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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Integrity Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[INTEGRITY LOGO]
1000 CODY ROAD
MOBILE, ALABAMA 36695
April 12, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Integrity Incorporated, which will be held at the Adam's Mark,
64 South Waterstreet, Mobile, Alabama 36602, on Friday, May 7, 1999, at 2:00
p.m. local time.
We look forward to your attendance at the Annual Meeting so that
you can vote your shares in person and become better acquainted with members of
the Board of Directors and management team. Three items of business, which will
be considered and voted upon this year, are explained in the accompanying Proxy
Statement. Even if you are planning to attend, please complete the enclosed
proxy card and return it in the enclosed envelope so that your shares may be
voted. You will still be able to vote your shares in person if you attend the
Annual Meeting.
If you have any questions about the Proxy Statement or the 1998
Annual Report, please contact Ms. Alison S. Richardson at (334) 633-9000.
Sincerely,
/s/ P. Michael Coleman
P. MICHAEL COLEMAN
Chairman, President and
Chief Executive Officer
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INTEGRITY INCORPORATED
1000 CODY ROAD
MOBILE, ALABAMA 36695
NOTICE TO THE HOLDERS OF CLASS A COMMON STOCK
OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 1999
Notice is hereby given to the holders of the $.01 par value per share
Class A common stock (the "Class A Common Stock") of Integrity Incorporated (the
"Company") that the Annual Meeting of Stockholders (the "Annual Meeting") of the
Company will be held at the Adam's Mark, 64 South Waterstreet, Mobile, Alabama
36602, on Friday, May 7, 1999, at 2:00 p.m., local time, for the following
purposes:
(i) To elect five directors to serve until the 2000 Annual Meeting
of Stockholders;
(ii) To approve the 1999 Long-Term Incentive Plan;
(iii) To ratify the selection of PricewaterhouseCoopers LLP as
independent auditors for the fiscal year ending December 31,
1999; and
(iv) To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only those stockholders of record at the close of business on March 12,
1999, are entitled to notice of and to vote at the Annual Meeting or any
adjournments thereof. The transfer books will not be closed. A complete list of
stockholders entitled to vote at the Annual Meeting will be available at the
Annual Meeting.
By Order of the Board of Directors,
/s/ Alison S. Richardson
ALISON S. RICHARDSON
April 12, 1999 Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE VOTE,
SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED BUSINESS
REPLY ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH, WITHDRAW
YOUR PROXY APPOINTMENT AND VOTE IN PERSON.
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INTEGRITY INCORPORATED
1000 CODY ROAD
MOBILE, ALABAMA 36695
APRIL 12, 1999
PROXY STATEMENT
FOR CLASS A COMMON STOCK
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 7, 1999
INTRODUCTION
This Proxy Statement is furnished to holders of the $.01 par value per
share Class A common stock ("Class A Common Stock") of Integrity Incorporated, a
Delaware corporation (the "Company" or "Integrity"), in connection with the
solicitation of proxies by the Company's Board of Directors from holders of the
outstanding shares of Class A Common Stock for use at the Annual Meeting of
Stockholders to be held at 2:00 p.m. local time at the Adam's Mark, 64 South
Waterstreet, Mobile, Alabama 36602, on Friday, May 7, 1999, and at any
adjournments thereof (the "Annual Meeting").
The Annual Meeting will be held for the following purposes: (i) to elect
five directors to serve until the 2000 Annual Meeting of Stockholders and until
their successors are elected and qualified; (ii) to approve the 1999 Long-Term
Incentive Plan; (iii) to ratify the selection of PricewaterhouseCoopers LLP as
independent auditors for the fiscal year ending December 31, 1999; and (iv) to
transact such other business as may properly come before the Annual Meeting or
any adjournments thereof.
The Company's mailing address and the location of its principal
executive offices is 1000 Cody Road, Mobile, Alabama 36695. This Proxy Statement
and the accompanying Proxy are first being mailed to stockholders of the Company
on or about April 12, 1999.
STOCKHOLDERS ENTITLED TO VOTE
Only stockholders of record of the Company at the close of business on
March 12, 1999 (the "Record Date") will be entitled to notice of, and to vote
at, the Annual Meeting. On the Record Date, there were 2,079,000 shares of the
Class A Common Stock issued and outstanding held by approximately 101
stockholders of record and approximately 1,800 beneficial stockholders. In
addition, there were 3,435,000 shares of the Company's $.01 par value per share
Class B common stock ("Class B Common stock") issued and outstanding held by
three stockholders of record. The Company's stock transfer books will not be
closed and shares may be transferred subsequent to the Record Date. However, all
votes must be cast in the names of stockholders of record on the Record Date.
Pursuant to the Certificate of Incorporation of the Company, holders of
Class A Common Stock are entitled to one vote per share. Holders of Class B
Common Stock are entitled to ten votes per share. All actions submitted to a
vote of stockholders are voted on by holders of Class A and Class B Common Stock
voting together as a single class.
QUORUM AND VOTING REQUIREMENTS
Pursuant to the Company's Bylaws, the holders of shares of the Class A
Common Stock and Class B Common Stock entitled to cast a majority of the votes
on the matters at issue at the Annual Meeting, present in person or by proxy,
shall constitute a quorum. For the purpose of determining the presence of a
quorum, abstentions and votes withheld from any nominee will be considered to be
"votes entitled to be cast" and therefore will be counted
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as present for purposes of determining the presence or absence of a quorum.
Broker non-votes will not be considered to be "votes entitled to be cast" and
will not be counted as present for quorum purposes. Broker non-votes are votes
that brokers holding shares of record for their customers are not permitted to
cast under applicable stock exchange rules because the brokers have not received
specific instructions from their customers as to certain proposals and as to
which the brokers advised the Company that they lack voting authority.
Proposal I, the election of five directors, requires the affirmative
vote of a plurality of the votes of the shares of Class A Common Stock and Class
B Common Stock represented and entitled to vote in the election of directors at
the Annual Meeting, provided a quorum is present. With respect to Proposal I,
the election of directors, stockholders may (1) vote "for" all five nominees,
(2) "withhold" authority to vote "for" all such nominees, or (3) "withhold"
authority to vote for any individual nominee or nominees but vote for all other
nominees. Because directors are elected by a plurality neither withholding
authority to vote with respect to one or more nominees or a broker non-vote will
have an effect on the outcome of the election of directors. Abstentions from
voting will have no effect on the outcome of the election of directors.
Proposal II, the approval of the 1999 Long-Term Incentive Plan, requires
the affirmative vote of a majority of the votes of the shares of Class A Common
Stock and Class B Common Stock represented and entitled to vote at the Annual
Meeting, provided a quorum is present. With respect to Proposal II, the approval
of the 1999 Long-Term Incentive Plan, stockholders may (1) vote "for," (2) vote
"against," or (3) "abstain" from voting on the proposal. An abstention will have
the same effect as a vote "against" while broker non-votes will not be
considered "votes entitled to be cast" and will have no effect on the outcome of
the approval of the 1999 Long-Term Incentive Plan.
Proposal III, the ratification of auditors, requires the affirmative
vote of a majority of the votes of the shares of Class A Common Stock and Class
B Common Stock represented and entitled to vote at the Annual Meeting, provided
a quorum is present. With respect to Proposal III, the ratification of auditors,
stockholders may (1) vote "for," (2) vote "against," or (3) "abstain" from
voting on the proposal. An abstention will have the same effect as a vote
"against," while broker non-votes will not be considered "votes entitled to be
cast" and will have no effect on the outcome of the ratification of auditors.
PROXIES
The accompanying proxy card is for use at the Annual Meeting if a
stockholder is unable to attend or is able to attend but does not wish to vote
in person. Stockholders should specify their choices with regard to each
proposal on the enclosed proxy card. All properly executed and dated proxy cards
delivered by stockholders to the Company in time to be voted at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the instructions given. If no specific instructions are given, the shares
represented by a signed and dated proxy card will be voted "For" (i) the
election of all director nominees, (ii) the approval of the 1999 Long-Term
Incentive Plan, and (iii) ratification of PriceWaterhouseCoopers LLP as
independent auditors for the fiscal year ending December 31, 1999. If any other
matters properly come before the Annual Meeting, the persons named as proxies
will vote upon such matters according to their judgment.
The Board of Directors is not aware of any other business to be
presented to a vote of the stockholders at the Annual Meeting. As permitted by
Rule 14a-4(c) under the Securities Exchange Act of 1934, as amended, the persons
named as proxies on the proxy cards will have discretionary authority to vote in
their judgment on any proposals presented by stockholders for consideration at
the Annual Meeting that were submitted to the Company after December 17, 1998.
Such proxies also will have discretionary authority to vote in their judgment
upon the election of any person as a director if a director nominee is unable to
serve for good cause or will not serve, and on matters incident to the conduct
of the Annual Meeting.
The giving of a proxy does not affect the right to vote in person should
the stockholder attend the Annual Meeting. Any stockholder that has given a
proxy has the power to revoke it at any time before it
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is voted by giving written notice of revocation to Alison S. Richardson, the
Secretary of the Company, at 1000 Cody Road, Mobile, Alabama 36695, by executing
and delivering to Ms. Richardson a proxy card bearing a later date, or by voting
in person at the Annual Meeting. If a stockholder is not attending the Annual
Meeting, any proxy or notice should be returned in time for receipt no later
than the close of business on the date preceding the Annual Meeting.
PROPOSAL I
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall
consist of not less than three, nor more than twelve individuals with the exact
number of directors determined by resolution of the Board of Directors. Pursuant
to the Company's Bylaws, the Board of Directors has set the number of directors
of the Company at five and has nominated the following individuals for election
by the holders of Class A Common Stock and Class B Common Stock as directors of
the Company:
P. Michael Coleman
Jean C. Coleman
Charles V. Simpson
Heeth Varnedoe III
Jimmy M. Woodward
Each director will be elected to hold office until the 2000 Annual
Meeting of Stockholders or until their earlier death, resignation or removal.
The persons designated as proxies intend to vote the shares represented thereby
in favor of the election to the Board of Directors of the nominees whose names
appear above, unless either authority to vote for any or all of the nominees is
withheld or such proxy has previously been revoked. It is believed that the
nominees will be available and able to serve as directors. In the event that a
nominee is unable to serve (which is not anticipated), the persons designated as
proxies will cast votes for the remaining nominees and for such other person as
they may select. It is anticipated that management stockholders of the Company
will vote for the election of the nominees.
In April 1999, Mr. John B. Ellis informed the Company that he would not
be available to serve as a director until the 2000 Annual Meeting of
stockholders and, therefore, withdrew his name as a nominee. The Company
recognizes Mr. Ellis' five years of exceptional service on its Board of
Directors and commends him for his laudable efforts to continually advance the
Company's performance. Replacing Mr. Ellis as nominee for director is Mr. Jimmy
M. Woodward.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR ELECTION
AS DIRECTORS. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE
SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL
BE VOTED FOR THE NOMINEES. THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES OF
THE SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK, VOTING TOGETHER AS
A SINGLE CLASS, REPRESENTED AND ENTITLED TO VOTE IN THE ELECTION AT THE ANNUAL
MEETING AT WHICH A QUORUM IS PRESENT IS REQUIRED FOR THE ELECTION OF THE
NOMINEES.
CERTAIN INFORMATION CONCERNING NOMINEES
The following table sets forth the names of the nominees for election as
directors, their ages, the year in which they were first elected a director,
their positions with the Company, their principal occupations and employers for
at least the last five years, and any other directorships held by them in
certain other companies. For information concerning membership on Committees of
the Board of Directors, see "Meetings of the Board of Directors and Committees"
below. For information concerning directors' ownership of Common Stock, see
"Beneficial Owners of More Than Five Percent of the Company's Common Stock;
Shares Held by Directors and Executive Officers" below.
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NAME AND YEAR FIRST POSITIONS WITH THE COMPANY, PRINCIPAL OCCUPATIONS DURING AT
ELECTED DIRECTOR AGE LEAST THE PAST FIVE YEARS, AND OTHER DIRECTORSHIPS
---------------- --- --------------------------------------------------
P. Michael Coleman 45 Mr. Coleman co-founded the Company in 1987 when he and a
(1987) partner purchased the music operations of Integrity
Communications, Inc. from Charles Simpson Ministries, Inc. He
has served as Chairman, President and the Chief Executive
Officer of the Company since 1987. Prior to 1987, Mr. Coleman
served as president of several different organizations in the
Christian communications industry.
Jean C. Coleman 52 Mrs. Coleman is a full-time homemaker in Mobile, Alabama and is
(1993) the wife of P. Michael Coleman.
Charles V. Simpson 62 Mr. Simpson has been the Senior Pastor of the Covenant Church
(1987) of Mobile for more than five years. Reverend Simpson is
Chairman of Charles Simpson Ministries which publishes Christian
Conquest magazine, The Covenant and the Kingdom curriculum, and
a monthly pastoral letter.
Heeth Varnedoe III 62 Mr. Varnedoe was President and Chief Operating Officer of
(1993) Flowers Industries Inc., a publicly-traded company which
produces bread and other baked products from 1986 to 1997. Mr.
Varnedoe continues to serve on the Board of Directors of
Flowers Industries Inc.
Jimmy M. Woodward 38 Mr. Woodward has been a director of Keebler Foods Company
since February 1998. He has served as Treasurer and Chief
Accounting Officer of Flowers Industries Inc. since 1997. In
1985, Mr. Woodward joined Flowers Industries Inc. as Tax
Accounting Manager and served as Assistant Treasurer of Flowers
Industries Inc. from 1990 to 1997.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
Board of Directors. The property, affairs and business of the Company
are under the general management of its Board of Directors as provided by the
laws of Delaware and the Bylaws of the Company. The Company has standing Audit
and Compensation Committees of the Board of Directors.
Audit Committee. The members of the Audit Committee are John B. Ellis
(Chairman) and Heeth Varnedoe III. The Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews with the
independent public accountants the plans and results of the audit engagement,
approves professional services provided by the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Company's
internal accounting controls. The Audit Committee held one meeting during 1998.
Compensation Committee. The members of the Compensation Committee are
Heeth Varnedoe III (Chairman) and John B. Ellis. The function of the
Compensation Committee is to review and approve the compensation of executive
officers and establish targets and incentive awards under incentive compensation
plans of the Company. The Compensation Committee held two meetings during 1998.
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The Board of Directors held four meetings during 1998. Each director,
during the period he or she was a director, attended at least 75% of the
meetings of the Board of Directors. Each member of a committee, during the
period he or she was a committee member, attended at least 75% of the meetings
of each committee on which they served.
COMPENSATION OF DIRECTORS
The Company historically paid a fee of $1,000 for each Board and
committee meeting attended by its directors who are not employees of the
Company, former employees of the Company or members of the immediate family of a
current or former employee of the Company. Beginning in 1998, this director fee
was increased to $1,500 for each Board and Committee meeting attended. The
Company also reimburses the directors for travel expenses incurred in connection
with their activities on behalf of the Company.
Pursuant to the Integrity Incorporated 1994 Stock Option Plan for
Outside Directors (the "Director Plan") adopted by the Company, each director
(other than employees, former employees or immediate family members of current
or former employees) automatically receives on the day following each annual
meeting of stockholders a grant of options to purchase 1,000 shares of Class A
Common Stock. Such options will have an exercise price equal to 100% of the fair
market value of the Class A Common Stock at the date of grant of such option.
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BENEFICIAL OWNERS OF MORE THAN FIVE PERCENT OF THE COMPANY'S COMMON STOCK;
SHARES HELD BY DIRECTORS AND EXECUTIVE OFFICERS
Based solely upon information made available to the Company, the
following table sets forth certain information with respect to the beneficial
ownership of Class A Common Stock and Class B Common Stock as of December 31,
1998, by (i) each person who is known by the Company to beneficially own more
than five percent of either Class A or Class B Common Stock; (ii) each nominee
for director of the Company; (iii) each of the Named Executive Officers (as
defined under "Executive Compensation" below); and (iv) all officers and
directors as a group. Except as otherwise indicated, the holders listed below
have sole voting and investment power with respect to all shares of Class A or
Class B Common Stock beneficially owned by them.
SHARES OF CLASS A SHARES OF CLASS B
COMMON STOCK COMMON STOCK PERCENTAGE OF
NAME AND ADDRESS ------------ ------------ CLASS A AND CLASS B
OF BENEFICIAL OWNER NUMBER PERCENTAGE (1) NUMBER PERCENTAGE (1) COMMON STOCK (1)
- ------------------- ------ -------------- ------ -------------- ----------------
Societe Generale Asset Management Corp.(2) 264,500 12.7% -- -- 4.8%
1221 Avenue of the Americas
New York, New York 10020
The Coleman Limited Partnership -- -- 223,021 6.5% 4.0%
c/o Mr. P. Michael Coleman
8561 Dawes Lake Road
Mobile, Alabama 36619
P. Michael Coleman (3) 65,100 3.1% 3,435,000 100.0% 63.5%
Jean C. Coleman -- -- 208,633 6.1% 3.8%
Jimmy M. Woodward -- -- -- -- --
Charles V. Simpson (4) 5,500 * -- -- *
Heeth Varnedoe III (4) 5,500 * -- -- *
Jerry W. Weimer (5) 43,000 2.1% -- -- *
Donald J. Moen (6) 41,189 2.0% -- -- *
Daniel D. McGuffey (7) 20,000 * -- -- *
Keith J. Manwaring (8) 10,000 * -- -- *
All executive officers and directors as a 220,589 10.6% 3,435,000 100.0% 66.3%
group (13 persons) (9)
- ----------------------------------
* Less than 1%.
(1) Based upon 2,079,000 shares of Class A Common Stock issued and
outstanding as of December 31, 1998 and 3,435,000 shares of Class B
Common Stock issued and outstanding as of December 31, 1998. Except as
indicated, the information presented does not include 525,000 shares of
Class A Common Stock reserved for issuance upon exercise of stock
options under the Incentive Plan, 25,000 shares of Class A Common Stock
reserved for issuance upon exercise of stock options under the Director
Plan and 400,000 shares of Class A Common Stock that will be reserved
for issuance under the 1999 Long-Term Incentive Plan. Approximately
200,000 shares of Class A Common Stock reserved for issuance under the
Incentive Plan will be returned to the Company upon approval of the 1999
Long-Term Incentive Plan. See "Proposal II - 1999 Long-Term Incentive
Plan."
(2) Based on a Schedule 13G/A filed on December 31, 1998, Societe Generale
Asset Management Corp. has shared voting and dispositive power as to
264,500 shares with its investment advisory client, SoGen International
Fund, Inc.
(3) Includes 65,000 shares of Class A Common Stock held by The Coleman
Charitable Foundation, Inc. over which Mr. Coleman, as Chairman, has
shared voting and dispositive power; 223,021 shares of Class B
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Common Stock held by The Coleman Limited Partnership, over which Mr.
Coleman, as General Partner, has sole voting and dispositive power; and
208,633 shares of Class B Common Stock held by Jean C. Coleman.
(4) Includes options to purchase 5,000 shares of Class A Common Stock
granted under the Director Plan, which are immediately exercisable.
(5) Includes options to purchase 40,000 shares of Class A Common Stock,
which are immediately exercisable.
(6) Includes options to purchase 33,889 shares of Class A Common Stock,
which are immediately exercisable.
(7) Includes options to purchase 20,000 shares of Class A Common Stock,
which are immediately exercisable.
(8) Includes options to purchase 10,000 shares of Class A Common Stock,
which are immediately exercisable.
(9) Includes options to purchase 135,889, shares of Class A Common Stock,
which are immediately exercisable.
EXECUTIVE OFFICERS OF THE COMPANY
Except for Mr. Coleman, discussed above, the following table sets forth
the names of the executive officers of the Company, their ages, their positions
with the Company and their principal occupations and employers for at least the
last five years. For information concerning executive officers' ownership of
Common Stock, see "Beneficial Owners of More Than Five Percent of the Company's
Common Stock; Shares Held by Directors and Executive Officers."
POSITIONS WITH THE COMPANY AND PRINCIPAL
NAME AGE OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------------------
Jerry W. Weimer 51 Mr. Weimer joined the Company in March 1996 as Executive Vice
President, Chief Operating Officer. In this position, Mr. Weimer
manages and oversees Integrity's day-to-day operations in all areas
except finance and administration. Mr. Weimer's previous experience
includes more than 15 years in the music industry. From 1992 to
1996, he held the position of Executive Vice President of Word, Inc.,
the former Christian music division of Thomas Nelson, Inc., and prior
to 1991, he was President of the Gaither Management Group, which is
involved in Christian music publishing.
Donald J. Moen 48 Mr. Moen joined the Company as Creative/Product Director in February
1988 and is currently Executive Vice President and Creative
Director. In this position, Mr. Moen provides creative input to the
product creation process. Also, as an artist and songwriter, Mr.
Moen has completed numerous recordings for the Company and has been a
worship leader for the Hosanna! Music series. In 1994, the Company's
musical "God With Us," for which Mr. Moen was the key creative
director, won a Dove Award for best musical. In 1993, he was a Dove
Award nominee for his recording "Worship with Don Moen," and in 1992,
he was a nominee for his song "God Will Make a Way."
Keith J. Manwaring 52 Mr. Manwaring joined the Company in November 1990 as the Managing
Director of the Company's Australian subsidiary. In February 1992,
Mr. Manwaring transferred to the Company's headquarters in Mobile,
Alabama where he assumed the position of Vice President,
International, Church Resources and Special Sales. In September
1995, certain areas of the Company were restructured and Mr.
Manwaring became solely responsible for international sales as Senior
Vice President, International. In December 1996, Mr. Manwaring's
title was changed to Senior Vice President, General Manager
International Group to again reflect some restructuring of the
Company.
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POSITIONS WITH THE COMPANY AND PRINCIPAL
NAME AGE OCCUPATIONS DURING AT LEAST THE PAST FIVE YEARS
- ---- --- -----------------------------------------------
Alison S. Richardson 33 Mrs. Richardson joined the Company in May 1989 as a Financial
Analyst. She was promoted to Accounting Manager in August 1991, to
the position of Corporate Controller in April 1992, Vice President,
Corporate Controller in May 1994, and to her current position of
Senior Vice President of Finance and Administration in December
1996. Mrs. Richardson's responsibilities include management of the
accounting department and all aspects of internal and external
financial reporting. She also is responsible for the administrative
function of the Company, including facilities management, risk
management, human resources and information systems and operations.
Prior to joining the Company, Mrs. Richardson was employed by the
national accounting firm of Pannell, Kerr, Forster from January 1987
to May 1989.
Daniel D. McGuffey 45 Mr. McGuffey joined the Company in December 1996 as Senior Vice
President, General Manager of the Integrity Label Group. In this
position, he is responsible for retail marketing, sales, creative
services and special markets. Prior to joining Integrity, Mr.
McGuffey was Vice President of Marketing and Sales for Star Song
Communications, a Christian music publisher, from 1992 to December
1996, where he was instrumental in the marketing and sales
development of over 30 artists and labels. He also held the position
of Vice President of Marketing and Sales for Reunion Records from
1991 to 1992 and began his career in the music industry in 1980 with
the Sparrow Corporation, a Christian music publisher.
Douglas P. Meduna 42 Mr. Meduna joined the Company in February 1997 as the Vice President,
Direct Response. As Vice President, Direct Response, Mr. Meduna
provides general management for the Direct Response division. Prior
to accepting his position with the Company, Mr. Meduna worked with
Guideposts Inc., a nonprofit publishing organization, for over ten
years. During his time with Guideposts, Mr. Meduna served as
Marketing Manager, Circulation Director, Marketing Director and
finally Development Director.
Robert G. Rist 52 Mr. Rist joined the Company on March 31, 1997, as Vice President,
Church Resources. The Church Resources division of the Company
specializes in providing material to be used by local congregations
specifically in the area of worship. Prior to joining the Company,
Mr. Rist served as President of Warner Press in Anderson, Indiana,
for seven years and prior to that in various positions at Alexandria
House, Inc., a music distribution company in Alexandria, Indiana for
14 years.
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EXECUTIVE COMPENSATION
The following table presents certain summary information concerning
compensation paid or accrued by the Company for services rendered in all
capacities during the fiscal years ended December 31, 1996, 1997 and 1998 for
(i) the President and Chief Executive Officer of the Company; and (ii) the four
other most highly compensated executive officers of the Company whose total
salary and bonus exceeded $100,000 (determined as of December 31, 1998 and
collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------ -------
Securities
Name and Underlying LTIP All Other
Principal Position Year Salary Bonus Options/SAR Payouts(1) Compensation (2)
- ------------------ ---- ------ ----- ----------- ---------- ----------------
P. Michael Coleman .......... 1998 $296,206 $ 73,041 -- -- $ 3,652
Chairman, President and . 1997 282,293 50,000 -- -- 20,500
Chief Executive Officer . 1996 276,042 -- -- -- 1,800
Jerry W. Weimer (3) ......... 1998 200,000 50,000 -- -- 3,585
Executive Vice President, 1997 175,294 31,000 -- -- 17,754
Chief Operating Officer . 1996 134,616 -- 100,000 -- 1,632
Donald J. Moen .............. 1998 142,299 40,977 -- $19,440 4,352
Executive Vice President, 1997 138,727 -- -- -- 20,500
Creative Director ....... 1996 136,744 -- 40,000(4) -- 770
Daniel D. McGuffey (3) ...... 1998 120,386 71,240 -- -- 2,700
Senior Vice President ... 1997 111,758 112,000 -- -- 4,750
Integrity Label Group ... 1996 -- -- 50,000 -- --
Keith J. Manwaring .......... 1998 102,102 21,829 -- 17,010 4,900
Senior Vice President, .. 1997 94,925 23,726 -- -- 1,686
General Manager ......... 1996 92,610 30,098 35,000(4) -- 1,200
International Group
- ----------
(1) Comprised of payments made under the Company's 1995 Cash Incentive Plan.
See "--Cash Incentive Plan."
(2) Comprised of contributions made by the Company to the Company's 401(k)
Plan and Profit Sharing Plan on behalf of each of the Named Executive
Officers.
(3) Mr. Weimer joined the Company in March 1996 and Mr. McGuffey in December
1996, and as a result compensation information is presented for only a
portion of the last three fiscal years.
(4) Comprised of units granted under the Company's 1995 Cash Incentive Plan.
See "--Cash Incentive Plan."
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FISCAL YEAR-END OPTION VALUES
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Name at Fiscal Year-End(1) at Fiscal Year-End(2)
---- --------------------- ---------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
P. Michael Coleman -- -- -- --
Jerry W. Weimer 40,000 60,000 $50,744 $76,116
Donald J. Moen 31,944 27,774 3,888 15,556
Daniel D. McGuffey 20,000 30,000 37,500 56,250
Keith J. Manwaring 5,000 20,000 10,000 40,000
- -------------
(1) No options were exercised by the Named Executive Officers in 1998.
(2) Represents the fair market value of a share of Class A Common Stock as
of December 31, 1998 of $3.75, less the option exercise price,
multiplied by the total number of exercisable or unexercisable options;
however; the exercise price of some of the options to purchase shares of
Class A Common Stock was higher than the fair market value of the Class
A Common Stock as of December 31, 1998 and thus such options were
"out-the-money" as of such date.
Employment Arrangements
Employment Agreements. The Company has entered into an employment
agreement (the "Weimer Employment Agreement") with Mr. Weimer for the position
of Executive Vice President/Chief Operating Officer. The Weimer Employment
Agreement provides for a base salary of $175,000, and Mr. Weimer is eligible to
receive cash bonuses under the executive cash bonus compensation system
established from time to time by the Company. The term of the Weimer Employment
Agreement begins on March 28, 1996, and continues until terminated for death,
disability, cause or upon mutual written agreement. The Weimer Employment
Agreement also may be terminated after Mr. Weimer has been employed by the
Company for at least eighteen (18) months, upon six (6) months prior written
notice of termination from the Company to Mr. Weimer. The Company, at its sole
discretion, may elect to pay Mr. Weimer an amount equal to his salary for six
(6) months in lieu of providing the above-mentioned notice. The Weimer
Employment Agreement contains non-competition, non-solicitation and
confidentiality provisions and expressly incorporates the Change in Control
Agreement agreed to and executed by Mr. Weimer and the Company.
In addition, the Company has entered into an employment agreement (the
"Moen Employment Agreement") with Mr. Moen for the position of Executive Vice
President/Creative Director. The Moen Employment Agreement provides for a
non-refundable, non-recoupable cash signing bonus of $25,000 and a base salary
of $143,581, and Mr. Moen is eligible to receive cash bonuses under the
executive cash bonus compensation system established from time to time by the
Company. The term of the Moen Employment Agreement begins on October 1, 1998,
and continues for a period of three (3) years from that date, unless earlier
terminated for death, disability, cause, or upon mutual written agreement. The
Moen Employment Agreement contains non-competition, non-solicitation and
confidentiality provisions and expressly incorporates the 1995 Cash Incentive
Plan, Severance Agreement and Change in Control Agreement agreed to and executed
by Mr. Moen and the Company.
The Company has also entered into an employment agreement (the
"McGuffey Employment Agreement") with Mr. McGuffey for the position of Senior
Vice President and General Manager, Integrity Label Group. The McGuffey
Employment Agreement currently provides for a base annual salary of
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$116,000. The Company also agreed to pay Mr. McGuffey those amounts necessary to
cover the commuting and living expenses associated with maintaining two
residences, and Mr. McGuffey is eligible to receive an annual cash bonus of
$10,000 plus additional cash bonuses for meeting certain performance goals as
established from time to time by the Company. The term of the McGuffey
Employment Agreement begins on January 1, 1998, and continues until terminated
for death, disability, cause or upon mutual written agreement. The McGuffey
Employment Agreement also may be terminated upon six (6) months prior written
notice of termination from the Company to Mr. McGuffey; however, the Company, at
its sole discretion, may elect to pay Mr. McGuffey an amount equal to his salary
for six (6) months in lieu of providing such notice. If Mr. McGuffey is
terminated upon six months notice, he will be entitled to receive a severance
benefit equal to the greater of (1) three times his base salary less 1/12 of his
base salary for each full month he has been employed following the date of the
McGuffey Employment Agreement, or (2) 1/2 of his base salary. In either case his
severance would be reduced by any amount the Company paid Mr. McGuffey in lieu
of the six months notice. The McGuffey Employment Agreement contains
non-competition, non-solicitation and confidentiality provisions and expressly
incorporates the Change in Control Agreement agreed to and executed by Mr.
McGuffey and the Company.
Change in Control Agreements. The Company has entered into change in
control agreements (the "Change in Control Agreements") with certain Named
Executive Officers as well as other senior officers of the Company. The Change
in Control Agreements provide that in the event the officer is employed by the
Company at the time of a Change in Control (as defined in the Change in Control
Agreement), the officer shall be entitled to supplemental employment benefits
should his employment with the Company terminate within 18 months after the
Change in Control has occurred. The Change in Control Agreements provide that
such termination of employment can be involuntary, other than termination for
cause or the result of death, disability, or retirement age, or voluntary,
following a material change in the nature or location of his position or a
material change in the benefits provided to the officer by the Company. The
supplemental benefits that are required to be provided to the officer upon such
a termination include a severance payment in an amount equal to one-half of the
officer's annual base salary as well as various other benefits including basic
life insurance, long-term disability insurance, health insurance and other
medical benefits.
Without the consent of the officer, the terms of the Change in Control
Agreement may be terminated or amended by the Company following the first
anniversary of its execution at any time prior to the first to occur of (i) a
Change in Control, (ii) the public announcement of a proposal for a transaction
that, if consummated, will constitute a Change in Control, or (iii) the Board of
Directors learns of a proposal for a transaction that, if consummated, would
constitute a Change in Control. Upon the occurrence of any of the foregoing
events, the Change in Control Agreements continue in effect at such time without
termination or further change by the Company until the earlier of (x) 18 months
following any Change in Control, or (y) the final withdrawal or termination of a
proposal under item (ii) or (iii) that, had it been consummated, would have
constituted a Change in Control, at which time the Change in Control Agreement
may, once again, be amended or terminated by the Company until one of such
events occurs.
A Change in Control, as defined in the Change in Control Agreements,
includes, among other things: a change of control of the Company such that any
person, other than current affiliates of the Company, becomes the beneficial
owner of securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities; any consolidation,
merger or share exchange involving the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of Company stock
would be converted into cash, securities or other property; the stockholders of
the Company approve any plan or proposal for the liquidation or dissolution of
the Company; or substantially all of the assets of the Company are sold or
otherwise transferred to parties that are not within a controlled group of
corporations in which the Company is a member.
Cash Incentive Plan. The Company has adopted the Integrity Incorporated
1995 Cash Incentive Plan (the "Cash Incentive Plan"). Under the Cash Incentive
Plan key employees of the Company are
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eligible to be awarded Units which are payable only in cash. The Units vest in
one-fifth increments on each anniversary of the date of grant until vested in
full. In addition, a participant becomes fully vested, but not paid, in all of
the Units of his or her award on the date which is six months after the
occurrence of a Change in Control (as defined in the Cash Incentive Plan) of the
Company if he or she is an employee of the Company on such date (such six-month
period being referred to as the "Transition Period") or upon his or her
termination of employment with the Company as a result of death, disability,
retirement after attaining retirement age, or termination by the Company other
than for cause during the Transition Period. Participants are entitled to
interim payments under the Cash Incentive Plan on January 15 of each of the five
years beginning January 15, 1997, unless the participant has previously received
a final payment. Participants are entitled to a final payment on January 15,
2001, or January 15 of the year following the participant's termination of
employment or next following the end of the Transition Period following a Change
in Control. The value of the Units, and the calculation of interim and final
payments, is determined based on the difference between the fair market value of
a number of shares of the Class A Common Stock of the Company equal to the
number of Units at the date of determination and the fair market value of the
same number of shares on the date of grant of the Units. The Board of Directors
may discontinue the Cash Incentive Plan at any time, and may amend it from time
to time; however, no outstanding award under the Cash Incentive Plan may be
revoked or altered in a manner unfavorable to the participant without the
consent of the participant. In 1995, awards were made under the Cash Incentive
Plan to certain of the Named Executive Officers, as well as other senior
officers of the Company, which awards, individually, currently do not have a
value in excess of $100,000. In 1996, one award was made under the Cash
Incentive Plan to one of the Named Executive Officers, which currently does not
have a value in excess of $100,000. No further awards were made under the Cash
Incentive Plan in 1997 or in 1998.
Severance Agreements. The Company has entered into severance agreements
(the "Severance Agreements") with certain Named Executive Officers as well as
other senior officers of the Company. The Severance Agreements provide for the
payment of severance benefits to such persons upon their termination of
employment by the Company without cause. Such persons are not entitled to
severance benefits under the Severance Agreement if they voluntarily resign,
quit, abandon their job or cannot perform their duties due to death or
disability. In addition, if an officer is entitled to severance benefits upon
termination of employment under the terms of a Change in Control Agreement, as
described above, the officer shall not be entitled to any benefits under the
Severance Agreement.
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STOCKHOLDER RETURN COMPARISON.
The following line graph presentation compares cumulative stockholder
returns of the Company with the Nasdaq Stock Market (U.S. Companies) and a Peer
Index over the period beginning with the Company's initial public offering on
July 1, 1994 through December 31, 1998 (assuming the investment of $100 in the
Company's Class A Common Stock, the Nasdaq Stock Market (U.S. Companies) and the
Peer Index on July 1, 1994, and reinvestment of all dividends).
COMPARISON OF CUMULATIVE TOTAL RETURNS
[CHART]
YEAR-END CUMULATIVE RETURNS
DECEMBER 31,
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
INTEGRITY INCORPORATED 66.7 23.6 18.1 13.9 41.7
THE NASDAQ STOCK MARKET 107.0 151.3 186.0 227.9 321.2
PEER INDEX 105.4 126.5 142.9 214.5 222.6
Total return calculations for the Nasdaq Stock Market (U.S. Companies)
and the Peer Index were prepared by the Center for Research in Security Prices,
The University of Chicago. The Peer Index is based upon the companies comprising
the Publishing Index in the Dow Jones Media Industry Group. Specific information
regarding the companies comprising the Peer Index will be provided to any
stockholder upon request to Alison S. Richardson, at the Company.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation:
Overview and Philosophy. The Compensation Committee of the Board of
Directors (the "Compensation Committee") is responsible for reviewing and making
decisions under a delegation of authority from the Board with respect to
salaries, wages, bonuses, stock options and other benefits for officers of the
Company.
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The objectives of the Company's executive compensation program are to:
- Encourage the achievement of Company performance by providing
compensation which directly relates to the performance of the
individual and the achievement of internal strategic objectives.
- Establish compensation policies and guidelines that will attract
and retain qualified personnel through an overall level of
compensation opportunity that is competitive within the
Company's industry.
- Promote a direct relationship between compensation and Company
performance by facilitating executive officer stock ownership
through stock option awards.
Overall, the Company's executive officer compensation program is
comprised of base salary, annual cash incentive bonus compensation, long-term
incentive compensation in the form of stock options, and various other benefits,
including a medical plan, which are generally available to all employees of the
Company.
Base Salary. The base salaries for the Company's executive officers
vary depending on the responsibilities of the officers. While the executive
officer base salary compensation is designed to be competitive with other
companies in the Company's industry, the Company believes that bonus
compensation described below better serves the compensation philosophy of the
Company.
1998 Cash Incentive Compensation. In order to maximize the common
interests of the Company's stockholders and its management, the Company awards
cash bonuses based on the Company's operating performance. The Company's
budgeted financial performance goals are set at the beginning of each fiscal
year and cash bonuses are then awarded in the judgment of the Compensation
Committee based on the achievement of budgeted targets and the individual
performance of the executive officer. As a result of their performance, eight of
the Company's executive officers received cash bonuses in fiscal 1998.
Stock Options. The stock option programs of the Company are long-term
incentive plans for executive officers and employees intended to relate employee
and stockholder long-term interests by creating a strong and direct link between
compensation and stockholder returns. In general, stock option awards are
granted on an annual basis if warranted by the Company's growth and
profitability. To encourage long-term performance, options generally vest over a
five-year period. The Compensation Committee considers current stock ownership
and option holdings in deciding the number of options to be awarded to each
recipient. In fiscal 1998, no stock options were granted to any executive
officers.
Compensation of Chief Executive Officer. In fiscal 1998, the Chief
Executive Officer of the Company, Mr. P. Michael Coleman, was compensated
pursuant to an unwritten employment agreement approved by the Board of Directors
of the Company prior to the Company's initial public offering in July 1994.
Under the agreement, Mr. Coleman received a base salary of $296,206 during
fiscal 1998.
The Compensation Committee has adopted several plans and agreements
designed to assist the Company in retaining key employees of outstanding ability
when considering various alternatives to enhance stockholder value, including
business transactions with third parties. These plans and agreements are
designed to offer key employees an increased incentive to join or continue in
the service of the Company and to increase their efforts for its welfare by
participating in the growth of the Company. Specifically, the Compensation
Committee adopted a form of Change in Control Agreement, the Cash Incentive
Plan, and a form of Severance Agreement, which were utilized with various key
employees. See "Proposal I - Election of Directors -- Executive Compensation --
Employment Arrangements."
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Section 162(m) of the Internal Revenue Code (the "Code") adopted as
part of the Revenue Reconciliation Act of 1993, generally limits to $1 million
the deduction that can be claimed by any publicly-held corporation for
compensation paid to any "covered employee" in any taxable year beginning after
December 31, 1993. The term covered employee for this purpose is defined
generally as the Chief Executive Officer and the four other highest paid
employees of the corporation. Performance-based compensation is outside the
scope of the $1 million limitation, and hence, generally can be deducted by a
publicly-held corporation without regard to amount, provided that, among other
requirements, such compensation is approved by the stockholders. The
Compensation Committee has not, and, given the current levels of executive
compensation in the Company, does not foresee the need in the immediate future,
to formulate a policy for the Company with regard to Section 162(m) and
executive compensation. Generally speaking, the Compensation Committee's
executive compensation policies are performance-based.
COMPENSATION COMMITTEE
Heeth Varnedoe III
John B. Ellis
CERTAIN TRANSACTIONS
Donald J. Moen. Mr. Donald J. Moen, Integrity's Executive Vice
President and Creative Director, is also one of the Company's exclusive
songwriters and artists. Mr. Moen received royalties of $208,149 in 1998.
The Board of Directors of the Company has adopted a policy which
requires that transactions between the Company and its officers, directors or
other affiliates shall be on terms no less favorable to the Company than could
be obtained from unaffiliated third parties on an arm's-length basis and,
further, that any such transaction shall be approved by a majority of the
Company's directors who have no interest in any such transaction.
PROPOSAL II
1999 LONG-TERM INCENTIVE PLAN
The Company currently maintains the Integrity Incorporated Amended and
Restated Long-Term Incentive Plan, last amended and restated effective as of May
3, 1996 (the "Prior Plan"). The Prior Plan provides for the granting of options,
stock appreciation rights, restricted stock, performance shares, and other
stock-based awards to key employees of the Company and its subsidiaries. As of
March 12, 1999, there were 204,973 shares of Class A Common Stock remaining
available for the grant of awards under the Prior Plan.
On February 11, 1999, the Board of Directors adopted the Integrity
Incorporated 1999 Long-Term Incentive Plan (the "1999 Plan"). The 1999 Plan
became effective as of its approval by the Board of Directors, but awards made
thereunder, as described below, are contingent upon the stockholders' approval
of the 1999 Plan at the Annual Meeting. If the stockholders approve the 1999
Plan, the Company will make no further awards under the Prior Plan and any
remaining shares under the Prior Plan will be returned to the Company.
The Company has reserved for issuance upon the grant or exercise of
awards pursuant to the 1999 Plan 400,000 shares of the authorized but unissued
shares of Class A Common Stock.
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SUMMARY OF THE 1999 PLAN
A summary of the 1999 Plan is set forth below. The summary is qualified
in its entirety by reference to the full text of the 1999 Plan, which is
attached to this Proxy Statement as Appendix A.
General
The purpose of the 1999 Plan is to promote the success, and enhance the
value, of the Company by linking the personal interests of employees, officers
and directors to those of the stockholders, and by providing such employees,
officers and directors with an incentive for outstanding performance. As of
March 12, 1999, there were approximately 154 employees (including all current
executive officers) and directors eligible to participate in the 1999 Plan.
The 1999 Plan authorizes the granting of awards to employees, officers
and directors of the Company or its subsidiaries in the following forms: (i)
options to purchase shares of Class A Common Stock, which may be incentive stock
options or nonqualified stock options, (ii) stock appreciation rights ("SARs"),
(iii) performance shares; (iv) restricted stock; or (v) any other right or
interest relating to Class A Common Stock or cash. Not more than 50% of the
shares authorized under the 1999 Plan may be granted as awards of restricted or
unrestricted stock. The maximum number of shares of Class A Common Stock with
respect to one or more options and/or SARs that may be granted during any one
calendar year under the 1999 Plan to any one participant is 200,000. The maximum
fair market value of any awards (other than options and SARs) that may be
received by a participant (less any consideration paid by the participant for
such award) during any one calendar year under the 1999 Plan is $5,000,000. The
number of shares available under the 1999 Plan is subject to adjustment by the
Committee to prevent dilution in the event of a stock split, combination of
shares, stock dividend or certain other events. To the extent that an award is
canceled, terminates, expires or lapses for any reason, or is settled in cash,
any shares of Class A Common Stock subject to the award will again be available
for the grant of an award under the 1999 Plan.
Pursuant to Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company may not deduct compensation in excess of $1
million paid to the Chief Executive Officer and the four next most highly
compensated executive officers of the Company. The 1999 Plan is designed to
comply with Code Section 162(m) so that the grant of options and SARs under the
1999 Plan, and other awards, such as performance shares, that are conditioned on
the performance goals described in Section 12.12 of the 1999 Plan, will be
excluded from the calculation of annual compensation for purposes of Code
Section 162(m) and will be fully deductible by the Company. The Board has
approved the 1999 Plan for submission to the stockholders in order to permit the
grant of awards thereunder that will constitute deductible performance-based
compensation for purposes of Code Section 162(m).
Administration
The 1999 Plan will be administered by the Compensation Committee of the
Board of Directors of the Company (the "Committee"). The Committee has the
power, authority and discretion to designate participants; determine the type or
types of awards to be granted to each participant and the number, terms and
conditions thereof; establish, adopt or revise any rules and regulations as it
may deem necessary or advisable to administer the 1999 Plan; and make all other
decisions and determinations that may be required under, or as the Committee
deems necessary or advisable to administer, the 1999 Plan.
Awards
Stock Options. The Committee is authorized to grant options under the
1999 Plan, which may be incentive stock options or nonqualified stock options.
All options will be evidenced by a written award agreement between the Company
and the participant, which will include such provisions as may be specified by
the Committee; provided, however that the exercise price may not be less than
the fair market
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value of a share of Class A Common Stock on the date the option is granted. The
terms of an incentive stock option must meet the requirements of Section 422 of
the Code.
Upon exercise of any option, payment for shares of Class A Common Stock
as to which the option is exercised shall be made in such manner and at such
time or times as shall be provided in the option agreement, including cash,
shares of Class A Common Stock previously acquired by the optionee, or any
combination thereof. If all or part of the exercise price is paid in shares of
Class A Common Stock, the value of such shares will be equal to the fair market
value of such shares as of the date of exercise.
Stock Appreciation Rights. The Committee may grant SARs to
participants. Upon the exercise of an SAR, the participant has the right to
receive the excess, if any, of the fair market value of one share of Class A
Common Stock on the date of exercise, over the grant price of the SAR, as
determined by the Committee, which will not be less than the fair market value
of one share of Class A Common Stock on the date of grant. All awards of SARs
will be evidenced by an award agreement, reflecting the terms, methods of
exercise, methods of settlement, form of consideration payable in settlement,
and any other terms and conditions of the SAR, as determined by the Committee at
the time of grant.
Performance Shares. The Committee may grant performance shares to
participants on such terms and conditions as may be selected by the Committee.
The Committee will have the complete discretion to determine the number of
performance shares granted to each participant and to set performance goals and
other terms or conditions to payment of the performance shares in its discretion
which, depending on the extent to which they are met, will determine the number
and value of performance shares that will be paid to the participant.
Restricted Stock Awards. The Committee may make awards of restricted
stock to participants, which will be subject to such restrictions on
transferability and other restrictions as the Committee may impose (including,
without limitation, limitations on the right to vote the restricted stock or the
right to receive dividends, if any, on the restricted stock).
Other Stock-Based Awards. The Committee may, subject to limitations
under applicable law, grant to participants such other awards that are payable
in, valued in whole or in part by reference to, or otherwise based on or related
to shares of Class A Common Stock, as deemed by the Committee to be consistent
with the purposes of the 1999 Plan, including without limitation shares of Class
A Common Stock awarded purely as a "bonus" and not subject to any restrictions
or conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Class A Common Stock, and awards
valued by reference to book value of shares of Class A Common Stock or the value
of securities of or the performance of specified Parents or Subsidiaries of the
Company. The Committee will determine the terms and conditions of any such
awards.
Performance Goals. The Committee may determine that any award will be
determined solely on the basis of (a) the achievement by the Company or a Parent
or Subsidiary of a specified target return, or target growth in return, on
equity or assets, (b) the Company's stock price, (c) the achievement by an
individual or a business unit of the Company, Parent or Subsidiary of a
specified target, or target growth in, revenues, net income or earnings per
share, (d) the achievement of objectively determinable goals with respect to
service or product delivery, service or product quality, customer satisfaction,
meeting budgets and/or retention of employees, or (e) any combination of the
goals set forth in (a) through (d) above. Furthermore, the Committee reserves
the right for any reason to reduce (but not increase) any such award,
notwithstanding the achievement of a specified goal. If an award is made on such
basis, the Committee must establish goals prior to the beginning of the period
for which such performance goal relates (or such other date as may be permitted
or required under Code Section 162(m)). Any payment of an award granted with
performance goals will be conditioned on the written certification of the
Committee in each case that the performance goals and any other material
conditions were satisfied.
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Limitations on Transfer; Beneficiaries. No award will be assignable or
transferable by a participant other than by will or the laws of descent and
distribution or, except in the case of an incentive stock option, pursuant to a
qualified domestic relations order; provided, however, that the Committee may
(but need not) permit other transfers where the Committee concludes that such
transferability (i) does not cause any option intended to be an incentive stock
option to fail to be described in Code Section 422(b), and (ii) is otherwise
appropriate and desirable, taking into account any factors deemed relevant,
including without limitation, any state or federal tax or securities laws or
regulations applicable to transferable awards. A participant may, in the manner
determined by the Committee, designate a beneficiary to exercise the rights of
the participant and to receive any distribution with respect to any award upon
the participant's death.
Acceleration Upon Certain Events. In the event of a Change in Control
of the Company (as defined in the 1999 Plan), all outstanding options, SARs and
other awards in the nature of rights that may be exercised will become fully
vested and all restrictions on all outstanding awards will lapse; provided,
however that such acceleration will not occur if, in the opinion of the
Company's accountants, such acceleration would preclude the use of "pooling of
interests" accounting treatment for a Change in Control transaction that would
otherwise qualify for such accounting treatment and is contingent upon
qualifying for such accounting treatment. Regardless of whether an event
described above shall have occurred, the Committee may in its sole discretion
declare all outstanding options, SARs and other awards in the nature of rights
that may be exercised to become fully vested, and/or all restrictions on all
outstanding awards to lapse, in each case as of such date as the Committee may,
in its sole discretion, declare. The Committee may discriminate among
participants or among awards in exercising such discretion.
Termination and Amendment
The Board or the Committee may, at any time and from time to time,
terminate, amend or modify the 1999 Plan without stockholder approval; provided,
however, that the Committee may condition any amendment on the approval of
stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations. The Committee may amend any outstanding award, but such amendment
shall not, without the participant's consent, reduce or diminish the value of
such award determined as if it had been exercised, vested, cashed in or
otherwise settled on the date of such amendment, and provided further that,
except as otherwise permitted in the 1999 Plan, the exercise price of any option
may not be reduced and the original term of any option may not be extended. No
termination, amendment, or modification of the 1999 Plan may adversely affect
any award previously granted under the 1999 Plan, without the written consent of
the participant.
CERTAIN FEDERAL INCOME TAX EFFECTS
Nonqualified Stock Options. Under present federal income tax
regulations, there will be no federal income tax consequences to either the
Company or the participant upon the grant of a non-discounted nonqualified stock
option. However, the participant will realize ordinary income on the exercise of
the nonqualified stock option in an amount equal to the excess of the fair
market value of the Class A Common Stock acquired upon the exercise of such
option over the exercise price, and the Company will be entitled to a
corresponding deduction (subject to Code Section 162(m) limitations). The gain,
if any, realized upon the subsequent disposition by the participant of the Class
A Common Stock will constitute short-term or long-term capital gain, depending
on the participant's holding period.
Incentive Stock Options. Under present federal income tax regulations,
there will be no federal income tax consequences to either the Company or the
participant upon the grant or the exercise of an incentive stock option.
Although the participant will not realize ordinary income upon his exercise of
an incentive stock option, the difference between the exercise price and the
fair market value of the shares at the time of exercise of the incentive stock
option will be treated as an item of tax preference for alternative minimum tax
purposes. If the participant holds the shares of Class A Common Stock for the
greater of two years after the date the incentive stock option was granted or
one year after the acquisition of such
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shares of Class A Common Stock (the "required holding period"), the difference
between the aggregate exercise price and the amount realized upon disposition of
the shares of Class A Common Stock will constitute long-term capital gain or
loss, and the Company will not be entitled to a federal income tax deduction. If
the shares of Class A Common Stock are disposed of in a sale, exchange or other
"disqualifying disposition" during the required holding period, the participant
will realize taxable ordinary income in an amount equal to the lesser of (i) the
gain realized by the participant upon such disposition, or (ii) the excess of
the fair market value of the Class A Common Stock purchased at the time of
exercise over the aggregate exercise price, and the Company will be entitled to
a federal income tax deduction equal to such amount (subject to Code Section
162(m) limitations). The gain in excess of such amount realized by the
participant as ordinary income would be taxed as a capital gain (subject to the
holding period requirements for long-term or short-term capital gain treatment).
SARs. Under present federal income tax regulations, a participant
receiving an SAR will not recognize income, and the Company will not be allowed
a tax deduction, at the time the award is granted. When a participant exercises
the SAR, the amount of cash and the fair market value of any shares of Common
Stock received will be ordinary income to the participant and will be allowed as
a deduction for federal income tax purposes to the Company (subject to Code
Section 162(m) limitations).
Performance Shares. Under present federal income tax regulations, a
participant receiving performance shares will not recognize income and the
Company will not be allowed a tax deduction at the time the award is granted.
When a participant receives payment of performance shares, the amount of cash
and the fair market value of any shares of Class A Common Stock received will be
ordinary income to the participant and will be allowed as a deduction for
federal income tax purposes to the Company (subject to Code Section 162(m)
limitations)
Restricted Stock. Under present federal income tax regulations, and
unless the participant makes an election to accelerate recognition of the income
to the date of grant, a participant receiving a restricted stock award will not
recognize income, and the Company will not be allowed a tax deduction, at the
time the award is granted. When the restrictions lapse, the participant will
recognize ordinary income equal to the fair market value of the Class A Common
Stock less any amount paid by the participant for such stock, and the Company
will be entitled to a corresponding tax deduction at that time (subject to Code
Section 162(m) limitations). A participant will recognize ordinary income on any
dividends paid on the shares of restricted stock when such dividends are
received, and the Company will have a corresponding deduction (unless the
participant elected to recognize income upon grant of the restricted stock, in
which event such dividends would not be deductible by the Company).
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BENEFITS TO NAMED EXECUTIVE OFFICERS AND OTHERS
As of March 12, 1999, awards had been granted or approved for grant
under the 1999 Plan to the following persons and groups, which awards are
subject to approval of the 1999 Plan at the Annual Meeting. Any future awards
under the 1999 Plan will be made at the discretion of the Committee. Therefore,
it is not presently possible to determine the benefits or amounts that will be
received by such persons or groups pursuant to the Incentive Plan in the future.
INCENTIVE PLAN
--------------
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF OPTIONS / SHARES OF
----------------- --------------- RESTRICTED STOCK
----------------
P. Michael Coleman....................... -- --
Chairman of the Board, Chief Executive
Officer and President
Jerry Weimer............................. $400,000 100,000 restricted shares(2)
Chief Operating Officer 100,000 stock options
Donald J. Moen........................... -- --
Executive Vice President, Creative
Director
Daniel D. McGuffey....................... -- --
Senior Vice President, Integrity Label
Group
Keith J. Manwaring....................... -- --
Senior Vice President, General Manager
International Group
All Executive Officers as a Group....... $400,000 100,000 restricted shares
100,000 stock options
Jean C. Coleman.......................... -- --
Director Nominee
John B. Ellis............................ -- --
Director Nominee
Charles V. Simpson....................... -- --
Director Nominee
Heeth Varnedoe III....................... -- --
Director Nominee
All Non-Executive Directors
as a Group (including the above)..... -- --
All Non-Executive Employees
as a Group........................... -- --
- ----------
(1) The dollar value of the shares of restricted stock and stock
options will vary based on the fair market value of the Class A Common Stock.
The value shown is based on the closing price per share of the Class A Common
Stock on March 12, 1999, of $4.00.
(2) The shares of restricted stock awarded to Mr. Weimer will vest at
the end of seven years.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF
THE 1999 PLAN. IF A CHOICE IS SPECIFIED ON THE PROXY BY THE STOCKHOLDER, THE
SHARES WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THE SHARES WILL
BE VOTED FOR APPROVAL. THE AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES OF THE
SHARES OF CLASS A COMMON STOCK AND CLASS B COMMON STOCK, VOTING TOGETHER AS A
SINGLE CLASS, REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A
QUORUM IS PRESENT IS REQUIRED FOR APPROVAL OF PROPOSAL II.
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PROPOSAL III
APPROVAL OF SELECTION OF AUDITORS
The Company's Board of Directors has selected PricewaterhouseCoopers LLP
to conduct the annual audit of the financial statements of the Company for the
fiscal year ending December 31, 1999. PricewaterhouseCoopers LLP has no
financial interest, direct or indirect, in the Company, and does not have any
connection with the Company except in its professional capacity as an
independent auditor.
The ratification by the holders of Class A Common Stock of the selection
of PricewaterhouseCoopers LLP as independent auditors is not required by law or
by the Bylaws of the Company. The Board of Directors, consistent with the
practice of many publicly held corporations, is nevertheless submitting this
selection to the holders of Class A Common Stock and the Class B Common Stock.
If this selection is not ratified at the Annual Meeting, the Board of Directors
intends to reconsider its selection of independent auditors for the fiscal year
ending December 31, 1999. Even if the selection is ratified, the Board of
Directors in its sole discretion may direct the appointment of a different
independent accounting firm at any time during the fiscal year if the Board
determines that such a change would be in the best interest of the Company and
its stockholders.
The Audit Committee, which is composed of directors who are not
employees of the Company, approves in advance all material non-audit services to
be provided by PricewaterhouseCoopers LLP and believes that these services have
no effect on audit independence.
Representatives of PricewaterhouseCoopers LLP will be present at the
Annual Meeting and will have an opportunity to make a statement, if they so
desire, and respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999. IF A CHOICE IS SPECIFIED
ON THE PROXY BY THE STOCKHOLDER, THE SHARES WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR RATIFICATION. THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE VOTES OF THE SHARES OF CLASS A COMMON
STOCK AND CLASS B COMMON STOCK, VOTING TOGETHER AS A SINGLE CLASS, REPRESENTED
AND ENTITLED TO VOTE AT THE ANNUAL MEETING AT WHICH A QUORUM IS PRESENT IS
REQUIRED FOR APPROVAL OF PROPOSAL III.
STOCKHOLDER PROPOSALS
Any proposal which a Company stockholder intends to be presented at the
next annual meeting of stockholders to be held in 2000 must be received by the
Company on or before December 14, 1999. Only proper proposals which are timely
received will be included in the Proxy Statement and Proxy.
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership of such securities with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Officers,
directors and greater than ten percent beneficial owners are required by
applicable regulations to furnish the Company with copies of all Section 16(a)
forms they file.
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Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no Forms
5 were required, the Company believes that during fiscal 1998 all of its
officers and directors complied with all applicable filing requirements.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company, personally, by telephone
or by telegraph. The Company does not expect to pay any compensation for the
solicitation of proxies, but may reimburse brokers, custodians or other persons
holding stock in their names or in the names of nominees for their expenses in
sending proxy materials to principals and obtaining their instructions.
MISCELLANEOUS
Management does not know of any matters to be brought before the Annual
Meeting other than as described in this Proxy Statement. Should any other
matters properly come before the Annual Meeting, the persons designated as
proxies will vote in accordance with their best judgment on such matters.
AVAILABILITY OF ANNUAL REPORT
ACCOMPANYING THIS PROXY STATEMENT IS A COPY OF THE COMPANY'S ANNUAL
REPORT FOR THE YEAR ENDED DECEMBER 31, 1998. STOCKHOLDERS WHO WOULD LIKE
ADDITIONAL COPIES OF THE ANNUAL REPORT SHOULD DIRECT THEIR REQUESTS IN WRITING
TO: INTEGRITY INCORPORATED, 1000 CODY ROAD, MOBILE, ALABAMA 36695, ATTENTION:
ALISON S. RICHARDSON.
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APPENDIX A
1999 LONG-TERM INCENTIVE PLAN
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INTEGRITY INCORPORATED
1999 LONG-TERM INCENTIVE PLAN
ARTICLE 1
PURPOSE
1.1 GENERAL. The purpose of the Integrity Incorporated 1999
Long-Term Incentive Plan (the "Plan") is to promote the success, and enhance the
value, of Integrity Incorporated (the "Company"), by linking the personal
interests of its employees, officers and directors to those of Company
stockholders and by providing such persons with an incentive for outstanding
performance. The Plan is further intended to provide flexibility to the Company
in its ability to motivate, attract, and retain the services of employees,
officers and directors upon whose judgment, interest, and special effort the
successful conduct of the Company's operation is largely dependent. Accordingly,
the Plan permits the grant of incentive awards from time to time to selected
employees, officers and directors.
ARTICLE 2
EFFECTIVE DATE
2.1 EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board (the "Effective Date"). However, the
Plan shall be submitted to the stockholders of the Company for approval within
12 months of the Board's approval thereof. No Incentive Stock Options granted
under the Plan may be exercised prior to approval of the Plan by the
stockholders and if the stockholders fail to approve the Plan within 12 months
of the Board's approval thereof, any Incentive Stock Options previously granted
hereunder shall be automatically converted to Non-Qualified Stock Options
without any further act. In the discretion of the Committee, Awards may be made
to Covered Employees which Awards are intended to constitute qualified
performance-based compensation under Code Section 162(m). Any such Awards shall
be contingent upon the stockholders having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1 DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award or Other Stock-Based
Award, or any other right or interest relating to Stock or cash, granted
to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means and includes each of the
following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 50% or
more of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this
subsection (1), the following
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acquisitions shall not constitute a Change of Control: (i) any
acquisition by a Person who is on the Effective Date the
beneficial owner of 50% or more of the Outstanding Company
Voting Securities, (ii) any acquisition directly from the
Company, (iii) any acquisition by the Company, (iv) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or (v) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (i) and (ii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Effective Date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(3) Consummation of a reorganization, merger,
consolidation or share exchange, or sale or other disposition of
all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly,
more than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation resulting from such
Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Voting Securities, and (ii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination.
(e) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(f) "Committee" means the committee of the Board described
in Article 4.
(g) "Company" means Integrity Incorporated, a Delaware
corporation.
(h) "Covered Employee" means a covered employee as defined
in Code Section 162(m)(3).
(i) "Disability" means any illness or other physical or
mental condition of a Participant that renders the Participant incapable
of performing his customary and usual duties for the Company, or any
medically determinable illness or other physical or mental condition
resulting from a bodily injury, disease or mental disorder which, in the
judgment of the Committee, is permanent and continuous in nature. The
Committee may require such medical or other evidence as it deems
necessary to judge the nature and permanency of the Participant's
condition. Notwithstanding the above, with respect to an Incentive Stock
Option, Disability shall mean Permanent and Total Disability as defined
in Section 22(e)(3) of the Code.
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(j) "Effective Date" has the meaning assigned such term in
Section 2.1.
(k) "Fair Market Value", on any date, means the closing
sales price of the Stock as reported on a securities exchange or the
Nasdaq National Market or Nasdaq Small Cap Market on such date or, in
the absence of reported sales on such date, the closing sales price on
the immediately preceding date on which sales were reported, provided
that if it is determined that the fair market value is not properly
reflected by such market quotations, Fair Market Value will be
determined by such other method as the Committee determines in good
faith to be reasonable.
(l) "Incentive Stock Option" means an Option that is
intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.
(m) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(n) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(o) "Other Stock-Based Award" means a right, granted to a
Participant under Article 11, that relates to or is valued by reference
to Stock or other Awards relating to Stock.
(p) "Parent" means a corporation which owns or beneficially
owns a majority of the outstanding voting stock or voting power of the
Company. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(q) "Participant" means a person who, as an employee,
officer or director of the Company or any Subsidiary, has been granted
an Award under the Plan.
(r) "Performance Share" means a right granted to a
Participant under Article 9, to receive cash, Stock, or other Awards,
the payment of which is contingent upon achieving certain performance
goals established by the Committee.
(s) "Plan" means the Integrity Incorporated 1999 Long-Term
Incentive Plan, as amended from time to time.
(t) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions and
to risk of forfeiture.
(u) "Stock" means the $0.01 par value Class A common stock
of the Company and such other securities of the Company as may be
substituted for Stock pursuant to Article 13.
(v) "Stock Appreciation Right" or "SAR" means a right
granted to a Participant under Article 8 to receive a payment equal to
the difference between the Fair Market Value of a share of Stock as of
the date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(w) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which a majority of the
outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Company. For Incentive Stock Options, the term
shall have the meaning set forth in Code Section 424(f).
(x) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
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(y) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1 COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. The Committee shall consist of two or more members of the Board. It
is intended that the directors appointed to serve on the Committee shall be
"non-employee directors" (within the meaning of Rule 16b-3 promulgated under the
1934 Act) and "outside directors" (within the meaning of Code Section 162(m) and
the regulations thereunder) to the extent that Rule 16b-3 and, if necessary for
relief from the limitation under Code Section 162(m) and such relief is sought
by the Company, Code Section 162(m), respectively, are applicable. However, the
mere fact that a Committee member shall fail to qualify under either of the
foregoing requirements shall not invalidate any Award made by the Committee
which Award is otherwise validly made under the Plan. The members of the
Committee shall be appointed by, and may be changed at any time and from time to
time in the discretion of, the Board. During any time that the Board is acting
as administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this Section
4.1) shall include the Board.
4.2 ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Company or any
Parent or Subsidiary, the Company's independent certified public accountants, or
any executive compensation consultant or other professional retained by the
Company to assist in the administration of the Plan.
4.3 AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to
each Participant;
(c) Determine the number of Awards to be granted and the
number of shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted
under the Plan, including but not limited to, the exercise price, grant
price, or purchase price, any restrictions or limitations on the Award,
any schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, based
in each case on such considerations as the Committee in its sole
discretion determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what
circumstances an Award may be settled in, or the exercise price of an
Award may be paid in, cash, Stock, other Awards, or other property, or
an Award may be canceled, forfeited, or surrendered;
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(g) Prescribe the form of each Award Agreement, which need
not be identical for each Participant;
(h) Decide all other matters that must be determined in
connection with an Award;
(i) Establish, adopt or revise any rules and regulations as
it may deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be
required under the Plan or as the Committee deems necessary or advisable
to administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided
herein.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan,
any Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
13.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 400,000, of which not more than 50% may be granted as Awards of
Restricted Stock or unrestricted Stock Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award
may consist, in whole or in part, of authorized and unissued Stock, treasury
Stock or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan
to the contrary (but subject to adjustment as provided in Section 13.1), the
maximum number of shares of Stock with respect to one or more Options and/or
SARs that may be granted during any one calendar year under the Plan to any one
Participant shall be 200,000. The maximum fair market value (measured as of the
date of grant) of any Awards other than Options and SARs that may be received by
any one Participant (less any consideration paid by the Participant for such
Award) during any one calendar year under the Plan shall be $5,000,000.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees, officers or directors of the Company or a Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
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(a) EXERCISE PRICE. The exercise price per share of Stock
under an Option shall be determined by the Committee, provided that the
exercise price for an Option shall not be less than the Fair Market
Value as of the date of the grant.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall
determine the time or times at which an Option may be exercised in whole
or in part. The Committee also shall determine the performance or other
conditions, if any, that must be satisfied before all or part of an
Option may be exercised. The Committee may waive any exercise provisions
at any time in whole or in part based upon factors as the Committee may
determine in its sole discretion so that the Option becomes exerciseable
at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by
which the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants; provided that if shares of Stock surrendered in payment of
the exercise price were themselves acquired otherwise than on the open
market, such shares shall have been held by the Participant for at least
six months.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a
written Award Agreement between the Company and the Participant. The
Award Agreement shall include such provisions, not inconsistent with the
Plan, as may be specified by the Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock
Options granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock
shall be set by the Committee, provided that the exercise price for any
Incentive Stock Option shall not be less than the Fair Market Value as
of the date of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse
under the earliest of the following circumstances; provided, however,
that the Committee may, prior to the lapse of the Incentive Stock Option
under the circumstances described in paragraphs (3), (4) and (5) below,
provide in writing that the Option will extend until a later date, but
if Option is exercised after the dates specified in paragraphs (3), (4)
and (5) below, it will automatically become a Non-Qualified Stock
Option:
(1) The Incentive Stock Option shall lapse as of the
option expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years
after it is granted, unless an earlier time is set in the Award
Agreement.
(3) If the Participant terminates employment for any
reason other than as provided in paragraph (4) or (5) below, the
Incentive Stock Option shall lapse, unless it is previously
exercised, three months after the Participant's termination of
employment.
(4) If the Participant terminates employment by
reason of his Disability, the Incentive Stock Option shall
lapse, unless it is previously exercised, one year after the
Participant's termination of employment.
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(5) If the Participant dies while employed, or
during the three-month period described in paragraph (3) or
during the one-year period described in paragraph (4) and before
the Option otherwise lapses, the Option shall lapse one year
after the Participant's death. Upon the Participant's death, any
exercisable Incentive Stock Options may be exercised by the
Participant's beneficiary, determined in accordance with Section
12.6.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 12, if a Participant exercises an
Option after termination of employment, the Option may be exercised only
with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market
Value (determined as of the time an Award is made) of all shares of
Stock with respect to which Incentive Stock Options are first
exercisable by a Participant in any calendar year may not exceed
$100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be
granted to any individual who, at the date of grant, owns stock
possessing more than ten percent of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary unless
the exercise price per share of such Option is at least 110% of the Fair
Market Value per share of Stock at the date of grant and the Option
expires no later than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive
Stock Option to a non-employee director. The Committee may grant an
Incentive Stock Option to a director who is also an employee of the
Company or Parent or Subsidiary but only in that individual's position
as an employee and not as a director.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock
Appreciation Right, the Participant to whom it is granted has the right
to receive the excess, if any, of:
(1) The Fair Market Value of one share of Stock on
the date of exercise; over
(2) The grant price of the Stock Appreciation Right
as determined by the Committee.
(b) OTHER TERMS. All awards of Stock Appreciation Rights
shall be evidenced by an Award Agreement. The terms, methods of
exercise, methods of settlement, form of consideration payable in
settlement, and any other terms and conditions of any Stock
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Appreciation Right shall be determined by the Committee at the time of
the grant of the Award and shall be reflected in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to
grant Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock,
or other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at
the time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Company; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted
under the Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing shares of Restricted Stock are registered in the
name of the Participant, certificates must bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Restricted Stock.
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ARTICLE 11
OTHER STOCK-BASED AWARDS
11.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 12
PROVISIONS APPLICABLE TO AWARDS
12.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
12.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 13.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made, and after taking into account the tax, securities and accounting
effects of such an exchange.
12.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
12.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Company or a Parent or Subsidiary on the grant or exercise of an Award may be
made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
12.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party other than the Company or a Parent or Subsidiary, or
shall be subject to any lien, obligation, or liability of such Participant to
any other party other than the Company or a Parent or Subsidiary. No unexercised
or restricted Award shall be assignable or transferable by a Participant other
than by will or the laws of descent and distribution or, except in the case of
an Incentive Stock Option, pursuant to a domestic relations order that would
satisfy Section 414(p)(1)(A) of the Code if such Section applied to an Award
under the Plan; provided, however, that the Committee may (but need not) permit
other transfers where the Committee concludes that such transferability (i) does
not result in accelerated taxation, (ii) does not cause any Option intended to
be an incentive stock option to fail to be described in Code Section 422(b), and
(iii) is otherwise appropriate and desirable, taking into account any factors
deemed relevant, including
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without limitation, any state or federal tax or securities laws or regulations
applicable to transferable Awards.
12.6 BENEFICIARIES. Notwithstanding Section 12.5, a Participant may,
in the manner determined by the Committee, designate a beneficiary to exercise
the rights of the Participant and to receive any distribution with respect to
any Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
12.7. STOCK CERTIFICATES. All Stock certificates delivered under the
Plan are subject to any stop-transfer orders and other restrictions as the
Committee deems necessary or advisable to comply with federal or state
securities laws, rules and regulations and the rules of any national securities
exchange or automated quotation system on which the Stock is listed, quoted, or
traded. The Committee may place legends on any Stock certificate to reference
restrictions applicable to the Stock.
12.8. ACCELERATION UPON A CHANGE IN CONTROL. Except as otherwise
provided in the Award Agreement, upon the occurrence of a Change in Control, all
outstanding Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully exercisable and all
restrictions on outstanding Awards shall lapse; provided, however that such
acceleration will not occur if, in the opinion of the Company's accountants,
such acceleration would preclude the use of "pooling of interest" accounting
treatment for a Change in Control transaction that (a) would otherwise qualify
for such accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
12.9. ACCELERATION UPON CERTAIN EVENTS NOT CONSTITUTING A CHANGE IN
CONTROL. In the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control (as defined in Section 3.1) but which
the Board of Directors deems to be, or to be reasonably likely to lead to, an
effective change in control of the Company of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of the 1934 Act, the
Committee may in its sole discretion declare all outstanding Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised to be fully exercisable, and/or all restrictions on all outstanding
Awards to have lapsed, in each case, as of such date as the Committee may, in
its sole discretion, declare, which may be on or before the consummation of such
transaction or event. To the extent that this provision causes Incentive Stock
Options to exceed the dollar limitation set forth in Section 7.2(d), the excess
Options shall be deemed to be Non-Qualified Stock Options.
12.10. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an
event has occurred as described in Section 12.8 or 12.9 above, the Committee may
in its sole discretion at any time determine that all or a portion of a
Participant's Options, Stock Appreciation Rights, and other Awards in the nature
of rights that may be exercised shall become fully or partially exercisable,
and/or that all or a part of the restrictions on all or a portion of the
outstanding Awards shall lapse, in each case, as of such date as the Committee
may, in its sole discretion, declare. The Committee may discriminate among
Participants and among Awards granted to a Participant in exercising its
discretion pursuant to this Section 12.10.
12.11 EFFECT OF ACCELERATION. If an Award is accelerated under Section
12.8 or 12.9, the Committee may, in its sole discretion, provide (i) that the
Award will expire after a designated period
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of time after such acceleration to the extent not then exercised, (ii) that the
Award will be settled in cash rather than Stock, (iii) that the Award will be
assumed by another party to the transaction giving rise to the acceleration or
otherwise be equitably converted in connection with such transaction, or (iv)
any combination of the foregoing. The Committee's determination need not be
uniform and may be different for different Participants whether or not such
Participants are similarly situated.
12.12. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Company or a Parent or Subsidiary of a specified
target return, or target growth in return, on equity or assets, (b) the
Company's stock price, (c) the achievement by an individual or a business unit
of the Company, Parent or Subsidiary of a specified target, or target growth in,
revenues, net income or earnings per share, (d) the achievement of objectively
determinable goals with respect to service or product delivery, service or
product quality, customer satisfaction, meeting budgets and/or retention of
employees, or (e) any combination of the goals set forth in (a) through (d)
above. If an Award is made on such basis, the Committee shall establish goals
prior to the beginning of the period for which such performance goal relates (or
such later date as may be permitted under Code Section 162(m) or the regulations
thereunder) and the Committee may for any reason reduce (but not increase) any
Award, notwithstanding the achievement of a specified goal. Any payment of an
Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
12.13. TERMINATION OF EMPLOYMENT. Whether military, government or other
service or other leave of absence shall constitute a termination of employment
shall be determined in each case by the Committee at its discretion, and any
determination by the Committee shall be final and conclusive. A termination of
employment shall not occur in a circumstance in which a Participant transfers
from the Company to one of its Parents or Subsidiaries, transfers from a Parent
or Subsidiary to the Company, or transfers from one Parent or Subsidiary to
another Parent or Subsidiary.
ARTICLE 13
CHANGES IN CAPITAL STRUCTURE
13.1. GENERAL. In the event a stock dividend is declared upon the
Stock, the authorization limits under Section 5.1 and 5.4 shall be increased
proportionately, and the shares of Stock then subject to each Award shall be
increased proportionately without any change in the aggregate purchase price
therefor. In the event the Stock shall be changed into or exchanged for a
different number or class of shares of stock or securities of the Company or of
another corporation, whether through reorganization, recapitalization,
reclassification, share exchange, stock split-up, combination of shares, merger
or consolidation, the authorization limits under Section 5.1 and 5.4 shall be
adjusted proportionately, and there shall be substituted for each such share of
Stock then subject to each Award the number and class of shares into which each
outstanding share of Stock shall be so exchanged, all without any change in the
aggregate purchase price for the shares then subject to each Award, or, subject
to Section 15.2, there shall be made such other equitable adjustment as the
Committee shall approve.
ARTICLE 14
AMENDMENT, MODIFICATION AND TERMINATION
14.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the
Committee may, at any time and from time to time, amend, modify or terminate the
Plan without stockholder approval; provided, however, that the Board or
Committee may condition any amendment or modification on the approval of
stockholders of the Company if such approval is necessary or deemed advisable
with respect to tax, securities or other applicable laws, policies or
regulations.
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14.2 AWARDS PREVIOUSLY GRANTED. At any time and from time to time,
the Committee may amend, modify or terminate any outstanding Award without
approval of the Participant; provided, however, that, subject to the terms of
the applicable Award Agreement, such amendment, modification or termination
shall not, without the Participant's consent, reduce or diminish the value of
such Award determined as if the Award had been exercised, vested, cashed in or
otherwise settled on the date of such amendment or termination, and provided
further that, except as otherwise permitted in the Plan, the exercise price of
any Option may not be reduced and the original term of any Option may not be
extended. No termination, amendment, or modification of the Plan shall adversely
affect any Award previously granted under the Plan, without the written consent
of the Participant.
ARTICLE 15
GENERAL PROVISIONS
15.1. NO RIGHTS TO AWARDS. No Participant or eligible participant
shall have any claim to be granted any Award under the Plan, and neither the
Company nor the Committee is obligated to treat Participants or eligible
participants uniformly.
15.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Company unless and until shares of Stock are in
fact issued to such person in connection with such Award.
15.3. WITHHOLDING. The Company or any Parent or Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Company, an amount sufficient to satisfy federal, state, and local
taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount required to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
15.4. NO RIGHT TO CONTINUED SERVICE. Nothing in the Plan or any Award
Agreement shall interfere with or limit in any way the right of the Company or
any Parent or Subsidiary to terminate any Participant's employment or status as
an officer or director at any time, nor confer upon any Participant any right to
continue as an employee, officer or director of the Company or any Parent or
Subsidiary.
l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant pursuant to an Award, nothing contained
in the Plan or any Award Agreement shall give the Participant any rights that
are greater than those of a general creditor of the Company or any Parent or
Subsidiary.
15.6. INDEMNIFICATION. To the extent allowable under applicable law,
each member of the Committee shall be indemnified and held harmless by the
Company from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which such member may be a party or in
which he may be involved by reason of any action or failure to act under the
Plan and against and from any and all amounts paid by such member in
satisfaction of judgment in such action, suit, or proceeding against him
provided he gives the Company an opportunity, at its own expense, to handle and
defend the same before he undertakes to handle and defend it on his own behalf.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.
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15.7. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall
be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company
or any Parent or Subsidiary unless provided otherwise in such other plan.
15.8. EXPENSES. The expenses of administering the Plan shall be borne
by the Company and its Parents or Subsidiaries.
15.9. TITLES AND HEADINGS. The titles and headings of the Sections in
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
15.10. GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular and the singular shall include the plural.
15.11. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
15.12. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company
to make payment of awards in Stock or otherwise shall be subject to all
applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Company shall be under no obligation to
register under the 1933 Act, or any state securities act, any of the shares of
Stock paid under the Plan. The shares paid under the Plan may in certain
circumstances be exempt from registration under the 1933 Act, and the Company
may restrict the transfer of such shares in such manner as it deems advisable to
ensure the availability of any such exemption.
15.13. GOVERNING LAW. To the extent not governed by federal law, the
Plan and all Award Agreements shall be construed in accordance with and governed
by the laws of the State of Delaware.
15.14 ADDITIONAL PROVISIONS. Each Award Agreement may contain such
other terms and conditions as the Committee may determine; provided that such
other terms and conditions are not inconsistent with the provisions of this
Plan.
The foregoing is hereby acknowledged as being the Integrity Incorporated
1999 Long-Term Incentive Plan as adopted by the Board of Directors of the
Company on February 11, 1999, and to be submitted to the Company's stockholders
at the 1999 Annual Meeting of Stockholders.
Integrity Incorporated
By: /s/ P. Michael Coleman
-------------------------------------
Its: President
------------------------------------
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PROXY INTEGRITY INCORPORATED
MOBILE, ALABAMA
ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Integrity Incorporated (the "Company"),
Mobile, Alabama, hereby constitutes and appoints P. Michael Coleman or Alison S.
Richardson, or either one of them, each with full power of substitution, to vote
the number of shares of Class A Common Stock which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders to
be held at the Adam's Mark, 64 South Waterstreet, Mobile, Alabama, 36602, on
Friday, May 7, 1999, at 2:00 p.m., local time, or at any adjournments thereof
(the "Annual Meeting"), upon the proposals described in the Notice of Annual
Meeting of Stockholders and Proxy Statement, both dated April 12, 1999, the
receipt of which is acknowledged, in the manner specified below. The proxies, in
their discretion, are further authorized to vote on any stockholder proposals
subsequently presented for a vote of the stockholders at the Annual Meeting, as
well as on the election of any person as a director if any nominee named herein
is unable to serve or for good cause will not serve, and on matters incident to
the Annual Meeting and any adjournments thereof. At the present time, the Board
of Directors knows of no other business to be presented to a vote of the
stockholders at the Annual Meeting. The Board of Directors recommends a vote FOR
Proposals 1, 2 and 3.
1. ELECTION OF DIRECTORS. On the proposal to elect the following slate of
directors to serve until the 2000 Annual Meeting of Stockholders of the
Company and until their successors are elected and qualified:
P. Michael Coleman, Jean C. Coleman, Charles V. Simpson, Heeth Varnedoe III,
Jimmy M. Woodward
FOR [ ] [ ] WITHHOLD AUTHORITY
To withhold authority for any individual nominee(s), write the name of the
nominee(s) in the space provided:
---------------------------------------------------------------------------
2. 1999 LONG-TERM INCENTIVE PLAN. On the proposal to approve the 1999 Long-Term
Incentive Plan:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. SELECTION OF AUDITORS. On the proposal to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent auditors for the
fiscal year ending December 31, 1999:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(Continued and to be dated and signed on reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3 AND WITH DISCRETIONARY AUTHORITY ON CERTAIN
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY
ADJOURNMENTS THEREOF.
Please sign exactly as your name appears on your stock certificate and date.
Where shares are held jointly, each stockholder should sign. When signing as
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.
Shares Held:
------------------
------------------------------
Signature of Stockholder
------------------------------
Signature of Stockholder (If
held jointly)
Date: , 1999
-------------------
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF INTEGRITY INCORPORATED'S BOARD OF DIRECTORS
AND MAY BE
REVOKED BY THE STOCKHOLDER PRIOR TO ITS EXERCISE.