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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 under sec.240.14a-12Pursuant to Section 240.14a-11c or Section 240.14a-12
WESCO INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-110-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
O-11(a)0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[WESCO INTERNATIONAL LOGO]
2003
-------------------------------------------------
-------------------------------------------------
Notice of Annual Meeting
and Proxy Statement
WESCO INTERNATIONAL, INC.
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[COVER GRAPHIC]-----------------------------------
225 West Station Square Drive, Suite 700
Pittsburgh, PA 15219
WESCO INTERNATIONAL, INC.
COMMERCE COURT,225 WEST STATION SQUARE DRIVE, SUITE 700
FOUR STATION SQUARE
PITTSBURGH, PENNSYLVANIA 15219
NOTICE OF 20022003 ANNUAL MEETING OF STOCKHOLDERS
May 22, 200221, 2003
The Annual Meeting of the Stockholders of WESCO International, Inc. will be
held on Wednesday, May 22, 2002,21, 2003, at 2:00 p.m., E.D.S.T., at the Sheraton Inn,
Seven300 West Station Square Drive, Pittsburgh, Pennsylvania 15219, to consider and
take action on the following:
1) Election of a class of three directors for a three-year term
expiring in 2005;2006;
2) Approval of the Company's 1999 Long-Term Incentive Plan; and
2)3) Transaction of any other business properly brought before the
meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL.THESE PROPOSALS.
Stockholders of record at the close of business on April 8, 2002,7, 2003 will be
entitled to vote at the Annual Meeting or any adjournments thereof. A list of
stockholders entitled to vote will be available at the Annual Meeting and during
ordinary business hours for ten days prior to the meeting at our corporate
offices, Commerce Court,225 West Station Square Drive, Suite 700, Four Station Square, Pittsburgh, Pennsylvania,
15219, for examination by any stockholderholder of record for any legally valid purpose.
WESCO International, Inc. stockholders or their authorized representatives
by proxy may attend the meeting. If your shares are held through an intermediary
such as a broker or a bank, you should present proof of your ownership at the
meeting. Proof of ownership could include a proxy from your bank or broker or a
copy of your account statement.
Most shareholdersstockholders of record have a choice of voting over the Internet, by
telephone, or by returning the enclosed proxy card. You should check your proxy
card or information forwarded by your bank, broker or other holder of record to
see which options are available to you.
In order to assure a quorum, it is important that stockholders who do not
expect to attend the meeting in person either fill in, sign, date, and return
the enclosed proxy in the accompanying envelope or otherwise make arrangements
to vote via telephone or over the Internet.
By order of the Board of Directors,
/s/ Daniel A. Brailer
DANIEL A. BRAILER
Secretary
WESCO INTERNATIONAL, INC.
COMMERCE COURT,225 WEST STATION SQUARE DRIVE, SUITE 700
FOUR STATION SQUARE
PITTSBURGH, PENNSYLVANIA 15219
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 200221, 2003
PROXY SOLICITATION AND VOTING INFORMATION
The accompanying proxy is solicited by the Board of Directors of WESCO
International, Inc. (the "Company") for use at the Annual Meeting of the
Stockholders (the "Annual Meeting") to be held on May 22, 2002,21, 2003, at the Sheraton
Inn, Seven300 West Station Square Drive, Pittsburgh, Pennsylvania 15219, at 2:00
p.m., local time, and at any adjournment or postponement thereof. The enclosed proxyproxies
will be voted if properly signed, received by the Secretary of the Company prior
to the close of voting at the Annual Meeting, and not revoked. If no direction
is given in the proxy, it will be voted "FOR" the proposals set forth in this
Proxy Statement, including election of the directors nominated by the Board of
Directors and certain amendments to the Company's 1999 Long Term Incentive Plan,
as amended (the "LTIP"). The Company has not received timely notice of any
stockholder proposals for presentation at the Annual Meeting as required by
Section 14a-4(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
Alternatively, stockholders may be entitled to deliver their proxiesvote over the Internet or by
telephone; individual stockholders should check the enclosed proxy card or the
information forwarded to them by their bank, broker or other holder of record to
see whether these options are available to them. If no direction is given in the
proxy, it will be voted "FOR" the election of the directors nominated by the
Board of Directors. The Company has not received timely notice of any
stockholder proposals for presentation at the Annual Meeting as required by
Section 14a-4(c) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Action will be taken at the
Annual Meeting for the election of directors, the amendments to the LTIP
described in this Proxy Statement and any other business that properly comes
before the meeting, and the proxy holders have the right to and will vote in
accordance with their judgment.
A stockholder who has returned a proxy via mail, telephone or Internet may
revoke it at any time before it is voted at the Annual Meeting by delivering a
revised proxy bearing a later date, by voting by ballot at the Annual Meeting,
or by delivering a written notice withdrawing the proxy to the Secretary of the
Company at the address set forth above.
This Proxy Statement, together with the accompanying proxy card, is first
being mailed to stockholders on or about April 19, 2002.25, 2003. The Company's 20012002
Annual Report to Stockholders accompanies this Proxy Statement. The cost of this
solicitation of proxies will be borne by the Company. In addition to soliciting
proxies by mail, telephone and the Internet, the Board of Directors of the
Company, without receiving additional compensation for this service, may solicit
in person. Arrangements also will be made with brokerage firms and other
custodians, nominees, and fiduciaries to forward proxy soliciting material to
the beneficial owners of the Common Stock, par value $.01 per share, of the
Company ("Common Stock") held of record by such persons, and the Company will
reimburse such brokerage firms, custodians, nominees, and fiduciaries for
reasonable out-of-pocket expenses incurred by them in doing so. The cost of this
proxy solicitation will consist primarily of printing, legal fees, and postage
and handling.
Holders of Common Stock at the close of business on April 8, 20027, 2003 (the
"Record Date") are entitled to vote at the Annual Meeting or any adjournment or
adjournments thereof. On that date 44,928,55245,075,295 shares of Common Stock were issued
and outstanding (including 4,653,131 shares of non-voting Class B Common Stock)Stock,
par value $.01 per share ("Class B Common Stock"). The presence, in person or by
proxy, of stockholders holding at least a majority of the shares of voting
Common Stock will constitute a quorum for the transaction of business at the
Annual Meeting. StockholdersHolders of Common Stock are entitled to cast one vote per share
on each matter presented for consideration and action at the Annual Meeting.
Proxies that are transmitted by nominee holders on behalf of beneficial owners
will count toward a quorum and will be voted as instructed by the nominee
holder. The Boardelection of Directorsdirectors will be electeddetermined by a plurality of the votes
cast at such election.election, and the adoption of the LTIP, as amended, will require
the affirmative vote of the holders of a majority of the votes present at the
meeting.
PROPOSAL ONE
BOARD OF DIRECTORS AND ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board") consists of eightten
members, divided into three classes. The terms of office of the three classes of
directors (Class I, Class II and Class III) end in successive years. The current
term of the Class IIII directors expires this year, and their successors are to be
elected at the Annual Meeting for a three-year term expiring in 2005.2006. The terms
of the Class III and Class IIIII directors do not expire until 20032004 and 2004,2005,
respectively. Two new directors, William J. Vareschi and Sandra Beach Lin,
joined the Board in December 2002. Mr. Vareschi was appointed as a Class I
director, and Ms. Lin was appointed as a Class II director.
The Board has nominated Roy W. Haley, George L. Miles Jr.,Michael J. Cheshire, James A. Stern and James L.
SingletonWilliam J.
Vareschi for election as Class IIII directors. The nominees for Class IIII directors
have previously served as members of the Board of the Company. In
addition, the Board has accepted the resignation of Anthony D. Tutrone,
effective March 6, 2002, and has appointed Robert Q. Bruhl to serve the
remainder of Mr. Tutrone's unexpired term. The accompanying
proxy will be voted for the election of Messrs. Haley, MilesCheshire, Stern and Singleton,Vareschi,
unless authority to vote for one or more of the nominees is withheld. In the
event that any of the nominees is unable or unwilling to serve as a director for
any reason (which is not anticipated), the proxy will be voted for the election
of any substitute nominee designated by the Board.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
CLASS IIII DIRECTOR NOMINEES.
CLASS I DIRECTORS -- PRESENT TERM EXPIRES IN 20032006
MICHAEL J. CHESHIRE.......................... Mr. Cheshire was the Chairman and Chief
Age: 5354 Executive Officer of Gerber Scientific, Inc.,
Director since 1998 from 1998 to 2001 and President and Chief
Executive Officer from 1997 to 2001.1998. Prior to
joining Gerber Scientific, Mr. Cheshire spent
21 years with the General Signal Corporation
and was most recently presidentPresident of their
electrical group.
JAMES A. STERN............................... Mr. Stern has been Chairman of The Cypress
Age: 5152 Group L.L.C. ("Cypress") since its formation
Director since 1998 in April 1994. Prior to joining Cypress, Mr.
Stern was a managing director with Lehman
Brothers, Inc. ("Lehman Brothers") and served
as head of the Merchant Banking Group. During
his career at Lehman Brothers, he also served
as head of that firm's Investment Banking,
High Yield and Primary Capital Markets
Groups. Mr. Stern is also a director of
AMTROL, Inc., Cinemark USA, Inc., Frank's
Nursery & Crafts, Inc. and Lear
Corporation, and is a trustee of Tufts
University.
2
WILLIAM J. VARESCHI.......................... Mr. Vareschi has been Chief Executive Officer
Age: 60 of Central Parking Corporation since April
Director since 2002 2001. Before joining Central Parking Corp.,
his prior business career of more than 35
years of service was spent with the General
Electric Company, which he joined in 1965. He
held numerous financial management positions
within GE, including Chief Financial Officer
for GE Plastics Europe (in the Netherlands),
GE Lighting (Cleveland, Ohio), and GE
Aircraft Engines (Cincinnati, Ohio). In 1996,
Mr. Vareschi became President and Chief
Executive Officer of GE Engine Services, a
position he held until his retirement in
2000.
CLASS II DIRECTORS -- PRESENT TERM EXPIRES IN 2004
ROBERT Q. BRUHL.............................. Mr. Bruhl has beenwas an employee of The Cypress
Age: 31 since32 Group, L.L.C. from July 1996 and Vice President of Cypressthrough March
Director since 2002 2003, where he served as Vice President since
2000. Prior to joining Cypress, he held
positions as an analyst in the investment
banking department of Salomon Smith Barney
and as an accountant with Deloitte & Touche.
Mr. Bruhl was appointed toSANDRA BEACH LIN............................. Ms. Lin joined Alcoa Closure Systems
Age: 45 International in 2002 as President following
Director since 2002 20 years of business experience in the
Boardspecialty chemicals, medical products, and
automotive components industries. She joined
Honeywell (then AlliedSignal) in March
2002 to serve out the remainder1994 and
held various general management positions,
most recently serving as President of Bendix
Commercial Vehicle Systems. Before joining
Honeywell, she held a variety of business
segment general management, product
marketing, and sales roles at Smith & Nephew
Perry, Crest Ultrasonics, and American
Cyanamid. Ms. Lin is a member of the
termCommittee of Anthony D. Tutrone, who resigned from the
Board effective March 6, 2002.200, an international,
professional organization of preeminent women
entrepreneurs and corporate leaders.
23
ROBERT J. TARR, JR........................... Mr. Tarr is a professional director and
Age: 5859 private investor. He is also a special
Director since 1998 partner of Chartwell Investments, LLP, a
private equity firm. He was the Chairman,
Chief
Director since 1998 Executive Officer and President of
HomeRuns.com, Inc. from February 2000 to
September 2001. Prior to joining
HomeRuns.com, he worked for more than 20
years in senior executive roles for Harcourt
General, Inc., including six years as
President, Chief Executive Officer and Chief
Operating Officer of Harcourt General, Inc.
(formerly General Cinema Corporation) and The
Neiman Marcus Group, Inc. Mr. Tarr is also a
director of the John Hancock Financial
Services, Inc., Houghton Mifflin & Co., and Barneys New York, Inc.
KENNETH L. WAY............................... Mr. Way has beenserved as Chairman of Lear
Age: 63 Corporation Age: 62 sincefrom 1988 to 2003, and has been
Director since 1998 affiliated with Lear
Director since 1998 Corporation and its
predecessor companies for 36 years in
engineering, manufacturing and general
management capacities. Mr. Way retired on
January 1, 2003, yet remains a member of
Lear's Board of Directors. Mr. Way is also a
director of Comerica, Inc. and CMS Energy
Corporation.
Corporation, and is on the board of trustees
for Kettering University and Henry Ford
Health Systems.
CLASS III DIRECTORS -- NOMINEES FOR TERMS TO EXPIRE IN 2005
ROY W. HALEY................................. Mr. Haley has been Chief Executive Officer of
Age: 5556 the Company since February 1994, and Chairman
Chairman of the Board and Chief Executive Officer of the Board since 1998. From 1988 to 1993,
Director since 1994Chief Executive Officer Mr. Haley was an executive at American
Director since 1994 General Corporation, a diversified financial
services company, where he served as Chief
Operating Officer, and as President and as a
director. Mr. Haley is also a director of
United Stationers, Inc. and Cambrex
Corporation.Corporation, and is Chairman of the
Pittsburgh Branch of the Federal Reserve Bank
of Cleveland.
GEORGE L. MILES, JR.......................... Mr. Miles has been President and Chief
Age: 6061 Executive Officer of WQED PittsburghMultimedia since
Director since 2000 September 1994. Mr. Miles is also a director
of Equitable Resources.Resources, Westwood One,
Advanced Technology Systems, Inc. and Harley
Davidson, Inc.
JAMES L. SINGLETON........................... Mr. Singleton has beenis President of The Cypress
Age: 47 Group, L.L.C. and was a Vice Chairmanfounding partner of
Age: 46 CypressDirector since its formation1998 that firm in April 1994. Director since 1998 Prior to joining Cypress, he
was a Managing Director in the Merchant
Banking Group at Lehman Brothers. Mr.
Singleton is also a director of Cinemark USA,
Inc., Club Corp,Corp., Inc., and Danka Business
Systems PLC,
HomeRuns.com, Inc. and L.P. Thebault Company.PLC.
4
MEETINGS AND COMMITTEES OF THE BOARD
The Board has four standing committees: an Executive Committee, a
Nominating and Governance Committee, an Audit Committee, and a Compensation
Committee. The full Board held fivefour meetings in 2001.2002. Each director attended 75%
or more of the aggregate number of meetings of the Board and the committees of
the Board on which she or he served.
3
EXECUTIVE COMMITTEE
The Executive Committee consists of Messrs. Cheshire, Haley, Singleton and
Stern, with Mr. Singleton serving as Chairman. It is responsible for overseeing
the management of the affairs and business of the Company and has been delegated
authority to exercise the powers of the Board, as necessary, during intervals
between Board meetings. The Executive Committee held threeno separate meetings in
2001.2002.
NOMINATING AND GOVERNANCE COMMITTEE
TheEffective September 2002, the Nominating Committee changed its name to the
Nominating and Governance Committee to more accurately reflect both its
traditional and newly-defined responsibilities. It is the responsibility of the
Nominating and Governance Committee to review and make recommendations to the
Board with respect to the corporate governance policies and practices of the
Company and to develop and recommend to the Board a set of corporate governance
principles applicable to the Company. The Committee consists of Ms. Lin and
Messrs. Miles, Singleton and Way, with Mr. Miles serving as Chairman. It is
responsible for identifying and nominating candidates for election or
appointment to the Board. The Committee operates under a separate charter
setting forth its duties and responsibilities, which was adopted by the full
Board in September 2002. The Nominating and Governance Committee was formed in March 2002 and consequently, held notwo
meetings in 2001.2002. The principle activities of the Committee in 2002 involved the
development of new or revised corporate governance practices and the recruiting
of two new directors of the Board of Directors.
AUDIT COMMITTEE
The Audit Committee consists of Messrs. Bruhl, Cheshire, Miles, Tarr, and
Tarr,Vareschi, with Mr. Tarr serving as Chairman, and operates under a written
charter, which was includedrevised in September 2002. The charter is attached to this
proxy statement as an appendix to the Proxy Statement for the Company's 2001 Annual
Meeting.Appendix B. The Audit Committee is responsible for: (a)
recommending the firm to be appointed as independent accountants to audit the
Company's financial statements and to perform services related to the audit; (b)
reviewing the scope and results of the audit with the independent accountants;
(c) reviewing with the management and the independent accountants the Company's
year end operating results; (d) considering the adequacy of the internal
accounting and control procedures of the Company; and (e) reviewing the
non-audit services to be performed by the independent accountants, if any, and
considering the effect of such performance on the accountants' independence. The
Audit Committee held sixseven meetings in 20012002 and has furnished the following
report:
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Company is composed of threefive independent
directors.directors according to the current Independence Standards of the New York Stock
Exchange. The Committee operates under a written charter, which was included as
an appendix to the Proxy Statement for the Company's 2001 Annual Meeting.charter.
Management of the Company has the primary responsibility for the financial
statements and the reporting process, including the system of internal controls.
The Audit Committee is responsible for reviewing the Company's financial
reporting process on behalf of the Board of Directors.Board.
In this context, the Audit Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that the Company's financial statements were prepared in accordance
with generally accepted accounting principles, and the Committee reviewed and
discussed the Company's audited financial statements with management and the
independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with the Audit Committee).
5
In addition, the Committee has discussed with the independent accountants
the accountant'saccountants' independence from the Company and its management, including the
matters in the written disclosures required by the Independence Standards Board
Standard No. 1 (Independence Discussions With Audit Committees).
The Committee discussed with the Company's internal and independent
accountants the overall scope and plan for their respective audits. The
Committee meets with the internal and independent accountants, with and without
management present, to discuss the results of their examinations, their
evaluations of the Company's internal controls, and the overall quality of the
Company's financial reporting.
4
In reliance on thesethe reviews and discussions referred to above, the Committee
recommended to the Board of Directors (and the Board has approved) that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
December 31, 2001,2002, for filing with the Securities and Exchange Commission. The
Committee and the Board have also appointed the selection of the Company's
independent accountants, PricewaterhouseCoopers LLP, for the year 2002.2003.
RESPECTFULLY SUBMITTED:
THE AUDIT COMMITTEE
Robert J. Tarr, Jr., Chairman
Robert Q. Bruhl
Michael J. Cheshire
George L. Miles, Jr.
William J. Vareschi
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Aggregate fees for professional services rendered for the Company by
PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") in connection with itsfor the years ended
December 31, 2002 and 2001 were as follows:
2002 2001
---------- ----------
Audit....................................................... $ 595,250 $ 688,080
Audit-related............................................... 323,050 104,865
Tax......................................................... 273,920 292,875
---------- ----------
$1,192,220 $1,085,820
The audit fees for the years ended December 31, 2002 and 2001,
respectively, were for professional services rendered for the audits of the
consolidated financial statements of the Company, reviews of the Company's
quarterly consolidated financial statements as of and statutory audits. Audit fees for
the year ended December 31, 2001 also included fees related to the issuance of
comfort letters, consents and its limited reviewsassistance with review of documents filed with the
Company's unaudited condensed consolidated
interim financial statementsSEC.
The audit-related fees for the years ended December 31, 2002 and 2001, in
each case, were $517,650.for assurance and related services related to employee benefit
plan audits, accounting consultations and attest services.
Tax fees for the years ended December 31, 2002 and 2001, respectively, were
for services related to tax planning and tax advice.
During the yearyears ended December 31, 2002 and 2001, PricewaterhouseCoopers
rendered no professional services to the Company in connection with the design
and implementation of financial information systems.
In addition to the fees described above, aggregate fees of $568,170 were
billed by PricewaterhouseCoopers during the year ended December 31, 2001,
primarily for the following professional services:
- Audit-related services:.............................. $275,295
- Income tax compliance and related tax services:...... $292,875
Fees for audit-related services and related consents include fees for
issuance of a comfort letter and consents, audits of the Company's employee
benefit plans and financial statements of certain foreign subsidiaries for
statutory purposes.
The Audit Committee reviews summaries of the services provided by
PricewaterhouseCoopers and the related fees and has considered whether the
provision of non-audit services is compatible with maintaining the independence
of PricewaterhouseCoopers.
The Company's Audit Committee is in the process of adopting pre-approval
policies and procedures for audit and non-audit services. Therefore, the proxy
disclosure does not include pre-approval policies and
6
procedures and related information. The Company is early-adopting components of
the proxy fee disclosure requirements; the requirement does not become effective
until periodic annual filings for the first fiscal year ending after December
15, 2003.
On recommendation of the Audit Committee, the Board has appointed
PricewaterhouseCoopers to audit the 20022003 financial statements. Representatives
from this firm will be at the annual meeting to make a statement, if they
choose, and to answer any questions you may have.
COMPENSATION COMMITTEE
In 2001,2002, the Compensation Committee consisted of Messrs. Singleton, Stern,
Tarr, Tutrone, and Way, withall of whom are independent directors according to the current
Independence Standards of the New York Stock Exchange. Mr. Stern servingserved as
Chairman. Effective March 6,
2002, Mr. Tutrone resigned fromChairman of the Board and consequently, no longer serves on
the Compensation Committee. The Compensation Committee is responsible for the
review, recommendation and approval of compensation arrangements for directors
and executive officers, for the approval of such arrangements for other senior
level employees, and for the administration of certain benefit and compensation
plans and arrangements of the Company. The Committee operates under a separate
charter setting forth its duties and responsibilities, which was adopted by the
full board in September 2002. The Compensation Committee held threetwo meetings in
2001.
5
2002.
COMPENSATION OF DIRECTORS
Members of the Board who are also employees of the Company do not receive
cash compensation for their services as directors. Each director of the Company
who is not an employee of the Company or any of its subsidiaries or Cypress is
entitled to receive an annual director's fee of $30,000, increased from $25,000
effective July 2002, payable in shares of common stock, or a combination of cash
and shares of common stock (of which a maximum of 50% may consist of cash), at
the directors' election. Each director of the Company who receives a directors'
fee currently receives a fee of $1,000 for each meeting at which such director
renders services to the Company, including meetings of shareholders, the Board
or any committee of the Board on which she or he serves. Committee chairpersons
receive a fee of $2,000 for committee meeting attendance. If attendance at a
Board meeting is telephonic, meeting fees are reduced to $500. Effective January
1, 2000, the Company established the Deferred Compensation Plan for Non-Employee
Directors under which non-employee directors can elect to defer 25% or more of
the annual director's fee. Amounts deferred under this arrangement will,are, on the
deferral date, be converted into stock units (common stock equivalents), which will
be credited via book entry to a bookkeepingan account in the director's name. For purposes of
determining the number of stock units to be credited to a director for a
particular year, the average of the high and low trading prices of the Common
Stock on the first trading day in January of that year will be used.
Distribution of deferred stock units will be made in a lump sum or in
installments, in the form of shares of Common Stock, in accordance with the
distribution schedule selected by the director at the time the deferral election
is made.
6In addition, as of each July 1, beginning with July 1, 2002, each
non-employee director who will be continuing as a director after that date
receives a non-qualified stock option to purchase 5,000 shares of Common Stock
(or such other amount as the Board may determine from time to time). The
exercise price of these options equals the fair market value per share of Common
Stock on the date of grant. A non-employee director's options vest on the third
anniversary of the date of grant.
7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the Company's
Chief Executive Officer and for the Company's four other most highly compensated
executive officers with compensation in excess of $100,000 for 1999, 2000, 2001 and
20012002 (the "Named Executive Officers"). Note that certain prior-year amounts have
been reclassified to conform with current-year presentation.
LONG-TERM
COMPENSATION
---------------
ANNUAL COMPENSATION SECURITIES ALL OTHER
FISCAL ---------------------- UNDERLYING ALL OTHER COMPENSATION ($)
NAME AND PRINCIPAL POSITION(S) YEAR SALARY ($) BONUS ($) OPTIONS (#S)(1) (2)(3)(4)(5)
- ------------------------------ ------ ---------- --------- --------------- ------------------------------------------
Roy W. Haley,...................................... 2002 615,000 175,000 -- 31,722
Chairman and 2001 601,253600,000 175,000 100,000 36,496
Chairman and37,749
Chief Executive Officer 2000 518,750 350,000 100,000 31,06932,311
Stephen A. Van Oss,................ 2002 282,500 130,000 -- 23,479
Vice President and 2001 231,667 75,000 50,000 22,232
Chief ExecutiveFinancial Officer 1999 500,000 200,0002000 171,744 100,000 50,000 18,952
William M. Goodwin,................ 2002 230,000 85,000 -- 35,92521,025
Vice President, Operations 2001 224,000 60,000 35,000 22,802
2000 191,752 100,000 35,000 20,630
James H. Mehta...............Mehta..................... 2002 275,000 25,000 -- 15,010
Vice President, 2001 275,281275,000 25,000 25,000 14,672
Vice President14,953
Business Development 2000 275,000 70,000 25,000 14,100
Business Development 1999 275,000 40,00014,550
Donald H. Thimjon.................. 2002 230,000 61,000 -- 14,938
Patrick M. Swed,............. 2001 271,941 40,000 35,000 22,64423,000
Vice President, Operations 2000 227,500 100,000 35,000 20,825
1999 216,667 70,000 -- 22,300
Stephen A. Van Oss,.......... 2001 231,948 75,000 50,000 21,951
Vice President and 2000 171,744 100,000 50,000 18,502
Chief Financial Officer 1999 153,707 45,000 -- 19,150
Donald H. Thimjon............ 2001 228,441227,635 70,000 35,000 21,400
Vice President, Operations22,206
2000 191,752 100,000 35,000 19,468
1999 180,841 60,000 -- 20,50020,758
- ---------------
(1)No options were granted in 2002 to Named Executive Officers. All options granted
in 2000 and 2001 were granted under the Company's Long-Term Incentive Plan ("LTIP").LTIP. Options granted in 2001
have an exercise price of $4.50 per share. Options granted in 2000 have an
exercise price of $9.875 per share. No options were granted in 1999. Options granted under the LTIP are subject
to certain time and performance-based vesting requirements.
None of the options granted under the LTIP are currently exercisable.
(2)(1) Includes contributions by the Company under the WESCO Distribution, Inc.
Retirement Savings Plan in the amounts of (a) $5,100, $2,200, $4,125,
$2,200, and $5,100 for Messrs. Haley, Van Oss, Goodwin, Mehta and Thimjon,
respectively, in 2002, (b) $4,475, $2,100, $4,213, $2,672, and $4,800 for
Messrs. Haley, Van Oss, Goodwin, Mehta and Thimjon, respectively, in 2001,
(c) $4,800, $2,100, $3,945, $2,100 and $4,800 for Messrs. Haley, Mehta, Swed, Van Oss,
Goodwin, Mehta and Thimjon, respectively, in 2001, (b) $4,800, $2,100, $4,800, $2,100 and $4,800 for
Messrs. Haley, Mehta, Swed, Van Oss and Thimjon, respectively, in 2000 and
(c) $4,800, $2,938, $4,800, $2,000 and $4,800 for Messrs. Haley, Mehta,
Swed, Van Oss and Thimjon, respectively, in 1999.2000.
(3) Includes contributions by the Company under the WESCO Distribution, Inc.
Deferred Compensation Plan in the amounts of (a) $20,021,$12,300, $8,525, $3,738,
$-0-, $5,844,and $3,738 for Messrs. Haley, Van Oss, Goodwin, Mehta and Thimjon,
respectively, in 2002, (b) $20,021, $7,851, $5,783, $-0- and $4,600 for
Messrs. Haley, Mehta, Swed, Van Oss, Goodwin, Mehta and Thimjon, respectively, in 2001,
(b)(c) $14,269, $4,402, $3,395, $-0-, $4,025, $4,402 and $2,668 for Messrs. Haley, Mehta, Swed, Van Oss,
Goodwin, Mehta and Thimjon, respectively, in 2000 and
(c) $19,125, $-0-, $5,500, $5,150 and $3,700 for Messrs. Haley, Mehta, Swed,
Van Oss and Thimjon, respectively, in 1999.2000.
(4) Includes an annual automobile allowance paid by the Company in the amount of
$12,000 per year for each of Messrs. Haley, Mehta, Swed, Van Oss, Goodwin, Mehta and
Thimjon in each of 1999,
20002002, 2001 and 2001.
72000.
(5) Includes the dollar value of insurance premiums paid by the Company for each
executive officer's term life insurance in the amounts of (a) $2,322, $754,
$2,162, $810, and $2,162 for Messrs. Haley, Van Oss, Goodwin, Mehta and
Thimjon, respectively, in 2002, (b) $1,253, $281, $806, $281, and $806 for
Messrs. Haley, Van Oss, Goodwin, Mehta and Thimjon , respectively in 2001
and (c) $1,242, $450, $1,290, $450, and $1,290 for Messrs. Haley, Van Oss,
Goodwin, Mehta, and Thimjon, respectively in 2000.
8
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for each Named Executive Officer
with regard toThere were no stock options granted to the Named Executive Officers during
2001:
% OF
TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
NUMBER OF GRANTED RATES OF STOCK PRICE
SECURITIES TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(1)
OPTIONS IN FISCAL EXERCISE EXPIRATION ---------------------
NAME GRANTED YEAR PRICE ($/SH) DATE 5% 10%
- ---- ---------- --------- ------------ ---------- --------- ---------
Roy W. Haley................ 100,000 11.6 4.50 12/21/2011 283,003 717,184
James H. Mehta.............. 25,000 2.9 4.50 12/21/2011 70,751 179,296
Patrick M. Swed............. 35,000 4.0 4.50 12/21/2011 99,051 251,014
Stephen A. Van Oss.......... 50,000 5.8 4.50 12/21/2011 141,501 358,592
Donald H. Thimjon........... 35,000 4.0 4.50 12/21/2011 99,051 251,014
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date. These assumptions are not intended to forecast future
appreciation of our stock price. The potential realizable value computation
does not take into account federal or state income tax consequences of
option exercises or sales of appreciated stock.2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The table below sets forth information for each Named Executive Officer
with regard to the aggregate stock options held at December 31, 2001. No stock
options were exercised by any2002. None of
the Named Executive Officers exercised stock options during 2001.2002.
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT FY-END IN-THE-MONEY OPTIONS
(#) AT FY-END ($)(1)(2)
-------------------------------- -------------------------------
NAME (EXERCISABLE -- UNEXERCISABLE) (EXERCISABLE -- UNEXERCISABLE)
- ---- -------------------------------- -------------------------------
Roy W. Haley........................... 1,829,659 525,125 $4,146,664 $45,000
James H. Mehta......................... 614,559 121,527 1,471,178 11,250
Patrick M. Swed........................ 449,251 141,527 1,062,722 15,750$4,842,068 $99,000
Stephen A. Van Oss..................... 103,462 126,010 36,668 22,50069,129 49,500
William M. Goodwin..................... 244,783 117,685 621,558 34,650
James H. Mehta......................... 614,558 121,528 1,738,664 24,750
Donald H. Thimjon...................... 244,783 117,685 532,292 15,750621,558 34,650
- ---------------
(1) Based on the closing market price per share of $4.95$5.49 as reported on the NYSE
on December 31, 2001.2002.
(2) Certain of the options have an exercise price in excess of $4.95$5.49 per share.
Accordingly, no value is reflected in the table for those options that are
not in-the-money.
EMPLOYMENT AGREEMENTS
Employment Agreement with the Chief Executive Officer. The Company is a
party to an employment agreement with Mr. Haley providing for a rolling
employment term of three years. Pursuant to this agreement, Mr. Haley is
entitled to an annual base salary of $500,000, subject to adjustments as
determined by the Board of Directors, and an annual incentive bonus equal to a
percentage of his annual base salary ranging from 0% to 200%. The actual amount
of Mr. Haley's annual incentive bonus will be determined based upon the
Company's financial performance as compared to the annual performance objectives
established for the relevant fiscal year. If Mr. Haley's employment is
terminated by the Company without "cause," by Mr. Haley for "good reason" or as
a result of Mr. Haley's death or disability, Mr. Haley is entitled to continued
payments
8
of his average annual base salary and his average annual incentive
bonus, reduced by any disability payments for the three-year period, or in the
case of a termination due to Mr. Haley's death or disability, the two-year
period, following such termination, and continued welfare benefit coverage for
the two-year period following such termination. In addition, in the event of any
such qualifying termination, all outstanding options held by Mr. Haley will
become fully vested.
The agreement further provides that, in the event of the termination of Mr.
Haley's employment by the Company without "cause" or by Mr. Haley for "good
reason," in either such case, within the two-year period following a "change in
control" of the Company, in addition to the termination benefits described
above, Mr. Haley is entitled to receive continued welfare benefit coverage and
payments in lieu of additional contributions to the Company's Retirement Savings
Plan and Deferred Compensation Plan for the three-year period following such
change in control. The Company has agreed to provide Mr. Haley with an excise
tax gross up with respect to any excise taxes Mr. Haley may be obligated to pay
pursuant to Section 4999 of the United States Internal Revenue Code of 1986
("IRC") on any excess parachute payments. In addition, following a change in
control, Mr. Haley is entitled to a minimum annual bonus equal to 50% of his
base salary, and the definition of "good reason" is modified to include certain
additional events. The agreement also contains customary covenants regarding
nondisclosure of confidential information and non-competition and
non-solicitation restrictions.
9
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
RESPONSIBILITIES AND GOALS:
The Compensation Committee, composed of independent, non-employee
directors, has the responsibility of administering executive compensation and
benefit programs, policies and practices. In 2001,2002, the Committee consisted of
Messrs. Stern, Singleton, Tarr, Tutrone and Way, with Mr. Stern serving as Chairman. Mr.
Tutrone resigned from the Board effective March 6, 2002, and consequently, no
longer serves on the Compensation Committee. The
Committee engages the assistance of outside consultants and uses third-party
surveys in its consideration of compensation levels and incentive plan designs.
On an annual basis, the Committee reviews and approves the compensation and
benefit programs for the executive officers, including the Chairman and Chief
Executive Officer.
EXECUTIVE OFFICER COMPENSATION:
The objective of the Company's compensation program for executive officers
(including Mr. Haley, Chief Executive Officer) is to attract, motivate, and
reward
executive management for achieving high levels of business performance and
improving financial results. This reflects the Company's commitment to attract,
develop, retain and motivate the high caliber of executive performance required to performbe successful in
the competitive distribution industry, and to ensureenhance positive business performanceresults
and growth in shareholder value.
The Company's compensation program for executive officers consists of a
base salary, annual incentive bonuses and long-term incentives. Executives have
significant amounts of compensation at risk, based on performance. Executives
also maintain a significant equity stake in the Company, aligning the interests
of management with those of the shareholders.stockholders.
- Base salaries for the Company's executives are targeted at or near the
median of similarly sized industrial distribution companies and electrical distribution
companies.other
large distributors or wholesalers. Salaries for each executive are
reviewed annually, taking into account factors such as overall company
performance in relation to competition and industry circumstances,
changes in duties and responsibilities, and individual performance and changes in the competitive marketplace.performance. In
2001, the Committee adjusted base salaries for executive officers
(including Mr. Haley) to more closely align WESCO's pay structure with
median pay levels of peer companies operating in the industrial and
wholesale distribution industries. 9
Salaries for certain company
executives (excluding Mr. Haley) were adjusted on a selective basis in
2002 to reflect changes in position and increased responsibility.
- Annual incentives are awarded for achievement of strategic and
operational objectives, improvement in operating results, and performance
in relation to financial goals of the Company, which are established at
the beginning of the year. Cash bonus incentive awards granted for 2002
performance reflect partial achievement of targeted performance levels.
Overall, cash bonus incentive awards paid for 2002 were significantly reduced in 2001, as a result of declining financial
performance.consistent with
those paid for 2001.
- Long-term incentives are generally granted in the form of stock options.
The Committee believes that stock options are the mostan effective long-term link
between executive performance and shareholder value. The committee has
authorized stock option grants on an award cycle of approximately 18
months.
CEO COMPENSATION:
In determining the 20012002 compensation of Mr. Haley, the Company's Chief
Executive Officer, the Committee assessed his individual performance and
leadership, as reflected in the Company's financial and operating performance,
(including such factors as sales, operating income, cash flow and
capitalization), new business development initiatives, cash flow generation, and acquisition programs.progress made in
capital structure improvements, refinancings, working capital performance, and
overall liquidity.
During 2001,2002, Mr. Haley's base pay was not adjusted to an annualizedfrom the year-end 2001
rate of $615,000 per year. This is the first significant salary adjustment since Mr.
Haley's salary was set at $500,000 per year in 1998. For 2001,2002, Mr. Haley's cash bonus was reduced by 50% to $175,000. He was granted options to purchase 100,000
shares of Common Stock at $4.50 per share under the terms of the LTIP. This
information is also shown in the Summary Compensation Table in this Proxy
Statement.
10
CONCLUSIONS:
The Committee's goal is to maintain compensation and benefit programs that
are competitive within the distribution industry and clearly linked to
shareholder value. The Committee believes that the 20012002 compensation levels
disclosed in this Proxy Statement are reasonable and appropriate.
The Committee intends to ensure that compensation paid to its executive
officers is within the limits of, or exempt from, the deductibility limits of
162(m) of the Internal Revenue Code and expects that all compensation will be
deductible. However, it reserves the right to pay compensation that is not
deductible if it determines that to be in the best interests of the Company and
the shareholders.
RESPECTFULLY SUBMITTED:
COMPENSATION COMMITTEE
James A. Stern, Chairman
James L. Singleton
Robert J. Tarr, Jr.
Kenneth L. Way
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is an officer or employee of the
Company. No member of the Committee has a current or prior relationship, and no
officer who is a statutory insider of the Company has a relationship to any
other company required to be described under the Securities and Exchange
Commission rules relating to disclosure of executive compensation.
1011
COMPARATIVE STOCK PERFORMANCE
The following performance graph compares the total stockholder return of an
investment in the Company's Common Stock to that of a peer group of other
industrial and construction products distributors(1)(2)distributors and the Russell 2000 index of
small cap stocks for the period commencing May 11, 1999, the date on which the
Common Stock was first publicly traded, and ending on December 31, 2001.2002. The
graph assumes that the value of the investment in the Company's Common Stock was
$100 on May 11, 1999. The historical information set forth below is not
necessarily indicative of future performance. The Company does not make or
endorse any predictions as to future stock performance.
COMPARISON OF 43 MONTH CUMULATIVE TOTAL RETURN*
AMONG WESCO INTERNATIONAL, INC.
STOCK PRICE PERFORMANCE
MAY 11, 1999 [INCEPTION] - DECEMBER 31, 2001, THE RUSSELL 2000 INDEX
AND A PEER GROUP
[STOCK PRICE PERFORMANCE GRAPH]
For
WESCO INTERNATIONAL, INC. RUSSELL 2000 PEER GROUP
------------------------- ------------ ----------
5/11/1999 100.00 100.00 100.00
12/99 49.31 113.95 102.45
12/00 40.28 110.51 95.77
12/01 27.50 113.26 112.48
12/02 30.50 90.06 112.54
* $100 invested on 5/11/99 in stock or index-
including reinvestment dividends.
Fiscal year ending December 31.
12
The following table reflects the companies that are included in the Peer
Group Indexes for the years presented. Companies in italics were, at varying
points, removed from the Peer Group Index as such companies ceased to be
publicly-traded companies.
1999
the peer group included the following 28 companies: Airgas, Inc.,
Applied Industrial Technologies
Barnes Group, Inc.,
Building Materials Holding Corporation,Corp.
Barnett, Inc.,
Cameron Ashley Building
Products, Inc.,
Fastenal Company
Grainger (W.W.), Inc.,
Hughes Supply, Inc.,
Industrial Distribution Group, Inc.,
Innovative Valve Technology, Inc., JLK
JKL Direct Distributors, Inc.,
Kaman Corp.,
KEVCO, Inc.,
Lawson Products, Inc.,
Maxco, Inc.,
MSC Industrial Direct Co., Inc.,
NCH Corporation
Noland Company
Pameco Corp.,
Park-Ohio Holdings Corp.,
Pentacon, Inc.,
Premier Farnell PLC
SCP Pool Corporation,Corp.
Strategic Distribution, Inc.,
SunSource, Inc.,
Watsco, Inc. and
Wilmar Industries, Inc.
During2000
Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
KEVCO, Inc.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
NCH Corporation
Noland Company
Pameco Corp.
Park-Ohio Holdings Corp.
Pentacon, Inc.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc.
SunSource, Inc.
Watsco, Inc.
2001
Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
KEVCO, Inc.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
NCH Company
Noland Company
Pameco Corp.
Park-Ohio Holdings Corp.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc.
Watsco, Inc.
2002
Airgas, Inc.
Applied Industrial Technologies
Barnes Group, Inc.
Building Materials Holding Corp.
Fastenal Company
Grainger (W.W.), Inc.
Hughes Supply, Inc.
Industrial Distribution Group, Inc.
Kaman Corp.
Lawson Products, Inc.
Maxco, Inc.
MSC Industrial Direct Co., Inc.
Noland Company
Park-Ohio Holdings Corp.
Premier Farnell PLC
SCP Pool Corp.
Strategic Distribution, Inc.
Watsco, Inc.
13
PROPOSAL TWO
APPROVAL OF LONG-TERM INCENTIVE PLAN, AS AMENDED
The Board of Directors has recommended that the course of 2000, fiveshareholders of the companies includedCompany
approve the Company's 1999 Long-Term Incentive Plan (the "1999 Plan"), as
amended and restated by the Board of Directors on April 15, 2003 (the "Amended
Plan"). The following is a summary of the Amended Plan. This summary is
qualified in its entirety by reference to the peer groupcomplete text of the Amended Plan,
which is attached as Appendix A.
The Amended Plan reflects amendments to the 1999 Plan which will (1) permit
grants of stock appreciation rights, restricted stock units, other stock-based
awards and short-term cash awards under the Incentive Plan, (2) add several
items to the list of performance goals that may be used in connection with
awards intended to qualify as "performance-based compensation" under Section
162(m) of the Internal Revenue Code, (3) permit participants to elect deferred
delivery of option shares, (4) provide for indemnification of members of the
prior period ceased to be independent public companies and, as a
consequence, were no longer included inCompensation Committee who administer the peer groupAmended Plan, (5) clarify that the
Company's obligations under the Plan are binding upon the Company's successors,
(6) add flexibility with respect to fiscal
2000. Those five companies were: Barnett, Inc., Cameron Ashley Building
Products, Inc., Innovative Valve Technology, Inc., JLK Direct Distributors,
Inc.,the grant of awards to employees located
outside of the United States and Wilmar Industries, Inc.
Over(7) make other technical changes to Plan
provisions.
The Company reserved for issuance under the course1999 Plan a number of 2001, two additional companies previously includedshares of
Common Stock equal to the sum of (1) 6,936,000 shares, (2) shares of Common
Stock carried forward from the pool of shares available for issuance under
predecessor stock option plans under which no further grants are being made and
(3) shares used by participants to pay the exercise price and/or withholding
taxes in connection with options granted under such predecessor plans. Shares
subject to expired or forfeited awards once again become available for grant
under the peer group ceased1999 Plan. The Amended Plan does not increase the number of shares of
Common Stock available for issuance.
The Board of Directors believes that the grant of stock-based awards to key
employees and non-employee directors of the Company is a vital factor in
attracting and retaining effective and capable personnel who contribute to the
growth and success of the Company and in establishing a direct link between the
financial interests of such individuals and of the Company's shareholders. The
Board believes that the changes to the 1999 Plan, discussed above, are
appropriate in order to enhance the Company's flexibility under the Incentive
Plan.
DURATION OF THE AMENDED PLAN; SHARES TO BE ISSUED. The 1999 Plan became
effective on May 11, 1999. The Amended Plan will remain effective until May 11,
2009 unless terminated earlier by the Board of Directors. Certain provisions of
the Amended Plan relating to performance-based awards under Section 162(m) of
the Internal Revenue Code will expire on the fifth anniversary of the date of
stockholder approval of the Amended Plan.
The shares of Common Stock to be independent public companiesissued or delivered under the Amended Plan
will be authorized and unissued shares or previously issued and outstanding
shares of Common Stock reacquired by the Company. Shares of Common Stock covered
by any unexercised portions of terminated awards and shares of Common Stock
subject to any awards which are otherwise surrendered by participants without
receiving any payment or other benefit with respect thereto may again be subject
to new awards under the Amended Plan.
On April 15, 2003, the closing price of the Common Stock on the New York
Stock Exchange was $3.44 per share.
ADMINISTRATION. The Amended Plan is administered by the Compensation
Committee of the Board of Directors. The Compensation Committee determines the
employees and directors who will be eligible for and granted awards, determines
the amount and type of awards, establishes rules and guidelines relating to the
Amended Plan, establishes, modifies and determines terms and conditions of
awards and takes such other action as a consequence,may be necessary for the proper
administration of the Amended Plan. Members of the Compensation Committee are
no longer included inentitled to be indemnified by the peer groupCompany with respect to claims relating to
their actions in the administration of the Amended Plan except in the case of
willful misconduct.
14
PARTICIPANTS. Any key employee or non-employee director of the Company or
its subsidiaries may be selected by the Compensation Committee to receive an
award under the Amended Plan. Presently, there are approximately 5,500 employees
and directors all of whom could potentially be eligible to participate in the
Amended Plan. In any calendar year, no participant may receive awards for more
than 1 million shares of Common Stock and $2 million in cash. In applying these
limitations, if it is the Compensation Committee's intention that an award will
be earned over a period of more than one calendar year, then the amount subject
to the award will be allocated to the first calendar year in which such amount
may be earned (determined without regard to possible vesting acceleration as a
result of a change in control or Compensation Committee action).
STOCK OPTIONS. The Compensation Committee may grant to a participant
incentive stock options that qualify under Section 422 of the Internal Revenue
Code, options which do not qualify as incentive stock options ("non-qualified
stock options") or a combination thereof. The terms and conditions of stock
option grants including the quantity, price, waiting periods, and other
conditions on exercise will be determined by the Compensation Committee. Option
grants may include grants of accelerated ownership options (also known as
"reload" options). Options will generally have a term of ten years, except that
the option may expire earlier upon the participant's termination of employment
as set forth in the Amended Plan and the participant's option agreement.
The exercise price for stock options will be determined by the Compensation
Committee at its discretion, provided that the exercise price per share for each
incentive stock option shall be at least equal to 100% of the fair market value
of one share of Common Stock on the date when the incentive stock option is
granted. Subject to the Committee's discretion, payment for shares of Common
Stock on the exercise of stock options may be made in cash, by the delivery
(actually or by attestation) of shares of Common Stock held by the participant
for at least six months prior to the date of exercise (unless the Compensation
Committee determines that such holding period is not necessary), a combination
of cash and shares of Common Stock, or in accordance with a "cashless" exercise
program).
Non-employee directors are eligible to receive awards under the Amended
Plan. Presently directors receive automatic annual stock option grants as
described above under "Compensation of Directors."
STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted by the
Compensation Committee to a participant either separate from or in tandem with
non-qualified stock options or incentive stock options (including options
granted under the Amended Plan or other stock option plans of the Company). If
there is a change to the accounting rules applicable to stock options granted
under the Amended Plan, the Compensation Committee may, without the approval of
any participant, substitute stock appreciation rights for outstanding options.
A stock appreciation right entitles the participant to receive, upon its
exercise, a payment equal to (i) the excess of the fair market value of a share
of Common Stock on the exercise date over the exercise price of the stock
appreciation rights, times (ii) the number of shares of Common Stock with
respect to which the stock appreciation right is exercised. The exercise price
of a stock appreciation right is determined by the Compensation Committee, but
in the case of stock appreciation rights granted in tandem with stock options,
may not be less than the exercise price of the related stock option. Upon
exercise of a stock appreciation right, payment will be made in cash or shares
of Common Stock, or a combination thereof, as determined at the discretion of
the Compensation Committee.
RESTRICTED SHARES AND RESTRICTED UNITS. The Compensation Committee may
award to a participant shares of Common Stock subject to specified restrictions
("Restricted Shares"). The Restricted Shares are subject to forfeiture and are
non-transferable until the participant meets certain conditions such as
continued employment over a specified forfeiture period (the "Forfeiture
Period") and/or attains specified performance targets over the Forfeiture
Period.
The Compensation Committee, at its sole discretion, may waive all
restrictions with respect to a Restricted Share award under certain
circumstances (including the death, disability, or retirement of a
15
participant, or a material change in circumstances arising after the date of
grant) subject to such terms and conditions as it deems appropriate.
The Compensation Committee may also grant units representing the right to
receive shares of Common Stock in the future subject to the achievement of one
or more goals relating to the completion of service by the Participant and/or
the achievement of performance or other objectives ("Restricted Units"). The
Committee has the sole discretion to waive the forfeiture period and any other
conditions with respect to Restricted Units under appropriate circumstances
(including the death, permanent disability or retirement of the participant or a
material change in circumstances).
Any performance targets applicable to Restricted Shares or Restricted Units
will be determined by the Compensation Committee but in the case of awards
intended to qualify as "performance-based" for purposes of Section 162(m) of the
Internal Revenue Code will include specified levels of one or more of operating
income, return on stockholders' equity, return on investment, return on invested
assets, stock price appreciation, earnings before interest, taxes, depreciation
and amortization, cash flow, sales growth, margin improvement, income before
taxes (IBT), IBT margin, working capital performance, earnings per share, growth
in earnings per share, expense targets, productivity targets or ratios,
attainment of specific milestones in connection with strategic initiatives
and/or customer satisfaction (the "Performance Goals").
PERFORMANCE AWARDS. The Compensation Committee may grant performance
awards to participants under such terms and conditions as the Compensation
Committee deems appropriate. A performance award entitles a participant to
receive a payment from the Company, the amount of which is based upon the
attainment of predetermined performance targets over a specified award period.
Performance awards may be paid in cash, shares of Common Stock or a combination
thereof, as determined by the Compensation Committee.
Award periods and performance targets will be determined by the
Compensation Committee. In the case of awards intended to qualify as
"performance-based" for purposes of Section 162(m) of the Internal Revenue Code
will include specified levels of one or more of the Performance Goals. When
circumstances occur which cause predetermined performance targets to be an
inappropriate measure of achievement, the Compensation Committee, at its
discretion, may adjust the performance targets.
OTHER STOCK-BASED AWARDS. The Compensation Committee may make other awards
of stock purchase rights or cash awards, Common Stock awards or other types of
awards that are valued in whole or in part by reference to the value of the
Common Stock. The Compensation Committee will determine the conditions and terms
that apply to these awards.
SHORT-TERM CASH AWARDS. The Compensation Committee may make
performance-based annual cash incentive awards to employees using whatever
performance criteria the Compensation Committee deems appropriate. For those
employees whom the Compensation Committee determines to be subject to Section
162(m) of the Internal Revenue Code, however, annual cash incentive awards that
are intended to qualify as "performance-based" compensation will be based only
on attainment of specified levels of the Performance Goals. In administering the
incentive program and determining short-term incentive awards, the Compensation
Committee will not have the flexibility to pay a covered executive more than the
incentive amount indicated by the executive's attainment under the applicable
payment schedule. The Compensation Committee will have the flexibility, however,
to reduce this amount.
CHANGE IN CONTROL. In the event of a change in control of the Company as
defined in the Amended Plan, all stock options and stock appreciation rights
will immediately become exercisable, the restrictions on all Restricted Shares
and Restricted Units will immediately lapse and all performance awards will
immediately become payable.
FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of the
principal federal income tax consequences of Incentive Plan benefits under
present tax law. The summary is not intended to be exhaustive and, among other
things, does not describe state, local or foreign tax consequences.
16
Stock Options. No tax is incurred by the participant, and no amount is
deductible by the Company, upon the grant of a nonqualified stock option. At the
time of exercise of such an option, the difference between the exercise price
and the fair market value of the Common Stock will constitute ordinary income to
the participant. The Company will be allowed a deduction equal to the amount of
ordinary income recognized by the participant.
In the case of incentive stock options, although no income is recognized
upon exercise and the Company is not entitled to a deduction, the excess of the
fair market value of the Common Stock on the date of exercise over the exercise
price is counted in determining the participant's alternative minimum taxable
income. If the participant does not dispose of the shares acquired on the
exercise of an incentive stock option within one year after their receipt and
within two years after the grant of the incentive stock option, gain or loss
recognized on the disposition of the shares will be treated as long-term capital
gain or loss. In the event of an earlier disposition of shares acquired upon the
exercise of an incentive stock option, the participant may recognize ordinary
income, and if so, the Company will be entitled to a deduction in a like amount.
Stock Appreciation Rights. The participant will not recognize any income
at the time of grant of a stock appreciation right. Upon the exercise of a stock
appreciation right, the cash and the value of any Common Stock received will
constitute ordinary income to the participant. The Company will be entitled to a
deduction in the amount of such income at the time of exercise.
Restricted Shares. A participant will normally not recognize taxable
income upon an award of Restricted Shares, and the Company will not be entitled
to a deduction until the lapse of the applicable restrictions. Upon the lapse of
the restrictions, the participant will recognize ordinary taxable income in an
amount equal to the fair market value of the Common Stock as to which the
restrictions have lapsed, and the Company will be entitled to a deduction in the
same amount. However, a participant may elect under Section 83(b) of the
Internal Revenue Code to recognize taxable ordinary income in the year the
Restricted Shares are awarded in an amount equal to the fair market value of the
shares at that time, determined without regard to the restrictions. In such
event, the Company will then be entitled to a deduction in the same amount. Any
gain or loss subsequently recognized by the participant will be a capital gain
or loss.
Restricted Units. A participant will normally not recognize taxable income
upon an award of Restricted Shares, and the Company will not be entitled to a
deduction until the lapse of the applicable restrictions. Upon the lapse of the
restrictions and the issuance of the earned shares, the participant will
recognize ordinary taxable income in an amount equal to the fair market value of
the Common Stock received and the Company will be entitled to a deduction in the
same amount.
Performance Awards, Other Stock-Based Awards and Short-Term Cash Awards.
Normally, a participant will not recognize taxable income upon the award of such
grants. Subsequently, when the conditions and requirements for the grants have
been satisfied and the payment determined, any cash received and the fair market
value of any Common Stock received will constitute ordinary income to the
participant. The Company will also then be entitled to a deduction in the same
amount.
PLAN BENEFITS
The following table shows the number of shares of Common Stock that will be
subject to stock option awards granted under the Amended Plan in fiscal 2001. Those two
companies were Pentacon, Inc.year
2003 to non-employee directors, as a group. The stock compensation plan for
certain non-employee directors provides for an automatic annual grant of 5,000
non-qualified stock options per director. There are currently no committed
future grants to the Company's executive officers and SunSource, Inc.
11non-executive employees
under the Amended Plan. Refer to the Summary Compensa-
17
tion Table of this proxy statement for information regarding option grants to
the Company's named executive officers in the last three fiscal years.
PLAN BENEFITS
1999 LONG-TERM INCENTIVE PLAN
NUMBER OF
SHARES OF
COMMON STOCK
UNDERLYING
GROUP THE OPTION
----- ----------------
Roy W. Haley,............................................... (1)
Chairman and Chief Executive Officer
Stephen A. Van Oss.......................................... (1)
Vice President, Chief Financial Officer
William M. Goodwin.......................................... (1)
Vice President, Operations
James H. Mehta.............................................. (1)
Vice President, Business Development
Donald H. Thimjon........................................... (1)
Vice President, Operations
Executive Group............................................. (1)
Non-Executive Director Group................................ 35,000
Non-Executive Officer Employee Group........................ (1)
- ---------------
(1) While the Company's executive officers and key employees are eligible to
participate in the Amended Plan, there is no currently outstanding
commitment to make awards to any employee.
VOTE REQUIRED
Approval of the Amended Plan will require the affirmative vote of at least
a majority in voting interest of the stockholders present in person or by proxy
and voting at the Annual Meeting, assuming the presence of a quorum. If the
stockholders do not approve the Amended Plan, it will not be implemented, but
the Company reserves the right to adopt such other compensation plans and
programs as it deems appropriate and in the best interests of the Company and
its stockholders.
BOARD RECOMMENDATION
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE AMENDED PLAN AND
RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE "FOR" ADOPTION OF THE AMENDED
PLAN.
CERTAIN TRANSACTIONS AND RELATIONSHIPS WITH THE COMPANY
Amended and Restated Registration and Participation Agreement.AMENDED AND RESTATED REGISTRATION AND PARTICIPATION AGREEMENT. In
connection with the Company's recapitalization in 1998, an investor group led by
The Cypress Group L.L.C. ("Cypress"), which included, among others, Chase
Capital Partners and Co-Investment Partners, L.P. and Clayton, Dublier & Rice
("CD&R"), Westinghouse and the Company entered into a registration and
participation agreement (the "Registration and Participation Agreement"), which
amended and restated the previous agreement among CD&R, Westinghouse, and the
Company, to reflect, among other things, the succession of the investor group to
CD&R's and Westinghouse's rights and obligations thereunder. Among other things,
the Registration and Participation Agreement provides that so long as Cypress
owns any of the Company's securities, Cypress shall have the right to designate
one director to the Board and to the Board of Directors of WESCO Canada. At the
time the Company entered the Registration and Participation Agreement, Cypress
was notno
persons affiliated with WESCO,Cypress served on the Board, and the Company's
management believes the transaction was made on an arms-length basis on terms no
less favorable to the Company than otherwise could have been obtained from an unaffiliated party.
Management Stockholders.obtained.
18
MANAGEMENT STOCKHOLDERS. Each member of management who holds common stock
is a party to a stock subscription agreement with the Company, which provides
that each management stockholder is entitled to certain benefits of, and bound
by certain obligations in, the Registration and Participation Agreement,
including certain registration rights thereunder.
SECURITY OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of April 8, 2002,7, 2003, by each person or group known by the Company
to beneficially own more than five percent of the outstanding Common Stock, each
director, and the executive officers named in the Summary Compensation Table,
and by all directors and executive officers as a group. Unless otherwise
indicated, the holders of all shares shown in the table have sole voting and
investment power with respect to such shares. In determining the number and
percentage of shares beneficially owned by each person, shares that may be
acquired by such person pursuant to options or convertible stock exercisable or
convertible within 60 days of the date hereof are deemed outstanding for
purposes of determining the total number of outstanding shares for such person
and are not deemed outstanding for such purpose for all other stockholders.
SHARES BENEFICIALLY PERCENT OWNED
NAME OWNEDOWNED(4) BENEFICIALLY
- ---- ------------------- -------------
Cypress Merchant Banking Partners L.P.(1)................... 18,580,966 41.4%41.2%
c/o The Cypress Group L.L.C
65 East 55th Street
New York, New York 10222
Cypress Offshore Partners L.P.(1)..................................................... 962,370 2.1%
Bank of Bermuda (Cayman) Limited
P.O. Box 513, G.T.G.T
Third Floor-BritishFloor -- British America Tower
George Town, Grand Cayman
Cayman Islands, B.W.I
JPMorgan Partners (BHCA), L.P.(2)........................... 4,653,131 10.3%
c/o JPMorgan Partners, L.L.C
1221 Avenue of the Americas, 39th Floor
New York, New York 10020
Co-Investment Partners, L.P................................. 4,653,189 10.3%
c/o CIP Partners, LLC
660 Madison Avenue
New York, New York 10020
Co-Investment Partners, L.P................................. 4,653,189 10.3%
c/o CIP Partners, LLC
660 Madison Avenue
New York, New York 10021
12
SHARES BENEFICIALLY PERCENT OWNED
NAME OWNED BENEFICIALLY
- ---- ------------------- -------------
James L. Singleton(1).......................................Singleton (1)...................................... 19,543,336 43.5%43.4%
James A. Stern(1)...........................................Stern (1).......................................... 19,543,336 43.5%43.4%
Roy W. Haley................................................ 2,979,575 6.4%3,129,575 6.7%
James H. Mehta.............................................. 1,079,271 2.4%
PatrickWilliam M. Swed............................................. 697,213 1.5%Goodwin.......................................... 380,035 *
Donald H. Thimjon........................................... 368,475377,475 *
Stephen A. Van Oss.......................................... 186,927191,927 *
Robert J. Tarr, Jr.......................................... 54,25557,396 *
Kenneth L. Way.............................................. 79,390117,673 *
Michael J. Cheshire......................................... 29,39035,673 *
George L. Miles, Jr......................................... 5,21811,501 *
Robert Q. Bruhl............................................. 100 *
Sandra Beach Lin............................................ -- --
William J. Vareschi......................................... -- --
All executive officers and directors as a group (16) 26,222,197 54.1%(19)
persons(3)................................................ 26,441,334 54.4%
19
- ---------------
* Indicates ownership of less than 1% of the Common Stock.
(1) Cypress Merchant Banking Partners L.P. and Cypress Offshore Partners L.P.
are affiliates of Cypress. The general partner of Cypress Merchant Banking
Partners L.P. and Cypress Offshore Partners L.P. is Cypress Associates L.P.,
and The Cypress Group L.L.C. is the general partner of Cypress Associates
L.P. Messrs. Singleton and Stern are members of Cypress and may be deemed to
share beneficial ownership of the shares of common stock shown as
beneficially owned by such Cypress funds. Such individuals disclaim
beneficial ownership of such shares.
(2) These shares constitute shares of non-voting Class B common stockCommon Stock which are
convertible at any time into common stockvoting Class A Common Stock at the option of
the holder.
(3) Included in this figure are 3,503,2413,544,918 shares that may be acquired by the
executive officers and directors pursuant to options or convertible stock
exercisable or convertible within 60 days of the date hereof.
(4) Included in this figure are 39,382 shares of Common Stock that have been
earned by certain non-employee Directors pursuant to the Deferred
Compensation Plan for Non-Employee Directors (see Compensation of
Directors).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons beneficially holding more than ten
percent of the Company's Common Stock are required to report their ownership of
the Company's Common Stock and any changes in that ownership to the Commission
and the New York Stock Exchange. Specific due dates for these reports have been
established. The Company is required to report in this proxy statement any
failure to file by these dates. To the Company's knowledge, for the fiscal year
ended December 31, 2001,2002, each officer and director of the Company timely filed
all such required reports, except that the Company inadvertently filed Forms 5Form 4
late for Messrs. Haley, Mehta, Swed, Goodwin, Thimjon, Van, Van Oss, andDaniel A. Brailer with respect to certain options granted to themhim by the
Company.
13
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has served as the independent accountants for
Fiscal 2001.2002. Representatives of PricewaterhouseCoopers LLP 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.
STOCKHOLDER PROPOSALS FOR 20022003 ANNUAL MEETING
Rule 14a-8 of the Exchange Act contains the procedures for including
certain stockholder proposals in the Company's proxy statement and related
materials. The deadline for submitting a stockholder proposal pursuant to Rule
14a-8 for the 2003 Annual Meeting of Stockholders of the Company is December 21,31,
2002. With respect to any stockholder proposal outside the procedures provided
in Rule 14a-8 and received by the Company no later than December 21,31, 2002, the
Company may be required to include certain limited information concerning such
proposal in the Company's proxy statement so that proxies solicited for the 2003
Annual Meeting of Stockholders may confer discretionary authority to vote on any
such matter. Any stockholder proposals should be addressed to the Secretary of
the Company, Commerce Court,225 West Station Square Drive, Suite 700, Four Station Square, Pittsburgh, Pennsylvania
15219.
1420
APPENDIX A
WESCO INTERNATIONAL, INC.
1999 LONG-TERM INCENTIVE PLAN
(AS RESTATED EFFECTIVE APRIL 15, 2003)
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
1.01 PURPOSE. The purpose of the WESCO International, Inc. 1999 Long-Term
Incentive Plan (as the same may be amended from time to time, the "Plan") is to
assist WESCO International, Inc., a Delaware corporation (the "Company"), and
its Subsidiaries (as defined below) in attracting and retaining highly competent
key employees and non-employee directors and to act as an incentive in
motivating selected key employees and non-employee directors of the Company and
its Subsidiaries (as defined below) to achieve long-term corporate objectives.
1.02 ADOPTION AND TERM. The Plan was initially approved by the Board of
Directors of the Company (the "Board") and the stockholders of the Company to be
effective as of May 11, 1999, the effective date of the initial public offering
of the Company's Common Stock (the "Effective Date"). This is a complete
restatement of the Plan effective April 15, 2003. The Plan shall remain in
effect until terminated by action of the Board; provided, however, that no
Incentive Stock Option (as defined below) may be granted hereunder after the
tenth anniversary of the Effective Date and the provisions of Articles VII and
VIII with respect to the Performance Goals (as defined below) applicable to
performance-based awards to "covered employees" under Section 162(m) of the Code
(as defined below) shall expire as of the fifth anniversary of the date of the
Company's 2003 Annual Meeting of Shareholders unless such provisions are
re-approved by the shareholders before such date.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, capitalized terms shall have the following
meanings:
2.01 ACCELERATED OWNERSHIP OPTIONS shall have the meaning given to such
term in Section 6.04.
2.02 ACQUIRING CORPORATION shall have the meaning given to such term in
Section 11.08(b).
2.03 AWARD means any grant to a Participant of one or a combination of
Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights
or Stock Units described in Article VI, Restricted Shares or Restricted Units
described in Article VII, Performance Awards described in Article VIII, other
stock-based Awards described in Article IX and short-term cash incentive Awards
described in Article X.
2.04 AWARD AGREEMENT means a written agreement between the Company and a
Participant or a written notice from the Company to a Participant specifically
setting forth the terms and conditions of an Award granted under the Plan.
2.05 AWARD PERIOD means, with respect to an Award, the period of time set
forth in the Award Agreement during which specified target performance goals
must be achieved or other conditions set forth in the Award Agreement must be
satisfied.
2.06 BENEFICIARY means an individual, trust or estate who or which, by a
written designation of the Participant filed with the Company or by operation of
law, succeeds to the rights and obligations of the Participant under the Plan
and an Award Agreement upon the Participant's death.
2.07 BOARD shall have the meaning given to such term in Section 1.02.
2.08 CHANGE IN CONTROL means the first to occur of the following events
after the Effective Date: the acquisition by any person, entity or "group" (as
defined in Section 13(d) of the Securities Exchange Act of
A-1
1934, as amended), other than the Company, its Subsidiaries, any employee
benefit plan of the Company or its Subsidiaries, or Cypress Merchant Banking
Partners L.P. or any successor investment vehicle, of 30% or more of the
combined voting power of the Company's then outstanding voting securities; (b)
the merger or consolidation of the Company, as a result of which persons who
were stockholders of the Company immediately prior to such merger or
consolidation, do not, immediately thereafter, own, directly or indirectly, more
than 70% of the combined voting power entitled to vote generally in the election
of directors of the merged or consolidated company; (c) the liquidation or
dissolution of the Company; (d) the sale, transfer or other disposition of all
or substantially all of the assets of the Company to one or more persons or
entities that are not, immediately prior to such sale, transfer or other
disposition, affiliates of the Company; and (e) during any period of not more
than two years, individuals who constitute the Board as of the beginning of the
period and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clause (a) or (b) of this sentence) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at least
two-thirds (2/3) of the directors then still in office who were directors at
such time or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority of the Board.
2.09 CODE means the Internal Revenue Code of 1986, as amended. References
to a section of the Code include that section and any comparable section or
sections of any future legislation that amends, supplements or supersedes said
section.
2.10 COMMITTEE means the Compensation Committee of the Board.
2.11 COMPANY shall have the meaning given to such term in Section 1.01.
2.12 COMMON STOCK means Common Stock of the Company.
2.13 DATE OF GRANT means the date as of which the Committee grants an
Award. If the Committee contemplates an immediate grant to a Participant, the
Date of Grant shall be the date of the Committee's action. If the Committee
contemplates a date on which the grant is to be made other than the date of the
Committee's action, the Date of Grant shall be the date so contemplated and set
forth in or determinable from the records of action of the Committee; provided,
however, that the Date of Grant shall not precede the date of the Committee's
action.
2.14 EFFECTIVE DATE shall have the meaning given to such term in Section
1.02.
2.15 EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
2.16 EXERCISE PRICE shall have the meaning given to such term in Section
6.01(b).
2.17 EXTRAORDINARY TERMINATION shall have the meaning given to such term in
Section 6.03(e).
2.18 FAIR MARKET VALUE means a price that is based on the opening, closing,
actual, high, low, or average selling prices of a share of Common Stock on the
New York Stock Exchange ("NYSE") or other established stock exchange (or
exchanges) on the applicable date, the preceding trading day, the next
succeeding trading day, or an average of trading days, as determined by the
Committee in its discretion. Such definition of Fair Market Value shall be
specified in the Award Agreement and may differ depending on whether Fair Market
Value is in reference to the grant, exercise, vesting, or settlement or payout
of an Award. If, however, the accounting standards used to account for equity
awards granted to Participants are substantially modified subsequent to the
Effective Date of the Plan, the Committee shall have the ability to determine
Fair Market Value based on the relevant facts and circumstances. If shares of
Common Stock are not traded on an established stock exchange, Fair Market Value
shall be determined by the Committee in good faith.
2.19 INCENTIVE STOCK OPTION means a stock option within the meaning of
Section 422 of the Code.
2.20 MERGER means any merger, reorganization, consolidation, share
exchange, transfer of assets or other transaction having similar effect
involving the Company.
2.21 NON-QUALIFIED STOCK OPTION means a stock option which is not an
Incentive Stock Option.
2.22 OPTIONS mean all Non-Qualified Stock Options and Incentive Stock
Options.
A-2
2.23 ORIGINAL OPTION shall have the meaning given to such term in Section
6.04.
2.24 PARTICIPANT means a person designated to receive an Award under the
Plan in accordance with Section 5.01.
2.25 PERFORMANCE AWARDS means Awards granted in accordance with Article
VIII.
2.26 PERFORMANCE GOALS means any of the following (in absolute terms or
relative to one or more other companies or indices): operating income, return on
stockholders' equity, return on investment, return on invested assets, stock
price appreciation, earnings before interest, taxes, depreciation and
amortization, cash flow, sales growth, margin improvement, income before taxes
(IBT), IBT margin, working capital performance, earnings per share, growth in
earnings per share, expense targets, productivity targets or ratios, attainment
of specific milestones in connection with strategic initiatives and/or customer
satisfaction.
2.27 PERMANENT DISABILITY means a physical or mental disability or
infirmity that prevents the performance of a Participant's employment-related
duties lasting (or likely to last, based on competent medical evidence presented
to the Board) for a period of six months or longer. The Board's reasoned and
good faith judgment of Permanent Disability shall be final and shall be based on
such competent medical evidence as shall be presented to it by such Participant
or by any physician or group of physicians or other competent medical expert
employed by the Participant or the Company to advise the Board.
2.28 PLAN shall have the meaning given to such term in Section 1.01.
2.29 PRIOR PLANS shall have the meaning given to such term in Section 4.01.
2.30 RESTRICTED SHARES means Common Stock subject to restrictions imposed
in connection with Awards granted under Article VII.
2.31 RESTRICTED UNIT means units representing the right to receive Common
Stock in the future subject to restrictions imposed in connection with Awards
granted under Section 8.
2.32 RETIREMENT means a Participant's retirement at or after age 65.
2.33 STOCK APPRECIATION RIGHTS means Awards granted in accordance with
Article VI.
2.34 STOCK UNITS means Awards consisting of the right to receive shares of
Common Stock in the future.
2.35 SUBSIDIARY means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
ARTICLE III
ADMINISTRATION
3.01 COMMITTEE. The Plan shall be administered by the Committee. The
Committee shall have exclusive and final authority in each determination,
interpretation or other action affecting the Plan and its Participants. The
Committee shall have the sole discretionary authority to interpret the Plan, to
establish and modify administrative rules for the Plan, to impose such
conditions and restrictions on Awards as it determines appropriate, and to take
such steps in connection with the Plan and Awards granted hereunder as it may
deem necessary or advisable. The Committee may, subject to compliance with
applicable legal requirements, with respect to Participants who are not subject
to Section 16(b) of the Exchange Act or Section 162(m) of the Code, delegate
such of its powers and authority under the Plan as it deems appropriate to
designated officers or employees of the Company. In addition, the Board may
exercise any of the authority conferred upon the Committee hereunder. In the
event of any such delegation of authority or exercise of authority by the Board,
references in the Plan to the Committee shall be deemed to refer to the delegate
of the Committee or the Board, as the case may be.
3.02 INDEMNIFICATION. Each person who is or shall have been a member of
the Board, or a Committee appointed by the Board, or an officer of the Company
to whom authority was delegated in accordance with the Plan shall be indemnified
and held harmless by the Company against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him or her in
connection with or resulting from
A-3
any claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf; provided, however, that the foregoing
indemnification shall not apply to any loss, cost, liability, or expense that is
a result of his or her own willful misconduct. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
ARTICLE IV
SHARES
4.01 NUMBER OF SHARES ISSUABLE. The total number of shares of Common Stock
authorized to be issued under the Plan shall be the sum of (a) 6,936,000 shares,
(b) the number of shares of Common Stock covered by any unexercised portions of
stock options granted under the Company's 1994 Stock Option Plan, 1998 Stock
Option Plan or Stock Option Plan for Branch Employees (the "Prior Plans") that
are canceled or terminated after the Effective Date and (c) the number of shares
of Common Stock surrendered by Participants after the Effective Date to pay all
or a portion of the exercise price and/or withholding taxes with respect to the
exercise of stock options granted under any of the Prior Plans. The number of
shares available for issuance under the Plan shall be subject to adjustment in
accordance with Section 11.08. The shares to be offered under the Plan shall be
authorized and unissued shares of Common Stock, or issued shares of Common Stock
which will have been reacquired by the Company.
4.02 SHARES SUBJECT TO TERMINATED AWARDS. Shares of Common Stock covered
by any unexercised portions of terminated Options (including canceled Options),
Stock Appreciation Rights or Stock Units granted under Article VI, terminated
Restricted Units or shares of Common Stock forfeited as provided in Article VII
and shares of Common Stock subject to any Award that are otherwise surrendered
by a Participant or terminated may be subject to new Awards under the Plan. If
any shares of Common Stock are withheld from those otherwise issuable or are
tendered to the Company, by attestation or otherwise, in connection with the
exercise of an Option, only the net number of shares of Common Stock issued as a
result of such exercise shall be deemed delivered for purposes of determining
the maximum number of shares available for delivery under the Plan.
ARTICLE V
PARTICIPATION
5.01 ELIGIBLE PARTICIPANTS. Participants in the Plan shall be such key
employees and non-employee directors of the Company and its Subsidiaries as the
Committee, in its sole discretion, may designate from time to time. The
Committee's designation of a Participant in any year shall not require the
Committee to designate such person to receive Awards in any other year. The
designation of a Participant to receive an Award under one portion of the Plan
does not require the Committee to include such Participant under other portions
of the Plan. The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the types and amounts of their
respective Awards. The Committee may grant Awards from time to time on a
discretionary basis and/or provide for automatic Awards on a formula basis to a
Participant or designated group of Participants. Subject to adjustment in
accordance with Section 11.08, during any calendar year no Participant shall be
granted Awards in respect of more than 1,000,000 shares of Common Stock (whether
through grants of Options, Stock Appreciation Rights or other Awards of Common
Stock or rights with respect thereto) and $2 million in cash; provided, however,
that if it is the Committee's intention as of the Date of Grant of an Award, as
evidenced by the applicable Award Agreement, that such Award shall be earned by
the Participant over a period of more than one calendar year, then for purposes
of applying the
A-4
foregoing per calendar year limitations, the shares of Common Stock and/or cash
subject to such Award shall be allocated to the first calendar year in which
such shares and/or cash may be earned (determined without regard to possible
vesting as a result of a Change in Control or pursuant to any provision of this
Plan authorizing the Committee to accelerate the vesting of an Award).
ARTICLE VI
STOCK OPTIONS
6.01 OPTION AWARDS.
(A) GRANT OF OPTIONS. The Committee may grant, to such Participants as the
Committee may select, Options entitling the Participants to purchase shares of
Common Stock from the Company in such numbers, at such prices, and on such terms
and subject to such conditions, not inconsistent with the terms of the Plan, as
may be established by the Committee. The terms of any Option granted under the
Plan shall be set forth in an Award Agreement.
(B) EXERCISE PRICE OF OPTIONS. The exercise price of each share of Common
Stock which may be purchased upon exercise of any Option granted under the Plan
(the "Exercise Price") shall be determined by the Committee; provided, however,
that, except in the case of any substituted Options described in Section
11.08(c), the Exercise Price shall in all cases be equal to or greater than the
Fair Market Value on the Date of Grant.
(C) DESIGNATION OF OPTIONS. Except as otherwise expressly provided in the
Plan, the Committee may designate, at the time of the grant of an Option, such
Option as an Incentive Stock Option or a Non-Qualified Stock Option; provided,
however, that an Option may be designated as an Incentive Stock Option only if
the applicable Participant is an employee of the Company or a Subsidiary on the
Date of Grant.
(D) SPECIAL INCENTIVE STOCK OPTION RULES. No Participant may be granted
Incentive Stock Options under the Plan (or any other plans of the Company and
its Subsidiaries) that would result in Incentive Stock Options to purchase
shares of Common Stock with an aggregate Fair Market Value (measured on the Date
of Grant) of more than $100,000 first becoming exercisable by such Participant
in any one calendar year. Notwithstanding any other provision of the Plan to the
contrary, no Incentive Stock Option shall be granted to any person who, at the
time the Option is granted, owns stock (including stock owned by application of
the constructive ownership rules in Section 424(d) of the Code) possessing more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary, unless at the time the Incentive Stock Option is
granted the Exercise Price is at least 110% of the Fair Market Value on the Date
of Grant of the Common Stock subject to the Incentive Stock Option and the
Incentive Stock Option by its terms is not exercisable for more than five (5)
years from the Date of Grant.
(E) RIGHTS AS A STOCKHOLDER. A Participant or a transferee of an Option
pursuant to Section 11.04 shall have no rights as a stockholder with respect to
the shares of Common Stock covered by an Option until that Participant or
transferee shall have become the holder of record of any such shares, and no
adjustment shall be made with respect to any such shares of Common Stock for
dividends in cash or other property or distributions of other rights on the
Common Stock for which the record date is prior to the date on which that
Participant or transferee shall have become the holder of record of any shares
covered by such Option; provided, however, that Participants are entitled to the
adjustments set forth in Section 11.08.
6.02 STOCK APPRECIATION RIGHTS.
(A) STOCK APPRECIATION RIGHT AWARDS. The Committee is authorized to grant
to any Participant one or more Stock Appreciation Rights. Such Stock
Appreciation Rights may be granted either independent of or in tandem with
Options granted to the same Participant (including Options granted under this
Plan or any other plans of the Company). Stock Appreciation Rights granted in
tandem with Options may be granted simultaneously with, or, in the case of
Non-Qualified Stock Options, subsequent to, the grant to such Participant of the
related Option; provided, however, that: (i) any Option covering any share of
Common Stock shall expire and not be exercisable upon the exercise of any Stock
Appreciation Right with respect to
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the same share, (ii) any Stock Appreciation Right covering any share of Common
Stock shall expire and not be exercisable upon the exercise of any related
Option with respect to the same share, and (iii) an Option and Stock
Appreciation Right covering the same share of Common Stock may not be exercised
simultaneously. Upon exercise of a Stock Appreciation Right with respect to a
share of Common Stock, the Participant shall be entitled to receive an amount
equal to the excess, if any, of (A) the Fair Market Value of a share of Common
Stock on the date of exercise over (B) the Exercise Price of such Stock
Appreciation Right established in the Award Agreement, which amount shall be
payable as provided in Section 6.02(c).
(B) EXERCISE PRICE. The Exercise Price established under any Stock
Appreciation Right granted under this Plan shall be determined by the Committee,
but in the case of Stock Appreciation Rights granted in tandem with Options
shall not be less than the Exercise Price of the related Option. Upon exercise
of Stock Appreciation Rights, the number of shares subject to exercise under any
related Option shall automatically be reduced by the number of shares of Common
Stock represented by the Option or portion thereof which are surrendered as a
result of the exercise of such Stock Appreciation Rights.
(C) PAYMENT OF INCREMENTAL VALUE. Any payment which may become due from
the Company by reason of a Participant's exercise of a Stock Appreciation Right
may be paid to the Participant as determined by the Committee (i) all in cash,
(ii) all in Common Stock, or (iii) in any combination of cash and Common Stock.
In the event that all or a portion of the payment is made in Common Stock, the
number of shares of Common Stock delivered in satisfaction of such payment shall
be determined by dividing the amount of such payment or portion thereof by the
Fair Market Value on the Exercise Date. No fractional share of Common Stock
shall be issued to make any payment in respect of Stock Appreciation Rights; if
any fractional share would be issuable, the combination of cash and Common Stock
payable to the Participant shall be adjusted as directed by the Committee to
avoid the issuance of any fractional share.
(D) SUBSTITUTION OF STOCK APPRECIATION RIGHTS FOR OPTIONS. In the event
the Company no longer uses APB Opinion 25 to account for equity compensation and
is required to or elects to expense the cost of stock options pursuant to FAS
No. 123 (or a successor standard), the Committee shall have the ability, without
Participant consent, to substitute Stock Appreciation Rights paid only in shares
of Common Stock for outstanding Options (including Options granted under this
Plan or any other plans of the Company); provided, the terms of the substituted
Stock Appreciation Rights are the same as the terms for the Options and the
difference between the Fair Market Value of the underlying shares of Common
Stock and the Exercise Price of the Stock Appreciation Rights is equivalent to
the difference between the Fair Market Value of the underlying shares of Common
Stock and the Exercise Price of the Options. If this provision creates adverse
accounting consequences for the Company, it shall be considered null and void.
6.03 TERMS OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
(A) CONDITIONS ON EXERCISE. An Award Agreement with respect to Options and
Stock Appreciation Rights may contain such waiting periods, exercise dates and
restrictions on exercise (including, but not limited to, periodic installments)
as may be determined by the Committee at the time of grant.
(B) DURATION OF OPTIONS AND STOCK APPRECIATION RIGHTS. Options and Stock
Appreciation Rights shall terminate after the first to occur of the following
events:
(i) Expiration of the Option and Stock Appreciation Rights as provided
in the related Award Agreement; or
(ii) Termination of the Award as provided in Section 6.03(e) following
the Participant's Termination of Employment; or
(iii) Ten years from the Date of Grant.
(C) ACCELERATION OF EXERCISE TIME. The Committee, in its sole discretion,
shall have the right (but shall not in any case be obligated), exercisable at
any time after the Date of Grant, to permit the exercise of any Option and Stock
Appreciation Rights prior to the time such Option and Stock Appreciation Rights
would otherwise become exercisable under the terms of the related Award
Agreement.
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(D) EXTENSION OF EXERCISE TIME. In addition to the extensions permitted
under Section 6.03(e) in the event of Termination of Employment, the Committee,
in its sole discretion, shall have the right (but shall not in any case be
obligated), exercisable on or at any time after the Date of Grant, to permit the
exercise of any Option or Stock Appreciation Right after its expiration date
described in Section 6.03(e), subject, however, to the limitations described in
Sections 6.03(b)(i) and (iii).
(E) EXERCISE OF OPTIONS AND STOCK APPRECIATION RIGHTS UPON TERMINATION OF
EMPLOYMENT.
(I) EXTRAORDINARY TERMINATION. Unless otherwise provided in the Award
Agreement or otherwise determined by the committee at the Date of Grant, in
the event that a Participant's employment with the Company and the
Subsidiaries terminates by reason of the Participant's death, permanent
Disability or Retirement (each an "Extraordinary Termination"), then any
Options and Stock Appreciation Rights held by the Participant and then
exercisable shall remain exercisable solely until the first to occur of (i)
the first anniversary of the Participant's termination of employment or
(ii) the expiration of the term of the Option or Stock Appreciation Rights
unless the exercise period is extended by the Committee in accordance with
Section 6.03(d). Any Options and Stock Appreciation Rights held by the
Participant that are not exercisable at the date of the Extraordinary
Termination shall terminate and be cancelled immediately upon such
Extraordinary Termination, and any Options and Stock Appreciation Rights
described in the preceding sentence that are not exercised within the
period described in such sentence shall terminate and be cancelled upon the
expiration of such period.
(II) OTHER TERMINATION OF EMPLOYMENT. Unless otherwise provided in
the Award Agreement or otherwise determined by the Committee at or after
the Date of Grant, in the event that a Participant's employment with the
Company and the Subsidiaries terminates for any reason other than an
Extraordinary Termination, any Options and Stock Appreciation Rights held
by such Participant that are exercisable as of the date of such termination
shall remain exercisable for a period of 60 days (or, if shorter, during
the remaining term of the Options and Stock Appreciation Rights), unless
the exercise period is extended by the Committee in accordance with Section
6.03(d). Any Options and Stock Appreciation Rights held by the Participant
that are not exercisable at the date of the Participant's termination of
employment shall terminate and be cancelled immediately upon such
termination, and any Options and Stock Appreciation Rights described in the
preceding sentence that are not exercised within the period described in
such sentence shall terminate and be cancelled upon the expiration of such
period.
6.04 ACCELERATED OWNERSHIP OPTIONS. With respect to any Option or any
stock option granted under the terms of one of the Prior Plans or otherwise (an
"Original Option"), the Committee shall have the authority to specify, at or
after the time of grant of such Original Option, that, subject to the
availability of shares of Common Stock under the Plan, a Participant shall be
granted a new option (referred to as an "Accelerated Ownership Option") in the
event (i) such Participant exercises all or a part of such Original Option by
surrendering previously acquired shares of Common Stock in full or partial
payment of the exercise price under such Original Option, and/or (ii) a
Participant's withholding tax obligation with respect to the exercise of an
Original Option is satisfied in whole or in part by the delivery of previously
acquired shares of Common Stock by the Participant to the Company or the
withholding of shares of Common Stock from the shares otherwise issuable to the
Participant upon the exercise of the Original Option. Each such Accelerated
Ownership Option shall cover a number of shares of Common Stock equal to the
number of shares of Common Stock surrendered in payment of the exercise price
under such Original Option and/or surrendered or withheld to pay withholding
taxes with respect to such Original Option. Each such Accelerated Ownership
Option shall have an Exercise Price per share of Common Stock equal to the Fair
Market Value of the Common Stock on the date of exercise of the Original Option
in respect of which the Accelerated Ownership Option was granted and shall
expire on the stated expiration date of the Original Option. An Accelerated
Ownership Option shall be exercisable at any time and from time to time from and
after the Date of Grant of such Accelerated Ownership Option, subject to such
restrictions on exercisability as may be imposed in the discretion of the
Committee. Any Accelerated Ownership Option may provide for the grant, when
exercised, of subsequent Accelerated Ownership Options to the extent and upon
such terms and conditions, consistent with this Section 6.04, as the Committee
in its sole discretion shall specify at or after the time of grant of such
Accelerated Ownership Option. An Accelerated Ownership Option shall contain such
other terms and
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conditions, which may include a restriction on the transferability of the shares
of Common Stock received upon exercise of the Accelerated Ownership Option, as
the Committee in its sole discretion shall deem desirable and which may be set
forth in rules or guidelines adopted by the Committee or in the Award Agreements
evidencing the Accelerated Ownership Options.
6.05 OPTION EXERCISE PROCEDURES. Each Option and Stock Appreciation Right
granted under the Plan shall be exercised by written notice to the Company which
must be received by the officer or employee of the Company designated in the
Award Agreement at or before the close of business on the expiration date of the
Award. The Exercise Price of shares purchased upon exercise of an Option granted
under the Plan shall be paid in full in cash by the Participant pursuant to the
Award Agreement; provided, however, that in lieu of such cash a Participant may
(if authorized by the Committee) pay the Exercise Price in whole or in part by
delivering (actually or by attestation) to the Company shares of the Common
Stock having a Fair Market Value on the date of exercise of the Option equal to
the Exercise Price for the shares being purchased; except that (i) any portion
of the Exercise Price representing a fraction of a share shall in any event be
paid in cash and (ii) unless the Committee determines otherwise, no shares of
the Common Stock which have been held for less than six months may be delivered
in payment of the Exercise Price of an Option. Payment may also be made, in the
discretion of the Committee, by the delivery (including, without limitation, by
fax) to the Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions to a broker-dealer to sell
or margin a sufficient portion of the shares and deliver the sale or margin loan
proceeds directly to the Company to pay for the Exercise Price. The date of
exercise of an Option shall be determined under procedures established by the
Committee, and as of the date of exercise the person exercising the Option
shall, as between the Company and such person, be considered for all purposes to
be the owner of the shares of Common Stock with respect to which the Option has
been exercised. Any part of the Exercise Price paid in cash upon the exercise of
any Option shall be added to the general funds of the Company and may be used
for any proper corporate purpose. Unless the Committee shall otherwise
determine, any shares of Common Stock transferred to the Company as payment of
all or part of the Exercise Price upon the exercise of any Option shall be held
as treasury shares.
6.06 DEFERRED DELIVERY OF OPTION SHARES. In lieu of exercising an Option
for the immediate delivery of the underlying shares of Common Stock, a
Participant shall have the right, in accordance with procedures established by
the Committee, to elect to receive Stock Units which do not reflect current
ownership of shares of Common Stock, but rather the right to receive delivery of
shares at a later date. Upon such an exercise of an Option, a book account
maintained by the Company for the Participant shall be credited with the shares
of Common Stock otherwise issuable upon the exercise. The number of shares of
Common Stock credited to the account shall be delivered to the Participant at a
later date specified by the Participant at the time of the election. During the
deferral period, in the discretion of the Committee, either (i) the account
shall be credited with additional Stock Units reflecting the dividends that
would have been received on the Stock Units if those dividends were reinvested
in additional shares of Common Stock or (ii) the deemed dividends shall be paid
to the Participant currently in cash. During the deferral period, the Company's
obligation to the Participant shall be an unfunded, unsecured promise to deliver
shares of Common Stock at the end of the deferral period.
6.07 CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Options and
Stock Appreciation Rights outstanding on the date of such Change in Control
shall become immediately and fully exercisable. Unless otherwise determined by
the Committee, the provisions of this Section 6.07 shall not be applicable to
any Options and Stock Appreciation Rights granted to a Participant if any Change
in Control results from such Participant's beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of Common Stock.
ARTICLE VII
RESTRICTED SHARES AND RESTRICTED UNITS
7.01 RESTRICTED SHARE AND RESTRICTED UNIT AWARDS. The Committee may grant
to any Participant a Restricted Share Award consisting of such number of shares
of Common Stock on such terms, conditions and
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restrictions, whether based on performance standards, periods of service,
retention by the Participant of ownership of specified shares of Common Stock or
other criteria, as the Committee shall establish. The Committee may also grant
Restricted Stock Units representing the right to receive shares of Common Stock
in the future subject to the achievement of one or more goals relating to the
completion of service by the Participant and/or the achievement of performance
or other objectives. With respect to performance-based Awards of Restricted
Shares or Restricted Units intended to qualify for deductibility under the
"performance-based" compensation exception contained in Section 162(m) of the
Code, performance targets will consist of specified levels of one or more of the
Performance Goals. The terms of any Restricted Share and Restricted Unit Awards
granted under this Plan shall be set forth in an Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with this
Plan.
(A) ISSUANCE OF RESTRICTED SHARES. As soon as practicable after the Date
of Grant of a Restricted Share Award by the Committee, the Company shall cause
to be transferred on the books of the Company or its agent, shares of Common
Stock, registered on behalf of the Participant, evidencing the Restricted Shares
covered by the Award, subject to forfeiture to the Company as of the Date of
Grant if an Award Agreement with respect to the Restricted Shares covered by the
Award is not duly executed by the Participant and timely returned to the
Company. All shares of Common Stock covered by Awards under this Article VII
shall be subject to the restrictions, terms and conditions contained in the Plan
and the applicable Award Agreements entered into by the appropriate
Participants. Until the lapse or release of all restrictions applicable to an
Award of Restricted Shares the share certificates representing such Restricted
Shares may be held in custody by the Company, its designee, or, if the
certificates bear a restrictive legend, by the Participant. Upon the lapse or
release of all restrictions with respect to an Award as described in Section
7.01(d), one or more share certificates, registered in the name of the
Participant, for an appropriate number of shares as provided in Section 7.01(d),
free of any restrictions set forth in the Plan and the related Award Agreement
shall be delivered to the Participant.
(B) STOCKHOLDER RIGHTS. Beginning on the Date of Grant of a Restricted
Share Award and subject to execution of the related Award Agreement as provided
in Section 7.01(a), and except as otherwise provided in such Award Agreement,
the Participant shall become a stockholder of the Company with respect to all
shares subject to the Award Agreement and shall have all of the rights of a
stockholder, including, but not limited to, the right to vote such shares and
the right to receive dividends; provided, however, that any shares of Common
Stock distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed, shall be subject to the
same restrictions as such Restricted Shares and held or restricted as provided
in Section 7.01(a).
(C) RESTRICTION ON TRANSFERABILITY. None of the Restricted Shares may be
assigned or transferred (other than by will or the laws of descent and
distribution or to an inter vivos trust with respect to which the Participant is
treated as the owner under Sections 671 through 677 of the Code), pledged or
sold prior to the lapse of the restrictions applicable thereto.
(D) DELIVERY OF SHARES UPON VESTING. Upon expiration or earlier
termination of the forfeiture period without a forfeiture and the satisfaction
of or release from any other conditions prescribed by the Committee, or at such
earlier time as provided under the provisions of Section 7.03, the restrictions
applicable to the Restricted Shares shall lapse. As promptly as administratively
feasible thereafter, subject to the requirements of Section 11.05, the Company
shall deliver to the Participant or, in case of the Participant's death, to the
Participant's Beneficiary, one or more share certificates for the appropriate
number of shares of Common Stock, free of all such restrictions, except for any
restrictions that may be imposed by law.
7.02 TERMS OF RESTRICTED SHARES.
(A) FORFEITURE OF RESTRICTED SHARES. Subject to Sections 7.02(b) and 7.03,
Restricted Shares shall be forfeited and returned to the Company and all rights
of the Participant with respect to such Restricted Shares shall terminate unless
the Participant continues in the service of the Company or a Subsidiary until
the expiration of the forfeiture period for such Restricted Shares and satisfies
any and all other conditions set forth in the Award Agreement. The Committee
shall determine the forfeiture period (which may, but need not,
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lapse in installments) and any other terms and conditions applicable with
respect to any Restricted Share Award.
(B) WAIVER OF FORFEITURE PERIOD. Notwithstanding anything contained in
this Article VII to the contrary, the Committee may, in its sole discretion,
waive the forfeiture period and any other conditions set forth in any Award
Agreement under appropriate circumstances (including the death, disability or
Retirement of the Participant or a material change in circumstances arising
after the date of an Award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the Restricted Shares) as the Committee
shall deem appropriate.
7.03 RESTRICTED STOCK UNITS. Restricted Unit Awards shall be subject to
the restrictions, terms and conditions contained in the Plan and the applicable
Award Agreements entered into by the appropriate Participants. Until the lapse
or release of all restrictions applicable to an Award of Restricted Units, no
shares of Common Stock shall be issued in respect of such Awards and no
Participant shall have any rights as a stockholder of the Company with respect
to the shares of Common Stock covered by such Restricted Unit Award. Upon the
lapse or release of all restrictions with respect to a Restricted Unit Award,
one or more share certificates, registered in the name of the Participant, for
an appropriate number of shares, free of any restrictions set forth in the Plan
and the related Award Agreement shall be delivered to the Participant. A
Participant's Restricted Unit Award shall not be contingent on any payment by or
consideration from the Participant other than the rendering of services.
Notwithstanding anything contained in this Section 7.03 to the contrary, the
Committee may, in its sole discretion, waive the forfeiture period and any other
conditions set forth in any Award Agreement under appropriate circumstances
(including the death, Permanent Disability or Retirement of the Participant or a
material change in circumstances arising after the date of an Award) and subject
to such terms and conditions (including forfeiture of a proportionate number of
the Restricted Units) as the Committee shall deem appropriate.
7.04 CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all
restrictions applicable to Restricted Share and Restricted Unit Awards shall
terminate fully and the Participant shall immediately have the right to the
delivery of share certificates. Unless otherwise determined by the Committee,
the provisions of this Section 7.04 shall not be applicable to any Restricted
Shares and Restricted Units granted to a Participant if any Change in Control
results from such Participant's beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of Common Stock.
ARTICLE VIII
PERFORMANCE AWARDS
8.01 PERFORMANCE AWARDS.
(A) AWARD PERIODS AND DETERMINATIONS OF AWARDS. The Committee may grant
Performance Awards to Participants. A Performance Award shall consist of the
right to receive a payment (measured by the Fair Market Value of a specified
number of shares of Common Stock, increases in such Fair Market Value during the
Award Period and/or a fixed cash amount) contingent upon the extent to which
certain predetermined performance targets have been met during an Award Period.
Performance Awards may be made in conjunction with, or in addition to,
Restricted Share Awards made under Article VII. The Award Period shall be two or
more fiscal or calendar years or other annual periods as determined by the
Committee. The Committee, in its discretion and under such terms as it deems
appropriate, may permit newly eligible Participants, such as those who are
promoted or newly hired, to receive Performance Awards after an Award Period has
commenced.
(B) PERFORMANCE TARGETS. The performance targets may include such goals
related to the performance of the Company and/or the performance of a
Participant as may be established by the Committee in its discretion. In the
case of Performance Awards intended to qualify for deductibility under the
"performance-based" compensation exception contained in Section 162(m) of the
Code, the targets will consist of specified levels of one or more of the
Performance Goals. The performance targets established by the Committee may
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vary for different Award Periods and need not be the same for each Participant
receiving a Performance Award in an Award Period. Except to the extent
inconsistent with the performance-based compensation exception under Section
162(m) of the Code, in the case of Performance Awards granted to Participants to
whom such section is applicable, the Committee, in its discretion, but only
under extraordinary circumstances as determined by the Committee, may change any
prior determination of performance targets for any Award Period at any time
prior to the final determination of the value of a related Performance Award
when events or transactions occur to cause such performance targets to be an
inappropriate measure of achievement.
(C) EARNING PERFORMANCE AWARDS. The Committee, on or as soon as
practicable after the Date of Grant, shall prescribe a formula to determine the
percentage of the applicable Performance Award to be earned based upon the
degree of attainment of performance targets.
(D) PAYMENT OF EARNED PERFORMANCE AWARDS. Payments of earned Performance
Awards shall be made in cash or shares of Common Stock or a combination of cash
and shares of Common Stock, in the discretion of the Committee. The Committee,
in its sole discretion, may provide such terms and conditions with respect to
the payment of earned Performance Awards as it may deem desirable.
8.02 TERMS OF PERFORMANCE AWARDS.
(A) TERMINATION OF EMPLOYMENT. Unless otherwise provided below or in
Section 8.03, in the case of a Participant's Termination of Employment prior to
the end of an Award Period, the Participant will not have earned any Performance
Awards for that Award Period.
(B) RETIREMENT. If a Participant's Termination of Employment is because of
Retirement prior to the end of an Award Period, the Participant will not be paid
any Performance Award, unless the Committee, in its sole and exclusive
discretion, determines that an Award should be paid. In such a case, the
Participant shall be entitled to receive a pro-rata portion of his or her Award
as determined under subsection (d).
(C) DEATH OR DISABILITY. If a Participant's Termination of Employment is
due to death or to disability (as determined in the sole and exclusive
discretion of the Committee) prior to the end of an Award Period, the
Participant or the Participant's personal representative shall be entitled to
receive a pro-rata share of his or her Award as determined under subsection (d).
(D) PRO-RATA PAYMENT. The amount of any payment to be made to a
Participant whose employment is terminated by Retirement, death or disability
(under the circumstances described in subsections (b) and (c)) will be the
amount determined by multiplying (i) the amount of the Performance Award that
would have been earned through the end of the Award Period had such employment
not been terminated by (ii) a fraction, the numerator of which is the number of
whole months such Participant was employed during the Award Period, and the
denominator of which is the total number of months of the Award Period. Any such
payment made to a Participant whose employment is terminated prior to the end of
an Award Period shall be made at the end of such Award Period, unless otherwise
determined by the Committee in its sole discretion. Any partial payment
previously made or credited to a deferred account for the benefit of a
Participant in accordance with Section 8.01(d) of the Plan shall be subtracted
from the amount otherwise determined as payable as provided in this Section
8.02(d).
(E) OTHER EVENTS. Notwithstanding anything to the contrary in this Article
VIII, the Committee may, in its sole and exclusive discretion, determine to pay
all or any portion of a Performance Award to a Participant who has terminated
employment prior to the end of an Award Period under certain circumstances
(including the death, disability or Retirement of the Participant or a material
change in circumstances arising after the Date of Grant), subject to such terms
and conditions as the Committee shall deem appropriate.
8.03 CHANGE IN CONTROL. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Performance
Awards for all Award Periods shall immediately become fully payable (at the
maximum level) to all Participants and shall be paid to Participants within
thirty (30) days after such Change in Control. Unless otherwise determined by
the Committee, the provisions of this Section 8.03 shall not be applicable to
any Performance Awards granted to a Participant if
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any Change in Control results from such Participant's beneficial ownership
(within the meaning of Rule 13d-3 under the Exchange Act) of Common Stock.
ARTICLE IX
OTHER STOCK-BASED AWARDS
9.01 GRANT OF OTHER STOCK-BASED AWARDS. Other stock-based awards,
consisting of stock purchase rights, Awards of Common Stock, or Awards valued in
whole or in part by reference to, or otherwise based on, Common Stock, may be
granted either alone or in addition to or in conjunction with other Awards under
the Plan. Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the persons to whom and the time or times at
which such Awards shall be made, the number of shares of Common Stock to be
granted pursuant to such Awards, and all other conditions of the Awards. Any
such Award shall be confirmed by an Award Agreement executed by the Company and
the Participant, which Award Agreement shall contain such provisions as the
Committee determines to be necessary or appropriate to carry out the intent of
this Plan with respect to such Award.
9.02 TERMS OF OTHER STOCK-BASED AWARDS. In addition to the terms and
conditions specified in the Award Agreement, Awards made pursuant to this
Article IX shall be subject to the following:
(A) NON-TRANSFERABILITY. Any Common Stock subject to Awards made under
this Article IX may not be sold, assigned, transferred, pledged or otherwise
encumbered prior to the date on which the shares are issued, or, if later, the
date on which any applicable restriction, performance or deferral period lapses;
and
(B) INTEREST AND DIVIDENDS. If specified by the Committee in the Award
Agreement, the recipient of an Award under this Article IX shall be entitled to
receive, currently or on a deferred basis, interest or dividends or dividend
equivalents with respect to the Common Stock or other securities covered by the
Award; and
(C) TERMINATION OF SERVICE. The Award Agreement with respect to any Award
shall contain provisions dealing with the disposition of such Award in the event
of a termination of service prior to the exercise, realization or payment of
such Award, whether such termination occurs because of Retirement, Permanent
Disability, death or other reason, with such provisions to take account of the
specific nature and purpose of the Award.
(D) PERFORMANCE-BASED AWARDS. With respect to Awards under this Article IX
intended to qualify for deductibility under the "performance-based" compensation
exception contained in Section 162(m) of the Code, performance targets will
consist of specified levels of one or more of the Performance Goals.
ARTICLE X
SHORT-TERM CASH INCENTIVE AWARDS
10.01 ELIGIBILITY. This Article X is a limited purpose provision that
shall apply only in the event the Committee deems it appropriate that the
Company's short-term cash incentives for executive officers of the Company who
are from time to time determined by the Committee to be "covered employees" for
purposes of Section 162(m) of the Code qualify for deductibility under the
"performance-based" compensation exception contained in Section 162(m).
10.02 AWARDS.
(A) PERFORMANCE TARGETS. For each fiscal year of the Company with respect
to which the Committee determines this Article X to be in effect, the Committee
shall establish objective performance targets based on specified levels of one
or more of the Performance Goals. Such performance targets shall be established
by the Committee on a timely basis to ensure that the targets are considered
"pre-established" for purposes of Section 162(m) of the Code.
(B) AMOUNTS OF AWARDS. In conjunction with the establishment of
performance targets for a fiscal year, the Committee shall adopt an objective
formula (on the basis of percentages of Participants' salaries, shares in
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a bonus pool or otherwise) for computing the respective amounts payable under
the Plan to Participants if and to the extent that the performance targets are
attained. Such formula shall comply with the requirements applicable to
performance-based compensation plans under Section 162(m) of the Code and, to
the extent based on percentages of a bonus pool, such percentages shall not
exceed 100% in the aggregate.
(C) PAYMENT OF AWARDS. Awards will be payable to Participants in cash each
year upon prior written certification by the Committee of attainment of the
specified performance targets for the preceding fiscal year.
(D) NEGATIVE DISCRETION. Notwithstanding the attainment by the Company of
the specified performance targets, the Committee shall have the discretion,
which need not be exercised uniformly among the Participants, to reduce or
eliminate the award that would be otherwise paid.
(E) GUIDELINES. The Committee may adopt from time to time written policies
for its implementation of this Article X. Such guidelines shall reflect the
intention of the Company that all payments hereunder qualify as
performance-based compensation under Section 162(m) of the Code.
10.03 NON-EXCLUSIVE ARRANGEMENT. The adoption and operation of this
Article X shall not preclude the Board or the Committee from approving other
short-term incentive compensation arrangements for the benefit of individuals
who are Participants hereunder as the Board or Committee, as the case may be,
deems appropriate and in the best interests of the Company.
ARTICLE XI
TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
11.01 PLAN PROVISIONS CONTROL AWARD TERMS; SUCCESSORS. The terms of the
Plan shall govern all Awards granted under the Plan, and in no event shall the
Committee have the power to grant any Award under the Plan the terms of which
are contrary to any of the provisions of the Plan. In the event any provision of
any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as
constituted on the Date of Grant of such Award shall control. All obligations of
the Company under the Plan with respect to Awards granted hereunder shall be
binding on any successor to the Company, whether the existence of such successor
is the result of a direct or indirect purchase, merger, consolidation, or
otherwise, of all or substantially all of the business and/or assets of the
Company.
11.02 AWARD AGREEMENT. No person shall have any rights under any Award
granted under the Plan unless and until the Company and the Participant to whom
such Award shall have been granted shall have executed and delivered an Award
Agreement or the Participant shall have received and acknowledged notice of the
Award authorized by the Committee expressly granting the Award to such person
and containing provisions setting forth the terms of the Award.
11.03 MODIFICATION OF AWARD AFTER GRANT. No Award granted under the Plan
to a Participant may be modified (unless such modification does not materially
decrease the value of that Award) after its Date of Grant except by express
written agreement between the Company and such Participant, provided that any
such change (a) may not be inconsistent with the terms of the Plan, and (b)
shall be approved by the Committee.
11.04 LIMITATION ON TRANSFER. Except as provided in Section 7.01(c) in the
case of Restricted Shares, a Participant's rights and interest under the Plan
may not be assigned or transferred other than by will or the laws of descent and
distribution and, during the lifetime of a Participant, only the Participant
personally (or the Participant's personal representative) may exercise rights
under the Plan. The Participant's Beneficiary may exercise the Participant's
rights to the extent they are exercisable under the Plan following the death of
the Participant. Notwithstanding the foregoing, the Committee may grant
Non-Qualified Stock Options that are transferable, without payment of
consideration, to immediate family members of the Participant, to trusts or
partnerships for such family members, or to such other parties as the Committee
may approve (as evidenced by the applicable Award Agreement or an amendment
thereto), and the Committee may also amend outstanding Non-Qualified Stock
Options to provide for such transferability.
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11.05 WITHHOLDING TAXES. The Company shall be entitled, if the Committee
deems it necessary or desirable, to withhold (or secure payment from the
Participant in lieu of withholding) the amount of any withholding or other tax
required by law to be withheld or paid by the Company with respect to any amount
payable and/or shares issuable under such Participant's Award or with respect to
any income recognized upon a disqualifying disposition of shares received
pursuant to the exercise of an Incentive Stock Option, and the Company may defer
payment of cash or issuance of shares upon exercise or vesting of an Award
unless indemnified to its satisfaction against any liability for any such tax.
The amount of such withholding or tax payment shall be determined by the
Committee and shall be payable by the Participant at such time as the Committee
determines. With the approval of the Committee, the Participant may elect to
meet his or her withholding requirement (i) by having withheld from such Award
at the appropriate time that number of shares of Common Stock, rounded up to the
next whole share, the Fair Market Value of which is equal to the amount of
withholding taxes due (the amount of withholding that may be satisfied in this
manner may be limited by the Committee, in its discretion, in order to avoid
adverse financial accounting consequences to the Company), (ii) by direct
payment to the Company in cash of the minimum amount of any taxes required to be
withheld with respect to such Award or (iii) by a combination of withholding
such shares and paying cash.
11.06 SURRENDER OF AWARDS. Any Award granted under the Plan may be
surrendered to the Company for cancellation on such terms as the Committee and
the Participant approve.
11.07 CANCELLATION AND RESCISSION OF AWARDS.
(A) DETRIMENTAL ACTIVITIES. Unless the Award Agreement specifies
otherwise, the Committee may cancel, rescind, suspend, withhold or otherwise
limit or restrict any unexpired, unpaid, or deferred Awards at any time if the
Participant is not in compliance with all applicable provisions of the Award
Agreement and the Plan, or if the Participant engages in any "Detrimental
Activity." For purposes of this Section 11.07, "Detrimental Activity" shall
include: (i) the rendering of services for any organization or engaging directly
or indirectly in any business which is or becomes competitive with the Company,
or which organization or business, or the rendering of services to such
organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company; (ii) the disclosure to anyone outside the
Company, or the use in other than the Company's business, without prior written
authorization from the Company, of any confidential information or material
relating to the business of the Company, acquired by the Participant either
during or after employment with the Company; (iii) any attempt directly or
indirectly to induce any employee of the Company to be employed or perform
services elsewhere or any attempt directly or indirectly to solicit the trade or
business of any current or prospective customer, supplier or partner of the
Company; or (iv) any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company.
(b) Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify in a manner acceptable to the Company that he or she
is in compliance with the terms and conditions of the Plan. In the event a
Participant fails to comply with the provisions of paragraphs (a)(i)-(iv) of
this Section 11.07, if applicable, prior to, or during the six months after, any
exercise, payment or delivery pursuant to an Award, such exercise, payment or
delivery may be rescinded within two years thereafter. In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain
realized or payment received as a result of the rescinded exercise, payment or
delivery, in such manner and on such terms and conditions as may be required,
and the Company shall be entitled to set-off against the amount of any such gain
any amount owed to the Participant by the Company.
11.08 ADJUSTMENTS TO REFLECT CAPITAL CHANGES.
(A) RECAPITALIZATION. The number and kind of shares subject to outstanding
Awards, the Exercise Price for such shares, the number and kind of shares
available for Awards subsequently granted under the Plan, the maximum number of
shares in respect of which Awards can be made to any Participant in any calendar
year and the Performance Goals and Award Periods applicable to outstanding
Awards shall be appropriately adjusted to reflect any stock dividend, stock
split, or share combination or any recapitalization, merger, consolidation,
exchange of shares, liquidation or dissolution of the Company or other change in
capitalization with a similar substantive effect upon the Plan or the Awards
granted under the Plan. The
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Committee shall have the power and sole discretion to determine the amount of
the adjustment to be made in each case.
(B) CERTAIN MERGERS. After any Merger in which the Company is not the
surviving corporation or pursuant to which a majority of the shares which are of
the same class as the shares that are subject to outstanding Options are
exchanged for, or converted into, or otherwise become shares of another
corporation, the surviving, continuing, successor or purchasing corporation, as
the case may be (the "Acquiring Corporation"), will either assume the Company's
rights and obligations under outstanding Award Agreements or substitute awards
in respect of the Acquiring Corporation's stock for outstanding Awards,
provided, however, that if the Acquiring Corporation does not assume or
substitute for such outstanding Awards, the Board shall provide prior to the
Merger that any unexercisable and/or unvested portion of the outstanding Awards
shall be immediately exercisable and vested as of a date prior to such Merger,
as the Board so determines. The exercise and/or vesting of any Award that was
permissible solely by reason of this Section 11.08 shall be conditioned upon the
consummation of the Merger. Any Awards which are neither assumed by the
Acquiring Corporation nor exercised as of the date of the Merger shall terminate
effective as of the effective date of the Merger. Comparable rights shall accrue
to each Participant in the event of successive Mergers of the character
described above.
(C) OPTIONS TO PURCHASE SHARES OR STOCK OF ACQUIRED COMPANIES. After any
Merger in which the Company or a Subsidiary shall be a surviving corporation,
the Committee may grant Options or other Awards under the provisions of the
Plan, pursuant to Section 424 of the Code or as is otherwise permitted under the
Code, in full or partial replacement of or substitution for old stock options
granted under a plan of another party to the merger whose shares of stock
subject to the old options may no longer be issued following the Merger. The
manner of application of the foregoing provisions to such options and any
appropriate adjustments in the terms of such stock options shall be determined
by the Committee in its sole discretion. Any such adjustments may provide for
the elimination of any fractional shares which might otherwise become subject to
any Options. The foregoing shall not be deemed to preclude the Company from
assuming or substituting for stock options of acquired companies other than
pursuant to this Plan.
11.09 LEGAL COMPLIANCE. Shares of Common Stock shall not be issued
hereunder unless the issuance and delivery of such shares shall comply with
applicable laws and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
11.10 NO RIGHT TO EMPLOYMENT. No Participant or other person shall have
any claim of right to be granted an Award under the Plan. Neither the Plan nor
any action taken hereunder shall be construed as giving any Participant any
right to be retained in the service of the Company or any of its Subsidiaries.
11.11 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES. Payments received by a
Participant pursuant to the provisions of the Plan shall not be included in the
determination of benefits under any pension, group insurance or other benefit
plan applicable to the Participant which is maintained by the Company or any of
its Subsidiaries, except as may be provided under the terms of such plans or
determined by the Board.
11.12 GOVERNING LAW. All determinations made and actions taken pursuant to
the Plan shall be governed by the laws of the State of Delaware, other than the
conflict of laws provisions thereof, and construed in accordance therewith.
11.13 NO STRICT CONSTRUCTION. No rule of strict construction shall be
implied against the Company, the Committee or any other person in the
interpretation of any of the terms of the Plan, any Award granted under the Plan
or any rule or procedure established by the Committee.
11.14 CAPTIONS. The captions (i.e., all Section headings) used in the Plan
are for convenience only, do not constitute a part of the Plan, and shall not be
deemed to limit, characterize or affect in any way any provisions of the Plan,
and all provisions of the Plan shall be construed as if no captions had been
used in the Plan.
11.15 SEVERABILITY. Whenever possible, each provision in the Plan and
every Award at any time granted under the Plan shall be interpreted in such
manner as to be effective and valid under applicable law, but if any
A-15
provision of the Plan or any Award at any time granted under the Plan shall be
held to be prohibited by or invalid under applicable law, then (a) such
provision shall be deemed amended to accomplish the objectives of the provision
as originally written to the fullest extent permitted by law and (b) all other
provisions of the Plan, such Award and every other Award at any time granted
under the Plan shall remain in full force and effect.
11.16 AMENDMENT AND TERMINATION.
(A) AMENDMENT. The Board shall have complete power and authority to amend
the Plan at any time; provided, that no termination or amendment of the Plan
may, without the consent of the Participant to whom any Award shall theretofore
have been granted under the Plan, materially adversely affect the right of such
individual under such Award; and provided further, that no such alteration or
amendment of the Plan shall, without approval by the stockholders of the Company
(a) increase the total number of shares of Common Stock which may be issued or
delivered under the Plan or (b) increase the total number of shares which may be
covered by Awards to any one Participant.
(B) TERMINATION. The Board shall have the right and the power to terminate
the Plan at any time. No Award shall be granted under the Plan after the
termination of the Plan, but the termination of the Plan shall not have any
other effect and any Award outstanding at the time of the termination of the
Plan may be exercised after termination of the Plan at any time prior to the
expiration date of such Award to the same extent such Award would have been
exercisable had the Plan not been terminated.
11.17 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any
provision of the Plan to the contrary, in order to comply with the laws in other
countries in which the Company and its Subsidiaries operate or have employees or
directors, the Board, in its sole discretion, shall have the power and authority
to:
(A) Determine which Subsidiaries shall be covered by the Plan;
(B) Determine which employees or directors outside the United States are
eligible to participate in the Plan;
(C) Modify the terms and conditions of any Award granted to employees or
directors outside the United States to comply with applicable foreign laws;
(D) Establish subplans and modify exercise procedures and other terms and
procedures, to the extent such actions may be necessary or advisable. Any
subplans and modifications to Plan terms and procedures established under this
Section 11.17 by the Board shall be attached to this Plan document as
appendices; and
(E) Take any action, before or after an Award is made, that it deems
advisable to obtain approval or comply with any necessary local government
regulatory exemptions or approvals.
Notwithstanding the above, the Board may not take any actions hereunder,
and no Awards shall be granted, that would violate the Exchange Act, the Code,
any securities law, or governing statute or any other applicable law.
* * * * * *
A-16
APPENDIX B
WESCO INTERNATIONAL, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors:
1. in its oversight of the Company's accounting and financial reporting
principles, policies and internal controls and internal audit function;
2. in its oversight of the quality and integrity of the Company's financial
statements and the independent audit thereof;
3. in selecting (subject to shareholder approval, as applicable),
evaluating and, where deemed appropriate, replacing the outside
auditors;
4. in evaluating the independence and qualification of the outside
auditors;
5. in the compliance by the Company with legal and regulatory requirements;
and
6. prepare the SEC required Audit Committee reports to be included in the
Company's annual report and proxy statement.
While certain duties and responsibilities of the Audit Committee are more
specifically set forth below, the general function of the Audit Committee is
oversight. Management of the Company is responsible for the preparation,
presentation and integrity of the Company's financial statements. In addition,
management is responsible for maintaining appropriate accounting and financial
reporting principles and policies and internal controls and procedures designed
to assure compliance with accounting standards and applicable laws and
regulations.
Each member of the Audit Committee shall rely on (i) the integrity of those
persons and organizations within and outside the Company from which it receives
information and (ii) the accuracy of the financial and other information
provided to the Audit Committee by such persons or organizations absent actual
knowledge to the contrary (which shall be promptly reported to the Board of
Directors).
The outside auditors for the Company are ultimately accountable to the
Board of Directors and the Audit Committee. The outside auditors shall submit to
the Audit Committee and the Company annually a formal written statement
delineating all relationships between the outside auditors and the Company
("Statement as to Independence"), addressing at least the matters set forth in
Independence Standard No. 1 adopted by the Independence Standards Board.
AUDIT COMMITTEE MEMBERSHIP
The Audit Committee shall consist of at least three Directors, all of whom
shall have no relationship to the Company that may interfere with the exercise
of their independence from management and the Company and shall otherwise
satisfy the applicable membership and independence requirements under the rules
of the New York Stock Exchange, Inc. and applicable law. All members of the
Committee shall have a working familiarity with basic financial and accounting
processes, and at least one member shall have accounting or financial management
expertise, as required by Securities Exchange Commission rules.
The members of the Audit Committee shall be appointed at least annually by
the Board of Directors on the recommendation of the Nominating and Governance
Committee and may be replaced by the Board of Directors.
MEETINGS
The Audit Committee shall hold at least four meetings per year and such
additional meetings as the Audit Committee or its Chairperson shall determine.
In addition, the Audit Committee should meet separately and periodically
with management, the Director of the internal audit department and the outside
auditors to review and discuss the annual and quarterly reporting process and
such other appropriate matters and to discuss any matters that the Audit
Committee or any of those persons or firms believe should be discussed
privately.
B-1
The Audit Committee may request any officer or employee of the Company or
the Company's outside counsel or outside auditors to attend a meeting of the
Audit Committee or to meet with any members of, or consultants to, the Audit
Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITY
To carry out its oversight responsibilities, the Audit Committee shall have
the following duties and powers:
1. With respect to the outside auditors, to:
a. have sole authority to retain, evaluate and replace the Company's
outside auditors and approve all audit engagement fees and terms
and any significant non-audit engagements by the outside auditors;
b. ensure that the outside auditors prepare and deliver annually the
Statement as to Independence (it being understood that the outside
auditors are responsible for the accuracy and completeness of this
Statement), actively engage the outside auditors in a dialogue
with respect to any relationships or services disclosed in this
Statement that may impact the objectivity and independence of the
Company's outside auditors and take appropriate action to satisfy
itself of the outside auditors' independence;
c. meet with the outside auditors to discuss the planning and
staffing of the annual audit and the results of their examination
and their evaluation of internal controls and the overall quality
of financial reporting;
d. approve in advance any significant non-audit services that are
proposed to be furnished to the Company by the Company's outside
auditors as permitted by law and review the disclosure of such
arrangements in the Company's periodic reports;
e. set clear hiring policies for employees or former employees of the
Company's outside auditors; and
f. at least annually, obtain and review a report by the independent
auditor describing: the firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, and any steps
taken to deal with any such issues.
2. With respect to the internal audit department, to
a. appoint and/or replace the director of the internal audit
department and maintain a direct reporting line to the Audit
Committee. The director of the internal audit department shall
maintain an administrative reporting line to the Chief Financial
Officer;
b. advise the director of the internal audit department of
requirements to provide to the Audit Committee summaries of and,
as appropriate, the complete internal audit department reports
along with management's responses thereto; and
c. discuss with the outside auditors the internal audit department's
responsibilities, budget and staffing and any recommended changes
in the planned scope of the internal audit.
3. With respect to financial reporting principles and policies and
internal audit controls and procedures to:
a. advise management, the internal audit department and the outside
auditors that they are expected to provide to the Audit Committee
a timely analysis of significant financial reporting issues and
practices; and
b. meet with the outside auditors, with and (where deemed necessary)
without representatives of management and the internal audit
department present to:
1) discuss the scope of the annual audit;
2) discuss the Company's annual and quarterly financial statements
prior to filing, including the Company's disclosures under
"Management's Discussion and Analysis of Financial Condition
and Results of Operations." Also review the results of the
outside auditor's review of the annual and quarterly financial
statements;
B-2
3) discuss the Company's press releases, as well as financial
information and earnings guidance provided to analysts and
rating agencies;
4) discuss any other significant matters arising from any audit or
report or communication, whether raised by management, the
internal audit department or the outside auditors, relating to
the Company's financial statements; and
5) review and discuss material off-balance sheet transactions;
6) confirm that there are no material non-compliance issues with
SEC reporting requirements that would require accounting
restatements or special disclosures;
7) discuss the effect of regulatory accounting initiatives, as
well as off-balance sheet structures, on the Company's
financial statements;
8) discuss significant changes to the Company's auditing and
accounting principles, policies, controls, procedures and
practices proposed or contemplated by the outside auditors, the
internal audit department or management; and
9) inquire about significant risks and exposures, if any, and the
steps taken to monitor and minimize such risks;
10) review the form of opinion the outside auditors propose to
render to the Board of Directors and shareholders;
c. Recommend to the Board of Directors whether the audited financial
statements should be included in the Company's Form 10-K; and
d. Obtain from the outside auditors assurance that the audit was
conducted in a manner consistent with prior years and in
accordance with general accepted accounting principles and
regulatory requirements; and
e. Discuss with the Company's counsel any significant legal matters
that may have a material effect on the financial statements, the
Company's compliance policies, including materials notices to or
inquiries received from governmental agencies.
4. With respect to reporting:
a. approve the Company's Code of Ethics for its senior financial
officers as required by Securities and Exchange Commission rules;
and
b. obtain reports from management, the Company's internal audit
department and the outside auditor that the Company and its
subsidiaries and foreign affiliated entities are in conformity
with applicable legal requirements, the Company's Code of Business
Conduct and Ethics and the Company's Code of Ethics for its senior
financial officers and advise the Board of Directors with respect
to the Company's policies and procedures regarding compliance with
applicable laws and regulations and with the Company's Code of
Business Conduct and Ethics; and
c. review reports and disclosures of insider and affiliated party
transactions and waivers of the Code of Ethics for the Company's
senior financial officers; and
d. review this Charter at least annually and recommend any changes to
the full Board of Directors.
5. The Audit Committee shall have the resources and authority appropriate
to discharge its responsibilities, including the authority to engage outside
auditors for special audits, reviews and other procedures and to retain special
counsel and other experts or consultants.
6. The Audit Committee shall conduct an annual self-performance evaluation.
REPORTS OF THE COMMITTEE
At each regular meeting of the Board of Directors, the Committee shall
report the substance of all actions taken by the Committee since the date of its
last report to the Board of Directors. Each report shall be filed with the
minutes of the Board of Directors to which it is presented, as a part of the
corporate records.
B-3
Mark Here
for Address |_|
Change or
Comments
PLEASE SEE REVERSE SIDE
1. ELECTION OF DIRECTORS: The election of three directors, 01 Michael J.
Cheshire, 02 James A. Stern, and 03 William J. Vareschi, for a three-year
term to expire in 2006.
FOR all nominees WITHHOLD
listed above AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed above
|_| |_|
(Instruction: To withhold authority to vote for any nominee, write that
nominee's name on the line below.)
________________________________________________________________________________
2. Approval of 1999 Long-Term Incentive Plan, as amended.
FOR AGAINST ABSTAIN
|_| |_| |_|
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting. This proxy, when properly executed will
be voted in the manner directed herein by the undersigned stockholder. If no
direction is made, the proxy will be voted for Proposals 1 and 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please disregard if you have previously provided your consent decision. |_|
By checking the box to the right, I consent to future delivery of annual
reports, proxy statements, prospectuses and other materials and shareholder
communications electronically via the Internet at a webpage which will be
disclosed to me. I understand that the Company may no longer distribute printed
materials to me from any future shareholder meeting until such consent is
revoked. I understand that I may revoke my consent at any time by contacting the
Company's transfer agent, Mellon Investor Services LLC, Ridgefield Park, NJ and
that costs normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing documents, will
be my responsibility.
Signature____________________ Signature____________________ Dated:_______ , 2003
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
Detach here from proxy voting card.
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11PM Eastern Time
the day prior to annual meeting day.
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
PLEASE MARK
YOUR VOTES AS
INDICATED IN [X]
THIS EXAMPLE
1. ELECTION OF DIRECTORS: The election of three directors, 01 Roy W. Haley, 02 George L. Miles, Jr. and 03 James L. Singleton,
for a three-year term to expire in 2005.
FOR all nominees WITHHOLD (Instruction: To withhold authority to vote for any nominee, write
listed above AUTHORITY that nominee's name on the line below.)
(except as marked to vote for all nominees
to the contrary) listed above --------------------
Please disregard if you have previously [ ]
[ ] [ ] provided your consent decision.
By checking the box to the right, I consent to
future delivery of annual reports, proxy
2. In their discretion, the Proxies are authorized to vote upon such other statements, prospectuses and other materials and
business as may properly come before the meeting. This proxy, when shareholder communications electronically via the
properly executed will be voted in the manner directed herein by the- ----------------------------------- ------------------------------------- ---------------------
Internet at a webpage which will be disclosed to
undersigned stockholder. If no direction is made, the proxy will be me. I understand that the Company may no longer
voted for Proposal 1. distribute printed materials to me from any
future shareholder meeting until such consent is
revoked. I understand that I may revoke my consent
at any time by contacting the Company's transfer
agent, Mellon Investor Services LLC, Ridgefield
Park, NJ and that costs normally associated with
tenants, both should sign. When signing as attorney, as executor, electronic delivery, such as usage and telephone
administrator, trustee or guardian, please give full title as such. If a charges as well as any costs I may incur in
corporation, please sign in full corporate name by President or other printing documents, will be my responsibility.
authorized officer. If a partnership, please sign in partnership name by
authorized person.
DATED: ____________________________________, 2002
_________________________________________________
Signature
_________________________________________________
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
- -----------------------------------------------------------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
INTERNET AND TELEPHONE VOTING IS AVAILABLE THROUGH 4PM EASTERN TIME
THE BUSINESS DAY PRIOR TO ANNUAL MEETING DAY.
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
INTERNET TELEPHONE MAILTelephone Mail
http://www.eproxy.com/wcc 1-800-435-6710
Use the Internet to vote your Use any touch-tone telephone to Mark, sign and date
proxy. Have your proxy card in vote your proxy. Have your proxy your proxy card
hand when you access the web OR card in hand when you call. You will OR and
website.site. You will be prompted to enter be prompted to enter your control return it in the
enter your control number, located in number, located in the box below, enclosed postage-paid
in
the box below, to create and and then follow the directions given. envelope.
submit an electronic ballot.
IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
YOU CAN VIEW THE ANNUAL REPORT AND PROXY STATEMENT ON
THE INTERNET AT:- ----------------------------------- ------------------------------------- ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement on
the internet at: http://www.wescodist.com/annualreport
WESCO INTERNATIONAL, INC. THIS PROXY IS SOLICITED ON BEHALF
COMMERCE COURT, SUITEInternational, Inc. This Proxy is solicited on behalf
225 West Station Square Drive of the Board of Directors. The Board of
Suite 700 OF THE BOARD OF DIRECTORS. THE BOARD OF
FOUR STATION SQUARE DIRECTORS RECOMMENDS A VOTE FOR ALL
PITTSBURGH, PENNSYLVANIADirectors recommends a vote For
Pittsburgh, Pennsylvania 15219 DIRECTOR NOMINEES.Proposals 1 and 2.
PROXY
The undersigned hereby appoints Stephen A. Van Oss and Daniel A. Brailer as
Proxies, and each of them with full power of substitution, to represent the
undersigned and to vote all shares of common stock of WESCO International, Inc.,
which the undersigned would be entitled to vote if personally present and voting
at the Annual Meeting of Shareholders to be held May 22, 200221, 2003 or any adjournment
thereof, upon all matters coming before the meeting.
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *Detach here from proxy voting card.