ENGINEERING MEASUREMENTS COMPANY
600 DIAGONAL HIGHWAY
LONGMONT, CO 80501
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on October 22, 1997
TO THE SHAREHOLDERS OF ENGINEERING MEASUREMENTS COMPANY:
The Annual meeting of the Shareholders of Engineering Measurements Company,
hereinafter referred to as the "Company", will be held at the Company's
headquarters, 600 Diagonal Highway, Longmont Colorado on October 22, 1997, at
10:00 a.m., local time, pursuant to call therefor by the Board of Directors for
the following purposes:
1. To elect Directors to serve until the next Annual Meeting of Shareholders of
the Company or until their successors have been duly elected and qualified.
2. To adopt the Engineering Measurements Company 1997 Incentive Plan.
3. To transact such other business as may properly come before the meeting, or
any adjournment thereof.
The Board of Directors has fixed the close of business on September 15, 1997 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting.
By Order of The Board of Directors
/s/ Charles E. Miller
Charles E. Miller, President
September 22, 1997
YOUR VOTE IS IMPORTANT
Please execute and return the enclosed Proxy promptly, whether or not you intend
to be present at the meeting. Should you decide to attend the meeting, you may
vote in person at that time if you so desire. Your attention to the enclosed
Proxy Statement furnished by Management and authorized by the Board of Directors
is urged.
PROXY ENGINEERING MEASUREMENTS COMPANY PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD OCTOBER 22, 1997
The undersigned hereby constitutes, appoints and authorizes Charles E. Miller,
as the true and lawful attorney and Proxy of the undersigned with full power of
substitution and appointment, for and in the name, place and stead of the
undersigned to act for and vote as designated below, all of the undersigned's
shares of the $.01 par value common stock of Engineering Measurements Company, a
Colorado corporation, at the Annual Meeting of Shareholders to be held at the
Company's headquarters, 600 Diagonal Highway, Longmont Colorado at 10:00 a.m.
local time on October 22, 1997 and at any and all adjournments thereof, for the
following purposes:
1. To elect Directors to serve until the next Annual Meeting of Shareholders and
until their successors are duly elected and qualified:
[ ] FOR all nominees listed below (except as marked to the contrary):
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below:
Charles E. Miller Walter Kluck Thomas G. Miller William A. Ringer
(Instructions: To withhold authority to vote for any individual nominee, draw a
line through or otherwise strike out his name. If authority to vote for the
election of any nominee is not withheld, the execution of this Proxy shall be
deemed to grant such authority.)
2. To adopt the Engineering Measurements Company 1997 Incentive Plan and reserve
500,000 shares the Company's Common Stock for issuance thereunder:
[ ] FOR the adoption of the Incentive Plan
[ ] AGAINST the adoption of the Incentive Plan
[ ] ABSTAIN from adopting the Incentive Plan
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
- --------------------------------------------------------------------------------
The undersigned hereby revokes any Proxies as to said shares heretofore given by
the undersigned, and ratifies and confirms all that said attorneys and Proxies
may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL 1 . THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN RESPECT TO
MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE NOTICE OF THE
ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
Dated: , 1997
Signature
Joint Owner Signature
Please indicate change of address
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement furnished herewith. Signature(s) should agree
with the name(s) shown hereon. Executors, administrators, trustees, guardians
and attorneys should indicate when signing. Attorneys should submit power of
attorney. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
ENGINEERING MEASUREMENTS COMPANY. PLEASE SIGN AND RETURN THIS PROXY TO THE
COMPANY. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF
YOU ATTEND THE MEETING.
ENGINEERING MEASUREMENTS COMPANY
600 Diagonal Highway
Longmont, CO 80501
(303) 651-0550
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held on October 22, 1997
INTRODUCTION
The accompanying Proxy is solicited by the Board of Directors of Engineering
Measurements Company, a Colorado corporation, hereinafter called the "Company,"
for use at the Annual Meeting of Shareholders to be held on Wednesday, October
22, 1997 at 10:00 a.m. local time, at the Company's headquarters, 600 Diagonal
Highway, Longmont Colorado and at any recesses or adjournments thereof. These
proxy materials are being mailed to shareholders commencing approximately
September 22, 1997.
The Proxy may be revoked at any time by the shareholder before it is exercised.
All shares of stock represented by valid Proxies received prior to the meeting
pursuant to this solicitation and not revoked before they are exercised will be
voted. In each case where the shareholder has appropriately specified how the
Proxy is to be voted, it will be voted in accordance with such specification.
Unless specific instructions are given to the contrary, the persons named in the
accompanying proxy will vote FOR the election of the four persons nominated to
serve as directors of the Company. Abstentions received with respect to any
proposal will be counted for purposes of determining whether a quorum is present
at the Meeting, but will not be counted for purposes of determining whether the
requisite vote has been obtained for the proposal. Broker non-votes with
respect to a particular proposal will not be counted for purposes of either
determining whether a quorum is present at the Meeting or determining whether
the requisite vote for such proposal has been obtained. The giving of a proxy
will not affect a shareholder's right to attend the meeting and vote in person.
Any shareholder giving a proxy has the right to revoke it at any time before it
is exercised by executing and returning a proxy bearing a later date, by giving
written notice of revocation to the Company's secretary, or by attending the
meeting and voting in person.
ADOPTION OF 1997 INCENTIVE PLAN
On July 28, 1997, the Board of Directors (the "Board") adopted, subject to
shareholder approval, the Engineering Measurements Company 1997 Incentive Plan
(the "Plan"). The Board reserved 500,000 shares for issuance under the Plan.
The Plan provides that the Board, or a subcommittee thereof, may grant
Incentive or Non-Qualified Stock Options, Limited Stock Appreciation Rights,
Tandem Stock Appreciate Rights, Stand-Alone Stock Appreciation Rights; shares of
Restricted Stock; shares of Phantom Stock, Stock Bonuses and Cash Bonuses. The
Plan, as proposed by the Board, is set forth as Exhibit A to this Proxy
Statement.
The Board believes that the Plan will be of material benefit to the Company
by assisting the Company and its subsidiaries in attracting, retaining and
motivating key employees of proven ability and by rewarding directors and
advisors to the Company who are responsible for, or contribute to, the
management, growth and protection of the business of the Company.
PAGE 1 OF 13
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE ENGINEERING
MEASUREMENTS COMPANY 1997 INCENTIVE PLAN.
The Plan will be adopted if the number of votes cast favoring the action
exceeds the number of votes cast opposing the action. Unless otherwise
specified, proxies solicited by the Board will be voted FOR the adoption of the
Plan. The following description of the Plan, is qualified in its entirety by
reference to the Plan included herewith as Exhibit A.
Summary of the Plan
Administration. The Plan shall be administered either by the entire Board
of Directors (which shall in that case constitute the "Committee") or by a
Committee of the Board of Directors consisting of two or more persons, each of
whom shall be a "disinterested person" within the meaning of Rule 16b -3
promulgated under Section 16 of the Exchange Act. The Committee has full
authority, subject to the terms of the Plan, to make all determinations under
the Plan, including authority to interpret and construe any provision of the
Plan and the terms of any Incentive Award. The Committee may ( i ) grant
Options, shares of restricted stock, shares of phantom stock or stock bonuses,
or stock appreciation rights, (ii) reprice and accelerate the date on which any
Option or Stand-Alone stock appreciation right granted becomes exercisable or
(iii) reprice and accelerate the Vesting Date, Issue Date or other conditions
imposed by the Plan. The Company will indemnify each member of the Committee
for actions taken under the Plan.
Eligibility. Persons eligible to receive Incentive Awards under the Plan
shall include employees, officers and directors of the Company, and advisors to
the Company who are responsible for, or contribute to, the management, growth
and protection of the business of the Company.
Options. The Committee may grant options pursuant to the Plan, which shall
be clearly identified in the Option Agreement as either Incentive Stock Options
or Non-Qualified Stock Options.
Exercise Price. The Plan provides that the exercise price under each Non-
Statutory Stock Option shall be determined by the Committee on date of grant,
but shall not be less than the minimum price required by law. The exercise of
any Incentive Stock Option shall be not less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant.
Non-Transferability. All options granted under the Plan may be exercised
during the optionee's lifetime only by the optionee and are non-transferable
except by will or the laws of descent and distribution. Notwithstanding the
above, the Committee may, at its discretion, permit the transfer of a Non-S
tatutory Stock Option.
Exercise. The duration of each option will be as specified by the
Committee but will not exceed ten years from the date of grant. The Committee,
at its discretion, may establish a vesting schedule for any option granted under
the Plan.
Effect of Termination of Services. If an optionee's employment is
terminated for any reason other than Cause (as defined in the Plan) disability
or death, (i) options granted, to the extent that they were exercisable at the
time of such termination, shall remain exercisable until the expiration of one
month. In the event of termination for Cause, all outstanding options shall
expire at the commencement of business on the date of such termination.
Change of Control. In the event of a Change of Control, as described in
the Plan, each Option shall become fully and immediately exercisable. A
Change of Control includes the purchase of 35% or more of the Company's
PAGE 2 OF 13
outstanding securities by one person; a proxy fight which results in a new
majority on the Board; a dissolution, liquidation or sale of substantially
all the assets of the Company or if the Board determines in its sole and
absolute discretion that there has been a change of control of the Company.
Limited Stock Appreciation Rights (" LSARs "). The Committee may grant, in
connection with any Option granted, one or more LSARS relating to a number of
shares of common stock equal to or less than the number of shares of common
stock subject to the related option. An LSAR may be granted at the same time
as, or subsequent to the time that, an Option is granted. The exercise of an
LSAR relating to an Option shall entitle the Participant to a cash payment which
shall be computed as set forth in the Plan for Non-Qualified Stock Options and
for Incentive Stock Options. Any Participant may request that such Participant
receive Common Stock rather than cash. The Committee may decide whether or not
to grant such request.
Tandem Stock Appreciation Rights ("SARs"). The Committee may grant in
connection with any Option one or more Tandem SARs relating to a number of
shares of Common Stock equal to or less than the number of shares subject to the
related Option. The exercise of a Tandem SAR shall entitle a Participant to a
cash payment, computed as set forth in Section 8 of the Plan. The Participant
may request, and the Committee, in its sole discretion may grant, the issuance
of Common Stock rather than cash.
Stand-Alone Stock Appreciation Rights. Stand-Alone SARs shall be evidenced
by Agreements in a form approved by the Committee. The exercise of a Stand-
Alone SAR prior to a Change of Control shall entitle a Participant to a cash
payment, computed as set forth in Section 9 of the Plan. A Participant may
request, and the Committee has the discretion to grant, the issuance of Common
Stock rather than cash.
Restricted Stock. The Committee may great shares of Restricted Stock, to
be evidenced by an agreement approved by the Committee. At the time of granting
such Restricted Stock, the Committee shall establish an Issue Date and a Vesting
Date with respect to the Shares. The Committee may impose restrictions or
conditions on the vesting of shares. In the event of Change of Control all
shares of Restricted Stock which have not theretofore vested, shall immediately
vest.
Phantom Stock. The Committee may grant shares of Phantom Stock, and shall
establish a Vesting Date, and impose such restrictions and conditions as it
deems appropriate. Upon vesting Participant is entitled to receive cash
computed as set forth in Section 11 of the Plan. Upon a Change of Control, all
shares of Phantom Stock shall immediately vest.
Stock Bonuses. The Committee may great Stock Bonuses as it may determine
from time to time.
Cash Bonuses. The Committee may grant, in connection with the great of
any Restricted Stock or Stock Bonus, a cash bonus payable promptly after the
date the Participant is required to recognize income for federal income tax
purposes.
Term of Plan; Amendment. The Plan will terminate on July 28, 2007, ten
years from the date the Plan was adopted by the Board, or, if earlier, upon
the purchase of all Common Stock subject to the Plan pursuant to the exercise of
Incentive Awards granted under the Plan. Any Incentive Awards outstanding
after the termination of the Plan will remain in effect in accordance with their
terms. The Board may terminate or amend the Plan, except that the Board may
not, without shareholder approval, increase the number of shares of Common Stock
as to which Incentive Awards may be granted, materially increase the benefits
accruing to participants or materially modify the eligibility requirements.
PAGE 3 OF 13
Federal Income Tax Consequences
Federal Income Tax Consequences
Incentive Stock Options. An optionee will not realize taxable income upon
the grant of an Incentive Stock Option under the Plan. In addition, an optionee
will not realize regular taxable income upon the exercise of an Incentive Stock
Option if the optionee holds the shares acquired until at least one year after
exercise and, if later, until two years after the date of grant of option.
However, the amount by which the fair market value of the shares exceeds the
option price at the time of exercise generally is an item of tax preference for
purposes of the alternative minimum tax. If an optionee acquires stock through
the exercise of an Incentive Stock Option under the Plan and subsequently sells
the stock after holding the stock for the period described above, the gain which
is the difference between the sale price of the stock and the option exercise
price will be taxed as capital gain. The gain will not be treated as ordinary
income except when the holding period requirements discussed above are not
satisfied.
An Incentive Stock Option does not entitle the Company to an income tax
deduction except to the extent that an optionee realizes ordinary income
therefrom.
Non-Qualified Stock Options. An optionee generally will not recognize
taxable income upon the grant of a Non-Qualified Stock Option. When an optionee
exercises a Non-Qualified Stock Option, the optionee will recognize taxable
ordinary income at that time equal to the difference between the option price
and the fair market value of the stock on the date of exercise.
An optionee will generally have a basis in stock acquired through the
exercise of a Non-Qualified Stock Option under the Plan equal to the fair market
value of the stock on the date of exercise. If the optionee subsequently sells
the stock, the gain which is the difference between the sale price and the basis
will be taxed as capital gain.
Any ordinary income recognized by an optionee upon exercise of a Non-
Qualified Stock Option will be allowable to the Company as a deduction at the
time it is recognized by the optionee.
Stand-Alone SARs, Tandem SARs and LSARs. The receipt of cash upon exercise
of a Stand-Alone SAR, Tandem SAR or LSAR will be taxable to the holder as
ordinary income and will give rise to a corresponding tax deduction to the
Company at the time of exercise. The receipt of Common Stock upon exercise of a
Stand-Alone SAR, Tandem SAR or LSAR will be taxable to the holder as ordinary
income in an amount equal to the fair market value of the Common Stock received,
unless such Common Stock is subject to a substantial risk of forfeiture, in
which case, tax will not be triggered until the risk of forfeiture lapses. The
Company will be entitled to a tax deduction equal to the amount of taxable
income recognized by the holder of a Stand-Alone SAR, Tandem SAR or LSAR who
exercises such Incentive Award for Common Stock at the time such taxable income
is recognized by the holder.
Restricted Stock. A Participant generally will not recognize taxable
income upon receipt of Restricted Stock unless the Participant makes an election
under Section 83(b) of the Internal Revenue Code. Upon the vesting of
Restricted Stock, a Participant will recognize ordinary taxable income equal to
the difference between the fair market value of the Restricted Stock which has
vested, less any amount paid by the Participant for such Restricted Stock. The
Company will be entitled to a tax deduction equal to the amount of taxable
income recognized by the holder of Restricted Stock at the time such taxable
income is recognized by the holder of such Restricted Stock.
PAGE 4 OF 13
Phantom Stock. Generally, a Participant holding Phantom Stock will be
taxable (at ordinary income tax rates) at the time such Phantom Stock vests in
an amount equal to the amount of cash to which the Participant is entitled and
the Company will be entitled to a corresponding tax deduction at the same time.
Stock Bonuses. A Participant will recognize taxable ordinary income upon
the receipt of a Stock Bonus in an amount equal to the fair market value of the
Common Stock received less any amount paid for such Common Stock. The Company
will be entitled to a corresponding tax deduction in the same amount at the time
such income is recognized by the Participant.
Cash Bonuses. A Cash Bonus will constitute taxable ordinary income to a
Participant and will entitle the Company to a corresponding tax deduction at the
time a Cash Bonus is paid.
Nondeductibility of "Excess Parachute Payments." Certain Incentive Awards
vest or become payable as the result of a Change in Control, as defined in the
Plan. In addition, the Committee may have the discretion to accelerate the
vesting of or render payable certain Incentive Awards upon a Change in Control,
even if such Incentive Awards do not automatically vest or become payable upon
such Change in Control. The acceleration of vesting or the payment of an
Incentive Award as the result of a Change in Control may result in the
disallowance of the Company's tax deduction for such Incentive Award if such
Incentive Award is treated as an "excess parachute payment" within the meaning
of Section 280G of the Internal Revenue Code. In addition, an excess parachute
payment received by a Plan Participant will be subject to an excise tax of 20%
under Section 4999 of the Internal Revenue Code.
While the rules of Sections 280G and 4999 are extremely complex, they can
be summarized as follows: An Incentive Award or payment thereunder generally
will constitute a "parachute payment" only if (i) paid to certain highly-
compensated employees or independent contractors, (ii) the Incentive Award or
acceleration of benefits thereunder is "contingent upon" (or deemed to be
contingent upon) a Change in Control, and (iii) after exclusion of certain
portions of such payments or benefits, the Incentive Award or payment thereunder
(along with other compensatory payments contingent upon the Change in Control)
exceeds three times the average of the recipient's compensation income for the
previous five taxable years. An "excess parachute payment" (i.e., the amount
which would not be deductible by the Company) is the excess of a Participant's
parachute payments over the greater of (a) the average of the Participant's
compensation income for the previous five taxable years or (b) the amount of
such parachute payments that can be shown to be reasonable compensation for
prior services rendered.
Nondeductibility of Compensation in Excess of $1 Million. The Company may
not deduct compensation of more than $1,000,000 that is paid in a taxable year
to an individual who, on the last day of the taxable year, is the Company's
chief executive officer or among one of its four other highest compensated
officers for that year. The deduction limit, however, does not apply to certain
types of compensation, including qualified performance-based compensation. The
Company believes that compensation attributable to Incentive Stock Options,
Nonstatutory Stock Options and certain other Incentive Awards will be treated as
qualified performance-based compensation and therefore will not be subject to
the deduction limit.
Withholding of Income and Employment Taxes. Generally, the Company will be
required to withhold and pay over income and employment taxes with respect to an
Incentive Award at the time the Participant recognizes taxable income with
respect to such Incentive Award.
Participants in the Plan should consult their own tax advisors to determine
the specific tax consequences of the Plan for them.
PAGE 5 OF 13
PERSONS MAKING THE SOLICITATION
This Proxy is solicited by the Board of Directors of the Company. In addition
to the solicitation of Proxies by mail, certain of the officers or employees of
the Company, without extra remuneration, may solicit Proxies personally or by
telephone, facsimile, telegraph or cable. The total expense of such
solicitation will be borne by the Company and will include reimbursement paid to
brokerage firms and other custodians, nominees and fiduciaries for their expense
in forwarding solicitation material regarding the meeting to beneficial owners.
REQUIRED VOTE FOR EACH PROPOSAL
The four nominees for director receiving the highest number of votes cast by
shareholders of the Company entitled to vote thereon, assuming that a quorum of
a majority (a "Quorum") of the outstanding shares of common stock of the Company
entitled to vote at the Meeting is present in person or by proxy, will be
elected to serve on the Board of Directors.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The date for determination of Shareholders entitled to vote at the meeting (the
"Record Date") is the close of business on September 15, 1997. On such date
there were outstanding 2,800,052 shares of Common Stock, $.01 par value (the
"Common Stock") of the Company, each of which is entitled to one (1) vote.
On the Record Date the security ownership of each person who owned of record or
beneficially, to the knowledge of the Company, five percent (5%) or more of any
class of voting securities of the Company, and of each current Director (and
each nominee Director) and of the Officers and Directors (and nominees) as a
group was as follows. All information is based on information furnished by each
such person. Unless otherwise stated, the indicated persons have sole voting
and investment power over the shares listed.
Name of Amount and Nature Percent
Title of Class Beneficial Owner of Ownership of Class
Common Stock Charles E. Miller 1,255,721 (1) 39.7
Common Stock William A. Ringer 98,900 (2) 3.5
Common Stock Saeid Hosseini 61,400 (3) 2.2
Common Stock David S. Miller 397,027 (4) 14.3
Common Stock Walter Kluck 22,750 (5) 0.8
Common Stock Thomas G. Miller 282,400 (6) 10.1
Common Stock Ken Teegardin 20,000 (7) 0.7
All Directors and Officers as a
Group (Six Persons) 1,741,171 53.1
PAGE 6 OF 13
(1) Record and Beneficial; includes 869,080 shares of common stock owned
directly; an option to purchase 20,000 shares of common stock under
the 1988 Non-statutory Stock Option Plan; an option to purchase 20,875
shares of common stock under the 1991 Incentive Plan; and the right to
convert a portion of a loan balance into 345,766 shares of common
stock pursuant to loan agreements (See Note 4 to the Consolidated
Financial Statements). Mr. Miller has sole voting and investing
power on 857,080 of the owned shares; the remaining 12,000 shares have
shared voting and investment power. Charles E. Miller's business
address is 600 Diagonal Highway, Longmont, CO 80501.
(2) Record and Beneficial; includes 78,900 shares of common stock owned
with sole voting and investment power; and an option to purchase
20,000 shares of common stock pursuant to the 1991 Non-Employee
Director Stock Plan. William A. Ringer's business address is 5675
Arapahoe Avenue, Boulder, CO 80303.
(3) Record and Beneficial; includes 25,000 shares of common stock with
sole voting and investment power; and an option to purchase 36,400
shares of common stock under the 1991 Incentive Plan. Saeid
Hosseini's business address is 600 Diagonal Highway, Longmont, CO
80501.
(4) Record and Beneficial; includes 397,027 shares of common stock owned.
David Miller has sole voting and investment power for 379,432 of the
shares; the remaining 17,595 shares have shared voting and investment
power. David S. Miller's business address is 420 E. Armour, N. Kansas
City, MO 64166.
(5) Record and Beneficial; includes 2,750 shares of common stock owned
with sole voting and investment power; and an option to purchase
20,000 shares of common stock under the 1991 Non-Employee Director
Stock Plan. Walter Kluck's business address is P.O. Box 421, Clifton,
NJ 07015.
(6) Record and Beneficial; includes 262,400 shares of common stock owned
directly; and an option to purchase 20,000 shares of common stock
under the 1991 Non-Employee Director Stock Plan. Thomas Miller has
sole voting and investment power for 259,400 owned shares; the
remaining 3,000 shares have shared voting and investment powers.
Thomas G. Miller's business address is 11725 W. 112th St., Overland
Park, KS 66210.
(7) Record and Beneficial; includes an option to purchase 20,000 shares of
common stock under the 1991 Incentive Plan. Ken Teegardin's business
address is 600 Diagonal Highway, Longmont, CO 80501.
ELECTION OF DIRECTORS
The Bylaws, as amended, provide for a Board of four(4) Directors. Management
recommends the election of the nominees listed below as Directors, to hold
office until the next Annual Meeting of Shareholders or until their successors
are elected and qualify. Except where otherwise instructed, proxies will be
voted for election of all the nominees. If, at the time of the 1997 Annual
Meeting of Shareholders, any of such nominees should be unable to or decline to
serve, the discretionary authority provided in the Proxy will be exercised to
vote for a substitute. Management has no reason to believe that any substitute
nominee or nominees will be required.
PAGE 7 OF 13
The following Table indicates the name of each of the Company's Directors and
nominees for Directors, their ages and business experience during the past five
(5) years:
Year First Position, Date first held
Name of Elected as and Principal Occupation
Director Age Director (For Past Five Years)
Charles E. 59 1967 Chief Executive Officer, President, Director
Miller and Chairman of the Board, previously
President from 1967 to 1987; Member of the
Compensation, and Non-Employee Director Stock
Plan Committees.
William A. 63 1978 Director, Member of the Audit and Compensation
Ringer Committees; President of Granville Phillips
Company, Boulder, Colorado, which is not an
affiliate of the Company. Employed by
Granville Phillips in an executive capacity
for more than five years prior to the date of
this report.
Thomas G. 50 1995 Director, Member Incentive Plan Committee; CEO
Miller and physician of College Park Family Care
Center of Overland Park, Kansas, which is not
an affiliate of the Company. Employed by
College Park Family Care Center in an
executive capacity for more than five years
prior to the date of this report.
Walter 69 1995 Director, Member of the Audit and Incentive
Kluck Plan Committees; CEO of Industrial
Representatives, Inc. of Clifton, New Jersey,
which is not an affiliate of the Company.
Employed by Industrial Representatives, Inc.
in an executive capacity for more than five
years prior to the date of this report.
The Board of Directors has standing Audit, Compensation, and Incentive Plan
Committees. Mr. Ringer and Mr. Kluck constitute the members of the Audit
Committee, and Messrs. Charles Miller, Ringer, and Kluck serve on the
Compensation Committee. Mr. Kluck and Mr. Thomas Miller serve on the Incentive
Plan Committee. The Audit Committee reviews financial statements. The Audit
Committee met once during the fiscal year ending April 30, 1997. The
Compensation Committee meets informally as required to recommend to the Board of
Directors the compensation to be paid to the officers of the Company and to
recommend to the Board of Directors any other profit sharing and bonus issues
that may come before the Board of Directors. The Compensation Committee met
once during fiscal year 1997. The Incentive Plan Committee and the Non-Employee
Director Stock Plan Committee administer the respective Plans. Such Committees
did not meet formally during the last fiscal year.
The Board of Directors held four meetings during the fiscal year ending April
30, 1997. All Directors attended all meetings.
All Directors hold office until the next annual meeting of the shareholders of
the Company or until their successors have been elected and qualified. Officers
serve at the discretion of the Board of Directors and are elected annually.
None of the Directors have been involved in any litigation or bankruptcy during
the past five years.
Charles E. Miller and Thomas G. Miller are brothers.
PAGE 8 OF 13
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulation to furnish the Company with the copies of all Section 16(a) forms
they file. Based solely on review of the copies of such forms furnished to the
Company, or written representations that no Forms 5 were required, the Company
believes that during the last fiscal year, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent beneficial
owners were complied with. Except for Mr. Hosseini who filed late on the
exercise of 20,000 options.
EXECUTIVE OFFICERS
The Table below indicates the name of each of the Company's executive officers,
their ages and positions, and their business experience during the past five (5)
years.
Position, Principal
Name of Officer Age Occupation (for the past 5 years)
Charles E. Miller 59 Chief Executive Officer, President,
Chairman of the Board and Secretary;
previously President from 1967 to 1987.
Saeid Hosseini 34 Vice President Sales and Marketing.
Previously Product Line Manager, and Manager
of Applications Engineering. Employed by the
Company for more than five years prior to
the date of this proxy statement.
Ken H. Teegardin 35 Vice President of Operations.
Previously Director of Manufacturing,
employed at the Company since 1995. Employed
in a manufacturing management capacity at
Johnson Yokogawa Corporation, Newnan,
Georgia, which is not an affiliate of the
Company, for more than five years prior to
the date of this proxy statement.
SIGNIFICANT EMPLOYEES
The Table below indicates the name of each of the Company's significant
employees, their ages and positions, and their business experience during the
past five (5) years.
Position, Principal
Name of Employee Age Occupation (for the past 5 years)
John B. Thompson 40 Controller since August 1992.
Louis T. Yoshida 55 Director of Engineering since January
1995. Employed as president, director
of research and development at
Innovative Technology Corporation,
Longmont, Colorado, which is not an
affiliate of the Company, for more
than five years prior to the date of
this proxy statement.
PAGE 9 OF 13
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation awarded to, earned by, or
paid to the Company's Chief Executive Officer and no other officers received
compensation over $100,000 for services in all capacities to the Company during
the fiscal years ended April 30, 1994, 1995 and 1996:
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Name and Annual Restricted Underlying LTIP Other
Principal Compen- Stock Options/ Pay- Compen-
Position Year Salary ($) Bonus ($) sation ($) Awards ($) SAR's (#) outs ($) sation ($)
Charles E. 1995 $ 86,874 $ 0 0 0 10,875 0 $1,098
Miller, CEO 1996 $121,664 $7,133 0 0 0 0 $1,217
and Chairman 1997 $133,688 $2,651 0 0 10,000 0 $1,408
of the Board
Other Compensation for Mr. Miller reflects the matching portion of the Company's
401K plan.
Option/SAR Grants in Last Fiscal Year
None.
PAGE 10 OF 13
Aggregated Option/SAR Exercises in Last Fiscal Year and FY-End Option/SAR
Values
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SAR's at Options/SAR's at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise (#) Realized ($) Unexercisable Unexercisable
Charles 0 0 20,000/0 $45,000/$0
E. Miller 10,875/0 $ 6,743/$0
5,000/0 $ 4,350/$0
5,000/0 $ 1,250/$0
Long-Term Incentive Plans - Awards in Last Fiscal Year
None.
PAGE 11 OF 13
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company received an annual Director's fee
of $3,000. This fee is paid whether or not the Director attends meetings of the
Board and its Committees.
Under the 1988 Non-Statutory Stock Option Plan, options to purchase 40,000
shares were granted to directors, 20,000 shares each to William A. Ringer, and
Charles E. Miller, in fiscal year 1993 exercisable at $1.75 per share from July
1, 1993 to December 31, 1997. Under the 1991 Non-Employee Director Stock Plan,
in fiscal year 1995 options to purchase 60,000 shares were granted, 20,000 each
to William A. Ringer, Walter Kluck, and Thomas G. Miller, exercisable at $3.40
per share from October 14, 1995 through October 14, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The terms and conditions pertaining to the Industrial Development Revenue Bond
purchased by Charles E. Miller from Colorado National Bank of Denver in August
1992, remain the same. The only difference is that Charles E. Miller now has
all rights, title and interest of the debt instrument instead of Colorado
National Bank of Denver. For terms and conditions please refer to note 5 of the
Notes to the Consolidated Financial Statements contained in the Company's annual
report.
The related party transactions between the Company and Marcum Natural Gas are
set forth in Item 1 of the Company's annual report. Other related party
transactions include the sales from the Company to DVCO of approximately $29,000
in fiscal year ended April 30, 1997 and $61,000 in fiscal year ended April 30,
1996. The Company also recognized $50,000 of royalty income from DVCO during
fiscal year ended April 30, 1997 and $50,000 for fiscal year 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton served as the Company's independent certified public accountants
for the year ended April 30, 1997 and is expected to serve in such capacity for
the current fiscal year.
It is expected that a representative of Grant Thornton will be present at the
Annual Meeting of the Shareholders. Such representative will have the
opportunity to make a statement, if he desires to do so, and is expected to be
available to respond to appropriate questions.
PROPOSALS BY SHAREHOLDERS
Any shareholder who wishes to submit a proposal to be considered at the Annual
Meeting of the Company's shareholders, to be held after the April 30, 1998
fiscal year, must submit the proposal to the Company by May 16, 1998 for the
proposal to be included in the Proxy Statement for that meeting. Any such
proposals should be sent to the Company's principal executive offices at 600
Diagonal Highway, Longmont, Colorado 80501.
PAGE 12 OF 13
OTHER MATTERS
Management is not aware that any matters not referred to in the Proxy Statement
will be presented for action at the meeting. If any other matters properly come
before the meeting, the persons named in the enclosed Proxy will vote such Proxy
in accordance with their best judgment.
AVAILABILITY OF ANNUAL REPORT
The Company will provide any Shareholder with a copy of its Annual Report on
Form 10-KSB for its fiscal year ended April 30, 1997, without charge upon
receipt of a written request for such report. Such requests should be addressed
to the Company's secretary at 600 Diagonal Highway, Longmont, Colorado 80501.
The Annual Report is not a part of this proxy statement.
Longmont, Colorado
September 22, 1997
PAGE 13 OF 13
ENGINEERING MEASUREMENTS COMPANY Exhibit A
1997 INCENTIVE PLAN
I. Purpose of the Plan
A. This Engineering Measurements Company ("EMCO") 1997 Incentive Plan is
intended to promote the interests of the Company by providing the
employees of the Company and others, who are largely responsible for
the management, growth and protection of the business of the Company,
with incentives and rewards to encourage them to continue to provide
their services to the Company.
II. Definitions
As used in the Plan, the following definitions apply to the terms indicated
below:
A. "Board of Directors" shall mean the Board of Directors of EMCO.
B. "Cause," when used in connection with the termination of a
Participant's employment with the Company, shall mean the termination
of the Participant's employment by the Company on account of (i) the
willful and continued failure by the Participant substantially to
perform his duties and obligations (other than any such failure
resulting from his incapacity due to physical or mental illness) or
(ii) the willful engaging by the Participant in misconduct which could
reasonably be expected to cause substantial injury to the Company.
For purposes of this Section 2(b), no act, or failure to act, on a
Participant's part shall be considered "willful" unless done, or
omitted to be done, by the Participant in bad faith and without
reasonable belief that his action or omission was in the best
interests of the Company.
C. "Cash Bonus" shall mean an award of a bonus payable in cash pursuant
to Section 13 hereof.
D. "Change in Control" shall mean:
1. a change in control of EMCO of a nature that would be required
to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Exchange Act; or
2. the occurrence of any of the following events:
PAGE 1 OF 30
a) any Person (who is not such a person on August 1, 1997) is
or becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly,
of securities of EMCO representing 35% or more of the
combined voting power of EMCO's then outstanding securities;
b) a majority of individuals who are nominated by the Board of
Directors for election to the Board of Directors on any
date, fail to be elected to the Board of Directors as a
direct or indirect result of any proxy fight or contested
election for positions on the Board of Directors;
c) the Board of Directors determines in its sole and absolute
discretion that there has been a change in control of EMCO;
d) a dissolution or liquidation of EMCO; or
e) a sale of all or substantially all of EMCO's assets.
E. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
F. "Committee" shall mean the Incentive Plan Committee of the Board of
Directors or such other committee as the Board of Directors shall
appoint from time to time to administer the Plan. The entire Board
of Directors shall constitute the Committee until a separate committee
is appointed.
G. "Common Stock" shall mean EMCO's common stock, $.01 par value per
share.
H. "Company" shall mean Engineering Measurements Company, a Colorado
corporation, and each of its Subsidiaries.
I. "Disability" shall mean a Participant's inability to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period
of not less than twelve (12) months.
J. "Disqualified Period" means, in the case of any Incentive Stock
Option, the period beginning on the date such Option is granted and
ending on the later of the date (i) two years after the date such
PAGE 2 OF 30
Option is granted, or (ii) one year after the transfer of any Common
Stock to a Participant pursuant to the exercise of such Option.
K. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
L. The "Fair Market Value" of a share of Common Stock with respect to any
day shall be (i) the closing sales price on the immediately preceding
business day of a share of Common Stock as reported on the principal
securities exchange on which shares of Common Stock are then listed or
admitted to trading or (ii) if not so reported, the average of the
closing bid and ask prices on the immediately preceding business day
as reported on the National Association of Securities Dealers
Automated Quotation System or (iii) if not so reported, as furnished
by any member of the National Association of Securities Dealers, Inc.
selected by the Committee. In the event that the price of a share of
Common Stock shall not be so reported, the Fair Market Value of Common
Stock shall be determined by the Committee in its absolute discretion.
M. "Incentive Award" shall mean an Option, LSAR, Tandem SAR, Stand-Alone
SAR, share of Phantom Stock, Stock Bonus or Cash Bonus granted
pursuant to the terms of the Plan.
N. "Incentive Stock Option" shall mean an Option which is an "incentive
stock option" within the meaning of Section 422 of the Code and which
is identified as an Incentive Stock Option in the agreement by which
it is evidenced.
O. "Issue Date" shall mean the date established by the Committee on which
certificates representing shares of Restricted Stock shall be issued
by EMCO pursuant to the terms of Section 10(d) hereof.
P. "LSAR" shall mean a limited stock appreciation right which is granted
pursuant to the provisions of Section 7 hereof and which relates to an
Option. Each LSAR shall be exercisable only upon the occurrence of a
Change in Control and only in the alternative to the exercise of its
related Option.
Q. "Non-Qualified Stock Option" shall mean an Option which is not an
Incentive Stock Option and which is identified as a Non-Qualified
Stock Option in the agreement by which it is evidenced.
R. "Option" shall mean an option to purchase shares of Common Stock of
EMCO granted pursuant to Section 6 hereof. Each Option shall be
PAGE 3 OF 30
identified as either an Incentive Stock Option or a Non-Qualified
Stock Option in the agreement by which it is evidenced.
S. "Participant" shall mean a Person who is eligible to participate in
the Plan and to whom an Incentive Award is granted pursuant to the
Plan, and, upon such Person's death, such Person's successors, heirs,
executors and administrators, as the case may be.
T. "Person" shall mean a "person," as such term is used in Sections 13(d)
and 14(d) of the Exchange Act.
U. "Phantom Stock" shall mean the right to receive in cash or Common
Stock (as determined by the Committee), the amounts provided for in
Section 11(b), which right is granted pursuant to Section 11 hereof
and subject to the terms and conditions contained therein.
V. "Plan" shall mean the Engineering Measurements Company 1997 Incentive
Plan, as it may be amended from time to time.
W. "Restricted Stock" shall mean a share of Common Stock which is granted
pursuant to the terms of Section 10 hereof and which is subject to the
restrictions set forth in Section 10(c) hereof for so long as such
restrictions continue to apply to such share.
X. "Securities Act" shall mean the Securities Act of 1933, as amended.
Y. "Stand-Alone SAR" shall mean a stock appreciation right granted
pursuant to Section 9 hereof which is not related to any Option.
Z. "Stock Bonus" shall mean a grant of a bonus payable in shares of
Common Stock pursuant to Section 12 hereof.
AA. "Subsidiary" shall mean any corporation in which at the time of
reference EMCO owns, directly or indirectly, stock comprising more
than fifty percent of the total combined voting power of all classes
of stock of such corporation.
BB. "Tandem SAR" shall mean a stock appreciation right granted pursuant to
Section 8 hereof which is related to an Option. Each Tandem SAR shall
be exercisable only to the extent its related Option is exercisable
and only in the alternative to the exercise of its related Option.
CC. "EMCO" shall mean Engineering Measurements Company, a Colorado
corporation, and its successors.
PAGE 4 OF 30
DD. "Vesting Date" shall mean the date established by the Committee on
which a share of Restricted Stock or Phantom Stock may vest.
III. Stock Subject to the Plan
A. Under the Plan, the Committee may grant to Participants (i) Options,
(ii) LSARs, (iii) Tandem SARs, (iv) Stand-Alone SARs, (v) shares of
Restricted Stock, (vi) shares of Phantom Stock, (vii) Stock Bonuses
and (viii) Cash Bonuses.
B. Subject to adjustment as provided in Section 14 hereof, the Committee
may grant Options, Stand-Alone SARs, shares of Restricted Stock,
shares of Phantom Stock and Stock Bonuses under the Plan with respect
to a number of shares of Common Stock that in the aggregate does not
exceed 500,000 shares. The total number of shares of Common Stock
with respect to which Incentive Stock Options are granted under the
Plan shall not exceed 500,000. The grant of an LSAR, Tandem SAR or
Cash Bonus shall not reduce the number of shares of Common Stock with
respect to which Options, Stand-Alone SARs, shares of Restricted
Stock, shares of Phantom Stock or Stock Bonuses may be granted
pursuant to the Plan.
C. In the event that any outstanding Option or Stand-Alone SAR expires,
terminates or is canceled for any reason (other than pursuant to
Paragraphs 7(b)(ii) or 8(b)(iii) hereof), the shares of Common Stock
subject to the unexercised portion of such Option or Stand-Alone SAR
shall again be available for grants under the Plan. In the event
that an outstanding Option is canceled pursuant to Paragraphs
7(b)(ii) or 8(b)(iii) hereof by reason of the exercise of an LSAR or
a Tandem SAR, the shares of Common Stock subject to the canceled
portion of such Option shall not again be available for grants under
the Plan. In the event that any shares of Restricted Stock or Phantom
Stock, or any shares of Common Stock granted in a Stock Bonus are
forfeited or canceled for any reason, such shares shall again be
available for grants under the Plan.
D. Shares of Common Stock issued under the Plan may be either newly
issued shares or treasury shares, at the discretion of the Committee.
IV. Administration of the Plan
A. The Plan shall be administered either by the entire Board of Directors
(which shall in that case constitute the Committee) or by a Committee
of the Board of Directors consisting of two or more persons, each of
whom shall be a "disinterested person" within the meaning of Rule
16b-3 promulgated under Section 16 of the Exchange Act. The Committee
PAGE 5 OF 30
shall from time to time designate the persons who shall be granted
Incentive Awards and the amount and type of such Incentive Awards.
B. The Committee shall have full authority to administer the Plan,
including authority to interpret and construe any provision of the
Plan and the terms of any Incentive Award issued under it and to adopt
such rules and regulations for administering the Plan as it may deem
necessary. Decisions of the Committee shall be final and binding on
all parties.
C. The Committee may, in its absolute discretion (i) reprice and
accelerate the date on which any Option or Stand-Alone SAR granted
under the Plan becomes exercisable, (ii) reprice and accelerate the
Vesting Date or Issue Date, or waive any condition imposed pursuant
to Section 10(b) hereof, with respect to any share of Restricted
Stock granted under the Plan and (iii) reprice and accelerate the
Vesting Date or waive any condition imposed pursuant to Section 11
hereof, with respect to any share of Phantom Stock granted under the
Plan. In the event the Committee decides to accelerate one type of
Incentive Award, the Committee shall not be required to reprice or
accelerate all types of Incentive Awards. In addition, the Committee
shall have full discretion to apply one or more of the provisions of
Section 14 hereof selectively to one or more types of Incentive
Awards.
D. In addition, the Committee may, in its absolute discretion, grant
Incentive Awards to Participants on the condition that such
Participants surrender to the Committee for cancellation such other
Incentive Awards (including, without limitation, Incentive Awards
with higher exercise prices) as the Committee specifies.
Notwithstanding Section 3 herein, except as may be required pursuant
to Section 422 of the Code, prior to the surrender of such other
Incentive Awards, Incentive Awards granted pursuant to the preceding
sentence of this Section 4 shall not count against the limits set
forth in such Section 3.
E. The Committee may, in its sole discretion, impose terms and
conditions, including conditions relating to the manner and timing of
payments, on the exercise of Options, purchase or receipt of
Restricted Stock or Bonus Stock, or any other Incentive Award
hereunder. Such terms and conditions may include, but are not limited
to, permitting a Participant to deliver to the Company his promissory
note as full or partial payment for the exercise of an Option. The
Committee, in its sole discretion, may authorize the Company to make a
loan to a Participant in connection with the exercise of Options or
purchase of Restricted Stock or Bonus Stock, or authorize the Company
to arrange or guarantee loans to a Participant by a third party. Any
loan by the Company or acceptance of a promissory note shall be made
PAGE 6 OF 30
in accordance with the corporate law of the Company's state of
incorporation and applicable margin rules and laws.
F. Whether an authorized leave of absence, or absence in military or
government service, shall constitute termination of employment shall
be determined by the Committee.
G. No member of the Committee shall be liable for any action, omission,
or determination relating to the Plan, and EMCO shall indemnify and
hold harmless each member of the Committee and each other director or
employee of the Company to whom any duty or power relating to the
administration or interpretation of the Plan has been delegated
against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the approval of
the Committee) arising out of any action, omission or determination
relating to the Plan, unless, in either case, such action, omission or
determination was taken or made by such member, director or employee
in bad faith and without reasonable belief that it was in the best
interests of the Company. This indemnification and hold harmless
shall be in addition to any others rights, including rights of
indemnification or hold harmless, that the person may have.
V. Eligibility
A. The Persons who shall be eligible to receive Incentive Awards pursuant
to the Plan shall be such Persons, including employees, officers and
directors of the Company, and advisors to the Company, who are
responsible for, or contribute to, the management, growth and
protection of the business of the Company, as the Committee shall
select from time to time.
VI. Options
A. The Committee may grant Options pursuant to the Plan, which Options
shall be evidenced by agreements in such form as the Committee shall
from time to time approve. Options shall comply with and be subject
to the following terms and conditions:
B. Identification of Options. All Options granted under the Plan shall
be clearly identified in the agreement evidencing such Options as
either Incentive Stock Options or as Non-Qualified Stock Options.
C. Exercise Price. The exercise price of any Non-Qualified Stock Option
granted under the Plan shall be such price as the Committee shall
determine on the date on which such Non-Qualified Stock Option is
granted; provided, that such price may not be less than the minimum
PAGE 7 OF 30
price required by law. The exercise price of any Incentive Stock
Option granted under the Plan shall be not less than 100% of the Fair
Market Value of a share of Common Stock on the date on which such
Incentive Stock Option is granted.
D. Term and Exercise of Option
1. Each Option shall be exercisable on such date or dates, during
such period and for such number of shares of Common Stock as
shall be determined by the Committee on the day on which such
Option is granted and set forth in the option agreement with
respect to such Option; provided, however, that no Option shall
be exercisable after the expiration of ten years from the date
such Option was granted; and, provided, further, that each Option
shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
2. Each Option shall be exercisable in whole or in part; provided,
that no partial exercise of an Option shall be for an aggregate
exercise price of less than $1,000. The partial exercise of an
Option shall not cause the expiration, termination or
cancellation of the remaining portion thereof. Upon the partial
exercise of an Option, the agreements evidencing such Option and
any related LSARs and Tandem SARs shall be returned to the
Participant exercising such Option together with the delivery of
the certificates described in Section 6(c)(v) hereof.
3. An Option shall be exercised by delivering notice to EMCO's
principal office, to the attention of its Secretary, no less than
three business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the
agreements evidencing the Option and any related LSARs and Tandem
SARs, shall specify the number of shares of Common Stock with
respect to which the Option is being exercised and the effective
date of the proposed exercise and shall be signed by the
Participant. The Committee may also require as a condition of
exercise that the Participant will agree, if requested by the
Committee in connection with a public offering of the Company's
securities, to adhere to lock-up arrangements between the Company
and an underwriter involved in such public offering. The
Participant may withdraw such notice at any time prior to the
close of business on the business day immediately preceding the
effective date of the proposed exercise, in which case such
agreements shall be returned to him. Payment for shares of
Common Stock purchased upon the exercise of an Option shall be
PAGE 8 OF 30
made on the effective date of such exercise either (A) in cash,
by certified check, bank cashier's check or wire transfer, (B)
subject to the approval of the Committee, in shares of Common
Stock owned by the Participant for at least six months and valued
at their Fair Market Value on the effective date of such
exercise, or (C) some combination of the foregoing approved by
the Committee. Any payment in shares of Common Stock shall be
effected by the delivery of such shares to the Secretary of EMCO,
duly endorsed in blank or accompanied by stock powers duly
executed in blank, together with any other documents and
evidences as the Secretary of EMCO shall require from time to
time.
4. Any Option granted under the Plan may be exercised by a
broker-dealer acting on behalf of a Participant if (i) the
broker-dealer has received from the Participant or the Company a
fully-and-duly-endorsed agreement evidencing such Option and
instructions signed by the Participant requesting EMCO to deliver
the shares of Common Stock subject to such Option to the
broker-dealer on behalf of the Participant and specifying the
account into which such shares should be deposited, (ii) adequate
provision has been made with respect to the payment of any
withholding taxes due upon such exercise and (iii) the
broker-dealer and the Participant have otherwise complied with
applicable margin rules and laws, including Regulation T.
5. Certificates for shares of Common Stock purchased upon the
exercise of an Option shall be issued in the name of the
Participant and delivered to the Participant as soon as
practicable following the effective date on which the Option
is exercised.
6. During the lifetime of a Participant, each Option granted to him
shall be exercisable only by him. No Option shall be assignable
or transferable otherwise than by will, or the laws of descent
and distribution.
E. Limitations on Grant of Incentive Stock Options
1. Incentive Stock Options may be granted only to employees
(including officers) of the Company, its "parent corporation" or
a "subsidiary" of the Company as such terms are defined in
Section 424 of the Code. The Committee shall designate the
employees or class of employees eligible to receive Incentive
Stock Options.
2. The aggregate Fair Market Value of shares of Common Stock with
respect to which Incentive Stock Options are exercisable for the
PAGE 9 OF 30
first time by a Participant during any calendar year under the
Plan and any other stock option plan of the Company (or any
"subsidiary" of EMCO as such term is defined in Section 424 of
the Code) shall not exceed $100,000. Such Fair Market Value
shall be determined as of the date on which each such Incentive
Stock Option is granted. In the event that the aggregate Fair
Market Value of shares of Common Stock with respect to such
Incentive Stock Options exceeds $100,000, then Incentive Stock
Options granted hereunder to such Participant shall, to the
extent and in the order required by Regulations promulgated under
the Code (or any other authority having the force of Regulations)
("Regulations"), automatically be deemed to be Non-Qualified
Stock Options, but all other terms and provisions of such
Incentive Stock Options shall remain unchanged. In the absence
of such Regulations, or in the event such Regulations require or
permit a discretionary designation of the Options which shall
cease to constitute Incentive Stock Options, such Options shall,
to the extent of such excess and in the reverse order in which
they were granted (i.e., last granted Options first),
automatically be deemed to be Non-Qualified Stock Options, but
all other terms and provisions of such Incentive Stock Options
shall remain unchanged.
3. No Incentive Stock Option may be granted to an individual if, at
the time of the proposed grant, such individual owns stock
possessing more than ten percent of the total combined voting
power of all classes of stock of EMCO or any of its
"subsidiaries" (within the meaning of Section 424 of the Code),
unless (i) the exercise price of such Incentive Stock Option is
at least one hundred and ten percent of the Fair Market Value of
a share of Common Stock at the time such Incentive Stock Option
is granted and (ii) such Incentive Stock Option is not
exercisable after the expiration of five years from the date
such Incentive Stock Option is granted.
F. Effect of Termination of Employment
1. In the event that the employment of a Participant with the Company
shall terminate for any reason other than Cause, Disability or
death (i) Options granted to such Participant, to the extent that
they were exercisable at the time of such termination, shall
remain exercisable until the expiration of one month after such
termination, on which date they shall expire, and (ii) Options
granted to such Participant, to the extent that they were not
exercisable at the time of such termination, shall expire at the
PAGE 10 OF 30
close of business on the date of such termination; provided,
however, that no Option shall be exercisable after the expiration
of its term.
2. In the event of the termination of a Participant's employment for
Cause, all outstanding Options granted to such Participant shall
expire at the commencement of business on the date of such
termination.
G. Acceleration of Exercise Date Upon Change in Control. Unless
otherwise provided in a Participant's employment, directorship,
consulting or Option agreement (as approved by the Committee), upon
the occurrence of a Change in Control, each Option granted under the
Plan and outstanding at such time shall become fully and immediately
exercisable and shall remain exercisable until its expiration,
termination or cancellation pursuant to the terms of the Plan.
H. Arrangements for Disposition of Option Shares. The Committee may, in
its discretion, enter into arrangements with one or more banks,
brokers or other financial institutions to facilitate the disposition
of shares acquired upon the exercise of Options, including, without
limitation, arrangements for the simultaneous exercise of Options and
the sale of shares of the Company's stock acquired upon exercise.
VII. Limited Stock Appreciation Rights
A. The Committee may grant in connection with any Option granted
hereunder one or more LSARs relating to a number of shares of Common
Stock equal to or less than the number of shares of Common Stock
subject to the related Option. An LSAR may be granted at the same
time as, or subsequent to the time that, its related Option is
granted. Each LSAR shall be evidenced by an agreement in such form as
the Committee shall from time to time approve. Each LSAR granted
hereunder shall be subject to the following terms and conditions:
B. Benefit Upon Exercise
1. The exercise of an LSAR relating to a Non-Qualified Stock Option
with respect to any number of shares of Common Stock shall
entitle the Participant to a cash payment, for each such share,
equal to the excess of (i) the greater of (A) the highest price
per share of Common Stock paid in the Change in Control in
connection with which such LSAR became exercisable and (B) the
Fair Market Value of a share of Common Stock on the date of such
Change in Control over (ii) the exercise price of the related
Option. Such payment shall be paid as soon as practical, but in
PAGE 11 OF 30
no event later than the expiration of five business days, after
the effective date of such exercise.
2. The exercise of an LSAR relating to an Incentive Stock Option
with respect to any number of shares of Common Stock shall
entitle the Participant to a cash payment, for each such share,
equal to the excess of (i) the Fair Market Value of a share of
Common Stock on the effective date of such exercise over (ii) the
exercise price of the related Option. Such payment shall be paid
as soon as practical, but in no event later than the expiration
of five business days, after the effective date of such exercise.
3. Any Participant may request in writing to the Committee to
receive the amount payable to such Participant under this Section
7(a) in Common Stock rather than cash. The Committee, in its
sole discretion, may decide whether to grant such request. In
the event the Committee grants such request, the amount payable
to such Participant under this Section 7(a) shall be paid to such
Participant in Common Stock with a Fair Market Value equal to the
cash that would have otherwise been payable to such Participant.
C. Term and Exercise of LSARs
1. An LSAR shall be exercisable only during the period commencing on
the first day following the occurrence of a Change in Control and
terminating on the expiration of sixty days after such date.
Notwithstanding the preceding sentence of this Section 7(b), in
the event that an LSAR held by any Participant who is or may be
subject to the provisions of Section 16(b) of the Exchange Act
becomes exercisable prior to the expiration of six months
following the date on which it is granted, and as a result the
profit recovery provisions of Section 16(b) of the Exchange Act
would apply, then the LSAR shall also be exercisable during the
period commencing on the first day immediately following the
expiration of such six month period and terminating on the
expiration of sixty days following such date. Notwithstanding
anything else herein, an LSAR relating to an Incentive Stock
Option may be exercised with respect to a share of Common Stock
only if the Fair Market Value of such share on the effective date
of such exercise exceeds the exercise price relating to such
share. Notwithstanding anything else herein, an LSAR may be
exercised only if and to the extent that the Option to which it
relates is exercisable.
2. The exercise of an LSAR with respect to a number of shares of
Common Stock shall cause the immediate and automatic cancellation
PAGE 12 OF 30
of the Option to which it relates with respect to an equal number
of shares. The exercise of an Option, or the cancellation,
termination or expiration of an Option (other than pursuant to
this Paragraph (ii)), with respect to a number of shares of
Common Stock, shall cause the cancellation of the LSAR related to
it with respect to an equal number of shares.
3. Each LSAR shall be exercisable in whole or in part; provided,
that no partial exercise of an LSAR shall be for an aggregate
exercise price of less than $1,000. The partial exercise of an
LSAR shall not cause the expiration, termination or cancellation
of the remaining portion thereof. Upon the partial exercise of
an LSAR, the agreements evidencing the LSAR, the related Option
and any Tandem SARs related to such Option shall be returned to
the Participant exercising such LSAR together with the payment
described in Paragraph 7(a)(i) or (ii) hereof, as applicable.
4. During the lifetime of a Participant, each LSAR granted to him
shall be exercisable only by him. No LSAR shall be assignable or
transferable otherwise than by will, or the laws of descent and
distribution, and otherwise together with its related Option.
5. An LSAR shall be exercised by delivering notice to EMCO's
principal office, to the attention of its Secretary, no less than
three business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the
applicable agreements evidencing the LSAR, the related Option and
any Tandem SARs relating to such Option, shall specify the number
of shares of Common Stock with respect to which the LSAR is being
exercised and the effective date of the proposed exercise and
shall be signed by the Participant. The Participant may withdraw
such notice at any time prior to the close of business on the
business day immediately preceding the effective date of the
proposed exercise, in which case such agreements shall be
returned to him.
VIII. Tandem Stock Appreciation Rights
A. The Committee may grant in connection with any Option granted
hereunder one or more Tandem SARs relating to a number of shares of
Common Stock equal to or less than the number of shares of Common
Stock subject to the related Option. A Tandem SAR may be granted at
the same time as, or subsequent to the time that, its related Option
is granted. Each Tandem SAR shall be evidenced by an agreement in
such form as the Committee shall from time to time approve. Tandem
SARs shall comply with and be subject to the following terms and
conditions:
PAGE 13 OF 30
B. Benefit Upon Exercise. The exercise of a Tandem SAR with respect to
any number of shares of Common Stock shall entitle a Participant to a
cash payment, for each such share, equal to the excess of (i) the Fair
Market Value of a share of Common Stock on the effective date of such
exercise over (ii) the exercise price of the related Option. Such
payment shall be paid as soon as practical, but in no event later than
the expiration of five business days, after the effective date of such
exercise. Any Participant may request in writing to the Committee to
receive the amount payable to such Participant under this Section
8(a) in Common Stock rather than cash. The Committee, in its sole
discretion, may decide whether to grant such request. In the event
the Committee grants such request, the amount payable to such
Participant under this Section 8(a) shall be paid to such Participant
in Common Stock with a Fair Market Value equal to the cash that would
have otherwise been payable to such Participant.
C. Term and Exercise of Tandem SAR
1. A Tandem SAR shall be exercisable at the same time and to the
same extent (on a proportional basis, with any fractional amount
being rounded down to the immediately preceding whole number) as
its related Option. Notwithstanding the first sentence of this
Paragraph 8(b)(i), (i) a Tandem SAR shall not be exercisable at
any time that an LSAR related to the Option to which the Tandem
SAR is related is exercisable and (ii) a Tandem SAR relating to
an Incentive Stock Option may be exercised with respect to a
share of Common Stock only if the Fair Market Value of such share
on the effective date of such exercise exceeds the exercise price
relating to such share.
2. Notwithstanding the first sentence of Section 8(b)(i) hereof, the
Committee may, in its absolute discretion, grant one or more
Tandem SARs which shall not become exercisable unless and until
the Participant to whom such Tandem SAR is granted is, in the
determination of the Committee, subject to Section 16(b) of the
Exchange Act and which shall cease to be exercisable if and at
the time that the Participant ceases, in the determination of the
Committee, to be subject to such Section 16(b).
3. The exercise of a Tandem SAR with respect to a number of shares
of Common Stock shall cause the immediate and automatic
cancellation of its related Option with respect to an equal
number of shares. The exercise of an Option, or the
cancellation, termination or expiration of an Option (other than
pursuant to this Paragraph (iii)), with respect to a number of
PAGE 14 OF 30
shares of Common Stock shall cause the automatic and immediate
cancellation of its related Tandem SARs to the extent that the
number of shares of Common Stock subject to such Option after
such exercise, cancellation, termination or expiration is less
than the number of shares subject to such Tandem SARs. Such
Tandem SARs shall be canceled in the order in which they became
exercisable.
4. Each Tandem SAR shall be exercisable in whole or in part;
provided, that no partial exercise of a Tandem SAR shall be for
an aggregate exercise price of less than $1,000. The partial
exercise of a Tandem SAR shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
Upon the partial exercise of a Tandem SAR, the agreements
evidencing such Tandem SAR, its related Option and LSARs relating
to such Option shall be returned to the Participant exercising
such Tandem SAR together with the payment described in Section
8(a) hereof.
5. During the lifetime of a Participant, each Tandem SAR granted to
him shall be exercisable only by him. No Tandem SAR shall be
assignable or transferable otherwise than by will, or the laws of
descent and distribution, and otherwise than together with its
related Option.
6. A Tandem SAR shall be exercised by delivering notice to EMCO's
principal office, to the attention of its Secretary, no less than
three business days in advance of the effective date of the
proposed exercise. Such notice shall be accompanied by the
applicable agreements evidencing the Tandem SAR, its-related
Option and any LSARs related to such Option, shall specify the
number of shares of Common Stock with respect to which the Tandem
SAR is being exercised and the effective date of the proposed
exercise and shall be signed by the Participant. The Participant
may withdraw such notice at any time prior to the close of
business on the business day immediately preceding the effective
date of the proposed exercise, in which case such agreements
shall be returned to him.
IX. Stand-Alone Stock Appreciation Rights
A. The Committee may grant Stand-Alone SARs pursuant to the Plan, which
Stand-Alone SARs shall be evidenced by agreements in such form as the
Committee shall from time to time approve. Stand-Alone SARs shall
comply with and be subject to the following terms and conditions:
PAGE 15 OF 30
B. Exercise Price. The exercise price of any Stand-Alone SAR granted
under the Plan shall be determined by the Committee at the time of the
grant of such Stand-Alone SAR.
C. Benefit Upon Exercise. The exercise of a Stand-Alone SAR with respect
to any number of shares of Common Stock prior to the occurrence of a
change in Control shall entitle a Participant to a cash payment, for
each such share, equal to the excess of (i) the Fair Market Value of a
share of Common Stock on the exercise date over (ii) the exercise
price of the Stand-Alone SAR. The exercise of a Stand-Alone SAR with
respect to any number of shares of Common Stock upon or after the
occurrence of a Change in Control shall entitle a Participant to a
cash payment, for each such share, equal to the excess of (i) the
greater of (A) the highest price per share of Common Stock paid in
connection with such Change in Control and (B) the Fair Market Value
of a share of Common Stock on the date of such Change in Control over
(ii) the exercise price of the Stand-Alone SAR. Such payments shall
be paid as soon as practical, but in no event later than five business
days, after the effective date of the exercise. Any Participant may
request in writing to the Committee to receive the amount payable to
such Participant under this Section 9(b) in Common Stock rather than
cash. The Committee, in its sole discretion, may decide whether to
grant such request. In the event the Committee grants such request,
the amount payable to such Participant under this Section 9(b) shall
be paid to such Participant in Common Stock with a Fair Market Value
equal to the cash that would have otherwise been payable to such
Participant.
D. Term and Exercise of Stand-Alone SARs
1. Each Stand-Alone SAR shall be exercisable on such date or dates,
during such period and for such number of shares of Common Stock
as shall be determined by the Committee and set forth in the
Stand-Alone SAR agreement with respect to such Stand-Alone SAR;
provided, however, that no Stand-Alone SAR shall be exercisable
after the expiration of ten years from the date such Stand-Alone
SAR was granted; and, provided, further, that each Stand-Alone
SAR shall be subject to earlier termination, expiration or
cancellation as provided in the Plan.
2. Each Stand-Alone SAR may be exercised in whole or in part;
provided, that no partial exercise of a Stand-Alone SAR shall be
for an aggregate exercise price of less than $1,000. The partial
exercise of a Stand-Alone SAR shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
Upon the partial exercise of a Stand-Alone SAR, the agreement
PAGE 16 OF 30
evidencing such Stand-Alone SAR shall be returned to the
Participant exercising such Stand-Alone SAR together with the
payment described in Section 9(b) hereof.
3. A Stand-Alone SAR shall be exercised by delivering notice to
EMCO's principal office, to the attention of its Secretary, no
less than three business days in advance of the effective date of
the proposed exercise. Such notice shall be accompanied by the
applicable agreement evidencing the Stand-Alone SAR, shall
specify the number of shares of Common Stock with respect to
which the Stand-Alone SAR is being exercised and the effective
date of the proposed exercise and shall be signed by the
Participant. The Participant may withdraw such notice at any
time prior to the close of business on the business day
immediately preceding the effective date of the proposed
exercise, in which case the agreement evidencing the
Stand-Alone SAR shall be returned to him.
4. During the lifetime of a Participant, each Stand-Alone SAR
granted to him shall be exercisable only by him. No Stand-Alone
SAR shall be assignable or transferable otherwise than by will,
or the laws of descent and distribution.
E. Effect of Termination of Employment
1. In the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause,
Disability or death (i) Stand-Alone SARs granted to such
Participant, to the extent that they were exercisable at the time
of such termination, shall remain exercisable until the
expiration of one month after such termination, on which date
they shall expire, and (ii) Stand-Alone SARs granted to such
Participant, to the extent that they were not exercisable at the
time of such termination, shall expire at the close of business
on the date of such termination; provided, however, that no
Stand-Alone SAR shall be exercisable after the expiration of its
term.
2. In the event that the employment of a Participant with the
Company shall terminate on account of the Disability or death of
the Participant (i) Stand-Alone SARs granted to such Participant,
to the extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of one
year after such termination, on which date they shall expire, and
(ii) Stand-Alone SARs granted to such Participant, to the extent
that they were not exercisable at the time of such termination,
PAGE 17 OF 30
shall expire at the close of business on the date of such
termination; provided, however, that no Stand-Alone SAR shall be
exercisable after the expiration of its term.
3. In the event of the termination of a Participant's employment for
Cause, all outstanding Stand-Alone SARs granted to such
Participant shall expire at the commencement of business on the
date of such termination.
F. Acceleration of Exercise Date Upon Change in Control. Upon the
occurrence of a Change in Control, each Stand-Alone SAR granted under
the Plan and outstanding at such time shall become fully and
immediately exercisable and shall remain exercisable until its
expiration, termination or cancellation pursuant to the terms of the
Plan.
X. Restricted Stock
A. The Committee may grant shares of Restricted Stock pursuant to the
Plan. Each grant of shares of Restricted Stock shall be evidenced by
an agreement in such form as the Committee shall from time to time
approve. Each grant of shares of Restricted Stock shall comply with
and be subject to the following terms and conditions:
B. Issue Date and Vesting Date. At the time of the grant of shares of
Restricted Stock, the Committee shall establish an Issue Date or
Issue Dates and a Vesting Date or Vesting Dates with respect to such
shares. The Committee may divide such shares into classes and assign
a different Issue Date and/or Vesting Date for each class. Except as
provided in Sections 10(c) and 10(f) hereof, upon the occurrence of
the Issue Date with respect to a share of Restricted Stock, a share of
Restricted Stock shall be issued in accordance with the provisions of
Section 10(d) hereof. Provided that all conditions to the vesting of
a share of Restricted Stock imposed pursuant to Section 10(b) hereof
are satisfied, and except as provided in Sections 10(c) and 10(f)
hereof, upon the occurrence of the Vesting Date with respect to a
share of Restricted Stock, such share shall vest and the restrictions
of Section 10(c) hereof shall cease to apply to such share.
C. Conditions to Vesting. At the time of the grant of shares of
Restricted Stock, the Committee may impose such restrictions or
conditions, not inconsistent with the provisions hereof, to the
vesting of such shares as it, in its absolute discretion deems
appropriate. By way of example and not by way of limitation, the
Committee may require, as a condition to the vesting of any class or
classes of shares of Restricted Stock, that the Participant or the
PAGE 18 OF 30
Company achieve certain performance criteria, such criteria to be
specified by the Committee at the time of the grant of such shares.
D. Restrictions on Transfer Prior to Vesting. Prior to the vesting of a
share of Restricted Stock, no transfer of a Participant's rights with
respect to such shares, whether voluntary or involuntary, by operation
of law or otherwise, shall vest the transferee with any interest or
right in or with respect to such share, but immediately upon any
attempt to transfer such rights, such share, and all of the rights
related thereto, shall be forfeited by the Participant and the
transfer shall be of no force or effect.
E. Issuance of Certificates
1. Except as provided in Sections 10(c) or 10(f) hereof, reasonably
promptly after the Issue Date with respect to shares of
Restricted Stock, EMCO shall cause to be issued a stock
certificate, registered in the name of the Participant to whom
such shares were granted, evidencing such shares; provided, that
EMCO shall not cause to be issued such a stock certificate unless
it has received a stock power duly endorsed in blank with respect
to such shares. Each such stock certificate shall bear the
following legend:
a) The transferability of this certificate and the shares of
stock represented hereby are subject to the restrictions,
terms and conditions (including forfeiture and restrictions
against transfer) contained in the Engineering Measurements
Company 1997 Incentive Plan and an Agreement entered into
between the registered owner of such shares and Engineering
Measurements Company. A copy of the Plan and Agreement is
on file in the office of the Secretary of Engineering
Measurements Company, 600 Diagonal Highway, Longmont,
Colorado 80501.
b) Such legend shall not be removed from the certificate
evidencing such shares until such shares vest pursuant to
the terms hereof.
2. Each certificate issued pursuant to Section 10(d)(i) hereof,
together with the stock powers relating to the shares of
Restricted Stock evidenced by such certificate, shall be
deposited by the Company with a custodian designated by the
Company. The Company shall cause such custodian to issue to the
Participant a receipt evidencing the certificates held by it
which are registered in the name of the Participant.
PAGE 19 OF 30
F. Consequences Upon Vesting. Upon the vesting of a share of Restricted
Stock pursuant to the terms hereof, the restrictions of Section 10(c)
hereof shall cease to apply to such share. Reasonably promptly after
a share of Restricted Stock vests pursuant to the terms hereof, EMCO
shall cause to be issued and delivered to the Participant to whom such
shares were granted, a certificate evidencing such share, free of the
legend set forth in Paragraph 10(d)(i) hereof, together with any other
property of the Participant held by the custodian pursuant to Section
14(b) hereof.
G. Effect of Termination of Employment.
1. In the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause prior to
the vesting of shares of Restricted Stock granted to such
Participant, a proportion of such shares, to the extent not
forfeited or canceled on or prior to such termination pursuant to
any provision hereof, shall vest on the date of such termination.
The proportion referred to in the preceding sentence shall be
determined by the Committee at the time of the grant of such
shares of Restricted Stock and may be based on the achievement of
any conditions imposed by the Committee with respect to such
shares pursuant to Section 10(b). Such proportion may be equal
to zero.
2. In the event of the termination of a Participant's employment for
Cause, all shares of Restricted Stock granted to such Participant
which have not vested as of the date of such termination shall
immediately be forfeited.
H. Effect of Change in Control. Upon the occurrence of a Change in
Control, all shares of Restricted Stock which have not theretofore
vested (including those with respect to which the Issue Date has not
yet occurred), or been canceled or forfeited pursuant to any provision
hereof, shall immediately vest.
XI. Phantom Stock
A. The Committee may grant shares of Phantom Stock pursuant to the Plan.
Each grant of shares of Phantom Stock shall be evidenced by an
agreement in such form as the Committee shall from time to time
approve. Each grant of shares of Phantom Stock shall comply with and
be subject to the following terms and conditions:
B. Vesting Date. At the time of the grant of shares of Phantom Stock,
the Committee shall establish a Vesting Date or Vesting Dates with
PAGE 20 OF 30
respect to such shares. The Committee may divide such shares into
classes and assign a different Vesting Date for each class. Provided
that all conditions to the vesting of a share of Phantom Stock imposed
pursuant to Section 11(c) hereof are satisfied, and except as provided
in Section 11(d) hereof, upon the occurrence of the Vesting Date with
respect to a share of Phantom Stock, such share shall vest.
C. Benefit Upon Vesting. Upon the vesting of a share of Phantom Stock,
a Participant shall be entitled to receive in cash, within 30 days of
the date on which such share vests, an amount in cash in a lump sum
equal to the sum of (i) as the Committee may establish at the time of
grant of shares of Phantom Stock either (A) the Fair Market Value of a
share of Common Stock of the Company on the date on which such share
of Phantom Stock vests, (B) the appreciation in the value of a share
of the Common Stock over a base amount (which may be a Fair Market
Value of a share of Common Stock on the grant date or some other base
value which is less than or more than Fair Market Value) set by the
Committee on the date such share of Phantom Stock is granted and (ii)
the aggregate amount of cash dividends and distributions paid with
respect to a share of Common Stock of the Company during the period
commencing on the date on which the share of Phantom Stock was granted
and terminating on the date on which such share vests.
D. Conditions to Vesting. At the time of the grant of shares of Phantom
Stock, the Committee may impose such restrictions or conditions, not
inconsistent with the provisions hereof, to the vesting of such shares
as it, in its absolute discretion deems appropriate. By way of
example and not by way of limitation, the Committee may require, as a
condition to the vesting of any class or classes of shares of Phantom
Stock, that the Participant or the Company achieve certain performance
criteria, such criteria to be specified by the Committee at the time
of the grant of such shares.
E. Effect of Termination of Employment
1. In the event that the employment of a Participant with the
Company shall terminate for any reason other than Cause prior to
the vesting of shares of Phantom Stock granted to such
Participant, a proportion of such shares, to the extent not
forfeited or canceled on or prior to such termination pursuant to
any provision hereof, shall vest on the date of such termination.
The proportion referred to in the preceding sentence shall be
determined by the Committee at the time of the grant of such
shares of Phantom Stock and may be based on the achievement of
PAGE 21 OF 30
any conditions imposed by the Committee with respect to such
shares pursuant to Section 11(c). Such proportion may be equal
to zero.
2. In the event of the termination of a Participant's employment for
Cause, all shares of Phantom Stock granted to such Participant
which have not vested as of the date of such termination shall
immediately be forfeited.
F. Effect of Change in Control. Upon the occurrence of a Change in
Control, all shares of Phantom Stock which have not theretofore
vested, or been canceled or forfeited pursuant to any provision
hereof, shall immediately vest.
XII. Stock Bonuses
A. The Committee may grant Stock Bonuses in such amounts as it shall
determine from time to time. A Stock Bonus shall be paid at such time
and subject to such conditions as the Committee shall determine at the
time of the grant of such Stock Bonus. Certificates for shares of
Common Stock granted as a Stock Bonus shall be issued in the name of
the Participant to whom such grant was made and delivered to such
Participant as soon as practicable after the date on which such Stock
Bonus is required to be paid.
XIII. Cash Bonuses
A. The Committee may, in its absolute discretion, grant, in connection
with any grant of Restricted Stock or Stock Bonus or at any time
thereafter, a cash bonus, payable promptly after the date on which the
Participant is required to recognize income for federal income tax
purposes in connection with such Restricted Stock or Stock Bonus, in
such amounts as the Committee shall determine from time to time;
provided however, that in no event shall the amount of a Cash Bonus
exceed the Fair Market Value of the related shares of Restricted Stock
or Stock Bonus on such date. A Cash Bonus shall be subject to such
conditions as the Committee shall determine at the time of the grant
of such Cash Bonus.
XIV. Adjustment Upon Changes in Common Stock
A. Shares Available for Grants. In the event of any change in the number
of shares of Common Stock outstanding by reason of any stock dividend
or split, recapitalization, merger, consolidation, combination or
exchange of shares or similar corporate change, the maximum aggregate
number of shares of Common Stock with respect to which the Committee
may grant Options, Stand-Alone SARs, shares of Restricted Stock,
PAGE 22 OF 30
shares of Phantom Stock and Stock Bonuses shall be appropriately
adjusted by the Committee. In the event of any change in the number
of shares of Common Stock outstanding by reason of any other event or
transaction, the Committee may, but need not, make such adjustments in
the number and class of shares of Common Stock with respect to which
Options, Stand-Alone SARs, shares of Restricted Stock, shares of
Phantom Stock and Stock Bonuses may be granted, as the Committee may
deem appropriate.
B. Outstanding Restricted Stock and Phantom Stock. Unless the Committee
in its absolute discretion otherwise determines, any securities or
other property (including dividends paid in cash) received by a
Participant with respect to a share of Restricted Stock, the Issue
Date with respect to which occurs prior to such event, but which has
not vested as of the date of such event, as result of any dividend,
stock split, recapitalization, merger, consolidation, combination,
exchange of shares or otherwise will not vest until such share of
Restricted Stock vests, and shall be promptly deposited with the
custodian designated pursuant to Paragraph 10(d) (ii) hereof.
1. The Committee may, in its absolute discretion, adjust any grant
of shares of Restricted Stock, the Issue Date with respect to
which has not occurred as of the date of the occurrence of any of
the following events, or any grant of shares of Phantom Stock, to
reflect any dividend, stock split, recapitalization, merger,
consolidation, combination, exchange of shares or similar
corporate change as the Committee may deem appropriate to prevent
the enlargement or dilution of rights of Participants under the
grant.
C. Outstanding Options, LSARs, Tandem SARs and Stand-Alone SARs--Increase
or Decrease in Issued Shares Without Consideration. Subject to any
required action by the shareholders of EMCO, in the event of any
increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares of Common
Stock or the payment of a stock dividend (but only on the shares of
Common Stock), or any other increase or decrease in the number of
such shares effected without receipt of consideration by EMCO, the
Committee shall proportionally adjust the number of shares of Common
Stock subject to each outstanding Option, LSAR, Tandem SAR and
Stand-Alone SAR, and the exercise price per share of Common Stock of
each such Option, LSAR, Tandem SAR and Stand-Alone SAR.
D. Outstanding Options, LSARs. Tandem SARs and Stand-Alone SARs--Certain
Mergers. Subject to any required action by the shareholders of EMCO,
in the event that EMCO shall be the surviving corporation in any
PAGE 23 OF 30
merger or consolidation (except a merger or consolidation as a result
of which the holders of shares of Common Stock receive securities of
another corporation), each Option, LSAR, Tandem SAR and Stand-Alone
SAR outstanding on the date of such merger or consolidation shall
pertain to and apply to the securities which a holder of the number of
shares of Common Stock subject to such Option, LSAR, Tandem SAR or
Stand-Alone SAR would have received in such merger or consolidation.
E. Outstanding Options, LSARs, Tandem SARs and Sand-Alone SARs-Certain
Other Transactions. In the event of (i) a dissolution or liquidation
of EMCO, (ii) a sale of all or substantially all of EMCO's assets,
(iii) a merger or consolidation involving EMCO in which EMCO is not
the surviving corporation or (iv) a merger or consolidation involving
EMCO in which EMCO is the surviving corporation but the holders of
shares of Common Stock receive securities of another entity and/or
other property, including cash, the Committee shall, in its absolute
discretion, have the power to:
1. cancel, effective immediately prior to the occurrence of such
event, each Incentive Award outstanding immediately prior to such
event (whether or not then exercisable or vested), and, in full
consideration of such cancellation, (i) pay to a Participant
entitled to exercise or vested in (including as a result of such
event) an Option or Stand-Alone SAR an amount in cash, for each
share of Common Stock subject to such Option or Stand-Alone SAR,
respectively, equal to the excess of (i) the value, as determined
by the Committee in its absolute discretion, of the property
(including cash) received by the holder of a share of Common
Stock as a result of such event over (ii) the exercise price of
such Option or Stand-Alone SAR, (ii) pay to a Participate
entitled to receive or vested in (including as a result of such
event) a share of Phantom Stock or a Cash Bonus the amount to
which such Participant is entitled pursuant to Section 11 or
Section 13 hereof, as applicable, (c) pay to a Participant
entitled to receive or vested in (including as a result of such
event) a Stock Bonus, the amount or property to which such
Participant is entitled under Section 12 hereof, or (D) no amount
shall be paid to a Participant in respect of Restricted
Stock which (despite such event) remains Restricted Stock;
2. provide for the exchange of each Option (including any related
LSAR or Tandem SAR) and Stand-Alone SAR outstanding immediately
prior to such event (whether or not then exercisable or vested)
for an Option on or stock appreciation right with respect to, as
appropriate, some or all of the property for which such Option or
Stand-Alone SAR is exchanged and, incident thereto, make an
PAGE 24 OF 30
equitable adjustment as determined by the Committee in its
absolute discretion in the exercise price of the Option or stock
appreciation right, or the number of shares or amount of property
subject to the Option or stock appreciation right or, if
appropriate, provide for a cash payment to the Participant to
whom such Option or Stand-Alone SAR was granted in partial
consideration for the exchange of the Option or Stand-Alone SAR;
or
3. provide for the assumption by any successor or surviving
corporation of any Incentive Award outstanding on the date of
such event.
F. Outstanding Incentive Awards -- Other Changes. In the event of any
change in the capitalization of EMCO or corporate change other than
those specifically referred to in Section 14 (c), (d) or (e) hereof,
the Committee may, in its absolute discretion, make such adjustments
in the number and class of shares subject to, comprising, or used for
the purposes of measuring, any Incentive Award outstanding on the date
on which such change occurs and, if applicable, in the per share
exercise price of any Incentive Award as the Committee may consider
appropriate to prevent dilution or enlargement of rights.
G. No Other Rights. Except as expressly provided in the Plan, no
Participant shall have any rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any
dividend, any increase or decrease in the number of shares of stock of
any class or any dissolution, liquidation, merger or consolidation of
EMCO or any other corporation. Except as expressly provided in the
Plan, no issuance by EMCO of shares of stock of any class, or
securities convertible, into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect
to the number of shares of Common Stock subject to an Incentive Award
or the exercise price of any Option, LSAR, Tandem SAR or Stand-Alone
SAR.
XV. Rights as a Stockholder
A. No person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by or relating to any Incentive Award
granted pursuant to this Plan until the date of the issuance of a
stock certificate with respect to such shares. Except as otherwise
expressly provided in Section 14 hereof, no adjustment to any
Incentive Award shall be made for dividends or other rights for which
the record date occurs prior to the date such stock certificate is
issued.
XVI. No Special Employment Rights; No Right to Incentive Award
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A. Nothing contained in the Plan or any Incentive Award shall confer upon
any Participant any right with respect to the continuation of his
employment by the Company or interfere in any way with the right of
the Company, subject to the terms of any separate employment agreement
to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant from the rate
in existence at the time of the grant of an Incentive Award.
B. No person shall have any claim or right to receive an Incentive Award
hereunder. The Committee's granting of an Incentive Award to a
Participant at any time shall neither require the Committee to grant
an Incentive Award to such Participant or any other Participant or
other person at any time nor preclude the Committee from making
subsequent grants to such Participant or any other Participant or
other person.
XVII. Securities Matters
A. The Company shall be under no obligation to effect the registration
pursuant to the Securities Act of any shares of Common Stock to be
issued hereunder or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company shall not
be obligated to cause to be issued or delivered any certificates
evidencing shares of Common Stock pursuant to the Plan unless and
until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all applicable
laws, regulations of governmental authority and the requirements of
any securities exchange on which shares of Common Stock are traded.
The Committee may require, as a condition of the issuance and
delivery of certificates evidencing shares of Common Stock pursuant to
the terms hereof, that the recipient of such shares make such
covenants, agreements and representations, and that such certificates
bear such legends, as the Committee, in its sole discretion, deems
necessary or desirable.
B. The exercise of any Option granted hereunder shall only be effective
at such time as counsel to the Company shall have determined that the
issuance and delivery of shares of Common Stock pursuant to such
exercise is in compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities exchange
on which shares of Common Stock are traded. The Company may, in its
sole discretion, defer the effectiveness of any exercise of an Option
granted hereunder in order to allow the issuance of shares of Common
Stock pursuant thereto to be made pursuant to registration or an
exemption from the registration or other methods for compliance
available under federal or state securities laws. The Company shall
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inform the Participant in writing of its decision to defer the
effectiveness of the exercise of an Option granted hereunder. During
the period that the effectiveness of the exercise of an Option has
been deferred, the Participant may, by written notice, withdraw such
exercise and obtain the refund of any amount paid with respect
thereto.
C. Rule 16b-3 under the Exchange Act provides that the grant of a stock
option or certain other equity securities to a director or officer of
a company will be exempt from the provisions of Section 16(b) of the
Exchange Act if the conditions set forth in that Rule are satisfied.
Unless otherwise specified by the Committee, grants of Options and
other equity securities hereunder to individuals who are officers or
directors of the Company shall be made in a manner that satisfies the
conditions of that Rule.
XVIII. Withholding Taxes
A. Cash Remittance. Whenever shares of Common Stock are to be issued
upon the exercise of an Option, the occurrence of the Issue Date or
Vesting Date with respect to a share of Restricted Stock or the
payment of a Stock Bonus, the Company shall have the right to require
the Participant to remit to the Company in cash an amount sufficient
to satisfy federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or payment prior to the
delivery of any certificate or certificates for such shares. In
addition, upon the exercise of an LSAR, Tandem SAR or Stand-Alone SAR,
the grant of a Cash Bonus or the making of a payment with respect to a
share of Phantom Stock, the Company shall have the right to withhold
from any cash payment required to be made pursuant thereto an amount
sufficient to satisfy the federal, state and local withholding tax
requirements.
B. Stock Remittance. At the election of the Participant, subject to the
approval of the Committee, when shares of Common Stock are to be
issued upon the exercise of an Option, the occurrence of the Issue
Date or the Vesting Date with respect to a share of Restricted Stock
or the grant of a Stock Bonus, in lieu of the remittance required by
Section 18(a) hereof, the Participant may tender to the Company a
number of shares of Common Stock determined by such Participant, the
Fair Market Value of which at the tender date the Committee determines
to be sufficient to satisfy the federal, state and local withholding
tax requirements, if any, attributable to such exercise, occurrence or
grant and not greater than the Participant's estimated total federal,
state and local tax obligations associated with such exercise,
occurrence or grant.
PAGE 27 OF 30
C. Stock Withholding. At the election of the Participant, subject to the
approval of the Committee, when shares of Common Stock are to be
issued upon the exercise of an Option, the occurrence of the Issue
Date or the Vesting Date with respect to a share of Restricted Stock
or the grant of a Stock Bonus, in lieu of the remittance required by
Section 18(a) hereof, the Company shall withhold a number of such
shares determined by such Participant, the Fair Market Value of which
at the exercise date the Committee determines to be sufficient to
satisfy the federal, state and local withholding tax requirements, if
any, attributable to such exercise, occurrence or grant and is not
greater than the Participant's estimated total federal, state and
local tax obligations associated with such exercise, occurrence or
grant.
D. Timing and Method of Elections. Notwithstanding any other provisions
of the Plan, a Participant who is subject to Section 16(b) of the
Exchange Act may not make either of the elections described in
Section 18(b) and (c) hereof prior to the expiration of six months
after the date on which the applicable Option, share of Restricted
Stock or Stock Bonus was granted, except in the event of the death or
Disability of the Participant, unless the Company is advised by its
counsel that such elections may be permitted pursuant to Section 16 of
the Exchange Act or any rule or interpretation of the U.S. Securities
and Exchange Commission thereunder. Except with the consent of the
Committee, a Participant who is subject to Section 16(b) of the
Exchange Act may not make such elections other than (i) during the
10-day window period beginning on the third business day following the
date of release for publication of EMCO's quarterly and annual summary
statements of sales and earnings and ending on the twelfth business
day following such date or (ii) at least six months prior to the date
as of which the income attributable to the exercise of such Option is
recognized under the Code. Such election shall be irrevocable and
shall be made by the delivery to EMCO's principal office, to the
attention of its Secretary, of a written notice signed by the
Participant.
E. Notification of Inquiries and Agreements. Each Participant shall
notify the Company in writing within 10 days after the date such
Participant (i) first obtains knowledge of any Internal Revenue
Service inquiry, audit, assertion, determination, investigation, or
question relating in any manner to the value of any shares of Common
Stock, Options or other Incentive Award granted hereunder; (ii)
includes or agrees (including, without limitation, in any settlement,
closing or other similar agreement) to include in gross income with
respect to any shares of Common Stock, Option or other Incentive Award
granted hereunder (A) any amount in excess of the amount reported on
Form 1099 or Form W-2 to such Participant by the Company, or (B) if no
such Form was received, any amount; (iii) exercises, sells, disposes
PAGE 28 OF 30
of, or otherwise transfers (other than to such Person's successors,
heirs, executors or administrators, as the case may be) an Option
acquired pursuant to this Plan; or (iv) sells, disposes of, or
otherwise transfers (other than to such Person's successors, heirs,
executors or administrators, as the case may be) shares of Common
Stock acquired pursuant to the exercise of an Incentive Stock Option
within the Disqualified Period. Upon request, a Participant shall
provide to the Company any information or document relating to any
event described in the preceding sentence which the Company (in its
sole discretion) requires in order to calculate and substantiate any
change in the Company's tax liability as a result of such event.
XIX. Amendment of the Plan
A. The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however,
that without approval of the shareholders no revision or amendment
shall (i) except as provided in Section 14 hereof, increase the number
of shares of Common Stock that may be issued under the Plan, (ii)
materially increase the benefits accruing to individuals holding
Incentive Awards granted pursuant to the Plan or (iii) materially
modify the requirements as to eligibility for participation in the
Plan.
XX. No Obligation to Exercise; No Guarantee ISO.
A. The grant to a Participant of an Option, LSAR, Tandem SAR or
Stand-Alone SAR shall impose no obligation upon such Participant to
exercise such Option, LSAR, Tandem SAR or Stand-Alone SAR. The
Company and the Committee shall have no liability to a Participant if
any Incentive Stock Option in fact does not qualify as such pursuant
to Section 422 of the Code.
XXI. Transfers Upon Death
A. Upon the death of a Participant, outstanding Incentive Awards granted
to such Participant may be exercised only by the executors or
administrators of the Participant's estate or by any person or persons
who shall have acquired such right to exercise by will, or the laws of
descent and distribution. No transfer by will, or the laws of descent
and distribution, of any Incentive Award, or the right to exercise any
Incentive Award, shall be effective to bind the Company unless the
Committee shall have been furnished with (a) written notice thereof
and with a copy of the will, order, and/or such evidence as the
Committee may deem necessary to establish the validity of the transfer
and (b) an agreement by the transferee to comply with all the terms
and conditions of the Incentive Award that are or would have been
applicable to the Participant and to be bound by the acknowledgments
PAGE 29 OF 30
made by the Participant in connection with the grant of the Incentive
Award.
XXII. Expenses and Receipts
A. The expenses of the Plan shall be paid by the Company. Any proceeds
received by the Company in connection with any Incentive Award will be
used for general corporate purposes.
XXIII. Failure to Comply
A. In addition to the remedies of the Company elsewhere provided for
herein, failure by a Participant to comply with any of the terms and
conditions of the Plan or the agreement executed by such Participant
evidencing an Incentive Award, unless such failure is remedied by such
Participant within ten days after having been notified of such failure
by the Committee, shall be grounds for the cancellation and forfeiture
of such Incentive Award, in whole or in part, as the Committee, in its
absolute discretion, may determine.
XXIV. Effective Date and Term of Plan
A. The Plan was adopted by the Board of Directors of Engineering
Measurements Company on July 28, 1997, in accordance with applicable
law, the requirements of Section 422 of the Code and the requirements
of Rule 16b-3 promulgated under Section 16(b) of the Exchange Act.
No grants may be made under the Plan after July 27, 2007.
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