<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Mountbatten, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................
2) Aggregate number of securities to which transaction applies:
.......................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
.......................................................
4) Proposed maximum aggregate value of transaction:
.......................................................
5) Total fee paid:
......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by the
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>
MOUNTBATTEN, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1997
To the Shareholders of MOUNTBATTEN, INC.:
The Annual Meeting of Shareholders of Mountbatten, Inc. (the "Company")
will be held at 10:00 a.m., local time, on Wednesday, May 14, 1997, at the
offices of the Company, 33 Rock Hill Road, Bala Cynwyd, Pennsylvania 19004, for
the following purposes:
1. To elect four directors to serve until the expiration of
their one-year terms and until their successors are elected;
2. To consider and vote upon the election of Price Waterhouse
LLP as independent public accountants for the Company for 1997;
3. To consider and vote upon a proposal to amend the Company's
1995 Equity Incentive Plan for Key Employees;
4. To consider and vote upon a proposal to amend the Company's
1995 Equity Incentive Plan for Outside Directors; and
5. To transact such other business as may properly come before
the Annual Meeting and any adjournment, postponement or continuation thereof.
The Board of Directors has fixed the close of business on April 4, 1997
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting.
A copy of the Company's Annual Report for the year ended December 31,
1996 is being mailed to shareholders together with this Notice.
Whether or not you expect to attend the Annual Meeting in person,
please complete, sign and return the enclosed form of proxy in the envelope
provided.
By Order of the Board of Directors,
Kenneth L. Brier,
President and Chief Executive Officer
April 16, 1997
Bala Cynwyd, Pennsylvania
<PAGE>
MOUNTBATTEN, INC.
----------
This Proxy Statement and the form of proxy enclosed herewith, which are
first being mailed to shareholders on or about April 16, 1997, are furnished in
connection with the solicitation by the Board of Directors of Mountbatten, Inc.
(the "Company") of proxies to be voted at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held at 10:00 a.m., local time, on Wednesday, May
14, 1997, and at any adjournment, postponement or continuation thereof, at the
principal executive offices of the Company, 33 Rock Hill Road, Bala Cynwyd,
Pennsylvania 19004.
Shares represented by proxies in the accompanying form, if properly
signed and returned, will be voted in accordance with the specifications made
thereon by the shareholders. Any proxy not specifying to the contrary will be
voted in favor of the adoption of the proposals referred to in the Notice of
Annual Meeting and for the election of the nominees for director named below. A
shareholder who signs and returns a proxy in the accompanying form may revoke it
at any time before it is voted by giving written notice of revocation or a duly
executed proxy bearing a later date to the Secretary of the Company or by
attending the Annual Meeting and voting in person.
The cost of solicitation of proxies in the accompanying form will be
borne by the Company, including expenses in connection with preparing and
mailing this Proxy Statement. Such solicitation will be made by mail and may
also be made on behalf of the Company in person or by telephone or telegram by
the Company's regular officers and employees, none of whom will receive special
compensation for such services. The Company, upon request therefor, will also
reimburse brokers or persons holding shares in their names or in the names of
nominees for their reasonable expenses in sending proxies and proxy material to
beneficial owners.
Only holders of Common Stock of record at the close of business on
April 4, 1997 will be entitled to notice of and to vote at the Annual Meeting.
Shareholders do not have cumulative voting rights with respect to the election
of directors. Each share of Common Stock is entitled to one vote on all matters
to come before the Annual Meeting.
As of the close of business on April 4, 1997, the Company had
outstanding 2,528,530 shares of Common Stock, $.001 par value. The presence in
person or by proxy of the holders of majority of the outstanding shares will
constitute a quorum at the Annual Meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth as of February 28, 1997 the amount and
percentage of the Company's outstanding Common Stock beneficially owned by (i)
each person who is known by the Company to own beneficially more than 5% of its
Common Stock, (ii) each director and
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nominee for director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all executive officers and directors of the Company
as a group.
Shares Percent of
Name of Individual Beneficially Outstanding
or Identity of Group Owned(1) Common Stock
- -------------------- -------- ------------
Executive Officers
- ------------------
Kenneth L. Brier................. 461,794(2) 17.2%
Ted A. Drauschak................. 164,750(3) 6.2%
Stephen C. Fletcher.............. 75,000(4) 2.9%
Joel D. Cooperman................ 49,000(5) 1.9%
Directors
- ---------
J. Michael Adams................. 7,650(6) *
Thomas P. Garry.................. 6,000(7) *
5% Holders
- ----------
Jack Brier (8)................... 308,375(9) 12.2%
ESQF Advisors, Inc. and
Martin J. Whitman ............ 293,000(10) 11.6%
All directors and executive
officers as a group (6 persons).. 764,194(11) 26.0%
- ----------
* Represents less than 1%.
(1) Information furnished by each individual named. This table includes shares
that are owned jointly, in whole or in part, with the person's spouse or
children, or individually by such spouse or children.
(2) Includes 17,918 shares owned by Kenneth L. Brier's wife and 2,500 shares
owned by his son as to which Kenneth L. Brier disclaims beneficial
ownership. Also includes 159,000 shares subject to currently exercisable
options. Kenneth L. Brier's address is 33 Rock Hill Road, Bala Cynwyd, PA
19004.
(3) Includes 120,250 shares subject to currently exercisable options and 2,000
shares owned by Mr. Drauschak's children as to which he disclaims
beneficial ownership. Mr. Drauschak's address is 33 Rock Hill Road, Bala
Cynwyd, PA 19004.
(4) Includes 67,500 shares subject to currently exercisable options.
(5) Includes 49,000 shares subject to currently exercisable options.
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(6) Includes 400 shares owned by Mr. Adams' wife, for which he disclaims
beneficial ownership, and 6,000 shares subject to currently exercisable
options.
(7) Includes 6,000 shares subject to currently exercisable options.
(8) Jack Brier is Kenneth L. Brier's father. Jack Brier's address is Kleinerts,
Inc., Suite 100, 120 West Germantown Pike, Plymouth Meeting, PA 19462.
(9) Includes 10,416 shares owned by Jack Brier's wife, as to which he disclaims
beneficial ownership.
(10) Based upon the Schedule 13G of ESQF Advisors, Inc. ("ESQF") and Martin J.
Whitman filed July 7, 1996, ESQF is a registered investment adviser, of
which Mr. Whitman is chief executive officer and controlling person. The
address of ESQF and Mr. Whitman is 767 Third Avenue, New York, NY 10017.
(11) Includes 407,750 shares subject to currently exercisable options.
SECTION 16(a) REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 (the "Exchange Act")
requires that the officers and directors of a corporation, such as the Company,
which has a class of equity securities registered under Section 12 of the
Exchange Act, as well as persons who own more than 10% of a class of equity
securities of such a corporation, file reports of their ownership of such
securities, as well as monthly statements of changes in such ownership, with the
corporation and the Securities and Exchange Commission (the "SEC"). Based upon
written representations received by the Company from its officers and directors,
and the Company's review of the monthly statements of changes filed by its
officers and directors during 1996, the Company believes that all such filings
required during 1996 were made on a timely basis.
RELATIONSHIP WITH THE MOUNTBATTEN SURETY COMPANY, INC.
The Mountbatten Surety Company, Inc. (the "Surety Company") is a wholly
owned subsidiary of the Company. The Surety Company is in the business of
writing surety bonds and is currently licensed in 15 states in the eastern third
of the United States. The Surety Company has applied for licenses in Alabama,
Georgia, North Carolina and West Virginia and intends to apply for licenses to
write surety bonds in those additional states in which it can meet regulatory
requirements and adhere to its long-term objectives for marketing and growth.
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ELECTION OF DIRECTORS
The Company's Board of Directors consists of four members. Each
director is elected for a one-year term and serves until the next annual meeting
of the Company and the election of his successor. The current one-year terms of
the Company's directors expire in 1997.
Four directors are to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the election of the nominees named below, all of whom are currently
directors of the Company. If a nominee becomes unavailable for any reason, it is
intended that the proxies will be voted for a substitute nominee designated by
the Board of Directors. The Board of Directors has no reason to believe the
nominees named will be unable to serve if elected. Any vacancy occurring on the
Board of Directors for any reason may be filled by a majority of the directors
then in office. The nominees for director receiving a plurality of the votes
cast at the Annual Meeting will be elected. Shares held by brokers or nominees
as to which instructions have not been received from the beneficial owner or
person otherwise entitled to vote and as to which the broker or nominee does not
have discretionary voting power, i.e. broker non-votes, will be treated as not
present and not entitled to vote for nominees for election as director.
Abstentions from voting and broker non-votes in the election of directors will
have no effect since they will not represent votes cast at the Annual Meeting
for the purpose of electing directors.
The names of the nominees for directors, together with certain
information regarding them, are as follows:
Director
Name Age Since
---- --- -----
Kenneth L. Brier 47 1992
Ted A. Drauschak 37 1992
J. Michael Adams (1) 49 1994
Thomas P. Garry (1) 56 1994
- -------------
(1) Member of the Company's Audit, Compensation and Nominating Committees.
Mr. Brier has served as Chairman of the Board and President of the
Company and President of the Surety Company since their inception in 1992. From
November 1990 until March 1992 he was employed by Xsirius, Inc., a publicly held
research and development company where he was engaged in investigating the
possibility of establishing an environmental consulting division. From August
1985 to October 1990 he was involved in real estate development and management
consulting. Mr. Brier is also a director of Kleinerts, Inc.
Mr. Drauschak has served as Executive Vice President, Secretary and
Director of the Company since its inception in 1992 and, since March 1997, has
been the President of HMS Dreadnought, Inc., the Company's subsidiary that is in
the business of dispute resolution, claims
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handling and construction management. He also served as Executive Vice President
and Director of the Surety Company since its inception in 1992 until March 1997.
From November 1990 to March 1992 he was employed full-time by Xsirius, Inc.
Prior to November 1990, he was Director of Real Estate Development for Tedco
Equities, a real estate development concern.
Mr. Adams has been a Director of the Company since 1994 and of the
Surety Company since 1992. He has been the Dean of the College of Design Arts,
Drexel University, Philadelphia, Pennsylvania for more than five years. Mr.
Adams is also a director of R.R. Donnelly International.
Mr. Garry has been a Director of the Company since 1994 and of the
Surety Company since 1992. In 1996, Mr. Garry retired after more than 30 years
of service from Rohm and Haas, a Fortune 500 chemical and engineering company,
where he most recently served as Operations Manager, Industrial Chemicals.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met five times in 1996. The Board of Directors
has an Audit Committee, a Compensation Committee and a Nominating Committee.
The Audit Committee of the Company consists of Messrs. Adams and Garry.
The Audit Committee, which met one time in 1996, reviews audit reports and
management recommendations made by the Company's outside auditing firm.
The Compensation Committee of the Company consists of Messrs. Adams and
Garry. The Compensation Committee met two times in 1996 to review and recommend
compensation plans, approve certain compensation changes and recommend option
grants under and determine participants in the Company's stock option plans.
The Nominating Committee, which consists of Messrs. Adams and Garry, is
responsible for recommending nominees for director. The Nominating Committee did
not meet in 1996. The Nominating Committee will consider written nominations for
directors from shareholders, which nominations should be sent to the Company at
its principal executive offices, attention: Secretary.
None of the directors attended fewer than 75% of the aggregate of the
total number of meetings of the Board of Directors plus the total number of
meetings of all committees of the Board of Directors on which he served that
were held during 1996.
Compensation of Directors
A director of the Company who is not an employee is paid $300 for each
meeting attended of the Board of Directors and of each committee on which he
serves. If a director serves on the Board of Directors of both the Company and
the Surety Company, and the Boards
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of Directors of both companies meet on the same day, the director receives only
one meeting fee. In such event, meeting fees are allocated 50% to the Company
and 50% to the Surety Company. In addition, the Company's outside directors,
Messrs. Adams and Garry, each received directors' fees of $8,500 for 1996. Under
the Company's 1995 Equity Incentive Plan for Outside Directors, each outside
director of the Company or any of the Company's subsidiaries is entitled to
receive an annual grant of options to purchase 2,000 shares of the Company's
Common Stock at an exercise price equal to the fair market value of the shares
on the grant date.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the compensation paid by the Company
during each of the three fiscal years ended December 31, 1996, December 31, 1995
and December 31, 1994 to the chief executive officer of the Company and the
three other most highly compensated executive officers of the Company whose
compensation exceeded $100,000 in the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
Long-Term
Name and Annual Compensation Compensation
Principal ---------------------- Options All Other
Position Year Salary Bonus Granted Compensation
---------- ---- ------ ----- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth L. Brier, Chairman 1996 $166,000 $ 39,712 60,000 $124,038 (1)
of the Board, President, and 1995 147,000 106,000 15,000 24,619
Chief Executive Officer 1994 147,000 - - 22,181
Ted A. Drauschak, Executive 1996 $125,700 $ 43,850 55,000 $12,193 (2)
Vice President 1995 106,992 50,900 15,000 11,315
1994 111,400 - - 12,164
Stephen C. Fletcher, Vice 1996 $155,000 $ 41,250 45,000 $ 8,400 (3)
President of the Company 1995 136,992 37,900 - 12,800
and President of the Surety 1994 131,300 - - 6,200
Company's Bond Division
Joel D. Cooperman (3) 1996 $110,000 $ 42,995 39,000 $ 8,400 (3)
Vice President of Finance, 1995 62,500 31,000 40,000 5,250
Treasurer and Chief Financial
Officer
</TABLE>
- ----------
(1) Represents an automobile allowance of $8,400, disability and life insurance
premium payments of $27,459, payments for vacation not used of $13,834 and
premiums for a retirement plan annuity of $74,345.
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(2) Represents an automobile allowance of $8,400 and disability and life
insurance premiums of $3,793.
(3) Mr. Cooperman began full-time employment at the Company on May 15, 1995.
Represents an automobile allowance of $8,400.
The following table sets forth information with respect to options
granted to the persons named in the Summary Compensation Table above during the
fiscal year ended December 31, 1996.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Percent of Total
Number of Securities Options Granted Exercise
Underlying to Employees in Price Expiration
Name Options Granted (#) Fiscal Year ($/sh) Date
- ---- -------------------- ------------ -------- -----
<S> <C> <C> <C> <C> <C>
Kenneth L. Brier 20,000(1) 27.5% $5.25 1/16/06
20,000(2) 5.78 1/16/01
20,000(3) 8.00 12/20/06
Ted A. Drauschak 15,000(1) 25.2% $5.25 1/16/06
20,000(2) 5.25 1/16/06
20,000(3) 8.00 12/20/06
Stephen C. Fletcher 25,000(4) 20.6% $5.25 1/16/06
20,000(3) 8.00 12/20/06
Joel D. Cooperman 15,000(5) 17.9% $5.25 1/16/06
24,000(3) 8.00 12/20/06
</TABLE>
- ---------------
(1) This option became exercisable commencing on July 16, 1996.
(2) This option becomes exercisable in five cumulative annual installments of
4,000 shares each commencing January 16, 1997.
(3) This option will become exercisable commencing on June 20, 1997.
(4) This option becomes exercisable in five cumulative annual installments of
5,000 shares each commencing January 16, 1997.
(5) This option becomes exercisable in five cumulative annual installments of
3,000 shares each commencing January 16, 1997.
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The following table sets forth information with respect to options held
on December 31, 1996 by the persons named in the Summary Compensation Table.
None of these persons exercised any options during the fiscal year ended
December 31, 1996.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Options at Options at
December 31, 1996 December 31, 1996
----------------- -----------------
Name Exercisable Unexercisable Exercisable(1) Unexercisable(1)
---- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C>
Kenneth L. Brier 155,000 20,000 $504,250 $ 54,400
Ted A. Drauschak 107,500 37,500 $343,750 $132,000
Stephen C. Fletcher 50,000 70,000 $200,000 $191,250
Joel D. Cooperman 40,000 39,000 $ 64,000 $126,750
</TABLE>
- ----------
(1) Represents the difference between the aggregate exercise price and the
aggregate market value as of December 31, 1996.
Employment Agreements
Kenneth L. Brier has an employment agreement with the Company for a
term that commenced April 6, 1994 and ends April 30, 1997, which is
automatically renewed on each April 30th for successive terms of three years
unless either the Company or Mr. Brier gives written notice of non-renewal at
least 90 days prior to a renewal date. The agreement provides for an initial
minimum base salary of $147,000 per year, which may be increased by the Board of
Directors, and for an annual bonus as determined by the Compensation Committee.
If the Company terminates Mr. Brier's employment other than for just cause, as
defined in the agreement, or Mr. Brier terminates the agreement for good reason,
as defined in the agreement, Mr. Brier will be entitled to an amount equal to
the then remaining term of the agreement times his then current base salary,
paid in semi-monthly installments for the remainder of the term.
Ted A. Drauschak has an employment agreement with the Company, which
can be terminated by either party upon 90 days' written notice. The agreement
provides for a salary at the initial rate of $10,475 per month, subject to
annual review by the Company, and for an annual bonus as determined by the
Compensation Committee.
Stephen C. Fletcher has an employment agreement with the Surety
Company, which can be terminated by either party upon 90 days' written notice.
The agreement provides for a salary at the initial rate of $10,416 per month,
subject to annual review by the Surety Company, and for an annual bonus as
determined by the Compensation Committee.
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Joel D. Cooperman has an employment agreement with the Company, which
can be terminated by either party upon five months' written notice. The
agreement provides for a salary at the initial rate of $9,166.67 per month,
subject to annual review by the Company, and for an annual bonus as determined
by the Compensation Committee.
Each of the employment agreements described herein provides that, if
during a period of one year immediately subsequent to a change of control of the
Company, as defined in the agreement, the employee's employment is terminated by
the Company without just cause or by the employee for "good reason," the
employee will be entitled to certain payments under the agreement. For this
purpose, termination for "good reason" within one year immediately subsequent to
a change of control of the Company includes an adverse change or reduction, as
the case may be, in the employee's duties, responsibilities, titles, location or
other terms of his salary, bonus or benefits. Under such provision, if the
employee is terminated by the Company without just cause or the employee
terminates his employment for good reason following a change in control, he will
be entitled to receive severance in an amount equal to his average aggregate
annual compensation during the five calendar years preceding the taxable year in
which such termination occurs multiplied by 2.99, which payment must be made on
or before the fifth day following such termination; provided, however, that any
portion of such payment that would result in such payment being subject to an
excise tax under the Internal Revenue Code of 1986, as amended (the "Code"),
will be treated as a loan by the Company to the employee payable in 10 years
with interest fixed at the applicable federal rate for the month in which such
event occurs, subject to his right to prepay such amount in whole or in part
prior to such time without penalty.
Certain Transactions
Gary L. Bragg, Esquire, Secretary and a Director of the Surety Company,
is also a shareholder in the law firm of O'Neill, Bragg and Staffin, P.C., which
has served as general counsel to the Company and the Surety Company since 1992,
principally in connection with corporate and regulatory matters. Such firm is
paid its customary fees for such services.
ELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Unless instructed to the contrary, it is intended that votes will be
cast pursuant to the proxies for the election of Price Waterhouse LLP as the
Company's independent public accountants for 1997. The Company has been advised
by Price Waterhouse LLP that none of its members has any financial interest in
the Company. Election of Price Waterhouse LLP will require the affirmative vote
of a majority of the votes cast by holders of the shares of Common Stock voting
at the Annual Meeting.
A representative of Price Waterhouse LLP will attend the Annual
Meeting, will have the opportunity to make a statement, if such representative
desires to do so, and will be available to respond to any appropriate questions
presented by shareholders at the Annual Meeting.
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AMENDMENT TO THE COMPANY'S 1995
EQUITY INCENTIVE PLAN FOR KEY EMPLOYEES
The Board of Directors determined to amend the Company's 1995 Equity
Incentive Plan for Key Employees, as amended (the "Plan"), on March 21, 1997,
subject to shareholder approval at the Annual Meeting, to increase the total
number of shares for which grants may be made from 250,000 to 500,000 shares, in
order to make additional shares available to be issued under the Plan in the
future to key employees.
The purpose of the Plan is to attract and retain key employees who
demonstrate outstanding competence and upon whose judgment, initiative and
efforts the Company is largely dependent for the successful conduct of its
business. The Plan permits the granting of options to purchase Common Stock of
the Company ("Options"), including Options intended to qualify as incentive
stock options ("Incentive Stock Options") under Section 422 of the Code and
Options not intended to so qualify ("Non-Qualified Stock Options"), restricted
stock awards ("Restricted Stock Awards") or restricted unit awards ("Restricted
Unit Awards") (collectively, "Awards"), stock appreciation rights ("SARs") and
limited stock appreciation rights ("LSARs") to key employees of the Company and
its affiliates.
The total number of shares of the Company's Common Stock that may be
the subject of Options, Awards, SARs and LSARs granted under the Plan may not
exceed 500,000 shares in the aggregate; provided, however, that no person may be
granted options, rights or awards with respect to a number of shares, determined
on a cumulative basis, that exceeds 90% of the aggregate number of shares that
are available to be issued under the Plan. If the amendment is not approved by
the shareholders at the Annual Meeting, the Plan will remain in force as
originally adopted.
As of March 31, 1997: (i) no Options had been exercised under the Plan;
(ii) Non-Qualified Stock Options for the purchase of an aggregate of 109,000
shares were outstanding and (iii) Incentive Stock Options for the purchase of an
aggregate of 141,000 shares were outstanding. Therefore, no shares of Common
Stock are currently available for grants and Awards under the Plan.
The amendment will increase the number of shares currently available
for grants and awards under the Plan in furtherance of the purposes of the Plan.
No determination has been made as to the allocation of grants or awards with
respect to the additional shares.
The number of persons who are currently eligible to participate in the
Plan is approximately 17 persons, including executive officers of the Company.
Through March 31, 1997, options to purchase shares of the Company's
Common Stock have been granted as follows: Mr. Brier, 60,000 shares; Mr.
Drauschak, 55,000 shares; Mr. Fletcher, 45,000 shares; Mr. Cooperman, 79,000
shares; all executive officers as a group, 239,000 shares; and all employees,
excluding executive officers as a group, 11,000 shares. All of the
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executive officers named above have received Options to purchase more than 5% of
the shares available under the Plan.
The closing price per share of the Company's Common Stock on March 21,
1997, as reported on the Nasdaq National Market, was $8.50.
If an Option or Award expires or is cancelled for any reason without
having been fully exercised or vested, the number of shares or restricted units
subject to such Option or Award that had not been purchased or become vested may
again be made subject to an Option or Award under the Plan. Appropriate
adjustments in outstanding Options, Awards, SARs or LSARs and in the number or
kind of shares or units subject to the Plan are provided for in the event of a
stock split, stock dividend, share combination or spin-off and certain other
types of corporate transactions involving the Company, including mergers,
consolidations, reorganizations and recapitalizations.
The Plan is administered by the Compensation Committee, which currently
consists of two directors of the Company, none of whom is eligible to receive
Options, Awards, SARs or LSARs under the Plan and all of whom qualify as outside
directors for purposes of Section 162(m) of the Code. The Compensation Committee
is authorized to select from among the eligible employees those individuals who
are key employees and those to whom Options, Awards, SARs and LSARs are to be
granted and to determine the number of shares or units to be subject to and the
terms and conditions of the Options, Awards, SARs or LSARs. The Compensation
Committee is also authorized to adopt, amend and rescind rules relating to the
administration of the Plan and to the interpretation of Options, Awards, SARs
and LSARs.
Incentive and Non-Qualified Options
The price of the shares subject to Options will be set by the
Compensation Committee but may not be less than 100% of the fair market value of
such shares on the date the Option is granted as determined by the Compensation
Committee.
Unless otherwise provided in the option agreement or as may be
otherwise determined by the Compensation Committee, an Option may not be
exercised during the first six months after its grant. Thereafter, Options will
become exercisable in such installments, which may be cumulative, as the
Compensation Committee may determine. The Compensation Committee may accelerate
the exercisability of any installments and may provide that some or all
installments will become immediately exercisable in certain circumstances.
Unless the Compensation Committee accelerates exercisability, no Option that is
unexercisable at the time an optionee's employment terminates may thereafter
become exercisable. Except in certain limited circumstances, no Option may be
exercised after ten years from the date of grant.
An outstanding Non-Qualified Option that has become exercisable
generally terminates one year after the termination of employment due to
retirement, total disability or death, and three months after employment
termination for any reason other than retirement, total disability
11
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or death. Incentive Stock Options that have become exercisable generally will
terminate one year after termination of employment due to total disability or
death and three months after an employment termination for any other reason. No
Option may be assigned or transferred, except by will or by the applicable laws
of descent and distribution. During the lifetime of the optionee, the Option may
be exercised only by the optionee.
The Plan authorizes the Compensation Committee to grant to the
optionee, in exchange for the surrender and cancellation of such Options, new
Options having option prices lower or higher than the option price provided in
the surrendered Options, and containing such other terms and conditions as the
Compensation Committee may deem appropriate.
The Compensation Committee will determine whether Options granted are
to be Incentive Stock Options meeting the requirements of Section 422 of the
Code. Incentive Stock Options may be granted only to eligible employees of the
Company and its subsidiaries. Any such optionee must own less than 10% of the
total combined voting power of the Company or of any of its subsidiaries unless
at the time such Incentive Stock Option is granted the price of the Option is at
least 110% of the fair market value of the Common Stock subject to the Option
and, by its terms, the Incentive Stock Option is not exercisable after the
expiration of five years from the date of grant. An optionee may not receive
Incentive Stock Options for shares that first become exercisable in any calendar
year with an aggregate fair market value determined at the date of grant in
excess of $100,000. In no event may an Incentive Stock Option be exercised after
ten years from the date of grant.
The option price must be paid in full at the time of exercise unless
otherwise determined by the Compensation Committee. Payment must be made in cash
or, in the discretion of the Compensation Committee, by delivery of shares of
the Company's Common Stock valued at their then fair market value or a
combination of cash and stock. It is the policy of the Compensation Committee
that any taxes required to be withheld must also be paid at the time of
exercise.
Subject to provisions under Section 16(b) of the Exchange Act with
respect to executive officers, the Compensation Committee may, in lieu of
delivering all or a portion of the shares as to which an Option has been
exercised, elect to pay the optionee an amount equal to the "appreciation
value," which is the difference between the option price for the shares as to
which such election is made and the fair market value of such shares on the date
the Option was exer cised. The appreciation value may be paid in cash or in
shares of the Company's Common Stock or a combination thereof.
In the case of a Non-Qualified Stock Option, the Compensation Committee
may, in lieu of delivering shares or paying the optionee the appreciation value,
elect to defer payment and credit the amount of such appreciation value to the
account of the optionee on the Company's books and either to treat the amount in
such account as if it had been invested in the manner from time to time
determined by the Compensation Committee or, for the Company's convenience, to
contribute the amount in such account to a trust that invests for the accounts
of participants in a manner determined by the Compensation Committee.
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Restricted Stock Awards
The Plan permits the grant of Restricted Stock Awards, which are
restricted Common Stock bonuses that vest in accordance with the Plan. Shares
awarded as Restricted Stock Awards will be issued in the name of the grantee and
will be delivered to the grantee, or an escrow holder, if any, as soon as
reasonably practicable after the Award is made and after the grantee has
executed an award agreement and any other documents that the Compensation
Committee in its discretion may require, without the payment of any cash
consideration by the grantee. Upon delivery, the grantee, or escrow holder, if
any, will have all the rights of a shareholder with respect to such shares,
including the right to vote the shares and receive dividends and other
distributions with respect to the shares. Such shares may not be sold,
transferred, otherwise disposed of or pledged until they become vested. Upon
termination of the grantee's employment, all such shares that are not then
vested will automatically be forfeited and transferred to the Company at no cost
to the Company. The Compensation Committee may also impose other restrictions
and conditions on the shares.
Restricted Unit Awards
The Plan permits the grant of Restricted Unit Awards, which are bonuses
credited to the grantee's account and payable, at the Compensation Committee's
discretion, in cash or the Company's Common Stock or a combination thereof. No
shares will actually be issued to the grantee at the time a Restricted Unit
Award is made. Rather, the Company will establish a separate account for each
grantee and record in such account the number of such units awarded to the
grantee. When the Company pays a cash dividend on its Common Stock, an amount
will be credited to each such account equal to the cash dividend paid on one
share of Common Stock for each unit then in the account (the "Dividend
Equivalents").
Each Restricted Unit Award agreement will specify a date or dates on
which payment of the value of vested units and Dividend Equivalents is to be
made with respect to such units in the grantee's account. As soon as reasonably
practicable after the payment date, the Company will deliver to the grantee one
share of the Company's Common Stock for each vested unit then credited to the
grantee's account and cash equal to the vested Dividend Equivalents so credited.
The Compensation Committee may, however, in its discretion, elect to pay the
grantee cash in lieu of delivering all or part of such Common Stock. If a cash
payment is made, the amount of such cash payment will, in respect to each vested
unit for which such cash payment is made, be equal to the fair market value of a
share of Common Stock on the payment date. The terms of a Restricted Unit Award
may allow the grantee to request, and the Compensation Committee may permit,
deferral of payment of vested units and Dividend Equivalents, in which case the
Compensation Committee may determine to credit interest annually on Dividend
Equivalents. No Restricted Unit Awards have been granted under the Plan.
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Vesting of Awards
Shares awarded as Restricted Stock Awards and units awarded as
Restricted Unit Awards, including Dividend Equivalents, will vest at such time
or times and on such terms, conditions and performance criteria as the
Compensation Committee may determine. However, such shares or units may not vest
earlier than six months after the date of award and may vest only if, on the
date of the vesting, the grantee is then and has continuously been an employee
of the Company or an affiliate of the Company from the date of award. The
Compensation Committee, in its discretion, may determine that in the event of
the grantee's death or total disability while an employee, the unvested portion
of all shares or units awarded to the grantee, including Dividend Equivalents,
will thereupon immediately vest. The Compensation Committee may also accelerate
the vesting of shares or units, including Dividend Equivalents, in its
discretion and on such terms or conditions as it deems appropriate, and may
provide that some or all unvested shares and units will immediately vest and be
payable in the event of a change in control of the Company.
Stock Appreciation Rights
SARs may be granted by the Compensation Committee under the Plan in
connection with an Option, either at the time of grant or by amendment to the
related option agreement (a "Related SAR"), or may be granted independent of an
Option. Each Related SAR will be subject to the same terms and conditions as the
related Option and to such additional conditions as the Compensation Committee
may determine. Related SARs are exercisable only to the extent the Option is
exercisable and will become nonexercisable and be forfeited if and to the extent
the related Option is exercised or becomes unexercisable.
A Related SAR entitles the optionee to surrender to the Company
unexercised the related Option, or any portion thereof, and to receive from the
Company in exchange therefor a cash payment and/or Common Stock of the Company
equal to the appreciation value of the number of shares called for by the
Option, or portion thereof, which is surrendered. Payments to be made upon the
exercise of a Related SAR may, in the Compensation Committee's discretion, be in
cash, in shares of the Company's Common Stock or partly in cash and partly in
shares. Cash will always be paid in lieu of fractional shares, if any.
The Compensation Committee may determine when Related SARs will be
exercisable, provided that a Related SAR will not be exercisable prior to the
time the related Option could be exercised and, except in the event of death or
total disability, will not be exercisable for a period of six months from the
date of grant of such Related SAR. A Related SAR may be exercised in whole or in
part only upon surrender of a proportionate part of the related Option by the
optionee.
A SAR that is granted independent of an Option entitles the holder to
receive the number of shares of Common Stock or cash, or combination thereof, as
the Compensation Committee in its discretion shall determine at the date of
grant and as provided for in the agreement pursuant to which the SAR is granted.
The aggregate value of the SAR on the date of exercise will be
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equal to the appreciation value of the shares subject to the SAR on the date of
exercise over the exercise price of the SAR.
Limited Stock Appreciation Rights
At the time of a grant of an Option or SARs, the Compensation Committee
has the discretion to grant to the optionee an LSAR that is related to such
Option or SAR, which will entitle the optionee to surrender the Option or SAR or
any portion thereof and to receive in cash in respect of each share subject to
the Option or SAR a sum equal to the excess of the fair market value of such
share over the exercise price of such Option or SAR, as determined under the
Plan.
The LSAR may only be exercised during a 60-day period following a
"Trigger Event," except that no LSAR may be exercised within six months of the
date the LSAR was granted. To the extent that an LSAR is exercised, the related
Option or SAR will be canceled to the extent of the number of shares covered by
such exercise, and such shares will no longer be available for grants or awards
under the Plan. Trigger Events are as follows: (i) the date on which any shares
of the Company are first purchased pursuant to a tender or exchange offer (other
than an offer by the Company and related entities); (ii) the date that any
person or group (other than the Company or related entity or any person who
beneficially owned more than 10% of the outstanding Common Stock of the Company
on the date of adoption of the Plan by the Board of Directors) acquires 30% or
more of all votes to which all shareholders of the Company would be entitled to
vote in the election of the Board of Directors; (iii) beginning on the date,
during any period of two consecutive years, on which individuals who at the
beginning of the period constitute the Company's Board of Directors cease for
any reason to constitute at least a majority thereof, unless the election or
nomination for election of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of such period; and (iv) the date of approval by the shareholders of
the Company of an agreement providing for the merger or consolidation of the
Company or the sale or other disposition of all or substantially all of the
assets of the Company.
Acceleration of Exercisability Upon a Change of Control
The Compensation Committee may, in its absolute discretion, provide
that in the event of a change of control of the Company, the Options or SARs or
some or all of the shares and units awarded under the Plan as Awards, including
Dividend Equivalents, shall immediately vest. A "change of control" shall occur
if: (i) any person or group (other than any person as of the date of adoption of
the Plan by the Board of Directors known by the Company to be the beneficial
owner of securities representing 10% or more of the combined voting power of the
Company's outstanding securities) acquires beneficial ownership of securities of
the Company representing 30% or more of the combined voting power of the
Company's then outstanding securities; or (ii) more than 50% of the assets of
the Company are disposed of by the Company pursuant to a partial or complete
liquidation of the Company, a sale of assets of the Company or otherwise.
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Amendment and Termination
The Plan is not limited in duration, except that no Incentive Stock
Option may be granted under the Plan after November 3, 2005. The Plan can be
amended, modified, suspended or terminated at any time or from time to time by
the Board of Directors of the Company or the Compensation Committee, subject to
any required shareholder approval or any shareholder approval that the Board of
Directors may deem to be advisable for any reason, such as for the purpose of
obtaining or retaining any statutory or regulatory benefits under tax,
securities or other laws or satisfying any applicable stock exchange listing
requirements. Neither the amendment, suspension, nor termination of the Plan
shall, without the consent of the Optionee or the Grantee, alter or impair any
rights or obligations under any Option, SAR or Award theretofore granted. No
Option, SAR or Award may be granted during any period of suspension nor after
termination of the Plan, and in no event may any Option intended to be an
Incentive Stock Option be granted under the Plan more than ten years after the
date the adoption of the Plan was approved by the Board of Directors.
Federal Income Tax Consequences
The Plan is not qualified under Section 401(a) of the Code. The
following description, which is based on existing laws, sets forth generally
certain of the federal income tax consequences of Options and Awards under the
Plan. This description may differ from the actual tax consequences of
participation in the Plan.
An employee receiving an Option will not recognize income for federal
income tax purposes upon the grant of the Option, nor will the Company be
entitled to any deduction on account of such grant. In the case of Non-Qualified
Stock Options, the optionee will recognize ordinary taxable income for federal
income tax purposes upon the exercise of the Non-Qualified Stock Option in an
amount equal to the difference between the option price and the fair market
value of the shares on the date of exercise. When the optionee disposes of the
shares acquired upon exercise of the option, the employee will generally
recognize capital gain or loss equal to the difference between (i) the selling
price of the shares and (ii) the sum of the option price and the amount included
in the employee's income when the Option was exercised. Such gain will be
long-term or short-term depending upon whether the shares were held for more or
less than one year after the date of exercise.
Incentive Stock Options granted under the Plan are intended to qualify
as incentive stock options under Section 422 of the Code. A purchase of shares
upon exercise of an Incentive Stock Option will not result in recognition of
income at that time. However, the excess of the fair market value of the shares
purchased over the exercise price will constitute an item of tax preference.
This tax preference will be included in the optionee's computation of his
alternative minimum tax.
If the optionee does not dispose of the shares issued to him upon the
exercise of an Incentive Stock Option within one year of such issuance or within
two years from the date of the
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grant of such Option, whichever is later, then any gain or loss realized by the
optionee on a later sale or exchange of such shares generally will be a
long-term capital gain or long-term capital loss. If the optionee sells the
shares during such period, the sale will be referred to as a "disqualifying
disposition." In that event, the optionee will recognize ordinary income for the
year in which the disqualifying disposition occurs equal to the amount, if any,
by which the lesser of the fair market value of such shares on the date of
exercise of such Option or the amount realized from the sale exceeded the amount
the optionee paid for such shares. Any additional gain realized generally will
be capital gain, which will be long-term or short-term depending on the holding
period for the shares. If the optionee disposes of the shares by gift during
such period, the transfer will be treated as a disqualifying disposition subject
to the rules described herein.
If the purchase price upon exercise of an Option is paid with shares
already owned by the optionee, generally no gain or loss will be recognized with
respect to the shares used for payment and the additional shares received will
be taxed as described herein. However, if payment of the purchase price upon
exercise of an Incentive Stock Option is made with shares acquired upon exercise
of an Incentive Stock Option before the shares used for payment have been held
for the two-year or one-year period described herein, use of such shares as
payment will be treated as a disqualifying disposition of the shares used for
payment subject to the rules described herein.
If, on exercise of an Option, the Compensation Committee elects to pay
the appreciation value in cash or stock in lieu of delivering shares pursuant to
such exercise, the optionee would also recognize ordinary income equal to the
amount of cash and/or the fair market value of the shares paid to such optionee
as the appreciation value.
No taxable income is recognized upon receipt of a SAR or an LSAR. If a
SAR or an LSAR is exercised and cash is received, the employee will recognize
ordinary income equal to the cash received. However, when an employee receives
shares upon exercise of a SAR, the employee will recognize ordinary income equal
to the fair market value of the shares on the date such shares are received.
When the shares are sold, the employee will recognize capital gain or loss equal
to the difference between (i) the selling price of the shares and (ii) the
amount included in the employee's income when the SAR was exercised. Depending
upon the length of time the employee held the shares after the date the shares
were issued to him, the gain or loss will be long-term or short-term.
An employee receiving a Restricted Stock Award will not have taxable
income upon receipt of the restricted stock but will generally recognize
ordinary income when the shares are no longer subject to forfeiture upon
termination of employment, except that the employee may elect under Section
83(b) of the Code within 30 days after grant to recognize ordinary income for
federal income tax purposes at the time the Award is received. In the event a
Section 83(b) election is made, however, no deduction will be allowed if the
shares are later forfeited upon termination of employment. The amount of such
ordinary income will be the fair market value of the shares at the time the
income is recognized.
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An employee receiving a Restricted Unit Award should not have taxable
income when the units or the Dividend Equivalents are credited to his account.
Instead, the employee generally would recognize ordinary income equal to the
fair market value of the shares on the payment date, or the amount of cash if
the Compensation Committee elects a cash payment, including the value of the
Dividend Equivalents credited to the employee's account when the shares and/or
cash are delivered or paid in accordance with the terms of the award agreement.
Any gain or loss recognized upon the sale of shares acquired pursuant
to an Award will generally be treated as capital gain or loss and will be
long-term or short-term depending upon the holding period of the shares. Under
current law, any gain realized by an employee other than long-term capital gain
is taxable at a maximum federal income tax rate of 39.6%. Long-term capital gain
is taxable at a maximum federal income tax rate of 28%.
The Company will be entitled to a tax deduction in connection with an
Option, Award or SAR under the Plan only in an amount equal to the ordinary
income realized by the optionee and at the time such optionee recognizes such
income, provided that applicable tax withholding requirements are met.
Vote Required
Approval of the amendment to the Plan will require the affirmative vote
of the holders of a majority of the votes cast by holders of the outstanding
shares of the Company's Common Stock present in person or represented by proxy
at the Annual Meeting and entitled to vote. Abstentions are not considered
votes cast at the meeting and are not counted in determining the number of votes
necessary for a majority. An abstention will therefore have no practical effect
on the voting on this proposal. Broker non-votes are not considered shares
present in person or represented by proxy and entitled to vote on the proposal
and will have no effect on the vote. The Board of Directors recommends a vote
FOR the approval of the amendment to the Plan.
AMENDMENT TO THE 1995 EQUITY INCENTIVE PLAN
FOR OUTSIDE DIRECTORS
The Board of Directors determined to amend the Company's 1995 Equity
Incentive Plan for Outside Directors, as amended (the "Director Plan"), on March
21, 1997, subject to shareholder approval at the Annual Meeting, to modify the
description of the persons eligible to participate in the Director Plan. If the
amendment is approved by the shareholders at the Annual Meeting, the persons
eligible to participate in the Director Plan will be persons who serve as a
member of the Board of Directors of the Company or any of its subsidiaries and
who are not employees of the Company or any subsidiary of the Company. Prior to
this amendment, only outside directors of the Company and the Surety Company
were eligible to participate. The Company has added an additional wholly owned,
operating subsidiary, HMS Dreadnought, Inc., for which one additional person has
been appointed as an outside director. If the amendment is approved, this
additional director will be added as an outside director under the Director
Plan.
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The purpose of the Director Plan is to assist the Company and its
subsidiaries in attracting and retaining highly qualified outside directors, to
compensate them for their services to the Company or any such subsidiary and,
in so doing, to strengthen the alignment of the interests of the outside
directors with the interests of the shareholders by ensuring ongoing ownership
of the Company's Common Stock. Under the Director Plan, as proposed to be
amended, an outside director is a director of the Company or any of its
subsidiaries who is not an employee of the Company or of any of its affiliates.
The Director Plan provides for an annual grant of a non-qualified stock
option to purchase 2,000 shares of the Company's Common Stock on the first
business day after the conclusion of the Company's annual meeting of
shareholders. A person who is elected or appointed an outside director after the
first business day after the conclusion of the Company's annual meeting of
shareholders but on or before December 31 of such year will, on the business day
following such director's election or appointment, be granted an option to
purchase 2,000 shares of Common Stock under the Director Plan. Grants of options
are made automatically, and no action by the Board of Directors will be
required. The total number of shares of the Company's Common Stock that may be
the subject of grants under the Director Plan may not exceed 50,000 shares in
the aggregate.
The total number of shares subject to options granted to the four
outside directors in 1996 was 8,000 shares. In 1997, a total of 10,000 shares,
or 2,000 shares each, will be allocated to the five outside directors, including
the 2,000 shares to be allocated to the outside director of HMS Dreadnought,
Inc. if the amendment is approved by the shareholders of the Company.
The closing price per share of the Company's Common Stock on March 21,
1997, as reported on the Nasdaq National Market was $8.50.
If an option expires or is cancelled for any reason without having been
fully exercised or vested, the number of shares subject to such option that had
not been purchased or become vested may again be made subject to an option under
the Director Plan. Appropriate adjustments in outstanding options and in the
number or kind of shares subject to the Director Plan are provided for in the
event of a stock split, stock dividend, share combination, spin-off and certain
other types of corporate transactions involving the Company, including mergers,
consolidations, reorganizations and recapitalizations.
The Director Plan is administered by the Board of Directors. The Board
has the power to interpret and to adopt rules for the administration,
interpretation and application of the Director Plan. The Board does not have any
discretion to determine who will be granted options under the Director Plan, to
determine the number of options to be granted to each outside director or to
determine the timing of such grants.
The Director Plan can be amended, modified, suspended or terminated by
the Board of Directors of the Company, subject to any required shareholder
approval or any shareholder
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approval that the Board of Directors may deem advisable for any reason, such as
for the purpose of obtaining or retaining any statutory or regulatory benefits
under tax, securities or other laws or satisfying any applicable stock exchange
listing requirements. Neither the amendment, suspension or termination of the
Director Plan shall, without the consent of the outside director, alter or
impair any rights or obligations under any option theretofore granted under the
Director Plan.
The exercise price of each option granted under the Director Plan is
100% of the fair market value of a share of the Company's Common Stock on the
date that the option is granted.
No option granted under the Director Plan may be exercised during the
first six months after its grant; thereafter, options will become exercisable in
whole or in part at any time or from time to time until it expires. No option
that is not exercisable at the time an optionee ceases to be an outside director
of the Company may thereafter become exercisable. In general, no option may be
exercised after ten years from the date of grant.
Upon the occurrence of a change in control of the Company, all
outstanding options will become immediately exercisable. A "change of control"
shall occur if: (i) any person or group (other than any person as of the date of
adoption of the Director Plan by the Board of Directors known by the Company to
be the beneficial owner of securities representing 10% or more of the combined
voting power of the Company's outstanding securities) acquires beneficial
ownership of securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities or (ii) more than 50%
of the assets of the Company are disposed of by the Company pursuant to a
partial or complete liquidation of the Company, a sale of assets of the Company
or otherwise.
An outstanding option that has become exercisable generally terminates
one year after an optionee ceases to be an outside director. No option may be
assigned or transferred, except by will or by the applicable laws of descent and
distribution. During the lifetime of the optionee, an option may be exercised
only by the optionee. The option price must be paid in full in cash at the time
of exercise; provided, however, at the discretion of the Board of Directors,
payment may be made in whole or in part in shares of the Company's Common Stock
valued at their fair market value, as determined by the Board of Directors.
Federal Income Tax Consequences
The Director Plan is not qualified under Section 401(a) of the Code.
The following description, which is based on existing laws, sets forth generally
certain of the federal income tax consequences of options granted under the
Director Plan. This description may differ from the actual tax consequences of
participation in the Director Plan.
An optionee will not recognize income for federal income tax purposes
upon the receipt of the option, nor will the Company be entitled to any
deduction on account of such grant. Such optionee will recognize ordinary
taxable income for federal income tax purposes at the time of
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<PAGE>
exercise in the amount by which the fair market value of such shares then
exceeds the option price. When the optionee disposes of the shares acquired upon
exercise of the option, the optionee will generally recognize capital gain or
loss equal to the difference between (i) the amount received upon disposition of
the shares and (ii) the sum of the option price and the amount included in the
optionee's income when the option was exercised. Such gain will be long term or
short term depending upon whether the shares were held for more or less than one
year after the date of exercise. If the purchase price upon exercise of an
option is paid with shares already owned by the optionee, generally no gain or
loss will be recognized with respect to the shares used for payment and the
additional shares received will be taxed as described herein.
Under current law, any gain realized by a director other than long-term
capital gain is taxable at a maximum federal income tax rate of 39.6%. Long-term
capital gain is taxable at a maximum federal income tax rate of 28%.
The Company will be entitled to a tax deduction in connection with the
exercise of an option under the Director Plan only in an amount equal to the
ordinary income realized by the optionee and at the time such optionee
recognizes such income, provided that applicable tax withholding requirements
are met.
Vote Required
Approval of the amendment to the Director Plan will require the
affirmative vote of the holders of a majority of the votes cast by holders of
the outstanding shares of the Company's Common Stock present in person or
represented by proxy at the Annual Meeting and entitled to vote. Abstentions are
not considered shares of stock present in person or represented by proxy at the
meeting and entitled to vote and are not counted in determining the number of
votes necessary for a majority. An abstention will therefore have no practical
effect on the voting on this proposal. Broker non-votes are not considered
shares present in person or represented by proxy and entitled to vote on the
Director Plan and will have no effect on the vote. The Board of Directors
recommends that the shareholders vote FOR the approval of the amendment to the
Director Plan.
ANNUAL REPORT
A copy of the Company's Annual Report for 1996 is being mailed to the
Company's shareholders with this Proxy Statement.
SHAREHOLDER PROPOSALS
Any shareholder who, in accordance with and subject to the provisions
of the proxy rules of the SEC, wishes to submit a proposal for inclusion in the
Company's proxy statement for its 1998 Annual Meeting of Shareholders must
deliver such proposal in writing to the Company's
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Secretary at the Company's principal executive offices at 33 Rock Hill Road,
Bala Cynwyd, Pennsylvania 19004, not later than December 17, 1997.
OTHER PROPOSALS
The Board of Directors does not know of any matters to be presented for
consideration other than the matters described in the Notice of Annual Meeting,
but if any matters are properly presented, it is the intention of the persons
named in the accompanying proxy to vote on such matters in accordance with their
judgment.
By Order of the Board of Directors,
Kenneth L. Brier,
President and Chief Executive Officer
April 16, 1997
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PROXY
MOUNTBATTEN, INC.
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 14, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints each of Kenneth L.
Brier and Ted A. Drauschak, proxies of the undersigned, with full power of
substitution, to vote all of the shares of Common Stock of Mountbatten, Inc.
(the "Company") which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at the offices of the Company,
33 Rock Hill Road, Bala Cynwyd, Pennsylvania 19004, on Wednesday, May 14, 1997
at 10:00 a.m., and at any adjournment, postponement or continuation thereof, as
follows:
1. ELECTION OF DIRECTORS
(______) FOR all the nominees listed below
(______) WITHHOLD AUTHORITY to vote for the nominees listed
below:
INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.
Kenneth L. Brier Ted A. Drauschak
J. Michael Adams Thomas P. Garry
2. PROPOSAL TO ELECT PRICE WATERHOUSE LLP as the independent public
accountants for the Company for 1997. The Board of Directors recommends
a vote FOR this proposal.
(____) FOR (____) AGAINST (____) ABSTAIN
3. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 EQUITY INCENTIVE
PLAN FOR KEY EMPLOYEES. The Board of Directors recommends a vote FOR
this proposal.
(____) FOR (____) AGAINST (____) ABSTAIN
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1995 EQUITY INCENTIVE
PLAN FOR OUTSIDE DIRECTORS. The Board of Directors recommends a vote
FOR this proposal.
(____) FOR (____) AGAINST (____) ABSTAIN
5 In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and any adjournment,
postponement or continuation thereof.
<PAGE>
This proxy will be voted as specified. If a choice is not specified,
the proxy will be voted FOR the nominees for Director and FOR Proposals
2, 3 and 4.
This proxy should be dated, signed by
the shareholder exactly as his name
appears below and returned promptly to
the Company in the enclosed envelope.
For joint accounts, each joint owner
should sign. Persons signing in a
fiduciary capacity should so indicate.
_________________________________(SEAL)
_________________________________(SEAL)
Date: __________________, 1997
<PAGE>
The following materials are being provided to the Commission and
are not included with the proxy materials being distributed to shareholders.
MOUNTBATTEN, INC.
1995 EQUITY INCENTIVE PLAN
FOR OUTSIDE DIRECTORS
MOUNTBATTEN, INC., a corporation organized under the laws of the
Commonwealth of Pennsylvania, hereby sets forth the 1995 Equity Incentive Plan
for Outside Directors. The Plan provides for the grant of nonqualified stock
options to Outside Directors. The Plan shall become effective upon the approval
of the Plan by shareholders of the Company in accordance with Section 5(d).
1. Definitions. Whenever the following terms are used in the Plan they
shall have the meanings specified below unless the context clearly indicates to
the contrary:
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean a change in the power to direct or cause
the direction of the management and policies of the Company arising from (1) any
"person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d) of
the Exchange Act), becoming the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities, other than a person or group who, as of the date of the
adoption of this Plan by the Board of Directors of the Company, is known by the
Company to be the beneficial owner, directly or indirectly, of securities of the
Company representing 10% or more of the combined voting power of the Company's
outstanding securities, or (2) more than 50% of the assets of the Company being
disposed of by the Company pursuant to a partial or complete liquidation of the
Company, a sale of assets (including stock of a subsidiary or subsidiaries) of
the Company or otherwise.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder and any comparable provision of any
future legislation amending, supplementing or superseding such section.
"Common Stock" shall mean the Common Stock, $.001 par value, of the
Company.
"Company" shall mean Mountbatten, Inc., a Pennsylvania corporation.
"Director" shall mean a member of the Board or a member of the Board of
Directors of any Subsidiary of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
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"Fair Market Value" shall mean the last sales price of the Company's
Common Stock quoted in the automated quotation system of the National
Association of Securities Dealers, Inc. ("Nasdaq") for the date in question, as
published in The Wall Street Journal. If no such sale prices are quoted by
Nasdaq for such date, the next preceding date for which such sale prices are
quoted shall be used.
"Option" shall mean an option granted under the provisions of Section 4
of the Plan to purchase Common Stock of the Company.
"Optionee" shall mean an Outside Director to whom an Option is granted.
"Outside Director" shall mean a Director who, at the time he becomes a
Director, is not also an employee of the Company or any Subsidiary of the
Company or any affiliate of the Company or any Subsidiary of the Company.
"Plan" shall mean this 1995 Equity Incentive Plan for Outside
Directors.
"Secretary" shall mean the Corporate Secretary or an Assistant
Secretary of the Company.
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
"Surety Company" shall mean The Mountbatten Surety Company, Inc., a
Pennsylvania insurance company.
"Termination of Service" shall mean a cessation of an Outside
Director's service as a member of the Board or the Board of Directors of any
Subsidiary of the Company, whether as a result of resignation, failure to be
reelected, removal for cause, death or any other reason.
"Total Disability" shall mean a permanent and total disability as
determined in accordance with Section 72(m)(7) of the Code.
2. Administration.
(a) Administration by the Board. The Plan shall be administered by the
Board.
(b) Duty and Power of Board Under the Plan. It shall be the duty of the
Board to conduct the general administration of the Plan in accordance with its
provisions. The Board shall have the power to interpret the Plan and the Options
and
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to adopt rules for the administration, interpretation and application of the
Plan as are consistent therewith and to interpret, amend or revoke any such
rules. The Board shall not have any discretion to determine who will be granted
Options or to deter mine the number of Options to be granted to any Outside
Director, the timing of such grant or the exercise price of any Option.
(c) Board Actions. The Board may act either by vote of a majority of
its members present at a meeting of the Board at which a quorum is present or by
a memorandum or other written instrument signed by all members of the Board.
(d) Compensation; Professional Assistance; Good Faith Actions. Members
of the Board shall not receive any compensation for their services in
administering the Plan, but all expenses and liabilities they incur in
connection with the administration of the Plan shall be borne by the Company.
The Board may employ attorneys, consultants, accountants or other persons. The
Board, the Company and the officers and directors of the Company shall be
entitled to rely upon the advice, opinions or valuations of any such persons.
All actions taken and all interpretations and determinations made by the Board
in good faith shall be final and binding upon all Optionees, the Company and all
other interested persons. No member of the Board shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan, and all members of the Board shall be fully protected and indemnified
by the Company in respect to any such action, determination or interpretation.
3. Shares Subject to the Plan.
(a) Limitations. The shares of stock issuable pursuant to Options shall
be shares of the Company's Common Stock. The total number of such shares that
may be subject to Options granted under the Plan shall not exceed 50,000 in the
aggregate.
(b) Effect of Unexercised or Cancelled Options. If an Option expires or
is cancelled for any reason without having been fully exercised or vested, the
number of shares subject to such Option which were not purchased or did not vest
prior to such expiration or cancellation may again be made subject to an Option
granted hereunder.
(c) Changes in the Company's Shares. In the event that the outstanding
shares of Common Stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, stock dividend (either in shares of the Company's Common Stock or of
another class of the Company's stock), spin-off or combination of shares,
appropriate adjustments shall be made by the Board in the aggregate number and
kind of shares that may be issued on exercise of Options.
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4. Stock Options.
(a) Granting of Options.
(i) Eligibility. Each Outside Director shall be eligible to be
granted Options.
(ii) Granting of Options. Each Outside Director on the first
business day following the election of directors at each annual meeting of
shareholders of the Company shall, on such date, be granted an Option for the
purchase of 2,000 shares of Common Stock. Each person appointed or elected an
Outside Director after the first business day following the election of
directors at each annual meeting of shareholders of the Company but on or before
December 31 of such year shall, on the business day following the date of
appointment or election to the Board or to the Board of Directors of any
Subsidiary of the Company, as the case may be, be granted an Option for the
purchase of 2,000 shares of Common Stock.
(iii) Form of Option. All Options granted under this Plan
shall be non-statutory options not intended to qualify under Section 422 of the
Code.
(b) Terms of Options.
(i) Option Agreement. Each Option shall be evidenced by a
written stock option agreement that shall be executed by the Optionee and the
Company and that shall contain such terms and conditions as the Board determines
are required by the Plan.
(ii) Option Price. The exercise price of the shares subject to
each Option shall be 100% of the Fair Market Value for such shares on the date
the Option is granted.
(iii) Date of Grant. The date on which an Option shall be
granted shall be the date determined under Section 4(a)(ii).
(iv) Commencement of Exercisability. Except as otherwise
provided in Section 4(b)(vii), no Option may be exercised in whole or in part
during the first six months after such Option has been granted and, thereafter,
the Option shall be exercisable in full or in part at any time or from time to
time until it expires as provided in Section 4(b)(v).
(v) Expiration of Options.
(A) Each Option shall terminate on the expiration of
ten years from the date the Option was granted.
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(B) Each Option, or portion thereof, which has become
exercisable may be exercised until the earlier to occur of: (1) the expiration
of such Option pursuant to Section 4(b)(v)(A), or (2) the expiration of one year
from the date of the Optionee's Termination of Service, except that, in the
event of an Optionee's removal for cause, all Options shall terminate
immediately upon such Optionee's Termination of Service.
(vi) Adjustment in Outstanding Options. In the event that the
outstanding shares of the Common Stock of the Company are increased or
decreased or changed into or exchanged for a different number or kind of shares
of the Company, or other securities of the Company, or of another corporation,
by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend (either in shares of the
Company's Common Stock or of another class of the Company's stock), spin-off or
combination of shares, the Board shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
or portions thereof then unexercised, shall be exercisable, to the end that
after such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share. Any such
adjustment made by the Board shall be final and binding upon all Optionees, the
Company and all other interested persons.
(vii) Change in Control. In the event of a Change in Control
each outstanding Option shall become immediately exercisable, regardless of
whether the Option had otherwise become exercisable pursuant to Section
4(b)(iv).
(c) Exercise of Options.
(i) Person Eligible to Exercise. During the lifetime of the
Optionee, only he or she may exercise an Option granted to him or her or any
portion thereof. After the death of the Optionee, any exercisable portion of an
Option may be exercised by his or her personal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution. The Company may require appropriate
proof from any such other person of his or her right or power to exercise the
Option or any portion thereof.
(ii) Fractional Shares. The Company shall not be required to
issue fractional shares on exercise of an Option.
(iii) Manner of Exercise. An exercisable Option, or any
exercisable portion thereof, may be exercised solely by delivery to the
Secretary or his or her office of all of the following:
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(A) Notice in writing signed by the Optionee or other
person then entitled to exercise such Option or portion thereof, stating that
such Option or portion is exercised, such notice complying with all applicable
rules established by the Board;
(B) Full cash payment for the shares with respect to
which such Option or portion is thereby exercised and which are to be delivered
to him or her pursuant to such exercise; provided, at the discretion of the
Board, payment may be made in whole or in part in shares of Common Stock of the
Company, which Common Stock will be valued at its then Fair Market Value, or in
whole or in part pursuant to such other arrangement, including a simultaneous
exercise and sale arrangement, as the Board, in its absolute discretion,
determines; and
(C) Such representations and documents as the Board, in
its absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act of 1933, as amended, and any
other federal or state securities laws or regulations. The Board may, in its
absolute discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer orders to transfer agents and
registrars.
(iv) Conditions to Issuance of Stock Certificates. The shares of
Common Stock deliverable upon exercise of an Option, or any part thereof, may be
either previously authorized but unissued shares or issued shares which have
then been reacquired by the Company. In addition to the satisfaction of the
other applicable provisions of the Plan, the Company shall not be required to
issue or deliver any certificate or certificates for shares of Common Stock
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(A) The admission of such shares to listing on all
stock exchanges or automated quotation systems of a national securities
association on which such class of stock is then listed;
(B) The completion of any registration or other
qualification of such shares under any state or federal law or under the rulings
or regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Company shall, in its absolute
discretion, deem necessary or advisable;
(C) The obtaining of any approval or other clearance
from any state or federal governmental agency which the Company shall, in its
absolute discretion, determine to be necessary or advisable;
(D) The provision for any income tax withholding which
the Company shall, in its absolute discretion, determine to be necessary or
advisable; and
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(E) The lapse of such reasonable period of time
following the exercise of the Option as the Company may determine, in its
absolute discretion, from time to time to be necessary or advisable for reasons
of administrative convenience.
(v) Rights as Shareholders. An Optionee shall not be, nor have
any of the rights of, a shareholder of the Company in respect to any shares that
may be purchased upon the exercise of any Option or portion thereof unless and
until certificates representing such shares have been issued by the Company to
such Optionee.
5. Miscellaneous Provisions.
(a) No Assignment or Transfer. No Option or interest or right therein
or part thereof, shall be liable for the debts, contracts, or engagements of the
Optionee or his or her successors in interest nor shall they be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means, whether such disposition is voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided,
however, that nothing in this Section 5(a) shall prevent transfers by will or by
the applicable laws of descent and distribution.
(b) Amendment, Suspension or Termination of the Plan. The Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any time or from time to time by the Board, subject to any required shareholder
approval or any shareholder approval that the Board may deem advisable for any
reason, such as for the purpose of obtaining or retaining any statutory or
regulatory benefits under tax, securities or other laws or satisfying any
applicable stock exchange listing requirements. Neither the amendment,
suspension nor termination of the Plan shall, without the consent of the
Optionee, alter or impair any rights or obligations under any outstanding
Option. No Option may be granted during any period of suspension nor after
termination of the Plan.
(c) Compliance with Rule 16b-3. To the extent that Rule 16b-3 under the
Exchange Act applies to Options granted under the Plan, it is the intent of the
Company that the Plan comply in all respects with the requirements of Rule
16b-3, that any ambiguities or inconsistencies in construction of the Plan be
interpreted to give effect to such intention and that if the Plan shall not so
comply, whether on the date of adoption or by reason of any later amendment to
or interpretation of Rule 16b-3, the provisions of the Plan shall be deemed to
be automatically amended so as to bring them into full compliance with such
rule.
(d) Shareholder Approval. Notwithstanding anything to the contrary set
forth herein, no Option may be exercised until the Plan shall have been approved
by the affirmative vote of the holders of a majority of the shares of the
Company's
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outstanding Common Stock present or represented by proxy and entitled to vote at
a duly convened meeting of shareholders of the Company.
(e) Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.
As amended by the Board of Directors on March 21, 1997.
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MOUNTBATTEN, INC.
1995 EQUITY INCENTIVE PLAN
FOR KEY EMPLOYEES
MOUNTBATTEN, INC., a corporation organized under the laws of the
Commonwealth of Pennsylvania, hereby sets forth the 1995 Equity Incentive Plan
for Key Employees. The Plan permits the grant of stock options, stock
appreciation rights, limited stock appreciation rights, restricted stock and
restricted unit awards. The Committee of the Board of Directors that administers
the Plan may select and grant to key employees of the Company and its
Affiliates, the type of option, stock appreciation right or award which the
Company determines to be most effective in advancing the interests of the
Company through the motivation and retention of those key employees upon whose
judgment, initiative and continued efforts the Company is largely dependent for
the successful conduct of its business.
1. DEFINITIONS
Whenever the following terms are used in the Plan they shall have the
meaning specified below unless the context clearly indicates to the contrary.
"Affiliate" shall mean any corporation in which the Company owns,
directly or indirectly, 25% or more of the voting stock.
"Award" shall mean an award of restricted stock or restricted units
granted under the provisions of Section 5 of the Plan.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean a change in the power to direct or cause
the direction of the management and policies of the Company arising from (1) any
"person" or "group" (as such terms are used in Sections 13(d)(3) and 14(d) of
the Exchange Act), becoming the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities, other than a person or group who, as of the date of the
adoption of this Plan by the Board of Directors of the Company, is known by the
Company to be the beneficial owner, directly or indirectly, of securities of the
Company representing 10% or more of the combined voting power of the Company's
outstanding securities, or (2) more than 50% of the assets of the Company being
disposed of by the Company pursuant to a partial or complete liquidation of the
Company, a sale of assets (including stock of a subsidiary or subsidiaries) of
the Company or otherwise.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder and any comparable provision of any
future legislation amending, supplementing or superseding such section.
"Committee" shall mean the committee appointed by the Board (pursuant
to Section 2(a) of the Plan) to administer the Plan.
"Company" shall mean Mountbatten, Inc., a Pennsylvania corporation.
"Director" shall mean a member of the Board.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Employee" shall mean any salaried, full-time employee of the Company,
or of any corporation which is then an Affiliate, whether such employee is so
employed at the time the Plan is adopted or becomes so employed subsequent to
the adoption of the Plan.
"Exercise Price" shall mean: (i) in the case of an Option, the Fair
Market Value per Share upon the date of grant; and (ii) in the case of a Right,
the Fair Market Value per Share upon the date of grant.
"Fair Market Value" shall be the last sales price of Shares quoted by
the automated quotation system of the National Association of Securities
Dealers, Inc. ("Nasdaq") for the date in question, as published in The Wall
Street Journal. If no sale prices are quoted with respect to the Shares by
Nasdaq for such date, the next preceding date for which such sale prices are
quoted shall be used.
"Grantee" shall mean an Employee to whom an Award is granted.
"Incentive Stock Option" shall mean an Option designated as such by the
Committee which meets the requirements of Section 422 of the Code.
"LSAR" shall mean a limited stock appreciation right awarded under the
provisions of Section 7 hereof.
"Option" shall mean an option to purchase Shares granted under the
provisions of Section 4 of the Plan and, where applicable, shall include an
Incentive Stock Option.
"Optionee" shall mean an Employee to whom an Option or Right is
granted.
"Plan" shall mean this 1995 Equity Incentive Plan for Key Employees, as
amended.
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"Related" shall mean: (i) in the case of a Right, a Right which is
granted in connection with, and to the extent exercisable, in whole or in part,
in lieu of, an Option or another Right; and (ii) in the case of an Option, an
Option with respect to which and to the extent a Right exercisable, in whole or
in part, in lieu thereof, has been granted.
"Restricted Stock Award" shall mean an award of restricted Shares
granted under the provisions of Section 5(d) of the Plan.
"Restricted Unit Award" shall mean an Award of restricted units granted
under the provisions of Section 5(e) of the Plan.
"Retirement" shall mean a Termination of Employment by reason of the
Employee's retirement at or after the Employee's earliest permissible retirement
date pursuant to and in accordance with his or her employer's regular retirement
plan or practice.
"Right" shall mean any Stock Appreciation Right or LSAR granted under
the Plan.
"Secretary" shall mean the Corporate Secretary or an Assistant
Secretary of the Company.
"Shares" shall mean shares of the Company's Common Stock, $.001 par
value per share.
"Stock Appreciation Right" shall mean a Right granted under the
provisions of Section 6 of the Plan.
"Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company if each of the corporations other than
the last corporation in the unbroken chain then owns stock possessing 50% or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
"Termination of Employment" shall mean a cessation of the
employee-employer relationship between an Employee and the Company or an
Affiliate for any reason, including, but not by way of limitation, a termination
by resignation, discharge, death, Total Disability or Retirement or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous reemployment by the Company or an Affiliate.
"Total Disability" shall mean permanent and total disability as
determined in accordance with Section 72(m)(7) of the Code.
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2. ADMINISTRATION
(a) Appointment of Committee. The Committee shall consist of at least
two Directors, appointed by and holding office at the pleasure of the Board. No
Options, Rights or Awards may be granted to any member of the Committee during
the term of such Director's membership on the Committee. A Director shall be
eligible to serve on the Committee only if such Director is a "non-employee
director" as that term is defined under Rule 16b-3 under the Exchange Act and an
"outside director" as that term is defined under Section 162(m) of the Code and
the rules, regulations and interpretations thereunder. The duties and
responsibilities of the Committee may be assigned by the Board to a standing
committee of the Board; provided, however, that all of the members of such
standing committee must satisfy all of the eligibility requirements set forth
above for membership on the Committee.
(b) Duty and Power of Committee. It shall be the duty of the Committee
to conduct the general administration of the Plan in accordance with its
provisions. The Committee shall have the power to determine which Employees are
key Employees and to interpret the Plan, the Options, the Rights and the
Awards, and to adopt rules for the administration, interpretation and
application of the Plan as are consis tent therewith and to interpret, amend or
revoke any such rules.
(c) Matters Relating to Termination of Employment. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from Retirement or
Total Disability, and all questions of whether particular leaves of absence
constitute Terminations of Employment.
(d) Transfer Restrictions. The Committee, in its absolute discretion,
may impose such restrictions on the transferability of the Shares issued upon
the exercise of an Option or issued as an Award as it deems appropriate, and any
such restrictions shall be set forth in the respective Option or Award agreement
and may be referred to on the certificates evidencing such Shares.
(e) Committee Actions. The Committee may act either by vote of a
majority of its members at a meeting or by a memorandum or other written
instrument signed by all members of the Committee.
(f) Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee may receive reasonable compensation for their services as
members, and all expenses and liabilities they incur in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants, or
other persons. The Committee, the Company and officers and directors of the
Company shall be entitled to rely upon the advice, opinions or valuations of any
such persons. All
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actions taken and all interpretations and determinations made by the Committee
in good faith shall be final and binding upon all Optionees, Grantees, the
Company and all other interested persons. No member of the Committee shall be
personally liable for any action, determination, or interpretation made in good
faith with respect to the Plan, the Options, the Rights or the Awards, and all
members of the Committee shall be fully protected by the Company in respect to
any such action, determination or interpretation.
3. SHARES SUBJECT TO THE PLAN
(a) Limitations. The total number of Shares that may be subject to
Options, Rights and Awards granted under the Plan shall not exceed 500,000 in
the aggregate. Moreover, no key Employee shall be granted Options, Rights or
Awards with respect to a number of Shares, determined on a cumulative basis,
that exceeds 90% of the aggregate number of Shares that are available to be
issued under the Plan pursuant to this Section 3(a).
(b) Effect of Unexercised or Cancelled Options or Stock Appreciation
Rights, Unvested Restricted Stock or Unit Awards. If an Option, Right or Award
expires or is cancelled for any reason without having been fully exercised or
vested, the number of Shares or units subject to such Option, Right or Award
that were not purchased or did not vest prior to such expiration or cancellation
may again be made subject to an Option, a Right or an Award granted hereunder
(to the same Optionee or Grantee or to a different Optionee or Grantee),
provided that a surrender of all or part of an Option in connection with the
exercise of a Right shall not be considered a termination and the Shares covered
by such Option or the surrendered portion may not be reallocated by the
Committee.
(c) Changes in Company's Shares. In the event that the outstanding
Shares are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company, or of
another corporation by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend, spin-off or
combination of shares, appropriate adjustments shall be made by the Committee in
the aggregate number and kind of shares and units that may be issued on exercise
of Options or Rights or granted as Awards.
4. STOCK OPTIONS AND RIGHTS
(a) Granting of Options and Rights.
(1) Eligibility. Any key Employee of the Company or of any
corporation which is then an Affiliate shall be eligible to be granted Options
and/or Rights.
(2) Granting of Options and/or Rights.
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(A) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among the eligible key Employees to
whom Options or Rights should be granted and determine the
number of Shares to be subject to such Options or Rights.
(ii) Determine the terms and conditions of such
Options or Rights, consistent with the Plan.
(iii) Determine whether such Options are to be
Incentive Stock Options or not, provided any Incentive Stock
Option must meet all the applicable requirements of Section 422
of the Code.
(B) Upon the selection of a key Employee to be granted an
Option or Right, the Committee shall authorize the Company to grant
such Option or Right and may impose such conditions on the grant of
such Option or Right, as it deems appropriate.
(b) Terms of Options or Rights.
(1) Option Agreement; Rights Agreement. Each Option and/or Right
shall be evidenced by a written agreement which shall be executed by the
Optionee and the Company and which shall contain the terms and conditions
determined by the Committee. Notwithstanding anything to the contrary in the
Plan, agreements evidencing Incentive Stock Options shall contain such terms and
conditions, among others, as may be necessary in the opinion of the Committee to
qualify them as Incentive Stock Options under Section 422 of the Code.
(2) Exercise Price. The Exercise Price of the Shares subject to
each Option or Right shall be set by the Committee; provided, however, that the
price shall not be less than 100% of the Fair Market Value for such Shares on
the date the Option and/or Right is granted as determined by the Committee. The
Exercise Price shall be subject to adjustment only as provided in Section
4(b)(7) of the Plan.
(3) Date of Grant. The date on which an Option or Right shall be
granted shall be the date of the Committee's authorization of such grant or such
later date as may be determined by the Committee at the time such grant is
authorized.
(4) Commencement of Exercisability.
(A) Except as may be otherwise provided in the agreement
evidencing an Option and/or Right or as may be otherwise determined by
the Committee, no Option or Right may be exercised in whole or in part
during the first six months after such Option or Right is granted.
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(B) Subject to the provisions of Section 4(b)(4)(A) and
(C), Options or Rights shall become exercisable at such times and in
such installments (which may be cumulative) as the Committee shall
provide in the terms of each individual Option or Right; provided,
however, that in the agreement evidencing an Option or Right or after
an Option or Right is granted, the Committee may, on such terms and
conditions as it may determine to be appropriate and notwithstanding
the provisions of Section 4(b)(4)(A) and (C), accelerate the time at
which such Option or Right or any portion thereof may be exercised.
(C) No portion of an Option or Right which is
unexercisable (except an Incentive Stock Option which is unexercisable
solely by virtue of the sequential exercise restriction contained in
Section 4(b)(9)(C)) at the time of the Optionee's Termination of
Employment shall thereafter become exercisable; provided, however, that
this does not limit the discretion of the Committee to provide in the
terms of an Option or Right that there will be an acceleration of
exercisability upon the occurrence of certain types of Terminations of
Employment.
(5) Replacement Options and Rights. The Committee, in its
absolute discretion, may grant to holders of outstanding Options or Right, in
exchange for the surrender and cancellation of such Options or Rights, new
Options or Rights having Exercise Prices lower (or higher) than the Exercise
Price provided in the Options or Rights so surrendered and cancelled and
containing such other terms and conditions as the Committee may deem
appropriate.
(6) Expiration of Options and Rights.
(A) Except as otherwise provided in Section 4(b)(6)(B),
each Option or Right shall terminate on the expiration of ten years
from the date the Option or Right was granted. Notwithstanding the
foregoing or any other provision of the Plan, no Incentive Stock Option
may be exercised after the expiration of ten years from the date the
Option was granted.
(B) Each Option or Right or portion thereof which has
become exercisable may be exercised until the first to occur of the
following events:
(i) The expiration of three months from the date of
the Optionee's Termination of Employment unless such
Termination of Employment results from the Optionee's death,
Total Disability or Retirement, and except as provided in (iv)
below; or
(ii) The expiration of one year from the date of the
Optionee's Termination of Employment by reason of Total
Disability; or
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(iii) The expiration of one year from the date of the
Optionee's Retirement; provided no Incentive Stock Option may be
exercised after the expiration of three months from the date of
the Optionee's Retirement, and except as provided in (iv) below;
or
(iv) The expiration of one year from the date of the
Optionee's death, if such death occurs while the Optionee is in
the employ of the Company or an Affiliate or within the
three-month or one-year period referred to in (i), (ii) or (iii)
above, whichever is applicable.
(C) Subject to the provisions of subparagraphs (A) and (B)
of this Section 4(b)(6), the Committee shall provide, in the terms of
each individual Option or Right, when such Option or Right expires and
becomes unexercisable.
(7) Adjustments in Outstanding Options or Rights. In the event
that the outstanding Shares subject to Options or Rights are increased or
decreased or changed into or exchanged for a different number or kind of shares
of the Company, or other securities of the Company, or of another corporation,
by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend, spin-off or combination of
shares, the Committee shall make an appropriate and equitable adjustment in the
number and kind of shares as to which all outstand ing Options or Rights, or
portions thereof then unexercised, shall be exercisable, to the end that after
such event the Optionee's proportionate interest shall be maintained as before
the occurrence of such event. Such adjustment in an outstanding Option or Right
shall be made without change in the total Exercise Price applicable to the
Option or Right or the unexercised portion of the Option or Right (except for
any change in the aggregate price resulting from rounding-off of share
quantities or prices) and with any necessary corresponding adjustment in option
price per share and provided that any such adjustment in respect to an Incentive
Stock Option shall be made in such manner as not to constitute a "modification"
as defined in Section 425 of the Code. Any such adjustment made by the Committee
shall be final and binding upon all Optionees, the Company and all other
interested persons.
(8) Change of Control. In its absolute discretion and on such
terms and conditions as it deems appropriate, and notwithstanding the provisions
of Section 4(b)(4), the Committee may provide that in the event of a Change of
Control, that such Option or Right shall immediately vest and may be exercised
at any time on or following a Change of Control.
(9) Certain Additional Provisions for Incentive Stock Options.
Notwithstanding anything to the contrary in the Plan, each Incentive Stock
Option must meet the following requirements:
(A) The Optionee at the time the Option is granted is an
Employee of the Company or a Subsidiary of the Company.
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(B) The Optionee (together with persons whose stock
ownership is attributed to the Optionee pursuant to Section 425(d) of
the Code) at the time the Option is granted does not own stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of any of its Subsidiaries, unless
at the time of grant the exercise price of the Option is at least 110%
of the Fair Market Value of the Common Stock subject to the Option and
the Option may not be exercisable after the expiration of five years
from the date the Option was granted.
(C) No Option may be granted to an Employee which, when
aggregated with all other Incentive Stock Options granted to such
Employee by the Company and its Subsidiaries, would result in stock
having an aggregate Fair Market Value (determined for each share of
stock as of the time the Option covering such share is granted) in
excess of $100,000 becoming first available for purchase upon exercise
of the Option during any calendar year.
(D) The Option may not be exercised after the expiration
of three months after the Optionee ceases to be employed by the Company
or a Subsidiary.
(10) Substitute Options or Rights. Options or Rights may be
granted under the Plan from time to time in substitution for options or rights
held by employees of other corporations who are about to become Employees of
the Company as the result of a merger or consolidation of the employing
corporation with the Company or the acquisition by the Company or any Affiliate
of the assets of the employing corporation or the acquisition by the Company or
any Affiliate of stock of the employing corporation as a result of which it
becomes an Affiliate of the Company. The terms and conditions of substitute
Options or Rights so granted may vary from the terms and conditions set forth in
the Plan to such extent as the Committee at the time of grant may deem
appropriate in order to conform, in whole or in part, to the provisions of the
options or rights in substitution for which Options or Rights are being granted,
but no such variation shall be such as to affect the qualified status of any
such Option which has been granted in substitution for an incentive stock option
under Section 422 of the Code.
(c) Exercise of Options and Rights.
(1) Person Eligible to Exercise. During the lifetime of the
Optionee, only the Optionee may exercise an Option or Right granted to the
Optionee or any portion thereof. After the death of the Optionee, any
exercisable portion of an Option or Right may be exercised by the Optionee's
personal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
The Company may require appropriate proof from any such other person of such
person's right or power to exercise the Option or Right or any portion thereof.
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(2) Fractional Shares; Partial Exercise. The Company shall not
be required to issue fractional Shares on exercise of an Option and the
Committee may, by the terms of the Option, require any partial exercise thereof
to be with respect to a specified minimum number of Shares.
(3) Manner of Exercise. An exercisable Option or Right, or any
exercisable portion thereof, may be exercised solely by delivery to the
Secretary or the Secretary's office of all of the following:
(A) Notice in writing signed by the Optionee or other
person then entitled to exercise such Option or Right or portion
thereof, stating that such Option or Right or portion is exercised,
such notice complying with all applicable rules established by the
Committee;
(B) In the case of an Option, full cash payment of the
Exercise Price for the Shares with respect to which such Option or
portion is thereby exercised and which are to be delivered to the
Optionee pursuant to such exercise; provided, at the discretion of the
Committee, payment may be made in whole or in part in Shares which
Shares will be valued at its then Fair Market Value as determined by
the Committee or in whole or in part pursuant to such other
arrangement, including any deferred payment arrangement or simultaneous
exercise and sale arrangement, as the Committee, in its absolute
discretion, determines; and
(C) Such representations and documents as the Committee,
in its absolute discretion, deems necessary or advisable to effect
compliance with all applicable provisions of the Securities Act of
1933, as amended, and any other federal or state securities laws or
regulations. The Committee may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on Share
certificates and issuing stop-transfer orders to transfer agents and
registrars.
(4) Right to Elect to Pay Profit or to Credit Profit in Lieu of
Delivering Option Shares. The Committee, in its absolute discretion, may elect
(in lieu of delivering all or a portion of the shares of Common Stock as to
which an Option has been exercised) if the Fair Market Value of the Common Stock
exceeds the Exercise Price of the Option (i) to pay the Optionee in cash or in
Shares, or a combination of cash and Shares, an amount equal to the excess of
the Fair Market Value of the Shares on the exercise date over the Exercise Price
or, in the case of an Option which is not an Incentive Stock Option, (ii) to
defer payment and to credit the amount of such excess on the Company's books for
the account of the Optionee and either (a) to treat the amount in such account
as if it had been invested in the manner from time to time determined by the
Committee, with dividends or other income thereon being deemed to have been so
reinvested or (b) for the Company's convenience, to contribute the amount in
such account to a trust, which may be revocable by the
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Company, for investment in the manner from time to time determined by the
Committee and set forth in the instrument creating such trust. The election
pursuant to this Section 4(c)(4) shall be made by giving written notice to the
Optionee (or other person exercising the Option). Shares paid pursuant to this
subparagraph will be valued at the Fair Market Value on the exercise date. For
purposes of any cash payment to an Optionee who is subject to Section 16(b) of
the Exchange Act and who exercises an Option during a "window period," for
purposes of this Section 4(c)(4) the Fair Market Value of the Common Stock on
the exercise date shall be deemed to be that value determined by the Committee
in its discretion which is not less than the lowest Fair Market Value, nor more
than the highest Fair Market Value, of a Share on any day during such "window
period." "Window period" shall mean the ten-day period defined in Rule
16b-3(e)(3) under the Exchange Act. For purposes of the limitations in Section
3(a), the number of Shares which are paid or credited pursuant to this Section
4(c)(4) shall not be counted, but the full number of Shares as to which the
Option was exercised shall be counted even though the Committee has made an
election under this Section 4(c)(4) in respect to some or all of the Shares.
(5) Conditions to Issuance of Stock Certificates. The Shares
deliverable upon exercise of an Option, or any part thereof, may be either
previously authorized but unissued Shares or issued Shares which have then been
reacquired by the Company. The Company shall not be required to issue or deliver
any certificate or certificates for Shares purchased upon the exercise of any
Option or portion thereof prior to fulfillment of all of the following
conditions:
(A) The admission of such Shares to listing on all stock
exchanges or automated quotation system operated by a national
securities association on which such class of stock is then listed or
traded;
(B) The completion of any registration or other
qualification of such Shares under any state or federal law or under
the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body, which the Company shall, in its
absolute discretion, deem necessary or advisable;
(C) The obtaining of any approval or other clearance from
any state or federal governmental agency which the Company shall, in
its absolute discretion, determine to be necessary or advisable;
(D) The provision for any income tax withholding which the
Company shall, in its absolute discretion, determine to be necessary or
advisable; and
(E) The lapse of such reasonable period of time following
the exercise of the Option as the Company may determine, in its
absolute discretion, from time to time to be necessary or advisable for
reasons of administrative conve nience.
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(6) Rights as Shareholders. An Optionee shall not be, nor have
any of the rights or provisions of, a shareholder of the Company in respect to
any Shares which may be purchased upon the exercise of any Option, or that are
subject to any Right, or portion thereof unless and until certificates
representing such Shares have been issued by the Company to such Optionee.
5. AWARDS
(a) Eligibility. Any key Employee of the Company or of any corporation
which is then an Affiliate shall be eligible to be granted Awards.
(b) Award Procedure. The Committee shall from time to time in its
absolute discretion:
(1) Select from among the eligible key Employees the Employees
to whom Awards shall be granted, determine whether such Awards are to be
Restricted Stock Awards or Restricted Unit Awards (or both) and determine the
number of Shares or units to be covered by such Awards; and
(2) Determine the terms and conditions of such Awards,
consistent with the Plan.
(c) Award Agreements. Each Award shall be evidenced by a written
agreement, executed by the Grantee and the Company, which shall contain such
restrictions, terms and conditions as the Committee may require and (without
limiting the generality of the foregoing) such agreements reflecting Restricted
Stock Awards may impose an escrow condition and/or require that an appropriate
legend be placed on Share certificates.
(d) Restricted Stock Awards.
(1) Shares Subject to Award. The Shares awarded as a Restricted
Stock Award may be either previously authorized but unissued Shares or issued
Shares which have then been reacquired by the Company. Such awarded Shares shall
be issued in the name of the Grantee and delivered to the Grantee (or the escrow
holder, if any) as soon as reasonably practicable after the Award is made (and
after the Grantee has executed the Award agreement and any other documents which
the Committee, in its absolute discretion, may require) without the payment of
any cash consideration by such Grantee. Unless and until the Shares so awarded
to the Grantee shall have vested in the manner set forth in Section 5(f), below,
such Shares shall not be sold, transferred or otherwise disposed of and shall
not be pledged or otherwise hypothecated. Upon the Termination of Employment of
the Grantee, all of such Shares which are not then vested shall thereupon be
forfeited and automatically transferred to and reacquired by the Company at no
cost to the Company. The
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Committee may also impose such other restrictions and conditions on the Shares
as it deems appropriate.
(2) Rights as Shareholder.
(A) Upon delivery of the Shares awarded to the Grantee (or
the escrow holder, if any) as a Restricted Stock Award, the Grantee
shall have all the rights of a shareholder with respect to such Shares,
including the right to vote the Shares and receive all dividends, or
other distributions paid or made with respect to the Shares.
(B) In the event that as a result of a stock dividend,
stock-split, reclassification, recapitalization, combination of Shares
or the adjustment in the capital stock of the Company or otherwise, or
as a result of a merger, consolidation, spin-off or other
reorganization, the Company's Common Stock shall be increased, reduced
or otherwise changed, and by virtue of any such change a Grantee shall
in the Grantee's capacity as owner of unvested Shares of stock which
have been awarded to the Grantee as a Restricted Stock Award (the
"prior Shares") be entitled to new or additional or different shares of
stock or securities (other than rights or warrants to purchase
securities), such new or additional or different shares or securities
shall thereupon be considered to be unvested Restricted Stock Awards
and shall be subject to all of the conditions and restrictions which
were applicable to the prior Shares pursuant to the Plan.
(C) If a Grantee receives rights or warrants with respect
to any Shares which were awarded to the Grantee as Restricted Stock
Awards, such rights or warrants or any Shares or other securities
acquired by the exercise of such rights or warrants may be held,
exercised, sold or otherwise disposed of by the Grantee free and clear
of the restrictions and obligations provided in the Plan.
(3) Conditions. Each Restricted Stock Award shall contain either
performance-based criteria to be met prior to vesting or require a minimum time
period of six months over which the Shares comprising such Restricted Stock
Award shall vest in increments as the Committee, in each case, shall determine.
(e) Restricted Unit Awards.
(1) Restricted Unit Account. In the case of Restricted Unit
Awards, no Shares shall be issued to the Grantee at the time the Award is made,
and no fund shall be set aside by the Company for the payment of any such Award;
but rather the Company shall establish and maintain a separate written account
for each Grantee and shall record in such account the number of Restricted Units
awarded to such Grantee. Whenever the Company pays a cash dividend upon its
Common Stock, there
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shall be credited to each such Grantee's account an amount equal to the cash
dividend paid upon one Share for each Restricted Unit then in such Grantee's
account (hereinafter referred to as "Dividend Equivalents").
(2) Payment of Restricted Units. Each Restricted Unit Award
agreement shall specify a date or dates on which payment of the value of vested
Restricted Units (and Dividend Equivalents with respect to such vested
Restricted Units) in the Grantee's account is to be made. As soon as reasonably
practicable after the payment date, the Company shall deliver to the Grantee one
Share for each vested Restricted Unit credited to the Grantee's account and cash
equal to the vested Dividend Equivalents credited to the Grantee's account;
provided, however that the Committee may, in its absolute discretion, elect to
pay the Grantee cash or part cash and part Shares in lieu of delivering only
Shares for the vested Restricted Units. If a cash payment is made in lieu of
delivering Shares the amount of such cash payment shall (in respect to each
vested Restricted Unit for which a cash payment is to be made) be equal to the
Fair Market Value of the Shares on the payment date. The Shares delivered in
payment, in whole or in part, of a Restricted Unit may be either previously
authorized but unissued Shares or issued Shares which have then been reacquired
by the Company. Payments to be made hereunder shall, if the Grantee is then
deceased, be made to the Grantee's estate or others as may be designated in
writing by the Grantee, with the approval of the Committee.
(3) Deferral of Payment. The Restricted Unit Award agreement may
permit a Grantee to request the payment of vested Restricted Units (and Dividend
Equivalents with respect to such Restricted Units) be deferred beyond the
payment date specified in the agreement. It shall be at the Committee's sole
discretion whether or not to permit such deferment and to specify the terms and
conditions which are not inconsistent with the Plan, to be contained in the
agreement. In the event of such deferment, the Committee may determine that
interest shall be credited annually on the Dividend Equivalents at a rate to be
determined by the Committee. The Committee may also determine to compound such
interest.
(4) Adjustments in Capitalization. The Committee shall make an
appropriate adjustment in the number of kind of Restricted Units then credited
to the account or accounts of any Grantee due to changes in the Company's
outstanding Common Stock by reason of a merger, consolidation, spin-off or
other reorganization, recapitalization, reclassification, stock split-up, stock
dividend, or combination of Shares and any such adjustment made by the Committee
shall be final and binding upon all Grantees, the Company and all other
interested persons.
(5) No Trust Fund. Grantees of Restricted Unit Awards shall not
have any interest in any fund or specific asset of the Company by reason of such
Award. No trust fund shall be created in connection with the Plan or any
Restricted Unit Award thereunder, and there shall be no required funding of
amounts which may become payable under any such Award.
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(f) Vesting of Awards. Shares awarded as Restricted Stock Awards and
units awarded as Restricted Unit Awards (including Dividend Equivalents with
respect to such Restricted Unit Awards) shall vest at such time or times and on
such terms, conditions and performance criteria, as the Committee may determine;
provided, however, that (i) no such Shares or units shall vest until six months
from the date of Award and (ii) the vesting of such Shares or units shall occur
only if the Grantee on the date of the vesting is then and has continuously been
an Employee from the date of the Award. In the event of Termination of
Employment as a result of the death or Total Disability of a Grantee, the
Committee, in its absolute discretion, may determine that the unvested portion
of some or all Shares awarded to the Grantee as Restricted Stock Awards and some
or all units awarded to the Grantee as Restrict ed Unit Awards (including
unvested Dividend Equivalents) shall thereupon immediately vest. The Committee
may also decide at any time in its absolute discretion and on such terms and
conditions as it deems appropriate, to accelerate the vesting of Shares awarded
as Restricted Stock Awards and units awarded as Restricted Unit Awards
(including unvested Dividend Equivalents).
6. STOCK APPRECIATION RIGHTS
(a) Eligibility. Any key Employee of the Company or of any corporation
which is then an Affiliate shall be eligible to be granted Stock Appreciation
Rights.
(b) Grant of Stock Appreciation Rights. A Stock Appreciation Right
whether Related to an Option or independent of an Option shall, upon its
exercise, entitle the Optionee to whom such Stock Appreciation Right was granted
to receive the number of Shares or cash or combination thereof, as the Committee
in its discretion shall determine at the date of grant and as provided for in
the applicable agreement pursuant to which the Stock Appreciation Right is
granted. The aggregate value of the Stock Appreciation Right (i.e., the sum of
the amount of cash and/or Fair Market Value of such Shares on the date of
exercise) shall equal the amount by which the Fair Market Value per Share on the
date of such exercise shall exceed the Exercise Price of such Stock Appreciation
Right (see Section 6(c) below for instructions on how to calculate the Exercise
Price of a Related Stock Appreciation Right), multiplied by the number of Shares
with respect of which such Stock Appreciation Right shall have been exercised. A
Stock Appreciation Right may be related to an Option or may be granted
independently of any Option, as the Committee shall from time to time in each
case determine at the date of grant and as provided in the applicable agreement.
(c) Related Stock Appreciation Right. A Related Stock Appreciation
Right may be granted at the time of grant of an Option or, in the case of a
nonqualified stock option, at any time thereafter during the term of the
nonqualified stock option. The Exercise Price of a Related Stock Appreciation
Right shall be the same as the Exercise Price of the Related Option. The
following provisions shall apply to a Related Stock Appreciation Right:
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(1) Grant of Related Stock Appreciation Right. Related Stock
Appreciation Rights may be granted by the Committee under the Plan in connection
with an Option, either at the time of grant or by amendment to the Related Stock
Option Agreement. Each Related Stock Appreciation Right shall be subject to the
same terms and conditions as the Related Option and to such additional
conditions as the Committee shall determine, shall be exercisable only to the
extent the Related Option is exercisable and shall become nonexercisable and be
forfeited if and to the extent the Related Option is exercised or becomes
unexercisable.
(2) Exercise of Stock Appreciation Rights. A Related Stock
Appreciation Right shall entitle the Optionee to surrender to the Committee
unexercised the Related Option, or any portion thereof, and to receive from the
Company in exchange therefor a cash payment and/or Shares having an aggregate
Fair Market Value equal to the excess of the Fair Market Value of one Share over
the Exercise Price per Share provided for in the related Option, multiplied by
the number of Shares called for by the Option, or portion thereof, which is
surrendered. The Committee shall have the sole discretion to determine the form
in which payment is to be made upon the exercise of a Related Stock Appreciation
Right (i.e., whether in cash, in Shares or partly in cash and partly in Shares).
In no event will fractional Shares be issued but cash will be paid in lieu
thereof.
(3) Window Period Exercises for Cash. Notwithstanding the
provisions of Section 6(c)(2), above, the Committee shall have the ability, in
its discretion, to fix the Fair Market Value of a Share for purposes of
determining the amount of cash and the number of Shares, if any, to be received
upon the exercise of a Related Stock Appreciation Right during any "window
period" (which consists of a period beginning on the third business day
following the date of release of quarterly or annual sales and earnings
information by the Company and ending on the twelfth business day following such
release date) for payment wholly or partly in cash at an amount not greater than
the highest Fair Market Value, nor less than the lowest Fair Market Value, of a
Share during such window period.
(4) Relation to Related Options. Related Stock Appreciation
Rights shall be exercisable at such time as may be determined by the Committee,
provided that a Related Stock Appreciation Right shall not be exercisable prior
to the time the Related Option could be exercised and, except in the event of
death or Total Disability, shall not be exercisable for a period of six months
from the date of grant of such Right. A Related Stock Appreciation Right may be
exercised in whole or in part only upon surrender of a proportionate part of the
Related Option by the Optionee.
(5) Expiration or Termination. Each Related Stock Appreciation
Right and all Rights and obligations thereunder shall terminate and may no
longer be exercised upon the termination or exercise of the Related Option.
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(6) Shares May Be Used Only Once. Shares subject to a Related
Option to which a Related Stock Appreciation Right is related shall be used not
more than once to calculate the cash or Shares to be received by the Optionee
pursuant to an exercise of such Related Stock Appreciation Right.
(7) Effect of Death or Other Termination of Employment. In the
event of the Termination of Employment of a recipient of a Related Stock
Appreciation Right, the recipient's Related Stock Appreciation Right shall be
exercisable only to the extent and upon the conditions that the Related Option
is exercisable under the applicable provisions of Section 4(b)(6) hereof.
(8) Adjustment in Outstanding Options. In the event that the
Options to which any Related Stock Appreciation Rights are related are adjusted
pursuant to the provisions of Section 4(b)(7), then the Committee shall make an
appropriate and equitable adjustment in the number of such Stock Appreciation
Rights, to the end that after such event the Optionee shall be in the same
position with respect to the Options as the Optionee was prior to the occurrence
of such event.
7. LIMITED STOCK APPRECIATION RIGHTS; ACCELERATION OF AWARDS
(a) Grant of LSAR. At the time of grant of an Option or Stock
Appreciation Right to any Optionee (or, in the case of a nonqualified stock
option or a Stock Appreciation Right not related to an Incentive Stock Option,
at any time thereafter during the term of the Option or Stock Appreciation
Right), the Committee shall have full and complete authority and discretion also
to grant to the Optionee an LSAR which is Related to such Option or Stock
Appreciation Right.
(b) Exercise of LSAR. An LSAR shall entitle the holder thereof, upon
exercise of the LSAR within the exercise period prescribed below and
satisfaction of any conditions imposed by the Committee in the grant of the
LSAR, to surrender the Related Option and/or Related Stock Appreciation Right or
any portion thereof, and to receive without payment to the Company an amount of
cash determined pursuant to Section 7(d) hereof. An LSAR shall be exercisable
only during one or more of the periods prescribed below in Section 7(c);
provided, however, that no LSAR may be exercised within six months of the date
the LSAR was granted and an LSAR shall be exercisable only at such time or times
and to the extent that the Related Stock Appreciation Right or Option is
exercisable and only when the Fair Market Value per Share exceeds the Exercise
Price per Share. To the extent that an LSAR is exercised, the Related Option
and/or Stock Appreciation Right shall automatically be cancelled to the extent
of the number of Shares covered by such exercise, and such Shares shall no
longer be available for future Grants or Awards. To the extent that a Related
Option or Stock Appreciation Right is exercised, the Related LSAR shall
automatically be cancelled to the extent of the number of Shares covered by such
exercise.
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(c) Trigger Event. An LSAR shall be exercisable, subject to the
provisions in Section 7(b), during any one or more of the following periods:
(1) For a period of 60 days beginning on the date on which
Shares are first purchased pursuant to a tender offer or exchange offer (other
than such an offer by the Company, any Subsidiary, any employee benefit plan of
the Company or of any Subsidiary or any entity holding Shares or other
securities of the Company for or pursuant to the terms of such plan), whether or
not such offer is approved or opposed by the Company and regardless of the
number of Shares purchased pursuant to such offer;
(2) For a period of 60 days beginning on the date the Company
acquired knowledge that any person or group deemed a person as used in Section
13(d) of the Exchange Act (other than the Company, any Subsidiary, any employee
benefit plan of the Company or of any Subsidiary or any entity holding shares or
other securities of the Company for or pursuant to the terms of any such plan,
or any person or group who, as of the date of adoption of this Plan by the Board
of Directors of the Company, is known by the Company to be the beneficial owner,
directly or indirectly, of securities representing 10% or more of the combined
voting power of the Company's outstanding securities), in a transaction or
series of transactions, has become the beneficial owner, directly or indirectly
(with beneficial ownership determined as provided in Rule 13d-3, or any
successor rule, under the Exchange Act), of securities of the Company entitling
the person or group to 30% or more of all votes (without consideration of the
rights of any class of stock to elect directors by a separate class vote) to
which all shareholders of the Company would be entitled to vote in the election
of the Board of Directors were an election held on such date;
(3) For a period of 60 days beginning on the date, during any
period of two consecutive years, when individuals who at the beginning of such
period constitute the Board of Directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the shareholders of the Company, of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of such period; and
(4) For a period of 60 days beginning on the date of approval by
the shareholders of the Company of an agreement (a "reorganization agreement")
providing for:
(A) The merger or consolidation of the Company with
another corporation where the shareholders of the Company, immediately
prior to the merger or consolidation, do not beneficially own,
immediately after the merger or consolidation, shares of the
corporation issuing cash or securities in the merger or consolidation
entitling such shareholders to 51% or more of all votes (without
consideration of the rights of any class of stock to elect directors by
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a separate class vote) to which all shareholders of such corporation
would be entitled in the election of directors or where the members of
the Board of Directors of the Company, immediately prior to the merger
or consolidation, do not, immediately after the merger or
consolidation, constitute a majority of the Board of Directors of the
corporation issuing cash or securities in the merger or consolidation;
or
(B) The sale or other disposition of all or substantially all
the assets of the Company.
Each of the events specified in (1), (2), (3) and (4) is a "Trigger
Event" for the purposes of the Plan.
(d) Payment Upon Exercise. Upon exercise of an LSAR, the Participant
shall be entitled to receive an amount of cash in respect of each Share subject
to the Related Option or Stock Appreciation Right equal to the excess of the
fair market value of such Share over the Exercise Price of such Related Option
or Stock Appreciation Right. In the case of LSARs related to Incentive Stock
Options, "fair market value" shall mean the Fair Market Value of Shares on the
date the LSAR is exercised. In the case of all other LSARs, "fair market value"
shall mean the highest last sale price of the Shares quoted by Nasdaq during the
period beginning on the 90th day prior to the date on which the LSAR is
exercised and ending on such date, except that:
(1) In the event of a tender offer or exchange offer for Shares,
fair market value shall mean the greater of such last sale price or the highest
price paid for Shares pursuant to any tender offer or exchange offer in effect
at any time beginning on the 90th day prior to the date on which the LSAR is
exercised and ending on such date;
(2) In the event of the acquisition by any person or group of
beneficial ownership of securities of the Company entitling the person or group
to 30% or more of the combined voting power of the Company's outstanding
securities as described in Section 7(c)(2), fair market value shall mean the
greater of such last price or the highest price per Share paid shown on Schedule
13D, or any amendment thereto, filed by the person or group becoming a 30%
beneficial owner or disclosing an intention or possible intention to acquire
control of the Company; and
(3) In the event of approval by shareholders of the Company of a
reorganization agreement, fair market value shall mean the greater of such last
sale price or the fixed or formula price specified in the reorganization
agreement if such price is determinable as of the date of exercise of the LSAR.
Any securities or property which are part or all of the consideration
paid for Shares in a tender offer or exchange offer or under an approved
reorganization agreement shall be valued at the higher of (1) the valuation
placed on such securities
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or property by the person making the tender offer or exchange offer or by the
corporation other than the Company issuing securities or property in the merger
or consolidation or to whom the Company is selling or otherwise disposing of
all or substantially all the assets of the Company and (2) the valuation placed
on such securities or property by the Committee.
(e) Acceleration of Options and Stock Appreciation Rights. All Options
and Stock Appreciation Rights shall become fully exercisable upon the occurrence
of any Trigger Event, whether or not such Options or Stock Appreciation Rights
are then exercisable under the provisions of the applicable agreements relating
thereto, except that:
(1) In no event will Stock Appreciation Rights or Options
related to Stock Appreciation Rights be exercisable within six months after the
date on which granted; and
(2) Stock Appreciation Rights related to LSARs may not be
exercised for cash during any of the 60-day periods after a Trigger Event.
8. MISCELLANEOUS PROVISIONS
(a) Options, Rights and Awards Not Transferable. No Option or interest
or right therein or part thereof and no Right, Restricted Stock Award or
Restricted Unit Award shall be liable for the debts, contracts, or engagements
of the Optionee, Grantee or such person's successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means, whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect;
provided, however, that nothing in this Section 8(a) shall prevent transfers by
will or by the applicable laws of descent and distribution.
(b) Employment. Nothing in the Plan or in any Option, Right or Award
shall confer upon any Employee the right to continue in the employ of the
Company or any Affiliate or shall interfere with or restrict in any way the
rights of the Company and Affiliates to discharge any Employee at any time for
any reason whatsoever, with or without good cause.
(c) Effect of a Change of Control. The Committee may, in its absolute
discretion, provide that in the event of a Change of Control, some or all Shares
and units awarded under the Plan as Restricted Stock Awards or Restricted Unit
Awards including unvested Dividend Equivalents shall immediately vest.
(d) Amendment, Suspension or Termination of the Plan. The Plan may be
wholly or partially amended or otherwise modified, suspended or terminated at
any
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time or from time to time by the Board or the Committee, subject to any required
shareholder approval or any shareholder approval that the Board may deem
advisable for any reason, such as for the purpose of obtaining or retaining any
statutory or regulatory benefits under tax, securities or other laws or
satisfying any applicable stock exchange listing requirements. Neither the
amendment, suspension, nor termination of the Plan shall, without the consent of
the Optionee or the Grantee, alter or impair any rights or obligations under any
Option, Right or Award theretofore granted. No Option, Right or Award may be
granted during any period of suspension nor after termination of the Plan, and
in no event may any Option intended to be an Incentive Stock Option be granted
under the Plan more than ten years after the date the adoption of the Plan was
approved by the Board.
(e) Effect upon Other Compensation Plans. The adoption of the Plan
shall not affect any other stock option, compensation or incentive plans in
effect for the Company or any Affiliate and the Plan shall not preclude the
Board from establishing any other forms of incentive or compensation for
Employees of the Company or any Affiliate.
(f) Compliance with Rule 16b-3. To the extent that Rule 16b-3 under the
Exchange Act applies to Options, Rights or Awards granted under the Plan, it is
the intent of the Company that the Plan comply in all respects with the
requirements of Rule 16b-3, that any ambiguities or inconsistencies in
construction of the Plan be interpreted to give effect to such intention and
that if the Plan shall not so comply, whether on the date of adoption or by
reason of any later amendment to or interpretation of Rule 16b-3, the
provisions of the Plan shall be deemed to be automatically amended so as to
bring them into full compliance with such rule.
(g) Shareholder Approval. Notwithstanding anything to the contrary set
forth herein, no Option or Right may be exercised and no Award may be granted
until the Plan shall have been approved by the affirmative vote of the holders
of a majority of the outstanding Shares present or represented by proxy and
entitled to vote at a duly convened meeting of shareholders of the Company.
(h) Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.
As amended by the Board of Directors on March 21, 1997.
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