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SCHEDULE 14A
(RULE 14A-101)
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 Rule 14a-11(c) or Rule 14a-12
PENSKE MOTORSPORTS, INC
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(Name of Registrant as Specified in Its Charter)
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(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)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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Penske Logo
13400 OUTER DRIVE WEST
DETROIT, MI 48239
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 13, 1998
To the Stockholders of Penske Motorsports, Inc.:
The Annual Meeting of Stockholders of Penske Motorsports, Inc. will be held
at the Townsend Hotel, 100 Townsend Street, Birmingham, Michigan 48009, on
Wednesday, May 13, 1998, at 9:00 A.M. Eastern Daylight Time. The purposes of the
meeting are:
1. To elect four Class II Directors to serve a three-year term on the
Board of Directors;
2. To consider and act upon a proposal to amend the Penske
Motorsports, Inc. 1996 Stock Incentive Plan to increase by 320,000
shares the number of shares of the Company's common stock issuable
upon exercise of options issued under the Plan; and
3. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on April 1, 1998 will
be entitled to vote at the meeting.
Your attention is called to the attached proxy statement and accompanying
proxy. You are requested to sign and return the proxy in the enclosed envelope,
to which no postage need be affixed if mailed in the United States. If you
attend the meeting, you may withdraw your proxy and vote your own shares.
By Order of the Board of Directors
ROBERT H. KURNICK, JR.
Secretary
Detroit, Michigan
April 15, 1998
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PENSKE MOTORSPORTS, INC.
13400 OUTER DRIVE WEST
DETROIT, MICHIGAN 48239
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 13, 1998
GENERAL INFORMATION
The Annual Meeting of Stockholders of Penske Motorsports, Inc. (the
"Company") will be held at the Townsend Hotel, 100 Townsend Street, Birmingham,
Michigan 48009, on Wednesday, May 13, 1998, at 9:00 A.M., Eastern Daylight Time,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders. The approximate mailing date for this proxy statement and proxy is
April 15, 1998.
It is important that your shares be represented at the meeting. If it is
impossible for you to attend the meeting, please sign and date the enclosed
proxy and return it to the Company. The proxy is solicited by the Board of
Directors of the Company. Shares represented by valid proxies in the enclosed
form will be voted if received in time for the Annual Meeting. Expenses in
connection with the solicitation of proxies will be borne by the Company and may
include requests by mail and personal contact by its directors, officers and
employees. The Company will reimburse brokers or other nominees for their
expenses in forwarding proxy materials to principals. Any person giving a proxy
has the power to revoke it any time before it is voted.
VOTING SECURITIES AND PRINCIPAL HOLDERS
Only holders of record of shares of the Company's Common Stock, $.01 par
value (the "Common Stock"), at the close of business on April 1, 1998 (the
"Record Date") are entitled to notice of, and to vote at, the meeting or at any
adjournment or adjournments thereof, each share having one vote. On the Record
Date, there were issued and outstanding 14,208,898 shares of the Common Stock.
The following table shows as of the Record Date the beneficial ownership of
the outstanding Common Stock by each person known to the Company to be the
beneficial owner of 5% or more of the Common Stock:
SHARES
BENEFICIALLY OWNED(1)
----------------------
NAME NUMBER PERCENT
---- ------ -------
Roger S. Penske(2)(3)....................................... 7,876,189 55.4%
Penske Corporation(2)(3).................................... 7,801,875 54.9%
Penske Performance, Inc.(2)................................. 7,801,875 54.9%
PSH Corp.(2)................................................ 7,801,875 54.9%
The France Family Group(4)(5)............................... 7,855,421 55.3%
International Speedway Corporation(5)....................... 7,850,521 55.3%
Facility Investments, Inc.(5)............................... 7,850,521 55.3%
Kaiser Ventures Inc.(6)..................................... 1,627,923 11.5%
Carrie B. DeWitt(7)......................................... 906,542 6.4%
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(1) Unless otherwise noted, each person or entity has sole voting and investment
power over the shares listed opposite his or its name, subject to community
property laws where applicable.
(2) The record owner of the 7,801,875 shares of Common Stock of the Company is
PSH Corp., a subsidiary of Penske Performance, Inc. Penske Performance, Inc.
is a wholly-owned indirect subsidiary of Penske Corporation and owns 80% of
the stock of PSH Corp. Consequently, Penske Corporation and Penske
Performance, Inc. may also be deemed to beneficially own the shares of
Common Stock owned by PSH Corp. Mr. Roger S. Penske is a Director and the
Chairman of each of Penske Corporation, Penske Performance, Inc. and PSH
Corp. (which collectively with Mr. Penske are herein referred to as the
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"Penske Group"), and also by direct and indirect ownership of shares and by
reason of voting agreements may be deemed to own beneficially approximately
57.0% of the outstanding shares of Penske Corporation. As such, Mr. Penske
may be deemed to beneficially own the shares of Common Stock owned by PSH
Corp. The address of PSH Corp. and Penske Performance, Inc. is 1105 North
Market Street, Wilmington, Delaware 19890.
(3) The address of such person is 13400 Outer Drive West, Detroit, Michigan
48239.
(4) The "France Family Group" owns approximately 55.0% of the total of all
classes of stock of International Speedway Corporation ("ISC"), which
represents 61.9% of the votes represented by the total of all classes of
stock of ISC. The France Family Group consists of the following living
lineal descendants of William H.G. France, and Anne B. France, some spouses
of such descendants and various entities controlled by such descendants and
their spouses, which consists of the following natural persons and other
entities: William C. France; Betty Jane France; James C. France; Sharon M.
France; Lesa D. Kennedy; Brian Z. France; Jamison C. France; Jennifer A.
France; Amy L. France; Benjamin Z. Kennedy; Western Opportunity Limited
Partnership, a Nevada limited partnership; Sierra Central Corp., a Nevada
corporation; Principal Investment Company, a Nevada corporation; White River
Investment Limited Partnership, a Nevada limited partnership; Cen Rock
Corp., a Nevada corporation; Secondary Investment Company, a Nevada
corporation; Polk City Limited Partnership, a Nevada limited partnership;
Boone County Corporation, a Nevada corporation; Carl Investment Limited
Partnership, a Nevada limited partnership; Quaternary Investment Company, a
Nevada corporation; National Association for Stock Car Auto Racing, Inc.
("NASCAR"), a Florida corporation; and Automotive Research Bureau, a Florida
corporation.
(5) Facility Investments, Inc. ("FII") owns 20.0% of the stock of PSH Corp. and
shares voting and investment power over the shares of PSH Corp. pursuant to
an Investment and Development Agreement, dated November 22, 1995, by and
between ISC and Penske Corporation. Consequently, FII may be deemed to
beneficially own the 7,801,875 shares of Common Stock owned by PSH Corp. FII
is a wholly-owned subsidiary of ISC and, as such, ISC may also be deemed to
beneficially own the shares of Common Stock owned by PSH Corp. By direct and
indirect ownership of shares of ISC, the France Family Group may be deemed
to beneficially own the shares of Common Stock owned by PSH Corp. The
address of The France Family Group, ISC and FII is 1801 West International
Speedway Boulevard, Daytona Beach, Florida 32114.
(6) The address of such person is 3633 E. Inland Empire Boulevard, Suite 850,
Ontario, California 91764.
(7) The address of Mrs. Dewitt is 2152 North U.S. 1 Highway, Rockingham, North
Carolina 28379.
PROPOSAL I
ELECTION OF DIRECTORS
The Board of Directors proposes that H. Lee Combs, Richard E. Stoddard,
James E. Williams and Jo DeWitt Wilson be elected as directors of the Company to
hold office until the Annual Meeting of Stockholders in the year 2001, or, in
each case, until his or her successor is elected and qualified.
The persons named in the accompanying proxy intend to vote all valid
proxies received by them for the election of the foregoing nominees, unless such
proxies are marked to the contrary. The four nominees receiving the greatest
number of votes cast at the meeting or its adjournment shall be elected.
Abstentions, withheld votes and broker non-votes will not be deemed votes cast
in determining which nominees receive the greatest number of votes cast, but
they will be counted for purposes of determining whether a quorum is present. If
any nominee is unable or declines to serve, which is not anticipated, it is
intended that the proxies be voted in accordance with the best judgment of the
proxy holder. The following information is furnished with respect to each
nominee for election as a director, with respect to each director whose term of
office as a
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director will continue after this meeting, and with respect to each executive
officer of the Company named in the Summary Compensation Table below:
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
AS OF THE RECORD DATE TERM
NAME AND YEAR FIRST POSITIONS AND OFFICES ------------------------- TO
BECAME A DIRECTOR AGE WITH THE COMPANY NUMBER PERCENT EXPIRE
------------------- --- --------------------- ------ ------- ------
NOMINEES FOR ELECTION AS DIRECTORS
H. Lee Combs (1995)............... 45 Director 1,000 * 2001
Richard E. Stoddard (1995)........ 47 Director 4,000 * 2001
James E. Williams (1995).......... 58 Director 112,500 * 2001
Jo DeWitt Wilson (1997)........... 60 Director and President of North 5,109 * 2001
Carolina Motor Speedway, Inc.
DIRECTORS CONTINUING IN OFFICE
Walter P. Czarnecki (1995)........ 54 Vice Chairman of the Company 4,979 * 1999
Gary W. Dickinson (1997).......... 59 Director 1,000 * 2000
William C. France (1995).......... 64 Director 7,855,421(1) 55.3% 1999
Gregory W. Penske (1995).......... 35 Director, President, and Chief 16,900(2) * 2000
Executive Officer of the
Company
Roger S. Penske (1995)............ 60 Chairman of the Company 7,876,189(3) 55.4% 1999
Richard J. Peters (1995).......... 49 Director 25,333(4) * 2000
OTHER EXECUTIVE OFFICERS
Gene Haskett...................... 54 President of Michigan Speedway, 16,600(5) *
President of Nazareth Speedway
and Executive Vice President of
the Company
Les Richter....................... 67 Executive Vice President of the 14,100(6) *
Company
All directors and executive officers as a group (14 persons) 8,085,510(7) 56.9%
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* Under 1.0%
(1) 7,801,875 of the shares which Mr. France may be deemed to beneficially own
are owned of record by PSH Corp. Mr. France disclaims beneficial ownership
of these shares.
(2) Includes 13,900 shares which Mr. Penske has the right to acquire upon
exercise of options within 60 days of the Record Date. Also includes 1,500
shares owned by Mr. Penske's spouse with respect to which Mr. Penske
disclaims beneficial ownership.
(3) Includes 7,801,875 shares which are owned of record by PSH Corp., 1,000
shares owned by Mr. Penske's spouse and 7,835 shares owned by Mr. Penske as
custodian for his children. Mr. Penske disclaims beneficial ownership of
these 7,810,710 shares of Common Stock.
(4) Includes 18,333 shares which Mr. Peters has the right to acquire upon
exercise of options within 60 days of the Record Date. Also includes 3,000
shares owned by Mr. Peters' spouse with respect to which Mr. Peters
disclaims beneficial ownership.
(5) Includes 11,100 shares which Mr. Haskett has the right to acquire upon
exercise of options within 60 days of the Record Date.
(6) Includes 11,100 shares which Mr. Richter has the right to acquire upon
exercise of options within 60 days of the Record Date.
(7) Includes 59,950 shares which executive officers of the Company have the
right to acquire upon exercise of options within 60 days of the Record Date.
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OTHER INFORMATION RELATING TO DIRECTORS
The following is a brief account of the business experience during the past
five years of each member or nominee of the Board of Directors of the Company.
H. Lee Combs has been a director of the Company since November 1995. Mr.
Combs has also served as Senior Vice President -- Operations of ISC since
January 1996 and as a director of ISC since 1987. Prior to service as Senior
Vice President -- Operations, Mr. Combs served as Vice President and Chief
Financial Officer of ISC since 1987.
Richard E. Stoddard has been a director of the Company since January 1996.
Mr. Stoddard also serves as Chairman of the Board of Kaiser Ventures Inc.
("Kaiser") and has served in such capacity since November 1988. In addition, Mr.
Stoddard was appointed Chief Executive Officer of Kaiser Steel Corporation in
June 1988 and continues to serve as Chief Executive Officer of Kaiser. In
January 1998, Mr. Stoddard was also appointed President of Kaiser.
James E. Williams has been a director of the Company since January 1996.
Mr. Williams is also the Chairman and Chief Executive Officer of Golden State
Foods, and has served in such capacity since April 1961.
Jo DeWitt Wilson has been a director of the Company since July 1, 1997. Ms.
Wilson also serves as the President of North Carolina Motor Speedway, Inc., and
has served in that capacity since September 1, 1994. Prior to September 1994,
Ms. Wilson was a self-employed manufacturers sales representative. Ms. Wilson's
father, L.G. DeWitt, was the founder of North Carolina Speedway and Ms. Wilson's
mother, Carrie B. DeWitt, owns approximately 6.4% of the Company's Common Stock.
Walter P. Czarnecki has been Vice Chairman of the Board of the Company
since January 1996, and, prior thereto, served as the Company's President. Mr.
Czarnecki has also served as a senior executive of the Penske Speedway Group
since 1979. Mr. Czarnecki is the Executive Vice President of Penske Corporation,
has been a member of the Board of Directors of Penske Corporation since 1979 and
serves as a director of Penske Truck Leasing Corporation, which is the general
partner of Penske Truck Leasing Co., L.P.
Gary W. Dickinson has been a director of the Company since March 1997. Mr.
Dickinson is the Chairman of the Board of NonLinear Dynamics Incorporated, a
data mining and pattern recognition software firm, and has served in such
capacity since January 1997. Prior to January 1997, Mr. Dickinson had been
President and Chief Executive Officer of Delco Electronics and Executive Vice
President of Hughes Electronics. Between 1989 and 1993, Mr. Dickinson served as
Group Vice President of General Motors responsible for the General Motors
Technical Staffs including the GM Research Laboratories, Design Staff and
Advanced Engineering Staff.
William C. France has been a director of the Company since November 1995.
Mr. France is also the Chairman of the Board and Chief Executive Officer of ISC
and has served in such capacity since 1987. Mr. France is a member of the France
Family Group, which controls ISC. In addition, Mr. France and his brother
control NASCAR.
Gregory W. Penske has been a director of the Company since its formation
and President and Chief Executive Officer since July 1, 1997. Prior to July 1,
1997, Mr. Penske served as an Executive Vice President of the Company since
February 1996. In addition, Mr. Penske has served as President of the California
Speedway Corporation since January 1997. Mr. Penske is also the President of
Penske Automotive Group, Inc., which owns and operates six automobile
dealerships in Southern California, and has served in that position since
December 1993. From July 1992 to the present Mr. Penske served as the President
of D. Longo, Inc. which owns and operates a Toyota dealership in El Monte,
California and is a subsidiary of Penske Automotive Group, Inc. Gregory W.
Penske is the son of Roger S. Penske.
Roger S. Penske has been Chairman of the Board of the Company since its
formation. Prior to March 1996, Mr. Penske was Chairman of the Board of Michigan
International Speedway, Inc. ("Michigan Speedway") since 1973, Chairman of the
Board and President of Pennsylvania International Raceway, Inc. ("Nazareth
Speedway") since 1986, and Chairman of the Board of California Speedway
Corporation
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("California Speedway") since 1994. Mr. Penske is also Chairman of the Board and
Chief Executive Officer of Penske Corporation. Penske Corporation is a
privately-owned diversified transportation services company which (among other
things) holds, through its subsidiaries, interests in a number of businesses,
including the Company. Mr. Penske is also a member of the Boards of Directors of
General Electric Company, Gulfstream Aerospace Corporation, Philip Morris
Companies Inc., Detroit Diesel Corporation and Penske Truck Leasing Corporation,
which is the general partner of Penske Truck Leasing Co., L.P. Mr. Penske is
also a founder of Penske Racing, Inc. and Penske Racing South, Inc. which are
two of the most successful racing teams in North America. Penske Racing's Indy
car team is recognized as the most successful Indy car team in history and the
Penske Racing South Winston Cup team is one of the most successful teams on the
NASCAR circuit.
Richard J. Peters has been the President and Chief Executive Officer of
R.J. Peters & Company, LLC, since July 1, 1997. Prior to July 1, 1997, Mr.
Peters served as the Chief Executive Officer, President and Director of the
Company since January 1996, and, prior thereto, acted as the Company's chief
executive officer and a Director. Mr. Peters has also served as an officer of
various subsidiaries of the Company since 1990. Mr. Peters served as the
Treasurer and Chief Financial Officer of Penske Corporation between 1988 and
July 1997 and as an Executive Vice President of Penske Corporation between
September 1996 and July 1997. Mr. Peters has been a member of the Board of
Directors of Penske Corporation since 1990. Mr. Peters is also a director of
Captec Net Lease Realty, Inc. and a Trustee of Aon Funds.
Pursuant to an Investment and Development Agreement, dated as of November
22, 1995, as amended, between ISC and Penske Corporation, as long as PSH Corp.
owns a majority of the issued and outstanding voting stock of the Company, ISC
is permitted to designate a percentage of the members of the Board of Directors
of each of the Company, Michigan Speedway, North Carolina Speedway, Nazareth
Speedway and California Speedway equal to the greater of (i) 20.0% or (ii) the
percentage of stock ownership of ISC in PSH Corp. as adjusted to reflect changes
in such percentage. However, ISC may designate at least two persons to each such
Board so long as ISC owns at least 10.0% of the outstanding Common Stock of PSH
Corp., and one person to each such Board so long as ISC owns at least 2.0% of
the outstanding common stock of PSH Corp. Messrs. France and Combs are the
current ISC designees for each such Board. As long as ISC is permitted to have
at least two designees to a Board, at least one designee is to serve on any
executive or similar committee that may be created by the applicable Board. If
PSH Corp. no longer owns a majority of the issued and outstanding voting stock
of the Company, the foregoing obligations of Penske Corporation are to be met on
a "best efforts" basis.
Pursuant to an Organization Agreement, dated November 22, 1995, among PSH
Corp., Kaiser and the Company, as amended, and a Stockholders Agreement, dated
November 22, 1995, among PSH Corp., Kaiser and the Company, as amended, PSH
Corp. has also agreed to use its best efforts, without incurring any additional
expenses, to vote its shares of the Company so as to elect a designee of Kaiser
to the Board of Directors of the Company so long as Kaiser owns at least 5.0% of
the outstanding Common Stock. Mr. Stoddard is the current Kaiser designee.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has a standing Audit Committee, the current members of which
are Messrs. Combs (Chairman), Williams and Peters. During 1997, the Audit
Committee held one meeting and had informal discussions in lieu of meetings. The
Audit Committee is responsible for policies, procedures and other matters
relating to accounting, internal financial controls and financial reporting,
including the engagement of independent auditors and the planning, scope,
timing, and cost of any audit and any other services they may be asked to
perform, and will review with the auditors their report on the financial
statements following completion of each such audit. In addition, the Audit
Committee is responsible for policies, procedures and other matters relating to
business integrity, ethics and conflicts of interest.
The Company has a standing Compensation Committee, the current members of
which are Messrs. France, Roger S. Penske (Chairman) and Stoddard. In 1997, the
Compensation Committee held one meeting and had informal discussions in lieu of
additional meetings. The Compensation Committee is
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responsible for policies, procedures and other matters relating to employee
benefit and compensation plans, including compensation of the executive officers
as a group and the chief executive officer individually. The Compensation
Committee is also responsible for administering and making recommendations to
the Board with respect to awards under the stock based compensation plans,
policies, procedures and other matters relating to management development and
for reviewing, monitoring and recommending (for approval by the Company's Board
of Directors) plans with respect to succession of the chief executive officer.
The Company does not have a Nominating Committee or a committee performing
a similar function.
During 1997, the Board of Directors held four meetings and took action by
written consent in lieu of six additional meetings.
DIRECTOR COMPENSATION
The Company does not currently have any arrangements in place to compensate
directors for their services; accordingly, except as described below, no
director received any compensation for services as a director in 1997. The
Company did, however, purchase on behalf of Mr. Dickinson 1,000 shares of the
Company's Common Stock. The purchase was effected as an open market transaction
and the stock price was $34.25 per share. The purchase occurred on August 7,
1997. The Company also paid on Mr. Dickinson's behalf, car expenses in 1997 of
approximately $12,840. The Company may begin compensating its non-employee
directors in 1998 in amounts not yet determined. Directors who are also
employees of the Company will not receive compensation for service on the Board
of Directors. The Company reimburses all directors for their expenses incurred
in connection with their activities as a director of the Company.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information for each of the fiscal years
ended December 31, 1995, 1996, and 1997 concerning the compensation of the
Company's Chief Executive Officer and each of the Company's other most highly
compensated executive officers where total annual salary and bonus exceeded
$100,000.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
-------------------------------------- ------------
OTHER SECURITIES ALL OTHER
NAME AND PRINCIPAL ANNUAL UNDERLYING COMPENSATION
POSITION(S) YEAR SALARY(1) BONUS(1) COMPENSATION(2) OPTIONS(#) ($)(3)
------------------ ---- --------- -------- --------------- ---------- ------------
Gregory W. Penske........... 1997 $300,000 $217,500 -- 25,000 --
President and Chief 1996 -- -- -- 15,000 --
Executive Officer of the Company 1995 -- -- -- -- --
Richard J. Peters(4)........ 1997 $ 80,000 -- -- 40,000(5) --
former President and Chief 1996 -- $150,000 -- 30,000(5) --
Executive Officer of the 1995 -- -- -- -- --
Company
Gene Haskett................ 1997 $250,000 $181,125 $49,804 15,000 $4,500
Executive Vice President of 1996 $250,000 $135,730 -- 15,000 $4,500
the Company, President, Michigan 1995 $225,000 $102,604 -- -- $2,624
Speedway and President,
Nazareth Speedway
Les Richter................. 1997 $150,000 $112,125 -- 15,000 --
Executive Vice President 1996 $150,000 $ 90,000 -- 15,000 --
of the Company 1995 -- -- -- -- --
- - ---------------
(1) Does not include the dollar value of perquisites and other personal
benefits.
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(2) The aggregate amount of perquisites and other personal benefits received did
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such executive officer other than with respect to Mr. Haskett,
who received 401(k) compensation of $4,500, car reimbursement of
approximately $47,932 and life insurance premium paid on his behalf of
$1,872.
(3) Includes the Company's matching contributions to the Company's 40l(k) plan.
(4) Mr. Peters served as the Company's President and Chief Executive Officer
from January 1, 1997 until June 30, 1997. Mr. Gregory W. Penske has served
in such capacity since July 1, 1997. Messrs. Peters and Richter did not
receive any compensation in any form from the Company in 1995 and Mr.
Gregory W. Penske did not receive any compensation in any form from the
Company in 1995 or 1996.
(5) Effective upon Mr. Peters' resignation, the Board of Directors amended Mr.
Peters' stock grants in consideration of his providing consulting services
from time to time on behalf of the Company. As a result of the Board's
amendment, Mr. Peters' options entitle him to purchase 25,000 shares of the
Company's common stock at an exercise price of $25.50 per share. The
amendment was effective July 1, 1997 and the options vest in three equal
annual increments with the first 8,333 shares vesting on May 2, 1998, the
second 8,333 shares on May 2, 1999 and the final vesting of 8,334 shares on
May 2, 2000. The Board also permitted Mr. Peters to retain a vested option
to purchase 8,400 shares at $24.00 per share, subject to expiration on
February 28, 2006, and the Board accelerated the vesting of an option to
purchase an additional 1,600 shares at $24.00 per share, subject to
expiration on February 28, 2006. As a result of the foregoing, Mr. Peters'
amended option entitles him to purchase 35,000 shares of the Company's
common stock.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended December 31, 1997 to each of the
executive officers named in the Summary Compensation Table above:
INDIVIDUAL GRANTS POTENTIAL
----------------------------------------------------- REALIZABLE VALUE AT
PERCENT ASSUMED ANNUAL
OF TOTAL RATES
OPTIONS OF STOCK PRICE
SHARES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
---- ----------- ---------- -------- ---------- ------ -------
Gregory W. Penske............ 25,000(1) 21.7% 27.75 1/20/07 436,500 1,105,750
Richard J. Peters............ 40,000(2) 34.8% 25.50(2) 1/20/07 98,550(2) 232,400(2)
Gene Haskett................. 15,000(1) 13.0% 27.75 1/20/07 261,900 663,450
Les Richter.................. 15,000(1) 13.0% 27.75 1/20/07 261,900 663,450
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(1) These options were granted on January 20, 1997 as an incentive for future
performance. Each option was granted at an exercise price equal to the
market price of the Common Stock on the date of grant. The options are
exercisable in the following increments: 10% beginning July 20, 1997; 28%
beginning January 20, 1998; 46% beginning January 20, 1999; 64% beginning
January 20, 2000; 82% beginning January 20, 2001; and 100% beginning January
20, 2002. The options expire 10 years after the date of grant.
(2) Mr. Peters option was amended upon termination of his employment. As a
result of the amendment, the option granted to Mr. Peters in 1997 to
purchase 40,000 shares was amended to entitle him to purchase only 5,000
shares at an exercise price of $25.50 per share. Consequently, the potential
realizable value of such option grant at assumed annual rates of stock price
appreciation of 5% and 10% for the option term is $98,550 and $232,400,
respectively. See Note 5 to the Summary Compensation Table above.
(3) A 5% and 10% annually compounded increase in the Company's stock price from
the date of grant to the end of the 10-year option term would result in
stock prices of $45.21 and $71.98 per share, respectively.
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These amounts are based on assumed rates of appreciation only. Actual gains,
if any, on stock option exercises and Company Common Stock holdings will
depend on a number of factors, including overall market conditions and the
future performance of the Company and its Common Stock.
OPTION VALUES AT FISCAL YEAR END
The following table shows the number of shares covered by both exercisable
and non-exercisable stock options held by the executive officers named in the
Summary Compensation Table as of December 31, 1997, together with the value of
in-the-money options at such date (which represents the positive spread between
the exercise price of any such existing stock options and $24.875 per share,
representing the closing market price of the Common Stock on December 31, 1997).
No options were exercised in 1997 by any of such persons.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END AT FISCAL YEAR-END
(#) ($)
------------------------------ -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------
Gregory W. Penske............................. 6,700/33,300 $3,675/$9,450
Richard J. Peters............................. 10,000/25,000 $8,750/$0
Gene Haskett.................................. 5,700/24,300 $3,675/$9,450
Les Richter................................... 5,700/24,300 $3,675/$9,450
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Certain Relationships
During the fiscal year ended December 31, 1997, Messrs. Roger Penske,
France and Stoddard served as the members of the Compensation Committee. Prior
to March 26, 1996, Mr. Roger Penske served as an officer of the Company and as
an officer of various of the Company's subsidiaries. None of the Compensation
Committee members were, during the fiscal year ended December 31, 1997, an
officer or employee of the Company or any of its subsidiaries and no member of
the Compensation Committee, except Mr. Roger Penske, is a former officer of the
Company or any of its subsidiaries. Mr. Stoddard is the Chairman of the Board,
Chief Executive Officer and President of Kaiser and Mr. France is the Chairman
of the Board and Chief Executive Officer of ISC and of NASCAR.
Related Transactions
KAISER TRANSACTIONS. The Company, as a result of the Organization Agreement
dated November 22, 1995 between PSH Corp., Kaiser and the Company, as amended
(the "Organization Agreement"), entered into various agreements with Kaiser,
which holds approximately 11.5% of the issued and outstanding shares of the
Company's Common Stock. Pursuant to such agreements (i) the Company and Kaiser
agreed to cause certain services to be provided to each other, (ii) the Company
agreed to reimburse Kaiser for costs incurred in the preparation of the site of
the California Speedway, (iii) Kaiser agreed to indemnify Michigan Speedway and
the California Speedway against certain environmental liabilities, (iv) the
Company, PSH Corp. and Kaiser entered into a Stockholders Agreement and (v) the
Company agreed to reimburse Kaiser and Penske Performance, Inc. for certain
pre-development expenses incurred by Kaiser and Penske Performance, Inc. in
connection with the California Speedway.
Kaiser paid the Company $174,000 for tickets, hospitality and race related
merchandise primarily at California Speedway during 1997.
SEWER SERVICES AGREEMENT. Pursuant to a Sewer Services Agreement between
the California Speedway and Kaiser, Kaiser has agreed to provide sanitary sewer
treatment services for the wastewater generated by the property owned by the
California Speedway at Kaiser's wastewater treatment facility located on a
parcel owned by Kaiser. In consideration for such services, the California
Speedway has agreed to pay Kaiser an
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annual fee of $88,800, adjusted annually by increases in the Consumer Price
Index. The Company has the option to purchase the facility at its fair market
value at any time. After the fifth anniversary of the Sewer Service Agreement,
Kaiser may terminate the agreement upon one year's prior written notice to the
California Speedway for a good and valid business reason exercised in good
faith. The Company paid Kaiser $92,000 under the Sewer Services Agreement during
the fiscal year ended December 31, 1997.
ENVIRONMENTAL INDEMNIFICATION. Pursuant to the Organization Agreement,
Kaiser agreed to investigate and, if necessary, to remediate specifically
identified portions of the site of the California Speedway and adjacent parcels
which require remediation to comply with applicable environmental laws. In
addition, Kaiser has indemnified the California Speedway and Michigan Speedway
from environmental liabilities associated with the condition of the site.
STOCKHOLDERS AGREEMENT. Pursuant to the Organization Agreement, as amended,
PSH Corp., Kaiser and the Company entered into a Stockholders Agreement (as
amended, the "Stockholders Agreement"). The Stockholders Agreement provides that
if PSH Corp. desires to transfer any shares of capital stock of the Company for
consideration to an unrelated third party, PSH Corp. must first offer such
shares to Kaiser on the same terms and conditions as the proposed transfer. The
Stockholders Agreement also provides that if Kaiser desires to transfer any
shares of capital stock of the Company for consideration to an unrelated third
party, Kaiser must first offer such shares to ISC at a price equal to the
average closing price of the Company's shares on the Nasdaq Stock Market(SM) for
the previous thirty trading days. If ISC elects not to purchase such shares,
then PSH Corp. has the right to purchase such shares on the same terms and
conditions as the proposed transfer. In either case, if the non-transferring
party elects not to purchase such shares, then the transferring party may
transfer its shares to the unrelated third party. The Organization Agreement
also grants to the Company a right of first refusal to participate in any
transaction or opportunity that directly relates to the conduct or ownership of
a motorsports complex that may come to PSH Corp., Kaiser or an affiliate of
either, excluding ISC and its affiliates. Under certain circumstances, Kaiser
may distribute a portion of the shares of the Company's Common Stock that it
owns to its stockholders, free from the right of first refusal. In addition,
pursuant to a Registration Rights Agreement between the Company and Kaiser, the
Company has granted incidental registration rights to Kaiser, subject to certain
limitations, each time the Company files a registration statement in connection
with the sale of its Common Stock.
REIMBURSEMENT OF PRE-DEVELOPMENT AND DEVELOPMENT COSTS. Penske Performance,
Inc. and Kaiser are entitled to be reimbursed by the Company for their out of
pocket costs incurred prior to November 22, 1995 in the design, permitting, and
development of the California Speedway. In 1997, the Company paid Kaiser
$325,000 as reimbursement of costs incurred by Kaiser in its preparation of the
site of the California Speedway for its development and construction. The
Company does not have any further obligations to reimburse Penske Performance,
Inc. or Kaiser for additional pre-development costs associated with the
California Speedway.
REGISTRATION RIGHTS. Kaiser holds limited demand registration rights which
enable Kaiser to demand registration of the shares of Common Stock held by
Kaiser. The demand registration rights are subject to various conditions,
including a right of first refusal in favor of PSH Corp., and the registration
rights can only be exercised by a secured lender of Kaiser who holds the Kaiser
shares as a result of foreclosure. The terms of the agreement were, in
management's judgment, no less favorable than terms which would have been
negotiated with an independent third party.
NASCAR TRANSACTIONS. In connection with the promotion of NASCAR-sanctioned
events, the Company enters into standard NASCAR sanction agreements requiring
the payment of sanction fees, prize money and point funds to NASCAR. NASCAR is
an affiliate of ISC by virtue of Messrs. William and James France's common
control of both entities. Mr. William C. France, a director of the Company, is a
member of The France Family Group. ISC beneficially owns, through Facility
Investments, Inc.'s ownership of the common stock of PSH Corp., more than five
percent of the outstanding Common Stock of the Company. The Company and its
subsidiaries paid NASCAR sanction fees, prize money and points funds totaling
$9.9 million in 1997.
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PENSKE AFFILIATE TRANSACTIONS. The Company, through its subsidiaries, sells
speedway admissions tickets, hospitality suites and related items and
merchandise and apparel to Detroit Diesel Corporation ("DDC"), Diesel Technology
Company ("DTC"), Penske Truck Leasing Co., L.P. ("PTL"), Penske Auto Centers,
Inc. ("PAC"), Penske Automotive Group, Inc. ("PAG"), Penske Racing, Inc. ("PR")
and Penske Racing South, Inc. ("PRS"). The Company, through it subsidiary
Competition Tire West, Inc., sells racing tires and accessories to Penske Racing
South, Inc. Roger S. Penske, a director and beneficial owner of more than five
percent of the Common Stock of the Company and its subsidiaries, indirectly,
through his ownership of Penske Corporation, owns in excess of ten percent of
the equity interests of each of DDC, DTC, PTL, PAC, PAG, PR, and PRS and also
serves as a director and executive officer of DDC, PAC, PAG, PR and PRS, of the
general partner of DTC and of the general partner of PTL. These companies
generally pay the publicly quoted selling prices, although they often receive
discounts from such prices for tickets, hospitality suites and related items and
merchandise and apparel. In 1997, DDC, DTC, PTL, PAC, PAG, PR, and PRS paid
approximately $870,000, $23,000, $505,000, $11,000, $195,000, $78,000, and
$31,000, respectively, to the Company's subsidiaries for such tickets,
hospitality suites and related items, merchandise and apparel and racing tires
and accessories.
The Company and its subsidiaries purchase goods and services from PTL and
Penske Jet, Inc. ("Penske Jet"). Roger S. Penske, a director and beneficial
owner of more than five percent of the Common Stock of the Company and its
subsidiaries, indirectly, through his ownership of Penske Corporation, owns in
excess of ten percent of the equity interests of PTL and Penske Jet and also
serves as a director and executive officer of Penske Jet and of the general
partner of PTL. The Company generally pays quoted market prices for the goods
and services provided by PTL and Penske Jet. During 1997, the Company paid
$777,000 and $214,000 to PTL and Penske Jet, respectively, for goods and
services.
PENSKE CORP. TRANSACTIONS. The Company reimburses Penske Corporation for
certain services provided by Penske Corporation to the Company. The cost is not
necessarily the lowest cost at which such services could be obtained from third
parties. Roger S. Penske, a director and beneficial owner of more than five
percent of the Common Stock of the Company, beneficially owns approximately
57.0% of the equity interest of Penske Corporation. In 1997, the Company paid to
Penske Corporation approximately $511,000 for such services.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Compensation Committee's overall compensation philosophy
applicable to the Company's executive officers is to provide a compensation
program that is intended to attract and retain qualified executives for the
Company and to provide them with incentive to achieve Company goals and increase
stockholder value. The Compensation Committee implements this philosophy
principally through salaries, bonuses, and its stock option program.
SALARIES. The Compensation Committee's policy is to provide salaries that
in most cases are less than those of similar executive officers in similar
companies. The Compensation Committee determines comparable salaries through
company research.
STOCK OPTIONS AND BONUSES. The Compensation Committee's policy is to
provide a significant portion of executive officers' total compensation through
stock options and annual bonuses as incentives to achieve the Company's
financial and operational goals and increase stockholder value.
Stock Options. The Compensation Committee's policy is to award stock
options to the Company's officers in amounts reflecting the participant's
position and ability to influence the Company's overall performance. Options are
intended to provide participants with an increased incentive to make
contributions to the long-term performance and growth of the Company, to join
the interests of participants with the interests of stockholders of the Company,
and to attract and retain qualified employees. The Compensation Committee's
policy has generally been to grant options with a term of 10 years (with
portions exercisable over shorter periods) to provide a long-term incentive, and
to fix the exercise price of the options at the fair market value of the
underlying shares on the date of grant. Such options only have value if the
price of the underlying shares increases above the exercise price. In 1996,
1997, and 1998, the Board of Directors of the Company awarded
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options to purchase 75,000 shares, 115,000 shares, and 165,000 shares,
respectively, of Common Stock to the Company's executive officers. Of the
400,000 shares available for issuance under the Company's 1996 Stock Incentive
Plan, 80,000 shares remain available for grant, after giving effect to the
cancellation of Mr. Peters options (see Note 5 to the Summary Compensation Table
on page 7 above).
In consideration of Richard J. Peters' agreement to provide consulting
services to the Company after his resignation from the Company, the Board of
Directors amended Mr. Peters' stock options as follows, effective July 1, 1997:
1. Unvested options to purchase 40,000 shares of common stock at an
exercise price of $27.25 per share were cancelled.
2. Unvested options to purchase 1,600 shares of common stock at an
exercise price of $24 per share were accelerated. These options expire on
February 28, 2006.
3. Options to purchase 25,000 shares of common stock at exercise
prices ranging from $24 to $27.25 per share were amended to provide for (a)
an exercise price of $25.50 per share and (b) vesting in three annual
increments, with 8,333 shares vesting on May 2, 1998, another 8,333 shares
vesting on May 2, 1999 and 8,334 shares vesting on May 2, 2000. The
original expiration date of these options (February 28, 2006) was
continued.
In addition, Mr. Peters retains vested options to purchase 8,400 shares of
common stock at an exercise price of $24 per share; these options expire on
February 29, 2006.
The Board of Directors determined to modify Mr. Peters' options in order to
more effectively incentivize him with respect to his consulting services. The
Board believes that it is in the Company's best interests to engage Mr. Peters
as a consultant because he has been intimately involved in many critical aspects
of the Company's strategic planning and other initiatives, and that the
above-described amendment to his options is an appropriate and effective form of
compensation for his services.
OPTION REPRICING
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE PRICE ORIGINAL OPTION TERM
SECURITIES UNDERLYING AT TIME OF AT TIME OF NEW REMAINING AT
OPTIONS REPRICED REPRICING OR REPRICING OR EXERCISE DATE OF REPRICING
NAME DATE OR AMENDED(#) AMENDMENT($) AMENDMENT($) PRICE($) OR AMENDMENT
---- ---- --------------------- ------------ -------------- -------- --------------------
Richard J.
Peters(1).......... 7/1/97 40,000(2) 32.875 27.75 N/A N/A
7/1/97 1,600(3) 32.875 24.00 24.00 (4)
7/1/97 20,000 32.875 24.00 25.50 (4)
7/1/97 5,000 32.875 27.75 25.50 (4)
- - ---------------
(1) Excludes options to purchase 8,400 shares of common stock which were not
repriced.
(2) These options were cancelled.
(3) These options were originally scheduled to vest on February 28, 1998, but
were accelerated to vest as of July 1, 1997. No other amendment was made to
these options.
(4) February 28, 2006. Term of the options was not changed.
Bonuses. The Company's bonus arrangements for its executive officers are
intended to make a major portion of each executive officer's compensation
dependent on the Company's overall performance. Such bonuses are also intended
to link executive compensation to stockholder value and to encourage the
executives to act as a team. Bonuses are also intended to recognize the
executive's individual contributions to the Company. A portion of the executive
bonus is entirely within the discretion of the Board.
Bonuses for the Company's officers are recommended to the Compensation
Committee by the Company's Chairman of the Board and its Chief Executive Officer
based on their evaluations of the
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individual's performance during the year. The Compensation Committee reviews
these evaluations and recommends, to the Board of Directors, bonuses it deems
appropriate.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code generally disallows a tax deduction to public companies
for compensation over $1 million paid to the corporation's chief executive
officer and four other most highly compensated executive officers. The Company
believes that Section 162(m) does not apply to stock options currently
outstanding or subsequently granted under the Company's existing stock option
plans.
Section 162(m) provides that qualifying performance-based compensation will
not be subject to the deduction limit if certain requirements are met. The
Company currently intends to structure grants under future stock option plans in
a manner that complies with this statute. The Company does not currently intend
to structure the discretionary annual bonus for executive officers described
under "Bonuses" above to comply with Section 162(m). Such bonuses do not meet
Section 162(m)'s requirement that they be "payable solely on account of the
attainment of one or more performance goals." The Company believes the annual
discretionary bonuses, as currently structured, best serve the interests of the
Company and its stockholders by allowing the Company to recognize an executive
officer's contribution as appropriate.
1997 COMPENSATION DECISIONS REGARDING GREGORY W. PENSKE. The Compensation
Committee approved a $217,500 bonus for Mr. Penske for calendar 1997 and awarded
Mr. Penske an option to purchase 25,000 shares of the Company's Common Stock at
an exercise price of $27.75 per share. Mr. Penske assumed the position of Chief
Executive Officer on July 1, 1997. Prior to July 1, 1997, Mr. Richard J. Peters
served as the Company's Chief Executive Officer. The Company awarded to Mr.
Peters an option to purchase 40,000 shares of Common Stock at an exercise price
of $27.75 per share. See Footnote 5 to the Summary Compensation Table on Page 7
for a description of Mr. Peters' options subsequent to his resignation. In
January 1998, the Company awarded Mr. Penske an option to purchase 50,000 shares
of Common Stock at an exercise price of $26.375 per share. The bonus and options
granted to Messrs. Penske and Peters were based on the Company's financial and
operational performance, as well as Mr. Penske's individual performance. In
particular, they were based on the Company's strong financial performance and on
the Company's meeting many of the financial performance targets set forth in the
Company's annual plan. Mr. Penske did not participate in the approval of his own
compensation, but did participate in the discussion of the Company's performance
in 1997.
By The Compensation Committee
Roger S. Penske
William C. France
Richard E. Stoddard
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PERFORMANCE GRAPH
The following line graph compares for the period from March 27, 1996 (the
date on which the Company became a public company) to December 31, 1997 (i) the
yearly cumulative total shareholder return (i.e., the change in share price plus
the cumulative amount of dividends, assuming dividend reinvestment, divided by
the initial share price, expressed as a percentage) on the Company's Common
Stock, with (ii) the cumulative total return of the Nasdaq Stock Market -- U.S.
Index, and with (iii) the cumulative total return on the common stock of
publicly-traded peer issuers deemed by the Company to be the companies included
in the Nasdaq SIC 7900 Index (assuming dividend reinvestment and weighted based
on market capitalization at the beginning of each year):
COMPARISON OF 21 MONTH CUMULATIVE TOTAL RETURN*
AMONG PENSKE MOTORSPORTS, INC., THE NASDAQ STOCK MARKET -- (U.S.) INDEX
AND A PEER GROUP
[GRAPH]
PENSKE
MEASUREMENT PERIOD MOTORSPORTS,
(FISCAL YEAR COVERED) INC. PEER GROUP NASDAQ
3/27/96 $ 100 $ 100 $ 100
12/31/96 $ 105 $ 95 $ 118
12/31/97 $ 104 $ 177 $ 145
* $100 invested on 3/27/96 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
CERTAIN TRANSACTIONS
RACEWAY SERVICES. The Company, through its subsidiaries, sells tickets,
hospitality suites and related items and merchandise to Raceway Services, Inc.,
("Raceway Services"). Walter P. Czarnecki, a director of the Company, owns all
of the equity interests of Raceway Services. In 1997, Raceway Services paid
$1,059,000 to the Company and/or its subsidiaries for such tickets, hospitality
suites and related items and merchandise. Raceway Services generally pays the
publicly quoted selling prices, although it often receives discounts from such
prices for such tickets, hospitality suites and related items and merchandise.
NCMS TRANSACTION. On April 1, 1997, the Company and Ms. Carrie B. DeWitt
("Ms. DeWitt") entered into an option agreement (the "Option Agreement"). Ms.
DeWitt is the mother of Jo DeWitt Wilson who became a director of the Company on
July 15, 1997. Pursuant to the Option Agreement, Ms. DeWitt granted to the
Company the option to acquire all 1,461,378 shares of her Common Stock
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("NCMS Stock"), $0.25 par value per share of North Carolina Motor Speedway, Inc.
("NCMS") in exchange for the Company's Common Stock at a ratio of one share of
NCMS Stock for each .620333 share of the Company's Common Stock. The ratio
reflected a value of $18.61 per share of NCMS Stock and $30.00 per share of the
Company's Common Stock. The Company also paid $1,400,000 (equivalent to $.958
per share of Ms. DeWitt's stock) into escrow for the option, payable to Ms.
DeWitt upon the occurrence of certain events relating to consummation of the
Merger of NCMS with and into a subsidiary of the Company (the "Merger"). The
Company paid Ms. DeWitt the $1,400,000 in November 1997. The Board of Directors
of the Company approved the Merger on May 1, 1997. In the Option Agreement, the
Company also agreed that if it exercised the option and the transaction were
taxable to Ms. DeWitt, it would reimburse, on a tax-free basis, her income
taxes, if any, resulting from the exchange , less $1,400,000. The Company
exercised the option on May 15, 1997, and after such exercise owned 1,563,478
shares of NCMS stock (approximately 69.9% of the outstanding shares), which
included 102,100 shares of NCMS Stock previously owned by the Company. The
Option Agreement provides Ms. DeWitt with rights during specified periods to
dispose of all or any portions Ms. DeWitt desires of the Company's Common Stock
she received upon exercise at a price equal to the greater of the then fair
market value of the shares or $30.00 a share, either through a sale to the
Company or an affiliate or registration of such shares for sale to the public.
The terms of the option were derived through negotiations with Ms. DeWitt and
her representatives.
On December 2, 1997, the Merger was completed. In connection with the
Merger, and pursuant to the terms thereof, Jo DeWitt Wilson, a director of the
Company, received 5,109 shares of the Company's Common Stock in exchange for her
7,100 shares of NCMS Stock. In addition, Nancy B. Daugherty, Ms. DeWitt Wilson's
sister, received 3,598 shares of the Company's Common Stock in exchange for her
5,000 shares of NCMS Stock and Mr. Fred Daugherty, Ms. DeWitt Wilson's
brother-in-law, received 12,112 shares of the Company's Common Stock in exchange
for his 16,832 shares of NCMS stock.
For information concerning other related party transactions, see
"Compensation Committee Interlocks and Insider Participation" above.
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO STOCK OPTION PLAN
In March 1996, the Board of Directors of the Company (the "Board")
authorized, and the stockholders of the Company approved, a stock incentive plan
for executive and key management employees of the Company and its subsidiaries,
including a limited number of consultants and advisors (the "Stock Option
Plan"). Under the Stock Option Plan, key employees, outside consultants and
advisors (the "Participants") of the Company and its subsidiaries (as defined in
the Stock Option Plan), may receive awards of stock options (both Nonqualified
Options and Incentive Options, as defined in the Stock Option Plan), stock
appreciation rights or restricted stock. A maximum of 400,000 shares of Common
Stock is subject to the Stock Option Plan. The purpose of the Stock Option Plan
is to provide key employees (including officers and directors who are also key
employees) and key non-employee consultants and advisors of the Company and its
subsidiaries ("employees") with an increased incentive to make significant and
extraordinary contributions to the long-term performance and growth of the
Company and its subsidiaries, to join the interests of key employees with the
interests of the stockholders of the Company, and to facilitate attracting and
retaining key employees of exceptional ability.
In January 1998, the Board awarded to Participants options to purchase
165,000 shares of Common Stock. The January 1998 award, together with previous
stock option awards, leaves only 80,000 shares available for grant under the
Stock Option Plan.
The Board believes that the best interests of the Company will be served by
increasing by 320,000 the number of shares available for awards granted under
the Stock Option Plan. The Board of Directors believes that the existing awards
have enhanced the Company's position in the highly competitive market for
managerial and executive talent and have enabled the Company to appropriately
align executives' long-term interests with those of stockholders through stock
ownership by the executive. To remain competitive, it is the judgment of the
Board that an amendment permitting the allocation of additional shares to awards
under the Stock Option Plan should be adopted. The essential features of the
Stock Option Plan are outlined below.
Administration. The Stock Option Plan is administered by the Board and by
the Compensation Committee of the Board of Directors of the Company (the
"Committee"), or such other committee as may be specified by the Board of
Directors to perform the functions and duties of the Committee under the Stock
Option Plan. To date, all awards under the Stock Option Plan have been granted
by the entire Board of Directors. Subject to the provisions of the Stock Option
Plan, the Committee shall determine, from those eligible to be Participants, the
persons to be granted stock options, stock appreciation rights and restricted
stock, the amount of stock or rights to be optioned or granted to each such
person, and the terms and conditions of any stock options, stock appreciation
rights and restricted stock. Subject to the provisions of the Stock Option Plan,
the Committee is authorized to interpret the Stock Option Plan, to make, amend,
and rescind rules and regulations relating to the Stock Option Plan and to make
all other determinations necessary or advisable for the Stock Option Plan's
administration.
Participants. The Participants in the Stock Option Plan are those key
employees, consultants and advisors of the Company or any subsidiary who in the
judgment of the committee are or will become responsible for the direction and
financial success of the Company or any subsidiary. Key employees include
officers and directors who are also key employees of the Company or any
subsidiary.
Shares Subject to Plan. The maximum number of shares with respect to which
stock options or stock appreciation rights may be granted or which may be
awarded as restricted stock under the Stock Option Plan is 400,000 shares of
Common Stock, 720,000 shares upon approval of the proposed amendment. Shares
covered by expired or terminated stock options or stock appreciation rights or
forfeited restricted stock awards will again become available for grant or award
under the Stock Option Plan. No employee may receive options, stock appreciation
rights, restricted stock to any combination thereof for more than 200,000 shares
of Common Stock over the term of the Stock Option Plan. The number of shares
subject to each outstanding stock option, stock appreciation right or restricted
stock award, the option price with respect to outstanding stock options, the
grant value with respect to outstanding stock appreciation rights, the aggregate
number of
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shares remaining available under the Stock Option Plan and the 200,000 share
per-employee limitation will be subject to such adjustment as the Committee, in
its discretion, deems appropriate to reflect such events as stock dividends,
stock splits, recapitalizations, mergers, consolidations or reorganizations of
or by the Company.
Stock Options and Stock Appreciation Rights. Subject to the terms of the
Stock Option Plan, the Committee may grant to Participants either Incentive
Options meeting the definition of an incentive stock option under Section 422 of
the Code or Nonqualified Options not meeting such definition, or any combination
thereof. The exercise price for an Incentive Option may not be less than 100% of
the fair market value of the stock on the date of grant; however, the exercise
price for an Incentive Option granted to an employee who owns more than 10% of
the voting stock of the Company or an subsidiary may not be less than 110% of
the fair market value of the stock on the date of grant. The exercise price for
a Nonqualified Option may not be less than 50% of the fair market value of the
date of grant.
Subject to the terms of the Stock Option Plan, the committee may grant
stock appreciation rights to Participants either in conjunction with, or
independently of, any stock options. Stock appreciation rights may be granted in
conjunction with stock options as an alternative right or as an additional
right. Upon exercise of a stock appreciation right, a Participant will generally
be entitled to receive an amount equal to the difference between the fair market
value of the shares at the time of grant and the fair market value of the shares
at the time of exercise. This amount may be payable in cash, shares of Common
Stock or a promissory note from the Participant, or any combination thereof, as
determined in the discretion of the Committee.
The exercise period of stock options and stock appreciation rights will be
determined by the Committee, but no stock option or stock appreciation right may
be exercisable prior to the expiration of six months from the date of grant or
after 10 years from the date of grant, subject to certain conditions and
limitation.
Stock option and stock appreciation rights are not transferable by a
Participant other than by will or by the laws of descent and distribution, and
stock options and stock appreciation rights are exercisable, during the lifetime
of the Participant, only by the Participant.
If the employment or consultancy of a Participant by the Company or a
subsidiary terminates, the Committee may, in its discretion, permit the exercise
of stock options and stock appreciation rights granted to such Participant (i)
for a period not to exceed three months following termination of employment with
respect to Incentive Options or related stock appreciation rights if termination
off employment is not due to death or permanent disability of the Participant,
(ii) for a period not to exceed one year following the termination of employment
with respect to Incentive Options or related stock appreciation rights if
termination of employment is due to the death or permanent disability of the
Participant, and (iii) for a period not to extend beyond the expiration date
with respect to Nonqualified Options or related or independently granted stock
appreciation rights.
Restricted Stock Awards. Subject to the terms of the Stock Option Plan, the
Committee may award shares of restricted stock to Participants. All shares of
restricted stock will be subject to the following terms and conditions, among
others: (a) At the time of each award of restricted shares, a restricted period
of less than six months and no greater than five years, will be established for
the shares. The restricted period may differ among Participants and may have
different expiration dates with respect to portions of shares covered by the
same award; (b) Shares of restricted stock awarded to Participants may not be
sold, assigned transferred, pledged, hypothecated or otherwise encumbered during
the restricted period applicable to such shares. Except for such restrictions on
transfer, a Participant will have all the rights of a shareholder in respect of
restricted shares awarded to him or her including the right to receive any
dividends on, and the right to vote, the shares; and (c) If a Participant ceases
to be an employee or consultant of the Company or a subsidiary for any reason
other than death or permanent disability, all shares theretofore awarded to the
Participant which are still subject to the restrictions imposed by provision (b)
above will upon such termination of employment or consultancy be forfeited and
transferred back to the Company. If such employment or consultancy is terminated
by action of the Company or a subsidiary without cause or by agreement between
the Company or a subsidiary and the Participant, the Committee may, in its
discretion, release some or all of the shares from the restrictions; (d) If a
Participant ceases to be an employee or consultant of the Company or a
subsidiary by
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reason of death or permanent disability, the restrictions will lapse with
respect to shares then subject to such restrictions, unless otherwise determined
by the Committee.
Termination, Duration and Amendments of Plan. The Stock Option Plan may be
abandoned or terminated at any time by the Board of Directors. Unless sooner
terminated, the Stock Option Plan will terminate on March 20, 2006, the tenth
anniversary of the date ten years after its initial adoption by the Board of
Directors. The termination of the Stock Option Plan will not affect the validity
of any stock option, stock appreciation right or restricted stock outstanding on
the date of termination.
For the purpose of conforming to any changes in applicable law or
governmental regulation, or for any other lawful purpose, the Board of Directors
will have the right, with or without approval of the stockholders of the
Company, to amend or revise the terms of the Stock Option Plan at any time;
however, no such amendment or revision will (i) without approval or ratification
of the stockholders (A) increase the maximum number of shares in the aggregate
which are subject to the Stock Option Plan (other than anti-dilution
adjustments), (B) increase the maximum number of shares for which any
Participant may be granted stock options, stock appreciation rights or awarded
restricted stock under the Stock Option Plan (other than anti-dilution
adjustments), (C) change the class of persons eligible to be Participants under
the Stock Option Plan, or (D) materially increase the benefits accruing to
Participants under the Stock Option Plan, or (ii) without the consent of the
holder thereof, change the stock option price (other than anti-dilution
adjustments) or alter or impair any stock option, stock appreciation right or
restricted stock which has been previously granted or awarded under the Stock
Option Plan.
Federal Income Tax Consequences. The rules governing the tax treatment of
stock options, stock appreciation rights, restricted stock and shares acquired
upon the exercise of stock options and stock appreciation rights are technical.
Therefore, the description of federal income tax consequences set forth below is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary individual circumstances. Finally, the tax
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
INCENTIVE OPTIONS. Incentive Options granted pursuant to the Plan are
intended to qualify as "Incentive Options" within the meaning of Section 422 of
the Code. If the Participant makes no disposition of the shares acquired
pursuant to exercise of an Incentive Option within one year after the transfer
of shares to such Participant and within two years from grant of the option,
such Participant will realize no taxable income as a result of the grant or
exercise of such option, and any gain or loss that is subsequently realized may
be treated as long-term capital gain or loss, as the case may be. Under these
circumstances, the Company will not be entitled to a deduction for federal
income tax purposes with respect to either the issuance of such Incentive
Options or the transfer of shares upon their exercise. However, the exercise of
an Incentive Option is an item of tax preference and a Participant may have
alternative minimum tax liability.
If shares acquired upon exercise of Incentive Options are disposed of prior
to the expiration of the above time periods, the Participant will recognize
ordinary income in the year in which the disqualifying disposition occurs, the
amount of which will generally be the lesser of (i) the excess of the market
value of the shares on the date of exercise over the option price, or (ii) the
gain recognized on such disposition. Such amount will ordinarily be deductible
by the Company for federal income tax purposes in the same year, provided that
the amount constitutes reasonable compensation. In addition, the excess, if any,
of the amount realized on a disqualifying disposition over the market value of
the shares on the date of exercise will be treated as capital gain.
NONQUALIFIED OPTIONS. A Participant who acquires shares by exercise of a
Nonqualified Option generally realizes as taxable ordinary income, at the time
of exercise, the difference between the exercise price and the fair market value
of the shares on the date of exercise. Such amount will ordinarily be deductible
by the Company in the same year, provided that the amount constitutes reasonable
compensation. Subsequent appreciation or decline in the value of the shares on
the sale or other disposition of the shares will generally be treated as capital
gain or loss.
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STOCK APPRECIATION RIGHTS. A Participant generally will recognize ordinary
income upon the exercise of a stock appreciation right in an amount equal to the
amount of cash received and the fair market value of any shares received at the
time of exercise, plus the amount of any taxes withheld. Such amount will
ordinarily be deductible by the Company in the same year, provided that the
amount constitutes reasonable compensation.
RESTRICTED STOCK. A Participant granted shares of restricted stock under
the Plan is not required to include the value of such shares in ordinary income
until the first time such Participant's rights in the shares are transferable or
are not subject to substantial risk of forfeiture, whichever occurs earlier,
unless such Participant timely files an election under Section 83(b) of the Code
to be taxed on the receipt of the shares. In either case, the amount of such
income will be equal to the excess of the fair market value of the stock at the
time the income is recognized over the amount (if any) paid for the stock. The
Company will ordinarily be entitled to a deduction, in the amount of the
ordinary income recognized by the Participant, for the Company's taxable year in
which the Participant recognizes such income, provided that the amount
constitutes reasonable compensation.
WITHHOLDING PAYMENTS. If, upon exercise of a Nonqualified Option or stock
appreciation right, or upon the award of restricted stock or the expiration of
restrictions applicable to restricted stock, or upon a disqualifying disposition
of shares acquired upon exercise of an Incentive Option, the Company or any
subsidiary must pay amounts for income tax withholding, then in the Committee's
sole discretion, either the Company will appropriately reduce the amount of
stock or cash to be delivered or paid to the Participant or the Participant must
pay such amount to the Company to reimburse the Company for such payment. The
Committee may permit a Participant to satisfy such withholding obligations by
electing to reduce the number of shares of Common Stock delivered or deliverable
to the Participant upon exercise of a stock option or stock appreciation right
or award of restricted stock or by electing to tender an appropriate number of
shares of Common Stock back to the Company subsequent to exercise of a stock
option or stock appreciation right or award of restricted stock (with such
restrictions as the committee may adopt).
LIMITATION ON COMPENSATION DEDUCTION. Publicly-held corporations are
precluded from deducting compensation paid to certain of its executive officers
in excess of $1 million. The employees covered by the $1 million limitation on
deductibility of compensation include the chief executive officer and those
employees whose annual compensation is required to be reported to the Securities
and Exchange Commission (other than the chief executive officer). The grant or
award of stock options, stock appreciation rights and restricted stock generally
are included in an employee's compensation for purposes of the $1 million
limitation on deductibility of compensation.
There is an exception to the $1 million deduction limitation for
compensation (including the grant or award of stock options, stock appreciation
rights and restricted stock) paid pursuant to a qualified performance-based
compensation plan. Compensation attributable to stock options or stock
appreciation rights is deemed to satisfy the qualified performance-based
compensation exception if the grant or award is made by a compensation committee
comprised of outside directors; the plan under which the option or right is
granted states the maximum number of shares with respect to which options or
rights may be granted during a specified period to any employee; and, under the
terms of the option or right, the amount of compensation the employee could
receive is based solely on an increase in the value of the stock after the date
of the grant or award.
If the amount of compensation a covered employee will receive under the
grant or award is not based solely on an increase of the value of the stock
after the date of the grant (e.g., restricted stock or an option that is granted
with an exercise price that is less than the fair market value as of the date of
the grant), none of the compensation attributable to the grant or award is
qualified performance-based compensation attributable to the grant or award is
qualified performance-based compensation unless the grant or award is made on
account of the attainment of a performance goal that has been previously
established and approved by the stockholders of the Company.
The grant of stock options or stock appreciation rights to a Participant
under the Stock Option Plan to purchase the Company's stock at fair market value
determined on the date of the grant will, if granted at fair market value, be
deemed to satisfy the requirements of the performance-based compensation
exception and
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21
the $1 million deduction limitation will not limit the otherwise deductibility
of the compensation paid to covered employees by the Company. However, the
issuance of restricted stock or the grant of a stock option with an exercise
price less than the fair market value of the stock on the date of grant of a
stock option with an exercise price less than the fair market value of the stock
on the date of grant will be included in a covered employee's compensation in
determining the $1 million deductibility limit.
Accounting Treatment. Generally, under current accounting rules neither the
grant nor the exercise of an Incentive Option or a Nonqualified Option granted
at an exercise price equal to the fair market value of the shares on the date of
grant requires any charge against earnings. The Company has implemented the
provisions of the Financial Accounting Standards Board Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation,
which provides for the disclosure of the pro-forma impact of the issuance of
options on net income and net income per share in the footnotes to the Company's
financial statements. Accordingly, management currently believes that there will
be no impact on earnings of the Company as a result of the adoption of SFAS 123.
Stock appreciation rights will require a charge against earnings of the
Company each year representing appreciation in the value of such rights during
such year. In the case of stock appreciation rights, such charge is based on the
difference between the market value on the date of grant of the Common Stock
with respect to which the stock appreciation right is granted and the current
market price of such Common Stock. In the event of a decline in the market price
of the Common Stock subsequent to a charge against earnings related to the
estimated costs of stock appreciation rights, reversal of prior charges is made
in the amount of such decline (but not to exceed aggregate prior increases).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
the Common Stock, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of stock of the
Company.
To the Company's knowledge, based solely on a review of copies of reports
provided by such individuals to the Company and written representations of such
individuals that no other reports were required, during the fiscal year ended
December 31, 1997, all Section 16(a) filing requirements applicable to its
directors, officers, and greater than 10% beneficial owners were complied with;
except that (i) a report on Form 4 covering a transaction by PSH Corp., was
filed late by all of the members of the Penske Group, other than PSH Corp., and
by all of the members of the France Family Group and ISC and FII, and (ii) an
initial report on Form 3 was filed late by Gary W. Dickinson, a director of the
Company.
OTHER MATTERS
RELATIONSHIP WITH INDEPENDENT AUDITOR. Deloitte & Touche LLP is the
independent auditor for the Company and its subsidiaries and has reported on the
Company's consolidated financial statements included in the Annual Report of the
Company which accompanies this proxy statement. The Company's independent
auditor is appointed by the Board of Directors.
Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meeting of Stockholders and will have the opportunity to make a statement
at the meeting if they desire to do so. The representatives will also be
available to respond to appropriate questions.
OTHER PROPOSALS. Neither the Company nor the members of its Board of
Directors intend to bring before the Annual Meeting any matters other than those
set forth in the Notice of Annual Meeting of Stockholders, and they have no
present knowledge that any other matters will be presented for action at the
meeting by others. If any other matters properly come before such meeting,
however, it is the intention of the persons named in the enclosed form of proxy
to vote in accordance with their best judgment.
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A stockholder proposal which is intended to be presented at the 1999 Annual
Meeting of stockholders must be received by the Company at its principal
executive offices, 13400 Outer Drive West, Detroit, Michigan, 48239 by December
16, 1998.
By Order of the Board of Directors
ROBERT H. KURNICK, JR.
Secretary
Detroit, MI
April 15, 1998
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Penske Logo
24
PENSKE MOTORSPORTS, INC.
- - --------------------------------------------------------------------------------
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY FOR THE
ANNUAL MEETING OF STOCKHOLDERS
P The undersigned hereby appoints Roger S. Penske, Walter P. Czarnecki
and Gregory W. Penske, or each of them, with full power of
R substitution, as Proxies, and hereby authorizes them to represent the
undersigned at the 1998 Annual Meeting of Stockholders of PENSKE
O MOTORSPORTS, INC. to be held on May 13, 1998 or any adjournment
thereof, and to vote all shares of PENSKE MOTORSPORTS, INC.
X Common Stock which the undersigned would be entitled to vote if
personally present.
Y
1. Election of four Class II directors, nominees: H. Lee Combs, Richard E. Stoddard,
James E. Williams and Jo DeWitt Wilson
2. Approval of the Amendment to the Penske Motorsports, Inc. 1996 Stock Incentive Plan to increase the
number of shares of the Company's common stock issuable upon exercise of options issued under the Plan
by 320,000 shares.
AS TO EACH ITEM SET FORTH ON THE REVERSE HEREOF, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED ON THE
REVERSE SIDE AND IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR ITEMS 1 and 2. As to any other business
that may come before the Annual Meeting, or any adjournment thereof, this proxy will be voted in the
discretion of the proxies.
SEE REVERSE SIDE
- - --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
25
/X/ Please mark your
votes as in this
example.
The Board of Directors recommends a vote "FOR" Proposals 1 and 2 described in the proxy statement:
FOR WITHHOLD 2. Approval of the amendment to the Penske
all vote for all Motorsports, Inc. 1996 Stock Incentive Plan
nominees nominees to increase the number of shares of the Company's
1. Election of common stock issuable upon exercise of options Please check this
Directors / / / / issued under the Plan by 320,000 shares. box if you are / /
(See Reverse) attending the
Annual Meeting.
FOR AGAINST ABSTAIN
For, except vote withheld from the following nominee(s): / / / / / /
- - --------------------------------------------------------
Please sign exactly as name appears above. Joint
owners should all sign. Executors, administrators,
trustees, etc. should so indicate when signing. If
signer is a corporation, sign full corporate name
by duly authorized officer who adds his or her name
and title.
----------------------------------------------------
----------------------------------------------------
SIGNATURE(S) DATE
- - ------------------------------------------------------------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
[PENSKE MOTORSPORTS LOGO]
IMPORTANT: PLEASE VOTE, DATE AND SIGN YOUR PROXY
AND RETURN IT IN THE ENVELOPE PROVIDED
26
Appendix A
Amended and Restated
PENSKE MOTORSPORTS, INC.
1996 STOCK INCENTIVE PLAN
1. DEFINITIONS: As used herein, the following definitions shall
apply:
(a) "Board of Directors" shall mean the Board of Directors of
the Corporation.
(b) "Committee" shall mean the Compensation Committee
designated by the Board of Directors of the Corporation,
or such other committee as shall be specified by the
Board of Directors to perform the functions and duties of
the Committee under the Plan; provided, however, that the
Committee shall comply with the requirements of (i) Rule
16b-3 of the Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
and (ii) Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations
thereunder.
(c) "Corporation" shall mean Penske Motorsports, Inc., a
Delaware corporation, or any successor thereof.
(d) "Discretion" shall mean in the sole discretion of the
Committee, with no requirement whatsoever that the
Committee follow past practices, act in a manner
consistent with past practices, or treat a key employee,
consultant or advisor in a manner consistent with the
treatment afforded other key employees, consultants or
advisors with respect to the Plan.
(e) "Incentive Option" shall mean an option to purchase
Common Stock of the Corporation which meets the
requirements set forth in the Plan and also meets the
definition of an incentive stock option within the
meaning of Section 422 of the Code; provided, however,
that Incentive Options may only be granted to persons who
are employees of the Corporation or of a subsidiary
corporation in which the Corporation owns, directly or
indirectly, 50% or more of the combined voting power of
all classes of stock of the subsidiary
27
corporation. The stock option agreement for an Incentive
Option shall state that the option is intended to be an
Incentive Option.
(f) "Nonqualified Option" shall mean an option to purchase
Common Stock of the Corporation which meets the
requirements set forth in the Plan but does not meet the
definition of an incentive stock option within the
meaning of Section 422 of the Code. The stock option
agreement for a Nonqualified Option shall state that the
option is intended to be a Nonqualified Option.
(g) "Participant" shall mean any individual designated by the
Committee under Paragraph 6 for participation in the
Plan.
(h) "Plan" shall mean this Amended and Restated Penske
Motorsports, Inc. 1996 Stock Incentive Plan.
(i) "Restricted stock award" shall mean a grant of Common
Stock of the Corporation which is subject to forfeiture,
restrictions against transfer, and such other terms and
conditions determined by the Committee, as provided in
Paragraph 18.
(j) "Stock appreciation right" shall mean a right to receive
the appreciation in value, or a portion of the
appreciation in value, of a specified number of shares of
the Common Stock of the Corporation, as provided in
Paragraph 12.
(k) "Subsidiary" shall mean any corporation or similar entity
in which the Corporation owns, directly or indirectly,
stock or other equity interest ("Stock") possessing more
than 25% of the combined voting power of all classes of
Stock; provided, however, that an Incentive Option may be
granted to an employee of a Subsidiary only if the
Subsidiary is a corporation and the Corporation owns,
directly or indirectly, 50% or more of the total combined
voting power of all classes of Stock of the Subsidiary.
2. PURPOSE OF PLAN: The purpose of the Plan is to provide key
employees (including officers and directors who are also key
employees), consultants and advisors of the Corporation and
its Subsidiaries with an increased incentive to make
significant and extraordinary contributions to the long-term
performance and growth of the Corporation and its
Subsidiaries, to join the interests of key employees,
consultants and advisors with the interests of the
shareholders of the Corporation, and to facilitate attracting
and retaining key employees, consultants and advisors of
exceptional ability.
28
3. ADMINISTRATION: The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the
Committee shall determine, from those eligible to be
Participants under the Plan, the persons to be granted stock
options, stock appreciation rights and restricted stock, the
amount of stock or rights to be optioned or granted to each
such person, and the terms and conditions of any stock
options, stock appreciation rights and restricted stock.
Subject to the provisions of the Plan, the Committee is
authorized to interpret the Plan, to make, amend and rescind
rules and regulations relating to the Plan and to make all
other determinations necessary or advisable for the Plan's
administration. Interpretation and construction of any
provision of the Plan by the Committee shall, unless otherwise
determined by the Board of Directors of the Corporation, be
final and conclusive. A majority of the Committee shall
constitute a quorum, and the acts approved by a majority of
the members present at any meeting at which a quorum is
present, or acts approved in writing by a majority of the
Committee, shall be the acts of the Committee.
4. INDEMNIFICATION OF COMMITTEE MEMBERS: In addition to such
other rights of indemnification as they may have, the members
of the Committee shall be indemnified by the Corporation in
connection with any claim, action, suit or proceeding relating
to any action taken or failure to act under or in connection
with the Plan or any option, stock appreciation right or
restricted stock granted hereunder to the full extent provided
for under the Corporation's Bylaws with respect to
indemnification of directors of the Corporation.
5. MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN: The maximum number
of shares with respect to which stock options or stock
appreciation rights may be granted or which may be awarded as
restricted stock under the Plan shall be 720,000 shares in the
aggregate of Common Stock of the Corporation. The number of
shares with respect to which a stock appreciation right is
granted, but not the number of shares which the Corporation
delivers or could deliver to a Participant upon exercise of a
stock appreciation right, shall be charged against the
aggregate number of shares remaining available under the Plan;
provided, however, that in the case of a stock appreciation
right granted in conjunction with a stock option under
circumstances in which the exercise of the stock appreciation
right results in termination of the stock option and vice
versa, only the number of shares subject to the stock option
shall be charged
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against the aggregate number of shares remaining available
under the Plan. If a stock option or stock appreciation right
expires or terminates for any reason (other than termination
as a result of the exercise of a related right) without having
been fully exercised, or if shares of restricted stock are
forfeited, the number of shares with respect to which the
stock option or stock appreciation right was not exercised at
the time of its expiration or termination, and the number of
forfeited shares of restricted stock, shall again become
available for the grant of stock options or stock appreciation
rights, or the award of restricted stock, under the Plan,
unless the Plan shall have been terminated.
Notwithstanding any other provision in this Plan, no employee,
consultant or advisor of the Corporation or a Subsidiary may
receive options, stock appreciation rights, restricted stock
or any combination thereof for more than 200,000 shares of
Common Stock of the Corporation over the term of the Plan, as
provided in Paragraph 23. For purposes of this 200,000 share
per-person limitation, there shall be taken into account all
shares covered by stock options and stock appreciation rights
granted, and all restricted shares awarded, to an employee
regardless of whether such stock options or stock appreciation
rights expire or terminate without being fully exercised or
whether such restricted shares are forfeited back to the
Corporation. The number of shares subject to each outstanding
stock option, stock appreciation right or restricted stock
award, the option price with respect to outstanding stock
options, the grant value with respect to outstanding stock
appreciation rights, the aggregate number of shares remaining
available under the Plan and the 200,000 share per-person
limitation shall be subject to such adjustment as the
Committee, in its Discretion, deems appropriate to reflect
such events as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations
of or by the Corporation; provided, however, that no
fractional shares shall be issued pursuant to the Plan, no
rights may be granted under the Plan with respect to
fractional shares, and any fractional shares resulting from
such adjustments shall be eliminated from any outstanding
stock option, stock appreciation right, or restricted stock
award.
6. PARTICIPANTS: The Committee shall determine and designate from
time to time, in its Discretion, those key employees,
consultants or advisors of the Corporation or any Subsidiary
to receive stock options,
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30
stock appreciation rights, or restricted stock who, in the
judgment of the Committee, are or will become responsible for
the direction and financial success of the Corporation or any
Subsidiary; provided, however, that Incentive Options may be
granted only to persons who are key employees of the
Corporation or a Subsidiary, and in the case of a Subsidiary
only if (i) the Corporation owns, directly or indirectly, 50%
or more of the total combined voting power of all classes of
Stock of the Subsidiary and (ii) the Subsidiary is a
corporation. For the purposes of the Plan, key employees shall
include officers and directors who are also key employees of
the Corporation or any Subsidiary.
7. WRITTEN AGREEMENT: Each stock option, stock appreciation right
and restricted stock award shall be evidenced by a written
agreement (each a "Corporation-Participant Agreement")
containing such provisions as may be approved by the
Committee. Each such Corporation-Participant Agreement shall
constitute a binding contract between the Corporation and the
Participant and every Participant, upon acceptance of such
Agreement, shall be bound by the terms and restrictions of the
Plan and of such Agreement. The terms of each such
Corporation-Participant Agreement shall be in accordance with
the Plan, but each Agreement may include such additional
provisions and restrictions determined by the Committee, in
its Discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan.
8. ALLOTMENT OF SHARES: The Committee shall determine and fix, in
its Discretion, the number of shares of Common Stock with
respect to which a Participant may be granted stock options
and stock appreciation rights and the number of shares of
restricted stock which a Participant may be awarded; provided,
however, that no Incentive Option may be granted under the
Plan to any one Participant which would result in the
aggregate fair market value, determined as of the date the
option is granted, of underlying stock with respect to which
incentive stock options are exercisable for the first time by
such Participant during any calendar year under any plan
maintained by the Corporation (or any parent or subsidiary
corporation of the Corporation) exceeding $100,000.
9. STOCK OPTIONS: Subject to the terms of the Plan, the
Committee, in its Discretion, may grant to Participants either
Incentive Options or Nonqualified Options or any combination
thereof. Each option granted under the
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31
Plan shall designate the number of shares covered thereby, if
any, with respect to which the option is an Incentive Option,
and the number of shares covered thereby, if any, with respect
to which the option is a Nonqualified Option.
10. STOCK OPTION PRICE: Subject to the rules set forth in this
Paragraph 10, at the time any stock option is granted, the
Committee, in its Discretion, shall establish the price per
share for which the shares covered by the option may be
purchased. With respect to an Incentive Option, such option
price shall not be less than 100% of the fair market value of
the stock on the date on which such option is granted;
provided, however, that with respect to an Incentive Option
granted to an employee who at the time of the grant owns
(after applying the attribution rules of Section 424(d) of the
Code) more than 10% of the total combined voting stock of the
Corporation or of any parent or subsidiary, the option price
shall not be less than 110% of the fair market value of the
stock on the date such option is granted. With respect to a
Nonqualified Option, the option price shall not be less than
50% of the fair market value of the stock on the date upon
which such option is granted. Fair market value of a share
shall be determined by the Committee and may be determined by
taking the mean between the highest and lowest quoted selling
prices of the Corporation's Common Stock on any exchange or
other market on which the shares of Common Stock of the
Corporation shall be traded on such date, or if there are no
sales on such date, on the next following day on which there
are sales. The option price shall be subject to adjustment in
accordance with the provisions of paragraph 5 of the Plan.
11. PAYMENT OF STOCK OPTION PRICE: To exercise in whole or in part
any stock option granted hereunder, payment of the option
price in full in cash or, with the consent of the Committee,
in Common Stock of the Corporation or by a promissory note
payable to the order of the Corporation in a form acceptable
to the Committee, shall be made by the Participant for all
shares so purchased. Such payment may, with the consent of the
Committee, also consist of a cash down payment and delivery of
such promissory note in the amount of the unpaid exercise
price. In the Discretion of and subject to such conditions as
may be established by the Committee, payment of the option
price may also be made by the Corporation retaining from the
shares to be delivered upon exercise of the stock option that
number of shares having a fair market value on the date of
exercise equal to the option price of the number of
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shares with respect to which the Participant exercises the
stock option. Such payment may also be made in such other
manner as the Committee determines is appropriate, in its
Discretion. No Participant shall have any of the rights of a
shareholder of the Corporation under any stock option until
the actual issuance of shares to said Participant, and prior
to such issuance no adjustment shall be made for dividends,
distributions or other rights in respect of such shares,
except as provided in Paragraph 5.
12. STOCK APPRECIATION RIGHTS: Subject to the terms of the Plan,
the Committee may grant stock appreciation rights to
Participants either in conjunction with, or independently of,
any stock options granted under the Plan. A stock appreciation
right granted in conjunction with a stock option may be an
alternative right wherein the exercise of the stock option
terminates the stock appreciation right to the extent of the
number of shares purchased upon exercise of the stock option
and, correspondingly, the exercise of the stock appreciation
right terminates the stock option to the extent of the number
of shares with respect to which the stock appreciation right
is exercised. Alternatively, a stock appreciation right
granted in conjunction with a stock option may be an
additional right wherein both the stock appreciation right and
the stock option may be exercised. A stock appreciation right
may not be granted in conjunction with an Incentive Option
under circumstances in which the exercise of the stock
appreciation right affects the right to exercise the Incentive
Option or vice versa, unless the stock appreciation right, by
its terms, meets all of the following requirements:
(a) the stock appreciation right will expire no later than
the Incentive Option;
(b) the stock appreciation right may be for no more than the
difference between the option price of the Incentive
Option and the fair market value of the shares subject to
the Incentive Option at the time the stock appreciation
right is exercised;
(c) the stock appreciation right is transferable only when
the Incentive Option is transferable, and under the same
conditions;
(d) the stock appreciation right may be exercised only when
the Incentive Option is eligible to be exercised; and
(e) the stock appreciation right may be exercised only
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when the fair market value of the shares subject to the
Incentive Option exceeds the option price of the
Incentive Option.
Upon exercise of a stock appreciation right, a Participant
shall be entitled to receive, without payment to the
Corporation (except for applicable withholding taxes), an
amount equal to the excess of or, in the Discretion of the
Committee if provided in the Corporation-Participant
Agreement, a portion of the excess of (i) the then aggregate
fair market value of the number of shares with respect to
which the Participant exercises the stock appreciation right,
over (ii) the aggregate fair market value of such number of
shares at the time the stock appreciation right was granted.
This amount shall be payable by the Corporation, in the
Discretion of the Committee, in cash or in shares of Common
Stock of the Corporation or any combination thereof.
13. GRANTING AND EXERCISING OF STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS: Subject to the provisions of this
Paragraph 13, each stock option and stock appreciation right
granted hereunder shall be exercisable at any such time or
times or in any such installments as may be determined by the
Committee at the time of the grant; provided, however, no
stock option or stock appreciation right may be exercisable
prior to the expiration of six months from the date of grant
unless the Participant dies or becomes disabled prior thereto.
Moreover, if a Participant who is granted a stock appreciation
right is a person who is regularly required to report his or
her ownership and changes in ownership of Common Stock of the
Corporation to the Securities and Exchange Commission and is
subject to short-swing profit liability under the provisions
of Section 16(b) of the Exchange Act, then any election to
exercise as well as any actual exercise of such Participant's
stock appreciation right shall be made only during the period
beginning on the third business day and ending on the twelfth
business day following the release for publication by the
Corporation of quarterly or annual summary statements of sales
and earnings. Notwithstanding anything contained in the Plan
to the contrary, stock appreciation rights shall always be
granted and exercised in such a manner as to conform to the
provisions of Rule 16b-3(e), or any replacement rule, adopted
pursuant to the provisions of the Exchange Act. In addition,
the aggregate fair market value (determined at the time the
option is granted) of the Common Stock with respect to which
Incentive Options are exercisable for the first time by a
Participant during any calendar year shall not exceed
$100,000.
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A Participant may exercise a stock option or stock
appreciation right, if then exercisable, in whole or in part
by delivery to the Corporation of written notice of the
exercise, in such form as the Committee may prescribe,
accompanied, in the case of a stock option, by (i) payment for
the shares with respect to which the stock option is exercised
in accordance with Paragraph 11, or (ii) in the Discretion of
the Committee, irrevocable instructions to a stock broker to
promptly deliver to the Corporation full payment for the
shares with respect to which the stock option is exercised
from the proceeds of the stock broker's sale of or loan
against the shares. Except as provided in Paragraph 17, stock
options and stock appreciation rights granted to a Participant
may be exercised only while the Participant is an employee of
the Corporation or a Subsidiary.
Successive stock options and stock appreciation rights may be
granted to the same Participant, whether or not the stock
option(s) and stock appreciation right(s) previously granted
to such Participant remain unexercised. A Participant may
exercise a stock option or a stock appreciation right, if then
exercisable, notwithstanding that stock options and stock
appreciation rights previously granted to such Participant
remain unexercised.
14. NON-TRANSFERABILITY OF STOCK OPTIONS AND STOCK APPRECIATION
RIGHTS: No stock option or stock appreciation right granted
under the Plan to a Participant shall be transferable by such
Participant otherwise than by will or by the laws of descent
and distribution, and stock options and stock appreciation
rights shall be exercisable, during the lifetime of the
Participant, only by the Participant.
15. TERM OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS: If not
sooner terminated, each stock option and stock appreciation
right granted hereunder shall expire not more than 10 years
from the date of the granting thereof; provided, however, that
with respect to an Incentive Option or a related stock
appreciation right granted to a Participant who, at the time
of the grant, owns (after applying the attribution rules of
Section 424(d) of the Code) more than 10% of the total
combined voting stock of all classes of stock of the
Corporation or of any parent or subsidiary, such option and
stock appreciation right shall expire not more than five (5)
years after the date of granting thereof.
16. CONTINUATION OF EMPLOYMENT: The Committee may require,
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in its Discretion, that any Participant under the Plan to whom
a stock option or stock appreciation right shall be granted
shall agree in writing as a condition of the granting of such
stock option or stock appreciation right to remain in the
employ of the Corporation or a Subsidiary as an employee,
consultant or advisor for a designed minimum period from the
date of the granting of such stock option or stock
appreciation right as shall be fixed by the Committee.
17. TERMINATION OF EMPLOYMENT: If the employment or consultancy of
a Participant by the Corporation or a Subsidiary shall
terminate, the Committee may, in its Discretion, permit the
exercise of stock options and stock appreciation rights
granted to such Participant (i) for a period not to exceed
three months following termination of employment with respect
to Incentive Options or related stock appreciation rights if
termination of employment is not due to death or permanent
disability of the Participant, (ii) for a period not to exceed
one year following termination of employment with respect to
Incentive Options or related stock appreciation rights if
termination of employment is due to the death or permanent
disability of the Participant, and (iii) for a period not to
extend beyond the expiration date with respect to Nonqualified
Options or related or independently granted stock appreciation
rights. In no event, however, shall a stock option or stock
appreciation right be exercisable subsequent to its expiration
date and, furthermore, unless the Committee in its Discretion
determine otherwise, a stock option or stock appreciation
right may only be exercised after termination of a
Participant's employment or consultancy to the extent
exercisable on the date of such termination or to the extent
exercisable as a result of the reason for such termination.
The period of time, if any, a Participant shall have to
exercise stock options or stock appreciation rights upon
termination of employment or consultancy shall be set forth in
the Corporation-Participant Agreement, subject to extension of
such time period by the Committee in its Discretion.
18. RESTRICTED STOCK AWARDS: Subject to the terms of the Plan, the
Committee may award shares of restricted stock to
Participants. All shares of restricted stock granted to
Participants under the Plan shall be subject to the following
terms and conditions (and to such other terms and conditions
prescribed by the Committee):
(a) At the time of each award of restricted shares, there
shall be established for the shares a
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restricted period, which shall be no less than six months
and no greater than five years. Such restricted period
may differ among Participants and may have different
expiration dates with respect to portions of shares
covered by the same award.
(b) Shares of restricted stock awarded to Participants may
not be sold, assigned, transferred, pledged, hypothecated
or otherwise encumbered during the restricted period
applicable to such shares. Except for such restrictions
on transfer, a Participant shall have all of the rights
of a shareholder in respect of restricted shares awarded
to him or her including, but not limited to, the right to
receive any dividends on, and the right to vote, the
shares.
(c) If the employment of a Participant as an employee,
consultant or advisor of the Corporation or a Subsidiary
terminates for any reason (voluntary or involuntary, and
with or without cause) other than death or permanent
disability, all shares theretofore awarded to the
Participant which are still subject to the restrictions
imposed by Paragraph 18(b) shall upon such termination of
employment be forfeited and transferred back to the
Corporation, without payment of any consideration by the
Corporation. In the event such employment is terminated
by action of the Corporation or a Subsidiary without
cause or by agreement between the Corporation or a
Subsidiary and the Participant, however, the Committee
may, in its Discretion, release some or all of the shares
from the restrictions.
(d) If the employment of a Participant as an employee,
consultant or advisor of the Corporation or a Subsidiary
terminates by reason of death or permanent disability,
the restrictions imposed by Paragraph 18(b) shall lapse
with respect to shares then subject to such restrictions,
unless otherwise determined by the Committee.
(e) Stock certificates shall be issued in respect of shares
of restricted stock awarded hereunder and shall be
registered in the name of the Participant. Such
certificates shall be deposited with the Corporation or
its designee, together with a stock power endorsed in
blank, and, in the Discretion of the Committee, a legend
shall be placed upon such certificates reflecting that
the shares represented thereby are subject to
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restrictions against transfer and forfeiture.
(f) At the expiration of the restricted period applicable to
the shares, the Corporation shall deliver to the
Participant or the legal representative of the
Participant's estate the stock certificates deposited
with it or its designee and as to which the restricted
period has expired. If a legend has been placed on such
certificates, the Corporation shall cause such
certificates to be reissued without the legend.
In the case of events such as stock dividends, stock splits,
recapitalizations, mergers, consolidations or reorganizations
of or by the Corporation, any stock, securities or other
property which a Participant receives or is entitled to
receive by reason of his or her ownership of restricted shares
shall, unless otherwise determined by the Committee, be
subject to the same restrictions applicable to the restricted
shares and shall be deposited with the Corporation or its
designee.
19. INVESTMENT PURPOSE: If the Committee in its Discretion
determines that as a matter of law such procedure is or may be
desirable, it may require a Participant, upon any acquisition
of Common Stock hereunder (whether by reason of the exercise
of stock options or stock appreciation rights or the award of
restricted stock) and as a condition to the Corporation's
obligation to issue or deliver certificates representing such
shares, to execute and deliver to the Corporation a written
statement, in form satisfactory to the Committee, representing
and warranting that the Participant's acquisition of shares of
stock shall be for such person's own account, for investment
and not with a view to the resale or distribution thereof and
that any subsequent offer for sale or sale of any such shares
shall be made either pursuant to (a) a registration statement
on an appropriate form under the Securities Act of 1933, as
amended (the "Securities Act"), which registration statement
has become effective and is current with respect to the shares
being offered and sold, or (b) a specific exemption from the
registration requirements of the Securities Act, but in
claiming such exemption the Participant shall, prior to any
offer for sale or sale of such shares, obtain a favorable
written opinion from counsel for or approved by the
Corporation as to the availability of such exemption. The
Corporation may endorse an appropriate legend referring to the
foregoing restriction upon the certificate or certificates
representing any shares issued or transferred to a Participant
under the Plan.
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20. RIGHTS TO CONTINUED EMPLOYMENT: Nothing contained in the Plan
or in any stock option, stock appreciation right or restricted
stock granted or awarded pursuant to the Plan, nor any action
taken by the Committee hereunder, shall confer upon any
Participant any right with respect to continuation of
employment as an employee, consultant or advisor of the
Corporation or a Subsidiary nor interfere in any way with the
right of the Corporation or a Subsidiary to terminate such
person's employment at any time.
21. WITHHOLDING PAYMENTS: If upon the exercise of a Nonqualified
Option or stock appreciation right, or upon the award of
restricted stock or the expiration of restrictions applicable
to restricted stock, or upon a disqualifying disposition
(within the meaning of Section 422 of the Code) of shares
acquired upon exercise of an Incentive Option, there shall be
payable by the Corporation or a Subsidiary any amount for
income tax withholding, in the Committee's Discretion, either
the Corporation shall appropriately reduce the amount of
Common Stock or cash to be delivered or paid to the
Participant or the Participant shall pay such amount to the
Corporation or Subsidiary to reimburse it for such income tax
withholding. The Committee may, in its Discretion, permit
Participants to satisfy such withholding obligations, in whole
or in part, by electing to have the amount of Common Stock
delivered or deliverable by the Corporation upon exercise of a
stock option or stock appreciation right or upon award of
restricted stock appropriately reduced, or by electing to
tender Common Stock back to the Corporation subsequent to
exercise of a stock option or stock appreciation right or
award of restricted stock, to reimburse the Corporation or a
Subsidiary for such income tax withholding (any such election
being irrevocable), subject to such rules and regulations as
the Committee may adopt, including such rules as it determines
appropriate with respect to Participants subject to the
reporting requirements of Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), to
effect such tax withholding in compliance with the Rules
established by the Securities and Exchange Commission (the
"Commission") under Section 16 to the Exchange Act and the
positions of the staff of the Commission thereunder expressed
in no-action letters exempting such tax withholding from
liability under Section 16(b) of the Exchange Act. The
Committee may make such other arrangements with respect to
income tax withholding as it shall determine.
22. EFFECTIVENESS OF PLAN: The Plan shall be effective on the date
the Board of Directors of the Corporation
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adopts the Plan, provided that the shareholders of the
Corporation approve the Plan within 12 months of its adoption
by the Board of Directors. Stock options, stock appreciation
rights and restricted stock may be granted or awarded prior to
shareholder approval of the Plan, but each such stock option,
stock appreciation right or restricted stock grant or award
shall be subject to shareholder approval of the Plan. No stock
option or stock appreciation right may be exercised prior to
shareholder approval, and any restricted stock awarded is
subject to forfeiture if such shareholder approval is not
obtained.
23. TERMINATION, DURATION AND AMENDMENTS OF PLAN: The Plan may be
abandoned or terminated at any time by the Board of Directors
of the Corporation. Unless sooner terminated, the Plan shall
terminate on the date ten years after its adoption by the
Board of Directors, and no stock options, stock appreciation
rights or restricted stock may be granted or awarded
thereafter. The termination of the Plan shall not affect the
validity of any stock option, stock appreciation right or
restricted stock outstanding on the date of termination.
For the purpose of conforming to any changes in applicable law
or governmental regulations, or for any other lawful purpose,
the Board of Directors shall have the right, with or without
approval of the shareholders of the Corporation, to amend or
revise the terms of the Plan at any time; provided, however,
that no such amendment or revision shall (i) without approval
or ratification of the shareholders of the Corporation (A)
increase the maximum number of shares in the aggregate which
are subject to the Plan (subject, however, to the provisions
of Paragraph 5), (B) increase the maximum number of shares for
which any Participant may be granted stock options, stock
appreciation rights or awarded restricted stock under the Plan
(except as contemplated by Paragraph 5), (C) change the class
of persons eligible to be Participants under the Plan, or (D)
materially increase the benefits accruing to Participants
under the Plan, or (ii) without the consent of the holder
thereof, change the stock option price (except as contemplated
by Paragraph 5) or alter or impair any stock option, stock
appreciation right or restricted stock which shall have been
previously granted or awarded under the Plan.
As adopted by the Board of Directors on March 21, 1996.
As amended by the Board of Directors on February 2, 1998.