SIMPSON MANUFACTURING CO., INC.
4637 Chabot Drive, Suite 200
Pleasanton, California 94588
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
The annual meeting of shareholders of Simpson Manufacturing Co., Inc.
(the "Company"), a California Corporation, will be held at 4:00 p.m.,
Pacific Daylight Time, on May 15, 1997, at the Simpson Strong-Tie Company
Inc. training facility located at 1470 Doolittle Drive, San Leandro,
California, for the following purposes:
1. To elect seven directors to the Company's Board of Directors,
each to hold office until his or her successor is elected and qualifies or
until his or her earlier resignation or removal.
2. To consider and act upon a proposal to increase by 300,000
shares (from 1,200,000 to 1,500,000) the number of shares of Common Stock
reserved for issuance under the Simpson Manufacturing Co., Inc. 1994 Stock
Option Plan.
3. To consider and act upon a proposal to ratify the selection
of Coopers & Lybrand L.L.P. as the Company's independent auditors for the
current fiscal year.
4. To transact such other business as may properly come before
the meeting.
At the conclusion of the Annual Meeting of Shareholders, a tour of the
Company's San Leandro facility will be conducted for interested
shareholders.
Only shareholders of record as of March 24, 1997, are entitled to
notice of and will be entitled to vote at this meeting or any adjournment
thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Stephen B. Lamson
Secretary
Pleasanton, California
April 14, 1997
*****************************************************************
* TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, *
* YOU ARE URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY *
* AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED, *
* WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOUR PROXY *
* CAN BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED. *
*****************************************************************
SIMPSON MANUFACTURING CO., INC.
4637 Chabot Drive, Suite 200
Pleasanton, California 94588
April 14, 1997
PROXY STATEMENT
SOLICITATION AND VOTING OF PROXIES
The accompanying proxy is solicited on behalf of the Board of
Directors of Simpson Manufacturing Co., Inc., a California Corporation (the
"Company"), for use at the Annual Meeting of Shareholders of the Company to
be held at the Simpson Strong-Tie Company Inc. ("SST") training facility
located at 1470 Doolittle Drive, San Leandro, California, on May 15, 1997,
at 4:00 p.m., Pacific Daylight Time, or any adjournment (the "Meeting").
Only holders of record of the Company's Common Stock at the close of
business on March 24, 1997, will be entitled to vote at the Meeting. At the
close of business on that date, the Company had 11,456,446 shares of Common
Stock outstanding and entitled to vote. A majority, or 5,728,224, of these
shares, present in person or by proxy, will constitute a quorum for the
transaction of business. This Proxy Statement and the Company's Annual
Report to Shareholders for the year ended December 31, 1996, are being
mailed to each shareholder on or about April 14, 1997.
REVOCABILTIY OF PROXY
A shareholder who has given a proxy may revoke it at any time before
it is exercised at the Meeting, by (1) delivering to the Secretary of the
Company (by any means, including facsimile) a written notice stating that
the proxy is revoked, (2) signing and so delivering a proxy bearing a later
date or (3) attending the Meeting and voting in person (although attendance
at the Meeting will not, by itself, revoke a proxy). If, however, a
shareholder's shares are held of record by a broker, bank or other nominee
and that shareholder wishes to vote at the Meeting, the shareholder must
bring to the Meeting a letter from the broker, bank or other nominee
confirming the shareholder's beneficial ownership of the shares to be
voted.
EXPENSES OF PROXY SOLICITATION
The expenses of this solicitation of proxies will be paid by the
Company. Following the original mailing of this Proxy Statement and other
soliciting materials, the Company or its agents may also solicit proxies by
mail, telephone or facsimile or in person.
VOTING RIGHTS
The holders of the Company's Common Stock are entitled to one vote per
share on any matter submitted to a vote of the shareholders, except that,
subject to certain conditions, shareholders may cumulate their votes in the
election of directors, and each shareholder may give one candidate a number
of votes equal to the number of directors to be elected multiplied by the
number of shares held by such shareholder or may distribute such
shareholder's votes on the same principle among as many candidates as such
shareholder thinks fit. No shareholder will be entitled, however, to
cumulate votes (that is, cast for any nominee a number of votes greater than
the number of votes that the shareholder normally is entitled to cast)
unless the nominees' names have been placed in nomination prior to the
voting and the shareholder gives notice at the Meeting prior to the voting
of the shareholder's intention to cumulate the shareholder's votes. If any
one shareholder gives such notice, all shareholders may cumulate their votes
for nominees. In the election of directors, the nominees receiving the
highest number of affirmative votes of the shares entitled to be voted for
them up to the number of directors to be elected by such shares are elected.
Votes against a nominee and votes withheld have no legal effect.
The Board of Directors expects all nominees named below to be available
for election. In case any nominee is not available, the proxy holders may
vote for a substitute. The Company knows of no specific matter to be brought
before the Meeting that is not identified in the notice of the Meeting or
this Proxy Statement. If, however, proposals of shareholders that are not
included in this Proxy Statement are presented at the Meeting, the proxies
will be voted in the discretion of the proxy holders. Regulations of the
Securities and Exchange Commission permit the proxies solicited by this
Proxy Statement to confer discretionary authority with respect to matters of
which the Company is not aware a reasonable time before the Meeting.
Accordingly, the proxy holders may use their discretionary authority to vote
with respect to any such matter pursuant to the proxies solicited hereby.
Directors will be elected at the Meeting by a plurality of the votes
cast at the Meeting by the holders of shares represented in person or by
proxy. Approval of Proposal No. 2 and Proposal No. 3 will require the
affirmative vote of a majority of the votes cast at the Meeting by the
holders of shares represented in person or by proxy. Abstentions and broker
nonvotes are counted as shares present for determination of a quorum but are
not counted as affirmative or negative votes on any item to be voted upon
and are not counted in determining the number of shares voted on any item.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of March 24,
1997, with respect to the beneficial ownership of the Company's Common
Stock by (1) each shareholder known by the Company to be the beneficial
owner of more than 5% of the Company's Common Stock, (2) each director of
the Company, (3) each person currently serving as an executive officer of
the Company named in the Summary Compensation Table (see "Executive
Compensation" below), and (4) all current executive officers and directors
of the Company as a group.
Name and, for Each 5% Amount and Nature of Percent
Beneficial Owner, Address Beneficial Ownership(1) of Class
- --------------------------------- ----------------------- --------
Simpson Investment Company (2) 6,149,055 53.7%
3669 Mount Diablo Blvd.
Lafayette, CA 94549
Barclay Simpson (2) 6,503,405 56.8%
4637 Chabot Drive, Suite 200
Pleasanton, CA 94588
Thomas J Fitzmyers (3) 889,992 7.6%
4637 Chabot Drive, Suite 200
Pleasanton, CA 94588
Scudder, Stevens & Clark, Inc.(4) 651,900 5.7%
Two International Place
Boston, MA 02110-4103
Stephen B. Lamson(5) 209,750 1.8%
Donald M. Townsend(6) 115,197 1.0%
Alan R. McKay(7) 4,500 *
Earl F. Cheit(7) 2,500 *
Sunne Wright McPeak(7) 3,000 *
Barry Lawson Williams(7) 2,500 *
All current executive officers
and directors as a group(8) 7,530,844 63.9%
- ------------------
* Less than 1%
(1) The information in this table is based upon information supplied by
officers and directors, and, with respect to principal shareholders,
statements on Schedule 13D or 13G filed with the Securities and
Exchange Commission. Unless otherwise indicated below, the persons
named in the table had sole voting and sole investment power with
respect to all shares beneficially owned, subject to community
property laws where applicable.
(2) Simpson Investment Company ("SIC") is the record owner of 6,149,055
shares as shown in the table. SIC is managed by Barclay Simpson, who
has sole voting and dispositive power with respect to and is deemed to
own beneficially all of the shares held in the name of SIC. Mr.
Simpson has a 77% interest and his seven children hold the remaining
23% interest in SIC. Mr. Simpson's (but not SIC's) beneficial
ownership also includes 100,000 shares owned by the Company's profit
sharing trusts, of which Messrs. Simpson, Fitzmyers and Lamson are the
trustees and share voting and dispositive power, as to which shares
such trustees disclaim beneficial ownership except to the extent of
their participation as beneficiaries of one of such trusts. Includes
250 shares subject to options granted under the 1994 Stock Option Plan
that are exercisable within 60 days.
(3) Includes 209,360 shares subject to options granted under the 1994
Stock Option Plan that are exercisable within 60 days. Includes
100,000 shares owned by the Company's profit sharing trusts, of which
Messrs. Simpson, Fitzmyers and Lamson are the trustees and share voting
and dispositive power, as to which shares such trustees disclaim
beneficial ownership except to the extent of their participation as
beneficiaries of one of such trusts.
(4) As of December 31, 1996, Scudder, Stevens & Clark, Inc. ("Scudder")
beneficially owned 651,900 shares of the Company's Common Stock.
Scudder has sole power to vote or to direct the vote of 179,300 shares
and shared power to vote or direct the vote of 318,600 shares.
(5) Includes 53,298 shares subject to options granted under the 1994 Stock
Option Plan that are exercisable within 60 days. Includes 100,000
shares owned by the Company's profit sharing trusts, of which
Messrs. Simpson, Fitzmyers and Lamson are the trustees and share voting
and dispositive power, as to which shares such trustees disclaim
beneficial ownership except to the extent of their participation as
beneficiaries of one of such trusts.
(6) Includes 47,419 shares subject to options granted under the 1994 Stock
Option Plan that are exercisable within 60 days.
(7) Includes 2,500 shares subject to options granted under the 1995
Independent Director Stock Option Plan that are exercisable within 60
days.
(8) Includes 320,327 shares subject to options exercisable within 60 days,
including the options described in the above notes, and 100,000 shares
owned by the Company's profit sharing trusts as described in notes 2, 3
and 5 above.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Nominees
The names of the Company's directors, all of whom will be nominated
for re-election, and certain information about them are set forth below. It
is intended that shares represented by proxies in the accompanying form will
be voted for the election of the nominees listed below. Although the Board
of Directors does not know whether any nominations will be made at the
Meeting other than those set forth below, if any such nomination is made, or
if votes are cast for any candidates other than those nominated by the Board
of Directors, the persons authorized to vote shares represented by executed
proxies in the enclosed form (if authority to vote for the election of
directors or for any particular nominees is not withheld) will have full
discretion and authority to vote cumulatively and allocate votes among any
or all of the nominees of the Board of Directors in such order as they may
determine.
Director
Name Age Since Position
- ---------------------------------- ----- --------- ---------------------------
Barclay Simpson(1)(4) 75 1956 Chairman of the Board
and Director
Thomas J Fitzmyers 56 1978 President, Chief
Executive Officer and
Director
Stephen B. Lamson 44 1989 Chief Financial Officer,
Treasurer, Secretary and
Director
Earl F. Cheit(2)(4) 70 1994 Director
Alan R. McKay(2)(4) 71 1994 Director
Sunne Wright McPeak(1)(3)(4) 48 1994 Director
Barry Lawson Williams(1)(2)(3)(4) 52 1994 Director
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
(3) Member of 1994 Stock Option Plan Committee
(4) Member of the Growth Committee
The Board of Directors has not established a nominating committee.
EXECUTIVE OFFICERS
Barclay Simpson, Thomas J Fitzmyers and Stephen B. Lamson are the
executive officers of the Company and are also directors and executive
officers of subsidiaries of the Company. Donald M. Townsend, age 50, a
director and the Chief Executive Officer of the Company's subsidiary,
Simpson Dura-Vent Company, Inc. ("SDV"), is also regarded as an executive
officer of the Company, because, by virtue of his role in management of SDV,
he performs policy-making functions for the Company.
BIOGRAPHICAL INFORMATION
BARCLAY SIMPSON has been the Chairman of the Board of Directors and a
director of the Company since 1956. Since 1982, Mr. Simpson and his wife
have owned Barclay Simpson Fine Arts Gallery, a commercial art gallery in
Lafayette, California. Mr. Simpson is also a member of the Boards of
Directors of Civic Bancorp, Calender Robinson Insurance, the University Art
Museum of the University of California at Berkeley, the California College
of Arts and Crafts and other charitable and educational institutions.
THOMAS J FITZMYERS has served as President and a director of the Company
since 1978, as the President and a director of SST since 1983 and as a
director of SDV since 1982. He was appointed as the Company's Chief
Executive Officer in 1994. Mr. Fitzmyers was employed by Union Bank from
1971 to 1978. He was a Regional Vice President when he left Union Bank to
join the Company in 1978.
STEPHEN B. LAMSON has served as the Company's, SST's and SDV's Chief
Financial Officer and Treasurer since 1989, as the Company's and SDV's
Secretary since 1989, as SST's Secretary since 1992, as a director of the
Company since 1990, as a director of SST since 1992 and as a director of
SDV since 1989. From 1980 to 1989, Mr. Lamson was with Coopers & Lybrand.
He was an audit manager when he left that firm to join the Company in 1989.
EARL F. CHEIT has been a Senior Advisor to the Asia Foundation on Asia-
Pacific Economic Affairs since 1984 and became Dean Emeritus of the Haas
School of Business at the University of California, Berkeley, in 1992. He
is currently a director of The Shaklee Corporation and CNF Transportation,
Inc. and a Trustee of Mills College.
ALAN R. McKAY has been the President of Alan R. McKay & Associates, an
engineering consulting firm based in Lafayette, California, since 1959. He
is a registered civil, structural and geotechnical engineer in the State of
California with extensive experience in connector applications.
SUNNE WRIGHT McPEAK is the President and Chief Executive Officer of the Bay
Area Council, a business sponsored organization founded in 1945 that
promotes economic activity and environmental quality in the region. Prior
to this position, she was the President and Chief Executive Officer of the
Bay Area Economic Forum, a partnership of government, business, academic
and foundation sectors of the nine San Francisco Bay Area counties. From
1979 through 1994, she served on the Board of Supervisors of Contra Costa
County, including several terms as Chair. Her most recent term as Chair
concluded in 1992. In addition, Ms. McPeak served as President of the
California State Association of Counties and has been a member of the
advisory boards of the Urban Land Institute and California State
University, Hayward. She is currently a director of the California
Foundation for the Environment and the Economy.
BARRY LAWSON WILLIAMS has been President of Williams Pacific Ventures Inc.,
a venture capital and real estate investment and consulting firm, since
1987. From 1989 until its sale in 1992, he was also Chief Executive Officer
and owner of C.N. Flagg Power Inc. He is a director of PG&E Corporation,
American President Companies, Ltd., Tenera Inc., CH2M HILL Companies, Ltd.,
The U.S.A. Group, Inc., Newhall Land and Farming Co. Inc., Northwestern
Mutual Life Insurance Co. and Lucas Arts/Lucas Digital Companies.
DONALD M. TOWNSEND (who is not a director nominee) has been employed by the
Company since 1981 and has served as a director of SDV since 1984 and as
its President and Chief Operating Officer since 1991. He was appointed as
SDV's Chief Executive Officer in 1994. From 1984 to 1991, he was the Vice
President and General Manager of SDV.
ATTENDANCE AT MEETINGS
The Board of Directors held five meetings and its committees held a
total of ten meetings in 1996. Each director attended 100% of the meetings
of the Board of Directors and the committees on which he or she served in
1996.
THE BOARD RECOMMENDS A VOTE "FOR" ELECTION OF EACH OF THE SEVEN
NOMINATED DIRECTORS.
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE
SIMPSON MANUFACTURING CO., INC. 1994 STOCK OPTION PLAN
At the Meeting, the Company's shareholders will be asked to consider a
proposal to amend the Simpson Manufacturing Co., Inc. 1994 Stock Option
Plan (the "Option Plan") to increase the number of shares authorized for
issuance under the Option Plan by 300,000 shares to 1,500,000.
The Board of Directors believes that the amendment to the Option Plan
is in the best interests of the Company. The purpose of the Option Plan is
to provide a means by which selected employees and directors of and
consultants to the Company, and its subsidiaries, may be given an
opportunity to purchase stock of the Company. In addition, the Company, by
means of the Option Plan, seeks to retain the services of persons who are
now employees or directors of or consultants to the Company and its
affiliates, to secure and retain the services of new employees, directors
and consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its subsidiaries. The
Board of Directors believes that the reservation of additional shares for
issuance on exercise of options to be granted under the Option Plan will
assist the Company in seeking those goals.
DESCRIPTION OF 1994 STOCK OPTION PLAN
By affording selected employees and directors of and consultants to the
Company and its subsidiaries the opportunity to buy shares of Common Stock
of the Company, the Option Plan is intended to enhance the ability of the
Company and its subsidiaries to retain the services of persons who are now
employees, directors or consultants, to secure and retain the services of
new employees, directors and consultants, and to provide incentives for such
persons to exert maximum efforts for the success of the Company and its
subsidiaries. The Option Plan was adopted by the Company's Board of
Directors and approved by the Company's shareholders prior to the Company's
initial public offering in 1994. After this proposal is approved by the
shareholders, no more than 1,500,000 shares of Common Stock may be sold
(including shares already sold) pursuant to all options granted under the
Option Plan. Common Stock sold on exercise of options granted under the
Option Plan may be previously unissued shares or reacquired shares, bought
on the market or otherwise.
The Company's Board of Directors has delegated the administration of
the Option Plan to its 1994 Stock Option Plan Committee (the "Committee"),
consisting of Sunne Wright McPeak and Barry Lawson Williams. The members of
the Committee are (a) "non-employee directors" which means directors who
satisfy the requirements established by the Securities and Exchange
Commission for non-employee directors under Rule 16b-3 and (b) "outside
directors" which means directors who satisfy the requirements established
under section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). Members of the Committee are appointed by the Company's Board of
Directors for indefinite terms and may be removed by the Board of Directors
at any time.
The Committee administers the Option Plan (as its manager and not as
its trustee) and determines (a) who will be granted options, (b) when and
how each option will be granted, (c) whether an option will be an incentive
stock option or a nonstatutory stock option, (d) the provisions of each
option, including the time or times the option may be exercised, and (e) the
number of shares for which an option is granted. The Committee also
construes and interprets the Option Plan and the options granted under it
and establishes, amends and revokes rules and regulations concerning the
administration of the Option Plan.
Participation in the Option Plan is open to employees and directors of
and consultants to the Company or any of its subsidiaries who are selected
by the Committee on the basis of their past and anticipated future
contributions to the Company and its subsidiaries. A participant may be
granted incentive stock options only if the participant is an employee of
the Company, but any participant may be granted nonstatutory stock options.
A participant who owns stock representing more than 10% of the voting power
of all classes of stock of the Company or any of its affiliates may not be
granted an option under the Option Plan unless the per share exercise price
of that option is at least 110% of the fair market value of a share of
Common Stock on the date of the grant and the option is exercisable for a
period of not more than five years after the date of the grant.
The terms of each option granted under the Option Plan are determined
by the Committee and specified in the option granted to each participant.
The date or dates on which each option becomes exercisable may be based on
performance or other criteria, but no option may be exercised more than ten
years after the date it is granted. The number of shares of Common Stock
subject to an option under the Option Plan may be divided into periodic
installments, with the option becoming exercisable ("vesting") during each
installment period with respect to the shares allotted to that period. The
vesting provisions may vary among options. At the discretion of the
Committee, the terms of an option may permit an optionee to exercise the
option before it vests. In such cases, however, the Company will have the
right to repurchase from the optionee, at the exercise price, any shares
purchased by exercising an unvested option. This repurchase right will lapse
at a rate equivalent to the vesting rate, starting on the date the option is
granted. If an optionee is allowed to purchase shares under an unvested
option and later ceases to be an employee or director of or consultant to
the Company or one of its subsidiaries, the Company will have 90 days from
the date of such cessation to exercise its repurchase right.
Several conditions apply to incentive stock options generally, in
accordance with the Code. The exercise price of each incentive stock option
must be at least 100% of the fair market value of the Common Stock on the
date the option is granted. If a participant is granted an incentive stock
option, the favorable federal income tax treatment accorded to incentive
stock options (discussed below) will be available only if (a) the optionee
does not sell the shares received on exercise of the option until at least
two years after the option is granted and one year after its exercise, and
(b) the optionee is an employee of the Company at all times during the
period beginning on the date the option is granted and ending three months
before the exercise of the option. In addition, to the extent that incentive
stock options granted under the Option Plan or other plans of the Company
and its affiliates that vest in any year allow an optionee to acquire Common
Stock with a fair market value of more than $100,000, those incentive stock
options are treated as nonstatutory stock options.
The following options have been granted or committed to be granted
under the Option Plan to the following persons in the amounts and at the
exercise prices indicated:
Number
of Shares Exercise
Name and Title of Person Subject Price Expiration
or Description of Group Year to Option Per Share Date
- ------------------------------- ---- --------- --------- ----------
Thomas J Fitzmyers 1993 31,500 $ 3.64 3/04/01
President, Chief Executive 1994 207,110 11.50 5/25/01
Officer and Director 1994 4,500 10.25 2/14/02
1996 4,500 23.00(1) 4/04(1)
Stephen B. Lamson 1993 31,500 3.64 3/04/01
Chief Financial Officer 1994 20,548 11.50 5/25/01
Secretary and Director 1994 2,500 10.25 2/14/02
1996 2,500 23.00(1) 4/04(1)
Donald M. Townsend 1993 6,222 3.64 3/04/01
President and Chief 1994 1,552 3.64 3/04/01
Executive Officer of SDV 1994 35,895 11.50 5/25/01
1994 7,500 10.25 2/14/02
1996 7,500 23.00(1) 4/04(1)
Barclay Simpson 1994 500 11.28 2/14/00
Chairman of the Board 1996 500 25.30(1) 4/02(1)
Current Executive Officers, various 364,327 3.64-25.30 3/04/01-
as a Group 4/04
Current Directors Who - - - -
Are Not Executive
Officers, as a Group
Employees and Consultants various 724,102 3.64-23.00 3/04/01-
Who Are Not Executive 1/01/04
Officers, as a Group
- ---------------
(1) The date of grant for the 1996 options is to be determined by the
Committee. Each option has a term of seven years from the date of
grant except for Barclay Simpson's, which has a term of five years
from the date of grant. The exercise price of each of these options
is based on the market price of the Company's Common Stock on December
31, 1996.
The closing market price of a share of Common Stock of the Company, as
reported in The Nasdaq Stock Market on March 24, 1997, was $23.50.
In general, on exercising an option granted under the Option Plan, the
optionee must pay the exercise price in cash to the Company. The Committee
may, in its absolute discretion, allow the optionee to pay the exercise
price either at the time the option is granted or when the optionee
exercises it, by delivering shares of Common Stock to the Company, or
according to a deferred payment arrangement, or in some other manner. If the
Committee allows the optionee to defer payment for the exercise of an
option, the optionee will be charged interest at least annually on the
deferred amount at the minimum amount necessary to avoid characterization of
any portion of the exercise price as interest under the Code or, if less, at
the maximum rate permitted by law. The Company may be required to withhold
income tax on exercise of a nonstatutory stock option. To the extent
provided in an option, the optionee may satisfy the withholding obligation
by paying cash, by authorizing the Company to withhold shares from the
shares the optionee would otherwise receive on exercising the option, or by
delivering to the Company shares of the Company's Common Stock already owned
by the optionee.
The grant of a nonstatutory stock option under the Option Plan should
not have any federal income tax consequences. On exercising a nonstatutory
stock option, the optionee generally will recognize taxable ordinary income
equal to the excess of (a) the fair market value of the shares of Common
Stock purchased on such exercise, over (b) the option exercise price for
those shares. The Company will generally be required to withhold tax from
the optionee's regular or supplemental wages based on the amount of ordinary
income that the optionee recognizes and will generally be entitled to a
business expense deduction in that amount.
When an optionee sells shares acquired by exercising a nonstatutory
stock option, the optionee will recognize capital gain or loss equal to the
difference between the selling price for those shares on such disposition,
and the fair market value of the shares at the time the optionee exercises
the option. If the optionee holds the shares for a year or more after
exercising the nonstatutory option (not including the time the optionee
holds the option before exercising it), any gain on the disposition of those
shares will be characterized as long-term capital gain. An optionee's sale
of shares acquired on exercise of a nonstatutory stock option has no tax
consequences to the Company.
The grant of an incentive stock option under the Option Plan generally
has no federal income tax consequences to the optionee. Similarly, the
optionee should not recognize any income on exercising an incentive stock
option. The optionee will not recognize income with respect to an incentive
stock option until the optionee sells the shares acquired on exercise of the
option, at which time the optionee will generally recognize capital gain or
loss equal to the difference between (a) the selling price for those shares
on such disposition, and (b) the option exercise price for those shares.
This federal income tax treatment is available, however, only if the
optionee does not sell the shares acquired on exercise of an incentive stock
option until at least two years after the option grant and at least one year
after the option exercise. If an optionee sells the shares before holding
them for the required period, the shares will be treated as having been
acquired through the exercise of a nonstatutory stock option. Accordingly,
an optionee would recognize as ordinary income the excess of the fair market
value of the shares at the time the optionee exercises the option over the
option exercise price for those shares, and would recognize as capital gain
or loss the difference between the selling price on the disposition and the
fair market value of the shares at the time the optionee exercises the
option. In such case, the Company could take a business expense deduction in
an amount equal to the amount the optionee recognizes as ordinary income.
Net long-term capital gains of individuals are currently subject to a
maximum marginal federal income tax rate of 28%, and the maximum marginal
federal income tax rate on individuals' ordinary income is 39.6%. In
addition, because an individual may deduct only $3,000 of net capital losses
in any year, it may be advantageous to characterize gain as long-term
capital gain if the optionee has capital losses from other investments.
If an optionee under the Option Plan ceases to be an employee or
director of or consultant to the Company or one of its subsidiaries for a
reason other than disability or death, the optionee may exercise options he
or she holds under the Option Plan, to the extent that those options have
vested on the date of such cessation, at any time during the period ending
on the earlier of (a) the 90th day after such cessation (or such longer or
shorter period specified in the options, which must be at least 30 days), or
(b) the date the options expire. If the optionee does not exercise the
options within that time, the options terminate and the optionee forfeits
the right to exercise them. Any option or portion of an option that is not
vested on the date of such cessation terminates on that date and cannot be
exercised thereafter.
If an optionee ceases to be an employee or director of or consultant to
the Company or one of its subsidiaries because the optionee becomes
disabled, the optionee may exercise options granted to the optionee under
the Option Plan, to the extent that those options are vested on the date of
such cessation, within the period ending on the earlier of (a) the first
anniversary of such cessation (or such longer or shorter period specified in
the options, which must be at least six months), or (b) the date the options
expire. If the optionee does not exercise the options within that time, the
options terminate and the optionee forfeits the right to exercise them. Any
option or portion of an option that is not vested on the date of such
cessation terminates on that date and may not be exercised thereafter.
If an optionee under the Option Plan dies while serving as an employee
or director of or consultant to the Company or one of its subsidiaries or
within a period specified in the option after ceasing to be an employee,
director or consultant, the optionee's estate or the person who inherits the
option may exercise it, to the extent that the option is vested at the time
of death, within the period ending on the earlier of (a) the 180th day after
the first anniversary of the optionee's death (or such longer or shorter
period specified in the option, which must be at least six months), or
(b) the date the option expires. If the option is not exercised within that
time, it terminates and may not be exercised. Any option or portion of an
option that has not vested at the date of death terminates on that date and
may not be exercised.
Notwithstanding the termination, disability or death of an optionee,
the Committee may extend the expiration date of any outstanding option in
circumstances in which it deems such action to be appropriate, but, no such
extension may extend the term of an option beyond the date of expiration of
the term of such option as set forth in the option agreement.
Options granted under the Option Plan may not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed of by the Optionee
during his or her lifetime, whether by operation of law or otherwise, other
than by will or the laws of descent and distribution applicable to such
optionee, or be made subject to execution, attachment or similar process,
although the Committee may in its discretion at the time of approval of the
grant of an option or thereafter permit an option to be transferred by an
optionee to a trust or other entity established by the optionee for estate
planning purposes, and may permit further transferability, or impose
conditions or limitations on any permitted transferability. An option is
otherwise exercisable during the lifetime of the person to whom the option
is granted only by such person.
The Committee may suspend or terminate the Option Plan at any time.
Unless the Committee terminates it earlier, the Option Plan will terminate
on February 22, 2004. No options will be granted under the Option Plan after
it is terminated. Options outstanding when the Option Plan is terminated,
however, may be exercised after the termination of the Option Plan,
according to the vesting schedules of the options, until the end of the
exercise period of the options as determined under the options. The
Committee may amend the Option Plan at any time, subject in some cases to
the approval of the Company's shareholders.
The Option Plan is not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, and is not qualified
under section 401(a) of the Code.
For an optionee under the Option Plan who is not an affiliate of the
Company (that is, a director, executive officer or other person controlling,
controlled by or under common control with the Company), there are no
restrictions on the optionee's sale of the shares purchased on exercising an
option under the Option Plan. If an optionee is an affiliate of the Company,
shares of Common Stock that the optionee acquires on exercise of an option
may not be sold unless the resale is registered under the Securities Act or
the sale is made pursuant to an applicable exemption from registration,
including pursuant to Rule 144 under the Securities Act. In general, under
Rule 144 as currently in effect, an affiliate would be entitled to sell
shares of Common Stock in brokers' transactions or transactions with "market
makers" within any three-month period in an amount that does not exceed the
greater of (a) one percent of the then outstanding shares of Common Stock or
(b) the average weekly trading volume of the Common Stock on The Nasdaq
Stock Market during the four calendar weeks preceding the date on which
notice of the sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are also subject to certain notice requirements and the
availability of current public information about the Company. The Company in
its discretion may register for resale the shares of Common Stock that are
subject to the Option Plan by filing a post-effective amendment to the
registration statement on Form S-8 relating to the Option Plan to add a
reoffer prospectus on Form S-3, after which resales of shares acquired on
exercise of options would no longer be subject to the limitations of Rule
144.
A copy of the Option Plan is attached to this Proxy Statement as
Exhibit A and is incorporated herein by this reference. The foregoing
description of the Option Plan is qualified in its entirety by reference to
Exhibit A attached hereto.
THE BOARD RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE
SIMPSON MANUFACTURING CO., INC. 1994 STOCK OPTION PLAN
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand L.L.P. as its
principal independent auditors to audit the Company's financial statements
for 1997, and the shareholders will be asked to ratify such selection.
Coopers & Lybrand L.L.P. has audited the Company's financial statements
since prior to 1975. A representative from Coopers & Lybrand L.L.P. will be
present at the Meeting, will be given an opportunity to make a statement at
the Meeting if he or she desires to do so, and will be available to respond
to appropriate questions.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFICATION OF SELECTION OF
COOPERS & LYBRAND L.L.P.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below provides information relating to compensation for the
years ended December 31, 1996, 1995 and 1994, for the Chief Executive
Officer and the other three most highly compensated executive officers of
the Company and the Chief Executive Officer of SDV (determined as of the
end of 1996) (collectively, the "Named Executive Officers"). The amounts
shown include compensation for services in all capacities that were provided
to the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
Long-Term Compenation
-------------------------------
Annual Compensation Awards(2) Payouts
------------------------------- -------------------- ---------
Other Re- Securities
Annual stricted Underlying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus sation(1) Awards SARs(3) Payouts sation(4)
- -------------------------- ---- --------- --------- --------- -------- ---------- --------- ---------
Thomas J Fitzmyers, 1996 $ 230,818 $ 664,180 $ 12,782 - 4,500 - $ 22,500
President and Chief 1995 223,020 495,775 2,450 - - - 22,500
Executive Officer of 1994 215,472 527,060 85,243 - 211,610 - 22,500
the Company
Barclay Simpson, 1996 150,000 334,502 - - 500 - 22,500
Chairman of the Board 1995 150,000 285,241 - - - - 22,500
of the Company 1994 150,000 527,060 - - 500 - 22,500
Stephen B. Lamson, 1996 105,984 393,541 2,568 - 2,500 - 16,283
Chief Financial Officer 1995 102,396 293,766 - - - - 15,359
of the Company 1994 98,928 312,332 7,656 - 23,048 - 14,839
Donald M. Townsend, 1996 160,680 198,940 12,462 - 7,500 - 22,500
President and Chief 1995 155,244 127,074 4,015 - - - 22,500
Executive Officer 1994 145,320 170,033 16,168 - 44,947 - 21,798
of SDV
- ---------------
(1) Includes bonuses paid to the officers in amounts equal to interest
payable by the officers to the Company or its subsidiaries in 1994 and
the income tax payable with respect to those bonuses, without
deducting an aggregate of $61,708 interest received from the officers
in 1994.
(2) As of March 24, 1997, Messrs. Fitzmyers, Lamson and Townsend,
respectively, own 536,632, 56,452 and 67,778 shares of Common Stock
that they received in 1994 in exchange for shares of common stock of
Simpson Holdings, Inc. ("Holdings") and SDV that they had acquired
under incentive stock purchase plans and owned at December 31, 1993.
They are entitled to share in any dividends that are paid with respect
to these shares.
(3) Shares subject to outstanding stock options, which have exercise
prices of $3.64 to $25.30 per share.
(4) Represents contributions to the Company's profit sharing plan trusts
for the accounts of the Named Executive Officers.
EMPLOYEE STOCK OPTIONS
The tables below provide information regarding options to purchase
share of Common Stock granted and to be granted to the Named Executive
Officers for the year ended December 31, 1996, under the Company's 1994
Stock Option Plan.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
% of Total
Number of Options/ Potential Realizable Value
Securities SARs Market at Assumed Annual Rates
Underlying Granted to Exercise Price of Stock Price Appreciation
Options/ Employees or Base at Grant Expir- for Option Term
SARs in Price Date ($/ ation -------------------------------
Name Granted(#) Fiscal Year ($/share) share)(1) Date(1) 0% 5% 10%
- ---------------------- ----------- ----------- --------- --------- ------- --------- --------- ---------
Thomas J Fitzmyers 4,500 4.1% $ 23.00 $ 23.00 4/04 $ - $ 42,135 $ 98,192
Barclay Simpson 500 0.5% 25.30 23.00 4/02 - 3,532 9,760
Stephen B. Lamson 2,500 2.3% 23.00 23.00 4/04 - 23,408 54,551
Donald M. Townsend 7,500 6.9% 23.00 23.00 4/04 - 70,225 163,654
- ---------------
(1) The date of grant is to be determined by the Committee. Each option
has a term of seven years from the date of grant except for Barclay
Simpson's, which has a term of five years from the date of grant. The
exercise price of each of these options is based on the market price
of the Company's Common Stock on December 31, 1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
DECEMBER 31, 1996, OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
Shares at December 31, at December 31,
Acquired on Value 1996, Exercisable/ 1996, Exercisable/
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- ---------------------- ------------ ------------ ------------------ ------------------
Thomas J Fitzmyers 31,500 $ 322,403(1) 208,235/7,875 $ 2,396,109/43,031
Stephen B. Lamson - - 52,673/4,375 854,111/23,906
Donald M. Townsend - - 45,544/13,125 587,203/71,719
Barclay Simpson - - 125/875 1,465/4,395
- ---------------
(1) The value realized for option exercises is the aggregate fair market
value of the Company's Common Stock on the date of exercise less the
exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Boards of Directors of the Company
comprises Barclay Simpson, the Chairman of the Board of the Company, and
Sunne Wright McPeak and Barry Lawson Williams, both independent directors of
the Company. Ms. McPeak and Mr. Williams have no relationships with the
Company or any of its subsidiaries other than as members of the Company's
Board of Directors and certain committees of the Company's Board of
Directors. Certain transactions to which Mr. Simpson, his affiliates and
members of his family have been parties are described below.
Real Estate Transactions
The Company, directly and through its subsidiaries, leases certain of
its facilities from general partnerships (the "Partnerships") wholly or
partly comprising current or former directors, officers, employees and
shareholders of the Company and its subsidiaries. The Partnerships, their
partners, the percentage interests of such partners in the Partnerships and
the properties that the Partnerships lease, or previously leased and sold,
to the Company or a subsidiary, are as follows:
Partners
Partnership (percentage interests) Property Location
- --------------------- ------------------------------------------------ ---------------------
SIC Barclay Simpson (77%), John B. Simpson (5%), San Leandro,
Anne Simpson Gattis (5%), Jean D. Simpson California
(5%), Jeffrey P. Gainsborough (2%), Julie
Marie Simpson (2%), Elizabeth Simpson Murray
(2%) and Amy Simpson (2%)
Doolittle Investors Everett H. Johnston Family Trust (23.13%), San Leandro,
Barclay and Sharon Simpson (25.51%), Thomas California
J Fitzmyers (5.24%), Judy F. Oliphant,
Successor Trustee of the Oliphant Family
Revocable Trust Agreement Dated January 27,
1993 (Survivors Trust) ("Oliphant Trust")
(20.61%), and SIC (25.51%)
Columbus-Westbelt
Investment Co. Everett H. Johnston Family Trust (5.54%), Columbus, Ohio
Thomas J Fitzmyers (1.10%), Oliphant Trust
(5.54%), Barclay and Sharon Simpson (13.31%),
Richard C. Perkins Trust (5.48%), Stephen
B. Lamson (3.32%), Tyrell T. Gilb Trust
(5.54%), Doyle E. Norman (5.54%), Stephen P.
Eberhard (5.05%), Robert J. Phelan (5.54%),
Jeffrey P. Gainsborough (11.01%), Julie Marie
Simpson (11.01%), Elizabeth Simpson Murray
(11.01%) and Amy Simpson (11.01%)
Vacaville Investors Everett H. Johnston Family Trust (49.90%), Vacaville,
Thomas J Fitzmyers (1.13%), Oliphant Trust California
(12.47%), Barclay and Sharon Simpson (4.57%),
SIC (27.50%), Richard C. Perkins Trust (4.43%)
Vicksburg Investors Everett H. Johnston Family Trust (41.17%), Vicksburg,
Thomas J Fitzmyers (6.02%), Oliphant Trust Mississippi
(12.61%), Barclay and Sharon Simpson (33.92%)
and Richard C. Perkins Trust (6.28%)
Barclay Simpson is the managing partner of SIC, a general partnership
of Mr. Simpson and his seven children. Everett H. Johnston, formerly a
director and executive officer of the Company (now retired), is the
managing partner of each Partnership other than SIC. Richard C. Perkins,
Stephen P. Eberhard and Robert J. Phelan are supervisory employees of the
Company or SST and Doyle E. Norman and Tyrell T. Gilb (both now retired)
are consultants to the Company. Sharon Simpson is Barclay Simpson's wife;
and John B. Simpson, Anne Simpson Gattis, Jean D. Simpson, Jeffrey P.
Gainsborough, Julie Marie Simpson, Elizabeth Simpson Murray and Amy Simpson
are his children.
Aggregate lease payments by the Company and its subsidiaries to the
Partnerships in 1996, 1995 and 1994 were, and the terms of the leases will
expire, as follows:
lease Payments Lease
---------------------------------- Expiration
Partnership 1996 1995 1994 Date
- --------------------------------- ---------- ---------- ---------- ----------
SIC $ 185,100 $ 185,100 $ 185,100 12/31/01
Doolittle Investors 231,096 230,438 223,200 12/31/01
Columbus Westbelt Investment Co. 581,064 418,525 351,600 9/30/05
Vacaville Investors 437,640 437,640 478,428 11/30/03
Vicksburg Investors 329,017 322,289 302,534 11/30/03
Based on formal and informal third-party appraisals, the Company
believes that the rent under one of the leases with the Partnerships may
exceed the rent that might be available for comparable facilities leased
from unrelated lessors in arm's length transactions. The leases with the
Partnerships are expected to continue until the expiration of the
respective terms of the leases, and they may hereafter be renewed. The
Company's future rent obligations under the continuing leases are expected
to be consistent with the rents paid in 1996, subject to adjustments as
provided in certain of the leases.
If and when any lease is proposed to be amended or renewed or any
property subject to any lease is proposed to be purchased by the Company,
the Company will enter into such transaction only with the approval of a
majority of the directors of the Company who are not employees or officers
of the Company and who are not partners of any of the Partnerships and only
after such directors satisfy themselves that such transaction will be fair,
just and reasonable as to the Company, beneficial to the Company and on
terms reasonably consistent with the terms available from unrelated parties
in similar transactions negotiated at arm's length.
The Company does not intend in the future to lease from any of the
Partnerships or any other entities controlled by any of its directors,
officers or employees any facilities that are not on or adjacent to the
property subject to the existing leases.
Cash Profit Sharing Bonus Plan
The Company maintains a cash profit sharing bonus plan for the benefit
of employees of the Company and its subsidiaries. The Company may change,
amend or terminate its bonus plan at any time. Under the bonus plan as
currently in effect, the Compensation Committee of the Board of Directors
determines a "qualifying level" for the coming fiscal year for the Company,
SDV and each branch of SST. The qualifying level is equal to the value of
the net operating assets (as defined) of the Company, SDV or the respective
branch of SST, multiplied by a rate of return on those assets. If profits
exceed the qualifying level in any fiscal quarter, a portion of such excess
profits is distributed to the eligible employees as cash bonuses. An
acceptable range of participation in the excess profits distributed as cash
bonuses and the specific amounts distributed to the Named Executive
Officers are determined by the Compensation Committee of the Board of
Directors, while the percentage of excess profits distributed and the
amounts distributed to all other participants are determined by the
executive officers. The failure to earn a cash bonus in any given quarter
does not affect the ability to earn a cash bonus in any other quarter.
Amounts paid under these programs aggregated $9.3 million, $6.6 million and
$7.0 million in 1996, 1995 and 1994, respectively, the amounts of which
paid to Named Executive Officers in 1996, 1995 and 1994 are shown in the
Summary Compensation Table above.
Profit Sharing Plans
The Company's subsidiaries maintain defined contribution profit
sharing plans for their U.S. based salaried employees (the "Salaried Plan")
and for U.S. based nonunion hourly employees (the "Hourly Plan"). An
employee is eligible for participation in a given year if he or she is an
employee on the first and last days of that calendar year and completes at
least 750 hours of service during that calendar year. As of December 31,
1996, there were 279 employees participating in the Salaried Plan and 391
employees participating in the Hourly Plan. Under the Salaried Plan and the
Hourly Plan, the Board of Directors may authorize contributions to the plan
trusts in their exclusive discretion. Contributions to the plan trusts by
the Company's subsidiaries are limited by the amount deductible for federal
income tax purposes under section 404(a) of the Code. Barclay Simpson,
Thomas J Fitzmyers and Stephen B. Lamson, who are Named Executive Officers
of the Company, are the trustees of the plan trusts and are also
participants in the salaried plan. The amounts contributed by the Company
for their accounts in 1996, 1995 and 1994 are shown in the Summary
Compensation Table above. Certain of the Company's foreign subsidiaries
maintain similar plans for their employees.
Compensation of Directors
The Company's directors who do not receive compensation as officers or
employees of the Company are each paid an annual retainer of $10,000 and a
fee of $1,000 for attending in person each meeting of the Board of
Directors and for attending in person each meeting of any committee held on
a day when the Board of Directors does not meet. Each outside director is
also paid $500 for each committee meeting he or she attends in person on
the same day as a Board of Directors meeting and for Board of Directors
meetings attended by telephone conference. Directors are also reimbursed
for expenses incurred in connection with their attendance at Board of
Directors and committee meetings.
1995 Independent Director Stock Option Plan
The Board of Directors has adopted, and the shareholders have approved,
the Simpson Manufacturing Co., Inc. 1995 Independent Director Stock Option
Plan (the "Independent Director Plan"). The purpose of the Independent
Director Plan is to give independent directors of the Company an opportunity
to buy shares of Common Stock of the Company, to encourage independent
directors in their efforts on behalf of the Company and to secure their
continued service to the Company. Options to purchase 2,000 shares of Common
Stock were committed to be granted under the Independent Director Plan in
1996.
REPORT OF THE COMPENSATION COMMITTEE, 1994 STOCK OPTION PLAN COMMITTEE AND
BOARD ON EXECUTIVE COMPENSATION
The Compensation Committee and the 1994 Stock Option Plan Committee of
the Board of Directors are responsible for the development and review of
the Company's compensation policy for all the salaried employees. The
overall philosophy of the Company's compensation program is to provide a
high degree of incentive to employees by creating programs that reward
achievement of specific profit goals. The Company believes that these
incentive programs based on profit targets are best suited to align the
interests of employees and shareholders. In addition, the Company does not
have any special plans for the Chief Executive Officer or other executive
officers of the Company. The absence of special plans for the executive
officers is intended to create a sense of unity and cooperation among the
Company's employees. The four elements of the Company's compensation plan
for most salaried employees and all officers are base salary, a profit
sharing retirement plan, a cash profit sharing bonus plan and the Option
Plan.
The Compensation Committee has not performed any recent salary
surveys, but based on surveys in prior years and recent raises, it believes
the base salaries for the Chief Executive Officer and other executive
officers are about average as compared to similar companies. Raises for the
officers in 1996 were 3.5%, except for Barclay Simpson, Chairman, who did
not receive an increase in salary in 1996.
All U.S. based salaried employees, including the Chief Executive
Officer and other executive officers, participate in the profit sharing
plan in proportion to their salary. For 1996, 15% of all U.S. based
salaried employees' base pay will be contributed to the plan subject to the
limitations of applicable law. In 1996, Thomas J Fitzmyers, Chief Executive
Officer, and Donald M. Townsend, President and Chief Executive Officer of
SDV, were subject to a contribution limit under applicable law; the
Company's contribution to the profit sharing plan for their accounts is
$22,500 each.
All salaried employees except those on commission programs,
participate in the Company's quarterly cash profit sharing bonus plan.
Annually, the Compensation Committee establishes an acceptable range of
participation in the profits in excess of the qualifying level to be
distributed as cash bonuses for each profit center. The Compensation
Committee also approves the specific percentages to be distributed to the
Chief Executive Officer and other executive officers. The executive
officers determine the specific percentages for distributions to all other
participating employees. Historically the percentage of profits in excess
of the qualifying level distributed under these plans has not changed
substantially from year to year. Employees with higher levels of
responsibility typically receive higher proportions of the cash profit
sharing for their profit center. Barclay Simpson's participation rate
decreased in 1995, Thomas J Fitzmyers' and Stephen B. Lamson's
participation rates decreased slightly in 1996 and will be decreased by
approximately 10% in 1997 and Donald M. Townsend's participation rate has
not changed for nine years. In 1996, the Chief Executive Officer received
288% of his base salary in cash profit sharing bonuses. Because the cash
profit sharing bonus plan is based upon a return on net operating assets,
and not subjectively determined, the Compensation Committee believes the
plan provides substantial incentive to all participating employees, not
only the Company's officers.
In 1994, the Company adopted the Option Plan to replace its previous
incentive stock purchase plans. The 1994 Stock Option Plan Committee
believes an option plan is most effective if options are granted to all
participants on an objective rather than subjective basis. Therefore, under
the Option Plan, participants are granted options if Company-wide and
profit center operating goals are met. The Compensation Committee
establishes these goals at the beginning of the year. The 1994 Stock Option
Plan Committee also believes that option plans with broad based
participation are most effective. The 1994 Stock Option Plan Committee
determines each year the employees who are eligible to participate in the
Option Plan, based on job responsibilities and contributions made to the
Company. At present, over one quarter of the Company's salaried employees
participate in the Option Plan. The 1994 Stock Option Plan Committee
determines the number of options to be granted under the Option Plan. In
determining the potential grants, the 1994 Stock Option Plan Committee
considers previous stock and option awards, current options owned, job
responsibilities and contributions to the Company. These same
considerations apply to option grants to the Chief Executive Officer and
other executive officers. Because of the responsibilities of the Chief
Executive Officer and the other executive officers, their stock option
grants are higher than those of other participants who also achieve their
goals.
In 1995, the Company adopted the Independent Director Plan to give the
outside members of the Board of Directors an opportunity to buy shares of
Common Stock of the Company. The Independent Director Plan is administered
by the Board of Directors (as its manager and not as its trustee) and
determines which persons are eligible to be granted options. The Board of
Directors believes this kind of option plan is most effective if options
are granted to outside directors on an objective basis. Therefore, the
Board of Directors determines the number of shares subject to options that
they believe will be an appropriate incentive to be granted when an outside
director becomes a member of the Board of Directors and if Company-wide
operating goals, established by the Compensation Committee at the beginning
of the year, are met. These operating goals were met in 1996 and
accordingly, an option to purchase 500 shares was committed to be granted
to each outside director.
1994 Stock
Compensation Committee Option Plan Committee
-------------------------------- -------------------------------
Barclay Simpson, Chair Sunne Wright McPeak, Chair
Sunne Wright McPeak Barry Lawson Williams
Barry Lawson Williams
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total shareholder return on
the Company's Common Stock from May 31, 1994, through December 31, 1996,
with the cumulative total return on The Nasdaq Stock Market U.S. Index and
the Dow Jones Building Materials Index over the same period (assuming the
investment of $100 in the Company's Common Stock and in each of the indices
on May 31, 1994, and reinvestment of all dividends).
SIMPSON MANUFACTURING CO., INC.
Comparison of Cumulative Total Return
May 31, 1994, to December 31, 1996
Nasdaq Dow Jones
Simpson Stock Building
Manufacturing Market - Materials
Co., Inc. U.S. Index Index
------------- ------------- -------------
May-94 $100 $100 $100
Dec-1994 89 104 95
Dec-1995 111 147 130
Dec-1996 190 180 155
(1) The Company's initial public offering commenced on May 26, 1994. Data
is shown beginning May 31, 1994, because data for cumulative returns
on The Nasdaq Stock Market U.S. Index and the Dow Jones Building
Materials Index are available only at month end.
(2) Historical returns are not necessarily indicative of future
performance.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers and persons who own more than
ten percent of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership of the Company's Common Stock
with the Securities and Exchange Commission. Such persons are required by
SEC regulation to furnish the Company with copies of all section 16(a)
reports that they file. Based solely on its review of the copies of such
reports furnished to the Company and written representations from the
executive officers and directors, the Company believes that all section
16(a) filing requirements were met in 1996, except as follows: Sunne
Wright McPeak, one of the Company's directors, purchased stock in May 1996
and was 14 days late in filing a report on Form 4.
OTHER BUSINESS
The Board of Directors does not presently intend to bring any other
business before the Meeting and, so far as is known to the Board of
Directors, no matters are to be brought before the Meeting except as
specified in the notice of the Meeting. As to any business that may
properly come before the Meeting, however, it is intended that proxies, in
the form enclosed, will be voted in respect thereof in accordance with the
judgment of the persons voting such proxies.
DISCLAIMER REGARDING INCORPORATION BY REFERENCE OF THE REPORT OF THE
COMPENSATION COMMITTEE AND THE STOCK PRICE PERFORMANCE GRAPH
THE INFORMATION SHOWN IN THE SECTIONS ENTITLED "REPORT OF THE
COMPENSATION COMMITTEE AND BOARD ON EXECUTIVE COMPENSATION" AND "COMPANY
STOCK PRICE PERFORMANCE" SHALL NOT BE DEEMED TO BE INCORPORATED BY
REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE THIS PROXY
STATEMENT INTO ANY FILING BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, EXCEPT TO THE EXTENT THAT THE COMPANY
INCORPORATES THIS INFORMATION BY SPECIFIC REFERENCE, AND SUCH INFORMATION
SHALL NOT OTHERWISE BE DEEMED FILED UNDER SUCH ACTS.
SHAREHOLDER PROPOSALS
Shareholder proposals for inclusion in the proxy statement and form of
proxy relating to the Company's 1998 Annual Meeting of Shareholders must be
received by the Company a reasonable time before the Company's solicitation
is made, and in any event not later than December 16, 1997.
BY ORDER OF THE BOARD
Stephen B. Lamson
Secretary
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, YOU ARE URGED TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. YOUR PROXY CAN BE REVOKED BY YOU AT ANY TIME BEFORE IT IS VOTED.
EXHIBIT A
SIMPSON MANUFACTURING CO., INC.
1994 STOCK OPTION PLAN
Adopted February 23, 1994
and Amended through March 6, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its
Affiliates, may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company
and its Affiliates, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to
exert maximum efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c),
be either Incentive Stock Options or Nonstatutory Stock Options. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to section
6, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are
defined in sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Simpson Manufacturing Co., Inc., a California
corporation.
(g) "Consultant" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is
compensated for such services; provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who
are not compensated by the Company for their services as Directors.
(h) "Continuous Status as an Employee, Director or Consultant" means
the employment or relationship as a Director or Consultant is not
interrupted or terminated. The Board, in its sole discretion, may determine
whether Continuous Status as an Employee, Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by
the Board, including sick leave, military leave or any other personal leave;
or (ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as
a Consultant or a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means the value of the Common Stock as
determined in good faith by the Board and in a manner consistent with
section 260.140.50 of Chapter 3 of Title 10 of the California Code of
Regulations.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of section 422 of the Code and the
regulations promulgated thereunder.
(n) "Non-Employee Director" means a Director who satisfies the
requirements established from time to time by the Securities and Exchange
Commission for non-employee directors under Rule 16b-3.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of
the Plan.
(s) "Optioned Stock" means the Common Stock of the Company subject to
an Option.
(t) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
(u) "Outside Director" means a member of the Board who satisfies the
requirements established from time to time for outside directors under
section 162(m) of the Code.
(v) "Plan" means this Simpson Manufacturing Co., Inc. 1994 Stock
Option Plan.
(w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
(x) "Securities Act" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection
3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a
Nonstatutory Stock Option; the terms and conditions of each Option granted
(which need not be identical), including the time or times such Option may
be exercised as a whole or in part; and the number of shares for which an
Option shall be granted to each such person;
(2) To grant Options under the Plan;
(3) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in
a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective; and
(4) To amend the Plan as provided in section 11.
(c) The Board may delegate administration of the Plan to a Committee
of the Board that will satisfy the requirements of rule 16b-3. The Committee
shall consist solely of two or more Directors, each of whom is a Non-
Employee Director and an Outside Director, who shall be appointed by the
Board. Subject to the foregoing, from time to time the Board may increase
the size of the Committee and appoint additional qualified members, remove
members (with or without cause) and appoint new members in substitution
therefor, or fill vacancies, however caused. If administration is delegated
to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the Board
(and references in this Plan to the Board shall thereafter be to the
Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this section 3 to
the contrary, the Board or the Committee may delegate to a committee of one
or more members of the Board the authority to grant options to eligible
persons who are not then subject to section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of section 10 relating to adjustments on
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate 1,200,000 shares of the Common Stock. If any Option
shall for any reason expire or otherwise terminate, as a whole or in part,
without having been exercised in full, the stock not purchased under such
Option shall revert to and again become available for issuance under the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Option if, at the
time of grant, such person owns (or is deemed to own pursuant to section
424(d) of the Code) stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Option is at least 110
percent of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five years from the date
of grant.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option Agreement or
otherwise), except as the Board may otherwise determine in the specific
case, the substance of each of the following provisions:
(a) Term of Options. No Option shall be exercisable after the
expiration of ten years from the date it is granted.
(b) Price. The exercise price of each Incentive Stock Option shall be
not less than 100 percent of the Fair Market Value of the stock subject to
the Option on the date the Option is granted.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii)
in the absolute discretion of the Board or the Committee (which discretion
may be exercised in a particular case without regard to any other case or
cases), at the time of the grant or thereafter, (A) by the withholding of
shares of Common Stock issuable on exercise of the Option or delivery to the
Company of other Common Stock of the Company, (B) according to a deferred
payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock of the Company)
with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be
interest under the deferred payment arrangement, or if less, the maximum
rate permitted by law.
(d) Transferability. An Option shall not be sold, assigned,
transferred, pledged, hypothecated or otherwise disposed by the Optionee
during his or her lifetime, whether by operation of law or otherwise, other
than by will or the laws of descent and distribution applicable to such
Optionee, or be made subject to execution, attachment or similar process;
provided that the Board may in its discretion at the time of approval of the
grant of an Option or thereafter permit an Option to be transferred by an
Optionee to a trust or other entity established by the Optionee for estate
planning purposes, and may permit further transferability, or impose
conditions or limitations on any permitted transferability. An Option shall
otherwise be exercisable during the lifetime of the person to whom the
Option is granted only by such person.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). An Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period,
and may be exercised with respect to some or all of the shares allotted to
such period or any prior period as to which the Option shall have become
vested but shall not have been fully exercised. An Option may be subject to
such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board
may deem appropriate. The vesting provisions may vary among Options, but in
each case will provide for vesting of at least twenty percent per year of
the total number of shares subject to the Option.
(f) Conditions On Exercise of Options and Issuance of Shares.
(1) Shares shall not be issued on exercise of an Option unless
the exercise of such Option and the delivery of such Shares pursuant thereto
shall comply with all applicable laws and regulations, including, without
limitation, the Securities Act, the Exchange Act, the rules and regulations
promulgated thereunder and the requirements of any stock exchange on which
the Common Stock may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(2) The Company may require any Optionee, or any person to whom
an Option is transferred under subsection 6(d), as a condition of exercising
an Option, (1) to give written assurances satisfactory to the Company as to
the Optionee's knowledge and experience in financial and business matters or
to employ a purchaser representative reasonably satisfactory to the Company
who is knowledgeable and experienced in financial and business matters, and
that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and
(2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Option for such person's own
account and not with any present intention of selling or otherwise
distributing the stock. The foregoing requirements, and any assurances given
pursuant to such requirements, shall be inapplicable if (i) the issuance of
the shares on the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act, or (ii)
as to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, with advice of its
counsel, place such legends on stock certificates issued under the Plan as
the Company deems necessary or appropriate to comply with applicable
securities laws, including, but not limited to, legends restricting the
transfer of the stock.
(g) Termination of Employment or Relationship as a Director or
Consultant. If an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than on the Optionee's death or disability),
the Optionee may exercise his or her Option (to the extent that the Optionee
shall have been entitled to exercise it at the date of termination) but only
within the period ending on the earlier of (i) the ninetieth day after the
termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period, which in no event shall be
less than thirty days, specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionee does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Disability of Optionee. If an Optionee's Continuous Status as an
Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that
the Optionee shall have been entitled to exercise it at the date of
termination), but only within the period ending on the earlier of (i) the
first anniversary of such termination (or such longer or shorter period,
which in no event shall be less than six months, specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in
the Option Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after termination, the Optionee
does not exercise his or her Option within the time specified herein, the
Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(i) Death of Optionee. If of an Optionee dies during, or within a
period specified in the Option after the termination of, the Optionee's
Continuous Status as an Employee, Director or Consultant, the Option may be
exercised (to the extent that the Optionee shall have been entitled to
exercise the Option at the date of death) by the Optionee's estate or by a
person who shall have acquired the right to exercise the Option by bequest
or inheritance, but only within the period ending on the earlier of (i) the
one hundred eightieth day after the first anniversary of the date of death
(or such longer or shorter period, which in no event shall be less than six
months, specified in the Option Agreement), or (ii) the expiration of the
term of such Option as set forth in the Option Agreement. If, at the time of
death, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert
to and again become available for issuance under the Plan. If, after death,
the Optionee's estate or a person who shall have acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for
issuance under the Plan.
(j) Exemptions. Notwithstanding subsections (g), (h) and (i) above,
the Board shall have the authority to extend the expiration date of any
outstanding Option in circumstances in which it deems such action to be
appropriate (provided that no such extension shall extend the term of an
Option beyond the date of expiration of the term of such Option as set forth
in the Option Agreement).
(k) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares
subject to the Option prior to the full vesting of the Option. Any unvested
shares so purchased shall be subject to a repurchase right in favor of the
Company, with the repurchase price to be equal to the original purchase
price of the stock, or to any other restriction the Board determines to be
appropriate; provided that the right to repurchase at the original purchase
price shall lapse at a minimum rate of twenty percent per year over five
years from the date the Option is granted and such right shall be exercised
within ninety days of termination of employment for cash or cancellation of
purchase money indebtedness for the shares. Should the right of repurchase
be assigned by the Company, the assignee shall pay the Company cash equal to
the difference between the original purchase price and the stock's Fair
Market Value if the original purchase price is less than the stock's Fair
Market Value.
(l) Withholding. To the extent approved by the Board in the specific
case, at the time of approval of the grant of the Option or thereafter, the
Optionee may satisfy any Federal, state or local tax withholding obligation
relating to the exercise of such Option by any of the following means or by
a combination of such means: (l) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the Common Stock
of the Company. The value of shares withheld or delivered shall equal the
Fair Market Value of the shares on the day the Option is exercised.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of Common Stock required to satisfy such
Options.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock on exercise of the Options;
provided that this undertaking shall not require the Company to register
under the Securities Act either the Plan, any Option or any stock issued or
issuable pursuant to any such Option. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency
the authority that counsel for the Company deems necessary for the lawful
issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock on exercise of such
Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to
such Option unless and until such person has satisfied all requirements for
exercise of the Option pursuant to its terms. No adjustment will be made for
dividends or other rights for which the record date is prior to the date of
satisfaction of all such requirements.
(b) Throughout the term of any Option, the Company shall deliver to
the holder of such Option, not later than 120 days after the close of each
of the Company's fiscal years during the Option term, a balance sheet and an
income statement. This section shall not apply when issuance is limited to
key employees whose duties in connection with the Company assure them access
to equivalent information.
(c) Nothing in the Plan or any instrument executed or Option granted
or other action taken pursuant thereto shall confer on any Employee,
Director, Consultant or Optionee any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant)
or shall affect the right of the Company or any Affiliate to terminate the
employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
under all plans of the Company and its Affiliates exceeds $100,000, the
Options or portions thereof in excess of such limit (according to the order
in which they are granted) shall be treated as Nonstatutory Stock Options.
10. ADJUSTMENTS ON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reclassification,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split or reverse stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
otherwise), the Plan and outstanding Options will be appropriately adjusted
by the Board in the class(es) and maximum number of shares subject to the
Plan and the class(es) and number of shares and price per share of stock
subject to outstanding Options.
(b) In the event of: (1) a merger or consolidation in which the
Company is not the surviving corporation or (2) a reverse merger in which
the Company is the surviving corporation but the shares of the Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise then to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Options outstanding under the Plan or shall
substitute similar options for those outstanding under the Plan, or (ii)
such Options shall continue in full force and effect. If any surviving
corporation refuses to assume or continue such Options, or to substitute
similar options for those outstanding under the Plan, then such Options
shall be terminated if not exercised prior to such event. In the event of a
dissolution or liquidation of the Company, any Options outstanding under the
Plan shall terminate if not exercised prior to such event.
11. AMENDMENT OF THE PLAN.
(a) The Board at any time or from time to time shall have the right to
amend, modify, suspend or terminate the Plan for any reason; provided that
the Company will seek shareholder approval for any change if and to the
extent required by applicable law, regulation or rule.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with
the maximum benefits provided or to be provided under the Code and the
regulations promulgated thereunder relating to Incentive Stock Options or to
cause the Plan or Incentive Stock Options granted under it to comply
therewith.
(c) Rights and obligations under any Option granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan,
unless (i) the Company requests the consent of the person to whom the Option
shall have been granted and (ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day prior to the tenth
anniversary of the earlier of the date of the adoption of the Plan by the
Board or the date that the Plan is approved by the shareholders of the
Company. No Options may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of
the Plan, except with the consent of the person to whom the Option shall
have been granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan
shall have been approved by the shareholders of the Company, which approval
shall be within twelve months before or after the date the Plan is adopted
by the Board, and, if required, an appropriate permit shall have been issued
by the Commissioner of Corporations of the State of California.
14. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
It is the Company's intent that the Plan comply in all respects with
Rule 16b-3. If any provision of this Plan is found not to be in compliance
with Rule 16b-3, that provision shall be deemed to have been amended or
deleted as and to the extent necessary to comply with Rule 16b-3, and the
remaining provisions of the Plan shall continue in full force and effect,
without change. All transactions under the Plan shall be executed in
accordance with the requirements of Section 16 of the Exchange Act and the
applicable regulations promulgated thereunder.