SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
( ) Filed by the Registrant
( ) Filed by a Party other than the Registrant
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by
Rule 14a-b(e)(2))
(X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to (section mark)240.14a-11(c) or
(section mark)240.14a-12
Glenayre Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement If Other Than Registrant)
PAYMENT OF FILING FEE (Check the appropriate box):
(X ) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
( ) $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: *
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
(Set forth the amount on which the filing fee is calculated and state how
it was determined)
( ) Fee previously paid with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
(Glenayre logo appears here)
GLENAYRE TECHNOLOGIES, INC.
5935 Carnegie Boulevard
Charlotte, North Carolina 28209
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1996
The 1996 Annual Meeting of the Stockholders of Glenayre Technologies, Inc.,
a Delaware corporation (the "COMPANY"), will be held in The Equity Situation
Room, Donaldson, Lufkin & Jenrette Securities Corp., 277 Park Avenue, 12th
Floor, New York, NY 10172, on May 22, 1996 at 2:00 p.m., EDT, for the following
purposes:
1. To elect three Class III Directors.
2. To consider and vote upon a proposal to establish the Company's 1996
Incentive Stock Plan.
3. To ratify the selection of Ernst & Young LLP as independent auditors to
audit the financial statements of the Company.
4. To transact any other business that may properly come before the 1996
Annual Meeting and any adjournment(s) thereof.
The close of business on March 29, 1996 has been fixed as the record date
for determination of stockholders entitled to notice of and to vote at the 1996
Annual Meeting and any adjournment(s) thereof.
A Proxy Statement, a form of proxy and the Annual Report to the
stockholders of the Company for the year ended December 31, 1995 are enclosed
with this Notice.
A list of stockholders entitled to vote at the 1996 Annual Meeting will be
open to the examination of any stockholder for any purpose germane to the 1996
Annual Meeting, during ordinary business hours, for a period of 10 days prior to
the 1996 Annual Meeting at the office of the Company at 667 Madison Avenue, 25th
Floor, New York, New York 10021.
Stockholders are cordially invited to attend this meeting. Each
stockholder, whether or not he or she expects to be present in person at the
1996 Annual Meeting, is requested to SIGN, DATE AND RETURN THE ENCLOSED PROXY in
the accompanying envelope as promptly as possible.
A stockholder may revoke his or her proxy at any time prior to voting.
BY ORDER OF THE BOARD OF DIRECTORS
Stanley Ciepcielinski
EXECUTIVE VICE PRESIDENT AND SECRETARY
April 12, 1996
<PAGE>
GLENAYRE TECHNOLOGIES, INC.
PROXY STATEMENT
THE 1996 ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of the Company of proxies for use at the 1996 Annual
Meeting of Stockholders of Glenayre Technologies, Inc. (the "COMPANY") to be
held in The Equity Situation Room, Donaldson, Lufkin & Jenrette Securities
Corp., 277 Park Avenue, 12th Floor, New York, NY 10172 on May 22, 1996 at 2:00
p.m., EDT, and at any adjournment(s) thereof.
VOTING AND RECORD DATE
As of March 29, 1996, the record date for the determination of stockholders
of the Company entitled to notice of and to vote at the 1996 Annual Meeting, the
Company had 60,614,422 shares of common stock, $.02 par value ("COMMON STOCK"),
outstanding and entitled to vote. Each holder of Common Stock at the close of
business on March 29, 1996 will be entitled to one vote for each share so held
of record. All votes at the 1996 Annual Meeting specified in this Proxy
Statement will be by written ballot.
Under rules followed by the National Association of Securities Dealers,
Inc., brokers who hold shares in street name for customers have the authority to
vote on certain items when they have not received instructions from beneficial
owners. Brokers that do not receive instructions are entitled to vote on the
election of directors. With respect to the other proposals presented to
stockholders, no broker may vote shares held for customers without specific
instruction from such customers. One-third of the total outstanding shares will
constitute a quorum at the meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business.
SOLICITATION OF PROXIES
Any stockholder giving a proxy for the 1996 Annual Meeting may revoke it at
any time prior to the voting thereof by giving written notice to the Chairman or
the Secretary of the Company by filing a later-dated proxy with either of them
prior to the commencement of the 1996 Annual Meeting or by voting in person at
the 1996 Annual Meeting. Proxies and notices of revocation should be mailed or
delivered to American Stock Transfer & Trust Company, 40 Wall Street, 46th
Floor, New York, New York 10005 for receipt by American Stock Transfer & Trust
Company no later than two business days prior to the 1996 Annual Meeting, or
should be deposited with the Chairman or the Secretary of the Company
immediately prior to the commencement of the 1996 Annual Meeting.
All shares of stock represented by proxies will be voted at the 1996 Annual
Meeting, and at any adjournment(s) thereof, as specified therein by the persons
giving the proxies. If no direction is given, the proxy will be voted to elect
the nominees listed under "ELECTION OF DIRECTORS," to approve the establishment
of the Company's 1996 Incentive Stock Plan, to ratify the selection of Ernst &
Young LLP as independent auditors, and in the discretion of the holders of the
proxies on all other matters properly brought before the 1996 Annual Meeting and
any adjournment(s) thereof.
This Proxy Statement, the Notice of the 1996 Annual Meeting (the "NOTICE")
and the form of proxy were first mailed to stockholders on or about April 12,
1996. The Company's principal executive offices are located at 5935 Carnegie
Boulevard, Charlotte, North Carolina 28209, telephone number (704) 553-0038.
Solicitation of proxies is being made primarily by mail; however, there may
also be further solicitation in person and by telephone at nominal cost by
directors, officers, employees and agents of the Company, who will receive no
additional compensation therefor. The Company will bear all costs of soliciting
proxies including charges made by brokers and other persons holding stock in
their names or in the names of nominees for reasonable expenses incurred in
sending proxy material to beneficial owners and obtaining their proxies.
1
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 8, 1996, certain information
with respect to Common Stock beneficially owned by each director of the Company,
by the Chief Executive Officer and the Company's four other highest paid
executive officers (collectively, the "NAMED EXECUTIVE OFFICERS"), by all
current directors and executive officers of the Company as a group, and by each
person known to the Company as of March 8, 1996 to beneficially own more than 5%
of such Common Stock. The information, including Percent Outstanding, includes
shares subject to stock options exercisable within 60 days of March 8, 1996.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP (1) OUTSTANDING
<S> <C> <C>
Ramon D. Ardizzone 25,623 (2) *
Clarke H. Bailey 961,875 (3) 1.56%
Gerald B. Cramer 1,462,528 (4) 2.40%
Barry W. Gray 1,551,225 (5) 2.55%
John J. Hurley 218,398 (6) *
Thomas C. Israel 1,593,787 (7) 2.62%
Edward J. Rosenthal 547,509 (8) *
Thomas E. Skidmore 1,488,705 (9) 2.45%
Stanley Ciepcielinski 14,820 (10) *
Gary B. Smith 15,000 (11) *
Kenneth C. Thompson 37,673 (12) *
Russ K. Allen 12,012 (13) *
All Directors and executive officers as a group (14 Persons) 6,600,171 (14) 10.57%
Cramer Rosenthal McGlynn, Inc. (15) 4,016,609 6.62%
FMR Corp. (16) 3,677,132 6.06%
</TABLE>
* Does not exceed 1%.
(1) All shares are owned with sole voting and dispositive power except as
otherwise noted.
(2) Includes the presently exercisable right to acquire 25,000 shares pursuant
to the Company's Long-Term Incentive Plan.
(3) Includes the presently exercisable right to acquire 135,000 shares pursuant
to the Company's 1987 Stock Option Plan, as amended, ("1987 PLAN") and
826,875 shares pursuant to the Long-Term Incentive Plan.
(4) Includes the presently exercisable right to acquire 316,250 shares pursuant
to the Long-Term Incentive Plan. Also includes 11,632 shares owned by
Daphna Cramer, the wife of Mr. Cramer, and 35,437 shares owned by Cramer
Rosenthal McGlynn, Inc., an investment management firm ("CRM") and does not
include 2,870,331 shares held by CRM in various investment management
accounts. Mr. Cramer is Chairman and Chief Executive Officer of CRM. See
Footnote 15 below.
(5) Includes the presently exercisable right to acquire 60,750 shares pursuant
to the Long-Term Incentive Plan. Also includes 9,000 shares owned by the
Adrienne and Barry Gray Foundation, 1,355,000 shares owned by A.C. Israel
Enterprises, Inc., a private investment company ("A.C. ISRAEL "), and
43,875 shares owned by the A.C. Israel Foundation. Mr. Gray is President of
A.C. Israel and the A.C. Israel Foundation. Mr. Gray has shared voting
power with respect to the shares owned by A.C. Israel and the A.C. Israel
Foundation and may be deemed to have beneficial ownership of such shares.
(6) Includes the presently exercisable right to acquire 37,500 shares pursuant
to the Long-Term Incentive Plan.
(7) Includes the presently exercisable right to acquire 158,875 shares pursuant
to the Long-Term Incentive Plan. Also, includes 1,355,000 shares owned by
A.C. Israel and 43,875 shares owned by the A.C. Israel Foundation. Mr.
Israel is Chairman of A.C. Israel and the A.C. Israel Foundation. Mr.
Israel has shared voting power with respect to the shares owned by A.C.
Israel and the A.C. Israel Foundation.
(8) Includes the presently exercisable right to acquire 27,000 shares pursuant
to the Long-Term Incentive Plan. Also includes 331,570 shares owned by
R.F.P. No. 4, a general partnership of which Mr. Rosenthal is a general
partner, and 65,331 shares owned by ROVEST Ltd. Partnership ("ROVEST"), a
limited partnership of which Mr. Rosenthal is a managing general partner,
88,171 shares owned by the Edward J. Rosenthal Keogh Plan, 35,437 shares
owned by CRM, and does not include 3,915,841 shares held by CRM in various
management accounts. Mr. Rosenthal is the Vice Chairman of the Board of
CRM. See Footnote 15 below.
2
<PAGE>
(9) Includes the presently exercisable right to acquire 60,750 shares pursuant
to the Long-Term Incentive Plan. Also, includes 1,424,205 shares owned by
Glentel Inc. ("GEL"), a Canadian electronics and telecommunications
company. In 1992, the Company acquired GEL's telecommunications equipment
and related software business (the "GEMS Business"). Mr. Skidmore is the
Chairman, President and Chief Executive Officer of GEL.
(10) Includes the presently exercisable right to acquire 13,625 shares pursuant
to the Long-Term Incentive Plan.
(11) Includes the presently exercisable right to acquire 15,000 shares pursuant
to the Long-Term Incentive Plan.
(12) Includes the presently exercisable right to acquire 36,428 shares pursuant
to the Long-Term Incentive Plan.
(13) Includes the presently exercisable right to acquire 10,000 shares pursuant
to the Long-Term Incentive Plan.
(14) Includes the presently exercisable right to acquire 135,000 shares pursuant
to the 1987 Plan and 1,639,553 shares pursuant to the Long-Term Incentive
Plan and does not include 1,275,224 shares held by CRM in various
investment management accounts. See Footnote 15 below.
(15) The address of CRM is 707 Westchester Avenue, White Plains, New York 10604.
The information with respect to the holdings of CRM is provided as of March
8, 1996 and is based on information provided by CRM to the Company and
includes 65,331 shares held for ROVEST, 1,099,209 shares held for Mr.
Cramer and 11,632 shares held for Daphna Cramer. CRM has shared voting and
dispositive power with respect to such shares.
(16) The address of FMR Corp. ("FMR") is 82 Devonshire Street, Boston,
Massachusetts 02109. This information is provided as of March 14, 1996 and
is based on information provided by FMR to the Company. This number
includes (i) 2,901,521 shares beneficially owned by Fidelity Management &
Research Company, an investment advisor to various registered investment
companies and to certain other funds which are generally offered to limited
groups of investors; (ii) 642,011 shares beneficially owned by Fidelity
Management Trust Company, a trustee or managing agent for various private
investment accounts, primarily employee benefit plans, and an investment
advisor to certain funds which are generally offered to limited groups of
investors; and (iii) 133,600 shares beneficially owned by Fidelity
International Limited, as a result of its serving as investment advisor to
various non-U.S. investment companies. FMR has sole voting power with
respect to 361,124 shares.
ELECTION OF DIRECTORS
The Company's Board of Directors presently consists of eight members. The
Company's Certificate of Incorporation and By-laws provide that the Board of
Directors shall be divided into three classes, each consisting, as nearly as may
be possible, of one-third of the total number of directors, for terms of three
years. At the 1996 Annual Meeting, three Class III Directors are to be elected.
The Board of Directors has nominated Ramon D. Ardizzone, Barry W. Gray and
Edward J. Rosenthal for election as Directors to serve for three-year terms
expiring at the Annual Meeting of Stockholders in 1999, and until their
respective successors shall have been elected and qualified. All nominees are
now serving as directors of the Company. The Company's employment agreements
with Mr. Bailey and Mr. Ardizzone provide that each of them shall be nominated
for directorships during the term of such person's employment with the Company.
See "COMPENSATION -- Employment Agreements." The Company's agreement with GEL
provides that the Company will use its best efforts to nominate Thomas E.
Skidmore to the Board of Directors. See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS".
The Board of Directors recommends a vote FOR all of the nominees. The
affirmative vote of a plurality of shares voted is required for the election of
the nominees by the holders of the shares entitled to vote at a meeting at which
a quorum is present. Provided a quorum is present, abstentions and shares not
voted are not taken into account in determining a plurality. The shares
represented by the proxies which the Board of Directors receives will be voted
for the election of the three nominees in the absence of contrary instructions.
Each of the nominees has indicated his willingness to serve if elected, and the
Board of Directors has no reason to believe that any nominee will be
unavailable. In the event that a vacancy arises among such nominees by death or
any other reason prior to the 1996 Annual Meeting, the proxy may be voted for a
substitute nominee or nominees designated by the Board of Directors.
Biographical information follows for each person nominated and each person
whose term as a director will continue after the 1996 Annual Meeting. The
information concerning the directors and nominees has been furnished by them to
the Company.
3
<PAGE>
NOMINEES FOR ELECTION AS CLASS III DIRECTORS AT THE 1996 ANNUAL MEETING
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH COMPANY, BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS
<S> <C> <C>
Ramon D. Ardizzone 58 President of the Company since December 1994; Chief Executive Officer of the Company
since May 1995; Acting Chief Executive Officer of the Company from December 1994 until
May 1995; Director of the Company since November 1992; Chief Operating Officer of the
Company from June 1994 until December 1994; Acting Chief Operating Officer of the Company
from May 1994 until June 1994; Executive Vice President of the Company from November 1992
until December 1994; and Executive Vice President of the Company in charge of Sales and
Marketing from November 1992 until May 1994. Executive Vice President -- Sales and
Marketing of GEL from August 1988 to November 1992; President of Aerotron, Inc., a
land-mobile radio manufacturing company from 1986 to 1988; and employed by General
Electric Company in various management positions from 1956 to 1986. Director of Arcus,
Inc. and Tigera Group, Inc.
Barry W. Gray 64 Director of the Company since 1990; President and a Director of A.C. Israel since
September 1991; Vice President and a Director of A.C. Israel from 1982 to September 1991.
Edward J. Rosenthal 61 Director of the Company since 1988; Vice Chairman of the Board of CRM since January 1995;
Executive Vice President of CRM from 1973 to December 1994; Director of Hudson General
Corp. and Astro Communications, Inc.
<CAPTION>
DIRECTORS CONTINUING IN OFFICE AS CLASS I DIRECTORS UNTIL THE 1997 ANNUAL MEETING
<S> <C> <C>
Clarke H. Bailey 41 Vice Chairman of the Company since November 1992; Chairman of the Executive Committee
since March 1994; Director of the Company since December 1990; Chief Executive Officer of
the Company from December 1990 to March 1994; and Acting Chief Executive Officer of the
Company from May 1994 until December 1994. Chairman and Chief Executive Officer of United
Acquisition Company and its parent, United Gas Holding Corporation since February 1995;
Chairman of Arcus, Inc. since July 1995; and a variety of capacities for the investment
banking firm of Oppenheimer & Co., Inc. from March 1984 to December 1990, most recently
as Managing Director and head of the Principal Investments Department. Director of Tigera
Group, Inc.
Gerald B. Cramer 65 Director and Chairman of the Board of Directors of the Company since 1986; Chairman of
the Board and Chief Executive Officer of CRM since 1973; Director of OSHAP Technologies,
Ltd., Express America Holdings Corp. and Edison Control Corporation.
Thomas E. Skidmore 46 Director of the Company since November 1992; Director of GEL since 1989; Chairman and
President of GEL since November 1992; Chief Executive Officer of GEL since November 1990;
Vice Chairman of GEL from November 1990 until November 1992; Director of TCG
International, Inc. ("TCGI") since 1984; Vice Chairman -- Finance and Investments, since
1987 and Chief Executive Officer -- Communications Group of TCGI since November 1990;
TCGI is an automotive replacement glass, auto parts aftermarket and mobile communications
distributor and retailer, and has been the majority stockholder of GEL since August 1989;
Director of Autostock Inc.
<CAPTION>
DIRECTORS CONTINUING IN OFFICE AS CLASS II DIRECTORS UNTIL THE 1998 ANNUAL MEETING
<S> <C> <C>
John J. Hurley 61 Vice Chairman of the Company since December 1994; Director of the Company since November
1992; President of the Company from November 1992 until December 1994; Chief Operating
Officer of the Company from November 1992 until March 1994; and Chief Executive Officer
of the Company from March 1994 until May 1994. President of GEL from July 1988 to
November 1992; Director of GEL from July 1988 to June 1993; Chief Operating Officer of
Antenna Specialists Company, a communications antenna manufacturer from 1985 to 1988; and
employed by General Electric Company from 1966 to 1985, where he held several positions,
including General Manager of General Electric Company's cellular business.
Thomas C. Israel 52 Director of the Company since 1986; Chairman and a Director of A.C. Israel since
September 1991; Vice President and a Director of A. C. Israel from 1982 to September
1991; Director of Culbro, Inc. and Noel Group, Inc.
</TABLE>
4
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
The Board of Directors met five times during the last fiscal year. The
Board of Directors has standing Executive, Audit, Compensation and Plan
Administration Committees. The functions and membership of each are set forth
below. The Board of Directors has no standing nominating committee.
The Executive Committee currently consists of Messrs. Cramer, Ardizzone,
Israel and Bailey. The Executive Committee held eight meetings during the last
fiscal year. The Executive Committee exercises the full powers of the Board of
Directors to the extent permitted by law between Board of Directors meetings.
The Audit Committee currently consists of Messrs. Gray, Israel and Hurley.
The Audit Committee met six times during the last fiscal year. The function of
the Audit Committee is to review the internal accounting control procedures of
the Company, review the consolidated financial statements of the Company and
review with the independent public accountants the results of their audit.
The Compensation Committee currently consists of Messrs. Gray and
Rosenthal. The Compensation Committee met two times during the last fiscal year.
The Compensation Committee exercises all powers of the Board of Directors in
connection with compensation matters, other than those matters which are subject
to the administration of the Plan Administration Committee.
The Plan Administration Committee currently consists of Messrs. Rosenthal
and Skidmore. The Plan Administration Committee met four times during the last
fiscal year. The function of the Plan Administration Committee is to administer
the 1987 Plan and the Long-Term Incentive Plan.
Each member of the Board of Directors attended 75% or more of the aggregate
number of meetings of the Board of Directors and the meetings of all committees
of the Board of Directors on which he or she served during the last fiscal year.
COMPENSATION
COMPENSATION OF DIRECTORS
The Company pays an annual retainer fee of $27,500 to non-officer directors
of the Company. The Company does not pay directors any per meeting fees. No fees
are paid to officer directors in addition to their regular compensation. All
directors are reimbursed for their reasonable travel and accommodation expenses
incurred with respect to their duties as directors. Non-officer directors of the
Company receive automatic formula-based awards of options to purchase Common
Stock under the Long-Term Incentive Plan. If the 1996 Stock Incentive Plan is
approved, non-officer directors will continue to receive automatic awards of
options to purchase Common Stock. Under the Company's By-laws, the Chairman and
Vice Chairmen of the Board are considered officers of the Company. The Company
pays an annual retainer fee of $100,000 and $27,500 to Messrs. Cramer and
Hurley, respectively. Mr. Bailey receives $150,000 annually pursuant to an
employment agreement. See "Employment Agreements -- Bailey Employment
Agreement". During 1995, Messrs. Cramer and Bailey received awards of options to
purchase 37,500 and 45,000 shares of Common Stock, respectively, at an exercise
price of $35.8333 per share under the Long-Term Incentive Plan.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to
compensation paid to the named Executive Officers during 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
NUMBER OF
ANNUAL COMPENSATION SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS
NAME AND PRINCIPAL SALARY BONUS COMPENSATION GRANTED
POSITION YEAR ($) ($) ($)(1) (#)
<S> <C> <C> <C> <C> <C>
Ramon D. Ardizzone 1995 $232,738 $229,430 -- 187,500
President and Chief 1994 196,203 78,975 -- --
Executive Officer 1993 187,577 73,304 -- --
Stanley Ciepcielinski 1995 148,571 133,580 -- 37,500
Executive Vice President 1994 121,660 47,628 -- 106,625
and Chief Financial Officer 1993 111,540 44,658 -- 151,875
Gary B. Smith 1995 157,685 141,699 -- 45,000
Executive Vice President (4) 1994 119,973 61,027 -- 108,000
Kenneth C. Thompson 1995 147,901 132,918 -- 90,000
Executive Vice President (5)
Russ K. Allen 1995 361,804 51,600 -- 30,000
Executive Vice President (5)
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL COMPENSATION
POSITION YEAR ($)
<S> <C> <C>
Ramon D. Ardizzone 1995 $ 12,937(2)
President and Chief 1994 12,937
Executive Officer 1993 15,931
Stanley Ciepcielinski 1995 6,000(3)
Executive Vice President 1994 6,000
and Chief Financial Officer 1993 3,611
Gary B. Smith 1995 9,762(3)
Executive Vice President (4) 1994 9,098
Kenneth C. Thompson 1995 6,000(3)
Executive Vice President (5)
Russ K. Allen 1995 10,191(3)
Executive Vice President (5)
</TABLE>
(1) While officers enjoy certain perquisites, such perquisites do not exceed the
lesser of $50,000 or 10% of such officer's salary and bonus.
(2) Includes a $6,000 matching contribution to a defined contribution plan and
$6,937 term life insurance premiums paid on behalf of the executive officer.
(3) Represents a matching contribution to a defined contribution plan.
(4) Mr. Smith was first elected an executive officer in September 1994.
(5) Messrs. Thompson and Allen were first elected executive officers in February
1995.
The following table sets forth information with respect to grants of stock
options to the named Executive Officers during 1995:
OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES POTENTIAL REALIZABLE VALUE
UNDERLYING % OF TOTAL OPTIONS AT ASSUMED ANNUAL RATES OF
OPTIONS GRANTED TO EXERCISE OR STOCK PRICE APPRECIATION
GRANTED(1) EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM
NAME (#) 1995 ($/SHARE) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Ramon D. Ardizzone 112,500 6.9% $28.2200 5/24/2005 $ 1,996,918 $ 5,060,552
75,000 4.6% 35.8333 12/6/2005 1,690,436 4,283,871
Stanley
Ciepcielinski 37,500 2.3% 35.8333 12/6/2005 845,218 2,141,936
Gary B. Smith 45,000 2.8% 35.8333 12/6/2005 1,014,262 2,570,323
Kenneth C. Thompson 45,000 2.8% 16.7245 2/6/2005 473,387 1,199,648
45,000 2.8% 35.8333 12/6/2005 1,014,262 2,570,323
Russ K. Allen 30,000 1.8% 35.8333 12/6/2005 676,174 1,713,548
</TABLE>
6
<PAGE>
(1) Options granted under the Long-Term Incentive Plan which are subject to a
two-year vesting schedule with one-third vesting upon grant and the
remainder vesting equally on each anniversary date of the grant. Vesting may
be accelerated in certain events relating to a Change in Control of the
Company, as defined.
The following table sets forth certain information with respect to the
number and value of options held by the named Executive Officers at the end of
1995:
AGGREGATED OPTION EXERCISES IN 1995
AND 1995 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
SHARES ACQUIRED DECEMBER 31, 1995 (#) DECEMBER 31, 1995 ($)(1)
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
Ramon D. Ardizzone 131,388 $2,828,138 25,000 125,000 $ 141,668 $ 1,279,335
Stanley
Ciepcielinski 119,250 2,600,175 13,625 59,875 100,271 1,083,398
Gary B. Smith 71,982 1,851,228 51,000 66,000 1,027,002 1,112,002
Kenneth C. Thompson 107,250 3,151,897 21,428 102,750 252,592 2,049,392
Russ K. Allen 27,000 720,000 43,750 53,750 957,293 1,013,960
</TABLE>
(1) Represents the difference between the closing market price of the Common
Stock on the NASDAQ National Market System on December 29, 1995 and the
exercise price of the options.
EMPLOYMENT AGREEMENTS
BAILEY EMPLOYMENT AGREEMENT. The Company is party to an employment
agreement with Mr. Bailey, dated as of December 3, 1990, as amended (the "BAILEY
AGREEMENT"), which provides for his employment through December 2, 1993 and is
automatically extended on a year-to-year basis unless either party gives at
least 135 days prior notice to the other party of a decision not to extend the
term. The Bailey Agreement has been automatically extended through December 2,
1996. Effective February 1, 1995, Mr. Bailey may also serve in an executive
position or as a director of other corporations with the prior consent of the
Company, if serving in such other positions does not interfere with Mr. Bailey's
performance of his duties for the Company. The Bailey Agreement provides for an
annual salary of $150,000, which may be increased, but not decreased based on an
annual salary review, and participation in the Company's 401(k) Plan and other
employee benefits if expressly awarded to him in the future. Effective February
1, 1995, Mr. Bailey waived the right to participate in all other existing
employee benefit plans. Pursuant to the Bailey Agreement, Mr. Bailey shall be
paid such bonus as approved from time to time by the Board of Directors of the
Company or the Compensation Committee. The Bailey Agreement also provides that
Mr. Bailey shall be nominated for a position on the Board of Directors during
the term of his employment.
If Mr. Bailey's employment is terminated before completion of the term of
the Bailey Agreement without "Cause" as defined in the Bailey Agreement, or if
Mr. Bailey resigns his employment for "Good Reason" as defined in the Bailey
Agreement, the Company is required to pay to Mr. Bailey a lump sum equal to his
then existing basic salary for the unexpired term of the Bailey Agreement. If
Mr. Bailey's employment had been terminated without Cause or if Mr. Bailey had
resigned for Good Reason as of March 31, 1996, the payment to Mr. Bailey under
the Bailey Agreement would have been $101,096. Mr. Bailey, or his estate, is
also entitled to all salary, bonus and other compensation entitlements accrued
through the termination date in the event of his death or the termination of his
employment by reason of disability.
If Mr. Bailey's employment with the Company is terminated for any reason,
the unexercised portion of his options under the 1987 Plan and the Long-Term
Incentive Plan will remain exercisable until the expiration of the specific
option agreements.
Mr. Bailey is entitled to terminate his employment upon a "Change in
Control" of the Company, as defined in the Bailey Agreement. The definition of
Change in Control includes: (i) the acquisition by any person of 25% or more of
the Company's Common Stock, which acquisition is not supported by Mr. Bailey and
the Chairman of the Board of the Company (the "CHAIRMAN"); or (ii) a material
change in the composition or character of the Board of Directors, including (a)
the replacement of a majority of the incumbent Directors with Directors not
supported by Mr. Bailey and the Chairman and (b) the election at any meeting of
the stockholders of a majority of Directors standing for election who have not
been supported by
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Mr. Bailey and the Chairman. In the event of such termination, Mr. Bailey would
be entitled to receive a lump sum amount equal to his then existing basic salary
for the remainder of the term of the Bailey Agreement. If Mr. Bailey had
terminated his employment as of March 31, 1996 as a result of a Change in
Control of the Company, payments under the Bailey Agreement would have been
$101,096.
ARDIZZONE AGREEMENT. The Company is party to an employment agreement with
Mr. Ardizzone dated as of June 21, 1995, as amended (the "Ardizzone Agreement")
which provides for his employment through December 31, 1997. Thereafter, the
term of the Ardizzone Agreement is automatically extended on a year-to-year
basis unless either party gives at least 90 days prior notice to the other party
of a decision not to extend the term. In addition, the Company may terminate Mr.
Ardizzone's employment for any reason on 60 days prior written notice prior to
December 31, 1997 or on 14 days prior written notice thereafter. At the
discretion of the Board of Directors, but in no event later than January 1,
1997, Mr. Ardizzone shall become the Vice Chairman of the Board and Chief
Executive Officer. Mr. Ardizzone is entitled to an annual salary ("Base Salary")
of $350,000 which may be increased but not decreased based upon an annual salary
review. At such time as Mr. Ardizzone becomes Vice Chairman and Chief Executive
Officer, the Base Salary shall become $150,000 per annum. Pursuant to the
Ardizzone Agreement, Mr. Ardizzone shall participate in the Management by
Objective Bonus Plan ("MBO Plan"). Under the MBO Plan, Mr. Ardizzone is eligible
to receive an annual bonus not to exceed 50% of his base salary based on the
performance of the Company. In 1995, the Board of Directors amended the 1995 MBO
Plan to permit participants an opportunity to earn a larger bonus of up to 100%
for 1995 if the Company exceeded targeted earnings, as defined, by 100%. In
1995, Mr. Ardizzone was entitled to and received the maximum bonus specified in
the Ardizzone Agreement. At such time that Mr. Ardizzone becomes Vice Chairman
and Chief Executive Officer, his annual MBO Plan bonus shall be increased to
$300,000. The Ardizzone Agreement also provides that Mr. Ardizzone shall be
nominated for a position on the Board of Directors during the term of his
employment. Pursuant to the Ardizzone Agreement, Mr. Ardizzone shall be granted
an option within 30 days of each January 1 during the term of the Ardizzone
Agreement to purchase no fewer than 50,000 shares of the Company's Common Stock
at the closing price on the day of the award.
If Mr. Ardizzone's employment is terminated by the Company before the
completion of the term of the Ardizzone Agreement without "Cause" as defined in
the Ardizzone Agreement, or if Mr. Ardizzone resigns his employment for "Good
Reason" as defined in the Ardizzone Agreement, the Company is required to pay
Mr. Ardizzone a lump sum equal to two times the annual rate of base salary being
paid to him at the time of such termination. In addition, if Mr. Ardizzone's
employment is terminated because of his resignation for "Good Reason," Mr.
Ardizzone's death, his "Total and Permanent Disability" as defined in the
Ardizzone Agreement, or the Company's giving Mr. Ardizzone the 60 day (before
December 31, 1997) or the 14 day (after December 31, 1997) notice of
termination, he (or his estate) is entitled to a pro rata share of the MBO Plan
bonus calculated on the assumption that the results of operations or financial
condition of the Company as of the termination date shall continue on the same
basis through the end of such fiscal year. If Mr. Ardizzone's employment had
been terminated without "Cause" or if Mr. Ardizzone resigned for "Good Reason,"
as of March 31, 1996, payments under the Ardizzone Agreement would have been
$700,000 and $743,750, respectively.
Mr. Ardizzone is entitled to a $200,000 payment upon termination of his
employment on account of his "Total and Permanent Disability." Mr. Ardizzone is
entitled to participate in the Company's Retiree Medical Plan upon termination
for any reason.
Mr. Ardizzone is entitled to terminate his employment upon a "Change in
Control" of the Company as defined in the Ardizzone Agreement. The definition of
"Change in Control" includes: (i) the acquisition by any person of 25% or more
of the Company's Common Stock, which acquisition is not supported by Mr.
Ardizzone and the Chairman; or (ii) a material change in the composition or
character of the Board of Directors, including (i) the replacement of a majority
of the incumbent Directors with Directors not supported by Mr. Ardizzone and the
Chairman and (ii) the election at any meeting of the stockholders of a majority
of Directors standing for election who have not been supported by Mr. Ardizzone
and the Chairman. In the event of such termination, Mr. Ardizzone would be
entitled to the same benefits that he would receive in the event of his
resignation for "Good Reason."
EXECUTIVE SEVERANCE BENEFIT AGREEMENTS. The Company is party to an
agreement with Mr. Ciepcielinski (the "CIEPCIELINSKI AGREEMENT"), dated February
1, 1995 which entitles Mr. Ciepcielinski to certain benefits if a "Change in
Control" occurs and if Mr. Ciepcielinski's employment is terminated within three
years after the "Change in Control" for any reason other than for Mr.
Ciepcielinski's (i) death; (ii) disability; (iii) retirement; (iv) termination
for "Cause" as defined in the Ciepcielinski Agreement; or (v) voluntary
termination other than for "Good Reason" as defined in the Ciepcielinski
Agreement.
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The definition of "Change in Control" is similar to that under the
Ardizzone Agreement above. In the event of such termination, the Company shall
pay Mr. Ciepcielinski a lump sum equal to (i) 140% of the greater of the base
salary in effect on such termination date or in effect on the date immediately
preceding the "Change in Control" date and (ii) a pro rata share of any bonus in
which Mr. Ciepcielinski participates for the fiscal year in which such
termination occurs.
Executive Severance Benefit Agreements, dated February 1, 1995 between the
Company and individually with Russ K. Allen, Kenneth C. Thompson and Gary B.
Smith are identical, in all material respects, to the Ciepcielinski Agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Skidmore, a Director of the Company and a member of the Plan
Administration Committee of the Board of Directors of the Company is the
Chairman, President and Chief Executive Officer of GEL. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS".
REPORT OF THE COMPENSATION AND PLAN ADMINISTRATION COMMITTEES ON EXECUTIVE
COMPENSATION
The Company's Board of Directors approves all compensation decisions with
regard to executive officers, including the Chief Executive Officer, based on
recommendations from the Compensation Committee and the Plan Administration
Committee. The Compensation Committee is responsible for the establishment of
all compensation and benefit programs, excluding the 1987 Plan and the Long-Term
Incentive Plan, as well as the overall monitoring of those programs. The Plan
Administration Committee is responsible for administering the 1987 Plan and the
Long-Term Incentive Plan. The Company's compensation philosophy and executive
compensation programs are discussed in this report.
EXECUTIVE COMPENSATION PHILOSOPHY. In general, executive officers who are
in a position to make a substantial contribution to the success and growth of
the Company should have interests similar to those of the stockholders.
Executive officers should be motivated by and benefit from increased stockholder
value. Therefore, the Company believes that executive officers should hold a
meaningful equity position in the Company through the purchase of Common Stock
and/or the award of options to purchase Common Stock.
The Company also believes that a significant percentage of an executive
officer's cash compensation, consisting of salary and bonus, should be based on
performance ranked in the following order: corporate, function and individual
performance. Again, the Company's objective is to align the financial interests
of the executive officers with those of the Company's stockholders.
The Company's Board of Directors believes that the executive compensation
program must be competitive with those of other companies of comparable size and
complexity in order to attract, retain and motivate talented individuals.
EXECUTIVE COMPENSATION PROGRAM. The Company's compensation program consists
of base salary, annual incentive bonus (paid in cash) and long-term incentives,
generally in the form of Common Stock and options to purchase Common Stock.
BASE SALARY. The Compensation Committee generally reviews and
determines the relative levels of base salary for executive officers on an
annual basis. In determining the levels of base salary for an executive
officer, the Compensation Committee considers relative levels of
responsibility, individual and Company performance and cost of living
increases. The Compensation Committee made no change to the level of base
salary for Mr. Bailey during the two years ended December 31, 1994.
Effective February 1, 1995, Mr. Bailey's base salary was reduced to
$150,000. Additionally, the Compensation Committee made no change to the
level of base salary for Mr. Cramer during the three years ended December
31, 1995.
ANNUAL INCENTIVE COMPENSATION. During 1995, executive officers, except
for Messrs. Cramer, Bailey and Hurley, participated in the MBO Plan, the
Company's annual incentive cash bonus program. The goal of the MBO Plan is
to motivate executive officers to improve the Company's income from
continuing operations, plus amortization expense (the "EARNINGS"), over
budgeted targets. The MBO Plan provides for the payment of quarterly cash
awards to the executive officers based 70% on Earnings and 30% on the
achievement of individual objectives as established each year when the
Company budget is set. An executive's maximum bonus is also established
when the Company budget is set. If both the top Earnings objective is
reached and all the individual objectives are achieved, the maximum
potential bonuses range from 40% to 50% of each executive officer's base
annual salary. In 1995, the Board of Directors amended the 1995 MBO Plan to
permit participants an opportunity to earn a larger bonus of up to 100% for
1995 if the Company exceeded its Earnings target by 100%. MBO Plan bonuses
are payable only from the MBO Plan pool which
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consists of 22% of the amount by which actual Earnings exceed the Earnings
target established for the applicable year. Should the MBO Plan pool be
insufficient to pay the maximum bonuses allowed, all bonus payments will be
made on a pro rata basis from the funds available in the pool.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Ardizzone has served as Chief Executive Officer since May 1995 and
Acting Chief Executive Officer from December 1994 until May 1995. In
accordance with the Ardizzone Agreement, Mr. Ardizzone participated in the
MBO Plan in 1995 and received the maximum bonus of $229,430 based on
exceptional operating earnings of the Company in 1995.
LONG-TERM INCENTIVES. On March 31, 1991, the Company established the
Long-Term Incentive Plan to provide for various types of equity-related
awards to (i) attract and retain key executive and managerial employees,
directors and other key persons providing services to the Company, (ii)
motivate participants by means of growth related incentives, (iii) provide
incentive compensation opportunities that are comparable with those of
other similar corporations and (iv) further the identity of interests of
participants with those of the stockholders of the Company.
Under the Long-Term Incentive Plan, the Plan Administration Committee
has the discretion to determine who will be given awards in any year, the
types of awards to be made (such as stock options, SARs, restricted stock
or other awards) and the number of shares of Common Stock to be covered by
a particular award. In determining whether to make an award to a particular
executive officer and the size of such award, the Plan Administration
Committee considers the executive officer's level of responsibility within
the Company, prior awards made to the executive officer, individual and
Company performance and the amount of the executive officer's other
compensation components. For information related to options granted to the
named Executive Officers in 1995, see "Options Granted in 1995" Table.
The Revenue Reconciliation Act of 1993 added Section 162(m) to the Internal
Revenue Code of 1986 (the "Code"). Code Section 162(m) provides that
compensation paid to a company's chief executive officer and the four other
highest paid executive officers employed by the company at year-end will not be
deductible by the company for federal income tax purposes to the extent such
compensation exceeds $1.0 million. Code Section 162(m) excepts from this
limitation certain "performance-based compensation."
Although base salary and bonuses paid to the named Executive Officers have
traditionally been well under $1.0 million, compensation from the exercise of
stock options can cause a named Executive Officer to have compensation in excess
of $1.0 million. However, all options granted to the named Executive Officers
prior to October 1993 are exempt from Code Section 162(m) under a "grandfather"
provision. In May 1994, the Company's stockholders approved an amendment to the
terms of the Long-Term Incentive Plan so that, among other things, future awards
under the Long-Term Incentive Plan may qualify as "performance-based
compensation."
This report is submitted by the Compensation Committee and the Plan
Administration Committee which consists of the following members:
<TABLE>
<S> <C>
COMPENSATION COMMITTEE PLAN ADMINISTRATION COMMITTEE
Barry W. Gray, Chairman Edward J. Rosenthal, Chairman
Edward J. Rosenthal Thomas E. Skidmore
</TABLE>
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on $100 invested
on December 31, 1990 in each of the Company's Common Stock, the Standard &
Poor's 500 Stock Index and the Standard & Poor's Communication Equipment
Manufacturers Index at the end of each fiscal year through 1995. The returns are
calculated assuming the reinvestment of dividends. The Company has not paid any
cash dividends during the period covered by the graph below. The Company entered
the communication equipment manufacturing business in November 1992. Before
November 1992, the Company was variously engaged in the oil and gas pipeline
construction business and the real estate business. The stock price performance
shown on the graph below is not necessarily indicative of future stock price
performance.
(Performance Graph appears here--plot points below)
INDEXED/CUMULATIVE RETURNS
<TABLE>
<CAPTION>
COMPANY/
INDEX NAME 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
GEMS $100 $100 $177 $1,004 $1,333 $3,232
S&P 500 100 130 140 155 157 215
NASDAQ-100 100 165 180 199 202 287
S&P CEMI 100 155 167 161 183 274
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Skidmore, a Director of the Company, is Chairman, President, and Chief
Executive Officer of GEL. GEL continues to have certain rights and obligations
with respect to the Company under the terms of the agreements entered into
between the Company and GEL (the "GEL Agreements") in connection with the
acquisition of the GEMS Business. The Company agreed to use its best efforts,
subject to the fiduciary obligations of its directors, to nominate and cause
Thomas E. Skidmore or another designee of GEL reasonably acceptable to the
Company, to be elected to the Board of Directors of the Company. GEL's right to
such Board representation will terminate at such time as GEL owns less than
1,012,500 shares of the Company's Common Stock. Under the indemnification
provisions of the GEL Agreements, GEL paid the Company $1.3 million in 1995. The
Company and GEL have submitted to binding arbitration the Company's remaining
indemnification claims against GEL under the GEL Agreements.
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COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors and officers of
the Company and persons who beneficially own more than 10% of the Common Stock
file with the SEC initial reports of beneficial ownership and reports of changes
in beneficial ownership of the Common Stock of the Company. Directors, officers
and greater than 10% beneficial owners are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports, and amendments thereto, furnished to the Company and written
representations that no other reports were required, during 1995 all reports
required by Section 16(a) to be filed by its directors, officers and greater
than 10% beneficial owners were filed on a timely basis.
PROPOSAL TO ESTABLISH THE COMPANY'S 1996 INCENTIVE STOCK PLAN
The Board of Directors has adopted, subject to stockholder approval, the
Glenayre 1996 Incentive Stock Plan (the "Plan"). The Plan reserves shares of the
Company's Common Stock for issuance to certain key employees and other key
persons providing services to the Company or a subsidiary and non-officer
directors of the Company. The Plan authorizes the issuance of such shares to key
employees and other key persons in the form of stock options, stock appreciation
rights ("SARs"), restricted stock and performance shares. The Plan authorizes
the issuance of such shares to non-officer directors only in the form of
nonqualified stock options.
BACKGROUND AND PURPOSE. As described in the Compensation Committee Report,
one of the fundamental components of compensation for the Company's key
employees, key persons and non-officer directors is long-term incentive
compensation. The Company has for a number of years provided long-term incentive
compensation to its key employees, key persons and non-officer directors
pursuant to the Glenayre Technologies, Inc. Long Term Incentive Plan (the "Prior
Plan"). The Prior Plan provides for awards of equity-based long term incentive
compensation, including stock options, SARs, restricted stock and other awards.
Section 162(m) of the Internal Revenue Code ("Section 162(m)") limits the
deductibility to the Company of certain compensation paid to certain key
employees in excess of one million dollars. Section 162(m) excludes from this
limit compensation that qualifies as "performance-based compensation." In order
to provide both short and long term equity-based incentive awards that meet the
requirements of "performance-based compensation" under Section 162(m), the Board
recommends the adoption of the Plan to succeed the Prior Plan, which would
provide equity-based incentive compensation.
The Plan would, like the Prior Plan, have a great deal of flexibility in
the types of awards that could be made and the terms and conditions, including
performance-related conditions, applicable to those awards. Approval of the Plan
would better position the Company to take advantage of the "performance-based
compensation" exception to the deduction limits of Section 162(m) and would
enhance the Company's ability to recruit and retain key management employees and
to put greater emphasis on variable, performance-related compensation. The
following is a summary of the material terms of the Plan as proposed.
NUMBER OF SHARES. Initially, 2,200,000 shares of Common Stock
(approximately 3.6% of the current outstanding Common Stock) will be available
for awards under the Plan. All shares available for awards in any year that are
not used, as well as shares allocated to awards under the Plan that are canceled
or forfeited, will be available in subsequent years. If the Plan is approved, no
further awards will be made under the Prior Plan.
ADMINISTRATION. The Plan will be administered by the Plan Administration
Committee of the Board of Directors (the "Committee"). It is intended that the
Committee will at all times be composed of "disinterested persons" within the
meaning of Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange
Act of 1934 and that all of its members acting with respect to matters governed
by Section 162(m) will be "outside directors"within the meaning of Section
162(m), subject to applicable transition rules. Under the Plan, the Committee
will (i) select the key employees and other key persons to receive awards from
time to time, (ii) make awards in such form and amounts as it determines, (iii)
impose such limitations, restrictions and conditions upon awards as it deems
appropriate, (iv) interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) correct any
defect or omission or reconcile any inconsistency in the Plan or any award
granted thereunder and (vi) make all other determinations and take all other
actions necessary or advisable for the implementation and administration of the
Plan. The Committee will also have the authority to accelerate the vesting
and/or waive any restrictions, or otherwise amend the terms of any award within
its discretion, of any outstanding awards. No awards of "incentive stock
options"will be made under the Plan after May 21, 2006. In no event may an
individual receive awards under the Plan during any calendar year covering in
excess of 250,000 shares.
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<PAGE>
ELIGIBILITY. Only key employees and other key persons providing services to
the Company or a subsidiary and non-officer directors of the Company may
participate in the Plan. Key employees are those employees who occupy managerial
or other important positions and who have made or are expected to make important
contributions to the business of the Company or a subsidiary, as determined by
the Committee. Initially, approximately 200 employees are expected to be
eligible to participate. Other key persons are those persons, as determined by
the Committee, who provide important services to the Company. As mentioned
above, the Committee in its discretion will select which key employees and other
key persons will in fact receive awards from time to time. Non-officer directors
are those directors who are not regular employees of the Company or any
subsidiary on the date of grant of an award. There currently are four
non-officer directors, including Messrs. Gray, Israel, Rosenthal and Skidmore,
that would be eligible to participate under the Plan.
AWARDS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. The Plan provides
for the grant of options to purchase shares of Common Stock at option prices
determined by the Committee as of the date of grant. For stock option awards
intended to qualify as "performance-based compensation" under Section 162(m) or
for incentive stock options (described below), the option price will not be less
than the fair market value of shares of Common Stock at the close of business on
the date of grant. The fair market value of the Common Stock on April 2, 1996
was $36 per share.
The Plan also provides for the grant of SARs (either in tandem with stock
options or freestanding), which entitle holders upon exercise to receive either
cash or shares of Common Stock or a combination thereof, as the Committee shall
determine, with a value equal to the difference between (i) the fair market
value on the exercise date of the shares with respect to which an SAR is
exercised and (ii) the fair market value of such shares on the date of grant
(or, if different, the exercise price of the related option in the case of a
tandem SAR).
Awards to key employees and key persons of options under the Plan, which
may be either incentive stock options (which qualify for special tax treatment)
or nonqualified stock options, are determined by the Committee. The terms and
conditions of each such option and of any SAR are to be determined by the
Committee at the time of grant.
Exercise of an option (or an SAR) will result in the cancellation of any
related SAR (or option) to the extent of the number of shares in respect of
which such option or SAR has been exercised. Options and SARs granted under the
Plan will expire not more than 10 years from the date of grant, and the option
agreements entered into with the optionees will specify the extent to which
options and SARs may be exercised during their respective terms, including in
the event of the optionee's death, disability or termination of employment.
Payment for shares issuable pursuant to the exercise of an option may be
made either in cash or by tendering shares of Common Stock of the Company with a
fair market value at the date of the exercise equal to the portion of the
exercise price which is not paid in cash.
AWARDS OF RESTRICTED STOCK AND PERFORMANCE SHARES. The Plan provides for
the issuance of shares of restricted stock on such terms and conditions as are
determined from time to time by the Committee. The restricted stock award
agreement with the participant will set forth the terms of the award, including
the applicable restrictions. Such restrictions may include the continued service
of the participant with the Company, the attainment of specified performance
goals or any other conditions deemed appropriate by the Committee.
The stock certificates evidencing the restricted stock will bear an
appropriate legend and will be held in the custody of the Company until the
applicable restrictions have been satisfied. The participant cannot sell,
transfer, pledge, assign or hypothecate shares of restricted stock until the
applicable restrictions have been satisfied. Once the restrictions are
satisfied, the shares will be delivered to the participant. During the period of
restriction, the participant may exercise full voting rights with respect to the
restricted stock. The participant will also be credited with dividends, if any,
with respect to the restricted stock. Such dividends, if any, may be payable
currently or subject to additional restrictions as determined by the Committee
and set forth in the award agreement.
In addition to restricted stock, the Committee may award performance shares
to selected key employees and key persons. The value of a performance share will
equal the fair market value of a share of Common Stock. The Plan provides that
the number of performance shares granted and/or the vesting of granted
performance shares can be contingent on the attainment of certain performance
goals or other conditions over a period of time (called the "performance
period"), all as determined by the Committee and evidenced by an award
agreement. During the performance period, the Committee will determine the
number (if any) of performance shares that have been earned. Earned performance
shares may be paid in cash, shares of Common Stock or a combination thereof
having an aggregate fair market value equal to the value of the earned
performance shares as of the payment date. Common Stock used to pay earned
performance shares may have additional restrictions as determined by the
Committee. In addition, the Committee may cancel any earned performance shares
and
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<PAGE>
replace them with stock options determined by the Committee to be of equivalent
value based on a conversion formula specified in the participant's performance
share award agreement. Earned but unpaid performance shares may have dividend
equivalents rights as determined by the Committee and evidenced in the award
agreement but shall not have voting rights.
AWARD OF STOCK OPTIONS TO NON-OFFICER DIRECTORS. The Plan provides for the
automatic grant to each non-officer director of a nonqualified option to
purchase 18,000 shares of Common Stock on the date of the third anniversary of
either (i) the date the non-officer director was granted a stock option under
the Prior Plan or (ii) the date the non-officer director began his or her
service on the Board. Each non-officer director shall be granted an additional
nonqualified stock option to purchase 18,000 shares of Common Stock on each
third anniversary thereafter if he or she is then a non-officer director. The
option price shall be equal to the fair market value of the Common Stock on the
date of the grant. An option granted to a non-officer director is exercisable
immediately following the date of grant and expires ten years thereafter. Upon
the exercise of an option, or any portion thereof, the exercise price must be
paid either in cash or by tendering shares of Common Stock with a fair market
value at the date of the exercise equal to the portion of the exercise price
which is not paid in cash. Options granted to non-officer directors may not be
transferred, assigned or otherwise alienated other than by will or the laws of
descent and distribution.
CODE SECTION 162(M). Because stock options and SARs granted under the Plan
that are intended to qualify as "performance-based compensation" under Section
162(m) must have an exercise price equal at least to fair market value at the
date of grant, compensation from the exercise of such stock options and SARs
should be treated as "performance-based compensation" for Section 162(m)
purposes.
In addition, the Plan authorizes the Committee to make awards of restricted
stock or performance shares that are conditioned on the satisfaction of certain
performance criteria. For such awards intended to result in "performance-based
compensation," the Committee will establish prior to or within 90 days after the
start of the applicable performance period the applicable performance
conditions. The Committee may select from the following performance measures for
such purpose: (i) net income of the Company, (ii) earnings per common share of
the Company, (iii) Company net sales or (iv) total stockholder return of the
Company. The performance conditions will be stated in the form of an objective,
nondiscretionary formula and the Committee will certify in writing the
attainment of such performance conditions prior to any payout with respect to
such awards.
WITHHOLDING FOR PAYMENT OF TAXES. The Plan provides for the withholding and
payment by a participant of any payroll or withholding taxes required by
applicable law. The Plan permits a participant to satisfy such requirement, with
the approval of the Committee and subject to the terms of the Plan, by having
the Company withhold from the participant a number of shares of Common Stock
otherwise issuable under the award having a fair market value equal to the
amount of the applicable payroll and withholding taxes.
CHANGES IN CAPITALIZATION AND SIMILAR CHANGES. In the event of any change
in the outstanding shares of Common Stock of the Company by reason of any stock
dividend, split, spin-off, recapitalization, merger, consolidation, combination,
exchange of shares or otherwise, the aggregate number of shares of Common Stock
with respect to which awards may be made under the Plan, the terms, types of
shares and number of shares of any outstanding awards under the Plan and the
individual calendar year award limit set forth above may be equitably adjusted
by the Committee in its discretion.
CHANGES IN CONTROL. The Plan provides that in the event of a change in
control of the Company, all options and SARs will be fully exercisable as of the
date of the change in control and shall remain exercisable through their full
term. Outstanding awards of restricted stock and performance shares will become
immediately vested, and any applicable performance conditions shall be deemed
satisfied (at the target performance condition, if applicable) as of the date of
the change in control.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors will have the
power to amend, modify or terminate the Plan on a prospective basis. Stockholder
approval will be required for any change to the material terms of the Plan to
the extent required by Section 162(m) or Section 16(b) under the Securities
Exchange Act of 1934.
FEDERAL INCOME TAX TREATMENT.
INCENTIVE STOCK OPTIONS. Incentive stock options ("ISOs") granted under the
Plan will be subject to the applicable provisions of the Internal Revenue Code,
including Code Section 422. If shares of Common Stock of the Company are issued
to an optionee upon the exercise an ISO, and if no "disqualifying disposition"
of such shares is made by such optionee within one year after the exercise of
the ISO or within two years after the date the ISO was granted, then (i) no
income will be recognized by the optionee at the time of the grant of the ISO,
(ii) no income, for regular income tax purposes, will be realized by
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<PAGE>
the optionee at the date of exercise, (iii) upon sale of the shares acquired
upon exercise of the ISO, any amount realized in excess of the option price will
be taxed to the optionee, for regular income tax purposes, as a long-term
capital gain and any loss sustained will be a long-term capital loss and (iv) no
deduction will be allowed to the Company for federal income tax purposes. If a
"disqualifying disposition" of such shares is made, the optionee will realize
taxable ordinary income in an amount equal to the excess of the fair market
value of the shares purchased at the time of exercise over the option price (the
bargain purchase element) and the Company will be entitled to a federal income
tax deduction equal to such amount. The amount of any gain in excess of the
bargain purchase element realized upon a "disqualifying disposition"will be
taxable as capital gain to the holder (for which the Company will not be
entitled a federal income tax deduction). Upon exercise of an ISO, the optionee
may be subject to alternative minimum tax.
NONQUALIFIED STOCK OPTIONS. With respect to nonqualified stock options
("NQSOs") granted to optionees under the Plan, (i) no income is realized by the
optionee at the time the NQSO is granted, (ii) at exercise, ordinary income is
realized by the optionee in an amount equal to the difference between the option
price and the fair market value of the shares on the date of exercise, and the
Company receives a tax deduction for the same amount and (iii) on disposition,
appreciation or depreciation after the date of exercise is treated as either
short-term or long-term capital gain or loss depending on whether the shares
have been held for more than one year.
RESTRICTED STOCK. Upon becoming entitled to receive shares at the end of
the applicable restriction period without a forfeiture, the recipient has
ordinary income in an amount equal to the fair market value of the shares at
that time. However, a recipient who makes an election under Code Section 83(b)
within 30 days of the date of the grant will have ordinary taxable income on the
date of the grant equal to the fair market value of the shares of restricted
stock as if the shares were unrestricted and could be sold immediately. If the
shares subject to such election are forfeited, the recipient will not be
entitled to any deduction, refund or loss for tax purposes. Upon sale of the
shares after the forfeiture period has expired, the holding period to determine
whether the recipient has long-term or short-term capital gain or loss begins
when the restriction period expires, and the tax basis will be equal to the fair
market value of the shares when the restriction period expires. However, if the
recipient timely elects to be taxed as of the date of grant, the holding period
commences on the date of the grant and the tax basis will be equal to the fair
market value of the shares on the date of the grant as if the shares were then
unrestricted and could be sold immediately. The Company generally will be
entitled to a deduction equal to the amount that is taxable as ordinary
compensation income to the recipient.
PERFORMANCE SHARES. A participant who is awarded performance shares will
not recognize income and the Company will not be allowed a deduction at the time
the award is made. When a participant receives payment for performance shares in
cash or shares of Common Stock of the Company, the amount of the cash and the
fair market value of the shares received will be ordinary income to the
participant and will be allowed as a deduction for federal income tax purposes
to the Company. However, if there is a substantial risk that any shares used to
pay out earned performance shares will be forfeited (for example, because the
Committee conditions such shares on the performance of future services), the
taxable event is deferred until the risk of forfeiture lapses. In this case, the
participant can elect to make a Code Section 83(b) election as previously
described. The Company generally will be entitled to a deduction at the time the
income is recognized by the participant.
The Board recommends a vote FOR approval of the Plan. The affirmative vote
of a majority of the shares present in person or represented by proxy and
entitled to vote at the Annual Meeting is required for approval of the Plan.
Abstentions will have the same effect as a vote against the proposal. Broker
non-votes will not be counted for this purpose.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young LLP as independent
auditors to audit the financial statements of the Company and its subsidiaries
for the year ending December 31, 1996. This selection is being presented to the
stockholders for their ratification or rejection at this Annual Meeting.
Deloitte & Touche LLP served as the Company's independent auditors to audit
the financial statements of the Company and its subsidiaries for each of the two
fiscal years ended December 31, 1994 and December 31, 1993 and for prior fiscal
years. On April 7, 1995, the Company replaced Deloitte & Touche LLP with Ernst &
Young LLP as its independent auditors to audit the financial statements of the
Company and its subsidiaries for the fiscal year ended December 31, 1995. This
change in independent auditors, effective April 7, 1995, was recommended by the
Audit Committee of the Company's Board of Directors, approved by the Board of
Directors on April 4, 1995 and ratified by the stockholders on May 24, 1995.
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Deloitte & Touche LLP's reports on the financial statements of the Company
and its subsidiaries for each of the two fiscal years ended December 31, 1994
and December 31, 1993 did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principles.
During the Company's fiscal years ended December 31, 1994 and December 31,
1993 (i) there were no disagreements with Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which disagreement(s), if not resolved to the satisfaction of
Deloitte & Touche LLP, would have caused it to make reference to the subject
matter of the disagreement(s) in its report, and (ii) no "reportable events" (as
defined in Item 304(a)(1)(v) of Regulation S-K) occurred.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting with an opportunity to make a statement if they desire to do so,
and the representatives are expected to be available to respond to appropriate
questions.
The Board of Directors recommends a vote FOR the ratification of the
selection of Ernst & Young LLP as independent auditors to audit the financial
statements of the Company and its subsidiaries for the year ending December 31,
1996, and proxies solicited by the Board of Directors will be so voted unless
stockholders specify a different choice.
If the stockholders do not ratify the selection of Ernst & Young LLP, the
selection of independent auditors will be reconsidered by the Board of
Directors.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the Annual Meeting of
Stockholders to be held in 1997 must be received in writing by the Secretary of
the Company no later than December 13, 1996 to be considered for inclusion in
the Company's proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
1996 Annual Meeting other than those set forth in the Notice. However, if any
other matters do come before the 1996 Annual Meeting, it is intended that the
holders of the proxies will vote thereon in their discretion.
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Appendix A
<TABLE>
<S> <C>
PROXY GLENAYRE TECHNOLOGIES, INC.
5935 Carnegie Boulevard
Charlotte, North Carolina 28209
</TABLE>
PROXY SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS OF GLENAYRE TECHNOLOGIES, INC.
The undersigned hereby appoints Ramon D. Ardizzone, Gerald B. Cramer and Stanley
Ciepcielinski, and each of them, as Proxies, each with full power of
substitution, and hereby authorizes them to represent and to vote, as designated
below, all the common shares of Glenayre Technologies, Inc. held by the
undersigned on March 29, 1996, at the 1996 Annual Meeting of Stockholders to be
held in The Equity Situation Room, Donaldson, Lufkin & Jenrette Securities
Corp., 277 Park Avenue, 12th Floor, New York, New York 10172, on May 22, 1996 at
2:00 p.m., EDT, and at any adjournment(s) thereof.
1. ELECTION OF DIRECTORS.
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR ALL NOMINEES LISTED BELOW [ ] WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) (TO VOTE FOR ALL NOMINEES LISTED BELOW)
</TABLE>
TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE THROUGH THE
NOMINEE'S NAME:
Ramon D. Ardizzone Barry W. Gray Edward J. Rosenthal
2. PROPOSAL TO APPROVE THE ESTABLISHMENT OF THE COMPANY'S 1996 INCENTIVE STOCK
PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
OF THE COMPANY.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies each are authorized to vote upon such other
business as may properly come before the 1996 Annual Meeting and at any
adjournment(s) thereof.
<PAGE>
This proxy when properly executed will be
voted in the manner directed herein by the
undersigned stockholder. IF NO DIRECTION IS
MADE WITH RESPECT TO ANY PROPOSAL, THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF
ALL NOMINEES AND "FOR" EACH PROPOSAL AS TO
WHICH NO DIRECTION IS RECEIVED.
Receipt of the Notice of the 1996 Annual
Meeting and accompanying Proxy Statement is
hereby acknowledged.
Dated: , 1996
(Signature of Stockholder)
(Signature of Joint Stockholder,
if any)
Please check box if you intend to
be present at the meeting: [ ]
IMPORTANT: Please date this proxy
and sign exactly as your name
appears hereon. If stock is held
jointly, both holders should sign.
Executors, administrators,
trustees, guardians and others
signing in a representative
capacity should give full title.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
<PAGE>
Appendix B
Glenayre 1996 Incentive Stock Plan
<PAGE>
Contents
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
Article 1. Establishment, Purpose and Duration 1
Article 2. Definitions 1
Article 3. Administration 5
Article 4. Shares Subject to the Plan 6
Article 5. Eligibility and Participation 6
Article 6. Stock Options 6
Article 7. Stock Appreciation Rights 8
Article 8. Restricted Stock 10
Article 9. Performance Shares 12
Article 10. Performance Measures 13
Article 11. Beneficiary Designation 13
Article 12. Deferrals 13
Article 13. Rights of Key Persons 13
Article 14. Change in Control 14
Article 15. Awards to Non-Officer Directors 16
Article 16. Amendment, Modification and Termination 17
Article 17. Withholding 18
Article 18. Indemnification 18
Article 19. Successors 18
Article 20. Legal Construction 19
</TABLE>
<PAGE>
Glenayre 1996 Incentive Stock Plan
Article 1. Establishment, Purpose and Duration
1.1 Establishment of the Plan. Glenayre Technologies, Inc. hereby
establishes an incentive compensation plan to be known as the "Glenayre 1996
Incentive Stock Plan" as set forth in this document. The Plan permits the grant
of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation
Rights, Restricted Stock and Performance Shares.
Subject to approval by the Company's stockholders, the Plan shall become
effective as of May 22, 1996 (the "Effective Date") and shall remain in effect
as provided in Section 1.3 hereof. The Plan shall not become effective unless
stockholder approval is obtained.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of
Participants to those of the Company's stockholders, and by providing
Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract and retain the services of Participants upon whose
judgment, interest and special effort the successful conduct of its operation
largely is dependent.
1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as
described in Section 1.1 hereof, and shall remain in effect, subject to the
right of the Board of Directors to amend or terminate the Plan at any time
pursuant to Article 16 hereof, until all Shares subject to it shall have been
purchased or acquired according to the Plan's provisions. However, in no event
may an Award of an ISO be granted under the Plan after May 21, 2006.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:
2.1 "Award" means, individually or collectively, a grant under the Plan of
Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights,
Restricted Stock or Performance Shares.
2.2 "Award Agreement" means an agreement entered into by the Company and
each Participant setting forth the terms and provisions applicable to Awards
granted under the Plan.
2.3 "Board" or "Board of Directors" means the Board of Directors of the
Company.
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2.4 "Change in Control" of the Company shall have occurred when any
Acquiring Person (other than the Company, any employee benefit plan of the
Company or any person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan), alone or together with
its Affiliates and Associates, shall become the beneficial owner of 25% or more
of the shares of Common Stock of the Company then outstanding (except pursuant
to an offer for all outstanding shares of the Company's Common Stock at a price
and upon such terms and provisions as a majority of the Continuing Directors
determine to be in the best interests of the Company and its stockholders other
than the Acquiring Person or any Affiliate or Associate thereof on whose behalf
the offer is being made), and the Continuing Directors no longer constitute a
majority of the Board. For purposes of this definition, the following terms
shall have the following meanings:
(a) "Acquiring Person" means any individual, firm, corporation or other
entity who or which, together with all Affiliates and Associates,
shall be the beneficial owner of a substantial block of the Company's
Common Stock.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 as promulgated under the Exchange
Act.
(c) "Continuing Director" means any individual who is a member of the
Board, while such individual is a member of the Board, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person,
or a representative or nominee of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board prior to the
occurrence of the Change in Control; or any successor of a Continuing
Director, while such successor is a member of the Board, and who is
not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative or nominee of an Acquiring Person or of
any such Affiliate or Associate, and is recommended or elected to
succeed the Continuing Director by a majority of the Continuing
Directors.
2.5 "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to the Code shall include the valid and binding governmental
regulations, court decisions and other regulatory and judicial authority issued
or rendered thereunder.
2.6 "Committee" means the Plan Administration Committee of the Board, as
specified in Article 3 herein, appointed by the Board to administer the Plan.
2.7 "Common Stock" means the $0.02 par value common stock of the Company.
2.8 "Company" means Glenayre Technologies, Inc., a Delaware corporation,
and any successor as provided in Article 19 herein.
2.9 "Director" means any individual who is a member of the Board of
Directors.
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2.10 "Disability," with respect to a Participant, means "disability" as
defined from time to time under any long-term disability plan of the Company or
Subsidiary with which the Participant is employed.
2.11 "Earnings Per Share" means "earnings per common share" of the Company
determined in accordance with generally accepted accounting principles that
would be reported in the Company's Annual Report to Stockholders.
2.12 "Effective Date" shall have the meaning ascribed to such term in
Section 1.1 hereof.
2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.14 "Fair Market Value," with respect to a share of the Company's Common
Stock at a particular time, shall be that value as determined by the Committee
which shall be (i) if such Common Stock is listed on a national securities
exchange (which includes the NASDAQ Stock Market), on any given date, (A) the
closing price of a share of Common Stock, as reported on the consolidated
transaction reporting system for such exchange for that date, or if shares of
Common Stock were not traded on such date, on the next preceding day on which
shares of Common Stock were traded, or (B) if the Common Stock is not reported
on the consolidated transaction reporting system for such exchange, the last
price at which the Common Stock shall have been sold regular way on a national
securities exchange on said date, or, if no sales occur on said date, then on
the next preceding date on which there were such sales of Common Stock; or (ii)
if the Common Stock shall not be listed on a national securities exchange, the
mean between the average high bid and low asked prices last reported by the
National Association of Securities Dealers, Inc. for the over-the-counter market
on said date or, if no bid and asked prices are reported on said date, then on
the next preceding date on which there were such quotations; or (iii) if at any
time quotations for the Common Stock shall not be reported by the National
Association of Securities Dealers, Inc. for the over-the-counter market and the
Common Stock shall not be listed on any national securities exchange, the fair
market value determined by the Committee on the basis of available prices for
such Common Stock or in such other manner as the Committee may deem reasonable.
2.15 "Freestanding SAR" means an SAR that is granted independently of any
Option.
2.16 "Incentive Stock Option" or "ISO" means an option to purchase Shares,
granted under Article 6 herein, and which is designated an Incentive Stock
Option intended to meet the requirements of Section 422 of the Code.
2.17 "Insider" shall mean an individual who is, on the relevant date, an
officer, director or 10% beneficial owner of any class of the Company's equity
securities that is registered pursuant to Section 12 of the Exchange Act, all as
defined under Section 16 of the Exchange Act.
3
<PAGE>
2.18 "Key Person" means an employee or officer of the Company or a
Subsidiary, in a managerial or other position, who can make important
contributions to the Company or a Subsidiary or a key person providing important
services to the Company or a Subsidiary, all as determined by the Committee in
its discretion.
2.19 "Named Executive Officer" means, for a calendar year, a Participant
who is one of the group of "covered employees" for such calendar year within the
meaning of Code Section 162(m) or any successor statute.
2.20 "Net Income" means "net income" of the Company determined in
accordance with generally accepted accounting principles that would be reported
in the Company's Annual Report to Stockholders.
2.21 "Net Sales" means the "net sales" of the Company determined in
accordance with generally accepted accounting principles that would be reported
in the Company's Annual Report to Stockholders.
2.22 "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares granted to Key Persons under Article 6 or to non-officer Directors under
Article 15 which is not intended to meet the requirements of Code Section 422.
2.23 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.24 "Option Price" means the price at which a Share may be purchased by a
Participant upon the exercise of an Option.
2.25 "Participant" means a person who has outstanding an Award granted
under the Plan.
2.26 "Performance-Based Exception" means the performance-based exception
set forth in Code Section 162(m)(4)(C) from the deductibility limitations of
Code Section 162(m).
2.27 "Performance Share" means an Award granted to a Participant pursuant
to Article 9 herein.
2.28 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage of time,
the achievement of performance goals, or upon the occurrence of other events as
determined by the Committee, at its discretion), and the Shares are subject to a
substantial risk of forfeiture, as provided in Article 8 herein.
2.29 "Restricted Stock" means an Award granted to a Participant pursuant to
Article 8 herein.
2.30 "Shares" means shares of Common Stock of the Company.
4
<PAGE>
2.31 "Stock Appreciation Right" or "SAR" means an Award granted alone or in
connection with a related Option to a Participant pursuant to Article 7 herein.
2.32 "Subsidiary" means any corporation, partnership, joint venture,
affiliate or other entity in which the Company has an ownership interest, and
which the Committee designates as a participating entity in the Plan.
2.33 "Tandem SAR" means an SAR that is granted in connection with a related
Option, the exercise of which shall require forfeiture of the right to purchase
a Share under the related Option (and when a Share is purchased under the
Option, the Tandem SAR shall similarly be canceled).
2.34 "Total Stockholder Return" means the percentage change in value of an
initial investment in Shares over a specified period assuming reinvestment of
all dividends during the period.
Article 3. Administration
3.1 The Committee. The Plan shall be administered by the Plan
Administration Committee of the Board or by any other Committee appointed by the
Board consisting of not less than two (2) Directors. All of the members of the
Committee shall comply with the "disinterested administration" rules of Rule
16b-3 under the Exchange Act, if applicable. The members of the Committee shall
be appointed from time to time by, and shall serve at the discretion of, the
Board of Directors. In addition, any action taken with respect to Named
Executive Officers for purposes of meeting the Performance-Based Exception shall
be taken by the Committee only if all of the members of the Committee are
"outside directors" within the meaning of Code Section 162(m), subject to any
applicable transition rules under Code Section 162(m). If all of the members of
the Committee are not "outside directors," such action shall be taken by a
subcommittee of the Committee comprised of at least two members who are "outside
directors."
3.2 Authority of the Committee. Except as limited by law, or by the
Certificate of Incorporation or Bylaws of the Company, and subject to the
provisions herein, the Committee shall have full power to select Key Persons who
shall participate in the Plan; determine the sizes and types of Awards;
determine the terms and provisions of Awards in a manner consistent with the
Plan; construe and interpret the Plan and any agreement or instrument entered
into under the Plan; establish, amend or waive rules and regulations for the
Plan's administration; and (subject to the provisions of Article 16 herein),
amend the terms and provisions of any outstanding Award to the extent such terms
and provisions are within the discretion of the Committee as provided in the
Plan. Further, the Committee shall make all other determinations which may be
necessary or advisable for the administration of the Plan. To the extent
permitted by law, the Committee may delegate its authority hereunder.
3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders and
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its stockholders, employees, Participants and their
estates and beneficiaries.
5
<PAGE>
Article 4. Shares Subject to the Plan.
4.1 Number of Shares Available for Grants. Beginning on the Effective Date,
there is hereby reserved for grants of Awards under the Plan 2,200,000 Shares.
The number of Shares reserved for grants of Awards under this paragraph shall be
subject to adjustment as provided in Section 4.3.
In no event shall a Participant receive an Award or Awards during any one
calendar year covering in the aggregate more than 250,000 Shares. The limitation
on awards to a Participant during a calendar year under this paragraph shall be
subject to adjustment as provided in Section 4.3.
4.2 Lapsed Awards. If any Award granted under the Plan is canceled,
terminates, expires or lapses for any reason (with the exception of the
termination of a Tandem SAR upon exercise of the related Option, or the
termination of a related Option upon exercise of the corresponding Tandem SAR),
any Shares subject to such Award again shall be available for the grant of an
Award under the Plan.
4.3 Adjustments in Available Shares. In the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, including a spin-off or other
distribution of stock or property of the Company, any reorganization (whether or
not such reorganization comes within the definition of such term in Code Section
368) or any partial or complete liquidation of the Company, such adjustment
shall be made in the number and class of Shares which may be delivered under the
Plan, in the number and class of and/or price of Shares subject to outstanding
Awards granted under the Plan and in the limitation on awards to a Participant
during a calendar year, as may be determined to be appropriate and equitable by
the Committee, in its sole discretion, to prevent the dilution or enlargement of
rights under the Plan; provided, however, that the number of Shares subject to
any Award shall always be a whole number.
Article 5. Eligibility and Participation
5.1 Eligibility. Persons eligible to participate in the Plan are Key
Persons, as determined by the Committee, and any non-officer Director who
participates in the Plan pursuant to Article 15.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Key Persons those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. Non-officer Directors shall be granted Awards in accordance with the
provisions of Article 15.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Persons in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee.
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6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains and such other provisions as the
Committee shall determine. The Award Agreement also shall specify whether the
Option is intended to be an ISO within the meaning of Section 422 of the Code,
or an NQSO whose grant is intended not to fall under Code Section 422.
6.3 Option Price. The Committee shall determine the Option Price for each
grant of an Option under this Article 6, which such Option Price shall be set
forth in the applicable Award Agreement; provided, however, that the Option
Price shall be at least equal to 100% of the Fair Market Value of a Share on the
date the Option is granted with respect to the grant of either (i) an Option
granted to a Named Executive Officer that is intended to satisfy the
Performance-Based Exception or (ii) an ISO.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant; provided, however, that no
Option shall be exercisable later than the 10th anniversary date of its grant.
6.5 Exercise of Options. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve and which shall be set forth in the
applicable Award Agreement, which need not be the same for each grant or for
each Participant.
6.6 Payment. Options shall be exercised by the delivery of a written notice
of exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered to satisfy the Option Price must have been held by the Participant for
at least six months prior to their tender), or (c) by a combination of (a) and
(b).
The Committee also may allow cashless exercise as permitted under the
Federal Reserve Board's Regulation G or Regulation T, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with the Plan's purpose and applicable law.
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased under the Option(s).
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6.7 Restrictions on Share Transferability. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including without
limitation, restrictions under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such Shares are then
listed and/or traded and under any blue sky or state securities laws applicable
to such Shares.
6.8 Termination of Employment. Each Option Award Agreement shall set forth
the extent to which the Participant shall have the right to exercise the Option
following termination of the Participant's employment with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with the
Participant, need not be uniform among all Options issued pursuant to this
Article 6, may reflect distinctions based on the reasons for termination of
employment and may include provisions relating to the Participant's competition
with the Company after termination of employment. In that regard, if an Award
Agreement permits exercise of an Option following the death of the Participant,
the Award Agreement shall provide that such Option shall be exercisable to the
extent provided therein by any person that may be empowered to do so under the
Participant's will, or if the Participant shall fail to make a testamentary
disposition of the Option or shall have died intestate, by the Participant's
executor or other legal representative.
6.9 Nontransferability of Options.
(a) Incentive Stock Options. No ISO granted under this Article 6 may be
sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under the
Plan shall be exercisable during his or her lifetime only by such
Participant.
(b) Nonqualified Stock Options. Except as otherwise provided in a
Participant's Award Agreement, no NQSO granted under this Article 6
may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, except as otherwise provided in a
Participant's Award Agreement, all NQSOs granted to a Participant
under this Article 6 shall be exercisable during his or her lifetime
only by such Participant.
6.10 No Rights. A Participant granted an Option shall have no rights as a
stockholder of the Company with respect to the Shares covered by such Option
except to the extent that Shares are issued to the Participant upon the due
exercise of the Option.
Article 7. Stock Appreciation Rights
7.1 Grant of SARs. Subject to the terms and provisions of the Plan, SARs
may be granted to Key Persons in such number, and upon such terms, and at any
time and from time to time as shall be determined by the Committee. The
Committee may grant Freestanding SARs, Tandem SARs or any combination of these
forms of SARs.
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The Committee shall have complete discretion in determining the number of
Shares covered by SARs granted hereunder (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
provisions pertaining to such SARs. The number of Shares covered by a
Freestanding SAR shall be counted against the number of Shares available for
grants of Awards under Section 4.1, but the number of Shares covered by a Tandem
SAR shall not be so counted.
The grant price of a Freestanding SAR shall equal the Fair Market Value of
a Share on the date of grant of the SAR. The grant price of Tandem SARs shall
equal the Option Price of the related Option.
7.2 Exercise of Tandem SARs. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (i) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (ii) the value
of the payout with respect to the Tandem SAR may be for no more than 100% of the
difference between the Option Price of the underlying ISO and the Fair Market
Value of the Shares subject to the underlying ISO at the time the Tandem SAR is
exercised; and (iii) the Tandem SAR may be exercised only when the Fair Market
Value of the Shares subject to the ISO exceeds the Option Price of the ISO.
7.3 Exercise of Freestanding SARs. Freestanding SARs may be exercised upon
whatever terms and provisions the Committee, in its sole discretion, imposes
upon them.
7.4 SAR Agreement. Each SAR grant shall be evidenced by an Award Agreement
that shall specify the grant price, the term of the SAR and such other
provisions as the Committee shall determine.
7.5 Term of SARs. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion; provided, however, that
such term shall not exceed 10 years.
7.6 Payment of SAR Amount. Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the Fair Market Value of a Share on the date of
exercise over the grant price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value or in some combination thereof; provided,
however, that from and after the date of a Change in Control, the exercise of an
SAR may be settled only in cash.
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7.7 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Committee may impose such conditions on exercise of an SAR (including
without limitation, the right of the Committee to limit the time of exercise to
specified periods) as may be required to satisfy the requirements of Section 16
(or any successor provision) of the Exchange Act.
7.8 Termination of Employment. Each SAR Award Agreement shall set forth the
extent to which the Participant shall have the right to exercise the SAR
following termination of the Participant's employment with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with the
Participant, need not be uniform among all SARs issued pursuant to the Plan and
may reflect distinctions based on the reasons for termination of employment. In
that regard, if an Award Agreement permits exercise of an SAR following the
death of the Participant, the Award Agreement shall provide that such SAR shall
be exercisable to the extent provided therein by any person that may be
empowered to do so under the Participant's will, or if the Participant shall
fail to make a testamentary disposition of the SAR or shall have died intestate,
by the Participant's executor or other legal representative.
7.9 Nontransferability of SARs. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under this Article 7 may be sold,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
7.10 No Rights. A Participant granted an SAR shall have no rights as a
stockholder of the Company with respect to the Shares covered by such SAR except
to the extent that Shares are issued to the Participant upon the due exercise of
the SAR.
Article 8. Restricted Stock
8.1 Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, Restricted Stock may be granted to Key Persons in such number, and upon
such terms, and at any time and from time to time as shall be determined by the
Committee.
8.2 Restricted Stock Award Agreement. Each Restricted Stock grant shall be
evidenced by a Restricted Stock Award Agreement that shall specify the Period of
Restriction, the number of Shares of Restricted Stock granted and such other
provisions as the Committee shall determine.
8.3 Transferability. Except as provided in this Article 8, the Shares of
Restricted Stock granted herein may not be sold, transferred, pledged, assigned
or otherwise alienated or hypothecated until the end of the applicable Period of
Restriction established by the Committee and specified in the Restricted Stock
Award Agreement, or upon earlier satisfaction of any other conditions, as
specified by the Committee in its sole discretion and set forth in the
Restricted Stock Agreement. All rights with respect to the
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Restricted Stock granted to a Participant under the Plan shall be available
during his or her lifetime only to such Participant.
8.4 Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock,
restrictions based upon the achievement of specific performance goals
(Company-wide, divisional, and/or individual), time-based restrictions on
vesting following the attainment of the performance goals and/or restrictions
under applicable Federal or state securities laws.
The Company shall retain the certificates representing Shares of Restricted
Stock in the Company's possession until such time as all conditions and/or
restrictions applicable to such Shares have been satisfied.
Except as otherwise provided in this Article 8 or in the applicable Award
Agreement, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction.
8.5 Voting Rights. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to those Shares.
8.6 Dividends and Other Distributions. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder may be
credited with regular cash dividends paid with respect to the underlying Shares
while they are so held. The Committee may apply any restrictions to the
dividends that the Committee deems appropriate.
In the event that any dividend constitutes a "derivative security" or an
"equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend
shall be subject to a vesting period equal to the remaining vesting period of
the Shares of Restricted Stock with respect to which the dividend is paid.
8.7 Termination of Employment. Each Restricted Stock Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unvested Restricted Shares following termination of the Participant's employment
with the Company and its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Award Agreement
entered into with Participants, need not be uniform among all Shares of
Restricted Stock issued pursuant to the Plan and may reflect distinctions based
on the reasons for termination of employment; provided, however, that except in
cases of terminations resulting from a Change in Control and terminations by
reason of death or Disability, payment of an Award of Restricted Stock which is
intended to qualify for the Performance-Based Exception may not occur before
attainment of the related performance goal.
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Article 9. Performance Shares
9.1 Grant of Performance Shares. Subject to the terms and provisions of the
Plan, Performance Shares may be granted to eligible Key Persons in such amount
and upon such terms, and at any time and from time to time as shall be
determined by the Committee. The number and/or vesting of Performance Shares
granted, in the Committee's discretion, shall be contingent upon the degree of
attainment of specified performance goals or other conditions over a specified
period (the "Performance Period"). The terms and provisions of an Award of
Performance Shares shall be evidenced by an appropriate Award Agreement.
9.2 Value of Performance Shares. The value of a Performance Share at any
time shall equal the Fair Market Value of a Share at such time.
9.3 Form and Timing of Payment of Performance Shares. During the course of
a Performance Period, the Committee shall determine the number of Performance
Shares as to which the Participant has earned a right to be paid pursuant to the
terms of the applicable Award Agreement. The Committee shall pay any earned
Performance Shares as soon as practicable after they are earned in the form of
cash, Shares or a combination thereof (as determined by the Committee) having an
aggregate Fair Market Value equal to the value of the earned Performance Shares
as of the date they are earned. Any Shares used to pay out earned Performance
Shares may be granted subject to any restrictions deemed appropriate by the
Committee. In addition, the Committee, in its discretion, may cancel any earned
Performance Shares and grant Stock Options to the Participant which the
Committee determines to be of equivalent value based on a conversion formula
stated in the Performance Shares Award Agreement.
The Committee, in its discretion, may also grant dividend equivalents
rights with respect to earned but unpaid Performance Shares as evidenced by the
applicable Award Agreement. Performance Shares shall not have any voting rights.
9.4 Termination of Employment. Each Performance Share Award Agreement shall
set forth the extent to which the Participant shall have the right to receive
unearned Performance Shares following termination of the Participant's
employment with the Company and its Subsidiaries. Such provisions shall be
determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with the Participant, need not be uniform among all
Performance Shares awarded pursuant to the Plan and may reflect distinctions
based on the reasons of termination of employment; provided, however, that
except in cases of terminations resulting from a Change in Control and
terminations by reason of death or Disability, payment of an Award of
Performance Shares which is intended to qualify for the Performance-Based
Exception may not occur before attainment of the related performance goal.
9.5 Nontransferability. Except as otherwise provided in a Participant's
Award Agreement, Performance Shares may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated, other than by will or by the
laws of descent and distribution. Further, except as otherwise provided in a
Participant's Award Agreement,
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a Participant's rights under the Plan shall be exercisable during the
Participant's lifetime only by the Participant.
Article 10. Performance Measures
The performance measure(s) to be used for purposes of Awards (other than
Options) to Named Executive Officers which are designed to qualify for the
Performance-Based Exception shall be chosen from among the following
alternatives:
(a) Earnings Per Share;
(b) Net Income;
(c) Net Sales; or
(d) Total Stockholder Return.
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing performance measures without
obtaining stockholder approval of such changes, the Committee shall have the
discretion to make such changes without obtaining stockholder approval.
Article 11. Beneficiary Designation
Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his or her death before
he or she receives any or all of such benefit. Each such designation shall
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Company and will be effective only when filed by the
Participant in writing with the Company during the Participant's lifetime. In
the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to the Participant's estate.
Article 12. Deferrals
The Committee may permit a Participant to defer such Participant's receipt
of the payment of cash or the delivery of Shares that would otherwise be due to
such Participant by virtue of the exercise of an Option or SAR, the lapse or
waiver of restrictions with respect to Restricted Stock or the satisfaction of
any requirements or goals with respect to Performance Shares. If any such
deferral election is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals.
Article 13. Rights of Key Persons
13.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, nor confer upon any Participant any right to continue in the employ of the
Company or Subsidiary. For purposes of the Plan, a transfer of a Participant's
employment between the Company and a Subsidiary, or between Subsidiaries, shall
not be deemed to be a termination of employment.
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13.2 Participation. No Key Person shall have the right to be selected to
receive an Award under the Plan or, having been so selected, to be selected to
receive a future Award.
Article 14. Change in Control
14.1 Treatment of Outstanding Awards. Upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable laws, or by
the rules and regulations of any governing governmental agencies or national
securities exchanges:
(a) Any and all Options and SARs granted hereunder shall become
immediately exercisable, and shall remain exercisable throughout their
entire term;
(b) Any restriction periods and restrictions imposed on shares of
Restricted Stock shall lapse; and
(c) The target payout opportunities attainable under all outstanding
Awards of Restricted Stock and Performance Shares shall be deemed to
have been fully earned for the entire Performance Period(s) as of the
effective date of the Change in Control, and the vesting of all Awards
shall be accelerated as of the effective date of the Change in
Control.
14.2 Limitation on Change-in-Control Benefits. (a) It is the intention of
the Company and the Participants to reduce the amounts payable or distributable
to a Participant hereunder if the aggregate Net After Tax Receipts (as defined
below) to the Participant would thereby be increased, as a result of the
application of the excise tax provisions of Section 4999 of the Code.
Accordingly, anything in the Plan to the contrary notwithstanding, in the event
that the independent accountants regularly employed by the Company immediately
prior to any "change" described below (the "Accounting Firm") shall determine
that receipt of all Payments (as defined below) would subject the Participant to
tax under Section 4999 of the Code, it shall determine whether some amount of
Payments would meet the definition of a "Reduced Amount," (as defined below). If
the Accounting Firm determines that there is a Reduced Amount, the aggregate
Payments shall be reduced to such Reduced Amount in accordance with the
provisions of Section 14.2(b) below.
For purposes of this Section 14.2(a):
(i) A "Payment" shall mean any payment or distribution in the nature
of compensation to or for the benefit of a Participant who is a
"disqualified individual" within the meaning of Section 280G(c)
of the Code and which is contingent on a "change" described in
Section 280G(b)(2)(A)(i) of the Code with respect to the Company,
whether paid or payable pursuant to the Plan or otherwise;
(ii) "Plan Payment" shall mean a Payment paid or payable pursuant to
the Plan (disregarding this Section 14.2);
(iii)"Net After Tax Receipt" shall mean the Present Value of a
Payment, net of all taxes imposed on the Participant with respect
thereto under Sections 1 and 4999 of the Code, determined by
applying the highest marginal rate
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under Section 1 of the Code which applied to the Participant's
Federal taxable income for the immediately preceding taxable
year;
(iv) "Present Value" shall mean such value determined in accordance
with Section 280G(d)(4) of the Code; and
(v) "Reduced Amount" shall mean the smallest aggregate amount of
Payments which (A) is less than the sum of all Payments and (B)
results in aggregate Net After Tax Receipts which are equal to or
greater than the Net After Tax Receipts which would result if all
Payments were paid to or for the benefit of the Participant.
(b) If the Accounting Firm determines that aggregate Payments should be
reduced to the Reduced Amount, the Committee shall promptly give the
Participant notice to that effect and a copy of the detailed
calculation thereof, and the Participant may then elect, in the
Participant's sole discretion, which and how much of the Payments,
including without limitation Plan Payments, shall be eliminated or
reduced (as long as after such election the Present Value of the
aggregate Payments is equal to the Reduced Amount), and shall advise
the Committee in writing of such election within 10 days of the
Participant's receipt of notice. If no such election is made by the
Participant within such 10 day period, the Committee may elect which
of the Payments, including without limitation Plan Payments, shall be
eliminated or reduced (as long as after such election the Present
Value of the aggregate Payments is equal to the Reduced Amount) and
shall notify the Participant promptly of such election. All
determinations made by the Accounting Firm under this Section 14.2
shall be binding upon the Company and the Participant and shall be
made within 60 days immediately following the event constituting the
"change" referred to above. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit
of the Participant such Payments as are then due to the Participant
under the Plan.
(c) At the time of the initial determination by the Accounting Firm
hereunder, it is possible that amounts will have been paid or
distributed by the Company to or for the benefit of the Participant
pursuant to the Plan which should not have been so paid or distributed
("Overpayment") or that additional amounts which will have not been
paid or distributed by the Company to or for the benefit of the
Participant pursuant to the Plan could have been so paid or
distributed ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that the
Accounting Firm, based either upon the assertion of a deficiency by
the Internal Revenue Service against the Company or the Participant
which the Accounting Firm believes has a high probability of success
or controlling precedent or other substantial authority, determines
that an Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for the benefit of the Participant
shall be treated for all purposes as a loan ab initio to the
Participant which the Participant shall repay to the Company together
with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by the
Participant to the Company if and to the extent such deemed loan
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and payment would not either reduce the amount on which the
Participant is subject to tax under Section 1 and Section 4999 of the
Code or generate a refund of such taxes.
In the event that the Accounting Firm, based upon controlling
precedent or other substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Participant together
with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code.
14.3 Termination, Amendment, and Modifications of Change-in-Control
Provisions. Notwithstanding any other provision of the Plan or any Award
Agreement provision, the provisions of this Article 14 may not be terminated,
amended or modified on or after the date of a Change in Control to affect
adversely any Award theretofore granted under the Plan without the prior written
consent of the Participant with respect to said Participant's outstanding
Awards; provided, however, the Board of Directors, upon recommendation of the
Committee, may terminate, amend or modify this Article 14 at any time and from
time to prior to the date of a Change in Control.
Article 15. Awards to Non-Officer Directors
15.1 Awards Under Prior Plan. Each non-officer Director on July 15, 1992
was granted an option under the Glenayre Technologies, Inc. Long-Term Incentive
Plan (the "Prior Plan") to purchase Common Stock on the later of October 30,
1992 or the date such Director completed three years of service on the Board.
Each non-officer Director elected to the Board for the first time after July 15,
1992 was granted an option under the Prior Plan to purchase Common Stock on the
third anniversary of the Director's service on the Board. Thereafter, each
non-officer Director was awarded an additional option under the Prior Plan to
purchase Common Stock on the third anniversary of the initial option award.
15.2 Awards Under the Plan. Each non-officer Director, who was awarded an
option under the Prior Plan to purchase Common Stock as described in Section
15.1 shall be granted a Nonqualified Stock Option to purchase 18,000 shares of
Common Stock upon each third anniversary of the date on which such option was
granted under the Prior Plan, if he or she is then a non-officer Director. Each
non-officer Director who was not awarded an option under the Prior Plan shall be
granted a Nonqualified Stock Option to purchase 18,000 shares of Common Stock
upon the date such non-officer Director completes 3 years of service as a
Director and upon each third anniversary date thereafter, if he or she is then a
non-officer Director. Each Option granted under this Article 15 shall be
evidenced by an Award Agreement.
15.3 Option Price. The Option Price for each Option granted under this
Article 15 shall be equal to the Fair Market Value of a Share on the date the
Option is granted.
15.4 Exercise and Duration of Option. Options granted under this Article 15
shall be immediately exercisable and shall remain exercisable for 10 years from
the date of grant, whether or not the Director's service on the Board continues
during such period.
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15.5 Payments. Options shall be exercised by the delivery of a written
notice of exercise to the Company, setting forth the number of Shares with
respect to which the Option is to be exercised, accompanied by full payment for
the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, (b) by tendering
previously acquired Shares having an aggregate Fair Market Value at the time of
exercise equal to the total Option Price (provided that the Shares which are
tendered to satisfy the Option Price must have been held by the Director for at
least six months prior to their tender), or (c) by a combination of (a) and (b).
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Director, in the Director's
name, Share certificates in an appropriate amount based upon the number of
Shares purchased under the Option(s).
15.6 Nontransferability of Options. No Options granted under this Article
15 may be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution.
Further, Options granted to a Director under this Article 15 shall be
exercisable during his or her lifetime only by such Director.
15.7 No Rights. A Director granted an Option under this Article 15 shall
have no rights as a stockholder of the Company with respect to the Shares
covered by such Option except to the extent that shares are issued to the
Director upon the due exercise of the Option.
15.8 Limitation on Awards. Notwithstanding anything to the contrary herein,
(i) no Awards shall be made pursuant to this Article 15 to a Director who is an
employee of the Company or any Subsidiary; (ii) no awards shall be made pursuant
to this Article 15 following the suspension or termination of the Plan pursuant
to Article 16; and (iii) no awards shall be made pursuant to this Section 15
unless shares of Common Stock are available therefor under Section 4.1.
Article 16. Amendment, Modification and Termination
16.1 Amendment, Modification, and Termination. The Board may at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part; provided, however, that no amendment which requires stockholder
approval in order for the Plan to continue to comply with Rule 16b-3 under the
Exchange Act, including any successor to such Rule, shall be effective unless
such amendment shall be approved by the requisite vote of stockholders of the
Company entitled to vote thereon.
The Committee shall not have the authority to cancel outstanding Awards and
issue substitute Awards in replacement thereof.
16.2 Awards Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award.
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16.3 Acceleration of Award Vesting; Waiver of Restrictions. Notwithstanding
any provision of the Plan or any Award Agreement provision to the contrary, the
Committee, in its sole and exclusive discretion, shall have the power at any
time to (i) accelerate the vesting of any Award granted under the Plan,
including without limitation, acceleration to such a date that would result in
said Awards becoming immediately vested or (ii) waive any restrictions of any
Award granted under the Plan.
Article 17. Withholding
17.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, state and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any taxable event arising as a result of the Plan.
17.2 Share Withholding. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock
or upon any other taxable event arising as a result of Awards granted hereunder,
Participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares having a Fair Market Value on the date as of which the tax is to be
determined equal to the minimum statutory total tax which could be imposed on
the transaction. All such elections shall be irrevocable, made in writing,
signed by the Participant, and shall be subject to any restrictions or
limitations that the Committee, in its sole discretion, deems appropriate.
Article 18. Indemnification
Each person who is or shall have been a member of the Committee or of the
Board, shall be indemnified and held harmless by the Company against and from
any loss, cost, liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, action,
suit or proceeding to which he or she may be a party or in which he or she may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him or her in settlement thereof,
with the Company's approval, or paid by him or her in satisfaction of any
judgment in any such action, suit, or proceeding against him or her, provided he
or she shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
Article 19. Successors
All obligations of the Company under the Plan with respect to Awards
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
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Article 20. Legal Construction
20.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
20.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
20.3 Requirements of Law. The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
20.4 Securities Law Compliance. With respect to Insiders, transactions
under the Plan are intended to comply with all applicable conditions or Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
20.5 Governing Law. To the extent not preempted by Federal law, the Plan,
and all Award Agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of North Carolina.
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