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:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only
(as permitted by Rule
14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 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:
April 8, 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 The St. Regis Hotel, 2 East 55th
Street, New York, New York, on Thursday, May 15, 1997, at
9:30 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 9:30 a.m., local time, at The St.
Regis Hotel, 2 East 55th Street, New York, New York, 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.
April 8, 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 9:30 a.m., local
time, at The St. Regis Hotel, 2 East 55th Street, New
York, New York, 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 April 9, 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
stockholder's right to attend, or vote in person at, the
Annual Meeting. 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") were
entitled to notice of and to vote at the Annual Meeting.
On that date, there were issued and outstanding
20,656,502 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 4,388,852 additional shares of Common Stock
(representing approximately 21.2% 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 4,388,852
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 21, 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"), a diversified holding company, 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, and Meridian
Sports Incorporated ("Meridian"), 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, Inc. 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, a diversified holding
company, 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 Director, President and Chief Executive
Officer of the Tobacco Products Group of Mafco
Consolidated since 1996 and Vice Chairman and Chief
Executive Officer of the flavors business now being
conducted by Pneumo Abex (the "Flavors Business") since
1995. Mr. Folz has been President, Chief Executive
Officer and a Director of Cigar Holdings since 1996, and
President, Chief Executive Officer and a Director of
Cigar Corp. since 1984. 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, a diversified holding company, 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, Revlon Products, 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, a diversified holding company, 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. Mr.
Meister is also a Director of the following corporations
which file reports pursuant to the Exchange Act: General
Chemical Group, Inc., Minerals Technologies, Inc. and
Wheelabrator Technologies, Inc.
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, a diversified holding company, 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, a diversified holding
company, and various affiliates since 1993 and was Senior
Vice President of Holdings and MacAndrews Holdings from
1989 to 1993. (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.
SUMMARY COMPENSATION TABLE
Long-
Term
Compen-
sation
ANNUAL COMPENSATION Awards
Number
of
Secu-
rities
Other Under- All
Annual lying Other
Name and Compen- Options/ Compen-
Principal Salary Bonus sation SARs sation
Position Year ($) ($) ($) (#) ($)
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 1995 170,000 107,500 0 0 4,699(c)
President 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 1995 150,000 90,000 0 0 5,219(c)
President-Finance 1994 140,000 94,000 0 0 4,278(c)
________________
(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> <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 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.
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 $400,000 in 1996 and $500,000
thereafter, subject to increase at the discretion of Mafco
Worldwide. In addition, subject to approval by the stock-
holders, 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 stockholder 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 flavors 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 Company S&P 500 Food Index
Covered) 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 Company S&P 500 Index (a)
Covered) Index
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:
Highest Estimated Annual Straight Life Annuity
Consecutive Benefits at Retirement with Indicated
Three Year Years of Credited Service
Average
Compensation 15 20 25 30 35
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
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 for the fiscal year ended December
31, 1997. 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 1997.
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 following is a summary of the terms of the Power
Control Technologies 1997 Stock Option Plan ("1997 Plan").
Although the Company believes that the following summary
describes the material terms of the 1997 Plan, such summary
is qualified in its entirety by reference to the full text
of the 1997 Plan, a copy of which is attached as Anbnex A to
this Proxy Statement and is incorporated herein by reference.
The Company, subject to the approval of its
stockholders, has adopted 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 March 1, 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 8,523,202 41.4%
as a group (12 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).
Mafco Consolidated is 85% owned through Mafco
Holdings by Ronald O. Perelman, Chairman of the Board of
Directors of the Company. Mafco Holdings is a
diversified holding company with interests in several
industries. Through its 36% ownership, on a fully
diluted basis, of the Company, Mafco Holdings is engaged
in the processing of licorice and other flavors. Mafco
Holdings is engaged in the cosmetics and skin care,
fragrance and personal care products business through its
83% ownership of Revlon. Mafco Holdings owns 83% of
Coleman, which is engaged in the manufacture and
marketing of recreational outdoor products, portable
generators, power-washing equipment, spas and hot tubs
and 65% of Meridian Sports, a manufacturer and marketer
of specialized boats and water sports equipment. Marvel,
a youth entertainment company, is 80% owned by Mafco
Holdings. Mafco Holdings is also engaged in the
financial services business through its 80% ownership of
California Federal. The principal executive offices of
Mafco Holdings are located at 35 East 62nd Street, New
York, New York 10021.
FLAVORS ACQUISITION
On November 25, 1996, Mafco Consolidated and the
Company consummated the transactions contemplated by the
stock and value support rights purchase agreement, dated
as of October 23, 1996 (the "Purchase Agreement"), by and
among Mafco Consolidated, the Company, and PCT
International Holdings Inc. ("Purchaser"), a Delaware
corporation and wholly-owned subsidiary of the Company.
Pursuant to the Purchase Agreement, Purchaser acquired
from Mafco Consolidated, all the shares of Flavors (the
"Shares") and 23,156,502 Value Support Rights (each a
"VSR", and collectively, the "VSRs") issued pursuant to
a Value Support Rights Agreement, dated November 25,
1996, between Mafco Consolidated and American Stock
Transfer & Trust Company, as trustee. In consideration
for the Shares and VSRs, Purchaser paid Mafco
Consolidated cash in the amount of $180.0 million. In
addition, Purchaser will pay Mafco Consolidated deferred
cash payments of $3.7 million on June 30, 1997 and $3.5
million on December 31, 1997. The source of funds for
such payments was, and is anticipated to be, available
cash.
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 Registrable 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 30, 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.
April 8, 1997
BY ORDER OF THE BOARD OF DIRECTORS
POWER CONTROL TECHNOLOGIES INC.
POWER CONTROL TECHNOLOGIES INC.
COMMON STOCK
Proxy Solicited on Behalf of the Board of Directors
for Annual Meeting to be held on May 15, 1997
P
R The undersigned appoints Glenn P. Dickes, Joram C. Salig and Barry
O Schwartz, and each of them, attorneys and proxies, each with
X power of substitution, to vote all shares of Common Stock of Power
Y 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 9:30 A.M., local time, at The
St. Regis Hotel, 2 East 55th Street, New York, New York, 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 persons named above to vote such proxies in
accordance with their best judgment.
SEE REVERSE
SIDE
PLEASE MARK YOUR
X VOTES AS IN THIS
EXAMPLE
The Board of Directors recommends a vote FOR the following proposals.
WITHHOLD
AUTHORITY
to vote
FOR for all
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
Incorporation, 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 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.
