SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement | | Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
POWER CONTROL TECHNOLOGIES INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[Power Control Technologies Inc. Letterhead]
March [ ], 1997
To Our Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Power Control Technologies Inc. to be held at
[ ], on Thursday, May 15, 1997,
at [ ]:00 a.m. local time.
The business of the meeting will be to elect directors, approve
an amendment to the Company's Restated Certificate of Incorporation to
adopt a new corporate name, approve the Power Control Technologies Inc.
1997 Stock Option Plan, approve the Performance Bonus Plan and ratify the
selection of independent auditors for 1997. Information on each of these
matters can be found in the accompanying Proxy Statement.
While stockholders may exercise their right to vote their shares
in person, we recognize that many stockholders may not be able to attend
the Annual Meeting. Accordingly, we have enclosed a proxy which will
enable you to vote your shares on the issues to be considered at the
Annual Meeting even if you are unable to attend. If you desire to vote in
accordance with management's recommendations, you need only sign, date
and return the proxy in the enclosed postage-paid envelope to record your
vote. Otherwise, please mark the proxy to indicate your vote; date and
sign the proxy; and return it in the enclosed postage-paid envelope as
soon as conveniently possible.
Sincerely,
Theo W. Folz
Chief Executive Officer
POWER CONTROL TECHNOLOGIES INC.
35 East 62nd Street
New York, New York 10021
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
Power Control Technologies Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
Power Control Technologies Inc., a Delaware corporation (the "Company"),
will be held on the 15th day of May 1997 at [ ]:00 a.m., local time, at [
], for the following purposes:
1. To re-elect three members of the Company's Board of
Directors to serve until the annual meeting in 2000
and until such directors' successors are duly
elected and shall have qualified.
2. To ratify the selection of Ernst & Young LLP as the
Company's independent auditors for 1997.
3. To approve the proposed amendment to the Company's
Restated Certificate of Incorporation to change the
name of the Company to "M & F Worldwide Corp."
4. To approve the adoption of the Company's 1997 Stock
Option Plan.
5. To approve the adoption of the Company's
Performance Bonus Plan.
6. To transact such other business as may properly come
before the Annual Meeting or at any adjournments or
postponements thereof.
A Proxy Statement describing the matters to be considered at the
Annual Meeting is attached to this notice. Only stockholders of record at
the close of business on March 20, 1997 (the "Record Date") are entitled
to notice of, and to vote at, the Annual Meeting and at any adjournments
thereof. A list of stockholders entitled to vote at the Annual Meeting
will be located at the offices of the Company at 625 Madison Avenue, New
York, New York 10022, at least ten days prior to the Annual Meeting and
will also be available for inspection at the Annual Meeting.
To ensure that your vote will be counted, please complete, date
and sign the enclosed proxy card and return it promptly in the enclosed
prepaid envelope, whether or not you plan to attend the Annual Meeting.
Since proxies may be revoked at any time, any stockholder attending the
Annual Meeting may vote in person even if that stockholder has returned a
proxy.
By Order of the Board of Directors
Power Control Technologies Inc.
March [ ], 1997
PLEASE COMPLETE, SIGN AND DATE THE ACCOMPANYING
PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
THIS WILL ENSURE THAT YOUR SHARES ARE VOTED
IN ACCORDANCE WITH YOUR WISHES.
POWER CONTROL TECHNOLOGIES INC.
-----------------------------
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held May 15, 1997
-----------------------------
This Proxy Statement is being furnished in connection with the
solicitation by the Board of Directors (the "Board of Directors") of
Power Control Technologies Inc., a Delaware corporation (the "Company"),
of proxies to be voted at the 1997 Annual Meeting of Stockholders to be
held on the 15th day of May 1997 at [ ]:00 a.m., local time, at [ ], and
at any adjournments or postponements thereof (the "Annual Meeting").
This Proxy Statement and the enclosed proxy are first being sent to
stockholders on or about March [ ], 1997.
At the Annual Meeting, the Company's stockholders will be asked
(1) to re-elect the following persons as Directors of the Company until
the Company's annual meeting in 2000 and until such Directors' successors
are duly elected and shall have qualified: Howard Gittis, J. Eric Hanson
and Paul M. Meister; (2) to ratify the selection of Ernst & Young LLP as
the Company's independent auditors for 1997; (3) to approve the proposed
amendment to the Company's Restated Certificate of Incorporation to
change the name of the Company; (4) to approve the adoption of the
Company's 1997 Stock Option Plan (the "1997 Plan"); (5) to approve the
adoption of the Company's Performance Bonus Plan; and (6) to transact
such other business as may properly come before the Annual Meeting or at
any adjournments or postponements thereof.
The principal executive offices of the Company are located at 35
East 62nd Street, New York, New York 10021 and the telephone number is
212-572-8600.
Solicitation and Voting of Proxies; Revocation
All proxies duly executed and received by the Company will be
voted on all matters presented at the Annual Meeting in accordance with
the instructions given therein by the person executing such proxy or, in
the absence of such instructions, will be voted FOR the election to the
Board of Directors of the three nominees for Director identified in this
Proxy Statement, the ratification of Ernst & Young LLP as the Company's
auditors, the approval of the proposed amendment to the Company's
Restated Certificate of Incorporation to change the name of the Company,
the approval and adoption of the 1997 Plan and the approval and adoption
of the Performance Bonus Plan. The submission of a signed proxy will not
affect a stockholders right to attend, or vote in person at, the Annual
Meeting of stockholders. Any stockholder may revoke his or her proxy at
any time before it is voted by written notice to such effect received by
the Company at 35 East 62nd Street, New York, New York 10021, Attention:
Secretary, by delivery of a subsequently dated proxy or by attending the
Annual Meeting and voting in person (although attendance at the Annual
Meeting will not in and of itself constitute a revocation of a proxy).
The accompanying form of proxy is being solicited on behalf of
the Board of Directors. The solicitation of proxies may be made by mail
and may also be made by personal interview, telephone and facsimile
transmission, and by directors, officers and regular employees of the
Company without special compensation therefor. The Company will bear the
costs incurred in connection with the solicitation of proxies and
expects to reimburse banks, brokers and other persons for their
reasonable out-of-pocket expenses in handling proxy materials for
beneficial owners.
Record Date; Outstanding Shares; Voting at the Annual Meeting
Only holders of record of the Company's common stock, par value
$0.01 (the "Common Stock"), at the close of business on March 20, 1997
(the "Record Date") will be entitled to notice of and to vote at the
Annual Meeting. On that date, there were issued and outstanding [ ]
shares of Common Stock, each of which is entitled to one vote. The
presence, in person or by properly executed proxy, of the holders of a
majority of the shares of Common Stock outstanding and entitled to vote
at the Annual Meeting is necessary to constitute a quorum at the Annual
Meeting. Any stockholder present (including broker non-votes) at the
Annual Meeting but who abstains from voting shall be counted for purposes
of determining whether a quorum exists. With respect to all matters
considered at the Annual Meeting (other than the election of directors),
an abstention (or broker non-vote) has the same effect as a vote against
the proposal. Abstentions from voting on the election of directors
(including broker non-votes) will have no effect on the outcome of the
vote. The holder of the outstanding shares of the Company's Series A 8%
Convertible Redeemable Preferred Stock (the "Series A Preferred Stock")
does not have the right to vote such Series A Preferred Stock or the
Common Stock into which it may be converted at the Annual Meeting.
The affirmative vote of the holders of at least a majority of the
shares of Common Stock outstanding and entitled to vote is required to
approve the proposed amendment to the Company's Restated Certificate of
Incorporation to change the name of the Company. The affirmative vote of
the holders of at least a majority of the votes cast at the Annual
Meeting by the holders present or represented by proxy and entitled to
vote is required to approve and adopt the 1997 Plan and the Performance
Bonus Plan and to ratify the appointment of Ernst & Young LLP. The
affirmative vote of the holders of a plurality of the votes cast is
required to re-elect the director nominees.
Mafco Consolidated Group Inc. ("Mafco Consolidated"), which
beneficially owns 5,939,400 shares or approximately 28.8% of the
outstanding Common Stock as of the Record Date (excluding shares of
Common Stock issuable upon conversion of the shares of Series A Preferred
Stock owned by Mafco Consolidated, which were not outstanding or entitled
to vote as of the Record Date), has informed the Company of its intention
to vote its shares of Common Stock FOR each of the matters to be acted on
at the Annual Meeting (collectively, the "Proposals"). Based on the
foregoing, the affirmative vote of the holders of only [ ] additional
shares of Common Stock (representing approximately [ ]% of the shares of
Common Stock currently outstanding) would be required to approve the
proposed amendment to the Company's Restated Certificate of Incorporation
to change the name of the Company. If any holders of Common Stock do not
cast votes at the Annual Meeting as to the other Proposals, approval of
such other Proposals will require the affirmative vote of the holders of
fewer than [same # as above] shares of Common Stock.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board of Directors consists of Ronald O. Perelman, Jaymie A.
Durnan, Theo W. Folz, Howard Gittis, J. Eric Hanson, Lance Liebman, Paul
M. Meister, James G. Roche and Bruce Slovin. The Company's Restated
Certificate of Incorporation and By-Laws provide that the Board of
Directors shall be divided as evenly as possible into three classes.
The Board of Directors has nominated Messrs. Gittis, Hanson and
Meister for re-election as Directors at the Annual Meeting to serve until
the annual meeting in 2000. Messrs. Gittis, Hanson and Meister are
currently members of the Board of Directors whose terms expire at the
Annual Meeting and, except as herein stated, the proxies solicited hereby
will be voted FOR their election. The Board of Directors has been
informed that Messrs. Gittis, Hanson and Meister are willing to serve as
Directors, but if any of them should decline or be unable to act as a
Director, the individuals named in the proxies will vote for the election
of such other person or persons as they, in their discretion, may choose.
The Board of Directors has no reason to believe that any such nominees
will be unable or unwilling to serve.
Directors of the Company will be elected by a plurality vote of
the outstanding shares of Common Stock present in person or represented
by proxy at the Annual Meeting. Under applicable Delaware law, in
tabulating the votes, abstentions from voting on the election of
Directors (including broker non-votes) will be disregarded and have no
effect on the outcome of the vote.
The Board of Directors recommends that stockholders vote FOR the
election of each of the nominees listed herein for Director.
Directors and Director Nominees
The name, age (as of March [ ], 1997), principal occupation for
the last five years, selected biographical information and period of
service as a Director of the Company of each Director and Director
nominee are set forth hereafter.
Ronald O. Perelman (54) has been Chairman of the Board of
Directors and a Director of the Company since 1995 and has been Chairman
of the Board of Directors and Chief Executive Officer of Mafco Holdings
Inc. ("Holdings") and MacAndrews & Forbes Holdings Inc. ("MacAndrews
Holdings"), diversified holding companies, and various affiliates since
1980. Mr. Perelman is also Chairman of the Board of Directors of Andrews
Group Incorporated ("Andrews Group"), Consolidated Cigar Holdings Inc.
("Cigar Holdings"), Mafco Consolidated, Meridian Sports Incorporated
("Meridian"), and Toy Biz, Inc. ("Toy Biz") and Mr. Perelman is the
Chairman of the Executive Committees of the Boards of Marvel
Entertainment Group, Inc. ("Marvel"), Revlon Consumer Products
Corporation ("Revlon Products") and Revlon, Inc. ("Revlon"). Mr. Perelman
is also a Director of the following corporations which file reports
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"):
Andrews Group, The Coleman Company, Inc. ("Coleman"), Coleman Holdings
Inc. ("Coleman Holdings"), Coleman Worldwide Corporation ("Coleman
Worldwide"), Cigar Holdings, Consolidated Cigar Corporation ("Cigar
Corp."), California Federal Bank, A Federal Savings Bank ("CalFed"),
First Nationwide Holdings Inc. ("First Nationwide Holdings"), First
Nationwide (Parent) Holdings Inc. ("First Nationwide Parent"), Mafco
Consolidated, Marvel, Marvel Holdings Inc. ("Marvel Holdings"), Marvel
III Holdings Inc. ("Marvel III"), Marvel (Parent) Holdings Inc. ("Marvel
Parent"), Meridian, Pneumo Abex Corporation ("Pneumo Abex"), Revlon
Worldwide Corporation ("Revlon Worldwide"), Revlon, Revlon Products and
Toy Biz. Mr. Perelman's term as a Director of the Company expires in
1998. (On December 27, 1996, Marvel Holdings, Marvel Parent, Marvel III
and Marvel and several of its subsidiaries filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code.)
Jaymie A. Durnan (43) has been a Director of the Company since
1995 and has been Vice President of Holdings and MacAndrews Holdings,
diversified holding companies, since 1992 and Special Counsel to the
Chairman of MacAndrews Holdings since 1995. Mr. Durnan was an attorney
with the law firm of Marks & Murasi from 1990 through 1992 and a United
States Naval officer from 1975 to 1990. Mr. Durnan's term as a Director
of the Company expires in 1999.
Theo W. Folz (53) was appointed a Director, President and Chief
Executive Officer of the Company in 1996. Mr. Folz has been a President
and Chief Executive Officer of Cigar Holdings since 1996, President and
Chief Executive Officer of Cigar Corp. since 1984 and, since 1995, Vice
Chairman and Chief Executive Officer of the flavors business now being
conducted by Pneumo Abex (the "Flavors Business"). Mr. Folz is also a
Director of the following corporations which file reports pursuant to the
Exchange Act: Cigar Holdings, Cigar Corp., Mafco Consolidated and Pneumo
Abex. Mr. Folz's term as a Director of the Company expires in 1998.
Howard Gittis (63) has been a Director of the Company since 1995
and Vice Chairman of Holdings and MacAndrews Holdings, diversified
holding companies, and various affiliates since 1985. Mr. Gittis is a
Director of the following corporations which file reports pursuant to the
Exchange Act: Andrews Group, CalFed, Cigar Corp., Cigar Holdings, First
Nationwide Holdings, First Nationwide Parent, Mafco Consolidated, Pneumo
Abex, Revlon Worldwide, Revlon, Jones Apparel Group, Inc., Loral Space &
Communications Ltd. and Rutherford-Moran Oil Corporation.
J. Eric Hanson (50) has been a Director of the Company since 1995
and Executive Vice President-Finance and Administration of the Company
since 1997. Mr. Hanson has been Senior Vice President of Holdings and
MacAndrews Holdings, diversified holding companies, and various
affiliates since 1994 and was Vice President of Holdings from 1993 to
1994. Mr. Hanson was President of Edina Group Inc., a private investment
firm, from 1992 to 1993 and prior to 1992 served in various positions
culminating in his appointment as Chief Executive Officer of Ground Round
Restaurants, Inc. Mr. Hanson is also a Director of Meridian which files
reports pursuant to the Exchange Act.
Lance Liebman (55) has been a Director of the Company since 1995.
Professor Liebman has been Lucy G. Moses Professor of Law at Columbia Law
School since 1991 and was Dean of Columbia Law School from 1991 to 1996.
From 1976 to 1991, Professor Liebman was Professor of Law at Harvard Law
School and from 1981 to 1984 also held the position of Associate Dean.
Professor Liebman is a Director of Greater New York Insurance Co. and a
Trustee of National Income Realty Trust, a real estate investment trust.
Professor Liebman's term as a Director of the Company expires in 1999.
Paul M. Meister (44) has been a Director of the Company since
1995. Mr. Meister was Senior Vice President of Abex, Inc. (diversified
manufacturing) from 1992 to 1995 and Managing Director-Chief Financial
Officer of The Henley Group Inc. (diversified manufacturing), from prior
to 1990 to 1992. Mr. Meister has been Senior Vice President-Chief
Financial Officer of Fisher Scientific International, Inc. (scientific
instruments, equipment and supplies) since 1991.
James G. Roche (57) has been a Director of the Company since
1995. Dr. Roche has been Corporate Vice President and General Manager,
Electronic Sensors and Systems Division of Northrop Grumman Corporation,
a maker of aircraft, electronic systems and unmanned vehicles, and a
provider of information services, since 1996 and was Chief Advanced
Development, Planning and Public Affairs Officer of Northrop Corporation
from 1993 to 1996 and Corporate Vice President and Chief Advanced
Development and Planning Officer of Northrop Corporation from 1992.
Dr. Roche was Corporate Vice President and Assistant to the Chairman,
President and Chief Executive Officer of Northrop Corporation from prior
to 1991 to 1992. Dr. Roche's term as a Director of the Company expires in 1999.
Bruce Slovin (61) has been a Director of the Company since 1995
and the President of Holdings and MacAndrews Holdings, diversified
holding companies, and various affiliates since 1982. Mr. Slovin is a
Director of the following corporations which file reports pursuant to the
Exchange Act: Andrews Group, Cantel Industries, Inc., Coleman, Coleman
Holdings, Coleman Worldwide, Meridian, Continental Health Affiliates,
Inc. Infu-Tech, Inc. and Oak Hill Sportswear Corporation. Mr. Slovin's
term as a Director of the Company expires in 1998.
Board of Directors and its Committees
The Board of Directors has an Executive Committee, an Audit
Committee and a Compensation Committee.
The Executive Committee consists of Messrs. Perelman, Gittis and
Slovin. The Executive Committee may exercise all of the powers and
authority of the Board of Directors, except as otherwise provided under
the Delaware General Corporation Law. The Audit Committee, consisting of
Messrs. Meister and Liebman and Dr. Roche, makes recommendations to the
Board of Directors regarding the engagement of the Company's independent
auditors, reviews the plan, scope and results of the audit, reviews with
the auditors and management the Company's policies and procedures with
respect to internal accounting and financial controls and reviews changes
in accounting policy and the scope of the non-audit services which may be
performed by the Company's independent auditors. The Compensation
Committee, consisting of Messrs. Gittis and Liebman and Dr. Roche, makes
recommendations to the Board of Directors regarding compensation,
benefits and incentive arrangements for officers and other key managerial
employees of the Company. The Compensation Committee may consider and
recommend awards of options to purchase shares of Common Stock pursuant
to the Company's 1997 Plan.
During 1996, the Board of Directors acted four times by unanimous
written consent and held four meetings. During 1996, the Executive
Committee acted 15 times by unanimous written consent. The Compensation
Committee held four meetings and the Audit Committee held three meetings
during 1996.
Compensation of Directors
Directors who are not currently receiving compensation as
officers or employees of the Company or any of its affiliates are paid an
annual $25,000 retainer fee, payable in monthly installments, plus
reasonable out-of-pocket expenses and a fee of $1,000 for each meeting of
the Board of Directors or any committee thereof they attend.
Executive Officers
The following table sets forth as of the date hereof the
executive officers of the Company and executives of its operating
subsidiary, Pneumo Abex, which does business under the name Mafco
Worldwide Corporation ("Mafco Worldwide").
Name Position
Ronald O. Perelman Chairman of the Board and Director
Theo W. Folz President, Chief Executive Officer and Director
Irwin Engelman Executive Vice President and Chief Financial Officer
Barry F. Schwartz Executive Vice President and General Counsel
J. Eric Hanson Executive Vice President-Finance and Administration
and Director
Stephen G. Taub President and Chief Operating Officer of
Mafco Worldwide
Pramathesh S. Vora Senior Vice President of Mafco Worldwide
Peter W. Grace Senior Vice President-Finance of Mafco Worldwide
For biographical information about Messrs. Perelman, Folz and
Hanson, see "Directors and Director Nominees."
Irwin Engelman (62) has been Executive Vice President and Chief
Financial Officer since 1996 and Executive Vice President, Chief
Financial Officer and Director of Holdings and MacAndrews Holdings,
diversified holding companies, and various affiliates since 1992. Mr.
Engelman was Executive Vice President and Chief Financial Officer of GAF
Corporation, a specialty chemical and building materials company, from
1990 to 1992. Mr. Engelman is also a Director of CalFed and Revlon
Products. (On December 27, 1996, Marvel Holdings, Marvel Parent and
Marvel III, of which Mr. Engelman is an executive officer, filed voluntary
petitions for reorganization under Chapter 11 of the United States
Bankruptcy Code.)
Barry F. Schwartz (47) has been Executive Vice President and
General Counsel of the Company since 1996 and Executive Vice President
and General Counsel of Holdings and MacAndrews Holdings, diversified
holding companies, and various affiliates since 1992 and was Senior Vice
President of Holdings since 1989. (On December 27, 1996, Marvel Holdings,
Marvel Parent and Marvel III, of which Mr. Schwartz is an executive
officer, filed voluntary petitions for reorganization under Chapter 11 of
the United States Bankruptcy Code.)
Stephen G. Taub (45) has been President and Chief Operating
Officer of Mafco Worldwide since 1993. Mr. Taub was elected Senior Vice
President in 1987 and his responsibilities included the manufacturing,
botanical and spice operations of Mafco Worldwide, as well as product
marketing to the confectionery and pharmaceutical industries in Western
Europe. Mr. Taub joined Mafco Worldwide in 1975 as an Industrial Engineer
and in 1982 became Vice President of Marketing.
Pramathesh S. Vora (50) has been Senior Vice President of Mafco
Worldwide since 1993. Mr. Vora was elected Vice President of Research and
Development, including areas of quality control and technical marketing,
in 1984 and in 1986, was also given responsibility for international
tobacco sales and marketing for Europe, Asia and South America. Mr. Vora
joined Mafco Worldwide in 1977 as a chemical engineer, became the
Research and Development Manager in 1978 and was given responsibility for
Quality Control in 1982.
Peter W. Grace (51) has been Senior Vice President-Finance of
Mafco Worldwide since 1993. Mr. Grace joined Mafco Worldwide in 1978 as
Controller and was elected Vice President in 1982, responsible for all
domestic and international accounting, treasury and MIS functions.
Executive Compensation
The compensation paid to the Company's Chief Executive Officer
and each of the four most highly compensated executive officers of the
Company's principal operating business, which was acquired in late 1996,
for all services rendered during the three years ended December 31, 1996
and the compensation paid to the Company's former Chief Executive Officer
for all services rendered during the three years ended December 31, 1996
was as follows. The compensation shown includes amounts paid by Mafco
Worldwide in the periods prior to its acquisition by the Company. After
the sale of the Company's aerospace business in 1996, Albert D.
Indelicato resigned his position as President and Chief Executive
Officer.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-
Term
Compen-
sation
Annual Compensation Awards
Number of
Other Securities
Annual Underlying All
Compen- Options/ Other
Name and sation SARs Compen-
Principal Position Year Salary ($) Bonus ($) ($) (#) sation ($)
- ------------------ ---- ---------- --------- --- --- ----------
<S> <C> <C> <C> <C> <C> <C>
Albert D. Indelicato 1996 192,708 1,000,000 0 0 0
Chief Executive 1995 242,917 196,675 0 200,000 4,500(a)
Officer
and President 1994 213,500 1,100,000 0 0 12,603(a)
Theo W. Folz(b) 1996 330,000 363,000 0 0 0
Chief Executive 1995 300,000 300,000 0 0 0
Officer and President
Stephen G. Taub 1996 400,000 475,000 0 0 3,963(c)
President and Chief 1995 370,000 475,000 0 0 10,312(c)
Operating Officer 1994 290,000 290,000 0 0 4,748(c)
Pramathesh S. Vora 1996 180,000 198,000 0 0 4,137(c)
Senior Vice President 1995 170,000 107,500 0 0 4,699(c)
1994 140,000 84,000 0 0 4,414(c)
Peter W. Grace 1996 158,500 174,350 0 0 4,139(c)
Senior Vice President- 1995 150,000 90,000 0 0 5,219(c)
Finance 1994 140,000 94,000 0 0 4,278(c)
</TABLE>
_______________________
(a) Represents the Company's contributions to the Savings and Profit
Sharing Plan and Executive Retirement and Savings Program.
(b) Mr. Folz became Chief Executive Officer and President of the
Company in late 1996.
(c) Represents, in each case, 401(k) contributions of $3,000 per
year with the remainder going to the Supplemental Medical and Dental
Expense Plan benefits paid by Mafco Worldwide.
Aggregated Option/SAR Exercises in 1996
and Year End 1996 Option/SAR Values
The following chart shows, for 1996, the number of stock options
exercised and the 1996 year-end value of the options held by the
Company's former Chief Executive Officer; the other executive officers
named in the Summary Compensation Table did not hold options at any time
during 1996:
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares at Year End (#) Year End ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#)(a) Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C>
Albert D. Indelicato 0 (a) 0 0
</TABLE>
__________________
(a) In 1996, in connection with the sale of the aerospace business,
all outstanding employee stock options were cancelled and the
optionees were paid amounts in respect of such options in
accordance with agreements entered into with such optionees. In
1996, in connection with the sale of the aerospace business,
Mr. Indelicato received a bonus of $1,000,000 which included
payment in exchange for the cancellation of Mr. Indelicato's
200,000 options.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the
"Compensation Committee") is comprised of Messrs. Gittis and Liebman and
Dr. Roche, none of whom are officers of the Company. The Compensation
Committee's duties include determination of the Company's compensation
and benefit policies and practices for executive officers and key
managerial employees. In accordance with rules established by the
Securities and Exchange Commission (the "SEC"), the Company is required
to provide certain data and information in regard to the compensation
provided to the Company's Chief Executive Officer and the four other most
highly compensated executive officers. The Compensation Committee has
prepared the following report for inclusion in this Proxy Statement.
Compensation Policies. The overall objectives of the Company's
compensation program are to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals
inherent in the Company's business strategy, to maximize the link between
executive and stockholder interests through a stock option plan and to
recognize individual contributions as well as overall business results.
To achieve these objectives, the Company has developed an overall
compensation strategy and specific compensation plans that tie a
substantial portion of an executive's compensation to performance.
During 1996, the Company sold the assets of its aerospace
business and acquired the licorice extract and flavorings business of
Mafco Worldwide, its present operating business. As a result, there have
been substantial changes in the Company's management. The Company's
present Chief Executive Officer had been and continues to be the Chief
Executive Officer of the Mafco Worldwide business.
The key elements of the Company's compensation program consist of
fixed compensation in the form of base salary, and variable compensation
in the forms of annual incentive compensation and stock option awards. An
executive officer's annual base salary represents the fixed component of
such executive officer's total compensation, and variable compensation is
intended to comprise a substantial portion of an executive's total
annual compensation. The Compensation Committee's policies with respect
to each of these elements, including the bases for the compensation
awarded to Mr. Folz, the Company's Chief Executive Officer, are discussed
below. In addition, while the elements of compensation described below
are considered separately, the Compensation Committee takes into account
the full compensation package afforded by the Company to the individual,
including pension benefits, insurance and other benefits, as well as the
programs described below.
Base Salaries. Base salaries for executive officers are
determined based upon the Compensation Committee's evaluation of the
responsibilities of the position held and the experience of the
individual, and by reference to historical levels of salary paid by the
Company and its predecessors.
Salary adjustments are based on a periodic evaluation of the
performance of the Company and each executive officer, as well as
financial results of the business. The Compensation Committee takes into
account the effect of corporate transactions that have been consummated
during the relevant year and, where appropriate, also considers
non-financial performance measures. These include increases in market
share, manufacturing efficiency gains, improvements in product quality
and improvements in relations with customers, suppliers and employees.
Annual Incentive Compensation Awards. The variable compensation
payable annually to executive officers (including the Chief Executive
Officer) generally consists principally of annual incentive
compensation awards. Annual incentive compensation is payable pursuant to
contractual provisions with certain executives which provide eligibility
to receive bonuses under the Company's Performance Bonus Plan determined
in accordance with a formula relating to achievement of Company
performance goals. The Performance Bonus Plan is described elsewhere in
this Proxy Statement. Such performance goals, are based upon the
Company's operating income. The annual incentive compensation earned by
the executives with respect to 1996 was determined in accordance with
such provisions.
Other Incentive Compensation Awards. The other principal
component of executives' compensation is stock options, which are
intended as a tool to attract, provide incentive to and to retain those
executives who make the greatest contribution to the business, and who
can have the greatest effect on the long-term profitability of the
Company. The exercise price of stock options is set at a price equal to
the market price of the Common Stock at the time of the grant. The
options therefore do not have any value to the executive unless the
market price of the Common Stock rises. The Compensation Committee
believes that these stock options more closely align the executives'
interests with those of its stockholders, and focus management on
building profitability and long-term stockholder value.
In 1996, in connection with the sale of the aerospace business,
all outstanding employee stock options were cancelled and the optionees
were paid amounts in respect of such options in accordance with
agreements entered into with such optionees. As a result of the
acquisition of the Mafco Worldwide business, in the beginning of 1997,
option grants were made to the management and key employees of the
Company under the Power Control Technologies Inc. 1995 Stock Option Plan
(the "1995 Plan"). In addition, in early 1997, the Company adopted the
Power Control Technologies Inc. 1997 Stock Option Plan (the "1997 Plan")
so that the Company would have options available for future grants.
Chief Executive Officer Compensation. Mr. Folz serves as Chief
Executive Officer of the Company and has served as Chief Executive
Officer of the Mafco Worldwide business for the past two years. Mr. Folz
also serves as the Chief Executive Officer of the Company's affiliate,
Consolidated Cigar Holdings Inc. Mr. Folz's level of compensation from
the Company was continued at the same level as the compensation paid
prior to the acquisition of the Mafco Worldwide business and, therefore,
was not established by the Compensation Committee. Nonetheless, the
Compensation Committee believes Mr. Folz's compensation from the Company
is appropriate in light of the experience and expertise Mr. Folz brings
to the position and the fact that Mr. Folz does not devote full time to
his position with the Company, and considering compensation levels of
Chief Executive Officers of comparable companies (including, but not
limited to, companies comprising the peer group selected for the
performance graph, as well as other companies of similar size with which
the Compensation Committee believes the Company competes for executive
talent). No specific weight is given by the Compensation Committee to any
of the foregoing factors. As additional compensation and to align Mr.
Folz's interest with the interests of the Company's stockholders, in
early 1997 Mr. Folz also was granted options to acquire shares of the
Company's Common Stock.
Deductibility of Compensation. The Compensation Committee intends
to limit executive compensation in order to ensure full deductibility of
compensation in light of the limitation on the deductibility of certain
compensation in excess of one million dollars under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The 1995 Plan, the
Performance Bonus Plan and the 1997 Plan, described elsewhere in this Proxy
Statement, are designed so as to cause stock options and bonuses granted
thereunder to be exempt from the limitations contained in such Section 162(m).
The Compensation Committee
of the Board of Directors
Howard Gittis, Chairman
Lance Liebman
James G. Roche
Compensation Committee Interlocks and Insider Participation
Howard Gittis, Lance Liebman and James G. Roche served on the
Compensation Committee during 1996.
Employment Arrangements
Certain of the executive officers of the Company's principal
operating subsidiary are parties to employment agreements with Mafco
Worldwide or Mafco Consolidated. The following is a description of
certain terms of such agreements.
Mr. Folz has an employment contract with Mafco Consolidated which
includes compensation for his duties as Chief Executive Officer of Mafco
Worldwide. The portion allocable to Mafco Worldwide is reimbursed by
Mafco Worldwide and is shown in the compensation table above. Mr. Folz
received no other benefits from Mafco Worldwide nor is he a participant
in the Mafco Worldwide pension plans. Mr. Folz is not entitled to receive
any severance payments from Mafco Worldwide or the Company.
Mafco Worldwide entered into an employment agreement with Mr.
Taub which provides for him to be employed commencing on September 1,
1996 through December 31, 2000. At any time on or after December 31,
1999, Mafco Worldwide will have the right to give written notice of the
non-renewal of the employment term. Upon the giving of such notice, the
employment term is automatically extended so that it ends twelve months
after the last day of the month in which the notice was given. From and
after January 1, 2001, the employment term is extended on a day-to-day
basis until Mafco Worldwide gives notice of non-renewal, as described
above. Mr. Taub will be paid an annual base salary of not less than
$500,000, subject to increase at the discretion of Mafco Worldwide. In
addition, subject to approval by the stockholders, Mr. Taub may earn a
performance bonus of up to 150% of base salary, subject to an annual
maximum of $1 million, pursuant to his participation in the Performance
Bonus Plan as set forth in his employment agreement. See Proposal
5-Approve the Adoption of the Performance Bonus Plan. In the event of a
breach of the agreement by Mafco Worldwide, Mr. Taub is entitled to
terminate the employment agreement; in that event or in the event that
Mafco Worldwide terminates the agreement other than for cause or Mr.
Taub's disability, Mr. Taub is generally entitled to receive payment of
base salary and bonus and the continuation of benefits for the longer of
the remaining term of the agreement or twelve months, offset by any other
compensation Mr. Taub earns during this period.
Mafco Worldwide also entered into employment agreements with
Messrs. Grace and Vora which provide for each to be employed commencing
on September 1, 1996, through December 31, 1999. At any time on or after
December 31, 1998, Mafco Worldwide will have the right to give notice of
the non-renewal of the employment term. Upon the giving of such notice
the employment term is automatically extended so that it ends twelve
months after the last day of the month in which the notice was given.
From and after January 1, 2000 the employment term is extended on a
day-to-day basis until Mafco Worldwide gives notice of non-renewal, as
described above. Mr. Grace will be paid an annual base salary of not less
that $158,500, subject to increase at the discretion of Mafco Worldwide.
Mr. Vora will be paid an annual base salary of not less than $180,000,
also subject to increase at the discretion of Mafco Worldwide. In
addition, subject to approval by the stockholders, Messrs. Grace and Vora
may each earn a performance bonus of up to 150% of base salary, subject
to an annual maximum of $1 million, pursuant to their participation in
the Performance Bonus Plan as set forth in their respective employment
agreements. All such bonus payments are subject to stockholder approval
of the Performance Bonus Plan. See Proposal 5-Approve the Adoption of the
Performance Bonus Plan. In the event of a breach of an agreement by Mafco
Worldwide, Messrs. Grace and Vora are entitled to terminate their
respective employment agreements; in that event or in the event that
Mafco Worldwide terminates an agreement other than for cause or
disability, the executive is generally entitled to receive payment of
base salary and bonus and the continuation of benefits for the longer of
the remaining term of the agreement or twelve months, offset by any other
compensation the executive earns during this period.
On January 7, 1997, the Company entered into an employment
agreement with Mr. Hanson which provides for him to be employed
commencing January 1, 1997 through December 31, 1999. At any time on or
after January 1, 1999, the Company will have the right to give written
notice of the non-renewal of the employment term. Upon the giving of such
notice, the employment term is automatically extended so that it ends
twenty-four months after the last day of the month in which the notice
was given. From and after December 31, 1999, the employment term is
extended on a day-to-day basis until the Company gives notice of
non-renewal, as described above. Mr. Hanson will be paid an annual base
salary of not less than $491,000 through September 30, 1997, and not less
than $500,000 thereafter. Mr. Hanson is also eligible for a discretionary
bonus as determined by the Board of Directors. In the event of a breach
of the agreement by the Company, Mr. Hanson is entitled to terminate the
employment agreement; in that event or in the event that the Company
terminates the agreement other than for cause or Mr. Hanson's disability,
Mr. Hanson is generally entitled to receive payment of base salary and
the continuation of benefits for the longer of the remaining term of the
agreement or twenty-four months, offset by certain other compensation Mr.
Hanson earns during the period.
Common Stock Performance
The Company's Common Stock commenced trading on the New York
Stock Exchange (the "NYSE") on June 16, 1995. The two graphs set forth
below present a comparison of cumulative shareholder return through
December 31, 1996, assuming reinvestment of dividends, by an investor who
invested $100 on June 16, 1995 in each of (i) the Common Stock, (ii) the
S & P 500 Composite Index (the "S & P 500 Index") and (iii) a peer group
composed of the companies in the Dow Jones Food Index (Graph 1) and a
peer group of aerospace companies (the "Aerospace Index") (Graph 2). The
two performance graphs are provided because the Company's line of
business changed in 1996 from aerospace to the food business.
Comparison of Cumulative Total Return Among
Company Common Stock, the S & P 500
Index and the Dow Jones Food Index
[GRAPH APPEARS HERE]
Measurement Period Dow Jones
(Fiscal Year Covered) Company S&P 500 Index Food Index
- --------------------- ------- ------------- ----------
Measurement Pt. $100.00 $100.00 $100.00
6/16/95
FYE 12/31/95 $152.00 $116.00 $114.00
FYE 12/31/96 $143.00 $142.00 $133.00
Comparison of Cumulative Total Return Among
Company Common Stock, the S & P 500
Index and the Aerospace Index
[GRAPH APPEARS HERE]
Measurement Period Aerospace
(Fiscal Year Covered) Company S&P 500 Index Index (a)
- --------------------- ------- ------------- ---------
Measurement Pt. $100.00 $100.00 $100.00
6/16/95
FYE 12/31/95 $152.00 $116.00 $118.00
FYE 12/31/96 $143.00 $142.00 $160.00
- ------------------------------
(a) Includes Allied-Signal, BE Aerospace Inc., Curtiss-Wright
Corp., Goodrich (B.F.) Company, Honeywell
Inc., Moog Inc, Parker Hannifin Corp., Precision Castparts
Corp., Rohr Inc., and Sundstrand Corp.
Retirement Plans
Albert D. Indelicato is a participant in the Pneumo Abex
Retirement Income Plan (the "PACRIP"). Under the PACRIP, Mr. Indelicato
had 24 full years of credited service as of December 31, 1996 and is
currently entitled to an annual retirement benefit of approximately
$64,446 under such plan, expressed as a basic life annuity.
Pension Plan for Salaried Employees.
The following table sets forth information concerning the
estimated annual benefits payable to Messrs. Taub, Grace and Vora under
Mafco Worldwide's Defined Benefit Pension Plan (the "Salaried Pension
Plan") effective as of December 31, 1990, established in replacement of a
prior plan. Participants in the Salaried Pension Plan generally include
participants under the prior plan and certain salaried employees who are
at least age 21 and credited with at least one thousand hours of service
in any Plan Year (as defined in the Salaried Pension Plan) since the date
such employee commenced employment.
Benefits to participants vest fully after five years of service
and such benefits are determined primarily by a formula taking into
account an average final compensation determined by averaging the three
consecutive completed calendar years of greatest compensation earned
during the participant's service to Mafco Worldwide and the number of
years of service attained by the individual participants. Benefits are
subject to the maximum limitations imposed by federal law on pension
benefits. The annual limitation in 1996 was $120,000 based on a maximum
allowable compensation of $150,000. Such compensation is composed
primarily of regular base salary, bonus and employers contributions to
qualified deferred compensation plans. Subject to certain restrictions,
participants may make voluntary after-tax contributions of up to ten
percent of their aggregate compensations. Any such voluntary
contributions are fully vested and nonforfeitable at all times.
Mafco Worldwide has established the Mafco Worldwide Corporation
Benefit Restoration Plan (the "Restoration Plan") effective January 1,
1994 which was designed to restore retirement benefits to those employees
whose eligible pension earnings were limited to $150,000 under
regulations enacted by the Internal Revenue Service. The Omnibus Budget
Reconciliation Act of 1993 ("OBRA '93") limited pension benefits under
tax qualified plans, based on maximum compensation of $150,000, which
will be adjusted annually based upon inflation. Had the enactment of OBRA
'93 not limited pension benefits under tax qualified plans, the limit
would have been $255,300 in 1996. The Restoration Plan was established to
provide pension benefits to those employees who would have lost benefits
due to the reduction in the maximum compensation allowed for the
calculation of benefits under the Salaried Pension Plan. The Restoration
Plan will not be funded and all other vesting and payment rules will
follow the Salaried Pension Plan.
The following table shows estimated annual benefits payable upon
retirement under the Salaried Pension Plan and the Restoration Plan:
<TABLE>
<CAPTION>
Highest
Consecutive
Three Year
Average Estimated Annual Straight Life Annuity Benefits at Retirement
Compensation with Indicated Years of Credited Service
-------------- ----------------------------------------
15 20 25 30 35
---- ---- ---- ---- ---
<S> <C> <C> <C> <C> <C> <C>
100,000 25,226 33,635 42,044 42,044 42,044
125,000 32,726 43,635 54,544 54,544 54,544
150,000 40,226 53,635 67,044 67,044 67,044
175,000 47,726 63,635 79,544 79,544 79,544
200,000 55,226 73,635 92,044 92,044 92,044
225,000 62,726 83,635 104,544 104,544 104,544
250,000 69,854 93,139 116,424 116,424 116,424
300,000+ 69,854 93,139 116,424 116,424 116,424
</TABLE>
Benefits shown above reflect the straight life annuity benefit form of
payment for employees, assume normal retirement at age 65, reflect the
deduction for Social Security amounts, but do not reflect the offset for
the actuarial equivalent of the benefit derived from the employer
contribution account in the 401(k) Plan.
As of December 31, 1996, credited years of service for each of
the following individuals were as follows: Mr. Taub, 21 years; Mr. Grace,
19 years; and Mr. Vora, 20 years.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers
and directors, and persons who own more than ten percent of a registered
class of the Company's equity securities, to file reports of ownership
and changes in ownership on Forms 3, 4 and 5 with the SEC and the NYSE.
Officers, directors and greater than ten percent owners are required to
furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms
it has received and written representations from certain reporting
persons that they were not required to file Forms 5 for a specified
fiscal year, the Company believes that all its officers, Directors and
greater than ten percent beneficial owners complied with all filing
requirements applicable to them with respect to transactions during 1996.
PROPOSAL 2 - RATIFICATION OF SELECTION OF AUDITORS
On November 25, 1996, the Company engaged Ernst & Young LLP to
replace Arthur Andersen LLP as its independent auditors. The Company's
decision to change independent auditors was made in connection with the
Company's acquisition of the Flavors Business from Mafco Consolidated.
Ernst & Young LLP has been the independent auditors for the Flavors
Business since 1987 and is also the auditor for Mafco Consolidated.
The change of auditors was approved by the Company's Board of
Directors upon the recommendation of the Audit Committee of the Board of
Directors.
In connection with the audits of the Company's financial
statements for each of the years in the two year period ended December
31, 1995, and the subsequent interim period, there have been no
disagreements with Arthur Andersen LLP on any matters of accounting
principles or practices, financial statement disclosure or auditing scope
and procedures. The reports of Arthur Andersen LLP on the Company's
financial statements for each of the years in the two year period ended
December 31, 1995 did not contain any adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit
scope, or accounting principles.
The ratification of the selection of Ernst & Young LLP will
require the affirmative vote of the holders of a majority of the votes
cast, in person or represented by proxy, at the Annual Meeting. Under
applicable Delaware law, in tabulating the votes, abstentions from voting
on the ratification of the auditors (including broker non-votes) will be
counted and will have the same effect as a vote against the proposal.
Ernst & Young LLP representatives will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire
to do so and will be available to respond to appropriate questions.
The Company recommends that stockholders vote FOR the
ratification of the selection of Ernst & Young LLP as the Company's
independent auditors for 1996.
PROPOSAL 3 - APPROVE THE PROPOSED AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION
CHANGING THE NAME OF THE COMPANY
The Board of Directors has proposed and recommended an amendment
(the "Amendment") to Article "FIRST" of the Company's Restated
Certificate of Incorporation to read as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is M & F WORLDWIDE CORP.
The officers and directors of the Company believe a change in the
name of the Company is desirable to more accurately reflect its current
business and its plans for the future. Significant changes have occurred
at the Company in the past year; the Company sold the assets of its
aerospace business and acquired the licorice extract and flavoring
business of Mafco Worldwide, its present operating business. Accordingly,
the officers and directors of the Company believe that changing the
Company's name to "M & F Worldwide Corp." will project a more appropriate
corporate identity.
The approval of the Amendment will require the affirmative vote
of the holders of a majority of the shares of Common Stock outstanding
and entitled to vote at the Annual Meeting. Under applicable Delaware
law, in tabulating the votes, abstentions from voting on the approval of
the Amendment (including broker non-votes) will be counted and will have
the same effect as a vote against the proposal.
The Company recommends that stockholders vote FOR the approval of
the Amendment to the Company's Restated Certificate of Incorporation
effecting the corporate name change.
PROPOSAL 4 - APPROVE THE ADOPTION OF THE
POWER CONTROL TECHNOLOGIES INC. 1997 STOCK OPTION PLAN
Description of the 1997 Plan
The Company, subject to the approval of its stockholders, has
adopted the Power Control Technologies 1997 Stock Option Plan (the "1997
Plan"). A maximum of 1,000,000 shares of Common Stock has been reserved
for issuance under the 1997 Plan, subject to equitable adjustment upon
the occurrence of any stock dividend, stock split, recapitalization,
combination or exchange of shares.
Unless otherwise determined by the Board of Directors of the
Company, the 1997 Plan shall be administered by a committee appointed by
the Board ("Compensation Committee"), which shall consist of two or more
members of the Board who are "outside directors" within the meaning of
Section 162(m) of the Code. The Compensation Committee may, in its
discretion, delegate to a subcommittee its duties hereunder, including
the grant of Options and Rights. The full Board shall also have the
authority, in its discretion, to grant Options and Rights under the 1997
Plan and to administer the 1997 Plan. For all purposes under the 1997
Plan, any entity which performs the duties described herein, shall be
referred to as the "Committee." The Committee shall have full authority,
subject to the provisions of the 1997 Plan, among other things, to
determine the persons to whom options or stock appreciation rights will
be granted, to determine the exercise price of the stock options and to
prescribe, amend and rescind rules and regulations relating to the 1997
Plan.
Grants of stock options and stock appreciation rights
(collectively, "Awards") may be made under the 1997 Plan to selected
employees, directors (including directors who are not employees) and
consultants of the Company and its present or future affiliates, in the
discretion of the Committee. Stock options may be either "incentive stock
options," as such term is defined in Section 422 of the Code, or
nonqualified stock options. The exercise price of a nonqualified stock
option may be above, at or below the fair market value per share of
Common Stock on the date of grant; the exercise price of an incentive
stock option may not be less than the fair market value per share of
Common Stock on the date of grant.
Stock appreciation rights may be granted alone or in tandem with
stock options. A stock appreciation right is a right to be paid an
amount equal to the excess of the fair market value of a share of Common
Stock on the date the stock appreciation right is exercised over either
the price per share specified in the applicable Award agreement (in case
of a free standing stock appreciation right) or the exercise price of the
related stock option (in case of a tandem stock appreciation right), with
payment to be made in cash, Common Stock, or both as specified in the
Award agreement or determined by the Committee.
No person may be granted stock options or stock appreciation
rights under the 1997 Plan in any calendar year representing an aggregate
of more than 600,000 shares of Common Stock. Stock options and stock
appreciation rights shall be exercisable at the times and upon the
conditions that the Committee may determine, as reflected in the
applicable Award agreement. The exercise period shall be determined by
the Committee; provided, however, that in the case of an incentive stock
option, such exercise period shall not exceed ten (10) years from the
date of grant of such incentive stock option.
Except to the extent the Committee provides otherwise, in the
event that the employment of a grantee shall terminate (other than by
reason of death or disability), all stock options and stock appreciation
rights that are not exercisable at the time of such termination shall
terminate and all stock options and stock appreciation rights that are
exercisable at the time of such termination may be exercised for a period
of three months immediately following such termination (but in no case
after the Awards expire in accordance with their terms). Except to the
extent the Committee provides otherwise, in the event that the employment
of a grantee shall terminate by reason of death or disability, all stock
options and stock appreciation rights that are not exercisable at the
time of such termination shall terminate and all stock options and stock
appreciation rights that are exercisable at the time of such termination
may be exercised for a period of one year immediately following such
termination (but in no case after the Awards expire in accordance with
their terms).
Except to the extent the Committee provides otherwise, Awards
granted under the 1997 Plan shall not be transferable otherwise than by
will or by the laws of descent and distribution. The 1997 Plan may, at
any time and from time to time, be altered, amended, suspended, or
terminated by the Board of Directors, in whole or in part; provided that,
unless otherwise determined by the Board, an amendment that requires
stockholder approval in order for the 1997 Plan to continue to comply
with Section 162(m) of the Code or any other law, regulation or stock
exchange requirement shall not be effective unless approved by the
requisite vote of stockholders. In addition, no amendment may be made
which adversely affects any of the rights of a grantee under any Award
theretofore granted, without such grantee's consent.
Certain Federal Income Tax Consequences of Awards
The following discussion is a brief summary of the principal
United States Federal income tax consequences under current Federal
income tax laws relating to Awards under the 1997 Plan. This summary is
not intended to be exhaustive and, among other things, does not describe
state, local or foreign income and other tax consequences.
Non-Qualified Stock Options. An optionee will not recognize any
taxable income upon the grant of a nonqualified stock option and the
Company will not be entitled to a tax deduction with respect to the grant
of a nonqualified stock option. Upon exercise, the excess of the fair
market value of a share of Common Stock on the exercise date over the
option exercise price will be taxable as ordinary income to the optionee
and will be subject to applicable withholding taxes. The Company will
generally be entitled to a tax deduction at such time in the amount of
such ordinary income.
In the event of a sale of a share of Common Stock received upon
the exercise of a nonqualified stock option, any appreciation or
depreciation after the exercise date generally will be taxed as capital
gain or loss and will be long-term capital gain or loss if the holding
period for such Common Stock is more than one year.
Incentive Stock Options. An optionee will not recognize any
taxable income at the time of grant or timely exercise of an incentive
stock option and the Company will not be entitled to a tax deduction with
respect to such grant or exercise. Exercise of an incentive stock option
may, however, give rise to taxable compensation income subject to
applicable withholding taxes, and a tax deduction to the Company, if the
incentive stock option is not exercised on a timely basis (generally,
while the optionee is employed by the Company or within 90 days after
termination of employment) or if the optionee subsequently engages in a
"disqualifying disposition," as described below. The amount by which
the fair market value of the Common Stock on the exercise date of an
incentive stock option exceeds the exercise price generally will increase
the optionee's "alternative minimum taxable income."
A sale or exchange by an optionee of shares acquired upon the
exercise of an incentive stock option more than one year after the
transfer of the shares to such optionee and more than two years after the
date of grant will result in any difference between the net sale proceeds
and the exercise price being treated as long-term capital gain (or loss)
to the optionee. If such sale or exchange takes place within two years
after the date of grant of the incentive stock option or within one year
from the date of transfer of the incentive stock option shares to the
optionee, such sale or exchange will generally constitute a
"disqualifying disposition" of such shares that will have the following
results: any excess of (i) the lesser of (a) the fair market value of the
shares at the time of exercise and (b) the amount realized on such
disqualifying disposition of the shares over (ii) the option exercise
price of such shares, will be ordinary income to the optionee, subject to
applicable withholding taxes, and the Company will be entitled to a tax
deduction in the amount of such income. Any further gain or loss after
the date of exercise generally will qualify as capital gain or loss and
will not result in any deduction by the Company.
Exercise with Shares. If an optionee uses previously acquired
shares of Common Stock to pay the exercise price of an option, the
optionee would not ordinarily recognize any taxable income to the extent
that the number of new shares of Common Stock received upon exercise of
the option does not exceed the number of previously acquired shares so
used. If non-recognition treatment applies to the payment for option
shares with previously acquired shares, the tax basis of the option
shares received without recognition of taxable income is the same as the
basis of the shares surrendered as payment. In the case of an incentive
stock option, if a greater number of shares of Common Stock is received
upon exercise than the number of shares surrendered in payment of the
option price, such excess shares will have a zero basis in the hands of
the holder. Where a nonqualified stock option is being exercised, the
option holder will be required to include in gross income (and the
Company will be entitled to deduct) an amount equal to the fair market
value of the additional shares on the date the option is exercised less
any cash paid for the shares. Moreover, if the stock previously acquired
by exercise of an incentive stock option is transferred in connection
with the exercise of another option whether or not an incentive stock
option, and if, at the time of such transfer, the stock so transferred
has not been held for the holding period required in order to receive
favorable treatment under the rules governing incentive stock option,
then such transfer will be treated as a disqualifying disposition of the
shares so transferred.
Stock Appreciation Rights. The grant of stock appreciation rights
has no federal income tax consequences at the time of grant. Upon the
exercise of stock appreciation rights, the amount received (or the fair
market value of the Common Stock received) is generally taxable as
ordinary income, and the Company is entitled to a corresponding
deduction. Upon the sale of the Company's Common Stock acquired by the
exercise of stock appreciation rights, employees will recognize capital
gain or loss (assuming such stock was held as a capital asset) in an
amount equal to the difference between the amount realized upon such sale
and the fair market value of the stock on the date that governs the
determination of such employees' ordinary income.
The approval of the adoption of the 1997 Plan will require the
affirmative vote of the majority of the votes cast, in person or
represented by proxy, at the Annual Meeting. Under applicable Delaware
law, in tabulating the votes, abstentions from voting on the approval
of adoption of the 1997 Plan (including broker non-votes) will be counted
and will have the same effect as a vote against the proposal.
The Company recommends that stockholders vote FOR the approval of
the adoption of the 1997 Plan.
PROPOSAL 5 - APPROVE THE ADOPTION OF THE PERFORMANCE
BONUS PLAN
Mafco Worldwide has entered into employment agreements with
Messrs. Taub, Grace and Vora, each of which provides, among other things,
for payment of bonuses (the "Performance Bonus Plan"), subject to
approval by stockholders of the Performance Bonus Plan. Compensation
payable under the Performance Bonus Plan is intended to qualify as
"performance based compensation" under Section 162(m) of the Code. Under
the Performance Bonus Plan, the participants are eligible to receive
annual performance bonus awards based upon achievement of performance
goals established by the Compensation Committee and set forth in their
respective employment agreements. Performance goals under the Performance
Bonus Plan are based upon the achievement of EBITDA goals set forth in
the Company business plan during each calendar year. The payments under
the Performance Bonus Plan may not exceed $1,000,000 with respect to any
participant in any calendar year and shall not be made unless the
Compensation Committee certifies that the performance goals with respect
to the applicable year have been met.
The approval of the Performance Bonus Plan will require the
affirmative vote of the majority of the votes cast, in person or
represented by proxy, at the Annual Meeting. Under applicable Delaware
law, abstentions from voting on the approval of the adoption of the
Performance Bonus Plan (including broker non-votes) will be counted and
will have the same effect as a vote against the proposal.
The Company recommends that stockholders vote FOR the approval of
the adoption of the Performance Bonus Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS
The following table sets forth as of February [ ], 1997, the
total number of shares of Common Stock beneficially owned, and the
percent so owned, by each Director of the Company, by each person known
to the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, by the officers named in the summary
compensation table and by all Directors and officers (including a former
executive officer) as a group. The number of shares owned are those
"beneficially owned," as determined under the rules of the SEC, and such
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which a person has sole or shared voting power or investment power
and any shares of Common Stock which the person has the right to acquire
within 60 days through the exercise of any option, warrant or right,
through conversion of any security, or pursuant to the automatic
termination of power of attorney or revocation of trust, discretionary
account or similar arrangement.
Amount and Nature
of Beneficial Percent of
Ownership(a) Class
Ronald O. Perelman (b) 8,439,400 36.4%
35 East 62nd Street
New York, NY 10021
Jaymie A. Durnan 0 *
Theo W. Folz 0 *
Howard Gittis 0 *
J. Eric Hanson 7,400 *
Lance Liebman 0 *
Paul M. Meister 76,402 *
James G. Roche 0 *
Bruce Slovin 0 *
Albert D. Indelicato 175,576 *
Stephen G. Taub 0 *
Pramathesh S. Vora 0 *
Peter W. Grace 0 *
All Directors and executive officers
as a group ([ ] persons)
_____________________
* Less than 1%.
(a) Includes Common Stock and options exercisable within 60 days.
(b) Represents outstanding shares of Common Stock owned indirectly
through Mafco Consolidated, which is 85% owned by Holdings.
Holdings is wholly owned by Mr. Perelman. Of such shares of Common
Stock, 2,500,000 represent shares of Common Stock issuable upon the
conversion of 20,000 shares of Series A Preferred Stock owned by
Mafco Consolidated. All of the shares owned are pledged to secure
obligations. In addition, shares of intermediate holding companies
are or may from time to time be pledged to secure obligations of
Holdings or its affiliates.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mafco Consolidated beneficially owns 36.4% of the outstanding
Common Stock of the Company (assuming conversion of the Series A
Preferred Stock).
Transfer Agreement
In connection with the merger of Abex, Inc. ("Abex"), currently
known as Mafco Consolidated Group Inc., and a wholly owned subsidiary of
Holdings (the "Abex Merger") and the related transfer (the "Transfer") to
a subsidiary of Mafco Consolidated of substantially all of Abex's
consolidated assets and liabilities with the remainder being retained by
the Company, the Company and a subsidiary of Abex and certain other
subsidiaries of Abex entered into a Transfer Agreement (the "Transfer
Agreement"). The Transfer Agreement provides for appropriate transfer,
indemnification and tax sharing arrangements, in a manner consistent with
applicable law and existing contractual arrangements.
The Transfer Agreement requires such subsidiary to undertake
certain administrative and funding obligations with respect to certain
asbestos claims and other liabilities retained by the Company. The
Company will be obligated to make reimbursement for the amounts so funded
only when amounts are received by the Company under related
indemnification and insurance arrangements. Such administrative and
funding obligations would be terminated as to asbestos products claims in
the case of a bankruptcy of Pneumo Abex or the Company or of certain
other events affecting the availability of coverage for such claims from
third party indemnitors and insurers. The Transfer Agreement further
provides for certain funding indemnification and cooperation arrangements
between the Company and such subsidiary in respect of certain liabilities
which may arise under the Employee Retirement Income Security Act of 1974
in respect of the sale of Abex Friction Products on November 21, 1994.
The Transfer Agreement also provides that the Company will be
reimbursed by a subsidiary of Mafco Consolidated at the end of 1995,
1996, 1997 and 1998 for amounts spent by the Company in excess of $1.5
million during each such period in connection with certain costs and
expenses incurred by the Company by virtue of being a public company,
such as compliance with certain Commission and stock exchange filing
requirements. Such reimbursement obligation is subject to early
termination in the case of certain "change in control" events affecting
the Company. No such reimbursements were required to be made in 1995 and
1996,
Registration Rights Agreement
In connection with the Abex Merger, Mafco Consolidated and the
Company entered into a Registration Rights Agreement providing Mafco
Consolidated with the right to require the Company to use its best
efforts to register under the Securities Act of 1933, as amended (the
"Securities Act"), and the securities or blue sky laws of any
jurisdiction designated by Mafco Consolidated all or a portion of the
issued and outstanding Common Stock, if any, retained (the "Retained
Shares") by Mafco Consolidated in the Abex Merger (as a result of the
exercise of appraisal rights) or issuable upon conversion (the
"Conversion Shares") of the Series A Preferred Stock (collectively, the
"Registrable Shares"). Such demand rights are subject to the conditions
that the Company is not required to (i) effect a demand registration in
the first year following the effective time of the Abex Merger other than
in respect of the Retained Shares, (ii) effect a demand registration more
than once in any 12 month period, (iii) effect more than one demand
registration with respect to the Retained Shares and two demand
registrations with respect to the Conversion Shares, or (iv) file a
registration statement during periods (not to exceed three months) (a)
when the Company is contemplating a public offering, (b) when the Company
is in possession of certain material non-public information, or (c) when
audited financial statements are not available and their inclusion in a
registration statement is required. In addition, and subject to certain
conditions described in the Registration Rights Agreement, if at any time
the Company proposes to register under the Securities Act an offering of
Common Stock or any other class of equity securities, then Mafco
Consolidated will have the right to require the Company to use its best
efforts to effect the registration under the Securities Act and the
securities or blue sky laws of any jurisdiction designated by Mafco
Consolidated of all or a portion of the Registra-ble Shares as designated
by Mafco Consolidated. The Company is responsible for all expenses
relating to the performance of, or compliance with, the Registration
Rights Agreement except that Mafco Consolidated is responsible for
underwriters' discounts and selling commissions with respect to the
Registrable Shares being sold.
Acquisition of Libra Shares
In connection with Mafco Consolidated's acquisition of 5,939,400
shares of Common Stock from Libra Invest & Trade Ltd., the Company and
Mafco Consolidated entered into an agreement pursuant to which Mafco
Consolidated agreed to certain limitations on its ability to dispose of
its shares of Common Stock or Series A Preferred Stock for a period of
three years in addition to the limitations contained in the Company's
Restated Certificate of Incorporation. Pursuant to such agreement, the
Company agreed to treat the shares so acquired as "Registrable Shares"
under the Registration Rights Agreement.
On February 5, 1996, all of the shares of Common Stock and Series
A Preferred Stock owned by Mafco Consolidated were pledged to secure
certain obligations. In connection with such pledge, Mafco Consolidated
(i) entered into an agreement with the Company pursuant to which, among
other things, the Company consented to such pledge and to any sale or
other transfer of such shares which may occur upon exercise of the
pledgee's rights thereunder, subject to the pledgee's agreement to abide
by certain procedures intended to ensure compliance with the restrictions
on transfers of shares of Common Stock contained in the Company's
Restated Certificate of Incorporation and By-Laws, and (ii) assigned its
rights under the Registration Rights Agreement to the pledgee.
ADDITIONAL INFORMATION
The Company will make available a copy of its Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 and any Quarterly
Reports on Form 10-Q filed thereafter, without charge, upon written
request to the Secretary, Power Control Technologies Inc., 35 East 62nd
Street, New York, New York 10021. Each such request must set forth a good
faith representation that, as of the Record Date, March 20, 1997, the
person making the request was a beneficial owner of Common Stock entitled
to vote.
In order to ensure timely delivery of such documents prior to the
Annual Meeting, any request should be received by the Company promptly.
STOCKHOLDER PROPOSALS
Under the rules and regulations of the SEC as currently in
effect, any holder of at least $1,000 in market value of Common Stock who
has held such securities for at least one year and who desires to have a
proposal presented in the Company's proxy material for use in connection
with the Annual Meeting of stockholders to be held in 1998 must transmit
that proposal (along with his or her name, address, the number of shares
of Common Stock that he or she holds of record or beneficially, the dates
upon which the securities were acquired and documentary support for a
claim of beneficial ownership) in writing as set forth below. Proposals
of stockholders intended to be presented at the next annual meeting
must be received by the Secretary, Power Control Technologies Inc., 35
East 62nd Street, New York, New York 10021, not later than [November 1],
1997.
OTHER BUSINESS
The Company knows of no other matters which may come before the
annual meeting. However, if any such matters properly come before the
meeting, the individuals named in the proxies will vote on such matters
in accordance with their best judgment.
March [ ], 1997
By Order of the Board of Directors
PRELIMINARY COPY
FOR THE INFORMATION OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
- ---------------------------------------------------------------------------
P
R
O
X
Y
POWER CONTROL TECHNOLOGIES INC.
COMMON STOCK
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING TO BE HELD ON APRIL 15, 1996
The undersigned appoints Glenn P. Dickes, Joram C. Salig and Barry F.
Schwartz, and each of them, attorneys and proxies, each with power of
substitution, to vote all shares of Common Stock of Power Control
Technologies Inc. ("PCT") that the undersigned may be entitled to
vote at the Annual Meeting of Stockholders of PCT to be held on
Thursday, May 15, 1997 at [ ] A.M., local time, at [ ], on the
proposals set forth on the reverse side hereof and on such other
matters as may properly come before the meeting and any adjournments
or postponements thereof.
The proxy holders will vote the shares represented by this proxy in
the manner indicated on the reverse side hereof. Unless a contrary
direction is indicated, the proxy holders will vote such shares "FOR"
the proposals set forth on the reverse side hereof. If any further
matters properly come before the Annual Meeting, it is the intention
of the person named above to vote such proxies in accordance with
their best judgment.
---------------
| SEE REVERSE |
| SIDE |
---------------
- --------------------------------------------------------------------------
----
| X | PLEASE MARK YOUR
---- VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote FOR the following proposals.
-------------------------------------------------------------------------
WITHHOLD
AUTHORITY
FOR TO VOTE
ALL FOR ALL
NOMINEES NOMINEES
_ _
1. To elect Howard Gittis, J. |_| |_|
Eric Hanson and Paul M. Meister as
directors of PCT for terms
expiring in 2000 and until their
successors are duly elected and
qualified.
WITHHOLD for the following only:
(Write the name of the nominee(s)
in the space below)
-------------------------------
FOR AGAINST ABSTAIN
_ _ _
2. To approve the proposed |_| |_| |_|
amendment to the Company's
Restated Certificate of Incor-
poration, as described in the
accompanying Proxy Statement.
_ _ _
3. To approve the adoption of |_| |_| |_|
the 1997 Stock Option Plan, as
described in the accompanying
Proxy Statement.
_ _ _
4. To approve the adoption of |_| |_| |_|
the Performance Bonus Plan, as
described in the accompanying
Proxy Statement.
_ _ _
5. To ratify the appointment of |_| |_| |_|
Ernst & Young LLP as independent
certified public accountants of
PCT for the fiscal year ending
December 31, 1997.
_ _ _
6. To transact such other |_| |_| |_|
business as may properly come
before the Annual Meeting and any
adjournments or postponements
thereof.
-------------------------------------------------------------------------
SIGNATURE ------------------------------------ DATE--------------------
NOTE: Please sign exactly as name appears hereon. If a joint
account, each joint owner must sign. If signing for a
corporation or partnership or as agent, attorney or
fiduciary, indicate the capacity in which you are signing.
- ---------------------------------------------------------------------------
ANNEX A
POWER CONTROL TECHNOLOGIES INC.
1997 STOCK OPTION PLAN
1. PURPOSE
This Power Control Technologies Inc. 1997 Stock Option Plan (the
"Plan") is intended to encourage stock ownership by employees, directors
and consultants of Power Control Technologies Inc. (the "Company") and
Affiliate Corporations (as defined in Section 2(a)), so that they may
acquire or increase their proprietary interest in the Company, and to
encourage such employees, directors and consultants to remain in the employ
or service of the Company and to put forth maximum efforts for the success
of the business of the Company. It is further intended that options granted
pursuant to Section 6 of the Plan shall constitute "incentive stock
options" ("Incentive Stock Options") within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, and the regulations issued
thereunder (the "Code"), and options granted pursuant to Section 7 of the
Plan shall constitute "nonqualified stock options" ("Nonqualified Stock
Options"). Stock appreciation rights ("Rights") related to stock options
granted under the Plan ("Options"), and Rights that are not related to
Options, may be granted under the Plan, as hereinafter set forth.
2. DEFINITIONS
As used in the Plan, the following words and phrases shall have the
meanings indicated:
(a) "Affiliate Corporation" shall mean any corporation, directly or
indirectly, through one or more intermediaries, controlling, controlled by
or under common control with the Company.
(b) "Disability" shall mean an Optionee's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or
that has lasted or can be expected to last for a continuous period of not
less than twelve (12) months.
(c) "Fair Market Value" per share as of a particular date shall mean
(i) the closing price per share of Common Stock (as defined in Section 5)
on a national securities exchange or on the NASDAQ stock market for the
last preceding date on which there was a sale of Common Stock on such
exchange, or (ii) if the shares of Common Stock are then traded on any
other over-the-counter market, the average of the closing bid and asked
prices for the shares of Common Stock in such over-the-counter market for
the last preceding date on which there was a sale of Common Stock in such
market or (iii) if the shares of Common Stock are not then listed on a
national securities exchange or traded in an over-the-counter market, such
value as the Committee in its discretion may determine.
(d) "Parent Corporation" shall mean any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if,
at the time of granting an Option, each of such corporations (other than
the Company) owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(e) "Subsidiary Corporation" shall mean any corporation (other than
the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting an Option, each of such corporations
(other than the last corporation in an unbroken chain) owns stock
possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
(f) "Ten Percent Stockholder" shall mean an Optionee who, at the time
an Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of
the Company or of its Parent or Subsidiary Corporations.
3. ADMINISTRATION
Unless otherwise determined by the Board of Directors of the Company
(the "Board"), the Plan shall be administered by a committee appointed by
the Board ("Compensation Committee"), which shall consist of two or more
members of the Board who are "outside directors" within the meaning of
section 162(m) of the Code. The Compensation Committee may, in its
discretion, delegate to a subcommittee its duties hereunder, including the
grant of Options and Rights. The full Board shall also have the authority,
in its discretion, to grant Options and Rights under the Plan and to
administer the Plan. For all purposes under the Plan, any entity which
performs the duties described herein, shall be referred to as the
"Committee."
The Committee shall have the authority in its discretion, subject to
and not inconsistent with the express provisions of the Plan, to administer
the Plan and to exercise all the powers and authorities either specifically
granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to
grant Options and Rights; to determine which Options shall constitute
Incentive Stock Options and which Options shall constitute Nonqualified
Stock Options; to determine which Options, if any, shall be accompanied by
Rights; to determine the purchase price of the shares of Common Stock
covered by each Option (the "Option Price"); to determine the persons to
whom, and the time or times at which, Options shall be granted; to
determine the number of shares to be covered by each Option; to interpret
the Plan; to prescribe, amend and rescind rules and regulations relating to
the Plan; to determine the terms and provisions of the Option Agreements
and Award Agreements (which need not be identical) entered into in
connection with Options and Rights granted under the Plan; and to make all
other determinations deemed necessary or advisable for the administration
of the Plan. The Committee may delegate to one or more of its members or to
one or more agents such administrative duties as it may deem advisable, and
the Committee or any person to whom it has delegated duties as aforesaid
may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan.
No member of the Committee shall be liable for any action taken or
determination made in good faith with respect to the Plan or any Option or
Right granted hereunder.
4. ELIGIBILITY
Options or Rights, or both, may be granted to key employees
(including, without limitation, officers) and directors (whether or not
such directors are employees) of, or consultants to, the Company or its
present or future Affiliate Corporations, except that Incentive Stock
Options shall be granted only to individuals who, on the date of such
grant, are employees of the Company or a Parent Corporation or a Subsidiary
Corporation. In determining the persons to whom Options and Rights shall be
granted and the number of shares to be covered by each Option and any
Rights, the Committee shall take into account the duties of the respective
persons, their present and potential contributions to the success of the
Company and such other factors as the Committee shall deem relevant in
connection with accomplishing the purpose of the Plan. A person to whom an
Option or a Right has been granted hereunder is sometimes referred to
herein as an "Optionee."
An Optionee shall be eligible to receive more than one grant of an
Option or Rights during the term of the Plan, but only on the terms and
subject to the restrictions hereinafter set forth.
5. STOCK
The stock subject to Options and Rights hereunder shall be shares of
the Company's common stock, par value $0.01 per share ("Common Stock").
Such shares may, in whole or in part, be authorized but unissued shares or
shares that shall have been or that may be reacquired by the Company. The
aggregate number of shares of Common Stock with respect to which Options
and Rights may be granted from time to time under the Stock Plan shall not
exceed 1,000,000. No person may be granted Options or Rights under the Plan
during any calendar year with respect to more than 600,000 shares of Common
Stock. The limitations established by the preceding two sentences shall be
subject to adjustment as provided in Section 8(h).
6. INCENTIVE STOCK OPTIONS
Options granted pursuant to this Section 6 are intended to constitute
Incentive Stock Options and shall be subject to the following special terms
and conditions, in addition to the general terms and conditions specified
in Section 8.
(a) Value of Shares. The aggregate Fair Market Value (determined as
of the date the Incentive Stock Option is granted) of the shares of Common
Stock with respect to which Options granted under the Plan and all other
option plans of the Company, any Parent Corporation and any Subsidiary
Corporation become exercisable for the first time by an Optionee during any
calendar year shall not exceed $100,000.
(b) Ten Percent Stockholder. In the case of an Incentive Stock Option
granted to a Ten Percent Stockholder, (i) the Option Price shall not be
less than one hundred ten percent (110%) of the Fair Market Value of a
share of Common Stock on the date of grant of such Incentive Stock Option,
and (ii) the exercise period shall not exceed five (5) years from the date
of grant of such Incentive Stock Option.
7. NONQUALIFIED STOCK OPTIONS
Options granted pursuant to this Section 7 are intended to constitute
Nonqualified Stock Options and shall be subject only to the general terms
and conditions specified in Section 8.
8. TERMS AND CONDITIONS OF OPTIONS
Each Option granted pursuant to the Plan shall be evidenced by a
written stock option agreement ("Option Agreement") between the Company and
the Optionee, which shall comply with and be subject to the following terms
and conditions:
(a) Number of Shares. Each Option Agreement shall state the number of
shares of Common Stock to which the Option relates.
(b) Option Price. Each Option Agreement shall state the Option Price
per share of Common Stock, which, in the case of Incentive Stock Options,
shall be not less than one hundred percent (100%) of the Fair Market Value
of a share of Common Stock on the date of grant of the Option. The Option
Price shall be subject to adjustment as provided in Section 8(h).
(c) Medium and Time of Payment. The Option Price shall be paid in
full, at the time of exercise, in cash or in shares of Common Stock having
a Fair Market Value equal to the Option Price or in a combination of cash
and such shares, and may be effected in whole or in part with monies
borrowed from the Company pursuant to repayment terms and conditions as
shall be determined from time to time by the Committee, in its discretion,
separately with respect to each exercise of Options and each Optionee;
provided, however, that each such method and time for payment and each such
borrowing and terms and conditions of security, if any, and repayment shall
be permitted by and be in compliance with applicable law.
(d) Term and Exercise of Options. Options shall be exercisable over
the exercise period as and at the times and upon the conditions that the
Committee may determine, as reflected in the Option Agreement; provided,
however, that the Committee shall have the authority to accelerate the
exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. The
exercise period shall be determined by the Committee; provided, however,
that in the case of an Incentive Stock Option, such exercise period shall
not exceed ten (10) years from the date of grant of such Incentive Stock
Option. The exercise period shall be subject to earlier termination as
provided in Section 8(e) and 8(f). An Option may be exercised, as to any or
all full shares of Common Stock as to which the Option has become
exercisable, by giving written notice of such exercise to the Company;
provided, however, that an Option may not be exercised at any time as to
fewer than 100 shares (or such number as to which the Option is then
exercisable if such number of shares is less than 100).
(e) Termination of Employment or Service. Except as provided in this
Section 8(e) and in Section 8(f), an Option may not be exercised unless the
Optionee is then in the employ of, or a director of, or a consultant to (1)
the Company, (2) an Affiliate Corporation or (3) a corporation issuing or
assuming the Option in a transaction to which Section 424(a) of the Code
applies or a Parent Corporation or Subsidiary Corporation of the
corporation described in clauses (1), (2) or (3) above in this Section 8(e)
(any such corporation, an "Employer") and unless the Optionee has remained
continuously employed or in service with an Employer since the date of
grant of the Option. Unless otherwise determined by the Committee, in the
event that the employment or service of an Optionee shall terminate other
than by reason of death or Disability (and regardless of whether the
Optionee is entitled to any contractual or severance payments with respect
to such termination), then all Options of such Optionee that are not
exercisable as of the date of such termination shall terminate as of the
date of termination and all exercisable Options shall (unless earlier
terminated in accordance with their terms) remain exercisable for a period
of three months immediately following the date of termination and shall
terminate thereafter. Nothing in the Plan or in any Option or Right granted
pursuant hereto shall confer upon an individual any right to continue in
the employ of, or as a director of, or a consultant to an Employer or
interfere in any way with the right of an Employer to terminate such
employment or service at any time.
(f) Death or Disability of Optionee. Unless otherwise determined by
the Committee, if an Optionee shall die while employed by, or a director
of, or a consultant to an Employer, or if the Optionee's employment or
service shall terminate by reason of Disability, then all Options of such
Optionee that are not exercisable as of the date of such death or
termination by reason of Disability shall terminate as of the date of such
death or termination by reason of Disability and all Options that are
exercisable as of such date shall (unless earlier terminated in accordance
with their terms) remain exercisable for a period of one year immediately
following the date of such death or termination by reason of Disability and
shall terminate thereafter.
(g) Nontransferability of Options. Unless otherwise determined by the
Committee, the Options shall not be transferable otherwise than by will or
by the laws of descent and distribution, and Options may be exercised,
during the lifetime of the Optionee, only by the Optionee or by the
guardian or legal representative of the Optionee.
(h) Effect of Certain Changes.
(1) If there is any change in the number of shares of Common
Stock as a result of the declaration of stock dividends,
recapitalization resulting in stock splits or combinations or
exchanges of such shares, the number of shares of Common Stock
available for Options and Rights, the number of such shares covered
by outstanding Options and Rights, and the price per share of such
Options or the applicable market value of Rights shall be
proportionately adjusted by the Compensation Committee to reflect
any increase or decrease in the number of issued shares of Common
Stock; provided, however, that any fractional shares resulting from
such adjustment shall be eliminated.
(2) In the event of a change in the Common Stock of the Company
as presently constituted, which is limited to a change of all of its
authorized shares with par value into the same number of shares with
a different par value or without par value, the shares resulting
from any such change shall be deemed to be the Common Stock within
the meaning of the Plan.
(3) To the extent that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made
by the Compensation Committee, whose determination shall be final,
binding and conclusive, provided that each Incentive Stock Option
granted pursuant to the Plan shall not be adjusted in a manner that
causes such option to fail to continue to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Code.
(i) Rights as a Stockholder. An Optionee or a transferee of an Option
shall have no rights as a stockholder with respect to any shares covered by
the Option until the date of the issuance of a stock certificate to him or
her for such shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or
distribution of other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 8(h).
(j) Other Provisions. The Option Agreements authorized under the Plan
shall contain such other provisions, including, without limitation, (i) the
granting of Rights, (ii) the imposition of restrictions upon the exercise
of an Option and (iii) in the case of an Incentive Stock Option, the
inclusion of any condition not inconsistent with such Option's qualifying
as an Incentive Stock Option, as the Committee shall deem advisable.
9. STOCK APPRECIATION RIGHTS
(a) Grant and Exercise. Rights may be granted either alone ("Free
Standing Rights") or in conjunction with all or part of any Option granted
under the Plan ("Related Rights"). In the case of a Nonqualified Stock
Option, Related Rights may be granted either at or after the time of the
grant of such Option. In the case of an Incentive Stock Option, Related
Rights may be granted only at the time of the grant of the Incentive Stock
Option.
A Related Right or applicable portion thereof granted with respect to
any Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that, unless
otherwise determined by the Committee, a Related Right granted with respect
to less than the full number of shares covered by a related Option shall
only be reduced if and to the extent that the number of shares covered by
the exercise or termination of the related Option exceeds the number of
shares not covered by the Right immediately prior to such termination or
exercise.
A Related Right may be exercised in accordance with paragraph (b) of
this Section 9, by surrendering the applicable portion of the related
Option. Upon such exercise and surrender, the Optionee shall be entitled to
receive an amount determined in the manner prescribed in paragraph (b) of
this Section 9. Options which have been so surrendered, in whole or in
part, shall no longer be exercisable to the extent the Related Rights have
been exercised.
(b) Terms and Conditions. Rights shall be subject to such terms and
conditions not inconsistent with the provisions of the Plan as shall be
determined from time to time by the Committee, including the following:
(1) Related Rights shall be exercisable only at such time or
times and to the extent that the Options to which the Related Rights
relate shall be exercisable in accordance with the provisions of
Sections 6, 7 and 8 and this Section 9 of the Plan.
(2) Upon the exercise of a Related Right, an Optionee shall be
entitled to receive up to, but not more than, an amount in cash or
shares of Common Stock equal in value to the excess of the Fair
Market Value of one share of Common Stock over the Option Price per
share specified in the related Option multiplied by the number of
shares in respect of which the Related Right shall have been
exercised, with the Committee having the right to determine the form
of payment.
(3) Unless otherwise determined by the Committee, Related
Rights shall be transferable only when and to the extent (and subject
to the same restrictions) that the underlying Option would be
transferable under Section 8(g) of the Plan.
(4) Upon an exercise of a Related Right, the Option or part
thereof to which the Related Right relates shall terminate but the
number of shares available for issuance set forth in Section 5 of the
Plan shall be reduced only by the number of shares actually issued
upon the exercise of such Related Right.
(5) A Related Right granted in connection with an Incentive
Stock Option may be exercised only if and when the market price of
the Common Stock subject to the Incentive Stock Option exceeds the
exercise price of such Option.
(6) Each Free Standing Right granted pursuant to the Plan shall
be evidenced by a written award agreement ("Award Agreement") between
the Company and the recipient. Free Standing Rights shall be
exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee at or after grant
thereof.
(7) The term of each Free Standing Right shall be fixed by the
Committee.
(8) Upon the exercise of a Free Standing Right, a recipient
shall be entitled to receive up to, but not more than, an amount in
cash or shares of Common Stock equal in value to the excess of the
Fair Market Value of one share of Common Stock over the price per
share specified in the Award Agreement multiplied by the number of
shares in respect of which such Right is being exercised, with the
Committee having the right to determine the form of payment.
(9) Unless otherwise determined by the Committee, Free Standing
Rights shall not be transferable otherwise than by will or by the
laws of descent and distribution, and may be exercised, during the
lifetime of the recipient, only by the recipient or by the guardian
or legal representative of the recipient.
(10) In the event of the termination of employment or service
of a recipient of a Free Standing Right or the death, disability or
retirement of such recipient of a Free Standing Right, such Free
Standing Right shall be exercisable to the same extent that an Option
would have been exercisable in accordance with the provisions of
Sections 8(e) and (f), in the event of the termination of employment
or service or the death, disability or retirement of the Optionee.
10. AGREEMENT BY OPTIONEE REGARDING WITHHOLDING TAXES
If the Committee shall so require as a condition of exercise, each
Optionee shall agree that
(a) no later than the date of exercise of any Option or Right
granted hereunder, the Optionee will pay to the Company or make
arrangements satisfactory to the Committee regarding payment of any
federal, state or local taxes of any kind required by law to be
withheld upon the exercise of such Option or Right; and
(b) the Company shall have the right, to the extent permitted
or required by law, to deduct from any payment of any kind otherwise
due to the Optionee, federal, state and local taxes of any kind
required by law to be withheld upon the exercise of such Option or
Right.
11. TERM OF PLAN
Options and Rights may be granted pursuant to the Plan from time to
time within a period of ten (10) years from the date the Plan is adopted by
the Board.
12. AMENDMENT AND TERMINATION OF THE PLAN
The Board at any time and from time to time may suspend, terminate,
modify or amend the Plan; provided, however, that, unless otherwise
determined by the Board, an amendment that requires stockholder approval in
order for the Plan to continue to comply with Section 162(m) of the Code or
any other law, regulation or stock exchange requirement shall not be
effective unless approved by the requisite vote of stockholders. Except as
provided in Section 8, no suspension, termination, modification or
amendment of the Plan may adversely affect any Option or Right previously
granted, unless the written consent of the Optionee is obtained.
13. EFFECTIVENESS; APPROVAL OF STOCKHOLDERS
The Plan shall take effect upon its adoption by the Board or the
Compensation Committee, but its effectiveness and the exercise of any
Options or Rights shall be subject to the approval of the stockholders of
the Company, which approval must occur within twelve (12) months after the
date the Plan is adopted by the Board.
14. EFFECT OF HEADINGS
The section and subsection headings contained herein are for
convenience only and shall not affect the construction of the Plan.
15. COMPLIANCE WITH CERTAIN LAWS
This Plan is intended to comply with the requirements of Section
162(m) of the Code and shall be interpreted accordingly.
