SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
DANIELSON HOLDING CORP.
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(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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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 price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined.):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Danielson Holding Corporation
767 Third Avenue, Fifth Floor
New York, New York 10017
-----------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Tuesday, September 4, 2001
-----------------------------
To Stockholders of Danielson Holding Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of
Danielson Holding Corporation (the "Company") will be held at 1 North
Franklin Street, Third Floor, Chicago, Illinois, on Tuesday, September 4,
2001, at 2:00 p.m., local time, for the following purposes:
1. To elect a board of ten directors to hold office until their
successors have been elected and qualified;
2. To ratify the appointment of KPMG LLP as certified
independent public accountants for the 2001 calendar year;
3. To approve the amendment to the Company's certificate of
incorporation increasing the number of authorized common
shares from 100,000,000 to 150,000,000;
4. To approve the amendment to the Company's 1995 Stock and
Incentive Plan as set forth in the Proxy Statement enclosed
herewith; and
5. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Holders of record of the Company's Common Stock at the close of
business on August 2, 2001 are entitled to notice and to vote at the
meeting or any adjournment thereof.
By Order of the Board of Directors,
By: /s/ W. James Hall
------------------------
W. James Hall
General Counsel and Secretary
New York, New York
August 2, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE
PAID ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
DANIELSON HOLDING CORPORATION
767 Third Avenue
New York, New York 10017-2023
ANNUAL MEETING OF STOCKHOLDERS
September 4, 2001
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Danielson Holding
Corporation, a Delaware corporation (the "Company" or "DHC"), to be voted
at the Annual Meeting of Stockholders of the Company to be held on Tuesday,
September 4, 2001, at 1 North Franklin Street, 3rd floor, Chicago, Illinois
60606, at 2:00 p.m. local time (the "Annual Meeting"), and any postponement
or adjournment thereof, for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders and described therein. This Proxy
Statement and the enclosed form of proxy are first being sent to
stockholders commencing on Friday, August 3, 2001.
The expenses of soliciting proxies for the Annual Meeting
are to be paid by the Company. Solicitation of proxies may be made by means
of personal calls upon, or telephonic or electronic communications with,
stockholders or their personal representatives by Directors, officers, and
employees of the Company who will not be specially compensated for such
services. Although there is no formal agreement to do so, the Company may
reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding this Proxy
Statement to stockholders whose common stock is held of record by such
entities.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Record Date and Share Ownership
The Board of Directors of the Company has fixed the close of
business on August 2, 2001 as the record date for the determination of the
stockholders entitled to receive notice of, and to vote at, the Annual
Meeting (the "Record Date"). The only outstanding class of stock of the
Company is its common stock, par value $0.10 per share ("Common Stock"). On
the Record Date, there were 19,505,954 shares of Common Stock issued and
outstanding.
Voting and Quorum
Each share of Common Stock will be entitled to one vote at
the Annual Meeting. The presence at the Annual Meeting, in person or by
proxy, of the holders of a majority of the total number of shares of Common
Stock outstanding on the Record Date will constitute a quorum for the
transaction of business by such holders at the Annual Meeting. Where a
quorum is present, (i) the vote of the holders of a majority of shares of
Common Stock voting will decide the election of Directors, and the ten
nominees for Director receiving the highest number of votes (i.e., a
plurality) will be elected as Directors, and (ii) the vote of the holders
of a majority of the shares voting will decide the ratification of the
appointment of KPMG LLP as the independent certified public accountants for
the Company for 2001; (iii) the vote of the holders of a majority of the
shares of the shares voting is required to approve the amendment to
the Certificate of Incorporation; and (iv) the vote of the holders of a
majority of the shares voting will decide the amendment of the 1995 Stock
and Incentive Plan and ratification of the granting of certain options
pursuant to that amendment. If any votes are withheld, such withheld votes
will be excluded entirely from the vote and will have no effect.
Abstentions will have no effect on the election of Directors but, for
purposes of determining whether a proposal has received a majority vote,
abstentions will be included in the vote totals with the result that an
abstention will have the same effect as a negative vote. In instances where
brokers are prohibited from exercising discretionary authority for
beneficial owners who have not returned a proxy (so-called "broker
non-votes"), those shares of Common Stock will not be included in the vote
totals and, therefore, will have no effect on the vote.
Proxies and Revocation of Proxies
Proxies in the enclosed form are solicited by the Board of
Directors of the Company in order to provide each stockholder an
opportunity to vote on all matters scheduled to come before the Annual
Meeting, whether or not the stockholder attends in person. All proxies
received pursuant to this solicitation will be voted except as to matters
where authority to vote is specifically withheld or the holder has elected
to abstain and, where a choice is specified as to a proposal, they will be
voted in accordance with such specification. In the absence of specific
directions, properly executed proxies will be voted "FOR" (i) the nominees
for election as Directors of the Company listed below; (ii) confirmation of
the appointment of KPMG LLP as the Company's independent certified public
accountants for the current fiscal year; (iii) the amendment to the
Certificate of Incorporation; and (iv) approval and ratification of an
amendment to the 1995 Stock and Incentive Plan and ratification of the
granting of certain options pursuant to the amendment. Any stockholder
giving a proxy has the power to revoke the proxy prior to its exercise. A
proxy may be revoked (a) by delivering to the Secretary of the Company at
or prior to the Annual Meeting an instrument of revocation or a duly
executed proxy bearing a date or time later than the date or time of the
proxy being revoked or (b) at the Annual Meeting if the stockholder is
present and elects to vote in person. Mere attendance at the Annual Meeting
will not serve to revoke a proxy.
Other Proposals
The Board does not know of any matter other than the
foregoing that is expected to be presented for consideration at the Annual
Meeting. However, if other matters properly come before the Annual Meeting,
the persons named in the accompanying proxy intend to vote on those matters
in accordance with their judgment.
PRINCIPAL STOCKHOLDERS
The following table sets forth the beneficial ownership of
Common Stock as of July 31, 2001 of (a) each Director and nominee for
Director, (b) each executive officer, and (c) each person known by the
Company to own beneficially more than five percent of the outstanding
shares of Common Stock. The Company believes that, except as otherwise
stated, the beneficial holders listed below have sole voting and investment
power regarding the shares reflected as being beneficially owned by them.
Amount and Nature of Percent of
Beneficial Ownership Class(1)
-------------------- ----------
Principal Stockholders
SZ Investments, LLC
2 N. Riverside Plaza
Chicago, IL 60606 3,900,437(2),(3) 18.2
Commissioner of Insurance
of the State of California
c/o Harry J. LeVine
Special Deputy Commissioner
Mission Insurance Companies' Trusts
425 Market Street
San Francisco, CA 94105 1,803,235 (2),(4) 9.2
Martin J. Whitman
c/o Danielson Holding Corporation
767 Third Avenue
New York, NY 10017-2023 1,281,143 (2),(5) 6.6
Officers and Directors
Martin J. Whitman 1,281,143 (2),(5) 6.6
David M. Barse 208,333 (6) 1.1
Samuel Zell 3,900,437 (2),(7) 18.2
Joseph F. Porrino 56,667 (8) *
Frank B. Ryan 48,667 (8) *
Eugene M. Isenberg 69,924 (9) *
Wallace O. Sellers 50,000 (10) *
Stanley J. Garstka 51,008 (11) *
William Pate 45,000 (12) *
Harry J. LeVine 0 *
Michael Carney 149,167 (13) *
W. James Hall 5,000 (15) *
All Officers and Directors
as a Group (12 persons) 5,865,346 (14) 26.7
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* Percentage of shares beneficially owned does not exceed one percent of
the outstanding Common Stock.
1 Share percentage ownership is rounded to nearest tenth of one percent
and reflects the effect of dilution as a result of outstanding options
and warrants to the extent such options and warrants are, or within 60
days will become, exercisable. As of July 31, 2001 (the date as of
which this table was prepared), there were exercisable options
outstanding to purchase 1,005,584 shares of Common Stock and an
exercisable warrant to purchase 2,002,568 shares of common stock.
Shares underlying any option or warrant which was exercisable on July
31, 2001 or becomes exercisable within the next 60 days are deemed
outstanding only for purposes of computing the share ownership and
share ownership percentage of the holder of such option or warrant.
2 In accordance with provisions of DHC's Certificate of Incorporation,
all certificates representing shares of Common Stock beneficially
owned by holders of five percent or more of the Common Stock are owned
of record by DHC, as escrow agent, and are physically held by DHC in
that capacity.
3 Includes shares underlying a Warrant to purchase 1,900,437 shares of
Common Stock at an exercise price of $4.74391 per share.
4 Beneficially owned by the Commissioner of Insurance of the State of
California in his capacity as trustee for the benefit of holders of
certain deficiency claims against certain trusts which assumed
liabilities of certain present and former insurance subsidiaries of
the Company.
5 Includes 803,669 shares beneficially owned by Third Avenue Value Fund
("TAVF"), an investment company registered under the Investment
Company Act of 1940; 104,481 shares beneficially owned by Martin J.
Whitman & Co., Inc. ("MJW&Co"), a private investment company; and
84,358 shares beneficially owned by Mr. Whitman's wife and three adult
family members. Mr. Whitman controls the investment adviser of TAVF,
and may be deemed to own beneficially a five percent equity interest
in TAVF. Mr. Whitman is the principal stockholder in MJW&Co, and may
be deemed to own beneficially the shares owned by MJW&Co. Mr. Whitman
disclaims beneficial ownership of the shares of Common Stock owned by
TAVF and Mr. Whitman's family members.
6 Includes shares underlying currently exercisable options to purchase
an aggregate of 50,000 shares of Common Stock at an exercise price of
$5.6875 per share, 50,000 shares of Common Stock at an exercise price
of $7.0625 per share, and 50,000 shares of Common Stock at an exercise
price of $3.65625 per share and 33,333 shares of Common Stock at an
exercise price of $5.3125 per share. Does not include shares
underlying options to purchase an aggregate of 16,667 shares of Common
Stock at an exercise price of $5.1325 per share or 25,000 shares of
Common Stock at an exercise price of $4.00 per share which are not
currently exercisable and do not become exercisable within the next 60
days.
7 Includes 2,000,000 shares of Common Stock owned by SZ Investments,
L.L.C. ("SZ"), a company controlled by Mr. Zell, and 1,900,437 shares
of Common Stock issuable upon exercise of a Warrant owned by SZ.
8 Includes shares underlying currently exercisable options to purchase
an aggregate of 46,667 shares of Common Stock at an exercise price of
$3.63 per share. Does not include shares underlying options to
purchase an aggregate of 40,000 shares of Common Stock at an exercise
price of $4.00 per share. These options are subject to approval and
ratification of the shareholders and are not exercisable within 60
days.
9 Includes 20,088 shares owned by Mentor Partnership, a partnership
controlled by Mr. Isenberg, and 28 shares owned by Mr. Isenberg's
wife. Also includes shares underlying currently exercisable options to
purchase an aggregate of 46,666 shares of Common Stock at an exercise
price of $3.63 per share. Does not include shares underlying options
to purchase an aggregate of 40,000 shares of Common Stock at an
exercise price of $4.00 per share. These options are subject to
approval and ratification of the shareholders and are not exercisable
within 60 days.
10 Includes shares underlying currently exercisable options to purchase
an aggregate of 40,000 shares of Common Stock at an exercise price of
$7.00 per share. Does not include shares underlying options to
purchase an aggregate of 40,000 shares of Common Stock at an exercise
price of $4.00 per share. These options are subject to approval and
ratification of the shareholders and are not exercisable within 60
days.
11 Includes shares underlying currently exercisable options to purchase
an aggregate of 40,000 shares of Common Stock at an exercise price of
$5.50 per share. Does not include shares underlying options to
purchase an aggregate of 40,000 shares of Common Stock at an exercise
price of $4.00 per share. These options are subject to approval and
ratification of the shareholders and are not exercisable within 60
days.
12 Does not include shares underlying options to purchase an aggregate of
22,800 shares of Common Stock at an exercise price of $4.00 per share
which are not currently exercisable and do not become exercisable within
the next 60 days. These options are subject to approval and ratification
of the shareholders and are not exercisable within 60 days.
13 Includes shares underlying currently exercisable options to purchase
an aggregate of 50,000 shares of Common Stock at an exercise price of
$5.6875 per share, 35,000 shares of Common Stock at an exercise price
of $7.0625 per share, 35,000 shares of Common Stock at an exercise
price of $3.65625 per share and 16,667 shares of Common Stock at an
exercise price of $5.3125 per share. Does not include shares
underlying options to purchase an aggregate of 8,333 shares of Common
Stock at an exercise price of $5.3125 per share or 12,500 shares of
Common Stock at an exercise price of $4.00 per share which are not
currently exercisable and do not become exercisable within the next
60 days.
14 In calculating the percentage of shares owned by officers and
Directors as a group, the shares of Common Stock underlying all
options which are beneficially owned by officers and Directors and
which are currently exercisable or become exercisable within the next
60 days are deemed outstanding.
15 Does not include shares underlying options to purchase an aggregate of
5,000 shares of Common Stock at an exercise price of $4.00 per share
which are not currently exercisable and do not become exercisable within
the next 60 days.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires the Company's Directors and executive officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission and the
American Stock Exchange initial reports of ownership and reports of changes
in ownership of Common Stock and other equity securities of the Company.
Officers, Directors and greater than ten-percent stockholders are required
by Federal securities regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To DHC's knowledge, based solely upon review of the copies
of such reports furnished to DHC and written representations that no other
reports were required, except for one Form 4 as filed with respect to each
of Mr. Zell and SZ Investments, LLC, all Section 16(a) filing requirements
applicable to DHC's officers, Directors and greater than ten percent
beneficial owners were complied with for the fiscal year ended December 31,
2000.
Proposal 1
ELECTION OF DIRECTORS
A board of ten Directors will be elected at the Annual
Meeting by the holders of Common Stock, to hold office until their
successors have been elected and qualified. It is intended that, unless
authorization to do so is withheld, the proxies will be voted "FOR" the
election of the Director nominees named below. Each of the nominees
currently is a Director of the Company. Each nominee has consented to be
named in this Proxy Statement and to serve as a Director if elected.
However, if any nominee shall become unable to stand for election as a
Director at the Annual Meeting, an event not now anticipated by the Board,
the proxy will be voted for a substitute designated by the Board or, if no
substitute is selected by the Board prior to or at the Annual Meeting, for
a motion to reduce the membership of the Board to the number of nominees
available.
The nominees are listed on the following pages with brief
statements of their principal occupation and other information. A listing
of the nominees' beneficial ownership of Common Stock appears on the
preceding pages under "PRINCIPAL STOCKHOLDERS." All of the nominees for
Director, other than Harry LeVine, who was appointed by the other Directors
on December 12, 2000, were elected to their present terms as Directors by
the stockholders at the Annual Meeting of Stockholders of the Company held
on June 15, 2000. The term of office of each Director continues until the
election of Directors to be held at the next Annual Meeting of Stockholders
or until his successor has been elected. There is no family relationship
between any nominee for election as a Director and any other nominee for
election as a Director or executive officer of the Company. The information
set forth below concerning the Directors has been furnished by such
Directors to the Company.
The Company, Martin J. Whitman and SZ Investments, LLC
("SZ") have entered into an agreement pursuant to which, as long as SZ
continues to directly or indirectly own at least 1,000,000 shares of Common
Stock, (i) SZ will have the right to continue to nominate two members of
DHC's Board of Directors (which nominees are Samuel Zell and William Pate)
and (ii) Mr. Whitman has agreed to vote and use his best efforts to cause
to be voted the shares of Common Stock owned or controlled by him in favor
of SZ's designees. In addition, SZ has agreed that, so long as Mr. Whitman
directly or indirectly owns 500,000 shares of Common Stock and Mr. Whitman
continues to be affiliated with Third Avenue Funds in the same or
substantially similar manner as his current affiliation (so long as such
entities continue to exist), SZ will vote the shares owned by it for the
election of Mr. Whitman and one other designee of Mr. Whitman (which
nominee is David Barse).
The Board of Directors unanimously recommends that the
stockholders vote "FOR" the nominees listed below:
Director
Director Age Principal Occupation Since
- -------- --- -------------------- --------
Martin J. Whitman 76 Chief Executive Officer 1990
of the Company
David M. Barse 39 President and Chief 1996
Operating Officer of
the Company
Samuel Zell 60 Chairman of the Board 1999
Eugene M. Isenberg 71 Chairman of the Board 1990
and Chief Executive Officer
of Nabors Industries, Inc.
Joseph F. Porrino 56 Counselor to the President 1990
of the New School for
Social Research
Frank B. Ryan 64 Professor of Mathematics 1990
at Rice University
Wallace O. Sellers 71 Former Vice Chairman and 1995
a Director of Enhance
Financial Services Group, Inc.
Stanley J. Garstka 57 Deputy Dean and Professor 1996
in the Practice of Management
at Yale University School
of Management
William Pate 37 Director of Mergers and 1999
Acquisitions of Equity
Group Investments, L.L.C.
Harry J. LeVine 48 Special Deputy Commissioner 2000
of the California Department
of Insurance and Acting
Chief Executive Officer of
the California Conservation
and Liquidation Office
Mr. Whitman is the Chief Executive Officer and a Director of
the Company. Since 1974, Mr. Whitman has been the President and controlling
stockholder of M.J. Whitman & Co., Inc. (now known as Martin J. Whitman &
Co., Inc.) ("MJW&Co") which, until August 1991, was a registered
broker-dealer. Since March 1990, Mr. Whitman has been the Chairman of the
Board, Chief Executive Officer and a Trustee (and, from January 1991 to May
1998, the President) of Third Avenue Trust and its predecessor, Third
Avenue Value Fund, Inc. (together with its predecessor, "Third Avenue
Trust"), an open-end management investment company registered under the
Investment Company Act of 1940 (the "40 Act") and containing three
investment series. Since July 1999, Mr. Whitman has been the Chairman of
the Board, Chief Executive Officer and a Trustee of Third Avenue Variable
Series Trust ("Variable Trust"), an open-end management investment company
registered under the 40 Act and containing one investment series. Since
March 1990, Mr. Whitman has been Chairman of the Board and Chief Executive
Officer (and, until February 1998, the President) of EQSF Advisers, Inc.
("EQSF"), the investment adviser of Third Avenue Trust and Variable Trust.
Until April 1994, Mr. Whitman also served as the Chairman of the Board,
Chief Executive Officer and a Director of Equity Strategies Fund, Inc.,
previously a registered investment company. Mr. Whitman was a Principal of
Whitman Heffernan Rhein & Co., Inc. ("WHR"), an investment and financial
advisory firm which he helped to found during the first quarter of 1987 and
which ceased operations in December 1996. Since March 1991, Mr. Whitman has
served as a Director of Nabors Industries, Inc. ("Nabors"), a
publicly-traded oil and gas drilling company listed on the American Stock
Exchange ("AMEX"). From August 1997 to May 2001 Mr. Whitman served as a
director of Tejon Ranch Co., an agricultural and land management company
listed on the New York Stock Exchange ("NYSE"). Since May 2000, Mr. Whitman
has served as a director for Stewart Information Services Corporation, a
title insurance company publicly traded on the NYSE. From March 1993
through February 1996, Mr. Whitman served as a director of Herman's
Sporting Goods, Inc., a retail sporting goods chain, which filed a
voluntary petition under Chapter 11 of the United States Bankruptcy Code on
April 26, 1996. Mr. Whitman also serves as a Director of the Company's
principal operating subsidiary, National American Insurance Company of
California ("NAICC"). Mr. Whitman co-authored the book The Aggressive
Conservative Investor and is the author of Value Investing: A Balanced
Approach. Mr. Whitman is a Distinguished Faculty Fellow in Finance at the
Yale University School of Management ("Yale School of Management") and an
adjunct professor at the Columbia University School of Business. Mr.
Whitman graduated from Syracuse University magna cum laude in 1949 with a
Bachelor of Science degree and received his Masters degree in Economics
from the New School for Social Research in 1956. Mr. Whitman is a Chartered
Financial Analyst.
Mr. Barse has been the President, Chief Operating Officer
and a Director of the Company since July 1996 and a director of NAICC since
August 1996. Since June 1995, Mr. Barse has been the President (and, since
July 1999, Chief Executive Officer) of M.J. Whitman Holding Corporation
("MJWHC"), which has several subsidiaries including a securities
broker-dealer and money management concern. From April 1995 until February
1998 he served as the Executive Vice President and Chief Operating Officer
of Third Avenue Trust and EQSF, henceforth assuming the position of
President. Since July 1999, Mr. Barse has been the President and Chief
Operating Officer of Variable Trust. Mr. Barse joined the predecessor of
MJWHC in December 1991 as General Counsel. Mr. Barse also presently serves
as a director of CGA Group, Ltd., a Bermuda based financial services
company, and American Capital Access Holdings, a financial insurance
company. Mr. Barse was previously an attorney with the law firm of Robinson
Silverman Pearce Aronsohn & Berman LLP. Mr. Barse received a Bachelor of
Arts in Political Science from George Washington University in 1984 and a
Juris Doctor from Brooklyn Law School in 1987.
Mr. Zell is the Chairman of the Board of the Company. Mr.
Zell is Chairman of the Board of Directors of Equity Group Investments,
L.L.C. ("EGI"), an investment company, since 1999, and had been Chairman of
the Board of its predecessor, Equity Group Investments, Inc., for more than
five years. Mr. Zell is also Chairman of the Board of American Classic
Voyages Co., a provider of overnight cruises in the United States; Anixter
International Inc., a distributor of electrical and cable products; Capital
Trust, Inc., a specialized finance company; Chart House Enterprises, Inc.,
an owner and operator of restaurants; Davel Communications, Inc., an
operator of pay telephones in the United States; and Manufactured Home
Communities, an equity real estate investment trust ("REIT") primarily
focused on manufactured home communities. Mr. Zell is Chairman of the Board
of Trustees of Equity Office Properties Trust, an equity REIT primarily
focused on office buildings and Equity Residential Properties Trust, an
equity REIT primarily focused on multifamily residential properties. He is
a director of Ramco Energy plc, an independent oil company in the United
Kingdom. Mr. Zell obtained a Bachelor of Arts degree in Policital Science
in 1963 and a Juris Doctor degree in 1966 from the University of Michigan
at Ann Arbor.
Mr. Isenberg, since 1987, has been Chairman and Chief
Executive Officer of Nabors Industries, Inc., the world's largest land and
offshore platform drilling company. Mr. Isenberg presently serves as a
director of the American Stock Exchange, the National Association of
Securities Dealers, Inc., and the National Petroleum Council. From 1969 to
1982, Mr. Isenberg was Chairman of the Board and principal stockholder of
Genimar Inc., a steel trading and building products manufacturing company.
From 1955 to 1968, he was employed in various management capacities with
the Exxon Corp. Mr. Isenberg founded and is the principal sponsor of the
Parkside School for children with learning disabilities in New York City.
Mr. Isenberg graduated from the University of Massachusetts in 1950 with a
Bachelor of Arts degree in Economics and from Princeton University in 1952
with a Masters degree in Economics. The University of Massachusetts'
"Eugene M. Isenberg School of Management" is named in recognition of his
generous contributions towards new facilities, the funding of scholarships,
and the endowment of a professorship.
Mr. Porrino has been the Counselor to the President of the
New School for Social Research (the "New School") since February 1998 and
was the Executive Vice President of the New School from September 1991 to
February, 1998. Prior to that time, Mr. Porrino was a partner in the New
York law firm of Putney, Twombly, Hall & Hirson, concentrating his practice
in the area of labor law. Mr. Porrino received a Bachelor of Arts degree
from Bowdoin College in 1966, and was awarded a Juris Doctor degree from
Fordham University School of Law in 1970.
Dr. Ryan was Professor of Mathematics at Rice University
from August 1990 through July 1999. From August 1990 to February 1995, Dr.
Ryan also served as Vice President-External Affairs at Rice University.
Since November 1996, Dr. Ryan has served as a Director of Siena Holdings,
Inc., a real estate and health management company, the capital stock of
which is traded over-the-counter. From March 1996 through September 1999,
Dr. Ryan has served as a Director of Texas Micro, Inc., a computer systems
company that was merged in September 1999 with Radisys Corporation, a
computer systems company the capital stock of which is traded on NASDAQ.
Until 1998, Dr. Ryan served as a Director of America West Airlines, Inc., a
publicly-traded company listed on the NYSE. For two years ending August
1990, Dr. Ryan was the President and Chief Executive Officer of Contex
Electronics Inc., a subsidiary of Buffton Corporation, the capital stock of
which is publicly traded on the AMEX. Prior to that, and beginning in 1977,
Dr. Ryan was a Lecturer in Mathematics at Yale University, where he was
also the Associate Vice President in charge of institutional planning. Dr.
Ryan obtained a Bachelor of Arts degree in Physics in 1958 from Rice
University, a Masters degree in Mathematics from Rice in 1961, and a
Doctorate in Mathematics from Rice in 1965.
Mr. Sellers is a former Vice-Chairman and Director of
Enhance Financial Services Group, Inc. ("Enhance Group"), a financial
services corporation the capital stock of which is publicly traded on the
NYSE. Until December 31, 1994, Mr. Sellers was the President and Chief
Executive Officer of Enhance Group from its inception in 1986, as well as
its principal subsidiaries, Enhance Reinsurance Company and Asset Guaranty
Insurance Company, from their inceptions in 1986 and 1988, respectively.
From 1987 to 1994, Mr. Sellers served as a Director, and from 1992 to 1993
as the Chairman, of the Association of Financial Guaranty Insurers in New
York. Mr. Sellers received a Bachelor of Arts degree from the University of
New Mexico in 1951 and a Masters degree in Economics from New York
University in 1956. Mr. Sellers attended the Advanced Management Program at
Harvard University in 1975 and is a Chartered Financial Analyst.
Mr. Garstka has been Deputy Dean at the Yale School of
Management since November, 1995 and has been a Professor in the Practice of
Management at the Yale School of Management since 1988. Mr. Garstka was the
Acting Dean of the Yale School of Management from August 1994 to October
1995, and an Associate Dean of the Yale School of Management from 1984 to
1994. Mr. Garstka has served on the Board of Trustees of MBA Enterprises
Corps, a non-profit organization (1991-1999) and on the Board of Trustees
of The Foote School in New Haven, Connecticut from 1995 to 1998. From 1988
to 1990, Mr. Garstka served as a director of Vyquest, Inc., a
publicly-traded company listed on the AMEX. Mr. Garstka was a Professor in
the Practice of Accounting from 1983 to 1988, and an Associate Professor of
Organization and Management from 1978 to 1983, at the Yale School of
Management. Mr. Garstka has also authored numerous articles on accounting
and mathematics. Mr. Garstka received a Bachelor of Arts degree in
Mathematics from Wesleyan University in Middletown, Connecticut in 1966, a
Masters degree in Industrial Administration in 1968 from Carnegie Mellon
University and a Doctorate in Operations Research in 1970 from Carnegie
Mellon University.
Mr. Pate has served as a director of Mergers and
Acquisitions for EGI or its predecessor since February 1994. Mr. Pate
serves on the Board of Directors of CNA Surety Corporation. Prior to
February 1994, Mr. Pate was an associate at Credit Suisse First Boston. Mr.
Pate received a Bachelor of Arts degree from Harvard College in 1986 and a
law degree from the University of Chicago in 1993
Mr. LeVine is currently the Special Deputy Commissioner in
charge of the California Department of Insurance's Conservation and
Liquidation Office (the "CLO"). The CLO presently has 53 insurance
companies under management with combined assets exceeding $1.0 billion that
have been conserved or are in the process of liquidation. Prior to becoming
the head of the CLO, Mr. LeVine had been Senior Staff Counsel to the
operation since 1989. Prior to 1989, Mr. LeVine was in private practice as
an attorney. Mr. LeVine received a Bachelor of Arts degree from the
University of California, Berkeley with honors in 1975 and a Juris Doctor
from the University of California, Los Angeles in 1982.
Committees
The Board of Directors has an Audit Committee, a
Compensation Committee, and an Acquisition Committee. The Board does not
have a nominating committee or a committee performing the functions of a
nominating committee.
The Audit Committee consists of Messrs. Porrino, Ryan and
Garstka, all Independent Directors, as defined by Section 121 (A) of the
American Stock Exchange's Listing Standards. The Audit Committee held three
meetings in 2000. All three members were present for each of these
meetings. The Audit Committee is primarily responsible for reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee also recommends engagement of the
Company's independent public accountants.
The Compensation Committee consists of Messrs. Porrino, Ryan
and Sellers, all Independent Directors. The Compensation Committee held one
meeting in 2000. All three members were present. The Compensation Committee
reviews, and makes recommendations to the Board of Directors concerning,
the Company's executive compensation policy.
The Acquisition Committee consists of Messrs. Whitman, Zell,
Barse and Pate. The Acquisition Committee had numerous formal and informal
meetings in 2000. The Acquisition Committee reviews, and makes
recommendations to the Board of Directors concerning, potential
transactions for the Company.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Company's Board of Directors is
responsible for providing independent, objective oversight of the Company's
accounting functions and internal controls. The Audit Committee is composed
of three directors, each of whom is independent as defined by the American
Stock Exchange listing standards. The Audit Committee operates under a
written charter approved by the Board of Directors. A copy of the charter
is attached to this Proxy Statement as Appendix A.
Management is responsible for the Company's internal
controls and financial reporting process. KPMG LLP, the Company's
independent accountants, are responsible for performing an independent
audit of the Company's consolidated financial statements in accordance with
generally accepted auditing standards and to issue a report thereon. The
Audit Committee's responsibility is to monitor and oversee these processes.
In connection with these responsibilities, the Audit
Committee met with management and KPMG LLP to review and discuss the
December 31, 2000 financial statements. The Audit Committee also discussed
with KPMG LLP the matters required by Statement on Auditing Standards No.
61 (Communication with Audit Committees). The Audit Committee also received
written disclosure from KPMG LLP required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees), and the
Audit Committee discussed with KPMG LLP the firm's independence.
Based upon the Audit Committee's discussions with management
and KPMG LLP, and the Audit Committee's review of the representations of
management and KPMG LLP, the Audit Committee recommended that the Board of
Directors include the audited consolidated financial statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000,
that was filed with the Securities and Exchange Commission.
THE AUDIT COMMITTEE
Joseph F. Porrino, Chairman
Stanley J. Garstka
Frank B. Ryan
Independent Auditor's Fees
The aggregate fees billed by KPMG LLP for professional
services rendered for the audit of the Company's consolidated financial
statements for the year ended December 31, 2000 and for the reviews of the
financial statements included in the Company's Quarterly Reports on Form
10-Q for that fiscal year were $211,000.
Financial Information System Design and Implementation Fees
There were no fees billed by KPMG LLP for professional
services rendered for information technology services relating to financial
information systems design and implementation for the fiscal year ended
December 31, 2000.
All Other Fees
The aggregate fees billed by KPMG LLP for services rendered
to the Company other than the services described above under "Audit Fees"
and "Financial Information System Design and Implementation Fees" for the
fiscal year ended December 31, 2000 were $166,000.
The audit committee has considered whether the provision of
non-audit services is compatible with maintaining the independent auditors'
independence.
Compensation of Directors
During 2000, each Director who was not an officer or
employee of the Company or its subsidiaries received compensation of $2,500
for each Board meeting attended, whether in person or by telephone. For
attendance at Board meetings during 2000, each of Mr. Zell, Mr. Isenberg,
Mr. Porrino, Dr. Ryan, Mr. Garstka, and Mr. Pate each received $5,000, and
Mr. Sellers received $2,500, plus, in each case, reimbursement of
reasonable expenses. Directors who are officers or employees of the Company
or its subsidiaries receive no fees for service on the Board. No attendance
fee is paid to any Directors with respect to any committee meetings.
Attendance at Board of Directors Meetings
The Board held 2 meetings during 2000. No Director attended
less than 75 percent of the aggregate number of meetings of the Board of
Directors held during 2000 and all committees of the Board on which he
served, except for Mr. Sellers who attended more than 66 percent of such
meetings.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Age Principal Position with the Company
- ---- --- -----------------------------------
Martin J. Whitman 76 Chief Executive Officer and a Director
David M. Barse 39 President, Chief Operating Officer
and a Director
Michael T. Carney 47 Chief Financial Officer and Treasurer
W. James Hall 37 General Counsel and Secretary
For additional information about Messrs. Whitman and Barse,
see "ELECTION OF DIRECTORS" above.
Mr. Carney was the Chief Financial Officer ("CFO") of DHC
from August 1990 until March 1996 and has been the CFO of the Company and a
director of NAICC since August 1996. Since 1990, Mr. Carney has served as
Treasurer and CFO of Third Avenue Trust and EQSF and, since 1989, as CFO of
MJW&Co., and MJW and MJWHC and their predecessors. Since July 1999, Mr.
Carney has served as Treasurer and CFO of Variable Trust. From 1990 through
April 1994, Mr. Carney also served as CFO of Carl Marks Strategic
Investments, L.P.; from 1989 through December, 1996 Mr. Carney served as
CFO of WHR; and from 1989 through April 1994, Mr. Carney served as
Treasurer and CFO of Equity Strategies Fund. From 1988 to 1989, Mr. Carney
was the Director of Accounting of Smith New Court, Carl Marks, Inc., and,
from 1986 to 1988, Mr. Carney served as the Controller of Carl Marks & Co.,
Inc. Mr. Carney graduated from St. John's University in 1981 with a
Bachelor of Science degree in Accounting.
Mr. Hall has been the General Counsel and Secretary of DHC
since December 2000. Mr. Hall has also served as General Counsel and
Secretary of MJWHC and MJW since June 2000, of Third Avenue Trust and EQSF
since September 2000 and of Variable Trust since September 2000. Prior to
June of 2000, Mr. Hall was an associate at Paul, Weiss, Rifkind, Wharton &
Garrison LLP from February 2000. Mr. Hall served as an associate at Morgan,
Lewis Bockius LLP from November 1996 to January 2000 and as an associate at
Gibson, Dunn and Crutcher LLP from March 1992 though June 1996. Mr. Hall
served as a Captain in the U.S. Army Reserve from 1986 through 1992. Mr.
Hall graduated from the University of Pennsylvania School of Law in 1991
and the Massachusetts Institute of Technology in 1986 with Bachelor of
Science degrees in Biology and Aeronautical/Astronautical Engineering.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table presents certain
information relating to compensation paid by the Company for services
rendered in 2000 by the Chief Executive Officer and each other executive
officer of the Company who had cash compensation for such year in excess of
$100,000 (sometimes referred to below as the "named executive officers").
Only those columns which call for information applicable to the Company or
the individual named for the periods indicated have been included in such
table.
- ---------------------------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
--------------------------------------------
Awards
--------------
Securities
Underlying All Other
Year Salary (a) Bonus Options Compensation
Name and Principal Position ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------------
Martin J. Whitman 2000 $ 200,000 -0- -0- -0-
Chairman of the Board
& Chief Executive Officer 1999 $ 200,000 -0- -0- -0-
1998 $ 200,000 -0- -0- -0-
- ---------------------------------------------------------------------------------------------------------------------------
David M. Barse 2000 $ 75,000 $150,000 50,000 -0-
President and Chief Operating Officer 1999 $ 75,000 $ 80,000 50,000 -0-
1998 $ 75,000 -0- 50,000 -0-
- ---------------------------------------------------------------------------------------------------------------------------
Michael Carney 2000 $ 75,000 $ 50,000 25,000 -0-
Treasurer and Chief Financial Officer 1999 $ 75,000 $ 40,000 25,000 -0-
1998 $ 75,000 -0- 35,000 -0-
- ---------------------------------------------------------------------------------------------------------------------------
- -------------------
(a) Amounts shown indicate cash compensation earned and received by executive
officers in the year shown.
Option/SAR Grants in Last Fiscal Year
The following table presents certain information relating to
the grants of stock options made during 2000 to the named executive
officers of the Company. The options were granted under the Company's 1995
Stock and Incentive Plan. Pursuant to rules of the Securities and Exchange
Commission, the table also shows the value of the options granted at the
end of the option term if the stock price were to appreciate annually by 5%
and 10%, respectively. There is no assurance that the stock price will
appreciate at the rates shown in the table. Only those tabular columns
which call for information applicable to the Company or the named
individuals have been included in such table.
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Individual Grants Appreciation for
Option Term
- ------------------------------------------------------------------------------------------------------------------
Number of Percent of
Securities Total
Underlying Options/SARs
Options/ Granted to
SARs Employees Exercise or 5% 10%
Granted in Fiscal Base Price Expiration
Name (#) (1) Year ($/Sh) Date ($) ($)
- ------------------------------------------------------------------------------------------------------------------
Martin J. Whitman -0- - - - - -
David M. Barse 50,000 26.0 4.00 12/12/10 125,779 318,748
Michael Carney 25,000 13.0 4.00 12/12/10 62,889 159,374
- ------------------------------------------------------------------------------------------------------------------
- ----------------
(1) One-half of these options became exercisable on June 12, 2001 and
one-third of the balance of the options become exercisable on each
of the first three anniversaries of the date of grant. In the event of
a change in control of the Company (within the meaning of the 1995
Plan), all awards will become immediately vested and fully exercisable.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table presents certain information relating to
the value of unexercised stock options as of the end of 2000, on an
aggregated basis, owned by the named executive officers. Such officers did
not exercise any of such options during 2000. Only those tabular columns
which call for information applicable to DHC or the named executive
officers have been included in such table.
- ---------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options
Options at Fiscal Year-End at Fiscal Year-End
(#) ($)
----------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
Martin J. Whitman 210,000 -0- 328,125 -0-
David M. Barse 183,333 66,667 45,313 28,125
Michael Carney 136,667 33,333 31,719 14,063
- ---------------------------------------------------------------------------------------------------------------
Compensation Committee Interlocks and Insider Participation
During 2000, none of the persons who served as members of
the Compensation Committee of the Company's Board of Directors also was,
during that year or previously, an officer or employee of the Company or
any of its subsidiaries or had any other relationship requiring disclosure
herein.
Board of Directors Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors (the
"Committee"), during 2000, was comprised of three independent (i.e.,
non-employee) directors. The Committee provided the following report on
executive compensation during 2000 as required by applicable securities
regulations:
"The Committee's overriding goal continues to be to
structure compensation in a way that will attract and retain highly
qualified executives who will conduct the business of the Company in a
manner that will maximize stockholder value.
The annual base salary of each of the Company's executive
officers for 2000 remained the same as for 1998 and 1999, $200,000 for Mr.
Whitman, $75,000 each for Messrs. Barse and Carney. Mr. Hall received
$50,000. The Company continues to try to balance its desire not to take
significant additional cash out of the Company in the form of executive
compensation while searching for opportunities to meet its goal of
maximizing stockholder values with the reality of the extensive efforts
which each of these executives undertakes in overseeing the Company's
operations as well as identifying and negotiating potential opportunities
on behalf of the Company. The Committee believes the bonuses awarded were
appropriate given the high level of service rendered to the Company and
also the excellent investment returns in the Company's securities
portfolio. The Company is able to retain these executives at their current
levels of base compensation in part because they are also employed by
affiliates of the Company, and the Committee continues to believe that it
was appropriate to maintain these compensation levels for its executive
officers. The Committee will continue to review bonus compensation in light
of the Company's achievements in any given year and the role the executives
play in those achievements.
In addition to the cash compensation of its executives, the
Company granted stock options during the year under its 1995 Stock and
Incentive Plan (the "1995 Plan"). On December 12, 2000, the Committee
granted options to purchase an aggregate of 192,500 shares of the Company's
Common Stock at an exercise price of $4.00 per share (the mean of the high
and low prices of the Common Stock on the American Stock Exchange on the
date of grant). The options were granted to employees of the Company
(including Messrs. Barse, Carney and Hall), as well as to certain key
employees of NAICC. Of these options, 50,000 were granted to Mr. Barse,
25,000 were granted to Mr. Carney, and 10,000 were granted to Mr. Hall. The
Committee believed that these option grants were reasonable, particularly
in light of the extensive efforts undertaken by these executives compared
to their limited cash compensation levels.
In making determinations regarding compensation, the
Committee does not rely upon quantitative measures or other measurable
objective indicia, such as earnings or specifically weighted factors or
compensation formulae. In light of the fact that the Company, at the
parent-company level, is a holding company with a small staff responsible
for numerous and diverse areas of the Company's business and management,
and given the high level of awareness each executive has of the others'
activities and contributions, the Committee evaluates executive performance
and reaches compensation decisions based, in part, upon the recommendations
of the Company's executives.
Finally, the Committee notes that Section 162(m) of the
Internal Revenue Code, in most circumstances, limits to $1 million the
deductibility of compensation, including stock-based compensation, paid to
top executives by public companies. None of the 2000 compensation paid to
the executive officers named in the Summary Compensation Table exceeded the
threshold for deductibility under Section 162(m)."
The Compensation Committee:
Joseph F. Porrino
Frank B. Ryan
Wallace O. Sellers
Performance Graph
The following graph sets forth a comparison of the
semiannual percentage change in the Company's cumulative total stockholder
return on Common Stock with the Standard & Poor's 500 Stock Index* and the
NASDAQ Financial Sub Index.** The foregoing cumulative total returns are
computed assuming (i) an initial investment of $100, and (ii) the
reinvestment of dividends at the frequency with which dividends were paid
during the applicable years. The Company has never paid any dividend on
shares of Common Stock. The graph below reflects comparative information
for the five fiscal years of the Company beginning with the close of
trading on December 31, 1995 and ending December 31, 2000. The stockholder
return reflected below is not necessarily indicative of future performance.
[GRAPHIC OMITTED]
- ---------------------
* The Standard & Poor's 500 Stock Index is a capitalization-weighted
index of 500 stocks designed to measure performance of the broad
domestic economy through changes in the aggregate market value of 500
stocks representing all major industries.
** The NASDAQ Financial Sub Index ("NFSI") is maintained by NASDAQ. As
described by NASDAQ, the NFSI consists of 100 large financial
organizations listed on the NASDAQ National Market.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company shares certain personnel and facilities with
several affiliated and unaffiliated companies (including M.J. Whitman
Holding Corporation and EQSF Advisers, Inc., for both of which Mr. Whitman
is the Chairman, Mr. Barse is the President, Mr. Carney is the Chief
Financial Officer and Mr. Hall is the General Counsel and Secretary), and
certain expenses are allocated among the various entities. Personnel costs
are allocated based upon actual time spent on the Company's business or
upon fixed percentages of compensation. Costs relating to office space and
equipment are allocated based upon fixed percentages. Inter-company
balances are reconciled and reimbursed on a monthly basis.
The Company has also entered into a non-exclusive investment
advisory agreement with Equity Group Investments, L.L.C., ("EGI"), a
company controlled by Mr. Zell, pursuant to which EGI has agreed to
provide, at the request of the Company, certain investment banking services
to the Company in connection with potential transactions. For these
services, DHC pays an annual fee of $125,000 to EGI. In the event that any
transaction is consummated for which the Acquisition Committee of the
Company's Board of Directors determines that EGI provided material
services, the Company will pay to EGI a fee in the amount of 1% of the
consideration paid by the Company in connection with such transaction. Mr.
Zell and Mr. Pate are members of the Acquisition Committee, along with Mr.
Whitman and Mr. Barse. The Company has also agreed to reimburse, upon
request, EGI's out-of-pocket expenses related to the investment advisory
agreement.
PROPOSAL 2
CONFIRMATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected KPMG LLP as independent certified
public accountants to audit the books and records of the Company for the
current fiscal year and recommends that the stockholders confirm such
selection. KPMG LLP served in that capacity with respect to 2000. In the
event of a negative vote, the Board of Directors will reconsider its
selection. A representative of KPMG LLP is expected to be present at the
Annual Meeting, to have the opportunity to make a statement and to respond
to appropriate questions from stockholders.
The Board of Directors unanimously recommends that the
stockholders vote "FOR" confirmation of KPMG LLP as independent certified
public accountants for the current fiscal year.
Proposal 3
AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED COMMON SHARES
FROM 100,000,000 TO 150,000,000
The Company's Certificate of Incorporation currently
authorizes the issuance of 110,000,000 shares of stock, consisting of
10,000,000 shares of Preferred Stock, par value $.10 per share ("Preferred
Stock"), and 100,000,000 shares of Common Stock. As of July 27, 2001, no
shares of Preferred Stock were issued and outstanding. As of that date,
19,516,694 shares of Common Stock were issued (of which 19,505,954 shares
were outstanding and 10,740 shares were held in the Company's treasury) and
1,116,000 were reserved for issuance upon exercise of outstanding
compensatory stock options, 2,002,568 were reserved for exercise of
warrants issued in 1999 to SZ Investments LLC, and 70,000,000 were reserved
for exercise of the recently registered ABC Warrants leaving a balance of
7,364,738 authorized, unissued and unreserved shares of Common Stock.
The Company believes that this amount of authorized stock is
not sufficient to meet future contingencies or to provide adequate
flexibility to the Company to pursue strategic transactions. Should the
shareholders approve Proposal 4, there will be even less authorized stock
available to meet these needs. The Company believes that it would be
appropriate to increase the number of authorized shares of Common Stock to
150,000,000. This number should be sufficient to meet most conceivable
contingencies or strategic needs in the near future. Accordingly, the Board
of Directors has unanimously approved, and recommends that the Company's
stockholders also approve, the proposed amendment to the Certificate of
Incorporation, which will amend Section 4.1 of the Certificate of
Incorporation to read as follows:
"4.1. The Corporation is authorized to issue two
classes of shares designated "Preferred Stock" and
"Common Stock", respectively. The total number of
shares of capital stock the Corporation is authorized
to issue is 160,000,000. The number of shares of
Preferred Stock authorized to be issued is 10,000,000
and the number of shares of Common Stock authorized
to be issued is 150,000,000. The par value of each
share in each class is $.10."
Except for the shares reserved for issuance under the
Amended 1995 Stock and Incentive Plan, the Company does not have any
present intention, commitment or agreement to issue additional shares of
Common Stock authorized by the proposed amendment. However, the increase in
the number of authorized shares of Common Stock to 150,000,000 will provide
the Company with greater flexibility in connection with possible future
financing, capital enhancement or other corporate transactions. It also
avoids the expense and delay of further seeking stockholder approval to
amend the Certificate of Incorporation in the event additional shares of
Common Stock are sought to be issued in the future.
Since the holders of Common Stock are not entitled to
preemptive rights or cumulative voting, the issuance of additional shares
of Common Stock would dilute, under certain circumstances, the ownership
and voting rights of stockholders. The proposed increase in the number of
shares of Common Stock is not intended to inhibit a change of control of
the Company. The Company's Certificate of Incorporation currently contains
provisions limiting transfers by holders of 5% or more of the Common Stock
and prohibiting parties from acquiring 5% of the Common Stock without the
Company's consent. Such provisions are intended to prevent an unreasonable
risk of an "ownership change" of the Company within the meaning of Section
382(g) of the Internal Revenue Code of 1986, as amended, so as to preserve
the Company's net operating loss carryforward.
The Board of Directors unanimously recommends that the stockholders vote
"FOR" the amendment to the certificate of incorporation increasing the
number of authorized common shares from 100,000,000 to 150,000,000.
Proposal 4
Approval of Amendments to 1995 Stock and Incentive Plan
The Board of Directors has approved, and the stockholders
are being asked to approve and ratify, an amendment (the "Amendment") to
the Company's 1995 Stock and Incentive Plan (the "1995 Plan"). The purpose
of the Amendment is to enable the Company to continue to provide incentives
to increase the personal financial identification of key personnel with the
long term growth of the Company and the interests of the Company's
stockholders through the ownership and performance of the Company's Common
Stock, to enhance the Company's ability to retain key personnel, and to
attract outstanding prospective employees, other service providers and
Directors. The Amendment will provide the Company with additional capacity
to compensate future employees and service providers as the Company pursues
its strategy of growth.
The summary of the Amendment that appears below is qualified
in its entirety by reference to the full text of the Amended 1995 Plan
attached hereto as Appendix B. Capitalized terms not otherwise defined
herein have the same meaning ascribed to them in Appendix B.
SUMMARY OF ORIGINAL 1995 PLAN PROVISIONS
The Company's stockholders approved the 1995 Plan at their
meeting on April 25, 1995, effective as of March 21, 1995. The 1995 Plan
provides for the following awards that can be made in order to implement
the purposes of the 1995 Plan: (1) stock options, including incentive stock
options (within the meaning of Section 422 of the Internal Revenue Code)
and non-qualified stock options; (2) stock appreciation rights, whether in
tandem with stock options or freestanding; (3) restricted stock; (4)
incentive awards; and (5) performance awards. Directors of the Company and
employees and independent contractors of the Company and its subsidiaries
are eligible to participate in the Plan. The 1995 Plan is administered by
the Compensation Committee of the Board of Directors (the "Committee"). The
1995 Plan grants the Committee broad flexibility in establishing the terms
and restrictions for particular awards as facts and circumstances warrant.
Subject to the terms of the 1995 Plan, the Committee has authority (i) to
select the individuals who will receive awards, (ii) to determine the
timing, form, amount or value and terms of grants and awards (provided that
no incentive stock option may be exercisable more than ten years after its
date of grant), and the conditions and restrictions, if any, subject to
which grants and awards will be made and become payable under the 1995
Plan, and (iii) to construe the 1995 Plan and to prescribe rules and
regulations with respect to the administration of the 1995 Plan. In the
event of a change in control of the Company (within the meaning of the 1995
Plan), all awards will become immediately vested and fully exercisable.
Each award under the 1995 Plan is evidenced by an agreement in such form
and containing such provisions not inconsistent with the provisions of the
1995 Plan as the Committee from time to time approves.
However, the 1995 Plan does impose certain significant
limitations on the discretion of the Committee. First, the exercise price
per share of Common Stock under an option may not be less than the fair
market value of the share on the date of grant of the option. Second,
non-Employee Directors may be granted awards only in accordance with
Section 7.07 of the Plan. Except as otherwise described below (regarding
the proposed amendment to the 1995 Plan), Section 7.07 provides for a grant
of an option covering 40,000 shares of Common Stock to a non-Employee
Director at the first annual meeting of the Company stockholders upon or
following the Director's election to the Board of Directors at an exercise
price equal to the stock's fair market value on the date of grant. Any
options granted pursuant to Section 7.07 to a non-Employee Director (i)
have a term of ten years, (ii) vest one-third per year on each of the first
three anniversaries of the date of grant, and (iii) cease to be exercisable
three months following termination of the optionee's service as a Director
(or one year in the case of death).
Shares are deemed to be issued under the 1995 Plan only to
the extent actually issued pursuant to an award or settled in cash. To the
extent that an award lapses or is forfeited, any shares subject to such
award are made available again for grant. In the event of any increases or
decreases in the number of issued and outstanding shares of Common Stock
pursuant to stock splits, mergers, reorganizations, recapitalizations,
stock dividends or other events described under the terms of the 1995 Plan,
the Committee will make appropriate adjustments to (i) the aggregate number
of shares available for issuance under the 1995 Plan and the number of
shares subject to outstanding grants or awards, (ii) the exercise price per
share of outstanding stock options and (iii) the number and kinds of shares
which may be distributed under the 1995 Plan. The terms of stock options,
stock appreciation rights, restricted stock, and incentive and performance
awards are also subject to adjustments by the Committee to reflect changes
in the Company's capitalization.
No awards may be granted under the 1995 Plan after March 21,
2005. The 1995 Plan will remain in effect until all awards have been
satisfied or expired. The 1995 Plan may be terminated by the Board of
Directors, but any such termination will not affect awards made prior to
termination. The Board of Directors may at any time terminate or amend the
1995 Plan in any respect, except that the provisions of Section 7.07
regarding grants to non-Employee Directors generally may not be amended
more than once every six months and the Board may not, without approval of
the stockholders of the Company, amend the 1995 Plan so as to (i) increase
the number of shares of Common Stock which may be issued under the 1995
Plan (except for adjustments in the number of shares permitted with respect
to certain stock splits, stock dividends, mergers, reorganizations or
recapitalizations as described above); (ii) change the option exercise
price (except for adjustments in the number of shares permitted with
respect to certain stock splits, stock dividends, reorganizations or
recapitalizations as described above); (iii) modify the requirements as to
eligibility for participation; (iv) materially increase the benefits
accruing to participants under the 1995 Plan; or (v) extend the duration of
the 1995 Plan beyond March 21, 2005.
The relevant federal income tax effects applicable to
options are summarized below. The following is a brief summary only, and
reference is made to the Internal Revenue Code and the regulations and
interpretations issued thereunder for a complete statement of all relevant
federal tax consequences. This summary is not intended to be exhaustive and
does not describe state, local or foreign tax consequences.
o With respect to non-qualified options, an optionee
generally will not be subject to tax at the time the
option is granted. Upon exercise of the option where
the exercise price is paid in cash, the optionee
generally must include in ordinary income at the time
of exercise an amount equal to the excess, if any, of
the fair market value of the stock at the time of
exercise over the exercise price, and will have a tax
basis in such shares equal to the cash paid upon
exercise plus the amount taxable as ordinary income
to the optionee. The Company generally will be
entitled to a deduction in the amount of an
optionee's ordinary income at the time such income is
recognized by the optionee. Income and payroll taxes
are required to be withheld on the amount of ordinary
income resulting from the exercise.
o With respect to incentive stock options, generally no
taxable income is realized by an optionee upon grant
of the option. If shares of stock are issued to the
optionee pursuant to the exercise of the option and
the optionee does not dispose of the shares within
the two-year period after the date of grant or within
one year after the receipt of such shares (a
"disqualifying disposition"), then, generally (i) the
optionee will not realize ordinary income upon
exercise and (ii) upon sale of such shares, any
amount realized in excess of the exercise price paid
for the shares will be taxed to such participant as
capital gain (or loss), and the Company will not be
entitled to any deduction in connection with the
option. If shares acquired upon the exercise of an
incentive stock option are disposed of in a
disqualifying disposition, the optionee generally
will include in ordinary income in the year of
disposition an amount equal to the excess of the fair
market value of the shares at the time of exercise
(or, if less, the amount realized on the disposition
of the shares) over the exercise price paid for the
shares, and the Company generally will be entitled to
a deduction in the amount of an optionee's ordinary
income at the time such income is recognized by the
optionee. Subject to certain exceptions, an option
that otherwise qualifies as an incentive stock option
generally will not be treated as an incentive stock
option if it is exercised more than three months
following termination of employment, in which case it
will be treated instead as a non-qualified option (as
discussed above).
On August 1, 2001, the closing price of the Company's common
stock as reported on the American Stock Exchange was $4.10 per share.
PROPOSED AMENDMENTS
Shares Subject to the Amended 1995 Plan
The Amendment provides for an increase in the aggregate
number of shares of Common Stock which may be issued under the 1995 Plan,
or as to which options, stock appreciation rights or other awards may be
granted, to a total not to exceed 2,540,000, increased from 1,700,000. Of
this amount, a maximum of 2,000,000 shares may relate to awards to eligible
persons (including Employee Directors). This amount is increased from
1,500,000 shares to provide additional flexibility for future Awards for
incentives and other appropriate corporate purposes. The aggregate number
of shares which may be issued to non-Employee Directors is also being
increased from 200,000 to 540,000 shares.
Maximum Awards to Individuals
The present Plan provides for a maximum of 125,000 shares to
be subject to awards to any one individual in any one year. This number was
increased to 300,000 to provide additional flexibility and to comport with
market changes since 1995. The Amendment would increase the limit but still
retain the intent to comply with Section 162(m) of the Code. This Amendment
is being made to increase the Company's flexibility under the 1995 Plan.
Awards to Independent Contractors
The Amendment provides that the Committee may issue Awards
to persons who are not Employees of the Company but who provide services to
the Company such that it is appropriate for those persons ("Independent
Contractors") to receive compensation or incentives in the form of an
Award. These awards to Independent Contractors are to be included in the
total limit of 2,000,000 shares available to eligible persons. The
Amendment specifically provides that the exercise of any Option awarded to
an Independent Contractor may be restricted based upon the continuing
services provided by such Independent Contractor. The Board believes that
this provision of the Amendment will give it increased flexibility to
attract, retain and give incentives to highly qualified persons who provide
valuable services to the Company. The Committee has already awarded Options
subject to ratification by the shareholders to certain Independent
Contractors and such Awards shall be ratified by the approval and
ratification of the Amendment.
Increase in Fixed Grants to Non-Employee Directors
The Amendment provides a fixed grant of Options to
non-Employee Directors serving as of December 12, 2000 to purchase 40,000
shares. This grant was made as of December 12, 2000, the date that the
Amendment was approved by the unanimous vote of all Directors not affected
by this provision of the Amendment (the "Unaffected Directors"). The
Unaffected Directors included Samuel Zell, William Pate and Harry LeVine.
Each of those three Directors has agreed to waive their rights to any fixed
grant of Options, and thus they will receive no additional grant pursuant
to the Amendment. The Unaffected Directors believe that an additional grant
to non-Employee Directors will increase the Company's ability to retain the
highest quality Directors for the Company and reward present Directors for
long and distinguished service to the Company.
Adoption and Extension of Director Options Issued in 1991
The Amendment provides that certain Options granted to three
current Directors in 1991 will be extended and adopted under the 1995 Plan.
The option to purchase 46,667 shares granted to Joseph Porrino, the option
to purchase 46,667 shares granted to Frank B. Ryan and the option to
purchase 46,666 shares granted to Eugene M. Isenberg. All three of these
Options were granted on September 16, 1991 and all have an exercise price
of $3.625 per share. These three Directors did not receive the initial
fixed grant of options for non-Employee Directors under the 1995 Plan
because they were already Directors at the time of its adoption. The other
Directors of the Company unanimously voted to extend the term of the 1991
Options and incorporate them within the terms of the 1995 Plan, insofar as
their terms did not conflict with the terms of the 1995 Plan. If any such
conflict were to arise, the Amendment provides that the terms of the 1995
Plan as amended by the Amendment would control. The other Directors believe
that the extension of these Options will increase the Company's ability to
retain and give proper incentives to the affected Directors and reward them
for long and distinguished service to the Company.
The Board of Directors Unanimously recommends that the
stockholders vote "For" the approval and ratification of the Amendment to
the Company's 1995 Stock and Incentive Plan.
PROPOSALS AND NOMINATIONS BY STOCKHOLDERS
Proposals of stockholders intended to be presented at the
2002 Annual Meeting of Stockholders of the Company must be received by the
Company for inclusion in the Proxy Statement and form(s) of proxy relating
to such Annual Meeting no later than January 31, 2002. Proposals to be
timely submitted for stockholder action at the Company's 2002 Annual
Meeting must be received by the Company at its principal executive offices
no less than 45 days prior to August 4, 2002. Stockholder proposals should
be directed to the attention of the Secretary of the Company at the address
of the Company set forth on the first page of this Proxy Statement. Timely
receipt of a stockholder's proposal will satisfy only one of various
conditions established by the SEC for inclusion in the Company's proxy
materials.
ANNUAL REPORT
The Annual Report to Stockholders of the Company for the
year ended December 31, 2000 was mailed to all stockholders of the Company
of record on March 31, 2001.
By Order of the Board of Directors
DANIELSON HOLDING CORPORATION
W. James Hall
Secretary
August 2, 2001
Appendix A
DANIELSON HOLDING CORPORATION, INC. AUDIT COMMITTEE CHARTER
Organization
There shall be a committee of the Board of Directors to be known as the
Audit Committee. The Audit Committee shall consist of at least three
independent members of the Board of Directors, who serve at the pleasure of
the Board. The Board of Directors shall designate the Audit Committee
members and the committee chair. The Audit Committee shall be composed of
directors who are independent of the management of the corporation and are
free of any relationship that, in the opinion of the Board of Directors,
would interfere with their exercise of independent judgment as committee
members.
Members of the Audit Committee should be considered independent if they
have no relationship to the corporation which may interfere with the
exercise of their independence from management and the corporation. If a
director has a relationship which could interfere with the exercise of
their independence from management and the corporation, such a director who
has one or more of these relationships may be appointed to the Audit
Committee, if the Board under exceptional and limited circumstances
determines that membership on the committee by the individual is required
by the best interest of the corporation and its shareholders, and the Board
discloses in the next annual proxy statement subsequent to such
determination, the nature of the relationship and the reasons for that
determination.
Meetings
The Audit Committee should meet at least four times annually or more
frequently as circumstances may require. The Audit Committee should meet at
least annually with management and independent accountants in separate
executive sessions to discuss any matters that the Audit Committee or each
of the entities believe should be discussed privately.
Director Qualifications
The Audit Committee members should be experienced in reviewing and
evaluating financial matters with at least one member having accounting or
related financial management expertise.
Statement of Policy-Purpose
The Audit Committee shall assist the Board of Directors in fulfilling their
responsibility to the shareholders, potential shareholders, investment
community, the public and any governmental body relating to corporate
accounting, reporting practices of the corporation, the quality and
integrity of the financial reports, legal compliance and ethics codes that
management of the corporation and the board have established. It is the
responsibility of the Audit Committee to maintain free and open
communication between the directors and the financial management of the
corporation to encourage continuous improvement of and adherence to the
corporation's policies, procedures and practices.
Responsibilities and Duties
In carrying out its responsibilities, the Audit Committee believes its
policies and procedures should remain flexible, to best react to the
changing conditions and ensure the directors and shareholders that
corporate accounting and reporting practices of the corporation are in
accordance with all legal requirements and are of the highest quality.
In carrying out these responsibilities, the Audit Committee will:
|X| Review and reassess the adequacy of this charter at least
annually. This charter must be submitted to the Board of Directors
for approval and have the document published at least every three
years in accordance with SEC regulations.
|X| Review and update this charter periodically, as conditions
require.
|X| Review and recommend to the Board of Directors the selection of
independent accountants to audit the financial statements of the
corporation, its divisions and subsidiaries.
|X| Review and approve fees and other compensation to be paid to the
independent accountants.
|X| Review and discuss with the independent accountants all
significant relationships the accountants have with the
corporation to verify the accountants' independence.
|X| Review the performance of the independent accountants and approve
any discharge of the independent accounts when circumstances so
warrant.
|X| Meet with the independent accountants and financial management of
the corporation to review the scope of the proposed audit for the
current year and the audit procedures to be utilized.
|X| At the conclusion of the audit, meet with the independent
accountants to review the audit, their comments and
recommendations.
|X| Review with the independent accountants and the corporation's
financial and accounting personnel, the integrity, adequacy and
effectiveness of the accounting and financial controls of the
corporation, and its internal and external financial reporting
practices and processes and receive and review any recommendations
for the improvement of such internal control procedures, reporting
practices and processes or areas where new or more detailed
controls or procedures are desirable.
|X| Review and meet separately with management and independent
accountants to discuss any significant difficulties encountered
during the course of the audits, including but not limited to
restrictions on scope of work, access to information,
disagreements among management and independent accountants in
connection with preparation of financial statements, and any
change in accounting principles.
|X| Meet separately with independent accountants, without members of
management present to discuss independent accountants' evaluation
of the corporation's financial and accounting personnel,
cooperation received during the audit, and any matters which may
be brought to the attention of the Audit Committee.
|X| Prior to releasing quarterly and year-end earnings, review with
the independent accountants and financial management of the
corporation their qualitative judgments about the appropriateness
of the corporation's accounting principles and financial
disclosure practices used and about the degree of aggressiveness
or conservatism of the corporation's accounting principles and
underlining estimates.
|X| Review the financial statements contained in the annual report to
shareholders with management and the independent accountants to
determine that the independent accountants are satisfied with the
disclosure and content of the financial statements to be presented
to shareholders.
|X| Review accounting and financial human resources and succession
planning within the corporation.
|X| Establish, review and update a code of ethical conduct and ensure
management has established a system to enforce such code.
|X| Review management's monitoring of the corporation's compliance
with such code of ethical conduct and ensure that a proper review
system is in place to satisfy legal reporting requirements.
|X| Review with corporation's legal counsel any compliance matter,
including corporate securities trading, or any legal matter which
could have significant impact on the corporation's financial
statements.
|X| Submit the minutes of all meetings of the Audit Committee to, or
discuss the matters discussed at each committee meeting with the
Board of Directors.
|X| Investigate any matter brought to the attention of the Audit
Committee within the scope of its duties, with the power to retain
outside independent counsel, accountants, or others for this
purpose if, in its judgment, that is appropriate.
|X| Perform any other activities consistent with this charter, the
corporation's by-laws and governing law, as the Audit Committee or
the Board of Directors deems necessary or appropriate.
|X| Annually issue a report to shareholders to be included in the
corporation's annual proxy statement, stating whether the audit
committee has 1) reviewed and discussed the audited financial
statements with management and the independent accountants, and 2)
received certain disclosure from the independent accountants
regarding their independence.
Addendum 1
The following are examples of relationships which members of the Audit
Committee may have which may interfere with the exercise of their
independence from management and the corporation:
1. A director being employed by the corporation or any of its
affiliates for the current year or any of the past five years;
2. A director accepting any compensation from the corporation or any
of its affiliates other than compensation for board service or
benefits under tax qualified retirement plans;
3. A director being a member of immediate family of an individual who
is, or has been in any of the past five years, employed by the
corporation or any of its affiliates as an executive officer;
4. A director being a partner in, or a controlling shareholder or an
executive officer of, any for profit business organization to
which the corporation made, or from which the corporation received
payments that are or have been significant to the corporation or
business organization in any of the past five years;
5. A director being employed as an executive of another company where
any of the corporation's executives serve on the company's
compensation committee.
Appendix B
Danielson Holding Corporation
1995 Stock and Incentive Plan
(As amended effective December 12, 2000)
ARTICLE I.
PURPOSE
The purpose of the DANIELSON HOLDING CORPORATION 1995 STOCK AND INCENTIVE
PLAN (the "Plan") is to provide a means through which Danielson Holding
Corporation, a Delaware corporation (the "Company"), and its subsidiaries
may attract able persons to enter the employ, provide services for or
become Directors of the Company and to provide a means whereby those
persons upon whom the responsibilities of the successful administration and
management of the Company rest, and whose present and potential
contributions to the welfare of the Company are of importance, can acquire
and maintain stock ownership, thereby strengthening their concern for the
welfare of the Company and their desire to remain in its service, employ or
as Directors. A further purpose of the Plan is to provide such persons with
additional incentive and reward opportunities designed to enhance the
profitable growth of the Company. Accordingly, the Plan provides for
granting Incentive Stock Options, Options which do not constitute Incentive
Stock Options, Stock Appreciation Rights, Restricted Stock Awards,
Performance Awards, Incentive Awards, Stock Bonuses, or combinations of the
foregoing, as is best suited to the circumstances of the particular person,
as provided herein.
ARTICLE II.
DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "Award" means, individually or collectively, any Option, Restricted
Stock Award, Performance Award, Incentive Award, or Stock Appreciation
Right.
(b) "Award Agreement" means a written agreement between the Company and
Holder with respect to any Award.
(c) "Board" means the Board of Directors of the Company.
(d) A "Change of Control" of the Company means and shall be deemed to occur
if any of the following occurs: (i) the acquisition, after March 21, 1995,
by an individual, entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Exchange Act) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20 percent or
more of either (A) the then outstanding shares of Common Stock or (B) the
combined voting power of the voting securities of the Company entitled to
vote generally in the election of Directors (the "Voting Securities"); (ii)
individuals who, on March 22, 1995, constituted the Board (the "Incumbent
Board"), cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual who becomes a Director
subsequent to March 21, 1995 and whose election, or nomination for election
by the Company's stockholders, was approved by a vote of at least a
majority of the Directors then serving on and comprising the Incumbent
Board shall be deemed to be, and treated as if such individual were, a
member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents; (iii) approval by
the Board or the stockholders of the Company of (A) a tender offer to
acquire 20 percent or more of the shares of Common Stock or Voting
Securities, (B) a reorganization, (C) a merger, or (D) a consolidation,
other than a reorganization, merger or consolidation with respect to which
all or substantially all of the individuals and entities who were the
beneficial owners, immediately prior to such reorganization, merger or
consolidation, of the shares of Common Stock and Voting Securities
beneficially own, directly or indirectly, immediately after such
reorganization, merger or consolidation, more than 80 percent of the then
outstanding common stock and voting securities (entitled to vote generally
in the election of Directors) of the corporation resulting from such
reorganization, merger or consolidation, in substantially the same
proportions as their respective ownership, immediately prior to such
reorganization, merger or consolidation, of the shares of Common Stock and
the Voting Securities; or (iv) approval by the Board or the Company's
stockholders of (A) a complete or substantial liquidation or dissolution of
the Company, or (B) the sale or other disposition of all or substantially
all of the assets of the Company.
(e) "Code" means the Internal Revenue Code of 1986, as amended. Reference
in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
thereunder.
(f) "Committee" means not less than two members of the Board who are
selected by the Board as provided in Article IV, Section 4.01.
(g) "Common Stock" means the common stock, $0.10 par value per share, of
the Company.
(h) "Company" means Danielson Holding Corporation, a Delaware corporation,
and any successor thereto.
(i) "Director" means an individual elected to the Board by the stockholders
of the Company or by the Board under applicable corporate law who is
serving on the Board on the date the Plan is adopted by the Board or is
elected to the Board after such date.
(j) "Eligible Compensation," for purposes of Article XII hereof, means, for
any calendar year, the sum of all amounts of authorized salary, bonus and
fees paid directly to the Participant by the Company which would be
reportable for Federal income tax purposes. Eligible Compensation shall
include all such amounts with respect to the Participant for the entire
calendar year if such individual was a Participant for any portion of such
year.
(k) "Employee" means any person (including a Director) in an employment
relationship with the Company or any subsidiary corporation (as defined in
Section 424 of the Code.)
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
Reference in the Plan to any section of the Exchange Act shall be deemed to
include any amendments or successor provisions to such section and any
regulation thereunder.
(m) "Expiring Director Options" means the options granted as of September
16, 1991 that are held by three non-Employee Directors, namely Joseph
Porrino, Frank B. Ryan, and Eugene M. Isenberg, and outstanding as of
December 12, 2000.
(n) "Fair Market Value" means, as of any specified date, the mean of the
reported high and low sales prices of the Common Stock on the composite
tape of the principal stock exchange on which the Company's Common Stock is
listed for trading on that date or, if no prices are recorded on that date,
on the last preceding date on which such prices of the Common Stock are so
reported. If the Common Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder,
its fair market value shall be deemed to be equal to the average between
the reported high and low and closing bid and asked prices of Common Stock
on the most recent date on which Common Stock was publicly traded. In the
event Common Stock is not publicly traded at the time a determination of
this value is required to be made hereunder, the determination of its fair
market value shall be made by the Committee in such manner as it deems
appropriate.
(o) "Holder" means an Employee, Independent Contractor, or a non-employee
Director, who has received an Award under the Plan.
(p) "Incentive Award" means an Award granted under Article XI of the Plan.
(q) "Incentive Award Agreement" means a written agreement between the
Company and a Holder with respect to an Incentive Award.
(r) "Incentive Stock Option" means an incentive stock option within the
meaning of Section 422 of the Code.
(s) "Independent Contractor" means any person who is not an Employee and
who nonetheless provides services to the Company or any subsidiary of the
Company.
(t) "Option" means an Award granted under Article VII of the Plan and,
except as otherwise specified in the Plan, includes both Incentive Stock
Options to purchase Common Stock and Options which do not constitute
Incentive Stock Options to purchase Common Stock.
(u) "Option Agreement" means a written agreement between the Company and a
Holder with respect to an Option.
(v) "Performance Award" means an Award granted under Article X of the Plan.
(w) "Performance Award Agreement" means a written agreement between the
Company and a Holder with respect to a Performance Award.
(x) "Plan" means the Company's 1995 Stock and Incentive Plan, as amended
from time to time.
(y) "Restricted Stock Agreement" means a written agreement between the
Company and a Holder with respect to a Restricted Stock Award.
(z) "Restricted Stock Award" means an Award granted under Article IX of the
Plan.
(aa) "Rule 16b-3" means SEC Rule 16b-3 promulgated under the Exchange Act,
as such may be amended from time to time, and any successor rule,
regulation or statute fulfilling the same or a similar function.
(bb) "SEC" means the Securities and Exchange Commission and any successor
thereto.
(cc) "Spread" means, in the case of a Stock Appreciation Right, an amount
equal to the excess, if any, of the Fair Market Value of a share of Common
Stock on the date such right is exercised over the exercise price of such
Stock Appreciation Right.
(dd) "Stock Appreciation Right" means an Award granted under Article VIII
of the Plan.
(ee) "Stock Appreciation Rights Agreement" means a written agreement
between the Company and a Holder with respect to an Award of Stock
Appreciation Rights.
ARTICLE III.
EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of March 21, 1995, provided the Plan is
approved by the stockholders of the Company within twelve months after such
effective date. No Awards, including Awards of Incentive Stock Options may
be granted under the Plan after March 21, 2005. The Plan shall remain in
effect until all Awards granted under the Plan have been satisfied or
expired.
ARTICLE IV.
ADMINISTRATION
Section 4.01. Composition of the Committee. The Plan shall be administered
by a Committee which shall be (i) appointed by the Board; (ii) constituted
so as to permit the Plan to comply with Rule 16b-3; and (iii) constituted
solely of "Outside Directors" within the meaning of Section 162(m) of the
Code and applicable interpretive authority thereunder. Except for Awards
described in Article VII, Section 7.07, or permitted for disinterested
persons under Rule 16b-3(c)(2), no member of the Committee shall be
eligible to receive an Award under the Plan or shall have received an Award
or been granted or awarded equity securities pursuant to any other plan of
the Company or any of its affiliates in the year preceding the date of any
service on the Committee.
Section 4.02. Powers. Subject to the provisions of, and except as otherwise
provided by, the Plan, the Committee shall have sole authority, in its
discretion, to determine which Employees or Independent Contractors shall
receive an Award, the time or times when such Award shall be made, what
type of Award shall be granted, the number of shares of Common Stock which
may be issued under each Option, Stock Appreciation Right or Restricted
Stock Award, and the value of each Performance Award and Incentive Award.
In making such determinations, the Committee may take into account the
nature of the services rendered by the respective individuals, their
present and potential contribution to the Company's success and such other
factors as the Committee in its discretion shall deem relevant.
Section 4.03. Additional Powers. The Committee shall have such additional
powers as are delegated to it by the other provisions of the Plan. Subject
to the express provisions of the Plan, the Committee is authorized to
construe the Plan and the respective agreements executed thereunder, to
prescribe such rules and regulations relating to the Plan as it may deem
advisable to implement the Plan, and to determine the terms, restrictions
and provisions of each Award, including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
designated Options to qualify as Incentive Stock Options, and to make all
other determinations necessary or advisable for administering the Plan. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in any agreement relating to an Award in the manner and to
the extent it shall deem expedient to implement such agreement. The
determinations of the Committee with respect to the matters referred to in
this Article IV shall be conclusive and binding.
Section 4.04. Liability Limitation. Neither the Board nor the Committee,
nor any member of either, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in
connection with the Plan (including, without limitation, any Award or Award
Agreement), and the members of the Board and the Committee shall be
entitled to indemnification and reimbursement by the Company in respect of
any claim, loss, damage or expense (including, without limitation,
attorneys' fees) arising or resulting therefrom to the fullest extent
permitted by law and/or under any directors' and officers' liability
insurance coverage which may be in effect from time to time.
ARTICLE V.
GRANT OF OPTIONS, STOCK APPRECIATION RIGHTS,
RESTRICTED STOCK AWARDS, PERFORMANCE AWARDS,
AND INCENTIVE AWARDS; SHARES SUBJECT TO THE PLAN
Section 5.01. Stock Grant and Award Limits. The Committee may from time to
time grant Awards to one or more individuals determined by it to be
eligible for participation in the Plan in accordance with the provisions of
Article VI. Subject to Article XII, the aggregate number of shares of
Common Stock that may be issued under the Plan (other than such shares that
may be issued under Section 7.07) shall not exceed 2,000,000 shares; the
aggregate number of shares of Common Stock that may be issued under Section
7.07 shall not exceed 540,000 shares. Shares shall be deemed to have been
issued under the Plan only (i) to the extent actually issued and delivered
pursuant to an Award, or (ii) to the extent an Award granted under Article
VII, VIII, IX, X, or XI is settled in cash. To the extent that an Award
lapses or the rights of its Holder terminate, any shares of Common Stock
subject to such Award thereupon shall be available again for the grant of
an Award. No Award shall be granted under the Plan after March 21, 2005.
Separate stock certificates shall be issued by the Company for those shares
acquired pursuant to the exercise of any Option which does not constitute
an Incentive Stock Option. Notwithstanding any provision in the Plan to the
contrary, the maximum number of shares of Common Stock that may be subject
to Awards of Options and Stock Appreciation Rights under Article VII or
Article VIII hereof granted to any one individual during any calendar year,
including 1995 and thereafter, is 300,000 shares (subject to adjustment in
the same manner as provided in Article XII with respect to shares of Common
Stock subject to Awards then outstanding). The limitation set forth in the
preceding sentence shall be applied in a manner which is designed to permit
compensation generated in connection with the exercise of Options and Stock
Appreciation Rights to constitute "performance-based" compensation for
purposes of Section 162(m) of the Code, including, without limitation,
counting against such maximum number of shares, to the extent required
under Section 162(m) of the Code and applicable interpretive authority
thereunder, any shares subject to Options or Stock Appreciation Rights
which are canceled or repriced.
Section 5.02. Stock Offered. The stock to be offered pursuant to the grant
of an Award may be authorized but unissued Common Stock or Common Stock
previously issued and outstanding and reacquired by the Company.
ARTICLE VI.
ELIGIBILITY
Awards made pursuant to Articles IX, X, and XI may be granted only to
persons who, at the time of grant, are Employees or Independent
Contractors. Awards made pursuant to Articles VII, VIII, and XII may be
granted only to persons who, at the time of grant, are Employees,
Independent Contractors, or (only as set forth in the following sentence)
Directors. Except as set forth in Article VII, Section 7.07, Awards under
this Plan may not be granted to any Director who is not an employee of the
Company. In no event is any individual other than an Employee eligible to
receive any Incentive Stock Option under the Plan. An award may be granted
on more than one occasion to the same person and, subject to the
limitations set forth in the Plan, such Award may include an Incentive
Stock Option or an Option which is not an Incentive Stock Option, a Stock
Appreciation Right, a Restricted Stock Award, a Performance Award, an
Incentive Award or any combination thereof.
ARTICLE VII.
STOCK OPTIONS
Section 7.01. Option Period. The term of each Option shall be as specified
by the Committee at the date of grant.
Section 7.02. Limitations on Exercise of Option. An Option shall be
exercisable in whole or in such installments and at such times as
determined by the Committee; provided, however, that no Incentive Stock
Option shall be exercisable after ten years after the date of grant of such
Incentive Stock Option.
Section 7.03. Special Limitations on Incentive Stock Options. To the extent
that the aggregate Fair Market Value (determined at the time the respective
Incentive Stock Option is granted) of Common Stock with respect to which
Incentive Stock Options granted after 1986 are exercisable for the first
time by an individual during any calendar year under all incentive stock
option plans of the Company and its subsidiaries exceeds $100,000, such
Incentive Stock Options shall be treated as options which do not constitute
Incentive Stock Options. No Incentive Stock Option shall be granted to an
individual if, at the time the Option is granted, such individual owns
stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or its subsidiaries, within the
meaning of Section 422(b)(6) of the Code unless (i) at the time such Option
is granted the option price is at least 110 percent of the Fair Market
Value of the Common Stock subject to the Option and (ii) such Option by its
terms is not exercisable after the expiration of five years from the date
of grant.
Section 7.04. Option Agreement. Each Option shall be evidenced by an Option
Agreement in such form and containing such provisions not inconsistent with
the provisions of the Plan as the Committee from time to time shall
approve, including, without limitation, provisions to qualify an Incentive
Stock Option under Section 422 of the Code. An Option Agreement may provide
for the payment of the option price, in whole or in part, by the delivery
of a number of shares of Common Stock (plus cash if necessary) having a
Fair Market Value equal to such option price. Each Option Agreement shall
provide that the Option may not be exercised earlier than six months from
the date of grant and shall specify the effect of termination of employment
on the exercisability of the Option. In the case of an Independent
Contractor, the Option Agreement may provide for limitations on the
exercisability of the Option and shall specify the effect on the
exercisabliliy of the option of a termination of the Independent
Contractor's services to the Company or any of its subsidiaries. Moreover,
an Option Agreement may provide for a "cashless exercise" of the Option by
establishing procedures whereby the Holder, by a properly executed written
notice directs (i) an immediate market sale or margin loan respecting all
or a part of the shares of Common Stock to which such Holder is entitled
upon exercise pursuant to an extension of credit by the Company to the
Holder in the amount of the Option price, (ii) the delivery of the shares
of Common Stock from the Company directly to a brokerage firm, and (iii)
the delivery of the Option price from sale or margin loan proceeds from the
brokerage firm directly to the Company. Such Option Agreement also may
include, without limitation, provisions relating to (a) subject to the
provisions hereof accelerating vesting on a Change of Control, vesting of
Options, including a provision that Options shall continue to vest and
remain exercisable for so long as a Holder who terminates employment with
the Company remains an employee of any Company subsidiary or affiliate of
the Company, (b) tax matters (including provisions covering any applicable
employee wage or other withholding requirements and requiring additional
"gross-up" payments to Holders to meet any excise taxes or other additional
income tax liability imposed as a result of a Change of Control payment
resulting from the operation of the Plan or of such Option Agreement), and
(c) any other matters not inconsistent with the terms and provisions of
this Plan that the Committee shall in its sole discretion determine. The
terms and conditions of the respective Option Agreements need not be
identical.
Section 7.05. Option Price and Payment. The price at which a share of
Common Stock may be purchased upon exercise of an Option shall be
determined by the Committee, but such purchase price (i) shall not be less
than the Fair Market Value of a share of Common Stock on the date such
Option is granted, and (ii) shall be subject to adjustment as provided in
Article XII. The Option or portion thereof may be exercised by delivery of
an irrevocable notice of exercise to the Company. The purchase price of the
Option or portion thereof shall be paid in full in the manner prescribed by
the Committee. Separate stock certificates shall be issued by the Company
for shares acquired pursuant to the exercise of an Incentive Stock Option
and for shares acquired pursuant to the exercise of any Option which does
not constitute an Incentive Stock Option.
Section 7.06. Stockholder Rights and Privileges. The Holder shall be
entitled to all of the privileges and rights of a stockholder only with
respect to such shares of Common Stock as have been purchased under the
Option and for which certificates of stock have been registered in the
Holder's name.
Section 7.07. Fixed Grants to Non-Employee Directors. Each non-employee
Director shall receive, on the date of the first annual meeting of
stockholders of the Company upon or following his election to the Board
during the period commencing on January 1, 1995 and ending upon the
expiration or termination of the Plan, an Option to purchase 40,000 shares
of Common Stock at the Fair Market Value thereof on the date of grant. In
addition, each non-employee Director serving in such capacity as of
December 12, 2000 shall also receive, as of the grant date of December 12,
2000, an Option to purchase 40,000 shares of Common Stock at the Fair
Market Value thereof on the date of the grant. Also, Expiring Director
Options are hereby incorporated under this Plan and this Section 7.07 and
extended for ten years from December 12, 2000. The Expiring Director
Options shall be construed pursuant to the Option Agreements issued at the
time of the grant, except insofar as there may be any conflict between the
terms of such agreement and this Plan, in which case the provision of the
Plan, as amended, shall control. Each Option granted under this Article
VII, Section 7.07, shall (i) not constitute an Incentive Stock Option, (ii)
not have Stock Appreciation Rights granted in connection therewith, (iii)
have a term of ten years (except as otherwise herein provided with respect
Expiring Director Options), (iv) vest one-third per year on each of the
first three anniversary dates of grant subject to acceleration and vesting
pursuant to Article XII, Section 12.03, and (v) cease to be exercisable
after the date which is three months after the termination of such
individual's service as a Director (provided, however, that such exercise
period shall be extended to one year in the event of the death of the
non-employee Director). Any non-employee Director holding Options granted
under this Section 7.07 who is a member of the Committee shall not
participate in any action of the Committee with respect to any claim or
dispute involving such non-employee Director. Notwithstanding the terms and
provisions of Article XIII hereof, the terms and provisions of this Section
7.07 shall not be amended more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security
Act, the Exchange Act, or other applicable law, or the rules under any of
the foregoing.
ARTICLE VIII.
STOCK APPRECIATION RIGHTS
Section 8.01. Stock Appreciation Rights. A Stock Appreciation Right is the
right to receive an amount equal to the Spread with respect to a share of
Common Stock upon the exercise of such Stock Appreciation Right. Stock
Appreciation Rights may be granted in connection with the grant of an
Option in which case, the Option Agreement will provide that exercise of
Stock Appreciation Rights will result in the surrender of the right to
purchase the shares under the Option as to which the Stock Appreciation
Rights were exercised and such other conditions as may be required by
applicable income tax laws. Alternatively, Stock Appreciation Rights may be
granted independently of Options in which case each Award of Stock
Appreciation Rights shall be evidenced by a Stock Appreciation Rights
Agreement which shall contain such terms and conditions as may be approved
by the Committee including without limitation all applicable matters set
forth with specificity in Article VII, Section 7.04, with respect to Option
Agreements. The terms and conditions of the respective Stock Appreciation
Rights Agreements need not be identical. The Spread with respect to a Stock
Appreciation Right may be payable either in cash, shares of Common Stock
with a Fair Market Value equal to the Spread or in a combination of cash
and shares of Common Stock. With respect to Stock Appreciation Rights that
are subject to Section 16 of the Exchange Act, however, except as provided
in Article XII, Section 12.03 hereof, the Committee shall retain sole
discretion (i) to determine the form in which payment of the Stock
Appreciation Right will be made (i.e., cash, securities or any combination
thereof) or (ii) to approve an election by a Holder to receive cash in full
or partial settlement of Stock Appreciation Rights. Each Stock Appreciation
Rights Agreement shall provide that the Stock Appreciation Rights may not
be exercised earlier than six months from the date of grant and shall
specify the effect of termination of employment on the exercisability of
the Stock Appreciation Rights.
Section 8.02. Exercise Price. The exercise price of each Stock Appreciation
Right shall be determined by the Committee, but such exercise price (i)
shall not be less than the Fair Market Value of a share of Common Stock on
the date the Stock Appreciation Right is granted (or such greater exercise
price as may be required if such Stock Appreciation Right is granted in
connection with an Incentive Stock Option that must have an exercise price
equal to 110 percent of the Fair Market Value of the Common Stock on the
date of grant pursuant to Article VII, Section 7.03), and (ii) shall be
subject to adjustment as provided in Article XII.
Section 8.03. Exercise Period. The term of each Stock Appreciation Right
shall be a specified by the Committee at the date of grant.
Section 8.04. Limitations on Exercise of Stock Appreciation Right. A Stock
Appreciation Right shall be exercisable in whole or in such installments
and at such times as determined by the Committee.
ARTICLE IX.
RESTRICTED STOCK AWARDS
Section 9.01. Restriction Period. At the time a Restricted Stock Award is
made, the Committee shall establish a period of time (the "Restriction
Period") applicable to such Award. Each Restricted Stock Award may have a
different Restriction Period, in the discretion of the Committee. The
Restriction Period applicable to a particular Restricted Stock Award shall
not be changed except as permitted by Article IX, Section 9.02 or Article
XII.
Section 9.02. Other Terms and Conditions. Common Stock awarded pursuant to
a Restricted Stock Award shall be represented by a stock certificate
registered in the name of the Holder of such Restricted Stock Award. If
provided for by the Award Agreement, the Holder shall have the right to
receive dividends during the Restriction Period, to vote Common Stock
subject thereto and to enjoy all other stockholder rights, except that (i)
the Holder shall not be entitled to delivery of the stock certificate until
the Restriction Period shall have expired, (ii) the Company shall retain
custody of the stock during the Restriction Period, (iii) the Holder may
not sell, transfer, pledge, exchange, hypothecate or otherwise dispose of
the stock during the Restriction Period, and (iv) a breach of the terms and
conditions established by the Committee pursuant to the Restricted Stock
Agreement, shall cause a forfeiture of the Restricted Stock Award. At the
time of such Award, the Committee, in its sole discretion, may prescribe
additional terms, conditions or restrictions relating to Restricted Stock
Awards, including but not limited to, rules pertaining to the termination
of employment or service as a Director (by retirement, disability, death or
otherwise) of a Holder prior to expiration of the Restriction Period. Such
additional terms, conditions or restrictions shall be set forth in a
Restricted Stock Agreement made in conjunction with the Award. Such
Restricted Stock Agreement may also include, without limitation, provisions
relating to: (a) subject to the provisions hereof accelerating vesting on a
Change of Control, vesting of Awards (including a provision continuing such
vesting after a Holder has terminated employment with the Company provided
such employee remains an employee of any subsidiary or affiliate of the
Company), (b) tax matters (including provisions (x) covering any applicable
employee wage withholding requirements, (y) prohibiting an election by the
holder under Section 83(b) of the Code and (z) requiring additional
"gross-up" payments to Holders to meet any excise taxes or other additional
income tax liability imposed as a result of a Change of Control payment
resulting from the operation of the Plan or of such Restricted Stock
Agreement), and (c) any other matters not inconsistent with the terms and
provisions of this Plan that the Committee in its sole discretion shall
determine.
Section 9.03. Payment for Restricted Stock. The Committee shall determine
the amount and form of any payment for Common Stock received pursuant to a
Restricted Stock Award, provided that in the absence of such a
determination, a Holder shall not be required to make any payment for
Common Stock received pursuant to a Restricted Stock Award, except to the
extent otherwise required by law.
Section 9.04. Agreements. At the time any Award is made under this Article
IX, the Company and the Holder shall enter into a Restricted Stock
Agreement setting forth each of the matters contemplated hereby and such
other matters as the Committee may determine to be appropriate. The terms
and provisions of the respective Restricted Stock Agreements need not be
identical.
ARTICLE X.
PERFORMANCE AWARDS
Section 10.01. Performance Period. The Committee shall establish, with
respect to and at the time of each Performance Award, a performance period
over which the performance of the Holder shall be measured.
Section 10.02. Performance Awards. Each Performance Award shall have a
maximum value established by the Committee at the time of such Award.
Section 10.03. Performance Measures. A Performance Award shall be awarded
to an employee contingent upon future performance of the Company or any
subsidiary, division or department thereof by or in which such employee is
employed (if applicable) during the performance period. The Committee shall
establish the performance measures applicable to such performance prior to
the beginning of the performance period but subject to such later revisions
as the Committee shall deem appropriate to reflect significant, unforeseen
event or changes.
Section 10.04. Award Criteria. In determining the value of Performance
Awards, the Committee shall take into account an individual's
responsibility level, performance, potential, other Awards and such other
considerations as it deems appropriate.
Section 10.05. Payment. Following the end of the performance period, the
Holder of a Performance Award shall be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Award, based
upon the achievement of the performance measures for such performance
period, as determined by the Committee. Payment of a Performance Award may
be made in cash, Common Stock or a combination thereof, as determined by
the Committee. Payment shall be made in a lump sum or in installments as
prescribed by the Committee. Any payment to be made in Common Stock shall
be based on the Fair Market Value of the Common Stock on the payment date.
Section 10.06. Termination of Employment. A Performance Award shall
terminate if the Holder does not remain continuously in the employ of the
Company or in service as a Director at all times during the applicable
performance period, except as may be determined by the Committee or as may
otherwise be provided in the Award at the time of grant.
Section 10.07. Agreement. At the time any Award is made under this Article
X, the Company and the Holder shall enter into a Performance Award
Agreement setting forth each of the matters contemplated hereby and, in
addition, such matters as are set forth in Article IX, Section 9.02, as the
Committee may determine to be appropriate. The terms and provisions of the
respective Performance Award Agreements need not be identical.
ARTICLE XI.
INCENTIVE AWARDS
Section 11.01. Incentive Awards. Incentive Awards are rights to receive
shares of Common Stock (or cash in an amount equal to the Fair Market Value
thereof), or rights to receive an amount equal to any appreciation in the
Fair Market Value of Common Stock (or portion thereof) over a specified
period of time, which vest over a period of time or upon the occurrence of
an event (including without limitation a Change of Control) as established
by the Committee, without payment of any amounts by the Holder thereof
(except to the extent otherwise required by law) or satisfaction of any
performance criteria or objectives. Each Incentive Award shall have a
maximum value established by the Committee at the time of such Award.
Section 11.02. Award Period. The Committee shall establish, with respect to
and at the time of each Incentive Award, a period over which or the event
upon which the Award shall vest with respect to the Holder.
Section 11.03. Awards Criteria. In determining the value of Incentive
Awards, the Committee shall take into account an individual's
responsibility level, performance, potential, other Awards and such other
considerations as it deems appropriate.
Section 11.04. Payment. Following the end of the vesting period for an
Incentive Award, the Holder of an Incentive Award shall be entitled to
receive payment of an amount, not exceeding the maximum value of the
Incentive Award, based upon the then vested value of the Award. Payment of
an Incentive Award may be made in cash, Common Stock or a combination
thereof as determined by the Committee. Payment shall be made in a lump sum
or in installments as prescribed by the Committee in its sole discretion.
Any payment to be made in Common Stock shall be based upon the Fair Market
Value of the Common Stock on the payment date. Cash dividend equivalents
may be paid during or after the vesting period with respect to an Incentive
Award, as determined by the Committee.
Section 11.05. Termination of Employment. An Incentive Award shall
terminate if the Holder does not remain continuously in the employ of the
Company or in service as a Director at all times during the applicable
performance period, except as may be determined by the Committee or as may
otherwise be provided in the Award at the time of grant.
Section 11.06. Agreement. At the time any Award is made under this Article
XI, the Company and the Holder shall enter into an Incentive Award
Agreement setting forth each of the matters contemplated hereby and, in
addition, such matters as are set forth in Article IX, Section 9.02, as the
Committee may determine to be appropriate. The terms and provisions of the
respective Incentive Award Agreements need not be identical.
ARTICLE XII.
RECAPITALIZATION OR REORGANIZATION
Section 12.01. Proportionate Adjustment of Awards. The shares with respect
to which Awards may be granted are shares of Common Stock as presently
constituted, but if, and whenever, prior to the expiration or distribution
to the Holder of an Award theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on Common Stock without receipt of consideration by the
Company, the number of shares of Common Stock with respect to which such
Award may thereafter be exercised or satisfied, as applicable, (i) in the
event of an increase in the number of outstanding shares, shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of a reduction in the number
of outstanding shares, shall be proportionately reduced, and the purchase
price per share shall be proportionately increased.
Section 12.02. Recapitalization. If the Company recapitalizes or otherwise
changes its capital structure, thereafter upon any exercise or
satisfaction, as applicable, of an Award theretofore granted, the Holder
shall be entitled to (or entitled to purchase, if applicable) under such
Award, in lieu of the number of shares of Common Stock then covered by such
Award, the number and class of shares of stock and securities to which the
Holder would have been entitled pursuant to the terms of the
recapitalization if, immediately prior to such recapitalization, the Holder
had been the holder of record of the number of shares of Common Stock then
covered by such Award.
Section 12.03. Change of Control. In the event of a Change of Control, all
outstanding Awards shall immediately vest and become exercisable or
satisfiable, as applicable. The Committee, in its discretion, may determine
that upon the occurrence of a Change of Control, each Award outstanding
hereunder, other than any Award made under Section 7.07, shall terminate
within a specified number of days after notice to the Holder, and such
Holder shall receive, with respect to each share of Common Stock subject to
such Award, cash in an amount equal to the excess of (i) the higher of (x)
the Fair Market Value of such share of Common Stock immediately prior to
the occurrence of such Change of Control or (y) the value of the
consideration to be received in connection with such Change of Control for
one share of Common Stock over (ii) the exercise price per share, if
applicable, of Common Stock set forth in such Award; provided, however,
that upon the occurrence of a Change in Control, any Award made under
Section 7.07 shall terminate and be cashed out in accordance with the
foregoing formulation. The provisions contained in the preceding sentence
shall be inapplicable to an Award granted within six months before the
occurrence of a Change of Control if the Holder of such Award is subject to
the reporting requirements of Section 16(a) of the Exchange Act. If the
consideration offered to stockholders of the Company in any transaction
described in this paragraph consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash. The provisions contained in
this paragraph shall not terminate any rights of the Holder to further
payments pursuant to any other agreement with the Company following a
Change of Control.
Section 12.04. Other Adjustments. In the event of changes in the
outstanding Common Stock by reason of recapitalization, reorganizations,
mergers, consolidations, combination, exchanges or other relevant changes
in capitalization occurring after the date of the grant of any Award and
not otherwise provided for by this Article XII, any outstanding Awards and
any agreements evidencing such Awards shall be subject to adjustment by the
Committee at its discretion as to the number and price of shares of Common
Stock or other consideration subject to such Awards. In the event of any
such change in the outstanding Common Stock, the aggregate number of shares
available under the Plan may be appropriately adjusted by the Committee,
whose determination shall be conclusive.
Section 12.05. Corporate Powers Not Affected. The existence of the Plan and
the Awards granted hereunder shall not affect in any way the right or power
of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the
Company's capital structure or its business, any merger or consolidation of
the Company, any issue of debt or equity securities ahead of or affecting
Common Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange, or other disposition of all or any
part of its assets or business or any other corporate act or proceeding.
Section 12.06. Stockholder Approvals. Any adjustment provided for in
Sections 12.01, 12.02, 12.03 and 12.04 shall be subject to any required
stockholder action.
Section 12.07. No Other Effect on Prior Awards. Except as hereinbefore
expressly provided, the issuance by the Company of shares of stock of any
class or securities convertible into shares of stock of any class, for
cash, property, labor or services, upon direct sale, upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares of
obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to
the number of shares of Common Stock subject to Awards theretofore granted
or the purchase price per share, if applicable.
ARTICLE XIII.
AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect
to any shares for which Awards have not theretofore been granted. The Board
shall have the right to alter or amend the Plan or any part thereof from
time to time; provided, however, that no change in any Award theretofore
granted which would impair the rights of the Holder may be made without the
consent of such Holder (unless such change is required in order to cause
the benefits under the Plan to qualify as performance-based compensation
within the meaning of Section 162(m) of the Code and applicable
interpretive authority thereunder); and provided, further, that, without
approval of the stockholders, the Board may not amend the Plan so as to:
(a) Increase the maximum number of shares which may be issued on exercise
or surrender of an Award, except as provided in Article XII;
(b) Change the Option price, except as provided in Article XII;
(c) Change the class of individuals eligible to receive Awards or
materially increase the benefits accruing to employees and Directors under
the Plan;
(d) Extend the maximum period during which Awards may be granted under the
Plan;
(e) Modify materially the requirements as to eligibility for Participation
in the Plan; or
(f) Decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
ARTICLE XIV.
MISCELLANEOUS
Section 14.01. No Right to Receive Award. Neither the adoption of the Plan
by the Company nor any action of the Board or the Committee shall be deemed
to give an employee, Independent Contractor, or any Director any right to
be granted an Award to purchase Common Stock, a right to a Stock
Appreciation Right, a Restricted Stock Award, a Performance Award, or an
Incentive Award or any of the rights hereunder except as may be evidenced
by an Award or by an Award Agreement duly executed on behalf of the
Company, and then only to the extent and on the terms and conditions
expressly set forth therein. The Plan shall be unfunded. The Company shall
not be required to establish any special or separate fund or to make any
other segregation of funds or assets to assure the payment of any Award.
Section 14.02. No Employment Rights Conferred. Nothing contained in the
Plan shall (i) confer upon any employee, Independent Contractor or Director
any right with respect to continuation of employment with or other rights
to receive any compensation from the Company or any subsidiary or (ii)
interfere in any way with the right of the Company or any subsidiary to
terminate such individual's employment or other service (or service as a
Director, in accordance with applicable corporate law) at any time.
Section 14.03. Other Laws; Withholding. The Company shall not be obligated
to issue any Common Stock pursuant to any Award granted under the Plan at
any time when (i) the shares covered by such Award have not been registered
under the Securities Act of 1933 and such other state and Federal laws,
rules or regulations as the Company or the Committee deems applicable and,
in the opinion of legal counsel for the Company, there is no exemption from
the registration requirements of such laws, rules or regulations available
for the issuance and sale of such shares, or (ii) the Company has been
advised by tax counsel that such issuance may jeopardize the existence,
restrict the use, or otherwise adversely affect the full availability, of
the Company's net operating tax loss carryforwards (including, without
limitation, the Company's ability to issue additional shares of Company
stock). No fractional shares of Common Stock shall be delivered, nor shall
any cash in lieu of fractional shares be paid. The Company shall have the
right to deduct in cash (whether under this Plan or otherwise) any taxes
required by law to be withheld in connection with all Awards and to require
any payments to enable it to satisfy its withholding obligations. In the
case of any Award satisfied in the form of Common Stock, no shares shall be
issued unless and until arrangements satisfactory to the Company shall have
been made to satisfy any withholding tax obligations applicable with
respect to such Award. Subject to such terms and conditions as the
Committee may impose, the Company shall have the right to retain, or the
Committee may, subject to such terms and conditions as it may establish
from time to time, permit Holders to elect to tender, Common Stock
(including Common Stock issuable in respect of an Award) to satisfy, in
whole or in part, the amount required to be withheld.
Section 14.04. No Restrictions on Corporate Action. Nothing contained in
this Plan shall be construed to prevent the Company or any subsidiary from
taking any corporate action which is deemed by the Company or such
subsidiary to be appropriate or in its best interest, whether or not such
action would have an adverse effect on the Plan or any Award made under the
Plan. No Employee, Independent Contractor, beneficiary or other person
shall have any claim against the Company or any subsidiary as a result of
any such action. Further, nothing in this Plan shall be construed to
require the Company to register the shares of Common Stock underlying any
Option or other Award granted under this Plan, or any other shares of
Company stock under the Securities Act of 1933, as amended, or under any
applicable state securities or "blue sky" law.
Section 14.05. Restrictions on Transfer. An Award (other than an Incentive
Stock Option) shall not be transferable except (i) by will or the laws of
descent and distribution, or (ii) by gift to any member of the Holder's
immediate family or to a trust for the benefit of such immediate family
member, if permitted in the applicable Award Agreement. An Award may be
exercisable during the lifetime of the Holder only by such Holder or the
Holder's guardian or legal representative unless it has been transferred to
a member of the Holder's immediate family or to a trust for the benefit of
such immediate family member, in which case it shall be exercisable only by
such transferee. For the purpose of this provision, a Holder's "immediate
family" shall mean the Holder's spouse, children and grandchildren.
Notwithstanding any such transfer, the Holder will continue to be subject
to the withholding requirements provided for in Section 14.03 hereof. In no
case shall an Incentive Stock Option be transferable by a Holder otherwise
than by will or the laws of descent and distribution, and any such
Incentive Stock Option shall be exercisable only by the Holder.
Section 14.06. Rule 16b-3. It is intended that the Plan comply fully with
and satisfy all of the requirements of Section 162(m) of the Code so that
Options and Stock Appreciation Rights granted hereunder with an exercise
price not less than Fair Market Value of a share of Common Stock on the
date of grant shall constitute "performance-based" compensation within the
meaning of such section. If any provision of the Plan would disqualify the
Plan or would not otherwise permit the Plan to comply with Section 162(m)
as so intended, such provision shall be construed or deemed amended to
conform to the requirements or provisions of Section 162(m); provided,
however, that no such construction or amendment shall have an adverse
effect on the economic value to a Holder of any Award previously granted
hereunder.
Section 14.07. Governing Law. This Plan shall be construed in accordance
with the laws of the State of Delaware.
***
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Stockholders
DANIELSON HOLDING CORPORATION
September 4, 2001
Please Detach and Mail in the Envelope Provided
Please mark your
A |X| votes as in this
example.
FOR all nominees WITHHOLD
at right (except AUTHORITY
as marked to the to vote for
contrary) nominees at
right
1. ELECTION OF | | | |
DIRECTORS. | | | |
INSTRUCTION: To withhold authority to
vote for any nominee, write that
nominee's name in the space below.
Nominees: Martin J. Whitman
David M. Barse
Samuel Zell
Eugene M. Isenberg
Joseph F. Porrino
Frank B. Ryan
Wallace O. Sellers
Stanley J. Garstka
William Pate
Harry J. LeVine
2. TO RATIFY THE APPOINTMENT OF KPMG LLP AS CERTIFIED INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE 2001 CALENDAR YEAR.
FOR AGAINST ABSTAIN
| | | | | |
3. TO APPROVE THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
INCREASING THE NUMBER OF AUTHORIZED COMMON SHARES FROM 100,000,000 TO
150,000,000.
FOR AGAINST ABSTAIN
| | | | | |
4. TO APPROVE THE AMENDMENT TO THE COMPANY'S 1995 STOCK AND INCENTIVE PLAN
AS SET FORTH IN THE PROXY STATEMENT ENCLOSED HEREWITH.
FOR AGAINST ABSTAIN
| | | | | |
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature _________________ Signature if held jointly _____________
Dated ______________, 2001
NOTE: Please sign exactly as name appears above. When shares are held by
joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
DANIELSON HOLDING CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
Annual Meeting of Stockholders - SEPTEMBER 4, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND UNLESS
OTHERWISE PROPERLY MARKED AND EXECUTED BY THE UNDERSIGNED STOCKHOLDER THIS
WILL BE VOTED FOR ALL PROPOSALS AS RECOMMENDED BY THE BOARD OF DIRECTORS.
The undersigned hereby appoints David M. Barse, with full power to act
without the other, and with full power of substitution as the undersigned
or any attorneys and proxies of the undersigned would be entitled to vote
if personally present at the Annual Meeting of Stockholders of Danielson
Holding Corporation to be held at 1 North Franklin Street, Third Floor,
Chicago, Illinois on Tuesday, September 4, 2001 at 2:00 p.m., local time,
or at any adjournment or postponement thereof, upon such business as may
properly come before the meeting, including the items set forth below.
(Continued and to be signed on reverse side)