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:
[X] Preliminary Proxy Statement
[_] Confidential, For Use of the Commission Only
(as Permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Stratford American Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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STRATFORD AMERICAN CORPORATION
2400 East Arizona Biltmore Circle, Building 2, Suite 1270
Phoenix, Arizona 85016
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 8, 1998
To the Stockholders of Stratford American Corporation:
The 1998 Annual Meeting of Stockholders of Stratford American
Corporation, an Arizona corporation (the "Company"), will be held at Stratford
American Corporation, 2400 East Arizona Biltmore Circle, Building 2, Suite 1270,
Phoenix, Arizona 85016, on Wednesday, July 8, 1998 at 2:00 p.m., Mountain
Standard Time, for the following purposes:
1. To consider and act upon a proposal to amend the Company's
Articles of Incorporation to effect a fifteen-to-one reverse
stock split of the Company's presently issued shares of Common
Stock;
2. To consider and act upon a proposal to adopt the 1998 Stock
Incentive Plan;
3. To elect six directors to the Board of Directors;
4. To consider and act upon a proposal to ratify the appointment
of KPMG Peat Marwick, LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1998; and
5. To transact such other business as may properly come before
the meeting.
Only Stockholders of record at the close of business on May 15, 1998
are entitled to notice of and to vote at the Annual Meeting. Holders of Common
Stock as of such date are entitled to vote on all of the above proposals. Shares
can be voted at the meeting only if the holder is present or represented by
proxy. A list of Stockholders entitled to vote at the Annual Meeting will be
open for inspection at the Annual Meeting and will be open for inspection at the
offices of Stratford American Corporation, 2400 East Arizona Biltmore Circle,
Building 2, Suite 1270, Phoenix, Arizona 85016, during ordinary business hours
for ten days prior to the meeting.
It is important that your shares be represented at this meeting. To
assure your representation at the meeting, please complete, date, sign and
promptly mail the enclosed proxy card in the accompanying envelope, which
requires no postage if mailed in the United States.
By Order of the Board of Directors,
Phoenix, Arizona Timothy A. Laos, Secretary
May 30, 1998
PROXY STATEMENT
OF
STRATFORD AMERICAN CORPORATION
2400 East Arizona Biltmore Circle, Building 2, Suite 1270
Phoenix, Arizona 85016
-----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Stratford American Corporation, an Arizona
corporation (the "Company"), of proxies for use at the 1998 Annual Meeting of
Stockholders to be held on July 8, 1998, at 2:00 p.m., Mountain Standard Time.
The Annual Meeting will be held at Stratford American Corporation, 2400 East
Arizona Biltmore Circle, Building 2, Suite 1270, Phoenix, Arizona 85016.
This Proxy Statement and the accompanying form of proxy are being first
mailed to Stockholders on or about May 30, 1998. The Stockholder giving the
proxy may revoke it at any time before it is exercised at the meeting by: (i)
delivering to the Secretary of the Company a written instrument of revocation
bearing a date later than the date of the proxy; (ii) duly executing and
delivering to the Secretary a subsequent proxy relating to the same shares; or
(iii) attending the meeting and voting in person (attendance at the meeting will
not in and of itself constitute revocation of a proxy). Any proxy which is not
revoked will be voted at the Annual Meeting in accordance with the Stockholder's
instructions. If a Stockholder returns a properly signed and dated proxy card
but does not mark any choices on one or more items, his or her shares will be
voted in accordance with the recommendations of the Board of Directors as to
such items. The proxy card gives authority to the proxies to vote shares in
their discretion on any other matter properly presented at the Annual Meeting.
Proxies will be solicited from the Company's Stockholders by mail. The
Company will pay all expenses in connection with the solicitation, including
postage, printing and handling, and the expenses incurred by brokers,
custodians, nominees and fiduciaries in forwarding proxy material to beneficial
owners. It is possible that directors, officers and regular employees of the
Company may make further solicitation personally or by telephone, telegraph or
mail. Directors, officers and regular employees of the Company will receive no
additional compensation for any such further solicitation.
Only holders (the "Stockholders") of the Company's Common Stock, $0.01
par value (the "Common Stock"), at the close of business on May 15, 1998 (the
"Record Date"), are entitled to notice of, and to vote at, the Annual Meeting.
As of March 31, 1998, there were 88,076,806 shares of Common Stock outstanding.
Each share of Common Stock is entitled to one vote on each matter to be
considered at the Annual Meeting. A majority of the outstanding shares of Common
Stock, present in person or represented by proxy at the Annual Meeting, will
constitute a quorum for the transaction of business at the Annual Meeting.
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote and present in person or by
proxy at the Annual Meeting is required for approval of Proposals One through
Four. It is expected that shares held by officers and directors of the Company,
which in the aggregate represent approximately 27.66% of the outstanding shares
of Common Stock, will be voted in favor of each of Proposals One through Four.
Votes that are withheld will have the effect of a negative vote. Abstentions may
be specified on all proposals. Abstentions are included in the determination of
the number of shares represented for a quorum. Abstentions will have the effect
of a negative vote on a proposal. Broker non-votes are not counted for purposes
of determining whether a quorum is present or whether a proposal has been
approved. With regard to the election of directors, votes may be cast in favor
of or withheld from each nominee. Stockholders voting on the election of
directors may cumulate their votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of votes
to which the Stockholder's shares are entitled, or may distribute their votes on
the same principle among as many candidates as they choose, provided that votes
cannot be cast for more than the total number of directors to be elected at the
meeting. As indicated in the proxy accompanying this Proxy Statement,
discretionary power to cumulate votes is being solicited. In order to cumulate
votes, at least one Stockholder must announce, prior to the casting of votes for
the election of directors, that he or she intends to cumulate votes. Proxies
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will be tabulated by the Company with the assistance of the Company's transfer
agent. The Company will, in advance of the Annual Meeting, appoint one or more
Inspectors of Election to count all votes and ballots at the Annual Meeting and
make a written report thereof.
Security Ownership of Certain Principal Stockholders and Management
The following table sets forth certain information, as of March 31,
1998, with respect to the number of shares of the Company's Common Stock
beneficially owned by individual directors and director nominees, by all
directors and officers of the Company as a group and by persons known to the
Company to own more than 5% of the Company's Common Stock. Unless otherwise
indicated below, to the Company's knowledge, all persons below have sole voting
and investment power with respect to their shares, except to the extent
authority is shared by spouses under applicable law. This information is based
upon the Company's records and the persons' filings with the Securities and
Exchange Commission.
Name and Address of Common Percent Common Shares After Percent
Beneficial Owner Shares of Reverse Stock Split(2) of
---------------- ------ Total(1) ---------------------- Total(2)
-------- --------
JDMD Investments, L.L.C.(3) 24,318,077 27.6% 1,621,206 27.6%
2400 E. Arizona Biltmore Circle
Phoenix, Arizona 85016
Investments Four Corporation(4) 6,506,667 7.4% 433,778 7.4%
8630 E. Via de Ventura, Suite 220
Scottsdale, Arizona 85258
Gerald J. Colangelo(3) 6,079,519 6.9% 405,302 6.9%
2400 E. Arizona Biltmore Circle
Phoenix, Arizona 85016
David H. Eaton(3) 6,079,519 6.9% 405,302 6.9%
2400 E. Arizona Biltmore Circle
Phoenix, Arizona 85016
Mel L. Shultz(3) 6,079,519 6.9% 405,302 6.9%
2400 E. Arizona Biltmore Circle
Phoenix, Arizona 85016
Richard H. Dozer 50,000 * 3,334 *
401 E. Jefferson Street
Phoenix, Arizona 85004
Dale M. Jensen(3) 6,079,519 6.9% 405,302 6.9%
9800 E. Dynamite Rd., #229
Scottsdale, AZ 85255
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Mitchell S. Vance 0 0% 0 0%
26 Burning Tree Road
Newport Beach, CA 92660
All directors, director nominees 24,368,077 27.66% 1,624,542 27.66%
and officers as a group (7 persons)
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* Less than 1%.
(1) Based on 88,076,806 shares of Common Stock outstanding as of March 31,
1998.
(2) Based on 5,871,787 shares of Common Stock that will be outstanding
after giving effect to the fifteen-to-one reverse stock split of the
Common Stock.
(3) Messrs. Colangelo, Eaton, Jensen and Shultz each own a 25% interest in
JDMD Investments, L.L.C. ("JDMD"). Messrs. Colangelo, Eaton, Jensen and
Shultz share voting and investment power with respect to the shares
held by JDMD. Accordingly, the number of shares for each of Messrs.
Colangelo, Eaton, Jensen and Shultz represents 25% of the number of
shares owned by JDMD.
(4) Investments Four Corporation has sole voting and investment power with
respect to its shares.
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PROPOSAL ONE:
AMENDMENT OF ARTICLES OF INCORPORATION TO
EFFECT REVERSE STOCK SPLIT
The Reverse Stock Split
The Board of Directors believes that the best interests of the Company
and its Stockholders will be served by amending the Company's Articles of
Incorporation to effect a fifteen-to-one reverse stock split of the Company's
presently issued shares of capital stock. The Board of Directors has unanimously
approved and recommends a vote for Proposal One.
If the Stockholders approve this Proposal One, the Company's Articles
of Incorporation will be amended to replace a portion of the existing provision
relating to the Company's authorized capital with the following provision
relating thereto:
"IV.
AUTHORIZED CAPITAL
------------------
1. Aggregate Capital. The aggregate number of shares which the
corporation shall have authority to issue is One Hundred Fifty
Million (150,000,000) consisting of One Hundred Million
(100,000,000) common shares, one cent ($0.01) par value (the
"Common Stock"), and Fifty Million (50,000,000) preferred
shares, one cent ($0.01) par value. Each fifteen (15) shares
of the Corporation's Common Stock issued as of the date and
time immediately following the filing of this Amendment to the
Articles of Incorporation (the "Split Effective Date") shall
be automatically changed and reclassified, as of the Split
Effective Date and without further action, into one (1) fully
paid and nonassessable share of the Corporation's Common
Stock; provided, however, that any fractional interest
resulting from such change and classification shall be rounded
upward to the nearest whole share."
If the Stockholders approve this Proposal One, the above amendment to
the Company's Articles of Incorporation will become effective upon the filing of
articles of amendment with the Arizona Corporation Commission. The amendment to
the Company's Articles of Incorporation (the "Amendment"), as it will appear if
Proposal One is approved by the Stockholders, is attached as Exhibit 1.
The proposed reverse stock split will not affect any Stockholder's
proportionate equity interest in the Company or the rights, preferences,
privileges or priorities of any Stockholder, other than a relatively slight
adjustment which may occur due to the rounding up of fractional shares.
Likewise, the proposed reverse split will not affect the total Stockholders'
equity of the Company or any components of Stockholders' equity as reflected on
the financial statements of the Company except (i) to change the numbers of the
issued and outstanding shares of capital stock and (ii) for a relatively slight
adjustment which will occur due to the costs incurred by the Company in
connection with this Proxy Statement, the Annual Meeting and the implementation
of such of the proposals as are approved by the Stockholders. However, because
the number of shares of capital stock that the Company is authorized to issue
will not be decreased in proportion to the fifteen-to-one decrease in the number
of issued shares, the number of shares which are authorized but unissued, and
the percentage of ownership of the Company represented by such shares if they
are issued in the future in the discretion of the Board of Directors,
effectively will be increased.
The following table illustrates, as of March 31, 1998, the principal
effects on the Company's capital stock of the reverse stock split:
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Number of Shares of Capital Stock
Prior to After
Reverse Split Reverse Split
------------- -------------
Common
- ------
Authorized 100,000,000 100,000,000
Issued and outstanding 88,076,806 5,871,787
Available for
future issuance 11,923,194 94,128,213
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Exchange of Shares; No Fractional Shares
Pursuant to the proposed amendment, every fifteen shares of issued
capital stock would be converted and reclassified into one share of post-split
capital stock, and any fractional interests resulting from such reclassification
would be rounded upward to the nearest whole share. For example, a holder of 150
shares prior to the Split Effective Date (defined below) would be the holder of
10 shares at the Split Effective Date, and the holder of 100 shares prior to the
Split Effective Date would be the holder of 7 shares at the Split Effective
Date. The proposed reverse stock split would become effective (the "Split
Effective Date") immediately following the filing of the Amendment with the
Arizona Corporation Commission. Stockholders will be notified on or after the
Split Effective Date that the reverse stock split has been effected. The
Company's transfer agent, Harris Trust, will act as the Company's exchange agent
(the "Exchange Agent") for Stockholders in implementing the exchange of their
certificates.
As soon as practicable after the Split Effective Date, Stockholders
will be notified and requested to surrender their certificates to the Exchange
Agent in exchange for certificates representing post-split Common Stock.
Stockholders will not receive certificates for shares of post-split Common Stock
unless and until the certificates representing their shares of pre-split Common
Stock are surrendered and they provide such evidence of ownership of such shares
as the Company or the Exchange Agent may require. Stockholders should not
forward their certificates to the Exchange Agent until they have received notice
from the Company that the reverse stock split has become effective. Beginning on
the Split Effective Date, each certificate representing shares of the Company's
pre-split Common Stock will be deemed for all corporate purposes to evidence
ownership of the appropriate number of shares of post-split Common Stock.
No service charge will be payable by Stockholders in connection with
the exchange of certificates, all costs of which will be borne and paid by the
Company.
Stockholders have no right under Arizona law to dissent from the
reverse stock split or to dissent from the rounding up of fractional interests
resulting from the stock split.
Purposes of the Reverse Stock Split and Effective Increase in Authorized Shares
The primary objectives of the reverse stock split are to increase the
market value per share of the Common Stock and to increase the liquidity of the
Common Stock.
The Board of Directors believes that the current price per share of the
Company's Common Stock may reduce the effective marketability of the Common
Stock because of the reluctance of certain brokerage firms to recommend
lower-priced stocks to their clients. Certain institutional investors have
internal policies preventing the purchase of lower-priced stocks and many
brokerage houses do not permit lower-priced stocks to be used as collateral for
margin accounts. Further, a number of brokerage houses have polices and
practices that tend to discourage individual brokers
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within those firms from dealing in lower-priced stocks. Some of those policies
and practices pertain to the payment of brokers' commissions and to
time-consuming procedures that function to make the handling of lower-priced
stocks unattractive to brokers from an economic standpoint. In addition, the
structure of trading commissions tends to have an adverse impact upon holders of
lower-priced stocks because the brokerage commission on a sale of lower-priced
stocks generally represents a higher percentage of the sales price than the
commission on a relatively higher-priced stock.
The Board of Directors believes that the low, per-share market price of
the Common Stock impairs the marketability of the Common Stock to institutional
investors and members of the investing public and creates a negative impression
with respect to the Company. Many investors and market makers look upon
lower-priced stocks as unduly speculative in nature and, as a matter of policy,
avoid investment and trading in such stocks. The foregoing factors adversely
affect both the pricing and the liquidity of the Common Stock. Thus, the
potential increase in trading price is expected to be attractive to the
financial community and the investing public.
The Board of Directors is hopeful that the decrease in the number of
shares outstanding as a consequence of the proposed reverse stock split, and the
resulting anticipated increased price level, will stimulate interest in the
Company's Common Stock and possibly promote greater liquidity for the Company's
Stockholders. There can be no assurance, however, that there will be any greater
liquidity, and it is possible that the liquidity could even be adversely
affected by the reduced number of shares which would be outstanding after the
proposed reverse stock split is effected.
If the reverse stock split becomes effective, the quoted market price
of the Company's stock should increase as a result of decreasing the number of
shares outstanding without altering the aggregate economic interest in the
Company represented by such shares. The Board believes that the increased price
would be a more appropriate trading price for the Company and is concerned with
long-term development of its business opportunities. In addition, the increase
in the market price may serve to mitigate the present reluctance, policies and
practices on the part of brokerage firms referred to above and diminish the
adverse impact of trading commissions on the potential market for the Company's
shares. There can be no assurance, however, that the reverse stock split will
achieve these desired results, that any such increase would be in proportion to
the fifteen-to-one reverse split ratio or that the per-share price level of the
Common Stock immediately after the proposed reverse stock split can be
maintained for any period of time.
A reverse stock split may result in some Stockholders owning "odd lots"
of less than 100 shares. The costs, including brokerage commissions, of
transactions in odd lots are generally higher than the costs in transactions in
"round lots" of even multiples of 100.
The primary objective of the effective increase in the number of shares
which are authorized but unissued, and in the percentage of ownership of the
Company represented by such shares if they are issued in the future in the
discretion of the Board of Directors, is for the Company to have additional
shares of Common Stock authorized and available for issuance as the need arises
for possible future financing transactions, stock acquisitions, asset purchases,
stock dividends or splits, issuances under any stock option plan that may be
adopted in the future, and other general corporate purposes. The Board believes
that the effective increase in the number and percentage of authorized but
unissued shares will provide the Company additional flexibility to issue
additional shares of Common Stock to meet the Company's future financing needs.
In order to avoid the delay and expense involved in obtaining Stockholder
approval, the Board believes it to be in the best interests of the Company and
its Stockholders to have shares of Common Stock authorized and available for
issuance without further action by the Stockholders. If Proposal One is
approved, Stockholders will have no preemptive rights with respect to the
additional authorized shares of Common Stock. Such shares may be issued on such
terms, at such times and on such conditions as the Board may determine in its
discretion. The Board of Directors has not entered into any negotiations,
agreements or understandings, nor made any other determinations, with respect to
the issuance of any shares of such Common Stock, except in connection with
presently outstanding warrants and shares or options or shares that may be
issued in the future to employees or directors of the Company either
individually or under employee benefit plans that may be adopted in the future
(including the 1998 Stock Incentive Plan described in Proposal Two).
Although the reverse stock split and the effective increase in the
number and percentage of authorized but unissued shares are not intended to be
anti-takeover devices, the effective increase in the authorized capital together
with a subsequent issuance of equity securities could impede a potential
takeover for various reasons including, but not
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limited to, diluting the stock ownership of persons attempting to gain control
of the Company and issuing securities to individuals or entities favorable to
management. Moreover, the availability of such additional shares in and of
itself might have the effect of discouraging an attempt to acquire control of
the Company other than through negotiations with the Board of Directors. Except
as described in this paragraph and the provisions of Arizona law providing for
cumulative voting in the election of directors, there are no provisions of the
Articles of Incorporation or Bylaws, either as currently in effect or as
proposed to be amended and restated in this Proxy Statement, which would act to
discourage a change in control of the Company. The Company has no plans to adopt
any measures, other than the reverse stock split, which may be deemed to be
anti-takeover devices.
The Board of Directors is not aware of any present efforts by any
person to accumulate the Company's capital stock or to obtain control of the
Company through tender offer, merger or other business combination, proxy
contest or otherwise. The Board has not formulated any program, nor entered into
any agreement or understanding, and has no current intention, to issue any
unissued and unreserved shares of Common Stock for the purpose of impeding or
preventing any proposed takeover.
Certain Federal Income Tax Consequences
A summary of the federal income tax consequences of the reverse stock
split as contemplated in Proposal One is set forth below. The discussion is
based on the present federal income tax law. The discussion is not intended to
be, nor should it be relied on as, a comprehensive analysis of the tax issues
arising from or relating to the proposed split. Income tax consequences to
Stockholders may vary from the federal tax consequences described generally
below. STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE EFFECT OF
THE CONTEMPLATED REVERSE STOCK SPLIT UNDER APPLICABLE FEDERAL, STATE AND LOCAL
INCOME TAX LAWS.
The proposed reverse stock split constitutes a "recapitalization" to
the Company and its Stockholders to the extent that issued shares of Common
Stock are exchanged for a reduced number of shares of Common Stock. Therefore,
neither the Company nor its Stockholders will recognize any gain or loss for
federal income tax purposes as a result thereof.
The shares of Common Stock to be issued to each Stockholder will have
an aggregate basis, for computing gain or loss, equal to the aggregate basis of
the shares of such stock held by such Stockholder immediately prior to the Split
Effective Date. A Stockholder's holding period for the shares of Common Stock to
be issued will include the holding period for the shares of Common Stock held
thereby immediately prior to the effective date provided that such shares of
stock were held by the Stockholder as capital assets on the effective date.
Voting Requirements
Each holder of Common Stock is entitled to one vote per share held.
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote and present in person or by
proxy at the Annual Meeting is required for approval of Proposal One. Proxies
solicited by the Board of Directors will be voted for approval of the Proposal
One. Stockholders are not entitled to cumulate votes.
FOR THIS PURPOSE, A STOCKHOLDER VOTING THROUGH A PROXY WHO ABSTAINS WITH RESPECT
TO APPROVAL OF PROPOSAL ONE IS CONSIDERED TO BE PRESENT AND ENTITLED TO VOTE ON
THE APPROVAL OF PROPOSAL ONE AT THE MEETING, AND IS IN EFFECT A NEGATIVE VOTE,
BUT A STOCKHOLDER (INCLUDING A BROKER) WHO DOES NOT GIVE AUTHORITY TO A PROXY TO
VOTE ON THE APPROVAL OF PROPOSAL ONE SHALL NOT BE CONSIDERED PRESENT AND
ENTITLED TO VOTE ON PROPOSAL ONE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL ONE.
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PROPOSAL TWO:
ADOPTION OF 1998 STOCK INCENTIVE PLAN
The Board of Directors believes that the best interests of the Company
and its Stockholders will be served by the adoption of the 1998 Stratford
American Corporation Stock Incentive Plan (the "Stock Incentive Plan"). The
Board of Directors has unanimously approved the Stock Incentive Plan and
recommends a vote for Proposal Two.
The Stock Incentive Plan will assist the Company in the recruitment,
retention and motivation of key employees and consultants who are highly
qualified and in a position to make material contributions to the Company's
success. The Stock Incentive Plan is intended to offer these individuals a
significant incentive through awards of Incentive Stock Options, Nonqualified
Options, Stock Appreciation Rights (tandem and free-standing), Restricted
Shares, Deferred Shares, Performance Units or Performance Shares.
The Company's continued need for highly qualified employees makes the
Stock Incentive Plan essential to the Company's ability to recruit and retain
its employees. The Company also believes that its continuing success will depend
in part on its ability to recruit, retain and motivate highly qualified
non-employee members of its Board of Directors, and that option grants to
eligible directors will assist the Company in achieving these objectives. In
April, 1998, subject to Stockholder approval being sought at the Annual Meeting,
the Board of Directors unanimously adopted the Stock Incentive Plan. Under the
Plan, no grants or awards of shares of Common Stock are required to be issued in
any particular year. Shares of Common Stock not used for grants or awards in any
particular year would not be carried over into any following year.
Summary of the Provisions of the Stock Incentive Plan
The description of the Stock Incentive Plan set forth below is a
summary only and is qualified in its entirety by reference to the text of the
Stock Incentive Plan, which is attached to this Proxy Statement as Exhibit 2.
Capitalized terms not otherwise defined shall have the meanings assigned to such
terms in the Stock Incentive Plan.
Eligibility and Participation. Participants in the Stock Incentive Plan
are selected by the Board of Directors or the Compensation Committee of the
Board of Directors. The Stock Incentive Plan contemplates that awards will be
granted from time to time to officers, directors, key employees and certain
consultants and advisors of the Company. The approximate number of persons
currently eligible to participate in the Stock Incentive Plan is 98 employees
and 6 directors (following the election of directors at the Annual Meeting).
Only employees of the Company are eligible for Incentive Stock Options, but
employees, directors, consultants and advisors of the Company are eligible for
Nonqualified Options. Usually, the only consideration received by the Company
for the grant of an award will be past services and/or the expectation of future
services. The Stock Incentive Plan does not confer on any Participant any right
with respect to continued employment or other service to the Company and will
not interfere in any manner with the right of the Company to terminate a
Participant's employment or other service at any time.
Administration. The Stock Incentive Plan is administered either by the
full Board of Directors or by the Compensation Committee of the Board, if any.
For the purposes of this summary, the terms "Compensation Committee" and "Board"
are used interchangeably, however, the Company does not presently have a
Compensation Committee. The Compensation Committee is authorized to (i) select
Participants in the Stock Incentive Plan, (ii) determine the type and amount of
awards, including the number of shares of Common Stock covered by any awards,
(iii) determine the vesting and exercise provisions of awards, (iv) determine
whether, when and to what extent awards are to be made, subject to the
restrictions of the Stock Incentive Plan, (v) determine the terms and conditions
of any award, (vi) adjust the terms and conditions of any award, unless
otherwise prohibited or restricted under the Stock Incentive Plan, (vii)
prescribe forms, (viii) issue Common Stock within the provisions of the Stock
Incentive Plan, (ix) assist any Participant in the exercise of one or more
awards, (x) determine to what extent and under what circumstances loans extended
under any financial assistance arrangement would be forgiven by the Company in
whole or in part, (xi) accelerate the benefits of an award in the event of a
Corporate Transaction or Change of Control, as defined below, or in the event of
termination of employment or consulting services by reason of death, disability,
normal retirement, early retirement with the consent of the Company, entry into
public or military service with a related leave of absence from the Company,
hardship or other special circumstances, (xii) make such adjustments in the
number, option prices and kind of shares or other rights covered by outstanding
awards or otherwise issuable under the Stock Incentive Plan, to be equitably
required in order to prevent dilution or expansion of the rights of Participants
that otherwise would result from any stock dividend, stock split, exchange or
combination of shares, recapitalization or other change in the capital structure
of the Company, merger, consolidation, spin-off, split-off, split-up,
reorganization, liquidation of assets or issuance of warrants in any corporate
transaction, (xiii) interpret the provisions of the Stock Incentive Plan and any
award issued thereunder, and (xiv) delegate certain decisions to officers of the
Company, provided that no delegation may be made that would cause any award to
cease to be exempt from Section 16(b) of the Exchange Act. Administration of the
proposed automatic option grant program for eligible non-
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employee directors shall be self executing. All determinations by the
Compensation Committee are final and binding.
Amendment and Termination. The Compensation Committee may amend the
Stock Incentive Plan; provided, however, that no such amendment may increase the
maximum number of shares of Common Stock, Performance Units or SARs issuable in
the aggregate or to any one Participant, or cause the Stock Incentive Plan to
cease to satisfy any applicable condition of Rule 16b-3 of the Exchange Act,
without the approval of the Stockholders. The Stock Incentive Plan will
terminate on the earlier of July 8, 2008 or the date on which all awards
available for issuance during the last year of the Stock Incentive Plan shall
have been issued or canceled.
Limitations on Awards. The number of shares reserved for issuance
pursuant to awards granted under the Plan each year shall be equal to 3% of the
issued and outstanding shares of Common Stock on January 1 of each year,
commencing on January 1, 1998. No grants or awards are required to be made
during any calendar year. Shares of Common Stock not used for grants or awards
in any calendar year would not be carried over into the following year. In no
event shall the total number of shares of Common Stock covered by grants and
awards or the number of Stock Appreciation Rights or Performance Units to any
one individual exceed 500,000 per year or 2,000,000 over the term of the Stock
Incentive Plan. In addition, the total number of Performance Units granted to
all participants under the Stock Incentive Plan may not exceed 3,000,000. No
Incentive Stock Option, Nonqualified Option or Free-standing Stock Appreciation
Right may be exercised more than 10 years from the date of grant.
Pricing and Payment of Options. The per-share exercise price of each
stock option granted under the Stock Incentive Plan will be established by the
Compensation Committee at the time of award. Subject to the provisions of the
Code, stock option grants to Participants may be either Incentive Stock Options
or Nonqualified Stock Options. In the case of an Incentive Stock Option, the per
share exercise price may be no less than 100% of the fair market value of a
share of Common Stock on the date of grant (110% in the case of an optionee who
owns, directly or indirectly, 10% or more of the outstanding voting power of all
classes of stock of the Company). In the case of a Nonqualified Stock Option,
the per share exercise price may be no less than 85% of the fair market value of
Common Stock on the date of grant. With respect to Incentive Stock Options, the
aggregate market value of the Common Stock for which one or more options granted
to any optionee may become exercisable during any one calendar year may not
exceed $100,000.
Under the Stock Incentive Plan, the purchase price of an option is
payable upon exercise (i) in cash, (ii) in nonforfeitable, unrestricted Common
Stock already owned by a Participant, (iii) through a sale and remittance
procedure by which a Participant delivers concurrent written instructions to a
Company-designated brokerage firm to immediately sell the purchased Common Stock
and remit to the Company sufficient funds to pay for the options exercised and
by which the Company delivers the certificates for the purchased Common Stock
directly to the brokerage firm, or (iv) in any other legal consideration that
the Compensation Committee may deem appropriate. For a Nonqualified Option, a
grant may also provide that payment may be made in the form of Restricted Shares
subject to risk of forfeiture or restrictions on transfer, provided that such
risks of forfeiture and restrictions on transfer shall apply to the same number
of shares of Common Stock received by the Participant as applied to the
forfeitable or restricted Common Stock surrendered by the Participant.
The Compensation Committee may, in its discretion, assist any
Participant in the exercise of one or more awards under the Stock Incentive
Plan, including the satisfaction of any federal, state, local and foreign income
and employment tax obligations arising therefrom, by extending a loan to such
Participant, by permitting the Participant to pay the exercise price in
installments or by granting a cash bonus to the Participant to permit the
Participant to pay tax obligations. Loans or installment payments may be
authorized either with or without collateral; however, the maximum loan or
installment available may not exceed the exercise price (less the par value of
such Common Stock) plus applicable federal, state and local income and
employment tax obligations incurred by the Participant in connection with the
acquisition. In addition, the Compensation Committee at its discretion may
forgive one or more loans extended to a Participant (but not that portion of a
loan equal to the par value of the Common Stock acquired).
Under the Stock Incentive Plan, a stock option grant may provide for
the automatic grant to a participant of Reload Option Rights upon the exercise
of Incentive Stock Options or Nonqualified Options, provided that the term of
any Reload Option Right shall not extend beyond the term of the option
originally exercised.
Incentive Stock Options. Incentive Stock Options, within the meaning of
Section 422 of the Code ("ISOs"), may be granted at the discretion of the
Compensation Committee under the Stock Incentive Plan. No provision of the Stock
Incentive Plan relating to ISOs may be interpreted or authority exercised so as
to disqualify the awards or the Stock Incentive Plan under Section 422 of the
Code.
Stock Appreciation Rights. Stock Appreciation Rights ("SARs") may be
granted under the Stock Incentive Plan either in tandem with an ISO or
Nonqualified Option, or free-standing. A Tandem SAR permits the Participant to
receive, upon exercise of the SAR, cash and/or Common Stock at the discretion of
the Participant or Compensation Committee in accordance with the grant, equal in
value to the excess of the then per share fair market value on the
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date of exercise over the per share purchase price of the ISO or Nonqualified
Option to which it relates multiplied by the number of shares as to which such
SAR is being exercised. Upon the exercise of a Tandem SAR, the related ISO or
Nonqualified Option shall be canceled to the extent of the number of shares as
to which the SAR is exercised, and upon the exercise of an ISO or Nonqualified
Option, the Tandem SAR relating to such option shall be canceled to the extent
of the number of shares as to which the ISO or Nonqualified Option is exercised.
A Free-standing SAR permits the Participant to receive, upon exercise of the
SAR, cash equal to the excess of the then per share fair market value of Common
Stock over the exercise price per share, multiplied times the equivalent number
of shares covered by the SAR.
Exercisability of ISOs, Nonqualified Options and SARs. The Compensation
Committee has the authority to determine the vesting and exercise provisions of
all awards granted under the Stock Incentive Plan. Special exercise rules apply,
as described below, for the exercisability of Incentive Stock Options after
termination of employment or permanent and total disability.
The Compensation Committee, in its sole discretion, may accelerate the
benefits of any award under the Stock Incentive Plan in the event of a Corporate
Transaction or Change of Control, with such acceleration rights being granted in
connection with an award pursuant to an agreement evidencing the same or at any
time after an award has been granted to a Participant. "Corporate Transaction"
means (i) a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to change the
state in which the Company is incorporated, (ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company in complete
liquidation or dissolution of the Company, or (iii) any reverse merger in which
the Company is the surviving entity but in which securities possessing more than
50% of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from the persons holding those
securities immediately prior to such merger. "Change of Control" means a change
in ownership or control of the Company either by (i) the direct or indirect
acquisition by any person or related group of persons other than the Company or
a person that directly or indirectly controls, is controlled by, or is under
common control with, the Company of beneficial ownership (within the meaning of
Rule 13d-3 of the Exchange Act) of securities possessing more than 50% of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's Stockholders or other
transaction, in each case which the Company's Board of Directors does not
recommend such Stockholders to accept; or (ii) a change in the composition of
the Company's Board of Directors over a period of 36 consecutive months or less
such that a majority of the Board members (rounded up to the next whole number)
ceases, by reason of one or more contested elections for Board membership, to be
comprised of individuals who either have been Board members continuously since
the beginning of such period or have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
continuously serving at the beginning of such period who were still in office at
the time such election or nomination was approved by the Board.
Restricted and Deferred Shares. The Stock Incentive Plan permits the
Compensation Committee to grant or sell shares of Common Stock to Participants
with a "substantial risk of forfeiture" within the meaning of Section 83 of the
Code for a period to be determined by the Compensation Committee as of the date
of the award. Each grant or sale will constitute an immediate transfer of the
ownership of Common Stock to the Participant in consideration of the performance
of services, permitting such Participant to dividend, voting and other ownership
rights, subject to the substantial risk of forfeiture and restrictions on
transfer adopted at the date of the award. The Common Stock subject to the
restrictions may not be sold, assigned, transferred, pledged or otherwise
encumbered, and any dividends or other distributions paid on the Restricted
Shares will be sequestered and reinvested on an immediate or deferred basis.
The Compensation Committee may also authorize grants or sales of
Deferred Shares to Participants. Each grant or sale of Deferred Shares will
constitute an agreement by the Company to issue or transfer Common Stock to a
Participant in the future in consideration of the performance of services,
subject to the fulfillment during the Deferral Period of such conditions as the
Committee may specify. Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment that is less
than the fair market value on the date of grant. During the Deferral Period, the
Participant will not have any rights of ownership in the Deferred Shares and
will not have the right to vote the Deferred Shares. The Compensation Committee
may, at its sole discretion, authorize the payment of dividend equivalents on
the Deferred Shares in cash or additional shares of Common Stock on a current,
deferred or contingent basis.
Performance Shares and Performance Units. Under the Stock Incentive
Plan, the Compensation Committee may award Performance Shares and/or Performance
Units, which shall become payable to a Participant upon the achievement of
specific performance objectives established by the Compensation Committee. Each
grant shall specify the number of available Performance Shares or Performance
Units, a Performance Period and Management Objectives that must be achieved by
the Participant, which may be described in terms of Company-wide objectives or
objectives that are related to the performance of the individual Participant or
the division, business unit, subsidiary, department or function with respect to
which the Participant is employed or provides consulting services.
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Restrictions on Resale. No person who acquires shares of Common Stock
under the Stock Incentive Plan may, during any period of time that such person
is an "affiliate" of the Company within the meaning of the rules and regulations
of the Securities and Exchange Commission under the Securities Act, offer to
sell such shares of Common Stock unless such offer and sale is made (i) pursuant
to an effective registration statement under the Securities Act, or (ii)
pursuant to an appropriate exemption from the registration requirements of the
Securities Act, such as are set forth in Rule 144 promulgated thereunder.
Under Section 16 of the Exchange Act, any person who is a beneficial
owner of more than 10% of any equity security of the Company registered under
the Exchange Act (such as the Common Stock of the Company), or an executive
officer or director of the Company, is deemed to be an "affiliate" of the
Company and may be liable to the Company for any profit realized from any sale
of Common Stock or any other equity security of the Company within a period of
less than six months before or after any purchase of an equity security of the
Company, irrespective of the intention on the part of such person in entering
into the transaction.
Federal Income Tax Considerations. The discussion that follows is a
summary, based upon current law, of some of the significant federal income tax
considerations relating to awards under the Stock Incentive Plan. The following
discussion does not address state, local or foreign tax consequences.
A Participant will not recognize taxable income upon the grant or
exercise of an ISO except under certain circumstances when the exercise price is
paid with already-owned shares of Common Stock that were acquired through the
previous exercise of an ISO. However, upon the exercise of an ISO, the excess of
the fair market value of the shares received on the date of exercise over the
exercise price of the shares will be treated as a tax preference item for
purposes of the alternative minimum tax. In order for the exercise of an ISO to
qualify for the foregoing tax treatment, the Participant generally must be an
employee of the Company from the date the ISO is granted through the date three
months before the date of exercise, except in the case of death or disability,
where special rules apply. The Company will not be entitled to any deduction
with respect to the grant or exercise of an ISO.
If shares acquired upon exercise of an ISO are not disposed of by the
Participant within two years from the date of grant or within one year after the
transfer of such shares to the Participant (the "ISO Holding Period"), then (i)
no amount will be reportable as ordinary income with respect to such shares by
the Participant and (ii) the Company will not be allowed a deduction in
connection with such ISO or the Common Stock acquired pursuant to the exercise
of the ISO. If a sale of such Common Stock occurs after the ISO Holding Period
has expired, then any amount recognized in excess of the exercise price will be
reportable as a long-term capital gain, and any amount recognized below the
exercise price will be reportable as a long-term capital loss. The exact amount
of tax payable on a long-term capital gain will depend upon the tax rates in
effect at the time of the sale. The ability of a Participant to utilize a
long-term capital loss will depend upon the Participant's other tax attributes
and the statutory limitations on capital loss deductions not discussed herein.
To the extent that alternative minimum taxable income was recognized on exercise
of the ISO, the basis in the Common Stock acquired may be higher for determining
a long-term capital gain or loss for alternative minimum tax purposes.
A "disqualifying disposition" will result if Common Stock acquired upon
the exercise of an ISO (except in the circumstances of a decedent's ISO as
described below) is sold before the ISO Holding Period has expired. In such
case, at the time of a disqualifying disposition (except in the case of a
Participant subject to restrictions under Section 16 of the Exchange Act, as
noted below), the Participant will recognize ordinary income in the amount of
the difference between the exercise price and the lesser of (i) the fair market
value on the date of exercise or (ii) the amount realized on disposition. If the
amount realized on the sale is less than the exercise price, then the
Participant will recognize no ordinary income, and the recognized loss will be
reportable as a short-term capital loss. The Participant will report as a
short-term capital gain, as applicable, any amount recognized in excess of the
fair market value on the date of exercise, and the Company will be allowed a
deduction on its federal income tax return in the year of the disqualifying
disposition equal to the ordinary income recognized by the Participant. To the
extent that alternative minimum taxable income was recognized on exercise of the
ISO, the basis in the Common Stock acquired may be higher for determining a
short-term capital gain or loss for alternative minimum tax purposes.
The general rules discussed above are different if the Participant
disposes of the shares of Common Stock in a disqualifying disposition in which a
loss, if actually sustained, would not be recognized by the Participant.
Examples of these dispositions include gifts or sales to related parties such as
members of the Participant's family and corporations or entities in which the
Participant owns a majority equity interest. In such circumstances, the
Participant would recognize ordinary income equal to the difference between the
exercise price of the Common Stock and the fair market value of the Common Stock
on the date of exercise. The amount of ordinary income would not be limited by
the price at which the Common Stock was actually sold by the Participant.
If the Participant retires or otherwise terminates employment with the
Company, other than by reason of death or permanent and total disability, an ISO
must be exercised within three months of such termination in order to be
eligible for the tax treatment of the ISOs described above, provided the ISO
Holding Period requirements are met.
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If a Participant terminates employment because of a permanent and total
disability, the ISO will be eligible for such treatment if it is exercised
within one year of the date of termination of employment, provided the ISO
Holding Period requirements are met. In the event of a Participant's death, the
ISO will be eligible for such treatment if exercised by the Participant's
legatees, personal representatives or distributees within one year from the date
of death, provided that the death occurred while the Participant was employed,
within three months of the date of termination of employment or within one year
following the date of termination of employment because of permanent and total
disability.
In general, a Participant to whom a Nonqualified Option is granted will
recognize no taxable income at the time of the grant. Upon exercise of a
Nonqualified Option, the Participant will recognize ordinary income in an amount
equal to the amount by which the fair market value of the Common Stock on the
date of exercise exceeds the exercise price of the Nonqualified Option, and the
Company will generally be entitled to a deduction equal to the ordinary income
recognized by the Participant in the year the Participant recognizes ordinary
income, subject to the limitations of Section 162(m) of the Code.
For purposes of the alternative minimum tax applicable to individuals,
the exercise of an ISO is treated in the same manner as the exercise of a
Nonqualified Option. Thus, a Participant must, in the year of option exercise,
include the difference between the exercise price and the fair market value of
the stock on the date of exercise in alternative minimum taxable income. The
alternative minimum tax is imposed upon an individual's alternative minimum
taxable income currently, but only to the extent that such tax exceeds the
taxpayer's regular income tax liability for the taxable year.
With regard to an SAR, a Participant will not recognize income when an
SAR is granted. Upon exercise of an SAR, the Participant will recognize as
ordinary income the amount of cash and/or the fair market value of any Common
Stock received. Shares of Common Stock received upon exercise of an SAR will
have a tax basis equal to their fair market value on the date received. On the
disposition of such shares, any additional gain or any loss recognized will be a
capital gain or loss, and will be a long-term gain or loss if the shares are
held for more than one year.
For Performance Shares, no taxable income is recognized by the
Participant upon the grant of a Performance Share award. The Participant must
recognize as ordinary income the fair market value of any shares of Common Stock
actually delivered in accordance with the terms of the Performance Share award.
Special rules apply to affiliates of the Company. On the disposition by the
Participant of any Common Stock received pursuant to a Performance Share award,
any additional gain or loss recognized will be a capital gain or loss, and will
be a long-term gain or loss if the shares are held for more than one year.
For Performance Units, if payments are made in cash, the Participant
incurs ordinary income when payment is made, and the Company will be entitled to
a deduction equal to the ordinary income recognized by the Participant in the
year the Participant recognizes ordinary income.
With regard to Restricted Stock, neither the Company nor the
Participant receiving a Restricted Stock Award will realize any federal tax
consequences at the time the award is granted. If, however, the Participant
makes a Section 83(b) election under the Code within 30 days of the date of the
grant, then special rules will apply. A Participant who is granted Restricted
Stock may make a Section 83(b) election, within 30 days of the grant, to have
the grant taxed as compensation income at the date of receipt, with the result
that any future appreciation or depreciation in the value of the shares of
Common Stock granted shall be taxed as a capital gain or loss upon a subsequent
sale of the Common Stock. The Company will be entitled to deduct as a
compensation expense the same amount as the Participant is required to recognize
as ordinary income in the same year as the Participant includes the amount in
income for federal tax purposes, subject to the limitations set forth in Section
162(m) of the Code. If a Participant does not make a Section 83(b) election,
then the grant will be taxed as compensation income at the fair market value on
the date the restrictions lapse. If a Section 83(b) election is made and the
Common Stock is subsequently forfeited, a loss is not allowed.
With regard to Deferred Shares, no taxable income is recognized by the
Participant at the time of the grant. The Participant must recognize as ordinary
income the difference between the fair market value of any shares of Common
Stock actually delivered in accordance with the terms of the Deferred Shares
grant and the purchase price, if any, paid by the Participant for such shares.
On the disposition by the Participant of any Common Stock received under a
Deferred Shares grant, any additional gain or any loss recognized will be a
capital gain or loss, and will be a long-term gain or loss if the shares are
held for more than one year. The Company will be entitled to a deduction equal
to the amount of ordinary income recognized by the Participant, subject to the
limitations of Section 162(m) of the Code.
The Company is required to withhold certain income taxes from
Participants upon exercises of Nonqualified Options, SARs and Performance Shares
or the lapsing of restrictions or time periods for Restricted Shares or Deferred
Shares. The Company will be entitled to a business expense deduction for both
financial statement and federal income
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tax purposes equal to the ordinary income recognized by the Participant in the
year the Participant recognizes ordinary income from the exercise of
Nonqualified Options, SARs and Performance Shares.
In addition to the foregoing federal tax consequences, the exercise,
ultimate sale or other disposition of awards by Participants will in most cases
be subject to state income taxation.
New Plan Benefits
Because awards under the Stock Incentive Plan are in the discretion of
the Compensation Committee, the benefits to be received by Participants as a
result of the Plan are not presently determinable.
Voting Requirements
Each holder of Common Stock is entitled to one vote per share held.
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote and present in person or by
proxy at the Annual Meeting is required for approval of Proposal Two. Proxies
solicited by the Board of Directors will be voted for approval of the Proposal
Two. Stockholders are not entitled to cumulate votes.
FOR THIS PURPOSE, A STOCKHOLDER VOTING THROUGH A PROXY WHO ABSTAINS WITH RESPECT
TO APPROVAL OF PROPOSAL TWO IS CONSIDERED TO BE PRESENT AND ENTITLED TO VOTE ON
THE APPROVAL OF PROPOSAL TWO AT THE MEETING, AND IS IN EFFECT A NEGATIVE VOTE,
BUT A STOCKHOLDER (INCLUDING A BROKER) WHO DOES NOT GIVE AUTHORITY TO A PROXY TO
VOTE ON THE APPROVAL OF PROPOSAL TWO SHALL NOT BE CONSIDERED PRESENT AND
ENTITLED TO VOTE ON PROPOSAL TWO.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
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PROPOSAL THREE:
ELECTION OF DIRECTORS
Nominees
The Board of Directors currently consists of four members holding seats
to serve as members until the next Annual Meeting of Stockholders or until their
respective successors are duly elected and qualified, unless they earlier resign
or are removed from office. The Company's Bylaws presently provide for a Board
of Directors of not less than three (3) nor more than fifteen (15) in number,
with the exact number to be fixed as provided in the Company's Bylaws.
The Board of Directors proposes that Gerald J. Colangelo, David H.
Eaton, Mel L. Shultz, Richard H. Dozer, Mitchell S. Vance and Dale M. Jensen be
elected to serve as the members of the Board of Directors. All but Mr. Vance are
currently serving as directors. A brief description of the business experience
of each nominee is set forth below in the table under the heading "Directors and
Executive Officers." Unless otherwise instructed, the persons named in the
accompanying proxy will vote FOR the election of such nominees. All of the
nominees have consented to being named herein and have indicated their intention
to serve if elected. If for any reason any nominee should become unable to serve
as a director, the accompanying proxy may be voted for the election of a
substitute nominee designated by the Board of Directors.
Voting Requirements
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock entitled to vote and present in person or by proxy at the Annual
Meeting is required for approval of the election of directors. Proxies solicited
by the Board of Directors will be voted for approval of the election of
directors. Stockholders are entitled to cumulate their votes with respect to the
election of directors and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
Stockholder's shares are entitled, or may distribute their votes on the same
principle among as many candidates as they choose, provided that votes cannot be
cast for more than the total number of directors to be elected. In order to
cumulate votes, at least one Stockholder must announce, prior to the casting of
votes for the election of directors, that he or she intends to cumulate votes.
As is indicated in the proxy, discretionary power to cumulate votes is being
solicited. With regard to the election of directors, votes may be cast in favor
of or withheld from each nominee.
FOR THIS PURPOSE, A STOCKHOLDER VOTING THROUGH A PROXY WHO ABSTAINS WITH RESPECT
TO APPROVAL OF THE ELECTION OF DIRECTORS IS CONSIDERED TO BE PRESENT AND
ENTITLED TO VOTE ON THE APPROVAL OF THE ELECTION OF DIRECTORS AT THE MEETING,
AND IS IN EFFECT A NEGATIVE VOTE, BUT A STOCKHOLDER (INCLUDING A BROKER) WHO
DOES NOT GIVE AUTHORITY TO A PROXY TO VOTE ON THE ELECTION OF DIRECTORS SHALL
NOT BE CONSIDERED PRESENT AND ENTITLED TO VOTE ON THE ELECTION OF DIRECTORS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL THREE.
Directors and Executive Officers
The following table sets forth certain information with respect to the
directors, director nominee and executive officers of the Company as of March
31, 1998.
Name Age Position, Tenure and Experience
- ---- --- -------------------------------
David H. Eaton 62 Mr. Eaton has served as Chairman of the Board of Directors of
the Company since February 29, 1988, and as its Chief Executive
Officer since June 1, 1998. Mr. Eaton serves as a Director of
Stratford American Resource Corporation ("SARC"), Stratford
American Energy Corporation ("SAEC"), Stratford American Gold
Venture Corporation ("SAGVC") and Stratford American
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Oil and Gas Corporation ("SAOGC"), as a Director and Chief
Executive Officer of Stratford American Car Rental Systems, Inc.
("SCRS"), and as a Director and the President of Stratford
American Properties Corporation ("SAPC").
Gerald J. Colangelo 58 Mr. Colangelo has been a Director of the Company since April
26, 1989. He is also a Director of SCRS, SAPC and SAGVC. Mr.
Colangelo currently is the President and Chief Executive
Officer of the Phoenix Suns of the National Basketball
Association, and has been the General Manager of the Suns since
their inception in 1968. Additionally, Mr. Colangelo currently
serves as the managing general partner of the Arizona
Diamondbacks, a new Major League Baseball franchise, and has
served in that position since its inception in February 1994.
Richard H. Dozer 41 Mr. Dozer has been a Director of the Company since March 25,
1998. Mr. Dozer joined the Phoenix Suns Professional
Basketball franchise in July 1987 as Business Manager, was
promoted to Vice President and Chief Operating Officer in June
of 1989, and served in that position until March 9, 1995, when
he was named President of the Arizona Diamondbacks, where he
serves today.
Dale M. Jensen 48 Mr. Jensen has been a Director of the Company since March 25,
1998. Mr. Jensen was the co-founder and former Executive Vice
President of Information Technology, Inc., a computer software
provider to banks and savings and loan associations. Mr.
Jensen retired from that position when Information Technology,
Inc. was sold in 1995 and has been managing his personal
investments since that time. Mr. Jensen's current investment
holdings include ranch and farm properties, oil and gas
development and exploration, real estate development, including
world class golf courses, hotels, restaurants and convention
centers, High Five Entertainment and an interest in the Phoenix
Suns and the Arizona Diamondbacks.
Mel L. Shultz 47 Mr. Shultz has been a Director and the President of the Company
since May 20, 1987. Prior to 1987, Mr. Shultz was involved on
his own behalf in real estate development and oil and gas
investment. Mr. Shultz is also a Director and the President of
SCRS, SARC, SAEC, SAGVC, and SAOGC, and a Director of SAPC.
Mitchell S. Vance 35 Mr. Vance is a nominee to become a director. From February
1993 to March 1998, Mr. Vance was a Partner of Pacific
Mezzanine Investors, a private investment firm based in Newport
Beach, California, which invests in private equity and debt
securities primarily for leveraged buyouts and for late-stage
venture investments, and manages over $350 million of capital
for eight institutional limited partners. From 1990 to 1993,
Mr. Vance was a General Partner of Tessler, Geisz and Vance, a
New York based private leveraged buyout firm. Previously, Mr.
Vance was an associate with the leveraged buyout firm of
Levine, Tessler, Leichtman & Company in Beverly Hills,
California and he began his career as an investment manager
with First Westinghouse Capital Corporation in Pittsburgh,
Pennsylvania.
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Mr. Vance is currently or has been a board member of Suiza
Foods Corporation, Smarte Carte, Inc. And U.S. Vantage Corp.
Timothy A. Laos 44 Mr. Laos has been the Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company since March 1995. From
1992 through March 1995, Mr. Laos served as the corporate
controller for the Haworth Corporation, a local real estate
developer. Mr. Laos is also the Vice President, Treasurer and
Secretary of SCRS, SARC, SAEC, SAGVC, SAPC and SAOGC, and also
serves as a Director of SAPC. Mr. Laos devotes approximately
half of his time to the activities of the Company and SCRS,
SARC, SAEC, SAGVC, SAPC and SADGC
Board Meetings and Committees of the Board of Directors
During the fiscal year ended December 31, 1997, the Board of Directors
met 1 time. During the fiscal year ended December 31, 1997, all incumbent
directors attended 75% or more of the aggregate of the total number of meetings
of the Board of Directors (held during the period for which such person was a
director).
The Board of Directors, as a whole, serves as the Audit Committee. In
that capacity, the Board of Directors meets to review audit plans and
activities, reviews the Company's system of internal financial controls,
approves all significant fees for audit and non-audit services provided by the
independent auditors, and recommends the annual selection of independent
auditors.
The Company does not have standing nominating or compensation
committees of the Board of Directors, and the functions typically performed by
those kinds of committees are performed by the full Board of the Company.
Compensation of Directors
The Company generally does not compensate its directors for services as
such, but reimburses them for reasonable expenses involved in attending
meetings. In addition, the directors will be eligible for awards under the Stock
Incentive Plan described in Proposal Two, if it is approved by the Stockholders.
Executive Compensation
The following table sets forth the compensation paid to the Chief
Executive Officer and the President of the Company (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during the periods indicated. Compensation for each of the Company's other
executive officers was less than $100,000 during such periods.
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Summary Compensation Table
Annual Compensation
-------------------
----------------------------------------------
Name and Principal Year Ended Salary ($)(1) Bonus ($)(2) Other Annual
------------------- ---------- ------------- --------- ------------
Position Compensation(3)
-------- ---------------
David H. Eaton 1997 $75,000 -- --
Chief Executive Officer 1996 $75,000 -- --
1995 $75,000 -- $31,250
Mel L. Shultz 1997 $75,000 -- --
President 1996 $75,000 -- --
1995 -- $150,000 --
- ----------
(1) Mr. Shultz elected not to receive a salary during 1995.
(2) Subsequent to the sale of the University Center Project in 1995, Mr.
Shultz was paid a bonus for his performance in directing the sale and for his
work in other various projects for the Company.
(3) Mr. Eaton elected to defer payment of a portion of his salary during
1994. The amount, recorded as a liability in the year earned, was completely
paid in 1995 as reflected above.
Option Grants
The Company had not previously adopted any stock option plan and has
not made any grants pursuant to the proposed Stock Incentive Plan, the terms of
which are summarized in connection with Proposal Two of this Proxy Statement.
The Company did not grant any stock options to the Named Executive Officers
during the fiscal year ended December 31, 1997.
Aggregated Option Exercises and Fiscal Year-End Option Values
The following table sets forth information with respect to the number
of unexercised options held by the Named Executive Officers at December 31,
1997. None of such options are in-the-money and no Named Executive Officer
exercised any options during the fiscal year ended December 31, 1997.
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Name Shares Acquired Value Realized Number of Value of
on Exercise ($) Securities Unexercised
(#) Underlying Options In-the-Money
at FY-End (#) Options at
Exercisable/ FY-End ($)
Unexercisable Exercisable/
Unexercisable
- ---------------- -------------- --------------- ------------------ -------------
Mel L. Shultz 3,000,000 $90,000 -- --
-17-
Termination of Employment and Change of Control Agreements
The Company has no compensatory plans or arrangements that will result
from the termination of employment of any executive officer or other employee or
from a change of control of the Company or a change in any employee's
responsibilities following a change in control.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and reports of changes in ownership of the Company's equity
securities. Officers, directors and greater than 10% stockholders are required
by SEC regulations to provide the Company with copies of all Section 16(a)
reports they file. To the Company's knowledge, based solely upon a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, the Company believes that all Section 16(a)
filing requirements applicable to the Company's officers, directors and greater
than 10% stockholders were satisfied during the fiscal year ended December 31,
1997.
Certain Transactions
All transactions between the Company and its officers, directors,
principal shareholders or affiliates have been and will be on terms no less
favorable to the Company than can be obtained from unaffiliated third parties
and have been and will be approved by a majority of the disinterested directors
of the Company.
Guarantee. David H. Eaton, Mel L. Shultz and Gerald J. Colangelo, in
their capacities as the officers and/or directors of SAPC, and as previous
direct shareholders of the Company, personally guaranteed an obligation owed by
SAPC. The Company executed an Indemnification Agreement to indemnify the
guarantors with respect to the guarantee. The terms of the guarantee were as
follows:
Guarantors Amount of Debt Payee
---------- -------------- -----
David H. Eaton, Mel L. Shultz and $300,000 due April 1997, interest Bank of America
Gerald J. Colangelo due quarterly commencing August 1994
at lender's reference rate,
unsecured.
This obligation, including accrued interest, was paid in full on April 30, 1997.
Promissory Note. In March 1990, the Company executed a convertible
debenture note (the "Debenture") in the principal amount of $213,691 payable to
David H. Eaton. The Debenture bore interest at the rate of 12% per annum. The
Debenture was originally due and payable in full on April 15, 1991, but
contained provisions which automatically extended the term for successive 30-day
periods until Mr. Eaton demanded payment in full. Alternatively, Mr. Eaton was
entitled to convert the Debenture to shares of the Company's common stock at the
conversion price of 5/32 which was the closing price of the Company's common
stock on the date the liability to Mr. Eaton arose. The Debenture was
unanimously approved by the Board of Directors of the Company, with Mr. Eaton
abstaining.
In February, 1998, the Company and Mr. Eaton agreed to convert the
Debenture into a promissory note (the "Note") in the principal amount of
$343,240. The Note bears interest at the rate of 12% per annum and requires
monthly payments of $6,000, which commenced on March 1, 1998. Mr. Eaton has the
option on February 1, 1999, or at any time thereafter, to demand payment in full
of all principal and accrued interest due under the Note. The conversion of the
Debenture for the Note and the terms of the Note were unanimously approved by
the Board of Directors of the Company, with Mr. Eaton abstaining.
-18-
PROPOSAL FOUR:
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Previous Independent Public Accountants
On February 14, 1996, the Company dismissed Price Waterhouse LLP as its
independent accounts. The Board of Directors, as a whole, serves as the
Company's Audit Committee. In that capacity, the Board of Directors participated
in and approved the decision to change independent accountants.
The report of Price Waterhouse LLP on the financial statements for the
fiscal year ended December 31, 1994 contained no adverse opinion or disclaimer
of opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principle. The report of Price Waterhouse LLP on the financial
statements for the fiscal year ended December 31, 1993, contained no adverse
opinion or disclaimer but did contain an explanatory paragraph as to
uncertainty, stating that the Company had a net capital deficiency raising
substantial doubt about the Company's ability to continue as a going concern.
In connection with its audits for the two most recent years prior to
the dismissal and through February 14, 1996, there have been no disagreements
with Price Waterhouse LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of Price Waterhouse LLP would
have caused them to make reference thereto in their report on the financial
statements for such years.
The Company received from Price Waterhouse LLP a letter addressed to
the SEC stating whether or not it agrees with the above statements. A copy of
such letter, dated February 15, 1996, was filed as Exhibit 16.1 to the Form 8-K
which was filed with the SEC on February 22, 1996.
The Company engaged KPMG Peat Marwick LLP as its new independent
accountants as of February 14, 1996.
Ratification of Appointment of Independent Public Accountants
The Company's Board of Directors has selected, and is submitting to the
Stockholders for ratification, the appointment of KPMG Peat Marwick LLP to serve
as independent public accountants to audit the financial statements of the
Company for the fiscal year ending December 31, 1998 and to perform other
accounting services as may be requested by the Company. KPMG Peat Marwick LLP
has acted as independent public accountants for the Company since its
appointment effective February 14, 1996.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting, will be available to respond to appropriate questions, and
will have the opportunity to make a statement if they desire to do so.
Although it is not required to do so, the Board of Directors has
submitted the selection of KPMG Peat Marwick LLP to the Stockholders for
ratification.
Voting Requirements
Each holder of Common Stock is entitled to one vote per share held.
The affirmative vote of holders of a majority of the outstanding shares
of Common Stock of the Company entitled to vote and present in person or by
proxy at the Annual Meeting is required for approval of Proposal Four. Proxies
solicited by the Board of Directors will be voted for approval of Proposal Four.
Stockholders are not entitled to
-19-
cumulate votes.
FOR THIS PURPOSE, A STOCKHOLDER VOTING THROUGH A PROXY WHO ABSTAINS WITH RESPECT
TO APPROVAL OF PROPOSAL FOUR IS CONSIDERED TO BE PRESENT AND ENTITLED TO VOTE ON
THE APPROVAL OF PROPOSAL FOUR AT THE MEETING, AND IS IN EFFECT A NEGATIVE VOTE,
BUT A STOCKHOLDER (INCLUDING A BROKER) WHO DOES NOT GIVE AUTHORITY TO A PROXY TO
VOTE ON THE APPROVAL OF PROPOSAL FOUR SHALL NOT BE CONSIDERED PRESENT AND
ENTITLED TO VOTE ON PROPOSAL FOUR.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL FOUR.
-20-
OTHER BUSINESS
The Company's Board of Directors is not aware of any other business to
be considered or acted upon at the Annual Meeting of the Stockholders other than
those described above. If other business requiring a vote of Stockholders is
properly presented at the meeting, proxies will be voted in accordance with the
judgment on such matters of the person or persons acting as proxy. If any matter
not appropriate for action at the Annual Meeting should be presented, the
holders of the proxies will vote against consideration thereof or action
thereon.
STOCKHOLDER PROPOSALS
The Company welcomes comments or suggestions from its Stockholders. If
a Stockholder desires to have a proposal formally considered at the 1999 Annual
Meeting of Stockholders, and evaluated by the Board for possible inclusion in
the Proxy Statement for that meeting, the proposal (which must comply with the
requirements of Rule 14a-8 promulgated under the Exchange Act) must be received
in writing by the Secretary of the Company at the address set forth on the first
page hereof on or before January 30, 1999.
ANNUAL REPORT
The Company's Annual Report to Stockholders, with audited financial
statements, accompanies this Proxy Statement and was mailed this date to all
Stockholders of record as of the Record Date. The Company will furnish to any
Stockholder submitting a request, without charge, a copy of the Company's Annual
Report on Form 10-KSB. Any exhibit to the Annual Report on Form 10-KSB will be
furnished to any Stockholder of the Company. The fee for furnishing a copy of
any exhibit will be 25 cents per page plus $3.00 for postage and handling.
By Order of the Board of Directors,
Timothy A. Laos, Secretary
Phoenix, Arizona
May 30, 1998
-21-
EXHIBIT 1
---------
The first paragraph of Article IV of the Articles of Incorporation of
Stratford American Corporation is amended to read as follows:
IV.
AUTHORIZED CAPITAL
------------------
"1. Aggregate Capital. The aggregate number of shares which the
corporation shall have authority to issue is One Hundred Fifty
Million (150,000,000) consisting of One Hundred Million
(100,000,000) common shares, one cent ($0.01) par value (the
"Common Stock") and Fifty Million (50,000,000) preferred
shares, one cent ($0.01) par value. Each fifteen (15) shares
of the Corporation's Common Stock issued as of the date and
time immediately following the filing of this Amendment to the
Articles of Incorporation (the "Split Effective Date") shall
be automatically changed and reclassified, as of the Split
Effective Date and without further action, into one (1) fully
paid and non-assessable share of the Corporation Common Stock;
provided, however, that any fractional interest resulting from
such change and classification shall be rounded upward to the
nearest whole share."
EXHIBIT 2
---------
STRATFORD AMERICAN CORPORATION
1998 STOCK INCENTIVE PLAN
1. Purposes. The purposes of this Plan are to attract, retain and
motivate officers and other key employees of and consultants to Stratford
American Corporation (the "Corporation") and its Subsidiaries and to provide
such persons with incentives and rewards for superior performance more directly
linked to the profitability of the Corporation's business and increases in
stockholder value.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section 5 of
this Plan, including a Free-standing Appreciation Right and a Tandem
Appreciation Right.
"Base Price" means the price to be used as the basis for determining
the Spread upon the exercise of a Free-standing Appreciation Right.
"Board" means the Board of Directors of the Corporation.
"Change of Control" means a change in ownership or control of the
Corporation effected through either of the following transactions:
a. the direct or indirect acquisition by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than 50% of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders or other
transaction, in each case which the Board does not recommend such stockholders
to accept; or
b. a change in the composition of the Board over a period of
36 consecutive months or less such that a majority of the Board members (rounded
up to the next whole number) ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who either (i)
have been Board members continuously since the beginning of such period or (ii)
have been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (i) who were
still in office at the time such election or nomination was approved by the
Board.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" means the committee described in Section 15(a) of this
Plan.
"Common Shares" means (i) shares of the Common Stock, par value $.01
per share, of the Corporation and (ii) any security into which Common Shares may
be converted by reason of any transaction or event of the type referred to in
Section 11 of this Plan.
"Corporate Transaction" means any of the following stockholder-approved
transactions to which the Corporation is a party:
a. a merger or consolidation in which the Corporation is not
the surviving entity, except for a transaction the principal purpose of which is
to change the state in which the Corporation is incorporated,
b. the sale, transfer or other disposition of all or
substantially all of the assets of the
1
Corporation in complete liquidation or dissolution of the Corporation, or
c. any reverse merger in which the Corporation is the
surviving entity but in which securities possessing more than 50% of the total
combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such merger.
"Date of Grant" means the date specified by the Committee on which a
grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares shall become
effective, which shall not be earlier than the date on which the Committee takes
action with respect thereto.
"Deferral Period" means the period of time during which Deferred Shares
are subject to deferral limitations under Section 7 of this Plan.
"Deferred Shares" means an award pursuant to Section 7 of this Plan of
the right to receive Common Shares at the end of a specified Deferral Period.
"Effective Date" means the effective date of this Plan as provided in
Section 18(a).
"Eligible Director" means a non-employee director identified in Section
21(a).
"Free-standing Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is not granted in tandem with an Option
Right or similar right.
"Incentive Stock Option" means an Option Right that is intended to
qualify as an "incentive stock option" under Section 422 of the Code or any
successor provision thereto.
"Management Objectives" means the achievement or performance objectives
established pursuant to this Plan for Participants who have received grants of
Performance Shares or Performance Units or, when so determined by the Committee,
Restricted Shares.
"Market Value per Share" means the fair market value of the Common
Shares as determined by the Committee in accordance with the following
provisions:
a. If the Common Shares are not at the time listed or admitted
to trading on any national securities exchange but are traded on the NASDAQ
National Market System, the Market Value per Share shall be the closing selling
price per share on the date in question, as such price is reported by the
National Association of Securities Dealers through the NASDAQ National Market
System or any successor system. If there is no reported closing selling price
for the Common Shares on the date in question, then the closing selling price on
the last preceding date for which such quotation exists shall be determinative
of the Market Value per Share.
b. If the Common Shares are at the time listed or admitted to
trading on any national securities exchange, then the Market Value per Share
shall be the closing selling price per share on the date in question on the
securities exchange determined by the Committee to be the primary market for the
Common Shares, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Shares on
such exchange on the date in question, then the Market Value per Share shall be
the closing selling price on the exchange on the last preceding date for which
such quotation exists.
c. If the Common Shares are on the date in question neither
listed nor admitted to trading on any national securities exchange nor traded on
the NASDAQ National Market System, then the Market Value per Share on such date
shall be determined by the Committee after taking into account such factors as
the Committee shall deem appropriate.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Nonqualified Option" means an Option Right that is not intended to
qualify as a Tax-qualified Option.
"Optionee" means the person so designated in an agreement evidencing an
outstanding Option Right.
2
"Option Price" means the purchase price payable upon the exercise of an
Option Right.
"Option Right" means the right to purchase Common Shares from the
Corporation upon the exercise of a Nonqualified Option or a Tax-qualified Option
granted pursuant to Section 4 of this Plan.
"Participant" means a person who is selected by the Committee to
receive benefits under this Plan and (i) is at that time an officer, including
without limitation an officer who may also be a member of the Board, or other
key employee of or a consultant or advisor to the Corporation or any Subsidiary,
(ii) is at that time a member of the Board, or (iii) has agreed to commence
serving in any capacity described in (i) or (ii).
"Performance Period" means, in respect of a Performance Share or
Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating thereto are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one Common Share awarded pursuant to Section 8 of this Plan.
"Performance Unit" means a bookkeeping entry that records a unit
equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Reload Option Rights" means additional Option Rights automatically
granted to an Optionee upon the exercise of Option Rights pursuant to Section
4(g) of this Plan.
"Restricted Shares" means Common Shares granted or sold pursuant to
Section 6 of this Plan as to which neither the substantial risk of forfeiture
nor the restrictions on transfer referred to in Section 6 hereof has expired.
"Rule 16b-3" means Rules 16b-3, as promulgated and amended from time to
time by the Securities and Exchange Commission under the 1934 Act, or any
successor rule to the same effect.
"Spread" means, in the case of a Free-standing Appreciation Right, the
amount by which the Market Value per Share on the date when the Appreciation
Right is exercised exceeds the Base Price specified therein or, in the case of a
Tandem Appreciation Right, the amount by which the Market Value per Share on the
date when the Appreciation Right is exercised exceeds the Option Price specified
in the related Option Right.
"Subsidiary" means a corporation, partnership, joint venture, limited
liability company, unincorporated association or other entity in which the
Corporation has a direct or indirect ownership or other equity interest;
provided, however, for purposes of determining whether any person may be a
Participant for purposes of any grant of Incentive Stock Options, "Subsidiary"
means any corporation in which the Corporation owns or controls directly or
indirectly more than 50% of the total combined voting power represented by all
classes of stock issued by such corporation at the time of the grant.
"Tandem Appreciation Right" means an Appreciation Right granted
pursuant to Section 5 of this Plan that is granted in tandem with an Option
Right or any similar right granted under any other plan of the Corporation.
"Tax-qualified Option" means an Option Right that is intended to
qualify under particular provisions of the Code, including without limitation an
Incentive Stock Option.
3. Shares and Performance Units Available under the Plan.
(a) Subject to adjustment as provided in Section 11 of this
Plan, the total number of Common Shares available for grant under the Plan in
each calendar year shall be equal to 3% of the total number of Common Shares
outstanding as of the first day of each such calendar year for which the Plan is
in effect, commencing with January 1, 1998; provided that any Common Shares
available for grant in any particular calendar year which are not, in fact,
granted in such year shall not be added to the Common Shares available for grant
in any subsequent calendar year. In no event shall the aggregate number of
Common Shares covered by grants and awards to any one individual participating
in the Plan exceed 500,000 shares per year or 2,000,000 shares over the term of
the Plan. Common Shares awarded under this Plan may be Common Shares of original
issuance or Common Shares held in treasury or a combination thereof. For the
purposes of this Section 3(a):
3
(i) Upon payment in cash of the benefit provided by
any award granted under this Plan, any Common Shares that were covered by that
award shall again be available for issuance or transfer hereunder.
(ii) Common Shares covered by any award granted under
this Plan shall be deemed to have been issued or transferred, and shall cease to
be available for future issuance or transfer in respect of any other award
granted hereunder, at the earlier of the time when they are actually issued or
transferred or the time when dividends or dividend equivalents are paid thereon;
provided, however, that Restricted Shares shall be deemed to have been issued or
transferred at the earlier of the time when they cease to be subject to a
substantial risk of forfeiture or the time when dividends are paid thereon.
(b) In no event shall the aggregate Appreciation Rights which
may be granted to any one individual participating in the Plan exceed 500,000
Appreciation Rights per year or 2,000,000 over the term of the Plan.
(c) The number of Performance Units that may be granted under
this Plan shall not in the aggregate exceed 3,000,000 Performance Units that are
granted under this Plan and are paid in Common Shares or are not earned by the
Participant at the end of the Performance Period shall be available for future
grants of Performance Units hereunder.
4. Option Rights. The Committee may from time to time authorize grants
to Participants of options to purchase Common Shares upon such terms and
conditions as the Committee may determine in accordance with the following
provisions:
(a) Each grant shall specify the number of Common Shares to
which it pertains; provided, however, that no Participant shall be granted
Option Rights for more than 500,000 Common Shares in any one fiscal year of the
Corporation, subject to adjustment as provided in Section 11 of this Plan.
(a) Each grant shall specify an Option Price per Common Share,
which, in the case of Incentive Stock Options, shall be equal to or greater than
the Market Value per Share on the Date of Grant and which, in the case of
Nonqualified Options, shall be equal to or greater than 85% of the Market Value
per Share on the Date of Grant.
(b) With respect to Incentive Stock Options, the aggregate
Market Value (determined as of the respective Date or Dates of Grant) of the
Common Shares for which one or more options granted to any Optionee under this
Plan may for the first time become exercisable as Incentive Stock Options under
the federal tax laws during any one calendar year shall not exceed $100,000. To
the extent that the Optionee holds two or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Stock Options
under the federal tax laws shall be applied on the basis of the order in which
such options are granted. Should the number of Common Shares for which any
Incentive Option first becomes exercisable in any calendar year exceed the
applicable $100,000 limitation, then that option may nevertheless be exercised
in such calendar year for the excess number of shares as a Nonqualified Option
under the federal tax laws. In addition, if any individual to whom an Incentive
Stock Option is granted is the owner of stock (as determined under Section
424(d) of the Code) possessing 10% or more of the total combined voting power of
all classes of stock of the Corporation or any Subsidiary, then the exercise
price per share shall not be less than 110% of the Market Value per Share on the
Date of Grant, and the option term shall not exceed five years, measured from
the Date of Grant.
(c) Each grant shall specify the form of consideration to be
paid in satisfaction of the Option Price and the manner of payment of such
consideration, which may include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Corporation, (ii) nonforfeitable,
unrestricted Common Shares, which are already owned by the Optionee and have a
value at the time of exercise that is equal to the Option Price, (iii) any other
legal consideration that the Committee may deem appropriate, including without
limitation any form of consideration authorized under Section 4(e) below, on
such basis as the Committee may determine in accordance with this Plan, and (iv)
any combination of the foregoing.
(d) Any grant of a Nonqualified Option may provide that
payment of the Option Price may also be made in whole or in part in the form of
Restricted Shares or other Common Shares that are subject to risk of forfeiture
or restrictions on transfer. Unless otherwise determined by the Committee on or
after the Date of Grant, whenever any Option Price is paid in whole or in part
by means of any of the forms of consideration specified in this Section 4(e),
the Common Shares received by the Optionee upon the exercise of the Nonqualified
Option shall be
4
subject to the same risks of forfeiture or restrictions on transfer as those
that applied to the consideration surrendered by the Optionee; provided,
however, that such risks of forfeiture and restrictions on transfer shall apply
only to the same number of Common Shares received by the Optionee as applied to
the forfeitable or restricted Common Shares surrendered by the Optionee.
(e) Each grant shall provide for deferred payment of the
Option Price through a sale and remittance procedure by which a Participant
shall provide concurrent irrevocable written instructions to (i) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased Common Shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate Option
Price payable for the purchased Common Shares, and (ii) the Corporation to
deliver the certificates for the purchased Common Shares directly to such
brokerage firm to complete the sale transaction.
(f) Any grant may provide for the automatic grant to the
Optionee of Reload Option Rights upon the exercise of Option Rights, including
Reload Option Rights for Common Shares or any other noncash consideration
authorized under Sections 4(d) and (e) above; provided, however, that the term
of any Reload Option Right shall not extend beyond the term of the Option Right
originally exercised.
(g) Successive grants may be made to the same Optionee
regardless of whether any Option Rights previously granted to the Optionee
remain unexercised.
(h) Each grant shall specify the period or periods of
continuous employment, or continuous engagement of the consulting services, of
the Optionee by the Corporation or any Subsidiary that are necessary before the
Option Rights or installments thereof shall become exercisable.
(i) Option Rights granted pursuant to this Section 4 may be
Nonqualified Options or Tax-qualified Options or combinations thereof.
(j) Any grant of a Nonqualified Option may provide for the
payment to the Optionee of a dividend equivalents thereon in cash or Common
Shares on a current, deferred or contingent basis, or the Committee may provide
that any dividend equivalents shall be credited against the Option Price.
(k) No Option Right granted pursuant to this Section 4 may be
exercised more than 10 years from the Date of Grant.
(l) An Optionee shall have no stockholder rights with respect
to Common Shares covered by any option until such person shall have exercised
the option and paid the exercise price for the purchased shares.
(m) The Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected Participant, the
cancellation of any or all outstanding Option Rights under this Section 4 and
grant in substitution new Option Rights under the Plan covering the same or
different numbers of Common Shares but with an exercise price not less than (i)
85% of the Market Value per Share on the new Date of Grant or (ii) 100% of the
Market Value per Share on the new Date of Grant in the case of Incentive Stock
Options.
(n) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Optionee and shall contain such terms and provisions as the
Committee may determine consistent with this Plan.
5. Appreciation Rights. The Committee may also authorize grants to
Participants of Appreciation Rights. An Appreciation Right shall be a right of
the Participant to receive from the Corporation an amount, which shall be
determined by the Committee and shall be expressed as a percentage (not
exceeding 100%) of the Spread at the time of the exercise of an Appreciation
Right. Any grant of Appreciation Rights under this Plan shall be upon such terms
and conditions as the Committee may determine in accordance with the following
provisions:
(a) Any grant may specify that the amount payable upon the
exercise of an Appreciation Right may be paid by the Corporation in cash, Common
Shares or any combination thereof and may (i) either grant to the Participant or
reserve to the Committee the right to elect among those alternatives or (ii)
preclude the right of the Participant to receive and the Corporation to issue
Common Shares or other equity securities in lieu of cash; provided, however,
that no form of consideration or manner of payment that would cause Rule 16b-3
to cease to apply to this Plan shall be permitted.
5
(b) Any grant may specify that the amount payable upon the
exercise of an Appreciation Right shall not exceed a maximum specified by the
Committee on the Date of Grant.
(c) Any grant may specify (i) a waiting period or periods
before Appreciation Rights shall become exercisable and (ii) permissible dates
or periods on or during which Appreciation Rights shall be exercisable.
(d) Any grant may specify that an Appreciation Right may be
exercised only in the event of a Change of Control of the Corporation, Corporate
Transaction or other similar transaction or event.
(e) Any grant may provide for the payment to the Participant
of dividend equivalents thereon in cash or Common Shares on a current, deferred
or contingent basis.
(f) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall describe the subject Appreciation
Rights, identify any related Option Rights, state that the Appreciation Rights
are subject to all of the terms and conditions of this Plan and contain such
other terms and provisions as the Committee may determine consistent with this
Plan.
(g) Regarding Tandem Appreciation Rights only: Each grant
shall provide that a Tandem Appreciation Right may be exercised only (i) at a
time when the related Option Right (or any similar right granted under any other
plan of the Corporation) is also exercisable and the Spread is positive and (ii)
by surrender of the related Option Right (or such other right) for cancellation.
(h) Regarding Free-standing Appreciation Rights only:
(i) Each grant shall specify in respect of each
Free-standing Appreciation Right a Base Price per Common Share, which shall be
equal to or greater than the Market Value per Share on the Date of Grant;
(ii) Successive grants may be made to the same
Participant regardless of whether any Free-standing Appreciation Rights
previously granted to the Participant remain unexercised;
(iii) Each grant shall specify the period or periods
of continuous employment, or continuous engagement of the consulting services,
of the Participant by the Corporation or any Subsidiary that are necessary
before the Free-standing Appreciation Rights or installments thereof shall
become exercisable; and
(iv) No Free-standing Appreciation Right granted
under this Plan may be exercised more than 10 years from the Date of Grant.
6. Restricted Shares. The Committee may also authorize grants or sales
to Participants of Restricted Shares upon such terms and conditions as the
Committee may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer
of the ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting and
other ownership rights, subject to the substantial risk of forfeiture and
restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Restricted
Shares covered thereby shall be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined by
the Committee on the Date of Grant.
(d) Each grant or sale shall provide that, during the period
for which substantial risk of forfeiture is to continue, the transferability of
the Restricted Shares shall be prohibited or restricted in the manner and to the
extent prescribed by the Committee on the Date of Grant. Such restrictions may
include without limitation rights of repurchase or first refusal in the
Corporation or provisions subjecting the Restricted Shares to a continuing
substantial risk of forfeiture in the hands of any transferee.
(e) Any grant or sale may require that any or all dividends or
other distributions paid on the
6
Restricted Shares during the period of such restrictions be automatically
sequestered and reinvested on an immediate or deferred basis in additional
Common Shares, which may be subject to the same restrictions as the underlying
award or such other restrictions as the Committee may determine.
(f) Successive grants or sales may be made to the same
Participant regardless of whether any Restricted Shares previously granted or
sold to a Participant remain restricted.
(g) Each grant or sale shall be evidenced by an agreement,
which shall be executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan. Unless
otherwise directed by the Committee, all certificates representing Restricted
Shares, together with a stock power that shall be endorsed in blank by the
Participant with respect to the Restricted Shares, shall be held in custody by
the Corporation until all restrictions thereon lapse.
7. Deferred Shares. The Committee may also authorize grants or sales of
Deferred Shares to Participants upon such terms and conditions as the Committee
may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute the agreement by the
Corporation to issue or transfer Common Shares to the Participant in the future
in consideration of the performance of services, subject to the fulfillment
during the Deferral Period of such conditions as the Committee may specify.
(b) Each grant or sale may be made without additional
consideration from the Participant or in consideration of a payment by the
Participant that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Deferred Shares
covered thereby shall be subject to a Deferral Period, which shall be fixed by
the Committee on the Date of Grant.
(d) During the Deferral Period, the Participant shall not have
any right to transfer any rights under the subject award, shall not have any
rights of ownership in the Deferred Shares and shall not have any right to vote
the Deferred Shares, but the Committee may on or after the Date of Grant
authorize the payment of dividend equivalents on the Deferred Shares in cash or
additional Common Shares on a current, deferred or contingent basis.
(e) Successive grants or sales may be made to the same
Participant regardless of whether any Deferred Shares previously granted or sold
to a Participant have vested.
(f) Each grant or sale shall be evidenced by an agreement,
which shall be executed on behalf of the Corporation by any officer thereof and
delivered to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
8. Performance Shares and Performance Units. The Committee may also
authorize grants of Performance Shares and Performance Units, which shall become
payable to the Participant upon the achievement of specified Management
Objectives, upon such terms and conditions as the Committee may determine in
accordance with the following provisions:
(a) Each grant shall specify the number of Performance Shares
or Performance Units to which it pertains, which may be subject to adjustment to
reflect changes in compensation or other factors.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be determined by the Committee on the Date of
Grant.
(c) Each grant shall specify the Management Objectives that
are to be achieved by the Participant, which may be described in terms of
Corporation-wide objectives or objectives that are related to the performance of
the individual Participant or the Subsidiary, division, department or function
within the Corporation or Subsidiary in which the Participant is employed or
with respect to which the Participant provides consulting services.
(d) Each grant shall specify in respect of the specified
Management Objectives a minimum acceptable level of achievement below which no
payment will be made and shall set forth a formula for determining the amount of
any payment to be made if performance is at or above the minimum acceptable
level but falls short of full achievement of the specified Management
Objectives.
7
(e) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that shall have been earned, and any
grant may specify that any such amount may be paid by the Corporation in cash,
Common Shares or any combination thereof and may either grant to the Participant
or reserve to the Committee the right to elect among those alternatives;
provided, however, that no form of consideration or manner of payment that would
cause Rule 16b-3 to cease to apply to this Plan shall be permitted.
(f) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Committee on the Date of Grant. Any grant of Performance Units may specify that
the amount payable, or the number of Common Shares issued, with respect thereto
may not exceed maximums specified by the Committee on the Date of Grant.
(g) On or after the Date of Grant of Performance Shares, the
Committee may provide for the payment to the Participant of dividend equivalents
thereon in cash or additional Common Shares on a current, deferred or contingent
basis.
(h) The Committee may adjust Management Objectives and the
related minimum acceptable level of achievement if, in the sole judgment of the
Committee, events or transactions have occurred after the Date of Grant that are
unrelated to the performance of the Participant and result in distortion of the
Management Objectives or the related minimum acceptable level of achievement.
(i) Successive grants may be made to the same Participant
regardless of whether any Performance Shares or Performance Units granted to any
Participant have vested.
(j) Each grant shall be evidenced by an agreement, which shall
be executed on behalf of the Corporation by any officer thereof and delivered to
and accepted by the Participant and shall contain such terms and provisions as
the Committee may determine consistent with this Plan.
9. Corporate Transaction or Change of Control. In order to preserve a
Participant's rights under an award granted pursuant to this Plan in the event
of a Change of Control of or Corporate Transaction with respect to the
Corporation, the Committee in its discretion may, at the time an award is made
or at any time thereafter, take one or more of the following actions: (a)
provide for the acceleration of any time period or vesting relating to the
exercise or realization of the award, (b) provide for the purchase of the award
upon the Participant's request for an amount of cash or the property that could
have been received upon the exercise or realization of the award had the award
been currently exercisable or payable, (c) adjust the terms of the award in a
manner determined by the Committee to reflect the Change of Control or Corporate
Transaction, (d) cause the award to be assumed, or new rights substituted
therefor, by another entity, or (e) make such other provision as the Committee
may consider equitable and in the best interests of the Corporation.
10. Transferability.
(a) Any grant made under this Plan may provide that all or any
part of the Common Shares that are to be issued or transferred by the
Corporation upon the exercise of Option Rights or Appreciation Rights or upon
the termination of the Deferral Period applicable to Deferred Shares or in
payment of Performance Shares or Performance Units, or are no longer subject to
the substantial risk of forfeiture and restrictions on transfer referred to in
Section 6 of this Plan, shall be subject to further restrictions upon transfer.
11. Adjustments. The Committee may make or provide for such adjustments
in the number of Common Shares covered by outstanding Option Rights,
Appreciation Rights, Deferred Shares and Performance Shares granted hereunder,
the Option Prices per Common Share or Base Prices per Common Share applicable to
any such Option Rights and Appreciation Rights, and the kind of shares
(including shares of another issuer) covered thereby, as the Committee may in
good faith determine to be equitably required in order to prevent dilution or
expansion of the rights of Participants that otherwise would result from (a) any
stock dividend, stock split, combination of shares, recapitalization or other
change in the capital structure of the Corporation or (b) any Corporate
Transaction, merger, consolidation, spin-off, split-off, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of warrants or other rights to purchase securities or any other
corporate transaction or event having an effect similar to any of the foregoing.
The Committee may also make or provide for such adjustments in the maximum
number of Common Shares specified in Section 3(a) of this Plan, the maximum
number of Appreciation Rights specified in Section 3(b) of this Plan and the
maximum number of Common Shares specified in Section 4(a) of this Plan as the
Committee may in good faith determine to be appropriate in order to reflect any
transaction or event described in this Section 11.
8
12. Fractional Shares. The Corporation shall not be required to issue
any fractional Common Shares pursuant to this Plan. The Committee may provide
for the elimination of fractions or for the settlement thereof in cash.
13. Withholding Taxes. To the extent that the Corporation is required
to withhold federal, state, local or foreign taxes in connection with any
payment made or benefit realized by a Participant or other person under this
Plan, and the amounts available to the Corporation for the withholding are
insufficient, it shall be a condition to the receipt of any such payment or the
realization of any such benefit that the Participant or such other person make
arrangements satisfactory to the Corporation for payment of the balance of any
taxes required to be withheld. At the discretion of the Committee, any such
arrangements may without limitation include relinquishment of a portion of any
such payment or benefit or the surrender of outstanding Common Shares. The
Corporation and any Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with respect to which
withholding is not required.
14. Certain Terminations of Employment or Consulting Services, Hardship
and Approved Leaves of Absence. Notwithstanding any other provision of this Plan
to the contrary, in the event of termination of employment or consulting
services by reason of death, disability, normal retirement, early retirement
with the consent of the Corporation, termination of employment or consulting
services to enter public or military service with the consent of the Corporation
or leave of absence approved by the Corporation, or in the event of hardship or
other special circumstances, of a Participant who holds an Option Right or
Appreciation Right that is not immediately and fully exercisable, any Restricted
Shares as to which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, any Deferred Shares as to which the
Deferral Period is not complete, any Performance Shares or Performance Units
that have not been fully earned, or any Common Shares that are subject to any
transfer restriction pursuant to Section 10(b) of this Plan, the Committee may
take any action that it deems to be equitable under the circumstances or in the
best interests of the Corporation, including without limitation waiving or
modifying any limitation or requirement with respect to any award under this
Plan.
15. Administration of the Plan.
(a) This Plan shall be administered by the Board or by the
Compensation Committee of the Board, which shall be composed of not less than
two members of the Board, each of whom shall be a "non-employee director" within
the meaning of Rule 16b-3. For purposes of grants and awards pursuant to, and
administration of, this Plan, the terms "Committee" and "Board" are used
interchangeably.
(b) The interpretation and construction by the Committee of
any provision of this Plan or any agreement, notification or document evidencing
the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred
Shares, Performance Shares or Performance Units, and any determination by the
Committee pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No member of the
Committee shall be liable for any such action taken or determination made in
good faith.
(c) The Committee may delegate to an officer of the
Corporation the authority to make decisions pursuant to this Plan provided that
no such delegation may be made that would cause any award or other transaction
under the Plan to cease to be exempt from Section 16(b) of the 1934 Act. The
Committee may authorize any one or more of its members or any officer of the
Company to execute and deliver documents on behalf of the Committee.
16. Loans or Installment Payments; Bonuses.
(a) The Committee may, in its discretion, assist any
Participant in the exercise of one or more awards under the Plan, including the
satisfaction of any federal, state, local and foreign income and employment tax
obligations arising therefrom, by (i) authorizing the extension of a loan from
the Corporation to such Participant; or (ii) permitting the Participant to pay
the exercise price or purchase price for the purchased shares in installments
over a period of years; or (iii) granting a cash bonus to the Participant to
enable the Participant to pay federal, state, local and foreign income and
employment tax obligations arising from an award. Any loan or installment method
of payment (including the interest rate and terms of repayment) shall be upon
such terms as the Committee specifies in the applicable option or issuance
agreement or otherwise deems appropriate under the circumstances. Loans or
installment payments may be authorized with or without security or collateral.
However, the maximum credit available to the Participant may not exceed the
exercise or purchase price of the acquired shares (less the par value of such
shares) plus any federal, state and local income and employment tax liability
incurred by the Participant in
9
connection with the acquisition of such shares. The amount of any bonus shall be
determined by the Committee in its sole discretion under the circumstances.
(b) The Committee may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Committee may deem appropriate; provided, however, that
the Committee shall not forgive that portion of any loan owed to cover the par
value of the Common Shares.
17. Amendments and Other Matters. (a) This Plan may be amended from
time to time by the Committee; provided, however, (i) except as expressly
authorized by this Plan, no such amendment shall increase the maximum number of
Common Shares specified in Section 3(a) hereof, increase the maximum number of
Appreciation Rights specified in Section 3(b) hereof, increase the maximum
number of Performance Units specified in Section 3(c) hereof, increase the
number of Common Shares specified in Section 4(a) hereof, or otherwise cause
this Plan to cease to satisfy any applicable condition of Rule 16b-3, without
the further approval of the stockholders of the Corporation.
(b) The Committee may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral by
the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Corporation or a Subsidiary to the
Participant.
(c) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Corporation
or any Subsidiary and shall not interfere in any way with any right that the
Corporation or any Subsidiary would otherwise have to terminate any
Participant's employment or other service at any time. Nothing contained in the
Plan shall prevent the Corporation or any Subsidiary from adopting other or
additional compensation arrangements for its employees.
(d) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as a Tax-qualified Option
from so qualifying, any such provision shall be null and void with respect to
any such Option Right; provided, however, that any such provision shall remain
in effect with respect to other Option Rights, and there shall be no further
effect on any provision of this Plan.
(e) The provisions of the Plan relating to the grant, vesting
and exercise of awards hereunder shall be governed by the laws of the State of
Arizona without resort to that State's conflict-of-laws rules, as such laws are
applied to contracts entered into and performed in such State. The forum for
resolving controversies respecting the Plan shall be in Pima County, Arizona.
(f) The provisions of the Plan shall inure to the benefit of,
and be binding upon, the Corporation and its successors or assigns, and the
Participants, their legal representatives, their heirs or legatees and their
permitted assignees.
(g) With respect to persons subject to Section 16 of the 1934
Act, transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successors under the 1934 Act. To the extent any
provisions of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable by
the Committee.
(h) Awards may be made to Participants who are foreign
nationals or employed outside the United States and who are not persons subject
to Section 16 of the 1934 Act on such terms and conditions different from those
specified in the Plan as the Committee considers necessary or advisable to
achieve the purpose of the Plan or to comply with applicable laws.
18. Effective Date and Term of Plan.
(a) This Plan shall become effective as of July 8, 1998 (the
"Effective Date"). Awards may be made under the Plan from and after the
Effective Date. However, no grants or awards under the Plan shall become
exercisable, and no Common Shares issued under the Plan shall vest, unless and
until the Plan is approved by the stockholders of the Corporation at the Annual
Meeting to be held July 8, 1998. Should such stockholder approval not be
obtained, then grants and awards made under this Plan shall terminate and cease
to remain outstanding, and no further grants or awards shall be made under the
Plan.
(b) The Plan shall terminate upon the earlier of (i) July 8,
2008 or (ii) the date on which all
10
awards available for issuance in the last year of the Plan shall have been
issued or cancelled. Upon termination of the Plan, no further awards may be
granted, but all grants outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the agreements
evidencing such grants.
19. Use of Proceeds. Any cash proceeds received by the Corporation from
the sale of Common Shares under the Plan shall be used for general corporate
purposes.
20. Regulatory Approvals.
(a) The implementation of the Plan, the granting of any awards
under the Plan and the issuance of any Common Shares shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the awards granted under it and
the Common Shares issued pursuant to it.
(b) No Common Shares or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the Common
Shares issuable under the Plan, and all applicable listing requirements of any
securities exchange on which the Common Shares are then listed for trading.
11
Preliminary
-----------
Stratford American Corporation Proxy
2400 East Arizona Biltmore Circle, Building 2, Suite 1270
Phoenix, Arizona 85016
- --------------------------------------------------------------------------------
This proxy is solicited on behalf of the Board of Directors.
The undersigned appoints David H. Eaton, Mel L. Shultz and Gerald J.
Colangelo, and each of them, as proxies, each with the power of substitution,
and authorizes them to represent and vote, as designated on the reverse side
hereof, all shares of Common Stock of Stratford American Corporation held by the
undersigned on May 15, 1998, at the Annual Meeting of Shareholders to be held on
July 8, 1998, and at any adjournment or postponement of the meeting. In their
discretion, the proxies are authorized to vote such shares upon such other
business as may properly come before the Annual Meeting.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder(s). If no direction is made, this proxy
will be voted FOR the listed proposals.
(Continued and to be SIGNED on the reverse side.)
Please mark boxes X in blue or black ink. This Board of Directors recommends a
vote FOR the proposals listed below. More detailed information concern each of
the proposals is provided in the Proxy Statement of Stratford American
Corporation, dated May 30, 1998.
1. Approval of the Amendment to the Company's Articles of Incorporation to [_]FOR [_]AGAINST [_]ABSTAIN
effect a fifteen-to-one reverse stock split of the Company's presently
issued shares of Common Stock.
2. Approval of the proposal to adopt the 1998 Stock Incentive Plan. [_]FOR [_]AGAINST [_]ABSTAIN
3. Election of Gerald J. Colangelo, David H. Eaton, Mel L. Shultz, Richard H. [_]FOR [_]AGAINST [_]ABSTAIN
Dozer , Mitchell S. Vance and Dale M. Jensen as members of the Board of
Directors.
4. Ratification of the appointment of KPMG Peat Marwick, LLP as the Company's [_]FOR [_]AGAINST [_]ABSTAIN
independent accountants for the fiscal year ended December 31, 1998.
Please sign exactly as name appears at left.
When shares are held by joint tenants, both
should sign. When signing as an attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by president or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
Date ___________________________________1998,
Signature ____________________________
Signature if held jointly ___________________
(Please mark, sign, date and return the Proxy Card promptly using the enclosed envelope.)