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[REDMAN LOGO]
July , 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of the Shareholders
of Redman Industries, Inc. on Wednesday, August 21, 1996. The meeting will be
held at the offices of the Company, 2550 Walnut Hill Lane, Suite 200, Dallas,
Texas 75229, at 10:00 A.M. local time.
The following Notice of Annual Meeting of Shareholders describes the
formal business to be transacted. The meeting will also include a report on the
operations of the Company. Our 1996 annual report is enclosed.
It is important that your shares be represented at the meeting, regardless
of how many shares you own and whether or not you plan to attend in person.
Therefore, we encourage you to either vote in person or by using the enclosed
proxy card.
If you arrive early, you are invited to have coffee and meet informally
with the Directors.
Sincerely,
/S/ THOMAS W. STURGESS
Thomas W. Sturgess
Chairman of the Board
2550 Walnut Hill Lane, Suite 200
Dallas, Texas 75229
214/353-3600
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REDMAN INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 21, 1996
TO THE SHAREHOLDERS OF REDMAN INDUSTRIES, INC.:
The 1996 Annual Meeting of Shareholders of Redman Industries, Inc. will be
held on August 21, 1996 at 10:00 A.M., Dallas time, at the offices of the
Company at 2550 Walnut Hill Lane, Suite 200, Dallas, Texas 75229, for the
following purposes:
1. To elect to the Board of Directors three directors to hold office for
a three year term ending at the third succeeding annual meeting of
shareholders after their election and until their successors are elected
and qualified;
2. To consider and vote upon a proposal to approve the Redman Industries,
Inc. 1996 Long Term Incentive Plan;
3. To consider and vote upon a proposal to amend the Restated Certificate
of Incorporation of Redman Industries, Inc. to increase the number of
authorized shares of Common Stock, par value $0.01, from 20,000,000 to
40,000,000 shares authorized for issuance; and
4. To act upon such other matters as may properly come before the meeting
and any adjournment thereof.
Only shareholders of record at the close of business on June 27, 1996 will
be entitled to notice of and to vote at the meeting.
You are cordially invited to attend the meeting in person. YOUR VOTE IS
IMPORTANT. ACCORDINGLY, YOU ARE URGED TO SIGN AND RETURN THE ACCOMPANYING PROXY
CARD WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. IF YOU DO ATTEND, YOU MAY
VOTE BY BALLOT AT THE MEETING, THEREBY CANCELING ANY PROXY PREVIOUSLY GIVEN.
By order of the Board of Directors,
/s/ PAUL L. BARRETT
PAUL L. BARRETT, Secretary
2550 Walnut Hill Lane
Suite 200
Dallas, Texas 75229
July , 1996
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REDMAN INDUSTRIES, INC.
2550 WALNUT HILL LANE
SUITE 200
DALLAS, TEXAS 75229
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PROXY STATEMENT
---------------------
This Proxy Statement and accompanying proxy card are being furnished by the
Board of Directors (the "Board of Directors") of Redman Industries, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Shareholders to be held on Wednesday, August 21, 1996, and at any adjournments
or postponements thereof (the "Meeting"). The Proxy Statement, accompanying
proxy card and the Company's Annual Report to Shareholders for the fiscal year
ended March 29, 1996 are being mailed to shareholders beginning on or about July
, 1996. The Annual Report is not to be regarded as proxy solicitation material
or as a part of this Proxy Statement.
Only shareholders of record at the close of business on June 27, 1996 (the
"Record Date") are entitled to notice of and to vote at the Meeting. Each
shareholder is entitled to one vote in person or by proxy for each share of the
Company's common stock, par value $.01 per share (the "Common Stock"), held. The
enclosed proxy, even though executed and returned, may be revoked at any time
prior to its use by the filing of a written notice of revocation with the
Secretary of the Company prior to the convening of the Meeting, or by presenting
another executed proxy card with a later date. Proxies may also be revoked by a
shareholder attending and voting in person at the Meeting. Attendance at the
Meeting, in and of itself, will not constitute a revocation of a proxy.
At June 27, 1996, the Record Date, there were 13,342,751 shares of the
Company's Common Stock outstanding and entitled to one vote each at the Meeting.
A quorum (the presence, in person or by proxy, of the holders of a majority of
the shares of Common Stock issued and outstanding and entitled to vote) is
required for any vote taken at the Meeting to be deemed valid. When a quorum is
present, then the vote of the holders of a majority of the Company's outstanding
Common Stock present in person or by proxy shall be required for the election of
any director, the approval of the Company's 1996 Long Term Incentive Plan or
(except for the approval of the proposed amendment to the Company's Restated
Certificate of Incorporation) the approval of any other matter which is
submitted to a vote of the shareholders at the Meeting. The approval of
two-thirds of the outstanding shares of Common Stock is required for the
approval of the proposed amendment to the Company's Restated Certificate of
Incorporation.
Only votes cast "for" a matter constitute affirmative votes. Votes
"withheld" or abstaining from voting are counted for quorum purposes, but are
voted neither for nor against a matter, although they have the same effect as
negative votes. Broker non-votes are counted for quorum purposes but have no
effect because they are not treated as shares entitled to vote (except for the
election of directors in which case broker non-votes have the same effect as
negative votes). If specific voting instructions are given, the proxy card will
be voted in accordance with such instructions. If the proxy card is signed and
returned without specifying choices, the proxy will be voted for the nominees
for election as director as stated herein, for the approval of the Company's
1996 Long Term Incentive Plan, for the amendment to the Company's Restated
Certificate of Incorporation and in accordance with the discretion of the named
attorneys-in-fact on other matters properly brought before the Meeting. If a
broker indicates on the proxy that it does not have discretionary authority as
to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
ELECTION OF DIRECTORS
The Board of Directors is classified into three classes of directors
serving staggered three year terms, with the term of one class expiring at each
annual meeting of shareholders. The term of office of the directors in Class 3
expires at the Meeting. The term of office of those directors in Class 1 will
expire at the 1997 annual
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meeting of shareholders, and the term of office of those directors in Class 2
will expire at the 1998 annual meeting of shareholders.
Thomas W. Sturgess, C.A. Rundell, Jr. and Robert L. Stark, the Class 3
directors whose terms expire at the Meeting, have each been nominated by the
Board of Directors for re-election to a three-year term. It is intended that the
attorneys-in-fact named in the proxy card will vote for the election of such
nominees at the Meeting. Each Class 3 nominee elected at the Meeting will hold
office until the annual meeting of shareholders to be held in 1999 and until his
successor has been duly elected and qualified, unless prior to such meeting a
director shall resign, or his directorship shall become vacant due to his death
or removal. While it is not anticipated that any of the nominees will become
unavailable for election, if any nominee should be unable to serve as a
director, the shares represented by a proxy may be voted for any substitute
nominee designated by the Board of Directors, unless the Board of Directors
reduces the number of directors.
Set forth below are the names, ages and positions of the nominees for
election as director and each of the continuing directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- -------------------------------------
<S> <C> <C>
NOMINEES FOR ELECTION FOR TERMS
EXPIRING AT THE 1999 ANNUAL MEETING (CLASS 3)
Thomas W. Sturgess(a)........................ 45 Chairman of the Board
C.A. Rundell, Jr. (b)(c)(d).................. 64 Director
Robert L. Stark (b)(c)(d).................... 63 Director
DIRECTORS WHOSE TERMS EXPIRE AT
THE 1997 ANNUAL MEETING (CLASS 1)
Robert M. Linton(a).......................... 50 President, Chief Executive Officer
and Director
Fergus J. Walker(a).......................... 61 Executive Vice President, Chief
Financial Officer and Director
DIRECTORS WHOSE TERMS EXPIRE AT
THE 1998 ANNUAL MEETING (CLASS 2)
James T. Callier, Jr.(a)..................... 61 Director
Henry T. DeNero(b)........................... 50 Director
Frank J. Feraco(c)(d)........................ 49 Director
</TABLE>
- ---------------
(a) Serves on the Executive Committee
(b) Serves on the Audit Committee
(c) Serves on the Compensation Committee
(d) Served on the Option Committee
Set forth below is a description of the backgrounds of the nominees for
election as director and each of the continuing directors of the Company. There
is no family relationship between any of the directors or executive officers of
the Company.
THOMAS W. STURGESS, a nominee for election as director, has served as
Chairman of the Board of the Company since July 1993, as Chief Executive Officer
from July 1993 until January 1996, as a director since August 1988, as President
and Assistant Secretary from December 1992 until July 1993, as Vice President
and Secretary from August 1988 to December 1992 and as President of Redman
Corporation, a former subsidiary of the Company ("Redman Subsidiary"), from
November 1988 until its merger with the Company in September 1993. Since June
1991, Mr. Sturgess has served as a director of RBPI Holding Corporation ("RBPI
Holding"), a former subsidiary of the Company which engages, through its
subsidiaries, in the manufacture and sale of aluminum and vinyl windows and
doors. For more than the past five years, Mr. Sturgess has served as a general
partner of Wingate Partners, L.P. ("Wingate Partners"), a Dallas-based private
investment firm. Mr. Sturgess also serves as Chairman of the Board, Chief
Executive Officer and President of United Stationers Inc. ("United Stationers"),
a wholesale distributor of office products.
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Mr. Sturgess devotes a substantial portion of his efforts and time to fulfilling
his primary responsibility to United Stationers.
C.A. RUNDELL, JR., a nominee for election as director, has served as a
director of the Company since November 1993. Mr. Rundell has been President and
sole proprietor of Rundell Enterprises, a venture capital and investments
company, since 1988 and Chairman of the Board of NCI Building Systems, Inc., a
company engaged in the manufacture of metal building systems, since 1989. Mr.
Rundell currently serves as a director of Tyler Corporation, Tandy Brands
Accessories, Inc., Eljer Industries, Inc. and Inter-Regional Financial Group.
ROBERT L. STARK, a nominee for election as director, has served as a
director of the Company since November 1993. Since September 1993, Mr. Stark has
served as Dean of the University of Kansas Regents Center. From 1958 until his
retirement in March 1993, Mr. Stark served in various capacities at Hallmark
Cards, Inc., a worldwide manufacturer of greeting cards and related products,
including as Executive Vice President, director and President of the Personal
Communications Group. Mr. Stark currently serves as a director of Mercantile
Bancorporation and Payless Shoe Source, Inc.
JAMES T. CALLIER, JR. has served as a director of the Company since August
1988, as Chairman of the Board from December 1992 until July 1993 and as
President from August 1988 until December 1992. For more than the past five
years, Mr. Callier has been President of Callier Interests, a Houston-based
private investment firm, and a general partner of Wingate Partners. Mr. Callier
serves as a director of RBPI Holding. Mr. Callier also currently serves as a
director of United Stationers.
HENRY T. DENERO has served as a director of the Company since October 1994.
Since July 1995, Mr. DeNero has been Executive Vice President of First Data
Corporation, a company engaged in computer services. Prior thereto he was a
consultant, and was Vice Chairman of Dayton Hudson Corporation from 1992 to
1994. From 1973 to 1992, Mr. DeNero served in various capacities with McKinsey &
Company Inc., a management consulting firm, most recently as a director of the
firm.
FRANK J. FERACO has served as a director of the Company since July 1994.
Since April 1996, Mr. Feraco has been President of the Kohler Company, a company
engaged in the manufacturing and marketing of plumbing products worldwide. Mr.
Feraco was President of the Danaher Tool Group of the Danaher Corporation from
April 1994 to March 1996. The Danaher Tool Group is engaged in the manufacture
of hand tools for industrial and consumer use. From 1991 to 1994, Mr. Feraco
served as President and Chief Executive Officer of the Sterling Plumbing Group,
a subsidiary of the Kohler Company. From 1975 to 1991, he served in various
capacities with Emerson Electric Company, most recently as Senior Vice
President, Sales/Marketing for Skil Corporation, a subsidiary of Emerson
Electric Company.
ROBERT M. LINTON has served as President and a director of the Company
since July 1993, as Chief Executive Officer since January 1996, and as President
of Redman Homes, Inc., a subsidiary of the Company ("Redman Homes"), since
January 1991.
FERGUS J. WALKER has served as Chief Financial Officer and a director of
the Company since July 1993 and as Executive Vice President since July 1990. In
addition, Mr. Walker served as Executive Vice President of Redman Subsidiary
from April 1989 until September 1993.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Executive Committee, an Audit Committee and a
Compensation Committee. During the Company's 1996 fiscal year, the Board of
Directors also had an Option Committee. In May 1996, the functions of the Option
Committee were assumed by the Compensation Committee. The following are the
current members and functions of the standing committees of the Board of
Directors and former members and functions of the Option Committee.
Executive Committee. The members of the Executive Committee are Messrs.
Sturgess (Chairman), Callier, Linton and Walker. The Executive Committee
discharges certain duties of the Board of Directors during interim periods
between meetings of the full Board.
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Audit Committee. The members of the Audit Committee are Messrs. Rundell
(Chairman), DeNero and Stark. The Audit Committee recommends to the Board of
Directors the appointment of independent auditors, reviews the plan, scope and
results of the audit of the Company's financial statements and reviews the
Company's significant accounting policies and related matters.
Compensation Committee. The members of the Compensation Committee are
Messrs. Stark (Chairman), Feraco and Rundell. The Compensation Committee
represents and makes recommendations to the full Board of Directors in matters
relating to the compensation of Company officers, and presently administers the
Company's stock option plans.
Option Committee. The members of the Option Committee during fiscal 1996
were Messrs. Stark (Chairman), Feraco and Rundell. The Option Committee
administered the 1993 Stock Option Plan and the Incentive Holders' Stock Option
Plan (as such terms are hereinafter defined). See "Executive
Compensation -- Compensation Pursuant to Plans -- Incentive Holders' Stock
Option Plan" and "-- 1993 Stock Option Plan."
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors met six times during the Company's fiscal year ended
March 29, 1996. In addition, during fiscal 1996, the Audit and Compensation
Committees met two times each. The Option Committee met one time and the
Executive Committee did not meet. Each director attended at least 75 percent of
the meetings of the Board of Directors of the Company and standing committees of
which he was a member during fiscal 1996 or the period thereof during which he
was a member.
COMPENSATION OF DIRECTORS
Pursuant to the Company's By-Laws, the members of the Board of Directors
are compensated in a manner and at a rate determined from time to time by the
Board of Directors. The Company pays its independent directors an annual fee of
$12,000, a fee of $1,000 per board meeting attended and a fee of $500 per
committee meeting attended. In addition, the Company reimburses its directors
for travel and lodging expenses in connection with their attendance at board
meetings. The Company also grants options to each independent director pursuant
to the automatic provisions of the 1993 Stock Option Plan. Effective August 1995
(and after giving effect to the adjustments resulting from the Company's
declaration of a dividend (the "Stock Dividend") payable on March 8, 1996 to all
holders of record on February 23, 1996, of one additional share of Common Stock
for each share of Common Stock issued and outstanding), Messrs. Callier, DeNero,
Feraco, Rundell and Stark were each granted an option exercisable for 2,000
shares of Common Stock at an exercise price of $12.75 per share, the fair market
value of Common Stock at the grant date, pursuant to the terms of the 1993 Stock
Option Plan. See "Executive Compensation -- Compensation Pursuant to
Plans -- 1993 Stock Option Plan." Directors who are employees of the Company
receive no additional consideration for serving as directors.
Subject to the approval of the Company's 1996 Long Term Incentive Plan,
awards of non-qualified options shall be made to outside directors under that
plan rather than under the 1993 Stock Option Plan. Commencing with the Meeting,
each person who is serving as an Outside Director Participant (as defined below)
on the third trading day following the later of (i) the date on which the annual
meeting of the Company's shareholders or any adjournment thereof is held in any
year and (ii) the date on which the Company publicly announces the results of
operations of the Company for the fiscal quarter immediately preceding such
annual meeting, shall automatically be granted an option to purchase 3,000
shares of Common Stock. In addition, an initial grant of an option to purchase
10,000 shares of Common Stock shall automatically be granted to each outside
director in connection with such director's first election as a director on the
third trading day following the effective date of such election. See "Approval
of the Redman Industries, Inc. 1996 Long Term Incentive Plan."
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APPROVAL OF THE REDMAN INDUSTRIES, INC.
1996 LONG TERM INCENTIVE PLAN
In the past, the Company has provided long-term incentive compensation to
executives, key employees and independent directors. The Company believes that
such incentives permit it to attract and retain high quality talent and to
motivate its independent directors, executives and key employees to achieve
business and financial goals that create value for shareholders.
Subject to the approval of the Company's shareholders, the Board of
Directors has adopted the 1996 Long Term Incentive Plan (the "1996 LTIP")
effective as of August 22, 1996. A total of 700,000 shares of Common Stock
(which had a per share market price of $ on July , 1996) may be used
for awards under the 1996 LTIP, no more than 50,000 of which may be issued or
transferred as Restricted Shares (as defined below).
As described below, the 1996 LTIP would continue to provide long-term
incentives to executives, key employees and independent directors which are
similar to those provided by the Company's 1993 Stock Option Plan. Under the
1993 Stock Option Plan, both qualified and non-qualified stock options have been
granted in the past to executive officers, key employees and independent
directors of the Company and its subsidiaries. Approximately 130,246 shares of
Common Stock relating to awards under the 1993 Stock Option Plan remain unissued
as of June 27, 1996. The Company currently intends to continue to issue
qualified and non-qualified stock options under the 1993 Stock Option Plan,
until all shares reserved under the 1993 Stock Option Plan have been issued. For
a description of the 1993 Stock Option Plan, see "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan." The
Board of Directors has previously amended the Company's Incentive Holders' Stock
Option Plan to decrease the number of shares available for grant so that no
further shares are available for grant under that plan. For a description of the
Incentive Holders' Stock Option Plan, see "Executive
Compensation -- Compensation Pursuant to Plans -- Incentive Holders' Stock
Option Plan."
Shareholder approval of the 1996 LTIP is sought to qualify the 1996 LTIP
pursuant to Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange
Act"), as in effect on the date of this Proxy Statement, and thereby render
certain transactions under the 1996 LTIP exempt from certain provisions of
Section 16 of the Exchange Act. Shareholder approval is also sought in order to
comply with certain requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), and the NASDAQ National Market System.
The following summary of certain material features of the 1996 LTIP is
qualified in its entirety by reference to the full text of the 1996 LTIP, which
is set forth in the attached Exhibit A.
GENERAL
The purposes of the 1996 LTIP are to (1) attract and retain key executives
and other key employees; (2) motivate participating employees, by means of
appropriate incentives; (3) attract and retain well-qualified individuals to
serve as members of the Company's Board of Directors; (4) provide incentive
compensation opportunities that are competitive with those of other
corporations; and (5) further identify the interests of eligible employees with
those of the Company's other shareholders through compensation alternatives
based on the Company's Common Stock.
Awards under the 1996 LTIP may be granted only to persons who are regular
salaried employees of the Company or one or more of its subsidiaries and either
are officers of, or hold key positions in or for, the Company or any subsidiary
("Participants"). In addition, the 1996 LTIP, like the 1993 Stock Option Plan,
provides for the automatic grant of non-qualified options to individuals not
employed by the Company who serve as members of the Board of Directors ("Outside
Director Participants"). The Company estimates that approximately 35 to 50
employees presently will be eligible to receive awards under the 1996 LTIP in
addition to the six executives named in the Summary Compensation Table below. In
the event Messrs. Rundell and Stark are re-elected to the Board of Directors,
there will be a total of five Outside Director Participants under the 1996 LTIP.
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The 1996 LTIP is a flexible plan that will give the Compensation Committee
broad discretion to fashion the terms of the awards to provide eligible
Participants with stock-based incentives and performance-based bonus
opportunities, payable in cash or stock as the Compensation Committee deems
appropriate. The 1996 LTIP will permit the issuance of awards in a variety of
forms, including (1) non-qualified and incentive stock options (collectively,
"Stock Options"), (2) shares of the Company's Common Stock that are subject to
certain restrictions as provided in the 1996 LTIP or as otherwise determined by
the Compensation Committee in accordance with the provisions of the 1996 LTIP
("Restricted Shares") and (3) units that are valued based upon the long-term
performance of the Company ("Performance Units"). The maximum aggregate number
of shares of Common Stock with respect to which all Stock Options, Restricted
Shares and Performance Units may be awarded from time to time under the 1996
LTIP is 700,000. Of that amount, no more than 50,000 shares will be issued or
transferred as Restricted Shares. All Stock Options must be granted at an
exercise price no less than the fair market value of the Common Stock at the
grant date. In addition, the maximum aggregate number of shares that may be
subject to Stock Options, Restricted Shares, and Performance Units granted to a
single Participant during any year cannot exceed 200,000.
Shares of Common Stock subject to an award that remain unissued upon
termination of the award (for example, upon an optionee's termination of
employment without exercise of vested Stock Options, or with respect to
non-vested Stock Options that are forfeited upon termination of employment) will
become available for additional awards under the 1996 LTIP. Also, in the event
of a stock dividend, stock split, recapitalization, merger, reorganization or
similar event, the aggregate number of shares subject to the 1996 LTIP and the
number, class and price of shares subject to awards outstanding, shall be
automatically adjusted to prevent dilution or enlargement as a result of such
event.
ADMINISTRATION OF THE 1996 LTIP
The 1996 LTIP shall be administered, construed and interpreted by the
Compensation Committee. The Compensation Committee shall have plenary authority
in its sole discretion and subject to the express provisions of the 1996 LTIP,
to grant Stock Options, to determine the purchase price of the Common Stock
covered by each Stock Option, the term of each Stock Option and to change the
same, the class or classes of shares of Common Stock to be covered by each Stock
Option, the Participants to whom, and the time or times at which, Stock Options
shall be granted and the number of shares to be covered by each Stock Option; to
designate Stock Options as incentive stock options or non-qualified stock
options; to determine the vesting schedule with respect to each Stock Option; to
grant Restricted Shares and Performance Units and to determine the term of the
restricted period and appropriate long-term objectives and other conditions
applicable to such Restricted Shares or Performance Units, the Participants to
whom, and the time or times at which Restricted Shares or Performance Units
shall be granted and the number of Restricted Shares or Performance Units to be
covered by each grant; to determine whether Performance Units shall be payable
in cash or in the form of shares of Common Stock; to interpret the 1996 LTIP; to
prescribe, amend and rescind rules and regulations relating to the 1996 LTIP; to
determine the terms and provisions of the option agreements, and the Restricted
Share and Performance Unit agreements entered into in connection with awards
under the 1996 LTIP; to prepare and distribute in such manner as the
Compensation Committee determines to be appropriate information concerning the
1996 LTIP; and to make all other determinations deemed necessary or advisable
for the administration of the 1996 LTIP.
AWARDS UNDER THE 1996 LTIP
Stock Options for Participants. The Compensation Committee in its
discretion shall determine the number of shares of Common Stock subject to Stock
Options to be granted to each Participant. The Compensation Committee may grant
non-qualified stock options, incentive stock options or a combination thereof to
Participants. Stock Options granted under the 1996 LTIP will provide for the
purchase of Common Stock at prices not less than 100% of the fair market value
thereof on the date the Stock Option is granted. No Stock Option granted shall
be exercisable more than ten years from the date of grant.
Stock Options granted under the 1996 LTIP will be vested and exercisable at
such times and subject to such restrictions and conditions as the Compensation
Committee shall approve. Unless otherwise provided in
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an option agreement, a Stock Option granted under the 1996 LTIP shall become
100% vested at the earliest of the Participant's retirement from active
employment at or after reaching the age of 60 (or such other age determined by
the Compensation Committee) or the Participant's death or disability. Each Stock
Option shall become vested and exercisable in such cumulative installments and
upon such events as the Compensation Committee may determine in its sole
discretion. Subject to the foregoing, the unvested portion of any Stock Option
granted under the 1996 LTIP shall be forfeited on the date the Participant
ceases to be an employee of the Company. The Compensation Committee may also, in
its sole discretion, accelerate the exercisability of any Stock Option or
installment thereof at any time.
The exercise price of any Stock Option may be paid in cash or in shares of
Common Stock, valued at the fair market value per share on the date of exercise.
In addition, an option holder may also make payment at the time of exercise of a
Stock Option (other than an incentive stock option) for such class of Common
Stock by delivering to the Company a properly executed exercise notice together
with irrevocable instructions to a broker approved by the Company that upon such
broker's sale of shares with respect to which such Stock Option is exercised, it
is to deliver promptly to the Company the amount of sale proceeds necessary to
satisfy the option exercise price and any required withholding taxes.
Stock Options for Outside Director Participants. Under the terms of the
1996 LTIP, awards of non-qualified options shall be made to Outside Director
Participants. Commencing with the Meeting, each person who is serving as an
Outside Director Participant on the third trading day following the later of (i)
the date on which the annual meeting of the Company's shareholders or any
adjournment thereof is held in any year and (ii) the date on which the Company
publicly announces the results of operations of the Company for the fiscal
quarter immediately preceding such annual meeting, shall automatically be
granted a Stock Option to purchase 3,000 shares of Common Stock. In addition,
but without duplication with respect to the foregoing grant to existing Outside
Director Participants, an initial grant of a Stock Option to purchase 10,000
shares of Common Stock shall automatically be granted to each Outside Director
Participant in connection with such director's first election as a director on
the third trading date following the effective date of such election.
Stock Options granted to Outside Director Participants will provide for the
purchase of Common Stock at prices not less than 100% of the fair market value
thereof on the date the Stock Option is granted. Fifty percent of each Stock
Option granted to an Outside Director Participant shall be exercisable within
one year after the date of grant, an additional twenty-five percent shall be
exercisable within two years after the date of grant, and the remainder shall be
exercisable three years after the date of grant. The right to purchase shares
shall be cumulative so that when the right to purchase any shares has accrued,
such shares or any part thereof may be purchased at any time thereafter until
the expiration or termination of the Stock Option. Such Stock Options will have
additional terms and conditions similar to those described above with respect to
the 1996 LTIP generally.
If the 1996 LTIP is approved by the Company's shareholders at the Meeting,
the provisions of the 1993 Stock Option Plan relating to automatic grants of
options to Outside Director Participants will be superseded by the terms
contained in the 1996 LTIP and all future option grants to Outside Director
Participants shall be made pursuant to the terms of the 1996 LTIP.
Restricted Shares. The Compensation Committee may from time to time
authorize grants to any Participant of Restricted Shares upon such terms and
conditions as it may determine in accordance with the provisions of the 1996
LTIP. Each grant will constitute an immediate transfer of the ownership of
shares of Common Stock to the Participant in consideration of the performance of
services, entitling such Participant to voting and other ownership rights, but
subject to the restrictions hereinafter referred to.
At the time an award of Restricted Shares is made, the Compensation
Committee shall establish a period or periods of time (each a "Restricted
Period") applicable to such award that shall not be more than ten years. Each
award of Restricted Shares may have a different Restricted Period or Restricted
Periods. The Compensation Committee, in its sole discretion at the time an award
is made, may provide for the incremental lapse of Restricted Periods with
respect to a portion or portions of the Restricted Shares awarded, and for the
lapse or termination of restrictions upon all or any portion of the Restricted
Shares upon the satisfaction of other conditions in addition to or other than
the expiration of the applicable Restricted Period.
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<PAGE> 10
The Compensation Committee may also, in its sole discretion, shorten or
terminate a Restricted Period or waive any conditions for the lapse or
termination of restrictions with respect to all or any portion of the Restricted
Shares. Notwithstanding the foregoing, all restrictions shall lapse or terminate
with respect to all Restricted Shares upon the Participant's death, disability,
or retirement from active employment at or after the age of 60, or such other
age as the Compensation Committee may determine.
A Participant awarded Restricted Shares shall generally have the rights and
privileges of a shareholder as to such Restricted Shares, including, without
limitation, the right to vote such Restricted Shares, except that the
Participant shall not be entitled to delivery of the stock certificate
evidencing Restricted Shares until the expiration or termination of the
Restricted Period and the satisfaction of any other conditions prescribed by the
Compensation Committee. In addition, none of the shares then subject to a
Restricted Period may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period applicable to such shares
and until the satisfaction of any other conditions prescribed by the
Compensation Committee. All of the shares then subject to a Restricted Period
shall be forfeited and all rights of the Participant to such Restricted Shares
shall terminate without further obligation on the part of the Company if the
Participant ceases to be an employee of the Company or any of its subsidiaries
before the expiration or termination of such Restricted Period and the
satisfaction of any other conditions prescribed by the Compensation Committee
applicable to such Restricted Shares.
Dividends, if any, in respect of Restricted Shares shall be currently paid;
provided, however, that in lieu of paying currently a dividend of shares of
Common Stock in respect of Restricted Shares, the Compensation Committee may, in
its sole discretion, register in the name of a Participant a stock certificate
representing such shares of Common Stock issued as a dividend in respect of such
Restricted Shares, and may cause the Company to hold such certificate in custody
for the Participant's account subject to the same terms and conditions as such
Restricted Shares.
Performance Units. The Compensation Committee shall designate the
Participants to whom Performance Units, valued based upon the long-term
performance of the Company, are to be awarded under the 1996 LTIP and shall
determine the terms for such awards. At the time an award of Performance Units
is made, the Compensation Committee shall prescribe a range of long-term
financial or other performance objectives, including minimum, maximum and target
objectives of the Company ("Long-term Objectives") and shall specify a period
(the "Incentive Period") during which the Company's performance will be
measured. Generally, the Incentive Period shall commence on the date such
Performance Unit is granted and shall last for such period, not shorter than two
years nor longer than ten years, as the Compensation Committee shall designate.
The Compensation Committee shall also determine a range of dollar values of each
Performance Unit associated with such range of Long-term Objectives.
If the minimum Long-term Objective prescribed by the Compensation Committee
for any Performance Unit is not achieved or exceeded, then such Performance Unit
shall have no value and no amount shall be payable with respect thereto. If such
minimum Long-term Objective is achieved or exceeded, then the value of all
Performance Units to be paid with respect thereto shall be based upon the level
of Long-term Objective achieved, subject to any maximum performance unit value
imposed by the Compensation Committee. If during the course of an Incentive
Period there shall occur significant events that were not foreseen in
establishing the minimum Long-term Objective for such Incentive Period and which
the Compensation Committee expects to have a substantial effect on such
objective during such Incentive Period, in its sole discretion, the Compensation
Committee may revise such objective.
Provided the minimum Long-term Objectives are met and Participants are
employees of the Company or one of its subsidiaries as of the last day of the
Incentive Period, Participants shall be eligible to receive an award payable, as
determined by the Compensation Committee, in cash or in shares of Common Stock,
with a fair market value equal to the value of such Performance Units
(determined in accordance with the dollar values assigned by the Compensation
Committee to the Long-term Objectives), as of the last day of the Incentive
Period. Generally, any Performance Units awarded to a Participant during the
Participant's employment period for which the Incentive Period has not ended
shall be forfeited upon the date such employment terminates.
8
<PAGE> 11
CHANGES IN CONTROL
Unless a Participant's written agreement evidencing an award of Stock
Options, Restricted Shares, or Performance Units under the 1996 LTIP provides
otherwise, in the event that, while any Stock Options, Restricted Shares, or
Performance Units are outstanding under the 1996 LTIP: (a) there shall occur a
change of control of a nature that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act or any similar provision promulgated under the Exchange Act; (b) any
"person" or "group" (as those terms are used in Sections 13(d) and 14(d) of the
Exchange Act), becomes the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company's then outstanding
securities; or (c) during any period of two consecutive years commencing on or
after August 22, 1996, individuals who at the beginning of the period
constituted the Board of Directors cease for any reason to constitute at least a
majority of the Board of Directors then in office, unless the election, or the
nomination for election by the Company's shareholders, of each director who was
not a director at the beginning of the period has been approved in advance by
directors representing at least two-thirds of the directors then in office who
were directors at the beginning of the period; then, each Stock Option,
Restricted Share and Performance Unit outstanding immediately prior to the
consummation of such transaction, without the necessity of any action by the
Board of Directors, shall become fully vested and all restrictions on such
shares shall lapse, and (A) the holder of any outstanding Stock Option shall be
entitled, immediately prior to the effective date of such transaction, to
exercise such Stock Option; (B) the holder of any Restricted Shares shall be
entitled to receive a stock certificate representing a number of shares of
Common Stock equal to the number of Restricted Shares with respect to which the
applicable restrictions have lapsed or terminated; and (C) the recipient of any
Performance Unit shall be entitled, immediately prior to the effective date of
such transaction, to receive the value of each unit.
TRANSFERABILITY; AMENDMENTS
Stock Options granted under the 1996 LTIP shall not be transferable
otherwise than by will or the laws of descent and distribution, or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder, and Stock Options shall be exercisable during the lifetime of the
Participant only by the Participant or by the Participant's guardian or legal
representative (unless such exercise would disqualify a Stock Option as an
incentive stock option).
The Board of Directors of the Company shall have the right to amend,
suspend or terminate the 1996 LTIP at any time; provided, however, that an
amendment shall be subject to shareholder approval if such approval is required
by Rule 16b-3 promulgated under the Exchange Act or under any successor rule,
the Code or the rules of any securities exchange or market system on which
securities of the Company are listed or admitted to trading at the time such
amendment is adopted.
9
<PAGE> 12
ESTIMATION OF BENEFITS
The amounts that will be paid pursuant to the 1996 LTIP (other than to
Outside Director Participants) are not currently determinable. Had the 1996 LTIP
been in effect during the Company's 1996 fiscal year, and assuming that the
Compensation Committee would have administered it in the same manner in which it
currently administers the 1993 Stock Option Plan, the stock-based awards
reflected in the following table would have been received by the individuals and
groups referred to below (after giving effect to the Stock Dividend):
<TABLE>
<CAPTION>
1996 LONG TERM
INCENTIVE PLAN
NAME AND POSITION STOCK OPTIONS
-------------------------------------------------------------------- --------------
<S> <C>
Thomas W. Sturgess.................................................. 23,334
Chairman and Former Chief Executive Officer
Robert M. Linton.................................................... 23,334
President and Chief Executive Officer
Fergus J. Walker.................................................... 23,334
Executive Vice President
Garry F. Edmundson.................................................. 10,000
President Western Homes Corporation
Merle W. Miller, II................................................. 10,000
Vice President Redman Homes
Philip C. Surles.................................................... 10,000
Vice President Redman Homes
Executive Officer Group............................................. 132,002
Non-Executive Officer Director Group................................ 15,000
Non-Executive Officer Employee Group................................ 114,004
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
The following summary of the federal income tax consequences of the 1996
LTIP is not comprehensive and is based on current income tax laws, regulations
and rulings.
Incentive Stock Options. An optionee does not recognize income on the grant
of an incentive stock option. Generally, if an optionee exercises an incentive
stock option in accordance with the terms of the option and does not dispose of
the shares acquired within two years from the date of the grant of the option
nor within one year from the date of exercise, the optionee will not realize any
income by reason of the exercise and the Company will be allowed no deduction by
reason of the grant or exercise. The optionee's basis in the shares acquired
upon exercise will be the amount paid upon exercise. The optionee's gain or
loss, if any, recognized on the sale or other disposition will be capital gain
or loss. The amount of gain or loss will be the difference between the amount
realized on the disposition of the shares and the optionee's basis in the
shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise (an "Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (1) the
amount realized on the Early Disposition, or (2) the fair market value of the
shares on the date of exercise, over the optionee's basis in the shares. The
Company will be entitled to a deduction in an amount equal to such income. The
excess, if any, of the amount realized on the Early Disposition of such shares
over the fair market value of the shares on the date of exercise will be
long-term or short-term capital gain, depending upon the holding period of the
shares. If an optionee disposes of such shares for less than the optionee's
basis in the shares, the difference between the amount realized and the basis
will be a long-term or short-term capital loss, depending upon the holding
period of the shares.
Non-Qualified Stock Options. Non-qualified stock options do not qualify for
the special tax treatment accorded to incentive stock options under the Code.
Although an optionee does not recognize income at the time of the grant of the
option, the optionee recognizes ordinary income upon the exercise of a
non-qualified
10
<PAGE> 13
option in an amount equal to the difference between the fair market value of the
stock on the date of exercise of the option and the amount of the exercise
price.
As a result of an optionee's exercise of a non-qualified stock option, the
Company will be entitled to deduct as compensation an amount equal to the amount
included in the optionee's gross income. The Company's deduction will be taken
in the Company's taxable year in which the option is exercised.
The Stock Options for Outside Director Participants under the 1996 LTIP
will be non-qualified stock options.
Restricted Shares; Performance Units. Grantees of Restricted Shares and
Performance Units do not recognize income at the time of the grant of such stock
or units. However, when Restricted Shares become free from any restrictions or
when Performance Units are paid, grantees recognize ordinary income in an amount
equal to the cash received and the fair market value of the Restricted Shares on
the date all restrictions lapse, and the Company is entitled to a deduction in
the same amount. Alternatively, the grantee of Restricted Shares may elect to
recognize taxable income in the year the Restricted Shares are awarded in an
amount equal to the fair market value of the shares at such time. In that event,
the Company is entitled to a deduction in such year in the same amount.
Limitation on Deduction. Section 162(m) of the Code provides that no
deduction will be allowed for certain remuneration with respect to a covered
employee to the extent such remuneration exceeds $1 million. Under regulations
issued by the Internal Revenue Service, an employee is a covered employee if the
employee's compensation is required to be reported in the Summary Compensation
Table of a company's proxy statement and the employee is employed as of the last
day of the taxable year. Code Section 162(m) does not apply to compensation
payable solely on account of the attainment of one or more performance goals if
(1) the goals are determined by a committee of two or more outside directors,
(2) the material terms under which the remuneration will be paid, including the
goals, are disclosed to shareholders and approved by a majority of the
shareholders, and (3) the committee of two or more outside directors certifies
that the goals have been met. The Company will consider the limitation imposed
by Code Section 162(m) and will determine what, if any, action is appropriate
with respect to the administration of the 1996 LTIP.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the shares of Common Stock entitled
to vote on this proposal and represented in person or by proxy is required for
approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE 1996 LTIP.
APPROVAL OF AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
The Company's Restated Certificate of Incorporation currently authorizes
the issuance of 20,000,000 shares of Common Stock, $.01 par value per share. As
of June 27, 1996, 13,342,751 shares of Common Stock were issued and outstanding,
an additional 526,504 shares of Common Stock were subject to options granted
under the Company's stock option plans, and an additional 1,162,000 shares were
held as treasury shares, leaving a balance of 4,968,745 authorized, unissued and
unreserved shares of Common Stock. The Company's Board of Directors has proposed
that the Company's Restated Certificate of Incorporation be amended to increase
the authorized number of shares of Common Stock from 20,000,000 to 40,000,000.
The Board of Directors believes that the authorization of such additional
shares of Common Stock is in the best interests of the Company and its
shareholders and is appropriate in order to provide added flexibility for future
corporate purposes, which may include capital and financing needs, stock
distributions and stock splits, business acquisitions, management incentive and
employee benefit plans and other general corporate purposes. The increase in the
number of authorized shares of Common Stock will permit the Board of Directors
to approve the issuance of additional shares of Common Stock if warranted
without the need for further action by shareholders to authorize such shares,
subject to present or future requirements of any stock
11
<PAGE> 14
exchange or quotation system upon which the Common Stock may be listed and
applicable law. The Board of Directors believes that the availability of such
additional shares of Common Stock would enable the Company to act promptly to
take advantage of various corporate opportunities as such opportunities arise
without the delay or cost of calling a special shareholder meeting to amend the
Company's Restated Certificate of Incorporation to increase the number of
authorized shares.
The additional authorized shares of Common Stock also could conceivably be
issued to make any attempt to acquire control of the Company more difficult and
costly and thereby discourage attempts to acquire the Company. For example,
additional shares of Common Stock could be sold in private placement
transactions to purchasers who support the Board of Directors and who are
opposed to a takeover bid that the Board of Directors believes is not in the
best interests of the Company and its shareholders. Additional shares of Common
Stock also could be issued to increase the aggregate number of outstanding
shares of Common Stock, thereby diluting the interests of parties attempting to
obtain control of the Company. If an issuance of additional shares of Common
Stock is made on other than a pro rata basis to all shareholders, dilution of
ownership interest and voting power of existing shareholders may occur and,
depending on the consideration for which the shares of Common Stock were issued,
such additional shares could dilute earnings per share.
There are at present no plans or arrangements concerning the issuance of
additional shares of Common Stock, except pursuant to outstanding stock options
and employee benefit plans and the 1996 LTIP. If any plans or arrangements are
made concerning the issuance of any such shares, holders of the then outstanding
shares of Common Stock may or may not be given the opportunity to vote with
respect thereto, depending upon the nature of any such transaction, the law
applicable thereto, the policy of any stock exchange or quotation system upon
which the shares of Common Stock may be listed at such time and the judgment of
the Board of Directors.
None of the outstanding shares of Common Stock have preemptive rights or
cumulative voting rights. The proposed amendment to the Company's Restated
Certificate of Incorporation would not change the terms and conditions of the
outstanding shares of Common Stock and the additional shares of Common Stock
proposed to be authorized when issued would be identical to the outstanding
shares of Common Stock. The proposed amendment to the Company's Restated
Certificate of Incorporation is set forth in the attached Exhibit B.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of two-thirds of the outstanding shares of Common
Stock is required for approval of the proposed amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
12
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of June 27, 1996, certain information
regarding beneficial ownership of Common Stock by (i) each person known by the
Company to beneficially own five percent or more of its outstanding Common
Stock, (ii) each of the directors and certain executive officers of the Company
individually and (iii) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
SHAREHOLDER OWNERSHIP (1) OF CLASS (1)
--------------------------------------------------------- ------------- ------------
<S> <C> <C>
FMR Corp................................................. 997,400(2) 7.5
82 Devonshire Street
Boston, MA 02109
Merrill Lynch & Co., Inc................................. 1,088,000(3) 8.2
World Financial Center, North Tower
250 Vesey Street
New York, NY 10281
James T. Callier, Jr..................................... 9,000(4) *
Henry T. DeNero.......................................... 6,000(5) *
Garry F. Edmundson....................................... 7,500(6) *
Frank J. Feraco.......................................... 7,000(7) *
Robert M. Linton......................................... 156,520(8) 1.2
Merle W. Miller, II...................................... 23,500(6) *
C.A. Rundell, Jr......................................... 13,500(9) *
Robert L. Stark.......................................... 11,500(9) *
Thomas W. Sturgess....................................... 47,502(8) *
Philip C. Surles......................................... 5,685(10) *
Fergus J. Walker......................................... 56,896(8) *
All directors and executive officers as a group.......... 424,719(11) 3.2
</TABLE>
- ---------------
* Represents less than 1%
(1) The information contained in this table with respect to Common Stock
ownership reflects "beneficial ownership" of shares, as defined in Rule
13d-3 under the Exchange Act. Unless otherwise indicated, the shareholders
identified in this table have sole voting and investment power with respect
to the shares owned of record by them.
(2) FMR Corp. ("FMR") has the sole power to dispose of or direct the
disposition of 997,400 shares of Common Stock. Fidelity Management and
Research Company ("Fidelity"), a wholly-owned subsidiary of FMR and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, as amended (the "Advisers Act"), is the beneficial owner of
997,400 shares of Common Stock as a result of acting as investment adviser
to various investment companies (the "Funds"), registered under Section 8
of the Investment Company Act of 1940, as amended (the "Investment Company
Act"). Additionally, Edward C. Johnson, 3rd, Chairman of FMR, FMR, through
its control of Fidelity, and the Funds each has sole power to dispose of
the 997,400 shares of Common Stock owned by the Funds. Neither FMR nor
Edward C. Johnson, 3rd has the sole power to vote or direct the voting of
the shares owned directly by the Funds, which power resides with the Funds'
Boards of Trustees. Members of the Edward C. Johnson, 3rd family and trusts
for their benefit are the predominant owners of Class B shares of common
stock of FMR, representing 49% of the voting power of FMR. Edward C.
Johnson, 3rd owns 12% and Abigail P. Johnson, a director of FMR, owns 24.5%
of the aggregate outstanding voting stock of FMR. The Johnson family group
and all other Class B shareholders have entered into a shareholders' voting
agreement. These Johnson family members, through their ownership of voting
common stock and the execution of the shareholders' voting agreement, may
be deemed to form a
13
<PAGE> 16
controlling group with respect to FMR. The information provided above was
derived from a Schedule 13G dated February 14, 1996 filed by FMR, Mr.
Johnson and Fidelity with the Securities and Exchange Commission (the
"Commission"), to which reference is hereby made.
(3) Merrill Lynch & Co., Inc. ("ML&Co.") may be deemed to be the beneficial
owner of 1,088,000 shares of Common Stock by virtue of its control of its
wholly owned subsidiary, Merrill Lynch Group, Inc. ("ML Group"). ML Group
may be deemed to be the beneficial owner of such shares by virtue of its
control of its wholly owned subsidiary, Princeton Services, Inc. ("PSI").
PSI may be deemed to be the beneficial owner of such shares by virtue of
its being the general partner of Merrill Lynch Asset Management, L.P. d/b/a
Merrill Lynch Asset Management ("MLAM") and Fund Asset Management ("FAM").
Each of MLAM and FAM are registered under Section 203 of the Advisers Act
and may be deemed to be the owners of a portion of such shares. MLAM may be
deemed to be the beneficial owner of less than 5% of the outstanding Common
Stock as a result of acting as investment adviser to several investment
companies registered under the Investment Company Act. FAM may be deemed to
be the beneficial owner of 826,000 shares of the outstanding Common Stock
as a result of acting as investment adviser to several investment companies
registered under the Investment Company Act including Merrill Lynch Special
Value Fund, Inc. (the "Fund"), which is the beneficial owner of 826,000
shares of Common Stock. Pursuant to Rule 13d-4 promulgated under the
Exchange Act, ML&Co., ML Group, PSI, MLAM, FAM and the Fund disclaim
beneficial ownership of such shares. The information provided above was
derived from a Schedule 13G dated January 30, 1996 filed by ML&Co., ML
Group, PSI, FAM and the Fund with the Commission, to which reference is
hereby made.
(4) Includes 1,000 shares of Common Stock issuable upon exercise of an option
granted pursuant to the 1993 Stock Option Plan. See "-- Election of
Directors -- Compensation of Directors" and "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan."
(5) Includes 6,000 shares of Common Stock issuable upon exercise of options
granted pursuant to the 1993 Stock Option Plan. See "-- Election of
Directors -- Compensation of Directors" and "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan."
(6) Includes 7,500 shares of Common Stock issuable upon exercise of options
granted pursuant to the 1993 Stock Option Plan. See "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan"
and "-- Stock Options Granted."
(7) Includes 7,000 shares of Common Stock issuable upon exercise of options
granted pursuant to the 1993 Stock Option Plan. See "-- Election of
Directors -- Compensation of Directors" and "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan."
(8) Includes 17,502 shares of Common Stock issuable upon exercise of options
granted pursuant to the 1993 Stock Option Plan. See "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan"
and "-- Stock Options Granted."
(9) Includes 9,500 shares of Common Stock issuable upon exercise of options
granted pursuant to the 1993 Stock Option Plan. See "-- Election of
Directors -- Compensation of Directors" and "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan."
(10) Includes 5,000 shares of Common Stock issuable upon exercise of options
granted pursuant to the 1993 Stock Option Plan. See "Executive
Compensation -- Compensation Pursuant to Plans -- 1993 Stock Option Plan"
and "-- Stock Options Granted."
(11) Includes an aggregate of 133,006 shares of Common Stock issuable on
exercise of options that are exercisable within 60 days.
14
<PAGE> 17
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
The Compensation Committee consists of Messrs. Feraco, Rundell and Stark.
Base salaries and, for the most part, formula based bonuses, were paid to
executive officers during the Company's fiscal year ended March 29, 1996. In
addition, the Option Committee granted stock options to executive officers
during fiscal 1996 pursuant to the Company's 1993 Stock Option Plan. See
"-- Compensation Pursuant to Plans -- 1993 Stock Option Plan" and "-- Stock
Options Granted."
The Company's executive compensation policy seeks to fairly compensate
executives for their performance and contributions to the Company, to provide
incentives that will attract and retain key employees and to instill a long-term
commitment on the part of employees to the Company, all consistent with
shareholders' interests. Compensation of executive officers for fiscal 1996
performance generally consisted of base salary and discretionary bonuses at the
Company level and of base salary and formula based bonuses at the Company's
operating subsidiaries. Messrs. Miller and Surles participated in such a formula
based bonus plan at the subsidiary level. Mr. Edmundson's compensation is
determined pursuant to his employment agreement with Western Homes Corporation
("Western Homes"), a subsidiary of the Company. See "-- Employment/Severance
Agreements."
Base salaries and discretionary bonuses historically have been reviewed and
adjusted from time to time based on such factors as an individual's performance,
contributions, changes in job content and responsibilities and the Company's
performance, competitive practices and economic conditions. It is an objective
of the Compensation Committee to maintain base salaries that are reflective of
the individual executive's experience and responsibility level, and that are
competitive with the salary levels of executives at other companies engaged in
the same or similar line of business with revenues in a range comparable to
those of the Company.
The Compensation Committee reviewed and approved the base salaries and
discretionary bonuses provided to executive officers at the Company level,
including Messrs. Sturgess, Linton and Walker, for fiscal 1996. In so doing, the
Compensation Committee considered (i) the Company's financial results for fiscal
1996 and the improvement in the financial condition of the Company as a result
thereof, (ii) comparative data for comparable companies, to the extent publicly
available (which included companies within the Company Peer Group Index used for
the purposes of the Performance Graph included herein), and (iii) certain
subjective factors, with an emphasis on the performance of the Company's
executives. Based upon those factors, the Compensation Committee reviewed and
approved specific bonus awards for executive officers at the Company level. The
Compensation Committee also approved an increase in Mr. Linton's base salary in
connection with his appointment to the additional position of Chief Executive
Officer.
Additionally, the Company's existing 1993 Stock Option Plan, which was
administered by the Option Committee and currently is administered by the
Compensation Committee, forms the basis for the Company's long term incentive
plan for executives and other key employees. An objective of the 1993 Stock
Option Plan is to align executive and shareholder long-term interests through
stock ownership, thereby creating a link between executive reward and
shareholder return. During fiscal 1996, grants were awarded to employees,
including executive officers of the Company, under the 1993 Stock Option Plan.
See "-- Compensation Pursuant to Plans -- 1993 Stock Option Plan" and "-- Stock
Options Granted." Subject to approval of the 1996 LTIP by the Company's
shareholders, the Compensation Committee will also administer that plan. See
"Approval of the Redman Industries, Inc. 1996 Long Term Incentive Plan."
The Company generally is not permitted a deduction for compensation paid to
its chief executive officer or any of its next four highest paid officers in
excess of $1,000,000 each. This limitation is set forth in section 162(m) of the
Code. Compensation subject to this limitation includes most forms of
compensation, e.g., cash compensation paid under an employment contract and
bonuses. Additionally, compensation for this purpose also may include employee
stock options for the year in which the Company would be entitled to a deduction
with respect to such options, i.e., in the year non-qualified stock options are
exercised or, for incentive stock options, the year in which the employee makes
a disqualifying distribution of the stock received upon an exercise of the
incentive stock option.
15
<PAGE> 18
The current compensation of any of the Company's executives is
significantly less than $1,000,000. Based upon the final Treasury Regulations
promulgated on December 19, 1995, the Company does not believe that the
limitation will adversely affect the Company with respect to its current
compensation structure. The Company will consider this limitation with respect
to future compensation of its executives to determine what, if any, action is
appropriate.
Robert L. Stark, Chairman
Frank J. Feraco
C. A. Rundell, Jr.
16
<PAGE> 19
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended March 29, 1996,
March 31, 1995 and April 1, 1994, all cash compensation paid by the Company, as
well as certain other compensation paid or accrued, during the Company's last
three fiscal years to the persons serving as Chief Executive Officer and each of
the four other most highly compensated executive officers of the Company in all
capacities in which they served.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
------------------------------------ COMPENSATION
OTHER ANNUAL SECURITIES ------------
COMPENSATION UNDERLYING ALL OTHER
SALARY BONUS (2)(3) OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR ($) ($) ($) (#)(4) (5)($)
- --------------------------------------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Sturgess 1996 125,000 125,000 765 23,334 0
Chairman and Former 1995 10,417 10,000 0 23,334 0
Chief Executive Officer 1994 0 0 0 0 0
Robert M. Linton 1996 233,333 400,000 14,951 23,334 18,322
President and Chief 1995 215,000 300,000 12,000 23,334 15,254
Executive Officer 1994 200,004 225,000 9,882 248,828 11,637
Fergus J. Walker 1996 200,000 340,000 12,430 23,334 16,863
Executive Vice President 1995 190,000 260,000 9,431 23,334 11,915
1994 180,000 175,000 7,004 84,348 9,375
Garry F. Edmundson 1996 127,404 218,796 9,439 10,000 31,068
President 1995 125,000 290,179 2,961 10,000 24,322
Western Homes 1994 102,668 172,682 6,469 49,766 22,494
Merle W. Miller, II 1996 132,000 289,289 12,164 10,000 15,745
Vice President 1995 123,000 240,607 7,445 10,000 11,773
Redman Homes 1994 120,000 163,094 4,342 51,320 7,166
Philip C. Surles 1996 82,333 233,342 5,678 10,000 9,734
Vice President 1995 73,000 122,315 3,314 10,000 6,255
Redman Homes 1994 73,000 94,513 2,898 4,852 5,169
</TABLE>
- ---------------
(1) The positions indicated beneath each individual's name below were the
positions held by such individuals during fiscal 1996.
(2) The Company provides certain benefits to certain of its executive officers.
The aggregate incremental costs of these benefits to the Company for each
officer do not exceed the lesser of either $50,000 or 10% of the total of
annual salary and bonus reported for each such officer.
(3) Other Annual Compensation for each of the named executive officers consists
of gross-up payments for tax liabilities incurred in connection with the
return of employee contributions from the Savings and Retirement Plan
resulting from regulatory limitations with respect thereto. See
"-- Compensation Pursuant to Plans -- Savings and Retirement Plan" and
"-- Savings and Retirement Restoration Plan."
(4) The option amounts stated in this table are adjusted to reflect the effect
of the Stock Dividend.
(5) All Other Compensation consists of the following contributions and payments
by the Company for fiscal 1996 on behalf of the named executive officers:
<TABLE>
<CAPTION>
LINTON WALKER EDMUNDSON MILLER SURLES
------- ------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Contributions to Savings & Retirement Plan...... $ 5,176 $ 3,102 $ 2,988 $ 5,066 $ 3,414
Contributions to Savings & Retirement
Restoration Plan.............................. 12,450 10,953 8,184 9,983 5,168
Rental and Automobile Allowances................ 0 0 16,526 0 0
Payments for Term Life Insurance................ 696 2,808 3,370 696 1,152
------- ------- --------- ------- -------
Total................................. $18,322 $16,863 $31,068 $15,745 $ 9,734
======= ======= ======== ======= =======
</TABLE>
See "-- Compensation Pursuant to Plans -- Savings and Retirement Plan" and
"-- Savings and Retirement Restoration Plan."
17
<PAGE> 20
EMPLOYMENT/SEVERANCE AGREEMENTS
Each of Messrs. Sturgess, Linton and Walker has entered into an employment
agreement with the Company. No fixed term of employment is provided by such
employment agreements, which provide for minimum base annual salaries of
$125,000, $215,000 and $190,000 to Messrs. Sturgess, Linton and Walker,
respectively. Such employment agreements provide that the executive shall be
entitled to an annual bonus in an amount determined by the Compensation
Committee in its sole discretion. The employment agreements provide that upon
termination of the executive's employment by the executive for good reason or by
the Company for any reason other than cause or the executive's death, permanent
disability or retirement, such executive would be entitled to receive severance
pay in an amount equal to the sum of (i) the executive's base annual salary then
in effect plus (ii) 75% of the executive's base annual salary then in effect or
the highest annual bonus paid to the executive during such executive's
employment under the employment agreement, whichever is higher, plus (iii) a
bonus for the period beginning on the first day of the Company's then current
fiscal year and ending on the date of termination (the "Stub Period") in an
amount to be determined by the Compensation Committee in its sole discretion.
If, at any time within two years following a change of control (as defined
therein), the executive voluntarily resigns or the Company terminates the
executive's employment for any reason, the employment agreements provide that
the executive would be entitled to receive (in lieu of the severance pay
described in the preceding sentence) severance pay in an amount equal to the sum
of (i) two times the executive's base annual salary then in effect plus (ii) two
times 75% of the base annual salary then in effect or two times the highest
annual bonus paid to the executive during such executive's employment under the
employment agreement, whichever is higher, plus (iii) a bonus for the Stub
Period in an amount to be determined by the Compensation Committee in its sole
discretion; provided, however, that the total amount payable to the executive
under clauses (i) and (ii), of this sentence shall not exceed $1,000,000. If the
executive becomes entitled to payments or benefits under any arrangement with
the Company (including under the employment agreements) which are subject to
excise tax (collectively, "Payments"), the employment agreements provide that
the Company shall pay to such executive an additional amount such that the net
amount retained by the executive, after (i) excise tax on Payments, (ii)
federal, state and local income and excise tax upon the payment described in
this sentence and (iii) interest and penalties arising from delayed payment of
the excise tax, shall be equal to the full amount of the Payments.
Mr. Edmundson entered into an employment agreement with Western Homes
pursuant to which Mr. Edmundson agreed to serve as President of Western Homes
through March 31, 1998 in exchange for, among other things, (i) an annual salary
of $130,000 and (ii) an annual bonus equal to a percentage of the profits of
Western Homes subject to certain deductions. Western Homes has the right to
terminate the employment agreement at any time without cause by paying a sum
equal to $10,833 multiplied by the number of months remaining under the term of
such agreement and, in the event such agreement is terminated due to the
employee's death or incapacity or is not renewed at the end of its term, Western
Homes will pay to Mr. Edmundson (or his designees or estate) $10,833 per month
for six months following such termination.
COMPENSATION PURSUANT TO PLANS
Savings and Retirement Plan. The Company currently maintains a qualified
defined contribution retirement and savings plan for the benefit of its
employees, including its executive officers (the "Retirement Plan"). Under the
Retirement Plan, participants may generally elect to defer not less than 1% nor
more than 15% of their pre-tax compensation (as described below), subject to
certain limits, for each payroll period. Amounts deferred, up to 6% of a
participant's pre-tax compensation, are called Matched Salary Deferral
Contributions. Each month, the Company contributes to participant accounts an
amount equal to (i) 50% of the Matched Salary Deferral Contributions made for
such month less (ii) the aggregate amount forfeited by participants who leave
the employment of the Company prior to becoming fully vested in their matching
contribution accounts, and which has not previously been used to offset the
Company's matching contribution. In addition, the Company may make an annual
supplemental matching contribution, at the sole discretion of its Board of
Directors.
18
<PAGE> 21
Each participant is entitled to a lump sum cash distribution of the total
value of the participant's account upon reaching the retirement age of 65 or
upon the participant's death or permanent disability. At the time of termination
of employment with the Company for any other reason, each participant is
entitled to a lump sum cash distribution of 100% of the participant's individual
contributions and any earnings thereon and the vested portion of the employer
contributions in the participant's account. Employer contributions are subject
to a vesting schedule with the employee being 100% vested in such contributions
after five years of employment.
The pre-tax compensation covered by the Retirement Plan is the gross amount
reported on the participant's federal income tax withholding statement exclusive
of prizes, awards, car allowances, moving expenses, executive medical
reimbursements, automobile insurance, referral bonuses, group term life and
severance pay up to a maximum amount as specified under the Code (presently
$150,000).
Savings and Retirement Restoration Plan. The Company currently maintains a
non-qualified supplemental defined contribution retirement plan for its "highly
compensated employees" (as defined under the Code), including the individuals
listed on the Summary Compensation Table above (the "Savings and Retirement
Restoration Plan"). Under the Savings and Retirement Restoration Plan, a
participant may generally elect to have an after-tax amount up to the maximum of
the excess, if any, of 15% of such participant's pre-tax compensation (as
described below) over the maximum allowable participant contribution under the
Retirement Plan for each payroll period transferred to an annuity account
purchased by the participant. Each month, the Company is required to contribute
to participant accounts an amount equal to the excess of the amount of the
Company's matching contribution under the Retirement Plan if (i) contributions
to the Retirement Plan were not subject to restrictions imposed by the Code and
(ii) the participant's after-tax contribution under the Savings and Retirement
Restoration Plan were added to such participant's contribution under the
Retirement Plan for such month, over the amount of the Company's matching
contribution under the Retirement Plan for such month. In addition, the Company
may make an annual supplemental matching contribution, at the sole discretion of
its Board of Directors. The Company's matching contributions, as well as
earnings on participant accounts, are taxable to the executive in the calendar
year during which contributions are made and earnings are credited under the
Savings and Retirement Restoration Plan.
Participants are always 100% vested in their deferred contributions,
earnings and matching contributions under the Savings and Retirement Restoration
Plan. The total value of each participant's accumulations under the Savings and
Retirement Restoration Plan is payable to the participant upon the termination
of the participant's employment with the Company either (i) in the form of a
Qualified Joint and Survivor Annuity (as defined therein) or (ii) in such other
form as may be permitted under the terms of the participant's annuity contract.
The pre-tax compensation covered by the Savings and Retirement Restoration
Plan is the same as that covered by the Retirement Plan, determined without
regard to the dollar limit under the Retirement Plan.
Bonus Plans. The Company currently maintains various compensation plans
providing for the payment of cash bonuses to its employees. Executive officers
of the Company may receive bonuses at the discretion of the Compensation
Committee of the Board of Directors. Middle and upper management employees at
the Company's subsidiaries participate in plans that provide, in most cases, for
the payment of quarterly and annual formula based bonuses based upon the
profitability of the operating units for which they are responsible.
Incentive Holders' Stock Option Plan. The Company has adopted a
nonqualified stock option plan (the "Incentive Holders' Stock Option Plan") for
certain of its officers and key employees including certain named executive
officers who held outstanding Incentive Units (as defined below) that were
granted prior to the consummation of the Company's initial public offering in
September 1993 (the "Initial Public Offering").
In September 1992, at which time the Company was privately held, the
Company and a former subsidiary adopted forms of incentive unit agreements for
the grant of incentive units ("Incentive Units") to certain key employees. In
November 1992, the Company and a former subsidiary of the Company awarded
Incentive Units to certain key employees including Messrs. Linton, Walker,
Edmundson, Miller and Surles. Immediately prior to the consummation of the
Company's Initial Public Offering in September 1993, all
19
<PAGE> 22
outstanding Incentive Units were exchanged for stock options to purchase shares
of Common Stock granted under the Incentive Holders' Stock Option Plan.
Additionally, under the Incentive Holders' Stock Option Plan, options are fully
vested with differing exercise dates. However, the Common Stock that may be
acquired on exercise of such an option (net of any shares retained by the
Company to pay withholding taxes required to be paid by the Company) is required
to be issued to the option holder on the exercise date unless the optionee
elects not to exercise the option within five business days of such exercise
date, in which case the option expires with respect to the shares then
exercisable. Each option holder must include, in taxable income, the fair market
value on the exercise date of those shares of Common Stock the option holder is
entitled to acquire on such date unless the option holder has elected not to
receive such shares.
Since the purposes for which the Incentive Holders' Plan was adopted were
fulfilled, the Board of Directors amended the Incentive Holders' Plan so that no
further shares are available for grant under the Incentive Holders' Plan.
1993 Stock Option Plan. The Company has adopted a qualified and
nonqualified stock option plan (the "1993 Stock Option Plan") for certain of its
officers, key employees and independent directors. A total of 700,000 shares of
Common Stock (adjusted to reflect the Stock Dividend) has been reserved for
issuance under the 1993 Stock Option Plan. The maximum number of shares as to
which options may be granted to a single individual under the 1993 Stock Option
Plan is 300,000 (adjusted to reflect the Stock Dividend). During fiscal 1996,
the Option Committee (consisting of Messrs. Feraco, Rundell and Stark) possessed
all powers attendant to the administration of the 1993 Stock Option Plan,
including the power to grant options, which powers have been assumed by the
Compensation Committee.
Under the 1993 Stock Option Plan, certain executive officers and key
employees are eligible to receive qualified and non-qualified options to
purchase shares of Common Stock. Stock options are exercisable at such time and
on such terms as the Compensation Committee determines. The Compensation
Committee may provide for the immediate vesting and exercisability of options
granted under the 1993 Stock Option Plan upon the occurrence of an event
constituting a change of control (as defined in the 1993 Stock Option Plan). All
options granted under the 1993 Stock Option Plan in fiscal 1996, including those
to the named executive officers, contain such a provision. Options granted have
exercise prices equal to the fair market value per share of the Common Stock on
the date of grant. Pursuant to the terms of the 1993 Stock Option Plan, no
incentive options may be granted after ten years from the date of the plan.
Subject to certain additional limitations, no option by its terms is exercisable
after the expiration of ten years from the date of grant, or such other period
(in the case of non-qualified options) or such shorter period (in the case of
incentive options) as the Compensation Committee in its sole discretion may
determine. Stock options are exercisable only if the holder is an officer or
employee of the Company at the time of exercise (subject to certain grace
periods). Stock options are not transferable, except by will and by the laws of
descent and distribution.
Subject to certain limitations in the case of incentive options, an
optionee under the 1993 Stock Option Plan must pay the full option price upon
exercise of an option (i) in cash, (ii) with the consent of the Compensation
Committee, by delivering shares of Common Stock already owned by such optionee
(including shares to be received upon exercise of the option) and having a fair
market value at least equal to the exercise price or (iii) in any combination of
the foregoing. The Company may require the optionee to satisfy the Company's
federal tax withholding obligations with respect to the exercise of options by
(i) additional withholding from the optionee's salary, (ii) requiring the
optionee to pay in cash or (iii) reducing the number of shares of Common Stock
to be issued (except in the case of incentive options).
The 1993 Stock Option Plan also provided for the automatic grant, after
each annual meeting of the Company's shareholders, to each person who is serving
as an independent director (i.e., excluding directors who are employees of the
Company) of an option to purchase an aggregate of 2,000 shares (as adjusted for
the Stock Dividend) of Common Stock. In addition, each independent director was
granted an option under the 1993 Stock Option Plan to purchase 10,000 shares (as
adjusted for the Stock Dividend) of Common Stock on the third business day
following the effective date of such independent director's initial election to
office. The options granted to independent directors under the 1993 Stock Option
Plan vest 50% on the first anniversary after the date of grant, with the
remaining 50% vesting in two equal installments on the second and third
20
<PAGE> 23
anniversaries of the date of grant. Such options have additional terms and
conditions similar to those described above with respect to the 1993 Stock
Option Plan generally. Upon the approval of the Company's 1996 Long Term
Incentive Plan, no additional options will be granted to directors under the
1993 Stock Option Plan. See "Election of Directors -- Compensation of Directors"
and "Approval of Redman Industries, Inc. 1996 Long Term Incentive Plan."
STOCK OPTIONS GRANTED
The following table sets forth certain information concerning stock options
granted during fiscal 1996 to each of the executive officers named in the
Summary Compensation Table. The table also sets forth certain hypothetical gains
that would exist for the options over the full option term, assuming compound
rates of stock appreciation of 5% and 10%. The actual future value of the
options will depend on the market value of the Company's Common Stock.
OPTION GRANTS IN FISCAL 1996(1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES
SECURITIES OPTIONS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE MARKET PRICE APPRECIATION FOR
OPTIONS EMPLOYEES OR BASE OF STOCK AT OPTION TERM(2)
GRANTED IN FISCAL PRICE GRANT DATE EXPIRATION --------------------
NAME (#)(3)(4)(5) YEAR ($/SH) ($/SH)(6) DATE 5%($) 10%($)
- -------------------------- ------------ ---------- --------- ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Thomas W. Sturgess........ 23,334 9.5 15.125 15.125 1/05/02 120,029 272,305
Robert M. Linton.......... 23,334 9.5 15.125 15.125 1/05/02 120,029 272,305
Fergus J. Walker.......... 23,334 9.5 15.125 15.125 1/05/02 120,029 272,305
Garry F. Edmundson........ 10,000 4.1 15.125 15.125 1/05/02 51,439 116,699
Merle W. Miller, II....... 10,000 4.1 15.125 15.125 1/05/02 51,439 116,699
Philip C. Surles.......... 10,000 4.1 15.625 15.625 1/23/02 53,140 120,556
</TABLE>
- ---------------
(1) All employee stock options were granted under the 1993 Stock Option Plan.
See "-- Compensation Pursuant to Plans -- 1993 Stock Option Plan." All
amounts reported in the above table reflect the effects of the Stock
Dividend. Accordingly, pursuant to the anti-dilution provisions of the 1993
Stock Option Plan, the number of shares of Common Stock granted pursuant to
the reported options was, in each case, multiplied by two and the exercise
price thereof divided by two. In addition, and not included in the above
table, on January 6, 1995, the Company agreed to grant options (the
"Contingent Options") under the 1993 Stock Option Plan to purchase
additional shares of Common Stock, in each case (adjusted to reflect the
Stock Dividend), as follows: (i) 23,333 shares of Common Stock to each of
Messrs. Sturgess, Linton and Walker and (ii) 10,000 shares of Common Stock
to each of Messrs. Edmundson and Miller. Such Contingent Options are to be
granted at the fair market value of the Common Stock on January 4, 1997,
provided that the executive is continuously employed by the Company or a
subsidiary thereof through such date. In the event of a change of control
(as defined in the 1993 Stock Option Plan), the Company will immediately
grant all Contingent Options described in this paragraph to all such
executives who have been continuously employed by the Company or a
subsidiary thereof through the date of such change of control.
(2) These amounts, based on the assumed appreciation rates of 5% and 10%
prescribed by the Commission rules, are not intended to forecast possible
future appreciation, if any, of the Company's stock price. No gain to the
stock options is possible without an increase in the stock price, which
will benefit all shareholders.
(3) Of Messrs. Sturgess', Linton's and Walker's options, each for 23,334 shares
of Common Stock, beginning on January 5, 1996, and continuing annually for
the following three years, one-fourth of the shares subject to each option
become exercisable.
21
<PAGE> 24
(4) Of Messrs. Edmundson's and Miller's options, each for 10,000 shares of
Common Stock, beginning on January 5, 1996, and continuing annually for the
following three years, one-fourth of the shares subject to each option
become exercisable.
(5) Of Mr. Surles' option for 10,000 shares of Common Stock, beginning on
January 23, 1996, and continuing annually for the following three years,
one-fourth of the shares subject to such option become exercisable.
(6) For stock options granted to employees pursuant to the 1993 Stock Option
Plan, Fair Market Value is defined as the average of the high and low
prices of the Common Stock on the date of grant of the stock option.
STOCK OPTIONS EXERCISED
The following table sets forth, in the aggregate, the number of securities
underlying options exercised during fiscal 1996 and states the value at the end
of fiscal 1996 of exercisable and unexercisable options remaining outstanding.
The "Value Realized" column reflects the difference between the fair market
value (the average of the high and low prices on the date of exercise) and the
exercise price on the date of grant for all options exercised, even though the
executive may have actually received fewer shares as a result of the withholding
of shares to cover the withholding taxes withheld by the Company associated with
such exercise. The "Value Realized" numbers do not necessarily reflect what the
executive might receive should he choose to sell the shares acquired upon the
option exercise, since the market price of shares so acquired may at any
time be higher or lower than the price on the exercise date of the option.
AGGREGATED OPTION EXERCISES IN
FISCAL 1996 AND 1996 FISCAL YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS AT
SHARES UNDERLYING OPTIONS AT 1996 FISCAL
ACQUIRED ON VALUE 1996 FISCAL YEAR-END(#) YEAR-END($)(3)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Sturgess.................. 0 0 17,502 29,166 171,374 231,138
Robert M. Linton.................... 49,764 855,070 17,502 29,166 171,374 231,138
Fergus J. Walker.................... 0 0 17,502 29,166 171,374 231,138
Garry F. Edmundson.................. 0 0 7,500 12,500 73,438 99,063
Merle W. Miller, II................. 0 0 7,500 12,500 73,438 99,063
Philip C. Surles.................... 972 19,678 5,000 12,500 41,875 103,906
</TABLE>
- ---------------
(1) All share amounts reported in the above table reflect the effects of the
Stock Dividend. The options exercised in fiscal 1996 by Mr. Linton and Mr.
Surles were granted under the Company's Incentive Holders' Stock Option
Plan. Other options included in the table were granted under the Company's
1993 Stock Option Plan. See "-- Compensation Pursuant to Plans -- Incentive
Holders' Stock Option Plan" and "-- 1993 Stock Option Plan."
(2) Based on the difference between the fair market value and the exercise
price per share on the respective exercise date.
(3) Based on the difference between the fair market value and the exercise
price per share on March 29, 1996.
PERFORMANCE GRAPH
The following chart compares the cumulative total shareholder return (stock
growth plus dividends) on the Company's Common Stock from September 23, 1993,
the date of the Initial Public Offering, through March 29, 1996, the end of the
Company's fiscal year, with total shareholder return for the same period of the
NASDAQ Stock Market -- U.S. (the "Nasdaq Index"), and a Company-selected peer
index, weighted by market equity capitalization (the "Peer Group Index"). The
companies included in the Peer Group Index are
22
<PAGE> 25
Champion Enterprises, Inc., Clayton Homes, Inc., Fleetwood Enterprises, Inc.,
Liberty Homes, Inc., Oakwood Homes Corporation, Schult Homes, Inc. and Skyline
Corporation. Cumulative total shareholder returns are calculated assuming that
$100 was invested on September 23, 1993 in each of the Common Stock, the Nasdaq
Index, and the Peer Group Index, and that all dividends were reinvested. In
addition, the Initial Public Offering price of $15.00 was used as the beginning
price for the Company's Common Stock on the Performance Graph.
The comparisons in this table are set forth in response to Commission
disclosure requirements, and therefore are not intended to forecast or be
indicative of future performance of the Common Stock.
COMPARISON OF EIGHTEEN MONTH CUMULATIVE TOTAL RETURN
AMONG REDMAN INDUSTRIES, INC., THE NASDAQ STOCK MARKET --
U.S. INDEX PEER GROUP INDEX
<TABLE>
<CAPTION>
MEASUREMENT PERIOD REDMAN IN- NASDAQ MARKET
(FISCAL YEAR COVERED) DUSTRIES PEER GROUP US
<S> <C> <C> <C>
9/23/93 100 100 100
4/1/94 118 97 99
3/31/95 129 110 111
3/29/96 270 157 153
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee is composed of Messrs. Feraco, Rundell
and Stark. Mr. Sturgess, Chairman of the Board, also served as Chief Executive
Officer of the Company and as a member of the Compensation Committee until
January 30, 1996. In addition, Mr. Sturgess serves as a general partner of
Wingate Partners.
In September 1993, the Company consummated the Initial Public Offering
pursuant to which it and certain of its shareholders (including Wingate
Partners, of which Messrs. Callier, Sturgess and a former director of the
Company are general partners) sold shares of Common Stock. In February 1994,
certain of the Company's shareholders (including Wingate Partners) sold
additional shares of Common Stock in a registered public offering (the
"Secondary Public Offering"). After giving effect to the Secondary Offering,
Wingate Partners no longer owned any shares of the Company's Common Stock.
In connection with the Initial Public Offering, the Company distributed all
of the outstanding common stock of RBPI Holding to the Company's pre-Initial
Public Offering shareholders including Wingate Partners (the "Spin-Off"). As a
result of the Spin-Off, Wingate Partners and its affiliates own (as of June 27,
1996) approximately 95% of the outstanding capital stock of RBPI Holding. In
addition, concurrently with the Spin-Off, the Company entered into a transition
services agreement (the "Transition Agreement") pursuant to which it provided
certain services to RBPI Holding. The Transition Agreement has been terminated
as of September 30, 1995. The Company received $178,000 for services provided
during the fiscal year ended
23
<PAGE> 26
March 29, 1996. Pursuant to the Transition Agreement, RBPI Holding agreed to
indemnify the Company against any losses and expenses arising out of the
Company's performance of services thereunder.
In connection with the Spin-Off, the Company and RBPI Holding entered into
a separation and indemnification agreement (the "Separation Agreement") which
specifies the manner in which the federal income tax liability of the
consolidated group of which the Company is the common parent (the "Group") will
be allocated for the final year in which RBPI Holding is a member of the Group
and for prior taxable years of the Group in which a federal income tax
deficiency is asserted. The Separation Agreement also provides for the
cancelation of any existing tax sharing or allocation agreements of the Group
and for the forgiveness of existing intercompany accounts, except for a payable
owed by RBPI Holding to the Company in the amount of approximately $2.0 million
(the "Intercompany Payable"). In connection therewith, RBPI Holding issued to
the Company a promissory note in the aggregate principal amount of the
Intercompany Payable. Principal and interest on the Note is payable in sixteen
semi-annual installments, which began on April 1, 1994. Such promissory note
bears interest at 7% per annum and is subordinated to the payment in full of all
amounts owing under RBPI Holding's senior loan agreement. Finally, the
Separation Agreement provides that RBPI Holding and the Company will indemnify
each other against certain existing or future claims or liabilities relating to
their respective businesses.
The Company is also contingently liable for certain insurance obligations
arising out of the business of RBPI Holding prior to a refinancing consummated
by the Company in July 1990. RBPI Holding has agreed to indemnify the Company
with respect to, among other things, these obligations. The Company does not
believe that any liability which it may incur as a result of the foregoing
obligations will be material to the consolidated results of operations or
financial position of the Company.
CERTAIN TRANSACTIONS
NCI Building Systems, Inc., of which Board member C.A. Rundell, Jr. is
Chairman of the Board, is providing the pre-engineered metal building for a
manufactured housing plant being constructed for the Company's Redman Homes
subsidiary in Talladega, Alabama at a cost of approximately $525,000. Management
believes that this transaction is on pricing terms that are reasonable and
competitive, based on quotes received from other suppliers.
SECTION 16(A) FILINGS
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the Commission and to furnish the Company with copies of all such
Section 16(a) forms they file. Based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons,
the Company believes that, during the year ended March 29, 1996, each of its
officers, directors and greater than ten percent shareholders complied with all
such applicable filing requirements except for one form for a transfer of shares
by Mr. Miller that was filed late.
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young as the Company's
independent auditors, for the fiscal year ending March 28, 1997. Representatives
of Ernst & Young are expected to be present at the Meeting with the opportunity
to make a statement if they desire to do so and to respond to appropriate
questions.
FEES AND EXPENSES OF SOLICITATION
The cost of soliciting proxies and cost of the Meeting will be borne by the
Company. In addition to the solicitation of proxies by mail, proxies may be
solicited personally, by telephone, telegraph and similar means by directors,
officers or employees of the Company, none of whom will be specially compensated
for such activities. The Company also intends to request that brokers, banks and
other nominees solicit proxies from their principals and will pay such brokers,
banks and other nominees certain expenses incurred by them for
24
<PAGE> 27
such activities. The Company has retained Georgeson & Company, Inc., a proxy
soliciting firm, to assist in the solicitation of proxies, for an estimated fee
of $5,000, plus reimbursement of certain out-of-pocket expenses.
SUBMISSION OF FUTURE SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the next annual
meeting of shareholders and who wishes such proposal to be included in the proxy
statement for that meeting must submit such proposal in writing to the Secretary
of the Company, at the address of the Company set forth on the first page of
this Proxy Statement, and such proposal must be received by the Company on or
before March , 1997.
OTHER MATTERS
The Board of Directors does not intend to present and does not have any
reason to believe that others will present at the Meeting any items of business
other than as stated in the Notice of Meeting of Shareholders. If, however,
other matters are properly brought before the Meeting, it is the intention of
the persons named in the accompanying Proxy to vote the shares represented
thereby in accordance with their best judgment and discretionary authority to do
so is included in the Proxy.
By Order of The Board of Directors,
/s/ PAUL L. BARRETT,
PAUL L. BARRETT,
Secretary
Dallas, Texas
July , 1996
25
<PAGE> 28
EXHIBIT A
REDMAN INDUSTRIES, INC.
1996 LONG TERM INCENTIVE PLAN
1. Purpose
The REDMAN INDUSTRIES, INC. 1996 LONG TERM INCENTIVE PLAN (the "1996 Plan")
has been established by REDMAN INDUSTRIES, INC. (the "Corporation") to:
(a) Attract and retain key executives and other key employees;
(b) Motivate participating employees, by means of appropriate
incentives;
(c) Attract and retain well-qualified individuals to serve as members
of the Corporation's Board of Directors;
(d) Provide incentive compensation opportunities that are competitive
with those of other corporations; and
(e) Further identify the interests of eligible employees with those of
the Corporation's other stockholders through compensation alternatives
based on the Corporation's Common Stock;
and thereby promote the long-term financial interest of the Corporation,
including the growth in value of the Corporation's equity and enhancement of
long-term stockholder return.
2. Scope
Awards under the 1996 Plan may be granted in the form of (i) incentive
stock options ("Incentive Stock Options") as provided in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), (ii) non-qualified stock
options ("Non-qualified Options") (unless otherwise indicated, references in the
1996 Plan to "options" include Incentive Stock Options and Non-qualified
Options), (iii) shares of Common Stock, $.01 par value per share, of the
Corporation (the "Common Stock") that are restricted as provided in paragraph 12
hereof ("Restricted Shares"), or (iv) units valued based upon the long-term
performance of the Corporation as determined pursuant to paragraph 13 hereof
("Performance Units"). The maximum aggregate number of shares of Common Stock
with respect to which all options (including options granted to Outside Director
Participants), Restricted Shares and Performance Units may be awarded from time
to time under the 1996 Plan shall be 700,000 (subject to adjustment as described
in paragraph 17 hereof); provided, however, that the maximum aggregate number of
shares of Common Stock with respect to which Restricted Shares may be awarded
from time to time under the 1996 Plan shall be 50,000 (subject to adjustment as
described in paragraph 17 hereof). The maximum number of shares of Common Stock
with respect to which Incentive Stock Options, Non-qualified Options, Restricted
Shares, and Performance Units may be granted in any one year to any employee
shall not exceed 200,000 (subject to adjustment as described in paragraph 17
hereof). Shares of Common Stock with respect to which awards are granted may be,
in whole or in part, authorized and unissued shares, authorized and issued
shares held in the treasury of the Corporation, or issued shares reacquired by
the Corporation, as the Board of Directors of the Corporation (the "Board of
Directors") shall from time to time determine. If for any reason any shares as
to which an option has been granted cease to be subject to purchase thereunder,
or any Restricted Shares are forfeited to the Corporation, then the shares in
respect of which such option was granted, or such Restricted Shares, shall
become available for subsequent awards under the 1996 Plan to the extent
permitted by the Code and other applicable law.
3. Effective Date
The 1996 Plan shall become effective on August 22, 1996 and, unless sooner
terminated pursuant to the terms hereof, the Plan shall terminate on August 22,
2006. The 1996 Plan (and each award granted under the 1996 Plan) will become
null and void unless the 1996 Plan is approved no later than August 22, 1997, by
the affirmative vote of the holders of a majority of the shares of voting stock
of all classes of the Corporation present, or represented, and entitled to vote
at a meeting of stockholders of the Corporation at which a
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majority of the outstanding shares of the Corporation's voting stock is voted on
the proposal to approve the 1996 Plan. The agreement relating to each award
granted under the 1996 Plan prior to approval of the Plan by stockholders as
aforesaid shall expressly provide that such award will not be exercisable or
payable prior to such approval and that such award will become null and void
unless the 1996 Plan is approved by the stockholders as aforesaid no later than
August 22, 1997.
4. Administration
(a) The 1996 Plan shall be administered, construed and interpreted by the
Compensation Committee of the Board of Directors provided, however, that the
Compensation Committee shall be comprised solely of two or more "outside
directors" as that term is defined in the regulations under Section 162(m) of
the Code. (All references herein to the "Committee" shall be deemed to refer
exclusively to the Compensation Committee or any successor thereto of the Board
of Directors of the Corporation.) Alternatively, the 1996 Plan may be
administered, construed and interpreted by the Board of Directors of the
Corporation, if consisting solely of "outside directors" as that term is defined
in the regulations under Section 162(m) of the Code.
(b) With respect to persons subject to Section 16 of the 1934 Act,
transactions under the 1996 Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provision of the 1996 Plan or action by the Board of Directors or the Committee
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by the Board of Directors or the Committee, as
applicable.
(c) The Committee shall have plenary authority in its sole discretion and
subject to the express provisions of the 1996 Plan, to grant options, to
determine the purchase price of the Common Stock covered by each option (the
"Exercise Price"), the term of each option and to change the same, the class or
classes of shares of Common Stock to be covered by each option, the Employees
(as defined in paragraph 5 hereof) to whom, and the time or times at which,
options shall be granted and the number of shares to be covered by each option;
to designate options as Incentive Stock Options or Non-qualified Options; to
grant Restricted Shares and Performance Units and to determine the term of the
restricted period and appropriate long-term objectives and other conditions
applicable to such Restricted Shares or Performance Units, the Employees to whom
and the time or times at which Restricted Shares or Performance Units shall be
granted and the number of Restricted Shares or Performance Units to be covered
by each grant; whether Performance Units shall be payable in cash or in the form
of shares of Common Stock; to interpret the 1996 Plan; to prescribe, amend and
rescind rules and regulations relating to the 1996 Plan; to determine the terms
and provisions of the option agreements, and the Restricted Share and
Performance Unit agreements entered into in connection with awards under the
1996 Plan; to prepare and distribute in such manner as the Committee determines
to be appropriate information concerning the 1996 Plan, and to make all other
determinations deemed necessary or advisable for the administration of the 1996
Plan. The Committee may delegate to one or more of its members or to one or more
agents such administrative duties as it may deem advisable, and the Committee or
any person to whom it has delegated duties as aforesaid may employ one or more
persons to render advice with respect to any responsibility the Committee or
such person may have under the 1996 Plan; provided, however, that except as
authorized in paragraph 4(a) above, the Committee shall not delegate its
authority to construe and interpret the 1996 Plan, to determine which Employees
may participate in the 1996 Plan, or its authority to make grants of options,
Restricted Shares, or Performance Units.
(d) The Committee shall function as follows. The Committee may adopt such
rules as it deems necessary, desirable or appropriate. The Committee may act at
a meeting or in writing without a meeting. The Committee shall elect one of its
members as chairman, appoint a secretary (who may or may not be a Committee
member, as the case may be) and advise the Board of Directors of such actions.
The secretary shall keep a record of all minutes and forward all necessary
communications to the Corporation. A majority of the Committee shall constitute
a quorum. All decisions of the Committee shall be made by a vote of not less
than a majority of the Committee members present at a meeting of the Committee
at which a quorum is present or by a written consent signed by all of the
members of the Committee. A dissenting Committee member who, within a reasonable
time after he has knowledge of any action or failure to act in accordance
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with the preceding sentence, registers his dissent in writing delivered to the
other Committee members and to the Board of Directors, shall not be responsible
for any such action or failure to act.
(e) All usual and reasonable expenses of the Committee shall be paid by the
Corporation, and no member shall receive compensation with respect to his
services for the Committee except as may be authorized by the Board of
Directors. The Board of Directors and the Committee may employ attorneys,
consultants, accountants or other persons, and the Board of Directors, the
Committee, the Corporation and its officers and directors shall be entitled to
rely upon the advice, opinions or valuations of any such persons. All actions
taken and all interpretations and determinations made by the Board of Directors
or the Committee in good faith shall be final and binding upon all Employees who
have received awards, the Corporation and all other interested persons. No
member of the Board of Directors or the Committee or any person to whom it has
delegated duties as aforesaid shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
1996 Plan or awards made thereunder, and the Corporation shall indemnify and
hold harmless each member of the Board of Directors or the Committee or any
person to whom it has delegated duties as aforesaid against all loss, cost,
expenses or damages, occasioned by any act or omission to act in connection with
any such action, determination or interpretation under or of the 1996 Plan,
consistent with the Corporation's certificate of incorporation and bylaws.
(f) Subject to such limitations or restrictions as may be imposed by the
Code or other applicable law, the Committee may grant to an Employee who has
been granted an award under the 1996 Plan or any other benefit plan maintained
by the Corporation or any of its subsidiaries, or any predecessor or successor
thereto, in exchange for the surrender and cancellation of such prior award, a
new award with such terms and conditions as the Committee may deem appropriate
consistent with the provisions of the 1996 Plan.
5. Eligibility; Factors To Be Considered in Granting Awards
(a) Except as provided in paragraph (c) hereof, awards shall be granted
only to persons who are regular salaried employees of the Corporation or one or
more of its Subsidiaries (as defined below) and either are officers of, or hold
key positions in or for, the Corporation or any Subsidiary ("Employees"). An
Employee who has been granted an award or awards under the 1996 Plan may be
granted an additional award or awards, subject to such limitations as may be
imposed by the Code on the grant of Incentive Stock Options or other applicable
law.
(b) For purposes of this 1996 Plan, the term "Subsidiary" means any
corporation (other than the Corporation) during any period of which fifty
percent (50%) or more of the total combined voting power of all classes of stock
is owned, directly or indirectly, by the Corporation. For purposes of this 1996
Plan, the term "Affiliate" shall have the same meaning as in Rule 12b-2
promulgated under the 1934 Act.
(c) Awards of Non-qualified Options shall be made, subject to and in
accordance with paragraph 14, to individuals not employed by the Corporation who
serve as members of the Board of Directors ("Outside Director Participants").
6. Exercise Price; Fair Market Value
The per share Exercise Price of each option for shares of Common Stock
shall be determined by the Committee, but shall in no event be less than one
hundred percent (100%) of the Fair Market Value on the date the option is
granted, subject to the requirements for Incentive Stock Options set forth in
paragraph 9 hereof. The Exercise Price will be subject to adjustment in
accordance with the provisions of paragraph 17 of the 1996 Plan. For purposes of
this 1996 Plan, the term "Fair Market Value per Share" as of any date shall
mean, for shares of Common Stock with respect to which Restricted Shares and
options shall be granted, the closing price of such Common Stock on such date
(or if there are no sales on such date, on the next preceding date on which
there were sales), as reported on the New York Stock Exchange Composite Tape, or
if such Common Stock is not listed or admitted to trading on the New York Stock
Exchange, as reported on the principal consolidated transaction reporting system
for the principal national securities exchange on which the Common Stock is
listed or admitted to trading, or if such Common Stock is not listed or admitted
to trading on any national securities exchange, the closing price of such Common
Stock as reported on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System ("NASDAQ"), or if such
Common Stock is not listed or admitted to trading on the NASDAQ National
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Market System, the last quoted sales price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported by
the NASDAQ System or such other system as may then be in use, or if such Common
Stock is not reported on any such system and is not listed or admitted to
trading on any national securities exchange, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in such
Common Stock selected by the Committee, or if no such market maker is making a
market in such Common Stock, the fair value of such Common Stock as determined
in good faith by the Committee by applying generally recognized principles of
valuing closely-held securities; provided, however, that in any event the Fair
Market Value per Share shall be appropriately adjusted to reflect events
described in paragraph 17 hereof. The Committee shall determine the date on
which an option is granted, provided that such date is consistent with the Code
and any applicable rules or regulations thereunder.
7. Term of Options
The term of each option granted under the 1996 Plan shall be as the
Committee shall determine, but in no event shall any option have a term of more
than ten (10) years from the date of grant, subject to earlier termination as
provided in paragraphs 15 and 16 hereof. If the holder of an Incentive Stock
Option owns Common Stock possessing more than ten percent (10%) of the combined
voting power of all classes of stock of the Corporation or any Subsidiary, the
term of such Incentive Stock Option shall not exceed five (5) years from the
date of grant.
8. Exercise of Options
(a) Unless otherwise provided in the option agreement, an option granted
under the 1996 Plan shall become one hundred percent (100%) vested at the
earliest of the Employee's retirement from active employment at or after
Retirement Age or the Employee's death or Total and Permanent Disability (as
defined in paragraph 16 hereof). Unless otherwise determined by the Committee,
an Employee's Retirement Age ("Retirement Age") hereunder is sixty (60). Each
option shall become vested and exercisable in such cumulative installments and
upon such events as the Committee may determine in its sole discretion. Subject
to the foregoing, the unvested portion of any option granted under the 1996 Plan
shall be forfeited on the date the Employee ceases to be an Employee of the
Corporation. The Committee may also, in its sole discretion, accelerate the
exercisability of any option or installment thereof at any time.
(b) An option may be exercised at any time or from time to time, as to any
or all full shares of Common Stock as to which the option has become
exercisable; provided, however, that an option shall not be exercised at any
time as to less than fifty (50) shares (or less than the number of shares of
Common Stock as to which the option is then exercisable, if that number is less
than fifty (50) shares).
(c) At the time of exercise of any option, the per share Exercise Price of
such option shall be paid in full for each share of Common Stock with respect to
which such option is exercised. Payment may be made in cash or in shares of the
Common Stock, valued at the Fair Market Value per Share on the date of exercise.
If the Corporation shall have a class of its Common Stock registered pursuant to
Section 12 of the 1934 Act, an option holder may also make payment at the time
of exercise of an option (other than an Incentive Stock Option) for such class
of Common Stock by delivering to the Corporation a properly executed exercise
notice together with irrevocable instructions to a broker approved by the
Corporation that upon such broker's sale of shares with respect to which such
option is exercised, it is to deliver promptly to the Corporation the amount of
sale proceeds necessary to satisfy the option Exercise Price and any required
withholding taxes (subject to the provisions of paragraph 20 hereof).
(d) Upon the exercise of an option or portion thereof in accordance with
the 1996 Plan, the option agreement and such rules and regulations as may be
established by the Committee, the holder thereof shall have the rights of a
stockholder with respect to the Common Stock issued as a result of such
exercise.
9. Incentive Stock Options
(a) The Committee shall designate the Employees to whom Incentive Stock
Options, as described in Section 422 of the Code or any successor section
thereto, are to be awarded under the 1996 Plan and shall
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determine the class or classes and the number of shares of Common Stock to be
covered by each Incentive Stock Option. Incentive Stock Options shall be awarded
only to Employees. In no event shall the aggregate Fair Market Value of all
Common Stock (determined at the time the option is awarded) with respect to
which Incentive Stock Options are exercisable for the first time by an
individual during any calendar year (under all plans of the Corporation and its
Subsidiaries) exceed $100,000.
(b) The Exercise Price of a share of Common Stock under each Incentive
Stock Option shall be determined by the Committee; provided, however, that in no
event shall such price be less than one hundred percent (100%) of the Fair
Market Value per Share as of the date of grant or one hundred ten percent (110%)
of such Fair Market Value per Share if the holder of the Incentive Stock Option
owns Common Stock possessing more than ten percent (10%) of the combined voting
power of all classes of stock of the Corporation or any Subsidiary. The Exercise
Price will be subject to adjustment in accordance with the provisions of
paragraph 17 of the 1996 Plan.
(c) Except as provided in paragraphs 15 and 16 hereof, no Incentive Stock
Option shall be exercised at any time unless the holder thereof is then an
Employee of the Corporation or one of its Subsidiaries. For this purpose,
"Subsidiary" shall include, as under Treasury Regulations Section
1.421-7(h)(3)-(4), example (3), any corporation that is a Subsidiary of the
Corporation during the entire portion of the requisite period of employment
during which it is the employer of the holder.
(d) In the event of amendments to the Code or applicable rules or
regulations relating to Incentive Stock Options subsequent to the date hereof,
the Corporation may amend the provisions of the 1996 Plan, and the Corporation
and the Employees holding such Incentive Stock Options may agree to amend
outstanding option agreements to conform to such amendments.
10. Non-qualified Stock Options
The Committee shall designate the Employees to whom non-qualified stock
options are to be awarded under the 1996 Plan and shall determine the class or
classes and the number of shares of Common Stock to be covered by each
non-qualified stock option. The Exercise Price of a share of Common Stock under
a Non-qualified Option shall be determined by the Committee; provided, however,
that in no event shall such price be less than one hundred percent (100%) of the
Fair Market Value per Share as of the date of grant. The Exercise Price will be
subject to adjustment in accordance with the provisions of paragraph 17 of the
1996 Plan.
11. Non-Transferability of Options
Options granted under the 1996 Plan shall not be transferable otherwise
than by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules thereunder, and
options shall be exercisable during the lifetime of the Employee only by the
Employee or by the Employee's guardian or legal representative (unless such
exercise would disqualify an option as an Incentive Stock Option).
12. Award and Delivery of Restricted Shares
(a) The Committee shall designate the Employees to whom Restricted Shares
are to be granted under the 1996 Plan and shall determine the terms for such
grants. At the time an award of Restricted Shares is made, the Committee shall
establish a period or periods of time (each a "Restricted Period") applicable to
such award that shall not be more than ten (10) years. Each award of Restricted
Shares may have a different Restricted Period or Restricted Periods. The
Committee may, in its sole discretion, at the time an award is made, provide for
the incremental lapse of Restricted Periods with respect to a portion or
portions of the Restricted Shares awarded, and for the lapse or termination of
restrictions upon all or any portion of the Restricted Shares upon the
satisfaction of other conditions in addition to or other than the expiration of
the applicable Restricted Period. The Committee may also, in its sole
discretion, shorten or terminate a Restricted Period or waive any conditions for
the lapse or termination of restrictions with respect to all or any portion of
the Restricted Shares. Notwithstanding the foregoing, all restrictions shall
lapse or terminate with respect to all Restricted Shares upon the Employee's
death, Total and Permanent Disability (as defined in paragraph 16
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hereof), or retirement from active employment at or after the Retirement Age (as
defined in paragraph 8 hereof).
(b) At the time a grant of Restricted Shares is made to an Employee, a
stock certificate representing a number of shares of Common Stock equal to the
number of such Restricted Shares shall be registered in the Employee's name but
shall be held in custody by the Corporation for such Employee's account. The
Employee shall generally have the rights and privileges of a stockholder as to
such Restricted Shares, including, without limitation, the right to vote such
Restricted Shares, except that, subject to the earlier lapse or termination of
restrictions as herein provided, the following restrictions shall apply: (i) the
Employee shall not be entitled to delivery of the stock certificate evidencing
Restricted Shares until the expiration or termination of the Restricted Period
applicable to such shares and the satisfaction of any other conditions
prescribed by the Committee; (ii) none of the shares then subject to a
Restricted Period shall be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period applicable to such shares
and until the satisfaction of any other conditions prescribed by the Committee;
and (iii) all of the shares then subject to a Restricted Period shall be
forfeited and all rights of the Employee to such Restricted Shares shall
terminate without further obligation on the part of the Corporation if the
Employee ceases to be an Employee of the Corporation or any of its Subsidiaries
before the expiration or termination of such Restricted Period and the
satisfaction of any other conditions prescribed by the Committee applicable to
such Restricted Shares. Dividends in respect of Restricted Shares shall be
currently paid; provided, however, that in lieu of paying currently a dividend
of shares of Common Stock in respect of Restricted Shares, the Committee may, in
its sole discretion, register in the name of an Employee a stock certificate
representing such shares of Common Stock issued as a dividend in respect of
Restricted Shares, and may cause the Corporation to hold such certificate in
custody for the Employee's account subject to the same terms and conditions as
such Restricted Shares. Upon the forfeiture of any Restricted Shares, such
forfeited Restricted Shares shall be transferred to the Corporation without
further action by the Employee. The Employee shall have the same rights and
privileges, and be subject to the same restrictions, with respect to any shares
received pursuant to paragraph 17 hereof.
(c) Upon the expiration or termination of the Restricted Period applicable
to such shares and the satisfaction of any other conditions prescribed by the
Committee or at such earlier time as provided for herein, the restrictions
applicable to the shares subject to such Restricted Period shall lapse and a
certificate for a number of shares of Common Stock equal to the number of
Restricted Shares with respect to which the restrictions have expired or
terminated shall be delivered, free of all such restrictions, except any that
may be imposed by law, to the Employee or the Employee's Beneficiary. An
Employee's "Beneficiary" is a person or persons (natural or otherwise)
designated by such Employee, pursuant to a written instrument executed by such
Employee and filed with the Committee, to receive any benefits payable hereunder
in the event of such Employee's death. The Corporation shall not be required to
deliver any fractional share of Common Stock but shall pay to the Employee or
the Employee's Beneficiary, in lieu thereof, the product of (i) the Fair Market
Value per Share (determined as of the date the restrictions expire or terminate)
and (ii) the fraction of a share to which such Employee would otherwise be
entitled. Subject to paragraph 20 hereof, no payment will be required from the
Employee upon the issuance or delivery of any Common Stock upon the expiration
or termination of a Restricted Period with respect to Restricted Shares.
13. Award of Performance Units
(a) The Committee shall designate the Employees to whom Performance Units,
valued based upon the long-term performance of the Corporation, are to be
awarded under the 1996 Plan and shall determine the terms for such awards. At
the time an award of Performance Units is made, the Committee shall prescribe a
range of long-term financial or other performance objectives, including minimum,
maximum and target objectives of the Corporation ("Long-term Objectives") during
the Incentive Period (as defined in paragraph 13(c) hereof) applicable to such
Performance Units, and shall determine a range of dollar values of each
Performance Unit associated with such range of Long-term Objectives. If the
minimum Long-term Objective prescribed by the Committee for any Performance Unit
is not achieved or exceeded, then such Performance Unit shall have no value and
no amount shall be payable with respect thereto. If such minimum Long-term
Objective is achieved or exceeded, then the dollar value of all Performance
Units to be paid with
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respect thereto shall be based upon the level of Long-term Objective achieved,
subject to any maximum Performance Unit value imposed by the Committee. If
during the course of an Incentive Period there shall occur significant events
that were not foreseen in establishing the minimum Long-term Objective for such
Incentive Period and which the Committee expects to have a substantial effect on
such objective during such Incentive Period, in its sole discretion, the
Committee may revise such objective.
(b) Any Employee who is an Employee of the Corporation or a Subsidiary as
of the Valuation Date (as defined in paragraph 13(c)) with respect to
Performance Units that have been previously awarded to him, shall, if the
minimum Long-term Objective specified in paragraph 13(a) is met, be eligible to
receive an award payable, as determined by the Committee, in cash or in shares
of Common Stock, with a Fair Market Value equal to the value of such Performance
Units determined pursuant to such paragraph 13(a) as of the Valuation Date
applicable thereto. Payment of such award shall be made as soon as practicable
following the Valuation Date of such Performance Units. Except as otherwise
provided in paragraph 15(b) hereof, any Performance Units awarded to an Employee
during his employment period for which the Incentive Period has not ended shall
be forfeited upon the date such employment terminates, and he shall not be
entitled to any payment in respect thereof.
(c) For purposes of the 1996 Plan,
(i) the "Incentive Period" with respect to a Performance Unit shall be
a period beginning on the date such Performance Unit is granted and lasting
for such period, not shorter than two (2) years nor longer than ten (10)
years, as the Committee shall designate; and
(ii) the "Valuation Date" means the last day of the Incentive Period
for a Performance Unit.
14. Stock Option Grants to Outside Director Participants.
(a) Commencing with the Annual Meeting of the Corporation's stockholders to
be held in 1996, each person who is serving as an Outside Director Participant
on the third trading day following the later of (i) the date on which the Annual
Meeting of the Corporation's stockholders or any adjournment thereof is held in
any year and (ii) the date on which the Corporation publicly announces the
results of operations of the Corporation for the fiscal quarter immediately
preceding such Annual Meeting, shall automatically be granted an Option to
purchase 3,000 shares of Common Stock, subject to adjustment as described in
paragraph 17. In addition, but without duplication with respect to the foregoing
grant to existing Outside Director Participants, an initial grant of an Option
to purchase 10,000 shares of Common Stock (subject to adjustment as described in
paragraph 17) shall automatically be granted to each individual who is first
elected an Outside Director Participant on the third trading date following the
effective date of such election. The Options granted hereunder shall be
Non-qualified Options and shall be subject to the following:
(b) Exercise Price. The Exercise Price for each share purchasable under any
Non-qualified Option granted hereunder shall be the Fair Market Value per Share
at the date such Option is granted. The Exercise Price will be subject to
adjustment in accordance with the provisions of paragraph 17 of the 1996 Plan.
(c) Payment. At the time of exercise of any option, the per share Exercise
Price of such option shall be paid in full for each share of Common Stock with
respect to which such option is exercised. Payment may be made in cash or in
shares of the Common Stock, valued at the Fair Market Value per Share on the
date of exercise. If the Corporation shall have a class of its Common Stock
registered pursuant to Section 12 of the 1934 Act, an option holder may also
make payment at the time of exercise of an option for such class of Common Stock
by delivering to the Corporation a properly executed exercise notice together
with irrevocable instructions to a broker approved by the Corporation that upon
such broker's sale of shares with respect to which such option is exercised, it
is to deliver promptly to the Corporation the amount of sale proceeds necessary
to satisfy the option Exercise Price.
(d) Exercisability of Stock Option. Subject to paragraphs (e), (f) and (g)
below, (i) fifty percent (50%) of each Option shall be exercisable within one
(1) year after the date of the grant, (ii) an additional twenty-five percent
(25%) shall be exercisable within two (2) years after the date of grant, and
(iii) the remainder shall be exercisable three (3) years after the date of the
grant. The right to purchase shares shall be
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cumulative so that when the right to purchase any shares has accrued, such
shares or any part thereof may be purchased at any time thereafter until the
expiration or termination of the Option. No Option by its terms shall be
exercisable after the expiration of ten (10) years from the date of grant of the
Option.
(e) Death. In the event of the death of an Outside Director Participant,
(i) all Options held by such optionee on the date of death shall become
exercisable and (ii) the estate of such optionee shall have the right within one
(1) year after the date of death (but in no event after the expiration of the
Option) to exercise his Option with respect to all or any part of the shares of
stock underlying the Options held by such optionee immediately prior to the time
of his death.
(f) Disability. If an Outside Director Participant's service as a director
of the Corporation is terminated because of Total and Permanent Disability (as
defined in paragraph 16), (i) all options held by such optionee as of the date
of such termination shall become exercisable and (ii) such optionee shall have
the right within one (1) year after the date of such termination (but in no
event after the expiration of the Option) to exercise his Option with respect to
all or any part of the shares of stock underlying the Options held by such
optionee immediately prior to the time of such termination.
(g) Retirement. If an Outside Director Participant retires (as defined
herein) from the Corporation, (i) all Options held by such optionee on the date
of his retirement shall become exercisable and (ii) such optionee shall have the
right, within one (1) year after the date of his retirement (but in no event
after the expiration date of the Option) to exercise his Option with respect to
all or any part of the shares of stock underlying the Options held by such
optionee immediately prior to the time of retirement. "Retirement" for this
purpose shall mean either failure of the Corporation to retain or nominate for
re-election such Outside Director Participant or such director's ineligibility
to run for re-election pursuant to the Corporation's by-laws.
(h) Other Termination or For Cause. In the event an Outside Director
Participant is terminated for any reason other than those specified in
paragraphs (e), (f) or (g) above, such optionee shall have the right, within
thirty (30) days after the date of such termination (but in no event after the
expiration date of the Option), to exercise his Option with respect to all or
any part of the shares of stock which such optionee was entitled to purchase
immediately prior to such termination; provided, however, that if the optionee
is removed from office for Cause (as defined below) by action of the
stockholders of the Corporation in accordance with its bylaws and the General
Corporation Law of the State of Delaware, or if such optionee voluntarily
terminates his service without the consent of the Corporation (of which fact the
Committee shall be the sole judge), then such optionee shall immediately forfeit
his rights under his Option, except as to the shares of Common Stock of the
Corporation already purchased thereunder.
(i) Ineligibility for Other Grants. Any Outside Director Participant who
receives an Option pursuant to this paragraph 14 shall be ineligible to receive
any other Option under any other Section of this Plan.
(j) The Committee. The provisions of this paragraph 14 shall be
administered by the Committee solely in accordance with the terms hereof;
provided, however, that the Committee shall maintain the authority to interpret
this paragraph of the Plan and to make all determinations permitted by this
paragraph 14 or deemed necessary for its administration.
15. Termination of Employment; Forfeiture Events Involving Termination for
Cause
(a) Unless otherwise determined by the Committee, in the event that the
employment of an Employee to whom an option has been granted under the 1996 Plan
terminates for any reason (except pursuant to an authorized leave of absence for
military or government service as determined by the Committee or as set forth in
paragraph 16 hereof), such Employee shall have a period of ninety (90) days
following termination of employment in which to exercise any then vested options
under the 1996 Plan, and at the end of the 90-day period, all rights of such
Employee under any then outstanding option shall terminate and shall be
forfeited immediately as to any unexercised portion thereof.
(b) Unless otherwise determined by the Committee, if an Employee to whom
Performance Units have been granted ceases to be an Employee of the Corporation
or of a Subsidiary prior to the end of the Incentive Period with respect to such
Performance Units for any reason other than death, Total and Permanent
A-8
<PAGE> 36
Disability or retirement from active employment at or after the Retirement Age,
the Employee shall immediately forfeit all such Performance Units. If an
Employee to whom Performance Units have been granted terminates employment by
reason of retirement on or after the Retirement Age, Total and Permanent
Disability or death, he shall, if the minimum Long-term Objectives specified in
paragraph 13(a) hereof are met, be eligible to receive an award payable in the
form of cash or shares of Common Stock, as determined by the Committee, equal to
the value of such Performance Units, determined pursuant to such paragraph 13(a)
and payable as soon as practicable following the Valuation Date of such
Performance Units. If the Employee terminates employment due to his death or if
an Employee who retires from active employment on or after his Retirement Age or
terminated employment due to Total and Permanent Disability dies prior to
receipt of any such payment, then his designated Beneficiary shall, if the
minimum Long-term Objectives specified in paragraph 13(a) are met, be entitled
to receive an award payable in the form of cash or shares of Common Stock, as
determined by the Committee, equal to the value of such Performance Units,
determined pursuant to such paragraph 13(a), and payable as soon as practicable
following the Valuation Date of such Performance Units. In the event that the
person designated by the Employee as his Beneficiary shall not be living at the
time, or if no designation has been made, then the payment of such cash award
shall be made to the estate of the Employee.
(c) Awards granted under the 1996 Plan shall not be affected by any change
of duties or position so long as the holder continues to be an Employee. Any
option, Restricted Share, or Performance Unit agreement, and any rules and
regulations relating to the 1996 Plan, may contain such provisions as the
Committee shall approve with reference to the determination of the date
employment terminates and the effect of leaves of absence. Any such rules and
regulations with reference to any option agreement shall be consistent with the
provisions of the Code and any applicable rules and regulations thereunder.
Nothing in the 1996 Plan or in any award granted pursuant to the 1996 Plan shall
confer upon any Employee any right to continue in the employ of the Corporation
or any Subsidiary or interfere in any way with the right of the Corporation or
any Subsidiary to terminate such employment at any time.
(d) Notwithstanding the foregoing provisions of this paragraph 15, if an
Employee's employment terminates for "Cause," as defined in the terms of any
agreement or award granted under the 1996 Plan, or if a former Employee engages
in any activity inimical, contrary or harmful to the interest of the Corporation
within three (3) years after termination of employment, all unexercised options,
restricted stock or Performance Units will be forfeited immediately upon such
termination, and the Employee or former Employee shall pay to the Corporation
any option gain realized from exercising options under the 1996 Plan, and/or any
proceeds from the vesting of restricted stock or the payment of Performance
Units under the 1996 Plan. If no definition of "Cause" appears in the terms of
any such agreement or award, then for all purposes of the 1996 Plan, "Cause"
shall mean and include (i) the unauthorized disclosure to any third party of any
trade secret or confidential information of the Corporation, (ii) the commission
of an act of embezzlement or fraud, or (iii) conviction of a felony or any crime
of moral turpitude. Acts harmful to the interest of the Corporation shall mean
and include accepting employment with or serving as a consultant, advisor or in
any other capacity to any business entity that is in competition with the
Corporation, or soliciting, recruiting or employing any Employee of the
Corporation.
16. Death or Total and Permanent Disability of Employee
The following provisions shall apply unless an Employee's written agreement
evidencing an award of options, Restricted Shares, or Performance Units under
the 1996 Plan provides otherwise. If an Employee to whom an option has been
granted under the 1996 Plan shall die or suffer a Total and Permanent Disability
while employed by the Corporation or a Subsidiary, such option may be exercised
as set forth in this paragraph 16 by the Employee, legal guardian of the
Employee (unless such exercise would disqualify an option as an Incentive Stock
Option), a legatee or legatees of the Employee under the Employee's last will,
or by the Employee's personal representatives or distributees, whichever is
applicable, at any time within twelve (12) months after the date of the
Employee's death or Total and Permanent Disability, but in no event later than
the date on which the option terminates. Notwithstanding the above, if an
Employee who terminates employment by reason of Total and Permanent Disability
shall die, a legatee or legatees of such Employee under the Employee's last
will, or the executor of such Employee's estate, shall only have the right to
exercise
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<PAGE> 37
such option during the period ending twelve (12) months after the date of the
Employee's termination of employment by reason of Total and Permanent
Disability. For purposes hereof, "Total and Permanent Disability" shall have the
meaning set forth in Code Section 22(e)(3) or any successor provision thereto.
17. Adjustments upon Changes in Capitalization, etc.
Notwithstanding any other provision of the 1996 Plan, all outstanding
awards of options or Restricted Shares under the 1996 Plan, and all terms of the
1996 Plan relating to the maximum number of shares available thereunder or with
respect to which awards may be made thereunder to any Employee in any one year,
shall automatically be adjusted, insofar as the number and classes of shares
available thereunder, the number of shares of Common Stock or other securities
covered by an option or award of Restricted Shares and/or to the purchase price
of a share of Common Stock or other securities available under, to prevent
dilution or enlargement, including adjustments in the event of changes in the
outstanding Common Stock by reason of stock dividends, split-ups,
recapitalizations, mergers, consolidations, combinations or exchanges of shares,
separations, reorganizations, liquidations and the like. Any fractional shares
resulting from such adjustments to options or Restricted Shares shall be
eliminated. In the event of any offer to holders of Common Stock generally
relating to the acquisition of their shares, the Committee shall make such
adjustment as it deems equitable in respect to outstanding options and
Restricted Shares, including revision of outstanding options and Restricted
Shares so that they may be exercisable or redeemable for or payable in the
consideration payable in the acquisition transaction. Any such determination by
the Committee shall be conclusive.
18. Change of Control
The following provisions shall apply unless an Employee's written agreement
evidencing an award of options, Restricted Shares, or Performance Units under
the 1996 Plan provides otherwise. In the event that, while any options,
Restricted Shares, or Performance Units are outstanding under the 1996 Plan: (a)
there shall occur a change of control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Securities Exchange Act of 1934 (the "Act") or any similar provision
promulgated under the Act; (b) any "person" or "group" (as those terms are used
in Sections 13(d) and 14(d) of the Act), becomes the "beneficial owner" (as
defined in Rule 13d-3 of the Act), directly or indirectly, of securities of the
Corporation representing thirty percent (30%) or more of the combined voting
power of the Corporation's then outstanding securities; or (c) during any period
of two consecutive years commencing on or after August 22, 1996, individuals who
at the beginning of the period constituted the Board cease for any reason to
constitute at least a majority of the Board of Directors then in office, unless
the election, or the nomination for election by the Corporation's shareholders,
of each director who was not a director at the beginning of the period has been
approved in advance by directors representing at least two-thirds ( 2/3) of the
directors then in office who were directors at the beginning of the period;
then, each option, Restricted Share and Performance Unit outstanding immediately
prior to the consummation of such transaction, without the necessity of any
action by the Board of Directors, shall become fully vested and all restrictions
on such shares shall lapse, and (A) the holder of any outstanding option shall
be entitled, immediately prior to the effective date of such transaction, to
exercise such option; (B) the holder of any Restricted Shares shall be entitled
to receive a stock certificate representing a number of shares of Common Stock
equal to the number of Restricted Shares with respect to which the applicable
restrictions have lapsed or terminated; and (C) the recipient of any Performance
Unit shall be entitled, immediately prior to the effective date of such
transaction, to receive the value of each unit.
19. Termination and Amendment
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the 1996 Plan at any time; provided, however, that an
amendment shall be subject to stockholder approval if such approval is required
by Rule 16b-3 promulgated under the 1934 Act or under any successor rule, the
Code or the rules of any securities exchange or market system on which
securities of the Corporation are listed or admitted to trading at the time such
amendment is adopted. The Board of Directors may delegate to the Committee all
or any portion of its authority under this paragraph 19. If the 1996 Plan is
terminated, the terms
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<PAGE> 38
of the 1996 Plan shall, notwithstanding such termination, continue to apply to
awards granted prior to such termination. In addition, no suspension,
termination, modification or amendment of the 1996 Plan may, without the consent
of the Employee to whom an award shall theretofore have been granted, adversely
affect the rights of such Employee under such award.
20. Withholding Tax
(a) The Corporation shall have the right to deduct from all amounts paid in
cash in consequence of the settlement of a Performance Unit under the 1996 Plan
any taxes required by law to be withheld with respect to such cash payments.
Subject to paragraph 20(c) below, where an Employee or other person is entitled
to receive shares of Common Stock pursuant to the exercise of an option or the
settlement of a Performance Unit pursuant to the 1996 Plan, the Corporation
shall have the right to require the Employee or such other person to pay to the
Corporation the amount of any taxes that the Corporation is required to withhold
with respect to such shares, or, in lieu thereof, to retain, or sell without
notice, a sufficient number of such shares to cover the amount required to be
withheld. Upon the disposition (within the meaning of Code Section 424(c)) of
shares of Common Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to the expiration of the holding period requirements of Code
Section 422(a)(1), the Employee shall be required to give notice to the
Corporation of such disposition and the Corporation shall have the right to
require the Employee to pay to the Corporation the amount of any taxes that are
required by law to be withheld with respect to such disposition.
(b) Upon termination of the Restricted Period with respect to any
Restricted Shares (or such earlier time, if any, as an election is made by the
Employee under Code Section 83(b), or any successor provisions thereto, to
include the value of such shares in taxable income), the Corporation shall have
the right to require the Employee or other person receiving shares of Common
Stock in respect of such Restricted Shares to pay to the Corporation the amount
of taxes that the Corporation is required to withhold with respect to such
shares of Common Stock or, in lieu thereof, to retain or sell without notice a
sufficient number of shares of Common Stock held by it to cover the amount
required to be withheld. The Corporation shall have the right to deduct from all
dividends paid with respect to Restricted Shares the amount of taxes that the
Corporation is required to withhold with respect to such dividend payments.
21. Written Agreements; Stock Legends
Each award of options, Restricted Shares, or Performance Units shall be
evidenced by a written agreement, executed by the Employee and the Corporation,
which shall contain such restrictions, terms and conditions as the Committee may
require, and certificates evidencing shares of Common Stock issued under the
1996 Plan shall have conspicuously noted thereon such restrictions on
transferability as the Corporation may require in order to ensure compliance
with applicable federal and state securities laws and regulations.
22. Compliance with Applicable Laws
Notwithstanding any other provision of the 1996 Plan, the Corporation shall
have no liability to issue any shares of Common Stock under the 1996 Plan unless
such issuance would comply with all applicable laws and the applicable
requirements of any securities exchange or similar authority. Prior to the
issuance of any shares of Common Stock under the 1996 Plan, the Corporation may
require a written statement that the recipient is acquiring the shares for
investment and not for the purpose or with the intention of distributing the
shares.
23. Effect on Other Stock Plans
The adoption of the 1996 Plan shall have no effect on awards made or to be
made to Employees pursuant to other plans of the Corporation or its
Subsidiaries, or any predecessors or successors thereto. The adoption of the
formula provisions of paragraph 14 hereof for Outside Director Participants
shall supersede and replace the awards of non-qualified stock options to be made
to Outside Director Participants under the Corporation's 1993 Stock Option Plan,
effective for the Annual Meeting of the Corporation's stockholders to be held in
1996.
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<PAGE> 39
IN WITNESS WHEREOF and as conclusive evidence of its adoption of the 1996
Plan, the Corporation has caused this 1996 Long Term Incentive Plan to be duly
executed this day of , 1996.
REDMAN INDUSTRIES, INC.
By:
---------------------------
A-12
<PAGE> 40
EXHIBIT B
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
Redman Industries, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That the board of directors of the Corporation, at a meeting duly
held on May 21, 1996, adopted resolutions setting forth a proposed amendment to
the Restated Certificate of Incorporation of the Corporation, declaring said
amendment to be advisable and authorizing the officers to submit such amendment
to the stockholders of the Corporation for consideration thereof. The proposed
amendment, in the form adopted by the board of directors of the Corporation, is
as set forth in Appendix A to this Certificate.
SECOND: That the stockholders of the Corporation entitled to vote thereon,
at a meeting duly held on August 21, 1996, voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the capital of the Corporation shall not be reduced under or
by reason of said amendment.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be duly
executed as of the day of August, 1996.
REDMAN INDUSTRIES, INC.
By:
-------------------------
Name:
-----------------------
Title:
----------------------
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<PAGE> 41
APPENDIX A
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The Restated Certificate of Incorporation of the Corporation is amended by
deleting the first paragraph of ARTICLE FOURTH in its entirety and replacing
such first paragraph with the following paragraph:
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is 50,000,000 shares,
divided into two classes as follows: (i) 10,000,000 shares of
Preferred Stock, par value $0.01 per share ("Preferred Stock");
and (ii) 40,000,000 shares of Common Stock, par value $0.01 per
share ("Common Stock").
B-2
<PAGE> 42
REDMAN INDUSTRIES, INC.
2550 WALNUT HILL LANE, SUITE 200, DALLAS, TEXAS 75229
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Paul L. Barrett and J. Mark Kilpatrick
as proxies, each with the power to appoint his substitute, and the undersigned
hereby authorizes either of them to represent and to vote, as designated below,
all shares of Common Stock of Redman Industries, Inc., par value $.01 per share
("Common Stock"), held of record by the undersigned on June 27, 1996, at the
annual meeting of shareholders of Redman Industries, Inc. to be held on August
21, 1996, or at any postponement or adjournment thereof, and especially to
vote on the items of business specified below, as more fully described in the
Notice of Annual Meeting of Shareholders dated July , 1996, and the Proxy
Statement accompanying the same, the receipt of which is hereby acknowledged.
The undersigned hereby revokes any proxies heretofore given to
represent or vote such Common Stock and hereby ratifies and confirms all action
that said proxies, their substitutes, or any of them, might lawfully take in
accordance with the terms hereof. This Proxy may be revoked at any time before
it is voted by delivering to the Secretary of the Company either a written
revocation of proxy or a duly executed proxy bearing a later date or by
appearing at the annual meeting and voting in person.
(Continued and to be signed on reverse side)
<PAGE> 43
Please mark
your votes as
indicated in
this example [x]
THIS PROXY, WHEN PROPERTY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE ON THIS
PROXY CARD, THIS PROXY WILL BE VOTED FOR ALL NOMINEES LISTED IN ITEM 1 AND FOR
PROPOSALS 2 AND 3, AND THE PROXIES WILL USE THEIR DISCRETION WITH RESPECT TO
ANY MATTER REFERRED TO IN ITEM 4.
1. ELECTION OF DIRECTORS
FOR all nominees listed below (except WITHHOLD AUTHORITY to vote for
as marked to the contrary below) [ ] all nominees listed below [ ]
(INSTRUCTION: To withhold authority to vote for any individual, strike a line
through the nominee's name in the list below.)
C. A. Rundell, Jr. Robert L. Stark Thomas W. Sturgess
2. Proposal to approve the Redman Industries, FOR AGAINST ABSTAIN
Inc. 1996 Long Term Incentive Plan [ ] [ ] [ ]
3. Proposal to approve the Amendment to the FOR AGAINST ABSTAIN
Restated Certificate of Incorporation of [ ] [ ] [ ]
Redman Industries, Inc., to increase the
number of authorized shares of Common Stock,
par value $0.01, from 20,000,000 to 40,000,000
shares authorized for issuance
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the annual meeting or any adjournment or
postponement thereof.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, guardian or in some other representative capacity, please give full
title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature(s) Date
------------------------------------------- ---------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
