THE STEPHAN CO.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Friday, August 29, 1997
To the Stockholders:
The Annual Meeting of the Stockholders of The Stephan Co.
(the "Company") will be held on Friday, August 29, 1997 at 10:00 AM,
local time, at The Doubletree Guest Suites, 555 Northwest Sixty-Second
Street, Fort Lauderdale, Florida, 33309 for the following purposes:
1. To elect five directors to hold office until the Annual
Meeting of Stockholders in 1998 until their respective successors
have been duly elected and qualified; and
2. To approve the Company's 1990 Key Employee Stock Incentive
Plan, as amended, including an amendment to increase the number of
shares available for grant thereunder from 470,000 to 870,000; and
3. To transact such other business as may properly come before
the meeting or any adjournment(s) thereof.
The Board of Directors has fixed the close of business on ________,
1997 as the record date for the determination of stockholders entitled
to notice of, and to vote at, the Company's 1997 Annual Meeting of
Stockholders (the "Meeting"). Only stockholders of record at the close
of business on this date will be entitled to notice of, and to vote
at, the Meeting or any adjournment(s) thereof.
By Order of the Board of Directors
PETER FEROLA
Secretary
______ __ , 1997
YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND
RETURN IT PROMPTLY IN THE POSTAGE PREPAID ENVELOPE WHICH HAS BEEN
PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
THE PROXY MAY BE REVOKED BY YOU AT ANY TIME PRIOR TO EXERCISE, AND
IF YOU ARE PRESENT AT THE MEETING YOU MAY, IF YOU WISH, REVOKE YOUR
PROXY AT THAT TIME AND EXERCISE YOUR RIGHT TO VOTE YOUR SHARES
PERSONALLY.
PROXY STATEMENT
THE STEPHAN CO.
Annual Meeting of Stockholders
To Be Held on August 29, 1997
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of The Stephan Co. (the "Company"),
a Florida corporation, for use at the 1997 Annual Meeting of
Stockholders to be held on August 29, 1997, and at any adjournment(s)
thereof (the "Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Meeting is to be held at
The Doubletree Guest Suites, located at 555 Northwest Sixty-Second
Street, Fort Lauderdale, Florida, 33309, at 10:00 A.M., local time.
The principal executive offices of the Company are located at 1850 West
McNab Road, Fort Lauderdale, Florida (telephone no. 954-971-0600). The
enclosed proxy and this proxy statement are being first sent to
stockholders of the Company on or about July , 1997.
Solicitation and Revocation
Proxies in the form enclosed are solicited by, or on behalf of, the
Company's Board of Directors. The persons named in the proxy have been
designated as proxies by the Board of Directors. If a quorum,
consisting of the presence (in person or by proxy) of holders of a
majority of the outstanding shares of common stock, $.01 par value, of
the Company (the "Common Stock"), exists at the Meeting, (i) the
directors shall be elected by the affirmative vote of a plurality of
the shares of Common Stock cast at the Meeting; (ii) approval of the
Company's 1990 Key Employee Stock Incentive Plan, as amended, including
the amendment described herein to increase the number of shares of
Common Stock reserved for grant pursuant to awards which may be granted
thereunder, shall require that the affirmative votes cast favoring such
proposal exceed the votes cast opposing such proposal at the Meeting;
and (iii) approval of any other matters which may properly come before
the Meeting shall, subject to applicable law, require that the
affirmative votes favoring such matter exceed the votes cast opposing
such matter at the Meeting. Abstentions and shares of record held by a
broker or nominee ("Broker Shares") that are voted on any proposal will
be included in determining the existence of a quorum. Broker Shares
that are not voted on any matter are treated as shares as to which
voting power has been withheld by the beneficial owner of such shares
and, therefore, as shares not entitled to vote on the proposal, and
will not be included in determining the existence of a quorum.
Abstentions and non-voted Broker Shares will, therefore, not have an
effect on the outcome of the election of the five nominees for
directors or any other proposal to come before the Meeting. A
"withheld" vote is the equivalent of an abstention.
Shares represented by properly executed proxies received by the
Company will be voted at the Meeting in the manner specified therein or,
if no specification is made, will be voted (i) "FOR" the election of all
five of the nominees for directors named herein; and (ii) "FOR" the
approval of the 1990 Key Employee Stock Incentive Plan, as amended. In
the event that any other matters are properly presented at the Meeting
for action, the persons named in the enclosed proxy will vote the proxies
(which confer authority upon them to vote on any such matters) in
accordance with their best judgment. Any proxy given pursuant to this
solicitation may be revoked by the stockholder at any time before it
is exercised by written notification delivered to the Secretary of the
Company, by voting in person at the Meeting, or by executing and
delivering another proxy bearing a later date. Attendance by a
stockholder at the Meeting does not alone serve to revoke his or her
proxy.
The solicitation of proxies will be made primarily by mail but, in
addition, may be made by directors, officers and employees of the
Company personally or by telephone or telegraph, without extra
compensation. Brokers, nominees and fiduciaries will be reimbursed
for their out-of-pocket and clerical expenses in transmitting proxies
and related material to beneficial owners. The costs of soliciting
proxies will be borne by the Company. It is estimated that said costs
will be nominal.
Annual Report
The Company's Annual Report to Stockholders for the fiscal year
ended December 31, 1996, which contains audited financial statements,
is being mailed with this Proxy Statement to all persons who were
stockholders of record as of the close of business on _____ __, 1997.
Additional copies of the Annual Report will be provided free of charge
upon written request to the Company, 1850 West McNab Road,Fort
Lauderdale, Florida 33309, Attn.: Secretary.
Record Date; Voting
The Company's Board of Directors has fixed the close of business on
____, 1997 as the record date for the determination of stockholders of
the Company who are entitled to receive notice of, and vote at, the
Meeting. At the close of business on that date, an aggregate of
_,___,___ shares of Common Stock were issued and outstanding, each of
which is entitled to one vote on each matter to be voted upon at the
Meeting. The Company's stockholders do not have cumulative voting
rights. The Company has no other class of voting securities entitled
to vote at the Meeting.
SECURITY OWNERSHIP
Security Ownership by Certain Beneficial Owner
The following table sets forth, as of the close of business on December 31,
1996, information as to the stockholder (other than directors and executive
officers of the Company) which is known by the Company to beneficially own
more than 5% of its outstanding Common Stock (based solely upon a filing
made by said holder with the Securities and Exchange Commission on February
14, 1997 on Schedule 13G pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"):
Number of Shares
Name and Address Beneficially Percent
of Beneficial Owner Owned (1) of Class
____________________ _______________ ___________
FMR Corporation (2) 412,200 10%
82 Devonshire St.
Boston, Mass. 02109-7614
(1) Beneficial ownership, as reported in the above table, has been
determined in accordance with Rule 13d-3 under the Exchange Act. Unless
otherwise indicated, beneficial ownership includes both sole voting and
sole dispositive power.
(2) Fidelity Management & Research Company ("Fidelity"), a wholly-owned
subsidiary of FMR Corp., is the beneficial owner of the shares reflected
above as a result of acting as a registered investment adviser to various
registered investment companies. One such company, Fidelity Low-Priced Stock
Fund, owns the shares reflected above. FMR Corp., through its control of
Fidelity, has sole voting power with respect to zero shares and sole power to
dispose of all the above indicated shares.
Ownership by Management
The following table sets forth, as of April 29, 1997, information
concerning beneficial ownership of Common Stock by each director and nominee
for election as a director of the Company, the Named Executives, as defined
below, and all directors and executive officers of the Company as a group
(based solely upon information furnished by such persons):
Number of Shares
Beneficially Percent
Name of Beneficial Owner Owned (1) of Class
_________________________ ________________ ___________
Thomas M. D'Ambrosio. . . . . . 225,714(2) 5.0%
John DePinto. . . . . . . . . . 130,890(2) 3.0%
Frank F. Ferola . . . . . . . . 569,435(2)(4)(5) 14.0%
Curtis Carlson. . . . . . . . 9,088(2) (3)
Leonard Genovese. . . . . . . . 1,000 (3)
Samuel Lazar. . . . . . . . . . (3) (3)
Charles Hall. . . . . . . . . . (3) (3)
All executive officers and directors
as a group (10 persons). . . . 1,060,877(2) 25%
(1) Beneficial ownership, as reported in the above table, has been
determined in accordance with Rule 13d-3 under the Exchange Act.
Unless otherwise indicated, beneficial ownership includes both sole
voting and sole dispositive power.
(2) Includes the following shares that may be acquired upon the
exercise of options by the specified person(s) within 60 days of
April 29, 1997: Mr. D'Ambrosio - 9,000; Mr. DePinto - 17,686; Mr.
Frank Ferola - 30,000; Mr. Carlson - 5,062; and all executive
officers and directors as a group 186,498.
(3) Represents less than 1%.
(4) Does not include 79,195 shares covered by options granted to Mr.
Ferola, whose exercise is contingent on certain increases in the
Company's Common Stock price, as more fully set forth in the
"Executive Compensation" section hereof.
(5) Includes 5,500 shares owned by Mr. Ferola's personal charitable
foundation, of which Mr. Frank Ferola is a co- trustee.
PROPOSAL I: ELECTION OF DIRECTORS
The entire Board of Directors, presently consisting of five members, is
to be elected at the Meeting. The Company's By-Laws provide that the number
of directors shall be set from time to time by resolution of the Board of
Directors and always have a minimum of one director. The Company's Board of
Directors had six members in 1996 until the death of one of its members in
January 1997. Thereafter, the Board of Directors, by resolution, set the
size of the Board at five members. The five nominees listed below have all
consented to being named in this Proxy Statement and to serving as directors
if elected. All of the nominees except one are current Board members. In
the unexpected event that any of such nominees should become unable to or
for good cause will not serve, it is intended that proxies will be voted for
substitute nominee(s) designated by the current Board of Directors. The
Board has no reason to believe that any of the named nominees will be unable
to stand for election.
Proxies in the accompanying form will be voted at the Meeting in favor
of the election of each of the five nominees listed on the accompanying form
of proxy, unless authority to do so is withheld as to an individual nominee
or nominees or all nominees as a group. Proxies cannot be voted for a
greater number of persons than the number of nominees named. Directors will
be elected by a plurality of the affirmative votes cast by the holders of
shares of Common Stock at the Meeting (assuming a quorum exists).
Set forth below is certain information with respect to each nominee for
election as a director of the Company at the Meeting (based solely on
information furnished by such persons):
Age Year of First Principal Occupations
(as of Election as During Past Five Years;
Name 4-1-97) a Director Other Directorships
_____ _______ ___________ _______________________
Frank F. Ferola 54 1980 For more than the past
five years, Chairman of the
Board, President and
Chief Executive Officer
of the Company.
Thomas M. D'Ambrosio(1) 68 1980 For more than the past
five years, Vice President
and, since March 1989,
Treasurer of the Company;
practicing attorney.
Leonard Genovese 62 (2) For more than the past
five years, Chairman
& Chief Executive Officer
of Genovese Drug, Inc., an
American Stock Exchange listed
company. Mr. Genovese
is a director of three other
publicly listed companies:
T.R. Financial,
Aid Auto Stores, and
Kellwood Co.
John DePinto (3)(4) 79 1980 Retired executive.
Curtis Carlson (3)(4) 44 1996 For more than the past five
years, partner in the law
firm of Carlson & Bales, PA,
a Miami- based law firm. In
fiscal year 1996, the Company
paid to Carlson & Bales,
P.A., a law firm of which
Mr. Carlson is a partner,
approximately $158,000 for
legal services rendered by
such firm to the Company.
________________
(1) Mr. D'Ambrosio intends to devote approximately 20% of his
business time to the affairs of the Company.
(2) Mr. Genovese is being nominated for the first time as a
director to fill the vacancy caused by the resignation of
W. Gregg Baldwin in 1997. It is expected that Mr. Genovese
will be selected by the Company's full Board to serve on the
Stock Option and Compensation and Audit Committees.
(3) Member of the Audit Committee.
(4) Member of the Stock Option and Compensation Committee.
The Board of Directors unanimously recommends a vote "FOR"
the election of the five nominees named above as directors of the Company.
Executive Officers
The executive officers of the Company consist of Mr. Frank Ferola, as
President, Chairman of the Board and Chief Executive Officer; Thomas M.
D'Ambrosio, Vice President and Treasurer; David A. Spiegel, Chief
Financial Officer; Peter Ferola, Vice President/Administration and Secretary;
Lucille Murphy, President/Old 97 Company, a wholly-owned subsidiary of the
Company; Franc Ferola, Vice President/Operations; Charles V. Hall,
President/Trevor Sorbie of America, Inc., a wholly-owned subsidiary of the
Company; and Samuel Lazar, President/Scientific Research Products, Inc.
of Delaware, a wholly-owned subsidiary of the Company.
The following sets forth certain information with respect to the
executive officers of the Company who are not directors or nominees for
election as a director (based solely on information furnished by such
persons):
Mr. Spiegel, 48, was appointed as Chief Financial Officer in January
1994. For more than the past four years prior to 1994, Mr. Spiegel had
been a certified public accountant, engaged in private practice. For more
than the five years prior to 1994, Mr. Spiegel was the independent public
accountant for the Company.
Mr. Peter Ferola, 28, was appointed as Vice President/Administration
in January 1996. For more than the past five years, Mr. Ferola has been
employed by the Company in various capacities. In February 1997, Mr. Ferola
was selected as Secretary of the Company to fill the vacancy caused by the
death of Mr. Stephen Letizia. Mr. Ferola had previously been the Company's
Assistant Secretary.
Ms. Lucille Murphy, 49, was appointed as President of Old 97 Company in
January 1996. For more than the past five years Ms. Murphy has been employed
by Old 97 Company, a wholly-owned subsidiary of the Company.
Mr. Samuel Lazar, 51, was appointed as President of Scientific Research
Products, Inc. of Delaware, a wholly-owned subsidiary of the Company, in
April 1994, when such company was acquired by the Company, a position which
he held for over five years prior to the acquisition.
Mr. Franc Ferola, 31, was appointed as Vice President/Operations in
January 1996. For more than the past five years, Mr. Ferola has been
employed by the Company in various capacities.
Mr. Charles Hall, 49, was appointed as President of Trevor Sorbie of
America, Inc., a wholly-owned subsidiary of the Company, in June 1996, when
such company was acquired by the Company, a position which he held for two
years prior to the acquisition. Prior to 1994, Mr. Hall served as Vice
President - Sales for Fort Pitt Acquisition Co., a professional hair care
company.
Peter Ferola and Franc Ferola are brothers and sons of Frank Ferola.
Board of Directors; Committees of the Board
The Board of Directors met five times during fiscal year 1996. During
fiscal year 1996, no director attended fewer than 75% of the total number of
meetings of the Board and of the committees of the Board on which he served.
The Board has established two standing committees, which consist of an Audit
Committee, and a Stock Option and Compensation Committee. The current
functions of such committees are as follows:
The Audit Committee, which held two meetings during fiscal 1996, reviews
the internal and external audit functions of the Company and makes
recommendations to the Board of Directors with respect thereto. It also has
primary responsibility for the formulation and development of the auditing
policies and procedures of the Company, and for making recommendations to the
Board of Directors with respect to the selection of the Company's independent
auditing firm. The Chairman of this Committee is Curtis Carlson.
The Stock Option and Compensation Committee, which held two meetings
during fiscal 1996, has primary responsibility for the administration of the
Company's 1990 Key Employee Stock Incentive Plan, including primary
responsibility for the granting of options thereunder. The Committee is
also responsible for establishing the overall philosophy of the Company's
executive compensation program and overseeing the executive compensation
plan developed to execute the Company's compensation strategy. The Chairman
of this Committee is Curtis Carlson.
Compensation Committee Interlocks and Insider Participation
The Stock Option and Compensation Committee consists of Curtis Carlson
and John DePinto, neither of whom are officers or employees of the Company
or have any direct or indirect material interest in or a relationship with
the Company, other than their stockholdings as discussed above and as
related to their position as directors. None of the executive officers of
the Company has served on the board of directors or on the compensation
committee (or other board committee performing equivalent functions) of any
other entity, any of whose executive officers served on the Board of
Directors of the Company or on the Stock Option and Compensation Committee.
Compensation of Directors
All directors of the Company are compensated for their services by
payment of $300 for each Board Meeting attended.
During fiscal 1996, options to purchase an aggregate of 15,186 shares
of Common Stock, at an exercise price of $15.75 per share, were granted by
the Company to directors of the Company who were not employees or regularly
retained consultants of the Company (each, an "Outside Director") pursuant
to the Company's 1990 Outside Directors' Stock Option Plan.
Under such Plan, each Outside Director is automatically granted, upon
such person's election or re-election to serve as a director of the Company,
an option exercisable over five years, to purchase Common Stock. Upon
initial election to the Board of Directors, an Outside Director is granted
an option to purchase 5,062 shares of Common Stock. An option to purchase
5,062 shares of Common Stock is granted to each incumbent Outside Director
during each fiscal year of the Company thereafter on the earlier of
(i) June 30, or (ii) the date on which the stockholders of the Company elect
directors at an Annual Meeting of such stockholders or any adjournment
thereof. The aggregate number of shares of Common Stock reserved for grant
under the Outside Directors' Stock Option Plan (as adjusted for stock splits)
is 202,500, of which options covering 40,434 shares are outstanding.
EXECUTIVE COMPENSATION
The following table sets forth information for the fiscal years
ended December 31, 1996, December 31, 1995 and December 31, 1994, with
respect to compensation earned by the Company's Chief Executive Officer
and the two other executive officers of the Company serving at the end of
fiscal year 1996 who received a total of salary and bonus in excess of
$100,000 during fiscal 1996 (the "Named Executives").
Summary Compensation Table
Long-Term
Annual Compensation Compensation
______________________ ______________
Name and Other Securities
Principal Fiscal Annual Underlying All Other
Position(s) Year Salary Bonus Compensation Options (#) Compensation
__________ ______ _______ _____ ____________ __________ ____________
Frank F. 1996 $173,353 $677,030 $0 70,000(1) $0
Ferola 1995 157,594 335,538 0 -0- 0
President, 1994 143,268 683,839 0 -0- 0
Chairman of
the Board
and Chief
Executive Officer
Charles Hall 1996 $103,517 $0 $0 -0- $0
President, 1995(2) N/A N/A N/A N/A N/A
Trevor Sorbie 1994(2) N/A N/A N/A N/A N/A
of America,
Inc.
Samuel Lazar, 1996 $130,800 $21,976 $0 -0- $0
President, 1995 130,800 22,501 0 -0- 0
Scientific 1994(3) 87,200 N/A N/A N/A N/A
Research
Products, Inc.
Of Delaware
(1) Reflects the grant of options covering 70,000 shares of Common Stock,
whose exercise is contingent on certain increases in the Company's
Common Stock trading price. See - "Employment and Termination
Arrangements."
(2) Mr. Hall began his employment with the Company on June 28, 1996.
(3) Mr. Lazar began his employment with the Company on April 15, 1994.
Stock Option Grants in the Last Fiscal Year
No stock appreciation rights were granted to the Named Executives in
fiscal 1996. The following table sets forth certain information concerning
stock options granted to the Chief Executive Officer in fiscal year 1996,
and the named Executives, other than the Company's Chief Executive Officer
were not granted any stock options in fiscal 1996.
Potential Realizable
Value At Assumed Annual
Number of Percentage of Rates of Stock
Securities Total Options Appreciation for Option
Underlying Granted to Exercise Term (1)
Options Employees in Price Per Expiration _____________________
Name Granted (#) Fiscal Year(%) Share($) Date 5% 10%
____ __________ ______________ ________ __________ ___ ____
Frank 70,000(2) 62% $14.75 April
F. Ferola 2001 $0 $320,602
_______________________
(1) Potential realizable value is based on the assumption that the
Common Stock appreciates at the annual rates shown (compounded annually)
from the date of grant until the expiration of the option term. These
numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect any estimate or
prediction by the Company of future Common Stock price increases.
(2) Reflects the grant of options covering 70,000 shares of Common Stock
whose exercise is contingent on certain increases in the Company's Common
Stock trading price. See - "Employment and Termination Arrangement."
Options Exercised in Last Fiscal Year and Year-End Option Values
The following table sets forth certain information at December 31, 1996,
respecting exercisable and non-exercisable stock options held by the Chief
Executive Officer. The Chief Executive Officer did not exercise any stock
options in fiscal year 1996. The table also includes the value of the
"in-the-money" stock options which reflects the spread between the exercise
price of the existing stock option and the year-end price of the Common
Stock. The other Named Executives do not hold any stock options.
Value of
Number of Unexercised In-
Unexercised Options the-Money Options
Held at December 31, at December 31, 1996(1)
1996(1)
___________________ ________________________
Non- Non-
Name Exercisable Exercisable Exercisable Exercisable
______ ___________ ___________ ___________ _____________
Frank F. Ferola 30,000 70,000(2) $0 $0
__________________
(1) Based on the closing price of the Common Stock on December 31,1996
($ 12.875).
(2) Reflects options covering 70,000 shares of Common Stock whose exercise
is contingent on the future trading prices of the Company's Common Stock.
See - "Employment and Termination Arrangements."
Employment and Termination Arrangements
In May 1992, Mr. Frank Ferola's employment agreement with the Company
was extended for a period of four years until January 1997. Pursuant to such
agreement, as extended, Mr. Ferola received compensation of $118,403 per
annum subject to an annual increase of 10% and a bonus amount equal to not
less than 7% nor more than 10% of the Company's income before income taxes,
as determined by a formula set forth in his employment agreement. Mr. Ferola
had the right to terminate his employment with the Company without penalty
after submission of thirty days' written notice.
In 1996, Mr. Ferola relinquished $335,000 (approximately 50%) of the
1995 annual bonus to which he was otherwise entitled. In consideration
thereof, the Compensation Committee awarded him a five-year option to
purchase 70,000 shares of the Company's Common Stock, whose exercise is
contingent on the Company's Common Stock trading for 20 consecutive business
days at $19.175, a 30% increase over its price on the date of grant ($14.75).
If this condition were met, Mr. Ferola would also receive a cash payment of
$335,000.
In 1997, Mr. Ferola relinquished $100,000 of the 1996 annual bonus to
which he was otherwise entitled. In consideration thereof, the Compensation
Committee awarded him a five-year option to purchase 9,195 shares of the
Company's Common Stock, whose exercise is contingent on the Company's Common
Stock trading for 20 consecutive business days at $14.138, a 30% increase
over its price on the date of grant ($10.875). If this condition were met,
Mr. Ferola would also receive a cash payment of $100,000.
In January 1997, the Company entered into a new employment agreement
with Mr. Ferola, replacing the aforementioned contract. The term of this
new agreement is three years, expiring in January 2000. Under such
agreement, Mr. Ferola is to receive compensation in the amount of $425,000
per annum, subject to an annual increase of 10%, and an annual stock option
grant of 50,000 shares of the Company's Common Stock at an exercise price
equal to the fair market value of the Company's Common Stock on the date
of grant. In addition, Mr. Ferola is entitled to receive an annual
performance bonus based on increases of at least 10% in the Company's
earnings per share, as determined, on a base year, by a formula set forth
in the employment agreement.
In the event of a change in control of the Company, Mr. Ferola is
entitled to receive an amount equal to his base salary for the remaining
term of the contract plus an additional twenty-four months' salary. In
addition, under the terms of the agreement, Mr. Ferola will receive from
the Company, in a lump sum payment, an amount equal to the most recent
annual bonus paid multiplied by the sum of the number of years (including
fractions thereof) remaining in the term of his agreement plus two.
In January 1996, the Company entered into an employment agreement with
Mr. Peter Ferola, effective for three years until January 1999. Pursuant to
such agreement, Peter Ferola is to receive compensation of $77,765 per annum
subject to an annual increase of 10% and an annual stock option grant of
10,000 shares of the Company's Common Stock at an exercise price equal to
the fair market value of the Company's Common Stock on the date of grant.
In addition, Peter Ferola is entitled to receive an annual performance bonus
based on increases of at least 10% in the Company's earnings per share
calculated on a base year, as determined by a formula set forth in his
employment agreement. Peter Ferola did not receive a bonus for fiscal year
1996.
In the event of a change in control of the Company, Peter Ferola is
entitled to receive an amount equal to his base salary for the remaining term
of the contract plus an additional twelve months' salary. In addition, under
the terms of the agreement, Mr. Ferola will receive from the Company, in a
lump sum payment, an amount equal to the most recent annual bonus paid
multiplied by the sum of the number of years (including fractions thereof)
remaining in the term of his agreement plus one.
In January 1996, the Company entered into an employment agreement with
Ms. Lucille Murphy, effective for three years until January 1999. Pursuant
to such agreement, Ms. Murphy is to receive compensation of $72,100 per annum
subject to an annual increase of 10%. Under the terms of the contract, Ms.
Murphy is also entitled to an annual bonus, whose amount shall be determined
each year by the Compensation Committee. For fiscal year 1996, Ms. Murphy
received a bonus of $15,000.
In the event of a change in control of the Company, Ms. Murphy is
entitled to receive an amount equal to her base salary for the remaining
term of the contract plus an additional twelve months' salary. In addition,
under the terms of the agreement, Ms. Murphy will receive from the Company,
in a lump sum payment, an amount equal to the most recent annual bonus paid
multiplied by the sum of the number of years (including fractions thereof)
remaining in the term of her agreement plus one.
In June 1996, the Company entered into an employment agreement with
Mr. Charles V. Hall, effective for five years until June 2001. Pursuant to
such agreement, Mr. Hall receives compensation of $200,000 per annum in year
one and in year two and $250,000 per annum in each of the remaining three
years. Mr. Hall is also entitled to receive a performance bonus based on
pretax earnings of Sorbie Acquisition Company as determined by a formula set
forth in his employment agreement.
In January 1996, the Company entered into an employment agreement with
Mr. Franc Ferola, effective for three years until January 1999. Pursuant to
such agreement, Franc Ferola is to receive compensation of $77,765 per annum
subject to an annual increase of 10% and an annual stock option grant of
10,000 shares of the Company's Common Stock at an exercise price equal to the
fair market value of the Company's Common Stock on the date of grant. In
addition, Franc Ferola is entitled to receive an annual performance bonus
based on increases of at least 10% in the Company's earnings per share, as
determined by a formula set forth in his employment agreement calculated on
a base year. Franc Ferola did not receive a bonus for fiscal year 1996.
In the event of a change in control of the Company, Franc Ferola is
entitled to receive an amount equal to his base salary for the remaining term
of the contract plus an additional twelve months' salary. In addition, under
the terms of the agreement, Mr. Ferola will receive from the Company, in a
lump sum payment, an amount equal to the most recent annual bonus paid
multiplied by the sum of the number of years (including fractions thereof)
remaining in the term of his agreement plus one.
STOCK OPTION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee (the "Committee") of the
Company's Board of Directors is comprised of two individuals, neither of whom
is an officer or employee of the Company. The Committee is responsible for
establishing the overall philosophy of the Company's executive compensation
program developed to execute the Company's compensation strategy.
The Company's Executive Compensation Strategy
The Company's executive compensation program has been designed to
promote stockholder interests and to:
1. Attract, reward and retain key executives who are important to the
Company's long-term viability and success.
2. Provide compensation that is competitive with that of companies of
comparable size and stature.
It is the Company's intention to ensure that all compensation paid to its
executives is tax deductible under Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). Although Section 162(m) of the Code
imposes limits on deductibility for compensation to certain executives
exceeding $1 million per year, the Company does not currently anticipate any
limitations of this deduction of any compensation paid to any executive.
Elements of the Executive Compensation Program
The Company's executive compensation program includes two principal
elements: annual cash compensation and long-term awards.
Annual cash compensation includes both base salaries and bonuses.
Executives' base salaries are evaluated each year based upon an assessment
of competitive market data of comparable companies. Executives are eligible
for adjustments in base salary based upon assessments of individual
performance and changes in principal job duties and responsibilities.
Long-term incentive compensation is granted pursuant to the Company's
1990 Key Employee Stock Incentive Plan ("Incentive Plan"). The Incentive
Plan permits the Company to grant stock options to executives at a price no
less than 100% of the fair market value of the Common Stock on the date of
the grant.
The Committee's Actions in 1996
Each year the Committee reviews and approves annual salaries and
bonuses, grants of long-term incentive awards and the performance targets and
criteria established for the Incentive Plan. In addition, the Committee
reviews the performance of the Company and its divisions and subsidiaries and
exercises the final authority in determining and approving the nature and
amount of payout of executive incentive awards. Compensation paid to
executive officers of the Company, including Chief Executive Officer's
compensation, are paid in accordance of with terms and conditions of any
applicable employment agreements.
In fiscal year 1996, stock options were granted to executive officers of
the Company as follows:
Officer Number of Shares Covered Option Price
_______ _________________________ _____________
Frank Ferola 70,000(1) $14.75
David Spiegel 5,000 15.13
Peter Ferola 10,000 16.50
Lucille Murphy 7,500 15.13
Franc Ferola 10,000 16.50
(1) Reflects the grant of options covering 70,000 shares of Common Stock,
whose exercise is contingent on certain increases in the Company's
Common Stock trading price.
Chief Executive Officer Compensation
In May 1992, the Committee extended Mr. Frank Ferola's employment
agreement with the Company for a period of four years until January 1997.
Pursuant to such agreement, as extended, Mr. Ferola received compensation of
$118,403 per annum subject to an annual increase of 10% and a bonus amount
qual to not less than 7% nor more than 10% of the Company's income before
taxes, as determined by a formula set forth in his employment agreement.
In January 1997, the Company entered into a new employment agreement
with Mr. Frank Ferola, replacing the aforementioned contract. The term of
this new agreement is three years, expiring in January 2000. Under such
agreement, Mr. Ferola is to receive compensation in the amount of $425,000
per annum, subject to an annual increase of 10%, and an annual stock option
grant of 50,000 shares of the Company's Common Stock at an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. In addition, Mr. Ferola is entitled to receive an annual bonus based
on increases in the Company's earnings per share of at least 10%, calculated
on a base year, as determined by a formula set forth in the employment
agreement.
Members of the Stock Option and Compensation Committee:
Curtis Carlson, Chairman
John DePinto
STOCK PERFORMANCE CHART
The chart below compares cumulative stockholder return (assuming
reinvestment of dividends) on the Company's Common Stock, over the five-year
period ending on December 31, 1996, with the cumulative total return of
companies in the Standard & Poor's 500 Stock Index and in the Standard &
Poor's Custom Composite Index.
Dec. Dec. Dec. Dec. Dec. Dec.
1991 1992 1993 1994 1995 1996
The Stephan Co. $100 $165 $203 $128 $157 $130
S&P 500 100 108 118 120 165 203
S&P Custom
Composite 100 104 103 73 84 88
PROPOSAL II: APPROVAL AND ADOPTION
OF THE COMPANY'S 1990 KEY EMPLOYEE STOCK INCENTIVE PLAN,
AS AMENDED
In February 1997, the Company's Board of Directors adopted, subject to
stockholder approval at the Meeting, an amendment to the 1990 Key Employee
Stock Incentive Plan (the "1990 Plan") providing for an increase in the
number of shares of Common Stock reserved for issuance pursuant to awards
granted under the 1990 Plan from 470,000 to 870,000 shares. Additionally,
in order to ensure that all compensation paid to its executives is tax
deductible under Section 162(m) of the Code, the Company is seeking
stockholder approval of the entire 1990 Plan, as such is proposed to be
amended as discussed above.
The Board of Directors believes that the Company will be at a
disadvantage in attracting and retaining qualified and experienced persons
to serve as officers and key employees were it limited in its ability to
grant stock or stock-related incentive awards. Based on certain reviews it
has conducted, the Company believes that the level and amount of awards it
has granted in the past are consistent with those of other companies of the
Company's size and nature of business. However, because there are only
30,805 shares of Common Stock presently remaining available for grant under
the 1990 Plan, the Board of Directors believes that, unless it increases the
number of shares that it has available for grant in the future, it could be
limited in its ability to attract and retain high caliber personnel.
Additionally, the Company believes that it needs the flexibility of having
additional shares of Common Stock reserved under the 1990 Plan for use in
connection with the negotiation by the Company of future acquisitions. Such
additional shares could be granted to key and other employees, at and of the
companies, which the Company may acquire.
In light of the foregoing, the Board of Directors believes that the
proposal to increase the number of shares available for grant under the 1990
Plan is in the best interests of the Company and its stockholders.
The purpose of the 1990 Plan is to offer to the Company's key employees
(including those of its subsidiaries) long-term performance-based stock
and/or other equity interests in the Company, thereby enhancing the Company's
ability to attract, retain and reward such key employees and to increase the
mutuality of interests between those employees and the Company's
stockholders. The Company believes that in connection with any potential
acquisition, the opportunity for key employees of acquired companies to
participate in the 1990 Plan would provide such employees with an incentive
to remain with the Company following the acquisition.
The 1990 Plan presently authorizes the granting of incentive awards for
up to 470,000 shares of Common Stock, subject to adjustments as discussed
below. As April 29, 1997, 30 officers and employees were granted options to
purchase a total of 439,195 shares of Common Stock. No other awards have
been made under the 1990 Plan. Assuming that all outstanding options
(including all unvested and contingent options) are exercised, 30,805
shares of Common Stock would remain available for grant through stock option
grants, restricted stock awards, deferred stock awards, and other stock-based
awards. The proposed amendment to the 1990 Plan would increase the number of
shares available for grant under the 1990 Plan to 870,000 shares.
The following summary of the 1990 Plan does not purport to be complete
and is subject to and qualified in its entirety by reference to the text of
the 1990 Plan, as proposed to be amended, annexed hereto as Exhibit A.
Summary of the Plan
Incentive awards consist of stock options, restricted stock awards,
deferred stock awards, and other stock-based awards as described below.
The shares of Common Stock available for incentive awards will be made
available from either authorized and unissued shares or issued shares to be
purchased or otherwise acquired by the Company. Unless sooner terminated,
the 1990 Plan will expire at the close of business on April 15, 2000.
Officers and key employees of the Company and its subsidiaries (but
excluding members of the Committee and any directors who receive options
under the Directors' Plan) are eligible to receive incentive awards
("Eligible Persons"). Approximately 40 officers and other employees are
currently eligible to participate in the 1990 Plan.
The 1990 Plan is administered by the Committee, which has the authority
to determine the persons to whom awards will be granted, the number of awards
to be granted and the specific term of each grant, subject to the provisions
of the 1990 plan.
Types of Incentive Awards
Incentive and Nonqualified Options. The 1990 Plan provides both for
"incentive stock options" ("Incentive Options") as defined in Section 422 of
the Code and for options not qualifying as Incentive Options ("Nonqualified
Options"), both of which may be granted with other stock-based awards
available under the 1990 Plan. The Committee shall determine the Eligible
Persons to whom Options may be granted.
Pursuant to the 1990 Plan, the Committee shall determine the exercise
price for each share issued in connection with an Incentive Option
(collectively referred to as "Options"), but the exercise price shall in all
cases be not less than 100% of the fair market value of Common Stock on the
date the Option is granted (or in the case of an Incentive Option granted to
an Eligible Employee owning more than 10% of the outstanding Common Stock,
not less than 110% of such fair market value). The exercise price must be
paid in full at the time of exercise, either in cash, or subject to any
limitations as the Committee may impose, in securities of the Company or
through other cashless exercise mechanisms permitted by the Company.
The Committee shall determine when Options may be exercised, which in no
event shall be more than ten years from the date of grant (or in the case of
an Incentive Option granted to an eligible person owning more than 10% of
the outstanding Common Stock, not more than five years), and the manner in
which each Option shall become exercisable. Other than as set forth herein,
the rules relating to the terms of Options apply to both Incentive Options
and Nonqualified Options. Options may not be transferred by the grantee
other than by will or the laws of descent and distribution.
Restricted Stock Awards. The Committee may award shares of restricted
stick ("Restricted Stock"). Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the 1990 Plan. The
Committee shall determine the Eligible Persons to whom and the time or
times at which, grants of Restricted Stock will be made, the number of shares
to be awarded, the price (if any) to be paid by the recipient, the time or
times within which such awards may be subject to forfeiture (the "Restriction
Period"), the vesting schedule and rights to acceleration thereof, and all
other terms and conditions of the awards.
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals or such other factors or criteria
as the Committee may determine.
Restricted Stock awarded under the 1990 Plan may not be sold, exchanged,
assigned, transferred, pledged, encumbered or otherwise disposed of other
than to the Company during the applicable Restriction Period. Except for the
foregoing restrictions, the grantee shall, even during the Restriction
Period, have all of the rights of a stockholder, including the right to
receive all dividends declared on, and the right to vote, such shares.
In order to enforce the foregoing restrictions, the 1990 Plan requires
that all shares of Restricted Stock awarded to the grantee remain in the
physical custody of the Company until the restrictions on such shares have
terminated.
Deferred Stock Awards. The Committee may award shares of deferred stock
("Deferred Stock"). Shares of Deferred Stock may be awarded either alone or
in addition to other awards granted under the 1990 Plan. The Committee shall
determine the Eligible Persons to whom and the time or times at which
Deferred Stock shall be awarded, the number of shares of Deferred Stock to be
awarded to any person, the duration of the period (the "Deferral Period")
during which, and the conditions under which, receipt of the stock will be
deferred, and all other terms and conditions of the awards.
The Committee may condition the grant of Deferred Stock upon the
attainment of specified performance goals or such other factors or criteria
as the Committee may determine.
Deferred Stock awards granted under the 1990 Plan may not be sold,
exchanged, assigned, transferred, pledged, encumbered or otherwise disposed
of other than to the Company during the applicable Deferral Period. The
grantee, as determined by the Committee, may be paid dividends declared
currently or deferred and deemed to be reinvested in additional Deferred
Stock. The grantee may request to defer the receipt of an award for an
additional specified period. The Committee may accelerate vesting of all or
any part of the Deferred Stock award and/or may waive the deferral l
imitations for all or any part of a Deferred Stock award.
If a grantee of an award ceases to be an employee of the Company prior
to the expiration of the Deferral Period applicable to all or any part of the
Deferred Stock awarded to such grantee, then, all shares of Stock theretofore
awarded to the grantee which are still subject to the Deferral Period shall,
upon such termination of employment, vest or be forfeited in accordance with
the terms and conditions established by the Committee at the time of grant.
Other Stock-Based Awards. The Committee may grant performance shares
and shares of stock valued with reference to the performance of the Company
or any subsidiary, either alone, in addition to or in tandem with Stock Options,
Restricted Stock or Deferred Stock (collectively "Stock-Based Awards").
Subject to the terms of the 1990 Plan, the Committee has complete discretion
to determine the terms and conditions applicable to Stock-Based Awards. Such
terms and conditions may require, among other things, continued employment
and/or the attainment of specified performance objectives.
Shares of stock subject to Stock-Based Awards may not be sold, assigned,
transferred, pledged or otherwise encumbered, prior to the date the shares
are issued or, if later, the date on which any applicable restriction or
performance or deferral period lapses.
Other Terms and Conditions
Agreements; Transferability. Options, Restricted Stock, Deferred Stock,
and Stock-Based Awards granted under the 1990 Plan will be evidenced by
agreements consistent with the 1990 Plan in such form as the Committee may
prescribe. Neither the 1990 Plan nor any agreements thereunder confer any
right to continued employment upon any holder of an Option, Restricted Stock,
Deferred Stock, or Stock-Based Award. Further, all agreements will generally
provide that the right to exercise Options or receive Restricted Stock
before the expiration of the Restriction Period or Deferred Stock before the
expiration of the Deferral Period or to receive payment under Stock-Based
Awards, cannot be transferred except by will or the laws of descent and
distribution.
Change of Control Provisions. In the event of a "Change of Control"
(as defined in the 1990 Plan) of the Company, the Committee may at its
discretion do any or all of the following, either at the time an award is
made, or at any time prior to or concurrently with such Change of Control:
(i) allow the exercise in full of all outstanding Options and allow such
Options to remain exercisable in full until their expiration date, and (ii)
allow for the lapse of all restrictions and deferral limitations on Restricted
Stock awards, Deferred Stock awards, and Stock-Based Awards.The Committee may
further change or limit any such awards in any way it deems appropriate and
in the Company's best interest.
Amendments and Termination. The Board may at any time, and from time to
time, amend any of the provisions of the 1990 Plan, and may at any time
suspend or terminate the 1990 Plan. However, no amendment, pursuant to the
terms of the 1990 Plan, shall be effective unless and until it has been
duly approved by the holders of the outstanding shares of Common Stock if
(i) it increases the aggregate number of shares of Common Stock which may be
issued under the 1990 Plan (except as described under the caption "Adjustment"
below), or (ii) the failure to obtain such approval would adversely affect
the compliance of the 1990 Plan with the requirements of any applicable law,
rule or regulation. The Committee may amend the terms of any Option or other
award theretofore granted under the 1990 Plan. However, subject to the
adjustments described below, no such amendment may be made by the Committee
which in any material respect impairs the rights of the participant without
the participant's consent.
Adjustment. In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a dividend or its equivalent which is
credited to a 1990 Plan participant or a regular cash dividend), Common Stock
split, or other change in corporate structure affecting the Common Stock,
such substitution or adjustment shall be made in the aggregate number of
shares reserved for issuance under the 1990 Plan, in the number and option
price of shares subject to outstanding Options granted under the 1990 Plan,
and in the number of shares subject to other outstanding awards (including
but not limited to awards of Restricted Stock, Deferred Stock and Other
Stock-Based Awards) granted under the 1990 Plan as may be determined to be
appropriate by the Committee in order to prevent dilution or enlargement of
rights, provided that the number of shares subject to any award shall always
be a whole number.
Certain Federal Income Tax Consequences of the 1990 Plan
The following is a brief summary of the Federal income tax aspects of
awards made under the 1990 Plan based upon statutes, regulations and
interpretations in effect on the date hereof. This summary is not intended
to be exhaustive, and does not describe foreign, state or local tax
consequences.
1. Incentive Options. The participant will recognize no taxable
income upon the grant or exercise of an Incentive Option. Upon a disposition
of the shares after the later of two years from the date of the grant and one
year after the transfer of shared to the participant, (i) the participant
will recognize he difference, if any, between the amount realized and the
exercise price as long-term capital gain or long-term capital loss (as the
case may be) if the shares are capital assets; and (ii) the Company will not
qualify for any deduction in connection with the grant or exercise of the
Options. The excess, if any, of the fair market value of the shares on the
date of exercise of an Incentive Option over the exercise price will be
treated as an item of adjustment for a participant's taxable year in which
the exercise occurs and may result in an alternative minimum tax liability
for the participant. In the case of a disposition of shares in the same
taxable year as the exercise, where the amount realized on the disposition
is less than the fair market value of the shares on the date of exercise,
there will be no adjustment since the amount treated as an item of
adjustment, for alternative minimum tax purposes, is limited to the excess
of the amount realized on such disposition over the exercise price which is
the same amount included in regular taxable income.
If Common Stock acquired upon the exercise of an Incentive Option is
disposed of prior to the expiration of the holding periods described above,
(i) the participant will recognize ordinary compensation income in the taxable
year of disposition in an amount equal to the excess, if any, of the lesser
of the fair market value of the shares on the date of exercise or the amount
realized on the disposition of the shares, over the exercise price paid for
those shares; and (ii) the Company will qualify for a deduction equal to any
such amount recognized, subject to the limitation that the compensation be
reasonable and other applicable limitations under the Code. The participant
will recognize the excess, if any, of the amount realized over the fair
market value of the shares on the date of exercise, if the shares are capital
assets, as short-term or long-term capital gain, depending on the length of
time that the participant held the shares, and the Company will not qualify
for a deduction with respect to such excess.
Subject to certain exceptions for disability or death, if an Incentive
Option is exercised more than three months following the termination of the
participant's employment, the option will generally be taxed as a
nonqualified stock option. See "Nonqualified Options."
2. Nonqualified Options. Except as noted below, with respect to
Nonqualified Options (i) upon grant of the option, the participant will
recognize no income; (ii) upon exercise of the option (if the shares of
Common Stock are not subject to a substantial risk of forfeiture), the
participant will recognize ordinary compensation income in an amount equal
to the excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price, and the Company will qualify for a deduction
in the same amount, subject to the requirement that the compensation be
reasonable and other applicable limitations under the Code; (iii) the Company
will be required to comply with applicable Federal income tax withholding
requirements with respect to the amount of ordinary compensation income
recognized by the participant; and (iv) on a sale of the shares, the
participant will recognize gain or loss equal to the difference, if any,
between the amount realized and the sum of the exercise price and the
ordinary compensation income recognized. Such gain or loss will be treated
as capital gain or loss if the shares are capital assets and as short-term
or long-term capital gain or loss, depending upon the length of time that the
participant held the shares.
If the shares acquired upon exercise of a Nonqualified Option are
subject to substantial risk of forfeiture, the participant's and the
Company's Federal income tax consequences of the exercise and disposition
of the shares will be determined under rules similar to those set forth
below under the caption "Restricted Stock."
3. Restricted Stock. A participant who receives Restricted Stock will
recognize ordinary compensation income in an amount equal to the excess, if
any, of the fair market value of the Restricted Stock at the time the
Restricted Stock is no longer subject to a substantial risk of forfeiture,
over the consideration paid for the Restricted Stock. However, a participant
may elect, under Section 83(b) of the Code, within 30 days of the transfer
of the Restricted Stock, to recognize ordinary compensation income on the
date of transfer in an amount equal to the excess, if any, of the fair
market value on the date of such transfer of the shares of Restricted Stock
(determined without regard to the restrictions) over the consideration paid
for the Restricted Stock. If the participant makes such election and
thereafter forfeits the shares, he or she will qualify for a deduction only
in an amount equal to the excess, if any, of the consideration paid for the
shares over the amount realized on such forfeiture. With respect to a sale
of shares after the forfeiture period has expired where the participant has
not made election under Section 83(b), the holding period to determine
whether the participant has long-term or short-term capital gain or loss
begins when the Restriction Period expires, and the tax basis for such shares
will generally be the fair market value of such shares on such date. If the
participant makes an election under Section 83(b), the holding period will
commence on the day after the date of transfer and the tax basis will equal
the fair market value of such shares (determined without regard to the
restrictions) on the date of transfer. A participant's shares are treated as
being subject to a substantial risk of forfeiture so long as his or her sale
of the shares at a profit could subject him or her to a suit under Section
16(b) of the Exchange Act.
Whether or not the participant makes an election under Section 83(b),
the Company generally will qualify for a deduction (subject to he
reasonableness of compensation limitation and other applicable limitations
under the Code) equal to the amount that is taxable as ordinary income to
the participant, in its taxable year in which or with which ends the taxable
year of the participant in which such income is included in the participant's
gross income. The income recognized by the participant will be subject to
applicable withholding tax requirements.
Dividends paid on Restricted Stock which is subject to a substantial
risk of forfeiture generally will be treated as compensation that is taxable
as ordinary compensation income to the participant and will be deductible
by the Company subject to the reasonableness limitation and other
applicable limitations under the Code. If, however, the participant makes a
Section 83(b) election, the dividends will be treated as dividends and
taxable as ordinary income to the participant, but will not be deductible
by the Company.
4. Deferred Stock. A participant who receives an award of Deferred Stock
will recognize no income on the grant of such award. However, he or she will
recognize ordinary compensation income on the transfer of the Deferred Stock
(or the later lapse of a substantial risk of forfeiture to which the Deferred
Stock is subject, if the participant does not make a Section 83(b) election),
in accordance with the same rules as discussed above under the caption
"Restricted Stock."
5. Other Stock-Based Awards. The Federal income tax treatment of
other Stock-Based Awards will depend on the nature of any such award and the
restrictions applicable to such award. Such an award may, depending on the
nature of and conditions applicable to the award, be taxable as an Option or
an award of Restricted Stock.
Employees who may participate in the 1990 Plan in the future and the
amounts and terms of their awards will be determined by the Committee, in its
discretion, as summarized above. Because no such determinations have yet
been made, it is not possible to state the terms of any awards which may be
granted under the 1990 Plan or the names, positions of, or respective amounts
of awards to any individuals who are eligible for awards under the 1990 Plan.
There are no agreements or commitments to make any such awards as of the date
hereof.
The closing sales price of the Common Stock on the American Stock
Exchange on April 29, 1997 was $9.38.
Approval and adoption of the 1990 Plan, as amended, requires that the
number of votes cast by persons present at the Meeting, in person or by
proxy, in favor of such proposal exceeds the number of votes cast thereat in
opposition to such proposal.
The Board of Directors unanimously recommends a vote "FOR" the approval
and adoption of Proposal II.
INDEPENDENT AUDITORS
Pursuant to a recommendation of the Audit Committee, the Board of
Directors has selected and retained the firm of Deloitte & Touche to act as
independent certified public accountants for the Company for the 1997
fiscal year. Representatives of Deloitte & Touche are expected to be
present at the Meeting, to have the opportunity to make a statement, if
they so desire, and to be available to respond to appropriate questions.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors has
no knowledge of any business which will be presented for consideration at
the Meeting, other than as described above. If any other matter or
matters are properly brought before the Meeting or any adjournment(s)
thereof, it is the intention of the persons named in the accompanying
form of proxy to vote all proxies on such matter(s) in accordance with
their best judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
Any proposal which is intended to be presented by any stockholder for
action at the 1998 Annual Meeting of Stockholders must be received in
writing by the Secretary of the Company at 1850 West McNab Road, Fort
Lauderdale, Florida 33309, not later than , 1998, in order for
such proposal to be considered for inclusion in the Company's Proxy
Statement and form of proxy relating to the 1998 Annual Meeting of
Stockholders.
By Order of the Board of Directors
PETER FEROLA
Secretary
Dated: ________ __, 1997
EXHIBIT A
THE STEPHAN CO.
1990 Key Employee Stock Incentive Plan
As Amended, July 15, 1994, April 12, 1996
and February 19, 1997
Section 1. Purpose; Definitions.
The purpose of The Stephan Co. 1990 Key Employee Stock
Incentive Plan (the "Plan") is to enable The Stephan Co. to
offer to its key employees and to key employees of its
subsidiaries, long term performance-based stock and/or
other equity interests in The Stephan Co. thereby enhancing
its ability to attract, retain and reward such key
employees, and to increase the mutuality of interests
between those employees and the stockholders of The Stephan
Co. The various types of long-term incentive awards which
may be provided under the Plan will enable The Stephan Co.
to respond to changes in compensation practices, tax laws,
accounting regulations and the size and diversity of its
businesses.
For purposes of the Plan, the following terms shall be
defined as set forth herein:
(a) "Board" means the Board of Directors of The Stephan Co.
(b) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor thereto.
(c) "Committee" means the Stock Option Committee of the
Board or any other committee of the Board which the Board
may designate.
(d) "Company" means The Stephan Co., a corporation
organized under the laws of the state of Florida.
(e) "Deferred Stock" means stock to be received, under an
award made pursuant to Section 7 hereof, at the end of a
specified deferral period.
(f) "Disability" means disability as determined under
procedures established by the Committee for purpose of the
Plan.
(g) "Early Retirement" means retirement from active
employment with the Company or any subsidiary prior to age
65.
(h) "Fair Market Value," unless otherwise required by any
applicable provision of the Code or any regulations issued
thereunder, means as of any given date: (i) if the Common
Stock (as hereinafter defined) is listed on a national
securities exchange or quoted on the NASDAQ National Market
System, the closing price of the Common Stock on the last
preceding day on which the Common Stock was traded, as
reported on the composite tape or by NASDAQ/NMS System
Statistics, as the case may be; (ii) if the Common Stock is
not listed on a national securities exchange or quoted on
the NASDAQ National Market System, but is traded in the over-
the-counter market, the average of the bid and asked prices
for the Common Stock on the last preceding day for which
such quotations are reported by NASDAQ; and (iii) if the
fair market value of the Common Stock cannot be determined
pursuant to clause (i) or (ii) hereof, such price as the
Committee shall determine.
(i) "Incentive Stock Option" means any Stock Option
intended to be and designated as an "incentive stock option"
within the meaning of Section 422 of the Code.
(j) "Non-Qualified Stock Option" means any Stock Option
that id not an Incentive Stock Option.
(k) "Normal Retirement" means retirement from active
employment with the Company or any subsidiary on or after
age 65.
(l) "Other Stock-Based Award" means an award under Section
8 hereof that is valued in whole or in part by reference to,
or is otherwise based on, stock.
(m) "Plan" means this The Stephan Co. 1990 Key Employee
Stock Incentive Plan, as hereinafter amended from time to
time.
(n) "Restricted Stock" means Stock, received under an award
made pursuant to Section 6 hereof, that is subject to
restrictions under said Section 6.
(o) "Retirement" means normal retirement or early
retirement.
(p) "Stock" means the Common Stock of the Company, par
value $.01 per share.
(q) "Stock Option" or "Option" means any option to purchase
shares of Stock which is granted pursuant to the Plan.
(r) "Subsidiary" means any present or future subsidiary
corporation of the Company, as such term is defined in
Section 424(f) of the Code, or any successor thereto.
Section 2. Administration
The Plan shall be administered by the Committee, the
membership of which shall be at all times constituted so as
not to adversely affect the compliance of the Plan with the
requirements of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as in effect
from time to time, or with the requirements of any other
applicable law, rule or regulation.
The Committee shall have full authority to grant, pursuant
to the terms of the Plan, to officers and other key
employees eligible under Section 4 hereof: (I) Stock
Options, (ii) Restricted Stock, (iii) Deferred Stock,
and/or (iv) Other Stock-Based Awards.
For purposes of illustration and not of limitation, the
Committee shall have the authority (subject to express
provisions of this plan):
(i) to select the officers and other key employees of the
Company or any Subsidiary to whom Stock Options, Restricted
Stock and/or Other Stock-Based Awards may from time to time
be granted hereunder;
(ii) to determine the Incentive Stock Options, Non-Qualified
Stock Options, Restricted Stock, Deferred Stock and/or Other
Stock-Based Awards, or any combination thereof, if any, to
be granted hereunder to one or more eligible employees;
(iii) to determine the number of shares to be covered by
each award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of this Plan, of any award granted hereunder
(including, but not limited to, share price, any
restrictions or limitations, and any vesting, acceleration,
or forfeiture provisions, as the Committee shall determine);
(v) to determine the terms and conditions under which
awards granted hereunder are to operate on a tandem basis
and/or in conjunction with or apart from other cash awards
made by the Company or any Subsidiary outside of this Plan;
(vi) to determine the extent and circumstances under which
Stock and other amounts payable with respect to an award
hereunder shall be deferred, which may be either automatic
or at the election of the participant; and
(vii) to substitute (A) new Stock Options for previously
granted Stock Options, which previously granted Stock
Options have higher option exercise prices and/or certain
other less favorable terms, and (B) new awards of any type
for previously granted awards of the same type, which
previously granted awards are upon less favorable terms.
Subject to Section 10 hereof, the Committee shall have the
authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable, to interpret the
terms and provisions of the Plan and any award issued under
the Plan (and to determine the form and substance of all
agreements relating thereto), and to otherwise supervise
the administration of the Plan.
Subject to Section 10 hereof, all decisions made by the
Committee pursuant to the provisions of the Plan shall be
made in the Committee's sole discretion and shall be final
and binding upon all persons, including the Company, its
Subsidiaries and Plan participants.
Section 3. Stock Subject to Plan.
The total number of shares of Stock reserved and available
for distribution under the Plan shall be 870,000 shares.
Such shares may consist, in whole or in part, of authorized
and unissued shares.
If any shares of Stock that have been optioned cease to be
subject to a Stock Option, or if any shares of Stock that
are subject to any Restricted Stock, Deferred Stock award
or Other Stock-Based Award granted hereunder are forfeited
or any such award terminates without a payment being made
to the participant in the form of cash and/or Stock, such
shares shall again be available for distribution in
connection with future grants and awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, dividend (other than a dividend or its
equivalent which is credited to a Plan participant or a
regular cash dividend), Stock split, or other change in
corporate structure affecting the Stock, such substitution
or adjustment shall be made in the aggregate number of
shares reserved for issuance under the Plan, in the number
and option price of shares subject to outstanding options
granted under the Plan, and in the number of shares subject
to other outstanding awards (including but not limited to
awards of Restricted Stock, Deferred Stock and Other Stock-
Based Awards) granted under the Plan as may be determined
to be appropriate by the Committee in order to prevent
dilution or enlargement or rights, provided that the number
of shares subject to any award shall always be a whole
number.
Section 4. Eligibility
Officers and key employees of the Company or any Subsidiary
(but excluding members of the Committee and any director
who receives options under a directors' stock option plan)
who are at the time of the grant of an award under this
Plan employed by the Company or any Subsidiary and who a re
responsible for or contribute to the management, growth,
and/or profitability of the business of the Company or any
Subsidiary, are eligible to granted Options and awards
under the Plan. Eligibility under the Plan shall be
determined by the Committee.
Section 5. Stock Options
(a) Grant and Exercise. Stock Options granted under the
Plan may be of two types: (I) Incentive Stock Options and
(ii) Non-Qualified Stock Options. Any Stock Option granted
under the Plan shall contain such terms as the Committee
may from time to time approve. The Committee shall have
the authority to grant to any optionee Incentive Stock
Options, Non-Qualified Stock Options, or both types of
Stock Options and may be granted alone or in addition to
other awards granted under the Plan. To the extent that
any Stock Option does not qualify as an Incentive Stock
Option, it shall constitute a separate Non-Qualified Stock
Option.
Anything in the Plan to the contrary notwithstanding, no
term of the Plan relating to Incentive Stock Options or any
agreement providing for Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion
or authority granted under the Plan be so exercised, so as
to disqualify the Plan under Section 422 of the Code, or,
without the consent of the optionee(s) affected, to
disqualify any Incentive Stock Option under Section 422.
(b) Terms and Conditions. Stock Options granted under the
Plan shall be subject to the following terms and
conditions:
(i) Option Price. The option price per share of
Stock purchasable under a Stock Option shall be determined
by the Committee at the time of grant but shall not be less
than 100% (110%, in the case of an Incentive Stock Option
granted to an optionee ("10% Stockholder") who, at the time
of the grant, owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the
Company or its parent (if any) or subsidiary corporations,
as those terms are defined in Sections 424(e) and (f) of
the Code) of the Fair Market Value of the Stock at the time
of grant.
(ii) Option Term. The term of each Stock Option
shall be fixed by the Committee, but no Incentive Stock
Option shall be exercisable more than ten years (five
years, in the case of an Incentive Stock Option granted to
a 10% Stockholder) after the date on which the Option is
granted and no Non-Qualified Stock Option shall be
exercisable more than ten years and one day after the date
on which the option is granted.
(iii)Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee at
the time of the grant; provided, however, that except as
otherwise provided in this Section 5 and Section 9 below,
unless waived by the Committee at or after the time of
grant, no Stock Options shall be exercisable prior to the
first anniversary date of the grant of the Option. If the
Committee provides, in its discretion, that any Stock
Option is exercisable only in installments, the Committee
may waive such installment exercise provisions at any time
at or after the time at or after the time of grant in whole
or in part, based upon such factors as the Committee shall
determine.
(iv) Method of Exercise. Subject to whatever
installment, exercise and waiting period provisions are
applicable in a particular case, Stock Options may be
exercised in whole or in part at any time during the option
period, by giving written notice of exercise to the Company
specifying the number of shares of Stock to be purchased.
Such notice shall be accompanied by payment in full of he
purchase price, which shall be (I) in cash; (ii) unless
otherwise provided in the Stock Option Agreement referred
to in Section 5(b) (xii) below, in whole shares of Stock
which are already owned by the holder of the Option; (iii)
unless otherwise provided in the Stock Option agreement
referred to in Section 5(b) (xii) below, in whole shares of
stock which are already owned by the holder of the Option;
(iii) unless otherwise provided in the Stock Option
agreement referred to in Section 5(b)(xii) below, partly in
cash and partly in such Stock; or (iv) any other form of
consideration which has been approved by the Committee,
including any approved cashless exercise mechanism
(including, if so approved, by means of irrevocable
broker's instruction letter and of the application of a
specified portion of the shares of Stock issuable upon
exercise of a Stock Option as payment of the exercise price
therefor). Cash payments shall be made by wire transfer,
certified bank check or personal check, in each case
payable to the order of the Company; provided, however,
that the Company shall not be required to deliver
certificates for shares of Stock with respect to which an
Option is exercised by payment of cash until the Company
has confirmed the receipt of good and available funds in
payment of the purchase price thereof. Payment in the form
of Stock (which shall be valued at the Fair Market Value of
a share of Stock on the date of exercise) shall be made by
delivery of stock certificates in negotiable form which are
effective to transfer good and valid title thereto the Company,
free of any liens or encumbrances. The right to deliver in full
or partial payment of the exercise price of a Stock Option
any consideration other than cash shall be limited to such
frequency and/or amount as the Committee shall determine in
its sole and absolute discretion. Except as otherwise
expressly provided in this Plan, no Option may be exercised
at any time unless the holder thereof is then an employee
of the Company or of a subsidiary. The holder of an option
shall have none of the rights of a stockholder with respect
to the shares subject to the Option until such shares shall
be transferred to the holder upon the exercise of the
Option.
(v) Transferability; Exercisability. No Stock
Option shall be transferable by the optionee otherwise than
by will or by the laws of descent and distribution, and all
Stock Options shall be exercisable, during the optionee's
lifetime, only by the optionee.
(vi) Termination by Reason of Death. Subject to
Section 5(b)(x) below, if an optionee's employment by the
Company or a Subsidiary terminates by reason of death, any
Stock Option held by such optionee, unless otherwise
determined by the Committee at grant, shall be fully vested
and may thereafter be exercised by optionee's be exercised
by the legal representative of the estate or by the legatee
of the optionee under the will of the optionee, for a
period of one year (or such other period as the Committee
may specify at grant) from the date of such death or until
the expiration of the stated term of such Stock Option,
which ever period is the shorter.
(vii) Termination by Reason of Disability.
Subject to Section 5(b)(x) below, if an optionee's
employment by the Company or any Subsidiary terminates by
reason of Disability, any Stock Option held by such
Optionee, unless otherwise determined by the Committee at
the time of grant, shall be fully vested and may thereafter
be exercised by the optionee for a period of three years
(or such other period as the Committee shall specify at the
time of grant), from the date of such termination of
employment or until the expiration of the stated term of
such Stock Option, whichever period is the shorter;
provided, however, that if the optionee dies within such
three-year period (or such other period as the Committee
shall specify at the time of the grant), any unexercised
Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at
the time of death for a period of one year from the date of
such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(viii) Termination by Reason of Retirement. Subject to
Section 5(b)(x) below, if an optionee's employment by the
Company or a Subsidiary terminates by reason of Normal
Retirement, any Stock Option held by such optionee, unless
otherwise determined by the Committee at grant, shall be
fully vested and may thereafter by exercised by the
optionee for a period of three years (or such other period
as the Committee may specify at the time of grant) from the
date of such termination of employment or the expiration of
the stated term of such Stock Option, whichever period is
the shorter; provided, however, that if the optionee dies
within such three year period, any unexercised Stock Option
held by such optionee shall thereafter be exercisable, to
the extent to which it was exercisable at the time of
death, for a period of one year from the date of such death
or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. If an optionee's
employment with the Company or any Subsidiary terminates by
reason of Early Retirement, any Stock Option held by such
optionee, unless otherwise determined by the Committee at
the time of grant, shall be fully vested and may thereafter
be exercised by the optionee for a period of one (1) year
(or such longer period as the Committee may specify at the
time of grant, but in no event more than three (3) years)
from the date of such termination of employment or the
expiration of the stated term of such Stock Option,
whichever period is the shorter.
(ix) Other Termination. Subject to the provisions of
Section 12(g) below and unless otherwise determined by the
Committee at the time of grant, if an optionee's employment
by the Company or any Subsidiary terminates for any reason
other than death, Disability or Retirement, the Stock
Option shall thereupon automatically terminate, except that
if the optionee is involuntarily terminated by the Company
or a Subsidiary without cause, such Stock Option may be
exercised for the lesser of three months after termination
of employment or the balance of such Option's term.
(x) Additional Incentive Stock Option Limitation. In
the case of an Incentive Stock Option, the amount of
aggregate Fair Market Value of Stock (determined at the
time of grant of the Option) with respect which Incentive
Stock Options are exercisable for the first time by an
optionee during any calendar year (under all such plans of
optionee's employer corporation and its parent and
subsidiary corporations, as defined in Sections 424(e) and
(f) of the Code) shall not exceed $100,000.
(xi) Buyout and Settlement Provisions. The Committee
may at any time offer to buy out a Stock Option previously
granted, based upon such terms and conditions as the
Committee shall establish and communicate to the optionee
at the time that the offer is made.
(xii) Stock Option Agreement. Each grant of a
Stock Option shall be confirmed by, and shall be subject to
the terms of, an agreement executed by the Company and the
participant.
Section 6. Restricted Stock.
(a) Grant and Exercise. Shares of Restricted Stock may be
issued either alone or in addition to other awards granted
under the Plan. The Committee shall determine the eligible
persons to whom, and the number of shares to be awarded,
the price (if any) that will be paid by the recipient, the
time or times within which such awards may be subject to
forfeiture (the "Restriction Period"), the vesting schedule
and rights to acceleration thereof, and all other terms and
conditions of the awards.
The Committee may condition the grant of Restricted Stock
upon the attainment of specified performance goals or such
other factors as the Committee may determine.
(b) Terms and Conditions. Each Restricted Stock award
shall be subject to the following terms and conditions:
(i) Issuance; Certificates. Restricted Stock, when
issued, will be represented by a stock certificate or
certificates registered in the name of the holder to whom
such Restricted Stock shall have been awarded. During the
Restriction Period certificates representing the Restricted
Stock and any securities constituting Retained
Distributions (as defined below) shall bear a restrictive
legend to the effect that ownership of the Restricted Stock
(and such Retained Distributions), and the enjoyment of all
rights appurtenant thereto, are subject to the
restrictions, terms and conditions provided in the Plan and
the applicable Restricted Stock agreement. Such
certificates shall be deposited by the holder with the
Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the
Restricted Stock and any securities constituting Retained
Distributions that shall be forfeited or that shall not
become vested in accordance with the Plan and the
applicable Restricted Stock agreement.
(ii) Rights of Holder. Restricted Stock shall
constitute issued and outstanding shares of Common Stock
for all corporate purposes. The holder will have the right
to vote such Restricted Stock, to receive and retain all
regular cash dividends and other cash equivalent
distributions as the Board may in its sole discretion
designate, pay or distribute on such Restricted Stock and
to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Restricted
Stock, with the exceptions that (A) the holder will not be
entitled to delivery of the stock certificate or
certificates representing such Restricted Stock until the
Restriction Period shall have expired and unless all other
vesting requirements with respect thereto shall have been
fulfilled; (B) the Company will retain custody of the stock
certificate or certificates representing the Restricted
Stock during the Restriction Period; (C) other than regular
cash dividends and other equivalent distributions as the Board
may in its sole discretion designate, pay or distribute,
the Company will retain custody of all distributions
("Retained Distributions") made or declared with respect to
the Restricted Stock (and such Retained Distributions will
be subject to the same restrictions, terms and conditions
as are applicable to the Restricted Stock) until such time,
if ever, as the Restricted Stock with respect to which such
Retained Distributions shall have been made, paid or
declared shall have become vested an with respect to which
the Restriction Period shall have expired; (D) the holder
may not sell, assign, transfer, pledge, exchange, encumber
or dispose of the Restricted Shares or any Retained
Distributions during the Restriction Period; and (E) a
breach of any of the restrictions, terms or conditions
contained in this Plan or the Restricted Stock agreement
referred to in the following clause (iv) or otherwise
established by the Committee with respect to any Restricted
Stock or Retained Distributions will cause a forfeiture of
such Restricted Stock and any Retained Distributions with
respect thereto.
(iii) Expiration of Restriction Period. Upon the
expiration of the Restriction Period with respect to each
award of Restricted Stock and the satisfaction of any other
applicable restrictions, terms and conditions (A) all or
part of such Restricted Stock shall become vested in
accordance with the terms of the Restricted Stock agreement
referred to in the following clause (iv), and (B) any
Retained Distributions with respect to such Restricted
Stock shall become vested to the extent that the Restricted
Stock related thereto shall have become vested. Any such
Restricted Stock and Retained Distributions that do not
vest shall be forfeited to the Company and the holder shall
not thereafter have any rights with respect to such
Restricted Stock and Retained Distributions that have been
so forfeited.
(iv) Restricted Stock Agreement. Each Restricted
Stock award shall be confirmed by, and shall be subject to
the terms of, an agreement executed by the Company and the
participant.
Section 7. Deferred Stock
(a) Grant and Exercise. Deferred Stock may be
awarded either alone or in addition to other awards granted
under the Plan. The Committee shall determine the eligible
persons to whom, and the time or times at which Deferred
Stock shall be awarded, the number of shares of Deferred
Stock to be awarded to any person, the duration of the
period (the "Deferral Period") during which, and the
conditions under which, receipt of the stock will be
deferred, and all the other terms and conditions of the
awards. The Committee may condition the grant of Deferred
Stock upon the attainment of specified performance goals or
such other factors or criteria as the Committee may determine.
(b) Terms and Conditions. Each Deferred Stock award shall
be subject to the following terms and conditions:
(i) Transferability. Subject to the provisions of
this Plan, and the award agreement referred to in Section 7
(b) (vii) below, Deferred Stock awards may not be sold,
assigned, transferred, pledged or otherwise encumbered
during the Deferral Period. At the expiration of the
Deferral Period (or the Additional Deferral Period referred
to in Section 7(b)(vi) below, where applicable), share
certificates shall be delivered to the participant, or his
legal representative, in a number equal to the shares
covered by the Deferred Stock award.
(ii) Dividends. As determined by the Committee at
the time of award, amounts equal to any dividends declared
during the Deferral Period (or the Additional Deferral
Period referred to in Section 7(b)(vi) below, where
applicable) with respect to the number of shares covered by
a Deferred Stock award may be paid to the participant
currently or deferred and deemed to be reinvested in
additional Deferred Stock.
(iii) Termination of Employment. Subject to the
provisions of the award agreement and this Section 7 and
Section 12(g) below, upon termination of a participant's
employment with the Company or any Subsidiary for any
reason during the Deferral Period (or the Additional
Deferral Period referred to in Section 7(b)(vi) below,
where applicable) for a given award, the Deferred Stock in
question will vest or be forfeited in accordance with the
terms and conditions established by the Committee at the
time of grant.
(iv) Modification by Committee. The Committee may,
after grant, accelerate the vesting of all or any part of
any Deferred Stock award and/or waive the deferral
limitations for all or any part of a Deferred Stock award.
(v) Waiver of Deferral Limitations. In the event of
hardship or other special circumstances of a participant
whose employment with the Company or any Subsidiary is
involuntarily terminated (other than for cause), the
Committee may waive in whole or in part any or all of the
remaining deferral limitations imposed hereunder or
pursuant to the award agreement referred to in Section
7(b)(vii) below with respect to any or all of the
participant's Deferred Stock.
(vi) Request for Modification. A participant may
request to, and the Committee may at any time, defer the
receipt of an award (or an installment of an award) for an
additional specified period or until a specified event (the
"Additional Deferral Period"). Subject to any exceptions
adopted by the Committee, such request must generally be made
at least one year prior to expiration of the Deferral Period
for such Deferred Stock award (or such installment).
(vii) Deferred Stock Agreement. Each Deferred Stock
award shall be confirmed by, and shall be subject to the
terms of, an agreement executed by the Company and the
participant.
Section 8. Other Stock-Based Awards.
(a) Grant and Exercise. Other Stock-Based Awards which
may include performance shares, and shares valued by
reference to the performance of the Company or any
Subsidiary, any be granted either alone or in addition to
or in tandem with Stock Options, Restricted Stock or
Deferred Stock.
The Committee shall determine the eligible persons to whom
and the time or times at which, such awards shall be made,
the number of shares of Stock to be awarded pursuant to
such awards, and all other terms and conditions of the
awards. The Committee may also provide for the grant of
Stock under such awards upon the completion of a specified
performance period.
(b) Terms and Conditions. Each Other Stock-Based Award
shall be subject to the following term and conditions:
(i) Transferability. Shares of Stock subject to an
Other Stock-Based Award may not be sold, assigned,
transferred, pledged or otherwise encumbered prior to the
date on which the shares are issued, or, if later, the date
on which any applicable restriction, performance or
deferral period lapses.
(ii) Dividends. The recipient of any other Stock-
Based Award shall be entitled to receive, currently or on a
deferred basis, dividends or dividend equivalents with
respect to the number of shares covered by the award, as
determined by the Committee at the time of the award. The
Committee may provide that such amounts (if any) shall be
deemed to have been reinvested in additional stock.
(iii) Vesting. Any Other Stock-Based Award and any
Stock covered by an Other Stock-Based Award shall vest or
be forfeited to the extent so provided in the award
agreement, as determined by the Committee.
(iv) Disability; Death. In the event of a
participant's Retirement, Disability or death, or in case
of special circumstances, the Committee may waive in whole
or in part any or all of the limitations imposed hereunder
(if any) with respect to any or all of an Other Stock-Based
Award.
(v) Other Stock-Based Award Agreement. Each Other
Stock-Based Award shall be confirmed by, and shall be
subject to the agreement executed by the Company and by the
participant.
Section 9. Change in Control Provisions.
(a) A "Change in Control" shall be deemed to have occurred
on the tenth day after:
(i) any individual, firm, corporation or other entity,
or any group (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Act")) becomes,
directly or indirectly, the beneficial owner (as defined in
the General Rules and Regulations of the Securities and
Exchange Commission with respect to Sections 13(d) and
13(g) of the Act) or more than 20% of the then outstanding
shares of the Company's capital stock entitled to vote
generally in the election of directors of the Company; or
(ii) the commencement of, or the first public
announcement of the intention of any individual, firm,
corporation or other entity or of any group (as defined in
Section 13(d)(3) of the Act) to commence, a tender or
exchange offer subject to Section 14(d)(1) of the Act for
any class of the Company's capital stock; or
(iii)the stockholders of the Company approve (A) a
definitive agreement for the merger or other business
combination of the Company with or into another
corporation, pursuant to which the stockholders of the
Company do not own, immediately after the transaction, more
than 50% of the voting power of the corporation that
survives and is a publicly owned corporation and not a
subsidiary of another corporation, or (B) a definitive
agreement for the sale, exchange, or other disposition of
all or substantially all of the assets of the Company, or
(C) any plan or proposal for the liquidation or dissolution
of the Company; provided, however, that a "Change of
Control" shall not be deemed to have taken place if
beneficial ownership is acquired by, or a tender or
exchange offer is commenced or announced by, the Company,
any profit-sharing, employee ownership or other employee
benefit plan of the Company, or any trustee of or fiduciary
with respect to any such plan when acting in such capacity,
or any group comprised solely of such entities.
(b) In the event of a "Change of Control" as defined in
subsection (a) above, awards granted under the Plan will be
subject to the following provisions, unless the provisions
of this Section 9 are suspended or terminated by an
affirmative vote of a majority of the Board prior to the
occurrence of a "Change of Control":
(i) all outstanding Stock Options, which have been
outstanding for at least six months, shall become
exercisable in full, whether or not otherwise exercisable
at such time, any such Stock Option shall remain
exercisable in full thereafter until it expires pursuant to
its terms; and
(ii) all restrictions and deferral limitations
contained in Restricted Stock awards, Deferred Stock awards
and Other Stock-Based awards granted under the Plan shall
lapse.
Section 10. Amendments and Termination.
The Board may at any time, and from time to time, amend any
of the provisions of the Plan, an may at any time suspend
or terminate the Plan; provided, however, that no such
amendment shall be effective unless and until it has been
duly approved by the holders of the outstanding shares of
Stock if (a) it increases the aggregate number of shares of
Stock which are available pursuant to the Plan, (except as
provided in Section 3 above) or (b) the failure to obtain
such approval would adversely affect the compliance of the
Plan with the requirements of Rule 16b-3 under the Exchange
Act, as in effect from time to time, or with the
requirements of any other applicable law, rule or
regulation. The Committee may amend the terms of any Stock
Option or other award theretofore granted under the Plan;
provided, however, that subject to Section 3 above, no such
amendment may be made by the Committee which in any
material respect impairs the rights of the participant
without the participant's consent.
Section 11. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any
payments not yet made to a participant or optionee by the
Company, nothing contained herein shall give any such
participant or optionee rights that are greater than those
of a general creditor of the Company.
Section 12. General Provisions.
(a) Investment Representations; Legend. The Committee may
require each person acquiring shares of Stock pursuant to a
Stock Option or other award under the Plan to represent to
and agree with the Company in writing that the optionee or
participant is acquiring the shares for investment without
a view to distribution thereof.
All certificates for shares of stock delivered under the
Plan shall be subject to such stop transfer order and other
restrictions as the Committee may deem advisable under the
rules and regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed, any applicable Federal or
state securities law, and any applicable corporate law, and the
Committee may cause a legend or legends to be put on any
such certificate to make appropriate reference to such
restrictions.
(b) Additional Incentive Arrangements. Nothing contained
in the Plan shall prevent the Board from adopting such
other or additional incentive arrangements as it may deem
desirable, including, but not limited to, 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.
(c) No Right of Employment. Nothing contained in the Plan
or in any award hereunder shall be deemed to confer upon
any employee of the Company or any Subsidiary any right to
continued employment with the Company or any Subsidiary,
nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate the employment of
any employee at any time.
(d) Payment of Taxes. Not later than the date as of which
an amount first becomes includible in the gross income of
the participant with respect to any option or other award
under the Plan, the participant shall pay to the Company,
or make arrangements satisfactory to the Committee
regarding payment of, any Federal, state and local taxes of
any kind required by law to be withheld or paid with
respect to such amount. If permitted by the Committee, tax
withholding or payment obligations may be settled with
Stock, including Stock that is part of the award that gives
rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditional upon such
payment or arrangements and the Company or the
participant's employer (if not the Company) shall, to the
extent permitted by law, have the right to deduct any such
taxes from any payment of any kind otherwise due to the
participant from the Company or any Subsidiary.
(e) Applicable Law. The Plan and all awards made and
actions taken hereunder shall be governed by and construed
in accordance with the laws of the State of Florida
(without regard to choice of law provisions).
(f) Compensation. Any Stock Option granted or other award
made under the Plan shall not be deemed compensation for
purposes of computing benefits under any retirement plan of
the Company or any Subsidiary and shall not affect any
benefits under any other benefit plan now or subsequently
in effect under which the availability or amount of
benefits is related to the level of compensation (unless
required by a specific reference in any such other plan to
awards under this Plan).
(g) Leave of Absence; Change of Employment. A leave of
absence, unless otherwise determined by the Committee prior
to the commencement thereof, shall not be considered a
termination of employment. Any Stock Option granted or
awards made under the Plan shall not be affected by any
change of employment, so long as the holder continues
to be an employee of the Company or any Subsidiary.
(h) Transferability. Except as otherwise expressly
provided in the Plan, no right or benefit under the Plan
may be alienated, sold, assigned, hypothecated, pledged,
exchanged, transferred, encumbered or charged, and any
attempt to alienate, sell, assign, hypothecate, pledge,
exchange, transfer, encumber or charge the same shall be
void. No right or benefit hereunder shall in any manner be
liable for or subject to the debts, contracts, liabilities
or torts of the person entitled to such benefit.
(i) Securities Laws. The obligations of the Company with
respect to all Stock Options and awards under the Plan
shall be subject to (I) all applicable laws, rules and
regulations and such approvals by any governmental agencies
as may be required, including, without limitation, the
effectiveness of a registration statement under the
Securities Act of 1933, as amended, and (ii) the rules and
regulations of any securities exchange on which the Stock
may be listed.
(j) Conflict of Plan with Certain Laws. If any of the
terms or provisions of the Plan conflict with the
requirements of Rule 16b-3 under he Exchange Act, as in
effect from time to time, or with the requirements of any
other applicable law, rule or regulation, and/or with
respect to Incentive Stock Options, Section 422 of the
Code, then such term or provisions shall be deemed
inoperative to the extent they so conflict with the
requirements of said Rule 16b-3 and/or with respect to
Incentive Stock Options, Section 422 of the Code. With
respect to Incentive Stock Options, if this Plan does not
contain any provision required to be included herein under
Section 422 of the Code, such provision shall be deemed to
be incorporated herein with the same force and effect as if
such provision had been set out at length herein.
(k) Termination for Failure to Execute Agreement. The
Committee may terminate any Stock Option or other award
made under the Plan if a written agreement relating thereto
is not executed and returned to the Company within 30 days
after such agreement has been delivered to the participant
for his or her execution.
Section 13. Effective Date of Plan.
The Plan shall be effective as of April 16, 1990, subject
to the approval of the Plan by the holders of the Company's
Stock at a meeting of stockholders held within one year
after the effective date. Any grants of Stock Options or
awards under the Plan prior to such approval shall be
effective when made (unless otherwise specified by the
Committee at the time of grant), but shall be conditioned upon,
and subject to, such approval of the Plan by the Company's
stockholders (and no Stock Options may be exercised, and no
awards of Restricted Stock, Deferred Stock or Other Stock-Based
Awards shall best or otherwise become free or restrictions,
prior to such approval).
Section 14. Term of Plan.
No Stock Option, Restricted Stock Award, Deferred Stock or
Other Stock-Based Award shall be granted pursuant to the
Plan on of after the tenth anniversary of the effective
date, but awards granted prior to such tenth anniversary
may extend beyond that date.
