GIANT CEMENT HOLDING, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 12, 1998
To the Stockholders of
GIANT CEMENT HOLDING, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of GIANT CEMENT HOLDING, INC. (the "Company") will be held at the
offices of Proskauer Rose LLP, 1585 Broadway, 17th Floor, New York, New York, on
May 12, 1998, at 10:00 a.m. (local time).
The meeting will be held for the following purposes:
(1) To elect five directors.
(2) To amend the Company's 1994 Directors Stock Option Plan for
Non-Employee Directors to increase the annual number of
options automatically granted to non-employee directors from
5,000, to 10,000 which if approved, will replace all current
cash compensation.
(3) To ratify the appointment of Coopers & Lybrand L.L.P.
as the Company's independent auditors for fiscal 1998.
(4) To transact such other business as may properly come
before the Meeting and any adjournment or adjournments
thereof.
A Proxy Statement describing matters to be considered at the Meeting is
attached to this Notice. Only stockholders of record at the close of business on
March 16, 1998, will be entitled to notice of and to vote at the Meeting.
You are cordially invited to attend the Meeting.
By Order of the Board of Directors
TERRY L. KINDER
Secretary
Summerville, South Carolina
March 24, 1998
IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE MARK, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT IN THE SELF-ADDRESSED, POSTAGE PREPAID
ENVELOPE WHICH HAS BEEN PROVIDED FOR YOUR CONVENIENCE. IN THE EVENT YOU ATTEND
THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
GIANT CEMENT HOLDING, INC.
320-D Midland Parkway
Summerville, South Carolina 29485
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 12, 1998
---------------------
GENERAL
This Proxy Statement and the accompanying proxy card are furnished in
connection with the solicitation of proxies by the Board of Directors of Giant
Cement Holding, Inc., a Delaware corporation (the "Company"), for use at the
1998 Annual Meeting of Stockholders (the "Meeting"), and any adjournments
thereof. The Meeting is to be held on Wednesday, May 12, 1998, at 10:00 a.m.
(local time) at the offices of Proskauer Rose LLP, 1585 Broadway, 23rd Floor,
New York, New York. The approximate date of mailing this Proxy Statement and
accompanying proxy card to the Company's stockholders is March 27, 1998.
In an effort to have as large a representation at the Meeting as
possible, proxy solicitations may be made personally or by telephone or telegram
by officers or employees of the Company, without added compensation, or by
Corporate Communications, Inc., the Company's investor relations firm, which
will not receive a separate fee for any such solicitations. The Company will
bear the entire cost of soliciting proxies hereunder and will reimburse brokers,
banks and other custodians, nominees and fiduciaries for their expense in
sending proxy materials to beneficial owners.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on March 16, 1998
(the "Record Date") will be entitled to vote at the Meeting. As of the Record
Date, the Company had outstanding 9,255,522 shares of common stock, par value
$.01 per share (the "Common Stock"). Each share of Common Stock entitles the
record holder thereof to one vote on all matters properly coming before the
Meeting.
<PAGE>
PRINCIPAL HOLDERS
The following table lists the persons who, to the knowledge of
management of the Company, based upon filings with the Securities and Exchange
Commission, are the beneficial owners of more than 5% of the outstanding shares
of Common Stock:
Name and Address Shares of Common Percent of Class
of Beneficial Owner Stock (a)
FMR Corp. ("FMR") 1,085,900 (b) 11.7%
One Financial Center
Boston, MA 02111
The Prudential Insurance Company of America 1,081,600 (c) 11.7%
("Prudential")
751 Broad Street
Newark, NJ 07102-3777
T. Rowe Price Associates 847,200 (d) 9.1%
100 E. Pratt Street
Baltimore, MD 21202
Wellington Management Company ("WMC") 480,000 (e) 5.2%
75 State Street
Boston, MA 02109
(a) Under the rules of the Securities and Exchange Commission (the "SEC"), a
person is deemed to be the beneficial owner of a security if such person
has or shares the power to vote or to direct the voting of such security,
or the power to dispose, or to direct the disposition, of such security. A
person is also deemed to be the beneficial owner of any securities of which
that person has the right to acquire ownership within 60 days as well as
any securities owned by such person's spouse, children or other relative
living in the same house. Unless otherwise indicated, the named persons
having sole voting and investment power with respect to the shares held by
them.
(b) According to a Schedule 13G filed with the SEC by FMR, FMR, in its capacity
as a parent holding company may be deemed to be the beneficial owner of
these shares, which are owned by various subsidiaries including: (i)
799,000 shares deemed beneficially owned by Fidelity Management & Research
Company, an investment advisor to various investment companies including
Fidelity Low Priced Stock Fund (540,700 shares) (ii) 270,400 shares deemed
beneficially owned by Fidelity Management Trust Company and (iii) 37,100
shares deemed beneficially owned by Fidelity International Limited. Edward
C. Johnson 3d, and FMR Corp., through its control of Fidelity and the
funds, each has sole power to dispose of the 778,400 shares owned by the
funds.
(c) According to a Schedule 13G filed with the SEC by Prudential, the shares
shown as owned by Prudential include: (i) 51,700 shares held for the
benefit of Prudential's general account and (ii) 1,029,900 shares held for
the benefit of Prudential's clients and over which Prudential may have
direct or indirect voting and/or investment discretion.
(d) According to a Schedule 13G filed with the SEC by T. Rowe Price, these
securities are owned by various individual and institutional investors
including T. Rowe Price Small Cap Value Fund, Inc. (which owns 750,000
shares, representing 8.1% of the shares outstanding), which T. Rowe Price
Associates, Inc. (Price Associates) serves as investment advisor with power
to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, Price Associates is deemed to be a beneficial owner of such
securities; however, Price Associates expressly disclaims that it is, in
fact, the beneficial owner of such securities.
(e) According to a Schedule 13G filed with the SEC by WMC, WMC, in its capacity
as investment advisor, may be deemed to be the beneficial owner of these
shares, which are owned by numerous investment counseling clients.
<PAGE>
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of Common Stock as of the record date of each director of
the Company, each executive officer of the Company named in the Summary
Compensation Table below and all directors and executive officers as a group.
Name Shares of Common Stock (1) Percent of Class
---- -------------------------- ----------------
Gary L. Pechota 202,177(2) 2.1%
Terry L. Kinder 136,336(3) 1.4%
Dean M. Boylan 32,400(4) *
Edward Brodsky 27,500(5) *
Robert L. Jones 30,500(6) *
Richard A. Familia 13,601(7) *
All Directors and Executive 442,514(8) 4.8%
Officers as a group (six persons)
- -------------
* Indicates less than one percent
(1) Unless otherwise indicated, the beneficial owner has both sole voting and
sole investment power with respect to his shares.
(2) Includes 185,000 shares that Mr. Pechota may purchase under presently
exercisable stock options.
(3) Includes 132,500 shares that Mr. Kinder may purchase under presently
exercisable stock options.
(4) Includes 27,500 shares that Mr. Boylan may purchase under presently
exercisable stock options. Does not include 1,000 shares of Common Stock
owned by Mr. Boylan's spouse, as to which shares he disclaims beneficial
ownership.
(5) Represents 27,500 shares that Mr. Brodsky may purchase under presently
exercisable stock options. Does not include 2,000 shares of Common Stock
owned by Mr. Brodsky's spouse, as to which shares Mr. Brodsky disclaims
beneficial ownership.
(6) Includes 27,500 shares that Mr. Jones may purchase under presently
exercisable stock options.
(7) Includes 13,000 shares that Mr. Familia may purchase under presently
exercisable stock options.
(8) See Notes (2) through (7) above. This total includes 413,500 shares which
such executive officers and directors may acquire upon the exercise of
stock options (See "Compensation of Directors"; "Executive Compensation -
Stock Options").
ELECTION OF DIRECTORS
At the Meeting, five directors are to be elected to serve until the
next Annual Meeting of Stockholders and until their successors are elected and
qualified.
The Board of Directors has no reason to expect that any of the nominees
will be unable to stand for election. In the event that a vacancy among the
original nominees occurs prior to the Meeting, the proxies will be voted for a
substitute nominee or nominees named by the Board of Directors and for the
remaining original Nominees.
Nominees
GARY L. PECHOTA (48) has served as Chairman, President, Chief
Executive Officer and a director of the Company since its inception in April
1994. Mr. Pechota also has served as President of Giant Cement Company ("Giant")
since January 1993, and as President of Keystone Cement Company ("Keystone")
since May 1992. Prior to joining Keystone, Mr. Pechota served as President and
Chief Executive Officer of Dacotah Cement Company, a state-owned cement company,
from January 1982 to May 1992. Mr. Pechota has been employed in the cement
industry for over 16 years.
<PAGE>
TERRY L. KINDER (39) has served as Vice President, Chief Financial
Officer, Secretary, Treasurer and a director of the Company since April 1994 and
a director of Giant, Keystone and GRR since June 1989. Mr. Kinder has also
served as Vice President, Secretary and Treasurer of Giant Group Ltd. ("GROUP")
from June 1986 to September 1994. From June 1989 to December 1992, Mr. Kinder
also served as President of Giant, and from June 1989 to August 1992, he served
as President of Keystone. Prior to joining GROUP, Mr. Kinder was a Certified
Public Accountant with Coopers & Lybrand L.L.P. from January 1980 to June 1986.
DEAN M. BOYLAN (71) has been a director of the Company since April
1994. He served as a director of GROUP from 1985 to September 1994 and was a
director of Keystone from 1976 until January 1985 when it was acquired by GROUP.
Mr. Boylan has been an employee and a director of Boston Sand & Gravel Company,
Inc., a publicly-held company since prior to 1985 and is presently Vice
Chairman.
EDWARD BRODSKY (68) has been a director of the Company since April
1994. He served as a director of GROUP from 1986 to September 1994. Mr. Brodsky
has been a partner at the law firm of Proskauer Rose LLP, New York, New York,
which renders legal services to the Company, since August 1992. Prior thereto,
he was a partner at the law firm of Spengler Carlson Gubar Brodsky & Frischling,
New York, New York, from 1977 to August 1992.
ROBERT L. JONES (61) has been a director of the Company since April
1994. He served as a director of GROUP from 1984 to September 1994. Mr. Jones
has been the Chairman of Davidson-Jones-Beers since February 1995 and prior
thereto was the President of Davidson & Jones Corporation - a predecessor
holding company located in Raleigh, North Carolina, engaged in general
contracting and real estate activities - since prior to 1986. Since 1990, he has
been a director of Carolina Power & Light Company (New York Stock Exchange).
Information About the Board of Directors and Committees of the Board
During 1997, the Board of Directors of the Company held five meetings.
Each of the directors attended at least 75% of the meetings of the Board of
Directors and the meetings held by all committees of the Board on which he
served.
The Company has a standing Compensation and Stock Option Committee and
Audit Committee. The members of each committee are appointed by the Board of
Directors to serve until their respective successors are elected and qualified.
The Audit Committee annually reviews the qualifications of the
Company's independent certified public accountants, makes recommendations to the
Board of Directors as to the selection of such accountants, reviews the plan,
fees and results of the audits performed by such accountants, receives reports
from them and meets with their representatives for purposes of reviewing and
considering questions relating to their examinations and reports and reviews,
either directly or through such accountants, the internal control and accounting
procedures of the Company. The members of the Audit Committee are Messrs.
Boylan, Brodsky and Jones. The Audit Committee held one meeting during 1997.
The Compensation and Stock Option Committee, which met twice during
1997, has responsibility for determining the executive compensation and benefit
policies and procedures of the Company, administers the Company's 1994 Employee
Stock Option Plan. The members of the Compensation and Stock Option Committee
are Messrs. Boylan, Brodsky and Jones.
There is no standing nominating committee or other committee performing
similar functions.
Compensation of Directors
Each director who is not an employee of the Company is currently paid
an annual fee of $15,000, plus $500 for each Board of Directors meeting
attended. No additional consideration is paid to directors for committee
participation. Under the 1994 Directors Stock Option Plan, each non-employee
director currently receives an annual grant of options to purchase 5,000 shares
of Common Stock. These options vest 50% on the date of grant and 50% on the
first anniversary of that date and expire five years after the date of grant.
This Proxy Statement sets forth below, a proposal to amend the 1994
Directors Stock Option Plan to increase the number of shares subject to options
granted annually to non-employee directors from 5,000 to 10,000. If such
amendment is approved by the stockholders of the Company at the Annual Meeting,
the Company will cease to make payments of cash fees to non-employee directors.
<PAGE>
PROPOSAL NO. 2 APPROVAL OF THE
AMENDMENT TO THE 1994 DIRECTORS STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
In 1994, the Company adopted the 1994 Directors Stock Option Plan for
Non-Employee Directors (the "Plan") to provide an incentive to non-employee
directors of the Company and as a means to attract to the Company individuals of
experience and ability to serve as directors. The Board of Directors of the
Company adopted an amendment to the Plan (the "Amendment") on February 3, 1998,
subject to the approval of stockholders by the affirmative vote of the majority
of the total votes cast on the proposal to adopt the Amendment, either in person
or by proxy. The Amendment increases from 5,000 to 10,000 the number of shares
subject to options automatically granted to non-employee directors annually. If
the Amendment is approved by the stockholders, the Company will cease to make
payments of cash fees to non-employee directors of $15,000 per year plus $500
per meeting of the Board. The Company believes the increased option grants, in
lieu of cash compensation, will further align the directors with the interest of
stockholders.
The Board of Directors recommends that stockholders vote in favor of the
Amendment.
The following summary of the material features of the Plan and the
Amendment are qualified in their entirety by reference to the Plan and the
Amendment, set forth as Annex A to this Proxy Statement. The changes in the Plan
effected by the Amendment are indicated in such Annex A.
Administration
The Plan is administered by the Compensation and Stock Option Committee
of the Board of Directors (the "Committee").
Option Grants
All directors who are not employees of the Company or a subsidiary of
the Company are eligible to receive options under the Plan. Pursuant to the
Amendment, options to purchase 10,000 shares of Common Stock are automatically
granted to (i) each eligible director, two business days following the public
release by the Company of the financial results for the year and (ii) new
directors who are not employees of the Company. With respect to 1998, if the
Amendment is approved by the stockholders, the non-employee directors would be
granted options to purchase 5,000 shares of Common Stock (in addition to options
for 5,000 shares that were previously granted as provided in the Plan) two
business days following the public release by the Company of the financial
results for the quarter and six-month period ended June 30, 1998. Options
granted under the Plan are non-qualified options. The Plan provides for the
issuance of options to purchase up to an aggregate 300,000 shares of Common
Stock, par value $.01 per share, subject to adjustment under certain
circumstances. Such shares of Common Stock shall be authorized but unissued or
reacquired shares of Common Stock. In the event any option outstanding under the
Plan expires for any reason or is terminated, the shares subject to the option
but not delivered shall be available for future grants. All options shall be
evidenced by a written instrument which shall incorporate the applicable
provisions of the Plan. The exercise price for options granted under the Plan
shall be an amount equal to 100% of the fair market value of the Common Stock on
the date of grant. Each option granted under the Plan is exercisable with
respect to 50% of the shares of Common Stock subject to such grant on the date
of grant and the remaining 50% of the shares of Common Stock is exercisable
after the first anniversary of the date of grant. No option may be exercised
after the first to occur of the following events: (i) the expiration of ten
years from the date of grant; (ii) the expiration of one year from the time the
optionee shall voluntarily or involuntarily cease to serve as a director, unless
such termination results from removal for cause by stockholders; (iii) the
removal of the optionee as a director by the stockholders and (iv) the effective
date of either the merger or consolidation of the Company into another
corporation, or the acquisition by another corporation of all or substantially
all of the Company's assets or 80% or more of the Company's then outstanding
voting stock, or the liquidation or dissolution of the Company, unless the
agreement of merger or consolidation provides otherwise. Three people are
eligible to participate in the Plan.
Adjustments
In the event of a recapitalization, reclassification, stock dividend,
stock split, reverse stock split or another similar transaction, the number of
shares of Common Stock reserved for issuance under the Plan and the option price
shall be subject to adjustment. If the Company shall be the surviving
corporation in any reorganization, merger or consolidation of the Company, any
outstanding option granted pursuant to the Plan and the option price shall be
subject to adjustment.
<PAGE>
Transfer Restrictions
Options granted under the Plan may not be transferred except by will,
the laws of descent and distribution, pursuant to a "qualified domestic
relations order" as defined in the Internal Revenue Code of 1986, as amended, or
Title I of the Employment Retirement Income Security Act, or the rules
thereunder.
Amendment and Term
The Plan shall terminate in 2004 or the date on which all shares of
Common Stock available for issuance under the Plan shall be issued pursuant to
the exercise or cancellation of options granted under the Plan. The Board of
Directors may at any time terminate the Plan and from time to time may amend or
modify the Plan, provided, however, that the Board of Directors may not, without
stockholder approval, (i) increase the maximum number of shares as to which
options may be granted to each optionee under the Plan, (ii) permit the granting
of options other than at the times provided in the Plan, (iii) permit granting
the options at an exercise price less that 100% of the fair market value of the
shares of Common Stock on the date of grant, (iv) permit the exercise of an
option unless full payment for the shares as to which the option relates is made
at the time of purchase, (v) extend the maximum period during which options may
be exercised, (vi) permit the cancellation of an option and subsequent
reissuance of a new option to the same optionee in substitution of the canceled
option at the then existing fair market value, or (vii) effect any change that
would require stockholder approval under Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended.
Withholding
The Company has the right to deduct from payments of any kind otherwise
due to the optionee any federal, state or local taxes of any kind required by
law to be withheld with respect to any shares of Common Stock issued upon the
exercise of options under the Plan. Subject to the prior approval of the
Company, the optionee may elect to satisfy such obligations, in whole or in part
(i) by causing the Company to withhold shares of Common Stock otherwise issuable
pursuant to the exercise of an option or (ii) by delivering to the Company
shares of Common Stock.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal years
ended December 31, 1995, 1996 and 1997 awarded to or earned by the Chief
Executive Officer of the Company and the other executive officers of the Company
whose salary and bonus exceeded $100,000 (the "Named Executive Officers") for
services rendered in all capacities.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Other
Annual
Compensa- Restricted Securities Other
tion Stock Op- Underlying LTIP Compen-
Name and Principal Award(s) tions/SARs Options/SARs Payouts sation
Position Year Salary ($) Bonus ($) ($) (1) (#) (#) ($) ($)(2)
-------- ---- ---------- --------- ------- --- --- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary L. Pechota, 1997 275,000 180,000 40,000 - 38,922
Chairman of the Board, 1996 260,000 160,000 - - 20,000 - 37,514
President and Chief 1995 250,000 150,000 - - - - 18,125
Executive Officer
Terry L. Kinder, 1997 165,000 95,000 30,000 - 25,681
Vice President, 1996 156,000 80,000 - - 10,000 - 28,314
Chief Financial Officer 1995 150,000 75,000 - - - - 14,250
and Treasurer
Rich Familia, 1997 118,000 18,000 - 3,500 - 14,584
Vice President of 1996 112,300 16,500 - - 2,000 - 15,333
Environmental Affairs 1995 109,263 12,500 - - - 10,379
</TABLE>
(1) The Named Executive Officers did not receive any annual compensation not
properly categorized as salary or bonus, except for certain perquisites and
other personal benefits which are not shown because the aggregate amount of
such compensation, if any, for each of the Named Executive Officers during
such fiscal year did not exceed the lesser of $50,000 or 10% of total
salary and bonus reported for such executive officer.
(2) Represents amounts contributed by the Company to the Named Executive
Officers pursuant to the Company's Profit Sharing Plans and Special
Retirement Agreements (See Employment Agreements).
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options to the Chief Executive Officer of the Company and the Named Executive
Officers for 1997.
Option Grants in Last Fiscal Year
Options % of Exercise Expiration Potential Value (3)
Name Granted Total Price Date(2) 5% 10%
---- ------- ----- ----- ------- -- ---
Gary L. Pechota 40,000 36.4 $16.00 02/11/02 $ 177,000 $ 391,000
Terry L. Kinder 30,000 27.3 $16.00 02/11/02 $ 133,000 $ 293,000
Richard A. Familia 3,500 3.2 $16.00 02/11/02 $ 15,000 $ 34,000
All Stockholders (1) N/A N/A N/A N/A $41,215,000 $91,102,000
(1) The potential realizable gain to all stockholders (based on 9,324,622
shares outstanding, at December 31, 1997 an assumed market value of $16.00
per share and assumed appreciation rates of 5% and 10%, over a period of
five years), is provided as a comparison to the potential gain realized by
the named executive officers at the same assumed rates of stock
appreciation.
(2) One-half of these options vested on February 12, 1997 and one-half vested
on February 12, 1998.
(3) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to expiration of their term,
assuming the specified compounded rates of appreciation (5% and 10%) on the
Company's Common Stock over the term of the options. These numbers are
calculated based on the rules of the SEC and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock
option exercise and Common Stock holdings are dependent on the timing of
such exercise and the future performance of the Company's Common Stock.
There can be no assurance that the rates of appreciation assumed in this
table can be achieved or that amounts reflected will be received by the
option holder.
Option Exercises and Holdings
The following table sets forth information with respect to the Chief
Executive Officer of the Company and the Named Executive Officers concerning
unexercised options held at December 31, 1997.
Aggregate Option Exercises in Last Fiscal Year and FY-End Option Values
Number of Options Value of Unexercised
Shares Value Exercisable/ In-The-Money-Options
Name Acquired Realized Unexercisable Exercisable/Unexercisable
---- -------- -------- ------------- -------------------------
Gary L. Pechota -0- -0- 140,000/20,000 $1,280,000 $147,000
Terry L. Kinder -0- -0- 100,000/15,000 $ 904,000 $107,000
Richard A. Familia -0- -0- 11,250/ 1,750 $ 88,000 $ 12,000
Employment Agreements
Messrs. Pechota, Kinder and Familia are employed by the Company
pursuant to employment agreements (the "Employment Agreements"), which commenced
on July 30, 1997, except Mr. Familia's agreement which commenced on October 30,
1997, and expire December 31, 2000. Each Employment Agreement is automatically
renewed for additional one year terms subject to earlier termination by either
the Company or the respective employee. Mr. Pechota, Mr. Kinder and Mr. Familia
are compensated at an annual base salary of $275,000, $165,000 and $118,000,
respectively, during the term of their Employment Agreements, subject to annual
increases and/or bonuses as determined by the Compensation and Stock Option
Committee. Each of them has agreed not to compete with the Company for a period
of one year following the termination of his Employment Agreement other than by
the Company without cause or by the employee for good reason, as defined, or as
otherwise provided.
Commencing with fiscal year 1996, the Company's Board approved Special
Retirement Agreements ("SRA'S") for certain employees participating in the
Company's Profit Sharing Plans and salaried Retirement Plans. Pursuant to the
Internal Revenue Code, the Internal Revenue Service sets limit (currently
$150,000) on the amount of annual compensation which Plans or the employees
benefit under the Retirement Plans. The SRA's establish balances for each
participant in an amount equal to that required to provide the actuarial
equivalent benefit, as the Internal Revenue Service limitations did not apply.
Retirement Plans
The Company has two retirement plans (the "Retirement Plans") for
salaried employees under which a salaried employee (but not a director as such)
who retires at age 65 or thereafter, or an employee who retires prior to
reaching age 65 but after age 55 and who has completed ten or more years of
continuous service at retirement, may be eligible at retirement to receive
during his lifetime an annual pension equal to the sum of the following:
<PAGE>
(a) for each eligible year beginning on or after October 1,
1989, 1-1/4% of the salaried employee's annual base wages
(subject to certain limitations) from the Company, plus
1/4% of such salary in excess of Social Security Covered
Compensation, plus
(b) for the period October 1, 1987, to October 1, 1989, 1-1/4%
of the salaried employee's annual base wages (subject to
certain limitations) from the Company, plus 1/4% of such
salary in excess of the Social Security Wage Base; plus
(c) for each eligible year beginning prior to October 1, 1987,
1-1/2% of the first $15,000 of salary and 1% of such base
wages over $15,000 (using annual rate of salary as of
October 1, 1987, for years before 1987) for each year of
service after the employee's first year of service after
the employee attains the age of 21. For the Named
Executive Officers, annual base wage would be the amount
shown as salary in the Summary Compensation Table (subject
to certain limitations). The amount of benefits payable to
each recipient is not reduced by the amount of Social
Security benefits payable to such recipient. For purposes
of illustration, pensions estimated to be payable upon
retirement at normal retirement age under the Retirement
Plans to persons in specified salary classifications are
shown in the following table:
Annual Pension Based on Specified Years of Employment
Assuming Retirement at Age 65
Current Salary (1) 10 Years 20 Years 30 Years 40 Years
------------------ -------- -------- -------- --------
$ 5,000 $ 650 $ 1,300 $ 2,000 $ 2,650
10,000 1,300 2,650 3,950 5,300
20,000 2,500 5,000 7,550 10,050
40,000 4,350 8,700 13,000 17,300
50,000 5,300 10,500 15,700 20,900
96,000 9,850 19,150 28,450 37,750
125,000 12,700 24,600 36,450 48,350
150,000 15,200 29,300 42,400 57,500
- --------------
(1) A retrospective salary scale of 6% has been assumed. Current IRS
Regulations limit eligible compensation for qualified defined benefit plans
to $150,000 per annum.
These benefits are expressed in terms of life annuities. In general,
benefits will be paid in the form of joint and 50% survivor benefits to the
employee and his or her spouse unless elections are made to the contrary.
The maximum annual pension payable under the Retirement Plans to a retired
employee is $120,000. Messrs. Pechota, Kinder and Familia have five, eleven
and five years, respectively, of credited service under the Retirement
Plans.
Compensation and Stock Option Committee Report on Executive Compensation
The Compensation and Stock Option Committee of the Board of Directors
consist of Dean M. Boylan, Edward Brodsky and Robert L. Jones. Mr. Brodsky is a
partner of the law firm of Proskauer Rose LLP, which provides legal services to
the Company.
The Compensation and Stock Option Committee is responsible for
developing and making recommendations to the Company with respect to executive
compensation policies addressing such matters as salaries, bonuses, incentive
plans, benefits and overall compensation. The Committee, subject to the terms of
his Employment Agreement, determines the compensation to be paid to the Chief
Executive Officer, and in consultation with the Chief Executive Officer,
determines compensation of each of the other executive officers of the Company.
The objectives of the Committee in determining the type and amount of
executive officer compensation are to provide a level of base compensation which
allows the Company to attract and retain competent personnel.
The only salaried executive officers of the Company are Gary Pechota,
Chief Executive Officer, Chairman of the Board and President, Terry L. Kinder,
Vice President and Chief Financial Officer, Secretary and Treasurer and Richard
Familia, Vice President of Environmental Affairs.
The Company's compensation program for executive officers consists of
three key elements: a base salary, a discretionary annual bonus and periodic
grants of stock options. The Committee believes that this approach best serves
the interests of stockholders by ensuring that executive officers are
compensated in a manner that advances both the short- and long-term interests of
stockholders. Thus, compensation for the Company's executive officers involves a
high proportion of pay which is at risk: the variable annual bonus (which
permits individual performance to be recognized on an annual basis, and which is
based, in part, on an evaluation of the contribution made by the executive
officer to Company performance) and stock options (which directly relate a
significant portion of the executive officer's long-term remuneration to stock
price appreciation realized by the Company's stockholders).
<PAGE>
In evaluating executive officer compensation, the Compensation and
Stock Option Committee considers the executive officer's length of service to
the Company, the Company's performance, including its financial condition, net
income and net income per share, the executive officer's performance and the
range of compensation of executive officers with similar responsibilities in
comparable companies, including those companies in the peer group used to
construct the Company's stock price performance graph, but assigns no particular
weight to any of these factors.
The Chief Executive Officer's base salary is established under his
Employment Contract. The Compensation and Stock Option Committee determined the
amount of his bonus for 1997 and the number of options he has been granted based
on an evaluation of the factors described above and, with respect to the number
of options, the relationship of the number of options granted to him to the
number of options available under the Employee Plan and the number of options
granted to subordinate executive officers and other employees of the Company.
Compensation and Stock Option Committee:
Dean M. Boylan
Edward Brodsky
Robert L. Jones
STOCK PRICE PERFORMANCE
The following graph compares the cumulative total return to
stockholders of the Company from the date its Common Stock commenced trading on
the Nasdaq Stock Market's National Market to December 31, 1997, to the
cumulative total returns on the S&P 500 Index and the securities of a Peer Group
made up of Centex Construction Products, Lafarge Corporation, Lone Star
Industries, Medusa Corporation and Southdown, Inc. Under the rules of the SEC,
this graph is not deemed "soliciting material" and is not incorporated by
reference in any filings with the SEC under the Securities Act of 1933 or the
Securities Exchange Act of 1934.
COMPARATIVE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG GIANT CEMENT HOLDING, INC., S&P 500 INDEX
AND A PEER GROUP INDEX
9/30/94 12/31/94 12/31/95 12/31/96 12/31/97
Giant Cement Holding, Inc. 100.00 84.82 82.14 115.08 165.18
Peer Group 100.00 88.31 101.34 128.25 196.65
S&P 500 Index 100.00 99.98 137.56 169.15 225.58
ASSUMES $100 INVESTED ON SEP. 30, 1994, ASSUMES DIVIDENDS REINVESTED,
FISCAL YEAR ENDING DEC. 31, 1997
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Edward Brodsky, a director of the Company and the Chairman of the
Compensation Committee, is a senior partner in the law firm of Proskauer Rose
LLP, which received $453,878 from the Company for rendering legal services to
the Company during 1997.
<PAGE>
EMPLOYMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors
has selected the firm of Coopers & Lybrand, L.L.P., Certified Public
Accountants, as independent auditors to examine the consolidated financial
statements of the Company for the year 1998.
A representative of Coopers & Lybrand, L.L.P. is expected to be present
at the Meeting to respond to appropriate questions, and such representative will
have the opportunity to make a statement if he or she desires to do so.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1999
annual meeting of stockholders must be received by the Company for inclusion in
its proxy statement on form of proxy no later than November 24, 1998.
VOTING PROCEDURES
At the Meeting, stockholders will be requested to act upon the matters
set forth in this Proxy Statement. If you are not present at the meeting, your
shares can be voted only when represented by proxy. The shares represented by
your proxy will be voted in accordance with your directions if the proxy is
properly signed and returned to the Company, at or before, the Meeting. If no
instructions are specified in the proxy with respect to any proposal, the shares
represented thereby will be voted for the nominees for the Board of Directors
listed in this Proxy Statement and for the ratification of Coopers & Lybrand as
the Company's independent auditors for fiscal 1998. If any other matters shall
properly come before the Meeting, the enclosed proxy will be voted in accordance
with the best judgment of the persons voting this proxy.
A proxy may be revoked at any time prior to it being voted at the
Meeting by delivering to the Secretary of the Company a signed writing revoking
the proxy or a duly executed proxy bearing a later date, or by attending the
Meeting and voting in person. The mere presence at the Meeting of a person
appointing a proxy does not revoke the appointment. All executed proxies not
revoked will be voted at the Meeting in accordance with the instructions
contained therein.
A majority of the outstanding shares of Common Stock represented at the
Meeting, in person or by proxy, will constitute a quorum. The votes of
stockholders present in person or represented by proxy at the Meeting will be
tabulated by an inspector of election appointed by the Company. The five
nominees for directors of the Company who receive the greatest number of votes
cast will be elected directors of the company. The affirmative vote of the
holders of a majority of the shares present in person or represented by proxy at
the Meeting is required to ratify the appointment of the independent auditors.
Abstentions are counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved. Abstentions and broker
non-votes will have no effect on the election of directors (Proposal 1),
approval of the proposed amendment to the Company's 1994 Directors Stock Option
Plan (Proposal 2) or the ratification of the selection of independent public
accountants (Proposal 3).
OTHER BUSINESS
The Board of Directors does not know of any matters to be presented for
action at the Meeting other than as set forth in this Proxy Statement. If any
other business should properly come before the Meeting, the persons named in the
proxy intend to vote thereon in accordance with their best judgment.
The Company's 1997 Annual Report to Stockholders is being furnished
with this Proxy Statement. Reference is made to such Annual Report for financial
information of the Company.
Upon the written request of any stockholder of records as of March 16,
1998, a copy of the Company's 1997 Annual Report to the Securities and Exchange
Commission on Form 10-K (excluding exhibits) will be provided without charge.
Requests should be directed to: Terry L. Kinder, Secretary, Giant Cement
Holding, Inc., 320-D Midland Parkway, Summerville, SC 29485.
By Order of the Board of Directors
TERRY L. KINDER,
Secretary
Summerville, South Carolina
March 24, 1998
<PAGE>
ANNEX A
(Language which is deleted by the amendment
to the 1994 Directors Stock Option Plan
For Non-Employee Directors is bracketed;
added language is in italics)
GIANT CEMENT HOLDING, INC.
1994 DIRECTORS STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose. The purpose of the 1994 Directors Stock Option Plan For
Non-employee Directors (the "Plan") of GIANT CEMENT HOLDING, INC., a
Delaware corporation (the "Company"), is to serve the best interests of the
Company by providing an incentive to non-employee directors of the Company
and a means to attract to the Company individuals of experience and ability
to serve as directors through the grant of options (the "Options") to
purchase shares (the "Shares") of the Common Stock, $.01 par value (the
"Common Stock"), of the Company.
2. Administration. The Plan shall be administered by an Option Committee
appointed by the Board of Directors consisting of not less than two
directors who are not also employees of the Company. The interpretation and
construction by the Option Committee of any provisions of the Plan or of
any Option granted thereunder shall be binding and conclusive on all
persons to whom an Option has been granted (an "Optionee") and of their
legal representatives and beneficiaries.
3. Eligibility and Grants.
3.01 General. All directors of the Company who are not employees
of the Company or any subsidiary of the Company shall be eligible
to receive Options hereunder. Options shall be granted
automatically to each eligible director subject to the applicable
limits of the Plan as follows: (i) each eligible director shall be
granted an Option to purchase 10,000 shares of Common Stock on the
effective date of the initial public offering of the Common Stock,
(ii) each eligible director shall be granted an Option to purchase
[5,000] 10,000 shares of Common Stock on the date which is two (2)
business days immediately following the public release by the
Company of the financial results for the immediately preceding
fiscal year, provided the director has been a director for at
least six months, and (iii) upon a person becoming a director, he
or she shall be granted an option to purchase 10,000 shares of
Common Stock. Notwithstanding anything to the contrary in clause
(ii) of the preceding sentence, grants of options that would
otherwise be made in 1998 pursuant to such clause shall be made as
follows: each eligible director shall be granted an Option to
purchase 5,000 shares of Common Stock on the date which is two (2)
business days immediately following the public release by the
<PAGE>
Company of the financial results for the immediately preceding
fiscal year, and an additional Option to purchase 5,000 shares of
Common Stock on the date which is two (2) business days
immediately following the public release by the Company of the
financial results for the fiscal quarter and six months ended
June 30, 1998, provided, in each case, the director has been a
director for at least six months. If the number of Shares which
may be the subject of Options under the Plan is not sufficient to
make all automatic grants required to be made pursuant to the
Plan on the applicable date, the number of Shares subject to the
Options granted to each director shall be reduced on a pro rata
basis.
3.02 "Exercise Price". The exercise price for Options granted
under the Plan shall be an amount equal to 100% of the Fair Market
Value per share of the Shares on the date of grant. "Fair Market
Value" of a Share of Common Stock as of a specified date shall
mean the closing price of a Share on the principal securities
exchange, or, if not listed on an exchange or if an exchange is
not the principal market, on the NASDAQ System on which such
Shares are traded on the day immediately preceding the date as of
which Fair Market Value is being determined, or on the next
preceding date on which such Shares are traded if no Shares were
traded on such immediately preceding day, or if the shares are not
traded on a securities exchange or NASDAQ, Fair Market Value shall
be deemed to be the average of the high bid and low asked prices
of the Shares in the over-the-counter market on the day
immediately preceding the date as of which Fair Market Value is
being determined or on the next preceding date on which such high
bid and low asked prices were recorded. If the Shares are not
publicly traded, Fair Market Value shall be determined in good
faith by the Option Committee. In no case shall Fair Market Value
be less than the par value of a Share of Common Stock.
4. Stock. The stock subject to Options granted under the Plan shall be
shares of authorized but unissued or reacquired Common Stock. Subject
to adjustment upon the occurrence of the events specified and in the
manner provided in Section 8 hereof, the maximum number of Shares
which may be issued under Options exercised under this Plan shall not
exceed 300,000. The number of Shares subject to Options outstanding
under the Plan at any time may not exceed the number of Shares remaining
available for issuance under the Plan. In the event that any Option
outstanding under the Plan expires for any reason or is terminated, the
Shares allocable to the unexercised portion of such Option may again be
subjected to an Option under the Plan.
5. Terms and Conditions of Options. Options granted pursuant to the Plan shall
be evidenced by Option Agreements in such form as the Option Committee
shall from time to time determine, which Agreements shall comply with and
be subject to the following terms and conditions:
(a)Subject to Sections 5(b) and (c) and Section 6 hereof,
each Option granted hereunder is exercisable with respect
to fifty percent (50%) of the Shares subject to such
Option upon the date of grant, and with respect to the
remaining fifty percent (50%) of the Shares within twelve
<PAGE>
(12) months after the date of grant; provided, however,
the Option shall become exercisable in full (i) in the
event that any person, corporation, partnership,
association or other entity, shall, directly or
indirectly, either separately or in a group, becomes the
beneficial owner of shares of the Company's Common Stock
having the right or power to vote at least twenty percent
(20%) of the outstanding shares of Common Stock without
the acquisition of such shares having been approved in
advance by the Board of Directors of the Company or (ii)
in the event of a "business combination" (as defined in
Section 203(c)(3) of the Delaware General Corporation Law,
or any successor provision) without such transaction
having been approved in advance by the Board of Directors.
(b)No Option which is unexercisable at Termination of
Directorship (as defined in Section 6) shall thereafter
be exercisable.
(c)The grant of Options by the Option Committee shall be
effective as of the date of grant; provided, however, that
no Option granted hereunder shall be exercisable unless
and until the Optionee shall enter into an individual
Option Agreement with the Company that shall set forth the
terms and conditions of such Option. Each such Agreement
shall expressly incorporate by reference the provisions of
this Plan and shall state that in the event of any
inconsistency between the provisions hereof and the
provisions of such Agreement, the provisions of this Plan
shall govern.
(d)To exercise an Option, the Optionee shall give written
notice to the Company specifying the number of Shares to
be purchased and shall pay for such Shares at the time of
exercise. Such payment may be made in cash, through
delivery to the Company of Shares of Common Stock with a
Fair Market Value equal to the exercise price or through a
combination of cash and Shares, and any Shares so
delivered shall be valued at their Fair Market Value on
the date on which the Option is exercised. No Shares shall
be issued until full payment therefor has been made.
(e)During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee and shall not be
assignable or transferable. In the event of the Optionee's
death, no Option shall be transferable by the Optionee
otherwise than by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations
order as defined in the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.
(f)An Optionee or a transferee of a deceased Optionee shall
have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the
issuance of a stock certificate for such Shares. No
adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the
<PAGE>
record date is prior to the date such stock certificate is
issued, except as provided in Section 8 hereof.
(g)Subject to the terms and conditions and within the
limitations of the Plan, the Option Committee may modify,
extend or renew outstanding Options granted under the
Plan, or accept the exchange of outstanding Options (to
the extent not theretofore exercised) for the granting of
new Options in substitution therefor, provided that no
modification, extension or renewal of an Option shall be
made which would adversely affect the status of the Plan
under rule 16b-3 ("Rule 16b-3") of the Securities Exchange
Act of 1934, as amended. Notwithstanding the foregoing,
however, no modification of an Option shall, without the
consent of the Optionee, impair any rights or obligations
under any Option theretofore granted under the Plan.
6. Expiration of Options.
No Option may be exercised to any extent by anyone after the first to
occur of the following events:
(a)The expiration of ten (10) years from the date the Option
was granted;
(b)The expiration of one (1) year from the time the Optionee
shall voluntarily or involuntarily cease to continue to
serve as a director of the Company (a "Termination of
Directorship"), unless such Termination of Directorship
results from his death, disability or removal for cause by
stockholders;
(c)The expiration of one (1) year from the date of the
Optionee's Termination of Directorship by reason of his
or her disability;
(d)The expiration of one (1) year from the date of the
Optionee's death;
(e)The removal of the Optionee as a director for cause by
stockholders; or
(f)The effective date of either the merger or consolidation
of the Company into another corporation, or the
acquisition by another corporation of all or substantially
all of the Company's assets or 80% or more of the
Company's then outstanding voting stock, or the
liquidation or dissolution of the Company, unless the
agreement of merger or consolidation shall otherwise
provide; provided that each Optionee shall, in such event,
have the right immediately prior to such dissolution or
liquidation, or merger or consolidation in which the
Company is not the surviving corporation, to exercise the
Option in whole or in part, whether or not the Optionee's
right to exercise such Option had otherwise accrued
pursuant to the terms of the Option Agreement pursuant to
which such Option was granted. At least ten (10) days
prior to the effective date of such merger, consolidation,
<PAGE>
acquisition, liquidation or dissolution, the Option
Committee shall give the Optionee notice of such event if
the Option has then neither been fully exercised nor
become unexercisable under this Section 6.
7. Term of Plan.
7.01 Effective Date. The Plan shall become effective when adopted
by the Board of Directors, but no Option granted under the Plan
shall become exercisable unless and until the Plan shall have been
approved by the Company's stockholders. If such stockholder
approval is not obtained within twelve months after the date of
the Board's adoption of the Plan, the Plan shall be a nullity and
any Options granted hereunder shall be canceled. Amendments to the
Plan not requiring stockholder approval shall become effective
when adopted by the Board of Directors or the Option Committee, as
required; amendments requiring stockholder approval (as provided
in Section 10 hereof) shall become effective when such approval is
obtained. Subject to this limitation, Options may be granted under
the Plan at any time after the effective date and before the date
fixed for termination of the Plan.
7.02 Termination. Unless sooner terminated in accordance with
Section 8 hereof, the Plan shall terminate upon the earlier of (i)
the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the Board of Directors,
or (ii) the date on which all Shares available for issuance under
the Plan shall have been issued pursuant to the exercise or
cancellation of Options granted under the Plan. If the date of
termination is determined under (i) above, then Options
outstanding on such date shall continue to have force and effect
in accordance with the provisions of the instruments evidencing
such Options.
8. Adjustment Provisions for Recapitalizations, Reorganizations and Related
Transactions.
8.01 Recapitalizations and Related Transactions. If, through or
as a result of any recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar
transaction, (i) the outstanding shares of Common Stock are
increased, decreased or exchanged for a different number or kind
of shares or other securities of the Company, or (ii) additional
Shares or new or different shares or other non-cash assets are
distributed with respect to such shares of Common Stock or other
securities, an appropriate and proportionate adjustment shall be
made in (x) the maximum number and kind of shares reserved for
issuance under the Plan, (y) the number and kind of shares or
other securities subject to any then outstanding Options under the
Plan, and (z) the price for each Share subject to any then
outstanding Options under the Plan, without changing the aggregate
purchase price as to which such Options remain exercisable.
Notwithstanding the foregoing, no adjustment shall be made
pursuant to this Section 8 which would be considered as the
adoption of a new plan requiring stockholder approval.
<PAGE>
8.02 Reorganization; Merger and Related Transactions. If the
Company shall be the surviving corporation in any reorganization,
merger or consolidation of the Company with one or more other
corporations, any then outstanding Option granted pursuant to the
Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Common Stock subject to such
Options would have been entitled immediately following such
reorganization, merger, or consolidation, with a corresponding
proportionate adjustment of the purchase price as to which such
Options may be exercised so that the aggregate purchase price as
to which such Options may be exercised shall be the same as the
aggregate purchase price as to which such Options may be exercised
for the Shares remaining subject to the Options immediately prior
to such reorganization, merger, or consolidation.
8.03 Authority to Make Adjustments. Any adjustments under this
Section 8 shall be made by the Board of Directors, whose
determination as to what adjustments, if any, will be made and the
extent thereof will be final, binding and conclusive. No
fractional shares will be issued under the Plan on account of any
such adjustments.
8.04 Limit on Rights. Except as herein before expressly provided
in this Section 8, the Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class,
stock split, or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class
or by reason of any dissolution, liquidation, merger or
consolidation or spin-off of assets or stock of another
corporation, and any issue by the Company of shares of stock of
any class or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to
the Option.
8.05 Right of Company. The grant of an Option pursuant to the
Plan shall not affect in any way the right or power of the Company
to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or consolidate or
to dissolve, liquidate, sell or transfer all or any part of its
business or assets.
9. Securities Law Requirements. No Shares shall be issued upon the exercise of
any Option unless and until the Company has determined that: (i) it and the
Optionee have taken all actions required to register the Shares under the
Securities Act of 1933, as amended, or perfect an exemption from the
registration requirements thereof; (ii) any applicable listing requirement
of any stock exchange or quotation system on which the Common Stock are
listed has been satisfied; and (iii) any other applicable provision of
state or federal law has been satisfied.
10. Amendment of the Plan.
10.01 Authority. The Board of Directors may at any time terminate,
and from time to time may amend or modify the Plan; provided,
<PAGE>
however, that no amendment or modification may become effective
without approval of the amendment or modification by the
stockholders of the Company if stockholder approval is required to
enable the Plan to satisfy any applicable statutory or regulatory
requirements (including, without limitation, applicable state law
and Rule 16b-3), or if the Company, on the advice of counsel,
determines that stockholder approval is otherwise necessary or
desirable. The Option Committee shall have the right to amend or
modify the terms and provisions of the Plan and of any outstanding
Option to the extent necessary to ensure the qualification of the
Plan under Rule 16b-3.
10.02 Approval. Notwithstanding the foregoing, no amendment or
modification to the Plan shall be made without the approval of the
amendment or modification by the stockholders if such amendment or
modification would:
(a)increase the maximum number of Shares as to which
Options may be granted under Section 3 or 4 hereof to
each Optionee or in the aggregate;
(b)permit the granting of Options under the Plan other
than at the times provided in Section 3 hereof;
(c)permit the granting of Options under the Plan at an
exercise price less than 100% of the Fair Market Value of
the Shares at the time the Option is granted;
(d)permit exercise of an Option unless full payment
for the Shares as to which the Option is exercised is
made at the time of purchase;
(e)extend the maximum period during which Options may be
exercised; or
(f)permit the cancellation of an Option and subsequent
reissuance of a new Option to the same Optionee in
substitution for the canceled Option at the then existing
Fair Market Value.
11. Limitation of Rights. Neither the Plan nor the granting of an Option
nor any other action taken pursuant to the Plan, shall constitute or be
evidence of any agreement or understanding, express or implied, that the
Company shall retain a director for any period of time.
12. Withholding. The Company shall have the right to deduct from payments of
any kind otherwise due to the Optionee any federal, state or local taxes of
any kind required by law to be withheld with respect to any Shares issued
upon exercise of Options under the Plan. Subject to the prior approval of
the Company, which may be withheld by the Company in its sole discretion,
the Optionee may elect to satisfy such obligations, in whole or in part,
(i) by causing the Company to withhold shares of Common Stock otherwise
issuable pursuant to the exercise of an Option or (ii) by delivering to the
Company shares of Common Stock already owned by the Optionee. The Shares so
delivered or withheld shall have a Fair Market Value equal to such
withholding obligation as of the date that the amount of tax to be withheld
is to be determined. An Optionee who has made an election pursuant to this
<PAGE>
Section 12 may only satisfy his or her withholding obligation with shares
of Common Stock which are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements. Notwithstanding the
foregoing, no election to use Shares for the payment of withholding taxes
shall be effective unless made in compliance with any applicable
requirements of Rule 16b-3.
13. Governing Law. The provisions of this Plan shall be governed and
construed in accordance with the laws of the State of Delaware without
regard to the principles of conflicts of law.
