<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
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 sec. 240.14a-11(c) or sec. 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Chase Brass Industries, Inc.
- --------------------------------------------------------------------------------
(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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
CHASE BRASS INDUSTRIES, INC.
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 14, 1997
---------------------
The Annual Meeting of Stockholders of Chase Brass Industries, Inc. (the
"Company"), will be held at Chase Manhattan Bank, 270 Park Avenue, 11th Floor,
Room G, New York, New York, on Wednesday, May 14, 1997, at 10:30 a.m., EDT, for
the following purposes:
1. To elect seven (7) directors of the Company, each to serve until
the 1998 Annual Meeting of Stockholders or until his successor is elected
and qualified;
2. To consider and vote upon a proposal to amend the Restated
Certificate of Incorporation of the Company to change the corporate name to
"Chase Industries Inc.";
3. To consider and vote upon proposed amendments to the Company's 1994
Long-Term Incentive Plan to (i) increase the maximum number of shares of
Company common stock that may be issued thereunder from 1,000,000 to
1,500,000 and (ii) limit the number of stock options and stock appreciation
rights that may be granted to any employee of the Company during any
two-year period in order to comply with certain provisions of the Internal
Revenue Code of 1986, as amended;
4. To consider and vote upon a proposal to approve the Company's 1997
Non-Employee Director Stock Option Plan, involving the issuance of a
maximum of 100,000 shares of Company common stock;
5. To consider and vote upon a proposal to approve the Company's 1997
Executive Deferred Compensation Stock Option Plan, involving the issuance
of a maximum of 300,000 shares of Company common stock;
6. To ratify the appointment of Coopers & Lybrand L.L.P. as the
independent accountants for the Company for the year ending December 31,
1997; and
7. To consider and transact such other business as may properly come
before the meeting or any adjournment thereof.
A copy of the Proxy Statement in which the foregoing matters are described
in more detail accompanies this Notice of Annual Meeting of Stockholders.
The transfer books of the Company will not be closed, but only stockholders
of record at the close of business on March 31, 1997, are entitled to notice of
and to vote at the meeting or any adjournment thereof. A complete list of these
stockholders will be available for examination at the Company's offices located
at 300 Park Avenue, New York, New York, 10001, during normal business hours for
ten days before the meeting.
Please sign, date and return your proxy in the enclosed return envelope as
promptly as possible. You may revoke your proxy at any time before the shares to
which it relates are voted at the meeting.
By Order of the Board of Directors
/s/ MICHAEL T. SEGRAVES
MICHAEL T. SEGRAVES
Secretary
April 14, 1997
<PAGE> 3
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE ANNUAL MEETING IN
ORDER THAT THE PRESENCE OF A QUORUM MAY BE ASSURED. WHETHER OR NOT YOU INTEND TO
BE PRESENT AT THE MEETING, PLEASE COMPLETE AND SIGN THE ACCOMPANYING FORM OF
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
---------------------
CHASE BRASS INDUSTRIES, INC.
14212 COUNTY ROAD M-50
MONTPELIER, OHIO 43543
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 14, 1997
---------------------
SOLICITATION AND REVOCATION OF PROXIES
The accompanying Proxy is solicited by the Board of Directors of Chase
Brass Industries, Inc. (the "Company"), for use at the Annual Meeting of
Stockholders to be held at Chase Manhattan Bank, 270 Park Avenue, 11th Floor,
Room G, New York, New York on May 14, 1997, at 10:30 a.m., EDT, or any
adjournment thereof (the "Annual Meeting"). The approximate date on which this
Proxy Statement and accompanying Proxy are first being sent to stockholders is
April 15, 1997.
The common stock of the Company, par value $.01 per share ("Common Stock"),
can be voted at the Annual Meeting only if the holder is present or represented
by proxy at the Annual Meeting. A stockholder executing and returning the Proxy
may revoke it at any time before it is exercised by giving written notice of the
revocation to the Secretary of the Company or by executing and delivering to the
Company a later-dated Proxy. Attendance at the Annual Meeting will not be
effective to revoke the Proxy unless written notice of revocation also has been
delivered to the Secretary of the Company before the Proxy is exercised.
The record date for the stockholders entitled to notice of and to vote at
the Annual Meeting is the close of business on March 31, 1997 (the "Record
Date").
QUORUM AND VOTING
The only class of outstanding voting securities of the Company is Common
Stock. As of the close of business on the Record Date, there were 5,997,396
shares of Common Stock outstanding and entitled to vote at the Annual Meeting
and 4,100,079 shares of nonvoting common stock, par value $.01 per share
("Nonvoting Common Stock"), outstanding. Each share of Nonvoting Common Stock is
convertible into one share of Common Stock at the option of the holder thereof
to the extent the conversion does not result in such holder or its affiliates,
directly or indirectly, owning or controlling a greater number of securities of
any kind issued by the Company than such holder and its affiliates are permitted
to own or control under the Small Business Investment Act of 1958, the Bank
Holding Company Act of 1956, and the regulations promulgated thereunder.
Holders of Common Stock of record at the close of business on the Record
Date are entitled to one vote for each share held on all matters submitted to a
vote of stockholders at the Annual Meeting or any adjournment thereof. Shares of
Common Stock issued upon the conversion of any Nonvoting Common Stock after the
Record Date will be entitled to be voted at the Annual Meeting or any
adjournment thereof by the record holder as of the Record Date of the Nonvoting
Common Stock so converted. The holders of shares of Common Stock do not have
cumulative voting rights.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute a
quorum at the Annual Meeting. If a quorum is not present
1
<PAGE> 4
(either in person or by proxy), the stockholders entitled to vote who are
present in person or by proxy have the power to adjourn the Annual Meeting from
time to time, without notice other than an announcement at the Annual Meeting,
until a quorum is present. At any adjourned Annual Meeting at which a quorum is
present in person or by proxy, any business may be transacted that might have
been transacted at the Annual Meeting as originally notified.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
an automated system administered by the Company's transfer agent and will
determine whether or not a quorum is present. Abstentions and broker non-votes
are treated as shares that are present and entitled to vote for purposes of
determining the presence of a quorum for the transaction of business.
Abstentions and broker non-votes are tabulated separately, with abstentions
counted in tabulations of the votes cast on a proposal for purposes of
determining whether a proposal has been approved while broker non-votes relating
to a proposal are not counted as a vote cast with respect to that proposal.
The election of directors will be determined by plurality vote; the
amendment to the Restated Certificate of Incorporation requires the approval of
a majority of the outstanding shares of Common Stock; and the amendment to the
1994 Long-Term Incentive Plan (the "1994 Incentive Plan"), the adoption of the
1997 Non-Employee Director Stock Option Plan (the "1997 Director Stock Option
Plan"), the adoption of the 1997 Executive Deferred Compensation Stock Option
Plan (the "1997 Executive Stock Option Plan") and the ratification of the
appointment of Coopers & Lybrand L.L.P. require the approval of a majority of
the outstanding shares of Common Stock that are present at the Annual Meeting in
person or by proxy and entitled to vote thereon. Therefore, abstentions will
have a neutral effect on the election of directors and will have the effect of
votes against the proposals to amend the Restated Certificate of Incorporation,
amend the 1994 Incentive Plan, adopt the 1997 Director Stock Option Plan, adopt
the 1997 Executive Stock Option Plan and ratify the selection of independent
accountants, whereas broker non-votes will have a neutral effect on the election
of directors and the proposals to amend the 1994 Incentive Plan, adopt the 1997
Director Stock Option Plan, adopt the 1997 Executive Stock Option Plan and
ratify the selection of independent accountants but will have the effect of
votes against the proposal to amend the Restated Certificate of Incorporation.
Shares represented by each Proxy that is properly executed and returned and
upon which no contrary instructions are indicated about a specified matter will
be voted as follows with respect to the specified matter: FOR the election of
the seven persons named in this Proxy Statement as the Board of Directors'
nominees for election to the Board of Directors; FOR the approval of the
proposed amendment to the Company's Restated Certificate of Incorporation; FOR
the approval of the proposed amendment to the 1994 Incentive Plan; FOR the
adoption of the 1997 Director Stock Option Plan; FOR the adoption of the 1997
Executive Stock Option Plan; FOR the ratification of the appointment of the
independent accountants for the Company for 1997; and in accordance with the
discretion of the holders of the Proxy with respect to any other business that
properly comes before the stockholders at the Annual Meeting.
PROPOSAL 1.
ELECTION OF DIRECTORS
The Board of Directors currently consists of seven members. The Board of
Directors has designated the following nominees for election as directors of the
Company, with their terms to expire at the annual meeting of stockholders in
1998 or until their successors are elected and qualified:
Martin V. Alonzo
Raymond E. Cartledge
Charles E. Corpening
Donald J. Donahue
John R. Kennedy
Thomas F. McWilliams
William R. Toller
2
<PAGE> 5
Each nominee currently is a director of the Company. For information about
each nominee, see "Directors and Executive Officers" below.
Should any nominee named in this Proxy Statement for the office of director
become unable or unwilling to accept nomination or election, the person acting
under the Proxy will vote for the election, in his stead, of any other person
whom the Board of Directors recommends. The Board of Directors has no reason to
believe that any nominee named above will be unable or unwilling to serve if
elected.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE ELECTION
OF THE NOMINEES.
DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Board of Directors currently consists of one person who is an employee
of the Company and six persons who are not employees of the Company (i.e.,
outside directors). Set forth below are the names, ages and positions of the
Company's directors and executive officers as of the Record Date.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Martin V. Alonzo........................ 65 Chairman of the Board, President, Chief Executive
Officer and Director
Duane R. Grossett....................... 62 President and Chief Operating Officer of CBCC*
Lawrence R. Lansford.................... 50 President and Chief Operating Officer of Leavitt+
Michael T. Segraves..................... 52 Chief Financial Officer, Vice President and Secretary
Raymond E. Cartledge.................... 67 Director
Charles E. Corpening.................... 31 Director
Donald J. Donahue....................... 72 Director
John R. Kennedy......................... 66 Director
Thomas F. McWilliams.................... 54 Director
William R. Toller....................... 66 Director
</TABLE>
- ---------------
* Chase Brass & Copper Company, Inc. ("CBCC"), is a wholly-owned subsidiary
of the Company through which the Company conducts its brass rod
operations.
+ Leavitt Tube Company, Inc., ("Leavitt"), is a wholly-owned subsidiary of
the Company through which the Company conducts its steel tube operations.
The current term of office of each director will expire at the 1997 Annual
Meeting. At each annual meeting of stockholders, successors to the directors
will be elected to serve until the next annual meeting of stockholders and until
their successors are elected and qualified.
Executive officers of the Company are appointed by and serve at the
discretion of the Board of Directors.
The Company, Citicorp Venture Capital Ltd. ("CVC") and Mr. Alonzo are
parties to a Voting Agreement (the "Voting Agreement") pursuant to which the
Company has agreed to use its best efforts to cause up to two designees of CVC
and one designee of Mr. Alonzo to be nominated for election as directors of the
Company, and each of CVC and Mr. Alonzo have agreed to vote their respective
shares of Common Stock in favor of such designees. Pursuant to the Voting
Agreement, at any time the Board of Directors consists of five or more directors
and CVC owns 20% or more of the outstanding Common Stock (after giving effect to
the full conversion of all outstanding shares of Nonvoting Common Stock), CVC
will be entitled to two such designees, and at any time the Board of Directors
consists of fewer than five directors or CVC owns less than 20% of the
outstanding Common Stock (after giving effect to the full conversion of all
outstanding shares of Nonvoting Common Stock), CVC will be entitled to one such
designee. CVC has designated Charles E. Corpening and Thomas F. McWilliams as
its director nominees and Mr. Alonzo has designated himself as a director
nominee pursuant to the Voting Agreement.
3
<PAGE> 6
The Company's existing bank credit facility also requires Mr. Alonzo to
continue to serve on the Board of Directors of the Company as long as he is
physically able to do so.
There are no family relationships among the directors or executive officers
and, except as to the designation of Messrs. Corpening, McWilliams and Alonzo as
director nominees pursuant to the Voting Agreement, there were no arrangements
or understandings between any such person and any other person pursuant to which
his selection as a director or an officer was made.
Set forth below is certain biographical information regarding the executive
officers and directors of the Company.
Martin V. Alonzo. Mr. Alonzo has served as Chairman of the Board, President
and Chief Executive Officer of the Company since the Company began operations in
August 1990. Mr. Alonzo also served as President of Leavitt from August 1996
until the appointment of Mr. Lansford in March 1997. From 1987 until 1990, Mr.
Alonzo pursued entrepreneurial opportunities, which included advising the Maxxam
Group in connection with its acquisition of Kaiser Aluminum and, in conjunction
with CVC, analyzing prospective acquisitions, primarily of metals-related
companies. From 1967 until 1987, Mr. Alonzo was employed by AMAX, Inc., a large
mining and integrated aluminum company, in various capacities, including senior
vice president and president -- industrial minerals division, executive vice
president and president -- specialty and light metals operations and, from 1984
until July 1987, executive vice president and chief financial officer. Mr.
Alonzo also served as a director of Alumax Inc., an integrated aluminum company,
from 1974 to 1987.
Duane R. Grossett. Mr. Grossett has served as President and Chief Operating
Officer of CBCC since October, 1996. Prior to such time, Mr. Grossett had served
as a director of the Company since August 1990, a position from which he
resigned after accepting the positions with CBCC. From April 1994 to April 1995,
Mr. Grossett also was engaged by the Company as an independent consultant and,
in such capacity, performed the functions of President and Chief Operating
Officer of CBCC from April 1994 until February 1995. From 1989 until 1993, Mr.
Grossett served as president and chief executive officer of Easco Corp., a
manufacturer of extruded aluminum products. From 1980 until 1986, Mr. Grossett
served as president of Extruded Metals Inc. and, from 1986 until 1989, as
executive vice president and chief operating officer of Mueller Brass Co., Inc.
(predecessor to Mueller Industries, Inc.), each a competitor of the Company.
Lawrence R. Lansford. Mr. Lansford has served as President and Chief
Operating Officer of Leavitt since March 1997. Prior to joining Leavitt, Mr.
Lansford was employed by Zurich-based Asea Brown Boveri, Inc., serving from 1993
until 1996 as president of ABB Traction, Inc., Asea Brown Boveri's railway
transportation equipment segment for North America. From 1990 until 1993, Mr.
Lansford served as president of ABB Power Products Manufacturing, Asea Brown
Boveri's power segment manufacturing division, and before that was group
executive with responsibility for ABB Air Preheater, Inc. and ABB Raymond, Inc.
Mr. Lansford became affiliated with Asea Brown Boveri through its 1990
acquisition of Combustion Engineering, Inc., where Mr. Lansford began his career
after graduation from the Georgia Institute of Technology. Mr. Lansford also was
a 1986 Sloan Fellow at Massachusetts Institute of Technology.
Michael T. Segraves. Mr. Segraves has served as Vice President and
Secretary of the Company since September 1996, and as Chief Financial Officer
since February 1997. Prior to joining the Company, Mr. Segraves was employed
from 1992 to 1996 as vice president of administration and chief financial
officer of AMP Circuits, a wholly-owned subsidiary of AMP Incorporation, a
manufacturer in the electronics industry. From 1990 through 1992, Mr. Segraves
was chief financial officer of Browning Ferris Industries' European subsidiary,
headquartered in Utrecht, The Netherlands. Prior to these positions, Mr.
Segraves was employed at Ford Motor Company and Tenneco, Inc., in various
financial management positions. He graduated with a Bachelor of Science degree
in Engineering from The United States Military Academy at West Point, New York,
and also received an MBA degree majoring in finance from the Indiana University
Graduate School of Business.
Raymond E. Cartledge. Mr. Cartledge was elected as a director of the
Company in May 1995. Mr. Cartledge served as chairman of the board and chief
executive officer of Union Camp Corporation, a paper and packaging company, from
1986 until 1994. Mr. Cartledge currently serves as chairman of the board
4
<PAGE> 7
of Savannah Foods & Industries, Inc., and also serves as a director of UCAR
International Inc., Blount Inc., Delta Air Lines, Inc., Sun Company, Inc. and
Union Camp Corporation.
Charles E. Corpening. Mr. Corpening was elected as a director of the
Company in May 1995. Mr. Corpening has been a principal of CVC, which
beneficially owns approximately 48.3% of the outstanding Common Stock (see
"Security Ownership of Certain Beneficial Owners and Management" below), since
1994. Prior to joining CVC, Mr. Corpening was a vice president of Roundtree
Capital Corp., a private investment firm based in Stamford, Connecticut from
1990 until 1994. Mr. Corpening was employed in the merchant banking division of
the Rockefeller Group from 1988 until 1990 and worked in the mergers and
acquisitions group of PaineWebber, Inc., from January 1987 until December 1988.
Mr. Corpening received a masters of business administration from Columbia
University Business School in 1993. Mr. Corpening also serves as a director of
Davco Restaurants Inc. and Kemet Corporation.
Donald J. Donahue. Mr. Donahue was elected as a director of the Company in
November 1994. From 1987 until February 1996, Mr. Donahue served as chairman of
the board of directors of Magma Copper Company, a fully-integrated producer of
electrolytic copper and related products. Mr. Donahue was chairman of the board
and chief executive officer of KMI Continental, Inc. ("KMI"), a natural resource
conglomerate, from 1984 to 1985, and vice chairman and chief operating officer
of KMI's predecessor firm from 1975 to 1984. From September 1990 until August
1993, Mr. Donahue also served as chairman of NAC Holding Corporation, a holding
company for the North American Company For Life And Health Insurance (NACOLAH).
Mr. Donahue also serves as vice chairman of Pioneer Companies, Inc., and as a
member of the board of directors of several Counsellors Funds whose investment
manager is an affiliate of E. M. Warburg, Pincus & Co., Inc.
John R. Kennedy. Mr. Kennedy was elected as a director of the Company in
November 1994. From 1975 until his retirement in 1996, Mr. Kennedy served as
president and chief executive officer of Federal Paper Board Company, Inc. Mr.
Kennedy also serves as a director of De Vlieg-Bullard, Inc., International Paper
Company, and Holnam Inc.
Thomas F. McWilliams. Mr. McWilliams has served as a director of each of
the Company and CBCC since August 1990, and served as Vice President of the
Company from July 1993 until September 1994. Since 1983, Mr. McWilliams has been
affiliated with CVC and has served as vice president and a managing director of
CVC as well as a member of CVC's investment committee. From 1978 until 1983, Mr.
McWilliams served as an executive officer, including as vice president,
president and chief operating officer, of Shelter Resources Corporation, a
publicly-held holding company with operating subsidiaries in the manufactured
housing industry. From 1967 until 1978, Mr. McWilliams served in various
corporate finance and management positions at Citibank, N.A. Mr. McWilliams also
serves as a director of Ergo Science Corporation and Pen-Tab Industries.
William R. Toller. Mr. Toller was elected as a director of the Company in
October 1996. From October 1990 until July 1996, Mr. Toller served as chairman
and chief executive officer of Witco Corporation, a specialty chemical company.
Mr. Toller continues to serve on the board of Witco Corporation, and also serves
as a director of Commodore Separation Technologies, Inc., FusePlus, Inc., and
The United States Chamber of Commerce. Mr. Toller also is a member of the Board
of Trustees of the International Center for the Disabled in New York City and
the National Advisory Board of the First Commercial Bank in Little Rock,
Arkansas.
MEETINGS AND COMMITTEES OF DIRECTORS
The Board of Directors of the Company has an Audit Committee and a
Compensation Committee. The Board of Directors does not have a nominating
committee.
The Audit Committee makes recommendations to the Board of Directors
concerning the selection of the Company's independent accountants, reviews and
approves the scope of the annual audit and discusses internal accounting
procedures and financial controls with the Company's management and auditors.
The Audit Committee also reviews compliance by Company management and employees
with Company policies
5
<PAGE> 8
and may initiate and supervise any special investigations it deems necessary.
The members of the Audit Committee are Messrs. Donahue (Chairman), Kennedy and
McWilliams, all of whom are independent outside directors. The Audit Committee
held one meeting in 1996, at which all members of the Audit Committee were
present.
The Compensation Committee is responsible for setting annual base and cash
bonus compensation levels of executive officers and for establishing and
administering the Company's compensation policies and practices, including the
1994 Incentive Plan, and supervising the administration of the Company's other
employee benefit plans. The members of the Compensation Committee are Messrs.
Kennedy (Chairman), Donahue and McWilliams. The Compensation Committee held
three meetings in 1996, and all members of the Compensation Committee attended
each meeting.
During 1996, the Board of Directors of the Company held five meetings. Each
of the directors (other than Mr. Corpening) attended at least 75% of all
meetings held by the Board of Directors and all meetings of each committee of
the Board of Directors on which such director served during 1996. Mr. Corpening
attended three of the five meetings held in 1996. No Board meetings were held in
1996 after Mr. Toller's election to the Board.
MANAGEMENT COMPENSATION
BOARD COMPENSATION
Cash Compensation. Each member of the Board of Directors who is not an
employee or officer of the Company or any subsidiary of the Company
("Non-Employee Director") receives an annual retainer of $15,000 for service as
a director, plus $1,000 for each meeting of the Board of Directors attended and
$500 for each meeting of a committee of the Board of Directors attended, and
reimbursement of all ordinary and necessary expenses incurred in attending any
meeting of the Board of Directors or any committee of the Board of Directors.
Employees of the Company who also serve as members of the Board of Directors do
not receive any additional compensation for service as a director, but are
reimbursed for expenses.
Stock Option Awards. Pursuant to the 1994 Incentive Plan, each Non-Employee
Director is granted, on the date such person is elected or appointed as a
director, stock options to purchase 5,000 shares of Common Stock at an exercise
price equal to the average trading price of the Common Stock on the New York
Stock Exchange during the five trading days immediately preceding the date of
grant. In 1996, Mr. Toller was elected as a director on October 28, 1996, and
was granted stock options to purchase 5,000 shares of the Company's Common Stock
at a per share price of $17.875. All stock options granted to Non-Employee
Directors vest in equal proportions on each of the first five anniversaries of
the date of grant, provided that the person has been a director of the Company
continuously through that date. Non-Employee Directors reelected to successive
terms do not receive additional grants of stock options upon any such
reelection. See "Employment Contracts and Termination of Employment and Change
in Control Arrangements -- 1994 Incentive Plan" and "Proposal 3. Amendment to
1994 Long-Term Incentive Plan -- Description of 1994 Incentive Plan -- Vesting
and Exercisability" below.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation paid by the Company to its executive officers is
administered by the Compensation Committee of the Board of Directors and
generally consists of base salaries, annual cash incentives, equity incentives
awarded pursuant to the 1994 Incentive Plan, contributions to Company-sponsored
401(k) plans and miscellaneous perquisites.
The following table sets forth the total compensation awarded to, earned by
or paid by the Company to its Chief Executive Officer and to each of the other
two executive officers of the Company whose total cash compensation exceeded
$100,000 for services rendered during 1996.
6
<PAGE> 9
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1)
----------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(2) SARS(#)(3) ($)(4)
--------------------------- ---- --------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Martin V. Alonzo......................... 1996 300,000 450,000 0 0 44,460
Chairman of the Board, 1995 300,000 375,000 0 0 22,506
President and Chief Executive Officer 1994 250,000 325,000 0 250,000 19,068
George R. Miller......................... 1996 115,000 75,000 0 0 18,682
Vice President -- 1995 110,000 65,000 0 0 17,255
Sales and Marketing of CBCC 1994 99,180 50,000 0 25,000 14,453
Robert L. Meyer*......................... 1996 142,798 0 0 0 13,154
President and Chief Operating 1995 142,277 100,000 37,900 50,000 100,968
Officer of CBCC
</TABLE>
- ---------------
* Mr. Meyer resigned from CBCC effective as of October 25, 1996, and was
succeeded by Duane Grossett. After such date, Mr. Meyer was not employed by
CBCC or any other affiliate of the Company.
(1) No restricted stock awards were granted to any named executive officer
during the period reported.
(2) While the named executives may have received certain perquisites in 1996,
such perquisites did not exceed the lesser of $50,000 or 10% of such
executive's salary and bonus.
(3) Options were awarded pursuant to the 1994 Incentive Plan.
(4) The amounts disclosed in this column for 1996 include:
(i) premiums and imputed income paid by the Company with respect to
term life insurance for the benefit of Messrs. Alonzo, Miller and
Meyer in the amounts of $15,960, $8,776 and $1,896, respectively;
(ii) contributions by the Company to the Company's 401(k) Profit Sharing
Plan for the benefit of Messrs. Alonzo, Miller and Meyer in the
amounts of $7,500, $7,500 and $7,114, respectively;
(iii) contributions by the Company to the Company's 401(k) Savings and
Investment Plan for the benefit of Messrs. Alonzo, Miller and
Meyer in the amounts of $4,750, $2,406 and $4,144, respectively;
and
(iv) contributions by the Company to the Company's Benefit Restoration
Plan in the amount of $16,250 for the benefit of Mr. Alonzo.
No options or stock appreciation rights were granted during 1996 to the
executive officers named in the Summary Compensation Table ("Named Executive
Officers").
The following table sets forth information with respect to all unexercised
options to purchase the Company's Common Stock granted to the Named Executive
Officers through the end of fiscal year 1996 under the 1994 Incentive Plan. No
options were exercised by such persons during 1996. No stock appreciation rights
have been granted.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED VALUE AT FY-END(#) AT FY-END($)
ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(3)
-------------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
Mr. Alonzo(1)......... -- -- 100,000/150,000 987,500/1,481,250
Mr. Miller(1)......... -- -- 10,000/15,000 98,750/148,125
Mr. Meyer(2).......... -- -- 10,000/0 86,250/0
</TABLE>
- ---------------
(1) Options were granted on November 10, 1994, under the 1994 Incentive Plan,
and have a per share exercise price of $10.00.
(2) Options were granted on February 27, 1995, under the 1994 Incentive Plan and
have a per share exercise price of $11.25; 10,000 options became exercisable
on February 27, 1996, and the 40,000 unexercisable options were cancelled
upon Mr. Meyer's resignation on October 25, 1996.
(3) Based on the closing price ($19.875) of the Company's Common Stock on
December 31, 1996, as reported in the New York Stock Exchange composite
transactions listing.
7
<PAGE> 10
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
Employment Agreements
Martin V. Alonzo. The Company and Mr. Alonzo are parties to an employment
agreement which is effective through December 31, 1999, and automatically will
be extended on a year-to-year basis unless terminated by the Company or Mr.
Alonzo on 30 days' notice before the start of the following year. The employment
agreement provides for a current annual salary of $300,000, subject to future
annual increases at the discretion of the Board of Directors. Mr. Alonzo also is
entitled to annual cash incentives at the discretion of the Board of Directors.
Under the employment agreement, if Mr. Alonzo's employment is terminated in
certain circumstances, including a termination by the Company in violation of
the agreement or a termination by Mr. Alonzo for good reason (as defined in the
employment agreement), the Company will be required to pay Mr. Alonzo severance
payments in an amount equal to one and one-half times the sum of Mr. Alonzo's
then current base salary and the average of Mr. Alonzo's bonus for the three
previous years. If Mr. Alonzo's employment is terminated by the Company in
violation of the agreement or by Mr. Alonzo for good reason following a "change
in control" of the Company, Mr. Alonzo also will be entitled (in addition to any
other severance payments he may be owed) to receive a lump sum payment of cash
in an amount equal to 2.99 times Mr. Alonzo's annualized includable compensation
(determined within the meaning of the Internal Revenue Code of 1986, as amended
(the "Code")) and to continue participation for four years in all employee
benefit plans in which he was entitled to participate immediately before
termination of his employment or in substantially similar plans. A "change in
control" of the Company has the same meaning in Mr. Alonzo's employment
agreement as contained in the 1994 Incentive Plan as discussed below under "1994
Incentive Plan." The Company also has agreed to reimburse Mr. Alonzo for
reasonable legal fees and costs that Mr. Alonzo incurs in connection with the
resolution in Mr. Alonzo's favor of any dispute or controversy under his
employment agreement.
Robert L. Meyer. CBCC entered into an employment agreement with Robert L.
Meyer upon his employment as CBCC's President and Chief Operating Officer in
February 1995. Mr. Meyer's employment agreement provided for an annual salary of
$170,000, plus annual cash incentives at the discretion of the board of
directors of CBCC and the compensation committee of the Company. Mr. Meyer
resigned from CBCC in October 1996, at which time the Company entered into a
substantially identical employment agreement with Duane Grossett as described
below.
Duane R. Grossett. CBCC entered into an employment agreement with Duane R.
Grossett upon his employment as CBCC's President and Chief Operating Officer in
October 1996. Mr. Grossett's employment agreement is effective through January
4, 2000, and provides for an annual salary of $190,000, plus annual cash
incentives at the discretion of the board of directors of CBCC and the
compensation committee of the Company.
If Mr. Grossett's employment is terminated by CBCC without cause (as
defined in Mr. Grossett's employment agreement) or by Mr. Grossett for good
reason (as defined in Mr. Grossett's employment agreement), CBCC will be
required to pay to Mr. Grossett a severance payment in an amount equal to Mr.
Grossett's then-current base salary and maintain for one year health insurance
for the benefit of Mr. Grossett and his family to the extent in effect prior to
termination. If Mr. Grossett's employment is terminated by CBCC in violation of
the agreement or by Mr. Grossett for good reason following a "change in control"
of the Company (as discussed below under "1994 Incentive Plan") or at any time
after the Company ceases to own a majority of the voting stock of CBCC, Mr.
Grossett also will be entitled (in addition to any other severance payments he
may be owed) to receive a lump sum payment in cash in an amount equal to Mr.
Grossett's prior year's bonus. CBCC also has agreed to reimburse Mr. Grossett
for reasonable legal fees and costs that Mr. Grossett incurs in connection with
the resolution in Mr. Grossett's favor of any dispute or controversy under his
employment agreement.
8
<PAGE> 11
1994 Incentive Plan
The Company's 1994 Long-Term Incentive Plan (previously defined herein as
the "1994 Incentive Plan") provides for the granting of incentive awards to the
Company's directors, officers and employees in the form of stock options, stock
appreciation rights and restricted stock. Pursuant to the 1994 Incentive Plan,
upon a "change in control" of the Company, (1) each holder of a stock option
will be granted a corresponding stock appreciation right, (2) all outstanding
stock appreciation rights and stock options will become immediately and fully
vested and exercisable in full, and (3) the restriction period on any restricted
stock award will be accelerated and the restrictions will expire.
In general, under the 1994 Incentive Plan a "change in control" of the
Company occurs in any of four situations: (1) a person other than (a) the
Company, certain companies affiliated with the Company, benefit plans of the
Company or of certain companies affiliated with the Company or of a company with
the same ownership as the Company, (b) CVC or (c) certain affiliates of CVC,
acquires 50% or more of the voting power of the Company's outstanding voting
securities; (2) a person described in clause (1) announces a tender offer for
50% or more of the Company's outstanding voting securities and the Board of
Directors approves or does not oppose the tender offer, provided an event
described in clause (1), (3) or (4) occurs within one year of such tender offer;
(3) the Company merges or consolidates with another corporation or partnership,
or the Company's stockholders approve such a merger or consolidation, other than
mergers or consolidations in which the Company's voting securities are converted
into securities having the majority of voting power in the surviving company; or
(4) the Company liquidates or sells all or substantially all its assets, or the
Company's stockholders approve such a liquidation or sale, except sales to
corporations having substantially the same ownership as the Company.
In addition, if a change in control occurs in connection with a merger or
consolidation of the Company pursuant to which the Company is not the surviving
corporation or a sale of all or substantially all of the Company's assets, then
the holders of awards will be entitled to receive (upon payment of the exercise
price, if applicable) the same consideration to which they would have been
entitled had they exercised their stock options or stock appreciation rights, or
had the restrictions on any restricted stock award lapsed, immediately prior to
such transaction.
INDEMNITY AGREEMENTS
The Company has entered into indemnity agreements with each of its
directors and executive officers. Those agreements require the Company, to the
extent permitted under applicable law, to indemnify such persons against all
expenses, judgments, fines and penalties incurred in connection with the defense
or settlement of any actions brought against them by reason of the fact that
they are or were directors or officers of the Company or assumed certain
responsibilities at the direction of the Company. Each indemnification agreement
also provides that, upon a potential change in control of the Company and if the
indemnified director or officer so requests, the Company will create a trust for
the benefit of the indemnified director or officer in an amount sufficient to
satisfy payment of any liabilities and suits against which the Company has
indemnified the director or officer. The Company expects to enter into similar
agreements with persons selected to be directors and executive officers in the
future.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Kennedy, Donahue and McWilliams served as members of the
Compensation Committee of the Company during 1996. None of such persons are
officers or employees, or, except for Mr. McWilliams who served as a Vice
President of the Company from July 1993 until September 1994, former officers or
employees of the Company. During the period that Mr. McWilliams served as an
officer of the Company, he did not receive any compensation from the Company for
his service as an officer.
None of the executive officers of the Company served as a member of the
Compensation Committee or Board of Directors of any other company during 1996.
9
<PAGE> 12
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
STRATEGY AND OBJECTIVES
The Company's executive compensation program is administered by the
Compensation Committee of the Board of Directors which is comprised entirely of
Non-Employee Directors. The Compensation Committee determines any annual
increase in the base salary of the Chief Executive Officer, the annual bonus to
be paid to the Chief Executive Officer, and, based on recommendations of the
Chief Executive Officer, the compensation to be provided to the other executive
officers.
In determining compensation levels and developing compensation programs for
the Company's officers, the Compensation Committee analyzes the relationship
between base salary, annual cash incentives, equity incentives and benefits. The
underlying objectives of the Company's compensation strategy include the
following:
- Attract and retain superior executive talent, and motivate those
executives to achieve optimum short-term and long-term corporate
operating results.
- Align the interests of executive officers with the creation of
shareholder value and ensure long-term growth orientation through
equity-based plans.
- Provide a compensation package that recognizes individual contributions
as well as overall business results.
COMPONENTS OF COMPENSATION
The key elements of the Company's executive compensation program are base
salary, annual cash incentive and equity incentive compensation. These elements
are addressed separately.
The Compensation Committee does not exclusively use quantitative methods or
mathematical formulas in setting any element of compensation. In determining
each component of compensation, the Compensation Committee considers all
elements of an executive's total compensation package, including insurance and
other benefits.
Base Salaries. The base salary of each of the executive officers, other
than the Chief Executive Officer (the "CEO"), is reviewed annually, with
adjustments made based primarily on the recommendations of the CEO. In reviewing
base salaries the CEO considers various factors, including the performance of
the individual with respect to specific objectives and increases in
responsibilities. The specific objectives for each individual are established by
each individual after consultation with the CEO, and vary for each executive
position and for each year. In addition, in the first quarter of each year, the
Board of Directors approves the Company's business plan developed by management
for the current year. The business plan establishes objectives for the current
year with respect to areas such as marketing, operations, capital expenditures
and financial performance. In reviewing annual base salaries, the CEO and the
Compensation Committee also consider each individual's responsibilities related
to achieving the objectives in the business plan and, in an effort to provide
competitive compensation, salaries of similarly situated employees in comparator
companies as discussed below under "Compensation Review."
The financial performance of the Company, primarily operating income,
EBITDA (earnings before interest, taxes, depreciation and amortization) and net
income, also is considered in determining annual adjustments to base salaries,
but more emphasis is placed on financial performance in determining annual cash
incentives rather than base salaries. When the CEO completes his reviews, he
makes a recommendation to the Compensation Committee for its review and
approval.
For 1996, in accordance with the terms of the agreement (the "Leavitt
Acquisition Agreement"), pursuant to which the Company purchased its Leavitt
steel tube division in August 1996, the base salary of senior management
(including executive officers) of Leavitt (who were hired in conjunction with
the acquisition) were set at their level prior to the acquisition.
10
<PAGE> 13
Annual Cash Incentives. Annual cash incentives to executive officers, other
than the CEO, are determined by the Compensation Committee based upon the
recommendations of the CEO. The CEO in developing his bonus recommendations for
the other executive officers, as well as the Compensation Committee in
evaluating the CEO's recommendations, considers primarily the financial
performance of the Company as described above, as well as whether the Company
attained or exceeded the objectives set forth in the Company's annual business
plan and the performance of the Company in relation to industry conditions and
performance of comparable companies. The CEO and the Compensation Committee also
consider individual performance which contributed to the Company's financial
performance or otherwise assisted the Company's efforts to achieve the
objectives set forth in its business plan. Failure of the Company to attain or
exceed the objectives in the business plan does not, however, necessarily
prevent any cash bonus from being paid, although it may affect the size of cash
bonuses paid. Although in 1996 the Company exceeded the objectives established
in its 1996 business plan, as a result of the resignation of CBCC's President in
fourth quarter 1996, and the acquisition of Leavitt in third quarter 1996, the
only cash incentive for executive officers of CBCC paid by the Company for 1996
for full year performance was paid to CBCC's Vice President -- Sales and
Marketing (who had over 50 years experience with CBCC) as reported in the
Summary Compensation Table. The Company also paid a cash incentive to the new
President of CBCC (who accepted such position at the end of October 1996) for
performance in the fourth quarter 1996 in the amount of $20,000.
No specific weighting was assigned to any of the factors considered in
determining annual adjustments to base salaries and cash bonuses for officers of
CBCC.
Pursuant to the terms of the Leavitt Acquisition Agreement, the Company
paid cash incentives to the executive officers of Leavitt for 1996 performance
based on a formula incentive plan established by the prior owner of Leavitt.
Under the formula plan, target bonus amounts for each executive are set each
year as a percentage of base salary. The target bonus amounts for the executive
officers of Leavitt for 1996 were set by the prior owner and ranged from 25% to
40% of base salary. The bonus amount paid is then determined based on the
attainment of pre-established objectives for operating profit, return on assets
and cash flow of Leavitt, with attainment of 80% required for an objective's
weighted percentage to apply in the calculation of the bonus payment. Each
objective's weighted percentage is based on a linear scale, ranging from
one-sixth upon attainment of the 80% threshold level, to one-third upon
attainment of 100%, and one-half upon attainment of 120% and above, resulting in
a maximum possible bonus of 150% of target bonus. For 1996, Leavitt exceeded
120% of one target objective and attained in excess of 90% of the other two
target objectives, resulting in cash incentives for Leavitt's executive officers
equal to 109% of target bonus. The amount of the 1996 bonus paid by the Company
was equal to the difference between the amount of bonus earned for 1996 less the
amount paid by the prior owner of Leavitt for the period January 1, 1996, to
August 30, 1996, the closing date of the Leavitt acquisition.
Equity Incentive Compensation. The Compensation Committee endorses the view
that equity ownership by management is beneficial in aligning management's and
stockholders' interests in the enhancement of stockholder value. Through the
1994 Incentive Plan, the Company has utilized stock options (and has the ability
to utilize stock appreciation rights and restricted stock) as components of
executive compensation to ensure external competitiveness of the total executive
compensation package, motivate executives to improve long-term stock
performance, encourage equity ownership of the Company by executive officers and
align executive interests with the enhancement of stockholder value.
In granting stock options or other stock-based compensation under the 1994
Incentive Plan, the Compensation Committee considers the total number of shares
available for future grants under the 1994 Incentive Plan, prior grants
outstanding and estimated requirements for future grants. Individual awards,
with the exception of grants to the CEO, are made on the recommendation of the
CEO, taking into consideration each participant's position and scope of
responsibilities, the strategic and operational goals of the Company, the
expected future performance of each participant to achieve these goals, and
unvested options, if any, held by each participant. Awards granted to the CEO
are determined separately by the Compensation Committee based on the same
criteria as grants to other employees, as well as the Committee's perception of
the CEO's expected future contributions to the Company's achievement of its
long-term performance goals. The
11
<PAGE> 14
Compensation Committee historically has elected to grant more options in one
lump sum, rather than grant a smaller number on an annual basis, to create an
immediately meaningful incentive to enhance stockholder value in the Company.
Although no stock options were granted to the Named Executive Officers in 1996,
the Company did grant in 1996 to Duane Grossett (who accepted a position as
CBCC's President and Chief Executive Officer in October 1996) and Michael
Segraves (who accepted a position as CBCC's Chief Financial Officer in September
1996) options to purchase 50,000 and 20,000 shares of common stock,
respectively.
Except with respect to grants to Non-Employee Directors, the exercise price
for awards granted under the 1994 Incentive Plan, the term of such awards, the
vesting of such awards and the other terms and conditions of such awards are
determined by the Committee, in its discretion. All stock options previously
granted to employees under the 1994 Incentive Plan have an exercise equal to the
market price on the date of grant and vest in 20% increments over five years
from the date of grant. Stock options granted under the 1994 Incentive Plan must
expire not more than ten years from their date of grant.
Compensation Review. The Compensation Committee recently engaged William M.
Mercer, Incorporated ("Mercer"), an executive compensation consultant, to review
the Company's compensation program for the Company's CEO, Martin V. Alonzo, and
the officers of CBCC and Leavitt. Mercer compared the Company's compensation
program for these officers with a broad group of companies deemed comparable for
compensation purposes, which included companies in addition to companies in the
peer group used in the Performance Graph below. The 1966 annual revenues of the
Company are between the median and seventy-fifth percentile of revenues of the
companies surveyed, with 1996 shareholder return for the Company exceeding that
for the comparator companies. Based on the results of its survey, Mercer
provided to the Compensation Committee a comprehensive analysis of the
components of and total remuneration levels for Mr. Alonzo and the officers of
CBCC and Leavitt as compared to the companies surveyed. The study provided by
Mercer supports the cash bonus to Mr. Miller for 1996 as well as Mr. Alonzo's
1996 cash bonus described below.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The 1996 base compensation of Mr. Alonzo, the Chairman, President and CEO,
was governed by the terms of the employment agreement entered into between Mr.
Alonzo and the Company in November 1994 in conjunction with the Company's
initial public offering. See "Management Compensation -- Other Compensation
Arrangements -- Employment Agreements." Mr. Alonzo's employment agreement
provides that Mr. Alonzo's base salary will be reviewed annually and may be
increased at the discretion of the Compensation Committee. The Compensation
Committee anticipates that any future increase in the CEO's base salary will be
based on the Compensation Committee's assessment of the CEO's performance and
its expectations as to his future contributions to the Company.
In 1997, the Company also paid to Mr. Alonzo a cash bonus of $450,000 for
1996 services. In determining Mr. Alonzo's cash bonus, the Compensation
Committee considered the Company's performance in 1996, as well as Mercer's
study as discussed above, to determine the appropriate total cash remuneration
level for Mr. Alonzo. Based on the findings set forth in Mercer's report, Mr.
Alonzo's base salary is below the median for the companies surveyed, with the
addition of Mr. Alonzo's cash bonus raising Mr. Alonzo's total cash compensation
to approximate the seventy-fifth percentile based on the comparator companies.
Under the terms of his employment agreement, Mr. Alonzo will continue to be
eligible for annual cash incentive awards at the discretion of the Compensation
Committee. The Compensation Committee anticipates that future cash incentives
paid to the CEO will be based primarily on the financial performance of the
Company, as well as the individual performance of Mr. Alonzo in supporting the
Company's financial performance and attainment of strategic Company objectives.
POLICY WITH RESPECT TO $1 MILLION DEDUCTION LIMIT
The Company's executive compensation strategy is to be cost and tax
effective. Therefore, the Company's policy is to avail itself of all proper
deductions under the Internal Revenue Code, where practical, while
12
<PAGE> 15
maintaining the flexibility to approve compensation arrangements which it deems
to be in the best interests of the Company and its stockholders, but which may
not always qualify for full tax deductibility. Amendments to the Internal
Revenue Code in 1993 limit, in certain circumstances, the deductibility of
compensation in excess of $1 million paid to each of the five highest paid
executives in one year. Although the total compensation of the executive
officers did not exceed this deduction limitation in 1996, and is unlikely to
exceed it in 1997, certain factors involved in the Company's compensation
program may impact on whether the deduction limitation is exceeded in the
future. Although the 1994 Incentive Plan is intended to permit compensation
associated with stock options and stock appreciation rights to be excluded from
the deduction limitations, certain payments under the Incentive Plan, including
grants of restricted stock, may be included as compensation for purposes of
calculating the deduction limitation, potentially impacting the deduction
limitation.
As the Company moves forward in its efforts to create stockholder value in
the years ahead, the Compensation Committee will continue to review, monitor and
evaluate the Company's program for executive compensation to assure that it is
internally effective in support of the Company's strategy, competitive in the
marketplace to attract, retain and motivate the talent needed to achieve the
Company's financial objectives, and appropriately rewards the creation of value
on behalf of the Company's stockholders.
This report has been provided by the Compensation Committee of the Board of
Directors:
John R. Kennedy, Chairman
Donald J. Donahue
Thomas F. McWilliams
13
<PAGE> 16
PERFORMANCE GRAPH
Set forth below is a graph comparing the total stockholder return on the
Company's Common Stock, the Standard & Poor's 500 Composite Index ("S&P"), the
Russell 2000 Index, the Dow Jones Industrials Index, a group of the Company's
current peers and a group of the Company's historical peers as used in the
performance graph for the 1996 Proxy Statement. The historical peer group
consists of Brush Wellman, Inc., Mueller Industries, Inc., Olin Corporation and
Wolverine Tube, Inc., and was selected on a non-ferrous metals line of business
basis, with the current peer group consisting of the historical peer group with
the addition of Maverick Tube, Inc., a steel tube producer, to correspond to the
Leavitt acquisition in August 1996. The graph illustrates total stockholder
return at each of December 31, 1994, 1995 and 1996, and at February 28, 1997, of
$100 invested at November 4, 1994 (the date the Common Stock began trading), and
assumes reinvestment of all dividends. The return of each Company in the peer
group has been weighted according to its respective market capitalization.
COMPARATIVE TOTAL RETURN
<TABLE>
<CAPTION>
PEER PEER
MEASUREMENT PERIOD CHASE GROUP GROUP
(FISCAL YEAR BRASS (WITH (WITHOUT RUSSELL DOW JONES
COVERED) INDUSTRIES MAVERICK) MAVERICK) S&P 500 2000 INDUSTRIALS
<S> <C> <C> <C> <C> <C> <C>
11/4/94 100 100 100 100 100 100
12/31/94 96.25 97.65 98.11 99.60 99.38 101.43
12/31/95 126.25 144.63 147.57 137.02 127.65 138.79
12/31/96 198.75 155.48 157.03 168.48 148.70 178.82
2/28/97 237.50 172.62 175.06 180.41 147.94 190.73
</TABLE>
14
<PAGE> 17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Company's knowledge, set forth below is certain information, as of
the Record Date, regarding ownership of Common Stock by (i) each person who
beneficially owns 5% or more of the Common Stock, (ii) each director and
executive officer of the Company and (iii) all directors and executive officers
of the Company as a group. To the Company's knowledge, each person holds sole
voting and investment power over the shares shown unless otherwise indicated.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE OF
NAME OWNERSHIP CLASS(1)
---- ---------- -------------
<S> <C> <C>
Citicorp Venture Capital Ltd................................ 4,859,964(2) 48.1%(3)
399 Park Avenue
New York, New York 10043
Martin V. Alonzo............................................ 834,643(4) 13.7%
c/o Chase Brass Industries, Inc.
14212 County Road M-50
Montpelier, Ohio 43543
Thomas F. McWilliams........................................ 150,697(5) 2.5%
Duane R. Grossett........................................... 3,000 *
Raymond E. Cartledge........................................ 4,000(6) *
Donald J. Donahue........................................... 3,500(5) *
John R. Kennedy............................................. 3,000(5) *
Charles E. Corpening........................................ 2,000(7) *
William R. Toller........................................... -0- --
Lawrence R. Lansford........................................ -0- --
Michael T. Segraves......................................... -0- --
All directors and executive officers as a group (10
persons).................................................. 1,000,840(8) 16.4%
</TABLE>
- ---------------
* Less than one percent.
(1) Based on 5,997,396 shares of Common Stock outstanding as of the Record Date.
(2) Includes 4,100,079 shares of Nonvoting Common Stock held by CVC. Each share
of Nonvoting Common Stock is convertible into one share of Common Stock at
the option of the holder thereof. See "Quorum and Voting" above.
(3) Gives effect to 4,100,079 shares of Nonvoting Common Stock held by CVC,
which are not included for purposes of calculating the percentage ownership
of any other stockholder. See note (2) above. Without giving effect to the
outstanding Nonvoting Common Stock held by CVC such percentage would be
12.7%.
(4) Excludes 25,000 shares of Common Stock held by Mr. Alonzo's wife, as to
which Mr. Alonzo disclaims beneficial ownership. Includes 100,000 shares
subject to stock options granted under the 1994 Incentive Plan that
currently are exercisable.
(5) Includes 2,000 shares subject to stock options granted under the 1994
Incentive Plan that currently are exercisable.
(6) Includes 2,000 shares subject to stock options granted under the 1994
Incentive Plan that are exercisable within 60 days of the Record Date.
(7) Consists solely of shares subject to stock options granted under the 1994
Incentive Plan that are exercisable within 60 days of the Record Date.
(8) Includes 110,000 shares subject to stock options granted under the 1994
Incentive Plan that currently are exercisable or that are exercisable within
60 days of the Record Date.
15
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and each of CVC and Mr. Alonzo are parties to a Registration
Rights Agreement (the "Registration Rights Agreement") pursuant to which each of
CVC and Mr. Alonzo are entitled to require the Company to file a registration
statement under the Securities Act of 1933 ("Securities Act") covering the sale
of some or all of the shares of Common Stock held by CVC and Mr. Alonzo, subject
to certain conditions. Pursuant to the Registration Rights Agreement, the
Company may be required to file on behalf of each of CVC and Mr. Alonzo an
unlimited number of registration statements on Form S-2 or Form S-3 under the
Securities Act, when available. At any time that the Company is not eligible to
use a Form S-2 or Form S-3 registration statement, CVC and Mr. Alonzo also may
require the Company to file a registration statement on their behalf on an
appropriate registration form, provided that the Company will not be required to
effect more than two such registrations on behalf of CVC or one such
registration on behalf of Mr. Alonzo during the term of the Registration Rights
Agreement. All such demand registrations require that the registration statement
relate to a minimum of, in the case of CVC, 5% of the outstanding Common Stock
or, in the case of Mr. Alonzo, 2% of the outstanding Common Stock. In addition,
in the event the Company proposes to register any of its shares of Common Stock
under the Securities Act, other than in this offering, CVC and Mr. Alonzo will
be entitled to require the Company to include all or a portion of their shares
in such registration, subject to certain conditions. Each demand registration
pursuant to the Registration Rights Agreement must be at least 180 days apart.
Generally, all fees, costs and expenses of any registration under the
Registration Rights Agreement will be borne by the Company, provided that CVC
and Mr. Alonzo will be required to bear their respective pro rata share of
underwriting discounts and commissions. CVC and Mr. Alonzo may assign their
respective rights under the Registration Rights Agreement to persons to whom
they transfer or otherwise assign shares of the Common Stock that they hold,
provided that the shares transferred or assigned to that person represent five
percent or more of the outstanding Common Stock on a fully-diluted basis at the
time of transfer.
PROPOSAL 2.
AMEND RESTATED CERTIFICATE OF INCORPORATION TO
CHANGE CORPORATE NAME TO "CHASE INDUSTRIES INC."
The Board of Directors of the Company has approved the following
resolution, subject to the approval of the stockholders of the Company by the
requisite vote at the 1997 Annual Meeting:
RESOLVED, Article First of the Restated Certificate of Incorporation
of Chase Brass Industries, Inc. (the "Corporation"), be amended in its
entirety to read as follows:
"FIRST: The name of the Corporation is Chase Industries Inc."
FURTHER RESOLVED, that the appropriate officers of the Corporation
shall be authorized to execute the Certificate of Amendment to the
Corporation's Restated Certificate of Incorporation setting forth the
amendment authorized in the preceding resolution and to file the same with
the Secretary of State of the State of Delaware.
The Board of Directors believes that the change of the corporate name will
preserve the name recognition of "Chase," while better reflecting the Company's
intent to broaden its operations from primarily a brass rod manufacturer to an
engineered materials company engaged in a broader base of industries. The
Company took the first step in broadening of the scope of its business with the
August 1996 acquisition of the Leavitt steel tube division of UNR Industries,
Inc., which the Company now operates through its wholly-owned subsidiary Leavitt
Tube Company, Inc. Moreover, the Board continues to evaluate opportunities
through which the Company may further expand its businesses through strategic
acquisitions and joint venture opportunities in the manufacturing and related
fields.
If the proposed amendment to the Company's Restated Certificate of
Incorporation is approved by the requisite vote of stockholders at the 1997
Annual Meeting, such amendment will become effective when the
16
<PAGE> 19
Certificate of Amendment to the Company's Restated Certificate of Incorporation
is filed with the Secretary of State of the State of Delaware (which is expected
to occur promptly after the 1997 Annual Meeting).
The Board of Directors has unanimously approved the proposed amendment to
the Company's Restated Certificate of Incorporation to change the corporate
name. The affirmative vote of holders of a majority of the outstanding shares of
the Company's Common Stock will be necessary for the approval of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE PROPOSAL
TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
CORPORATE NAME TO "CHASE INDUSTRIES INC."
PROPOSAL 3.
AMENDMENT TO 1994 LONG-TERM INCENTIVE PLAN
GENERAL
The Board of Directors and stockholders of the Company adopted the
Company's 1994 Long-Term Incentive Plan (previously defined as the "1994
Incentive Plan") prior to the closing of the Company's initial public offering
of Common Stock in November 1994 (the "Offering"). The 1994 Incentive Plan
provides for the granting of stock options, stock appreciation rights and
restricted stock (collectively, "Incentive Awards") to directors and employees
of the Company and its subsidiaries. The Board of Directors believes that the
1994 Incentive Plan strengthens the Company's ability to attract and retain
qualified directors and key employees upon whom the financial success and growth
of the Company depend, and enables the Company to provide its directors and
employees an opportunity to acquire a proprietary interest in the success of the
Company, resulting in an increased incentive for such persons to remain with the
Company and strive to maximize the success of the Company.
The maximum number of shares of Common Stock that may be issued under the
1994 Incentive Plan currently is 1,000,000, subject to adjustment in the event
of stock splits or reclassification. In connection with the Offering, the
Company granted stock options to purchase a total of 490,000 shares of Common
Stock to all employees of CBCC. In connection with the Leavitt acquisition in
1996, the Company granted stock options to purchase a total of 228,250 shares of
Common Stock to all employees of Leavitt. As a result of such grants, together
with certain additional grants of stock options to employees and directors of
the Company, as of March 31, 1997, there were 119,800 shares of Common Stock
available for additional Incentive Awards to be granted under the 1994 Incentive
Plan. See "Description of 1994 Incentive Plan -- Outstanding Incentive Awards"
below.
All stock options previously granted to employees under the 1994 Incentive
Plan vest in 20% increments over five years and have an exercise price equal to
the market value of the Common Stock on the date of grant (or $10.00, the
Offering price, in the case of stock options granted in connection with the
Offering). Stock options granted to Non-Employee Directors are described above
under "Management Compensation -- Board Compensation." If the 1997 Director
Stock Option Plan is approved as proposed in "Proposal 4" below, no further
grants will be made to Non-Employee Directors under the 1994 Incentive Plan.
AMENDMENTS
In April 1997, the Compensation Committee adopted, and the Board of
Directors ratified, certain amendments to the 1994 Incentive Plan, subject to
stockholder approval. The amendments to the 1994 Incentive Plan (collectively,
the "1994 Incentive Plan Amendment") would (i) increase the maximum aggregate
number of shares of Common Stock that may be issued pursuant to Incentive Awards
granted under the 1994 Incentive Plan by 500,000, from 1,000,000 to 1,500,000
and (ii) limit to 100,000 the aggregate number of shares of Common Stock that
may be subject to stock options and stock appreciation rights granted to any
employee of the Company during any two-year period.
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to approve the 1994 Incentive Plan Amendment to
increase the shares available under the 1994 Incentive Plan to provide the
Company with the ability to continue to utilize equity compensation to attract
and retain qualified
17
<PAGE> 20
personnel and to have shares available for future grants of Incentive Awards to
employees as the Compensation Committee deems appropriate, particularly in the
event the Company consummates another acquisition.
The 1994 Incentive Plan Amendment to limit to 100,000 the aggregate number
of shares that may be subject to Stock Options and SARs granted to any employee
during any two-year period is being proposed in order to conform the 1994
Incentive Plan to the requirements of certain provisions of the Internal Revenue
Code of 1986, as amended, to permit the Company to take advantage of deductions
for certain expenses in the event an executive officer's total compensation in a
future year exceeds $1 million and is comprised, in part, of income related to
Stock Options and/or stock appreciation rights granted under the 1994 Incentive
Plan in the future. See "Description of 1994 Incentive Plan -- Federal Income
Tax Consequences" below.
DESCRIPTION OF 1994 INCENTIVE PLAN
The following is a summary of the principal features of the 1994 Incentive
Plan, together with the applicable tax implications. This summary, however, does
not purport to be a complete description of all provisions of the 1994 Incentive
Plan. Any stockholder who wishes to obtain a copy of the actual plan document
may do so by written request to the Corporate Secretary at the Company's
executive offices in Montpelier, Ohio.
Administration of Plan. The 1994 Incentive Plan is administered by the
Board or by a committee consisting of two or more Non-Employee Directors
appointed by the Board of Directors (the "Committee"). The members of the
Compensation Committee currently administer the 1994 Incentive Plan.
The Committee has wide discretion and flexibility to administer the 1994
Incentive Plan in the manner that it determines, from time to time, is in the
best interests of the Company. In granting awards under the 1994 Incentive Plan
(other than awards to Non-Employee Directors), the Committee has discretion to
establish the persons to whom Incentive Awards will be granted and the exercise
price and/or vesting periods, as it deems appropriate.
Shares of Common Stock Subject to the 1994 Incentive Plan. The 1994
Incentive Plan currently provides for the issuance of a maximum of 1,000,000
shares of Common Stock, subject to adjustment as described in "Adjustment
Provisions" below. Incentive Awards to which such shares of Common Stock relate
may be awarded to any one eligible participant or allocated among the eligible
participants, as determined by the Committee. If the 1994 Incentive Plan
Amendment is approved by the requisite vote of stockholders at the Annual
Meeting, the maximum available shares will be increased to 1,500,000 and no more
than 100,000 shares of Common Stock may be subject to Stock Options or stock
appreciation rights granted in the future to an employee of the Company during
any two-year period, subject in each case to adjustment as described in
"Adjustment Provisions" below.
If any Incentive Awards granted under the 1994 Incentive Plan are forfeited
or surrendered before exercise or lapse of restrictions, in whole or in part,
the shares reserved therefor shall revert to the status of available shares
under the 1994 Incentive Plan.
Eligibility. Employees eligible to participate in the 1994 Incentive Plan
are designated by the Committee and are chosen from among those employees
determined to be key employees. The Committee has determined that all employees
of the Company and its subsidiaries should be recognized as key employees and,
therefor, eligible to participate in the 1994 Incentive Plan. In addition, each
Non-Employee Director is eligible to receive a one-time grant of Non-qualified
Stock Options. See "Management Compensation -- Board Compensation -- Stock
Option Awards" above. If the 1997 Non-Employee Director Stock Option Plan,
described in "Proposal 4" below, is approved by the requisite vote of
stockholders at the Annual Meeting, the 1994 Incentive Plan will be amended by
the Compensation Committee and Board of Directors of the Company to provide that
no further grants will be made to Non-Employee Directors under the 1994
Incentive Plan.
Types of Awards. The types of Incentive Awards that may be granted under
the 1994 Incentive Plan include (i) incentive stock options ("Incentive Stock
Options"), as defined in Section 422 of the Code, (ii) stock options other than
Incentive Stock Options ("Non-qualified Stock Options" and, together with
18
<PAGE> 21
Incentive Stock Options, "Stock Options"), (iii) stock appreciation rights
("SARs") and (iv) restricted stock ("Restricted Stock").
Terms and Conditions of Stock Options. Except for Non-qualified Stock
Options granted to Non-Employee Directors, the purchase price of Common Stock
under each Stock Option is determined by the Committee; provided, however, that
the exercise price for Common Stock subject to an Incentive Stock Option may not
be less than the greater of the par value of the Common Stock or 100% of the
fair market value of the Common Stock on the date of grant of such Incentive
Option. The purchase price of Common Stock under a Non-qualified Stock Option
must be at least equal to the par value of the Common Stock, but may be less
than the fair market value of the Common Stock on the date of grant. The
aggregate fair market value (determined at the time an Incentive Stock Option is
granted) of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by an employee during any calendar year (under
all stock option plans of the Company and its subsidiaries) will not exceed
$100,000, or such other amount as may be prescribed under the Code or applicable
regulations and rulings from time to time.
Except for Stock Options granted to Non-Employee Directors, Stock Options
may be exercised as determined by the Committee, but in no event later than ten
years from the date of grant in the case of Incentive Stock Options.
For a discussion of the terms of Stock Options granted to Non-Employee
Directors under the 1994 Incentive Plan, see "Management Compensation -- Board
Compensation -- Stock Option Awards" above.
Upon the exercise of a Stock Option, the participant must pay the purchase
price in full either in cash, a cash equivalent acceptable to the Committee, or
a combination of cash and its equivalent acceptable to the Committee. The
purchase price may be paid, with the approval of the Committee, by assigning and
delivering to the Company shares of Common Stock having a value equal to the
exercise price or a combination of cash and such shares equal in value to the
exercise price. In addition, at the request of a participant and to the extent
permitted by applicable law, the Committee may approve arrangements with a
brokerage firm under which such brokerage firm, on behalf of the participant,
will pay the exercise price of the Stock Options being exercised to the Company
and the Company will promptly deliver to such firm the shares exercised.
Terms and Conditions of Stock Appreciation Rights. An SAR may be granted
either in tandem with or independent of a Stock Option. An SAR is the right to
receive an amount equal to the excess of the fair market value of a share of
Common Stock on the date of exercise over the fair market value of a share of
Common Stock on the date of grant (in the case of SARs granted independent of a
Stock Option) or the exercise price of the related Stock Option (in the case of
an SAR granted in tandem with a Stock Option).
An SAR granted in tandem with a Stock Option will require the holder, upon
exercise, to surrender the related Stock Option or any portion thereof to the
extent unexercised, with respect to the number of shares as to which such SAR is
exercised, and to receive payment as described above. The surrendered Stock
Option will then cease to be exercisable. A tandem SAR will be exercisable or
transferable only to the extent that the related Stock Option is exercisable or
transferable.
An SAR granted independent of a Stock Option will be exercisable as
determined by the Committee. An independent SAR will entitle the holder, upon
exercise, to receive payment as described above. The Committee may limit the
amount payable upon exercise of any tandem or independent SAR. Any such
limitation will be specified at the time the SAR is granted.
Payment upon the exercise of SARs will be made, at the discretion of the
Committee, in cash, in shares of Common Stock, or a combination of cash and
shares of Common Stock.
Terms and Conditions of Restricted Stock Awards. A Restricted Stock award
is the grant of shares of Common Stock or the right to purchase Common Stock, at
a price determined by the Committee, which is nontransferable and subject to
substantial risk of forfeiture until specific conditions are met. Certificates
evidencing Restricted Stock awards will bear a legend making reference to the
restrictions imposed. The restrictions will lapse in accordance with a schedule
or other conditions determined by the Committee. During the restriction period,
the holder of a Restricted Stock award may, at the discretion of the Committee,
be
19
<PAGE> 22
given certain rights as a stockholder, including the right to vote the stock
subject to the Restricted Stock award and/or receive dividends with respect
thereto.
Vesting and Exercisability. Except as described below, if a plan
participant's relationship with the Company is terminated for any reason other
than death, disability or normal retirement, then all Incentive Awards granted
to such participant that are not then exercisable (or for which restrictions
have not lapsed) shall become null and void as of the date of such termination.
The portion, if any, of such Incentive Awards that are exercisable as of the
date of termination shall be exercisable for a period of the lesser of the
remaining term of the Incentive Award or 180 days after the date of termination.
If an employee's employment is terminated as a result of a death,
disability or normal retirement, then any and all Incentive Awards granted to
such employee that are not then exercisable (or for which restrictions have not
lapsed) shall become exercisable (and the restrictions thereon, if any, shall
lapse) as of the date of termination. All such Incentive Awards which have
become exercisable as of the date of such termination (either as a result of the
acceleration of exercisability as described above or otherwise) shall remain
exercisable for the lesser of the remaining term of such Incentive Awards or
three years after the date of termination of employment.
If a Non-Employee Director ceases to serve as a director as a result of
death or disability, then all Stock Options granted to such Non-Employee
Director that are not then exercisable shall become exercisable as of the date
of ceasing to serve as a director. All such Stock Options which have become
exercisable as of the date of ceasing to serve as a director as a result of
death or disability (either as a result of the acceleration of exercisability as
described above or otherwise), as well as all Stock Options held by a
Non-Employee Director that are otherwise exercisable at the time of such
director's resignation or retirement (including as a result of declining to
accept a nomination or otherwise stand for reelection) from the Board of
Directors on or after the date of the fifth annual meeting of stockholders after
such director's election or appointment to the Board of Directors, shall remain
exercisable for the lesser of the remaining term of such Incentive Awards or
three years after ceasing to serve as a director. Resignation or retirement from
the Board of Directors does not result in any acceleration of vesting of
outstanding Stock Options.
If a plan participant's relationship with the Company is terminated by the
Company for cause, then any and all Incentive Awards granted to such participant
that have not been exercised or for which restrictions have not lapsed shall
become null and void as of the date of such termination.
Adjustment Provisions. The 1994 Incentive Plan contains provisions that
automatically modify the terms of Incentive Awards or permit the Committee to
modify the terms of Incentive Awards when a subdivision, consolidation or change
in control of the Company occurs or when the Company undergoes certain
restructurings that do not result in a change in control of the Company.
The terms of an Incentive Award and the maximum number of shares of Common
Stock authorized for issuance under the 1994 Incentive Plan will be adjusted if
the Company subdivides as a whole the number of shares of Common Stock then
outstanding into a greater number of shares of Common Stock (such as in a stock
split) or consolidates as a whole the number of shares of Common Stock then
outstanding into a lesser number of shares of Common Stock (such as in a reverse
stock split). In addition, if the Common Stock is subdivided or consolidated
into one or more different kinds of securities, the holders of Incentive Awards
will be entitled to purchase or receive (in lieu of the shares of Common Stock
originally subject to the Incentive Award) the kinds of securities into which
the Common Stock is subdivided or consolidated.
If the 1994 Incentive Plan Amendment is approved, the two-year 100,000 per
employee share limitation as described above under "Amendments" also would be
adjusted commensurate with any such adjustment to the total number of shares
available for issuance under the 1994 Incentive Plan.
Change in Control Provisions; Restructure without a Change in Control. For
a description of the change in control provisions contained in the 1994
Incentive Plan, see "Management Compensation -- Employment Contracts and
Termination of Employment and Change in Control Agreements -- 1994 Incentive
Plan."
20
<PAGE> 23
If a restructuring of the Company occurs that does not constitute a change
in control of the Company, the Committee may (but need not) cause the Company to
take any one or more of the following actions (except with respect to stock
options granted to Non-Employee Directors): (1) accelerate in whole or in part
the time of vesting and exercisability of any outstanding Stock Options and
Stock Appreciation Rights in order to permit those Stock Options and Stock
Appreciation Rights to be exercisable before, upon or after the completion of
the restructuring; (2) grant each optionholder corresponding Stock Appreciation
Rights; (3) accelerate in whole or in part the expiration of some or all of the
restrictions on any Restricted Stock; (4) if the restructuring involves a
transaction in which the Company is not the surviving entity, cause the
surviving entity to assume in whole or in part any one or more of the
outstanding Incentive Awards upon such terms and provisions as the Committee
deems desirable; or (5) redeem in whole or in part any one or more of the
outstanding Incentive Awards (whether or not then exercisable) in consideration
of a cash payment, adjusted for withholding obligations. A restructuring
generally is any merger of the Company or the direct or indirect transfer of all
or substantially all of the Company's assets (whether by sale, merger,
consolidation, liquidation or otherwise) in one transaction or a series of
transactions.
Transferability. Incentive Awards granted under the 1994 Incentive Plan
generally are not transferrable, provided that Stock Options and SARs may be
transferred to certain family members and trusts or partnerships created for the
benefit of family members. SARs granted in tandem with Stock Options will not be
transferrable other than in connection with the transfer of the Stock Options to
which such SARs relate.
Amendment and Termination of the 1994 Incentive Plan. No Incentive Award
may be granted under the 1994 Incentive Plan after November 10, 2004, the tenth
anniversary of the effective date of the 1994 Incentive Plan. The Board of
Directors of the Company may, insofar as permitted by law, with respect to any
shares which, at the time, are not subject to Incentive Awards, suspend or
discontinue the 1994 Incentive Plan.
The Committee may, subject to ratification by the Board of Directors of the
Company, amend or modify the 1994 Incentive Plan at any time for any purpose, to
the extent permitted by law. However, the 1994 Incentive Plan may not be amended
to (a) increase materially the aggregate number of shares of Common Stock that
may be issued under the 1994 Incentive Plan, (b) increase materially the
benefits accruing to eligible individuals under the 1994 Incentive Plan or (c)
modify materially the eligibility requirements for participation in the 1994
Incentive Plan, in each case without the consent of the requisite holders of the
shares of Common Stock then outstanding as may be required by applicable law in
effect as of the time of the amendment.
Federal Income Tax Consequences. A participant receiving Non-qualified
Stock Options or SARs will not recognize taxable income at the time the
Non-qualified Stock Option or SAR is granted. At the time the Non-qualified
Stock Option or SAR is exercised, the participant will recognize ordinary
taxable income in an amount equal to the difference between the exercise price
(or fair market value of the Common Stock at the time of grant of SARs granted
independent of Stock Options) and the fair market value of the Common Stock on
the date of exercise. The Company will be entitled to a concurrent deduction
equal to the ordinary income recognized by the participant.
An employee granted an Incentive Stock Option will not recognize taxable
income at the time of grant or, subject to certain conditions, at the time of
exercise. If stock acquired upon exercise of an Incentive Stock Option is held
for a minimum of two years from the date of grant of the Stock Option and one
year from the date of exercise, the gain or loss (in an amount equal to the
difference between the sales price and the exercise price) upon disposition of
the stock will be treated as long-term capital gain or loss, and the Company
will not be entitled to any deduction.
If the holding period requirement is not met, the employee will recognize
ordinary income in an amount equal to the lesser of (i) the excess of the fair
market value of Common Stock on the date of exercise over the exercise price or
(ii) the excess of the amount realized on the sale of such stock over the
exercise price.
An employee receiving a Restricted Stock award generally will recognize
ordinary taxable income at the time the restrictions lapse in an amount equal to
the difference between the fair market value of the Common Stock at the time the
restrictions lapse and the price, if any, paid by the employee for such Common
21
<PAGE> 24
Stock (unless the employee makes a Section 83(b) election as discussed below).
Any dividends received by the employee before the termination of restrictions
will be taxed as ordinary income. The Company will be entitled to a deduction
equal to the ordinary income recognized by the employee. Upon the disposition of
the Common Stock, the employee will recognize taxable gain or loss equal to the
difference between the fair market value of the Common Stock at the time the
restrictions lapse and the amount realized upon the disposition of the Common
Stock. The gain or loss will be taxable as a capital gain or loss.
If an employee makes an election under Section 83(b) of the Code (a
"Section 83(b) election"), the employee will recognize ordinary income when the
Restricted Stock is transferred to the employee (without regard to any risk of
forfeiture or restriction on the employee's ability to freely transfer the
Restricted Stock) in an amount equal to the fair market value of the Restricted
Stock at that time over the amount, if any, paid by the employee for the
Restricted Stock. If the employee makes a Section 83(b) election, the Company
will be entitled to a deduction equal to the ordinary income recognized by the
employee in the year of the election. However, dividends received before the
restrictions lapse will not be deductible by the Company. Upon the disposition
of the Common Stock, the employee will recognize gain or loss equal to the
difference between the amount realized and the sum of the income recognized by
the employee as a result of the Section 83(b) election and any amounts paid by
the employee for the Restricted Stock.
Special rules may apply with respect to employees subject to Section 16(b)
of the Securities Exchange Act of 1934. Other than in the case of an Incentive
Stock Option held in accordance with the specified holding period requirements,
the amount and timing of the recognition of income by an employee subject to
Section 16(b) (and the concurrent deduction by the Company) on the exercise of a
Stock Option or SAR generally will be based on the fair market value of the
shares received when the restrictions of Section 16(b) lapse, unless the
employee elects otherwise by making a Section 83(b) election.
Section 162(m) of the Internal Revenue Code generally imposes a $1 million
per person annual limit on the amount the Company may deduct as compensation
expense for its chief executive officer and its four other highest paid
executives. Under Internal Revenue Service regulations, income attributable to
Incentive Awards previously granted under the 1994 Incentive Plan will not be
taken into account for purposes of calculating the $1 million annual limit on
deductible compensation imposed by Section 162(m) of the Code. If the proposed
amendment to increase available shares under the 1994 Incentive Plan is
approved, the 1994 Incentive Plan will be required to comply with certain
requirements of Section 162(m) of the Code to cause Stock Options and SARs
granted thereunder in the future to be classified as "performance-based
compensation" under Section 162(m)(4)(C) of the Code and, thereby, exempt from
the $1 million limit imposed by Section 162(m). The 1994 Incentive Plan, as
amended by the 1994 Plan Amendment, is intended to comply with such requirements
with respect to Stock Options and SARs. As a result, income recognized by an
executive officer upon the exercise of a Stock Option or SAR should not be
subject to or count against the Section 162(m) $1 million annual limit on
deductible compensation. Restricted Stock Awards generally are not available for
the exemption from the $1 million annual limit imposed by Section 162(m) and,
therefore, income attributable to grants of Restricted Stock, if any, that may
be made in the future under the 1994 Incentive Plan will be included for
purposes of the $1 million limitation.
Outstanding Incentive Awards. Upon the closing of the Offering, the Company
granted (i) to Mr. Alonzo and Mr. Miller, Non-qualified Stock Options to
purchase 250,000 and 25,000 shares of Common Stock, respectively, (ii) to all
other employees (289 persons), Non-qualified Stock Options to purchase an
aggregate of 195,000 shares of Common Stock; and (iii) to each of Messrs.
Donahue, Grossett, Kennedy and McWilliams, as Non-Employee Directors,
Non-qualified Stock Options to purchase 5,000 shares of Common Stock. All of
these Stock Options have a per share exercise price equal to the $10.00 Offering
price to the public.
Pursuant to the employment agreement between Robert L. Meyer and CBCC, on
February 27, 1995, the Company granted to Mr. Meyer Non-qualified Stock Options
to purchase 50,000 shares of Common Stock. The Stock Options granted to Mr.
Meyer had a per share exercise price of $11.25 (the closing price of the Common
Stock on the date of grant). Mr. Meyer resigned from his position with CBCC in
October 1996 and
22
<PAGE> 25
forfeited 40,000 of the 50,000 Stock Options granted to him which had not vested
as of the date of Mr. Meyer's resignation.
Pursuant to the employment agreement between Duane R. Grossett and CBCC, on
October 28, 1996, the Company granted to Mr. Grossett, who succeeded Mr. Meyer
as President of CBCC, Non-qualified Stock Options to purchase 50,000 shares of
Common Stock. The Stock Options granted to Mr. Grossett have a per share
exercise price of $18.875 (the closing price of Common Stock on the date of
grant). After his acceptance of the position with CBCC, Mr. Grossett resigned as
a director of the Company and forfeited 3,000 of the 5,000 shares granted to him
as a Non-Employee Director, which had not vested as of the date of Mr.
Grossett's resignation.
In connection with the Leavitt acquisition in August 1996, the Company
granted to all employees of Leavitt (419 persons) Non-qualified Stock Options to
purchase an aggregate of 228,250 shares of Common Stock. All of these Stock
Options have a per share exercise price of $17.00 (the closing price of the
Common Stock on the date of grant).
The Company also has granted additional Stock Options under the 1994
Incentive Plan as the Compensation Committee from time to time has deemed
appropriate.
The following table reflects all Stock Options granted under the 1994
Incentive Plan as of March 31, 1997. No SARs or Restricted Stock awards have
been granted under the 1994 Incentive Plan.
1994 LONG-TERM INCENTIVE PLAN
STOCK OPTION GRANTS
AS OF MARCH 31, 1997(1)(2)
<TABLE>
<CAPTION>
STOCK OPTIONS
NAME (AND POSITION) GRANTED
------------------- -------------
<S> <C>
Martin V. Alonzo............................................ 250,000
(Chairman of the Board, President and Chief Executive
Officer)
George R. Miller............................................ 25,000
(Vice President -- Sales and Marketing of CBCC (Retired))
Robert L. Meyer(3).......................................... 50,000
(former President and Chief Operating Officer of CBCC)
Current Executive Officers, as a group (4 persons)(4)....... 350,000
Non-Executive Directors, as a group (6 persons)(5).......... 30,000
Non-Executive Officer Employee Group (746 persons).......... 471,700
</TABLE>
- ---------------
(1) Excludes 20,000 Stock Options granted to the former Chief Financial Officer
of CBCC who resigned in 1996 and is not required to be reported in the
Summary Compensation Table; also excludes 5,000 Stock Options granted to
Duane Grossett as a former Non-Employee Director. See Note 5 below
(2) A total of 951,700 Stock Options have been granted; 71,500 Stock Options
have been forfeited upon termination of employment; 33,975 stock options
have been exercised; 119,800 shares remain available for future grants.
(3) Mr. Meyer resigned in October 1995 and forfeited the 40,000 unvested Stock
Options; the remaining 10,000 Stock Options have been exercised.
(4) Includes Mr. Alonzo (250,000), Duane R. Grossett (50,000) (President and
Chief Operating Officer of CBCC; appointed October 1996); Michael T.
Segraves (20,000) (Chief Financial Officer; appointed September 1996); and
Lawrence R. Lansford (30,000) (President and Chief Operating Officer of
Leavitt; appointed March 3, 1997)
(5) Mr. Grossett, who received 5,000 Stock Options upon the closing of the
Offering, resigned his position as a director of the Company after accepting
the position of President and Chief Operating Officer of CBCC in October
1996 and is excluded from this group.
All Stock Options previously granted to employees under the 1994 Incentive
Plan vest in 20% increments on each of the first five anniversaries of the date
of grant, have an exercise price equal to the market value of Common Stock on
the date of grant and expire 10 years after the date of grant.
23
<PAGE> 26
The closing market value of Common Stock as of March 31, 1997, was $20.25
per share, as reported on the New York Stock Exchange.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL OF THE PROPOSED 1994 INCENTIVE
PLAN AMENDMENT
To be approved by the stockholders, the 1994 Incentive Plan Amendment must
receive the approval of stockholders holding at least a majority of the
outstanding shares of Common Stock present at the Annual Meeting and entitled to
vote on the 1994 Incentive Plan Amendment. The enclosed form of Proxy provides a
means for stockholders to vote for the 1994 Incentive Plan Amendment, to vote
against the 1994 Incentive Plan Amendment, or to abstain from voting with
respect to the 1994 Incentive Plan Amendment. Each properly executed Proxy
received in time for the meeting will be voted as specified therein. Because
abstentions are counted as present and entitled to vote on the 1994 Incentive
Plan Amendment, they will have the effect of votes against Proposal 3. If a
stockholder executes and returns a Proxy but does not specify otherwise, the
shares represented by such stockholder's Proxy will be voted FOR the 1994
Incentive Plan Amendment.
If the 1994 Incentive Plan Amendment is not approved by stockholders at the
Annual Meeting, no further Stock Options or SARs will be granted to executive
officers of the Company under the 1994 Incentive Plan in excess of shares
available under the current 1,000,000 share limitation.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
1994 INCENTIVE PLAN AMENDMENT. BECAUSE THE 1994 INCENTIVE PLAN AMENDMENT WILL
INCREASE THE NUMBER OF INCENTIVE AWARDS THAT MAY BE GRANTED TO ALL EXECUTIVE
OFFICERS AND, IF THE 1997 DIRECTOR STOCK OPTION PLAN DOES NOT RECEIVE THE
REQUISITE STOCKHOLDER VOTES FOR APPROVAL, DIRECTORS OF THE COMPANY, EACH OF THE
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY HAS AN INTEREST IN, AND MAY
BENEFIT FROM, THE ADOPTION OF THE 1994 INCENTIVE PLAN AMENDMENT.
PROPOSAL 4.
ADOPTION OF 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
GENERAL
The Compensation Committee of the Company adopted, subject to stockholder
approval, the Company's 1997 Non-Employee Director Stock Option Plan (previously
defined as the "1997 Director Stock Option Plan") in April 1997. The 1997
Director Stock Option Plan provides for the granting of stock options to Non-
Employee Directors upon their election to the Board of Directors and, at the
election of each Non-Employee Director, in lieu of all or a portion of such
Non-Employee Director's annual retainer. The Board of Directors believes that
the 1997 Director Stock Option Plan will strengthen the Company's ability to
attract and retain highly qualified individuals to serve as directors of the
Company and encourage directors to acquire additional proprietary interests in
the success of the Company, resulting in an increased incentive for such persons
to remain with the Company and strive to maximize the success of the Company.
The maximum number of shares of Common Stock that may be issued under the
1997 Director Stock Option Plan is 100,000, subject to adjustment in the event
of stock splits or reclassification.
DESCRIPTION OF 1997 DIRECTOR STOCK OPTION PLAN
The following is a summary of the principal features of the 1997 Director
Stock Option Plan, together with the applicable tax implications. This summary,
however, does not purport to be a complete description of all provisions of the
1997 Director Stock Option Plan. Any stockholder who wishes to obtain a copy of
the actual plan document may do so by written request to the Corporate Secretary
at the Company's executive offices in Montpelier, Ohio.
24
<PAGE> 27
Types of Awards. The types of awards that may be granted under the 1997
Director Stock Option Plan are (i) Non-qualified Stock Options and (ii) upon the
occurrence of a change in control, stock appreciation rights ("SARs").
Administration of Plan. The 1997 Director Stock Option Plan is administered
by the Board or by a committee consisting of two or more Non-Employee Directors
appointed by the Board of Directors (the "Director Plan Committee"). The members
of the Compensation Committee initially will administer the 1997 Director Stock
Option Plan.
As awards granted under the 1997 Director Stock Option Plan are automatic
and/or determined by formula, the necessity for administration will be limited.
Notwithstanding, subject to the terms of the 1997 Director Stock Option Plan,
the Director Plan Committee has discretion and flexibility to interpret and take
action with respect to the 1997 Director Stock Option Plan in the manner that it
determines, from time to time, is in the best interests of the Company for the
proper administration of the 1997 Director Stock Option Plan consistent with the
express terms thereof.
Shares of Common Stock Subject to the 1997 Director Stock Option Plan. The
1997 Director Stock Option Plan provides for the issuance of a maximum of
100,000 shares of Common Stock, subject to adjustment as described in
"Adjustment Provisions" below. If any stock options granted under the 1997
Director Stock Option Plan are forfeited or surrendered before exercise or lapse
without exercise, in whole or in part, the shares reserved therefor will revert
to the status of available shares under the 1997 Director Stock Option Plan.
Eligibility. Under the 1997 Director Stock Option Plan, grants of stock
options and (upon a change in control) SARs will be made only to Non-Employee
Directors.
Automatic Awards of Stock Options. Each Non-Employee Director will be
granted, on the date such person is elected or appointed as a director, stock
options to purchase 5,000 shares of Common Stock at an exercise price equal to
the average closing price of the Common Stock on the New York Stock Exchange
(the "Average Fair Market Value") during the five trading days immediately
preceding the date of grant. All stock options automatically granted to
Non-Employee Directors will vest in equal proportions on each of the first five
anniversaries of the date of grant, provided that the person has been a director
of the Company continuously through that date. Non-Employee Directors reelected
to successive terms will not receive additional grants of stock options upon any
such reelection.
Currently, automatic grants of stock options to Non-Employee Directors as
described above are provided for under the 1994 Incentive Plan. If the 1997
Director Stock Option Plan is approved by the requisite vote of stockholders at
the Annual Meeting, the 1994 Incentive Plan will be amended to provide that no
further grants of stock options will be made to Non-Employee Directors under the
1994 Incentive Plan. For a discussion of the terms of stock options granted to
Non-Employee Directors under the 1994 Incentive Plan, see "Management
Compensation -- Board Compensation -- Stock Option Awards" above. Because all
nominees for election as a director at the Annual Meeting are incumbent
directors, none of such persons will be entitled to receive an automatic grant
of stock options pursuant to the 1994 Incentive Plan or, if approved by the
stockholders, the 1997 Director Stock Option Plan.
Stock Options Granted upon Deferral of Annual Retainer. On or before
January 1 of each calendar year, each Non-Employee Director may elect to defer
all or a portion (in 25% increments) of such director's annual retainer
(currently $15,000) for the upcoming calendar year and receive, in lieu thereof,
stock options equal to the value of the deferred retainer. Stock options granted
in lieu of a director's deferred retainer will be granted as of the last day of
each calendar quarter (the date on which quarterly payments of the annual
retainer are paid, in arrears) in the year to which the election relates. The
number of stock options granted each quarter will be determined by dividing 25%
of the annual retainer amount deferred by 50% of the Average Fair Market Value
(as defined above) for the last five trading days of that calendar quarter, and
also will have an exercise price equal to 50% of the Average Fair Market Value.
Each stock option granted to Non-Employee Directors in lieu of their annual
retainer will vest fully immediately upon grant.
25
<PAGE> 28
For example, if a Non-Employee Director defers the full annual retainer
amount of $15,000, assuming a constant Average Fair Market Value of $20.00 for
each quarter, that director would receive a grant of stock options to purchase
375 shares of Common Stock ($3,750 divided by $10.00) as of the last day of each
calendar quarter, with an exercise price of $10.00 per share. If a director
exercised those stock options immediately upon grant (i.e., at the end of each
quarter) and sold the underlying stock, that director would receive cash, net of
the exercise price, at the end of each quarter in an amount equal to $3,750, or
25% of the $15,000 deferred annual retainer.
Notwithstanding the foregoing, if the 1997 Director Stock Option Plan is
approved by the requisite vote of stockholders at the Annual Meeting,
Non-Employee Directors may elect to receive stock options in lieu of the
remaining balance of their 1997 annual retainer at any time until May 31, 1997.
In addition, any Non-Employee Director elected or appointed during any calendar
year may elect to receive stock options under the 1997 Director Stock Option
Plan in lieu of all or a portion (in 25% increments) of such director's pro
rated annual retainer for such calendar year at any time prior to 30 days after
election or appointment to the Board of Directors. In each case, however, such
election will apply only to that portion of the electing director's annual
retainer relating to periods after the date the election is made, and the
numerator of the formula pursuant to which the number of stock options granted
is determined will be adjusted to reflect the portion of the deferred annual
retainer attributable to each remaining calendar quarter (or portion thereof) in
the year to which any such initial election relates.
Exercise of Stock Options and Payment For Stock. Upon the exercise of a
stock option, the holder must pay the purchase price in full either in cash, a
cash equivalent acceptable to the Committee, or a combination of cash and its
equivalent acceptable to the Committee. The purchase price may be paid, with the
approval of the Committee, by assigning and delivering to the Company shares of
Common Stock having a value equal to the exercise price or a combination of cash
and such shares equal in value to the exercise price. In addition, at the
request of a holder and to the extent permitted by applicable law, the Committee
may approve arrangements with a brokerage firm under which such brokerage firm,
on behalf of the holder, will pay the exercise price of the stock options being
exercised to the Company and the Company will promptly deliver to such firm the
shares for which the stock options are exercised.
Terms and Conditions of Stock Appreciation Rights. An SAR may be granted
only upon the occurrence of a change in control and only in tandem with a stock
option. An SAR is the right to receive an amount in cash equal to the excess of
the fair market value of a share of Common Stock on the date of exercise over
the exercise price of the related stock option.
An SAR will require the holder, upon exercise, to surrender the related
stock option or any portion thereof to the extent unexercised, with respect to
the number of shares as to which such SAR is exercised. The surrendered stock
option will then cease to be exercisable. An SAR will be exercisable or
transferable only to the extent that the related stock option is exercisable or
transferable, and will be forfeited or canceled upon any forfeiture or
cancellation of the corresponding stock option prior to exercise or upon the
exercise of the corresponding stock option.
Alternative Vesting and Exercisability. If a Non-Employee Director ceases
to serve as a director for any reason other than death or disability, then all
stock options granted to such director that are not then exercisable shall
become null and void as of the date of ceasing to serve as a director. The
portion, if any, of such stock options that are exercisable as of the date of
ceasing to serve as a director shall be exercisable for a period of the lesser
of the remaining term of the stock options or 180 days after the date of ceasing
to serve as a director; provided, that, if a Non-Employee Director resigns from
the Board of Directors on or after the date of the fifth annual meeting of
stockholders after such director's election or appointment to the Board of
Directors (including as a result of declining to accept a nomination or
otherwise stand for reelection), such stock options shall remain exercisable for
the lesser of the remaining term of such stock options or three years after
ceasing to serve as a director.
If a Non-Employee Director ceases to serve as a director as a result of
death or disability, then all stock options granted to such Non-Employee
Director that are not then exercisable shall become exercisable as of the date
of ceasing to serve as a director. All such stock options which have become
exercisable as of the date
26
<PAGE> 29
of ceasing to serve as a director as a result of death or disability (either as
a result of the acceleration of exercisability as described above or otherwise)
shall remain exercisable for the lesser of the remaining term of such stock
options or three years after ceasing to serve as a director.
If a Non-Employee Director is removed from the Board of Directors for
cause, then any and all stock options granted to such director as automatic
awards upon election to the Board of Directors that have not been exercised
shall become null and void as of the date of such removal.
Adjustment Provisions. The 1997 Director Stock Option Plan contains
provisions that automatically adjust the maximum number and/or type of
securities available for issuance under the 1997 Director Stock Option Plan and
the terms of outstanding stock options and SARs upon a subdivision,
consolidation or reclassification of outstanding Common Stock or when the
Company undergoes certain restructurings.
Change in Control Provisions. The 1997 Director Stock Option Plan provides
that, upon a "change in control" of the Company, (1) all outstanding stock
options will become immediately and fully vested and exercisable in full and (2)
each holder of a stock option will be granted a corresponding stock appreciation
right. "Change in control" is defined in the 1997 Director Stock Option Plan the
same as in the 1994 Incentive Plan. See "Management Compensation -- Employment
Contracts and Termination of Employment and Change in Control Agreements -- 1994
Incentive Plan."
In addition, if a change in control occurs in connection with a merger or
consolidation of the Company pursuant to which the Company is not the surviving
corporation or a sale of all or substantially all of the Company's assets, then
the holders of stock options and SARs will be entitled to receive (upon payment
of the exercise price, if applicable) the same consideration to which they would
have been entitled had they exercised their stock options or SARS immediately
prior to such transaction.
If a restructuring of the Company occurs that does not constitute a change
in control of the Company, (1) if the restructuring involves a transaction in
which the Company is not the surviving entity, the surviving entity shall assume
all outstanding stock options and corresponding SARs (if any); or (2) the
Company may redeem in whole or in part any one or more of the outstanding stock
options and corresponding SARs (whether or not then exercisable) in
consideration of a cash payment in an amount of the excess of market value over
exercise price immediately prior to the restructuring. A restructuring generally
is any merger of the Company or the direct or indirect transfer of all or
substantially all of the Company's assets (whether by sale, merger,
consolidation, liquidation or otherwise) in one transaction or a series of
transactions.
Transferability. Stock options granted under the 1997 Director Stock Option
Plan will not be transferable other than by will or pursuant to the laws of
descent and distribution or, upon approval by the Director Plan Committee, to
certain family members and trusts or partnerships created for the benefit of
family members. SARs granted in connection with stock options upon the
occurrence of a change in control will not be transferable other than in
connection with the transfer of the stock options to which such SARs relate, and
the transfer of stock options also will effect the transfer of corresponding
SARs (if any).
Amendment and Termination of the 1997 Director Stock Option Plan. No stock
option may be granted under the 1997 Director Stock Option Plan after the tenth
anniversary of stockholder approval of the 1997 Director Stock Option Plan. The
Board of Directors or Compensation Committee may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to outstanding
stock options or SARs, suspend or discontinue the 1997 Director Stock Option
Plan.
The Director Plan Committee may amend or modify the 1997 Director Stock
Option Plan at any time for any purpose. However, no such amendment may
adversely affect the rights of any existing optionholder or any participant who
has an election in effect to defer all or a portion of his or her annual
retainer without such person's consent. In addition, the 1997 Director Stock
Option Plan may not be amended without stockholder approval to increase
materially the aggregate number of shares of Common Stock that may be issued, to
modify the formulas pursuant to which awards are granted, or to modify the
eligibility criteria for participation under the 1997 Director Stock Option
Plan.
27
<PAGE> 30
Federal Income Tax Consequences. A participant receiving stock options or
SARs will not recognize taxable income at the time the stock option or SAR is
granted. At the time the stock option or SAR is exercised, the participant will
recognize ordinary taxable income in an amount equal to the difference between
the exercise price and the fair market value of the Common Stock on the date of
exercise. The Company will be entitled to a concurrent deduction equal to the
ordinary income recognized by the participant.
Special rules may apply in situations where Section 16(b) of the Securities
Exchange Act of 1934 prevents shares acquired upon exercise of a stock option
from being resold immediately. The amount and timing of the recognition of
income by a Non-Employee Director (and the concurrent deduction by the Company)
on the exercise of a stock option or SAR generally will be based on the fair
market value of the shares received when the restrictions arising under Section
16(b) lapse, unless the Non-Employee Director elects otherwise by making a
Section 83(b) election.
The closing market value of Common Stock as of March 31, 1997, was $20.25
per share, as reported on the New York Stock Exchange.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL OF THE PROPOSED 1997 DIRECTOR
STOCK OPTION PLAN
To be approved by the stockholders, the 1997 Director Stock Option Plan
must receive the approval of stockholders holding at least a majority of the
outstanding shares of Common Stock present at the meeting and entitled to vote
on the 1997 Director Stock Option Plan. The enclosed form of Proxy provides a
means for stockholders to vote for the 1997 Director Stock Option Plan, to vote
against the 1997 Director Stock Option Plan, or to abstain from voting with
respect to the 1997 Director Stock Option Plan. Each properly executed Proxy
received in time for the Annual Meeting will be voted as specified therein. If a
stockholder executes and returns a Proxy but does not specify otherwise, the
shares represented by such stockholder's Proxy will be voted FOR the 1997
Director Stock Option Plan.
If the 1997 Director Stock Option Plan is not approved by the stockholders
at the Annual Meeting, no stock options (or SARs) will be granted pursuant to
the 1997 Director Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
1997 DIRECTOR STOCK OPTION PLAN. BECAUSE THE 1997 DIRECTOR STOCK OPTION PLAN
WILL AUTHORIZE THE GRANT OF STOCK OPTIONS AND SARS TO NON-EMPLOYEE DIRECTORS,
EACH NON-EMPLOYEE DIRECTOR OF THE COMPANY HAS AN INTEREST IN, AND MAY BENEFIT
FROM, THE ADOPTION OF THE 1997 DIRECTOR STOCK OPTION PLAN.
PROPOSAL 5.
ADOPTION OF 1997 EXECUTIVE DEFERRED COMPENSATION STOCK OPTION PLAN
GENERAL
The Compensation Committee of the Company adopted, subject to stockholder
approval, the Company's 1997 Executive Deferred Compensation Stock Option Plan
(previously defined as the "1997 Executive Stock Option Plan") in April 1997.
The 1997 Executive Stock Option Plan provides for the granting of stock options
to eligible executive employees of the Company and its subsidiaries, at the
employee's election, in lieu of all or a portion of such employee's annual cash
bonus. The 1997 Executive Stock Option Plan will enable the Company to provide
eligible employees an opportunity to acquire additional proprietary interests in
the success of the Company, which will more closely align the interest of
participating employees in the Company with that of the stockholders and, the
Board of Directors believes, result in an increased incentive for such persons
to remain with the Company and strive to maximize the success of the Company.
The maximum number of shares of Common Stock that may be issued under the
1997 Executive Stock Option Plan is 300,000, subject to adjustment in the event
of stock splits or reclassification.
28
<PAGE> 31
DESCRIPTION OF 1997 EXECUTIVE STOCK OPTION PLAN
The following is a summary of the principal features of the 1997 Executive
Stock Option Plan, together with the applicable tax implications. This summary,
however, does not purport to be a complete description of all provisions of the
1997 Executive Stock Option Plan. Any stockholder who wishes to obtain a copy of
the actual plan document may do so by written request to the Corporate Secretary
at the Company's executive offices in Montpelier, Ohio.
Types of Awards. The types of awards that may be granted under the 1997
Executive Stock Option Plan are (i) Non-qualified Stock Options and (ii) upon
the occurrence of a change in control, stock appreciation rights ("SARs").
Administration of Plan. The 1997 Executive Stock Option Plan is
administered by the Board or by a committee consisting of two or more
Non-Employee Directors appointed by the Board of Directors (the "Executive Plan
Committee"). The members of the Compensation Committee initially will administer
the 1997 Executive Stock Option Plan.
As awards granted under the 1997 Executive Stock Option Plan are determined
by formula, the necessity for administration will be limited. Notwithstanding,
subject to the terms of the 1997 Executive Stock Option Plan, the Executive Plan
Committee has discretion and flexibility to interpret and take action with
respect to the 1997 Executive Stock Option Plan in the manner that it
determines, from time to time, is in the best interests of the Company for the
proper administration of the 1997 Executive Stock Option Plan consistent with
the express terms thereof.
Shares of Common Stock Subject to the 1997 Executive Stock Option Plan. The
1997 Executive Stock Option Plan provides for the issuance of a maximum of
300,000 shares of Common Stock, subject to adjustment as described in
"Adjustment Provisions" below. If any stock options granted under the 1997
Executive Stock Option Plan are forfeited or surrendered before exercise or
lapse without exercise, in whole or in part, the shares reserved therefor will
revert to the status of available shares under the 1997 Executive Stock Option
Plan. The stock options to which such shares of Common Stock relate may be
awarded to any one eligible employee or allocated among eligible employees,
depending on whether eligible employees elect to participate in the 1997
Executive Stock Option Plan and the extent to which they elect to participate;
provided that no more than 100,000 shares of Common Stock may be subject to
stock options granted to any participant under the 1997 Executive Stock Option
Plan during any calendar year (or otherwise with respect to any compensation
deferred with respect to any single calendar year).
Eligibility. Under the 1997 Executive Stock Option Plan, grants of stock
options and (upon a change in control) SARs will be made only to those executive
officers and key management personnel of the Company and its subsidiaries as the
Executive Plan Committee from time to time may designate. The Compensation
Committee initially has designated Martin V. Alonzo (Chairman of the Board,
President and Chief Executive Officer of the Company), Duane R. Grossett
(President and Chief Operating Officer of CBCC) and Lawrence R. Lansford
(President and Chief Operating Officer of Leavitt) as the individuals eligible
to participate in the 1997 Executive Stock Option Plan.
Grant of Stock Options. On or before September 30 of each calendar year,
each eligible employee may elect to defer all or a portion (in 25% increments)
of such employee's annual cash bonus for such calendar year (which bonus will be
determined after that calendar year end) and receive, in lieu thereof, stock
options equal to the value of the deferred cash bonus.
Stock options granted in lieu of an employee's foregone cash bonus will be
granted as of the date the annual cash bonus for the year to which an election
relates is determined. The stock options related to each annual bonus amount
deferred will be granted in four series, with the number of stock options
granted with respect to each series determined by dividing 25% of the cash bonus
amount deferred by 50% of the average closing price of the Common Stock on the
New York Stock Exchange for the last five trading days of each calendar quarter
(in each case, the "Average Quarter-End Price") in the preceding calendar year,
with the stock options calculated for each calendar quarter representing one
series. Stock options granted in each series will have an exercise price equal
to 50% of the Average Quarter-End Price for the calendar quarter to which
29
<PAGE> 32
such series relates. Each stock option granted to eligible employee in lieu of
their annual cash bonus will vest fully immediately upon grant.
For example, if an eligible employee defers a cash bonus amount of
$100,000, assuming Average Quarter-End Prices of $20.00, $21.00, $22.00 and
$23.00 for the four quarters of the calendar year to which the cash bonus
relates, that eligible employee would receive four grants of stock options as of
the date the annual cash bonus is determined as follows:
<TABLE>
<CAPTION>
AVERAGE
QUARTER-END
SERIES PRICE SHARES SUBJECT TO STOCK OPTIONS EXERCISE PRICE
- ------ ----------- ------------------------------- --------------
<S> <C> <C> <C>
1 $20 2,500 ($25,000 divided by $10.00) $10.00
2 $21 2,381 ($25,000 divided by $10.50) $10.50
3 $22 2,273 ($25,000 divided by $11.00) $11.00
4 $23 2,174 ($25,000 divided by $11.50) $11.50
</TABLE>
In the discretion of the Executive Plan Committee, any eligible employee
who becomes employed after September 30 of any calendar year may elect to
receive stock options under the 1997 Executive Stock Option Plan in lieu of such
employee's annual cash bonus for such calendar year within such time period as
the Executive Plan Committee may determine, provided that the numerator of the
formula pursuant to which the number of stock options granted is determined will
be adjusted to reflect the portion of the deferred annual cash bonus
attributable in each remaining calendar quarter (or portion thereof) in the year
to which any such initial election relates, determined on a pro-rated basis.
Exercise of Stock Options and Payment For Stock. Upon the exercise of a
stock option, the holder must pay the purchase price in full either in cash, a
cash equivalent acceptable to the Committee, or a combination of cash and its
equivalent acceptable to the Committee. The purchase price may be paid, with the
approval of the Committee, by assigning and delivering to the Company shares of
Common Stock having a value equal to the exercise price or a combination of cash
and such shares equal in value to the exercise price. In addition, at the
request of a holder and to the extent permitted by applicable law, the Committee
may approve arrangements with a brokerage firm under which such brokerage firm,
on behalf of the holder, will pay the exercise price of the stock options being
exercised to the Company and the Company will promptly deliver to such firm the
shares exercised.
Terms and Conditions of Stock Appreciation Rights. An SAR may be granted
only upon the occurrence of a change in control and only in tandem with a stock
option. An SAR is the right to receive an amount in cash equal to the excess of
the fair market value of a share of Common Stock as of the date of exercise over
the exercise price of the related stock option.
An SAR will require the holder, upon exercise, to surrender the related
stock option or any portion thereof to the extent unexercised, with respect to
the number of shares as to which such SAR is exercised. The surrendered stock
option will then cease to be exercisable. An SAR will be exercisable or
transferable only to the extent that the related stock option is exercisable or
transferable, and will be forfeited or canceled upon any forfeiture or
cancellation of the corresponding stock option prior to exercise or upon the
exercise of the corresponding stock option.
Alternative Vesting and Exercisability. Except as described below, if a
participant's employment is terminated for any reason other than death,
disability or normal retirement, then all stock options granted to such
participant under the 1997 Executive Stock Option Plan shall be exercisable for
a period of the lesser of the remaining term of the stock options or 180 days
after the date of termination. If a participant's employment is terminated as a
result of death, disability or normal retirement, then all stock options granted
to such participant under the 1997 Executive Stock Option Plan shall remain
exercisable for the lesser of the remaining term of such stock options or three
years after the date of termination of employment.
Adjustment Provisions. The 1997 Executive Stock Option Plan contains
provisions that automatically adjust the maximum number and/or types of
securities available for issuance under the 1997 Executive Stock
30
<PAGE> 33
Option Plan and the terms of outstanding stock options and SARs upon a
subdivision, consolidation or reclassification of outstanding Common Stock or
when the Company undergoes certain restructurings.
The one-year 100,000 per employee share limitation described above under
"Shares of Common Stock Subject to the 1997 Executive Stock Option Plan" also
would be adjusted commensurate with any such adjustment to the maximum number of
shares available for issuance under the 1997 Executive Stock Option Plan.
Change in Control Provisions. The 1997 Executive Stock Option Plan provides
that, upon a "change in control" of the Company, (1) all outstanding stock
options will become immediately and fully vested and exercisable in full and (2)
each holder of a stock option will be granted a corresponding stock appreciation
right. "Change in control" is defined in the 1997 Executive Stock Option Plan
the same as in the 1994 Incentive Plan. See "Management
Compensation -- Employment Contracts and Termination of Employment and Change in
Control Agreements -- 1994 Incentive Plan."
In addition, if a change in control occurs in connection with a merger or
consolidation of the Company pursuant to which the Company is not the surviving
corporation or a sale of all or substantially all of the Company's assets, then
the holders of stock options and SARs will be entitled to receive (upon payment
of the exercise price, if applicable) the same consideration to which they would
have been entitled had they exercised their stock options or SARs immediately
prior to such transaction.
If a restructuring of the Company occurs that does not constitute a change
in control of the Company, the Committee may (but need not) cause the Company to
take any one or more of the following actions: (1) grant each optionholder
corresponding SARs; (2) if the restructuring involves a transaction in which the
Company is not the surviving entity, cause the surviving entity to assume in
whole or in part any one or more of the outstanding awards upon such terms and
provisions as the Committee deems desirable; or (3) redeem in whole or in part
any one or more of the outstanding stock options or SARs (whether or not then
exercisable) in consideration of a cash payment in an amount of the excess of
market value over exercise price immediately prior to the restructuring. A
restructuring generally is any merger of the Company or the direct or indirect
transfer of all or substantially all of the Company's assets (whether by sale,
merger, consolidation, liquidation or otherwise) in one transaction or a series
of transactions.
Transferability. Stock options granted under the 1997 Executive Stock
Option Plan will not be transferable other than by will or pursuant to the laws
of descent and distribution or to certain family members and trusts or
partnerships created for the benefit of family members. SARs granted in
connection with stock options upon the occurrence of a change in control will
not be transferable other than in connection with the transfer of the stock
options to which such SARs relate, and the transfer of stock options also will
effect the transfer of corresponding SARs (if any).
Amendment and Termination of the 1997 Executive Stock Option Plan. No stock
option may be granted under the 1997 Executive Stock Option Plan after the tenth
anniversary of stockholder approval of the 1997 Executive Stock Option Plan. The
Board of Directors or Compensation Committee may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to outstanding
stock options or SARs, suspend or discontinue the 1997 Executive Stock Option
Plan.
The Executive Plan Committee may amend or modify the 1997 Executive Stock
Option Plan at any time for any purpose, including to permit eligible employees
to also defer a portion of their annual salary in exchange for stock options.
However, no such amendment may adversely affect the rights of any existing
optionholder or any participant who has an election in effect to defer
compensation without such person's consent. In addition, the 1997 Executive
Stock Option Plan may not be amended without stockholder approval to increase
materially the aggregate number of shares of Common Stock that may be issued
under the 1997 Executive Stock Option Plan.
Federal Income Tax Consequences. A participant receiving stock options or
SARs will not recognize taxable income at the time the stock option or SAR is
granted. At the time the stock option or SAR is exercised, the participant will
recognize ordinary taxable income in an amount equal to the difference between
the exercise price and the fair market value of the Common Stock on the date of
exercise. The Company will
31
<PAGE> 34
be entitled to a concurrent deduction equal to the ordinary income recognized by
the participant, subject to the limitations as may be imposed by Section 162(m)
of the Code as discussed below.
Section 162(m) of the Internal Revenue Code generally imposes a $1 million
per person annual limit on the amount the Company may deduct as compensation
expense for its chief executive officer and its four other highest paid
executives. Under current Internal Revenue Service regulations, income
attributable stock options (and SARs) granted under the 1997 Executive Stock
Option Plan may not qualify for an exemption from the $1 million annual limit on
deductible compensation imposed by Section 162(m) of the Code. If income
attributable to such stock options (or SARs) granted to a covered executive
officer is not eligible for an exemption from the $1 million limitation, that
income would be included in the annual compensation calculation for such
executive in the year recognized by the executive for purposes of the $1 million
deduction limit. To the extent the total compensation paid (or deemed paid) by
the Company to such executive officer for that year exceeded $1 million, such
excess would not be deductible by the Company if the executive was employed by
the Company as of the end of the year.
Special rules may apply with respect to employees subject to Section 16(b)
of the Securities Exchange Act of 1934. The amount and timing of the recognition
of income by an employee subject to Section 16(b) (and the concurrent deduction
by the Company) on the exercise of a stock option or SAR generally will be based
on the fair market value of the shares received when the restrictions arising
under Section 16(b) lapse, unless the employee elects otherwise by making a
Section 83(b) election.
The closing market value of Common Stock as of March 31, 1997, was $20.25
per share, as reported on the New York Stock Exchange.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL OF THE PROPOSED 1997 EXECUTIVE
STOCK OPTION PLAN
To be approved by the stockholders, the 1997 Executive Stock Option Plan
must receive the approval of stockholders holding at least a majority of the
outstanding shares of Common Stock present at the meeting and entitled to vote
on the 1997 Executive Stock Option Plan. The enclosed form of Proxy provides a
means for stockholders to vote for the 1997 Executive Stock Option Plan, to vote
against the 1997 Executive Stock Option Plan, or to abstain from voting with
respect to the 1997 Executive Stock Option Plan. Each properly executed Proxy
received in time for the Annual Meeting will be voted as specified therein. If a
stockholder executes and returns a Proxy but does not specify otherwise, the
shares represented by such stockholder's Proxy will be voted FOR the 1997
Executive Stock Option Plan.
If the 1997 Executive Stock Option Plan is not approved by the stockholders
at the Annual Meeting, no stock options (or SARs) will be granted pursuant to
the 1997 Executive Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
1997 EXECUTIVE STOCK OPTION PLAN. BECAUSE THE 1997 EXECUTIVE STOCK OPTION PLAN
WILL AUTHORIZE THE GRANT OF STOCK OPTIONS AND SARS TO EXECUTIVE OFFICERS OF THE
COMPANY AS FROM TIME TO TIME DESIGNATED BY THE EXECUTIVE PLAN COMMITTEE AS
ELIGIBLE TO PARTICIPATE IN THE 1997 EXECUTIVE STOCK OPTION PLAN, EACH OF THE
EXECUTIVE OFFICERS OF THE COMPANY HAS AN INTEREST IN, AND MAY BENEFIT FROM, THE
ADOPTION OF THE 1997 EXECUTIVE STOCK OPTION PLAN.
PROPOSAL 6.
RATIFICATION OF AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as the
auditors of the Company for the current fiscal year. Coopers & Lybrand L.L.P.
has audited the Company's financial statements since it was formed in 1990. The
Company expects that representatives of Coopers & Lybrand L.L.P. will be present
at the Annual Meeting to respond to appropriate questions and will have an
opportunity to make a statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
FOR THE RATIFICATION OF THE SELECTION OF COOPERS & LYBRAND L.L.P. AS THE
COMPANY'S AUDITORS FOR 1997.
32
<PAGE> 35
OTHER BUSINESS
Management knows of no other matters that will come before the Annual
Meeting. However, if other matters do come before the Annual Meeting, the Proxy
holders will vote in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR NEXT MEETING
To qualify for inclusion in the proxy statement and form of proxy relating
to the 1998 Annual Meeting of Stockholders, a proposal intended by a stockholder
for presentation at that meeting must be received by the Company at its
principal executive offices on or before December 15, 1997.
GENERAL
Solicitation of Proxies may be made by mail, personal interview, telephone,
or telegraph by officers, directors, and regular employees of the Company. The
Company also has retained Chase Mellon Shareholder Services, who also serves as
the Company's transfer agent for the Common Stock, to solicit stockholders in
connection with the matters to be presented at the Annual Meeting for a fee of
$5,500, plus reimbursement of certain expenses. The Company also may request
banking institutions, brokerage firms, custodians, nominees, and fiduciaries to
forward solicitation material to the beneficial owners of the Common Stock that
those companies or persons hold of record, and the Company will reimburse the
forwarding expenses. Except for certain non-reimbursable expenses that may be
incurred by Chase Mellon, the Company will bear all costs of solicitation.
The Company's Annual Report to Stockholders for the year ended December 31,
1996, is being sent to stockholders with this Proxy Statement and does not form
any part of the material for the solicitation of proxies.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE SENT TO ANY STOCKHOLDER WITHOUT
CHARGE UPON WRITTEN REQUEST ADDRESSED TO MICHAEL T. SEGRAVES, SECRETARY, AT THE
OFFICES OF THE COMPANY, 14212 COUNTY ROAD M-50, MONTPELIER, OHIO 43543.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WHETHER OR NOT YOU
EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO COMPLETE, SIGN AND
RETURN THE PROXY IN THE ENCLOSED POSTAGE-PAID, ADDRESSED ENVELOPE.
By Order of the Board of Directors
/s/ MICHAEL T. SEGRAVES
MICHAEL T. SEGRAVES
Secretary
Montpelier, Ohio
April 14, 1997
33
<PAGE> 36
The following Appendices are provided to the Commission in connection with
Proposals 3, 4 and 5 set forth in the Proxy Statement of Chase Brass
Industries, Inc., dated April 14, 1997, as required by Instruction 3 of Rule
14a-101, Item 10 (but such documents are not being provided to securityholders
as part of the soliciting materials):
Appendix 1 1994 Long-Term Incentive Plan (Proposal 3), as amended subject
to stockholder approval
Appendix 2 1997 Non-Employee Director Stock Option Plan (Proposal 4)
Appendix 3 1997 Executive Deferred Compensation Stock Option Plan
(Proposal 5)
<PAGE> 37
Appendix 1
CHASE BRASS INDUSTRIES, INC.
1994 LONG-TERM INCENTIVE PLAN
(AS AMENDED AS OF APRIL 1, 1997)
SCOPE AND PURPOSE OF PLAN
Chase Brass Industries, Inc., a Delaware corporation (the
"Corporation"), has adopted this 1994 Long-Term Incentive Plan (the "Plan") to
provide for the granting of:
(a) Incentive Options (hereafter defined) to certain Key
Employees (hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key
Employees and Non-Employee Directors (hereafter defined);
(c) Restricted Stock Awards (hereafter defined) to certain Key
Employees; and
(d) Stock Appreciation Rights (hereafter defined) to certain
Key Employees.
The purpose of the Plan is to provide an incentive for Key Employees
and directors of the Corporation or its Subsidiaries (hereafter defined) to
remain in the service of the Corporation or its Subsidiaries, to extend to them
the opportunity to acquire a proprietary interest in the Corporation so that
they will apply their best efforts for the benefit of the Corporation, and to
aid the Corporation in attracting able persons to enter the service of the
Corporation and its Subsidiaries.
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than (a) the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation, or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation (b)
Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), or (c) any
Affiliate of CVC that is directly controlled by Citicorp or Citibank, N.A., or
otherwise is in the same tier as CVC of Affiliates under the control of such
entities ("Direct Affiliates"), but shall not include any entities that may be
deemed an Affiliate of CVC as a result of the investment by any Direct
Affiliate in such entity.
1.2 "Affiliate" means (a) any Person who is directly or
indirectly the beneficial owner of at least 10% of the voting power of the
outstanding Voting Securities of the Corporation or (b) any Person controlling,
controlled by, or under common control with the Corporation or any Person
contemplated in clause (a) of this Subsection 1.2.
1.3 "Award" means the grant of any form of Option, Restricted
Stock Award, or Stock Appreciation Right under the Plan, whether granted
individually, in combination, or in tandem, to a Holder pursuant to the terms,
conditions, and limitations that the Committee may establish in order to
fulfill the objectives of the Plan.
1.4 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Award granted to that Holder.
1.5 "Board of Directors" means the board of directors of the
Corporation.
-1-
<PAGE> 38
1.6 "Business Day" means any day other than a Saturday, a
Sunday, or a day on which banking institutions in the state of Ohio are
authorized or obligated by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have
occurred if:
(a) any Acquiring Person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing fifty
percent or more of the combined voting power of the then outstanding
Voting Securities of the Corporation; or
(b) a public announcement is made of a tender or
exchange offer by any Acquiring Person for fifty percent or more of
the outstanding Voting Securities of the Corporation, and the Board of
Directors approves or fails to oppose that tender or exchange offer in
its statements in Schedule 14D-9 under the Exchange Act; provided,
however, that the events to occur under Subsection 9.2 hereof shall
not occur solely as a result of an event described in this clause (b)
unless, within one year after the occurrence of such event, an event
described in clauses (a), (c) or (d) hereof shall have occurred, in
which case such events to occur under Subsection 9.2 hereof shall
occur upon the occurrence of such event but shall be deemed to have
been effective as of the time of the occurrence of the event described
in this clause (b); or
(c) the stockholders of the Corporation approve a
merger or consolidation of the Corporation with any other corporation
or partnership (or, if no such approval is required, the consummation
of such a merger or consolidation of the Corporation), other than a
merger or consolidation that would result in the Voting Securities of
the Corporation outstanding immediately before the consummation
thereof continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity or of a
parent of the surviving entity) a majority of the combined voting
power of the Voting Securities and Convertible Voting Securities (on a
fully-diluted basis assuming full conversion thereof) of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or
(d) the stockholders of the Corporation approve a plan
of complete liquidation of the Corporation or an agreement for the
sale or disposition by the Corporation of all or substantially all the
Corporation's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a
liquidation, sale or disposition of all or substantially all the
Corporation's assets in one transaction or a series of related
transactions to a Subsidiary of the Corporation or any other
corporation owned directly or indirectly by the stockholders of the
Corporation in substantially the same proportions as their ownership
of stock in the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee appointed pursuant to
Section 3 by the Board of Directors to administer the Plan.
1.10 "Convertible Voting Securities" means any and all options,
warrants, or other rights to purchase, or securities convertible into or
exchangeable or exercisable for, directly or indirectly, Voting Securities of
any Person.
1.11 "Corporation" means Chase Brass Industries, Inc., a
Delaware corporation.
1.12 "Date of Grant" has the meaning given it in Subsection 4.3.
1.13 "Disability" has the meaning given it in Subsection 10.3.
-2-
<PAGE> 39
1.14 "Disinterested Person" means a Person that meets the
definition of both a "Non-Employee Director" under Rule 16b-3(b)(3) and an
"outside director" under Section 162(m).
1.15 "Effective Date" means the later of (a) the date the Plan
is adopted by the Board of Directors, (b) the date the Plan is approved by the
stockholders of the Corporation and (c) the closing date of the Initial Public
Offering.
1.16 "Eligible Individuals" means (a) Key Employees, (b)
Non-Employee Directors, and (c) any other Person that the Committee designates
as eligible for an Award (other than for Incentive Options) because the Person
performs, or has performed, bona fide consulting or advisory services for the
Corporation or any of its Subsidiaries (other than services in connection with
the offer or sale of securities in a capital-raising transaction) and the
Committee determines that the Person has a direct and significant effect on the
financial development of the Corporation or any of its Subsidiaries.
Notwithstanding the foregoing provisions of this Subsection 1.16, to ensure
that the requirements of the fourth sentence of Subsection 3.1 are satisfied,
the Board of Directors may from time to time specify individuals who shall not
be eligible for the grant of Awards or equity securities under any plan of the
Corporation or its Affiliates. Nevertheless, the Board of Directors may at any
time determine that an individual who has been so excluded from eligibility
shall become eligible for grants of Awards and grants of such other equity
securities under any plans of the Corporation or its Affiliates so long as that
eligibility will not impair the Plan's satisfaction of the conditions of Rule
16b-3.
1.17 "Employee" means any employee of the Corporation or of any
of its Subsidiaries, including officers and directors of the Corporation who
are also employees of the Corporation or of any of its Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934
and the rules and regulations promulgated thereunder, or any successor law, as
it may be amended from time to time.
1.19 "Exercise Notice" has the meaning given it in Subsection
5.5.
1.20 "Exercise Price" has the meaning given it in Subsection
5.4.
1.21 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market Value,
then the last reported sale price, regular way, on the composite tape
of that exchange on the last Business Day before the date in question
or, if no such sale takes place on that Business Day, the average of
the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to unlisted trading
privileges on that securities exchange; or
(b) If shares of Stock of the same class are not
listed or admitted to unlisted trading privileges as provided in
Subsection 1.21(a) and sales prices for shares of Stock of the same
class in the over-the-counter market are reported by the National
Association of Securities Dealers, Inc. Automated Quotations, Inc.
("NASDAQ") National Market System (or such other system then in use)
at the date of determining the Fair Market Value, then the last
reported sales price so reported on the last Business Day before the
date in question or, if no such sale takes place on that Business Day,
the average of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not
listed or admitted to unlisted trading privileges as provided in
Subsection 1.21(a) and sales prices for shares of Stock of the same
class are not reported by the NASDAQ National Market System (or a
similar system then in use) as provided in Subsection 1.21(b), and if
bid and asked prices for shares of Stock of the same class in the
over-the-counter market are reported by NASDAQ (or, if not so
reported, by the National Quotation Bureau Incorporated) at the
-3-
<PAGE> 40
date of determining the Fair Market Value, then the average of the
high bid and low asked prices on the last Business Day before the date
in question; or
(d) If shares of Stock of the same class are not
listed or admitted to unlisted trading privileges as provided in
Subsection 1.21(a) and sales prices or bid and asked prices therefor
are not reported by NASDAQ (or the National Quotation Bureau
Incorporated) as provided in Subsection 1.21(b) or Subsection 1.21(c)
at the date of determining the Fair Market Value, then the value
determined in good faith by the Committee, which determination shall
be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges as provided in Subsection
1.21(a) or sales prices or bid and asked prices therefor are reported
by NASDAQ (or the National Quotation Bureau Incorporated) as provided
in Subsection 1.21(b) or Subsection 1.21(c) at the date of determining
the Fair Market Value, but the volume of trading is so low that the
Board of Directors determines in good faith that such prices are not
indicative of the fair value of the Stock, then the value determined
in good faith by the Committee, which determination shall be
conclusive for all purposes notwithstanding the provisions of
Subsections 1.21(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in
Subsection 9.3(d)(v), Fair Market Value shall have the meaning and shall be
determined as set forth above; provided, however, that the Committee, with
respect to any such redemption, shall have the right to determine that the Fair
Market Value for purposes of the redemption should be an amount measured by the
value of the shares of Stock, other securities, cash, or property otherwise
being received by holders of shares of Stock in connection with the
Restructuring and upon that determination the Committee shall have the power
and authority to determine Fair Market Value for purposes of the redemption
based upon the value of such shares of stock, other securities, cash, or
property. Any such determination by the Committee, as evidenced by a
resolution of the Committee, shall be conclusive for all purposes.
1.22 "Fair Value" means such value as is determined by a
majority of the "disinterested" directors of the Corporation, as evidenced by a
resolution of such disinterested directors, even if the disinterested directors
of the Corporation constitute less than a quorum. If the Corporation does not
have any disinterested directors, the Fair Value shall be such value as is
determined by a nationally recognized investment banking firm selected by the
Corporation, the expenses of which shall be borne by the Corporation.
1.23 "Holder" means an Eligible Individual to whom an
outstanding Award has been granted or a transferee of any Award as permitted
under Section 4.7.
1.24 "Incentive Option" means an incentive stock option as
defined under Section 422 of the Code and regulations thereunder.
1.25 "Initial Public Offering" means the first public offering
of Stock by the Corporation effected pursuant to an effective registration
statement under the Securities Act.
1.26 "Key Employee" means any Employee whom the Committee
identifies as having a direct and significant effect on the performance of the
Corporation or any of its Subsidiaries.
1.27 "Non-Employee Director" means a director of the Corporation
who while a director is not an Employee or an officer of the Corporation or any
subsidiary of the Corporation.
1.28 "Nonstatutory Option" means a stock option that does not
satisfy the requirements of Section 422 of the Code or that is designated at
the Date of Grant or in the applicable Award Agreement to be an option other
than an Incentive Option.
-4-
<PAGE> 41
1.29 "Non-Surviving Event" means an event of Restructuring as
described in either Subsection 1.36(b) or Subsection 1.36(c).
1.30 "Normal Retirement" means the separation of a Holder from
employment with the Corporation and its Subsidiaries on or after the attainment
of age 59 1/2 with the right to receive an immediate benefit under a
tax-qualified retirement plan under Section 401(a) of the Code approved by the
Corporation or any Subsidiary thereof.
1.31 "Option" means either an Incentive Option or a Nonstatutory
Option, or both.
1.32 "Person" means any person or entity of any nature
whatsoever, specifically including (but not limited to) an individual, a firm,
a company, a corporation, a partnership, a trust, or other entity. A Person,
together with that Person's affiliates and associates (as "affiliate" and
"associate" are defined in Rule 12b-2 under the Exchange Act for purposes of
this definition only), and any Persons acting as a partnership, limited
partnership, joint venture, association, syndicate, or other group (whether or
not formally organized), or otherwise acting jointly or in concert or in a
coordinated or consciously parallel manner (whether or not pursuant to any
express agreement), for the purpose of acquiring, holding, voting, or disposing
of securities of the Corporation with that Person, shall be deemed a single
"Person."
1.33 "Plan" means the Corporation's 1994 Long-Term Incentive
Plan, as it may be amended from time to time.
1.34 "Restricted Stock" means Stock that is nontransferable or
subject to substantial risk of forfeiture until specific conditions are met.
1.35 "Restricted Stock Award" means the grant of or the right to
purchase, on the terms and conditions of Section 7 or that the Committee
otherwise determines, Restricted Stock.
1.36 "Restructuring" means the occurrence of any one or more of
the following:
(a) The merger or consolidation of the Corporation
with any Person, whether effected as a single transaction or a series
of related transactions, with the Corporation remaining the continuing
or surviving entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged for stock or
other securities of any other Person or of the Corporation, cash, or
other property;
(b) The merger or consolidation of the Corporation
with any Person, whether effected as a single transaction or a series
of related transactions, with (i) the Corporation not being the
continuing or surviving entity of that merger or consolidation or (ii)
the Corporation remaining the continuing or surviving entity of that
merger or consolidation but all or a part of the outstanding shares of
Stock are changed into or exchanged for stock or other securities of
any other Person or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation (whether by sale,
merger, consolidation, liquidation, or otherwise) to any Person,
whether effected as a single transaction or a series of related
transactions.
1.37 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act, or any successor rule, as it may be amended from time to time,
and references to paragraphs or clauses of Rule 16b-3 shall refer to the
corresponding paragraphs or clauses of Rule 16b-3 as it exists at the Effective
Date or the comparable paragraph or clause of Rule 16b-3 as it may thereafter
be amended.
-5-
<PAGE> 42
1.38 "Section 162(m)" means Section 162(m) of the Code, or any
successor section under the Code, as it may be amended from time to time and as
interpreted by final or proposed regulations promulgated thereunder from time
to time.
1.39 "Securities Act" means the Securities Act of 1933 and the
rules and regulations promulgated thereunder, or any successor law, as it may
be amended from time to time.
1.40 "Stock" means the Corporation's authorized common stock,
par value $.01 per share, or any other securities that are substituted for the
Stock as provided in Section 9.
1.41 "Stock Appreciation Right" means the right to receive an
amount equal to the excess of the Fair Market Value of a share of Stock (as
determined on the date of exercise) over, as appropriate, the Exercise Price of
a related Option or the Fair Market Value of the Stock on the Date of Grant of
the Stock Appreciation Right.
1.42 "Subsidiary" means, with respect to any Person, any
corporation, or other entity of which a majority of the Voting Securities is
owned, directly or indirectly, by that Person.
1.43 "Total Shares" has the meaning given it in Subsection 9.2.
1.44 "Voting Securities" means (i) any securities that are
entitled to vote generally in the election of directors, in the admission of
general partners or in the selection of any other similar governing body and
(ii) with respect to the Corporation, all shares of the Corporation's nonvoting
common stock, par value $.01 per share (all of which are convertible into
shares of the Corporation's common stock, par value $.01 per share).
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of
Subsections 2.2 and 2.5 and Section 9 of this Plan, the aggregate number of
shares of Stock that may be issued, transferred or exercised pursuant to Awards
under the Plan shall be one million five hundred thousand (1,500,000) shares of
Stock. Except as provided in Section 8, awards to which shares of such Stock
relate may be awarded to any one Eligible Individual or allocated among the
Eligible Individuals, as determined by the Committee; provided that no more
than 100,000 shares of Stock may be subject to Incentive Awards granted to any
single Eligible Individual during any two-year period.
2.2 Limitation of Shares. For purposes of the limitations
specified in Subsection 2.1, the following principles shall apply:
(a) the following shall count against and decrease the
number of shares of Stock that may be issued for purposes of
Subsection 2.1: (i) shares of Stock subject to outstanding Options,
outstanding shares of Restricted Stock, and shares subject to
outstanding Stock Appreciation Rights granted independent of Options
(based on a good faith estimate by the Corporation or the Committee of
the maximum number of shares for which the Stock Appreciation Right
may be settled (assuming payment in full in shares of Stock)), and
(ii) in the case of Options granted in tandem with Stock Appreciation
Rights, the greater of the number of shares of Stock that would be
counted if one or the other alone was outstanding (determined as
described in clause (i) above);
(b) the following shall be added back to the number of
shares of Stock that may be issued for purposes of Subsection 2.1: (i)
shares of Stock with respect to which Options, Stock Appreciation
Rights granted independent of Options, or Restricted Stock Awards
expire, are canceled, or otherwise terminate without being exercised,
converted, or vested, as applicable, and (ii) in the case of Options
granted in tandem with Stock Appreciation Rights, shares of Stock as
to which an Option has been surrendered in connection with the
exercise of a related ("tandem") Stock Appreciation Right, to the
extent the number surrendered exceeds the number issued upon exercise
of the Stock Appreciation Right;
-6-
<PAGE> 43
(c) shares of Stock subject to Stock Appreciation
Rights granted independent of Options (calculated as provided in
clause (a) above) that are exercised and paid in cash shall be added
back to the number of shares of Stock that may be issued for purposes
of Subsection 2.1;
(d) shares of Stock that are transferred by a Holder
of an Award (or withheld by the Corporation) as full or partial
payment to the Corporation of the purchase price of shares of Stock
subject to an Option or the Corporation's or any Subsidiary's tax
withholding obligations shall not be added back to the number of
shares of Stock that may be issued for purposes of Subsection 2.1 and
shall not again be subject to Awards; and
(e) if the number of shares of Stock counted against
the number of shares that may be issued for purposes of Subsection 2.1
is based upon an estimate made by the Corporation or the Committee as
provided in clause (a) above and the actual number of shares of Stock
issued pursuant to the applicable Award is greater or less than the
estimated number, then, upon such issuance, the number of shares of
Stock that may be issued pursuant to Subsection 2.1 shall be further
reduced by the excess issuance or increased by the shortfall, as
applicable.
Notwithstanding the provisions of this Subsection 2.2, (i) no Stock
shall be treated as issuable under the Plan to Eligible Individuals (A) subject
to Section 16 of the Exchange Act if otherwise prohibited from issuance under
Rule 16b-3 or (B) subject to Section 162(m) if otherwise prohibited from
issuance under Section 162(m) and (ii) the Committee may impose restrictions
which are more limited than set forth herein with respect to shares of stock
subject to Awards that may be added back to the number of shares of stock that
may be issued for purposes of Subsection 2.1.
2.3 Description of Shares. The shares to be delivered under
the Plan shall be made available from (a) authorized but unissued shares of
Stock, (b) Stock held in the treasury of the Corporation, or (c) previously
issued shares of Stock reacquired by the Corporation, including shares
purchased on the open market, in each situation as the Board of Directors or
the Committee may determine from time to time at its sole option.
2.4 Registration and Listing of Shares. From time to time, the
Board of Directors and appropriate officers of the Corporation shall and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons
to make shares of Stock available for issuance pursuant to the exercise of
Awards.
2.5 Reduction in Outstanding Shares of Stock. Nothing in this
Section 2 shall impair the right of the Corporation to reduce the number of
outstanding shares of Stock pursuant to repurchases, redemptions, or otherwise;
provided, however, that no reduction in the number of outstanding shares of
Stock shall (a) impair the validity of any outstanding Award, whether or not
that Award is fully exercisable or fully vested, or (b) impair the status of
any shares of Stock previously issued pursuant to the exercise of an Award or
thereafter issued pursuant to a then-outstanding Award as duly authorized,
validly issued, fully paid, and nonassessable shares.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Board of Directors may administer the Plan
with respect to all Eligible Individuals or may delegate all or part of that
duty to the Committee; provided that the Committee shall not have the power to
appoint members of the Committee. Except for references in Subsections 3.1,
3.2, and 3.3, and unless the context otherwise requires, references herein to
the Committee shall also refer to the Board of Directors as administrator of
the Plan. The Committee shall be constituted so that, as long as Stock is
registered under Section 12 of the Exchange Act, each member of the Committee
shall be a Disinterested Person and so that the Plan in all other applicable
respects will qualify transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3 and the exemption from
the deductibility limitation imposed by Section 162(m) provided by the
performance-based compensation exception described in Section 162(m), to the
extent exemptions thereunder may be available. The number of Persons that
shall constitute the Committee shall be
-7-
<PAGE> 44
determined from time to time by a majority of all the members of the Board of
Directors and, unless that majority of the Board of Directors determines
otherwise or Rule 16b-3 or Section 162(m) is amended to require otherwise,
shall be no less than two Persons. Notwithstanding the foregoing, the Board of
Directors may designate the Compensation Committee of the Board of Directors to
serve as the Committee hereunder, provided that each member of such
Compensation Committee is a Disinterested Person.
3.2 Duration, Removal, Etc. The members of the Committee shall
serve at the discretion of the Board of Directors, which shall have the power,
at any time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of
the Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Rule 16b-3 or Section 162(m) may require from time to time.
3.3 Meetings and Actions of Committee. The Board of Directors
shall designate which of the Committee members shall be the chairman of the
Committee. If the Board of Directors fails to designate a Committee chairman,
the members of the Committee shall elect one of the Committee members as
chairman, who shall act as chairman until he ceases to be a member of the
Committee or until the Board of Directors elects a new chairman. The Committee
shall hold its meetings at those times and places as the chairman of the
Committee may determine. At all meetings of the Committee, a quorum for the
transaction of business shall be required and a quorum shall be deemed present
if at least a majority of the members of the Committee are present. At any
meeting of the Committee, each member shall have one vote. All decisions and
determinations of the Committee shall be made by the majority vote or majority
decision of all of its members present at a meeting at which a quorum is
present; provided, however, that any decision or determination reduced to
writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting that was duly called and held.
The Committee may make any rules and regulations for the conduct of its
business that are not inconsistent with the provisions of the Plan, the
Certificate of Incorporation of the Corporation, the by-laws of the
Corporation, and Rule 16b-3 and Section 162(m) so long as applicable, as the
Committee may deem advisable.
3.4 Committee's Powers. Subject to the express provisions of
the Plan and Rule 16b-3, the Committee shall have the authority, in its sole
and absolute discretion, to (a) adopt, amend, and rescind administrative and
interpretive rules and regulations relating to the Plan; (b) determine the
Eligible Individuals to whom, and the time or times at which, Awards shall be
granted; (c) determine the amount of cash and the number of shares of Stock,
Stock Appreciation Rights, or Restricted Stock Awards, or any combination
thereof, that shall be the subject of each Award; (d) determine the terms and
provisions of each Award Agreement (which need not be identical), including
provisions defining or otherwise relating to (i) the term and the period or
periods and extent of exercisability of the Options, (ii) the extent to which
the transferability of shares of Stock issued or transferred pursuant to any
Award is restricted, (iii) the effect of termination of employment of a Holder
on the Award, and (iv) the effect of approved leaves of absence (consistent
with any applicable regulations of the Internal Revenue Service); (e)
accelerate, pursuant to Section 8, the time of exercisability of any Option
that has been granted; (f) construe the respective Award Agreements and the
Plan; (g) make determinations of the Fair Market Value of the Stock pursuant to
the Plan; (h) delegate its duties under the Plan to such agents as it may
appoint from time to time, provided that the Committee may not delegate its
duties with respect to making Awards to, or otherwise with respect to Awards
granted to, Eligible Individuals who are subject to Section 16(b) of the
Exchange Act or Section 162(m); (i) subject to ratification by the Board of
Directors, terminate, modify, or amend the Plan; and (j) make all other
determinations, perform all other acts, and exercise all other powers and
authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee
deems appropriate. Subject to Rule 16b-3 and Section 162(m), the Committee may
correct any defect, supply any omission, or reconcile any inconsistency in the
Plan, in any Award, or in any Award Agreement in the manner and to the extent
it deems necessary or desirable to carry the Plan into effect, and the
Committee shall be the sole and final judge of that necessity or desirability.
The determinations of the Committee on the matters referred to in this
Subsection 3.4 shall be final and conclusive.
-8-
<PAGE> 45
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to
the Plan only to persons who are Eligible Individuals at the time of the grant
thereof.
4.2 Grant of Awards. Subject to the express provisions of the
Plan, the Committee shall determine which Eligible Individuals shall be granted
Awards from time to time. In making grants, the Committee shall take into
consideration the contribution that the potential Holder has made or may make
to the success of the Corporation or its Subsidiaries and such other
considerations as the Board of Directors may from time to time specify. The
Committee shall also determine the number of shares subject to each of the
Awards and shall authorize and cause the Corporation to grant Awards in
accordance with those determinations.
4.3 Date of Grant. Subject to the penultimate sentence of this
Subsection 4.3 and clause (ii) of the first sentence of Subsection 10.9, the
date on which the Committee completes all action resolving to offer an Award to
an individual, including the specification of the number of shares of Stock to
be subject to the Award, shall be the date on which the Award covered by an
Award Agreement is granted (the "Date of Grant"), even though certain terms of
the Award Agreement may not be determined at that time and even though the
Award Agreement may not be executed until a later time. With respect to Awards
granted to Non-Employee Directors under Subsection 8.2(b) or 8.2(c), the Date
of Grant shall be the date identified in the applicable subsection. In no
event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Award Agreement by the Corporation
and the Holder.
4.4 Award Agreements. Each Award granted under the Plan shall
be evidenced by an Award Agreement that is executed by the Corporation
incorporating those terms that the Committee shall deem necessary or desirable.
More than one Award may be granted under the Plan to the same Eligible
Individual and be outstanding concurrently. In the event an Eligible
Individual is granted both one or more Incentive Options and one or more
Nonstatutory Options, those grants shall be evidenced by separate Award
Agreements, one for each of the Incentive Option grants and one for each of the
Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any
provision contained herein to the contrary, (a) a person shall not be eligible
to receive an Incentive Option unless he is an Employee of the Corporation or a
corporate Subsidiary (but not a partnership Subsidiary) and (b) a Person shall
not be eligible to receive an Incentive Option if, immediately before the time
the Option is granted, that person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total
combined voting power or value of all classes of outstanding stock of the
Corporation or a Subsidiary; provided, however, Subsection 4.5(b) shall not
apply if, at the time the Incentive Option is granted, the Exercise Price of
the Incentive Option is at least one hundred ten percent of Fair Market Value
and the Incentive Option is not, by its terms, exercisable after the expiration
of five years from the Date of Grant.
4.6 No Right to Award. The adoption of the Plan shall not be
deemed to give any Person a right to be granted an Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Except as otherwise provided in Section 8 with respect to Awards to
Non-Employee Directors, all Options granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include and be subject to,
the terms and conditions set forth in this Section 5 (to the extent each term
and condition applies to the form of Option) and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement that expressly contains terms and
provisions that differ from the terms and provisions set forth in Subsections
9.2, 9.3, and 9.4 and any of the terms and provisions of Section 10 (other than
Subsections 10.5, 10.8 and 10.9).
-9-
<PAGE> 46
5.1 Number of Shares. Each Award Agreement shall state the
total number of shares of Stock to which it relates.
5.2 Vesting. Each Award Agreement shall state the time or
periods in which, or the conditions upon satisfaction of which, the right to
exercise the Option or a portion thereof shall vest and the number of shares of
Stock for which the right to exercise the Option shall vest at each such time,
period, or fulfillment of condition.
5.3 Expiration of Options. Options may be exercised during the
term determined by the Committee and set forth in the Award Agreement; provided
that no Incentive Option shall by its terms be exercisable after the expiration
of a period of ten years commencing on the Date of Grant of the Incentive
Option.
5.4 Exercise Price. Each Award Agreement shall state the
exercise price per share of Stock (the "Exercise Price"); provided, however,
that the exercise price per share of Stock subject to an Incentive Option shall
not be less than the greater of (a) the par value per share of the Stock or (b)
100% of the Fair Market Value per share of the Stock on the Date of Grant of
the Option, and the exercise price per share of Stock subject to a Nonstatutory
Option shall not be less than the par value per share of the Stock (but may be
less than the Fair Market Value of a share of the Stock on the Date of Grant).
5.5 Method of Exercise. The Option shall be exercisable only
by written notice of exercise (the "Exercise Notice") delivered to the
Corporation during the term of the Option, which notice shall (a) state the
number of shares of Stock with respect to which the Option is being exercised,
(b) be signed by the Holder of the Option or, if the Holder is dead or becomes
affected by a Disability, by the person authorized to exercise the Option
pursuant to Subsection 10.3, (c) be accompanied by the Exercise Price for all
shares of Stock for which the Option is being exercised, and (d) include such
other information, instruments, and documents as may be required to satisfy any
other condition to exercise contained in the Award Agreement. The Option shall
not be deemed to have been exercised unless all of the requirements of the
preceding provisions of this Subsection 5.5 have been satisfied.
5.6 Incentive Option Exercises. Except as otherwise provided
in Subsection 10.3, during a Holder's lifetime, only the Holder may exercise an
Incentive Option.
5.7 Medium and Time of Payment. The Exercise Price of an
Option shall be payable in full upon the exercise of the Option (a) in cash or
by an equivalent means acceptable to the Committee, (b) on the Committee's
prior consent, with shares of Stock owned by the Holder (including shares
received upon exercise of the Option or shares of Restricted Stock already held
by the Holder) and having a Fair Market Value at least equal to the aggregate
Exercise Price payable in connection with such exercise, or (c) by any
combination of clauses (a) and (b). If the Committee elects to accept shares
of Stock in payment of all or any portion of the Exercise Price, then (for
purposes of payment of the Exercise Price) those shares of Stock shall be
deemed to have a cash value equal to their aggregate Fair Market Value
determined as of the date the certificate for such shares is delivered to the
Corporation. If the Committee elects to accept shares of Restricted Stock in
payment of all or any portion of the Exercise Price, then an equal number of
shares issued pursuant to the exercise shall be restricted on the same terms
and for the restriction period remaining on the shares used for payment.
5.8 Payment with Sale Proceeds. In addition, at the request of
a Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under
which that brokerage firm, on behalf of the Holder, shall pay to the
Corporation the Exercise Price of the Option being exercised and the
Corporation shall promptly deliver the exercised shares of Stock to the
brokerage firm. To accomplish this transaction, the Holder must deliver to the
Corporation an Exercise Notice containing irrevocable instructions from the
Holder to the Corporation to deliver the Stock certificates representing the
shares of Stock directly to the broker. Upon receiving a copy of the Exercise
Notice acknowledged by the Corporation, the broker shall sell that number of
shares of Stock or loan the Holder an amount sufficient to pay the Exercise
Price and any withholding obligations due. The broker then shall deliver to
the Corporation that portion of the sale or loan proceeds necessary to cover
the Exercise Price and any withholding obligations due. The Committee shall
-10-
<PAGE> 47
not approve any transaction of this nature if the Committee believes that the
transaction would give rise to the Holder's liability for short-swing profits
under Section 16(b) of the Exchange Act.
5.9 Payment of Taxes. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary if
the Holder is an employee of a Subsidiary of the Corporation), at the time of
the exercise of an Option or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising an Option. In connection with the exercise of an
Option requiring tax withholding, a Holder may (a) direct the Corporation to
withhold from the shares of Stock to be issued to the Holder the number of
shares necessary to satisfy the Corporation's obligation to withhold taxes,
that determination to be based on the shares' Fair Market Value as of the date
of exercise; (b) deliver to the Corporation sufficient shares of Stock (based
upon the Fair Market Value as of the date of such delivery) to satisfy the
Corporation's tax withholding obligation, which tax withholding obligation is
based on the shares' Fair Market Value as of the later of the date of exercise
or the date as of which the shares of Stock issued in connection with such
exercise become includable in the income of the Holder; or (c) deliver
sufficient cash to the Corporation to satisfy its tax withholding obligations.
Holders who elect to use such a Stock withholding feature must make the
election at the time and in the manner that the Committee prescribes. The
Committee may, at its sole option, deny any Holder's request to satisfy
withholding obligations through Stock instead of cash. In the event the
Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of
any tax withholding obligation is insufficient to discharge that tax
withholding obligation, then the Holder shall pay to the Corporation,
immediately upon the Committee's request, the amount of that deficiency in the
form of payment requested by the Committee.
5.10 Limitation on Aggregate Value of Shares That May Become
First Exercisable During Any Calendar Year Under an Incentive Option. Except
as otherwise provided in Subsection 9.3, with respect to any Incentive Option
granted under the Plan, the aggregate Fair Market Value of shares of Stock
subject to an Incentive Option and the aggregate Fair Market Value of shares of
Stock or stock of any Subsidiary (or a predecessor of the Corporation or a
Subsidiary) subject to any other incentive stock option (within the meaning of
Section 422 of the Code) of the Corporation or its Subsidiaries (or a
predecessor corporation of any such corporation) that first become purchasable
by a Holder in any calendar year may not (with respect to that Holder) exceed
$100,000, or such other amount as may be prescribed under Section 422 of the
Code or applicable regulations or rulings from time to time. As used in the
previous sentence, Fair Market Value shall be determined as of the Date of
Grant of the Incentive Option. For purposes of this Subsection 5.10,
"predecessor corporation" means (a) a corporation that was a party to a
transaction described in Section 424(a) of the Code (or which would be so
described if a substitution or assumption under that Section had been effected)
with the Corporation, (b) a corporation which, at the time the new incentive
stock option (within the meaning of Section 422 of the Code) is granted, is a
Subsidiary of the Corporation or a predecessor corporation of any such
corporations, or (c) a predecessor corporation of any such corporations.
Failure to comply with this provision shall not impair the enforceability or
exercisability of any Option, but shall cause the excess amount of shares to be
reclassified in accordance with the Code.
5.11 No Fractional Shares. The Corporation shall not in any
case be required to sell, issue, or deliver a fractional share with respect to
any Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same
fraction (as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
5.12 Modification, Extension, and Renewal of Options. Subject
to the terms and conditions of and within the limitations of the Plan, Rule
16b-3, and any consent required by the last sentence of this Subsection 5.12,
the Committee may (a) modify, extend, or renew outstanding Options granted
under the Plan, (b) accept the surrender of Options outstanding hereunder (to
the extent not previously exercised) and authorize the granting of new Options
in substitution for outstanding Options (to the extent not previously
exercised), and (c) amend the terms of an Incentive Option at any time to
include provisions that have the effect of changing the Incentive Option to a
Nonstatutory Option. Nevertheless, without the consent of the Holder, the
Committee may not modify any outstanding Options so as to specify a higher or
lower Exercise Price or accept the surrender of outstanding
-11-
<PAGE> 48
Incentive Options and authorize the granting of new Options in substitution
therefor specifying a higher or lower Exercise Price. In addition, no
modification of an Option granted hereunder shall, without the consent of the
Holder, alter or impair any rights or obligations under any Option theretofore
granted to such Holder under the Plan except, with respect to Incentive
Options, as may be necessary to satisfy the requirements of Section 422 of the
Code or as permitted in clause (c) of this Subsection 5.12.
5.13 Other Agreement Provisions. The Award Agreements
authorized under the Plan shall contain such provisions in addition to those
required by the Plan (including, without limitation, restrictions or the
removal of restrictions upon the exercise of the Option and the retention or
transfer of shares thereby acquired) as the Committee may deem advisable. Each
Award Agreement shall identify the Option evidenced thereby as an Incentive
Option or Nonstatutory Option, as the case may be, and no Award Agreement shall
cover both an Incentive Option and a Nonstatutory Option. Each Award Agreement
relating to an Incentive Option granted hereunder shall contain such
limitations and restrictions upon the exercise of the Incentive Option to which
it relates as shall be necessary for the Incentive Option to which such Award
Agreement relates to constitute an incentive stock option, as defined in
Section 422 of the Code.
5.14 Option Status. To the extent an Incentive Option (or any
portion thereof) fails to constitute an incentive stock option under Section
422 of the Code, such portion of the Incentive Option which fails to so qualify
shall be deemed to be a Nonstatutory Option under this Plan.
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply
with, and the related Award Agreements shall be deemed to include and be
subject to, the terms and conditions set forth in this Section 6 (to the extent
each term and condition applies to the form of Stock Appreciation Right) and
also the terms and conditions set forth in Sections 9 and 10; provided,
however, that the Committee may authorize an Award Agreement related to a Stock
Appreciation Right that expressly contains terms and provisions that differ
from the terms and provisions set forth in Subsections 9.2, 9.3, and 9.4 and
any of the terms and provisions of Section 10 (other than Subsection 10.9).
6.1 Form of Right. A Stock Appreciation Right may be granted
to an Eligible Individual (a) in connection with an Option, either at the time
of grant or at any time during the term of the Option, or (b) independent of an
Option.
6.2 Rights Related to Options. A Stock Appreciation Right
granted pursuant to an Option shall entitle a Holder, upon exercise, to
surrender that Option or any portion thereof, to the extent unexercised, and to
receive payment of an amount computed pursuant to Subsection 6.2(b). That
Option shall then cease to be exercisable to the extent surrendered. Stock
Appreciation Rights granted in connection with an Option shall be subject to
the terms of the Award Agreement governing the Option, which shall comply with
the following provisions in addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Subsection
10.8, a Stock Appreciation Right granted in connection with an Option
shall be exercisable only at such time or times and only to the extent
that the related Option is exercisable and shall not be transferable
except to the extent that the related Option is transferable.
(b) Value of Right. Upon the exercise of a Stock
Appreciation Right related to an Option, a Holder shall be entitled to
receive payment from the Corporation of an amount determined by
Multiplying:
(i) The difference obtained by subtracting the
Exercise Price of a share of Stock specified in the related
Option from the Fair Market Value of a share of Stock on
the date of exercise of the Stock Appreciation Right, by
-12-
<PAGE> 49
(ii) The number of shares as to which that Stock
Appreciation Right has been exercised.
6.3 Right Without Option. A Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the Committee
and set forth in the Award Agreement governing the Stock Appreciation Right,
which Award Agreement shall comply with the following provisions:
(a) Number of Shares. Each Award Agreement shall
state the total number of shares of Stock to which the Stock
Appreciation Right relates.
(b) Vesting. Each Award Agreement shall state the
time or periods in which the right to exercise the Stock Appreciation
Right or a portion thereof shall vest and the number of shares of
Stock for which the right to exercise the Stock Appreciation Right
shall vest at each such time or period.
(c) Expiration of Rights. Each Award Agreement shall
state the date at which the Stock Appreciation Rights shall expire if
not previously exercised.
(d) Value of Right. Each Stock Appreciation Right
shall entitle a Holder, upon exercise thereof, to receive payment of
an amount determined by multiplying:
(i) The difference obtained by subtracting the
Fair Market Value of a share of Stock on the Date of Grant
of the Stock Appreciation Right from the Fair Market Value
of a share of Stock on the date of exercise of that Stock
Appreciation Right, by
(ii) The number of shares as to which the Stock
Appreciation Right has been exercised.
6.4 Limitations on Rights. Notwithstanding Subsections 6.2(b)
and 6.3(d), the Committee may limit the amount payable upon exercise of a Stock
Appreciation Right. Any such limitation must be determined as of the Date of
Grant and be noted on the Award Agreement evidencing the Holder's Stock
Appreciation Right.
6.5 Payment of Rights. Payment of the amount determined under
Subsection 6.2(b) or 6.3(d) and Subsection 6.4 may be made, in the sole
discretion of the Committee, unless specifically provided otherwise in the
Award Agreement, solely in whole shares of Stock valued at Fair Market Value on
the date of exercise of the Stock Appreciation Right, solely in cash, or in a
combination of cash and whole shares of Stock. If the Committee decides to
make full payment in shares of Stock and the amount payable results in a
fractional share, payment for the fractional share shall be made in cash.
6.6 Payment of Taxes. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary if
the Holder is an employee of a Subsidiary of the Corporation), at the time of
the exercise of a Stock Appreciation Right or thereafter, the amount that the
Committee deems necessary to satisfy the Corporation's or its Subsidiary's
current or future obligation to withhold federal, state, or local income or
other taxes that the Holder incurs by exercising a Stock Appreciation Right.
In connection with the exercise of a Stock Appreciation Right requiring tax
withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to
be based on the shares' Fair Market Value as of the date of exercise; (b)
deliver to the Corporation sufficient shares of Stock (based upon the Fair
Market Value as of the date of such delivery) to satisfy the Corporation's tax
withholding obligation, which tax withholding obligation is based on the
shares' Fair Market Value as of the later of the date of exercise or the date
as of which the shares of Stock issued in connection with such exercise become
includable in the income of the Holder; or (c) deliver sufficient cash to the
Corporation to satisfy its tax withholding obligation. Holders who elect to
have Stock withheld pursuant to (a) or (b) above must make the election at the
time and in the manner that the Committee prescribes. The Committee may, in
its sole discretion, deny any Holder's request to satisfy withholding
obligation through Stock instead of
-13-
<PAGE> 50
cash. In the event the Committee subsequently determines that the aggregate
Fair Market Value (as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency in the form of payment requested by the Committee.
6.7 Other Agreement Provisions. The Award Agreements
authorized relating to Stock Appreciation Rights shall contain such provisions
in addition to those required by the Plan (including, without limitation,
restrictions or the removal of restrictions upon the exercise of the Stock
Appreciation Right and the retention or transfer of shares thereby acquired) as
the Committee may deem advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with
and be subject to, and the related Award Agreements shall be deemed to include,
the terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement related to a Restricted Stock Award
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Subsections 9.2, 9.3, and 9.4 and the terms and
provisions set forth in Section 10 (other than Subsections 10.8 and 10.9).
7.1 Restrictions. All shares of Restricted Stock Awards
granted or sold pursuant to the Plan shall be subject to the following
conditions:
(a) Transferability. The shares may not be sold,
transferred, or otherwise alienated or hypothecated until the
restrictions are removed or expire.
(b) Conditions to Removal of Restrictions. Conditions
to removal or expiration of the restrictions may include, but are not
required to be limited to, continuing employment or service as a
director, officer, consultant, or advisor or achievement of
performance objectives described in the Award Agreement.
(c) Legend. Each certificate representing Restricted
Stock Awards granted pursuant to the Plan shall bear a legend making
appropriate reference to the restrictions imposed.
(d) Possession. The Committee may require the
Corporation to retain physical custody of the certificates
representing Restricted Stock Awards during the restriction period and
may require a Holder of the Award to execute stock powers in blank for
those certificates and deliver those stock powers to the Corporation,
or the Committee may require the Holder to enter into an escrow
agreement providing that the certificates representing Restricted
Stock Awards granted or sold pursuant to the Plan shall remain in the
physical custody of an escrow holder until all restrictions are
removed or expire.
(e) Other Conditions. The Committee may impose other
conditions on any shares granted or sold as Restricted Stock Awards
pursuant to the Plan as it may deem advisable, including without
limitation (i) restrictions under the Securities Act or Exchange Act,
(ii) the requirements of any securities exchange upon which the shares
or shares of the same class are then listed, and (iii) any state
securities law applicable to the shares.
7.2 Expiration of Restrictions. The restrictions imposed in
Subsection 7.1 on Restricted Stock Awards shall lapse as determined by the
Committee and set forth in the applicable Award Agreement, and the Corporation
shall promptly deliver to the Holder of the Restricted Stock Award a
certificate representing the number of shares for which restrictions have
lapsed, free of any restrictive legend relating to the lapsed restrictions.
Each Restricted Stock Award may have a different restriction period as
determined by the Committee in its sole discretion. The Committee may, in its
discretion, prospectively reduce the restriction period applicable to a
particular Restricted Stock Award.
-14-
<PAGE> 51
7.3 Rights as Stockholder. Subject to the provisions of
Subsections 7.1 and 10.9, the Committee may, in its discretion, determine what
rights, if any, a Holder shall have with respect to the Restricted Stock Awards
granted or sold, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto.
7.4 Payment of Taxes. The Committee may, in its discretion,
require a Holder to pay to the Corporation (or the Corporation's Subsidiary if
the Holder is an employee of a Subsidiary of the Corporation) the amount that
the Committee deems necessary to satisfy the Corporation's or its Subsidiary's
current or future obligation to withhold federal, state, or local income or
other taxes that the Holder incurs by reason of the Restricted Stock Award. A
Holder may (a) direct the Corporation to withhold from the shares of Stock to
be issued to the Holder the number of shares necessary to satisfy the
Corporation's obligation to withhold taxes, that determination to be based on
the shares' Fair Market Value as of the date on which tax withholding is to be
made; (b) deliver to the Corporation sufficient shares of Stock (based upon the
Fair Market Value as of the date of such delivery) to satisfy the Corporation's
tax withholding obligation, which tax withholding obligation is based on the
shares' Fair Market Value as of the later of the date of issuance or the date
as of which the shares of Stock issued become includable in the income of the
Holder; or (c) deliver sufficient cash to the Corporation to satisfy its tax
withholding obligations. Holders who elect to have Stock withheld pursuant to
(a) or (b) above must make the election at the time and in the manner that the
Committee prescribes. The Committee may, in its sole discretion, deny any
Holder's request to satisfy withholding obligations through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate
Fair Market Value (as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency.
7.5 Other Agreement Provisions. The Award Agreements relating
to Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS
Except as otherwise provided in this Section 8 or the applicable Award
Agreement, Awards granted pursuant to this Section 8 shall be subject to the
conditions of Section 5 to the extent permitted under Rule 16b-3.
8.1 Ineligibility for Other Awards. Non-Employee Directors
shall not be eligible to receive any Awards under the Plan other than the
Awards specified in this Section 8.
8.2 Awards of Nonstatutory Options.
(a) Eligibility. Each Non-Employee Director of the
Corporation shall be eligible for Awards as specified in Subsections
8.2(b) or 8.2(c) below.
(b) Awards to Non-Employee Directors at the Closing of
Initial Public Offering. Each Non- Employee Director as of the
closing date of the Initial Public Offering (including persons who are
elected as a Non-Employee Director in conjunction with the closing of
the Initial Public Offering) shall be awarded a Nonstatutory Option to
purchase 5,000 shares of Stock at an Exercise Price per share equal to
the public offering price set forth on the cover page of the
Corporation's final prospectus pursuant to which the Initial Public
Offering is effected.
(c) Awards to Non-Employee Directors Elected or
Appointed After the Closing of the Initial Public Offering. Each
Non-Employee Director who is elected or appointed to the Board of
Directors after the closing date of the Initial Public Offering, and
has not served as a member of the Board of Directors before such date,
shall be awarded a Nonstatutory Option to purchase 5,000 shares of
Stock upon the date of such election or appointment to the Board of
Directors at an Exercise Price per share equal to the
-15-
<PAGE> 52
average Fair Market Value of a share of Stock for the five trading
days immediately preceding the Date of Grant.
8.3 Available Stock. The automatic Awards specified in
Subsection 8.2 shall be made in the amounts specified in Subsection 8.2 only if
the number of shares of Stock available to be issued, transferred or exercised
pursuant to Awards under this Plan (as calculated in Section 2) is sufficient
to make all automatic grants required to be made by Subsection 8.2 on the Date
of Grant of those automatic Awards. In the event that the number of shares of
Stock that are available to be issued, transferred, or exercised pursuant to
Awards under the Plan on the Date of Grant of the automatic Awards described in
Subsection 8.2 is insufficient to permit the grant of the entire number of
shares specified in Subsection 8.2, then the number of available shares shall
be apportioned equally among the automatic Awards made on that date, and the
number of shares apportioned to each automatic Award shall be the amount of
shares automatically subject to that automatic Award.
8.4 Exercisability. Each Nonstatutory Option granted pursuant
to this Section 8 shall become exercisable with respect to 1,000 shares of
Stock on each of the first five anniversaries of the Date of Grant. Each
Nonstatutory Option awarded pursuant to this Section 8 shall expire 10 years
after the Date of Grant.
SECTION 9. ADJUSTMENT PROVISIONS
9.1 Adjustment of Awards and Authorized Stock. The terms of an
Award and the number of shares of Stock authorized pursuant to Subsection 2.1
for issuance under the Plan shall be subject to adjustment from time to time,
in accordance with the following provisions:
(a) If at any time, or from time to time, the
Corporation shall subdivide as a whole (by reclassification, by a
Stock split, by the issuance of a distribution on Stock payable in
Stock, or otherwise) the number of shares of Stock then outstanding
into a greater number of shares of Stock, then (i) the maximum number
of shares of Stock available for the Plan as provided in Subsection
2.1 shall be increased proportionately, and the kind of shares or
other securities available for the Plan shall be appropriately
adjusted, (ii) the number of shares of Stock (or other kind of shares
or securities) that may be acquired under any Award shall be increased
proportionately, and (iii) the price (including Exercise Price) for
each share of Stock (or other kind of shares or securities) subject to
then outstanding Awards shall be reduced proportionately, without
changing the aggregate purchase price or value as to which outstanding
Awards remain exercisable or subject to restrictions.
(b) If at any time, or from time to time, the
Corporation shall consolidate as a whole (by reclassification, reverse
Stock split, or otherwise) the number of shares of Stock then
outstanding into a lesser number of shares of Stock, (i) the maximum
number of shares of Stock available for the Plan as provided in
Subsection 2.1 shall be decreased proportionately, and the kind of
shares or other securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of Stock (or other
kind of shares or securities) that may be acquired under any Award
shall be decreased proportionately, and (iii) the price (including
Exercise Price) for each share of Stock (or other kind of shares or
securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or
value as to which outstanding Awards remain exercisable or subject to
restrictions.
(c) Whenever the number of shares of Stock subject to
outstanding Awards and the price for each share of Stock subject to
outstanding Awards are required to be adjusted as provided in this
Subsection 9.1, the Committee shall promptly prepare a notice setting
forth, in reasonable detail, the event requiring adjustment, the
amount of the adjustment, the method by which such adjustment was
calculated, and the change in price and the number of shares of Stock,
other securities, cash, or property purchasable subject to each Award
after giving effect to the adjustments. The Committee shall promptly
give each Holder such a notice.
-16-
<PAGE> 53
(d) Adjustments under Subsections 9.1(a) and (b) shall
be made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding, and
conclusive. No fractional interest shall be issued under the Plan on
account of any such adjustments.
9.2 Changes in Control. Upon the occurrence of a Change in
Control, subject to Subsection 1.7(b) (a) each Holder of an Option shall
immediately be granted corresponding Stock Appreciation Rights; (b) all
outstanding Stock Appreciation Rights and Options shall immediately become
fully vested and exercisable in full, including that portion of any Stock
Appreciation Right or Option that pursuant to the terms and provisions of the
applicable Award Agreement had not yet become exercisable (the total number of
shares of Stock as to which a Stock Appreciation Right or Option is exercisable
upon the occurrence of a Change in Control is referred to herein as the "Total
Shares"); and (c) the restriction period of any Restricted Stock Award shall
immediately be accelerated and the restrictions shall expire. If a Change in
Control involves a Restructuring or occurs in connection with a series of
related transactions involving a Restructuring and if such Restructuring is in
the form of a Non-Surviving Event and as a part of such Restructuring shares of
Stock, other securities, cash, or property shall be issuable or deliverable in
exchange for Stock, then a Holder of an Award shall be entitled to purchase or
receive (in lieu of the Total Shares that the Holder would otherwise be
entitled to purchase or receive), as appropriate for the form of Award, the
number of shares of Stock, other securities, cash, or property to which that
number of Total Shares would have been entitled in connection with such
Restructuring (and, for Options, at an aggregate exercise price equal to the
Exercise Price that would have been payable if that number of Total Shares had
been purchased on the exercise of the Option immediately before the
consummation of the Restructuring). Nothing in this Subsection 9.2 shall
impose on a Holder the obligation to exercise any Award immediately before or
upon the Change of Control or cause the Holder to forfeit the right to exercise
the Award during the remainder of the original term of the Award because of a
Change in Control.
9.3 Restructuring Without Change in Control. In the event a
Restructuring shall occur at any time while there is any outstanding Award
hereunder and that Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control,
then:
(a) no outstanding Option or Stock Appreciation Right
shall immediately become fully vested and exercisable in full merely
because of the occurrence of the Restructuring;
(b) no Holder of an Option shall automatically be
granted corresponding Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock
Award shall not immediately be accelerated and the restrictions expire
merely because of the occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may
(but shall not be required to) cause the Corporation to take any one
or more of the following actions with respect to outstanding Awards
other than Awards granted pursuant to Section 8 hereof:
(i) accelerate in whole or in part the time of
the vesting and exercisability of any one or more of the
outstanding Stock Appreciation Rights and Options so as to
provide that those Stock Appreciation Rights and Options
shall be exercisable before, upon, or after the
consummation of the Restructuring;
(ii) grant each Holder of an Option
corresponding Stock Appreciation Rights;
(iii) accelerate in whole or in part the
expiration of some or all of the restrictions on any
Restricted Stock Award;
-17-
<PAGE> 54
(iv) if the Restructuring is in the form of a
Non-Surviving Event, cause the surviving entity to assume
in whole or in part any one or more of the outstanding
Awards upon such terms and provisions as the Committee
deems desirable; or
(v) redeem in whole or in part any one or more
of the outstanding Awards (whether or not then exercisable)
in consideration of a cash payment, as such payment may be
reduced for tax withholding obligations as contemplated in
Subsections 5.9, 6.6, or 7.4, as applicable, in an amount
equal to:
(A) for Options and Stock Appreciation
Rights granted in connection with Options, the
excess of (1) the Fair Market Value, determined as
of the date immediately preceding the consummation
of the Restructuring, of the aggregate number of
shares of Stock subject to the Award and as to
which the Award is being redeemed over (2) the
Exercise Price for that number of shares of Stock;
(B) for Stock Appreciation Rights not
granted in connection with an Option, the excess
of (1) the Fair Market Value, determined as of the
date immediately preceding the consummation of the
Restructuring, of the aggregate number of shares
of Stock subject to the Award and as to which the
Award is being redeemed over (2) the Fair Market
Value of the number of shares of Stock on the Date
of Grant; and
(C) for Restricted Stock Awards, the
Fair Market Value, determined as of the date
immediately preceding the consummation of the
Restructuring, of the aggregate number of shares
of Stock subject to the Award and as to which the
Award is being redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Subsection 9.3. In the event of any
election or action taken by the Corporation pursuant to this Subsection 9.3
that requires the amendment or cancellation of any Award Agreement as may be
specified in any notice to the Holder thereof, that the Holder shall promptly
deliver that Award Agreement to the Corporation in order for that amendment or
cancellation to be implemented by the Corporation and the Committee. The
failure of the Holder to deliver any such Award Agreement to the Corporation as
provided in the preceding sentence shall not in any manner affect the validity
or enforceability of any action taken by the Corporation and the Committee
under this Subsection 9.3, including without limitation any redemption of an
Award as of the consummation of a Restructuring. Any cash payment to be made
by the Corporation pursuant to this Subsection 9.3 in connection with the
redemption of any outstanding Awards shall be paid to the Holder thereof
currently with the delivery to the Corporation of the Award Agreement
evidencing that Award; provided, however, that any such redemption shall be
effective upon the consummation of the Restructuring notwithstanding that the
payment of the redemption price may occur subsequent to the consummation. If
all or any portion of an outstanding Award is to be exercised or accelerated
upon or after the consummation of a Restructuring that does not occur in
connection with a Change in Control and is in the form of a Non-Surviving
Event, and as a part of that Restructuring shares of stock, other securities,
cash, or property shall be issuable or deliverable in exchange for Stock, then
the Holder of the Award shall thereafter be entitled to purchase or receive (in
lieu of the number of shares of Stock that the Holder would otherwise be
entitled to purchase or receive) the number of shares of Stock, other
securities, cash, or property to which such number of shares of Stock would
have been entitled in connection with the Restructuring (and, for Options, upon
payment of the aggregate exercise price equal to the Exercise Price that would
have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the
Restructuring) and such Award Agreement shall be subject to adjustments that
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Section 9. Notwithstanding the provisions of this Subsection 9.3,
the Committee shall not have the power or authority to take any action pursuant
to this Subsection 9.3 that causes the Plan not to be in compliance with the
requirements of Rule 16b-3 and any such action purported to be taken by the
Committee shall be null and void and without any force or effect.
-18-
<PAGE> 55
9.4 Notice of Restructuring. The Corporation shall attempt to
keep all Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's stockholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 Termination of Employment. Except as provided below, if a
Holder is an Eligible Individual because the Holder is an Employee and if that
employment relationship is terminated for any reason other than (a) Normal
Retirement, (b) that Holder's death, or (c) that Holder's Disability
(hereinafter defined), then any and all Awards held by such Holder in such
Holder's capacity as an Employee as of the date of the termination that are not
yet exercisable (or for which restrictions have not lapsed) shall become null
and void as of the date of such termination and the portion, if any, of such
Awards that are exercisable as of the date of termination shall be exercisable
for a period of the lesser of (i) the remainder of the term of the Award or
(ii) the date which is 180 days after the date of termination. If a Holder is
an Eligible Individual because such Holder is an Employee and if that
employment relationship is terminated as a result of (a) Normal Retirement, (b)
that Holder's death, or (c) that Holder's Disability, then any and all Awards
held by such Holder in such Holder's capacity as an Employee as of the date of
termination that are not yet exercisable (or for which restrictions have not
lapsed) shall become exercisable (and the restrictions thereon, if any, shall
lapse) as of the date of termination, and all such Awards held by that Holder
as of the date of termination that are exercisable (either as a result of this
sentence or otherwise) shall be exercisable for a period of the lesser of (i)
the remainder of the term of the Award or (ii) the date which is three years
after the date of termination. Any portion of any such Award not exercised
upon the expiration of the lesser of the periods specified in (i) or (ii) of
the preceding two sentences shall be null and void upon the expiration of such
period, as applicable. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by the
Corporation for "cause" (hereafter defined), then any and all Awards held by
such Holder in such Holder's capacity as an Employee as of the date of the
termination shall become null and void as of the date of such termination.
"Cause" shall have the meanings given such term in the employment agreement of
the Holder (if any) with the Corporation or a Subsidiary of the Corporation;
provided, however, that if that Holder has no employment agreement, "cause"
shall mean, as determined by the Board of Directors in the sole discretion
exercised in good faith of the Board of Directors, (a) the breach by the Holder
of any nondisclosure, noncompetition, or other agreement to which the Holder
and the Corporation are parties, (b) the commission by the Holder of a felony
or of a misdemeanor involving moral turpitude, (c) the participation by the
Holder in any fraud, (d) dishonesty by the Holder that is detrimental to the
best interest of the Corporation, (e) the willful and continued failure by the
Holder to substantially perform his duties to the Corporation (other than any
such failure resulting from the Holder's incapacity due to physical or mental
illness) after written demand for substantial performance is delivered by the
Corporation specifically identifying the manner in which the Corporation
believes the Holder has not substantially performed his duties, or (f) the
willful engaging by the Holder in misconduct which is materially injurious to
the Corporation, monetarily or otherwise.
10.2 Other Loss of Eligibility. If a Holder is an Eligible
Individual because the Holder is serving in a capacity other than as an
Employee, and:
(a) if that capacity is terminated for any reason other
than the Holder's death or Disability, then that portion, if any, of
any and all Awards held by the Holder that were granted because of
that capacity which are not yet exercisable (or for which restrictions
have not lapsed) as of the date of the termination shall become null
and void as of the date of the termination and, except as provided
below, the portion, if any, of any and all Awards held by the Holder
that are then exercisable as of the date of the termination shall
survive the termination and shall be exercisable for a period of the
lesser of (i) the remainder of the term of the Award or (ii) 180 days
following the date such capacity is terminated;
(b) if that capacity is terminated by reason of the
Holder's death or Disability, then the portion, if any, of any and all
Awards held by the Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of that termination for
death or Disability shall become exercisable (and the restrictions
thereon, if any, shall lapse), and all such Awards held by that Holder
as of the date of
-19-
<PAGE> 56
termination that are exercisable (either as a result of this sentence
or otherwise) shall be exercisable for the lesser of (i) the remainder
of the term of the Award or (ii) three years after the date such
capacity is terminated;
(c) if that capacity is terminated by reason of the
Holder's resignation or retirement from the position as a member of
the Board of Directors (including as a result of declining to accept a
nomination or otherwise stand for reelection) on or after the date of
the fifth annual meeting of stockholders of the Corporation held after
the date on which such Holder was elected or appointed to the Board of
Directors (other than as a result of Disability), any and all Awards
held by the Holder that are exercisable as of the date of such
resignation or retirement shall be exercisable for the lesser of (i)
the remainder of the term of the Award or (ii) three years after the
date of ceasing to serve as a director; or
(d) if that capacity is terminated by the Corporation for
"cause" (hereafter defined), then any and all Awards held by the
Holder that were granted because of that capacity shall become null
and void as of the date of such termination. "Cause" shall have the
meaning given such term in the contractual agreement of the Holder (if
any) with the Corporation or a Subsidiary of the Corporation;
provided, however, that if that Holder has no contractual agreement,
"cause" shall mean, as determined by the Board of Directors in the
sole discretion exercised in good faith of the Board of Directors, (i)
the breach by the Holder of any other agreement to which the Holder
and the Corporation are parties, (ii) the commission by the Holder of
a felony or of a misdemeanor involving moral turpitude, (iii) the
participation by the Holder in any fraud, (iv) dishonesty by the
Holder that is detrimental to the best interest of the Corporation,
(v) the willful and continued failure by the Holder to substantially
perform his duties to the Corporation (other than any such failure
resulting from the Holder's incapacity due to physical or mental
illness) after written demand for substantial performance is delivered
by the Corporation specifically identifying the manner in which the
Corporation believes the Holder has not substantially performed his
duties, or (vi) the willful engaging by the Holder in misconduct which
is materially injurious to the Corporation, monetarily or otherwise.
Any portion of an Award not exercised upon the expiration of the
lesser of the periods specified in clauses (a), (b) or (c) of this Subsection
10.2 shall be null and void upon the expiration of such period, as applicable.
10.3 Death or Disability. Upon the death or Disability of a
Holder, any and all Awards held by the Holder that are not yet exercisable (or
for which restrictions have not lapsed) as of the date of the Holder's death or
Disability may be exercised by, in the case of the Holder's Disability, the
Holder, his guardian or his legal representative or, in the case of the
Holder's death, by the Holder's legal representatives, heirs, legatees, or
distributees, in each case for the periods prescribed in Subsection 10.1 or
Subsection 10.2, as applicable. "Disability" shall have the meaning given it
in the employment agreement of the Holder; provided, however, that if that the
Holder has no employment agreement, "Disability" shall mean, as determined by
the Board of Directors in the sole discretion exercised in good faith of the
Board of Directors, a physical or mental impairment of sufficient severity that
either the Holder is unable to continue performing the duties he performed
before such impairment or the Holder's condition entitles him to disability
benefits under any insurance or employee benefit plan of the Corporation or its
Subsidiaries and that impairment or condition is cited by the Corporation as
the reason for termination of the Holder's employment or participation as a
member of the Board of Directors.
10.4 Leave of Absence. With respect to an Award, the Committee
may, in its sole discretion, determine that any Holder who is on leave of
absence for any reason will be considered to still be in the employ of the
Corporation, provided that rights to that Award during a leave of absence will
be limited to the extent to which those rights were earned, vested, or
exercisable when the leave of absence began.
10.5 Transferability of Awards.
(a) Permitted Transferees. The Committee may, in its
discretion, permit a Holder to transfer all or any portion of an
Option or Stock Appreciation Right, or authorize all or a portion of
any Option
-20-
<PAGE> 57
or Stock Appreciation Right to be granted to an Eligible Individual to
be on terms which permit transfer by such Holder, to (i) the spouse,
children or grandchildren of the Holder ("Immediate Family Members"),
(ii) a trust or trusts for the exclusive benefit of such Immediate
Family Members, or (iii) a partnership in which such Immediate Family
Members are the only partners (collectively, "Permitted Transferees");
provided that (x) there may be no consideration for any such transfer
and (y) subsequent transfers of Awards transferred as provided above
shall be prohibited except subsequent transfers back to the original
Holder of the Award and transfers to other Permitted Transferees of
the original Holder. Award Agreements evidencing Options or Stock
Appreciation Rights with respect to which such transferability is
authorized at the time of grant must be approved by the Committee, and
must expressly provide for transferability in a manner consistent with
this subsection 10.5(a).
(b) Qualified Domestic Relations Orders. Options and
Stock Appreciation rights may be transferred pursuant to qualified
domestic relations orders entered or approved by a court of competent
jurisdiction upon delivery to the Company of written notice of such
transfer and a certified copy of such order.
(c) Other Transfers. Except as expressly permitted by
subsections 10.5(a) and 10.5(b), Awards requiring exercise shall not
be transferable other than by will or the laws of descent and
distribution.
(d) Effect of Transfer. Following the transfer of any
Award as contemplated by Subsections 10.5(a), 10.5(b) and 10.5(c), (i)
such Award shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided
that the term "Holder" shall be deemed to refer to the Permitted
Transferee, the recipient under a qualified domestic relations order,
or the estate or heirs of a deceased Holder, as applicable, to the
extent appropriate to enable the Holder to exercise the transferred
Award in accordance with the terms of this Plan and applicable law and
(ii) the provisions of Subsections 10.1, 10.2 and 10.3 hereof shall
continue to be applied with respect to the original Holder and,
following the occurrence of any such events described therein the
Awards shall be exercisable by the Permitted Transferee, the recipient
under a qualified domestic relations order, or the estate or heirs of
a deceased Holder, as applicable, only to the extent and for the
periods specified in Subsections 10.1, 10.2 and 10.3.
(e) Procedures and Restrictions. Any Holder desiring
to transfer an Award as permitted under Subsections 10.5(a) or 10.5(b)
shall make application therefor in the manner and time specified by
the Committee and shall comply with such other requirements as the
Committee may require to assure compliance with all applicable
securities laws. The Committee shall not give permission for such a
transfer if (i) it would give rise to short-swing liability under
Section 16(b) of the Exchange Act, (ii) it may not be made in
compliance with all applicable federal, state and foreign securities
laws or (iii) with respect to any Award granted prior to October 21,
1996 (the effective date of amendments to this Plan to convert this
Plan to be in accordance with Rule 16b-3 as amended effective August
15, 1996), such transfer would occur within six months after the date
of grant of such Award.
(f) Registration. To the extent the issuance to any
Permitted Transferee of any shares of Stock issuable pursuant to
Awards transferred as permitted in this Subsection 10.5 is not
registered pursuant to the effective registration statement of the
Corporation generally covering the shares to be issued pursuant to
this Plan to initial Holders of Awards, the Corporation shall not have
any obligation to register the issuance of any such shares of Stock to
any such transferee.
(g) Option Status. To the extent a permitted transfer
of an Incentive Option under this Section 10.5 would cause an
Incentive Option (or any portion thereof) to fail to constitute an
incentive stock option under Section 422 of the Code, such portion of
the Incentive Option shall be deemed to be a Nonstatutory Option under
this Plan.
-21-
<PAGE> 58
10.6 Forfeiture and Restrictions on Transfer. Each Award
Agreement may contain or otherwise provide for conditions giving rise to the
forfeiture of the Stock acquired pursuant to an Award or otherwise and may also
provide for those restrictions on the transferability of shares of the Stock
acquired pursuant to an Award or otherwise that the Committee in its sole and
absolute discretion may deem proper or advisable. The conditions giving rise
to forfeiture may include, but need not be limited to, the requirement that the
Holder render substantial services to the Corporation or its Subsidiaries for a
specified period of time. The restrictions on transferability may include, but
need not be limited to, options and rights of first refusal in favor of the
Corporation and stockholders of the Corporation other than the Holder of such
shares of Stock who is a party to the particular Award Agreement or a
subsequent holder of the shares of Stock who is bound by that Award Agreement.
10.7 Delivery of Certificates of Stock. Subject to Subsection
10.8, the Corporation shall promptly issue and deliver a certificate
representing the number of shares of Stock as to which (a) an Option has been
exercised after the Corporation receives an Exercise Notice and upon receipt by
the Corporation of the Exercise Price and any tax withholding as may be
requested, (b) a Stock Appreciation Right has been exercised (to the extent the
Committee determines to pay such Stock Appreciation Right in shares of Stock
pursuant to Subsection 6.5) and upon receipt by the Corporation of any tax
withholding as may be requested, and (c) restrictions have lapsed with respect
to a Restricted Stock Award and upon receipt by the Corporation of any tax
withholding as may be requested. The value of the shares of Stock or cash
transferable because of an Award under the Plan shall not bear any interest
owing to the passage of time, except as may be otherwise provided in an Award
Agreement. If a Holder is entitled to receive certificates representing Stock
received for more than one form of Award under the Plan, separate Stock
certificates shall be issued with respect to Incentive Options and Nonstatutory
Options.
10.8 Conditions to Delivery of Stock. Nothing herein or in any
Award granted hereunder or any Award Agreement shall require the Corporation to
issue any shares with respect to any Award if that issuance would, in the
opinion of counsel for the Corporation, constitute a violation of the
Securities Act or any similar or superseding statute or statutes, any other
applicable statute or regulation, or the rules of any applicable securities
exchange or securities association, as then in effect. At the time of any
exercise of an Option or Stock Appreciation Right, or at the time of any grant
of a Restricted Stock Award, the Corporation may, as a condition precedent to
the exercise of such Option or Stock Appreciation Right or vesting of any
Restricted Stock Award, require from the Holder of the Award (or in the event
of his death, his legal representatives, heirs, legatees, or distributees) such
written representations, if any, concerning the Holder's intentions with regard
to the retention or disposition of the shares of Stock being acquired pursuant
to the Award and such written covenants and agreements, if any, as to the
manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by that Holder (or
in the event of the Holder's death, his legal representatives, heirs, legatees,
or distributees) will not involve a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable state or
federal statute or regulation, or any rule of any applicable securities
exchange or securities association, as then in effect.
10.9 Certain Directors and Officers. With respect to Holders
who are directors or officers of the Corporation or any of its Subsidiaries and
who are subject to Section 16(b) of the Exchange Act, Awards granted prior to
the date the stockholders of the Corporation shall have approved the Plan shall
be subject to such stockholder approval, may not be transferred or exercised,
as applicable, until such stockholder approval is obtained, and shall become
null and void on the first anniversary of the Effective Date if such
stockholder approval is not obtained on or before the Effective Date. In
addition, no such officer or director shall have shares of Stock withheld to
pay tax withholding obligations unless permitted under Rule 16b-3 and agreed to
by the Committee. Any election by any such officer or director to have tax
withholding obligations satisfied by the withholding of shares of Stock shall
be irrevocable, shall be communicated in writing to the Committee and shall be
subject to prior approval by Board of Directors, the Committee or the
shareholders of the Corporation as provided by Rule 16b-3. Any election by
such an officer or director to receive cash in full or partial settlement of a
Stock Appreciation Right, as well as any exercise by such individual of a Stock
Appreciation Right for such cash, in either case to the extent permitted under
the applicable Award Agreement or otherwise permitted by the Committee, shall
be subject to prior approval by the Board of Directors, the Committee or the
shareholders of the Corporation as provided by Rule 16b-3.
-22-
<PAGE> 59
10.10 Securities Act Legend. Certificates for shares of Stock,
when issued, may have the following legend, or statements of other applicable
restrictions, endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION
OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER) THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION
WILL NOT VIOLATE APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.11 Legend for Restrictions on Transfer. Each certificate
representing shares issued to a Holder pursuant to an Award granted under the
Plan shall, if such shares are subject to any transfer restriction, including a
right of first refusal, provided for under the Plan or an Award Agreement, bear
a legend that complies with applicable law with respect to the restrictions on
transferability contained in this Subsection 10.11, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
ENTITLED "CHASE BRASS INDUSTRIES, INC. 1994 LONG-TERM INCENTIVE PLAN"
AS ADOPTED BY CHASE BRASS INDUSTRIES, INC. (THE "CORPORATION"), AND
DATED NOVEMBER 10, 1994, AND AN AGREEMENT THEREUNDER BETWEEN THE
CORPORATION AND THE INITIAL HOLDER THEREOF DATED ___________________,
199___, AND MAY NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF
EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL FURNISH A COPY OF
SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
10.12 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof.
Nevertheless, dividends, dividend equivalent rights and voting rights may be
extended to and made part of any Award (other than Options or Stock
Appreciation Rights) denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The
Committee may also establish rules and procedures for the crediting of interest
on deferred cash payments and dividend equivalents for deferred payment
denominated in Stock or units of Stock.
10.13 Furnish Information. Each Holder shall furnish to the
Corporation all information requested by the Corporation to enable it to comply
with any reporting or other requirement imposed upon the Corporation by or
under any applicable statute or regulation.
10.14 Obligation to Exercise. The granting of an Award hereunder
shall impose no obligation upon a Holder to exercise the same or any part
thereof.
10.15 Adjustments to Awards. Subject to the general limitations
set forth in Sections 5, 6, and 9, the Committee may make any adjustment in the
exercise price of, the number of shares subject to, or the terms of a
Nonstatutory Option or Stock Appreciation Right by canceling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock Appreciation Right. Such adjustment shall be made by amending,
substituting, or regranting an outstanding Nonstatutory Option or Stock
Appreciation Right.
-23-
<PAGE> 60
Such amendment, substitution, or regrant may result in terms and conditions
that differ from the terms and conditions of the original Nonstatutory Option
or Stock Appreciation Right. The Committee may not, however, impair the rights
of any Holder of previously granted Nonstatutory Options or Stock Appreciation
Rights without that Holder's consent. If such action is effected by amendment,
such amendment shall be deemed effective as of the Date of Grant of the amended
Award.
10.16 Remedies. The Corporation shall be entitled to recover
from a Holder reasonable attorneys' fees incurred in connection with the
enforcement of the terms and provisions of the Plan and any Award Agreement
whether by an action to enforce specific performance or for damages for its
breach or otherwise.
10.17 Information Confidential. As partial consideration for the
granting of each Award hereunder, a Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax or financial advisors, or to a
financial institution to the extent that such information is necessary to
secure a loan. In the event any breach of this promise comes to the attention
of the Committee, it shall take into consideration that breach in determining
whether to recommend the grant of any future Award to that Holder, as a factor
mitigating against the advisability of granting any such future Award to that
Person.
10.18 Consideration. No Option or Stock Appreciation Right shall
be exercisable and no restriction on any Restricted Stock Award shall lapse
with respect to a Holder unless and until the Holder thereof shall have paid
cash or property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
SECTION 11. EFFECTIVENESS, DURATION AND AMENDMENT OF PLAN
11.1 Effectiveness; Duration. Notwithstanding the provisions of
the Plan, Awards granted prior to the date the stockholders of the Corporation
approve the Plan shall be subject to such stockholder approval and may not be
transferred or exercised, as applicable, until such stockholder approval is
obtained. No Awards may be granted hereunder after the date that is ten years
after the Effective Date.
11.2 Amendment. The Committee may, insofar as permitted by law
and subject to ratification of the Board of Directors, with respect to any
shares which, at the time, are not subject to Awards, suspend or discontinue
the Plan or revise or amend it in any respect whatsoever and may amend any
provision of the Plan or any Award Agreement to make the Plan or the Award
Agreement, or both, comply with Section 16(b) of the Exchange Act and the
exemptions from those sections in the regulations thereunder. The Committee
may also, subject to ratification of the Board of Directors, amend, modify,
suspend, or terminate the Plan for the purpose of meeting or addressing any
changes in other legal requirements applicable to the Corporation or the Plan
or for any other purpose permitted by law. The Plan may not be amended without
the consent of the holders of a majority of the shares of Stock then
outstanding to (a) increase materially the aggregate number of shares of Stock
that may be issued under the Plan (except for adjustments pursuant to Section 9
hereof), (b) increase materially the benefits accruing to Eligible Individuals
under the Plan, or (c) modify materially the requirements about eligibility for
participation in the Plan; provided, however, that such amendments may be made
without the consent of stockholders of the Corporation to the extent applicable
law and other legal requirements (including Rule 16b-3 or Section 162(m))
permit such changes without shareholder approval. Notwithstanding the
provisions of this Subsection 11.2, the Committee specifically shall have the
authority, subject to ratification by the Board of Directors, to amend the Plan
(without approval of the holders of the shares of Stock then outstanding) to
the extent required to cause the Plan, as it relates to Options and Stock
Appreciation Rights granted to Eligible Individuals subject to Section 162(m),
to comply with the requirements for classification of Awards as "performance-
based compensation" under Section 162(m)(4)(C), except for such amendments that
require such stockholder approval under Section 162(m).
-24-
<PAGE> 61
SECTION 12. GENERAL
12.1 Application of Funds. The proceeds received by the
Corporation from the sale of shares pursuant to Awards may be used for any
general corporate purpose.
12.2 Right of the Corporation and Subsidiaries to Terminate
Employment. Nothing contained in the Plan, or in any Award Agreement, shall
confer upon any Holder the right to continue in the employ of the Corporation
or any Subsidiary or interfere in any way with the rights of the Corporation or
any Subsidiary to terminate the Holder's employment at any time.
12.3 No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Committee shall be
liable for any act, omission or determination taken or made in good faith with
respect to the Plan or any Award granted under it; and members of the Board of
Directors and the Committee shall be entitled to indemnification and
reimbursement by the Corporation in respect of any claim, loss, damage, or
expense (including attorneys' fees, the costs of settling any suit, provided
such settlement is approved by independent legal counsel selected by the
Corporation, and amounts paid in satisfaction of a judgment, except a judgment
based on a finding of bad faith) arising therefrom to the full extent permitted
by law and under any directors' and officers' liability or similar insurance
coverage that may from time to time be in effect. This right to
indemnification shall be in addition to, and not a limitation on, any other
indemnification rights any member of the Board of Directors or the Committee
may have.
12.4 Other Benefits. Participation in the Plan shall not
preclude a Holder from eligibility in any other stock or stock option plan of
the Corporation or any Subsidiary or any old age benefit, insurance, pension,
profit sharing, retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the stockholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.
12.5 Exclusion from Pension and Profit-Sharing Compensation. By
acceptance of an Award (regardless of form), as applicable, each Holder shall
be deemed to have agreed that the Award is special incentive compensation that
will not be taken into account in any manner as salary, compensation, or bonus
in determining the amount of any payment under any pension, retirement, or
other employee benefit plan of the Corporation or any Subsidiary unless any
pension, retirement, or other employee benefit plan of the Corporation or any
Subsidiary expressly provides that such Award shall be so considered for
purposes of determining the amount of any payment under any such plan. In
addition, each beneficiary of a deceased Holder shall be deemed to have agreed
that the Award will not affect the amount of any life insurance coverage, if
any, provided by the Corporation or a Subsidiary on the life of a Holder that
is payable to the beneficiary under any life insurance plan covering employees
of the Corporation or any Subsidiary.
12.6 Execution of Receipts and Releases. Any payment of cash or
any issuance or transfer of shares of Stock to a Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 Unfunded Plan. Insofar as it provides for Awards of cash
and Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Corporation shall not be required to segregate any assets
that may at any time be represented by cash, Stock, or rights thereto, nor
shall the Plan be construed as providing for such segregation, nor shall the
Corporation nor the Board of
-25-
<PAGE> 62
Directors nor the Committee be deemed to be a trustee of any cash, Stock, or
rights thereto to be granted under the Plan. Any liability of the Corporation
to any Holder with respect to a grant of cash, Stock, or rights thereto under
the Plan shall be based solely upon any contractual obligations that may be
created by the Plan and any Award Agreement; no such obligation of the
Corporation shall be deemed to be secured by any pledge or other encumbrance on
any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.
12.8 No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.
12.9 Payment of Expenses. All expenses incident to the
administration, termination, or protection of the Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Corporation or its
Subsidiaries.
12.10 Corporation Records. Records of the Corporation or its
Subsidiaries regarding a Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by
the Committee to be incorrect.
12.11 Information. The Corporation and its Subsidiaries shall,
upon request or as may be specifically required hereunder, furnish or cause to
be furnished all of the information or documentation which is necessary or
required by the Committee to perform its duties and functions under the Plan.
12.12 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to a Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
12.13 Corporation Action. Any action required of the Corporation
shall be by resolution of its Board of Directors or by a person authorized to
act by resolution of the Board of Directors.
12.14 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable and the Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein. If any of the terms or
provisions of this Plan or any Award Agreement conflict with the requirements
of Rule 16b-3 (as those terms or provisions are applied to Eligible Individuals
who are subject to Section 16(b) of the Exchange Act) or Section 422 of the
Code (with respect to Incentive Options), then those conflicting terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of Rule 16b-3 (unless the Board of Directors or the Committee, as
appropriate, has expressly determined that the Plan or such Award should not
comply with Rule 16b-3) or Section 422 of the Code. With respect to Incentive
Options, if this Plan does not contain any provision required to be included
herein under Section 422 of the Code, that provision shall be deemed to be
incorporated herein with the same force and effect as if that provision had
been set out at length herein; provided, further, that, to the extent any
Option that is intended to qualify as an Incentive Option cannot so qualify,
that Option (to that extent) shall be deemed a Nonstatutory Option for all
purposes of the Plan.
12.15 Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail. Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered on the date on which it is actually received, addressed
to the applicable party as specified in the applicable Award Agreement. The
Corporation or a Holder may change, at any time and from time to time, by
written notice to the other, the address which it or he had previously
specified for receiving notices. Until changed in accordance herewith, the
Corporation and each Holder shall specify as its and his address for receiving
notices the address set forth in the Award Agreement pertaining to the shares
to which such notice relates. Any person entitled to notice hereunder may
waive such notice.
-26-
<PAGE> 63
12.16 Successors. The Plan shall be binding upon the Holder, his
legal representatives, heirs, legatees, and distributees, upon the Corporation,
its successors and assigns and upon the Committee and its successors.
12.17 Headings. The titles and headings of Sections and
Subsections are included for convenience of reference only and are not to be
considered in construction of the provisions hereof.
12.18 Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Delaware, without giving effect to any conflict of law provisions
thereof, except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Delaware corporate law conflicts with
the contract law of such state, in which event Delaware corporate law, without
giving effect to any conflict of law provisions thereof, shall govern. The
obligation of the Corporation to sell and deliver Stock hereunder is subject to
applicable federal and state laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Stock.
12.19 Availability of Exempt Transactions. Notwithstanding the
provisions of the Plan, nothing contained in the Plan shall prohibit any
transactions permitted by Rule 16a-2(d) promulgated under the Exchange Act to
the extent such transactions are approved by the Committee and are not in
violation of, and do not otherwise cause the Plan not to be in compliance with,
Rule 16b-3.
12.20 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of the Plan dictates, the
plural shall be read as the singular and the singular as the plural.
-27-
<PAGE> 64
IN WITNESS WHEREOF, Chase Brass Industries, Inc., acting by and
through its officer hereunto duly authorized, has executed this instrument, to
be effective as of April 1, 1997, subject, with respect to the provisions of
Section 2.1 set forth herein, to approval by the stockholders of the
Corporation.
CHASE BRASS INDUSTRIES, INC.
By:
------------------------------
Approved by the stockholders of the
Corporation as of ,1997.
----------------
ATTEST:
----------------------------------------
-28-
<PAGE> 65
APPENDIX 2
CHASE BRASS INDUSTRIES, INC.
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
SCOPE AND PURPOSE OF PLAN
Chase Brass Industries, Inc., a Delaware corporation (the
"Corporation"), has adopted this 1997 Non-Employee Director Stock Option Plan
(this "Plan") to provide for the granting of Options (hereafter defined) to
Non-Employee Directors (hereafter defined).
The purpose of this Plan is to aid the Corporation in attracting highly
qualified individuals to serve as Non-Employee Directors (hereafter defined) of
the Corporation, and to extend to Non-Employee Directors the opportunity to
acquire additional proprietary interests in the Corporation, providing an
incentive for Non-Employee Directors of the Corporation to remain in the
service of the Corporation and apply their best efforts to maximize the success
of the Corporation.
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than (a) the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation, or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation (b)
Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), or (c) any
Affiliate of CVC that is directly controlled by Citicorp or Citibank, N.A., or
otherwise is in the same tier as CVC of Affiliates under the control of such
entities ("Direct Affiliates"), but shall not include any entities that may be
deemed an Affiliate of CVC as a result of the investment by any Direct
Affiliate in such entity.
1.2 "Affiliate" means (a) any Person who is directly or indirectly
the beneficial owner of at least 10% of the voting power of the outstanding
Voting Securities of the Corporation or (b) any Person controlling, controlled
by, or under common control with the Corporation or any Person contemplated in
clause (a) of this Subsection 1.2.
1.3 "Annual Retainer" means the compensation to which a Non-Employee
Director is entitled as a retainer for service as a director during a Plan
Year, exclusive of (1) any fees paid to such director for attending meetings of
the Board of Directors or meetings of any committee of the Board of Directors,
(2) any other amounts paid to such director on a per-meeting basis, or (3) any
amounts paid by the Corporation or its Subsidiaries to such director for
services rendered to the Corporation or its Subsidiaries in a capacity other
than as a director.
-1-
<PAGE> 66
1.4 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Options granted to that Holder.
1.5 "Board of Directors" means the board of directors of the
Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or
a day on which banking institutions in the state of Ohio are authorized or
obligated by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have
occurred if:
(a) any Acquiring Person is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing fifty percent
or more of the combined voting power of the then outstanding Voting
Securities of the Corporation; or
(b) a public announcement is made of a tender or exchange
offer by any Acquiring Person for fifty percent or more of the
outstanding Voting Securities of the Corporation, and the Board of
Directors approves or fails to oppose that tender or exchange offer in
its statements in Schedule 14D-9 under the Exchange Act; provided,
however, that the events to occur under Subsection 8.1 hereof shall not
occur solely as a result of an event described in this clause (b)
unless, within one year after the occurrence of such event, an event
described in clauses (a), (c) or (d) hereof shall have occurred, in
which case such events to occur under Subsection 8.1 hereof shall occur
upon the occurrence of such event but shall be deemed to have been
effective as of the time of the occurrence of the event described in
this clause (b); or
(c) the stockholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or
partnership (or, if no such approval is required, the consummation of
such a merger or consolidation of the Corporation), other than a merger
or consolidation that would result in the Voting Securities of the
Corporation outstanding immediately before the consummation thereof
continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity or of a parent
of the surviving entity) a majority of the combined voting power of the
Voting Securities and Convertible Voting Securities (on a fully-diluted
basis assuming full conversion thereof) of the surviving entity (or its
parent) outstanding immediately after that merger or consolidation; or
(d) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all the
Corporation's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a liquidation,
sale or disposition of all or substantially all the Corporation's assets
in one transaction or a series of related transactions to a Subsidiary
of the Corporation or any other corporation owned directly or indirectly
by
-2-
<PAGE> 67
the stockholders of the Corporation in substantially the same
proportions as their ownership of stock in the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee appointed pursuant to Section 3
by the Board of Directors to administer this Plan.
1.10 "Convertible Voting Securities" means any and all options,
warrants, or other rights to purchase, or securities convertible into or
exchangeable or exercisable for, directly or indirectly, Voting Securities of
any Person.
1.11 "Corporation" means Chase Brass Industries, Inc., a Delaware
corporation.
1.12 "Date of Grant" has the meaning given it in Subsection 4.3.
1.13 "Disability" has the meaning given it in Subsection 10.2.
1.14 "Disinterested Person" means a Person that meets the definition
of a "Non-Employee Director" under Rule 16b-3(b)(3).
1.15 "Effective Date" means the date this Plan is approved by the
stockholders of the Corporation.
1.16 "Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, or any successor law, as it may
be amended from time to time.
1.17 "Exercise Notice" has the meaning given it in Subsection 7.3.
1.18 "Exercise Price" means the price per share at which one share of
Stock may be purchased pursuant to an Option, as specified in Subsection 5.1 or
6.1, as applicable.
1.19 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market Value,
then the last reported sale price, regular way, on the composite tape of
that exchange as of the date or dates on which Fair Market Value is to
be determined or, if no such sale takes place on such date or dates, the
average of the closing bid and asked prices, regular way, in either case
as reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to unlisted trading
privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.19(a) and sales prices for shares of Stock
-3-
<PAGE> 68
of the same class in the over-the-counter market are reported by the
National Association of Securities Dealers, Inc. Automated Quotations,
Inc. ("NASDAQ") National Market System (or such other system then in
use) at the date or dates of determining the Fair Market Value, then the
last reported sales price so reported as of the date or dates on which
Fair Market Value is to be determined or, if no such sale takes place on
such date or dates, the average of the high bid and low asked prices so
reported; or
(c) If shares of Stock of the same class are not listed or
admitted to unlisted trading privileges as provided in Subsection
1.19(a) and sales prices for shares of Stock of the same class are not
reported by the NASDAQ National Market System (or a similar system then
in use) as provided in Subsection 1.19(b), and if bid and asked prices
for shares of Stock of the same class in the over-the-counter market are
reported by NASDAQ (or, if not so reported, by the National Quotation
Bureau Incorporated) at the date or dates of determining the Fair Market
Value, then the average of the high bid and low asked prices on the last
trading day before the date in question;
provided, that if information to establish Fair Market Value of the Stock
pursuant to this Subsection 1.19 is not available on any date or dates for
which Fair Market Value is to be determined, subclause (a), (b) or (c), as
applicable, shall be applied for the next preceding date on which such
information is available.
1.20 "Holder" means a Non-Employee Director to whom an outstanding
Option has been granted under this Plan or a transferee of any Option granted
under this Plan as permitted under Subsection 10.3.
1.21 "Non-Employee Director" means a director of the Corporation who
while a director is not an employee or an officer of the Corporation or any
Subsidiary of the Corporation.
1.22 "Non-Surviving Event" means an event of Restructuring as
described in either Subsection 1.28(b) or Subsection 1.28(c).
1.23 "Option" means an option to purchase Stock granted pursuant to
this Plan; Options granted under this Plan are not "incentive stock options"
under Section 422 of the Code.
1.24 "Participant" means a Non-Employee Director who has elected in
accordance with Section 4.2(b) to receive Options in lieu of receiving all or
part of such Non-Employee Director's Annual Retainer.
1.25 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant
-4-
<PAGE> 69
to any express agreement), for the purpose of acquiring, holding, voting, or
disposing of securities of the Corporation with that Person, shall be deemed a
single "Person."
1.26 "Plan" means the Corporation's 1997 Non-Employee Director Stock
Option Plan, as it may be amended from time to time.
1.27 "Plan Year" means the twelve (12) consecutive month period
beginning January 1 and ending December 31.
1.28 "Restructuring" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining
outstanding and not changed into or exchanged for stock or other
securities of any other Person or of the Corporation, cash, or other
property;
(b) The merger or consolidation of the Corporation with any
Person, whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the Corporation
remaining the continuing or surviving entity of that merger or
consolidation but all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities of any other
Person or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation (whether by sale,
merger, consolidation, liquidation, or otherwise) to any Person, whether
effected as a single transaction or a series of related transactions.
1.29 "Retirement" means, with respect to a Non-Employee Director,
resignation from the position as a member of the Board of Directors (including
as a result of declining to accept a nomination or otherwise stand for
reelection) on or after the date of the fifth annual meeting of stockholders of
the Corporation held after the date on which such Non-Employee Director was
elected or appointed to the Board of Directors.
1.30 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act, or any successor rule, as it may be amended from time to time, and
references to paragraphs or clauses of Rule 16b-3 shall refer to the
corresponding paragraphs or clauses of Rule 16b-3 as it exists at the Effective
Date or the comparable paragraph or clause of Rule 16b-3 as it may thereafter
be amended.
1.31 "Securities Act" means the Securities Act of 1933 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
-5-
<PAGE> 70
1.32 "Stock" means the Corporation's authorized common stock, par
value $.01 per share, or any other securities that are substituted for the
Stock as provided in Subsection 8.1 or Section 9.
1.33 "Stock Appreciation Right" or "SAR" means the right to receive an
amount equal to the excess of the Fair Market Value of a share of Stock (as
determined on the date of exercise) over the Exercise Price.
1.34 "Subsidiary" means, with respect to any Person, any corporation,
or other entity of which a majority of the Voting Securities is owned, directly
or indirectly, by that Person.
1.35 "Total Shares" has the meaning given it in Subsection 8.1.
1.36 "Voting Securities" means (i) any securities that are entitled to
vote generally in the election of directors, in the admission of general
partners or in the selection of any other similar governing body and (ii) with
respect to the Corporation, all shares of the Corporation's nonvoting common
stock, par value $.01 per share (all of which are convertible into shares of
the Corporation's common stock, par value $.01 per share).
SECTION 2. SHARES OF STOCK SUBJECT TO THIS PLAN
2.1 Maximum Number of Shares. Subject to the provisions of
Subsection 2.2 and Section 9 of this Plan, the aggregate number of shares of
Stock that may be issued, transferred or exercised pursuant to Options under
this Plan shall be ONE HUNDRED THOUSAND (100,000) shares of Stock.
2.2 Limitation of Shares. For purposes of the limitations specified
in Subsection 2.1, the following principles shall apply:
(a) the number of shares of Stock subject to outstanding
Options shall count against and decrease the number of shares of Stock
that may be issued for purposes of Subsection 2.1;
(b) the number of shares of Stock with respect to which
Options have expired, are cancelled, or otherwise terminate without
being exercised, converted, or vested, as applicable, shall be added
back to the number of shares of Stock that may be issued for purposes of
Subsection 2.1; and
(c) the number of shares of Stock that are transferred by a
Holder of an Option (or withheld by the Corporation) as full or partial
payment to the Corporation of the purchase price of shares of Stock
subject to an Option or the Corporation's tax withholding obligations
shall not be added back to the number of shares of Stock that may be
issued for purposes of Subsection 2.1 and shall not again be subject to
Options.
Notwithstanding the provisions of this Subsection 2.2, the Committee may
impose restrictions which are more limited than set forth herein with respect
to shares of Stock subject
-6-
<PAGE> 71
to Options that may be added back to the number of shares of Stock that may be
issued for purposes of Subsection 2.1.
2.3 Source of Shares. The shares to be delivered under this Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 Registration and Listing of Shares. From time to time, the Board
of Directors and appropriate officers of the Corporation shall and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons
to make shares of Stock available for issuance pursuant to the exercise of
Options.
SECTION 3. ADMINISTRATION OF PLAN
3.1 Committee. The Board of Directors may administer this Plan or
may delegate all or part of that duty to the Committee; provided that the
Committee shall not have the power to appoint members of the Committee. Except
for references in this Subsection 3.1, and unless the context otherwise
requires, references herein to the Committee shall also refer to the Board of
Directors as administrator of this Plan. The Committee shall be constituted so
that, as long as Stock is registered under Section 12 of the Exchange Act, each
member of the Committee shall be a Disinterested Person and so that this Plan
in all other applicable respects will qualify transactions related to this Plan
for the exemptions from Section 16(b) of the Exchange Act provided by Rule
16b-3 to the extent exemptions thereunder may be available. The number of
Persons that shall constitute the Committee shall be determined from time to
time by a majority of all the members of the Board of Directors and, unless
that majority of the Board of Directors determines otherwise, shall be no less
than two Persons. Notwithstanding the foregoing, the Board of Directors may
designate the Compensation Committee of the Board of Directors to serve as the
Committee hereunder, provided that each member of such Compensation Committee
is a Disinterested Person.
3.2 Committee's Powers. Subject to the express provisions of this
Plan and Rule 16b-3, the Committee shall have such power and authority as may
be necessary or advisable to carry out its functions and duties as described in
this Plan, including the authority, in its sole and absolute discretion, to (a)
interpret this Plan and make such determination as it deems necessary for Plan
administration and to adopt, amend, and rescind administrative and interpretive
rules and regulations relating to this Plan; (b) redeem, pursuant to Subsection
8.2(d), outstanding Options and Stock Appreciation Rights; (c) construe the
respective Award Agreements and this Plan; (d) terminate, modify, or, subject
to Subsection 11.2, amend this Plan; and (e) make all other determinations,
perform all other acts, and exercise all other powers and authority necessary
or advisable for administering this Plan, including the delegation of those
ministerial acts and responsibilities as the Committee deems appropriate.
Subject to Rule 16b-3 and the foregoing, the Committee may correct any defect,
supply any omission, or reconcile any inconsistency in this Plan, in any
Option, or in any Award Agreement in the manner and to the
-7-
<PAGE> 72
extent it deems necessary or desirable to carry this Plan into effect, and the
Committee shall be the sole and final judge of that necessity or desirability.
The determinations of the Committee on the matters referred to in this
Subsection 3.2 shall be final and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Non-Employee Directors. Options may be granted pursuant to this
Plan only to Persons who are Non-Employee Directors at the time of the grant
thereof and, with respect to Options granted pursuant to Subsection 6.1, who
have properly elected in accordance with Subsection 4.2 to be a Participant in
the Plan Year in which the Options were granted.
4.2 Participation.
a. Automatic Awards. Each Non-Employee Director, upon
initial election to the Board of Directors, automatically shall become a
Participant in this Plan for purposes of Section 5.
b. Deferred Retainer Awards. A Non-Employee Director shall
become a Participant for a Plan Year for purposes of Section 6 by filing with
the secretary of the Corporation prior to the first day of such Plan Year an
irrevocable written election in a form prescribed by the Committee to receive
Options in lieu of all or a portion, in twenty-five percent (25%) increments,
of the Non-Employee Director's Annual Retainer payable for such upcoming Plan
Year; provided that a Non-Employee Director may become a Participant for
purposes of Section 6 (i) for the 1997 Plan Year by filing such an election by
May 31, 1997, with such election to apply with respect to Annual Retainer
amounts attributable to the portion of the 1997 Plan Year from and after the
date of (or a later date specified in) such election and (ii) for the Plan Year
in which such Non-Employee Director is first elected or appointed to the Board
of Directors, by filing such an election within 30 days after election or
appointment to the Board of Directors, with such election to apply with respect
to Annual Retainer amounts attributable to the portion of the Plan Year in
which such Person is elected or appointed to the Board of Directors from and
after the date of (or a later date specified in) such election. Such written
election shall become a part of the Participant's Award Agreement, and a copy
will be attached as an exhibit thereto.
4.3 Date of Grant. Notwithstanding that (i) certain terms of the
Award Agreement may not be determined at that time or (ii) the Award Agreement
may not be executed until a later time, the date on which the Options covered
by an Award Agreement is granted (the "Date of Grant"), shall be (A) the date
of election or appointment to the Board of Directors for Options granted
pursuant to Subsection 5.1 and (B) the last day of each calendar quarter of a
Plan Year with respect to Options granted pursuant to Subsection 6.1. In no
event shall a Holder gain any rights in addition to those specified by this
Plan, as interpreted and administered by the Committee, regardless of the time
that may pass between the grant of the Options and the actual execution of the
Award Agreement by the Corporation and the Holder.
4.4 Award Agreements. Each Option granted under this Plan shall be
evidenced by an Award Agreement in such form and containing such terms as the
Committee shall approve,
-8-
<PAGE> 73
and which shall not contain any provisions inconsistent with the terms of this
Plan. Options granted pursuant to Section 5.1 shall be evidenced by one Award
Agreement for each Non-Employee Director and Options granted under Section 6.1
to a Non-Employee Director for a Plan Year shall be evidenced by separate Award
Agreements for Options granted as of the end of each calendar quarter in such
Plan Year in which Options are granted.
SECTION 5. AUTOMATIC GRANTS OF OPTIONS
5.1 Automatic Options Granted to Non-Employee Directors Elected or
Appointed After the Effective Date. Each Non-Employee Director who is elected
or appointed to the Board of Directors after the Effective Date, and has not
served as a member of the Board of Directors before such date, shall be awarded
an Option to purchase 5,000 shares of Stock upon the date of such election or
appointment to the Board of Directors at an exercise price per share equal to
the average Fair Market Value of a share of Stock for the five trading days
immediately preceding the effective date of election or appointment to the
Board of Directors.
5.2 Exercisability. Subject to Section 8, each Option granted
pursuant to this Section 5 shall become exercisable with respect to 1,000
shares of Stock on each of the first five anniversaries of the Date of Grant.
SECTION 6. STOCK OPTIONS UPON DEFERRAL OR ANNUAL RETAINER
6.1 Number of Shares. Subject to Subsections 6.4 and 6.5, a
Participant shall be granted Options as of the last day in each calendar
quarter of a Plan Year in accordance with the following formula, provided that
the Participant has filed with the Company a written election of deferral of
his or her Annual Retainer for such Plan Year in accordance with Subsection
4.2:
<TABLE>
<S> <C>
25% of the Annual Retainer Number of Shares (rounded
Amount to be Deferred for such = up to the nearest whole share)
Plan Year
- ------------------------------
50% of the average Fair Market
Value of a share of Stock for
the last five trading days of
the calendar quarter in which
the Date of Grant occurs
</TABLE>
Subject to Subsection 6.4, the numerator of the above fraction shall be
determined according to the amount of Annual Retainer elected to be deferred
for the Plan Year by the Participant in accordance with Subsection 4.2(b).
6.2 Vesting. Subject to Section 8, each Option granted pursuant to
this Section 6 shall become exercisable in full on the Date of Grant.
-9-
<PAGE> 74
6.3 Exercise Price. The per share Exercise Price of Options granted
pursuant to Subsection 6.1 shall be 50% of the average Fair Market Value of a
share of Stock for the five trading days immediately preceding the Date of
Grant of such Options, such that Options granted to a Participant over a Plan
Year shall have four separate exercise prices.
6.4 Participation Commencing During a Plan Year. In the event a
Participant elects to defer all or a portion of his or her Annual Retainer
after the start of a Plan Year as permitted by the proviso of Subsection
4.2(b), the numerator in the formula set forth in Subsection 6.1 shall be
adjusted with respect to such Participant for such Plan Year to reflect the
portion of the deferred Annual Retainer attributable to each remaining calendar
quarter (or portion thereof) in the Plan Year to which any such initial
election relates.
6.5 Termination of Status as Non-Employee Director. Notwithstanding
the provisions of Subsection 6.1, if a Non-Employee Director who has made an
election pursuant to Subsection 4.2(b) ceases to be a Non-Employee Director
during a Plan Year to which such election relates, no Options will be granted
to such Non-Employee Director for the calendar quarter in which such
Participant ceases to be a Non-Employee Director or for any period thereafter.
Any Annual Retainer earned for the calendar quarter in which such Participant
ceases to be a Non-Employee Director shall be paid in cash and, upon such
payment, the Corporation shall have no further obligation under this Plan to
such Participant other than with respect to Options and SARs (if any) granted
under this Plan and outstanding as of the date such Participant ceases to be a
Non-Employee Director.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS
All options granted under this Plan shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 7 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth
in Sections 8, 9 and 10.
7.1 Expiration of Options. Subject to the provisions in Section 10,
each Option shall expire ten (10) years after the Date of Grant of such Option.
7.2 Exercise Price. Each Award Agreement shall state that the
Exercise Price shall be the exercise price per share of Stock as calculated
pursuant to Section 5.1 or 6.1, as applicable.
7.3 Method of Exercise. The Option shall be exercisable only by
written notice of exercise (the "Exercise Notice") delivered to the Corporation
during the term of the Option, which notice shall (a) state the number of
shares of Stock with respect to which the Option is being exercised, (b) be
signed by the Holder of the Option or, if the Holder is dead or becomes
affected by a Disability, by the person authorized to exercise the Option
pursuant to Subsection 10.2, (c) be accompanied by the Exercise Price for all
shares of Stock for which the Option is being exercised, and (d) include such
other information, instruments, and documents as may be required by the
Committee to evidence such Holder's authority to exercise the Option
-10-
<PAGE> 75
or as otherwise required as provided by Subsection 10.5. The Option shall not
be deemed to have been exercised unless all of the requirements of the
preceding provisions of this Subsection 7.3 have been satisfied.
7.4 Medium and Time of Payment. The Exercise Price of an Option
shall be payable in full upon the exercise of the Option (a) in cash or by an
equivalent means acceptable to the Committee, (b) on the Committee's prior
consent, with shares of Stock owned by the Holder (including shares received
upon exercise of the Option) and having a Fair Market Value at least equal to
the aggregate Exercise Price payable in connection with such exercise, or (c)
by any combination of clauses (a) and (b). If the Committee elects to accept
shares of Stock in payment of all or any portion of the Exercise Price, then
(for purposes of payment of the Exercise Price) those shares of Stock shall be
deemed to have a cash value equal to their aggregate Fair Market Value
determined as of the date the certificate for such shares, duly endorsed for
transfer to the Corporation and free from any restriction on transfer, is
delivered to the Corporation.
7.5 Payment with Sale Proceeds. In addition, at the request of a
Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under
which that brokerage firm, on behalf of the Holder, shall pay to the
Corporation the Exercise Price of the Option being exercised and the
Corporation shall promptly deliver the exercised shares of Stock to the
brokerage firm. To accomplish this transaction, the Holder must deliver to the
Corporation an Exercise Notice containing irrevocable instructions from the
Holder to the Corporation to deliver the Stock certificates representing the
shares of Stock directly to the broker. Upon receiving a copy of the Exercise
Notice acknowledged by the Corporation, the broker shall sell that number of
shares of Stock or loan the Holder an amount sufficient to pay the Exercise
Price. The broker then shall deliver to the Corporation that portion of the
sale or loan proceeds necessary to cover the Exercise Price. The Committee
shall not approve any transaction of this nature if the Committee believes that
the transaction would give rise to the Holder's liability for short-swing
profits under Section 16(b) of the Exchange Act.
7.6 No Fractional Shares. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same
fraction (as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
7.7 Available Stock. The Options to be granted pursuant to
Subsections 5.1 and 6.1 shall be made in the amounts specified therein only if,
as of the Date of Grant of any such Options, the number of shares of Stock
available to be issued pursuant to Options under this Plan (as calculated in
Section 2) is sufficient to make all grants of Options required to be made
pursuant to Subsections 5.1 and/or 6.1 on such Date of Grant. In the event
that the number of shares of Stock that are available to be issued pursuant to
Options under this Plan on the Date of Grant of such Options is insufficient to
permit the grant of the entire number of shares with respect to which Options
are to be granted on such Date of Grant, then the number of available shares
shall be apportioned pro rata among the Options to be granted on such Date of
Grant, and the number of shares subject to each Option shall be the number of
shares apportioned to that
-11-
<PAGE> 76
Option. Any such apportionment effective pursuant to the immediately preceding
sentence shall be as follows: (i) in the case of Options to be granted
pursuant to Section 5.1, equally and (ii) with respect to Options to be granted
pursuant to Section 6.1, pro rata among those Participants entitled to receive
Options on such Date of Grant, based on the number of Options to which each
Participant is entitled to receive pursuant to Subsection 6.1 as compared to
the total number of Options to which all Participants are entitled to receive
on such Date of Grant pursuant to Subsection 6.1 and (iii) if Options are to be
granted on such Date of Grant pursuant to both of Subsections 5.1 and 6.1, the
allocation among Subsection 5.1 and Subsection 6.1 shall be effected on a basis
consistent with the allocation of Options to be granted pursuant to Subsection
6.1. If any such pro ration of Options is effected with respect to any grants
due under Subsection 6.1 of this Plan, or if there shall not be any shares of
Stock available on any date on which Options are to be granted pursuant to
Subsection 6.1, the portion of deferred Annual Retainer for which Options are
not granted will be paid in cash as of the date such Options were to be
granted.
SECTION 8. EFFECTS OF CHANGE IN CONTROL
8.1 Change in Control. Upon the occurrence of a Change in Control,
subject to Subsection 1.7(b): (a) each Holder of an Option shall immediately be
granted one corresponding Stock Appreciation Right for each share of Stock
subject to an Option; and (b) all outstanding Options shall immediately become
fully vested and exercisable in full, including that portion of any Option that
pursuant to the terms and provisions of the applicable Award Agreement had not
yet become exercisable (the total number of shares of Stock as to which a Stock
Appreciation Right or Option is exercisable upon the occurrence of a Change in
Control is referred to herein as the "Total Shares"). If a Change in Control
involves a Restructuring or occurs in connection with a series of related
transactions involving a Restructuring and if such Restructuring is in the form
of a Non-Surviving Event and as a part of such Restructuring shares of stock,
other securities, cash, or property shall be issuable or deliverable in
exchange for Stock, then a Holder of an Option shall be entitled to purchase or
receive (in lieu of the Total Shares that the Holder would otherwise be
entitled to purchase or receive) the number of shares of stock, other
securities, cash, or property to which that number of Total Shares would have
been entitled in connection with such Restructuring at an aggregate exercise
price equal to the Exercise Price that would have been payable if that number
of Total Shares had been purchased on the exercise of the Option immediately
before the consummation of the Restructuring. Nothing in this Subsection 8.1
shall impose on a Holder the obligation to exercise any Option immediately
before or upon the Change in Control or cause the Holder to forfeit the right
to exercise the Option during the remainder of the original term of the Option
because of a Change in Control.
8.2 Restructuring Without Change in Control. In the event a
Restructuring shall occur at any time while there is any outstanding Option
hereunder and that Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control,
then:
(a) no outstanding Option shall immediately become fully
vested and exercisable in full merely because of the occurrence of the
Restructuring;
-12-
<PAGE> 77
(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(c) if the Restructuring is in the form of a Non-Surviving
Event and, as part of that Restructuring, shares of stock, other
securities, cash or property shall be issuable or deliverable in
exchange for Stock, the surviving entity shall assume the obligations of
the Corporation under this Plan and Options thereafter shall represent
the right to purchase or receive (in lieu of the Total Shares that the
Holder would otherwise be entitled to purchase or receive) the number of
shares of stock, other securities, cash or property to which the number
of Total Shares would have been entitled in connection with such
Restructuring at an aggregate exercise price equal to the Exercise Price
that would have been payable if that number of Total Shares had been
purchased on the exercise of the Option immediately before the
consummation of the Restructuring;
(d) the Corporation may (but shall not be required to) redeem
in whole or in part any one or more of the outstanding Options (whether
or not then exercisable) in consideration of a cash payment in an amount
equal to the excess of (i) the Fair Market Value, determined as of the
date immediately preceding the consummation of the Restructuring, of the
aggregate number of shares of Stock subject to the Options and as to
which the Options being redeemed over (ii) the Exercise Price for that
number of shares of Stock; any redemption of an Option pursuant this
Subsection 8.2(d) shall also constitute the redemption of any
corresponding Stock Appreciation Rights; provided, further, that any
cash payments be made by the Corporation pursuant to this Subsection
8.2(d) in connection with the redemption of any outstanding Option shall
be paid to the Holder thereof at the time of delivery to the Corporation
of the Award Agreement evidencing that Option, provided that any such
redemption shall be effective upon the consummation of the Restructuring
notwithstanding that the payment of the Redemption Price may occur
subsequent to the consummation or the failure of any Holder to deliver
the applicable Award Agreement; and
(e) if a Non-Employee Director becomes a director of the
surviving entity and is not otherwise employed by the surviving entity
or any Subsidiary thereof, then, for purposes of Section 10.1(a) hereof,
such Non-Employee Director shall not be deemed to have ceased to be a
Non-Employee Director.
8.3 Terms of Stock Appreciation Rights. A Stock Appreciation Right
granted pursuant to Subsection 8.1(a) shall entitle a Holder, upon exercise, to
surrender such Holder's Option or any portion thereof, to the extent
unexercised, and to receive payment of an amount computed pursuant to
Subsection 8.3(b). That Option shall then cease to be exercisable to the
extent surrendered. Stock Appreciation Rights granted pursuant to Subsection
8.1(a) shall be subject to the terms of the Award Agreement governing the
Option, which shall be deemed to incorporate the following provisions in
addition to those applicable to Options:
(a) Exercise and Transfer. A Stock Appreciation Right granted
pursuant to Subsection 8.1(a) shall be exercisable only at such time or
times and only to the extent
-13-
<PAGE> 78
that the related Option is exercisable and shall not be transferable
except to the extent that the related Option is transferable as provided
in Subsection 10.3.
(b) Value of Right. Upon the exercise of a Stock Appreciation
Right, a Holder shall be entitled to receive payment from the
Corporation of an amount in cash determined by multiplying:
(i) The difference obtained by subtracting the Exercise
Price from the Fair Market Value of a share of Stock on the date
of exercise of the Stock Appreciation Right, by
(ii) The number of shares of Stock as to which that
Stock Appreciation Right has been exercised.
(c) Award Agreements. Stock Appreciation Rights granted
pursuant to Subsection 8.1(a) shall be evidenced by the Award Agreements
evidencing the corresponding Options to which the Stock Appreciation
Rights relate, which Award Agreements shall be deemed to incorporate the
provisions of this Subsection 8.3. No separate Award Agreement shall be
issued evidencing any Stock Appreciation Rights.
8.4 Notice of Change in Control or Restructuring. Upon the
occurrence of a Change in Control or a Restructuring without Change in Control,
the Corporation shall provide written notice to all Holders of Options of the
occurrence of such event and the effects resulting therefrom as provided in
this Section 8.
SECTION 9. ADJUSTMENT PROVISIONS
9.1 Adjustment of Options and Authorized Stock. The terms of an
Option and the number of shares of Stock authorized pursuant to Subsection 2.1
for issuance under this Plan shall be subject to adjustment from time to time,
in accordance with the following provisions:
(a) If at any time, or from time to time, the Corporation
shall subdivide as a whole (by reclassification, by a stock split, by
the issuance of a distribution on Stock payable in Stock, or otherwise)
the number of shares of Stock then outstanding into a greater number of
shares of Stock, then (i) the maximum number of shares of Stock
available for this Plan as provided in Subsection 2.1 shall be increased
proportionately, and the kind of shares or other securities available
for this Plan shall be appropriately adjusted, (ii) the number of shares
of Stock (or other kind of shares or securities) that may be acquired
under any Option (and to which any corresponding Stock Appreciation
Right, if any, relates) shall be increased proportionately, and (iii)
the Exercise Price for each share of Stock (or other kind of shares or
securities) subject to then outstanding Options (and corresponding Stock
Appreciation Rights, if any) shall be reduced proportionately, without
changing the aggregate Exercise Price or value as to which outstanding
Options (and corresponding Stock Appreciation Rights, if any) remain
exercisable.
-14-
<PAGE> 79
(b) If at any time, or from time to time, the Corporation
shall consolidate as a whole (by reclassification, reverse stock split,
or otherwise) the number of shares of Stock then outstanding into a
lesser number of shares of Stock, (i) the maximum number of shares of
Stock available for this Plan as provided in Subsection 2.1 shall be
decreased proportionately, and the kind of shares or other securities
available for this Plan shall be appropriately adjusted, (ii) the number
of shares of Stock (or other kind of shares or securities) that may be
acquired under any Option (and to which any corresponding Stock
Appreciation Right, if any, relates) shall be decreased proportionately,
and (iii) the Exercise Price for each share of Stock (or other kind of
shares or securities) subject to then outstanding Options (and
corresponding Stock Appreciation Rights, if any) shall be increased
proportionately, without changing the aggregate Exercise Price or value
as to which outstanding Options (and corresponding Stock Appreciation
Rights, if any) remain exercisable.
(c) Whenever the number of shares of Stock subject to
outstanding Options (and corresponding Stock Appreciation Rights, if
any) and the price for each share of Stock subject to outstanding
Options (and corresponding Stock Appreciation Rights, if any) are
required to be adjusted as provided in this Subsection 9.1, the
Committee shall promptly prepare a notice setting forth, in reasonable
detail, the event requiring adjustment, the amount of the adjustment,
the method by which such adjustment was calculated, and the change in
price and the number of shares of Stock, other securities, cash, or
property purchasable subject to each Option (and corresponding Stock
Appreciation Rights, if any) after giving effect to the adjustments.
The Committee shall promptly provide a copy of such notice to each
Holder.
(d) Adjustments under Subsections 9.1(a) and (b) shall be made
by the Committee, and its determination as to what adjustments shall be
made and the extent thereof shall be final, binding, and conclusive. No
fractional interest shall be issued under this Plan on account of any
such adjustments.
SECTION 10. ADDITIONAL PROVISIONS
10.1 Loss of Eligibility.
(a) If a Participant ceases to be a Non-Employee Director for
any reason other than the Participant's death or Disability, then that
portion, if any, of any and all Options held by the Participant (or any
permitted transferee) which are not yet exercisable (or for which
restrictions have not lapsed) as of the date the Participant ceases to
be a Non-Employee Director ("Termination Date") shall become null and
void as of the Termination Date and, except as provided below, the
portion, if any, of any and all Options held by the Participant (or any
permitted transferee) that are then exercisable as of the Termination
Date shall survive the termination and shall be exercisable for a period
of the lesser of (i) the remainder of the term of the Option or (ii) 180
days following the Termination Date.
-15-
<PAGE> 80
(b) If a Participant ceases to be a Non-Employee Director by
reason of the Participant's death or Disability, then the portion, if
any, of any and all Options held by the Participant (or any permitted
transferee) that are not yet exercisable (or for which restrictions have
not lapsed) as of the Termination Date, shall become exercisable and all
such Options shall be exercisable for the lesser of (i) remainder of the
term of the Options or (ii) three years after the Termination Date.
(c) If a Participant ceases to be a Non-Employee Director by
reason of Retirement, then all such Options held by that Participant (or
any permitted transferee) as of the Termination Date that are
exercisable shall be exercisable for the lesser of (i) remainder of the
term of the Option or (ii) three years after the Termination Date.
(d) Notwithstanding the foregoing, if a Non-Employee Director
is removed from the Board of Directors by the Corporation for "cause"
(hereafter defined), then any and all Options held by such Non-Employee
Director (or any permitted transferee) that were granted to such
Non-Employee Director pursuant to Subsection 5.1 of this Plan shall
become null and void as of the date of such termination and any Options
held by such Non-Employee Director (or any permitted transferee) that
were granted pursuant to Section 6.1 shall be subject to Subsection
10.1(a). "Cause" shall mean, as determined by the Board of Directors in
the sole discretion exercised in good faith of the Board of Directors,
(a) the commission by the Non-Employee Director of a felony or of a
misdemeanor involving moral turpitude, (b) the participation by the
Non-Employee Director in any fraud, (c) dishonesty by the Non-Employee
Director that is detrimental to the best interest of the Corporation,
(d) the willful and continued failure by the Non-Employee Director to
substantially perform his duties to the Corporation (other than any such
failure resulting from the Non-Employee Director's incapacity due to
Disability) after written demand for substantial performance is
delivered by the Corporation specifically identifying the manner in
which the Corporation believes the Non-Employee Director has not
substantially performed his duties, or (e) the willful engaging by the
Non-Employee Director in misconduct which is materially injurious to the
Corporation, monetarily or otherwise.
Any portion of an Option not exercised upon the expiration of the
applicable periods specified above shall be null and void upon the expiration
of such period.
10.2 Death or Disability. Upon the death or Disability of a Holder,
any and all Options held by the Holder that have not been exercised as of the
date of the Holder's death or Disability may be exercised by, in the case of
the Holder's Disability, the Holder, his guardian or his legal representative
or, in the case of the Holder's death, by the Holder's legal representatives,
heirs, legatees, or distributees, in each case for the periods prescribed in
Subsection 10.1. "Disability" shall mean (i) with respect to a Participant, as
determined by the Board of Directors in the sole discretion exercised in good
faith of the Board of Directors, a physical or mental impairment of sufficient
severity that (a) either the Non-Employee Director is unable to continue
performing the duties he performed before such impairment or the Non-Employee
Director's condition entitles him to disability benefits under any insurance or
employee benefit plan of the Corporation or its Subsidiaries or any other
customary general
-16-
<PAGE> 81
disability policy, and (b) that impairment or condition is cited by the
Corporation as the reason for termination of the Non-Employee Director's
participation as a member of the Board of Directors and (iii) with respect to a
Holder that is a permitted transferee, the appointment of a legal guardian or
representative of such Holder.
10.3 Transferability of Options.
(a) Permitted Transferees. The Committee may, in its
discretion, permit a Holder to transfer all or any portion of an Option,
or authorize all or a portion of any Option to be granted to a
Non-Employee Director to be on terms which permit transfer by such
Holder, to (i) the spouse, children or grandchildren of the Holder
("Immediate Family Members"), (ii) a trust or trusts for the exclusive
benefit of such Immediate Family Members, or (iii) a partnership in
which such Immediate Family Members are the only partners (collectively,
"Permitted Transferees"); provided that (x) there may be no
consideration for any such transfer and (y) subsequent transfers of
Options transferred as provided above shall be prohibited except
subsequent transfers back to the original Holder of the Option and
transfers to other Permitted Transferees of the original Holder. Award
Agreements evidencing Options with respect to which such transferability
is authorized at the time of grant must be approved by the Committee,
and must expressly provide for transferability in a manner consistent
with this Subsection 10.3(a).
(b) Qualified Domestic Relations Orders. Options may be
transferred pursuant to qualified domestic relations orders entered or
approved by a court of competent jurisdiction upon delivery to the
Corporation of written notice of such transfer and a certified copy of
such order.
(c) Other Transfers. Except as expressly permitted by
subsections 10.3(a) and 10.3(b), Options requiring exercise shall not be
transferable other than by will or the laws of descent and distribution.
(d) Effect of Transfer. Following the transfer of any Option
as contemplated by Subsections 10.3(a), 10.3(b) and 10.3(c), (i) such
Option shall continue to be subject to the same terms and conditions as
were applicable immediately prior to transfer, provided that the term
"Holder" shall be deemed to refer to the Permitted Transferee, the
recipient under a qualified domestic relations order, or the estate or
heirs of a deceased Holder, as applicable, to the extent appropriate to
enable the Holder to exercise the transferred Option in accordance with
the terms of this Plan and applicable law and (ii) the provisions of
Subsection 10.1 hereof shall continue to be applied with respect to the
original Holder and, following the occurrence of any such events
described therein the Options shall be exercisable by the Permitted
Transferee, the recipient under a qualified domestic relations order, or
the estate or heirs of a deceased Holder, as applicable, only to the
extent and for the periods specified in Subsections 10.1 and 10.2.
(e) Procedures and Restrictions. Any Holder desiring to
transfer an Option as permitted under Subsections 10.3(a) or 10.3(b)
shall make application therefor in the manner and time specified by the
Committee and shall comply with such other
-17-
<PAGE> 82
requirements as the Committee may require to assure compliance with all
applicable securities laws. The Committee shall not give permission for
such a transfer if (i) it would give rise to short-swing liability under
Section 16(b) of the Exchange Act, or (ii) it may not be made in
compliance with all applicable federal, state and foreign securities
laws.
(f) Registration. To the extent the issuance to any Permitted
Transferee of any shares of Stock issuable pursuant to Options
transferred as permitted in this Subsection 10.3 is not registered
pursuant to the effective registration statement of the Corporation
generally covering the shares to be issued pursuant to this Plan to
initial Holders of Options, the Corporation shall not have any
obligation to register the issuance of any such shares of Stock to any
such transferee and may place legends on certificates evidencing such
shares restricting future transfers of such shares except in accordance
with applicable securities laws.
(g) Effect on Stock Appreciation Rights. If at the time any
Option is transferred as permitted under this Subsection 10.3 a
corresponding Stock Appreciation Right shall have been granted with
respect to such Option pursuant to Subsection 8.1(a) of this Plan, then
the transfer of such Option shall also constitute a transfer of the
corresponding Stock Appreciation Right, and Stock Appreciation Rights
shall not be transferable other than as part of a transfer of the Option
to which it relates as provided in this Subsection 10.3.
10.4 Delivery of Certificates of Stock. Subject to Subsection 10.5,
the Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price. The value of the shares of Stock or cash deliverable upon
the exercise of an Option or Stock Appreciation Right under this Plan shall not
bear any interest owing to the passage of time, except as may be otherwise
provided in an Award Agreement.
10.5 Conditions to Delivery of Stock. Nothing herein or in any Option
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Option if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or
any similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option the
Corporation may, as a condition precedent to the exercise of such Option,
require from the Holder of the Option (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written
representations, if any, concerning the Holder's intentions with regard to the
retention or disposition of the shares of stock being acquired pursuant to the
Option and such written covenants and agreements, if any, as to the manner of
disposal of such shares as, in the opinion of counsel to the Corporation, may
be necessary to ensure that any disposition by that Holder (or in the event of
the Holder's death, his legal representatives, heirs, legatees, or
distributees) will not involve a violation of the Securities Act or any similar
or superseding
-18-
<PAGE> 83
statute or statutes, any other applicable state or federal statute or
regulation, or any rule of any applicable securities exchange or securities
association, as then in effect.
10.6 Stockholder Approval. Options shall not be granted under this
Plan prior to the date the stockholders of the Corporation shall have approved
this Plan. This Plan shall become null and void as of December 31, 1997, if
such stockholder approval is not obtained on or before such date.
10.7 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares of Stock covered by an Option until a
certificate representing those shares is issued in such Holder's name. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash or other property) or distributions or other rights for which the record
date is before the date that certificate is issued, except as contemplated by
Sections 8 and 9 hereof.
10.8 Furnish Information. Each Holder shall furnish to the
Corporation all information requested by the Corporation to enable it to comply
with any reporting or other requirement imposed upon the Corporation by or
under any applicable statute or regulation.
10.9 Obligation to Exercise. The granting of an Option hereunder
shall impose no obligation upon a Holder to exercise the same or any part
thereof.
10.10 Consideration. No Option or Stock Appreciation Right shall be
exercisable unless and until the Holder thereof shall have paid cash or
property to the Corporation that the Committee believes is equal to or greater
in value than the par value of the Stock subject to such Option.
SECTION 11. EFFECTIVENESS, DURATION AND AMENDMENT OF PLAN
11.1 Effectiveness; Duration. This Plan shall become effective upon
the Effective Date, and no Options may be granted hereunder after the date that
is ten years after the Effective Date. Notwithstanding the foregoing, Non-
Employee Directors may, subject to Subsection 4.2(b), make elections to
participate in this Plan pursuant to Subsection 6.1 of this Plan at any time
after this Plan is adopted by the Compensation Committee of the Board of
Directors, provided that such election shall (i) relate only to that portion of
the Annual Retainer for the 1997 Plan Year that relates to periods from and
after the date of such election, (ii) be subject to Subsection 10.6 and (iii)
become null and void if stockholder approval is not obtained on or before
December 31, 1997. This Plan shall terminate upon the later of (i) the
complete exercise or lapse of the last outstanding Option or (ii) the last date
upon which Options may be granted hereunder.
11.2 Amendment. The Committee may, insofar as permitted by law, with
respect to any shares which, at the time, are not subject to outstanding
Options, suspend or discontinue this Plan, provided that no suspension or
discontinuation of this Plan shall adversely affect the rights of any Holder of
any outstanding Option at the time of such suspension or discontinuation or any
Participant who has an election in effect pursuant to Subsection 4.2(b), in
each case without such
-19-
<PAGE> 84
Holder's or Participant's consent, as applicable. Furthermore, the Committee
may revise or amend this Plan in any respect without approval of the
outstanding Voting Securities of the Company except to the extent any such
approval shall be required under any applicable law or the rules of any
securities exchange on which the Stock is traded as in effect at the time of
such amendment; provided, however, that (i) the Committee may not amend or
otherwise revise the terms of this Plan in any manner that would adversely
effect the rights of any Holder of any Option outstanding or any Participant
who has an election pursuant to Subsection 4.2(b) in effect at the time of any
such amendment or revision without such Holder's or Participant's consent, as
applicable, and (ii) the Committee will not amend this Plan to (a) increase
materially the aggregate number of shares of Stock that may be issued under
this Plan (except for adjustments pursuant to Section 9 hereof), (b) modify the
terms of Sections 5 or 6 of this Plan in any material respect, or (c) modify
materially the requirements about eligibility for participation in this Plan,
in each case without the affirmative vote of a majority of the votes cast on a
proposal for such amendment presented at a duly held meeting of stockholders of
the Company at which a quorum is, either in person or by proxy, present.
SECTION 12. GENERAL
12.1 Application of Funds. The proceeds received by the Corporation
from the sale of shares pursuant to Options may be used for any general
corporate purpose.
12.2 Right of the Corporation to Terminate Status as Director.
Nothing contained in this Plan, or in any Award Agreement, shall confer upon
any Holder the right to continue to serve as a member of the Board of Directors
or interfere in any way with the rights of the Corporation or its stockholders
to terminate the Holder's participation as a member of the Board of Directors
with or without cause.
12.3 No Liability for Good Faith Determinations. Neither the members
of the Board of Directors nor any member of the Committee shall be liable for
any act, omission or determination taken or made in good faith with respect to
this Plan or any Option granted under it; and members of the Board of Directors
and the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
12.4 Other Benefits. Participation in this Plan shall not preclude a
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any benefit, insurance, pension, profit
sharing, retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Non-Employee Directors, except as such participation therein may
be limited by the terms of any such other plan. Neither the adoption of this
Plan by the Compensation Committee nor
-20-
<PAGE> 85
the submission of this Plan to the stockholders of the Corporation for approval
shall be construed as creating any limitations on the power of the Compensation
Committee or the Board of Directors to adopt such other incentive arrangements
as it may deem desirable, including without limitation the granting of stock
options and the awarding of stock and cash otherwise than under this Plan and
such arrangements may be either generally applicable or applicable only in
specific cases.
12.5 Unfunded Plan. Insofar as it provides for Awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Corporation shall not be required to segregate any assets
that may at any time be represented by cash, Stock, or rights thereto, nor
shall the Plan be construed as providing for such segregation, nor shall the
Corporation nor the Board of Directors nor the Committee be deemed to be a
trustee of any cash, Stock, or rights thereto to be granted under the Plan.
Any liability of the Corporation to any Holder with respect to a grant of cash,
Stock, or rights thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan and any Award
Agreement; no such obligation of the Corporation shall be deemed to be secured
by any pledge or other encumbrance on any property of the Corporation. Neither
the Corporation nor the Board of Directors nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by the Plan.
12.6 Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock to a Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation
and neither shall have any liability to any Holder as a result thereof.
12.8 Payment of Expenses. All expenses incident to the
administration, termination, or protection of this Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Corporation or its
Subsidiaries.
12.9 Corporation Records. Records of the Corporation or its
Subsidiaries regarding a Participant's period of service as a member of the
Board of Directors, termination of service as a member of the Board of
Directors and the reason therefor, and other matters shall be conclusive for
all purposes hereunder, unless determined by the Committee to be incorrect.
12.10 Information. The Corporation shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished all of the
information or documentation which is necessary or required by the Committee to
perform its duties and functions under this Plan.
-21-
<PAGE> 86
12.11 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to a Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
12.12 Corporation Action. Any action required of the Corporation shall
be by resolution of the Board of Directors, the Compensation Committee, or by a
person authorized to act by resolution of the Board of Directors.
12.13 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable and this Plan shall be construed and enforced as if the illegal or
invalid provision had never been included herein.
12.14 Notices. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received, addressed to the
applicable party as specified in the applicable Award Agreement. The
Corporation or a Holder may change, at any time and from time to time, by
written notice to the other, the address which it or he had previously
specified for receiving notices. Until changed in accordance herewith, the
Corporation and each Holder shall specify as its and his address for receiving
notices the address set forth in the Award Agreement pertaining to the shares
to which such notice relates. Any person entitled to notice hereunder may
waive such notice.
12.15 Successors. This Plan shall be binding upon each Holder, his
legal representatives, heirs, legatees, and distributees, upon the Corporation,
its successors and assigns and upon the Committee and its successors.
12.16 Headings. The titles and headings of Sections and Subsections
are included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
12.17 Governing Law. All questions arising with respect to the
provisions of this Plan shall be determined by application of the laws of the
State of Delaware, without giving effect to any conflict of law provisions
thereof, except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Delaware corporate law conflicts with
the contract law of such state, in which event Delaware corporate law, without
giving effect to any conflict of law provisions thereof, shall govern. The
obligation of the Corporation to sell and deliver Stock hereunder is subject to
applicable federal and state laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Stock.
12.18 Availability of Exempt Transactions. Notwithstanding the
provisions of this Plan, nothing contained in this Plan shall prohibit any
transactions permitted by Rule 16a-2(d) promulgated under the Exchange Act to
the extent such transactions are approved by the
-22-
<PAGE> 87
Committee and are not in violation of, and do not otherwise cause this Plan not
to be in compliance with, Rule 16b-3.
12.19 Taxation and Withholding Issues. Each Non-Employee Director that
participates in this Plan shall be individually responsible for any taxation
results from the grant or award of Options and/or SARs under this Plan.
Because such Participants are not employees of the Company, the Company shall
not withhold for any state, local or federal taxes resulting from the grants or
awards under this Plan except to the extent the Company may be required to do
so under any applicable law, as from time to time may be in effect.
12.20 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
-23-
<PAGE> 88
This Plan has been approved by the Compensation Committee of the Company
as of March 31, 1997, and was approved by the stockholders of the Company as of
__________, 1997.
ATTEST:
-----------------------------
-24-
<PAGE> 89
APPENDIX 3
CHASE BRASS INDUSTRIES, INC.
1997 EXECUTIVE DEFERRED COMPENSATION STOCK OPTION PLAN
SCOPE AND PURPOSE OF PLAN
Chase Brass Industries, Inc., a Delaware corporation (the
"Corporation"), has adopted this 1997 Executive Deferred Compensation Stock
Option Plan (this "Plan") to provide for the granting of Options (hereafter
defined) to Non-Employee Directors (hereafter defined).
The purpose of this Plan is to enable the Corporation to provide
certain executive officers and key management employees from time to time
designated by the Committee (hereinafter defined) an opportunity to acquire
additional proprietary interests in the success of the Corporation, which will
more closely align the interest of participating employees in the Corporation
with that of the stockholders and result in an increased incentive for such
persons to remain with the Corporation and strive to maximize the success of
the Corporation.
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than (a) the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation, or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the stockholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation (b)
Citicorp Venture Capital, Ltd., a New York corporation ("CVC"), or (c) any
Affiliate of CVC that is directly controlled by Citicorp or Citibank, N.A., or
otherwise is in the same tier as CVC of Affiliates under the control of such
entities ("Direct Affiliates"), but shall not include any entities that may be
deemed an Affiliate of CVC as a result of the investment by any Direct
Affiliate in such entity.
1.2 "Affiliate" means (a) any Person who is directly or indirectly
the beneficial owner of at least 10% of the voting power of the outstanding
Voting Securities of the Corporation or (b) any Person controlling, controlled
by, or under common control with the Corporation or any Person contemplated in
clause (a) of this Subsection 1.2.
1.3 "Annual Bonus" means the annual cash bonus compensation to
which a Participant is entitled for service as an Employee during a Plan Year,
exclusive of any amounts paid by the Corporation or its Subsidiaries to such
Participant for services rendered to the Corporation or its Subsidiaries in a
capacity other than as an Employee as determined by the Compensation Committee
of the Board of Directors or pursuant to objective criteria approved by the
Compensation Committee.
<PAGE> 90
1.4 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Options granted to that Holder.
1.5 "Board of Directors" means the board of directors of the
Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday,
or a day on which banking institutions in the state of Ohio are authorized or
obligated by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have
occurred if:
(a) any Acquiring Person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing fifty
percent or more of the combined voting power of the then outstanding
Voting Securities of the Corporation; or
(b) a public announcement is made of a tender or exchange
offer by any Acquiring Person for fifty percent or more of the
outstanding Voting Securities of the Corporation, and the Board of
Directors approves or fails to oppose that tender or exchange offer in
its statements in Schedule 14D-9 under the Exchange Act; provided,
however, that the events to occur under Subsection 7.1 hereof shall
not occur solely as a result of an event described in this clause (b)
unless, within one year after the occurrence of such event, an event
described in clauses (a), (c) or (d) hereof shall have occurred, in
which case such events to occur under Subsection 7.1 hereof shall
occur upon the occurrence of such event but shall be deemed to have
been effective as of the time of the occurrence of the event described
in this clause (b); or
(c) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other corporation or
partnership (or, if no such approval is required, the consummation of
such a merger or consolidation of the Corporation), other than a
merger or consolidation that would result in the Voting Securities of
the Corporation outstanding immediately before the consummation
thereof continuing to represent (either by remaining outstanding or by
being converted into Voting Securities of the surviving entity or of a
parent of the surviving entity) a majority of the combined voting
power of the Voting Securities and Convertible Voting Securities (on a
fully-diluted basis assuming full conversion thereof) of the surviving
entity (or its parent) outstanding immediately after that merger or
consolidation; or
(d) the stockholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale
or disposition by the Corporation of all or substantially all the
Corporation's assets (or, if no such approval is required, the
consummation of such a liquidation, sale, or disposition in one
transaction or series of related transactions) other than a
liquidation, sale or disposition of all or substantially all the
Corporation's assets in one transaction or a series of related
transactions to a Subsidiary of the Corporation
-2-
<PAGE> 91
or any other corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions
as their ownership of stock in the Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the committee appointed pursuant to Section
3 by the Board of Directors to administer this Plan.
1.10 "Convertible Voting Securities" means any and all options,
warrants, or other rights to purchase, or securities convertible into or
exchangeable or exercisable for, directly or indirectly, Voting Securities of
any Person.
1.11 "Corporation" means Chase Brass Industries, Inc., a Delaware
corporation.
1.12 "Date of Grant" has the meaning given it in Subsection 4.3.
1.13 "Disability" has the meaning given it in Subsection 9.2.
1.14 "Disinterested Person" means a Person that meets the
definition of both a "Non-Employee Director" under Rule 16b-3(b)(3) and an
"outside director" under Section 162(m).
1.15 "Effective Date" means the date this Plan is approved by the
stockholders of the Corporation.
1.16 "Eligible Individuals" means Employees that the Committee
designates as eligible to participate in this Plan; provided that the class of
Employees that may be deemed as Eligible Individuals shall be limited to
executive officers of the Corporation and its Subsidiaries and key management
personnel of the Corporation and its Subsidiaries as determined by the
Committee.
1.17 "Employee" means any employee of the Corporation or any of the
Subsidiaries, including officers and directors of the Corporation or any
Subsidiary who also are employees of the Corporation or any of its
Subsidiaries.
1.18 "Exchange Act" means the Securities Exchange Act of 1934 and
the rules and regulations promulgated thereunder, or any successor law, as it
may be amended from time to time.
1.19 "Exercise Notice" has the meaning given it in Subsection 6.3.
1.20 "Exercise Price" means the price per share at which one share
of Stock may be purchased pursuant to an Option, as specified in Subsection
5.1.
1.21 "Fair Market Value" means, for a particular day:
-3-
<PAGE> 92
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market Value,
then the last reported sale price, regular way, on the composite tape
of that exchange as of the date or dates on which Fair Market Value is
to be determined or, if no such sale takes place on such date or
dates, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to
unlisted trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed
or admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices for shares of Stock of the same class in the
over-the-counter market are reported by the National Association of
Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ")
National Market System (or such other system then in use) at the date
or dates of determining the Fair Market Value, then the last reported
sales price so reported as of the date or dates on which Fair Market
Value is to be determined or, if no such sale takes place on such date
or dates, the average of the high bid and low asked prices so
reported; or
(c) If shares of Stock of the same class are not listed
or admitted to unlisted trading privileges as provided in Subsection
1.21(a) and sales prices for shares of Stock of the same class are not
reported by the NASDAQ National Market System (or a similar system
then in use) as provided in Subsection 1.21(b), and if bid and asked
prices for shares of Stock of the same class in the over-the-counter
market are reported by NASDAQ (or, if not so reported, by the National
Quotation Bureau Incorporated) at the date or dates of determining the
Fair Market Value, then the average of the high bid and low asked
prices on the last trading day before the date in question;
provided, that if information to establish Fair Market Value of the Stock
pursuant to this Subsection 1.21 is not available on any date or dates for
which Fair Market Value is to be determined, subclause (a), (b) or (c), as
applicable, shall be applied for the next preceding date on which such
information is available.
1.22 "Holder" means a Participant to whom an outstanding Option has
been granted under this Plan or a transferee of any Option granted under this
Plan as permitted under Subsection 9.3.
1.23 "Non-Surviving Event" means an event of Restructuring as
described in either Subsection 1.31(b) or Subsection 1.31(c).
1.24 "Normal Retirement" means the separation of an Employee from
employment with the Corporation and/or its Subsidiaries on or after the
attainment of age 59 1/2 with the right to receive an immediate benefit under a
tax qualified retirement plan under Section 401(a) of the Code approved by the
Corporation or any Subsidiary thereof.
-4-
<PAGE> 93
1.25 "Option" means an option to purchase Stock granted pursuant to
this Plan; Options granted under this Plan are not "incentive stock options"
under Section 422 of the Code.
1.26 "Participant" means an Eligible Individual who has elected in
accordance with Section 4.2 to receive Options in lieu of receiving all or part
of such Eligible Individual's Annual Bonus.
1.27 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of
the Corporation with that Person, shall be deemed a single "Person."
1.28 "Plan" means the Corporation's 1997 Executive Deferred
Compensation Stock Option Plan, as it may be amended from time to time.
1.29 "Plan Year" means the twelve (12) consecutive month period
beginning January 1 and ending December 31.
1.30 "Restructuring" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with
any Person, whether effected as a single transaction or a series of
related transactions, with the Corporation remaining the continuing or
surviving entity of that merger or consolidation and the Stock
remaining outstanding and not changed into or exchanged for stock or
other securities of any other Person or of the Corporation, cash, or
other property;
(b) The merger or consolidation of the Corporation with
any Person, whether effected as a single transaction or a series of
related transactions, with (i) the Corporation not being the
continuing or surviving entity of that merger or consolidation or (ii)
the Corporation remaining the continuing or surviving entity of that
merger or consolidation but all or a part of the outstanding shares of
Stock are changed into or exchanged for stock or other securities of
any other Person or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or
substantially all of the assets of the Corporation (whether by sale,
merger, consolidation, liquidation, or otherwise) to any Person,
whether effected as a single transaction or a series of related
transactions.
-5-
<PAGE> 94
1.31 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Exchange Act, or any successor rule, as it may be amended from time to time,
and references to paragraphs or clauses of Rule 16b-3 shall refer to the
corresponding paragraphs or clauses of Rule 16b-3 as it exists at the Effective
Date or the comparable paragraph or clause of Rule 16b-3 as it may thereafter
be amended.
1.32 "Section 162(m)" means Section 162(m) of the Code, or any
successor section under the Code as it may be amended from time to time and as
interpreted by final or proposed regulations promulgated thereunder from time
to time.
1.33 "Securities Act" means the Securities Act of 1933 and the
rules and regulations promulgated thereunder, or any successor law, as it may
be amended from time to time.
1.34 "Stock" means the Corporation's authorized common stock, par
value $.01 per share, or any other securities that are substituted for the
Stock as provided in Subsection 7.1 or Section 8.
1.35 "Stock Appreciation Right" or "SAR" means the right to receive
an amount equal to the excess of the Fair Market Value of a share of Stock (as
determined on the date of exercise) over the Exercise Price.
1.36 "Subsidiary" means, with respect to any Person, any
corporation, or other entity of which a majority of the Voting Securities is
owned, directly or indirectly, by that Person.
1.37 "Total Shares" has the meaning given it in Subsection 7.1.
1.38 "Voting Securities" means (i) any securities that are entitled
to vote generally in the election of directors, in the admission of general
partners or in the selection of any other similar governing body and (ii) with
respect to the Corporation, all shares of the Corporation's nonvoting common
stock, par value $.01 per share (all of which are convertible into shares of
the Corporation's common stock, par value $.01 per share).
SECTION 2. SHARES OF STOCK SUBJECT TO THIS PLAN
2.1 Maximum Number of Shares. Subject to the provisions of
Subsection 2.2 and Section 9 of this Plan, the aggregate number of shares of
Stock that may be issued, transferred or exercised pursuant to Options under
this Plan shall be three HUNDRED THOUSAND (300,000) shares of Stock. Options
with respect to such shares of Stock shall be allocated among Eligible
Individuals pursuant to the formula set forth in Subsection 5.1; provided that
no more than 100,00 shares of stock may be subject to options granted to any
single Eligible Individual during any one Plan Year (or otherwise with respect
to any Annual Bonus amount deferred for any Plan Year).
2.2 Limitation of Shares. For purposes of the limitations
specified in Subsection 2.1, the following principles shall apply:
-6-
<PAGE> 95
(a) the number of shares of Stock subject to outstanding
Options shall count against and decrease the number of shares of Stock
that may be issued for purposes of Subsection 2.1;
(b) the number of shares of Stock with respect to which
Options have expired, are cancelled, or otherwise terminate without
being exercised, converted, or vested, as applicable, shall be added
back to the number of shares of Stock that may be issued for purposes
of Subsection 2.1; and
(c) the number of shares of Stock that are transferred by
a Holder of an Option (or withheld by the Corporation) as full or
partial payment to the Corporation of the purchase price of shares of
Stock subject to an Option or the Corporation's or any of its
Subsidiary's tax withholding obligations shall not be added back to
the number of shares of Stock that may be issued for purposes of
Subsection 2.1 and shall not again be subject to Options.
Notwithstanding the provisions of this Subsection 2.2, the Committee
may impose restrictions which are more limited than set forth herein with
respect to shares of Stock subject to Options that may be added back to the
number of shares of Stock that may be issued for purposes of Subsection 2.1.
2.3 Source of Shares. The shares to be delivered under this Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 Registration and Listing of Shares. From time to time, the
Board of Directors and appropriate officers of the Corporation shall and are
authorized to take whatever actions are necessary to file required documents
with governmental authorities, stock exchanges, and other appropriate Persons
to make shares of Stock available for issuance pursuant to the exercise of
Options.
SECTION 3. ADMINISTRATION OF PLAN
3.1 Committee. The Board of Directors may administer this Plan or
may delegate all or part of that duty to the Committee; provided that the
Committee shall not have the power to appoint members of the Committee. Except
for references in this Subsection 3.1, and unless the context otherwise
requires, references herein to the Committee shall also refer to the Board of
Directors as administrator of this Plan. The Committee shall be constituted so
that, as long as Stock is registered under Section 12 of the Exchange Act, each
member of the Committee shall be a Disinterested Person and so that this Plan
in all other applicable respects will qualify transactions related to this Plan
for the exemptions from Section 16(b) of the Exchange Act provided by Rule
16b-3 and the exemption from the deductibility limitation imposed by Section
162(m) provided by the performance-based compensation exception described in
Section 162(m), to the extent exemptions thereunder may be available. The
number of Persons
-7-
<PAGE> 96
that shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board of Directors and, unless that majority
of the Board of Directors determines otherwise, shall be no less than two
Persons. Notwithstanding the foregoing, the Board of Directors may designate
the Compensation Committee of the Board of Directors to serve as the Committee
hereunder, provided that each member of such Compensation Committee is a
Disinterested Person.
3.2 Committee's Powers. Subject to the express provisions of this
Plan and Rule 16b-3, the Committee shall have such power and authority as may
be necessary or advisable to carry out its functions and duties as described in
this Plan, including the authority, in its sole and absolute discretion, to (a)
interpret this Plan and make such determination as it deems necessary for Plan
administration and to adopt, amend, and rescind administrative and interpretive
rules and regulations relating to this Plan; (b) redeem, pursuant to Subsection
7.2(d), outstanding Options and Stock Appreciation Rights; (c) construe the
respective Award Agreements and this Plan; (d) terminate, modify, or, subject
to Subsection 10.2, amend this Plan; and (e) make all other determinations,
perform all other acts, and exercise all other powers and authority necessary
or advisable for administering this Plan, including the delegation of those
ministerial acts and responsibilities as the Committee deems appropriate.
Subject to Rule 16b-3, Section 162(m) (to the extent an exemption pursuant
thereto is available) and the foregoing, the Committee may correct any defect,
supply any omission, or reconcile any inconsistency in this Plan, in any
Option, or in any Award Agreement in the manner and to the extent it deems
necessary or desirable to carry this Plan into effect, and the Committee shall
be the sole and final judge of that necessity or desirability. The
determinations of the Committee on the matters referred to in this Subsection
3.2 shall be final and conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Options may be granted pursuant to this
Plan with respect to Annual Bonus amounts attributable to a Plan Year only to
Persons who are Eligible Individuals for the applicable Plan Year and who have
properly elected in accordance with Subsection 4.2 to be a Participant for such
Plan Year.
4.2 Participation. An Eligible Individual shall become a
Participant for a Plan Year for purposes of Section 5 by filing with the
secretary of the Corporation prior to September 30 of such Plan Year an
irrevocable written election in a form prescribed by the Committee to receive
Options in lieu of all or a portion, in twenty-five percent (25%) increments,
of the Eligible Individual's Annual Bonus payable for performance in such
current Plan Year; provided that, in the discretion of the Committee, an
Eligible Individual who becomes an Employee after September 30 of any Plan Year
may become a Participant for purposes of Section 5 for such Plan Year by filing
such an election within the period of time after the commencement of such
Employee's employment by the Corporation or any Subsidiary of the Corporation
as prescribed by the Committee. Such written election shall become a part of
the Participant's Award Agreement, and a copy will be attached as an exhibit
thereto.
-8-
<PAGE> 97
4.3 Date of Grant. Notwithstanding that (i) certain terms of the
Award Agreement may not be determined at that time or (ii) the Award Agreement
may not be executed until a later time, the date on which the Options covered
by an Award Agreement is granted (the "Date of Grant"), shall be (a) the date
the Compensation Committee of the Board of Directors establishes the amount of
the Annual Bonus on account of which such Options are being granted or (b) if
the Annual Bonus of a Participant is being determined by objective criteria,
the date the Compensation Committee confirms the attainment of such criteria
and the Annual Bonus amount resulting therefrom on account of which such
Options are being granted. In no event shall a Holder gain any rights in
addition to those specified by this Plan, as interpreted and administered by
the Committee, regardless of the time that may pass between the grant of the
Options and the actual execution of the Award Agreement by the Corporation and
the Holder.
4.4 Award Agreements. Each Option granted under this Plan shall
be evidenced by an Award Agreement in such form and containing such terms as
the Committee shall approve, and which shall not contain any provisions
inconsistent with the terms of this Plan. Options granted for a Plan Year
shall be evidenced by separate Award Agreements for each series of Options
granted as provided by Subsection 5.1.
SECTION 5. GRANT OF STOCK OPTIONS
5.1 Number of Shares. Subject to Subsections 5.4 and 5.5, and
provided that the Participant has filed with the Company a written election of
deferral of his or her Annual Bonus for the applicable Plan Year in accordance
with Subsection 4.2, a Participant shall be granted, as of the Date of Grant,
Options on account of each Annual Bonus (or portion thereof) deferred for a
Plan Year in four series, with the number of shares of Stock of each series
determined in accordance with the following formula:
<TABLE>
<S> <C>
25% of the Annual Bonus Amount to be Number of Shares (rounded up to
Deferred for such Plan Year = the nearest whole share)
- ---------------------------------------
50% of the average Fair Market Value of
a share of Stock for the last five
trading days of the applicable calendar
quarter
</TABLE>
Subject to Subsection 5.4, the numerator of the above fraction shall be
determined according to the amount of Annual Bonus elected to be deferred for
the Plan Year by the Participant in accordance with Subsection 4.2. The
denominator of the above formula shall be determined for each series of Options
as of the end of each calendar quarter for the Plan Year to which the Annual
Bonus relates, with one series of Options being granted for each calendar
quarter in such Plan Year.
5.2 Vesting. Subject to Section 7, each Option granted pursuant
to this Section 5 shall become exercisable in full on the Date of Grant.
-9-
<PAGE> 98
5.3 Exercise Price. The per share Exercise Price of Options
granted pursuant to Subsection 5.1 shall be 50% of the average Fair Market
Value of a share of Stock for the last five trading days of the applicable
calendar quarter as provided in the last sentence of Subsection 5.1, such that
Options granted to a Eligible Individual over a Plan Year shall have four
separate Exercise Prices.
5.4 Participation Commencing During a Plan Year. In the event a
Participant elects to defer all or a portion of his or her Annual Bonus for a
Plan Year as permitted by the proviso of Subsection 4.2, the numerator in the
formula set forth in Subsection 5.1 shall be adjusted with respect to such
Participant for such Plan Year to reflect the portion of the deferred Annual
Bonus attributable to each calendar quarter (or portion thereof) remaining in
the Plan Year to which any such initial election relates from after the date
such Eligible Individual first becomes an Employee.
5.5 Termination of Employment. Notwithstanding the provisions of
Subsection 6.1, if a Eligible Individual who has made an election pursuant to
Subsection 4.2 ceases to be an Employee prior to the Date of Grant of the
Options to which any such election relates, no Options will be granted to such
Person pursuant to Subsection 5.1. Any Bonus, if any, earned for the Plan Year
to which such election relates shall be paid in cash and, upon such payment,
the Corporation shall have no further obligation under this Plan to such Person
other than with respect to Options and SARs (if any) granted under this Plan
and outstanding as of the date such Person ceases to be an Employee.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
All options granted under this Plan shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 6 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth
in Sections 7, 8 and 9.
6.1 Expiration of Options. Subject to the provisions in Section
9, each Option shall expire ten (10) years after the Date of Grant of such
Option.
6.2 Exercise Price. Each Award Agreement shall state that the
Exercise Price shall be the exercise price per share of Stock as calculated
pursuant to Section 5.1.
6.3 Method of Exercise. The Option shall be exercisable only by
written notice of exercise (the "Exercise Notice") delivered to the Corporation
during the term of the Option, which notice shall (a) state the number of
shares of Stock with respect to which the Option is being exercised, (b) be
signed by the Holder of the Option or, if the Holder is dead or becomes
affected by a Disability, by the person authorized to exercise the Option
pursuant to Subsection 9.2, (c) be accompanied by the Exercise Price for all
shares of Stock for which the Option is being exercised, and (d) include such
other information, instruments, and documents as may be required by the
Committee to evidence such Holder's authority to exercise the Option or as
otherwise required as provided by Subsection 9.5. The Option shall not be
deemed to have been exercised
-10-
<PAGE> 99
unless all of the requirements of the preceding provisions of this Subsection
6.3 have been satisfied.
6.4 Medium and Time of Payment. The Exercise Price of an Option
shall be payable in full upon the exercise of the Option (a) in cash or by an
equivalent means acceptable to the Committee, (b) on the Committee's prior
consent, with shares of Stock owned by the Holder (including shares received
upon exercise of the Option) and having a Fair Market Value at least equal to
the aggregate Exercise Price payable in connection with such exercise, or (c)
by any combination of clauses (a) and (b). If the Committee elects to accept
shares of Stock in payment of all or any portion of the Exercise Price, then
(for purposes of payment of the Exercise Price) those shares of Stock shall be
deemed to have a cash value equal to their aggregate Fair Market Value
determined as of the date the certificate for such shares, duly endorsed for
transfer to the Corporation and free from any restriction on transfer, is
delivered to the Corporation.
6.5 Payment with Sale Proceeds. In addition, at the request of a
Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under
which that brokerage firm, on behalf of the Holder, shall pay to the
Corporation the Exercise Price of the Option being exercised and the
Corporation shall promptly deliver the exercised shares of Stock to the
brokerage firm. To accomplish this transaction, the Holder must deliver to the
Corporation an Exercise Notice containing irrevocable instructions from the
Holder to the Corporation to deliver the Stock certificates representing the
shares of Stock directly to the broker. Upon receiving a copy of the Exercise
Notice acknowledged by the Corporation, the broker shall sell that number of
shares of Stock or loan the Holder an amount sufficient to pay the Exercise
Price and any withholding obligations due. The broker then shall deliver to
the Corporation that portion of the sale or loan proceeds necessary to cover
the Exercise Price and any withholding obligations due. The Committee shall
not approve any transaction of this nature if the Committee believes that the
transaction would give rise to the Holder's liability for short-swing profits
under Section 16(b) of the Exchange Act.
6.6 No Fractional Shares. The Corporation shall not in any case
be required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same
fraction (as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
6.7 Available Stock. The Options to be granted pursuant to
Subsection 5.1 shall be made in the amounts specified therein only if, as of
the Date of Grant of any such Options, the number of shares of Stock available
to be issued pursuant to Options under this Plan (as calculated in Section 2)
is sufficient to make all grants of Options required to be made pursuant to
Subsection 5.1 on such Date of Grant. In the event that the number of shares
of Stock that are available to be issued pursuant to Options under this Plan on
the Date of Grant of such Options is insufficient to permit the grant of the
entire number of shares with respect to which Options are to be granted on such
Date of Grant, then the number of available shares shall be apportioned pro
rata among
-11-
<PAGE> 100
the Options to be granted on such Date of Grant, and the number of shares
subject to each Option shall be the number of shares apportioned to that
Option. Any such apportionment effective pursuant to the immediately preceding
sentence shall be pro rata among those Participants entitled to receive Options
on such Date of Grant, based on the number of Options to which each Participant
is entitled to receive pursuant to Subsection 5.1 as compared to the total
number of Options to which all Participants are entitled to receive on such
Date of Grant pursuant to Subsection 5.1. If any such pro ration of Options is
effected, or if there shall not be any shares of Stock available on any date on
which Options are to be granted, the portion of deferred Annual Bonus for which
Options are not granted will be paid in cash as of the date such Options were
to be granted.
6.8 Payment of Taxes. The Committee may, in its discretion,
require a Participant to pay to the Corporation (or the Corporation's
Subsidiary if the Participant is an employee of a Subsidiary of the
Corporation), at the time of the exercise of an Option or thereafter, the
amount that the Committee deems necessary to satisfy the Corporation's or its
Subsidiary's current or future obligation to withhold federal, state, or local
income or other taxes that the Participant incurs upon the exercise of an
Option. In connection with the exercise of an Option requiring tax
withholding, a Participant may (a) direct the Corporation to withhold from the
shares of Stock to be issued upon such exercise the number of shares necessary
to satisfy the Corporation's or its Subsidiary's obligation to withhold taxes,
that determination to be based on the shares' Fair Market Value as of the date
of exercise; (b) deliver to the Corporation sufficient shares of Stock (based
upon the Fair Market Value as of the date of such delivery) to satisfy the
Corporation's or its Subsidiary's tax withholding obligation; or (c) deliver
sufficient cash to the Corporation to satisfy the Corporation's or its
Subsidiary's tax withholding obligations. Participants who elect to use such a
Stock withholding feature must make the election at the time and in the manner
that the Committee prescribes. The Committee may, at its sole option, deny any
Participant's request to satisfy withholding obligations through Stock instead
of cash. In the event the Committee subsequently determines that the aggregate
Fair Market Value (as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Participant shall pay to
the Corporation, immediately upon the Committee's request, the amount of that
deficiency in the form of payment requested by the Committee.
SECTION 7. EFFECTS OF CHANGE IN CONTROL
7.1 Change in Control. Upon the occurrence of a Change in
Control, subject to Subsection 1.7(b): (a) each Holder of an Option shall
immediately be granted one corresponding Stock Appreciation Right for each
share of Stock subject to an Option; and (b) all outstanding Options shall
immediately become fully vested and exercisable in full, including that portion
of any Option that pursuant to the terms and provisions of the applicable Award
Agreement had not yet become exercisable (the total number of shares of Stock
as to which a Stock Appreciation Right or Option is exercisable upon the
occurrence of a Change in Control is referred to herein as the "Total Shares").
If a Change in Control involves a Restructuring or occurs in connection with a
series of
-12-
<PAGE> 101
related transactions involving a Restructuring and if such Restructuring is in
the form of a Non-Surviving Event and as a part of such Restructuring shares of
stock, other securities, cash, or property shall be issuable or deliverable in
exchange for Stock, then a Holder of an Option shall be entitled to purchase or
receive (in lieu of the Total Shares that the Holder would otherwise be
entitled to purchase or receive) the number of shares of stock, other
securities, cash, or property to which that number of Total Shares would have
been entitled in connection with such Restructuring at an aggregate exercise
price equal to the Exercise Price that would have been payable if that number
of Total Shares had been purchased on the exercise of the Option immediately
before the consummation of the Restructuring. Nothing in this Subsection 7.1
shall impose on a Holder the obligation to exercise any Option immediately
before or upon the Change in Control or cause the Holder to forfeit the right
to exercise the Option during the remainder of the original term of the Option
because of a Change in Control.
7.2 Restructuring Without Change in Control. In the event a
Restructuring shall occur at any time while there is any outstanding Option
hereunder and that Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control,
then:
(a) no outstanding Option shall immediately become fully
vested and exercisable in full merely because of the occurrence of the
Restructuring;
(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(c) if the Restructuring is in the form of a
Non-Surviving Event and, as part of that Restructuring, shares of
stock, other securities, cash or property shall be issuable or
deliverable in exchange for Stock, the surviving entity shall assume
the obligations of the Corporation under this Plan and Options
thereafter shall represent the right to purchase or receive (in lieu
of the Total Shares that the Holder would otherwise be entitled to
purchase or receive) the number of shares of stock, other securities,
cash or property to which the number of Total Shares would have been
entitled in connection with such Restructuring at an aggregate
exercise price equal to the Exercise Price that would have been
payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the
Restructuring;
(d) the Corporation may (but shall not be required to)
redeem in whole or in part any one or more of the outstanding Options
in consideration of a cash payment, as such payment may be reduced for
tax withholding obligations as contemplated in Subsection 6.8 in an
amount equal to the excess of (i) the Fair Market Value, determined as
of the date immediately preceding the consummation of the
Restructuring, of the aggregate number of shares of Stock subject to
the Options and as to which the Options being redeemed over (ii) the
Exercise Price for that number of shares of Stock; any redemption of
an Option pursuant this Subsection 7.2(d) shall also constitute the
redemption of any corresponding Stock Appreciation Rights; provided,
further, that any cash
-13-
<PAGE> 102
payments be made by the Corporation pursuant to this Subsection 7.2(d)
in connection with the redemption of any outstanding Option shall be
paid to the Holder thereof at the time of delivery to the Corporation
of the Award Agreement evidencing that Option, provided that any such
redemption shall be effective upon the consummation of the
Restructuring notwithstanding that the payment of the Redemption Price
may occur subsequent to the consummation or the failure of any Holder
to deliver the applicable Award Agreement; and
(e) if a Participant becomes an employee of the surviving
entity or any Subsidiary thereof, then, for purposes of Section 9.1(a)
hereof, such Participant shall not be deemed to have ceased to be an
Employee.
7.3 Terms of Stock Appreciation Rights. A Stock Appreciation
Right granted pursuant to Subsection 7.1 shall entitle a Holder, upon exercise,
to surrender such Holder's Option or any portion thereof, to the extent
unexercised, and to receive payment of an amount computed pursuant to
Subsection 7.3(b). That Option shall then cease to be exercisable to the
extent surrendered. Stock Appreciation Rights granted pursuant to Subsection
7.1(a) shall be subject to the terms of the Award Agreement governing the
Option, which shall be deemed to incorporate the following provisions in
addition to those applicable to Options:
(a) Exercise and Transfer. A Stock Appreciation Right
granted pursuant to Subsection 7.1(a) shall be exercisable only at
such time or times and only to the extent that the related Option is
exercisable and shall not be transferable except to the extent that
the related Option is transferable as provided in Subsection 9.3.
(b) Value of Right. Upon the exercise of a Stock
Appreciation Right, a Holder shall be entitled to receive payment from
the Corporation of an amount in cash determined by multiplying:
(i) The difference obtained by subtracting the
Exercise Price from the Fair Market Value of a share of Stock
on the date of exercise of the Stock Appreciation Right, by
(ii) The number of shares of Stock as to which
that Stock Appreciation Right has been exercised.
(c) Award Agreements. Stock Appreciation Rights granted
pursuant to Subsection 7.1(a) shall be evidenced by the Award
Agreements evidencing the corresponding Options to which the Stock
Appreciation Rights relate, which Award Agreements shall be deemed to
incorporate the provisions of this Subsection 7.3. No separate Award
Agreement shall be issued evidencing any Stock Appreciation Rights.
7.4 Payment of Taxes. The Committee may, in its discretion,
require a Participant to pay to the Corporation (or the Corporation's
Subsidiary if the Participant is an employee of a Subsidiary of the
Corporation), at the time of the
-14-
<PAGE> 103
exercise of a Stock Appreciation Right or thereafter, the amount that the
Committee deems necessary to satisfy the Corporation's or its Subsidiary's
current or future obligation to withhold federal, state, or local income or
other taxes that the Participant incurs by exercising a Stock Appreciation
Right.
7.5 Notice of Change in Control or Restructuring. Upon the
occurrence of a Change in Control or a Restructuring without Change in Control,
the Corporation shall provide written notice to all Holders of Options of the
occurrence of such event and the effects resulting therefrom as provided in
this Section 7.
SECTION 8. ADJUSTMENT PROVISIONS
8.1 Adjustment of Options and Authorized Stock. The terms of an
Option and the number of shares of Stock authorized pursuant to Subsection 2.1
for issuance under this Plan shall be subject to adjustment from time to time,
in accordance with the following provisions:
(a) If at any time, or from time to time, the Corporation
shall subdivide as a whole (by reclassification, by a stock split, by
the issuance of a distribution on Stock payable in Stock, or
otherwise) the number of shares of Stock then outstanding into a
greater number of shares of Stock, then (i) the maximum number of
shares of Stock available for this Plan as provided in Subsection 2.1
shall be increased proportionately, and the kind of shares or other
securities available for this Plan shall be appropriately adjusted,
(ii) the number of shares of Stock (or other kind of shares or
securities) that may be acquired under any Option (and to which any
corresponding Stock Appreciation Right, if any, relates) shall be
increased proportionately, and (iii) the Exercise Price for each share
of Stock (or other kind of shares or securities) subject to then
outstanding Options (and corresponding Stock Appreciation Rights, if
any) shall be reduced proportionately, without changing the aggregate
Exercise Price or value as to which outstanding Options (and
corresponding Stock Appreciation Rights, if any) remain exercisable.
(b) If at any time, or from time to time, the Corporation
shall consolidate as a whole (by reclassification, reverse stock
split, or otherwise) the number of shares of Stock then outstanding
into a lesser number of shares of Stock, (i) the maximum number of
shares of Stock available for this Plan as provided in Subsection 2.1
shall be decreased proportionately, and the kind of shares or other
securities available for this Plan shall be appropriately adjusted,
(ii) the number of shares of Stock (or other kind of shares or
securities) that may be acquired under any Option (and to which any
corresponding Stock Appreciation Right, if any, relates) shall be
decreased proportionately, and (iii) the Exercise Price for each share
of Stock (or other kind of shares or securities) subject to then
outstanding Options (and corresponding Stock Appreciation Rights, if
any) shall be increased proportionately, without changing the
aggregate Exercise Price or value as to which outstanding Options (and
corresponding Stock Appreciation Rights, if any) remain exercisable.
-15-
<PAGE> 104
(c) Whenever the number of shares of Stock subject to
outstanding Options (and corresponding Stock Appreciation Rights, if
any) and the price for each share of Stock subject to outstanding
Options (and corresponding Stock Appreciation Rights, if any) are
required to be adjusted as provided in this Subsection 8.1, the
Committee shall promptly prepare a notice setting forth, in reasonable
detail, the event requiring adjustment, the amount of the adjustment,
the method by which such adjustment was calculated, and the change in
price and the number of shares of Stock, other securities, cash, or
property purchasable subject to each Option (and corresponding Stock
Appreciation Rights, if any) after giving effect to the adjustments.
The Committee shall promptly provide a copy of such notice to each
Holder.
(d) Adjustments under Subsections 8.1(a) and (b) shall be
made by the Committee, and its determination as to what adjustments
shall be made and the extent thereof shall be final, binding, and
conclusive. No fractional interest shall be issued under this Plan on
account of any such adjustments.
SECTION 9. ADDITIONAL PROVISIONS
9.1 Loss of Eligibility.
(a) If a Participant ceases to be an Employee for any
reason other than the Participant's death, Disability or Normal
Retirement, then any and all Options held by the Participant (or any
permitted transferee) as of the date the Participant ceases to be an
Employee ("Termination Date") shall survive the termination and shall
be exercisable for a period of the lesser of (i) the remainder of the
term of the Option or (ii) 180 days following the Termination Date.
(b) If a Participant ceases to be an Employee by reason
of the Participant's death, Disability or Normal Retirement, then any
and all Options held by the Participant (or any permitted transferee)
as of the Termination Date shall survive the termination and shall be
exercisable for the lesser of (i) remainder of the term of the Options
or (ii) three years after the Termination Date.
(c) Notwithstanding the foregoing, the Committee may, in
its sole discretion, determine that any Participant who is on leave of
absence for any reason will be considered to still be an Employee for
purposes of this Section 9.1.
Any portion of an Option not exercised upon the expiration of the
applicable periods specified above shall be null and void upon the expiration
of such period.
9.2 Death or Disability. Upon the death or Disability of a
Holder, any and all Options held by the Holder that have not been exercised as
of the date of the Holder's death or Disability may be exercised by, in the
case of the Holder's Disability, the Holder, his guardian or his legal
representative or, in the case of the Holder's death, by the Holder's legal
representatives, heirs, legatees, or distributees, in each case for
-16-
<PAGE> 105
the periods prescribed in Subsection 9.1. "Disability" shall mean (i) with
respect to a Participant, as determined by the Board of Directors in the sole
discretion exercised in good faith of the Board of Directors, a physical or
mental impairment of sufficient severity that (a) either the Participant is
unable to continue performing the duties he performed before such impairment or
the Participant's condition entitles him or her to disability benefits under
any insurance or employee benefit plan of the Corporation or its Subsidiaries
or any other customary general disability policy, and (b) that impairment or
condition is cited by the Corporation as the reason for termination of the
Non-Employee Director's participation as a member of the Board of Directors and
(ii) with respect to a Holder that is a permitted transferee under Subsection
9.3, the appointment of a legal guardian or representative of such Holder.
9.3 Transferability of Options.
(a) Permitted Transferees. The Committee may, in its
discretion, permit a Holder to transfer all or any portion of an
Option, or authorize all or a portion of any Option to be granted to a
Participant to be on terms which permit transfer by such Holder, to
(i) the spouse, children or grandchildren of the Holder ("Immediate
Family Members"), (ii) a trust or trusts for the exclusive benefit of
such Immediate Family Members, or (iii) a partnership in which such
Immediate Family Members are the only partners (collectively,
"Permitted Transferees"); provided that (x) there may be no
consideration for any such transfer and (y) subsequent transfers of
Options transferred as provided above shall be prohibited except
subsequent transfers back to the original Holder of the Option and
transfers to other Permitted Transferees of the original Holder.
Award Agreements evidencing Options with respect to which such
transferability is authorized at the time of grant must be approved by
the Committee, and must expressly provide for transferability in a
manner consistent with this Subsection 9.3(a).
(b) Qualified Domestic Relations Orders. Options may be
transferred pursuant to qualified domestic relations orders entered or
approved by a court of competent jurisdiction upon delivery to the
Corporation of written notice of such transfer and a certified copy of
such order.
(c) Other Transfers. Except as expressly permitted by
subsections 9.3(a) and 9.3(b), Options requiring exercise shall not be
transferable other than by will or the laws of descent and
distribution.
(d) Effect of Transfer. Following the transfer of any
Option as contemplated by Subsections 9.3(a), 9.3(b) and 9.3(c), (i)
such Option shall continue to be subject to the same terms and
conditions as were applicable immediately prior to transfer, provided
that the term "Holder" shall be deemed to refer to the Permitted
Transferee, the recipient under a qualified domestic relations order,
or the estate or heirs of a deceased Holder, as applicable, to the
extent appropriate to enable the Holder to exercise the transferred
Option in accordance with the terms of this Plan and applicable law
and (ii) the provisions of Subsection 9.1 hereof shall continue to be
applied with respect to the original
-17-
<PAGE> 106
Holder and, following the occurrence of any such events described
therein the Options shall be exercisable by the Permitted Transferee,
the recipient under a qualified domestic relations order, or the
estate or heirs of a deceased Holder, as applicable, only to the
extent and for the periods specified in Subsections 9.1 and 9.2.
(e) Procedures and Restrictions. Any Holder desiring to
transfer an Option as permitted under Subsections 9.3(a) or 9.3(b)
shall make application therefor in the manner and time specified by
the Committee and shall comply with such other requirements as the
Committee may require to assure compliance with all applicable
securities laws. The Committee shall not give permission for such a
transfer if (i) it would give rise to short-swing liability under
Section 16(b) of the Exchange Act, or (ii) it may not be made in
compliance with all applicable federal, state and foreign securities
laws.
(f) Registration. To the extent the issuance to any
Permitted Transferee of any shares of Stock issuable pursuant to
Options transferred as permitted in this Subsection 9.3 is not
registered pursuant to the effective registration statement of the
Corporation generally covering the shares to be issued pursuant to
this Plan to initial Holders of Options, the Corporation shall not
have any obligation to register the issuance of any such shares of
stock to any such transferee.
(g) Effect on Stock Appreciation Rights. If at the time
any Option is transferred as permitted under this Subsection 9.3 a
corresponding Stock Appreciation Right shall have been granted with
respect to such Option pursuant to Subsection 7.1(a) of this Plan,
then the transfer of such Option shall also constitute a transfer of
the corresponding Stock Appreciation Right, and Stock Appreciation
Rights shall not be transferable other than as part of a transfer of
the Option to which it relates as provided in this Subsection 9.3.
9.4 Delivery of Certificates of Stock. Subject to Subsection 9.5,
the Corporation shall promptly issue and deliver a certificate representing the
number of shares of stock as to which an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested. The value of
the shares of stock or cash deliverable upon the exercise of an Option or Stock
Appreciation Right under this Plan shall not bear any interest owing to the
passage of time, except as may be otherwise provided in an Award Agreement.
9.5 Conditions to Delivery of Stock. Nothing herein or in any
Option granted hereunder or any Award Agreement shall require the Corporation
to issue any shares with respect to any Option if that issuance would, in the
opinion of counsel for the Corporation, constitute a violation of the
Securities Act or any similar or superseding statute or statutes, any other
applicable statute or regulation, or the rules of any applicable securities
exchange or securities association, as then in effect. At the time of any
exercise of an Option the Corporation may, as a condition precedent to the
exercise of such Option, require from the Holder of the Option (or in the event
of his
-18-
<PAGE> 107
death, his legal representatives, heirs, legatees, or distributees) such
written representations, if any, concerning the Holder's intentions with regard
to the retention or disposition of the shares of Stock being acquired pursuant
to the Option and such written covenants and agreements, if any, as to the
manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by that Holder (or
in the event of the Holder's death, his legal representatives, heirs, legatees,
or distributees) will not involve a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable state or
federal statute or regulation, or any rule of any applicable securities
exchange or securities association, as then in effect.
9.6 Stockholder Approval. Options shall not be granted under this
Plan prior to the date the stockholders of the Corporation shall have approved
this Plan. This Plan shall become null and void as of December 31, 1997, if
such stockholder approval is not obtained on or before such date.
9.7 Rights as a Stockholder. A Holder shall have no right as a
stockholder with respect to any shares of Stock covered by an Option until a
certificate representing those shares is issued in such Holder's name. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash or other property) or distributions or other rights for which the record
date is before the date that certificate is issued, except as contemplated by
Sections 7 and 8 hereof.
9.8 Furnish Information. Each Holder shall furnish to the
Corporation all information requested by the Corporation to enable it to comply
with any reporting or other requirement imposed upon the Corporation by or
under any applicable statute or regulation.
9.9 Obligation to Exercise. The granting of an Option hereunder
shall impose no obligation upon a Holder to exercise the same or any part
thereof.
9.10 Consideration. No Option or Stock Appreciation Right shall be
exercisable unless and until the Holder thereof shall have paid cash or
property to the Corporation that the Committee believes is equal to or greater
in value than the par value of the Stock subject to such Option.
9.11 Securities Act Legend. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions, endorsed thereon and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD,
PLEDGED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF
PROVIDES EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION
OF THE ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER) THAT SUCH OFFER, SALE, PLEDGE,
-19-
<PAGE> 108
TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE FEDERAL OR
STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
SECTION 10. EFFECTIVENESS, DURATION AND AMENDMENT OF PLAN
10.1 Effectiveness; Duration. This Plan shall become effective
upon the Effective Date, and no Options may be granted hereunder after the date
that is ten years after the Effective Date. This Plan shall terminate upon the
later of (i) the complete exercise or lapse of the last outstanding Option or
(ii) the last date upon which Options may be granted hereunder.
10.2 Amendment. The Committee may, insofar as permitted by law,
with respect to any shares which, at the time, are not subject to outstanding
Options, suspend or discontinue this Plan, provided that no suspension or
discontinuation of this Plan shall adversely affect the rights of any Holder of
any outstanding Option at the time of such suspension or discontinuation or any
Participant who has an election in effect pursuant to Subsection 4.2, in each
case without such Holder's or Participant's consent, as applicable.
Furthermore, the Committee may revise or amend this Plan in any respect without
approval of the outstanding Voting Securities of the Company except to the
extent any such approval shall be required under any applicable law or the
rules of any securities exchange on which the Stock is traded as in effect at
the time of such amendment; provided, however, that (i) the Committee may not
amend or otherwise revise the terms of this Plan in any manner that would
adversely effect the rights of any Holder of any Option outstanding or any
Participant who has an election pursuant to Subsection 4.2 in effect at the
time of any such amendment or revision without such Holder's or Participant's
consent, as applicable, and (ii) the Committee will not amend this Plan to
increase materially the aggregate number of shares of stock that may be issued
under this Plan (except for adjustments pursuant to Section 9 hereof) without
the affirmative vote of a majority of the votes cast on a proposal for such
amendment presented at a duly held meeting of stockholders of the Company at
which a quorum is, either in person or by proxy, present.
SECTION 11. GENERAL
11.1 Application of Funds. The proceeds received by the
Corporation from the sale of shares pursuant to Options may be used for any
general corporate purpose.
11.2 Right of the Corporation to Terminate Status as Employee.
Nothing contained in this Plan, or in any Award Agreement, shall confer upon
any Holder the right to continue to serve as an Employee or interfere in any
way with the rights of the Corporation or the Board of Directors to terminate
the Holder's participation as an Employee with or without cause.
11.3 No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Committee shall be
liable for any act,
-20-
<PAGE> 109
omission or determination taken or made in good faith with respect to this Plan
or any Option granted under it; and members of the Board of Directors and the
Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.
11.4 Other Benefits. Participation in this Plan shall not preclude
a Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any benefit, insurance, pension, profit
sharing, retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Non-Employee Directors, except as such participation therein may
be limited by the terms of any such other plan. Neither the adoption of this
Plan by the Compensation Committee nor the submission of this Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations on the power of the Compensation Committee or the Board of
Directors to adopt such other incentive arrangements as it may deem desirable,
including without limitation the granting of stock options and the awarding of
stock and cash otherwise than under this Plan and such arrangements may be
either generally applicable or applicable only in specific cases.
11.5 Exclusion from Pension and Profit-Sharing Compensation. By
electing to participate in this Plan as provided in Subsection 4.2, each
Participant shall be deemed to have agreed that any compensation paid or deemed
paid by the Corporation or any of its Subsidiaries to such Participant on
account of the Options (and any corresponding SARs) granted hereunder in
amounts in excess of the amount of Annual Bonus deferred hereunder is special
incentive compensation that will not be taken into account in any manner as
salary, compensation, or bonus in determining the amount of any payment under
any pension, retirement, or other employee benefit plan of the Corporation or
any Subsidiary unless any pension, retirement, or other employee benefit plan
of the Corporation or any Subsidiary expressly provides that such amount shall
be so considered for purposes of determining the amount of any payment under
any such plan. In addition, each beneficiary of a deceased Participant shall
be deemed to have agreed that such excess compensation will not affect the
amount of any life insurance coverage, if any, provided by the Corporation or
any of its Subsidiaries on the life of a Participant that is payable to the
beneficiary under any life insurance plan covering employees of the Corporation
or any of its Subsidiaries.
11.6 Execution of Receipts and Releases. Any payment of cash or
any issuance or transfer of shares of stock to a Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the
provisions hereof, shall, to the extent thereof, be in full satisfaction of all
claims of such persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent
-21-
<PAGE> 110
to such payment, to execute a release and receipt therefor in such form as it
shall determine.
11.7 Unfunded Plan. Insofar as it provides for awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Corporation shall not be required to segregate any assets
that may at any time be represented by cash, Stock, or rights thereto, nor
shall the Plan be construed as providing for such segregation, nor shall the
Corporation nor the Board of Directors nor the Committee be deemed to be a
trustee of any cash, Stock, or rights thereto to be granted under the Plan.
Any liability of the Corporation to any Holder with respect to a grant of cash,
Stock, or rights thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan and any Award
Agreement; no such obligation of the Corporation shall be deemed to be secured
by any pledge or other encumbrance on any property of the Corporation. Neither
the Corporation nor the Board of Directors nor the Committee shall be required
to give any security or bond for the performance of any obligation that may be
created by the Plan.
11.8 No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation
and neither shall have any liability to any Holder as a result thereof.
11.9 Payment of Expenses. All expenses incident to the
administration, termination, or protection of this Plan, including, but not
limited to, legal and accounting fees, shall be paid by the Corporation or its
Subsidiaries.
11.10 Corporation Records. Records of the Corporation or its
Subsidiaries regarding a Participant's period of service as an Employee,
termination of service as an Employee and the reason therefor, and other
matters shall be conclusive for all purposes hereunder, unless determined by
the Committee to be incorrect.
11.11 Information. The Corporation shall, upon request or as may be
specifically required hereunder, furnish or cause to be furnished all of the
information or documentation which is necessary or required by the Committee to
perform its duties and functions under this Plan.
11.12 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to a Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
11.13 Corporation Action. Any action required of the Corporation
shall be by resolution of the Board of Directors, the Compensation Committee,
or by a person authorized to act by resolution of the Board of Directors.
11.14 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions
-22-
<PAGE> 111
hereof, but such provision shall be fully severable and this Plan shall be
construed and enforced as if the illegal or invalid provision had never been
included herein.
11.15 Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or sent by
mail. Any notice required or permitted to be delivered hereunder shall be
deemed to be delivered on the date on which it is actually received, addressed
to the applicable party as specified in the applicable Award Agreement. The
Corporation or a Holder may change, at any time and from time to time, by
written notice to the other, the address which it or he had previously
specified for receiving notices. Until changed in accordance herewith, the
Corporation and each Holder shall specify as its and his address for receiving
notices the address set forth in the Award Agreement pertaining to the shares
to which such notice relates. Any person entitled to notice hereunder may
waive such notice.
11.16 Successors. This Plan shall be binding upon each Holder, his
legal representatives, heirs, legatees, and distributees, upon the Corporation,
its successors and assigns and upon the Committee and its successors.
11.17 Headings. The titles and headings of Sections and Subsections
are included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
11.18 Governing Law. All questions arising with respect to the
provisions of this Plan shall be determined by application of the laws of the
State of Delaware, without giving effect to any conflict of law provisions
thereof, except to the extent Delaware law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent Delaware corporate law conflicts with
the contract law of such state, in which event Delaware corporate law, without
giving effect to any conflict of law provisions thereof, shall govern. The
obligation of the Corporation to sell and deliver Stock hereunder is subject to
applicable federal and state laws and to the approval of any governmental
authority required in connection with the authorization, issuance, sale, or
delivery of such Stock.
11.19 Availability of Exempt Transactions. Notwithstanding the
provisions of this Plan, nothing contained in this Plan shall prohibit any
transactions permitted by Rule 16a-2(d) promulgated under the Exchange Act to
the extent such transactions are approved by the Committee and are not in
violation of, and do not otherwise cause this Plan not to be in compliance
with, Rule 16b-3.
11.20 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.
-23-
<PAGE> 112
This Plan has been approved by the Compensation Committee of the
Company as of March 31, 1997, and was approved by the stockholders of the
Company as of __________, 1997.
ATTEST: __________________________________
-24-
<PAGE> 113
PROXY PROXY
CHASE BRASS INDUSTRIES, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Martin V. Alonzo and Thomas F. McWilliams, or
any of them, lawful attorneys and proxies of the undersigned with full power of
substitution, for and in the name, place and stead of the undersigned to attend
the Annual Meeting of Stockholders of Chase Brass Industries, Inc. (the
"Company") to be held at Chase Manhattan Bank, 270 Park Avenue, 11th Floor,
Room G, New York, New York, on Wednesday, May 14, 1997, at 10:30 a.m., local
time, and any adjournment(s) or postponement(s) thereof, with all powers the
undersigned would possess if personally present and to vote the number of votes
the undersigned would be entitled to vote if personally present.
(to be signed on the other side)
<PAGE> 114
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PLEASE MARK [X]
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE "FOR" PROPOSALS 1 THROUGH 6.
PROPOSAL 1 - THE ELECTION OF DIRECTORS: FOR all nominees WITHHOLD
listed (except as AUTHORITY
Martin V. Alonzo marked to the to vote for all
Raymond E. Cartledge contrary) nominees listed
Charles E. Corpening
Donald J. Donahue [ ] [ ]
John R. Kennedy
Thomas F. McWilliams
William R. Toller
Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name here:
- -----------------------------------------------------------------------
FOR AGAINST ABSTAIN
PROPOSAL 2 - AMENDMENT OF THE RESTATED CER- [ ] [ ] [ ]
TIFICATE OF INCORPORATION TO
CHANGE THE COMPANY'S NAME
TO "CHASE INDUSTRIES INC."
PROPOSAL 3 - AMENDMENT TO THE 1994 LONG- [ ] [ ] [ ]
TERM INCENTIVE PLAN.
PROPOSAL 4 - ADOPTION OF THE 1997 NON- [ ] [ ] [ ]
EMPLOYEE DIRECTOR STOCK OPTION
PLAN.
PROPOSAL 5 - ADOPTION OF THE 1997 EXECUTIVE [ ] [ ] [ ]
DEFERRED COMPENSATION STOCK
OPTION PLAN
PROPOSAL 6 - RATIFICATION OF THE APPOINTMENT [ ] [ ] [ ]
OF COOPERS & LYBRAND L.L.P. AS
THE INDEPENDENT AUDITORS OF THE
COMPANY.
In accordance with their discretion, said attorneys and proxies are authorized
to vote upon such other matters or proposals and hereon at due time of
solicitation of this proxy which may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DESCRIBED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3, 4, 5 AND 6.
The undersigned hereby revokes any proxies heretofore given to vote upon or act
with respect to such shares and hereby ratifies and confirms all that said
attorneys, proxies, the substitutes or any of them may lawfully do by virtue
hereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. THANK YOU.
Signature(s) Date
----------------------------------------------------------------- -------------------------
NOTE: Please sign exactly as your name appears hereon. When shares are held by joint tenants, both should sign.
When signing as attorney, executor, administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in partnership name by authorized person.
- --------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
