<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
Stant Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
STANT CORPORATION LOGO
March 27, 1997
Dear Stant Stockholder:
On behalf of the Board of Directors and management, I cordially invite you
to attend the Annual Meeting of Stockholders of Stant Corporation (the
"Company") which will be held on Wednesday, April 30, 1997 at 10:00 a.m. local
time in the Main Auditorium -- 1st Floor, Tri-State International Office Center,
200 Building, Lincolnshire, Illinois 60069-4437.
The principal items of business will be to (a) elect Directors, (b)
consider proposed amendments to the Company's 1993 Stock Option Plan for Key
Employees, (c) consider a proposed increase in the number of shares of Common
Stock with respect to which options may be granted under the Company's Stock
Option Plan for Directors, (d) consider approving the Company's 1997 Voluntary
Stock Option Plan for Key Employees, (e) consider approving the Company's
Management Incentive Plan for Key Employees and (f) consider the ratification of
the selection of auditors. Additional details about the Annual Meeting are in
the accompanying Notice of Annual Meeting and Proxy Statement. At the meeting, I
will also report on the progress of the Company and answer Stockholder
questions.
IT IS IMPORTANT THAT YOUR SHARES OF COMMON STOCK BE REPRESENTED AT THE
ANNUAL MEETING. WHETHER OR NOT YOU PLAN TO ATTEND PERSONALLY, PLEASE COMPLETE
AND MAIL THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE.
Very truly yours,
/s/ J.P. REILLY
J.P. Reilly
President and
Chief Executive Officer
<PAGE> 3
STANT CORPORATION LOGO
March 27, 1997
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The Annual Meeting of Stockholders of Stant Corporation (the "Company")
will be held at 10:00 a.m. local time on Wednesday, April 30, 1997 in the Main
Auditorium -- 1st Floor, Tri-State International Office Center, 200 Building,
Lincolnshire, Illinois 60069-4437 for the following purposes:
1. To elect two Class III Directors to a term expiring in 2000.
2. To consider approving certain amendments to the Company's 1993
Stock Option Plan for Key Employees.
3. To consider approving an increase in the number of shares of Common
Stock with respect to which options may be granted under the
Company's Stock Option Plan for Directors.
4. To consider approving the Company's 1997 Voluntary Stock Option
Plan for Key Employees.
5. To consider approving the Company's Management Incentive Plan for
Key Employees.
6. To consider ratifying the appointment of Deloitte & Touche LLP to
serve as the Company's independent auditors for 1997.
7. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on March 14, 1997 are
entitled to notice of and to vote at the meeting.
Anthony W. Graziano, Jr.
Secretary
<PAGE> 4
PROXY STATEMENT
STANT CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 30, 1997
---------------------
SOLICITATION AND REVOCATION OF PROXIES
The accompanying proxy is being solicited by the Board of Directors of
Stant Corporation (the "Company") for use at the Annual Meeting of Stockholders
(the "Annual Meeting") which will be held at 10:00 a.m. local time on Wednesday,
April 30, 1997 in the Main Auditorium -- 1st Floor, Tri-State International
Office Center, 200 Building, Lincolnshire, Illinois 60069-4437. Each stockholder
giving such a proxy has the power to revoke the same at any time before it is
voted by so notifying the Secretary of the Company in writing. All expenses in
connection with this solicitation of proxies will be borne by the Company. This
Proxy Statement and the accompanying proxy are being mailed to the Company's
stockholders (the "Stockholders") on or about March 27, 1997.
The Company has one class of securities outstanding and entitled to vote at
the Annual Meeting, its common stock, par value $.01 per share (the "Common
Stock"). Each outstanding share of Common Stock is entitled to one vote with
respect to each matter to be voted on at the Annual Meeting. At the close of
business on March 14, 1997, the record date for determination of Stockholders
entitled to notice of and to vote at the Annual Meeting (the "Record Date"), the
Company had 16,226,815 issued and outstanding shares of Common Stock (excluding
treasury shares not entitled to vote). As of the Record Date, Bessemer Capital
Partners, L.P. owned 9,229,595 shares of the Common Stock (56.88% of the issued
and outstanding shares of Common Stock) and thus has the voting power to
determine the outcome of the election of Directors and the five other proposals
to be considered at the Annual Meeting.
The representation in person or by proxy of a majority of the shares
entitled to vote shall constitute a quorum at the Annual Meeting. Directors are
elected by a plurality of the affirmative votes cast. The affirmative vote of
the holders of a majority of the shares cast is required to (a) approve the
proposed amendments to the 1993 Stock Option Plan for Key Employees of Stant
Corporation and its Subsidiaries (the "1993 Option Plan"), (b) approve a
proposed amendment to the Stant Corporation Stock Option Plan for Directors
(1993) (the "Directors Option Plan") increasing the number of shares with
respect to which options may be granted under the Directors Option Plan, (c)
approve the adoption of the 1997 Voluntary Stock Option Plan for Key Employees
of Stant Corporation and its Subsidiaries (the "1997 Option Plan"), (d) approve
the adoption of the Management Incentive Plan for Key Employees of Stant
Corporation and its Subsidiaries (the "MIP") and (f) ratify the appointment of
Deloitte & Touche LLP as the Company's independent auditors for 1997. Under the
Company's By-laws and under Delaware law, abstentions and "non-votes" are
counted as present in determining whether the quorum requirement is satisfied.
With regard to the election of Directors, votes may be cast in favor or
withheld. Votes that are withheld will be excluded entirely from the vote and
will have no effect. Abstentions may be specified on all the proposals (other
than the election of Directors) and will have the effect of a negative vote
because all of the proposals (other than the election of Directors) require the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote.
PROPOSAL I
ELECTION OF DIRECTORS
In the election of Directors, properly executed proxies will be voted as
marked, and if not marked will be voted in favor of the election of the two
persons named below under the caption "Nominees for Directors -- Class
III -- Present Term Expires in 1997" (each of whom is currently serving as a
Director) as Directors to serve until the Corporation's Annual Meeting of
Stockholders in 2000 and until their successors are duly elected and qualified.
If any nominee withdraws as a candidate prior to the Annual Meeting (a situation
which is not anticipated), proxies solicited hereunder will be voted in favor of
the nominee who remains as a candidate and may be voted for a substitute nominee
designated by the Board of Directors.
<PAGE> 5
NOMINEES FOR DIRECTORS
The Company's Restated Certificate of Incorporation provides that the
Directors shall be classified into three classes whose terms of office expire in
successive years and that each class shall consist, as nearly as may be
possible, of one-third of the total number of Directors constituting the entire
Board. Set forth below is information concerning the persons nominated by the
Board of Directors for election as Class III Directors with terms expiring at
the Corporation's Annual Meeting of Stockholders in 2000, as well as information
concerning the present Class I and Class II Directors, whose terms of office
will continue after the Annual Meeting. The two nominees as Class III Directors
are members of the present Board of Directors. Mr. Phipps was elected to the
Board at the 1994 Annual Meeting of Stockholders. Mr. Reilly was elected to the
Board in January 1997 to complete the unexpired term of David R. Paridy, who
retired as President and Chief Executive Officer and resigned as a Director.
CLASS III -- PRESENT TERM EXPIRES IN 1997
Ogden M. Phipps........... A Director of the Company since 1987. Until December
1994, Mr. Phipps was Chairman of the Board of
Bessemer Securities Corporation and of The Bessemer
Group, Incorporated, positions he had held for more
than ten years. He continues to serve as a director
of those corporations and of Kelley Oil & Gas
Corporation, and several private corporations, and as
an officer and director of several non-profit
organizations. Mr. Phipps is 56.
J.P. "Jack" Reilly........ A Director and President and Chief Executive Officer
of the Company since January 1997. Mr. Reilly was
Chief Executive Officer of Figgie International Inc.
("Figgie") from January 1995 until he joined the
Company. He also served Figgie as its President from
February 1, 1995 and as its Chairman of the Board
from May 16, 1995. Figgie is a manufacturer of
guidance and navigation systems for defense and
commercial applications, life support and air
purifying products for the aviation and fire
protection industries, and self-propelled aerial work
platforms for construction and maintenance
applications. Prior thereto Mr. Reilly was President
and Chief Operating Officer of Brunswick Corporation,
a world leader in marine power, pleasure boating and
recreation equipment, from 1993 to 1994, and
President and Chief Executive Officer of Tenneco
Automotive, a worldwide producer of automotive
components and a division of Tenneco Inc., from 1987
to 1993. Mr. Reilly continues to serve as the
non-executive Chairman of the Board of Directors of
Figgie and is a director of Trinova Corporation and a
director emeritus of Barat College. Mr. Reilly is 53.
CLASS I -- PRESENT TERM EXPIRES IN 1998
Robert D. Lindsay......... A Director of the Company since 1991. Mr. Lindsay was
also a Vice President of the Company from 1991 to
June 1993. He is currently the sole shareholder and
president of a corporation which is a general partner
of a limited partnership which is the general partner
of Bessemer Capital Partners, L.P. See "Security
Ownership of Certain Beneficial Owners and
Management", page 5. In addition, Mr. Lindsay is
currently the sole shareholder and the president of a
corporation which is a general partner of Bessemer
Partners & Co. Mr. Lindsay was a Managing Director of
Bessemer Securities Corporation from January 1991
until July 1, 1993. From January 1990 to January
1991, Mr. Lindsay was a Managing Director in the
Merchant Banking Division of Morgan Stanley & Co.
Incorporated and prior to that time was a Principal
at that firm. Mr. Lindsay is Chairman of Metropolitan
International, Inc. and a director of BCP/Essex
Holdings Inc. and several private companies. Mr.
Lindsay is 42.
2
<PAGE> 6
A. William Reynolds....... A Director of the Company since August 1995. Mr.
Reynolds is Chief Executive of the Old Mill Group, a
private investment company. He was formerly Chairman
and Chief Executive Officer of GenCorp, a technology-
based company with positions in aerospace, automotive
and polymer products. Mr. Reynolds served as Chief
Executive Officer of GenCorp from August 1985 until
July 1994, and as Chairman of that company until
March 1995. Mr. Reynolds is presently a director of
Boise Cascade Corporation, Boise Cascade Office
Products and Eaton Corporation. He also served as a
Director and Deputy Chairman of The Cleveland Federal
Reserve Bank from January 1991 to December 1992. On
January 1, 1993, he was appointed Chairman and served
in that capacity until December 31, 1996, when his
term of service was completed. Mr. Reynolds is 63.
CLASS II -- PRESENT TERM EXPIRES IN 1999
Edward O. Gaylord......... A Director of the Company since 1993. Mr. Gaylord has
served as Chairman of EOTT Energy Corp., an oil
trading and transportation firm, since January 1993
and also operates Gaylord & Company, a private
venture capital firm based in Houston, Texas. He
served as Chairman and Chief Executive Officer of
Presto Industries, Inc., a plastics manufacturer,
from 1985 to 1988, and prior thereto served as
President and Chief Executive Officer of Distribution
Systems Inc., a petroleum and chemical trucking and
storage terminal firm in Houston. Mr. Gaylord is a
director of the Houston Branch of the Federal Reserve
Bank of Dallas, Imperial Holly Corporation, Kinder
Morgan Energy Partners, L.P. and Seneca Foods
Corporation, and a trustee of MD Anderson Hospital
and Baylor College of Medicine. Mr. Gaylord is 65.
Ward W. Woods............. Chairman of the Board of Directors of the Company
since 1989. Mr. Woods has been President and Chief
Executive Officer of Bessemer Securities Corporation
since 1989 and is the sole shareholder and president
of a corporation which is the managing general
partner of a limited partnership which is the general
partner of Bessemer Capital Partners, L.P. See
"Security Ownership of Certain Beneficial Owners and
Management", page 5. In addition, Mr. Woods is the
sole shareholder and president of a corporation which
is the managing general partner of Bessemer Partners
& Co. Prior to February 1989, Mr. Woods was a Senior
Partner of Lazard Freres & Co., an investment banking
firm. He is also Chairman of the Board of BCP/Essex
Holdings, Inc. and a director of Freeport-McMoRan
Copper & Gold Inc., Kelley Oil & Gas Corporation,
Graphic Controls Corporation, Boise Cascade
Corporation and several private companies. Mr. Woods
is 54.
DIRECTORS' MEETINGS AND COMMITTEES
During 1996 the Board of Directors met seven times. All directors attended
at least 75% of the meetings of the Board of Directors and of the committees of
the Board of Directors of which they were members.
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of Messrs. Gaylord, Phipps and Reynolds. Mr. Gaylord serves as
Chairman. The principal functions of the Audit Committee are to recommend to the
Board of Directors the appointment of external auditors, review annually the
internal and external audit programs with both the internal and external
auditors, review the annual and other financial statements of the Company,
evaluate the quality and adequacy of the accounting, financial and internal
audit policies, procedures, controls and staffing of the Financial Department of
the Company and
3
<PAGE> 7
monitor compliance by the Company with environmental, conflict of interest and
other corporate policies. The Audit Committee met two times in 1996.
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is composed of Messrs. Lindsay, Reynolds and Woods. Mr. Woods serves
as Chairman. The purpose of the Compensation Committee is to oversee the
compensation and benefit programs provided to senior officers of the Company.
The Compensation Committee met three times in 1996.
The Committee of Independent Directors (the "Independent Committee") is
composed of Messrs. Reynolds and Gaylord. Mr. Reynolds serves as Chairman. The
purpose of the Independent Committee is to administer the 1993 Option Plan. If
the 1997 Option Plan and/or the MIP is adopted by the Stockholders, the
Independent Committee will also administer the 1997 Option Plan and/or the MIP.
The Independent Committee met once in 1996.
The Company does not have an Executive Committee or a Nominating Committee
or any committee performing similar functions.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company are entitled to receive an
annual retainer of $16,000, plus $1,000 for each Board of Directors meeting
attended. In addition, nonemployee directors are entitled to receive $900 for
each committee meeting attended. Directors are reimbursed for travel and other
expenses related to attendance at the meetings. A Director who is an employee of
the Company is not compensated for his service on the Board or its committees.
A nonemployee Director may elect to have any or all of his retainer and
meeting fees paid in the form of stock options, rather than in cash of
equivalent value, under the terms of the Directors Option Plan which was
approved at the Company's 1994 Annual Meeting of Stockholders. If a director
makes such an election, the number of shares subject to each stock option grant
is determined by dividing (a) the amount of compensation which the director
directed to be paid in options by (b) the fair market value of the Common Stock
minus $2.50. The $2.50 represents the amount to be paid on exercise of the
option. Fair market value is defined as the average of the market price (the
mean between the high and low sales price) of a share of the Common Stock at the
middle of each quarter during the year of participation.
Since the adoption of the Directors Option Plan, each nonemployee director
has elected to have all of his retainer and Board and Committee meeting fees
paid in the form of stock options. In part because of the success of the
Directors Option Plan, there are only approximately 16,000 shares available for
grant under the Plan. Accordingly, the Board of Directors has approved, subject
to Stockholder ratification at the Annual Meeting, an increase in the number of
shares with respect to which options may be granted under the Directors Option
Plan from 50,000 to 150,000. See "Proposal II -- Approval of Amendment to
Directors Option Plan."
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of the Record Date, by (a) each person who is
known by the Company to own beneficially more than 5% of the outstanding shares
of Common Stock, (b) each of the Company's Directors and Named Executive
Officers and (c) all Directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER
OF SHARES PERCENT(11)
--------- -----------
<S> <C> <C>
Bessemer Capital Partners, L.P. ("BCP")............................ 9,237,843(1) 56.93%
630 Fifth Avenue
New York, NY 10111
Dimensional Fund Advisors, Inc. ................................... 1,131,600(2) 6.97%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
David R. Paridy+................................................... 966,858(3) 5.44%
3088 Lantern Trail
Richmond, IN 47374
The Prudential Insurance Company of America........................ 944,700(4) 5.82%
751 Broad Street
Newark, NJ 07102-3777
Edward O. Gaylord*................................................. 19,337(5) x
Robert D. Lindsay*................................................. 4,083(1)(6) x
W. Thomas Margetts+................................................ 203,399(7) 1.16%
Gary G. Moose+..................................................... 5,000(8) x
Thomas F. Plocinik+................................................ 280,981(9) 1.58%
Ogden M. Phipps*................................................... 9,073(1)(6) x
J.P. Reilly*....................................................... 500 x
A. William Reynolds*............................................... 11,143(6) x
Thomas E. Schmitt+................................................. 20,500(10) x
Ward W. Woods*..................................................... 4,083(1)(6) x
All Directors and Executive Officers as a group (twelve)........... 1,803,463 10.15%
</TABLE>
- ---------------
* Indicates a Director
+ Indicates a Named Executive Officer
x Owns less than 1%
(1) The number of shares held by BCP also includes 8,248 shares owned by
certain employees or former employees of Bessemer Securities Corporation.
BCP owns 9,229,595 shares of the Common Stock. The sole general partner of
BCP is Kylix Partners, L.P., a Delaware limited partnership ("Kylix"),
which has its principal office at 630 Fifth Avenue, New York, New York
10111. Kylix's only activity is acting as the general partner of BCP. The
general partners of Kylix are Quentin Corporation, a Delaware corporation
("Quentin") (Quentin is the managing general partner of Kylix), Belisarius
Corporation, a Delaware corporation ("Belisarius"), and East Harbor
Corporation, a Delaware corporation ("East Harbor"), each of which has its
principal office at 630 Fifth Avenue, New York, New York 10111. Quentin,
Belisarius and East Harbor are wholly owned by, respectively, Mr. Woods,
Mr. Lindsay and Mr. Michael B. Rothfeld. The principal limited partner of
BCP is BSC, a Delaware corporation, which has its principal office at 630
Fifth Avenue, New York, New York 10111, and whose principal activity is
making investments. Approximately 93% of the common stock of BSC is owned
by trusts for the benefit of the heirs of the late Henry Phipps, including
Ogden M. Phipps, a director of the Company.
(2) All information is based solely upon a statement on Schedule 13-G, dated
February 5, 1997, filed with the Securities and Exchange Commission
("SEC"). Dimensional Fund Advisors, Inc. ("Dimensional Fund") is an
investment advisor registered under Section 203 of the Investment Advisors
Act of 1940 (the "Investment Act"). All shares of Common Stock reported as
beneficially owned by Dimensional Fund are owned by the advisory clients of
Dimensional Fund, no one of which, to the knowledge of
5
<PAGE> 9
Dimensional Fund, owns more than 5% of the outstanding shares of Common
Stock. Dimensional Fund has sole dispositive power over all 1,131,600
shares reported as beneficially owned by it, sole voting power over 785,600
of such shares and shared voting power over the remaining 346,000 such
shares. Persons who are officers of Dimensional Fund also serve as officers
of DFA Investment Dimensions Group, Inc. (the "Fund") and The DFA
Investment Trust Company (the "Trust"), each an open-end management
investment company registered under the Investment Act. In their capacities
as officers of the Fund and the Trust, these persons vote 140,500 shares
which are owned by the Fund and 205,500 shares which are owned by the
Trust.
(3) Includes 1,000 shares held by his son, which are deemed beneficially owned
by Mr. Paridy. Also includes 770,858 shares under certain option grants
which are, or will in the next 60 days become, exercisable. Mr. Paridy
resigned as a Director, and retired as President and Chief Executive
Officer, of the Company on January 23, 1997.
(4) All information is based solely upon a statement on Schedule 13-G, dated
February 3, 1997, filed with the SEC. Prudential Insurance Company of
America ("Prudential") is an insurance company as defined in Section
3(a)(19) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and an investment advisor registered under Section 203 of the
Investment Act. The 944,700 shares of the Common Stock reported as
beneficially owned by Prudential are held for the benefit of Prudential's
clients by its separate accounts, externally managed accounts, registered
investment companies, subsidiaries and/or other affiliates, all of which
holdings Prudential reports on a combined basis for the purpose of
administrative convenience. Prudential has sole voting power and sole
dispositive power over 616,800 shares of Common Stock and shared voting
power and shared dispositive power over 327,900 shares of Common Stock.
(5) Includes 5,000 shares held by Mr. Gaylord in an individual money purchase
pension plan and 4,337 shares under certain option grants pursuant to the
Directors Option Plan which are, or will in the next 60 days become,
exercisable.
(6) With respect to Messrs. Lindsay, Phipps, Reynolds and Woods, 4,083, 4,073,
1,143 and 4,083 of these shares, respectively, represent option grants
pursuant to the Directors Option Plan which are, or will in the next 60
days become, exercisable.
(7) Includes 1,100 shares owned by two foundations of which Mr. Margetts is the
principal manager. Mr. Margetts disclaims beneficial ownership of such
shares. Also includes 202,299 shares under certain option grants which are,
or will in the next 60 days become, exercisable.
(8) Includes 5,000 shares under certain option grants which are, or will in the
next 60 days become, exercisable. Mr. Moose resigned as an executive
officer of the Company effective as of March 14, 1997.
(9) Includes 200 shares owned by his adult children. Mr. Plocinik disclaims
beneficial ownership of such shares. Also includes 280,781 shares under
certain option grants which are, or will in the next 60 days become,
exercisable.
(10) Includes 20,500 shares under an option grant which is, or will in the next
60 days become, exercisable. Mr. Schmitt resigned as an executive officer
of the Company effective as of February 7, 1997.
(11) Each beneficial owner's percentage ownership is determined by including
shares subject to options held by such person (but not including shares
subject to options held by any other person) which are exercisable within
60 days.
6
<PAGE> 10
CERTAIN TRANSACTIONS
Since 1994, Bessemer Partners & Co. ("BP&Co."), a partnership which has as
its general partners corporations owned by Messrs. Woods, Lindsay and Rothfeld,
provided the Company with management, financial, strategic planning and advisory
services pursuant to a Management Advisory Services Agreement (the "Management
Services Agreement"). During 1996, pursuant to the Management Services
Agreement, the Company paid BP&Co. $850,000 in fees and reimbursed BP&Co. for
expenses. The Management Services Agreement is also summarized in the section
"Compensation Committee Interlocks and Insider Participation" on page 12.
Bessemer Trust Company N.A. ("BTC") serves as trustee, administrator and
investment manager for certain of the Company's defined benefit retirement
plans, including the Company's Retirement Plan for Salaried Employees. (BTC is a
wholly owned subsidiary of The Bessemer Group, Incorporated ("BGI"), which the
heirs of the late Henry Phipps own directly or through trusts for their
benefit.) Fees paid to BTC for investment management, trustee, administrative
and other services rendered on behalf of such plans in 1996 amounted to
$525,000. Messrs. Phipps and Woods are directors of BGI and BTC.
BCP has certain rights to require registration of the shares of the Common
Stock which it owns. Certain persons associated with BCP have "piggy-back"
registration rights with respect to their shares of Common Stock. In addition,
members of management who own shares of Common Stock purchased in 1987 or 1988
or hold stock options granted prior to July 21, 1993, will, upon the exercise of
those options, have certain "piggy-back" registration rights.
COMPENSATION OF EXECUTIVE OFFICERS
The following sections of this Proxy Statement cover components of the
total compensation for services to the Company in all capacities during the
three years ended December 31, 1996 of (i) those persons who at any time during
1996 served as the Company's Chief Executive Officer and (ii) those persons who
at December 31, 1996 were the four most highly compensated executive officers
other than the Chief Executive Officer. These persons are sometimes referred to
collectively as the "Named Executive Officers." The following sections include:
(i) a series of tables covering annual and long-term compensation; (ii) a
pension plan table summarizing the annual benefits payable under the Company's
defined benefit retirement plans; (iii) a report by the Compensation Committee
describing the Company's compensation policies for its executive officers and
the rationale upon which its Chief Executive Officer's compensation is based;
(iv) a performance graph comparing the Company's total stockholder return to the
Standard & Poor's ("S&P") 500 and the S&P Auto Parts-Aftermarket Index since
July 21, 1993, the date of the Company's Initial Public Offering of the Common
Stock ("IPO"), (v) a table of the benefits received under the 1993 Option Plan
in 1996 and (vi) a description of the 1993 Option Plan. A description of the
proposed amendments to the 1993 Option Plan which will be presented to
Stockholders for approval at the Annual Meeting is set forth under "Proposal
II -- Approval of Amendments to the 1993 Option Plan." A description of the
provisions of the proposed 1997 Option Plan which will be presented to
Stockholders for approval at the Annual Meeting is set forth under "Proposal
IV -- Approval of 1997 Option Plan." A description of the provisions of the
proposed MIP which will be presented to Stockholders for approval at the Annual
Meeting is set forth under "Proposal V -- Approval of Management Incentive
Plan."
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
The following table summarizes annual and long-term compensation with
respect to the three years ended December 31, 1996 for services rendered in all
capacities to the Company which was paid to the person who served as the
Company's Chief Executive Officer during 1996 and the four executive officers
who, at December 31, 1996, were the four most highly compensated executive
officers other than the Chief Executive Officer.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION OTHER LONG-TERM COMPENSATION
--------------------------- ANNUAL ----------------------
SALARY BONUS COMP.(1) OPTIONS(2)
NAME AND PRINCIPAL POSITION YEAR $ $ $ (#)
- ----------------------------------- ----- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
David R. Paridy(3)................. 1996 450,000 225,000 77,346 40,000
President and Chief Executive 1995 450,000 90,000 79,448 35,000
Officer 1994 325,000 325,000 72,218 --
W. Thomas Margetts................. 1996 160,600 82,000 24,034 10,000
Sr. Vice President -- 1995 153,600 30,000 21,078 --
Corporate Development 1994 134,600 65,500 20,337 --
Gary G. Moose(4)................... 1996 198,700 45,000 6,588 12,500
Sr. Vice President -- Marketing 1995 208,800 -- 3,532 5,000
1994(4) 78,373 -- 2,700 --
Thomas F. Plocinik................. 1996 248,900 183,300 27,500 15,000
President of Trico Products 1995 232,397 105,750 29,335 10,000
Corporation, a wholly owned 1994 158,000 150,000 27,283 --
subsidiary
Thomas E. Schmitt(5)............... 1996 166,400 83,200 9,443 15,000
Sr. Vice President -- Finance 1995 128,398 32,000 9,419 --
and Chief Financial Officer 1994 92,500 33,500 8,543 --
</TABLE>
- ---------------
(1) In connection with management's participation in the purchase of Stant
Manufacturing Inc. from Emery Air Freight Corporation in 1987 and its work
in subsequent transactions, including the acquisitions of Standard-Thomson
Corporation and Epicor Industries, Inc., stock options were granted to
Messrs. Paridy, Margetts and Plocinik. Payouts equivalent to dividends were
made to these individuals in 1994, 1995 and 1996. These amounts are included
in the figures set forth above in the Other Annual Compensation column as
follows: Paridy, $49,109 each year; Margetts, $13,944 each year; and
Plocinik, $16,942 each year. The balance of the amounts in this column
represent (i) employer 401(k) contributions to the Named Executive Officers
in 1994, 1995 and 1996, as follows: Paridy, $4,043, $4,043 and $4,156;
Margetts, $2,757, $2,985 and $3,006; Moose, $0, $33 and $3,167; Plocinik,
$2,761, $3,080 and $3,167; and Schmitt, $2,399, $3,330, and $3,051; and (ii)
the value of certain insurance and other benefits provided to the named
executive officers.
(2) Includes options granted in 1996 subject to stockholder approval of proposed
amendments to the 1993 Option Plan (see "Proposal II -- Approval of
Amendments to the 1993 Option Plan"). The Company does not grant stock
appreciation rights ("SARs") or restricted stock.
(3) Mr. Paridy retired on January 23, 1997 after serving as the Company's
President and Chief Executive Officer since the IPO and having been employed
by the Company and its predecessors for 34 years. Mr. Paridy was succeeded
as President and Chief Executive Officer by John P. "Jack" Reilly.
Additional information with respect to the compensation which will be paid
in the future to Mr. Paridy and with respect to Mr. Reilly's employment
arrangements, are set forth below under the caption "Employment Agreements."
(4) Mr. Moose joined the Company in September 1994 in connection with the
acquisition by the Company of FEDCO Automotive Components Company, Inc. Mr.
Moose resigned as an executive officer of the Company effective as of March
14, 1997.
(5) Mr. Schmitt resigned as an executive officer of the Company effective as of
February 7, 1997.
8
<PAGE> 12
1996 OPTION GRANTS
Pursuant to the 1993 Option Plan, during 1996 the Company granted
nonqualified stock options covering 233,500 shares of Common Stock to key
employees, of which grants 92,500 were made to Named Executive Officers. The
following table sets forth certain information concerning the stock option
grants to the Named Executive Officers. Certain of such grants ("Definitive
Grants") are final and binding on the Company and certain of such grants
("Provisional Grants") are subject to Stockholder approval of the proposed
amendments to the 1993 Option Plan (see "Proposal II -- Approval of Amendments
to the 1993 Option Plan," below).
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR(1) POTENTIAL REALIZABLE
-------------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF TOTAL ANNUAL RATES OF STOCK
OPTIONS GRANTED PRICE APPRECIATION
TO EMPLOYEES IN EXERCISE FOR OPTION TERM(2)
OPTIONS GRANTED CALENDAR PRICE EXPIRATION ---------------------
EXECUTIVE OFFICER (#) YEAR(%) ($/SHARE) DATE 5% 10%
- -------------------------- --------------- ------------------ --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
David R. Paridy
Definitive Grants....... 20,000 $ 10.25 3/13/06 $128,923 $326,717
Provisional Grants(3)... 20,000 $ 12.44 11/1/06 156,469 396,523
------
Total............ 40,000 17.1%
======
W. Thomas Margetts
Definitive Grants....... 4,000 $ 10.25 3/13/06 $ 25,785 $ 65,343
Provisional Grants...... 6,000 $ 12.44 11/1/06 46,941 118,957
------
Total............ 10,000 4.3%
======
Gary G. Moose
Definitive Grants....... 0 -- -- -- --
Provisional Grants(3)... 12,500 $ 12.44 11/1/06 $ 97,793 $247,827
------
Total............ 12,500 5.4%
======
Thomas F. Plocinik
Definitive Grants....... 8,000 $ 10.25 3/13/06 $ 51,569 $130,687
Provisional Grants...... 7,000 $ 12.44 11/1/06 54,764 138,783
------
Total............ 15,000 6.4%
======
Thomas E. Schmitt
Definitive Grants....... 8,000 $ 10.25 3/13/06 $ 51,569 $130,687
Provisional Grants(3)... 7,000 $ 12.44 11/1/06 54,764 138,783
------
Total............ 15,000 6.4%
======
</TABLE>
- ---------------
(1) The Company does not grant SARs.
(2) We recommend caution in interpreting the financial significance of these
figures. They are calculated by multiplying the number of options granted by
the difference between a future hypothetical stock price and the option
exercise price and are shown pursuant to rules of the Securities and
Exchange Commission. They assume the value of Company stock appreciates 5%
or 10% each year, compounded annually, for ten years (the life of each
option). They are not intended to forecast possible future appreciation, if
any, of such stock price or to establish a present value of options. Also,
if appreciation does occur at the 5% or 10% per year rate, the amounts shown
would not be realized by the officers until the year 2006. Depending on
inflation rates, these amounts may be worth significantly less in 2006, in
real terms, than their value today.
(3) Because Messrs. Paridy, Moose and Schmitt ceased to be Executive Officers of
the Company during the first quarter of 1997, their provisional grants of
stock options will lapse and the shares covered thereby will again become
available for the grant of options under the 1993 Option Plan.
9
<PAGE> 13
1996 OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table shows information regarding the exercise of stock
options during 1996 by the Named Executive Officers and the number and value of
any unexercised, in-the-money stock options as of December 31, 1996.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT YEAR-END AT YEAR END
EXECUTIVE OFFICER ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(1)(2)
- -------------------- --------------- -------- ------------------------------- -------------------------------------
<S> <C> <C> <C> <C>
David R. Paridy..... -- -- 750,858/20,000(3) $4,741,022/66,250
W. Thomas Margetts.. -- -- 202,299/6,000 $1,396,097/19,875
Gary G. Moose....... -- -- 5,000/12,500(3) $ 1,875/41,406
Thomas F.
Plocinik.......... -- -- 280,781/7,000 $1,733,295/23,188
Thomas E. Schmitt... -- -- 20,500/7,000(3) $ 45,875/23,188
</TABLE>
- ---------------
(1) Includes Provisional Grants.
(2) On December 31, 1996, the closing price of the Common Stock was $15.75.
(3) Because Messrs. Paridy, Moose and Schmitt ceased to be Executive Officers of
the Company during the first quarter of 1997, their stock options which were
unexercisable at December 31, 1996, will lapse prior to vesting and will
again become available for the grant of options under the 1993 Option Plan.
RETIREMENT PLANS
The Company maintains the Stant Retirement Plan for Salaried Employees (the
"Retirement Plan"), an IRS qualified plan, for its salaried employees, including
its executive officers. The Retirement Plan is a defined benefit plan which is
designed to provide noncontributory benefits based upon both years of service
and the employee's highest five-year average annual compensation ("Final Average
Earnings"), up to a maximum of $150,000 per annum, as adjusted. The benefit
under the Retirement Plan is calculated at 1% of Final Average Earnings up to
covered compensation (which is set by the Social Security Administration) times
the employee's years of service, plus 1 1/2% of Final Average Earnings in excess
of covered compensation times the employee's years of service.
Under the Retirement Plan, benefits usually begin at the normal retirement
age of 65. The Retirement Plan also provides benefits for employees electing
early retirement from ages 55 through 64. If such an election is made, the
benefits will be reduced to reflect the longer interval over which the benefits
will be paid. Executive officers participate in the Retirement Plan on the same
basis as other employees of the Company. Contributions to and benefits payable
under the Retirement Plan must be in compliance with the applicable guidelines
or maximums established by the Internal Revenue Code of 1986, as amended (the
"Code").
The Company has adopted the Pension Restoration Plan (the "Restoration
Plan"), an unfunded plan pursuant to which the Company undertakes to pay those
benefits which would otherwise be payable under the Retirement Plan, but which,
due to various Code limitations, are not permitted to be funded or paid through
the Retirement Plan. The Restoration Plan provides that any benefits under such
plan will be paid in the same form as benefits are paid under the Retirement
Plan. Plans such as the Restoration Plan are permitted under applicable law and
have been adopted by many corporations. Based upon their current compensation
levels, Messrs. Paridy, Margetts, Moose, Plocinik and Schmitt would each be
entitled to receive retirement benefits from the Company pursuant to the
Restoration Plan if any of them retired.
10
<PAGE> 14
The following table presents the benefits payable per year for life, with
sixty (60) monthly payments guaranteed, to participants in the Retirement Plan
and the Restoration Plan described above, assuming normal retirement in the
current year. If a retiree dies prior to receiving sixty (60) payments, the
remaining payments are made to the retiree's beneficiary.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------------------
FINAL EARNINGS 10 15 20 25 30 35
AS DEFINED IN THE PLANS YEARS YEARS YEARS YEARS YEARS YEARS
- ------------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
$100,000....................... 13,535 20,302 27,070 33,837 40,604 47,372
$200,000....................... 28,535 42,802 57,070 71,337 85,604 99,872
$300,000....................... 43,535 65,302 87,070 108,837 130,604 152,372
$400,000....................... 58,535 87,802 117,070 146,337 175,604 204,872
$500,000....................... 73,535 110,302 147,070 183,837 220,604 257,372
$600,000....................... 88,535 132,802 177,070 221,337 265,604 309,872
$700,000....................... 103,535 155,302 207,070 258,837 310,604 362,372
$800,000....................... 118,535 177,802 237,070 296,337 355,604 414,872
$900,000....................... 133,535 200,302 267,070 333,837 400,604 467,372
</TABLE>
The values reflected in the above chart represent the application of the
Retirement Plan formula to the specified amounts of compensation and years of
service. Compensation under the Retirement Plan includes base pay plus
commissions and cash bonuses. For the named executive officers in the Summary
Compensation Table, such cash compensation is set forth in the salary, bonus and
other compensation columns of such table. The credited years of service under
the Retirement Plan for each of the named executives in the Summary Compensation
Table are as follows: Mr. Paridy -- 34 years, Mr. Margetts -- 9 years, Mr.
Moose -- 1 year, Mr. Plocinik -- 7 years, and Mr. Schmitt -- 5 years.
EMPLOYMENT AGREEMENTS
In connection with the election of Mr. Reilly as the Company's President
and Chief Executive Officer, the Company and Mr. Reilly entered into an
Employment Agreement which provides for his employment as the Company's
President and Chief Executive Officer until January 31, 2000 at a minimum annual
salary of $500,000 and the ability to earn up to one hundred percent of his base
salary annually under the Company's Incentive Compensation Plan provided that
the Company achieves specified objectives. In connection with his employment,
Mr. Reilly will also receive a $1,200,000 signing bonus which, to permit full
tax deductibility to the Company, will be paid over time with amounts deferred
accruing interest at 8% per annum. The Company will also credit $250,000 to an
account established in Mr. Reilly's name which will be hypothetically invested
in an investment fund, to be designated by Mr. Reilly, until the termination of
his employment with the Company and paid to him thereafter. Neither amounts
credited to this account nor Mr. Reilly's signing bonus will be tax deductible
to the Company until actually paid to Mr. Reilly.
Mr. Reilly was also granted an option to purchase 300,000 shares of Common
Stock at $15.375 per share, the mean between the high and low sales price of a
share of Common Stock on NASDAQ on January 21, 1997. This option, which will
vest in equal installments on the first, second and third anniversaries of the
date of grant, is exercisable for ten years and is subject to Stockholder
approval of the proposed amendments to the 1993 Option Plan (see "Proposal
II -- Proposed Amendments to the 1993 Option Plan" below). Mr. Reilly's
employment may be terminated by the Company at any time "for cause," as defined
in his agreement. In addition, Mr. Reilly's employment agreement provides that
he may elect to take all or a portion of his incentive compensation in the form
of options to purchase shares of Common Stock on essentially the same terms and
conditions as the Directors Option Plan. It is in part because of this provision
in Mr. Reilly's employment agreement that the Board of Directors adopted, and
are submitting to the Stockholders for their approval at the Annual Meeting, the
1997 Option Plan.
11
<PAGE> 15
If Mr. Reilly's employment is terminated without cause or if there is a
constructive termination of his employment, he will be entitled to receive his
then current base salary for two years and to continue to participate for up to
two years following termination of his employment in all pension, retirement and
welfare plans of the Company in which he participated at the time his employment
was terminated.
The Named Executive Officers who are still employees of the Company have
employment agreements with the Company which provide for a base salary at a
minimum rate per annum and for an annual incentive award opportunity equal to
50% of base salary. The current annual rate of base salary is $171,000 for Mr.
Margetts and $250,000 for Mr. Plocinik. At the time they ceased to be Executive
Officers of the Company, the annual rate of base salary for Mr. Moose and Mr.
Schmitt was $180,000 and $172,200, respectively. Thomas K. Erwin and William S.
Wade, Jr., the individuals who replaced Mr. Schmitt and Mr. Moose, respectively,
also have Employment Agreements with the company which provide for a base salary
at the minimum rate per annum of $250,000 and for an annual incentive award
opportunity equal to 50% of base salary.
The employment of any of the executive officers referred to in the
preceding paragraph may be terminated by the Company at any time "for cause," as
defined in their respective agreements. If the employment of any such executive
is terminated without cause or if there is a constructive termination of his
employment (which includes an ordered relocation of the executive's place of
employment which results in his commutation increasing by more than 50 miles
round trip), he will be entitled to receive payment of his then-current base
salary for one year following the date of the termination of his employment
together with any earned but unpaid compensation under the incentive
compensation plan remaining unpaid under the plan for the year in which such
termination occurs. If the employment of any such executive is terminated
without cause or if there is a constructive termination of his employment after
a Change of Control (as defined below), he will be entitled to (i) receive, in
one lump sum, cash in an amount equal to two times his then current base salary
and maximum incentive award and (ii) continue to participate for up to two years
following the termination of his employment in all pension, retirement and
welfare plans of the Company in which he participated at the time his employment
was terminated.
The term "Change of Control" means (i) the acquisition by any Person (as
such term is defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of 20% or more of the combined voting power of the Company's
outstanding securities entitled to vote generally in the election of Directors
(the "Voting Securities") or (ii) a majority of the Directors of the Company are
individuals who were not nominated by the Board of Directors; provided, however,
that (y) the acquisition or disposition of any portion of the combined voting
power of the Voting Securities by Bessemer Capital Partners, L.P. ("BCP") and/or
by any Person affiliated with BCP (BCP and all such Persons being, collectively,
the "Bessemer Group") shall in no event constitute a Change of Control and (z)
the acquisition by any person who is not a member of the Bessemer Group of 20%
or more of the combined voting power of the Voting Securities shall not
constitute a Change of Control so long as during the entire time such Person
possesses 20% or more of such voting power the Bessemer Group has the power to
vote 50% or more of such voting power. In any dispute or controversy arising
under this Agreement following a Change of Control, the Company agrees to pay
the reasonable fees and expenses of one legal counsel for Executive; provided,
however, that Executive acts in good faith and in the reasonable belief of the
merit of Executive's position.
In accordance with an Employment Agreement dated October 31, 1996, between
Mr. Paridy and the Company, until March 31, 1999 Mr. Paridy will continue to
receive payments at the annual rate of $450,000, the base salary he was being
paid at the time of his retirement, and will continue to participate in all
pension, retirement and welfare plans of the Company in which he was
participating at the time he ceased to be a full time employee of the Company.
After March 31, 1999, Mr. Paridy will be eligible to retire with 36 years of
service.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is composed of three nonemployee Directors:
Robert D. Lindsay, A. William Reynolds and Ward W. Woods. Mr. Woods serves as
Chairman of the Committee. Messrs. Woods and Lindsay are sole shareholders of
corporations which are general partners of (i) a limited partnership
12
<PAGE> 16
which is the sole general partner of BCP, the owner of 56.88% of the outstanding
shares of Common Stock and (ii) BP&Co., the general partnership to which the
Company pays and has paid the fees described below.
BP&Co. provides the Company on a continuing basis with management,
financial, strategic planning and advisory services pursuant to the Management
Services Agreement. For such services the Company pays BP&Co. an annual fee in
equal quarterly installments and reimburses BP&Co. for out-of-pocket expenses.
Since January 1, 1995 the annual fee has been $850,000.
BCP has certain rights to require registration of the shares of Common
Stock which it owns.
BTC serves as trustee, administrator and investment manager for certain of
the Company's defined benefit retirement plans, including the Retirement Plan.
Fees paid to BTC for investment management, trustee, administrative and other
services rendered on behalf of such plans in 1996 amounted to $525,000. Messrs.
Phipps and Woods are directors of BGI and BTC.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee oversees the compensation and benefit programs
provided to executive officers of the Company. In developing appropriate
policies for these programs, the Compensation Committee has in past years used
the services of nationally-known independent employee compensation and benefit
firms.
COMPENSATION POLICIES
The Company's executive compensation policies are based on the principle
that compensation paid by the Company should be competitive with the market
place and should be structured to recognize and encourage exceptional
performance. In determining the appropriateness of compensation, the
Compensation Committee has in past years retained an independent firm to provide
data for the Committee's consideration as to the compensation practices of
manufacturing companies similar in size, capitalization and profitability to the
Company (the "Comparison Group"). (Most of the Comparison Group companies are
not in the S&P Auto Parts-Aftermarket Index, referred to on page 16, which
includes companies with greater revenue bases).
With respect to the executive officers of the Company, the Compensation
Committee endeavors to provide these officers with a competitive salary with
above average reward opportunities tied into the Company's success in creating
value for its stockholders. Accordingly, the Compensation Committee periodically
reviews salaries of executive officers and makes adjustments if warranted by
corporate and individual performance. The Committee considers salary data of the
companies in the Comparison Group to confirm that salary rates of executive
officers generally do not exceed the 60th percentile of base pay for similar
positions in the Comparison Group. The Committee does want to provide executive
officers with the opportunity to earn significant additional compensation
through the Company's short-term and long-term incentive compensation programs.
Under these programs, if corporate and individual goals are substantially met or
exceeded, the executive officers can earn amounts in the high end of the range
for companies in the Comparison Group.
ANNUAL COMPENSATION
The principal components of an executive officer's cash compensation, which
in the case of the Named Executive Officers are provided for pursuant to an
employment agreement (the material terms of which are disclosed on pages 11 and
12), are base salary and incentive pay. Base salaries paid to the executive
officers are reviewed periodically (usually once a year) and increases may be
approved by the Compensation Committee depending on an executive officer's
current pay, individual performance, relationship to others in the organization,
inflation information and compensation data for similar positions in the
Comparison Group as provided by an independent firm. In determining whether to
approve a salary adjustment, the individual's performance in discharging his
assigned duties and responsibilities is the most important factor, although no
factor is assigned any particular weight and no one factor is controlling. With
one exception, in 1996 the Compensation Committee limited salary increases for
the executive officers to cost of living adjustments. The
13
<PAGE> 17
one exception was a 10% merit increase to an executive officer (who is not a
Named Executive Officer) in connection with an expansion of his duties and
responsibilities.
Under their employment agreements with the Company, executive officers may
also be paid annual incentive awards. Such payments are made pursuant to an
incentive plan adopted at the beginning of each plan year, designating the
participants in the plan, which include executive officers, staff officers and
the general managers of the Company's operating units, and setting the bonus
rate for each participant. In addition under the plan, financial targets for the
Company and its operating units are set and each participant is assigned
specific individual objectives. For executive officers, the financial targets
are the Company's budget for "income from operations" for the year, which is
usually set at a 10% or better improvement over comparable prior year results,
and for "operating cash flow." The individual objectives relate to the
participant's particular job function. A participant may earn a full incentive
award (50% of base salary in the case of an executive officer) if the Company
achieves its financial targets (and the unit achieves its financial targets
where a unit's general manager is a participant) and the individual performance
objectives are attained. An additional payment (according to formula) may be
earned if financial targets are exceeded. A partial incentive award will be paid
if the Company achieves 85% or more of the financial targets. Notwithstanding
the plan formulas used to determine the amount of a bonus, the Committee retains
the right to increase or reduce the amount of the payment to any participant for
any reason which it, in its sole discretion, determines. For instance, even if
the financial targets are achieved, an executive officer will not be paid a
bonus if not warranted by the individual's performance as determined by the
Committee in the case of the President and by the Committee and President in the
case of the other executive officers.
If financial objectives are not met, the Committee will consider, on an
individual basis, authorizing an incentive payment on a discretionary basis to a
participant. Factors considered by the Compensation Committee in making its
determination with respect to authorizing a discretionary incentive payment to
an executive officer include the following: (i) extent of improvement in
financial results (principally income from operations) by the Company over prior
year financial results, (ii) actual financial results compared against budget,
(iii) extent of accomplishment of preassigned individual objectives and (iv)
outstanding Company performance, such as the development of new product lines
and individual performance during the course of the year. The Committee's
determination is subjective as no one factor is assigned any particular weight
and no one factor is controlling.
With respect to performance in 1996, the executive officers were granted
awards under the bonus plan based upon achievement of individual objectives and
the Company achieving 100% of both of the financial targets. The bonus awards
recognized, among other things, that in 1996 consolidated revenue, net income
and earnings per share increased 7%, 46% and 46%, respectively, over 1995.
LONG-TERM COMPENSATION
During 1996, stock option grants covering a total of 233,500 shares of
Common Stock were made to key executives of the Company, of which grants 92,500
were made to the Named Executive Officers. The size of those grants were based,
in part, upon recommendations made by an independent firm which obtains and
analyzes information on the stock option practices of the companies in the
Comparison Group. In the opinion of the Compensation Committee, stock options
align the interests of employees with stockholder interests, provide incentive
for the creation of stockholder value over the long term and significantly aid
in recruiting and retaining key personnel.
BENEFITS
The Company provides certain supplemental benefits to executive officers to
ensure that it can compete effectively for executive talent. These benefits
include additional Company-paid group life insurance and the Restoration Plan as
described in the section on "Retirement Plans" on pages 10 and 11.
14
<PAGE> 18
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee meets annually without the Chief Executive
Officer present to evaluate his performance and to determine his compensation.
With respect to compensation paid for 1996 to David R. Paridy, the former
President and Chief Executive Officer of the Company, the Committee based its
determinations on the same criteria used for its compensation decisions
regarding base salaries and annual incentives for the other executive officers.
In 1995 Mr. Paridy's base salary was established by the Committee after
reviewing salary data for companies in the comparison group. Mr. Paridy's base
salary was not changed for 1996. With respect to 1996 annual incentive
compensation, as with the other executive officers, the Committee decided to
award a bonus based upon achievement of both individual objectives and the
Company achieving 100% of both of the financial targets. In evaluating Mr.
Paridy's performance for purposes of the annual incentive award, the Committee
considered, among other factors, the fact that in 1996 consolidated revenues,
net income and earnings per share increased 7%, 46% and 46%, respectively.
Mr. Paridy retired in January 1997 and was succeeded by J.P. Reilly. With
respect to compensation that will be paid to Mr. Reilly pursuant to the
Employment Agreement which he entered into with the Company, see "Employment
Agreements" above.
Compensation Committee
of the Board of Directors
Ward W. Woods, Chairman
Robert D. Lindsay
A. William Reynolds
15
<PAGE> 19
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common
Stock for the period commencing July 21, 1993 (the date of the IPO) and ending
December 31, 1996 with the cumulative total return on the S&P 500 Index and the
S&P Auto Parts-Aftermarket Index over the same period, assuming an initial
investment of $100 on July 21, 1993 with all dividends reinvested.
TOTAL RETURN TO STOCKHOLDERS
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
7/21/93 Dec. 93 Dec. 94 Dec.95 Dec. 96
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Stant Corporation 100.00 126.83 92.84 61.83 100.53
Auto Parts & Equipment 500 100.00 105.68 92.16 113.94 127.84
S&P 500 Index 100.00 105.74 107.14 147.40 181.24
</TABLE>
* The IPO price used to calculate the Total Return to Stockholders as of July
21, 1993 was $16.00. The S&P 500 and the S&P Auto Parts-Aftermarket were both
calculated using the closing price on July 21, 1993.
16
<PAGE> 20
STOCK OPTIONS GRANTED DURING 1996
The following table shows stock option grants made during 1996 to the
individuals and the groups set forth below. All of such grants were Nonqualified
Stock Options. Certain of such grants are final and binding on the Company
("Definitive Grants") and certain of such grants ("Provisional Grants") are
subject to Stockholder approval of the proposed amendments to the 1993 Option
Plan (see "Proposal II -- Approval of Amendments to the 1993 Option Plan,"
below).
<TABLE>
<CAPTION>
STOCK OPTION GRANTS
----------------------------------------
NUMBER OF SECURITIES
UNDERLYING OPTIONS
GRANTED IN 1996
----------------------------------------
DEFINITIVE GRANTS PROVISIONAL GRANTS
----------------- ------------------
<S> <C> <C>
David R. Paridy.............................................. 20,000 20,000(1)
President and Chief Executive Officer
W. Thomas Margetts........................................... 4,000 6,000
Sr. Vice President -- Corporate Development
Gary G. Moose................................................ -- 12,500(1)
Sr. Vice President -- Marketing
Thomas F. Plocinik........................................... 8,000 7,000
President of Trico Products Corporation
Thomas E. Schmitt............................................ 8,000 7,000(1)
Sr. Vice President -- Finance and Chief Financial Officer
Executive Officer Group...................................... 46,800 62,500
Non-Executive Officer Group.................................. 60,700 63,500
</TABLE>
- ---------------
(1) Because Messrs. Paridy, Moose and Schmitt ceased to be Executive Officers of
the Company during the first quarter of 1997, their provisional grants of
stock options will lapse and the shares covered thereby will again become
available for the grant of options under the 1993 Option Plan.
PROPOSAL II
APPROVAL OF AMENDMENTS TO THE 1993 OPTION PLAN
INTRODUCTION
Prior to the IPO, the stockholders of the Company approved the 1993 Option
Plan and authorized 700,000 shares of Common Stock for issuance thereunder. As
noted in the 1993 Option Plan, its purpose is to promote the interests of the
Company by providing key employees additional incentive to continue and increase
their efforts with respect to, and to remain in the employ of, the Company. As
of the Record Date fewer than 1,000 shares remain available for issuance in
connection with future grants under the 1993 Option Plan.
On October 29, 1996 and February 27, 1997, the Board of Directors adopted
certain amendments to the 1993 Option Plan (the "Proposed Amendments"), subject
to stockholder approval, which:
-- authorize the issuance of 900,000 additional shares of Common Stock
pursuant to future grants of options under the 1993 Option Plan. These
additional shares represented approximately 5.5% of the Company's
outstanding shares of Common Stock as of the Record Date. The Board of
Directors believes the authorization for issuance of these additional
shares is necessary to continue to provide competitive long-term incentive
awards to key employees that are linked to the creation of shareholder
value.
-- provide that (i) the 1993 Option Plan may be administered by any Committee
of the Board of Directors, not just the Compensation Committee, (ii) the
Committee which administers the 1993 Option Plan shall be constituted, and
the Committee's delegation of administration shall be limited, so as to
permit transactions between the Company and its officers and directors
relating to the 1993 Option Plan to be exempt from Section 16(b) of the
Exchange Act pursuant to Rule 16b-3 promulgated by the SEC thereunder or
any successor rule and the grant of options under the 1993 Option Plan to
qualify as "performance-based compensation" under Section 162(m) of the
Code and (iii) the maximum number of shares for which options may be
granted to any one employee under the 1993 Option Plan is 500,000.
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-- provide that in the event an Optionee dies following the termination of
his or her employment but during a period when the Optionee's options are
still exercisable, the Optionee's estate will be granted a period of one
year after the date of death to exercise the option.
On October 29, 1996 the Board of Directors also established the Committee
of Independent Directors of the Corporation to administer the 1993 Option Plan
and appointed as members of such Committee A. William Reynolds (Chairman) and
Edward O. Gaylord.
NEW PLAN BENEFITS
It is not possible to state at this time the persons who will receive
options in the future under the 1993 Option Plan, the amount of options which
will be granted to any particular individual or to all participants in the 1993
Option Plan, or the price at which options will be granted (except that the
exercise price of the options will not be less than the fair market value of the
Common Stock on the date of grant). Set forth above under "1996 Option Grants"
and "Stock Options Granted During 1996" is information with respect to the grant
of certain options, at an exercise price of $12.44 per share, to executive
officers subject to approval by the Stockholders of the Proposed Amendments. In
addition, set forth above under "Employment Agreements" is information with
respect to the grant of an option to J.P. Reilly at the time he joined the
Company as President and Chief Executive Officer. Mr. Reilly's option is for
300,000 shares at an exercise price of $15.375 per share and is subject to
approval by the Stockholders of the Proposed Amendments.
The full text of the 1993 Option Plan, with the Proposed Amendments, is
attached to this Proxy Statement as Exhibit A. The principal features of the
1993 Option Plan and the Proposed Amendments are described below. Such
descriptions are qualified in their entirety by reference to the text of the
1993 Option Plan which is contained in Exhibit A. The Proposed Amendments will
not become effective unless Stockholder approval is obtained.
DESCRIPTION OF 1993 OPTION PLAN
Administration of the 1993 Option Plan. The 1993 Option Plan currently is
administered by the Compensation Committee. Subject to the express limitations
in the 1993 Option Plan, the Compensation Committee has authority to interpret
the 1993 Option Plan, to prescribe, amend and rescind rules and regulations
relating to it and to make all other determinations deemed necessary or
advisable for the administration of the 1993 Option Plan. The determination of
the Compensation Committee on these matters is conclusive.
Eligibility. Options can be granted only to salaried employees (which
includes executive officers) of the Company and of its present and future
subsidiaries. A Director of the Company who is not also an employee of the
Company or one of its subsidiaries is not eligible to receive any options.
Options may be granted to employees who hold or have held options under previous
plans. An employee who has been granted an option is eligible to receive
additional options. No member of the Compensation Committee is eligible to
receive options under the 1993 Option Plan.
Shares Available For the 1993 Option Plan. Subject to certain adjustments,
the maximum number of shares of Common Stock for which options may at any time
be granted under the 1993 Option Plan is 700,000. In the event of a stock
dividend, stock split, recapitalization, combination, exchange of shares,
merger, consolidation, or other change in capitalization, the Compensation
Committee may make appropriate adjustments in the number of shares authorized
for the 1993 Option Plan and, with respect to outstanding grants, may make
appropriate adjustments in the number of shares and the option price.
Grant of Options. Options may be granted to eligible employees in such
number and at such times during the term of the 1993 Option Plan as the
Compensation Committee determines, taking into account the nature of the
services rendered by the employees, their present and potential contributions to
the Company's success and such other factors as the Compensation Committee in
its discretion shall deem relevant. An option granted under the 1993 Option Plan
may be either an Incentive Stock Option ("ISO"), which is intended to meet the
requirements defined in Section 422 of the Code, or a Nonqualified Stock Option.
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Terms and Conditions of Options. The price per share of Common Stock at
which each option is exercisable (the "Option Price") is determined by the
Compensation Committee at the time of grant, but may not be less than 100% of
the market price (the mean between the high and low sales price of a share of
the Common Stock) on the date the option is granted. The market price for the
Common Stock on the NASDAQ on March 14, 1997 was $14.38. Options are exercisable
at such time and under such conditions as are set forth in the individual option
agreements, but in no event may any option be exercisable more than 10 years
from the date of granting thereof. No option granted under the 1993 Option Plan
shall become exercisable until six months from the date of its grant.
Amendment of the 1993 Option Plan. The Board of Directors and the
Compensation Committee may not amend certain features of the 1993 Option Plan
without the approval of the stockholders. Such amendments requiring stockholder
approval include (a) a material increase in the maximum number of shares of
Common Stock that may be issued under the 1993 Option Plan, (b) a material
modification in the requirements as to eligibility for participation in the 1993
Option Plan, or (c) any other amendments to the 1993 Option Plan that are
considered material for the purposes of Rule 16b-3(b) of the Exchange Act.
Federal Income Tax Consequences of the 1993 Option Plan. The material
federal income tax consequences of participation in the 1993 Option Plan are
summarized below. This summary does not address issues related to the tax
circumstances of any particular employee. The summary is based on federal income
tax laws in effect on the date hereof and is, therefore, subject to possible
future changes in law. This discussion does not address state, local or foreign
tax consequences.
ISOs. An optionee will not recognize any income upon either grant or
exercise of an ISO, although the exercise may subject the optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time of exercise over the purchase
price of the shares is included in income for purposes of the alternative
minimum tax. The treatment of any gain realized upon sale or other disposition
of the common stock received upon exercise of an ISO will depend on the holding
period.
If the optionee does not dispose of the stock received within either one
year after exercise of the ISO or two years after grant, any gain realized upon
disposition will be characterized as long-term capital gain. If the optionee
disposes of his/her shares within either one year after exercise of the ISO or
two years after grant, such disposition will be a disqualifying disposition. In
the case of a disqualifying disposition, the portion of the gain realized on
disposition equal to the excess of the fair market value of the shares at the
time the ISO was exercised over the option price will be ordinary income taxable
as compensation in the year of disposition. The balance, if any, of the gain may
be capital gain.
If the optionee sells the shares in a disqualifying disposition at a price
that is below the fair market value of the shares at the time the ISO was
exercised, the optionee's ordinary income will be limited to the excess of the
amount realized upon the disposition over the adjusted basis in the shares.
The Company is entitled to a deduction with respect to an ISO only in the
taxable year of the Company in which a disqualifying disposition occurs. In that
event, the deduction would be equal to the ordinary income, if any, recognized
by the optionee upon disposition of the shares, provided that the deduction is
not otherwise disallowed under the Code.
Nonqualified Stock Options. An optionee will not recognize any income upon
either grant or vesting of a Nonqualified Stock Option. Upon exercise of any
part of a Nonqualified Stock Option, the optionee will recognize ordinary income
in an amount equal to the difference between the option exercise price and the
then fair market value of the shares acquired. The Company must withhold taxes
from the optionee's compensation with respect to the ordinary income recognized
by the optionee upon exercise.
In general, upon a subsequent disposition of the shares, the optionee's
basis for determining taxable gain or loss is the amount paid for such shares
plus the amount that was includable in the optionee's income at the time of
exercise. Any gain recognized on such disposition would generally be taxed as
long-term or short-term
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capital gain depending on the length of time the optionee is deemed to have held
these shares and the holding period in effect at the time. The Company will be
entitled to a deduction for federal income tax purposes upon exercise of a
Nonqualified Stock Option in an amount equal to the ordinary income recognized
to the optionee, provided that the deduction is not otherwise disallowed under
the Code.
Cap on Company Deductions for Certain Compensation. Section 162(m) of the
Code limits the Company's tax deduction to $1 million per taxable year (the
"Million Dollar Cap") for certain compensation paid in a given year to the Chief
Executive Officer and the four highest compensated executives other than the
Chief Executive Officer named in the Proxy Statement (the "Covered Executives").
The Code and regulations issued under the Code exclude from the Million Dollar
Cap certain performance-based compensation. Stock options can qualify for this
performance-based exception, but only if they are granted at fair market value,
the total number of shares that can be granted to an executive for any period is
stated, stockholder and Board approval is obtained and certain other
requirements are met. Certain of the Proposed Amendments are intended to assure
that options granted pursuant to the 1993 Option Plan will be performance-based
compensation for purposes of the Million Dollar Cap.
THE PROPOSED AMENDMENTS
Additional shares. Because of the limited number of shares which remain
available for the grant of options under the 1993 Option Plan, the Board of
Directors believes it is appropriate at this time to authorize the issuance of
additional shares of Common Stock pursuant to the grant of future options under
the 1993 Option Plan. The 900,000 additional shares for which approval is sought
represent approximately 5.5% of the Company's outstanding shares of Common Stock
as of the Record Date. If the Proposed Amendments are adopted by the
Stockholders at the Annual Meeting, the Company intends to file a Registration
Statement under the Securities Act with the SEC covering the 900,000 additional
shares of Common Stock.
Million Dollar Cap. As described above, the Million Dollar Cap limits the
Company's tax deduction to $1 million per year for certain compensation paid to
each of the Covered Executives. However, this limitation does not apply to
certain performance-based compensation. Stock options may qualify for this
performance-based exception if certain conditions are met. One of the conditions
is that each Director who serves on the Committee of the Board of Directors
which administers the 1993 Option Plan must satisfy the requirements of the
Treasury Regulations issued pursuant to Section 162(m) of the Code. The Proposed
Amendments specify that the Committee which administers the 1993 Option Plan
must satisfy these requirements. In addition, Section 162(m) of the Code
requires that there be a maximum number of shares available for grant under the
1993 Option Plan which can be awarded to any one individual. The Proposed
Amendments provide that the maximum number of options which may be granted to
any one individual under the 1993 Option Plan is 500,000. The maximum number of
options provided by the Proposed Amendments is not designed to provide any
compensation to a particular Covered Executive. The maximum level established by
the Proposed Amendments is designed to preserve flexibility and has been
established at a level that will enable the Company to comply with the technical
provisions of the Million Dollar Cap and preserve the deductibility of
performance-based compensation paid to Covered Executives.
Section 16(b) of the Exchange Act. As currently in effect, the 1993 Option
Plan is designed so that the grant and exercise of options under the 1993 Option
Plan will be exempt from the "short swing" liability provisions contained in
Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder.
Recently, the SEC promulgated major revisions to Rule 16b-3. The Proposed
Amendments are intended to permit the 1993 Option Plan to comply with revised
Rule 16b-3 and, in this connection, the Proposed Amendments require that the
Committee which administers the 1993 Option Plan be composed of at least two (2)
members of the Board of Directors and that those Directors be Non-Employee
Directors as defined in Section (b)(3)(i) of Rule 16b-3.
Administration of the 1993 Option Plan. The 1993 Option Plan currently
provides that it must be administered by the Compensation Committee of the Board
of Directors. However, as indicated above, each individual who serves on the
Committee which administers the 1993 Option Plan must now satisfy the
requirements of the Treasury Regulations issued pursuant to Section 162(m) of
the Code. Such regulations
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are extremely complex and their interpretation is not free from doubt. To
maintain maximum flexibility with respect to who may serve on the Compensation
Committee, the Board believes that it is advisable to provide that the 1993
Option Plan may be administered by any Committee of the Board so long as all
members of that Committee satisfy the requirements of Section 162(m) of the Code
and Rule 16b-3 promulgated under the Exchange Act.
Exercise of Option After Death. At present, in the event that an optionee
dies following the termination of his or her employment but during a period when
the optionee's options are still exercisable (i.e., during the first year
following disability or three months following termination of employment for any
other reason), the 1993 Option Plan provides that the benefit of the option is
lost. The Board of Directors believes that this unduly prejudices the estate of
a deceased optionee and believes that it is appropriate to grant a period of one
year after death during which the estate or legal representative of the deceased
optionee may exercise the option.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock voting on
this matter, in person or by proxy, at the Annual Meeting is required for
approval of the adoption of the proposed amendments to the 1993 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ADOPTION OF THE PROPOSED AMENDMENTS TO THE 1993 OPTION PLAN.
PROPOSAL III
APPROVAL OF AMENDMENT TO DIRECTORS OPTION PLAN
At the 1994 Annual Meeting of Stockholders, the stockholders approved the
Stock Option Plan for Directors (1993) (the "Directors Option Plan") which
allows nonemployee Directors to elect to have part or all of their Board
retainer and Board and Committee meeting fees paid in the form of stock options,
rather than in cash of equivalent value. The Directors Option Plan allows
Directors not only to have an economic stake in the Company's long-term
performance, but to demonstrate their commitment to increasing stockholder value
by electing to take all or a portion of their compensation as Directors in the
form of stock options. The Directors Option Plan has been extremely successful
and, since its institution, every nonemployee Director has elected to have one
hundred percent of his retainer and meeting fees paid in the form of options.
In part because of the success of the Director Option Plan, there are only
approximately 16,000 shares available for grant under the Plan. Because all of
the nonemployee Directors have again elected to take one hundred percent of
their Board retainer and Board and Committee meeting fees for 1997 in the form
of options, the number of shares available under the Directors Option Plan will
not be sufficient based upon the current market price of the Common Stock.
Accordingly, the Board of Directors has approved, subject to ratification by the
Stockholders, an increase in the aggregate number of shares of Common Stock with
respect to which options may be granted under the Directors Option Plan from
50,000 to 150,000. No other changes in the Directors Option Plan have been
approved. The principal features of the Directors Option Plan are described
below.
NEW PLAN BENEFITS
All nonemployee Directors are entitled to participate in the Directors
Option Plan. It is not possible to state at this time the amount of options
individual Directors may receive under the Directors Option Plan because the
amount of options will depend upon, among other things, the amount paid to
Directors for annual retainer and Board and Committee meeting fees and the
percentage of such amount which individual Directors elect to have paid to them
in the form of options under the Directors Option Plan, rather than in cash.
MATERIAL FEATURES OF THE DIRECTORS OPTION PLAN
Administration and Participation. Only Directors who are not employed by
the Company are eligible to participate in the Directors Option Plan.
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The Directors Option Plan is administered by the Compensation Committee of
the Board of Directors (the "Committee").
The Committee is authorized to amend or terminate the Directors Option Plan
at any time. However, stockholders must approve amendments (other than an
adjustment by reason of a stock split, stock dividend, recapitalization, merger,
consolidation, or certain other events) which (a) increase the total number of
shares that may be purchased through options, (b) change the eligibility
requirements, (c) change the provisions regarding grant price, (d) materially
increase the cost of the Directors Option Plan to the Company or the benefits to
participants in the Directors Option Plan, or (e) extend the period for granting
options.
Securities Subject to Options. The Options that can be granted under the
Directors Option Plan are to purchase shares of Common Stock. Originally, 50,000
shares of Common Stock were authorized for issuance under the Directors Option
Plan. The Board of Directors has approved, subject to ratification by the
Stockholders at the Annual Meeting, an increase in the number of shares of
Common Stock which can be issued to 150,000. If the increase is approved by the
Stockholders, the Company intends to file a registration statement under the
Securities Act with the SEC covering the additional 100,000 shares of Common
Stock. The Directors Option Plan will remain in effect until all shares subject
to options granted under the Plan have been purchased, but no options may be
granted on or after January 1, 2004.
Election to Participate. Each December a Director will be able to have all
or a portion of his or her annual retainer fee for the following year, together
with any Board and Committee meeting fees, paid in the form of options granted
under the Directors Option Plan.
Grants. Grants will be made each year on December 31. The number of shares
subject to the grant will be based on the amount of compensation which each
participating Director ("Optionee") has directed to be paid in the form of
options granted under the Directors Option Plan. The number of shares subject to
each grant will be determined by dividing (a) the amount of compensation which
the Optionee had directed to be paid in options by (b) the Fair Market Value of
a share of Common Stock minus $2.50. The $2.50 represents the amount to be paid
upon exercise of the option. Fair Market Value is defined as the "average of the
market price (the mean between the high and low sales price) of a share of the
Common Stock at the middle of each quarter during the year of participation
(February 14, May 15, August 15 and November 15) as reported in The Wall Street
Journal for trades on the NASDAQ, or if there is no report of trading on any one
or more of those dates, on the immediately preceding date".
Exercise of Options. The exercise price of all options granted under the
Directors Option Plan will be $2.50 per share. The aggregate difference in value
at the time of each grant between this exercise price and the Fair Market Value
of the shares of Common Stock is designed to be equal to the compensation an
Optionee has elected not to receive in cash. Options may not be exercised within
six months of their date of grant, except that they become immediately
exercisable upon an Optionee's retirement because of age, disability or death or
upon the occurrence of certain mergers, consolidations or changes of control of
the Company.
No option granted under the Directors Option Plan is exercisable more than
three years after the date upon which the Optionee terminates his or her
position as a Director of the Company.
Adjustment of Shares and Option Prices. The number, price and kind of
shares available for and subject to options may be adjusted, as appropriate, in
the event of any merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, or other change in the corporate structure or
capitalization affecting the shares of the Common Stock.
Payment Upon Exercise. The exercise price for options may be paid to the
Company by (a) payment in cash, (b) tender of shares of Common Stock having a
fair market value equal to the purchase price provided that the Optionee has
owned such stock for at least six months, or (c) delivery of an irrevocable
written instruction letter requesting the Company to deliver the shares being
purchased to a broker, subject to the broker's written guarantee to deliver cash
to the Company.
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Withdrawal and Assignment of Interest. Options granted under the Directors
Option Plan will not be transferable by an Optionee other than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code and the Employee Retirement Income Security Act.
Federal Income Tax Consequences. The Company understands that, under
current law, an Optionee is not subject to federal income taxation upon receipt
of an option granted under the Directors Option Plan. Upon the exercise of an
option, the Optionee will realize ordinary income equal to the difference
between the fair market value of the shares of Common Stock at that time and the
exercise price.
The Company will be entitled to a federal income tax deduction at the same
time and in the same amount as the Optionee recognizes taxable income. All
income recognized on the exercise of an option will be considered taxable
income.
No incentive stock options or stock appreciation rights may be granted
under the Directors Option Plan.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock voting on
this matter, in person or by proxy, at the Annual Meeting is required for
approval of the amendment of the Directors Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENT OF THE DIRECTORS OPTION PLAN.
PROPOSAL IV
APPROVAL OF 1997 VOLUNTARY STOCK OPTION PLAN
In part because of the success of the Directors Option Plan (see "Proposal
III -- Approval of Amendment to Directors Option Plan"), the Board has adopted,
subject to Stockholder approval at the Annual Meeting, the 1997 Voluntary Stock
Option Plan for Key Employees of Stant Corporation and Subsidiaries (the "1997
Option Plan") which will allow key employees of the Company who are selected by
the Committee of the Board of Directors administering the 1997 Option Plan (the
"Committee") to take all or a portion of their cash incentive compensation in
the form of stock options, rather than in cash of an equivalent value. The fair
market value of an option granted under the 1997 Option Plan will be determined
by the formula set forth in the 1997 Option Plan by reference to the market
price of a share of Common Stock at four different dates during each year.
NEW PLAN BENEFITS
It is not possible to state at this time all of the persons who might be
permitted by the Committee to participate in the 1997 Option Plan or the amount
of options they may receive under the Plan as a result of having determined to
receive a portion of their cash incentive compensation in the form of options.
The employment agreements between the Company and its President and Chief
Executive Officer and its Senior Vice President and Chief Financial Officer
provide that those individuals may elect to participate in the 1997 Option Plan.
In this connection, neither Mr. Reilly nor Mr. Erwin has elected what
percentage, if any, of his 1997 incentive compensation will be deferred.
The full text of the 1997 Option Plan is attached to this Proxy Statement
as Exhibit B. The principal features of the 1997 Option Plan are described
below. Such descriptions are qualified in their entirety by reference to the
text of the 1997 Option Plan which is contained in Exhibit B. The 1997 Option
Plan will not become effective unless Stockholder approval is obtained.
MATERIAL FEATURES OF THE 1997 OPTION PLAN
Administration and Participation. Only officers or key employees of the
Company designated by the Committee are eligible to participate in the Plan.
The 1997 Option Plan will be administered by the Committee, the membership
of which will be constituted so as to permit transactions between the Company
and participants in the 1997 Option Plan to be
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exempt from Section 16(b) of the Exchange Act pursuant to Rule 16b-3 promulgated
by the SEC thereunder or any successor rule. If the 1997 Option Plan is adopted
by the Stockholders at the Annual Meeting, the Plan will initially be
administered by the Committee of Independent Directors which is currently
composed of A. William Reynolds (Chairman) and Edward O. Gaylord.
The Committee is authorized to amend or terminate the 1997 Option Plan at
any time. However, stockholders must approve amendments (other than an
adjustment by reason of a stock split, stock dividend, recapitalization, merger,
consolidation, or certain other events) which (a) increase the total number of
shares that may be purchased through options, (b) change the eligibility
requirements, (c) change the provisions regarding grant price, (d) materially
increase the cost of the 1997 Option Plan to the Company or the benefits to
participants in the 1997 Option Plan, or (e) extend the period for granting
options.
Securities Subject to Options. The Options that can be granted under the
1997 Option Plan are to purchase shares of Common Stock. A total of 250,000
shares of Common Stock has been authorized for issuance under the 1997 Option
Plan. The Company intends to file a registration statement under the Securities
Act with the SEC covering these shares of Common Stock. The 1997 Option Plan
will remain in effect until all shares subject to options granted under the Plan
have been purchased, but no options may be granted on or after January 1, 2007.
Election to Participate. By January 31 of each year each of the officers
and key employees of the Company who have been designated by the Committee to
participate in the 1997 Option Plan will be able to elect to have all or a
portion of his or her incentive compensation for that year paid in the form of
options granted under the 1997 Option Plan.
Grants. Grants will be made each year on March 31. The number of shares
subject to the grant will be based on the amount of incentive compensation which
each participating employee ("Optionee") has earned with respect to performance
during the preceding year and has directed to be paid in the form of options
granted under the 1997 Option Plan. The number of shares subject to each grant
will be determined by dividing (a) the amount of incentive compensation which
the Optionee had directed to be paid in options by (b) the Fair Market Value of
a share of Common Stock minus $2.50. The $2.50 represents the amount to be paid
upon exercise of the option. Fair Market Value is defined as the "average of the
market price (the mean between the high and low sales price) of a share of the
Common Stock at the middle of each quarter during the year of participation
(February 14, May 15, August 15 and November 15) as reported in The Wall Street
Journal for trades on the NASDAQ, or if there is no report of trading on any one
or more of those dates, on the immediately preceding date".
Exercise of Options. The exercise price of all options granted under the
1997 Option Plan will be $2.50 per share. The aggregate difference in value at
the time of each grant between this exercise price and the Fair Market Value of
the shares of Common Stock is designed to be equal to the incentive compensation
an Optionee has elected not to receive in cash. Options may not be exercised
within six months of their date of grant, except that they become immediately
exercisable upon an Optionee's retirement because of age, disability or death or
upon the occurrence of certain mergers, consolidations or changes of control of
the Company.
No option granted under the 1997 Option Plan is exercisable more than three
years after the date upon which the Optionee terminates his or her employment
with the Company.
Adjustment of Shares and Option Prices. The number, price and kind of
shares available for and subject to options may be adjusted, as appropriate, in
the event of any merger, consolidation, reorganization, recapitalization, stock
dividend, stock split, or other change in the corporate structure or
capitalization affecting the shares of the Common Stock.
Payment Upon Exercise. The exercise price for options may be paid to the
Company by (a) payment in cash, (b) tender of shares of Common Stock having a
fair market value equal to the purchase price provided that the Optionee has
owned such stock for at least six months, or (c) delivery of an irrevocable
written instruction letter requesting the Company to deliver the shares being
purchased to a broker, subject to the broker's written guarantee to deliver cash
to the Company.
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Withdrawal and Assignment of Interest. Options granted under the 1997
Option Plan will not be transferable by an Optionee other than by will or by the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code and the Employee Retirement Income Security Act.
Federal Income Tax Consequences. The Company understands that, under
current law, an Optionee is not subject to federal income taxation upon receipt
of an option granted under the 1997 Option Plan. Upon the exercise of an option,
the Optionee will realize ordinary income equal to the difference between the
fair market value of the shares of Common Stock at that time and the exercise
price.
The Company will be entitled to a federal income tax deduction at the same
time and in the same amount as the Optionee recognizes taxable income. All
income recognized on the exercise of an option will be considered taxable
income.
No incentive stock options or stock appreciation rights may be granted
under the 1997 Option Plan.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock voting on
this matter, in person or by proxy, at the Annual Meeting is required for
approval of the 1997 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE 1997 OPTION PLAN.
PROPOSAL V
APPROVAL OF MANAGEMENT INCENTIVE PLAN
The Board of Directors recommends that the Stockholders approve the
Management Incentive Plan for Key Employees of Stant Corporation and its
Subsidiaries (the "MIP"), the purpose of which is to provide annual short-term
incentives to key employees of the Company who contribute to the success of the
Company by providing an annual direct cash payment based upon annual business
unit or Company performance goals. The MIP is similar to the annual short-term
incentive programs which the Company has had in place for key employees for a
number of years, except it has been redesigned so that the deduction of
compensation paid to key employees should not be disallowed under Section 162(m)
of the Code. To that end, the MIP provides for cash payments to key employees
upon the attainment of preestablished, objective performance goals.
DESCRIPTION OF THE MIP
Administration of the MIP. The MIP will be administered by a committee of
the Board (the "MIP Committee") which shall consist solely of two or more Board
members who are considered "outside directors" under the regulations to Section
162(m) of the Code.
Eligibility. The Compensation Committee shall designate the key employees
of the Company who will receive incentive awards under the MIP. The key
employees so designated will be those employees the Compensation Committee
believes may be subject to Section 162(m) of the Code, which applies to
employees whose compensation is required to be reported to stockholders pursuant
to the SEC's compensation disclosure rules. The key employees subject to Section
162(m) of the Code for 1996 are listed on page 9. The employees not designated
by the Compensation Committee shall continue to receive incentive compensation
under the Company's historical management incentive programs.
Amount of Awards. The MIP Committee shall determine the amount of
incentive payments that will be made to eligible employees upon attainment of
the relevant performance goals. As a general matter, the incentive payments will
be calculated as a percentage of each eligible employee's salary. However, the
maximum amount of incentive compensation that may be paid to any eligible
employee with respect to any calendar year is $1,000,000.
25
<PAGE> 29
Performance Goals. The MIP Committee shall select financial targets that
must be met for compensation to be payable under the MIP. Although it cannot be
determined what the actual financial targets will be from year to year, the
business criteria upon which these targets will be based are set forth below:
PROFIT FROM OPERATIONS
OPERATING CASH FLOW CALCULATED AS FOLLOWS:
<TABLE>
<CAPTION>
AMOUNT
DETERMINED
BY PLAN
COMMITTEE
----------
<S> <C>
Profits from Operations................................................... $xxx
Plus/(Minus) Adjustments:
Depreciation and Amortization deducted from Operations.................. xxx
Other items (including noncash items) deducted from/added to Profit from
Operations........................................................... xxx
Plus/(Minus) Working Capital Adjustments:
Decreases (increases) in Inventory...................................... xxx
Decreases (increases) in Accounts Receivable............................ xxx
Decreases (increases) in Other Assets including Prepaids................ xxx
Increases (decreases) in Accounts Payable............................... xxx
Increases (decreases) in Accrued........................................ xxx
Liabilities (Excluding Income Taxes).................................... xxx
Increases (decreases) in Other Liabilities.............................. xxx
Operating Cash Flow....................................................... $xxx
====
</TABLE>
EARNINGS
EARNINGS PER SHARE
EBITDA
EXTRA VALUE ADDED
STOCK PRICE
MARKET SHARE
SALES
RETURN ON EQUITY
COSTS
For purposes of determining whether a particular Business Criteria has been
met the MIP Committee may, in its discretion, adjust any calculation up or down
for (i) extraordinary items, (ii) non-recurring items, (iii) special charges or
(iv) items or events which are unusual in nature or are infrequent of occurrence
or were unanticipated (and thus not reflected in the Company's annual operating
budget) at the time the Performance Goals were determined by the MIP Committee.
Terms and Conditions of Incentive Compensation Payments. Incentive
compensation will generally be paid under the MIP only after the MIP Committee
certifies that the applicable performance targets have been met. In addition,
the MIP Committee may provide that the incentive compensation will be paid on
the eligible employee's death or disability or upon a change of control of the
Company.
TAX CONSEQUENCES. The Company has been advised by counsel that the federal
tax consequences to participants in the MIP will be that payments under the Plan
will be taxed to the participants as ordinary income in the year of payment. In
addition, the Company has been advised by counsel that the deduction of payments
made in accordance with the MIP (other than payments made upon an eligible
employee's death or
26
<PAGE> 30
disability or upon a change of control of the Company) should not be disallowed
under Section 162(m) of the Code.
VOTE REQUIRED.
The affirmative vote of the majority of the shares of Common Stock voting
on this matter, in person or by proxy, at the Annual Meeting is required for
approval of the MIP.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPROVAL OF THE MANAGEMENT INCENTIVE PLAN.
PROPOSAL VI
APPOINTMENT OF AUDITORS
At the Annual Meeting, the Stockholders will vote on the ratification of
the appointment of Deloitte & Touche LLP, certified public accountants, as
independent auditors to audit the accounts of the Company and its subsidiaries
for 1997. A representative of Deloitte & Touche LLP will be present at the
Annual Meeting and will have an opportunity to make a statement if he or she
desires. That representative will be available to answer appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF THE AUDITORS.
OTHER MATTERS
The Board of Directors knows of no other matters which will come before the
Annual Meeting. However, if any matters other than those set forth in this
notice shall be properly presented for action, the persons named in the proxy
may vote on such other matters in accordance with their best judgment.
FILING UNDER SECTION 16(A)
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership of such securities with the SEC. Directors, executive officers and
greater than 10% beneficial owners are required by applicable regulations to
furnish the Company with copies of all Section 16(a) forms they filed.
Based solely upon a review of the copies of the forms furnished to the
Company and written representations from certain reporting persons that no other
Forms 4 or 5 were required, the Company believes that during 1996 all Directors,
executive officers and greater than 10% beneficial owners complied with all
applicable filing requirements.
27
<PAGE> 31
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual Meeting
of Stockholders must be received by the Company for inclusion in the 1998 Proxy
Statement no later than November 30, 1997.
ANNUAL REPORT
The Company's Annual Report for the year ended December 31, 1996, which is
not part of the proxy soliciting material, is being mailed to Stockholders
together with this Proxy Statement.
For the Board of Directors
Anthony W. Graziano, Jr.
Secretary
Richmond, Indiana
March 27, 1997
28
<PAGE> 32
EXHIBIT A
1993 STOCK OPTION PLAN FOR KEY EMPLOYEES
OF
STANT CORPORATION AND ITS SUBSIDIARIES, AS AMENDED
------------
1. Adoption and Purpose of the Plan. Stant Corporation, a Delaware
corporation (the "Company"), hereby adopts this stock option plan (the "Plan")
providing for the granting of stock options to key employees of the Company and
its subsidiaries, including the corporate staff, the General Managers of the
operating units, key sales personnel and other persons who have the ability to
make a significant contribution to the Company's success. The general purpose of
the Plan is to promote the interests of the Company and its subsidiaries by
providing to their key employees an additional incentive to continue and
increase their efforts with respect to, and to remain in the employ of, the
Company and its subsidiaries.
The Plan provides for the granting of "incentive" stock options ("incentive
stock options"), within the meaning of Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code") and for the granting of "nonqualified"
stock options ("nonqualified stock options"), and options granted under the Plan
shall be designated accordingly in the applicable option agreements.
2. Stock Subject to the Plan. There will be reserved for issuance upon
the exercise of options to be granted from time to time under the Plan an
aggregate of [700,000] 1,600,000 shares of the Company's Common Stock, par value
---------
$0.01 per share ("Common Stock"). Such shares may be in whole or in part, as the
Board of Directors of the Company (the "Board") shall from time to time
determine, authorized and unissued shares of Common Stock or issued shares of
Common Stock that shall have been reacquired by the Company. If any option
granted under the Plan shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject thereto shall again be
available for the purposes of the Plan. No employee shall be granted options
------------------------------------
under the Plan to purchase more than 500,000 shares of Common Stock.
- --------------------------------------------------------------------
3. Administration. The Plan shall be administered by a [the Compensation]
-
Committee composed of at least two members of the Board (the "Committee").
--------------------------------
Subject to the express provisions of the Plan, the Committee shall have plenary
authority, in its discretion, to determine the terms of all options granted
under the Plan (which need not be identical) including, without limitation, the
purchase price of the shares covered by each option, the individuals to whom,
and the time or times at which, options shall be granted, the number of shares
to be subject to each option, whether an option shall be an incentive stock
option or a nonqualified stock option, when an option can be exercised and
whether in whole or in installments. In making such determinations, the
Committee may take into account the nature of the services rendered by the
respective employees, their present and potential contributions to the Company's
success and such other factors as the Committee in its discretion shall deem
relevant. Subject to the express provisions of the Plan, the Committee shall
have plenary authority to interpret the Plan, to prescribe, amend and rescind
the rules and regulations relating to it and to make all other determinations
deemed necessary or advisable for the administration of the Plan. The
determination of the Committee on the matters referred to in this paragraph 3
shall be conclusive.
The Board shall select one of its members as Chairman of the Committee, and
the Committee shall hold its meetings at such times and places as it shall deem
advisable. A majority of its members shall constitute a quorum and all
determinations shall be made by a majority of its members. Any determination
reduced to writing and signed by a majority of the members shall be fully as
effective as if it had been made by a majority vote at a meeting duly called and
held.
[The Committee shall be constituted so as to permit the Plan to comply with
Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or any successor rule and shall initially consist of not
less than three members of the Board, each of whom is ineligible to receive
option
- ---------------
- ------ indicates new language
[ ] indicates deleted language
<PAGE> 33
grants, shall have been so ineligible for at least one year prior to serving on
the Committee and shall satisfy the requirements to be a disinterested person
contained in Rule 16b-3(c)(2)(i) of the Exchange Act.]
The membership of the Committee shall be constituted, and the Committee's
-------------------------------------------------------------------------
delegation of administration shall be limited, so as to permit (i) transactions
- -------------------------------------------------------------------------------
between the Company and its officers and directors relating to the Plan to be
- ------------------------------------------------------------------------------
exempt from Section 16b of the Securities Exchange Act of 1934, as amended (the
- -------------------------------------------------------------------------------
"Exchange Act") pursuant to Rule 16b-3 promulgated under the Exchange Act or any
- --------------------------------------------------------------------------------
successor rule and (ii) the grant of options under the Plan to qualify as
- -------------------------------------------------------------------------
"performance-based compensation" under Section 162(m) of the Internal Revenue
- -----------------------------------------------------------------------------
Code of 1986, as amended, and the regulations thereunder.
- --------------------------------------------------------
4. Eligibility. Options may be granted only to salaried employees (which
terms shall be deemed to include officers) of the Company and of its present and
future subsidiary corporations ("subsidiaries") as defined in Section 424(f) of
the Code. A director of the Company or of a subsidiary who is not also such an
employee of the Company or of one of its subsidiaries shall not be eligible to
receive any options under the Plan. Options may be granted to employees who hold
or have held options under previous plans. An employee who has been granted an
option shall be eligible to receive an additional option or options.
5. Option Prices. The purchase price of the Common Stock under each
option shall be determined by the Committee, but shall not be less than 100% of
the fair market value of the Common Stock on the date of grant of such option.
Such fair market value shall be determined by the Committee and shall not be
less than the Market Price (as defined below) on the date of grant of the
option. If no sales have occurred on the date of grant of the option, the fair
market value shall be measured by the Market Price on the closest trading day
prior to the date of grant of the option. For purposes of the Plan, "Market
Price" shall mean at any date the mean between the high and low sales prices of
a share of Common Stock on the NYSE Composite Tape or, if the Common Stock is
not listed or admitted to trading on the NYSE, the mean between the high and low
sales prices of a share of Common Stock on the principal national securities
exchange on which the Common Stock is listed, or, if the Common Stock is not
listed or admitted to trading on any national securities exchange, the mean
between the high and low sales prices of a share of Common Stock in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ"), or, if the Common Stock is
not reported by the NASDAQ, the mean between the high and low sales prices of a
share of Common Stock as reported by the National Quotation Bureau Incorporated,
or, in all other cases, the value set in good faith by the Committee.
6. Terms of Options. The term of each option shall be for such period as
the Committee shall determine, but not more than 10 years from the date of
granting thereof or such shorter period as is prescribed in paragraphs 7, 9 and
10.
7. Exercise of Options. The Committee may in its discretion prescribe in
the option grant the installments, if any, in which an option granted under the
Plan shall become exercisable, provided that no option shall be exercisable
until the later of the six months anniversary of the date of its grant [or six
months after the date Stockholder Approval (as defined in paragraph 13) is
obtained], except as provided in paragraph 10 or as the Committee otherwise
determines. In no case may an option be exercised at any time for less than 50
shares (or the remaining shares covered by the option if less than 50).
Payment shall be made in cash or, unless otherwise provided in the option
agreement, in whole shares of Common Stock already owned by the holder of the
option or partly in cash and partly in such shares. An option shall be exercised
by written notice to the Company. Such notice shall state that the holder of the
- ---------------
- ------ indicates new language
[ ] indicates deleted language
A-2
<PAGE> 34
option elects to exercise the option, the number of shares in respect of which
it is being exercised and the manner of payment for such shares and shall
either:
(i) be accompanied by payment of the full purchase price of such
shares; or
(ii) fix a date (not more than 10 business days from the date of
exercise) for the payment of the full purchase price of such shares.
Cash payments shall be made by cash or check payable to the order of the
Company. Common Stock payments (valued at Market Price on the date of exercise)
shall be made by delivery of stock certificates in negotiable form. If
certificates representing Common Stock are used to pay all or part of the
purchase price of an option, a separate certificate shall be delivered by the
Company representing the same number of shares as each certificate so used, and
an additional certificate shall be delivered representing the additional shares
to which the holder of the option is entitled as a result of the exercise of the
option. Except as provided in the third paragraph of this paragraph 7 or in
paragraphs 9 and 10, no option may be exercised at any time unless the holder
thereof is then an employee of the Company or of a subsidiary. The holder of an
option shall have none of the rights of a stockholder with respect to the shares
subject to the option until such shares shall be transferred to the holder upon
the exercise of the option.
Notwithstanding any contrary waiting period, installment period or other
limitation or restriction in any option agreement or in the Plan, each
outstanding option granted under the Plan shall become exercisable in full for
the aggregate number of shares covered thereby in the event:
(i) the Board (or, if approval of the Board is not required as a
matter of law, the stockholders of the Company) shall approve:
(a) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which
shares of Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of
Common Stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation immediately after
the merger;
(b) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, the
assets of the Company; or
(c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company;
(ii) any person (as such term is defined in Section 13(d) of the
Exchange Act), corporation or other entity other than the Company shall
make a tender offer or exchange offer to acquire any Common Stock (or
securities convertible into Common Stock) for cash, securities or any other
consideration, provided that;
(a) at least a portion of such securities sought pursuant to the
offer in question is acquired; and
(b) after consummation of such offer, the person, corporation or
other entity in question is the "beneficial owner" (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of 20% or more of the outstanding Common Stock (calculated as provided
in Rule 13d-3(d) in the case of rights to acquire Common Stock).
8. Nontransferability of Options. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and distribution.
Beginning on [the date Stockholder Approval (as defined in paragraph 13) is
obtained] July 16, 1993 (the date the Plan was first approved by the Company's
--------------------------------------------------------------------
stockholders, the designation of a beneficiary by an option holder shall not
- -------------
constitute a transfer. An option may be exercised, during the lifetime of the
holder thereof, only by such holder.
- ---------------
- ------ indicates new language
[ ] indicates deleted language
A-3
<PAGE> 35
9. Termination of Employment. In the event that an employee to whom an
option has been granted under the Plan ceases to be an employee of the Company
or one of its subsidiaries otherwise than by reason of normal or early
retirement in accordance with the provisions of a pension plan of the Company or
one of its subsidiaries (hereinafter "Retirement"), or death, such option may,
subject to the provisions of the last paragraph of this paragraph 9, be
exercised (to the extent of the number of shares covered by the option which
were purchasable by the employee immediately prior to the termination of his
employment) at any time:
(a) within one year (or such shorter period as may be specified in
the option agreement) after the termination of his employment due to his
being disabled within the meaning of Section 422(c)(6) of the Code
("total disability"); or
(b) within three months after the termination of his employment for
any other reason (or such shorter period as may be specified in the
option agreement), but, in either case, in no event after the expiration
of the original term of the option.
In the event that an employee to whom an option has been granted under the
Plan ceases to be an employee of the Company or one of its subsidiaries because
of Retirement, such option (unless otherwise provided in the option agreement)
may be exercised at any time within one year after the termination of employment
(but not after the expiration of the original term of the option):
(a) to the extent of the number of shares covered by the option
which were purchasable by the employee immediately prior to the
termination of employment if such holder is under the age 65 on the date
of termination of employment; or
(b) in full for the aggregate number of shares covered thereby if
such holder is 65 years of age or older on the date of termination of
employment.
Options granted under the Plan shall not be affected by any change of
employment so long as the holder continues to be an employee of the Company or
of a subsidiary. Nothing in the Plan or in any option granted pursuant to the
Plan shall confer on any individual any right to continue in the employ of the
Company or any of its subsidiaries or interfere in any way with the right of the
Company or any of its subsidiaries to terminate the holder's employment at any
time, with or without cause, notwithstanding the possibility that the number of
shares purchasable by an employee under the option may thereby be reduced or
eliminated.
Anything herein to the contrary notwithstanding, in the event the
employment of an employee to whom an option has been granted under the Plan
shall be terminated for cause, then, in such event, any option or options held
by such employee under the Plan, to the extent not theretofore exercised, shall
forthwith terminate. For purposes of this paragraph 9, whether or not such
employment shall have been terminated for cause shall be determined by the
Committee, and its determination shall be conclusive.
10. Death of Holder of Option. In the event of the death of [an employee
to whom an option has been granted under the Plan while employed by the Company
or a subsidiary,] the holder of an option, either while such individual is
--------------------------------------------------------
employed by the Company or a subsidiary or during the period subsequent to the
- ------------------------------------------------------------------------------
termination of employment but during which the option is exercisable pursuant to
- --------------------------------------------------------------------------------
paragraph 9 above, such option (unless the option shall have been previously
- ------------------
terminated pursuant to the provisions of paragraph 9, or unless otherwise
provided in his or her option agreement) may be exercised in full for the
------
aggregate number of shares covered thereby by a legatee or legatees of such
[employee] option holder under his or her last will, or by his or her personal
-------------
representatives or distributees, at any time within a period of one year after
his or her death (or such shorter period as may be specified in the option
agreement), but not after the expiration of the original term of the option.
11. Adjustments Upon Changes in Capitalization. Notwithstanding any other
provisions of the Plan, option agreements may contain such provisions as the
Committee shall determine to be appropriate for the adjustment of the number and
class of shares subject to each outstanding option and the option prices in the
- ---------------
- ------ indicates new language
[ ] indicates deleted language
A-4
<PAGE> 36
event of changes in the outstanding Common Stock by reason of any stock
dividend, stock split, recapitalization, combination, exchange of shares,
merger, consolidation, liquidation, split-up, split-off, spin-off or other
similar change in capitalization, any distribution to common stockholders,
including a rights offering, other than cash dividends, or any like change. In
the case of any such event, the aggregate number and class of shares available
under the Plan shall also be appropriately adjusted by the Committee, whose
determination shall be conclusive.
12. Termination and Amendment. Unless the Plan shall theretofore have
been terminated as hereinafter provided, the Plan shall terminate on, and no
option shall be granted after July 21, 2003. The Plan may be terminated,
modified or amended by the stockholders of the Company. The Board may at any
time terminate, modify or amend the Plan in such respects as it shall deem
advisable; provided, however, that the Board may not, without approval by the
holders of a majority of the outstanding shares of voting stock of the Company
present and voting at a duly held meeting at which a quorum is present:
(i) increase (except as provided in paragraph 11) the maximum number
of shares of Common Stock as to which options may be granted under the Plan
to any one employee or to all employees in the aggregate;
--------------------------------------------------------
(ii) change the class of employees eligible to receive options; or
(iii) adopt any other amendments to the Plan that [are considered
material for purposes of Rule 16b-3(b) under the Exchange Act] cause either
-----------
(i) transactions between the Company and its officers and directors
-------------------------------------------------------------------
relating to the Plan to be subject to Section 16b of the Exchange Act or
------------------------------------------------------------------------
(ii) prevent the grant of options under the Plan to qualify as
--------------------------------------------------------------
"performance-based compensation" under Section 162(m) of the Code.
------------------------------------------------------------------
No termination, modification or amendment of the Plan may, without the
consent of the employee to whom any option shall theretofore have been granted,
adversely affect the rights of such employee under such option.
13. Effectiveness of the Plan. The Plan [shall become] became effective
------
as of July 21, 1993[, provided that it is]. The amendments to the Plan adopted
------------------------------------
by the Board of Directors on October 30, 1996 (the "Amendments") shall become
- -----------------------------------------------------------------------------
effective as of the date the Amendments are approved by the holders of the
- -------------------------------------------
Common Stock, either by a majority of the votes cast by the stockholders at an
annual or special meeting at which a quorum is present, or by the written
consent of a majority of stockholders ("Stockholder Approval"). Prior to
Stockholder Approval, the Committee may, in its discretion, grant options under
the Plan, the exercise of which shall be expressly subject to the condition that
the [Plan] Amendments shall receive Stockholder Approval. No options granted by
----------
the Committee subject to Stockholder Approval shall be exercisable prior to the
-------------------------------
six month anniversary of the date [that the Plan shall receive] of Stockholder
--
Approval or as the Committee otherwise determines. Unless the [Plan] Amendments
----------
shall receive Stockholder Approval, [the Plan and] all options theretofore
granted thereunder subject to Stockholder Approval shall be and become null and
-------------------------------
void.
14. Time of Granting of Options. For all purposes of the Plan, the date
of grant of an option shall be the date on which the Committee approves the
granting of such option or any later date selected by the Committee as the date
of grant. Each grantee of an option shall be notified promptly of the grant of
the option and a written agreement shall promptly be executed and delivered by
or on behalf of the Company and the grantee.
15. Tax Withholding. In connection with the transfer of shares of Common
Stock as a result of the exercise of an option, the Company shall have the right
to retain or sell without notice, or to demand surrender of, shares of Common
Stock in value sufficient to cover any Withholding Tax (that is, any tax,
including any Federal, state or local income tax, required by any governmental
entity to be withheld or otherwise deducted
- ---------------
- ------ indicates new language
[ ] indicates deleted language
A-5
<PAGE> 37
and paid with respect to such transfer), and to make payment (or to reimburse
itself for payment made) to the appropriate taxing authority of an amount in
cash equal to the amount of such Withholding Tax, remitting any balance to the
employee. For purposes of this paragraph, the value of shares of Common Stock so
retained or surrendered shall be the Market Price on the date that the amount of
the Withholding Tax is to be determined (the "Tax Date"), and the value of
shares of Common Stock so sold shall be the actual net sale price per share
(after deduction of commissions) received by the Company.
Notwithstanding the foregoing, the employee shall be entitled to satisfy
the obligation to pay any Withholding Tax, in whole or in part, by providing the
Company with funds sufficient to enable the Company to pay such Withholding Tax
or by requiring the Company to retain or to accept upon delivery thereof by the
employee shares of Common Stock sufficient in value (determined in accordance
with the last sentence of the preceding paragraph) to cover the amount of such
Withholding Tax. Each election by an employee to have shares retained or to
deliver shares for this purpose shall be subject to the following restrictions:
(i) the election must be in writing and made on or prior to the Tax
Date;
(ii) the election shall be subject to the disapproval of the
Committee; and
(iii) if the employee is subject to Section 16 of the Exchange Act, an
election to have shares retained to satisfy the Withholding Tax
must either:
(a) be an irrevocable election made after the date Stockholder
Approval is obtained and at least six months prior to the Tax Date; or
(b) take effect (or, with respect to elections made prior to the
date Stockholder Approval is obtained, be made) during the ten-business
day "window period" beginning on the third business day following the
date on which the Company releases for publication its annual or
quarterly financial statements and ending on the twelfth business day
following the date of release thereof.
- ---------------
- ------ indicates new language
[ ] indicates deleted language
A-6
<PAGE> 38
EXHIBIT B
1997 VOLUNTARY STOCK OPTION PLAN FOR KEY EMPLOYEES
OF
STANT CORPORATION AND ITS SUBSIDIARIES
1. Purpose. The purpose of the 1997 Voluntary Stock Option Plan for Key
Employees (the "Plan") of Stant Corporation (the "Company") and its Subsidiaries
is to encourage ownership of the Company's common stock by key employees of the
Company and its subsidiaries.
2. Administration. The Plan shall be administered by a Committee of the
Board of Directors of the Company (the "Committee") the membership of which
shall be constituted so as to permit transactions between the Company and
employees who participate in the Plan ("Optionees") to be exempt from Section
16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")
pursuant to Rule 16b-3 promulgated by the Securities and Exchange Commission
thereunder or any successor rule. The Committee shall have full authority to
administer the Plan, including authority to interpret and construe any provision
of the Plan and to adopt such rules for the administration of the Plan as it may
deem necessary or appropriate. Decisions of the Committee shall be final and
binding on all persons who have an interest in the Plan.
3. Participation in the Plan. Only key employees of the Company or its
subsidiaries who are selected by the Committee are eligible to participate in
the Plan.
4. Number of Shares. The maximum number of shares of the common stock,
$.01 par value per share, of the Company (the "Shares") which may be issued
pursuant to options granted under the Plan (the "Options") shall be two hundred
fifty thousand (250,000) Shares, subject to adjustment as provided in paragraph
21.
5. Nonexercised Shares. If any outstanding Option under the Plan for any
reason expires or is terminated without having been exercised in full, the
Shares allocable to the unexercised portion of such Option shall again become
available for issuance under Options granted pursuant to the Plan.
6. Share Issuance. Upon the exercise of an Option, the Company may issue
new Shares or reissue Shares previously repurchased by or on behalf of the
Company.
7. Option Grant Dates. Options in respect of incentive compensation for
services to the Company during a particular year shall be granted to each
Optionee on the earlier of the day the Committee determines an Optionee's
incentive compensation for such year and March 31 of the following year (or, if
March 31 is not a business day, on the immediately preceding business day) (the
"Grant Date").
8. Option Price. The purchase price per share for the Shares covered by
each Option shall be $2.50 (the "Option Price").
9. Number of Option Shares. The number of Shares subject to an Option
granted to an Optionee on each Grant Date will be the aggregate number of Shares
equal to the nearest whole number determined by the following formula in accord
with the definitions set forth below:
<TABLE>
<C> <S> <C>
Elected Portion of Incentive Cash Compensation Number of
- ----------------------------------------------- = Option Shares
(Fair Market Value minus $2.50)
</TABLE>
Definitions. For purposes of determining the number of Option Shares
granted under this paragraph, the following definitions will apply:
"Incentive Cash Compensation." The dollar amount of incentive cash
compensation awarded to an Optionee by the Committee for services to the
Company during a particular year.
"Elected Portion of Incentive Cash Compensation." A dollar amount
determined each year for each Optionee equal to the dollar amount of the
percentage of the Incentive Cash Compensation, if any, which
<PAGE> 39
a participating employee has irrevocably elected, in writing, to have paid
in the form of Options granted under the Plan. This written election must
be received by the Secretary of the Company on or before January 31 of each
year and shall specify a percentage, up to 100% of the participating
employee's Incentive Cash Compensation for that year, to be paid in the
form of Options under this Plan; provided, however, that when an employee
is initially selected by the Committee to participate in the Plan such
Employee may make a written election under this paragraph within 30 days
following his/her initial selection, which election shall be effective for
Incentive Cash Compensation amounts earned during the calendar year of
his/her initial selection.
"Fair Market Value." The average of the midpoint of the bid and asked
price for shares at the middle of each quarter during the year of
participation (February 14, May 15, August 15 and November 15) as reported
in the Wall Street Journal for trades on the NASDAQ, or if no report of
trading on any one or more of those dates, on the immediately preceding
date.
10. Termination of Employment. If an employee participating in the Plan
retires, resigns, dies, or otherwise terminates his/her service as an employee,
he/she shall be granted on the earlier of the date that the Committee determines
such employee's incentive compensation, if any, for the year in which his/her
services as an employee terminated or March 31 of the year following such
termination, an Option for Shares under this Plan equal in value to the amount
of the Incentive Cash Compensation which would have been paid to the employee
during the year if he/she had not been a participant in the Plan.
11. Written Option Agreement. Each grant of an Option under the Plan
shall be evidenced by a written agreement, which shall comply with and be
subject to the terms and conditions contained in the Plan.
12. Nonstatutory Stock Options. Options granted under the Plan shall not
be entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986.
13. Period of Option. No Option may be exercised within six months of its
Grant Date, provided, however, that Options granted under the Plan shall be
immediately exercisable upon (i) the Optionee's retirement because of age,
disability or death, or (ii) the occurrence of any of the events described in
paragraph 17 (ii) [recognizing that Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Act"), may limit an Optionee's ability to resell the
Shares acquired upon the exercise until six months after the Grant Date]. No
Option shall be exercisable after expiration of three years from the date upon
which the Option holder terminates his/her employment with the Company.
14. Exercise of Options. Options may be exercised only by written notice
to the Secretary of the Company and payment of the exercise price in (i) cash or
(ii) delivery of an irrevocable written notice instructing the Company to
deliver the Shares being purchased to a broker, subject to the broker's written
guarantee to deliver cash to the Company, in each case equal to the full
consideration of the Option Price for the Shares which are being exercised.
Options may be exercised in whole or in part.
15. Options Nontransferable. Each Option granted under the Plan shall not
be transferable by the Optionee otherwise than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code of 1986, as amended, or Title I of the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder. No Option granted under the Plan, or any interest
therein, may be otherwise transferred, assigned, pledged, or hypothecated by the
Optionee to which the Option was granted during his/her lifetime, whether by
operation of law or otherwise, or be made subject to execution, attachment, or
similar process.
16. Exercise by Representative Following Death of Optionee. An Optionee,
by written notice to the Company, may designate one or more persons (and from
time to time change such designation), including his/her legal representative,
who, by reason of the Optionee's death, shall acquire the right to exercise all
or a portion of an Option granted under the Plan. Any exercise by a
representative shall be subject to the provisions of the Plan.
B-2
<PAGE> 40
17. Acceleration of Stock Options.
(i) Merger or Consolidation. Notwithstanding paragraph 13, in the
event of a dissolution or a liquidation of the Company or a merger and
consolidation in which the Company is not the surviving corporation, any
unexercised Options granted prior to the date of the merger or
consolidation shall become exercisable immediately prior to the date of the
merger or consolidation. In addition, upon the occurrence of any of these
events, any pro rata amounts of the Incentive Cash Compensation earned for
the year in which such event occurs, which would otherwise have been paid
in the form of Options granted under this Plan, shall be promptly paid to
each participating employee in cash.
(ii) Change of Control. If, while unexercised Options remain
outstanding hereunder, (a) any "person" (as this term is used in Sections
13(d) and 14(d) of the Act) other than the Company or an employee benefit
plan maintained by the Company is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities or (b) during any period of two
consecutive years, individuals who at the beginning of the period
constitute the Company's Board of Directors, including for this purpose any
new Director whose election or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds of the Directors
then still in office who were Directors at the beginning of the period,
cease for any reason to constitute a majority of the members of the Board,
then from and after the date on which public announcement of the
acquisition of such percentage is made or the date on which the change in
the composition of the Board set forth above occurs, all Options previously
granted under this Plan shall be immediately exercisable in full.
18. Effective Date of the Plan. The Plan shall be effective for elections
as of January 31, 1997, subject to stockholder approval of the Plan at the 1997
Annual Meeting of Stockholders.
19. Duration of the Plan. The Plan shall remain in effect until all
Shares subject to Option grants have been purchased or all unexercised Options
have expired. Notwithstanding the foregoing, no Options may be granted pursuant
to the Plan on or after the tenth anniversary of the Plan's effective date.
20. Amendment of the Plan. The Committee may suspend or discontinue the
Plan or revise or amend it in any respect; provided, however, that without
approval of a majority of the Company's stockholders, no revision or amendment
shall (i) change the number of Shares subject to the Plan (except as provided in
paragraph 21), (ii) change the designation of the class of employees eligible to
participate in the Plan, (iii) change the formulas to determine the amount,
price, or timing for the grants, or (iv) materially increase the benefits
accruing to participants under the Plan. Moreover, in no event may these Plan
provisions be amended more than once every six months, other than to comply with
changes in the Internal Revenue Code or the Employees Retirement Income Security
Act, or the rules and regulations thereunder. No amendment, modification, or
termination of the Plan shall in any manner adversely affect without the
consent, the rights of Optionees holding Options granted under the Plan.
21. Changes in Shares. In the event of any merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, or other change
in the corporate structure or capitalization affecting the Shares, appropriate
adjustment shall be made in the number (including the aggregate numbers
specified in paragraph 4) and kind of Shares or other securities which are or
may become subject to Options granted under the Plan prior to and subsequent to
the date of the change.
22. Limitation of Rights. Neither the Plan, nor the granting of an Option
under the Plan, nor 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 retain an individual as an employee for any period of time or at
any particular rate of compensation. Further, a participant shall have no rights
as a stockholder with respect to the Shares covered by his/her Options until the
date of the issuance to him/her of a stock certificate therefor.
23. Assignments. The rights and benefits under the Plan may not be
assigned except as provided in paragraphs 15 and 16.
B-3
<PAGE> 41
24. Notice. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the Secretary of the Company and
shall become effective when it is received.
25. Shareholder Approval and Registration Statement. The Plan shall be
approved by the Board of Directors and submitted to the Company's stockholders
for approval. Employees may elect to participate in the Plan prior to
stockholder approval and prior to the filing (and the effectiveness of) a
registration statement with the Securities and Exchange Commission covering the
Shares to be issued upon the exercise of Options. Any Options granted under the
Plan prior to the effectiveness of the registration statement shall not be
exercisable until, and are expressly conditional upon, the effectiveness of a
registration statement covering the Shares and approval by stockholders.
26. Governing Law. The Plan and all determinations made and actions taken
pursuant hereto shall be governed by and construed in accordance with the laws
of the State of Delaware.
B-4
<PAGE> 42
PROXY PROXY
STANT CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints J.P. Reilly and Ward W. Woods, or either of
them, as proxies with full power of substitution to represent and vote all
shares of Stant Corporation common stock of the undersigned at the Annual
Meeting of Stockholders of Stant Corporation to be held April 30, 1997, and at
any adjournments thereof on the matters set forth on the reverse side of this
Proxy.
IMPORTANT - PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED. IF NO
DIRECTION IS MADE, PROXIES WILL VOTE FOR THE NOMINEES FOR DIRECTORS AND FOR
EACH OF THE OTHER PROPOSALS.
(Please sign on reverse side.)
<PAGE> 43
STANT CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
(Continued from previous side)
1. ELECTION OF DIRECTORS FOR For All
THREE YEAR TERM: For Withheld Except
J.P. Reilly; Ogden M. Phipps / / / / / /
(INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE
LIST ABOVE.)
2. Approval of amendments to 1993 Option Plan. For Against Abstain
/ / / / / /
3. Approval of amendment to
Directors Option Plan. For Against Abstain
/ / / / / /
4. Approval of adoption of
1997 Option Plan. For Against Abstain
/ / / / / /
5. Approval of adoption of For Against Abstain
Management Incentive Plan. / / / / / /
6. Ratification of appointment
of Deloitte and Touche LLP For Against Abstain
as independent auditors. / / / / / /
7. In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
----------------------------------------------------------
Signature
----------------------------------------------------------
Signature if held jointly
Date:
----------------------------------------------------
Please sign exactly as name appears above. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
