Exhibit 10.18
Incentive Stock Option Plan
(Amended as of May 1995)
Xxxxxx Products Ltd.
Contents
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Page
Section 1. Definitions
Section 2. Purposes
Section 3. Shares Reserved for the Plan
Section 4. Administration of the Plan
Section 5. Eligibility
Section 6. Option Agreements
Section 7. Option Price
Section 8. Terms of Options
Section 9. Termination of Options
Section 10. Annual Limitation
Section 11. Exercise of Options
Section 12. Payment
Section 13. Nontransferability
Section 14. Purchase for Investment: Compliance with Securities Laws
Section 15. Adjustment of Shares
Section 16. Registration or Qualification of Shares
Section 17. Withholding Tax
Section 18. Suspension, Amendment, or Termination of Plan
Section 19. Effective Date and Duration of Plan
Section 20. Nonqualified Options
Section 21. Successors
Section 22. Governing Law
Incentive Stock Option Plan
(Amended as of May 1995)
Xxxxxx Products Ltd.
Section 1. Definitions
As used herein, the following words and phrases shall have the following
meanings:
(a) Board: The Board of Directors of the Company.
(b) Change of Control shall mean the occurrence of any one or more of the
following:
(i) Any transaction or series of transactions which, within a twelve
(12) month period, constitute a change of management or control,
which shall be deemed to have occurred whenever;
(1) At least thirty-five percent (35%) of the then outstanding
shares of Common Stock of the Company are (for cash,
property (including, without limitation, stock in any
corporation), or indebtedness, or any combination thereof
redeemed by the Company or purchased by any person(s),
firm(s) or entity(ies), or exchanged for shares in any
other corporation whether or not affiliated with the
Company, or any combination of such redemption, purchase or
exchange, or
(2) At least fifty-one percent (51%) of the Company's assets
are acquired by any person(s), firm(s) or entity(ies)
whether or not affiliated with the Company for cash,
property (including without limitation, stock in any
corporation) or indebtedness or any combination thereof, or
(3) During any period of two (2) consecutive years (not
including any period prior to the effective date of this
Plan, individuals who at the beginning of such period
constitute the Board (and any new Director, whose election
by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the Directors then still in
office who either were Directors at the beginning of the
period or whose election or nomination for election was so
approved), cease for any reason to constitute a majority
thereof, or
(4) The Company is merged or consolidated with another
corporation regardless of whether the Company is the
survivor.
(ii) Any substantial equivalent of any such redemption,, purchase,
exchange, transaction or series of transactions, acquisition,
merger or consolidation, which the Board of Directors reasonably
determines constitutes such a change of management or control.
For purposes of the foregoing definition the term "control" shall have
the meaning ascribed thereto under the Securities Exchange Act of
1934, as amended, and the regulations thereunder, the term
"management" shall mean both the Chief Executive Officer and the Chief
Operating Officer of the Company, and the "effective date of this
Plan" shall be deemed to be the date shareholders approve this Plan at
the 1995 annual shareholders meeting.
(c) Code: The Internal Revenue Code of 1986, as amended.
(d) Committee: The Xxxxxx Products Ltd. Compensation Committee, which
shall be appointed by the Chairman of the Board of the Company and
shall be composed of not fewer than two (2) Directors who meet the
"disinterested administration" rules of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.
(e) Common Stock: The Common Stock of the Company.
(f) Company means Xxxxxx Products Ltd., a Delaware corporation (including
any and all subsidiaries), or any successor thereto.
(g) Employee: Any employee of the Company.
(h) Incentive Stock Option: A stock option meeting the requirements of
Section 422 of the Code.
(i) Option: The right and privilege granted pursuant to this Plan to
acquire Common Stock pursuant to the terms of an Option Agreement.
(j) Option Agreement: The agreement by which the Company grants an Option
to an Employee and which identifies the specific terms and conditions
of that Option.
(k) Optionee: An Employee holding an Option.
(l) Plan: The Xxxxxx Products Ltd. Incentive Stock Option Plan, as herein
set forth.
Section 2. Purposes
The purposes of the Plan are:
(a) To encourage the sense of proprietorship on the part of the Employees
who will be largely responsible for the continued growth of the Company;
(b) To furnish the Employees with further incentive to develop and promote
the business and financial success of the Company;
(c) To induce the Employees to continue in the service of the Company, by
providing a means by which such Employees may be given an opportunity to
purchase Common Stock;
(d) To give the Employees an opportunity to share in the growth of the
Company; and
(e) To obtain for the Employees, in the case of Incentive Stock Options
granted hereunder, the favorable tax treatment accorded Incentive
Stock Options.
Section 3. Shares Reserved for the Plan
Subject to adjustment as provided in Section 15 herein, there is hereby
reserved for issuance to Employees under the Plan an additional one hundred
fifty thousand (150,000) shares of Common Stock (in addition to the seven
hundred fifty thousand (750,000) shares originally authorized in 1985, one
hundred three thousand two hundred (103,200) of which have been exercised since
1985). Such shares available for grants of Options shall be increased by the
number of shares available under this Section 3 which are covered by Options
which have lapsed, expired, terminated, or been canceled. In addition, any
shares originally reserved for issuance under this Plan in 1985 (including the
1990 amendment to the Plan) (the 'Original Authorized Shares") in excess of the
number of shares granted under Option hereunder prior to the effective date of
this Plan (i.e., the date of the 1995 annual shareholders meeting) plus any such
shares in connection with Options granted under the Original Authorized Shares
which lapse, expire, terminate, or are canceled, shall also be reserved and
available for issuance or reissuance under this Section 3. Any outstanding
Options covering Original Authorized Shares shall continue to remain outstanding
in accordance with the terms hereof. If any Option granted under this Plan is
canceled, terminates, expires, or lapses for any reason, any shares subject to
such Option again shall be available for the grant of an Option Award under the
Plan.
Section 4. Administration of the Plan
(a) The Plan shall be administered by the Committee. In administering the
Plan, the Committee will be subject to the provisions of the By-Laws of the
Company generally applicable to the operation of committees of the Board.
(b) Subject to the express provisions of the Plan, the Committee shall
have full power and authority, in its discretion, to determine initially and
from time to time those Employees to whom Options are to be granted and, subject
to the limitations imposed by Section 18 hereof, the times when such Options
shall be granted, the terms and conditions of each Option (including whether
such Option shall be an Incentive Stock Option or a nonqualified stock option),
and the number and purchase price of shares to be covered by each Option.
(c) Subject to the express provisions of the Plan, the Committee shall
also have the power and authority to construe and interpret the Plan and the
Option Agreements entered into thereunder and to make all other determinations
necessary or advisable for administering the Plan. The determination of the
Committee on all matters referred to in this section shall be final and
conclusive.
Section 5. Eligibility
Options may be granted to any Employee who is selected in accordance with
the provisions of this Plan by the Committee; provided, however, that no Option
may be granted to an Employee if the sum of the number of shares of Common Stock
subject to the Option plus the number of shares owned, directly or indirectly,
within the meaning of Section 318(a) of the Code, by the Employee as of the date
the Option is granted exceeds three percent (3%) of the issued and outstanding
Common Stock as of said date.
Section 6. Option Agreements
As a condition to the granting of an Option pursuant to this Plan, the
Committee will require each Optionee to execute a written Option Agreement. The
Option Agreement shall specify terms and conditions not inconsistent with this
Plan under which the Option is granted.
Section 7. Option Price
The per share purchase price of the Common Stock under each Option shall be
stated in the Option Agreement and, in all cases, shall be at least equal to the
fair market value of one (1) share of Common Stock on the date of grant of such
Option, as determined by the Committee.
Section 8. Terms of Options
Notwithstanding any other provision of this Plan, no Incentive Stock Option
granted hereunder shall be exercisable more than ten (10) years from the date of
grant of such Option, and no other Option granted hereunder shall be exercisable
more than ten (10) years and one (1) day from the date of grant of the Option.
Section 9. Termination of Options
Each Optionee's Option Agreement shall set forth the extent to which the
Optionee shall have the right to exercise the Option following termination of
the Optionee's employment with the Company and its subsidiaries. Such
provisions shall be determined in the sole discretion of the Committee, shall be
included in the Option Agreement entered into with Optionees, need not be
uniform among all Options issued pursuant to the Plan, and may reflect
distinctions based on the reasons for termination of employment.
Section 10. Annual Limitation
Notwithstanding any other provision of this Plan, the aggregate fair market
value (determined as of the time the Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Employee in any one (1) calendar year (under all incentive stock option
plans of the Company and its parent and any subsidiaries, including this Plan)
shall not exceed one hundred thousand dollars ($100,000). Subject to the
preceding sentence, the Committee shall have discretion in determining the
number of shares of Common Stock subject to Options granted to each Optionee;
provided, however, that the maximum number of shares subject to Options which
may be granted under this Plan to any single Employee during any calendar year
is seventy-five thousand (75,000).
Section 11. Exercise of Options
(a) Subject to the terms and conditions of the Plan and of the Option
Agreements entered into hereunder, Options may be exercised only by:
(i) Delivery of notice of exercise to the Company at its principal
office, attention of the Secretary, together with
(ii) Payment for the shares of Common Stock being so acquired.
(b) Except as otherwise provided in Section 9 hereof, each Option granted
hereunder shall be exercisable during the term thereof in accordance with such
terms and conditions as the Committee shall, in its sole discretion, impose;
provided, however, that no such term or condition shall be inconsistent with any
express provision of the Plan.
(c) On the exercise of and payment for an Option, a certificate or
certificates evidencing the shares of Common Stock as to which the Option is
exercised shall be delivered to the Optionee.
(d) An Option may be exercised during the Optionee's lifetime only by the
Optionee. In the event of the death of an Optionee, the Option or Options
theretofore granted to him may be exercised by the estate of the Optionee or by
a person who is the Optionee's spouse or surviving child and who acquired the
rights under the Option or Options by bequest or inheritance; provided, however,
that such exercise may be made only to the extent of the Optionee's right to
exercise the Option or Options at the time of his death.
(e) Notwithstanding the provisions of Section 11(b) hereof, in the event
of a Change of Control during the term of one (1) or more Options, each such
Option granted on or after February 14, 1990 and outstanding as of the effective
time of such Change of Control shall, effective as of the effective time of such
Change of Control, become exercisable with respect to all unexercised shares
thereunder for the remainder of its term; provided, however, in the event the
Optionee's employment with the Company (or any successor company) is terminated
after a Change of Control, such Option granted on or after February 14, 1990
shall remain exercisable for a period equal to the lesser of (i) seven (7)
calendar months after such termination of employment; or (ii) the remainder of
its term. Upon exercise of any Option subsequent to a Change of Control, the
Optionee shall be entitled to receive the securities or other such consideration
he would have been entitled to receive had he been entitled to exercise, and had
he exercised, such Option immediately prior to such Change of Control.
(f) Notwithstanding the provisions of Section I 1 (b) hereof, each Option
granted on or after February 14, 1990 and outstanding for at least one hundred
eighty (180) days during any fiscal year of the Company, commencing with the
fiscal year ended December 31, 1990, shall immediately become exercisable in
full by the holder thereof upon a determination that the Company has met one
hundred percent (100%) of budgeted Income Before Income Taxes for such fiscal
year. Such budgeted Income Before Income Taxes shall be as set annually by the
Board in connection with the adoption of the Company's budget for each fiscal
year, and the determination that the Company has met one hundred percent (100%)
of such budgeted Income Before Income Taxes shall be based upon the Company's
audited financial statements for such fiscal year, with the date of such
determination being the date of certification of such financial statements by
the independent accountants for the Company.
Section 12. Payment
Payment of the purchase price for shares purchased under Options must be
made in full by certified or bank cashier's check, or such other method as is
authorized by the Committee, including but not limited to, the tender of
previously held shares and broker-assisted "cashless" exercises.
Section 13. Nontransferability
An Option may not be transferred except by will or the laws of descent and
distribution. The exercise of any Option so transferred shall be subject to the
terms of this Plan.
Section 14. Purchase for Investment: Compliance with Securities Laws
Each Optionee and each other person who shall exercise an Option shall
acknowledge, represent, and agree, as the case may be, that:
(a) The Company shall not be obligated to transfer Common Stock pursuant
to the exercise of an Option unless the exercise of such Option and the
transfer of such Common Stock shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and applicable state securities laws;
(b) The Company shall be entitled to rely upon an opinion of counsel
selected by the Company as to whether any such transfer would be lawful;
(c) All Common Stock purchased pursuant to an Option is being purchased
for investment and not with a view to the distribution or resale thereof;
and
(d) Common Stock purchased pursuant to an Option will not be sold,
assigned, or transferred except in compliance with applicable federal and
state securities laws.
Section 15. Adjustment of Shares
In the event of any change in corporate capitalization, such as a stock
split, or a corporate transaction, such as any merger, consolidation,
separation, including a spin-off, or other distribution of stock or property of
the Company, any reorganization (whether or not such reorganization comes within
the definition of such term in Internal Revenue Code Section 368) or any partial
or complete liquidation of the Company, such adjustment shall be made in the
number and class of shares of Common Stock which may be delivered under the
Plan, and in the number and class of and/or price of shares of Common Stock
subject to outstanding Options granted under the Plan, as may be determined to
be appropriate and equitable by the Committee, in its sole discretion, to
prevent dilution or enlargement of rights; provided, however, that the number of
shares subject to any Option shall always be a whole number.
Section 16. Registration or Qualification of Shares
Notwithstanding anything herein to the contrary, no Option granted
hereunder may be exercised, and no shares shall be issued with respect to an
Option, unless at the time of exercise either (A) (i) a registration statement
has been filed with the Securities and Exchange Commission which has become
effective with respect to the shares subject to the Option; (ii) appropriate
registration or qualification has been effected under applicable state
securities laws; (iii) the exercise of such Option and the issuance and delivery
of such shares pursuant thereto shall comply with all applicable provisions of
law and the requirements of any stock exchange upon which the shares may then be
listed; or (B) the Committee shall have determined, based upon the advice of
counsel, that an exemption from registration shall be available with respect to
the issuance of shares subject to an Option, and the issuance and delivery of
such shares pursuant thereto shall comply with all applicable provisions of law.
Any such exercise of an Option and the issuance of shares with respect thereto
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
Section 17. Withholding Tax
The Company may make such provisions as it may deem appropriate for the
withholding of any taxes which the Company determines it is required to withhold
in connection with the grant or exercise of any Option or the disposition of any
Common Stock acquired pursuant to the exercise of an Option, and may authorize
Optionees to satisfy such withholding obligations by having the Company withhold
the number of shares of Common Stock under Option necessary to satisfy all or
part of the withholding liability.
Section 18. Suspension, Amendment, or Termination of Plan
The Board shall have the right, at any time, to suspend, amend, or
terminate the Plan; provided, however, that unless duly approved by the holders
of a majority of the Common Stock of the Company, no amendment shall increase
the total number of shares that shall be subject to the Plan; and, provided
further, that no termination of the Plan or action by the Board amending or
suspending the Plan shall affect or impair the rights of an Optionee under any
Option previously granted and still outstanding under the Plan, except as
otherwise provided herein. No Option may be granted under the Plan during any
suspension thereof or after the termination thereof.
Section 19. Effective Date and Duration of Plan
This Plan originally became operative and effective on its adoption by the
holders of a majority of the outstanding shares of Common Stock of the Company
at the 1985 annual shareholders meeting. The Plan was originally scheduled to
terminate on the tenth (10th) anniversary of its effective date. As amended
herein, the Plan's duration shall be extended for ten years after the date of
adoption of this amended Plan by the Company's shareholders at the 1995 annual
shareholders meeting. The termination of this Plan shall not affect or impair
the rights of an Optionee under any Option previously granted and still
outstanding under the Plan, except as otherwise provided herein.
Section 20. Nonqualified Options
Options issued under the Plan may be Incentive Stock Options or
nonqualified stock Options. Any other provision of the Plan to the contrary
notwithstanding, nonqualified stock options granted hereunder shall be subject
to such terms and conditions and be exercisable at such price as the Committee,
in its sole discretion, determines to be appropriate; provided, however, that
each such nonqualified Option shall clearly be identified as such. No
subsequent determination that an Option granted hereunder which is intended to
be an Incentive Stock Option fails to qualify as such shall affect the validity
or enforceability of such Option, which shall be considered a validly issued
nonqualified Option. To the extent any Option granted hereunder as an Incentive
Stock Option exceeds the limit set forth in the first sentence of Section 10
hereof, such Option shall be bifurcated, and as to the number of shares, the
aggregate price of which would not exceed such limit, the Option shall be
considered an Incentive Stock Option, and as to the excess, such Option shall be
considered a nonqualified Option.
Section 21. Successors
All obligations of the Company under the Plan with respect to Options
granted hereunder shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
Section 22. Governing Law
To the extent not preempted by Federal law, the Plan, and all agreements
hereunder, shall be construed in accordance with and governed by the laws of the
State of Delaware.
CERTAIN TRANSACTIONS
See "Compensation Committee Interlocks and Insider Participation" for a
discussion of Certain Transactions.
2. PROPOSAL TO AMEND AND RESTATE THE XXXXXX PRODUCTS LTD.
1990 INCENTIVE STOCK OPTION PLAN
In June 1985, the Company's Board of Directors and stockholders approved
the Incentive Stock Option Plan (referred to in this section of the proxy as the
"Plan") which was amended in 1990. Pursuant to the Plan, incentive stock
options which meet the requirements of Section 422 of the Code and nonqualified
stock options may be granted. The total number of shares of Common Stock which
were originally authorized for grant under options under the Plan was 750,000
(103,200 of which have been exercised since 1985). The 1985 Stock Option Plan
will expire in June, 1995 and will be replaced with a new Stock Option Plan
("the Stock Option Plan"). This amendment to the Plan seeks shareholder
approval of an additional authorization to grant one hundred fifty thousand (
150,000) shares of Common Stock under options. Any unused shares under the
original authorization of seven hundred fifty thousand (750,000) shares shall
also remain available for grant under the Plan. In addition, any shares under
options which expire, terminate, lapse, or are forfeited (whether pursuant to
options granted under the original share authorization or this 1995 additional
share authorization) shall once again be available for grant under the Plan.
All salaried employees of the Company (currently approximately 500
individuals) are eligible to receive grants of options under the Plan, including
all named executive officers appearing within this proxy statement. Members of
the Board of Directors who are not employees are not eligible to participate in
the Plan. As of the date of this proxy statement, neither the individuals who
are to receive options, nor the number of shares under option that will be
granted to any individual or group of individuals have been determined.
Full payment for shares purchased upon exercise of an option, along with
payment of any required tax withholding, must be made at the time of exercise.
This amendment to the Plan allows the Compensation Committee to authorize the
surrender of previously held shares and the use of a broker-assisted.
"cashless" exercises, to satisfy the exercise price.
This amendment to the Plan clarifies that the Plan will be administered by
a committee of members of the Board of Directors, all of whom are "disinterested
administrators" as defined under Rule 16b of the Securities Exchange Act of
1934. The Plan shall be administered by the Compensation Committee (the
"Committee"). The Committee has sole discretion to determine, subject to the
express provisions of the Plan, the employees to whom options are granted, the
terms and conditions of such options. whether the options will be incentive
stock options or nonqualified stock options, the time or times at which options
are granted, the option price of the options (which, pursuant to this amendment,
must at least equal the fair market value of Company stock on the date the
option is granted), when such options are exercisable (provided that the maximum
life of an option is ten years and one day), and the number of shares covered by
such options.
No option may be granted to an employee if the sum of the number of shares
of Common Stock subject to the option, plus the number of shares owned directly
or indirectly by the employee as of the date the option is granted exceeds 3% of
the issued and outstanding Common Stock as of such date.
The Plan provides that each option granted on or after February 14, 1990
and outstanding as of the time of a Change of Control shall, effective as of the
effective date of such Change of Control, become exercisable in full for the
remainder of its term; provided, however, in the event the optionee's employment
with the Company (or any successor company) is terminated after a Change of
Control, such option granted on or after February 14, 1990 shall remain
exercisable for a period equal to the lesser of (i) seven (7) calendar months
after such termination of employment or (ii) the remainder of its term. Upon
exercise of any option subsequent to a Change of Control, the optionee shall be
entitled to receive the securities or other consideration he would have been
entitled to receive had he been entitled to exercise, and had he exercised, such
option immediately prior to such Change of Control.
This amendment revises the definition of events which will be deemed to
constitute a Change in Control. Under the amended definition, a Change in
Control will be deemed to exist if: (i) at least 35% of the shares of Common
Stock are acquired by one individual or entity, or are redeemed by the Company,
(ii) at least 51 % of the Company's assets are purchased by one individual or
entity; (iii) a majority of the members of the Board of Directors are replaced;
(iv) the Company is merged or consolidated with another company; or (v) any
substantially equivalent event which is deemed by the Board of Directors to
constitute a change in management or control occurs.
The Plan provides that each option granted on or after February 14, 1990
and outstanding for at least 180 days during any fiscal year of the Company
shall also become exercisable in full by the holder thereof upon a determination
that the Company has met 100% of budgeted Income Before Income Taxes for such
fiscal year. Such budgeted Income Before Income Taxes shall be as set annually
by the Board of Directors in connection with the adoption of the Company's
annual budget.
This amendment to the Plan provides that the per share purchase price of
the Common Stock under each stock option must be at least equal to the fair
market value of Company stock on the date of grant. With respect to incentive
stock options, the aggregate fair market value (determined as of the date the
option is granted) of the Common Stock with respect to which such options are
exercisable for the first time by any one employee in any one calendar year may
not exceed $100,000. This amendment to the Plan preserves the ability to
qualify for full tax deductibility in connection with option exercises (under
Internal Revenue Code Section 162(m)) by adding the restriction that the total
number of shares which may be granted to any one optionee in any calendar year
is seventy-five thousand.
This amendment provides that the Committee shall determine, with respect to
each grant of options, how the options may be exercised following employment
termination. This amendment also extends the term of the Plan until May 16,
2005, clarifies that successors to the business of the Company shall remain
subject to liabilities under the Plan, and makes several other minor revisions
necessary to satisfy various technical requirements.
The shares of Common stock available for purchase under the Plan are the
Company's Common Stock, par value $0.10, and on March 1, 1995, the closing price
of Common Stock was $6.13.
Federal Income Tax Consequences
The following is a general description of Federal income tax consequences
to participants and the Company relating to nonqualified and incentive stock
options that may be granted under the Plan. This discussion does not purport to
cover all tax consequences relating to stock options.
An optionee will not recognize income upon the grant of a nonqualified
stock option to purchase shares of Common Stock. Upon exercise of the option,
the optionee will recognize ordinary compensation income equal to the excess of
the fair market value of the Company's Common Stock on the date the option is
exercised over the option price for such stock. The tax basis of the option
stock in the hand of the optionee will equal the option price for the stock plus
the amount of ordinary compensation income the optionee recognizes upon exercise
of the option, and the holding period for the stock will commence on the day the
option is exercised. An optionee who sells option stock will recognize capital
gain or loss measured by the difference between the tax basis of the stock and
the amount realized on the sale. Such gain or loss will be long term if the
stock is held for more than one year after exercise. The Company will be
entitled to a deduction equal to the amount of ordinary compensation income
recognized by the optionee. The deduction will be allowed at the same time the
optionee recognizes the income.
An optionee will not recognize income upon the grant of an incentive stock
option to purchase shares of the Company Common Stock, and will not recognize
income upon exercise of the option, provided such optionee was an employee of
the Company or a subsidiary at all times from the date of grant until three
months prior to exercise (or one year prior to exercise in the event of death or
disability). Generally, the amount by which the fair market value of the
Company's Common Stock on the date of exercise exceeds the option price will be
includable in alternative minimum taxable income for purposes of determining
alternative minimum tax and such amount will be added to the tax basis of such
stock for purposes of determining alternative minimum taxable income in the year
the stock is sold. Where an optionee who has exercised an incentive stock
option sells the shares acquired upon exercise more than two years after the
grant date and more than one year after exercise, long-term capital gain or loss
will be recognized equal to the difference between the sales price and the
option price. An optionee who sells such shares within two years after the
grant date or within one year after exercise will recognize ordinary
compensation income in an amount equal to the lesser of the difference between
(a) the option price and the fair market value of such shares on the date of
exercise or (b) the option price and the sales proceeds. Any remaining gain or
loss will be treated as a capital gain or loss. The Company or a subsidiary
will be entitled to a deduction equal to the amount of ordinary compensation
income recognized by the optionee in this case. The deduction will be allowable
at the same time the optionee recognizes the income.
If, as a result of a Change in Control event, a participant's options
become immediately exercisable, the additional economic value, if any,
attributable to the acceleration or issuance may be deemed a "parachute payment"
under Section 28OG of the Code. In such case, the participant may be subject to
a 20% nondeductible excise tax as to all or a portion of such economic value, in
addition to any income tax payable. The Company will not be entitled to a
deduction for that portion of any parachute payment that is subject to the
excise tax.
Notwithstanding any of the foregoing discussion with respect to the
deductibility of compensation under the Plan, Section 162(m) would render
nondeductible to the Company certain compensation in excess of $1,000,000 in any
year to certain executive officers of the Company, unless such excess
compensation is "performance based" (as defined) or is otherwise exempt from
Section 162(m). The applicable conditions of an exemption for a
performance-based compensation plan include, among others, a requirement that
the stockholders approve the material terms of the plan, and a requirement that
shareholders approve a maximum number of shares which may be granted to any one
optionee within a given period of time (this requirement is satisfied pursuant
to one of the amendments to the Plan, described above). Stock options that may
be granted under the Plan are intended to qualify for the exception for
performance-based compensation under Section 162(m).
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
AMENDMENT AND RESTATEMENT OF THE XXXXXX PRODUCTS LTD. 1990 INCENTIVE STOCK
OPTION PLAN AS DESCRIBED IN THIS PROXY STATEMENT.
3. INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to examine the financial statements of the Company for the fiscal
year ending December 31, 1995. In accordance with a resolution of the Board of
Directors, this selection is being presented to the stockholders for
ratification at the Meeting.
A representative of Price Waterhouse LLP will attend the Meeting and will
be available to respond to appropriate questions; however, no statement shall be
made by such representative on behalf of the Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR"
RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1995.
ANNUAL REPORT AND FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 as filed with the Securities and Exchange Commission will be
furnished without charge (except for exhibits) to orders upon written request
sent to Investor Relations, Xxxxxx Products Ltd, 000 XxXxxx Xxxxxx,
Xxxxxxxxxxxx, Xxxxxxxx 00000.
