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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the Commission
only (as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
HOME PRODUCTS INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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HOME PRODUCTS INTERNATIONAL, INC.
4501 WEST 47TH STREET
CHICAGO, ILLINOIS 60632
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1999
To the Stockholders of Home Products International, Inc.
The Annual Meeting of Stockholders of Home Products International, Inc. a
Delaware corporation (the "Company"), will be held on Wednesday, May 19, 1999 at
10:00 a.m., local time, at The Standard Club, 320 South Plymouth Court, Chicago,
IL 60604 for the following purposes, as more fully described in the accompanying
Proxy Statement.
1. To elect eight (8) directors for the next year.
2. To consider and vote upon the 1999 Performance Incentive Plan.
3. To consider and vote upon the 1999 Directors Restricted Stock Plan.
4. To transact such other business as may properly come before the annual
meeting.
Stockholders of record of the Company's Common Stock at the close of
business on March 26, 1999, the record date fixed by the Board of Directors, are
entitled to notice of, and to vote at, the meeting, also as more fully described
in the Proxy Statement.
All stockholders are cordially invited to attend the meeting. Those who
cannot attend are urged to sign, date and otherwise complete the enclosed proxy
and return it promptly in the envelope provided. Any stockholder giving a proxy
has the right to revoke it at any time before it is voted.
For the Board of Directors,
JAMES R. TENNANT
James R. Tennant
Chairman of the Board
Chicago, Illinois
April 19, 1999
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HOME PRODUCTS INTERNATIONAL, INC.
4501 WEST 47TH STREET
CHICAGO, ILLINOIS 60632
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PROXY STATEMENT
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APPROXIMATE DATE PROXY MATERIAL
FIRST SENT TO STOCKHOLDERS:
APRIL 19, 1999
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The following information is provided in connection with the solicitation
of proxies for the Annual Meeting of Stockholders of Home Products
International, Inc., a Delaware corporation (the "Company" or "HPI"), to be held
on Wednesday, May 19, 1999 (the "Meeting"), for the purposes stated in the
attached Notice of Annual Meeting of Stockholders.
GENERAL INFORMATION
SOLICITATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
stockholder and, in each case, such proxy is solicited on behalf of the Board of
Directors of the Company for use at the Meeting. The entire cost of soliciting
these proxies will be borne by the Company. Solicitation will be made by mail,
and may also be made by telephone or facsimile by directors, officers and
regular employees of the Company, but these persons will not be separately
compensated for such solicitation services. The Company will reimburse brokerage
houses and other nominees for their expenses in forwarding proxy solicitation
material to beneficial owners of the Company's Common Stock.
AUTHORITY CONFERRED BY PROXIES
The shares represented by proxies duly executed and returned by
stockholders and received by the Company before the Meeting will be voted as
directed in the proxies. In the absence of specific direction, the shares
represented by proxies will be voted: (1) FOR the election of all nominee
directors specified herein; (2) FOR the approval of the 1999 Performance
Incentive Plan; and (3) FOR the approval of the 1999 Directors Restricted Stock
Plan. As to the other matters, if any, to be voted upon at the Meeting, the
persons designated as proxies in the accompanying form of proxy will take such
action as they, in their discretion, may deem advisable. The persons named as
proxies were selected by the Board of Directors and one is a director and
executive officer of the Company and the other is an executive officer of the
Company.
REVOCABILITY OF PROXIES
Execution of the enclosed proxy will not affect your right as a stockholder
to attend the Meeting and to vote in person. Any stockholder giving a proxy has
the right to revoke it at any time by: (i) a later dated proxy, duly executed
and delivered or presented at the Meeting; (ii) a written revocation sent to and
received by the Secretary of the Company prior to the Meeting; or (iii)
attendance at the Meeting and voting in person.
VOTING SECURITIES AND RECORD DATE
The Company's voting securities consist of one class of Common Stock, par
value $0.01 per share (the "Common Stock"), and one class of Preferred Stock,
par value $0.01 per share (the "Preferred Stock"). The Company had 7,582,980
issued and outstanding shares of Common Stock and no shares of Preferred Stock
issued and outstanding as of the close of business on March 26, 1999 (the
"Record Date"). Only stockholders of record on the books of the Company at the
close of business on the Record Date will be entitled to vote at
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the Meeting. Each share of Common Stock is entitled to one vote. Representation
at the Meeting by the holders of one-third of the shares of Common Stock
outstanding on the Record Date, either in person or by proxy, will constitute a
quorum.
Votes for and against, abstentions and "broker non-votes" will each be
counted as present for purposes of determining the presence of a quorum. The
affirmative vote by the holders of a majority of the shares present (whether in
person or by proxy) and entitled to vote, will be required to approve: (i) the
1999 Performance Incentive Plan and (ii) the 1999 Directors Restricted Stock
Plan. Accordingly, abstentions have the same affect as a vote "against" the
proposal while broker non-votes do not affect the outcome. For the election of
directors, the eight nominees who receive the most votes will be elected.
Accordingly, abstentions and broker non-votes will not have any affect on the
outcome of such election.
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information as of March 26, 1999 (as
of December 31, 1998 with respect to Chase Venture Capital Associates, L.P.;
Warburg Pincus Asset Management, Inc.; SAFECO Asset Management Co. and Graver,
Bokhof, Goodwin & Sullivan, L.P.) with respect to the beneficial ownership of
the Company's issued and outstanding Common Stock by: (i) each stockholder known
by the Company to be the beneficial owner of more than 5% of its Common Stock,
(ii) each director, (iii) each executive officer named in the Summary
Compensation Table and (iv) all of the directors and executive officers of the
Company as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("SEC") which generally attribute beneficial
ownership of securities to persons which generally possess sole or shared voting
power and/or investment power with respect to those securities. Unless otherwise
indicated, the persons or entities identified in the table have sole voting and
investment power with respect to the shares shown as beneficially owned by them.
Based upon the SEC definition of beneficial ownership, stock options
exercisable by the executive officers and directors listed in the table within
60 days of the Record Date are included in the number of shares owned by such
individuals.
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
Chase Venture Capital Associates, L.P.(1)................... 1,334,043 17.6%
Warburg Pincus Asset Management, Inc.(2).................... 599,491 7.9
SAFECO Asset Management Company(3).......................... 489,200 6.5
Graver, Bokhof, Goodwin & Sullivan, L.P.(4)................. 418,419 5.5
Charles R. Campbell(5)...................................... 24,138 *
Joseph Gantz(6)............................................. 14,530 *
Stephen P. Murray(7)........................................ 1,339,043 17.6
Marshall Ragir(8)........................................... 240,339 3.2
Jeffrey C. Rubenstein(9).................................... 546,358 7.2
Daniel B. Shure(10)......................................... 20,401 *
Joel D. Spungin(11)......................................... 15,000 *
James R. Tennant(12)........................................ 602,519 7.4
Stephen R. Brian(13)........................................ 13,162 *
James E. Winslow(14)........................................ 70,489 *
All directors and executive Officers as a group (10
persons)(15).............................................. 2,654,986 32.1
- -------------------------
* Less than 1%.
(1) Chase Venture Capital Associates, L.P. ("CVCA"), is a California limited
partnership whose address is 380 Madison Avenue, New York, NY 10017. The
general partner is Chase Capital Partners ("CCP"), a New York general
partnership, whose address is the same as CVCA. CVCA and CCP have shared
voting and investment power with respect to the 1,334,043 shares of Common
Stock.
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(2) According to information contained in a report on Schedule 13G/A dated
January 9, 1999, filed by Warburg Pincus Asset Management, Inc.
("Warburg"), Warburg serves as investment adviser to numerous accounts. The
shares being reported in Schedule 13G/A are owned by Warburg's accounts.
Warburg has sole power to vote 172,891 shares of Common Stock (which
represent 2.3% of the shares outstanding); has shared power to vote 426,600
shares of Common Stock (which represent 5.6% of the shares outstanding);
and has sole power to dispose of 599,491 shares of Common Stock (which
represent 7.9% of the shares outstanding). For purposes of the reporting
requirements of the Securities Exchange Act of 1934, (the "1934 Act"),
Warburg is deemed to be a beneficial owner of such shares; however, Warburg
expressly disclaims that it is, in fact, the beneficial owner of such
shares. Warburg's address is 466 Lexington Avenue, New York, NY 10017.
(3) According to information contained in a report on Schedule 13G/A dated
February 11, 1999, filed by SAFECO Asset Management Company ("SAMC") and
SAFECO Corporation ("SAFECO") of which SAMC is a wholly owned subsidiary,
SAMC and SAFECO beneficially owns 489,200 shares of Common Stock (which
represent 6.5% of the shares outstanding) as a result of acting as an
investment adviser for registered investment companies. SAFECO and the
various accounts to which they are advisers have shared power to vote and
to dispose of 489,200 shares of Common Stock. SAMC and SAFECO expressly
disclaim that, they are in fact, the beneficial owners of such shares.
SAMC's address is 601 Union Street, Suite 2500, Seattle, WA 98101 and
SAFECO's address is SAFECO Plaza, Seattle, WA 98185.
(4) According to information available to the Company, Graver, Bokhof, Goodwin
& Sullivan, L.P., ("GBGS") and the various accounts to which they are
advisers have shared power to vote and to dispose of 418,419 shares of
Common Stock (which represent 5.5% of the shares outstanding). GBGS's
address is 100 South Wacker Drive, Suite 2100, Chicago, IL 60645.
(5) Includes 7,500 shares of Common Stock subject to stock options exercisable
within 60 days of March 26, 1999.
(6) Includes 5,000 shares of Common Stock subject to stock options exercisable
within 60 days of March 26, 1999.
(7) Mr. Murray is a general partner of Chase Capital Partners, which is the
general partner of CVCA, and in such capacity exercises shared voting and
investment power with respect to the shares beneficially owned by CVCA
(1,334,043 shares). Mr. Murray expressly disclaims that he, is in fact, the
beneficial owner of such shares. Includes 5,000 shares of Common Stock
subject to stock options exercisable within 60 days of March 26, 1999. Mr.
Murray's address is Chase Capital Partners, 380 Madison Ave., 12th Floor,
New York, NY 10017.
(8) Includes 164,000 shares of Common Stock beneficially owned by the Ragir
Foundation with respect to which Mr. Ragir, in his capacity as a director,
exercises shared voting and investment power. Mr. Ragir expressly disclaims
that he is, in fact, the beneficial owner of such shares. The number of
shares reported in the table also includes 66,993 shares of Common Stock
beneficially owned by the Meyer J. Ragir Family Irrevocable Trust --
Marshall Ragir Separate Trust with respect to which Mr. Ragir, in his
capacity as a co-trustee, exercises shared voting and investment power.
Does not include 15,190 shares of Common Stock beneficially owned by the
MJR/NLR Gift Trust -- Marshall Ragir Separate Trust with respect to which
Mr. Ragir does not exercise sole or shared voting or investment power.
Includes 7,500 shares of Common Stock subject to stock options exercisable
within 60 days of March 26, 1999.
(9) Mr. Rubenstein is the executor of the Norma L. Ragir Estate and in such
capacity exercises shared voting and investment power with respect to the
shares of Common Stock beneficially owned by the Norma L. Ragir Estate
(221,501 shares). Mr. Rubenstein is a director of the Meyer and Norma Ragir
Foundation (the "Ragir Foundation") and in such capacity exercises shared
voting and investment power with respect to the shares of Common Stock
beneficially owned by the Ragir Foundation (164,000 shares). Mr. Rubenstein
is co-trustee of five separate trusts and, in such capacities exercises
shared voting and investment power with respect to the shares of Common
Stock beneficially owned by the five separate trusts. The five trusts, and
the respective number of shares held by each is as follows: MJR/NLR Gift
Trust -- Judith Ragir Separate Trust (15,189 shares); MJR/NLR Gift Trust -
Robert
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Ragir Separate Trust (13,985 shares); MJR/NLR Gift Trust - Marshall Ragir
Separate Trust (15,190 shares) (collectively, the "Ragir Gift Trusts");
Meyer J. Ragir Family Irrevocable Trust -- Judith Ragir (16,500 shares);
and the Meyer J. Ragir Family Irrevocable Trust - Marshall Ragir Separate
Trust (66,993 shares) (collectively, the "Ragir Family Trusts"). All five
trusts are collectively referred to herein as the "Ragir Trusts". None of
the Ragir Trusts individually owns more than 1% of the Common Stock of the
Company. Mr. Rubenstein, as executor of the Norma L. Ragir Estate and a
director of the Ragir Foundation and co-trustee of the Ragir Trusts,
exercises either sole or shared voting and investment power with respect to
513,358 shares of Common Stock (which represent 6.8% of the outstanding
shares). Mr. Rubenstein expressly disclaims that he is, in fact, the
beneficial owner of such shares. Includes 7,500 shares of Common Stock
subject to stock options exercisable within 60 days of March 26, 1999. The
address for Mr. Rubenstein is 200 North LaSalle Street, Suite 2100,
Chicago, IL 60601.
(10) Includes 7,500 shares of Common Stock subject to stock options exercisable
within 60 days of March 26, 1999.
(11) Includes 7,500 shares of Common Stock subject to stock options exercisable
within 60 days of March 26, 1999.
(12) Includes 555,000 shares of Common Stock subject to stock options
exercisable within 60 days of March 26, 1999. Includes 20,690 shares
subject to the Executive Incentive Plan.
(13) Mr. Brian resigned from the Company on January 18, 1999 to pursue other
interests.
(14) Includes 48,400 shares of Common Stock subject to stock options exercisable
within 60 days of March 26, 1999. Includes 8,099 shares subject to the
Executive Incentive Plan.
(15) Includes 650,900 shares of Common Stock subject to stock options
exercisable within 60 days of March 26, 1999. Includes 28,789 shares
subject to the Executive Incentive Plan.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The By-Laws of the Company currently provide that the Board of Directors
shall consist of eight directors to be elected at the annual meeting of
stockholders to hold office until the next annual meeting or until their
successors are elected and qualified. The proxies solicited by and on behalf of
the Board of Directors will be voted FOR the election of the eight nominees
listed below, unless authority to do so is withheld as provided in the proxy.
All nominees have served as directors since the last annual meeting. The proxies
cannot be voted for a greater number of persons than the number of nominees
named. If for any reason one or more of the nominees should be unable to serve
or refuse to serve as a director (an event which is not anticipated), the
persons named as proxies will vote for another candidate or candidates nominated
by the Board of Directors, and discretionary authority to cast such votes is
included in the proxy. The nominees receiving the highest number of votes of
shares of Common Stock, up to the number of directors to be elected, shall be
elected.
NOMINEES FOR DIRECTORS
Information regarding the Board's nominees for election as directors is set
forth below.
Charles R. Campbell, age 59, has been a director of the Company since
September, 1994. Since 1996 Mr. Campbell has been a principal with the Everest
Group, a management consulting firm. From 1995 to 1996 Mr. Campbell was
President of C. R. Campbell & Associates, a management consulting firm. From
1985 to 1995, Mr. Campbell was Senior Vice President, Chief Financial and
Administrative Officer of Federal Signal Corporation, a diversified manufacturer
of capital goods.
Joseph Gantz, age 51, has been a director since February, 1998. Since
February, 1998 Mr. Gantz has been the Managing Partner of H3 Management L.L.C, a
management consulting firm. From 1996 to 1998 Mr. Gantz was the Chairman of the
Board of Seymour Housewares Corporation, a manufacturer of consumer
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laundry care products. From 1994 to 1996, Mr. Gantz was President and General
Manager of Rubbermaid Cleaning & Maintenance Products, a manufacturer and
marketer of brooms, brushes and mops.
Stephen P. Murray, age 36, has been a director since February, 1998. Mr.
Murray is a general partner of Chase Capital Partners. Prior to joining Chase
Capital Partners, Mr. Murray was a Vice President with the Middle Market Lending
Division of Manufacturers Hanover. Mr. Murray is a director of several privately
held companies.
Marshall Ragir, age 54, has been a director of the Company since July,
1995. Since 1991, Mr. Ragir has been President and Chief Executive Officer of
Know Business Inc., a venture capital and investment company. Mr. Ragir is a
director of several charitable foundations and non-profit agencies.
Jeffrey C. Rubenstein, age 57, has been a director of the Company since
September, 1986. Since 1991, Mr. Rubenstein has been a senior principal with the
law firm of Much Shelist Freed Denenberg Ament & Rubenstein, P.C., an Illinois
professional corporation, which is counsel to the Company. Mr. Rubenstein is a
director of Miller Building Systems, Inc., Vita Food Products, Inc. and a number
of privately held companies.
Daniel B. Shure, age 41, has been a director of the Company since December,
1994. Since 1988, Mr. Shure has been President and Chief Executive Officer of
Strombecker Corporation, an international toy manufacturer and distributor. Mr.
Shure is a director of several privately held companies.
Joel D. Spungin, age 61, has been director of the Company since September,
1996. Since 1995 Mr. Spungin has been President of DMS Enterprises, L.P., a
management advisory and investment company. Mr. Spungin has been Chairman
Emeritus of United Stationers, Inc. since 1994. From 1981 to 1995, Mr. Spungin
was employed by United Stationers, Inc., in various capacities with his final
position being Chairman of the Board and Chief Executive Officer. Mr. Spungin is
a director of AAR Corporation and a number of privately held companies.
James R. Tennant, age 46, joined the Company as Chairman of the Board and
Chief Executive Officer in April, 1994. Mr. Tennant was elected a director of
the Company in December, 1992, and was a member of the Company's Compensation
Committee until April, 1994. From 1982 to 1994, Mr. Tennant was Division
President of True North Communications, an international marketing services
company. Mr. Tennant is a director of Hines Horticulture, Inc.
BOARD AND COMMITTEES MEMBERSHIP
The Board of Directors met 7 times during the 1998 fiscal year and had
three ongoing committees. Those committees consisted of an Audit Committee, an
Executive Compensation Committee and a Nominating Committee. All of the
directors attended at least 75% of the meetings of the Board of Directors and
the committees on which they served.
The table below provides membership and meeting information for each of the
Board committees in fiscal 1998.
EXECUTIVE
NAME AUDIT COMPENSATION NOMINATING
- ---- ----- ------------ ----------
Charles R. Campbell....................................... X*
Joseph Gantz.............................................. X
Stephen P. Murray......................................... X
Marshall Ragir............................................ X
Jeffrey C. Rubenstein..................................... X X
Daniel B. Shure........................................... X
Joel D. Spungin........................................... X*
James R. Tennant.......................................... X*
1998 Meetings............................................. 2 4 0
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* Committee Chairman
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THE AUDIT COMMITTEE
The Audit Committee oversees the activities of the Company's independent
auditors. The Committee:
- Reviews with the outside auditors the scope of the audit, the auditor's
fees and related matters;
- Receives copies of the annual comments from the independent auditors on
accounting procedures and systems of control; and
- Reviews with the independent auditors any questions, comments or
suggestions they may have relating to the Company's internal controls,
accounting practices and procedures and those of the Company's
subsidiaries.
THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee is responsible for establishing annual
and long-term performance goals for the Executive Officers. This responsibility
includes establishing the compensation package and evaluating the performance of
the Chairman and Chief Executive Officer and the Chief Financial Officer. In
addition, the Committee:
- Recommends the granting of options and awards under the various Stock
Option Plans; and
- Publishes an annual Executive Compensation Committee Report for the
stockholders.
THE NOMINATING COMMITTEE
The Nominating Committee is responsible for recommending candidates for
membership on the Board of Directors and consulting with the Chairman on
committee assignments.
COMPENSATION OF DIRECTORS
All non-employee directors will receive an annual retainer of $7,500,
payable in Common Stock. The number of shares to be received by each
non-employee director will be based upon the closing price per share of the
Common Stock as reported on The NASDAQ National Market(sm) on the day of the
Meeting. Non-employee directors will receive a fee of $1,750 for each Board of
Directors' meeting attended and $500 for each committee meeting attended.
Beginning in 1999, all non employee directors that Chair a committee will
receive an annual fee of $2,500. Each non-employee director has the option to
receive these fees in cash or in Common Stock. If a non-employee director elects
to receive Common Stock, the number of shares to be received will be based upon
the closing price per share of the Common Stock as reported on The NASDAQ
National Market(sm) on the day of the Board of Directors' meeting or the
committee meeting. All of the shares of Common Stock which the non-employee
directors are entitled to receive as compensation will be delivered after the
end of the fiscal year in which such shares were earned. Additionally, each
non-employee director may defer payment of the retainer and/or director's fees
(whether payable in cash or shares of Common Stock) until termination of the
director's services or the attainment of a certain age. All fees paid in Common
Stock will be paid from the 1999 Directors Restricted Stock Plan, as further
described in Proposal No. 3, if such Plan is approved by the stockholders.
Non-employee directors will also be granted an option to purchase 2,500 shares
of Common Stock annually, and new non-employee directors will be granted an
option to purchase 5,000 shares of common stock in their first year of service.
All of the stock options granted to the non-employee directors will be granted
on the day of the Meeting (or date of election to the Board with respect to the
new directors) at an exercise price equal to the closing price per share as
reported on The NASDAQ National Market(sm) on such date and will become
exercisable in equal annual increments over a four year period beginning one
year from the date of grant. Stock option awards for the directors will be
granted pursuant to the 1999 Performance Incentive Plan, as further described in
Proposal No. 2, if such Plan is approved by the stockholders.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
ELECTION OF THE NOMINEES SET FORTH HEREIN.
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PROPOSAL NO. 2
ADOPTION OF THE 1999 PERFORMANCE INCENTIVE PLAN
The Company's stockholders are being asked to approve the 1999 Performance
Incentive Plan (the "1999 Plan"), which was approved by the Board of Directors
on February 23, 1999, subject to the approval by the Company's stockholders. The
1999 Plan has been implemented to allow the Board of Directors to create equity
incentives for key employees. This assists the Company in attracting, retaining
and motivating the best available talent and further aligns their interests with
those of the shareholders. The request for 1 million shares to fund the 1999
Plan has been determined based in part on the existing management organization
and salary structure. The 1999 Plan is not an effort to reprice existing options
and the Board of Directors has no intent to reprice any existing options. The
1999 Plan will enable the Board of Directors to carry out a structured
three-year incentive plan built around specific operating objectives. The Board
of Directors believes that the 1 million share allotment will be sufficient to
fund the incentive plans for three years. Accordingly, neither the Board of
Directors or management currently expects to request further shares for option
issuance until at least 2002. A majority of the expected incentive awards will
be granted at share prices that are greater than the share price on the date of
grant. This will ensure the performance sensitivity of the award. A copy of the
1999 Plan has been filed electronically with the Securities and Exchange
Commission, but is not included in the printed version of the Proxy. A copy of
the 1999 Plan can be obtained upon request sent to the Company's Secretary,
James E. Winslow, at 4501 W. 47(th) Street, Chicago, IL 60632. The following is
a summary of the material provisions of the 1999 Plan. Such discussion is
qualified in its entirety by reference to the full text of the 1999 Plan.
SUMMARY OF THE MATERIAL PROVISIONS OF THE 1999 PLAN
GENERAL.
The 1999 Plan provides for the grant of stock options to officers, key
employees and non-employee directors of the Company, and of stock appreciation
rights, restricted stock, performance grants and awards and other stock-based
grants and awards to officers and key employees of the Company. The 1999 Plan
provides for the issuance of a maximum of 1,000,000 shares of Common Stock plus
any shares of Common Stock issued under the Plan that are forfeited back to the
Company or are canceled and any shares that are tendered to the Company by a
participant in the 1999 Plan as payment of the exercise price of any option
granted pursuant to the Plan, in connection with the payment or settlement of
any other grant or award made pursuant to the Plan or in payment of withholding
for taxes incurred in connection with any award issued under the Plan. The
market value per share of Common Stock on March 26, 1999 was approximately
$9.00. The maximum number of shares which can be issued under the 1999 Plan is
subject to adjustment in the event of stock splits, dividends, recapitalizations
and other similar changes affecting the Company's Common Stock.
ADMINISTRATION.
The 1999 Plan is administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). Subject to the terms and
conditions of the 1999 Plan and the applicable laws and regulations, the
Committee has full power and authority to select recipients of awards from among
the eligible participants in the 1999 Plan, establish the types and terms of
awards granted, reduce the amount of any award, prescribe the form of agreements
and instruments evidencing awards granted under the 1999 Plan, require or permit
a participant to defer any payment cash or shares of Common Stock that would
otherwise be due to such participant under the 1999 Plan, interpret the 1999
Plan, and make all other determinations the Committee deems necessary or
advisable for the administration and operation of the Plan.
TYPES OF AWARDS.
STOCK OPTIONS. The 1999 Plan permits the grant of stock options as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or as non-qualified stock
options. Incentive stock options may be granted only to employees of the
Company.
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To the extent that the aggregate fair market value of Common Stock with
respect to which incentive stock options issued by the Company are exercisable
for the first time during any calendar year exceeds $100,000, such portion in
excess of $100,000 may be treated as a non-qualified option as determined by the
Committee. Non-qualified options to purchase 2,500 shares of Common Stock will
be granted automatically to each non-employee director of the Company after the
annual election by stockholders. New non-employee directors will receive
non-qualified options to purchase 5,000 shares of Common Stock for their first
year.
The exercise price per share of any option granted under the 1999 Plan is
determined by the Committee at the time of grant, but may not be less than 100%
of the fair market value of the Common Stock at the time of grant. The term of
each stock option is fixed by the Committee but, in the case of incentive stock
options, may not exceed 10 years from the date of grant. Stock options are
exercisable at such time(s) and subject to such terms and conditions as
determined by the Committee. No option may be exercised, however, unless the
holder thereof has continuously been an employee or non-employee director of the
Company from the date of grant until the date of exercise of the option, subject
to certain exceptions as determined by the Committee.
STOCK APPRECIATION RIGHTS. Stock appreciation rights may be granted under
the 1999 Plan either in tandem with stock options or on a free-standing basis to
officers and other employees of the Company. Stock appreciation rights are
exercisable at such times and in such manner as authorized by the Committee and
the Committee may provide that a stock appreciation right will be automatically
exercised on any specific date. No stock appreciation right may be exercised,
however, unless the holder thereof has continuously been an employee or
non-employee director of the Company from the date of grant until the date of
exercise, subject to certain exceptions as determined by the Committee.
RESTRICTED STOCK. Restricted stock grants available under the 1999 Plan
provide for the holder thereof to receive shares of Common Stock free of
restrictions on transfer (and such other restrictions as determined by the
Committee), the holder must remain employed by the Company, subject to such
exceptions permitted by the Committee, for a period of at least one year
beginning on the date of grant and ending on any date designated by the
Committee. The Committee may also establish performance goals that are required
to be achieved by the Company as a condition to the lapse of the restrictions on
any restricted stock award.
PERFORMANCE GRANTS AND AWARDS. The Committee may grant to officers and
other employees of the Company the right, expressed in units valued as
established by the Committee, to receive payments of shares of Common Stock
and/or cash based upon the Company's achievement of financial performance goals
determined by the Committee over a period of time specified by the Committee,
but not less than one year.
OTHER STOCK-BASED AWARDS. Other stock-based awards that are denominated in
units substantially equivalent to a hypothetical share of Common Stock or in
other units may be granted to officers or employees of the Company under the
1999 Plan. These stock-based awards may be made in such forms and on such terms
and conditions, including the Company's attainment of specific performance
goals, as the Committee approves. Payment of such awards may be made in cash,
shares of Common Stock or any combination thereof and at such times as
determined by the Committee.
TRANSFERABILITY OF AWARDS.
With certain limited exceptions in the discretion of the Committee, no
grant or award under the 1999 Plan is transferable by the holder thereof except
by will or the laws of descent and distribution. During the lifetime of a
participant, stock options and stock appreciation rights issued under the 1999
Plan will be exercisable only by the participant and shares of Common Stock
issued upon any such exercise or in settlement of any other award granted under
the 1999 Plan will be payable only to the participant or his or her legal
representative, subject to certain limited exceptions in the sole discretion of
the Committee.
CHANGE IN CONTROL.
In the event of a Change in Control of the Company (as defined in the 1999
Plan), unless otherwise determined by a majority of the continuing members of
the Board of Directors, all stock options and stock
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appreciation rights then outstanding under the 1999 Plan will become fully
exercisable, all restrictions on restricted stock outstanding under the 1999
Plan will be deemed satisfied and all performance grants and other stock-based
grants outstanding under the 1999 Plan will be deemed fully earned at the target
amount of the award specified in the grant agreement.
AMENDMENTS
The Board of Directors may amend the 1999 Plan at any time. However, any
amendment that increases the number of shares, or decreases the price, for which
options may be granted requires stockholder approval and the amendment of any
outstanding awards requires the consent of the holder of such award. The Board
of Directors may terminate the 1999 Plan at any time prior to its expiration on
May 19, 2009.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following information is a brief summary which relates only to certain
federal income tax consequences in connection with the 1999 Plan. This summary
is not intended to be exhaustive, does not constitute tax advice and, among
other things, does not describe state, local or foreign tax consequences.
NON-QUALIFIED STOCK OPTIONS. The holder of a non-qualified stock option
granted under the 1999 Plan will not recognize any income at the time the option
is granted. However, such holder will recognize income at the time he or she
exercises the option in an amount equal to the difference between the exercise
price of the option and the fair market value of the shares of Common Stock
received on the date of exercise.
The sale of shares issued pursuant to the exercise of a stock option will
generally result in capital gain or loss. A holder's holding period will
commence with the date such shares are issued to the holder by the Company, and
his or her tax basis in such shares will equal fair market value of that date.
Notwithstanding the foregoing, any holder who is subject to the trading
restrictions of Section 16(b) of the Exchange Act ("Section 16(b)") would not
recognize ordinary income until the date such trading restrictions terminate
(the "Deferred Date"). The amount of such income would equal the excess of the
fair market value on the Deferred Date of the shares of Common Stock received
upon exercise of the stock option over the exercise price for such shares and
the holding period for long-term capital gain would not begin until the Deferred
Date.
Holders subject to Section 16(b) can elect to recognize taxable income on
the date of exercise. In such event, the amount of income to be recognized would
equal the excess of the fair market value of the shares of Common Stock on the
date of exercise over the exercise price for such shares. The election to
recognize taxable income on the date of exercise is to be made by filing an
appropriate statement with the Internal Revenue Service on or before the 30th
day after the exercise date.
INCENTIVE STOCK OPTIONS. No income will be attributed to a holder on the
grant of an incentive stock option and no income will be attributed to a holder
to whom Common Stock is transferred on the exercise of an incentive stock
option. Upon a disposition of the shares issued upon exercise of such incentive
stock option, the holder will recognize capital gain. However, if the holder
fails to hold the shares he or she acquires through the exercise of an incentive
stock option for the later of (i) two years after the incentive stock option is
granted or (ii) one year after the Common Stock is transferred to him or her,
then upon disposition of the shares, the holder will recognize income, a portion
of which is ordinary income. Of the gain realized on disposition of the shares,
the portion that is ordinary income is equal to the lesser of: (i) the fair
market, value of the shares on the date of exercise, minus the exercise price,
or (ii) the amount realized on disposition on the shares, minus the exercise
price. Any gain in excess of this amount is capital gain.
STOCK APPRECIATION RIGHTS. Upon the exercise of a stock appreciation right,
the holder of such right will recognize compensation income in an amount equal
to the cash received plus the fair market value of the Common Stock received
from such exercise. The holder's tax basis in the shares of Common Stock
received in the exercise will be equal to the compensation income recognized
with respect to the Common Stock. The holder's holding period for shares
acquired pursuant to the exercise of a stock appreciation right begins on the
exercise date.
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Holders of awards under the 1999 Plan will be subject to applicable income
tax withholding requirements.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE 1999 PERFORMANCE INCENTIVE PLAN.
PROPOSAL NO. 3
ADOPTION OF THE 1999 DIRECTORS RESTRICTED STOCK PLAN
The Company's stockholders are being asked to approve the 1999 Directors
Restricted Stock Plan (the "Director Plan"), which was approved by the Board of
Directors on December 9, 1997, subject to the approval by the Company's
stockholders. The purpose of the Director Plan is to encourage ownership of
shares of the Company's Common Stock by directors, and to provide additional
incentive for such persons to promote the success of the Company. A copy of the
Director Plan has been filed electronically with the Securities and Exchange
Commission, but is not included in the printed version of the Proxy. A copy of
the Director Plan can be obtained upon request sent to the Company's Secretary,
James E. Winslow, at 4501 W. 47th Street, Chicago, IL 60632. The following is a
summary of the material provisions of the Director Plan. Such discussion is
qualified in its entirety to the full text of the Director Plan.
SUMMARY OF THE MATERIAL PROVISIONS OF THE DIRECTOR PLAN
As described above in this Proxy Statement, directors of the Company
receive certain fees for attending director and committee meetings and for
serving as the chairman of a committee. In certain cases, such fees are payable
in Common Stock and, in other cases, directors are entitled to elect to receive
such fees in cash or Common Stock. The Director Plan is intended to provide a
means for the issuance of restricted shares of Common Stock to the non-employee
directors of the Company when such fees are payable in Common Stock. See
"Election of Directors -- Compensation of Directors." All non-employee members
of the Board of Directors of the Company are eligible to participate in the
Director Plan, which includes seven directors of the Company. The Director Plan
provides for the issuance of shares of Common Stock which the Board may subject
to a substantial risk of forfeiture within the meaning of Section 83 of the
Internal Revenue Code of 1986, as amended, except, in the Board's discretion
upon a change of control of the Company. During any period in which a
substantial risk of forfeiture is imposed, the transferability of the shares
will be restricted, which may include rights of repurchase or first refusal or
subjecting the shares to a continuing substantial risk of forfeiture in the
hands of a transferee. Up to a maximum 100,000 shares of Common Stock may be
issued subject to the Director Plan. The market value of such shares on March
26, 1999 was approximately $900,000. Each issuance of shares shall be evidenced
by an agreement executed on behalf of the Company which specifies the terms and
restrictions, if any.
The maximum number of shares which can be issued under the Director Plan
may be subject to an adjustment in the event of stock splits, dividends,
recapitalization and other similar changes affecting the Company's Common Stock.
The Director Plan is administered by the Board of Directors (the "Board"). The
Board has the complete discretion to interpret the Director Plan and to adopt,
amend and rescind rules and regulations for implementing and administering this
plan, except that no amendment may increase the maximum number of shares
available under the Director Plan or otherwise cause Rule 16b-3 under the
Exchange Act to become inapplicable to the Director Plan without approval of the
Company's stockholders. The Board may take any action with respect to restricted
stock held by a director whose service is terminated by reason of death,
disability, retirement or otherwise.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE
APPROVAL OF THE 1999 DIRECTORS RESTRICTED STOCK PLAN.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the 1934 Act requires the Company's directors and
executive officers, and persons who beneficially own more than 10% of the
Company's Common Stock, to file with the SEC initial reports of
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beneficial ownership ("Form 3") and reports of changes in ownership of the
Company's Common Stock and other equity securities of the Company ("Form 4").
Executive officers, directors, and greater than 10% stockholders of the Company
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) reports that they file.
Based solely upon review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that during the 1998 fiscal year, all Section 16(a) filing
requirements applicable to its executive officers, directors and greater than
10% beneficial owners were complied with except Stephen R. Brian, an executive
officer who inadvertently reported one transaction in a late Form 4 filling.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the compensation earned by the Company's
Chief Executive Officer and each other executive officer of the Company
(collectively, the "Named Executive Officers"), during each of the Company's
last three fiscal years. The Company named Stephen R. Brian as President and
Chief Operating Officer of the Company, effective January 1, 1998, and as such,
Mr. Brian's compensation prior to 1998 is not required to be reported in the
following table.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARD
---------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS # ($)(1)
- --------------------------- ---- ---------- --------- ---------- ------------
James R. Tennant(3)....................... 1998 $350,000 $382,884 -0- $ 9,476
Chairman of the Board and Chief Executive 1997 288,750 314,913 250,000 8,775
Officer of HPI 1996 250,000 125,000 200,000 13,161
Stephen R. Brian(4)....................... 1998 265,000 193,453 100,000 19,076(2)
Chief Operating Officer and President of 1997 n/a n/a n/a n/a
HPI 1996 n/a n/a n/a n/a
James E. Winslow(5)....................... 1998 205,000 164,652 -0- 9,476
Executive Vice President, Chief Financial 1997 185,785 143,714 20,000 8,775
Officer and Secretary of HPI 1996 173,262 60,000 25,000 10,576
- -------------------------
(1) Reflects amounts contributed by the Company to the Company's Profit
Sharing/401(k) Plan and Trust.
(2) Reflects a car allowance of $800 per month as well as amounts contributed by
the Company to the Company's Profit Sharing/401(k) Plan and Trust.
(3) The 1998 Bonus excludes $103,600 which was converted into 10,632 Share Units
and deferred pursuant to the Company's Executive Incentive Plan ("EIP"). See
"Long-Term Incentive Plan -- Awards in Last Fiscal Year." The 1997 Bonus
excludes $107,625 which was converted into 10,058 Share Units and deferred
pursuant to the EIP.
(4) Effective January 18, 1999, Mr. Brian terminated his employment to pursue
other interests.
(5) The 1998 Bonus excludes $40,180 which was converted into 4,124 Share Units
and deferred pursuant to the Company's EIP. See "Long-Term Incentive Plan --
Awards in Last Fiscal Year." The 1997 Bonus excludes $42,538 which was
converted into 3,975 Share Units and deferred pursuant to the EIP.
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LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
The table below represents the value as of December 26, 1998 of the
deferred portions of the awards earned in fiscal 1998 under the Executive
Incentive Bonus Plan. The awards are to be paid in three annual installments as
soon as practicable following the closing of fiscal 2000, 2001 and 2002. The
number of Share Units awarded for 1998 was determined by dividing the total
dollar amount of the deferred award by the average trading price of the
Company's common stock for the final twenty trading days of the fiscal year (as
defined in the Plan). It is presently estimated that 70% of the Share Units will
be converted to shares of the Company's common stock and 30% of the Share Units
will be converted to cash.
The value of the 1998 deferred awards as of December 26, 1998 is determined
by multiplying the number of Share Units awarded under the Executive Incentive
Plan by the last reported sale price of the Company's common stock as reported
on the NASDAQ National Market(sm) on the last business day of the Company's
fiscal year (December 24, 1998, $9.50/sh).
LONG-TERM INCENTIVE PLAN -- AWARDS IN FISCAL 1998
VALUE OF DEFERRED
AWARD AS OF SHARE UNITS
NAME OF EXECUTIVE 12/26/98 #
- ----------------- ----------------- -----------
James R. Tennant.......................... $101,004 10,632
Stephen R. Brian.......................... -0- -0-
James E. Winslow.......................... 39,178 4,124
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information on option exercises in fiscal 1998
by the Named Executive Officers and the value of such officers' unexercised
options at December 26, 1998.
SHARES
ACQUIRED NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN
ON VALUE OPTIONS AT THE MONEY OPTIONS AT
NAME EXERCISE REALIZED FISCAL YEAR-END(1) FISCAL YEAR-END(3)
---- -------- -------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
James R. Tennant.............. -0- $-0- 371,668 433,332 $1,215,005 $ 599,995
Stephen R. Brian(2)........... -0- -0- -0- 100,000 -0- -0-
James E. Winslow.............. -0- -0- 20,067 85,033 50,352 216,423
- -------------------------
(1) Future exercisability is subject to vesting and the optionee remaining
employed by the Company.
(2) Mr. Brian terminated his employment with the Company on January 18, 1999.
All of the options expired on April 18, 1999, as Mr. Brian failed to
exercise the options within three months of his termination.
(3) Value is calculated by subtracting the exercise price from the assumed fair
market value of the securities underlying the option at fiscal year end and
multiplying the result by the number of "in-the-money" options held. There
is no guarantee that if and when these options are exercised they will have
this value. Fair market value was calculated based upon the last reported
sale price per share of the Company's Common Stock as reported on the Nasdaq
National Market on the last business day of the Company's fiscal year,
December 24, 1998 ($9.50).
OPTION GRANTS IN LAST FISCAL YEAR
Neither Mr. Tennant nor Mr. Winslow received stock option grants in 1998.
Mr. Brian was awarded 100,000 options in 1998; however, these options expired on
April 18, 1999 upon his failure to exercise the options within three months of
his termination of employment with the Company. Mr. Brian terminated his
employment on January 18, 1999.
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EMPLOYMENT AGREEMENTS
James R. Tennant is employed as Chairman of the Board and Chief Executive
Officer of the Company pursuant to an employment agreement dated as of January
1, 1997, as amended on October 13, 1998. Such employment agreement expires on
December 31, 1999, with automatic one year extensions thereafter unless canceled
by either party. The employment agreement provides for an annual base salary of
$350,000. Mr. Tennant is also entitled to receive a discretionary bonus, based
on the Company's financial performance, as well as to receive incentive bonuses
subject to the terms of the Executive Incentive Plan and the Management
Incentive Plan. If the Company does not renew Mr. Tennant's employment agreement
for any renewal year after December 31, 1999, Mr. Tennant will be entitled to
receive a severance payment of $250,000, payable in twelve monthly installments,
and may exercise options which have vested prior to such date. If Mr. Tennant's
employment is terminated after a change in control of the Company, Mr. Tennant
is entitled to receive a $500,000 severance payment and all of his stock options
will immediately vest. In the event that the Company is sold for a price of
$5.50 per share or more in a stock sale or asset sale and Mr. Tennant is
employed by the Company on the closing of any such event, Mr. Tennant will be
entitled, at his option, to (i) receive a $1,000,000 payment from the Company or
(ii) exercise all stock options he holds as if they were then available and
vested. Mr. Tennant's employment agreement provided for the granting of 350,000
options to purchase Common Stock, (100,000 options at $6.00/share; 175,000
options at $7.00/share; and 75,000 at $8.00/share). The 350,000 options vest
one-third each year beginning on January 1, 1997. As amended on October 13,
1998, Mr. Tennant may exercise the vested portion of these options at any time
prior to April 30, 2005. Mr. Tennant was granted additional stock options for
200,000 shares at a price of $5.00 per share, which vest in equal increments
over a three year period. As amended on October 13, 1998, Mr. Tennant may
exercise the vested portion of these options at any time prior to April 30,
2005. The principal terms of Mr. Tennant's January 1, 1997, as amended,
employment agreement, including the grant of additional stock options at an
exercise price of $5.00 per share, were included in an agreement between the
Company and Mr. Tennant dated September 19, 1996. The last reported sale price
of the Company's Common Stock on The NASDAQ National Market(sm) on September 19,
1996 was $5.00 per share.
Prior to his departure from the Company on January 18, 1999, Stephen R.
Brian was employed by the Company as President and Chief Operating Officer. Mr.
Brian had an employment contract, which he and the Company mutually agreed to
terminate upon his resignation from the Company to pursue other interests.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Jeffrey C. Rubenstein, a director of the Company and a member of the
Executive Compensation Committee is a senior principal with the law firm Much
Shelist Freed Denenberg Ament & Rubenstein, P.C., which serves as general
counsel to the Company. Legal fees paid to Mr. Rubenstein's firm were neither
material to the Company or to his firm. Mr. Rubenstein, as executor of the Meyer
J. Ragir Estate, executor of the Norma L. Ragir Estate, a director of the Ragir
Foundation, and co-trustee of the Ragir Trusts, exercises either sole or shared
voting and investment power with respect to 513,358 shares of the Company's
Common Stock, or 6.8% of the outstanding shares of Common Stock as of March 26,
1999. The Company's principal office and a manufacturing facility in Chicago,
Illinois is owned by the Ragir Gift Trust, of which Mr. Rubenstein serves as
co-trustee.
COMPENSATION COMMITTEE REPORT
The Compensation Committee ("Committee") determines and administers the
compensation of the Company's executive officers. The Committee is comprised
entirely of non-employee directors.
COMPENSATION PHILOSOPHY
At the direction of the Board of Directors and pursuant to the charter of
the Committee, the Committee endeavors to ensure that the compensation programs
for executive officers of the Company are effective in attracting and retaining
key executives responsible for the success of the Company and are administered
in an
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appropriate fashion in the long-term interests of the Company. The Committee
actions related to the compensation of the chief executive officer and the chief
financial officer of the Company are submitted to the full Board of Directors
for ratification.
The Committee believes that the Company's overall financial performance
should be an important factor in the total compensation of the Company's
executive officers. At the executive officer level, the Committee has a policy
that a significant portion of the total compensation should consist of variable,
performance-based components, such as stock awards and bonuses, which can
increase or decrease to reflect changes in corporate and individual performance.
These incentive compensation programs are intended to reinforce management's
commitment to enhancement of profitability and stockholder value.
The Committee takes into account various qualitative and quantitative
indicators of Company and individual performance in determining the level and
composition of compensation for the chief executive officer and other executive
officers. While the Committee considers such Company performance measures as net
income, earnings per share, return on average stockholders' equity, return on
capital employed and return on average total assets, the Committee does not
apply any specific quantitative formula in making compensation decisions.
However, the Executive Incentive Plan and the Management Incentive Plan are
based on specific Company performance measures of return on capital employed and
the attainment of certain budgeted goals, respectively. The Committee also
appreciates the importance of achievements that may be difficult to quantify
and, accordingly, recognizes qualitative factors, such as successful supervision
of major corporate projects, demonstrated leadership ability and contributions
to the industry.
Where possible, the Committee will attempt to evaluate the total
compensation of the Company's chief executive officer and other executive
officers in light of information regarding the compensation practices and
corporate financial performance of a peer group consisting of competitive
companies of similar asset size. From time to time, the Committee also receives
assessments and advice regarding the Company's compensation practices from
independent compensation consultants.
BASE SALARY
Base salaries for the chief executive officer and other executive officers
are established at levels considered appropriate in light of the duties and
scope of responsibilities of each executive officer's position. Salaries are
reviewed periodically and adjusted as warranted to reflect sustained individual
executive officer's performance. The Committee focuses primarily on total annual
compensation, including incentive awards, rather than base salary alone, as the
appropriate measure of executive officer performance and contribution.
PERFORMANCE BASED COMPENSATION
EXECUTIVE INCENTIVE PLAN. The Executive Incentive Plan ("EIP") applies to
the Company's senior executive management. The purpose of the EIP is to make
available to the participants, a portion of their total compensation in the form
of an incentive opportunity when they discharge their duties in a manner which
makes a measurable contribution to the Company's earnings and achieves a
predetermined return on capital employed goal. While the EIP provides annual
incentive opportunity, it also focuses on long-term results.
MANAGEMENT INCENTIVE PLAN. The Management Incentive Plan, ("MIP") applies
to executive officers and key employees of the Company. Participants are
eligible to earn an annual incentive award based on the attainment of
pre-approved Company and subsidiary goals. Participants are assigned a target
incentive award stated as a percent of their salary, based on a participant's
duties and responsibilities. The target incentive award is calculated at the end
of the fiscal year based upon the attainment of predetermined goals.
STOCK OPTIONS
In recommending grants under the various stock option plans, the Committee
considers various quantitative and qualitative factors. The number of options
previously awarded to and held by executive officers and key employees is
reviewed but is only one factor in determining the size of current option
grants.
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CHIEF EXECUTIVE OFFICER COMPENSATION
Compensation of the Chief Executive Officer for the 1998 fiscal year was
determined pursuant to the terms of Mr. Tennant's employment agreement. Mr.
Tennant also participates in the Executive Incentive Plan for senior executives
as well as the Management Incentive Plan.
Compensation Committee
Marshall Ragir
Jeffrey C. Rubenstein
Joel Spungin
The report of the Compensation Committee and the performance graph included
in "Company Stock Performance" shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filings under either the 1933 Act or the 1934 Act (together, the "Acts"), except
to the extent that the Company specifically incorporates such report or graph by
reference; and further, such report and graph shall not be deemed filed under
the Acts.
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COMPANY STOCK PERFORMANCE
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return on the NASDAQ Market Index and a
selected industry index (SIC code 3089 -- Plastics Products N.E.C.). The graph
is for a period of five years and assumes $100 was invested on December 26,
1993. Cumulative total return assumes that dividends, if any, were reinvested.
The cumulative total return set forth in the graph is not necessarily indicative
of future returns.
ASSUMES $100 INVESTED ON DEC. 26, 1993
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDING DEC. 26, 1998
PERFORMANCE GRAPH
HOME PRODUCTS SIC CODE INDEX NASDAQ MARKET INDEX
------------- -------------- -------------------
'12/26/93' 100.00 100.00 100.00
'12/31/94' 63.16 98.28 104.99
'12/30/95' 78.95 119.13 136.18
'12/26/96' 115.79 153.42 169.23
'12/27/97' 164.91 188.19 207.00
'12/26/98' 139.47 187.15 291.96
12/26/93 12/31/94 12/30/95 12/26/96 12/27/97 12/26/98
-------- -------- -------- -------- -------- --------
Home Products............... $100.00 $ 63.16 $ 78.95 $115.79 $164.91 $ 139.47
SIC Code Index.............. 100.00 98.28 119.13 153.42 188.19 187.15
NASDAQ Market Index......... 100.00 104.99 136.18 169.23 207.00 291.96
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed Arthur Andersen LLP,
independent public accountants, as independent auditors to examine the annual
consolidated financial statements of the Company and its subsidiary companies
for 1999. Arthur Andersen LLP has served as the Company's independent auditors
since 1996. A representative of Arthur Andersen LLP will be present at the
meeting to make a statement, if such representative so desires, and to respond
to stockholders' questions.
ANNUAL REPORT
A copy of the Company's Annual Report to Stockholders has accompanied this
Proxy Statement. The Company's Annual Report on Form 10-K for the fifty-two
weeks ended December 26, 1998, as filed with the Securities and Exchange
Commission, is available without charge to any stockholder upon written request
to James E. Winslow, Investor Relations, Home Products International, Inc., 4501
West 47th Street, Chicago,
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Illinois 60632. Copies of exhibits filed with the Form 10-K will be furnished,
if requested, upon payment of the Company's reasonable expenses in furnishing
those materials.
STOCKHOLDER PROPOSALS
Stockholder proposals submitted for evaluation as to inclusion in the proxy
materials for the Company's 2000 annual meeting of stockholders must be received
by the Company not later than 5:00 pm central standard time on December 20,
1999, at the Company's principal executive offices at 4501 West 47th Street,
Chicago, Illinois 60632.
OTHER MATTERS
Management is not aware of any other matters to be presented for action at
the Meeting. If any other matters are properly brought before the Meeting, it is
the intention of the persons named as proxies in the accompanying form of proxy
to vote the shares represented thereby in accordance with their best judgment.
For the Board of Directors,
JAMES R. TENNANT
James R. Tennant
Chairman of the Board
Chicago, Illinois
April 19, 1999
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EXHIBIT A
HOME PRODUCTS INTERNATIONAL, INC.
1999 DIRECTORS RESTRICTED STOCK PLAN
1. PURPOSE. The purpose of this 1999 Directors Restricted Stock Plan
(the "PLAN") is to further the success of Home Products International, Inc., a
Delaware corporation (the "COMPANY"), by attracting and retaining highly
qualified individuals for service as directors of the Company or any of the
Company's Subsidiaries (as defined below) and to provide to such persons
incentives and rewards relating to the Company's business plans.
2. DEFINITIONS. As used in this Plan, in addition to the terms defined
elsewhere herein, the following terms have the following meanings when used
herein with initial capital letters:
(a) "BOARD" means the Board of Directors of the Company or,
pursuant to any delegation by the Board to the Compensation Committee pursuant
to Section 8, the Compensation Committee, as it may exist from time to time.
(b) "CHANGE IN CONTROL" shall have the meaning set forth by
the Board.
(c) "CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
(d) "COMMON SHARES" means shares of common stock of the
Company.
(e) "COMPENSATION COMMITTEE" means any committee which is
appointed by the Board from time to time as its compensation committee, and
which so long as the Company has a class of equity securities traded on a
securities exchange or automated quotation system must consist solely of
Non-Employee Directors, each of whom will be a disinterested person within the
meaning of Rule 16b-3 (as defined hereinafter).
(f) "DATE OF GRANT" means the date determined in accordance
with the Board's authorization on which a grant of Restricted Shares becomes
effective.
(g) "FORM OF RESTRICTED SHARE GRANT" means the form adopted by
the Board for the transfer or issuance of Restricted Shares pursuant to Section
4 hereof, which form may be amended by the Board from time to time.
(h) "NON-EMPLOYEE DIRECTOR" means a director of the Company
who is not a full-time employee of the Company or any Subsidiary.
(i) "PARTICIPANT" means a person who is approved by the Board
to receive benefits under this Plan and who is at the time a director of the
Company or any one or more of its Subsidiaries, if any, or who has agreed to
commence serving in such capacity.
(j) "RESTRICTED SHARES" means Common Shares issued pursuant to
Section 4 as to which neither the substantial risk of forfeiture nor the
prohibition on transfers referred to in Section 4 has expired.
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(k) "RULE 16B-3" means rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "EXCHANGE ACT") (or any successor rule
substantially to the same effect), as in effect from time to time.
(l) "SUBSIDIARY" means any corporation with respect to which
the Company directly or indirectly owns stock possessing 50% or more of the
voting power, as described in Section 424(f) of the Code.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided
in Section 6, the number of Common Shares that may be issued or transferred
under this Plan as Restricted Shares and released from substantial risks of
forfeiture thereof may not exceed a maximum of ______________________. Common
Shares issued under this Plan may be shares of original issuance or treasury
shares or a combination of the foregoing.
4. RESTRICTED SHARES. The Board may authorize the issuance or transfer
of Restricted Shares to Participants. Each such grant will be in accordance with
the following provisions:
(a) Each such issuance or transfer will constitute an
immediate transfer of the ownership of Common Shares to the Participant in
consideration of the performance of services, entitling such Participant to
voting, dividend, and other ownership rights, but subject to the substantial
risk of forfeiture and restrictions on transfer provided below.
(b) Each such issuance or transfer may be made without
additional consideration.
(c) Each such issuance or transfer will provide that the
Restricted Shares covered thereby will be subject, except (if the Board so
determines) in the event of a Change in Control or other event specified in the
agreement referred to in Section 4(e), for a period to be determined by the
Board at the Date of Grant, to a "substantial risk of forfeiture" within the
meaning of Section 83 of the Code.
(d) Each such issuance or transfer will provide that during
the period for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares will be prohibited or restricted in the
manner and to the extent prescribed in or pursuant to the agreement referred to
in Section 4(e) (which restrictions may include, without limitation, rights of
repurchase or first refusal or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee).
(e) Each issuance or transfer of Restricted Shares will be
evidenced by an agreement executed on behalf of the Company by any officer or
director of the Company and delivered to and accepted by the Participant and
containing such terms and provisions as the Board may approve except that in no
event will any such agreement include any provision prohibited by the express
terms of the Plan. The agreement shall be consistent with the Form of Restricted
Share Grant adopted by the Board for the purpose of issuing Restricted Shares.
All certificates representing Restricted Shares will be held in custody by the
Company until all restrictions thereon have lapsed, together with a stock power
executed by the Participant in whose name such certificates are registered,
endorsed in blank and covering such Restricted
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Shares, which may be executed by any officer of the Company upon a
determination by the Board that an event causing the forfeiture of the
Restricted Shares has occurred.
5. TRANSFERABILITY. The Board may specify at the Date of Grant that
part or all of the Common Shares that are no longer subject to the substantial
risk of forfeiture and restrictions on transfer referred to in Section 4 will be
subject to further restrictions on transfer.
6. ADJUSTMENTS. In the event of:
(a) any stock dividend, stock split, combination of shares,
recapitalization, or other change in the capital structure of the Company,
(b) any merger, consolidation, spin-off, split-off, spin-out,
split-up, reorganization, partial or complete liquidation, or other distribution
of assets or issuance of rights or warrants to purchase securities, or
(c) any other corporate transaction or event having an effect
similar to any of the foregoing,
the Board may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it may determine to be equitable in
the circumstances and may require in connection therewith the surrender of all
awards so replaced. The Board may also make or provide for such adjustments in
the numbers of shares specified in Section 3 as the Board may determine is
appropriate to reflect any transaction or event described in this Section 6.
7. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local, or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements may include relinquishment of a portion of such benefit.
8. ADMINISTRATION OF THE PLAN.
(a) This Plan will be administered by the Board, which may
from time to time delegate all or any part of its authority under this Plan to
the Compensation Committee.
(b) The Board will take such actions as are required to be
taken by it hereunder, may take the actions permitted to be taken by it
hereunder, and will have the authority from time to time to interpret this Plan
and to adopt, amend, and rescind rules and regulations for implementing and
administering this Plan. All such actions will be in the sole discretion of the
Board, and when taken, will be final, conclusive, and binding. Without limiting
the generality or effect of the foregoing, the interpretation and construction
by the Board of any provision of this Plan or of any agreement, notification, or
document evidencing the grant of Restricted Shares and any determination by the
Board in its sole discretion pursuant to any provision of this Plan or of any
such agreement, notification, or document, will be final and conclusive. Without
limiting the generality or effect of any provision of the Certificate of
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Incorporation of the Company, no member of the Board will be liable for any such
action or determination made in good faith.
(c) The provisions of Section 4 will be interpreted as
authorizing the Board, in taking any action under or pursuant to this Plan, to
take any action it determines in its sole discretion to be appropriate subject
only to the express limitations therein contained and no authorization in any
such Section or other provision of this Plan is intended or may be deemed to
constitute a limitation on the authority of the Board.
(d) The existence of this Plan or any right granted or other
action taken pursuant hereto will not affect the authority of the Board or the
Company to take any other action, including in respect of the grant or award of
any option, security, or other right or benefit, whether or not authorized by
this Plan, subject only to limitations imposed by applicable law as from time to
time applicable thereto.
9. AMENDMENTS, ETC.
(a) This Plan may be amended from time to time by the Board
but without further approval by a majority of the stockholders of the Company
present in person or by proxy at a meeting of the Company's stockholders and
entitled to vote generally in the election of directors or as may be otherwise
required by Rule 16b-3, no such amendment will (i) increase the maximum number
of Common Shares pursuant to Section 3 in any material amount (except that
adjustments and additions authorized by this Plan will not be limited by this
provision) or (ii) cause Rule 16b-3 to become inapplicable to this Plan during
any period in which the Company has any class of equity securities registered
pursuant to Section 13 or 15 of the Exchange Act.
(b) The Board may, with the concurrence of the affected
Participant, cancel any agreement evidencing any award granted under this Plan.
In the event of such cancellation, the Board may authorize the granting of new
awards hereunder (which may or may not cover the same number of Common Shares
which had been the subject of the prior award) in such manner and subject to
such other terms, conditions, and discretions as would have been applicable
under this Plan had the canceled award not been granted.
(c) In case of termination of service as a director by reason
of death, disability, or normal or early retirement, or in the case of hardship
or other special circumstances, of a Participant who holds any Restricted Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or who holds Common Shares subject to any transfer
restriction imposed pursuant to Section 5, the Board may take such action as it
deems equitable in the circumstances or in the best interests of the Company,
including without limitation waiving or modifying any other limitation or
requirement under any such award.
(b) This Plan will not confer upon any Participant any right
with respect to continuance of service as a director of the Company or any
Subsidiary, nor will it interfere in any way with any right the Company or any
Subsidiary would otherwise have to terminate or modify the terms of such
Participant's service at any time.
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(e) This Plan will be governed by and constructed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflict of laws thereof. If any provision of this Plan is held to
be invalid or unenforceable, no other provision of this Plan will be affected
thereby.
(f) This Plan shall be effective upon adoption by the Board of
Directors, but the Plan shall be void unless it is approved by the Company's
stockholders within the earlier of the date of the Company's next annual meeting
of stockholders and twelve (12) months after the date the Plan is adopted by the
Board of Directors. Subject to the foregoing condition, Restricted Shares may be
granted pursuant to the Plan from time to time within the period commencing upon
adoption of the Plan by the Board and ending ten (10) years after the earlier of
such adoption and the approval of the Plan by the stockholders.
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EXHIBIT B
DRAFT
SUBJECT TO SHAREHOLDER
APPROVAL
1999 PERFORMANCE INCENTIVE PLAN OF
HOME PRODUCTS INTERNATIONAL, INC.
1. PURPOSE.
The purposes of the 1999 Performance Incentive Plan of Home Products
International, Inc. (the "Plan") are to advance the interests of the Company and
its shareholders by strengthening the ability of the Company to attract, retain
and reward highly qualified non-employee directors, officers and other
employees, to motivate officers and other selected employees to achieve business
objectives established to promote the long-term growth, profitability and
success of the Company, and to encourage ownership of the Common Stock of the
Company by participating non-employee directors, officers and other selected
employees. The Plan authorizes performance-based stock and cash incentive
compensation in the form of stock options, stock appreciation rights, restricted
stock, performance grants and awards, and other stock-based grants and awards.
2. DEFINITIONS.
For the purposes of the Plan, the following terms shall have the following
meanings:
(a) "ADJUSTED NET INCOME" means, with respect to any calendar or other fiscal
year of the Company, the amount reported as "Net Income" in the audited
Consolidated Income Statement of the Company and Subsidiaries for such year (as
set forth in the Company's Annual Report to Shareholders for such year),
adjusted to exclude any of the following items: (i) extraordinary items (as
described in Accounting Principles Board Opinion No. 30); (ii) gains or losses
on the disposition of discontinued operations; (iii) the cumulative effects of
changes in accounting principles; (iv) the writedown of any asset; and (v)
charges for restructuring and rationalization programs.
(b) "ANNUAL NET INCOME PER SHARE" means, with respect to any calendar or other
fiscal year of the Company in respect of which a determination thereof is being
or to be made, the Adjusted Net Income for such year divided by the average
number of shares of Common Stock outstanding during such year.
(c) "AWARD" means any payment or settlement in respect of a grant made pursuant
to the Plan, whether in the form of shares of Common Stock or in cash, or in any
combination thereof.
(d) "BOARD OF DIRECTORS" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, or any successor statute thereto, together with the published
rulings, regulations and interpretations duly promulgated thereunder.
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(f) "COMMITTEE" means the committee of the Board of Directors established and
constituted as provided in Section 5 of the Plan.
(g) "COMMON STOCK" means the common stock, $0.01 par value, of the Company, or
any security issued by the Company in substitution or exchange therefor or in
lieu thereof.
(h) "COMMON STOCK EQUIVALENT" means a Unit (or fraction thereof, if authorized
by the Committee) substantially equivalent to a hypothetical share of Common
Stock, credited to a Participant and having a value at any time equal to the
Fair Market Value of a share of Common Stock (or such fraction thereof) at such
time.
(i) "COMPANY" means Home Products International, Inc., a Delaware corporation,
or any successor corporation.
(j) "COVERED EMPLOYEE" means any person who is a "covered employee" within the
meaning of Section 162(m) of the Code.
(k) "CUMULATIVE NET INCOME" means, in respect of any Performance Period, the
aggregate cumulative amount of the Adjusted Net Income for the calendar or other
fiscal years of the Company during such Performance Period.
(l) "CUMULATIVE NET INCOME PER SHARE" means, in respect of any Performance
Period, the aggregate cumulative amount of the Annual Net Income Per Share for
the calendar or other fiscal years of the Company during such Performance
Period.
(m) "DIVIDEND EQUIVALENT" means, in respect of a Common Stock Equivalent and
with respect to each dividend payment date for the Common Stock, an amount equal
to the cash dividend on one share of Common Stock payable on such dividend
payment date.
(n) "EMPLOYEE" means any individual, including any officer of the Company, who
is on the active payroll of the Company or a Subsidiary at the relevant time.
(o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended and in
effect from time to time, including all rules and regulations promulgated
thereunder.
(p) "FAIR MARKET VALUE" means, in respect of any date on or as of which a
determination thereof is being or to be made, the closing sale price of the
Common Stock reported on The NASDAQ National Market on such date or any other
national securities market which is the principle market in which the Common
Stock is traded, or, if the Common Stock was not traded on such date, on the
next preceding day on which sales of shares of the Common Stock were reported on
The NASDAQ National Market or any other national securities market which is the
principle market in which the Common Stock is traded.
(q) "INCENTIVE STOCK OPTION" means any option to purchase shares of Common Stock
granted pursuant to the provisions of Section 6 of the Plan that is intended to
be and is specifically designated as an "incentive stock option" within the
meaning of Section 422 of the
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Code, or any successor provision thereof.
(r) "NON-EMPLOYEE DIRECTOR" means any director of the Company who is not an
employee of the Company or any Subsidiary of the Company.
(s) "NON-QUALIFIED STOCK OPTION" means any option to purchase shares of Common
Stock granted pursuant to the provisions of Section 6 of the Plan that is not an
Incentive Stock Option.
(t) "PARTICIPANT" means any Employee of the Company or a Subsidiary who receives
a grant or Award under the Plan. In addition, the term "Participant" also means
any Non-Employee Director of the Company who receives a Non-Qualified Stock
Option grant under the Plan.
(u) "PERFORMANCE GRANT" means a grant made pursuant to Section 9 of the Plan,
the Award of which is contingent on the achievement of specific Performance
Goals during a Performance Period, determined using a specific Performance
Measure, all as specified in the grant agreement relating thereto.
(v) "PERFORMANCE GOALS" mean, with respect to any applicable grant made pursuant
to the Plan, the one or more targets, goals or levels of attainment required to
be achieved in terms of the specified Performance Measure during the specified
Performance Period, all as set forth in the related grant agreement.
(w) "PERFORMANCE MEASURE" means, with respect to any applicable grant made
pursuant to the Plan, one or more of the criteria identified at Section 9(c) of
the Plan selected by the Committee for the purpose of establishing, and
measuring attainment of, Performance Goals for a Performance Period in respect
of such grant, as provided in the related grant agreement.
(x) "PERFORMANCE PERIOD" means, with respect to any applicable grant made
pursuant to the Plan, the one or more periods of time, which may be of varying
and overlapping durations, as the Committee may select during which the
attainment of one or more Performance Goals will be measured to determine
whether, and the extent to which, a Participant is entitled to receive payment
of an Award pursuant to such grant.
(y) "PLAN" means this 1999 Performance Incentive Plan of the Company, as set
forth herein and as hereafter amended from time to time in accordance with the
terms hereof.
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(z) "RESTRICTED STOCK" means shares of Common Stock issued pursuant to a
Restricted Stock Grant under Section 8 of the Plan so long as such shares remain
subject to the restrictions and conditions specified in the grant agreement
pursuant to which such Restricted Stock Grant is made.
(aa) "RESTRICTED STOCK GRANT" means a grant made pursuant to the provisions of
Section 8 of the Plan.
(bb) "STOCK APPRECIATION RIGHT" means a grant in the form of a right to benefit
from the appreciation of the Common Stock made pursuant to Section 7 of the
Plan.
(cc) "STOCK OPTION" means and includes any Non-Qualified Stock Option and any
Incentive Stock Option granted pursuant to Section 6 of the Plan.
(dd) "SUBSIDIARY" means any corporation or entity in which the Company directly
or indirectly owns or controls 50% or more of the equity securities issued by
such corporation or entity having the power to vote for the election of
directors.
(ee) "UNIT" means a bookkeeping entry used by the Company to record and account
for the grant, settlement or, if applicable, deferral of an Award until such
time as such Award is paid, canceled, forfeited or terminated, as the case may
be, which, except as otherwise specified by the Committee, shall be equal to one
Common Stock Equivalent.
3. EFFECTIVE DATE; TERM.
(a) EFFECTIVE DATE. The Plan shall be effective on May 19, 1999, upon approval
by the shareholders of the Company at the 1999 annual meeting of shareholders or
any adjournments thereof.
(b) TERM. The Plan shall remain in effect until May 19, 2009, unless sooner
terminated by the Board of Directors. Termination of the Plan shall not affect
grants and Awards then outstanding.
4. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) MAXIMUM NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN. The maximum
aggregate number of shares of Common Stock which may be issued pursuant to the
Plan, subject to adjustment as provided in Section 4(b) of the Plan, shall be
_________, plus (i) any shares of Common Stock issued under the Plan that are
forfeited back to the Company or are canceled, and (ii) any shares of Common
Stock that are tendered, whether by physical delivery or by attestation, to the
Company by a Participant as full or partial payment of the exercise price of any
Stock Option granted pursuant to the Plan, in connection with the payment or
settlement of any other grant or Award made pursuant to the Plan, or in payment
of any applicable withholding for federal, state, city, local or foreign income,
payroll or other taxes incurred in connection with the exercise of any Stock
Option or Stock Appreciation Right granted under the Plan or the receipt or
settlement of any other grant or Award under the Plan. The shares of Common
Stock that may be issued under the Plan may be authorized and unissued
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shares or issued shares that have been reacquired by the Company. No fractional
share of the Common Stock shall be issued under the Plan. Awards of fractional
shares of the Common Stock, if any, shall be settled in cash.
(b) ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event of any change in
the capital structure, capitalization or Common Stock of the Company such as a
stock dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, such proportionate adjustments, if any, as
the Board of Directors in its discretion may deem appropriate to reflect such
change shall be made with respect to: (i) the maximum number of shares of Common
Stock which may be (1) issued pursuant to the Plan, (2) the subject of any type
of grant or Award under the Plan, and (3) granted, Awarded or issued to any
Participant pursuant to any provision of the Plan; (ii) the number of shares of
Common Stock subject to any outstanding Stock Option, Stock Appreciation Right
or other grant or Award made to any Participant under the Plan; (iii) the per
share exercise price in respect of any outstanding Stock Options and Stock
Appreciation Rights; (iv) the number of shares of Common Stock and the number of
Units or the value of such Units, as the case may be, which are the subject of
grants and Awards then outstanding under the Plan; and (v) any other term or
condition of any grant affected by any such change.
5. ADMINISTRATION.
(a) THE COMMITTEE. The Plan shall be administered by the Compensation Committee
of the Board of Directors to be appointed from time to time by the Board of
Directors and comprised of not less than two of the then members of the Board of
Directors who qualify as "non-employee directors" within the meaning of Rule
16(b)-3 promulgated under the Exchange Act and as "outside directors" within the
meaning of Section 162(m) of the Code. Members of the Committee shall serve at
the pleasure of the Board of Directors. The Board of Directors may from time to
time remove members from, or add members to, the Committee. A majority of the
members of the Committee shall constitute a quorum for the transaction of
business and the acts of a majority of the members present at any meeting at
which a quorum is present shall be the acts of the Committee. Any one or more
members of the Committee may participate in a meeting by conference telephone or
similar means where all persons participating in the meeting can hear and speak
to each other, which participation shall constitute presence in person at such
meeting. Action approved in writing by a majority of the members of the
Committee then serving shall be fully as effective as if the action had been
taken by unanimous vote at a meeting duly called and held. The Company shall
make grants and effect Awards under the Plan in accordance with the terms and
conditions specified by the Committee, which terms and conditions shall be set
forth in grant agreements and/or other instruments in such forms as the
Committee shall approve.
(b) COMMITTEE POWERS. The Committee shall have full power and authority to
operate and administer the Plan in accordance with its terms. The powers of the
Committee include, but are not limited to, the power to: (i) select Participants
from among the Employees of the Company and Subsidiaries; (ii) establish the
types of, and the terms and conditions of, all grants and Awards made under the
Plan, subject to any applicable limitations set forth in, and consistent
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with the express terms of, the Plan; (iii) make grants and pay or otherwise
effect Awards subject to, and consistent with, the express provisions of the
Plan; (iv) establish Performance Goals, Performance Measures and Performance
Periods, subject to, and consistent with, the express provisions of the Plan;
(v) reduce the amount of any grant or Award; (vi) prescribe the form or forms of
grant agreements and other instruments evidencing grants and Awards under the
Plan; (vii) pay and to defer payment of Awards on such terms and conditions, not
inconsistent with the express terms of the Plan, as the Committee shall
determine; (viii) direct the Company to make conversions, accruals and payments
pursuant to the Plan; (ix) construe and interpret the Plan and make any
determination of fact incident to the operation of the Plan; (x) promulgate,
amend and rescind rules and regulations relating to the implementation,
operation and administration of the Plan; (xi) adopt such modifications,
procedures and subplans as may be necessary or appropriate to comply with the
laws of other countries with respect to Participants or prospective Participants
employed in such other countries; (xii) delegate to other persons the
responsibility for performing administrative or ministerial acts in furtherance
of the Plan; (xiii) engage the services of persons and firms, including banks,
consultants and insurance companies, in furtherance of the Plan's activities;
and (xiv) make all other determinations and take all other actions as the
Committee may deem necessary or advisable for the administration and operation
of the Plan.
(c) COMMITTEE'S DECISIONS FINAL. Any determination, decision or action of the
Committee in connection with the construction, interpretation, administration or
application of the Plan, and of any grant agreement, shall be final, conclusive
and binding upon all Participants, and all persons claiming through
Participants, affected thereby.
(d) ADMINISTRATIVE ACCOUNTS. For the purpose of accounting for Awards deferred
as to payment, the Company shall establish bookkeeping accounts expressed in
Units bearing the name of each Participant receiving such Awards. Each account
shall be unfunded, unless otherwise determined by the Committee in accordance
with Section 15(d) of the Plan.
(e) CERTIFICATIONS. In respect of each grant under the Plan to a Covered Person
which the Committee intends to be "performance based compensation" under Section
162(m) of the Code, the provisions of the Plan and the related grant agreement
shall be construed to confirm such intent, and to conform to the requirements of
Section 162(m) of the Code, and the Committee shall certify in writing (which
writing may include approved minutes of a meeting of the Committee) that the
applicable Performance Goal(s), determined using the Performance Measure
specified in the related grant agreement, was attained during the relevant
Performance Period at a level that equaled or exceeded the level required for
the payment of such Award in the amount proposed to be paid and that such Award
does not exceed any applicable Plan limitation.
6. STOCK OPTIONS.
(a) IN GENERAL. Options to purchase shares of Common Stock may be granted under
the Plan and may be Incentive Stock Options or Non-Qualified Stock Options. All
Stock Options shall be subject to the terms and conditions of this Section 6 and
shall contain such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee shall determine. Stock Options
may be granted in addition to, or in tandem with or independent of Stock
Appreciation Rights or other grants and Awards under the Plan. The Committee may
grant
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Stock Options that provide for the automatic grant of a replacement Stock Option
if payment of the exercise price and/or any related withholding taxes is made by
tendering (whether by physical delivery or by attestation) shares of Common
Stock or by having shares of Common Stock withheld by the Company. The
replacement Stock Option would cover the number of shares of Common Stock
tendered or withheld, would have a per share exercise price equal to at least
100% of the Fair Market Value of a share of Common Stock on the date of the
exercise of the original Stock Option, and would have such other terms and
conditions as may be specified by the Committee and set forth in the related
grant agreement.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary may be granted Stock Options.
Non-Employee Directors of the Company will be granted Non-Qualified Stock
Options as described below. The Committee shall determine, in its discretion,
the Employees to whom Stock Options will be granted, the timing of such grants,
and the number of shares of Common Stock subject to each Stock Option granted;
provided, that (i) the maximum aggregate number of shares of Common Stock which
may be issued and delivered upon the exercise of Non-Qualified Stock Options
granted under the Plan (including Non-Qualified Stock Options granted to
Non-Employee Directors) shall be determined by the Committee, (ii) the maximum
aggregate number of shares of Common Stock which may be issued and delivered
upon the exercise of Incentive Stock Options shall be determined by the
Committee, (iii) the maximum number of shares of Common Stock in respect of
which Stock Options may be granted to any Employee during any calendar year
shall be determined by the Committee, and (iv) in respect of Incentive Stock
Options, the aggregate Fair Market Value (determined as of the date the
Incentive Stock Option is granted) of the shares of Common Stock with respect to
which an Incentive Stock Option becomes exercisable for the first time by a
Participant during any calendar year shall not exceed $100,000, or such other
limit as may be required by the Code, except that, if authorized by the
Committee and provided for in the related grant agreement, any portion of any
Incentive Stock Option that cannot be exercised as such because of this
limitation may be converted into and exercised as a Non-Qualified Stock Option.
Non-Qualified Stock Options to purchase 2,500 shares of Common Stock will be
granted automatically to each Non-Employee Director of the Company at the time
of the first Board of Directors meeting of each fiscal year. New Non-Employee
Directors will receive Non-Qualified Stock Options to purchase 5,000 shares of
Common Stock (rather than 2,500 shares as specified in the preceding sentence)
for their first year. In no event shall any Stock Option or Stock Appreciation
Right be granted to a Participant in exchange for the Participant's agreement to
the cancellation of one or more Stock Options or Stock Appreciation Rights then
held by such Participant if the exercise price of the new grant is lower than
the exercise price of the grant to be cancelled and in no event shall any Stock
Option or Stock Appreciation Right be amended to reduce the option price, except
as contemplated by Section 4(b) of the Plan.
(c) OPTION EXERCISE PRICE. The per share exercise price of each Stock Option
granted under the Plan shall be determined by the Committee prior to or at the
time of grant, but in no event shall the per share exercise price of any Stock
Option be less than 100% of the Fair Market Value of the Common Stock on the
date of the grant of such Stock Option.
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(d) OPTION TERM. The Committee shall fix the term of each Stock Option; except
that in no event shall the term of any Incentive Stock Option exceed ten years
after the date such Incentive Stock Option is granted.
(e) EXERCISABILITY. A Stock Option shall be exercisable at such time or times
and subject to such terms and conditions as shall be determined by the Committee
at the date of grant. No Stock Option may be exercised unless the holder thereof
is at the time of such exercise a Non-Employee Director or an Employee who has
been continuously an Employee since the date such Stock Option was granted,
except that the Committee may permit the exercise of any Stock Option for any
period following the Participant's termination of employment not in excess of
the original term of the Stock Option on such terms and conditions as it shall
deem appropriate and specify in the related grant agreement.
(f) METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in part, by
giving written notice of exercise to the Company specifying the number of shares
of Common Stock to be purchased. Such notice shall be accompanied by payment in
full of the purchase price, plus any required withholding taxes, in cash or, if
permitted by the terms of the related grant agreement or otherwise approved in
advance by the Committee, in shares of Common Stock already owned by the
Participant valued at the Fair Market Value of the Common Stock on the date of
exercise. The Committee may also permit Participants, either on a selective or
aggregate basis, to simultaneously exercise Stock Options and sell the shares of
Common Stock thereby acquired pursuant to a brokerage or similar arrangement
approved in advance by the Committee and to use the proceeds from such sale to
pay the exercise price and withholding taxes.
7. STOCK APPRECIATION RIGHTS.
(a) IN GENERAL. Stock Appreciation Rights in respect of shares of Common Stock
may be granted under the Plan alone, in tandem with, in addition to or
independent of a Stock Option or other grant or Award under the Plan. A Stock
Appreciation Right entitles a Participant to receive an amount equal to the
excess of the Fair Market Value of a share of Common Stock on the date of
exercise over the Fair Market Value of a share of Common Stock on the date of
grant of the Stock Appreciation Right, or such other higher price as may be set
by the Committee, multiplied by the number of shares of Common Stock with
respect to which the Stock Appreciation Right shall have been exercised.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary selected by the Committee may be granted
Stock Appreciation Rights. The Committee shall determine, in its discretion, the
Employees to whom Stock Appreciation Rights will be granted, the timing of such
grants and the number of shares of Common Stock in respect of which each Stock
Appreciation Right is granted; provided that (i) the maximum aggregate number of
shares of Common Stock in respect of which Stock Appreciation Rights may be
granted shall be determined by the Committee, (ii) the maximum aggregate number
of shares of Common Stock which may be issued and delivered in payment or
settlement of Stock Appreciation Rights shall be determined by the Committee,
and (iii) the maximum number of shares of Common Stock in respect of which Stock
Appreciation Rights may be granted to any employee during any calendar year
shall be determined by the Committee.
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(c) EXERCISABILITY; EXERCISE; FORM OF PAYMENT. A Stock Appreciation Right may be
exercised by a Participant at such time or times and in such manner as shall be
authorized by the Committee and set forth in the related grant agreement. The
Committee may provide that a Stock Appreciation Right shall be automatically
exercised on one or more specified dates. No Stock Appreciation Right may be
exercised unless the holder thereof is at the time of exercise an Employee and
has been continuously an Employee since the date the Stock Appreciation Right
was granted, except that the Committee may permit the exercise of any Stock
Appreciation Right for any period following the Participant's termination of
employment not in excess of the original term of the Stock Appreciation Right on
such terms and conditions as it shall deem appropriate and specify in the
related grant agreement. A Stock Appreciation Right may be exercised, in whole
or in part, by giving the Company a written notice specifying the number of
shares of Common Stock in respect of which the Stock Appreciation Right is to be
exercised. Stock Appreciation Rights may be paid upon exercise in cash, in
shares of Common Stock, or in any combination of cash and shares of Common Stock
as determined by the Committee.
8. RESTRICTED STOCK GRANTS AND AWARDS.
(a) IN GENERAL. A Restricted Stock Grant is the issue of shares of Common Stock
in the name of an Employee, which issuance is subject to such terms and
conditions as the Committee shall deem appropriate, including, without
limitation, restrictions on the sale, assignment, transfer or other disposition
of such shares and the requirement that the Employee forfeit such shares back to
the Company (i) upon termination of employment for specified reasons within a
specified period of time, or (ii) if any specified Performance Goals are not
achieved during a specified Performance Period, or (iii) if such other
conditions as the Committee may specify are not satisfied.
(b) ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary selected by the Committee may receive a
Restricted Stock Grant. The Committee, in its sole discretion, shall determine
whether a Restricted Stock Grant shall be made, the Employee to receive the
Restricted Stock Grant, and the conditions and restrictions imposed on the
Restricted Stock Grant. The maximum number of shares of Common Stock that may be
issued as Restricted Stock under the Plan shall be determined by the Committee.
The maximum number of shares of Common Stock that may be issued to any Employee
as Restricted Stock during any calendar year shall be determined by the
Committee. The maximum amount any Employee may receive as a Restricted Stock
Grant in any calendar year shall be determined using the Fair Market Value of
such Restricted Stock Grant as at the date of the grant thereof.
(c) RESTRICTION PERIOD. Restricted Stock Grants shall provide that in order for
a Participant to receive shares of Common Stock free of restrictions, the
Participant must remain in the employment of the Company or its Subsidiaries,
subject to such exceptions as the Committee shall deem appropriate and specify
in the related grant agreement, for a period of not less than one year
commencing on the date of the grant and ending on such later date or dates as
the Committee may designate at the time of the grant (the "Restriction Period").
The Committee, in its sole discretion, may provide for the lapse of restrictions
in installments during the Restriction Period. The Committee may also establish
one or more Performance Goals that are required to be
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achieved during one or more Performance Periods within the Restriction Period as
a condition to the lapse of the restrictions.
(d) RESTRICTIONS. The following restrictions and conditions shall apply to each
Restricted Stock Grant during the Restriction Period: (i) the Participant shall
not be entitled to delivery of the shares of the Common Stock; (ii) the
Participant may not sell, assign, transfer, pledge, hypothecate, encumber or
otherwise dispose of or realize on the shares of Common Stock subject to the
Restricted Stock Grant; and (iii) the shares of the Common Stock issued as
Restricted Stock shall be forfeited to the Company if the Participant for any
reason ceases to be an Employee prior to the end of the Restriction Period,
except due to circumstances specified in the related grant agreement or
otherwise approved by the Committee. The Committee may in, its sole discretion,
include such other restrictions and conditions as it may deem appropriate.
(e) PAYMENT. Upon expiration of the Restriction Period and if all conditions
have been satisfied and any applicable Performance Goals attained, the shares of
the Restricted Stock will be made available to the Participant, subject to
satisfaction of applicable withholding tax requirements, free of all
restrictions; provided, that the Committee may, in its discretion, require (i)
the further deferral of any Restricted Stock Grant beyond the initially
specified Restriction Period, (ii) that the Restricted Stock be retained by the
Company, and (iii) that the Participant receive a cash payment in lieu of
unrestricted shares of Common Stock.
(f) RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to shares of
Restricted Stock, all of the rights of a shareholder of the Company, including
the right to vote the shares and receive any cash dividends paid thereon. Stock
dividends distributed with respect to shares of Restricted Stock shall be
treated as additional shares under the Restricted Stock Grant and shall be
subject to the restrictions and other terms and conditions set forth therein.
9. PERFORMANCE GRANTS AND AWARDS.
(a) ELIGIBILITY AND TERMS. The Committee may grant to officers of the Company
and other Employees of the Company and its Subsidiaries the prospective
contingent right, expressed in Units, to receive payments of shares of Common
Stock, cash or any combination thereof, with each Unit equivalent in value to
one share of Common Stock, or equivalent to such other value or monetary amount
as may be designated or established by the Committee ("Performance Grants"),
based upon Company performance over a specified Performance Period. The
Committee shall, in its sole discretion, determine the officers of the Company
and other Employees eligible to receive Performance Grants. At the time each
Performance Grant is made, the Committee shall establish the Performance Period,
the Performance Measure and the Performance Goals in respect of such Performance
Grant. The number of shares of Common Stock and/or the amount of cash earned and
payable in settlement of a Performance Grant shall be determined at the end of
the Performance Period (a "Performance Award").
(b) LIMITATIONS ON GRANTS AND AWARDS. The maximum number of shares of Common
Stock that may be issued pursuant to Performance Grants shall be determined by
the Committee. The maximum number of shares that may be the subject of
Performance Grants made to any Participant in respect of any Performance Period
or during any calendar year shall be determined
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by the Committee. The maximum amount any Participant may receive during any
calendar year as Performance Awards pursuant to Performance Grants shall be
determined by the Committee, determined using the Fair Market Value of such
Performance Awards as at the last day of the applicable performance Period or
Periods or as at date or dates of the payment thereof, whichever is higher.
(c) PERFORMANCE GOALS, PERFORMANCE MEASURES AND PERFORMANCE PERIODS. Each
Performance Grant shall provide that, in order for a Participant to receive an
Award of all or a portion of the Units subject to such Performance Grant, the
Company must achieve certain Performance Goals over a designated Performance
Period having a minimum duration of one year, with attainment of the Performance
Goals determined using a specific Performance Measure. The Performance Goals and
Performance Period shall be established by the Committee in its sole discretion.
The Committee shall establish a Performance Measure for each Performance Period
for determining the portion of the Performance Grant that will be earned or
forfeited based on the extent to which the Performance Goals are achieved or
exceeded. In setting Performance Goals, the Committee may use a Performance
Measure based on any one, or on any combination, of the following Company
performance factors as the Committee deems appropriate: (i) Cumulative Net
Income Per Share; (ii) Cumulative Net Income; (iii) return on sales; (iv) total
shareholder return; (v) return on assets; (vi) economic value added; (vii) cash
flow; (viii) return on equity; and (ix) cumulative operating income (which shall
equal consolidated sales minus cost of goods sold and selling, administrative
and general expense). Performance Goals may include minimum, maximum and target
levels of performance, with the size of Performance Award based on the level
attained. Once established by the Committee and specified in the grant
agreement, and if and to the extent provided in or required by the grant
agreement, the Performance Goals and the Performance Measure in respect of any
Performance Grant (or any Restricted Stock Grant or Stock-Based Grant that
requires the attainment of Performance Goals as a condition to the Award) shall
not be changed. The Committee may, in its discretion, eliminate or reduce (but
not increase) the amount of any Performance Award (or Restricted Stock or
Stock-Based Award) that otherwise would be payable to a Participant upon
attainment of the Performance Goal(s).
(d) FORM OF GRANTS. Performance Grants may be made on such terms and conditions
not inconsistent with the Plan, and in such form or forms, as the Committee may
from time to time approve. Performance Grants may be made alone, in addition to
in tandem with, or independent of other grants and Awards under the Plan.
Subject to the terms of the Plan, the Committee shall, in its discretion,
determine the number of Units subject to each Performance Grant made to a
Participant and the Committee may impose different terms and conditions on any
particular Performance Grant made to any Participant. The Performance Goals, the
Performance Period or Periods, and the Performance Measure applicable to a
Performance Grant shall be set forth in the relevant grant agreement.
(e) PAYMENT OF AWARDS. Each Participant shall be entitled to receive payment in
an amount equal to the aggregate Fair Market Value (if the Unit is equivalent to
a share of Common Stock), or such other value as the Committee shall specify, of
the Units earned in respect of such Performance Award. Payment in settlement of
a Performance Award may be
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made in shares of Common Stock, in cash, or in any combination of Common Stock
and cash, and at such time or times, as the Committee, in its discretion, shall
determine.
10. OTHER STOCK-BASED GRANTS AND AWARDS.
(a) IN GENERAL. The Committee may make other grants and Awards pursuant to which
Common Stock is, or in the future may be, acquired by Participants, and other
grants and Awards to Participants denominated in Common Stock Equivalents or
other Units ("Stock-Based Grants"). Such Stock-Based Grants may be granted alone
or in addition to, in tandem with, or independent of any other grant made or
Award effected under the Plan.
(b) ELIGIBILITY AND TERMS. The Committee may make Stock-Based Grants to officers
of the Company and other Employees of the Company and its Subsidiaries. Subject
to the provisions of the Plan, the Committee shall have authority to determine
the Employees to whom, and the time or times at which, Stock-Based Grants will
be made, the number of shares of Common Stock, if any, to be subject to or
covered by each Stock-Based Grant, and any and all other terms and conditions of
each Stock-Based Grant.
(c) LIMITATIONS. The aggregate number of shares of Common Stock issued to
Participants pursuant to Stock-Based Grants made and Awards effected pursuant to
this Section 10 shall be determined by the Committee.
(d) FORM OF GRANTS; PAYMENT OF AWARDS. Stock-Based Grants may be made in such
form or forms and on such terms and conditions, including the attainment of
specific Performance Goals, as the Committee, in its discretion, shall approve.
Payment of Stock-Based Awards may be made in cash, in shares of Common Stock, or
in any combination of cash and shares of Common Stock, and at such time or
times, as the Committee shall determine.
11. DEFERRALS.
The Committee may, whether at the time of grant or at anytime thereafter prior
to payment or settlement, require a Participant to defer, or permit (subject to
such conditions as the Committee may from time to time establish) a Participant
to elect to defer, receipt of all or any portion of any payment of cash or
shares of Common Stock that would otherwise be due to such Participant in
payment or settlement of any Award under the Plan. If any such deferral is
required by the Committee (or is elected by the Participant with the permission
of the Committee), the Committee shall establish rules and procedures for such
payment deferrals. The Committee may provide for the payment or crediting of
interest, at such rate or rates as it shall in its discretion deem appropriate,
on such deferred amounts credited in cash and the payment or crediting of
dividend equivalents in respect of deferred amounts credited in Common Stock
Equivalents. Deferred amounts may be paid in a lump sum or in installments in
the manner and to the extent permitted, and in accordance with rules and
procedures established, by the Committee.
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12. NON-TRANSFERABILITY OF GRANTS AND AWARDS.
No grant or Award under the Plan, and no right or interest therein, shall be (i)
assignable, alienable or transferable by a Participant, except by will or the
laws of descent and distribution, or (ii) subject to any obligation, or the lien
or claims of any creditor, of any Participant, or (iii) subject to any lien,
encumbrance or claim of any party made in respect of or through any Participant,
however arising. During the lifetime of a Participant, Stock Options and Stock
Appreciation Rights are exercisable only by, and shares of Common Stock issued
upon the exercise of Stock Options and Stock Appreciation Rights or in
settlement of other Awards will be issued only to, and other payments in
settlement of any Award will be payable only to, the Participant or his or her
legal representative. The Committee may, in its sole discretion, authorize
written designations of beneficiaries and authorize Participants to designate
beneficiaries with the authority to exercise Stock Options and Stock
Appreciation Rights granted to a Participant in the event of his or her death.
Notwithstanding the foregoing, the Committee may, in its sole discretion and on
and subject to such terms and conditions as it shall deem appropriate, which
terms and conditions shall be set forth in the related grant agreement: (i)
authorize a Participant to transfer all or a portion of any Non-Qualified Stock
Option or Stock Appreciation Right, as the case may be, granted to such
Participant; provided, that in no event shall any transfer be made to any person
or persons other than such Participant's spouse, children or grandchildren, or a
trust for the exclusive benefit of one or more such persons, which transfer must
be made as a gift and without any consideration or to a partnership in which
such persons are the only partners; and (ii) provide for the transferability of
a particular grant or Award pursuant to a qualified domestic relations order.
All other transfers and any retransfer by any permitted transferee are
prohibited and any such purported transfer shall be null and void. Each Stock
Option or Stock Appreciation Right which becomes the subject of permitted
transfer (and the Participant to whom it was granted by the Company) shall
continue to be subject to the same terms and conditions as were in effect
immediately prior to such permitted transfer. The Participant shall remain
responsible to the Company for the payment of all withholding taxes incurred as
a result of any exercise of such Stock Option or Stock Appreciation Right. In no
event shall any permitted transfer of a Stock Option or Stock Appreciation Right
create any right in any party in respect of any Stock Option, Stock Appreciation
Right or other grant or Award, other than the rights of the qualified transferee
in respect of such Stock Option or Stock Appreciation Right specified in the
related grant agreement.
13. CHANGE IN CONTROL.
(a) EFFECT ON GRANTS. In the event of a Change in Control (as defined below) of
the Company, except as the Board of Directors comprised of a majority of
Continuing Directors may expressly provide otherwise, and notwithstanding any
other provision of the Plan to the contrary: (i) all Stock Options and Stock
Appreciation Rights then outstanding shall become fully exercisable as of the
date of the Change in Control, whether or not then exercisable; (ii) all
restrictions and conditions in respect of all Restricted Stock Grants then
outstanding shall be deemed satisfied as of the date of the Change in Control;
and (iii) all Performance Grants and other Stock-Based Grants shall be deemed to
have been fully earned, at the target amount of the award opportunity specified
in the grant agreement, as of the date of the Change in Control.
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(b) CHANGE IN CONTROL DEFINED. A "Change in Control" of the Company shall occur
when: (i) any Person (other than the Company, any Subsidiary, any employee
benefit plan or other compensation program or arrangement of the Company or of
any Subsidiary, or any person holding shares of Common Stock for or pursuant to
the terms of any such plan, program or arrangement), alone, or together with its
Affiliates and Associates, shall become an "Acquiring Person" as defined in
Section 1 of the Rights Agreement dated May 21, 1997 between the Company and
Chase Mellon Shareholder Services; or (ii) the shareholders of the Company
approve a definitive agreement for a merger or consolidation involving the
Company which would result in the Common Stock outstanding immediately prior to
such merger or consolidation continuing to represent (whether by remaining
outstanding or by being converted into voting securities of the surviving
entity) less than fifty percent of the combined voting power of the Company and
such other entity outstanding immediately after such merger or consolidation; or
(iii) the shareholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or (iv) the Continuing Directors
no longer constitute a majority of the Board of Directors. "Acquiring Person"
means any person who or which, together with all its Affiliates and Associates,
has acquired 15% or more of the shares of Common Stock then outstanding.
"Affiliate" and "Associate" shall have the respective meanings ascribed to such
terms in Rule 12b-2 under the Exchange Act. "Continuing Director" means any
individual who is a member of the Board of Directors, while such individual is a
member of the Board of Directors, who is not an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, or a representative or nominee of
an Acquiring Person or of any such Affiliate or Associate, and was a member of
the Board of Directors prior to the occurrence of a Change in Control, and any
successor of a Continuing Director, while such successor is a member of the
Board of Directors, who is not an Acquiring Person, or an Affiliate or Associate
of an Acquiring Person, or representative or nominee of an Acquiring Person or
of any such Affiliate or Associate, and is recommended or elected to succeed the
Continuing Director by a majority of the Continuing Directors.
Notwithstanding the preceding sentence, no Person shall become an "Acquiring
Person" as the result of (a) being a Beneficial Owner of 15% or more of the
outstanding shares of common stock of the Company on the date of this Option
Agreement, (b) an acquisition by the Company of shares of its common stock
which, by reason of reducing the number of its then outstanding shares of common
stock, increases the percentage of its then outstanding shares of common stock
Beneficially Owned by such Person to 15% or more (c) such Person becoming the
Beneficial Owner of 15% or more of the then outstanding shares of common stock,
pursuant to a Permitted Offer, or (d) the acquisition by such Person of
newly-issued shares of common stock of the Company directly from the Company (it
being understood that a purchase from an underwriter or other intermediary is
not directly from the Company); provided, however, that if such Person shall,
after such acquisition by the Company, become the Beneficial Owner of any
additional shares of common stock of the Company, then such Person shall be
deemed to be an "Acquiring Person"; provided further, however, that any
transferee from such Person who becomes a Beneficial Owner of 15% or more of the
shares of common stock of the Company then outstanding shall nevertheless be
deemed to be an Acquiring Person. Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this paragraph, has become such inadvertently, and such Person
divests as promptly as practicable
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(and in any event within ten business days after notification by the Company) a
sufficient number of shares of common stock so that such Person would no longer
be an Acquiring Person, as defined pursuant to the foregoing provisions of this
paragraph, then such Person shall not be deemed to be an "Acquiring Person" for
any purpose hereof. Capitalized words used in this paragraph, unless otherwise
defined in the Option Agreement, shall have the same meaning as set forth in the
Rights Agreement.
14. AMENDMENT OF PLAN.
The Board of Directors may from time to time suspend, discontinue, or abandon
the Plan or revise or amend it in any respect whatsoever, except that (a)
without approval of shareholders of the Company, the number of shares subject to
the Plan and the number of shares covered by Option awards shall not be
increased, and the price at which options may be granted shall not be decreased,
except as provided in the Plan, and (b) an outstanding Option shall not be
amended in any respect without the consent of the Participant.
15. LIMITED LIABILITY.
No member of the Board of Directors or officer of the Company shall be liable
for any action or inaction of the entity or body, or another person or, except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the explicit provisions hereof, the Board of Directors and
Committee may act in their absolute discretion in all matters related to this
plan.
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Front Side of Proxy
PROXY
HOME PRODUCTS INTERNATIONAL, INC.
4501 West 47th Street
Chicago, Illinois 60632
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James R. Tennant and James E. Winslow
as Proxies, (jointly and severally), each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse side, all the shares of Common Stock of Home Products
International, Inc. held of record by the undersigned on March 26, 1999 at the
Annual Meeting of Stockholders to be held on May 19, 1999 or any adjournment
thereof.
In their discretion the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THE
SHARES WILL BE VOTED "FOR" ALL NOMINEES FOR DIRECTOR; "FOR" APPROVAL OF THE 1999
PERFORMANCE INCENTIVE PLAN AND "FOR" APPROVAL OF THE 1999 DIRECTORS RESTRICTED
STOCK PLAN.
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Stockholders and the related proxy statement.
(continued on reverse side)
42
-----------------------
I plan to
attend meeting
Backside of Proxy
[ ]
-----------------------
1. ELECTION OF DIRECTORS.
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below)___ below_____
(Instructions: To withhold authority to vote for any individual
nominee, strike a line through a nominee's name in the list below.)
Charles R. Campbell, Joseph Gantz, Stephen P. Murray, Marshall Ragir,
Jeffrey C. Rubenstein, Daniel B. Shure, Joel D. Spungin,
James R. Tennant.
2. Approval of the 1999 Performance Incentive Plan.
________ FOR ________ AGAINST ________ ABSTAIN
3. Approval of the 1999 Directors Restricted Stock Plan
________ FOR ________ AGAINST ________ ABSTAIN
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THESE
PROPOSALS
In their discretion, the Proxies are authorized to vote upon such other business
as may properly come before the meeting.
Date:___________________, 1998
------------------------------
Signature
-------------------------------
Signature (if held jointly)
Please sign exactly as name appears
hereon. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee, or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.