<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark one)
[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarterly period
ended April 30, 1996
or
[ ] Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the transition period
from to
---------------------- --------------------------
COMMISSION FILE NUMBER 0-6050
POWELL INDUSTRIES, INC.
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA 88-0106100
- ------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8550 Mosley Drive, Houston, Texas 77075-1180
- ------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 944-6900
--------------
Indicate by "X" whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Common Stock, par value $.01 per share; 10,567,704 shares outstanding on April
30, 1996.
<PAGE> 2
POWELL INDUSTRIES, INC.
<TABLE>
<S> <C>
PART I - Financial Information
Item 1. Financial Statements ........................... 3 - 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Quarterly
Results of Operations........................ 9 - 10
PART II - Other Information and Signatures ....................... 11 - 12
</TABLE>
<PAGE> 3
Powell Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, Except Share Data)
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 1996 1995
(unaudited)
----------- -----------
<S> <C> <C>
Current Assets:
Cash and cash equivalents............................................ $ 3,130 $ 3,035
Accounts receivable, less allowance for doubtful accounts
of $1,083 and $724, respectively.................................. 50,028 32,181
Costs and estimated earnings in excess of billings................... 11,635 14,725
Inventories.......................................................... 19,917 20,114
Deferred income taxes................................................ 486 1,039
Income taxes receivable.............................................. --- 718
Prepaid expenses and other current assets............................ 1,501 1,889
-------- -------
Total Current Assets............................................... 86,697 73,701
Property, plant and equipment, net..................................... 15,918 16,271
Deferred income taxes, noncurrent...................................... 1,667 1,286
Other assets........................................................... 5,457 5,624
-------- -------
Total Assets....................................................... $109,739 $96,882
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts and income taxes payable.................................... $ 14,856 $10,843
Accrued salaries, bonuses and commissions............................ 5,106 5,387
Accrued product warranty............................................. 3,505 3,015
Other accrued expenses............................................... 3,864 3,706
Billings in excess of costs and estimated earnings .................. 9,408 5,563
Current maturities of long-term debt................................. 2,813 2,813
-------- -------
Total Current Liabilities.......................................... 39,552 31,327
Long-term debt......................................................... 3,750 3,750
Deferred compensation expense.......................................... 2,079 2,006
Postretirement benefits liability...................................... 2,013 2,142
Stockholders' Equity:
Preferred stock, par value $.01; 5,000,000 shares authorized; none issued
Common stock, par value $.01; 15,000,000 shares authorized; 10,567,704 and
10,542,704, respectively, shares issued and outstanding ........... 106 105
Additional paid-in capital........................................... 5,318 5,062
Retained earnings.................................................... 60,509 56,183
Deferred compensation-ESOP........................................... (3,588) (3,693)
-------- -------
Total Stockholders' Equity......................................... 62,345 57,657
-------- -------
Total Liabilities and Stockholders' Equity......................... $109,739 $96,882
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
Powell Industries, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Revenues................................................................ $53,521 $41,398
Cost of goods sold...................................................... 40,955 32,459
---------- ----------
Gross profit............................................................ 12,566 8,939
Selling, general and administrative expenses............................ 8,404 6,616
---------- ----------
Earnings from operations................................................ 4,162 2,323
Interest, net........................................................... 82 145
---------- ----------
Earnings before income taxes............................................ 4,080 2,178
Income tax provision.................................................... 1,437 720
---------- ----------
Net earnings............................................................ 2,643 1,458
========== ==========
Net earnings per common and common equivalent share..................... $ 0.25 $ 0.14
========== ==========
Weighted average number of shares outstanding........................... 10,753,695 10,534,371
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
Powell Industries, Inc. and Subsidiaries
Consolidated Statements of Operations (unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Six Months Ended April 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Revenues................................................................ $103,090 $ 77,987
Cost of goods sold...................................................... 80,210 61,457
----------- -----------
Gross profit............................................................ 22,880 16,530
Selling, general and administrative expenses............................ 16,060 12,952
----------- -----------
Earnings from operations................................................ 6,820 3,578
Interest, net........................................................... 125 268
----------- -----------
Earnings before income taxes............................................ 6,695 3,310
Income tax provision.................................................... 2,369 1,049
----------- -----------
Net earnings............................................................ $ 4,326 $ 2,261
Net earnings per common and common equivalent share..................... $ 0.40 $ 0.21
=========== ===========
Weighted average number of shares outstanding........................... 10,745,361 10,526,037
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
Powell Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended April 30,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operating Activities:
Net earnings............................................................................ $4,326 $2,261
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Depreciation and amortization......................................................... 1,974 1,710
Deferred income taxes................................................................. 172 (415)
Postretirement benefits liability..................................................... (129) (48)
Changes in operating assets and liabilities:
Accounts receivable................................................................. (17,847) (2,568)
Costs and estimated earnings in excess of billings.................................. 3,090 (3,736)
Inventories......................................................................... 197 (4,402)
Prepaid expenses and other current assets........................................... 388 (655)
Other assets........................................................................ (88) (168)
Accounts payable and income taxes payable or receivable............................. 4,731 2,700
Accrued liabilities................................................................. 367 (2,589)
Billings in excess of costs and estimated earnings.................................. 3,845 2,297
Deferred compensation expense....................................................... 178 345
----------- -----------
Net cash provided by (used in) in operating activities.................................... 1,204 (5,268)
----------- -----------
Investing Activities:
Purchases of property, plant, and equipment............................................. (1,366) (1,248)
----------- -----------
Net cash used in investing activities..................................................... (1,366) (1,248)
----------- -----------
Financing Activities:
Exercise of stock grants................................................................ 257 156
----------- -----------
Net cash provided by financing activities................................................. 257 156
----------- -----------
Net increase (decrease) in cash and cash equivalents...................................... 95 (6,360)
Cash and cash equivalents at beginning of period.......................................... 3,035 7,598
----------- -----------
Cash and cash equivalents at end of period................................................ $3,130 $1,238
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
Part I
Item 1
POWELL INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, in the opinion
of management, reflect all adjustments which are of a normal recurring nature
necessary for a fair presentation of financial position, results of operations
and of cash flows. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's
latest annual report on Form 10K.
B. INVENTORY
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
(unaudited)
------------ -----------
<S> <C> <C>
The components of inventory are summarized below (in thousands):
Raw materials, parts and subassemblies.................................................... $13,355 $12,469
Work-in-process........................................................................... 6,562 7,645
----------- -----------
Total inventories......................................................................... $19,917 $20,114
=========== ===========
</TABLE>
C. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
(unaudited)
------------ -----------
<S> <C> <C>
Property, plant and equipment is summarized below (in thousands):
Land...................................................................................... $ 2,514 $ 2,514
Buildings and improvements................................................................ 14,866 14,777
Machinery and equipment................................................................... 24,724 23,889
Furniture & fixtures...................................................................... 4,090 3,910
Construction in progress.................................................................. 557 417
----------- -----------
46,751 45,507
Less-accumulated depreciation............................................................. (30,833) (29,236)
----------- -----------
Total property, plant and equipment, net.................................................. $15,918 $16,271
=========== ===========
</TABLE>
7
<PAGE> 8
Part I
Item 1
D. Other Financial Information (unaudited)
<TABLE>
<CAPTION>
Six months ended
April 30,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Supplemental disclosure of cash flow information (in thousands):
Cash paid during the period for:
Interest............................................................................. $ 357 $ 501
=========== ===========
Income taxes......................................................................... $ 1,500 $ 1,620
=========== ===========
</TABLE>
E. Production Contracts
For contracts in which the percentage-of-completion method is used, costs
and estimated earnings in excess of billings are reported as a current
asset and billings in excess of costs and estimated earnings are reported
as a current liability. The components of these contracts are as follows
(in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
(unaudited)
------------ -----------
<S> <C> <C>
Costs and estimated earnings......................................................... $40,937 $50,282
Progress billings.................................................................... (29,302) (35,557)
---------- -----------
Total costs and estimated earnings in excess of billings............................. $11,635 $14,725
=========== ===========
Progress billings.................................................................... $65,380 $29,682
Costs and estimated earnings......................................................... (55,972) (24,119)
---------- ----------
Total billings in excess of costs and estimated earnings............................. $ 9,408 $ 5,563
=========== ===========
</TABLE>
8
<PAGE> 9
Part I
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND QUARTERLY RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
During 1990, the Company concluded a private placement of $15,000,000 in term
notes, of which $6,563,000 was outstanding as of April 30, 1996. These notes
are unsecured with a fixed interest rate of 10.4 percent. The notes mature
through June 1997, with the next payment of $2,813,000 due in June 1996.
In October 1995, the Company entered into a $15,000,000 revolving line of
credit agreement with a major domestic bank. As of April 30, 1996, the Company
did not have borrowings outstanding under this line.
The Company's ability to satisfy its cash requirements is evaluated by
analyzing key measures of liquidity applicable to the Company. The following
table is a summary of the measures which are significant to management:
<TABLE>
<CAPTION>
April 30, October 31, April 30,
1996 1995 1995
<S> <C> <C> <C>
Working Capital $47,145,000 $42,374,000 $42,109,000
Current Ratio 2.19 to 1 2.35 to 1 2.38 to 1
Debt to Capitalization .10 to 1 .10 to 1 .15 to 1
</TABLE>
The consolidated statements of cash flows show that approximately $95,000 of
cash was generated during the six months ended April 30, 1996. The increases
in accounts receivable requiring the use of cash was due to the increased
volume of business and product shipment delays. Increases in billings in
excess of costs and estimated earnings and accounts payable had a positive
effect on the Company's cash flow during the quarter. The use of cash for
capital expenditures during the six months of 1996 was $1,366,000 which was
mainly invested in machinery and equipment.
The Company's fiscal 1996 asset management program will continue to focus on
the collection of receivables and reduction in inventories. The Company plans
to satisfy its fiscal 1996 capital requirements and operating needs primarily
with funds available in cash and cash equivalents of $3,130,000, funds
generated from operating activities and funds available under its existing
revolving credit line.
9
<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of revenues, certain items from
the Consolidated Statements of Operations.
<TABLE>
<CAPTION>
April 30,
---------
1996 1995
- ----------------------------------------------------------------------------------------------------------
three months six months three months six months
ended ended ended ended
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Gross Profit 23.5 22.2 21.6 21.2
Selling, general and administrative
expenses 15.7 15.6 16.0 16.6
Interest, net .2 .1 .4 .4
Net earnings before income tax 7.6 6.5 5.2 4.2
Income tax provision 2.7 2.3 1.7 1.3
Net earnings 4.9 4.2 3.5 2.9
</TABLE>
Revenues for the quarter ended April 30, 1996 were up 29 percent to $53,521,000
from $41,398,000 in the second quarter of last year. Revenues for the six
months ended April 30, 1996 were up 32 percent to $103,090,000 from $77,987,000
in the first six months of last year. This increase in volume was due to
higher electrical distribution equipment product line revenues which were
partially offset by lower revenues from process control product lines.
Gross profit, as a percentage of revenues, was 23.5 percent and 21.6 percent
for the quarters ended April 30, 1996 and 1995. The gross profit percentage
for the six months ended April 30, 1996 and 1995 was 22.2 percent and 21.2
percent, respectively. The higher percents in 1996 were due to changes in
product mix shipped during 1996 and efficiencies due to the increased volume of
activity.
Selling, general and administrative expenses as a percentage of revenues was
15.7 percent and 16 percent for the quarters ended April 30, 1996 and 1995.
These percentages for the six months ended April 30, 1996 and 1995 were 15.6
percent and 16.6 percent. The change in percent reflects the effect of higher
revenue volume without a corresponding increase in expenses.
Interest, net is lower in 1996 than in 1995 due to the scheduled annual
reduction in outstanding debt.
Income tax provision The effective tax rate was 35.2 percent and 33.1 percent
for the quarters ended April 30, 1996 and 1995. For the six months ended April
30, 1996 and 1995 the effective tax rate was 35.4 percent and 31.7 percent
respectively. The increase was primarily due to higher foreign sales
corporation credits in the previous year and the higher projected tax rate for
1996 due to an increased level of taxable income.
Net earnings were $2,643,000 or $.25 per share for the second quarter of fiscal
1996, an increase of 81 percent from $1,458,000 or $.14 per share for the same
period last year. For the six months ended April 30, 1996, net earnings were
$4,326,000 or $.40 per share, compared with $2,261,000 or $.21 per share for
the first six months of fiscal 1995, an increase of 91 percent. The increases
for the two quarters of 1996 were mainly due to the higher revenue volumes.
The order backlog at April 30, 1996 was $130.4 million compared to $112.6
million at October 31, 1995.
10
<PAGE> 11
Part II
OTHER INFORMATION
ITEM 1. Legal Proceedings
No material developments in litigation previously reported.
ITEM 2. Changes in Securities
None
ITEM 3. Defaults Upon Senior Securities
Not applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.7 Powell Industries, Inc. Executive Severance Protection
Plan dated March 15, 1996.
10.8 Powell Industries, Inc. Amendment to Employee Stock
Option Plan.
27.0 Financial Data Schedule
b. Reports on Form 8K
None
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POWELL INDUSTRIES, INC.
Registrant
June 07, 1996 /s/ Thomas W. Powell
- ------------- ----------------------------------------------
Date Thomas W. Powell
President and Chief Executive Officer
(Principal Executive Officer)
June 07, 1996 /s/ J. F. Ahart
- ------------- ----------------------------------------------
Date J.F. Ahart
Vice President,
Secretary-Treasurer
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE> 13
EXHIBIT INDEX
10.7 Powell Industries, Inc. Executive Severance Protection
Plan dated March 15, 1996.
10.8 Powell Industries, Inc. Amendment to Employee Stock
Option Plan.
27.0 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.7
MARCH 1996
REVISED
POWELL INDUSTRIES, INC.
EXECUTIVE SEVERANCE PROTECTION PLAN
W I T N E S S E T H:
WHEREAS, the Board of Directors (the "Board") of Powell Industries,
Inc. (the "Company") has determined that, in the event the Company becomes
subject to any proposed or threatened Change of Control (as defined in the
Plan), the Board and the Company must be able to rely on the continued advice
and support of key management personnel without concern that such personnel
might be distracted by personal financial concerns and leave the employ of the
Company;
WHEREAS, the Board has determined that a formal executive severance
protection plan should be adopted to insure stability and continuity of
employment of key management personnel in the event of a proposed or threatened
Change of Control;
WHEREAS, it is intended that this Plan set forth the terms and
conditions upon which benefits are payable to certain executives under this
Plan; and
WHEREAS, this Plan constitutes an employee welfare benefit plan, as
that term is defined in Section 3(1) of the Employee Retirement Income Security
Act of 1974 ("ERISA"); and
WHEREAS, it is intended that this Plan shall comply with the
requirements of Section 402 of ERISA that an employee benefit plan be
maintained pursuant to a written instrument;
NOW, THEREFORE, the Company has adopted this Plan which provides as
follows:
1. NAME OF PLAN:
Powell Industries, Inc. Executive Severance Protection Plan
(the "Plan").
2. NAME OF ADMINISTRATOR AND PLAN FIDUCIARY:
For purposes of Section 3(16) of ERISA, the Company is
administrator of this Plan. Unless the Board of Directors of the Company
designates a different committee, the Compensation Committee of the Company
(the "Committee") is designated Plan Administrator and Fiduciary of this Plan
and is charged with the general administration of this Plan.
3. FUNDING POLICY:
This Plan is not separately funded by the Company, and all
Plan benefits will be paid, as needed, from the general assets of the Company.
<PAGE> 2
4. PLAN OPERATION AND POWERS OF THE COMMITTEE AS PLAN ADMINISTRATOR AND
FIDUCIARY:
A. THE COMMITTEE. The Committee is authorized in its sole
discretion to make all rules, regulations and procedures it deems necessary or
appropriate for administering this Plan within policies established by the
Board of Directors of the Company, to construe its provisions, to correct its
defects, and supply any omissions or reconcile any inconsistencies which may
appear in this Plan, to determine all questions of eligibility and entitlement
to benefits and resolve all controversies. The Board of Directors of the
Company may allocate discretionary responsibilities to the Committee as
Fiduciary provided it is in writing. The Board of Directors of the Company may
in writing permit the Committee as Fiduciary to designate other persons to
carry out discretionary responsibilities.
B. CLAIMS. If an Executive believes any benefit under this Plan
has been incorrectly calculated or denied, he or she may file a claim with the
Committee. The Committee shall follow claims procedures substantially
identical to the claims procedures in the Powell Industries, Inc. Employees
Incentive Savings Plan.
C. STANDARD OF JUDICIAL REVIEW OF COMMITTEE ACTIONS. The
Committee has full and absolute discretion in the exercise of its authority
under this Plan, including without limitation, the authority to determine any
person's right to benefits under this Plan, the correct amount and form of any
benefits, the authority to decide any appeal, the authority to review and
correct the actions of any prior administrative committee, and all of the
rights, powers, and authorities specified in this Section 4 and this Plan.
Notwithstanding any provision of law or any explicit or implicit provision of
this document, any action taken or ruling or decision made by the Committee in
the exercise of any of its powers and authorities under this Plan, shall be
final and conclusive as to all parties, regardless of whether the Committee or
one or more of its members may have an actual or potential conflict of interest
with respect to the subject matter of the action, ruling, or decision. Thus,
no final action, ruling, or decision of the Committee shall be subject to de
novo review in any judicial proceeding and no final action, ruling, or decision
of the Committee may be set aside unless it is held to have been arbitrary and
capricious by a final judgment of a court having jurisdiction with respect to
the issue.
5. ELIGIBILITY FOR PLAN BENEFITS:
The Board of Directors shall designate the executives eligible
to receive benefits under this Plan (the "Executives") in the event of that
Executive's termination of employment following a Change of Control as
described in this Plan, and the Board shall designate whether each such
Executive is eligible for benefits under Executive Benefit Group 1 or Group 2.
The Board may change the benefit classification of an Executive, or add or
delete names from the list, from time to time, prior to a Change of Control.
The initial list of Executives and the Group designation of each is contained
on Attachment A hereto.
-2-
<PAGE> 3
6. PLAN BENEFITS:
The benefits payable under this Plan shall be calculated as follows:
<TABLE>
<CAPTION>
====================================================================================================================
BENEFITS INVOLUNTARY TERMINATION TERMINATION FOR CAUSE
<S> <C> <C>
Base Salary Group 1: 3 times the current annual Group 1 and 2: None
base salary
Group 2: 2 times the current annual
base salary
- --------------------------------------------------------------------------------------------------------------------
Annual Incentive Under Group 1: 3 times the maximum incentive Group 1 and 2: None.
Executive Incentive Plan opportunity for the current year
Group 2: 2 times the maximum incentive
opportunity for the current year
- --------------------------------------------------------------------------------------------------------------------
Employee Benefits Group 1: Continuation of medical, Group 1 and 2:
dental, and life benefits for executive
and dependents for up to 3 years.*
Executive would pay normal group rates None
for this coverage.
* These benefits cease Group 2: Continuation of medical,
at the earliest to occur dental, and life benefits for executive
of (i) maximum number of and dependents for up to 2 years.* None
years indicated or Executive would pay normal group rates
(ii) the Executive is for this coverage.
covered under another
plan. Group 1 and 2: COBRA coverage period,
if applicable, begins after the
benefits continuation period has ended.
Group 1 and 2: COBRA coverage
begins at termination unless
Executive is terminated for
gross misconduct.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BENEFITS PROVIDED BY OTHER PLANS
<S> <C> <C>
Qualified Retirement Group 1 and 2: All vested balances, (as Group 1 and 2: All vested
Plans required by law). balances, (as required by law).
- --------------------------------------------------------------------------------------------------------------------
Restricted Stock and Group 1 and 2: Immediate vesting at Group 1 and 2: Immediate vesting
Stock Options time of change of control per Option at time of change of control per
Plan. Option Plan.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
<PAGE> 4
Benefits are not payable under this Plan if an Executive's employment
is terminated following the sale or disposition of any subsidiary of the
Company unless that transaction is in conjunction with a Change of Control of
Powell Industries, Inc.
If an Executive dies during the Covered Period after his Involuntary
Termination, but before the payment or provision of all benefits to which that
Executive has become entitled, then (a) cash payments due under Section 7 shall
be made in accordance with the terms thereof, and (2) coverage for the
Executive's dependents shall continue for the applicable term provided in this
Section 6.
7. PLAN PAYMENTS:
Payments from this Plan will consist of the payment and
provision of severance benefits by the Company out of its general assets in
accordance with the terms of this Plan. Cash payments due will be paid to the
Executive or his estate within 90 days of the event causing the benefit payment
under this Plan.
8. PLAN AMENDMENT AND/OR TERMINATION:
This Plan may be amended at the sole discretion of the Company
by appropriate action by the Board of Directors of the Company, provided that
this Plan may not be amended following a "Change of Control" which has occurred
so as to reduce any benefits to which an Executive might become entitled under
this Plan. Notwithstanding the preceding sentence, no amendment which
adversely affects the benefits which would be payable to an Executive hereunder
shall be effective if adopted within one year of an actual Change of Control.
9. COORDINATION WITH EMPLOYMENT AND OTHER AGREEMENTS:
The severance benefits provided under this Plan to an
Executive of the Company shall be coordinated with any severance benefits
provided to such officer under any employment contract or other agreements
between the Company and its consolidated subsidiaries and such Executive, such
that for each item of severance benefit described herein, the Executive shall
be entitled to the most favorable of the benefits provided by this Plan and by
the employment contract or other agreement, but the Company shall not be
required under this Plan to pay or provide twice any item of severance benefit
that is covered both by this Plan and by such employment contract or other
agreement. Split dollar agreements, if any, between the Company and an
Executive shall operate according to their terms and shall not be affected by,
or affect, payments due under this Plan.
10. DEFINITIONS:
The following definitions shall apply for the purposes of this Plan:
"CHANGE OF CONTROL" of Powell Industries, Inc. means the date of
occurrence of one or more of the following:
-4-
<PAGE> 5
(a) Any "person", including a "syndication" or "group" as
those terms are used in Section 13(d)(3) of the Securities Exchange
Act of 1934, becomes, after the effective date of this Plan, the
beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's
then outstanding securities which ordinarily possess the power to vote
in the election of the Board of Directors without the happening of any
precondition or contingency ("Voting Securities");
(b) The Company is merged or consolidated with another
corporation and immediately after giving effect to the merger or
consolidation either (x) less than 80% of the outstanding Voting
Securities of the surviving or resulting entity are then beneficially
owned in the aggregate by the stockholders of the Company immediately
prior to the merger or consolidation, or if a record date has been set
to determine the stockholders of the Company entitled to vote on the
merger or consolidation, the stockholders of the Company as of the
record date, or (y) the Board of Directors, or similar governing body,
of the surviving or resulting entity does not have as a majority of
its members the persons specified in clause (c)(x) and (y) below;
(c) If at any time the following do not constitute a
majority of the Board of Directors of the Company (or any successor
entity referred to in clause (b) above): (x) persons who are directors
of the Company on December 31, 1995; and (y) persons who, prior to
their election as a director of the Company (or successors entity if
applicable) were nominated, recommended or endorsed by the Board of
Directors of the Company;
(d) The Company transfers substantially all of its assets
to another corporation which is a less than 80% owned subsidiary of
the Company.
"COVERED PERIOD" means three years from the date of occurrence of a
Change of Control.
"INVOLUNTARY TERMINATION" means, within the Covered Period,
termination of an Executive's employment following:
a) an Executive's resignation, for any reason, which is requested
by the Company;
b) a significant change or reduction in job duties and
responsibilities without the Executive's consent including,
but not limited to his position title, work location,
responsibility, or authority;
c) reduction in his base salary, incentive award opportunity,
employee benefits, or perquisites; and
d) resignation by the Executive for "good reason". "Good reason"
means the failure of the Company to provide a comparable
position and compensation.
-5-
<PAGE> 6
"TERMINATION FOR CAUSE" means a termination of the Executive's
employment because of (a) the conviction of the Executive by a state or federal
court of competent jurisdiction of any felony, (b) the conviction of the
Executive by a state or federal court of competent jurisdiction for
embezzlement or misappropriation of funds of the Company or its consolidated
subsidiaries, (c) gross negligence or willful misconduct of the Executive which
causes a material monetary injury to the Company or its consolidated
subsidiaries, or (d) the Executive's continued failure to substantially perform
material stated duties of his positions with the Company and its consolidated
subsidiaries.
11. GENERAL PROVISIONS:
A. NO ASSIGNMENT OF PROPERTY RIGHTS. Unless it is specifically
required by applicable law, the interest or property rights of any Executive in
this Plan or in any severance benefit to be paid pursuant to its terms, shall
not be assigned (either at law or in equity), alienated, anticipated or subject
to attachment, bankruptcy, garnishment, levy, execution or other legal or
equitable process. Any act in violation of this section shall be void.
B. NO EMPLOYMENT CONTRACT. This Plan is not an employment
contract and nothing contained in it shall prohibit the adjustment from time to
time of the terms of employment of any Executive, including his current
compensation and fringe benefits to which he may otherwise be entitled. No
provision in this Plan shall be construed to affect in any way the Company's
right to discharge any Executive at any time and for any reason, which right is
hereby reserved, subject to any separate contract with such Executive.
C. INTERPRETATION. The interpretation, performance and
enforcement of this Plan shall be governed by ERISA and, to the extent not
preempted, by the laws of the State of Texas, without regard to Texas rules
concerning conflicts of laws. Except when otherwise indicated by the context,
the use of masculine terminology in this Plan shall include the feminine.
D. TAX WITHHOLDING. If any Federal or state tax withholding is
required with respect to an Executive's severance benefit under this Plan, the
Committee shall make appropriate arrangements to withhold the required amount
from the Executive's benefit payment under this Plan.
E. NO OFFSET REQUIRED. An Executive shall not be required to
offset benefits received under this Plan by any compensation received from
future employers.
F. GROSS UP. Benefits paid to an Executive pursuant to this Plan
shall be "grossed-up" by the Company to cover (1) any federal excise tax due by
that Executive on account of these benefit payments and (2) any federal income
and employment taxes due on the federal excise tax described in this Section
11.F.
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<PAGE> 7
G. REIMBURSEMENT FOR LEGAL FEES. The Company shall reimburse an
Executive for legal fees incurred by an Executive to enforce the terms of this
Plan in an amount which does not exceed the following maximums:
Executive in Group 1 $150,000
========
Executive in Group 2 $100,000
========
Reimbursement shall be made by the Company to the Executive
within 30 days of receipt by the Company of a statement for such legal fees
submitted by the Executive.
12. EXECUTION.
To record the adoption of this Executive Severance Protection
Plan as set forth in this document, effective as of ______________, 1996, the
effective date for this Plan as approved by its Board, Powell Industries, Inc.
has caused its authorized representative to affix his name hereto.
POWELL INDUSTRIES, INC.
By
------------------------------------
--------------------------------------
Date
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<PAGE> 8
ATTACHMENT A
POWELL INDUSTRIES, INC.
EXECUTIVE SEVERANCE PROTECTION PLAN
EXECUTIVE BENEFIT GROUP
------------------------------------
Group I
------------------------------------
T. Powell
J.F. Ahart
R. L. Mitchell
R. Murphy
K. Shaw
A. Janas
T. Burtnett
G. Zeller
D. Dimlich
G. Auer
------------------------------------
------------------------------------
Group II
------------------------------------
J. Thomas
R. Rammler
M. Dehart
------------------------------------
-8-
<PAGE> 1
EXHIBIT 10.8
1992 POWELL INDUSTRIES, INC.
STOCK OPTION PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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ARTICLE I Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Effective Date of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.7 Disinterested Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.8 Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.9 Fair Market Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.10 Incentive Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.11 Maturity Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.12 Nonqualified Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.13 Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.14 Option Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.15 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.16 Reload Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.17 Restricted Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.18 Restricted Stock Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.19 Restricted Stock Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.20 Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.21 Stock Appreciation Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.22 Stock Appreciation Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.23 10% Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE IV General Provisions Relating to Options,
Reload Options, Stock Appreciation Rights and Awards . . . . . . . . . . . . . . . . . . . . . 4
4.1 Authority to Grant Options, Reload Options, Stock Appreciation Rights and Awards . . . . . . . 4
4.2 Dedicated Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Non-Transferability of Options, Reload Options, Stock Appreciation Rights and Awards . . . . . 5
4.4 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.5 No Rights as Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4.6 Changes in the Company's Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
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TABLE OF CONTENTS (CONT.)
<TABLE>
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<S> <C> <C>
4.7 Election Under Section 83(b) of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V Options and Reload Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.1 Type of Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3 Duration of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.4 Amount Exercisable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5 Exercise of Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Exercise on Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 Reload Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8 Substitution Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE VI Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.1 Stock Appreciation Rights Included in Options . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Stock Appreciation Rights Not Included in Options . . . . . . . . . . . . . . . . . . . . . . . 11
6.3 Payment on Exercise of a Stock Appreciation Right . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Exercise on Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.1 Award and Restricted Stock Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Restriction Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.3 Exercise on Termination of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII Administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX Amendment or Termination of Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE X Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.1 No Establishment of a Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.2 No Employment Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
10.3 Forfeiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.4 Tax Withholding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.5 Written Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.6 Indemnification of the Committee and the Board of Directors . . . . . . . . . . . . . . . . . . 15
10.7 Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.9 Other Compensation Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.10 Other Options or Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
ii
<PAGE> 4
ARTICLE ARTICLE I
PLAN
1.1 PURPOSE. This instrument amends Section 4.2 of the Plan and
restates the Plan. The Plan was originally adopted as the "1989 Powell
Industries, Inc. Stock Option Plan", effective March 17, 1989, and was
previously amended and restated effective January 1, 1992, which amendment and
restatement renamed the Plan the "1992 Powell Industries, Inc. Stock Option
Plan." All Options and Awards granted prior to December 31, 1991, will remain
subject to all of the terms and conditions of the Plan prior to the first
amendment and restatement which was effective January 1, 1992, and all Options,
Reload Options, Stock Appreciation Rights, and Awards issued on or after that
date and prior to the effective date of this amendment and restatement will be
subject to the terms and conditions of the Plan as first amended and restated.
All Options, Reload Options, Stock Appreciation Rights, and Awards issued on or
after the effective date of this amendment and restatement will be subject to
the terms and conditions of the Plan as hereby amended and restated. This Plan
continues to be a Plan for key employees of the Company and is intended to
advance the best interests of the Company and its shareholders by providing
those persons who have a substantial responsibility for the Company's growth
with additional incentives and an opportunity to obtain or increase their
proprietary interest in the Company, thereby encouraging them to continue their
employment with the Company.
1.2 EFFECTIVE DATE OF PLAN. The Plan became effective on March
17, 1989 and the first amendment and restatement became effective January 1,
1992. This amendment and restatement shall become effective on January 1,
1996, if within one year of that date it shall have been approved by the
holders of at least a majority of the outstanding shares of voting stock of the
Company voting in person or by proxy at a duly held stockholders' meeting, or
if the provisions of the corporate charter, by-laws or applicable state law
prescribes a greater degree of stockholder approval for this action, the
approval by the holders of that percentage, at a duly held meeting of
stockholders. No Option, Reload Option, Stock Appreciation Right, or Award
shall be granted pursuant to the Plan after March 16, 1999.
ARTICLE ARTICLE II
DEFINITIONS
The words and phrases defined in this Article shall have the meaning
set out in the definition unless the context in which any such word or phrase
appears reasonably requires a broader, narrower, or different meaning.
2.1 "AFFILIATE" shall mean any parent corporation and any
subsidiary corporation. The term "parent corporation" means any corporation
(other than the Company) in an unbroken chain of corporations ending with the
Company if, at the time of the action or transaction, each of the
1
<PAGE> 5
corporations other than the Company owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain. The term "subsidiary corporation" means any
corporation (other than the Company) in an unbroken chain of corporations
beginning with the Company if, at the time of the action or transaction, each
of the corporations other than the last corporation in the unbroken chain owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in the chain.
2.2 "AWARD" shall mean an award of Restricted Stock.
2.3 "BOARD OF DIRECTORS" shall mean the board of directors of
Powell Industries, Inc.
2.4 "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
2.5 "COMMITTEE" shall mean the Compensation Committee of the Board
of Directors, exclusive of any person who is not a Disinterested Person.
2.6 "COMPANY" shall mean Powell Industries, Inc., a Nevada
corporation.
2.7 "DISINTERESTED PERSON" shall mean a "disinterested person" as
that term is defined in Rule 16b-3 under the Securities Exchange Act of 1934.
2.8 "EMPLOYEE" shall mean a person employed by the Company or an
Affiliate to whom an Option, a Reload Option, a Stock Appreciation Right, or an
Award is granted.
2.9 "FAIR MARKET VALUE" of the Stock as of any date shall mean (i)
the average of the high and low sale prices of the Stock on that date on the
principal securities exchange on which the Stock is listed; or (ii) if the
Stock is not listed on a securities exchange, the average of the high and low
sale prices of the Stock on that date as reported on the NASDAQ National Market
System; or (iii) if the Stock is not listed on the NASDAQ National Market
System, the average of the high and low bid quotations for the Stock on that
date as reported by the National Quotation Bureau Incorporated; or (iv) if none
of the foregoing is applicable, the average between the closing bid and ask
prices per share of stock on the last preceding date on which those prices were
reported or that amount as determined by the Committee.
2.10 "INCENTIVE OPTION" shall mean an Option granted under this
Plan which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code.
2.11 "MATURITY DATE" shall mean the date the Stock Appreciation
Right given in a Stock Appreciation Rights Agreement vests.
2.12 "NONQUALIFIED OPTION" shall mean an Option other than an
Incentive Option.
2
<PAGE> 6
2.13 "OPTION" shall mean an option granted under this Plan to
purchase shares of Stock.
2.14 "OPTION AGREEMENT" shall mean the written agreement which sets
out the terms of an Option and/or Reload Option.
2.15 "PLAN" shall mean the 1992 Powell Industries, Inc. Stock
Option Plan, as amended and restated as set out in this document and as it may
be amended from time to time.
2.16 "RELOAD OPTION" shall mean an Option which the Committee may,
in its sole discretion, grant in connection with the issuing of an Option if
the exercise price of the Option is paid in whole or in part, by exchanging
Stock owned by the Employee. A Reload Option shall be an Incentive Option or
Nonqualified Option depending on the type of Option previously granted under
the Option Agreement containing the Reload Option feature. The Reload Options
will be subject to the same restrictions and provisions of the Plan as the
original Option, except when specific changes are set out in the Option
Agreement.
2.17 "RESTRICTED STOCK" shall mean stock awarded or purchased under
a Restricted Stock Agreement entered into pursuant to this Plan. The terms and
conditions of the Restricted Stock shall be determined by the Committee.
2.18 "RESTRICTED STOCK AGREEMENT" shall mean the agreement between
the Company and the Employee under which the Employee is awarded or may
purchase Restricted Stock.
2.19 "RESTRICTED STOCK PURCHASE PRICE" shall mean the purchase
price per share of Restricted Stock subject to an Award. The Restricted Stock
Purchase Price shall be determined by the Committee. It may be greater than or
less than the Fair Market Value of the Stock on the date of the grant or Award.
2.20 "STOCK" shall mean the common stock of the Company, $.01 par
value or, in the event that the outstanding shares of common stock are later
changed into or exchanged for a different class of stock or securities of the
Company or another corporation, that other stock or security.
2.21 "STOCK APPRECIATION RIGHT" shall mean a right granted to an
Employee under the terms of the Plan to receive an amount equal to the excess
of the Fair Market Value of one share of Stock as of the date of exercise of
the Stock Appreciation Right over the price per share of Stock specified in the
Stock Appreciation Rights Agreement or Option Agreement of which it is a part.
2.22 "STOCK APPRECIATION RIGHTS AGREEMENT" shall mean the written
agreement which sets out the terms of a Stock Appreciation Right. All of the
terms and conditions of a Stock Appreciation Right shall be determined by the
Committee.
3
<PAGE> 7
2.23 "10% SHAREHOLDER" shall mean an individual who, at the time
the Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Affiliate. An individual shall be considered as owning the stock owned,
directly or indirectly, by or for his brothers and sisters (whether by the
whole or half blood), spouse, ancestors, and lineal descendants; and stock
owned, directly or indirectly, by or for a corporation, partnership, estate, or
trust, shall be considered as being owned proportionately by or for its
shareholders, partners, or beneficiaries.
ARTICLE ARTICLE III
ELIGIBILITY
The individuals who shall be eligible to receive Incentive Options,
Nonqualified Options, Reload Options, Stock Appreciation Rights, and Awards of
Restricted Stock shall be those key employees as the Committee shall determine
from time to time. However, no member of the Committee shall be eligible to
receive any Option, Reload Option, Stock Appreciation Right or Award of
Restricted Stock or to receive stock, stock options, or stock appreciation
rights under any other plan of the Company or any of its Affiliates, if receipt
of it would cause the individual not to be a Disinterested Person. The Board
of Directors may designate one or more individuals who shall not be eligible to
receive any Option, Reload Option, Stock Appreciation Right, or Award of
Restricted Stock under this Plan or under other similar plans of the Company.
ARTICLE ARTICLE IV
GENERAL PROVISIONS RELATING TO OPTIONS,
RELOAD OPTIONS, STOCK APPRECIATION RIGHTS AND AWARDS
4.1 AUTHORITY TO GRANT OPTIONS, RELOAD OPTIONS, STOCK APPRECIATION
RIGHTS AND AWARDS. The Committee may grant to those key Employees as it shall
from time to time determine, Options, Reload Options, Stock Appreciation
Rights, or Awards of Restricted Stock under the terms and conditions of this
Plan. Subject only to any applicable limitations set out in this Plan, the
number of shares of Stock to be covered by any Option, Reload Option, Stock
Appreciation Right or Award of Restricted Stock to be granted to an Employee
shall be as determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with
respect to which Options, Reload Options, Stock Appreciation Rights and Awards
may be granted under this Plan shall be 1,500,000 shares. That number of
shares shall be subject to adjustment in accordance with the provisions of
Section 4.6. The shares may be treasury shares or authorized but unissued
shares.
4
<PAGE> 8
In the event that any outstanding Option, Reload Option, Stock
Appreciation Right or Award shall expire or terminate for any reason or any
Option, Reload Option, Stock Appreciation Right or Award is surrendered, the
shares of Stock and the Stock Appreciation Rights, if any, allocable to the
unexercised portion of that Option, Reload Option, Stock Appreciation Right or
Award may again be subject to an Option, Reload Option, Stock Appreciation
Right or Award under this Plan.
4.3 NON-TRANSFERABILITY OF OPTIONS, RELOAD OPTIONS, STOCK
APPRECIATION RIGHTS AND AWARDS. Options, Reload Options and Stock Appreciation
Rights shall not be transferable by the Employee otherwise than by will or
under the laws of descent and distribution, and shall be exercisable, during
the Employee's lifetime, only by him. Restricted Stock shall be purchased or
earned under a Restricted Stock Agreement during the Employee's lifetime, only
by him. Any attempt to transfer an Award other than under the terms of the
Plan and the Restricted Stock Agreement shall terminate the Award and all
rights of the Employee to that Restricted Stock.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to
sell or issue any Stock under any Option, Reload Option, Stock Appreciation
Right or Award if issuing that Stock would constitute or result in a violation
by the Employee or the Company of any provision of any law, statute, or
regulation of any governmental authority. Specifically, in connection with any
applicable statute or regulation relating to the registration of securities,
upon exercise of any Option, Reload Option, Stock Appreciation Right or Award,
the Company shall not be required to issue any Stock unless the Committee has
received evidence satisfactory to it to the effect that the holder of that
Option, Reload Option, Stock Appreciation Right or Award will not transfer the
Stock except in accordance with applicable law, including receipt of an opinion
of counsel satisfactory to the Company to the effect that any proposed transfer
complies with applicable law. The determination by the Committee on this
matter shall be final, binding and conclusive. The Company may, but shall in
no event be obligated to, register any Stock covered by this Plan pursuant to
applicable securities laws of any country or any political subdivision. In the
event the Stock issuable on exercise of an Option, Reload Option, Stock
Appreciation Right or Award is not registered, the Company may imprint on the
certificate evidencing the Stock any legend that counsel for the Company
considers necessary or advisable to comply with applicable law. The Company
shall not be obligated to take any other affirmative action in order to cause
the exercise of an Option, Reload Option, Stock Appreciation Right or Award or
the issuance of shares under any of them to comply with any law or regulation
of any governmental authority.
4.5 NO RIGHTS AS STOCKHOLDER. No Employee shall have any rights
as a stockholder with respect to Stock covered by his Option, Reload Option,
Stock Appreciation Right or Award until the date a stock certificate is issued
for the Stock unless the granting agreement specifically gives him a right.
4.6 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options, Reload Options, Stock Appreciation Rights, or Awards shall
not affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations or
other changes in the Company's capital structure or its
5
<PAGE> 9
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Stock
or its rights, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction of the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, then (a) the
number, class, and per share price of shares of Stock subject to outstanding
Options or Reload Options under this Agreement shall be appropriately adjusted
in such a manner as to entitle an Employee to receive upon exercise of an
Option, for the same aggregate cash consideration, the equivalent total number
and class of shares as he would have received had he exercised his Option or
Reload Option in full immediately prior to the event requiring the adjustment;
and (b) the number and class of shares of Stock then reserved to be issued
under the Plan shall be adjusted by substituting for the total number and class
of shares of Stock then reserved, that number and class of shares of Stock that
would have been received by the owner of an equal number of outstanding shares
of each class of Stock as the result of the event requiring the adjustment. In
addition, if the Company shall effect a subdivision or consolidation of shares
or other capital readjustment, the payment of a stock dividend, or other
increase or reduction in the number of shares of the Stock outstanding, without
receiving compensation for it in money, services or property, the Committee
shall make an appropriate adjustment in the number of Stock Appreciation Rights
and/or Awards created under the Plan.
If the Company is merged or consolidated with another corporation or
if the Company is liquidated or sells or otherwise disposes of substantially
all its assets while unexercised Options remain outstanding under the Plan, (a)
subject to the provisions of clause (c) below, after the effective date of the
merger, consolidation, liquidation, sale or other disposition, as the case may
be, each holder of an outstanding Option or Reload Option shall be entitled,
upon exercise of the Option or Reload Option, to receive, in lieu of shares of
Stock, the number and class or classes of shares of stock or other securities
or property to which the holder would have been entitled if, immediately prior
to the merger, consolidation, liquidation, sale or other disposition, the
holder had been the holder of record of a number of shares of Stock equal to
the number of shares as to which the Option and Reload Option shall be so
exercised; (b) the Board of Directors may waive any limitations set out in or
imposed under this Plan so that all Options, from and after a date prior to the
effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, specified by the Board of Directors, shall be
exercisable in full; and (c) all outstanding Options may be canceled by the
Board of Directors as of the effective date of any merger, consolidation,
liquidation, sale or other disposition, if (i) notice of cancellation shall be
given to each holder of an Option and (ii) each holder of an Option shall have
the right to exercise that Option and any underlying Reload Option in full
(without regard to any limitations set out in or imposed under the Plan) during
a period set by the Board of Directors preceding the effective date of the
merger, consolidation, liquidation, sale or other disposition and, if in the
event all outstanding Options and Reload Options may not be exercised in full
under applicable securities laws without registration of the shares of Stock
issuable on
6
<PAGE> 10
exercise of the Options or Reload Options, the Board of Directors may limit the
exercise of the Options and Reload Options to the number of shares of Stock, if
any, as may be issued without registration. The method of choosing which
Options and Reload Options may be exercised and the number of shares of Stock
for which Options and Reload Options may be exercised shall be solely within
the discretion of the Board of Directors.
After a merger of one or more corporations into the Company or after a
consolidation of the Company and one or more corporations in which the Company
shall be the surviving corporation, each Employee shall be entitled to have his
Stock Appreciation Rights and/or Award appropriately adjusted based on the
manner the Stock was adjusted under the terms of the agreement of merger or
consolidation. If the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the surviving
corporation, or if the Company is liquidated, or sells or otherwise disposes of
substantially all of its assets to another corporation while unmatured Stock
Appreciation Rights remain outstanding under the Plan, all outstanding Stock
Appreciation Rights shall be cancelled as of the effective date of the merger,
consolidation, liquidation or sale but payment shall be made under the
Agreement prior to its cancellation as though each Stock Appreciation Right
matured on the effective date of the merger, consolidation, liquidation or
sale.
The issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services either upon direct sale or upon the exercise of rights
or warrants to subscribe for them, or upon conversion of shares or obligations
of the Company convertible into shares or other securities, shall not affect,
and no adjustment by reason of it shall be made with respect to, the number,
class, or price of shares of Stock then subject to outstanding Options, Reload
Options, Stock Appreciation Rights or Awards then subject to outstanding
grants.
4.7 ELECTION UNDER SECTION 83(B) OF THE CODE. No Employee shall
exercise the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Employee doing so shall forfeit all Options,
Reload Options, Stock Appreciation Rights and/or Awards issued to him under
this Plan.
ARTICLE ARTICLE V
OPTIONS AND RELOAD OPTIONS
5.1 TYPE OF OPTION. The Committee shall specify whether a given
Option shall constitute an Incentive Option or a Nonqualified Option.
5.2 OPTION PRICE. The price at which Stock may be purchased under
an Incentive Option shall not be less than the greater of (a) 100% of the Fair
Market Value of the shares of Stock on the date the Option is granted or (b)
the aggregate par value of the shares of Stock on the date the Option is
granted. The Committee in its discretion may provide that the price at
7
<PAGE> 11
which shares of Stock may be purchased shall be more than 100% of Fair Market
Value. In the case of any 10% Shareholder, the price at which shares of Stock
may be purchased under an Incentive Option shall not be less than 110% of the
Fair Market Value of the Stock on the date the Incentive Option is granted.
The price at which shares of Stock may be purchased under a
Nonqualified Option shall be the price determined by the Committee in its
discretion, so long as the price is not less than the par value of the shares
of Stock on the date the Option is granted.
5.3 DURATION OF OPTIONS. No Option shall be exercisable after the
expiration of 10 years from the date the Option is granted. A Reload Option
shall have a term which is no longer than the original term of the underlying
Option unless it is expressly provided otherwise in the Option Agreement. In
the case of a 10% Shareholder, no Incentive Option shall be exercisable after
the expiration of five years from the date the Incentive Option is granted.
5.4 AMOUNT EXERCISABLE. Each Option may be exercised from time to
time, in whole or in part, in the manner and subject to the conditions the
Committee, in its discretion, may provide in the Option Agreement, as long as
the Option is valid and outstanding. To the extent that the aggregate Fair
Market Value (determined as of the time an Incentive Option is granted) of the
Stock with respect to which Incentive Options first become exercisable by the
Optionee during any calendar year (under this Plan and any other incentive
stock option plan(s) of the Company or any Affiliate) exceeds $100,000, the
Options shall be treated as Nonqualified Options.
5.5 EXERCISE OF OPTIONS. Options shall be exercised by the
delivery of written notice to the Committee setting forth the number of shares
with respect to which the Option is to be exercised, together with: (a) cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company for an amount equal to the option price of the shares, (b)
Stock at the Fair Market Value on the date of exercise, and/or (c) any other
form of payment which is acceptable to the Committee, and specifying the
address to which the certificates for the shares are to be mailed. As promptly
as practicable after receipt of written notification and payment, the Company
shall deliver to the Employee certificates for the number of shares with
respect to which the Option has been exercised, issued in the Employee's name.
If shares of Stock are used in payment, the Fair Market Value of the shares of
Stock tendered must be less than the Option Price of the shares being purchased
and the difference must be paid by check. Delivery shall be deemed effected
for all purposes when a stock transfer agent of the Company shall have
deposited the certificates in the United States mail, addressed to the
optionee, at the address specified by the Employee.
5.6 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option Agreement, Options (including Reload Options)
shall terminate immediately upon severance of employment of the Employee from
the Company for any reason, with or without cause, other than death, retirement
for age or disability under the then established rules of the Company or
severance for disability. Whether authorized leave of absence or
8
<PAGE> 12
absence on military or government service shall constitute severance of the
employment of the Employee shall be determined by the Committee at that time.
If, before the expiration of an Incentive Option, the Employee shall
be retired in good standing from the employ of the Company because of his age
under the then established rules of the Company, the Incentive Option shall
terminate on the earlier of the Option's expiration date or one day less than
three months after his retirement. If before the expiration of a Nonqualified
Option, the Employee shall be retired in good standing from the employ of the
Company because of his age under the then established rules of the Company, the
Nonqualified Option shall terminate on the earlier of the Option's expiration
date or one day more than six months after his retirement. In the event of
retirement for age the Employee shall have the right prior to the termination
of the Option to exercise the Option, but without the right to exercise any
Reload Option feature of the Option, to the extent to which he was entitled to
exercise it immediately prior to his retirement unless it is expressly provided
otherwise in the Option Agreement.
If, before the expiration of an Option, the Employee shall be retired
for disability under the then established rules of the Company, or severed from
the employ of the Company for disability, the Option shall terminate on the
earlier of the Option's expiration date or one day less than one year after the
date he retired or was severed because of disability. In the event that the
Employee shall be retired for disability under the then established rules of
the Company or severed from the employ of the Company for disability, the
Employee shall have the right prior to the termination of the Option to
exercise the Option, but without the right to exercise any Reload Option
feature of the Option, to the extent to which he was entitled to exercise it
immediately prior to his retirement or severance of employment for disability
unless it is expressly provided otherwise in the Option Agreement.
If, before the expiration of an Option, the Employee, whether in the
employ of the Company or after he has retired for age or disability or was
severed for disability, dies the Option shall continue until the earlier of the
Option's expiration date or one year following the date of his death. After
the death of the Employee, his executors, administrators or any persons to whom
his Option may be transferred by will or by the laws of descent and
distribution shall have the right, at any time prior to the Option's
termination, to exercise it, but without the right to exercise any Reload
Option feature, to the extent to which he was entitled to exercise it
immediately prior to the death unless it is expressly provided otherwise in the
Option Agreement.
In determining the employment relationship between the Company and the
Employee, employment by any Affiliate shall be considered employment by the
Company, as shall employment by a corporation issuing or assuming a stock
option in a transaction to which Section 424(a) of the Code applies, or by a
parent corporation or subsidiary corporation of the corporation issuing or
assuming a stock option (and for this purpose, the phrase "corporation issuing
or assuming a stock option" shall be substituted for the word "Company" in the
definitions of parent corporation and subsidiary corporation in Section 2.1,
and the parent-
9
<PAGE> 13
subsidiary relationship shall be determined at the time of the corporate action
described in Section 424(a) of the Code).
5.7 RELOAD OPTIONS. From time to time, the Committee may grant
Reload Options to Employees. The time of grant of a Reload Option shall be the
time the Employee surrenders the shares of Stock with respect to which the
Reload Option is granted. The Reload Option shall be for the number of shares
of Stock surrendered by the Employee as payment upon the exercise of the
previously granted Option. The Reload Option shall be subject to the following
restrictions: (a) the Reload Option shall be subject to the same restrictions
on exercise and other Plan rules that are imposed on the underlying Option
which contained the Reload Option feature; and (b) the Reload Option shall not
be exercisable until the expiration of any retention holding period imposed on
the disposition of any shares of Stock covered by the underlying Option which
contained the Reload Option Feature unless it is expressly provided otherwise
in the Option Agreement.
5.8 SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with the
Company or any Affiliate as the result of a merger or consolidation of the
employing corporation with the Company or any Affiliate, or the acquisition by
the Company or any Affiliate of the assets of the employing corporation, or the
acquisition by the Company or any Affiliate of stock of the employing
corporation as the result of which it becomes an Affiliate of the Company. The
terms and conditions of the substitute Options granted may vary from the terms
and conditions set out in this Plan to the extent the Board of Directors, at
the time of grant, may deem appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are granted.
ARTICLE ARTICLE VI
STOCK APPRECIATION RIGHTS
6.1 STOCK APPRECIATION RIGHTS INCLUDED IN OPTIONS. Stock
Appreciation Rights may be included in any Option granted to permit the
Employee to surrender the Option or a portion of it which is then exercisable
and receive in exchange an amount equal to the excess of the Fair Market Value
of the Stock covered by the Option surrendered, or a portion of it, determined
on the date of surrender, over the aggregate Option price of the Stock. If
authorized by the Committee, an Employee may, by providing written notice to
the Committee, elect to surrender all or any portion of an Option for Stock
Appreciation Rights.
Stock Appreciation Rights included in Options may be exercised only
when the Fair Market Value of the Stock covered by the Option surrendered
exceeds the Option price of the Stock. Each of the Stock Appreciation Rights
included in an Option (a) shall have a term no later than the term of the
underlying Option, (b) may be for no more than 100% of the difference between
the exercise price of the underlying Option and the Fair Market Value of a
share of the
10
<PAGE> 14
Stock at the time the Stock Appreciation Right is exercised, (c) is
transferable only when the underlying Option is transferable, and under the
same conditions, and (d) may be exercised only when the underlying Option is
eligible to be exercised. The limitations set out in this paragraph may be
changed by the Committee in the grant of the Option and/or Stock Appreciation
Rights except when the grant is of Stock Appreciation Rights granted in
connection with an Incentive Option.
6.2 STOCK APPRECIATION RIGHTS NOT INCLUDED IN OPTIONS. The grant
to an Employee of a Stock Appreciation Right that is not a feature of an Option
shall, subject to the conditions contained in the Stock Appreciation Rights
Agreement, entitle the Employee to an amount equal to the excess of the Fair
Market Value of a share of Stock as of the date of exercise of the Stock
Appreciation Right over the Fair Market Value of a share of Stock as of the
date that the Stock Appreciation Right is granted. The Committee shall fix the
term of the Stock Appreciation Right which may not be in excess of 10 years
from the date the Stock Appreciation Right is granted. Within the 10 year
period the Committee may, in its discretion, provide that portions of the grant
may mature at intervals throughout the period.
6.3 PAYMENT ON EXERCISE OF A STOCK APPRECIATION RIGHT. Upon
exercise of Stock Appreciation Rights, the Committee may pay the Employee in
shares of Stock valued at Fair Market Value, in cash, or partly in cash and
partly in shares of Stock as the Committee determines in the exercise of its
sole discretion.
6.4 EXERCISE ON TERMINATION OF EMPLOYMENT. Any Stock Appreciation
Right included in an Incentive Option shall expire because of termination of
employment at the time the underlying Option expires. Any Stock Appreciation
Right included in a Nonqualified Option or not included in an Option shall
expire as provided for Nonqualified Options in Section 5.6 generally unless it
is expressly provided otherwise in the Option Agreement and/or the Stock
Appreciation Rights Agreement.
ARTICLE ARTICLE VII
AWARDS
7.1 AWARD AND RESTRICTED STOCK AGREEMENT. Each Award granted
shall be evidenced by a written Restricted Stock Agreement dated as of the date
of grant of the Award and executed by the Company and the Employee. The
Restricted Stock Agreement may vary any terms and conditions as the Committee
determines to be appropriate, including without limitation: (a) conditions
consistent with Section 16(b) of the Securities Exchange Act of 1934 and the
rules and regulations promulgated under it, as the same may be amended from
time to time, (b) the period during which the Award may be exercised, (c) the
manner of exercising the Award, (d) the minimum number of shares of Stock for
which the Award may be exercised, (e) the withholding of taxes in connection
with the exercise of the Award, (f) the period during which the Restricted
Stock may vest, (g) termination of Award rights upon certain events and (h) any
other matters
11
<PAGE> 15
the Committee shall determine. If any payment is required to exercise the
Award, subject to any restrictions as the Committee, in its sole discretion,
may include in the Restricted Stock Agreement, upon payment by the Employee of
the Restricted Stock Purchase Price, the Employee shall have all of the rights
of a shareholder with respect to the Stock, including the right to vote the
shares and receive all dividends and other distributions paid or made with
respect to it.
7.2 RESTRICTION PERIOD. No Award granted may have restrictions
continuing beyond 10 years from the date of the Award.
7.3 EXERCISE ON TERMINATION OF EMPLOYMENT. Any Award which has
not been exercised or upon which restrictions have not lapsed will expire upon
termination of the Employee's employment with the Company or its Affiliates
unless it is expressly provided otherwise in the Award.
ARTICLE ARTICLE VIII
ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan, Options, Reload Options, Stock
Appreciation Rights, or Awards shall be subject to the determination of the
Committee. A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and signed by a
majority of the members shall be as effective as if it had been made by a
majority vote at a meeting properly called and held. This Plan shall be
administered in such a manner as to permit the Options granted under it which
are designated to be Incentive Options to qualify as Incentive Options. In
carrying out its authority under the Plan, the Committee shall have full and
final authority and discretion, including but not limited to the following
rights, powers and authorities, to:
(a) determine the Employees to whom and the time or times
at which Options and/or Reload Options (with or without Stock
Appreciation Rights), Stock Appreciations Rights, or Awards will be
made,
(b) determine the number of shares and the purchase price
of Stock covered in each Option, Reload Option, Stock Appreciation
Right, or Award,
(c) determine the terms, provisions and conditions of
each Option, Reload Option, Stock Appreciation Right and Award, which
need not be identical,
(d) define the effect, if any, on an Option, Reload
Option, Stock Appreciation Right or Award of the death, disability,
retirement, or termination of employment of the Employee,
12
<PAGE> 16
(e) prescribe, amend and rescind rules and regulations
relating to the Plan, and
(f) make all other determinations and take all other
actions deemed necessary, appropriate, or advisable for the proper
administration of the Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive
and binding on all parties.
ARTICLE ARTICLE IX
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors may modify, revise or terminate this Plan at
any time and from time to time. However, without the further approval of the
holders of at least a majority of the outstanding shares of Stock, or if the
provisions of the corporate charter, by-laws or applicable state law prescribes
a greater degree of stockholder approval for this action, without the degree of
stockholder approval thus required, the Board of Directors may not (a) change
the aggregate number of shares of Stock which may be issued under Incentive
Options or under all Options, Reload Options, Stock Appreciation Rights or
Awards which may be issued under this Plan, (b) change the class of individuals
eligible to receive Options, Reload Options, Stock Appreciation Rights, or
Awards or (c) decrease the option price for Incentive Options below the Fair
Market Value of the Stock at the time it is granted. The Board shall have the
power to make any changes in the Plan and in the regulations and administrative
provisions under it or in any outstanding Incentive Option as in the opinion of
counsel for the Company may be necessary or appropriate from time to time to
enable any Incentive Option granted under this Plan to qualify as an incentive
stock option or such other stock option as may be defined under the Code so as
to receive preferential federal income tax treatment.
ARTICLE ARTICLE X
MISCELLANEOUS
10.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set
aside nor shall a trust fund of any kind be established to secure the rights of
any Employee under this Plan. All amounts at any time attributable to Stock
Appreciation Rights granted shall be solely a charge upon the Company, and all
Employees shall at all times rely solely upon the general credit of the Company
for the payment of any benefit which becomes payable under this Plan.
10.2 NO EMPLOYMENT OBLIGATION. The granting of any Option, Reload
Option, Stock Appreciation Right, or Award shall not constitute an employment
contract, express or implied, nor impose upon the Company or Affiliate any
obligation to employ or continue to employ any
13
<PAGE> 17
Employee. The right of the Company or any Affiliate to terminate the
employment of any person shall not be diminished or affected by reason of the
fact that an Option, a Reload Option, a Stock Appreciation Right, or an Award
has been granted to him.
10.3 FORFEITURE. Notwithstanding any other provisions of this
Plan, if the Committee finds by a majority vote after full consideration of the
facts that the Employee, before or after termination of his employment with the
Company or an Affiliate for any reason (a) committed or engaged in fraud,
embezzlement, theft, commission of a felony, or proven dishonesty in the course
of his employment by the Company or an Affiliate, which conduct damaged the
Company or Affiliate, or disclosed trade secrets of the Company or an
Affiliate, or (b) participated, engaged in or had a financial or other
interest, whether as an employee, officer, director, consultant, contractor,
shareholder, owner, or otherwise, in any commercial endeavor in the United
States which is competitive with the business of the Company or an Affiliate
without the written consent of the Company or Affiliate, the Employee shall
forfeit all outstanding Options, Reload Options, and Stock Appreciation Rights,
and all outstanding Awards which have not fully vested, including all rights
related to such matters, and including all unexercised Options and/or Reload
Options, and exercised Options and/or Reload Options, Stock Appreciation Rights
and other elections pursuant to which the Company has not yet delivered a stock
certificate, and any additional Options not yet granted pursuant to a Reload
Option. Clause (b) shall not be deemed to have been violated solely by reason
of the Employee's ownership of stock or securities of any publicly owned
corporation, if that ownership does not result in effective control of the
corporation, and if written notice of the ownership is given the Committee by
the Employee within 60 days after the later of the date on which the Employee
is notified of a grant of an Option, Reload Option, Stock Appreciation Right,
or Award under this Plan or the date on which the Employee acquires the
ownership.
The decision of the Committee as to the cause of the Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of
the Employee's competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of the Employee
by the Company or an Affiliate in any manner. To provide the Company with an
opportunity to enforce this Section, no certificate for Stock may be issued
under this Plan without the certification by the Committee that no action
forbidden by this provision has been raised for their determination.
10.4 TAX WITHHOLDING. The Company or any Affiliate shall be
entitled to deduct from other compensation payable to each Employee any sums
required by federal, state, or local tax law to be withheld with respect to the
grant or exercise of an Option, a Reload Option, a Stock Appreciation Right or
an Award. In the alternative, the Company may require the Employee (or other
person exercising the Option, Reload Option or Stock Appreciation Right or
receiving the Award) to pay the sum directly to the employer corporation. If
the Employee (or other person exercising the Option, Reload Option, the Stock
Appreciation Right, or receiving the Award) is required to pay the sum
directly, payment in cash or by check of such sums for taxes shall be delivered
within 10 days after the date of exercise. The Company shall have no
obligation upon exercise of any Option, Reload Option, Stock Appreciation Right
or receipt of an Award until
14
<PAGE> 18
payment has been received, unless withholding (or offset against a cash
payment) as of or prior to the date of exercise is sufficient to cover all sums
due with respect to that exercise. The Company shall not be obligated to
advise an Employee of the existence of the tax or the amount which the employer
corporation will be required to withhold.
10.5 WRITTEN AGREEMENT. Each Option, Reload Option, Stock
Appreciation Right and Award shall be embodied in a written Option Agreement,
Stock Appreciation Rights Agreement, or Restricted Stock Agreement which shall
be subject to the terms and conditions of this Plan and shall be signed by the
Employee and by a member of the Committee on behalf of the Committee and the
Company. The Option Agreement, Stock Appreciation Rights Agreement, or
Restricted Stock Agreement may contain any other provisions that the Committee
in its discretion shall deem advisable.
10.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of the Plan, the Company shall indemnity each
present and future member of the Committee and the Board of Directors against,
and each member of the Committee and the Board of Directors shall be entitled
without further act on his part to indemnity from the Company for, all expenses
(including the amount of judgments and the amount of approved settlements made
with a view to the curtailment of costs of litigation, other than amounts paid
to the Company itself) reasonably incurred by him in connection with or arising
out of any action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Committee and/or the Board of
Directors, whether or not he continues to be a member of the Committee and/or
the Board of Directors at the time of incurring the expenses. However, this
indemnity shall not include any expenses incurred by any member of the
Committee and/or the Board of Directors (a) in respect of matters as to which
he shall be finally adjudged in any action, suit or proceeding to have been
guilty of gross negligence or willful misconduct in the performance of his duty
as a member of the Committee and the Board of Directors, or (b) in respect of
any matter in which any settlement is effected, to an amount in excess of the
amount approved by the Company on the advice of its legal counsel. In
addition, no right of indemnification under this Plan shall be available to or
enforceable by any member of the Committee and the Board of Directors unless,
within 60 days after institution of any action, suit or proceeding, he shall
have offered the Company, in writing, the opportunity to handle and defend same
at its own expense. This right of indemnification shall inure to the benefit
of the heirs, executors or administrators of each member of the Committee and
the Board of Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a matter
of law, contract, or otherwise.
10.7 GENDER. If the context requires, words of one gender when
used in this Plan shall include the others and words used in the singular or
plural shall include the other.
10.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and shall
not be used in construing the terms of the Plan.
15
<PAGE> 19
10.9 OTHER COMPENSATION PLANS. The adoption of the Plan shall not
affect any other stock option, incentive or other compensation or benefit plans
in effect for the Company or any Affiliate, nor shall the Plan preclude the
Company from establishing any other forms of incentive or other compensation
for employees of the Company or any Affiliate.
10.10 OTHER OPTIONS OR AWARDS. The grant of an Option, Reload
Option, Stock Appreciation Right, or Award shall not confer upon the Employee
the right to receive any future or other Options, Reload Options, Stock
Appreciation Rights or Awards under this Plan, whether or not Options, Reload
Options, Stock Appreciation Rights or Awards may be granted to similarly
situated Employees, or the right to receive future Options, Reload Options,
Stock Appreciation Rights or Awards upon the same terms or conditions as
previously granted.
10.11 GOVERNING LAW. The provisions of this Plan shall be
construed, administered, and governed under the laws of the State of Texas and,
to the extent applicable, the laws of the United States.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the Company's
unaudited pro forma condensed consolidated financial statements for the quarter
ended April 30, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 3,130
<SECURITIES> 0
<RECEIVABLES> 51,111
<ALLOWANCES> 1,083
<INVENTORY> 19,917
<CURRENT-ASSETS> 86,697
<PP&E> 46,751
<DEPRECIATION> 30,833
<TOTAL-ASSETS> 109,739
<CURRENT-LIABILITIES> 39,552
<BONDS> 0
<COMMON> 106
0
0
<OTHER-SE> 62,239
<TOTAL-LIABILITY-AND-EQUITY> 109,739
<SALES> 53,521
<TOTAL-REVENUES> 53,521
<CGS> 40,955
<TOTAL-COSTS> 40,955
<OTHER-EXPENSES> 8,404
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82
<INCOME-PRETAX> 4,080
<INCOME-TAX> 1,437
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,643
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0
</TABLE>
