DEF 14A: Definitive proxy statements
Published on April 10, 2000
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[x] Definitive Proxy Statement the Commission Only (as
[ ] Definitive Additional Materials permitted by
[ ] Soliciting Material Pursuant to Rule 14a-6(e)(2))
Section 240.14a-11(c)
or Section 240.14a-12
Barrett Business Services, 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)
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[x] No fee required.
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
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previously. Identify the previous filing by registration statement number, or
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BARRETT BUSINESS SERVICES, INC.
April 10, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of
stockholders of Barrett Business Services, Inc., to be held at 2:00 p.m. on
Tuesday, May 16, 2000, at the Multnomah Athletic Club, 1849 S.W. Salmon Street,
Portland, Oregon.
Matters to be presented for action at the meeting include the
election of directors, amendment of the Company's stock incentive plan and
ratification of the selection of independent accountants.
We look forward to conversing with those of you who are able to
attend the meeting in person. Whether or not you can attend, it is important
that you sign, date and return your proxy as soon as possible. If you do attend
the meeting and wish to vote in person, you may withdraw your proxy and vote
personally.
Sincerely,
/s/ William W. Sherertz
William W. Sherertz
President and Chief Executive Officer
BARRETT BUSINESS SERVICES, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 16, 2000
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You are invited to attend the annual meeting of stockholders of
Barrett Business Services, Inc., to be held at the Multnomah Athletic Club, 1849
S.W. Salmon Street, Portland, Oregon, on Tuesday, May 16, 2000, at 2:00 p.m.,
Pacific Time.
Only stockholders of record at the close of business on March 31,
2000, will be entitled to vote at the meeting.
The meeting is being held to consider and act upon the following
matters:
1. Election of directors.
2. Approval of an amendment to the Company's 1993 Stock
Incentive Plan.
3. Approval of the appointment of PricewaterhouseCoopers LLP
as independent accountants for the current fiscal year ending December 31, 2000.
4. Such other business as may properly come before the
meeting or any adjournments thereof.
Please sign and date the accompanying proxy, and return it
promptly in the enclosed postage-paid envelope to avoid the expense of further
solicitation. If you attend the meeting, you may withdraw your proxy and vote
your shares in person.
By Order of the Board of Directors
/s/ Michael D. Mulholland
Michael D. Mulholland
Secretary
Portland, Oregon
April 10, 2000
BARRETT BUSINESS SERVICES, INC.
4724 S.W. MACADAM AVENUE
PORTLAND, OREGON 97201
(503) 220-0988
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PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
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This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors (the "Board") of Barrett
Business Services, Inc. (the "Company"), to be voted at the annual meeting of
stockholders to be held on May 16, 2000, and any adjournments thereof. The proxy
statement and accompanying form of proxy were first mailed to stockholders on
approximately April 10, 2000.
VOTING, REVOCATION AND SOLICITATION OF PROXIES
When a proxy in the accompanying form is properly executed and
returned, the shares represented will be voted at the meeting in accordance with
the instructions specified in the spaces provided in the proxy. If no
instructions are specified, the shares will be voted FOR Items 1, 2 and 3 in the
accompanying Notice of Annual Meeting of Stockholders.
Stockholders may expressly abstain from voting on Items 2 and 3
by so indicating on the proxy. Abstentions and shares represented by duly
executed and returned proxies of brokers or other nominees which are expressly
not voted on Item 2 or 3 will have no effect on the required vote on either
matter.
Any proxy given pursuant to this solicitation may be revoked by
the person giving the proxy at any time prior to its exercise by written notice
to the Secretary of the Company of such revocation, by a later-dated proxy
received by the Company, or by attending the meeting and voting in person. The
mailing address of the Company's principal executive offices is 4724 S.W.
Macadam Avenue, Portland, Oregon 97201.
The solicitation of proxies will be made primarily by mail, but
proxies may also be solicited personally or by telephone or facsimile by
directors and officers of the Company without additional compensation for such
services. Brokers and other persons holding shares in their names, or in the
names of nominees, will be reimbursed for their reasonable expenses in
forwarding soliciting materials to their principals and in obtaining
authorization for the execution of proxies. All costs of solicitation of proxies
will be borne by the Company.
OUTSTANDING VOTING SECURITIES
The close of business on March 31, 2000, has been fixed as the
record date for the determination of stockholders entitled to notice of and to
vote at the annual meeting. On the record date, the Company had outstanding
7,457,998 shares of Common Stock, $.01 par value ("Common Stock"), each share of
which is entitled to one vote at the meeting. Common Stock is the only
outstanding voting security of the Company.
ELECTION OF DIRECTORS
The directors of the Company are elected at the annual meeting of
stockholders in May to serve until the next annual meeting and until their
successors are elected and qualified. The Board has set the number of positions
on the Board at six. All of the nominees for election as directors are members
of the present Board.
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A nominee will be elected if the nominee receives a plurality of
the votes cast by the shares entitled to vote in the election, provided that a
quorum is present at the meeting. Unless authority to vote for a director or
directors is withheld, the accompanying proxy will be voted FOR the election of
the nominees named below. If for some unforeseen reason a nominee should become
unavailable for election, the number of directors constituting the Board may be
reduced prior to the annual meeting or the proxy may be voted for the election
of such substitute nominee as may be designated by the Board.
Any recommendations as to nominees for election at the 2001
annual meeting should be submitted in writing by December 11, 2000, to the
Secretary of the Company at its principal executive offices and should include
the name, address and qualifications of each proposed nominee.
The following table sets forth information with respect to each
person nominated for election as a director, including their ages as of February
29, 2000, business experience during the past five years and directorships in
other corporations.
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(1) During the past five years, the principal occupation and employment of
each nominee for director has been in the capacity set forth above except
as follows:
(a) Mr. Ames currently is actively engaged in numerous real estate
development ventures. From 1992 to 1995, he was the Vice Chairman
of the Board of Directors of First Interstate Bank of Oregon,
N.A. From 1983 to 1991, Mr. Ames served as President of the Bank.
(b) Mr. Godard has been Area Vice President of the Company in its
Northern California region since April 1998 and has been a member
of the Company's management since 1994.
(c) Mr. Meeker was Treasurer of the State of Oregon from 1987 to
1993.
(d) Ms. Sherertz was President and a director of the Company from
1975 to March 1993.
(e) Mr. Sherertz also serves as Chairman of the Board of Directors.
Ms. Sherertz and Mr. Sherertz were married to each other until 1994.
DIRECTORS' MEETINGS AND STANDING COMMITTEES
The standing committees of the Board include an audit committee
and a compensation committee. During 1999, the Board held 10 meetings, the audit
committee held five meetings and the compensation committee held four meetings.
Each director standing for reelection attended more than 75 percent of the
aggregate of the total number of meetings of the Board and the total number of
meetings held by all
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committees of the Board on which he or she served during 1999, except Mr.
Meeker, who attended 10 out of 14 meetings.
The audit committee reviews services provided by the independent
accountants, makes recommendations concerning their engagement or discharge, and
reviews with management and the independent accountants the results of their
audit, the adequacy of internal accounting controls, and the quality of
financial reporting. The members of the audit committee are Mr. Ames, chairman,
and Mr. Hochberg.
The compensation committee reviews the compensation of executive
officers of the Company and makes recommendations to the Board regarding salary
levels and other forms of compensation to be paid to executive officers,
including decisions as to grants of options and other stock-based awards. The
members of the compensation committee are Mr. Meeker, chairman, Mr. Hochberg and
Ms. Sherertz, who does not participate in the committee's deliberations
regarding stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the compensation committee of the board of
directors of the Company during 1999 were Herbert L. Hochberg, Anthony Meeker,
and Nancy B. Sherertz. Ms. Sherertz was President of the Company from 1975 to
March 1993.
STOCK OWNERSHIP BY PRINCIPAL STOCKHOLDERS AND MANAGEMENT
BENEFICIAL OWNERSHIP TABLE
The following table gives information regarding the beneficial
ownership of Common Stock as of March 31, 2000, by each director and nominee for
director and certain named executive officers and by all directors and executive
officers of the Company as a group. In addition, it gives information about each
person or group known to the Company to own beneficially more than 5 percent of
the outstanding shares of Common Stock. Unless otherwise indicated, all shares
listed as beneficially owned are held with sole voting and dispositive powers.
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* Less than 1 percent of the outstanding shares of Common Stock.
(1) The addresses of persons owning beneficially more than 5 percent of the
outstanding Common Stock are as follows: Heartland Advisors, Inc., 789
North Water Street, Milwaukee, Wisconsin 53202; Rentschler Family Trust
and Keith N. and Yolanda Rentschler, 7383 Whitegate Drive, Riverside,
California 92506; Wynnefield Capital Management, LLC, One Penn Plaza,
Suite 4720, New York,
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New York 10119; Nancy B. Sherertz, 401 Goldsborough Street, Easton,
Maryland 21601; and William W. Sherertz, 4724 S.W. Macadam Avenue,
Portland, Oregon 97201.
(2) Includes options to purchase Common Stock which are presently
exercisable or will become exercisable by May 30, 2000, as follows: Mr.
Ames, 7,500 shares; Mr. Godard, 49,306 shares; Mr. Hochberg, 750 shares;
Mr. Meeker, 7,500 shares; Mr. Mulholland, 94,122 shares; Ms. Sherertz,
750 shares; Mr. Sherertz, 182,443 shares; Mr. Vaughn, 30,600 shares; and
all directors and executive officers as a group, 391,659 shares.
(3) Heartland Advisors, Inc., a registered investment advisor, filed an
amendment to Schedule 13G on January 18, 2000, reporting sole voting
power as to 846,400 shares and sole dispositive power to 1,283,300
shares.
(4) Includes 15,800 shares owned by Mr. Hochberg's wife, as to which he
disclaims beneficial ownership and voting and dispositive powers.
(5) Ms. Sherertz disclaims beneficial ownership of 3,310 shares held by her
minor children.
(6) Includes 10,000 shares owned by Mr. Sherertz's wife and 31,300 shares
held by his minor children and her minor child, as to which he shares
voting and dispositive powers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 ("Section 16")
requires that reports of beneficial ownership of Common Stock and changes in
such ownership be filed with the Securities and Exchange Commission ("SEC") by
Section 16 "reporting persons," including directors, executive officers, and
certain holders of more than 10 percent of the outstanding Common Stock. To the
Company's knowledge, all Section 16 reporting requirements applicable to known
reporting persons were complied with for transactions and stock holdings during
1999.
APPROVAL OF AMENDMENT TO 1993 STOCK INCENTIVE PLAN
DESCRIPTION OF AMENDMENT TO THE INCENTIVE PLAN
On March 16, 2000, the Board adopted, subject to stockholder
approval, an amendment to the Company's 1993 Stock Incentive Plan (the
"Incentive Plan") to increase the number of shares of Common Stock which may be
made the subject of awards under the Incentive Plan by 250,000 to 1,550,000
shares, subject to adjustment for changes in capitalization. The Incentive Plan
provides for the grant of stock options and other stock-based awards to the
Company's employees, non-employee directors, and outside consultants or
advisers. At March 31, 2000, there were 76,889 shares available for future
grants of awards under the Incentive Plan. Shares subject to awards which expire
or are otherwise terminated will again become available for grants of new
awards. No awards or specific plans with respect thereto had been made regarding
the additional 250,000 shares authorized by the amendment at the date of this
proxy statement.
At March 31, 2000, 24 employees and five non-employee directors
held awards under the Incentive Plan and represented the pool of persons
considered eligible to participate in the Incentive Plan at that date. The
closing sale price for the Common Stock reported by The Nasdaq Stock Market on
March 31, 2000, was $6.00.
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DESCRIPTION OF AWARDS UNDER THE INCENTIVE PLAN
The Incentive Plan is administered by the compensation committee
of the Board (the "Committee"). The types of awards (collectively referred to as
"Awards") that may be granted by the Committee under the Incentive Plan include:
Options. Options to purchase Common Stock may be incentive stock
options meeting the requirements of Section 422 of the Code, or nonqualified
options which are not eligible for such tax-favored treatment. Incentive stock
options may expire not more than ten years from the date of grant. The Incentive
Plan does not specify a maximum term for nonqualified options. The exercise
price per share must be not less than 100 percent of the fair market value of a
share of Common Stock on the date the option is granted for incentive stock
options and not less than 75 percent of such fair market value for nonqualified
options. The Incentive Plan also authorizes the issuance of nonqualified
deferred compensation options with an exercise price of not less than $.01 per
share for the purpose of deferring a specified amount of income for a recipient.
The award agreement relating to an option may, in the discretion of the
Committee, provide that if an option is exercised using previously-acquired
shares in payment of the exercise price, the recipient shall automatically be
granted a replacement option (a "reload option") for a number of shares equal to
the number (or a portion of the number) of shares surrendered with an exercise
price equal to the fair market value of the Common Stock on the date of grant.
Stock Appreciation Rights (" SARs"). A recipient of SARs will
receive upon exercise an amount equal to the excess (or specified portion
thereof) of the fair market value of a share of Common Stock on the date of
exercise over the base price, multiplied by the number of shares as to which the
rights are exercised. The base price will be designated by the Committee in the
award agreement and may be equal to, higher or lower than the fair market value
of the Common Stock on the date of grant. Payment may be in cash, in shares of
Common Stock, in the form of a deferred compensation option or in any other form
approved by the Committee. SARs may be granted in connection with options or
other Awards or may be granted as independent Awards.
Restricted Awards. Restricted Awards may take the form of
restricted shares or restricted units. Restricted shares are shares of Common
Stock which are subject to such limitations as the Committee deems appropriate,
including restrictions on sale or transfer. Restricted shares may be subject to
forfeiture in the event the recipient terminates employment or service as a
consultant during a specified period. Stock certificates representing restricted
shares are issued in the name of the recipient but are held by the Company until
the expiration of any restrictions. From the date of issuance of restricted
shares, the recipient is entitled to the rights of a stockholder with respect to
such shares, including voting and dividend rights.
Restricted units are awards of units equivalent in value to a
share of Common Stock, which similarly may be subject to forfeiture if the
recipient terminates employment or service as a consultant during a specified
period. At the expiration of such period, payment is made with respect to
restricted units in an amount equal to the value of the number of shares covered
by the restricted units. Payment may be in cash or unrestricted shares of Common
Stock or in any other form approved by the Committee.
Performance Awards. Performance Awards are granted in units
equivalent in value to a share of Common Stock. A performance Award is subject
to forfeiture if or to the extent the recipient fails to meet certain
performance goals during a designated performance cycle. Performance Awards
earned by attaining performance goals are paid at the end of a performance cycle
in cash or shares of Common Stock or in any other form approved by the
Committee.
Other Stock-Based Awards. The Committee may grant other Awards
that involve payments or grants of shares of Common Stock or are measured by or
in relation to shares of Common Stock. The Incentive Plan provides flexibility
to design new types of stock-based or stock-related Awards to attract and retain
employees, directors and consultants in a competitive environment.
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Non-Employee Director Options. Non-employee directors may only
receive Awards under the Incentive Plan as described under "Executive
Compensation-Directors' Compensation" below.
ADJUSTMENTS FOR CHANGES IN CAPITALIZATION
In the event of a change in capitalization, the Committee may
make such proportionate adjustments in the aggregate number of shares for which
Awards may be granted under the Incentive Plan, the maximum number of shares
which may be awarded to any participant, and the number of shares covered by,
and the exercise or base price of, any outstanding Awards, as the Committee in
its sole discretion may deem appropriate.
DURATION, TERMINATION AND AMENDMENT OF THE INCENTIVE PLAN
The Incentive Plan will remain in effect until Awards have been
granted covering all available shares under the Incentive Plan or the Incentive
Plan is otherwise terminated by the Board. The Board may terminate the Incentive
Plan at any time, but any such termination will not affect any outstanding
Awards. The Board may also amend the Incentive Plan from time to time, but may
not, without stockholder approval, materially increase the benefits accruing to
participants under the Incentive Plan, materially increase the aggregate number
of shares of Common Stock which may be issued under the Incentive Plan, or
materially modify the requirements as to eligibility for participation in the
Incentive Plan. The Board may amend the Incentive Plan without stockholder
approval to take into account changes in certain laws and regulations.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS
The Incentive Plan complies with certain requirements contained
in Section 162(m) of the Internal Revenue Code of 1986 (the "Code"), which
relates to the deductibility by the Company of certain executive compensation
for federal income tax purposes. The maximum number of shares subject to options
or stock appreciation rights ("SARs") which may be granted to any individual
participant under the Incentive Plan during any calendar year may not exceed
200,000 shares.
The following discussion summarizes the principal anticipated
federal income tax consequences of grants of stock options under the Incentive
Plan to participants and to the Company.
Tax Consequences to Participants
Incentive Stock Options. Incentive stock options under the
Incentive Plan are intended to meet the requirements of Section 422 of the Code.
No income results to a participant upon the grant of an incentive stock option
or upon the issuance of shares when the option is exercised. The amount realized
on the sale or taxable exchange of such shares in excess of the exercise price
will be considered a capital gain, except that if such disposition occurs within
one year after exercise of the option or two years after grant of the option,
the participant will recognize compensation taxable at ordinary income tax rates
measured by the amount by which the lesser of (a) the fair market value on the
date of exercise or (b) the amount realized on the sale of the shares, exceeds
the exercise price. For purposes of determining alternative minimum taxable
income, an incentive stock option is treated as a nonqualified option.
Nonqualified Options. No taxable income is recognized upon the
grant of a nonqualified option. In connection with the exercise of a
nonqualified option, a participant will generally realize compensation income
(self-employment income for non-employee directors) measured by the difference
between the exercise price and the fair market value of the shares acquired on
the date of exercise. The participant's cost basis in the acquired shares is the
fair market value of the shares on the exercise date. Any gain upon sale of the
shares is capital gain.
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Payment of Exercise Price in Shares. The Committee may permit
participants to pay all or a portion of the exercise price using
previously-acquired shares of Common Stock. If an option is exercised and
payment is made in previously held shares, there is no taxable gain or loss to
the participant other than any gain recognized as a result of exercise of the
option, as described above.
Tax Consequences to the Company
To the extent participants qualify for capital gains treatment
with respect to the sale of shares acquired pursuant to exercise of an incentive
stock option, the Company will not be entitled to any tax deduction in
connection with incentive stock options. In the case of nonqualified stock
options, the Company will be entitled to receive a federal income tax deduction
at the same time and in the same amount as the amount which is taxable to
participants as ordinary income.
BOARD RECOMMENDATION AND VOTE REQUIRED
The Board recommends a vote FOR the proposed amendment to the
Incentive Plan. If a quorum is present at the annual meeting, the amendment will
be approved upon the affirmative vote of a majority of the votes cast upon the
proposal at the meeting. In the event the amendment is not approved by the
stockholders, the Incentive Plan will remain in effect as to the 1,300,000
shares of Common Stock already subject to the plan.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the years indicated the
compensation awarded or paid to, or earned by, the Company's chief executive
officer and the Company's other executive officers whose salary level and bonus
in 1999 exceeded $100,000.
SUMMARY COMPENSATION TABLE
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STOCK OPTION DATA
The following table provides information as to options to
purchase Common Stock granted under the Incentive Plan to the named executive
officers during 1999.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
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(1) Options generally become exercisable cumulatively in four equal annual
installments beginning one year after the date of grant; provided that
the option will become exercisable in full upon the officer's death,
disability or retirement, or in the event of a change in control of the
Company. A change in control is defined in the option agreements to
include (i) any occurrence which would be required to be reported as
such by the proxy disclosure rules of the SEC, (ii) the acquisition by a
person or group (other than the Company or one of its employee benefit
plans) of 30 percent or more of the combined voting power of its voting
securities, (iii) with certain exceptions, the existing directors'
ceasing to constitute a majority of the Board, (iv) certain transactions
involving the merger, sale, or transfer of a majority of the assets of
the Company, or (v) approval by the stockholders of a plan of
liquidation or dissolution of the Company. The options include a feature
which entitles an optionee who tenders previously-acquired shares of
Common Stock to pay all or part of the exercise price of the option, to
be granted a replacement option (a "reload option") to purchase a number
of shares equal to the number of shares tendered with an exercise price
equal to the fair market value of the Common Stock on the date of grant.
No SARs were granted by the Company during 1999.
(2) The values shown have been calculated based on the Black-Scholes option
pricing model and do not reflect the effect of restrictions on
transferability or vesting. The values were calculated based on the
following assumptions: (i) expectations regarding volatility of 46
percent were based on monthly stock price data for the Company; (ii) the
risk-free rate of return (5.75 percent) was assumed to be the Treasury
Bond rate whose maturity corresponds to the expected term (7.0 years) of
the option granted; and (iii) no dividends on the Common Stock will be
paid during the option term. The values which may ultimately be realized
will depend on the market value of the Common Stock during the periods
during which the options are exercisable, which may vary significantly
from the assumptions underlying the Black-Scholes model.
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Information concerning exercises of stock options during 1999 and
the value of unexercised options held by the named executive officers at
December 31, 1999, is summarized in the table below.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES(1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END (2)
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NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
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William W. Sherertz 168,693 55,000 $ 0 $ 0
Michael D. Mulholland 78,594 38,523 0 0
Gregory R. Vaughn 26,883 37,980 0 0
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(1) The named executive officers did not exercise any options or SARs during
1999 and did not hold any SARs at December 31, 1999.
(2) No options were "in-the-money" on December 31, 1999, because the market
value of the Common Stock, based on the mean of the reported high and
low sale prices on The Nasdaq Stock Market on that date, $6.625, was
below the option exercise price.
DIRECTORS' COMPENSATION
Under the standard arrangement in effect at the end of 1999,
directors (other than directors who are full-time employees of the Company, who
do not receive directors' fees) are entitled to receive a fee of $500 for each
Board meeting attended and each meeting of a committee of the Board attended
other than a committee meeting held on the same day as a Board meeting.
A nonqualified option for 1,000 shares of Common Stock is granted
automatically to each non-employee director whose term begins on or continues
after the date of each annual meeting of stockholders at an exercise price equal
to the fair market value of the Common Stock on the date of the meeting.
Accordingly, on May 12, 1999, each then non-employee director received an option
for 1,000 shares at an exercise price of $7.75 per share.
Payment of the exercise price of options granted to non-employee
directors may be in cash or in previously-acquired shares of Common Stock. Each
option includes a reload option feature to the extent that previously-acquired
shares are used to pay the exercise price. Non-employee director options (other
than reload options) become exercisable in four equal annual installments
beginning one year after the date of grant. Reload options become exercisable
six months following the date of grant. All options granted to a non-employee
director will be exercisable in full upon the director's death, disability or
retirement, or in the event of a change in control of the Company. The option
term will expire three months following the date upon which the holder ceases to
be a director other than by reason of death, disability or retirement; in the
event of death or disability, the option will expire one year thereafter, while
non-employee director options will expire five years after retirement.
EMPLOYMENT AGREEMENT
In January 1999, the Company entered into an employment agreement
with Michael D. Mulholland, Vice President-Finance and Secretary of the Company.
The term of the agreement will expire on January 26, 2002, subject to automatic
extension for an additional year annually unless either party notifies the other
of an election to terminate the agreement by December 27 of the prior year, such
that the effective term of the agreement will always have at least two years
remaining. In the event of a change in control of the Company, the agreement
will be renewed automatically for a two-year period beginning with the day
immediately preceding the change in control. The employment agreement provides
for an annual salary of $155,000, subject to annual review by the board of
directors, together with other compensation and benefits provided for in the
Company's compensation policy for executive officers adopted in 1995.
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Pursuant to the employment agreement, if Mr. Mulholland's
employment is terminated by the Company following a change in control of the
Company other than by reason of death or disability or for cause, or by Mr.
Mulholland within 90 days following a change in duties related to a change in
control of the Company, he will be entitled to receive a lump sum payment of an
amount equal to two times his then-current annual base salary, subject to
reduction to the extent that such amount would be subject to the excise tax
imposed on benefits that constitute excess parachute payments under Section 280G
of the Code.
A change in control of the Company for purposes of the employment
agreement is defined as summarized in the notes to the first table under "Stock
Option Data" above, except for a business combination transaction in which the
Company becomes a privately-held company and William W. Sherertz continues as
President and Chief Executive Officer. A change in duties includes a significant
change in the nature or scope of Mr. Mulholland's position, responsibilities,
authorities or duties, a significant diminution in his eligibility to
participate in compensation plans or benefits, a change in the location of his
employment by more than 30 miles or a significant violation of the Company's
obligations under the agreement.
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The compensation committee (the "Committee") of the Board is
composed of three outside directors who act as an independent resource to the
Board in recommending executive salary levels and analyzing other proposed forms
of executive compensation. The Committee, except for Ms. Sherertz, also provides
disinterested administration of the Company's stock-based Incentive Plan.
The Committee's goal is to serve the interests of the Company's
stockholders by enabling the Company to attract, motivate, and retain the
caliber of management expertise necessary for the successful implementation of
the Company's strategic goals.
The Company's overall approach to executive compensation is based
on a philosophy that combines a goal-driven annual cash compensation package
with equity incentives designed to build stock ownership among key employees.
These two key principles serve to align executives effectively with stockholder
interests by focusing management on financial goals necessary to enhance
stockholder value, as well as long-term growth, by strongly encouraging
significant ownership in the Company's stock.
Salaries. Base salaries for the Company's executive officers are
initially determined by evaluating the responsibilities of the position and the
experience of the individual, and by reference to the competitive marketplace
for management talent. Annual salary adjustments are determined by evaluating
the competitive marketplace, the performance of the Company, the performance of
the executive, particularly with respect to the individual's specific
contribution to the Company's success and any increased responsibilities assumed
by the executive.
Annual Cash Incentive Bonuses. The Committee implemented a policy
to guide its compensation decisions with respect to the executive officers of
the Company below the level of president. It is the Committee's belief that the
stewardship provided by the executive officers is best measured by the Company's
return on equity. Accordingly, recommendations for annual awards of cash
incentive bonuses for 1999 were based upon a formula with reference to the
Company's return on stockholders' equity for the year ended December 31, 1999,
and the executive's total salary for the year.
Long-Term Incentive Compensation. The Company strives to align
executive officer financial interests with long-term stockholder value. See
"Option Grants in Last Fiscal Year" above for details of options granted to the
named executive officers in 1999.
Chief Executive Officer Compensation. It was the recommendation
of the Company's president, William W. Sherertz, to the Committee that his
salary level remain unchanged for 1999. In view of the fact
10
that Mr. Sherertz's salary level has remained unchanged for several years, the
Committee awarded Mr. Sherertz a cash incentive bonus for 1999 based upon the
same formula used for other executive officers of the Company. In addition, the
Company awarded Mr. Sherertz an option for 30,000 shares of Company common stock
based upon the Company's performance for 1999 and in further recognition of his
continued declination to accept an increase in salary. The Committee recognizes
that Mr. Sherertz is a significant shareholder in the Company and, to the extent
his performance as chief executive officer results in an increase in the value
of the Company's stock, all stockholders, including him, share the benefits.
COMPENSATION COMMITTEE
Anthony Meeker, Chair
Herbert L. Hochberg
Nancy B. Sherertz
11
STOCK PERFORMANCE GRAPH
The following graph shows the cumulative total return at the
dates indicated for the period from December 31, 1994, until December 31, 1999,
for the Common Stock, the Standard & Poor's 500 Stock Index (the "S&P 500"), and
for a group of the Company's peers in the staffing industry. In addition, the
graph has been prepared assuming (i) reinvestment of dividends and (ii)
investment of $100 in each of the S&P 500 and the peer group at the close of
business on December 31, 1994.
[GRAPHIC OMITTED]
Prepared by the Center for Research in Security Prices Produced on 03/09/2000
including data to 12/31/1999
Companies in the Self-Determined Peer Group:
ADIA SERVICES INC CDI CORP
KELLY SERVICES INC MANPOWER INC WIS
OLSTEN CORP ROBERT HALF INTERNATIONAL INC
STAFF BUILDERS INC NEW UNIFORCE SERVICES INC
Notes:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/30/1994.
12
APPROVAL OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has selected PricewaterhouseCoopers LLP as independent
accountants to examine the financial statements of the Company for the fiscal
year ending December 31, 2000. Although the appointment of accountants is not
required to be submitted to a vote of the stockholders, the Board has decided to
ask the stockholders to approve the appointment and recommends that you vote FOR
approval. If a majority of the shares of Common Stock represented at the annual
meeting does not vote to approve the appointment, the Board will reconsider the
appointment.
PricewaterhouseCoopers LLP were the independent accountants for
the year ended December 31, 1999. The Company expects representatives of
PricewaterhouseCoopers LLP to be present at the 2000 annual stockholders'
meeting and to be available to respond to appropriate questions. The accountants
will have the opportunity to make a statement at the annual meeting if they
desire to do so.
OTHER MATTERS
Management knows of no matters to be brought before the annual
meeting other than the election of directors, amendment of the Incentive Plan,
and ratification of the selection of accountants. However, if any other business
properly comes before the meeting, the persons named in the accompanying form of
proxy will vote or refrain from voting thereon in accordance with their judgment
pursuant to the discretionary authority given them in the proxy.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING IN 2001
Stockholder proposals submitted for inclusion in the proxy
materials for the annual meeting of stockholders to be held in 2001 must be
received by the Company by December 11, 2000. Any such proposal should comply
with the SEC's rules governing stockholder proposals submitted for inclusion in
proxy materials. Proposals should be addressed to Michael D. Mulholland,
Secretary, Barrett Business Services, Inc., 4724 S.W. Macadam Avenue, Portland,
Oregon 97201.
For any proposal that is not submitted for inclusion in next
year's proxy materials, but instead is sought to be presented directly at the
2001 annual meeting, management will be able to vote proxies in its discretion
if the Company: (1) receives notice of the proposal before the close of business
on February 24, 2001, and advises stockholders in the 2001 proxy materials about
the nature of the matter and how management intends to vote on such matter; or
(2) has not received notice of the proposal by the close of business on February
24, 2001. Notices of intention to present proposals at the 2001 annual meeting
should be forwarded to the address listed above.
April 10, 2000 BARRETT BUSINESS SERVICES, INC.
13
PROXY
BARRETT BUSINESS SERVICES, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William W. Sherertz and Anthony Meeker
as proxies, each with power to act alone and with power of substitution, and
hereby authorizes them to represent and to vote all the shares of common stock
of Barrett Business Services, Inc., which the undersigned may be entitled to
vote at the Annual Meeting of Stockholders to be held on Tuesday, May 16, 2000,
at 2:00 p.m., or at any adjournment thereof.
(Continued and to be signed on reverse)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
/FOLD AND DETACH HERE/
1. ELECTION OF DIRECTORS: FOR all nominees listed WITHHOLD AUTHORITY
Robert R. Ames below (except as marked to vote for all nominees
Richard W. Godard to the contrary below) listed below
Herbert L. Hochberg / / / /
Anthony Meeker
Nancy B. Sherertz
William W. Sherertz
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- --------------------------------------------------------------
4. In their discretion, upon any other matter
which may properly come before the
meeting.
The shares represented by this proxy when properly executed will be
voted in the manner directed herein by the undersigned stockholder. If no
direction is made, this proxy will be voted FOR Items 1, 2, and 3. If any other
matters properly come before the meeting, the persons named as proxies will vote
in accordance with their best judgment.
The undersigned acknowledge receipt of the 2000 Notice of Annual Meeting
and accompanying Proxy Statement and revokes all prior proxies for said meeting.
Please sign exactly as your name appears hereon. If the shares are
jointly held, each joint owner named should sign. When signing as attorney,
personal representative, administrator, or other fiduciary, please give full
title. If a corporation, please sign in full corporate name by authorized
officer. If a partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
Signature(s)---------------------------------------------- Date:----------, 2000
/ FOLD AND DETACH HERE /
MEMORANDUM
- ----------
DATE: April 10, 2000
TO: Participants in the Barrett Business Services, Inc.
Employees' Savings Plan
FROM: Mike Mulholland
SUBJECT: Proxy solicitation in connection with May 16, 2000
Annual Meeting of Stockholders
- --------------------------------------------------------------------------------
The enclosed material, which consists of:
-- 1999 annual report to stockholders
-- Proxy statement
-- Proxy card
-- Return envelope
is being provided to you as a participant of Barrett's 401(k) plan,
which owns shares of the Company's common stock. Pursuant to the Plan Document
and Trust Agreement, you are entitled to vote the shares held for your account
in the Plan on the proposals outlined in the accompanying proxy statement.
After you have considered the enclosed information, please mark
your votes on the proxy card, sign the card, fold it and return it in the
postage-paid envelope. Your vote will be compiled with those of other Plan
participants and conveyed to the Company's stock transfer agent by the Plan's
trustee, Smith Barney Trust Company.
Enclosures
cc: Mary Ann Frantz
BARRETT BUSINESS SERVICES, INC.
AMENDED AND RESTATED
1993 STOCK INCENTIVE PLAN
Effective March 1, 1993
(as amended March 16, 2000)
TABLE OF CONTENTS
PAGE
ARTICLE 1 ESTABLISHMENT AND PURPOSE................................1
1.1 Establishment................................................1
1.2 Purpose......................................................1
ARTICLE 2 DEFINITIONS..............................................1
2.1 Defined Terms................................................1
2.2 Gender and Number............................................5
ARTICLE 3 ADMINISTRATION...........................................5
3.1 General......................................................5
3.2 Composition of the Committee.................................5
3.3 Authority of the Committee...................................5
3.4 Action by the Committee......................................6
3.5 Delegation...................................................6
3.6 Liability of Committee Members...............................6
3.7 Costs of Plan................................................6
ARTICLE 4 DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN......6
4.1 Duration of the Plan.........................................6
4.2 Shares Subject to the Plan...................................6
ARTICLE 5 ELIGIBILITY..............................................6
5.1 Employees and Non-Employee Subsidiary Directors..............6
5.2 Non-Employee Board Directors.................................7
ARTICLE 6 AWARDS...................................................7
6.1 Types of Awards..............................................7
6.2 General......................................................7
6.3 Nonuniform Determinations....................................7
6.4 Award Agreements.............................................7
6.5 Provisions Governing All Awards..............................7
ARTICLE 7 OPTIONS.................................................10
7.1 Types of Options............................................10
7.2 General.....................................................10
7.3 Option Price................................................10
7.4 Option Term.................................................11
7.5 Time of Exercise............................................11
7.6 Special Rules for Incentive Stock Options...................11
7.7 Restricted Shares...........................................11
7.8 Deferred Compensation Options...............................12
7.9 Reload Options..............................................12
7.10 Limitation on Number of Shares Subject to Options...........12
- i -
TABLE OF CONTENTS
(continued) PAGE
ARTICLE 8 STOCK APPRECIATION RIGHTS...............................12
8.1 General.....................................................12
8.2 Nature of Stock Appreciation Right..........................12
8.3 Exercise....................................................12
8.4 Form of Payment.............................................13
8.5 Limitation on Number of Stock Appreciation Rights...........13
ARTICLE 9 RESTRICTED AWARDS.......................................13
9.1 Types of Restricted Awards..................................13
9.2 General.....................................................13
9.3 Restriction Period..........................................13
9.4 Forfeiture..................................................14
9.5 Settlement of Restricted Awards.............................14
9.6 Rights as a Shareholder.....................................14
ARTICLE 10 PERFORMANCE AWARDS......................................15
10.1 General.....................................................15
10.2 Nature of Performance Awards................................15
10.3 Performance Cycles..........................................15
10.4 Performance Goals...........................................15
10.5 Determination of Awards.....................................15
10.6 Timing and Form of Payment..................................15
ARTICLE 11 OTHER STOCK BASED AND COMBINATION AWARDS................16
11.1 Other Stock-Based Awards....................................16
11.2 Combination Awards..........................................16
ARTICLE 12 DEFERRAL ELECTIONS......................................16
ARTICLE 13 DIVIDEND EQUIVALENTS....................................16
ARTICLE 14 NON-EMPLOYEE BOARD DIRECTORS............................16
14.1 General.....................................................16
14.2 Eligibility.................................................17
14.3 Definitions.................................................17
14.4 Initial Director Options....................................17
14.5 Annual Director Options.....................................17
ARTICLE 15 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.........17
15.1 Plan Does Not Restrict Corporation..........................17
15.2 Adjustments by the Committee................................18
ARTICLE 16 AMENDMENT AND TERMINATION...............................18
- ii -
TABLE OF CONTENTS
(continued) PAGE
ARTICLE 17 MISCELLANEOUS...........................................18
17.1 Tax Withholding.............................................18
17.2 Unfunded Plan...............................................19
17.3 Payments to Trust...........................................19
17.4 Annulment of Awards.........................................19
17.5 Engaging in Competition With the Corporation................19
17.6 Other Corporation Benefit and Compensation Programs.........19
17.7 Securities Law Restrictions.................................20
17.8 Governing Law...............................................20
ARTICLE 18 SHAREHOLDER APPROVAL....................................20
- iii -
BARRETT BUSINESS SERVICES, INC.
AMENDED AND RESTATED 1993 STOCK INCENTIVE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 Establishment. Barrett Business Services, Inc. ("Corporation"),
hereby establishes the Barrett Business Services, Inc., 1993 Stock Incentive
Plan (the "Plan"), effective as of March 1, 1993, subject to shareholder
approval as provided in Article 18. The Plan was previously amended effective
March 8, 1994, and March 12, 1997, and is further amended and restated as set
forth herein effective March 16, 2000, subject to shareholder approval as
provided in Article 16.
1.2 Purpose. The purpose of the Plan is to promote and advance the
interests of Corporation and its shareholders by enabling Corporation to
attract, retain, and reward key employees, directors, and outside consultants of
Corporation and its subsidiaries. It is also intended to strengthen the
mutuality of interests between such employees, directors, and consultants and
Corporation's shareholders. The Plan is designed to serve these purposes by
offering stock options and other equity-based incentive awards, thereby
providing a proprietary interest in pursuing the long-term growth,
profitability, and financial success of Corporation.
ARTICLE 2
DEFINITIONS
2.1 Defined Terms. For purposes of the Plan, the following terms shall
have the meanings set forth below:
"AWARD" means an award or grant made to a Participant of Options, Stock
Appreciation Rights, Restricted Awards, Performance Awards, or Other
Stock-Based Awards pursuant to the Plan.
"AWARD AGREEMENT" means an agreement as described in Section 6.4.
"BOARD" means the Board of Directors of Corporation.
"CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor thereto, together with rules,
regulations, and interpretations promulgated thereunder. Where the context
so requires, any reference to a particular Code section shall be construed
to refer to the successor provision to such Code section.
"COMMITTEE" means the committee appointed by the Board to administer
the Plan as provided in Article 3 of the Plan.
"COMMON STOCK" means the $.01 par value Common Stock of Corporation or
any security of Corporation issued in substitution, exchange, or lieu
thereof.
- 1 -
"CONSULTANT" means any consultant or adviser to Corporation or a
Subsidiary selected by the Committee, who is not an employee of Corporation
or a Subsidiary.
"CONTINUING RESTRICTION" means a Restriction contained in Sections
6.5(h), 17.5, 17.5, and 17.7 of the Plan and any other Restrictions
expressly designated by the Committee in an Award Agreement as a Continuing
Restriction.
"CORPORATION" means Barrett Business Services, Inc., a Maryland
corporation, or any successor corporation.
"DEFERRED COMPENSATION OPTION" means a Nonqualified Option granted in
lieu of a specified amount of other compensation pursuant to Section 7.8 of
the Plan.
"DIRECTOR OPTIONS" means options granted to Non-Employee Board
Directors pursuant to Article 14 of the Plan, including Initial Director
Options and Annual Director Options.
"DISABILITY" means the condition of being permanently "disabled" within
the meaning of Section 22(e)(3) of the Code, namely being unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment which can be expected to result in death or
which has lasted or can be expected to last for a continuous period of not
less than 12 months. However, the Committee may change the foregoing
definition of "Disability" or may adopt a different definition for purposes
of specific Awards.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute. Where the context
so requires, any reference to a particular section of the Exchange Act, or
to any rule promulgated under the Exchange Act, shall be construed to refer
to successor provisions to such section or rule.
"FAIR MARKET VALUE" means on any given date, the fair market value per
share of the Common Stock determined as follows:
(a) If the Common Stock is traded on an established securities
exchange, the mean between the reported high and low sale prices of Common
Stock as reported for such day by the principal exchange on which Common
Stock is traded (as determined by the Committee) or, if Common Stock was not
traded on such date, on the next preceding day on which Common Stock was
traded;
(b) If trading activity in Common Stock is reported in the NASDAQ
National Market System, the mean between the reported high and low sale
prices of Common Stock as reported for such day by the NASDAQ or, if Common
Stock trades were not reported on such date, on the next preceding day on
which Common Stock trades were reported by the NASDAQ;
(c) If trading activity in Common Stock is reported in the NASDAQ Bid
and Asked Quotations, the mean between the bid price and asked price quote
for such day as
- 2 -
reported by the NASDAQ or, if there are no such quotes for Common Stock for
such date, on the next preceding day for which bid and asked price quotes
for Common Stock were reported by NASDAQ; or
(d) If there is no market for Common Stock or if trading activities
for Common Stock are not reported in one of the manners described above, the
fair market value shall be as determined by the Committee.
"INCENTIVE STOCK OPTION" or "ISO" means any Option granted pursuant to
the Plan that is intended to be and is specifically designated in its Award
Agreement as an "incentive stock option" within the meaning of Section 422
of the Code.
"NON-EMPLOYEE BOARD DIRECTOR" means a member of the Board who is not an
employee of Corporation or any Subsidiary.
"NON-EMPLOYEE SUBSIDIARY DIRECTOR" means a member of the board of
directors of a Subsidiary who is neither an employee of Corporation or a
Subsidiary nor a member of the Board.
"NONQUALIFIED OPTION" or "NQO" means any Option, including a Deferred
Compensation Option, granted pursuant to the Plan that is not an Incentive
Stock Option.
"OPTION" means an ISO, an NQO, a Deferred Compensation Option, or a
Director Option.
"OTHER STOCK-BASED AWARD" means an Award as defined in Section 11.1.
"PARTICIPANT" means an employee or a Consultant of Corporation or a
Subsidiary, a Non-Employee Board Director, or a Non-Employee Subsidiary
Director who is granted an Award under the Plan.
"PERFORMANCE AWARD" means an Award granted pursuant to the provisions
of Article 10 of the Plan, the Vesting of which is contingent on performance
attainment.
"PERFORMANCE CYCLE" means a designated performance period pursuant to
the provisions of Section 10.3 of the Plan.
"PERFORMANCE GOAL" means a designated performance objective pursuant to
the provisions of Section 10.4 of the Plan.
"PLAN" means this Barrett Business Services, Inc., 1993 Stock Incentive
Plan, as set forth herein and as it may be hereafter amended and from time
to time.
"REPORTING PERSON" means a Participant who is subject to the reporting
requirements of Section 16(a) of the Exchange Act.
"RESTRICTED AWARD" means a Restricted Share or a Restricted Unit
granted pursuant to Article 9 of the Plan.
- 3 -
"RESTRICTED SHARE" means an Award described in Section 9.1(a) of the
Plan.
"RESTRICTED UNIT" means an Award of units representing Shares described
in Section 9.1(b) of the Plan.
"RESTRICTION" means a provision in the Plan or in an Award Agreement
which limits the exercisability or transferability, or which governs the
forfeiture, of an Award or the Shares, cash, or other property payable
pursuant to an Award.
"RETIREMENT" means:
(a) For Participants who are employees, retirement from active
employment with Corporation and its Subsidiaries on or after age 65, or such
earlier retirement date as approved by the Committee for purposes of the
Plan;
(b) For Participants who are Non-Employee Board Directors or
Non-Employee Subsidiary Directors, retirement from the applicable board of
directors after attaining the maximum age (if any) specified in the articles
of incorporation or bylaws of the applicable corporation; or
(c) For Participants who are Consultants, termination of service as a
Consultant after attaining a retirement age specified by the Committee for
purposes of an Award to such Consultant.
However, the Committee may change the foregoing definition of
"Retirement" or may adopt a different definition for purposes of specific
Awards.
"SHARE" means a share of Common Stock.
"STOCK APPRECIATION RIGHT" or "SAR" means an Award to benefit from the
appreciation of Common Stock granted pursuant to the provisions of Article 8
of the Plan.
"SUBSIDIARY" means a "subsidiary corporation" of Corporation, within
the meaning of Section 425 of the Code, namely any corporation in which
Corporation directly or indirectly controls 50 percent or more of the total
combined voting power of all classes of stock having voting power.
"VEST" or "VESTED" means:
(a) In the case of an Award that requires exercise, to be or to become
immediately and fully exercisable and free of all Restrictions (other than
Continuing Restrictions);
(b) In the case of an Award that is subject to forfeiture, to be or to
become nonforfeitable, freely transferable, and free of all Restrictions
(other than Continuing Restrictions);
- 4 -
(c) In the case of an Award that is required to be earned by attaining
specified Performance Goals, to be or to become earned and nonforfeitable,
freely transferable, and free of all Restrictions (other than Continuing
Restrictions); or
(d) In the case of any other Award as to which payment is not
dependent solely upon the exercise of a right, election, exercise, or
option, to be or to become immediately payable and free of all Restrictions
(except Continuing Restrictions).
2.2 Gender and Number. Except where otherwise indicated by the
context, any masculine or feminine terminology used in the Plan shall also
include the opposite gender; and the definition of any term in Section 2.1 in
the singular shall also include the plural, and vice versa.
ARTICLE 3
ADMINISTRATION
3.1 General. The Plan shall be administered by a Committee composed as
described in Section 3.2.
3.2 Composition of the Committee. The Committee shall be appointed by
the Board and shall consist of not less than a sufficient number of Non-Employee
Board Directors so as to qualify the Committee to administer the Plan as
contemplated by Rule 16b-3 under the Exchange Act. The Board may from time to
time remove members from, or add members to, the Committee. Vacancies on the
Committee, however caused, shall be filled by the Board. In the event that the
Committee shall cease to satisfy the requirements of Rule 16b-3, the Board shall
appoint another Committee satisfying such requirements.
3.3 Authority of the Committee. The Committee shall have full power
and authority (subject to such orders or resolutions as may be issued or adopted
from time to time by the Board) to administer the Plan in its sole discretion,
including the authority to:
(a) Construe and interpret the Plan and any Award Agreement;
(b) Promulgate, amend, and rescind rules and procedures relating to
the implementation of the Plan;
(c) Select the employees, Non-Employee Subsidiary Directors, and
Consultants who shall be granted Awards;
(d) Determine the number and types of Awards to be granted to each
such Participant;
(e) Determine the number of Shares, or Share equivalents, to be
subject to each Award;
(f) Determine the option price, purchase price, base price, or similar
feature for any Award; and
- 5 -
(g) Determine all the terms and conditions of all Award Agreements,
consistent with the requirements of the Plan.
Decisions of the Committee, or any delegate as permitted by the Plan,
shall be final, conclusive, and binding on all Participants.
3.4 Action by the Committee. A majority of the members of the
Committee shall constitute a quorum for the transaction of business. Action
approved by a majority of the members present at any meeting at which a quorum
is present, or action in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
3.5 Delegation. Notwithstanding the foregoing, the Committee may
delegate to one or more officers of Corporation the authority to determine the
recipients, types, amounts, and terms of Awards granted to Participants who are
not Reporting Persons.
3.6 Liability of Committee Members. No member of the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan, any Award, or any Participant.
3.7 Costs of Plan. The costs and expenses of administering the Plan
shall be borne by Corporation.
ARTICLE 4
DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN
4.1 Duration of the Plan. The Plan is effective March 1, 1993, subject
to approval by Corporation's shareholders as provided in Article 18. The Plan
shall remain in effect until Awards have been granted covering all the available
Shares or the Plan is otherwise terminated by the Board. Termination of the Plan
shall not affect outstanding Awards.
4.2 Shares Subject to the Plan. The shares which may be made subject
to Awards under the Plan shall be Shares of Common Stock, which may be either
authorized and unissued Shares or reacquired Shares. No fractional Shares shall
be issued under the Plan. Subject to adjustment pursuant to Article 15, the
maximum number of Shares for which Awards may be granted under the Plan shall be
1,550,000. If an Award under the Plan is canceled or expires for any reason
prior to having been fully Vested or exercised by a Participant or is settled in
cash in lieu of Shares or is exchanged for other Awards, all Shares covered by
such Awards shall be made available for future Awards under the Plan.
ARTICLE 5
ELIGIBILITY
5.1 Employees and Non-Employee Subsidiary Directors. Officers and
other key employees of Corporation and its Subsidiaries (including employees who
may also be directors of Corporation or a Subsidiary), Consultants, and
Non-Employee Subsidiary Directors who, in the Committee's judgment, are or will
be contributors to the long-term success of Corporation shall be eligible to
receive Awards under the Plan.
- 6 -
5.2 Non-Employee Board Directors. All Non-Employee Board Directors
shall be eligible to receive Director Options pursuant to Article 14 of the
Plan.
ARTICLE 6
AWARDS
6.1 Types of Awards. The types of Awards that may be granted under the
Plan are:
(a) Options governed by Article 7 of the Plan;
(b) Stock Appreciation Rights governed by Article 8 of the Plan;
(c) Restricted Awards governed by Article 9 of the Plan;
(d) Performance Awards governed by Article 10 of the Plan;
(e) Other Stock-Based Awards or combination awards governed by Article
11 of the Plan; and
(f) Director Options governed by Article 14 of the Plan.
In the discretion of the Committee, any Award (other than a Director
Option) may be granted alone, in addition to, or in tandem with other Awards
under the Plan.
6.2 General. Subject to the limitations of the Plan, the Committee may
cause Corporation to grant Awards to such Participants, at such times, of such
types, in such amounts, for such periods, with such option prices, purchase
prices, or base prices, and subject to such terms, conditions, limitations, and
restrictions as the Committee, in its discretion, shall deem appropriate. Awards
may be granted as additional compensation to a Participant or in lieu of other
compensation to such Participant. A Participant may receive more than one Award
and more than one type of Award under the Plan.
6.3 Nonuniform Determinations. The Committee's determinations under
the Plan or under one or more Award Agreements, including without limitation,
(a) the selection of Participants to receive Awards, (b) the type, form, amount,
and timing of Awards, (c) the terms of specific Award Agreements, and (d)
elections and determinations made by the Committee with respect to exercise or
payments of Awards, need not be uniform and may be made by the Committee
selectively among Participants and Awards, whether or not Participants are
similarly situated.
6.4 Award Agreements. Each Award shall be evidenced by a written Award
Agreement between Corporation and the Participant. Award Agreements may, subject
to the provisions of the Plan, contain any provision approved by the Committee.
6.5 Provisions Governing All Awards. All Awards shall be subject to
the following provisions:
- 7 -
(a) Alternative Awards. If any Awards are designated in their Award
Agreements as alternative to each other, the exercise of all or part of one
Award automatically shall cause an immediate equal (or pro rata)
corresponding termination of the other alternative Award or Awards.
(b) Rights as Shareholders. No Participant shall have any rights of a
shareholder with respect to Shares subject to an Award until such Shares are
issued in the name of the Participant.
(c) Employment Rights. Neither the adoption of the Plan nor the
granting of any Award shall confer on any person the right to continued
employment with Corporation or any Subsidiary or the right to remain as a
director of or a Consultant to Corporation or any Subsidiary, as the case
may be, nor shall it interfere in any way with the right of Corporation or a
Subsidiary to terminate such person's employment or to remove such person as
a Consultant or as a director at any time for any reason, with or without
cause.
(d) Nontransferable. Each Award (other than Restricted Shares after
they Vest) shall not be transferable otherwise than by will or the laws of
descent and distribution and shall be exercisable (if exercise is required)
during the lifetime of the Participant, only by the Participant or, in the
event the Participant becomes legally incompetent, by the Participant's
guardian or legal representative.
(e) Termination Of Employment. The terms and conditions under which an
Award may be exercised, if at all, after a Participant's termination of
employment or service as a Non-Employee Subsidiary Director or a Consultant
shall be determined by the Committee and specified in the applicable Award
Agreement.
(f) Change in Control. The Committee, in its discretion, may provide
in any Award Agreement that in the event of a change in control of
Corporation (as the Committee may define such term in the Award Agreement),
as of the date of such change in control:
(i) All, or a specified portion of, Awards requiring exercise
shall become fully and immediately exercisable, notwithstanding any
other limitations on exercise;
(ii) All, or a specified portion of, Awards subject to
Restrictions shall become fully Vested; and
(iii) All, or a specified portion of, Awards subject to
Performance Goals shall be deemed to have been fully earned.
Unless the Committee specifically provides otherwise in the change in
control provision for a specific Award Agreement, Awards shall become
exercisable, become Vested, or become earned as of a change in control date
only if, or to the extent, such acceleration in the exercisability, Vesting,
or becoming earned of the Awards does not result in an "excess parachute
payment" within the meaning of Section 280G(b) of the
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Code. The Committee, in its discretion, may include change in control
provisions in some Award Agreements and not in others, may include different
change in control provisions in different Award Agreements, and may include
change in control provisions for some Awards or some Participants and not
for others.
(g) Conditioning or Accelerating Benefits. The Committee, in its
discretion, may include in any Award Agreement a provision conditioning or
accelerating the Vesting of an Award or the receipt of benefits pursuant to
an Award, either automatically or in the discretion of the Committee, upon
the occurrence of specified events including, without limitation, a change
in control of Corporation (subject to the foregoing paragraph (f)), a sale
of all or substantially all the property and assets of Corporation, or an
event of the type described in Section Article 15 of this Plan.
(h) Payment of Purchase Price and Withholding. The Committee, in its
discretion, may include in any Award Agreement a provision permitting the
Participant to pay the purchase or option price, if any, for the Shares or
other property issuable pursuant to the Award, or the Participant's federal,
state, or local tax, or tax withholding, obligation with respect to such
issuance in whole or in part by any one or more of the following:
(i) By delivering previously owned Shares (including Restricted
Shares, whether or not vested);
(ii) By surrendering outstanding other Vested Awards under the
Plan denominated in Shares or in Share equivalent units;
(iii) By reducing the number of Shares or other property otherwise
Vested and issuable pursuant to the Award;
(iv) By delivering to Corporation a promissory note payable on
such terms and over such period as the Committee shall determine;
(v) By delivery (in a form approved by the Committee) of an
irrevocable direction to a securities broker acceptable to the
Committee:
(A) To sell Shares subject to the Option and to deliver all
or a part of the sales proceeds to Corporation in payment of all
or a part of the option price and taxes or withholding taxes
attributable to the issuance; or
(B) To pledge Shares subject to the Option to the broker as
security for a loan and to deliver all or a part of the loan
proceeds to Corporation in payment of all or a part of the option
price and taxes or withholding taxes attributable to the issuance;
or
(vi) In any combination of the foregoing or in any other form
approved by the Committee.
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If Restricted Shares are surrendered in full or partial payment of
the purchase or option price of Shares issuable under an Award, a
corresponding number of the Shares issued upon exercise of the Award
shall be Restricted Shares subject to the same Restrictions as the
surrendered Restricted Shares. Shares withheld or surrendered as
described above shall be valued based on their Fair Market Value on the
date of the transaction. Any Shares withheld or surrendered with
respect to a Reporting Person shall be subject to such additional
conditions and limitations as the Committee may impose to comply with
the requirements of the Exchange Act.
(i) Reporting Persons. With respect to all Awards granted to
Reporting Persons:
(i) Awards requiring exercise shall not be exercisable
until at least six months after the date the Award was granted,
except in the case of the death or Disability of the Participant;
and
(ii) Shares issued pursuant to any other Award may not be
sold by the Participant for at least six months after acquisition,
except in the case of the death or Disability of the Participant;
provided, however, that (unless an Award Agreement provides otherwise)
the limitation of this Section 6.5(i) shall apply only if or to the
extent required by Rule 16b-3 under the Exchange Act. Award Agreements
for Awards to Reporting Persons shall also comply with any future
restrictions imposed by such Rule 16b-3.
(j) Service Periods. At the time of granting Awards, the
Committee may specify, by resolution or in the Award Agreement, the
period or periods of service performed or to be performed by the
Participant in connection with the grant of the Award.
ARTICLE 7
OPTIONS
7.1 Types of Options. Options granted under the Plan may be in the
form of Incentive Stock Options or Nonqualified Options (including Deferred
Compensation Options and Director Options). The grant of each Option and the
Award Agreement governing each Option shall identify the Option as an ISO or an
NQO. In the event the Code is amended to provide for tax-favored forms of stock
options other than or in addition to Incentive Stock Options, the Committee may
grant Options under the Plan meeting the requirements of such forms of options.
7.2 General. Options shall be subject to the terms and conditions set
forth in Article 6 and this Article 7 and Award Agreements governing Options
shall contain such additional terms and conditions, not inconsistent with the
express provisions of the Plan, as the Committee shall deem desirable.
7.3 Option Price. Each Award Agreement for Options shall state the
option exercise price per Share of Common Stock purchasable under the Option,
which shall not be less than:
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(a) $.01 per share in the case of a Deferred Compensation Option;
(b) 75 percent of the Fair Market Value of a Share on the date of
grant for all other Nonqualified Options (except Director Options); or
(c) 100 percent of the Fair Market Value of a Share on the date of
grant for all Incentive Stock Options.
7.4 Option Term. The Award Agreement for each Option shall specify the
term of each Option, which may be unlimited or may have a specified period
during which the Option may be exercised, as determined by the Committee.
7.5 Time of Exercise. The Award Agreement for each Option shall
specify, as determined by the Committee:
(a) The time or times when the Option shall become exercisable and
whether the Option shall become exercisable in full or in graduated
amounts based on: (i) continuation of employment over a period
specified in the Award Agreement, (ii) satisfaction of performance
goals or criteria specified in the Award Agreement, or (iii) a
combination of continuation of employment and satisfaction of
performance goals or criteria;
(b) Such other terms, conditions, and restrictions as to when the
Option may be exercised as shall be determined by the Committee; and
(c) The extent, if any, that the Option shall remain exercisable
after the Participant ceases to be an employee, Consultant, or director
of Corporation or a Subsidiary.
An Award Agreement for an Option may, in the discretion of the
Committee, provide whether, and to what extent, the time when an Option becomes
exercisable shall be accelerated or otherwise modified (i) in the event of the
death, Disability, or Retirement of the Participant, or (ii) upon the occurrence
of a change in control of Corporation. The Committee may, at any time in its
discretion, accelerate the time when all or any portion of an outstanding Option
becomes exercisable.
7.6 Special Rules for Incentive Stock Options. In the case of an
Option designated as an Incentive Stock Option, the terms of the Option and the
Award Agreement shall conform with the statutory and regulatory requirements
specified pursuant to Section 422 of the Code, as in effect on the date such ISO
is granted. ISOs may be granted only to employees of Corporation or a
Subsidiary. ISOs may not be granted under the Plan after ten years following the
date specified in Section 4.1, unless the ten-year limitation of Section
422(b)(2) of the Code is removed or extended.
7.7 Restricted Shares. In the discretion of the Committee, the Shares
issuable upon exercise of an Option may be Restricted Shares if so provided in
the Award Agreement for the Option.
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7.8 Deferred Compensation Options. The Committee may, in its
discretion, grant Deferred Compensation Options with an option price less than
Fair Market Value to provide a means for deferral to future dates of
compensation otherwise payable to a Participant. The option price shall be
determined by the Committee subject to Section 7.3(a)) of the Plan. The number
of Shares subject to a Deferred Compensation Option shall be determined by the
Committee, in its discretion, by dividing the amount of compensation to be
deferred by the difference between the Fair Market Value of a Share on the date
of grant and the option price of the Deferred Compensation Option. Amounts of
compensation deferred with Deferred Compensation Options may include amounts
payable under Awards granted under the Plan or under any other compensation
program or arrangement of Corporation as permitted by the Committee. The
Committee shall grant Deferred Compensation Options only if it reasonably
determines that the recipient of such an Option is not likely to be deemed to be
in constructive receipt for income tax purposes of the income being deferred.
7.9 Reload Options. The Committee, in its discretion, may provide in
an Award Agreement for an Option that in the event all or a portion of the
Option is exercised by the Participant using previously acquired Shares, the
Participant shall automatically be granted (subject to the available pool of
Shares subject to grants of Awards as specified in Section 4.2 of the Plan) a
replacement Option (with an option price equal to the Fair Market Value of a
Share on the date of such exercise) for a number of Shares equal to (or equal to
a portion of) the number of shares surrendered upon exercise of the Option. Such
reload Option features may be subject to such terms and conditions as the
Committee shall determine, including without limitation, a condition that the
Participant retain the Shares issued upon exercise of the Option for a specified
period of time.
7.10 Limitation on Number of Shares Subject to Options. In no event may
Options for more than 200,000 Shares be granted to any individual under the Plan
during any calendar year.
ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1 General. Stock Appreciation Rights shall be subject to the terms
and conditions set forth in Article 6 and this Article 8 and Award Agreements
governing Stock Appreciation Rights shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the
Committee shall deem desirable.
8.2 Nature of Stock Appreciation Right. A Stock Appreciation Right is
an Award entitling a Participant to receive an amount equal to the excess (or,
if the Committee shall determine at the time of grant, a portion of the excess)
of the Fair Market Value of a Share of Common Stock on the date of exercise of
the SAR over the base price, as described below, on the date of grant of the
SAR, multiplied by the number of Shares with respect to which the SAR shall have
been exercised. The base price shall be designated by the Committee in the Award
Agreement for the SAR and may be the Fair Market Value of a Share on the grant
date of the SAR or such other higher or lower price as the Committee shall
determine.
8.3 Exercise. A Stock Appreciation Right may be exercised by a
Participant in accordance with procedures established by the Committee. The
Committee may also provide
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that a SAR shall be automatically exercised on one or more specified dates or
upon the satisfaction of one or more specified conditions. In the case of SARs
granted to Reporting Persons, exercise of the SAR shall be limited by the
Committee to the extent required to comply with the applicable requirements of
Rule 16b-3 under the Exchange Act.
8.4 Form of Payment. Payment upon exercise of a Stock Appreciation
Right may be made in cash, in installments, in Shares, by issuance of a Deferred
Compensation Option, or in any combination of the foregoing, or in any other
form as the Committee shall determine.
8.5 Limitation on Number of Stock Appreciation Rights. In no event may
more than 200,000 Stock Appreciation Rights be granted to any individual under
the Plan during any calendar year.
ARTICLE 9
RESTRICTED AWARDS
9.1 Types of Restricted Awards. Restricted Awards granted under the
Plan may be in the form of either Restricted Shares or Restricted Units.
(a) Restricted Shares. A Restricted Share is an Award of Shares
transferred to a Participant subject to such terms and conditions as
the Committee deems appropriate, including, without limitation,
restrictions on the sale, assignment, transfer, or other disposition of
such Restricted Shares and may include a requirement that the
Participant forfeit such Restricted Shares back to Corporation upon
termination of Participant's employment (or service as a Non-Employee
Subsidiary Director or a Consultant) for specified reasons within a
specified period of time or upon other conditions, as set forth in the
Award Agreement for such Restricted Shares. Each Participant receiving
a Restricted Share shall be issued a stock certificate in respect of
such Shares, registered in the name of such Participant, and shall
execute a stock power in blank with respect to the Shares evidenced by
such certificate. The certificate evidencing such Restricted Shares and
the stock power shall be held in custody by Corporation until the
Restrictions thereon shall have lapsed.
(b) Restricted Units. A Restricted Unit is an Award of units
(with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, and may include a requirement that the Participant forfeit
such Restricted Units upon termination of Participant's employment (or
service as a Non-Employee Subsidiary Director or a Consultant) for
specified reasons within a specified period of time or upon other
conditions, as set forth in the Award Agreement for such Restricted
Units.
9.2 General. Restricted Awards shall be subject to the terms and
conditions of Article 6 and this Article 9 and Award Agreements governing
Restricted Awards shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable.
9.3 Restriction Period. Award Agreements for Restricted Awards shall
provide that Restricted Awards, and the Shares subject to Restricted Awards, may
not be transferred, and may
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provide that, in order for a Participant to Vest in such Restricted Awards, the
Participant must remain in the employment (or remain as a Non-Employee
Subsidiary Director or a Consultant) of Corporation or its Subsidiaries, subject
to relief for reasons specified in the Award Agreement, for a period commencing
on the grant date of the Award and ending on such later date or dates as the
Committee may designate at the time of the Award (the "Restriction Period").
During the Restriction Period, a Participant may not sell, assign, transfer,
pledge, encumber, or otherwise dispose of Shares received under or governed by a
Restricted Award grant. The Committee, in its sole discretion, may provide for
the lapse of restrictions in installments during the Restriction Period. Upon
expiration of the applicable Restriction Period (or lapse of Restrictions during
the Restriction Period where the Restrictions lapse in installments) the
Participant shall be entitled to settlement of the Restricted Award or portion
thereof, as the case may be. Although Restricted Awards shall usually Vest based
on continued employment (or service as a Non-Employee Subsidiary Director or a
Consultant) and Performance Awards under Article 10 shall usually Vest based on
attainment of Performance Goals, the Committee, in its discretion, may condition
Vesting of Restricted Awards on attainment of Performance Goals as well as
continued employment (or service as a Non-Employee Subsidiary Director or a
Consultant). In such case, the Restriction Period for such a Restricted Award
shall include the period prior to satisfaction of the Performance Goals.
9.4 Forfeiture. If a Participant ceases to be an employee (or
Consultant or Non-Employee Subsidiary Director) of Corporation or a Subsidiary
during the Restriction Period for any reason other than reasons which may be
specified in an Award Agreement (such as death, Disability, or Retirement) the
Award Agreement may require that all non-Vested Restricted Awards previously
granted to the Participant be forfeited and returned to Corporation.
9.5 Settlement of Restricted Awards.
(a) Restricted Shares. Upon Vesting of a Restricted Share Award,
the legend on such Shares will be removed and the Participant's stock
power will be returned and the Shares will no longer be Restricted
Shares. The Committee may also, in its discretion, permit a Participant
to receive, in lieu of unrestricted Shares at the conclusion of the
Restriction Period, payment in cash, installments, or by issuance of a
Deferred Compensation Option equal to the Fair Market Value of the
Restricted Shares as of the date the Restrictions lapse.
(b) Restricted Units. Upon Vesting of a Restricted Unit Award, a
Participant shall be entitled to receive payment for Restricted Units
in an amount equal to the aggregate Fair Market Value of the Shares
covered by such Restricted Units at the expiration of the Applicable
Restriction Period. Payment in settlement of a Restricted Unit shall be
made as soon as practicable following the conclusion of the applicable
Restriction Period in cash, in installments, in Shares equal to the
number of Restricted Units, by issuance of a Deferred Compensation
Option, or in any other manner or combination of such methods as the
Committee, in its sole discretion, shall determine.
9.6 Rights as a Shareholder. A Participant shall have, with respect to
unforfeited Shares received under a grant of Restricted Shares, all the rights
of a shareholder of Corporation, including the right to vote the shares, and the
right to receive any cash dividends. Stock
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dividends issued with respect to Restricted Shares shall be treated as
additional Shares covered by the grant of Restricted Shares and shall be subject
to the same Restrictions.
ARTICLE 10
PERFORMANCE AWARDS
10.1 General. Performance Awards shall be subject to the terms and
conditions set forth in Article 6 and this Article 10 and Award Agreements
governing Performance Awards shall contain such other terms and conditions not
inconsistent with the express provisions of the Plan, as the Committee shall
deem desirable.
10.2 Nature of Performance Awards. A Performance Award is an Award of
units (with each unit having a value equivalent to one Share) granted to a
Participant subject to such terms and conditions as the Committee deems
appropriate, including, without limitation, the requirement that the Participant
forfeit such Performance Award or a portion thereof in the event specified
performance criteria are not met within a designated period of time.
10.3 Performance Cycles. For each Performance Award, the Committee
shall designate a performance period (the "Performance Cycle") with a duration
to be determined by the Committee in its discretion within which specified
Performance Goals are to be attained. There may be several Performance Cycles in
existence at any one time and the duration of Performance Cycles may differ from
each other.
10.4 Performance Goals. The Committee shall establish Performance Goals
for each Performance Cycle on the basis of such criteria and to accomplish such
objectives as the Committee may from time to time select. Performance Goals may
be based on (i) performance criteria for Corporation, a Subsidiary, or an
operating group, (ii) a Participant's individual performance, or (iii) a
combination of both. Performance Goals may include objective and subjective
criteria. During any Performance Cycle, the Committee may adjust the Performance
Goals for such Performance Cycle as it deems equitable in recognition of unusual
or nonrecurring events affecting Corporation, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
10.5 Determination of Awards. As soon as practicable after the end of a
Performance Cycle, the Committee shall determine the extent to which Performance
Awards have been earned on the basis of performance in relation to the
established Performance Goals.
10.6 Timing and Form of Payment. Settlement of earned Performance
Awards shall be made to the Participant as soon as practicable after the
expiration of the Performance Cycle and the Committee's determination under
Section 10.5, in the form of cash, installments, Shares, Deferred Compensation
Options, or any combination of the foregoing or in any other form as the
Committee shall determine.
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ARTICLE 11
OTHER STOCK BASED AND COMBINATION AWARDS
11.1 Other Stock-Based Awards. The Committee may grant other Awards
under the Plan pursuant to which Shares are or may in the future be acquired, or
Awards denominated in or measured by Share equivalent units, including Awards
valued using measures other than the market value of Shares. Other Stock-Based
Awards are not restricted to any specified form or structure and may include,
without limitation, Share purchase warrants, other rights to acquire Shares, and
securities convertible into or redeemable for Shares. Such Other Stock-Based
Awards may be granted either alone, in addition to, or in tandem with, any other
type of Award granted under the Plan.
11.2 Combination Awards. The Committee may also grant Awards under the
Plan in tandem or combination with other Awards or in exchange of Awards, or in
tandem or combination with, or as alternatives to, grants or rights under any
other employee plan of Corporation, including the plan of any acquired entity.
No action authorized by this section shall reduce the amount of any existing
benefits or change the terms and conditions thereof without the Participant's
consent.
ARTICLE 12
DEFERRAL ELECTIONS
The Committee may permit a Participant to elect to defer receipt of the
payment of cash or the delivery of Shares that would otherwise be due to such
Participant by virtue of the exercise, earn out, or Vesting of an Award made
under the Plan. If any such election is permitted, the Committee shall establish
rules and procedures for such payment deferrals, including, but not limited to:
(a) payment or crediting of reasonable interest or other growth or earnings
factor on such deferred amounts credited in cash, (b) the payment or crediting
of dividend equivalents in respect of deferrals credited in Share equivalent
units, or (c) granting of Deferred Compensation Options.
ARTICLE 13
DIVIDEND EQUIVALENTS
Any Awards may, at the discretion of the Committee, earn dividend
equivalents. In respect of any such Award which is outstanding on a dividend
record date for Common Stock, the Participant may be credited with an amount
equal to the amount of cash or stock dividends that would have been paid on the
Shares covered by such Award, had such covered Shares been issued and
outstanding on such dividend record date. The Committee shall establish such
rules and procedures governing the crediting of dividend equivalents, including
the timing, form of payment, and payment contingencies of such dividend
equivalents, as it deems are appropriate or necessary.
ARTICLE 14
NON-EMPLOYEE BOARD DIRECTORS
14.1 General. Awards shall be made to Non-Employee Board Directors only
pursuant to this Article 14. All Non-Employee Board Directors shall receive
Initial Director Options and
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Annual Director Options. No person, including the members of the Board or the
Committee, shall have any discretion as to the selection of eligible recipients
or the determination of the type, amount, or terms of Awards pursuant to this
Article 14.
14.2 Eligibility. The persons eligible to receive Awards pursuant to
this Article 14 are all Non-Employee Board Directors of Corporation.
14.3 Definitions. For purposes of this Article 14, the following terms
shall have the meanings set forth below:
"ANNUAL MEETING DATE" means the date of Corporation's regular annual
meeting of shareholders.
"OFFERING DATE" means the closing date of Corporation's initial public
offering of Shares pursuant to a registration statement which has become
effective under the Securities Act of 1933.
14.4 Initial Director Options.
(a) Grant of Initial Director Options. As of the Offering Date,
each Non-Employee Board Director who is a member of the Board on the
Offering Date shall be granted automatically an Initial Director Option
to purchase 1,500 Shares.
(b) Option Price. The option purchase price for each Initial
Director Option shall be equal to the public offering price of a Share.
(c) Terms of Initial Director Option. Each Initial Director
Option shall have the terms and conditions specified in the form of
Award Agreement attached to this Plan as Appendix A.
14.5 Annual Director Options.
(a) Grant of Annual Director Options. As of each Annual Meeting
Date, each Non-Employee Board Director whose term begins on or
continues after that Annual Meeting Date shall be granted automatically
an Annual Director Option to purchase 1,000 Shares.
(b) Option Price. The option exercise price for each Annual
Director Option shall be equal to the Fair Market Value of a Share as
of the Annual Meeting Date.
(c) Terms of Annual Director Options. Each Annual Director
Option shall have the terms and conditions specified in the form of
Award Agreement attached to this Plan as Appendix A.
ARTICLE 15
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC.
15.1 Plan Does Not Restrict Corporation. The existence of the Plan and
the Awards granted under the Plan shall not affect or restrict in any way the
right or power of the Board or
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the shareholders of Corporation to make or authorize any adjustment,
recapitalization, reorganization, or other change in Corporation's capital
structure or its business, any merger or consolidation of the Corporation, any
issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting Corporation's capital stock or the rights thereof, the dissolution or
liquidation of Corporation or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding.
15.2 Adjustments by the Committee. In the event of any change in
capitalization affecting the Common Stock of Corporation, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, or any other
change affecting the Common Stock, such proportionate adjustments, if any, as
the Committee, in its sole discretion, may deem appropriate to reflect such
change, shall be made with respect to the aggregate number of Shares for which
Awards in respect thereof may be granted under the Plan, the maximum number of
Shares which may be sold or awarded to any Participant, the number of Shares
covered by each outstanding Award, and the base price or purchase price per
Share in respect of outstanding Awards. The Committee may also make such
adjustments in the number of Shares covered by, and price or other value of any
outstanding Awards in the event of a spin-off or other distribution (other than
normal cash dividends), of Corporation assets to shareholders.
ARTICLE 16
AMENDMENT AND TERMINATION
Without further approval of Corporation's shareholders, the Board may
at any time terminate the Plan, or may amend it from time to time in such
respects as the Board may deem advisable, except that the Board may not, without
approval of the shareholders, make any amendment which would (i) materially
increase the benefits accruing to Participants under the Plan, (ii) materially
increase the aggregate number of shares of Common Stock which may be issued
under the Plan (except for adjustments pursuant to Article 15 of the Plan), or
(iii) materially modify the requirements as to eligibility for participation in
the Plan. Without further shareholder approval, the Board may amend the Plan to
take into account changes in applicable securities, federal income tax laws, and
other applicable laws. Further, should the provisions of Rule 16b-3, or any
successor rule, under the Exchange Act be amended, the Board, without further
shareholder approval, may amend the Plan as necessary to comply with any
modifications to such rule. The provisions of Article 14 may not be amended more
than once every six months, other than to conform with changes in the Code or in
Rule 16b-3 under the Exchange Act.
ARTICLE 17
MISCELLANEOUS
17.1 Tax Withholding. Corporation shall have the right to deduct from
any settlement of any Award under the Plan, including the delivery or vesting of
Shares, any federal, state, or local taxes of any kind required by law to be
withheld with respect to such payments or to take such other action as may be
necessary in the opinion of Corporation to satisfy all obligations for the
payment of such taxes. The recipient of any payment or distribution under the
Plan shall make arrangements satisfactory to Corporation for the satisfaction of
any such withholding tax
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obligations. Corporation shall not be required to make
any such payment or distribution under the Plan until such obligations are
satisfied.
17.2 Unfunded Plan. The Plan shall be unfunded and Corporation shall
not be required to segregate any assets that may at any time be represented by
Awards under the Plan. Any liability of Corporation to any person with respect
to any Award under the Plan shall be based solely upon any contractual
obligations that may be effected pursuant to the Plan. No such obligation of
Corporation shall be deemed to be secured by any pledge of, or other encumbrance
on, any property of Corporation.
17.3 Payments to Trust. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.
17.4 Annulment of Awards. Any Award Agreement may provide that the
grant of an Award payable in cash is revocable until cash is paid in settlement
thereof or that grant of an Award payable in Shares is revocable until the
Participant becomes entitled to the certificate in settlement thereof. In the
event the employment (or service as a Non-Employee Subsidiary Director or a
Consultant) of a Participant is terminated for cause (as defined below), any
Award which is revocable shall be annulled as of the date of such termination
for cause. For the purpose of this Section 17.4, the term "for cause" shall have
the meaning set forth in the Participant's employment agreement, if any, or
otherwise means any discharge (or removal) for material or flagrant violation of
the policies and procedures of Corporation or for other job performance or
conduct which is materially detrimental to the best interests of Corporation, as
determined by the Committee.
17.5 Engaging in Competition With the Corporation. Any Award Agreement
may provide that, if a Participant terminates employment (or service as a
Non-Employee Subsidiary Director or a Consultant) with Corporation or a
Subsidiary for any reason whatsoever, and within a period of time (as specified
in the Award Agreement) after the date thereof accepts employment with any
competitor of (or otherwise engages in competition with) Corporation, the
Committee, in its sole discretion, may require such Participant to return to
Corporation the economic value of any Award that is realized or obtained
(measured at the date of exercise, Vesting, or payment) by such Participant at
any time during the period beginning on the date that is six months prior to the
date of such Participant's termination of employment (or service as a
Non-Employee Subsidiary Director or a Consultant) with Corporation.
17.6 Other Corporation Benefit and Compensation Programs. Payments and
other benefits received by a Participant under an Award made pursuant to the
Plan shall not be deemed a part of a Participant's regular, recurring
compensation for purposes of the termination indemnity or severance pay law of
any state or country and shall not be included in, nor have any effect on, the
determination of benefits under any other employee benefit plan or similar
arrangement provided by Corporation or a Subsidiary unless expressly so provided
by such other plan or arrangements, or except where the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of cash compensation. Awards under the Plan may
be made in combination with or in tandem with, or as alternatives to, grants,
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awards, or payments under any other Corporation or Subsidiary plans,
arrangements, or programs. The Plan notwithstanding, Corporation or any
Subsidiary may adopt such other compensation programs and additional
compensation arrangements as it deems necessary to attract, retain, and reward
employees and directors for their service with Corporation and its Subsidiaries.
17.7 Securities Law Restrictions. No Shares shall be issued under the
Plan unless counsel for Corporation shall be satisfied that such issuance will
be in compliance with applicable federal and state securities laws. Certificates
for Shares delivered under the Plan may be subject to such stop-transfer orders
and other restrictions as the Committee may deem advisable under the rules,
regulations, and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed, and any
applicable federal or state securities law. The Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to such
restrictions.
17.8 Governing Law. Except with respect to references to the Code or
federal securities laws, the Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the state of Maryland.
ARTICLE 18
SHAREHOLDER APPROVAL
The adoption of the Plan and the grant of Awards under the Plan are
expressly subject to the approval of the Plan by Corporation's shareholders
holding a majority of Corporation's outstanding Shares.
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