SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a
- - -12
MOTO PHOTO, INC.
(Name of Registrant as Specified In Its Charter)
MOTO PHOTO, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125.00 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies: ________.
2) Aggregate number of securities to which transaction applies: ___________.
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: _________.
4) Proposed maximum aggregate value of transaction: _______________.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $_______________.
2) Form, Schedule or Registration Statement No.: _______________.
3) Filing Party: _______________.
4) Date Filed: _______________.
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK:
The Annual Meeting of Shareholders of Moto Photo, Inc. (the" Company") will
be held at the offices of the Company, 4444 Lake Center Drive, Dayton, Ohio
45426, on Wednesday, June 28, 1995 at 9:00 a.m., for the following purposes:
1. To elect a Board of Directors for the ensuing year;
2. To approve the amendment of the 1992 Performance and Equity
Incentive Plan of the Company (the "1992 Plan") to increase the total
number of shares that are authorized for issuance pursuant to the 1992
Plan from 500,000 shares to 1,250,000 shares.
3. To transact such other business as may properly be brought before
the Annual Meeting or any adjournment of the Annual Meeting.
The accompanying Proxy Statement contains information regarding the items
of business to be considered at the Annual Meeting.
The holders of Common Stock of record at the close of business on May 1,
1995, are entitled to notice of, and to vote at, the Annual Meeting or any
adjournment thereof. A list of such shareholders will be available at the
Annual Meeting and during the ten days before the Annual Meeting at the offices
of the Company, 4444 Lake Center Drive, Dayton, Ohio 45426.
Dayton, Ohio
May 5, 1995
Even if you plan to attend the meeting, please sign the enclosed form of proxy
and return it promptly in the envelope enclosed for that purpose. If you have
previously submitted a proxy card and are present at the Annual Meeting, you
will be able to revoke the proxy and vote your shares in person
MOTO PHOTO, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TABLE OF CONTENTS
PAGE
NOTICE 1
TABLE OF CONTENTS 2
GENERAL 3
Record Date and Outstanding Stock 3
Quorum and Voting 3
Action To Be Taken Under the Proxy 3
Votes Required 4
No Appraisal Rights 4
Solicitation of Proxies 4
Revocation of Proxies 4
Annual Report 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT 5
Potential Future Change in Control 6
ELECTION OF DIRECTORS 7
Information Concerning Nominees 7
Meetings of Board of Directors and Committees 8
Compensation of Outside Directors 9
PROPOSAL TO APPROVE THE AMENDMENT OF THE 1992 PERFORMANCE AND
EQUITY INCENTIVE PLAN OF THE COMPANY 9
Stock Ownership Program Pursuant to the 1992 Plan 10
Summary of Potential Option Awards Under Initial Phase
of Stock Ownership Program 14
Description of the 1992 Plan 15
Federal Income Tax Consequences 18
Summary of Award Activity Pursuant to 1992 Plan 19
Vote Required for Approval 20
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION 21
Executive Officers 21
Executive Compensation 22
Option Exercises and Year-End Option Values 23
Employment Contracts, Termination of Employment and
Change-in-Control Arrangements 23
Compensation Committee Interlocks and Insider Participation 24
Report of the Compensation Committee and Mr. Adler 24
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS 26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 27
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 28
PROPOSALS OF SHAREHOLDERS 28
OTHER MATTERS 28
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE
DAYTON, OHIO 45426
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
JUNE 28, 1995
The following information is furnished in connection with the Annual
Meeting of Shareholders of Moto Photo, Inc. (the "Company") to be held on
Wednesday, June 28, 1995 at 9:00 a.m., at the offices of the Company, 4444 Lake
Center Drive, Dayton,Ohio. This Proxy Statement will be mailed on or about May
5, 1995, to holders of Voting Common Stock ("Common Stock") of record as of the
record date.
GENERAL
RECORD DATE AND OUTSTANDING VOTING STOCK
The record date ("Record Date") for determining shareholders entitled to
vote at the Annual Meeting has been fixed at the time of the closing of business
on May 1, 1995. On that date, the Company had 7,782,640 shares of Common Stock
outstanding and entitled to be voted.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Annual Meeting. If a quorum is not present at the Annual Meeting, the Annual
Meeting may be adjourned to another place, date or time. At any such reconvened
meeting at which a quorum is present, any business may be transacted which might
have been transacted at the original meeting.
Cumulative voting is not permitted in the election of directors of the
Company. On all matters (including the election of directors) submitted to a
vote of the shareholders at the Annual Meeting or any adjournment of the Annual
Meeting, holders of Common Stock will be entitled to one vote for each share of
Common Stock owned of record by such shareholder on the Record Date.
ACTION TO BE TAKEN UNDER THE PROXY
Proxies in the accompanying form which are properly executed and returned
will be voted in accordance with the instructions on the proxies. Any proxy
upon which no instructions have been indicated with respect to a specified
matter will be voted as follows:
(a) "FOR" the election to the Board of Directors of the eight persons
named in this Proxy Statement as the nominees of the Board of Directors;
(b) "FOR" the approval of the amendment to the 1992 Performance and
Equity Incentive Plan of the Company (the "1992 Plan"); and
(c) As to any other matters which may properly come before the
meeting in accordance with the recommendation of the Board of Directors.
The Board of Directors knows of no other matters to be presented for
consideration at the meeting.
VOTES REQUIRED
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy at the Annual Meeting. The affirmative vote
of the holders of a majority of the shares of Common Stock which are present in
person or represented by proxy at the Annual Meeting is required to approve the
amendment to the 1992 Plan. Any other matters properly brought before the
Annual Meeting will be decided by a majority of the votes cast on the matter,
unless otherwise required by law.
Shares represented by proxies which are marked "withhold authority" with
respect to the election of any one or more nominees for election as directors
and proxies which are marked "abstain" on the proposal to approve the amendment
to the 1992 Plan will be counted for the purpose of determining the number of
shares represented by proxy at the meeting. As a result, proxies marked
"abstain" with regard to the proposal to approve the amendment to the 1992 Plan
will have the same effect as if the shares represented thereby were voted
against approval. However, because directors are elected by a plurality rather
than a majority of the shares present in person or represented by proxy at the
Annual Meeting, proxies marked "withhold authority" with respect to any one or
more nominees will not affect the outcome of the nominee's election unless the
nominee receives no affirmative votes or unless other candidates are nominated
for election as directors.
Shares represented by limited proxies will be treated as represented at the
meeting only as to such matter or matters for which authority is granted in the
limited proxy. Shares represented by proxies returned by brokers where the
brokers' discretionary authority is limited by stock exchange rules will be
treated as represented at the Annual Meeting only as to such matter or matters
voted on in the proxies.
NO APPRAISAL RIGHTS
There are no dissenters' appraisal rights under Delaware law with respect
to any actions proposed to be taken at the Annual Meeting.
SOLICITATION OF PROXIES
The enclosed proxy for the Annual Meeting is being solicited by the Board
of Directors of the Company. The cost of soliciting the proxies in the enclosed
form will be borne by the Company. In addition to the use of the mails, proxies
may be solicited by personal interview, telephone and facsimile by directors,
officers or other regular employees of the Company. No additional compensation
will be paid to directors, officers or other regular employees for such
services. Copies of proxy solicitation materials will be furnished to banks,
brokerage houses fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
The Company may, upon request, reimburse banks, brokerage houses and other
institutions, nominees and fiduciaries for their reasonable expenses in
forwarding proxy materials to beneficial owners.
REVOCATION OF PROXIES
Any shareholder returning the accompanying proxy may revoke such proxy at
any time prior to its exercise by (a) giving written notice to the Company of
such revocation, (b) voting in person at the Annual Meeting, or (c) executing
and delivering to the Company a later-dated proxy. Any such written notice of
revocation or later-dated proxy should be addressed to Jacob A. Myers,
Secretary, at the Company's offices.
ANNUAL REPORT
The Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1994, including audited financial statements, accompanies this
Proxy Statement. Neither the Report nor the financial statements are deemed to
be a part of the material for the solicitation of proxies.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
At April 17, 1995, the Company had 7,782,640 shares of Common Stock
outstanding. The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 17, 1995 by (i)
each of the Company's directors or nominees for director, its chief executive
officer and its other executive officers whose total salary and bonus for the
year ended December 31, 1994 exceeded $100,000, (ii) all directors, nominees and
executive officers of the Company as a group, and (iii) each person who is known
by the Company to beneficially own more than 5% of the Company's Common Stock.
Unless otherwise indicated, the Company believes that the persons named in the
table have sole voting and investment power with respect to the shares indicated
as beneficially owned by them.
NUMBER PERCENT
NAME OF SHARES OF CLASS
(1)
DIRECTORS AND CERTAIN
EXECUTIVE OFFICERS
Michael F. Adler (2) 1,481,776 18.5%
4444 Lake Center Drive
Dayton, OH 45426
Harry D. Loyle (3) 503,375 6.5%
410 S. Main Plaza
Pleasantville, NJ 08232
David A. Mason (4) 94,250 1.2%
Jacob A. Myers (5) 41,500 *
Frank W. Benson (6) 25,000 *
Dexter B. Dawes (7) 21,000 *
Leslie Charm (8) 15,000 *
Douglas M. Thomsen 5,000 *
Frank M. Montano (9) 100,000 1.3%
Robert F. Puccio (10) 30,000 *
ALL DIRECTORS, NOMINEES AND
EXECUTIVE
OFFICERS AS A GROUP (15
PERSONS) (11) 2,410,927 29.0%
BENEFICIAL OWNERS OF MORE THAN
5% OF THE COMMON STOCK
Fuji Photo Film U.S.A.
Inc. (12) 1,000,000 11.4%
555 Taxter Road
Elmsford, NY 10523
Robert W. Moore 439,945 5.7%
702 Northwest 5th St
Oklahoma City,OK 73102
________________________
* Less than 1%
(1)Percent of class is calculated without regard to shares of Common Stock
issuable upon exercise of outstanding warrants or stock options, except that
any shares a person is deemed to own by having the right to acquire upon
exercise of a warrant or option are considered to be outstanding solely for
purpose of calculating such person's percentage ownership.
(2)The shares of Common Stock indicated as beneficially owned by Mr. Adler: (i)
include 2,332 shares owned by Michael F. Adler as custodian for Elizabeth
Adler; (ii) include 6,000 shares owned by the Elizabeth Adler Trust for
which Mr. Adler is trustee; (iii) include 1,000 shares which he has the
right to acquire upon exercise of warrants owned by him; (iv) include
190,000 shares which he has the right to acquire by exercise of stock
options which are currently exercisable; (v) include 2,000 shares issuable
upon the exercise of warrants owned by the Robert Adler Trust for which Mr.
Adler is co-trustee and shares voting and investment power with Jacob A.
Myers, an officer and director of the Company; and (vi) exclude a total of
11,000 shares owned by Mr. Adler's spouse, as to which Mr. Adler disclaims
beneficial ownership. Such shares also include 1,204,080 shares of Common
Stock owned by Progressive Industries Corporation ("Progressive"), which is
98% owned by Mr. Adler and his family, which shares of Common Stock Mr.
Adler may be deemed to own due to his ownership of a controlling interest in
Progressive and his position as President of Progressive. The shares of
Common Stock owned by Progressive include 46,000 shares issuable upon
exercise of warrants owned by Progressive.
(3)Includes 3,000 shares which Mr. Loyle has the right to acquire upon exercise
of warrants owned by him and 321,375 shares held by Corral Photographic
Corp., a corporation 100% owned by Mr. Loyle.
(4)Includes 55,000 shares which Mr. Mason has the right to acquire upon
exercise of stock options which are currently exercisable and excludes 2,000
shares owned by Mr. Mason's wife, as to which Mr. Mason disclaims beneficial
ownership.
(5)Includes 15,000 shares which Mr. Myers has the right to acquire upon
exercise of a stock option which is currently exercisable.
(6)Includes 15,000 shares which Mr. Benson has the right to acquire upon
exercise of a stock option which is currently exercisable.
(7)Includes 15,000 shares which Mr. Dawes has the right to acquire upon
exercise of a stock option which is currently exercisable
(8)Consists of 15,000 shares which Mr. Charm has the right to acquire upon
exercise of a stock option which is currently exercisable.
(9)Consists of 100,000 shares which Mr. Montano has the right to acquire upon
exercise of stock options which are currently exercisable.
(10)Includes 25,000 shares which Mr. Puccio has the right to acquire upon
exercise of stock options which are currently exercisable.
(11)Includes 480,000 shares which such group has the right to acquire upon
exercise of stock options which are currently exercisable and 52,000 shares
which such group has the right to acquire upon exercise of warrants.
(12)Consists of 1,000,000 shares issuable upon exercise of warrants owned by
Fuji Photo Film U.S.A., Inc. ("Fuji").
POTENTIAL FUTURE CHANGE IN CONTROL
Fuji is the holder of 1,000,000 shares of Series G Non-Voting Cumulative
Preferred Stock (the "Fuji Preferred Stock") and warrants to purchase 1,000,000
shares of the Company's Common Stock for $2.375 per share which expire in 2002.
The Fuji Preferred Stock is redeemable by the Company at any time in
aggregate amounts of at least $1 million. The shares are subject to mandatory
redemption on January 1, 1999 ("Mandatory Redemption Date"). Any redemption of
the Fuji Preferred Stock must be either in cash from the proceeds of an equity
offering or in Common Stock valued at 90% of the market price at the time of
redemption; provided, however, that Fuji may refuse any proposed redemption by
the Company in shares of Common Stock and elect to continue to hold the Fuji
Preferred Stock without impairment of any right to require redemption at a later
time. The redemption price for the Fuji Preferred Stock is $10.00 per share, or
an aggregate of $10 million. If the market price of the Company's Common Stock
on the Mandatory Redemption Date is less than $3.00 per share, the redemption of
the Fuji Preferred Stock will be extended until the earlier of (i) the first
date on which the market price of the Common Stock exceeds $3.00 per share or
(ii) the date one year following the initial Mandatory Redemption Date. If the
Fuji Preferred Stock is redeemed in shares of Common Stock, depending upon the
market price of the Common Stock and the number of shares of Common Stock
outstanding, such redemption could result in Fuji acquiring control of the
Company.
The Fuji Preferred Stock is also redeemable at Fuji's option under certain
other circumstances ("Redemption Event") which include, after appropriate cure
periods, the failure of the Company to meet certain requirements under a supply
agreement with Fuji, default by the Company under certain other agreements
between the Company and Fuji, the termination of involvement in the day-to-day
management of the Company of either of Michael F. Adler or David A. Mason, a
change in control of the Company, the Company's bankruptcy or insolvency, or
failure by the Company to meet its obligations under other indebtedness in
excess of $100,000. If the Company fails to redeem all of the Fuji Preferred
Stock upon the occurrence of a Redemption Event, Fuji has the right, until all
of the shares of Fuji Preferred Stock are redeemed or the Redemption Event is
cured, to elect the majority of the Board of Directors.
ELECTION OF DIRECTORS
(Item 1 on the Proxy Card)
The Board of Directors has established the size of the Board as eight
members and has nominated the current eight members of the Board for re-
election. Each director to be elected will hold office until the next annual
meeting of shareholders and until his successor is duly elected and qualified,
or until such directors earlier death, resignation or removal. The affirmative
vote of a plurality of the votes cast in person or by proxy at the meeting is
required to elect the nominees listed. If any nominee becomes unavailable for
any reason, or if a vacancy shall occur before the election (which events are
not anticipated), the shares of Common Stock represented by the enclosed proxy
will be voted for such other person as may be recommended by the Board of
Directors of the Company.
There is no formal arrangement among the directors or shareholders to
nominate any person for election to the Board of Directors. No family
relationships exist between or among directors or officers of the Company.
INFORMATION CONCERNING NOMINEES
Michael F. Adler. Age 58. Mr. Adler was elected President of the Company
in February, 1984, its Chief Executive Officer in June, 1985, and its Chairman
in October 1990. He was elected a director of the Company on June 29, 1983.
Mr. Adler has also been President, Chief Executive Officer and a director of
Progressive Industries Corporation ("Progressive") since 1968, positions he
still holds. He is a member of the Board of Directors and Chairman of the
Venture Capital Committee of the City-Wide Development Corporation, Dayton,
Ohio, and a member of the Board of Directors of The 2003 Committee in Dayton,
Ohio. Mr. Adler has previously been a member of the Board of Trustees of the
Photo Marketing Association, the Ohio Building Authority, and the State
Governance Board-Jobs for Ohio Graduates, a member of the executive committee
and past Chairman of the Board of Trustees-Jobs for Dayton Graduates, as well as
chairman of the nominating council of the Public Utilities Commission of Ohio
and of the City-Wide Development Corporation, Dayton, Ohio.
Frank W. Benson. Age 67. Mr. Benson became a director of the Company in
February, 1989. Since June, 1988, Mr. Benson has been Director of Finance and
Administration, and, since October, 1989, Treasurer of the Center for Policy
Negotiation, Inc. in Boston, Massachusetts. He served as an independent
consultant to small businesses from May, 1987 through May, 1988. From February,
1983 through April, 1987, Mr. Benson was President, Treasurer, and a director
(through January, 1987) of Bailey's of Boston, Inc., a manufacturer and retailer
of ice cream and candies in Massachusetts.
Leslie Charm. Age 51. Mr. Charm was elected a director in October, 1990.
Mr. Charm's principal occupation since August, 1990 has been as partner of three
management consulting firms in Massachusetts: Restoration Associates, Youngman
and Charm and Conway & Youngman. From 1977 to August, 1990, Mr. Charm was
President of Docktor Pet Centers, Inc., Wilmington, Mass.; approximately fifteen
months after it was sold and Mr. Charm ceased his affiliation with Docktor Pet
Centers, Inc., such company filed a petition in bankruptcy. Mr. Charm is a
former director of the International Franchise Association. In addition, since
1989 Mr. Charm has been an adjunct professor of entrepreneurial finance at
Babson College in Wellesley, Massachusetts.
Dexter B. Dawes. Age 58. Mr. Dawes became a director of the Company in
December, 1989. Since September, 1989, Mr. Dawes has been President of John
Hancock Capital Growth Management, Inc. From 1972 to September 1989, he was
Chairman of the New York and San Francisco-based investment banking firm of
Bangert, Dawes, Reade, Davis & Thom Incorporated. Mr. Dawes is a trustee of the
Philharmonic Baroque Orchestra of San Francisco, California.
David A. Mason. Age 54. Mr. Mason was elected Treasurer and a director of
the Company in June, 1983 and Executive Vice President - Finance and Chief
Financial Officer in December, 1983. Mr. Mason has also been Senior Vice
President and Treasurer of Progressive since 1975 and a director of Progressive
since 1976, positions he still holds. Mr. Mason is a member of the Board of
Directors of the Dayton Chapter of the Financial Executives Institute and a
former member of the Executive Board of Advisors of the International Minilab
Association, Inc.
Jacob A. Myers. Age 59. Mr. Myers has been Secretary and a director of
the Company since June, 1983. Mr. Myers' principal occupation since 1959 has
been as a lawyer in the private practice of law in Dayton, Ohio. Since July 1,
1992, Mr. Myers has been principal in the firm of Myers & Frayne Co., L.P.A.
From September 2, 1986 to June 30, 1992, he was a principal in Coolidge, Wall,
Womsley & Lombard Co., L.P.A. Mr. Myers has been Secretary and a director of
Progressive since 1968, positions he still holds.
Douglas M. Thomsen. Age 76. Mr. Thomsen was first elected a director of
the Company in June, 1988. Until his retirement in January, 1988, Mr. Thomsen
had been associated with Federated Department Stores ("Federated") for over
forty years. Most recently, from March, 1987 to December, 1987, Mr. Thomsen
served as a consultant on a special project for Federated. From 1972 to March,
1987, Mr. Thomsen served as Chairman and Chief Executive Officer of Rike's,
Shillito/Rike's, and Lazarus, divisions of Federated.
Harry D. Loyle. Age 41. Mr. Loyle became a director of the Company in
July, 1993. Since July, 1985, Mr. Loyle's principal occupation has been as
President and Director of Franchise Development for ProMoto Management
Corporation, an area developer for the Company. He also serves as
Secretary/Treasurer and is a director and shareholder of the following One Hour
MotoPhoto franchisees: Corral Photographic Corporation in Northfield, New
Jersey, B & H Management Services, Inc. in Ventnor, New Jersey, and the Positive
Negative, Inc. in Bala Cynwyd, Pennsylvania. Mr. Loyle serves as director
and/or officer or partner of a number privately held businesses in New Jersey
and Pennsylvania. From 1976 to 1985, he was President and General Manager of
Charlex, Inc., a company that owned and operated retail photographic stores. In
January, 1995, Mr. Loyle was elected to the Franchise Advisory Council of the
International Franchise Association.
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors had four meetings during 1994. The Board of
Directors has established standing Audit and Compensation Committees; it does
not have a nominating committee. Each director attended, in person or through
telephone conference call, at least three-fourths of the aggregate meetings of
the Board of Directors and the meetings of the committees, if any, on which he
served.
The Audit Committee meets with management to consider the adequacy of the
internal controls of the Company and the objectivity of financial reporting.
The Audit Committee also meets with the independent auditors and with financial
personnel of the Company about such matters. The independent auditors
periodically meet alone with the Audit Committee and always have unrestricted
access to the Audit Committee. The Audit Committee has three members: Mr.
Dawes, Mr. Myers and Mr. Loyle. Mr. Loyle was appointed to the Audit Committee
in July, 1994. During 1994, Mickey L. Clagg also served as a member of the
Audit Committee until his resignation from the Board of Directors in July, 1994.
The Audit Committee met two times during 1994.
The Compensation Committee meets to review and to make recommendations to
the Board about certain compensation matters. In addition, the Compensation
Committee administers the Company's 1992 Performance and Equity Incentive Plan.
The Compensation Committee has three members: Mr. Benson, Chairman, Mr. Charm,
and Mr. Thomsen. The Compensation Committee met four times during 1994.
COMPENSATION OF OUTSIDE DIRECTORS
The Company pays certain compensation to its outside directors for their
services to the Company. Directors who are also employees of the Company
receive no additional remuneration for serving as directors.
Jacob A. Myers receives from the Company his regular hourly rate for time
he spends at meetings of the Board of Directors and committees. During 1994,
Mr. Myers' hourly rate was $180.
During 1994, outside directors (other than Mr. Myers, who is compensated as
noted above) were paid monthly fees of $350, as well as a fee of $500 per Board
of Directors meeting attended in person, $225 per committee meeting attended in
person, and $150 per meeting attended via telephone conference call.
In addition, Mr. Charm, who acts as a consultant to the Company, was paid
fees of $5,500 for his services in that capacity during 1994.
PROPOSAL TO APPROVE THE AMENDMENT OF THE 1992 PERFORMANCE
AND EQUITY INCENTIVE PLAN OF THE COMPANY
(Item 2 on the Proxy Card)
In April, 1992 the Board of Directors adopted and in July, 1992 the
shareholders of the Company approved the 1992 Performance and Equity Incentive
Plan of the Company (the "1992 Plan"). The 1992 Plan is designed to promote and
advance the interests of the Company and its shareholders by enabling the
Company to attract, retain and reward managerial and other key employees and to
strengthen the mutuality of interests between participants and the shareholders
of the Company in the Company's long-term growth, profitability and financial
success by offering a comprehensive incentive compensation program including
stock and cash incentive awards based on performance and other equity-based
awards.
As part of the Company's strategy to offer under the 1992 Plan equity-based
incentive programs to managerial and other key employees and to encourage its
employees to own shares of the Company's Common Stock, the Compensation
Committee of the Board of Directors (the "Committee") has implemented an officer
and key employee stock ownership program (the "Stock Ownership Program") under
and pursuant to the 1992 Plan. Under the Stock Ownership Program, participants
will be entitled to receive grants of stock options under the 1992 Plan based on
the number of shares of Common stock of the Company that are owned by the
participant. In addition, the Company may assist participants in acquiring
additional shares of Common Stock.
In order to ensure that a sufficient number of shares of Common Stock are
available for issuance in connection with the Stock Ownership Program and that
the Company otherwise remains able to offer under the 1992 Plan appropriate
equity incentives and competitive compensation opportunities for its officers
and key employees, the Board of Directors at its meeting in April, 1995 adopted,
subject to shareholder approval, an amendment to the 1992 Plan to increase the
total number of shares of Common Stock that are authorized for issuance pursuant
to awards granted under the 1992 Plan from 500,000 shares to 1,250,000 shares
and directed that the amendment be submitted to the shareholders for their
approval at the Annual Meeting. Such increased number of shares will be
available for all authorized purposes under the 1992 Plan, however, it is
anticipated that a significant portion of the shares will be subject to stock
options granted pursuant to the Stock Ownership Plan.
STOCK OWNERSHIP PROGRAM PURSUANT TO THE 1992 PLAN
The following is a description of the principal features of the proposed
Stock Ownership Program. Stock options granted pursuant to the Stock Ownership
Program will be subject in all respects to the restrictions and limitations of
the 1992 Plan. A description of the principal features of the 1992 Plan
immediately follows the description of the Stock Ownership Program set forth
below.
Eligibility. Persons eligible to participate in the Stock Ownership
Program will consist of employees of the Company determined from time to time by
the Committee. For the commencement of the Stock Ownership Program in June,
1995, the Committee anticipates that all officers of the Company having the rank
of vice president or above will generally be eligible to participate as well as
other key employees selected by the Committee. It is anticipated that such
group will consist in the aggregate of approximately 40 persons.
Determination of Share Ownership on Which Option Awards Are Based. Under
the initial phase of the Stock Ownership Program, the Company will determine the
number of shares of Common Stock owned by each participant as of June 15, 1995
(the "Effective Date"). Such determination will be based on evidence submitted
by each participant in form satisfactory to the Committee demonstrating that the
participant (i) is the "beneficial owner" within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934 (the "Exchange Act") of issued and
outstanding shares of Common Stock and (ii) has sufficient right to profit and
bears the economic risk of loss that could arise from fluctuations in the value
of such Common Stock. Attribution of beneficial ownership under Rule 13d-3
based on options or other rights to acquire Common Stock will not be considered
ownership of such Common Stock for purposes of the Stock Ownership Program.
Grant of Options. Participants must own at least 500 shares of Common
Stock, or such other number as the Committee may determine, in order to
qualify for option grants under the Stock Ownership Program. On the Effective
Date, each participant who owns at least 500 shares of Common Stock will be
granted options to purchase a number of shares of Common Stock equal to the
participant's "Award Multiplier" multiplied by the number of shares of Common
Stock owned by the participant as of the Effective Date; provided, however, that
the maximum number of shares owned by the participant upon which an award may be
based during the initial phase of the Stock Ownership Program shall not exceed a
number of shares equal to (a) the product of the participant's "Participation
Percentage" multiplied by the participant's "Base Salary," divided by (b) the
"Market Price" of the Common Stock on the Effective Date. The shares upon which
the participant's award is based pursuant to the preceding sentence are referred
to herein as "Qualifying Shares."
Each participant's Award Multiplier and Participation Percentage will be
determined by the Committee. Award Multipliers and Participation Percentages
may vary among participants and may vary for each participant in successive
phases of the Stock Ownership Program, all as determined by the Committee.
During the initial phase of the Stock Ownership Program, the Committee
anticipates that the Award Multiplier for all participants will be four and that
Participation Percentages will range between 10% and 25%.
Base Salary means the participant's annual base salary in effect as of
December 31 of the year immediately preceding the year in which the Effective
Date occurs, or if the participant was not employed by the Company on that date,
the participant's starting annual base salary upon commencement of employment by
the Company. Market Value means the last sale price of the Common Stock as
reported on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ").
For example, assuming a Market Price on the Effective Date of $2.50 per
share, a participant who has been assigned an Award Multiplier of four and a
Participation Percentage of 10%, who owns 5,000 shares of Common Stock as of the
Effective Date and whose Base Salary is $50,000 would be limited to 2,000
Qualifying Shares and, accordingly, would be granted options to purchase 8,000
shares of Common Stock, or four times the number of Qualifying Shares.
Options granted pursuant to the Stock Ownership Program may, in the sole
discretion of the Committee, be Incentive Stock Options intended to qualify
under Section 422 of the Code or Nonqualified Stock Options.
Vesting of Options. Options granted pursuant to the Stock Ownership
Program will become exercisable as to 50% of the shares covered by each option
grant at the rate of 20% (of such 50% portion) per year effective on each
successive anniversary of the Effective Date. The optionee's ability to
exercise the option as to such shares will expire on the date 30 days after the
fifth anniversary of the Effective Date.
Options granted pursuant to the Stock Ownership Program will become
exercisable as to the remaining 50% of the shares covered by the options at the
rate of 20% (of such 50% portion) per year effective on each successive
anniversary of the Effective Date, provided that (i) the Company shall have
reported for the fiscal year then most recently ended growth in its "EPS" (as
hereinafter defined) of 25% or more compared to the Company's EPS for the
previous fiscal year or (ii) the Company shall have reported as of the end of
such fiscal year cumulative compounded annual growth in EPS of 25% or more
measured based on the EPS reported for the fiscal year ended immediately prior
to the date of grant of the option. If for any fiscal year the required growth
in EPS is not achieved, the portion of the options that would have become
exercisable on the following anniversary of the Effective Date will not become
exercisable until the Company achieves the required cumulative compounded annual
growth in EPS of 25% or more measured as described above. Following any fiscal
year in which such required compounded annual growth has been achieved, any
portion of the options which previously had not become exercisable as a result
of the failure to achieve required growth in EPS shall become exercisable as of
the next anniversary of the Effective Date. To the extent they have not become
fully exercisable pursuant to the procedures described above, such options shall
become fully exercisable on the date nine years and nine months following the
Effective Date. All of such options not exercised on or before the tenth
anniversary of the Effective Date shall expire.
For purposes of the Stock Ownership Plan, EPS means the net income per
common share reported in the Company's audited consolidated financial statements
for the fiscal year in question. EPS for the fiscal year ended December 31,
1994 will be $0.04, an amount adjusted on a pro forma basis to give effect to
certain changes in the Company's capital structure affecting the net income per
common share that occurred in January 1995 as if such transactions had occurred
at the beginning of the year ended December 31, 1994. The Committee may adjust
the requirements as to 25% growth in EPS set forth in the preceding paragraph in
such manner as it deems appropriate in its sole discretion to take into account
any extraordinary or non-recurring events that may affect the Company's EPS
during future years.
Payment of Exercise Price. The exercise price of options granted in the
initial phase of the Stock Ownership Program will be equal to the Market Price
of the Common Stock on the Effective Date. The exercise price of options
granted under the Stock Ownership Program in future periods will be equal to the
Market Price of the Common Stock on the respective dates of grant. Unless
alternative payment methods are approved by the Committee, options granted
pursuant to the Stock Ownership Program may be exercised only upon the payment
in full of the applicable exercise price in cash. Options may be exercised in
whole or in part to the extent such options have become exercisable as described
elsewhere herein.
Effect of Death, Disability, Retirement and Termination of Employment. If
a participant dies during employment with the Company at a time when he or she
is entitled to exercise an option granted pursuant to the Stock Ownership
Program, then at any time or times within one year after death the options may
be exercised, but only as to any or all of those shares which the participant
was entitled to purchase immediately prior to his or her death. Options
exercisable after death may be exercised by the participant's estate or the
person upon whom such right devolves by will or the laws of descent and
distribution (a "Beneficiary"), and except as so exercised shall expire at the
end of the specified post-death exercise period.
In the event of a participant's retirement or disability at any time when
he or she is entitled to exercise an option, then within 90 days after
retirement or one year after disability, the participant may exercise such
option only as to those shares which he or she was entitled to purchase
immediately prior to his or her retirement or disability. If the participant
dies within the specified post-retirement or post-disability exercise period,
the option may be exercised by the participant's Beneficiary, to the same extent
as if the deceased participant had survived, during a period of one year from
the date of death.
If the employment of a participant is terminated for any reason other than
death, retirement or disability at a time when he or she is entitled to exercise
an option, then within 90 days after such termination of employment, the
participant may exercise such option only as to those shares which he or she was
entitled to purchase immediately prior to such termination of employment. If
the participant dies within the specified post-termination of employment
exercise period, the options may be exercised by his or her Beneficiary, to the
same extent as if the deceased participant had survived, during a period of 30
days from the date of death.
Except as exercised within the applicable period described above, each
option shall expire at the end of such period. In no event, however, may any
option granted pursuant to the Stock Ownership Program be exercised after the
expiration of the option exercise period established at the time of grant.
Purchases of Common Stock By Participants. Depending upon the particular
circumstances applicable to each participant, by acquiring additional shares of
Common Stock participants will generally be able to increase the size of the
option grants for which they may qualify under the initial and future phases of
the Stock Ownership Program. The decision whether to acquire additional shares
of Common Stock and the size and manner of acquisition are wholly within the
discretion of the participant.
The Company will pay or reimburse the participant for all brokerage
commissions incurred by the participant in the purchase (but not the sale) of
round lots of Common Stock of the Company during the period in which the
participant is enrolled in the Stock Purchase Program. The term "round lot"
means a number of shares evenly divisible by 100.
If requested by a participant, the Company may assist the participant in
obtaining financing for the purchase of additional shares by guaranteeing bank
borrowings incurred by the participant. Requests for Company guarantees will be
evaluated on an individual basis and are subject in all respects to the
Company's review and approval of the loan and guarantee documentation and
security arrangements. Loans guaranteed by the Company must have a maturity of
not more than five years, and principal and interest on the loan must be paid by
the participant through automatic payroll deduction.
The participant must be fully personally liable for the repayment of any
loan partially guaranteed by the Company, and the shares purchased with the loan
proceeds must be pledged as collateral to and held by the lending institution.
Additional collateral will also be required. In addition, the participant will
indemnify the Company against any liabilities or expenses incurred by the
Company if the Company's guarantee is called, including, without limitation,
amounts paid under the guarantee and fees and expenses of the Company, including
attorney's fees and expenses, incurred in reasonably contesting payment of the
guarantee or in collecting or attempting to collect amounts owed to the Company
by the participant in connection with his or her indemnification obligations
described above. If any amounts are owed by the Company to the participant,
including, without limitation, amounts in payment of salary, accrued vacation
and the like, the Company will be entitled to deduct or set off any and all such
amounts from and against any amounts owed by the participant to the Company in
connection with the Company guarantee as provided above. Participant's will
have no similar right of deduction or set-off against the Company.
In the event of (i) any failure to make a required payment or other default
under the loan or (ii) the call of the guarantee of the Company as a result of
any action or inaction by the participant (collectively, "Event of Default"),
and if the loan is not then promptly paid in full or the guarantee of the
Company released, all outstanding options granted pursuant to the Stock
Ownership Program will, unless otherwise directed by the Committee, terminate 10
days following the date of such Event of Default. Options held by the
participant will be exercisable during such 10-day period only to the extent
such options were exercisable as of the date of the Event of Default, and such
options shall expire at the end of such period. Thereafter, any such
participant will be permitted to participate in the Stock Ownership Program only
if and when readmitted by the Committee in its sole discretion. If the
participant dies within the specified 10-day period, the options may be
exercised by his or her Beneficiary, to the same extent as if the deceased
participant had survived, during a period of one year from the date of death.
In no event, however, may any option granted pursuant to the Stock Ownership
Program be exercised after the expiration of the option exercise period
established at the time of grant. If any amounts are owed to the Company by the
participant in connection with the Stock Ownership Program, the Company will be
entitled to refuse delivery of shares purchased by the participant upon exercise
of options granted under the Stock Ownership Program until all such amounts have
been paid in full. In addition, by participating in the Stock Ownership
Program, each participant thereby grants to the Company a security interest in
all shares purchased upon exercise of options under the Stock Ownership Program
as collateral for the payment of any amounts owed by the participant to the
Company in connection with the Stock Ownership Program.
If approved and directed by the Committee, the Company may also extend
loans directly to participants for the purchase of Common Stock upon terms
deemed appropriate by the Committee.
Ownership Maintenance Requirements. As long as any option granted to a
participant under the Stock Ownership Program remains outstanding, the
participant must continue to own at all times a number of shares of Common Stock
equal to the number of Qualifying Shares based upon which such option was
granted. Such ownership requirement will not be proportionately reduced in the
event of the partial exercise of any such option. However, all or a portion of
the shares purchased upon exercise of the option may be resold, subject to any
applicable restrictions. In the event a participant holds outstanding options
received pursuant to the Stock Ownership Program as a result of more than one
grant, the ownership requirement set forth above shall be cumulative as to the
number of Qualifying Shares applicable to each separate grant.
The Committee may at any time request a participant to furnish evidence of
compliance with the continuing ownership requirements. The standards applicable
to the determination of a participant's share ownership are as set forth
elsewhere herein with respect to the initial determination of ownership by a
participant. Upon determination by the Committee that a participant has failed
to maintain at any time the requisite ownership level or has failed to provide
upon request satisfactory evidence of such ownership, the Committee will notify
the participant of such determination and, unless otherwise directed by the
Committee, all outstanding options granted pursuant to the Stock Ownership
Program will terminate 90 days following the date of such determination.
Options granted under the Stock Ownership Program held by such participant will
be exercisable during such 90-day period only to the extent such options were
exercisable as of the date the Committee determined that the participant failed
to comply with the continuing ownership requirements described above, and such
options shall expire at the end of such period. Thereafter any such participant
shall be permitted to participate in the Stock Ownership Program only if and
when readmitted by the Committee in its sole discretion. If the participant
dies within the specified 90-day period, the options may be exercised by his or
her Beneficiary, to the same extent as if the deceased participant had survived,
during a period of one year from the date of death. In no event, however, may
any option granted pursuant to the Stock Ownership Program be exercised after
the expiration of the option exercise period established at the time of grant.
Continuation of Stock Ownership Program During Future Years. Although the
Committee may discontinue the Stock Ownership Program at any time, if the Stock
Ownership Program is successful in encouraging increased share ownership by
participating employees and in enhancing Company performance by strengthening
the interests of participating employees in the financial success of the
Company, the Committee anticipates that the Stock Ownership Program will be
continued during future years. Unless modified in the future by the Committee
and except as described below, the administration of the Stock Ownership Program
and the granting of options pursuant thereto will generally be conducted
pursuant to the procedures described herein in connection with the initial phase
of the Stock Ownership Program. Future enrollment dates, individual
Participation Percentages and Award Multipliers, Effective Dates for option
grants and the like will be determined at reasonable times in advance by the
Committee. In determining the number of shares of Common Stock owned by a
participant upon which option awards may be based in future phases of the Stock
Ownership Program, a number of shares equal to the number of Qualifying Shares
upon which all previous option awards were based will be excluded. In addition,
in order to qualify for an option award, the participant must own as of the
Effective Date of the option grant at least 500 shares, or such other number as
the Committee may determine, more than the number of Qualifying Shares upon
which previous option awards were based.
Stock Ownership Program Subject to Shareholder Approval of Amendments to
1992 Plan. All option grants made pursuant to the Stock Ownership Program shall
be expressly conditioned upon and subject to the approval of the amendments by
the shareholders at the Annual Meeting. If such approval is not obtained at the
Annual Meeting, or any adjournment thereof, all such options will be cancelled
and will be of no further force or effect and the Stock Ownership Program will
be terminated. Any then outstanding guarantees by the Company of participant
loans will not be affected by the cancellation of the Stock Ownership Program.
In the event the Stock Ownership Program is terminated, participants will have
no recourse against the Company in connection with the purchase of any shares of
Common Stock in anticipation of option awards under the Stock Ownership Program.
SUMMARY OF POTENTIAL OPTION AWARDS UNDER INITIAL PHASE OF STOCK OWNERSHIP
PROGRAM
The following table provides certain information concerning options that
may be granted under the initial phase of the Stock Ownership Program to (i) the
Company's chief executive officer, (ii) the other executive officers whose
annual salary and bonus during the year ended December 31, 1994 exceeded
$100,000 and (iii) all executive officers as a group. The actual number of
options may vary depending upon the Award Multiplier and Participation
Percentages as determined by the Committee for such persons as well as the
number of Qualifying Shares owned by such persons as of the Effective Date. The
Company does not generally maintain records concerning the share ownership of
persons other than executive officers and, as a result, cannot determine the
number of options that may be granted to eligible employees other than executive
officers until enrollment forms under the Stock Ownership Program indicating the
number of Qualifying Shares owned are returned by participants prior to the
Effective Date of June 15, 1995.
VALUE OF
SECURITIES
NUMBER UNDERLYING
NAME AND PRINCIPAL POSITION OF OPTIONS (1) OPTIONS (2)
Michael F. Adler 70,588 $ 150,000
President and Chief
Executive Officer
Frank M. Montano - -
Executive Vice President and
Chief Operating Officer
David A. Mason 51,764 110,000
Executive Vice President -
Finance Chief Financial
Officer and Treasurer
Robert F. Puccio 20,000 42,500
Executive Vice President -
Business Development
All Executive Officers as a 223,732 475,431
Group (9 persons)
_________________________
(1)Based on the number of shares of Common Stock owned by the respective
executive officers as of April 17, 1995 and assuming an Award Multiplier of
four, a Participation Percentage of 25% for each executive officer and a
Market Price of $2.125 per share.
(2)Based on the closing sale price of the Company's Common Stock on April 17,
1995 of $2.125 per share as reported on the NASDAQ.
DESCRIPTION OF THE 1992 PLAN
The 1992 Plan empowers the Company from time to time until July 15, 2002, to
award to officers and other key managerial, administrative and professional
employees of the Company and its subsidiaries Incentive, Non-Qualified and
Deferred Compensation Stock Options, Stock Appreciation Rights, Restricted Stock
and Restricted Unit Grants, Performance Equity and Performance Unit Grants, any
other Stock-Based Awards (collectively, the "Awards") authorized by the
Committee, and any combination of any or all of such Awards, whether in tandem
with each other or otherwise. The Stock Ownership Program described above will
be conducted under and pursuant to the 1992 Plan.
Administration. The 1992 Plan is administered by the Committee. The
Committee has the sole authority to construe and interpret the 1992 Plan, to
make rules and regulations relating to the implementation of the 1992 Plan, to
select participants, to establish the terms and conditions of Awards and to
grant Awards, with broad authority to delegate its responsibilities to others,
except with respect to the selection for participation of, and the granting of
Awards to, officers of the Company who are subject to Section 16(b) of the
Exchange Act. Members of the Committee are not eligible to receive Awards under
the 1992 Plan.
Eligibility. Managerial employees, including all officers of the Company, and
other key employees of the Company who hold positions of significant
responsibility are eligible to receive Awards under the 1992 Plan. On April 1,
1995, this group consisted of approximately 100 persons. The selection of
recipients of, and the nature and size of, Awards granted under the 1992 Plan is
wholly within the discretion of the Committee. There is no limit on the number
of shares of Common Stock in respect to which Awards may be granted to or
exercised by any person. Whether an Award may be exercised after a
participant's termination of employment shall be determined by the Committee,
except that if a participant's employment with the Company and its subsidiaries
terminates for any reason within six months after the date of grant of any Award
held by such participant, such Award shall expire as of such date of
termination.
Shares Subject to 1992 Plan. The number of shares of Common Stock reserved
for issuance, and in respect of which Awards may be granted, pursuant to the
respective components of the 1992 Plan was originally 500,000 shares. The 1992
Plan has been amended by the Board of Directors to increase such number to
1,250,000, subject to shareholder approval of the amendment at the Annual
Meeting. Such maximum number of shares in payment of Awards granted or which
may be subject to Awards is subject to appropriate equitable adjustment in the
event of a reorganization, stock split, stock dividend, combination of shares,
merger, consolidation of or other recapitalization of the Company. If any
Awards are forfeited, terminated, settled in cash or exchanged for other Awards
or expire unexercised, the shares of Common Stock theretofore subject to such
awards will again be available for further awards. In addition, shares which
are subject to Stock Appreciation Rights which expire unexercised or were not
issued upon the exercise thereof and shares received in payment of the purchase
price of a stock option in the exercise thereof will again be available for
Awards under the 1992 Plan. No fractional shares may be issued under the 1992
Plan.
Incentive Stock Options. Options designated as Incentive Stock Options within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), may be granted under the 1992 Plan. The number of shares of Common
Stock in respect of which Incentive Stock Options are first exercisable by any
optionee during any calendar year may not have a fair market value (determined
at the date of grant) in excess of $100,000 (or such other limit as may be
imposed by the Code). Incentive Stock Options may be exercisable for such
period or periods not in excess of 10 years after the date of grant as shall be
determined by the Committee.
Non-Qualified Stock Options. Non-Qualified Stock Options may be granted under
the 1992 Plan for such number of shares of Common Stock and will be exercisable
for such period or periods as the Committee may determine.
Deferred Compensation Stock Options. Deferred Compensation Stock Options are
designed to provide a means by which compensation payments can be deferred to
future dates. The number of shares subject to a Deferred Compensation Stock
Option is determined by the Committee using the following formulas:
Amount of Compensation Deferred = Number of
(FMV - Exercise Price) Optioned Shares
where, FMV means the fair market value of a share of Common Stock at the date
such option is granted and Exercise Price is the price at which such option may
be exercised, as determined by the Committee. Deferred Compensation Stock
Options will be exercisable for such period or periods as the Committee shall
determine.
Option Exercise Prices. In general, the exercise price of an Incentive Stock
Option must be at least 100% of the fair market value of the Common Stock on the
date of grant. Non-Qualified Stock Options and Deferred Compensation Stock
Options may be issued at such option exercise price as the Committee may
determine, except that the Committee will not issue such options at less than
100% of the fair market value of the Common Stock of the Company at the date of
grant unless it has been determined that such "discount" option price will not
result in taxable income under the Code to the optionee at the date of grant or
the date such option becomes first exercisable rather than at the date of
exercise.
Exercise of Options. No stock option may be exercised, except as provided
below, unless the holder thereof remains in the continuous employ of the
Company. Stock options shall be exercisable only upon the payment in full of
the applicable option exercise price in cash or, if approved by the Committee,
in shares of Common Stock (at the fair market value thereof at exercise date) or
by surrendering outstanding Awards denominated in stock or stock units. No
Incentive, Non-Qualified or Deferred Compensation Stock Option may be exercised
after the optionee ceases to be an employee of the Company, except where the
Committee adopts terms and conditions relating to such Option which permit its
exercise.
Stock Appreciation Rights. Under the 1992 Plan, a Stock Appreciation Right
("SAR") may be granted in tandem with, or independent of, any other Award
granted under the Plan. An SAR is an Award which will entitle the holder to
receive an amount equal to all,or some portion (as determined by the Committee
in respect of each SAR granted), of the excess of the fair market value of a
share of Common Stock on the date of exercise over the fair market value of such
share at the date of grant, multiplied by the number of shares as to which the
holder is exercising the SAR. The Company will pay such amount to the holder in
cash or in shares of Common Stock (at fair market value on the date of exercise)
or in Deferred Compensation Stock Options, or combination thereof, as the
Committee may in its sole discretion determine, except that any SAR exercised
upon or after a Change in Control (as defined in the 1992 Plan) must be paid in
cash.
When an SAR granted in tandem with an option is exercised, such option is
cancelled to the extent that the SAR is exercised. Conversely, if the optionee
elects to exercise the option, the tandem SAR is cancelled. The exercise of an
SAR granted in respect of (but not in tandem with) an option, either at the time
the option is granted or subsequent to the grant of the option, will not result
in the cancellation of such related option and the exercise of such option will
not result in the cancellation of the related SAR. The exercise of an SAR paid
in cash will not be included as an Award for the purpose of determining the
number of shares of Common Stock which may be issued under the 1992 Plan.
In no event may an SAR be exercised within six months after the date granted,
except in the event of the death or disability of the participant. The
Committee may also determine that an SAR shall be automatically exercised on one
or more specified dates, and will adopt procedures designed to limit the
exercise of SAR's by participants subject to Section 16(b) of the Exchange Act
in order to comply with the rules promulgated under the Exchange Act.
Restricted Stock. An Award of Restricted Stock consists of a specified
number of shares of Common Stock which are transferred to a participant selected
by, and for such consideration as determined by, the Committee and are subject
to forfeiture to the Company under such conditions and for such periods of time
as the Committee may determine. A participant may vote and receive cash
dividends on the shares of Restricted Stock awarded, but may not sell, assign,
transfer, pledge or otherwise encumber such shares of Restricted Stock during
the restriction period. Certificates for Restricted Stock will be held by the
Company until all conditions have been satisfied.
Restricted Units. An Award of Restricted Units (each unit having a value
equivalent to one share of Common Stock) may be granted to a participant subject
to such terms and conditions as the Committee may deem appropriate. Restricted
Units may be paid upon the expiration of the relevant restriction period in
cash, in shares of Common Stock equal to the number of Restricted Units granted,
in Deferred Compensation Stock Options or in any combination thereof, as
determined by the Committee.
Performance Equity and Performance Unit Grants. Performance Equity grants
(with each unit equal in value to one share of Common Stock at the date of
grant) and Performance Unit grants (with each unit representing such monetary
value as assigned by the Committee) entitle the participant to receive cash,
shares of Common Stock, Deferred Compensation Stock Options or any combination
thereof, as determined by the Committee, based upon the degree of achievement of
pre-established performance goals over a pre-established performance period as
determined by the Committee in its discretion. Performance goals are fixed by
the Committee on the basis of such criteria and to accomplish such goals as the
Committee may select. The Committee has sole discretion to determine the
employees eligible for Awards of Performance Equity or Performance Units, the
duration of each performance measurement period, the value of each Performance
Unit and the number of shares or units earned on the basis of the Company's
and/or the participant's performance relative to the established goals. During
a performance measurement period, the Committee may adjust the performance goals
upward or downward.
At the end of any performance measurement period, the Committee will
determine the number of performance shares and performance units which have been
earned on the basis of the actual performance in relation to the performance
goals. A participant must be an employee at the end of the performance period
to receive the proceeds of a Performance Equity or Performance Unit Grant;
provided, however, that if such participant dies, retires, becomes disabled or
ceases to be an employee with the Committee's consent prior to the end of the
performance measurement period, the Committee may authorize total or partial
payment to such participant or his or her legal representative. Performance
Equity grantees shall be entitled to receive payment for each unit earned in an
amount equal to the fair market value of a shares of Common Stock at the date of
the vesting of the Performance equity Award. Performance Unit grantees shall be
entitled to receive payment for each unit earned in an amount equal to the
dollar value of such unit.
Other Stock-Based Grants; Deferrals. The Committee has authority under the
1992 Plan to grant other Awards of Common Stock or Awards denominated as stock
units. The Committee may also permit a participant to elect to defer receipt of
the proceeds of any Award granted under the 1992 Plan.
Transferability. No Award granted under the 1992 Plan, and no right or
interest therein, is assignable or transferable by a participant except by will
or the laws of descent and distribution.
Term, Amendment and Termination. The 1992 Plan will terminate on July 15,
2002, except with respect to Awards then outstanding. The Board of Directors
may amend or terminate the 1992 Plan at any time, except that the Board of
Directors may not, without approval of the shareholders of the Company, make any
amendment which would increase the total number of shares available for issuance
(except as permitted by the 1992 Plan to reflect changes in capitalization),
materially change the eligibility requirements or materially increase the
benefits accruing to participants under the 1992 Plan.
Change in Control. In the event of a Change in Control of the Company
(defined in the 1992 Plan to mean the acquisition of 35% or more of the Common
Stock of the Company by any "Acquiring Person" coupled with any change in the
composition of the Board of Directors with the effect that a majority of the
directors are not "Continuing Directors"), unless the Board of Directors
expressly provides otherwise as of the date of any such Change in Control, (i)
all Incentive, Non-Qualified and Deferred Compensation Stock Options and Stock
Appreciation Rights then outstanding shall be fully exercisable, (ii) all
restrictions on and conditions of all Restricted Stock Grants and Restricted
Unit Grants then outstanding shall be deemed satisfied, and (iii) all
Performance Equity Grants and Performance Unit Grants shall be deemed to have
been fully earned, subject in each case to the limitation that any such Award
shall have been outstanding at least six months.
FEDERAL INCOME TAX CONSEQUENCES
Based on current provisions of the Code, and the existing regulations
thereunder, the anticipated Federal income tax consequences in respect of the
several types of Awards under the 1992 Plan (including grants of Incentive Stock
Options and Non-Qualified Stock Options under the Stock Ownership Plan) are as
described below.
At Grant of Options and SARs. An optionee will not recognize any taxable
income at the time an Incentive Stock Option or an SAR is granted and the
Company will not be entitled to a Federal income tax deduction at that time.
The same rules should apply to Non-Qualified and Deferred Compensation Stock
Options. However, because Non-Qualified Stock Options and Deferred Compensation
Stock Options may be granted at option exercise prices substantially below the
fair market value of the Common Stock of the Company on the date the option is
granted, the Internal Revenue Service ("IRS") might take the position that under
certain circumstances income is recognized at the time granted equal to the
amount of the "discount" at which a Non-Qualified Stock Option or a Deferred
Compensation Stock Option was granted.
Incentive Stock Options. No ordinary income will be recognized by the holder
of an Incentive Stock Option at the time of exercise. The excess of the fair
market value of the shares at the time of exercise over the aggregate option
price will be an adjustment to alternative minimum taxable income for purposes
of the Federal "alternative minimum tax" at the date of exercise.
If the optionee holds the shares until the later of two years after the date
the option was granted or one year after the acquisition of such shares, the
difference between the aggregate option price and the amount realized upon
disposition of the shares will constitute a long term capital gain or loss, as
the case may be, and the Company will not be entitled to a Federal income tax
deduction. If the shares are disposed of in a sale, exchange or other
"disqualifying disposition" prior to either of such holding periods, the
optionee will realize ordinary income in an amount equal to the excess of the
fair market value of the shares purchased at the time of exercise over the
aggregate option price and the Company will usually be entitled to a Federal
income tax deduction equal to such amount.
Non-Qualified and Deferred Compensation Stock Options. If Non-Qualified
Stock Options are issued at an exercise price of at least 100% of the fair
market value of the Common Stock at the date granted, ordinary income will be
recognized by the holder at the time of exercise of the option in an amount
equal to the excess of the fair market value of the shares purchased at the time
of such exercise over the aggregate option price. The Company will usually be
entitled to a corresponding Federal income tax deduction for the year of the
exercise. At the time of sale of the shares, the optionee will generally
realize a capital gain or loss based upon the difference between the per
share fair market value at the time of exercise and the per share selling
price at the time of such sale of the shares.
In the case of Non-Qualified Stock Options which may be, and Deferred
Compensation Stock Options which are intended to be, issued at an option
exercise price which is substantially less than 100% of fair market value, the
same rules should apply, unless the IRS takes the position that such "discount"
options are subject to tax on the grant date or at the time they first become
exercisable. In such event, the Company would be entitled to a corresponding
Federal income tax deduction at such time.
Stock Appreciation Rights. Upon the exercise of an SAR, the holder will
realize taxable ordinary income on the amount of cash received and/or the then
current fair market value of the shares of Common Stock acquired and the Company
will be entitled to a corresponding Federal income tax deduction. The holder's
basis in any shares of Common Stock acquired will be equal to the amount of
ordinary income upon which he or she was taxed. Upon any subsequent
disposition, any gain or loss realized will be a capital gain or loss.
Restricted Stock. Unless a participant makes the election described below,
a participant receiving a Restricted Stock Award will not recognize income and
the Company will not be allowed a deduction at the time such shares of
Restricted Stock are granted. While the restrictions on the shares are in
effect, a participant will recognize compensation income equal to the amount of
any dividends received and the Company will be allowed a deduction in a like
amount. When the restrictions on the shares are removed or lapse, the excess of
fair market value of the shares on the date the restrictions are removed or
lapse over the amount paid, if any, by the participant for the shares will be
treated as ordinary compensation income to the participant and allowed as a
deduction for Federal income tax purposes to the Company. Upon disposition
of the shares, any gain or loss recognized by the participant will
be treated as capital gain or loss, and the capital gain or loss will be short
term or long term depending upon the period of time the shares are held by the
participant following the removal or lapse of the restrictions. However, by
filing a Section 83(b) election with the IRS within 30 days after the date of
grant, a participant's ordinary income and commencement of holding period and
the Company's deduction will be determined as of the date of grant. In such a
case, the amount of ordinary income recognized by such a participant and
deductible by the Company will be equal to the excess of the fair market value
of the shares as of the date of grant over the amount paid, if any, by the
participant for the shares. If such election is made and a participant
thereafter forfeits his or her stock, no refund or deduction will be allowed for
the amount previously included in such participant's income.
Performance Equity, Performance Units and Restricted Units. A participant
receiving any Performance Award or any Restricted Units will not recognize
income, and the Company will not be allowed a deduction, at the time such Award
is granted. When a participant receives payment in cash or shares of Common
Stock, the amount of cash and the fair market value of the shares of Common
Stock received will be ordinary income to the participant and will be allowed as
a deduction for Federal income tax purposes to the Company.
Special Rules. To the extent an optionee pays all or part of the option
price of a stock option by tendering shares of Common Stock owned
by the optionee, the tax consequences described above apply except that the
number of shares received upon such exercise which is equal to the number of
shares surrendered in payment of the option price shall have the same basis and
tax holding period as the shares surrendered. If the shares surrendered had
previously been acquired upon the exercise of an Incentive Stock Option, the
surrender of such shares may be a disqualifying disposition of such shares. The
additional shares received upon such exercise have a tax basis equal to the
amount of ordinary income recognized on such exercise and a holding period which
commences on the date of exercise.
Withholding Taxes. Withholding taxes must be paid at the time of exercise of
any Non-Qualified or Deferred Compensation Stock Option or SAR. Withholding
taxes must also be paid in respect of any Restricted Stock or Restricted Unit
when the restrictions thereon lapse. In respect of all other Awards,
withholding taxes must be paid whenever income to the 1992 Plan participant is
recognized for tax purposes.
SUMMARY OF AWARD ACTIVITY PURSUANT TO 1992 PLAN
The following table indicates as of April 17, 1995 the number of shares
authorized for issuance under the 1992 Plan (exclusive of the proposed increase
in the authorized number of shares), the aggregate number of shares subject to
outstanding Awards, the number of shares issued pursuant to prior Awards, the
number of shares available for future Awards (exclusive of the proposed increase
in the authorized number of shares), and the number of shares available for
future Awards (including the proposed increase in the authorized number of
shares):
AVAILABLE
AUTHORIZED SUBJECT TO FOR FUTURE AVAILABLE
(EXCLUSIVE OUTSTANDING ISSUED AWARDS FOR FUTURE
OF AWARDS PURSUANT (EXCLUSIVE AWARDS
PROPOSED (NET OF TO OF (INCLUDING
INCREASE) CANCELLATIONS) PRIOR PROPOSED PROPOSED
(1) AWARDS(2) INCREASE) INCREASE)
500,000 315,000 4,100 180,900 930,900
______________________________
(1) Outstanding Awards under the 1992 Plan consist of Incentive Stock
Options to purchase 177,500 shares of Common Stock and Non-Qualified Stock
Options to purchase 137,500 shares of Common Stock granted to executive
officers and eligible employees of the Company at exercise prices ranging from
$2.125 to $2.875 per share. The exercise prices of all such options are 100%
of the market value of the Common Stock on the date of grant, and such options
become exercisable at rates ranging from 20% to 33-1/3% per year commencing
one year from the date of grant. The expiration dates of such options range
from September, 1997 to September, 1999. Of such options, 305,000 were
granted to executive officers of the Company and 10,000 were granted to
employees of the Company other than executive officers.
(2) Consists entirely of shares purchased by eligible employees of the
Company pursuant to a stock purchase program offered during 1994 under the
1992 Plan. Under this program the Company purchased for the accounts of
participants 4,100 shares of Common Stock on the open market at a price of
$2.1461 per share and paid all fees and commissions associated therewith.
Participants were required to pay 50% of the purchase price.
Based on the closing sale price of the Common Stock of the Company as
reported on the NASDAQ on April 17, 1995 of $2.125 per share, the market value
of the total number of shares of Common Stock issued under the 1992 Plan was
$8,712, the market value of shares underlying outstanding Awards under the 1992
Plan was $669,375, the market value of shares subject to future Awards
(exclusive of the proposed increase in the number of shares authorized for
issuance under the 1992 Plan) was $384,412, and the market value of shares
subject to future Awards (including the proposed increase in the number of
shares authorized for issuance under the 1992 Plan) was $1,978,162.
Provided that the shareholders approve the proposed amendment to the 1992
Plan, the increased number of shares will be available for all manner of Awards
authorized under the 1992 Plan. Except as described elsewhere herein in
connection with the Stock Ownership Program, the Committee has not at this time
considered or approved any future Awards under the 1992 Plan, and, as a result,
the identity of future Award recipients and the size and terms of future Awards
are not known at this time.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the shares of Common
Stock which are present in person or represented by proxy at the Annual Meeting
is required to approve the amendment to the 1992 Plan. Proxies marked "abstain"
with regard to the proposal to approve the amendment to the 1992 Plan will be
counted for the purpose of determining the number of shares represented by proxy
at the Annual Meeting. As a result, proxies marked "abstain" with regard to the
proposal will have the same effect as if the shares represented thereby were
voted against approval.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
APPROVAL OF THE AMENDMENT OF THE 1992 PLAN TO INCREASE THE TOTAL NUMBER OF
SHARES OF COMMON STOCK THAT ARE AUTHORIZED FOR ISSUANCE PURSUANT TO THE 1992
PLAN FROM 500,000 TO 1,250,000 SHARES.
EXECUTIVE OFFICERS AND EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
In addition to Messrs. Adler and Mason, who are listed elsewhere herein
under the heading "Information Concerning Nominees," the following individuals
also serve as executive officers of the Company.
Frank M. Montano. Age 42. Mr. Montano was appointed as Executive Vice
President and Chief Operating Officer in September, 1992. From June, 1990 to
September, 1992, he served with Sbarro, Inc., first as Vice President of
Licensing (June, 1990 to May, 1991) and then as Senior Vice President (May, 1991
to September, 1992). From April, 1989 to June, 1990, Mr. Montano was associated
with Diet Center, Inc., as Vice President of Operations (April, 1989 to October,
1989) and as Senior Vice President (October, 1989 to June, 1990). From August,
1986 to April, 1989, Mr. Montano was Vice President of Franchising for Marriott
Corporation.
Leonard S. Swartz. Age 62. Mr. Swartz was appointed as Senior Vice
President for Operations in July, 1989 and in January, 1990 was given primary
responsibility for franchise operations. Between February, 1984 and July, 1989,
Mr. Swartz was Executive Vice President for Operations of the Company.
Donald J. Isaacs. Age 50. Mr. Isaacs was appointed as Vice President of
Wholesale and Communication Services in September, 1994. Prior to his
appointment to his current position, Mr. Isaacs served as Vice President and
Controller of the Company from February, 1988 and as Controller from November,
1985.
Robert F. Puccio. Age 57. Mr. Puccio was appointed as Executive Vice
President of Business Development in June, 1993. Mr. Puccio has been involved
with franchising since 1977. Most recently, from July, 1990 to June 30, 1993,
he was President and owner of R.F. Puccio & Associates, a management consulting
firm serving the hospitality, retail and franchise industries. From September,
1987 to July, 1990, Mr. Puccio was associated with Dole Food Company ("Dole") in
California, as President of the Retail Division from December, 1988 to July,
1990 and as Vice President of Dole and President and Chief Executive Officer of
House of Almonds, Inc., a wholly-owned subsidiary of Dole, from September, 1987
to December, 1988.
Frans VanOudenallen. Age 49. Mr. VanOudenallen was appointed as Vice
President of Marketing in August, 1994. From December, 1986 to April, 1994, he
served with Ohio-based Cort Furniture Rental, most recently serving as Vice
President - Sales and Marketing from January, 1989 to June, 1992 and as Vice
President and Regional General Manager from June, 1992 to April, 1994.
Alfred E. Lefeld. Age 36. Mr. Lefeld was appointed as Vice President and
Controller in October, 1994. From June, 1993 to October, 1994, Mr. Lefeld
served as director of MIS for the Company. From January, 1992 to May, 1993, Mr.
Lefeld served as Controller - Midwest Division for MAB Paints and Coatings.
From March, 1984 to December, 1992, Mr. Lefeld was Controller for Paint America
Company.
Robert A. Galastro. Age 52. Mr. Galastro was appointed as Vice President
of Company Store Operations in September, 1994. From January, 1993 to
September, 1994, Mr. Galastro was Senior Vice President and Chief Operating
Officer of BCB, Inc., a franchisor of upscale bakery and gourmet coffee cafes.
From March, 1992 to December, 1992, Mr. Galastro was self-employed as a
consultant to the hospitality and retail industries. From December, 1991 to
February, 1992, Mr. Galastro served as Zone Vice President for Sbarro, Inc. Mr.
Galastro has also served from April, 1991 to November, 1991, as President and
Chief Operating Officer of Skolniks, Inc., a franchisor of upscale bagel
bakeries and cafes, and from January, 1990 to April, 1991 as President and Chief
Operating Officer of Winchells, Inc., a franchisor of donut and bakery cafes.
EXECUTIVE COMPENSATION
The following table discloses compensation received for the preceding three
fiscal years by the Company's chief executive officer and the other executive
officers of the Company whose total salary and bonus for the year ended December
31, 1994 exceeded $100,000. These individuals are referred to herein as the
"named executive officers."
LONG TERM
ANNUAL COMPENSATION
COMPENSATION
AWARDS
OTHER
ANNUAL RESTRICTED SECURITIES ALL OTHER
FISCAL COMPEN- STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL YEAR SALARY BONUS SATION(1) AWARDS($) OPTIONS(#) SATION(2)
POSITION
Michael F. Adler 1994 $153,246 - $17,373 - - $5,119
President and Chief 1993 145,423 $10,000 $15,847 - - 11,486
Executive Officer 1992 125,000 20,009 $17,821 - - 5,645
Frank M. Montano 1994 $148,246 - - - - $14,353
Executive Vice 1993 145,558 $15,000 - - - 54,028
President and Chief 1992 46,488 - - - 200,000 1,114
Operating Officer
David A. Mason 1994 $111,861 - - - - $3,117
Executive Vice 1993 102,185 $ 7,500 - - - 5,994
President - Finance, 1992 95,000 12,575 - - - 2,375
Chief Financial
Officer and Treasurer
Robert F. Puccio (3) 1994 $101,622 $7,500 - - - $13,820
Executive Vice 1993 45,344 - - $14,375 75,000 25,101
President - 1992 - - - (4) - -
Business Development
_________________________
(1) The primary component of "Other Annual Compensation" for Mr. Adler is a car
allowance. In 1994, 1993 and 1992, the car allowances were $11,993, $11,907,
and $13,980, respectively. "Other Annual Compensation" for the other named
executive offices was less than ten percent of their respective annual salaries
and bonuses and therefore need not be disclosed.
(2) "All Other Compensation" in 1994 for Messrs. Adler and Mason consists of
the Company's contributions for Messrs. Adler and Mason to the Company's defined
contribution retirement plan. "All Other Compensation" in 1994 for Mr. Montano
consists of $4,293 equivalent to interest at 9% that would have accrued during
such period on transition loans made by the Company to Mr. Montano during 1992
and 1993 in connection with his employment by the Company with respect to which
no interest is charged, $8,672 representing indebtedness under such loans
forgiven by the Company during 1994, and $1,388 representing Company's
contribution for Mr. Montano to the Company's defined contribution retirement
plan. "All Other Compensation" in 1994 for Mr. Puccio consists of a $10,000
relocation bonus and $3,820 representing the Company's contribution for Mr.
Puccio to the Company's defined contribution retirement plan.
(3) Mr. Puccio commenced employment with the Company on June 30, 1993.
(4) In connection with the commencement of Mr. Puccio's employment with the
Company, Mr Puccio was granted 5,000 shares of Common Stock of the Company
which are subject to forfeiture if Mr. Puccio leaves the Company's employ
prior to June 30, 1996. On June 30, 1993 (the date of grant of the
restricted stock award) the shares had an aggregate market value of $14,375
based on the closing sale price of the Common Stock on such date of $2.875
per share as reported on the NASDAQ. At December 31, 1994, the market value
of such shares was $11,875 based on the closing sale price of the Common
Stock on December 30, 1994 (the last trading date prior to the year-end) of
$2.375 per share as reported on the NASDAQ. Mr. Puccio is eligible to
receive dividends with respect to such shares when, as and if declared by the
Board of Directors on the same basis as other shareholders of the Company.
OPTION EXERCISES AND YEAR-END OPTION VALUES
No stock options were granted to the named executive officers during the
year ended December 31, 1994, and none of the named officers exercised any stock
options during such year.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS FISCAL YEAR END($)(1)
HELD AT
NAME FISCAL YEAR
END
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
Michael F. Adler 190,000 - $96,183 -
Frank M. Montano 100,000 100,000 - -
David A. Mason 55,000 - $35,625 -
Robert F. Puccio 25,000 50,000 - -
____________________
(1) Based on the closing sale price of the Company's Common Stock on
December 30, 1994 (the last trading date prior to the year-end) of $2.375 per
share as reported on the NASDAQ.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On January 1, 1994, Michael F. Adler, the Company's President and Chief
Executive Officer, entered into an employment contract effective through
December 31, 1996. The Contract is automatically renewed at the end of each
fiscal year for an additional three year term unless the Board takes other
action. The employment contract provides for a base salary of $150,000 per
year, subject to annual review of the Board of Directors. Under the employment
contract, Mr. Adler's eligibility for bonus payments for 1994 was based on an
incentive formula set forth in the contract. The employment contract calls for
Mr. Adler's bonuses for subsequent years to be determined by the Board of
Directors. The employment contract also provides that, in the event Mr. Adler's
employment is terminated without cause, he will be entitled to salary
continuation equal to thirty-six months of the salary he was receiving
immediately prior to termination.
On June 23, 1993, David A. Mason, the Company's Executive Vice President -
Finance, Chief Financial Officer and Treasurer, entered into an employment
contract effective April 1, 1993 through March 31, 1996. The employment
contract provides for a base salary of $104,000 per year, subject to annual
review by the Board of Directors. Under the employment contract, Mr. Mason's
bonus for 1992 was $10,000 based on an incentive formula set forth in the
contract together with an additional discretionary amount awarded by the Board
of Directors. The employment contract calls for Mr. Mason's bonuses for
subsequent years to be determined by the Board of Directors.
On January 1, 1994, Frank M. Montano, the Company's Executive Vice President
and Chief Operating Officer, entered into an employment contract effective
through December 31, 1996. The employment contract provides for a base salary
of $145,000 per year, subject to annual review by the Board of Directors. Under
the employment contract, Mr. Montano's eligibility for bonus payments for 1994
was based on an incentive formula set forth in the contract. The employment
contract calls for Mr. Montano's bonuses for subsequent years to be determined
by the Board of Directors.
On June 30, 1993, Robert F. Puccio, the Company's Executive Vice President -
Business Development, entered into an employment contract effective through
March 31, 1997. The employment contract provides for an annual base salary of
$100,000 during 1994 with increases of $20,000 per year through the term of the
contract. Under the employment contract, Mr. Puccio's eligibility for bonus
payments for 1993 and 1994 was based on an incentive formula set forth in the
contract. The employment contract calls for Mr. Puccio's bonuses for subsequent
years to be determined by the Board of Directors. Under the employment
contract, Mr. Puccio is also eligible to receive additional bonus amounts based
on the number of Company franchise locations opened during each year pursuant to
a formula set forth in the employment contract.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors are
Frank W. Benson, Chairman, Leslie Charm and Douglas M. Thomsen, all of whom are
independent non-employee directors. The Committee establishes the compensation
of the Chief Executive Officer. Michael F. Adler, President, Chief Executive
Officer and Chairman of the Board, sets compensation for all other executive
officers but reviews such decisions with the Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE AND MR. ADLER
COMPENSATION ELEMENTS
Compensation of the Company's executive officers consists of three principal
elements:
o Base salaries designed to be competitive in the
Company's geographic market and with comparably situated
companies;
o Annual bonuses which are generally dependent on the
Company's profitability for the year, but from time to time
discretionary bonuses are granted based on a subjective review of
the performance of executive officers and taking into
consideration accomplishments which will benefit the Company over
the longer term; and
o Stock options which are designed to align the
executives' interests with long-term interests of the
shareholders.
EXECUTIVE OFFICER COMPENSATION
Several of the Company's executive officers, including Messrs. Adler,
Montano, Mason and Puccio, are employed pursuant to employment contracts which
specify base salary and bonus levels. It is the Company's policy to pay base
salaries to executive officers in the 25th to 75th percentile for comparable
positions for comparably situated companies. Bonuses for executive officers are
determined either by the terms of the executive officer's employment contract or
by the Board of Directors. Bonuses during 1994 for a number of executive
officers were dependent upon the Company achieving specified pre-tax net income
levels.
During 1994, incentive stock options to purchase a total of 30,000 shares of
Common Stock were granted to two executive officers of the Company in connection
with the commencement of their employment with the Company at exercise prices
equal to the market value of the Common Stock on the date of grant. These
options become exercisable at the rate of 20% per year and expire five years
from the date of grant. No other stock options were granted to executive
officers during 1994, as significant stock options were granted to executive
officers in prior years and in anticipation of additional stock option grants in
connection with the commencement in 1995 of the proposed executive and key
employee Stock Ownership Program described elsewhere herein. See "Proposal to
Approve the Amendment of the 1992 Performance and Equity Incentive Plan of the
Company - Stock Ownership Program Pursuant to the 1992 Plan."
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Compensation for the Company's Chief Executive Officer, Michael F. Adler, is
determined under the terms of his employment contract with the Company. The
employment contract provides for base salary of $150,000 per year, subject to
annual review by the Board of Directors. During
1994, Mr. Adler received the base salary under the contract of $150,000. Mr.
Adler's bonus compensation for 1994 was also determined pursuant to the
employment contract and was dependent upon the Company achieving
certain target pre-tax net income levels. The target levels were not reached
during 1994, and Mr. Adler did not receive a bonus for such period. The
employment contract calls for Mr. Adler's bonuses for subsequent years to be
determined by the Board of Directors.
Compensation Committee:
Frank W. Benson, Chairman
Leslie Charm
Douglas M. Thomsen
Michael F. Adler, Chief Executive Officer
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
The following line graph compares the yearly percent change in the
cumulative total shareholder return of the Company's Common Stock against the
cumulative total return of the Center for Research in Security Prices ("CRSP")
Index for the Nasdaq Stock Market (U.S. Companies) and the CRSP Index for Nasdaq
Retail Trade Stocks for the period of five fiscal years (1990 to 1994). It
assumes that $100 was invested on December 31, 1989 in the Company's Common
Stock and in each of the other indices, with all dividends reinvested.
Date Company Index Market Index Peer Index
12/29/89 100.000 100.000 100.000
01/31/90 88.000 91.346 91.487
02/28/90 68.000 93.862 94.597
03/30/90 64.000 96.576 99.832
04/30/90 96.000 93.412 101.071
05/31/90 72.000 102.214 111.841
06/29/90 64.000 102.969 113.270
07/31/90 64.000 97.799 114.606
08/31/90 60.000 85.462 99.170
09/28/90 42.000 77.365 88.988
10/31/90 40.000 74.324 87.800
11/30/90 56.000 81.404 98.658
12/31/90 40.000 84.918 98.965
01/31/91 50.000 94.316 110.172
02/28/91 52.000 103.392 121.074
03/28/91 96.000 110.296 137.465
04/30/91 76.000 111.010 139.663
05/31/91 82.000 116.092 147.888
06/28/91 80.000 109.033 142.033
07/31/91 82.000 115.474 152.753
08/30/91 76.000 121.203 156.232
09/30/91 64.000 121.646 160.649
10/31/91 92.000 125.681 161.089
11/29/91 76.000 121.471 161.355
12/31/91 68.000 136.277 187.992
01/31/92 104.000 144.280 192.367
02/28/92 88.000 147.552 195.847
03/31/92 88.000 140.596 186.569
04/30/92 84.000 134.579 169.170
05/29/92 100.000 136.341 166.367
06/30/92 148.000 130.933 155.614
07/31/92 136.000 135.563 160.670
08/31/92 164.000 131.413 151.015
09/30/92 152.000 136.286 162.344
10/30/92 136.000 141.661 166.751
11/30/92 136.000 152.926 174.593
12/31/92 128.000 158.579 176.922
01/29/93 192.000 163.096 173.543
02/26/93 216.000 156.988 164.363
03/31/93 208.000 161.555 167.525
04/30/93 168.000 154.656 157.593
05/28/93 208.000 163.866 165.809
06/30/93 184.000 164.635 165.587
07/30/93 184.000 164.850 168.632
08/31/93 160.000 173.372 178.220
09/30/93 136.000 178.491 183.707
10/29/93 200.000 181.443 191.017
11/30/93 160.000 176.026 183.743
12/31/93 176.000 180.933 187.066
01/31/94 184.000 186.419 186.708
02/28/94 168.000 184.722 182.959
03/31/94 168.000 173.354 172.078
04/29/94 192.000 171.108 172.359
05/31/94 176.000 171.545 168.443
06/30/94 152.000 165.292 164.997
07/29/94 144.000 168.680 165.216
08/31/94 132.000 179.417 177.610
09/30/94 132.000 178.960 180.347
10/31/94 128.000 182.412 182.537
11/30/94 160.000 176.360 175.660
12/30/94 152.000 176.907 170.535
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September 1983, Foto Fair International, Inc. ("FFI"), a wholly-owned
subsidiary of Progressive, merged into the Company. Progressive is 98% owned by
Michael F. Adler and his family. Mr. Adler is President, Chief Executive
Officer and Chairman of the Board of Directors of the Company, and a director
and executive officer of Progressive. In connection with such merger, the
Company acquired the business and assets of FFI, which primarily was the
management by FFI of the businesses of National Photo Labs, Inc. ("NPL") and
National Photo Labs II, Inc. ("NPL II"), both of which were engaged in the one-
hour photo processing business. Directors and executive officers of the Company
own 16% of the outstanding common stock of NPL and 23% of the outstanding common
stock of NPL II. NPL and NPL II together own four one-hour photo processing
stores. The stores owned by NPL and NPL II are now managed by the Company
pursuant to management agreements and are operated as One Hour MotoPhoto stores
under franchise agreements. The management agreements provide for an annual
incentive fee based on cash generated. The franchise agreements provide for a
monthly royalties equal to the greater of 5% of net sales or $1,000 per store.
During the year ended December 31, 1994, the Company earned from NPL and NPL II
royalties and incentive fees of $154,734. Total revenues from NPL and
NPL II, including all royalties and incentive fees paid and revenues derived
from the sale by the Company to NPL and NPL II of operating supplies and
merchandise, were approximately $395,000, which constituted approximately 1.0%
of the Company's total revenues.
The terms of the merger of FFI and the Company described above were all
determined by arms' length negotiation between the Company and Progressive,
prior to Progressive's becoming a shareholder of the Company. The merger with
FFI was approved by the shareholders of the Company.
The Company's corporate offices are located at 4444 Lake Center Drive,
Dayton, Ohio 45426. The building in which the Company's offices are located is
76% owned by Michael F. Adler, members of Mr. Adler's family, David A. Mason,
and Leonard S. Swartz. Such offices, consisting of approximately 33,000 square
feet on approximately 2.4 acres of land, have been leased by the Company
pursuant to a lease agreement which commenced on July 1, 1989 and which has been
extended through 1999. In July 1990, the lease terms were amended to provide
for rent payable as follows: $12,792 per month through June 1992; $16,097 per
month from July 1992 through June 1994; and $18,083 per month from July 1994
through June 1999. During 1994, the Company made lease payments totaling
$209,940.
Jacob A. Myers, an officer and director of the Company, is a shareholder,
director and principal in the law firm of Myers and Frayne Co., L.P.A. ("Myers
and Frayne"). The Company uses the services of the firm on an ongoing basis.
During 1994, the Company paid fees of $79,484 to Myers and Frayne, which
exceeded five percent of the total revenues of Myers and Frayne during such
period.
Pursuant to the employment contract for Frank M. Montano when he joined the
Company in 1992, the Company advanced him moving expenses, the cost of temporary
housing in Dayton for a limited period of time, and a monthly living allowance
until Mr. Montano's home was sold. In connection with this arrangement, upon
the sale of his home in 1993, Mr. Montano executed a promissory note for
$52,036, the amount of the moving expenses and temporary housing and living
allowances; so long as Mr. Montano is still employed by the Company, one-sixth
of the principal will be forgiven on each anniversary date of the sale of his
home.
The foregoing transactions were and all future transactions with or loans to
officers, directors, key employees or their affiliates will be approved by a
majority of the members of the Board of Directors who were not officers of the
Company and/or were not interested in the transaction.
Harry D. Loyle is a shareholder, officer and director in three One Hour
MotoPhoto franchisees -- Corral Photographic Corporation, B&H Management
Services, Inc., and The Positive Negative, Inc. Each such franchisee owns and
operates one store under a One Hour MotoPhoto franchise agreement which provides
for a royalty fee of six percent of net retail sales. During 1994, these three
franchisees paid royalty and advertising fees of $57,604. Total revenues
derived by the Company from such stores were $327,218, which constituted
approximately 0.8% of the Company's total revenues.
In addition, Mr. Loyle is owner and President of ProMoto Management
Corporation, which acts as an area developer for the Company pursuant to an area
development agreement. As Area Developer, ProMoto Management Corporation
receives a portion of the initial franchise fee as compensation for the
recruitment of a franchisee in its area and also receives a portion of the
royalty paid to the Company by any franchised store in its area (including the
stores owned by the three franchisees named above) as compensation for
performing training, marketing, quality control and other services which would
otherwise be performed by the Company. During 1994, the Company paid ProMoto
Management Corporation fees of $228,019. The terms of the Company's area
development agreement with ProMoto Management Corporation are the same as those
in the agreements of most of the Company's other area developers.
Jay Adler, son of Michael F. Adler, President, Chairman of the Board and
Chief Executive Officer of the Company, is President of Franchise Development
and Management Corporation, which acts as an area developer for the Company
pursuant to an area development agreement. During 1994, the Company paid
Franchise Development and Management Corporation fees of $198,531. The terms of
the Company's area development agreement with Franchise Development and
Management Corporation are on substantially the same terms as those offered to
the Company's other area developers during the period in which the agreement was
entered into.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Ernst & Young LLP, independent certified public accountants, have been
reappointed by the Board of Directors of the Company as independent auditors for
the Company and it subsidiaries to examine and report on its financial
statements for 1994. Ernst & Young LLP have been auditors of the accounts of
the Company since November 1983. Representatives of Ernst & Young LLP are
expected to be present at the Annual Meeting, with the opportunity to make a
statement if they desire to do so, and will be available to respond to
appropriate questions.
PROPOSALS OF SHAREHOLDERS
The Board of Directors will consider proposals of shareholders intended to
be presented for action at the 1996 Annual Meeting of Shareholders. According
to the rules of the Securities and Exchange Commission, such proposals shall be
included in the Company's Proxy Statement if they are received in a timely
manner and if certain other requirements are met. For a shareholder proposal to
be included in the Company's Proxy Statement relating to the 1996 Annual
Meeting, a written proposal complying with the requirements established by the
Securities and Exchange Commission must be received at the Company's principal
executive offices, located at 4444 Lake Center Drive, Dayton, Ohio 45426, no
later than January 6, 1996. If the date of next year's shareholders' meeting is
advanced by more than 30 days or delayed for more than 90 days, the Company will
advise all shareholders of the change in the date by which shareholder proposals
must be received.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented for
action at the meeting other than those listed in the Notice of Meeting and
referred to in this Proxy Statement. If any other matters properly come before
the meeting or any adjournment of the meeting, the persons named on the
accompanying proxy intend to vote the shares represented by them in accordance
with the recommendations of the Board of Directors.
MOTO PHOTO, INC.
4444 LAKE CENTER DRIVE, DAYTON, OHIO 45426
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael F. Adler, David A. Mason and Jacob A.
Myers as Proxies, or any of them, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote, as designated below, all
the shares of Voting Common Stock of Moto Photo, Inc. (the "Company"), held of
record by the undersigned on May 1, 1995, at the Annual Meeting of Shareholders
to be held on June 28, 1995, or any adjournment thereof.
1. ELECTION OF DIRECTORS
" FOR the nominees listed below (except " WITHHOLD AUTHORITY to vote for
as marked to the contrary in " below) all nominees listed below
" Adler " Benson " Charm " Dawes " Mason " Myers
" Thomsen" Loyle
2. Proposal to approve the amendment of the 1992 Performance and Equity
Incentive Plan of the Company.
" For " Against " Abstain
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted as specified by the
shareholders. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED FOR THE
ELECTION OF ALL OF THE NOMINEES LISTED IN ITEM 1, AND FOR THE PROPOSAL LISTED IN
ITEM 2. If any other matters are brought before the meeting or if a nominee for
election as a director named in the proxy statement is unable to serve or for
good cause will not serve, the proxy will be voted in accordance with the
recommendations of the Board on such matters or for such substitute nominees
as the Board may recommend.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and
the Proxy Statement and hereby expressly revokes any and all proxies heretofore
given or executed by the undersigned with respect to the shares represented by
this proxy.
Date _______________________________
____________________________________
(Signature of Shareholder)
____________________________________
(Signature of Joint Shareholder, if any)
Please date this proxy, sign EXACTLY as name appears on this proxy and return it
in the enclosed envelope. When signing as attorney, executor, administrator,
trustee or guardian, please give full title. If more than one trustee, all
should sign. If shares are registered in more than one name, signatures of all
such persons are required.
APPENDIX TO PROXY STATEMENT OF MOTO PHOTO, INC.
CONTAINING SUPPLEMENTAL INFORMATION REQUIRED TO BE
PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION
The following is information required to be provided to the Securities and
Exchange Commission in connection with the Definitive Proxy Materials of Moto
Photo, Inc. in connection with 1995 Annual Meeting of Shareholders of the
Company. This information is not deemed to be a part of the Proxy Statement and
will not be provided to shareholders in connection with the Proxy Statement.
1. The Company anticipates that the Definitive Proxy Materials will be mailed
to the shareholders on or about May 5, 1995.
2. The following information is provided pursuant to Instruction 5, Item 10 of
Schedule 14A: The shares of Common Stock issuable by the Company pursuant to
the 1992 Performance and Equity Incentive Plan of the Company (the "1992 Plan")
are covered by the Company's Registration Statement on Form S-8 (File No. 33-
53188). In connection with the proposed increase in the number of shares
authorized for issuance pursuant to the 1992 Plan discussed in the Proxy
Statement, the Company anticipates that the Registration Statement will be post-
effectively amended to add such increased number of shares.
3. The complete text of the 1992 Plan is set forth below as required by
Instruction 3, Item 10 of Schedule 14A.
1992 MOTO PHOTO PERFORMANCE & EQUITY INCENTIVE PLAN
1. PURPOSE. The purpose of the 1992 Moto Photo Performance and
Equity Incentive Plan (herein referred to as the "Plan") is to promote and
advance the interest of Moto Photo, Inc. (the "Company") and its shareholders by
enabling the Company to attract, retain and reward managerial and other key
employees and to strengthen the mutuality of interests between such employees
and the Company's shareholders. The Plan is designed to meet this intent by
offering performance-based stock and cash incentives and other equity-based
incentive awards thereby providing a proprietary interest in pursuing the
long-term growth, profitability and financial success of the Company.
2. DEFINITIONS. For purposes of the Plan, the following terms shall
have the meanings set forth below:
(a) "Award" or "Awards" means an award or grant made to a
Participant under Sections 6 through 10, inclusive, of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as in effect
from time to time or any successor thereto, together with rules,
regulations and interpretations promulgated thereunder.
(d) "Committee" means the Committee of the Board constituted as
provided in Section 3 of the Plan.
(e) "Common Stock" means the Voting Common Stock, par value
$0.01 per share, of the Company or any security of the Company issued in
substitution, exchange or lieu thereof.
(f) "Company" means Moto Photo, Inc., a Delaware corporation, or
any successor corporation.
(g) "Deferred Compensation Stock Option" means any Stock Option
granted pursuant to the provisions of Section 6 of the Plan that is
specifically designated as such.
(h) "Disability" means disability as determined by the Committee
in accordance with standards and procedures similar to those under the
Company's long-term disability plan.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time, or any successor statute.
(j) "Fair Market Value" means the closing "asked" price of the
shares in the over-the-counter market on the date on which such value is to
be determined or, if such asked price is not available, the last sales
price on such day or, if no shares were traded on such day, on the next
preceding day on which the shares were traded, as reported by the National
Association of Securities Dealers Automatic Quotation System (NASDAQ) or
other national quotation service. If the shares are listed on a national
securities exchange, Fair Market Value means the closing price of the
shares on such national securities exchange on the day on which such value
is to be determined or, if no shares were traded on such day, on the next
preceding day on which shares were traded, as reported by National
Quotation Bureau, Inc. or other national quotation service. If at any time
shares of Common Stock are not traded on an exchange or in the
over-the-counter market, Fair Market Value shall be the value determined by
the Committee, taking into consideration those factors affecting or
reflecting value which they deem appropriate. For purposes of determining
the exercise price of an Incentive Stock Option, Fair Market Value shall
not under any circumstances exceed the amount contemplated by Section
422(b)(4) of the Code.
(k) "Incentive Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of the Plan that is intended to be
and is specifically designated as an "incentive stock option" within the
meaning of Section 422 of the Code.
(l) "Non-Qualified Stock Option" means any Stock Option granted
pursuant to the provisions of Section 6 of the Plan that is not an
Incentive Stock Option.
(m) "Participant" means an employee of the Company or a
Subsidiary who is granted an Award under the Plan.
(n) "Performance Award" means an Award granted pursuant to the
provisions of Section 9 of the Plan the vesting of which is contingent on
performance attainment.
(o) "Performance Equity Grant" means an Award of units
representing shares of Common Stock granted pursuant to the provisions of
Section 9 of the Plan.
(p) "Performance Unit Grant" means an Award of monetary units
granted pursuant to the provisions of Section 9 of the Plan.
(q) "Plan" means this 1992 Moto Photo Performance and Equity
Incentive Plan of the Company, as set forth herein and as it may be
hereafter amended and from time to time in effect.
(r) "Restricted Award" means an Award granted pursuant to the
provisions of Section 8 of the Plan.
(s) "Restricted Stock Grant" means an Award of shares of Common
Stock granted pursuant to the provisions of Section 8 of the Plan.
(t) "Restricted Unit Grant" means an Award of units representing
shares of Common Stock granted pursuant to the provisions of Section 8 of
the Plan.
(u) "Retirement" means retirement from active employment with
the Company and its Subsidiaries on or after the normal retirement date
specified in the Company's retirement plan for salaried employees or such
earlier retirement date as approved by the Committee for purposes of this
Plan.
(v) "Stock Appreciation Right" means an Award to benefit from
the appreciation of Common Stock granted pursuant to the provisions of
Section 7 of the Plan.
(w) "Stock Option" means an Award to purchase shares of Common
Stock granted pursuant to the provisions of Section 6 of the Plan.
(x) "Subsidiary" means any corporation or entity in which the
Company directly or indirectly controls 50% or more of the total voting
power of all classes of its stock having voting power.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee to be
appointed from time to time by the Board and comprised of not less than
two of the then members of the Board, provided that all of the members of
the Committee shall be persons who qualify to administer the Plan as
contemplated by Rule 16b-3(c)(2) of the Exchange Act or any successor
provision. Members of the Committee shall serve at the pleasure of the
Board and the Board may from time to time remove members from, or add
members to, the Committee. A majority of the members of the Committee
shall constitute a quorum for the transaction of business. Action approved
in writing by a majority of the members of the Committee then serving shall
be fully effective as if the action had been taken by unanimous vote at a
meeting duly called and held.
(b) The Committee is authorized to construe and interpret the
Plan to promulgate, amend and rescind rules and regulations relating to the
implementation of the Plan and to make all other determinations necessary
or advisable for the administration of the Plan. The Committee may
designate persons other than members of the Committee to carry out its
responsibilities under such conditions and limitations as it may prescribe,
except that the Committee may not delegate its authority with regard to
selection for participation of, and the granting of Awards to, persons
subject to Sections 16(b) of the Exchange Act. Any determination, decision
or action of the Committee in connection with the construction,
interpretation, administration, or application of the Plan shall be final,
conclusive and binding upon all persons participating in the Plan and any
person validly claiming under or through persons participating in the Plan.
The Committee's powers include, but are not limited to, modifications,
procedures and subplans as are necessary to comply with provisions of the
laws of foreign countries in which the Company and its subsidiaries may
operate to assure the viability of the benefits of Awards made to
Participants employed in such countries and to meet the intent of the Plan.
The Company shall effect the granting of Awards under the Plan in
accordance with the determinations made by the Committee, by execution of
instruments in writing in such form as approved by the Committee.
4. PLAN DURATION; COMMON STOCK SUBJECT TO PLAN.
(a) Term. The Plan shall terminate on July 15, 2002, except
with respect to Awards then outstanding.
(b) Shares of Common Stock Subject to Plan. The maximum number
of shares of Common Stock in respect of which Awards may be granted under
the Plan, subject to adjustment as provided in Section 15 of the Plan, is
500,000.
If any Awards are forfeited, terminated, expire unexercised,
settled in cash in lieu of stock or exchanged for other Awards, the shares
of Common Stock which were theretofor subject to such Awards shall again be
available for Awards under the Plan to the extent of such forfeiture or
expiration of such Awards. Further, any shares of Common Stock which are
used as full or partial payment to the Company by a Participant of the
purchase price of shares of Common Stock upon exercise of a Stock Option
shall again be available for Awards under the Plan, as shall any shares
covered by Stock Appreciation Rights which are not issued as payment upon
exercise.
Common Stock which may be issued under the Plan may be either
authorized and unissued shares or issued shares which have been reacquired
by the Company. No fractional shares of Common Stock shall be issued under
the Plan.
5. ELIGIBILITY. Persons eligible for Awards under the Plan shall
consist of managerial and other key employees of the Company and/or its
Subsidiaries who hold positions of significant responsibilities or whose
performance or potential contribution, in the sole judgment of the Committee,
will benefit the future success of the Company.
6. STOCK OPTIONS. Stock Options granted under the Plan may be in
the form of Incentive Stock Options, Non-Qualified Stock Options or Deferred
Compensation Stock Options and such Stock Options shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the express provisions of the Plan, as the
Committee shall deem desirable:
(a) Grant. Stock Options may be granted under the Plan on such
terms and conditions not inconsistent with the Provisions of the Plan and
in such form as the Committee may from time to time approve. Stock Options
may be granted alone, in addition to or in tandem with other Awards under
the Plan.
(b) Stock Option Price. The option exercise price per share of
Common Stock purchasable under a Stock Option shall be determined by the
Committee at the time of grant, but in no event shall the exercise price of
an Incentive Stock Option be less than one hundred percent (100%) of the
Fair Market Value of the Common Stock on the date of the grant of such
Stock Option.
(c) Option Term. The term of each Stock Option shall be fixed
by the Committee; except that the term of Incentive Stock Options shall not
exceed ten (10) years after the date the Incentive Stock Option is granted.
(d) Exercisability. A Stock Option shall be exercisable at such
time or times and subject to such terms and conditions as shall be
determined by the Committee at the date of grant. Except as provided in
Section 13 of this Plan, no Stock Option may be exercised unless the holder
thereof is at the time of such exercise in the employ of the Company or a
Subsidiary and has been continuously so employed since the date such Stock
Option was granted.
(e) Method of Exercise. A Stock Option may be exercised, in
whole or in part, by giving written notice of exercise to the Company
specifying the number of shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price in cash or, if
acceptable to the Committee in its sole discretion, in shares of Common
Stock already owned by the Participant, or by surrendering outstanding
Awards denominated in stock or stock units. Subject to Section 6(h) of
this Plan, the Committee may also permit Participants, either on a
selective or aggregate basis, to simultaneously exercise Options and sell
the shares of Common Stock thereby acquired, pursuant to a brokerage or
similar arrangement, approved in advance by the Committee, and use the
proceeds from such sale as payment of the purchase price of such shares.
(f) Special Rules for Incentive Stock Options. With respect to
Incentive Stock Options granted under the Plan, the following additional
provisions shall apply:
(i) The aggregate Fair Market Value (determined as of
the date the Incentive Stock Option is granted) of the number of
shares with respect to which Incentive Stock Options are exercisable
for the first time by a Participant during any calendar year shall not
exceed One Hundred Thousand Dollars ($100,000) or such other limit as
may be required by the Code;
(ii) If at the time an Incentive Stock Option is
granted, the Participant owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of
Company, then the terms of the Incentive Stock Option shall specify
that the exercise price shall be at least 110% of the Fair Market
Value of the Common Stock subject to the Incentive Stock Option and
such Incentive Stock Option shall not be exercisable after the
expiration of five (5) years from the date granted; and
(iii) The Committee shall include any other terms
and conditions as may be required in order that the Incentive Stock
Options qualify under Section 422 of the Code or successor provision.
(g) Deferred Compensation Stock Options. Deferred Compensation
Stock Options are intended to provide a means by which compensation
payments can be deferred to future dates. The number of shares of Common
Stock subject to a Deferred Compensation Stock Option shall be determined
by the Committee, in its sole discretion, in accordance with the following
formula:
Amount of Compensation to be Deferred = Number of (Fair Market Value -
Exercise Price) Optioned Shares
Amounts of compensation deferred may include amounts earned under Awards
granted under the Plan or under any other compensation plan, program or
arrangement of the Company as permitted by the Committee.
Deferred Compensation Stock Options will be granted only if the
Committee has reasonably determined that a recipient of such an option will
not be deemed at the date of grant to be in receipt of the amount of income
being deferred for purposes of the Code.
(h) Six Month Holding Period. Common Stock acquired upon
exercise of any Stock Option shall not be disposed of by the Participant
until after six months elapse from the date the Stock Option was granted.
7. STOCK APPRECIATION RIGHTS. The grant of Stock Appreciation
Rights under the Plan shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
express terms of the Plan, as the Committee shall deem desirable:
(a) Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling a Participant to receive an amount equal to (or if the
Committee shall determine at the time of grant, less than) the excess of
the Fair Market Value of a share of Common Stock on the date of exercise
over the Fair Market Value of a share of Common Stock on the date of grant
of the Stock Appreciation Right, or such other price as set by the
Committee, multiplied by the number of shares of Common Stock with respect
to which the Stock Appreciation Right shall have been exercised.
(b) Grant. A Stock Appreciation Right may be granted in tandem
with, in addition to or completely independent of a Stock Option or any
other Award under the Plan.
(c) Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee,
except that in no event shall a Stock Appreciation Right be exercisable
within the first six (6) months after the date of grant, except in the
event of the death or Disability of the Participant. In the case of an
officer who is subject to Section 16(b) of the Exchange Act, no payment in
the form of cash may be made upon the exercise of a Stock Appreciation
Right unless such exercise is made during the period beginning on the third
business day and ending on the twelfth business day following the date of
release for publication of the Corporation's quarterly or annual statement
of earnings, or unless the Committee has provided that the Stock
Appreciation Right shall be automatically exercised on one or more
specified dates outside of the control of the Participant.
(d) Form of Payment. Payment upon exercise of a Stock
Appreciation Right may be made in cash, in shares of Common Stock, a
Deferred Compensation Stock Option or any combination thereof, as the
Committee shall determine; provided, however, that any Stock Appreciation
Right exercised upon or subsequent to the occurrence of a Change in Control
(as defined in Section 16) shall be paid in cash.
8. RESTRICTED AWARDS. Restricted Awards granted under the Plan may
be in the form of either Restricted Stock Grants or Restricted Unit Grants.
Restricted Awards shall be subject to the following terms and conditions and
shall contain such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee shall deem desirable:
(a) Restricted Stock Grants. A Restricted Stock Grant is an
Award of shares of Common Stock transferred to a Participant subject to
such terms and conditions as the Committee deems appropriate, including,
without limitation, restrictions on the sale, assignment, transfer or other
disposition of such shares and the requirement that the Participant forfeit
such shares back to the Company upon termination of employment for
specified reasons within a specified period of time.
(b) Restricted Unit Grants. A Restricted Unit Grant is an Award
of units (with each unit having a value equivalent to one share of Common
Stock) granted to a Participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, the requirement
that the Participant forfeit such units upon termination of employment for
specified reasons within a specified period of time.
(c) Grants of Awards. Restricted Awards may be granted under
the Plan in such form and on such terms and conditions as the Committee may
from time to time approve. Restricted Awards may be granted alone, in
addition to or in tandem with other Awards under the Plan. Subject to the
terms of the Plan, the Committee shall determine the number of Restricted
Awards to be granted to a Participant and the Committee may impose
different terms and conditions on any particular Restricted Award made to
any Participant. Each Participant receiving a Restricted Stock Grant shall
be issued a stock certificate in respect of such shares of Common Stock.
Such certificate shall be registered in the name of such Participant, shall
be accompanied by a stock power duly executed by such Participant, shall
bear an appropriate legend referring to the terms, conditions and
restrictions applicable to such Award, and shall be held in custody by the
Company until the restrictions thereon shall have lapsed.
(d) Restriction Period. Restricted Awards shall provide that in
order for a Participant to vest in such Awards, the Participant must remain
in the employment of the Company or its Subsidiaries, subject to relief for
specified reasons, for such time period commencing on the date of the
Award and ending on such later date or dates as the Committee may designate
at the time of the Award ("Restriction Period"). During the Restriction
period, a Participant may not sell, assign, transfer, pledge, encumber or
otherwise dispose of shares of Common Stock received under a Restricted
Stock Grant. The Committee, in its sole discretion, may provide for the
lapse of restrictions in installments during the Restriction Period. Upon
expiration of the applicable Restriction period (or lapse of restrictions
during the Restriction Period where the restrictions lapse in installments)
the Participant shall be entitled to receive his or her Restricted Award or
portion thereof, as the case may be; provided, however, Common Stock
received upon payment of a Restricted Award shall not be disposed of by the
Participant until after six months elapse from the date the Restricted
Award was granted.
(e) Payment of Awards. A Participant shall be entitled to
receive payment for a Restricted Unit Grant (or portion thereof) in an
amount equal to the aggregate Fair Market Value of the shares of Common
Stock covered by such Award upon expiration of the applicable Restriction
Period. Payment in settlement of a Restricted Unit Grant shall be made as
soon as practicable following the conclusion of the respective Restriction
Period in cash, in shares of Common Stock equal to the number of units
granted under the Restricted Unit Grant with respect to which such payment
is made, a Deferred Compensation Stock Option or in any combination
thereof, as the Committee in its sole discretion shall determine. With
respect to a Restricted Stock Grant, the Committee may also, in its
discretion, permit a Participant to elect to receive, in lieu of shares of
unrestricted stock at the conclusion of a Restriction Period, a cash
payment equal to the Fair Market Value of the Restricted Stock vesting on
the date the restrictions lapse.
(f) Rights as a Shareholder. A Participant shall have, with
respect to the shares of Common Stock received under a Restricted Stock
Grant, all of the rights of a shareholder of the Company, including the
right to vote the shares, and the right to receive any cash dividends.
Stock dividends issued with respect to the shares covered by a Restricted
Stock Grant shall be treated as additional shares under the Restricted
Stock Grant and shall be subject to the same restrictions and other terms
and conditions that apply to shares under the Restricted Stock Grant with
respect to which such dividends are issued.
9. PERFORMANCE AWARDS. Performance Awards granted under the Plan
may be in the form of either Performance Equity Grants or Performance Unit
Grants. Performance Awards shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable:
(a) Performance Equity Grants. A Performance Equity Grant is an
Award of units (with each unit equivalent in value to one share of Common
Stock) granted to a Participant subject to such terms and conditions as the
Committee deems appropriate, including, without limitation, the requirement
that the Participant forfeit such units or a portion of such units in the
event certain performance criteria are not met within a designated period
of time.
(b) Performance Unit Grants. A Performance Unit Grant is an
Award of units (with each unit representing such monetary amount as
designated by the Committee) granted to a Participant subject to such terms
and conditions as the Committee deems appropriate, including, without
limitation, the requirement that the Participant forfeit such units or a
portion of such units in the event certain performance criteria are not met
within a designated period of time.
(c) Grants of Awards. Performance Awards may be granted under
the Plan in such form as the Committee may from time to time approve.
Performance Awards may be granted alone, in addition to or in tandem with
other Awards under the Plan. Subject to the terms of the Plan, the
Committee shall determine the number of Performance Awards to be granted to
a Participant and the Committee may impose different terms and conditions
on any particular Performance Award made to any Participant.
(d) Performance Goals and Performance Periods. Performance
Awards shall provide that in order for a Participant to vest in such Awards
the Company and/or the individual Participant, or his or her division or
unit, must achieve certain performance goals ("Performance Goals") over a
designated performance period ("Performance Period") having a minimum
duration of two years. The Performance Goals and Performance Period shall
be established by the Committee, in its sole discretion. The Committee
shall establish Performance Goals for each Performance Period before, or as
soon as practicable after, the commencement of the Performance Period. The
Committee shall also establish a schedule or schedules for such Performance
Period setting forth the portion of the Performance Award which will be
earned or forfeited based on the degree of achievement of the Performance
Goals actually achieved or exceeded. In setting Performance Goals, the
Committee may use such measures of performance in such manner as it deems
appropriate, such as, for example, return on equity, earnings growth,
revenue growth, comparisons to peer companies or prior period performance
of the Participant or his or her division or unit. During the Performance
Period, the Committee shall have the authority to adjust upward or downward
the Performance Goals in such manner as it deems appropriate.
(e) Payment of Awards. In the case of a Performance Equity
Grant, the Participant shall be entitled to receive payment for each unit
earned in an amount equal to the aggregate Fair Market Value of the shares
of Common Stock covered by such Award at the time such Award is vested or
otherwise required to be settled in accordance with its terms. In the case
of a Performance Unit Grant, the Participant shall be entitled to receive
payment for each unit earned in an amount equal to the dollar value of each
unit times the number of units earned. Payment in settlement of a
Performance Award shall be made as soon as practicable following the
conclusion of the respective Performance Period in cash, in shares of
Common Stock, a Deferred Compensation Stock Option or in any combination
thereof, as the Committee in its sole discretion shall determine.
10. OTHER STOCK-BASED AND COMBINATION AWARDS.
(a) The Committee may grant other Awards under the Plan pursuant
to which Common Stock is or may in the future be acquired, or Awards
denominated in stock units, including ones valued using measures other than
market value. Such Other Stock-Based Grants may be granted either alone,
in addition to or in tandem with any other type of Award Granted under the
Plan.
(b) The Committee may also grant Awards under the Plan in tandem
or combination with other Awards or in exchange of Awards, or in tandem or
combination with, or as alternatives to grants or rights under any other
employee plan of the Company, including the plan of any acquired entity.
(c) Subject to the provisions of the Plan, the Committee shall
have authority to determine the individuals to whom and the time or times
at which such Awards shall be made, the number of shares of Common Stock to
be granted or covered pursuant to such Awards, and any and all other
conditions and/or terms of the Awards.
11. DEFERRAL ELECTIONS. The Committee may permit a Participant to
elect to defer his or her receipt of the payment of cash or the delivery of
shares of Common Stock that would otherwise be due to such Participant by virtue
of the earn out or exercise of an Award made under the Plan. If any such
election is permitted, the Committee shall establish rules and procedures for
such payment deferrals, including, but not limited to, the possible (a) payment
or crediting of reasonable interest on such deferred amounts credited in cash,
(b) the payment or crediting of dividend equivalents in respect of deferrals
credited in units of Common Stock, and (c) granting of Deferred Compensation
Stock Options.
12. DIVIDEND EQUIVALENTS. Awards of Stock Options, Stock
Appreciation Rights, Restricted Unit Grants, Performance Equity Grants, and
other stock-based Awards may, in the discretion of the Committee, earn dividend
equivalents. In respect of any such Award which is outstanding on a dividend
record date for Common Stock, the Participant may be credited with an amount
equal to the amount of cash or stock dividends that would have been paid on the
shares of Common Stock covered by such Award had such covered shares been issued
and outstanding on such dividend record date. The Committee shall establish
such rules and procedures governing the crediting of dividend equivalents,
including the timing, form of payment and payment contingencies of such dividend
equivalents, as it deems are appropriate or necessary.
13. TERMINATION OF EMPLOYMENT. The terms and conditions under which
an Award may be exercised after a Participant's termination of employment shall
be determined by the Committee.
In the case of an Incentive Stock Option, such Award shall expire no
later than the date three months after the termination of the Participant's
employment for any reason other than death or Disability. In the event of
termination of the Participant's employment by reason of death or Disability,
the Incentive Stock Option shall expire on the earlier of the expiration of (i)
the date specified in the Award which in no event shall be later than 12 months
after the date of such termination, or (ii) the term specified in Section 6(c)
of this Plan.
Notwithstanding any other provision to the contrary, in the event a
Participant's employment with the Company or a Subsidiary terminates for any
reason within six (6) months of the date of grant of any Award held by the
Participant, such Award shall expire as of the date of such termination of
employment and the Participant and the Participant's legal representative or
beneficiary shall forfeit any and all rights pertaining to such Award.
14. NON-TRANSFERABILITY OF AWARDS. No Award under the Plan, and no
rights or interests therein, shall be assignable or transferable by a
Participant except by will or the laws of descent and distribution. During the
lifetime of a Participant, Stock Options and Stock Appreciation Rights are
exercisable only by, and payments in settlement of Awards will be payable only
to, the Participant or his legal representative.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
(a) The existence of the Plan and the Awards granted hereunder
shall not affect or restrict in any way the right or power of the Board or
the shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any
issue of bonds, debentures, preferred or prior preference stocks ahead of
or affecting the Company's capital stock or the rights thereof, the
dissolution or liquidation of the Company or any sale or transfer of all or
any part of its assets or business, or any other corporate act or
proceeding.
(b) In the event of any change in capitalization affecting the
Common Stock of the Company, such as a stock dividend, stock split,
recapitalization, merger, consolidation, split-up, combination or exchange
of shares or other form of reorganization, or any other change affecting
the Common Stock, such proportionate adjustments, if any, as the Board in
its discretion may deem appropriate to reflect such change shall be made
with respect to the aggregate number of shares of Common Stock for which
Awards in respect thereof may be granted under the Plan, the maximum number
of shares of Common Stock which may be sold or awarded to any Participant,
the number of shares of Common Stock covered by each outstanding Award, and
the price per share in respect of outstanding Awards.
(c) The Committee may also make such adjustments in the number
of shares covered by, and the price or other value of any outstanding
Awards in the event of a spin-off or other distribution (other than normal
cash dividends) of Company assets to shareholders. In the event that
another corporation or business entity is being acquired by the Company,
and the Company agrees to assume outstanding employee stock options and/or
stock appreciation rights and/or the obligation to make future grants of
options or rights to employees of the acquired entity, the aggregate number
of shares of Common Stock available for Awards under Section 4 of the Plan
may be increased accordingly.
16. CHANGE IN CONTROL.
(a) In the event of a Change in Control (as defined below) of
the Company, and except as the Board may expressly provide otherwise, (i)
all Stock Options and Stock Appreciation Rights then outstanding shall
become fully exercisable as of the date of the Change in Control, whether
or not then exercisable, (ii) all restrictions and conditions of all
Restricted Stock Grants and Restricted Unit Grants then outstanding shall
be deemed satisfied as of the date of the Change in Control, and (iii) all
Performance Equity Grants and Performance Unit Grants shall be deemed to
have been fully earned as of the date of the Change in Control, subject to
the limitation that any Award which has been outstanding less than six (6)
months on the date of the Change in Control shall not be afforded such
treatment.
(b) A "Change in Control" of the Company shall have occurred if,
after the date of approval of this Plan by the Shareholders of Company, any
Acquiring Person (other than the Company, any Subsidiary, any employee
benefit plan of the Company or of any Subsidiary, or any person or entity
organized, appointed or established by the Company or any Subsidiary for or
pursuant to the terms of any such plans), alone or together with its
Affiliates and Associates, shall become the beneficial owner of thirty-five
percent (35%) or more of the shares of Common Stock then outstanding
(except pursuant to an offer for all outstanding shares of the Company's
Common Stock at a price and upon such terms and conditions as a majority of
the Continuing Directors determine to be in the best interests of the
Company and its shareholders, (other than the Acquiring Person or any
Affiliate or Associate thereof on whose behalf the offer is being made)),
and the Continuing Directors no longer constitute a majority of the Board.
(c) "Acquiring Person" means any person (any individual, firm,
corporation or other entity) who or which, together with all Affiliates and
Associates, shall be the beneficial owner of a substantial block of the
Company's Common Stock.
(d) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(e) "Continuing Director" means (i) any individual who is a
member of the Board, while such individual is a member of the Board, who is
not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative or nominee of an Acquiring Person or of any
such Affiliate or Associate and was a member of the Board prior to the
occurrence of the Change in Control date, or (ii) any successor of a
Continuing Director, while such successor is a member of the Board, and who
is not an Acquiring Person, or an Affiliate or Associate, and is
recommended or elected to succeed the Continuing Director by a majority of
the Continuing Directors.
17. AMENDMENT AND TERMINATION. Without further approval of the
shareholders, the Board may at any time terminate the Plan, or may amend it from
time to time in such respects as the Board may deem advisable, except that the
Board may not, without approval of the shareholders, make any amendment which
would (i) increase the aggregate number of shares of Common Stock which may be
issued under the Plan (except for adjustments pursuant to Section 15 of the
Plan), (ii) materially modify the requirements as to eligibility for
participation in the Plan, or (iii) materially increase the benefits accruing to
Participants under the Plan. The above notwithstanding, the Board may amend the
Plan to take into account changes in applicable securities, federal income tax
laws and other applicable laws. Further, should the provisions of Rule 16b-3,
or any successor rule, under the Exchange Act be amended, the Board may amend
the Plan in accordance with any modifications to this rule.
18. MISCELLANEOUS.
(a) Tax Withholding. The Company shall have the right to deduct
from any settlement, including the delivery or vesting of shares, made
under the Plan any federal, state or local taxes of any kind required by
law to be withheld with respect to such payments or to take such other
action as may be necessary in the opinion of the Company to satisfy all
obligation for the payment of such taxes. If Common Stock is used to
satisfy tax withholding, such stock shall be valued based on the Fair
Market Value when the tax withholding is required to be made.
(b) No Right to Employment. Neither the adoption of the Plan
nor the granting of any Award shall confer upon any employee of the Company
or any Subsidiary any right to continued employment with the Company or any
Subsidiary, as the case may be, nor shall it interfere in any way with the
right of the Company or a Subsidiary to terminate the employment of any of
its employees at any time, with or without cause.
(c) Unfunded Plan. The Plan shall be unfunded and the Company
shall not be required to segregate any assets that may at any time be
represented by Awards under the Plan. Any liability of the Company to any
person with respect to any Award under the Plan shall be based solely upon
any contractual obligations that may be effected pursuant to the Plan. No
such obligation of the Company shall be deemed to be secured by any pledge
of, or other encumbrance on, any property of the Company.
(d) Payments to Trust. The Committee is authorized to cause to
be established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants
in the Plan.
(e) Annulment of Awards. The grant of any Award under the Plan
payable in cash is provisional until cash is paid in settlement thereof.
The grant of any Award payable in Common Stock is provisional until the
Participant becomes entitled to the certificate in settlement thereof. In
the event the employment of a Participant is terminated for cause (as
defined below), any Award which is provisional shall be annulled as of the
date of such termination for cause. For the purpose of this Section 18(e),
the term "terminated for cause" means any discharge for violation of the
policies and procedures of the Company or for other job performance or
conduct which is detrimental to the best interests of the Company, as
determined by the Committee in its sole discretion.
(f) Engaging in Competition With Company. In the event a
Participant terminates his or her employment with the Company or a
Subsidiary for any reason whatsoever (except after a Change in Control),
and within eighteen (18) months after the date thereof accepts employment
with any significant competitor of, or otherwise engages in material
competition with, the Company or a Subsidiary, the Committee, in its sole
discretion, may require such Participant to return to the Company the
economic value of any Award which is realized or obtained (measured at the
date of exercise, vesting or payment) by such Participant at any time
during the period beginning on that date which is six months prior to the
date of such Participant's termination of employment with the Company or a
Subsidiary.
(g) Other Company Benefit and Compensation Programs. Payments
and other benefits received by a Participant under an Award made pursuant
to the Plan shall not be deemed a part of a Participant's regular,
recurring compensation for purposes of the termination indemnity or
severance pay law of any country and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit
plan or similar arrangement provided by the Company or a Subsidiary unless
expressly so provided by such other plan or arrangements, or except where
the Committee expressly determines that inclusion of an Award or portion of
an Award should be included to accurately reflect competitive compensation
practices or to recognize that an Award has been made in lieu of a portion
of competitive annual cash compensation. Awards under the Plan may be made
in combination with or in tandem with, or as alternatives to, grants,
awards or payments under any other Company or Subsidiary plans. The Plan
notwithstanding, the Company or any Subsidiary may adopt such other
compensation programs and additional compensation arrangements as it deems
necessary to attract, retain and reward employees for their service with
the Company and its Subsidiaries.
(h) Securities Law Restrictions. No shares of Common Stock
shall be issued under the Plan unless counsel for the Company shall be
satisfied that such issuance will be in compliance with applicable Federal
and state securities laws. Certificates for shares of Common Stock
delivered under the Plan may be subject to such stop-transfer orders and
other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which the Common Stock is then listed,
and any applicable Federal or state securities law. The Committee may
cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
(i) Award Agreement. Each Participant receiving an Award under
the Plan shall enter into an agreement with the Company in a form specified
by the Committee agreeing to the terms and conditions of the Award and such
related matters as the Committee shall, in its sole discretion, determine.
(j) Costs of Plan. The costs and expenses of administering the
Plan shall be borne by the Company.
(k) Governing Law. The Plan and all actions taken thereunder
shall be governed by and construed in accordance with the laws of the State
of Delaware.
(l) Effective Date. The Plan shall be effective if, and when,
approved by the affirmative vote of a majority of the holders of the Common
Stock present in person or represented by proxy at the 1992 annual meeting
of shareholders or any adjournment thereof.