Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Celadon Group, Inc.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
CELADON GROUP, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the stockholders of CELADON GROUP, INC.
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of
Celadon Group, Inc. will be held at the Hyatt Regency, One South Capital Ave.,
Indianapolis, Indiana, 46236, December 1, 1997, at 1:30 p.m. (local time) for
the following purposes:
1. To elect five directors;
2. To approve the adoption of the Celadon Group, Inc. Non-Employee
Director Stock Option Plan, as amended and restated, and
3. To approve an amendment to the Celadon Group, Inc. 1994 Stock
Option Plan.
4. To ratify the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year; and
5. To transact such other business as may properly be brought
before the meeting.
The Board of Directors has fixed the close of business on October 3,
1997, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the meeting.
By order of the Board of Directors
/s/ Paul A. Will
----------------------------------
Paul A. Will
Secretary
October 17, 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO INSURE THAT YOUR SHARES ARE VOTED.
PROXY STATEMENT
TABLE OF CONTENTS
Page
----
Proxy Statement......................................................... 1
Directors and Executive Officers........................................ 1
Compensation of Directors and Executive Officers.................... 5
Employment Agreements............................................... 8
Stock Price Performance Chart....................................... 13
Security Ownership of Principal Stockholders and Management......... 14
Certain Relationships and Related Transactions...................... 16
Compensation Plans...................................................... 18
Approval of Celadon Group, Inc. Non-Employee
Director Stock Option Plan, as amended and restated
effective April 1, 1997............................................. 18
Approval of Amendment to the Celadon Group, Inc.
1994 Stock Option Plan.............................................. 22
Ratification of Appointment of Ernst & Young LLP........................ 29
Stockholders' Proposals................................................. 29
General................................................................. 29
Celadon Group, Inc. Non-Employee
Director Stock Option Plan, as amended and
restated effective April 1, 1997.................................... Exhibit A
Celadon Group, Inc. 1994 Stock Option Plan,
as amended effective August 19, 1997................................ Exhibit B
CELADON GROUP, INC.
9503 E. 33rd Street
Indianapolis, Indiana 46236
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Celadon Group, Inc. (the
"Company") to be voted at the annual meeting of stockholders of the Company (the
"Meeting") to be held on December 1, 1997, at the Hyatt Regency, One South
Capital Avenue, Indianapolis, Indiana 46236 If not otherwise specified, all
proxies received pursuant to this solicitation will be voted in the election of
directors FOR the persons named below, FOR the adoption of the Celadon Group,
Inc. Non-Employee Director Stock Option Plan, FOR the amendment to the Celadon
Group, Inc. 1994 Stock Option Plan (the "Stock Option Plan"), and FOR the
ratification of the appointment of Ernst & Young LLP as independent auditors for
the current fiscal year.
Stockholders who execute proxies may revoke them at any time before they
are exercised by giving written notice to the Secretary of the Company at the
address of the Company, by executing a subsequent proxy and presenting it to the
Secretary of the Company, or by attending the meeting and voting in person.
As of October 3, 1997, the record date for the Meeting, the Company had
outstanding 7,622,580 shares of Common Stock which are entitled to vote at the
meeting, each share being entitled to one vote. Only stockholders of record at
the close of business on October 3, 1997 will be entitled to vote at the
Meeting, and this Proxy Statement and the accompanying proxy are being sent to
such stockholders on or about October 17, 1997.
DIRECTORS AND EXECUTIVE OFFICERS
At the Meeting, five directors are to be elected to hold office until the
annual meeting of stockholders in 1998 and until their respective successors
have been elected and qualified. It is the intention of the persons named in the
enclosed form of proxy to vote for the election as directors of the Company,
Stephen Russell, Paul A. Biddelman, Michael Miller, Joel E. Smilow and Kilin To.
All
1
of the individuals are currently directors of the Company, and all of the named
individuals are nominees of the Board of Directors. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF ALL FIVE NOMINEES. The
directors and executive officers of the Company and its subsidiaries are as
follows:
Name Age Position
Stephen Russell 57 Chairman of the Board, President and Chief Executive Officer
of the Company
Ronald S. Roman 52 Senior Executive Vice President - Chief Operating Officer of
the Company
Don S. Snyder 48 Executive Vice President - Chief Financial Officer of the
Company
Michael W. Dunlap 35 Vice President - Treasurer of the Company
Paul A. Will 31 Vice President - Secretary and Controller of the Company
Paul A. Biddelman(1) (2) 51 Director of the Company
Michael Miller(1) 52 Director of the Company
Joel E. Smilow(2) 64 Director of the Company
Kilin To(1) (2) 54 Director of the Company
- ---------------
1. Members of the Audit Committee
2. Members of the Compensation Committee
Mr. Russell has been Chairman of the Board and Chief Executive Officer
of the Company since its inception in July 1986. He is also a director of
Petroleum Heat and Power Company, Inc., a director of the Interstate Truckload
Carriers Conference, and a member of the North American Transportation Alliance
advisory board. Mr. Russell has been a member of the Board of Advisors of the
Cornell University Johnson Graduate School of Management since 1983.
Mr. Roman has been Senior Executive Vice President - Chief Operating
Officer of the Company since June 1997. He was Executive Vice President - Fleet
Management and Customer Service of Celadon Trucking Services, Inc. from July
1996 to June 1997. From October 1985 to July 1996, Mr. Roman was employed by
North American Van Lines, Inc., an over-the-road household goods and high value
product full truckload transportation company, holding executive positions,
primarily Vice President - Fleet Services, from October 1985 to August 1995.
Mr. Snyder has been Executive Vice President, Chief Financial Officer of
the Company since September 1996. He was Executive Vice President, Chief
Financial Officer and Treasurer from April, 1996 to September, 1996. He served
as Vice President-Controller for Burlington Northern Railroad Company, a company
engaged in the railroad transportation business in the United States, from
December 1987 to December 1995. Mr. Snyder is a certified public accountant.
2
Mr. Dunlap has been Vice President - Treasurer of the Company since July
1996. He served as Vice President of Finance for National Freight, Inc., a
regional truckload transportation company, from October 1993 to July 1996. He
served as Vice President - Treasurer for Burlington Motor Carriers, Inc., a
nationwide truckload transportation company from June 1992 to October 1993, and
Corporate Controller for Burlington Motor Carriers, Inc. from October 1990 to
June 1992.
Mr. Will has been Vice President-Secretary and Controller of the Company
since September 1996. He was Vice President-Controller for Celadon Trucking
Services, Inc. from January 1996 to September 1996 and Controller from September
1993 to January 1996. He served as Controller for American Hi-Lift, a company
engaged in the business of renting aerial work platform equipment, from February
1992 to September 1993. Mr. Will is a certified public accountant.
Mr. Biddelman has been a director of the Company since October 1992. Mr.
Biddelman has been Treasurer of Hanseatic Corporation, a private investment
company, since April 1992. He is also a director of Petroleum Heat and Power
Company, Inc., Premier Parks, Inc., Electronic Retailing Systems International,
Inc., Oppenheimer Group, Inc., Star Gas Corporation (the General Partner of Star
Gas Partners L.P.), and Insituform Technologies, Inc.
Mr. Miller has been a director of the Company since February 1992. Mr.
Miller has been Chairman of the Board and Chief Executive Officer of Aarnel
Funding Corporation, a venture capital/real estate company since 1974, a partner
of Independence Realty, an owner and manager of real estate properties, since
1989, and President and Chief Executive Officer of Miller Investment Company,
Inc., a private investment company, since 1990.
Mr. Smilow has been a director of the Company since December 1996. Mr.
Smilow served as Chief Executive Officer of Playtex Products, Inc. and its
predecessors ("Playtex") from 1969 until July 10, 1995 and served as Chairman of
Playtex from 1969 until June 1995.
Mr. To has been a director of the Company since 1988. He has been a
managing partner of Sycamore Management, Inc., since 1995. He also had been a
Vice President of Citicorp Venture Capital, Ltd. ("CVC"), a subsidiary of
Citicorp N.A., from 1984 to 1995.
All directors of the Company hold office until the next annual meeting
of stockholders of the Company or until their successors are elected and
qualified or they resign. Mr. Russell and Hanseatic Corporation are parties to a
stockholders agreement pursuant to which they have agreed to vote their shares
of Common Stock for the other's designee. Those designees are Messrs. Russell
and Biddelman. See "Security Ownership of Principal Stockholders and Management"
and "Certain Relationships and Related Transactions--Transactions with Directors
and Stockholders". Executive officers hold office until their successors are
chosen and qualified, subject to their removal by the Board of Directors, to any
employment agreements or their resignation. See "Compensation of Directors and
Executive Officers--Employment Agreements."
3
Pursuant to Section 145 of the Delaware General Corporation Law, the
Company's Certificate of Incorporation provides that the Company shall, to the
full extent permitted by law, indemnify all directors, officers, incorporators,
employees, or agents of the Company against liability for certain of their acts.
The Company's Certificate of Incorporation provides that, with a number of
exceptions, no director of the Company shall be liable to the Company for
damages for breach of his fiduciary duty as a director.
The Audit Committee consists of Paul A. Biddelman, Michael Miller and
Kilin To. The Audit Committee meets with management and the Company's
independent auditors to determine the adequacy of internal controls and other
financial reporting matters. The Compensation Committee consists of Paul A.
Biddelman, Joel E. Smilow and Kilin To. The Compensation Committee reviews
general policy matters relating to compensation and benefits of employees and
officers of the Company, administers the Company's Employee Stock Purchase Plan
and through October 1996, administered the Company's Stock Option Plan.
Effective November 1, 1996, the full Board of Directors became the
administrators of the Company's Stock Option Plan. The Company does not have a
nominating committee or a committee performing similar functions.
The Board of Directors of the Company met five times during the fiscal
year ended June 30, 1997. In addition, on four occasions, the Board of Directors
took action pursuant to unanimous written consent. No current director, while he
was an elected Director, failed to attend at least 75% of those meetings plus
any committee meeting of the Board of which he was a member. The Company's Audit
Committee met two times during the year ended June 30, 1997. The Compensation
Committee met three times during the year ended June 30, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Company's
directors, officers, and any persons owning more than 10 percent of the Common
Stock are required to report their ownership of Common Stock and any changes in
that ownership, on a timely basis, to the Securities and Exchange Commission.
Based on material provided to the Company, all such required reports were filed
on a timely basis in fiscal 1997. However, the Form 4 for Brian L. Reach, a
former executive officer, for an April 1996 stock option repricing was filed
late due to an administrative oversight. That repricing was disclosed in the
fiscal year 1996 Annual Report on Form 10-K and Proxy statement.
4
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued by
the Company for services rendered during fiscal 1997, 1996 and 1995 to the Chief
Executive Officer of the Company, each of the three other most highly paid
executive officers of the Company, whose annual cash compensation exceeded
$100,000 and the Vice President of Special Projects who resigned March 21, 1997
and whose cash compensation exceeded $100,000 prior to his resignation,
(collectively, the "Named Executive Officers").
Summary Compensation Table
Long Term
Compensation
Awards
-------------
Securities
Fiscal Annual Compensation Underlying All Other
------------------------
Name and Principal Position Year Salary Bonus Options Compensation
- ----------------------------- -------- ----------- ----------- ------------- -------------
Stephen Russell 1997 $ 482,143 $ 236,957 --- $ 81,642(1)(2)(3)
Chairman of the Board 1996 438,711 --- 20,000 110,446(1)(2)
and Chief Executive Officer 1995 408,103 --- 50,000 130,978(1)(2)
Ronald S. Roman 1997 $ 137,837 $ 7,500 35,000 $ 33,125(3)(4)(5)(6)
Senior Executive Vice President,
Chief Operating Officer
Don S. Snyder 1997 $ 174,015 $ 40,000 --- $ 20,082(2)(3)(4)(5)(6)(7)
Executive Vice President 1996 41,350 10,000 35,000 ---
Chief Financial Officer
Michael W. Dunlap 1997 $ 99,12 $ 20,000 5,000 10,302(3)(4)(5)
Vice President, Treasurer
Brian L. Reach 1997 $ 134,818 $ --- --- $ 54,053(2)(3)(4)(8)
Vice President, Special Projects 1996 170,000 26,315 20,000 2,136(2)
1995 17,000 29,584 30,000 2,139(2)
- ------------
(1) Includes the premiums paid by the Company for term insurance and
split-dollar insurance for which the Company has an assignment against
the cash value for premiums paid, as follows: $69,477 in fiscal 1997,
$99,587 in fiscal 1996 and $120,123 in fiscal 1995.
(2) Includes the Company's contribution under the Company's 401(k) Profit
Sharing Plan, as follows: Stephen Russell-- $2,375 in fiscal 1997,
$2,375 in fiscal 1996 and $2,371 in fiscal 1995; Don S. Snyder $792 in
fiscal 1997; Brian L. Reach -- $1,603 in fiscal 1997, $2,136 in fiscal
1996, and $2,139 in fiscal 1995.
5
(3) Includes premiums and reimbursement under an Executive health and
disability benefit program as follows, Stephen Russell -- $9,789 in
fiscal 1997, $8,484 in fiscal 1996 and $8,484 in fiscal 1995; Ronald S.
Roman - $634 in fiscal 1997; Don S. Snyder - $611 in fiscal 1997;
Michael W. Dunlap - $413 in fiscal 1997; Brian L. Reach - $1,300 in
fiscal 1997.
(4) Includes premiums on the employee portion of split dollar life insurance
premiums as follows: Ronald S. Roman - $985 in fiscal 1997; Don S.
Snyder - $694 in fiscal 1997; Michael W. Dunlap - $379 in fiscal 1997;
Brian L. Reach $1,425 in fiscal 1997.
(5) Includes relocation related expense reimbursements as follows: Ronald S.
Roman - $31,506 in fiscal 1997, Don S. Snyder - $17,985 in fiscal 1997;
Michael W. Dunlap - $9,510 in fiscal 1997.
(6) The Company is a guarantor of personal loans to the executives secured
by shares of common stock of the Company as follows: Ronald S. Roman -
loan $18,000, shares held as collateral 2,000; Don S. Snyder - loan
$54,000, shares held as collateral 6,000.
(7) In connection with Don S. Snyder's relocation, the Company acquired his
personal residence and has incurred $122,325 in cost associated with the
acquisition and marketing of his home in Ft. Worth, Texas pursuant to
his employment contract. Such amount is not included in the above table.
(8) Brian L. Reach resigned as an officer and employee of the Company,
effective March 21, 1997 and became a consultant to the Company under
the terms of his employment contract. All other compensation includes
$49,725 received during the year ended June 30, 1997 as consulting fees.
STOCK OPTIONS
The following table contains information concerning the grant of stock options
to the named Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
---------------------------------------------------- Potential
Realizable
Number of Value at Assumed
Securities % of total Annual Rates of
Underlying Options Stock Price
Options Granted to Exercise or Appreciation For
Granted Employees Base Price Expiration Option Term (1)
Name (Shares) In Fiscal Year Per Share Date 5% 10%
- ------------------ ---------- ------------- ------------ ---------- ----------- -----------
Stephen Russell --- (5) --- --- --- --- ---
Ronald S. Roman 10,000 (2) 10% $7.50 8/30/06 $ 47,200 $ 199,500
25,000 (3) 26% $9.00 10/1/06 $141,500 $ 358,500
Don S. Snyder --- --- --- --- --- ---
Michael W. Dunlap 5,000 (4) 5% $7.50 8/30/06 23,600 59,750
Brian L. Reach --- (5) --- --- --- --- ---
- ------------------
6
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compounded rates of appreciation (5% and 10%) on
the Company's Common Stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect the Company's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and Common Stock
holdings are dependent on the timing of such exercise and the future
performance of the Company's Common Stock. There can be no assurance that
the rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the option holder.
(2) Options for 3,334 shares became exercisable on August 30, 1997, and options
for 3,333 shares become exercisable on each of August 30, 1998 and August
30, 1999.
(3) Options for 8,334 shares became exercisable on October 1, 1997, and options
for 8,333 shares become exercisable on each of October 1, 1998 and October
1, 1999.
(4) Options for 1,667 shares became exercisable on August 30, 1997. Options for
1,667 shares become exercisable on August 30, 1998, and options for 1,666
shares become exercisable on August 30, 1999.
(5) See "Report on Repricing of Options".
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the last fiscal
year and unexercised options held at June 30, 1997. There were no options
exercised during fiscal 1997.
AGGREGATED OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at June 30, 1997 at June 30, 1997 (1)
---------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- -------------------- ---------------------------- ---------------------------
Stephen Russell 63,334 6,666 $ 20,000 $ 10,000
Ronald S. Roman --- 35,000 --- $102,500
Don S. Snyder 23,334 11,666 $ 35,001 $ 17,499
Michael W. Dunlap --- 5,000 --- $ 20,000
Brian L. Reach (2) 60,000 --- $ 112,500 ---
- ------------
7
(1) Fair market value of underlying securities was $11.50 per share based on the
closing price of the Company's Common Stock on June 30, 1997.
(2) Brian L. Reach resigned as an officer and employee of the Company, effective
March 21, 1997.
DIRECTORS COMPENSATION
Non-employee directors of the Company receive an annual fee of $15,000,
payable quarterly, for serving as a director of the Company. Such directors
receive $1,250 per quarter for serving on committees. Board members are
reimbursed for their expenses for each meeting attended. See also "Compensation
Plans - Celadon Group Inc. Non-Employee Director Stock Option Plan."
EMPLOYMENT AGREEMENTS
The Company had a four-year employment agreement expiring January 21, 1998
with Stephen Russell, Chairman and Chief Executive Officer of the Company,
providing for an initial annual salary of $395,000, which salary was to be
increased 7.5% annually during the term of the agreement, plus a bonus computed
annually. Effective October 1, 1996, the Committee agreed to amend Mr. Russell's
contract to reflect his assumption of increased responsibilities following the
resignation of Leonard R. Bennett, the former President of the Company, on July
3, 1996. The amendment provided that Mr. Russell would receive five percent of
profit before tax in excess of $3,000,000 in lieu of the bonus computed under
his original contract. On August 1, 1997, the Compensation Committee of the
Board of Directors renegotiated the general terms of Mr. Russell's current
employment contract. As amended, the employment contract was extended for three
years to January 21, 2001. In lieu of a fixed percentage annual base salary
increase, Mr. Russell will receive an annual base salary increase equal to the
change in the Consumer Price Index, and stock options awarded to Mr. Russell on
September 9, 1994 to acquire 25,000 shares of Common Stock at an exercise price
of $20.00 per share were repriced to the closing sale price on the NASDAQ
National Market August 1, 1997 of $12.00. In replacement of a bonus based on a
stipulated percentage of pretax income above a minimum level, Mr. Russell will
participate in an incentive bonus program designed for all members of the
Company's senior management. Depending upon the Company's performance compared
with goals established by the Compensation Committee annually, Mr. Russell will
earn a bonus as a percentage of his base salary of between 0% and 105%. The
agreement also provides that in the event of termination: (i) as a result of a
change in control of the Company, Mr. Russell, will receive a lump sum severance
allowance in an amount equal to two times his annual compensation; (ii) without
cause or by Mr. Russell for cause, Mr. Russell will be entitled to receive his
salary for the remainder of the term of the agreement or one year, whichever is
greater; and (iii) as a result of the disability of Mr. Russell, he will be
entitled to receive 50% of his salary during the two-year period commencing on
the date of his termination. The agreement also includes a two-year non-compete
covenant commencing on termination of employment. As consideration for such
non-compete covenant, the Company has agreed to pay Mr. Russell 50% of his
salary during the two years following the termination of the employment
agreement.
8
The Company has an employment agreement with Ronald S. Roman, Senior
Executive Vice President - Chief Operating Officer, expiring September 30, 1999.
The agreement, as amended on June 30, 1997 coincident with Mr. Roman's promotion
to his current position, provides for annual compensation of $130,000, $150,000
and $165,000 for the periods ended June 30, 1997 and 1998 and September 30,
1999, respectively. The contract provides for the granting of an initial option
to acquire 10,000 shares of the Company's Common Stock at an exercise price of
$7.50 per share and 25,000 shares at an exercise price of $9.00 per share and
two additional grants of a minimum of 10,000 shares annually under the Company's
Stock Option Plan. Additionally, Mr. Roman receives either a company automobile
or a monthly car allowance and the right to participate in any bonus, insurance
or other benefit plan provided to the Company's executives generally. The
agreement contains a one-year non-compete covenant effective from the date
employment is terminated by either party for any reason. As consideration for
such non-compete covenant on the date of termination without cause, Mr. Roman
will receive a lump sum severance payment of $165,000 on the date of
termination.
The Company has an employment agreement with Don S. Snyder, Executive Vice
President, Chief Financial Officer of the Company, expiring April 1, 1998. Such
employment agreement provides for an annual salary of $160,000, which will be
increased at least 5% annually, and an annual bonus of not less than $40,000.
Pursuant to the agreement, upon employment by the Company, Mr. Snyder was
granted options to purchase 35,000 shares of the Company's Common Stock under
the Company's Stock Option Plan, is provided a monthly car allowance and is
entitled to participate in any insurance or other benefit plan provided to the
Company's executives generally. In connection with Mr. Snyder's relocation to
Indianapolis, Indiana, the Company is obligated to acquire Mr. Snyder's personal
residences under certain circumstances. Effective December 1, 1996, the Company
purchased Mr. Snyder's residence in Ft. Worth, Texas. The Company's obligation
concerning Mr. Snyder's Indianapolis, Indiana residence expires on July 1, 1999.
It is undeterminable at this time if the circumstances activating the Company's
obligation will occur. The agreement includes a two-year non-compete covenant
commencing on termination of employment. As consideration for such non-compete
covenant, in the event of termination by the Company without cause, Mr. Snyder
will receive a severance payment equal to two times his salary and bonus,
payable in biweekly installments during the two-year non-competition period.
The Company has an employment and consulting agreement with Brian L. Reach,
formerly Vice President Special Projects. The agreement provided for Mr. Reach's
employment, subject to termination by either Mr. Reach or the Company with two
weeks notice, at an annual salary of $170,000 plus benefits available to Company
executives generally. Mr. Reach terminated his employment as Vice President
Special Projects, effective March 21, 1997. Pursuant to the agreement, Mr. Reach
will be retained as a consultant until September 21, 1998, at an annual
compensation rate of $180,000 plus reasonable and necessary out-of-pocket
expenses following his termination as an employee. Mr. Reach's current benefits
were to be continued until such time as he accepted other employment or, if
sooner, the end of the consulting agreement. Mr. Reach accepted other employment
and his Company benefits were discontinued effective July 1, 1997. Mr. Reach
will be permitted to exercise stock options previously granted to him through
March 31, 1998 or when he ceases to be a consultant whichever is the first to
occur. The agreement includes a non-compete covenant.
9
REPORT ON REPRICING OF OPTIONS
The following table sets forth information relating to the repricing of
options held by executive officers since the registrant filed its initial public
offering of securities on January 21, 1994.
Option Repricing
January 19, 1994 through June 30, 1997
Length of
Market Exercise Original Term
Number Price at Price at New Remaining at
of Options Time of Time of Exercise Date of
Name Date Repriced Repricing(1) Repricing Price Repricing
---- ---- -------- ------------ --------- -------- ---------
Brian L. Reach 4/12/96 20,000 $9.50 $20.00 $10.00 8 yrs, 5 mos
Vice President 10/1/96 20,000 $8.75 $14.50 $ 8.75 7 yrs, 4 mos
Special Projects 10/1/96 10,000 $8.75 $14.50 $ 8.75 7 yrs, 6 mos.
Steve Russell 8/1/97 25,000 $12.00 $20.00 $12.00 6 yrs, 1 mo.
Chairman of the
Board, President
and Chief Executive
Officer
- ---------------
(1) Common Stock high/low price range per share on October 1, 1996, was $9.25 to
$8.75 and on August 1, 1997 was $12.00 to $11.50.
The October 1996 repricing was a component of Mr. Reach's agreement to
renegotiate and extend his employment and consulting agreement. The October 1996
repricing was in lieu of additional cash compensation in connection with the
agreement. The Compensation Committee considers the repricing to be consistent
with Mr. Reach's willingness to extend his relationship with the Company during
the final phase of winding down the freight forwarding business. His unique
experience with the freight forwarding business unit facilitated realization of
the value from this discontinued operation during the disposal of the business.
The adjusted exercise price was negotiated based on average closing prices prior
to repricing and recognizing that all of the options held by Mr. Reach were not
being repriced.
The repricing of Mr. Russell's options was done in conjunction with the
negotiation of an extension of his employment agreement which was expiring on
January 21, 1998. The committee believes adjusting the exercise price of his
existing options was appropriate in view of the other changes made in his
contract. See "Employment Agreements" and "Compensation Committee Report on
Executive Compensation."
Compensation Committee: Paul A. Biddelman, Joel E. Smilow and Kilin To (a).
(a) Mr. Smilow was elected as a Director of the Company and member of the
Compensation Committee on December 17, 1996.
10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors (the
"Committee") was formed in September 1993 and is currently comprised of three
non-employee directors of the Company. The Committee is responsible for
approving all executive employment contracts, changes in compensation (base
salary and bonus), and other forms of compensation paid to the Company's
executive officers in general. Until November 1996, the Committee also was
responsible for approving the issuance of all employee stock options. The policy
of the Committee is to consider on a subjective basis the executive's ability,
contribution and dedication toward the enhancement of stockholder value. For
fiscal year 1998, the Committee adopted a formal management incentive plan for
senior employees of the Company. Awards under the Plan will only be made after
achieving predetermined levels of profitability. The plan is designed to
attract, retain and motivate individuals who are responsible for enhancing
shareholder value through increased profitability of the Company.
In Fiscal 1994, the Committee approved a four-year employment contract for
Stephen Russell, President and Chief Executive Officer which provides for a base
salary of $395,000 with annual increases of 7.5%. The Committee believed this
base compensation was competitive as compared to a range of base salaries of
executives in similar positions with companies in the Company's peer group. In
addition, the Employment contract provided for a bonus determined on the basis
of three percent of profit before tax in excess of $3,000,000, not to exceed
$360,000. Effective October 1, 1996, the Committee agreed to amend Mr. Russell's
contract to reflect his assumption of increased responsibilities following the
resignation of Leonard R. Bennett, the former President of the Company, on July
3, 1996. The amendment provided that Mr. Russell would receive five percent of
profit before tax in excess of $3,000,000. On August 1, 1997, the Compensation
Committee of the Board of Directors renegotiated the general terms of Mr.
Russell's current employment contract which expires January 21, 1998. The
employment contract was extended for three years to January 21, 2001. In lieu of
a fixed percentage annual base salary increase, Mr. Russell will receive an
annual base salary increase equal to the change in the Consumer Price Index, and
stock options awarded to Mr. Russell on September 9, 1994 to acquire 25,000
shares of Common Stock at an exercise price of $20.00 per share were repriced to
the closing sale price on the NASDAQ National Market on August 1, 1997 of
$12.00. In replacement of a bonus based on a stipulated percentage of pretax
income above a minimum level, Mr. Russell will participate in an incentive bonus
program designed for all members of the Company's senior management. Depending
upon the Company's performance compared with goals established by the
Compensation Committee annually, Mr. Russell will earn a bonus as a percentage
of his base salary of between 0% and 105%. The Committee believes this provides
a direct link between the executive's compensation and Company performance and
resulting enhancement of stockholder value as well as his substantial
contribution to the improved performance of the Company in 1997.
Stock option grants were awarded on a discretionary, case by case basis,
after consideration of an individual's position, contribution to the Company,
length of service with the Company, number of options held, if any, and other
compensation.
11
The Company has not formulated a policy with respect to qualifying
compensation paid to executive officers for deductibility under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code") regarding the
deductibility of compensation exceeding $1 million in a taxable year paid to an
executive officer. However, the amendments to the Stock Option Plan set forth
under "Compensation Plans" are intended to meet the requirements of Section
162(m) of the Code.
COMPENSATION COMMITTEE
Paul A. Biddelman
Joel E. Smilow
Kilin To
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company and Citicorp Venture Capital, Ltd. ("CVC"), of which Mr. To was
an officer, are parties to a registration rights agreement relating to the
Common Stock owned by CVC. The Company, Mr. Russell and Hanseatic, a corporation
of which Paul A. Biddelman, a director of the Company, is an officer, are all
parties to a stockholders' agreement relating to the election of Mr. Russell and
a Hanseatic designee to the Board of Directors.
For a further description of the foregoing transactions, see "Security
Ownership of Principal Stockholders and Management"and "Certain Relationships
and Related Transactions."
12
STOCK PRICE PERFORMANCE
The following graph is a comparison of the cumulative total return to
stockholders of the Company from the date its Common Stock commenced trading on
the NASDAQ NATIONAL MARKET to June 30, 1997 to the cumulative total returns of
the NASDAQ Stock Market - U.S. and the NASDAQ Truck and Transportation Index for
that period.
Under the rules of the Securities and Exchange Commission ('SEC"), this
graph is not deemed "Soliciting Material" and is not incorporated by reference
in any filings with the SEC under the Securities Act of 1993 or the Securities
Exchange Act of 1934.
COMPARISON OF 41 MONTH CUMULATIVE TOTAL RETURN*
AMONG CELADON GROUP, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ TRUCKING & TRANSPORTATION INDEX
1/21/94 6/94 6/95 6/96 6/97
CELADON GROUP, INC. 100 95 105 53 79
NASDAQ STOCK MARKET(U.S.) 100 89 119 153 186
NASDAQ TRUCKING & TRANSPORTATION 100 89 100 111 127
- --------------------
* $100 INVESTED ON 1/21/94 IN STOCK OR INDEX-INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
13
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information furnished to the Company
regarding the beneficial ownership of Common Stock (i) by each person who, to
the knowledge of the Company, based upon filings with the Securities and
Exchange Commission, beneficially owns more than five percent of the outstanding
shares of the Common Stock, (ii) by each director of the Company, (iii) by each
of the executive officers named in the Summary Compensation Table, and (iv) by
all directors and executive officers of the Company as a group.
Beneficial Ownership of Common
Stock as of September 26, 1997 (1)
---------------------------------
Name and Shares %
Position
- ---------- -------------------- ------
Stephen Russell............................. 1,005,298(2) (3) 13.2%
Chairman of the Board, President and Chief
Executive Officer of the Company
Ronald S. Roman............................. 14,668 (3) *
Senior Executive Vice President, Chief Operating Officer
Don S. Snyder............................... 29,334(3) *
Executive Vice President, Chief Financial Officer
Michael W. Dunlap........................... 1,667(3) *
Vice President - Treasurer
Brian L. Reach.............................. 60,000(3)(4) *
Vice President Special Projects
Paul A. Biddelman........................... 1,016,723(3)(5)(6) 13.3%
Director of the Company
Michael Miller.............................. 21,667 (3)(6) *
Director of the Company
Joel E. Smilow.............................. 119,200(6) 1.6%
Director of the Company
Kilin To.................................... 45,752(3)(6) *
Director of the Company
Citicorp Venture Capital Ltd................ 438,358(7) 5.8%
Hanseatic Corporation....................... 995,056(5) 13.1%
Wolfgang Traber............................. 995,056(5) 13.1%
Columbia Funds Management Company........... 580,000(8)(9) 7.6%
Dimensional Fund Advisors, Inc.............. 502,900(9)(10) 6.6%
All executive officers and directors as a group
(ten persons)............................. 1,327,754 (11) 17.4%
- -------------
*Represents beneficial ownership of not more than one percent of the outstanding
Common Stock.
14
(1) Based upon 7,622,580 shares of Common Stock outstanding at September 26,
1997.
(2) Excludes 995,056 shares of Common Stock reported as beneficially owned by
Hanseatic Corporation ("Hanseatic") in filings with the Securities and
Exchange Commission, all of which may be deemed to be beneficially owned
by Mr. Russell by virtue of a stockholders agreement among Mr. Russell,
Hanseatic and the Company. Mr. Russell disclaims beneficial ownership of
such shares. Mr. Russell's address is One Celadon Drive, Indianapolis, IN
46236-4207.
(3) Includes shares of Common Stock which the directors and executive officers
had the right to acquire through the exercise of options within 60 days of
September 26, 1997, as follows: Stephen Russell - 63,334 shares; Ronald S.
Roman - 11,668 shares; Don S. Snyder - 23,334 shares; Michael W. Dunlap -
1,667 shares; Brian L. Reach - 60,000 shares; Paul A. Biddelman - 21,667
shares; Michael Miller - 21,667 shares; and Kilin To - 21,667 shares.
(4) Brian L. Reach resigned as an officer and employee of the Company,
effective March 21, 1997.
(5) Of such shares, 946,021 shares of Common Stock are held by Hanseatic
Americas LDC, a Bahamian limited duration company in which the sole
managing member is Hansabel Partners LLC, a Delaware limited liability
company in which Hanseatic is the sole managing member. The remaining
shares are held by Hanseatic for discretionary customer accounts, and
include 12,121 shares of Common Stock issuable upon exercise of an
outstanding warrant. Mr. Biddelman is the Treasurer of Hanseatic and holds
shared voting and investment power with respect to the shares held by
Hanseatic. In addition, Mr. Wolfgang Traber is the holder of a majority of
the shares of capital stock of Hanseatic. Excludes 1,005,298 shares of
Common Stock owned by Mr. Russell that are subject to a stockholders
agreement among Mr. Russell, Hanseatic and the Company. The address of
Hanseatic, Mr. Traber and Mr. Biddelman is 450 Park Avenue, New York, New
York 10022.
(6) Excludes shares of Common Stock which the directors, subject to
shareholder approval of the Celadon Group, Inc. Non-Employee Director
Stock Option Plan, had the right to acquire through the exercise of
options within 60 days of September 26, 1997, as follows: Paul A.
Biddelman - 4,000 shares; Michael Miller - 4,000 shares; Joel E. Smilow -
12,000 shares; and Kilin To - 4,000 shares.
(7) The address of Citicorp Venture Capital, Ltd. is 399 Park Avenue, New
York, New York.
(8) Columbia Funds Management Company, a registered investment advisor, is
deemed to have beneficial ownership of 580,000 shares of Celadon Group,
Inc., Common Stock as of June 30, 1997 all of which shares are held by
Columbia Special Fund, Inc. Columbia Funds Management disclaims beneficial
ownership of all such shares. The address of Columbia Funds Management
Company is 1300 SW Sixth Avenue, P. O. Box 1350, Portland, Oregon 97207.
The address of Columbia Special Funds, Inc. Is 1301 S.W. Sixth Avenue P.O.
Box 1350, Portland, Oregon 97207.
(9) This information is based upon Schedules 13G filed with the Securities and
Exchange Commission for the June 30, 1997 reporting period.
(10) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 502,900 shares of
Celadon Group, Inc. Common Stock as of June 30, 1997, all of which shares
are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares. The address of Dimensional Fund Advisors Inc. is 1299 Ocean
Avenue, 11th Floor, Santa Monica, CA 90401.
(11) See footnotes (3) and (6) above.
15
Except as otherwise indicated, the Company has been advised that the
beneficial holders listed in the table above have sole voting and investment
power regarding the shares shown as being beneficially owned by them. Except as
noted in the footnotes, none of such shares is known by the Company to be shares
with respect to which the beneficial owner has the right to acquire beneficial
ownership.
The Company, Stephen Russell and Hanseatic are parties to a stockholders
agreement which provides that, as long as Hanseatic and Mr. Russell each
beneficially own at least five percent of the outstanding shares of Common
Stock, the Company shall use its best efforts to insure that one member of the
Company's board of directors is a designee of Hanseatic and that another member
of the Company's board of directors is a designee of Mr. Russell. In addition,
Mr. Russell and Hanseatic have agreed to vote all shares of Common Stock owned
by them in favor of the election of such nominees or, upon the death of Mr.
Russell, for the designee of the holder of a majority of Mr. Russell's shares of
Common Stock on the date of death.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH DIRECTORS AND STOCKHOLDERS
Stephen Russell, Chairman and Chief Executive Officer of the Company,
and Leonard R. Bennett, President and Chief Operating Officer of the Company,
were parties to a voting agreement pursuant to which they agreed to vote their
shares of Common Stock for the other's designee or, upon the death of Mr.
Russell or Mr. Bennett, for the designee of the holder of a majority of the
decedent's shares of Common Stock on the date of death, as director of the
Company. Messrs. Russell and Bennett were the designees pursuant to such
agreement. The agreement was terminated upon Mr. Bennett's resignation from the
Company on July 3, 1996.
On July 3, 1996, Leonard R. Bennett, President Chief Operating Officer
and a Director of the Company resigned as an Officer and Director of the Company
and all of its subsidiaries. At that time, he also released the Company from its
obligations under his employment contract. The Company entered into a three year
noncompete and consulting agreement with Mr. Bennett which provided for annual
payments of $268,396 and continuation of certain disability and life insurance
benefits. In addition, on July 3, 1996, Mr. Bennett acquired the Company's 80.5%
interest in Celsur Inc. for a total of 100,000 shares of Celadon Group, Inc.
common stock and $2,440,645 in the form of a personal note, bearing interest at
the prime commercial lending rate of the Chase Manhattan Bank, N.A. New York,
New York and payable October 3, 1996. The note plus interest was paid in full on
October 3, 1996. Payments under the noncompete and consulting agreement, prior
to its termination, totaled $124,583. On March 28, 1997, the agreement was
terminated and all other obligations of the parties, except for the non-compete
and confidentiality provisions and certain indemnifications, ceased upon the
payment by the Company of $365,565.
16
On July 3, 1996, Peter Bennett, Executive Vice President Administration
of Celadon Trucking Services, Inc., (CTSI), the Company's principal operating
subsidiary, resigned as an officer and employee of CTSI. The Company entered
into a one year noncompete and consulting contract with Mr. Bennett providing
for an annual payment of $60,000. Payments under the contract prior to its
termination totaled $27,692. On March 28, 1997, the agreement was terminated and
all other obligations of the parties, except for the non-compete and
confidentiality provisions and certain indemnifications, ceased upon the payment
by the Company of $30,692.
The Company and CVC, a principal stockholder of the Company, and of
which Kilin To, a director of the Company, was an officer, entered into a
registration rights agreement, dated as of April 7, 1988, in connection with
CVC's purchase of 1,000,000 shares of Series F Convertible Preferred Stock and
warrants (all of which have been converted or exercised, as the case may be, at
a weighted average price of $3.08 per share into shares of Common Stock). Under
the terms of such agreement, CVC and its permitted transferees have the right to
require the Company to file, subject to certain terms and conditions, a
registration statement for any or all of the 476,894 shares of Common Stock
covered by such agreement which are then held by the requesting holders. In
addition, CVC and its permitted transferees have the right to require the
Company to include, subject to certain exceptions, any or all of the shares of
Common Stock covered by such agreement in any registration statement filed by
the Company.
The Company and Hanseatic, a corporation of which Paul Biddelman, a
director of the Company, is an officer, entered into a registration rights
agreement, dated as of October 8, 1992, in connection with Hanseatic's purchase
of a 9.25% Senior Subordinated Convertible Note (the "Hanseatic Note") for an
aggregate purchase price of $8,000,000. The Hanseatic Note was converted in
February 1994 into 739,371 shares of Common Stock (equivalent to a conversion
price of $10.82 per share). In connection with the purchase of the Hanseatic
Note, the Company paid Hanseatic a $160,000 facility fee and issued to Hanseatic
a warrant to purchase, 12,121 shares of Common Stock at any time prior to
September 30, 1998, at an exercise price of $10.82 per share. Until October
1998, Hanseatic and its permitted transferees have the right to require the
Company to file, subject to certain terms and conditions, a registration
statement in respect of any or all of the shares of Common Stock (subject to a
minimum of 363,636 shares) covered by such agreement which are then held by the
requesting holders. In addition, Hanseatic and its permitted transferees have
the right to require the Company to include, subject to certain exceptions, any
or all shares of Common Stock covered by such agreement in any registration
statement filed by the Company. Such "piggyback" rights, terminate on September
30, 2001.
The Company, Hanseatic, Stephen Russell, and Leonard Bennett were
parties to a stockholders' agreement, dated as of October 8, 1992, which was
amended on July 3, 1996 to release Mr. Bennett. Since July 1996, the agreement
has provided that each party shall vote its shares of Common Stock for the
election as director of one designee of the other party. See "Security Ownership
of Principal Stockholders and Management."
17
In July 1996, the Company guaranteed eight individual one year bank
loans to eight executives aggregating $270,000. The loans range in amounts from
$9,000 to $54,000, are full recourse to the individual executive and are secured
by a total of 30,000 shares of Celadon Group, Inc. Common Stock owned by the
executives individually. In February, 1997, one of the original participants
withdrew and was replaced by two additional executives. On July 1, 1997, the
bank loans and the Company's guarantee were extended until January 1, 1998. The
total amounts and ranges noted were not effected.
COMPENSATION PLANS
APPROVAL OF
CELADON GROUP, INC. NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN,
AS AMENDED AND RESTATED
The affirmative vote of at least a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote on this
matter at the meeting is required to approve the adoption of the Celadon Group,
Inc. Non-Employee Director Stock Option Plan, as amended and restated (the
"Director Option Plan"). THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT
THE STOCKHOLDERS VOTE THEIR SHARES FOR THE PROPOSAL TO ADOPT THE CELADON GROUP,
INC. NON- EMPLOYEE DIRECTOR STOCK OPTION PLAN, AS AMENDED AND RESTATED.
BACKGROUND
On March 31, 1997, the Board of Directors adopted the Director Option
Plan, effective as of April 1, 1997, subject to stockholder approval. The
Director Option Plan was subsequently amended and restated effective as of April
1, 1997, subject to stockholder approval, by action of the Board of Directors of
the Company on August 19, 1997.
The following description of the Director Option Plan is a summary of
the principal provisions of the Director Option Plan and is qualified in its
entirety by reference to the Director Option Plan, a copy of which has been
filed as an exhibit to this Proxy Statement.
PURPOSE OF THE PLAN
The purposes of the Director Option Plan are to enable the Company to
attract, retain, and motivate the non-employee directors of the Company and to
create a long-term mutuality of interest between the non-employee directors and
the Company's stockholders by granting options to purchase Common Stock
("Options").
18
ADMINISTRATION
The Director Option Plan will be administered by a committee (the
"Committee") of the Board of Directors of the Company (the "Board"), appointed
from time to time by the Board. The Committee is intended to consist of two or
more directors, each of whom will be non-employee directors as defined in Rule
16b-3 under Section 16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). If no Committee exists which has the authority to
administer the Director Option Plan, the functions of the Committee will be
exercised by the Board. The Committee has full authority to interpret the
Director Option Plan and decide any questions under the Director Option Plan and
to make such rules and regulations and establish such processes for
administration of the Director Option Plan as it deems appropriate subject to
the provisions of the Director Option Plan.
AVAILABLE SHARES
The Director Option Plan authorizes the issuance of up to 100,000 shares
of Common Stock upon the exercise of non-qualified stock options granted to
non-employee directors of the Company. In general, if Options are for any reason
canceled, or expire or terminate unexercised, the shares covered by such Options
will again be available for the grant of Options.
The Director Option Plan provides that appropriate adjustments will be
made in the number and kind of securities receivable upon the exercise of
Options in the event of a stock split, stock dividend, merger, consolidation or
reorganization.
ELIGIBILITY
All non-employee directors of the Company are eligible to be granted
Options under the Director Option Plan. A non-employee director is a director
serving on the Company's Board who is not an active employee of the Company
and/or a subsidiary or parent company of the Company, as defined in Sections
424(e) and 424(f) of the Code.
GRANT OF OPTIONS
On April 1, 1997, each of the four non-employee directors of the Company
on April 1, 1997 (the "Initial Grant Date") was granted an Option to purchase
4,000 shares of Common Stock, subject to the terms of the Director Option Plan.
Each non-employee director who is first elected to the Board after April 1, 1997
will be granted, as of the first day of the month coincident with or next
following the date of his or her election, an Option to purchase 8,000 shares of
Common Stock, subject to the terms of the Director Option Plan (such grant or
any grant on the Initial Grant Date is referred to as the "First Grant"). In
addition, on April 1, 1997, each non-employee director who was elected to the
Board within the one (1) year period ending March 31, 1997 was granted an
additional Option to purchase 8,000 shares of Common Stock, subject to the terms
of the Director Option Plan. As of the Initial Grant Date, only one non-employee
director qualified for this additional grant. Securities underlying options
granted on the Initial Grant Date totaled 24,000 shares of Common Stock of the
Company.
19
On each April 1 after the non-employee director receives the First
Grant, the non-employee director will be automatically granted an Option to
purchase 4,000 shares of Common Stock, provided that no such Option will be
granted if on the date of grant the Company has liquidated, dissolved or merged
or consolidated with another entity in such a manner that it is not the
surviving entity (unless the Director Option Plan has been assumed by such
surviving entity with regard to future grants). The exercise price for the
Options will be 100 percent of the fair market value (as defined in the Director
Option Plan) of the Common Stock at the time of the grant of the Options. Grants
on the Initial Grant Date have an exercise price of $10.50 per share.
EXERCISE OF OPTIONS
Subject to acceleration of the exercisability of the Options (as
described below), each Option granted under the Director Option Plan will be
exercisable on or after the later of (a) 6 months after the date of grant or (b)
approval of the Director Option Plan by stockholders. Shares purchased pursuant
to the exercise of Options will be paid for at the time of exercise as follows:
(i) in cash; (ii) by delivery of unencumbered shares of Common Stock held for at
least 6 months; or (iii) a combination thereof.
Except where an Option expires earlier (as described below), if not
previously exercised, each Option will expire upon the tenth anniversary of the
date of the grant thereof.
Options that are exercisable upon a non-employee director's termination
of directorship for any reason except death, disability or cause (as defined in
the Director Option Plan), prior to the complete exercise of an Option (or
deemed exercise thereof), will remain exercisable following such termination
until the earlier of (i) the expiration of the ninety (90) day period following
the non-employee director's termination of directorship or (ii) the remaining
term of the Option.
Options that are exercisable upon a non-employee director's termination
of directorship for disability or death, will remain exercisable by the
non-employee director or, in the case of death, by the non-employee director's
estate or by the person given authority to exercise such Options by his or her
will or by operation of law, until the earlier of (i) the first anniversary of
the non-employee director's termination of directorship or (ii) the remaining
term of the Option.
Upon a non-employee director's removal from the Board, failure to stand
for reelection or failure to be renominated for cause, or if the Company obtains
or discovers information after termination of directorship that such
non-employee director had engaged in conduct during such directorship that would
have justified a removal for cause during such directorship, all outstanding
Options of such non-employee director will immediately terminate and will be
null and void.
The Director Option Plan also provides that all outstanding Options
will terminate effective upon the consummation of a merger, consolidation
liquidation or dissolution in which the Company is not the surviving entity,
subject to the right of non-employee director to exercise all outstanding
Options prior to the effective date of the merger, consolidation, liquidation or
dissolution.
20
All Options granted to a non-employee director and not previously
exercisable become vested and fully exercisable immediately upon the occurrence
of a change in control (as defined in the Director Option Plan).
AMENDMENTS
The Director Option Plan provides that it may be amended by the
Committee or the Board at any time, and from time to time, to effect (i)
amendments necessary or desirable in order that the Director Option Plan and the
Options granted thereunder conform to all applicable laws, and (ii) any other
amendments deemed appropriate. Notwithstanding the foregoing, to the extent
required by law, no amendment may be made that would require the approval of the
stockholders of the Company under applicable law or under any regulation of a
principal national securities exchange or automated quotation system sponsored
by the National Association of Securities Dealers unless such approval is
obtained. The Director Option Plan may be amended or terminated at any time by
stockholders of the Company.
MISCELLANEOUS
Non-employee directors may be limited under Section 16(b) of the
Exchange Act to certain specific exercise, election or holding periods with
respect to the Options granted to them under the Director Option Plan. Options
granted under the Director Option Plan are subject to restrictions on transfer
and exercise. No Option granted under the Director Option Plan may be exercised
prior to the time period for exercisability, subject to acceleration in the
event of a change in control of the Company (as defined in the Director Option
Plan). Although Options will generally be nontransferable (except by will or the
laws of descent and distribution), the Committee may determine at the time of
grant or thereafter that an Option that is otherwise nontransferable is
transferable in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal U.S. federal income tax
consequences with respect to Options under the Director Option Plan is based on
statutory authority and judicial and administrative interpretations as of the
date of this Proxy Statement, which are subject to change at any time (possibly
with retroactive effect) and may vary in individual circumstances. Therefore,
the following is designed to provide only a general understanding of the federal
income tax consequences (state and local income tax and estate tax consequences
are not addressed below). This discussion is limited to the U.S. federal income
tax consequences to individuals who are citizens or residents of the U.S., other
than those individuals who are taxed on a residence basis in a foreign country.
In general, an optionee will realize no taxable income upon the grant of
non-qualified stock options and the Company will not receive a deduction at the
time of such grant, unless the option has a readily ascertainable fair market
value (as determined under applicable tax law) at the time of grant. Upon
exercise of a non-qualified stock option, an optionee generally will recognize
ordinary income
21
in an amount equal to the excess of the fair market value of the stock on the
date of exercise over the exercise price, but such amount will not be subject to
federal wage withholding or employment taxes. Upon a subsequent sale of the
stock by the optionee, the optionee will recognize short-term or long-term
capital gain or loss, depending upon his holding period for the stock. The
Company will generally be allowed a deduction equal to the amount recognized by
the optionee as ordinary income.
An optionee should consult with his or her tax advisor as to whether, as
a result of Section 16(b) of the Exchange Act and the rules and regulations
thereunder, the timing of income recognition is deferred for any period
following the exercise of an Option (the "Deferral Period"). If there is a
Deferral Period, absent a written election (pursuant to Section 83(b) of the
Code) filed with the Internal Revenue Service within 30 days after the date of
transfer of the shares of Common Stock pursuant to the exercise of the
non-qualified stock option to include in income, as of the transfer date, the
excess (on such date) of the fair market value of such shares over their
exercise price, recognition of income by the recipient could, in certain
instances, be deferred until the expiration of the Deferral Period.
In addition, any entitlement to a tax deduction on the part of the
Company is subject to the applicable federal tax rules, and in the event that
the exercisability of an Option is accelerated because of a change in control,
payments relating to the Options, either alone or together with certain other
payments may constitute parachute payments under Section 280(g) of the Code,
which excess amounts may be subject to excise taxes and be nondeductible by the
Company.
The Director Option Plan is not subject to any of the requirements of
the Employee Retirement Income Security Act of 1974, as amended. The Director
Option Plan is not, nor is it intended to be, qualified under Section 401(a) or
421 of the Code.
APPROVAL OF
AMENDMENT TO THE CELADON GROUP, INC. 1994 STOCK OPTION PLAN
The affirmative vote of at least a majority of the shares of Common
Stock present in person or represented by proxy and entitled to vote on this
matter at the meeting is required to approve the amendment to the Celadon Group,
Inc. 1994 Stock Option Plan. THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS
THAT THE STOCKHOLDERS VOTE THEIR SHARES FOR THE AMENDMENT TO THE CELADON GROUP,
INC. 1994 STOCK OPTION PLAN.
22
AMENDMENT TO 1994 STOCK OPTION PLAN
On August 19, 1997, the Board of Directors approved the amendment to the
Celadon Group, Inc. 1994 Stock Option Plan (the "Stock Option Plan"), subject to
stockholder approval, to provide that the aggregate number of shares of Common
Stock subject to awards under the Stock Option Plan be increased from 500,000 to
650,000. The Board of Directors also amended the Stock Option Plan, subject to
stockholder approval, to provide (i) for changes to reflect the new rules under
Section 16(b) of the Exchange Act, including the authorization of "cashless
exercises," the use of common stock to satisfy withholding obligations, and
ability to approve the transferability of nonqualified stock options and (ii)
for changes to reflect Section 162(m) of the Code.
The following description of the Stock Option Plan is a summary of the
principal provisions of the Stock Option Plan and is qualified in its entirety
by reference to the Stock Option Plan, a copy of which has been filed as an
exhibit to this Proxy Statement.
PURPOSE OF THE PLAN
The purposes of the Stock Option Plan are to enable the Company to
attract, retain, and motivate selected management and other key employees who
are important to the Company and to create a long-term mutuality of interest
between such persons and the Company's stockholders by granting stock options to
purchase Common Stock ("Options"), stock appreciation rights ("SARs") and
restricted stock awards (collectively, Options, SARs and restricted stock awards
are referred to herein as "Awards").
ADMINISTRATION
The Stock Option Plan is administered by a committee (the "Committee")
of the Board of Directors, appointed from time to time by the Board of
Directors. The committee is intended to consist of two or more directors, each
of whom will be a non-employee director as defined in Rule 16b-3 promulgated
under Section 16(b) of the Exchange Act and an outside director as defined under
Section 162(m) of the Code. If no Committee exists which has the authority to
administer the Stock Option Plan, the functions of the Committee will be
exercised by the Board of Directors. The Committee has full authority to
interpret the Stock Option Plan and decide any questions under the Stock Option
Plan and to make such rules and regulations and establish such processes for
administration of the Stock Option Plan as it deems appropriate subject to the
provisions of the Stock Option Plan. Any interpretation and decision made by the
Committee is final and conclusive.
AVAILABLE SHARES
The Stock Option Plan authorizes the issuance of up to 650,000 shares of
Common Stock upon the exercise of Options, SARs and restricted stock awards. As
of September 30, 1997, there were outstanding Options to acquire 385,300 shares
of Common Stock under the Stock Option Plan. No SARs or shares of restricted
stock have been issued under the Stock Option Plan. In general, if
23
Awards are for any reason canceled, or expire or terminate unexercised, the
shares covered by such Awards will again be available for the grant of Awards,
except that shares subject to a restricted stock award that are forfeited after
the optionee has received dividends or other benefits of ownership (excluding
voting rights) will not be available for the grant of Awards. The maximum number
of shares of Common Stock with respect to which Awards could be granted to any
individual under the Stock Option Plan during any fiscal year of the Company may
not exceed 75,000.
The Stock Option Plan provides that appropriate adjustments will be made
in the number and kind of securities subject to outstanding Awards and the
purchase price to prevent dilution of or enlargement of an optionee's rights in
the event of a stock split, stock dividend, merger, consolidation or
reorganization that satisfies the requirements set forth in the Stock Option
Plan.
ELIGIBILITY
Selected management and other key employees who are employed by the
Company or a parent or subsidiary corporation of the Company, as defined in
Sections 424(e) and 424(f) of the Code, are eligible to be granted Awards under
the Stock Option Plan.
GRANT OF AWARDS
The Committee determines, subject to the provisions of the Stock Option
Plan, the persons to whom and the time or times at which grants shall be made,
the number of shares of Common Stock subject to an Option or restricted stock
award, the number of Options which will be treated as incentive stock options
("ISOs") or nonqualified stock options, the duration of each Option, the
specific restrictions applicable to restricted stock awards, and other terms and
provisions of the Awards. In determining persons who are to receive Awards and
the number of shares of Common Stock to be covered by each Award, the Board of
Directors will consider the person's position, responsibilities, service,
accomplishments, present and future value to the Company, the anticipated length
of his future service, and other relevant factors.
The purchase price for the Options will be at least 100 percent of the
fair market value (as defined in the Stock Option Plan) of the Common Stock at
the time of the grant of the Options. In the case of an ISO granted to an
optionee owning more than 10 percent of the combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation of the Company
(as defined in Sections 424(3) and 424(f) of the Code) at the time the ISO is
granted, the purchase price for the ISO will be at least 110 percent of the fair
market value of the Common Stock at the time the ISO is granted.
Shares purchased pursuant to the exercise of Options will be paid for at
the time of exercise as follows: (i) cash, (ii) by delivery of unencumbered
shares of Common Stock held for at least 6 months, or (iii) a combination
thereof. If the Common Stock is traded on a national securities exchange or
system sponsored by the National Association of Securities Dealers, payment in
full or in part may also be made through a "cashless exercise" procedure whereby
the optionee delivers
24
irrevocable instructions to a broker to deliver promptly to the Company an
amount equal to the purchase price.
The Stock Option Plan also permits the Board of Directors in its
discretion, to provide for further nonqualified stock options for a number of
shares equal to the number of shares surrendered ("Reload Options"), if an
optionee exercises an Option by surrendering other shares of Common Stock held
by the optionee for at least six months prior to such date of surrender. The
purchase price of a Reload Option shall be equal to the fair market value of the
Common Stock on the date of exercise of the original Option and may be exercised
in accordance with the terms and conditions as the Committee may determine.
Except where an Option expires earlier (as described below), if not
previously exercised, each Option will expire upon the tenth anniversary of the
grant hereof (five years in the case of a 10 percent stockholder). No Options
may be granted after January 4, 2004.
The aggregate fair market value (determined at the time of grant) of the
Common Stock with respect to which ISOs are exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000.
The Stock Option Plan permits the Board of Directors to grant to all
eligible persons shares of Common Stock, subject to such restrictions as the
Board of Directors may determine (a restricted stock award). The Board of
Directors may grant SARs under the Plan. SARs may be granted either alone or in
addition to other Awards, and may, but need not, relate to a specific Option. A
SAR may be exercised only at a time when the fair market value of a share of the
Common Stock exceeds the fair market value on the date of grant of the SAR and
the SAR is otherwise exercisable. If a SAR relates to a specific Option, at the
time of its exercise, the employee must surrender the privilege of exercising
the related Option to the extent that the employee exercises the SAR. If a SAR
is exercised, the holder is entitled to receive, in cash or in shares of Common
Stock, or a combination thereof, at the discretion of the Committee, the excess
of the fair market value of shares for which the right is exercised over the
fair market value on the date of grant of the SAR. The exercise of SARs is
subject to certain restrictions set forth in the Stock Option Plan.
The Committee may at any time accelerate the vesting of Options and SARs
and the removal of restrictions from restricted stock awards. In the event of a
merger or other type of corporate transaction which results in a change of
control of the Company (as defined in the Stock Option Plan), Options granted
pursuant to the Stock Option Plan automatically vest and become immediately
exercisable in full, and any forfeiture restrictions contained in any restricted
stock award automatically terminate, under certain circumstances.
25
If the employment of any optionee terminates for cause (as defined in
the Stock Option Plan), any Options or SARs held by the optionee terminate. If
the employment of an optionee otherwise terminates, any Options or SARs held by
the optionee may be exercised during a period of 30 days after such termination,
unless such termination of employment occurs by reasons of retirement with the
consent of the Committee, disability or death. If the employment of any optionee
terminates by reason of retirement with the consent of the Committee or
disability, nonqualified stock options or SARs exercisable at the time of such
termination may be exercised for a period of up to three years after such
termination; ISOs exercisable at the time of such termination may be exercised
for a period of up to three months after retirement with the consent of the
committee and up to twelve months after disability. If the employment of any
optionee terminates by reason of death or if an optionee dies during the period
which Option or SARs are otherwise exercisable after retirement or disability,
Options or SARs exercisable at the time of termination of employment or such
later date, may be exercised by the executor or administrator of such optionee's
estate within one year of death.
AMENDMENT AND TERMINATION OF PLAN
The Stock Option Plan provides that it may be amended or terminated by
the Board of Directors of the Committee at any time; provided, however, that (i)
no such action shall affect or in any way impair an optionee's rights under any
Award previously granted under the Stock Option Plan and (ii) no amendment or
change shall, without stockholder approval, increase the maximum number of
shares of Common Stock which may be issued or transferred under the Stock Option
Plan, change the provisions of the Stock Option Plan regarding the purchase
price of Options, extend the period during which Awards may be granted or
exercised, or change the eligible class of employees under the Stock Option
Plan.
MISCELLANEOUS
Optionees may be limited under Section 16(b) of the Exchange Act to
certain specific exercise, election or holding periods with respect to the
Awards granted to them under the Stock Option Plan. Options granted under the
Stock Option Plan are subject to restrictions on transfer and exercise. No
Option granted under the Stock Option Plan may be exercised prior to the time
period for exercisability, subject to acceleration in the event of a change in
control of the Company (as defined in the Stock Option Plan). Although Options
will generally be nontransferable (except by will or the laws of descent and
distribution), the Committee may determine at the time of grant or thereafter
that a nonqualified stock option that is otherwise nontransferable is
transferable in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal U.S. federal income tax
consequences with respect to Options under the Stock Option Plan is based on
statutory authority and judicial and administrative interpretations as of the
date of this Proxy Statement, which are subject to change at any time (possibly
with retroactive effect) and may vary in individual circumstances. Therefore,
the following is designed to provide only a general understanding of the feral
income tax consequences (state and local income tax and estate tax consequences
are not addressed below). This discussion is limited to the U.S. federal income
tax consequences to individuals who are citizens or residents of the U.S., other
than those individuals who are taxed on a residence basis in a foreign country.
26
NONQUALIFIED STOCK OPTIONS. In general, an optionee will realize no
taxable income upon the grant of nonqualified stock options and the Company will
not receive a deduction at the time of such grant, unless the nonqualified stock
option has a readily ascertainable fair market value (as determined under
applicable tax law) at the time of grant. Upon exercise of a nonqualified stock
option, an optionee generally will recognize ordinary income in an amount equal
to the excess of the fair market value of the stock on the date of exercise over
the purchase price, but such amount will not be subject to federal wage
withholding or employment taxes. Upon a subsequent sale of the stock by the
optionee, the optionee will recognize short-term or long-term capital gain or
loss, depending upon his or her holding period for the stock. Subject to the
limitation under Section 162(m) of the Code (as described below), the Company
will generally be allowed a deduction equal to the amount recognized by the
optionee as ordinary income in connection with the exercise of the nonqualified
stock option.
INCENTIVE STOCK OPTIONS. Options granted under the Stock Option Plan may
be ISOs, provided that such Options satisfy the requirements of the Code
therefor. In general, neither the grant nor the exercise of an ISO will result
in taxable income to the optionee or a deduction to the Company. The sale of
Common Stock received pursuant to the exercise of an ISO which satisfied the
requirement of an ISO, as well as the holding period requirement described
below, will result in long-term capital gain or loss to the optionee equal to
the difference between the amount realized on the sale and the purchase price
and will not result in a tax deduction to the Company. To receive ISO treatment,
the optionee must not dispose of the Common Stock purchased pursuant to the
exercise of an ISO either (i) within two years after the ISO is granted or (ii)
within one year after the date of exercise.
If all requirements for ISO treatment other than the holding period
requirement are satisfied, the recognition of income by the optionee is deferred
until disposition of the Common Stock, but, in general, any gain in an amount
equal to the lesser of (i) the fair market value of the Common Stock on the date
of exercise or, with respect to officers and directors, the date that sale of
such stock would not create liability under Section 16(b) of the Exchange Act)
minus the purchase price of (ii) the amount realized on the disposition minus
the purchase price is treated as ordinary income. Any remaining gain is treated
as long-term or short-term capital gain depending on the optionee's holding
period for the stock disposed of. The Company will be entitled to a deduction at
that time equal to the amount of ordinary income realized by the optionee.
CERTAIN OTHER TAX ISSUES. In general, Section 162(m) of the Code denies
a publicly held corporation a deduction for federal income tax purposes for
compensation in excess of $1,000,000 per year per person to its chief executive
officer and the four other officers whose compensation is disclosed in its proxy
statement, subject to certain exceptions. Options will generally qualify under
one of these exceptions if they are granted under a plan that states the maximum
number of shares with respect to which Options may be granted to any employee
during a specified period and the plan under which Options are granted is
approved by stockholders and is administered by a compensation committee
comprised of outside directors. The Stock Option Plan is intended to satisfy
these requirements with respect to Options. Awards of restricted stock that are
granted or vest upon the
27
attainment of preestablished performance goals generally satisfy the exception
for performance based compensation under Section 162(m) of the Code; awards of
restricted stock (not subject to the attainment of performance goals) generally
do not satisfy the exception for performance based compensation under Section
162(m) of the Code.
In addition, any entitlement to a tax deduction on the part of the
Company is subject to the applicable federal tax rules, and in the event that
the exercisability of an Option is accelerated because of a change in control,
payments relating to the Options, either alone or together with certain other
payments may constitute parachute payments under Section 280G of the Code, which
excess amounts may be subject to excise taxes and be nondeductible by the
Company.
The Company has the right under the Stock Option Plan to deduct from any
payment to be made to an optionee, or to otherwise require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to the Stock Option Plan, payment by the optionee of any federal, state
or local taxes required by law to be withheld. An optionee may generally satisfy
such withholding obligation by reducing the number of shares of Common Stock
otherwise deliverable or by delivering shares of Common Stock already owned.
The Stock Option Plan is not subject to any of the requirements of the
Employee Retirement Income Security Act of 1974, as amended. The Stock Option
Plan is not, nor is it intended to be, qualified under Section 401(a) of the
Code.
AMENDMENT TO THE 1994 STOCK OPTION PLAN
On September 10, 1997, the Board of Directors amended the 1994 Stock
Option Plan, subject to the approval of stockholders, to provide that the
aggregate number of shares of Common stock subject to options, SARs, and
restricted stock awards granted or to be granted pursuant to the Plan be
increased from 500,000 to 650,000 subject to adjustment as provided in the Plan.
NEW PLAN BENEFITS
As of September 30, 1997, options to acquire 395,300 of the 650,000
shares of Common Stock authorized under the Stock Option Plan had been granted.
Under the existing Stock Option Plan, Stephen Russell has been granted
nonqualified options to acquire 70,000 shares at exercise prices ranging from
$10.00 to $13.625, expiring between September, 2004 and March, 2006; Ronald S.
Roman has been granted an ISO to acquire 10,000 shares at an exercise price of
$7.50 expiring August, 2006, a nonqualified option to acquire 25,000 shares at
an exercise price of $9.00 per share expiring October, 2006 and pursuant to his
employment agreement will receive minimum annual option awards to acquire 10,000
shares at the fair market value on June 30, 1998 and June 30, 1999; Don S.
Snyder has been granted a nonqualified option to acquire 35,000 shares at an
exercise price of $10.00 expiring in March 2006; Michael Dunlap has been granted
an ISO to acquire 5,000 shares at an exercise price of $7.50 expiring in August,
2006 and Brian L. Reach, formerly Vice President
28
Special Projects has been granted nonqualified options to acquire 40,000 shares
at exercise prices ranging from $8.75 to $13.625, and an ISO to acquire 20,000
shares at an exercise price of $8.75, all of which expire no later than March
31, 1998 pursuant to the terms of his employment agreement. Additionally, under
the Stock Option Plan the non-employee directors as a group have been granted
nonqualified options to purchase 39,000 shares at exercise prices ranging from
$14.50 to $20.00, expiring between January, 2004 and September, 2004. All
executive officers as a group have been granted ISOs and nonqualified options to
purchase a total of 215,000 shares at exercise prices ranging from $7.50 to
$14.50, expiring between January, 2004 and October, 2006.
All other employees of the Company have been granted ISOs for a total of
141,300 shares at prices ranging from $7.50 to $15.25 expiring between January,
2004 and April, 2007.
On October 1, 1997, the closing sale price of the Common Stock on the
NASDAQ National Market was $15.00 per share.
The Board of Directors believes that the Company's ability to grant
additional stock options, SARs, and restricted stock awards is important to the
Company's ability to recruit and retain qualified personnel.
INDEPENDENT PUBLIC ACCOUNTANTS
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP
The Board of Directors has appointed Ernst & Young LLP as the
independent auditors for the Company for the current fiscal year. A
representative of Ernst & Young LLP is expected to be present at the Meeting
with the opportunity to make a statement if such representative desires to do
so, and is expected to respond to appropriate questions. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS AUDITORS.
STOCKHOLDERS' PROPOSALS
Proposals of stockholders to be presented at the next annual meeting
must be received for inclusion in the Company's proxy statement and form of
proxy by June 19, 1998.
GENERAL
The Board of Directors does not know of any matters other than those
specified in the Notice of Annual Meeting of Stockholders that will be presented
for consideration at the meeting. However, if other matters properly come before
the meeting, it is the intention of the persons named in the enclosed proxy to
vote thereon in accordance with their judgement. In the event that any nominee
is unable to serve as a director at the date of the meeting, the enclosed form
of proxy will be voted
29
for any nominee who shall be designated by the Board of Directors to fill
such vacancy.
Under Delaware Law and the Company's Certificate of Incorporation and
By-laws, if a quorum is present, directors are elected by a plurality of the
votes cast by the holders of shares entitled to vote thereon. A majority of the
outstanding shares entitled to vote, present in person or represented by proxy
constitutes a quorum. Shares represented by proxies withholding votes from
nominees will be counted only for purposes of determining a quorum. Under
Delaware law and the rules of the Securities and Exchange Commission, if a
quorum is present, the affirmative vote of a majority of the shares present in
person or represented by proxy at the Meeting and entitled to vote on the matter
is required to approve and adopt the proposed Non-Employee Director Stock Option
Plan and the amendment to the 1994 Stock Option Plan. Shares abstaining will be
considered present and have the effect of a vote against the proposal. Any share
held by a broker as a nominee and not voted in accordance with stock exchange
rules will not be considered present or entitled to vote on the proposal.
The entire cost of soliciting proxies hereunder will be borne by the
Company. Proxies will be solicited by mail, and may be solicited personally by
directors, officers or regular employees of the Company who will not be
compensated for their services. The Company will reimburse brokers and banks for
their reasonable expenses for forwarding material to beneficial owners for whom
they hold stock.
The Company intends to furnish to its stockholders a copy of the
Company's 1997 Annual Report on Form 10-K filed with the Securities and Exchange
Commission.
Indianapolis, Indiana
October 17, 1997
30
EXHIBIT A
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CELADON GROUP, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
AS AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 1997
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Table of Contents
Page
----
I. PURPOSES OF THE PLAN............................................. 1
II. DEFINITIONS...................................................... 1
III. EFFECTIVE DATE................................................... 3
IV. ADMINISTRATION................................................... 4
A. Duties of the Committee................................. 4
B. Advisors................................................ 4
C. Indemnification......................................... 4
D. Meetings of the Committee............................... 4
E. Determinations........................................... 5
V. SHARES; ADJUSTMENT UPON CERTAIN EVENTS........................... 5
A. Shares to be Delivered; Fractional Shares............... 5
B. Number of Shares........................................ 5
C. Adjustments; Recapitalization, etc...................... 5
VI. AWARDS AND TERMS OF OPTIONS...................................... 6
A. Grant................................................... 6
B. Date of Grant........................................... 7
C. Option Agreement........................................ 7
D. Option Terms............................................ 7
E. Expiration.............................................. 7
F. Acceleration of Exercisability.......................... 8
VII. EFFECT OF TERMINATION OF DIRECTORSHIP............................ 8
A. General................................................. 8
B. Death or Disability..................................... 8
C. Termination by Company for Cause........................ 8
D. Cancellation of Options................................. 8
VIII. NONTRANSFERABILITY OF OPTIONS.................................... 8
IX. RIGHTS AS A STOCKHOLDER.......................................... 9
X. TERMINATION, AMENDMENT AND MODIFICATION.......................... 9
XI. USE OF PROCEEDS................................................. 9
i
XII. GENERAL PROVISIONS............................................... 9
A. Right to Terminate Directorship......................... 9
B. Trusts, etc............................................. 10
C. Notices................................................. 10
D. Severability of Provisions.............................. 10
E. Payment to Minors, Etc.................................. 10
F. Headings and Captions................................... 10
G. Costs................................................... 10
H. Controlling Law......................................... 11
I. Section 16(b) of the Act................................ 11
XIII. ISSUANCE OF STOCK CERTIFICATES;
LEGENDS; PAYMENT OF EXPENSES..................................... 11
A. Stock Certificates...................................... 11
B. Legends................................................. 11
C. Payment of Expenses..................................... 11
XIV. LISTING OF SHARES AND RELATED MATTERS............................ 11
XV. WITHHOLDING TAXES................................................ 12
ii
CELADON GROUP, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
As Amended and Restated effective as of April 1, 1997
I. PURPOSES OF THE PLAN
The purposes of this Non-Employee Director Stock Option Plan,
as amended and restated (the "Plan") are to enable the Celadon Group, Inc. (the
"Company") to attract, retain and motivate the directors who are important to
the success and growth of the business of the Company and to create a long-term
mutuality of interest between the directors and the stockholders of the Company
by granting the directors options to purchase Common Stock (as defined herein).
The Plan is an amendment and restatement of the Non-Employee Director Stock
Option Plan, initially effective April 1, 1997 and adopted on March 31, 1997.
II. DEFINITIONS
In addition to the terms defined elsewhere herein, for
purposes of this Plan, the following terms will have the following meanings when
used herein with initial capital letters:
A. "Act" means the Securities Exchange Act of 1934, as
amended.
B. "Board" means the Board of Directors of the Company.
C. "Cause" means an act or failure to act that constitutes
"cause" for removal of a director under applicable Delaware law.
D. "Change in Control" means any of the following:
1. the consummation of any consolidation or merger of the
Company in which the persons who are stockholders of the Company immediately
prior to such consolidation or merger do not own at least a majority of the
Common Stock and of the combined voting power of the then outstanding capital
stock of the continuing or surviving corporation in such merger, provided that
no Change in Control shall be deemed to have occurred if persons having
effective control over the affairs of the Company immediately prior to such
consolidation or merger have effective control over such continuing or surviving
corporation;
2. the consummation of any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company;
3. the approval by the stockholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company;
4. any "person," including a "group" as determined in
accordance with Sections 13(d) and 14(d) of the Act and the rules and
regulations thereunder, becoming the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Act), directly or
indirectly, of thirty percent (30%) or more of the combined voting power of the
Company's then outstanding capital stock, whether by means of open-market
purchases, tender offer, or otherwise, provided that no Change in Control shall
be deemed to have occurred as a result of the ownership of any capital stock by
the Company, any subsidiary of the Company, any employee benefit plan of the
Company, or any member of the Russell Family; or
5. the individuals who constitute the Incumbent Board cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to April 1, 1997, whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors comprising the Incumbent Board (either by a
specific vote or by an approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be considered as though such person were a member of the
Incumbent Board.
E. "Code" means the Internal Revenue Code of 1986, as amended
(or any successor statute).
F. "Committee" means a committee of the Board, appointed from
time to time by the Board, which Committee shall be intended to consist of two
or more directors who are non-employee directors as defined in Rule 16b-3 or
such other committee of the Board to which the Board has delegated its power and
functions hereunder. If for any reason the appointed Committee does not meet the
requirements of Rule 16b-3, such noncompliance with the requirements of Rule
16b-3 shall not affect the validity of the interpretations or other actions of
the Committee. If and to the extent that no Committee exists which has the
authority to administer the Plan, the functions of the Committee shall be
exercised by the Board.
G. "Common Stock" means the common stock of the Company, par
value $.033 per share, any common stock into which the common stock may be
converted and any common stock resulting from any reclassification of the common
stock.
H. "Company" means the Celadon Group, Inc., a Delaware
corporation, and any successor thereto.
I. "Disability" means a total and permanent disability, as
defined in Section 22(e)(3) of the Code.
J. "Eligible Director" means a director of the Company who is
not an active employee of the Company or any Related Person.
K. "Fair Market Value" means, for purposes of this Plan,
unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date, the last sales prices reported
for the Common Stock on the applicable date, (i) as reported by the principal
national securities exchange in the United States on which it is then traded, or
(ii) if not traded on any such national securities exchange, as quoted on an
automated quotation system
2
sponsored by the National Association of Securities Dealers, or if the sale of
the Common Stock shall not have been reported or quoted on such date, on the
first day prior thereto on which the Common Stock was reported or quoted.
L. "Incumbent Board" means the composition of the Board on
April 1, 1997.
M. "Option" means the right to purchase the number of Shares
granted in the Option agreement at a prescribed purchase price according to the
terms specified in the Plan.
N. "Participant" means an Eligible Director who is granted an
Option under the Plan, which Option has not expired.
O. "Related Person" means, other than the Company (a) any
corporation that is defined as a subsidiary corporation in Section 424(f) of the
Code; or (b) any corporation that is defined as a parent corporation in Section
424(e) of the Code. An entity shall be deemed a Related Person only for such
periods as the requisite ownership relationship is maintained.
P. "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the
Act as then in effect or any successor provisions.
Q. "Russell Family" means Stephen Russell; any lineal
descendants of Stephen Russell (including by adoption); any trust all of the
beneficiaries (other than contingent beneficiaries) of which are members of the
Russell Family (or their estates); any charitable trust, charitable foundation
or other charitable entity if and so long as a majority of the trustees,
directors, or members of a similar managing body of such trust, foundation, or
entity are members of the Russell Family; and any corporation, limited
partnership, general partnership, limited liability company, or other entity if
and so long as members of the Russell Family beneficially own equity interests
in such entity enabling them to effectively control the voting and disposition
of Common Stock owned by such entity.
R. "Securities Act" means the Securities Act of 1933, as
amended.
S. "Share" means a share of Common Stock.
T. "Termination of Directorship" with respect to an individual
means that individual is no longer acting as a director (whether a non-employee
director or employee director) of the Company.
III. EFFECTIVE DATE
The Plan shall become effective as of April 1, 1997, (the
"Effective Date"), subject to its approval by the majority of the votes of the
shares of Common Stock present in person or represented by proxy and entitled to
vote on the Plan at a meeting of stockholders within one (1) year after the Plan
is adopted by the Board, provided that the total vote cast on the Plan
represents the majority in interest of all securities entitled to vote on the
Plan. Grants of Options under the Plan will
3
be made on or after the Effective Date of the Plan, provided that, if the Plan
is not approved by the requisite vote of stockholders, all Options which have
been granted pursuant to the terms of the Plan shall be null and void. No
Options may be exercised prior to the approval of the Plan by the majority of
the Common Stock (at the time of approval).
IV. ADMINISTRATION
A. Duties of the Committee. The Plan shall be administered by
the Committee. The Committee shall have full authority to interpret the Plan and
to decide any questions and settle all controversies and disputes that may arise
in connection with the Plan; to establish, amend and rescind rules for carrying
out the Plan; to administer the Plan, subject to its provisions; to prescribe
the form or forms of instruments evidencing Options and any other instruments
required under the Plan and to change such forms from time to time; and to make
all other determinations and to take all such steps in connection with the Plan
and the Options as the Committee, in its sole discretion, deems necessary or
desirable. Any determination, action or conclusion of the Committee shall be
final, conclusive and binding on all parties.
B. Advisors. The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of the
Plan, and may rely upon any advice or opinion received from any such counsel or
consultant and any computation received from any such consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company.
C. Indemnification. To the maximum extent permitted by
applicable law, no officer or former officer of the Company or member or former
member of the Committee or of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Option granted
under it. To the maximum extent permitted by applicable law and the Certificate
of Incorporation and By-Laws of the Company and to the extent not covered by
insurance, each officer or former officer and member or former member of the
Committee or of the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel reasonably
acceptable to the Company) or liability (including any sum paid in settlement of
a claim with the approval of the Company), and advanced amounts necessary to pay
the foregoing at the earliest time and to the fullest extent permitted, arising
out of any act or omission to act in connection with the Plan, except to the
extent arising out of such officer's or former officer's, member's or former
member's own fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the officers, directors or members or former
officers, directors or members may have under applicable law or under the
Certificate of Incorporation or By-Laws of the Company.
D. Meetings of the Committee. The Committee shall adopt such
rules and regulations as it shall deem appropriate concerning the holding of its
meetings and the transaction of its business. All determinations by the
Committee shall be made by the affirmative vote of a majority of its members.
Any such determination may be made at a meeting duly called and held at which a
majority of the members of the Committee are in attendance in person or through
telephonic
4
communication. Any determination set forth in writing and signed by all the
members of the Committee shall be as fully effective as if it had been made by a
majority vote of the members at a meeting duly called and held.
E. Determinations. Each determination, interpretation or other
action made or taken pursuant to the provisions of this Plan by the Committee
shall be final, conclusive and binding for all purposes and upon all persons,
including, without limitation, the Participants, the Company, directors,
officers and other employees of the Company, and the respective heirs,
executors, adminis trators, personal representatives and other successors in
interest of each of the foregoing.
V. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
A. Shares to be Delivered; Fractional Shares. Shares to be
issued under the Plan shall be made available, at the sole discretion of the
Board, either from authorized but unissued Shares or from issued Shares
reacquired by Company and held in treasury. No fractional Shares will be issued
or transferred upon the exercise of any Option nor will any compensation be paid
with regard to fractional shares.
B. Number of Shares. Subject to adjustment as provided in this
Article V, the maximum aggregate number of Shares authorized for issuance under
the Plan shall be 100,000. Where an Option is for any reason canceled, or
expires or terminates unexercised, the Shares covered by such Option shall again
be available for the grant of Options, within the limits provided by the
preceding sentence.
C. Adjustments; Recapitalization, etc. The existence of this
Plan and the Options granted hereunder shall not affect in any way the right or
power of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or any
sale or transfer of all or part of its assets or business, or any other
corporate act or proceeding, in which case the provisions of this Article V(C)
shall govern outstanding Options:
1. The Shares with respect to which Options may be granted are
Shares of Common Stock as presently constituted, but, if and whenever the
Company shall effect a subdivision, recapitalization or consolidation of Shares
or the payment of a stock dividend on Shares without receipt of consideration,
the aggregate number and kind of shares of capital stock issuable under this
Plan shall be proportionately adjusted, and each holder of a then outstanding
Option shall have the right to purchase under such Option, in lieu of the number
of Shares as to which the Option was then exercisable but on the same terms and
conditions of exercise set forth in such Option, the number and kind of shares
of capital stock which he or she would have owned after such sub-division,
recapitalization, consolidation or dividend if immediately prior thereto he had
been the holder of record of the number of Shares as to which such Option was
then exercisable.
5
2. If the Company merges or consolidates with one or more
corporations and the Company shall be the surviving corporation, thereafter upon
exercise of an Option theretofore granted, the Participant shall be entitled to
purchase under such Option in lieu of the number of Shares as to which such
Option shall then be exercisable, but on the same terms and conditions of
exercise set forth in such Option, the number and kind of shares of capital
stock or other property to which the Participant would have been entitled
pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, the Participant had been the
holder of record of the number of Shares as to which such Option was then
exercisable.
3. If the Company shall not be the surviving corporation in
any merger or consolidation, or if the Company is to be dissolved or liquidated,
then, unless the surviving corporation assumes the Options or substitutes new
Options which are determined by the Board in its sole discretion to be
substantially similar in nature and equivalent in terms and value for Options
then outstanding, upon the effective date of such merger, consolidation,
liquidation or dissolution, any unexercised Options shall expire without
additional compensation to the holder thereof; provided, that, the Committee
shall deliver notice to each Participant at least twenty (20) days prior to the
date of consummation of such merger, consolidation, dissolution or liquidation
which would result in the expiration of the Options and during the period from
the date on which such notice of termination is delivered to the consummation of
the merger, consolidation, dissolution or liquidation, each Participant shall
have the right to exercise in full effective as of such consummation all the
Options that are then outstanding (without regard to limitations on exercise
otherwise contained in the Options) but contingent on occurrence of the merger,
consolidation, dissolution or liquidation, and, provided that, if the
contemplated transaction does not take place within a ninety (90) day period
after giving such notice for any reason whatsoever, the notice, accelerated
vesting and exercise shall be null and void and if and when appropriate new
notice shall be given as aforesaid.
4. If as a result of any adjustment made pursuant to the
preceding paragraphs of this Article V(C), any Participant shall become entitled
upon exercise of an Option to receive any shares of capital stock other than
Common Stock, then the number and kind of shares of capital stock so receivable
thereafter shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Common Stock set forth in this Article V(C).
5. Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class or securities convertible into
shares of stock of any class, for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number of Shares subject to Options theretofore granted or
the purchase price per Share.
VI. AWARDS AND TERMS OF OPTIONS
A. Grant. Upon the later of (i) the Effective Date of the Plan
and (ii) the date of the approval of the Plan by the Board (the "Initial Grant
Date"), each Eligible Director shall be
6
automatically granted an Option to purchase 4,000 Shares, subject to the terms
of the Plan. Any Eligible Director who is first elected to the Board after the
Initial Grant Date shall automatically be granted, as of the first day of the
month coincident with or next following the date of such election, an Option to
purchase 8,000 Shares, subject to the terms of the Plan (such grant or any grant
on the Initial Grant Date is referred to as the "First Grant"). Notwithstanding
the foregoing, on the Initial Grant Date, each Eligible Director who was elected
to the Board within the one (1) year period prior to the Initial Grant Date
shall also automatically be granted an Option to purchase 8,000 Shares, subject
to the terms of the Plan. Without further action by the Board or the
stockholders (except as provided in Article X) of the Company, each year, other
than the year in which an Eligible Director receives the First Grant, as of the
April 1 of each year following the Initial Grant Date, each Eligible Director
shall be automatically granted an Option to purchase 4,000 Shares, subject to
the terms of the Plan, provided that no such Option shall be granted if on the
date of grant the Company has liquidated, dissolved or merged or consolidated
with another entity in such a manner that it is not the surviving entity (unless
the Plan has been assumed by such surviving entity with regard to future
grants).
B. Date of Grant. If a grant of Options is to be made on a day
on which the principal national exchange or automated quotation system sponsored
by the National Association of Securities Dealers with respect to which Shares
are traded is not open for trading, the grant shall be made on the first day
thereafter on which such exchange or system is open for trading.
C. Option Agreement. Options shall be evidenced by Option
agreements in such form as the Committee shall approve from time to time.
D. Option Terms:
1. Exercise Price. The purchase price per share ("Purchase
Price") deliverable upon the exercise of an Option shall be 100% of the
Fair Market Value of such Share at the time of the grant of the Option,
or the par value of the Share, whichever is the greater.
2. Period of Exercisability for Options to Purchase Shares.
Except as otherwise provided herein, Options granted to Eligible
Directors shall vest and become exercisable on the later of (i) six (6)
months after the date of grant or (ii) the approval of the Plan by
stockholders in accordance with Article III hereof.
3. Procedure for Exercise. A Participant electing to exercise
one or more Options shall give written notice to the Secretary of the
Company of such election and of the number of Options he or she has
elected to exercise. Shares purchased pursuant to the exercise of
Options shall be paid for at the time of exercise in cash or by
delivery of unencumbered Shares owned by the Participant for at least
six months (or such longer period as required by applicable accounting
standards to avoid a charge to earnings) or a combination thereof.
E. Expiration. Except as otherwise provided herein, if not
previously exercised each Option shall expire upon the tenth anniversary of the
date of the grant thereof.
7
F. Acceleration of Exercisability. All Options granted to a
Participant and not previously exercisable shall become vested and fully
exercisable immediately upon the occurrence of
a Change in Control.
VII. EFFECT OF TERMINATION OF DIRECTORSHIP
A. General. Upon a Participant's Termination of Directorship
for any reason except death, Disability or Cause, prior to the complete exercise
of an Option (or deemed exercise thereof), then such Option shall thereafter be
exercisable to the extent such Option is vested and shall remain exercisable
until the earlier of (i) the expiration of the ninety (90) day period following
the Participant's Termination of Directorship or (ii) the remaining term of the
Option. Any termination of employment by the Company for Cause will be treated
in accordance with the provisions of paragraph (C) below.
B. Death or Disability. Upon Termination of Directorship on
account of Disability or death, all outstanding Options then exercisable and not
exercised by the Participant prior to such Termination of Directorship shall
remain exercisable by the Participant or, in the case of death, by the
Participant's estate or by the person given authority to exercise such Options
by his or her will or by operation of law, until the earlier of (i) first
anniversary of the Participant's Termination of Directorship or (ii) the
remaining term of the Option.
C. Termination by Company for Cause. Upon removal, failure to
stand for reelection or failure to be renominated for Cause, or if the Company
obtains or discovers information after Termination of Directorship that such
Participant had engaged in conduct during such directorship that would have
justified a removal for Cause during such directorship, all outstanding Options
of such Participant shall immediately terminate and shall be null and void.
D. Cancellation of Options. Except as provided in Article
VI(F), Options that were not exercisable during the period such person serves as
a director shall not become exercisable upon a Termination of Directorship for
any reason whatsoever, and such Options shall terminate and become null and void
upon a Termination of Directorship.
VIII. NONTRANSFERABILITY OF OPTIONS
No Option shall be transferable by the Participant otherwise
than by will or under applicable laws of descent and distribution and during the
lifetime of the Participant may be exercised only by the Participant or his or
her guardian or legal representative. In addition, except as provided above, no
Option shall be assigned, negotiated, pledged or hypothecated in any way
(whether by operation of law or otherwise), and no Option shall be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
negotiate, pledge or hypothecate any Option, or in the event of any levy upon
any Option by reason of any execution, attachment or similar process contrary to
the provisions hereof, such Option shall immediately terminate and become null
and void. Notwithstanding the foregoing, the Committee may determine at the time
of grant or thereafter that
8
an Option that is otherwise not transferable pursuant to this Article VIII is
transferable in whole or in part and in such circumstances, and under such
conditions, as specified by the Committee.
IX. RIGHTS AS A STOCKHOLDER
A Participant (or a permitted transferee of an Option) shall
have no rights as a stockholder with respect to any Shares covered by such
Participant's Option until such Participant (or permitted transferee) shall have
become the holder of record of such Shares, and no adjustments shall be made for
dividends in cash or other property or distributions or other rights in respect
to any such Shares, except as otherwise specifically provided in this Plan.
X. TERMINATION, AMENDMENT AND MODIFICATION
Subject to the number of Shares authorized for issuance under
the Plan as provided in Article V(B), the Plan shall continue in effect without
limit unless and until the Board otherwise determines. The termination of the
Plan shall not terminate any outstanding Options that by their terms continue
beyond such termination date. The Committee or the Board at any time or from
time to time may amend this Plan to effect (i) amendments necessary or desirable
in order that this Plan and the Options shall conform to all applicable laws and
regulations, and (ii) any other amendments deemed appropriate. Notwithstanding
the foregoing, solely to the extent required by law, the Committee or the Board
may not effect any amendment that would require the approval of the stockholders
of the Company under applicable law or under any regulation of a principal
national securities exchange or automated quotation system sponsored by the
National Association of Securities Dealers unless such approval is obtained.
This Plan may be amended or terminated at any time by the stockholders of the
Company.
Except as otherwise required by law, no termination, amendment
or modification of this Plan may, without the consent of the Participant or the
permitted transferee of his Option, alter or impair the rights and obligations
arising under any then outstanding Option.
XI. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options under
the Plan are to be added to the general funds of the Company and used for its
general corporate purposes as the Board shall determine.
XII. GENERAL PROVISIONS
A. Right to Terminate Directorship. This Plan shall not impose
any obligations on the Company to retain any Participant as a director nor shall
it impose any obligation on the part of any Participant to remain as a director
of the Company.
9
B. Trusts, etc. Nothing contained in the Plan and no action
taken pursuant to the Plan (including, without limitation, the grant of any
Option thereunder) shall create or be construed to create a trust of any kind,
or a fiduciary relationship, between the Company and any Participant or the
executor, administrator or other personal representative or designated
beneficiary of such Participant, or any other persons. If and to the extent that
any Participant or such Participant's executor, administrator or other personal
representative, as the case may be, acquires a right to receive any payment from
the Company pursuant to the Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company.
C. Notices. Any notice to the Company required by or in
respect of this Plan will be addressed to the Company at One Celadon Drive, 9503
East 33rd Street, Indianapolis, Indiana 46236, Attention: Chief Financial
Officer, or such other place of business as shall become the Company's principal
executive offices from time to time. Each Participant shall be responsible for
furnishing the Committee with the current and proper address for the mailing to
such Participant of notices and the delivery to such Participant of agreements,
Shares and payments. Any such notice to the Participant will, if the Company has
received notice that the Participant is then deceased, be given to the
Participant's personal representative if such representative has previously
informed the Company of his or her status and address (and has provided such
reasonable substantiating information as the Company may request) by written
notice under this Section. Any notice required by or in respect of this Plan
will be deemed to have been duly given when delivered in person or when
dispatched by telecopy or, in the case of notice to the Company, by facsimile as
described above, or one business day after having been dispatched by a
nationally recognized overnight courier service or three business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid. The Company assumes no responsibility or obligation
to deliver any item mailed to such address that is returned as undeliverable to
the addressee and any further mailings will be suspended until the Participant
furnishes the proper address.
D. Severability of Provisions. If any provisions of the Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provisions had not been included.
E. Payment to Minors, Etc. Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of receipt
thereof shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
F. Headings and Captions. The headings and captions herein are
provided for reference and convenience only. They shall not be considered part
of the Plan and shall not be employed in the construction of the Plan.
G. Costs. The Company shall bear all expenses included in
administering this Plan, including expenses of issuing Common Stock pursuant to
any Options hereunder.
10
H. Controlling Law. The Plan shall be construed and enforced
according to the laws of the State of Delaware, without giving effect to rules
governing the conflict of laws.
I. Section 16(b) of the Act. All elections and transactions
under the Plan by persons subject to Section 16 of the Act involving shares of
Common Stock are intended to comply with any applicable condition under Rule
16b-3. To the extent any provision of the Plan or action by the Committee fails
to so comply, it shall be deemed null and void. The Committee may establish and
adopt written administrative guidelines, designed to facilitate compliance with
Section 16(b) of the Act, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of business
thereunder.
XIII. ISSUANCE OF STOCK CERTIFICATES;
LEGENDS; PAYMENT OF EXPENSES
A. Stock Certificates. Upon any exercise of an Option and
payment of the exercise price as provided in such Option, a certificate or
certificates for the Shares as to which such Option has been exercised shall be
issued by the Company in the name of the person or persons exercising such
Option and shall be delivered to or upon the order of such person or persons,
however, in the case of Options exercised pursuant to Section V(C)3 hereof,
subject to the merger, consolidation, dissolution or liquidation triggering the
rights under that section.
B. Legends. Certificates for Shares issued upon exercise of an
Option shall bear such legend or legends as the Committee, in its sole
discretion, determines to be necessary or appropriate to prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act or to implement the provisions of any agreements between the Company and the
Participant with respect to such Shares.
C. Payment of Expenses. The Company shall pay all issue or
transfer taxes with respect to the issuance or transfer of Shares, as well as
all fees and expenses necessarily incurred by the Company in connection with
such issuance or transfer and with the administration of the Plan.
XIV. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board or the Committee shall determine in
its sole discretion that the listing, registration or qualification of the
Shares covered by the Plan upon any national securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
grant of Options or the award or sale of Shares under the Plan, no Option grant
shall be effective and no Shares will be delivered, as the case may be, unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
11
XV. WITHHOLDING TAXES
The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock, payment by the Participant
of any federal, state or local taxes required by law to be withheld.
12
EXHIBIT B
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CELADON GROUP, INC.
1994 STOCK OPTION PLAN,
AS AMENDED EFFECTIVE AUGUST 19, 1997
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[THIS PAGE INTENTIONALLY LEFT BLANK]
Table of Contents
Page
----
1. Purpose of the Plan 1
2. Administration of the Plan 1
3. Shares of Stock Subject to the Plan 2
4. Eligibility 3
5. Granting Plan Awards 3
6. Options 3
a. Option Price 3
b. Medium and Time of Payment 4
c. Waiting and Exercise Period 4
d. Reload Options 4
e. Fair Market Value 4
f. Incentive Stock Options 5
7. Restricted Stock Awards 5
a. Forfeiture Period 5
b. Restrictive Legend and Stock Power 5
8. Stock Appreciation Rights 6
a. Definition 6
b. Grant and Termination 6
c. Number of Rights 6
d. Exercise by Insiders 7
9. Non-Employee Directors 7
a. Current Directors 7
b. Options 7
c. Non-Committee Members 7
10. Adjustments upon Changes in Capitalization 7
11. Effectiveness, Termination and Amendment of the Plan 9
i
12. Death, Retirement and Termination of Employment 9
a. General 9
b. Retirement and Nonqualified Options 10
c. Retirement and Incentive Options 10
d. Death 10
e. Leaves of Absence 10
13. Acceleration of Vesting 10
a. Acceleration 10
b. Settlement 11
c. Change in Control 12
d. Change in Control Date 12
e. Change in Control Price 13
f. Russell Family 13
14. Miscellaneous Provisions 13
a. Rights as an Employee or Director 13
b. Rights as a Stockholder 13
c. Non-Assignability of Plan Awards 13
d. Leave of Absence 14
e. Withholding of Taxes 14
f. Other Restrictions 14
ii
CELADON GROUP, INC.
1994 STOCK OPTION PLAN,
As Amended Effective August 19, 1997
1. PURPOSE OF THE PLAN
The purpose of this 1994 Stock Option Plan, as amended (the "Plan") is
to encourage and enable selected management (including directors) and other key
employees of Celadon Group, Inc. (the "Company") or a parent or subsidiary of
the Company to acquire a proprietary interest in the Company through the
ownership of common stock, par value $.033 per share (the "Common Stock"), of
the Company. Such ownership will provide such persons with a more direct stake
in the future welfare of the Company and encourage them to remain with the
Company or a parent or subsidiary of the Company. It is also expected that the
Plan will encourage qualified persons to seek and accept employment or other
association with the Company or a parent or subsidiary of the Company. Pursuant
to the Plan, such persons may be granted stock options, restricted stock awards,
and stock appreciation rights (collectively, "Plan Awards").
As used herein, the term "parent" or "subsidiary" shall mean any
present or future corporation which is or would be a "parent corporation" or
"subsidiary corporation" of the Company as such terms are defined in Section 424
of the Internal Revenue Code of 1986, as amended (the "Code") determined as if
the Company were the employer corporation.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by a Compensation Committee (the
"Committee") as appointed from time to time by the Board of Directors of the
Company (the "Board"), which committee shall consist of two or more members of
the Board, each of whom shall be a non-employee director as defined in Rule
16(b)-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "1934 Act") and an outside director as defined under Section
162(m) of the Code. To the extent that no Committee exists which has the
authority to administer the Plan, the functions of the Committee shall be
exercised by the Board. If for any reason the appointed Committee does not meet
the requirements of Rule 16b-3 promulgated under Section 16(b) of the 1934 Act
or Section 162(m) of the Code, such noncompliance shall not affect the validity
of the Plan Awards, grants, interpretations or other actions of the Committee.
No person while a member of the Committee or any other committee of the Board
administering the Plan shall be eligible to receive a Plan Award except as
provided in Section 9.
In administering the Plan, the Committee shall follow any general
guidelines not inconsistent with the Plan established by the Board and may adopt
rules and regulations for carrying out the Plan. The Committee may consult with
counsel, who may be counsel to the Company, and shall not incur
1
any liability for any action taken in good faith in reliance upon the advice of
counsel. The interpretation and decision made by the Committee with regard to
any question arising under the Plan shall be final and conclusive on all persons
participating or eligible to participate in the Plan. Subject to the provisions
of the Plan and any guidelines established by the Board, the Committee from time
to time shall determine the terms and conditions of all Plan Awards, including,
but not limited to, the persons (the "Participants") to whom, and the time or
times at which, Plan Awards shall be granted, the number of shares subject to
each Plan Award, the number of options which shall be treated as incentive stock
options (as described in Section 422 of the Code), the duration of each option,
the specific restrictions applicable to restricted stock awards and other Plan
Awards, and other terms and provisions of each Plan Award.
It is the intent of the Company that this Plan and all Plan Awards
satisfy, and be interpreted in a manner that will satisfy, the applicable
requirements of Rule 16b-3 promulgated under the 1934 Act, so that Participants
who are or may be, with respect to their ownership of Common Stock, directly or
indirectly (including by virtue of any other person being required to report
ownership of securities owned by a Participant) subject to Section 16 of the
1934 Act ("Insiders") will be entitled to the benefits of such Rule 16b-3, or
other exemptive rules under such Section 16, and will not be subjected to
avoidable liability thereunder. If any provision of this Plan or of any Plan
Award would otherwise frustrate or conflict with the intent expressed in this
Section 2, that provision, to the extent possible, shall be interpreted and
deemed amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, such provision shall be deemed void as
applicable to Insiders.
3. SHARES OF STOCK SUBJECT TO THE PLAN
Expect as provided in Section 10, the aggregate number of shares that
may be issued or transferred pursuant to Plan Awards shall not exceed 650,000
shares of Common Stock. Such shares of Common Stock available under the Plan may
be authorized and unissued shares or previously issued shares acquired or to be
acquired by the Company and held in treasury. Any shares subject to a Plan Award
which for any reason terminates, expires, or is forfeited without the delivery
to the holder of the Plan Award of shares of Common Stock or other consideration
may again be subject to a new Plan Award, except that shares subject to a
restricted stock award that are forfeited after the holder thereof has received
dividends or other benefits of ownership (excluding voting rights) shall not
thereafter be available for grant pursuant to the Plan. If an option or related
stock appreciation right is exercised for shares of Common Stock, the shares
covered by such option shall not thereafter be available for grant pursuant to
the Plan. Any shares of Common Stock that are used by a Participant as full or
partial payment of withholding or other taxes or of the purchase price of shares
of Common Stock acquired on the exercise of an option shall be counted against
the limit set forth in the first sentence of this Section 3 and shall not
thereafter be available for Plan Awards, except that such shares shall be
available for Plan Awards to persons who are not Insiders. The maximum number of
shares of Common Stock subject to any stock option and/or stock appreciation
right which may be granted under the Plan to each participant shall not exceed
75,000 shares of Common Stock (subject to any adjustment as provided in Section
10 hereof) in each calendar year
2
during the entire term of the Plan. In the case of a stock appreciation right
related to a stock option, it shall apply against the Participant's individual
share limitations for both stock appreciation rights and stock options.
Notwithstanding the foregoing, in order to comply with Section 162(m) of the
Code, the Committee shall take into account that (i) if a Plan Award is
canceled, the canceled Plan Award continues to be counted against the maximum
number of shares of Common Stock for which Plan Awards may be granted to a
Participant under this Section 3 of the Plan, and (ii) if after the grant of a
Plan Award, the Committee or the Board reduced the exercise price or purchase
price, the transaction is treated as a cancellation of the Plan Award and a
grant of a new Plan Award, and in such case, both the Plan Award that is deemed
to be canceled and the Plan Award that is deemed to be granted, reduce the
maximum number of shares of Common Stock for which Plan Awards may be granted to
a participant under the Plan. To the extent that shares of Common Stock for
which stock options and/or stock appreciation rights are permitted to be granted
to a participant during a calendar year are not covered by a grant of stock
option and/or a stock appreciation right in the calendar year, such shares of
Common Stock shall be available for grant or issuance to the Participant in any
subsequent taxable year during the term of the Plan.
4. ELIGIBILITY
Plan Awards may be granted to management (including directors) and
other key employees who are employed by the Company or a parent or subsidiary of
the Company.
5. GRANTING OF PLAN AWARDS
All Plan Awards shall be granted within 10 years from January 5, 1994.
Except for automatic grants provided in Section 9, the date of the grant of any
Plan Award shall be the date on which the Committee authorizes the grant of such
Plan Award.
6. OPTIONS
Options shall be evidenced by stock option agreements in such form, not
inconsistent with the Plan, as the Committee shall approve from time to time,
which agreements need not be identical, and shall be subject to the following
terms and conditions and such other terms and conditions as the Committee may
prescribe:
(a) OPTION PRICE. The exercise price of each stock option
shall be not less than 100% of the Fair Market Value (as defined below)
of the Common Stock at the date the option is granted and not less than
the par value of the Common Stock. In the case of an incentive stock
option granted to a Participant owning more than 10% of the total
combined voting power of all classes of stock of the Company or of any
parent or subsidiary of the Company (a "10% Stockholder"), actually or
constructively under Section 424(d) of the Code, the exercise price
shall not be less than 110% of the Fair Market Value of the Common
3
Stock subject to the option at the date of its grant.
(b) MEDIUM AND TIME OF PAYMENT. Shares of Common Stock
purchased pursuant to the exercise of an option shall at the time of
purchase be paid for in full in cash, or with shares of Common Stock,
or a combination of cash and Common Stock to be valued at the Fair
Market Value thereof on the date of such exercise; provided, however,
that any shares of Common Stock so delivered shall have been
beneficially owned by the optionee for a period of not less than six
months prior to the date of exercise. If the Common Stock is traded on
a national securities exchange or system sponsored by the National
Association of Securities Dealers, payment in full or in part may also
be made through a "cashless exercise" procedure whereby the optionee
delivers irrevocable instructions to a broker to deliver promptly to
the Company an amount equal to the purchase price. Upon receipt of
payment and such documentation as the Company may deem necessary to
establish compliance with the Securities Act of 1933, as amended (the
"1933 Act"), the Company shall, without stock transfer tax to the
optionee or other person entitled to exercise the option, deliver to
the person exercising the option a certificate or certificates for such
shares."
(c) WAITING AND EXERCISE PERIOD. The waiting period and time
for exercising an option shall be prescribed by the Committee in each
particular case; provided, however, that (i) no option may be exercised
after 10 years from the date it is granted and (ii) in the case of an
incentive stock option granted to a 10% Stockholder, such option, by
its terms, shall be exercisable only within five years from the date of
grant.
(d) RELOAD OPTIONS. The Committee shall have the authority
(but not any obligation) to include within any option agreement a
provision entitling the optionee to a further option (a "Reload
Option") if the optionee exercises the option evidenced by the option
agreement, in whole or in part, by surrendering other shares of Common
Stock of the Company held by the optionee for at least six months prior
to such date of surrender in accordance with the Plan and the terms and
conditions of the option agreement. Any such Reload Option shall not be
an incentive stock option, shall be for a number of shares of Common
Stock equal to the number of surrendered shares, shall be exercisable
at a price equal to the Fair Market Value of the Common Stock on the
date of exercise of such original option, shall become exercisable if
the shares purchased by the optionee pursuant to the option agreement
are held for a minimum period of time established by the Committee, and
shall be subject to such other terms and conditions as the Committee
may determine.
(e) FAIR MARKET VALUE. The "Fair market Value" per share of
the Common Stock on any date shall be the "closing price" on the
trading day immediately preceding the date in question, where the
"closing price" on any day is (i) the last reported sales price regular
way or, in case no such reported sale takes place on such day, the
closing bid price regular way, in either case on the principal national
securities exchange (including, for purposes hereof, the NASDAQ
National Market System) on which the Common Stock is listed or admitted
to trading, (ii) if on such date the Common Stock is not listed or
admitted to trading on any national securities exchange, the highest
reported bid price for the Common
4
Stock as furnished by the National Association of Securities Dealers,
Inc. Through NASDAQ or a similar organization if NASDAQ is no longer
reporting such information, or (iii) if on such date the Common Stock
is not listed or admitted to trading on any national securities
exchange and is not quoted by NASDAQ or any similar organization, the
Fair Market Value of a share of Common Stock on such date, as
determined in good faith by the Committee in a manner consistent with
the requirements of the Code, whose determination shall be conclusive
absent manifest error, shall be used.
(f) INCENTIVE STOCK OPTIONS. No incentive stock options shall
be granted to any person, if, giving effect to such grant, the Fair
Market Value at the date of such grant of the Common Stock (or other
capital stock of the Company) which first becomes purchasable in any
calendar year under all incentive stock options held by such person
under the Plan and any other plans of the Company any parent or
subsidiary shall exceed $100,000. Incentive stock options shall not be
issued to directors who are not also employees of the Company or a
parent or subsidiary.
7. RESTRICTED STOCK AWARDS
Restricted stock awards shall be evidenced by agreements in such form,
not inconsistent with the Plan, as the Committee shall approve from time to
time, which agreements need not be identical, and shall be subject to the
following terms and conditions and such other terms and conditions as the
Committee may prescribe:
(a) FORFEITURE PERIOD. The period and time during, and the
conditions and restrictions under, which a restricted stock award is
subject to forfeiture (the "Restriction Period") shall be prescribed by
the Committee in each particular case, subject to the provisions of
Section 13.
(b) RESTRICTIVE LEGEND AND STOCK POWER. Each certificate
evidencing shares of Common Stock subject to a restricted stock award
shall bear an appropriate legend referring to the terms, conditions,
and restrictions applicable to such restricted stock award. The
Committee may prescribe that the certificates evidencing such shares be
held in escrow by a bank or other institution, or that the Company may
itself hold such shares in escrow, until the restrictions thereon shall
have lapsed and may require, as a condition of any restricted stock
award, that the recipient shall have delivered a stock power endorsed
in blank relating to the shares of Common Stock subject to the
restricted stock award. Upon the termination of the Restriction Period
with respect to any shares of Common Stock subject to a restricted
stock award, the certificate evidencing such shares will be delivered
out of escrow subject to the satisfaction by the recipient of
applicable Federal and state securities laws and withholding tax
requirements, including any Federal, state, or local withholding taxes.
At the discretion of the Committee, or as may be provided in the
agreement evidencing any option, such taxes may be paid, or may be
required to be paid, in cash or by tender of the holder of restricted
stock or withholding by the Company of the number of shares of Common
Stock whose Fair
5
Market Value equals the amount required to be withheld. At the
discretion of the Committee, such taxes may be paid by the Company.
8. STOCK APPRECIATION RIGHTS
Stock appreciation rights shall be evidenced by agreements (which, in
the case of stock appreciation rights related to a stock option, may be included
as part of the agreement evidencing such option) in such form, not inconsistent
with the Plan, as the Committee shall approve from time to time, which
agreements need not be identical, and shall be subject to the following terms
and conditions and such other terms and conditions as the Committee may
prescribe:
(a) DEFINITION. A stock appreciation right means a right
granted pursuant to the Plan to receive, upon the exercise of such
right, up to the excess of (i) the Fair Market Value of one share of
common Stock on the date of exercise or at any time during a specified
period before the date of exercise over (ii) the Fair Market Value of
one share of Common Stock on the date of grant. Any payment by the
Company in respect of such right may be made in cash, shares of Common
Stock, other property, or any combination thereof as the Committee, in
its sole discretion, shall determine or as shall be provided in the
agreement evidencing such stock appreciation right.
(b) GRANT AND TERMINATION. Stock appreciation rights may be
granted either alone or in addition to other Plan Awards granted under
the Plan and may, but need not, relate to a specific stock option
granted under the Plan. The provisions of stock appreciation rights
need not be the same with respect to each Participant. Any stock
appreciation right related to a stock option may be granted at the same
time such stock option is granted or at any time thereafter before
exercise or expiration of such stock option. In the case of any stock
appreciation right related to any stock option, the stock appreciation
right or applicable portion thereof shall terminate and no longer be
exercisable upon the termination or exercise of the related stock
option or portion thereof, except that a stock appreciation right
granted with respect to less than the full number of shares of Common
Stock covered by a related stock option shall only be reduced when the
exercise or termination of the related stock option exceeds the number
of shares not covered by the stock appreciation right. Any stock option
related to any stock appreciation right shall no longer be exercisable
to the extent the related stock appreciation right has been exercised.
(c) NUMBER OF RIGHTS. If any agreement evidencing a stock
appreciation right which does not relate to any option shall provide
that such stock appreciation right may be settled only in cash (a
"cash-only right"), the number of shares of Common Stock to which such
cash-only right relates shall not be deducted from the limit set forth
in Section 3; provided that the number of cash-only rights which may be
issued in any fiscal year of the Company shall not exceed 22,500.
Except with respect to cash-only rights, the Committee, for purposes of
determining compliance with the limit set forth in Section 3, shall
estimate the number of shares of Common Stock expected to be issued on
settlement of any stock
6
appreciation right, taking into account any intention of the Committee
to require settlement in cash.
(d) EXERCISE BY INSIDERS. No stock appreciation right may be
exercised by an Insider unless such exercise is exempt form Section
16(b) of the 1934 Act pursuant to Rule 16b-3 promulgated thereunder or
otherwise.
9. NON-EMPLOYEE DIRECTORS
Each director of the Company who is not an employee of the Company or
any parent or subsidiary (a "Non-Employee Director") shall receive Plan Awards
as follows:
(a) CURRENT DIRECTORS. On the date of approval of this Plan by
the Board, each Non-Employee Director shall receive an option to
purchase 8,000 shares of Common Stock, subject, in each case, to
adjustment as provided in Section 10.
(b) OPTIONS. The exercise price per share of any option
granted pursuant to this Section 9 shall be 100% of the Fair Market
Value of a share of Common Stock on the date of grant (except for
grants pursuant to Section 9(a), which shall be exercisable at a price
per share equal to the initial public offering price in the Company's
initial public offering), subject to adjustment as provided in Section
10. Each option granted pursuant to this Section 9 shall be exercisable
six months after the date of grant and shall terminate 10 years from
the date of grant (unless earlier exercised or terminated in accordance
with the Plan). No option granted pursuant to this Section 9 shall
provide for Reload Options or be accompanied by stock appreciation
rights.
(c) NON-COMMITTEE MEMBERS. Nothing in this Section 9 shall
limit the authority of the Committee to grant Plan Awards to
Non-Employee Directors who are not members of the Committee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If dividends payable in Common Stock during any fiscal year of the
Company exceed in the aggregate 5% of the shares of Common Stock issued and
outstanding at the beginning of such fiscal year, or if there is during any
fiscal year of the Company one or more splits, subdivisions, or combinations of
shares of Common Stock resulting in an increase or decrease by more than 5% of
the shares of Common Stock outstanding at the beginning of the year, the number
of shares of Common Stock available under the Plan shall be increased or
decreased proportionately, as the case may be, the number of shares of Common
Stock subject to stock appreciation rights and the related Fair Market Value
thereof as of the date of grant shall be increased or decreased proportionately,
as the case may be, and the exercise price and number of shares of Common Stock
deliverable upon the exercise thereafter of any options theretofore granted
shall be increased or decreased proportionately,
7
as the case may be, without change in the aggregate purchase price. Common Stock
dividends, splits, subdivisions, or combinations during any fiscal year which do
not exceed in the aggregate 5% of the shares of Common Stock issued and
outstanding at the beginning of such year shall be ignored for purposes of the
Plan. All adjustments shall be made as of the day such action necessitating such
adjustment becomes effective.
(b) In the case of any change or reclassification of the Common Stock,
including by reason of any merger, consolidation, or sale of all or
substantially all of the assets of the Company, and including a change into a
right to receive cash or other property, but excluding a change or
reclassification provided for in Section 10(a), (i) the holder of each option
shall thereafter be entitled, upon exercise of such option, to receive the kind
and amount of securities, property, or cash, or any combination thereof,
receivable upon such change or reclassification by a holder of the number of
shares of Common Stock for which such option might have been exercised (without
regard to any waiting or vesting period) immediately prior to such change or
reclassification and (ii) the holder of each stock appreciation right shall be
entitled to receive, upon exercise thereof, the excess, if any, of the fair
market value (determinate in a manner consistent with the definition of Fair
Market Value in Section 6(e)) of the securities, property, or cash, or
combination thereof, receivable upon such change or reclassification by a holder
of one share of Common Stock over the grant price of such stock appreciation
right.
(c) In the event that the Committee shall determine that any event not
specifically provided for in Sections 10(a) and (b) affects the shares of Common
Stock such that an adjustment is determined by the Committee to be appropriate
to prevent dilution or enlargement of participants' rights under the Plan, then
the Committee shall, in such manner as it may deem equitable, adjust any or all
of (i) the number and kind of shares which may thereafter be issued in
connection with Plan Awards; (ii) the number and kind of shares issued or
issuable in respect of outstanding Plan Awards; and (iii) the exercise price,
grant price, or purchase price relating to any Plan Award or, if deemed
appropriate, make provision for a cash payment with respect to any outstanding
Plan Award; provided, however, in each case, that, with respect to incentive
stock options, no such adjustment shall be authorized to the extent that such
adjustment would cause the Plan to violate Section 422(b) (2) of the Code or any
successor provision thereto.
8
11. EFFECTIVENESS, TERMINATION AND AMENDMENT OF THE PLAN
(a) The Plan shall become effective January 5, 1994, the date
of its adoption by the favorable vote of a majority of the Board,
subject, however, to approval by the stockholders of the Company within
12 months next following such adoption by the Board. If such approval
is not obtained, the Plan and any and all Plan Awards granted during
such interim period shall terminate and be of no further force or
effect. The Plan shall, in all events, terminate on January 5, 2004, or
on such earlier date as the Board may determine, except that the Plan
will remain in effect with respect to Plan Awards outstanding as of
such termination date. Any option or stock appreciation right
outstanding at the termination date shall remain outstanding until it
has either expired or has been exercised. Any restricted stock award
outstanding at the termination date shall remain subject to the terms
of the Plan until the restrictions thereon shall have lapsed.
(b) The Board or Committee shall have the right to amend,
suspend, or terminate the Plan at any time; provided, however, that (i)
no such action shall affect or in any way impair the rights of a
Participant under any Plan Award theretofore granted or (ii) unless
first duly approved by the stockholders of the Company entitled to vote
thereon at a meeting (which may be the annual meeting) duly called and
held for such purpose, except as provided in Section 10, or by a
consent of stockholders, no amendment or change shall be made in the
Plan; (A) increasing the total number of shares of Common Stock which
may be issued or transferred under the Plan; (B) increasing the maximum
individual Participant limitations for a calendar year under Section 3;
(C) changing the provisions of Section 6(a); (D) extending the period
during which Plan Awards may be granted or exercised; (E) changing the
designation of persons eligible to receive Plan Awards; or (F)
effecting any change that would require stockholder approval in order
for the Plan to comply with the applicable provisions, if any, of
Section 16(b) of the 1934 Act, Section 162(m) of the Code, or, with
regard to incentive stock options, Section 422 of the Code."
12. DEATH, RETIREMENT, AND TERMINATION OF EMPLOYMENT
(a) GENERAL. An option or stock appreciation right which has
not theretofore expired shall terminate on the date of the termination
for Cause (as hereinafter defined) or 30 days after the date of the
termination for any reason, other than for cause, death, or Retirement
(as defined in Section 12(b)), of the holder's employment or
association with the Company or a parent or subsidiary of the Company
(including by reason of any event as a result of which a parent or
subsidiary ceases to be such), subject to the condition that no option
or stock appreciation right granted in connection with an option may be
exercised in whole or in part after the expiration date of the option
or more than 10 years after the date of grant of such option or stock
appreciation right. "Cause" shall mean (i) the conviction by a
Participant of a felony or a crime involving moral turpitude or (ii)
the commission by a Participant of a public or notorious act which
subjects the Company to public disrespect, scandal, or ridicule and
which adversely affects the value of the services to the Company of
9
such Participant.
(b) RETIREMENT AND NONQUALIFIED OPTIONS. With respect to
nonqualified options and stock appreciation rights, upon the
termination of employment or association due to retirement with the
consent of the Committee or Disability (as hereinafter defined,)
(collectively, "Retirement"), the holder of such option or stock
appreciation right may, during a period (the "Retirement period") which
is the longer of (i) up to 10 years after the date of grant of such
option or stock appreciation right, such period to be set on a case by
case basis by the Committee, and (ii) three years from the date of such
termination, exercise such stock appreciation right or purchase some or
all of the shares covered by such non-qualified stock option which was
exercisable under the Plan immediately prior to such termination.
"Disability" shall have the meaning provided in Section 22(e) (3) of
the Code.
(c) RETIREMENT AND INCENTIVE OPTIONS. With respect to
incentive stock options, upon the termination of the employment of any
such employee due to Retirement, the employee may, within three months
after the date of such termination (12 months in the case of
Disability), purchase some or all of the shares covered by an incentive
stock option which was exercisable under the Plan immediately prior to
such termination and shares not purchased within three months (12
months in the case of Disability) after the date of termination due to
Retirement under such incentive stock option may be purchased during
the Retirement Period but will be non-qualified stock option stock and
not incentive stock option stock; provided, however, that, prior to
such purchase, the option will remain subject to the provisions of the
Plan governing incentive stock options.
(d) DEATH. Upon the death of any holder of any option or stock
appreciation right while in active service or of the death of any
disabled or retired person within the periods referenced in Sections
12(b) and (c), the person or persons to whom such holder's rights under
an option or stock appreciation right are transferred by will or the
laws of descent and distribution may, within 12 months after the date
of such person's death, exercise such stock appreciation right or
purchase some or all of the shares to which such person was entitled
pursuant to the exercise of an option under the Plan on the date of his
death.
(e) LEAVES OF ABSENCE. Leaves of absence pursuant to Section
14(d) shall not be deemed terminations or interruptions of employment
or other association.
13. ACCELERATION OF VESTING
(a) ACCELERATION. Immediately upon the occurrence of a Change
in Control of the Company (as hereinafter defined), except as specifically
otherwise provided by the terms of an agreement relating to a particular Plan
Award,
(i) all options and stock appreciation rights shall
immediately become exercisable in full, including that portion of any
option or stock appreciation right that had not become
10
exercisable, and the Company shall afford each holder of an option the
opportunity to exercise such right prior to its settlement pursuant to
Section 13(b), and
(ii) all restricted stock awards shall immediately vest and no
longer be subject to forfeiture.
(b) SETTLEMENT. Immediately following the occurrence of any
Change in Control,
(i) each stock appreciation right not theretofore exercised
shall be settled by a payment to the holder thereof by the Company in
cash of the amount to which the holder thereof would have been entitled
(on a basis as if the Fair Market Value was determined as provided in
Section 13(b) (iii)) had he exercised such right on the Change in
Control Date (as hereinafter defined) (immediately prior to the
occurrence of such Change in Control, if it occurred on the Change in
Control Date), and thereafter shall be deemed terminated, and
(ii) each stock option not theretofore exercised shall be
settled by a payment to the holder thereof by the Company in cash of an
amount equal to the excess of the Fair Market Value on the Change in
Control Date over the exercise price of such option, multiplied by the
number of shares of Common Stock for which each option is exercisable
immediately prior to the Change in Control, and thereafter shall be
deemed terminated,
provided, that,
(iii) in each case, for purposes of the foregoing, the Fair
Market Value on the Change in Control Date shall be the higher of the
Fair Market Value, as defined, on such date and the Change in Control
Price (as hereinafter defined),
(iv) in the case of an option with a related stock
appreciation right, whichever of such option or such stock appreciation
right entitles the holder to the greatest payment shall be settled
pursuant to Section 13(b) (i) or (ii), and the other shall be
terminated without any further payment,
(v) in the case of any option or stock appreciation right
which had been granted to an Insider within the six-month period
preceding the Change in Control Date, such settlement shall be delayed
until such time as such settlement would not cause such Insider to
realize liability under Section 16(b) of the 1934 Act, and
(vi) no settlement shall be made pursuant to this Section
13(b) of any option or stock appreciation right held by an Insider who
has control over the timing or occurrence of the Change in Control.
11
(c) CHANGE IN CONTROL. A "Change in Control" shall mean:
(i) consummation of
(A) any consolidation or merger of the Company in
which the persons who are the stockholders of the Company
immediately prior to such consolidation or merger do not own
at least a majority of each of the common stock and of the
combined voting power of the then outstanding capital stock of
the continuing or surviving corporation in such merger,
provided that no Change in Control shall be deemed to have
occurred if persons having effective control over the affairs
of the Company immediately prior to such consolidation or
merger have effective control over such continuing or
surviving corporation; or
(B) any sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or
(ii) approval by the stockholders of the Company of any plan
or proposal for the liquidation or dissolution of the Company; or
(iii) any "person," including a "group" as determined in
accordance with Sections 13(d) and 14(d) of the 1934 Act and the rules
and regulations thereunder, becoming the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the 1934 Act), directly or
indirectly, of 30% or more of the combined voting power of the
Company's then outstanding capital stock, whether by means of
open-market purchases, tender offer, or otherwise, provided that no
Change in Control shall be deemed to have occurred as a result of the
ownership of any capital stock by the Company, any subsidiary of the
Company, any employee benefit plan of the Company, or any member of the
Russell Family (as hereinafter defined); or
(iv) individuals who constitute the Board on December 1, 1993
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to December 1, 1993, whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be considered as though
such person were a member of the Incumbent Board.
(d) CHANGE IN CONTROL DATE. "Change in Control Date" shall mean (i) in
the case of a Change in Control described in Section 13(c) (i), (ii), or (iv),
the date of occurrence thereof, and (ii) in the case of a Change in Control
described in Section 13(c) (iii), the date on which the Company first obtains
knowledge of the occurrence thereof.
12
(e) CHANGE IN CONTROL PRICE. "Change in Control Price" shall mean (i)
in the case of a Change in Control described in Section 13(c)(i), the amount
paid or to be paid in or as a result of such merger, consolidation, or other
transaction per share of Common Stock, (ii) in the case of a Change in Control
described in Section 13(c)(iii), the highest price per share of Common Stock
paid to acquire Common Stock by the person described therein in the one-year
preceding the Change of Control Date or in the transaction which results in the
Change of Control, and (iii) in the case of a Change in Control described in
Section 13(c) (ii) or (iv), the highest price per share of Common Stock paid to
acquire Common Stock by any person (other than a member of the Russell or
Bennett Family) proposing such liquidation or distribution, or becoming or
nominating a person for election as a director without the approval of the
Incumbent Board.
(f) RUSSELL FAMILY. "Russell Family" shall mean (i) Stephen Russell;
(ii) any lineal descendants of Stephen Russell (including by adoption); (iii)
any trust all of the beneficiaries (other than contingent beneficiaries) of
which are members of the Russell Family (or their estates); (iv) any charitable
trust, charitable foundation, or other charitable entity if and so long as a
majority of the trustees, directors, or members of a similar managing body of
such trust, foundation, or entity are members of the Russell Family; and (v) any
corporation, limited partnership, general partnership, limited liability
company, or other entity if and so long as members of the Russell Family
beneficially own equity interests in such entity enabling them to effectively
control the voting and disposition of Common Stock owned by such entity.
14. MISCELLANEOUS PROVISIONS
(a) RIGHTS AS AN EMPLOYEE OR DIRECTOR. Nothing in the Plan, the grant
or holding of a Plan Award, or in any agreement entered into pursuant to the
Plan shall confer to any Participant any right to continue in the employ of or
other association with the Company or any parent or subsidiary of the Company or
interfere in any way with the right of the Company or any parent or subsidiary
of the Company to terminate such employment or other association of a
Participant at any time.
(b) RIGHTS AS A STOCKHOLDER. Except as provided in Section 14(c), a
holder of a restricted stock award shall have all of the rights of a stockholder
with respect to all of the shares of Common Stock subject to the restricted
stock award, including, without limitation, the right to vote such shares and to
receive dividends in cash or other property or other distributions or rights in
respect of such shares. A holder of a Plan Award (other than a restricted stock
award) shall have no rights as a stockholder with respect to any shares of
Common Stock issuable or transferable upon exercise thereof until the date a
stock certificate is issued to him for such shares, and, except as otherwise
expressly provided in the Plan, no adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
(c) NON-ASSIGNABILITY OF PLAN AWARDS. No Plan Award shall be assignable
or transferable by the recipient, except (i) by will or by the laws of descent
and distribution or (ii) in the case of Plan Awards other than incentive stock
options, pursuant to a qualified domestic relations order (as defined in the
Code or the Employee Retirement Income Security Act or the rules
13
thereunder), provided that such restriction on the transfer or assignment of a
restricted stock award shall expire upon the date of expiration of the related
Restriction Period. During the lifetime of a recipient (or transferee pursuant
to Section 14(c) (ii)), Plan Awards shall be exercisable only by him or his
personal representative or guardian. No Plan Award or interest therein may be
pledged, attached, or otherwise encumbered other than in favor of the Company.
Notwithstanding the foregoing, the Committee may determine at the time of grant
or thereafter that a stock option (other than an incentive stock option) that is
otherwise not transferable pursuant to this Section 14(c), is transferable in
whole or in part and in such circumstances and under such conditions, as
specified by the Committee.
(d) LEAVE OF ABSENCE. In the case of a Participant on an approved leave
of absence, the Committee may, if it determines that to do so would be in the
best interests of the Company, provide in a specific case for continuation of
Plan Awards during such leave of absence, such continuation to be on such terms
and conditions as the Committee determines to be appropriate, except that in no
event shall an option or stock appreciation right be exercisable after 10 years
from the date it is granted.
(e) WITHHOLDING OF TAXES. The Company shall have the right to deduct
from any payment to be made to a Participant, or to otherwise require, prior to
the issuance or delivery of any shares of Common Stock or the payment of any
cash hereunder, payment by the Participant of, any Federal, state or local taxes
required by law to be withheld.
Except as set forth in an option agreement, a Participant may satisfy
any such withholding obligation (without additional approval by the Committee)
by reducing the number of shares of Common Stock otherwise deliverable or by
delivering shares of Common Stock already owned. Any fraction of a share of
Common Stock required to satisfy such tax obligations shall be disregarded and
the amount due shall be paid instead in cash by the Participant.
(f) OTHER RESTRICTIONS. Each Plan Award shall be subject to the
requirement that, if at any time the Board or the Committee shall determine, in
its discretion, that the listing, registration, or qualification of the shares
of Common Stock issuable or transferable upon exercise thereof upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such Plan Award or the
issue, transfer, or purchase of shares thereunder, such Plan Award may not be
exercised in whole or in part unless such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any conditions
not acceptable to the Board. The Company shall not be obligated to sell or issue
any shares of Common Stock in any manner in contravention of the 1933 Act or any
state securities law.
14
DETACH HERE
APPENDIX 1
PROXY CARD
CELADON GROUP, INC.
9503 East 33RD Street
One Celadon Drive
Indianapolis, Indiana 46236-4207
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Stephen Russell, Paul A.
Biddelman and Don S. Snyder and each of them, with full power of
substitution, proxies of the undersigned, to vote all shares of Common
Stock of Celadon Group, Inc. (the "Company") that the undersigned would
be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company to be held on Monday, December 1, 1997, at
P 1:30 o'clock p.m., (local time) at the Hyatt Regency, One South Capital
Avenue, Indianapolis, Indiana 46236, and at any adjournments thereof.
R The undersigned hereby revokes any proxy heretofore given with respect
to such shares.
O
This Proxy, when properly executed, will be voted in the
X manner directed herein by the undersigned stockholder. If no direction
is made, this proxy will be voted for the election of the nominees
Y named in Proposal 1 and for the approval of the plan named in Proposal
2 and for Proposals 3 and 4. If more than one of said proxies or their
substitutes shall be present and vote at said meeting, or any
adjournment thereof, a majority of them so present and voting (or if
only one be present and vote, then that one) will have and may exercise
all the powers hereby granted.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
Please mark
[X] vote as in
this example.
This Proxy when properly executed and returned will be voted in the manner
directed below. If no direction is made, this Proxy will be voted FOR all
nominees and the proposals listed below.
<CAPITON>
1. ELECTION OF DIRECTORS
FOR AGAINST ABSTAIN
Nominees: Stephen Russell, Paul A. Biddelman, Michael Miller, 2.APPROVAL AND ADOPTION OF [ ] [ ] [ ]
Joel E. Smilow, Kiln To. NON-EMPLOYEE DIRECTOR
STOCK OPTION PLAN.
FOR WITHHELD
[ ] [ ] 3.APPROVAL OF AMENDMENT [ ] [ ] [ ]
TO 1994 STOCK OPTION PLAN.
MARK HERE [ ] 4.RATIFICATION OF APPOINT- [ ] [ ] [ ]
FOR ADDRESS MENT OF ERNST & YOUNG
CHANGE AND LLP AS AUDITORS.
[ ]_____________________ NOTE BELOW
FOR ALL NOMINEES EXCEPT
AS NOTED ABOVE
5.In their discretion, the Proxies are authorized to
vote upon such other business as may properly
come before the meeting.
Please mark, sign, date and return the Proxy Card promptly
using the enclosed envelope which requires no postage
when mailed in the USA.
Please sign below exactly as your name appears. When shares
are held by joint tenants, both shall sign. When signing
as attorney, executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please
sign in full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
Signature: Date: Signature: Date: