SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendent No. )
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[_] Prelliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted
Rule 14a-6 (e) (2))
[X] Definitive Proxy Statement
[_] Definitive Additional Statement
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240
DAVCO RESTAUTANTS, INC.
- -------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11 (c) (1) (ii), 14a-6(i) (1),
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 table below per Exchange Act Rules 14a-6(i) (4) and 0
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(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):
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[ ] Fee paid previously with preliminary materials.
[X] 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
was paid previously. Identify the previous filing by registration st
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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Notes:
DAVCO RESTAURANTS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Notice is hereby given that the Annual Meeting of Shareholders
of DavCo Restaurants, Inc. (the "Company") will be held at the offices of
the Company, 1657 Crofton Boulevard, Crofton, Maryland 21114, on
January 29, 1997, at 9:30 o'clock a.m., eastern time, for the following
purposes:
1. To elect nine Directors to serve until the next
Annual Meeting of Shareholders;
2. To approve the 1997 Director Stock Option Plan.
3. To approve the 1997 Employee Stock Option
Plan.
4. To elect an Auditor for the Company for the
ensuing year; the Board of Directors of the Company has
recommended Arthur Andersen LLP, the present Auditor, for election
as Auditor; and
5. To consider and act upon any other matters
which may properly come before the meeting or any
adjournment thereof.
In accordance with the provisions of the Bylaws, the Board of
Directors has fixed the close of business on December 16, 1996, as the
record date for the determination of the holders of Common Stock
entitled to notice of and to vote at the Annual Meeting.
By order of the
Board of Directors
s/Harvey Rothstein
----------------
Harvey Rothstein
Secretary
Crofton, Maryland
December 30, 1996<PAGE>
December 30, 1996
DavCo Restaurants, Inc.
1657 Crofton Boulevard
Crofton, Maryland 21114
PROXY STATEMENT
Annual Meeting of Shareholders to be Held
January 29, 1997
Any shareholder giving the enclosed Proxy has the power to
revoke such Proxy prior to its exercise either by revoking the Proxy in
person at the meeting, by executing a later-dated proxy or by delivering
a signed written notice of the revocation to the office of the Secretary of
the Company before the meeting begins. The Proxy will be voted at the
Annual Meeting of Shareholders if the signer of the Proxy was a
shareholder of record on December 16, 1996 (the "Record Date").
The Proxy is solicited by the Board of Directors of the Company.
Solicitation of the Proxy may be made through officers and regular
employees of the Company by telephone or by oral communications with
some Shareholders following the original solicitation period. No additional
compensation will be paid to such officers and regular employees for
Proxy solicitation. Expenses incurred in the solicitation of Proxies will be
borne by the Company.
On the Record Date, there were outstanding and entitled to vote
at the meeting 6,587,628 shares of the Company's Common Stock (the
"Common Stock"). Each outstanding share of Common Stock is entitled
to one vote. This proxy statement is first being sent to the shareholders
on or about December 30, 1996. A list of the shareholders entitled to
vote at the meeting will be available for inspection at the meeting for
purposes relating to the meeting.
MATTERS TO BE ACTED UPON
1. Election of Directors
Pursuant to the Bylaws of the Company, the Board of Directors
has determined that the number of directors constituting the full Board of
Directors shall be nine. Proxies are solicited in favor of the nominees
named on the following pages and it is intended that the proxies will be
voted for the nine nominees. In the event that any of the nominees
should become unable or unwilling to serve as a director, it is intended
that the proxies will be voted for the election of such other person, if any,
as shall be designated by the Board of Directors. It is not anticipated that
any of the nominees will be unable or unwilling to serve as a director.
Each director to be elected will serve until the next Annual Meeting of
Shareholders or until a successor is elected and shall qualify.
Information Regarding Nominees for Election of Directors
A brief statement of the business experience and positions with
the Company for the past five years, a listing of certain other directorships
and the ages (as of December 31, 1996) of each person nominated to
become a director of the Company are set forth on the following pages.
Except as indicated below, there are no family relationships between any
of the directors, nominees and executive officers of the Company nor any
arrangement or understanding between any director or nominee and any
other person pursuant to which he or she was or is to be selected as a
director or nominee.
Name
Principal Occupation and Other Information
Ronald D.
Kirstien
Mr. Kirstien has served as Chairman of the Board
and Chief Executive Officer of the Company since
1987, and President of DavCo Food, Inc., formerly
the Company's operating subsidiary ("DavCo")
since 1983. Mr. Kirstien joined DavCo in 1980 as
Vice President of Operations. He began his career
in 1961 with Gino's Restaurants, Inc., and
transferred to the Rustler division of Gino's
Restaurants, Inc. in 1973. Age 51. Director since
December 1987.
Harvey
Rothstein
Mr. Rothstein has served as Secretary and
Executive Vice President of the Company and
Executive Vice President of Real Estate and
Development of DavCo since 1987. Mr. Rothstein
joined DavCo in 1979, and became Vice President
of Real Estate and Development in 1980. From
1978 to 1979, Mr. Rothstein was the manager of
franchise development for Arthur Treacher's, Inc.
Age 53. Director since December 1987.
Gino Marchetti
Mr. Marchetti co-founded Gino's Restaurants, Inc.,
a publicly-traded company which operated a
hamburger restaurant chain, in 1958 and served on
the board of directors of Gino's Restaurants, Inc.
until 1982. Mr. Marchetti served on the board of
directors of DavCo from December 1987 to August
1993. Mr. Marchetti was also a professional
football player with the former Baltimore Colts and
has been inducted into the National Football
League's Hall of Fame. Age 70. Director since
September 1993.
James D.
Farley
Mr. Farley served as Vice Chairman and Director of
Citibank, N.A. and Citicorp from 1984 until his
retirement in 1991. Mr. Farley also currently serves
as director of Moore Corporation, Ltd., a provider of
business forms, and is the Chairman of the
Hartford Foundation, a non-profit organization. Age
70. Director since February 1993.
Harold O.
Rosser
Mr. Rosser is currently a principal in the private
equity firm of Bruckman, Rosser, Sherrill & Co., Inc.
Prior to 1995, Mr. Rosser served as Managing
Director of Citicorp Venture Capital, Ltd. since 1994
and Vice President of Citicorp Venture Capital, Ltd.
since 1987, after spending 12 years with Citicorp
and Citibank, N.A. in various corporate finance
positions. Mr. Rosser also currently serves as a
director of Jitney-Jungle Stores of America, Inc.
and Restaurant Associates Corp. Mr. Rosser
previously served as a member of the Company's
board of directors from 1991 to mid-1993. Age 48.
Director since September 1993.
Byron L. Knief
Mr. Knief currently serves as President of Citicorp
Capital Investors, Ltd. and Senior Vice President of
Citicorp Venture Capital, Ltd. Mr. Knief joined
Citicorp in 1966 and has run a variety of Citicorp
businesses in the United States, Canada, Latin
America and Europe. Mr. Knief also currently
serves as a director of Fonorola, Inc., a Canadian
telephone company. Mr. Knief previously served as
a director of the Company from 1991 to mid-1993.
Age 54. Director since September 1993.
Barton J.
Winokur
Mr. Winokur has been a partner of the law firm of
Dechert Price & Rhoads since 1972. He is the
chairman of the firm's Mergers and Acquisitions
and International Law Service Groups. His practice
encompasses a broad range of corporate matters,
with emphasis on international business law and
negotiations of mergers and acquisitions. Mr.
Winokur also currently serves as director of
AmeriSource Corporation, a drug wholesaling
company, The Bibb Company, a manufacturer of
home textiles, CDI Corporation, a provider of
consulting and engineering, temporary help and
executive placement services, and Farm Fresh,
Inc., a chain of supermarket grocery stores. Age
56. Director since September 1993.
Edward H.
Chambers
Mr. Chambers is Executive Vice President -
Finance and Administration for Wawa, Inc., an
operator of Mid-Atlantic convenience stores with
sales in excess of $900 million. From 1984 to
1988, Mr. Chambers served as President and Chief
Executive Officer of Northern Lites, Ltd., a start-up
venture operating quick service restaurants. From
1976 to 1984, he served as Senior Vice President -
Finance and then President of the Kentucky Fried
Chicken Retail Operations of Heublien/RJR
Nabisco. Mr. Chambers presently serves as a
member of the board of directors of Nobel
Education Dynamics, a publicly traded company,
and of Riddle Memorial Hospital. Age 59. Director
since 1995.
Charles
Corpening
Mr. Corpening joined and became an officer of
Citicorp Venture Capital, Ltd. in 1994. Prior to
joining CVC, Mr. Corpening was a Vice President
with Roundtree Capital Corporation, a private
investment firm based in Stamford, Connecticut.
Additionally, he had worked with the Rockefeller
Group and the Mergers and Acquisitions Group of
Paine Webber, Inc. He received his A.B. from
Princeton University and his M.B.A. from Columbia
Business School. Mr. Corpening is also a director
of Kemet Corporation, Chase Brass and W.B.
Bottling. Director since 1995.
2. Approval of the 1997 Director Stock Option Plan.
The Board of Directors recommends that the
shareholders vote FOR the approval of the Company's 1997 Director
Stock Option Plan (the "1997 Director Plan"). The 1997 Director Plan is
intended to enable the Company to provide incentive compensation to
directors of the Company and the Company's subsidiaries who are not
employees of the Company.
The Plan was adopted, subject to shareholder approval,
by the Board of Directors on September 17, 1996. The following is a
description of the 1997 Director Plan, a copy of which is attached as
Exhibit A to this Proxy Statement. The description which follows is
qualified in its entirety by Exhibit A. For a discussion of the federal income
tax consequences relevant to the 1997 Director Plan, see "Federal
Income Tax Consequences Relevant to Stock Option Plans" below.
The 1997 Director Plan provides solely for the award of
nonqualified stock options to certain non-executive directors of the
Company and its subsidiaries. Each of Messrs. Chambers, Farley,
Marchetti, Rosser and Winokur will be awarded 4,000 stock options upon
their re-election to the Board of Directors. In addition, 4,000 stock options
will be awarded to one director of MDF, Inc., a wholly-owned subsidiary
of the Company ("MDF"). Each such award will be at fair market value
on the date of grant. 100% of the options will become exercisable on the
first anniversary date following the date of grant and generally will expire
ten years following the date of grant. No options granted under the 1997
Director Plan may be transferred other than by will or the laws of descent
or distribution.
An aggregate of 24,000 shares of Common Stock of the
Company will be reserved for issuance under the 1997 Director Stock
Option Plan. Except for any other adjustments made by the Board of
Directors relating to a stock split or certain other changes in the number
of shares of Common Stock, or to reflect extraordinary corporate
transactions, further increases in the number of shares authorized for
issuance under the 1997 Director Plan must be approved by the
shareholders of the Company.
The following table sets forth the benefits to be received
by each of the named group on January 29, 1997 under the 1997
Director Plan, assuming that the 1997 Director Plan is approved by the
shareholders.
NEW BENEFIT PLANS
1996 Director Stock Option Plan(1)
Name Number of Units
--------- ----------------
Non-Executive Director Group 24,000
(1) Dollar value of the benefits not determinable as of the date hereof.
3. Approval of the 1997 Employee Stock Option
The Board of Directors recommends that the shareholders vote
FOR the approval of the Company's 1997 Employee Stock Option Plan
(the "1997 Plan"). The 1997 Plan is intended to enable the Company to
provide incentive compensation to key employees.
The 1997 Plan was adopted, subject to shareholder approval, by
the Board of Directors on September 17, 1996. The following is a
description of the 1997 Plan, a copy of which is attached hereto as Exhibit
B. The description which follows is qualified in its entirety by Exhibit B.
For a discussion of the federal income tax consequences relevant to the
1997 Plan, see "Federal Income Tax Consequences Relevant to Stock
Option Plans" below.
The 1997 Plan provides solely for the award of 31,000
nonqualified stock options to nine executives ("Executives") of the
Company upon approval of the 1997 Plan by the shareholders. Under
the 1997 Plan, the following options will be awarded to each of the
following designated executive officers: (1) 7,500 stock options each to
the Company's Chief Executive Officer, Ronald Kirstien and the
Company's Executive Vice President, Harvey Rothstein; (2) 3,000 stock
options to each of the Company's two Senior Vice Presidents, Joseph
Cunnane and Richard Borchers; (3) 3,000 stock options to the
Company's Vice President of Finance, Charles C. McGuire, III; (4) 2,000
stock options each to the Company's remaining two Vice Presidents; and
(5) 1,500 stock options to each of the Company's two Division Vice
Presidents. Each award will be at fair market value on the date of grant
and generally will expire on the tenth anniversary of the date of grant.
20% of the options will vest on each of the first five anniversaries of the
date of grant and such options will become exercisable upon vesting. In
the event that any Executive's employment with the Company is
terminated for any reason whatsoever, all unvested options will expire and
be permanently forfeited. No options granted under the 1997 Plan may
be transferred other than by will or the laws of descent and distribution.
An aggregate of 31,000 shares of Common Stock of the
Company will be reserved for issuance under the 1997 Plan. Except for
any other adjustments made by the Board of Directors relating to a stock
split or certain other changes in the number of shares of Common Stock,
or to reflect extraordinary corporate transactions, further increases in the
number of shares authorized for issuance under the 1997 Plan must be
approved by the shareholders of the Company.
The following table sets forth the benefits by each of the named
group on January 29, 1997 under the 1997 Plan, assuming the 1997 Plan
is approved by the shareholders.
<TABLE>
<CAPTION>
NEW BENEFIT PLANS
1997 Employee Stock Option Plan(1)
Name Number of Units
------ ------------------
<S> <C>
Ronald D. Kirstien 7,500
President and Chief Executive Officer
Harvey Rothstein 7,500
Executive Vice President
Joseph F. Cunnane III 3,000
Senior Vice President
Richard H. Borchers 3,000
Senior Vice President
Charles C. McGuire, III 3,000
Vice President of Finance
Executive Group (5 persons) 24,000
Non-Executive Officer 7,000
Employee Group (4 persons)
(1) Dollar value of the benefits not determinable as of the date hereof.
</TABLE>
4. Election of Auditors
The Board of Directors recommends that the shareholders vote
FOR the election of the firm of Arthur Andersen LLP as the auditors to
audit the financial statements of the Company and certain of its
subsidiaries for the fiscal year ending September 27, 1997. It is intended
that the proxies in the form enclosed with this proxy statement will be
voted for such firm unless shareholders specify to the contrary in their
proxies or specifically abstain from voting on this matter.
Representatives of Arthur Andersen LLP are expected to be
present at the Annual Meeting of Shareholders. They will have the
opportunity to make statements if they desire to do so and will be
available to respond to appropriate questions.
5. Other Business
The Board of Directors does not know of any other business to
be presented at the Annual Meeting of Shareholders. If any other matters
properly come before the meeting, however, it is intended that the
persons named in the enclosed form of proxy will vote said proxy in
accordance with their best judgment.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The table below sets forth certain information regarding beneficial
ownership of Common Stock as of December 16, 1996, by each person
or entity known to the Company who owns of record or beneficially five
percent or more of the Common Stock, by each named executive officer
and director nominee and all officers and director nominees as a group.
Unless otherwise indicated, the business address of each person or entity
listed below is 399 Park Avenue, New York, New York 10043.
<TABLE>
<CAPTION>
Percentage of Outstanding
Number of Shares of Common Stock(1)
Name Common Stock (*denotes less than 1%)
- ---------------------------------- --------------- --------------------------
<S> <C> <C>
Citicorp Venture Capital, Ltd. (2) . . . . 3,133,049 47.6%
Ronald D. Kirstien (3)(4). . . . . . . . . 483,038 7.1
Harvey Rothstein (3)(4)(5) . . . . . . . . 380,492 5.7
James D. Farley (6). . . . . . . . . . . . 43,322 *
Byron L. Knief (7) . . . . . . . . . . . . 45,742 *
Harold O. Rosser (8) . . . . . . . . . . . 76,829 1.2
Gino Marchetti (9)(10) . . . . . . . . . . 5,200 *
Barton J. Winokur (9)(11). . . . . . . . . 8,000 *
Edward H. Chambers (12) . . . . . . . . . . 2,100 *
Charles Corpening (13) . . . . . . . . . . 0 *
Joseph F. Cunnane, III (3)(9). . . . . . . 5,200 *
Richard H. Borchers (3)(9) . . . . . . . . 4,500 *
Charles C. McGuire, III (3) . . . . . . . . 200 *
All officers and directors as a group (12
Persons)(4)(6)(9) . . . . . . . . . . 1,054,623 16.0
World Equity Partners, L.P. (14) . . . . . 441,026 6.7
</TABLE>
(1) In determining the percent of shares beneficially owned, shares issuable
pursuant to options and warrants exercisable within 60 days of December
16, 1996 are deemed outstanding for purposes of determining the total
number of outstanding shares for the holders of such options or warrants
and are not deemed outstanding for such purpose for all other
stockholders.
(2) Citicorp Venture Capital, Ltd. ("CVC") is a subsidiary of Citibank, N.A.,
a national bank. The shares listed in this table do not include 119,724
shares of Common Stock owned by certain affiliates of CVC.
(3) Business address is 1657 Crofton Boulevard, Crofton, Maryland 21114.
(4) Includes all stock options exercisable within 60 days of December
16, 1996 to acquire 148,846 and 82,923 shares of Common Stock by Messrs.
Kirstien and Rothstein, respectively.
(5) Includes approximately 83,000 shares held in trust.
(6) Includes 18,288 stock options which are exercisable within 60 days of
December 16, 1996 to acquire 18,288 shares.
(7) Mr. Knief serves as Senior Vice President, of CVC.
(8) Business address is Bruckman, Rosser, Sherrill & Co., Inc., 425 Park
Avenue, 7th Floor, New York, New York 10022.
(9) Includes all stock options exercisable within 60 days of December 16,
1996 to acquire 2,000 shares each for Messrs. Marchetti, Cunnane and
Borchers, and 4,000 shares for Mr. Winokur.
(10) Business address is 324 Devon Way, West Chester, Pennsylvania 19380.
(11) Business address is 4000 Bell Atlantic Tower, 1717 Arch Street,
Philadelphia, Pennsylvania 19103.
(12) Business address is Wawa, Inc., 260 Baltimore Pike, Wawa,
Pennsylvania 19063.
(13) Mr. Corpening serves as an officer of CVC.
(14) World Equity Partners, L.P., a limited partnership of which another
affiliate of CVC is the investment advisor, received a warrant which
is exercisable for 441,026 shares of Common Stock in connection with
the recapitalization described in "Certain Relationships and
Transactions" below. All warrants are currently exercisable.
DIRECTORS MEETINGS AND COMPENSATION
The Board of Directors held five (5) meetings during the year
ended September 28, 1996. Each of the Company's directors
participated in 80% or more of the meetings except Mr. Farley who
participated in 60% of the meetings and Mr. Corpening who participated
in 40% of the meetings. During fiscal 1995, each director of the Company
(other than Messrs. Kirstien, Rothstein, Rosser, Knief and Corpening)
received a stipend of $1,500 for each Board of Directors meeting
attended by such director. No additional compensation was paid for
committee participation. The Board of Directors has established an Audit
Committee, a Compensation Committee and an Operating Committee.
The Audit Committee, which currently consists of Messrs. Rosser,
Chambers and Winokur, oversees actions taken by the Company's
independent auditors, recommends the engagement of auditors and
reviews the Company's audit results. The Compensation Committee,
which consists of Messrs. Knief, Rosser, Farley, Winokur and Kirstien
approves the compensation of executives of the Company, makes
recommendations to the Board of Directors with respect to standards for
setting compensation levels and administers the Company's incentive
plans. The Operations Committee, which consists of Messrs. Chambers,
Corpening, Kirstien and Marchetti, reviews quarterly performance and
operational goals with senior executives and makes recommendations to
the Board of Directors concerning personnel matters and operating
strategies.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
Exchange Agreement and Stockholders Agreement
The Company entered into an exchange agreement dated as of
August 16, 1993 pursuant to which the Company will, at CVC's option,
exchange all or any portion of the shares of Common Stock held by CVC,
on a share-for-share basis, into Non-Voting Common Stock, par value
$.001 per share ("Non-Voting Common"). The Non-Voting Common has
all of the same rights and conditions, including the right to receive
dividends, as the Common Stock, except holders of Non-Voting Common
have no voting rights except as required by law and except with respect
to certain amendments to the Company's Restated Certificate of
Incorporation. The Company has been informed by CVC that CVC has
no present intention to convert its shares of Common Stock into shares
of Non-Voting Common.
The Company, CVC, Management and WEP entered into a
stockholders agreement dated as of August 16, 1993 which restricts
transfers of Common Stock by CVC, Management and WEP, subject to
certain exceptions. These restrictions are intended, among other things,
to ensure compliance with the requirements contained in the Company's
agreements with Wendy's International regarding minimum ownership of
the Company's capital stock by CVC, Management and WEP.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following Summary Compensation Table discloses, for the
fiscal years indicated, individual compensation information for Mr. Kirstien
and the four other most highly compensated executive officers in fiscal
1996 who were serving as executive officers at the end of fiscal 1996.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------- -------------------------
Restricted All other
Fiscal Other Annual Stock Options/ Compensa-
Name and Principal Position Year Salary($) Bonus($) Compensation(1) Awards($) SARs(#) tion(2)
- ---------------------------- -------- ---------- -------- --------------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Kirstien 1996 325,000 81,250 2,180 0 7,500 9,338
President and Chief 1995 260,842 195,000 4,127 0 0 7,368
Executive Officer 1994 248,033 200,000 3,611 0 0 5,314
Harvey Rothstein 1996 250,000 62,500 6,139 0 7,500 6,011
Executive Vice President 1995 221,946 137,040 7,104 0 0 4,698
of Real Estate and 1994 210,830 174,300 6,661 0 0 6,309
Development
Joseph F. Cunnane, III 1996 133,650 12,696 2,059 0 3,000 1,265
Senior Vice President 1995 126,827 17,325 2,449 0 0 1,397
of Operations 1994 112,499 33,000 2,466 0 5,000 1,469
Richard H. Borchers 1996 103,725 12,966 3,868 0 3,000 876
Senior Vice President 1995 98,465 19,689 4,543 0 0 850
of Human Resources 1994 85,600 26,000 4,167 0 5,000 1,735
Peter J. Campisi (3) 1996 128,077 0 7,013 0 3,000 1,431
Senior Vice President 1995 145,384 16,800 7,896 0 5,000 903
and Chief Financial Officer 1994 30,153 15,750 0 0 0 0
</TABLE>
(1) Other annual compensation consists of income for personal use of Company-
leased automobile (including gross-up for taxes).
(2) All other compensation consists of the Company's 401(k) contribution,
group term life insurance premiums paid by the Company and, for Messrs.
Kirstien and Rothstein, medical costs and expenses.
(3) Peter J. Campisi was hired July, 1994. Mr. Campisi resigned effective
July 31, 1996.
Option Grants in Last Fiscal Year (1)
The following table discloses, for Mr. Kirstien and the other named
executives, information regarding stock options and warrants
granted during fiscal 1996.
<TABLE>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Option Term (2)
Number of % of Total Options Exercise or
Options Granted to Employees Base Price Expiration
Name Granted in Fiscal Year (per share) Date 5% 10%
- ------------------- --------- -------------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Ronald D. Kirstien 7,500 23% $8.50 (3) $40,092 $101,601
Harvey Rothstein 7,500 23% 8.50 (3) 40,092 101,601
Joseph F. Cunnane,III 3,000 9% 8.50 (3) 16,037 40,640
Richard H. Borchers 3,000 9% 8.50 (3) 16,037 40,640
Peter J. Campisi (4) 3,000 9% 8.50 (3) 16,037 40,640
</TABLE>
(1) The options vest over a five year period beginning February 8, 1996.
(2) Amounts reflect certain assumed rates of appreciation set forth in the
Securities and Exchange Commission's executive compensation disclosure
rules. Actual gains, if any, on stock option exercises depend on future
performance of the Common Stock and overall market conditions. Fair
market value per share on the date of grant was determined to be $8.50.
(3) Options granted under the 1996 Plan and indicated herein generally will
expire on the tenth anniversary of the date of grant. Twenty percent of
the options will vest on each of the first five anniversaries of the date
of grant and such options become exercisable upon vesting. In the event
that any named executive's employment with the Company is terminated for
any reason whatsoever, all unexercisable options will expire and be
permanently forfeited.
(4) Peter J. Campisi was hired July, 1994. Mr. Campisi resigned effective
July 31, 1996.
Option Exercises and Fiscal Year End Values for the Fiscal Year Ending
September 28, 1996 (1)
The following table shows information regarding the exercise of stock
options during fiscal 1996 by Mr. Kirstien and the other named executives
and the number and value of any unexercised stock options held by them as
of September 28, 1996:
<TABLE>
<CAPTION>
Value of Unexercised In-The
Number of Unexercised -Money Options/at FY-End
Shares Value Options at FY-End (#) ($)(2)
Acquired on Realized
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -------------------- ------------- ------------ -------------------------- ---------------------------
<S> <C> <C> <C>
Ronald D. Kirstien 0 0 148,846 / 189,423 290,250/369,375
Harvey Rothstein 0 0 82,923 / 108,851 161,700/212,259
Joseph F. Cunnane, III 0 0 2,000 / 8,000 0/750
Richard H. Borchers 0 0 2,000 / 8,000 0/750
Peter J. Campisi (3) 0 0 1000 / 0 0/0
</TABLE>
(1) The closing price of the Common Stock on September 27, 1996 was $8.75.
(2) Value equals fair market value as of September 27, 1996 less exercise
price.
(3) Peter J. Campisi was hired July, 1994. Mr. Campisi resigned effective
July 31, 1996.
Pension Plan
The Company does not currently maintain a pension plan for its employees.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of
Messrs. Kirstien, Rosser, Winokur, Farley and Knief.
Report of Compensation Committee
This Report outlines the Company's management compensation philosophy and
reviews the compensation decisions made in fiscal 1996 regarding Mr.
Kirstien and the other named executives.
Management Compensation Philosophy.
To advance the interests of its shareholders, the Company has developed a
management compensation system that ensures that key members of management
are compensated at a level which is competitive for the quick-service
restaurant industry and commensurate with each such member's responsibility.
An annual review process has been instituted to determine such member's
annual performance against pre-determined criteria.
Criteria Used For Making Compensation Decisions in Fiscal 1996.
This section describes the criteria used by the Company regarding
compensation decisions affecting Mr. Kirstien and the other executives
for fiscal 1996.
For fiscal 1996, the criteria used by the Company regarding fiscal 1996
bonuses consisted of (i) the Company's restaurant sales and earnings per
share as compared to budgeted amounts for these items, (ii) meeting the
schedule for opening new restaurants set forth in the Company's development
agreement with Wendy's International, and (iii) performance of newly opened
restaurants based on certain criterion.
Base salary for other executive officers are determined on a case-by-case
basis by the Compensation Committee and aim to compensate each such officer
at a level which meets industry standards and such officer's performance.
Bonuses for executives of the Company are based on certain predetermined,
quantitative performance criteria of the Company. For fiscal 1996 , such
criteria generally consisted of (i) the Company's net sales as compared
to prior year net sales, (ii) pre-tax income targets for the Company, (iii)
cash flow targets for the Company, (iv) management retention, (v) other
operational factors depending on such executive's primary area of
responsibility and (vi) a discretionary component based on a variety of
intangible factors (generally less than 5% of the total bonus).
Performance Graph
The following graph compares the cumulative total return on $100 invested
on August 9, 1993 (the first day of public trading of the Common Stock)
in the Common Stock of the Company, the S&P 500 Index and the S&P
Restaurants Index. The return of the Standard & Poor's indices is
calculated assuming reinvestment of dividends during the period presented.
The Company has not paid any dividends. The stock price performance
shown on the graph below is not necessarily indicative of future
price performance.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN GRAPH APPEARS HERE
MEASUREMENT DATE DAVCO RESTAURANTS, INC S&P 500 PEER GROUP
- ----------------- ----------------------- --------- ----------
<S> <C> <C> <C>
8/10/93 100 100 100
9/93 FYE 121 103 102
9/94 FYE 132 107 107
9/95 FYE 111 139 145
9/96 FYE 72 167 173
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
RELEVANT TO STOCK OPTION PLANS
The following is intended only as a brief summary of the Federal income tax
rules relevant to stock options issued under the 1997 Employee Stock Option
Plan and the 1997 Director Stock Option Plan. These rules are highly
technical and subject to change in the future.
Commencing in 1994, a publicly held corporation may not, subject to
limited exceptions, deduct for federal income tax purposes certain
compensation paid to an executive who is the chief executive or one of the
four other highest paid executives in excess of $1 million in any taxable
year (the "$1 million cap"). In general, compensation received on account
of the exercise of options that were granted on or prior to February 17,
1993 will not be subject to the $1 million cap. Compensation attributable
to the exercise of options granted after February 17, 1993, however, could
be counted in determining whether the $1 million cap has been exceeded
in any taxable year. Whether the $1 million cap with respect to such an
executive will be exceeded, and whether the Company's deductions for
compensation paid in excess of the $1 million cap will be denied, will
depend on the resolution of various factual and legal issues that cannot be
determined at this time.
Nonqualified Stock Options. In general, an optionee will not recognize
any taxable income, and the Company will not be entitled to a deduction,
upon the grant of a nonqualified stock option ("NQO") within the
meaning of Section 422 of the Internal Revenue Code, as amended. Upon the
exercise of an NQO where the exercise price is paid in cash, the optionee
will recognize ordinary income (subject to wage and employment tax
withholding) equal to the excess of the fair market value of the shares
acquired over the option exercise price. The amount of such excess is
generally determined by reference to the fair market value of the Common
Stock on the date of exercise. However, in the case of an optionee subject
to six month short-swing profit liability under Section 16(b) of the
Securities Exchange Act of 1934 (a "16(b) Person") (typically, officers,
directors and major stockholders of the Company), such excess is determined
by using the fair market value on the later of the date of exercise or the
date six months after the date of grant, unless such optionee elects to be
taxed based on the fair market value of the Common Stock on the date of
exercise by filing an appropriate election with the Internal Revenue Service
within 30 days after the exercise date. Such liability is unlikely to
attach since under recently enacted rules, it only applies if a 16(b) Person
exercises an option and sells the option stock within six months of the date
of the option grant. An optionee's basis in the stock received will equal
such stock's fair market value on the date of exercise (or on the date six
months after the date of grant, if later, in the case of an optionee who
is a 16(b) Person and who makes no such election). The Company will
be entitled to a deduction (subject to the $1 million cap) equal to the
compensation taxable to the optionee.
Upon the sale of shares acquired pursuant to the exercise of an NQO, such
optionee will recognize capital gain or loss equal to the difference
between the selling price of the shares and the optionee's basis in the
shares. Such capital gain or loss will be long-term gain or loss if the
optionee has held the shares for more than one year. In the case of an
optionee who is a 16(b) Person and who does not make the election described
above, any such capital gain will be long-term only if the stock has been
held for more than one year after the later of the exercise date or the date
six months after the date of grant. The Company will not be entitled to any
deduction with respect to any capital gain recognized by the optionee.
Use of Common Stock to Pay Option Price. If an optionee delivers
previously-acquired Common Stock, however acquired, in payment of all or
part of the option exercise price of an NQO, the optionee will not, as a
result of such delivery, recognize gain or loss for federal income tax
purposes on the shares surrendered. The optionee's tax basis in, and
holding period for, the previously-acquired stock surrendered will carry
over to an equal number of the option shares received on a share-for-share
basis. The fair market value of the shares received in excess of the shares
surrendered will constitute compensation taxable to the optionee as ordinary
income. Such fair market value will be determined on the date of exercise,
except in the case of 16(b) Persons as discussed above. The tax basis for
such shares will equal their fair market value as so determined, and such
shares' holding period begin on the date on which the fair market value of
such shares is determined. The Company will be entitled to a tax deduction
(subject to the $1 million cap) equal to the compensation income recognized
by the optionee. The Company will not be entitled to a deduction with
respect to any such capital gain recognized by the optionee.
DIRECTOR AND OFFICER SECURITIES REPORTS
The federal securities laws require the Company's directors and officers,
and persons who own more than ten percent of the Company's Common Stock,
to file with the Securities and Exchange Commission, the applicable stock
exchange and the Secretary of the Company, initial reports of ownership and
reports of changes in ownership of the Common Stock of the Company.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, all the Company's officers, directors and greater-
than-ten-percent beneficial owners made all required filings during the
fiscal year ended September 28, 1996.
SHAREHOLDER PROPOSALS
Proposals of shareholders to be presented at the 1997 Annual Meeting of
Shareholders must be received by the Secretary of the Company by July 15,
1997 to be considered for inclusion in the Company's Proxy Statement and
form of proxy relating to that meeting. It is anticipated that the 1997
Annual Meeting will be scheduled for January 26, 1998.
VOTE REQUIRED FOR APPROVAL
As to each matter submitted to the shareholders for approval at the 1996
Annual Meeting of Shareholders, the affirmative vote of the holders of
a majority of the Common Stock of the Company represented at the meeting
and entitled to vote is required for approval. Holders of one-third of
the outstanding shares entitled to vote need to be present at the Annual
Meeting of Shareholders for a quorum to be present.
EXHIBIT A
1997 DIRECTOR STOCK OPTION PLAN
1. Purpose. The purpose of the 1997
Director Stock Option Plan of DavCo Restaurants, Inc. (the
"Company") is to promote the interests of the Company by
providing incentives to certain qualified directors of the
Company and to reward those designated directors for services
rendered on behalf of the Company.
2. Definitions. As used herein, the
following terms shall have the following meanings:
"Board" shall mean the Board of Directors
of the Company.
"Code" shall mean the Internal Revenue
Code of 1986, as amended.
"Company" shall mean DavCo
Restaurants, Inc., a Delaware corporation.
"Disability" shall mean the condition of an
Optionee which (i) renders such Optionee unable to engage in
any substantial gainful activities by reason of any medically
determinable physical or mental impairment which can be
expected to result in death, (ii) which has lasted or can be
expected to last for a continuous period of not less than six (6)
months or (iii) prevents such Optionee from serving as a
director of the Company.
"ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
"Fair Market Value" shall mean the
arithmetic mean of the highest and lowest sale prices of the
shares of the Company's Stock as reported on the NASDAQ
National Market System on (i) the relevant date for valuation or
(ii) if there are no such sales on such date, the nearest
preceding date upon which such sales took place.
"Nonparticipant Board Members" shall
mean those members of the Board who are not Optionees
hereunder.
"Option" shall mean an option to
purchase shares of Stock, granted pursuant to the Plan and
subject to the terms and conditions described in the Plan, which
is not an "incentive stock option" within the meaning of Section
422A of the Code.
"Optionee" shall mean a director of the
Company who is designated to receive Options pursuant to the
Plan.
"Plan" shall mean the DavCo
Restaurants, Inc.'s 1997 Director Stock Option Plan, as
amended from time to time pursuant to Section 7.
"Stock" shall mean the Company's
common stock, par value $.001 per share.
"Subsidiary" shall mean a subsidiary of
the Company as defined in Section 425(f) of the Code.
3. Administration. The Plan shall be
administered by the Nonparticipant Board Members. Grants of
Options under the Plan and the amount and nature of the
awards to be granted shall be automatic as described in Section
5. The Nonparticipant Board Members shall have the power to
interpret the Plan, to determine all questions thereunder and to
adopt and amend such rules and regulations for the
administration of the Plan as they may deem desirable. Any
interpretation, determination, or other action made or taken by
the Nonparticipant Board Members shall be final, binding and
conclusive. Any action reduced to writing and signed by all of
the Nonparticipant Board Members shall be as fully effective as
if it had been taken by a vote at a meeting duly called and held.
None of the Nonparticipant Board Members shall be personally
liable for any interpretation, determination or other action made
in good faith with respect to the Plan or the Options.
4. Shares Subject to the Plan.
(a) Class. The shares which are to
be made the subject to awards granted under the Plan shall be
the Company's authorized but unissued Stock. In connection
with the issuance of Stock under the Plan, the Company may
repurchase Stock in the open market or otherwise.
(b) Aggregate Amount. The total
number of shares of Stock authorized for issuance pursuant to
Options granted under the Plan shall not exceed 24,000 shares
(subject to adjustment under Section 8(c)). If any outstanding
Option expires or terminates prior to exercise for any reason,
then the Stock allocable to the unexercised portion of such
Option shall not be charged against the limitation of this Section
4(b) and may again become the subject of an Option granted
under the Plan.
5. Terms, Conditions and Form of
Options. Each Option granted under the Plan shall be
evidenced by a written agreement (the "Agreement") in such
form as the Board shall from time to time approve, which
Agreements shall comply with and be subject to the following
terms and conditions.
(a) Option Grants. On the date of
the first meeting of the Board following the Annual Meeting of
Shareholders in each year, each Optionee will automatically be
granted an Option to purchase shares of Stock in the amounts
set forth below, without further action by the Board:
<TABLE>
<CAPTION>
Optionee Shares
<S> <C>
Barton J. Winokur 4,000
Gino Marchetti 4,000
Edward Chambers 4,000
Randolph Habeck 4,000
James D. Farley 4,000
Harold Rosser 4,000
</TABLE>
(b) Exercise Period. 100% of the
Options will become exercisable on each of the first anniversary
of the grant date of Options. Options shall terminate ten (10)
years from the date of grant. On the date that any Optionee is
terminated as a director of the Company, for any reason
whatsoever (including for death or Disability) (the "Termination
Date"), Options granted to such director which have not become
exercisable as of the Termination Date shall be forfeited.
(c) Exercise Price. The price per
share of Stock at which an Option may be exercised shall be
equal to the Fair Market Value on the date the Option is
granted.
(d) Exercise Procedure. Options
may be exercised (in full or in part) by written notice to the
Company at its principal office specifying the number of shares
of Stock with respect to which the Option is being exercised and
accompanied by payment, in cash, of the exercise price for the
shares with respect to which the Option is being exercised.
(e) Options Non-Transferable. No
option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution. No interest of
any Optionee under the Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy
or any other legal or equitable process. During the lifetime of
the Optionee, Options shall be exercisable only by the Optionee
who received them or the Optionee's guardian or legal
representative.
(f) Death or Disability of Optionee.
In the case of death, Options may be exercised by the person or
persons to whom the Optionee's rights under the Option pass
by will or applicable law or, if no person has such rights, by the
Optionee's executors or administrators; provided that such
person(s) consent in writing to abide by and be subject to the
terms of the Plan and the Agreement and such written consent
is delivered to an officer of the Company. In the case of
Disability such that an Optionee is incapable of exercising any
Option, Options may be exercised by the Optionee's legal
guardian, of, if no such person exists, by the person or persons
to whom the Optionee's rights under the Option pass by will or
applicable law or, if no person has such rights, by the
Optionee's executors or administrators; provided that such
person(s) consent in writing to abide by and be subject to the
terms of the Plan and the Agreement and such written consent
is delivered to an officer of the Company.
(g) Termination of Employment. If
an Optionee's employment with the Company as a director is
terminated for any reason whatsoever, he or she, or such
persons' representative as provided in Section 5(f), may
exercise such person's Option to the extent exercisable, at any
time or from time to time, but in no event later than the
expiration date specified pursuant to Section 5(b).
(h) No Rights as Shareholder. No
Optionee shall have any rights as a shareholder with respect to
any shares of Stock subject to Options prior to the date of
issuance to such person of a certificate or certificates for such
shares of Stock.
6. Compliance With Other Laws and
Regulations. The Plan, the grant and exercise of Options
under the Plan, and the obligation of the Company to issue
shares of Stock under such Options shall be subject to all
applicable federal and state laws, rules and regulations,
including those related to disclosure of financial and other
information to Optionees, and to any approvals by any
government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (a) the listing of such
shares on any stock exchange or the NASDAQ National Market
System on which the Stock may then be listed, where such
listing is required under the rules or regulations of such
exchange or system, and (b) the compliance with applicable
federal and state securities laws and regulations relating to the
issuance and delivery of such certificates; provided, however,
that the Company shall make all reasonable efforts to so list
such shares and to comply with such laws and regulations.
7. Amendment and Discontinuance. The
Board may from time to time amend, suspend or discontinue the
Plan; provided, however, that, subject to the provisions of
Section 8(c), no action of the Board without approval of the
shareholders of the Company may be taken if such action would
cause the Plan to fail to comply with Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, as then in effect
without the consent of each Option holder. Notwithstanding the
foregoing, Section 5 shall not be amended more than once
every six months, other than to comport with changes in the
Code, ERISA or the rules thereunder.
8. General Provisions.
(a) Assignability. The rights and
benefits under the Plan shall not be assignable or transferable
by an Optionee other than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee, Options
granted under the Plan shall be exercisable only him or her.
(b) Termination of Plan. No Options
may be granted under this Plan after the date which is five years
after the effective date of the Plan (or if such date is not a
business day, on the next succeeding business day). The Plan
shall automatically terminate after all Options granted
thereunder have terminated or expired.
(c) Adjustments in Event of Change
in Stock. In the event of any change in the Stock by reason of
any stock dividend, recapitalization, reorganization, merger,
consolidation, stock split, combination, or exchange of shares,
or of any similar change affecting the Stock, the number and
class of shares subject to outstanding Agreements, the exercise
price per share thereof, and any other terms of the Plan or the
Agreements which in the Board's sole discretion require
adjustment shall be appropriately adjusted consistent with such
change in such manner as the Board may deem appropriate.
(d) No Right to Continue as an
Employee. None of the Plan, the granting of any Option or any
other action taken pursuant to the Plan shall constitute or be
evidence of any agreement or understanding, express or
implied, that the Company will continue to employ an Optionee
for any period of time or at any particular rate of compensation.
(e) ERISA. The Plan is not an
employee benefit plan which is subject to the provisions of
ERISA and the provisions of Section 401(a) of the Code are not
applicable to the Plan.
(f) Non-Statutory Stock Options.
All Options granted under the Plan shall be non-statutory
options not entitled to special tax treatment under Section 422A
of the Code.
(g) Effective Date of the Plan. The
Plan shall take effect upon adoption by the shareholders of the
Company.
(h) Governing Law. The Plan and all
interpretations and determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of
Delaware without regard to the choice of law provisions thereof.
EXHIBIT B
1997 EMPLOYEE STOCK OPTION PLAN
1. Purpose. The purpose of the 1997
Employee Stock Option Plan of DavCo Restaurants, Inc. (the
"Company") is to promote the interests of the Company by
providing incentives to certain qualified employees of the
Company.
2. Definitions. As used herein, the
following terms shall have the following meanings:
"Board" shall mean the Board of Directors
of the Company.
"Code" shall mean the Internal Revenue
Code of 1986, as amended.
"Company" shall mean DavCo
Restaurants, Inc., a Delaware corporation.
"Disability" shall mean the condition of an
Optionee which (i) renders such Optionee unable to engage in
any substantial gainful activities by reason of any medically
determinable physical or mental impairment which can be
expected to result in death, (ii) which has lasted or can be
expected to last for a continuous period of not less than six (6)
months or (iii) prevents such Optionee from serving as an
employee of the Company.
"ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
"Fair Market Value" shall mean the
arithmetic mean of the highest and lowest sale prices of the
shares of the Company's Stock as reported on the NASDAQ
National Market System on (i) the relevant date for valuation or
(ii) if there are no such sales on such date, the nearest
preceding date upon which such sales took place.
"Option" shall mean an option to
purchase shares of Stock, granted pursuant to the Plan and
subject to the terms and conditions described in the Plan, which
is not an "incentive stock option" within the meaning of Section
422A of the Code.
"Optionee" shall mean an employee of
the Company who is designated to receive Options pursuant to
the Plan.
"Plan" shall mean the DavCo
Restaurants, Inc.'s 1997 Employee Stock Option Plan, as
amended from time to time pursuant to Section 7.
"Stock" shall mean the Company's
common stock, par value $.001 per share.
"Subsidiary" shall mean a subsidiary of
the Company as defined in Section 425(f) of the Code.
3. Administration. The Plan shall be
administered by the Board. Grants of Options under the Plan
and the amount and nature of the awards to be granted shall be
automatic as described in Section 5. The Board shall have the
power to interpret the Plan, to determine all questions
thereunder and to adopt and amend such rules and regulations
for the administration of the Plan as they may deem desirable.
Any interpretation, determination, or other action made or taken
by the Board shall be final, binding and conclusive. Any action
reduced to writing and signed by all of the Board shall be as
fully effective as if it had been taken by a vote at a meeting duly
called and held. None of the Board shall be personally liable for
any interpretation, determination or other action made in good
faith with respect to the Plan or the Options.
4. Shares Subject to the Plan.
(a) Class. The shares which are to
be made the subject to awards granted under the Plan shall be
the Company's authorized but unissued Stock. In connection
with the issuance of Stock under the Plan, the Company may
repurchase Stock in the open market or otherwise.
(b) Aggregate Amount. The total
number of shares of Stock authorized for issuance pursuant to
Options granted under the Plan shall not exceed 31,000 shares
(subject to adjustment under Section 8(c)). If any outstanding
Option expires or terminates prior to exercise for any reason,
then the Stock allocable to the unexercised portion of such
Option shall not be charged against the limitation of this Section
4(b) and may again become the subject of an Option granted
under the Plan.
5. Terms, Conditions and Form of
Options. Each Option granted under the Plan shall be
evidenced by a written agreement (the "Agreement") in such
form as the Board shall from time to time approve, which
Agreements shall comply with and be subject to the following
terms and conditions.
(a) Option Grants. On the date of
the first meeting of the Board following the Annual Meeting of
Shareholders in each year, each Optionee will automatically be
granted an Option to purchase shares of Stock in the amounts
set forth below, without further action by the Board:
Optionee Shares
Ronald D. Kirstien 7,500
Harvey Rothstein 7,500
Joseph Cunnane 3,000
Richard Borchers 3,000
[Vice President] 3,000
[Vice President] 2,000
[Vice President] 2,000
[Division V.P. A] 1,500
[Division V.P. B] 1,500
(b) Exercise Period. 20% of the
Options will become exercisable on each of the first, second,
third, fourth and fifth anniversaries of the grant date of Options.
Options shall terminate ten (10) years from the date of grant.
On the date that any Optionee is terminated as an employee of
the Company, for any reason whatsoever (including for death or
Disability) (the "Termination Date"), Options granted to such
employee which have not become exercisable as of the
Termination Date shall be forfeited.
(c) Exercise Price. The price per
share of Stock at which an Option may be exercised shall be
equal to the Fair Market Value on the date the Option is
granted.
(d) Exercise Procedure. Options
may be exercised (in full or in part) by written notice to the
Company at its principal office specifying the number of shares
of Stock with respect to which the Option is being exercised and
accompanied by payment, in cash, of the exercise price for the
shares with respect to which the Option is being exercised.
(e) Options Non-Transferable. No
option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution. No interest of
any Optionee under the Plan shall be subject to attachment,
execution, garnishment, sequestration, the laws of bankruptcy
or any other legal or equitable process. During the lifetime of
the Optionee, Options shall be exercisable only by the Optionee
who received them or the Optionee's guae exercised by the Optionee's legal
guardian, of, if no such person exists, by the person or persons
to whom the Optionee's rights under the Option pass by will or
applicable law or, if no person has such rights, by the
Optionee's executors or administrators; provided that such
person(s) consent in writing to abide by and be subject to the
terms of the Plan and the Agreement and such written consent
is delivered to an officer of the Company.
(g) Termination of Employment. If
an Optionee's employment with the Company is terminated for
any reason whatsoever, he or she, or such persons'
representative as provided in Section 5(f), may exercise such
person's Option to the extent exercisable, at any time or from
time to time, but in no event later than the expiration date
specified pursuant to Section 5(b).
(h) No Rights as Shareholder. No
Optionee shall have any rights as a shareholder with respect to
any shares of Stock subject to Options prior to the date of
issuance to such person of a certificate or certificates for such
shares of Stock.
6. Compliance With Other Laws and
Regulations. The Plan, the grant and exercise of Options
under the Plan, and the obligation of the Company to issue
shares of Stock under such Options shall be subject to all
applicable federal and state laws, rules and regulations,
including those related to disclosure of financial and other
information to Optionees, and to any approvals by any
government or regulatory agency as may be required. The
Company shall not be required to issue or deliver any
certificates for shares of Stock prior to (a) the listing of such
shares on any stock exchange or the NASDAQ National Market
System on which the Stock may then be listed, where such
listing is required under the rules or regulations of such
exchange or system, and (b) the compliance with applicable
federal and state securities laws and regulations relating to the
issuance and delivery of such certificates; provided, however,
that the Company shall make all reasonable efforts to so list
such shares and to comply with such laws and regulations.
7. Amendment and Discontinuance. The
Board may from time to time amend, suspend or discontinue the
Plan; provided, however, that, subject to the provisions of
Section 8(c), no action of the Board without approval of the
shareholders of the Company may be taken if such action would
cause the Plan to fail to comply with Rule 16b-3 of the
Securities Exchange Act of 1934, as amended, as then in effect
without the consent of each Option holder. Notwithstanding the
foregoing, Section 5 shall not be amended more than once
every six months, other than to comport with changes in the
Code, ERISA or the rules thereunder.
8. General Provisions.
(a) Assignability. The rights and
benefits under the Plan shall not be assignable or transferable
by an Optionee other than by will or by the laws of descent and
distribution, and during the lifetime of the Optionee, Options
granted under the Plan shall be exercisable only him or her.
(b) Termination of Plan. No Options
may be granted under this Plan after the date which is five years
after the effective date of the Plan (or if such date is not a
business day, on the next succeeding business day). The Plan
shall automatically terminate after all Options granted
thereunder have terminated or expired.
(c) Adjustments in Event of Change
in Stock. In the event of any change in the Stock by reason of
any stock dividend, recapitalization, reorganization, merger,
consolidation, stock split, combination, or exchange of shares,
or of any similar change affecting the Stock, the number and
class of shares subject to outstanding Agreements, the exercise
price per share thereof, and any other terms of the Plan or the
Agreements which in the Board's sole discretion require
adjustment shall be appropriately adjusted consistent with such
change in such manner as the Board may deem appropriate.
(d) No Right to Continue as an
Employee. None of the Plan, the granting of any Option or any
other action taken pursuant to the Plan shall constitute or be
evidence of any agreement or understanding, express or
implied, that the Company will continue to employ an Optionee
for any period of time or at any particular rate of compensation.
(e) ERISA. The Plan is not an
employee benefit plan which is subject to the provisions of
ERISA and the provisions of Section 401(a) of the Code are not
applicable to the Plan.
(f) Non-Statutory Stock Options.
All Options granted under the Plan shall be non-statutory
options not entitled to special tax treatment under Section 422A
of the Code.
(g) Effective Date of the Plan. The
Plan shall take effect upon adoption by the shareholders of the
Company.
(h) Governing Law. The Plan and all
interpretations and determinations made and actions taken
pursuant hereto shall be governed by the laws of the State of
Delaware without regard to the choice of law provisions thereof.
