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:
[X] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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):
[X] 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:
<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 7, 1999
------------------------------
TO OUR SHAREHOLDERS:
Our 1999 annual meeting of shareholders will be held at the offices of
the law firm of Olshan Grundman Frome & Rosenzweig, LLP, located at 505 Park
Avenue, New York, New York, on Wednesday, July 7, 1999, beginning at 10:00 a.m.
local time. At the meeting, shareholders will act on the following matters:
1. Election of five directors, each for a term of one year;
2. Consideration of a proposal to amend our Articles of Incorporation
to increase the number of authorized shares of common stock from
20,000,000 shares to 50,000,000 shares;
3. Consideration of a proposal to approve and ratify our acquisition
of all of the issued and outstanding common stock of Bes-Pac, Inc.,
a South Carolina corporation, pursuant to the terms of an Agreement
and Plan of Merger, dated as of October 9, 1998, among BPI
Acquisition Corp., a South Carolina corporation wholly owned by us,
Bes-Pac, the sole shareholder of Bes-Pac, and us, which acquisition
was consummated on October 28, 1998;
4. Consideration of a proposal to approve and ratify the amendment of
our 1998 Executive Incentive Compensation Plan to increase the
number of shares of common stock reserved for issuance pursuant to
grants of awards under such plan from 1,000,000 shares to 2,000,000
shares; and
5. Any other matters that properly come before the meeting.
Shareholders of record at the close of business on June 7, 1999 are
entitled to vote at the meeting or any postponement or adjournment.
By Order of the Board of Directors
BRADLEY HACKER
Corporate Secretary
Miami, Florida
June __, 1999
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>
ANNUAL MEETING OF SHAREHOLDERS
OF
HI-RISE RECYCLING SYSTEMS, INC.
-----------------------------
PROXY STATEMENT
-----------------------------
This proxy statement contains information related to our annual meeting
of shareholders of to be held on Wednesday, July 7, 1999, beginning at 10:00
a.m., at the offices of the law firm of Olshan Grundman Frome & Rosenzweig, LLP,
located at 505 Park Avenue, New York, New York, and at any adjournments or
postponements.
ABOUT THE MEETING
WHAT IS THE PURPOSE OF THE ANNUAL MEETING?
At the annual meeting, shareholders will act upon the matters outlined
in the accompanying notice of meeting, including the election of directors,
amendment of our articles of incorporation, approval and ratification of our
acquisition of Bes-Pac and approval and ratification of an amendment to our 1998
Executive Incentive Compensation Plan. In addition, our management will report
on the performance of the Company during 1998 and respond to questions from
shareholders.
WHO IS ENTITLED TO VOTE?
Only shareholders of record at the close of business on the record
date, June 7, 1999, are entitled to receive notice of the annual meeting and to
vote the shares of common stock that they held on that date at the meeting, or
any postponement or adjournment of the meeting. Each outstanding share entitles
its holder to cast one vote on each matter to be voted upon.
WHO CAN ATTEND THE MEETING?
All shareholders as of the record date, or their duly appointed
proxies, may attend. Please note that if you hold shares in "street name" (that
is, through a broker or other nominee), you will need to bring a copy of a
brokerage statement reflecting your stock ownership as of the record date.
WHAT CONSTITUTES A QUORUM?
The presence at the meeting, in person or by proxy, of the holders of a
majority of the shares of common stock outstanding on the record date will
constitute a quorum, permitting the meeting to conduct its business. As of the
record date, 12,876,752 shares our of common stock were outstanding. Proxies
received but marked as abstentions and broker non-votes will be included in the
calculation of the number of shares considered to be present at the meeting but
will not be counted as votes cast "for" or "against" any given matter.
If less than a majority of outstanding shares entitled to vote are
represented at the meeting, a majority of the shares present at the meeting may
adjourn the meeting to another date, time or place, and notice need not be
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<PAGE>
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.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and
return it to us, it will be voted as you direct. If you are a registered
shareholder and you attend the meeting, you may deliver your completed proxy
card in person. "Street name" shareholders who wish to vote at the meeting will
need to obtain a proxy from the institution that holds their shares.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote
at any time before the proxy is exercised by filing with our Secretary either a
notice of revocation or a duly executed proxy bearing a later date. The powers
of the proxy holders will be suspended if you attend the meeting in person and
so request, although attendance at the meeting will not by itself revoke a
previously granted proxy.
WHAT ARE THE BOARD'S RECOMMENDATIONS?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendations of our Board of Directors. The recommendation of the Board is
set forth with the description of each item in this proxy statement. In summary,
the Board recommends a vote:
/bullet/ FOR the election of the nominated slate of directors (see
pages 6 to 7);
/bullet/ FOR the proposal to amend our Articles of Incorporation to
increase the number of authorized shares of common stock from
20,000,000 shares to 50,000,000 shares (see pages 16 to 17);
and
/bullet/ FOR the proposal to approve and ratify our acquisition of all
of the issued and outstanding capital stock of Bes-Pac
pursuant to the terms of the Agreement and Plan of Merger,
dated October 9, 1998, among Bes-Pac, the sole shareholder of
Bes-Pac, BPI Acquisition and us (see pages 17 to 19); and
/bullet/ FOR the proposal to approve and ratify the amendment of our
1998 Executive Incentive Compensation Plan to increase the
number of shares of common stock reserved for issuance
pursuant to grants of awards under such plan from 1,000,000
shares to 2,000,000 shares (see pages 19 to 25).
The Board does not know of any other matters that may be brought before
the meeting nor does it foresee or have reason to believe that the proxy holders
will have to vote for substitute or alternate board nominees. In the event that
any other matter should properly come before the meeting or any nominee is not
available for election, the proxy holders will vote as recommended by the Board
of Directors or, if no recommendation is given, in accordance with their best
judgment.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
ELECTION OF DIRECTORS. The affirmative vote of a plurality of the votes
cast at the meeting is required for the election of directors. A properly
executed proxy marked "WITHHOLD AUTHORITY" with respect to the election of one
or more directors will not be voted with respect to the director or directors
indicated, although it will be counted for purposes of determining whether there
is a quorum. Shareholders do not have the right to cumulate their votes for
directors.
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OTHER ITEMS. For each other item, the affirmative vote of a majority of
the shares of common stock present (either in person or by proxy) and voting
will be required for approval. A properly executed proxy marked "ABSTAIN" with
respect to any such matter will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention
will have the effect of a negative vote.
If you hold your shares in "street name" through a broker or other
nominee, your broker or nominee may not be permitted to exercise voting
discretion with respect to some of the matters to be acted upon. Thus, if you do
not give your broker or nominee specific instructions, your shares may not be
voted on those matters and will not be counted in determining the number of
shares necessary for approval. Shares represented by such "broker non-votes"
will, however, be counted in determining whether there is a quorum.
WHO PAYS FOR THE PREPARATION OF THE PROXY?
We will pay the cost of preparing, assembling and mailing the proxy
statement, notice of meeting and enclosed proxy card. In addition to the use of
mail, our employees may solicit proxies personally and by telephone. Our
employees will receive no compensation for soliciting proxies other than their
regular salaries. We 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 and we may reimburse such
persons for their expenses incurred in connection these activities.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is June __, 1999. You should review
this information in conjunction with our 1998 Annual Report to Shareholders,
which accompanies this proxy statement. Our principal executive offices are
located at 8505 N.W. 74th Street, Miami, Florida 33166, and our telephone number
is (305) 597-0243. A list of shareholders entitled to vote at the annual meeting
will be available at our offices for a period of ten days prior to the meeting
and at the meeting itself for examination by any shareholder.
4
<PAGE>
STOCK OWNERSHIP
WHO ARE THE LARGEST OWNERS OF THE COMPANY'S STOCK?
The following table shows each person known by us to beneficially own
more than 5% of our outstanding shares of common stock.
HOW MUCH STOCK DO THE COMPANY'S DIRECTORS AND EXECUTIVE OFFICERS OWN?
The following table also shows the amount of common stock beneficially
owned by (a) each of our directors, (b) each of our executive officers named in
the Summary Compensation Table below and (c) all of our directors and executive
officers as a group. Except as otherwise indicated, all information is as of the
record date.
<TABLE>
<CAPTION>
SHARES
AGGREGATE NUMBER ACQUIRABLE TOTAL NUMBER
OF OUTSTANDING SHARES WITHIN OF SHARES PERCENTAGE
BENEFICIALLY OWNED 60 DAYS(1) BENEFICIALLY OWNED OF SHARES
NAME (A) (B) (COLUMNS (A)+(B)) OUTSTANDING
---- ------------------ ---------- ------------------ -----------
<S> <C> <C> <C> <C>
Donald Engel................ 50,000 1,150,000 1,200,000 8.6%
J. Gary McAlpin............. -- 314,500 314,500 *
Bradley Hacker.............. -- 86,000 86,000 *
Ronald J. McCracken......... 1,890,500(2) -- 1,890,500 14.7%
Michael F. Bracken.......... -- 76,000 76,000 *
Evelio Acosta............... 1,276,094 -- 1,276,094 9.9%
Warren Adelson.............. 704,496 293,000 997,496 7.6%
Ira S. Merritt.............. 1,000 34,500 35,500 *
Joel M. Pashcow............. -- 49,500 49,500 *
Leonard Toboroff............ -- 20,000 20,000 *
All directors and executive
officers as a group (11
persons)................... 2,645,996 2,631,204 5,277,200 34.0%
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding common stock.
(1) Reflects the number of shares of common stock that could be purchased by
the holder by exercise of options granted under our stock option plans or
warrants within 60 days of the record date.
(2) Does not include an aggregate of 609,500 shares of common stock issuable
upon the conversion of a Subordinated Convertible Promissory Note Due 2003
of the Company. The convertible note was issued to Mr. McCracken in
connection with our acquisition of Bes-Pac and automatically converts into
common stock at such time as shareholders approve and ratify the
acquisition. See pages 17 to 19 of this proxy statement.
To our knowledge, based solely on a review of the copies of filings
furnished to the us and written or oral representations that no other reports
were required, we believe that all of our directors and executive officers
complied during 1998 with the reporting requirements of Section 16(a) of the
Securities Exchange Act of 1934, with the exception of (i) the grant of options
to purchase an aggregate of 107,500 shares of common stock to J.
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Gary McAlpin, our President and Chief Operating Officer, during the period May
through December 1997, and (ii) the grant of options to purchase an aggregate of
95,000 shares of common stock to Bradley Hacker, our Chief Financial Officer and
Secretary, during the period July 1993 through December 1997, which transactions
were reported in February 1999. Each of these late filings resulted from
administrative oversights.
ITEM 1--ELECTION OF DIRECTORS
Our Articles of Incorporation provide that the number of directors
constituting the 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 our Bylaws.
Our Bylaws provide that the number of directors shall be fixed from time to time
by resolution of the Board of Directors. The Board has fixed at five the number
of directors that will constitute the Board for the ensuing year. Each director
elected at the annual meeting will serve a one-year term.
Each of the current members of the Board has been nominated to be
reelected as a director at the annual meeting. The Board has no reason to
believe that any nominee will refuse or be unable to accept election. However,
if any of them should become unavailable to serve as director, the Board may
designate a substitute nominee. In that case, the persons named as proxies will
vote for the substitute nominees designated by the Board.
The directors standing for election are:
/bullet/ DONALD ENGEL
Mr. Engel, age 65, has been our Chief Executive Officer 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.
/bullet/ IRA S. MERRITT
Mr. Merritt, age 61, 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.
/bullet/ JOEL M. PASHCOW
Mr. Pashcow, age 54, 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.
6
<PAGE>
/bullet/ WARREN ADELSON
Mr. Adelson, age 56, 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.
/bullet/ LEONARD TOBOROFF
Mr. Toboroff, age 66, has been a director of the Company since
January 1999. Mr. Toboroff has served as a Vice President of
Riddell Sports, Inc. since April 1998. Since May 1989, Mr.
Toboroff has been a Vice Chairman of the Board of
Allis-Chalmers Corp. Additionally, Mr. Toboroff has served as
a director of Ameriscribe Corp. since August 1987 and served
as its Chairman and Chief Executive Officer from December 1987
to May 1988. From May through July 1982, Mr. Toboroff served
as Chairman and Chief Executive Officer of American Bakeries
Company. Mr. Toboroff has served as a director of Banner
Aerospace, Inc., a supplier of aircraft parts, since September
1992. He has also been a director of Engex, Inc. and Saratoga
Springs Beverage Corp. since 1993. Mr. Toboroff has been a
practicing attorney since 1961.
HOW ARE DIRECTORS COMPENSATED?
COMPENSATION. Each non-employee director receives an annual fee of
$10,000 and is reimbursed for expenses incurred in connection with activities as
a director of the Company. Directors who are also employees do not receive
additional compensation for their services as directors. Non-employee directors
serving on our Compensation Committee and/or Audit Committee also receive $1,000
per meeting.
OPTIONS. Each non-employee director receives an automatic grant of
options to purchase 20,000 shares of common stock under our 1996 Directors'
Stock Option Plan on his or her initial election to the Board of Directors.
Thereafter, each director receives an automatic grant of options to purchase
1,000 shares of common stock upon such directors reelection as a member of the
Board. For 1998, each of Messrs. Merritt, Pashcow, Adelson and Toboroff received
grants under this plan. Each option grant, vesting in equal installments over
five years and having a ten year term, permits the holder to purchase shares at
their fair market value on the date of grant, which was $2.50 in the case of
options granted in 1998.
HOW OFTEN DID THE BOARD MEET DURING 1998?
The Board of Directors met four times during 1998. Each director
attended more than 75% of the total number of meetings of the Board and
committees on which he served.
WHAT COMMITTEES HAS THE BOARD ESTABLISHED?
The Board of Directors has a standing Audit Committee and Compensation
Committee.
Messrs. Merritt and Adelson are the current members of the Audit
Committee. The Audit Committee held two meetings during 1998. The duties and
responsibilities of the Audit Committee include (a) recommending to the Board
the appointment of our auditors and any termination of engagement, (b) reviewing
the plan and scope of audits, (c) reviewing our significant accounting policies
and internal controls and (d) having general responsibility for all related
auditing matters.
7
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Messrs. Pashcow and Merritt are the current members of the Compensation
Committee, which committee held four meetings during the year ended December 31,
1998. The Compensation Committee reviews and approves the compensation of our
executive officers and administers our stock option plans.
MANAGEMENT
EXECUTIVE OFFICERS
Our executive officers are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
J. Gary McAlpin................................. 46 President and Chief Operating Officer
Bradley Hacker.................................. 39 Chief Financial Officer and Corporate Secretary
Michael F. Bracken.............................. 40 Executive Vice President - New Construction
Sales
Ronald J. McCracken............................. 48 Executive Vice President - Business Development
and Sales
Seymour Oestreicher............................. 73 Vice President - Distribution Development
William J. Stone................................ 52 Vice President - Sales
</TABLE>
J. GARY MCALPIN has been our President since January 1998 and our Chief
Operating Officer since March 1997. Mr. McAlpin joined us in October 1996
initially serving as our Vice President. From January 1996 to October 1996, Mr.
McAlpin served as a construction/project manager of Birwelco-Montenay, a power
generator. For the eight years prior to joining Birwelco-Montenay, Mr. McAlpin
served as the Vice President and General Manager of IDAB Incorporated, a
materials handling company.
BRADLEY HACKER has been our Chief Financial Officer since July 1997.
Mr. Hacker joined us in July 1993 as our controller. For the seven years prior
to joining us, Mr. Hacker was employed by various divisions of Campbell Taggert,
a subsidiary of Anheuser-Busch.
MICHAEL F. BRACKEN has been our Executive Vice President - New
Construction Sales since July 1996. Mr. Bracken joined us in September 1993 as a
salesman of our hi-rise system. From August 1992 to August 1993, Mr. Bracken was
the General Manager and Construction Project Manager of Brickell Biscayne
Condominium in Miami, Florida. Prior to 1992, Mr. Bracken served as a field
manager of Schlumberger Overseas Ltd., a petroleum engineering company in South
East Asia.
RONALD J. MCCRACKEN has been our Executive Vice President - Business
Development and Sales since October 1998. Prior to joining us, from February
1986 to October 1998, Mr. McCracken was the sole shareholder and served as the
President and Chief Executive Officer of Bes-Pac, our South Carolina subsidiary
engaged in the business of manufacturing and distributing solid waste handling
equipment. We acquired Bes-Pac in October 1998.
SEYMOUR OESTREICHER has been our Vice President - Distribution
Development since March 1995. Mr. Oestreicher was a founder and from 1987 until
1995 served as the Chairman of IDC Systems, a subsidiary of ours engaged in
selling, installing and servicing trash compaction systems. Mr. Oestreicher was
a founder and served
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as Chairman and President of International Synetics Corp., a company engaged in
the design, manufacture and installation of trash compaction systems from 1969
until 1986.
WILLIAM J. STONE has been our 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, Mr. Stone was engaged in real estate development in the states of Texas
and Florida and in Toronto, Canada.
ELECTION OF EXECUTIVE OFFICERS
Our officers are elected annually by and serve at the discretion of the
Board of Directors.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1995, we acquired all of the outstanding capital stock of
IDC Systems, Inc., a New York corporation organized in November 1987. Harriet
Oestreicher, the wife of Seymour Oestreicher, our Vice President - Distribution
Development, owned 47.5% of the outstanding capital stock of IDC Systems. In
connection with this acquisition, we 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, we issued an
aggregate of 25,083 additional shares of common stock to the former shareholders
of IDC Systems, of which Harriet Oestreicher received 15,885 shares.
In February 1997, we acquired all of the issued and outstanding capital
stock of Hesco Sales, Inc. and Atlantic Maintenance of Miami, Inc. from Evelio
Acosta. In connection with these transactions, Hesco Sales entered into a lease
with Acosta Family Limited Partnership, an affiliate of Evelio Acosta, for Hesco
Sales' corporate headquarters and manufacturing facilities in an approximately
110,000 square foot building situated in Miami, Florida at a monthly rental of
approximately $27,000 per month, plus applicable sales tax. We entered into an
agreement with the partnership unconditionally guaranteeing Hesco Sales'
obligations under this lease. Also in connection with the acquisition of Hesco
Sales and Atlantic Maintenance, Hesco Sales entered into a lease with Evelio
Acosta and his spouse, Gladys Acosta, for an approximately 3,000 square foot
shop in Hialeah, Miami, Florida, at a monthly rent of approximately $1,000 per
month. We also guaranteed the obligations of Hesco Sales under this lease.
During 1998, an aggregate of approximately $297,500 was paid to Evelio Acosta
under these leases.
In connection with our acquisition of Hesco Sales and Atlantic
Maintenance of Miami, Donald Engel, our Chairman of the Board and Chief
Executive Officer, loaned us $500,000, which loan accrued interest at an annual
rate of 10% per annum. We repaid the principal amount of the loan, together with
$33,333 of accrued interest, in October 1998 with amounts available under our
financing arrangements with General Electric Capital Corporation and
participating lenders. In connection with this loan, we granted Mr. Engel
warrants to purchase an aggregate of 200,000 shares of common stock at a price
of $2.75 per share, which purchase price was slightly greater than the market
price of the common stock on the date of grant of such warrants.
In connection with our acquisition of Bes-Pac, we entered into a five
year employment agreement with Ronald McCracken, the former sole shareholder of
Bes-Pac, pursuant to which Mr. McCracken is serving as our Executive Vice
President of Business Development and Sales. Additionally, in connection with
this acquisition, amendments to certain real property leases respecting three
facilities owned by Mr. McCracken at which Bes-Pac conducts business operations
were executed, which, among other things, shorted the term of two of such leases
to a period of seven years. We also agreed to guaranty Bes-Pac's obligations
under all of these leases. During 1998, an aggregate of approximately $52,000
was paid to Mr. McCracken under these leases.
9
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, for the fiscal years ended December 31,
1998, 1997 and 1996, the aggregate compensation awarded to, earned by or paid to
Donald Engel, our Chairman and Chief Executive Officer, J. Gary McAlpin, our
President and Chief Operating Officer, Bradley Hacker, our Chief Financing
Officer and Secretary, and Michael F. Bracken, our Executive Vice President -
New Construction Sales (collectively, the "named executive officers"). None of
our other executive officers earned compensation in excess of $100,000 during
1998. We did not grant any restricted stock awards or stock appreciation rights
or make any long-term incentive plan payouts during such fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION NUMBER OF
------------------------------- STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS GRANTED
--------------------------- ---- ------ ----- -------------
<S> <C> <C> <C> <C>
Donald Engel......................................... 1998 $ 180,000 - 200,000(2)
Chairman of the Board and Chief 1997 $ 180,000 - 200,000(3)
Executive Officer(1) 1996 $ 138,750 - 500,000(3)
J. Gary McAlpin...................................... 1998 $ 118,008 $ 100,000 200,000(2)
President and Chief Operating Officer 1997 $ 96,875 - 107,500(3)
1996 $ 16,912 - 17,500(3)
Bradley Hacker....................................... 1998 $ 82,840 $ 50,000 20,000(2)
Chief Financial Officer and Secretary 1997 $ 75,355 $ 20,000 35,000(3)
1996 $ 65,404 - 5,000(3)
Michael F. Bracken................................... 1998 $ 117,580 - 5,000(2)
Vice President - New Construction Sales 1997 $ 114,908 - 22,000(3)
1996 $ 95,041 - 34,000(3)
</TABLE>
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(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 our 1998 Executive Incentive Compensation
Plan.
(3) Represents options granted under our 1996 Stock Option Plan.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Donald Engel, effective as
of March 25, 1996, which provides for the employment of Mr. Engel as our
Chairman of the Board and Chief Executive Officer. This 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 our affairs. Mr. Engel
has agreed that during the term of his employment agreement and for a period
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of five years thereafter, he will not compete or engage in a business
competitive with any recycling or solid-waste disposal business in which we or
any of our affiliates then engages and which operates within any state in which
we conduct business. The employment agreement provides that it may be terminated
either by Mr. Engel or us 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.
We have also entered into five-year employment agreements with each of
J. Gary McAlpin and Bradley Hacker, effective as of March 10, 1998, which
provide for the employment of Mr. McAlpin as our President and Chief Operating
Officer and Mr. Hacker as our Chief Financial Officer. The initial term of each
of these agreements 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). Mr. McAlpin's 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.
Mr. Hacker's 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 we conduct business. Upon the termination of
Mr. McAlpin's or Mr. Hacker's employment due to our non-renewal of the
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 us 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
by us 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, a lump sum severance payment
in the amount of the base salary, and benefits that would have been paid by us
to such executive through the scheduled end of the employment agreement.
In connection with our acquisition of Bes-Pac, we entered into a
five-year employment agreement with Ronald J. McCracken, effective as of October
29, 1998, which provides for the employment of Mr. McCracken as our Executive
Vice President - Business Development and Sales. The initial term of this
agreement will be automatically extended for successive one-year terms unless
either party gives notice of its intent not to extend the term. Mr. McCracken's
employment agreement provides for an annual base salary of $120,000, subject to
annual increases in accordance with the Consumer Price Index. Pursuant to this
employment agreement, Mr. McCracken has agreed that during the term of his
employment agreement and for a period of two years thereafter, he will not,
directly or indirectly, engage in or have any interest in any business (whether
as an employee, officer, director, partner, agent, creditor, consultant or
otherwise) which engages in the business of providing manufacturing, marketing,
distributing and selling non-mobile solid waste handling equipment; provided,
however, that such restriction shall not apply to the ownership or acquisition
by Mr. McCracken of securities of any issuer that is registered under the
Securities Exchange Act of 1934, as amended, and that are listed for trading on
any national securities exchange or are quoted on Nasdaq. Upon the termination
of Mr. McCracken's employment with us for cause or by the executive without
cause, Mr. McCracken will be entitled to receive any unpaid salary through the
date of termination. Upon the termination of Mr. McCracken's employment by us
without cause, Mr. McCracken will be entitled to receive (i) any unpaid salary
accrued through the date of termination, (ii) base salary through the expiration
date of the agreement and (iii) benefits that would have been paid by the
Company through the expiration date of the employment agreement.
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<PAGE>
STOCK OPTION PLANS
In July 1993, we adopted 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 us. In
1995, the number of shares of common stock reserved for issuance under this plan
was increased by 150,000 shares to 500,000 shares. Under the 1993 Stock Option
Plan, options have been designated as "incentive stock options" or
"non-qualified options" within the meaning of the Internal Revenue Code of 1986,
as amended. As of December 31, 1998, 353,350 options had been granted and were
outstanding under the 1993 Stock Option Plan at an average exercise price of
$2.55 per share. No additional options are being granted under this option plan.
In July 1993, we also adopted a directors stock option plan pursuant to
which 50,000 shares of common stock had been reserved for issuance for grants of
options to non-employee directors. The Board of Directors terminated this
directors stock option plan in 1996.
In March 1996, we adopted the 1996 Stock Option Plan pursuant to which
1,000,000 shares of common stock have been reserved for issuance to officers and
other key employees and to certain other persons who are employed or engaged by
us. In connection with the adoption of the 1996 Stock Option Plan, our
Compensation Committee granted to Donald Engel, our Chairman of the Board and
Chief Executive Officer, options to purchase 500,000 shares of common stock.
Such options were to vest over a five-year period with vesting to accelerate in
the event that the price of the common stock increased to $6.00 per share, which
acceleration occurred in July 1996. As of December 31, 1998, 934,500 options had
been granted and were outstanding under the 1996 Stock Option Plan at an average
exercise price of $2.50 per share. No additional options are being granted by us
under the 1996 Stock Option Plan.
In March 1996, we also adopted a new directors stock option plan
pursuant to which 150,000 shares of common stock have been reserved for
issuance. Only non-employee directors are eligible to receive options under this
plan. The 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 and an automatic
grant of an option to purchase 1,000 shares of common stock upon such person's
re-election as a director. As of December 31, 1998, options to purchase an
aggregate of 49,000 shares of common stock had been granted under the new
directors stock option plan at an average exercise price of $2.50 per share.
In March 1998, we adopted the 1998 Executive Incentive Compensation
Plan (the "1998 Plan"). The 1998 Plan provides for grants of stock options,
stock appreciation rights ("SARs"), restricted stock, deferred stock, other
stock-related awards and performance or annual incentive awards that may be
settled in cash, stock or other property. The 1998 Plan was approved by
shareholders in June 1998 as part of our 1998 Annual Meeting of Shareholders.
The 1998 Plan is intended to supplement our existing stock option plans.
Pursuant to the 1998 Plan, an aggregate of 1,000,000 shares have been reserved
for issuance to our officers, directors, employees and independent contractors.
As of December 31, 1998, options to purchase an aggregate of 450,000 shares of
common stock were issued under the 1998 Plan. For a detailed discussion of the
1998 Plan refer to "Proposal 3" set forth in this proxy statement.
OPTION/SAR GRANT TABLE
The table below sets forth the following information with respect to
options granted to the named executive officers during 1998 and the potential
realizable value of such option grants:
/bullet/ the number of shares of common stock underlying options
granted during the year;
/bullet/ the percentage that such options represent of all options
granted to employees during the year;
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<PAGE>
/bullet/ the exercise price; and
/bullet/ the expiration date.
OPTION GRANTS FOR FISCAL 1998
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME GRANTED IN FISCAL YEAR ($/SHARE) DATE
---- --------- -------------- -------------- ----------
<S> <C> <C> <C> <C>
Donald Engel.............................. 200,000 44.5% $2.4375 12/31/08
J. Gary McAlpin........................... 200,000 44.5% $2.4375 12/31/08
Bradley Hacker............................ 10,000 2.2% $2.4375 12/31/08
Michael F. Bracken........................ 5,000 1.1% $2.4375 12/31/08
</TABLE>
OPTION EXERCISES AND VALUES FOR 1998
The table below sets forth the following information with respect to
option exercises during 1998 by each of the named executive officers and the
status of their options at December 31, 1998:
/bullet/ the number of shares of common stock acquired upon exercise of
options during 1998;
/bullet/ the aggregate dollar value realized upon the exercise of such
options;
/bullet/ the total number of exercisable and nonexercisable stock
options held at December 31, 1998; and
/bullet/ the aggregate dollar value of in-the-money exercisable options
at December 31, 1998.
13
<PAGE>
AGGREGATED OPTION EXERCISES DURING 1998
AND
OPTION VALUES ON DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT 12/31/98 AT 12/31/98(1)
UPON VALUE ------------------------------ ----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Donald Engel............ -- -- 950,000 -- (2) (2)
J. Gary McAlpin......... -- -- 314,500 10,000 (2) (2)
Bradley Hacker.......... -- -- 86,000 9,000 (2) (2)
Michael F. Bracken...... -- -- 76,000 39,000 (2) (2)
</TABLE>
- -------------------------
(1) Values are calculated by subtracting the exercise price from the fair
market value of the underlying common stock. For purposes of this table,
fair market value is deemed to be $2.406, the average of the high and low
common stock price reported for Nasdaq transactions on December 31, 1998.
(2) The option exercise price exceeded the fair market value of the Common
Stock on such date, and accordingly, such options were "underwater."
REPORT ON OPTION REPRICING
On November 12, 1998, the Compensation Committee of the Board of
Directors repriced substantially all outstanding options granted under our
various stock option plans and held by our then existing employees and directors
at a price of $2.50 per share, an amount slightly greater than the fair market
value of the common stock as of the date of repricing. All of the options
repriced by the Compensation Committee were exercisable at prices which were
greater than the market price of the common stock for an extended period of
time.
The Compensation Committee believes that stock options are a
significant factor in our ability to retain and provide incentives for employees
and executives and that, at their original exercise prices, the disparity
between the exercise price of these options and the market price for the common
stock at the time of repricing did not provide meaningful incentives to the
persons holding the options. The Compensation Committee also believes that the
repricing will benefit our shareholders by strengthening our ability to retain
qualified persons upon whose efforts and judgment our success is largely
dependent.
We completed this repricing through a one-for-one stock option exchange
of "underwater" stock options for all optionees under our various stock option
plans other than optionees who were no longer our employees, directors or
consultants as of such date. Other than the change in the exercise price, the
affected options remain the same.
14
<PAGE>
The following table sets forth information relating to options held by
our executive officers which were repriced by the Compensation Committee during
1998. No option repricings occurred prior to 1998.
OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF MARKET LENGTH OF
SECURITIES PRICE OF EXERCISE ORIGINAL
UNDERLYING STOCK AT PRICE AT NEW OPTION TERM
OPTIONS TIME OF TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED REPRICING REPRICING PRICE REPRICING
---- ---- ---------- --------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Donald Engel........................ 11/12/98 750,000 $2.40 $3.00-$4.00 $2.50 7-8 years
Chairman & Chief Executive Officer
J. Gary McAlpin..................... 11/12/98 125,000 $2.40 $2.55-$4.13 $2.50 7-8 years
President & Chief Operating Officer
Bradley Hacker...................... 11/12/98 85,000 $2.40 $2.55-$7.13 $2.50 4-8 years
Chief Financial Officer & Secretary
Michael Bracken..................... 11/12/98 78,000 $2.40 $2.73-$5.50 $2.50 4-8 years
Executive Vice President
Ronald J. McCracken................. -- -- -- -- -- --
Executive Vice President-Business
Development and Sales
Seymour Oestreicher................. 11/12/98 60,000 $2.40 $2.55-$4.13 $2.50 7-8 years
Vice President-Distribution
Development
William J. Stone.................... -- -- -- -- -- --
Vice President-Sales
</TABLE>
COMPENSATION COMMITTEE
JOEL PASHCOW IRA S. MERRITT
15
<PAGE>
PROPOSAL 1: AMENDMENT TO THE ARTICLES OF INCORPORATION
WHY DOES COMPANY BELIEVE THAT IT SHOULD INCREASE ITS AUTHORIZED CAPITAL?
Our Board of Directors has proposed an amendment to Article III of our
articles of incorporation that would increase the number of authorized shares of
common stock, par value $.01 per share, from 20,000,000 shares to 50,000,000
shares. Of the 20,000,000 shares of common stock presently authorized for
issuance, 12,876,752 shares were issued and outstanding as of the record date,
an aggregate of 2,447,750 shares are reserved for issuance pursuant to our
various stock option plans, an aggregate of 3,467,030 shares are reserved for
issuance upon exercise of outstanding warrants and, as described below, 609,500
shares are reserved for issuance upon conversion of a convertible promissory
note which was issued in connection with our acquisition of Bes-Pac.
Accordingly, assuming the issuance of all shares currently reserved for
issuance, we will have issued 19,646,921 of the 20,000,000 shares of common
stock currently authorized for issuance, leaving only 353,079 shares authorized
for subsequent issuances. If this proposal is approved, approximately 30,353,079
shares of common stock will be available for future issuance, in addition to the
shares currently reserved for issuance.
Our Board of Directors believes that the proposed increase in the
number of authorized shares of common stock would benefit us and our
shareholders by giving us needed flexibility in corporate planning and in
responding to developments in our business, including possible acquisition
transactions, stock splits or stock dividends and other general corporate
purposes. Having such authorized shares available for issuance in the future
would give us greater flexibility and allow us to issue shares of common stock
without incurring expenses related to the holding of a special shareholders'
meeting or waiting until the next annual meeting.
We have been an active acquiror of companies as part of our strategy to
broaden and strengthen our portfolio of product lines, geographic markets and
distribution channels. Such acquisitions have in the past and may in the future
involve payment with shares of common stock. Our Board of Directors believes
that the proposed increase in the number of authorized shares of common stock is
desirable to maintain our flexibility in choosing how to pay for acquisitions
and other corporate actions such as equity offerings to raise capital and
adoption of additional benefit plans.
Unless otherwise required by applicable law or regulation, the shares
of common stock proposed to be authorized will be issuable without further
shareholder action and on such terms and for such consideration as may be
determined by the Board. However, the Nasdaq Stock Market, on which the common
stock is listed, currently requires shareholder approval as a prerequisite to
listing shares in several instances, including acquisition transactions where
the present or potential issuance of shares could result in an increase of 20
percent or more in the number of shares of common stock outstanding.
Additionally, an increase in the number of authorized shares of common
stock could be used to make more difficult a change in control of the Company.
Under certain circumstances, the Board of Directors could use the issuance of
shares of common stock to create impediments to, or frustrate persons seeking to
effect, a coercive takeover or transfer of control of the Company. We are not
aware of any such action that may be proposed or pending.
Based on the foregoing, the Board of Directors recommends that the
first paragraph of Article III of our articles of incorporation be amended to
read as follows:
"The aggregate number of shares of all classes of capital stock that
this Corporation shall have authority to issue is fifty one million (51,000,000)
consisting of (i) fifty million (50,000,000) shares of common stock, par value
$0.01 per share (the "Common Stock"), and (ii) one million (1,000,000) shares of
preferred stock, par value $0.01 per share (the "Preferred Stock")."
16
<PAGE>
A copy of the entire text of Article III of our amended articles of
incorporation, as proposed herein, is attached to this proxy statement as Annex
A. The bold face portions of the first paragraph of Article III, as set forth in
Annex A, reflect the changes in our articles of incorporation that will result
from the approval of this proposed amendment at the Annual Meeting.
If the amendment to the articles of incorporation is approved at the
annual meeting, it will become effective upon the filing of the amendment with
the Secretary of State of the State of Florida, which is expected to be
accomplished as soon as practicable after approval is obtained.
WHAT EFFECT WILL AN INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
HAVE ON ME?
The actual change in the number of authorized shares of common stock
will have not have any effect on shareholders. However, future issuances of
common stock would result in dilution to existing shareholders.
WHAT IS THE RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS?
The Board of Directors believes that we have an insufficient number of
shares of common stock available for future acquisitions and other corporate
transactions and that it is in our best interests to increase the authorized
number of shares of common stock to 50,000,000 shares. The Board of Directors,
believing that we and our shareholders will benefit from an increase in the
number of authorized shares of common stock, recommends that shareholders vote
"for" approval of the proposed amendment to our Articles of Incorporation. Your
proxy will be voted "for" approval unless you specify otherwise.
PROPOSAL 2: APPROVAL AND RATIFICATION OF THE ACQUISITION BY THE COMPANY OF ALL
OF THE ISSUED AND OUTSTANDING COMMON STOCK OF BES-PAC, INC.
BACKGROUND
On October 30, 1998, we acquired all of the issued and outstanding
shares of common stock of Bes-Pac pursuant to the merger of Bes-Pac with and
into BPI Acquisition Corp., a South Carolina corporation wholly owned by us.
Pursuant to the merger, the issued and outstanding shares of common stock of
Bes-Pac were converted into the right to receive the following consideration:
(1) $3,000,000 in cash, (2) an aggregate of 1,890,500 shares of our common
stock, (3) a convertible promissory note of the Company in the principal amount
of $1,219,000, and (4) the contingent right to receive additional cash and
additional shares of our common stock. The consideration paid in the merger was
determined through negotiations between Ronald J. McCracken, the sole
shareholder of Bes-Pac, and us. The cash portion of the merger consideration was
funded through borrowings available under our new revolving and term credit
facilities of up to $40.0 million from General Electric Capital Corporation and
other participating lenders.
At the effective time of the merger, the separate corporate existence
of Bes-Pac ceased. BPI Acquisition Sub, the surviving corporation of the merger,
continues to be governed by the laws of the State of South Carolina under the
name "Bes-Pac, Inc." Prior to the Merger, Bes-Pac was engaged in the business of
manufacturing and distributing solid waste handling equipment. Bes-Pac's product
lines include large industrial compaction systems, roll-off waste containers and
a full line of recycling equipment.
In connection with the merger, we entered into a five year employment
agreement with Mr. McCracken pursuant to which he is serving as our Executive
Vice President of Business Development and Sales. Additionally,
17
<PAGE>
in connection with the merger, amendments to certain real property leases
respecting facilities owned by Mr. McCracken at which Bes-Pac conducts business
operations were executed, which, among other things, shorted the term of two of
such leases to a period of seven years. We have guaranteed Bes-Pac's obligations
under all of these leases.
WHY AM I BEING ASKED TO APPROVE AND RATIFY A TRANSACTION THAT HAS ALREADY
OCCURRED?
Rule 4460 of the National Association of Securities Dealers (the
"NASD"), which rule is applicable to us because our common stock is listed on
the Nasdaq SmallCap Market, sets forth certain corporate governance standards
for companies with Nasdaq listed securities. In general, pursuant to section
(i)(1)(D) of Rule 4460, we are required to obtain shareholder approval prior to
our issuance of common stock constituting in excess of 20% of the outstanding
shares of our common stock.
In connection with the negotiations regarding our acquisition of
Bes-Pac, the parties recognized that all of the shares of common stock intended
to be issued to Mr. McCracken (an aggregate of 2,504,500 shares of common stock)
represented in excess of 20% of our then outstanding shares of common stock.
Accordingly, we agreed that we would issue Mr. McCracken a convertible
promissory note as part of the merger consideration, which note would not be
convertible into common stock until such time as the merger is approved and
ratified by our shareholders. When the shareholders approve and ratify the
merger, the entire principal amount of the note will automatically convert into
a number of shares of common stock determined by dividing the then outstanding
principal amount of the note by $2.00, subject to adjustment under certain
circumstances. As of the record date, $1,219,000 was outstanding under the note,
which amount is convertible into 609,500 shares of common stock. Based on the
foregoing, we were able to complete the merger.
We are asking shareholders to approve and ratify the merger so that the
note will convert into shares of our common stock and reduce our debt service
obligations.
WHAT ARE TERMS OF THE CONVERTIBLE NOTE?
The note and the amounts payable under the note, including principal
and accrued interest, are unsecured obligations and are subordinated and junior
to certain of our existing and future indebtedness. Interest is paid quarterly
on the unpaid principal amount of the note at a variable rate of 1% per annum
over the rate of interest per annum announced by Citibank, N.A. As of the record
date, the interest payable on the note was 8 1/2% per annum. The principal
amount of the note is payable in quarterly installments of $67,722.22 each
commencing on July 31, 1999, with the remaining principal amount being due and
payable on October 31, 2003.
WHAT IF SHAREHOLDERS DO NOT APPROVE AND RATIFY THE MERGER?
If shareholders do not approve and ratify the merger, the note will not
be converted into common stock. Accordingly, the principal amount of the note
shall remain outstanding and payable by us in accordance with its terms.
WHAT EFFECT WILL THE CONVERSION OF THE NOTE HAVE ON SHAREHOLDERS?
As a result of the conversion of the note, approximately 609,500
additional shares of common stock will be issued and outstanding. These
additional shares will further dilute your percentage ownership of our common
stock and would, absent any further factors, reduce our earnings per share.
However, if the note is not converted, we will be required to pay the principal
and accrued interest on the note, thereby reducing our net income and earnings
per share. Ultimately, however, the extent of dilution or enhancement to our
shareholders with respect to earnings per share will depend on the actual
results we achieve.
18
<PAGE>
WILL THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THE NOTE BE FREELY
TRADABLE?
No. The shares of common stock issuable upon conversion of the note
will be "restricted securities" under the federal securities laws and will not
be freely tradable by Mr. McCracken. However, in connection with the merger, we
have agreed to register for resale the shares of common stock received by Mr.
McCracken in the merger, including the shares issuable, if any, upon conversion
of the note.
WHAT IS THE RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS?
The Board of Directors believes that it is in our best interests to
convert the note into common stock. Accordingly, the Board recommends that you
vote to approve and ratify the merger. Your proxy will be voted "for" approval
and ratification of the merger unless you specify otherwise.
PROPOSAL 3: APPROVAL AND RATIFICATION OF AMENDMENT TO THE 1998 EXECUTIVE
INCENTIVE COMPENSATION PLAN TO INCREASE THE NUMBER OF SHARES FROM
1,000,000 SHARES TO 2,000,000 SHARES RESERVED FOR ISSUANCE PURSUANT
TO GRANTS OF AWARDS UNDER SUCH PLAN
WHAT IS THE PURPOSE OF THE 1998 PLAN?
An integral part of our compensation philosophy is to provide
incentives to our employees to remain with us and to improve individual, as well
as Company performance. The 1998 Plan was adopted in order to allow us to
provide such incentives to our employees. The 1998 Plan provides 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 1998 Plan was intended to supplement our pre-existing stock option plans.
HOW MANY SHARES OF COMMON STOCK ARE CURRENTLY RESERVED FOR ISSUANCE UNDER THE
1998 PLAN?
One million (1,000,000) shares of common stock are currently reserved
for issuance upon the exercise of Awards granted under the 1998 Plan. As of the
record date, Awards to purchase an aggregate of 730,000 shares of common stock
have been granted and are outstanding under the 1998 Plan.
WHO IS ENTITLED TO RECEIVE GRANTS OF AWARDS UNDER THE 1998 PLAN?
Our officers, directors, employees and independent contractors and the
officers, directors and employees and independent contractors of our
subsidiaries are eligible to receive grants of Awards under the 1998 Plan.
WHO ADMINISTERS THE 1998 PLAN?
The 1998 Plan is administered by the Compensation Committee of our
Board of Directors, or in the absence thereof, the Board of Directors. The
Compensation Committee 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. Each
19
<PAGE>
member of the Compensation Committee is a "non-employee director" as defined
under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and an
"outsider director" for purposes of Section 162(m) of the Code.
WHAT TYPES OF AWARDS MAY BE GRANTED UNDER THE 1998 PLAN?
The Compensation Committee is authorized to grant the following types
of Awards under the 1998 Plan:
/bullet/ STOCK OPTIONS AND SARS. 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
exceeds the grant price of the SAR, may be granted by the
Compensation Committee under the 1998 Plan. The exercise price
per share of common stock subject to an option and the grant
price of an SAR are determined by the Compensation Committee,
but in the case of an ISO may not be less than the fair market
value of the common stock on the date of grant. Unless
otherwise determined by the Compensation Committee, 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 Nasdaq SmallCap market 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
Compensation Committee, 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 Compensation Committee may determine from time
to time. Methods of exercise and settlement and other terms of
the SARs are determined by the Compensation Committee.
/bullet/ RESTRICTED 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 Compensation Committee. A participant
granted restricted stock generally has all of the rights of a
shareholder, unless otherwise determined by the Compensation
Committee. An Award of deferred 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. As of the date hereof, no
Awards of restricted stock or deferred stock have been granted
under the 1998 Plan.
/bullet/ DIVIDEND EQUIVALENTS. The Compensation Committee 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
Compensation Committee. As of the date hereof, no Awards of
dividend equivalents have been granted under the 1998 Plan.
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<PAGE>
/bullet/ BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The
Compensation Committee 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 our obligations to pay
cash under the 1998 Plan or other plans or compensatory
arrangements, subject to such terms as the Compensation
Committee may determine. As of the date hereof, no such Awards
have been granted under the 1998 Plan.
/bullet/ OTHER STOCK-BASED AWARDS. The Compensation Committee 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 our performance or any other factors
designated by the Compensation Committee, 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 Compensation Committee
determines the terms and conditions of such Awards. As of the
date hereof, no such Awards have been granted under the 1998
Plan.
HOW ARE AWARDS EXERCISED?
Awards may be settled in the form of cash, shares of common stock,
other Awards or other property, in the discretion of the Compensation Committee.
The Compensation Committee may require or permit participants to defer the
settlement of all or part of an Award in accordance with the terms and
conditions the Compensation Committee 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. Additionally, the Compensation
Committee 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 Compensation Committee may, in its discretion, permit
transfers for estate planning or other purposes subject to any applicable
restrictions under Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended.
UNDER WHAT CIRCUMSTANCES MAY AWARDS BE GRANTED OR EXERCISED?
The right of a participant to exercise or receive a grant or settlement
of an Award, and the timing thereof, may be subject to performance conditions
(including subjective individual goals) specified by the Compensation Committee.
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. The Compensation
Committee 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.
The Compensation Committee 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. In addition, the Compensation Committee 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 provided
21
<PAGE>
in the applicable Award agreement, stock options and limited SARs 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 our assets (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.
WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF GRANTS OF STOCK OPTIONS TO THE
COMPANY AND ITS PARTICIPANTS?
In general, the grant of an option will create no tax consequences for
the participant or us. 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).
In general, we will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the participant in connection with an option.
We are not entitled to a tax deduction relating to amounts that represent a
capital gain to a participant. Accordingly, we 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, we intend that options and certain other Awards granted to
employees whom the Compensation 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 our ability to ensure that
options or other Awards under the 1998 Plan will qualify as "performance-based
compensation" that is fully deductible by us under Section 162(m).
22
<PAGE>
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 shareholders and not as tax
guidance to participants in the 1998 Plan. This discussion does not 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.
For your convenience, we have attached a copy of the entire text of the
1998 Plan, containing the proposed amendment, as Annex B to this Proxy
Statement.
23
<PAGE>
PRIOR GRANTS OF OPTIONS
As of the record date, options to purchase an aggregate of 730,000
shares of common stock had been granted under the 1998 Plan. The following table
indicates certain information as of the record date regarding options which have
been granted under the 1998 Plan to the following persons and groups:
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE
NAME AND POSITION SUBJECT TO OPTIONS PER SHARE VALUE OF OPTIONS(1)
----------------- ------------------ -------------- -------------------
<S> <C> <C> <C>
Donald Engel.......................... 200,000 $2.4375
Chairman of the Board and Chief
Executive Officer
J. Gary McAlpin....................... 200,000 $2.4375
President and Chief Operating
Officer
Bradley Hacker........................ 10,000 $2.4375
Chief Financial Officer and
Secretary
Michael Bracken....................... 5,000 $2.4375
Executive Vice President
Ronald J. McCracken................... -- -- --
Executive Vice President-Business
Development and Sales
Seymour Oestreicher................... 5,000 $2.4375
Vice President-Distribution
Development
William Stone......................... -- -- --
Vice President-Sales
All current executive officers as a
group (7 persons).................. 420,000 $2.4375
All current directors who are not
executive officers as a group
(3 persons)........................ -- -- --
All employees as a group, other than
executive officers (____ persons).. 30,500 $2.4375
</TABLE>
- -------------------------
(1) The closing sale price of the common stock on June __, 1999 was $____ per
share. Value is calculated by multiplying (i) the difference between
$_____ and the option exercise price by (ii) the number of shares of
common stock underlying the option.
24
<PAGE>
WHAT IS THE RECOMMENDATION OF THE BOARD?
The Board of Directors believes that it is in our best interests to
increase the number of shares of common stock subject to grants of Awards under
the 1998 Plan. Accordingly, the Board recommends that you vote to approve the
amendment of the 1998 Plan as described above. Your proxy will be voted "for"
approval of the amendment of the 1998 Plan unless you specify otherwise.
OTHER MATTERS
As of the date of this proxy statement, we know of no business that
will be presented for consideration at the annual meeting other than the items
referred to above. If any other matter is properly brought before the meeting
for action by shareholders, proxies in the enclosed form returned to us will be
voted in accordance with the recommendation of our Board of Directors or, in the
absence of such a recommendation, in accordance with the judgment of the proxy
holder.
SHAREHOLDER PROPOSALS
Shareholders interested in presenting a proposal for consideration at
our 2000 annual meeting of shareholders may do so by following the procedures
prescribed in Rule 14a-8 under the Securities Exchange Act of 1934 and our
Bylaws. To be eligible for inclusion in our proxy statement and form of proxy
relating to the meeting, shareholder proposals must be received by our Corporate
Secretary no later than __________, 1999. Any shareholder proposal submitted
other than for inclusion in our proxy materials for that meeting must be
delivered to us no later than _______, 2000, or such proposal will be considered
untimely. If a shareholder proposal is received after ______, 2000, we may vote
in our discretion as to the proposal all of the shares for which we have
received proxies for the 2000 annual meeting of shareholders.
By Order of the Board of Directors
BRADLEY HACKER
Corporate Secretary
Miami, Florida
June __, 1999
25
<PAGE>
ANNEX A
ARTICLES OF AMENDMENT
TO
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
HI-RISE RECYCLING SYSTEMS, INC.
Pursuant to the provisions of Section 607.1006 of the Florida Business
Corporation Act, Hi-Rise Recycling Systems, Inc. (the "Corporation") adopts the
following Articles of Amendment to its Amended and Restated Articles of
Incorporation, Charter Number L71375, filed with the Florida Secretary of State
on July 9, 1993 (the original Articles of Incorporation were filed with the
Florida Secretary of State on May 9, 1990):
1. In accordance with Section 607.1003 of the Florida Business
Corporation Act, the following Amendment to the Amended and Restated Articles of
Incorporation was adopted by all of the Directors of the Corporation and by a
majority of shareholders of the Corporation entitled to vote on July __, 1999.
The number of votes cast by the shareholders was sufficient for approval.
Article III of the Corporation's Articles of Incorporation is hereby deleted in
its entirety and replaced by the following provision, which shall be and is the
new Article III of the Articles of Incorporation:
RESOLVED, that Article III of the Corporation's Amended and Restated
Articles of Incorporation shall be amended in its entirety to read as follows:
ARTICLE III
CAPITAL STOCK
The aggregate number of shares of all classes of capital stock that
this Corporation shall have authority to issue is fifty one million
(51,000,000), consisting of (i) fifty million (50,000,000) shares of common
stock, par value $0.01 per share (the "Common Stock"), and (ii) one million
(1,000,000) shares of preferred stock, par value $0.01 per share (the "Preferred
Stock").
The designations and the preferences, limitations and relative rights
of the Common Stock and the Preferred Stock of the Corporation are as follows:
A. PROVISIONS RELATING TO THE COMMON STOCK.
1. VOTING RIGHTS.
(a) Except as otherwise required by law or as may be provided
by the resolutions of the Board of Directors authorizing the issuance of any
class or series of Preferred Stock, as provided in Section B of this Article
III, all rights to vote and all voting power shall be vested exclusively in the
holders of the Common Stock.
<PAGE>
(b) The holders of the Common Stock shall be entitled to one
vote per share on all matters submitted to a vote of shareholders, including,
without limitation, the election of directors.
2. DIVIDENDS. Except as otherwise provided by law or as may be provided
by the resolutions of the Board of Directors authorizing the issuance of any
class or series of Preferred Stock, as provided in Section B of this Article
III, the holders of the Common Stock shall be entitled to receive when, as and
if provided by the Board of Directors, out of funds legally available therefor,
dividends payable in cash, stock or otherwise.
3. LIQUIDATING DISTRIBUTIONS. Upon any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, and after
payment or provision for payment of the debts and other liabilities of the
Corporation, and except as may be provided by the resolutions of the Board of
Directors authorizing the issuance of any class or series of Preferred Stock, as
provided in Section B of this Article III, the remaining assets of the
Corporation shall be distributed pro-rata to the holders of the Common Stock.
B. PROVISIONS RELATING TO THE PREFERRED STOCK
1. GENERAL. The Preferred Stock may be issued from time to time in one
or more classes or series, the shares of each class or series to have such
designations, powers, preferences, rights, qualifications, limitations and
restrictions thereof as are stated and expressed herein and in the resolution or
resolutions providing for the issue of such class or series adopted by the Board
of Directors as hereinafter prescribed.
2. PREFERENCES. Authority is hereby expressly granted to and vested in
the Board of Directors to authorize the issuance of the Preferred Stock from
time to time in one or more classes or series, to determine and take necessary
proceedings fully to effect the issuance and redemption of any such Preferred
Stock, and, with respect to each class or series of the Preferred Stock, to fix
and state by the resolution or resolutions from time to time adopted providing
for the issuance thereof the following:
(a) whether or not the class or series is to have voting
rights, full or limited, or is to be without voting rights;
(b) the number of shares to constitute the class or series and
the designations thereof;
(c) the preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;
(d) whether or not the shares of any class or series shall be
redeemable and if redeemable the redemption price or prices, and the time or
times at which and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
2
<PAGE>
(e) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and if such retirement or
sinking fund or funds be established, the annual amount thereof and the terms
and provisions relative to the operation thereof;
(f) the dividend rate, whether dividends are payable in cash,
stock of the Corporation, or other property, the conditions upon which and the
times when such dividends are payable, the preference to or the relation to the
payment of the dividends payable on any other class or classes or series of
stock, whether or not such dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such dividends shall accumulate;
(g) the preferences, if any, and the amounts thereof that the
holders of any class or series thereof shall be entitled to receive upon the
voluntary or involuntary dissolution of, or upon any distribution of the assets
of the Corporation;
(h) whether or not the shares of any class or series shall be
convertible into, or exchangeable for, the shares of any other class or classes
or of any other series of the same or any other class or classes of the
Corporation and the conversion price or prices or ratio or ratios or the rate or
rates at which such conversion or exchange may be made, with such adjustments,
if any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(i) such other special rights and protective provisions with
respect to any class or series as the Board of Directors may deem advisable.
The shares of each class or series of the Preferred Stock may vary from
the shares of any other class or series thereof in any or all of the foregoing
respects. The Board of Directors may increase the number of shares of Preferred
Stock designated for any existing class or series by a resolution adding to such
class or series authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board of Directors may decrease
the number of shares of the Preferred Stock designated for any existing class or
series by a resolution, subtracting from such class or series unissued shares of
the Preferred Stock designated for such class or series and the shares so
subtracted shall become authorized, unissued and undesignated shares of the
Preferred Stock.
2. Except as hereby amended, the Amended and Restated Articles of
Incorporation of the Corporation shall remain the same.
IN WITNESS WHEREOF, the undersigned, being the Chief Financial Officer
of the Corporation, has executed these Articles of Amendment to the Amended and
Restated Articles of Incorporation of Hi-Rise Recycling Systems, Inc. this
________day of July, 1999.
3
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.,
a Florida Corporation
By:
------------------------------------------
Brad Hacker, Chief Financial Officer
4
<PAGE>
ANNEX B
HI-RISE RECYCLING SYSTEMS, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
<PAGE>
HI-RISE RECYCLING SYSTEMS, INC.
1998 EXECUTIVE INCENTIVE COMPENSATION PLAN
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.................................4
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...................................8
(a) Stand-Alone, Additional, Tandem and Substitute Awards............8
(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.......9
(c) Annual Incentive Awards Granted to Designated
Covered Employees...............................................10
(d) Written Determinations..........................................11
(e) Status of Section 8(b) and Section 8(c) Awards Under
Code Section 162(m).............................................11
9. Change in Control........................................................12
(a) Effect of "Change in Control"...................................12
(b) Definition of "Change in Control"...............................12
(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........................13
(c) Adjustments.....................................................13
(d) Taxes...........................................................14
i
<PAGE>
(e) Changes to the Plan and Awards..................................14
(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...................................................15
(k) Plan Effective Date and Stockholder Approval;
Termination of Plan.............................................15
ii
<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 (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,
B-1
<PAGE>
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.
(w) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
B-2
<PAGE>
(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
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
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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) 2,000,000 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
2,000,000 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.
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),
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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 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:
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(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 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
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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 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
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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).
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
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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 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.
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(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 "performance-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 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.
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(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 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
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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.
(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
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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.
(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
B-13
<PAGE>
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 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
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<PAGE>
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 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
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<PAGE>
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.
B-16
<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 Mansur Industries Inc., a
Florida corporation (the "Company"), hereby appoints Donald Engel and J. Gary
McAlpin, 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,
par value $.01 per share (the "Common Stock"), of the Company that the
undersigned is entitled to vote at the 1999 Annual Meeting of Shareholders of
the Company, to be held on Wednesday, July 7, 1999, at 10:00 a.m., local time,
at the offices of Olshan Grundman Frome Rosenzweig & Wolosky, LLP, located at
505 Park Avenue, New York, New York, and 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 PROPOSALS SET
FORTH.
Proposal 1. Election of Donald Engel, Ira S. Merritt, Joel M. Pashcow,
Warren Adelson and Leonard Toboroff 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. Amendment of the Company's Articles of Incorporation to
increase the number of authorized shares of Common Stock from
20,000,000 shares to 50,000,000 shares.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
Proposal 3. Approval and ratification of the Company's acquisition of all
of the issued and outstanding common stock of Bes-Pac, Inc.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
Proposal 4. Approval and ratification of an amendment to the Company's 1998
Executive Incentive Compensation Plan to increase the number of
shares of Common Stock reserved for issuance pursuant to grants of
awards under such plan from 1,000,000 shares to 2,000,000 shares.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the 1999 Annual Meeting
of Shareholders, and any adjournments or postponements thereof.
<PAGE>
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 1999
Annual Meeting of Shareholders and (ii) the Proxy Statement.
Dated:____________________________, 1999
________________________________________
(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 IS
NECESSARY IF MAILED IN THE UNITED
STATES.
