[INTERLAKE LOGO]
550 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-4387
(630) 852-8800
March 20, 1998
To Our Stockholders:
This year we are holding our annual meeting on Thursday, April 23, 1998,
at 10:00 a.m. local time, at the Opryland Hotel Convention Center, 2800
Opryland Drive, Nashville, Tennessee 37214.
Matters before the meeting are summarized in the formal notice of meeting
which appears on the next page. In addition, there will be a brief statement
concerning the affairs of The Interlake Corporation, after which stockholders
will be given an opportunity to ask questions or make comments.
Inasmuch as many of our stockholders are unable to personally attend the
annual meeting, the Board of Directors solicits proxies so that each
stockholder is given an opportunity to vote. If you are a stockholder of
record (Interlake shares are registered in your name), please return the
white card to First Chicago Trust Company of New York. If your shares are
held for your account by a bank or broker, please return the accompanying
voting instructions to your bank or broker. If you participate in The
Interlake Corporation Employee Stock Ownership Plan, enclosed are forms which
you may use to direct the trustee to vote certain shares in accordance with
your instructions. If you participate in the Chem-tronics, Inc. Employee
Stock Ownership Plan, or the Interlake Stock Fund of the Interlake Salaried
Employees Retirement Savings Plan, you will soon receive forms which you may
use to direct the trustee of your employee benefit plan to vote certain
shares held by such plan in accordance with its terms.
It is important to you and helpful to your directors that all stockholders
participate in the affairs of The Interlake Corporation. You may specify your
choices by marking the appropriate boxes on the proxy card or voting
instructions. To vote on all matters to be voted upon in accordance with the
recommendation of your Board of Directors, stockholders of record need only
sign and return the proxy card in the addressed, postage pre-paid envelope
provided.
Sincerely,
/s/W. Robert Reum
W. ROBERT REUM
Chairman of the Board, President
and Chief Executive Officer
[INTERLAKE LOGO]
550 WARRENVILLE ROAD
LISLE, ILLINOIS 60532-4387
(630) 852-8800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the annual meeting of stockholders of
The Interlake Corporation, a Delaware corporation, will be held at the Opryland
Hotel Convention Center, 2800 Opryland Drive, Nashville, Tennessee 37214, on
Thursday, April 23, 1998, at 10:00 a.m. local time, for the following
purposes:
1. To elect two directors;
2. To approve the 1998 Stock Incentive Program; and
3. To transact such other business as may properly come before said
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 10,
1998, as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting or any adjournment thereof.
By order of the Board of Directors.
STEPHEN R. SMITH
/s/Stephen R. Smith
Vice President, Secretary
and General Counsel
Lisle, Illinois
March 20, 1998
YOUR VOTE IS IMPORTANT
Please complete, sign and date the proxy card or voting instructions form
and return it promptly in the postage pre-paid envelope.
[INTERLAKE LOGO]
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation on behalf of the Board of Directors of The Interlake Corporation
of proxies to be used at the annual meeting of stockholders of Interlake to be
held at the Opryland Hotel Convention Center, 2800 Opryland Drive, Nashville,
Tennessee, on April 23, 1998, at 10:00 a.m. local time. Throughout this proxy
statement, "Interlake" and the "Corporation" mean The Interlake Corporation,
"Board" means the Board of Directors of Interlake, "last fiscal year" means the
period which began on December 30, 1996 and ended on December 28, 1997,
"executive officers" means certain officers of Interlake elected by the Board
and operating executives not elected by the Board who have been designated
executive officers of Interlake for purposes of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), "Common Stock" means Interlake's
voting Common Stock, par value $1 per share, and shares "outstanding" means
shares issued less treasury shares.
Interlake's address is 550 Warrenville Road, Lisle, Illinois
60532-4387. This proxy statement, the accompanying proxy card and the annual
report to stockholders are being mailed to stockholders commencing on March
20, 1998. This proxy statement is also being distributed to participants in
various employee benefit plans of Interlake or its subsidiaries or former
subsidiaries and to banks and brokers for redistribution to their customers.
DIRECTORS AND NOMINEES
Interlake's Restated Certificate of Incorporation, as amended to
date (the "Certificate"), provides for a Board consisting of not fewer than
seven nor more than 15 directors, the exact number to be fixed by the Board.
The Board of Directors currently consists of eight members.
The Certificate further provides that the directors are to be
divided into three classes and each class is to be elected for a three year
term. The Board has nominated John E. Jones and W. Robert Reum for three year
terms ending at the 2001 annual meeting. Both of the nominees are currently
directors of Interlake whose terms expire in 1998. If, for any reason not
now anticipated, any one of the two nominees becomes unable to serve, the
number of directors constituting the full Board and the number of directors
to be elected at the 1998 annual meeting will be reduced by one. If more
than one of the nominees becomes unable to serve, the proxy holders will vote
for a substitute or substitutes recommended by the Board Development
Committee and designated by the Board.
There follows information about the two nominees and other incumbent
directors whose terms of office as directors will continue after the 1998
annual meeting of stockholders. The period of each director's Board service
includes both Interlake and, if applicable, predecessors of Interlake.
TERM EXPIRES IN 2001
JOHN E. JONES, age 63, retired in January 1996 as the Chairman of
the Board, President, Chief Executive Officer and a Director of CBI Industries,
Inc., a manufacturer of industrial gases, provider of construction services
and investor in oil transport and storage businesses. Executive officer and
Director of CBI since 1976. Director of Allied Products Corporation, Amsted
Industries Incorporated, NICOR Inc., Valmont Industries, Inc. and BWAY Corp.
Interlake director since 1988. Committees: Management Development and
Compensation, Finance, and Board Development.
W. ROBERT REUM, age 55, Chairman of the Board, President and Chief
Executive Officer of Interlake since 1991. Director of Amsted Industries
Incorporated. Interlake director since 1987.
TERM WHICH EXPIRES IN 2000
FREDERICK C. LANGENBERG, age 70, retired in 1991 as Chairman of the
Board and Chief Executive Officer of Interlake. Interlake director since
1979. Committees: Audit Review, Finance, and Board Development.
WILLIAM G. MITCHELL, age 67, retired as Vice Chairman and Director
of Centel Corporation, a communications and electric services company, in 1987.
Director of The Northern Trust Company, The Sherwin-Williams Company, and
Peoples Energy Corporation. Interlake director since 1984. Committees:
Audit Review, and Management Development and Compensation.
ERWIN E. SCHULZE, age 72, Chairman Emeritus of the Board of
Governors of the Chicago Stock Exchange. Retired as Chairman of the Board,
President and Chief Executive Officer, and Director of The Ceco Corporation,
a manufacturer of building products and provider of concrete forming services
for the construction industry, in 1990. Director of AAR Corporation.
Interlake director since 1981. Committees: Management Development and
Compensation, and Finance.
TERM EXPIRES IN 1999
JOHN A. CANNING, JR., age 53, President, Madison Dearborn Partners,
Inc., a manager of private equity investment funds, since January 1993.
Formerly President of First Chicago Venture Capital from 1980 to 1993 and
Executive Vice President of The First National Bank of Chicago from 1987 to
1993. Director of Milwaukee Brewers Baseball Club, Inc., Norfolk Tides Baseball
Club, Northwestern Memorial Corporation and Northwestern Memorial Management
Corporation; member of the Board of Trustees of Northwestern University;
member of the Board of Visitors of Duke University School of Law. Interlake
director since 1993. Committees: Management Development and Compensation,
and Finance.
JAMES C. COTTING, age 64, retired in 1995 as Chairman and Chief
Executive Officer of Navistar International Corporation, a manufacturer of
medium and heavy duty trucks. Director of Asarco Incorporated and USG
Corporation. Member of the Board of Governors of the Chicago Stock Exchange.
Director of Junior Achievement of Chicago and a trustee of the Adler
Planetarium. Interlake director since 1989. Committees: Audit Review, and
Finance.
QUENTIN C. MCKENNA, age 71, retired in 1996 as Chairman of the
Board and a Director, and in 1991 as Chief Executive Officer, of Kennametal,
Inc., a manufacturer of metal cutting tools, machining systems, and materials
for applications requiring wear resistance. Past Director of PNC Financial
Corp. and its affiliate, Pittsburgh National Bank; past director of the Federal
Reserve Bank of Cleveland. Interlake director since 1986. Committees:
Audit Review, and Board Development.
1998 STOCK INCENTIVE PROGRAM
On February 26, 1998, the Corporation's Board of Directors adopted,
subject to stockholder approval, the 1998 Stock Incentive Program (the "1998
Program"). As of March 10, 1998, 161,920 shares of Common Stock were
available to be the subject of awards under the Corporation's 1989 Stock
Incentive Program, and 130,000 shares of Common Stock were available to be
the subject of awards under the Corporation's 1997 Stock Incentive program.
General Information
The purpose of the 1998 Program is to attract and retain outstanding
individuals as directors, officers and key employees of the Corporation and
its subsidiaries and to furnish performance incentives to such individuals
by providing opportunities for such individuals to acquire shares of Common
Stock. Benefits may not be granted under the 1998 Program after April 23,
2008.
The 1998 Program will be administered by the Management Development
and Compensation Committee (the "Committee") of the Corporation's Board of
Directors. Each of the at least three members of the Committee must be a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 (the "Exchange Act") and an "Outside Director" within
the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). The interpretation and construction by the Committee
of any provision of the 1998 Program or of any document evidencing the grant
of any Benefits and any determination by the Committee pursuant to any
provision of the 1998 Program or of any such document shall be final and
conclusive. No member of the Committee shall be liable for any such action
or determination made in good faith. The Corporation's Secretary (or another
officer designated from time to time by the Corporation's Chief Executive
Officer) will perform record-keeping functions under the 1998 Program. Any
decision by such officer, if approved by the Committee, will be binding and
conclusive for all purposes.
The Committee is authorized to designate the directors, officers
and key employees ("Participants") of the Corporation and its subsidiaries (or
any person who has agreed to commence serving in such capacity within 90 days)
who may receive Benefits under the 1998 Program. The granting of Benefits
to any such persons is entirely in the discretion of the Committee and the
Committee may consider such factors as it deems pertinent in designating
Participants and in determining the terms of such Benefits. Benefits which
may be granted under the 1998 Program include stock options, restricted
shares and shares in lieu of certain cash payments. Each type of Benefit is
described below.
Subject to adjustment as described below, the number of shares of
Common Stock that may be issued or transferred (I) upon the exercise of stock
options, (ii) as restricted shares and released from substantial risks of
forfeiture thereof, or (iii) as shares in lieu of certain cash payments shall
not exceed in the aggregate 1,150,000 shares plus any shares relating to
Benefits that expire or are forfeited or cancelled. Such shares may be
shares of original issuance or treasury shares or a combination of the
foregoing. The Corporation is not required to issue fractional shares under
the 1998 Program and may provide for elimination of fractions or the
settlement of fractions in cash. Upon the payment of any option price by the
transfer to the Corporation of shares of Common Stock or upon satisfaction
of any withholding amount by means of transfer or relinquishment of shares
of Common Stock, there shall be deemed to have been issued or transferred
under the 1998 Program only the net number of shares of Common Stock actually
issued or transferred by the Corporation. Notwithstanding the foregoing, the
aggregate number of shares of Common Stock actually issued or transferred by
the Corporation upon the exercise of stock options intended to qualify as
"incentive stock options" under Section 422 of the Code shall not exceed
1,150,000 shares, subject to adjustments as described below. The Committee
shall make or provide for such adjustments in the purchase price and in the
number and kind of shares covered by outstanding stock options as it may
determine in good faith is equitably required to prevent dilution or
enlargement of the rights of optionees as a result of any stock dividend,
stock split, combination of shares, recapitalization, merger, consolidation,
spin-off, reorganization, partial or complete liquidation or other corporate
transaction or event having a similar effect. In the event of any such
transaction or event, the Committee, in its discretion, may also provide in
substitution for any or all outstanding Benefits under the 1998 Program such
alternative consideration as it, in good faith, may determine to be equitable
in the circumstances and may require in connection therewith the surrender
of all Benefits so replaced. In such circumstances, the Committee shall also
make adjustments in the maximum number of shares issuable under the 1998
Program and in the per individual limits contained therein as it deems
appropriate.
Stock Options
The Committee is authorized to grant stock options to Participants.
The terms of each stock option will be determined by the Committee and set
forth in an option agreement delivered to the optionee. No Participant shall
be granted stock options under the 1998 Program for more than 575,000 shares of
Common Stock during any three year period, subject to adjustments as
described above. Stock options may be "incentive stock options" intended to
qualify under Section 422 of the Code, stock options which are not intended
to so qualify ("nonqualified stock options") or a combination of both. Each
stock option grant must specify the number of shares to which it pertains and
the option price, which may not be less than the fair market value of such
shares on the date of grant. "Fair market value" means, at any date, the
average of the high and low price of the Common Stock on that date (or, if
no sales of Common Stock occurred on that date, the last preceding date upon
which sales of Common Stock occurred) on the New York Stock Exchange
Composite Transactions or any other securities exchange on which the Common
Stock is traded if it is not traded on the New York Stock Exchange or The
Nasdaq Stock Market if the Common Stock is listed thereon and is not traded
on any national securities exchange, in each case as reported (corrected for
reporting errors) in The Wall Street Journal. As of March 10, 1998, the fair
market value of the Common Stock determined in accordance with the 1998
Program was $4.6875.
The Committee is authorized to fix the other terms and conditions
of all stock options granted under the 1998 Program, including the period or
periods of continuous employment or continuous service as a director or the
achievement of Management Objectives necessary prior to the stock option
becoming exercisable and any provision accelerating, for any reason stated,
such exercisability. Management Objectives are measurable performance
objectives established by the Committee and described in terms of
Corporation-wide objectives or objectives that are related to the performance
of the Common Stock, another corporation, the individual Participant or of
the subsidiary, division, department, region or function within the
Corporation or subsidiary in which the Participant is employed. If the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Corporation, or the manner in which it
conducts its business, or other events or circumstances render the Management
Objectives unsuitable, the Committee may in its discretion modify such
Management Objectives, in whole or in part, as the Committee deems
appropriate and equitable. The term of each stock option is also determined
by the Committee. No stock option may be granted for a term of more than ten
years from the date of grant.
Upon the exercise of any stock option, the option price is payable
in cash or check acceptable to the Corporation. The Committee may also provide
that the option price may be paid by the transfer to the Corporation of
shares of Common Stock owned by the optionee and having a fair market value
on the date of exercise equal to the Option Price or by a combination of cash
and delivery of shares of Common Stock owned by the optionee. The Committee
may also determine, at or after the date of grant of a stock option (other
than an "incentive stock option"), that payment of the option price may also
be made in whole or in part in the form of restricted shares or other shares
of Common Stock that are forfeitable or subject to restrictions on transfer
(based, in each case, on the fair market value per share on the date of
exercise) or other stock options (based on the difference (the "Spread")
between the fair market value and the exercise price of such option on the
date of exercise). Unless otherwise determined by the Committee at or after
the date of grant of a stock option, whenever any option price is paid in
whole or in part by means of any of the forms of consideration specified in
the preceding sentence, the shares of Common Stock received upon the exercise
of the stock options shall be subject to such risks of forfeiture or
restrictions on transfer as may correspond to any that apply to the
consideration surrendered, but only to the extent of (i) the number of shares
so surrendered, or (ii) the Spread of any unexercisable portion of stock
options. Any grant may provide for deferred payment of the option price from
the proceeds of sale through a bank or broker on a date satisfactory to the
Corporation of some or all of the shares to which such exercise relates.
The Committee may, with the agreement of the affected optionee,
amend or cancel any stock option granted under the 1998 Program, provided that
no such amendment will lower the exercise price of any outstanding options,
and no such amendment may cause a stock option to cease to qualify as "
performance-based" under Section 162(m) of the Code. In the event of any such
cancellation, the Committee may authorize the granting of new stock options
(which may or may not cover the same number of shares which had been the
subject of any prior stock option) in such manner, at such option price and
subject to the same terms and conditions as would have been applicable had
the cancelled stock options not been granted provided, however, that in the
event of a cancellation of a holder's Stock Options, new Stock Options under
the 1998 Program may not be issued to the same holder at a lower price.
Restricted Shares
The Committee is authorized to grant restricted shares, which
constitute an immediate transfer of ownership of shares of Common Stock to the
Participant in consideration of the performance of services, entitling such
Participant to voting, dividend and other ownership rights, but subject to
the substantial risk of forfeiture and restrictions on transfer referred to
below. No Participant may receive more than 100,000 restricted shares in any
one calendar year, subject to adjustments as described above. Each grant
must specify the number of shares of Common Stock subject thereto and must
be subject to forfeiture or lapse in such circumstances as the Committee may
determine. Restricted shares must be subject, for a period to be determined
by the Committee, to a substantial risk of forfeiture within the meaning of
Section 83 of the Code. Any grant of restricted shares may specify
Management Objectives which, if achieved, will result in termination or early
termination of the restrictions applicable to such shares. Each grant may
be made without additional consideration or in consideration of a payment by
such Participant that is less than fair market value. Each grant of
restricted shares shall provide that during the period for which a
substantial risk of forfeiture continues, the transferability of the
restricted shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Committee at the date of grant (which restrictions
may include, without limitation, rights of repurchase or first refusal in the
Corporation or provisions subjecting the restricted shares to a continuing
substantial risk of forfeiture in the hands of any transferee). Any grant
of restricted shares may require that any or all dividends or other
distributions paid thereon during the period of such restrictions be
automatically deferred and reinvested in additional restricted shares, which
may be subject to the same restrictions and substantial risks of forfeiture
as the underlying award. Unless otherwise directed by the Committee, all
certificates representing restricted shares shall be held in custody by the
Corporation until all restrictions thereon have lapsed. Each grant will
specify that the Committee may at any time amend, suspend or terminate the
restricted share grant, provided that, in the case of amendment, the amended
grant conforms to the provisions of the 1998 Program.
Shares in Lieu of Certain Cash Payments
The Committee is also authorized to grant shares of Common Stock in
lieu of cash which would otherwise be payable as a bonus to officers and key
employees of the Corporation and its subsidiaries pursuant to any incentive
compensation plan. Each grant may contain such terms and conditions as the
Committee may determine and must specify the proportion of any such bonus to
be paid in shares of Common Stock; however, no shares shall be subject to a
substantial risk of forfeiture within the meaning of Section 83 of the Code.
The number of whole shares of Common Stock to be delivered in lieu of cash
will be determined by dividing the value of the portion of the bonus to be
paid in shares of Common Stock by the fair market value of the Common Stock
as of a date selected by the Committee. The value of fractional shares will
be paid in cash.
Miscellaneous Benefit Terms
Except as otherwise determined by the Committee, no stock option
will be transferable other than by will or the laws of descent and distribution
and stock options will be exercisable during the Participant's lifetime only by
the Participant or his or her guardian or legal representative, and after the
participant's death, only by his or her legal representative. Any Benefit
may also be subject to other provisions as the Committee determines
appropriate, including restrictions on resale, provisions directed at
compliance with federal and state securities laws and stock exchange rules,
and conditions as to employment. The Committee may also authorize the
issuance or assumption of Benefits in connection with any merger,
consolidation, acquisition of property or stock, or reorganization upon such
terms and conditions as it may deem appropriate.
It shall be a condition to the receipt of any payment made or
benefit realized by a Participant under the Plan that the Participant make
arrangements satisfactory to the Corporation for payment of any federal,
state, local or foreign taxes required to be withheld in connection
therewith. The Committee has discretion to permit the Participant to
relinquish a portion of such payment or benefit to pay any taxes.
The designation of a director, executive officer or employee as a
participant under the 1998 Program will not enlarge or otherwise affect such
participant's right, if any, to continued employment or service as a
director.
The Committee may accelerate the time at which a stock option may be
exercised or the time at which a restriction or substantial risk of
forfeiture will lapse if a participant dies, becomes disabled or retires or
in case of hardship or other special circumstances.
1998 Program Amendment Provisions
The Committee is authorized to amend, suspend or terminate the 1998
Program at any time and from time to time, provided, however, that any
amendment which must be approved by the stockholders of the Corporation in
order to comply with applicable law or the rules of the principal national
securities exchange upon which the shares of Common Stock are traded or
quoted shall not be effective unless and until such approval has been
obtained. Presentation of the 1998 Program or any amendment thereto for
stockholder approval is not to be construed to limit the Corporation's
authority to offer similar or dissimilar benefits through plans that are not
subject to stockholder approval.
Benefits to be Granted Under the 1998 Program
The amount and types of Benefits that may be granted under the 1998
Program will be at the sole discretion of the Committee and cannot therefore
be determined. Certain awards were made under the 1989 and 1997 Stock
Incentive Programs during 1997. See "Executive Compensation."
Federal Income Tax Consequences
The following is a summary of certain of the federal income tax
consequences of certain transactions under the 1998 Program. Sections 1
through 4 address the tax consequences to all participants of the various
benefits contemplated under the 1998 Program. Section 5 addresses certain
special rules applicable only to those participants who are directors or
officers of the Corporation subject to Section 16(b) of the Exchange Act
(collectively, "Insiders"). Finally, Section 6 considers certain general
matters.
1. Incentive Stock Options
A participant will not recognize income upon the grant of an
incentive stock option. Furthermore, a participant will not recognize income
upon the exercise of an incentive stock option if he or she satisfies certain
employment and holding period requirements. To satisfy the employment
requirement, a participant must exercise the option not later than three
months after he or she ceases to be an employee of the Corporation (one year
if he or she is disabled). To satisfy the holding period requirement, a
participant must hold the optioned shares for more than two years from the
grant of the option and more than one year after the shares are transferred
to him or her. If these requirements are satisfied, the participant will be
taxed on any gain (measured by the difference between the participant's basis
in the shares and the net proceeds of the sale) at long-term capital gains
rates on the sale of the shares. Such long-term capital gain may be eligible
for reduced rates if applicable holding period requirements are satisfied.
If the shares of Common Stock acquired upon the timely exercise of
an incentive stock option are sold, exchanged or otherwise disposed of without
satisfying the holding period requirement (a "Disqualifying Disposition"),
the participant will usually recognize a portion of any gain as ordinary
income at the time of disposition up to the amount of the excess of the fair
market value of the underlying Common Stock at the time of exercise over the
option price (the "Spread"). Upon a Disqualifying Disposition that
constitutes a sale or exchange with respect to which any loss would be
recognized, the amount includable in ordinary income will be limited to any
excess of the net amount realized on the sale or exchange over the
participant's basis in the shares. A Disqualifying Disposition is usually
a transaction with an unrelated third party that is not subject to the
wash-sale provisions of the Code.
If the participant pays the option price of an incentive stock
option by the surrender of unrestricted shares of Common Stock that he or
she already owns, he or she will not recognize gain or loss on the shares
surrendered to the extent that their fair market value equals that of the
shares received. To that extent, the shares received will have a basis equal
to the basis of the shares surrendered, and the participant's holding period
of the shares received will include the holding period of the shares
surrendered. To the extent that the value of the shares received exceeds the
value of the shares surrendered, those shares received that represent such
excess in value will have a basis equal to zero and a holding period that will
commence on the day they are acquired. However, if a participant surrenders
shares that were acquired through the previous exercise of an incentive stock
option before the end of the requisite holding period, the participant may
recognize ordinary income on the surrender of those shares.
Individuals are subject to an alternative minimum tax ("AMT") based
upon an expanded tax base to the extent that the AMT exceeds the regular tax
liability. The AMT is imposed on alternative minimum taxable income in
excess of an exemption amount. Alternative minimum taxable income generally
is the taxpayer's taxable income increased or decreased by certain
adjustments and increased by certain preferences. For AMT purposes,
incentive stock options are generally treated in a manner similar to the
regular tax treatment of nonqualified stock options (see Section 2, below).
For example, upon the exercise of an incentive stock option, the amount of
the Spread will be included in alternative minimum taxable income, and the
basis of the shares will equal their fair market value when the incentive
stock option is exercised. A tax credit may be available in a subsequent
taxable year for some or all of any AMT paid.
Options otherwise qualifying as incentive stock options will be
treated as nonqualified stock options to the extent that the fair market value
of the shares with respect to which incentive stock options granted after 1986
are exercisable for the first time by a participant during any calendar year
(under all of the Corporation's plans and those of any of its subsidiaries)
exceeds $100,000. This rule is applied by taking the options into account
in the order in which they are granted.
2. Nonqualified Stock Options
A participant will not recognize income upon the grant of a
nonqualified stock option. Generally, the participant will recognize ordinary
income at the time of exercise equal to the amount of the Spread. Upon a
subsequent sale of the shares received upon exercise, any difference between
the net proceeds of the sale and the fair market value of the shares on the
date of exercise will be taxed as long-term or short-term capital gain or loss
depending on the holding period. Such long-term capital gain may be eligible
for reduced rates if appplicable holding period requirements are satisfied.
If a participant pays the option price of a nonqualified stock
option in whole or in part by the surrender of Common Stock that the
participant already owns, the participant will not recognize gain or loss on
the shares surrendered to the extent that their fair market value equals that
of the shares received. To that extent, the shares received will have a tax
basis equal to the basis of the shares surrendered, and the participant's
holding period of the shares received will include the holding period of the
shares surrendered. To the extent that the value of the shares received upon
exercise exceeds the value of the shares surrendered, the excess (reduced by
the amount of any cash paid by the participant) will be ordinary income.
Furthermore, the shares received that represent such excess in value will
have a basis equal to their fair market value and a holding period that will
commence on the day after they are acquired. However, if the shares
surrendered are considered substantially nonvested property within the
meaning of Section 83 of the Code, a Section 83(b) Election (as defined in
Section 3 below) with respect to the shares has not been made, and certain
shares received upon exercise are considered substantially nonvested
property, the participant will generally recognize ordinary income in the
year during which the restrictions terminate on the shares received.
3. Restricted Shares
A participant will not recognize income upon the receipt of
restricted shares unless the participant makes an election under Section 83(b)
of the Code (a "Section 83(b) Election") within 30 days after the shares are
transferred to the participant to have the shares taxed to the participant
as ordinary income at their fair market value on the date of transfer less
any amount paid by him or her.
If a participant makes a Section 83(b) Election, the participant
will recognize ordinary income in the year of receipt in an amount equal to the
excess of the fair market value of the shares (determined without regard to
the restrictions thereon) at the time of transfer over any amount paid by the
participant therefor. Upon a sale of such shares after the restrictions
terminate or are otherwise removed, any difference between the net proceeds
of the sale and the fair market value of the shares (determined without
regard to the restrictions thereon) at the time of transfer will be taxed as
long-term or short-term capital gain or loss depending on the holding period.
If a participant makes a Section 83(b) Election with respect to Common Shares
that are subsequently forfeited, the participant will not be entitled to
deduct any amount previously included in income by reason of that election.
If a participant does not make a Section 83(b) Election, the
participant will recognize ordinary income in the year during which the
restrictions terminate in an amount equal to any excess of the fair market
value of the shares on the date that the restrictions terminate or are
otherwise removed over any amount paid by the participant therefor. Upon a
sale of such shares after the restrictions terminate or are otherwise removed,
any difference between the net proceeds of the sale and the fair market value
of the shares on the date that the restrictions terminate or are otherwise
removed will be taxed as long-term or short-term capital gain or loss
depending on the holding period. If a Section 83(b) Election has not been
made, any unrestricted dividends received with respect to Common Shares that
are subject to restrictions will be treated as additional compensation income
and not as dividend income.
4. Shares in Lieu of Certain Cash Payments
A participant will recognize ordinary income upon receipt of shares
of Common Stock in lieu of certain cash payments, equal in amount to the fair
market value of the shares at the time of the transfer.
5. Special Rules Applicable to Insiders
In limited circumstances where the sale of Common Stock received as
a result of a grant or award could subject an Insider to suit under Section
16(b) of the Exchange Act, the tax consequences to the Insider may differ
from the tax consequences described above. In these circumstances, unless
an election under Section 83(b) of the Code has been made, the principal
difference (in cases where the Insider would otherwise be currently taxed
upon the receipt of the stock) usually will be to postpone valuation and
taxation of the stock received so long as the sale of the stock received
could subject the Insider to suit under Section 16(b) of the Exchange Act,
but no longer than six months.
6. General Matters
To the extent that a participant recognizes ordinary income in the
circumstances described above, his or her employer will be entitled to a
corresponding deduction provided, among other things, that the deduction
meets the test of reasonableness, is an ordinary and necessary business
expense, is not disallowed by the $1 million limitation on certain executive
compensation and is not an "excess parachute payment" within the meaning of
Section 280G of the Code.
THE BOARD OF DIRECTORS AND COMMITTEES
There were nine meetings of the Board in 1997. Each director attended
at least 75% of the aggregate of the total number of meetings of the Board
held during the period during which he was a director and the total number
of meetings held by all committees of the Board on which he served during the
period that he was a committee member.
The Audit Review Committee recommends to the Board the appointment of
independent accountants; meets periodically with Interlake's management,
internal audit management and independent accountants and reviews internal
accounting controls, the internal audit program and accounting practices;
reviews consolidated financial statements; and reviews Interlake's
non-financial auditing practices. The Audit Review Committee met two times in
1997.
The Management Development and Compensation Committee provides for
evaluation of the Chief Executive Officer; reviews and makes recommendations
to the Board regarding key employee compensation policies, plans and
programs, including recommending to the Board the salaries of all executive
officers; and administers certain compensation programs. The Management
Development and Compensation Committee met six times in 1997.
The Board Development Committee's primary responsibility is to seek out,
evaluate and recommend to the Board qualified nominees for election as
directors; and to implement systems for evaluation of the Board. Biographical
and other information about possible nominees recommended by stockholders in
accordance with the provisions of Interlake's by-laws should be sent to the
attention of the Secretary of Interlake. The Board Development Committee met
once in 1997.
The Finance Committee consults with management upon request and makes
recommendations to the Board as to major debt and equity financing
transactions, financial aspects of major acquisitions or dispositions, and
allocation of resources for capital expenditures; and reviews the general
administration of the retirement plans of the Corporation. The Finance
Committee met once in 1997.
VOTING SECURITIES AND SECURITY OWNERSHIP BY CERTAIN
PERSONS AND MANAGEMENT
Holders of record of shares of Common Stock at the close of business on
March 10, 1998 will be entitled to vote at the meeting. On that date,
23,162,142 shares of Common Stock were outstanding, each share being entitled
to one vote.
On March 10, 1998, officers, directors and employees of Interlake and
its subsidiaries had voting rights with respect to approximately 2,220,236
shares, or 9.6% of the shares of Common Stock then outstanding, exclusive of
shares owned outright by employees who are not executive officers. Such
voting rights arise from shares owned outright (in the case of directors and
officers), shares as to which the individual holder's beneficial interest is
limited to voting rights, and shares owned by various employee benefit plans
under which the plan trustee receives voting instructions from plan
participants.
Security Ownership by Certain Persons and Management
This section of the proxy statement relates to beneficial ownership of
Interlake's Common Stock based on information available to the Corporation
as of March 10, 1998. Common Stock is the only class of capital stock
entitled to be voted at the meeting. For the purposes of this section, a
person is deemed to be a beneficial owner if such person has or shares voting
power or investment power in respect of such shares or has the right to
acquire beneficial ownership within 60 days.
The table which follows shows beneficial ownership of Interlake's Common
Stock by each person who has advised Interlake that such person beneficially
owns more than five percent of Interlake's Common Stock.
Number of
Shares Percent(1)
FIRST CHICAGO NBD CORPORATION
and FIRST CHICAGO EQUITY CORPORATION
One First National Plaza
Chicago, Illinois 60670 7,894,737(2) 25.4%
JOHN P. MC NIFF,
ROBERT A. DAVIDSON,
LONGWOOD INVESTMENT ADVISORS, INC.
735 Chesterbrook Blvd., Suite 305
Wayne, Pennsylvania 19087 3,269,000(3) 14.1%
MARK DICKSTEIN,
DICKSTEIN PARTNERS, L.P.,
DICKSTEIN PARTNERS INC.
DICKSTEIN & CO., L.P.,
DICKSTEIN FOCUS FUND L.P.,
DICKSTEIN INTERNATIONAL LIMITED,
MARK AND ELYSSA DICKSTEIN FOUNDATION
660 Madison Avenue, 16th Floor
New York, NY 10021 2,546,900(4) 11.0%
(1) Percentages are percentages of Interlake's Common Stock computed as
provided in Rule 13d-3(d)(1) under the Securities Exchange Act of
1934, as amended. This means that, in the case of any holder of
Series A Convertible Exchangeable Preferred Shares ("Series A
Shares"), that holder's Series A Shares are treated as being converted
into shares of Common Stock, but no other Series A Shares are treated
as converted. In the case of all other holders, no Series A Shares
are treated as converted; computations are based solely upon
outstanding shares of Common Stock.
(2) First Chicago Equity Corporation ("FCEC") is the record and
beneficial owner of 31,500 shares of Interlake's Series A2 Convertible
Exchangeable Preferred Stock ("Series A2 Shares"). First Chicago NBD
Corporation is the parent company of FCEC. As of the date hereof,
the Series A2 Shares of FCEC are convertible into 7,894,737 (25.4%)
shares of Non-Voting Common Stock at any time, and into the same
number of shares of Common Stock in certain limited circumstances.
(The number of shares of Common Stock into which the Series A2 Shares
are convertible increases on each June 30th and December 31st if
preferential cash dividends accruing at the rate of nine percent per
annum are not paid.) Series A2 Shares may be converted into Series
A1 Shares, which in turn are convertible at any time into shares of
Common Stock, by any holder who can certify that by virtue of such
conversion it would not have a regulatory problem under certain laws
or regulations applicable to banks, bank holding companies, small
business investment companies or their affiliates. Interlake believes
that as of March 10, 1998, FCEC would have had such a regulatory
problem.
(3) In its most recent amendment to Schedule 13G filed with the Securities
and Exchange Commission, Longwood Investment Advisors, Inc. indicated
that it has shared dispositive power over 3,099,000 (13.4%) shares;
Robert A. Davidson and John P. McNiff indicated that they had shared
dispositive power over such 3,099,000 shares by virtue of being
responsible for the selection, acquisition and disposition of
portfolio securities on behalf of Longwood Investment Advisors, Inc.,
and sole dispositive power over an additional 62,000 (0.3%) shares and
108,000 (0.5%) shares, respectively.
(4) In his most recent Form 4 and amendment to Schedule 13D filed with the
Securities and Exchange Commission, Mark Dickstein indicated that he
is the beneficial owner of 2,546,900 (11.0%) shares of Common Stock,
over all of which he had shared voting and dispositive power (other
than 80,000 shares subject to sole voting and dispositive power); and
related entities which may form a group held shared voting and
dispositive power over the following numbers of shares: Dickstein
Partners Inc., 2,446,900 (10.6%); Dickstein Partners L.P., 1,927,300
(8.3%); Dickstein & Co., L.P., 1,735,300 (7.5%); Dickstein
International Limited, 519,600 (2.2%), Dickstein Focus Fund, L.P.,
192,000 (0.8%); and Mark and Elyssa Dickstein Foundation, 20,000
(0.1%).
The table which follows shows the beneficial ownership of Interlake's
Common Stock by directors, nominees, named executive officers, and
incumbent directors and incumbent executive officers as a group, including
an immaterial number of shares held in joint tenancy with close family
members. The table includes options exercisable within 60 days held by
Messrs. Langenberg, Reum, Fulton, Gregory and Smith and incumbent executive
officers as a group to purchase 36,591; 129,522; 40,000; 40,000; 33,000;
and 304,793 shares respectively. The percentage of outstanding shares
beneficially owned is computed in accordance with Rule 13d-3(d)(1) under
the Securities Exchange Act of 1934. This means that, in the case of any
holder or group of holders of options exercisable within 60 days, that
holder's or group's options are treated as exercised, but no other options
are treated as exercised.
Number of
Name Shares Percent(1)
--------- ------------- ----------
JOHN A. CANNING, JR.(2) 51,200 0.2
JAMES C. COTTING 3,200 *
ROBERT J. FULTON 153,749 0.7
STEPHEN GREGORY 132,982 0.6
JOHN E. JONES 3,200 *
FREDERICK C. LANGENBERG 156,312 0.7
QUENTIN C. MCKENNA 3,200 *
WILLIAM G. MITCHELL 6,800 *
W. ROBERT REUM 415,958 1.8
ERWIN E. SCHULZE 32,200 0.1
STEPHEN R. SMITH 115,206 0.5
All Directors and Executive Officers 1,248,291 5.3
(1) An asterisk in the table means that less than one-tenth of one percent
of the outstanding shares are beneficially owned.
(2) Mr. Canning is President of Madison Dearborn Partners, Inc., a private
equity investment fund. Madison Dearborn Partners VIII, of which Mr.
Canning is a partner, owns 3,500 of the outstanding shares of
Interlake's Series A2 Convertible Exchangeable Preferred Stock and
1,100 of the outstanding shares of Interlake's Series A3 Convertible
Preferred Stock, which shares are in certain circumstances convertible
into shares of Common Stock. Mr. Canning disclaims beneficial
ownership of the Series A Convertible Exchangeable Preferred Stock and
the shares of Common Stock into which it is convertible.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on a review of Forms 3 and 4 received, Interlake is not aware
of any director, officer or other person that failed to file on a timely
basis with respect to Interlake reports required by Section 16(a) during
the most recent fiscal year.
EXECUTIVE COMPENSATION
Summary Compensation Table
The table which follows shows the compensation paid to or earned by
Interlake's Chief Executive Officer and the four executive officers who,
in 1997, were the next most highly compensated.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards
Securities Payouts
Underlying LTP All Other
Name and Principal Salary Bonus Options/SAR's Payout Compensation
Position Year ($) ($)(1) (#) ($)(2) ($)(3)(4)
W. Robert Reum 1997 $480,000 $273,349 480,000 $584,220 $149,416
Chairman of the 1996 455,004 416,454 0 0 146,599
Board, President and 1995 455,004 373,085 0 0 145,171
Chief Executive
Officer
Robert J. Fulton 1997 $250,008 $255,191 200,000 $241,375 $ 9,667
President- 1996 240,000 92,322 0 0 137,023
Hoeganaes Corporation 1995 230,004 200,000 40,000 0 170,357
Stephen Gregory 1997 $225,000 $ 97,346 125,000 $203,300 $ 58,250
Vice President-Finance 1996 210,000 163,197 0 0 49,334
and Chief Financial 1995 190,008 109,059 0 0 62,952
Officer
Stephen R. Smith 1997 $203,004 $ 84,575 110,000 $168,280 $ 49,560
Vice President, 1996 195,000 129,584 0 0 42,686
Secretary and General 1995 185,004 91,018 0 0 38,674
Counsel
Craig A. Grant 1997 $186,000 $ 74,507 90,000 $103,040 $424,873
Vice President-Human 1996 176,004 94,862 0 0 37,284
Resources 1995 161,004 79,211 0 0 32,578
(1) Approximately 30% of the bonus for 1997 was paid in stock, including 11,729
shares to Mr. Reum, 12,650 shares to Mr. Fulton, 4,102 shares to Mr. Gregory,
3,530 shares to Mr. Smith and 3,263 shares to Mr. Grant.
(2) Includes 131,040 shares awarded to Mr. Reum, 51,000 shares to Mr. Fulton,
45,600 shares Mr. Gregory, and 37,760 shares to Mr. Smith, which became non-forfeitable
in 1997, valued at the fair market value on the date of grant.
(3) Includes contributions to defined contribution retirement plans plus,
for Messrs. Reum, Gregory, Smith and Grant, tax-adjusted amounts paid
or payable in cash which would have been payable as contributions
pursuant to such plans had contributions not been statutorily limited.
Mr. Fulton's 1995 and 1996 totals and Mr. Gregory's 1995 total also
include relocation expenses. Mr. Grant's 1997 total includes severance
benefits and accrued vacation pay received by Mr. Grant upon his
resignation effective December 31, 1997.
(4) Under the Corporation's Key Executive Retention Program, Mr. Reum held
196,560 shares of restricted stock, of which the fair market value as
of December 28, 1997 was $945,945; Mr. Fulton, 76,500 shares
($368,156); Mr. Gregory, 68,400 shares ($329,175); Mr. Smith, 56,640
shares $272,580) and Mr. Grant, 46,368 shares ($223,146).
Options Granted in 1997
The table which follows shows the numbers, certain terms of, and
the grant date values of the options granted during fiscal year 1997 to the
named executive.
Options Granted in 1997 Fiscal Year(1)
Percent of
Total Options Market
Options Granted to Exercise Price on Grant Date
Granted(2) Employees in Price Grant Expiration Values
Name (#) Fiscal Year ($/Share) Date(3) Date ($)(4)(5)
W. ROBERT REUM 480,000 37% $3.4375 $3.4375 4/24/07 $1,094,400
ROBERT J. FULTON 200,000 16% $3.4375 $3.4375 4/24/07 $456,000
STEPHEN GREGORY 125,000 10% $3.4375 $3.4375 4/24/07 $285,000
STEPHEN R. SMITH 110,000 9% $3.4375 $3.4375 4/24/07 $250,800
CRAIG A. GRANT 90,000 7% $3.4375 $3.4375 4/24/07 $205,200
(1) No stock appreciation rights (SARs) were granted in 1997.
(2) All options listed are not exercisable until April 21, 1999, at which
time the options become exercisable in full.
(3) Computed as the average of the high and low on April 24, 1997.
(4) Determined using the Black-Scholes option pricing model and utilizing
expected volatility of 56% based on Interlake's historical data from
December 30, 1990.
(5) Mr. Grant's options were cancelled as of December 31, 1997 upon his
resignation.
Aggregated Option/SAR Exercises in Last Year and
Fiscal Year-End Option/SAR Values
Information on stock option exercises during fiscal year 1997 and the
number of unexercised options at fiscal year end for each of the named
executive officers is set forth in the table which follows.
Options Outstanding at 1997 Fiscal Year-End
Shares Number of Securities Underlying
Acquired on Value Unexercised Options/SAR's at
Name Exercise Realized($) Fiscal Year End (#)
Exercisable Unexercisable
[S] [C] [C] [C] [C]
W. ROBERT REUM 129,522 480,000
ROBERT J. FULTON 40,000 200,000
STEPHEN GREGORY 40,000 125,000
STEPHEN R. SMITH 33,000 110,000
CRAIG A. GRANT 15,000 $30,000 13,000 90,000
Defined Benefit Plans
Mr. Fulton participates in the Hoeganaes Corporation Pension Plan for
Exempt Employees. The following table shows estimated annual benefits
payable for life, upon retirement, including benefit amounts which would
have been payable under the pension plan had such payments not been
statutorily limited.
Years of Service
Remuneration 10 15 20 25 30
150,000 $17,422 $26,133 $34,845 $43,556 $52,267
175,000 20,663 30,995 41,326 51,658 61,989
200,000 23,904 35,856 47,808 59,760 71,712
225,000 27,145 40,717 54,290 67,862 81,435
250,000 30,386 45,579 60,772 75,965 91,158
300,000 36,868 55,302 73,736 92,170 110,604
350,000 43,350 65,024 86,699 108,374 130,049
400,000 49,831 74,747 99,663 124,579 149,494
500,000 62,795 94,193 125,590 156,988 188,385
600,000 75,759 113,639 151,518 189,398 227,277
The Plan gives credit for the salary and bonus amounts reflected in the
Summary Compensation Table, averaged for the final five years of
employment. Mr. Fulton has approximately three years of credited service.
Benefits are not subject to deduction for social security or other offset
amounts. Benefits are calculated for an employee who retires in 1998 at
age 65.
Key Executive Severance Pay Agreements
Interlake has entered into Key Executive Severance Pay Agreements
(the "Severance Pay Agreements") with Messrs. Reum, Fulton, Gregory, Smith
and Grant and the other incumbent executive officers of Interlake (as
designated for purposes of the Exchange Act). (As Mr. Grant resigned
effective December 31, 1997, his severance pay agreement is no longer in
effect.)
Under the Severance Pay Agreements, an executive officer is entitled
to severance benefits if there is a termination of his or her employment
without cause and other than due to death or disability at any time within
a severance period of three years, subject to extension for an additional
year each year unless written notice is given to the contrary (or, if less
than the term of such severance period, within the period ending at the
participant's attainment of age 65, death or permanent disability) after a
change in control as defined in the agreements. In addition, following a
change in control, a participant may elect to terminate his employment
without loss of severance benefits in certain specified circumstances.
For purposes of the Severance Pay Agreements, a change in control is
deemed to have occurred if (i) Interlake is merged or reorganized into or
with, or sells all or substantially all of its assets to, another company
in a transaction in which former Interlake stockholders own less than 75
percent of the outstanding securities of the surviving or acquiring company
after the transaction, (ii) a filing is made with the Securities and
Exchange Commission disclosing the beneficial ownership by any person or
group of 25 percent or more of the voting power of Interlake, subject to
certain limited exceptions, (iii) during any period of two consecutive
years individuals who were directors at the beginning of such period cease
to constitute a majority of the Board without the approval of two-thirds of
the remaining Board members, or (iv) the Corporation files a report or
proxy statement with the Securities and Exchange Commission disclosing that
a change in control has occurred or will occur in the future.
In the event of a change in control, any executive officer who is
terminated or terminates his employment with rights to severance
compensation will be entitled to receive a lump sum payment equal to, in
the case of Messrs. Reum, Fulton, Gregory and Smith, three times the sum
of his highest base pay in effect for any period prior to the termination,
plus the target bonus established for either the fiscal year in which the
change in control occurs or the fiscal year in which the termination
occurs, whichever is higher. In addition, such executive will be entitled
to certain benefits for a three year period following the termination.
In addition, the Severance Pay Agreements provide that, in the case of
a termination other than for cause or upon death or permanent disability,
and other than upon termination during a change in control severance
period, the executive is entitled to a lump sum amount equal to one year's
base pay at the rate in effect at the time of the termination, plus the
executive's target bonus for the year of termination. In addition, such
executive will be entitled to certain benefits for a one year period after
the termination.
The Severance Pay Agreements provide that Interlake will pay for the
legal expenses of an executive if he has to enforce his rights under the
agreement following a change in control. A letter of credit has been
obtained for the purpose of securing the payment of such expenses. The
terms of the Severance Pay Agreements presently run through February 28,
1999, subject to automatic one-year extensions absent notice to the
contrary.
Compensation of Outside Directors
For the 1997-98 year, each outside director was paid a retainer
$30,000, with no additional amounts paid for attendance at meetings or
service as committee chairpersons. Interlake provides accidental death and
dismemberment insurance for its directors, and non-employee directors are
reimbursed their expenses of attendance at meetings of the Board or
committees of the Board.
As of January 23, 1997, each non-employee director was granted options
for 10,000 shares of Common Stock, vesting in virtually equal amounts at
the start of the annual meetings of stockholders occurring in 1998, 1999
and 2000. In addition, as of January 22, 1998, each non-employee director
was granted options for 10,000 shares of Common Stock, vesting in
virtually equal amounts at the start of the annual meetings of stockholders
occurring in 1999, 2000 and 2001.
Under the Directors' Post-Retirement Income Plan, each outside director
with four years' service as a director prior to April 1, 1997, is entitled
to annual post-retirement income beginning at age 65 or retirement from the
Board, whichever is later, and continuing for the lifetime of the retired
director. The annual benefit upon the retirement of any current director
who qualifies will be $30,000, reduced 10 percent for each full year that
his service as a non-employee director of Interlake is less than 10 years.
In 1988, Interlake established a trust for the payment of
post-retirement income to outside directors and provided the trustee with
funds to purchase annuities for retired directors covered by the plan and
for incumbent directors having more than four years' service. Should
Interlake become insolvent, the assets of the trust would be subject to the
claims of Interlake's creditors.
The Directors' Post-Retirement Income Plan provides that Interlake will
pay the legal expenses of a participant if he has to take legal action to
enforce his rights under the plan.
Report of the Management Development and Compensation Committee on Executive
Compensation
The Management Development and Compensation Committee of the Board of
Directors (the "Committee") is composed entirely of non-employee directors.
The Committee makes recommendations to the full Board as to the salaries of
key Board-elected officers (other than assistant officers) and heads of
certain key operating units, and as to the terms of payments under
Interlake's incentive compensation plans for key executives of Interlake
and certain operating units. In addition, any stock options or stock
awards are granted to executives upon the authorization of the Committee.
Compensation Philosophy and Strategy
The Corporation's compensation philosophy and strategy has been
designed to produce median level compensation upon achievement of improved
financial performance. In 1997, this philosophy and strategy was
implemented through a combination of annual compensation and the granting
of a long-term incentive.
Annual compensation. The Corporation's 1997 Senior Executive
Incentive Compensation ("SEIC") program was designed to provide an opportunity
for incentive awards which, if earned, when combined with base salaries, would
result in median overall compensation levels, consistent with the
Corporation's compensation philosophy. The financial measures against
which executives were measured were EBIT, average controllable working
capital as a percentage of sales, and revenue growth for their respective
operating units or, in the case of Interlake executives, Interlake as a
whole. In addition, a portion of operating unit executives' opportunities
was tied to overall corporate performance on a consolidated basis against
the same performance measures, and a portion (ten percent or less) of some
executives' opportunities was dependent upon their individual performance
against certain key competencies which have been identified as being
essential to driving success at Interlake. All amounts paid for 1997
under the SEIC program were due to meeting the performance levels
stipulated in the plan, with the exception of amounts paid with respect to
performance related to the key competencies. Thirty percent of payouts
under the SEIC program were made in shares of common stock, valued at the
market price at the beginning of the plan year.
Long term incentives. In February 1995, in the face of substantial
impending indebtedness maturities and the need to successfully refinance
them, the Corporation put in place the Key Executive Retention Program (the
"KERP"). The KERP was intended to drive improved EBIT levels as well as
promote the retention of key executives. Based on the Corporation's EBIT
levels for the 1995-96 period, payments and stock awards became fully
vested and non-forfeitable to KERP participants, in part in January 1997,
and in part in January-February 1998, thereby completing the KERP. In
retrospect, the Committee believes that the KERP met its goals during a
challenging period for the Corporation: Interlake achieved consistent and
significant EBIT improvement during the period; the Corporation
successfully refinanced and implemented a strategy to drive stockholder
value through enhanced EBIT levels, appropriate asset sales, and successful
resolution of historical environmental and tax issues; key executives
became owners of a material number of shares of stock, aligning their
interests with stockholders; a core of key executives was retained; and
common stockholder value doubled during the KERP period.
With the KERP completed, the Committee in 1997 established a new long
term incentive for management through the 1997 Stock Incentive Program.
The Committee felt a share-price based incentive was appropriate to drive
management's continued implementation of Interlake's strategy. Stock
options at the April 1997 market price were awarded to the key executive
team. The numbers of options awarded were set at levels meant to deliver,
if shareholder value appreciated significantly, two years of long-term
incentive value that, together with annual compensation, would enable key
executives to achieve median levels of total compensation.
Limitations on Deductibility
In 1997, the Corporation had non-deductible compensation expense by
virtue of Section 162(m) of the Internal Revenue Code which resulted in a
current cost to the Corporation for the 1997 tax year of approximately
$165,000. Although the KERP and the 1997 SEIC program were performance-based
programs, they did not meet the tests for performance-based compensation under
Section 162(m). The stock options issued to key executives in 1997 were
designed to qualify as performance-based compensation under Section 162(m).
CEO Compensation
With respect to Mr. Reum, the Committee's strategy is to keep his base
pay at below median levels, but to give him the opportunity through annual
and long-term incentives to achieve median level compensation. Consistent
with this strategy, Mr. Reum received modest or no salary increases in
recent years. His annual incentive award under the 1997 SEIC program was
based on the Corporation's achievement of threshold or higher levels of
EBIT, average controllable working capital as a percentage of sales, and
revenue growth, all specified at the beginning of the plan year. Mr.
Reum's annual incentive payout was less than the prior two years; despite
strong EBIT growth at the Corporation's Hoeganaes and Chem-tronics
businesses in 1997, a difficult year at North American Material Handing
adversely affected consolidated EBIT. As for long-term incentives, in 1997
the first portion of the KERP covering the 1995-96 performance period
became fully vested and non-forfeitable to Mr. Reum, and he received a
market-value option grant designed to provide two years of long-term
incentive value (for the 1997-98 performance period) resulting in an
overall median level of compensation if Interlake achieves significant
stock price appreciation.
The Management Development and Compensation Committee
John A. Canning, Jr., John E. Jones,
William G. Mitchell, Erwin E. Schulze
Performance Graph
The following graph compares the yearly percentage change in
Interlake's cumulative stockholder return on its Common Stock with that of
the Standard & Poor's 500 Stock Index and that of the Standard & Poor's
Manufacturing Index (Diversified Industrials) over the period of
Interlake's last five fiscal years. The graph assumes an investment of $100
on December 27, 1992. Interlake has not paid any dividends since 1989,
when it paid a special dividend of $45 per share, incurring $535 million of
indebtedness to do so.
1992 1993 1994 1995 1996 1997
The Interlake Corporation 100.00 75.86 48.28 68.97 96.55 132.69
% increase (decrease) (24%) (36%) 43% 40% 37%
during fiscal year
S&P 500 Index 100.00 109.25 110.53 149.84 188.21 245.60
% increase (decrease) 9% 1% 36% 26% 30%
during fiscal year
S&P Manufacturing Index 100.00 119.02 124.01 173.13 243.49 284.19
% increase (decrease) 19% 4% 40% 41% 17%
during fiscal year
GENERAL
The solicitation of proxies in the form which accompanies this proxy
statement is made on behalf of the Board. Proxies in such form will confer
discretionary authority with respect to any other matters which may
properly be brought before the meeting.
For a matter to be properly brought before the meeting, or for a
stockholder nomination of director candidates to be considered, notice
containing the information specified in Interlake's By-laws must be
received by the close of business on March 19, 1998. If other matters
properly come before the meeting, the persons holding such proxies intend
to vote the proxies in accordance with their judgment on all such matters.
A stockholder who signs and returns the enclosed form of proxy may
revoke the same at any time before it is voted by submitting a subsequently
dated proxy or giving notice to the Secretary of Interlake.
The cost of solicitation of proxies will be borne by Interlake. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by a few executive officers or regular employees of Interlake,
none of whom will receive any compensation therefor in addition to their
regular remuneration. Interlake will reimburse brokers and certain other
persons holding stock in their names or in the names of nominees for their
expenses in sending proxy material to principals and obtaining their
proxies.
As in past years, Interlake has retained Georgeson & Co., Wall Street
Plaza, New York, New York, to aid in the solicitation of proxies from
brokers, banks, nominees and other institutional owners, but not individual
holders of record, by personal interview, telephone, fax or mail. Interlake
will pay Georgeson & Co. a fee not expected to exceed $5,500 and will
reimburse such organization for certain expenses incurred by it.
Vote Required
A majority of the outstanding shares of Common Stock of the Company
will constitute a quorum. Each share has one vote on each matter to be
voted on at the meeting. As voting rights are not cumulative, each share
may be voted once for each directorship, and only once for the same
director nominee. The Delaware General Corporation Law requires that each
of the two nominees for director be elected by a plurality of the votes of
the shares of Common Stock present in person or represented by proxy at the
Annual Meeting.
At the Annual Meeting, the results of stockholder voting will be
tabulated by the inspector of elections appointed for the Annual Meeting.
Under Delaware law and the Company's Restated Certificate of Incorporation
and By-laws, properly executed proxies that are marked "abstain" or are
held in "street name" by brokers that are not voted on one or more
particular proposals (if otherwise voted on at least one proposal) will be
counted for purposes of determining whether a quorum has been achieved at
the Annual Meeting. Abstentions will have the same effect as a vote
against the proposal to which such abstention applies. Broker non-votes
will be treated neither as a vote for nor a vote against any of the
proposals to which such broker non-votes apply. Proxy cards which are
timely signed and returned with no other marking will be voted in
accordance with the recommendation of the Board of Directors.
Stockholder Proposals
In order to be considered for inclusion in Interlake's proxy statement
and form of proxy for the 1999 annual meeting of stockholders, any
stockholder proposal intended to be presented at that meeting must be
received by Interlake at 550 Warrenville Road, Lisle, Illinois 60532-4387
on or before November 22, 1998, and must set forth the matters detailed in
the Corporation's By-laws.
By order of the Board of Directors.
/s/Stephen R. Smith
STEPHEN R. SMITH
Vice President, Secretary
and General Counsel
Lisle, Illinois
Dated: March 20, 1998
EXHIBIT
THE INTERLAKE CORPORATION
1998 STOCK INCENTIVE PROGRAM
1. Purpose. The purpose of The Interlake Corporation 1998 Stock
Incentive Program (the "Program") is to attract and retain outstanding
individuals as directors, officers and key employees of The Interlake
Corporation (the "Corporation") and its Subsidiaries (as defined herein) and
to furnish incentives for superior performance by providing such persons
opportunities ("Benefits") to acquire shares of the Corporation's common stock,
$1 par value, or any security into which such shares may be changed by reason
of any transaction or event of the type described in Paragraph 15(a) hereof
("Common Stock").
2. Administration. The Program will be administered by the
Management Development and Compensation Committee (the "Committee") of the
Corporation's Board of Directors (the "Board"). The Committee shall consist
of not less than three directors as the Board may designate from time to
time, each of whom shall be a "Non-Employee Director" within the meaning of
Rule 16b-3 of the Securities and Exchange Commission and an "Outside Director"
within the meaning of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The interpretation and construction by the Committee
of any provision of the Program or of any agreement, notification or document
evidencing the grant of any Benefits and any determination by the Committee
pursuant to any provision of this Program or of any such agreement,
notification or document shall be final and conclusive. No member of the
Committee shall be liable for any such action or determination made in good
faith.
3. Participants. Participants in the Program will consist of such
directors, officers or key employees of the Corporation or any Subsidiary (or
any person who has agreed to commence serving in any of such capacities within
90 days following the granting of Benefits to such person) as the committee
in its sole discretion may designate from time to time to receive Benefits
hereunder (each a "Participant"). The Committee's designation of a
Participant at any time shall not require the Committee to designate such
person to receive a Benefit at any other time, or, if so designated, to
receive the same type or amount of Benefit at any other time, or as may be
received by any other Participant at any time. The Committee shall consider
such factors as it deems pertinent in selecting Participants and in
determining the type and amount of their respective Benefits.
4. Types of Benefits. Benefits under the Program may be granted in
any one or a combination of (a) Stock Options, (b) Restricted Shares, and
(c) Shares in Lieu of Certain Cash Payments, all as described below in
Paragraphs 6 through 9 hereof.
5. Shares Reserved Under the Program. (a) Subject to adjustment as
provided in Section 15(a) of this Program, the number of shares of Common
Stock that may be issued or transferred (i) upon the exercise of Stock
Options, (ii) as Restricted Shares and released from substantial risks of
forfeiture thereof, or (iii) as Shares in Lieu of Certain Cash Payments shall
not exceed in the aggregate 1,150,000 shares plus any shares relating to
Benefits that expire or are forfeited or cancelled. Such shares may be shares
of original issuance or treasury shares or a combination of the foregoing.
Upon the payment of any Option Price by the transfer to the Corporation of
shares of Common Stock or upon satisfaction of any withholding amount by means
of transfer or relinquishment of shares of Common Stock, there shall be deemed
to have been issued or transferred under this Program only the net number of
shares of Common Stock actually issued or transferred by the Corporation.
(b) Notwithstanding anything in this Section 5, or elsewhere in this
Program, to the contrary, the aggregate number of shares of Common Stock
actually issued or transferred by the Corporation upon the exercise of
Incentive Stock Options shall not exceed 1,150,000 shares, subject to
adjustments as provided in Section 15(a) of this Program. Further, no
Participant shall be granted Stock Options for more than 575,000 shares of
Common Stock during any three year period, subject to adjustments as
provided in Section 15(a) of this Program.
(c) Notwithstanding any other provision of this Program to the
contrary, in no event shall any Participant in any calendar year receive
more than 100,000 Restricted Shares, subject to adjustments as provided in
Section 15(a) of this Program.
6. Definitions. As used in the Program,
(a) The term "Date of Grant" means the date specified by the
Committee on which a grant of a Stock Option, Restricted Shares or
Shares in Lieu of Certain Cash Payments shall become effective (which
date shall not be earlier than the date on which the Committee takes
action with respect thereto).
(b) The term "Effective Date" shall be the date on which the
1998 Stock Incentive Program is approved by the stockholders of the
Corporation in accordance with Section 18.
(c) The term "Incentive Stock Options" means Stock Options
that are intended to qualify as "incentive stock options" under
Section 422 of the Code or any successor provision.
(d) The term "Management Objectives" means measurable
performance objectives established by the Committee pursuant to this
Program for Participants who have received, when so determined by the
Committee, Stock Options or Restricted Shares. Management Objectives
may be described in terms of Corporation-wide objectives or objectives
that are related to the performance of the Common Stock, the
individual Participant or of the Subsidiary, division, department,
region or function within the Corporation or Subsidiary in which the
Participant is employed. The Management Objectives may be made
relative to the performance of other corporations. If the Committee
determines that a change in the business, operations, corporate
structure or capital structure of the Corporation, or the manner in
which it conducts its business, or other events or circumstances
render the Management Objectives unsuitable, the Committee may in
its discretion modify such Management Objectives, in whole or in
part, as the Committee deems appropriate and equitable.
(e) The term "Market Value per Share" means, at any date, the
average of the high and low price of the Common Stock on that date
(or, if there are no sales on that date, the last preceding date on
which there was a sale) on (i) the New York Stock Exchange Composite
Transactions or (ii) any national securities exchange on which the
Common Stock is traded if it is not traded on the New York Stock
Exchange or (iii) The Nasdaq Stock Market if the Common Stock is
listed thereon and is not traded on any national securities exchange,
in each case as reported by The Wall Street Journal, corrected for
reporting errors.
(f) The term "Optionee" means the optionee named in an
agreement evidencing an outstanding Stock Option.
(g) The term "Option Price" means the purchase price per
share payable on exercise of a Stock Option.
(h) The term "Restricted Shares" means an award of shares of
Common Stock granted pursuant to Paragraph 8 of the Program.
(i) The term "Shares in Lieu of Certain Cash Payments" means
shares of Common Stock granted pursuant to Paragraph 9 hereof.
(j) The term "Stock Option" means an option to purchase Common
Stock granted pursuant to Paragraph 7 of the Program.
(k) The term "Subsidiary" means a corporation, company or
other entity (i) more than 50 percent of whose outstanding shares or
securities (representing the right to vote for the election of
directors or other managing authority) are, or (ii) which does not
have outstanding shares or securities (as may be the case in a
partnership, joint venture or unincorporated association), but more
than 50 percent of whose ownership interest representing the right
generally to make decisions for such other entity is, now or
hereafter, owned or controlled, directly or indirectly, by the
Corporation except that for purposes of determining whether any
person may be a Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in which at the
time the Corporation owns or controls, directly or indirectly, more
than 50 percent of the total combined voting power represented by all
classes of stock issued by such corporation.
7. Stock Options. The Committee may, from time to time and upon
such terms and conditions as it may determine, authorize the granting to
Participants of options to purchase shares of Common Stock. Each such grant
may utilize any or all the authorizations, and shall be subject to all of the
limitations, contained in the following provisions:
(a) Each grant shall specify the number of shares of Common
Stock to which it pertains, subject to limitations set forth in
Section 5 of this Program.
(b) Each grant shall specify an Option Price which shall not be
less than the Market Value per Share on the Date of Grant.
(c) Each grant shall specify that the Option Price shall be
payable at the time of exercise in cash or by check acceptable to the
Corporation. Any grant may also provide for payment of the Option
Price by the transfer to the Corporation of (i) shares of Common
Stock owned by the Optionee and having a Market Value at the time of
exercise equal to the total Option Price or (ii) a combination of cash
and shares of Common Stock owned by the Optionee and having a combined
Market Value equal to the total Option Price.
(d) The Committee may also determine, at or after the Date
of Grant, that payment of the Option Price of any option (other than
an Incentive Stock Option) may also be made in whole or in part in
the form of Restricted Shares or other shares of Common Stock that
are forfeitable or subject to restrictions on transfer (based, in
each case, on the Market Value per Share on the date of exercise)
or other Stock Options (based on the difference (the "Spread")
between the Market Value and the exercise price of such option on
the date of exercise). Unless otherwise determined by the Committee
at or after the Date of Grant, whenever any Option Price is paid in
whole or in part by means of any of the forms of consideration
specified in this paragraph, the shares of Common Stock received upon
the exercise of the Stock Options shall be subject to such risks of
forfeiture or restrictions on transfer as may correspond to any
that apply to the consideration surrendered, but only to the extent
of (i) the number of shares so surrendered, or (ii) the Spread of any
unexercisable portion of Stock Options.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a bank or broker on a date
satisfactory to the Corporation of some or all of the shares to
which such exercise relates.
(f) Successive grants may be made to the same Participant
whether or not any Stock Options previously granted to such
Participant remain unexercised.
(g) Each grant shall specify the period or periods of continuous
employment by the Optionee with the Corporation or of continuous
service by the Optionee as a director of the Corporation which is
necessary before a Stock Option or any installment thereof will
become exercisable and may provide that the exercise of a Stock
Option or any installment thereof will be accelerated for any reason
stated therein. Any grant may specify Management Objectives that
must be achieved as a condition to the exercise of such Stock Option.
(h) Stock Options granted under the Program may be (i) options
which are intended to qualify under particular provisions of the
Code (including Incentive Stock Options), (ii) options which are not
intended to so qualify, or (iii) combinations of the foregoing.
(i) No Stock Option shall be exercisable more than ten years
from the Date of Grant.
(j) Each grant of Stock Options shall be evidenced by an
agreement executed on behalf of the Corporation by an officer thereof
and delivered to the Optionee and containing such terms and
provisions, consistent with the Program, as the Committee may approve.
8. Restricted Shares. The Committee may from time to time and upon
such terms and conditions as it may determine, authorize the granting to
Participants of Restricted Shares. A Restricted Share constitutes an
immediate transfer of ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such Participant to
voting, dividend and other ownership rights, but subject to the substantial
risk of forfeiture and restrictions on transfer hereinafter referred to.
Each grant may utilize any or all of the authorizations, and shall be subject
to all of the limitations, contained in the following provisions:
(a) Subject to the provisions of Section 5, each such grant
shall specify the number of shares of Common Stock to which it
relates.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant
that is less than Market Value per Share at the Date of Grant.
(c) Each such grant shall be subject to such conditions,
limitations, restrictions and other matters, and shall be subject
to forfeiture or lapse in such circumstances, as the Committee may
prescribe; provided, however, that all or a portion of the shares of
Common Stock covered by such grant shall be subject, for a period
to be determined by the Committee at the Date of Grant, to a
substantial risk of forfeiture within the meaning of Section 83 of
the Code or any successor or substitute provision thereof and of the
regulations issued thereunder. Any grant of Restricted Shares
may specify Management Objectives which, if achieved, will result
in termination or early termination of the restrictions applicable
to such shares. The Committee shall have authority to cause a grant
of Restricted Shares to provide that termination of restrictions
applicable to such Restricted Shares or any installment thereof will
be accelerated for any reason stated therein.
(d) Each such grant shall specify that the Committee may at
any time amend, suspend or terminate the Restricted Share grant
covered thereby, provided that, in the case of an amendment, the
amended grant of Restricted Shares shall conform to the provisions
of the Program.
(e) Each such grant or sale shall provide that during the
period for which such substantial risk of forfeiture is to continue,
the transferability of the Restricted Shares shall be prohibited or
restricted in the manner and to the extent prescribed by the Committee
at the Date of Grant (which restrictions may include, without
limitation, rights of repurchase or first refusal in the Corporation
or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee).
(f) Any such grant or sale of Restricted Shares may require
that any or all dividends or other distributions paid thereon
during the period of such restrictions be automatically deferred
and reinvested in additional Restricted Shares, which may be subject
to the same restrictions and substantial risks of forfeiture as the
underlying award.
(g) Each grant or sale of Restricted Shares shall be
evidenced by an agreement executed on behalf of the Corporation
by any officer and delivered to and accepted by the Participant
and shall contain such terms and provisions, consistent with this
Program, as the Committee may approve. Unless otherwise directed
by the Committee, all certificates representing Restricted Shares
shall be held in custody by the Corporation until all restrictions
thereon shall have lapsed, together with a stock power executed by
the Participant in whose name such certificates are registered,
endorsed in blank and covering such Shares.
9. Shares in Lieu of Certain Cash Payments. The Committee may also
authorize the granting of shares of Common Stock in lieu of cash which would
otherwise be payable as a bonus, pursuant to any incentive compensation plan
or otherwise, to Participants. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the limitations, contained in
the following provisions:
(a) The proportion of any such bonus to be paid in shares of
Common Stock shall be as determined by the Committee.
(b) The number of whole shares to be delivered in lieu of cash
shall be determined by dividing the value of the portion of the
bonus to be paid in shares of Common Stock by the Market Value
per Share as of a date selected by the Committee. The value of
fractional shares shall be added to the cash portion of the bonus.
(c) None of the shares of Common Stock granted pursuant to this
Paragraph 9 shall be subject to a substantial risk of forfeiture
within the meaning of Section 83 of the Code or any successor or
substitute provision thereof and of the regulations issued thereunder.
(d) Each grant shall be evidenced by a written notification
executed on behalf of the Corporation by an officer thereof and
delivered to the Participant.
(e) Except to the extent provided in this Paragraph 9, no
cash bonus, whether payable pursuant to an incentive compensation
plan or otherwise, shall constitute a part of the Program or be
affected by the Program.
10. Limitation of Transferability. Except as otherwise determined
by the Committee, no Stock Option shall be transferable otherwise than by
will or the laws of descent and distribution and Stock Options shall be
exercisable during the lifetime of the Participant to whom such Stock Option
has been granted only by him or by his guardian or legal representative, and
after such Participant's death shall be exercisable only by his legal
representative.
11. Other Provisions. The award of any Benefit under the Program
may also be subject to other provisions (whether or not applicable to the
Benefit awarded to any other Participant) as the Committee determines
appropriate, including, without limitation, restrictions on resale or
other disposition, such provisions as may be appropriate to comply with
federal and state securities laws and stock exchange requirements, and
understandings or conditions as to the Participant's employment, in addition
to those specifically provided for under the Program.
12. Manner of Action by the Corporation. The Secretary of the
Corporation (or such other officer as the Chief Executive Officer of the
Corporation may from time to time designate) shall supervise the maintenance
of records for all Participants in the Program. Any determination of such
officer, if approved by the Committee, shall be binding and conclusive for all
purposes.
13. Taxes. To the extent that the Corporation is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan,
and the amounts available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or
the realization of any such benefit that the Participant or such other person
make arrangements satisfactory to the Corporation for payment of the balance
of any taxes required to be withheld. At the discretion of the Committee,
any such arrangements may include relinquishment of a portion of any such
payment or benefit. The Corporation and any Participant or such other person
may also make similar arrangements with respect to the payment of any taxes
with respect to which withholding is not required.
14. Tenure. A Participant's right, if any, to continue to serve the
Corporation as a director, officer or employee shall not be enlarged or
otherwise affected by the establishment of the Program or his designation as a
Participant.
15. Adjustment Provisions. (a) The Committee shall make or provide for
such adjustments in the number of shares of Common Stock covered by outstanding
Stock Options granted hereunder, in the Option Price applicable to such Stock
Options, and in the kind of securities covered thereby, as the Committee in
its sole discretion, exercised in good faith, determines is equitably required
to prevent dilution or enlargement of the rights of Optionees that otherwise
would result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation,
or (b) any merger, consolidation, spin-off, reorganization, partial or
complete liquidation, repurchase or exchange of shares, issuance of rights or
warrants to purchase securities, or (c) any other corporate transaction or
event having an effect similar to any of the foregoing. Moreover, in the
event of any such transaction or event, the Committee, in its discretion, may
provide in substitution for any or all outstanding Benefits under this Program
such alternative consideration as it, in good faith, may determine to be
equitable in the circumstances and may require in connection therewith the
surrender of all Benefits so replaced. The Committee shall also make or
provide for such adjustments in the numbers of shares specified in Section 5
of the Program as the Committee in its sole discretion, exercised in good
faith, determines is appropriate to reflect any transaction or event described
in the preceding sentence.
(b) Notwithstanding any other provision of the Program, and
without affecting the number of shares available hereunder, the
Committee may authorize the issuance or assumption of Benefits in
connection with any merger, consolidation, acquisition of property
or stock, or reorganization upon such terms and conditions as it may
deem appropriate.
16. Fractional Shares. The Corporation shall not be required to
issue any fractional shares of Common Stock pursuant to this Program. The
Corporation may provide for the elimination of fractions or for the settlement
of fractions in cash.
17. Amendment and Termination of Benefits and the Program. (a) The
Committee may at any time and from time to time amend, suspend or terminate
the Program; provided, however, that any amendment which must be approved by
the stockholders of the Corporation in order to comply with applicable law or
the rules of the principal national securities exchange upon which the shares
of Common Stock are traded or quoted shall not be effective unless and until
such approval has been obtained. No Benefit shall be granted pursuant to
the Program after the tenth anniversary of the Effective Date.
(b) The Committee may, with the concurrence of the affected
Optionee, amend or cancel any agreement evidencing Stock Options
granted under this Program; provided, however, that no such amendment
will lower the exercise price of any outstanding option, and no such
amendment will cause any Stock Option to cease to qualify as
"performance-based" within the meaning of Section 162(m) of the Code.
In the event of cancellation, the Committee may authorize the granting
of new Stock Options (which may or may not cover the same number of
shares which had been the subject of the prior agreement) in such
manner, at such Option Price, and subject to the same terms,
conditions and descriptions, as under the Program would have been
applicable had the cancelled Stock Options not been granted; provided,
however, that in the event of a cancellation of a holders' Stock
Options, such Stock Options may not be reissued to such holder at a
lower price.
(c) In case of termination of employment or cessation of
services as a director, in each case by reason of death, disability
or retirement under a retirement plan of the Corporation or any
Subsidiary or in the case of hardship or other special circumstances
of a Participant who holds a Stock Option not immediately exercisable
in full, or any Restricted Shares as to which a condition, limitation,
restriction or substantial risk of forfeiture has not lapsed, the
Committee may, in its sole discretion, accelerate the time at which
such Stock Option may be exercised or the time at which such
condition, limitation, restriction or substantial risk of forfeiture
will lapse.
(d) Presentation of the Program or any amendment to the Program
for stockholder approval is not to be construed to limit the
Corporation's authority to offer similar or dissimilar benefits
through plans or programs that are not subject to stockholder
approval.
18. Effective Date. This 1998 Stock Incentive Program shall become
effective on the date (the "Effective Date") that it is approved by the
affirmative vote of a majority of the shares present or represented at an
annual or special meeting of stockholders of the Corporation and entitled to
vote on the subject matter; provided that such stockholder approval is
obtained within 12 months after the adoption of this 1998 Stock Incentive
Program by the Board.