<PAGE>
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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ELTRAX SYSTEMS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
1999 ANNUAL MEETING OF SHAREHOLDERS
ELTRAX SYSTEMS, INC.
2000 TOWN CENTER, SUITE 690
SOUTHFIELD, MICHIGAN 48075
TO THE SHAREHOLDERS OF ELTRAX SYSTEMS, INC.:
You are cordially invited to attend our Annual Meeting of Shareholders
to be held on June 24, 1999 at 4:30 p.m., local time, at the Swissotel, 3391
Peachtree Road N.E., Atlanta, Georgia.
The formal Notice of Meeting, Proxy Statement and form of proxy are
enclosed.
Whether or not you plan to attend the meeting, please date, sign and
return the enclosed proxy in the envelope provided as soon as possible so that
your vote will be recorded.
Very truly yours,
/s/ William P. O'Reilly
---------------------------
William P. O'Reilly
CHAIRMAN OF THE BOARD
June 1, 1999
PLEASE SIGN, DATE AND RETURN
THE ENCLOSED PROXY PROMPTLY
TO SAVE THE COMPANY THE EXPENSE
OF ADDITIONAL SOLICITATION.
<PAGE>
ELTRAX SYSTEMS, INC.
2000 TOWN CENTER, SUITE 690
SOUTHFIELD, MICHIGAN 48075
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 24, 1999
--------------------------
TO THE SHAREHOLDERS OF ELTRAX SYSTEMS, INC.:
Notice is hereby given that the Annual Meeting of Shareholders of
Eltrax Systems, Inc. (the "Company") will be held on June 24, 1999 at 4:30 p.m.,
local time, at the Swissotel, 3391 Peachtree Road N.E., Atlanta, Georgia for the
following purposes:
1. To elect seven (7) persons to serve as directors for the ensuing year
or until their successors are elected and qualified;
2. To consider and act upon a proposal to adopt the Company's 1999 Stock
Incentive Plan; and
3. To consider and act upon such other matters as may properly come before
the meeting or any adjournment thereof.
The close of business on June 1, 1999 has been fixed as the record date
for the determination of shareholders who are entitled to vote at the meeting or
any adjournments thereof.
By Order of the Board of Directors
/s/ William P. O'Reilly
---------------------------
William P. O'Reilly
CHAIRMAN OF THE BOARD
June 1, 1999
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. NO ADMISSION
TICKET OR OTHER CREDENTIALS WILL BE NECESSARY. IF YOU DO NOT PLAN TO ATTEND THE
MEETING, PLEASE BE SURE YOU ARE REPRESENTED AT THE MEETING BY MARKING, SIGNING,
DATING AND MAILING YOUR PROXY IN THE REPLY ENVELOPE PROVIDED.
2
<PAGE>
ELTRAX SYSTEMS, INC.
2000 TOWN CENTER, SUITE 690
SOUTHFIELD, MICHIGAN 48075
-------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 24, 1999
-------------------
INTRODUCTION
The Annual Meeting of Shareholders of Eltrax Systems, Inc. (the
"Company") will be held on June 24, 1999 at 4:30 p.m., local time, at the
Swissotel, 3391 Peachtree Road N.E., Atlanta, Georgia, or at any adjournment or
adjournments thereof, for the purposes set forth in the Notice of Meeting (the
"Annual Meeting").
A proxy card is enclosed for your use. You are solicited on behalf of
the Board of Directors to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States.
Instructions are also provided with your proxy card to vote your shares via
telephone or the internet. The cost of soliciting proxies, including the
preparation, assembly and mailing of the proxies and soliciting material, as
well as the cost of forwarding such material to the beneficial owners of the
Company's common stock, $.01 par value (the "Common Stock"), will be borne by
the Company. Directors, officers and regular employees of the Company may,
without compensation other than their regular compensation, solicit proxies by
telephone, facsimile or personal conversation. The Company may reimburse
brokerage firms and others for reasonable expenses in forwarding proxy materials
to the beneficial owners of the Common Stock. The Company may also elect to
retain professional solicitors to assist in the solicitation of proxies. Any
professional solicitors will be paid by the Company. The Company expects that
any such fees will not exceed $10,000.
Any proxy given pursuant to this solicitation and received in time for
the Annual Meeting will be voted in accordance with the instructions given in
such proxy. Any shareholder giving a proxy may revoke it any time prior to its
use at the Annual Meeting by giving written notice of such revocation to the
Chairman of the Board of the Company, by filing a duly executed proxy bearing a
later date with the Chairman of the Board of the Company or by attending the
Annual Meeting and voting in person. Proxies that are signed by shareholders but
that lack any such specification will be voted in favor of the proposals set
forth in the Notice of Meeting and in favor of the election as directors of the
nominees listed in this Proxy Statement.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF THE
PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will first be mailed to
shareholders on or about June 1, 1999.
3
<PAGE>
VOTING OF SHARES
The close of business on June 1, 1999, has been fixed by the Board of
Directors of the Company as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. On May 28,
1999 the Company had outstanding 23,722,608 shares of Common Stock, held by
approximately 3,800 holders of record, each such share entitling the holder
thereof to one vote in person or by proxy on each matter to be voted on at the
Annual Meeting, voting together as a single class.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of Common Stock entitled to vote
at the meeting (23,722,608 shares as of May 28, 1999) is required for a quorum
for the transaction of business. In general, shares of Common Stock represented
by a properly signed and returned proxy card will be counted as shares present
and entitled to vote at the meeting for purposes of determining a quorum,
without regard to whether the card reflects abstentions (or is left blank) or
reflects a "broker non-vote" on a matter (i.e., a card returned by a broker on
behalf of its beneficial owner customer that is not voted on a particular matter
because voting instructions have not been received and the broker has no
discretionary authority to vote).
The election of a nominee for director and the approval of any other
proposal described in this Proxy Statement require the approval of a majority of
the shares present and entitled to vote in person or by proxy on that matter
(and at least a majority of the minimum number of votes necessary for a quorum
to transact business at the meeting). Shares represented by a proxy card voted
as abstaining on any of the proposals will be treated as shares present and
entitled to vote that were not cast in favor of a particular matter, and thus
will be counted as votes against that matter. Shares represented by a proxy card
providing for any broker non-vote on a matter will be treated as shares not
entitled to vote on that matter, and thus will not be counted in determining
whether that matter has been approved.
INCORPORATION BY REFERENCE
To the extent this Proxy Statement has been or will be specifically incorporated
by reference into any filing by the Company under the Securities Act of 1933, as
amended, or the Securities Act of 1934, as amended, the sections of this Proxy
Statement entitled "Report of the Compensation Committee on Executive
Compensation" and "Shareholder Return Performance Presentation" shall not be
deemed to be so incorporated unless specifically otherwise provided in any such
filing.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINATION
The Bylaws of the Company were amended in March 1999 to provide that
the number of directors shall consist of at least one and not more than ten. The
Board is presenting a slate of seven (7) nominees for election as directors at
the Annual Meeting, two of whom are employees of the Company and one who is a
consultant to the Company. The Board has nominated the seven (7) individuals
named herein to serve as directors of the Company until the next annual meeting
of shareholders or until their respective successors have been elected and
qualified. All of the nominees except Mr. Taylor are current members of the
Board. The existing members were all elected at the prior annual meeting except
for Penelope A. Sellers who was appointed to the Board subsequent to the
acquisition of Encore Systems, Inc. and Don G. Hallacy who was elected to the
Board in April, 1999 upon his employment as President and Chief Executive
Officer of the Company. The election of each nominee requires the affirmative
vote of a majority of the shares of the Common Stock represented in person or by
proxy at the Annual Meeting. Two of the current Board Members, Mr. Clunet R.
Lewis and Mr. Mack V. Traynor III have
4
<PAGE>
elected not to be nominated in 1999, although Mr. Lewis will remain General
Counsel to the Company under a consulting contract. The Board wishes to thank
these two individuals for their valuable service on the Board over the past
four years.
BOARD OF DIRECTORS RECOMMENDATION
The Board recommends a vote FOR the election of each of the nominees
listed below. The election of each nominee requires the affirmative vote of the
shareholders holding at least a majority of the shares of Common Stock of the
Company represented in person or by proxy at the Annual Meeting. In the absence
of other instructions, the proxies will be voted FOR the election of the
nominees named below. If prior to the Annual Meeting the Board should learn that
any nominee will be unable to serve by reason of death, incapacity or other
unexpected occurrence, the proxies that otherwise would have been voted for such
nominee will be voted for such substitute nominee as selected by the Board.
Alternatively, the proxies, at the Board's discretion, may be voted for such
fewer number of nominees as results from such death, incapacity or other
unexpected occurrence. The Board has no reason to believe that any of the
nominees will be unable to serve.
INFORMATION ABOUT NOMINEES
The following information has been furnished to the Company by the
persons who have been nominated by the Board to serve as directors for the
ensuing year.
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION
- --------------- --- --------------------
<S> <C> <C>
William P. O'Reilly 53 Chairman of the Board of the Company
James C. Barnard 65 Private Investor
Patrick J. Dirk 59 Chief Executive Officer of Troy Group, Inc.
Don G. Hallacy 43 President and Chief Executive Officer of the
Company
Stephen E. Raville 51 Chairman of Pointe Communications, Inc.
Penelope A. Sellers 48 President of the Company's Hospitality
Group
William G. Taylor 43 President of The Springs Company
</TABLE>
OTHER INFORMATION ABOUT NOMINEES
WILLIAM P. O'REILLY served as Chief Executive Officer of the Company
from January 1997, to April 1999, and has been Chairman of the Board of
Directors since August 1995 and a director of the Company since July 1995. For
the past 15 years, Mr. O'Reilly has been a private investor and entrepreneur who
has managed several different successful business ventures. In 1989, Mr.
O'Reilly formed a group of investors to acquire Military Communications Center,
Inc., where he served as Chairman of the Board and Chief Executive Officer from
1989 to 1994. In 1986, Mr. O'Reilly founded Digital Signal, Inc., a provider of
fiber optic capacity to long distance carriers in the telecommunications
industry, where he served as Chief Executive Officer from 1986 to 1989. In 1981,
Mr. O'Reilly founded Lexitel Corporation, a long distance carrier (which was
subsequently acquired by ALC Communications,
5
<PAGE>
Inc.), where he served as Chairman of the Board and Chief Executive Officer
from 1980 to 1984. Mr. O'Reilly is also currently a director of Pointe
Communications, Inc., a builder and operator of international communication
networks which provides voice, video and data services.
JAMES C. BARNARD has served as a director of the Company since 1997.
Prior to his retirement, Mr. Barnard served as Chairman and Chief Executive
Officer of Access America Telemanagement, Inc., a telecommunications management
company which Mr. Barnard founded in July 1989. Prior to forming Access America
Telemanagement, Inc., Mr. Barnard served as Chairman and Chief Executive Officer
of LDX NET, INC., a telecommunications company which merged with Wiltel in July
1987 to form the Williams Telecommunications Group, Inc. From July 1987 to June
1989, Mr. Barnard served as Vice Chairman of the Board of Directors of Williams
Telecommunications Group, Inc.
PATRICK J. DIRK has served as a director of the Company since its
formation and served as Chairman of the Board from February 1995 until August
1995. Mr. Dirk served as President and Chief Executive Officer of the Company
from its formation until September 1985 and as Chairman of the Board from
formation until May 1989. Mr. Dirk is Chairman of the Board and Chief Executive
Officer of Troy Group, Inc., an enterprise output solutions provider. From 1973
until 1982, Mr. Dirk was employed in various executive positions and as a Board
member with Kroy Inc., a marketer of automated lettering systems.
DON G. HALLACY was named President, CEO and a director of the company
in April 1999. Prior to joining the company Mr. Hallacy was with Sprint
Corporation for 7 years. At Sprint he held several key senior level positions
including Vice President -- Next Generation Solutions, Vice President -- Data
Networks Operations, Vice President -- Strategic Growth Initiatives and Vice
President - Technology Integration. As Vice President - Next Generation
Solutions, Mr. Hallacy planned Sprint's entry into the applications and value
added services marketplace. As Vice President of Sprint's Data Networks
Operations, he oversaw an organization of 1500 people and managed all aspects of
this high growth area, including network monitoring, service delivery, service
assurance and system development. In the role of Vice President -- Strategic
Growth Initiatives, Mr. Hallacy played a key role in the setting and
implementation of Sprint's broadband and application services strategy. As Vice
President -- Technology Integration, he oversaw management and development of
products for Sprint's business and government markets. Hallacy has also served
on the board of directors of Iridium North America. Prior to joining Sprint, Mr.
Hallacy had an extensive background in systems development and strategy with
McKinsey & Co. and Andersen Consulting.
STEPHEN E. RAVILLE has been a director of the Company since October
1997. Since 1996, Mr. Raville has been Chairman of the Board of Pointe
Communications ("Pointe"), Inc. Mr. Raville is also President and controlling
shareholder of First Southeastern Corp., a private investment company he formed
in 1992. In 1983, Mr. Raville founded TA Communications, a long-distance
telephone company, and served as its President. In 1985, in conjunction with a
merger between TA and ATC, he became Chairman and Chief Executive Officer of ATC
until the merger of ATC into WorldCom in late 1992. He currently serves on the
Board of Directors of Pointe Communications, Inc.
PENELOPE A. SELLERS has been a director of the Company since September,
1998 following the acquisition of Encore Systems, Inc. by the Company. Ms.
Sellers has been President of Encore Systems, Inc. for 20 years.
WILLIAM TAYLOR has been President and Director of The Springs Company,
a privately held investment and management services company, since 1992. Prior
to joining The Springs Company in 1990, Mr. Taylor was a Senior Vice President
with First Union National Bank. Mr. Taylor is also a director of Wachovia Bank,
N.A., Kanawha Insurance Company and Nicholas Financial, Inc.
6
<PAGE>
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board, which
met five (5) times during the year ended December 31, 1998 and also on one
occasion, took action pursuant to a resolution adopted by unanimous written
consent. The Board has also established a Compensation Committee and an Audit
Committee.
The current members of the Compensation Committee are Mr. Barnard and
Mr. Traynor. It is expected that Mr.Taylor will be appointed to the committee in
June 1999 following his election to the Board. The function of the Compensation
Committee is to set the compensation for those officers of the Company who are
also directors of the Company and to act on other such matters relating to
compensation as it deems appropriate, including the administration of the
Company's Stock Incentive Plan. The Compensation Committee met four (4) times
during the year ended December 31, 1998.
The current members of the Audit Committee are Messrs. Dirk and
Raville. The function of the Audit Committee is to review the accounting,
auditing, operating and reporting practices of the Company. The Audit Committee
reviews financial releases to the public, the Company's annual financial
statements, changes in accounting practices, the selection and scope of the work
of the Company's independent auditors and the adequacy of internal controls for
compliance with corporate policies and directives. The Audit Committee met one
(1) time during the year ended December 31, 1998.
All of the Directors attended 75% or more of the meetings of the Board
and committees on which they served during the year ended December 31, 1998.
DIRECTOR COMPENSATION
DIRECTORS' FEES. The Company pays non-employee directors $1,500 cash
compensation for each fiscal quarter. Accordingly, during the year ended
December 31, 1998, Messrs. Barnard, Dirk and Raville each received $6,000 in
cash compensation for service in 1998. Mr. Traynor received compensation of
$6,477 and certain employee benefits as an employee of the Company. The Company
reimburses directors for out-of-pocket expenses incurred in attending Board or
committee meetings.
STOCK OPTIONS. In February 1998, the Board of Directors approved the
grant of an option to purchase 10,000 shares of Common Stock to each
non-employee director. Mr. O'Reilly received options to purchase 75,000 shares
of Common Stock in 1998. Mr. Lewis received options to purchase 50,000 shares of
Common Stock in 1998.
The Compensation Committee or the Board of Directors will likely grant
options to the Company's current and any future non-employee directors from time
to time.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of March 31, 1999, unless
otherwise noted, by (a) each shareholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) each director and
nominee for director, (c) each executive officer named in the Summary
Compensation Table below under the heading "Executive Compensation and Other
Benefits -- Summary of Cash and Certain Other Compensation," and (d) all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED (1)(2)
-------------------------
PERCENT
NAME AMOUNT OF CLASS
- ------- --------- --------
<S> <C> <C>
William P. O'Reilly 1,509,416 (3) 6.4%
2000 Town Center, Ste. 690
Southfield, Michigan 48075
Edward C. Barrett 558,623 (4) 2.4%
1037C MacArthur Rd.
Reading, PA 19605
Mack V. Traynor, III 500,000 (5) 2.1%
19880 Sweetwater Curve
Shorewood, MN 55331
Clunet R. Lewis 437,053 (6) 1.8%
2000 Town Center, Ste. 690
Southfield, Michigan 48075
Penelope A. Sellers 418,500 1.8%
900 Circle 75 Parkway, Ste 1700
Atlanta, GA 30339
Patrick J. Dirk 367,742 (7) 1.6%
Troy Group, Inc.
2331 South Pullman Street
Santa Ana, California 92705
William G. Taylor 323,450 (8) 1.4%
The Springs Company
1605 Biltmore Drive
Charlotte, South Carolina 28207
Stephen E. Raville 135,000 (9) *%
2472 Brookhaven Place
Atlanta, Georgia 30319
Nicholas J. Pyett 110,000 (10) *%
2000 Town Center, Ste. 690
Southfield, MI 48075
</TABLE>
8
<PAGE>
<TABLE>
<S> <C> <C>
Don G. Hallacy 110,000 (11) *%
900 Circle 75 Parkway, Ste. 1700
Atlanta, GA 30339
James C. Barnard 85,000 (12) *%
14308 Spyglass Ridge
Chesterfield, Missouri 63017
All current directors and executive
officers as a group 4,554,784 (13) 19.2%
</TABLE>
* Less than 1% of the issued and outstanding shares of Common Stock.
Notes:
(1) Shares not outstanding but deemed beneficially owned by virtue of the
right of a person or member of a group to acquire them within 60 days
are treated as outstanding only when determining the amount and percent
owned by such person or group.
(2) Unless otherwise noted, all of the shares shown are held by individuals
or entities possessing sole voting and investment power with respect to
such shares.
(3) Includes options to purchase 235,500 shares of Common Stock, all
exercisable within 60 days.
(4) Includes 100,000 shares owned by Mr. Barrett's wife as to which he may
be deemed to share voting and investment power, 15,000 shares owned by
Mr. Barrett as custodian for his minor children as which he may be
deemed to have sole voting and investment power and options to purchase
43,500 shares of Common Stock, all exercisable within 60 days.
(5) Includes options to purchase 278,447 shares of Common Stock, all
exercisable within 60 days.
(6) Includes 50,000 shares of Common Stock held in trust for Mr. Lewis's
family members as to which he may be deemed to have voting and
investment power and options to purchase 135,500 shares of Common
Stock, all exercisable within 60 days.
(7) Includes 11,567 shares of Common Stock owned by Troy Systems, Inc. of
which Mr. Dirk is the Chairman of the Board, as to which he may be
deemed to have sole voting and investment power, 280,675 shares owned
jointly with Mr. Dirk's wife, as to which he may be deemed to share
voting and investment power and options to purchase 75,500 shares of
Common Stock, all exercisable within 60 days.
(8) Includes 320,000 shares of Common Stock owned by corporations of which
Mr. Taylor is the Chairman of the Investment Committee as to which he
may be deemed to have sole voting and investment power
(9) Includes options to purchase 35,000 shares of Common Stock, all
exercisable within 60 days.
(10) Includes options to purchase 110,000 shares of Common Stock, all
exercisable within 60 days.
(11) Includes options to purchase 100,000 shares of Common Stock, all
exercisable within 60 days and 10,000 shares owned by Mr. Hallacy's
wife's trust as to which he may be deemed to share voting and
investment power.
(12) Includes options to purchase 35,000 shares of Common Stock, all
exercisable within 60 days.
(13) Includes (i) an aggregate of 727,242 shares of Common Stock held by
controlled corporations, jointly with spouses or by spouses, as to
which members of the group may be deemed to have sole or shared voting
and investment power, and (ii) options to purchase an aggregate of
1,048,447 shares of Common Stock exercisable within 60 days held by
members of the group.
9
<PAGE>
EXECUTIVE COMPENSATION AND OTHER BENEFITS
REPORTS OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
POLICY ON EXECUTIVE OFFICER COMPENSATION. The executive compensation
program is administered by the Compensation Committee of the Board (the
"Committee") which in 1998 consisted of non-employee directors Mr. James
Barnard, and Mr. Mack V. Traynor III. The program supports the Company's
commitment to providing superior shareholder value. It is designed to attract
and retain high-quality executives, to encourage them to make career commitments
to the Company, and to accomplish the Company's short and long-term objectives.
The Committee attempts to structure a compensation program for the Company that
will reward its top executives with bonuses and stock and option awards upon
attainment of specified goals and objectives while striving to maintain salaries
at reasonably competitive levels. The Committee reviews the compensation
(including salaries, bonuses and stock options) of the Company's officers and
performs such other duties as may be delegated to it by the Board. The Committee
held four (4) formal meetings during the fiscal year ended December 31, 1998.
In reviewing the compensation to be paid to the Company's executive
officers during the fiscal year ended December 31, 1998, the Committee sought to
ensure that executive officers were rewarded for long-term strategic management,
for increasing the Company's value for its shareholders, and for achieving
internal goals.
The key components of executive officer compensation are salary,
bonuses and stock option awards. Salary is generally based on factors such as an
individual officer's level of responsibility, prior years' compensation,
comparison to compensation of other officers in the Company, and compensation
provided at competitive companies and companies of similar size. Bonuses and
stock option awards are intended to reward exceptional performances. Benchmarks
for determining base salary and bonus levels include targeted funds from
operations levels, strength of the balance sheet and creation of shareholder
value. Stock option awards are also intended to increase an officer's interest
in the Company's long-term success as measured by the market and book value of
its Common Stock. Stock awards may be granted to officers and directors of the
Company and its subsidiaries and to certain employees who have managerial or
supervisory responsibilities under the various Stock Incentive Plans. The
Committee has not awarded any bonus compensation for 1998 due to the losses
incurred.
CEO COMPENSATION. During the fiscal year ended December 31, 1998,
William P. O'Reilly served in the capacity of Chief Executive Officer of the
Company. Under Mr. O'Reilly's leadership, the Company's net loss decreased
significantly in 1998 as compared to 1997, and the Company continued its growth
by acquiring Encore Systems, Inc. and its subsidiaries and agreed to merge with
Sulcus Hospitality Technologies, Corp.
As of April 1, 1999, the Company entered into a consulting agreement
with Mr. O'Reilly which will compensate him at a rate of $225,000 annually.
Prior to entering into this Agreement, Mr. O'Reilly was paid $100,000 annually.
In January 1998, Mr. O'Reilly received options to purchase 75,000 shares of
Common Stock. Based upon pay levels for chief executive officers of publicly
traded technology companies, the Committee believes that Mr. O'Reilly's total
compensation in 1998 was below the compensation of executives in similar
positions, and accordingly the adjustment in 1999 was made.
Respectfully submitted,
James C. Barnard
Mack V. Traynor III
10
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the cash and non-cash compensation for
each of the last three fiscal years, as well as the nine-month transition period
ended December 31, 1996, awarded to or earned by the Chief Executive Officer of
the Company as well as for other executive officers of the Company and its
subsidiaries whose salary and bonus exceeded $100,000 during the year ended
December 31, 1998 (the "Named Executive Officers"). No other executive officer
of the Company received or earned compensation in the form of salary and bonus
which exceeded $100,000 during the year ended December 31, 1998.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (S) BONUS ($) OPTIONS (#) COMPENSATION ($)
--------------------------- ---- ---------- --------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
William P. O'Reilly (1)
CHIEF EXECUTIVE OFFICER 1998 $103,846 $- 75,000 $ -
1997 72,692 - 150,000 25,000
1996(5) - - - -
1996(6) - - - -
Clunet R. Lewis (2)
GENERAL COUNSEL AND 1998 $103,846 $- 50,000 $ -
SECRETARY 1997 72,692 - 75,000 25,000
1996(5) - - - -
1996(6) - - - -
Edward C. Barrett (3)
EXECUTIVE VICE PRESIDENT 1998 $136,850 $- - $ -
AND CHIEF OPERATING 1997 38,760 - 46,667 -
OFFICER 1996(5) - - - -
1996(6) - - - -
Nicholas J. Pyett (4)
CHIEF FINANCIAL OFFICER 1998 $135,000 $- 10,000 $ -
AND TREASURER 1997 94,134 - 100,000 -
1996(5) - - - -
1996(6) - - - -
</TABLE>
(1) William O'Reilly became the Chief Executive Officer in January 1997.
Until April 1, 1997, when he became an employee, Mr. O'Reilly was a
consultant to the Company. Mr. O'Reilly became an employee on April 1,
1997. The Company paid $25,000 to Mr. O'Reilly in 1997 as a consultant.
Such amount is listed under "All Other Compensation". In April 1999,
Mr. O'Reilly again entered into a consulting contract with the Company.
(2) Clunet R. Lewis became the Secretary and General Counsel in January
1997. Until April 1, 1997, when he became an employee, Mr. Lewis was a
consultant to the Company. Mr. Lewis became an employee on April 1,
1997. The Company paid $25,000 to Mr. Lewis in 1997 as a consultant.
Such amount is listed under "All Other Compensation". In April 1999,
Mr. Lewis again entered into a consulting contract with the Company.
(3) Edward C. Barrett became an employee on August 15, 1997 with the
acquisition of Hi-Tech Connections, Inc. and was elected Executive Vice
President in 1997.
(4) Nicholas J. Pyett joined the Company as Chief Financial Officer and
Treasurer on April 1, 1997.
(5) Represents the nine-month period ended December 31, 1996. In
October 1996, the Company changed its fiscal year end from March 31
to December 31, effective December 31, 1996.
(6) Represents the twelve-month period ended March 31, 1996.
11
<PAGE>
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED
DECEMBER 31, 1998 AND YEAR-END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS/SAR'S IN-THE-MONEY OPTIONS/SAR'S
SHARES AT FISCAL YEAR END AT FISCAL YEAR END (1)
ACQUIRED ON VALUE ------------------------------------ --------------------------
NAME EXERCISE IN 1998 RECEIVED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William P. O'Reilly - N/A 235,000 - $15,977 $-
Clunet R. Lewis - N/A 135,000 - 15,977 -
Edward C. Barrett - N/A 43,500 3,167 - -
Nicholas J. Pyett - N/A 60,000 50,000 - -
</TABLE>
(1) Value of the Company's unexercised, in-the-money options based on the
average of the high and low price of the Company's Common Stock as of
December 31, 1998 which was $4.53.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS TABLE
POTENTIAL REALIZABLE
VALUE AT ASSUMED
SHARES ANNUAL RATES OF STOCK
UNDERLYING % OF TOTAL PRICE APPRECIATION
OPTIONS/SARS OPTIONS/SARS EXERCISE FOR OPTION TERM
GRANTED IN GRANTED TO PRICE EXPIRATION
NAME 1998 EMPLOYEES IN 1998 ($/SH.) DATE 5% 10%
---- ------------ ----------------- -------- ---------- --------------------
<C> <S> <S> <S> <S> <S> <S>
William P. O'Reilly 75,000 9.0% $ 5.13 2/09/08 $241,731 612,595
Clunet R. Lewis 50,000 6.0 5.13 2/09/08 161,154 408,397
Edward C. Barrett -- -- N/A N/A -- --
Nicholas J. Pyett 10,000 1.2 5.13 2/09/08 32,231 81,679
</TABLE>
EMPLOYMENT AGREEMENTS
BARRETT EMPLOYMENT AGREEMENT. Edward C. Barrett, an executive officer of
the Company entered into an Employment and Non-Competition Agreement with the
Company on August 15, 1997 (the "Barrett Employment Agreement"). The Barrett
Employment Agreement provides for a minimum annual base salary for Mr. Barrett
of $100,000. The Barrett Employment Agreement contains a two-year
non-competition clause in the event of termination of Mr. Barrett's employment.
The Barrett Employment Agreement will terminate on July 31, 2000, unless
terminated earlier. Commencing August 1, 2000 and on each August 1st thereafter,
the term of the Barrett Employment Agreement will be automatically extended for
one (1) additional year unless on or before the July 1 immediately preceding any
such renewal period either party gives written notice to the other of the
cessation of further extensions, in which case no further automatic extensions
will occur. The Barrett Employment Agreement may be terminated (i) by Eltrax
immediately for cause; (ii) by either party upon 75 days' written notice for
whatever reason; and (iii) automatically in the event of the death or disability
of Mr. Barrett. In the event that Eltrax terminates the Barrett Employment
Agreement without cause, Mr. Barrett will be entitled to continue to be paid his
base salary through the termination date or 75 days, whichever is greater.
12
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
O'REILLY CONSULTING AGREEMENT. Effective April 1999, Mr. O'Reilly
entered into a consulting agreement with the Company. The contract provides for
an initial consulting fee of $225,000, and a consulting fee of $250,000 for
years thereafter. The agreement is for two years ending March 31, 2001, and
renews for successive one-year periods if not terminated earlier by the Company
or Mr. O'Reilly. The agreement contains a non-competition clause that expires
two years after the termination of the agreement.
LEWIS CONSULTING AGREEMENT. Effective April 1999, Mr. Lewis entered
into a consulting agreement with the Company. The contract provides for an
initial consulting fee of $215,000, and a consulting fee of $240,000 for years
thereafter. The agreement is for two years ending March 31, 2001, and renews for
successive one-year periods if not terminated earlier by the Company or Mr.
Lewis. The agreement contains a non-competition clause that expires two years
after the termination of the agreement.
HI-TECH CONNECTIONS, INC. ACQUISITION. On August 1, 1997, the Company
acquired its Hi-Tech Connections subsidiary from its owners, including Edward C.
Barrett, for approximately 919,999 shares of Common Stock (the "Hi-Tech
Acquisition Shares"). All of the Hi-Tech Acquisition Shares are restricted
stock, and have certain piggyback registration rights. All expenses of such
registration will be borne by the Company.
ENCORE SYSTEMS, INC. ACQUISITION. Effective September 1, 1998, the
Company acquired its Encore Systems, Inc. subsidiary and two related companies
from its owners, including Penelope A. Sellers, for $8,500,000 in cash and
approximately 465,000 shares of Common Stock (the "Encore Acquisition Shares").
All of the Encore Acquisition Shares are restricted stock, and have certain
piggyback registration rights. All expenses of such registration will be borne
by the Company.
SELLERS EMPLOYMENT AGREEMENT. Penelope A. Sellers, a director of the
Company, and President of the Company's Hospitality Group, entered into an
Employment and Non-Competition Agreement with the Company on August 31, 1998
(the "Sellers Employment Agreement"). The Sellers Employment Agreement
provides for a minimum annual base salary for Ms. Sellers of $94,800. The
Sellers Employment Agreement contains a two-year non-competition clause upon
termination of Ms. Sellers employment. The Sellers Employment Agreement will
terminate on August 31, 1999, unless terminated earlier. Commencing September
1, 1999 and on each September 1st thereafter, the term of the Sellers
Employment Agreement will be automatically extended for one (1) additional
year unless either party gives thirty (30) days written notice to the other
of the cessation of further extensions, in which case no further automatic
extensions will occur. The Sellers Employment Agreement may be terminated (i)
by Eltrax immediately for cause; (ii) by either party upon 30 days' written
notice for whatever reason; and (iii) automatically in the event of the death
or disability of Ms. Sellers. In the event that Eltrax terminates the Sellers
Employment Agreement without cause, Ms. Sellers will be entitled to continue
to be paid her base salary through the remaining term of the agreement or the
applicable renewal term, as the case may be.
13
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the yearly percentage change
in the cumulative total shareholder return on the Company's Common Stock against
the cumulative total shareholder return of a peer group of companies and the
NASDAQ market index, for the five (5) year period ending on December 31, 1998.
This line graph assumes a $100 investment on January 1, 1994 and actual
increases of the market value of the Company's Common Stock relative to an
initial investment of $100. The comparisons in this table are required by the
SEC and are not intended to forecast or be indicative of possible future
performance of the Company's Common Stock.
The peer group selected by the Company represents the published Media General
index of Business Software and Service Providers.
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Eltrax Systems, Inc. 100.00 33.33 116.67 341.67 316.67 320.83
Peer group 100.00 105.40 140.20 160.22 178.33 212.83
NASDAQ Market Index 100.00 104.99 136.18 169.23 207.00 291.96
</TABLE>
14
<PAGE>
PROPOSAL 2
PROPOSAL TO ADOPT THE
1999 STOCK INCENTIVE PLAN
INTRODUCTION
On May 24, 1999, the Board of Directors of the Company approved the
1999 Stock Incentive Plan (the "1999 Plan"), which will become effective if
approved by the Company's shareholders at the Annual Meeting. The 1999 Plan
provides that up to 10,000,000 shares of Common Stock, less the number of shares
of Common Stock granted under the Company's 1995 Stock Incentive Plan (the "1995
Plan"), 1997 Stock Incentive Plan (the "1997 Plan"), and 1998 Stock Incentive
Plan ("1998 Plan"), are available for various stock incentive awards. The 1999
Plan is intended to replace the 1995 Plan, 1997 Plan, and 1998 Plan (hereinafter
sometimes collectively referred to as the "Prior Plans"). However, until the
1999 Plan is approved by various state securities authorities, various stock
incentive awards may continue to be awarded pursuant to the Prior Plans.
The 1995 Plan, 1997 Plan, and 1998 Plan were approved by the
shareholders and implemented by the Company in 1995, 1997, and 1998,
respectively. In connection with the Company's merger with Sulcus Hospitality
Technologies Corp. in 1999, an increase in the number of shares of Common Stock
available for issuance under the 1998 Plan was increased by 1,500,000 shares to
2,500,000 shares. The maximum number of shares of Common Stock authorized for
issuance under the Prior Plans, including the maximum number of shares now
available or that become available for issuance based on options that expire
unexercised or were forfeited under the Prior Plans, is 4,500,000, of which no
shares were available for grant as of May 28, 1999. Although stock incentive
awards may continue to be awarded pursuant to the Prior Plans, such awards will
not increase the aggregate amount of Common Stock that may be issued pursuant to
the 1999 Plan and the Prior Plans as the 1999 Plan provides that any shares
issued pursuant to the Prior Plans reduces by an equal amount the amount of
shares of Common Stock that may be issued pursuant to the 1999 Plan.
The purpose of the 1999 Plan is to advance the interests of the Company
and its shareholders by enabling the Company (i) to attract and retain qualified
employees or consultants to perform services for the Company by providing an
incentive to such individuals through equity participation in the Company and by
rewarding such individuals who contribute to the achievement by the Company of
its economic objectives; and (ii) to pursue its growth strategy by providing a
means to the Company to provide an incentive through equity participation in the
Company in the form of stock options or other incentive awards to key employees
of newly acquired companies.
The major features of the 1999 Plan are summarized below, which summary
is qualified in its entirety by reference to the full text of the 1999 Plan, a
copy of which may be obtained from the Company.
SUMMARY OF THE 1999 PLAN
GENERAL. The 1999 Plan provides for the grant to participating eligible
recipients of the Company ("Participants") of (i) options to purchase shares of
Common Stock that qualify as "incentive stock options" ("Incentive Options")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"); (ii) options to purchase shares of Common Stock that do
not qualify as Incentive Options ("Non-Qualified Options"); (iii) awards of
shares of Common Stock that are subject to certain forfeiture and
transferability restrictions that lapse after specified periods of time or upon
certain events ("Restricted Stock Awards"); and (iv) awards of shares of Common
Stock ("Stock Bonuses"). Incentive Options and Non-Qualified Options are
collectively referred to herein as "Options," and
15
<PAGE>
Options, Restricted Stock Awards, and Stock Bonuses are collectively referred
to herein as "Incentive Awards."
The 1999 Plan will be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"). In accordance with and
subject to the provisions of the 1999 Plan, the Committee will have the
authority to determine all provisions of Incentive Awards as the Committee may
deem necessary or desirable and as consistent with the terms of the 1999 Plan,
including without limitation, (i) the recipients to be granted Incentive Awards
under the 1999 Plan; (ii) the nature and extent of the Incentive Awards to be
made to each Participant; (iii) the time or times when Incentive Awards will be
granted; (iv) the duration of each Incentive Award; and (v) the restrictions and
other conditions to which the payment or vesting of Incentive Awards may be
subject. In addition, the Committee will have the authority in its sole
discretion to pay the economic value of any Incentive Award in the form of cash,
Common Stock or any combination of both.
The Committee will have the authority under the 1999 Plan to amend or
modify the terms of any outstanding Incentive Award in any manner, including,
without limitation, the authority to modify the number of shares or other terms
and conditions of an Incentive Award, extend the term of an Incentive Award,
accelerate the exercisability or vesting or otherwise terminate any restrictions
relating to an Incentive Award, accept the surrender of any outstanding
Incentive Award or, to the extent not previously exercised or vested, authorize
the grant of new Incentive Awards in substitution for surrendered Incentive
Awards; provided, however that the amended or modified terms are permitted by
the 1999 Plan as then in effect and that any Participant adversely affected by
such amended or modified terms has consented to such amendment or modification.
In the event of any reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split, combination of
shares, rights offering, divestiture or extraordinary dividend (including a
spin-off) or any other change in the corporate structure or shares of the
Company, the Committee (or, if the Company is not the surviving corporation in
any such transaction, the board of directors of the surviving corporation) will
make appropriate adjustments to the number and kind of securities or other
property (including cash) available for issuance or payment under the 1999 Plan
and, in order to prevent dilution or enlargement of the rights of Participants,
(i) the number and kind of securities or other property (including cash) subject
to outstanding Options, and (ii) the exercise price of outstanding Options.
All employees (including, without limitation, officers and directors
who are also employees), non-employee directors, consultants and independent
contractors of the Company or any subsidiary of the Company, who, in the
judgment of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company and its
subsidiaries will be eligible to participate in the 1999 Plan. As of April 1,
1999, there were approximately 750 individuals eligible to participate in the
1999 Plan. As a holder of Incentive Awards (other than Restricted Stock Awards
and Stock Bonuses), a Participant will have no rights as a shareholder with
respect to the shares of Common Stock underlying such Incentive Awards unless
and until such Incentive Awards are exercised for, or paid in the form of,
shares of Common Stock and the Participant becomes the holder of record of such
shares. No right or interest of any Participant in an Incentive Award may be
assigned or transferred, except pursuant to a qualified domestic relations
order, testamentary will, the laws of descent and distribution, or as otherwise
expressly permitted by the 1999 Plan, or subjected to any lien or otherwise
encumbered during the lifetime of the Participant, either voluntarily or
involuntarily, directly or indirectly, by operation of law or otherwise, unless
approved by the Committee in its sole discretion. The maximum number of shares
of Common Stock that will be available for issuance under the 1999 Plan will be
10,000,000 shares of Common Stock less the number of shares of Common Stock
granted under the Prior Plans. No Participant may be granted any Options or
Stock Appreciation Rights, or any other Incentive Awards with a value based
solely on an increase in the value of the Common Stock after the date of grant,
relating to more than 300,000 shares of Common Stock in the aggregate in any
fiscal year of the Company (subject to adjustment as provided in the 1999 Plan);
provided, however, that a Participant who is first appointed or elected as an
officer, hired as an employee or retained as a consultant by the
16
<PAGE>
Company or who receives a promotion that results in an increase in
responsibilities or duties may be granted, during the fiscal year of such
appointment, election, hiring, retention or promotion, Options, Stock
Appreciation Rights or such other Incentive Awards relating to up to 500,000
shares of Common Stock (subject to adjustment as provided in the 1999 Plan).
On May 24, 1999, the last sale price of the Common Stock was $4.25 per share,
as reported on the Nasdaq SmallCap Market.
The 1999 Plan will terminate at midnight on June 24, 2009, unless
terminated earlier by action of the Board of Directors. The Board of Directors
may suspend or terminate the 1999 Plan or any portion thereof at any time, and
may amend the 1999 Plan in any respect without shareholder approval, unless
shareholder approval is then required by federal securities or tax laws or the
rules of Nasdaq. No Incentive Award will be granted after termination of the
1999 Plan. Incentive Awards outstanding upon termination of the 1999 Plan may
continue to be exercised, or become free of restrictions, in accordance with
their terms.
OPTIONS. The terms and conditions of any Option granted under the 1999
Plan, including whether the Option is to be considered an Incentive Stock Option
or a Non-Statutory Stock Option, will be determined by the Committee, subject to
certain requirements contained in the 1999 Plan. To the extent, however, that
any Incentive Stock Option granted under the 1999 Plan ceases for any reason to
qualify as an Incentive Stock Option under the Code, such Incentive Stock Option
will continue to be outstanding for purposes of the 1999 Plan but will
thereafter be deemed to be a Non-Statutory Stock Option. The per share price to
be paid by a Participant upon exercise of an Option will be determined by the
Committee in its discretion at the time of the Option grant; provided, however,
that (a) the exercise price for Incentive Stock Options must be equal to the
fair market value of one share of Common Stock on the date of grant and 110% of
the fair market value if, at the time the Incentive Stock Option is granted, the
Participant owns, directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company; and (b) the exercise price for Non-Statutory Stock
Options must not be less than 85% of the fair market value of one share of
Common Stock on the date of grant. The fair market value of the Company's Common
Stock is equal to the closing bid price, as reported by the Nasdaq SmallCap
Market as of the date of grant (or, if no shares were traded or quoted on such
date, as of the next preceding date on which there was such a trade or quote).
An Option will become exercisable at such times and in such
installments as may be determined by the Committee in its sole discretion at
the time of grant; provided, however, that no Option may be exercisable after
10 years from its date of grant. For Incentive Options, the aggregate fair
market value (determined as of the time the Incentive Option is granted) of
shares of Common Stock with respect to which Incentive Options become
exercisable for the first time by the Participant under the 1999 Plan during
any calendar year may not exceed $100,000.
Payment of an option exercise price must be made entirely in cash
unless the Committee, in its sole discretion and upon terms and conditions
established by the Committee, allows such payments to be made, in whole or in
part, (i) by tender of a written notice pursuant to which a Participant
irrevocably instructs a broker or dealer to sell a sufficient number of shares
or loan a sufficient amount of money to pay all or a portion of the exercise
price of the Option and/or any related withholding tax obligations and remit
such sums to the Company and directs the Company to deliver stock certificates
to be issued upon such exercise directly to such broker or dealer; (ii) by
tender shares of Common Stock that are already owned by the Participant or, with
respect to any Incentive Award, that are to be issued upon the grant, exercise
or vesting of such Incentive Award; (iii) by execution of a promissory note (on
terms acceptable to the Committee in its sole discretion); or (iv) by a
combination of such methods.
RESTRICTED STOCK AWARDS. Restricted Stock Awards are awards of Common
Stock granted to a recipient which are subject to restrictions on
transferability and the risk of forfeiture. The Committee may impose such
restrictions or conditions, not inconsistent with the provisions of the 1999
Plan, to the
17
<PAGE>
vesting of Restricted Stock Awards as it deems appropriate, including, without
limitation, that the Participant remain in the continuous employ or service of
the Company or any of its subsidiaries for a certain period of time or that the
Participant or the Company, or any subsidiary or division of the Company,
satisfy certain performance goals or criteria. Except as otherwise provided
under the 1999 Plan, a Participant will have all voting, dividend, liquidation
and other rights with respect to such shares of Common Stock issued to the
Participant as a Restricted Stock Award upon the Participant becoming the holder
of record of such shares as if such Participant were a holder of record of
shares of unrestricted Common Stock.
STOCK BONUSES. Stock Bonuses are awards of Common Stock that are not
subject to any restrictions other than, if imposed by the Committee,
restrictions on transferability. A Participant may be granted one or more Stock
Bonuses under the 1999 Plan, and such Stock Bonuses will be subject to such
terms and conditions, consistent with other provisions of the 1999 Plan, as may
be determined by the Committee in its sole discretion. Other than transfer
restrictions, if any, imposed by the Committee, the Participant will have all
voting, dividend, liquidation and other rights with respect to the shares of
Common Stock issued to a Participant as a Stock Bonus under the 1999 Plan upon
the Participant becoming the holder of record of such shares.
EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. If a
Participant's employment or other service with the Company and its subsidiaries
is terminated by reason of death, disability or retirement, (i) all outstanding
Options then held by the Participant will become immediately exercisable in full
and will remain exercisable for a period of one year after such termination (but
in no event after the expiration date of any such Option); (ii) all Restricted
Stock Awards then held by the Participant will become fully vested; and (iii)
all Stock Bonuses then held by the Participant will vest and/or continue to vest
in the manner determined by the Committee and set forth in the agreement
evidencing such Stock Bonuses. In the event a Participant's employment or other
service is terminated with the Company and its subsidiaries for any reason other
than death, disability or retirement, or a Participant is in the employ or
service of a subsidiary of the Company and such subsidiary ceases to be a
subsidiary of the Company (unless the Participant continues in the employ or
service of the Company or another subsidiary), (i) all outstanding Options then
held by the Participant will remain exercisable to the extent exercisable as of
such termination until the earlier of three months after such termination or the
expiration date of any such Option, unless termination is for cause, in which
case all Options will remain exercisable as of such termination for a period of
one month after such termination (but in no event after the expiration of any
such Option)); (ii) all Restricted Stock Awards then held by the Participant
that have not vested will be terminated and forfeited; and (iii) all Stock
Bonuses then held by the Participant will vest and/or continue to vest in the
manner determined by the Committee and set forth in the agreement evidencing
such Stock Bonuses.
CHANGE IN CONTROL OF THE COMPANY. In the event a "Change in Control" of
the Company occurs, then, unless otherwise provided by the Committee in its sole
discretion either in the agreement evidencing an Incentive Award at the time of
grant or at any time after the grant of an Incentive Award, (i) all outstanding
Options will become immediately exercisable in full and will remain exercisable
for the remainder of their terms, regardless of whether the Participant to whom
such Options have been granted remains in the employ or service of the Company
or any of its subsidiaries, (ii) all outstanding Restricted Stock Awards will
become immediately fully vested and non-forfeitable, and (iii) all outstanding
Stock Bonuses then held by the Participant will vest and/or continue to vest in
the manner determined by the Committee and set forth in the agreement evidencing
such Stock Bonuses. In addition, the Committee, without the consent of any
affected Participant, may determine that some or all Participants holding
outstanding Options will receive, with respect to some or all of the shares of
Common Stock subject to such Options, as of the effective date of any such
Change in Control, cash in an amount equal to the excess of the fair market
value of such shares immediately prior to the effective date of such Change in
Control over the exercise price per share of such Options. To the extent that
such acceleration of the vesting of Incentive Awards or the payment of cash in
exchange for all or part of an Incentive Award
18
<PAGE>
would be deemed a "payment" (as defined in the Code), together with any other
"payments" which such Participant has the right to receive from the Company or
any corporation that is a member of an "affiliated group" (as defined in
Section 1504(a) of the Code) of which the Company is a member, would
constitute a "parachute payment" (as defined in the Code), then the "payments"
to such Participant pursuant to the Change in Control provisions in the 1999
Plan will be reduced to the largest amount as will result in no portion of
such "payments" being subject to the excise tax imposed by Section 4999 of the
Code. To the extent, however, that a Participant has a separate agreement that
specifically provides that such "payments" will not be reduced, then the
foregoing limitations will not apply.
For purposes of the 1999 Plan, a "Change in Control" of the Company
will be deemed to have occurred, among other things, upon (i) the sale, lease,
exchange or other transfer, directly or indirectly, of substantially all of the
assets of the Company (in one transaction or in a series of related
transactions) to a person or entity that is not controlled by the Company; (ii)
the approval by the Company's shareholders of a plan or proposal for the
liquidation or dissolution of the Company; (iii) any person becoming after the
effective date of the 1999 Plan the beneficial owner, directly or indirectly,
of (A) 20% or more, but less than 50%, of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote at
elections of directors, unless the transaction resulting in such ownership has
been approved in advance by any individuals who are members of the Board on the
effective date of the 1999 Plan and any individual who subsequently becomes a
member of the Board whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the incumbent
directors (either by specific vote or by approval of the Company's proxy
statement in which such individual is named as a nominee for director without
objection to such nomination) (the "Incumbent Directors"), or (B) 50% or more of
the combined voting power of the Company's outstanding securities ordinarily
having the right to vote at elections of directors (regardless of any approval
by the Incumbent Directors); (iv) a merger or consolidation to which the Company
is a party if the Company's shareholders immediately prior to the effective date
of such merger or consolidation beneficially own, immediately following the
effective date of such merger or consolidation, securities of the surviving
corporation representing (A) more than 50%, but less than 80%, of the combined
voting power of the surviving corporation's then outstanding securities
ordinarily having the right to vote at elections of directors, unless such
merger or consolidation was approved in advance by the Incumbent Directors, or
(B) 50% or less of the combined voting power of the surviving corporation's then
outstanding securities ordinarily having the right to vote at elections of
directors, (regardless of any approval by the Incumbent Directors); (v) the
Incumbent Directors cease for any reason to constitute at least a majority of
the Board; or (vi) any other change in control of the Company of a nature that
would be required to be reported pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is then subject to such reporting requirements.
FEDERAL INCOME TAX CONSEQUENCES. The following description of federal
income tax consequences is based on current statutes, regulations and
interpretations. The description does not include state or local income tax
consequences. In addition, the description is not intended to address specific
tax consequences applicable to an individual Participant who receives an
Incentive Award.
INCENTIVE OPTIONS. There will not be any federal income tax
consequences to either the Participant or the Company as a result of the grant
to an employee of an Incentive Option under the 1999 Plan. The exercise by a
Participant of an Incentive Option also will not result in any federal income
tax consequences to the Company or the Participant, except that (i) an amount
equal to the excess of the fair market value of the shares acquired upon
exercise of the Incentive Option, determined at the time of exercise, over the
amount paid for the shares by the Participant will be includable in the
Participant's alternative minimum taxable income for purposes of the
alternative minimum tax, and (ii) the Participant may be subject to an
additional excise tax if any amounts are treated as excess parachute payments
(see explanation below). Special rules will apply if previously acquired
shares of Common Stock are permitted to be tendered in payment of an Option
exercise price.
19
<PAGE>
If the Participant disposes of the Incentive Option shares acquired
upon exercise of the Incentive Option, the federal income tax consequences will
depend upon how long the Participant has held the shares. If the Participant
does not dispose of the shares within two years after the Incentive Option was
granted, nor within one year after the Participant exercised the Incentive
Option and the shares were transferred to the Participant, then the Participant
will recognize a long-term capital gain or loss. The amount of the long-term
capital gain or loss will be equal to the difference between (i) the amount the
Participant realized on disposition of the shares, and (ii) the option price at
which the Participant acquired the shares. The Company is not entitled to any
compensation expense deduction under these circumstances.
If the Participant does not satisfy both of the above holding period
requirements (a "disqualifying disposition"), then the Participant will be
required to report as ordinary income, in the year the Participant disposes of
the shares, the amount by which the lesser of (i) the fair market value of the
shares at the time of exercise of the Incentive Option (or, for directors,
officers or greater than 10% shareholders of the Company, generally the fair
market value of the shares six months after the date of exercise, unless such
persons file an election under Section 83(b) of the Code within 30 days of
exercise), or (ii) the amount realized on the disposition of the shares,
exceeds the option price for the shares. The Company will be entitled to a
compensation expense deduction in an amount equal to the ordinary income
includable in the taxable income of the Participant. This compensation income
may be subject to withholding. The remainder of the gain recognized on the
disposition, if any, or any loss recognized on the disposition, will be
treated as long-term or short-term capital gain or loss, depending on the
holding period.
NON-QUALIFIED OPTIONS. Neither the Participant nor the Company incurs
any federal income tax consequences as a result of the grant of a Non-Qualified
Option. Upon exercise of a Non-Qualified Option, a Participant will recognize
ordinary income, subject to withholding, on the "Includability Date" in an
amount equal to the difference between (i) the fair market value of the shares
purchased, determined on the Includability Date, and (ii) the consideration
paid for the shares. The Includability Date generally will be the date of
exercise of the Non-Qualified Option. However, the Includability Date for
Participants who are officers, directors or greater-than-10% shareholders of
the Company will generally occur six months later, unless such persons file an
election under Section 83(b) of the Code within 30 days of the date of exercise
to include as ordinary income the amount realized upon exercise of the
Non-Qualified Option. The Participant may be subject to an additional excise
tax if any amounts are treated as excess parachute payments (see explanation
below). Special rules will apply if previously acquired shares of Common Stock
are permitted to be tendered in payment of an Option exercise price.
At the time of a subsequent sale or disposition of any shares of
Common Stock obtained upon exercise of a Non-Qualified Option, any gain or
loss will be a capital gain or loss. Such capital gain or loss will be
long-term capital gain or loss if the sale or disposition occurs more than
one year after the Includability Date and short-term capital gain or loss if
the sale or disposition occurs one year or less after the Includability Date.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Qualified Option for any
amounts includable in the taxable income of the Participant as ordinary income,
provided the Company complies with any applicable withholding requirements.
RESTRICTED STOCK AWARDS AND STOCK BONUSES. With respect to shares
issued pursuant to a Restricted Stock Award that is not subject to a
substantial risk of forfeiture or with respect to Stock Bonuses, a Participant
will include as ordinary income in the year of receipt an amount equal to the
fair market value of the shares received on the date of receipt. With respect
to shares that are subject to a substantial risk of forfeiture, a Participant
may file an election under Section 83(b) of the Code within 30 days after
receipt to include as ordinary income in the year of receipt an amount equal
to the fair market value of the shares received on the date of receipt
(determined as if the shares were not subject to any risk
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of forfeiture). If a Section 83(b) election is made, the Participant will not
recognize any additional income when the restrictions on the shares issued in
connection with the Restricted Stock Award lapse. The Company will receive a
corresponding tax deduction for any amounts includable in the taxable income of
the Participant as ordinary income. At the time any such shares are sold or
disposed of, any gain or loss will be treated as long-term or short-term
capital gain or loss, depending on the holding period from the date of receipt
of the Restricted Stock Award.
A Participant who does not make a Section 83(b) election within 30
days of the receipt of a Restricted Stock Award that is subject to a risk of
forfeiture will recognize ordinary income at the time of the lapse of the
restrictions in an amount equal to the then fair market value of the shares
free of restrictions. The Company will receive a corresponding tax deduction
for any amounts includable in the taxable income of a Participant as ordinary
income. At the time of a subsequent sale or disposition of any shares of Common
Stock issued in connection with a Restricted Stock Award as to which the
restrictions have lapsed, any gain or loss will be treated as long-term or
short-term capital gain or loss, depending on the holding period from the date
the restrictions lapse.
EXCISE TAX ON PARACHUTE PAYMENTS. Section 4999 of the Code imposes an
excise tax on "excess parachute payments", as defined in Section 280G of the
Code. Generally, parachute payments are payments in the nature of compensation
to certain employees or independent contractors who are also officers,
stockholders or highly-compensated individuals, where such payments are
contingent on a change in ownership or control of the stock or assets of the
paying corporation. In addition, the payments must be substantially greater in
amount than the recipient's regular compensation. Under Proposed Treasury
Regulations issued by the Internal Revenue Service, in certain circumstances the
grant, vesting, acceleration or exercise of Options pursuant to the 1999 Plan
could be treated as contingent on a change in ownership or control for purposes
of determining the amount of a Participant's parachute payments.
In general, the amount of a parachute payment (some portion of which
may be deemed to be an "excess parachute payment") would be the cash or the
fair market value of the property received (or to be received) less the
amount paid for such property. If a Participant were found to have received
an excess parachute payment, he or she would be subject to a special
nondeductible twenty percent (20%) excise tax on the amount of the excess
parachute payments, and the Company would not be allowed to claim any
deduction with respect to such payments.
AWARDS UNDER THE 1999 PLAN. The exact number or amounts of any future
grants of Incentive Awards under the 1999 Plan have not been determined at this
time.
RECOMMENDATION OF THE BOARD. The Board recommends a vote FOR approval
of the 1999 Plan. The affirmative vote of the holders of a majority of shares
of Common Stock present in person or by proxy at the Annual Meeting, assuming
a quorum is present, is necessary for approval. Unless a contrary choice is
specified, proxies solicited by the Board will be voted for approval of the
1999 Plan.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers, and all persons who
beneficially own more than 10% of the outstanding shares of the Company's Common
Stock ("Reporting Persons")to file with the Securities and Exchange Commission
(the "SEC") initial reports of ownership and reports of changes in ownership of
the Company's Common Stock and other equity securities of the Company. Reporting
persons are also required to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely upon a review of
the copies of such forms furnished to the Company for the year ended December
31, 1998, and the information provided to the Company by Reporting Persons of
the Company, no Reporting Person failed to file the forms required by Section 16
of the Exchange Act on a timely basis.
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors appointed PricewaterhouseCoopers, L.L.P. as the
Company's independent accountants for the fiscal year ending December 31, 1998.
Representatives of PricewaterhouseCoopers, L.L.P. will be available in person or
via teleconference at the Annual Meeting. Such representatives will have an
opportunity to make a statement if they so desire and will be available to
respond to questions.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Proposals of shareholders intended to be presented in the proxy
materials relating to the next Annual Meeting must be received by the Company at
its principal executive offices on or before December 10, 1999. Such proposals
should be directed to the Company: 2000 Town Center, Suite 690, Southfield,
Michigan 48075; Attention: Chief Financial Officer.
OTHER MATTERS
The management of the Company does not intend to present other items of
business and knows of no items of business that are likely to be brought before
the Annual Meeting except those described in this Proxy Statement. However, if
any other matters should properly come before the Annual Meeting, the persons
named in the enclosed proxy will have discretionary authority to vote such proxy
in accordance with their best judgment on such matters.
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MISCELLANEOUS
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS REPORT ON FORM
10-K (EXCLUSIVE OF EXHIBITS) FOR THE YEAR ENDED DECEMBER 31, 1998 TO EACH PERSON
WHO WAS A SHAREHOLDER OF THE COMPANY AS OF JUNE 1, 1999, UPON RECEIPT FROM ANY
SUCH PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT. SUCH REQUEST SHOULD
BE SENT TO: 2000 TOWN CENTER, SUITE 690, SOUTHFIELD, MICHIGAN 48075; ATTENTION:
SHAREHOLDER RELATIONS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William P. O'Reilly
William P. O'Reilly
CHAIRMAN OF THE BOARD
Southfield, Michigan
June 1, 1999
<PAGE>
ELTRAX SYSTEMS, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE OF PLAN
The purpose of the Eltrax Systems, Inc. 1999 Stock Incentive Plan (the
"Plan") is to advance the interests of Eltrax Systems, Inc. (the "Company") and
its shareholders by enabling the Company and its Subsidiaries to attract and
retain persons of ability to perform services for the Company and its
Subsidiaries by providing an incentive to such individuals through equity
participation in the Company and by rewarding such individuals who contribute to
the achievement by the Company of its economic objectives.
2. DEFINITIONS
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1. "BOARD" means the Board of Directors of the Company.
2.2. "BROKER EXERCISE NOTICE" means a written notice pursuant to which
a Participant, upon exercise of an Option, irrevocably instructs
a broker or dealer to sell a sufficient number of shares or loan
a sufficient amount of money to pay all or a portion of the
exercise price of the Option and/or any related withholding tax
obligations and remit such sums to the Company and directs the
Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
2.3. "CHANGE IN CONTROL" means an event described in Section 11.1 of
the Plan.
2.4. "CODE" means the Internal Revenue Code of 1986, as amended.
2.5. "COMMITTEE" means the group of individuals administering the
Plan, as provided in Section 3 of the Plan.
2.6. "COMMON STOCK" means the common stock of the Company, par value
$.01 per share, or the number and kind of shares of stock or
other securities into which such Common Stock may be changed in
accordance with Section 4.5 of the Plan.
2.7. "COMPANY" means Eltrax Systems, Inc., a Minnesota corporation.
2.8. "DISABILITY" means the disability of the Participant such as
would entitle the Participant to receive disability income
benefits pursuant to the long-term disability plan of the Company
or Subsidiary then covering the Participant or, if no such plan
exists or is applicable to the Participant, the permanent and
total disability of the Participant within the meaning of Section
22(e)(3) of the Code.
2.9. "ELIGIBLE RECIPIENTS" means all employees of the Company or any
Subsidiary and any non-employee directors, consultants and
independent contractors of the Company or any Subsidiary. An
Incentive Award may be granted to an employee, in connection with
hiring, retention or otherwise, prior to the date the employee
first performs services for the Company or the Subsidiaries,
provided that such Incentive Awards shall not become vested prior
to the date the employee first performs such services.
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2.10. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
2.11. "FAIR MARKET VALUE" means, with respect to the Common Stock, as
of any date (or, if no shares were traded or quoted on such date,
as of the next preceding date on which there was such a trade or
quote) (a) the mean between the reported high and low sale prices
of the Common Stock if the Common Stock is listed, admitted to
unlisted trading privileges or reported on any national
securities exchange or on the Nasdaq National Market; (b) if the
Common Stock is not so listed, admitted to unlisted trading
privileges or reported on any national securities exchange or on
the Nasdaq National Market, the closing bid price as reported by
the Nasdaq SmallCap Market, OTC Bulletin Board or the National
Quotation Bureau, Inc. or other comparable service; or (c) if the
Common Stock is not so listed or reported, such price as the
Committee determines in good faith in the exercise of its
reasonable discretion. If determined by the Committee, such
determination will be final, conclusive and binding for all
purposes and on all persons, including, without limitation, the
Company, the shareholders of the Company, the Participants and
their respective successors-in-interest. No member of the
Committee will be liable for any determination regarding the fair
market value of the Common Stock that is made in good faith.
2.12. "INCENTIVE AWARD" means an Option, Restricted Stock Award or
Stock Bonus granted to an Eligible Recipient pursuant to the
Plan.
2.13. "INCENTIVE STOCK OPTION" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the
Plan that qualifies as an "incentive stock option" within the
meaning of Section 422 of the Code.
2.14. "NON-STATUTORY STOCK OPTION" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6 of
the Plan that does not qualify as an Incentive Stock Option.
2.15. "OPTION" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.16. "PARTICIPANT" means an Eligible Recipient who receives one or
more Incentive Awards under the Plan.
2.17. "PREVIOUSLY ACQUIRED SHARES" means shares of Common Stock that
are already owned by the Participant or, with respect to any
Incentive Award, that are to be issued upon the grant, exercise
or vesting of such Incentive Award.
2.18. "PRIOR PLANS" means the Company's 1995 Stock Incentive Plan, 1997
Stock Incentive Plan, and 1998 Stock Incentive Plan.
2.19. "RESTRICTED STOCK AWARD" means an award of Common Stock granted
to an Eligible Recipient pursuant to Section 7 of the Plan that
is subject to the restrictions on transferability and the risk of
forfeiture imposed by the provisions of such Section 7.
2.20. "RETIREMENT" means termination of employment or service pursuant
to and in accordance with the regular (or, if approved by the
Board for purposes of the Plan, early) retirement/pension plan or
practice of the Company or Subsidiary then covering the
Participant, provided that if the Participant is not covered by
any such plan or practice, the Participant will be deemed to be
covered by the Company's plan or practice for purposes of this
determination.
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2.21. "SECURITIES ACT" means the Securities Act of 1933, as amended.
2.22. "STOCK BONUS" means an award of Common Stock granted to an
Eligible Recipient pursuant to Section 8 of the Plan.
2.23. "SUBSIDIARY" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has
a significant equity interest, as determined by the Committee.
2.24. "TAX DATE" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive
Award.
3. PLAN ADMINISTRATION
3.1. THE COMMITTEE. The Plan will be administered by the Board or by
a committee of the Board. So long as the Company has a class of
its equity securities registered under Section 12 of the Exchange
Act, any committee administering the Plan will consist solely of
two or more members of the Board who are "non-employee directors"
within the meaning of Rule 16b-3 under the Exchange Act and, if
the Board so determines in its sole discretion, who are "outside
directors" within the meaning of Section 162(m) of the Code.
Such a committee, if established, will act by majority approval
of the members (including written consent of a majority of the
members), and a majority of the members of such a committee will
constitute a quorum. As used in the Plan, "Committee" will refer
to the Board or to such a committee, if established. To the
extent consistent with corporate law, the Committee may delegate
to any officers of the Company the duties, power and authority of
the Committee under the Plan pursuant to such conditions or
limitations as the Committee may establish; provided, however,
that only the Committee may exercise such duties, power and
authority with respect to Eligible Recipients who are subject to
Section 16 of the Exchange Act. The Committee may exercise its
duties, power and authority under the Plan in its sole and
absolute discretion without the consent of any Participant or
other party, unless the Plan specifically provides otherwise.
Each determination, interpretation or other action made or taken
by the Committee pursuant to the provisions of the Plan will be
conclusive and binding for all purposes and on all persons, and
no member of the Committee will be liable for any action or
determination made in good faith with respect to the Plan or any
Incentive Award granted under the Plan.
3.2. AUTHORITY OF THE COMMITTEE.
(a) In accordance with and subject to the provisions of the
Plan, the Committee will have the authority to determine
all provisions of Incentive Awards as the Committee may
deem necessary or desirable and as consistent with the
terms of the Plan, including, without limitation, the
following: (i) the Eligible Recipients to be selected as
Participants; (ii) the nature and extent of the Incentive
Awards to be made to each Participant including the
number of shares of Common Stock to be subject to each
Incentive Award, any exercise price, the manner in which
Incentive Awards will vest or become exercisable and
whether Incentive Awards will be granted in tandem with
other Incentive Awards) and the form of written
agreement, if any, evidencing such Incentive Award; (iii)
the time or times when Incentive Awards will be granted;
(iv) the duration of each
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Incentive Award; and (v) the restrictions and other
conditions to which the payment or vesting of Incentive
Awards may be subject. In addition, the Committee will
have the authority under the Plan in its sole
discretion to pay the economic value of any Incentive
Award in the form of cash, Common Stock or any
combination of both.
(b) The Committee will have the authority under the Plan to
amend or modify the terms of any outstanding Incentive
Award in any manner, including, without limitation, the
authority to modify the number of shares or other terms
and conditions of an Incentive Award, extend the term of
an Incentive Award, accelerate the exercisability or
vesting or otherwise terminate any restrictions relating
to an Incentive Award, accept the surrender of any
outstanding Incentive Award or, to the extent not
previously exercised or vested, authorize the grant of
new Incentive Awards in substitution for surrendered
Incentive Awards; provided, however that the amended or
modified terms are permitted by the Plan as then in
effect and that any Participant adversely affected by
such amended or modified terms has consented to such
amendment or modification. No amendment or modification
to an Incentive Award, however, whether pursuant to this
Section 3.2 or any other provisions of the Plan, will be
deemed to be a regrant of such Incentive Award for
purposes of this Plan.
(c) In the event of (i) any reorganization, merger,
consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split,
combination of shares, rights offering, extraordinary
dividend or divestiture (including a spin-off) or any
other change in corporate structure or shares, (ii) any
purchase, acquisition, sale or disposition of a
significant amount of assets or a significant business,
(iii) any change in accounting principles or practices,
or (iv) any other similar change, in each case with
respect to the Company or any other entity whose
performance is relevant to the grant or vesting of an
Incentive Award, the Committee (or, if the Company is not
the surviving corporation in any such transaction, the
board of directors of the surviving corporation) may,
without the consent of any affected Participant, amend or
modify the vesting criteria of any outstanding Incentive
Award that is based in whole or in part on the financial
performance of the Company (or any Subsidiary or division
thereof) or such other entity so as equitably to reflect
such event, with the desired result that the criteria for
evaluating such financial performance of the Company or
such other entity will be substantially the same (in the
sole discretion of the Committee or the board of
directors of the surviving corporation) following such
event as prior to such event; provided, however, that the
amended or modified terms are permitted by the Plan as
then in effect.
4. SHARES AVAILABLE FOR ISSUANCE
4.1. MAXIMUM NUMBER OF SHARES AVAILABLE. Subject to adjustment as
provided in Section 4.5 of the Plan, the maximum number of shares
of Common Stock that will be available for issuance under the
Plan will be 10,000,000 shares of Common Stock less the number of
shares of Common Stock issued pursuant to the Prior Plans.
Notwithstanding any other provisions of the Plan to the contrary
other than Section 6.7, no Participant in the Plan may be granted
any Options or any other Incentive Awards with a value based
solely on an increase in the value
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of the Common Stock after the date of grant, relating to more
than 300,000 shares of Common Stock in the aggregate in any
fiscal year of the Company (subject to adjustment as provided
in Section 4.5 of the Plan); provided, however, that a
Participant who is first appointed or elected as an officer,
hired as an employee or retained as a consultant by the
Company or who receives a promotion that results in an
increase in responsibilities or duties may be granted, during
the fiscal year of such appointment, election, hiring,
retention or promotion Options or such other Incentive Awards
relating to up to 500,000 shares of Common Stock (subject to
adjustment as provided in Section 4.5 of the Plan).
4.2. ACCOUNTING FOR INCENTIVE AWARDS. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding
Incentive Awards will be applied to reduce the maximum number of
shares of Common Stock remaining available for issuance under the
Plan. Any shares of Common Stock that are subject to an
Incentive Award that lapses, expires, is forfeited or for any
reason is terminated unexercised or unvested and any shares of
Common Stock that are subject to an Incentive Award that is
settled or paid in cash or any form other than shares of Common
Stock, or used to satisfy the applicable tax withholding
obligation will automatically again become available for issuance
under the Plan. Any shares of Common Stock that constitute the
forfeited portion of a Restricted Stock Award, however, will not
become available for further issuance under the Plan.
4.3. GENERAL RESTRICTIONS. Delivery of shares of Common Stock or
other amounts under the Plan shall be subject to the following:
(a) Notwithstanding any other provision of the Plan, the
Company shall have no liability to deliver any shares of
Common Stock under the Plan or make any other
distribution of benefits under the Plan unless such
delivery or distribution would comply with all applicable
laws (including, without limitation, the requirements of
the Securities Act of 1933), and the applicable
requirements of any securities exchange or similar
entity.
(b) To the extent that the Plan provides for issuance of
stock certificates to reflect the issuance of shares of
Common Stock, the issuance may be reflected on a
non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any securities
exchange or similar entity.
4.4. SHARES OF COMMON STOCK ISSUED PURSUANT TO INCENTIVE STOCK
OPTIONS. Subject to Section 4.5, the maximum number of shares of
Common Stock that may be issued by Options intended to be
Incentive Stock Options pursuant to the Plan shall be 10,000,000
less the number of shares of Common Stock issued pursuant to the
Prior Plans.
4.5. ADJUSTMENTS TO SHARES AND INCENTIVE AWARDS. In the event of any
reorganization, merger, consolidation, recapitalization,
liquidation, reclassification, stock dividend, stock split,
combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off) or any other change
in the corporate structure or shares of the Company, the
Committee (or, if the Company is not the surviving corporation in
any such transaction, the board of directors of the surviving
corporation) will make appropriate adjustment (which
determination will be conclusive) as to the number and kind of
securities or other property (including cash) available for
issuance or payment under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants, (a) the
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number and kind of securities or other property (including cash)
subject to outstanding Options, and (b) the exercise price of
outstanding Options.
5. PARTICIPATION
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with other Incentive
Awards, as may be determined by the Committee in its sole discretion. Incentive
Awards will be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date will be the date of any related
agreement with the Participant.
6. OPTIONS
6.1. GRANT. An Eligible Recipient may be granted one or more Options
under the Plan, and such Options will be subject to such terms
and conditions, consistent with the other provisions of the Plan,
as may be determined by the Committee in its sole discretion.
The Committee may designate whether an Option is to be considered
an Incentive Stock Option or a Non-Statutory Stock Option. To
the extent that any Incentive Stock Option granted under the Plan
ceases for any reason to qualify as an "incentive stock option"
for purposes of Section 422 of the Code, such Incentive Stock
Option will continue to be outstanding for purposes of the Plan
but will thereafter be deemed to be a Non-Statutory Stock
Option.
6.2. EXERCISE PRICE. The per share price to be paid by a Participant
upon exercise of an Option will be determined by the Committee in
its discretion at the time of the Option grant, provided that (a)
such price will not be less than 100% of the Fair Market Value of
one share of Common Stock on the date of grant with respect to an
Incentive Stock Option (110% of the Fair Market Value if, at the
time the Incentive Stock Option is granted, the Participant owns,
directly or indirectly, more than 10% of the total combined
voting power of all classes of stock of the Company or any parent
or subsidiary corporation of the Company), and (b) such price
will not be less than 85% of the Fair Market Value of one share
of Common Stock on the date of grant with respect to a
Non-Statutory Stock Option.
6.3. EXERCISABILITY AND DURATION. An Option will become exercisable
at such times and in such installments as may be determined by
the Committee in its sole discretion at the time of grant;
provided, however, that no Option may be exercisable after 10
years from its date of grant or, in the case of an Eligible
Participant who owns, directly or indirectly (as determined
pursuant to Section 424(d) of the Code), more than 10% of the
combined voting power of all classes of stock of the Company or
any subsidiary or parent corporation of the Company (within the
meaning of Sections 424(f) and 424(e), respectively, of the
Code), five years from its date of grant. Notwithstanding the
foregoing, each Option granted to a participant shall vest at a
rate of at least 20% per year over 5 years from the date the
Option is granted.
6.4. PAYMENT OF EXERCISE PRICE. The total purchase price of the
shares to be purchased upon exercise of an Option will be paid
entirely in cash (including check, bank draft or money order);
provided, however, that the Committee, in its sole discretion and
upon terms and conditions established by the Committee, may allow
such payments to be made, in whole or in part, by tender of a
Broker
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Exercise Notice, Previously Acquired Shares, by tender of a
promissory note (on terms acceptable to the Committee in its
sole discretion) or by a combination of such methods.
6.5. MANNER OF EXERCISE. An Option may be exercised by a Participant
in whole or in part from time to time, subject to the conditions
contained in the Plan and in the agreement evidencing such
Option, by delivery in person, by facsimile or electronic
transmission or through the mail of written notice of exercise to
the Company (Attention: Chief Financial Officer) at its office at
2000 Town Center, Suite 690, Southfield, Michigan 48075 (or such
other office as the Company may designate), and by paying in full
the total exercise price for the shares of Common Stock to be
purchased in accordance with Section 6.4 of the Plan.
6.6. AGGREGATE LIMITATION OF COMMON STOCK SUBJECT TO INCENTIVE STOCK
OPTIONS. To the extent that the aggregate Fair Market Value
(determined as of the date an Incentive Stock Option is granted)
of the shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by a Participant
during any calendar year (under the Plan and any other incentive
stock option plans of the Company, any subsidiary or any parent
corporation of the Company (within the meaning of Sections 424(f)
and 424(e), respectively, of the Code)) exceeds $100,000 (or such
other amount as may be prescribed by the Code from time to time),
such excess Incentive Stock Options shall be treated as
Non-Statutory Stock Options. The determination shall be made by
taking Incentive Stock Options into account in the order in which
they were granted. If such excess only applies to a portion of
an Incentive Stock Option, the Committee, in its discretion,
shall designate which shares shall be treated as shares to be
acquired upon exercise of an Incentive Stock Option.
6.7. OPTIONS TO PURCHASE STOCK OF ACQUIRED COMPANIES. After any
reorganization, merger or consolidation involving the Company or
a subsidiary of the Company, the Committee may grant Options in
substitution of options issued under a plan of another party to
the reorganization, merger or consolidation, where such party's
stock may no longer be outstanding following such transaction.
Subject to Section 424(a) of the Code, the Committee shall have
sole discretion to determine all terms and conditions of Options
issued under this Section 6.7, including, but not limited to,
their exercise price and expiration date.
7. RESTRICTED STOCK AWARDS
7.1. GRANT. An Eligible Recipient may be granted one or more
Restricted Stock Awards under the Plan, and such Restricted Stock
Awards will be subject to such terms and conditions, consistent
with the other provisions of the Plan, as may be determined by
the Committee in its sole discretion. The Committee may impose
such restrictions or conditions, not inconsistent with the
provisions of the Plan, to the vesting of such Restricted Stock
Awards as it deems appropriate, including, without limitation,
that the Participant remain in the continuous employ or service
of the Company or a Subsidiary for a certain period or that the
Participant or the Company (or any Subsidiary or division
thereof) satisfy certain performance goals or criteria.
7.2. RIGHTS AS A SHAREHOLDER; TRANSFERABILITY. Except as provided in
Sections 7.1, 7.3 and 12.3 of the Plan, a Participant will have
all voting, dividend, liquidation and other rights with respect
to shares of Common Stock issued to the Participant
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as a Restricted Stock Award under this Section 7 upon the
Participant becoming the holder of record of such shares as if
such Participant were a holder of record of shares of
unrestricted Common Stock.
7.3. DIVIDENDS AND DISTRIBUTIONS. Unless the Committee determines
otherwise in its sole discretion (either in the agreement
evidencing the Restricted Stock Award at the time of grant or at
any time after the grant of the Restricted Stock Award), any
dividends or distributions (including regular quarterly cash
dividends) paid with respect to shares of Common Stock subject to
the unvested portion of a Restricted Stock Award will be subject
to the same restrictions as the shares to which such dividends or
distributions relate. In the event the Committee determines not
to pay such dividends or distributions currently, the Committee
will determine in its sole discretion whether any interest will
be paid on such dividends or distributions. In addition, the
Committee in its sole discretion may require such dividends and
distributions to be reinvested (and in such case the Participants
consent to such reinvestment) in shares of Common Stock that will
be subject to the same restrictions as the shares to which such
dividends or distributions relate.
7.4. ENFORCEMENT OF RESTRICTIONS. To enforce the restrictions
referred to in this Section 7, the Committee may place a legend
on the stock certificates referring to such restrictions and may
require the Participant, until the restrictions have lapsed, to
keep the stock certificates, together with duly endorsed stock
powers, in the custody of the Company or its transfer agent or to
maintain evidence of stock ownership, together with duly endorsed
stock powers, in a certificateless book-entry stock account with
the Company's transfer agent.
8. STOCK BONUSES
An Eligible Recipient may be granted one or more Stock Bonuses under the
Plan, and such Stock Bonuses will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee. The Participant will have all voting, dividend, liquidation and
other rights with respect to the shares of Common Stock issued to a Participant
as a Stock Bonus under this Section 10 upon the Participant becoming the holder
of record of such shares; provided, however, that the Committee may impose such
restrictions on the assignment or transfer of a Stock Bonus as it deems
appropriate.
9. EFFECT OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE
9.1. TERMINATION DUE TO DEATH, DISABILITY OR RETIREMENT. In the event
a Participant's employment or other service with the Company and
all Subsidiaries is terminated by reason of death, Disability or
Retirement:
(a) All outstanding Options then held by the Participant will
become immediately exercisable in full and will remain
exercisable for a period of one year after such
termination (but in no event after the expiration date of
any such Option);
(b) All Restricted Stock Awards then held by the Participant
will become fully vested; and
(c) All Stock Bonuses then held by the Participant will vest
and/or continue to vest in the manner determined by the
Committee and set forth in the agreement evidencing such
Stock Bonuses.
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<PAGE>
9.2. TERMINATION FOR REASONS OTHER THAN DEATH, DISABILITY OR
RETIREMENT.
(a) Subject to the second sentence of this Section 9.2(a), in
the event a Participant's employment or other service is
terminated with the Company and all Subsidiaries for any
reason other than death, Disability or Retirement, or a
Participant is in the employ or service of a Subsidiary
and the Subsidiary ceases to be a Subsidiary of the
Company (unless the Participant continues in the employ
or service of the Company or another Subsidiary), all
rights of the Participant under the Plan and any
agreements evidencing an Incentive Award will immediately
terminate without notice of any kind, and no Options then
held by the Participant will thereafter be exercisable,
all Restricted Stock Awards then held by the Participant
that have not vested will be terminated and forfeited,
and all Stock Bonuses then held by the Participant will
vest and/or continue to vest in the manner determined by
the Committee and set forth in the agreement evidencing
such Stock Bonuses. However, (i) if such termination is
due to any reason other than termination by the Company
or any Subsidiary for "cause," all outstanding Options or
Stock Appreciation Rights then held by such Participant
will remain exercisable to the extent exercisable as of
such termination for a period of three months after such
termination (but in no event after the expiration date of
any such Option), and (ii) if such termination is due to
termination by the Company or any Subsidiary for "cause",
all outstanding Options then held by such Participant
will remain exercisable as of such termination for a
period of one month after such termination (but in no
event after the expiration date of any such Option).
(b) For purposes of this Section 9.2, "cause" (as determined
by the Committee) will be as defined in any employment or
other agreement or policy applicable to the Participant
or, if no such agreement or policy exists, will mean (i)
dishonesty, fraud, misrepresentation, embezzlement or
deliberate injury or attempted injury, in each case
related to the Company or any Subsidiary, (ii) any
unlawful or criminal activity of a serious nature, (iii)
any intentional and deliberate breach of a duty or duties
that, individually or in the aggregate, are material in
relation to the Participant's overall duties, or (iv) any
material breach of any employment, service,
confidentiality or noncompete agreement entered into with
the Company or any Subsidiary.
9.3. MODIFICATION OF RIGHTS UPON TERMINATION. Notwithstanding the
other provisions of this Section 9, upon a Participant's
termination of employment or other service with the Company and
all Subsidiaries, the Committee may, in its sole discretion
(which may be exercised at any time on or after the date of
grant, including following such termination), cause Options and
Stock Appreciation Rights (or any part thereof) then held by such
Participant to become or continue to become exercisable and/or
remain exercisable following such termination of employment or
service and Restricted Stock Awards, Performance Units and Stock
Bonuses then held by such Participant to vest and/or continue to
vest or become free of transfer restrictions, as the case may be,
following such termination of employment or service, in each case
in the manner determined by the Committee; provided, however,
that no Option or Stock Appreciation Right may remain exercisable
beyond its expiration date.
9.4. BREACH OF CONFIDENTIALITY OR NONCOMPETE AGREEMENTS.
Notwithstanding anything in the Plan to the contrary, in the
event that a Participant materially
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breaches the terms of any confidentiality or noncompete
agreement entered into with the Company or any Subsidiary,
whether such breach occurs before or after termination of such
Participant's employment or other service with the Company or
any Subsidiary, the Committee in its sole discretion may
immediately terminate all rights of the Participant under the
Plan and any agreements evidencing an Incentive Award then
held by the Participant without notice of any kind.
9.5. DATE OF TERMINATION OF EMPLOYMENT OR OTHER SERVICE. Unless the
Committee otherwise determines in its sole discretion, a
Participant's employment or other service will, for purposes of
the Plan, be deemed to have terminated on the date recorded on
the personnel or other records of the Company or the Subsidiary
for which the Participant provides employment or other service,
as determined by the Committee in its sole discretion based upon
such records.
10. PAYMENT OF WITHHOLDING TAXES
10.1. GENERAL RULES. The Company is entitled to (a) withhold and
deduct from future wages of the Participant (or from other
amounts that may be due and owing to the Participant from the
Company or a Subsidiary), or make other arrangements for the
collection of, all legally required amounts necessary to satisfy
any and all federal, state and local withholding and
employment-related tax requirements attributable to an Incentive
Award, including, without limitation, the grant, exercise or
vesting of, or payment of dividends with respect to, an Incentive
Award or a disqualifying disposition of stock received upon
exercise of an Incentive Stock Option, or (b) require the
Participant promptly to remit the amount of such withholding to
the Company before taking any action, including issuing any
shares of Common Stock, with respect to an Incentive Award.
10.2. SPECIAL RULES. The Committee may, in its sole discretion and
upon terms and conditions established by the Committee, permit or
require a Participant to satisfy, in whole or in part, any
withholding or employment-related tax obligation described in
Section 10 of the Plan by electing to tender Previously Acquired
Shares, a Broker Exercise Notice or a promissory note (on terms
acceptable to the Committee in its sole discretion), or by a
combination of such methods.
11. CHANGE IN CONTROL
11.1. CHANGE IN CONTROL. For purposes of this Section 11, a "Change in
Control" of the Company will mean the following:
(a) the sale, lease, exchange or other transfer, directly or
indirectly, of substantially all of the assets of the
Company (in one transaction or in a series of related
transactions) to a person or entity that is not
controlled by the Company,
(b) the approval by the shareholders of the Company of any
plan or proposal for the liquidation or dissolution of
the Company;
(c) any person becomes after the effective date of the Plan
the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of (A) 20% or
more, but less than 50%, of the combined voting power of
the Company's outstanding securities ordinarily having
the right to vote at elections of directors, unless the
transaction resulting in such
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<PAGE>
ownership has been approved in advance by the Incumbent
Directors, or (B) 50% or more of the combined voting
power of the Company's outstanding securities
ordinarily having the right to vote at elections of
directors (regardless of any approval by the Incumbent
Directors);
(d) a merger or consolidation to which the Company is a party
if the shareholders of the Company immediately prior to
effective date of such merger or consolidation have
"beneficial ownership" (as defined in Rule 13d-3 under
the Exchange Act), immediately following the effective
date of such merger or consolidation, of securities of
the surviving corporation representing (i) more than 50%,
but less than 80%, of the combined voting power of the
surviving corporation's then outstanding securities
ordinarily having the right to vote at elections of
directors, unless such merger or consolidation has been
approved in advance by the Incumbent Directors (as
defined in Section 11.2 below), or (ii) 50% or less of
the combined voting power of the surviving corporation's
then outstanding securities ordinarily having the right
to vote at elections of directors (regardless of any
approval by the Incumbent Directors);
(e) the Incumbent Directors cease for any reason to
constitute at least a majority of the Board; or
(f) any other change in control of the Company of a nature
that would be required to be reported pursuant to Section
13 or 15(d) of the Exchange Act, whether or not the
Company is then subject to such reporting requirements.
11.2. INCUMBENT DIRECTORS. For purposes of this Section 11, "Incumbent
Directors" of the Company will mean any individuals who are
members of the Board on the effective date of the Plan and any
individual who subsequently becomes a member of the Board whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the Incumbent Directors (either by specific vote or by approval
of the Company's proxy statement in which such individual is
named as a nominee for director without objection to such
nomination).
11.3. ACCELERATION OF VESTING. Without limiting the authority of the
Committee under Sections 3.2 and 4.5 of the Plan, if a Change in
Control of the Company occurs, then, unless otherwise provided by
the Committee in its sole discretion either in the agreement
evidencing an Incentive Award at the time of grant or at any time
after the grant of an Incentive Award, (a) all outstanding
Options will become immediately exercisable in full and will
remain exercisable for the remainder of their terms, regardless
of whether the Participant to whom such Options have been granted
remains in the employ or service of the Company or any
Subsidiary; (b) all outstanding Restricted Stock Awards will
become immediately fully vested and non-forfeitable; and (c) all
outstanding Stock Bonuses then held by the Participant will vest
and/or continue to vest in the manner determined by the Committee
and set forth in the agreement evidencing such Stock Bonuses.
11.4. CASH PAYMENT FOR OPTIONS. If a Change in Control of the Company
occurs, then the Committee, if approved by the Committee in its
sole discretion either in an agreement evidencing an Incentive
Award at the time of grant or at any time after the grant of an
Incentive Award, and without the consent of any Participant
effected thereby, may determine that some or all Participants
holding
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<PAGE>
outstanding Options will receive, with respect to some or all
of the shares of Common Stock subject to such Options, as of
the effective date of any such Change in Control of the
Company, cash in an amount equal to the excess of the Fair
Market Value of such shares immediately prior to the effective
date of such Change in Control of the Company over the
exercise price per share of such Options.
11.5. LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding
anything in Section 11.3 or 11.4 of the Plan to the contrary, if,
with respect to a Participant, the acceleration of the vesting of
an Incentive Award as provided in Section 11.3 or the payment of
cash in exchange for all or part of an Incentive Award as
provided in Section 11.4 (which acceleration or payment could be
deemed a "payment" within the meaning of Section 280G(b)(2) of
the Code), together with any other "payments" which such
Participant has the right to receive from the Company or any
corporation that is a member of an "affiliated group" (as defined
in Section 1504(a) of the Code without regard to Section 1504(b)
of the Code) of which the Company is a member, would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the
Code), then the "payments" to such Participant pursuant to
Section 11.3 or 11.4 of the Plan will be reduced to the largest
amount as will result in no portion of such "payments" being
subject to the excise tax imposed by Section 4999 of the Code;
provided, however, that if a Participant is subject to a separate
agreement with the Company or a Subsidiary that expressly
addresses the potential application of Sections 280G or 4999 of
the Code (including, without limitation, that "payments" under
such agreement or otherwise will be reduced, that such "payments"
will not be reduced or that the Participant will have the
discretion to determine which "payments" will be reduced), then
this Section 11.5 will not apply, and any "payments" to a
Participant pursuant to Section 11.3 or 11.4 of the Plan will be
treated as "payments" arising under such separate agreement.
12. RIGHTS OF ELIGIBLE RECIPIENTS AND PARTICIPANTS; TRANSFERABILITY.
12.1. EMPLOYMENT OR SERVICE. Nothing in the Plan will interfere with
or limit in any way the right of the Company or any Subsidiary to
terminate the employment or service of any Eligible Recipient or
Participant at any time, nor confer upon any Eligible Recipient
or Participant any right to continue in the employ or service of
the Company or any Subsidiary.
12.2. RIGHTS AS A SHAREHOLDER. As a holder of Incentive Awards (other
than Restricted Stock Awards and Stock Bonuses), a Participant
will have no rights as a shareholder unless and until such
Incentive Awards are exercised for, or paid in the form of,
shares of Common Stock and the Participant becomes the holder of
record of such shares. Except as otherwise provided in the Plan,
no adjustment will be made for dividends or distributions with
respect to such Incentive Awards as to which there is a record
date preceding the date the Participant becomes the holder of
record of such shares, except as the Committee may determine in
its discretion.
12.3. RESTRICTIONS ON TRANSFER. Except as otherwise provided in this
Section 12.3, a Participant's rights and interest under the Plan
may not be assigned or transferred other than by will or the laws
of descent and distribution, or pursuant to the terms of a
domestic relations order, as defined in Section 414(p)(1)(B) of
the Code, which satisfies the requirements of Section
414(p)(1)(A) of the Code (a "Qualified Domestic Relations
Order"). During the lifetime of a Participant, only the
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Participant personally (or the Participant's personal
representative or attorney-in-fact) or the alternate payee named
in a Qualified Domestic Relations Order may exercise the
Participant's rights under the Plan. The Participant's
Beneficiary may exercise a Participant's rights to the extent
they are exercisable under the Plan following the death of the
Participant. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Non-Qualified
Stock Options may transfer such Options to his or her spouse,
lineal ascendants, lineal descendants, or to a duly established
trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the
Participant who originally received the Options or to an
individual or trust to whom the Participant could have initially
transferred the Option pursuant to this Section 12.3. Options
which are transferred pursuant to this Section 12.3 shall be
exercisable by the transferee according to the same terms and
conditions as applied to the Participant.
12.4. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to modify or rescind any previously approved
compensation plans or programs of the Company or create any
limitations on the power or authority of the Board to adopt such
additional or other compensation arrangements as the Board may
deem necessary or desirable.
13. SECURITIES LAW AND OTHER RESTRICTIONS
Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue any
shares of Common Stock under this Plan, and a Participant may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to
Incentive Awards granted under the Plan, unless (a) there is in effect with
respect to such shares a registration statement under the Securities Act and any
applicable state securities laws or an exemption from such registration under
the Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee, in its sole discretion, deems necessary or advisable. The
Company may condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing shares of Common Stock, as may be
deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.
14. PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may suspend or terminate the Plan or any portion thereof at any time,
and may amend the Plan from time to time in such respects as the Board may deem
advisable in order that Incentive Awards under the Plan will conform to any
change in applicable laws or regulations or in any other respect the Board may
deem to be in the best interests of the Company; provided, however, that no
amendments to the Plan will be effective without approval of the shareholders of
the Company if shareholder approval of the amendment is then required pursuant
to Section 422 of the Code or the rules of any stock exchange or Nasdaq. No
termination, suspension or amendment of the Plan may adversely affect any
outstanding Incentive Award without the consent of the affected Participant;
provided, however, that this sentence will not impair the right of the Committee
to take whatever action it deems appropriate under Sections 3.2, 4.5 and 13 of
the Plan.
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15. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan is effective as of __________________, 1999, the date it was
adopted by the Board and the shareholders. The Plan will terminate at midnight
on ________________, 2009, and may be terminated prior to such time to by Board
action, and no Incentive Award will be granted after such termination.
Incentive Awards outstanding upon termination of the Plan may continue to be
exercised, or become free of restrictions, in accordance with their terms.
16. MISCELLANEOUS
16.1. GOVERNING LAW. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations
and actions relating to the Plan will be governed by and
construed exclusively in accordance with the laws of the State of
Minnesota, notwithstanding the conflicts of laws principles of
any jurisdictions.
16.2. SUCCESSORS AND ASSIGNS. The Plan will be binding upon and inure
to the benefit of the successors and permitted assigns of the
Company and the Participants.
16.3. ANNUAL REPORT. Each year the Company will provide a copy of its
Annual Report to Shareholders on Form 10-K (or Form 10-KSB, as
applicable) to all Participants.
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PROXY
ELTRAX SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William P. O'Reilly and Don G. Hallacy,
and each of them, as Proxies, each with full power to appoint his substitute,
and hereby authorizes each of them to represent and to vote, as designated on
the reverse side, all the shares of Common Stock of Eltrax Systems, Inc. held
of record by the undersigned on June 1, 1999, at the Annual Meeting of
Shareholders to be held on June 24, 1999, or any adjournment, thereof.
- -------------- -------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE>
- --------------------------------------------------------------------------
/X/ Please mark
votes as in
this example.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER, IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 2 AND FOR ALL NOMINEES NAMED IN PROPOSAL 1 BELOW.
<TABLE>
<CAPTION>
<S> <C>
1. ELECTION OF DIRECTORS. 2. PROPOSAL TO CONSIDER AND FOR AGAINST ABSTAIN
Nominees: William P. O'Reilly, ACT UPON A PROPOSAL TO / / / / / /
Don G. Hallacy, James C. Barnard, APPROVE THE COMPANY'S 1999
Patrick J. Dirk, Stephen E. Raville, STOCK INCENTIVE PLAN
Penelope A. Sellers, William G. Taylor
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED
TO VOTE UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY
/ /______________________________________ ADJOURNMENTS THEREOF.
For all nominees except as noted above
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
Please sign exactly as name appears hereon. When
shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such.
If a corporation, please sign in full corporate name
by the President or other authorized officer. If a
partnership, please sign in partnership name by an
authorized person.
Signature:___________________ Date ________ Signature:___________________ Date ________
</TABLE>
