<PAGE>
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
BROOKS FIBER PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[FRONT]
[CORPORATE LOGO]
BROOKS FIBER PROPERTIES
March __, 1997
Dear Stockholder:
It is a pleasure to invite you to attend the 1997 Annual Meeting of
Stockholders of Brooks Fiber Properties, Inc., to be held on Tuesday, April 29,
1997 in the Main Dining Room on the 16th Floor of the St. Louis Club, 7701
Forsyth, St. Louis, Missouri at 10:00 a.m., St. Louis time. This year's Annual
Meeting of Stockholders marks the completion of our first year as a public
company. It has been a year marked by significant accomplishments for the
Company. We look forward to welcoming you to the meeting.
Whether or not you plan to attend the meeting in person, it is important
that your shares are represented at the meeting. I urge you to vote your shares
by marking the proxy form below, detaching it, and returning it promptly in the
envelope provided for that purpose.
Robert A. Brooks
Chairman of the Board
(Detach Proxy Form Here)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
BROOKS FIBER PROPERTIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert A. Brooks, James C. Allen and David
L. Solomon, or any one of them, the true and lawful attorneys in fact, agents
and proxies of the undersigned to represent the undersigned at the Annual
Meeting of the Stockholders of BROOKS FIBER PROPERTIES, INC. (the "Company") to
be held on Tuesday, April 29, 1997, commencing at 10:00 a.m., St. Louis time, in
the Main Dining Room on the 16th Floor of the St. Louis Club, 7701 Forsyth, St.
Louis, Missouri, and at any postponement or adjournment of said meeting, and to
vote all the shares of Voting Common Stock of the Company standing on the books
of the Company in the name of the undersigned as specified below and in the
discretion of any such person on such other business as may properly come before
the meeting and any postponement or adjournment thereof.
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING:
1. Election of Three Directors
[ ] FOR all nominees listed below
(except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME ON THE LIST BELOW.)
For term expiring in 2000 (Class I):
Robert F. Benbow Ronald H. Vander Pol Carol deB. Whitaker
2. Proposal to amend Article Fourth of the Restated Certificate of
Incorporation of the Company to increase the authorized number of shares of
Common Stock (NOTE: Abstentions from this proposal will count as votes
against the proposal)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the adoption of the Brooks Fiber Properties, Inc. 1997
Stock Incentive Plan (NOTE: Abstentions from this proposal will count as
votes against the proposal)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants of the Company for 1997 (NOTE: Abstentions from this
proposal will count as votes against the proposal)
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please complete, sign and date other side and return promptly.
<PAGE>
[BACK]
(Detach Proxy Form Here)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The undersigned hereby acknowledges receipt of the 1996 Annual Report to
Stockholders and the Notice of said Annual Meeting and accompanying Proxy
Statement.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF ALL OF SAID NOMINEES AS DIRECTORS AND
FOR PROPOSALS 2, 3 AND 4.
Dated this day of , 1997
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----------------------------------------------
----------------------------------------------
(If Stock is owned in joint names, both owners
must sign, or if owned by a corporation,
partnership or trust, this Proxy must be
signed by an authorized officer, partner or
trustee.) If the address at left is incorrect,
please write in the correct information.
PLEASE SIGN AS REGISTERED AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE TO:
BOATMEN'S TRUST COMPANY, P.O. BOX 14764, ST. LOUIS, MO 63178-9926.
<PAGE>
[CORPORATE LOGO]
BROOKS FIBER PROPERTIES
NOTICE OF THE 1997 ANNUAL MEETING OF
THE STOCKHOLDERS OF
BROOKS FIBER PROPERTIES, INC.
TO THE STOCKHOLDERS OF St. Louis, Missouri
BROOKS FIBER PROPERTIES, INC. March __, 1997
The 1997 Annual Meeting of the Stockholders of Brooks Fiber Properties,
Inc., a Delaware corporation (the "Company"), will be held in the Main Dining
Room on the 16th Floor of the St. Louis Club, 7701 Forsyth, St. Louis, Missouri
on Tuesday, April 29, 1997, commencing at 10:00 a.m., St. Louis time, for the
following purposes:
1. To elect three members in Class I of the Board of Directors to hold
office until the 2000 Annual Meeting of Stockholders, and until their
respective successors are elected and qualified or until their
respective earlier death, resignation or removal;
2. To consider and vote upon approval of a proposed amendment to Article
Fourth of the Company's Restated Certificate of Incorporation to, among
other things, increase the authorized number of shares of Common Stock
from 50,000,000 shares to 150,000,000 shares;
3. To consider and vote upon approval of the adoption of the Brooks Fiber
Properties, Inc. 1997 Stock Incentive Plan;
4. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors for the fiscal year ending December 31, 1997; and
5. To transact such other business, if any, as properly may be brought
before the meeting and any postponement or adjournment thereof.
The Board of Directors of the Company has fixed the close of business
on March 11, 1997 as the record date for the determination of Stockholders
entitled to receive notice of and to vote at the meeting and any postponement or
adjournment thereof.
By order of the Board of Directors.
John P. Denneen
Secretary
March __, 1997
St. Louis, Missouri
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES AT THE MEETING.
NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES.
<PAGE>
[CORPORATE LOGO] 425 WOODS MILL ROAD SOUTH, SUITE 300
TOWN & COUNTRY, MISSOURI 63017
BROOKS FIBER PROPERTIES
PROXY STATEMENT
FOR THE
1997 ANNUAL MEETING OF STOCKHOLDERS
This proxy statement is furnished to the holders of the Voting Common
Stock, $0.01 par value per share ("Common Stock"), of Brooks Fiber Properties,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies for use at the 1997 Annual Meeting of Stockholders (the
"1997 Annual Meeting") to be held in the Main Dining Room on the 16th Floor of
the St. Louis Club, 7701 Forsyth, St. Louis, Missouri commencing at 10:00 a.m.,
St. Louis time, on Tuesday, April 29, 1997 and at any postponement or
adjournment thereof, for the purposes set forth in the accompanying Notice of
the 1997 Annual Meeting of the Stockholders. Such holders are hereinafter
referred to as the "Stockholders." The Company is first mailing this proxy
statement and the enclosed form of proxy to Stockholders on or about March ___,
1997.
Whether or not you expect to be present in person at the meeting, you
are requested to complete, sign, date and return the enclosed form of proxy. If
you attend the meeting, you may vote by ballot. If you do not attend the
meeting, your shares of Common Stock can be voted only when represented by a
properly executed proxy. Any person giving such a proxy has the right to revoke
it at any time before it is voted by giving written notice of revocation to the
Secretary of the Company, by duly executing and delivering a proxy bearing a
later date, or by attending the Annual Meeting and voting in person.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The close of business on March 11, 1997 has been fixed as the record
date for the determination of the Stockholders entitled to notice of and to vote
at the 1997 Annual Meeting of Stockholders. As of the record date, __________
shares of Common Stock were issued and outstanding and entitled to vote at the
1997 Annual Meeting, and there were approximately ___ holders of record of
Common Stock, including participants in security position listings. Stockholders
will be entitled to cast one vote on each matter for each share of Common Stock
held of record on the record date. A majority of such shares are required to be
present or represented at the 1997 Annual Meeting in order for there to be a
quorum for the conduct of business.
A plurality of the votes of the holders of the shares of the Common
Stock entitled to vote which are present in person or represented by proxy at
the 1997 Annual Meeting shall be sufficient to elect directors (Proposal 1). The
affirmative vote of the holders of at least 66 2/3% of the shares of the Common
Stock outstanding on the record date is required to approve the amendment to the
Company's Restated Certificate of Incorporation (Proposal 2). The affirmative
vote of the holders of a majority of shares of the Common Stock entitled to vote
which are present in person or represented by proxy at the 1997 Annual Meeting
is required to approve the adoption of the Brooks Fiber Properties, Inc. 1997
Stock Incentive Plan (Proposal 3), to ratify the appointment of independent
public accountants (Proposal 4) and to act on any other matters properly brought
before the meeting.
Under the General Corporation Law of the State of Delaware, a withheld
vote and broker non-votes are not deemed to be voted and, as a result,
abstentions and broker non-votes are not included in the tabulation of the
voting results on the election of directors. Since the affirmative vote of the
holders of at least 66 2/3% of the shares of the Common Stock outstanding on the
record date is required to approve Proposal 2, shares represented by proxies
which are marked "abstain" and broker non-votes will have the effect of a vote
AGAINST the approval of the amendment to the Company's Restated Certificate of
Incorporation. Abstentions, but not broker non-votes, will have the same effect
as if the shares represented thereby were voted AGAINST Proposals 3 and 4. If no
specification is made on a duly executed proxy, the proxy will be voted FOR the
election of the directors nominated by the Board of Directors, FOR Proposals 2,
3 and 4, and in the discretion of the persons named as proxies on such other
business as may properly come before the meeting.
A broker non-vote occurs when a nominee holding shares for beneficial
owners votes shares at the meeting but does not vote all of its shares on a
particular proposal because the nominee does not have or choose to exercise
discretionary voting power with respect to that proposal and has not received
voting instructions from the beneficial owner. Broker non-votes and shares as to
which Stockholders abstain are included for purpose of determining whether a
quorum is present at a meeting.
A copy of the Company's Annual Report to Stockholders for the fiscal
year ended December 31, 1996 accompanies this Proxy Statement.
<PAGE>
COMMON STOCK OWNERSHIP OF DIRECTORS, NOMINEES AND OFFICERS
The following table sets forth information regarding the amount of the
outstanding Common Stock as of February 28, 1997 beneficially owned by each
director and nominee, the Chief Executive Officer and the four other most highly
compensated executive officers of the Company (each a "Named Executive") and all
of the directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
Percent of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned Outstanding(1)
- ----------------------------------------------------------------------------------- ------------------ --------------
<C> <C> <C>
James C. Allen (Chief Executive Officer and Director) ............................. 388,549(2) 1.18%
Robert F. Benbow (Director) ....................................................... 1,063,638(3) 3.26%
William J. Bresnan (Director) ..................................................... 51,634(4) *
Robert A. Brooks (Named Executive and Director) ................................... 853,666(5) 2.59%
Jonathan M. Nelson (Director) ..................................................... 899,075(6) 2.75%
John C. Shapleigh (Named Executive) ............................................... 328,437(7) 1.00%
David L. Solomon (Named Executive) ................................................ 143,607(8) *
G. Jackson Tankersley, Jr. (Director) ............................................. 5,533(9) *
Ronald H. Vander Pol (Director) ................................................... 2,056,000(10) 6.29%
Carol deB. Whitaker (Director) .................................................... 20,000(11) *
D. Craig Young (Named Executive and Director) ..................................... 160,318(12) *
All directors and executive officers as a group (18 persons) ...................... 6,377,248(13) 19.02%
- ---------------
<FN>
* Represents beneficial ownership of less than one percent.
(1) Percentages are determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
(2) Includes (i) 248,277 shares of Common Stock, warrants to purchase 260 shares of Common Stock and 139,642
shares of Common Stock subject to options which are exercisable within 60 days held by Mr. Allen and (ii) 370
shares of Common Stock owned by Linda Allen, wife of Mr. Allen. Mr. Allen disclaims beneficial ownership of
the shares owned by Mrs. Allen.
(3) Represents shares beneficially owned by entities to which Burr, Egan, Deleage & Co., of which Mr. Benbow is a
Vice President, directly or indirectly provides investment advisory services. Includes (i) 1,052,568 shares of
Common Stock held by Alta V Limited Partnership and (ii) 11,070 shares of Common Stock held by Customs House
Partners. The respective general partners of Alta V Limited Partnership and Customs House Partners exercise
sole voting and investment power with respect to the shares owned by such funds. The principals of Burr, Egan,
Deleage & Co. are general partners of Alta V Management Partners, L.P. (which is a general partner of Alta V
Limited Partnership) and Customs House Partners. As general partners of such funds, they may be deemed to
share voting and investment powers for the shares held by the funds. The principals of Burr, Egan, Deleage &
Co. disclaim beneficial ownership of all such shares held by the foregoing funds, except to the extent of
their proportionate pecuniary interests therein. Mr. Benbow is a Vice President of Burr, Egan, Deleage & Co.
and general partner of Alta Management Partners, L.P. (which is the general partner of Alta V Limited
Partnership). As a general partner of the fund, he may be deemed to share voting and investment powers for the
shares held by the fund. He disclaims beneficial ownership of all such shares held by the aforementioned fund
except to the extent of his proportionate pecuniary interests (if any) therein. He does not directly own any
securities of the Company.
(4) Represents 47,934 shares of Common Stock and an option to purchase 3,700 shares of Common Stock which is
exercisable within 60 days.
(5) Includes (i) 607,752 shares of Common Stock, warrants to purchase 107,200 shares of Common Stock and 126,774
shares of Common Stock subject to options which are exercisable within 60 days held by Robert A. Brooks and
(ii) 11,940 shares of Common Stock held by The Brooks Foundation, of which Mr. Brooks is a trustee.
(6) Includes (i) 30,190 shares of Common Stock held by Jonathan M. Nelson and (ii) 868,885 shares of Common Stock
owned by Providence Media Partners L.P. Mr. Nelson is a managing general partner of Providence Ventures, L.P.,
which is the general partner of the general partner of Providence Media Partners L.P. Mr. Nelson disclaims
beneficial ownership of shares beneficially owned by Providence Media Partners L.P.
(7) Includes (i) 188,911 shares of Common Stock and 97,454 shares of Common Stock subject to options which are
exercisable within 60 days held by John C. Shapleigh, (ii) 24,802 shares of Common Stock and warrants to
purchase 520 shares of Common Stock held by John C. Shapleigh's Individual Retirement Account, (iii) 12,120
shares of Common Stock held by John C. Shapleigh Holdings, L.P., of which Mr. Shapleigh is the General Partner
and (iv) 4,630 shares of Common Stock owned by Anne T. Shapleigh, wife of Mr. Shapleigh. Mr. Shapleigh
disclaims beneficial ownership of the shares owned by Mrs. Shapleigh.
(8) Represents 57,902 shares of Common Stock, warrants to purchase 20 shares of Common Stock and 85,685 shares of
Common Stock subject to options which are exercisable within 60 days.
(9) Represents 1,833 shares of Common Stock and 3,700 shares of Common Stock subject to an option which is
exercisable within 60 days. Excludes (i) 844,520 shares beneficially owned by Centennial Fund IV, L.P.
("Centennial IV"), including 827,860 shares of Common Stock and warrants to purchase 16,660 shares of Common
Stock, (ii) 593,670 shares beneficially owned by Centennial Fund III, L.P. ("Centennial III"), including
542,250 shares of Common Stock and warrants to purchase 51,420 shares of Common Stock, (iii) 21,510 shares of
Common Stock beneficially owned by Centennial Holdings IV, L.P. ("Holdings IV"), (iv) 5,400 shares of Common
Stock held by Centennial Holdings, Inc. ("CHI") and (v) 298 shares of Common Stock held The Tankersley Family
Limited Partnership ("Tankersley LP").
<PAGE>
Mr. Tankersley is (i) an individual General Partner of each of Centennial Holdings III, L.P. ("Holdings III")
and Holdings IV which serves as the sole General Partner of Centennial III and Centennial IV, respectively,
(ii) an executive officer and director of CHI and (iii) an individual General Partner of Tankersley LP. As the
sole General Partner of Centennial III, Holdings III may be deemed to be the indirect beneficial owner of
Centennial III's shares by virtue of its authority to make investment decisions regarding the voting and
disposition of shares directly beneficially owned by Centennial III (such decisions are made by the majority
decision of a three member Investment Committee of Holdings III on which Mr. Tankersley serves). As the sole
General Partner of Centennial IV, Holdings IV may be deemed to be the indirect beneficial owner of Centennial
IV's shares by virtue of its authority to make investment decisions regarding the voting and disposition of
shares directly beneficially owned by Centennial IV (such decisions are made by the majority decision of a six
member Investment Committee of Holdings IV on which Mr. Tankersley serves). Holdings III does not own directly
any shares of Common Stock. Mr. Tankersley disclaims beneficial ownership of all shares of the company's
Common Stock (i) directly or indirectly owned by Centennial III or Holdings III, (ii) directly or indirectly
owned by Centennial IV or Holdings IV, (iii) directly or indirectly owned by CHI and (iv) directly or
indirectly owned by Tankersley LP. Each of Centennial III and Holdings III disclaims beneficial ownership of
all shares directly beneficially owned by Centennial IV; each of Centennial IV and Holdings IV disclaims
beneficial ownership of all shares directly beneficially owned by Centennial III; and all members of the
Holdings III and Holdings IV Investment Committees disclaim beneficial ownership of shares directly
beneficially owned by Centennial III and Centennial IV, respectively. In addition, the officers and directors
of CHI disclaim beneficial ownership of shares directly beneficially owned by CHI, and the General Partners of
Tankersley LP disclaim beneficial ownership of shares directly beneficially owned by Tankersley LP.
(10) Includes (i) 1,587,500 shares of Common Stock held by Ronald H. Vander Pol and (ii) 468,500 shares of Common
Stock held by Rushing Wind Ltd., Mr. Vander Pol's private foundation. Mr. Vander Pol has the option to require
the Company to repurchase up to 2,016,000 of such shares at a price of $12.50 per share on or before February
1, 1998.
(11) Represents an option to purchase 20,000 shares of Common Stock which is exercisable within 60 days.
(12) Includes (i) 2,420 shares of Common Stock and 109,086 shares of Common Stock subject to options which are
exercisable within 60 days held by D. Craig Young, (ii) 26,449 shares of Common Stock held by D. Craig Young
and Joan L. Young JTWROS, (iii) 833 shares of Common Stock held by D. Craig Young's Individual Retirement
Account, (iv) 19,620 shares of Common Stock held by The Joan L. Young Revocable Trust, of which Joan L. Young,
the wife of D. Craig Young, is trustee, (v) 550 shares of Common Stock held by Joan L. Young's Individual
Retirement Account, (vi) 680 shares of Common Stock held by the Andrew G. Young Trust and (vii) 680 shares of
Common Stock held by the Troy D. Young Trust. Andrew G. Young and Troy D. Young are children of D. Craig
Young. Mr. Young disclaims beneficial ownership of the shares owned by The Joan L. Young Revocable Trust, Joan
L. Young's Individual Retirement Account, the Andrew G. Young Trust and the Troy D. Young Trust.
(13) Excludes 1,465,398 shares beneficially owned directly by Centennial IV, Centennial III, Holdings IV, CHI and
Tankersley LP, as set forth in footnote (9) above.
</TABLE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding the amount of the
outstanding Common Stock as of February 28, 1997 beneficially owned by each
person (or group of persons) known to the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock:
Percent of
Number of Shares Common Stock
Name of Beneficial Owner Beneficially Owned Outstanding(1)
- -------------------------------------------- ------------------ --------------
Putnam Investments, Inc. 2,284,448(2) 6.99%
One Post Office Square
Boston, MA 02109
Fidelity Investments, Inc. 2,072,000 6.34%
82 Devonshire Street
Boston, MA 02109
Ronald H. Vander Pol 2,056,000(3) 6.29%
7228 Kenowa Ave. S.W.
Byron Center, MI 43915
- ---------------
(1) Percentages are determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended.
(2) Includes (i) 2,225,548 shares of Common Stock beneficially owned by Putnam
Investment Management, Inc. ("PIM") and (ii) 58,900 shares of Common Stock
beneficially owned by The Putnam Advisory Company, Inc. ("PAC"). Putnam
Investments, Inc., a wholly-owned subsidiary of Marsh & McLennen Companies,
Inc., wholly owns PIM and PAC, each of which is a registered investment
adviser.
(3) Includes (i) 1,587,500 shares of Common Stock held by Ronald H. Vander Pol
and (ii) 468,500 shares of Common Stock held by Rushing Wind Ltd., Mr.
Vander Pol's private foundation. Mr. Vander Pol has the option to require
the Company to repurchase up to 2,016,000 of such shares at a price of
$12.50 per share on or before February 1, 1998.
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who beneficially own more than ten percent of a registered class of the
Company's equity securities, to file initial reports of ownership and changes in
ownership of Common Stock and other equity securities of the Company on Forms 3,
4 and 5 with the Securities and Exchange Commission (the "SEC"). Directors,
executive officers and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, or written representations from certain reporting persons, the Company
believes that each person who was a director, executive officer or greater than
ten percent beneficial owner of any class of its equity securities at any time
between its initial public offering on May 2, 1996 and December 31, 1996
complied with all of the above filing requirements, except that Mr. Brooks filed
a late Form 4 report for the month of August 1996 covering one transaction and
that Media/Communications Partners II Limited Partnership and M/CP II Limited
Partnership, both of which formerly owned more than a ten percent beneficial
interest in the Company, filed late Form 3s.
PROPOSAL 1
ELECTION OF DIRECTORS
NOMINEES AND CONTINUING DIRECTORS
The Company's By-Laws provide for a Board of twelve directors. The
Board of Directors is classified into three classes, each consisting as nearly
as possible of one-third of the directors constituting the entire Board of
Directors, with the terms of office of each class ending in successive years.
Presently, the Board of Directors has nine members and three vacancies. The
Board of Directors has nominated Robert F. Benbow, Ronald H. Vander Pol and
Carol deB. Whitaker, whose current terms as directors expire at the 1997 Annual
Meeting, for election as directors to hold office until the 2000 Annual Meeting
of Stockholders and until their respective successors are elected and qualified
in Class I or until their respective earlier death, resignation or removal.
Although the Board has not at this time identified qualified candidates who have
consented to fill the three vacancies, it has determined not to reduce the size
of the Board at this time because it believes that ultimately it would be
desirable to have a total of twelve directors.
Only persons nominated in accordance with the procedures set forth in
the Company's ByLaws are eligible for election by the Stockholders as directors.
The three nominees named above are the only persons who have been nominated in
accordance with such procedures for election at the 1997 Annual Meeting.
Accordingly, proxies cannot be voted for any nominees other than the three
nominees named in this Proxy Statement. Shares represented by your proxy will be
voted in accordance with your direction as to the election as director of the
persons named above. In the absence of direction, the shares represented by your
proxy will be voted FOR the election of each nominee. Should any of the nominees
be unable or unwilling to serve (which is not expected), the proxies (except
proxies marked to the contrary) will be voted for such other person or persons,
if any, as the Board of Directors of the Company may recommend.
Certain information with respect to each of the nominees and each of
the continuing directors is set forth below. Each of the nominees and the
continuing directors has served in his or her principal occupation for the last
five fiscal years, unless otherwise indicated.
Served as
Director
Name, Age, Principal Occupation or Position, Other Directorships Since
- --------------------------------------------------------------------- ---------
NOMINEES FOR TERMS ENDING IN 2000 (Class I):
Robert F. Benbow, 61 1993
Mr. Benbow is a Vice President of Burr, Egan, Deleage & Co. and
a General Partner in certain funds affiliated with Burr, Egan,
Deleage & Co. He joined that firm in 1990. He previously spent
22 years with the Bank of New England, N.A. where he was Senior
Vice President responsible for special industries lending in
the areas of media, project finance and energy. He serves as a
director of ST Enterprises, Ltd., a local exchange telephone
company; Datamarine International; Golden Sky Services, Inc.;
Incom Communications Corp.; U.S. One Communications Corp.; and
Teletrac, Inc.
<PAGE>
Ronald H. Vander Pol, 44 1996
Mr. Vander Pol has been a participant in the telecommunications
industry for the last 16 years. In 1982, he founded Teledial
America, Inc., a long distance reseller. He started Digital
Signal, Inc., a fiber optic provider, in 1986 and City Signal,
Inc., a competitive access provider, in 1989 (see "Certain
Relationships and Related Transactions"). Since then, Mr.
Vander Pol has started two additional long distance companies,
Teledial of North Carolina and ATS Network Services in
Tennessee. He holds a bachelor's degree from Calvin College in
Grand Rapids, Michigan.
Carol deB. Whitaker, 43 1996
Ms. Whitaker has almost twenty years of investment banking and
operating experience with both corporations and Wall Street
firms. Ms. Whitaker is Chairman of Whitko & Company, a Denver
based investment banking and management consulting firm.
Previous positions included Chief Executive Officer of W.W.
Comm, Inc., a start-up company exploring videotelecomunications
opportunities; acting Chief Financial Officer for OneComm
Corp., an emerging wireless communications company; and Vice
President of Development for Rifkin & Associates, Inc., a
privately owned cable television owner and operator, with
responsibility for acquisition financing.
DIRECTORS WITH TERMS ENDING IN 1998 (CLASS II):
James C. Allen, 50 1993
Mr. Allen has been Vice Chairman and Chief Executive Officer of
the Company since its formation in November 1993. Mr. Allen
previously served as President and Chief Operating Officer of
Brooks Telecommunications Corporation since 1993. Mr. Allen has
25 years experience as an entrepreneur, business planner and
developer, cable system operator, financier, expert witness and
advisor in cable television and broadband telecommunications.
Prior to joining the Company, he was a founder and President,
Chief Financial Officer and Chief Operating Officer of Cencom
Cable Associates, Vice President of Operations of Telcom
Engineering, Inc., a telecommunications engineering and
consulting firm with clients in both the telephone and cable
television industries, Vice President of Operations of United
Cable Television, Divisional Manager of Continental Telephone
Corporation, Vice President for Finance of National
Communications Service Corporation and Chief Financial and
Chief Operating Officer of David Lipscomb University.
William J. Bresnan, 63 1996
Mr. Bresnan is President and founder of Bresnan Communications,
a company that operates cable systems and/or provides telephony
services in five U.S. states as well as Poland and Chile. He
has been involved in the telecommunications industry since
1958. Mr. Bresnan was president of Teleprompter Corporation,
which at one time was the nation's largest cable television
company, and later was Chairman and Chief Executive Officer of
Group W Cable, Inc., a subsidiary of Westinghouse Electric
Corporation. He serves as a director of United Video Satellite
Group, Inc. and of numerous other organizations, including
National Cable Television Association, C-Span, Cable in the
Classroom, Cable Television Laboratories, the Foundation for
Minority Interests in Media, the National Cable Television
Center and Museum, and the Cable Television Advertising Bureau.
D. Craig Young, 43 1995
Mr. Young has served as President and Chief Operating Officer
of the Company since April 1995. He has 16 years experience in
the telecommunications industry. He served as Vice
President-Sales Operations, Custom Business Services of
Ameritech, Inc. from 1993 to 1995; Vice President-Sales and
Service, Business and Government Services of U.S. West
Communications, Inc. from 1992 to 1993; Vice President-Sales,
Large Business Services from 1989 to 1992; and Vice President
and General Manager-U.S. West Information Systems from 1986 to
1988. Mr. Young's responsibilities at Ameritech, Inc. and U.S.
West Communications, Inc. included the management of all voice
and data sales, engineering and pricing activities for large
commercial and government end users and full P&L responsibility
for more than $650 million in revenue and direction of a work
force of more than 4000 employees. Prior to that he served as
President of Executone Information Systems, a franchise
distributor of voice products. Mr. Young joined the Company in
1995.
<PAGE>
DIRECTORS WITH TERMS ENDING IN 1999 (CLASS III):
Robert A. Brooks, 64 1993
Mr. Brooks has been Chairman of the Company since its formation
in November 1993. Mr. Brooks was founder and previously served
as Chairman of the Board and Chief Executive Officer of Brooks
Telecommunications Corporation since 1991. Mr. Brooks has 39
years experience as entrepreneur, business planner and
developer, cable system operator, investor, engineer,
consultant, project manager, expert witness and management
advisor in cable television and broadband telecommunications.
He was a founder and served as Chairman from 1982 to 1991 of
Cencom Cable Associates, a cable television operator. Mr.
Brooks currently serves as a member of President's Council of
St. Louis University and is a Registered Professional Engineer,
a member of N.S.P.E., a Senior Member of I.E.E.E. and an
inducted member of the prestigious Cable Television Pioneers
Club.
Jonathan M. Nelson, 40 1993
Mr. Nelson is a managing general partner of Providence Ventures
L.P. which is the general partner of the general partner of
Providence Media Partners L.P. ("PMP"). Mr. Nelson is
Co-Chairman of Providence Ventures Inc. which is the management
company of PMP. He joined that firm in 1990. Mr. Nelson is also
president and chief executive officer of Providence Equity
Partners Inc., the management company of Providence Equity
Partners L.P. (together with PMP, "Providence") and a managing
director of Narragansett Capital, Inc. ("Narragansett"), the
management company for three separate equity investment funds.
Affiliates of Providence and Narragansett have equity
investments in cellular telephone, paging, wireless data, PCS,
cable television and broadcast businesses. Mr. Nelson is
currently a director of Wellman, Inc., Western Wireless
Corporation and numerous privately-held companies affiliated
with Providence or Narragansett. Mr. Nelson received an M.B.A.
degree from the Harvard Business School and a B.A. degree from
Brown University in 1977.
G. Jackson Tankersley, Jr., 47 1995
Mr. Tankersley is a co-founder and General Partner of The
Centennial Funds ("Centennial"). He joined that firm in 1981.
He also serves as the President and Chief Executive Officer of
Centennial Holdings, Inc., which manages Centennial. Since the
formation of Centennial in 1981, it has specialized its
investment activities in the electronic communications
industries. Previously, Mr. Tankersley served as a vice
president of Continental Illinois Venture Corporation and
Continental Illinois Equity Corporation, the private equity
investment arms of Continental Illinois Corp. He has served on
a number of the boards of directors of various public and
private portfolio investments of Centennial. Mr. Tankersley
received an M.B.A. degree from The Amos Tuck School of Business
and a B.A. degree (high honors) from Denison University.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
During 1996, the Board of Directors acted eleven times, and each
incumbent director other than Mr. Vander Pol attended at least 75% of the
meetings of the Board and committees on which he or she served that were held
during such director's tenure.
The Board of Directors has an Executive Committee, a Compensation
Committee, an Audit Committee, a Finance Committee and a Board Governance
Committee.
Messrs. Allen, Bresnan, Brooks (Chairman), Nelson and Tankersley are
members of the Executive Committee which, to the extent permitted by Delaware
law, is vested with all of the powers of the Board of Directors; the Executive
Committee acted once during 1996.
The Compensation Committee, consisting of Messrs. Tankersley (Chairman)
and Nelson and Ms. Whitaker, establishes and oversees the compensation policies
of the Company's operating subsidiaries and determines executive compensation.
The Compensation Committee acted on eight occasions during 1996. See "Executive
Compensation - Report of Compensation Committee on Executive Compensation."
The Audit Committee, of which Messrs. Benbow (Chairman), Bresnan and
Vander Pol are members, has authority to oversee the integrity and reliability
of the Company's accounting and financial reporting practices and the
effectiveness of its system of controls. It also recommends the public
accounting firm to be retained for the coming year and reviews the work to be
done by such firm. The Audit Committee met on two occasions during 1996.
<PAGE>
The Finance Committee, of which Messrs. Allen (Chairman), Nelson,
Tankersley and Young and Ms. Whitaker are members, met on two occasions during
1996. The Finance Committee is authorized to review and monitor the financial
condition of the Company and its subsidiaries and review and make
recommendations to the full Board of Directors with respect to potential
acquisitions and securities offerings.
The Board Governance Committee, of which Messrs. Bresnan, Nelson
(Chairman) and Tankersley are members, was established in May 1996 as successor
to the Nominating Committee established in February 1996. The Board Governance
Committee met on one occasion during 1996. The Board Governance Committee is
authorized to review potential nominees for director and make recommendations to
the full Board of Directors, and will accept recommendations for nomination of
directors from Stockholders. Only persons who are nominated in accordance with
the procedures set forth in the Company's By-Laws are eligible for election by
the Stockholders as directors. Nominations may be made at a meeting of
Stockholders at which directors are being elected (1) by or at the direction of
the Board of Directors or the Board Governance Committee or (2) by any
Stockholder who delivers timely notice addressed to the Secretary of the Company
at its principal executive offices. To be timely, a Stockholder's notice must be
received not less than fifty (50) days prior to the meeting or, in the event
less than sixty (60) days notice or public disclosure of the date of the meeting
is given or made, not later than the close of business on the tenth (10th) day
following the date on which the notice of meeting is mailed or such public
disclosure is made. Stockholders wishing to propose nominees to the Board
Governance Committee for consideration at a meeting of Stockholders at which
directors are to be elected should send the Secretary of the Company a written
notice setting forth (1) the name, age and business and residence address of the
proposed nominee, (2) the principal occupation or employment of such person, (3)
the amount of Common Stock beneficially owned by such person, (4) any other
information relating to such person required by the proxy rules of the SEC and
(5) the name, address and amount of Common Stock beneficially owned by the
Stockholder recommending the proposed nominee.
DIRECTOR COMPENSATION
Directors have not heretofore been compensated for their services as
directors but have been reimbursed for expenses incurred in connection with
attending Board and committee meetings. Effective with the 1997 Annual Meeting,
the Compensation Committee has approved an outside directors compensation
program pursuant to which directors who are not employees of the Company will be
paid a $10,000 annual retainer fee in quarterly installments plus a $1,000 per
diem meeting attendance fee and will be reimbursed for expenses incurred in
connection with attending Board and committee meetings. Under the program
directors will have the opportunity to elect to receive, in lieu of the cash
retainer and attendance fees, a number of common stock options equal to the
quotient of four times the cash fees divided by the market price of the Common
Stock on the first trading date following each Annual Meeting and with a price
equal to the market price of the Common Stock on such trading date. The
Compensation Committee has also approved an outside directors stock option
program effective with the 1997 Annual Meeting pursuant to which directors who
are not employees of the Company will receive an initial grant of non-qualified
stock options for 10,000 shares at fair market value on date of grant and,
thereafter, annual grants of non-qualified stock options for 5,000 shares at
fair market value on date of grant, which options will be one-half vested after
six months and will be fully vested upon completion of one full year of Board
service following the date of grant. The options will be granted pursuant to the
1997 Stock Incentive Plan (see "Proposal 3" below).
EXECUTIVE OFFICERS
Name Age Position
- ------------------------- --- ------------------------------------------------
Robert A. Brooks......... 64 Chairman of the Board
James C. Allen........... 50 Vice Chairman & Chief Executive Officer
D. Craig Young........... 43 President & Chief Operating Officer
John C. Shapleigh........ 47 Executive Vice President, Regulatory and
Corporate Development
David L. Solomon......... 37 Executive Vice President & Chief Financial
Officer
John K. Brooks........... 35 Senior Vice President and
President-JB Telecom, Inc.
Gregory J. Christoffel... 48 Senior Vice President & General Counsel
Marilou Crum............. 49 Senior Vice President, Marketing and
Carrier/Reseller Sales
Jim A. Moffit............ 51 Senior Vice President and Managing Director-GLA
International
Mark W. Senda............ 38 Senior Vice President, Operations
Waymon R. Tipton......... 39 Senior Vice President, Corporate Communications
and Strategic Development
Gerard J. Howe........... 41 Vice President, Finance, and Senior Vice
President & Chief Financial Officer-JB
Telecom, Inc.
<PAGE>
Robert A. Brooks, Chairman. Mr. Brooks has been Chairman of the Company
since its formation in November 1993. For more information about Mr. Brooks,
please see the appropriate description under the above caption "Nominees and
Continuing Directors."
James C. Allen, Vice Chairman, CEO. Mr. Allen has been Vice Chairman
and CEO of the Company since its formation in November 1993. For more
information about Mr. Allen, please see the appropriate description under the
above caption "Nominees and Continuing Directors."
D. Craig Young, President, COO. Mr. Young has served as President and
COO of the Company since April 1995. For more information about Mr. Young,
please see the appropriate description under the above caption "Nominees and
Continuing Directors."
John C. Shapleigh, Executive Vice President, Regulatory and Corporate
Development. Mr. Shapleigh has been Executive Vice President in charge of the
Company's regulatory and corporate development activities since its formation in
November 1993. Mr. Shapleigh has 22 years of entrepreneurial, management,
regulatory, government policy and legal experience. He is the immediate past
Chairman and previously served for two years as President of the Association for
Local Telecommunications Services (ALTS), the national trade association for
competitive local telecommunications companies. He also served for one year as
Associate Administrator of the National Telecommunications and Information
Administration (NTIA) in the U.S. Department of Commerce, a key federal
telecommunications policy position where he directed NTIA TELECOM 2000: Charting
the Course for a New Century, a comprehensive review of 18 telecommunications,
mass media and information industries, including telephone, television and cable
television; three years as Vice President and General Counsel of LDX Net and
Wiltel, developers of regional fiber optic telephone networks, positions
involving the negotiation of over $100 million in debt financing agreements and
oversight of all federal, state and local regulatory matters; and three years as
Commissioner, then Chairman, of the Missouri Public Service Commission. He has
an A.B. degree from Dartmouth College (Senior Honors) and a J.D. degree from the
Washington University School of Law (Law Quarterly). He is a recipient of the
President's Award of the Missouri Bar Association.
David L. Solomon, Executive Vice President & Chief Financial Officer.
Mr. Solomon has 13 years experience in financial management and reporting,
auditing and business advisory services with KPMG Peat Marwick LLP, most
recently as partner. Responsibilities included working with SEC registrants
including participation in initial public offerings, equity offerings, debt
offerings and required filings. Clients served included organizations in the
banking, thrift, insurance, and real estate industries. He joined the Company as
Senior Vice President and CFO in 1994 and also served as Secretary and Chief
Financial Officer of BTC until it was acquired by the Company in January 1996.
He is a member of the American Institute and Tennessee Society of CPAs. He has a
Bachelor of Science degree from David Lipscomb University.
John K. Brooks, Senior Vice President and President-JB Telecom, Inc.
Mr. Brooks has over 11 years of entrepreneurial, cable TV system management,
marketing and regulatory experience. He was Vice President of Operations of
Cencom Cable Associates, Inc. from 1983 until Cencom was acquired by a
subsidiary of Hallmark Cards, Inc. in 1991. Previous positions with Cencom
included Corporate Vice President - Operations; Regional Vice President -
Operations; Corporate Vice President - Government and Public Relations;
Assistant Vice President - Marketing and Programming; and South Carolina State
Manager - Cable Operations. Mr. Brooks has also been involved in cable system
acquisition due diligence, financing and franchise negotiations. He holds a B.A.
degree in Political Science from the University of Missouri and is a former
officer and director of the Missouri Cable Television Association. Mr. Brooks
served as Senior Vice President of Corporate Development of BTC from 1992 to
1994, as Executive Vice President of Operations of the Company from 1994 to 1995
and as President of JB Telecom, Inc. (formerly a subsidiary of BTC, which became
a subsidiary of the Company in January 1996) from 1995 to present. He has served
as Senior Vice President of the Company since February 1996. John K. Brooks is
the son of Robert A. Brooks.
Gregory J. Christoffel, Senior Vice President & General Counsel. Mr.
Christoffel has been Senior Vice President and General Counsel of the Company
since February 1996. Mr. Christoffel has 21 years of legal, regulatory and
management experience, principally in the telecommunications industry. He served
as former General Attorney for Mergers & Acquisitions and International Business
of Southwestern Bell Corporation. His experience at Southwestern Bell included
structuring and executing several industry-leading acquisitions in cellular
telephone, cable television and foreign telecommunications privatizations, as
well as extensive participation in critical legal proceedings before the Federal
District Court enforcing the Divestiture Decree and before the Federal
Communications Commission in proceedings regarding regulatory reform. Early in
his career, he served as First Assistant Public Counsel, representing the
consumer interest in rate proceedings before the Missouri Public Service
Commission, and as Assistant Attorney General in the Antitrust Division of the
Missouri Attorney General's office. In private practice, Mr. Christoffel served
his firm as managing partner and provided corporate, securities and transaction
counsel for a variety of companies involved in telecommunications equipment
manufacturing, domestic and foreign SMR wireless service and other
telecommunications businesses. Mr. Christoffel joined the Company in 1996 after
serving as the President of Brooks Telecommunications International, Inc.,
<PAGE>
responsible for overseeing the development of a broadband integrated services
digital network in a joint venture in Guangzhou, China. Mr. Christoffel holds an
A.B. (Classical) in philosophy and languages from St. Louis University School of
Philosophy and Letters and a J.D. cum laude from St. Louis University School of
Law (Law Journal, Woolsack).
Marilou Crum, Senior Vice President, Marketing and Carrier/Reseller
Sales. Ms. Crum joined the Company as Senior Vice President, Marketing and
Carrier/Reseller Sales in July 1996 and has over 20 years of management
experience within the telecommunications industry in sales, marketing and
product management. Ms. Crum is a former Vice President of National Accounts of
WilTel and was responsible for establishing and directing its National Accounts
program on a nationwide basis for both network services and customer premises
equipment. Prior to joining WilTel in 1987, Ms. Crum managed the Central Region
National Accounts organization for AT&T and was responsible for its Central
Region Product Marketing, Technical Support and Strategic Account Marketing.
Prior to joining AT&T in 1983, Ms. Crum also held a number of management
positions beginning in 1976 with Southwestern Bell in the areas of sales,
technical support, interstate network services and product marketing. Ms. Crum
has a B.S. degree from the University of Missouri.
Jim A. Moffit, Senior Vice President and Managing Director - GLA
International. Mr. Moffit has 26 years experience as a financial officer,
business and financial planner, specialist in regulatory matters, accountant,
expert witness, consultant and auditor, including 24 years with a large
independent telephone company and an international accounting firm. Mr. Moffit
was President of Contel Corporation Central Region for four years until Contel
was merged into GTE in 1991. Other positions with Contel included five years as
Vice President-Financial Director, Western Region; two years as Assistant Vice
President-Revenue Requirements, Western Region; four years as Assistant Vice
President-Financial Planning, Western Region; and five years as corporate chief
accountant. Mr. Moffit also spent four years on the audit staff of Arthur
Andersen. He holds a B.S., Accounting degree, with honors, from Northeast
Missouri State University and an M.B.A. degree from Washington University. Mr.
Moffit also has a CPA and is licensed to practice accounting in Missouri. He was
named as one of the telecommunications industry's "Rising Stars" by Telephony
Magazine in 1989. He has served the Company in various positions since its
formation in 1993 and was an executive officer of BTC from 1991 to 1993.
Mark W. Senda, Senior Vice President, Operations. Mr. Senda joined the
Company as Senior Vice President, Operations, effective January 1, 1997, and has
over 13 years experience in the telecommunications industry. From September 1995
until December 1996, he served as Vice President, North American Operations MFS
Global Network Services, Inc., where he was responsible for the installation and
maintenance of all products, services and infrastructure covering five regions.
Mr. Senda was also Senior Vice President, Network Services, from 1994 to
September 1995, Vice President, Operations, from 1993 to 1994, and Regional
Director, Operations, from 1992 to 1993, of MFS Telecom, Inc. From 1983 to 1992,
Mr. Senda held various operations and project management positions with MCI
Communications Corporation. He received a B.S. degree from the State University
of New York and an M.A. degree from Rutgers University.
Waymon R. Tipton, CFA, Senior Vice President, Corporate Communications
and Strategic Development. Mr. Tipton joined the Company as Senior Vice
President, Corporate Communications and Strategic Development in August 1996 and
has over fifteen years experience in investment banking, investment consulting
and institutional equity and fixed income securities sales. He was previously
Senior Vice President, founder, and manager of the Investment Banking Division
of a major regional bank specializing in acquisition and project financing. Mr.
Tipton was previously Senior Managed Accounts Consultant and partner with the
leading consulting group in PaineWebber. Prior thereto, he was regional
institutional securities salesman with Shearson- Lehman Bros. for intermediate
sized money managers, insurance companies, trust departments, and high net worth
individuals. Mr. Tipton is a holder of the Chartered Financial Analyst
designation and received an M.B.A. degree from the Owen Graduate School of
Management of Vanderbilt University and a B.A. degree from Vanderbilt
University.
Gerard J. Howe, Vice President, Finance and Senior Vice President &
Chief Financial Officer-JB Telecom, Inc. Mr. Howe has over 18 years experience
in the telecommunications industry in the areas of financial, regulatory,
information processing and human resource management. Mr. Howe previously served
as Vice President-Chief Financial Officer of SBC CableComms, U.K., a joint
venture between SBC Communications and Cox Communications, from 1993 to 1995.
SBC CableComms provided cable television and competitive local telephone
services in seven franchise areas encompassing 1.4 million homes throughout
England. In that position, Mr. Howe was responsible for financial reporting,
planning and budgeting, treasury operations, corporate development, and tax
planning and compliance, as well as for regulatory and legislative affairs. Mr.
Howe served as Vice President-Chief Financial Officer from 1990 to 1993 and as
Senior Vice President-Customer Services from 1995 to 1996 for Southwestern Bell
Yellow Pages. In addition to the aforementioned positions, Mr. Howe also held
various positions in the treasury, regulatory, audit and information systems
organizations of SBC and Southwestern Bell Telephone Company. He joined the
Company on June 1, 1996. Mr. Howe has a B.S. degree from Southern Illinois
University and an M.B.A. degree from St. Louis University.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain summary information for the
fiscal years ended December 31, 1996 and 1995 concerning the compensation paid
and awarded to each of the Named Executives during such fiscal years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Annual Compensation Compensation
-------------------------------------------- ------------
Other Annual Securities All Other
Name and Compensation Underlying Compensation
Principal Position Year Salary($) Bonus($)(2) ($)(3) Options(#)(4) ($)(5)
- --------------------------------------------------------- ---- ----------- ----------- ------------ ------------- ------------
<C> <C> <C> <C> <C> <C> <C>
Robert A. Brooks(1)...................................... 1996 $300,000 $120,000 --- 100,000 ---
Chairman of the Board 1995 250,000(1) 50,000 --- 60,000 ---
James C. Allen(1)........................................ 1996 $275,000 $110,000 --- 100,000 $4,750
Vice Chairman & Chief Executive Officer 1995 225,000(1) 50,000 --- 60,000 4,500
D. Craig Young........................................... 1996 $200,000 $ 80,000 --- 20,000 $2,000
President & Chief Operating Officer 1995 129,619(6) 50,000 --- 200,000 ---
David L. Solomon......................................... 1996 $180,000 $ 72,000 --- 100,000 $4,638
Executive Vice President & Chief Financial Officer 1995 165,000 45,000 --- 60,000 3,300
John C. Shapleigh........................................ 1996 $152,000 $ 50,000 --- 80,000 $3,172
Executive Vice President-Regulatory and 1995 146,000 25,000 --- 0 2,920
Corporate Development
<FN>
- ---------------
(1) Includes compensation paid by Brooks Telecommunications Corp. ("BTC") under a Management and Services Agreement between the
Company and BTC. Effective upon the merger of BTC into the Company on January 2, 1996, the Company pays all of the compensation
of Messrs. Brooks and Allen. During the period from January 2, 1996 to August 31, 1996, the Company made the services of Mr.
Brooks available to Brooks Telecommunications International, Inc. on a part-time, as needed basis. See "Certain Relationships
and Related Transactions."
(2) Represents bonuses earned in the reported year, which were paid in the following year. The payment of bonuses is at the
discretion of the Compensation Committee of the Board of Directors.
(3) The Company has not included in the Summary Compensation Table the value of incidental personal perquisites furnished by the
Company to the Named Executives since such value did not exceed the lesser of $50,000 or 10% of the total of annual salary and
bonus reported for any of such Named Executives.
(4) Represents shares of Common Stock subject to compensatory stock options granted during 1996 and 1995.
(5) Represents contributions made by the Company on behalf of the Named Executives under the Company's 401(k) Plan during 1996 and
1995.
(6) Hired on April 5, 1995.
</TABLE>
STOCK OPTION PLAN. The Company's 1993 Stock Option Plan currently
authorizes the Board of Directors to grant options and stock appreciation rights
covering up to 3,400,000 shares of Common Stock of the Company. As of February
28, 1997, options for an aggregate of 636,016 shares at $4.00 per share, 304,370
shares at $6.60 per share, 696,667 shares at $12.50 per share, 483,308 shares at
$25.50 per share, 109,500 shares at $25.625 per share, 130,000 shares at $27.00
per share, 80,000 shares at $29.50 per share, 184,000 shares at $32.00 per share
and 50,000 shares at $33.75 per share were outstanding under the Company's 1993
Stock Option Plan and an aggregate of 161,100 shares at $11.35 per share were
outstanding under the Stock Option Plan of BTC assumed upon effectiveness of the
merger with BTC on January 2, 1996. Options held by the CEO and each of the
other Named Executives are as follows: Mr. Brooks - 100,000 shares at $12.50 and
93,441 shares at $25.50; Mr. Allen - 100,000 shares at $12.50 and 106,309 shares
at $25.50; Mr. Young - 133,333 shares at $4.00, 20,000 shares at $12.50 and
35,752 shares at $25.50; Mr. Shapleigh - 80,000 shares at $12.50 and 70,787
shares at $25.50; and Mr. Solomon - 13,333 shares at $4.00, 40,000 shares at
$6.60, 100,000 shares at $12.50 and 39,019 shares at $25.50. All options become
fully vested upon a change-in-control of the Company, as defined in such
options.
<PAGE>
The following table presents certain information concerning stock
options granted during 1996 to each of the Named Executives and executive
officers and other employees, in each case, as a group. No options were granted
to non-employee directors. The exercise price for all of the grants of stock
options was the fair market value of the Common Stock on the dates of grant as
determined by the Compensation Committee of the Board of Directors.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term (1)
--------------------------------------------------- ------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration 5% 10%
Name Granted (#) Fiscal Year ($/Sh) Date(2) ($) ($)
- ----------------- ----------- ------------- ----------- ---------- ----------------- -----------------
<C> <C> <C> <C> <C> <C> <C>
Robert A. Brooks 100,000 7.64% $12.50 02/19/06 $786,118 $1,992,178
James C. Allen 100,000 7.64% 12.50 02/19/06 786,118 1,992,178
D. Craig Young 20,000 1.53% 12.50 02/19/06 157,223 398,435
John C. Shapleigh 80,000 6.11% 12.50 02/19/06 628,895 1,593,742
David L. Solomon 100,000 7.64% 12.50 02/19/06 786,118 1,992,178
<FN>
- ---------------
(1) The dollar amounts under the 5% and 10% columns are the result of calculations required by the rules of
the Securities and Exchange Commission and, therefore, are not intended to forecast possible future
appreciation, if any, of the Common Stock price. The amounts shown reflect the difference between the
appreciation and the exercise price at the assumed annual rates of appreciation through the tenth
anniversary of the dates of grant.
(2) All options vest in one-third increments on the first, second and third anniversaries of the date of
initial grant.
</TABLE>
The following table sets forth certain information with respect to each
of the Named Executives regarding the value of their unexercised options held as
of December 31, 1996. No options were exercised during 1996.
<TABLE>
AGGREGATED FISCAL YEAR-END OPTION VALUES
<CAPTION>
Number of Securities Underlying
Unexercised Options at Value of Unexercised in-the-Money
December 31, 1996(1) Options at December 31, 1996(2)
------------------------------- ---------------------------------
Name Exercisable(3) Unexercisable Exercisable Unexercisable
- ----------------- -------------- --------------- ---------------- ---------------
<C> <C> <C> <C> <C>
Robert A. Brooks 157,020 100,000 $2,947,933 $1,300,000
James C. Allen 175,540 100,000 3,209,891 1,300,000
D. Craig Young 66,667 153,333 1,433,341 3,126,660
John C. Shapleigh 129,260 80,000 2,711,029 1,040,000
David L. Solomon 65,187 153,333 1,213,399 2,324,660
<FN>
- ---------------
(1) Includes substituted options issued upon the effectiveness of the merger with
BTC on January 2, 1996.
(2) Reflects the difference between the exercise price and $25.50 per share.
(3) All of such options were exercised as of January 1, 1997.
</TABLE>
1996 EMPLOYEE STOCK PURCHASE PLAN. In February 1996, the Company
established an Employee Stock Purchase Plan (the "ESPP") to provide employees of
the Company with an opportunity to purchase Common Stock through payroll
deductions. Under the ESPP, up to 500,000 shares of Common Stock have been
reserved for issuance, subject to certain antidilution adjustments. The ESPP
became effective at the time of the Company's initial public offering of Common
Stock in May 1996. The ESPP is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code. The first
offering period under the ESPP is from May 1996 through April 30, 1997. The
Board of Directors will have authority to authorize up to four annual offering
periods thereafter. The ESPP terminates on April 30, 2001. Eligible employees
<PAGE>
may participate in the ESPP by authorizing payroll deductions during an offering
period within a percentage range determined by the Board of Directors.
Initially, the amount of authorized payroll deductions may not be less than 1%
nor more than 10% of an employee's cash compensation during an offering period,
but not more than $25,000 per year. Amounts withheld from payroll are applied at
the end of each offering period to purchase shares of Common Stock. Participants
may withdraw their contributions at any time before stock is purchased, and in
the event of withdrawal such contributions will be returned to the participants
with interest. The purchase price of the Common Stock is equal to 85% of the
lower of (i) the market price of the Common Stock immediately before the
beginning of the applicable offering period or (ii) the market price of the
Common Stock at the end of each offering period. All expenses incurred in
connection with the implementation and administration of the ESPP will be paid
by the Company.
401(K) PLAN. The Company has a 401(k) savings and retirement plan (the
"401(k) Plan") which covers substantially all employees of the Company. All
employees of the Company who are 21 years of age or older are eligible to
participate in the 401(k) Plan upon completion of twelve months of service. The
401(k) Plan allows participants to agree to certain salary deferrals which the
Company allocates to the participant's plan account. These amounts may not
exceed statutorily mandated annual limits set forth in Sections 401(k), 404 and
415 of the Internal Revenue Code. Participants are also eligible to receive
Company matching contributions each year in an amount up to 50% of the
participant's contribution up to a maximum of 4% of such participant's annual
compensation. All contributions to a participant's plan account are subject to
limitations imposed on retirement plans generally and 401(k) plans in
particular. The Company's contributions will generally vest over a five-year
period. Distribution of a participant's account under the 401(k) Plan may be
made at retirement, death, permanent disability or other termination of
employment in a lump sum form of payment. Participants may withdraw amounts from
their plan accounts after attainment of age 59 1/2 or in the event of proven
financial hardship, and may also take loans against their plan account balances.
INDEBTEDNESS OF MANAGEMENT
The Named Executives are indebted to the Company on 6% notes payable on
December 31, 1997 which were delivered by each of the Named Executives to
evidence their respective obligations to reimburse the Company for amounts of
income tax withholding payments made by the Company with respect to their stock
option exercises on January 1, 1997. None of such individuals was indebted to
the Company during the fiscal year ended December 31, 1996, and the respective
amounts owed to the Company as of February 28, 1997, (as reflected on the table
below) are the highest amounts the Named Executives have owed to date.
Amount Outstamding
Name at February 28, 1997
-------------------------- --------------------
Robert A. Brooks $ 956,572
James C. Allen 1,041,610
D. Craig Young 465,119
John C. Shapleigh 879,729
David L. Solomon 393,748
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") is responsible for setting corporate policy for Board compensation
and executive and other employee compensation and benefit plans. Jonathan M.
Nelson, G. Jackson Tankersley, Jr. (Chairman), Carol deB. Whitaker and Ronald H.
Vander Pol served on the Compensation Committee for all or part of the fiscal
year ended December 31, 1996. Mr. Vander Pol was replaced by Ms. Whitaker as a
member of the Compensation Committee on December 17, 1996. None of the past or
present Compensation Committee members is or was an employee of the Company. The
Compensation Committee's responsibilities include approval of executive pay
structure (i.e. salary bands, guidelines for annual merit increases and
incentives and aggregate amounts and guideline levels of participation in
executive stock plans), as well as individual approval of all compensation
matters for the Named Executives. In this connection, the Compensation Committee
has retained and relied upon the advice of an independent compensation
consultant who has conducted market surveys and made recommendations consistent
with the adopted compensation philosophy to the Compensation Committee.
COMPENSATION PHILOSOPHY
The Company's approach to executive compensation, as implemented by the
Compensation Committee, has been designed to provide a competitive compensation
program that will enable the Company to attract, motivate, reward and retain
individuals who possess the skills, experience and talents necessary to advance
the growth and financial performance of the Company. The Company's compensation
policies are designed to encourage shareholder value creation, corporate
teamwork, equity ownership in the Company and long term loyalty to the Company.
The Company's executive compensation has two key elements: (1) an annual
component, i.e., base salary and an annual discretionary bonus based upon
<PAGE>
achievement of corporate and personal objectives, and (2) a long-term component
consisting of stock options and awards.
The Company strives to provide compensation opportunities which
emphasize effectively rewarding management for the achievement of critical
corporate and personal performance objectives. In addition, the program provides
stock incentive opportunities designed to align the interests of executives and
other key employees with other stockholders through the ownership of Common
Stock. The following is a discussion of each of the elements of the Company's
executive compensation program including a description of the decisions and
actions taken by the Compensation Committee with respect to 1996 compensation
for the Chief Executive Officer and all executive officers as a group.
MANAGEMENT COMPENSATION PROGRAM
Compensation paid to the Company's executive officers for the fiscal
year ended December 31, 1996 (as reflected in the Summary Compensation Table set
forth above with respect to the Named Executives) consisted of the following
elements: base salary, annual incentive cash bonuses, stock options under the
Company's 1993 Stock Option Plan, participation in the Company's 1996 Employee
Stock Purchase Plan and contributions under the Company's 401(k) Plan.
BASE SALARY
In determining the base salary of executive officers, the Compensation
Committee establishes broad salary bands as flexible guidelines for future
salary administration which take into consideration a variety of factors
including the executive's levels of responsibility and individual experience and
performance, and the salaries of similar positions in the Company and in
comparable companies in the CLEC industry. The Compensation Committee believes
that its process for determining and adjusting the base salary of executive
officers is fully consistent with sound personnel practices. Based on the
Compensation Committee's consideration of the aforementioned factors, salary
increases based on merit were made effective as of January 1, 1996 for each of
the Named Executives (as reflected in the Summary Compensation Table set forth
above) and certain other executive officers of the Company.
Annual adjustments in base salaries typically are made effective at the
beginning of the calendar year for which they are intended to apply and
therefore reflect in large part achievement of the prior year's corporate and
individual performance objectives.
ANNUAL INCENTIVE BONUS
Each year, the Compensation Committee establishes ranges of annual
revenue and EBITDA (earnings (loss) before minority interest, interest, income
taxes, depreciation and amortization) targets and critical strategy/operating
objectives for each of the Named Executives which are reviewed and evaluated at
year-end in connection with its approval of the discretionary bonuses paid for
that year. Individual incentive bonus awards for 1996 were determined by the
Compensation Committee based on the Compensation Committee's determination
regarding the extent to which each of the Named Executives achieved his
objectives.
STOCK INCENTIVES
The long term incentive element of the Company's management compensation
program has historically been primarily in the form of stock options grants. The
Compensation Committee has approved annual at-market option grants to each of
the Named Executives based on guidelines expressed as percentages of their
salaries with variations which recognize individual performance, leadership
potential and past grant history. These discretionary stock options have been
granted and administered by the Compensation Committee under the 1993 Stock
Option Plan which was designed to create an opportunity for key employees of the
Company to acquire a proprietary interest in the Company and thereby enhance
their efforts in the service of the Company and its stockholders. The
compensatory and administrative features of the 1993 Stock Option Plan conform
in all material respects to the design of standard comparable plans in the
industry and are, in the Compensation Committee's estimation, fair and
reasonable.
During 1996, the Compensation Committee approved grants of stock options
to 61 key employees and executive officers (including those Named Executives
reflected in the foregoing tables) for an aggregate of 1,309,000 shares at
exercise prices ranging from $12.50 to $33.75 per share, which options were
granted at a price equal to the fair market value of the Common Stock on the
dates of the grant. In most cases, options were granted under agreements which
provide that one-third of the options become exercisable on each succeeding
anniversary of the respective grant dates to further the executive retention
goal of the 1993 Stock Option Plan.
<PAGE>
CHIEF EXECUTIVE OFFICER COMPENSATION
During 1996, Mr. James C. Allen, Vice Chairman and Chief Executive
Officer of the Company, was eligible to participate in the same executive
compensation plans as were available to other corporate-level executive officers
of the Company. Based on the performance of the Company in the prior fiscal year
and the Compensation Committee's assessment of Mr. Allen's ongoing personal
performance in the position of Chief Executive Officer, Mr. Allen received a
$50,000 salary increase effective as of January 1, 1996 as reflected in the
Summary Compensation Table set forth above. Among the factors considered by the
Compensation Committee in its consideration of Mr. Allen's performance were the
continued expansion and construction of the Company's telecommunications
networks and the continued success of the Company's acquisition strategy. Mr.
Allen has been Chief Executive Officer of the Company since its inception in
November 1993 and, under his direction, the Company has achieved its strategic
objectives of having telecommunications networks in operation or under
construction in a total of 10 cities by the end of 1994, 20 cities by the end of
1995 and 30 cities by the end of 1996.
During 1996, a total of 19 switches were installed in the Company's
networks and network route miles increased 304%, the number of on-net buildings
connected increased 309% and circuits in service increased 321%. Total assets
increased 500% reflecting approximately $690 million of proceeds of debt and
equity offerings completed during the year. Fixed assets increased 470% and
total employment increased 378%. In addition, the Company completed the
acquisitions of (1) City Signal, Inc., which included networks in operation and
under construction in four cities in Michigan and Ohio, (2) GLA International
Ltd., which provides the Company a full range of telecommunications consulting,
management, engineering and information systems capabilities, (3) ALD
Communications, Inc., a switchless reseller of long distance telecommunications
services and a provider of shared tenant services in the San Francisco Bay area
and (4) Bittel Telecommunications Corporation, a switch-based reseller of long
distance telecommunications services in the Los Angeles and San Francisco Bay
areas.
Based on these achievements and for aggressively pursuing the
implementation of the Company's strategic growth objectives, Mr. Allen received
a cash bonus of $110,000 for 1996. His annual incentive cash bonus award for
1996 was earned under the same plan applicable to all other corporate-level
executive officers of the Company and was based on the Compensation Committee's
belief that Mr. Allen had exceeded his personal and corporate performance
objectives for 1996.
Mr. Allen was granted stock options on February 20, 1996 for 100,000
shares of Common Stock under the Company's 1993 Stock Option Plan at the option
price of $12.50 per share. This discretionary grant was made in accordance with
the guidelines established by the Compensation Committee and in recognition of
his contributions to the continuing success of the Company through internally
generated growth and through business acquisitions.
* * * * *
The foregoing report is provided by the following directors, who were
members of the Compensation Committee at the end of 1996:
Jonathan M. Nelson
G. Jackson Tankersley, Jr. (Chairman)
Carol deB. Whitaker
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Effective January 31, 1996, the Company acquired City Signal, Inc.,
which owned competitive access provider networks in operation and under
construction in Michigan and Ohio (the "City Signal Acquisition"). Mr. Vander
Pol, as the sole shareholder of City Signal, Inc., received 2,240,000 shares of
the Company's Common Stock in exchange for all of his shares of City Signal,
Inc. As of February 28, 1997, Mr. Vander Pol owned 2,056,000 shares of Common
Stock and has the option to require the Company to repurchase up to 2,016,000 of
such shares at a price of $12.50 per share on or before February 1, 1998.
<PAGE>
PERFORMANCE GRAPH
The following graph sets forth a comparison, for the period beginning
May 3, 1996 (the date the Company's Common Stock began trading on the NASDAQ
National Market) and ending December 31, 1996, of the cumulative total return on
a $100.00 investment in the Company's Common Stock, based on the market price of
the Common Stock, with the cumulative total return, assuming reinvestment of
dividends, on an investment of $100.00 for the same period in companies on the
NASDAQ Composite Index and on the NASDAQ Telecommunications Industry Index. The
indices are included for comparative purposes only. They do not necessarily
reflect management's opinion that such indices are an appropriate measure of the
relative performance of the Company's Common Stock and are not intended to
forecast or be indicative of future performance of the Common Stock.
[PERFORMANCE GRAPH]
5/2/96 6/28/96 9/30/96 12/31/96
-------- -------- -------- --------
Brooks Fiber Properties, Inc. $ 100 $ 122 $ 106 $ 94
NASDAQ Composite Index $ 100 $ 102 $ 105 $ 111
NASDAQ Telecommunications Industry Index $ 100 $ 101 $ 95 $ 95
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company was founded in November 1993 by BTC, executives and other
employees of BTC and the Company and a group of venture capital investors who
provided its initial $40.8 million of equity capital. As the Company's founding
stockholder, BTC received 1,162,800 founder's shares of the Company's Common
Stock and founder's warrants exercisable at $220.00 per share to purchase 81,600
shares of the Company's Series A-1 Convertible Preferred Stock (representing
1,632,000 shares of Common Stock on an as-converted basis at $11.00 per share).
BTC also invested $635,000 in the Company's first round financing to acquire
6,350 shares of the Company's Series A-1 Convertible Preferred Stock and
$1,000,065 in the Company's second round financing to acquire 6,061 shares of
Series A-2 Convertible Preferred Stock. On a fully diluted basis, these
securities represented a total of approximately 14.2% of the Company's capital
stock outstanding on January 2, 1996.
Pursuant to an Agreement and Plan of Merger dated December 19, 1995
between BTC and the Company, BTC was merged into the Company on January 2, 1996,
securities of the Company held by BTC were cancelled and the former holders of
BTC's Common Stock, BTC's Preferred Stock, Convertible Notes, and options and
warrants to purchase BTC Common Stock received shares of the Company's Common
Stock, warrants to purchase shares of the Company's Series A-1 Convertible
Preferred Stock ("Preferred Stock Warrants") and in-the-money options and
warrants to purchase shares of the Company's Common Stock which, at January 2,
1996, represented an aggregate of approximately 18.5% of the fully diluted
shares of Common Stock of the Company, and out-of-the money warrants to acquire
an additional 3.3% of the Company's fully diluted Common Stock on such date.
Certain of the executive officers, directors and stockholders of the Company
were also executive officers, directors and/or stockholders of BTC prior to the
merger and received, as a result of the merger, an aggregate of 690,720 shares
of the Company's Common Stock, Preferred Stock Warrants exercisable on an as
converted basis for 520,100 shares of the Company's Common Stock, 164,760
in-the-money Common Stock options, 55,540 in-the-money Common Stock warrants and
117,320 out-of-the money Common Stock warrants, including approximately 149,280
shares of the Company's Common Stock and Preferred Stock Warrants exercisable on
an as converted basis for approximately 115,400 shares of the Company's Common
Stock in exchange for an aggregate of 94,106 shares of BTC Common Stock acquired
since January 1, 1994 for a total of $2,579,261.
The terms of the BTC merger reflected an agreed value for the Company's
Common Stock of $12.50 per share (as adjusted for the 20 for 1 Common Stock
split effected concurrently with the merger). The transactional value was
mutually determined by the Company and BTC after consultation with their
respective financial advisors. At a valuation of $12.50 per share, BTC's
holdings of the Company's securities were valued at $22.6 million (accounting
for approximately 60% of BTC's total value) and BTC's other assets, comprised
primarily of the consulting business of GLA International, Inc. ("GLA"), were
valued at approximately $13.8 million. At a price of $12.50 per share, BTC's
fully diluted equity was valued at approximately $36.4 million. In exchange for
all of the outstanding securities of BTC, the Company issued 2,167,360 shares of
the Company's Common Stock (representing 756,340 incremental shares) valued at
approximately $27.1 million, 81,597 Preferred Stock Warrants valued at
approximately $5.0 million, 375,860 in-the-money Common Stock warrants and
options, and 758,980 out-of-the money Common Stock warrants.
Pursuant to the terms of a Management and Services Agreement dated
November 10, 1993 between the Company and BTC (which was canceled upon
effectiveness of the BTC merger), BTC had assigned and made available to the
Company the services of the Company's Chief Executive Officer on an as-needed
basis and the services of BTC's Chief Executive Officer to act as Chairman of
the Board of the Company, and had provided, at BTC's principal executive
offices, sufficient office space and support services for the Company's
principal executive offices for a fee of $250,000 per annum, plus the Company's
proportionate share of rent, utilities and telephone expenses. Pursuant to a
Consulting Agreement, GLA provided network engineering, design and other
<PAGE>
services to the Company. During the year ended December 31, 1995, the Company
paid BTC and GLA a total of $1,478,000 pursuant to such arrangements.
Pursuant to the terms of a Management and Services Agreement dated as
of January 2, 1996 between the Company and Brooks Telecommunications
International, Inc. ("BTI", a company spun-off to the stockholders of BTC prior
to its merger with the Company), the Company had agreed to assign and make
available to BTI, on a part-time, as needed basis, the services of its Chairman
to act as Chairman and Chief Executive Officer of BTI and to provide to BTI
sufficient office space and support services to conduct its business, for a fee
of $150,000 per annum plus BTI's proportionate share of rent, utilities,
telephone and other out-of-pocket expenses. The agreement was terminated
effective August 31, 1996.
Holdings IV and CHI are investors in World-Net, a privately-held
company with which the Company formed a strategic alliance on June 25, 1996, and
have invested a total of $13.3 million for a 20% fully diluted interest in
World-Net. G. Jackson Tankersley, Jr. is an individual General Partner of the
sole General Partner of Centennial VI and an executive officer and director of
CHI.
As a result of the City Signal Acquisition, Ronald H. Vander Pol
received 2,240,000 shares of the Company's Common Stock. In connection with the
Company's initial public offering, 224,000 of such shares were sold. Mr. Vander
Pol has the option to require the Company to repurchase any or all of the
remaining 2,016,000 shares at a price of $12.50 per share on or before February
1, 1998.
In March 1995, the Company paid to Whitko & Company, an investment
banking and management consulting firm of which Carol deB. Whitaker is chairman,
a fee of $292,000 for consulting services provided to the Company in connection
with the acquisition of certain assets by the Company. No continuing consulting
relationship exists between Whitko & Company and the Company. The Company
believes that the terms and conditions of such services were no less favorable
to the Company than those that would have been available to the Company in
comparable, arm's-length relationships with unaffiliated persons.
PROPOSAL 2
PROPOSAL TO AMEND ARTICLES FOURTH OF THE RESTATED CERTIFICATE
OF INCORPORATION OF THE COMPANY
Article Fourth of the Company's Restated Certificate of Incorporation
presently provides that the Company is authorized to issue 50,000,000 shares of
Common Stock and 1,040,012 shares of Preferred Stock, par value $0.01 per share.
On February 19, 1997, the Board of Directors unanimously adopted a resolution
setting forth and declaring the advisability of the proposed amendment to
Article Fourth of the Company's Restated Certificate of Incorporation set forth
in Annex A to this Proxy Statement. Among other things, the proposed amendment
would increase the authorized shares of Common Stock of the Company from
50,000,000 to 150,000,000. The amendment also includes other changes that
reflect the automatic conversion of the Company's Series A and Series B
Preferred Stock in connection with the initial public offering of the Company's
Common Stock and the redesignation of the Series C Junior Participating
Preferred Stock as Series A Junior Participating Preferred Stock. The Board of
Directors has directed that the proposed amendment be considered by the
Stockholders at the 1997 Annual Meeting. The additional shares of Common Stock
for which authorization is sought, if and when issued, would have the same
rights and privileges as the shares of Common Stock now outstanding.
As of February 28, 1997, there were 32,672,579 shares of Common Stock
outstanding, and no shares of Common Stock were held as treasury shares.
Unexercised options and warrants for 3,244,821 shares of Common Stock were
outstanding, 3,232,959 additional shares of Common Stock were reserved for
future issuance under the Company's employee benefit plans (including the
Company's 1997 Stock Incentive Plan - see "Proposal 3" below) and approximately
4 million shares were reserved for issuance pursuant to pending acquisitions.
Although the Board or Directors has no present commitments for the
issuance of additional shares of Common Stock, the additional shares of Common
Stock that would be authorized would be available to the Company for issuance in
connection with general corporate purposes including without limitation,
employee benefit plans, additional equity offerings and acquisitions, as well as
any stock dividend or stock split the Board might deem advisable. The Board of
Directors believes that the additional shares of Common Stock would give the
Company greater flexibility in executing its business strategies by allowing the
Company to issue shares of Common Stock without the expense and delay of further
action by the Stockholders, unless such action is required by law or NASDAQ
National Market requirements.
Although the Company considers from time to time acquisitions and other
transactions that may involve the issuance of additional shares of Common Stock
(any one or more of which may be under consideration or acted upon at any time),
except for the pending commitment to issue 600,000 shares of Common Stock, the
Company is not a party to any agreement with respect to any such transaction,
nor does it have any agreement, commitment or understanding with respect to any
such transaction that would involve the issuance of additional shares of Common
Stock.
<PAGE>
The issuance of additional shares of Common Stock by the Company may,
depending upon the circumstances under which the shares are issued, reduce
stockholders' equity per share and may reduce the percentage of ownership of
Common Stock of existing Stockholders. The issuance of additional shares of
Common Stock in payment of a stock dividend or to effect a stock split,
however, would not reduce the percentage of ownership of the Company by existing
Stockholders or reduce any Stockholders' interest in the earnings of the
Company. Stockholders have no preemptive right to subscribe for or purchase any
additional shares of Common Stock issued by the Company.
The proposed amendment of Article Fourth of the Restated Certificate of
Incorporation is not being recommended in response to any specific effort of
which management is aware to obtain control of the Company. However, shares of
authorized and unreserved Common Stock could be issued to a holder who might
thereby obtain sufficient voting power to create voting impediments that would
frustrate third parties seeking to gain control of the Company against the
wishes of the Board of Directors, whether or not such a takeover bid is in the
best interest of the Stockholders.
The affirmative vote of the holders of two-thirds of the shares of Common
Stock outstanding on the record date is required to adopt the proposed
amendment. If the proposal is approved by the Stockholders, such increase in the
number of authorized shares will become effective upon the filing of an
amendment to the Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware, which would occur as soon as practicable
following the approval of the proposal by the Stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
PROPOSED AMENDMENT OF ARTICLE FOURTH OF THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION.
PROPOSAL 3
PROPOSAL TO APPROVE THE ADOPTION OF THE BROOKS
FIBER PROPERTIES, INC. 1997 STOCK INCENTIVE PLAN
On _____________, 1997 the Board of Directors adopted and approved,
subject to Stockholder approval, the Brooks Fiber Properties, Inc. 1997 Stock
Incentive Plan (the "1997 Stock Incentive Plan"). The purpose of the 1997 Stock
Incentive Plan is to supplement and replace the Company's 1993 Stock Option Plan
and provide a flexible mechanism to provide incentives to, and to encourage
ownership of the Common Stock by, officers and other selected key management
employees of the Company and its subsidiaries. An aggregate of 3,000,000 shares
of Common Stock have been reserved for issuance pursuant to the 1997 Stock
Incentive Plan.
The Board of Directors believes that the successful continuation of the
Company's business strategy depends on attracting and retaining able executives,
managers and other key employees. The Board believes that the ability to grant
Awards (as hereinafter defined) under the 1997 Stock Incentive Plan will
strengthen its ability to attract and retain capable personnel. The 1997 Stock
Incentive Plan provides the Compensation Committee with the flexibility to grant
stock options, stock appreciation rights, restricted stock, restricted stock
units, performance stock, performance units, merit awards, phantom stock awards
and rights to acquire stock through purchase under a stock purchase program (the
"Awards"). The 1997 Stock Incentive Plan also provides for the annual grant of
non-qualified stock options to the non-employee directors of the Corporation
The Board of Directors is seeking Stockholder approval of the 1997 Stock
Incentive Plan in accordance with the requirements of the National Association
of Securities Dealers, Inc. for listing the shares of Common Stock issuable
thereunder on the Nasdaq National Market, the requirements of Section 162(m) of
the Internal Revenue Code for approval of performance-based compensation plans
and the requirements of Section 422 of the Code for Incentive Stock Options.
A copy of the 1997 Stock Incentive Plan is attached to this Proxy
Statement as Annex B. The following summary of the terms of the 1997 Stock
Incentive Plan is qualified in its entirety by reference to all of the
provisions thereof.
ADMINISTRATION
The 1997 Stock Incentive Plan is administered by the Compensation
Committee. Subject to the express provisions of the 1997 Stock Incentive Plan,
the Compensation Committee has plenary authority, in its discretion, to
interpret the 1997 Stock Incentive Plan, establish rules and regulations for its
operation, select employees of the Company and its subsidiaries to receive
Awards and determine the form and amount and other terms and conditions of such
Awards.
ELIGIBILITY
All directors and officers of the Company and other employees of the
Company and its subsidiaries (the "Employees") are eligible to be selected to
participate in the 1997 Stock Incentive Plan. The selection of participants from
among the Employees is within the discretion of the Compensation Committee. The
Company currently has approximately 800 Employees.
<PAGE>
AMENDMENT OF PLAN
The Board of Directors may suspend, terminate, modify or amend the 1997
Stock Incentive Plan at any time, with or without prior notice; provided,
however, it may not, without Stockholder approval, adopt any amendment which
would (a) increase the aggregate number of shares of Common Stock which may be
issued under the 1997 Stock Incentive Plan, (b) materially increase the benefits
accruing to participants in the 1997 Stock Incentive Plan or (c) materially
modify the eligibility requirements for participation in the 1997 Stock
Incentive Plan, except for adjustments to reflect stock splits or combinations,
reorganizations or other capital adjustments. No suspension, termination,
modification or amendment may terminate an outstanding Award or materially
adversely affect a participant's rights under an outstanding Award without the
participant's consent.
AVAILABLE SHARES
Three million shares of Common Stock are available for grant under the
1997 Stock Incentive Plan, not more than fifty percent of which may be in the
form of Restricted Stock and Performance Shares. Shares of Common Stock related
to Awards which terminate by expiration, forfeiture, cancellation or otherwise
without the issuance of shares, or are settled in cash in lieu of Common Stock,
and shares used to pay an option exercise price will be available for grant
under the 1997 Stock Incentive Plan.
LIMITATION ON AWARDS
No participant may receive an Award of a stock option or a stock
appreciation right under the 1997 Stock Incentive Plan to the extent that the
sum of the number of shares subject to the Award, and the number of shares
subject to prior Awards of options and stock appreciation rights during any
three consecutive calendar years, exceeds 1,000,000 shares. In addition, the
maximum number of shares with respect to which any participant may receive
Awards during any three consecutive calendar years is 1,000,000, and the maximum
amount of cash that may be paid out with respect to Awards to any individual
during any three consecutive years is $3,000,000.
STOCK OPTIONS
Under the 1997 Stock Incentive Plan, the Compensation Committee may grant
Awards in the form of incentive and non-qualified stock options to purchase
shares of the Common Stock. The Compensation Committee will determine the number
of shares subject to each option, the manner and time of the option's exercise
and the exercise price per share of stock subject to the option. In no event,
however, may the exercise price of a stock option be less than the fair market
value of the Common Stock on the date of the grant. Upon exercise, the option
price may, at the discretion of the Compensation Committee, be paid by a
participant in cash, shares of common stock, a combination thereof, or such
other consideration as the Compensation Committee may deem appropriate. Any
stock option granted in the form of an incentive stock option must satisfy the
applicable requirements of Section 422 of the Internal Revenue Code.
STOCK APPRECIATION RIGHTS
The 1997 Stock Incentive Plan authorizes the Compensation Committee to
grant Stock Appreciation Rights ("SARs") either in tandem with a stock option or
independent of a stock option. A SAR is a right to receive a payment equal to
the appreciation in market value of a stated number of shares of Common Stock
from the SAR's exercise price to the market value on the date of its exercise.
The Compensation Committee will determine the number of shares subject to the
Award, the manner and time of a SAR exercise and the exercise price, which shall
not be less than the fair market value of a share of Common Stock.
A tandem SAR may be granted either at the time of the grant of the
related stock option or at any time thereafter during the term of the stock
option. A tandem SAR shall be exercisable to the extent its related stock option
is exercisable, and the exercise price of such a SAR shall be the same as the
option price under its related stock option. Upon the exercise of a stock option
as to some or all of the shares covered by the Award, the related tandem SAR
shall be canceled automatically to the extent of the number of shares covered by
the stock option exercise.
A limited SAR is the same as a tandem SAR but becomes exercisable only
upon a "change in control" as defined in the 1997 Stock Incentive Plan, and upon
exercise, a participant receives a payment equal to the difference between the
fair market value and the exercise price.
STOCK AWARDS
The 1997 Stock Incentive Plan authorizes the Compensation Committee to
grant Awards in the form of shares of restricted stock or restricted stock
units. Such Awards will be subject to such terms, conditions, restrictions or
<PAGE>
limitations, if any, as the Compensation Committee deems appropriate including,
but not by way of limitation, restrictions on transferability and continued
employment. The 1997 Stock Incentive Plan gives the Compensation Committee the
discretion to accelerate the delivery of a stock Award.
PERFORMANCE SHARES
The 1997 Stock Incentive Plan allows for the grant of "performance
shares." For purposes of the 1997 Stock Incentive Plan, "performance shares" are
restricted shares of Common Stock which are awarded subject to attainment of
certain performance objectives over a period to be determined by the
Compensation Committee.
PERFORMANCE UNITS
Awards may also be granted in the form of performance units which are
units valued by reference to shares of the Common Stock. Performance units are
similar to performance shares in that they are awarded contingent upon the
attainment of certain performance objectives over a fixed period. The length of
the period, the performance objectives to be achieved during the period and the
measure of whether and to what degree the objectives have been achieved will be
determined by the Compensation Committee.
OPTION GRANTS TO NON-EMPLOYEE DIRECTORS
The 1997 Stock Incentive Plan also provides for the grant of stock
options to outside directors of the Company. Directors who are not employees of
the Company will receive an initial grant of a non-qualified stock option for
10,000 shares at fair market value on date of grant and, thereafter, an annual
grant of a non-qualified stock option for 5,000 shares at fair market value on
date of grant, which options will be one-half vested after six months and will
be fully vested upon completion of one full year of Board service following the
date of grant.
CHANGE IN CONTROL
In the event of a "change in control" (as defined in the 1997 Stock
Incentive Plan), (i) all of the terms, conditions, restrictions and limitations
in effect on any of an Employee's outstanding Awards would immediately lapse and
(ii) all of the Employee's outstanding Awards would automatically become one
hundred percent vested.
The 1997 Stock Incentive Plan defines a "change in control" as occurring
if: (a) any 'person' becomes the beneficial owner of securities representing 20%
or more of the voting power of the Company's outstanding securities; or (b)
during any period of three consecutive years, individuals who at the beginning
of such period constitute the Board of Directors, and any new director whose
election by the Board of Directors or nomination for election by the
Stockholders was approved by a vote of at least two-thirds of the directors then
still in office who either were directors at the beginning of the period or
whose election or nomination for election was previously so approved cease to
constitute at least a majority of the Board; or (c) the Stockholders approve a
merger or consolidation of the Company with another company which results in the
voting securities outstanding immediately prior thereto representing less than
65% of the voting securities outstanding immediately thereafter or in which a
"person" acquires more than 20% of the outstanding voting securities; or (d) the
Stockholders approve a plan of complete liquidation or an agreement for the sale
or disposition by the Company of all or substantially all of its assets; or (e)
any other event determined by a vote of at least two-thirds of the Board of
Directors to constitute a "Change in Control."
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences of
the Program, based on current income tax laws, regulations and rulings.
INCENTIVE STOCK OPTIONS
Subject to the effect of the Alternative Minimum Tax, discussed below,
an optionee does not recognize income on the grant of an Incentive Stock Option.
If an optionee exercises an Incentive Stock Option in accordance with the terms
of the option and does not dispose of the shares acquired within two years from
the date of the grant of the option nor within one year from the date of
exercise, the optionee will not realize any income by reason of the exercise,
and the Company will be allowed no deduction by reason of the grant or exercise.
The optionee's basis in the shares acquired upon exercise will be the amount
paid upon exercise. (See the discussion below for the tax consequences of the
exercise of an option with stock already owned by the optionee.) Provided the
optionee holds the shares as a capital asset at the time of sale or other
disposition of the shares, his gain or loss, if any, recognized on the sale or
other disposition will be capital gain or loss. The amount of his gain or loss
<PAGE>
will be the difference between the amount realized on the disposition of the
shares and his basis in the shares.
If an optionee disposes of the shares within two years from the date of
grant of the option or within one year from the date of exercise ("Early
Disposition"), the optionee will realize ordinary income at the time of such
Early Disposition which will equal the excess, if any, of the lesser of (i) the
amount realized on the Early Disposition, or (ii) the fair market value of the
shares on the date of exercise, over the optionee's basis is in the shares. The
Company will be entitled to a deduction in an amount equal to such income. The
excess, if any, of the amount realized on the Early Disposition of such shares
over the fair market value of the shares on the date of exercise will be
long-term or short-term capital gain, depending upon the holding period of the
shares, provided the optionee holds the shares as a capital asset at the time of
Early Disposition. If an optionee disposes of such shares for less than his
basis in the shares, the difference between the amount realized and his basis
will be a long-term or short-term capital loss, depending upon the holding
period of the shares, provided the optionee holds the shares as a capital asset
at the time of disposition.
The excess of the fair market value of the shares at the time the
Incentive Stock Option is exercised over the exercise price for the shares is an
item of adjustment for purposes of the alternative minimum tax ("Stock Option
Preference").
NON-QUALIFIED STOCK OPTIONS
Non-Qualified Stock Options (including Stock Options granted to
Employees and directors) do not qualify for the special tax treatment accorded
to Incentive Stock Options under the Code. Although an optionee does not
recognize income at the time of the grant of the option, he recognizes ordinary
income upon the exercise of a Non-Qualified Option in an amount equal to the
difference between the fair market value of the stock on the date of exercise of
the option and the amount of cash paid for the stock.
As a result of the optionee's exercise of a Non-Qualified Stock Option,
the Company will be entitled to deduct as compensation an amount equal to the
amount included in the optionee's gross income. The Company's deduction will be
taken in the Company's taxable year in which the option is exercised.
The excess of the fair market value of the stock on the date of
exercise of a Non-Qualified Stock Option over the exercise price is not a Stock
Option Preference.
STOCK APPRECIATION RIGHTS
Recipients of SARs do not recognize income upon the grant of such
rights. When a participant elects to receive payment of a SAR, he or she
recognizes ordinary income in an amount equal to the cash and fair market value
of shares of Common Stock received, and the Company is entitled to a deduction
equal to such amount.
PAYMENT IN SHARES
If the optionee exercises an option and surrenders stock already owned
by him or her ("Old Shares"), the following rules apply:
1. To the extent the number of shares acquired ("New Shares") exceeds
the number of Old Shares exchanged, the optionee will recognize ordinary income
on the receipt of such additional shares (provided the option is not an
Incentive Stock Option) in an amount equal to the fair market value of such
additional shares less any cash paid for them and the Company will be entitled
to a deduction in an amount equal to such income. The basis of such additional
shares will be equal to the fair market value of such shares (or, in the case of
an Incentive Stock Option, the cash, if any, paid for the additional shares) on
the date of exercise and the holding period for such additional shares will
commence on the date the option is exercised.
2. Except as provided below, to the extent the number of New Shares
acquired does not exceed the number of Old Shares exchanged, no gain or loss
will be recognized on such exchange, the basis of the New Shares received will
be equal to the basis of the Old Shares surrendered, and the holding period of
the New Shares received will include the holding period of the Old Shares
surrendered. However, under proposed regulations promulgated by the U.S.
Department of Treasury, if the optionee exercises an Incentive Stock Option by
surrendering Old Shares, the holding period for the New Shares will begin on the
date the New Shares are transferred to the optionee for purposes of determining
whether there is an Early Disposition of the New Shares and, if the optionee
makes an Early Disposition of the New Shares, he will be deemed to have disposed
of the New Shares with the lowest basis first. If the optionee exercises an
Incentive Stock Option by surrendering Old Shares which were acquired through
the exercise of an Incentive Stock Option or an option granted under an employee
stock purchase plan, and if the surrender occurs prior to the expiration of the
holding period applicable to the type of option under which the Old Shares were
<PAGE>
acquired, the surrender will be deemed to be an Early Disposition of the Old
Shares. The federal income tax consequences of an Early Disposition are
discussed above.
3. If the Old Shares surrendered were acquired by the optionee by
exercise of an Incentive Stock Option, or an option granted under an employee
stock purchase plan, then, except as provided in 2 above, the exchange will not
constitute an Early Disposition of the Old Shares.
4. Based upon prior rulings of the Internal Revenue Service in
analogous areas, it is believed that if an optionee exercises an Incentive Stock
Option and surrendered Old Shares and if he disposes of the New Shares received
upon exercise within two years from the date of the grant of the option or
within one year from the date of exercise, the following tax consequences would
result:
(i) To the extent the number of New Shares received upon
exercise does not exceed the number of Old Shares surrendered, the disposition
of the New Shares will not constitute an Early Disposition (unless the
disposition is a surrender of the New Shares in the exercise of an Incentive
Stock Option).
(ii) The disposition of the New Shares will constitute an
Early Disposition to the extent the number of New Shares received upon exercise
and disposed of exceeds the number of Old Shares surrendered.
RESTRICTED STOCK
Grantees of Restricted Stock do not recognize income at the time of the
grant of such stock. However, when shares of Restricted Stock become free from
any restrictions Grantees recognize ordinary income in an amount equal to the
fair market value of the stock on the date all restrictions are satisfied, less,
in the case of Restricted Stock, the amount paid for the stock. Alternatively,
the Grantee of Restricted Stock may elect to recognize income upon the grant of
the stock and not at the time the restrictions lapse, in which case the amount
of income recognized will be the fair market value of the stock on the date of
grant. The Company will be entitled to deduct as compensation the amount
includible in the Grantee's income in its taxable year in which the Grantee
recognizes the income.
TAXATION OF PREFERENCE ITEMS
Section 55 of the Code imposes an Alternative Minimum Tax equal to the
excess, if any, of (i) 26% of the optionee's "alternative minimum taxable
income" up to $175,000 ($87,500 in the case of married taxpayers filing
separately) and 28% of "alternative minimum taxable" income in excess of
$175,000 ($87,500 in the case of married taxpayers filing separately) over (ii)
his or her "regular" federal income tax. Alternative minimum taxable income is
determined by adding the optionee's Stock Option Preference and any other items
of tax preference to the optionee's adjusted gross income and then subtracting
certain allowable deductions and an exemption amount. The exemption amount is
$33,750 for single taxpayers, $45,000 for married taxpayers filing jointly and
$22,500 for married taxpayers filing separately. However, these exemption
amounts are phased out beginning at certain levels of alternative minimum
taxable income.
DEDUCTIBILITY OF COMPENSATION IN EXCESS OF $1 MILLION PER YEAR
Section 162(m) of the Code precludes a public corporation from
deducting compensation in excess of $1 million per year for its chief executive
officer and any of its four other highest paid executive officers. However,
certain performance-based compensation is exempt from this deduction limit.
Stock options and or SAR's will qualify for this exemption. In addition, certain
other Awards granted under the 1997 Stock Incentive Plan will also qualify while
others may not.
The foregoing statement is only a summary of the federal income tax
consequences of certain Awards which may be granted under the 1997 Stock
Incentive Plan and is based on the Company's understanding of present federal
tax laws and regulations.
OTHER TERMS OF AWARDS
Awards may be paid in cash, Common Stock, a combination of cash and
Common Stock or any other form of property, as the Compensation Committee shall
determine. If an Award is granted in the form of a stock award, stock option, or
performance share, or in the form of any other stock-based grant, the
Compensation Committee may include as part of such Award an entitlement to
receive dividends or dividend equivalents. At the discretion of the Compensation
Committee, payment of a stock award, performance share, performance unit,
dividend, or dividend equivalent may be deferred by a participant.
<PAGE>
The 1997 Stock Incentive Plan provides for the forfeiture of unvested
Awards in the event of termination of employment for a reason other than death,
disability, retirement, or termination by the Company other than for cause.
In the event that termination occurs by reason of death, all Awards
shall vest. In the event that termination occurs by reason of disability or
retirement, all Awards shall vest ratably except that the proportion of such
Awards subject to performance criteria shall remain subject to the same terms
and conditions. In the event of termination by the Company other than for cause,
Awards shall vest ratably except that all performance-based awards shall be
forfeited. In the event of death, disability, or retirement, options and stock
appreciation rights shall be exercisable for three years and in the event of
termination by the Company other than for cause, options and stock appreciation
rights are exercisable for three months thereafter, but in no event later than
the scheduled expiration date.
Upon the grant of any Award, the Compensation Committee may, by way of
an Award Agreement or otherwise, establish such other terms, conditions,
restrictions and limitations governing the grant of such Award as are not
inconsistent with the 1997 Stock Incentive Plan.
NEW PLAN BENEFITS
No Awards have been made to date under the 1997 Stock Incentive Plan.
Because the officers and employees of the Company who may participate in the
1997 Stock Incentive Plan and the amount of Awards will be determined by the
Compensation Committee in its discretion, it is not possible to state the names
or positions of, or the number of shares of Common Stock that may be granted to,
the Company's officers and key employees. However, the non-employee directors of
the Company will each be granted a non-qualified stock option for 10,000 shares
of Common Stock upon the effective date of the 1997 Stock Incentive Plan.
The affirmative vote of a majority of the shares of Common Stock
present and represented by proxy at the 1997 Annual Meeting is required to
approve the adoption of the 1997 Stock Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE ADOPTION
OF THE 1997 STOCK INCENTIVE PLAN.
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee,
has determined to appoint KPMG Peat Marwick LLP ("KPMG") as the Company's
independent accountants for the fiscal year ending December 31, 1997. A
resolution will be presented at the meeting to ratify the appointment of KPMG.
KPMG acted as independent accountants of the Company for the fiscal year
ended December 31, 1996 and their report on the Company's consolidated financial
statements for the fiscal year ended December 31, 1996 is included as part of
the Company's 1996 Annual Report to Stockholders which accompanies this Proxy
Statement. Effective December 1995, the Company changed its principal
independent accounting firm from Arthur Andersen LLP to KPMG. The decision to
change accounting firms was approved by the Audit Committee of the Company's
Board of Directors. None of the reports of Arthur Andersen LLP on the financial
statements of the Company contained an adverse opinion or a disclaimer of
opinion, or was qualified or modified in any respect. The Company has not had
any disagreement with Arthur Andersen LLP with respect to any matter of
accounting principle or practice, financial statement disclosure or auditing
scope or procedure, which would have caused Arthur Andersen LLP to make
reference to the matter of disagreement in connection with any report.
The Company has been advised that a representative of KPMG will be
present at the 1997 Annual Meeting with an opportunity to make a statement if
such representative desires and will be available to respond to appropriate
questions of the Stockholders.
The affirmative vote of a majority of the shares of Common Stock
present and represented by proxy at the 1997 Annual Meeting is required to
ratify the appointment of KPMG as the Company's independent accountants for the
fiscal year ending December 31, 1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KPMG AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 1997.
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended for inclusion in the Company's Proxy
Statement and proxy relating to the 1998 Annual Meeting of Stockholders should
be sent to: Executive Vice President and Chief Financial Officer, Brooks Fiber
Properties, Inc., 425 Woods Mills Road South, Suite 300, Town & Country,
Missouri 63017, and must be received by November __, 1997.
<PAGE>
MISCELLANEOUS
This solicitation of proxies is made by the Board of Directors of the
Company. The solicitation will be by mail and the expense thereof will be paid
by the Company. In addition, proxies may be solicited by telephone or telefax by
directors, officers and regular employees of the Company.
Management knows of no other matters to come before the meeting.
However, if any other matters properly come before the meeting or any
postponement or adjournment thereof, the proxies solicited hereby will be voted
on such matters in accordance with the judgment of the persons voting such
proxies.
Even if you plan to attend the meeting in person, please complete,
sign, date and return the enclosed proxy promptly. Should you attend the
meeting, you may revoke the proxy and vote in person. A postage-paid,
return-addressed envelope is enclosed for your convenience. No postage need be
affixed if mailed in the United States. Your cooperation in giving this your
immediate attention will be appreciated.
By Order of the Board of Directors
JOHN P. DENNEEN, Secretary
St. Louis, Missouri
March __, 1997
<PAGE>
ANNEX A
Amend Article Fourth of the Restated Certificate of Incorporation of
the Company to read in its entirety as follows:
FOURTH:
A. CLASSES AND NUMBER OF SHARES.
The aggregate number of shares of capital stock which the Corporation
is authorized to issue is 151,040,012 shares, consisting of:
(i) 150,000,000 shares of Common Stock, par value $.01 per share
("Common Stock")(1); and
(ii) 1,040,012 shares of Preferred Stock, par value $.01 per share
("Preferred Stock"), of which 50,000 shares are designated as Series A Junior
Participating Preferred Stock ("Series A Preferred Stock").
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(1) The term "Voting Common Stock" used in Article EIGHTH herein shall mean
"Common Stock."
B. PREEMPTIVE RIGHTS.
No shareholder of any class of stock of the Corporation shall have any
preemptive right to acquire any additional shares of stock of the Corporation of
any class or series or any security convertible into, or exercisable or
exchangeable for, such stock.
C. TERMS OF PREFERRED STOCK.
1. SERIES A PREFERRED STOCK. The preferences and relative,
participating, optional and other special rights of the Series A Preferred
Stock, and the qualifications, limitations and restrictions thereof, are as
follows:
(i) DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of any
series of Preferred Stock of the Corporation ranking prior and superior to the
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock, in preference to the holders of shares of Common Stock
and of any other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for the
purpose, quarterly dividends payable in cash on any regular quarterly dividend
payment date as shall be established by the Board of Directors (each such date
being referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10.00 or (b) subject to the
provision for adjustment hereinafter set forth, 1000 times the aggregate per
share amount of all cash dividends, and 1000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other
than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date or, with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred Stock.
In the event the Corporation shall at any time after February 29, 1996 (the
"Rights Declaration Date") declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in subparagraph (a) of this
paragraph (i) immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock); provided
that, in the event no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend Payment Date and
the next subsequent Quarterly Dividend Payment Date, a dividend of $10.00 per
share on the Series A Preferred Stock shall nevertheless be payable on such
subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
<PAGE>
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may, in
accordance with applicable law, fix a record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date shall be not more
than such number of days prior to the date fixed for the payment thereof as may
be allowed by applicable law.
(ii) VOTING RIGHTS. The holders of shares of Series A Preferred Stock
shall have the following voting rights:
(a) Each share of Series A Preferred Stock shall entitle the
holder thereof to 1000 votes on all matters submitted to a vote of the
stockholders of the Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
number of votes to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under the preceding sentence shall be
adjusted by multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred Stock, the holders of shares of Common Stock and
the holders of shares of any other capital stock of the Corporation having
general voting rights shall vote together as one class on all matters submitted
to a vote of stockholders of the Corporation.
(c) Except as otherwise set forth herein and except as
otherwise provided by law, holders of Series A Preferred Stock shall have no
special voting rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
(iii) CERTAIN RESTRICTIONS.
(a) Whenever dividends or distributions payable on the Series
A Preferred Stock as provided in paragraph (i) above are in arrears, thereafter
and until all accrued and unpaid dividends and distributions, whether or not
declared, on shares of Series A Preferred Stock outstanding shall have been paid
in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled;
(iii) except as permitted in subparagraph (a)(iv) of
this paragraph (iii) below, redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the Corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; and
(iv) purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under subparagraph (a) of
<PAGE>
this paragraph (iii), purchase or otherwise acquire such shares at such time and
in such manner.
(iv) REACQUIRED SHARES. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. The
Corporation shall cause all such shares upon their cancellation to be authorized
but unissued shares of Preferred Stock which may be reissued as part of a new
series of Preferred Stock, subject to the conditions and restrictions on
issuance set forth herein.
(v) LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Subject to the rights of the holders of any shares of any
series of Preferred Stock of the Corporation ranking prior and superior to the
Series A Preferred Stock with respect to liquidation, upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $1000.00 per share, plus an amount equal
to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series A Liquidation Preference").
Following the payment of the full amount of the Series A Liquidation Preference,
no additional distributions shall be made to the holders of shares of Series A
Preferred Stock, unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
1000 (as appropriately adjusted as set forth in subparagraph (b) below to
reflect such events as stock dividends, and subdivisions, combinations and
consolidations with respect to the Common Stock) (such number in clause (ii)
being referred to as the "Adjustment Number"). Following the payment of the full
amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, holders of Series A Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the Adjustment Number to 1
with respect to such Series A Preferred Stock and Common Stock, on a per share
basis, respectively.
(b) In the event there are not sufficient assets available to
permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences. In the event there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of Common
Stock.
(c) In the event the Corporation shall at any time after the
Rights Declaration Date declare or pay any dividend on Common Stock payable in
shares of Common Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification or otherwise than
by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the Adjustment Number
in effect immediately prior to such event shall be adjusted by multiplying such
Adjustment Number by a fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding immediately
prior to such event.
(vi) CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
declare or pay any dividend on Common Stock payable in shares of Common Stock,
or effect a subdivision or combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that are outstanding immediately prior to such event.
(vii) REDEMPTION. The shares of Series A Preferred Stock shall not be
redeemable.
<PAGE>
(viii) RANKING. The Series A Preferred Stock shall rank junior to all
other series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise.
(ix) FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
2. OTHER SERIES OF PREFERRED STOCK. The terms of the shares of each
other series of Preferred Stock shall be as stated and expressed in this
Certificate of Incorporation or any amendment hereto, or in the resolution or
resolutions providing for the issuance of such series of Preferred Stock adopted
by the Board of Directors. Subject to the requirements of the GCL and the
provisions of this Certificate of Incorporation, the Board of Directors is
expressly authorized to cause any number of the authorized and undesignated
shares of Preferred Stock to be issued from time to time in one or more series
of Preferred Stock with such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or restrictions
thereof, if any, as the Board of Directors may fix by resolution or resolutions,
prior to the issuance of any shares of such series of Preferred Stock, each of
which series may differ from any and all other series, including, without
limiting the generality of the foregoing, the following:
(i) The number of shares constituting such series of Preferred Stock
and the designation thereof;
(ii) The dividend rate, if any, on the shares of such series of
Preferred Stock, whether and the extent to which any such dividends shall be
cumulative or non-cumulative, the relative rights of priority, if any, of
payments of any dividends, and the times at which, and the terms and conditions
on which, any dividends shall be paid;
(iii) The right, if any, of the holders of shares of such series of
Preferred Stock to vote and the manner of voting, except as may otherwise be
provided by the GCL;
(iv) The right, if any, of the holders of shares of such series of
Preferred Stock to convert the same into, or the right, if any, of the
Corporation to exchange the same for, another class or series of stock of the
Corporation and the terms and conditions, including any provision for future
adjustment in the conversion or exchange rate, under which said shares may be
converted or exchanged;
(v) The redemption or purchase price or prices of the shares of such
series of Preferred Stock, if any, and the times at which, and the terms and
conditions on which, the shares of such series of Preferred Stock may be
redeemed or purchased;
(vi) The terms of the sinking fund, if any, to be provided for such
series of Preferred Stock, and the terms and amount of such sinking fund;
(vii) The rights of the holders of shares of such series of Preferred
Stock in the event of a voluntary or involuntary liquidation, dissolution or
winding up of the Corporation and the relative rights of priority, if any, of
such holders with respect thereto; and
(viii) Any other relative powers, preferences and rights, and any
qualifications, limitations or restrictions, of such series of Preferred Stock.
D. TERMS OF COMMON STOCK.
The voting powers and relative, participating, optional and other
special rights of the Common Stock, and the qualifications, limitations and
restrictions thereof, are as follows:
(i) VOTING RIGHTS AND POWERS. Except as provided in the GCL, the
holders of shares of the Common Stock shall vote together as a single class
(with the holders of all series of Preferred Stock entitled to vote together
with the holders of the shares of Common Stock) on all matters as to which such
holders are entitled to vote.
(ii) DIVIDEND RIGHTS. Cash dividends may be declared and paid upon the
Common Stock in such amounts and at such times as the Board of Directors may
determine, provided that such dividends are paid on the outstanding Common Stock
in equal amounts per share. Each share of the Common Stock shall be equal in
respect of rights to dividends and distributions when and as declared in the
form of stock or other property of the Corporation. Funds otherwise legally
available for the payment of dividends on the Common Stock shall not be
restricted or reduced by reason of there being any excess of the aggregate
preferential amount of any series of Preferred Stock outstanding over the
aggregate par value thereof.
(iii) LIQUIDATION RIGHTS. Upon the dissolution, liquidation or winding
up of the Corporation, after there shall have been paid or set apart for payment
<PAGE>
to the holders of any outstanding shares of Preferred Stock the full
preferential amounts to which they are entitled, the holders of the outstanding
shares of the Common Stock shall be entitled, on a share for share basis, to
receive the funds of the Corporation remaining for distribution to its
shareholders. Neither the sale of all or substantially all the property or
business of the Corporation nor the merger or consolidation of the Corporation
into or with any other Corporation or the merger or consolidation of any other
Corporation into or with the Corporation shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, of the Corporation within
the meaning of this paragraph (iii).
(iv) OTHER POWERS AND RIGHTS. Except as otherwise required by the GCL
or as otherwise provided in this Certificate of Incorporation, each share of
Common Stock shall have identical powers and rights.
<PAGE>
ANNEX B
BROOKS FIBER PROPERTIES, INC. 1997 STOCK INCENTIVE PLAN
SECTION 1
Statement of Purpose
1.1. The Brooks Fiber Properties, Inc. 1997 Stock Incentive Plan (the "Plan")
has been established by Brooks Fiber Properties, Inc. (the "Company") to:
(a) attract and retain executive, managerial and other salaried employees;
(b) motivate participating employees, by means of appropriate incentives,
to achieve long-range goals;
(c) provide incentive compensation opportunities that are competitive with
those of other major corporations; and
(d) further identify a Participant's interests with those of the Company's
other stockholders through compensation that is based on the Company's
common stock; and thereby promote the long-term financial interest of the
Company and its Related Companies, including the growth in value of the
Company's equity and enhancement of long-term stockholder return.
SECTION 2
Definitions
2.1. Unless the context indicates otherwise, the following terms shall have the
meaning set forth below:
(a) Award. The term "Award" shall mean any award or benefit granted to any
Participant under the Plan, including, without limitation, the grant of
Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Performance Stock, Performance Units, Merit Awards, Phantom Stock
Awards and Stock acquired through purchase under Section 12.
(b) Board. The term "Board" shall mean the Board of Directors of the
Company.
(c) Cause. The term "Cause" shall mean (a) the willful and continued
failure by the Participant to substantially perform his or her duties with
the Company (other than any such failure resulting from his or her
incapacity due to physical or mental illness), or (b) the willful engaging
by the Participant in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
definition, no act, or failure to act, shall be deemed "willful" unless
done, or omitted to be done, by the Participant not in good faith and
without reasonable belief that his or her action or omission was in the
best interest of the Company.
(d) Change in Control. A "Change in Control" shall be deemed to have
occurred if:
(1) any "person" as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any subsidiary of the Company, or any trustee
or other fiduciary holding securities under an employee benefit plan
of the Company or any subsidiary of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities in any transaction or series of transactions not approved
in advance by a vote of at least two-thirds (2/3) of the Board; or
(2) during any period of three consecutive years (not including any
period prior to the effective date of this Plan), individuals who at
the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described
in clause (1), (3), (4) or (5) of this definition) whose election by
the Board or nomination for election by the Company's stockholders was
approved by a vote of at least two- thirds (2/3) of the directors then
still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof; or
(3) the stockholders of the Company approve a merger or consolidation
of the Company with any other company other than (i) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 65% of the combined
voting power of the voting securities of the Company (or such
surviving entity) outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than 20% of the
combined voting power of the Company's then outstanding securities; or
<PAGE>
(4) the stockholders of the Company adopt a plan of complete
liquidation of the Company or approve an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets. For purposes of this clause (4), the term "the sale
or disposition by the Company of all or substantially all of the
Company's assets" shall mean a sale or other disposition transaction
or series of related transactions involving assets of the Company or
of any direct or indirect subsidiary of the Company (including the
stock of any direct or indirect subsidiary of the Company) in which
the value of the assets or stock being sold or otherwise disposed of
(as measured by the purchase price being paid therefor or by such
other method as the Board determines is appropriate in a case where
there is no readily ascertainable purchase price) constitutes more
than two-thirds of the fair market value of the Company (as
hereinafter defined). For purposes of the preceding sentence, the
"fair market value of the Company" shall be the aggregate market value
of the outstanding shares of Stock (on a fully diluted basis) plus the
aggregate market value of the Company's other outstanding equity
securities. The aggregate market value of the shares of Stock (on a
fully diluted basis) outstanding on the date of the execution and
delivery of a definitive agreement with respect to the transaction or
series of related transactions (the "Transaction Date") shall be
determined by the average closing price of the shares of Stock for the
ten trading days immediately preceding the Transaction Date. The
aggregate market value of any other equity securities of the Company
shall be determined in a manner similar to that prescribed in the
immediately preceding sentence for determining the aggregate market
value of the shares of Stock or by such other method as the Board
shall determine is appropriate; or
(5) any other event determined by a vote of at least two-thirds (2/3)
of the Board to constitute a "Change of Control."
(e) Code. The term "Code" means the Internal Revenue Code of 1986, as
amended. A reference to any provision of the Code shall include reference
to any successor provision of the Code.
(f) Committee. The term "Committee" means the Compensation Committee of the
Board, selected in accordance with the provisions of Subsection 4.2.
(g) Date of Termination. A Participant's "Date of Termination" shall be the
date on which his or her employment with all Employers and Related
Companies terminates for any reason; provided that a Date of Termination
shall not be deemed to occur by reason of a transfer of the Participant
between the Company and a Related Company (including Employers) or between
two Related Companies (including Employers); and further provided that a
Participant's employment shall not be considered terminated while the
Participant is on a leave of absence from an Employer or a Related Company
approved by the Participant's Employer.
(h) Disability. Except as otherwise provided by the Committee, a
Participant shall be considered to have a "Disability" during the period in
which he or she is unable, by reason of a medically determinable physical
or mental impairment, to carry out his or her duties with an Employer,
which condition, in the discretion of the Committee, is expected to have a
duration of not less than 120 days.
(i) Employee. The term "Employee" shall mean any officer of the Company or
any other person with an employment relationship with the Company or a
Related Company.
(j) Employer. The Company and each Related Company which, with the consent
of the Company, participates in the Plan for the benefit of its eligible
Employees are referred to collectively as the "Employers" and individually
as an "Employer".
(k) Fair Market Value. The "Fair Market Value" of the Stock on any given
date shall be the mean between the closing price per share of Stock on the
NASDAQ National market on such date (or if no sales of Stock were made on
such date, the closing price on the NASDAQ National Market on the next
preceding date on which sales were made on such market), or the price of
shares of Stock as determined by such other valuation method as may be
determined in good faith by the Committee.
(l) Immediate Family. With respect to a particular Participant, the term
"Immediate Family" shall mean the Participant's spouse, children,
stepchildren, adoptive relationships, sisters, brothers and grandchildren.
(m) Incentive Stock Option. The term "Incentive Stock Option" shall mean
any Incentive Stock Option granted pursuant to Section 6 of the Plan.
(n) Merit Award. The term "Merit Award" shall mean any Merit Award granted
pursuant to Section 13 of the Plan.
(o) Non-Qualified Stock Option. The term "Non-qualified Stock Option" shall
mean any Non-Qualified Stock Option granted pursuant to Section 6 of the
Plan.
<PAGE>
(p) Option. The term "Option" shall mean any Incentive Stock Option or Non-
Qualified Stock Option granted under the Plan.
(q) Participant. The term "Participant" means an Employee who has been
granted an award under the Plan.
(r) Performance-Based Compensation. The term "Performance-Based
Compensation" shall have the meaning ascribed to it in Section 162(m)(4)(C)
of the Code.
(s) Performance Period. The term "Performance Period" shall mean the period
over which applicable performance is to be measured.
(t) Performance Stock. The term "Performance Stock" shall have the meaning
ascribed to it in Section 10 of the Plan.
(u) Performance Units. The term "Performance Units" shall have the meaning
ascribed to it in Section 11 of the Plan.
(v) Phantom Stock Award. The term "Phantom Stock Award" shall mean any
Phantom Stock Award granted pursuant to Section 14 of the Plan.
(w) Qualified Retirement Plan. The term "Qualified Retirement Plan" means
any plan of the Company or a Related Company that is intended to be
qualified under Section 401(a) of the Code.
(x) Related Companies. The term "Related Companies' means any company
during any period in which it is a "subsidiary corporation" of the Company
(as that term is defined in Code Section 424(f)).
(y) Restricted Period. The term "Restricted Period" shall mean the period
of time for which shares of Restricted Stock or Restricted Stock Units are
subject to forfeiture pursuant to the Plan or during which Options and
Stock Appreciation Rights are not exercisable.
(z) Restricted Stock. The term "Restricted Stock" shall have the meaning
ascribed to it in Section 8 of the Plan.
(aa) Restricted Stock Units. The term "Restricted Stock Units" shall have
the meaning ascribed to it in Section 9 of the Plan.
(bb) Retirement. "Retirement" of a Participant shall mean the occurrence of
a Participant's Date of Termination under circumstances that constitute
such participant's retirement at normal retirement age under the terms of
the Qualified Retirement Plan of an Employer or Related Company that is
extended to the Participant immediately prior to the Participant's Date of
Termination or, if no such plan is extended to the Participant on his or
her Date of Termination, under the terms of any applicable retirement
policy of the Participant's Employer.
(cc) SEC. "SEC" means the Securities and Exchange Commission.
(dd) Stock. The term "Stock" shall mean shares of common stock, $.01 par
value per share, of the Company.
(ee) Stock Appreciation Rights. The term "Stock Appreciation Rights" shall
mean any Stock Appreciation Right granted pursuant to Section 7 of the
Plan.
SECTION 3
Eligibility
3.1. Subject to the discretion of the Committee and the terms and conditions of
the Plan, the Committee shall determine and designate from time to time, from
among the salaried, full-time officers and Employees of the Employers those
Employees who will be granted one or more Awards under the Plan.
SECTION 4
Operation and Administration
4.1. Subject to the approval of the stockholders of the Company at the Company's
1997 Annual Meeting of Stockholders, the Plan shall be effective April 29, 1997
("Effective Date"), provided, however, that any awards made under the Plan prior
to approval by the stockholders of the Company, shall be contingent upon such
approval. The Plan shall be unlimited in duration and remain in effect until
termination by the Board; provided however, that no Incentive Stock Option may
be granted under the Plan after April 29, 2002.
4.2. The Plan shall be administered by the Committee which shall be selected by
the Board, shall consist of members of the Board who are not Employees and are
not eligible to participate in the Plan, and shall consist of not less than two
members of the Board. The authority to manage and control the operation and
administration of the Plan shall be vested in the Committee, subject to the
following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select Employees to receive Awards, to
determine the time or times of receipt and to determine the types of Awards
<PAGE>
and the number of shares covered by the Awards, to establish the terms,
conditions, performance criteria, restrictions, and other provisions of
such Awards. In making such Award determinations, the Committee may take
into account the nature of services rendered by the respective Employee,
his or her present and potential contribution to the Company's success and
such other factors as the Committee deems relevant.
(b) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to determine the extent to which Awards under the
Plan will be structured to conform to the requirements applicable to
Performance-Based Compensation as described in Code Section 162(m), and to
take such action, establish such procedures, and impose such restrictions
at the time such awards are granted as the Committee determines to be
necessary or appropriate to conform to such requirements.
(c) The Committee will have the authority and discretion to interpret the
Plan and the Awards granted under the Plan, to establish, amend and rescind
any rules and regulations relating to the Plan, to determine the terms and
provisions of any agreements made pursuant to the Plan, to make all other
determinations that it deems necessary or advisable for the administration
of the Plan and to correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Award in the manner and to the
extent the Committee deems necessary or advisable to carry it into effect.
(d) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan shall be final and binding on all persons. The express
grant in the Plan of any specific power to the Committee shall not be
construed as limiting any power or authority of the Committee. Provided,
however, that except as otherwise permitted under Treasury Regulation
1.162-27(e)(2)(iii)(C), the Committee may not increase any Award once made
if payment under such Award is intended to constitute Performance-Based
Compensation.
(e) The Committee may only act by a majority of its members. Any
determination of the Committee may be made by the unanimous written consent
of its members. In addition, the Committee may authorize one or more of its
members or any officer of an Employer to execute and deliver documents and
perform other administrative acts pursuant to the Plan.
(f) No member or authorized delegate of the Committee shall be liable to
any person for any action taken or omitted in connection with the
administration of the Plan unless attributable to his or her own fraud or
willful misconduct. The Committee, the individual members thereof, and
persons acting as the authorized delegates of the Committee under the Plan,
shall be indemnified by the Employers against any and all liabilities,
losses, costs and expenses (including legal fees and expenses) of
whatsoever kind and nature which may be imposed on, incurred by, or
asserted against, the Committee or its members or authorized delegates by
reason of the performance of any action pursuant to the Plan if the
Committee or its members or authorized delegates did not act dishonestly or
in willful violation of the law or regulation under which such liability,
loss, cost or expense arises. This indemnification shall not duplicate but
may supplement any coverage available under any applicable insurance
policy.
4.3 Notwithstanding any other provision of the Plan to the contrary, no
Participant shall receive any Award of an Option or a Stock Appreciation Right
under the Plan to the extent that the sum of (a) the number of shares of Stock
subject to such Stock Option, and (b) the number of shares of Stock subject to
all other prior Awards of Options and Stock Appreciation Rights under the Plan
during the three-year period ending on the date of the Award, would exceed the
Participant's Individual Limit under the Plan. Subject to the provisions of
Section 16, a Participant's "Individual Limit" shall be 1,000,000 shares during
any three consecutive calendar years. In addition, the maximum number of shares
with respect to which any Participant may receive Awards during any three
consecutive calendar years is 1,000,000. The maximum amount of cash that may be
paid out with respect to Awards to any individual during any three consecutive
calendar years is $3,000,000.
4.4. To the extent that the Committee determines that it is necessary or
desirable to conform any Awards under the Plan with the requirements applicable
to "Performance-Based Compensation", as that term is used in Code Section
162(m)(4)(C), it may, at or prior to the time an Award is granted, take such
steps and impose such restrictions with respect to such Award as it determines
to be necessary to satisfy such requirements. To the extent that it is necessary
to establish performance goals for a particular Performance Period, those goals
will be based on one or more of the following business criteria: revenues,
EBITDA, net income, earnings per share, debt reduction, return on investment,
operating ratio, cash flow, return on assets, stockholders return, and return on
equity. If the Committee establishes performance goals for a Performance Period
relating to one or more of these business criteria, the Committee may determine
to approve a payment from that particular Performance Period upon attainment of
the performance goal relating to any one or more of such criteria.
<PAGE>
SECTION 5
Shares Available Under the Plan
5.1. The shares of Stock with respect to which Awards may be made under the Plan
shall be shares of currently authorized but unissued or treasury shares acquired
by the Company, including shares purchased in the open market or in private
transactions. Subject to the provisions of Section 16, the total number of
shares of Stock available for grant of Awards shall not exceed 3,000,000 shares
of Stock, not more than fifty percent of which may be in the form of Restricted
Stock and Performance Shares. Except as otherwise provided herein, if any Award
shall expire or terminate for any reason without having been exercised in full,
the unissued shares of Stock subject thereto (whether or not cash or other
consideration is paid in respect of such Award) shall again be available for the
purposes of the Plan. Any shares of Stock which are used as full or partial
payment to the Company upon exercise of an Award shall be available for purposes
of the Plan.
SECTION 6
Options
6.1. The grant of an "Option" under this Section 6 entitles the Participant to
purchase shares of Stock at a price fixed at the time the Option is granted, or
at a price determined under a method established at the time the Option is
granted, subject to the terms of this Section 6. Options granted under this
Section 6 may be either Incentive Stock Options or Non-Qualified Stock Options,
and subject to Subsection 6.6 and Sections 15 and 20, shall not be exercisable
for at least six months from the date of grant, as determined in the discretion
of the Committee. An "Incentive Stock Option" is an Option that is intended to
satisfy the requirements applicable to an "incentive stock option" described in
section 422(b) of the Code. A "Non-Qualified Option" is an Option that is not
intended to be an "incentive stock option" as that term is described in section
422(b) of the Code.
6.2. The Committee shall designate the Participants to whom Options are to be
granted under this Section 6 and shall determine the number of shares of Stock
to be subject to each such Option. To the extent that the aggregate fair market
value of Stock with respect to which Incentive Stock Options are exercisable for
the first time by any individual during any calendar year (under all plans of
the Company and all Related Companies) exceeds $100,000, such Options shall be
treated as Non-Qualified Stock Options, to the extent required by Section 422 of
the Code.
6.3. The determination and payment of the purchase price of a share of Stock
under each Option granted under this Section shall be subject to the following
terms of this Subsection 6.3:
(a) The purchase price shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option
is granted; provided, however, that in no event shall the price per share
be less than the Fair Market Value per share on the date of the grant or,
if earlier, the day on which the Participant granted the Option is hired,
promoted or other such singular event has occurred, provided the date of
grant shall not be more than 90 days following such date;
(b) The full purchase price of each share of Stock purchased upon the
exercise of any Option shall be paid at the time of such exercise and, as
soon as practicable thereafter, a certificate representing the shares so
purchased shall be delivered to the person entitled thereto; and
(c) The purchase price shall be paid either in cash, in shares of Stock
(valued at Fair Market Value as of the day of exercise), through a
combination of cash and Stock or through such cashless exercise arrangement
as may be approved by the Committee and established by the Company.
6.4. Except as otherwise expressly provided in the Plan, an Option granted under
this Section 6 shall be exercisable in accordance with the following terms of
this Subsection 6.4.
(a) The terms and conditions relating to exercise of an Option shall be
established by the Committee, and may include, without limitation,
conditions relating to completion of a specified period of service,
achievement of performance standards prior to exercise of the Option, or
achievement of Stock ownership objectives by the Participant. No Option may
be exercised by a Participant after the expiration date applicable to that
Option.
(b) The exercise of an Option will result in the surrender of the
corresponding rights under a tandem Stock Appreciation Right, if any.
6.5. The vesting and exercise periods of any Option shall be determined by the
Committee but the term of any Option shall not extend more than ten years after
the date of grant.
6.6. In the event the Participant exercises an Option under this Plan or a
predecessor plan of the Company or a Related Company and pays all or a portion
of the purchase price in Stock, in the manner permitted by Subsection 6.3, such
Participant, pursuant to the exercise of Committee discretion at the time the
Option is exercised or to the extent previously authorized by the Committee, may
be issued a new Option to purchase additional shares of Stock equal to the
number of shares of Stock surrendered to the Company in such payment. Such new
<PAGE>
Option shall have an exercise price equal to the Fair Market Value per share on
the date such new Option is granted and may have vesting and expiration dates on
the same dates as the vesting and expiration dates of the original Option so
exercised by payment of the purchase price in shares of Stock.
SECTION 7
Stock Appreciation Rights
7.1. Subject to the terms of this Section 7, a Stock Appreciation Right granted
under the Plan entitles the Participant to receive, in cash or Stock (as
determined in accordance with Subsection 7.4), value equal to all or a portion
of the excess of: (a) the Fair Market Value of a specified number of shares of
Stock at the time of exercise; over (b) a specified price which shall not be
less than (i) 100% of the Fair Market Value of the Stock at the time the Stock
Appreciation Right is granted, or, if earlier, the day on which the Participant
granted the Stock Appreciation Right is hired, promoted or other such singular
event has occurred, provided the date of grant shall not be more than 90 days
following such date, or, (ii) if granted in tandem with an Option, the exercise
price with respect to shares under the tandem Option.
7.2. Subject to the provisions of the Plan, the Committee shall designate the
Participants to whom Stock Appreciation Rights are to be granted under the Plan,
shall determine the exercise price or a method by which the price shall be
established with respect to each such Stock Appreciation Right, and shall
determine the number of shares of Stock on which each Stock Appreciation Right
is based. A Stock Appreciation Right may be granted in connection with all or
any portion of a previously or contemporaneously granted Option or not in
connection with an Option. If a Stock Appreciation Right is granted in
connection with an Option then, in the discretion of the Committee, the Stock
Appreciation Right may, but need not, be granted in tandem with the Option.
7.3. The exercise of Stock Appreciation Rights shall be subject to the
following:
(a) If a Stock Appreciation Right is not in tandem with an Option, then the
Stock Appreciation Right shall be exercisable in accordance with the terms
established by the Committee in connection with such rights but, subject to
Sections 15 and 20, shall not be exercisable for six months from the date
of grant and the term of any Stock Appreciation Right shall not extend more
than ten years from the date of grant; and may include, without limitation,
conditions relating to completion of a specified period of service,
achievement of performance standards prior to exercise of the Stock
Appreciation Rights, or achievement of objectives relating to Stock
ownership by the Participant; and
(b) If a Stock Appreciation Right is in tandem with an Option, then the
Stock Appreciation Right shall be exercisable only at the time the tandem
Option is exercisable and the exercise of the Stock Appreciation Right will
result in the surrender of the corresponding rights under the tandem
Option.
7.4. Upon the exercise of a Stock Appreciation Right, the value to be
distributed to the Participant, in accordance with Subsection 7.1, shall be
distributed in shares of Stock (valued at their Fair Market Value at the time of
exercise), in cash, or in a combination of Stock or cash, in the discretion of
the Committee.
7.5. The Committee may grant Limited Stock Appreciation Rights which entitle the
Participant to receive a cash payment in connection with a Change in Control. .
Notwithstanding the foregoing provisions of this Section 7, a Limited Stock
Appreciation Right shall be subject to the following:
(a) A Limited Stock Appreciation Right may (but need not) be granted in
connection with all or any portion of a previously or contemporaneously
granted Option, and may be granted in tandem with an Option regardless of
whether the Option is in tandem with a Stock Appreciation Right;
(b) In the case of a Limited Stock Appreciation Right that is in tandem
with an Option, the payment amount shall be equal to the difference between
the exercise price per share of the Stock covered by the tandem Option and
the Fair Market Value of a share of Stock upon the date of exercise;
(c) To the extent provided by the Committee, a Limited Stock Appreciation
Right may be automatically exercisable at a time determined by the
Committee, or it may be exercised by the Participant during the period
beginning not earlier than the date of a Change in Control, and ending not
later than ninety (90) days following the date of the Change in Control,
and may be exercisable regardless of whether the Participant is then
employed by an Employer or a Related Company; and
(d) If the Limited Stock Appreciation Right is in tandem with an Option,
the exercise of the Limited Stock Appreciation Right shall result in the
cancellation of the tandem Option (and any Stock Appreciation Right in
tandem with such Option).
<PAGE>
SECTION 8
Restricted Stock
8.1. Subject to the terms of this Section 8, Restricted Stock Awards under the
Plan are grants of Stock to Participants, the vesting of which is subject to
certain conditions established by the Committee, with some or all of those
conditions relating to events (such as continued employment or satisfaction of
performance criteria) occurring after the date of the grant of the Award,
provided, however, that to the extent that vesting of a Restricted Stock Award
is contingent on continued employment, the required employment period shall
generally not be less than one year following the grant of the Award unless such
grant is in substitution for an Award under this Plan or a predecessor plan of
the Company or a Related Company. To the extent, if any, required by the General
Corporation Law of the State of Delaware, a Participant's receipt of an Award of
newly issued shares of Restricted Stock shall be made subject to payment by the
Participant of an amount equal to the aggregate par value of such newly issued
shares of Stock.
8.2. The Committee shall designate the Participants to whom Restricted Stock is
to be granted, and the number of shares of Stock that are subject to each such
Award. The Award of shares under this Section 8 may, but need not, be made in
conjunction with a cash-based incentive compensation program maintained by the
Company, and may, but need not, be in lieu of cash otherwise awardable under
such program.
8.3. Shares of Restricted Stock granted to Participants under the Plan shall be
subject to the following terms and conditions:
(a) Restricted Stock granted to Participants may not be sold, assigned,
transferred, pledged or otherwise encumbered during the Restricted Period;
(b) The Participant as owner of such shares shall have all the rights of a
stockholder, including but not limited to the right to vote such shares
and, except as otherwise provided by the Committee or as otherwise provided
by the Plan, the right to receive all dividends and other distributions
paid on such shares;
(c) Each certificate issued in respect of shares of Restricted Stock
granted under the Plan shall be registered in the name of the Participant
but, at the discretion of the Committee, each such certificate may be
deposited with the Company with a stock power endorsed in blank or in a
bank designated by the Committee;
(d) The Committee may award Restricted Stock as Performance-Based
Compensation, which shall be Restricted Stock that becomes vested (or for
which vesting is accelerated) upon the achievement of performance goals
established by the Committee and the Committee may specify the number of
shares that will vest upon achievement of different levels of performance;
except as otherwise provided by the Committee, achievement of maximum
targets during the Performance Period shall result in the Participant's
receipt of the full amount of Restricted Stock comprising such Performance-
Based Compensation and, in the discretion of the Committee, achievement of
the minimum target but less than the maximum target, the Committee may
establish the Participant's right to a portion of the Award; and
(e) Except as otherwise provided by the Committee, any Restricted Stock
which is not earned by the end of a Restricted Period or Performance
Period, as the case may be, shall be forfeited. If a Participant's Date of
Termination occurs prior to the end of a Restricted Period or Performance
Period, as the case may be, the Committee may determine, in its sole
discretion, that the Participant will be entitled to settlement of all or
any portion of the Restricted Stock as to which he or she would otherwise
be eligible, and may accelerate the determination of the value and
settlement of such Restricted Stock or make such other adjustments as the
Committee, in its sole discretion, deems desirable. Subject to the
limitations of the Plan and the Award of Restricted Stock, upon the vesting
of Restricted Stock, such Restricted Stock will be transferred free of all
restrictions to the Participant (or his or her legal representative,
beneficiary or heir).
SECTION 9
Restricted Stock Units
9.1. Subject to the terms of this Section 9, a Restricted Stock Unit entitles a
Participant to receive shares or cash for the units at the end of a Restricted
Period to the extent provided by the Award with the vesting of such units to be
contingent upon such conditions as may be established by the Committee (such as
continued employment or satisfaction of performance criteria) occurring after
the date of grant of the Award, provided, however, that to the extent that the
vesting of a Restricted Stock Unit is contingent on continued employment, the
required employment period shall generally not be less than one year following
the date of grant of the Award unless such grant is in substitution for an Award
under this Plan or a predecessor plan of the Company or a Related Company. The
Award of Restricted Stock Units under this Section 9 may, but need not, be made
in conjunction with a cash-based incentive compensation program maintained by
the Company, and may, but need not, be in lieu of cash otherwise awardable under
such program.
<PAGE>
9.2. The Committee shall designate the Participants to whom Restricted Stock
Units shall be granted and the number of units that are subject to each such
Award. During any period in which Restricted Stock Units are outstanding and
have not been settled in Stock, the Participant shall not have the rights of a
stockholder, but, in the discretion of the Committee, may be granted the right
to receive a payment from the Company in lieu of a dividend in an amount equal
to any cash dividends that might be paid during the Restricted Period.
9.3 Except as otherwise provided by the Committee, any Restricted Stock Unit
which is not earned by the end of a Restricted Period shall be forfeited. If a
Participant's Date of Termination occurs prior to the end of a Restricted
Period, the Committee, in its sole discretion, may determine that the
Participant will be entitled to settlement of all or any portion of the
Restricted Stock Units as to which he or she would otherwise be eligible, and
may accelerate the determination of the value and settlement of such Restricted
Stock Units or make such other adjustments as the Committee, in its sole
discretion, deems desirable.
SECTION 10
Performance Stock
10.1. Subject to the terms of this Section 10, an Award of Performance Stock
provides for the distribution of Stock to a Participant upon the achievement of
performance objectives established by the Committee.
10.2. The Committee shall designate the Participants to whom Awards of
Performance Stock are to be granted, and the number of shares of Stock that are
subject to each such Award. The Award of shares of Performance Stock under this
Section 10 may, but need not, be made in conjunction with a cash-based incentive
compensation program maintained by the Company, and may, but need not, be in
lieu of cash otherwise awardable under such program.
10.3. Except as otherwise provided by the Committee, any Award of Performance
Stock which is not earned by the end of the Performance Period shall be
forfeited. If a Participant's Date of Termination occurs prior to the end of a
Performance Period, the Committee, in its sole discretion, may determine that
the Participant will be entitled to settlement of all or any portion of the
Performance Stock as to which he or she would otherwise be eligible, and may
accelerate the determination of the value and settlement of such Performance
Stock or make such other adjustments as the Committee, in its sole discretion,
deems desirable.
SECTION 11
Performance Units
11.1. Subject to the terms of this Section 11, the Award of Performance Units
under the Plan entitles the Participant to receive value for the units at the
end of a Performance Period to the extent provided under the Award. The number
of Performance Units earned, and value received from them, will be contingent on
the degree to which the performance measures established at the time of grant of
the Award are met.
11.2. The Committee shall designate the Participants to whom Performance Units
are to be granted, and the number of Performance Units to be subject to each
such Award.
11.3. For each Participant, the Committee will determine the value of
Performance Units, which may be stated either in cash or in units representing
shares of Stock; the performance measures used for determining whether the
Performance Units are earned; the Performance Period during which the
performance measures will apply; the relationship between the level of
achievement of the performance measures and the degree to which Performance
Units are earned; whether, during or after the Performance Period, any revision
to the performance measures or Performance Period should be made to reflect
significant events or changes that occur during the Performance Period; and the
number of earned Performance Units that will be settled in cash and/or shares of
Stock.
11.4. Settlement of Performance Units shall be subject to the following:
(a) The Committee will compare the actual performance to the performance
measures established for the Performance Period and determine the number of
Performance Units as to which settlement is to be made, and the value of
such Performance Units;
(b) Settlement of Performance Units earned shall be wholly in cash, wholly
in Stock or in a combination of the two, to be distributed in a lump sum or
installments, as determined by the Committee; and
(c) Shares of Stock distributed in settlement of Performance Units shall be
subject to such vesting requirements and other conditions, if any, as the
Committee shall determine, including, without limitation, restrictions of
the type that may be imposed with respect to Restricted Stock under
Section 8.
11.5. Except as otherwise provided by the Committee, any Award of Performance
Units which is not earned by the end of the Performance Period shall be
forfeited. If a Participant's Date of Termination occurs prior to the end of a
<PAGE>
Performance Period, the Committee, in its sole discretion, may determine that
the Participant will be entitled to settlement of all or any portion of the
Performance Units as to which he or she would otherwise be eligible, and may
accelerate the determination of the value and settlement of such Performance
Units or make such other adjustments as the Committee, in its sole discretion,
deems desirable.
SECTION 12
Stock Purchase Program
12.1. The Committee may, from time to time, establish one or more programs under
which Participants will be permitted to purchase shares of Stock under the Plan,
and shall designate the Participants eligible to participate under such Stock
purchase programs. The purchase price for shares of Stock available under such
programs, and other terms and conditions of such programs, shall be established
by the Committee. The purchase price may not be less than 75% of the Fair Market
Value of the Stock at the time of purchase (or, in the Committee's discretion,
the average Stock value over a period determined by the Committee), and further
provided that if newly issued shares of Stock are sold, the purchase price may
not be less than the aggregate par value of such newly issued shares of Stock.
12.2. The Committee may impose such restrictions with respect to shares
purchased under this Section 12, as the Committee, in its sole discretion,
determines to be appropriate. Such restrictions may include, without limitation,
restrictions of the type that may be imposed with respect to Restricted Stock
under Section 8.
SECTION 13
Merit Awards
13.1. The Committee may from time to time make an Award of Stock under the Plan
to selected Employees for such reasons and in such amounts as the Committee, in
its sole discretion, may determine. The consideration to be paid by an Employee
for any such Merit Award shall be fixed by the Committee from time to time, but,
if required by the General Corporation Law of the State of Delaware, it shall
not be less than the aggregate par value of the shares of Stock awarded to him
or her.
SECTION 14
Phantom Stock Awards
14.1. The Committee may make Phantom Stock Awards to selected Employees which
may be based solely on the value of the underlying shares of Stock, solely on
any earnings or appreciation thereon, or both. Subject to the provisions of the
Plan, the Committee shall have the sole and complete authority to determine the
number of hypothetical or target shares as to which each such Phantom Stock
Award is subject and to determine the terms and conditions of each such Phantom
Stock Award. There may be more than one Phantom Stock Award in existence at any
one time with respect to a selected Employee, and the terms and conditions of
each such Phantom Stock Award may differ from each other.
14.2. The Committee shall establish vesting or performance measures for each
Phantom Stock Award on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time, in its sole discretion,
determine. Such measures may be based on years of service or periods of
employment, or the achievement of individual or corporate performance
objectives, but shall, in each instance, be based upon one or more of the
business criteria set forth in Section 4.4. The vesting and performance measures
determined by the Committee shall be established at the time a Phantom Stock
Award is made. Phantom Stock Awards may not be sold, assigned, transferred,
pledged, or otherwise encumbered, except as provided in Section 17, during the
Performance Period.
14.3. The Committee shall determine, in its sole discretion, the manner of
payment, which may include cash or shares of Stock in such proportions as the
Committee shall determine.
14.4. Except as otherwise provided by the Committee, any Award of Phantom Stock
which is not earned by the end of the Performance Period shall be forfeited. If
a Participant's Date of Termination occurs prior to the end of a Performance
Period, the Committee, in its sole discretion, may determine that the
Participant will be entitled to settlement of all or a portion of the Phantom
Stock for which he or she would otherwise be eligible, and may accelerate the
determination of the value and settlement of Phantom Stock or make such other
adjustment as the Committee, in its sole discretion, deems desirable.
SECTION 15
Termination of Employment
15.1. If a Participant's employment is terminated by the Participant's Employer
for Cause or if the Participant's employment is terminated by the Participant
without the consent and approval of the Participant's Employer, all of the
Participant's unvested Awards shall be forfeited.
15.2. If a Participant's Date of Termination occurs by reason of death, all
Options and Stock Appreciation Rights outstanding immediately prior to the
Participant's Date of Termination shall immediately become exercisable and all
restrictions on any Awards outstanding immediately prior to the Participant's
Date of Termination shall lapse.
<PAGE>
15.3. If a Participant's Date of Termination occurs by reason of Disability or
Retirement, or by reason of the Participant's employment being terminated by the
Participant's Employer for any reason other than Cause, or by the Participant
with the consent and approval of the Participant's Employer, the Restricted
Period shall lapse on a proportion of any Awards outstanding immediately prior
to the Participant's Date of Termination (except that, to the extent that an
Award of Restricted Stock, Restricted Stock Units, Performance Units,
Performance Stock and Phantom Stock is subject to a Performance Period, such
proportion of the Award shall remain subject to the same terms and conditions
for vesting as were in effect prior to the Date of Termination and shall be
determined at the end of the Performance Period). The proportion of an Award
upon which the Restricted Period shall lapse shall be a fraction, the
denominator of which is the total number of months of any Restricted Period
applicable to an Award and the numerator of which is the number of months of
such Restricted Period which elapsed prior to the Date of Termination.
15.4. Stock Appreciation Rights and Non-Qualified Stock Options which are or
become exercisable by reason of death, Disability or Retirement or by reason of
the Participant's employment being terminated by the Participant's Employer for
reasons other than Cause or by the Participant with the consent and approval of
the Participant's Employer, shall expire on the expiration date set forth in the
Award or, if earlier:
(a) three years after the Date of Termination, if the Participant's
termination occurs because of death, Disability, or Retirement; and
(b) three months after the Date of Termination, if the Participant's
employment is terminated by the Participant's employer for reasons other
than Cause or by the Participant with the consent and approval of the
Participant's Employer.
Incentive Stock Options which are or become exercisable by reason of death,
Disability or Retirement shall expire on the expiration date set forth in the
Award or, if earlier, three months after the Date of Termination. Options and
Stock Appreciation Rights which are or become exercisable at the time of a
Participant's death may be exercised by the Participant's designated beneficiary
or, in the absence of such designation, by the person to whom the Participant's
rights will pass by will or the laws of descent and distribution.
15.5. Except to the extent the Company shall otherwise determine, if, as a
result of a sale or other transaction, a Participant's Employer ceases to be a
Related Company (and the Participant's Employer is or becomes an entity that is
separate from the Company), the occurrence of such transaction shall be treated
as the Participant's Date of Termination caused by the Participant's employment
being terminated by the Participant's Employer for a reason other than Cause.
15.6. Notwithstanding the foregoing provisions of this Section 15, the Committee
may, with respect to any Awards of a Participant (or portion thereof) that are
outstanding immediately prior to the Participant's Date of Termination,
determine that a Participant's Date of Termination will not result in forfeiture
or other termination of the Award.
SECTION 16
Adjustments to Shares
16.1. If the Company shall effect a reorganization, merger, or consolidation, or
similar event or effect any subdivision or consolidation of shares of Stock or
other capital readjustment, extraordinary cash dividend, payment of stock
dividend, stock split, spin-off, combination of shares or recapitalization or
other increase or reduction of the number of shares of Stock outstanding without
receiving compensation therefor in money, services or property, then the
Committee shall appropriately adjust (i) the number of shares of Stock available
under the Plan, (ii) the number of shares of Stock available under any
individual or other limitations under the Plan, (iii) the number of shares of
Stock subject to outstanding Awards and (iv) the per-share price under any
outstanding Award to the extent that the Participant is required to pay a
purchase price per share with respect to the Award. All share adjustments shall
be made to the nearest full share.
16.2. If the Committee determines that an adjustment in accordance with the
provisions of Subsection 16.1 would not be fully consistent with the purposes of
the Plan or the purposes of the outstanding Awards under the Plan, the Committee
may make such other adjustments as the Committee deems equitable, if any, that
the Committee determines are consistent with the purposes of the Plan and/or the
affected Awards.
SECTION 17
Transferability and Deferral of Awards
17.1. Awards under the Plan are not transferable except by will or by the laws
of descent and distribution. To the extent that a Participant who receives an
Award under the Plan has the right to exercise such Award, the Award may be
exercised during the lifetime of the Participant only by the Participant.
Notwithstanding the foregoing provisions of this Section 17, the Committee may,
subject to any restrictions under applicable securities laws, permit Awards
under the Plan (other than an Incentive Stock Option) to be transferred by a
Participant for no consideration to or for the benefit of the Participant's
Immediate Family (including, without limitation, to a trust for the benefit of a
<PAGE>
Participant's Immediate Family or to a Partnership comprised solely of members
of the Participant's Immediate Family), subject to such limits as the Committee
may establish, provided the transferee shall remain subject to all of the terms
and conditions applicable to such Award prior to such transfer.
17.2 The Committee may permit a Participant to elect to defer payment under a
Performance Unit or Phantom Stock Award under such terms and conditions as the
Committee, in its sole discretion, may determine; provided that any such
deferral election must be made prior to the time the Participant has become
entitled to payment under the Performance Unit or Phantom Stock Award.
SECTION 18
Award Agreement
18.1. Each Participant granted an Award pursuant to the Plan shall sign an Award
Agreement which signifies the offer of the Award by the Company and the
acceptance of the Award by the Participant in accordance with the terms of the
Award and the provisions of the Plan. Each Award Agreement shall reflect the
terms and conditions of the Award. Participation in the Plan shall confer no
rights to continued employment with an Employer nor shall it restrict the right
of an Employer to terminate a Participant's employment at any time.
SECTION 19
Tax Withholding
19.1 All Awards and other payments under the Plan are subject to withholding of
all applicable taxes, which withholding obligations shall be satisfied (without
regard to whether the Participant has transferred an Award under the Plan) by a
cash remittance, or with the consent of the Committee, through the surrender of
shares of Stock which the Participant owns or to which the Participant is
otherwise entitled under the Plan pursuant to an irrevocable election submitted
by the Participant to the Company at the office designated for such purpose. The
number of shares of Stock needed to be submitted in payment of the taxes shall
be determined using the Fair Market Value as of the applicable tax date rounding
down to the nearest whole share.
SECTION 20
Change in Control
20.1. Subject to the provisions of Section 16 (relating to the adjustment of
shares of Stock), and except as otherwise provided in the Plan or the Agreement
reflecting the applicable Award, upon the occurrence of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem with Stock
Appreciation Rights) shall become fully exercisable, except to the extent
that the right to exercise the Option is subject to any restrictions
established in connection with a Limited Stock Appreciation Right that is
in tandem with the Option;
(b) All outstanding Stock Appreciation Rights (regardless of whether in
tandem with Options) shall become fully exercisable, except that if Stock
Appreciation Rights are in tandem with an Option, and the Option is in
tandem with a Limited Stock Appreciation Right, the right to exercise the
Stock Appreciation Right shall be subject to any restrictions established
in connection with the Limited Stock Appreciation Right;
(c) All shares of Stock subject to Awards shall become fully vested; and
(d) Performance Units may be paid out in such manner and amounts as
determined by the Committee.
SECTION 21
Stock Options for Outside Directors
21.1 Effective upon the approval of the Plan, each member of the Board who is
not an employee of the company shall be granted an option for 10,000 shares of
Stock. Thereafter, each member of the Board who is not an employee of the
Company shall be granted an option for 5,000 shares of Stock on the date of the
annual meeting of the Company's shareholders. Each option granted under this
Section 21(i) shall have an exercise price per share equal to 100% of the Fair
Market Value per share of Stock on the date of grant, (ii) shall be exercisable
for 10 years from the date of grant but shall lapse upon the optionee's
termination of service as a member of the Board, (iii) shall become exercisable
with respect to 50% of the shares to which it relates six months after the date
of grant and with respect to the other 50% of the shares to which it relates one
year after the date of grant and (iv) shall be exercised by cash, by tender of
shares of Stock already owned by the optionee having a Fair Market Value equal
to the exercise price or a combination of cash and Stock.
<PAGE>
SECTION 22
Termination and Amendment
22.1 The Board may suspend, terminate, modify or amend the Plan, provided that
any amendment that would (a) increase the aggregate number of shares of Stock
which may be issued under the Plan, (b) materially increase the benefits
accruing to Participants under the Plan, or (c) materially modify the
requirements as to eligibility for participation in the Plan, shall be subject
to the approval of the Company's stockholders, except that any such increase or
modification that may result from adjustments authorized by Section 16 does not
require such approval. No suspension, termination, modification or amendment of
the Plan may terminate a Participant's existing Award or materially and
adversely affect a Participant's rights under such Award without the
Participant's consent.
