non-Employee Directors who hold Stock Options granted
pursuant to Section 6 may make payment through a broker in accordance with
procedures permitted by Regulation T. The Grantee shall pay the option price
and the amount of withholding tax due, if any, at the time of exercise. Shares
of Company Stock shall not be issued or transferred upon exercise of a Stock
Option until the option price and applicable withholding taxes are fully paid.
(h) Requirements for Incentive Stock Options. Each Grant of an
Incentive Stock Option shall provide that to the extent that the aggregate fair
market value of the Company Stock on the date of the Grant with respect to which
Incentive Stock Options are exercisable for the first time by a Grantee during
any calendar year under the Plan or any other stock option plan of the Company
exceeds $100,000, then such Stock Options, to the extent of such excess, shall
be treated as Nonqualified Stock Options. An Incentive Stock Option shall not
be granted to any Participant who, at the time of grant, owns stock possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company or parent of the Company, unless the option price per share is
not less than 110% of the fair market value of Company Stock on the date of
grant and the option term is not more than five years from the date of grant.
Notwithstanding anything in the Plan to the contrary, to the extent that any
Stock Option does not qualify as an Incentive Stock Option, such option shall be
treated as a Nonqualified Stock Option.
6. Option Grants to Non-Employee Directors
A Non-Employee Director shall be entitled to receive Nonqualified Stock
Options only in accordance with this Section 6.
(a) Initial Grant. Each Non-Employee Director who is a member of
the Board on the effective date of the Plan (the "Effective Date") and who was
not previously an employee of the Company will receive on the Effective Date a
grant of a Nonqualified Stock Option to purchase 5,000 shares of Company Stock.
Each Non-Employee Director who first becomes a member of the Board after the
Effective Date will receive a grant of a Nonqualified Stock Option to purchase
5,000 shares of Company Stock immediately upon his or her becoming a member of
the Board.
(b) Annual Grants. On each date that the Company holds its annual
meeting of stockholders, commencing with the 1997 calendar year, each Non-
Employee Director in office immediately after the annual election of directors
(excluding any directors first elected at such meeting, who shall each receive
the grant specified in Section 6(a)) will receive a grant of a Nonqualified
Stock Option to purchase 5,000 shares of Company Stock.
(c) Option Exercise Price; Term of Options. Options granted under
this Section 6 shall have a per share exercise price equal to the Fair Market
Value of a share of Company Stock on the date of grant, and such options shall
be fully exercisable on the date of grant. Options granted under this Section 6
shall have a term of ten years from the date of grant, subject to earlier
termination pursuant to Section 5(f).
(d) Administration. The provisions of the Section 6 are intended
to operate automatically and not require administration. However, to the extent
that administrative determinations are required, the provisions of this Section
6 shall be made by the members of the Board who are not eligible to receive
grants under this Section 6, but in no event shall such determinations affect
the eligibility of Grantees, the determination of the exercise price, the timing
of the grants or the number of shares subject to Stock Options granted hereunder
or otherwise cause the Plan, insofar as it relates to Non-Employee Directors, to
fail to satisfy the conditions of Rule 16b-3(c)(ii) under the Security Exchange
Act of 1934, as amended (the Exchange Act ).
(e) Acceleration. Upon the occurrence of a Change of Control,
each Stock Option granted pursuant to this Section 6 shall automatically
accelerate and become fully exercisable as to all shares subject to such option
and shall remain exercisable until the expiration of the option term.
(f) Applicability of the Plan Provisions. Except as otherwise
provided in the Plan (including this section 6), the Nonqualified Stock Options
granted to Non-Employee Directors shall be subject to the provisions of this
Plan applicable to Nonqualified Stock Options granted to other persons.
(g) Amendment. Notwithstanding any other provision of the Plan,
this Section 6 and the provisions of Section 5(f) and Section 5(g) as they
pertain to Non-Employee Directors may not be amended more than once every six
months, other than the comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended ( ERISA ) or the rules
thereunder.
7. Restricted Stock Grants
The Committee may issue or transfer shares of Company Stock, subject to
restriction as set forth herein, to a Participant under a grant (a Restricted
Stock Grant ). Non-Employee Directors and Key Advisors shall not be eligible to
receive Restricted Stock Grants. The following provisions are applicable to
Restricted Stock Grants:
(a) General Requirements. Share of Company Stock issued pursuant
to Restricted Stock Grants will be issued for no consideration unless otherwise
required under applicable law. Subject to any other restrictions by the
Committee as provided pursuant to this Section, restrictions on the transfer of
shares of Company Stock set forth in Section 7(d) shall lapse as provided in the
Grant Letter. The period of time during which the Restricted Stock Grant will
remain subject to restrictions including the time prior to satisfaction of
performance or other conditions for removal of restrictions will be designated
in the Grant Letter as the Restriction Period.
(b) Number of Shares. The Committee shall grant to each Grantee
a number of shares of Company Stock pursuant to a Restricted Stock Grant in such
manner as the Committee determines.
(c) Requirement of Employment. If the Grantee's employment
terminates during a period designated in the Grant Letter as the Restriction
Period, the Restricted Stock Grant terminates as to all shares covered by the
Grant as to which restrictions on transfer have not lapsed, and, unless the
Company has retained possession of the shares of Company Stock subject to
restriction, those shares of Company Stock must be immediately returned to the
Company. The Committee may, however, provide for complete or partial exceptions
to this requirements as it deems equitable.
(d) Restriction on Transfer and Legend on Stock Certificate.
During the Restriction Period, a Grantee may not sell, assign, transfer, pledge,
or otherwise dispose of the shares of Company Stock to which such Restriction
Period applies except as provided by the Committee. Each certificate for a
share issued or transferred under a Restricted Stock Grant shall contain a
legend giving appropriate notice of the restrictions in the Grant. The Grantee
shall be entitled to have the legend removed from the stock certificate or
certificates covering any of the shares subject to restrictions when all
restrictions an such shares have lapsed.
(e) Voting and Dividends. If so determine by the Committee, the
Grantee shall have the right to vote shares of the Company Stock subject to the
Restricted Stock Grant and to receive the payment of any cash dividends paid on
such shares during the Restricted Period.
(f) Lapse of Restrictions. All the restrictions imposed during
the Restricted Stock Grant shall lapse upon the expiration of the applicable
Restriction Period; provided, however, that upon a Change in Control (as defined
herein), the Restricted Period relating to the shares which have not, prior to
such date, been satisfied shall immediately lapse, unless the Committee, in its
sole discretion, determines not to lapse such restrictions upon a Change in
Control. The Committee may make such determination prior to the Change in
Control or, provided that the Committee making such determination following a
Change in Control is comprised of the same members as those on the Committee
immediately prior to such Change in Control, within thirty (30) days following
such Change in Control. In addition, the Committee may determine as to any or
all Restricted Stock Grants, that all restrictions shall lapse, without regard
to any Restriction Period, under such circumstances as it deems appropriate.
8. Stock-Based Award.
The Committee is authorized, subject to limitations under applicable
law, to grant to Participants other than Non-Employee Directors Awards of
Company Stock purely as a bonus and not subject to any restrictions or
conditions.
9. Transferability of Stock Options.
No Stock Option granted under the Plan may be transferred, except by
will or by the laws of descent and distribution. During the lifetime of the
person to whom a Stock Option is granted, such Stock Option may be exercised
only by such person. Notwithstanding the foregoing, a (i) Nonqualified Stock
Option may be transferred pursuant to the terms of a qualified domestic
relations order, within the meaning of sections 401(a)(13) and 414(p) of the
Code or within the meaning of Title I of ERISA and (ii) the Committee may
provide, in a Grant Letter, that a Grantee may transfer Stock Options to his or
her children, grandchildren or spouse or to one or more trusts for the benefit
of such family members or to partnerships in which such family members are the
only partners (a Family Transfer ), provided that Grantee receives no
consideration for a Family Transfer and the Grant Letter relating to Stock
Options transferred in a Family Transfer continue to be subject to the same
terms and conditions that were applicable to such Stock Options immediately
prior to the Family Transfer.
10. Change in Control.
A Change of Control shall be deemed to have occurred upon the
earliest to occur of the following events: (i) the date the shareholders of the
Company (or Board of Directors, if shareholders action is not required) approve
a plan or other arrangement pursuant to which the Company will be dissolved or
liquidated, or (ii) the date the shareholders of the Company (or the Board of
Directors, if shareholder action is not required) approve a definitive agreement
to sell or otherwise dispose of substantially all of the assets of the Company,
or (iii) the date the shareholders of the Company (or Board of Directors, if
shareholder action is not required) and the shareholders of the other
constituent corporation (or its board of directors if shareholder action is not
required) have approved a definitive agreement to merge or consolidate the
Company with or into such other corporation, other than, in either case, a
merger or consolidation of the Company in which holders of shares of Company
Stock immediately prior to the merger or consolidation will have at least a
majority of the ownership of common stock of the surviving corporation ( and, if
one class of common stock is not the only class of voting securities entitled to
vote on the election of directors of the surviving corporation, a majority of
the voting power of the surviving corporation's voting securities) immediately
after the merger or consolidation, which common stock (and, if applicable,
voting securities) is to be held in the same proportion as such holders'
ownership of Company Stock of the Company immediately before the merger or
consolidation, or (iv) the date any entity, person or group, within the meaning
of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act 1934, as
amended, (other than the Company or any employee benefit plan ( or related
trust) sponsored or maintained by the Company) shall have become the beneficial
owner of, or shall obtained voting control over, securities of the Company
having at least twenty percent (20%) of the combined voting power of outstanding
securities of the Company in the election of directors, or (v) the first day
after the date this Plan is approved by shareholders of the Company when
directors are elected such that a majority of the members of the Board of
Directors for less than two years, unless the election or nomination for
election of each new director who was not a director at the beginning of such
two year period was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period.
11. Amendment and Termination of the Plan.
(a) Amendment. The Board of Directors of the Company may amend
the Plan from time to time in such manner as it may deem advisable.
Nevertheless, the Board of Directors of the Company may not change the class of
individuals eligible to receive an incentive stock option or increase the
maximum number of shares as to which Grants or Awards may be made under the
Plan, or the individual limit for any single Participant, without obtaining
shareholder approval by such vote as is required by the Florida Business
Corporation Act, as amended and, if applicable, the provisions of the Company's
Articles of Incorporation or By-Laws, or, if a greater vote is required in order
to comply with applicable requirements of the Code or Rule 16b-3, by such vote
as is required by the Code or Rule 16b-3. No amendment to the Plan shall
adversely affect any outstanding Grant or Award, however, without the consent of
the Participant holding such Grant or Award.
(b) Termination of Plan. The Plan shall terminate on the day
immediately preceding the tenth anniversary of its effective date unless
terminated earlier by the Board of Directors of the Company or unless extended
by the Board with the approval of the shareholders.
(c) Termination and Amendment of Outstanding Grants. A
termination or amendment of the Plan that occurs after a Grant or Award is made
shall not result in the termination or amendment of the Grant or Award unless
the Participant holding such Grant or Award consents or unless the Committee
acts under Section 18(b). The termination of the Plan shall not impair the
power and authority of the Committee with respect to an outstanding Grant.
Whether or not the Plan has terminated, an outstanding Grant or Award may be
terminated or amended under Section 18(b) or may be amended by agreement of the
Company and the Participant holding such Grant or Award consistent with the
terms of the Plan.<PAGE>
12. Rights of Participants.
Nothing in this Plan shall entitle any Participant or other person to
any claim or right to be a Grant or Award under this Plan. Neither this Plan nor
any action taken hereunder shall be construed as giving any Participant any
rights to be retained by or in the employ of the Company.
13. Withholding of Taxes.
The Company shall have the right to deduct from wages paid to the
employee of the Company, any federal, state or local taxes required by law to be
withheld with respect to Grants or Awards, and the Participant or other person
receiving Company Stock under the Plan shall be required to pay to the Company
the amount of any such taxes which the Company is required to withhold with
respect to such Company Stock.
14. Agreements with Participants.
Each Grant made under this Plan shall be evidenced by a Grant Letter
containing such terms and conditions consistent with the term of the Plan, as
the Committee shall approve.
15. Requirements for Issuance of Shares.
No Company Stock shall be issued or transferred upon payment of any
Grant hereunder unless and until all legal requirements applicable to the
issuance or transfer of such Company Stock have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Restricted Stock Grant, Stock Option or Award made to any Participant
hereunder on such Participant's undertaking in writing to comply with such
restrictions on his subsequent disposition such shares of Company Stock as the
Committee shall deem necessary or advisable as a result of any applicable law,
regulation or official interpretation thereof, and certificates representing
such shares may be legended to reflect any such restrictions.
16. Heading
Sections headings are for reference only. In the event of a conflict
between a title and the content of a Section, the content of the Section shall
control.
17. Effective Date of the Plan
Subject to the approval of the Company's shareholders, this Plan shall
be effective as of the date the Plan is adopted by the Board of Directors of the
Company. If the Plan if not approved by the Company' shareholders within twelve
months following such date, all Grant under the Plan shall be null and void. No
Awards may be made prior to shareholders approval.
18. Miscellaneous
(a) Substitute Grants. The Committee may make a Grant to an
employee of another corporation who becomes a Participant by reason of a
corporate merger, consolidation, acquisition of stock or property,
reorganization or liquidation involving the Company or any of its subsidiaries
in substitution for a stock option or Restricted Stock Grant granted by such
corporation ( Substituted Stock Incentives ). The terms and conditions of the
substitute Grant may vary from the terms and conditions required by the Plan and
from those of the Substituted Stock Incentives. The Committee shall prescribe
the provisions of the substitute Grants.
(b) Compliance with Law. The Plan, the exercise of Grants and
the obligations of the Company to issue or transfer shares of Company Stock
under Grants shall be subject to all applicable laws and to approvals by a
governmental or regulatory agency as may be required, including, without
limitation, the filing of a registration statement under the Securities Act of
1933 with respect to shares of Company Stock under the Plan. The Plan is
intended to enable transactions under the Plan with respect to directors and
officers (within the meaning of Section 16(a) under the Securities Exchange Act
of 1934, as amended) to satisfy the conditions of Rule 16b-3; to the extent that
any provision of the Plan would cause a conflict with such conditions or would
cause the administration of the Plan as provided in Section 1 to fail to satisfy
the conditions of Rule 16b-3, such provision shall be deemed null and void to
the extent permitted by applicable law. Notwithstanding the foregoing, the
provision in Grant letter for Family Transfers pursuant to Section 9 is
expressly permitted, even though Stock Options evidenced by such Grant Letter
may not be deemed to satisfy the conditions of Rule 16b-3 as a result of such
provision. The Committee may revoke any Grant if it is contrary to applicable
law or modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payments to Participants. The Committee may, in its sole
discretion, agree to limit its authority under this Section.
(c) Ownership of Stock. A Participant shall have no rights as a
shareholder with respect to any shares of Company Stock covered by a Grant or
Award until the shares are issued or transferred to the Grantee or Successor
Grantee on the stock transfer records of the Company, except as may be
detremined pursuant to Section 7(e).
