SCHEDULE 14A INFORMATION
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Section 240.14a-12
Merrimac Industries,Inc.
----------------------------------------------
(Name of Registrant as Specified in its Charter)
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MERRIMAC INDUSTRIES, INC.
41 FAIRFIELD PLACE
WEST CALDWELL, NJ 07006-6287
April 30, 2001
Mason N. Carter
Chairman of the Board
Dear Stockholders of Merrimac Industries, Inc.:
You are cordially invited to attend the Annual Meeting of Stockholders of
Merrimac Industries, Inc. to be held at the offices of the Company, 41 Fairfield
Place, West Caldwell, New Jersey, on Wednesday, June 6, 2001 at 10:00 a.m. local
time.
In addition to the routine matters that are typically subjects of the
annual meeting, you will be asked to consider the proposals to adopt the 2001
Stock Option Plan, the 2001 Stock Purchase Plan and the 2001 Key Employee
Incentive Plan.
Additional information about the annual meeting and the various matters
upon which stockholders will act is found in the formal Notice of Annual Meeting
of Stockholders and Proxy Statement on the following pages. The Annual Report to
Stockholders for 2000, including financial statements, accompanies the Proxy
Statement, but does not constitute a part of the proxy solicitation material.
Since it is important that your shares be represented at the annual
meeting, we request that you promptly complete and submit the enclosed proxy
card either electronically, by telephone or by mail. Any stockholder returning a
proxy may revoke it.
Sincerely,
/s/ Mason N. Carter
Mason N. Carter
Chairman of the Board
MERRIMAC INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2001
The Annual Meeting of Stockholders of Merrimac Industries, Inc. (the
"Company") will be held at the offices of the Company, 41 Fairfield Place, West
Caldwell, New Jersey, on Wednesday, June 6, 2001, at 10:00 a.m., for the
following purposes:
(1) To elect three members to the Company's Board of Directors for a term
of three years;
(2) To approve the Company's 2001 Stock Option Plan;
(3) To approve the Company's 2001 Stock Purchase Plan;
(4) To approve the Company's 2001 Key Employee Incentive Plan;
(5) To ratify the selection of Arthur Andersen LLP as independent auditors
of the Company for the 2001 fiscal year; and
(6) To transact such other business as may properly come before the
meeting.
Holders of record of the Company's common stock, $0.01 par value per share,
at the close of business on April 20, 2001, the record date fixed by the Board
of Directors, are entitled to receive notice of, and to vote at, the meeting,
and at any adjournment or adjournments thereof. A proxy and proxy statement for
the meeting are enclosed herewith.
By Order of the Board of Directors,
/s/ ROBERT V. CONDON
------------------------------
ROBERT V. CONDON
Secretary
April 30, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE 2001 ANNUAL MEETING, PLEASE PROMPTLY
SUBMIT THE ACCOMPANYING PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, VIA
THE INTERNET, BY TELEPHONE OR BY MAIL.
MERRIMAC INDUSTRIES, INC.
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2001
The Board of Directors (the "Board") of Merrimac Industries, Inc. (the
"Company") hereby solicits all holders of the Company's common stock, par value
$0.01 per share ("Common Stock"), to vote by proxy at the Annual Meeting of
Stockholders, which will be held at the offices of the Company, 41 Fairfield
Place, West Caldwell, New Jersey, on Wednesday, June 6, 2001 at 10:00 a.m.
(including any adjournment or postponement thereof, the "Meeting") for the
purposes stated in the Notice of Annual Meeting of Stockholders. The shares
represented by proxies will be voted at the Meeting in accordance with the
instructions noted thereon.
A proxy may be revoked at any time before it is exercised by filing a
written notice of revocation with the Secretary of the Company, by revocation in
person at the Meeting or by presenting a later-dated proxy.
This Proxy Statement and the accompanying form of proxy are first being
mailed to stockholders on or about April 30, 2001.
The cost of solicitation will be paid by the Company. In addition to
solicitation by mail, directors, officers and employees of the Company may
solicit proxies from stockholders by telephone, letter, e-mail, facsimile or in
person. The Company expects to pay compensation for the solicitation of proxies,
plus expenses, to Corporate Investor Communications, Inc. ("CIC") to supply
brokers and other persons with proxy materials for forwarding to beneficial
holders of Common Stock. The Company expects to pay CIC a fee of approximately
$2,000 for its services. The Company will also reimburse such brokers and other
persons for expenses related to the forwarding of this mailing.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board fixed the close of business on April 20, 2001 (the "Record
Date"), as the record date for the determination of stockholders entitled to
receive notice of, and to vote, at the Meeting. At the close of business on the
Record Date, there were outstanding and entitled to vote 2,617,369 shares of
Common Stock. Every stockholder of record on the Record Date is entitled to one
vote for each share of Common Stock then held.
Under Delaware law and the Company's By-laws, the presence of a quorum is
required to conduct business at the Meeting. A quorum is defined as a majority
of all the shares of Common Stock entitled to vote at the Meeting, present in
person or by proxy. Votes withheld from director nominees, abstentions and
broker non-votes will be counted in determining whether a quorum has been
reached.
The affirmative vote of (i) a plurality of the shares present at the
Meeting and entitled to vote on the subject matter is required to elect the
director nominees to the Board, and (ii) a majority of the shares present at the
Meeting and entitled to vote on the subject matter is required
to approve the Company's 2001 Stock Option Plan, 2001 Stock Purchase Plan and
2001 Key Employee Incentive Plan, and to ratify the selection of Arthur Andersen
LLP as the Company's independent auditors.
Abstentions will have the same effect as negative votes, except that
abstentions will have no effect on the election of directors because directors
are elected by a plurality of the votes cast. In accordance with the American
Stock Exchange rules, brokers holding shares in street name for their customers
may vote, in their discretion, on behalf of any customers who do not furnish
voting instructions within 10 days of the Meeting, on items such as the election
of directors and appointment of auditors. However, brokers who have not received
voting instructions from their customers do not have discretion to vote on the
proposals to approve the Company's 2001 Stock Option Plan, 2001 Stock Purchase
Plan and 2001 Key Employee Incentive Plan, and such "non-votes" are not counted
in determining whether a majority of votes present and entitled to vote at the
Meeting have been cast for such approval.
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides that the Board of
Directors shall consist of three classes of directors with overlapping
three-year terms. One class of directors is to be elected each year with terms
extending to the third succeeding annual meeting of stockholders. Each of the
three nominees, Edward H. Cohen, Arthur A. Oliner and Harold J. Raveche, to be
elected as Class II directors at the Meeting would hold office until the
Company's annual meeting of stockholders in the year 2004 and until his
successor is duly elected and qualified. The two directors in Class III, Mason
N. Carter and Albert H. Cohen, and the two directors in Class I, Joel H.
Goldberg and Joseph B. Fuller, are serving terms expiring at the Company's
annual meetings in 2002 and 2003, respectively.
The persons named in the enclosed form of proxy will vote such proxy for
the election to the Board as Class II directors of Edward H. Cohen, Arthur A.
Oliner and Harold J. Raveche. Messrs. E. Cohen and Oliner have been previously
elected as directors by the stockholders. Approval of the director nominees
requires the affirmative vote of a plurality of the shares present at the
Meeting and entitled to vote on the subject matter. If no contrary indication is
made, proxies in the accompanying form are to be voted for such nominees or, in
the event any such nominee is not a candidate or is unable to serve as a
director at the time of the election (which is not now expected), for any
nominee who shall be designated by the Board of Directors to fill such vacancy,
unless the Board of Directors shall determine to reduce the number of directors
pursuant to the By-laws. There is no arrangement or understanding between any
director or nominee and any other person pursuant to which such person was
selected as a director or nominee.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
2
INFORMATION ABOUT NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS
The following table sets forth certain information with respect to each
nominee for director and each continuing director.
DIRECTOR OF THE
NAME AGE COMPANY SINCE
---- --- -------------
Class II:
Edward H. Cohen..................... 62 1998
Arthur A. Oliner.................... 79 1961
Harold J. Raveche................... 58 ---
Class I:
Joel H. Goldberg.................... 57 1997
Joseph B. Fuller.................... 44 2000
Class III:
Mason N. Carter..................... 55 1997
Albert H. Cohen..................... 68 1997
Edward H. Cohen is a senior partner at the law firm of Rosenman & Colin
LLP, with which he has been affiliated since 1963. He is a director of
Phillips-Van Heusen Corporation, Franklin Electronics Publishers, Inc., Voice
Powered Technology International, Inc. and Levcor International, Inc.
Arthur A. Oliner has been Professor Emeritus of Electrophysics at
Polytechnic University (formerly Polytechnic Institute of Brooklyn) since 1990.
Prior to that, he was head of its Electrical Engineering Department from 1966
until 1974, and was the director of its Microwave Research Institute from 1967
to 1982. He was elected a member of the National Academy of Engineering and a
Fellow of the IEEE, the AAAS, and the British IEE. Dr. Oliner is the author of
three books and has received many awards. He has been an engineering consultant
for such companies as IBM, Boeing, Raytheon, Hughes and Rockwell.
Harold J. Raveche has been President of the Stevens Institute of Technology
since 1988. Prior to that, he was the Dean of Rensselaer Polytechnic Institute
from 1985 until 1988. He was a member of the U.S. Trade and Technology missions
to Israel in 1998, Brazil in 1999 and Korea and Taiwan in 2000. Dr. Raveche is a
director of Cirrus Logic, Inc.
Joel H. Goldberg has been Chairman and Chief Executive Officer of Career
Consultants, Inc., a management consulting firm, and SK Associates, an
outplacement firm, located in Union, New Jersey since 1972. Mr. Goldberg is a
director of Phillips-Van Heusen Corporation, Hampshire Group, Limited, Marcal
Paper Company and Modell's, Inc., an advisor to the New Jersey Sports and
Exposition Authority and a member of the Advisory Council for Sports
3
Management of Seton Hall University. He is also a consultant to the New York
Giants and the New Jersey Nets professional sports teams.
Joseph B. Fuller has been President and Chief Executive Officer of Monitor
Company since June 1998. Monitor Company, of which Mr. Fuller was a founding
director in 1983, is a strategy advisory firm that serves international clients
on a diversified mix of issues related to enhancing competitiveness. Mr. Fuller
is an internationally recognized expert on telecommunications and has worked
extensively in the telecommunications equipment industry. He is a director of
Phillips-Van Heusen Corporation.
Mason N. Carter was elected to the position of Chairman of the Board on
July 24, 1997. He has served as President and Chief Executive Officer of the
Company since December 16, 1996. From 1994 to 1996 he was President of the
Products and Systems Group of Datatec Industries, Inc., Fairfield, New Jersey, a
leading provider of data network implementation services. He is a director of
Transnational Industries, Inc.
Albert H. Cohen has been self-employed as a management consultant and asset
(money) manager since 1987. He was the Chairman of the Board and the Chief
Executive Officer of Metex Corporation from 1986 to 1987 and from 1964 to 1986
he was its President and Chief Executive Officer. Metex Corporation is a
manufacturer of industrial and automotive products.
There are no family relationships among the directors or nominees for
director of the Company.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year that ended on December 30, 2000, the Board of
Directors held ten meetings, of which five were by telephone conference. Each
director attended 75% or more of the aggregate of the total number of meetings
of the Board and of the committees on which he served during fiscal year 2000.
The Board of Directors has a Stock Option Committee, Stock Purchase Plan
Committee, Audit Committee, Compensation Committee, Management Committee and
Nominating Committee.
The Stock Option Committee currently consists of Messrs. E. Cohen and
Fuller and administers the Company's 1997 Long-Term Incentive Plan and 1993
Stock Option Plan, and will administer the 2001 Stock Option Plan and 2001 Key
Employee Incentive Plan, if such Plans are approved by the stockholders at the
Meeting. During fiscal year 2000, the Stock Option Committee held one meeting.
The Stock Purchase Plan Committee currently consists of Messrs. A. Cohen
and Oliner and had administered the Company's 1995 Stock Purchase Plan, which
expired on December 31, 1999, and will administer the 2001 Stock Purchase Plan,
if such Plan is approved by the stockholders at the Meeting. During fiscal year
2000, the Stock Purchase Plan Committee did not meet.
The Audit Committee currently consists of Messrs. A. Cohen, E. Cohen and
Fuller. The Audit Committee's function is to review the Company's annual audit
and the Company's
4
accounting practices with the Company's independent auditors and to ascertain
their independence from management. The Audit Committee is responsible for
recommending the inclusion of the audited financial statements in the Company's
annual report on Form 10-KSB filed with the Securities and Exchange Commission.
During fiscal year 2000, the Audit Committee held six meetings, of which three
were by telephone conference.
Messrs. A. Cohen, Goldberg and Oliner currently serve on the Compensation
Committee. The Compensation Committee reviews compensation of all executive
officers of the Company. The Compensation Committee determines compensation
levels based on individual performance and responsibility, as well as overall
corporate performance. The predominant components of executive compensation have
been base salary and stock option grants. When corporate goals are achieved,
executive officers as well as other key employees may also be awarded cash
bonuses. In addition, the Compensation Committee administered the 2000 Key
Employee Incentive Plan (which has been terminated). During fiscal year 2000,
the Compensation Committee held four meetings.
Messrs. Carter and A. Cohen currently serve on the Management Committee.
The Management Committee determines the strategic business direction for the
Company and evaluates the impact of current changes in the business environment
in which the Company operates. During fiscal year 2000, the Management Committee
held two meetings.
Messrs. Carter and Oliner currently serve on the Nominating Committee.
Stockholders wishing to recommend persons for consideration by the Nominating
Committee as nominees for election to the Board must comply with the Company's
Bylaws (see "Stockholder Proposals" below). Any such recommendation should be
accompanied by a description of the person's experiences and a written statement
from the person recommended indicating his or her consent to be considered as a
nominee, and if nominated and elected, to serve as a director. During fiscal
year 2000, the Nominating Committee held two meetings.
AUDIT COMMITTEE REPORT
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. The Audit Committee operates under the written
charter adopted by the Board, which is Exhibit A to this Proxy Statement.
Management is responsible for the Company's internal financial controls and
financial reporting process. The independent auditors are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
issuing a report thereon.
We met and held discussions with management and Arthur Andersen LLP, the
Company's independent auditors. Management represented to us that the Company's
consolidated financial statements for the year ended December 30, 2000 were
prepared in accordance with generally accepted accounting principles. We
discussed the consolidated financial statements with both management and the
independent auditors. We also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees).
5
The Audit Committee discussed with the independent auditors the overall
scope and plans for the audit. We met with the independent auditors, with and
without management, to discuss the results of their examination, the evaluation
of the Company's internal controls, and the overall quality of the Company's
financial reporting.
We discussed with the independent auditors the auditor's independence from
the Company and management, including the independent auditors written
disclosures required by Independent Standards Board Standard No. 1 (Independence
Discussions With Audit Committees).
During fiscal year 2000, the Company paid Arthur Andersen LLP the following
fees:
Audit Fees. Approximately $144,000 for the last annual audit, including
review of periodic filings with the Securities and Exchange Commission.
Financial Information Systems Design and Implementation Fees. No amounts
were paid for financial information systems design and implementation.
All Other Fees. Approximately $73,000 for all other matters (which were
primarily related to tax compliance and assistance on tax related matters).
We reviewed the above information concerning the fees paid to the
independent auditors for the year ended December 30, 2000, and have considered
whether the provision of these services is compatible with maintaining the
independence of the independent auditors.
Based on the foregoing, we have recommended to the Board of Directors, and
the Board approved, that the audited consolidated financial statements be
included in the Company's Annual Report on Form 10-KSB for the year ended
December 30, 2000, for filing with the Securities and Exchange Commission.
Audit Committee
Albert H. Cohen
Edward H. Cohen, Chairman
Joseph B. Fuller
6
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each
executive officer of the Company.
NAME AGE CURRENT POSITION
---- --- ----------------
Mason N. Carter 55 Chairman of the Board, President and
Chief Executive Officer
Robert V. Condon 54 Vice President, Finance, Chief
Financial Officer, Treasurer and
Secretary
Richard E. Dec 57 Vice President, New Technology and
Business Development
Brian R. Dornan 52 Vice President and Chief Engineer, RF
Microwave Products Group
Ronald Gold 50 Vice President and General Manager,
Filtran Microcircuits Inc.
Reynold K. Green 42 Vice President and General Manager,
RF Microwave Products Group
Jayson E. Hahn 33 Vice President, Information
Technology and Chief Information
Officer
James J. Logothetis 41 Vice President,
Multi-Mix(R)Engineering
Joseph McAndrew 46 Vice President,
Multi-Mix(R)Operations
Michael Pelenskij 40 Vice President, Operations RF
Microwave Products Group
Dr. Kovilvila N. Ramachandran 60 President and Technical Director,
Filtran Microcircuits Inc.
Lawrence S. Ross 32 Vice President, Quality
Information regarding Mr. Carter is included on page 4.
Mr. Condon has been Vice President, Finance and Chief Financial Officer
since joining the Company in March 1996 and was appointed Secretary and
Treasurer in January 1997. Prior to joining the Company, he was with Berkeley
Educational Services as Vice President, Finance, Treasurer and Chief Financial
Officer from 1995 to February 1996.
Mr. Dec was appointed Vice President, Business Development in July 2000
after serving as Vice President, Marketing since joining the Company in March
1997. Prior to joining the Company, he was Vice President of Business
Development of Kinley & Manbeck, Inc., a business process re-engineering and
systems implementation consulting company, from April 1996 to March 1997. From
1995 to March 1996, he was National Account Manager, Product and Systems Group
for Datatec Industries, Inc.
7
Mr. Dornan was appointed Vice President and Chief Engineer of the RF
Microwave Products Group in December 2000 after serving as Vice President,
Research and Development since February 1998. From October 1996 to February 1998
he served as Group Vice President of Technology and Engineering of the Company.
He had been Group Vice President of Manufacturing from 1986 to October 1996.
Mr. Gold was appointed Vice President and General Manager of the Company's
subsidiary, Filtran Microcircuits Inc. ("FMI"), in September 2000 after serving
as the Company's Vice President, Materials and Business Processes from January
to August 2000. Prior to January 2000, Mr. Gold held the position of Director of
Materials since joining the Company in April 1997. Prior to his employment with
the Company, Mr. Gold held the positions of Commodity Manager, Materials Manager
and Manufacturing Engineering Manager at PrePress Solutions, Inc. from 1986 to
1997.
Mr. Green was appointed Vice President and General Manager of the RF
Microwave Products Group in January 2000. He was Vice President, Sales from
March 1997 to January 2000 and Vice President of Manufacturing from April 1996
to March 1997. He was a member of the Board of Directors from April 1996 to May
1997 and did not seek re-election to the Board. Prior to April 1996, Mr. Green
held positions as Director of Manufacturing, National Sales Manager and Director
of Quality Control and High-Reliability Services at the Company.
Mr. Hahn was appointed Vice President, Information Technology and Chief
Information Officer in October 2000 after serving as Director, Network Services
since June 1998. He served as Manager, Network Services from June 1997 to June
1998 and was Information Technology Support Specialist from December 1996 to
June 1997. Prior to joining the Company, Mr. Hahn was with Berkeley Educational
Services, where he held various Information Technology related positions from
1992 to November 1996.
Mr. Logothetis was appointed Vice President, Multi-Mix(R) Engineering in
May 1998 after rejoining the Company in January 1997 to serve as Director,
Advanced Technology. Prior to rejoining the Company, he served as a director for
Electromagnetic Technologies, Inc. in 1995 and became Vice President of
Microwave Engineering in 1996. From 1984 through 1994, Mr. Logothetis held
various engineering positions with the Company, including Group Manager,
Engineering.
Mr. McAndrew was appointed Vice President, Multi-Mix(R) Operations in June
1999 after serving as Director of Manufacturing Engineering from 1997 to 1999.
From 1984 through 1997, Mr. McAndrew held various engineering positions at the
Company including Manager, Manufacturing and Process Engineering.
Mr. Pelenskij was appointed Vice President, Operations RF Microwave
Products Group in January 2000, after serving as Director of Manufacturing of
the Company from January 1999 to January 2000. Prior to January 1999, Mr.
Pelenskij held the positions of Manager of Screened Components, RF Design
Engineer, and District Sales Manager at the Company since joining the Company in
1993.
Dr. Ramachandran has been President of FMI since January 1996 and has been
Technical Director of FMI since co-founding FMI in 1983. Dr. Ramachandran served
as a member of
8
FMI's Board of Directors prior to the Company's acquisition of FMI. Prior to
1983, Dr. Ramachandran held a position at the National Research Council of
Canada.
Mr. Ross was appointed Vice President, Quality in January 2000 after
serving as Director, Quality since joining the Company in March 1999. Prior to
joining the Company, Mr. Ross was employed as Manager, Quality & Efficiency at
Philips Consumer Electronics' Digital TV Group, a corporate design competency,
from December 1998 to March 1999. From May 1997 to December 1998, Mr. Ross held
the position of Corporate Quality Assurance Manager at General Bearing
Corporation, a ball and taper roller bearing design and manufacturing company.
From 1995 to 1997, he was Director, Quality and ISO Coordination for Mikron
Instrument Company, a non-contact temperature measurement design and
manufacturing company.
There are no family relationships among the executive officers of the
Company.
EXECUTIVE COMPENSATION
The following table sets forth a summary for the last three fiscal years of
the cash and non-cash compensation awarded to, earned by or paid to the
individuals who were (i) the Chief Executive Officer of the Company during
fiscal year 2000 and (ii) the four other most highly compensated executive
officers serving at the end of the last fiscal year (collectively, the "Named
Executive Officers"). No persons who were executive officers at any time during
fiscal year 2000, but not on December 30, 2000, would have been included under
clause (ii) if they had remained an executive officer at December 30, 2000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -----------------------------------
AWARDS PAYOUTS
---------------------------------- -----------------------------------
SECURITIES
UNDERLYING ALL OTHER
OPTIONS/SARS COMPENSATION ($)
NAME AND PRINCIPAL POSITION(S) YEAR SALARY ($) BONUS ($) (#) (1)
- --------------------------------------------------------------------------------------------------------------
Mason N. Carter 2000 $250,000 $100,000 5,000 $ 6,448
Chairman, President and 1999 240,000 - 15,000 4,800
Chief Executive Officer 1998 240,000 20,000(2) 22,000 4,800
Robert V. Condon 2000 $150,000 $ 20,000 - $ 5,674
Vice President, Finance, 1999 145,000 - 3,500 4,648
Chief Financial Officer, 1998 143,750 - 2,750 4,800
Treasurer and Secretary
Reynold K. Green 2000 $127,500 $ 10,000 - $ 4,791
Vice President and General 1999 126,000 - 3,500 3,680
Manager, RF Microwave 1998 123,500 - - 4,258
Products Group
Vice President, Sales
9
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------- -----------------------------------
AWARDS PAYOUTS
---------------------------------- -----------------------------------
SECURITIES
UNDERLYING ALL OTHER
OPTIONS/SARS COMPENSATION ($)
NAME AND PRINCIPAL POSITION(S) YEAR SALARY ($) BONUS ($) (#) (1)
- --------------------------------------------------------------------------------------------------------------
James J. Logothetis 2000 $120,000 $ 10,000 5,000 $ 2,700
Vice President, Multi-Mix 1999 116,000 5,000 3,500 1,745
Engineering; Vice President, 1998 107,667 5,000 - 1,616
Advanced Technology
Joseph McAndrew 2000 $115,000 $ 10,000 - $ 4,236
Vice President, Multi-Mix 1999 105,000 2,000 4,000 3,068
Operations; 1998 86,000 - - 2,773
Director,
Multi-Mix Operations
(1) Comprises matching 401(k) amounts and discretionary profit
sharing contributions contributed by the Company for the accounts of
the Named Executive Officers for fiscal year 2001 pursuant to the
Company's savings and investment plan.
(2) Constitutes a $20,000 signing bonus Mr. Carter received in
fiscal year 1998 in connection with an amendment to his employment
agreement with the Company. See "Employment contracts and termination
of employment and change-in-control arrangements" below.
The following table sets forth information concerning individual grants of
stock options made during fiscal year 2000 to each of the Named Executive
Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
- -----------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS
UNDERLYING OPTIONS/SARS GRANTED TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR OR BASE ($/SH) DATE
- -----------------------------------------------------------------------------------------------------------------------
Mason N. Carter 5,000 11.19% $8.375 2/22/10
James J. Logothetis 5,000 11.19% $8.375 2/22/10
10
The following table sets forth information concerning the exercise of stock
options during fiscal year 2000 by each of the Named Executive Officers and the
fiscal year-end value of unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS
SHARES OPTIONS/SARS AT FY-END($)**
ACQUIRED ON VALUE FY-END EXERCISABLE/
NAME EXERCISE(#) REALIZED($) EXERCISABLE/ UNEXERCISABLE * UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------
Mason N. Carter 1,650 $ 7,331 112,650 / 2,500 1,071,901 / 28,438
Robert V. Condon 3,500 42,875 13,750 / ----- 125,781 / ------
Reynold K. Green -0- -0- 12,850 / ----- 150,913 / ------
James J. Logothetis -0- -0- 28,000 / 8,000 208,563 / 62,065
Joseph McAndrew -0- -0- 13,350 / 19,250 118,850 / 130,804
* The vesting of unexercisable options may accelerate upon a change-in-
control of the Company.
** Amounts represent difference between the aggregate exercise price of
the options and a $19.75 market price of the Common Stock on December 30,
2000.
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS
Mason N. Carter has entered into an employment agreement, as amended as of
August 31, 2000, pursuant to which Mr. Carter will serve as President and Chief
Executive Officer of the Company for a minimum annual salary of $240,000. The
initial term of the employment agreement ends on December 31, 2007 and
automatically renews for successive one year periods thereafter unless
terminated pursuant to the terms of the employment agreement. If, within 12
months after a change-in-control of the Company, Mr. Carter resigns for "good
reason" (as defined in the employment agreement) or is dismissed without "cause"
(as defined in the employment agreement), the Company will pay Mr. Carter the
greater of (a) his 24-month salary and benefits (including bonus) or (b) his
salary and benefits from the date of his resignation or termination to the end
of the then current term of the employment agreement. The employment agreement
also provides that Mr. Carter will receive an annual special bonus on August 31
in each of the years 2001, 2002, 2003, 2004 and 2005, in the form of forgiveness
of 20% of the principal and the accrued interest on a $280,000 loan the Company
made to Mr. Carter on
11
August 31, 2000, in connection with the amendment to Mr. Carter's employment
agreement. See the "Certain relationships and related transactions" below.
In January 1998, the Company entered into severance agreements with each of
the Named Executive Officers (other than Mr. Carter). The severance agreements
provide, among other things, that if an executive is terminated by the Company
without "cause" or the executive resigns for "good reason" (as such terms are
defined in the severance agreements) within one year following a "change in
control" (as defined therein) the Company is obligated to pay to the executive
officer over a 12-month period two times his "annual base salary" (as defined
therein) and to continue to provide health insurance benefits for two years.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 4, 1998, the Company sold 22,000 shares of Common Stock to Mason N.
Carter, at a price of $12.75 per share, which approximated the average closing
price of the Common Stock during the first quarter of fiscal year 1998. The
Company extended to Mr. Carter a loan of $255,000 in connection with the
purchase of these shares. In addition, the Company amended a prior loan to Mr.
Carter of $105,000. A new promissory note for a total of $360,000 is due May 4,
2003 and interest payments (except as described below) are due quarterly,
calculated at a variable interest rate based on the prime rate of the Company's
lending bank. However, payment of interest that accrued from November 1998 until
November 1999 was deferred until the end of the term of the new promissory note
on May 4, 2003. Payment of the loan is secured by the pledge of 33,000 shares of
Common Stock purchased by Mr. Carter with the proceeds of the loans, as
collateral, pursuant to a pledge agreement between Mr. Carter and the Company,
and Mr. Carter has agreed to restrictions on the resale of these shares of
Common Stock.
On August 31, 2000, in connection with the amendment of Mr. Carter's
employment agreement, the Company loaned Mr. Carter $280,000 pursuant to a
promissory note executed by Mr. Carter in favor of the Company. The promissory
note provides that interest will be calculated at a variable interest rate based
on the prime rate of the Company's lending bank, payable annually. Each year 20%
of the amount due under this loan and accrued interest will be forgiven by the
Company, in accordance with Mr. Carter's employment agreement.
The Company is a party to a shareholder's agreement, dated as of October
30, 1998, with Charles F. Huber II, a former director and Chairman of the
Company. Pursuant to the shareholder's agreement, Mr. Huber is required to vote
his shares of Common Stock as directed by the Board of Directors or the Chief
Executive Officer of the Company. Mr. Huber is a Managing Director of William D.
Witter Associates, an affiliate of William D. Witter, Inc., which is a
beneficial owner of more than 5% of the Common Stock. Mr. Huber disclaims
beneficial ownership of the shares owned by William D. Witter, Inc.
During fiscal year 2000, Mr. A. Cohen was paid $8,775 for providing
financial consulting services to the Company.
During fiscal year 2000, the Company retained Career Consultants, Inc. and
SK Associates to perform executive searches and to provide outplacement services
to the Company. Dr. Goldberg is the Chairman and Chief Executive Officer of
these companies. The Company paid an aggregate of $83,750 to these companies
during the year 2000.
12
Mr. Oliner is compensated at a rate of $3,000 a month for providing
technology-related consulting services to the Company.
On April 7, 2000, the Company entered into a stock purchase and exclusivity
agreement with Ericsson Microelectronics, A.B. ("Ericsson") and Ericsson Holding
International, B.V. ("EHI") pursuant to which the Company sold to EHI 375,000
shares of Common Stock, representing approximately 17.5% of the Company's
outstanding Common Stock after giving effect to the sale, for an aggregate
purchase price of $3,375,000 in cash. The stock purchase and exclusivity
agreement also provides that the Company will design, develop and produce
exclusively for Ericsson Multi-Mix products that incorporate active RF power
transistors for use in wireless base station applications, television
transmitters and certain other applications that are intended for Bluetooth
transceivers and that the Company will generally be the priority supplier for
such products. Accordingly, Ericsson will receive first priority on all
Multi-Mix resources of the Company and will have priority access to FMI's
proprietary technology and manufacturing capabilities.
On October 26, 2000, the Company entered into subscription agreements for
Common Stock and three-year warrants to purchase shares of Common Stock
("Warrants") with investors led by Adam Smith Investment Partners, L.P. and
certain of its affiliates (the "Adam Smith Investors"), EHI and Messrs. E.
Cohen, Goldberg and Fuller, members of the Board (the "Director Investors").
Pursuant to the subscription agreements, the Company sold to the investors units
at a price of $12.80 per unit, each unit consisting of one share of Common Stock
and one Warrant with an exercise price of $21.25 which expire on October 26,
2003 ("Units"). Pursuant to the subscription agreements, the Adam Smith
Investors purchased 240,000 Units, EHI purchased 100,000 Units and Messrs. E.
Cohen, Goldberg and Fuller purchased 5,000, 11,000 and 4,000 Units,
respectively, for an aggregate purchase price of $4,608,000. The Common Stock
portion of the Units represented an aggregate of approximately 14% of the
outstanding Common Stock of the Company after giving effect to the sales.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives a monthly
director's fee of $1,500, plus an additional $500 for each meeting of the Board
and of any Committees of the Board attended. The directors are also reimbursed
reasonable travel expenses incurred in attending Board and Committee meetings.
In addition, pursuant to the 1993 Stock Option Plan, each non-employee director
was annually granted an immediately exercisable option to purchase 1,650 shares
of the Common Stock on the date of each annual meeting of stockholders. Each
such grant is at the fair market value on the date of grant. The number of
options granted annually has been increased to 2,500 shares commencing with
fiscal year 2001, and will be granted under the 2001 Stock Option Plan, if such
Plan is approved by the stockholders at the Meeting.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN STOCKHOLDERS
The following table sets forth, as of April 20, 2001, information
concerning the Common Stock owned by (i) persons known to the Company who are
beneficial owners of more than five
13
percent of the Common Stock (ii) each director, director nominee and Named
Executive Officer of the Company, and (iii) all directors, director nominees and
executive officers of the Company as a group, that was either provided by the
person to the Company or is publicly available from filings made with the
Securities and Exchange Commission.
Amount and Nature of
Name and Address Beneficial Ownership+ (direct
of Beneficial Owners except as noted) Percent of Class
-------------------- ---------------- ----------------
Ericsson Holding International, B.V. 575,000(1) 21.16%
c/o Lawrence Lyles
740 East Campbell Road
Richardson, Texas 75081
Adam Smith Investment Partners, L.P., 409,800(2) 14.52%
its affiliates and associates
101 East 52nd Street
New York, NY 10022
William D. Witter, Inc. 341,888(3) 13.06%
One Citicorp Center
153 East 53rd Street
New York, NY 10022
Arthur A. Oliner 200,668(4) 7.59%
11 Dawes Road
Lexington, MA 02173
Mason N. Carter 163,880(5) 6.01%
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
Joel H. Goldberg 50,600(6) 1.92%
c/o C.C.I. / SK Associates, Inc.
1767 Morris Avenue
Union, NJ 07083
Edward H. Cohen 22,950(7) *
c/o Rosenman & Colin LLP
575 Madison Avenue
New York, NY 10022
Albert H. Cohen 16,850(8) *
51 Primrose Court
Princeton, NJ 08540
Joseph B. Fuller 9,650(9) *
c/o Monitor Company
Two Canal Park
Cambridge, MA 02141
14
Amount and Nature of
Name and Address Beneficial Ownership+ (direct
of Beneficial Owners except as noted) Percent of Class
-------------------- ----------------------------- ----------------
Harold J. Raveche -- ---
c/o Stevens Institute of Technology
Castle Point on Hudson
Hoboken, NJ 07030
James J. Logothetis 30,479(10) 1.15%
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
Robert V. Condon 19,666(11) *
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
Reynold K. Green 19,368(12) *
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
Joseph McAndrew 17,728(13) *
c/o Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, NJ 07006
All directors and 621,966(14) 21.30%
executive officers as a group
(17 persons)
- --------------------------------------------------------------
+ In accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, a person is deemed to be the beneficial owner of securities if
such person has or shares voting power or investment power with respect
to such securities or has the right to acquire beneficial ownership
within 60 days.
* The percentage of shares beneficially owned does not exceed 1% of the
class.
(1) Includes 100,000 shares subject to immediately exercisable warrants.
Information as to the shares of Common Stock and warrants to purchase
shares of Common Stock beneficially owned by Ericsson Holding
International, B.V. is as of October 26, 2000, as set forth in Form 13D,
dated November 22, 2000, and filed with the Securities and Exchange
Commission.
(2) Adam Smith Investment Partners, L.P., its affiliates and associates
include Adam Smith Investment Partners, L.P. ("ASIP"), Adam Smith
Capital Management LLC ("ASCM"), Diamond Capital Management ("DCM"),
Adam Smith Investments, Ltd. ("ASI"), Richard Grossman, Orin Hirschman
and Richard and Ana Grossman JTWROS. The principal executive offices of
ASIP, ASCM and DCM, and the business address of each of Richard Grossman
and Orin Hirschman, are located at 101 East 52nd Street, New York, New
York 10022. The principal executive office of ASI is c/o Insinger Trust
(BVI) Limited, Tropic Isle Building, P.O. Box 438,
15
Road Town, Tortola, British Virgin Islands. Includes 204,900 shares
subject to immediately exercisable warrants. Information as to the
shares of Common Stock and warrants to purchase shares of Common Stock
beneficially owned by ASIP, ASCM, DCM, ASI, Richard Grossman, Orin
Hirschman and Richard and Ana Grossman is as of December 5, 2000, as
set forth in Form 13G/A, dated January 5, 2001, and filed with the
Securities and Exchange Commission.
(3) Information as to the shares of Common Stock beneficially owned was
provided to the Company by William D. Witter, Inc.
(4) Includes 26,400 shares subject to stock options that are exercisable
currently or within 60 days, and 9,528 shares owned by Dr. Oliner's
wife.
(5) Includes 111,000 shares subject to stock options that are exercisable
currently or within 60 days.
(6) Includes 6,600 shares subject to stock options that are exercisable
currently or within 60 days and 11,000 shares subject to immediately
exercisable warrants.
(7) Includes 4,950 shares subject to stock options that are exercisable
currently or within 60 days and 5,000 shares subject to immediately
exercisable warrants.
(8) Includes 8,250 shares subject to stock options that are exercisable
currently or within 60 days.
(9) Includes 1,650 shares subject to stock options that are exercisable
currently or within 60 days and 4,000 shares subject to immediately
exercisable warrants.
(10) Includes 28,000 shares subject to stock options and 695 shares subject
to options under the 1995 Stock Purchase Plan that are exercisable
currently or within 60 days.
(11) Includes 13,750 shares subject to stock options that are exercisable
currently or within 60 days.
(12) Includes 12,850 shares subject to stock options and 2,017 shares subject
to options under the 1995 Stock Purchase Plan that are exercisable
currently or within 60 days.
(13) Includes 13,350 shares subject to stock options and 1,764 shares subject
to options under the 1995 Stock Purchase Plan that are exercisable
currently or within 60 days.
(14) Includes 302,235 shares subject to stock options and 8,756 shares
subject to options under the 1995 Stock Purchase Plan that are
exercisable currently or within 60 days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Common Stock, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. Officers, directors and greater
than ten percent stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, the Company's officers, directors and greater than ten
percent stockholders complied with these Section 16(a) filing requirements with
respect to the Common Stock during the fiscal year ended December 30, 2000.
16
APPROVAL OF THE 2001 STOCK OPTION PLAN
On April 20, 2001, the Board of Directors adopted, subject to stockholder
approval, the 2001 Stock Option Plan. The 2001 Stock Option Plan is intended to
replace the 1993 Stock Option Plan and the 1997 Long Term Incentive Plan, both
of which will be terminated if the 2001 Stock Option Plan is approved by
stockholders. As of the date of this Proxy Statement, there are only 23,375
shares of Common Stock available for the grant of options under the 1993 Stock
Option Plan and only 17,635 shares of Common Stock available under the 1997 Long
Term Incentive Plan. Any outstanding options granted under the 1993 Stock Option
Plan and 1997 Long Term Incentive Plan will continue to be governed by their
applicable plans.
The following summary of certain features of the 2001 Stock Option Plan is
qualified in its entirety by reference to the full text of the 2001 Stock Option
Plan, which is Exhibit B to this Proxy Statement.
The 2001 Stock Option Plan authorizes the grant of an aggregate of 175,000
shares of Common Stock to key employees of the Company and its subsidiaries, to
the non-employee directors of the Company and to certain other persons. Under
the 2001 Stock Option Plan, the Company may grant to eligible individuals
incentive stock options, as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), and/or non-qualified stock options.
NATURE AND PURPOSES OF THE 2001 STOCK OPTION PLAN
The purposes of the 2001 Stock Option Plan are to induce certain
individuals to remain in the employ or service of the Company and its
subsidiaries, to attract new individuals to enter into such employment or
service and to encourage such individuals to secure or increase on reasonable
terms their stock ownership in the Company. The Board of Directors believes that
the 2001 Stock Option Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long-range
plans of the Company and securing its continued growth and financial success.
The approximate number of persons eligible to participate in the 2001 Stock
Option Plan is 210.
DURATION AND MODIFICATION
The 2001 Stock Option Plan will terminate not later than April 19, 2011.
The Board of Directors may at any time terminate the 2001 Stock Option Plan or
make such modifications of the 2001 Stock Option Plan as it may deem advisable.
However, except in certain limited circumstances, the Board of Directors may
not, without further approval by the stockholders, increase the number of shares
of Common Stock as to which options may be granted under the 2001 Stock Option
Plan, change the class of persons eligible to participate in the 2001 Stock
Option Plan or change the manner of determining the option prices.
ADMINISTRATION
The 2001 Stock Option Plan is administered by the Stock Option Committee,
or such other committee of the Board of Directors that the Board may designate
from time to time (the "Option Committee"). The Option Committee currently
consists of Messrs. E. Cohen and Fuller.
17
The members of the Option Committee are appointed annually by the Board. The
Option Committee, among other things, has complete authority, in its discretion,
to interpret the 2001 Stock Option Plan, to prescribe, amend and rescind rules
and regulations relating to it and to determine the participants in the 2001
Stock Option Plan, the time and price at which options will be granted, the
period during which options will be exercisable, the number of shares subject to
each option and whether an option will be an incentive stock option, a
non-qualified stock option or a combination thereof. The Option Committee will
not have the discretion to determine any of the foregoing with respect to the
non-discretionary options annually granted to non-employee directors. All
options granted to non-employee directors are non-qualified stock options. The
members of the Option Committee do not receive additional compensation for
service in connection with the administration of the 2001 Stock Option Plan.
DESCRIPTION OF OPTIONS
Under the 2001 Stock Option Plan, the per share exercise price of any
option may not be less than the fair market value of a share of Common Stock on
the date of grant, which generally is the closing sale price of the Common Stock
on the American Stock Exchange on the business day of the grant. The aggregate
fair market value of the shares of Common Stock for which a participant may be
granted incentive stock options which are exercisable for the first time in any
calendar year may not exceed $100,000. No participant may, during any fiscal
year, be granted options to purchase more than 15,000 shares of the Common
Stock.
On the date of each annual meeting of stockholders, directors who are not
employees of the Company or its subsidiaries will receive a non-discretionary
annual grant of options to purchase 2,500 shares of Common Stock at 100% of the
fair market value on the date of grant. An individual elected to the Board of
Directors other than at an annual meeting of stockholders receives a grant of
options to purchase 2,500 shares of Common Stock on the date of his or her
election.
Options granted under the 2001 Stock Option Plan generally become
exercisable with respect to all of the underlying shares on the first
anniversary of the date of grant, unless otherwise determined by the Option
Committee at the time of the grant of the option. The Option Committee may
permit any option to be exercised in whole or in part prior to the time that it
would otherwise be exercisable. The non-discretionary options
annually granted to non-employee directors are immediately exercisable. Upon the
exercise of an option, the option price must be paid in cash or in shares of
Common Stock. An option may not be granted for a period in excess of 10 years
from the date of grant.
In the event of the death, disability or retirement of an optionee, all
options that have been previously granted and have not expired become
immediately exercisable. If such options are not thereafter exercised, they
generally will terminate 12 months after such optionee's death or disability or
three months of such optionee's retirement, or if earlier the termination date
of such option. If an optionee's employment by, or service for, the Company and
its subsidiaries is terminated by the Company and its subsidiaries prior to his
death, disability or retirement other than for cause, all options that have been
previously granted and have not expired generally will terminate 30 days after
such optionee's termination date, or if earlier the termination date of such
option. If an optionee leaves the employ or service of the Company and its
subsidiaries prior to his or her death, disability or retirement by reason of
his or her voluntary action or for cause, any
18
options previously granted to but not exercised by such optionee will terminate
forthwith. The non-discretionary options annually granted to non-employee
directors expire three months after a non-employee director's service as a
director, or, in the case of death, 12 months after his date of death or, in
either case, if earlier, the termination date of such option.
Non-qualified stock options may be transferred for no consideration to or
for the benefit of the optionee's immediate family, a trust for the exclusive
benefit of the optionee's immediate family or a partnership or limited liability
company for one or more members of the optionee's immediate family. Any transfer
of a non-qualified stock option must be approved in advance by the Option
Committee subject to such conditions as the Option Committee may impose.
The number of shares reserved for issuance under the 2001 Stock Option Plan
and the number of shares covered by each option granted under the 2001 Stock
Option Plan will be adjusted in the event of a stock dividend, reorganization,
recapitalization, stock split-up, combination of shares, sale of assets, merger
or consolidation in which the Company is the surviving corporation. In the event
of the dissolution or liquidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving corporation, each option
will terminate.
SECURITIES SUBJECT TO THE 2001 STOCK OPTION PLAN
There are 175,000 authorized but unissued shares of Common Stock that have
been reserved for issuance upon the exercise of options granted under the 2001
Stock Option Plan. The number of authorized but unissued shares so reserved may
be reduced from time to time to the extent that a corresponding number of
outstanding shares are purchased by the Company and set aside for issuance upon
the exercise of options granted under the 2001 Stock Option Plan. If any such
options were to expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto would again become available for
the purposes of the 2001 Stock Option Plan.
The market value of the Common Stock, as of April 20, 2001 was $12.30 per
share.
FEDERAL INCOME TAX CONSEQUENCES OF ISSUANCE AND EXERCISE OF OPTIONS
The following discussion of the Federal income tax consequences of the
granting and exercise of options under the 2001 Stock Option Plan, and the sale
of Common Stock acquired as a result thereof, is based on an analysis of the
Code, existing laws, judicial decisions and administrative rulings and
regulations, all of which are subject to change. In addition to being subject to
the Federal income tax consequences described below, an optionee may also be
subject to state and/or local income tax consequences in the jurisdiction in
which he or she works and/or resides.
Non-Qualified Stock Options
No income will be recognized by an optionee at the time a non-qualified
stock option is granted. Ordinary income will be recognized by an optionee at
the time a non-qualified stock option is exercised, and the amount of such
income will be equal to the excess of the fair market value on the exercise date
of the shares issued to the optionee over the option price. In the case of an
employee, this ordinary (compensation) income will also constitute wages subject
to
19
withholding, and the Company will be required to make whatever arrangements are
necessary to ensure that the amount of the tax required to be withheld is
available for payment in money.
The Company will generally be entitled to a deduction for Federal income
tax purposes at such time and in the same amount that the optionee is required
to be included in his or her income upon the exercise of a non-qualified stock
option.
If an optionee makes payment of the option price by delivering shares of
Common Stock, the optionee generally will not recognize any gain as a result of
such delivery, but the amount of gain, if any, which is not so recognized will
be excluded from his or her basis in the new shares received.
Capital gain or loss on a subsequent sale or other disposition of the
shares acquired upon the exercise of a non-qualified stock option will be
measured by the difference between the amount realized on the disposition and
the tax basis of such shares. The tax basis of the shares acquired upon the
exercise of any non-qualified stock option will be equal to the sum of the
exercise price of such non-qualified stock option and the amount included in
income with respect to such option.
If an optionee transfers a non-qualified stock option by gift, the optionee
will recognize ordinary income at the time that the transferee exercises the
option. The Company will be required to report the ordinary income recognized by
the optionee, and to withhold income and employment taxes, and pay the Company's
share of employment taxes, with respect to such ordinary income. The optionee
may also be subject to federal gift tax on the value of the transferred
non-qualified stock option at the time that the transfer of the non-qualified
stock option is considered completed for gift purposes. The Internal Revenue
Service takes the position that the transfer is not complete until the
non-qualified stock option is fully vested.
Incentive Stock Options
In general, neither the grant nor the exercise of an incentive stock option
will result in taxable income to an optionee or a deduction to the Company.
However, for purposes of the alternative minimum tax, the spread on the exercise
of an incentive stock option will be considered as part of the optionee's
income.
The sale of Common Stock received pursuant to the exercise of an incentive
stock option which satisfies the holding period rules will result in capital
gain to an optionee and will not result in a tax deduction to the Company. To
receive incentive stock option treatment as to the shares acquired upon exercise
of an incentive stock option, an optionee must neither dispose of such shares
within two years after such incentive stock option is granted nor within one
year after the exercise of such incentive stock option. In addition, an optionee
generally must be an employee of the Company or a subsidiary of the Company at
all times between the date of grant and the date three months before exercise of
such incentive stock option. If an incentive stock option is exercised more than
three months after the termination of an optionee's employment with the Company,
the option will be treated as a non-qualified stock option.
If the holding period rules are not satisfied, the portion of any gain
recognized on the disposition of the shares acquired upon the exercise of an
incentive stock option will be equal to the lesser of (a) the fair market value
of the shares on the date of exercise minus the option price
20
or (b) the amount realized on the disposition minus the option price, will be
treated as ordinary (compensation) income, with any remaining gain being treated
as capital gain. The Company generally will be entitled to a deduction equal to
the amount of such ordinary income.
If an optionee makes payment of the option price by delivering shares of
Common Stock, the optionee generally will not recognize any gain as a result of
such delivery, but the amount of gain, if any, which is not so recognized will
be excluded from his or her basis in the new shares received. However, the use
by an optionee of shares previously acquired pursuant to the exercise of an
incentive stock option to exercise an incentive stock option will be treated as
a taxable disposition if the transferred shares are not held by the optionee for
the requisite holding period.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 2001 STOCK OPTION PLAN
Approval of the 2001 Stock Option Plan requires the affirmative vote of a
majority of the shares present at the Meeting and entitled to vote on the Plan.
Unless otherwise indicated, the accompanying form of proxy will be voted FOR the
proposal to adopt the 2001 Stock Option Plan.
APPROVAL OF THE 2001 STOCK PURCHASE PLAN
On April 20, 2001, the Board of Directors of the Company adopted, subject
to stockholder approval, a 2001 Stock Purchase Plan (the "2001 Purchase Plan").
The 2001 Purchase Plan is intended to replace the 1995 Stock Purchase Plan,
which expired on December 31, 1999.
The following summary of certain features of the 2001 Purchase Plan is
qualified in its entirety by reference to the full text of the 2001 Purchase
Plan, which is Exhibit C to this Proxy Statement.
NATURE AND PURPOSE OF THE 2001 PURCHASE PLAN
The Board of Directors believes that the approval of the 2001 Purchase Plan
will allow the Company to attract and retain the highly trained and motivated
individuals on which the future success of the Company depends. The 2001
Purchase Plan provides employees of the Company and its subsidiaries with an
opportunity to purchase shares of Common Stock through payroll deductions. The
Company intends that the 2001 Purchase Plan will qualify as an "employee stock
purchase plan" under Section 423 of the Code.
SECURITIES SUBJECT TO THE 2001 PURCHASE PLAN
The number of shares of Common Stock reserved for sale under the 2001
Purchase Plan is 250,000.
The market value of the Common Stock, as of April 20, 2001 was $12.30 per
share.
21
ELIGIBILITY
Each employee of the Company and its participating subsidiaries (as
designated by the Board of Directors) who completes one consecutive year of
service with the Company is eligible to participate under the 2001 Purchase
Plan. As of April 20, 2001, approximately 200 people were eligible to
participate in the 2001 Purchase Plan.
ADMINISTRATION OF THE 2001 PURCHASE PLAN
The 2001 Purchase Plan is administered by the Stock Purchase Committee. The
Committee has sole authority to determine all questions arising under the 2001
Purchase Plan, including its interpretation. The members of the Stock Purchase
Committee are appointed by the Board of Directors. Currently, the Stock Purchase
Committee is comprised of Messrs. A. Cohen and Oliner.
PURCHASE OF SHARES
The Company may, from time to time, but is not obligated to, offer a number
of shares of Common Stock for purchase by participating employees under the 2001
Purchase Plan. A participating employee is given the opportunity to purchase a
portion of these shares on the last day (the "Purchase Date") of a 27-month
offering period. In addition, commencing 90 days after the date of the
commencement of the offering period, a participating employee may elect, on up
to two occasions, to purchase shares of Common Stock on the last day of a
calendar month prior to the Purchase Date.
Participation in the 2001 Purchase Plan is entirely voluntary. An employee
may become a participant in the 2001 Purchase Plan by completing an agreement
authorizing payroll deductions from his or her compensation and filing it with
the Company on the date specified by the Stock Purchase Committee prior to the
commencement of the first offering period with respect to which it is to be
effective. Payroll deductions will generally be equal to the percentage of
compensation (not to exceed 10% of such participating employee's annual
compensation) specified by the participating employee. However, the maximum
number of shares that a participating employee may elect to purchase can not
exceed that proportion of the total number of shares being offered as of the
date of his agreement equal to his compensation divided by the aggregate
compensation of all employees electing to participate as of such date.
The purchase price per share at which shares of Common Stock are to be sold
under the 2001 Purchase Plan is established by the Stock Purchase Committee and
will not be less than the lower of (i) 85% of the fair market value of a share
of Common Stock on the offering date or (ii) 85% of the fair market value of a
share of Common Stock on the date on which the shares are purchased by the
participating employee.
Unless a participating employee terminates his or her participation during
the offering period, or exercises his or her right to purchase shares prior to
the Purchase Date, each participating employee will purchase on the Purchase
Date the maximum number of whole shares at the applicable purchase price with
the accumulated payroll deductions in his or her account. If a participating
employee exercises his or her right to purchase shares prior to the
22
Purchase Date, such shares will be purchased with the accumulated payroll
deductions in his or her account, and if necessary, by the participating
employee remitting any additional required funds to the Company.
In no event may a participating employee subscribe to purchase shares (i)
if after giving effect to the election to purchase such shares, the
participating employee will have more than 5% of the combined voting power of
all outstanding shares of the capital stock of the Company, or (ii) totaling in
any one calendar year, together with any other shares purchasable under any
other employee stock purchase plan under Section 423 of the Code, more than
$25,000 (determined at the time of an offer of an agreement or the granting of
such option agreement, as the case may be).
NO RIGHTS
A participating employee under the 2001 Purchase Plan has no rights as a
stockholder, including voting rights, with respect to shares of Common Stock
covered by the 2001 Purchase Plan until the purchase by, and issuance of such
shares to, him or her.
ADJUSTMENTS
The number of shares available under the 2001 Purchase Plan will be
adjusted in the event of a stock dividend, reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation.
WITHDRAWAL; TERMINATION OF EMPLOYMENT
A participating employee may withdraw all, but not less than all, the
payroll deductions credited to his account under the 2001 Purchase Plan at any
time prior to a Purchase Date by giving written notice to the Company. If the
participating employee withdraws during an offering period, all of the
participating employee's payroll deductions credited to his account, plus
interest on such funds from the date withheld at the rate of 5% per annum, will
be paid to the participating employee within 30 business days after receipt of
the notice of withdrawal, and no further payroll deductions for the purchase of
shares will be made during such offering period.
If a participating employee's employment by the Company or a subsidiary is
terminated, such participating employee's agreement shall terminate immediately
and the payroll deductions accumulated in his account will be returned to him
(with interest) within 30 days after such termination, except that (i) in the
event such termination of employment is due to normal or earlier or disability
retirement under the Company's qualified plans, such participating employee
shall have the right for 30 days after such termination (or until the Purchase
Date if it occurs prior to the expiration of such 30-day period) to elect to
purchase all or fewer than all of the shares covered by the agreement and (ii)
in the event that a participating employee dies while employed by the Company or
a subsidiary, such participating employee's estate or beneficiary shall have the
right, at any time within 12 months of such participating employee's death (or
on or before the Purchase Date if it occurs before the expiration of such
12-month period), to elect to purchase all or fewer than all of the shares
covered by the deceased participating employee's agreement.
23
A participating employee's withdrawal during an offering period will not
have any effect upon his eligibility to participate in a succeeding offering
period or in any similar plan that may hereafter be adopted by the Company.
All payroll deductions received or held by the Company under the 2001
Purchase Plan may be used by the Company for any corporate purpose, and the
Company is not obligated to segregate such payroll deductions.
TRANSFERS
An agreement entered into between a participating employee and the Company
pursuant to the 2001 Purchase Plan is not assignable or transferable except by
will or the laws of descent and distribution, and during the lifetime of a
participating employee the shares which are covered hereby may be purchased only
by such participating employee.
DURATION AND MODIFICATION
The 2001 Purchase Plan will terminate not later than April 19, 2011. The
Board of Directors may at any time and for any reason terminate or amend the
2001 Purchase Plan as it may deem advisable provided that any such termination
shall not affect any agreement then outstanding under the 2001 Purchase Plan.
However, the Board of Directors may not, without approval by the stockholders of
the Company, increase the number of shares of Common Stock which may be covered
by all agreements entered into under the 2001 Purchase Plan (either in the
aggregate or with respect to any one employee) except for appropriate
adjustments in the event of certain changes in the capitalization of the
Company, or change the class of persons eligible to participate in the 2001
Purchase Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the Federal income tax consequences of the
participation in, and the purchase of shares of Common Stock under, the 2001
Purchase Plan is based on an analysis of the Code as currently in effect,
existing laws, judicial decisions and administrative rulings and regulations,
all of which are subject to change. In addition to being subject to the Federal
income tax consequences described below, a participating employee may also be
subject to state and/or local income tax consequences in the jurisdiction in
which he works and/or resides.
The 2001 Purchase Plan, and the right of participating employees to make
purchases thereunder, is intended to qualify under the provisions of Sections
421 and 423 of the Code. Under these provisions, no income will be taxable to a
participating employee at the time of the purchase of shares. Upon disposition
of the shares, the participating employee will be subject to tax, and the amount
of the tax will depend on the length of the holding period. If the shares are
disposed of by the participating employee at least two years after the beginning
of an offering period and at least one year from the date the shares are
purchased, the lesser of (a) the excess of the fair market value of the shares
at the time of such disposition over the purchase price or (b) 15% of the fair
market value of the shares on the first day of the offering period, will be
treated as ordinary income. Any additional gain will be taxed at capital gain
rates. If the shares are sold
24
after such time and the sale price is less than the purchase price, the
participating employee recognizes no ordinary income but instead a capital loss.
If the shares are sold or otherwise disposed of before the expiration of
such two-year and one-year periods, the excess of the fair market value of the
shares on the Purchase Date over the purchase price will be treated as ordinary
income. Any additional gain or loss on such sale or disposition will be
long-term or short-term capital gain or loss, depending on the length of the
holding period.
The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participating employee except to the extent of
ordinary income recognized by participating employees upon disposition of shares
within two years from offering date of grant or within one year from the date of
purchase.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 2001 STOCK PURCHASE PLAN
Approval of the 2001 Stock Purchase Plan requires the affirmative vote of a
majority of the shares present at the Meeting and entitled to vote on the Plan.
Unless otherwise indicated, the accompanying form of proxy will be voted FOR the
proposal to adopt the 2001 Stock Purchase Plan.
APPROVAL OF THE 2001
KEY EMPLOYEE INCENTIVE PLAN
At last year's annual meeting of the stockholders, the Company's
stockholders approved the Company's 2000 Key Employee Incentive Plan (the "2000
Incentive Plan"). However, following extensive consultation with outside counsel
to the Company (who had not designed the Plan), the Board of Directors
determined that the 2000 Incentive Plan was poorly designed, flawed in concept
in several areas and could not deliver the benefits that it was intended to
deliver. Accordingly, the Board of Directors voted to terminate the 2000
Incentive Plan. The Board of Directors also adopted, subject to stockholder
approval, the 2001 Key Employee Incentive Plan (the "2001 Incentive Plan"). The
2001 Incentive Plan is intended to deliver the same benefits that had been
intended under the 2000 Incentive Plan. No benefits were awarded under the 2000
Incentive Plan.
The purpose of the 2001 Incentive Plan is to give the Company a competitive
advantage in retaining and motivating key officers and employees and to provide
the Company with a stock plan providing incentives linked to increases in
stockholder value.
The following is a summary of certain provisions of the 2001 Incentive
Plan, which summary is qualified in its entirety by reference to the full text
of the 2001 Incentive Plan attached as Appendix D to this Proxy Statement.
ADMINISTRATION AND ELIGIBILITY
Benefits under the 2001 Incentive Plan are intended to qualify as
"performance-based compensation" within the meaning Section 162(m) of the Code,
and will be administered by the
25
Stock Option Committee or such other committee of two or more directors who are
intended to qualify as "outside directors" within the meaning of Section 162(m)
of the Code as the Board of Directors may from time to time designate (the
"Committee"). Among other things, the Committee has the authority to select the
key officers and employees of the Company and its subsidiaries (the
"Participants") to whom shares of Common Stock ("Restricted Shares") may be
issued and to allocate the percentage share of the Restricted Shares to each
Participant (the "Award Percentage"). The Committee has selected seven key
employees of the Company and its subsidiaries as Participants in the 2001
Incentive Plan and has determined the Award Percentage for each Participant.
PLAN FEATURES
The number of Restricted Shares issued under the 2001 Incentive Plan will
depend on whether the Company achieves two target market capitalizations during
the five-year period beginning on April 20, 2001 (the "Effective Date"). If the
Company attains or achieves an average market capitalization equal to or greater
than $50,000,000 during any six-month period (the "$50,000,000 Market
Capitalization"), then each Participant will be issued the number of Restricted
Shares determined by multiplying (a) his Award Percentage, (b) 5% and (c) the
average market capitalization during such six-month period and dividing the
product by the average fair market value of the Common Stock during such
six-month period. If the Company attains or achieves an average market
capitalization equal to or greater than $80,000,000 over the course of any
six-month period (the "$80,000,000 Market Capitalization"), then each
Participant will be awarded the number of Restricted Shares determined by
multiplying (a) his Award Percentage, (b) 5% and (c) the average market
capitalization during such six-month period and dividing the product by the
average fair market value of the Common Stock during such six-month period. Such
six-month periods may be coterminous, in whole or in part. In no event can
Restricted Shares be issued upon attainment of either the $50,000,000 Market
Capitalization or the $80,000,000 Market Capitalization more than once during
the five-year term of the 2001 Incentive Plan. For purposes of the 2001
Incentive Plan, market capitalization is defined as the number of outstanding
shares of Common Stock (excluding any shares of Common Stock issued subsequent
to the Effective Date, other than shares of Common Stock issued upon the
exercise of stock options granted to employees, directors or consultants,
through the purchase of shares of Common Stock under any stock purchase plan and
upon the exercise of any warrants outstanding on the Effective Date) on a fully
diluted basis, multiplied by the fair market value per share of the Common
Stock.
In the event of a Change in Control (as defined in the 2001 Incentive
Plan), the $50,000,000 Market Capitalization will be deemed to be achieved if
the number of shares of Common Stock (calculated on a fully diluted basis) on
the date of the Change in Control multiplied by the Change in Control Price (as
defined in the 2001 Incentive Plan) (any such number, the "Change in Control
Market Capitalization") is equal to or greater than $50,000,000, and the
$80,000,000 Market Capitalization will be deemed to be achieved if the Change in
Control Market Capitalization is equal to or greater than $80,000,000.
The maximum value of an award of Restricted Shares which may be issued to
any Participant upon achievement of the $50,000,000 Market Capitalization or a
$50,000,000
26
Change in Control Market Capitalization is $1,500,000 (based on the fair market
value of the Common Stock on the date of issuance of the Restricted Shares). The
maximum value of an award of Restricted Shares which may be issued to any
Participant upon achievement of the $80,000,000 Market Capitalization or an
$80,000,000 Change in Control Market Capitalization is $3,500,000 (based on the
fair market value of the Common Stock on the date of issuance of the Restricted
Shares). In the event a Change in Control shall occur which results in a Change
of Control Market Capitalization equal to or greater than $80,000,000 prior to
achievement of the $50,000,000 Market Capitalization, the maximum award would be
$5,000,000.
One-third of the Restricted Shares will vest on each of the first, second
and third anniversaries of the date of an award. During the vesting period and
for two years thereafter the Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered, except that a Participant will be
permitted to sell such number of shares as may be required to satisfy his
federal, state and local tax liability incurred as a result of the vesting of
the Restricted Shares or, under certain circumstances, as a result of the
issuance of the Restricted Shares.
Generally, in the event of a Participant's termination of employment with
the Company for any reason, all unvested Restricted Shares will be forfeited by
the Participant. However, the Committee has the discretion to waive any
remaining restrictions with respect to any of such Participant's Restricted
Shares. In the event of a Participant's involuntary termination of employment by
the Company (other than for cause), all unvested Restricted Stock held by such
Participant will become fully vested, but will still be subject to the two year
holding period. The 2001 Incentive Plan also provides that in the event of a
Change in Control all Restricted Shares will immediately become fully vested,
transferable and free of all restrictions.
The market value of the Common Stock, as of April 20, 2001 was $12.30 per
share.
CHANGE IN CAPITALIZATION
The 2001 Incentive Plan provides that, in the event of any change in
corporate capitalization, such as a stock split, or a corporate transaction,
such as any merger, consolidation, separation, spin-off or other distribution of
property, or any reorganization or partial or complete liquidation of the
Company, the Committee may make such substitution or adjustment in the aggregate
number and kind of shares available for issuance under the 2001 Incentive, in
the number and kind of shares subject to be issued under the 2001 Incentive
Plan, and in the target market capitalization threshold for each of the
$50,000,000 Market Capitalization and the $80,000,000 Market Capitalization to
the extent necessary to account for any such change in corporate capitalization
or such other equitable substitution or adjustments as may be determined to be
appropriate by the Committee.
TERM AND AMENDMENT
The 2001 Incentive Plan will terminate at the end of five years after its
Effective Date; provided that the Restricted Shares outstanding as of such date
shall not be affected or impaired by the termination of the 2001 Incentive Plan.
The Board of Directors may amend the 2001 Incentive Plan, but no amendment
may impair the rights of a Participant without the Participant's consent. In
addition, the 2001
27
Incentive Plan may not be amended without the approval of the Company's
stockholders to the extent such approval is required by law or agreement.
NEW PLAN BENEFITS
The benefits which a Participant will receive in the event that the 2001
Incentive Plan is approved by the stockholders or which would have been received
if the Plan had been in effect during fiscal year 2000 cannot be determined
because receipt of Restricted Shares is dependent upon the extent to which
proposed goals are achieved and future stock prices and the Restricted Shares
are subject to a vesting period. The following table sets forth the Award
Percentage for each of the Named Executive Officers and all executive officers
as a group.
Executive Officer Award Percentage
----------------- ----------------
Mason N. Carter 38.6%
Robert V. Condon 11.3%
Reynold K. Green 11.3%
James J. Logothetis 11.3%
Joseph McAndrew 11.3%
All executive officers as a group,
including the above (7 persons) 100.0%
FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the Federal income tax consequences of the
issuance, vesting, sale and forfeiture of Restricted Shares is based on an
analysis of the Code, as currently in effect, existing laws, judicial decisions
and administrative rulings and regulations, all of which are subject to change.
In addition to being subject to the Federal income tax consequences described
below, a Participant may also be subject to state and local tax consequences in
the jurisdiction in which he works and/or resides.
No income will be recognized by a Participant at the time Restricted Shares
are issued to him. Ordinary income will be recognized by a Participant at the
time such Restricted Shares vest. The amount of such ordinary income will be
equal to the fair market value of the Common Stock on the vesting date. This
ordinary (compensation) income will also constitute wages subject to withholding
and the Company will be required to make whatever arrangements are necessary to
ensure that the amount of tax required to be withheld is available for payment.
Any subsequent gain or loss will be a capital gain or loss with the
Participant's holding period being measured from the vesting date and with the
Participant's basis being equal to the fair market value of the shares on such
date.
Notwithstanding the foregoing, a Participant may, within 30 days after
Restricted Shares are issued to him under the 2001 Incentive Plan, elect (a
"Section 83(b) Election") under Section 83(b) of the Code to include in income
as of the date of their issuance the fair market value of such Restricted
Shares, notwithstanding that such shares are subject to a "substantial risk of
forfeiture" within the contemplation of Section 83 of the Code. Such income will
be ordinary (compensation) income which will also constitute wages subject to
withholding and the
28
Company will be required to make whatever arrangements are necessary to ensure
that the amount required to be withheld is available for payment. If
subsequently such Restricted Shares are forfeited to the Company, such event
will not be a taxable event to the Participant. Upon the eventual sale of the
Restricted Shares, any gain or loss will be a capital gain or loss with the
Participant's holding period being determined by reference to the date of
issuance and his basis being the fair market value thereof on the date of
issuance. If a Participant makes a Section 83(b) Election, and subsequently
retransfers the Restricted Shares to the Company, he will not be entitled to a
deduction with respect thereto and will not have a capital loss as a result
thereof.
The Company generally will be entitled to a deduction for Federal income
tax purposes in an amount equal to the amount included in income by the
Participant.
To the extent permitted by the Committee, the Participant may satisfy his
withholding obligations by delivering to the Company shares of the Common Stock
having a fair market value equal to the amount required to be withheld. Such
delivery will be deemed to be a sale for Federal income tax purposes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE 2001 KEY EMPLOYEE INCENTIVE PLAN
Approval of the 2001 Key Employee Incentive Plan requires the affirmative
vote of a majority of the shares present at the Meeting and entitled to vote on
the Plan. Unless otherwise indicated, the accompanying form of proxy will be
voted FOR the proposal to adopt the 2001 Key Employee Incentive Plan.
RATIFICATION OF SELECTION
OF INDEPENDENT AUDITORS
The Board of Directors has, upon recommendation of the Audit Committee,
selected Arthur Andersen LLP as independent auditors to audit and report upon
the consolidated financial statements of the Company for the fiscal year
beginning January 1, 2001. Arthur Andersen LLP served as the Company's
independent auditors in fiscal year 2000 and in prior years. The Board of
Directors recommends that the stockholders ratify the selection of Arthur
Andersen LLP.
Representatives of Arthur Andersen LLP have been invited, and are expected,
to attend the Meeting, will have an opportunity to make a statement, if they
desire to do so, and will be available to answer questions that may be asked by
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Ratification of the selection of the independent auditors requires the
affirmative vote of a majority of the shares present at the Meeting and entitled
to vote on the subject matter. Unless otherwise indicated, the accompanying form
of proxy will be voted FOR the ratification of the selection of the independent
auditors.
29
STOCKHOLDER PROPOSALS
In order to be included in the proxy statement and proxy card relating to
the 2002 annual meeting of stockholders, stockholder proposals must be received
by the Secretary of the Company at the address below no later than December 20,
2001. The proxy or proxies designated by the Company will have discretionary
authority to vote on any matter properly presented by a stockholder for
consideration at the next annual meeting of stockholders but not submitted for
inclusion in the proxy materials for such meeting, unless notice of the matter
is received by the Secretary of the Company at the address set forth below not
later than March 9, 2002. All proposals must meet the requirements set forth in
the rules and regulations of the SEC in order to be eligible for inclusion in
the proxy statement for the 2002 annual meeting of stockholders.
ANNUAL REPORT
All stockholders as of the Record Date are concurrently being sent a copy
of the Company's Annual Report for the fiscal year ended December 31, 2000 on
Form 10-KSB as filed with the Securities and Exchange Commission.
In addition, upon the written request of any other stockholder, the Company
will furnish that person, without charge, with a copy of the form 10-KSB Annual
Report as filed with the Securities and Exchange Commission. Any such request
should be made in writing to:
Secretary
Merrimac Industries, Inc.
P.O. Box 986
West Caldwell, NJ 07007-0986
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors has no
knowledge of any business other than that described above that will be presented
at the Meeting for action by the stockholders. If any other business should
properly come before the Meeting, it is intended that the persons designated as
attorneys and proxies in the enclosed form of proxy will vote all such proxies
as they in their discretion determine.
By Order of the Board of Directors
/s/ ROBERT V. CONDON
------------------------------
ROBERT V. CONDON
Secretary
April 30, 2001
30
Exhibit A
MERRIMAC INDUSTRIES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I. PURPOSE
The Audit Committee is a committee of the Board of Directors. It shall provide
assistance to the Board in fulfilling the Board's statutory responsibilities
relating to the quality and integrity of the Company's financial reports,
monitor the Company's financial reporting process, and perform such other
activities consistent with this Charter and the Company's By-laws as the
Committee or the Board deems appropriate.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors, none of whom
shall be an employee of the Company and each of whom shall be free from any
relationship to the Company that in the opinion of the Board, would interfere
with the exercise of his independence from management and the Company. All
members of the Committee shall be financially literate, and at least one member
shall have accounting or related financial management expertise.
The members of the Audit Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until the next annual
organizational meeting or until their respective successors shall be duly
elected and qualified.
The Committee shall have the power to retain outside counsel and other
professionals if, in its judgment, that is appropriate.
III. MEETINGS
The Audit Committee shall meet at least three times annually, to review the
audit plan of the outside auditors, to review the Company's annual financial
statements prior to their issuance, and to review the post-audit findings of the
outside auditors. The Committee shall confer with the outside auditors and
management to review the Company's interim financial statements and reports
prior to their issuance.
The Committee shall report to the Board at least annually as to its activities.
IV. RELATIONSHIP WITH OUTSIDE AUDITORS
The outside auditors are ultimately accountable to the Board and the Audit
Committee, as representatives of the Company's shareholders, and the Board and
the Audit Committee have the ultimate authority and responsibility to select,
evaluate, propose the outside auditors for shareholder ratification and, where
appropriate, replace the outside auditors.
A-1
V. DUTIES AND RESPONSIBILITIES
The Audit Committee's primary duties and responsibilities are to:
DOCUMENTS/REPORTS REVIEW
- ------------------------
1. Review and assess the adequacy of this Charter at least annually.
2. Review all public announcements of financial results and quarterly and
annual financial statements and reports prior to any filing with the
Securities and Exchange Commission or any release to the public or
investors.
OUTSIDE AUDITORS
- ----------------
3. Recommend to the Board the selection of outside auditors and approve the
fees and other compensation to be paid to the outside auditors.
4. Review all significant relationships the outside auditors have with the
Company to determine their independence. The outside auditors shall
annually provide the Audit Committee a written statement delineating all
such relationships.
5. Review the annual audit plan of the outside auditors and evaluate their
performance.
FINANCIAL REPORTING PROCESSES
- -----------------------------
6. Consult with the outside auditors concerning the completeness and accuracy
of the Company's financial statements.
7. Consult with the outside auditors concerning the quality of the Company's
accounting principles as applied in its financial statements and reporting.
8. Review any significant judgments made in management's preparation of the
financial statements and the view of the outside auditors as to the
appropriateness of such judgments.
9. Review any significant difficulties encountered during the course of the
audit or review, including any restrictions on the scope of the outside
auditor's work or access to reviewed information.
10. Review any significant disagreements between management and the outside
auditors in connection with any public announcements of financial results
and quarterly and annual financial statements and reports.
11. Review major changes to the Company's accounting principles as recommended
by the outside auditors or management.
A-2
12. Review with the outside auditors the adequacy of the Company's system of
internal controls, including computerized information system controls and
security, and any related significant findings and recommendations of the
outside auditors, together with management's responses thereto.
13. Review periodically with the Company's general counsel, legal and
regulatory matters that could have a significant impact on the Company's
financial statements.
OTHER
- -----
14. Review periodically the Company's compliance with its Conflict of Interest
policy.
15. Investigate any other matter brought to its attention within the scope of
its duties which it deems appropriate for investigation.
A-3
Exhibit B
MERRIMAC INDUSTRIES, INC.
2001 STOCK OPTION PLAN
1. Purpose. The purposes of the 2001 Stock Option Plan (the "Plan") are to
induce certain individuals to remain in the employ, or to continue to serve as
directors of, or consultants or advisors to, Merrimac Industries, Inc. (the
"Company") and its present and future subsidiary corporations (each a
"Subsidiary"), as defined in Section 424(f) of the Internal Revenue Code of
1986, as amended (the "Code"), to attract new individuals to enter into such
employment or service and to encourage such individuals to secure or increase on
reasonable terms their stock ownership in the Company. The Board of Directors of
the Company (the "Board") believes that the granting of stock options
("Options") under the Plan will promote continuity of management and increased
incentive and personal interest in the welfare of the Company by those who are
or may become primarily responsible for shaping and carrying out the long range
plans of the Company and securing its continued growth and financial success.
Options granted hereunder are intended to be either (i) "incentive stock
options" (which term shall have the meaning ascribed thereto by the provisions
of Section 422(b) of the Code) or (ii) options which are not incentive stock
options ("non-qualified stock options") or (iii) a combination thereof, as
determined by the Committee (the "Committee") referred to in Section 5 hereof at
the time of the grant thereof.
2. Effective Date of Plan. The Plan became effective on April 20, 2001,
subject to ratification by the stockholders of the Company.
3. Stock Subject to Plan. 175,000 of the authorized but unissued shares of
the common stock, $0.01 par value, of the Company (the "Common Stock") are
hereby reserved for issue upon the exercise of Options granted under the Plan;
provided, however, that the number of shares so reserved may from time to time
be reduced to the extent that a corresponding number of issued and outstanding
shares of the Common Stock are purchased by the Company and set aside for issue
upon the exercise of Options. If any Options expire or terminate for any reason
without having been exercised in full, the unpurchased shares subject thereto
shall again be available for the purposes of the Plan.
4. Administration. The Plan shall be administered by the Committee. Subject
to the express provisions of the Plan, the Committee shall have complete
authority, in its discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it, to determine the terms and
provisions of the respective option agreements or certificates (which need not
be identical), to determine the individuals (each a "Participant") to whom and
the times and the prices at which Options shall be granted, the periods during
which each Option shall be exercisable, the number of shares of the Common Stock
to be subject to each Option and whether such Option shall be an incentive stock
option or a non-qualified stock option and to make all other determinations
necessary or advisable for the administration of the Plan. In making such
determinations, the Committee may take into account the nature of the services
rendered by the respective individuals, their present and potential
contributions to the success of the Company and the Subsidiaries and such other
factors as the Committee in its discretion shall deem relevant. The Committee's
determination on the matters referred to in this Section 4 shall be conclusive.
Any dispute or disagreement which may arise under or as a result of or with
respect to any Option shall be determined by the Committee, in its sole
discretion, and any
B-1
interpretations by the Committee of the terms of any Option shall be final,
binding and conclusive.
5. Committee. The Committee shall consist of two or more members of the
Board. The Committee shall be appointed annually by the Board, which may at any
time and from time to time remove any members of the Committee, with or without
cause, appoint additional members to the Committee and fill vacancies, however
caused, in the Committee. A majority of the members of the Committee shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members present at a meeting duly called and held. Any decision
or determination of the Committee reduced to writing and signed by all of the
members of the Committee shall be fully as effective as if it had been made at a
meeting duly called and held.
6. Eligibility. An Option may be granted only to a key employee of the
Company or a Subsidiary or to a director of the Company or a Subsidiary who is
not an employee of the Company or a Subsidiary or to an independent consultant
or advisor who renders services to the Company or a Subsidiary.
7. Option Prices.
(a) The initial per share option price of any Option shall be the price
determined by the Committee, but not less than the fair market value of a share
of the Common Stock on the date of grant; provided, however, that, in the case
of a Participant who owns more than 10% of the total combined voting power of
the Common Stock at the time an Option which is an incentive stock option is
granted to him or her, the initial per share option price shall not be less than
110% of the fair market value of a share of the Common Stock on the date of
grant.
(b) For all purposes of the Plan, the fair market value of a share of
the Common Stock on any date shall be equal to (i) the closing sale price of the
Common Stock on the American Stock Exchange on such date or (ii) if there is no
sale of the Common Stock on such Exchange on such date, the average of the bid
and asked prices on such Exchange at the close of the market on such business
day.
8. Option Term. Participants shall be granted Options for such term as the
Committee shall determine, not in excess of 10 years from the date of the
granting thereof; provided, however, that, in the case of a Participant who owns
more than 10% of the total combined voting power of the Common Stock at the time
an Option which is an incentive stock option is granted to him or her, the term
with respect to such Option shall not be in excess of five years from the date
of the granting thereof.
9. Limitations on Amount of Options Granted.
(a) The aggregate fair market value of the shares of the Common Stock
for which any Participant may be granted incentive stock options which are
exercisable for the first time in any calendar year (whether under the terms of
the Plan or any other stock option plan of the Company) shall not exceed
$100,000.
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(b) No Participant shall, during any fiscal year of the Company, be
granted Options under the Plan to purchase more than 15,000 shares of the Common
Stock.
10. Exercise of Options.
(a) Except as otherwise determined by the Committee at the time of
grant, a Participant may not exercise an Option during the period commencing on
the date of the grant of such Option to him or her and ending on the day
immediately preceding the first anniversary of such date. Except as otherwise
determined by the Committee at the time of grant, a Participant may, during the
period commencing on the first anniversary of the date of the grant of an Option
to him or her and ending at the time the Option expires pursuant to the terms
hereof, exercise such Option with respect to all of the shares granted thereby.
(b) Except as hereinbefore otherwise set forth, an Option may be
exercised either in whole at any time or in part from time to time.
(c) An Option may be exercised only by a written notice of intent to
exercise such Option with respect to a specific number of shares of the Common
Stock and payment to the Company of the amount of the option price for the
number of shares of the Common Stock so specified; provided, however, that all
or any portion of such payment may be made in kind by the delivery of shares of
the Common Stock having a fair market value equal to the portion of the option
price so paid; provided further, however, that no portion of such payment may be
made by delivering shares of the Common Stock acquired upon the exercise of an
Option if such shares shall not have been held by the Participant for at least
six months; and provided further, however, that, subject to the requirements of
Regulation T (as in effect from time to time) promulgated under the Securities
Exchange Act of 1934, as amended, the Committee may implement procedures to
allow a broker chosen by a Participant to make payment of all or any portion of
the option price payable upon the exercise of an Option and receive, on behalf
of such Participant, all or any portion of the shares of the Common Stock
issuable upon such exercise.
(d) The Committee may, in its discretion, permit any Option to be
exercised, in whole or in part, prior to the time when it would otherwise be
exercisable.
11. Transferability. (a) Except as otherwise provided in Section 11(b)
hereof, no Option shall be assignable or transferable except by will and/or by
the laws of descent and distribution and, during the life of any Participant,
each Option granted to such Participant may be exercised only by him or her.
(b) A Participant may, with the prior approval of the Committee,
transfer for no consideration an Option which is a non-qualified stock option to
or for the benefit of the Participant's Immediate Family, a trust for the
exclusive benefit of the Participant's Immediate Family or to a partnership or
limited liability company for one or more members of the Participant's Immediate
Family, subject to such limits as the Committee may establish, and the
transferee shall remain subject to all the terms and conditions applicable to
the Option prior to such transfer. The term "Immediate Family" shall mean the
Participant's children, stepchildren,
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grandchildren, parents, stepparents, grandparents, spouse, former spouse,
siblings, nieces, nephews, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, including adoptive
relationships or any person sharing the Participant's household (other than a
tenant or employee).
12. Termination of Employment or Service. Unless otherwise determined by
the Committee, in the event a Participant's employment or service with the
Company and the Subsidiaries terminates by reason of his or her death, each
Option therefore granted to him or her which shall not have theretofore expired
or otherwise been cancelled shall immediately become exercisable in full and
shall terminate upon the earlier to occur of the expiration of 12 months after
the date of his or her death and the date of termination specified in such
Option. Unless otherwise determined by the Committee, in the event a
Participant's employment or service with the Company and the Subsidiaries
terminates by reason of his or her disability, each Option therefore granted to
him or her which shall not have theretofore expired or otherwise been cancelled
shall immediately become exercisable in full and shall terminate upon the
earlier to occur of the expiration of 12 months after the date of his or her
disability and the date of termination specified in such Option. Unless
otherwise determined by the Committee, in the event a Participant's employment
or service with the Company and the Subsidiaries terminates by reason of his or
her retirement, each Option therefore granted to him or her which shall not have
theretofore expired or otherwise been cancelled shall immediately become
exercisable in full and shall terminate upon the earlier to occur of the
expiration of three months after the date of his or her retirement and the date
of termination specified in such Option. Unless otherwise determined by the
Committee, in the event the employment or service of a Participant is terminated
by the Company and its Subsidiaries for any reason other than death, disability,
retirement or cause, each Option theretofore granted to him or her which shall
not have theretofore expired or otherwise been cancelled shall terminate upon
the earlier to occur of the expiration of 30 days after the date of his or her
termination and the date of termination specified in such Option. Unless
otherwise terminated by the Committee in the event a Participant leaves the
employ or service of the Company and its Subsidiaries by reason of his or her
voluntary action or for cause prior to death, disability or retirement, each
Option theretofore granted to him or her which shall not have theretofore
expired or otherwise been cancelled shall, to the extent not theretofore
exercised, terminate forthwith. For purposes of the foregoing (a) "disability"
means total disability as determined in accordance with the terms of any
long-term disability plan maintained by the Company or the Subsidiaries (or, if
the Company and the Subsidiaries have no such plan, as determined by the
Committee) (b) "retirement" means termination of employment in accordance with
the retirement provisions of any retirement plan maintained by the Company or
the Subsidiaries (or, if the Company and the Subsidiaries have no such plan, at
or after age 65) and (c) "cause" means (i) a plea of guilty or nolo contendere
to, or conviction for, the commission of a felony offense by a Participant; (ii)
a material breach by a Participant of a fiduciary duty owed to the Company or
any of its Subsidiaries, (iii) a material breach by a Participant of any
nondisclosure, non-solicitation or non-competition obligation owed to the
Company or any of its Subsidiaries and (iv) the willful and continued failure or
gross neglect on the part of a Participant to perform his or her employment
duties.
13. Adjustment of Number of Shares. In the event that a dividend shall be
declared upon the Common Stock payable in shares of the Common Stock, the number
of shares of the Common Stock then subject to any Option and the number of
shares of the Common Stock
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reserved for issuance in accordance with the provisions of the Plan but not yet
covered by an Option, the number of shares set forth in Section 9(b) hereof and
the number of shares set forth in Section 20(b)(i) hereof shall be adjusted by
adding to each share the number of shares which would be distributable thereon
if such shares had been outstanding on the date fixed for determining the
stockholders entitled to receive such stock dividend. In the event that the
outstanding shares of the Common Stock shall be changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or of another corporation, whether through reorganization, recapitalization,
stock split-up, combination of shares, sale of assets, merger or consolidation
in which the Company is the surviving corporation, then, there shall be
substituted for each share of the Common Stock then subject to any Option, for
each share of the Common Stock reserved for issuance in accordance with the
provisions of the Plan but not yet covered by an Option, for each share of the
Common Stock referred to in Section 9(b) hereof and for each share of the Common
Stock referred to in Section 20(b)(i) hereof, the number and kind of shares of
stock or other securities into which each outstanding share of the Common Stock
shall be so changed or for which each such share shall be exchanged. In the
event that there shall be any change, other than as specified in this Section
13, in the number or kind of outstanding shares of the Common Stock, or of any
stock or other securities into which the Common Stock shall have been changed,
or for which it shall have been exchanged, then, if the Committee shall, in its
sole discretion, determine that such change equitably requires an adjustment in
the number or kind of shares then subject to any Option, the number or kind of
shares reserved for issuance in accordance with the provisions of the Plan but
not yet covered by an Option, the number or kind of shares referred to in
Section 9(b) hereof and number or kind of shares referred to in Section 20(b)(i)
hereof, such adjustment shall be made by the Committee and shall be effective
and binding for all purposes of the Plan and of each stock option agreement or
certificate entered into in accordance with the provisions of the Plan. In the
case of any substitution or adjustment in accordance with the provisions of this
Section 13, the option price in each stock option agreement or certificate for
each share covered thereby prior to such substitution or adjustment shall be the
option price for all shares of stock or other securities which shall have been
substituted for such share or to which such share shall have been adjusted in
accordance with the provisions of this Section 13. No adjustment or substitution
provided for in this Section 13 shall require the Company to sell a fractional
share under any stock option agreement or certificate. In the event of the
dissolution or liquidation of the Company, or a merger, reorganization or
consolidation in which the Company is not the surviving corporation, then,
except as otherwise provided in the second sentence of this Section 13, each
Option, to the extent not theretofore exercised, shall terminate forthwith.
14. Purchase for Investment, Withholding and Waivers. Unless the shares to
be issued upon the exercise of an Option by a Participant shall be registered
prior to the issuance thereof under the Securities Act of 1933, as amended, such
Participant will, as a condition of the Company's obligation to issue such
shares, be required to give a representation in writing that he or she is
acquiring such shares for his or her own account as an investment and not with a
view to, or for sale in connection with, the distribution of any thereof. In the
event of the death of a Participant, a condition of exercising any Option shall
be the delivery to the Company of such tax waivers and other documents as the
Committee shall determine. In the case of each non-qualified stock option, a
condition of exercising the same shall be the entry by the person exercising the
same into such arrangements with the Company with respect to withholding as the
Committee may determine.
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15. No Stockholder Status. Neither any Participant nor his or her legal
representatives, legatees or distributees shall be or be deemed to be the holder
of any share of the Common Stock covered by an Option unless and until a
certificate for such share has been issued. Upon payment of the purchase price
thereof, a share issued upon exercise of an Option shall be fully paid and
non-assessable.
16. No Restrictions on Corporate Acts. Neither the existence of the Plan
nor any Option shall in any way affect the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the Common
Stock or the rights thereof, or dissolution or liquidation of the Company, or
any sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding whether of a similar character or otherwise.
17. No Employment Right. Neither the existence of the Plan nor the grant of
any Option shall require the Company or any Subsidiary to continue any
Participant in the employ or service of the Company or such Subsidiary.
18. Termination and Amendment of the Plan. The Board may at any time
terminate the Plan or make such modifications of the Plan as it shall deem
advisable; provided, however, that the Board may not without further approval of
the holders of a majority of the shares of the Common Stock present in person or
by proxy at any special or annual meeting of the stockholders, increase the
number of shares as to which Options may be granted under the Plan (as adjusted
in accordance with the provisions of Section 13 hereof), or change the class of
persons eligible to participate in the Plan, or change the manner of determining
the option prices. Except as otherwise provided in Section 13 hereof, no
termination or amendment of the Plan may, without the consent of the Participant
to whom any Option shall theretofore have been granted, adversely affect the
rights of such Participant under such Option.
19. Expiration and Termination of the Plan. The Plan shall terminate on
April 19, 2011 or at such earlier time as the Board may determine. Options may
be granted under the Plan at any time and from time to time prior to its
termination. Any Option outstanding under the Plan at the time of the
termination of the Plan shall remain in effect until such Option shall have been
exercised or shall have expired in accordance with its terms.
20. Options for Outside Directors.
(a) A director of the Company who is not an employee of the Company or
a Subsidiary (an "Outside Director") shall be eligible to receive, in addition
to any other Option which he or she may receive pursuant to Section 6 hereof, an
Option in accordance with Section 20(b) hereof. Except as otherwise provided in
this Section 20, each such Option shall be subject to all of the terms and
conditions of the Plan.
(b) (i) On the date of each annual meeting of stockholders, each
Outside Director shall receive a grant of an Option, which shall be a
non-qualified stock option, to purchase 2,500 shares of Common Stock. If an
Outside Director is first elected a member of the Company's
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Board of Directors other than at an annual meeting of stockholders, then, on the
date he or she is first so elected, he or she shall receive a grant of an
Option, which shall be a non-qualified stock option, to purchase 2,500 shares of
Common Stock. Options granted to Outside Directors shall be immediately
exercisable.
(ii) The number and nature of shares subject to any Option held by
an Outside Director shall be subject to adjustment only to the extent set forth
in Section 13 hereof.
(iii) The initial per share option price of each Option granted to
an Outside Director under this Section 20 shall be equal to the fair market
value of a share of the Common Stock on the date of grant.
(iv) The term of each Option granted to an Outside Director shall be
five years from the date of the granting thereof, unless sooner terminated in
accordance with Section 20(c).
(iv) All or any portion of the payment required upon the exercise of
an Option granted to an Outside Director may be made in kind by the delivery of
shares of the Common Stock having a fair market value equal to the portion of
the option price so paid; provided, however, that no portion of such payment may
be made by delivering shares of the Common Stock acquired upon the exercise of
an Option if such shares shall not have been held by such Outside Director for
at least six months; and provided further, however, that, subject to the
requirements of Regulation T (as in effect from time to time) promulgated under
the Exchange Act, the Committee may implement procedures to allow a broker
chosen by such Outside Director to make payment of all or any portion of the
option price payable upon the exercise of an Option and receive, on behalf of
such Outside Director, all or any portion of the shares of the Common Stock
issuable upon such exercise.
(c) If an Outside Director's service as a director terminates by reason
of his or her death, each Option theretofore granted to him or her pursuant to
Section 20(b) hereof which shall not have theretofore expired or otherwise been
cancelled shall terminate upon the earlier to occur of 12 months following the
date of his or her death and the date of termination specified in such Option.
If an Outside Director's service as a director terminates for any reason other
than death, each Option theretofore granted to him or her pursuant to Section
20(b) hereof which shall not have theretofore expired or otherwise been
cancelled shall terminate upon the earlier to occur of three months following
such termination and the date of termination specified in such Option.
(d) The provisions of this Section 20 may not be amended except by the
vote of a majority of the members of the Board and by the vote of a majority of
the members of the Board who are not Outside Directors.
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Exhibit C
MERRIMAC INDUSTRIES, INC.
2001 STOCK PURCHASE PLAN
1. Purpose. The purpose of this 2001 Stock Purchase Plan ("Plan") is to
provide an opportunity for employees of Merrimac Industries, Inc. (the
"Company") and of its present and future Subsidiaries to purchase shares of
Common Stock of the Company and thereby to have an additional incentive to
contribute to the prosperity of the Company. It is the intention of the Company
that the Plan qualify as an "employee stock purchase plan" within the meaning of
Section 423 of the Code. The provisions of the Plan shall be construed so as to
extend and limit participation in a manner consistent with that section of the
Code.
2. Definitions. The following words have the following meanings unless a
different meaning is plainly required by the context.
(a) "Agreement" means the Option Offer and Stock Purchase Agreement
setting forth the terms and conditions pursuant to which shares of Common Stock
may be purchased by an Employee under the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Stock Purchase Plan Committee appointed under
Section 4 to administer the Plan.
(e) "Common Stock" means the common stock, par value $0.01, of the
Company.
(f) "Compensation" means regular fixed basic compensation in effect for
an Employee on the date of the Agreement, and, at the discretion of the
Committee, such discretion to be exercised uniformly with respect to all
Employees, any bonus or overtime pay, but in all cases excluding any
contribution to an employee benefit plan or other similar payment or
contribution.
(g) "Employee" means any employee, including any officer, who has been
in the service of the Company or of any Subsidiary which has been designated by
the Company as a Subsidiary eligible to participate in the Plan for at least one
consecutive year immediately prior to the date on which he enters into an
Agreement with the Company hereunder, other than any employee working in a
country whose laws make participation in the Plan impractical and/or illegal.
(h) "Fair Market Value" means, with respect to a share of the Common
Stock on any date, (i) the closing sale price of the Common Stock on the
American Stock Exchange on such date or (ii) if there is no sale of the Common
Stock on such Exchange on such date, the average of the bid and asked prices on
such Exchange at the close of the market on such business day.
(i) "Interest" means interest at the rate of 5% a year.
(j) "Purchase Date" means the last day of a period of 27 months
beginning with the date of the offer of an Agreement hereunder.
(k) "Subsidiary" means any corporation in which the Company owns
directly or indirectly a majority of the issued and outstanding shares of stock.
3. Stock.
(a) The total number of shares of Common Stock which may be sold under
the Plan shall not exceed 250,000 shares except to the extent of adjustments
authorized by Section 6(a)(x). These shares may consist in whole or in part of
unissued shares or treasury shares.
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(b) If an Agreement entered into under the Plan shall expire or
terminate for any reason, any unpurchased shares subject thereto shall (unless
the Plan shall have been terminated) again be available for the purposes of the
Plan.
4. Administration. The Board shall appoint a Stock Purchase Plan Committee
consisting of at least two members of the Board who shall serve at the pleasure
of the Board. The Committee shall administer the Plan and shall, when and as
authorized by the Board from time to time, offer to enter into an Agreement
under the Plan with each Employee who elects to participate in the Plan and
shall have the sole authority to interpret the Plan and any Agreement. All
decisions made by the Committee shall be final.
5. Number of Shares Which an Employee May Purchase. An Employee may elect
to purchase pursuant to the terms of an Agreement entered into hereunder that
number of shares of Common Stock having a Fair Market Value equal to such
percentage of his Compensation as such Employee elects, up to 10% of his
Compensation, but not more than that proportion of the total number of shares
being offered as of the date of such Agreement equal to his Compensation divided
by the aggregate Compensation of all Employees who elect to participate as of
the date of such Agreements. Any fractional shares resulting from these
calculations shall be eliminated. Such Employee may elect to purchase fewer than
the total number of shares which he is entitled to elect under the preceding
sentence. Notwithstanding the foregoing, no Agreement may be entered into
hereunder between the Company and any Employee:
(a) if such Employee (or any other person whose stock ownership shall
be attributed to such Employee pursuant to Section 424(d) of the Code),
immediately after execution of the Agreement, owns stock (including that which
he may purchase under the Agreement and any other stock which the Employee may
purchase under outstanding options and other Agreements) possessing 5% or more
of the total combined voting power or value of all classes of stock of the
Company or of any of its Subsidiaries; or
(b) if such Agreement permits such Employee's rights to purchase stock
under all employee stock purchase plans (within the meaning of Section 423 of
the Code) of the Company and its Subsidiaries to accrue at a rate which exceeds
a Fair Market Value of $25,000 (determined at the time of offer of such
Agreement or the granting of such option agreement, as the case may be) for any
one calendar year.
6. Terms and Conditions of Agreements.
(a) Agreements shall be in such form as the Committee shall from time
to time approve and shall comply with the following terms and conditions:
(i) The purchase price per share shall not be less than the lesser
of (A) 85% of the Fair Market Value of a share of Common Stock on the date
designated by the Committee as the date that offers to enter into
Agreements are made or (B) 85% of the Fair Market Value on the date such
option is exercised.
(ii) The Employee in his Agreement shall direct the Company or the
Subsidiary, as the case may be, to withhold from his Compensation,
throughout the duration of the Agreement, amounts sufficient to accumulate
over the term of the Agreement the aggregate purchase price of the shares
which are covered by the Agreement.
(iii) The stated term of each Agreement shall be 27 months.
(iv) The Agreement shall not be assignable or transferable except by
will or by the laws of descent and distribution. During the lifetime of an
Employee who is a party to such an Agreement the shares which are covered
thereby may be purchased only by him.
(v) Subject to earlier purchase pursuant to Section 6(a)(vii) or
(viii), each Agreement shall provide that the Employee on the Purchase Date
shall purchase all of the shares covered thereby unless he shall have, in
the manner provided for in the Agreement, notified the Company on or
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before the Purchase Date, that he does not desire to purchase any of such
shares or that he desires to purchase fewer than all of such shares. Each
Agreement shall also provide that on the Purchase Date the funds then on
deposit for the Employee's account shall be applied to the purchase price
of such shares, and that the excess, if any, over the purchase price of
purchased shares shall forthwith be paid to the Employee.
(vi) Each Agreement shall provide that the Employee who has entered
into it may at any time on or before the Purchase Date terminate the
Agreement in its entirety by delivering written notice to the Company. Upon
such termination all funds held for the Employee's account, plus Interest
shall be paid promptly to the Employee within 30 business days.
(vii) Each Agreement shall provide that, after it has been in effect
for at least 90 days and subject to Section 9, the Employee, from time to
time (but no more than twice) prior to the Purchase Date, on written notice
received by the Company at least five business days prior to the end of any
calendar month, may elect to purchase on the last day of such month or of
any subsequent month (unless the Purchase Date shall first occur) all or
fewer than all of the shares covered by the Agreement.
(viii) If the employment by the Company and/or its Subsidiaries of
an Employee who has entered into an Agreement hereunder shall terminate,
the Agreement shall terminate immediately and within 30 business days of
such termination the Employee shall be paid all funds held for the
Employee's account, plus Interest; provided, however, that if any
termination of employment is due to either normal, early or disability
retirement under the Company's qualified plans, the Employee shall have the
right within 30 days thereafter (or on or before the Purchase Date if it
occurs before the expiration of such period) to elect to purchase all or
fewer than all of the shares covered by the Agreement; and further
provided, that if the Employee shall die while in the employ of the Company
or a Subsidiary during the term of the Agreement, his estate, personal
representative, or beneficiary shall have the right, at any time within 12
months of his death (or on or before the Purchase Date if it occurs before
the expiration of such period), to elect to purchase all or fewer than all
of the shares covered by the deceased employee's Agreement.
(ix) Each Agreement shall provide that the purchase price shall be
payable in United States dollars upon any purchase of shares thereunder by
transfers, to the extent required to cover the purchase price, of amounts
held for the Employee's account, supplemented, if necessary, by payments
from the Employee in the form of cash, certified check, bank draft or money
order payable to the order of the Company.
(x) If there shall be any increase or decrease in the number of
issued shares of the Common Stock resulting from a subdivision or a
consolidation or reclassification of shares, or the payment of a stock
dividend, appropriate adjustments shall be made by the Board in the
aggregate number of shares subject to the Plan, the formula determining the
number of shares with respect to which Agreements may be entered into with
any particular Employee and the number of shares and price per share
subject to outstanding Agreements, provided, however, that any fractional
shares resulting from any such adjustment shall be eliminated.
(xi) If the Company shall be the surviving or resulting corporation
in any merger or consolidation, any Agreement entered into under the Plan
shall apply to the shares to which a holder of the number of shares of
Common Stock covered by the Agreement would have been entitled.
(b) Agreements under the Plan may contain such other provisions as the
Committee may deem appropriate, provided such other provisions do not violate
any applicable statute or regulation, apply uniformly to all Employees and are
not inconsistent with the terms of the Plan.
7. Rights as a Stockholder. An Employee who is a party to an Agreement
entered into hereunder shall have no rights as a stockholder with respect to
shares covered by such Agreement until the date of the issuance of the shares to
him. No adjustment will be made for dividends or other rights for which the
record date is prior to the date of such issuance.
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8. Employee Representations. If, at the time of any purchase under an
Agreement under the Plan, in the opinion of counsel for the Company, it is
necessary or desirable, in order to comply with any applicable law or regulation
relating to the sale of securities, that the Employee shall agree that he will
purchase the shares that are subject to the Agreement for investment and not
with any present intention to resell the same, the employee will, upon the
request of the Company, execute and deliver to the Company an agreement to such
effect.
9. Effective Date of Plan. The Plan became effective on April 20, 2001,
subject to approval within 12 months of adoption by the holders of a majority of
the shares of the Common Stock present in person or by proxy at any special or
annual meeting of the stockholders. Agreements may be entered into following
such date, provided that they shall expressly provide that no shares may be
issued thereunder unless and until the Plan shall have been approved by
stockholders.
10. Term of Plan. No offer to enter into an Agreement shall be made
pursuant to the Plan after April 19, 2011. The Board may terminate the Plan at
any time, provided, however, that any such termination shall not affect any
Agreement then outstanding under the Plan.
11. Amendment of Plan. The Board may amend the Plan at any time, and from
time to time, provided, however, that, without the further approval of the
holders of a majority of the shares of the Common Stock present in person or by
proxy at any special or annual meeting of the stockholders, the Board may not
(a) increase (other than by adjustments provided in Section 6(a)(x)) the maximum
number of shares which may be covered by all Agreements entered into under the
Plan (either in the aggregate or with respect to any individual) or (b) change
the persons or category of persons eligible to participate in the Plan.
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EXHIBIT D
MERRIMAC INDUSTRIES, INC.
2001 KEY EMPLOYEE INCENTIVE PLAN
1. Purpose. The purpose of the Merrimac Industries, Inc. 2001 Key Employee
Incentive Plan (the "Plan") is to give Merrimac Industries, Inc. (the "Company")
a competitive advantage in retaining and motivating key officers and employees
and to provide the Company and its Subsidiaries with a stock plan providing
incentives linked to increases in stockholder value. The Plan was approved by
the Board of Directors of the Company (the "Board") on April 20, 2001 (the
"Effective Date"), subject to approval by the stockholders of the Company at the
2001 Annual Meeting of Stockholders.
2. Definitions. For purposes of the Plan, the following terms are defined
as set forth below:
(a) "Cause" means: (i) a plea of guilty or nolo contendere to, or
conviction for, the commission of a felony offense by a Participant; (ii) a
material breach by a Participant of a fiduciary duty owed to the Company or any
of its Subsidiaries; (iii) a material breach by a Participant of any
nondisclosure, non-solicitation or non-competition obligation owed to the
Company or any of its Subsidiaries and (iv) the willful and continued failure or
gross neglect on the part of a Participant to perform his employment duties. The
Committee shall have the sole discretion to determine whether "Cause" exists,
and its determination shall be final.
(b) "Change in Control" means the happening of any of the following
events:
(i) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 50% or more of the then outstanding shares of Common
Stock of the Company ("Outstanding Company Common Stock"); provided,
however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change in Control: (A) any acquisition
by the Company, (B) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any of its
Subsidiaries or (C) any acquisition by any Person pursuant to a transaction
which complies with clauses (A) and (B) of subsection (iii); or
(ii) Individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation or sale or other disposition of all
or substantially all of the assets of the Company or the purchase of assets
or stock of another entity (a "Business Combination"), in each case, unless
immediately following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners of the
Outstanding Company Common Stock immediately prior to such Business
Combination will beneficially own, directly or indirectly, more than 50% of
the combined voting power of the then outstanding securities entitled to
vote generally in the election of directors of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) and (B) at least a majority of the members of the
board of directors of the corporation resulting from such Business
Combination will have been members of the Incumbent Board at the time of
the initial agreement, or action of the Board, providing for such Business
Combination; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
D-1
(c) "Change in Control Market Capitalization" means the number of
outstanding shares of Common Stock on the date of a Change in Control (excluding
any shares of Common Stock issued subsequent to the Effective Date, other than
shares of Common Stock issued (i) upon exercise of stock options granted to
employees, directors or consultants, (ii) through the purchase of shares of
Common Stock under any stock purchase plan maintained by the Company or its
Subsidiaries for the benefit of employees or (iii) upon the exercise of any or
all of the 360,000 warrants outstanding on the Effective Date), calculated on a
fully diluted basis, multiplied by the Change in Control Price.
(d) "Change in Control Price" means the higher of (i) the highest Fair
Market Value during the 60-day period prior to and including the date of a
Change in Control or (ii) if the Change in Control is the result of a tender or
exchange offer or a Business Combination, the highest price per share of Common
Stock paid in such tender or exchange offer or Business Combination. To the
extent that the consideration paid in any such tender or exchange offer or
Business Combination consists all or in part of securities or other non-cash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Committee.
(e) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(f) "Committee" means the committee of directors which shall administer
the Plan and shall be appointed pursuant to Section 3.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(h) "Common Stock" means the common stock, par value $0.01 per share,
of the Company, subject to adjustment as set forth in Section 5(f).
(i) "Fair Market Value" means, as of any date, the closing price of the
Common Stock as reported on the American Stock Exchange (or, if the Common Stock
is listed on a different national securities exchange or in the over-the-counter
market, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national security exchange or
as reported by NASDAQ, as the case may be, on which the Common Stock is listed
or admitted to trading) on such date or, if there are no reported sales on such
date, on the last day prior to such date on which there are such reported sales.
(j) "Market Capitalization" means, as of any date, the number of then
outstanding shares of Common Stock (excluding any shares of Common Stock issued
subsequent to the Effective Date, other than shares of Common Stock issued (i)
upon exercise of stock options granted to employees, directors or consultants,
(ii) through the purchase of shares of Common Stock under any stock purchase
plan maintained by the Company or its Subsidiaries for the benefit of employees
or (iii) upon the exercise of any or all of the 360,000 warrants outstanding on
the Effective Date), calculated on a fully diluted basis, multiplied by the Fair
Market Value.
(k) "Participants" means the key employees of the Company and its
Subsidiaries who shall be eligible to participate in the Plan.
(l) "Subsidiaries" means a corporation or other entity in which the
Company directly or indirectly controls 50% or more of the total combined voting
power of all classes of such corporation's or other entity's stock, equity
securities, partnership interests or membership interests.
3. Committee. The Plan shall be administered by the Committee, which shall
consist of two or more members of the Board both or all of whom are intended to
be "outside directors" within the contemplation of section 162(m)(4)(C)(i) of
the Code. The Committee shall be appointed annually by the Board, which may at
any time and from time to time remove any members of the Committee, with or
without cause, appoint additional members of the Committee and fill vacancies,
however caused, in the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made by
a majority of its members present at a meeting duly called and held. Any
decision or determination of the Committee reduced to writing and signed by
D-2
all of the members of the Committee shall be fully as effective as if it had
been made at a meeting duly called and held.
4. Administration. Concurrently with the adoption of the Plan, the
Committee shall determine the Participants and shall allocate to each
Participant the percentage share (the "Award Percentage") of the restricted
shares (the "Restricted Shares") that will be granted to such Participant in the
event that the Company achieves the performance goals provided in Section 5.
Subject to the express provisions of the Plan, the Committee shall have complete
authority, in its discretion, to interpret the Plan, to prescribe, amend and
rescind rules and regulations relating to it and to make all other
determinations necessary or advisable for the administration of the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective Participants, their present and
potential contributions to the success of the Company and its Subsidiaries and
such other factors as the Committee in its discretion shall deem relevant. The
Committee's determinations on the matters referred to in this Section 4 shall be
conclusive. Any dispute or disagreement which may arise hereunder, or as a
result of, or with respect to, any Restricted Shares shall be determined by the
Committee, in its sole discretion, and any interpretations by the Committee of
the terms thereof shall be final, binding and conclusive.
5. Performance Goals.
(a) $50,000,000 Market Capitalization. In the event that the Company
shall achieve an average Market Capitalization equal to or greater than
$50,000,000 during any six-month period during the five-year period beginning on
the Effective Date (the "$50,000,000 Market Capitalization"), then the Company
shall issue to each Participant who shall still be in the employ of the Company
or its Subsidiaries, subject to the terms and conditions set forth in Section 6,
the number of Restricted Shares determined by multiplying (i) such Participant's
Award Percentage, (ii) 5% and (iii) the average Market Capitalization during
such six-month period and dividing the product by the average Fair Market Value
during such six-month period. In no event shall Restricted Shares be issued more
than once pursuant to this Section 5(a).
(b) $80,000,000 Market Capitalization. In the event that the Company
shall achieve an average Market Capitalization equal to or greater than
$80,000,000 during any six-month period during the five-year period beginning on
the Effective Date (the "$80,000,000 Market Capitalization"), then the Company
shall issue to each Participant who shall still be in the employ of the Company
or its Subsidiaries, subject to the terms and conditions set forth in Section 6,
the number of Restricted Shares determined by multiplying (i) such Participant's
Award Percentage, (ii) 5% and (iii) the average Market Capitalization during
such six-month period and dividing the product by the average Fair Market Value
during such six-month period. Such six-month period may be, in whole or in part,
coterminous with, the six-month period in which the $50,000,000 Market
Capitalization is achieved. In event shall Restricted Shares be issued more than
once pursuant to this Section 5(b).
(c) Change in Control - $50,000,000 Market Capitalization. In the event
that there shall be a Change in Control prior to the achievement of the
$50,000,000 Market Capitalization and the Change in Control Market
Capitalization shall equal or exceed $50,000,000 but shall not exceed
$80,000,000, then the Company shall issue to each Participant who shall still be
in the employ of the Company or its Subsidiaries, the number of Restricted
Shares determined by multiplying (i) such Participant's Award Percentage, (ii)
5% and (iii) the Change in Control Market Capitalization and dividing the
product by the Change in Control Price.
(d) Change in Control - $80,000,000 Market Capitalization. In the event
that there shall be a Change in Control prior to the achievement of the
$80,000,000 Market Capitalization and the Change in Control Market
Capitalization shall equal or exceed $80,000,000, then the Company shall issue
to each Participant who shall still be in the employ of the Company or its
Subsidiaries, the number of Restricted Shares determined by multiplying (i) such
Participant's Award Percentage, (ii) (A) if the $50,000,000 Market
Capitalization shall have previously been achieved, 5% or (B) if the $50,000,000
Market Capitalization shall not have previously been achieved, 10% and (iii) the
Change in Control Market Capitalization and dividing the product by the Change
in Control Price.
(e) Maximum Grant. Notwithstanding anything to the contrary contained
herein, (i) the maximum value of Restricted Shares which may be granted to any
Participant upon achievement of the performance
D-3
goals set forth in Section 5(a) or (c) shall be $1,500,000 (based on the Fair
Market Value on the date of issuance of such shares), and (ii) the maximum value
of Restricted Shares which may be granted to any Participant upon achievement of
the performance goals set forth in Section 5(b) or (d) shall be $3,500,000
(based on the Fair Market Value on the date of issuance of such shares);
provided, however, that the maximum value of Restricted Shares payable upon
achievement of the performance goals set forth in Section 5(d) shall be
$5,000,000 (based on the Fair Market Value on the date of issuance of such
shares) in the event that the $50,000,000 Market Capitalization shall not have
been achieved prior to the date of the Change in Control.
(f) Adjustments. In the event of any change in corporate
capitalization, such as a stock dividend, stock split or a corporate
transaction, such as a merger, consolidation, separation, including a spin-off,
or other distribution of stock or property of the Company, any reorganization
(whether or not such reorganization comes within the definition of such term in
Section 368 of the Code) or any partial or complete liquidation of the Company,
the Committee may make such substitution or adjustments in the aggregate number
and kind of shares available for issuance under the Plan, to the extent
necessary to account for any such change in corporate capitalization and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion.
6. Restricted Stock Awards.
(a) Certificates. Certificates issued in respect of Restricted Shares
shall be registered in the names of the Participants and shall bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Shares, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Merrimac Industries, Inc. 2001 Key Employee Incentive
Plan. Copies of such Plan are on file at the offices of Merrimac
Industries, Inc."
(b) Holding of Shares. The Committee may require that the certificates
evidencing such shares be held in custody by the Company until the restrictions
thereon shall have lapsed and that, as a condition of any issuance of Restricted
Shares to a Participant, such Participant shall have delivered to the Company a
stock power, endorsed in blank, relating to such Restricted Shares.
(c) Vesting. The Restricted Shares shall vest ratably in annual
installments over a three-year period commencing on the date of issuance. During
the vesting period, such Restricted Shares may not be sold, assigned,
transferred, pledged or otherwise encumbered. Upon a Participant's termination
of employment for any reason other than involuntary termination of employment by
the Company (other than for Cause), all unvested Restricted Shares shall be
forfeited by the Participant.
(d) Holding Period. Restricted Shares which have vested may not be
sold, assigned, transferred, pledged or otherwise encumbered for a period of two
years following the vesting date of such Restricted Shares, except that
Restricted Shares may be sold by a Participant to the extent required to satisfy
all federal, state, local and foreign taxes of any kind, with respect to the
vesting of Restricted Shares, including the withholding obligation described in
Section 7.
(e) Impact of Change in Control. Notwithstanding any other provision of
the Plan to the contrary, upon a Change in Control, all Restricted Shares shall
immediately become fully vested, transferable and free of all restrictions.
(f) Waiver of Restrictions. The Committee shall have the discretion to
waive, in whole or in part at any time, any or all remaining restrictions with
respect to any or all of a Participant's Restricted Shares.
7. Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for federal income tax
purposes with respect to any grant of Restricted Shares or the vesting of
Restricted Shares, such Participant shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be
D-4
withheld with respect to such amount. To the extent determined by the Committee,
withholding obligations may be settled with Common Stock, including Common Stock
that is part of the grant of Restricted Shares. The Company shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to such Participant. The Committee may establish such procedures
as it deems appropriate, including making irrevocable elections, for the
settlement of withholding obligations with Common Stock.
8. Term, Amendment and Termination.
(a) Term. The Plan will terminate on April 19, 2006; provided, however,
that any grants of Restricted Shares outstanding as of such date shall not be
affected or impaired by the termination of the Plan.
(b) Amendment and Termination. The Board may amend, alter, or terminate
the Plan, but no amendment, alteration or termination shall be made which would
impair the rights of a Participant without the Participant's consent. In
addition, no such amendment shall be made without the approval of the Company's
stockholders to the extent such approval is required by law.
9. No Employment Right. Neither the existence of the Plan nor the grant of
Restricted Shares shall require the Company or any Subsidiary to continue any
Participant in the employ or service of the Company or such Subsidiary.
10. Compliance With Securities Laws. The Committee may require each
Participant to represent to and agree with the Company in writing that such
person is acquiring any Restricted Shares without a view to the distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan, the Company shall not be
required to issue or deliver any certificate for shares of Common Stock under
the Plan prior to fulfillment of all of the following conditions:
(a) Listing or approval for listing upon notice of issuance of such
shares on the American Stock Exchange or such other securities exchange as may
at the time be the principal market for the Common Stock;
(b) Any registration or other qualification of such shares under any
state or federal law or regulation or the maintaining in effect of any such
registration or other qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or advisable; and
(c) Obtaining any other consent, approval or permit from any state or
federal governmental agency which the Committee shall, in its absolute
discretion upon the advice of counsel, determine to be necessary or advisable.
D-5
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MERRIMAC INDUSTRIES, INC.
41 FAIRFIELD PLACE
WEST CALDWELL, NEW JERSEY 07006-6287
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mason N. Carter and Arthur A. Oliner as
Proxies, each with the power to appoint his substitute, and hereby authorizes
either or both to represent and to vote all shares of Common Stock of Merrimac
Industries, Inc. held of record by the undersigned on April 20, 2001, at the
Annual Meeting of Stockholders to be held on June 6, 2001, at Merrimac
Industries, Inc., 41 Fairfield Place, West Caldwell, New Jersey, at 10:00 a.m.
local time (or any adjournment or postponement thereof) for the proposals and
items referred to on the reverse side and described in the Proxy Statement, and
to vote in their discretion on any other business as may properly come before
the Annual Meeting (or any adjournment or postponement thereof).
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted (i) for the election
of the nominees of the Board of Directors, (ii) for the approval of the 2001
Stock Option Plan, (iii) for the approval of the 2001 Stock Purchase Plan, (iv)
for the approval of the 2001 Key Employee Incentive Plan and (v) for the ratifi-
cation of the selection of Arthur Andersen LLP as the Independent Auditors.
PLEASE MARK ON THE REVERSE SIDE, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
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FOLD AND DETACH HERE
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Please mark your votes as indicated in this example [X]
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FORPROPOSALS 1, 2, 3, 4
AND 5:
No. 1 Election of Directors
FOR WITHHOLD
all from
nominees nominees
[ ] [ ]
Nominees: 01-Edward H. Cohen, 02-Arthur A. Oliner and 03-Harold J. Raveche
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
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No. 2 Approval of the 2001 Stock Option Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 3 Approval of the 2001 Stock Purchase Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 4 Approval of the 2001 Key Employee Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 5 Ratification of Arthur Andersen LLP as the Independent Auditors
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: , 2001
------------------------------
- ------------------------------------------
Signature
- ------------------------------------------
Signature
This proxy must be signed exactly as name appears hereon. When shares are held
by joint tenants, both should sign. Executors, administrators, trustees, etc.,
should give full title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer.
SIGN, DATE AND MAIL YOUR PROXY PROMPTLY TODAY.
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DETACH HERE
VOTE BY INTERNET OR TELEPHONE OR MAIL
24 HOURS A DAY, 7 DAYS A WEEK
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR
SHARES IN THE SAME MANNER AS IF YOU MARKED, SIGNED
AND RETURNED YOUR PROXY CARD.
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INTERNET
HTTP://WWW.PROXYVOTING.COM/MRM
Use the Internet to vote your proxy. Have your proxy card in hand when you
access the web site. You will be prompted to enter your control number, located
in the box below, to create and submit an electronic ballot.
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OR
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TELEPHONE
1-800-840-1208
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter your control number, located in the
box below, and then follow the directions given
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OR
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MAIL
Mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope
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IF YOU VOTE YOUR PROXY BY INTERNET OR BY TELEPHONE,
YOU DO NOT NEED TO MAIL BACK YOUR PROXY CARD.
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