<PAGE>
SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant To Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/ / Preliminary information statement / / Confidential, for use of the
Commission only (as permitted
by Rule 14c-5(d)(2))
/ X / Definitive information statement
PUBCO CORPORATION
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and O-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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P U B C O C O R P O R A T I O N
3830 Kelley Avenue
Cleveland, Ohio 44114
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 14, 1998
Notice is hereby given that the Annual Meeting of Stockholders (the
"Meeting") of Pubco Corporation (the "Company") will be held at the
Ramada Inn, I-295 and Route 13 North, New Castle, Delaware 19720 on
September 14, 1998, at 11:00 A.M. Eastern Time to consider and act upon
the following:
1. Election of a Board of Directors to serve until the next
Annual Meeting of Stockholders or until their successors are duly
elected and qualified.
2. Proposal to approve the 1998 Equity Incentive Plan.
3. Such other matters as may properly come before the Meeting.
Stockholders of record of the Company's Common Stock and Class B
Stock at the close of business on August 14, 1998, the record date fixed
by the Board of Directors, are entitled to notice of and to vote at the
Meeting or at any adjournment thereof.
By Order of the Board of Directors
Stephen R. Kalette
Secretary
Cleveland, Ohio
August 17, 1998
SEE INFORMATION STATEMENT ENCLOSED
<PAGE>
P U B C O C O R P O R A T I O N
3830 Kelley Avenue
Cleveland, Ohio 44114
INFORMATION STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
September 14, 1998
August 17, 1998
Matters to be Considered at the Meeting
This Information Statement is furnished by Pubco Corporation, a Delaware
corporation (the "Company"), for the Annual Meeting of Stockholders to be held
September 14, 1998, and at all adjournments thereof (the "Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The Company's Annual Report for the year ended December 31,
1997 is being mailed together with this Information Statement on or about
August 20, 1998. Stockholders of record as of the close of business on
August 14, 1998 (the "Record Date") are entitled to notice of and to vote at
the Meeting.
The only business which the Board of Directors intends to present or knows
that others will present at the Meeting is as set forth in the attached Notice
of Annual Meeting of Stockholders.
Voting
Holders of record at the close of business on the Record Date of the
Company's issued and outstanding Common Stock, par value $.01 per share
("Common Stock"), will be entitled to one vote for each share held and holders
of record at the close of business on the Record Date of the Company's Class B
Stock, par value $.01 per share ("Class B Stock"), will be entitled to 10
votes for each share held. As of July 27, 1998, the Company had 3,199,021
shares of Common Stock outstanding and 553,452 shares of Class B Stock
outstanding.
A stockholder who has indicated his intention to vote for the five
nominees for the Board of Directors named herein and for approval of the 1998
Equity Incentive Plan beneficially owns shares entitled to approximately 82%
of all possible votes in such election, thereby assuring election of the five
nominees and approval of the 1998 Equity Incentive Plan.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
<PAGE>
APPROVAL OF THE 1998 EQUITY INCENTIVE PLAN
In July 1998, the Board of Directors adopted the Company's 1998 Equity
Incentive Plan (the "Plan") subject to approval by the Company's stockholders.
Stockholders are requested in this proposal to approve the Plan. The
Company believes that its ability to provide employees with attractive
equity-based incentives is critical in allowing it to attract and retain
qualified individuals. The Company believes that the grant of stock options
encourages employees to build long-term stockholder value. The affirmative
vote of the holders of a majority of the shares present in person or
represented by proxy and entitled to vote at the meeting will be required to
approve the Plan. Abstentions will be counted toward the tabulation of votes
cast on this proposal and will have the same effect as negative votes. Mr.
Kanner has announced his intention to vote for approval of the Plan, thereby
assuring stockholder approval. The Plan is reproduced as Appendix A,
reference to which is made for its complete terms.
Summary of Terms of the Plan
General
The Plan provides for the grant of (i) both incentive and nonstatutory
stock options, (ii) stock bonuses, (iii) rights to purchase restricted stock,
and (iv) stock appreciation rights (collectively, "Stock Awards"). Incentive
stock options granted under the Plan are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"). Nonstatutory stock options granted under
the Plan are intended not to qualify as incentive stock options under the
Code. See "Federal Income Tax Information" for a general discussion of the
tax treatment of incentive and nonstatutory stock options.
Purpose
The Plan was adopted to (i) provide a means by which selected officers and
employees of and consultants to the Company and its affiliates could be given
an opportunity to benefit from increases in the value of the stock of the
Company, (ii) assist in retaining the services of employees holding key
positions as well as secure and retain the services of persons capable of
filling such positions and (iii) provide incentives for such persons to exert
maximum efforts for the success of the Company.
Administration
The Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the Plan and, subject to the
provisions of the Plan, to determine the persons to whom and the dates on
which Stock Awards will be granted; whether a Stock Award will be an incentive
stock option, a nonstatutory stock option, a stock bonus, a right to purchase
restricted stock, a stock appreciation right or a combination of the
foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; whether a person shall be permitted
<PAGE>
to receive stock upon exercise of an independent stock appreciation right; and
the number of shares with respect to which a Stock Award shall be granted to
each such person. The Board of Directors is authorized to delegate
administration of the Plan to a committee composed of not fewer than two
members of the Board. As used herein with respect to the Plan, the "Board"
refers to any such committee as well as to the Board of Directors itself.
Eligibility
Incentive stock options may be granted under the Plan only to Employees
(including officers) of the Company and its affiliates. Other Stock Awards
may be granted under the Plan only to employees (including officers) of and
consultants to the Company and its affiliates.
No incentive stock option may be granted under the Plan to any person who,
at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock options granted under the Plan, the aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which such options are exercisable for the first time by an
optionee during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000.
Stock Subject to the Plan
The maximum number of shares of Common Stock issueable under the Plan is
200,000, subject to adjustment for certain corporate events. If any Stock
Award granted under the Plan expires or otherwise terminates, in full or in
part, without being exercised in full, the Common Stock not acquired pursuant
to such Stock Award again becomes available for issuance under the Plan.
Terms of Options
The following is a description of the permissible terms of options under
the Plan. Individual option grants may be more or less restrictive as to any
or all of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the Plan may not be less than the fair market value of the Common Stock
subject to the option on the date of the option grant, and in some cases (see
"Eligibility" above), may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the Plan is determined by the
Board. The closing price of the Company's Common Stock as reported on the
Nasdaq Small Cap Market on July 27, 1998 was $11.50 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the Plan is deemed to be cancelled and a new option granted.
<PAGE>
The exercise price of options granted under the Plan must be paid either:
(i) in cash ; (ii) by delivery of other Common Stock of the Company or (iii)
pursuant to a deferred payment arrangement or in any other form of legal
consideration.
Option Exercise. Options granted under the Plan may become exercisable
("vest") in cumulative increments as determined by the Board. Unless the
Board determines otherwise at the time of grant, shares covered by options
under the Plan vest at the rate of 25% of the shares subject to the option on
the first anniversary of the date of grant and 25% of such shares at the end
of each of the next three anniversaries thereafter during the optionee's
employment or provision of services as a consultant. To the extent provided
by the terms of an option, and in the discretion of the Board, an optionee may
satisfy any federal, state or local tax withholding obligation relating to the
exercise of such option by a cash payment upon exercise, by authorizing the
Company to withhold a portion of the stock otherwise issuable to the optionee,
by delivering the already-owned stock of the Company or by a combination of
these means.
Term. The maximum term of options under the Plan is 10 years, except that
in certain cases (see "Eligibility") the maximum term is five years. Options
under the Plan terminate three months after termination of the optionee's
employment or relationship as a consultant of the Company or any affiliate of
the Company, unless (i) such termination is due to such person's permanent and
total disability (as defined in the Code), in which case it may be exercised
(to the extent the option was exercisable at the time of disability) at any
time within one year of such termination (or expiration, if earlier); (ii) the
optionee dies while employed by or serving as a consultant of the Company or
any affiliate of the Company, or within a period specified by the option after
termination of such relationship, in which case the option may be exercised
(to the extent the option was exercisable at the time of the optionee's death)
within the period ending on the earlier of twelve (12) months after the
optionee's death or the expiration of the term of the option by the person or
persons to whom the rights to such option pass by will or by the laws of
descent and distribution; or (iii) the option by its terms specifically
provides otherwise. The option term may also be extended in the event that
exercise of the option within these periods is prohibited for specified
reasons.
Terms of Stock Bonuses and Purchases of Restricted Stock
The following is a description of the permissible terms of stock bonuses
and restricted stock purchase agreements under the Plan. The terms and
conditions of stock bonus or restricted stock purchase agreements may change
from time to time, and the terms and conditions of separate agreements need
not be identical, but each stock bonus or restricted stock purchase agreement
includes the substance of each of the following provisions as appropriate:
Purchase Price. The purchase price under each restricted stock purchase
agreement is such amount as the Board may determine and designate in such
agreement but in no event may the purchase price be less than eighty-five
percent (85%) of the stock's fair market value on the date such award is
made. Notwithstanding the foregoing, the Board may determine that eligible
<PAGE>
participants in the Plan may be awarded stock pursuant to a stock bonus
agreement in consideration for past services actually rendered to the Company
for its benefit.
Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board.
Termination of Employment. In the event a participant's continuous status
as an employee terminates, the Company may repurchase or otherwise re-acquire
any or all of the shares of stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.
Stock Appreciation Rights
The three types of Stock Appreciation Rights that are authorized for
issuance under the Plan are as follows:
Tandem Stock Appreciation Rights. Tandem stock appreciation rights may be
granted appurtenant to an option, and are generally subject to the same terms
and conditions applicable to the particular option grant to which they
pertain. Tandem stock appreciation rights require the holder to elect between
the exercise of the underlying option for shares of stock and the surrender,
in whole or in part, of such option for an appreciation distribution. The
appreciation distribution payable on the exercised tandem right is in cash
(or, if so provided, in an equivalent number of shares of stock based on fair
market value on the date of the option surrender) in an amount up to the
excess of (i) the fair market value (on the date of the option surrender) of
the number of shares of stock covered by that portion of the surrendered
option in which the optionee is vested over (ii) the aggregate exercise price
payable for such vested shares.
Concurrent Stock Appreciation Rights. Concurrent stock appreciation
rights may be granted appurtenant to an option and may apply to all or any
portion of the shares of stock subject to the underlying option and are
generally subject to the same terms and conditions applicable to the
particular option grant to which they pertain. A concurrent right is
exercised automatically at the same time the underlying option is exercised
with respect to the particular shares of stock to which the concurrent right
pertains. The appreciation distribution payable on an exercised concurrent
right is in cash (or, if so provided, in an equivalent number of shares of
stock based on fair market value on the date of the exercise of the concurrent
right) in an amount equal to such portion as shall be determined by the Board
at the time of the grant of the excess of (i) the aggregate fair market value
(on the date of the exercise of the concurrent right) of the vested shares of
stock purchased under the underlying option which have concurrent rights
appurtenant to them over (ii) the aggregate exercise price paid for such
shares.
Independent Stock Appreciation Rights. Independent stock appreciation
rights may be granted independently of any option and are generally subject to
the same terms and conditions applicable to nonstatutory stock options. The
<PAGE>
appreciation distribution payable on an exercised independent right may not be
greater than an amount equal to the excess of (i) the aggregate fair market
value (on the date of the exercise of the independent right) of a number of
shares of Company stock equal to the number of share equivalents in which the
holder is vested under such independent right, and with respect to which the
holder is exercising the independent right on such date, over (ii) the
aggregate fair market value (on the date of the grant of the independent
right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised independent right is in cash or, if so
provided, in an equivalent number of shares of stock based on fair market
value on the date of the exercise of the independent right.
Adjustment Provisions
If there is any change in the stock subject to the Plan or subject to any
Stock Award granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or transaction not involving the
receipt of consideration by the Company), the Plan and Stock Awards
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to an employee during a calendar year, and the class,
number of shares and price per share of stock subject to such outstanding
Stock Awards.
Effect on Certain Corporate Events
The Plan provides that, in the event of a dissolution, liquidation, sale
of substantially all of the assets of the Company, a specified type of merger
or other corporate reorganization, to the extent permitted by law, any
surviving corporation will be required to either assume Stock Awards
outstanding under the Plan or substitute similar Stock Awards for those
outstanding under the Plan, or such outstanding Stock Awards will continue in
full force and effect. In the event that any surviving corporation declines
to assume or continue Stock Awards outstanding under the Plan, or to
substitute similar Stock Awards, then with respect to Stock Awards held by
persons then performing services as employees, directors or consultants, the
Stock Awards will become immediately vested and will terminate if not
exercised prior to such corporate event. The acceleration of a Stock Award in
the event of an acquisition or similar corporate event may be viewed as an
anti-takeover provision, which may have the effect of discouraging a proposal
to acquire or otherwise obtain control of the Company.
Duration, Amendment and Termination
The Board may suspend or terminate the Plan without stockholder approval
or ratification at any time or from time to time. Unless sooner terminated,
the Plan will terminate on July 17, 2008.
The Board may also amend the Plan at any time or from time to time.
However, no amendment will be effective unless approved by the stockholders of
the Company within twelve months before or after its adoption by the Board if
<PAGE>
the amendment would: (i) modify the requirements as to eligibility for
participation (to the extent such modification requires stockholder approval
in order for the Plan to satisfy Section 422 or 162(m) of the Code, if
applicable, or Rule 16b-3 ("Rule 16b-3") of the Securities Exchange Act of
1934, as amended (the "Exchange Act"); (ii) increase the number of shares
reserved for issuance upon exercise of options; or (iii) change any other
provision of the Plan in any other way if such modification requires
stockholder approval in order to comply with Rule 16b-3 or satisfy the
requirements of Section 422 of the Code. The Board may submit any other
amendment to the Plan for stockholder approval, including, but not limited to,
amendments intended to satisfy the requirements of Section 162(m) of the Code
regarding the exclusion of performance-based compensation from the limitation
on the deductibility of compensation paid to certain employees.
Restrictions on Transfer
Under the Plan, an incentive stock option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution and
during the lifetime of the optionee, may be exercised only by the optionee. A
nonstatutory stock option may not be transferred except by will or by the laws
of descent and distribution or pursuant to a "qualified domestic relations
order" or as otherwise approved by the Board. In any case, the optionee may
designate in writing a third party who may exercise the option in the event of
the optionee's death. In addition, shares subject to repurchase by the
Company under an early exercise stock purchase agreement may be subject to
restrictions on transfer which the Board deems appropriate. No rights under a
stock bonus or restricted stock purchase agreement shall be transferable
except by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order satisfying the requirements of Rule 16b-3
and any administrative interpretations or pronouncements thereunder, so long
as stock awarded under such agreement remains subject to the terms of the
agreement.
Federal Income Tax Information
Incentive Stock Options. Incentive stock options under the Plan are
intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (i) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
<PAGE>
(ii) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition
will be a capital gain or loss, which will be long-term or short-term
depending on whether the stock was held for more than one year. Long-term
capital gains currently are generally subject to lower tax rates than ordinary
income. Slightly different rules may apply to optionees who acquire stock
subject to certain repurchase options.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the
Code and the satisfaction of a tax reporting obligation) to a corresponding
business expense deduction in the tax year in which the disqualifying
disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. Generally, with respect to employees, the
Company is required to withhold from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation, the Company will generally
be entitled to a business expense deduction equal to the taxable ordinary
income realized by the optionee. Upon disposition of the stock, the optionee
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long or short-term depending on whether the stock was held for more
than one year. Slightly different rules may apply to optionees who acquire
stock subject to certain repurchase options.
Restricted Stock and Stock Bonuses. Restricted stock and stock bonuses
granted under the Plan generally have the following federal income tax
consequences:
Upon acquisition of stock under a restricted stock or stock bonus award,
the recipient normally will not recognize taxable ordinary income equal to the
excess of the stock's fair market value over the purchase price, if any. To
the extent the stock is subject to certain types of vesting restrictions, the
taxable event will be delayed until the vesting restrictions lapse unless the
recipient elects to be taxed on receipt of the stock pursuant to Section 83(b)
of the Code. Generally, with respect to employees, the Company is required to
withhold from regular wages or supplemental wage payments an amount based on
the ordinary income recognized. Subject to the requirement of reasonableness,
Section 162(m) of the Code and the satisfaction of a tax reporting obligation,
the Company will generally be entitled to a business expense deduction equal
to the taxable ordinary income realized by the recipient. Upon disposition of
the stock, the recipient will recognize a capital gain or loss equal to the
<PAGE>
difference between the selling price and the sum of the amount paid for such
stock, if any, plus any amount recognized as ordinary income upon acquisition
(or vesting) of the stock. Such gain or loss will be long or short-term
depending on whether the stock was held for more than one year from the date
ordinary income is measured. Slightly different rules may apply to persons
who acquire stock subject to forfeiture.
Stock Appreciation Rights. No taxable income is realized upon the receipt
of a stock appreciation right, but upon exercise of the stock appreciation
right the fair market value of the shares (or cash in lieu of shares) received
must be treated as compensation taxable as ordinary income to the recipient in
the year of such exercise. Generally, with respect to employees, the Company
is required to withhold from the payment made on exercise of the stock
appreciation right or from regular wages or supplemental wage payments an
amount based on the ordinary income recognized. Subject to the requirement of
reasonableness, Section 162(m) of the Code and the satisfaction of a reporting
obligation, the Company will be entitled to a business expense deduction equal
to the taxable ordinary income recognized by the recipient.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconcilation Act of 1993, the U.S. Congress amended the Code to add Section
162(m) which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1 million for a covered employee. It is possible that
compensation attributable to awards under the Plan, when combined with all
other types of compensation received by a covered employee from the Company,
may cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with applicable Treasury regulations issued under Section 162(m) of
the Code, compensation attributable to stock options and stock appreciation
rights will qualify as performance-based compensation, provided that certain
conditions are met.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 27, 1998 (i) the number of
shares of the Company's stock owned, directly or indirectly, by each Director
of the Company and by all Directors and officers as a group, and (ii) the
number of shares of the Company's stock held by each person who was known by
the Company to beneficially own more than 5% of the Company's stock:
<TABLE>
<CAPTION>
Common Stock Class B Stock Aggregate
Amount and Nature Amount and Nature Percent of
of Beneficial Percent of of Beneficial Percent of Voting
Name of Holder Ownership (1)(2) Class Ownership (1)(2) Class Power
<S> <C> <C> <C> <C> <C>
Glenn E. Corlett -- -- -- -- --
Harold L. Inlow -- -- -- --
Stephen R. Kalette 166 * 13,759 2.5 1.6
Robert H. Kanner 2,066,894 64.6 514,044 92.9 82.5
William A. Dillingham 3,725 * -- -- --
Leo L. Matthews (3) -- -- -- -- --
3830 Kelley Avenue
Cleveland, Ohio 44114
All Directors and
officers as a group 2,070,885 64.7 527,803 95.4 84.1
(7 persons)
FMR Corp. (4)
82 Devonshire Street
Boston, MA 02109 316,500 9.9 -- -- 3.6
<FN>
* indicates less than 1%.
</TABLE>
(1) Each owner has sole voting and investment power with respect to the
shares beneficially owned by him.
(2) Class B Stock is convertible into Common Stock on a share for share
basis. Therefore, ownership of Class B Stock may also be deemed to
be beneficial ownership of the same number of shares of Common Stock.
(3) Mr. Matthews owns approximately 3.6% of the Common Stock of the
Company's Allied Construction Products, Inc. subsidiary ("Allied").
(4) Information concerning FMR Corp. is based upon disclosure contained
in a Schedule 13G mailed to the Company on February 18, 1998.
ELECTION OF DIRECTORS
Five Directors are to be elected for the ensuing year to hold office
until the next Annual Meeting of Stockholders and until their successors
are elected and shall qualify. Mr. Kanner, Mr. Kalette and Mr. Corlett
<PAGE>
were elected to the Board of Directors at the 1997 Annual Meeting of
Stockholders. Mr. Dillingham and Mr. Inlow were appointed to the Board
on December 10, 1997. Election as a Director requires the favorable vote
of the majority of the votes of the Common Stock and Class B Stock
(voting together as a single class) voting at the election of Directors.
Information Concerning Nominees
Name, Age and Position Principal Occupation
with the Company During Last Five Years
Glenn E. Corlett Dean of the College of Business at Ohio University
54, Director since in Athens, Ohio since July 1, 1997. Between
1997, Member of the November, 1996 and June, 1997, Mr. Corlett was an
Audit Committee independendent business consultant in Cleveland,
Ohio. For more than five years prior to November,
1996, Mr. Corlett was the Executive Vice President
and Chief Operating Officer of N. W. Ayer,
Incorporated, a New York City-based advertising
agency he joined in 1990.
William A. Dillingham President of the Company's computer printer and
55, Director since labeling supplies businesses for more than 10 years.
1997, President of
the Company's computer
printer and labeling
supplies businesses.
Harold L. Inlow Independent business consultant since January 1,
64, Director since 1995. For more than 25 years prior to January 1,
1997, Member of the 1995, Mr. Inlow was the President of the Company's
Audit Committee Kline's Department Store subsidiary.
Stephen R. Kalette Director and executive officer of the Company since
48, Director since April, 1984.
1983, Vice President,
Administration, General
Counsel & Secretary
Robert H. Kanner Director and executive officer of the Company since
50, Director since December, 1983; Director of CleveTrust Realty
1983, Chairman, Investors.
President & CEO
Board of Directors
The Board of Directors establishes broad corporate policies which are
carried out by the officers of the Company who are responsible for day-to-day
operations. In 1997, the Board held one meeting and took action by unanimous
written consent on two other occasions. No Director was absent during the
year from any of the meetings of the Board of Directors or of any of the
committees of the Board on which he served.
<PAGE>
Committees of the Board of Directors
The Company has a standing Audit Committee. The Audit Committee consists
of Mr. Corlett and Mr. Inlow . The Audit Committee (i) reviews the internal
controls of the Company and its financial reporting; (ii) meets with the
Treasurer and such other officers as it, from time to time, deems necessary;
(iii) meets with the Company's independent public accountants and reviews the
scope and results of auditing procedures, the degree of such auditors'
independence, audit and non-audit fees charged by such accountants, and the
adequacy of the Company's internal accounting controls; and (iv) recommends to
the Board the appointment of the independent accountants.
Compensation of Directors
The Company pays its outside Directors an annual fee of $15,000, payable
monthly. The Company also reimburses its Directors for any expense reasonably
incurred while performing services for the Company. Directors who are
employees of the Company or otherwise receive compensation from the Company do
not receive any fee for acting as Directors of the Company.
Other Executive Officers
Leo L. Matthews, age 58, has been President of Allied since it was
acquired in March, 1993.
Certain Transactions
The Company leases a general purpose 312,000 square foot building in
Cleveland, Ohio (the "Building") on a triple net basis. The premises are used
for executive and administrative facilities, computer printer supplies and
labeling supplies manufacturing and administrative operations, and Allied's
manufacturing and administrative operations. The Company subleases a portion
of the building to an unrelated party. The annual rental for the Building is
approximately $548,700. The Partnership that owns the Building is 80% owned
and controlled by Mr. Kanner. Mr. Dillingham, Mr. Kalette and five other
individuals have a minority interest in the Partnership.
<PAGE>
MANAGEMENT COMPENSATION
Summary Compensation Table
<TABLE>
The following table discloses compensation paid or accrued, during each of the Company's last three
fiscal years, to the Company's Chief Executive Officer and to its other executive officers.
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
Name and Other Annual Restricted LTIP All Other
Principal Bonus Compensation Stock Options Payouts Compensation
Position Year Salary($) ($) ($) Awards ($) SARs(#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert H. Kanner(1)
Chairman, CEO, 1997 $525,000 --- $72,014(2) --- --- --- $184,691(3,4,5)
President & 1996 525,000 --- 64,917 --- --- --- 185,560
CFO 1995 525,000 --- 59,836 --- --- --- 188,973
Stephen R. Kalette
VP-Admin., 1997 $330,000 --- $26,416(6) --- --- --- $ 35,799(4,5)
General Counsel 1996 330,000 --- 25,022 --- --- --- 35,076
& Secretary 1995 330,000 --- 25,776 --- --- --- 35,815
William A. Dillingham(7)
President of 1997 $450,000 --- $ 5,473(7) --- --- --- $ 31,000(5,8)
the supplies 1996 450,000 --- 7,284 --- --- --- 30,000
business 1995 450,000 --- 5,946 --- --- --- 30,000
Leo L. Matthews(9)
President of 1997 $130,000 $ 90,900 $ 5,163(10) --- --- --- $ 10,847(11)
Allied 1996 120,000 85,055 5,459 --- --- --- 7,200
1995 120,000 10,000 4,817 --- --- --- 7,200
<FN>
(1) Mr. Kanner deferred his entire Salary for each of the years reported under the terms of deferred
compensation plans established for his benefit. The amounts reported for each year are the amounts
deferred for that year. As compensation is earned by Mr. Kanner, it is paid by the Company to
deferred compensation trusts. These amounts are being be distributed to Mr. Kanner by the trusts in
accordance with the terms of the deferred compensation plans.
(2) Of the amount shown in the table, $67,620 in 1997, $61,370 in 1996 and $55,870 in 1995 represents the
premiums on life insurance paid for by the Company on Mr. Kanner's life, and for which the Company is
not a beneficiary; and $4,394 in 1997, $3,547 in 1996 and $3,966 in 1995 represents the cost of
providing Mr. Kanner with use of an automobile during the year.
(3) Of the amount reflected, $125,400 in 1997, $127,900 in 1996 and $130,100 in 1995 represents a payment
by the Company toward the premium on split dollar life insurance on Mr. Kanner's life and for which
the Company is not the beneficiary. The amounts will be repaid to the Company out of the death
proceeds from such policy.
(4) In 1988, the Company adopted a non-qualified plan to provide retirement benefits for executive
officers and other key employees. The plan provides benefits upon retirement, death or disability
<PAGE>
of the participant and benefits are subject to a restrictive vesting schedule. $58,291
in 1997, $57,660 in 1996 and $58,873 in 1995 of the amounts shown in the table for Mr.
Kanner and $34,799 of the amounts shown in the table for Mr. Kalette in 1997 and all of
the amounts shown in the table for Mr. Kalette in 1996 and 1995 are amounts contributed
to such plan for the benefit of such executive officers with respect to the years
noted. Vesting of benefits under the plan is phased in over 20 years and only a portion
of the amount contributed for each year has fully vested.
(5) In 1997, the Company adopted a 401K plan to provide retirement benefits for employees of
Pubco and the Company's printer supplies business, including officers. Participating
employees make voluntary contributions to the Plan, a portion of which the Company
matches. Of the amounts shown in the 1997 table for Mr. Kalette and Mr. Kanner, $1,000
was contributed by Pubco to such plan. Of the amount shown in the 1997 table for Mr.
Dillingham, $1,000 was contributed by Buckeye to such plan. Vesting of benefits under
the plan is phased in over six years.
(6) Of the amount shown in the table, $22,210 in 1997, $21,396 in 1996 and $20,546 in 1995
represents the premiums on life insurance paid for by the Company on Mr. Kalette's life,
and for which the Company is not a beneficiary; and $3,725 in 1997, $3,154 in 1996 and
$4,023 in 1995 represents the cost of providing Mr. Kalette with use of an automobile
during the year.
(7) All of the amounts shown as paid to or for Mr. Dillingham were paid by Buckeye. Of the
amount shown in the table, $3,885 in 1997, $3,535 in 1996 and $3,205 in 1995 represents
the premiums on life insurance paid for by Buckeye on Mr. Dillingham's life, and for
which Buckeye is not a beneficiary; and $1,588 in 1997, $3,749 in 1996 and $2,741 in
1995 represents the cost of providing Mr. Dillingham with use of an automobile during
the year.
(8) In 1988, Buckeye adopted a non-qualified plan to provide retirement benefits for
executive officers and other key employees. The plan provides benefits upon retirement,
death or disability of the participant and benefits are subject to a restrictive vesting
schedule. Of the amount shown in the table for Mr. Dillingham, $30,000 in 1997 and all
of the amounts in 1996 and 1995 are amounts contributed to such plan for the benefit of
such executive officer with respect to the years noted. Vesting of benefits under the
plan is phased in over 20 years and only a portion of the amount contributed for each
year has fully vested.
(9) All of the amounts shown as paid to or for Mr. Matthews were paid by Allied. Mr.
Matthews has an employment agreement with Allied providing, effective for 1997, for a
minimum 130,000 per year base salary; a share of Allied's earnings in excess of its
operating plan earnings, if any, and discretionary bonuses (as was paid in 1995).
(10) Of the amount shown in the table, $1,710 in 1997, $1,710 in 1996 and $1,710 in 1995
represents the premiums on life insurance paid for by Allied on Mr. Matthew's life, and
for which Allied is not a beneficiary; and $3,453 in 1997, $3,749 in 1996 and $3,107 in
1995 represents the cost of providing Mr. Matthews with use of an automobile during that
year.
(11) In 1993, Allied adopted a 401-K plan to provide retirement benefits for Allied's
employees, including officers. Participating employees make voluntary contributions to
the Plan, a portion of which Allied matches. All of the amount shown in the table for
Mr. Matthews was contributed by Allied to such plan. Vesting of benefits under the plan
is phased in over three years.
</TABLE>
<PAGE>
Unless covered by an employment agreement with the Company, officers
serve for one year terms or until their respective successors are duly
elected and qualified.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As Directors of the Company, Mr. Kanner and Mr. Kalette participate
in Board of Directors' deliberations and decisions concerning executive
officer compensation. Mr. Kanner and Mr. Kalette are executive officers
of the Company.
The Statement of the Board of Directors Regarding Executive
Compensation and the Stock Performance Charts which follow shall not be
deemed incorporated by reference by any general statement incorporating
by reference this Information Statement into any filing under the
Securities Act of 1933 or under the Securities Exchange Act of 1934,
except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under
such Acts.
STATEMENT OF THE BOARD OF DIRECTORS
REGARDING EXECUTIVE COMPENSATION
The compensation of the Company's executive officers is not, as a
matter of course, directly determined by Company performance through
objective criteria; although Mr. Matthews' employment arrangement
includes participation in a bonus pool related to the performance of
Allied and Mr. Matthews' compensation may include discretionary bonuses
as in 1995.
Several years ago the Board set Mr. Kanner's and Mr. Kalette's
compensation at levels it determined were appropriate based upon the
nature of their respective responsibilities and their willingness to work
for the Company at such compensation levels. The Board did not formally
review Mr. Kanner's or Mr. Kalette's compensation for 1997 and their
compensation is expected to remain the same until further review by each
of them and the other Directors. Future adjustment to Mr. Kanner's and
Mr. Kalette's compensation, if any, would be based upon a change in their
respective levels of responsibilities and the size and scope of the
Company's operations.
Glenn E. Corlett
Willaim A. Dillingham
Harold L. Inlow
Robert H. Kanner
Stephen R. Kalette
<PAGE>
STOCK PERFORMANCE CHART
The following chart is a comparison of the Cumulative Total Return on the
Company's Common Stock over the five year period ending December 31, 1997,
with the Cumulative Total Return on the Center for Research in Security
Prices ("CRSP") Index for Nasdaq Stock Market (US Companies) and a
self-determined peer group.
" Date " " Company" " Market" " Market" " Peer" "Peer "
" " " Index " " Index " " Count " " Index" "Count"
"12/31/92", 100.000, 100.000, 3929, 100.000, 7
"01/29/93", 112.195, 102.846, 3917, 102.494, 7
"02/26/93", 102.439, 99.010, 3948, 106.188, 7
"03/31/93", 107.317, 101.875, 3973, 104.966, 7
"04/30/93", 110.976, 97.528, 4008, 104.396, 7
"05/28/93", 104.878, 103.350, 4036, 106.959, 7
"06/30/93", 92.683, 103.826, 4072, 105.490, 7
"07/30/93", 87.805, 103.949, 4104, 108.416, 7
"08/31/93", 102.439, 109.321, 4139, 116.559, 7
"09/30/93", 121.951, 112.577, 4174, 116.772, 7
"10/29/93", 107.317, 115.107, 4221, 119.773, 7
"11/30/93", 102.439, 111.676, 4304, 117.836, 7
"12/31/93", 104.878, 114.790, 4376, 122.639, 7
"01/31/94", 109.756, 118.274, 4400, 121.756, 7
"02/28/94", 102.439, 117.170, 4439, 118.769, 7
"03/31/94", 112.195, 109.964, 4491, 112.854, 7
"04/29/94", 106.098, 108.537, 4520, 109.119, 7
"05/31/94", 104.878, 108.802, 4562, 110.545, 7
"06/30/94", 103.659, 104.822, 4576, 107.579, 7
"07/29/94", 97.561, 106.972, 4594, 111.414, 7
"08/31/94", 103.659, 113.792, 4612, 118.352, 7
"09/30/94", 112.195, 113.501, 4615, 110.076, 7
"10/31/94", 97.561, 115.732, 4637, 109.952, 7
"11/30/94", 104.878, 111.892, 4653, 102.890, 7
"12/30/94", 107.317, 112.206, 4658, 106.503, 7
"01/31/95", 92.683, 112.835, 4648, 107.848, 7
"02/28/95", 100.000, 118.802, 4650, 112.275, 7
"03/31/95", 107.317, 122.325, 4644, 117.178, 7
"04/28/95", 97.561, 126.177, 4655, 120.577, 7
"05/31/95", 97.561, 129.432, 4654, 126.692, 7
"06/30/95", 87.805, 139.922, 4671, 128.133, 7
"07/31/95", 107.317, 150.207, 4690, 138.356, 7
"08/31/95", 104.878, 153.252, 4713, 135.003, 7
"09/29/95", 107.317, 156.777, 4709, 135.542, 7
"10/31/95", 112.195, 155.878, 4747, 132.315, 7
"11/30/95", 117.073, 159.538, 4779, 137.695, 7
"12/29/95", 117.073, 158.688, 4819, 135.853, 7
"01/31/96", 125.610, 159.470, 4809, 142.716, 7
"02/29/96", 134.146, 165.539, 4839, 148.712, 7
"03/29/96", 129.268, 166.088, 4878, 148.561, 7
"04/30/96", 151.220, 179.868, 4923, 154.890, 7
"05/31/96", 158.537, 188.126, 4981, 160.113, 7
"06/28/96", 163.415, 179.646, 5034, 161.128, 7
"07/31/96", 148.781, 163.650, 5066, 155.691, 7
"08/30/96", 153.659, 172.819, 5090, 156.493, 7
"09/30/96", 153.659, 186.037, 5096, 169.990, 7
"10/31/96", 153.659, 183.983, 5138, 163.082, 7
"11/29/96", 158.537, 195.356, 5180, 178.908, 7
"12/31/96", 143.902, 195.180, 5176, 172.893, 7
<PAGE>
"01/31/97", 141.463, 209.053, 5161, 186.226, 7
"02/28/97", 151.220, 197.490, 5170, 194.706, 7
"03/31/97", 151.220, 184.596, 5168, 192.466, 7
"04/30/97", 162.195, 190.368, 5155, 194.310, 7
"05/30/97", 164.634, 211.941, 5148, 205.090, 7
"06/30/97", 160.976, 218.431, 5132, 213.927, 7
"07/31/97", 173.171, 241.488, 5127, 239.804, 7
"08/29/97", 215.854, 241.118, 5116, 223.789, 7
"09/30/97", 207.317, 255.384, 5106, 228.147, 7
"10/31/97", 210.976, 242.157, 5114, 211.895, 7
"11/28/97", 209.756, 243.370, 5130, 214.938, 7
"12/31/97", 202.439, 239.480, 5081, 219.585, 7
Companies in the Self-Determined Peer Group;
ALLEGHENY TELEDYNE INC AMERICAN BUSINESS PRODS INC GA
INGERSOLL RAND CO MOORE CORP LTD
NASHUA CORP STANLEY WORKS
WALLACE COMPUTER SERVICES INC
INDEPENDENT AUDITORS
Ernst & Young LLP was the Company's independent auditor for the
fiscal year 1997. The Company has been advised by Ernst & Young that
neither the firm nor any of its associates has any relationship with the
Company or any affiliate of the Company other than the usual relationship
that exists between independent auditor and client. A representative of
that firm might be present at the Meeting, will have an opportunity to
make a statement if he desires to do so, and will be available to respond
to appropriate questions from stockholders.
By Order of the Board of Directors
Stephen R. Kalette
Secretary
FORM 10-K REPORT
IN ADDITION TO ITS ANNUAL REPORT TO STOCKHOLDERS, THE COMPANY FILES
AN ANNUAL REPORT WITH THE SECURITIES AND EXCHANGE COMMISSION ON FORM
10-K. STOCKHOLDERS MAY OBTAIN A COPY WITHOUT EXHIBITS WITHOUT CHARGE BY
WRITING TO THE COMPANY, ATTENTION: STEPHEN R. KALETTE, SECRETARY, PUBCO
CORPORATION, 3830 KELLEY AVENUE, CLEVELAND, OHIO 44114. COPIES OF
EXHIBITS MAY BE OBTAINED AT $0.25 PER PAGE TO COVER THE COMPANY'S COSTS
IN FURNISHING SUCH COPIES.
<PAGE>
Appendix A
PUBCO CORPORATION
1998 EQUITY INCENTIVE PLAN
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates may be
given an opportunity to benefit from increases in value of the stock of
the Company through the granting of (i) Incentive Stock Options, (ii)
Nonstatutory Stock Options, (iii) Stock Bonuses, (iv) Rights to purchase
Restricted Stock, and (v) Stock Appreciation Rights, all as defined below.
(b) The Company, by means of the Plan, seeks to retain the services
of persons who are now Employees of and Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees and
Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated pursuant
to subsection 3(c), be either (i) Options granted pursuant to Section 6
hereof, including Incentive Stock Options and Nonstatutory Stock Options,
(ii) Stock Bonuses or Rights to Purchase Restricted Stock granted
pursuant to Section 7 hereof, or (iii) Stock Appreciation Rights granted
pursuant to Section 8 hereof. All Options shall be separately designated
Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and in such form as issued pursuant to Section 6, and a separate
certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are
defined in Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "COMPANY" means Pubco Corporation, a Delaware corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT"
means a right granted pursuant to subsection 8(b)(2) of the Plan.
A-1
<PAGE>
(g) "CONSULTANT" means any person, whether or not a Director,
engaged by the Company or an Affiliatge to render consulting services and
who is compensated for such services, other than by being paid solely a
director's fee.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE" means that the service of an
individual to the Company, as an Employee or Consultant, is not
interrupted or terminated. The Board, in its sole discretion, may
determine whether Continuous Status as an Employee shall be considered
interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave,
or (ii) transfers between locations of the Company or between the
Company, Affiliates or their successors.
(i) "COVERED EMPLOYEE" means the chief executive officer and the
four (4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the
Exchange Act, as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board.
(k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service
as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or a national market system, including without
limitation the National Market of The Nasdaq Stock Market, or
such other part of The NASDAQ Stock Market for which selling
prices are reported, the Fair Market Value of a share of common
stock shall be the mean between the high and low sales prices
for such stock (or the closing bid, if no sales were reported)
as quoted on such system or exchange (or the exchange with the
greatest volume of trading in common stock) on the day of
determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
(ii) If the common stock is quoted on The Nasdaq Stock
Market (but not on the National Market thereof) or is regularly
quoted by a recognized securities dealer, but selling prices are
not reported, the Fair Market Value of a share of common stock
shall be the mean between the bid and asked prices for the
common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such
other source as the Board deems reliable;
A-2
<PAGE>
(iii) In the absence of an established market for the
common stock, the Fair Market Value shall be determined in good
faith by the Board.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT"
means a right granted pursuant to subsection 8(b)(iii) of the Plan.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary,
does not receive compensation (directly or indirectly) from the Company
or its parent or subsidiary for services rendered as a Consultant or in
any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K
promulgated pursuant to the Securities Act ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would
be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item
404(b) of Regulation S-K or (ii) is otherwise considered a "non-employee
director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
(u) "OPTIONEE" means an Employee or Consultant who holds an
outstanding Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within
the meaning of Treasury regulations promulgated under Section 162(m) of
the Code), is not a former employee of the Company or an "affiliated
corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the
Company or an "affiliated corporation" at any time, and is not currently
receiving direct or indirect remuneration from the Company or an
"affiliated corporation" for services in any capacity other than as a
Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
A-3
<PAGE>
(w) "PLAN" means this Pubco Corporation 1998 Equity Incentive Plan.
(x) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect with respect to the Company when
discretion is being exercised with respect to the Plan.
(y) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.
(z) "STOCK AWARD" means any right granted under the Plan, including
any Option, any Stock Bonus, any Right to Purchase Restricted Stock, and
any Stock Appreciation Right.
(aa) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions
of any individual Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(bb) "STOCK BONUS" and "RIGHT TO PURCHASE RESTRICTED STOCK" mean
rights granted under Section 7 of the Plan.
(cc) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a
right granted pursuant to subsection 8(b)(i) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection
3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how
each Stock Award shall be granted; whether a Stock Award will be an
Incentive Stock Option, a Nonstatutory Stock Option, a Stock Bonus, a
Right to Purchase Restricted Stock, a Stock Appreciation Right, or a
combination of the foregoing; the provisions of each Stock Award
granted (which need not be identical), including the time or times
when a person shall be permitted to receive stock pursuant to a Stock
Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number
of shares with respect to which a Stock Award shall be granted to
each such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of
this power, may correct any defect, omission or inconsistency in the
Plan or in any Stock Award Agreement, in a manner and to the extent
it shall deem necessary or expedient to make the Plan fully effective.
A-4
<PAGE>
(iii) To amend the Plan or a Stock Award as provided in Section
14.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best
interests of the Company which are not in conflict with the
provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the
members of which Committee shall be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is
delegated to a Committee, the Committee shall have, in connection with
the administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee of two (2) or
more Outside Directors any of the administrative powers the Committee is
authorized to exercise (and references in this Plan to the Board shall
thereafter be to the Committee or such subcommittee), subject, however,
to such resolutions, not inconsistent with the provisions of the Plan, as
may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the
Plan. Notwithstanding anything in this Section 3 to the contrary, at any
time the Board or the Committee may delegate to a committee of one or
more members of the Board the authority to grant Stock Awards to eligible
persons who (i) are not then subject to Section 16 of the Exchange Act
and/or (ii) are either (A) not then Covered Employees and are not
expected to be Covered Employees at the time of recognition of income
resulting from such Stock Award, or (B) not persons with respect to whom
the Company wishes to avoid the application of Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock
Awards shall not exceed in the aggregate 200,000 shares of the Company's
Common Stock, par value $.01 per share. If any Stock Award shall for any
reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award
shall revert to and again become available for issuance under the Plan.
Shares subject to Stock Appreciation Rights exercised in accordance with
Section 8 of the Plan shall not be available for subsequent issuance
under the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees and
other Stock Awards may be granted only to Employees and Consultants.
A-5
<PAGE>
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock
of the Company or of any of its Affiliates unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market
Value of such stock at the date of grant and the Option is not
exercisable after the expiration of five (5) years from the date of
grant, or in the case of a Right to Purchase Restricted Stock, the
purchase price is at least one hundred percent (100%) of the Fair Market
Value of such stock at the date of grant.
(c) Subject to Section 13, no person shall be eligible to be granted
Options or Stock Appreciation Rights coverning more than 150,000 shares
of stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of
separate Options need not be identical, but each Option shall include
(through incorporation of provisions hereof by reference in the Option or
otherwise) the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of
ten (10) years from the date it was granted, or such earlier time as set
forth in the Option Agreement.
(b) PRICE. The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the Fair Market Value of
the stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Incentive Stock Option may be granted
with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pusuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash, or (ii) at the discretion
(determined at the time of grant) of the Board or the Committee, (A) by
delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement, except that payment
of the common stock's "par value" (as defined in the Delaware General
Corporation Law) shall not be made by deferred payment, (which may
include, without limiting the generality of the foregoing, the use of
other common stock of the Company) with the person to whom the Option is
granted or to whom the Option is transferred pursuant to subsection 6(d),
or (C) in any other form of legal consideration that may be acceptable to
the Board. In the case of any deferred payment arrangement, interest
shall be payable at least annually and shall be charged at the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
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(d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution,
and shall be exercisable during the lifetime of the person to whom the
Incentive Stock Option is granted only by such person. A Nonstatutory
Stock Option shall only be transferable by the Optionee upon such terms
and conditions as are set forth in the Option Agreement for such
Nonstatutory Stock Option, as the Board or the Committee shall determine
in its discretion, or by written notice by the Optionee accepted by the
Board. Notwithstanding the foregoing, the person to whom the Option is
granted may, be delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the
Option.
(e) VESTING. Unless specifically stated otherwise in a particular
Option, twenty-five percent (25%) of the Options in each Stock Award
shall first become exercisable on the first anniversary of the Stock
Award and twenty-five percent (25%) on each of the next three
anniversaries. The total number of shares of stock subject to an Option
may, but need not, be allotted in other periodic installments (which may,
but need not, be equal). The Option Agreement may provide that from time
to time during each of such installment periods, the Option may become
exercisable ("vest") with respect to some or all of the shares allotted
to that period, and may be exercised with respect to some or all of the
shares allotted to such period and/or any prior period as to which the
Option became vested but was not fully exercised. The Option may be
subject to such other terms and conditions on the time or times when it
may be exercised (which may be based on performance or other criteria) as
the Board may deem appropriate. The provisions of this subsection 6(e)
are subject to any Option provisions governing the minimum number of
shares as to which an Option may be exercised.
(f) TERMINATION OF EMPLOYMENT. In the event an Optionee's
Continuous Status as an Employee terminates (other than upon the
Optionee's death or disability), the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it at
the date of termination) but only within such period of time ending on
the earlier of (i) the date three (3) months after the termination of the
Optionee's Continuous Status as an Employee (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, after
termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and
the shares covered by such Option shall revert to and again become
available for issuance under the Plan.
Unless stated otherwise in the Option Agreement, if the exercise of
the Option following the termination of the Optionee's Continuous Status
as an Employee (other than upon the Optionee's death or disability) would
result in liability under Section 16(b) of the Exchange Act, then the
Option shall terminate on the earlier of (i) the expiration of the term
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of the Option set forth in the Option Agreement, or (ii) the tenth (10th)
day after the last date on which such exercise would result in such
liability under Seciton 16(b) of the Exchange Act. Finally, unless
stated otherwise in the Option Agreement, if the exercise of the Option
following the termination of the Optionee's Continuous Status as an
Employee (other than upon the Optionee's death or disability) would be
prohibited at any time solely because the issuance of shares would
violate the registration requirements under the Act, then the Option
shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the first paragraph of this subsection 6(f), or (ii)
the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, during which the
exercise of the Option would not be in violation of such registration
requirements.
(g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent
that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled
to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
(h) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination
of, the Optionee's Continuous Status as an Employee, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the Option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i)
the date twelve (12) months following the date of death (or such longer
or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after death, the Option is
not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and
again become available for issuance under the Plan.
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(i) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time while an Employee,
to exercise the Option as to any part or all of the shares subject to the
Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or
to any other restriction the Board determines to be appropriate.
(j) RE-LOAD OPTIONS. Without in any way limiting the authority of
the Board or Committee to make or not to make grants of Options
hereunder, the Board or Committee shall have the authority (but not an
obligation) to include as part of any Option Agreement a provision
entitling the Optionee to a further Option (a "Re-Load Option") in the
event the Optionee exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of common
stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the
exercise price of such Option; (ii) shall have an expiration date which
is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (iii) shall have an exercise price
which is equal to one hundred percent (100%) of the Fair Market Value of
the common stock subject to the Re-Load Option on the date of exercise of
the original Option. Notwithstanding the foregoing, a Re-Load Option
which is an Incentive Stock Option and which is granted to a 10%
shareholder (as described in subsection 5(c)), shall have an exercise
price which is equal to one hundred ten percent (110%) of the Fair Market
Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five
(5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the
time of the grant of the original Option; provided, however, that the
designation of any Re-Load Option as an Incentive Stock Option shall be
subject to the one hundred thousand dollar ($100,000) annual limitation
on exercisability of Incentive Stock Options described in subsection
12(d) of the Plan and in Section 422(d) of the Code. There shall be no
Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be
subject to the availability of sufficient shares under subsection 4(a)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each Stock Bonus or Restricted Stock Purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of Stock
Bonus or Restrictred Stock Purchase agreements may change from time to
time, and the terms and conditions of separate agreements need not be
identical, but each Stock Bonus or Restricted Stock Purchase agreement
shall include (through incorporation of provisions hereof by reference in
the agreement or otherwise) the substance of each of the following
provisions as appropriate:
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(a) PURCHASE PRICE. The purchase price under each Restricted Stock
Purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the
purchase price be less that eighty-five percent (85%) of the stock's Fair
Market Value on the date such award is made. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible
participants in the Plan may be awarded stock pursuant to a Stock Bonus
agreement in consideration for past services actually rendered to the
Company for its benefit.
(b) TRANSFERABILITY. Rights under a Stock Bonus or Restricted Stock
Purchase agreement shall be transferable by the grantee only upon such
terms and conditions as are set forth in the applicable Stock Award
Agreement, as the Board or the Committee shall determine in its
discretion, so long as stock awarded under such Stock Award Agreement
remains subject to the terms of the agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to
a stock purchase agreement shall be paid either: (i) in cash at the time
of purchase; (ii) at the discretion of the Board or the Committee,
according to a deferred payment arrangement, except that payment of the
common stock's "par value" (as defined in the Delaware General
Corporation Law) shall not be made by deferred payment, or other
arrangement with the person to whom the stock is sold; or (iii) in any
other form of legal consideration that may be acceptable to the Board or
the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a Stock Bonus agreement in
consideration for past services actually rendered to the Company or for
its benefit.
(d) VESTING. Shares of stock sold or awarded under this Section 7,
may, but need not, be subject to a repurchase option in favor of the
Company in accordance with a vesting schedule to be determined by the
Board or the Committee.
(e) TERMINATION OF EMPLOYMENT. In the event a Participant's
Continuous Status as an Employee terminates, the Company may repurchase
or otherwise reacquire any or all of the shares of stock held by that
person which have not vested as of the date of termination under the
terms of the Stock Bonus or Restricted Stock Purchase agreement between
the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights
under the Plan to Employees of the Company or its Affiliates. To
exercise any outstanding Stock Appreciation Right, the holder must
provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. No
limitation shall exist on the aggregate amount of cash payments the
Company may make under the Plan in connection with the exercise of a
Stock Appreciation Right.
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(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan.
(i) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights may be granted appurtenant to an Option, and
shall, except as specifically set forth in this Section 8, be subject
to the same terms and conditions applicable to the particular Option
grant to which it pertains. Tandem Stock Appreciation Rights will
require the holder to elect between the exercise of the underlying
Option for shares of stock and the surrender, in whole or in part, of
such Option for an appreciation distribution. The appreciation
distribution payable on the exercised Tandem Stock Appreciation Right
shall be in cash (or, if so provided, in an equivalent number of
shares of stock based on Fair Market Value on the date of the Option
surrender) in an amount up to the excess of (A) the Fair Market Value
(on the date of the Option surrender) of the number of shares of
stock covered by that portion of the surrendered Option in which the
Optionee is vested over (B) the aggregate exercise price payable for
such vested shares.
(ii) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Stock
Appreciation Rights may be granted appurtenant to an Option and may
apply to all or any portion of the shares of stock subject to the
underlying Option and shall, except as specifically set forth in this
Section 8, be subject to the same terms and conditions applicable to
the particular Option grant to which it pertains. A Concurrent Stock
Appreciation Right shall be exercised automatically at the same time
the underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Stock Appreciation Right
pertains. The appreciation distribution payable on an exercised
Concurrent Stock Appreciation Right shall be in cash (or, if so
provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the exercise of the Concurrent Stock
Appreciation Right) in an amount equal to such portion as shall be
determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the
exercise of the Concurrent Stock Appreciation Right) of the vested
shares of stock purchased under the underlying Option which have
Concurrent Stock Appreciation Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.
(iii) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Stock
Appreciation Rights may be granted independently of any Option and
shall, except as specifically set forth in this Section 8, be subject
to the same terms and conditions applicable to Nonstatutory Stock
Options as set forth in Section 6. They shall be denominated in
share equivalents. The appreciation distribution payable on the
exercised Independent Stock Appreciation Right shall not be greater
than an amount equal to the excess of (A) the aggregate Fair Market
Value (on the date of the exercise of the Independent Stock
Appreciation Right) of a number of shares of Company stock equal to
the number of share equivalents in which the holder is vested under
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such Independent Stock Appreciation Right, and with respect to which
the holder is exercising the Independent Stock Appreciation Right on
such date, over (B) the aggregate Fair Market Value (on the date of
the grant of the Independent Stock Appreciation Right) of such number
of shares of Company stock. The appreciation distribution payable on
the exercised Independent Stock Appreciation Right shall be in cash
or, if so provided, in an equivalent number of shares of stock based
on Fair Market Value on the date of the exercise of the Independent
Stock Appreciation Right.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of any adversely affected
holders of Options and/or Stock Appreciation Rights, (i) the repricing of
any outstanding Options and/or any Stock Appreciation Rights under the
Plan and/or (ii)the cancellation of any outstanding Options and/or any
Stock Appreciation Rights under the Plan and the grant in substitution
therefor of new Options and/or Stock Appreciation Rights under the Plan
covering the same or different numbers of shares of stock, but having an
exercise price per share not less than: one hundred percent (100%) of
the Fair Market Value in the case of an Incentive Stock Option or, in the
case of an Incentive Stock Option held by a 10% shareholder (as described
in subsection 5(b)), not less than one hundred ten percent (110%) of the
Fair Market Value per share of stock on the new grant date.
Notwithstanding the foregoing, the Board or the Committee may grant an
Option and/or Stock Appreciation Right with an exercise price lower than
that set forth above if such Option and/or Stock Appreciation Right is
granted as part of a transaction to which section 424(a) of the Code
applies.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy
such Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon exercise of the Stock
Award; provided, however, that this undertaking shall not require the
Company to register under the Securities Act of 1933, as amended (the
"Securities Act") either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for
the lawful issuance and sale of stock under the Plan, the Company shall
be relieved from any liability for failure to issue and sell stock upon
exercise of such Stock Awards unless and until such authority is obtained.
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11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award
or any part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at
which it may first be exercised or the time during which it will vest.
(b) Neither an Employee or Consultant, nor any person to whom a
Stock Award is transferred in accordance with the Plan, shall be deemed
to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such
person has satisfied all requirements for exercise of the Stock Award
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee or Consultant or
other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate, or to continue acting as a Consultant, or shall
affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without notice and with or without
cause, the right of the Company's Board of Directors and/or the Company's
shareholders to remove any Director pursuant to the terms of the
Company's Bylaws and the provisions of the Delaware Law.
(d) To the extent that the aggregate Fair Market Value (determined
at the time of grant) of stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds
one hundred thousand dollars ($100,000), the Options or portions thereof
which exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options.
(e) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance
with the Plan, as a condition of exercising or acquiring stock under any
Stock Award, (i) to give written assurances satisfactory to the Company
as to such person's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the
merits and risks of exercising the Stock Award; and (ii) to give written
assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances
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given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise or acquisition of stock under
the Stock Award has been registered under a then currently effective
registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under
the then applicable legends on stock certificates issued under the Plan
as such counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement,
the person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under a Stock Award by any of the following means or
by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the common
stock otherwise issuable to the participant as a result of the exercise
or acquisition of stock under the Stock Award; or (iii) delivering to the
Company owned and unencumbered shares of the common stock of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Stock Award, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash,
stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan will be
appropriately adjusted in the class(es) and maximum number of shares
subject to the Plan pursuant to subsection 4(a) and the maximum number of
shares subject to award to any person during any calendar year pursuant
to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price
per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by
the Company".)
(b) In the event of: (i) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; or
(iii) a reverse merger in which the Company is the surviving corporation
but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise, then to
the extent permitted by applicable law: (A) any surviving corporation or
an Affiliate of such surviving corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar Stock Awards for
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those outstanding under the Plan, or (B) such Stock Awards shall continue
in full force and effect. In the event any surviving corporation and its
Affiliates refuse to assume or continue such Stock Awards, or to
substitute similar options for those outstanding under the Plan, then,
with respect to Stock Awards held by persons then performing services as
Employees or Consultants, the time during which such Stock Awards may be
vested shall be accelerated so that all such outstanding Stock Awards
shall be immediately vested and the expiration of Stock Awards
accelerated so that Stock Awards will terminate if not exercised prior to
such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the
Plan. However, except as provided in Section 13 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved by
the shareholders of the Company within twelve (12) months before or after
the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for Stock Awards
under the Plan;
(ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires
shareholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or 162(m) of the Code); or
(iii) Modify the Plan in any other way if such modification
requires shareholder approval in order for the Plan to satisfy the
requirements of Section 422 of the Code or to comply with the
requirements of Rule 16b-3.
(b) The Board may in its sole discretion submit any other amendment
to the Plan for shareholder approval, including, but not limited to,
amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations promulgated thereunder regarding
the exclusion of performance-based compensation from the limit on
corporate deductibility of compensation paid to certain executive
officers.
(c) It is expressly contemplated that the Board may amend the Plan
in any respect the Board deems necessary or advisable to provide eligible
Employees and Consultants with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan
and/or Incentive Stock Options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the person to whom the
Stock Award was granted and (ii) such person consents in writing.
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(e) The Board at any time, and from time to time, may amend the
terms of any one or more Stock Award; provided, however, that the rights
and obligations under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the person to
whom the Stock Award was granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate ten (10) years from the date
the Plan is adopted by the Board or approved by the shareholders of the
Company, whichever is earlier. No Stock Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Stock Award
was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective upon adoption by the Board, so long
as the shareholders of the Company approve the Plan within twelve months
after such effective date. No Stock Awards granted under the Plan shall
be exercised unless and until the Plan has been so approved by the
shareholders of the Company.
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