UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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
Wilshire Enterprises, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit 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.
[ ] 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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WILSHIRE ENTERPRISES, INC.
921 Bergen Avenue
Jersey City, New Jersey 07306
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 2004
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of WILSHIRE
ENTERPRISES, INC., a Delaware corporation (hereinafter called the "Company"),
will be held at the Wydham Wilmington Hotel, 700 King Street, Wilmington,
Delaware 19801 at 10:30 A. M. on June 16, 2004 for the following purposes:
(1) To elect two directors of the Company to serve until the expiration
of their terms and thereafter until their successors have been duly
elected and qualified.
(2) To adopt the Company's 2004 Stock Option and Incentive Plan.
(3) To adopt the Company's 2004 Non-Employee Director Stock Option Plan.
(4) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Stockholders of record at the close of business on April 23, 2004, are
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
PLEASE SEE VOTING PROXY SHEET INCLUDED IN ENVELOPE.
IT IS VERY IMPORTANT THAT YOUR SHARES ARE REPRESENTED AND VOTED AT THE
MEETING. YOUR SHARES MAY BE VOTED ELECTRONICALLY ON THE INTERNET, BY TELEPHONE
OR BY SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD. WE URGE YOU TO DO
SO NOW REGARDLESS OF WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON.
By Order of the Board of Directors
/s/ S. Wilzig Izak
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S. WILZIG IZAK
Chairman of the Board
Dated: May 7, 2004
WILSHIRE ENTERPRISES, INC.
921 Bergen Avenue
Jersey City, New Jersey 07306
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 2004
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This Proxy Statement and the accompanying form of proxy, which were first
sent to stockholders on or about May 7, 2004 are submitted in connection with
the solicitation of proxies for the Annual Meeting of Stockholders by the
Board of Directors of Wilshire Enterprises, Inc. (the "Company") to be held on
June 16, 2004 at 10:30 A.M. or any adjournment thereof (the "Annual Meeting").
The close of business on April 23, 2004 has been fixed as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. As of the record date, 7,802,831 shares of common stock ($1.00
par value) of the Company ("Common Stock") were outstanding and entitled to
vote at the Annual Meeting, each such share being entitled to one vote.
A form of proxy is enclosed designating Eric J. Schmertz and Miles Berger as
proxies to vote shares at the Annual Meeting. Each proxy in that form properly
signed and received prior to the meeting will be voted as specified in the
proxy or if not specified, FOR the election as directors of those nominees
named in this Proxy Statement; FOR the adoption of the Company's 2004 Stock
Option and Incentive Plan; and FOR the adoption of the Company's 2004 Non-
Employee Director Stock Option Plan. Should any nominee for director named in
this Proxy Statement become unavailable for election, which is not
anticipated, it is intended that the persons acting under the proxies will
vote for the election in his stead of such other person as may be nominated by
the Board of Directors.
At the time this Proxy Statement was mailed to stockholders, management was
not aware that any matter other than the matters described above would be
presented for action at the Annual Meeting. If other matters properly come
before the Meeting, it is intended that the shares represented by proxies will
be voted with respect to those matters in accordance with the best judgment of
the persons voting them.
Any stockholder who returns a proxy on the enclosed form, or votes via
telephone or the Internet, has the right to revoke that proxy at any time
before it is voted. Any stockholder who submitted a proxy by mail may change
their vote or revoke their proxy by (a) filing with the Secretary of the
Company a written notice of revocation or (b) timely delivering a valid,
later-dated proxy. Any stockholder who submitted a proxy by telephone or via
the Internet may change their vote or revoke their proxy with a later
telephone or Internet proxy, as the case may be. Attendance at the Annual
Meeting will not have the effect of revoking a proxy unless the stockholder
gives written notice of revocation to the Secretary before the proxy is
exercised or such stockholder votes by written ballot at the Annual Meeting.
The presence in person or by properly executed proxy of the holders of a
majority of the outstanding shares of Common Stock is necessary to constitute
a quorum at the Annual Meeting. The votes of stockholders present in person or
represented by proxy at the Annual Meeting will be tabulated by inspectors of
election appointed by the Company. The inspectors of election will treat
shares represented by proxies that reflect abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum and for purposes of determining the outcome of matters submitted for a
vote. Abstentions, however, do not technically constitute a vote "for" or
"against" any matter and thus will be disregarded in the calculation of votes
cast. The inspectors of election will treat shares referred to as "broker non-
votes" (shares held by brokers or nominees as to which instructions have not
been received from the beneficial owners or persons entitled to vote and that
the broker or nominee does not have discretionary power to vote on a
particular matter) as shares that are present and entitled to vote for
purposes of determining the presence of a quorum and for purposes of
determining the outcome of any matters submitted for a vote.
Assuming a quorum is present, the nominees for director receiving a
plurality of votes cast at the Annual Meeting will be elected directors. A
proxy that has properly withheld authority with respect to the election of one
or both directors will not be voted with respect to the director or directors
indicated, although it will be
counted for the purposes of determining whether there is a quorum. The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote at the Annual Meeting is
necessary for adoption of the Company's 2004 Stock Option and Incentive Plan
and for adoption of the Company's 2004 Non-Employee Director Stock Option
Plan. An abstention or broker non-vote with respect to these two proposals
will not be voted, although it will be counted for the purposes of determining
whether there is a quorum. An abstention will have the effect of a negative
vote on these two matters. Broker non-votes will not count in determining the
number of shares entitled to vote or the number of votes cast, and so will not
affect the outcome of the voting on these two matters.
The cost of soliciting the proxies to which this Proxy Statement relates
will be borne by the Company. In following up the original solicitation of
proxies by mail, the Company will make arrangements with brokerage houses and
other custodians, nominees and fiduciaries to send proxies and proxy material
to the beneficial owners of the stock and will reimburse them for their
expenses. In addition to the use of the mail, and without additional
compensation therefor, proxies may be solicited in person or by telephone,
facsimile or telegram by officers and regular employees of the Company.
Voting Securities and Principal Holders Thereof
Based on information available to the Company, the Company believes that the
following persons held beneficial ownership of more than five percent of the
outstanding Common Stock as of December 31, 2003:
Name of Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership (1) of Class
- ------------------- ------------------------ --------
Estate of Siggi B. Wilzig ............... 1,660,792(2) 21.28%
C/o Daniel Swick
Herrick, Feinstein LLP
2 Penn Plaza
Newark, NJ 07105-2245
Dimensional Fund Advisors, Inc .......... 506,790(3) 6.49%
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401
Donald Brenner .......................... 413,056(4) 5.2%
P. O. Box 721
Alpine, NJ 07620
Oaktree Capital Management, LLC ......... 357,400(5) 4.6%
333 South Grand Avenue
Los Angeles CA 90071
And
Kevin C. McTavish ....................... 132,500(5) 1.7%
5400 LBJ Freeway, Suite 1470
Dallas, TX 75240
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(1) Each beneficial owner's percentage ownership of Common Stock is determined
by assuming that options, warrants and other convertible securities that
are held by such person (but not those held by any other person) and that
are exercisable or convertible within 60 days of December 31, 2003 have
been exercised or converted. Options, warrants and other convertible
securities that are not exercisable within 60 days of December 31, 2003
have been excluded. Unless otherwise noted, the Company believes that all
persons named in the above table have sole voting and investment power
with respect to all shares of Common Stock beneficially owned by them.
(2) Mr. Wilzig, former Chairman and President of the Company, served as the
Senior Consultant to the Company. He died on January 7, 2003. The table
above reflects the Estate's ownership as reported by the Estate.
2
(3) Pursuant to a filing with the Securities and Exchange Commission which
reported beneficial ownership as of December 31, 2003, Dimensional Fund
Advisors, Inc. ("Dimensional"), a registered investment advisor, disclosed
that it is deemed to have beneficial ownership of 506,790 shares of Common
Stock, all of which shares are held in the portfolios of certain "Funds".
Such Funds consist of investment companies to which Dimensional provides
investment advice and certain other commingled group trusts and separate
accounts for which Dimensional serves as an investment manager.
Dimensional disclaims beneficial ownership of all such shares.
(4) Pursuant to a filing with the Securities and Exchange Commission on July
2, 2002, Mr. Brenner, disclosed that he has beneficial ownership of
413,056 shares of Common Stock, consisting of 17,975 shares for which he
has sole voting power and 395,081 shares for which he has shared voting
power.
(5) Pursuant to a filing with the Securities and Exchange Commission on
Schedule 13D on October 28, 2003, Oaktree Capital Management, LLC, a
California limited liability company and a registered investment advisor,
("Oaktree") disclosed that it is deemed to have beneficial ownership of
357,400 shares of Common Stock (4.6%). Such Schedule 13D was filed on
behalf of Oaktree in its capacity as the managing member of OCM Real
Estate Opportunities Fund III GP, LLC, a Delaware limited liability
Company ("OCM GP"), which is the general partner of OCM Real Estate
Opportunities Fund III, L.P., a Delaware limited partnership (the "OCM
Fund" and together with Oaktree and OCM GP, the "Oaktree Filers").
Pursuant to a filing with the Securities and Exchange Commission on
Schedule 13D on November 4, 2003, Mr. McTavish, Mr. Owen Blicksilver, Mr.
Roger Stull, Mr. Philip Zuzelo and Mr. Joseph Magliolo III (collectively,
the "McTavish Filers') disclosed that they have beneficial ownership of
132,500 shares of Common Stock (1.7%). In their respective filings, the
Oaktree Filers and the McTavish Filers indicated that, together, they may
be deemed to constitute a "group" within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended, although each of the
Oaktree Filers and the McTavish Filers state that neither the fact of the
filings nor anything contained therein shall be deemed to be an admission
by the Oaktree Filers or the McTavish Filers that a "group" exists.
BOARD OF DIRECTORS AND ITS COMMITTES; DIRECTOR COMPENSATION
The Company is incorporated under the laws of the State of Delaware. The
interests of stockholders of the Company are represented by the Board of
Directors, which oversees the business and management of the Company. This
solicitation of proxies is intended to give all stockholders the opportunity
to vote for the persons who are to be their representatives, as directors in
the governance of the Company.
The Company's current Restated Certificate of Incorporation and By-Laws
provide for a six member Board of Directors divided into three classes of
directors serving staggered three-year terms. The term of office of directors
in Class III expires at the 2004 Annual Meeting, Class I at the next
succeeding Annual Meeting and Class II at the following succeeding Annual
Meeting. Two Class III nominees are named in this Proxy Statement.
Board of Directors Meetings
The Board of Directors of the Company holds periodic meetings as necessary
to deal with matters which it must consider. During 2003, the Board met a
total of eight times. The Board of Directors has an Audit Committee, a
Compensation Committee, a Stock Option Committee and a Nominating Committee.
All directors attended all of the meetings of the Board and Committees on
which they served except for one audit committee meeting that Milton
Donnenberg was unable to attend due to illness.
Executive Committee
The Board of Directors has an Executive Committee which consists of W.
Martin Willschick, Ernest Wachtel and S. Wilzig Izak. This Committee may
exercise all authority of the full Board with the exception of specified
limitations relating to major corporate matters.
3
The Audit Committee
The Audit Committee of the Board of Directors serves to: (a) oversee the
accounting and financial reporting processes of the Company, internal controls
of the Company, and audits of the financial statements of the Company; (b)
assist the Board of Directors in its oversight of: (i) the integrity of the
Company's financial statements, (ii) the Company's compliance with legal and
regulatory requirements, (iii) the independent auditors' qualifications and
independence, (iv) the performance of the Company's internal audit functions
and its independent auditors, and (v) the accounting and financial reporting
processes of the Company; and (c) prepare the Audit Committee report for
inclusion in the proxy statement as required by the SEC. The Audit Committee's
Charter is attached hereto as Appendix A.
The members of the Audit Committee are Mr. Willschick (Chair), Mr. Schmertz
and Mr. Donnenberg. The Audit Committee held four meetings during 2003. The
report of the Audit Committee is included elsewhere herein.
The Company's Common Stock is listed on The American Stock Exchange and the
Company is governed by the listing standards applicable thereto. All members
of the Audit Committee of the Board of Directors have been determined to be
"independent directors" pursuant to the definition contained in The American
Stock Exchange's Corporate Governance Rules and under the SEC's Rule 10A-3.
The Board of Directors has determined that Mr. Martin Willschick constitutes
an "audit committee financial expert", as such term is defined by the SEC. As
noted above, Mr. Willschick - as well as the other members of the Audit
Committee - has been determined to be "independent" within the meaning of SEC
and AMEX regulations.
Compensation Committee
The Compensation Committee of the Board serves to: (a) to assist the Board
in establishing and maintaining compensation and benefits policies and
practices that support the successful recruitment, development and retention
of talent in order to achieve the Company's business objectives and optimize
long-term financial returns; (b) to assist the Board in discharging its
responsibilities for compensating the Company's executives; and (c) to produce
a compensation committee report on executive compensation for inclusion in the
Company's proxy statement in accordance with applicable federal securities
laws, rules and regulations and the American Stock Exchange.
The members of the Compensation Committee are Mr. Wachtel (Chair), Mr.
Schmertz and Mr. Berger. The Compensation Committee held four meetings during
2003. The report of the Compensation Committee is included elsewhere herein.
Stock Option Committee
The Board has a Stock Option Committee, which administers the Company's
stock option plans. This Committee, comprised of W. Martin Willschick, Milton
Donnenberg, and Ernest Wachtel, met once during the past year.
Nominating Committee
The Nominating Committee of the Board of Directors was just recently formed.
Prior to its formation, the entire Board performed its functions. The purposes
of the Nominating Committee are to: (a) identify and screen individuals
qualified for nomination to the Board; (b) recommend to the Board director
nominees for election at each meeting of stockholders at which directors are
to be elected and recommend to the Board individuals to fill any vacancies on
the Board that arise between such meetings; and (c) recommend to the Board
directors for appointment to each committee of the Board.
The newly appointed members of the Nominating Committee are Mr. Wachtel
(Chair), Mr. Berger and Mr. Donnenberg.
Nominating Committee Charter. The Board has adopted a Nominating Committee
charter to govern its Nominating Committee. A copy of the Nominating
Committee's charter is attached hereto as Appendix B.
4
Independence of Nominating Committee Members. All members of the Nominating
Committee of the Board of Directors have been determined to be "independent
directors" pursuant to the definition contained in Section 121A of the
American Stock Exchange Company Guide.
Procedures for Considering Nominations Made by Stockholders. The Nominating
Committee's charter describes procedures for nominations to be submitted by
stockholders and other third-parties, other than candidates who have
previously served on the Board or who are recommended by the Board. The by-
laws state that a nomination must be delivered to the Secretary of the Company
at the principal executive offices of the Company not later than the close of
business on the 90th day nor earlier than the close of business on the 120th
day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that if the date of the annual meeting is more than 30 days
before or more than 60 days after such anniversary date, notice to be timely
must be so delivered not earlier than the close of business on the 120th day
prior to such annual meeting and not later than the close of business on the
later of the 90th day prior to such annual meeting or the close of business on
the 10th day following the day on which public announcement of the date of
such meeting is first made by the Company. The public announcement of an
adjournment or postponement of an annual meeting will not commence a new time
period (or extend any time period) for the giving of a notice as described
above. The charter requires a nomination notice to set forth as to each person
whom the proponent proposes to nominate for election as a director: (a) all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected), and (b) information that will enable the Nominating
Committee to determine whether the candidate or candidates satisfy the
criteria established pursuant to the charter for director candidates.
Qualifications. The charter describes the minimum qualifications for
nominees and the qualities or skills that are necessary for directors to
possess. Each nominee:
o must satisfy any legal requirements applicable to members of the Board;
o must have business or professional experience that will enable such
nominee to provide useful input to the Board in its deliberations;
o must have a reputation for honesty and ethical conduct;
o must have a working knowledge of the types of responsibilities expected
of members of the board of directors of a public company; and
o must have experience, either as a member of the board of directors of
another public or private company or in another capacity, that
demonstrates the nominee's capacity to serve in a fiduciary position.
Identification and Evaluation of Candidates for the Board. Candidates to
serve on the Board will be identified from all available sources, including
recommendations made by stockholders. The Nominating Committee's charter
provides that there will be no differences in the manner in which the
Nominating Committee evaluates nominees recommended by stockholders and
nominees recommended by the Committee or management, except that no specific
process shall be mandated with respect to the nomination of any individuals
who have previously served on the Board. The evaluation process for
individuals other than existing Board members will include:
o a review of the information provided to the Nominating Committee by the
proponent;
o a review of reference letters from at least two sources determined to be
reputable by the Nominating Committee; and
o a personal interview of the candidate,
together with a review of such other information as the Nominating Committee
shall determine to be relevant.
5
Third Party Recommendations. In connection with the 2004 Annual Meeting, the
Nominating Committee did not receive any nominations from any shareholder or
group of stockholders which owned more than 5% of the Company's Common Stock
for at least one year.
Since the adoption of the Sarbanes-Oxley Act in July 2002, there has been a
growing public and regulatory focus on the independence of directors.
Recently, the American Stock Exchange adopted amendments to its definition of
independence. Additional requirements relating to independence are imposed by
the Sarbanes-Oxley Act with respect to members of the Audit Committee. As
noted above, the Board has determined that the members of the Audit Committee
satisfy all such definitions of independence. The Board has also determined
that all of the non-employee members of the Board satisfy the AMEX definition
of independence.
The Board of Directors has established a procedure that enables stockholders
to communicate in writing with members of the Board. Any such communication
should be addressed to Ms. S. Wilzig Izak, Chairman of the Board and should be
sent to such individual c/o Wilshire Enterprises, Inc., 921 Bergen Avenue,
Jersey City, New Jersey 07306. Any such communication must state, in a
conspicuous manner, that it is intended for distribution to the entire Board
of Directors. Under the procedures established by the Board, upon the Chairman
of the Board's receipt of such communication, the Company's Secretary will
send a copy of such communication to each member of the Board, identifying it
as a communication received from a shareholder. Absent unusual circumstances,
at the next regularly scheduled meeting of the Board held more than two days
after such communication has been distributed, the Board will consider the
substance of any such communication.
Board members are encouraged, but not required by any specific Board policy,
to attend the Company's annual meeting of stockholders. All of the members of
the Board attended the Company's 2003 Annual Meeting of stockholders.
Each non-employee director receives an annual fee of $11,000. Non-employee
members of the Executive Committee also receive an annual fee of $4,000.
Members of the Audit Committee also receive an annual fee of $5,000 and
members of the Compensation Committee, Nominating Committee and Stock Option
Committee also receive an annual fee of $2,000. Each non-employee director
also receives an additional fee of $750 for each meeting of the Board and each
Committee thereof which such director attends.
6
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors Unanimously Recommends Voting FOR These Two Directors
Two directors, constituting the Class III Directors, are to be elected at
the 2004 Annual Meeting for three-year terms expiring in 2007. There is no
cumulative voting. The Board's nominees for Class III Directors are Ernest
Wachtel and Martin Willschick.
The information provided below with respect to director nominees and present
directors includes (1) name, (2) class, (3) principal occupation, business
experience during the past five years, and age, (4) the year in which he or
she became a director and (5) number and percentage of shares of Common Stock
of the Company beneficially owned. This information has been furnished by the
directors.
Year Shares of Common
Became Stock Beneficially
Director Owned on March 26,
Principal Occupation of the 2004 and Percentage
Name Class and Age (a) Company of Class (b)
- ---------------------------------------------- ----- -------------------------------------- -------- -------------------
Miles Berger .................................. I Chairman of Berger Organization 2002 1,000(f)
Real Estate Management (0.01%)
And Development Company
Newark, NJ Age 51
Milton Donnenberg (g) ......................... II Formerly President, Milton Donnenberg 1981 22,460(c)
Assoc., Realty Management, (0.29%)
Carlstadt, NJ Age 81
S. Wilzig Izak ................................ II Chairman of the Board since 1987 82,798(e)
September 20, 1990; Chief Executive (1.06%)
Officer since May 1991; Executive Vice
President (1987-1990); prior thereto,
Senior Vice President Age 45
Eric J. Schmertz, Esq. ........................ I Of Counsel to the Dweck law firm; 1983 23,218(c)
Distinguished Professor Emeritus (0.30%)
and formerly Dean, Hofstra University
School of Law, Hempstead, NY. Age 78
Ernest Wachtel ................................ lll President, Ellmax Corp., Builders and 1970 98,491(c)
Realty Investors, Elizabeth, NJ Age 79 (1.26%)
W. Martin Willschick .......................... lll Manager, Treasury Services, City of 1997 11,062(d)
Toronto, Canada Age 52 (0.14%)
Mr. Willschick is Ms. Izak's cousin
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(a) No nominee or director is a director of any other company with a class of
securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934 or subject to the requirements of Section 15(d) of that Act or
any company registered as an investment company under the Investment
Company Act of 1940.
(b) The shares of the Company's Common Stock are owned directly and
beneficially, and the holders have sole voting and investment power,
except as otherwise noted.
(c) Includes 10,300 shares of stock that could be obtained by each of these
Outside Directors on the exercise of options exercisable within 60 days of
March 26, 2004.
(d) Includes 9,000 shares of stock that could be obtained by W. Martin
Willschick on the exercise of options exercisable within 60 days of March
26, 2004. Mr. Willschick is Ms. Izak's first cousin.
7
(e) Includes 10,000 shares of stock that could be obtained by S. Wilzig Izak
on the exercise of options exercisable within 60 days of March 26, 2004.
(f) Includes 1,000 shares of stock that could be obtained by Miles Berger on
the exercise of options exercisable within 60 days of March 26, 2004.
(g) Mr. Donnenberg is Ms. Izak's uncle by marriage.
At March 26, 2004 all current directors and current executive officers as a
group (seven persons) beneficially owned equity securities as follows:
Amount
Beneficially
Title of Class Owned Percent of Class
-------------- ------------ ----------------
Common Stock ................................ 364,029 * 4.56%
- ---------------
* Includes 175,900 shares subject to options exercisable within 60 days of
March 26, 2004.
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors, executive officers and 10% stockholders to file with the Securities
and Exchange Commission certain reports regarding such persons' ownership of
the Company's securities. The Company is required to disclose any failures to
file such reports on a timely basis. The Company is not aware of any such
untimely filings during the fiscal year ended December 31, 2003, except that
Mr. Berger (a director of the Company) reported late an option grant that
occurred on May 15, 2003, Mr. Kupperman (an officer of the Company) reported
late an option grant that occurred on January 2, 2003 and Ms. Izak (a director
and officer of the Company) reported late an option grant that occurred on
July 15, 2002. The filings were made promptly after the failures to file were
noted.
8
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth, for the years ended December 31, 2003, 2002
and 2001, the cash compensation paid by the Company and its subsidiaries, as
well as certain other compensation paid or accrued by such entities for those
years, to or with respect to the executive officers of the Company (the "Named
Officers"), for services rendered in all capacities during such period.
Annual Compensation
Name and Current ------------------------------- All Other
Principal Position Year Salary Bonus Other (a) Compensation(b)
- ------------------ ---- -------- ------- --------- ---------------
S. Wilzig Izak........................................................ 2003 $175,000 100,000 -- $ 3,295
Chairman and CEO 2002 $145,000 -- -- $ 2,306
2001 $140,000 -- -- $ 2,286
Philip G. Kupperman................................................... 2003 $250,000 150,000 -- $ 4,475
President, COO and CFO 2002(c) 125,000 N/A N/A $35,393
2001 N/A N/A N/A N/A
- ---------------
(a) During the periods covered, the Named Officers did not receive perquisites
(i.e., personal benefits such as country club memberships or use of
automobiles or automobile allowances) in excess of the lesser of $50,000
or 10% of such individual's salary and bonus.
(b) The amounts include the Company's contribution to the employees Individual
Retirement Account and the dollar value of life insurance premiums paid.
(c) Mr. Kupperman joined the Company as an employee July 1, 2002. All Other
Compensation includes $33,000 received as a consultant prior to joining
the Company.
Stock Options
In June 1995, the Company adopted two new stock-based compensation plans
(the 1995 Stock Option and Incentive Plan and the 1995 Non-Employee Director
Stock Option Plan) under which up to 450,000 and 150,000 shares of Common
Stock, respectively, are available for grant. Options may no longer be granted
under stock option plans approved prior to 1995 and, no options granted under
such prior plans currently remain outstanding.
In 2003, the Company granted 50,000 stock options pursuant to the 1995 Stock
Option and Incentive Plan and granted 5,000 options under the 1995 Non-
Employee Director Stock Option Plan.
During 2003, no options expired unexercised.
Equity Compensation Plan Information
The following table gives information about our Common Stock that may be
issued upon the exercise of options, warrants and rights under our 1995 Stock
Option and Incentive Plan and our 1995 Non-employee Director Stock Option
Plan, as of December 31, 2003. These plans were our only equity compensation
plans in existence as of December 31, 2003.
9
( c)
Number of Securities
(a) Remaining Available For
Number of Securities (b) Future Issuance Under
To Be Issued Upon Weighted-Average Equity Compensation
Exercise of Exercise Price of Plans (Excluding
Outstanding Options Outstanding Options Securities Reflected In
Plan Category Warrants and Rights Warrants and Rights Column (a))
- ------------- -------------------- ------------------- -----------------------
Equity Compensation Plans
Approved by Stockholders................................. 438,740 $3.61 161,260
Equity Compensation Plans Not
Approved by Stockholders................................. 0 0
------- -------
TOTAL.................................................... 438,740 161,260
======= =======
Shown below is information with respect to stock options exercised in fiscal
year 2003 and the fiscal year-end value of unexercised options for the Named
Officers:
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
Number of Securities
Underlying Value of Unexercised In-
Unexercised Options at The-Money (a)
Shares 12/31/03 Options at 12/31/03
Acquired Value --------------------------- ---------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
S. Wilzig Izak ............................ 0 0 10,000 40,000 $ 27,800 $111,200
Philip G. Kupperman ....................... 0 0 125,000 175,000 $347,500 $477,000
- ---------------
(a) Values for "in-the-money" options represent the positive spread between
the exercise price of an existing option and $6.10, the closing sales
price of the Company's Common Stock on the American Stock Exchange on
December 31, 2003. There is no guarantee that if these options are
exercised they will have this value.
Option Grants in 2003
Shown below is further information on grants of stock options pursuant to
the 1995 Stock Option and Incentive Plan during the fiscal year ended December
31, 2003 to the Named Officers:
Potential
Realizable
Value At Assumed
Annual Rates
of Stock
% of Total Options Appreciation For
Number of Securities Granted to Exercise or Option Term (a)
Underlying Options Employees Base Price Expiration -------------------
Name Granted (b) In Fiscal Year ($/Sh) Date 5% 10%
- ---- -------------------- ------------------ ----------- ---------- -------- --------
Philip G. Kupperman ............... 50,000 100% $3.51 1/2/13 $110,500 $279,500
- ---------------
(a) The Securities and Exchange Commission (the "SEC") requires disclosure of
the potential realizable value or present value of each grant. The 5% and
10% assumed annual rates of compounded stock price appreciation are
mandated by rules of the SEC and do not represent the Company's estimate
or projection of the Company's future common stock prices. The disclosure
assumes the options will be held for the full ten-year term prior to
exercise. Such options may be exercised prior to the end of such term. The
actual value, if any, an executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the option
is exercised. There can be no assurance that the stock price will
appreciate at the rates shown in the table.
(b) The options granted to Philip G. Kupperman vest on July 1, 2004.
Employment Agreements
On July 1, 2002, the Company entered into an employment agreement with
Philip G. Kupperman pursuant to which Mr. Kupperman serves as the President,
Chief Operating Officer and Chief Financial Officer of the Company, until June
30, 2004 (the "Expiration Date"). Under the agreement, Mr. Kupperman receives
an annual base salary of $250,000 per year and was entitled to an aggregate of
300,000 stock options
10
plus an annual bonus as determined by the Board of Directors of the Company,
provided that such bonus shall not be less than $50,000 per contract year. In
the event that the agreement is terminated other than for "Cause" (as defined
in the agreement), or in the event of a Change in Control Event (as defined in
the Company's 1995 Stock Option and Incentive Plan), all non-vested options
shall automatically vest. In addition, in the event that the agreement is
terminated other than for Cause, the Company shall continue to pay Mr.
Kupperman's base salary and bonus through the Expiration Date. The agreement
prohibits Mr. Kupperman from competing with the Company for a period of two
years from the Expiration Date and contains certain restrictions on soliciting
customers and employees of the Company for the same period.
On March 29, 2004, the Company provided Sherry Wilzig Izak, the Chairman of
the Board, with a severance agreement. The agreement provides that on
termination of her employment for any reason other than termination for Cause
(as defined), she will receive a payment equal to $200,000.
On April 24, 2004, the Company entered into an employment agreement with
Daniel C. Pryor pursuant to which Mr. Pryor will initially serve as Vice
President-Business Development, and, after June 30, 2004, as the President,
Chief Operating Officer and Chief Financial Officer of the Company, until June
30, 2006 (the "Expiration Date"), subject to a one year extension under
certain circumstances. Under the agreement, Mr. Pryor will receive an annual
base salary of $250,000 per year and is entitled to an annual bonus and stock
options as determined by the Board of Directors of the Company, or Stock
Option Committee, as the case may be. In the event that the agreement is
terminated other than for "Cause" (as defined in the agreement), or in the
event of a Change in Control Event (as defined in the Company's 1995 Stock
Option and Incentive Plan), all non-vested options shall automatically vest.
In addition, in the event that the agreement is terminated other than for
Cause, the Company shall continue to pay Mr. Pryor's base salary and bonus
through the Expiration Date. In addition, upon a Change in Control, Mr. Pryor
may elect to terminate his employment and receive a lump sum payment equal to
twice his then current annual salary, subject to certain limitations. The
agreement prohibits Mr. Pryor from competing with the Company for a period of
two years from the Expiration Date and contains certain restrictions on
soliciting customers and employees of the Company for the same period.
11
Performance Graph
The following graph compares the cumulative total return on a hypothetical
$100 investment made at the close of business on December 31, 1998 (i) the
Company's Common Stock, (ii) the Standard and Poor's 500 Index, and (iii) the
Dow Jones Oil- Secondary Index. The graph is calculated assuming that all
dividends are reinvested during the relevant periods. The graph shows how a
$100 investment would increase or decrease in value over time, based on
dividends and increases or decreases in market price.
[graphic]
12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
-------- -------- -------- -------- -------- --------
Wilshire Enterprises ......................................... 100.00 83.33 77.78 69.33 76.89 135.56
Dow Jones Oil - Secondary .................................... 100.00 124.93 160.69 155.43 161.25 298.44
S&P Composite ................................................ 100.00 121.04 110.02 96.95 75.52 97.18
COMPENSATION COMMITTEE REPORT
The following report is not to be deemed "soliciting material" or deemed to
be filed with the Securities and Exchange Commission or subject to Regulation
14A of the Securities Exchange Act of 1934, except to the extent specifically
requested by the Company or incorporated by reference in documents otherwise
filed.
The Compensation Committee of the Board of Directors (the "Committee") is
composed of independent, non-employee directors. The Committee's primary
responsibility is to assist the Board in discharging its responsibilities for
compensating the Company's executives.
The goals of the Committee's compensation policies pertaining to executive
officers are to provide a competitive level of salary and other benefits to
attract, retain and motivate highly qualified personnel, while balancing the
desire for cost containment. The Committee believes that its compensation
policies achieve these goals.
The Company provides the Chief Executive Officer and President with
competitive salaries. The Company increased the Chief Executive Officer's
salary in 2003 from $150,000 to $200,000 and paid performance bonuses to the
Chief Executive Officer and the President of $100,000 and $150,000,
respectively.
The Committee also believes that the key element in the Company's long term
compensation of executive officers is a stock option plan which is tied to the
Company's performance through emphasis on equity. During 2003, the Stock
Option Committee granted 50,000 stock options to the President, Chief
Operating Officer and Chief Financial Officer.
12
This report shall not be deemed incorporated by reference by any general
statement incorporating this Statement by reference to any filing under the
Securities Act of 1933, as amended, or under the Securities Exchange Act of
1934, as amended, and shall not be deemed filed under either of such acts
except to the extent that the Company specifically incorporates this
information by reference.
Respectfully submitted by the members of the Compensation Committee of the
Board of Directors
Ernest Wachtel, Chairman
Miles Berger
Eric J. Schmertz
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Messrs. Wachtel, Berger and
Schmertz. None of these individuals are or were at any time officers or
employees of the Company. No executive officer of the Company has served as a
director or member of the compensation committee of any other entity, one of
whose executive officers served as a member of the Compensation Committee of
the Company. No interlocking relationship exists between our Board of
Directors or Compensation Committee and the board of directors or compensation
committee of any other company.
During June 2000, the Company acquired mortgage notes receivable secured by
underlying property from The Trust Company of New Jersey ("TCNJ") for
$3,500,000. The Company subsequently advanced the borrower an additional
$2,790,000. The mortgage notes receivable and subsequent advances are due 2007
and bear interest at 9.75%. The cost of the original mortgage note and the
subsequent advance were partially funded by a $5,300,000 mortgage provided by
TCNJ. In connection with the mortgage note receivable the Company will earn a
$2,500,000 financing fee. The fee is being recognized by the effective
interest method over the term of the mortgage receivable. Under this
agreement, the Company has the right to receive proceeds from the sale of the
underlying property. During the years 2003 and 2002, the Company received
mortgage amortization and financing fees in the amount of $650,000 and
$4,946,000, respectively, and paid down $482,000 and $3,709,000, respectively,
of the related mortgage payable to TCNJ.
In March 2002, the Company refinanced an existing mortgage loan with TCNJ
for $4.08 million and redeemed an unsecured line of credit with TCNJ for $1.5
million. As of year end 2003, the Company was indebted to TCNJ for
approximately $18.5 million of first mortgage loans at a weighted average
interest rate of approximately 6.375% and a $2.7 million loan secured by
marketable securities at prime.
Siggi B. Wilzig, whose shareholdings of the Company are described on Page 2
of this proxy statement, was an officer, director and significant shareholder
of TCNJ up until his death on January 7, 2003.
AUDIT COMMITTEE REPORT
The following report is not to be deemed "soliciting material" or deemed to
be filed with the Securities and Exchange Commission or subject to Regulation
14A of the Securities Exchange Act of 1934, except to the extent specifically
requested by the Company or incorporated by reference in documents otherwise
filed.
The Audit Committee reviews Wilshire's financial reporting process on behalf
of the Board of Directors. In fulfilling its responsibilities, the Committee
has reviewed and discussed the audited financial statements contained in the
2003 Annual Report on SEC Form 10-K with Wilshire's management and the
independent auditors. Management is responsible for the financial statements
and the reporting process, including the system of internal controls. The
independent auditors are responsible for expressing an opinion on the
conformity of those audited financial statements with accounting principles
generally accepted in the United States.
The Committee discussed with the independent auditors their independence
from Wilshire and its management including the matters in the written
disclosures required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees and considered the
compatibility of non-audit services with the auditors' independence. In
addition, the Committee discussed the matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees,
as amended.
13
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board, and the Board has approved, the inclusion of the
audited financial statements in Wilshire's Annual Report on SEC Form 10-K for
the year ended December 31, 2003, for filing with the Securities and Exchange
Commission.
This report shall not be deemed incorporated by reference by any general
statement incorporating this Proxy Statement by reference to any filing under
the Securities Act of 1933, as amended, or under the Securities Act of 1934,
as amended, and shall not be deemed filed under either of such acts except to
the extent that the Company specifically incorporates this information by
reference.
Respectfully submitted by the members of the Audit Committee of the Board of
Directors:
W. Martin Willschick, Chairman
Eric J. Schmertz
Milton Donnenberg
Audit Fees and Related Matters
In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and
the Audit Committee's charter, all audit and audit-related work and all non-
audit work performed by the Company's independent accountants, Ernst & Young,
LP ("Ernst & Young"), is approved in advance by the Audit Committee, including
the proposed fees for such work. The Audit Committee is informed of each
service actually rendered.
Audit Fees
The aggregate fees incurred by the Company for fiscal years ended December
31, 2003 and 2002 for professional services rendered by Ernst & Young LLP in
connection with (i) the audit of the Company's annual financial statements and
(ii) the review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and
September 30 were $115,000 and $123,000 respectively. The Company engaged
Ernst & Young LLP to audit the Company's 2001 financial statements, that were
restated to reflect certain operations as discontinued. The Company incurred
professional fees of $108,700 in connection with the 2001 audit.
Audit-Related Fees
The Company did not incur any fees for fiscal years ended December 31, 2003
and 2002 for assurance and related services by Ernst & Young LLP in connection
with the performance of the audit or review of the Company's financial
statements, including 401(k) plan audits.
Tax Fees
The Company did not incur any fees for fiscal year ended December 31, 2003
and 2002 for professional services rendered by Ernst & Young LLP for tax
compliance, tax advice or tax planning.
All Other Fees
The Company did not incur any other fees for fiscal years ended December 31,
2003 and 2002 for services rendered by Ernst & Young LLP.
Of the time expended by the Company's principal accountants to audit the
Company's financial statements for the year ended December 31, 2003, less than
50% of such time involved work performed by persons other than the principal
accountant's full-time, permanent employees.
Other Matters
The Audit Committee of the Board of Directors has considered whether the
provision of the Audit-Related Fees, Tax Fees and All Other Fees are
compatible with maintaining the independence of the Company's principal
accountant.
14
PROPOSAL 2 AND 3
PROPOSALS TO ADOPT THE COMPANY'S
2004 STOCK OPTION AND INCENTIVE PLAN
AND
2004 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors Unanimously Recommends Voting FOR this Proposal
The Board of Directors maintains a stock option plan for employees and
consultants that was ratified in 1995. Only 57,160 options remain unissued and
the Plan expires in 2005. The Company believes that a stock option plan is an
important means by which the Company can attract and retain qualified
individuals to perform services for the Company. Accordingly, the Board of
Directors has approved, subject to shareholder approval, the 2004 Stock Option
and Incentive Plan (the "Option Plan"). The Option Plan provides for the grant
of stock options, stock appreciation rights and other awards to employees and
consultants of the Company. The Board has also approved, subject to
shareholder approval, the 2004 Non-Employee Director Stock Option Plan (the
"Outside Director Plan"), to attract and retain qualified personnel to accept
positions as outside directors of the Company. Under the current Outside
Director Plan no more shares can be issued to the current directors and having
the ability to do so is necessary to attract and retain qualified individuals
to serve the Company.
The following is a description of the Option Plan and the Outside Director
Plan (collectively referred to as the "Plans"). Complete copies of both Plans
are attached to this Proxy Statement as Appendices C and D.
The principal aspects of the Plans are as follows:
Purposes
The purpose of the Option Plan is to encourage stock ownership by key
employees and consultants of the Company, to provide additional incentive for
them to promote the successful business operations of the Company, to
encourage them to continue providing services to the Company, and to attract
new employees and consultants of the Company.
The purpose of the Outside Director Plan is to attract qualified personnel
to accept positions of responsibility as directors of the Company to provide
incentives for persons to remain on the Board and to induce such persons to
maximize the Company's performance during the terms of their Options.
Shares Available
A total of 600,000 shares of Common Stock is available for the grant of
awards pursuant to the Option Plan and a total of 150,000 shares of Common
Stock is available for grant under the Outside Director Plan. Such amounts are
subject to adjustments, as described below. Both Plans provide that shares may
be either authorized but unissued shares or issued shares reacquired by the
Company. No awards or options have been or will be granted under the Plans
prior to the Annual Meeting.
Administration
The Option Plan is administered by the Stock Option Committee of the Board
of Directors of the Company (the "Committee"). The Committee which administers
the Option Plan consists of not less than two members of the Board. No member
of the Board may serve on the Committee which administers the Option Plan if
such member (i) is or has been granted or awarded stock, stock options or any
other security of the Company or any of its affiliates pursuant to the Option
Plan or any other plan of the Company (other than the Outside Director Plan)
either while serving on the Committee or during the one year period prior to
being appointed to the Committee; (ii) is an employee or former employee of
the Company or (iii) receives remuneration from the Company in any capacity
other than a director. The Committee has the authority to manage, administer
and interpret the Plan. The Outside Director Plan is administered by a
Committee designated by the Board and consisting solely of employee directors
of the Company. The Committee which administers the Outside Director Plan
initially will consist solely of Sherry Wilzig Izak, the only director who
15
is not an outside director of the Company. However, the Outside Director Plan
specifies the terms of the options granted thereunder. Accordingly, the
Committee which administers the Outside Director Plan will have substantially
less discretion than the Committee which administers the Option Plan.
With respect to the Option Plan, the Committee will determine those
employees and consultants of the Company who will receive stock options and
other awards under such Plan, the types and amounts of such awards and the
exercise prices of options to be granted under the Option Plan (subject to the
terms of the Option Plan).
Upon approval of the Plans by the stockholders at the Annual Meeting, the
members of the Committee which administers the Option Plan will be Messrs.
Berger, Schmertz and Wachtel.
Eligibility
Awards may be made under the Option Plan to all employees and consultants of
the Company or any of its subsidiaries, provided that no employee or
consultant may receive awards of or relating to more than 250,000 shares of
Common Stock in the aggregate in any year. The only persons who will be
eligible to receive options under the Outside Director Plan are persons who
constitute "Outside Directors" (i.e., directors who are not employees or
consultants of the Company or any of its subsidiaries and have not been
employees or consultants for a period of twelve months).
The Company is unable to determine at the present time the identity or
number of key employees and consultants who may be granted awards under the
Option Plan. Messrs. Berger, Donnenberg, Schmertz, Willschick and Wachtel will
qualify for an initial grant of 10,000 stock options each at an exercise price
of fair market value on the date of the Annual Meeting under the Outside
Director Plan upon approval of the Outside Director Plan by the stockholders
at the Annual Meeting. Although the current Board of Directors includes the
five Outside Directors listed above and the Company has no present plans to
increase the number of Outside Directors on the Board, the Company is unable
to determine at the present time the identity or number of Outside Directors
who may be granted options under the Outside Director Plan in the future.
Terms and Conditions of Stock Options and Other Awards Granted Pursuant to the
Plans
Types of Options and Other Awards
Options granted under the Option Plan may either be incentive stock options
("Incentive Stock Options") or non-qualified stock options ("Non-qualified
Stock Options"). Incentive Stock Options and Non-qualified Stock Options are
collectively referred to as "Options". All Options granted under the Outside
Director Plan will be Non-qualified Stock Options. Incentive Stock Options are
designed to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"). See
"Federal Income Tax Consequences". The determination of whether a particular
Option granted under the Option Plan is an Incentive Stock Option or a Non-
qualified Stock Option will be made by the Committee at the time of grant.
Under the Option Plan, the Committee may also grant stock appreciation
rights ("Stock Appreciation Rights" or "SARs"), which may be awarded either in
tandem with Options ("Tandem SARs") or on a stand-alone basis ("Nontandem
SARs"); shares of Common Stock which are subject to various restrictions
("Restricted Shares"); units representing shares of Common Stock ("Performance
Shares"); units which do not represent shares of Common Stock but which may be
paid in the form of Common Stock ("Performance Units"); and shares of Common
Stock that are not subject to any conditions as to vesting ("Unrestricted
Shares").
Subject to the terms of the Outside Director Plan, each Outside Director
will initially receive at the Annual Meeting a Non-qualified Stock Option to
purchase 10,000 shares of Common Stock. Any new Outside Director will receive
a grant of 10,000 Non-qualified Stock Options at fair market value upon
becoming a Director. On each Anniversary Date (as defined), each Outside
Director will receive a Non-qualified Stock Option to purchase 5,000 shares of
Common Stock. An "Anniversary Date" means the date of the Annual Meeting, each
year, provided, in each case, such person continues to serve on the Board on
16
such date. No Outside Director may receive more than one grant in any calendar
year. All Options granted to Outside Directors will vest in installments. See
"Exercise of Options".
Term of the Plans and Term of Options Granted Thereunder
No Option may be granted under either Plan more than 10 years after such
Plan was approved by the Board. An Option granted under the Outside Director
Plan will cease to be exercisable 10 years after the date on which it is
granted. The term of each Option granted under the Option Plan shall be
determined by the Committee, provided that in no event will an Incentive Stock
Option be exercisable after 10 years from the date it is granted or, in the
case of an Incentive Stock Option granted to a person who owns more than 10%
of the voting control of the Company (a "10% Stockholder"), five years from
the date it is granted.
Limitation on Grants of Incentive Stock Options
The Fair Market Value (as defined in the Plans) of the Company's Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any optionee during any calendar year may not exceed $100,000.
Exercise of Options
Unless the Committee administering the Option Plan establishes otherwise at
the time of grant or thereafter or except as otherwise provided for in the
respective Plans, each Option granted under the Option Plan and the Outside
Director Plan is exercisable in annual installments of 25% per year,
commencing one year after the date of grant. The Committee administering the
Option Plan has the authority to accelerate the exercisability of all Options
granted thereunder.
For information concerning certain acceleration provisions, see "Mandatory
Exercise; Acceleration" below.
Exercise Price
In general, the price at which shares of Common Stock will be purchased
under a Non-qualified Stock Option granted under the Option Plan will be not
less than 85% of the Fair Market Value (as defined) of such shares on the
grant date. The Committee may also determine at the time of grant or at any
later time while a Non-qualified Stock Option is exercisable that the Company
will allow a credit against the Option exercise price (a "Right") in an amount
equal to the increase of the Fair Market Value of the Common Stock at the
exercise date over the Fair Market Value at the date that the Right is
granted, but not to exceed the amount allowed to the Company as a federal tax
deduction upon such exercise. Such Right will be applicable only toward the
purchase price of shares of Common Stock. The price at which shares of Common
Stock will be purchased under an Incentive Stock Option will be not less than
the Fair Market Value of the shares on the grant date, provided that an
Incentive Stock Option granted to a 10% Stockholder will be not less than 110%
of the Fair Market Value of the Common Stock on the grant date. The exercise
price of Options granted under the Outside Director Plan will be 100% of the
Fair Market Value of such shares on the grant date. The closing sales price of
a share of Common Stock on the American Stock Exchange on April 16, 2004 was
$5.59 per share.
For purposes of the Plans, "Fair Market Value" is defined as the average of
the high and low sales prices of a share of Common Stock on the American Stock
Exchange. If the Common Stock is not listed on that Exchange, "Fair Market
Value" will mean such average on another national securities exchange or on
the NASDAQ National Market System, or if such sales prices are not available,
the average of the over-the-counter bid and asked prices for a share of the
Common Stock, provided that if the Committee determines that the trading
activity of the Common Stock does not constitute a representative market
price, the Committee has the discretion to engage an independent party to
determine Fair Market Value for this purpose. Payment on exercise of an Option
under the Plans must be by bank cashier's check or by tender of a number of
shares of Common Stock having a Fair Market Value equal to the exercise price
times the number of shares being purchased, or a combination of the above.
Under the Option Plan, the approach of utilizing shares to acquire shares can
only be effected with the consent of the Committee. The Committee is also
authorized to establish a cashless exercise program.
17
Exercise, Surrender or Exchange of SARs
Tandem SARs are exercisable only to the extent that the related Option is
exercisable and only for the period determined by the Committee. Upon exercise
of all or a portion of Tandem SARs, the related Option shall be canceled with
respect to an equal number of shares of Common Stock. Similarly, upon exercise
of all or a portion of an Option, the related Tandem SARs shall be canceled
with respect to an equal number of shares of Common Stock. Nontandem SARs
shall be exercisable for the period determined by the Committee.
Upon surrender of a Tandem SAR and the related unexercised Option, the
recipient will be entitled to receive shares of Common Stock having an
aggregate market price equal to (i) the market price of the shares subject to
the unexercised Option, less (ii) the aggregate Option price specified in the
Option (after giving effect to any related Rights). Upon surrender of a
Nontandem SAR, the recipient will be entitled to receive shares of Common
Stock having an aggregate market price equal to (i) the market price of the
shares covered by the Nontandem SAR, less (ii) the aggregate base price of
such shares specified by the Committee. The Committee, at its discretion, may
cause all or any portion of the payment to be made in cash in lieu of Common
Stock. Any fractional shares resulting from the exercise of an SAR will be
paid in cash.
Restricted Shares
Restricted Shares granted under the Option Plan may not be sold,
transferred, pledged or otherwise encumbered or disposed of during the
restricted period established by the Committee. The Committee may also impose
additional restrictions on a recipient's right to dispose of or encumber
Restricted Shares.
It is intended that the vesting of Restricted Shares will be based upon
length of service and/or performance goals established by the Committee.
Holders of Restricted Shares may exercise the rights of a stockholder, such
as the right to vote the shares and to receive dividends and other
distributions, unless otherwise provided by the Committee.
Any Restricted Shares granted to an employee or consultant shall be
forfeited if the employee voluntarily terminates employment with the Company
or its subsidiaries or resigns or the consultant voluntarily terminates his
consultancy arrangement with the Company or if such employment of consultancy
arrangement is terminated for cause, in each case prior to the expiration of
the restricted period and the satisfaction of any other conditions applicable
to such Restricted Shares. If the employee's employment or the consultant's
consultancy arrangement terminates for any other reason, the Restricted Shares
of such a person shall be forfeited, unless the Committee determines
otherwise.
Performance Shares and Performance Units
The Committee may award Performance Shares equivalent to one share of Common
Stock and Performance Units which will have a specified value or formula-based
value at the end of a performance period. The Committee shall determine
periods and performance objectives in connection with each grant of
Performance Shares or Performance Units.
Vesting of awards of Performance Shares and Performance Units will occur
upon achievement of the applicable objectives within the applicable
performance period. It is intended that vesting of awards of Performance
Shares and Performance Units will be based upon performance goals established
by the Committee. The Committee may, at its discretion, permit vesting in the
event performance objectives are partially met or grant additional vested
Performance Shares or Performance Units in the event performance objectives
are surpassed. Payment for vested Performance Shares and Performance Units may
be in cash, Common Stock or any combination thereof, as determined by the
Committee.
No voting or dividend rights attach to the Performance Shares; however, the
Committee may credit a recipient's Performance Share account with additional
shares equivalent to the Fair Market Value of any dividends on an equivalent
number of shares of Common Stock.
18
Unrestricted Shares
Unrestricted Shares may also be granted at the discretion of the Committee.
No payment shall be required for Unrestricted Shares. While the grant of
Unrestricted Shares is within the discretion of the Committee, it is the
Company's intention that the grant of Unrestricted Shares will be utilized
only in situations where the performance of an employee or consultant is of
such benefit to the Company as to justify a stock bonus or in situations where
providing the incentives associated with Unrestricted Shares would be in the
best interests of the Company.
Termination of Employment or of Service on the Board
In the event that the employment or consultancy arrangement of a person
granted Options under the Option Plan or the service on the Board of Directors
by an Outside Director granted Options under the Outside Director Plan is
terminated for any reason other than death, disability, retirement, cause or
resignation, all such individual's Options will terminate three months after
the date upon which such employment, consultancy arrangement or service on the
Board terminates, as the case may be, but in any event not later than the date
on which such Options otherwise terminate. In the event that such an
optionee's employment or consultancy arrangement terminates by reason of death
or disability or retirement, an Option exercisable by him shall terminate one
year after the date of death disability, but in any event not later than the
date on which the Option would otherwise terminate. In the event that such an
optionee's employment or consultancy arrangement terminates by reason of
retirement, an option exercisable by him shall terminate three months after
the date of retirement, but in any event not later than the date on which the
Option would otherwise terminate. Options granted under the Plans may be
exercised after termination only to the extent exercisable on the date of
termination. If an optionee's employment, consultancy arrangement or service
on the Board terminates for cause, or if the individual shall voluntarily
terminate such relationship or resign, all of the individual's Options will
terminate upon the date on which such employment, consultancy arrangement or
Board service terminated. If the Company "Suspends" (as defined in the Option
Plan) the employment of an employee, the Company will not be obligated to
issue any shares upon the exercise by the employee of Options during the
"Suspension Period" (as defined). If, at the conclusion of the Suspension
Period, the Company terminates the employee's employment or the employee
resigns or voluntarily terminates his employment, all exercises during the
Suspension Period shall be deemed void. If, at the conclusion of the
Suspension Period, the Company decides to continue the employment of the
employee, the Company will deliver share certificates with respect to all
Options which were properly exercised (but for the "Suspension") during the
Suspension Period. The effect of termination on the exercisability of SARs is
the same as described above with respect to the exercisabilty of Options.
Adjustments
The number of shares available for the grant of outstanding awards under the
Option Plan and the grant of Options under the Outside Director Plan, the
number of shares covered by Options to be granted under the Outside Director
Plan in the future, the number of shares covered by outstanding awards and
Options and the exercise prices of outstanding Options will be adjusted
equitably for stock splits, stock dividends, recapitalizations, mergers and
other similar changes in the Company's capital stock.
Lapsed Options
If any Option under the Plans should terminate for any reason without having
been exercised in full, the unpurchased shares will become available for the
grant of additional awards under the applicable Plan.
Mandatory Exercise; Acceleration
In the event that the Company adopts a plan of reorganization pursuant to
which it will merge into or sell its assets to another corporation or if the
Company adopts a plan of complete liquidation, the Plans provide that the
Company may give an optionee written notice requiring the individual either
(a) to exercise the Option within 30 days after receipt of such notice,
including all installments whether or not they would otherwise be exercisable,
or (b) to surrender the Option or any unexercised portion thereof. Any portion
of
19
the Option which is not exercised in accordance with the provisions of the
applicable Plan by the end of the 30 day period will automatically lapse and
the optionee will have no further rights with respect to such Options.
The Option Plan provides that in the event that a "Change in Control Event"
(as defined) occurs, all Options, SARs or Restricted Stock shall become fully
exercisable or vested immediately and automatically upon the occurrence of the
Change in Control Event. The Outside Director Plan provides that in the event
of a Change in Control Event, all Options granted under the Outside Director
Plan will become fully exercisable immediately and automatically upon the
occurrence of the Change in Control Event. The definition of "Change in
Control Event" is identical in both of the Plans, and is set forth in the
Exhibits to this Proxy.
No Right of Employment or Service on the Board
No provision in the Plans confers upon any optionee the right to continue in
the employment of the Company, as a consultant or as a Director or affects any
right which the Company may have to terminate the employment or consultancy
arrangement of, or service on the Board by, any optionee.
Assignment
Benefits under the Plans generally are not assignable or transferable other
than by will or the laws of descent and distribution.
Termination, Amendment and Modification
In general, the Board of Directors of the Company may at any time terminate
or amend the Plans as it may deem advisable, except that no such termination
or amendment shall deprive an optionee of any right which has accrued under
the Plans.
Federal Income Consequences
THE FOLLOWING DISCUSSION OF TAX CONSEQUENCES IS GENERAL IN NATURE AND
RELATES SOLELY TO FEDERAL INCOME TAX MATTERS. OPTIONEES AND RECIPIENTS OF
OTHER AWARDS GRANTED UNDER THE PLANS ARE ADVISED TO CONSULT THEIR PERSONAL TAX
ADVISORS AS TO THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES BEFORE
EXERCISING AN OPTION OR AWARD OR DISPOSING OF ANY STOCK RECEIVED PURSUANT TO
THE EXERCISE OF AN OPTION OR AWARD. IN ADDITION, THE FOLLOWING SUMMARY IS
BASED UPON AN ANALYSIS OF THE CODE AS CURRENTLY IN EFFECT, EXISTING LAWS,
JUDICAL DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED
REGULATIONS, ALL OF WHICH ARE SUBJECT TO CHANGE.
Treatment of Options
The Code treats Incentive Stock Options and Non-qualified Stock Options
differently. However, there generally are no Federal income tax consequences
to the optionee or the Company by reason of the grant of Options under either
of the Plans.
Generally, upon exercise of a Non-qualified Stock Option, an optionee will
recognize taxable, ordinary income equal to the excess of the fair market
value of the stock on the exercise date over the Option price. The Company
will be entitled to a tax deduction in an amount equal to the ordinary income
recognized by the optionee in the fiscal year which includes the end of the
optionee's taxable year. The Company will be required to satisfy applicable
withholding requirements in order to be entitled to a tax deduction. In
general, if an optionee, in exercising a Non-qualified Stock Option, tenders
shares of Common Stock in partial or full payment of the Option price, no gain
or loss will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of an Incentive Stock Option and the
tender is within two years from the date of grant or one year after the date
of exercise of the Incentive Stock Option, the tender will be a disqualifying
disposition of the shares acquired upon exercise of the Incentive Stock
Option.
20
For Incentive Stock Options, an optionee generally does not recognize
taxable income at the time of exercise. However, the excess of the fair market
value of the stock on the date of exercise over the exercise price will be
taken into account in determining whether the "alternative minimum tax" will
apply for the year of exercise. If the shares acquired upon exercise are held
until at least two years form the date of grant and more than one year from
the date of exercise, any gain or loss upon the sale of such shares, if held
as capital assets, will be long-term capital gain or loss (measured by the
difference between the sales price of the stock and the exercise price). Under
current federal income tax law, a long-term capital gain will be taxed at a
rate which is less than the maximum rate of tax on ordinary income. If the
two-year and one year holding period requirements are not met (a
"disqualifying disposition"), an optionee will recognize ordinary income in
the year of disposition in an amount equal to the lesser of (i) the fair
market value of the stock on the date of exercise minus the exercise price or
(ii) the amount realized on disposition minus the exercise price. The
remainder of the gain will be treated as long-term capital gain if the stock
has been held for more than a year. If an optionee makes a disqualifying
disposition, the Company will be entitled to a tax deduction equal to the
amount of ordinary income recognized by the optionee.
In general, if an optionee, in exercising an Incentive Stock Option, tenders
shares of Common Stock in partial or full payment of the Option price, no gain
or loss will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of another Incentive Stock Option and
the tender is within two years from the date of grant or one year after the
date of exercise of the other Option, the tender will be a disqualifying
disposition of the shares acquired upon exercise of the other Option.
As noted above, the exercise of an Incentive Stock Option could subject an
optionee to the alternative minimum tax. The application of the alternative
minimum tax to any particular optionee depends upon the particular facts and
circumstances which exist with respect to the optionee in the year of
exercise. However, as a general rule, the amount by which the fair market
value of the Common Stock on the date of exercise of an Option exceeds the
exercise price of the Option will constitute an item of "adjustment" for
purposes of determining the alternative minimum taxable income on which the
alternative tax may be imposed. As such, this item will enter into the tax
base on which the alternative minimum tax is computed, and may therefore cause
the alternative minimum tax to become applicable in any given year.
Stock Appreciation Rights, Performance Shares and Performance Units
There will be no federal income tax consequences to either the recipient or
the Company upon the grant of a SAR, Performance Share or Performance Unit.
Generally, the recipient will recognize ordinary income upon the receipt of
payment pursuant to a SAR, Performance Share or Performance Unit in an amount
equal to the fair market value of the Common Stock and the aggregate amount of
cash received. The Company generally will be entitled to a corresponding tax
deduction equal to the amount includible in the recipient's income.
Restricted Shares
Generally, absent an election to be taxed currently under Section 83(b) of
the Code (a "Section 83(b) Election"), there will be no federal income tax
consequences to either the recipient or the Company upon the grant of
Restricted Shares. At the expiration of the restriction period and the
satisfaction of any other restrictions applicable to the Restricted Shares,
the recipient will recognize ordinary income and the Company generally will be
entitled to a corresponding deduction equal to the fair market value of the
Common Stock at that time. If a Section 83(b) Election is made within 30 days
after the date of the Restricted Shares are received, the recipient will
recognize an amount of ordinary income at the time of the receipt of the
Restricted Shares, and the Company generally will be entitled to a
corresponding deduction, equal to the fair market value (determined without
regard to applicable restrictions) of the shares at such time. If a Section
83(b) Election is made, no additional income will be recognized by the
recipient upon the lapse of restrictions on the shares (and prior to the sale
of such shares), but, if the shares are subsequently forfeited, the recipient
may not deduct the income that was recognized pursuant to the Section 83(b)
Election at the time of the receipt of the shares.
21
Unrestricted Shares
Generally, the recipient will recognize ordinary income upon the receipt of
Unrestricted Shares in an amount equal to the fair market value of the Common
Stock received. The Company generally will be entitled to a corresponding tax
deduction equal to the amount includible in the recipient's income if
applicable withholding requirements are satisfied.
Persons Subject to Liability Under Section 16(b) of the Exchange Act
Special rules apply under the Code which may delay the timing and alter the
amount of income recognized with respect to awards granted to persons subject
to liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such persons include directors, "officers" for
purposes of Section 16 of the Exchange Act and holders of more than 10% of the
outstanding Common Stock.
Limitations on the Company's Compensation deduction
Code Section 162(m) denies a deduction to any publicly held corporation for
compensation paid to certain "covered employees" in a taxable year to the
extent that compensation exceeds $1 million for a covered employee. It is
possible that compensation attributable to stock options granted in the future
under the Option Plan, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to
be exceeded in any particular year. Certain kinds of compensation, including
qualified "performance-based compensation," are disregarded for purposes of
the deduction limitation. In accordance with Treasury regulations issued under
Code Section 162(m), compensation attributable to stock options will qualify
as performance-based compensation, provided that: (i) the stock award plan
contains a per-employee limitation on the number of shares for which stock
options may be granted during a specified period; (ii) the per-employee
limitation is approved by the stockholders; (iii) the award is granted by a
compensation committee comprised solely of "outside directors"; and (iv) the
exercise price of the award is no less than the fair market value of the stock
on the date of grant.
Tax Withholding
The Company, as and when appropriate, shall have the right to require each
optionee purchasing shares of Common Stock to pay any federal, state or local
taxes required by law to be withheld.
Other
The Plans are not subject to any provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA") and are not qualified under Section 401
of the Code.
The Board of Directors recommends a vote FOR the adoption of the 2004 Stock
Option and Incentive Plan.
The Board of Directors recommends a vote FOR the adoption of the 2004 Non-
Employee Director Stock Option Plan.
STOCKHOLDER PROPOSALS FOR 2005 ANNUAL MEETING
Stockholder Proposals for Inclusion in 2005 Proxy Statement
If any stockholder intends to present a proposal for consideration at the
2005 Annual Meeting of Stockholders, such proposal must be received by the
Company not later than January 7, 2005 for inclusion, pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, in the Company's proxy statement
for such meeting. Such proposal also will need to comply with Securities and
Exchange Commission regulations regarding the inclusion of stockholder
proposals in Company-sponsored proxy materials.
Other Requirements for Stockholder Proposals for Presentation at 2005 Annual
Meeting.
According to the by-laws of the Company, notice of any proposal to be
presented by any stockholder at any annual meeting must be given timely, in
writing, to the Secretary of the Company. To be timely, a
22
stockholder's notice must be given to the Secretary not less than 60 or more
than 90 days prior to the date of the meeting; provided that if the date of
the meeting is first publicly announced less than 70 days before the date of
the meeting, such advance notice must be given within ten days after such
meeting date is first publicly announced. All such notices must set forth, as
to each matter the stockholder proposes to bring before the Annual Meeting,
(i) the text of the proposal, (ii) a brief description of the reasons for such
proposal, (iii) the name and address of the stockholder proposing such
business, (iv) the class and number of shares of Common Stock which are
beneficially owned by the stockholder and (v) any material interest of the
stockholder in such proposal. The chairperson of the meeting will determine
whether sufficient notice has been given; in the absence of such notice, a
stockholder proposal will not be considered.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, if a
stockholder notifies the Company in a time or manner inconsistent with the
Company's by-laws of an intent to present a proposal at the Company's 2005
Annual Meeting (and for any reason the proposal is voted upon at that Annual
Meeting), the Company's proxy holders will have the right to exercise
discretionary voting authority with respect to the proposal, if presented at
the meeting, without including information regarding the proposal in its proxy
materials.
Code of Ethics
The Company has adopted a Code of Ethics that applies to its principal
executive officer, principal financial officer, principal accounting officer
or controller and persons performing similar functions. A copy of the Code of
Ethics is available on the Company's website (http://
www.wilshireenterprisesinc.com) under the caption "Corporate Policies."
Ernst & Young has served as the Company's independent auditors for 2003.
Representatives of Ernst & Young LLP are expected to attend the Annual
Meeting, to have an opportunity to make a statement, if they desire to do so,
and to be available to respond to appropriate questions. The Audit Committee
has not yet selected independent auditors for 2004.
We hope that you will attend the meeting of stockholders, and look forward
to your presence. HOWEVER, EVEN IF YOU PLAN TO ATTEND, YOU ARE URGED TO EITHER
VOTE YOUR SHARES ELECTRONICIALLY ON THE INTERNET, BY TELEPHONE OR BY
COMPLETING, SIGNING AND RETURNING THE ENCLOSED PROXY CARD. If you wish to
change your vote or vote differently in person, your proxy may be revoked at
any time prior to the time it is voted at the meeting.
/s/ S. Wilzig Izak
--------------
S. WILZIG IZAK
Chairman of the Board
Dated: May 7, 2004
A copy of the Company's Annual Report for the year ended December 31, 2003,
including financial statements, accompanies this Proxy Statement. The Annual
Report is not to be regarded as proxy soliciting material or as a
communication by means of which any solicitation is to be made.
The Company will provide without charge, to any shareholder of record who
requests it a copy of its Annual Report to the Securities and Exchange
Commission on Form 10-K including financial statements and the schedules
thereto, for the year ended December 31, 2003. Requests for copies of the Form
10-K should be sent to: Wilshire Enterprises, Inc., Shareholder Relations
Department, 921 Bergen Avenue, Jersey City, New Jersey 07306.
23
Appendix A
WILSHIRE ENTERPRISES, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
MISSION
The Audit Committee of the Board of Directors (the "Committee") of Wilshire
Enterprises, Inc. (the "Company") will assist the Board of Directors (the
"Board") in fulfilling its oversight responsibilities. The Committee will
review (i) the financial reporting process (including the financial reports
provided by the Company to the public), (ii) the systems of internal control,
(iii) the external audit process and (iv) the Company's process for monitoring
compliance with laws and regulations and with the code of conduct. In
performing its duties, the Committee will maintain effective working
relationships with the Board, management and the external auditors. To
effectively perform his or her role, each Committee member will obtain an
understanding of the detailed responsibilities of Committee membership as well
as the Company's business, operations and risks.
AUTHORITY
The Board authorizes the Committee, within the scope of its responsibilities
to:
o Seek any information it requires from:
^ Any employee (and all employees are directed to co-operate with any
request made by the Committee)
^ External parties
o Obtain outside legal or other professional advice
o Encourage the attendance of Company officers at meetings as appropriate
ORGANIZATION
Membership
3.1 The Committee will be comprised of at least three members, all of whom
shall be independent, as defined by the Securities and Exchange Commission's
Rules and Regulations and the American Stock Exchange.
3.2 Each member of the Committee shall be able to read and understand
financial statements.
3.3 The Chairman of the Committee shall have accounting or related
financial management expertise, shall be nominated at the Annual Meeting of
the Board and shall serve for a one-year term. The Chairman may continue to
serve in this capacity following the one-year term if appointed by the Board
at its Annual Meeting.
3.4 Members of the Committee shall be appointed by the Board at the Annual
Meeting of the Board and shall serve for one-year terms. Members may continue
to serve on the Committee if appointed by the Board at its Annual Meeting.
Meetings
3.5 The Committee shall meet no fewer than four times per fiscal year in
accordance with a schedule established each year by the Board and at such
other times that the Committee may determine. Meetings may be conducted either
in person or telephonically.
3.6 A quorum for any meeting shall be two members (assuming the Committee
consists of three members), whose participation may be either in person or by
phone.
3.7 The Secretary of the Committee shall be the Company Secretary, or such
other person as appointed by the Board. The Secretary of the Committee shall
record minutes of the proceedings of all meetings. The Committee at a
subsequent meeting shall approve such minutes.
3.8 Meeting agendas shall be developed by the Committee Chairman, in
consultation with the Company's management and the Secretary of the Committee.
Committee members who would like to suggest agenda items should communicate
with one of these individuals. Agendas shall be circulated to Committee
members prior to Committee meetings.
3.9 In addition to the Committee members and the Secretary of the
Committee, meetings shall include, at the discretion of the Committee, the
Company's Chief Executive Officer, Chief Financial Officer and Controller as
well as representatives from the Company's external audit firm. As
appropriate, the Committee may request any officer or employee of the Company
or representatives of the Company's outside counsel, investment bankers or
other individuals that it deems appropriate to attend a meeting.
3.10 The external auditors may request that the Chairman of the Committee
call a special meeting of the audit committee, if such auditors deem such a
meeting to be necessary and appropriate.
ROLES AND RESPONSIBILITIES
Financial Reporting Process and Financial Statements
4.1 In consultation with the Company's management and its external
auditors, review the design and operation of the Company's financial reporting
and disclosure process, both internally and externally.
4.2 Establish complaint procedures for employees and others to report
matters affecting financial reporting and disclosure, internal controls and
related accounting and auditing issues as well as protocols to address these
concerns.
4.3 Review the Company's critical accounting policies, including any
changes to these policies and practices on an annual or interim basis. This
review shall include an analysis, prepared by management of the Company and
the external auditors, of significant financial reporting issues and judgments
made in connection with the preparation of the Company's financial statements,
including an analysis of the effect of alternative Generally Accepted
Accounting Principles (GAAP) methods on the Company's financial statements and
a description of any transactions as to which management obtained accounting
opinion letters.
4.4 Review and discuss the certifications made by the Company's Chief
Executive and Chief Financial Officers with respect to the accuracy and
completeness of the financial statements and disclosures included in annual
and interim reports filed with the Securities and Exchange Commission and the
basis upon which those certifications were made prior to filing such reports.
4.5 Review the results of the work performed by the Company's external
auditors prior to the release of annual and interim financial reports to
consider any issues that arose during the course of that work concerning the
completeness or accuracy of the financial statements or disclosures. Confirm
that the scope of the external auditors review of the interim and audit of the
annual financial statements was performed in accordance with Generally
Accepted Auditing Standards (GAAS).
System of Internal Controls
4.6 Obtain an understanding of the significant business and operational
risks that the Company faces and the internal controls and processes in place
to mitigate the impact of those risks on the Company's performance and
viability.
4.7 Understand the scope, nature and results of testing of the Company's
internal controls by the Company's external auditors and whether appropriate
corrective action has been taken on their recommendations.
4.8 Review and discuss the certifications made by the Company's Chief
Executive and Chief Financial Officers with respect to the Company's system of
internal controls included in annual and interim
A-2
reports filed with the Securities and Exchange Commission and the basis upon
which those certifications were made prior to filing such reports.
External Audit
4.9 Assume direct responsibility for the appointment, retention and
oversight of the independent auditor, which firm is ultimately accountable to
the Committee.
4.10 Review the experience and qualifications of the senior members of the
independent auditor team and the quality control procedures of the independent
auditor. Obtain and review the formal written statement and letter required by
Independence Standards Board Standard No. 1 related to the auditors'
independence. Ensure that the audit team has followed required partner
rotational standards.
4.11 Review the external auditor's proposed audit scope and approach and
ensure no unjustified restrictions or limitations have been placed on the
scope of their audit procedures.
4.12 Review and approve the external audit fees based upon the proposed
audit scope.
4.13 Establish criteria for the pre-approval of non-audit services to be
performed by the independent auditors and ensure such services comply with the
scope of services regulations promulgated by the Securities and Exchange
Commission and other Company regulators.
4.14 Review the results of the independent auditors procedures, including
all matters required to be reported in accordance with GAAS and other
regulatory standards.
4.15 Meet separately with the external auditors to discuss any matters
that the Committee or auditors believe should be discussed privately.
4.16 Ensure that specific findings and recommendations made by the
external auditors are received and discussed on a timely basis and Company
management takes that appropriate corrective action.
Compliance with Laws and Regulations
4.17 Review the effectiveness of the system for monitoring compliance with
laws and regulations and the results of management's investigation and follow-
up (including disciplinary action) of any fraudulent acts or non-compliance.
4.18 Obtain regular updates from management and the Company's legal
counsel regarding regulatory compliance matters as well as any legal issues
that could have a significant impact on the Company's financial statements or
business operations.
Compliance with the Company's Code of Conduct
4.19 Ensure that the Company's Code of Conduct is in writing and that it
has been distributed to and understood by Company employees and other
individuals covered by its contents.
4.20 Review the process for monitoring compliance with the Code of Conduct
and obtain regular updates from management regarding compliance.
Reporting and other Responsibilities
4.21 Regularly update the Board concerning Committee activities, ensure
that the Board is aware of matters that may significantly impact the financial
condition or affairs of the Company and make appropriate recommendations to
address these matters.
4.22 Perform other oversight functions as requested by the Board.
4.23 If necessary, institute special investigations and, if appropriate,
hire special counsel or experts to assist in such investigations.
4.24 Review and update the Committee Charter and receive approval of
changes from the Board.
4.25 Evaluate the Committee's own performance on a regular basis.
A-3
Appendix B
WILSHIRE ENTERPRISES, INC.
NOMINATING COMMITTEE CHARTER
Purposes of the Nominating Committee
The purposes of the Nominating Committee are:
o to consider proposals made by shareholders and others to nominate
specific individuals to the board of directors of Wilshire Enterprises,
Inc. (the "Company");
o to identify qualified individuals for membership on such board (the
"Board"); and
o to recommend to the Board the director nominees for election at each
annual meeting of shareholders and at each other meeting of shareholders
at which directors are to be elected.
Membership of the Nominating Committee
The Nominating Committee:
o shall consist of not less than three members of the Board, the exact
number to be established by the Board from time to time;
o shall consist solely of individuals who meet the independence standards
set forth in Securities and Exchange Commission rules and in the listing
standards applicable to the Company; and
o shall consist solely of members who are appointed by, and who may be
removed by the Board.
Criteria for Nomination to the Board of Directors
Each individual nominated by the Nominating Committee to serve on the Board
of Directors shall, in the Nominating Committee's opinion, satisfy the
following criteria (the "Minimum Criteria") together with such other criteria
as shall be established by the Nominating Committee:
o such nominee shall satisfy any legal requirements applicable to members
of the Board;
o such nominee shall have business or professional experience that will
enable such nominee to provide useful input to the Board in its
deliberations;
o such nominee shall have a reputation for honesty and ethical conduct;
o such nominee shall have a working knowledge of the types of
responsibilities expected of members of the board of directors of a
public corporation; and
o such nominee shall have experience, either as a member of the board of
directors of another public or private corporation or in another
capacity, that demonstrates the nominee's capacity to serve in a
fiduciary position.
Procedures to be Followed with Respect to the Submission of Names for
Consideration by the Nominating Committee.
The following procedures (the "Minimum Procedures") shall be utilized in
considering any candidate for election to the Board at an annual meeting,
other than candidates who have previously served on the Board or who are
recommended by the Board. A nomination must be delivered to the Secretary of
the Company at the principal executive offices of the Company not later than
the close of business on the ninetieth (90th) day nor earlier than the close
of business on the one hundred twentieth (120th) day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that if
the date of the annual meeting is more than thirty (30) days before or more
than sixty (60) days after such anniversary date, notice to be timely must be
so delivered not earlier than the close of business on the one hundred
twentieth (120th) day prior to such annual
meeting and not later than the close of business on the later of the ninetieth
(90th) day prior to such annual meeting or the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Company. In no event shall the public
announcement of an adjournment or postponement of an annual meeting commence a
new time period (or extend any time period) for the giving of a notice as
described above. Such notice shall set forth as to each person whom the
proponent proposes to nominate for election as a director (a) all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a director
if elected), and (b) information that will enable the Nominating Committee to
determine whether the candidate satisfies the Minimum Criteria and any
Additional Criteria (as defined below) established by the Nominating
Committee.
In the event that a director is to be nominated at a special meeting of
shareholders or is to be elected by the Board, the Nominating Committee shall
develop procedures designed to conform, as nearly as practicable, to the
procedures applicable to elections of Board members at annual meetings.
The Nominating Committee may, but shall not be required to, develop other
procedures (the "Additional Procedures") designed to supplement the Minimum
Procedures.
Processes to be Followed in Considering Candidates
Candidates to serve on the Board shall be identified from such sources as
shall be available to the Nominating Committee, including without limitation
recommendations made by shareholders.
There shall be no differences in the manner in which the Nominating
Committee evaluates nominees recommended by shareholders and nominees
recommended by the committee or management, except that no specific process
shall be mandated with respect to the nomination of any individuals who have
previously served on the Board. The evaluation process shall include (i) a
review of the information provided to the Nominating Committee by the
proponent, (ii) a review of reference letters from at least two sources
determined to be reputable by the Nominating Committee and (iii) a personal
interview of the candidate, together with a review of such other information
as the Nominating Committee shall determine to be relevant.
Duties of the Nominating Committee
The Nominating Committee shall:
o determine whether other criteria (the "Additional Criteria"), beyond the
Minimum Criteria, should apply in nominating members of the Board, such
Additional Criteria to
o reflect, at a minimum, all applicable laws, rules, regulations and
listing standards applicable to the Company, and
o take into account a potential candidate's experience, areas of expertise
and other factors relative to the overall composition of the board of
directors;
o determine whether the Minimum Procedures should be supplemented with
Additional Procedures relating to the information to be submitted to the
Nominating Committee regarding prospective candidates;
o annually review the size, composition and needs of the Board and make
recommendations to the Board;
o recommend to the Board the director nominees for election at the next
annual meeting of shareholders;
o consider and recommend candidates for appointment to the Board to the
extent vacancies arise between annual meetings of shareholders;
o consider director candidates submitted by shareholders and other third-
parties, in accordance with the Minimum Procedures and any Additional
Procedures adopted by the Nominating Committee; and
B-2
o annually review the Nominating Committee charter and recommend to the
Board any changes it deems necessary or desirable.
Meetings of the Nominating Committee
The Nominating Committee shall meet as often as necessary to carry out its
responsibilities, but not less than once each year. At the discretion of the
chairperson of the Nominating Committee, but at least once each year for all
or a portion of a meeting, the members of the Nominating Committee shall meet
in executive session, without any members of management present.
Additional Authority of the Nominating Committee
The Nominating Committee shall have the authority, in its discretion, to
retain outside counsel and other advisors.
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Appendix C
WILSHIRE ENTERPRISES, INC.
2004 STOCK OPTION AND INCENTIVE PLAN
ARTICLE 1
Establishment; Purpose; Definitions
1.1 Establishment and Effective Date. Wilshire Enterprises, Inc., a
Delaware corporation (the "Company" or "Wilshire"), hereby establishes a stock
incentive plan to be known as the Wilshire Enterprises, Inc. 2004 Stock Option
and Incentive Plan (the "Plan"). The Plan shall become effective as of June
16, 2004, upon the approval of the Company's stockholders at the 2004 Annual
Meeting of Stockholders.
1.2 Purpose of the Plan. The purpose of the Plan is to encourage stock
ownership by key employees and consultants of the Company, to provide
additional incentive for them to promote the successful business operations of
the Company, to encourage them to continue providing services to the Company,
and to attract new employees and consultants of the Company.
1.3 Definitions. As used in the Plan, unless the context requires
otherwise, the following terms shall have the meanings specified hereinafter.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Change in Control Event" shall have the meaning ascribed to such
term in Article 12 of the Plan.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean the committee of the Board of Directors
provided for in Section 3.1 of the Plan.
(e) "Common Stock" shall mean the Common Stock, par value $1.00 per
share, of the Company, or, if another security is substituted for the
Common Stock pursuant to the adjustment provisions of Article 8, such other
security.
(f) "Fair Market Value" shall mean the average of the high and low sales
prices of a share of Common Stock on the American Stock Exchange, or if the
Common Stock is not listed thereon, on another national securities exchange
or on the NASDAQ National Market System, whichever is applicable, on the
Grant Date or other relevant date, or if such sales prices are not
available, the average of the over-the-counter bid and asked prices for a
share of the Common Stock on the Grant Date or other relevant date;
provided, that if in the opinion of the Committee the trading activity of
the Common Stock is deemed not to constitute a representative market price,
the Committee shall have the discretion to engage an independent party to
determine Fair Market Value for this purpose.
(g) "Grant Date" shall mean the date on which an Option is granted.
(h) "Option" shall mean the right to purchase one or more shares of
Common Stock granted under Article 5 of the Plan.
(i) "Optionee" shall mean a key employee or consultant to whom an Option
has been granted under the Plan.
(j) "Performance Shares" shall mean a grant of shares of Common Stock
made pursuant to Article 14 of the Plan.
(k) "Performance Units" shall mean a grant made pursuant to Article 15
of the Plan.
(l) "Restricted Shares" shall mean a grant of shares of Common Stock
made pursuant to Article 13 of the Plan.
(m) "Retirement" shall mean (i) the termination of one's employment or
consulting career or (ii) such other or related circumstances as shall
result in the Committee's determining, in its discretion, that the
termination of an employment or consulting relationship should be treated
as a "Retirement" for purposes of the Plan.
(n) "Stock Appreciation Right" shall mean a right granted under Article
6 of the Plan.
(o) "Suspend", "Suspended" or "Suspension", when referring to the
employment of an Optionee, shall mean the reasonable determination by the
Board of Directors or the Chairman or the President of the Company that the
Optionee's performance of his duties or the Optionee's conduct warrants an
investigation by management in order to determine whether or not the
Optionee's employment should be terminated. The duties of an Optionee may
but need not be limited by management while the Optionee's employment is so
Suspended, and the Optionee will be deemed by management to be an employee
who is not in good standing.
(p) "Suspended Optionee" shall mean an Optionee whose employment has
been suspended.
(q) "Suspension Period" shall mean the time period beginning with the
date on which the Board of Directors or Chairman or President of the
Company makes its determination that an investigation of the Optionee is
warranted and ending on the date the Company (i) terminates the employment
of a Suspended Optionee or (ii) determines to continue the employment of a
Suspended Optionee and terminate any investigation of such Optionee.
(r) "Unrestricted Shares" shall mean a grant of shares of Common Stock
made pursuant to Article 16 of the Plan.
ARTICLE 2
Awards; Shares Available
2.1 Form of Awards. Awards under the Plan may be granted in any one or all
of the following forms: (i) incentive stock options ("Incentive Stock
Options") meeting the requirements of Section 422 of the Code; (ii) non-
qualified stock options ("Non-qualified Stock Options") (unless otherwise
indicated, references in the Plan to "Options" shall include both Incentive
Stock Options and Non-qualified Stock Options); (iii) stock appreciation
rights ("Stock Appreciation Rights"), as described in Article 6 hereof, which
may be awarded either in tandem with Options ("Tandem Stock Appreciation
Rights") or on a stand-alone basis ("Nontandem Stock Appreciation Rights");
(iv) shares of Common Stock which are restricted as provided in Article 13
hereof ("Restricted Shares"); (v) units representing shares of Common Stock,
as described in Article 14 hereof ("Performance Shares"); (vi) units which do
not represent shares of Common Stock but which may be paid in the form of
Common Stock, as described in Article 15 hereof ("Performance Units"); and
(vii) shares of Common Stock that are not subject to any conditions as to
vesting ("Unrestricted Shares"), as described in Article 16 hereof.
2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for award under the Plan is 600,000, subject to
adjustment pursuant to Article 8 hereof. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Company. In the event that prior to the end of the
period during which Options may be granted under the Plan, any Option or any
Nontandem Stock Appreciation Right under the Plan expires unexercised or is
terminated, surrendered or canceled (other than in connection with the
exercise of Stock Appreciation Rights) without being exercised in whole or in
part for any reason, or any Restricted Shares, Performance Shares or
Performance Units are forfeited, or if such awards are settled in cash in lieu
of shares of Common Stock, then such shares or units shall be available for
subsequent awards under the Plan, upon such terms as the Committee may
determine.
2.3 Return of Prior Awards. As a condition to any award under the Plan,
the Committee shall have the right, at its discretion, to require recipients
to return to the Company awards previously granted under the Plan or any other
stock option plan of the Company. Subject to the provisions of the Plan, such
new award shall be upon such terms and conditions as are specified by the
Committee at the time the new award is granted.
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ARTICLE 3
Administration
3.1 Committee. Awards shall be determined, and the Plan shall be
administered, by a Committee as appointed from time to time by the Board from
amongst its members, which Committee shall consist of not less than two (2)
members of the Board. Except as permitted by Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "Act"), and by Section 162(m) of the
Code (or regulations promulgated thereunder), no member of the Board may serve
on the Committee if such member: (i) is or has been granted or awarded stock,
stock options, stock appreciation rights or any other equity security or
derivative security of the Company or any of its affiliates pursuant to the
Plan or any other plan of the Company or its affiliates either while serving
on the Committee or during the one year period prior to being appointed to the
Committee; (ii) is an employee or former employee of the Company; or (iii)
receives remuneration from the Company, either directly or indirectly, in any
capacity other than as a director.
3.2 Powers of Committee. Subject to the express provisions of the Plan,
the Committee shall have the power and authority (i) to grant Options and to
determine the purchase price of the Common Stock covered by each Option, the
term of each Option, the number of shares of Common Stock to be covered by
each Option and any performance objectives or vesting standards applicable to
each Option; (ii) to designate Options as Incentive Stock Options or Non-
qualified Stock Options and to determine which Options, if any, shall be
accompanied by Tandem Stock Appreciation Rights, (iii) to grant Tandem Stock
Appreciation Rights and Nontandem Stock Appreciation Rights and to determine
the terms and conditions of such rights; (iv) to grant Restricted Shares and
to determine the term of the restricted period and other conditions and
restrictions applicable to such shares; (v) to grant Performance Shares and
Performance Units and to determine the performance objectives, performance
periods and other conditions applicable to such shares or units; (vi) to grant
Unrestricted Shares; (vii) to determine the employees and consultants to whom,
and the time or times at which, Options, Stock Appreciation Rights, Restricted
Shares, Performance Shares, Performance Units and Unrestricted Shares shall be
granted; and (viii) to modify or amend each Option, Stock Appreciation Right,
Restricted Share, Performance Share, Performance Unit, and/or Unrestricted
Share granted under the Plan.
3.3 Interpretations. The Committee shall have sole discretionary authority
to interpret the terms of the Plan, to adopt and revise rules, regulations and
policies to administer the Plan and to make any other factual determinations
which it believes to be necessary or advisable for the administration of the
Plan. All actions taken and interpretations and determinations made by the
Committee in good faith shall be final and binding upon the Company, all
employees and consultants who have received awards under the Plan and all
other interested persons.
3.4 Liability; Indemnification. No member of the Committee shall be
personally liable for any action, interpretation or determination made in good
faith with respect to the Plan or awards made thereunder, and each member of
the Committee shall be fully indemnified and protected by the Company with
respect to any liability he or she may incur with respect to any such action,
interpretation or determination, to the extent such indemnification is
permitted by applicable law and to the extent such indemnification is provided
in the Company's Certificate of Incorporation and By-laws, as amended from
time to time, or under any agreement between any such member and the Company.
ARTICLE 4
Eligibility
4.1 Criteria. Awards may be made to all employees and consultants of the
Company or any of its subsidiaries (subject to such requirements as may be
prescribed by the Committee); provided, however, that (i) no employee or
consultant may receive awards of or relating to more than 250,000 shares of
Common Stock in the aggregate in any fiscal year of the Company and (ii) no
consultant may be granted Incentive Stock Options unless the Code is amended
to permit consultants to receive the tax advantages associated with "incentive
stock options" under the Code. Subject to the immediately preceding sentence,
awards may be made to a director of the Company who is not also a member of
the Committee, provided that the director is
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also an employee or consultant of the Company. In determining the employees
and consultants to whom awards shall be granted and the number of shares to be
covered by each award, the Committee shall take into account the nature of the
services rendered by such employees and consultants, their present and
potential contributions to the success of the Company and its subsidiaries and
such other factors as the Committee in its sole discretion shall deem
relevant.
4.2 Subsidiaries. As used herein, the term "subsidiary" shall mean any
present or future corporation, partnership or joint venture in which the
Company owns, directly or indirectly, 50% or more of the economic interests.
Notwithstanding the foregoing, only employees of the Company and any present
or future corporation which is or may be a "subsidiary corporation" of the
Company as such term is defined in Section 424(f) of the Code shall be
eligible to receive Incentive Stock Options.
ARTICLE 5
Stock Options
5.1 Option Grant. Options may be granted under the Plan for the purchase
of shares of Common Stock. The Committee shall, from time to time, select the
employees and consultants to whom Options will be granted and shall determine
the number of shares to be covered by each Option and the option exercise
price per share. Options shall be granted upon such terms and conditions,
including the satisfaction of corporate or individual performance objectives
and other vesting standards, as the Committee shall determine, subject to the
provisions of the Plan.
5.2 Designation as Non-qualified Stock Option or Incentive Stock Option.
In connection with any grant of Options, the Committee shall designate in the
written agreement required pursuant to Article 10 hereof whether the Options
granted shall be Incentive Stock Options or Non-qualified Stock Options, or in
the case both are granted, the number of shares of each. If no specification
is made, the Option shall be deemed to be a Non-qualified Stock Option.
5.3 Option Price. The price at which shares of Common Stock shall be
purchased under a Non-qualified Stock Option shall not be less than 85% of the
Fair Market Value of such shares on the Grant Date. The Committee may also
determine at the time of grant or at any later time while the Non-qualified
Stock Option is exercisable that the Company will allow a credit against the
option exercise price (a "Right") of a Non-qualified Stock Option in an amount
equal to the increase in the Fair Market Value of the Common Stock at the
exercise date over the Fair Market Value at the date that the Right is
granted, but not to exceed the amount allowed to the Company as a federal tax
deduction upon such exercise. Under no circumstances may the exercise price of
any Option be less than the par value of the Common Stock. Such Right will be
applicable only towards the purchase price of shares of Common Stock. The
price at which shares of Common Stock shall be purchased under an Incentive
Stock Option shall be not less than the Fair Market Value of such shares on
the Grant Date. In the case of an Incentive Stock Option granted to an
employee owning (actually or constructively under Section 424(d) of the Code),
more than 10% of the total combined voting power of all classes of stock of
the Company or of a subsidiary (a "10% Stockholder"), the Option price shall
not be less than 110% of the Fair Market Value of the Common Stock on the
Grant Date. The Option price so determined for any Option pursuant to this
Section 5.3 shall also be applicable in connection with the exercise of any
Tandem Stock Appreciation Rights granted with respect to such Option.
5.4 Limitation on Amount of Incentive Stock Options. In the case of
Incentive Stock Options, the aggregate Fair Market Value (determined at the
time the Incentive Stock Option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by an
Optionee during any calendar year (under all plans of the Company and any
subsidiary) shall not exceed $100,000.
5.5 Limitation on Time of Grant. No grant of an Incentive Stock Option
shall be made under the Plan more than ten (10) years after the date the Plan
is approved by the Board.
5.6 Exercise of Options. Unless the Committee establishes otherwise at the
time an Option is granted or thereafter, or except as provided by Articles 7,
9 and 12, (i) each Option shall be exercisable in annual installments, (ii) no
Option shall be exercisable for one year after the Grant Date and (iii)
thereafter, 25% of
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such Option shall first become exercisable on each of the first, second, third
and fourth annual anniversary dates of the Grant Date. Accordingly, an Option
may be exercised at any time and from time to time as to all or any part of
the shares covered thereby at any time on or after the fourth annual
anniversary of the Grant Date and thereafter until the term of such Option
expires or otherwise ends. The Committee may accelerate the exercisability of
any Option at any time.
5.7 Method of Exercise. To the extent permitted by Section 5.6 above,
Optionees may exercise their Options from time to time by giving written
notice to the Company. The date of exercise shall be the date on which the
Company receives an exercise notice. Such notice shall state the number of
shares to be purchased and the desired closing date, which date shall be at
least fifteen days after the giving of such notice unless an earlier date
shall have been mutually agreed upon. At the closing, the Company shall
deliver to the Optionee (or other person entitled to exercise the Option) at
the principal office of the Company, or such other place as shall be mutually
acceptable, a certificate or certificates for such shares against either (1)
payment in full of the Option price for the number of shares to be delivered,
by bank cashier's check, or (2) with the prior consent of the Committee,
tender to the Company of a number of shares of Common Stock that have been
owned by the Optionee for a period of at least six months free of any
substantial risk of forfeiture or that were purchased on the open market
without assistance, direct or indirect, from the Company having a Fair Market
Value (as of the date of closing) equal to the Option price times the number
of shares being purchased or (3) a combination of (1) and (2). The Committee
shall have no obligation to permit the tender of shares in payment of the
Option price. The Committee, in its discretion, may establish a cashless
exercise program under the Plan. If the Optionee (or other person entitled to
exercise the Option) shall fail to accept delivery of and pay for all or any
part of the shares specified in his notice when the Company shall tender such
shares to him, his right to exercise the Option with respect to such
unpurchased shares may be terminated by the Committee.
5.8 Term. The term of each Option granted hereunder shall be determined by
the Committee; provided, however, that, notwithstanding any other provision of
the Plan, in no event shall an Incentive Stock Option be exercisable after ten
(10) years from the date it is granted, or in the case of an Incentive Stock
Option granted to a 10% Stockholder, five (5) years from the date it is
granted.
5.9 Cancellation of Stock Appreciation Rights. Upon exercise of all or a
portion of an Option, any related Tandem Stock Appreciation Rights shall be
canceled with respect to an equal number of shares of Common Stock.
ARTICLE 6
Stock Appreciation Rights
6.1 Grants of Stock Appreciation Rights. Tandem Stock Appreciation Rights
may be awarded by the Committee in connection with any Option granted under
the Plan, either at the time the Option is granted or thereafter at any time
prior to the exercise, termination or expiration of the Option. Nontandem
Stock Appreciation Rights may also be granted by the Committee at any time. At
the time of grant of Nontandem Stock Appreciation Rights, the Committee shall
specify the number of shares of Common Stock covered by such right and the
base price of shares of Common Stock to be used in connection with the
calculation described in Section 6.4 below. The base price of any Nontandem
Stock Appreciation Rights shall be not less than 85% of the Fair Market Value
of a share of Common Stock on the date of grant. Stock Appreciation Rights
shall be subject to such terms and conditions not inconsistent with the other
provisions of the Plan as the Committee shall determine.
6.2 Limitations on Exercise. Tandem Stock Appreciation Rights shall be
exercisable only to the extent that the related Option is exercisable and
shall be exercisable only for such period as the Committee may determine
(which period may expire prior to the expiration date of the related Option);
provided, however, if no such period is specified, a Tandem Stock Appreciation
Right shall be exercisable only for the period that the related Option is
exercisable. Upon the exercise of all or a portion of Tandem Stock
Appreciation Rights, the related Option shall be canceled with respect to an
equal number of shares of Common Stock. Shares of Common Stock subject to
Options, or portions thereof, surrendered upon exercise
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of Tandem Stock Appreciation Rights shall not be available for subsequent
awards under the Plan. Nontandem Stock Appreciation Rights shall be
exercisable during such period as the Committee shall determine.
6.3 Surrender or Exchange of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall entitle the recipient to surrender to the
Company unexercised the related Option, or any portion thereof, and, subject
to Section 6.6, to receive from the Company in exchange therefor that number
of shares of Common Stock having an aggregate Fair Market Value equal to (A)
the excess of (i) the Fair Market Value of one (1) share of Common Stock as of
the date the Tandem Stock Appreciation Rights are exercised over (ii) the
Option price per share specified in such Option, multiplied by (B) the number
of shares of Common Stock subject to the Option, or portion thereof, which is
surrendered. In addition, the Optionee shall be entitled to receive an amount
equal to any credit against the Option exercise price which would have been
allowed had the Option, or portion thereof, been exercised. Cash shall be
delivered in lieu of any fractional shares.
6.4 Exercise of Nontandem Stock Appreciation Rights. The exercise of
Nontandem Stock Appreciation Rights shall, subject to Section 6.6, entitle the
recipient to receive from the Company that number of shares of Common Stock
having an aggregate Fair Market Value equal to (A) the excess of (i) the Fair
Market Value of one (1) share of Common Stock as of the date on which the
Nontandem Stock Appreciation Rights are exercised over (ii) the base price of
the shares covered by the Nontandem Stock Appreciation Rights, multiplied by
(B) the number of shares of Common Stock covered by the Nontandem Stock
Appreciation Rights, or the portion thereof being exercised. Cash shall be
delivered in lieu of any fractional shares.
6.5 Settlement of Stock Appreciation Rights. As soon as is reasonably
practicable after the exercise of any Stock Appreciation Rights, the Company
shall (i) issue, in the name of the recipient, stock certificates representing
the total number of full shares of Common Stock to which the recipient is
entitled pursuant to Section 6.3 or 6.4 hereof and cash in an amount equal to
the Fair Market Value, as of the date of exercise, of any resulting fractional
shares, or (ii) if the Committee causes the Company to elect to settle all or
part of its obligations arising out of the exercise of the Stock Appreciation
Rights in cash pursuant to Section 6.6 hereof, deliver to the recipient an
amount in cash equal to the Fair Market Value, as of the date of exercise, of
the shares of Common Stock it would otherwise be obligated to deliver.
6.6 Cash Settlement. The Committee, in its discretion, may cause the
Company to settle all or any part of its obligation arising out of the
exercise of Stock Appreciation Rights by the payment of cash in lieu of all or
part of the shares of Common Stock it would otherwise be obligated to deliver
in an amount equal to the Fair Market Value of such shares on the date of
exercise.
ARTICLE 7
Termination
If the Company shall terminate the employment or consultancy arrangement of
an Optionee or holder of Stock Appreciation Rights for any reason other than
for cause or upon the conclusion of a Suspension Period, all such individual's
Options and/or Stock Appreciation Rights shall terminate three months after
the date upon which such employment or consultancy arrangement shall cease,
but in any event, no later than the date upon which the respective Options
and/or Stock Appreciation Rights expire. If the individual shall voluntarily
terminate his employment or consultancy arrangement with the Company or resign
(other than due to Retirement), or if the Company shall terminate the
employment or consultancy arrangement of an Optionee for cause, all such
individual's Options and/or Stock Appreciation Rights shall terminate upon the
date on which such employment or consultancy arrangement shall cease. If the
Company shall Suspend the employment of an employee, the Company shall not be
obligated to issue any shares upon the exercise by the employee of any Options
held by him and shall not be obligated to settle any Stock Appreciation Rights
of the employee if the exercise occurs during the Suspension Period. Any
documents tendered by the employee to the Company during the Suspension Period
pursuant to an exercise will not be deemed to be accepted by the Company
during such Suspension Period, and any such exercise shall be governed by the
provisions set
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forth in the following two sentences. If, at the conclusion of the Suspension
Period, the Company shall terminate the employment of the Suspended Optionee
or such Suspended Optionee shall resign or voluntarily terminate his
employment with the Company, all such exercises shall be deemed void, and the
Company will return to the employee any documents tendered to effect an
exercise, including the purchase price, without interest. If, at the
conclusion of the Suspension Period, the Company shall determine to continue
the employment of the Suspended Optionee, the Company shall deliver share
certificates to the Optionee and will settle all Stock Appreciation Rights
with respect to all Options and Stock Appreciation Rights which were properly
exercised (but for the Suspension) by the employee during the Suspension
Period as promptly a practicable after the date the Suspension Period ends. If
the employment or consultancy arrangement of an Optionee or holder of a Stock
Appreciation Right shall terminate as a result of such individual's death,
disability or Retirement, all such individual's Options and Stock Appreciation
Rights shall (except as otherwise determined by the Committee) terminate one
year after the date of termination, but in any event, not later than the date
upon which the respective Options and Stock Appreciation Rights shall expire.
During such period, the Options and/or Stock Appreciation Rights may be
exercised by the Optionee or holder of Stock Appreciation Rights or his
personal representatives, next of kin, executors or legatees, as the case may
be. No exercise permitted by this Article 7 shall entitle an Optionee or
holder of Stock Appreciation Rights or his personal representatives, next of
kin, executors or legatees to exercise any portion of any Option and/or Stock
Appreciation Rights beyond the extent to which such Option and/or Stock
Appreciation Rights are exercisable pursuant to the provisions of this Plan on
the date such individual's employment or consultancy arrangement with the
Company terminates.
ARTICLE 8
Changes in Capital Structure
In the event that there is a change in the capitalization of the Company,
such as by reason of a stock dividend, recapitalization, extraordinary
dividend of cash or property, stock split-up, combination of shares, or other
event which the Committee determines is dilutive, then appropriate adjustments
shall be made by the Committee to the number and kind of shares reserved for
issuance under the Plan. In addition, the Committee shall make appropriate
adjustments to the number and kind of shares subject to outstanding Options,
Stock Appreciation Rights, Restricted Shares or Performance Shares and the
purchase price per share thereunder shall be appropriately adjusted consistent
with such change. In no event shall fractional shares be issued or issuable
pursuant to any adjustment made under this Article 8. The determination of the
Committee as to any adjustment shall be final and conclusive.
ARTICLE 9
Mandatory Exercise
Notwithstanding anything to the contrary set forth in this Plan, in the
event that the Company should adopt a plan of reorganization pursuant to which
it shall merge into, consolidate with, or sell its assets to, any other
corporation or entity or if the Company should adopt a plan of complete
liquidation, the Company may give an Optionee or holder of Stock Appreciation
Rights written notice thereof requiring such Optionee or holder either (a) to
exercise the Option or Stock Appreciation Rights within thirty days after
receipt of such notice including all installments whether or not they would
otherwise be exercisable at that date, or (b) to surrender such Option or
Stock Appreciation Rights or any unexercised portion thereof. Any portion of
such Option or Stock Appreciation Rights which shall not have been exercised
in accordance with the provisions of the Plan by the end of such 30-day period
shall automatically lapse irrevocably and the Optionee or holder shall have no
further rights thereunder.
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ARTICLE 10
Written Agreement
Each award of Options, Stock Appreciation Rights, Restricted Shares,
Performance Shares, Performance Units and Unrestricted Shares under the Plan
will be evidenced by a written agreement in such form as the Committee may
from time to time approve. Such agreement will contain such provisions as the
Committee may in its discretion deem advisable, including without limitation
additional restrictions or conditions upon the award. The Committee may
require any person receiving an award hereunder, as a condition to the grant
of such award or any other event, to make such representations and warranties
and to execute and deliver such notices of exercise and other documents as the
Committee may deem consistent with the Plan or the terms and conditions of the
Option agreement. Not in limitation of any of the foregoing, in any such case
referred to in the preceding sentence the Committee may also require such
person to execute and deliver documents containing such representations,
warranties and agreements as the Committee or counsel to the Company shall
deem necessary or advisable to comply with any applicable Federal or State
securities laws, and any other applicable law, regulation or rule.
ARTICLE 11
Listing; Registration
If at any time the Board determines, in its discretion, that the listing,
registration or qualification of any of the stock subject to any award under
the Plan upon any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of or in connection with granting awards under the
Plan or the issue of stock thereunder, no further awards need be granted, the
exercise of outstanding Options and Stock Appreciation Rights and the delivery
of any Plan benefit may be deferred, and the Company shall not be obligated to
issue or deliver any shares, until such action can be taken or consent or
approval can be obtained at the Company's expense, free of any condition
unacceptable to the Board.
ARTICLE 12
Change in Control
Notwithstanding any other provision of this Plan, in the event that a
"Change in Control Event" occurs, all Options, Stock Appreciation Rights and
Restricted Shares granted hereunder which are held by persons who are employed
by the Company or provide consulting services to the Company as of the
occurrence of such a Change in Control Event shall become fully exercisable or
vested immediately and automatically upon the occurrence of such a Change in
Control Event. For purposes of this Plan, the term "Change in Control Event"
shall mean any of the following events:
(i) the acquisition by any one person, or more than one person acting as
a group, other than any such person or group that beneficially owned
(within the meaning of Rule 13d-3) 10% or more of the total voting
power of the capital stock of the Company as of the date on which
this Plan is approved by the Board, of ownership of stock of the
Company possessing 15% or more of the total voting power of the
capital stock of the Company;
(ii) the approval by the stockholders of the Company of (i) any
consolidation or merger of the Company, in which the holders of
voting stock of the Company immediately before the consolidation or
merger will not own 50% or more of the voting shares of the
continuing or surviving corporation immediately after such
consolidation or merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or series or related transactions) of
all or substantially all of the assets of the Company; or
(iii)a change of 25% (rounded to the next whole percent) in the
membership of the Board of Directors within a 12-month period,
unless the election, or nomination for election by stockholders, of
each
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new director within such period was approved by the vote of 80%
(rounded to the next whole person) of the directors then still in
office who were in office at the beginning of such 12-month period.
ARTICLE 13
Restricted Shares
13.1 Grant of Restricted Shares. The Committee may from time to time cause
the Company to grant Restricted Shares under the Plan to employees and
consultants, subject to such restrictions, conditions and other terms as the
Committee may determine.
13.2 Restrictions. At the time a grant of Restricted Shares is made, the
Committee shall establish a period of time (the "Restricted Period")
applicable to such Restricted Shares. Each grant of Restricted Shares may be
subject to a different Restricted Period. The Committee may, in its sole
discretion, at the time a grant is made, prescribe restrictions in addition to
or other than the expiration of the Restricted Period, including the
satisfaction of corporate or individual performance objectives, which shall be
applicable to all or any portion of the Restricted Shares. The Committee may
also, in its sole discretion, shorten or terminate the Restricted Period or
waive any other restrictions applicable to all or a portion of such Restricted
Shares. None of the Restricted Shares may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the Restricted Period or
prior to the satisfaction of any other restrictions prescribed by the
Committee with respect to such Restricted Shares.
13.3 Restricted Share Certificates. The Company shall issue, in the name
of each employee and consultant to whom Restricted Shares have been granted,
stock certificates representing the total number of Restricted Shares granted
to such person, as soon as reasonably practicable after the grant. The
Company, at the direction of the Committee, shall hold such certificates,
properly endorsed for transfer, for the employee's or consultant's benefit
until such time as the Restricted Shares are forfeited to the Company, or the
restrictions lapse.
13.4 Rights of Holders of Restricted Shares. Unless otherwise provided by
the Committee, holders of Restricted Shares shall have the right to vote such
shares and have the right to receive any cash dividends with respect to such
shares. All distributions, if any, received by an employee or consultant with
respect to Restricted Shares as a result of any stock split, stock
distribution, a combination of shares, or other similar transaction shall be
subject to the restrictions of this Article 13.
13.5 Forfeiture. Any Restricted Shares granted to an employee or
consultant pursuant to the Plan shall be forfeited if the employee voluntarily
terminates employment with the Company or its subsidiaries or resigns or the
consultant voluntarily terminates his consultancy arrangement with the Company
or its subsidiaries, or if the employee's employment or the consultant's
consultancy arrangement is terminated for cause prior to the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions applicable to such Restricted Shares. Upon such forfeiture, the
Restricted Shares that are forfeited shall be retained in the treasury of the
Company and be available for subsequent awards under the Plan, unless the
Committee directs that such Restricted Shares be canceled upon forfeiture. If
the employee's employment or the consultant's consultancy arrangement
terminates for any other reason, Restricted Shares of such person shall be
forfeited, unless the Committee, in its sole discretion, shall determine
otherwise.
13.6 Delivery of Restricted Shares. Upon the expiration or termination of
the Restricted Period and the satisfaction of any other conditions prescribed
by the Committee, the restrictions applicable to the Restricted Shares shall
lapse and a stock certificate for the number of Restricted Shares with respect
to which the restrictions have lapsed shall be delivered, free of all such
restrictions, to the employee or consultant or his beneficiary or estate, as
the case may be.
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ARTICLE 14
Performance Shares
14.1 Award of Performance Shares. For each Performance Period (as defined
below), Performance Shares may be granted under the Plan to such employees and
consultants of the Company and its subsidiaries as the Committee shall
determine in its sole discretion. Each Performance Share shall be deemed to be
equivalent to one (1) share of Common Stock. Performance Shares granted to an
employee or consultant shall be credited to an account (a "Performance Share
Account") established and maintained for such person.
14.2 Performance Period. "Performance Period" shall mean such period of
time as shall be determined by the Committee in its sole discretion. Different
Performance Periods may be established for different recipients of Performance
Shares. Performance Periods may run consecutively or concurrently.
14.3 Right to Payment of Performance Shares. With respect to each award of
Performance Shares under the Plan, the Committee shall specify performance
objectives (the "Performance Objectives") which must be satisfied in order for
the recipient to vest in the Performance Shares which have been awarded to him
for the Performance Period. If the Performance Objectives established for a
recipient for the Performance Period are partially but not fully met, the
Committee may, nonetheless, in its sole discretion, determine that all or a
portion of the Performance Shares have vested. If the Performance Objectives
for a Performance Period are exceeded, the Committee may, in its sole
discretion, grant additional, fully vested Performance Shares to the
recipient. The Committee may also determine, in its sole discretion, that
Performance Shares awarded to an employee or consultant shall become partially
or fully vested upon the termination of the employee's employment or the
consultant's consultancy arrangement for any reason prior to the end of the
Performance Period.
14.4 Payment for Performance Shares. As soon as practicable following the
end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 14.3). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Shares shall be granted to the
recipient pursuant to Section 14.3. As soon as reasonably practicable after
such determinations, or at such later date as the Committee shall determine at
the time of grant, the Company shall pay to the recipient an amount with
respect to each vested Performance Share equal to the Fair Market Value of a
share of Common Stock on such payment date or, if the Committee shall so
specify at the time of grant, an amount equal to (i) the Fair Market Value of
a share of Common Stock on the payment date less (ii) the Fair Market Value of
a share of Common Stock on the date of grant of the Performance Share. Payment
may be made entirely in cash, entirely in Common Stock (including Restricted
Shares) or in such combination of cash and Common Stock as the Committee shall
determine in its sole discretion.
14.5 Voting and Dividend Rights. Except as provided herein, no employee or
consultant shall be entitled to any voting rights, to receive any cash
dividends, or to have his Performance Share Account credited or increased as a
result of any cash dividends or other distribution with respect to Common
Stock. Notwithstanding the foregoing, within sixty (60) days from the date of
payment of a cash dividend by the Company on its shares of Common Stock, the
Committee, in its sole discretion, may credit a recipient's Performance Share
Account with additional Performance Shares having an aggregate Fair Market
Value equal to the cash dividend per share paid on the Common Stock multiplied
by the number of Performance Shares credited to his account at the time the
cash dividend was declared.
ARTICLE 15
Performance Units
15.1 Award of Performance Units. For each Performance Period (as
previously defined), Performance Units may be granted under the Plan to such
employees or consultants of the Company and its subsidiaries as the Committee
shall determine in its sole discretion. The award agreement covering such
Performance Units
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shall specify a value for each Performance Unit or shall set forth a formula
for determining the value of each Performance Unit at the time of payment (the
"Ending Value"). If necessary to make the calculation of the amount to be paid
to the recipient pursuant to Section 15.3, the Committee shall also state in
the award agreement the initial value of each Performance Unit (the "Initial
Value"). Performance Units granted to an employee or consultant shall be
credited to an account (a "Performance Unit Account") established and
maintained for such person.
15.2 Right to Payment of Performance Units. With respect to each award of
Performance Units under the Plan, the Committee shall specify Performance
Objectives which must be satisfied in order for the recipient to vest in the
Performance Units which have been awarded to him for the Performance Period.
If the Performance Objectives established for an employee or consultant for
the Performance Period are partially but not fully met, the Committee may,
nonetheless, in its sole discretion, determine that all or a portion of the
Performance Units have vested. If the Performance Objectives for a Performance
Period are exceeded, the Committee may, in its sole discretion, grant
additional, fully vested Performance Units to the recipient. The Committee
may, in its sole discretion, adjust the Performance Objectives or the Initial
Value or Ending Value of any Performance Units to reflect extraordinary
events, such as stock splits, recapitalizations, mergers, combinations,
divestitures, spin-offs and the like. The Committee may also determine, in its
sole discretion, that Performance Units awarded to an employee or consultant
shall become partially or fully vested upon the termination of the
individual's employment or consultancy arrangement or for any other reason.
15.3 Payment for Performance Units. As soon as practicable following the
end of a Performance Period, the Committee shall determine whether the
Performance Objectives for the Performance Period have been achieved (or
partially achieved to the extent necessary to permit partial vesting at the
discretion of the Committee pursuant to Section 15.2). If the Performance
Objectives for the Performance Period have been exceeded, the Committee shall
determine whether additional Performance Units shall be granted to the
recipient pursuant to Section 15.2. As soon as reasonably practicable after
such determinations, or at such later date as the Committee shall determine at
the time of grant, the Company shall pay to the recipient an amount with
respect to each vested Performance Unit equal to the Ending Value of the
Performance Unit or, if the Committee shall so specify at the time of grant,
an amount equal to (i) the Ending Value of the Performance Unit less (ii) the
Initial Value of the Performance Unit. Payment may be made entirely in cash,
entirely in Common Stock (including Restricted Shares) or in such combination
of cash and Common Stock as the Committee shall determine in its sole
discretion.
ARTICLE 16
Unrestricted Shares
16.1 Award of Unrestricted Shares. The Committee may cause the Company to
grant Unrestricted Shares to employees or consultants at such time or times,
in such amounts and for such reasons as the Committee, in its sole discretion,
shall determine. No payment shall be required for Unrestricted Shares.
16.2 Delivery of Unrestricted Shares. The Company shall issue, in the name
of each person to whom Unrestricted Shares have been granted, stock
certificates representing the total number of Unrestricted Shares granted to
the individual, and shall deliver such certificates to the employee or
consultant as soon as reasonably practicable after the date of grant or on
such later date as the Committee shall determine at the time of grant.
ARTICLE 17
Miscellaneous
17.1 Tax Withholding. The Company shall have the right to require
employees or consultants or their respective beneficiaries or legal
representatives to remit to the Company an amount sufficient to satisfy
Federal, state and local withholding tax requirements, or to deduct from all
payments under the Plan amounts sufficient to satisfy all withholding tax
requirements. Whenever payments under the Plan are to be made to a
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recipient in cash, such payments shall be net of any amounts sufficient to
satisfy all Federal, state and local withholding tax requirements. The
Committee may, in its sole discretion, permit a recipient to satisfy his tax
withholding obligation either by (i) surrendering shares owned by the
individual or (ii) having the Company withhold from shares otherwise
deliverable to the individual. Shares surrendered or withheld shall be valued
at their Fair Market Value as of the date on which income is required to be
recognized for income tax purposes.
17.2 Non-assignability. No award granted hereunder (other than
Unrestricted Shares) shall be assignable or transferable by the Optionee or
holder except by will or the laws of descent and distribution, in which events
the terms of this Plan, including all restrictions and limitations set forth
herein, shall continue to apply to the transferee. Each award shall only be
exercisable by the recipient during his lifetime.
17.3 Optionee's Rights as Stockholder. An Optionee shall have no rights as
a stockholder of the Company with respect to any shares subject to an Option
until the Option has been exercised and the certificate with respect to the
shares purchased upon exercise of the Option has been duly issued and
registered in the name of the Optionee.
17.4 Term. No award shall be granted under the Plan more than ten (10)
years after the date on which the Board adopts the Plan.
17.5 Adoption and Ratification. This Plan has been adopted by the Board
subject to the ratification by the shareholders of the Company at the
Company's 2004 Annual Meeting of Stockholders. This Plan shall terminate
unless ratified by the stockholders within one year of adoption by the Board.
17.6 Termination and Amendment. The Board may at any time terminate or
amend the Plan or any award then outstanding as it may deem advisable;
provided, however, that no such amendment may be made without stockholder
approval if such approval is required by Rule 16b-3 under the Act. No
termination or amendment may, without the consent of the employee or
consultant to whom an award has been granted, adversely affect the rights of
such individual under such award.
17.7 Governing Law. This Plan and all agreements entered into hereunder
shall be governed by and construed under the laws of the State of Delaware.
17.8 No Right to Employment or Consultancy Arrangement. Nothing in the
Plan or in any written agreement entered into pursuant to the Plan, nor the
grant of any award, shall confer upon any employee or consultant any right to
continue an employment or consultancy arrangement with the Company or a
subsidiary or to be entitled to any remuneration or benefits not set forth in
the Plan or such written agreement or interfere with or limit the right of the
Company or a subsidiary to modify the terms of or terminate such arrangement
at any time.
17.9 Compliance with Section 16(b). In the case of individuals who are or
may be subject to Section 16 of the Act, it is the intent of the Company that
the Plan and any award granted hereunder satisfy and be interpreted in a
manner that satisfies the applicable requirements of Rule 16b-3, so that such
persons will be entitled to the benefits of Rule 16b-3. If any provision of
the Plan or any award would otherwise conflict with the intent expressed
herein, that provision, to the extent possible, shall be interpreted and
deemed amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, such provision shall be deemed void
as applicable to individuals who are subject to Section 16 of the Act.
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Appendix D
WILSHIRE ENTERPRISES, INC.
2004 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
ARTICLE 1
Establishment; Purpose; Definitions
1.1 Establishment and Effective Date. Wilshire Enterprises, Inc., a
Delaware corporation (the "Company" or "Wilshire"), hereby establishes a stock
option plan to be known as the Wilshire Enterprises, Inc. 2004 Non-Employee
Director Stock Option Plan (the "Plan"). The Plan shall become effective as of
June 16, 2004, upon the approval of the Company's stockholders at the 2004
Annual Meeting of Stockholders.
1.2 Purpose of the Plan. The purpose of the Plan is to attract qualified
personnel to accept positions of responsibility as directors of the Company,
to provide incentives for persons to remain on the Board and to induce such
persons to maximize the Company's performance during the terms of their
options.
1.3 Definitions. As used in the Plan, unless the context requires
otherwise, the following terms shall have the meanings specified hereinafter.
(a) "Anniversary Date" shall mean the date of the Company's annual
meeting of shareholders each year.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Change in Control Event" shall have the meaning ascribed to such
term in Article 11 of the Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Committee" shall mean the committee of the Board of Directors
provided for in Section 3.1 of the Plan.
(f) "Common Stock" shall mean the Common Stock, par value $1.00 per
share, of the Company, or, if another security is substituted for the
Common Stock pursuant to the adjustment provisions of Article 7, such
other security.
(g) "Election Date" shall mean for an Outside Director the first date
on which such person commences service as an Outside Director.
(h) "Fair Market Value" shall mean the average of the high and low
sales prices of a share of Common Stock on the American Stock Exchange, or
if the Common Stock is not listed thereon, on another national securities
exchange or on the NASDAQ National Market System, whichever is applicable,
on the Grant Date or other relevant date, or if such sales prices are not
available, the average of the over-the-counter bid and asked prices for a
share of the Common Stock on the Grant Date or other relevant date;
provided, that if in the opinion of the Committee the trading activity of
the Common Stock is deemed not to constitute a representative market
price, the Committee shall have the discretion to engage an independent
party to determine Fair Market Value for this purpose.
(i) "Grant Date" shall mean the date on which an Option is granted.
(j) "Option" shall mean the right to purchase one or more shares of
Common Stock granted under Article 5 of the Plan.
(k) "Optionee" shall mean a person to whom an Option has been granted
under the Plan.
(l) "Outside Director" shall mean any member of the Board who, on the
Election Date or any of the Anniversary Dates, shall not have been
compensated (directly or indirectly) by the Company or any of the
Company's subsidiaries as an employee, consultant or advisor during the
twelve months
preceding such Anniversary Date (other than reimbursement for out-of-
pocket expenses or compensation pursuant to the Plan) and who is
appointed, elected or re-elected as a director of the Company on such date
or who continues to be a director of the Company on and after such date.
(m) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934,
as amended.
ARTICLE 2
Stock Options; Shares Available
2.1. Stock Option Grants. Options shall be granted under the Plan pursuant
to Article 5 hereof. All Options granted hereunder shall be non-qualified
stock options ("Non-qualified Stock Options").
2.2 Maximum Shares Available. The maximum aggregate number of shares of
Common Stock available for grant under the Plan is 150,000, subject to
adjustment pursuant to Article 7 hereof. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares reacquired by the Company. In the event that prior to the end of the
period during which Options may be granted under the Plan, any Option under
the Plan expires unexercised or is terminated, surrendered or canceled without
being exercised in whole or in part for any reason, then such shares shall be
available for subsequent grant under the Plan.
ARTICLE 3
Administration
3.1 Committee. The Plan shall be administered by a Committee of the Board
designated by the Board and consisting solely of members of the Board who are
not Outside Directors. If, at any time, all members of the Board are Outside
Directors, then, at such time, the Committee shall consist of all of the
members of the Board.
3.2 Powers of Committee. Subject to the express provisions of the Plan,
the Committee shall have the power and authority (i) to calculate the purchase
price of the Common Stock covered by each Option; (ii) to interpret the Plan;
(iii) to promulgate, amend and rescind rules and regulations relating to the
Plan, provided that no such rules or regulations shall be inconsistent with
any of the terms of the Plan; (iv) to subject any Option to such additional
restrictions and conditions (not inconsistent with the Plan) as may be
specified when granting the Option; (v) to modify or amend each Option; and
(vi) to make all other determinations in connection with the administration of
the Plan.
3.3 Liability; Indemnification. No member of the Committee shall be
personally liable for any action, interpretation or determination made in good
faith with respect to the Plan or awards made thereunder, and each member of
the Committee shall be fully indemnified and protected by the Company with
respect to any liability he or she may incur with respect to any such action,
interpretation or determination, to the extent such indemnification is
permitted by applicable law and to the extent such indemnification is provided
in the Company's Certificate of Incorporation and By-laws, as amended from
time to time, or under any agreement between any such member and the Company.
ARTICLE 4
Eligibility
The only persons who shall be eligible to receive Options under the Plan
shall be persons who, on their applicable Anniversary Dates, constitute
Outside Directors, provided that each such person has served as an Outside
Director for at least one year prior to each of such person's Anniversary
Dates.
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ARTICLE 5
Stock Options
5.1 Option Grant. On the date of adoption of this Plan by the stockholders
of the Company, each Outside Director who will continue to be a director after
such stockholders meeting shall be granted by the Company an Option to
purchase ten thousand (10,000) shares of Common Stock. On the Election Date of
any Outside Director who first becomes an Outside Director after the date of
adoption of the Plan, the Company shall grant such Outside Director an Option
to purchase ten thousand (10,000) shares of Common Stock. At the close of
business on each Anniversary Date of each Outside Director during the term of
the Plan after the initial date of adoption, provided that each such Outside
Director has not previously received an Option under the Plan during the same
calendar year, the Company shall grant to each Outside Director an Option to
purchase five thousand (5,000) shares of Common Stock. All share numbers are
subject to adjustment pursuant to Article 7 hereof.
5.2 Option Price. The price at which shares of Common Stock shall be
purchased under an Option shall be 100% of the Fair Market Value of such
shares on the Grant Date.
5.3 Expiration Date. Each Option shall cease to be exercisable ten years
after the date on which it is granted.
5.4 Exercise of Options. Except as provided by Articles 6, 8 and 11, (i)
each Option shall be exercisable in annual installments, (ii) no Option shall
be exercisable for one year after the Grant Date and (iii) thereafter, 25% of
such Option shall first become exercisable on each of the first, second, third
and fourth annual anniversary dates of the Grant Date. Accordingly, an Option
may be exercised at any time and from time to time as to all or any part of
the shares covered thereby at any time on or after the fourth annual
anniversary of the Grant Date and thereafter until the term of such Option
expires or otherwise ends.
5.5 Method of Exercise. To the extent permitted by Section 5.4 above,
Optionees may exercise their Options from time to time by giving written
notice to the Company. The date of exercise shall be the date on which the
Company receives an exercise notice. Such notice shall state the number of
shares to be purchased and the desired closing date, which date shall be at
least fifteen days after the giving of such notice unless an earlier date
shall have been mutually agreed upon. At the closing, the Company shall
deliver to the Optionee (or other person entitled to exercise the Option) at
the principal office of the Company, or such other place as shall be mutually
acceptable, a certificate or certificates for such shares against either (1)
payment in full of the Option price for the number of shares to be delivered,
by bank cashier's check, or (2) tender of a number of shares of Common Stock
to the Company having a Fair Market Value equal to the Option price times the
number of shares being purchased or (3) a combination of (1) and (2).
ARTICLE 6
Termination
In the event that an Optionee ceases to serve on the Board for any reason
other than cause, death, disability or resignation, all such individual's
Options shall terminate three months after the date upon which such service
terminates, but in any event, no later than the date upon which the Options
expire. If the individual shall voluntarily resign from the Board, or if the
Company shall remove the Optionee from the Board by means of a resolution
which states that the Optionee is being removed for cause, all such
individual's Options shall terminate upon the date on which such Board service
shall cease. If the Optionee shall die or become disabled while serving on the
Board, all such individual's Options shall (except as otherwise determined by
the Committee) terminate one year after the date of death or disability, but
in any event, not later than the date upon which the respective Options shall
expire. During such period, the Options may be exercised by the Optionee or
his personal representatives, next of kin, executors or legatees, as the case
may be. No exercise permitted by this Article 6 shall entitle an Optionee or
his personal representatives, next of kin, executors or legatees to exercise
any portion of any Option beyond the extent to which such Option is
exercisable pursuant to the provisions of this Plan on the date such
individual's service on the Board terminates.
D-3
ARTICLE 7
Changes in Capital Structure
In the event that there is a change in the capitalization of the Company,
such as by reason of a stock dividend, recapitalization, extraordinary
dividend of cash or property, stock split-up, combination of shares, or other
event which the Committee determines is dilutive, then appropriate adjustments
shall be made by the Committee to the number and kind of shares reserved for
issuance under the Plan. In addition, the Committee shall make appropriate
adjustments to the number and kind of shares subject to outstanding Options
and the purchase price per share thereunder shall be appropriately adjusted
consistent with such change. In no event shall fractional shares be issued or
issuable pursuant to any adjustment made under this Article 7. The
determination of the Committee as to any adjustment shall be final and
conclusive.
ARTICLE 8
Mandatory Exercise
Notwithstanding anything to the contrary set forth in this Plan, in the
event that the Company should adopt a plan of reorganization pursuant to which
it shall merge into, consolidate with, or sell its assets to, any other
corporation or entity or if the Company should adopt a plan of complete
liquidation, the Company may give an Optionee written notice thereof requiring
such Optionee or holder either (a) to exercise the Option within thirty days
after receipt of such notice including all installments whether or not they
would otherwise be exercisable at that date, or (b) to surrender such Option
or any unexercised portion thereof. Any portion of such Option which shall not
have been exercised in accordance with the provisions of the Plan by the end
of such 30-day period shall automatically lapse irrevocably and the Optionee
shall have no further rights thereunder.
ARTICLE 9
Written Agreement
Each award of Options under the Plan will be evidenced by a written
agreement setting forth the terms of such Options.
ARTICLE 10
Listing; Registration
If, at any time, the listing, registration or qualification of any of the
stock subject to Options under the Plan upon any securities exchange or under
any state or federal law, or the consent or approval of any governmental
regulatory body, becomes necessary as a condition of or in connection with
granting Options under the Plan or the purchase or issue of stock thereunder,
the exercise of outstanding Options may be deferred, and the Company shall not
be obligated to issue or deliver any shares, until such action can be taken or
consent or approval can be obtained at the Company's expense.
ARTICLE 11
Change in Control
Notwithstanding any other provision of this Plan, in the event that a
"Change in Control Event" occurs, all Options granted hereunder to an Outside
Director shall become fully exercisable immediately and automatically upon the
occurrence of such a Change in Control Event. For purposes of this Plan, the
term "Change in Control Event" shall mean any of the following events:
D-4
(i) the acquisition by any one person, or more than one person acting as
a group, other than any such person or group that beneficially owned
(within the meaning of Rule 13d-3) 10% or more of the total voting
power of the capital stock of the Company as of the date on which
this Plan is approved by the Board, of ownership of stock of the
Company possessing 15% or more of the total voting power of the
capital stock of the Company;
(ii) the approval by the stockholders of the Company of (i) any
consolidation or merger of the Company, in which the holders of
voting stock of the Company immediately before the consolidation or
merger will not own 50% or more of the voting shares of the
continuing or surviving corporation immediately after such
consolidation or merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or series or related transactions) of
all or substantially all of the assets of the Company; or
(iii)a change of 25% (rounded to the next whole percent) in the
membership of the Board of Directors within a 12-month period,
unless the election, or nomination for election by stockholders, of
each new director within such period was approved by the vote of 80%
(rounded to the next whole person) of the directors then still in
office who were in office at the beginning of such 12-month period.
ARTICLE 12
Miscellaneous
12.1 Tax Withholding. The Company shall have the right to require
Optionees or their respective beneficiaries or legal representatives to remit
to the Company an amount sufficient to satisfy Federal, state and local
withholding tax requirements.
12.2 Non-assignability. No Option shall be assignable or transferable by
the Optionee except by will or the laws of descent and distribution, in which
events the terms of this Plan, including all restrictions and limitations set
forth herein, shall continue to apply to the transferee. Each Option shall be
exercisable only by the recipient during his lifetime.
12.3 Optionee's Rights as Stockholder. An Optionee shall have no rights as
a stockholder of the Company with respect to any shares subject to an Option
until the Option has been exercised and the certificate with respect to the
shares purchased upon exercise of the Option has been duly issued and
registered in the name of the Optionee.
12.4 Term. No Option shall be granted under the Plan more than ten (10)
years after the date on which the Board adopts the Plan.
12.5 Adoption and Ratification. This Plan has been adopted by the Board
subject to the ratification by the shareholders of the Company at the
Company's 2004 Annual Meeting of Stockholders. This Plan shall terminate
unless ratified by the stockholders within one year of adoption by the Board.
12.6 Termination and Amendment. The Board may at any time terminate or
amend the Plan or any Option then outstanding as it may deem advisable;
provided, however, that no such amendment may be made without stockholder
approval if such approval is required by Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Act"). No termination or amendment may,
without the consent of the Optionee to whom an Option has been granted,
adversely affect the rights of such individual under such Option. In no event
may the provisions of this Plan relating to the amount of shares covered by
Options, the exercise price of Options or the timing of Option grants or
exercises be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act or the
rules thereunder, unless permitted by Rule 16b-3.
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WILSHIRE ENTERPRISES, INC.
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1-800-293-8533
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand
when you call. You will be prompted to enter the company number, proxy number
and account number. Follow the voting instructions to vote your shares.
PLEASE DO NOT RETURN THE CARD BELOW IF VOTED
ELECTRONICALLY
FOLD AND DETACH HERE AND READ THE REVERSE SIDE
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To vote in accordance with the Board of Directors' recommendations,
just sign below; no boxes need to be checked.
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The Board of Directors recommends a vote "FOR" Proposals 1, 2 and 3.
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Please mark
your votes
like this /X/
(1) Nominees for Class III Director: Ernest Wachtel and Martin Willschick
To withhold authority to vote for any individual nominee, write that nominee's
name in the space below.
WITHHOLD
FOR AUTHORITY
/ / / /
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(2) Adopt the Company's 2004 Stock Option and Incentive Plan.
FOR AGAINST ABSTAIN
/ / / / / /
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IMPORTANT: PLEASE CHECK THE BOXES ABOVE, DATE AND SIGN BELOW AND PROMPTLY RETURN
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
(3) Adopt the Company's 2004 Non-Employee Director Stock Option Plan.
FOR AGAINST ABSTAIN
/ / / / / /
(4) Upon all such other matters as may properly come before the meeting and/or
any adjournments thereof, as the proxies in their discretion may determine.
The Board of Directors is not aware of any such matter.
Any proxies heretofore given for the annual meeting are hereby revoked.
I PLAN TO ATTEND THE MEETING YES NO
/ / / /
COMPANY ID:
PROXY NUMBER:
ACCOUNT NUMBER:
Signature ______________________ Signature ________________________ Date _______
Please sign exactly as your name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or authorized officer. If a
partnership, please sign in partnership name by authorized person.
(Continued on reverse side)
The Board of Directors recommends a vote "FOR" Proposals 1, 2 and 3.
FOLD AND DETACH HERE
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WILSHIRE ENTERPRISES, INC.
PROXY -- COMMON STOCK
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
SHAREHOLDERS, JUNE 16, 2004
The undersigned appoints Eric J. Schmertz and Miles Berger, and each of
them, attorneys and proxies, with power of substitution in each of them, to vote
for and on behalf of the undersigned at the Annual Meeting of Shareholders to be
held on June 16, 2004, and at any adjournments thereof, upon matters properly
coming before the meeting, as set forth in the Notice of Annual Meeting and
Proxy Statement, both of which have been received by the undersigned. Without
otherwise limiting the general authorization given hereby, said attorneys and
proxies are instructed to vote as follows:
This proxy when properly executed will be voted in the manner directed
herein by the undersigned.
In the absence of such direction the proxy will be voted FOR the
nominees listed in Item 1 and FOR the Proposals set forth in Items 2 and 3.
Address Change
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(Continued on reverse side)