SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 18, 2000
The Annual Meeting of the Stockholders of Northern Technologies
International Corporation, a Delaware corporation (the "Company"), will be held
at the Hyatt Regency Minneapolis, 1300 Nicollet Mall, Minneapolis, Minnesota
55403, beginning at 11:00 a.m., local time, on Friday, February 18, 2000, for
the following purposes:
1. To elect eight (8) persons to serve as directors until
the next annual meeting of the stockholders or until
their respective successors shall be elected and
qualified;
2. To adopt the Company's 2000 Stock Incentive Plan;
3. To approve the appointment of Deloitte & Touche LLP as
independent auditors for the fiscal year ending August
31, 2000; and
4. To transact such other business as may properly come
before the meeting.
The record date for determination of stockholders entitled to notice
of and to vote at the meeting and any adjournments thereof is the close of
business on December 30, 1999.
Whether or not you expect to attend the meeting in person, please
complete, sign, date and promptly return the enclosed proxy in the envelope
provided, which requires no postage if mailed in the United States.
By Order of the Board of Directors
/s/ G. Patrick Lynch
G. Patrick Lynch
SECRETARY
January 12, 2000
Lino Lakes, Minnesota
<PAGE>
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
6680 N. HIGHWAY 49
LINO LAKES, MINNESOTA 55014
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 18, 2000
INTRODUCTION
The Annual Meeting of the Stockholders of Northern Technologies
International Corporation (the "Company") will be held at the Hyatt Regency
Minneapolis, 1300 Nicollet Mall, Minneapolis, Minnesota 55403, beginning at
11:00 a.m., local time, on Friday, February 18, 2000, or at any adjournments
thereof (the "Annual Meeting"), for the purposes set forth in the Notice of
Meeting.
A proxy card is enclosed for your use. You are solicited on behalf
of the Board of Directors to SIGN AND RETURN THE PROXY CARD IN THE ACCOMPANYING
ENVELOPE. No postage is required if mailed within the United States. The cost of
soliciting proxies, including the preparation, assembly and mailing of proxies
and soliciting material, as well as the cost of forwarding such material to the
beneficial owners of the Company's common stock, will be borne by the Company.
Directors, officers and regular employees of the Company may, without
compensation other than their regular compensation, solicit proxies by
telephone, telegraph or personal conversation. The Company may reimburse
brokerage firms and others for expenses in forwarding proxy materials to the
beneficial owners of the Company's common stock.
Any stockholder giving a proxy may revoke it at any time prior to
its use at the Annual Meeting either by giving written notice of such revocation
to the Secretary of the Company, by filing a duly executed proxy bearing a later
date with the Secretary of the Company or by appearing at the Annual Meeting and
filing written notice of revocation with the Secretary of the Company prior to
use of the proxy. Proxies will be voted as specified by stockholders. Proxies
that are signed by stockholders but that lack any such specification will be
voted in favor of the proposals set forth in the Notice of Meeting and in favor
of the election as directors of the nominees for directors listed in this Proxy
Statement.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL OF
THE PROPOSALS SET FORTH IN THE NOTICE OF MEETING.
The Company expects that this proxy material will first be mailed to
stockholders on or about January 12, 2000.
<PAGE>
VOTING OF SHARES
Only holders of the Company's common stock, $.02 par value (the
"Common Stock"), of record at the close of business on December 30, 1999 will be
entitled to vote at the Annual Meeting. On December 30, 1999, the Company had
3,870,325 outstanding shares of Common Stock, each such share entitling the
holder thereof to one vote on each matter to be voted on at the Annual Meeting.
The holders of a majority of the shares entitled to vote and represented in
person or by proxy at the Annual Meeting will constitute a quorum for the
transaction of business at the Annual Meeting. In general, shares of Common
Stock represented by a properly signed and returned proxy card will be counted
as shares present and entitled to vote at the meeting for purposes of
determining a quorum, without regard to whether the card reflects abstentions
(or is left blank) or reflects a "broker non-vote" on a matter (i.e., a card
returned by a broker because voting instructions have not been received and the
broker has no discretionary authority to vote). Holders of shares of Common
Stock are not entitled to cumulate voting rights.
The election of a nominee for director requires the approval of a
plurality of the votes of the shares present and entitled to vote in person or
by proxy and the approval of the other proposals described in this Proxy
Statement requires the approval of a majority of the votes of the shares present
and entitled to vote in person or by proxy on that matter (and at least a
majority of the minimum number of votes necessary for a quorum to transact
business at the Annual Meeting). Shares represented by a proxy card voted as
abstaining on any of the proposals will be treated as shares present and
entitled to vote that were not cast in favor of a particular matter, and thus
will be counted as votes against the matter. Shares represented by a proxy card
including any broker non-vote on a matter will be treated as shares not entitled
to vote on that matter, and thus will not be counted in determining whether that
matter has been approved.
ELECTION OF DIRECTORS
NOMINATION
The Bylaws of the Company, as amended, provide that the Board of
Directors (the "Board") shall consist of eight members. The Board has nominated
the eight persons listed in this Proxy Statement to serve as directors of the
Company until the next regular meeting of stockholders or until their successors
are elected and qualified. All of the nominees are current members of the Board.
Assuming a quorum is represented at the Annual Meeting, either in
person or by proxy, the election of each director requires the affirmative vote
of a plurality of the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The Board recommends a vote FOR the election of each of
the nominees listed in this Proxy Statement. The Board intends to vote the
proxies solicited on its behalf for the election of each of the nominees as
directors. If prior to the Annual Meeting the Board should learn that any of the
nominees will be unable to serve by reason of death, incapacity or other
unexpected occurrence, the proxies may be cast for another nominee to be
designated by the Board to fill such vacancy, unless the stockholder indicates
to the contrary on the proxy. Alternatively, the proxies may, at the Board's
discretion, be voted for such fewer nominees as results from such death,
incapacity or other unexpected occurrence. The Board has no reason to believe
that any of the nominees will be unable to serve.
2
<PAGE>
INFORMATION ABOUT NOMINEES
The following table sets forth certain information as of January 12,
2000, which has been furnished to the Company by each person who has been
nominated by the Board to serve as a director for the ensuing year.
DIRECTOR
NAME AGE PRINCIPAL OCCUPATION SINCE
---- --- -------------------- -----
Sidney Dworkin 78 Chairman of the Board and Chief 1979
Executive Officer of Advanced Modular
Systems, Inc.
Vincent J. Graziano 66 President Emeritus of the Company and 1979
Internal Consultant
Gerhard Hahn 55 General Manager of Knuppel KG 1996
Dr. Donald A. Kubik 59 Vice Chairman and Chief Technology 1995
Officer of the Company; Member of
Executive Committee Serving as Co-Chief
Executive Officer of the Company
Richard G. Lareau 71 Partner of Oppenheimer Wolff & Donnelly 1980
LLP
Philip M. Lynch 63 Co-Chief Executive Officer and Chairman 1979
of the Board of the Company and
Executive Vice President of Inter Alia
Holding Company
Haruhiko Rikuta 34 Corporate Officer of Taiyonic Limited 1997
and President of NTI Asean LLC
Dr. Milan R. Vukcevich 62 Chief Scientist Research and Development 1995
of Bicron Saint-Gobain Industrial
Ceramics
OTHER INFORMATION ABOUT NOMINEES
Mr. Dworkin has been Chairman of the Board and Chief Executive
Officer of Advanced Modular Systems, Inc., a company which sells and leases
modular buildings, since 1988. In addition, since September 1987, Mr. Dworkin
has been an independent venture capitalist. Mr. Dworkin also serves as a
director of CCA Industries, Inc., Cragar Industries, Inc., Grand Court
Lifestyle, Inc., Viragen, Inc., and Paragon Mortgage Company, Inc. and as
Chairman of the Board of Comtrex Systems Corp., Nova Pet, Inc., and Marbledge
Group, Inc.,
Mr. Graziano was employed by the Company from 1976 until his
retirement from the Company in 1999, and was President of the Company at the
time he retired. Since his retirement from the Company in September 1999, Mr.
Graziano has been serving as an internal consultant to the Company. Prior to
joining the Company, Mr. Graziano served as Manager of Manufacturing Systems
with the management consulting department of Peat, Marwick, Mitchell & Co. in
Europe and the United States for nine years.
3
<PAGE>
Mr. Hahn has been employed as General Manager by Knuppel KG, a
German packaging firm, since 1966. Mr. Hahn has also been employed by Excor
Korrosionsschutz-Technologien und Produkte GmbH (the Company's German joint
venture) since 1991.
Dr. Kubik has been employed by the Company since 1978 and has been
Vice Chairman since September 1999. Dr. Kubik was Vice President of the Company
from 1979 to September 1999 and was Treasurer of the Company from 1998 to
September 1999. Since September 1999, he has been a Member of the Executive
Committee Acting as Co-Chief Executive Officer of the Company. During his employ
as senior chemist with the Company, Dr. Kubik was responsible for developing the
patent that led to the Company's introduction of protective plastic film and
paper products incorporating volatile corrosion inhibitors. Prior to joining the
Company, Dr. Kubik held a research and development position with 3M Company.
Mr. Lareau has been a partner of the law firm of Oppenheimer Wolff &
Donnelly LLP for more than five years. Mr. Lareau also serves as a director of
Ceridian Corporation, Merrill Corporation and Nash Finch Company, all public
companies, and as a trustee of Mesabi Trust.
Mr. Lynch has been Executive Vice President of Inter Alia Holding
Company, a financial and management consulting firm, for more than five years.
Mr. Lynch is also a member of the Board of Directors of the Fosbel Group of
Companies: Fosbel International (U.K.), Fosbel, Inc. (U.S.), Fosbel Japan, Ltd.
(Tokyo), Fosbel do Brasil (San Paulo), and Fosbel Europe BV, (operating in 17
Western and three Eastern European countries). The Fosbel Group is itself a
joint venture between multinational listed companies: Glaverbel S.A.,
(Bruxelles), a leading Belgian glass manufacturing company and an affiliate of
Asahi Glass Co., Ltd., and Burmah Castrol plc, an English petrochemical and
materials science company.
Mr. Rikuta, a citizen of Japan, has been employed at Taiyo Petroleum
Gas Co. Ltd. as Manager, ZERUST Department, since February 1993. From August
1991 to January 1993, Mr. Rikuta served as a Sales Representative of the
Company. Mr. Rikuta received a B.A. degree in Economics from Seijo University in
Tokyo, Japan in March 1989. In May 1991, Mr. Rikuta received a B.A. degree in
International Relations from the University of Wisconsin in Milwaukee,
Wisconsin.
Dr. Vukcevich is employed as Chief Scientist Research and
Development of Bicron Saint-Gobain Industrial Ceramics. Dr. Vukcevich was
employed by GE Lighting from 1973 to 1995, holding various positions including
Chief Scientist, Manager of Metallurgical Engineering and Coordinator of
International Research and Development in Materials Science.
INFORMATION ABOUT THE BOARD AND ITS COMMITTEES
The business and affairs of the Company are managed by the Board,
which held three meetings during the fiscal year ended August 31, 1999.
Committees established and maintained by the Board include the Audit Committee
and the Compensation Committee.
The Audit Committee of the Board maintains an active role in
communication with the Company's independent auditors and with the management of
the Company. The Audit Committee for fiscal 1999 consisted of Messrs. Lareau,
Lynch and Dworkin. The Audit Committee met one time during fiscal 1999. Messrs.
Lareau, Lynch and Dworkin will serve as the Audit Committee for fiscal 2000.
The responsibilities of the Compensation Committee of the Board
include setting the compensation for the executive officers of the Company and
setting the terms of and grants of awards under the Company's 1994 Stock
Incentive Plan. The Compensation Committee, consisting of Messrs.
4
<PAGE>
Dworkin, Hahn, Rikuta and Vukcevich, met one time during fiscal 1999. Messrs.
Dworkin, Hahn, Rikuta and Vukcevich will serve as the Compensation Committee for
fiscal 2000.
All of the directors of the Company except Vincent J. Graziano (who
missed one Board meeting) attended 75% or more of the aggregate meetings of the
Board and all such committees on which they served during fiscal 1999.
COMPENSATION OF DIRECTORS
DIRECTORS FEES. Each person who was a non-employee director received
an annual retainer of $7,500 in fiscal 1999 for services rendered as a director
of the Company. Each non-employee director of the Company also receives $750 for
each Board meeting and $500 for each Board committee meeting attended. The
Chairman of the Board does not receive any Board or committee meeting fee. The
Company pays the premium on a group insurance policy for the Chairman of the
Board.
AUTOMATIC OPTION GRANTS TO NON-EMPLOYEE DIRECTORS. Pursuant to the
Company's 1994 Stock Incentive Plan and 2000 Stock Incentive Plan, each
non-employee director of the Company is automatically granted a non-qualified
option to purchase an aggregate of 2,000 shares of Common Stock (a "Director
Option") on the first day of each fiscal year while serving as a non-employee
director of the Company. Non-employee directors who are elected or appointed to
the Board following the first day of the Company's fiscal year receive a
Director Option to purchase the pro-rata portion of the aggregate 2,000 shares
of Common Stock calculated by dividing the number of months remaining in the
fiscal year at the time of election or appointment divided by twelve.
On September 1, 1996, Messrs. Dworkin, Hahn, Lareau, Lynch and
Vukcevich (collectively, the "Outside Directors") each received a Director
Option to purchase 2,000 shares of Common Stock at an exercise price of $5.00
per share. On September 1, 1997, each Outside Director received a Director
Option to purchase 2,000 shares of Common Stock at an exercise price of $12.00
per share; however, on September 17, 1999, these options were voluntarily
cancelled. On November 19, 1997, Mr. Rikuta received a Director Option to
purchase 1,575 shares of Common Stock at an exercise price of $10.625 per share.
On September 1, 1998, each Outside Director, as well as Mr. Rikuta (also a
non-employee director of the Company), received a Director Option to purchase
2,000 shares of Common Stock at an exercise price of $6.25 per share. On
September 1, 1999, each Outside Director, as well as Mr. Rikuta received a
Director Option to purchase 2,000 shares of Common Stock at an exercise price of
$6.5625 per share. Subsequently, Mr. Lynch voluntarily returned his September 1,
1999 option to purchase 2,000 shares of Common Stock. All of such Director
Options granted vest in equal one-third installments over a three-year period.
5
<PAGE>
PRINCIPAL STOCKHOLDERS AND BENEFICIAL
OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company as of December 30, 1999, unless
otherwise noted, (a) by each stockholder who is known by the Company to own
beneficially more than 5% of the outstanding Common Stock, (b) by each director,
(c) each Named Executive Officer (as defined below under the heading, "Executive
Compensation and Other Benefits") and (d) by all executive officers and
directors of the Company as a group.
SHARES OF COMMON STOCK BENEFICIALLY OWNED (1)
---------------------------------------------
NAME AMOUNT PERCENT OF CLASS (%)(2)
- ---- ------ -----------------------
Inter Alia Holding Company 911,668(3) 23.6
Sidney Dworkin 55,167(4) 1.4
Vincent J. Graziano 61,866(5) 2.3
Gerhard Hahn 7,337 *
Dr. Donald A. Kubik 106,007(6) 2.7
Richard G. Lareau 27,343(7) *
Philip M. Lynch 3,667(8) *
Haruhiko Rikuta 17,717(9) *
Dr. Milan R. Vukcevich 4,597(10) *
Loren M. Ehrmanntraut 50,333(11) 1.3
Constance M. Fason 1,767(12) *
All directors and executive officers
as a group (13 persons) 1,271,627(13) 32.9
- ----------------------
*Less than 1%.
(1) Shares not outstanding but deemed beneficially owned by virtue of
the right of a person or member of a group to acquire them within 60
days are treated as outstanding only when determining the amount and
percent owned by such person or group. Unless otherwise noted, all
of the shares owned or held by individuals or entities possessing
sole voting and investment power with respect to such shares.
(2) Based on 3,870,325 shares of Common Stock outstanding as of December
30, 1999.
(3) Includes 911,668 shares held of record by Inter Alia Holding
Company, a financial and management consulting firm of which Mr.
Lynch, the Chairman of the Board of Directors and during fiscal 1999
the Co-Chief Executive Officer of the Company, is an officer and
director.
(4) Does not include 21,015 shares held by Sidelmar, a partnership in
which Mr. Dworkin, a director of the Company, is a general partner.
Includes 4,667 shares of Common Stock which may be acquired within
60 days pursuant to the exercise of options.
(5) Includes 2,667 shares of Common Stock which may be acquired within
60 days pursuant to the exercise of options.
(6) Includes 667 shares of Common stock which may be acquired within 60
days pursuant to the exercise of options.
6
<PAGE>
(7) Includes 4,667 shares of Common Stock which may be acquired within
60 days pursuant to the exercise of options.
(8) Does not include 911,668 shares held of record or beneficially owned
by Inter Alia Holding Company, of which Mr. Lynch is an officer and
director. Includes 3,667 shares of Common Stock which may be
acquired within 60 days pursuant to the exercise of options.
(9) Includes 1,717 shares of Common Stock which may be acquired within
60 days pursuant to the exercise of options.
(10) Includes 1,333 shares of Common Stock which may be acquired within
60 days pursuant to the exercise of options.
(11) Includes 3,333 shares of Common Stock which may be acquired within
60 days pursuant to the exercise of options.
(12) Includes 1,667 shares of Common stock which may be acquired within
60 days pursuant to the exercise of options.
(13) Includes (i) 911,668 shares held of record by Inter Alia Holding
Company, a financial and management consulting firm of which Mr.
Lynch, the Chairman of the Board of Directors and the Co-Chief
Executive Officer of the Company, is an officer and director, (ii)
21,015 shares held of record by Sidelmar, a partnership in which Mr.
Dworkin, a director of the Company, is a general partner, and (iii)
options to purchase 22,718 shares which are held by officers and
directors of the Company which are exercisable within 60 days.
7
<PAGE>
EXECUTIVE COMPENSATION AND OTHER BENEFITS
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION PAID TO EXECUTIVE OFFICERS
The following table provides summary information concerning cash and
non-cash compensation paid or accrued by the Company to or on behalf of the
Company's Co-Chief Executive Officers and the most highly compensated executive
officers of the Company whose cash and non-cash salary and bonus exceeded
$100,000 in the fiscal year ended August 31, 1999 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) OPTIONS (#) COMPENSATION ($)(2)
- --------------------------- ---- ---------- ------------ ----------- -------------------
<S> <C> <C> <C> <C> <C>
Vincent J. Graziano (3) 1999 230,000 0 0 5,000
PRESIDENT AND CO-CHIEF EXECUTIVE OFFICER 1998 230,000 55,000 0 5,000
1997 217,107 55,000 0 4,750
Philip M. Lynch (4) 1999 0 0 2,000 0 (5)
CHAIRMAN OF THE BOARD AND CO-CHIEF 1998 0 0 2,000 0 (5)
EXECUTIVE OFFICER 1997 0 0 2,000 0 (5)
Donald A. Kubik 1999 200,000 0 0 4,667
VICE PRESIDENT AND VICE CHAIRMAN 1998 200,000 55,000 0 5,000
1997 176,082 55,000 0 4,750
Loren M. Ehrmanntraut 1999 117,410 0 0 3,025
CHIEF FINANCIAL OFFICER 1998 117,410 55,000 0 5,000
1997 117,410 55,000 0 5,013
Constance M. Fason (6) 1999 108,000 0 0 2,520
VICE PRESIDENT 1998 108,000 0 0 0
</TABLE>
- -----------------------------
(1) Bonuses paid in 1998 were earned in 1997 and bonuses paid in 1997
were earned in 1996; there were no bonuses earned in 1998 and paid
in 1999.
(2) Compensation hereunder consists of contributions to the 401(k) plans
of the Named Executive Officers.
(3) Retired as President and Co-Chief Executive officer in September
1999. Mr. Graziano's duties as Co-Chief Executive Officer are now
fulfilled by an Executive Committee the Members of which are Messrs.
Kubik, Ehrmanntraut, Korosec and G. Patrick Lynch.
(4) Mr. Lynch is not an employee of the Company. The options granted to
Mr. Lynch are Director Options granted under the Company's 1994
Stock Incentive Plan. See "Election of Directors -- Compensation of
Directors" contained in this Proxy Statement.
(5) Does not include any commissions payable to Inter Alia Holding
Company, an entity affiliated with Mr. Lynch, under a certain
Manufacturer's Representative Agreement. See "Certain Relationships
and Related Transactions" contained in this Proxy Statement.
(6) Ms. Fason was not employed by the Company in 1997.
8
<PAGE>
OPTION GRANTS AND EXERCISES
The following tables provide information for the year ended August
31, 1999 as to individual grants of options to purchase shares of the Common
Stock, exercises of options and the potential realizable value of the options
held by the Named Executive Officers at August 31, 1999.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
PERCENT OF TOTAL OPTIONS
GRANTED TO EMPLOYEES EXERCISE OR BASE
NAME OPTIONS GRANTED (1) IN FISCAL YEAR PRICE ($/SHARE) EXPIRATION DATE
---- ------------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Vincent J. Graziano 10,000(2) 29.0% 6.25 11/19/2003
Philip M. Lynch 2,000 0%(3) 6.25 11/19/2003
Donald A. Kubik 10,000(2) 29.0% 6.25 11/19/2003
Loren M. Ehrmanntraut 10,000 29.0% 6.25 11/19/2003
Constance M. Fason 5,000 13.0% 6.25 11/19/2003
</TABLE>
(1) These options were granted under the Company's 1994 Stock Incentive
Plan (the "Plan"). The options vest in three equal installments on
the first, second and third anniversary of the date of grant. To the
extent not already exercisable, options granted under the Plan
become immediately exercisable in full upon certain "changes in
control" (as defined in the Plan) of the Company.
(2) Subsequent to August 31, 1999, each of Messrs. Graziano and Kubik
voluntarily returned options with respect to 2,000 of the 10,000
shares subject to the options granted to each of Messrs. Graziano
and Kubik during Fiscal 1999.
(3) Mr. Lynch is not an employee of the Company.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND
FISCAL 1999 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT AUGUST 31, 1999 AT AUGUST 31, 1999 (1)
SHARES -------------------------- ----------------------
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE ($) UNEXERCISABLE ($)
---- ------------ ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Graziano 38,000 139,875(2) 0 10,000 0 1,250
Philip M. Lynch 5,000 11,250(3) 3,001 3,999 1,834 1,166
Donald A. Kubik 5,000 13,000(4) 0 10,000 0 1,250
Loren M. Ehrmanntraut 32,500 96,875(5) 0 10,000 0 1,250
Constance M. Fason 0 0 0 5,000 0 625
</TABLE>
- ---------------------
(1) Value is calculated as the excess of the fair market value of the
Common Stock on August 31, 1999 over the exercise price of the
options. On August 31, 1999, the fair market value of the Common
Stock was $6.375 per share.
(2) Based on exercise price of $3.125 and 3,000 shares purchased
November 18, 1998 at $6.00/share and exercise price of $3.00 and
35,000 shares purchased June 11, 1999 at $6.75/share.
9
<PAGE>
(3) Based on exercise price of $3.125 and 2,000 shares purchased
November 13, 1998 at $5.875/share and exercise price of $3.00 and
2,000 shares purchased November 13, 1998 at $5.875/share.
(4) Based on exercise price of $3.00 and 3,100 shares purchased October
15, 1998 at $5.125/share and exercise price of $3.00 and 1,900
shares purchased November 23, 1998 at $6.375/share.
(5) Based on exercise price of $3.125 and 2,500 shares purchased
November 13, 1998 at $5.875/share and exercise price of $3.00 and
30,000 shares purchased June 9, 1999 at $6.00/share.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On October 1, 1976, the Company entered into a Manufacturer's
Representative Agreement with The Saxxon Organization, Incorporated (the
"Agreement"). The Agreement has no expiration date and may be terminated by
either party upon 60 days written notice. Effective January 9, 1980, the
Agreement was assigned to Inter Alia Holding Company, a financial and management
consulting firm of which Philip M. Lynch, the Chairman of the Board of Directors
of the Company, is an officer and director. Under the Agreement, Inter Alia
Holding Company (or the "Representative") is entitled to commissions from the
Company on the net proceeds of sales of the Company's product generated by Inter
Alia Holding Company. The Representative acts as an independent manufacturer's
representative of the Company. It has a non-exclusive worldwide right to offer
for sale and solicit orders for the Company's products in accordance with prices
determined by the Company. The Representative is responsible for all of its own
operating expenses with no entitlement for reimbursement from the Company. The
Representative has not effected any sales within the United States. The
Representative's effort has developed sales outside the United States, which
resulted in commissions of $45,484, $51,754 and $42,582 for the fiscal years
ending August 31, 1999, 1998 and 1997, respectively. In light of the Company's
own domestic sales effort and its distributor network within the United States,
the Company does not anticipate the Representative developing any sales within
the United States. Additionally, the Company's expanding international joint
venture program may also limit opportunities abroad for the Representative.
Thus, the Company does not anticipate that the Representative will develop any
significant sales volume for the Company.
On August 31, 1984, Inter Alia purchased 119,083 shares of Common
Stock and paid therefor by signing a promissory note. The promissory note (the
"Note") has a face value of $125,375 and bears interest at 11% per year. The
Note was originally due on December 31, 1992 and is currently due on demand. The
outstanding balance of the Note, including accrued interest of $119,334 was
$244,710 at August 31, 1999.
The Company paid reimbursement for travel and related Company
expenses of $419,500, $458,000 and $382,000 for the year ended August 31, 1999,
1998 and 1997, respectively, to Inter Alia Holding Company of which the
Company's Co-Chief Executive Officer and Chairman of the Board is and officer
and director. Mr. G. Patrick Lynch, Vice President of Strategic Planning,
Secretary and Member of the Executive Committee of the Company is also an
officer and director of Inter Alia Holding Company.
Gerhard Hahn, a director of the Company, is a shareholder and
General Manager of Knuppel KG. Knuppel KG is a 50% partner with the Company in a
joint venture in Germany. The German joint venture entity has granted a loan of
750,000 DM to Knuppel KG. The loan is secured by Knuppel KG's equity in the
German joint venture and bears interest at 7.5% per annum.
Haruhiko Rikuta, a director of the Company, is Manager, Zerust
Department of Taiyo Petroleum Gas Co. Ltd. ("Taiyo Petroleum"). Taiyo Petroleum
is a 50% partner with the Company in Taiyonic Limited, the Company's joint
venture in Japan. Additionally, Taiyo Petroleum is a partner with the Company in
the joint venture in South Korea and a 50% partner with the Company in NTI Asean
LLC, a Nevada limited liability company, which has established joint ventures
with third parties in the Asean region.
Mr. Vincent Graziano, who has retired as President and Co-Chief
Executive Officer of the Company, but also remains a director of the Company,
has agreed to render services to the Company on a half time/half salary basis
from December 1, 1999 to December 31, 2000. The Company anticipates
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paying Mr. Graziano approximately $147,000 in exchange for services rendered
during the fiscal year ending August 31, 2000.
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PROPOSAL TO ADOPT THE
2000 STOCK INCENTIVE PLAN
INTRODUCTION
On November 19, 1999, the Board of Directors of the Company adopted
the 2000 Stock Incentive Plan (the "Plan"), which is being submitted to the
Company's stockholders for their approval. The purpose of the Plan is to advance
the interests of the Company and its stockholders by enabling the Company and
its subsidiaries to attract and retain persons of ability to perform services
for the Company and its subsidiaries by providing an incentive to such
individuals through equity participation in the Company and by rewarding such
individuals who contribute to the achievement by the Company of its economic
objectives. The Board of Directors has reserved a maximum of 200,000 shares of
Common Stock for issuance under the Plan. The major features of the Plan are
summarized below, which summary is qualified in its entirety by reference to the
actual text of the Plan, a copy of which may be obtained from the Company.
SUMMARY OF THE PLAN
GENERAL. The Plan provides for awards ("Incentive Awards") to all
employees (including officers and directors who are also employees) non-employee
directors, consultants and independent contractors of the Company and its
subsidiaries and any joint venture partners (including officers, directors and
partners thereof) of the Company or any subsidiary, of: (i) options to purchase
Common Stock that qualify as "incentive stock options" within the meaning of
Section 422 of the Code ("Incentive Options"); (ii) options to purchase Common
Stock that do not qualify as such Incentive Options ("Non-Statutory Options");
(iii) awards of shares of common stock that are subject to certain forfeiture
and transferability restrictions that lapse after specified employment periods
("Restricted Stock Awards"); (iv) rights entitling the recipient to receive a
payment from the Company, in the form of shares of common stock, cash, or a
combination of both, upon the achievement of established performance goals
("Performance Units"); (v) awards of shares of common stock ("Stock Bonuses");
(vi) rights entitling the recipient to receive a payment from the Company, in
the form of shares of common stock, cash, or a combination or both, equal to the
difference between the market value of one or more shares of common stock and
the exercise price of such shares under the terms of such right ("Stock
Appreciation Rights"). Incentive Options and Non-Statutory Options are
collectively referred to herein as "Options," and Options, Restricted Stock
Awards, Performance Units, Stock Bonuses and Stock Appreciation Rights are
collectively referred to herein as "Incentive Awards."
The Plan also provides for the automatic grant on Non-Statutory
Options to non-employee directors of the Company. See "Election of
Directors--Compensation of Directors--Automatic Option Grants to Non-Employee
Directors" for a detailed description of the automatic grant feature of the
Plan.
The Plan is administered by the Compensation Committee (the
"Committee"), which selects the participants to be granted Incentive Awards
under the Plan, determines the amount of the grants to the participants, and
prescribes discretionary terms and conditions of each grant not otherwise fixed
under the Plan. Eligible recipients under the Plan include all employees
(including, without limitation, officers and directors who are also employees)
of the Company or any subsidiary of the Company, any non-employees consultants
and independent contractors of the Company or any subsidiary of the Company and
any joint venture partners (including without limitation, officers, directors
and partners thereof) of the Company or any subsidiary of the Company.
The Plan will terminate on November 18, 2009, unless sooner
terminated by action of the Board of Directors. No Award will be granted after
termination of the Plan. Currently, a maximum of 200,000
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shares of Common Stock are reserved for issuance under the Plan. In the event of
any reorganization, merger, recapitalization, stock dividend, stock split or
similar change in the corporate structure or shares of the Company, appropriate
adjustments will be made to the number and kind of shares reserved under the
Plan and under outstanding Incentive Awards and to the exercise price of
outstanding Options. No right or interest in any Award may be assigned or
transferred by a participant, except by will or the laws of descent and
distribution, or subjected to any lien or otherwise encumbered.
OPTIONS. The exercise price for a Non-Statutory Option must be not
less than 85% of the fair market value of the Common Stock on the day the
Non-Statutory Option is granted. An Incentive Option must be granted with an
exercise price equal to the fair market value of the Common Stock on the date
the Incentive Option is granted, except that an Incentive Option granted to a
person owning stock representing more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary may not be
granted at less than 110% of the fair market value on the date of grant. In
determining the fair market value of the Common Stock, the Committee will use
the closing price of the Common Stock as reported by the American Stock Exchange
as of the date of grant.
Payment of an option exercise price may be made either in cash or,
in the sole discretion of the Committee, by (i) delivery of a broker exercise
notice (pursuant to which the broker or dealer is instructed to sell enough
shares or loan the optionee enough money to pay the exercise price and to remit
such sums to the Company), or (ii) transfer from the participant to the Company
of previously acquired shares of Common Stock having an aggregate fair market
value on the date of exercise equal to the payment required. Options may not be
transferred other than by will or the laws of descent and distribution, and
during the lifetime of an optionee may be exercised only by the optionee.
Options may be exercised in whole or in installments, as determined by the
Committee. Incentive Options will have a maximum term fixed by the Committee,
not to exceed 10 years from the date of grant or, in the case of Incentive
Options granted to persons owning stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any subsidiary,
five years from the date of grant. To the extent that the aggregate fair market
value (determined as of the date and Incentive Option is granted) of the shares
of Common Stock with respect to which Incentive Options are exercisable for the
first time by a participant during any calendar year exceeds $100,000, such
excess Incentive Options will be treated as Non-Statutory Options. Non-Statutory
Options have a maximum term fixed by the Committee, not to exceed 10 years from
the date of grant.
RESTRICTED STOCK AWARDS. Restricted Stock Awards are grants to
participants of shares of Common Stock that are subject to restrictions and the
possibility of forfeiture for a period of time set by the Committee during which
the participant must remain continuously employed by the Company.
PERFORMANCE UNITS. Performance Units may be awarded on such terms
and conditions as the Compensation Committee may specify. Such conditions may
include payment or vesting restrictions which involve continued employment with
the Company and satisfaction by the Company or a specified business unit or
subsidiary of predetermined performance goals approved by the Compensation
Committee at the time the Performance Units are awarded. Upon satisfaction of
applicable terms and conditions, Performance Units will be payable in cash,
shares of Common Stock or some combination thereof in the Compensation
Committee's sole discretion.
STOCK BONUSES. Stock Bonuses are awards of common stock that are not
subject to any restrictions other than restrictions on transferability. A
participant may be granted one or more Stock Bonuses under the Plan, and such
Stock Bonuses will be subject to such terms and conditions, consistent with
other provisions of the Plan, as may be determined by the Committee in its sole
discretion. The participant will have all voting, dividend, liquidation and
other rights with respect to the shares of
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common stock issued to a participant as a Stock Bonus under the Plan upon the
participant becoming the holder of record of such shares.
STOCK APPRECIATION RIGHTS. The terms of a Stock Appreciation Right
award shall be determined by the Committee, subject to certain Plan
requirements. The exercise price per share may not be less than the fair market
value of a share of the underlying common stock on the date the Stock
Appreciation Right is granted. A Stock Appreciation Right will generally not be
exercisable within six months of its date of grant, and will expire at the time
fixed in the applicable award agreement, which will not be more than ten (10)
years after the date of grant.
EFFECT OF TERMINATION OF EMPLOYMENT. If a participant ceases to be
employed by or render services to the Company and all subsidiaries ("Termination
of Service"), all Incentive Awards held by the participant will be affected in
the manner set forth below.
Upon Termination of Service due to death, disability or retirement,
(i) all outstanding Options and Stock Appreciation Rights then held by the
participant will remain exercisable to the extent exercisable as of such
termination following such termination until the expiration date of the Option
or Stock Appreciation Right), (ii) all Restricted Stock Awards then held by the
Participant that have not vested will be terminated and forfeited, and (iii) all
outstanding Performance Units and Stock Bonuses will vest and/or continue to
vest in the manner determined by the Committee and set forth in the agreement
evidencing such Performance Units or Stock Bonuses.
Upon Termination of Service for any other reason (other than by the
Company for "cause"), (i) all outstanding Options and Stock Appreciation Rights
will remain exercisable to the extent exercisable as of such termination for a
period of one month after such termination (but in no event after the expiration
date of such Option or Stock Appreciation Right), (ii) all outstanding
Restricted Stock Awards that have not vested as of such termination will be
terminated and forfeited, and (iii) all outstanding Performance Units and Stock
Bonuses will vest and/or continue to vest in the manner determined by the
Committee. In the event of termination by the Company for "cause," all rights of
the participant under the Plan and any Incentive Awards will immediately
terminate without notice of any kind. The Company also has the right to rescind
Incentive Awards or Option exercises made to Participants in the six months
prior to such Participant's termination of employment with the Company if such
Participants takes certain actions that could have an adverse affect on the
Company. The Company may also require Participants to pay to the Company any
gains realized from such Incentive Award or Option exercise. The Committee may
in its discretion modify the post-termination provisions of the Plan, provided
that no Option may remain exercisable after its expiration date.
CHANGE IN CONTROL OF THE COMPANY. In the event a "change in control"
of the Company occurs, then, if approved by the Committee, (i) all outstanding
Options and Stock Appreciation Rights will become immediately exercisable in
full and will remain exercisable for the remainder of their terms, regardless of
whether the participant remains in the employ or service of the Company or any
subsidiary, (ii) all outstanding Restricted Stock Awards will become immediately
fully vested, and (iii) all outstanding Performance Units and Stock Bonuses will
vest and/or continue to vest in the manner determined by the Committee. In
addition, the Committee, without the consent of any affected participant, may
determine that some or all participants holding outstanding Options will receive
cash in an amount equal to the excess of the fair market value immediately prior
to the effective date of such change in control over the exercise price per
share of the Options.
To the extent that such acceleration of the vesting of Incentive
Awards would constitute a "parachute payment" (as defined in the Code), then,
pursuant to the Plan, such acceleration will be
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modified to such extent that the participant will not be subject to the excise
tax imposed by Section 4999 of the Code.
For purposes of the Plan, a "change in control" of the Company will
be deemed to have occurred, among other things, upon (i) a sale, lease, exchange
or other transfer of substantially all of the assets of the Company to an entity
that is not controlled by the Company, (ii) a merger or consolidation to which
the Company is a party if, after such merger or consolidation, the Company's
stockholders do not beneficially own more than 80% of the combined voting power
of the surviving corporation's outstanding voting securities, (iii) any person
becoming the beneficial owner of 40% or more of the combined voting power of the
Company's outstanding securities, or (iv) a change in the composition of the
Board such that the individuals who constitute the Board on the effective date
of the Plan cease for any reason to constitute at least a majority of the Board
(with exceptions for individuals who are nominated or otherwise approved by the
current Board).
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is
based on current statutes, regulations and interpretations. The description does
not include state or local income tax consequences. In addition, the description
is not intended to address specific tax consequences applicable to an individual
participant who receives an Award.
INCENTIVE OPTIONS. There will not be any federal income tax
consequences to either the participant or the Company as a result of the grant
to an employee of an Incentive Option under the Stock Incentive Plan. The
exercise by a participant of an Incentive Option also will not result in any
federal income tax consequences to the Company or the participant, except that
(i) an amount equal to the excess of the fair market value of the shares
acquired upon exercise of the Incentive Option, determined at the time of
exercise, over the amount paid for the shares by the participant will be
includable in the participant's alternative minimum taxable income for purposes
of the alternative minimum tax, and (ii) the participant may be subject to an
additional excise tax if any amounts are treated as excess parachute payments
(see explanation below). Special rules will apply if previously acquired shares
of Common Stock are permitted to be tendered in payment of an Option exercise
price.
If the participant disposes of the Incentive Option shares acquired
upon exercise of the Incentive Option, the federal income tax consequences will
depend upon how long the participant has held the shares. If the participant
does not dispose of the shares within two years after the Incentive Option was
granted nor within one year after the participant exercised the Incentive Option
and the shares were transferred to the participant, then the participant will
recognize a long-term capital gain or loss. The amount of the long-term capital
gain or loss will be equal to the difference between (i) the amount the
participant realized on disposition of the shares, and (ii) the option price at
which the participant acquired the shares. The Company is not entitled to any
compensation expense deduction under these circumstances.
If the participant does not satisfy both of the above holding period
requirements (a "disqualifying disposition"), then the participant will be
required to report as ordinary income, in the year the participant disposes of
the shares, the amount by which the lesser of (i) the fair market value of the
shares at the time of exercise of the Incentive Option (or, for directors,
officers or greater than 10 percent stockholders of the Company, generally the
fair market value of the shares six months after the date of exercise, unless
such persons file an election under Section 83(b) of the Code within 30 days of
exercise), or (ii) the amount realized on the disposition of the shares, exceeds
the option price for the shares. The Company will be entitled to a compensation
expense deduction in an amount equal to the ordinary income includable in the
taxable income of the participant. This compensation income may be subject to
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withholding. The remainder of the gain recognized on the disposition, if any, or
any loss recognized on the disposition, will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
NON-STATUTORY OPTIONS. Neither the participant nor the Company
incurs any federal income tax consequences as a result of the grant of a
Non-Statutory Option. Upon exercise of a Non-Statutory Option, a participant
will recognize ordinary income, subject to withholding on the "Includability
Date" in an amount equal to the difference between (i) the fair market value of
the shares purchased, determined on the Includability Date, and (ii) the
consideration paid for the shares. The Includability Date generally will be the
date of exercise of the Non-Statutory Option. However, the Includability Date
for participants who are officers, directors or greater-than-10 percent
stockholders of the Company will generally occur six months later, unless such
persons file an election under Section 83(b) of the Code within 30 days of the
date of exercise to include as ordinary income the amount realized upon exercise
of the Non-Statutory Option. The participant may be subject to an additional
excise tax if any amounts are treated as excess parachute payments (see
explanation below). Special rules will apply if previously acquired shares of
common stock are permitted to be tendered in payment of an Option exercise
price.
At the time of a subsequent sale or disposition of any shares of
common stock obtained upon exercise of a Non-Statutory Option, any gain or loss
will be a capital gain or loss. Such capital gain or loss will be long-term
capital gain or loss if the sale or disposition occurs more than one year after
the Includability Date and short-term capital gain or loss if the sale or
disposition occurs one year or less after the Includability Date.
In general, the Company will be entitled to a compensation expense
deduction in connection with the exercise of a Non-Statutory Option for any
amounts includable in the taxable income of the participant as ordinary income,
provided the Company complies with any applicable withholding requirements.
RESTRICTED STOCK AWARDS AND STOCK BONUSES. With respect to shares
issued pursuant to a Restricted Award that is not subject to a risk of
forfeiture or with respect to Stock Bonuses, a participant will include as
ordinary income in the year of receipt an amount equal to the fair market value
of the shares received on the date of receipt. With respect to shares that are
subject to a risk of forfeiture, a participant may file an election under
Section 83(b) of the Code within thirty (30) days after receipt to include as
ordinary income in the year of receipt an amount equal to the fair market value
of the shares received on the date of receipt (determined as if the shares were
not subject to any risk of forfeiture). If a Section 83(b) election is made, the
participant will not recognize any additional income when the restrictions on
the shares issued in connection with the Restricted Stock Award lapse. The
Company will receive a corresponding tax deduction for any amounts includable in
the taxable income of the participant as ordinary income.
A participant who does not make a Section 83(b) election within
thirty (30) days of the receipt of a Restricted Stock Award that is subject to a
risk of forfeiture will recognize ordinary income at the time of the lapse of
the restrictions in an amount equal to the then fair market value of the shares
free of restrictions. The Company will receive a corresponding tax deduction for
any amounts includable in the taxable income of a participant as ordinary
income.
PERFORMANCE UNITS. A participant who receives a Performance Unit
will not recognize any taxable income at the time of the grant. Upon settlement
of the Performance Unit, the participant will realize ordinary income in an
amount equal to the cash and the fair market value of any shares of Common Stock
received by the participant. Provided that proper withholding is made, the
Company
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would be entitled to a compensation expense deduction for any amounts includable
by the participants as ordinary income.
STOCK APPRECIATION RIGHTS. A participant who receives a Stock
Appreciation Right will not recognize any taxable income at the time of the
grant. Upon the exercise of a Stock Appreciation Right, the participant will
realize ordinary income in an amount equal to the cash in the fair market value
of any shares of common stock received by the participant. Provided that proper
withholding is made, the Company will be entitled to a compensation expense
deduction for any amounts includable by the participant as ordinary income.
EXCISE TAX ON PARACHUTE PAYMENTS. The Code also imposes a 20% excise
tax on the recipient of "excess parachute payments," as defined in the Code and
denies tax deductibility to the Company on excess parachute payments. Generally,
parachute payments are payments in the nature of compensation to employees of a
company who are officers, stockholders, or highly compensated individuals, which
payments are contingent upon a change in ownership or effective control of the
company, or in the ownership of a substantial portion of the assets of the
company. For example, acceleration of the exercisability of Options, or the
vesting of Restricted Stock Awards, upon a change in control of the Company may
constitute parachute payments, and in certain cases, "excess parachute
payments."
INCENTIVE AWARDS UNDER THE 2000 PLAN
As of the date of this Proxy Statement, the compensation committee has not
approved any awards under the Plan. Neither the number or types of future Plan
awards to be received by or allocated to particular participants or groups of
participants is presently determinable.
BOARD OF DIRECTORS RECOMMENDATIONS
The Board of Directors recommends that the stockholders vote FOR
approval and ratification of the Plan. The affirmative vote of the holders of a
majority of shares of Common Stock of the Company present in person or by proxy
at the Annual Meeting, assuming a quorum is present, is necessary for approval.
Unless a contrary choice is specified, proxies solicited by the Board of
Directors will be voted FOR approval of the Plan.
SELECTION OF AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP,
independent certified public accountants, as auditors of the Company for the
fiscal year ending August 31, 2000. Such firm has acted as independent auditors
of the Company since the fiscal year ended August 31, 1990. If the stockholders
of the Company do not ratify the appointment of Deloitte & Touche LLP, another
firm of independent auditors will be considered by the Board of Directors.
Representatives of Deloitte & Touche LLP will be present at the meeting, will
have an opportunity to make a statement if they so desire and will be available
to respond to questions.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors and executive officers
and all persons who beneficially own more than 10% of the outstanding shares of
the Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's Common
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Stock. Executive officers, directors and greater than 10% beneficial owners are
also required to furnish the Company with copies of all Section 16(a) forms they
file. To the Company's knowledge, based upon a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended August 31, 1998, none of the
directors, officers and beneficial owners of greater than 10% of the Company's
Common Stock failed to file on a timely basis the forms required by Section 16
of the Exchange Act, except that one Form 3 for Matjaz Korosec involving one
transaction was filed two months late.
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of stockholders of the Company intended to be presented in
the proxy materials relating to the next Annual Meeting must be received by the
Company at its principal executive offices on or about September 14, 2000.
OTHER BUSINESS
The Company knows of no business that will be presented for
consideration at the Annual Meeting other than that described in this Proxy
Statement. As to other business, if any, that may properly come before the
Annual Meeting, it is intended that proxies solicited by the Board will be voted
in accordance with the judgment of the person or persons voting the proxies.
MISCELLANEOUS
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT
ON FORM 10-KSB FOR THE FISCAL YEAR ENDED AUGUST 31, 1999, TO EACH PERSON WHO WAS
A STOCKHOLDER OF THE COMPANY AS OF DECEMBER 30 1999, UPON RECEIPT FROM ANY SUCH
PERSON OF A WRITTEN REQUEST FOR SUCH AN ANNUAL REPORT. SUCH REQUEST SHOULD BE
SENT TO: NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION, 6680 N. HIGHWAY 49,
LINO LAKES, MINNESOTA 55014; ATTN: STOCKHOLDER INFORMATION.
By Order of the Board of Directors
/s/ Philip M. Lynch
Philip M. Lynch
CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER
January 12, 2000
Lino Lakes, Minnesota
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NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
2000 STOCK INCENTIVE PLAN
1. Purpose of Plan.
The purpose of the Northern Technologies International Corporation 2000
Stock Incentive Plan (the "Plan") is to advance the interests of Northern
Technologies International Corporation (the "Company") and its stockholders by
enabling the Company and its Subsidiaries to attract and retain persons of
ability to perform services for the Company and its Subsidiaries by providing an
incentive to such individuals through equity participation in the Company and by
rewarding such individuals who contribute to the achievement by the Company of
its economic objectives.
2. Definitions.
The following terms will have the meanings set forth below, unless the
context clearly otherwise requires:
2.1. "Board" means the Board of Directors of the Company.
2.2. "Broker Exercise Notice" means a written notice pursuant to which
a Participant, upon exercise of an Option, irrevocably instructs a broker or
dealer to sell a sufficient number of shares or loan a sufficient amount of
money to pay all or a portion of the exercise price of the Option and/or any
related withholding tax obligations and remit such sums to the Company and
directs the Company to deliver stock certificates to be issued upon such
exercise directly to such broker or dealer.
2.3. "Change in Control" means an event described in Section 13.1 of
the Plan.
2.4. "Code" means the Internal Revenue Code of 1986, as amended.
2.5. "Committee" means the group of individuals administering the Plan,
as provided in Section 3 of the Plan.
2.6. "Common Stock" means the common stock of the Company; par value
$.02 per share, or the number and kind of shares of stock or other securities
into which such Common Stock may be changed in accordance with Section 4.3 of
the Plan.
2.7. "Disability" means the disability of the Participant such as would
entitle the Participant to receive disability income benefits pursuant to the
long-term disability plan of the Company or Subsidiary then covering the
Participant or, if no such plan exists or is applicable to the Participant, the
permanent and total disability of the Participant within the meaning of Section
22(e)(3) of the Code.
2.8. "Eligible Recipients" means all employees (including, without
limitation, officers and directors who are also employees) of the Company or any
Subsidiary, any non-employee consultants and independent contractors of the
Company or any Subsidiary and any joint venture partners (including without
limitation, officers, directors and partners thereof) of the Company or any
Subsidiary.
2.9. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
2.10. "Fair Market Value" means, with respect to the Common Stock, as
of any date (or, if no shares were traded or quoted on such date, as of the next
preceding date on which there was such a trade or quote), the closing market
price per share of the Common Stock as reported on the American Stock Exchange
Composite Tape on that date.
2.11. "Incentive Award" means an Option, Stock Appreciation Right,
Restricted Stock Award, Performance Unit or Stock Bonus granted to an Eligible
Recipient pursuant to the Plan.
2.12. "Incentive Stock Option" means a right to purchase Common Stock
granted to an Eligible Recipient pursuant to Section 6 of the Plan that
qualifies as an "incentive stock option" within the meaning of Section 422 of
the Code.
2.13. "Non-Employee Director" means any member of the Board of
Directors of the Company who is not an employee of the Company or any
Subsidiary.
2.14. "Non-Statutory Stock Option" means a right to purchase Common
Stock granted to an Eligible Recipient pursuant to Section 6 of the Plan that
does not qualify as an Incentive Stock Option.
2.15. "Option" means an Incentive Stock Option or a Non-Statutory Stock
Option.
2.16. "Participant" means an Eligible Recipient who receives one or
more Incentive Awards under the Plan.
2.17. "Performance Unit" means a right granted to an Eligible Recipient
pursuant to Section 9 of the Plan to receive a payment from the Company, in the
form of stock, cash or a combination of both, upon the achievement of
established performance goals.
2.18. "Previously Acquired Shares" means shares of Common Stock that
are already owned by the Participant or, with respect to any Incentive Award,
that are to be issued upon the grant, exercise or vesting of such Incentive
Award.
2.19. "Restricted Stock Award" means an award of Common Stock granted
to an Eligible Recipient pursuant to Section 8 of the Plan that is subject to
the restrictions on transferability and the risk of forfeiture imposed by the
provisions of such Section 8.
2.20. "Retirement" means termination of employment or service pursuant
to and in accordance with the regular (or, if approved by the Board for purposes
of the Plan, early) retirement/pension plan or practice of the Company or
Subsidiary then covering the Participant, provided that if the Participant is
not covered by any such plan or practice, the Participant will be deemed to be
covered by the Company plan or practice for purposes of this determination.
2.21. "Securities Act" means the Securities Act of 1933, as amended.
2.22. "Stock Appreciation Right" means a right granted to an Eligible
Recipient pursuant to Section 7 of the Plan to receive a payment from the
Company in the form of stock, cash or a combination of both, equal to the
difference between the Fair Market Value of one or more shares of Common Stock
and the exercise price of such shares under the terms of such Stock Appreciation
Right.
2.23. "Stock Bonus" means an award of Common Stock granted to an
Eligible Recipient
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pursuant to Section 10 of the Plan.
2.24. "Subsidiary" means any entity that is directly or indirectly
controlled by the Company or any entity in which the Company has a significant
equity interest, as determined by the Committee.
2.25. "Tax Date" means the date any withholding tax obligation arises
under the Code for a Participant with respect to an Incentive Award.
3. Plan Administration.
3.1. The Committee. The Plan will be administered by the Board, all of
whom will be "disinterested persons" within the meaning of Rule 16b-3 under the
Exchange Act, or by a committee consisting solely of not fewer than two members
of the Board who are such "disinterested persons." As used in this Plan, the
term "Committee" will refer to the Board or to such a committee, if established.
To the extent consistent with corporate law, the Committee may delegate to any
officers of the Company the duties, power and authority of the Committee under
the Plan pursuant to such conditions or limitations as the Committee may
establish; provided, however, that only the Committee may exercise such duties,
power and authority with respect to Eligible Recipients who are subject to
Section 16 of the Exchange Act. Each determination, interpretation or other
action made or taken by the Committee pursuant to the provisions of the Plan
will be conclusive and binding for all purposes and on all persons, and no
member of the Committee will be liable for any action or determination made in
good faith with respect to the Plan or any Incentive Award granted under the
Plan.
3.2. Authority of the Committee.
(a) In accordance with and subject to the provisions of the
Plan, the Committee will have the authority to determine all provisions
of Incentive Awards as the Committee may deem necessary or desirable
and as consistent with the terms of the Plan, including, without
limitation, the following: (i) the Eligible Recipients to be selected
as Participants; (ii) the nature and extent of the Incentive Awards to
be made to each Participant (including the number of shares of Common
Stock to be subject to each Incentive Award, any exercise price, the
manner in which Incentive Awards will vest or become exercisable and
whether Incentive Awards will be granted in tandem with other Incentive
Awards) and the form of written agreement, if any, evidencing such
Incentive Award; (iii) the time or times when Incentive Awards will be
granted; (iv) the duration of each Incentive Award; and (v) the
restrictions and other conditions to which the payment or vesting of
Incentive Awards may be subject. In addition, the Committee will have
the authority under the Plan in its sole discretion to pay the economic
value of any Incentive Award in the form of cash, Common Stock or any
combination of both.
(b) The Committee will have the authority under the Plan to
amend or modify the terms of any outstanding Incentive Award in any
manner, including, without limitation, the authority to modify the
number of shares or other terms and conditions of an Incentive Award,
extend the term of an Incentive Award, accelerate the exercisability or
vesting or otherwise terminate any restrictions relating to an
Incentive Award, accept the surrender of any outstanding Incentive
Award or, to the extent not previously exercised or vested, authorize
the grant of new Incentive Awards in substitution for surrendered
Incentive Awards; provided, however that the amended or modified terms
are permitted by the Plan as
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then in effect and that any Participant adversely affected by such
amended or modified terms has consented to such amendment or
modification. No amendment or modification to an Incentive Award,
however, whether pursuant to this Section 3.2 or any other provisions
of the Plan, will be deemed to be a regrant of such Incentive Award for
purposes of this Plan.
(c) In the event of (i) any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock
dividend, stock split, combination of shares, rights offering,
extraordinary dividend or divestiture (including a spin-off) or any
other change in corporate structure or shares, (ii) any purchase,
acquisition, sale or disposition of a significant amount of assets or a
significant business, (iii) any change in accounting principles or
practices, or (iv) any other similar change, in each case with respect
to the Company or any other entity whose performance is relevant to the
grant or vesting of an Incentive Award, the Committee (or, if the
Company is not the surviving corporation in any such transaction, the
board of directors of the surviving corporation) may, without the
consent of any affected Participant, amend or modify the vesting
criteria of any outstanding Incentive Award that is based in whole or
in part on the financial performance of the Company (or any Subsidiary
or division thereof) or such other entity so as equitably to reflect
such event, with the desired result that the criteria for evaluating
such financial performance of the Company or such other entity will be
substantially the same (in the sole discretion of the Committee or the
board of directors of the surviving corporation) following such event
as prior to such event; provided, however, that the amended or modified
terms are permitted by the Plan as then in effect.
4. Shares Available for Issuance.
4.1. Maximum Number of Shares Available. Subject to adjustment as
provided in Section 4.3 of the Plan, the maximum number of shares of Common
Stock that will be available for issuance under the Plan will be 200,000 shares.
4.2. Accounting for Incentive Awards. Shares of Common Stock that are
issued under the Plan or that are subject to outstanding Incentive Awards will
be applied to reduce the maximum number of shares of Common Stock remaining
available for issuance under the Plan. Any shares of Common Stock that are
subject to an Incentive Award that lapses, expires, is forfeited or for any
reason is terminated unexercised or unvested and any shares of Common Stock that
are subject to an Incentive Award that is settled or paid in cash or any form
other than shares of Common Stock will automatically again become available for
issuance under the Plan. Any shares of Common Stock that constitute the
forfeited portion of a Restricted Stock Award, however, will not become
available for further issuance under the Plan.
4.3. Adjustments to Shares and Incentive Awards. In the event of any
reorganization, merger, consolidation, recapitalization, liquidation,
reclassification, stock dividend, stock split, combination of shares, rights
offering, divestiture or extraordinary dividend (including a spin-off) or any
other change in the corporate structure or shares of the Company, the Committee
(or, if the Company is not the surviving corporation in any such transaction,
the board of directors of the surviving corporation) will make appropriate
adjustment (which determination will be conclusive) as to the number and kind of
securities available for issuance under the Plan and, in order to prevent
dilution or enlargement of the rights of Participants, the number, kind and,
where applicable, exercise price of securities subject to outstanding Incentive
Awards.
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5. Participation.
Participants in the Plan will be those Eligible Recipients who, in the
judgment of the Committee, have contributed, are contributing or are expected to
contribute to the achievement of economic objectives of the Company or its
Subsidiaries. Eligible Recipients may be granted from time to time one or more
Incentive Awards, singly or in combination or in tandem with other Incentive
Awards, as may be determined by the Committee in its sole discretion. Incentive
Awards will be deemed to be granted as of the date specified in the grant
resolution of the Committee, which date will be the date of any related
agreement with the Participant.
6. Options.
6.1. Grant. An Eligible Recipient may be granted one or more Options
under the Plan, and such Options will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion. The Committee may designate whether an Option
is to be considered an Incentive Stock Option or a Non-Statutory Stock Option.
6.2. Exercise Price. The per share price to be paid by a Participant
upon exercise of an Option will be determined by the Committee in its discretion
at the time of the Option grant, provided that (a) such price will not be less
than 100% of the Fair Market Value of one share of Common Stock on the date of
grant with respect to an Incentive Stock Option (110% of the Fair Market Value
if, at the time the Incentive Stock Option is granted, the Participant owns,
directly or indirectly, more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary corporation of the
Company), and (b) such price will not be less than 85% of the Fair Market Value
of one share of Common Stock on the date of grant with respect to a
Non-Statutory Stock Option.
6.3. Exercisabilitv and Duration. An Option will become exercisable at
such times and in such installments as may be determined by the Committee in its
sole discretion at the time of grant; provided, however, that no Option may be
exercisable after 10 years from its date of grant.
6.4. Payment of Exercise Price. The total purchase price of the shares
to be purchased upon exercise of an Option will be paid entirely in cash
(including check, bank draft or money order); provided, however, that the
Committee, in its sole discretion and upon terms and conditions established by
the Committee, may allow such payments to be made, in whole or in part, by
tender of a Broker Exercise Notice, Previously Acquired Shares or by a
combination of such methods.
6.5. Manner of Exercise. An Option may be exercised by a Participant in
whole or in part from time to time, subject to the conditions contained in the
Plan and in the agreement evidencing such Option, by delivery in person, by
facsimile or electronic transmission or through the mail of written notice of
exercise to the Company (Attention: Chief Financial Officer) at its principal
executive office in Lino Lakes, Minnesota and by paying in full the total
exercise price for the shares of Common Stock to be purchased in accordance with
Section 6.4 of the Plan.
6.6. Aggregate Limitation of Stock Subject to Incentive Stock Options.
To the extent that the aggregate Fair Market Value (determined as of the date an
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which incentive stock options (within the meaning of Section 422 of the Code)
are exercisable for the first time by a Participant during any calendar year
(under the Plan and any other incentive stock option plans of the Company or any
subsidiary or
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parent corporation of the Company (within the meaning of the Code)) exceeds
$100,000 (or such other amount as may be prescribed by the Code from time to
time), such excess Options will be treated as Non-Statutory Stock Options. The
determination will be made by taking incentive stock options into account in the
order in which they were granted. If such excess only applies to a portion of an
incentive stock option, the Committee, in its discretion, will designate which
shares will be treated as shares to be acquired upon exercise of an incentive
stock option.
6.7. Automatic Grants to Non-Employee Directors.
(a) Grant of Options. At such time as, following the effective
date of the Plan, Non-Employee Directors are first elected or appointed
to the Board of Directors, such Non-Employee Directors will be granted
automatically, on a one-time basis on the date of their election or
appointment, a Non-Statutory Stock Option to purchase the pro-rata
portion of 2,000 shares of Common Stock, calculated by dividing the
number of months remaining in the fiscal year at the time of election
or appointment divided by twelve. Following the effective date of the
Plan, Non-Employee Directors will be granted automatically, on the
first day of each fiscal year, a Non-Statutory Stock Option to purchase
2,000 shares of Common Stock. Notwithstanding the foregoing provisions
of this Section 6.7(a), a Non-Statutory Stock Option shall not be
granted under this Section 6.7(a) to the extent a Non-Employee Director
is automatically granted a similar option under the Company's 1994
Stock Incentive Plan. All automatic grants pursuant to this Section 6.7
are subject to adjustment as provided in Section 4.3 of the Plan.
(b) Option Exercise Price. The per share price to be paid by
the Non-Employee Director at the time an Option is exercised will be
100% of the Fair Market Value of one share of Common Stock on the date
the Option is granted. The total purchase price of the shares to be
purchased upon exercise will be paid entirely in cash (including check,
bank draft or money order).
(c) Duration of Options. Each Option will terminate five years
after its date of grant and will become exercisable, on a cumulative
basis, with respect to 33 1/3% of the shares covered by such Option on
each anniversary of the date of its grant.
(d) Effect of Termination of Directorship. In the event a
Non-Employee Director's service as a director of the Company is
terminated by reason of death, Disability or Retirement, all
outstanding Options then held by the Non-Employee Director will become
immediately exercisable in full and will remain exercisable following
such termination until the expiration of any such Option. In the event
that a Non-Employee Director's service as a director of the Company is
terminated for any reason other than death, Disability, or Retirement
all outstanding Options then held by the Non-Employee Director will
remain exercisable to the extent exercisable as of such termination of
service for a period of three months after such termination of service
(but in no event after the expiration of any such Option). Such Options
will not be subject to the termination provisions of Section 11 of the
Plan.
(e) Manner of Option Exercise. An Option may be exercised by a
Non-Employee Director in whole or in part from time to time, subject to
the conditions contained in the Plan and in the agreement evidencing
such Option, by giving written notice of exercise to the Company at its
principal executive office (such notice to specify the particular
Option that is being exercised and the number of shares with respect to
which the Option is being
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exercised) accompanied by payment, in cash or check payable to the
Company, of the total purchase price of the shares to be purchased
under the Option.
(f) Non-Discretionary Grants. Options granted to Non-Employee
Directors pursuant to this Section 6.7 are intended to qualify as
"formula awards" within the meaning of Rule 16b-3 under the Exchange
Act. As a result, other than as provided in Section 16 of the Plan, the
Committee will not have the authority to amend the eligibility
requirements for, or modify the terms of, such Options (including,
without limitation, the authority to modify the rights of Non-Employee
Directors in connection with termination of service as a director or a
change in control of the Company) if such amendments or modifications
would disqualify such Options from treatment as "formula awards."
7. Stock Appreciation Rights.
7.1. Grant. An Eligible Recipient may be granted one or more Stock
Appreciation Rights under the Plan, and such Stock Appreciation Rights shall be
subject to such terms and conditions, consistent with the other provisions of
the Plan, as will be determined by the Committee in its sole discretion.
7.2. Exercise Price. The exercise price of a Stock Appreciation Right
will be determined by the Committee, in its discretion, at the date of grant but
will not be less than 100% of the Fair Market Value of one share of Common Stock
on the date of grant.
7.3. Exercisability and Duration. A Stock Appreciation Right will
become exercisable at such time and in such installments as may be determined by
the Committee in its sole discretion at the time of grant; provided, however,
that no Stock Appreciation Right may be exercisable after 10 years from its date
of grant. A Stock Appreciation Right will be exercised by giving notice in the
same manner as for Options, as set forth in Section 6.5 of the Plan.
8. Restricted Stock Awards.
8.1. Grant. An Eligible Recipient may be granted one or more Restricted
Stock Awards under the Plan, and such Restricted Stock Awards will be subject to
such terms and conditions, consistent with the other provisions of the Plan, as
may be determined by the Committee in its sole discretion. The Committee may
impose such restrictions or conditions, not inconsistent with the provisions of
the Plan, to the vesting of such Restricted Stock Awards as it deems
appropriate, including, without limitation, that the Participant remain in the
continuous employ or service of the Company or a Subsidiary for a certain period
or that the Participant or the Company (or any Subsidiary or division thereof)
satisfy certain performance goals or criteria.
8.2. Rights as a Stockholder; Transferability. Except as provided in
Sections 8.1, 8.3 and 14.3 of the Plan, a Participant will have all voting,
dividend, liquidation and other rights with respect to shares of Common Stock
issued to the Participant as a Restricted Stock Award under this Section 8 upon
the Participant becoming the holder of record of such shares as if such
Participant were a holder of record of shares of unrestricted Common Stock.
8.3. Dividends and Distributions. Unless the Committee determines
otherwise in its sole discretion (either in the agreement evidencing the
Restricted Stock Award at the time of grant or at any time after the grant of
the Restricted Stock Award), any dividends or distributions (including regular
quarterly cash dividends) paid with respect to shares of Common Stock subject to
the unvested portion of a Restricted Stock Award will be subject to the same
restrictions as the shares to
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which such dividends or distributions relate. In the event the Committee
determines not to pay such dividends or distributions currently, the Committee
will determine in its sole discretion whether any interest will be paid on such
dividends or distributions. In addition, the Committee in its sole discretion
may require such dividends and distributions to be reinvested (and in such case
the Participants consent to such reinvestment) in shares of Common Stock that
will be subject to the same restrictions as the shares to which such dividends
or distributions relate.
8.4. Enforcement of Restrictions. To enforce the restrictions referred
to in this Section 8, the Committee may place a legend on the stock certificates
referring to such restrictions and may require the Participant, until the
restrictions have lapsed, to keep the stock certificates, together with duly
endorsed stock powers, in the custody of the Company or its transfer agent or to
maintain evidence of stock ownership, together with duly endorsed stock powers,
in a certificateless book-entry stock account with the Company's transfer agent.
9. Performance Units.
An Eligible Recipient may be granted one or more Performance Units
under the Plan, and such Performance Units will be subject to such terms and
conditions, consistent with the other provisions of the Plan, as may be
determined by the Committee in its sole discretion. The Committee may impose
such restrictions or conditions, not inconsistent with the provisions of the
Plan, to the vesting of such Performance Units as it deems appropriate,
including, without limitation, that the Participant remain in the continuous
employ or service of the Company or any Subsidiary for a certain period or that
the Participant or the Company (or any Subsidiary or division thereof) satisfy
certain performance goals or criteria. The Committee will have the sole
discretion either to determine the form in which payment of the economic value
of vested Performance Units will be made to the Participant (i.e., cash, Common
Stock or any combination thereof) or to consent to or disapprove the election by
the Participant of the form of such payment.
10. Stock Bonuses.
An Eligible Recipient may be granted one or more Stock Bonuses under
the Plan, and such Stock Bonuses will be subject to such terms and conditions,
consistent with the other provisions of the Plan, as may be determined by the
Committee in its sole discretion. The Participant will have all voting,
dividend, liquidation and other rights with respect to the shares of Common
Stock issued to a Participant as a Stock Bonus under this Section 10 upon the
Participant becoming the holder of record of such shares; provided, however,
that the Committee may impose such restrictions on the assignment or transfer of
a Stock Bonus as it deems appropriate.
11. Effect of Termination of Employment or Other Service.
11.1. Termination Due to Death, Disability or Retirement. In the event
a Participant's employment or other service with the Company and all
Subsidiaries is terminated by reason of death, Disability or Retirement:
(a) All outstanding Options and Stock Appreciation Rights then
held by the Participant will remain exercisable to the extent
exercisable as of such termination following such termination until the
expiration date of such Option or Stock Appreciation Right;
(b) All Restricted Stock Awards then held by the Participant
that have not vested will be terminated and forfeited; and
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(c) All Performance Units and Stock Bonuses then held by the
Participant will vest and/or continue to vest in the manner determined
by the Committee and set forth in the agreement evidencing such
Performance Units or Stock Bonuses.
11.2. Termination for Reasons Other than Death, Disability or
Retirement.
(a) In the event a Participant's employment or other service
is terminated with the Company and all Subsidiaries for any reason
other than death, Disability or Retirement, or a Participant is in the
employ or service of a Subsidiary and the Subsidiary ceases to be a
Subsidiary of the Company (unless the Participant continues in the
employ or service of the Company or another Subsidiary), all rights of
the Participant under the Plan and any agreements evidencing an
Incentive Award will immediately terminate without notice of any kind,
and no Options or Stock Appreciation Rights then held by the
Participant will thereafter be exercisable, all Restricted Stock Awards
then held by the Participant that have not vested will be terminated
and forfeited, and all Performance Units and Stock Bonuses then held by
the Participant will vest and/or continue to vest in the manner
determined by the Committee and set forth in the agreement evidencing
such Performance Units or Stock Bonuses; provided, however, that if
such termination is due to any reason other than termination by the
Company or any Subsidiary for "cause," all outstanding Options and
Stock Appreciation Rights then held by such Participant will remain
exercisable to the extent exercisable as of such termination for a
period of one month after such termination (but in no event after the
expiration date of any such Option or Stock Appreciation Right).
(b) For purposes of this Section 11.2, "cause" (as determined
by the Committee) will be as defined in any employment or other
agreement or policy applicable to the Participant or, if no such
agreement or policy exists, will mean (i) dishonesty, fraud,
misrepresentation, embezzlement or deliberate injury or attempted
injury, in each case related to the Company or any Subsidiary, (ii) any
unlawful or criminal activity of a serious nature, (iii) any
intentional and deliberate breach of a duty or duties that,
individually or in the aggregate, are material in relation to the
Participant's overall duties, or (iv) any material breach of any
employment, service, confidentiality or noncompete agreement entered
into with the Company or any Subsidiary.
11.3. Modification of Rights Upon Termination. Notwithstanding the
other provisions of this Section 11, upon a Participant's termination of
employment or other service with the Company and all Subsidiaries, the Committee
may, in its sole discretion (which may be exercised at any time on or after the
date of grant, including following such termination), cause Options and Stock
Appreciation Rights (or any part thereof) then held by such Participant to
become or continue to become exercisable and/or remain exercisable following
such termination of employment or service and Restricted Stock Awards,
Performance Units and Stock Bonuses then held by such Participant to vest and/or
continue to vest or become free of transfer restrictions, as the case may be,
following such termination of employment or service, in each case in the manner
determined by the Committee; provided, however, that no Option may remain
exercisable beyond its expiration date.
11.4. Breach of Confidentiality or Noncompete Agreements.
Notwithstanding anything in this Plan to the contrary, in the event that a
Participant materially breaches the terms of any confidentiality or noncompete
agreement entered into with the Company or any Subsidiary or takes any other
action that the Committee, in its sole discretion, deems to be adverse to the
interests of the Company or any Subsidiary (an "Adverse Action"), whether such
Adverse Action occurs before or after termination of such Participant's
employment or other service with the Company or any
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Subsidiary, the Committee in its sole discretion may immediately terminate all
rights of the Participant under the Plan and any agreements evidencing an
Incentive Award then held by the Participant without notice of any kind. In
addition, to the extent that a Participant takes such Adverse Action during the
period beginning 6 months prior to, and ending 6 months following, the date of
such employment or service termination, the Committee in its sole discretion
will have the authority (by so providing in the agreement evidencing such
Incentive Award at the time of grant) to rescind (i) any grant of an Incentive
Award made to such Participant during such period and (ii) any exercise of an
Option of the Participant that was exercised during such period, and to require
the Participant to pay to the Company, within 10 days of receipt from the
Company of notice of such rescission, the amount of any gain realized from such
rescinded grant or exercise. Such payment will be made in cash (including check,
bank draft or money order) or, with the Committee's consent, shares of Common
Stock with a Fair Market Value on the date of payment equal to the amount of
such payment. The Company will be entitled to withhold and deduct from future
wages of the Participant (or from other amounts that may be due and owing to the
Participant from the Company or Subsidiary) or make other arrangements for the
collection of all amounts necessary to satisfy such payment obligation.
11.5. Date of Termination of Employment or Other Service. Unless the
Committee otherwise determines in its sole discretion, a Participant's
employment or other service will, for purposes of the Plan, be deemed to have
terminated on the date recorded on the personnel or other records of the Company
or the Subsidiary for which the Participant provides employment or other
service, as determined by the Committee in its sole discretion based upon such
records.
12. Payment of Withholding Taxes.
12.1. General Rules. The Company is entitled to (a) withhold and deduct
from future wages of the Participant (or from other amounts that may be due and
owing to the Participant from the Company or a Subsidiary), or make other
arrangements for the collection of, all legally required amounts necessary to
satisfy any and all federal, state and local withholding and employment-related
tax requirements attributable to an Incentive Award, including, without
limitation, the grant, exercise or vesting of, or payment of dividends with
respect to, an Incentive Award or a disqualifying disposition of stock received
upon exercise of an Incentive Stock Option, or (b) require the Participant
promptly to remit the amount of such withholding to the Company before taking
any action, including issuing any shares of Common Stock, with respect to an
Incentive Award.
12.2. Special Rules. The Committee may, in its sole discretion and upon
terms and conditions established by the Committee, permit or require a
Participant to satisfy, in whole or in part, any withholding or
employment-related tax obligation described in Section 12.1 of the Plan by
electing to tender Previously Acquired Shares or a Broker Exercise Notice, or by
a combination of such methods.
13. Change in Control.
13.1. Change in Control. For purposes of this Section 13.1, a "Change
in Control" of the Company will mean (a) the sale, lease, exchange or other
transfer of substantially all of the assets of the Company (in one transaction
or in a series of related transaction) to a person or entity that is not
controlled, directly or indirectly, by the Company, (b) a merger or
consolidation to which the Company is a party if the stockholders of the Company
immediately prior to effective date of such merger or consolidation do not have
"beneficial ownership" (as defined in Rule 13d-3 under the
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Exchange Act) immediately following the effective date of such merger or
consolidation of more than 80% of the combined voting power of the surviving
corporation's outstanding securities ordinarily having the right to vote at
elections of directors, or (c) a change in control of the Company of a nature
that would be required to be reported pursuant to Section 13 or 15(d) of the
Exchange Act, whether or not the Company is then subject to such reporting
requirements, including, without limitation, such time as (i) any person
becomes, after the effective date of the Plan, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 40% or
more of the combined voting power of the Company's outstanding securities
ordinarily having the right to vote at elections of directors, or (ii)
individuals who constitute the Board on the effective date of the Plan cease for
any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the effective date of the Plan whose
election, or nomination for election by the Company's stockholders, was approved
by a vote of at least a majority of the directors comprising the Board on the
effective date of the Plan will, for purposes of this clause (ii), be considered
as though such persons were a member of the Board on the effective date of the
Plan.
13.2. Acceleration of Vesting. Without limiting the authority of the
Committee under Section 3.2 of the Plan, if a Change in Control of the Company
occurs, then, if approved by the Committee in its sole discretion either in an
agreement evidencing an Incentive Award at the time of grant or at any time
after the grant of an Incentive Award, (a) all Options and Stock Appreciation
Rights will become immediately exercisable in full and will remain exercisable
for the remainder of their terms, regardless of whether the Participants to whom
such Options or Stock Appreciation Rights have been granted remain in the employ
or service of the Company or any Subsidiary; (b) all outstanding Restricted
Stock Awards will become immediately fully vested; and (c) all Performance Units
and Stock Bonuses then held by the Participant will vest and/or continue to vest
in the manner determined by the Committee and set forth in the agreement
evidencing such Performance Units or Stock Bonuses.
13.3. Cash Payment for Options. If a Change in Control of the Company
occurs, then the Committee, if approved by the Committee in its sole discretion
either in an agreement evidencing an Incentive Award at the time of grant or at
any time after the grant of an Incentive Award, and without the consent of any
Participant effected thereby, may determine that some or all Participants
holding outstanding Options will receive, with respect to and in lieu of some or
all of the shares of Common Stock subject to such Options, as of the effective
date of any such Change in Control of the Company, cash in an amount equal to
the excess of the Fair Market Value of such shares immediately prior to the
effective date of such Change in Control of the Company over the exercise price
per share of such Options.
13.4. Limitation on Change in Control Payments. Notwithstanding
anything in Section 13.2 or 13.3 of the Plan to the contrary, if, with respect
to a Participant, the acceleration of the vesting of an Incentive Award as
provided in Section 13.2 or the payment of cash in exchange for all or part of
an Incentive Award as provided in Section 13.3 (which acceleration or payment
could be deemed a "payment" within the meaning of Section 280G(b)(2) of the
Code), together with any other payments which such Participant has the right to
receive from the Company or any corporation that is a member of an "affiliated
group" (as defined in Section 1504(a) of the Code without regard to Section
1504(b) of the Code) of which the Company is a member, would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), then the
payments to such Participant pursuant to Section 13.2 or 13.3 will be reduced to
the largest amount as will result in no portion of such payments being subject
to the excise tax imposed by Section 4999 of the Code; provided, however, that
if such Participant is subject to a separate agreement with the
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Company or a Subsidiary which specifically provides that payments attributable
to one or more forms of employee stock incentives or to payments made in lieu of
employee stock incentives will not reduce any other payments under such
agreement, even if it would constitute an excess parachute payment, then the
limitations of this Section 13.4 will, to that extent, not apply.
14. Rights of Eligible Recipients and Participants: Transferability.
14.1. Employment or Service. Nothing in the Plan will interfere with or
limit in any way the right of the Company or any Subsidiary to terminate the
employment or service of any Eligible Recipient or Participant at any time, nor
confer upon any Eligible Recipient or Participant any right to continue in the
employ or service of the Company or any Subsidiary.
14.2. Rights as a Stockholder. As a holder of Incentive Awards (other
than Restricted Stock Awards), a Participant will have no rights as a
stockholder unless and until such Incentive Awards are exercised for, or paid in
the form of, shares of Common Stock and the Participant becomes the holder of
record of such shares. Except as otherwise provided in the Plan, no adjustment
will be made for dividends or distributions with respect to such Incentive
Awards as to which there is a record date preceding the date the Participant
becomes the holder of record of such shares, except as the Committee may
determine in its discretion.
14.3. Restrictions on Transfer. Except pursuant to testamentary will or
the laws of descent and distribution or as otherwise expressly permitted by the
Plan, no right or interest of any Participant in an Incentive Award prior to the
exercise or vesting of such Incentive Award will be assignable or transferable,
or subjected to any lien; during the lifetime of the Participant, either
voluntarily or involuntarily, directly or indirectly by operation of law or
otherwise. A Participant will, however, be entitled to designate a beneficiary
to receive an Incentive Award upon such Participant's death, and in the event of
a Participant's death, payment of any amounts due under the Plan will be made
to, and exercise of any Options (to the extent permitted pursuant to Section 9
of the Plan) may be made by, the Participant's legal representatives, heirs and
legatees.
14.4. Non-Exclusivity of the Plan. Nothing contained in the Plan is
intended to modify or rescind any previously approved compensation plans of
programs of the Company or create any limitations on the power or authority of
the Board to adopt such additional or other compensation arrangements as the
Board may deem necessary or desirable.
15. Securities Law and Other Restrictions.
Notwithstanding any other provision of the Plan or any agreements
entered into pursuant to the Plan, the Company will not be required to issue any
shares of Common Stock under this Plan, and a Participant may not sell, assign,
transfer or otherwise dispose of shares of Common Stock issued pursuant to
Incentive Awards granted under the Plan, unless (a) there is in effect with
respect to such shares a registration statement under the Securities Act and any
applicable state securities laws or an exemption from such registration under
the Securities Act and applicable state securities laws, and (b) there has been
obtained any other consent, approval or permit from any other regulatory body
which the Committee, in its sole discretion, deems necessary or advisable. The
Company may condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing shares of Common Stock, as may be
deemed necessary or advisable by the Company in order to comply with such
securities law or other restrictions.
12
<PAGE>
16. Plan Amendment. Modification and Termination.
The Board may suspend or terminate the Plan or any portion thereof at
any time, and may amend the Plan from time to time in such respects as the Board
may deem advisable in order that Incentive Awards under the Plan will conform to
any change in applicable laws or regulations or in any other respect the Board
may deem to be in the best interests of the Company; provided, however, that (a)
the Board will not have the authority to amend the eligibility requirements for
Options granted pursuant to Section 6.7 of the Plan, or to modify the number of
shares, exercise price, exercisability, duration, manner of payment or other
terms with respect to such Options, more than once every six months, other than
to comply with changes in the Code, the Employee Retirement Income Security Act
or the rules promulgated thereunder; and (b) no amendments to the Plan will be
effective without approval of the stockholders of the Company if stockholder
approval of the amendment is then required pursuant to Rule 16b-3 under the
Exchange Act, Section 422 of the Code or the rules of the National Association
of Securities Dealers, Inc. No termination, suspension or amendment of the Plan
may adversely affect any outstanding Incentive Award without the consent of the
affected Participant; provided, however, that this sentence will not impair the
right of the Committee to take whatever action it deems appropriate under
Sections 4.3 and 13 of the Plan.
17. Effective Date and Duration of the Plan.
The Plan is effective as of November 19, 1999, the date it was adopted
by the Board. The Plan will terminate at midnight on November 18, 2009, and may
be terminated prior to such time to by Board action, and no Incentive Award will
be granted after such termination. Incentive Awards outstanding upon termination
of the Plan may continue to be exercised, or become free of restrictions, in
accordance with their terms.
18. Miscellaneous.
18.1. Governing Law. The validity, construction, interpretation,
administration and effect of the Plan and any rules, regulations and actions
relating to the Plan will be governed by and construed exclusively in accordance
with the laws of the State of Minnesota.
18.2. Successors and Assigns. The Plan will be binding upon and inure
to the benefit of the successors and permitted assigns of the Company and the
Participants.
13
<PAGE>
NORTHERN TECHNOLOGIES INTERNATIONAL CORPORATION
6680 N. HIGHWAY 49
LINO LAKES, MN 55014
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having duly received the Notice of Annual Meeting
of Stockholders and Proxy Statement, hereby appoints Philip M. Lynch and Donald
A. Kubik (each with power to act alone and with powers of substitution) to
represent the undersigned and to vote, as designated below, all the shares of
common stock of Northern Technologies International Corporation (the "Company")
held of record by the undersigned on December 30, 1999, at the Annual Meeting of
Stockholders to be held on February 18, 2000 at the Hyatt Regency Minneapolis,
1300 Nicollet Mall, Minneapolis, Minnesota 55403 and any adjournments thereof.
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS:
<S> <C> <C>
[ ] FOR all nominees listed below [ ] AGAINST all nominees listed below
(INSTRUCTION: TO VOTE AGAINST ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THAT NOMINEE'S NAME)
Sidney Dworkin Vincent J. Graziano Gerhard Hahn Donald A. Kubik
Richard G. Lareau Philip M. Lynch Haruhiko Rikuta Milan R. Vukcevich
2. APPROVAL AND ADOPTION OF THE COMPANY'S 2000 STOCK INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. REAPPOINTMENT OF DELOITTE & TOUCHE AS THE COMPANY'S INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other business as may properly come
before the meeting.
</TABLE>
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED
FOR THE ELECTION OF ALL NOMINEES FOR DIRECTORS, FOR THE ADOPTION AND APPROVAL OF
THE COMPANY'S 2000 STOCK INCENTIVE PLAN, FOR THE REAPPOINTMENT OF DELOITTE &
TOUCHE AS THE COMPANY'S INDEPENDENT AUDITORS AND IN THE DISCRETION OF THE PROXY
HOLDER ON OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
PLEASE SIGN exactly as the name appears
on this card. When shares are held by
joint tenants, both should sign. When
signing as an attorney, executor,
administrator, trustee or guardian,
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.
Dated:____________________________, 2000
----------------------------------------
Signature
----------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
