SCHEDULE 14A
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CORT BUSINESS SERVICES CORPORATION.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6 (i)(3).
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:1
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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CORT BUSINESS SERVICES
Notice of Annual Meeting of Stockholders to be held May 14, 1997
To the Stockholders of CORT BUSINESS SERVICES CORPORATION:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of the Stockholders
of CORT BUSINESS SERVICES CORPORATION will be held at the Holiday Inn Fair Oaks,
Fairfax, Virginia, on Wednesday, May 14, 1997, at 2 p.m., local time, for the
purpose of:
(1) Electing seven directors (Proposal No. 1);
(2) Approving the appointment of independent accountants of the
Corporation for the fiscal year ending December 31, 1997
(Proposal No. 2);
(3) Approving an amendment to the Corporation's Restated
Certificate of Incorporation to increase the number of
authorized shares of Common Stock (Proposal No. 3);
(4) Approving the adoption of the Amended and Restated 1995
Stock-Based Incentive Compensation Plan (Proposal No. 4);
(5) Approving the adoption of the 1997 Directors Stock Option Plan
(Proposal No. 5); and
(6) Transacting such other business as may properly come before
the meeting.
The Board of Directors has fixed the close of business on March 28,
1997 as the record date for the determination of stockholders entitled to notice
of and to vote at the meeting and any adjournments thereof; only holders of
stock of the Corporation of record on that date are entitled to notice of and to
vote at the meeting and any adjournments. A list of stockholders will be
available at the time and place of the meeting and, during the 10 days prior to
the meeting, at the office of the Corporate Secretary, 4401 Fair Lakes Court,
Suite 300, Fairfax, Virginia 22033.
It is important that your shares be represented at the meeting
regardless of the number of shares that you own. Please complete and sign the
enclosed proxy card, which is being solicited by the Board of Directors of the
Corporation, and return it in the enclosed postage pre-paid envelope as soon as
you can, whether or not you plan to attend in person.
Respectfully,
FRANCES ANN ZIEMNIAK
Vice President of Finance, CFO
& Assistant Secretary
Dated: March 31, 1997
4401 FAIR LAKES COURT, SUITE 300, FAIRFAX, VIRGINIA 22033
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CORT BUSINESS SERVICES
4401 FAIR LAKES COURT, SUITE 300
FAIRFAX, VIRGINIA 22033
PROXY STATEMENT
General Information
This proxy statement is furnished in connection with the solicitation
of proxies to be used at the annual meeting of stockholders of CORT Business
Services Corporation (the "Corporation" or the "Company") to be held on May 14,
1997 at 2:00 p.m., local time, and at any adjournment thereof. The form of proxy
and this proxy statement are being mailed to stockholders on or about March 31,
1997. The Corporation's annual report to stockholders, including financial
statements, accompanies this notice and proxy statement, but is not incorporated
as part of the proxy statement and is not to be regarded as part of the proxy
solicitation material.
Proxies are solicited by the Board of Directors of the Corporation in
order to provide every stockholder an opportunity to vote on all matters
scheduled to come before the meeting, whether or not he or she attends the
meeting in person. When the enclosed proxy card is returned properly signed, the
shares represented thereby will be voted by the proxy holders named on the card
in accordance with the stockholder's directions. You are urged to specify your
choices by marking the appropriate boxes on the enclosed proxy card. If the
proxy is signed and returned without specifying choices, the shares will be
voted as recommended by the Board of Directors. A stockholder giving a proxy may
revoke it at any time before it is voted at the meeting by filing with the
Corporate Secretary an instrument revoking it, or by a duly executed proxy
bearing a later date. If you do attend, you may, if you wish, vote by ballot at
the meeting, thereby canceling any proxy vote previously given.
If a stockholder wishes to give a proxy to someone other than those
designated on the proxy card, he or she may do so by crossing out the names of
the designated proxies and by then inserting the name of another person(s). The
signed proxy card should be presented at the meeting by the person(s)
representing the stockholder.
On March 14, 1997, there were 12,777,398 shares of Common Stock issued
and outstanding, each of which is entitled to one vote.
The holders of a majority of the outstanding shares must be present in
person or by phone at the annual meeting in order to constitute a quorum for the
purpose of transacting business at the meeting. Except for the election of
directors, the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at the meeting and entitled
to vote on the proposals is required to ratify and approve the proposals.
Directors are elected by a plurality of the votes cast by written ballot.
Abstentions are counted in tabulations of the votes cast by stockholders on the
proposals and will have the effect of a negative vote. Brokers who hold shares
in street name for customers have the authority to vote only on certain routine
matters in the absence of instruction from the beneficial owners. A broker
non-vote occurs when the broker does not have the authority to vote on a
particular proposal. Under applicable Delaware law, broker non-votes will not be
counted for purposes of determining whether any proposal has been approved.
Solicitation of proxies is made on behalf of the Board of Directors of
the Corporation, and the cost of preparing, assembling, and mailing the notice
of annual meeting, proxy statement, and form of proxy will
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be borne by the Corporation. In addition to the use of the mail, proxies may be
solicited by directors, officers and regular employees of the Corporation,
without additional compensation, in person or by telephone or facsimile.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Corporation's Board of Directors consist of seven directors, whose
terms expire annually.
Unless otherwise specified by the stockholders, the shares represented
by the proxies will be voted for the seven nominees for directors listed below.
Keith E. Alessi, Paul N. Arnold, Bruce C. Bruckmann, Michael A. Delaney, Charles
M. Egan, Gregory B. Maffei, and James A. Urry are nominated for terms which will
expire at the 1998 Annual Meeting of Stockholders. Each nominee for director has
consented to his nomination as a director and, so far as the Board and
Management are aware, will serve as a director if elected. The names and
biographical summaries of the seven persons who have been nominated to stand for
election at the 1997 Annual Meeting of Stockholders appear below.
MR. KEITH E. ALESSI Director Since October 1993
Mr. Alessi, age 42, is Chairman, Chief Executive Officer and a director
of Jackson Hewitt Inc. Mr. Alessi was Vice Chairman and Chief Financial
Officer of Farm Fresh, Inc. from June 1994 through ____________. He had
previously served in various executive capacities, including President,
with Farm Fresh from 1988 to 1992. Mr. Alessi was Chairman and Chief
Executive Officer of Virginia Supermarkets, Inc., from 1992 to 1994.
Mr. Alessi is also a director of Farm Fresh, Inc. and Shoppers Food
Warehouse, Inc.
MR. PAUL N. ARNOLD Director Since March 1993
Mr. Arnold, age 50, has been the Chief Executive Officer and a Director
of the Company since July 1992. Mr. Arnold has been with the Company
and Mohasco Corporation, its former parent, for 27 years and has held
group management positions within the Company since 1976.
MR. BRUCE C. BRUCKMANN Director Since March 1993
Mr. Bruckmann, age 43, is currently Managing Director of Bruckmann,
Rosser, Sherrill & Co., Inc. Mr. Bruckmann was a Vice President of
Citicorp Venture Capital, Ltd., which is an affiliate of the Company,
through 1993 and a Managing Director from 1993 through 1994. He is also
a Director of Mohawk Industries, Inc., AmeriSource Health Corporation,
Chromcraft-Revington, Inc. and Jitney-Jungle Stores of America, Inc.
MR. MICHAEL A. DELANEY Director Since May 1995
Mr. Delaney, age 42, has been a Vice President of Citicorp Venture
Capital, Ltd., which is an affiliate of the Company, since 1989. From
1986 through 1989 he was Vice President of Citicorp Mergers and
Acquisitions. Mr. Delaney is also a director of Sybron Chemicals, Inc.,
GVC Holdings, JAC Holdings, DRA International, Enterprise Radio
Corporation, Southern Coil Processing, Inc., and AmeriSource Health
Corporation.
MR. CHARLES M. EGAN Director Since September 1993
Mr. Egan, age 60, has been with the Company since the acquisition of
General Furniture Leasing Company in September 1993. Mr. Egan joined
General Furniture Leasing Company
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in 1989 and became its President and Chief Executive Officer in 1992.
From 1985 to 1989, Mr. Egan was Executive Vice President of Mohasco
Corporation. Mr. Egan was President of CORT Furniture Rental
Corporation from 1980-1985.
MR. GREGORY B. MAFFEI Director Since November 1995
Mr. Maffei, age 36, has been with Microsoft Corporation since April
1993, serving as Treasurer since 1994. Before joining Microsoft, he was
self-employed from October 1992 to March 1993, serving as a consultant
for various companies including Microsoft. From April 1991 to September
1992, he served as Vice President and Chief Financial Officer of Pay 'N
Pak Stores, Inc. Before joining Pay 'N Pak Stores, Inc., Mr. Maffei was
a Vice President of Citicorp Venture Capital, Ltd., which is an
affiliate of the Company. Mr. Maffei is also a Director of Mobile
Telecommunications Technologies Corporation, Citrix Systems, Inc. and
Dorling Kindersely Holdings, PLC.
MR. JAMES A. URRY Director Since March 1993
Mr. Urry, age 43, has been with Citibank, N.A. since 1981 serving as a
Vice President since 1986. He has been a Vice President of Citicorp
Venture Capital, Ltd., which is an affiliate of the Company, since
1989. He is also a Director of AmeriSource Health Corporation, Clark
Material Handling Corporation, Hancor Holding Corporation,
International Knife and Saw Corporation, Palomar Products Inc.,
Recreational Vehicle Product Company and York International
Corporation.
Although the Board of Directors and Management do not contemplate that
any of the nominees will be unable to serve, in the event that prior to the
meeting any of the nominees become unable to serve because of special
circumstances, the shares of stock represented by the proxies will be voted for
the election of a nominee who shall be designated by the Board.
The Board of Directors recommends that you vote FOR the election of
Messrs. Alessi, Arnold, Bruckmann, Delaney, Egan, Maffei and Urry.
PROPOSAL NO. 2
APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Unless otherwise specified by the stockholders, the shares of stock
represented by the proxies will be voted for the approval of the appointment of
KPMG Peat Marwick LLP, a firm of independent accountants, to audit and report
upon the financial statements of the Corporation for the fiscal year 1997. KPMG
Peat Marwick LLP has been the independent accountants of CORT Furniture Rental
Corporation since 1972 and the Company since its formation in March 1993. In the
opinion of the Board of Directors and Management, KMPG Peat Marwick LLP is well
qualified to act in this capacity.
A representative of KPMG Peat Marwick LLP is expected to be present at
the annual meeting. The representative will have the opportunity to make a
statement if he or she desires to do so and will be available to respond to
appropriate questions. The Corporation has been advised by KPMG Peat Marwick LLP
that the firm has no financial interest, direct or indirect, in the Corporation,
other than serving as independent accountants during the period stated.
The Board of Directors recommends that stockholders vote FOR the
approval of the appointment of KPMG Peat Marwick LLP as independent accountants.
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PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
General
The Board of Directors has approved and recommends that the
stockholders authorize an amendment to paragraph 1 of Article Four of the
Company's Restated Certificate of Incorporation (the "Charter") to increase the
number of shares of each class of Common Stock, par value $.01 per share
(together, the "Stock"), which the Company is authorized to issue from
15,500,000 per class to 20,000,000.
The Company's authorized capital stock currently consists of 15,500,000
shares of Common Stock, par value $.01 per share, and 15,500,000 shares of Class
B Common Stock, par value $.01 per share. All shares of Common Stock and Class B
Common Stock are identical and entitle the holders to the same rights and
privileges; provided, however, that the holders of Class B Common Stock shall
have no voting rights. No shares of Class B Common Stock have been issued. On
March 14, 1997, 12,777,398 shares of Common Stock had been issued, of which
12,777,398 were outstanding and none were held in the treasury of the Company.
Therefore, on March 14, 1997, there were 2,722,602 unissued shares of Common
Stock available for issuance without further action by the stockholders.
The additional shares of Stock for which authorization is sought would
be a part of the existing classes of Stock and, if and when issued, would have
the same rights and privileges as the shares of Stock currently outstanding;
provided, however, that such additional shares of Class B Common Stock shall
have no voting rights. The shares of Stock now outstanding do not entitle the
holders to preemptive or subscription rights to purchase additional shares of
Stock. The amendment would make no change in any respect with regard to the
rights and privileges of shares of Stock. The text of the proposed amendment is
set forth in Appendix A.
Reasons for and Effects of the Amendment
The Company currently has no plans, agreements or understandings for
the issuance of additional shares of Stock except upon conversion of outstanding
convertible securities and as required under existing director stock option,
employee compensation and stock option plans. The Board believes that having
additional authorized shares of Stock available for issuance as the need may
arise will give the Company more financial flexibility, without the expense and
delay of a special stockholders' meeting, in connection with these possible
issuances and potential equity financings, future opportunities to expand the
business through investments or acquisitions, stock dividends and splits, new
management incentive and employee benefit plans and sales to employee savings
plans. The additional shares of Stock will be available without further action
by the stockholders, unless such action is required by applicable law, the rules
of any stock exchange on which the Company's securities may then be listed or
the Company's Charter.
Neither the Board nor management is considering the use of Stock to
assume control of the Company or to hinder an attempt to remove the incumbent
management of the Company, and neither is aware of any specific efforts to
accumulate Stock, to obtain control of the Company or to remove management.
The proposed increase in the number of authorized shares of Stock is
not intended to deter or prevent a change in control. Moreover, the Company has
elected not to be subject to Section 203 of the Delaware General Corporation
Law, rendering such anti-takeover statute inapplicable to the Company. Had the
Company not so elected, Section 203 would generally preclude a person who
acquires fifteen percent (15%) or more of the voting stock of the Company from
effecting a merger or certain other business combinations with the Company for
three (3) years after such acquisition without the prior approval of the Board.
Although the Board has no present intention of doing so, the Company's
authorized but unissued Stock could be issued in one or more transactions which
would make more difficult or costly, and less likely, a takeover of the
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Company. Issuing additional shares of Stock would also have the effect of
diluting the stock ownership of persons seeking to obtain control of the
Company. The proposed amendment to the Charter is not being recommended in
response to any specific effort of which the Company is aware to obtain control
of the Company, nor is the Board currently proposing to stockholders any
anti-takeover measures.
The New York Stock Exchange, on which the issued shares of the
Company's Common Stock are listed, currently requires, as a precondition for
listing any additional shares, the approval of the stockholders prior to any
issuances by the Company of Stock, or securities convertible into or exercisable
for Stock, having voting power at least equal to twenty percent (20%) of the
aggregate voting power outstanding prior to the issuance of such stock or which
would otherwise result in a change in control of the Company.
The Board of Directors recommends that stockholders vote FOR this
proposal to amend the Charter as set forth above.
PROPOSAL NO. 4
APPROVAL OF THE AMENDED AND RESTATED 1995 STOCK-BASED INCENTIVE
COMPENSATION PLAN
In 1995, the Board of Directors adopted and the Company's stockholders
approved the 1995 Stock-Based Incentive Compensation Plan (the "Original 1995
Employee Plan"). The Original 1995 Employee Plan became effective October 31,
1995.
Awards under the Original 1995 Employee Plan may be made to officers
and key employees of the Company in the form of 1995 Plan Stock Options,
Restricted Stock, Deferred Stock and Stock Appreciation Rights (each, an
"Award"). The aggregate maximum number of shares of Common Stock available for
Awards under the Original 1995 Employee Plan is 577,427 shares. On March 18,
1997, the last reported sales price of the Common Stock on the New York Stock
Exchange was $24.875. At the time of adoption, no additional shares of Common
Stock, beyond those authorized under the Original 1995 Employee Plan, were
reserved for issuance under such plan. No Awards can be made under the Original
1995 Employee Plan after October 31, 1997.
Proposed Amended and Restated 1995 Employee Plan
The Board of Directors has approved, subject to stockholder approval,
the Amended and Restated 1995 Employee Plan (the "Amended 1995 Employee Plan")
which amends and restates the Original 1995 Employee Plan to provide for (i) an
increase in the total number of shares of Common Stock available as Awards under
the Original 1995 Employee Plan, (ii) an extension of the expiration date of the
Original 1995 Employee Plan to the date immediately preceding the tenth
anniversary of the effective date of the Amended 1996 Employee Plan and (iii)
the transferability of 1995 Plan Stock Options, whether awarded under the
Original 1995 Employee Plan or the Amended 1995 Employee Plan, by a plan
participant to certain family members of such participant and trusts established
for the benefit of such family members. Proposal No. 4 seeks stockholder
approval of the Amended 1995 Employee Plan.
The Board of Directors considers the amendments necessary for the
attraction and retention by the Company of valued employees by ensuring that
additional Awards beyond those authorized under the Original 1995 Employee Plan
can be made and that holders of 1995 Plan Stock Options, whether awarded under
the Original 1995 Employee Plan or the Amended 1995 Employee Plan, may transfer
such options for estate tax planning purposes.
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Summary of the Proposed Amended and Restated 1995 Employee Plan
The following summary describes features of the Amended 1995 Employee
Plan. This summary is qualified in its entirety by reference to the specific
provisions of the Amended 1995 Employee Plan, the full text of which is set
forth as Appendix B.
Purpose. The purpose of the Amended 1995 Employee Plan is to assist the
Company, its subsidiaries and affiliates in attracting and retaining valued
employees by offering them a greater stake in the Company's success and a closer
identity with it, and to encourage ownership of the Company's stock by such
employees.
Administration. The Amended 1995 Employee Plan will be administered by
a committee of three or more persons designated by the Board of Directors (the
"Compensation Committee"), all of whom are Non-Employee Directors and Outside
Directors (as such terms are defined in the Amended 1995 Employee Plan) as well
as directors of the Company. The Compensation Committee has the power and
authority to, among other things, (i) interpret and administer the Amended 1995
Employee Plan, (ii) adopt regulations for carrying out the Amended 1995 Employee
Plan, (iii) make changes in such regulations as it shall, from time to time,
deem advisable, (iv) select the employees to whom Awards will be granted (each a
"Participant" and collectively, "Participants"), (v) determine the type and
amount of Awards to be granted to each Participant and (vi) establish the terms
and conditions of Awards under the Amended 1995 Employee Plan.
Eligibility. Any officer or other key employee of the Company, its
subsidiaries or affiliates, including a director who is such an employee, is
eligible to participate in the Amended 1995 Employee Plan. As of March 18, 1997,
there were approximately 100 employees eligible to participate in the Original
1995 Employee Plan, of whom approximately 85 were Participants. Participation in
the Amended 1995 Employee Plan is at the discretion of the Compensation
Committee and shall be based upon an employee's present and potential
contributions to the success of the Company, its subsidiaries and affiliates and
such other factors as the Compensation Committee deems relevant.
Awards under the Amended 1995 Employee Plan. Awards under the Amended
1995 Employee Plan may be in the form of 1995 Plan Stock Options, Restricted
Stock, Deferred Stock and Stock Appreciation Rights.
Deferred and Restricted Stock
The Compensation Committee may grant shares of Common Stock in the form
of either Deferred Stock or Restricted Stock. In a Deferred Stock award, the
Company agrees to deliver, subject to certain conditions, a fixed number of
shares of Common Stock at the end of a specified deferral period or periods.
During such period, the Participant has no rights as a stockholder with respect
to any such shares. Amounts equal to any dividends declared during the deferral
period with respect to such Deferred Stock will either be paid to the
Participant, reinvested in additional shares of Deferred Stock or otherwise
reinvested, as determined by the Compensation Committee at the time of the
award. Shares of Common Stock awarded pursuant to a Deferred Stock award shall
be issued at the end of a deferral period as specified in the Deferred Stock
agreement evidencing such Award, subject to adjustment by the Compensation
Committee.
In a Restricted Stock award, the Compensation Committee grants to a
Participant shares of Common Stock that are subject to certain restrictions,
including forfeiture of such stock upon the happening of certain events. During
the restriction period, holders of Restricted Stock have the right to receive
dividends from and to vote the shares of Restricted Stock. Shares of Common
Stock awarded pursuant to a Restricted Stock award shall be issued on the grant
date, held in escrow by or on behalf of the Company and delivered to the
Participant at the end of a restriction period as specified in the Restricted
Stock agreement evidencing such Award, subject to adjustment by the Compensation
Committee.
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1995 Plan Stock Options
1995 Plan Stock Options may be either incentive stock options ("ISOs")
or non-qualified stock options ("Non-Qualified Options"). ISOs are intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Unless a 1995 Plan Stock
Option is specifically designated at the time of grant as an ISO, 1995 Plan
Stock Options will be Non-Qualified Options. No 1995 Plan Stock Option is
exercisable sooner than six months from the date granted.
Stock Appreciation Rights
The Compensation Committee may grant stock appreciation rights ("SARs")
in tandem with all or a portion of a related 1995 Plan Stock Option under the
Amended 1995 Employee Plan (a "Tandem SAR") or may grant SARs separately (a
"Freestanding SAR"). Each SAR entitles the holder to receive payment in cash, in
shares of Common Stock, Restricted Stock or Deferred Stock, or any combination
thereof, as determined by the Compensation Committee, equal to the excess of the
fair market value on the date of exercise of the shares of Common Stock covered
by the SAR over the base price of the SAR. The base price of a Tandem SAR is the
option price under the related 1995 Plan Stock Option. The base price of a
Freestanding SAR is at least 100% of the fair market value of the Common Stock
on the date of grant of the Freestanding SAR. A Tandem SAR may be granted either
at the time of the grant of the 1995 Plan Stock Option or at any time thereafter
during the term of the option and is exercisable only to the extent that the
related 1995 Plan Stock Option is exercisable. No SAR is exercisable sooner than
six months from the date granted.
The exercise of either a Tandem SAR or a 1995 Plan Stock Option related
to a Tandem SAR, as to some or all of the shares of Common Stock covered by such
grant, automatically cancels to the extent of the number of shares of Common
Stock actually covered by such exercise, the number of shares covered
respectively by the related 1995 Plan Stock Option or Tandem SAR.
Exercise Price. The exercise price of 1995 Plan Stock Options will be
determined by the Compensation Committee, although the exercise price of an ISO
shall be at least 100% of the fair market value of a share of Common Stock on
the date the ISO is granted, or at least 110% of the fair market value of a
share of Common Stock on the date the ISO is granted if the receiving
Participant owns, directly or indirectly, shares constituting more than 10% of
the total combined voting power of all classes of capital stock of the Company
(a "Ten Percent Holder").
Form of Consideration. Upon the exercise of a 1995 Plan Stock Option,
the Participant shall pay the option price of the shares of Common Stock in full
in cash at the time of exercise or, with the consent of the Compensation
Committee, in whole or in part in (i) Common Stock valued at fair market value
on the exercise date or (ii) Restricted Stock based on the fair market value of
the Restricted Stock on the exercise date.
Term of 1995 Plan Stock Option. The term of each 1995 Plan Stock Option
shall be ten years from the date such option was granted. In the case of an ISO
granted to a Ten Percent Holder, the term shall be five years from the date of
issuance.
Termination of Employment. In the event that a Participant's employment
is terminated by reason of death, any 1995 Plan Stock Option or SAR granted to
such Participant may be exercised, to the extent exercisable at the time of
death or otherwise permitted by the Compensation Committee, by the Participant's
transferee or legal representative for the earlier of six months from the date
of death or the expiration of the term of such option or SAR. Moreover, in the
event that a Participant's employment is terminated by reason of disability or
retirement, any unexercised 1995 Plan Stock Option or SAR granted to such
Participant may be exercised, to the extent exercisable at time of termination
or otherwise permitted by the Compensation Committee, for the earlier of three
months from the date of such termination or the expiration of the term of such
option or SAR. If a Participant's employment is terminated for any reason other
than death, disability
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or retirement, all unexercised 1995 Employee Stock Options or SARs awarded to
the Participant terminate as of such termination date.
In the event that a Participant's employment is terminated by reason of
death, disability, retirement, or otherwise, any Deferred Stock or Restricted
Stock granted to such Participant is subject to the terms of the corresponding
Deferred Stock agreement or Restricted Stock agreement, respectively.
Rights of Participants. Nothing in the Amended 1995 Employee Plan, any
Award or agreement related thereto shall confer upon any Participant any right
to continued employment with the Company, its subsidiaries or affiliates, nor
interfere with the right of the Company or a subsidiary to terminate the
employment of any Participant at any time.
Non-assignability. No Award shall be transferable otherwise than by
will or the laws of descent and distribution; provided, however, that 1995 Plan
Stock Options (other than ISOs) may be pledged, assigned or transferred (i)
during the Participant's lifetime by such Participant to certain members of his
or her family, certain trusts for their benefit and certain corporations,
partnerships and other entities of which such family members own, directly or
indirectly, all of the equity interests in such entity (each, a "Permitted
Transferee"), (ii) by a Permitted Transferee to another Permitted Transferee or
(iii) as otherwise permitted by the Compensation Committee; provided, further,
that any such transfer shall comply with all terms and conditions established by
the Compensation Committee.
Adjustments Upon Changes in Capitalization. In the event of a
reorganization, merger, consolidation, recapitalization, spin-off, split-off,
split-up, issuance of stock rights, stock dividend, combination of shares, stock
split or any other change in the corporate structure of the Company affecting
the Common Stock, or any distribution to stockholders other than a cash
dividend, the Board of Directors shall make the adjustments in the number and
kind of shares authorized by the Amended 1995 Employee Plan and any adjustments
to outstanding Awards as it determines appropriate. No fractional shares of
Common Stock shall be issued in connection with an Award pursuant to any such
adjustment.
Amendment and Termination of the Amended 1995 Employee Plan. The Board
of Directors may amend, suspend or terminate the Amended 1995 Employee Plan at
any time. Termination of the Amended 1995 Employee Plan shall not affect Awards
outstanding under such plan at the time of termination.
Expiration. Unless terminated earlier by the Board of Directors, the
Amended 1995 Employee Plan shall terminate on the date immediately preceding the
tenth anniversary of its effective date.
Certain Federal Income Tax Consequences. The following description of
certain income tax consequences of the Amended 1995 Employee Plan is based upon
current statutes, regulations and interpretations and does not include state or
local income tax consequences. This description is for general informational
purposes only and is not intended to address specific tax consequences that may
be applicable to a Participant who receives an Award based on his or her
particular circumstances.
Deferred Stock
A Participant realizes no taxable income and the Company is not
entitled to a deduction when a Deferred Stock award is made. When the deferral
period for the award ends and the shares of Common Stock are delivered to the
Participant, the Participant will realize ordinary income equal to the fair
market value of the shares at that time, and, provided the applicable conditions
of Section 162(m) of the Code are met (see discussion below), the Company will
be entitled to a corresponding deduction. A Participant's tax basis in shares of
Common Stock delivered at the end of a deferral period will be equal to the fair
market value of such shares when delivered to the Participant. Upon sale of the
shares, the Participant will realize short-term or long-term capital gain or
loss (assuming the shares are held as a capital asset), depending upon whether
the shares have been held for more than one year at the time of sale. Such gain
or loss will be equal to the
8
<PAGE>
difference between the amount realized upon the sale of the shares and the tax
basis of the shares in the Participant's hands. Amounts paid with respect to
dividends on the Deferred Stock during the deferral period will likewise be
treated as compensation income when received by the Participant.
Restricted Stock
Shares of Restricted Stock received pursuant to awards under which the
Participant may forfeit the shares to the Company upon certain events (such as
the Participant's voluntary termination of employment during the restriction
period or the failure to meet certain performance goals) will be considered
subject to a substantial risk of forfeiture for federal income tax purposes. If
a Participant who receives such shares of Restricted Stock does not make the
election described below pursuant to Section 83(b) of the Code, the Participant
realizes no taxable income when the shares of Restricted Stock are deposited in
escrow for the benefit of the Participant and the Company is not entitled to a
deduction. When the forfeiture restrictions with respect to the Restricted Stock
lapse, the Participant will realize ordinary income equal to the fair market
value of the shares at that time, and, provided the applicable conditions of
Section 162(m) of the Code are met, the Company will be entitled to a
corresponding deduction. Dividends paid with respect to shares of Restricted
Stock for which no Section 83(b) election has been made will be treated as
compensation income received by the Participant. A Participant's tax basis in
shares of Restricted Stock for which no Section 83(b) election has been made
will be equal to their fair market value when the forfeiture restrictions lapse,
and the Participant's holding period for the shares will begin when the
forfeiture restrictions lapse. Upon sale of the shares, the Participant will
realize short-term or long-term capital gain or loss (assuming the shares are
held as a capital asset), depending upon whether the shares have been held for
more than one year at the time of sale. Such gain or loss will be equal to the
difference between the amount realized upon the sale of the shares and the tax
basis of the shares in the Participant's hands.
Participants receiving shares of Restricted Stock that are subject to a
substantial risk of forfeiture may, instead, make an election under Section
83(b) of the Code with respect to the shares (a "Section 83(b) election"). By
making a Section 83(b) election, the Participant elects to realize compensation
income with respect to the shares when the shares are placed in escrow for the
benefit of the Participant rather than at the time the forfeiture restrictions
lapse. The amount of such compensation income will be equal to the fair market
value (determined without regard to restrictions other than those which will
lapse) of the shares when such shares are placed in escrow for the benefit of
the Participant, and the Company will be entitled to a corresponding
compensation deduction at that time (subject to any applicable limitations under
Section 162(m) of the Code). By making a Section 83(b) election, the Participant
will realize no additional compensation income with respect to the shares when
the forfeiture restrictions lapse, and will instead recognize gain or loss with
respect to the shares when they are sold. Dividend payments received with
respect to shares of Restricted Stock for which a Section 83(b) election has
been made will be treated as dividend income, assuming the Company has adequate
current or accumulated earnings and profits. The Participant's tax basis in the
shares with respect to which a Section 83(b) election is made will be equal to
their fair market value (determined without regard to restrictions other than
those which will lapse) when placed in escrow for the benefit of the
Participant, and the Participant's holding period for such shares begins at that
time. If, however, the shares are subsequently forfeited to the Company, the
Participant will not be entitled to claim a loss with respect to the shares to
the extent of the income realized by the Participant upon the making of the
Section 83(b) election. To make a Section 83(b) election, a Participant must
file an appropriate form of election with the Internal Revenue Service and with
his or her employer, each within 30 days after shares of Restricted Stock are
placed in escrow for the benefit of the Participant, and the Participant must
also attach a copy of his or her election to his or her federal income tax
return for the year in which the shares are received.
Non-Qualified Options
A Participant realizes no taxable income and the Company is not
entitled to a deduction when a Non-Qualified Option is granted. Upon exercise of
a Non-Qualified Option, a Participant will realize ordinary income (even if the
Non-Qualified Option has been transferred to a Permitted Transferee) equal to
the excess
9
<PAGE>
of the fair market value of the shares received over the exercise price of the
Non-Qualified Option, and, provided the applicable conditions of Section 162(m)
of the Code are met, the Company will be entitled to a corresponding deduction.
A holder's tax basis in the shares of Common Stock received upon exercise of a
Non-Qualified Option will be equal to the fair market value of such shares on
the exercise date, and the holder's holding period for such shares will begin at
that time. Upon sale of the shares of Common Stock received upon exercise of a
Non-Qualified Option, the holder will realize short-term or long-term capital
gain or loss (assuming the shares are held as a capital asset), depending upon
whether the shares have been held for more than one year. The amount of such
gain or loss will be equal to the difference between the amount realized in
connection with the sale of the shares, and the holder's tax basis in such
shares.
Under the Amended 1995 Employee Plan, Non-Qualified Options may, with
the consent of the Compensation Committee, be exercised in whole or in part with
shares of Common Stock held by the holder. Although a Participant will recognize
compensation income in connection with such an exercise as described above, the
holder will recognize no gain or loss with respect to the shares of Common Stock
surrendered, and the equivalent number of shares received will have a tax basis
equal to the tax basis of the surrendered shares. Shares of Common Stock
received in excess of the number of shares surrendered will have a tax basis
equal to their fair market value on the date of the exercise of the
Non-Qualified Option.
ISOs
A Participant realizes no taxable income and the Company is not
entitled to a deduction when an ISO is granted or exercised. Provided the
Participant meets the applicable holding period requirements for the shares
received upon exercise of an ISO (two years from the date of grant of the ISO
and one year from the date of exercise of the ISO), gain or loss realized by a
Participant upon sale of the shares received upon exercise of an ISO will be
long-term capital gain or loss (assuming the shares are held as a capital
asset), and the Company will not be entitled to a deduction. If, however, the
Participant disposes of the shares before meeting the applicable holding period
requirements (a "disqualifying disposition"), the Participant will realize
ordinary income at that time equal to the excess of the amount realized upon
such disposition (or, if less, the fair market value of the shares at the time
of exercise of the ISO) over the exercise price of the ISO, and the Company will
be entitled to a corresponding deduction (subject to any applicable limitations
under Section 162(m) of the Code). Any amount realized upon a disqualifying
disposition of the shares in excess of the fair market value of the shares on
the exercise date of the ISO will be treated as capital gain (assuming the
shares are held as a capital asset) and will be treated as long-term capital
gain if the shares have been held for more than one year.
Under the Amended 1995 Employee Plan, ISOs may, with the consent of the
Compensation Committee, be exercised in whole or in part with shares of Common
Stock held by the Participant. The Participant will recognize no gain or loss
with respect to the shares of Common Stock surrendered (assuming the surrender
of the previously-owned shares does not constitute a disqualifying disposition
of those shares), and the equivalent number of shares received will have a tax
basis equal to the tax basis of the surrendered shares. Shares of Common Stock
received in excess of the number of shares surrendered will have a tax basis of
zero (assuming the applicable holding period for those shares continues to be
met).
SARs
A Participant realizes no taxable income and the Company is not
entitled to a deduction when a SAR is granted. Upon exercising a SAR, a
Participant will realize ordinary income in an amount equal to the cash or the
fair market value of the stock received (assuming such shares are not Restricted
Stock or Deferred Stock subject to the rules described above) and, provided the
applicable conditions of Section 162(m) are met, the Company will be entitled to
a corresponding deduction.
10
<PAGE>
Section 162(m) Limitations on Compensation Deductions
Pursuant to Section 162(m) of the Code, a publicly-held corporation may
be denied a deduction for compensation paid in any one taxable year in excess of
$1 million to a "covered employee" unless the compensation properly qualifies as
"performance based compensation" subject to certain requirements. A covered
employee for this purpose is the chief executive officer of the corporation and
each of the four other most highly compensated officers of the corporation, as
reported to shareholders under the Securities Exchange Act of 1934, as amended.
The Company expects that grants of Awards to persons who may be covered
employees will meet the applicable requirements for performance based
compensation and that, as a result, compensation that is otherwise deductible
under the Code will not be subject to limitation under Section 162(m) of the
Code.
Withholding
Participants shall be responsible to make appropriate provision for all
taxes required to be withheld in connection with any Award, the exercise thereof
and the transfer of shares of Common Stock pursuant to the Amended 1995 Employee
Plan. Such responsibility shall extend to all applicable Federal, state, local
or foreign withholding taxes. In the case of the payment of Awards in Common
Stock or the exercise of 1995 Plan Stock Options or SARs, the Company shall, at
the election of the Participant, have the right to retain the number of shares
of Common Stock whose fair market value equals the withholding tax obligation of
such Participant.
New Plan Benefits Table (to be inserted)
The Board of Directors recommends that stockholders vote FOR this
proposal to adopt the Amended and Restated 1995 Stock-Based Incentive
Compensation Plan.
11
<PAGE>
PROPOSAL NO. 5
APPROVAL OF THE 1997 DIRECTORS STOCK OPTION PLAN
General
The Board of Directors has adopted, subject to stockholder approval,
the 1997 Directors Stock Option Plan (the "1997 Directors Plan"). The 1997
Directors Plan provides for the granting of Non-Qualified Options (the "1997
Directors Options") to acquire up to approximately 50,000 shares of Common Stock
to non-employee directors of the Company. On March 18, 1997, the last reported
sales price of the Common Stock on the New York Stock Exchange was $24.875.
Currently, five of the seven members of the Board of Directors are eligible to
receive awards under the 1997 Directors Plan.
The Company believes that the 1997 Directors Plan will assist the
Company in attracting and retaining the services of experienced and
knowledgeable independent directors and provide additional incentives for such
independent directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of Common Stock.
Summary of the 1997 Directors Plan
The following summary describes features of the 1997 Directors Plan.
This summary is qualified in its entirety by reference to the specific
provisions of the 1997 Directors Plan, the full text of which is set forth as
Appendix C.
Purpose. The purpose of the 1997 Directors Plan is to assist the
Company in attracting and retaining services of experienced and knowledgeable
independent directors of the Company for the benefit of the Company and its
stockholders and provide additional incentives for such independent directors to
continue to work for the best interests of the Company and its stockholders
through continuing ownership of Common Stock.
Administration. The 1997 Directors Plan shall be administered by a
committee of two or more persons designated by the Board of Directors (the
"Directors Plan Committee"), each of whom shall be a director of the Company and
an employee of the Company or any subsidiary of the Company and therefore shall
not be eligible to participate in the 1997 Directors Plan. The Directors Plan
Committee shall have full power to interpret and administer the 1997 Directors
Plan, full authority to act in determining the terms and conditions of 1997
Directors Options and the power to adopt regulations, and amend such
regulations, for carrying out the 1997 Directors Plan, including, without
limitation, the power, unilaterally and without approval of a plan participant,
to amend, in certain circumstances, an existing 1997 Directors Option; provided,
however, that any amendment must comply with the requirements of the 1997
Directors Plan and the rules and regulations promulgated by the Securities and
Exchange Commission under Rule 16b-3 of the Securities Exchange Act of 1934, as
amended.
Eligibility. All members of the Board of Directors who are not
employees of the Company or a subsidiary ("Non-Employee Directors") on the
business day immediately following the Company's Annual Meeting of Stockholders
for calendar years 1997, 1998, 1999, 2000 and 2001 (each, a "Grant Date"),
beginning with the 1997 Annual Meeting, shall be eligible to participate in the
1997 Directors Plan.
Grant of Options. Awards under the 1997 Directors Plan shall consist of
the grant from the Company to each Non-Employee Director who is in office on a
Grant Date of an option to purchase 2,000 shares of Common Stock. The 1997
Directors Options will vest ratably over a three (3) year period.
Exercise Price. The exercise price for 1997 Directors Options shall be
equal to the fair market value of a share of Common Stock on the Grant Date. If
the Common Stock is publicly traded, then the fair market value per share on any
Grant Date shall be the previous days' closing price of actual sales of shares
of
12
<PAGE>
Common Stock on the principal national securities exchange on which the Common
Stock is listed, or if not listed, as reported on the National Association of
Securities Dealers Automated Quotation System, on such date or, if the Common
Stock was not traded or reported on such date, on the last preceding day on
which the Common Stock was traded or reported.
Form of Consideration. The 1997 Directors Plan permits payment for
shares issued upon exercise of a 1997 Directors Option to be made in cash or,
with the consent of the Directors Plan Committee and if not prohibited by the
Company's and its subsidiaries' financing agreements, in Common Stock owned by
such Non-Employee Director for at least six (6) months, or such shorter period
as the Directors Plan Committee may determine, valued at its fair market value
on the date of exercise.
Term of Option. The term of each 1997 Directors Option shall be ten
(10) years.
Termination of Membership on Board of Directors. If a Non-Employee
Director ceases to be a member of the Board of Directors for any reason prior
the date on which a Directors Plan Option becomes fully vested, the shares of
Common Stock subject to such option which are not vested shall be forfeited and
such Non-Employee Director shall not have further rights to exercise such
option. Moreover, a person is eligible for a grant of a 1997 Directors Option
only if he or she is serving as a Non-Employee Director on the applicable Grant
Date.
Non-assignability. No option shall be transferable otherwise than by
will or the laws of descent and distribution; provided, however, that 1997
Directors Options may be pledged, assigned or transferred (i) during the
Non-Employee Director's lifetime by such director to certain members of his or
her family, certain trusts for their benefit and certain corporations,
partnerships and other entities of which such family members own, directly or
indirectly, all of the equity interests in such entity (each, a "Permitted
Transferee"), (ii) by a Permitted Transferee to another Permitted Transferee or
(iii) as otherwise permitted by the Directors Plan Committee; provided, further,
that any such transfer shall comply with all terms and conditions established by
the Directors Plan Committee.
Adjustments Upon Changes in Capitalization. In the event that the
Common Stock changes by reason of any stock dividend, spin-off,
recapitalization, stock split or combination or exchange of shares, merger,
reorganization or consolidation in which the Company is the surviving company,
reclassification or change in par value or any other extraordinary or unusual
event affecting the outstanding Common Stock without the Company's receipt of
consideration, or if the value of outstanding shares of the Common Stock is
substantially reduced as a result of a spin-off or the Company's payment of an
extraordinary dividend or distribution, the maximum number of shares of Common
Stock available for the 1997 Directors Options, the number of shares covered by
outstanding 1997 Directors Options, the kind of shares issued under the 1997
Directors Plan and the exercise price per share of each 1997 Directors Option
may be adjusted by the Directors Plan Committee to preclude, to the extent
possible, the enlargement or dilution of rights and benefits under such 1997
Directors Options. Any fractional shares resulting from such adjustment shall be
eliminated.
Amendment and Termination of the 1997 Directors Plan. The Board of
Directors may amend or terminate the 1997 Directors Plan at any time. No such
action by the Board of Directors shall materially impair a grantee's rights
under a previously granted 1997 Directors Option unless the grantee consents or
the Directors Plan Committee acts to remain in compliance with all applicable
laws and approvals of governmental or regulatory agencies. Termination of the
1997 Directors Plan shall not impair the Directors Plan Committee's power and
authority with respect to an outstanding 1997 Directors Option. Whether or not
the 1997 Directors Plan has terminated, the Directors Plan Committee may
terminate or amend an outstanding 1997 Directors Option upon the agreement
between the Company and the grantee or to remain in compliance with all
applicable laws and approvals of governmental or regulatory agencies.
Expiration. Unless terminated or extended earlier, the 1997 Directors
Plan shall terminate on the day immediately preceding the tenth anniversary of
its effective date.
13
<PAGE>
Certain Federal Income Tax Consequences. The following description of
certain income tax consequences of the 1997 Directors Plan is based on current
statutes, regulations and interpretations and does not include state or local
income tax consequences. This description is for general informational purposes
only and is not intended to address specific tax consequences that may be
applicable to a Non-Employee Director who receives a 1997 Directors Option based
on his or her particular circumstances.
All 1997 Directors Options to be granted under the 1997 Directors Plan
are intended not to qualify as "incentive stock options" as that term is defined
in Section 422 of the Code. Neither the Non-Employee Director nor the Company
will incur any federal income tax consequences as a result of the grant of a
1997 Directors Option under the 1997 Directors Plan. Upon the exercise of a 1997
Directors Option, the difference between the exercise price and the fair market
value of the shares on the date of exercise will be taxable as ordinary income
to the Non-Employee Director (even if the 1997 Directors Option has been
transferred to a Permitted Transferee).
At the time of a subsequent sale of any shares of Common Stock obtained
upon the exercise of a 1997 Directors Option under the 1997 Directors Plan, any
gain or loss will be a capital gain or loss to the 1997 Directors Option holder.
The 1997 Directors Option holder's tax basis in such stock for purposes of
determining capital gain or loss will be the exercise price paid pursuant to the
1997 Directors Option plus the amount of ordinary income recognized on exercise
of the 1997 Directors Option. Any capital gain or loss recognized on a
subsequent sale of Common Stock will be a long-term gain or loss if the sale
occurs more than one year after the date of exercise and a short-term capital
gain or loss if the sale occurs one year or less after the date of exercise.
The Company will be entitled to a deduction for federal income tax
purposes at the same time and in the same amount that the holder of any option
recognizes ordinary income, to the extent that such income is considered
reasonable compensation under the Code.
New Plan Benefits Table. (to be inserted)
The Board of Directors recommends a vote FOR this proposal to approve
the 1997 Directors Stock Option Plan.
14
<PAGE>
Security Ownership of Certain Beneficial Owners and Directors and Officers
The following table sets forth certain information with respect to
beneficial ownership of common stock of CORT Business Services Corporation as of
March 14, 1997 by (i) each of the Company's directors and certain of its
executive officers, (ii) each person who is known by the Company to own
beneficially more than 5% of the Company's common stock and (iii) by all of the
Company's directors and executive officers as a group. The Company owns all of
the issued and outstanding capital stock of CORT Furniture Rental Corporation
(CFR).
Common Stock(1)
------------------------
Number Percentage
of Shares of Class
--------- --------
Directors:
Bruce C. Bruckmann ......................... 162,739(2) 1.3%
Paul N. Arnold ............................. 147,762(2) 1.1%
Charles M. Egan ............................ 35,982(2) *
Keith E. Alessi ............................ 44,993(2) *
Gregory B. Maffei .......................... 35,192(2) *
James A. Urry .............................. 23,737(2) *
Michael A. Delaney ......................... 7,209(2) *
Certain Executive Officers:
Lloyd Lenson ............................... 103,420(2) *
Kenneth W. Hemm ............................ 79,516(2) *
Steven D. Jobes ............................ 55,729(2) *
Frances Ann Ziemniak ....................... 45,574(2) *
Five Percent Stockholders:(3)
Citicorp Venture Capital, Ltd.(4) .......... 5,778,518 45.2%
399 Park Avenue, 14th Floor
New York, New York 10043
The Kaufmann Fund, Inc. .................... 900,000 7.0%
140 East 45th Street, 43rd Floor
New York, New York 10017
All Directors and Executive Officers as a group
(16 persons) ............................... 859,168(2) 6.5%
- -------------
* Less than 1%.
(1) The Company has two authorized classes of common stock: Common Stock
(voting) and Class B Common Stock (nonvoting); however, there are no
shares of the Company's Class B Common Stock issued or outstanding.
(2) Includes shares under option of 1,334; 100,756; 20,168; 1,334; 1,667;
1,334; 1,334; 48,674; 22,617; 52,379; 23,597 for Messrs. Bruckman,
Arnold, Egan, Alessi, Maffei, Urry, Delaney, Lenson, Hemm, Jobes and
Ms. Ziemniak, respectively, and 367,422 in total for all Directors and
Executive Officers as a group.
(3) The Board of Directors and Management are not aware of any other person
or entity who holds beneficially more than 5% of the outstanding Common
Stock of the Corporation.
(4) CVC is a party to an agreement with the Company, dated March 30, 1993,
pursuant to which CVC is required by April 1, 1999 (or such later date
as the Small Business Administration may approve) to reduce (by
conversion to non-voting stock or other disposition) its ownership of
the Company's Common Stock (voting) to a percentage at which CVC will
no longer be presumed to have control of the Company under regulations
of the Small Business Administration. In general, the presumption of
control exists so long as a person holds 20% or more of the issuer's
outstanding voting common stock.
15
<PAGE>
Board of Directors
The Corporation's Board of Directors held five meetings during fiscal
year 1996. All of the directors attended more than 75% of the meetings of the
Board of Directors and the Committees of the Board of Directors on which they
served, except Gregory B. Maffei with respect to the Audit Committee and Michael
A. Delaney with respect to the Board of Directors and Compensation Committee.
Directors who are not employees of the Company or Citicorp Venture
Capital, Ltd. ("CVC") receive a monthly payment of $1,000, $500 for attendance
at each meeting of the Board of Directors and $500 for attendance at each
meeting of a committee of the Board of Directors and are reimbursed for expenses
incurred in connection with attendance at meetings of the Board of Directors or
committees thereof. In addition, directors not employed by the Company were
entitled to receive options for common stock pursuant to the 1995 Directors
Stock Option Plan (the "Directors Plan").
The Company adopted the Directors Plan, which provides for the granting
of stock options on a non-discretionary basis to non-employee directors of the
Company. An aggregate of 50,000 shares of common stock have been reserved for
issuance under the Directors Plan. The Directors Plan provided for automatic
grants of an option to purchase shares of common stock to non-employee directors
on November 15, 1995 and 1996, which options will become exercisable over time.
The option exercise price will be equal to 100% of the fair market value of the
common stock on the date of grant of the option. Options granted to directors
under the Directors Plan will be treated as nonstatutory stock options under the
Internal Revenue Code, as amended. The Company granted 10,000 options in 1996
pursuant to the terms of the Directors Plan.
Committees of the Board
The standing Committees of the Board of Directors are the Audit,
Compensation and Directors Stock Option Committees.
The Audit Committee recommends the independent accountants to conduct
the annual audit of the books and accounts of the Corporation, and reviews the
adequacy of the Corporation's financial reporting, accounting systems and
controls. The Audit Committee also evaluates the Corporation's internal and
external auditing procedures. During fiscal year 1996, the Audit Committee,
which currently consists of Messrs. Alessi, Chairman; Bruckmann, and Maffei,
held two meetings.
The Compensation Committee reviews and recommends actions to the Board
of Directors on such matters as salary and other compensation of officers and
the administration of certain benefit plans. The Compensation Committee also has
the authority to administer, grant and award stock options under the
Corporation's stock option plans. The Committee held four meetings during fiscal
year 1996. Current members of the Committee are Messrs.
Urry, Chairman; Bruckmann, and Delaney.
The Directors Stock Option Committee administers the Directors Plan.
The Committee held no meetings during fiscal year 1996. Current members of the
committee are Messrs. Arnold and Egan.
Report of the Compensation Committee of the Board of Directors on
Executive Compensation
Role of Committee. The Compensation Committee of the Board of Directors
(the "Committee") establishes, oversees and directs executive compensation
policies of the Company and administers the Company's stock option plans. The
Committee seeks to align executive compensation with Company objectives and
strategies, management programs, business financial performance and enhanced
stockholder value. The Committee consists of independent outside directors, none
of whom is or was an officer or employee of the Company or CFR.
16
<PAGE>
The Committee's objectives include (i) attracting and retaining
exceptional individuals as executive officers and (ii) providing key executives
with motivation to perform to the full extent of their abilities in an effort to
maximize Company performance to deliver enhanced value to the Company's
stockholders. The Committee seeks to place a greater percentage of executive
officers' compensation at risk, as compared to non-executives, by tying
compensation directly to the performance of the business and value of the Common
Stock. Executive compensation consists primarily of an annual salary, bonuses
linked to the performance of the Company and long-term equity-based
compensation.
Compensation. The annual salaries of the Company's executive officers
are set at levels designed to attract and retain exceptional individuals by
rewarding them for individual and Company achievements. The Committee reviews
the annual salary of each executive officer in relation to such officer's
performance and previous salaries and general market and industry conditions or
trends and makes appropriate adjustments. In the future, the Committee plans to
review executive officers' salaries annually and to adjust such salaries based
on each executive officer's past performance, expected future contributions, the
scope and nature of responsibilities of, including changes in such
responsibilities, and competitive compensation data relating to such executive
officer.
The Committee believes that a portion of the executives' compensation
should be tied to the financial results of the Company in order to reward
individual performance and overall Company success. Each fiscal year,
challenging Company financial performance and individual strategic and operating
objectives and targets are established for each officer. Typical targets include
earnings, revenue, and return on assets. A portion of the bonus is based upon
subjective criteria particular to each officer's individual operating
responsibilities. In 1996, the Company and the executive officers exceeded these
goals. Accordingly, Messrs. Arnold, Hemm, Jobes and Lenson and Ms. Ziemniak
earned bonuses attributable to their respective Company financial performance
and individual strategic and operating objectives and targets.
The Company has instituted employee stock option plans in order to
offer key employees the opportunity to acquire an equity interest in the
Company, thereby aligning the interests of these employees more closely with the
long term interests of stockholders. Awards under these employee stock option
plans may be in the form of options, deferred stock, restricted stock or stock
appreciation rights. Options, which have a fixed exercise price and vest over a
five-year period, were granted to executive officers and other key employees in
1994 and 1995. In late 1995 and 1996, the Company granted options to executive
officers which vest over a three-year period and have an exercise price equal to
the market value of the Common Stock on the date of grant.
1996 Chief Executive Officer Compensation. The Committee determined the
1996 compensation of Mr. Arnold, President and Chief Executive Officer, in
accordance with the above discussion. In addition, the Committee based Mr.
Arnold's bonus on his overall leadership and management of the Company through
the acquisition of Evans Rents and the public offering of the Common Stock in
July 1996.
Deductibility of Compensation. Section 162(m) of the Internal Revenue
Code imposes a $1 million limit on the deductibility of compensation paid to
executive officers of public companies. The Committee believes that all of the
compensation awarded to the Company's executive officers will be fully
deductible in accordance with this limit.
COMPENSATION COMMITTEE
James A. Urry, Chairman
Bruce C. Bruckmann
Michael A. Delaney
Stockholder Return Performance Graph
The following graph compares the percentage change in cumulative total
stockholder return on the Company's Common Stock against the cumulative total
return of the Standard & Poor's 500 Index and the Dow
17
<PAGE>
Jones Other Industrial and Commercial Services Index from the initial public
offering price on November 17, 1995 to December 31, 1996. Cumulative total
return to stockholders is measured by dividing (x) the sum of (i) total
dividends for the period (assuming dividend reinvestment) plus (ii) per-share
price change for the period by (y) the share price at the beginning of the
period. The graph is based on an investment of $100 at the initial public
offering price on November 17, 1995 in the Common Stock and in each index.
(graph to be inserted)
Executive Compensation
The following table sets forth, for the fiscal years ended December 31,
1994, 1995, and 1996, certain information regarding the cash compensation paid
by the Company, as well as certain other compensation paid or accrued for those
years, to each of the five most highly compensated executive officers of the
Company, in all capacities in which they served:
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Securities(1)
Name and Annual Compensation Other Annual Underlying All Other
Principal Position Year Salary Bonus(1) Compensation(2) Options Compensation(3)
- ------------------ ----------- --------- --------------- --------- --------------
<S> <C> <C> <C> <C> <C>
Paul N. Arnold ...................... 1996 $223,750 $167,813 -- 2,850 $11,781
President & Chief Executive .... 1995 210,000 145,593 -- 128,467 8,983
Officer ........................ 1994 189,306 113,454 -- 101,971 8,279
Kenneth W. Hemm ..................... 1996 132,764 86,363 -- 2,850 6,124
Group Vice President ........... 1995 125,591 74,639 -- 67,667 26,284
1994 117,573 69,070 -- 53,669 19,477
Steven D. Jobes ..................... 1996 119,287 77,536 -- 2,850 --
Vice President, Marketing, ..... 1995 116,707 68,306 -- 35,117 --
Merchandising and Sales ........ 1994 109,218 55,937 -- 53,669 967
Lloyd Lenson ........................ 1996 129,988 74,964 -- 2,850 5,193
Group Vice President ........... 1995 125,678 61,852 -- 43,167 5,323
1994 118,723 60,701 -- 67,086 4,213
Frances Ann Ziemniak(4) ............. 1996 120,400 78,260 $132,153 2,850 1,708
Vice President of Finance, ..... 1995 88,593 51,676 -- -- --
Chief Financial Officer and
Assistant Secretary
<FN>
- ---------------
(1) The amounts shown consist of cash bonuses earned in the fiscal year
identified but paid in the subsequent fiscal year.
(2) In 1996, the Company made payments to reimburse moving expenses
($72,905) and to cover applicable taxes on reimbursed moving expenses
($59,248).
(3) The Company maintains an investment and profit-sharing defined
contribution retirement plan. All of the Company's employees are
eligible to participate after one year of service. The Company makes a
matching contribution as a percentage of the employee contributions.
The Company may, at its discretion, make additional contributions based
on the Company's performance. The amounts shown include both the
matching contribution and the Company's discretionary payment on behalf
of the named executives in which all of the above are fully vested. In
addition, the amounts shown include the amounts allocated to certain
management employees in the defined contribution portion of the CORT
Furniture Rental Supplemental Executive Retirement Plan. The Company
contributes a fixed dollar amount per plan member with the total
contribution allocated among all plan members on the basis of their age
and years of service.
(4) Ms. Ziemniak was hired in March 1995.
</FN>
</TABLE>
18
<PAGE>
Stock Options
Options Granted
The following table sets forth information regarding stock options
granted under the 1995 Stock-Based Incentive Compensation Plan (the "1995 Plan")
during the fiscal year 1996 to the named executive officers of the Company:
Option Grants in 1996
Individual Grants
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Number of Stock Price
Securities Percent of Total Appreciation
Underlying Options Granted For Option Term(2)
Options to Employees in Exercise Price Expiration --------------------
Name Granted(1) Fiscal Year (per share) Date 5% 10%
- ---- ------- ----------- ----------- ---- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Paul N. Arnold 2,850 2.2% $20.75 12/18/06 37,191 94,250
Kenneth W. Hemm 2,850 2.2% $20.75 12/18/06 37,191 94,250
Steven D. Jobes 2,850 2.2% $20.75 12/18/06 37,191 94,250
Lloyd Lenson 2,850 2.2% $20.75 12/18/06 37,191 94,250
Frances Ann Ziemniak 2,850 2.2% $20.75 12/18/06 37,191 94,250
<FN>
- -------------
(1) Options under the 1995 Plan are exercisable when vested.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10%, compounded
annually from the date the respective options were granted to their
expiration date and are not presented to forecast possible future
appreciation, if any, in the Common Stock. The potential realizable values
shown are net of the option exercise price, but do not include deductions
for taxes or other expenses associated with the
exercise of the options or the sale of the underlying shares. The actual
realizable values, if any, on the stock option exercises will depend on the
future performance of the Common Stock, the optionee's continued employment
through applicable vesting periods and the date on which the options are
exercised.
</FN>
</TABLE>
19
<PAGE>
The following table sets forth information regarding 1996 year-end option
values for the named executive officers of the Company:
Aggregated 1996 Year-End Option Values
<TABLE>
<CAPTION>
Shares Number of Securities Value of
Acquired Underlying Unexercised In-the-Money Unexercised
on Value Options at Fiscal Year End at Fiscal Year End Options
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul N. Arnold -- -- 100,756 79,550 1,590,472 661,538
Kenneth W. Hemm 18,084 195,542 22,617 39,016 449,360 331,932
Steven D. Jobes 15,000 284,868 52,379 22,683 945,812 171,060
Lloyd Lenson -- -- 48,674 22,683 863,602 171,060
Fran Ziemniak -- -- 23,597 22,683 352,663 171,060
</TABLE>
Supplemental Executive Retirement Plan
The CORT Furniture Rental Supplemental Executive Retirement Plan (the "SERP
Plan") provides a supplement to the retirement benefits that certain key
management employees will receive from the Retirement Plan for Salaried and
Sales Employees of Mohasco Corporation (the "Mohasco Plan") and the CORT
Furniture Rental Investment Savings and Profit Sharing Retirement Plan (the
"401(k) Plan"). The SERP Plan consists of a defined benefit plan and a defined
contribution plan.
Certain key management employees of the Company with at least five years of
service (employment) have been selected by the Board of Directors as
participants in the defined benefit portion of the SERP Plan. Such officers
include Messrs. Arnold, Lenson and Jobes. The defined SERP Plan benefits are a
function of service with the Company and Final Average Compensation (average
monthly compensation during the 36 consecutive months out of the last 60 months
of the participant's employment that produce the highest average). Compensation
includes salary, bonuses and 401(k) Plan salary deferrals. Benefits are equal to
a targeted percentage as determined by the Board of Directors upon selection of
the employee to participate in the SERP Plan--(55% in the case of Mr. Arnold and
50% in the case of Mr. Jobes and Mr. Lenson) of the Final Average Compensation
as of the date of the participant's retirement or termination of employment
multiplied by the ratio of the participant's actual years of service as of the
applicable event to the participant's years of service projected to the
participant's Normal Retirement Date (first day of the month after the date the
participant attains age 65). The benefits are reduced by (i) the annuity value
of Company contributions made on behalf of the participant to the 401(k) Plan
and (ii) the annuity benefit, on a single life basis only, payable to the
participant under the Mohasco Plan.
The estimated annual benefits payable upon retirement, expressed as a straight
life annuity, before reduction for the 401(k) Plan or the Mohasco Plan, are as
follows:
TARGETED PERCENTAGE: 55%
Years of Service
--------------------------------------------------------------
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
$125,000 $ 65,528 $ 65,528 $ 65,528 $ 65,528 $ 65,528
150,000 78,634 78,634 78,634 78,634 78,634
175,000 91,739 91,739 91,739 91,739 91,739
200,000 104,845 104,845 104,845 104,845 104,845
225,000 117,951 117,951 117,951 117,951 117,951
250,000 131,056 131,056 131,056 131,056 131,056
300,000 157,268 157,268 157,268 157,268 157,268
400,000 209,690 209,690 209,690 209,690 209,690
450,000 235,901 235,901 235,901 235,901 235,901
500,000 262,113 262,113 262,113 262,113 262,113
20
<PAGE>
TARGETED PERCENTAGE: 50%
Years of Service
--------------------------------------------------------------
Remuneration 15 20 25 30 35
$125,000 $ 59,571 $ 59,571 $ 59,571 $ 59,571 $ 59,571
150,000 71,485 71,485 71,485 71,485 71,485
175,000 83,399 83,399 83,399 83,399 83,399
200,000 95,314 95,314 95,314 95,314 95,314
225,000 107,228 107,228 107,228 107,228 107,228
250,000 119,142 119,142 119,142 119,142 119,142
300,000 142,971 142,971 142,971 142,971 142,971
400,000 190,627 190,627 190,627 190,627 190,627
450,000 214,456 214,456 214,456 214,456 214,456
500,000 238,284 238,284 238,284 238,284 238,284
As of December 31, 1996, Mr. Arnold was credited with 29 years of service, Mr.
Jobes with 26 years of service and Mr. Lenson with 19 years of service.
Other key management employees have been selected by the Board of Directors as
participants in the defined contribution portion of the SERP Plan. Such officers
include Mr. Hemm and Ms. Ziemniak. Defined contribution benefits are equal to
the balance in an executive's SERP Account (the annual contribution credited to
such executive's account, adjusted to reflect gains, losses or forfeitures
incurred), as of the last day of the month in which the executive attained age
65.
A participant in either the defined benefit or defined contribution portion of
the SERP Plan whose employment with the Company is terminated without Cause
(i.e., other than as a result of willful gross misconduct materially or
demonstrably injurious to the Company or willful refusal to perform
substantially the duties reasonably assigned to him) or who has a substantial
reduction in duties and responsibilities or in compensation will vest
immediately in his SERP Plan benefit. In addition, such a participant (other
than the Chief Executive Officer) will be entitled to receive a lump sum payment
equal to the amount of compensation he received during the final six or 12
months based on length of service (12 months in the case of Messrs. Arnold,
Hemm, Jobes and Lenson and Ms. Ziemniak) prior to such event. The Chief
Executive Officer is entitled to a severance payment of twice this amount.
Amounts paid by the Company under any employment agreement or other severance
arrangement will reduce the severance payment under the SERP Plan. In addition,
the Company and Mr. Arnold have agreed that one-half of such severance payment
will be paid in a lump sum and the remaining half will be paid in eighteen equal
monthly installments commencing one month after the date of his termination.
Each participant in the SERP Plan has agreed not to compete with the Company for
a period of 18 months following the termination of his employment with the
21
<PAGE>
Company unless such participant's employment was terminated without Cause.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Based solely on review of the copies of the forms furnished to the
Company, or written representations that no form was required to be filed, the
Company believes that during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
beneficial owners of more than ten percent of the Company's Common Stock were
satisfied; except that Victoria Stiles failed to file timely her initial report
on Form 3.
Employment Agreements
The Company has entered into employment agreements with Paul N. Arnold,
dated December 27, 1976, as amended on July 24, 1992 and August 18, 1993;
Kenneth W. Hemm, dated October 6, 1980; Steven D. Jobes dated August 1, 1984 and
Lloyd Lenson, dated April 27, 1987. Each of these agreements provides for a
minimum base salary and prohibits the Company from terminating the employee for
an initial period of time ranging from one to two years from the date of such
agreement. Thereafter, the Company may terminate any of these employees upon two
to six months' written notice or payment of two to six months' base salary.
However, the Company may terminate any of these employees without regard to the
minimum period of employment or the notice of severance payment requirements for
certain acts or omissions by such employee. Each of the employees has agreed not
to compete with the Company in a specified territory and not to disclose any
confidential information for periods ranging from one to two years following
termination of his employment with the Company.
Equity Share Agreement
Pursuant to an Equity Share Agreement dated April 20, 1994 (the
"Agreement") entered into in conjunction with the Company's relocation of one of
its Group Vice Presidents, the Company loaned such officer, Lloyd Lenson, and
his wife Eileen S. Lenson (collectively, "Lenson") the principal amount of
$225,000 (the "Loan Amount") to facilitate the purchase of a single family
dwelling in California. The Agreement provides that upon the occurrence of the
earliest of one of several specified events (a "Termination Event") Lenson will
repay the Loan Amount to the Company as adjusted pursuant to the Agreement.
Adjustment will be made to reflect the Agreement's grant to the Company of a
proportionate interest in any change of value between the total purchase price
of the house, as defined in the Agreement, and the fair market value of the
house on the date of the Termination Event.
1998 Stockholder Proposals
In the event that a stockholder desires to have a proposal included in
the proxy statement for the 1998 Annual Meeting of the Stockholders, the
proposal must be received by the Corporation in writing on or before December 1,
1997, by certified mail, return receipt requested, and must comply in all
respects with applicable rules and regulations of the Securities and Exchange
Commission, the laws of the state of Delaware and the Corporation's By-Laws
relating to such inclusion. Stockholder proposals may be mailed to the Corporate
Secretary, CORT Business Services Corporation, 4401 Fair Lakes Court, Suite 300,
Fairfax, Virginia 22033.
22
<PAGE>
OTHER BUSINESS
The Board of Directors and Management know of no matters to be
presented at the meeting other than those set forth in this proxy statement.
However, if any other business is properly brought before the meeting or any
adjournment thereof, the proxy holders will vote in regard thereto according to
their discretion insofar as such proxies are not limited to the contrary.
By order of the Board of Directors
FRANCES ANN ZIEMNIAK
Assistant Secretary
23
<PAGE>
Appendix A
Amendment to Restated Certificate of Incorporation
An amendment to the following section of the Company's Restated
Certificate of Incorporation is reflected below by printing additions in
boldface and deleted material in brackets:
1. The first sentence of the first paragraph of Article Four of the
Restated Certificate of Incorporation of the Company is hereby
amended in its entirety to read as follows:
"The aggregate number of shares of stock which the Corporation
shall have authority to issues is 40,000,000 [31,000,000] shares,
divided into two (2) classes consisting of: 20,000,000
[15,500,000] shares of Common Stock, par value $.01 per share
("Common Stock") and 20,000,000 [15,500,000] shares of Class B
Common Stock, par value $.01 per shares ("Class B Common Stock").
<PAGE>
APPENDIX B
AMENDED AND RESTATED
CORT BUSINESS SERVICES CORPORATION
1995 STOCK-BASED INCENTIVE COMPENSATION PLAN
Date Adopted: July 25, 1995
Date Amended: ______ __, 199_
<PAGE>
AMENDED AND RESTATED
CORT BUSINESS SERVICES CORPORATION
1995 STOCK-BASED INCENTIVE COMPENSATION PLAN
1. Purpose of the Plan
The purpose of the Plan is to assist the Company, its Subsidiaries and
Affiliates in attracting and retaining valued employees by offering them a
greater stake in the Company's success and a closer identity with it, and to
encourage ownership of the Company's stock by such Employees.
2. Definitions
2.1 "Affiliate" means any entity other than the Subsidiaries
in which the Company has a substantial direct or indirect equity
interest, as determined by the Board.
2.2 "Award" means an award of Deferred Stock, Restricted
Stock, Options or SARs under the Plan.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986, as
amended.
2.5 "Common Stock" means the Class A Common Stock of the
Company, par value $.01 per share, or such other class or kind of
shares or other securities resulting from the application of Section
10.
- 1 -
<PAGE>
2.6 "Company" means CORT Business Services Corporation, a
Delaware corporation, or any successor corporation.
2.7 "Committee" means the committee designated by the Board to
administer the Plan under Section 4. The Committee shall have at least
three members, each of whom shall be a member of the Board, a
Non-Employee Director and an Outside Director.
2.8 "Deferred Stock" means an Award made under Section 6 of
the Plan to receive Common Stock at the end of a specified Deferral
Period.
2.9 "Deferral Period" means the period during which the
receipt of a Deferred Stock Award under Section 6 of the Plan will be
deferred.
2.10 "Effective Date" shall have the meaning ascribed to such
term in Section 11 of the Plan.
2.11 "Employee" means an officer or other key employee of the
Company, a Subsidiary or an Affiliate including a director who is such
an employee.
2.12 "Fair Market Value" means on any given date, the value
per share of the Common Stock as determined by the Committee if the
Common Stock is not traded in a public market, and, if the Common Stock
is traded in a public market, shall be, if the Common Stock is listed
on a national securities exchange or included in the NASDAQ Stock
Market National Market System, the last reported sale price thereof on
such date, or, if the Common Stock is not so listed or included, the
mean between the last reported "bid" and "asked" prices thereof on such
date, as reported on NASDAQ or, if not so reported, as reported by the
National Daily Quotation Bureau, Inc. or as reported in the customary
financial reporting service, as applicable and as the Committee
determines.
2.13 "Grantee" means an Employee to whom an Option is granted.
2.14 "Holder" means a Grantee or a Permitted Transferee, as
applicable.
2.15 "Incentive Stock Option" means an Option intended to meet
the requirements of an incentive stock option as defined in section 422
of the Code and designated as an Incentive Stock Option.
2.16 "1934 Act" means the Securities Exchange Act of 1934, as
amended.
-2-
<PAGE>
2.17 "Non-Employee Director" shall have the meaning given to
such term in Rule 16b-3.
2.18 "Non-Qualified Option" means an Option not intended to be
an Incentive Stock Option, and designated as a Non-Qualified Option.
2.19 "Option" means any stock option granted from time to time
under Section 8 of the Plan.
2.20 "Outside Director" means a member of the Board who: (i)
is not a current employee of the Company, its Subsidiaries or
Affiliates; (ii) is not a former employee of the Company, its
Subsidiaries or Affiliates who receives during the year compensation
for prior services with the Company, its Subsidiaries or Affiliates
(other than benefits under a tax-qualified retirement plan); (iii) has
not been an officer of the Company, its Subsidiaries or Affiliates; and
(iv) does not receive any remuneration from the Company, its
Subsidiaries or Affiliates (either directly or indirectly) in any
capacity other than as director. The requirements of this Section shall
be interpreted and applied in a manner consistent with the requirements
of Treasury Regulation ss. 1.162-27(e)(3).
2.21 "Performance Goals" means a goal that must be met by the
end of a period specified by the Committee (but that is substantially
uncertain to be met before the grant of the Award) based upon: (i) the
price of Common Stock, (ii) the market share of the Company, its
Subsidiaries or Affiliates (or any business unit thereof), (iii) sales
by the Company, its Subsidiaries or Affiliates (or any business unit
thereof), (iv) earnings per share of Common Stock, (v) return on
shareholder equity of the Company, or (vi) costs of the Company, its
Subsidiaries or Affiliates (or any business unit thereof).
2.22 "Permitted Transferee" means the spouse, parents,
siblings, children or grandchildren (in each case, natural or adopted)
of a Grantee, any trust for his or her benefit or the benefit of his or
her spouse, parents, siblings, children or grandchildren (in each case,
natural or adopted), or any corporation or partnership in which the
direct and beneficial owner of all of the equity interest in such
corporation or partnership is such individual Grantee or Permitted
Transferee (or any trust for the benefit of such persons).
2.23 "Plan" means the CORT Business Services Corporation 1995
Stock-Based Incentive Compensation Plan herein set forth, as amended
from time to time.
2.24 "Restricted Stock" means Common Stock awarded by the
Committee under Section 7 of the Plan.
2.25 "Restriction Period" means the period during which
Restricted Stock awarded under Section 7 of the Plan is subject to
forfeiture.
2.26 "Rule 16b-3" means Rule 16b-3, or any successor thereto,
promulgated by the Securities and Exchange Commission under the 1934
Act.
2.27 "SAR" means a stock appreciation right awarded by the
Committee under Section 9 of the Plan.
2.28 "Retirement" means retirement from the active employment
of the Company, a Subsidiary or an Affiliate pursuant to the relevant
provisions of the applicable pension plan of such entity or as
otherwise determined by the Board.
2.29 "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company (or any subsequent parent of the Company) if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
2.30 "Ten Percent Stockholder" means a person who on any given
date owns, either directly or indirectly (taking into account the
attribution rules contained in section 424(d) of the Code), stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a Subsidiary.
-3-
<PAGE>
3. Eligibility
Any Employee is eligible to receive an Award.
4. Administration and Implementation of Plan
4.1 The Plan shall be administered by the Committee, which
shall have full power to interpret and administer the Plan and full
authority to act in selecting the Employees to whom Awards will be
granted, in determining the type and amount of Awards to be granted to
each such Employee, the terms and conditions of Awards granted under
the Plan and the terms of agreements which will be entered into with
Holders, so long as such terms, conditions and agreements are not
otherwise inconsistent with the Plan.
4.2 The Committee's powers shall include, but not be limited
to, the power to determine whether, to what extent and under what
circumstances an Option may be exchanged for cash, Restricted Stock,
Deferred Stock or some combination thereof; to determine whether, to
what extent and under what circumstances an Award is made and operates
on a tandem basis with other Awards made hereunder; to determine
whether, to what extent and under what circumstances Common Stock or
cash payable with respect to an Award shall be deferred, either
automatically or at the election of the Holder (including the power to
add deemed earnings to any such deferral); to determine the effect, if
any, of a change in control of the Company upon outstanding Awards; and
to grant Awards (other than Incentive Stock Options) that are
transferable by the Grantee.
4.3 The Committee shall have the power to adopt regulations
for carrying out the Plan and to make changes in such regulations not
inconsistent with the Plan as it shall, from time to time, deem
advisable. The Committee shall have the power unilaterally and without
approval of a Holder to amend an existing Award in order to carry out
the purposes of the Plan so long as such an amendment does not take
away any benefit granted to a Holder by the Award and as long as the
amended Award comports with the terms of the Plan and Rule 16b-3. Any
interpretation by the Committee of the terms and provisions of the Plan
and the administration thereof, and all action taken by the Committee,
shall be final and binding on Holders.
4.4 The Committee may condition the grant of any Award or the
lapse of any Deferral or Restriction Period (or any combination
thereof) upon the Grantee's achievement of a Performance Goal that is
established by the Committee before the grant of the Award. The
Committee shall have discretion to determine the specific targets with
respect to various categories of Performance Goals set forth in the
definition thereof. Before granting an Award or permitting the lapse of
any Deferral or Restriction Period subject to this Section, the
Committee shall certify that an individual has satisfied the applicable
Performance Goal.
5. Shares of Stock Subject to the Plan
5.1 Subject to adjustment as provided in Section 10, the total
number of shares of Common Stock available for Awards under the Plan
shall be 1,210,000 shares.
5.2 The maximum number of Awards that may be awarded to any
Employee shall not exceed 363,000 shares during the term of the Plan
(the "Individual Limit"). Subject to Section 5.3 and Section 10, any
Award that is cancelled or repriced by the Committee shall count
against the Individual Limit. Notwithstanding the foregoing, the
Individual Limit may be adjusted to reflect the effect on Awards of any
transaction or event described in Section 10.
-4-
<PAGE>
5.3 Any shares of Common Stock issued by the Company shall
reduce the shares of Common Stock available for Awards under the Plan
and shall be counted against the Individual Limit. Any shares of Common
Stock issued hereunder may consist, in whole or in part, of authorized
and unissued shares or treasury shares of Common Stock. If any shares
of Common Stock subject to any Award granted hereunder are forfeited or
such Award otherwise terminates without the issuance of such shares or
the payment of other consideration in lieu of such shares, the shares
subject to such Award, to the extent of any such forfeiture or
termination, shall again be available for Awards under the Plan.
6. Deferred Stock
An Award of Deferred Stock is an agreement by the Company to deliver to
the Holder a specified number of shares of Common Stock at the end of a
specified Deferral Period. Such an Award shall be subject to the following terms
and conditions.
6.1 Deferred Stock Awards shall be evidenced by Deferred Stock
agreements. Such agreements shall conform to the requirements of the
Plan and may contain such other provisions as the Committee shall deem
advisable.
6.2 Upon determination of the number of shares of Deferred
Stock to be awarded to a Holder, the Committee shall direct that the
same be credited to the Holder's account on the books of the Company
but that issuance and delivery of the same shall be deferred until the
date or dates provided in Section 6.5 hereof. Prior to issuance and
delivery hereunder the Holder shall have no rights as a stockholder
with respect to any shares of Deferred Stock credited to the Holder's
account.
6.3 Amounts equal to any dividends declared during the
Deferral Period with respect to the number of shares covered by a
Deferred Stock Award will be paid to the Holder currently, or deferred
and deemed to be reinvested in additional Deferred Stock, or otherwise
reinvested on such terms as are determined at the time of the Award by
the Committee, in its sole discretion, and specified in the Deferred
Stock agreement.
6.4 The Committee may condition the grant of an Award of
Deferred Stock or the expiration of the Deferral Period upon the
Grantee's achievement of one or more Performance Goal(s) specified in
the Deferred Stock agreement. If the Grantee fails to achieve the
specified Performance Goal(s), the Committee shall not grant the
Deferred Stock Award to the Holder, or the Holder shall forfeit the
Award and no Common Stock shall be transferred to him pursuant to the
Deferred Stock Award. Dividends paid during the Deferral Period on
Deferred Stock subject to a Performance Goal shall be reinvested in
additional Deferred Stock and the lapse of the Deferral Period for such
Deferred Stock shall be subject to the Performance Goal(s) previously
established by the Committee.
6.5 The Deferred Stock agreement shall specify the duration of
the Deferral Period taking into account Grantee's termination of
employment on account of death, disability, Retirement or other cause.
The Deferral Period may consist of one or more installments. At the end
of the Deferral Period or any installment thereof the shares of
Deferred Stock applicable to such installment credited to the account
of a Holder shall be issued and delivered to the Holder (or, where
appropriate, the Holder's legal representative) in accordance with the
terms of the Deferred Stock agreement. The Committee may, in its sole
discretion, accelerate the delivery of all or any part of a Deferred
Stock Award or waive the deferral limitations for all or any part of a
Deferred Stock Award.
7. Restricted Stock
An Award of Restricted Stock is a grant by the Company of a specified
number of shares of Common Stock to the Holder, which shares are subject to
forfeiture upon the happening of specified events. Such an Award shall be
subject to the following terms and conditions:
-5-
<PAGE>
7.1 Restricted Stock shall be evidenced by Restricted Stock
agreements. Such agreements shall conform to the requirements of the
Plan and may contain such other provisions as the Committee shall deem
advisable.
7.2 Upon determination of the number of shares of Restricted
Stock to be granted to the Holder, the Committee shall direct that a
certificate or certificates representing the number of shares of Common
Stock be issued to the Holder with the Holder designated as the
registered owner. The certificate(s) representing such shares shall be
legended as to sale, transfer, assignment, pledge or other encumbrances
during the Restriction Period and deposited by the Holder, together
with a stock power endorsed in blank, with the Company, to be held in
escrow during the Restriction Period.
7.3 During the Restriction Period the Holder shall have the
right to receive dividends from and to vote the shares of Restricted
Stock.
7.4 The Committee may condition the grant of an Award of
Restricted Stock or the expiration of the Restriction Period upon the
Grantee's achievement of one or more Performance Goal(s) specified in
the Restricted Stock agreement. If the Grantee fails to achieve the
specified Performance Goal(s), the Committee shall not grant the
Restricted Stock to the Holder, or the Holder shall forfeit the Award
of Restricted Stock and the Common Stock shall be forfeited to the
Company.
7.5 The Restricted Stock agreement shall specify the duration
of the Restriction Period and the performance, employment or other
conditions (including termination of employment on account of death,
disability, Retirement or other cause) under which the Restricted Stock
may be forfeited to the Company. At the end of the Restriction Period
the restrictions imposed hereunder shall lapse with respect to the
number of shares of Restricted Stock as determined by the Committee,
and the legend shall be removed and such number of shares delivered to
the Holder (or, where appropriate, the Holder's legal representative).
The Committee may, in its sole discretion, modify or accelerate the
vesting and delivery of shares of Restricted Stock.
8. Options
Options give an Employee the right to purchase a specified number of
shares of Common Stock from the Company for a specified time period at a fixed
price. Options may be either Incentive Stock Options or Non-Qualified Stock
Options. The grant of Options shall be subject to the following terms and
conditions:
8.1 Option Grants: Options shall be evidenced by Option
agreements. Such agreements shall be uniform and not inconsistent with
the requirements of the Plan, and may contain such other provisions as
the Committee shall deem advisable.
8.2 Option Price: The price per share at which Common Stock
may be purchased upon exercise of an Option shall be determined by the
Committee, but, in the case of grants of Incentive Stock Options, shall
be not less than the Fair Market Value of a share of Common Stock on
the date of grant. In the case of any Incentive Stock Option granted to
a Ten Percent Stockholder, the option price per share shall not be less
than 110% of the Fair Market Value of a share of Common Stock on the
date of grant. The option price per share for Non-Qualified Options may
be less than the Fair Market Value of a share of Common Stock on the
date of grant.
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8.3 Term of Options: The Option agreements shall specify when
an Option may be exercisable and the terms and conditions applicable
thereto. The term of an Option shall in no event be greater than ten
(10) years (five (5) years in the case of an Incentive Stock Option
granted to a Ten Percent Stockholder) and no Option may be exercisable
sooner than six months from date of grant.
8.4 Incentive Stock Options: Each provision of the Plan and
each Option agreement relating to an Incentive Stock Option shall be
construed so that each Incentive Stock Option shall be an incentive
stock option as defined in section 422 of the Code, and any provisions
of the Option agreement thereof that cannot be so construed shall be
disregarded. In no event may a Holder be granted an Incentive Stock
Option which does not comply with the grant and vesting limitations
prescribed by section 422(d) of the Code. Incentive Stock Options may
not be granted to employees of Affiliates.
8.5 Restrictions on Transferability: No Incentive Stock Option
shall be transferable otherwise than by will or the laws of descent and
distribution and, during the lifetime of the Grantee, shall be
exercisable only by the Grantee. Upon the death of a Grantee, the
person to whom the rights have passed by will or by the laws of descent
and distribution may exercise an Incentive Stock Option only in
accordance with this Section 8.
8.6 Payment of Option Price: The option price of the shares of
Common Stock upon the exercise of an Option shall be paid in full in
cash at the time of the exercise or, with the consent of the Committee,
in whole or in part in Common Stock valued at Fair Market Value on the
date of exercise. With the consent of the Committee, payment upon the
exercise of a Non-Qualified Option may be made in whole or in part by
Restricted Stock (based on the fair market value of the Restricted
Stock on the date the Option is exercised, as determined by the
Committee). In such case the Common Stock to which the Option relates
shall be subject to the same forfeiture restrictions originally imposed
on the Restricted Stock exchanged therefor.
8.7 Termination by Death: If a Grantee's employment by the
Company, a Subsidiary or Affiliate terminates by reason of death, any
Option granted to such Grantee (whether held by such Grantee or a
subsequent Holder) may thereafter be exercised (to the extent such
Option was exercisable at the time of death or on such accelerated
basis as the Committee may determine at or after grant) by, where
appropriate, a subsequent Holder, if any, the Holder's transferee or
legal representative, for a period of six (6) months from the date of
death or until the expiration of the stated term of the Option,
whichever period is shorter.
8.8 Termination by Reason of Retirement or Disability: If a
Grantee's employment by the Company, a Subsidiary or Affiliate
terminates by reason of disability (as determined by the Committee) or
Retirement, any unexercised Option granted to the Grantee (whether held
by such Grantee or a subsequent Holder) may thereafter be exercised by
the Holder (or, where appropriate, the Holder's transferee or legal
representative), to the extent it was exercisable at the time of
termination or on such accelerated basis as the Committee may determine
at or after grant, for a period of three (3) months from the date of
such termination of employment or until the expiration of the stated
term of the Option, whichever period is shorter.
8.9 Other Termination: If a Grantee's employment by the
Company, Subsidiary or Affiliate terminates for any reason other than
death, disability or Retirement, all unexercised Options awarded to the
Grantee (whether held by such Grantee or a subsequent Holder) shall
terminate on the date of such termination of employment.
9. Stock Appreciation Rights
SARs give the Holder the right to receive, upon exercise of the SAR,
the increase in the Fair Market Value of a specified number of shares of Common
Stock from the date of grant of the SAR to the date of exercise. The grant of
SARs shall be subject to the following terms and conditions:
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9.1 SARs are rights to receive a payment in cash, Common
Stock, Restricted Stock or Deferred Stock as selected by the Committee.
The value of these rights, which are determined by the appreciation in
the number of shares of Common Stock subject to the SAR, shall be
evidenced by SAR agreements. Such agreements shall conform to the
requirements of the Plan and may contain such other provisions as the
Committee shall deem advisable. An SAR may be granted in tandem with
all or a portion of a related Option under the Plan ("Tandem SAR"), or
may be granted separately ("Freestanding SAR"). A Tandem SAR may be
granted either at the time of the grant of the Option or at any time
thereafter during the term of the Option and shall be exercisable only
to the extent that the related Option is exercisable. In no event shall
any SAR be exercisable within the first six (6) months of its grant.
9.2 The base price of a Tandem SAR shall be the option price
under the related Option. The base price of a Freestanding SAR shall be
not less than one hundred percent (100%) of the Fair Market Value of
the Common Stock, as determined by the Committee, on the date of grant
of the Freestanding SAR.
9.3 A SAR shall entitle the recipient to receive a payment
equal to the excess of the Fair Market Value of the shares of Common
Stock covered by the SAR on the date of exercise over the base price of
the SAR. Such payment may be in cash, shares of Common Stock, Deferred
Stock, Restricted Stock or any combination, as the Committee shall
determine. Upon exercise of a Tandem SAR as to some or all of the
shares of Common Stock covered by the grant, the related Option shall
be cancelled automatically to the extent of the number of shares of
Common Stock covered by such exercise, and such shares shall no longer
be available for purchase under the Option pursuant to Section 8.
Conversely, if the related Option is exercised as to some or all of the
shares of Common Stock covered by the grant, the related Tandem SAR, if
any, shall be cancelled automatically to the extent of the number of
shares of Common Stock covered by the Option exercised.
9.4 SARs shall be subject to the same terms and conditions
applicable to Options as stated in sections 8.3, 8.5, 8.7, 8.8, 8.9.
SARs shall also be subject to such other terms and conditions not
inconsistent with the Plan as shall be determined by the Committee.
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10. Adjustments upon Changes in Capitalization
In the event of a reorganization, recapitalization, stock split,
spin-off, split-off, split-up, stock dividend, issuance of stock rights,
combination of shares, merger, consolidation or any other change in the
corporate structure of the Company affecting Common Stock, or any distribution
to stockholders other than a cash dividend, the Board shall make appropriate
adjustment in the number and kind of shares authorized by the Plan and any
adjustments to outstanding Awards as it determines appropriate. No fractional
shares of Common Stock shall be issued in connection with an Award hereunder
pursuant to such an adjustment. The Fair Market Value of any fractional shares
resulting from adjustments pursuant to this Section shall be paid in cash to the
Holder.
11. Effective Date, Termination and Amendment
The Plan, as amended, shall become effective on May 14, 1997 (the
"Effective Date"), subject to stockholder approval. The Plan shall remain in
full force and effect until the earlier of ten (10) years from the Effective
Date, or the date it is terminated by the Board. The Board shall have the power
to amend, suspend or terminate the Plan at any time.
Termination of the Plan pursuant to this Section 11 shall not affect
Awards outstanding under the Plan at the time of termination.
12. Transferability
Except as provided below, Awards may not be pledged, assigned or
transferred for any reason during the Holder's lifetime, and any attempt to do
so shall be void and the relevant Award shall be forfeited; provided, however
that each Non-Incentive Stock Option may be pledged, assigned or transferred (i)
during the Grantee's lifetime by the Grantee to a Permitted Transferee, (ii) by
a Permitted Transferee to another Permitted Transferee or (iii) as otherwise
permitted by the Committee; provided, further, that any such transfer shall
comply with all terms and conditions established by the Committee and any term,
condition or restriction contained in the agreement entered into with the
Holder. Any transferee of the Holder, including, but not limited to any
Permitted Transferee, shall, in all cases, be subject to the provisions of the
agreement between the Company and the Holder.
13. General Provisions
13.1 Nothing contained in the Plan, or any Award granted
pursuant to the Plan, shall confer upon any Employee any right with
respect to continuance of employment by the Company, a Subsidiary or
Affiliate, nor interfere in any way with the right of the Company, a
Subsidiary or Affiliate to terminate the employment of any Employee at
any time.
13.2 For purposes of this Plan, transfer of employment between
the Company and its Subsidiaries and Affiliates shall not be deemed
termination of employment.
13.3 Holders shall be responsible to make appropriate
provision for all taxes required to be withheld in connection with any
Award, the exercise thereof and the transfer of shares of Common Stock
pursuant to this Plan. Such responsibility shall extend to all
applicable Federal, state, local or foreign withholding taxes. In the
case of the payment of Awards in the form of Common Stock, or the
exercise of Options or SARs, the Company shall, at the election of the
Holder, have the right to retain the number of shares of Common Stock
whose Fair Market Value equals the amount to be withheld in
satisfaction of the applicable withholding taxes. Agreements evidencing
such Awards shall contain appropriate provisions to effect withholding
in this manner.
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13.4 Without amending the Plan, Awards may be granted to
Employees who are foreign nationals or employed outside the United
States or both, on such terms and conditions different from those
specified in the Plan as may, in the judgment of the Committee, be
necessary or desirable to further the purpose of the Plan.
13.5 To the extent that Federal laws (such as the 1934 Act,
the Code or the Employee Retirement Income Security Act of 1974) do not
otherwise control, the Plan and all determinations made and actions
taken pursuant hereto shall be governed by the law of Delaware and
construed accordingly.
13.6 The Committee may amend any outstanding Awards to the
extent it deems appropriate. Such amendment may be made by the
Committee without the consent of the Holder, except in the case of
amendments adverse to the Holder, in which case the Holder's consent is
required to any such amendment.
13.7 The Plan, as amended and restated in its entirety herein,
replaces and supersedes all prior versions of the Plan.
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APPENDIX C
CORT BUSINESS SERVICES CORPORATION
1997 DIRECTORS STOCK OPTION PLAN
Adopted:
<PAGE>
CORT BUSINESS SERVICES CORPORATION
1997 DIRECTORS STOCK OPTION PLAN
1. Purpose of the Plan. The purpose of the Plan is to assist the
Company and its Subsidiaries in attracting and retaining services of experienced
and knowledgeable independent directors of the Company for the benefit of the
Company and its stockholders and to provide additional incentives for such
independent directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of its common stock.
2. Definitions
2.01 "1934 Act" means the Securities Exchange Act of 1934, as
amended.
2.02 "Board" means the Board of Directors of the Company.
2.03 "Cause" shall have the meaning given to such term in
Section 7.04.
2.04 "Code" means the Internal Revenue Code of 1986, as
amended.
2.05 "Committee" means the committee designated by the Board
to administer the Plan under Section 5. The Committee shall have at
least two members, each of whom shall be a member of the Board and
shall not be an Eligible Director.
2.06 "Common Stock" means the Company's Common Stock, $.01 par
value per share, or such other class or kind of shares or other
securities resulting from the application of Section 8.
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2.07 "Company" means CORT Business Services Corporation, a
Delaware corporation, or any successor corporation.
2.08 "Eligible Director" means each director of the Company
who is not otherwise an employee of the Company or any Subsidiary.
2.09 "Fair Market Value" means, on any given date, the
previous days' closing price of actual sales of shares of Common Stock
on the principal national securities exchange on which the Common Stock
is listed, or if not listed, as reported on the National Association of
Securities Dealers Automated Quotation System, on such date or, if the
Common Stock was not traded or reported on such date, on the last
preceding day on which the Common Stock was traded or reported.
2.10 "Grant" shall have the meaning given to such term in
Section 3 of the Plan.
2.11 "Grantee" means an Eligible Director to whom an Option is
granted.
2.12 "Holder" means an Eligible Director or a Permitted
Transferee, as applicable.
2.13 "Loan Exercise" shall have the meaning given to such term
in Section 5.02.
2.14 "Mature Common Stock" means Common Stock owned for six
(6) months or more, or such other period as the Committee may determine
subject to applicable accounting regulations, by the respective Holder.
2.15 "1934 Act" means the Securities Exchange Act of 1934, as
amended.
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2.16 "Option" means a non-qualified stock option granted from
time to time under Section 3 of the Plan.
2.17 "Option Exercise Period" means, with respect to shares of
Common Stock related to any Grant, the period commencing when the
shares of Common Stock granted pursuant to an Option vest and ending
ten years (10) from the date of such Grant.
2.18 "Permitted Transferee" means the spouse, parents,
siblings, children or grandchildren (in each case, natural or adopted)
of a Grantee, any trust for his or her benefit or the benefit of his or
her spouse, parents, siblings, children or grandchildren (in each case,
natural or adopted), or any corporation, limited liability company,
partnership or similar entity in which the direct and beneficial owner
of all of the equity interest in such corporation, limited liability
company, partnership or similar entity is such individual Grantee or
Permitted Transferee (or any trust for the benefit of such persons).
2.19 "Plan" means the CORT Business Services Corporation 1997
Directors Stock Option Plan herein set forth, as it may be amended from
time to time.
2.20 "Rule 16b-3" means Rule 16b-3, or any successor rule,
promulgated by the SEC under the 1934 Act.
2.21 "SEC" means the Securities and Exchange Commission, or
any successor entity.
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2.22 "Share Delivery Exercise" shall have the meaning given to
such term in Section 5.02.
2.23 "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company (or any subsequent parent of the Company) if each of the
corporations other than the last corporation in the unbroken chain owns
stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
3. Eligibility; Grant of Option
An Option to acquire 2,000 shares of Common Stock shall be granted
(each a "Grant") to each Eligible Director on the business day immediately
following the Company's Annual Meeting of Stockholders for calendar years 1997,
1998, 1999, 2000 and 2001, beginning with the 1997 Annual Meeting, subject to
approval of the Plan by the stockholders of the Company.
4. Vesting and Forfeitures
4.01 A Holder shall become vested as to one-third of the
shares of Common Stock covered by the Option awarded under each Grant
on the first anniversary of such Grant, as to two-thirds of the shares
of Common Stock covered by the Option awarded under each Grant on the
second anniversary of such Grant and as to all of the
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<PAGE>
shares of Common Stock related to the Option awarded under each Grant
on the third anniversary of such Grant.
4.02 If a Grantee shall cease being a director of the Company
for any reason prior to the date on which any Option awarded hereunder
is fully vested, the shares subject to such Option which are not vested
shall be forfeited and the Holder shall have no further rights to
exercise the Option with respect to such unvested shares.
5. Administration and Implementation of Plan
5.01 The Plan shall be administered by the Committee, which
shall have full power to interpret and administer the Plan and full
authority to act in determining such terms and conditions of Options
granted under the Plan which are not otherwise inconsistent with the
Plan.
5.02 The Committee's powers shall include, but not be limited
to, the power: (a) to establish an arrangement through registered
broker-dealers whereby temporary financing may be made available to a
Holder by the broker-dealer, under the rules and regulations of the
Federal Reserve Board, for the purpose of assisting the Holder in the
exercise of an Option; (b) to establish procedures at the Committee's
discretion, and if not prohibited by the restrictions in the Company's
and its Subsidiaries' financing agreements, for a Holder (i) to have
withheld from the total number of shares to be acquired upon the
exercise of an Option that number of shares having a Fair Market Value,
which, together with such cash as shall be paid in respect of
fractional shares,
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shall equal the minimum statutory tax withholding obligation incurred
by the Holder upon such exercise, or (ii) to exercise an Option by
delivering a number of shares of Mature Common Stock owned by such
Holder having a Fair Market Value that shall equal the option exercise
price and/or the tax withholding obligation incurred by the Holder upon
such exercise (a "Share Delivery Exercise"); and (c) to establish a
loan program, or to cause its Subsidiaries to establish a loan program,
if not prohibited by the restrictions in the Company's and
Subsidiaries' financing agreements, to loan to a Holder who is a
director of the Company at the time of exercise an amount sufficient to
satisfy the exercise price and/or tax obligation incurred by the Holder
upon such exercise and thereafter loan promptly to such Holder such
additional amounts sufficient to pay further withholding obligations as
may be determined from time to time to be payable as a result of such
exercise (a "Loan Exercise"). Any amounts loaned to such Holder shall
be evidenced by a promissory note from such Holder having such terms
and conditions as are mutually agreed to by the Committee and the
Holder; provided, however, that such loan shall bear a market rate of
interest and shall not limit the recourse of the lender to any
particular assets of the Holder.
5.03 The Committee shall have the power to adopt regulations
for carrying out the Plan and to make changes in such regulations not
inconsistent with the Plan as it shall, from time to time, deem
advisable. The Committee shall have the power unilaterally and without
approval of a Holder to amend an existing Option in order to carry out
the purposes of the Plan so long as such amendment does not take away
any
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<PAGE>
benefit granted to a Holder by the Option and as long as the amended
Option is not inconsistent with the Plan and Rule 16b-3. Any
interpretation by the Committee of the terms and provisions of the Plan
and the administration thereof, and all action taken by the Committee,
shall be final and binding on Holders.
6. Shares of Common Stock Subject to the Plan
6.01 Subject to adjustment as provided in Section 8, the total
number of shares of Common Stock available for Options under the Plan
shall be 50,000 shares of Common Stock.
6.02 The grant of an Option shall reduce the shares of Common
Stock as to which Options may be granted by the number of shares
subject to such Option. Any shares issued hereunder may consist, in
whole or in part, of authorized and unissued shares or treasury shares
of Common Stock. If any shares subject to any Option granted hereunder
are forfeited or such Option otherwise terminates without the issuance
of such shares or the payment of other consideration in lieu of such
shares, the shares subject to such Option, to the extent of any such
forfeiture or termination, shall again be available for grants of
Options under the Plan. In the event there are insufficient shares of
Common Stock available for Options under the Plan to satisfy all of the
Option grants under Section 3 on the same day, such Option grants shall
be reduced pro-rata.
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7. Options
Options give an Eligible Director the right to purchase a specified
number of shares of Common Stock from the Company for a specified time period at
a fixed price. The grant of Options shall be subject to the following terms and
conditions:
7.01 Option Grants: Options shall be evidenced by Option award
certificates. Such certificates shall be uniform and not inconsistent
with the requirements of the Plan, and may contain such other
provisions as the Committee shall deem advisable.
7.02 Option Price: The price per share at which Common Stock
may be purchased upon exercise of an Option shall be the Fair Market
Value of a share of Common Stock on the date of grant.
7.03 Exercise of Option: Subject to Section 5 of this Plan,
each Option granted under this Plan may be exercised in full at one
time or in part from time to time only during the Option Exercise
Period by the giving of written notice, signed by the Holder, to the
Company stating the number of shares of Common Stock with respect to
which the Option is being exercised, accompanied by full payment for
such shares pursuant to Section 7.05 hereof.
7.04 Transfer and Exercise: No Option shall be transferable by
the Holder except by will or the laws of descent and distribution;
provided, however, that Options may be pledged, assigned or transferred
(i) during the Grantee's lifetime by the Grantee to a Permitted
Transferee, (ii) by a Permitted Transferee to another Permitted
Transferee or (iii) as otherwise permitted by the Committee; provided,
further, that any
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such transfer shall comply with all terms and conditions established by
the Committee. In the event of the death, retirement or any other
termination of Board service of a Grantee except for removal for Cause,
the Option, if (i) the vesting of such Option is accelerated by the
Committee in its discretion or (ii) otherwise exercisable by the Holder
at the time of such termination, may be exercised upon the earlier of
(A) the end of the Option Exercise Period and (B) within one (1) year
after such termination. In the event of termination for Cause, all
previously granted Options shall be of no further force and effect.
Termination for "Cause" shall be defined as termination on account of
any act of (x) fraud or intentional misrepresentation, or (y)
embezzlement, misappropriation or conversion of assets or opportunities
of the Company or any Subsidiary.
7.05 Payment of Option Price: The Option price of the shares
of Common Stock acquired upon the exercise of an Option shall be paid
in full in cash at the time of the exercise or, with the consent of the
Committee in accordance with Section 5.02, and if not prohibited by the
restrictions in the Company's and its Subsidiaries' financing
agreements, pursuant to a Share Delivery Exercise.
8. Adjustments Upon Changes in Capitalization
In the event of a reorganization, recapitalization, stock split,
reverse stock split, spin-off, split-off, split up, stock dividend, issuance of
stock rights, combination of shares, merger, consolidation or any other change
in the corporate structure of the Company
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<PAGE>
affecting Common Stock, or any distribution to stockholders in respect of stock
other than a cash dividend, the Committee shall make the adjustments in the
number and kind of shares authorized by the Plan and any adjustments to
outstanding Options as it determines appropriate. No fractional shares of Common
Stock shall be issued upon exercise of an Option pursuant to such an adjustment.
The Fair Market Value of any fractional shares resulting from adjustments
pursuant to this section shall be paid in cash to the Holder. If during the term
of any Option granted hereunder the Company shall be merged into or consolidated
with or otherwise combined with a person or entity, or there is a liquidation of
the Company, then at the election of the Committee, the Company may take such
other action as the Committee shall determine to be reasonable under the
circumstances (and consistent with Rule 16b-3) to permit the Holder to realize
the value of such Option, including without limitation paying cash to such
Holder equal to the value of the Option or requiring the acquiring corporation
to grant options or stock to such Holder having a value equal to the value of
the Option.
9. Effective Date, Termination and Amendment
The Plan shall become effective on May 14, 1997, subject to stockholder
approval. The Plan shall remain in full force and effect until the earlier of
the tenth anniversary of the date of its adoption by the Board, or the date it
is terminated by the Board. The Board shall have the power to amend the Plan or
to suspend or terminate the Plan at any time.
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<PAGE>
Termination of the Plan pursuant to this Section 9 shall not affect
Options outstanding under the Plan at the time of termination.
10. General Provisions
10.01 No Eligible Director shall have any claim or right to be
granted an Option hereunder. Neither this Plan nor any action taken
hereunder shall be construed as (i) giving any Holder any right to
continue to be affiliated with the Company, (ii) giving any Holder any
equity or interest of any kind in any assets of the Company, or (iii)
creating a trust of any kind or a fiduciary relationship of any kind
between the Company and any such person. No Holder shall have any of
the rights of a stockholder with respect to shares of Common Stock
covered by an Option until such time as the Option has been exercised
and shares have been issued to such person.
10.02 Holders shall be responsible to make appropriate
provision for all taxes required to be withheld in connection with any
Option, the exercise thereof and the transfer of shares of Common Stock
pursuant to this Plan. Such responsibility shall extend to all
applicable Federal, state, local or foreign withholding taxes. In the
case of the exercise of Options, the Company shall, at the election of
the Holder, but only with the consent of the Committee, and if not
prohibited by the restrictions in the Company's and its Subsidiaries'
financing agreements, have the right to satisfy the applicable tax
obligation through a Share Delivery Exercise or a Loan Exercise.
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<PAGE>
10.03 The Company shall not be obligated to deliver
certificates for Common Stock upon the exercise of an Option unless the
Holder has made payment in full for such Common Stock required by
Sections 7.02 and 7.05 and has arranged for withholding of all taxes
required by Section 10.02.
10.04 Upon exercise of an Option, the Holder shall be required
to make such representations and furnish such information as may be
reasonably required by the Committee to permit the Company to issue or
transfer the shares of Common Stock in compliance with the provisions
of applicable Federal or state securities laws. The Company, in its
discretion, may postpone the issuance and delivery of shares of Common
Stock upon any exercise of an Option until completion of such
registration or other qualification of such shares under any Federal or
state laws, or stock exchange listing, as the Company may consider
appropriate. The Company is not obligated to register or qualify the
shares of Common Stock issued pursuant to Options under Federal or
state securities laws and may refuse to issue such shares if neither
registration nor exemption therefrom is practical. The Board may
require that prior to the issuance or transfer of any shares of Common
Stock upon exercise of an Option, the recipient enter into a written
agreement to comply with any restrictions on subsequent disposition
that the Committee deems necessary or advisable under any applicable
Federal and state securities laws. Certificates representing the shares
of Common Stock issued hereunder may bear a restrictive legend to
reflect such restrictions.
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10.05 To the extent that Federal laws (such as the 1934 Act,
the Code or the Employee Retirement Income Security Act of 1974, as
amended) do not otherwise control, the Plan and all determinations made
and actions taken pursuant hereto shall be governed by the law of the
State of Delaware and construed accordingly.
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