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
Filed by the registrant |X|
Filed by a party other than the registrant | |
Check the appropriate box:
| | Preliminary proxy statement
| | Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive proxy statement Definitive additional materials
| | Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HI-RISE RECYCLING SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
HI-RISE RECYCLING SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
| | No fee required.
| | Fee computed on the table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
- -------------------------------------------------------------------------------
(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:
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<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
8505 N.W. 74TH STREET, MIAMI, FLORIDA 33166
-------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY 15, 1998
-------------------
To the Shareholders of Hi-Rise Recycling Systems, Inc.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of Hi-Rise Recycling Systems, Inc., a Florida corporation
(the "Company"), will be held at 10:00 a.m., local time, on Wednesday, July 15,
1998, at the offices of the law firm of Greenberg Traurig Hoffman Lipoff Rosen &
Quentel located at the Met Life Building, 200 Park Avenue, New York, New York
for the following purposes:
(1) To elect four members to the Company's Board of Directors to
hold office until the Company's 1999 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To consider and vote upon a proposal to approve the adoption
of the Company's 1998 Executive Incentive Compensation Plan;
and
(3) To transact such other business as may properly come before
the Annual Meeting and any and all adjournments or
postponements thereof.
All shareholders are cordially invited to attend; however, only
shareholders of record at the close of business on June 8, 1998 are entitled to
vote at the Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
DONALD ENGEL
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
Miami, Florida
June 22, 1998
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
<PAGE>
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
HI-RISE RECYCLING SYSTEMS, INC.
---------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Hi-Rise Recycling Systems, Inc., a Florida
corporation (the "Company"), of proxies from the holders of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), for use at the 1998 Annual
Meeting of Shareholders of the Company to be held at 10:00 a.m., local time, on
Wednesday, July 15, 1998, at the offices of the law firm of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel located at the Met Life Building, 200 Park
Avenue, New York, New York or at any adjournment(s) or postponement(s) thereof
(the "Annual Meeting"), pursuant to the foregoing Notice of Annual Meeting of
Shareholders.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is June 22, 1998. Shareholders should
review the information provided herein in conjunction with the Company's 1997
Annual Report to Shareholders, which accompanies this Proxy Statement. The
Company's principal executive offices are located at 8505 N.W. 74th Street,
Miami, Florida 33166, and its telephone number is (305) 597-0243.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of four members to the Company's Board of
Directors to serve until the Company's 1999 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) A proposal to approve the adoption of the Company's 1998
Executive Incentive Compensation Plan; and
(3) Such other business as may properly come before the Annual
Meeting, including any adjournments or postponements thereof.
<PAGE>
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) FOR the election of the four nominees for director named below
and (b) FOR the proposal to approve the adoption of the Company's 1998 Executive
Incentive Compensation Plan. In the event a shareholder specifies a different
choice by means of the enclosed proxy, his or her shares will be voted in
accordance with the specification so made.
The Board of Directors does not know of any other matters that may be
brought before the Annual Meeting nor does it foresee or have reason to believe
that proxy holders will have to vote for substitute or alternate nominees. In
the event that any other matter should come before the Annual Meeting or any
nominee is not available for election, the persons named in the enclosed proxy
will have discretionary authority to vote all proxies not marked to the contrary
with respect to such matters in accordance with their best judgment.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on June 8, 1998,
as the record date (the "Record Date") for determining shareholders of the
Company entitled to notice of, and to vote at, the Annual Meeting. As of the
Record Date, there were 9,054,879 shares of Common Stock issued and outstanding,
all of which are entitled to be voted at the Annual Meeting. Each share of
Common Stock is entitled to one vote on each matter submitted to shareholders
for approval at the Annual Meeting. Shareholders do not have the right to
cumulate their votes for directors.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The affirmative vote of a majority of the shares of
Common Stock present and voting at the Annual Meeting is required to approve the
proposal to adopt the Company's 1998 Executive Incentive Compensation Plan. Any
other matter that may be submitted to a vote of the shareholders will be
approved if the number of shares of Common Stock voted in favor of the matter
exceeds the number of shares voted in opposition to the matter, unless such
matter is one for which a greater vote is required by law or by the Company's
Articles of Incorporation or Bylaws. If less than a majority of outstanding
shares entitled to vote are represented at the Annual Meeting, a majority of the
shares so represented may adjourn the Annual Meeting to another date, time or
place, and notice need not be given of the new date, time or place if the new
date, time or place is announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote for purposes of determining
the outcome of any matter submitted to the shareholders for a vote, but will not
be counted as votes cast "for" or "against" any given matter.
A broker or nominee holding shares registered in its name, or in the
name of its nominee, which are beneficially owned by another person and for
which it has not received instructions as to voting from the beneficial owner,
may have discretion to vote the beneficial owner's shares with respect to the
election of directors and other matters addressed at the Annual Meeting. Any
such shares which are not represented at the Annual Meeting either in person or
by proxy will not be considered as shares present at the Annual Meeting, and
will not be considered to have cast votes on any matters addressed at the Annual
Meeting.
A list of shareholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 8505 N.W. 74th Street, Miami, Florida 33166,
for a period of ten days prior to the Annual Meeting and at the Annual Meeting
itself for examination by any shareholder.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth information, as of the Record Date, with
respect to the beneficial ownership of shares of the Company's Common Stock by
(i) each person known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock, (ii) the Named Executive Officers (as
defined herein), (iii) each director of the Company and (iv) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENTAGE OF OUTSTANDING
BENEFICIAL OWNER(1) OWNERSHIP(2) SHARES OWNED
- ----------------------------------------------------------- ----------------- -------------------------
<S> <C> <C>
Donald Engel........................................... 750,000(3) 7.6%
Evelio Acosta.......................................... 1,276,094 14.0%
Warren Adelson......................................... 790,012(4) 8.0%
Ira S. Merritt......................................... 24,500(5) *
Joel M. Pashcow........................................ 23,500(6) *
Michael F. Bracken........................................ 27,600(7) *
All directors and executive officers as a group
(9 persons)......................................... 1,719,407(8) 16.7%
</TABLE>
- -------------------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the beneficial
owners identified above is 8505 N.W. 74th Street, Miami, Florida 33166.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by
assuming that options or warrants that are held by such person (but not
those held by any other person) and that are exercisable within 60 days
have been exercised. Unless otherwise noted, the Company believes that
all persons named in the table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
(3) Includes 700,000 shares of Common Stock issuable upon the exercise of
options granted under the Company's 1996 Stock Option Plan.
(4) Includes 16,000 shares of Common Stock issuable upon the exercise of
presently exercisable options and 250,000 shares of Common Stock
issuable upon the exercise of warrants, which warrants are currently
exercisable.
(5) Includes 23,500 shares of Common Stock issuable upon the exercise of
options granted under the Company's New Directors Plan.
(6) Consists of 23,500 shares of Common Stock issuable upon the exercise of
options granted under the Company's New Directors Plan.
(7) Consists of 27,600 shares of Common Stock issuable upon the exercise of
options granted under the Company's 1993 Stock Option Plan and 1996
Stock Option Plan.
(8) Includes (i) 28,652 shares of Common Stock which were issued to Harriet
Oestreicher, Seymour Oestreicher's wife, in connection with the
Company's acquisition of IDC Systems, Inc. ("IDC Systems"), (ii) 5,000
shares of Common Stock issuable upon the exercise of presently
exercisable options to purchase Common Stock held by Seymour
Oestreicher, (iii) 60,600 shares of Common Stock issuable upon the
exercise of presently exercisable options to purchase Common Stock held
by Gary McAlpin and (iv) 32,000 shares of Common Stock issuable upon
the exercise of presently exercisable options to purchase Common Stock
held by Bradley Hacker. See notes (2) through (7) above.
3
<PAGE>
ELECTION OF DIRECTORS; NOMINEES
The Company's Articles of Incorporation provide that the number of
directors constituting the Company's Board of Directors shall be at least one,
with the exact number of directors to be fixed from time to time in the manner
provided in the Company's Bylaws. The Company's Bylaws provide that the number
of directors shall be fixed from time to time by resolution of the Board of
Directors within the limits specified by the Company's Articles of
Incorporation. The Board of Directors has fixed at four the number of directors
that will constitute the Board of Directors for the ensuing year. Each director
elected at the Annual Meeting will serve for a term expiring at the Company's
1999 Annual Meeting of Shareholders or when his successor has been duly elected
and qualified.
Each of the current members of the Board of Directors has been
nominated by the Company to be reelected as a director at the Annual Meeting.
The Board of Directors has no reason to believe that any nominee will refuse or
be unable to accept election; however, in the event that one or more nominees
are unable to accept election or if any other unforeseen contingencies should
arise, each proxy that does not direct otherwise will be voted for the remaining
nominees, if any, and for such other persons as may be designated by the Board
of Directors.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------------- ----- ----------------------------------------------------
<S> <C>
Donald Engel.................................... 64 Chairman of the Board of Directors and Chief
Executive Officer
J. Gary McAlpin................................. 45 Chief Operating Officer
Bradley Hacker.................................. 38 Chief Financial Officer
Michael F. Bracken................................. 39 Executive Vice President - New Construction Sales
William J. Stone................................ 51 Executive Vice President - Sales
Seymour Oestreicher............................. 72 Vice President - Distribution Development
Warren Adelson.................................. 55 Director
Ira S. Merritt.................................. 60 Director
Joel M. Pashcow................................. 53 Director
</TABLE>
DONALD ENGEL has been Chief Executive Officer of the Company since
March 1996 and Chairman of the Board since May 1997. From March 1996 to May
1997, Mr. Engel served as Co-Chairman of the Board. Prior to joining the
Company, Mr. Engel was a private investor. From June 1991 to June 1993, Mr.
Engel served as a consultant to Bear Stearns & Co., Inc. From March 1985 to June
1991, Mr. Engel served as a consultant to Drexel Burnham Lambert where he had
been managing director since 1978. Mr. Engel has served as a director of
multi-national companies such as Revlon Group, Inc., Triangle Industries, Inc.,
and Uniroyal Chemical, Inc.
J. GARY MCALPIN has been Chief Operating Officer of the Company since
March 1997. Mr. McAlpin joined the Company in October 1996 as a Vice President.
From January 1996 to October 1996, he served as a construction/project manager
of Birwelco-Montenay, a power generator. For the prior eight years, he served as
Vice President and General Manager of IDAB Incorporated, a materials handling
company.
4
<PAGE>
BRADLEY HACKER has been Chief Financial Officer of the Company since
July 1997. Mr. Hacker joined the Company in July 1993 as controller. For the
prior seven years, Mr. Hacker was employed by various divisions of Campbell
Taggert, a subsidiary of Anheuser-Busch.
MICHAEL F. BRACKEN has been Executive Vice President - New
Construction Sales of the Company since July 1996. Mr. Bracken joined the
Company in September 1993 as a salesman. From August 1992 to August 1993, Mr.
Bracken was the General Manager and Construction Project Manager of Brickell
Biscayne Condominium in Miami. Prior thereto, he served as a field manager of
Schlumberger Overseas Ltd., a petroleum engineering company, for eleven years in
South East Asia.
WILLIAM J. STONE has been Executive Vice President - Sales since May
1997. Since 1990, Mr. Stone has founded a number of companies engaged in various
aspects of waste handling in high-rise buildings in South Florida. Prior to
1990, he was engaged in real estate development in Texas, Toronto and Florida.
SEYMOUR OESTREICHER has been Vice President - Distribution Development
of the Company since March 1995. Mr. Oestreicher was a founder and has been
Chairman of IDC Systems, a company engaged in selling, installing and servicing
trash compaction systems, since its formation in 1987. Mr. Oestreicher was a
founder and served as Chairman and President of International Dynetics Corp., a
company engaged in the design, manufacture and installation of trash compaction
systems, from 1969 until 1986. At IDC Systems and International Dynetics Corp.,
Mr. Oestreicher oversaw the design, manufacture and sale of refuse compactors
and specialized electro-hydraulic waste handling equipment primarily in New
York, New Jersey and Connecticut, with distribution worldwide. From January 1951
to June 1969, he was Vice President of AMF, Inc., with responsibility for
operations and sales in its International Electrical Products Division.
WARREN ADELSON has been a director of the Company since May 1993. Mr.
Adelson has been President of Adelson Galleries, a New York art gallery, since
January 1990. From 1974 to January 1990, Mr. Adelson was Vice President of Coe
Kerr Gallery, a New York City art gallery.
IRA S. MERRITT has been a director of the Company since March 1996.
Since his semi-retirement in 1990, Mr. Merritt, a licensed certified public
accountant, has been engaged in selling residential real estate in Boca Raton,
Florida. From 1988 to 1990, Mr. Merritt was employed by the Sidney Kohl Company,
a Florida real estate company, where he established the firm's property
management division. From 1982 to 1988, Mr. Merritt was the Executive Vice
President and Chief Financial Officer of Hanover Companies, Inc. From 1975 to
1982, Mr. Merritt was the senior partner of Merritt, Levy and Cohen, an
accounting firm specializing in the real estate industry.
JOEL M. PASHCOW has been a director of the Company since March 1996.
Mr. Pashcow is now the Chairman of the Executive Committee of the Board of
Trustees of Ramco-Gershenson Property Trust (NYSE) and Chairman and President of
Atlantic Realty Trust. Mr. Pashcow served as the Chairman of the Board of
Directors of RPS Realty Trust, a New York Stock Exchange commercial property
REIT, from February 1988 to April 1996. Mr. Pashcow has served as a member of
the Board of Governors of the Real Estate Securities and Syndication Institute
and as a director and member of the executive committee of the National Realty
Committee.
ELECTION OF EXECUTIVE OFFICERS AND DIRECTORS
The Company's officers are elected annually by the Board of Directors
and serve at the discretion of the Board of Directors. The Company's directors
hold office until the next annual meeting of shareholders and until their
successors have been duly elected and qualified.
In connection with the Company's IPO in July 1993, the Company agreed
with Whale Securities Co., L.P., who acted as the underwriter (the
"Underwriter"), for a period of five years, to nominate and use its best efforts
to elect a designee of the Underwriter as a director of the Company. To date,
the Underwriter has not exercised this right.
5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1997, the Company's Board of
Directors held four meetings and took certain actions by written consent. During
1997, no director attended fewer than 75% of the aggregate of (i) the number of
meetings of the Board of Directors held during the period he served on the Board
of Directors and (ii) the number of meetings of committees of the Board of
Directors held during the period he served on such committees.
The only committees of the Board of Directors are the Audit Committee
and the Compensation Committee. The Board of Directors does not have a
nominating or similar committee.
Messrs. Merritt and Adelson are the current members of the Audit
Committee, which committee held three meetings during the year ended December
31, 1997. The duties and responsibilities of the Audit Committee include (a)
recommending to the Board of Directors the appointment of the Company's auditors
and any termination of engagement, (b) reviewing the plan and scope of audits,
(c) reviewing the Company's significant accounting policies and internal
controls and (d) having general responsibility for all related auditing matters.
Messrs. Pashcow and Merritt are the current members of the Compensation
Committee, which committee held three meeting during the year ended December 31,
1997. The Compensation Committee reviews and approves the compensation of the
Company's executive officers and administers the Company's 1993 Stock Option
Plan and 1996 Stock Option Plan.
ADDITIONAL INFORMATION CONCERNING DIRECTORS
The Company pays non-employee directors an annual fee of $10,000 and
reimburses all directors for their expenses in connection with their activities
as directors of the Company. Directors of the Company who are also employees of
the Company do not receive additional compensation for their services as
directors. In addition, non-employee directors of the Company's Compensation
Committee and Audit Committee receive $1,000 per meeting.
Previously, non-employee directors were eligible to receive options
under the Company's 1993 Directors Option Plan. The 1993 Directors Option Plan
terminated upon the approval of the 1996 Directors Option Plan by the Company's
shareholders in July 1996. Non-employee directors currently are eligible to
receive options under the Company's 1996 Directors Option Plan. During 1997, the
Company granted options under the 1996 Directors Option Plan to purchase 1,000
shares of Common Stock to each of Warren Adelson, Ira S. Merritt and Joel M.
Pashcow, as non-employee directors.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of the Company's outstanding Common Stock, to file
with the Securities and Exchange Commission (the "SEC") initial reports of
ownership and reports of changes in ownership of Common Stock. Such persons are
required by SEC regulation to furnish the Company with copies of all such
reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written or oral representations that
no other reports were required for such persons, during the fiscal year ended
December 31, 1997, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1995, 1996 and 1997, the aggregate compensation awarded to, earned by or paid to
Donald Engel, who has been Chief Executive Officer of the Company since March
1996, and Michael F. Bracken, Vice President - New Construction Sales
(together, the "Named Executive Officers"). No other executive officer of the
Company had aggregate compensation exceeding $100,000 during the year ended
December 31, 1997. The Company did not grant any restricted stock awards or
stock appreciation rights or make any long-term incentive plan payouts during
such fiscal years.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL
COMPENSATION LONG-TERM
------------------------ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS(#)
- ------------------------------------------------------------ -------- -------- ---------------
<S> <C> <C> <C>
Donald Engel............................................. 1995 $ -- --
Chairman of the Board and Chief 1996 138,750 500,000(2)
Executive Officer(1) 1997 180,000 200,000(2)
Michael Bracken.......................................... 1995 $ 90,000 24,000(3)
Vice President - New Construction Sales 1996 95,041 34,000(3)
1997 114,908 22,000(4)
</TABLE>
- -------------------------
(1) Mr. Engel has served as the Chief Executive Officer since March 1996,
served as Co-Chairman of the Board from March 1996 to May 1997 and has
served Chairman of the Board since May 1997.
(2) Represents options granted under the Company's 1996 Stock Option Plan
to purchase 500,000 shares of Common Stock at an exercise price of
$4.00 per share and 200,000 shares of Common Stock at an exercise price
of $3.25 per share.
(3) Represents options granted under the Company's 1993 Stock Option Plan
to purchase 24,000 shares of Common Stock at an exercise price of $4.75
and 34,000 shares of Common Stock at an exercise price of $4.125.
(4) Represents options granted under the Company's 1996 Stock Option Plan
to purchase 22,000 shares of Common Stock at an exercise price of
$2.73.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Donald Engel,
effective as of March 25, 1996, which provides for the employment of Mr. Engel
as Chairman of the Board and Chief Executive Officer of the Company. Such
employment agreement provides for an annual base salary of $180,000 subject to
annual increases in accordance with the Consumer Price Index. The employment
agreement requires Mr. Engel to devote his full time, energies and efforts to
the affairs of the Company. Mr. Engel has agreed that during the term of his
employment agreement and for a period of five years thereafter, he will not
compete or engage in a business competitive with any recycling or solid-waste
disposal business in which the Company or its subsidiaries or affiliates then
engages and which operates within any state in which the Company conducts
business. The employment agreement provides that Mr. Engel or the Company may
terminate such agreement upon ten days notice. Upon the termination of the
employment agreement, Mr. Engel will be entitled to receive any unpaid salary
and accrued bonus through the date of termination.
The Company has entered into a three-year employment and consulting
agreement with Mark D. Shantzis, effective as of March 25, 1996, which provides
for the employment of Mr. Shantzis as Co-Chairman of the Board and President of
the Company or Consultant to the Company. Mr. Shantzis resigned as Co-Chairman
of the Board in May 1997 but continues to serve as a Consultant. The initial
term of the employment and consulting agreement will be automatically extended
for successive one year terms unless either party gives notice of its intent not
to
7
<PAGE>
extend the term at least six months prior to its expiration date (three months
in the case of any extension period after the initial term). Such agreement
provides for an annual base salary of $180,000 subject to annual increases in
accordance with the Consumer Price Index. Mr. Shantzis has agreed that during
the term of his employment and consulting agreement and for a period of one year
thereafter, he will not consult, compete or engage in or own in excess of 5% of
any entity which engages in the business of providing mechanical multi-story
recycling and which operates within any state in which the Company conducts
business. The employment and consulting agreement provides that Mr. Shantzis or
the Company may terminate such agreement upon 30 days notice. Upon the
termination of Mr. Shantzis' employment and/or consulting relationship with the
Company, Mr. Shantzis will be entitled to receive any unpaid salary and bonus
accrued through the date of termination and a lump sum severance payment in the
amount of the base salary that would have been paid by the Company to Mr.
Shantzis through the scheduled end of the employment and consulting agreement.
The Company has entered into a five-year employment agreement with each
of J. Gary McAlpin (the "McAlpin Employment Agreement") and Bradley Hacker (the
"Hacker Employment Agreement"), effective as of March 10, 1998, which employment
agreements provide for the employment of Mr. McAlpin as Chief Operating Officer
and Mr. Hacker as Chief Financial Officer. The initial terms of the McAlpin
Employment Agreement and the Hacker Employment Agreement will be automatically
extended for a five-year term upon a change of control of the Company, and for
successive one-year terms unless either party gives notice of its intent not to
extend the term at least six months prior to its expiration date (three months
in the case of any extension period after the initial term). The McAlpin
Employment Agreement provides for an annual base salary of $120,000 subject to
annual increases in accordance with the Consumer Price Index and an annual
incentive bonus of not less than $50,000 and the Hacker Employment Agreement
provides for an annual base salary of $85,000 subject to annual increases in
accordance with the Consumer Price Index and an annual incentive bonus of not
less than $25,000. Pursuant to their respective employment agreements, Mr.
McAlpin and Mr. Hacker have each agreed that during the term of his employment
agreement and for a period of one year thereafter, he will not consult with or
engage in or own in excess of 5% of any entity which engages in the business of
providing mechanical multi-story recycling and which operates within any state
in which the Company conducts business. Upon the termination of Mr. McAlpin's or
Mr. Hacker's employment with the Company due to the non-renewal by the Company
of either the McAlpin Employment Agreement or the Hacker Employment Agreement,
the terminated executive will be entitled to receive any unpaid salary and bonus
accrued through the date of termination plus one-year's base salary. Upon the
termination of Mr. McAlpin's or Mr. Hacker's employment with the Company by the
Company for cause or by the executive without cause, the terminated executive
will be entitled to receive any unpaid salary and bonus accrued through the date
of termination. Upon the termination of Mr. McAlpin's or Mr. Hacker's employment
with the Company by the Company without cause, the terminated executive will be
entitled to receive any unpaid salary accrued through the date of termination,
any bonus that would have been payable to the executive for the fiscal year and
a lump sum severance payment in the amount of the base salary, benefits that
would have been paid by the Company to such executive through the scheduled end
of the employment agreement plus one-year's base salary.
On February 20, 1998, HS Acquisition Corp., a newly-formed wholly-owned
subsidiary of the Company, merged with and into Hesco Sales, Inc., a Florida
corporation ("Hesco") owned by Evelio Acosta ("Acosta"), with Hesco as the
surviving corporation (the "Hesco Merger"). As a result of the Hesco Merger,
Hesco became a wholly-owned subsidiary of the Company. On February 20, 1998, AM
Acquisition Corp., a newly-formed wholly-owned subsidiary of the Company, merged
with and into Atlantic Maintenance of Miami, Inc., a Florida corporation
("Atlantic Maintenance") owned by Acosta, with Atlantic Maintenance as the
surviving corporation (the "Atlantic Maintenance Merger"). As a result of the
Atlantic Maintenance Merger, Atlantic Maintenance became a wholly-owned
subsidiary of the Company. In connection with the Hesco Merger and the Atlantic
Maintenance Merger, Hesco has entered into a five-year employment agreement with
Acosta, effective as of February 20, 1998, which provides for the employment of
Acosta by Hesco. Such agreement provides for an annual base salary of $75,000
subject to annual increases in accordance with the Consumer Price Index. Acosta
has agreed that during the term of his employment and consulting agreement and
for a period of two years thereafter, he will not consult with or engage in or
own in excess of 1% of any business of the type and character engaged in and
competitive with the business of the Company. The employment and consulting
agreement provides that Acosta or Hesco may terminate such agreement upon 60
days notice. Upon the termination of Acosta's employment with Hesco by Hesco
without cause, Acosta will be entitled to receive any unpaid salary and bonus
accrued through the date of termination and a
8
<PAGE>
lump sum severance payment in the amount of the base salary that would have been
paid by Hesco to Acosta through the scheduled end of the employment and
consulting agreement.
STOCK OPTION PLANS
In July 1993, the Company adopted the 1993 Stock Option Plan (the "1993
Stock Option Plan") pursuant to which 350,000 shares of Common Stock were
reserved for issuance to officers and other key employees and to certain other
persons who are employed or engaged by the Company. In 1995, the number of
shares of Common Stock reserved for issuance under the 1993 Stock Option Plan
was increased by 150,000 shares to 500,000 shares. Under the 1993 Stock Option
Plan, options are designated as "incentive stock options" or "non-qualified
options" within the meaning of the Internal Revenue Code of 1986, as amended.
The purpose of the 1993 Stock Option Plan is to encourage stock ownership by
persons instrumental to the success of the Company, in order to give them a
greater personal interest in the Company's business. Generally, the exercise
price of any stock option granted to an eligible employee may not be less than
100% of the fair market value of the shares underlying such option on the date
of the grant, unless such employee owns more than 10% of the outstanding Common
Stock, in which case the exercise price of any incentive stock may not be less
than 110% of such fair market value. Generally the term of each option and the
manner in which it may be exercised is determined by the Board of Directors,
provided, that no option may be exercisable more than ten years after the date
of grant and, in the case of an incentive stock option to an eligible employee
owning more than 10% of the outstanding Common Stock, no more than five years.
Payment for shares purchased upon exercise of any option may be in cash or in
shares of the Company's Common Stock. Options are not transferable, except upon
the death of an optionee. In general, the unexercised portion of an option
granted to an employee under the 1993 Stock Option Plan shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of: (i) three months after the date on which the employee's employment is
terminated for any reason other than for Cause (as defined in the 1993 Stock
Option Plan), mental or physical disability or death; (ii) immediately upon the
termination of the employee's employment for Cause; (iii) one year after the
date on which the employee's employment is terminated by reason of the
employee's mental or physical disability or (iv)(A) one year after the date of
termination of the employee's employment by reason of the death of the employee
or (B) three months after the date of the employee's death if such death occurs
during the one year period following the employee's termination as a result of
mental or physical disability. As of December 31, 1997, 496,106 options have
been granted and are outstanding under the 1993 Stock Option Plan at an average
exercise price of $4.87 per share.
In July 1993, the Company also adopted the Directors Option Plan (the
"Directors Option Plan") pursuant to which 50,000 shares of Common Stock have
been reserved for issuance. Only non-employee directors are eligible to receive
options under the Directors Option Plan. The Directors Option Plan provides for
an automatic grant of an option to purchase 5,000 shares of Common Stock upon a
person's election as a director of the Company and an automatic grant of 2,500
shares of Common Stock upon such person's re-election as a director of the
Company. The Company has granted to Warren Adelson options to purchase 5,000
shares of Common Stock under the Directors Option Plan at an exercise price
equal to $5.00 per share, options to purchase 2,500 shares of Common Stock at an
exercise price equal to $6.06 per share and options to purchase 2,500 shares of
Common Stock at an exercise price of $8.25 per share. In addition, in March
1996, the Company granted to each of Messrs. Merritt and Pashcow options under
the Directors Option Plan to purchase 2,500 shares of Common Stock at an
exercise price of $3.75 per share. In 1996, the Board of Directors terminated
the Directors Option Plan.
In 1996, the Board of Directors and the shareholders of the Company
adopted the Company's 1996 Stock Option Plan (the "1996 Stock Option Plan")
pursuant to which 1,000,000 shares of Common Stock are reserved for issuance to
officers and other key employees and to certain other persons who are employed
or engaged by the Company. The purpose of the 1996 Stock Option Plan is to
encourage stock ownership by persons instrumental to the success of the Company,
in order to give them a greater personal interest in the Company's business. The
terms and provisions of the 1996 Stock Option Plan are substantially similar to
those of the 1993 Stock Option Plan. In connection with the adoption of the 1996
Stock Option Plan, the Company's Compensation Committee granted to Donald Engel,
the Company's Chairman of the Board and Chief Executive Officer, subject to
shareholder approval of the 1996 Stock Option Plan, options to purchase 500,000
shares of Common Stock at $4.00 per share. Such options were to vest over a
five-year period with vesting to accelerate in the event that the price of the
Common
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<PAGE>
Stock increased to $6.00 per share, which acceleration occurred in July 1996. As
of December 31, 1997, 912,500 options have been granted and are outstanding
under the 1996 Stock Option Plan at an average exercise price of $3.53 per
share.
In addition, in March 1996, the Board of Directors adopted, subject to
shareholder approval which has been obtained, the New Directors Plan (the "New
Directors Plan") pursuant to which 150,000 shares of Common Stock are reserved
for issuance. Only non-employee directors are eligible to receive options under
the New Directors Plan. The New Directors Plan provides for an automatic grant
of an option to purchase 20,000 shares of Common Stock upon a person's election
as a director of the Company and an automatic grant of 1,000 shares of Common
Stock upon such person's re-election as a director of the Company. The Company
has granted to each of Messrs. Pashcow and Merritt options to purchase 21,500
shares of Common Stock under the New Directors Plan at an exercise price of
$4.00 per share and to Mr. Adelson options to purchase 1,000 shares of Common
Stock under the New Directors Plan at an exercise price of $4.00 per share.
OPTION/SAR GRANT TABLE
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended December 31, 1997 to the Named
Executive Officers.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS GRANTED TO
UNDERLYING EMPLOYEES IN EXERCISE PRICE
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE EXPIRATION DATE
- ------------------------------- ------------------ ------------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
Donald Engel................. 200,000 52.6% $2.97 7/24/2007
Michael F. Bracken.............. 22,000 5.5% 2.72 12/31/2007
</TABLE>
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1997. No stock options were exercised by the Named Executive Officers during
the year ended December 31, 1997. No stock appreciation rights have been granted
or are outstanding.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FY-END(#) AT FY-END($)
ON VALUE ----------------------------------------------------------------
NAME EXERCISE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------ ------------- ---------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Donald Engel........... -- -- 700,000 -- --(1) --(1)
Michael F. Bracken........ -- -- 72,400 27,600 --(1) --(1)
</TABLE>
- ---------------
(1) The closing bid price for the Company's Common Stock as reported on NASDAQ
on December 31, 1997 was $2.3125. Value is zero as the exercise prices for
all options are greater than the closing bid price at December 31, 1997.
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<PAGE>
CERTAIN TRANSACTIONS
During the years ended December 31, 1997 and 1996, product development
expenses of $0 and $7,666, respectively, were paid to Tekmar Inc. ("Tekmar"), a
company owned by the wife of Byron M. Blank, a former Vice-President of the
Company. At December 31, 1997 and 1996, the Company had a note receivable from
Tekmar in the amount of $33,223. The note bears interest at 5.5% and is due 180
days after demand for repayment by the Company. As of the date hereof, the
Company has not demanded repayment of such note and does not anticipate that it
will demand repayment in the foreseeable future.
In February 1995, the Company, through its newly-formed wholly-owned
subsidiary IDC Acquisition Sub, Inc., acquired all of the outstanding capital
stock of IDC Systems, a New York corporation organized in November 1987 of which
Harriet Oestreicher owned 47.5% of the outstanding capital stock. Mrs.
Oestreicher is the wife of Seymour Oestreicher, the Company's Vice President -
Distribution Development. In connection with the acquisition, the Company paid
$500,000 in cash and issued 26,667 shares of Common Stock to the former
shareholders of IDC Systems and agreed to issue additional shares of Common
Stock in three equal amounts annually, commencing in February 1996. In April
1996, 1997 and 1998, an aggregate of 25,083 additional shares of Common Stock
were issued to the former shareholders of IDC Systems, of which Harriet
Oestreicher received 15,885 shares.
The Company had entered into a two-year consulting agreement with
Harriet Oestreicher, the wife of Seymour Oestreicher, effective as of February
23, 1995, which provided for the employment of Mrs. Oestreicher as a consultant
to IDC Systems. The consulting agreement terminated pursuant to its terms in
February 1997. The consulting agreement provided for an annual fee of $50,000.
Mrs. Oestreicher has agreed not to compete or engage in a business competitive
with the Company's current or anticipated business (including those previously
conducted by IDC Systems) during the term of her consulting agreement and for a
period of five years thereafter.
In March 1996, the Company entered into an employment agreement with
Donald Engel, the Company's Chairman of the Board and Chief Executive Officer,
and an employment and consulting agreement with Mark D. Shantzis, the Company's
then Co-Chairman of the Board. On March 10, 1998, the Company entered into an
employment agreement with each of J. Gary McAlpin, the Chief Operating Officer
of the Company, and Bradley Hacker, the Chief Financial Officer of the Company.
See "Executive Compensation" above for a description of these agreements.
In connection with the Hesco Merger and the Atlantic Maintenance
Merger, Hesco entered into, and the Company entered into an unconditional
guaranty relating to, a lease with the Acosta Family Limited Partnership, an
affiliate of Acosta, for Hesco's corporate headquarters and manufacturing
facilities in an approximately 110,000 square foot building situated in Miami,
Florida at a monthly rent of approximately $27,000 per month. Prior to the Hesco
Merger and the Atlantic Maintenance Merger, in January 1998, the land and
building were sold by United Truck and Body Corporation, a subsidiary of Hesco,
to the Acosta Family Limited Partnership for a purchase price of approximately
$1.3 million. Also in connection with the Hesco Merger and the Atlantic
Maintenance Merger, Hesco entered into, and the Company entered into
unconditional guaranty relating to, a lease with Acosta and Gladys Acosta for an
approximately 3,000 square foot shop in Hialeah, Miami, Florida, at a monthly
rent of approximately $1,000 per month.
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<PAGE>
PROPOSAL TO APPROVE THE ADOPTION OF
THE 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
BACKGROUND AND PURPOSE. In March 1998, the Board of Directors adopted
the 1998 Executive Incentive Compensation Plan (the "1998 Plan") and recommended
that it be submitted to the Company's shareholders for their approval at the
Annual Meeting. The terms of the 1998 Plan provide for grants of stock options,
stock appreciation rights ("SARs"), restricted stock, deferred stock, other
stock-related awards and performance or annual incentive awards that may be
settled in cash, stock or other property (collectively, "Awards"). The effective
date of the 1998 Plan is June 1, 1998 (the "Effective Date"). The 1998 Plan is
intended to supplement the 1996 Stock Option Plan and the 1993 Stock Option Plan
(collectively, the "Preexisting Plans"). No Awards have been made under the 1998
Plan as of the date of this Proxy Statement, and no Awards will be granted under
the 1998 Plan unless the 1998 Plan is approved by the Company's shareholders at
the Annual Meeting.
Shareholder approval of the Plan is required (i) for purposes of
compliance with certain exclusions from the limitations of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), which are further
described below, (ii) in order for the 1998 Plan to be eligible under the "plan
lender" exemption from the margin requirements of Regulation G promulgated under
the Exchange Act and (iii) by the rules of the Nasdaq National Market.
As of the adoption of the 1998 Plan, options had been granted and are
outstanding for 912,500 of the 1,000,000 shares available for issuance pursuant
to options granted under the 1996 Stock Option Plan and options had been granted
and are outstanding for 496,106 of the 500,000 shares available for issuance
pursuant to options granted under the 1993 Stock Option Plan. Accordingly, with
only approximately 91,394 shares available for option grants under the
Preexisting Plans, a principal purpose of the 1998 Plan is to provide additional
shares for which options can be granted and thereby allow the Company to grant
additional options under the 1998 Plan in furtherance of the purposes described
above. In addition, the Board determined to adopt a new plan in order to respond
to a number of changes and proposed changes relating to Rule 16b-3 under the
Exchange Act and regulations under Section 162(m) of the Code, to broaden the
types of performance goals that may be set and the types of Awards that may be
granted by the Committee, as described below, and otherwise to add flexibility
to annual incentive awards and other performance-based awards intended to
qualify for corporate tax deductions under Section 162(m) and to otherwise adopt
provisions intended to enable the Committee to better promote the goals of the
Company's compensation policies and programs, as discussed above.
The following is a summary of certain principal features of the 1998
Plan. This summary is qualified in its entirety by reference to the complete
text of the 1998 Plan, which is attached to this Proxy Statement as Annex A.
Shareholders are urged to read the actual text of the 1998 Plan in its entirety.
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
1998 Plan, the total number of shares of Common Stock that may be subject to the
granting of Awards under the 1998 Plan at any time during the term of the 1998
Plan shall be equal to 1,000,000 shares, plus the number of shares with respect
to which Awards previously granted under the 1998 Plan terminate without being
exercised, and the number of shares that are surrendered in payment of any
Awards or any tax withholding requirements.
The 1998 Plan limits the number of shares which may be issued pursuant
to incentive stock options to 1,000,000 shares.
In addition, the 1998 Plan imposes individual limitations on the amount
of certain Awards in part to comply with Section 162(m) of the Code. Under these
limitations, during any fiscal year the number of options, SARs, restricted
shares of Common Stock, deferred shares of Common Stock, shares as a bonus or in
lieu of other Company obligations, and other stock-based Awards granted to any
one participant may not exceed 250,000 for each type of such Award, subject to
adjustment in certain circumstances. The maximum amount that may be paid out as
an annual incentive Award or other cash Award in any fiscal year to any one
participant is $1,000,000, and the maximum amount that may be earned as a
performance Award or other cash Award in respect of a performance period by any
one participant is $5,000,000.
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<PAGE>
The Committee, as described below, is authorized to adjust the
limitations described in the two preceding paragraphs and is authorized to
adjust outstanding Awards (including adjustments to exercise prices of options
and other affected terms of Awards) in the event that a dividend or other
distribution (whether in cash, shares of Common Stock or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the Common Stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants. The Committee is also authorized to adjust performance
conditions and other terms of Awards in response to these kinds of events or in
response to changes in applicable laws, regulations or accounting principles.
ELIGIBILITY. The persons eligible to receive Awards under the 1998 Plan
are the officers, directors, employees and independent contractors of the
Company and its subsidiaries. An employee on leave of absence may be considered
as still in the employ of the Company or a subsidiary for purposes of
eligibility for participation in the 1998 Plan.
ADMINISTRATION. The 1998 Plan is to be administered by a committee
designated by the Board of Directors consisting of not less than two directors
(the "Committee"'), each member of which must be a "non-employee director" as
defined under Rule 16b-3 under the Exchange Act and an "outside director" for
purposes of Section 162(m) of the Code. However, except as otherwise required to
comply with Rule 16b-3 of the Exchange Act, or Section 162(m) of the Code, the
Board may exercise any power or authority granted to the Committee. Subject to
the terms of the 1998 Plan, the Committee or the Board is authorized to select
eligible persons to receive Awards, determine the type and number of Awards to
be granted and the number of shares of Common Stock to which Awards will relate,
specify times at which Awards will be exercisable or settleable (including
performance conditions that may be required as a condition thereof), set other
terms and conditions of Awards, prescribe forms of Award agreements, interpret
and specify rules and regulations relating to the 1998 Plan, and make all other
determinations that may be necessary or advisable for the administration of the
1998 Plan.
STOCK OPTIONS AND SARS. The Committee or the Board is authorized to
grant stock options, including both incentive stock options ("ISOs"), which can
result in potentially favorable tax treatment to the participant, and
non-qualified stock options, and SARs entitling the participant to receive the
amount by which the fair market value of a share of Common Stock on the date of
exercise (or defined "change in control price" following a change in control)
exceeds the grant price of the SAR. The exercise price per share subject to an
option and the grant price of an SAR are determined by the Committee, but in the
case of an ISO must not be less than the fair market value of a share of Common
Stock on the date of grant. For purposes of the 1998 Plan, the term "fair market
value" means the fair market value of Common Stock, Awards or other property as
determined by the Committee or the Board or under procedures established by the
Committee or the Board. Unless otherwise determined by the Committee or the
Board, the fair market value of Common Stock as of any given date shall be the
closing sales price per share of Common Stock as reported on the principal stock
exchange or market on which Common Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported. The maximum term of each option or
SAR, the times at which each option or SAR will be exercisable, and provisions
requiring forfeiture of unexercised options or SARs at or following termination
of employment generally are fixed by the Committee or the Board, except that no
option or SAR may have a term exceeding ten years. Options may be exercised by
payment of the exercise price in cash, shares that have been held for at least 6
months, outstanding Awards or other property having a fair market value equal to
the exercise price, as the Committee or the Board may determine from time to
time. Methods of exercise and settlement and other terms of the SARs are
determined by the Committee or the Board. SARs granted under the 1998 Plan may
include "limited SARs" exercisable for a stated period of time following a
change in control of the Company, as discussed below.
RESTRICTED AND DEFERRED STOCK. The Committee or the Board is authorized
to grant restricted stock and deferred stock. Restricted stock is a grant of
shares of Common Stock which may not be sold or disposed of, and which may be
forfeited in the event of certain terminations of employment, prior to the end
of a restricted period specified by the Committee or the Board. A participant
granted restricted stock generally has all of the rights of a shareholder of the
Company, unless otherwise determined by the Committee or the Board. An Award of
deferred
13
<PAGE>
stock confers upon a participant the right to receive shares of Common Stock at
the end of a specified deferral period, subject to possible forfeiture of the
Award in the event of certain terminations of employment prior to the end of a
specified restricted period. Prior to settlement, an Award of deferred stock
carries no voting or dividend rights or other rights associated with share
ownership, although dividend equivalents may be granted, as discussed below.
DIVIDEND EQUIVALENTS. The Committee or the Board is authorized to grant
dividend equivalents conferring on participants the right to receive, currently
or on a deferred basis, cash, shares of Common Stock, other Awards or other
property equal in value to dividends paid on a specific number of shares of
Common Stock or other periodic payments. Dividend equivalents may be granted
alone or in connection with another Award, may be paid currently or on a
deferred basis and, if deferred, may be deemed to have been reinvested in
additional shares of Common Stock, Awards or otherwise as specified by the
Committee or the Board.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee or
the Board is authorized to grant shares of Common Stock as a bonus free of
restrictions, or to grant shares of Common Stock or other Awards in lieu of
Company obligations to pay cash under the 1998 Plan or other plans or
compensatory arrangements, subject to such terms as the Committee or the Board
may specify.
OTHER STOCK-BASED AWARDS. The Committee or the Board is authorized to
grant Awards that are denominated or payable in, valued by reference to, or
otherwise based on or related to shares of Common Stock. Such Awards might
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, purchase rights for shares of Common
Stock, Awards with value and payment contingent upon performance of the Company
or any other factors designated by the Committee or the Board, and Awards valued
by reference to the book value of shares of Common Stock or the value of
securities of or the performance of specified subsidiaries or business units.
The Committee or the Board determines the terms and conditions of such Awards.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS. The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions (including
subjective individual goals) as may be specified by the Committee or the Board.
In addition, the 1998 Plan authorizes specific annual incentive Awards, which
represent a conditional right to receive cash, shares of Common Stock or other
Awards upon achievement of certain preestablished performance goals and
subjective individual goals during a specified fiscal year. Performance Awards
and annual incentive Awards granted to persons whom the Committee expects will,
for the year in which a deduction arises, be "covered employees" (as defined
below) will, if and to the extent intended by the Committee, be subject to
provisions that should qualify such Awards as "performance-based compensation"
not subject to the limitation on tax deductibility by the Company under Code
Section 162(m). For purposes of Section 162(m), the term "covered employee"
means the Company's chief executive officer and each other person whose
compensation is required to be disclosed in the Company's filings with the SEC
by reason of that person being among the four highest compensated officers of
the Company as of the end of a taxable year. If and to the extent required under
Section 162(m) of the Code, any power or authority relating to a performance
Award or annual incentive Award intended to qualify under Section 162(m) of the
Code is to be exercised by the Committee and not the Board.
Subject to the requirements of the 1998 Plan, the Committee or the
Board will determine performance Award and annual incentive Award terms,
including the required levels of performance with respect to specified business
criteria, the corresponding amounts payable upon achievement of such levels of
performance, termination and forfeiture provisions and the form of settlement.
In granting annual incentive or performance Awards, the Committee or the Board
may establish unfunded award "pools," the amounts of which will be based upon
the achievement of a performance goal or goals based on one or more of certain
business criteria described in the 1998 Plan (including, for example, total
shareholder return, net income, pretax earnings, EBITDA, earnings per share, and
return on investment). During the first 90 days of a fiscal year or performance
period, the Committee or the Board will determine who will potentially receive
annual incentive or performance Awards for that fiscal year or performance
period, either out of the pool or otherwise.
14
<PAGE>
After the end of each fiscal year or performance period, the Committee
or the Board will determine (i) the amount of any pools and the maximum amount
of potential annual incentive or performance Awards payable to each participant
in the pools and (ii) the amount of any other potential annual incentive or
performance Awards payable to participants in the 1998 Plan. The Committee or
the Board may, in its discretion, determine that the amount payable as an annual
incentive or performance Award will be reduced from the amount of any potential
Award.
OTHER TERMS OF AWARDS. Awards may be settled in the form of cash,
shares of Common Stock, other Awards or other property, in the discretion of the
Committee or the Board. The Committee or the Board may require or permit
participants to defer the settlement of all or part of an Award in accordance
with such terms and conditions as the Committee or the Board may establish,
including payment or crediting of interest or dividend equivalents on deferred
amounts, and the crediting of earnings, gains and losses based on deemed
investment of deferred amounts in specified investment vehicles. The Committee
or the Board is authorized to place cash, shares of Common Stock or other
property in trusts or make other arrangements to provide for payment of the
Company's obligations under the 1998 Plan. The Committee or the Board may
condition any payment relating to an Award on the withholding of taxes and may
provide that a portion of any shares of Common Stock or other property to be
distributed will be withheld (or previously acquired shares of Common Stock or
other property be surrendered by the participant) to satisfy withholding and
other tax obligations. Awards granted under the 1998 Plan generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
participant's death, except that the Committee or the Board may, in its
discretion, permit transfers for estate planning or other purposes subject to
any applicable restrictions under Rule 16b-3.
Awards under the 1998 Plan are generally granted without a requirement
that the participant pay consideration in the form of cash or property for the
grant (as distinguished from the exercise), except to the extent required by
law. The Committee or the Board may, however, grant Awards in exchange for other
Awards under the 1998 Plan, awards under other Company plans, or other rights to
payment from the Company, and may grant Awards in addition to and in tandem with
such other Awards, rights or other awards.
ACCELERATION OF VESTING; CHANGE IN CONTROL. The Committee or the Board
may, in its discretion, accelerate the exercisability, the lapsing of
restrictions or the expiration of deferral or vesting periods of any Award, and
such accelerated exercisability, lapse, expiration and if so provided in the
Award agreement, vesting shall occur automatically in the case of a "change in
control" of the Company, as defined in the 1998 Plan (including the cash
settlement of SARs and "limited SARs" which may be exercisable in the event of a
change in control). In addition, the Committee or the Board may provide in an
Award agreement that the performance goals relating to any performance based
Award will be deemed to have been met upon the occurrence of any "change in
control." Upon the occurrence of a change in control, if so provided in the
Award agreement, stock options and limited SARs (and other SARs which so
provide) may be cashed out based on a defined "change in control price," which
will be the higher of (i) the cash and fair market value of property that is the
highest price per share paid (including extraordinary dividends) in any
reorganization, merger, consolidation, liquidation, dissolution or sale of
substantially all assets of the Company, or (ii) the highest fair market value
per share (generally based on market prices) at any time during the 60 days
before and 60 days after a change in control. For purposes of the 1998 Plan, the
term "change in control" generally means (a) approval by shareholders of any
reorganization, merger or consolidation or other transaction or series of
transactions if persons who were shareholders immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power of the reorganized,
merged or consolidated company's then outstanding, voting securities, or a
liquidation or dissolution of the Company or the sale of all or substantially
all of the assets of the Company (unless the reorganization, merger,
consolidation or other corporate transaction, liquidation, dissolution or sale
is subsequently abandoned), or (b) a change in the composition of the Board such
that the persons constituting the current Board, and subsequent directors
approved by the current Board (or approved by such subsequent directors), cease
to constitute at least a majority of the Board.
AMENDMENT AND TERMINATION. The Board of Directors may amend, alter,
suspend, discontinue or terminate the 1998 Plan or the Committee's authority to
grant Awards without further shareholder approval, except
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<PAGE>
shareholder approval must be obtained for any amendment or alteration if such
approval is required by law or regulation or under the rules of any stock
exchange or quotation system on which shares of Common Stock are then listed or
quoted. Thus, shareholder approval may not necessarily be required for every
amendment to the 1998 Plan which might increase the cost of the 1998 Plan or
alter the eligibility of persons to receive Awards. Shareholder approval will
not be deemed to be required under laws or regulations, such as those relating
to ISOs, that condition favorable treatment of participants on such approval,
although the Board may, in its discretion, seek shareholder approval in any
circumstance in which it deems such approval advisable. Unless earlier
terminated by the Board, the 1998 Plan will terminate at such time as no shares
of Common Stock remain available for issuance under the 1998 Plan and the
Company has no further rights or obligations with respect to outstanding Awards
under the 1998 Plan.
SECURITIES ACT REGISTRATION. The Company intends to register the shares
of Common Stock available for Awards under the 1998 Plan pursuant to a
Registration Statement on Form S-8 filed with the SEC.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS OF OPTIONS. The following is
a brief description of the federal income tax consequences generally arising
with respect to Awards of options under the 1998 Plan.
The grant of an option will create no tax consequences for the
participant or the Company. A participant will not have taxable income upon
exercising an ISO (except that the alternative minimum tax may apply). Upon
exercising an option other than an ISO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and the fair
market value of the freely transferable and non-forfeitable shares of Common
Stock acquired on the date of exercise.
Upon a disposition of shares of Common Stock acquired upon exercise of
an ISO before the end of the applicable ISO holding periods, the participant
must generally recognize ordinary income equal to the lesser of (i) the fair
market value of the shares of Common Stock at the date of exercise of the ISO
minus the exercise price, or (ii) the amount realized upon the disposition of
the ISO shares of Common Stock minus the exercise price. Otherwise, a
participant's disposition of shares of Common Stock acquired upon the exercise
of an option (including an ISO for which the ISO holding periods are met)
generally will result in short-term or long-term capital gain or loss measured
by the difference between the sale price and the participant's tax basis in such
shares of Common Stock (the tax basis generally being the exercise price plus
any amount previously recognized as ordinary income in connection with the
exercise of the option).
The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option. The Company generally is not entitled to a tax deduction relating to
amounts that represent a capital gain to a participant. Accordingly, the Company
will not be entitled to any tax deduction with respect to an ISO if the
participant holds the shares of Common Stock for the ISO holding periods prior
to disposition of the shares.
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to
the Code, which generally disallows a public company's tax deduction for
compensation to covered employees in excess of $1 million in any tax year
beginning on or after January 1, 1994. Compensation that qualifies as
"performance-based compensation" is excluded from the $1 million deductibility
cap, and therefore remains fully deductible by the company that pays it. As
discussed above, the Company intends that options and certain other Awards
granted to employees whom the Committee expects to be covered employees at the
time a deduction arises in connection with such Awards, qualify as such
"performance-based compensation," so that such Awards will not be subject to the
Section 162(m) deductibility cap of $1 million. Future changes in Section 162(m)
or the regulations thereunder may adversely affect the ability of the Company to
ensure that options or other Awards under the 1998 Plan will qualify as
"performance-based compensation" that is fully deductible by the Company under
Section 162(m).
The foregoing discussion, which is general in nature and is not
intended to be a complete description of the federal income tax consequences of
the 1998 Plan, is intended for the information of stockholders considering how
to vote at the Annual Meeting and not as tax guidance to participants in the
1998 Plan. This discussion does not
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address the effects of other federal taxes or taxes imposed under state, local
or foreign tax laws. Participants in the 1998 Plan should consult a tax advisor
as to the tax consequences of participation.
NEW PLAN BENEFITS. No Awards have been granted under the 1998 Plan
through the date of this Proxy Statement. The Company believes that Awards
granted under the 1998 Plan will be granted primarily to those persons who
possess a capacity to contribute significantly to the successful performance of
the Company. Because persons to whom Awards may be made are to be determined
from time to time by the Committee in its discretion, it is impossible at this
time to indicate the precise number, name or positions of persons who will
hereafter receive Awards or the nature and terms of such Awards.
The Board recommends that the 1998 Plan be approved.
A copy of the entire text of the 1998 Plan is provided herewith as
Annex A to this Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL TO
ADOPT THE 1998 EXECUTIVE INCENTIVE COMPENSATION PLAN.
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OTHER BUSINESS; REPRESENTATIVES OF THE COMPANY'S AUDITORS
The Board of Directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
Representatives of Coopers & Lybrand LLP, the Company's independent
auditors, are not expected to be present at the Annual Meeting, and,
accordingly, will not be available to respond to shareholder inquiries.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1999 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later than February 18, 1999.
By Order Of The Board of Directors
DONALD ENGEL
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
Miami, Florida
June 22, 1998
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ANNEX A
HI-RISE RECYCLING SYSTEMS, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE>
<TABLE>
<CAPTION>
HI-RISE RECYCLING SYSTEMS, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
<S> <C>
1. Purpose.................................................................................1
2. Definitions.............................................................................1
3. Administration..........................................................................3
(a) Authority of the Committee.....................................................3
(b) Manner of Exercise of Committee Authority......................................4
(c) Limitation of Liability........................................................4
4. Stock Subject to Plan...................................................................4
(a) Limitation on Overall Number of Shares Subject to Awards.......................4
(b) Application of Limitations.....................................................4
5. Eligibility; Per-Person Award Limitations...............................................5
6. Specific Terms of Awards................................................................5
(a) General........................................................................5
(b) Options........................................................................5
(c) Stock Appreciation Rights......................................................6
(d) Restricted Stock...............................................................6
(e) Deferred Stock.................................................................7
(f) Bonus Stock and Awards in Lieu of Obligations..................................8
(g) Dividend Equivalents...........................................................8
(h) Other Stock-Based Awards.......................................................8
7. Certain Provisions Applicable to Awards.................................................9
(a) Stand-Alone, Additional, Tandem and Substitute Awards..........................9
(b) Term of Awards.................................................................9
(c) Form and Timing of Payment Under Awards; Deferrals.............................9
(d) Exemptions from Section 16(b) Liability........................................9
8. Performance and Annual Incentive Awards.................................................9
(a) Performance Conditions.........................................................9
(b) Performance Awards Granted to Designated Covered Employees....................10
(c) Annual Incentive Awards Granted to Designated Covered Employees...............11
(d) Written Determinations........................................................12
(e) Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m)......12
9. Change in Control......................................................................12
(a) Effect of "Change in Control."................................................12
(b) Definition of "Change in Control..............................................13
(c) Definition of "Change in Control Price."......................................13
10. General Provisions.....................................................................13
(a) Compliance With Legal and Other Requirements..................................13
(b) Limits on Transferability; Beneficiaries......................................14
(c) Adjustments...................................................................14
(d) Taxes.........................................................................14
(e) Changes to the Plan and Awards................................................15
(f) Limitation on Rights Conferred Under Plan.....................................15
(g) Unfunded Status of Awards; Creation of Trusts.................................15
(h) Nonexclusivity of the Plan....................................................15
(i) Payments in the Event of Forfeitures; Fractional Shares.......................15
(j) Governing Law.................................................................16
(k) Plan Effective Date and Stockholder Approval; Termination of Plan.............16
</TABLE>
(i)
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of this 1998 Executive Incentive Compensation
Plan (the "Plan") is to assist Hi-Rise Recycling Systems, Inc., a Florida
corporation (the "Company") and its subsidiaries in attracting, motivating,
retaining and rewarding high-quality executives and other employees, officers,
Directors and independent contractors by enabling such persons to acquire or
increase a proprietary interest in the Company in order to strengthen the
mutuality of interests between such persons and the Company's stockholders, and
providing such persons with annual and long term performance incentives to
expend their maximum efforts in the creation of shareholder value. The Plan is
also intended to qualify certain compensation awarded under the Plan for tax
deductibility under Section 162(m) of the Code (as hereafter defined) to the
extent deemed appropriate by the Committee (or any successor committee) of the
Board of Directors of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right
granted to a Participant under Section 8(c) hereof to receive a cash payment,
Stock or other Award, unless otherwise determined by the Committee, after the
end of a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and
"Beneficial Ownership" shall have the meanings ascribed to such terms in Rule
13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined
with related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist of at
least two directors, and each member of which shall be
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(i) a "non-employee director" within the meaning of Rule 16b-3 under the
Exchange Act, unless administration of the Plan by "non-employee directors" is
not then required in order for exemptions under Rule 16b-3 to apply to
transactions under the Plan, and (ii) an "outside director" within the meaning
of Section 162(m) of the Code, unless administration of the Plan by "outside
directors" is not then required in order to qualify for tax deductibility under
Section 162(m) of the Code.
(j) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.
(k) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.
(l) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(p) "Effective Date" means the effective date of the Plan,
which shall be June 1, 1998.
(q) "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, only employees of
the Company or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(s) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of
Stock, Awards or other property as determined by the Committee or the Board, or
under procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.
(u) "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(v) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.
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(w) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(x) "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.
(y) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
(z) "Parent Corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company, if
each of the corporations in the chain (other than the Company) owns stock
possessing 50% or more of the combined voting power of all classes of stock in
one of the other corporations in the chain.
(aa) "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.
(bb) "Performance Award" means a right, granted to an
Eligible Person under Section 8 hereof, to receive Awards based upon performance
criteria specified by the Committee or the Board.
(cc) "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(dd) "Restricted Stock" means Stock granted to a
Participant under Section 6(d) hereof, that is subject to certain restrictions
and to a risk of forfeiture.
(ee) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3
and Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan
and Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act
(ff) "Stock" means the Company's Common Stock, and such
other securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(gg) "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.
(hh) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
3. ADMINISTRATION.
(a) AUTHORITY OF THE COMMITTEE. The Plan shall be
administered by the Committee; provided, however, that except as otherwise
expressly provided in this Plan or in order to comply with Code Section 162(m)
or Rule 16b-3 under the Exchange Act, the Board may exercise any power or
authority granted to the Committee under this Plan. The Committee or the Board
shall have full and final authority, in each case subject to and consistent with
the provisions of the Plan, to select Eligible Persons to become Participants,
grant Awards, determine the type, number and other terms and conditions of, and
all other matters relating to, Awards, prescribe Award agreements (which need
not be identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award agreements
and correct defects, supply
A-3
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omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.
(b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The
Committee, and not the Board, shall exercise sole and exclusive discretion on
any matter relating to a Participant then subject to Section 16 of the Exchange
Act with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the
Exchange Act. Any action of the Committee or the Board shall be final,
conclusive and binding on all persons, including the Company, its subsidiaries,
Participants, Beneficiaries, transferees under Section 10(b) hereof or other
persons claiming rights from or through a Participant, and stockholders. The
express grant of any specific power to the Committee or the Board, and the
taking of any action by the Committee or the Board, shall not be construed as
limiting any power or authority of the Committee or the Board. The Committee or
the Board may delegate to officers or managers of the Company or any subsidiary,
or committees thereof, the authority, subject to such terms as the Committee or
the Board shall determine, (i) to perform administrative functions, (ii) with
respect to Participants not subject to Section 16 of the Exchange Act, to
perform such other functions as the Committee or the Board may determine, and
(iii) with respect to Participants subject to Section 16, to perform such other
functions of the Committee or the Board as the Committee or the Board may
determine to the extent performance of such functions will not result in the
loss of an exemption under Rule 16b-3 otherwise available for transactions by
such persons, in each case to the extent permitted under applicable law and
subject to the requirements set forth in Section 8(d). The Committee or the
Board may appoint agents to assist it in administering the Plan.
(c) LIMITATION OF LIABILITY. The Committee and the Board,
and each member thereof, shall be entitled to, in good faith, rely or act upon
any report or other information furnished to him or her by any executive
officer, other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.
4. STOCK SUBJECT TO PLAN.
(a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO
AWARDS. Subject to adjustment as provided in Section 10(c) hereof, the total
number of shares of Stock reserved and available for delivery in connection with
Awards under the Plan shall be the sum of (i) 1,000,000 plus (ii) the number of
shares with respect to Awards previously granted under the Plan that terminate
without being exercised, expire, are forfeited or canceled, and the number of
shares of Stock that are surrendered in payment of any Awards or any tax
withholding with regard thereto. Any shares of Stock delivered under the Plan
may consist, in whole or in part, of authorized and unissued shares or treasury
shares. Subject to adjustment as provided in Section 10(c) hereof, in no event
shall the aggregate number of shares of Stock which may be issued pursuant to
ISOs exceed 1,000,000 shares.
(b) APPLICATION OF LIMITATIONS. The limitation contained in
Section 4(a) shall apply not only to Awards that are settleable by the delivery
of shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.
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5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 250,000 shares of Stock, subject to adjustment as provided
in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),
6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as an
Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $1,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $5,000,000.
6. SPECIFIC TERMS OF AWARDS.
(a) GENERAL. Awards may be granted on the terms and
conditions set forth in this Section 6. In addition, the Committee or the Board
may impose on any Award or the exercise thereof, at the date of grant or
thereafter (subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any time,
any term or condition of an Award that is not mandatory under the Plan. Except
in cases in which the Committee or the Board is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Florida law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b) OPTIONS. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:
(i) EXERCISE PRICE. The exercise price per share of
Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price
shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of the Stock on the date of
grant of the Option and shall not, in any event, be less than
the par value of a share of Stock on the date of grant of such
Option. If an employee owns or is deemed to own (by reason of
the attribution rules applicable under Section 424(d) of the
Code) more than 10% of the combined voting power of all
classes of stock of the Company or any Parent Corporation and
an Incentive Stock Option is granted to such employee, the
option price of such Incentive Stock Option (to the extent
required by the Code at the time of grant) shall be no less
than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted.
(ii) TIME AND METHOD OF EXERCISE. The Committee or
the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole
or in part (including based on achievement of performance
goals and/or future service requirements), the time or times
at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions,
the methods by which such exercise price may be paid or deemed
to be paid (including in the discretion of the Committee or
the Board a cashless exercise procedure), the form of such
payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or
any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a
deferred basis), and the methods by or forms in which Stock
will be delivered or deemed to be delivered to Participants.
(iii) ISOS. The terms of any ISO granted under
the Plan shall comply in all respects with the provisions of
Section 422 of the Code. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority
granted under the
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Plan be exercised, so as to disqualify either the Plan or any
ISO under Section 422 of the Code, unless the Participant has
first requested the change that will result in such
disqualification. Thus, if and to the extent required to
comply with Section 422 of the Code, Options granted as
Incentive Stock Options shall be subject to the following
special terms and conditions:
(A) the Option shall not be exercisable more
than ten years after the date such Incentive Stock Option is
granted; provided, however, that if a Participant owns or is
deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power
of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such
Participant, the term of the Incentive Stock Option shall be
(to the extent required by the Code at the time of the grant)
for no more than five years from the date of grant; and
(B) The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is
granted) of the shares of stock with respect to which
Incentive Stock Options granted under the Plan and all other
option plans of the Company or its Parent Corporation during
any calendar year exercisable for the first time by the
Participant during any calendar year shall not (to the extent
required by the Code at the time of the grant) exceed
$100,000.
(c) STOCK APPRECIATION RIGHTS. The Committee and the Board
each is authorized to grant SAR's to Participants on the following terms and
conditions:
(i) RIGHT TO PAYMENT. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon
exercise thereof, the excess of (A) the Fair Market Value of
one share of stock on the date of exercise (or, in the case of
a "Limited SAR" that may be exercised only in the event of a
Change in Control, the Fair Market Value determined by
reference to the Change in Control Price, as defined under
Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee or the Board. The grant price of
an SAR shall not be less than the Fair Market Value of a share
of Stock on the date of grant except as provided under Section
7(a) hereof.
(ii) OTHER TERMS. The Committee or the Board shall
determine at the date of grant or thereafter, the time or
times at which and the circumstances under which a SAR may be
exercised in whole or in part (including based on achievement
of performance goals and/or future service requirements), the
time or times at which SARs shall cease to be or become
exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form
of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and
conditions of any SAR. Limited SARs that may only be exercised
in connection with a Change in Control or other event as
specified by the Committee or the Board, may be granted on
such terms, not inconsistent with this Section 6(c), as the
Committee or the Board may determine. SARs and Limited SARs
may be either freestanding or in tandem with other Awards.
(d) RESTRICTED STOCK. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:
(i) GRANT AND RESTRICTIONS. Restricted Stock shall
be subject to such restrictions on transferability, risk of
forfeiture and other restrictions, if any, as the Committee or
the Board may impose, which restrictions may lapse separately
or in combination at such times, under such
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circumstances (including based on achievement of performance
goals and/or future service requirements), in such
installments or otherwise, as the Committee or the Board may
determine at the date of grant or thereafter. Except to the
extent restricted under the terms of the Plan and any Award
agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a
stockholder, including the right to vote the Restricted Stock
and the right to receive dividends thereon (subject to any
mandatory reinvestment or other requirement imposed by the
Committee or the Board). During the restricted period
applicable to the Restricted Stock, subject to Section 10(b)
below, the Restricted Stock may not be sold, transferred,
pledged, hypothecated, margined or otherwise encumbered by the
Participant.
(ii) FORFEITURE. Except as otherwise determined by
the Committee or the Board at the time of the Award, upon
termination of a Participant's employment during the
applicable restriction period, the Participant's Restricted
Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the
Committee or the Board may provide, by rule or regulation or
in any Award agreement, or may determine in any individual
case, that restrictions or forfeiture conditions relating to
Restricted Stock shall be waived in whole or in part in the
event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Restricted Stock.
(iii) CERTIFICATES FOR STOCK. Restricted Stock
granted under the Plan may be evidenced in such manner as the
Committee or the Board shall determine. If certificates
representing Restricted Stock are registered in the name of
the Participant, the Committee or the Board may require that
such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such
Restricted Stock, that the Company retain physical possession
of the certificates, and that the Participant deliver a stock
power to the Company, endorsed in blank, relating to the
Restricted Stock.
(iv) DIVIDENDS AND SPLITS. As a condition to the
grant of an Award of Restricted Stock, the Committee or the
Board may require that any cash dividends paid on a share of
Restricted Stock be automatically reinvested in additional
shares of Restricted Stock or applied to the purchase of
additional Awards under the Plan. Unless otherwise determined
by the Committee or the Board, Stock distributed in connection
with a Stock split or Stock dividend, and other property
distributed as a dividend, shall be subject to restrictions
and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has
been distributed.
(e) DEFERRED STOCK. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:
(i) AWARD AND RESTRICTIONS. Satisfaction of an
Award of Deferred Stock shall occur upon expiration of the
deferral period specified for such Deferred Stock by the
Committee or the Board (or, if permitted by the Committee or
the Board, as elected by the Participant). In addition,
Deferred Stock shall be subject to such restrictions (which
may include a risk of forfeiture) as the Committee or the
Board may impose, if any, which restrictions may lapse at the
expiration of the deferral period or at earlier specified
times (including based on achievement of performance goals
and/or future service requirements), separately or in
combination, in installments or otherwise, as the Committee or
the Board may determine. Deferred Stock may be satisfied by
delivery of Stock, cash equal to the Fair Market Value of the
specified number of shares of Stock covered by the Deferred
Stock, or a combination thereof, as determined by the
Committee or the Board at the
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date of grant or thereafter. Prior to satisfaction of an Award
of Deferred Stock, an Award of Deferred Stock carries no
voting or dividend or other rights associated with share
ownership.
(ii) FORFEITURE. Except as otherwise determined by
the Committee or the Board, upon termination of a
Participant's employment during the applicable deferral period
thereof to which forfeiture conditions apply (as provided in
the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to
deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee
or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred
Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in
part the forfeiture of Deferred Stock.
(iii) DIVIDEND EQUIVALENTS. Unless otherwise
determined by the Committee or the Board at date of grant,
Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either
(A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having
a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the
amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or
permit the Participant to elect.
(f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.
(g) DIVIDEND EQUIVALENTS. The Committee and the Board each
is authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.
(h) OTHER STOCK-BASED AWARDS. The Committee and the Board
each is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
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7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.
(a) STAND-ALONE, ADDITIONAL, TANDEM AND SUBSTITUTE AWARDS.
Awards granted under the Plan may, in the discretion of the Committee or the
Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under other plans
of the Company or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).
(b) TERM OF AWARDS. The term of each Award shall be for such
period as may be determined by the Committee or the Board; provided that in no
event shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).
(c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee or
the Board shall determine, including, without limitation, cash, Stock that have
been held for at least 6 months, other Awards or other property, and may be made
in a single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or the Board
or upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee or
the Board (subject to Section 10(e) of the Plan) or permitted at the election of
the Participant on terms and conditions established by the Committee or the
Board. Payments may include, without limitation, provisions for the payment or
crediting of a reasonable interest rate on installment or deferred payments or
the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.
(d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure
that neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability under
Section 16(b) thereof (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the Fair Market Value of Stock at the date of grant of the Award
then required in order to comply with Rule 16b-3.
8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.
(a) PERFORMANCE CONDITIONS. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion
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to reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m), shall be exercised by the
Committee and not the Board.
(b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 8(b).
(i) PERFORMANCE GOALS GENERALLY. The performance
goals for such Performance Awards shall consist of one or more
business criteria and a targeted level or levels of
performance with respect to each of such criteria, as
specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m) and regulations
thereunder including the requirement that the level or levels
of performance targeted by the Committee result in the
achievement of performance goals being "substantially
uncertain." The Committee may determine that such Performance
Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of
the performance goals must be achieved as a condition to
grant, exercise and/or settlement of such Performance Awards.
Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) BUSINESS CRITERIA. One or more of the
following business criteria for the Company, on a consolidated
basis, and/or specified subsidiaries or business units of the
Company (except with respect to the total stockholder return
and earnings per share criteria), shall be used exclusively by
the Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500 Stock Index or the
S&P Specialty Retailer Index; (3) net income; (4) pretax
earnings; (5) earnings before interest expense, taxes,
depreciation and amortization; (6) pretax operating earnings
after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8)
earnings per share; (9) return on equity; (10) return on
capital; (11) return on investment; (12) operating earnings;
(13) working capital or inventory; and (14) ratio of debt to
stockholders' equity. One or more of the foregoing business
criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof that are intended
to qualify as "performanced-based compensation under Code
Section 162(m).
(iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING
PERFORMANCE GOALS. Achievement of performance goals in respect
of such Performance Awards shall be measured over a
performance period of up to ten years, as specified by the
Committee. Performance goals shall be established not later
than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date
as may be required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) PERFORMANCE AWARD POOL. The Committee may
establish a Performance Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in
connection with Performance Awards. The amount of such
Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the
business
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criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may
specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.
(v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS.
Settlement of such Performance Awards shall be in cash, Stock,
other Awards or other property, in the discretion of the
Committee. The Committee may, in its discretion, reduce the
amount of a settlement otherwise to be made in connection with
such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or
settlement of Performance Awards.
(c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Annual Incentive Award shall be contingent
upon achievement of preestablished performance goals and other terms set forth
in this Section 8(c).
(i) ANNUAL INCENTIVE AWARD POOL. The Committee may
establish an Annual Incentive Award pool, which shall be an
unfunded pool, for purposes of measuring Company performance
in connection with Annual Incentive Awards. The amount of such
Annual Incentive Award pool shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by
the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Annual Incentive Award
pool as a percentage of any such business criteria, a
percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical
relationship to such business criteria.
(ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later
than the end of the 90th day of each fiscal year, or at such
other date as may be required or permitted in the case of
Awards intended to be "performance-based compensation" under
Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive
Awards, and the amounts potentially payable thereunder, for
that fiscal year, either out of an Annual Incentive Award pool
established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section
162(m), the amount potentially payable shall be based upon the
achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the
Committee; in other cases, such amount shall be based on such
criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant
shall be subject to the limitation set forth in Section 5
hereof.
(iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After
the end of each fiscal year, the Committee shall determine the
amount, if any, of (A) the Annual Incentive Award pool, and
the maximum amount of potential Annual Incentive Award payable
to each Participant in the Annual Incentive Award pool, or (B)
the amount of potential Annual Incentive Award otherwise
payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any
Participant as an Annual Incentive Award shall be reduced from
the amount of his or her
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potential Annual Incentive Award, including a determination to
make no Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid
or forfeited in the event of termination of employment by the
Participant prior to the end of a fiscal year or settlement of
such Annual Incentive Award.
(d) WRITTEN DETERMINATIONS. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).
(e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER
CODE SECTION 162(M). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.
9. CHANGE IN CONTROL.
(a) EFFECT OF "CHANGE IN CONTROL." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b), the following provisions shall apply:
(i) Any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully
exercisable and vested as of the time of the Change in
Control, subject only to applicable restrictions set forth in
Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided
by their terms) shall become exercisable for amounts, in cash,
determined by reference to the Change in Control Price;
(iii) The restrictions, deferral of settlement,
and forfeiture conditions applicable to any other Award
granted under the Plan shall lapse and such Awards shall be
deemed fully vested as of the time of the Change in Control,
except to the extent of any waiver by the Participant and
subject to applicable restrictions set forth in Section 10(a)
hereof; and
(iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions
under the Plan, such performance goals and other conditions
will be deemed to be met if and to the extent so provided by
the Committee in the Award agreement relating to such Award.
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(b) DEFINITION OF "CHANGE IN CONTROL. A "Change in Control"
shall be deemed to have occurred upon:
(i) Approval by the shareholders of the Company of
a reorganization, merger, consolidation or other form of
corporate transaction or series of transactions, in each case,
with respect to which persons who were the shareholders of the
Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power
entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding
voting securities, or a liquidation or dissolution of the
Company or the sale of all or substantially all of the assets
of the Company (unless such reorganization, merger,
consolidation or other corporate transaction, liquidation,
dissolution or sale (any such event being referred to as a
"Corporate Transaction") is subsequently abandoned); or
(ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the "Incumbent
Board") cease for any reason to constitute at least a majority
of the Board, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising
the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in
connection with an actual or threatened election contest
relating to the election of the Directors of the Company, as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Securities Exchange Act) shall be, for
purposes of this Agreement, considered as though such person
were a member of the Incumbent Board.
(c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.
10. GENERAL PROVISIONS.
(a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The
Company may, to the extent deemed necessary or advisable by the Committee or the
Board, postpone the issuance or delivery of Stock or payment of other benefits
under any Award until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule or
regulation, listing or other required action with respect to any stock exchange
or automated quotation system upon which the Stock or other Company securities
are listed or quoted, or compliance with any other obligation of the Company, as
the Committee or the Board, may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply
with or be subject to such other conditions as it may consider appropriate in
connection with the issuance or delivery of Stock or payment of other benefits
in compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations. The foregoing notwithstanding, in connection
with a Change in Control, the Company shall take or cause to be taken no action,
and shall undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of Stock
or payment of benefits under any Award or the imposition of any other conditions
on such issuance, delivery or payment, to the extent that such postponement or
other condition would represent a greater burden on a Participant than existed
on the 90th day preceding the Change in Control.
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(b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the Committee
or the Board.
(c) ADJUSTMENTS. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof
to Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.
(d) TAXES. The Company and any Subsidiary is authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or
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<PAGE>
receive Stock or other property and to make cash payments in respect thereof in
satisfaction of a Participant's tax obligations, either on a mandatory or
elective basis in the discretion of the Committee.
(e) CHANGES TO THE PLAN AND AWARDS. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.
(f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.
(g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan
is intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.
(h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).
(i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES.
Unless otherwise determined by the Committee or the Board, in the event of a
forfeiture of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the
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<PAGE>
Board shall determine whether cash, other Awards or other property shall be
issued or paid in lieu of such fractional shares or whether such fractional
shares or any rights thereto shall be forfeited or otherwise eliminated.
(j) GOVERNING LAW. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of Florida without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL;
TERMINATION OF PLAN. The Plan shall become effective on the Effective Date,
subject to subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable NASDAQ requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may
be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.
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<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
8505 N.W. 74TH STREET
MIAMI, FLORIDA 33166
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
COMMON STOCK
The undersigned holder of Common Stock of Hi-Rise Recycling Systems,
Inc., a Florida corporation (the "Company"), hereby appoints Donald Engel and
Brad Hacker, and each of them, as proxies for the undersigned, each with full
power of substitution, for and in the name of the undersigned to act for the
undersigned and to vote, as designated below, all of the shares of Common Stock
of the Company that the undersigned is entitled to vote at the 1998 Annual
Meeting of Shareholders of the Company, to be held on Wednesday, July 15, 1998,
at 10:00 a.m., local time, at the offices of the law firm of Greenberg Traurig
Hoffman Lipoff Rosen & Quentel located the Met Life Building, 200 Park Avenue,
New York, New York, or at any adjournment(s) or postponement(s) thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE
DIRECTOR NOMINEES LISTED IN PROPOSAL (1) BELOW AND THE OTHER PROPOSAL SET FORTH
BELOW.
Proposal 1. Election of Donald Engel, Warren Adelson, Ira S. Merritt and Joel M.
Pashcow as directors of the Company.
| | VOTE FOR all nominees listed above, except vote withheld from
the following nominee(s) (if any).
----------------------------------------------------------------
| | VOTE WITHHELD from all nominees.
Proposal 2. Proposal to approve the adoption of the Company's 1998 Executive
Incentive Compensation Plan.
| | FOR | | AGAINST | | ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting, and any adjournments or
postponements thereof.
(SEE REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED "FOR" ALL OF THE PROPOSALS.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement and (iii) the Company's 1997 Annual Report to
Shareholders.
Dated:______________________________ , 1998
___________________________________________
(Signature)
___________________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name
appears hereon and mail it promptly even
though you may plan to attend the meeting.
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.
PLEASE MARK, SIGN AND DATE THIS PROXY CARD
AND PROMPTLY RETURN IT IN THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN
THE UNITED STATES.
