SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
File by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the Com-
|X| Definitive Proxy Statement mission Only (as permitted by Rule
|_| Definitive Additional Materials 14a-6(e)(2))
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SMITH-MIDLAND CORPORATION
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i) (1)
and 0-11.
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
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Exchange Act Rule 0-11 (a) (2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the form
or schedule and the date of its filing.
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SMITH-MIDLAND CORPORATION
Route 28
Midland, Virginia 22728
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on July 22, 2002
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
SMITH-MIDLAND CORPORATION (the "Company"), a Delaware corporation, will be held
on Monday, July 22, 2002 at 7:00pm at the Company's Corporate Headquarters,
located at 5119 Catlett Road, Midland, Virginia 22728 for the following
purposes:
1. To elect four (4) members of the Board of Directors;
2. To ratify a proposed amendment to the Smith-Midland Corporation
1994 Stock Option Plan to increase the number of shares
authorized to be issued by 450,000;
3. To ratify and approve the engagement of BDO Seidman, LLP as
independent auditors for the Company for the year ending
December 31, 2002; and
4. To consider and act upon any matters incidental to the foregoing
and any other matters that may properly come before the meeting
or any and all adjournments thereof.
The Board of Directors has fixed the close of business on June 18, 2002
as the record date for the determination of Stockholders entitled to notice of
and to vote at the Annual Meeting and any adjournment or adjournments thereof.
We hope that all Stockholders will be able to attend the Annual Meeting
in person. In order to assure that a quorum is present at the Annual Meeting,
please date, sign and promptly return the enclosed proxy whether or not you
expect to attend the Annual Meeting. A postage-prepaid envelope has been
enclosed for your convenience. If you attend the Annual Meeting, your proxy
will, at your request, be returned to you and you may vote your shares in
person.
By Order of the Board of Directors
/s/ Rodney I. Smith
Rodney I. Smith
President
Midland, Virginia
June 18, 2002
SMITH-MIDLAND CORPORATION
Route 28
Midland, Virginia 22728
PROXY STATEMENT
For the Annual Meeting of Stockholders
To be held on July 22, 2002
The enclosed proxy is solicited by the Board of Directors of
SMITH-MIDLAND CORPORATION (the "Company") for use at the Annual Meeting of
Stockholders to be held on Tuesday, July 22, 2002 at 7:00 PM at the Company's
Corporate Headquarters, located at 5119 Catlett Road, Midland, Virginia 22728
and at any adjournment or adjournments thereof.
Stockholders of record at the close of business on June 18, 2002 will
be entitled to vote at the Annual Meeting or any adjournment thereof. On or
about that date, 3,638,031 shares of the Company's Common Stock, $.01 par value
per share (the "Common Stock"), were issued and outstanding. The Company has no
other outstanding voting securities.
Each share of Common Stock entitles the holder to one vote with respect
to all matters submitted to Stockholders at the Annual Meeting. A quorum for the
Annual Meeting is a majority of the shares outstanding. Directors will be
elected by plurality vote. Other proposals to be voted upon by the Stockholders
of the Company require the votes of a majority of shares of Common Stock present
at the Annual Meeting for passage. Abstentions and broker non-votes (the latter
of which result when a broker holding shares for a beneficial holder in "street
name" has not received timely voting instructions on certain matters from such
beneficial holder and the broker does not have discretionary voting power on
such matters) are counted for purposes of determining the presence or absence of
a quorum at the Annual Meeting. Abstentions are counted in tabulations of the
votes cast on proposals presented to Stockholders, whereas broker non-votes are
not counted for purposes of determining whether stockholder approval for a
proposal has been obtained.
An Annual Report, containing the Company's audited financial statements
for the years ended December 31, 2001 and December 31, 2000, is being mailed to
all stockholders entitled to vote. This Proxy Statement and the accompanying
proxy were first mailed to Stockholders on or about June 21, 2002.
Execution of a proxy will not in any way affect a Stockholder's right
to attend the Annual Meeting and vote in person. The proxy may be revoked at any
time before it is exercised by written notice to the Secretary prior to the
Annual Meeting, or by giving to the Secretary a duly executed proxy bearing a
later date than the proxy being revoked at any time before such proxy is voted,
or by appearing at the Annual Meeting and voting in person. The shares
represented by all properly executed proxies received in time for the Annual
Meeting will be voted as specified therein. In the absence of a special choice,
shares will be voted in favor of the election of Directors of those persons
named in this Proxy Statement and in favor of all other items set forth herein.
1
The Board of Directors knows of no other matter to be presented at the
Annual Meeting. If any other matter should be presented at the Annual Meeting
upon which a vote may be taken, such shares represented by all proxies received
by the Board of Directors will be voted with respect thereto in accordance with
the judgment of the persons named as attorneys in the proxies. The Board of
Directors knows of no matter to be acted upon at the Annual Meeting that would
give rise to appraisal rights for dissenting stockholders.
Proposal #1
ELECTION OF DIRECTORS
Four Directors, constituting the entire Board of Directors, are to be
elected at the Annual Meeting. Each Director of the Company is elected at the
Company's Annual Meeting of Stockholders and serves until his successor is duly
elected by the stockholders. Vacancies and newly created directorships resulting
from any increase in the number of authorized Directors may be filled by a
majority vote of Directors then remaining in office. Officers are elected by and
serve at the direction of the Board of Directors.
Shares represented by all proxies received by the Board of Directors
and not so marked as to withhold authority to vote for an individual Director,
or for all Directors, will be voted (unless one or more nominees are unable or
unwilling to serve) for the election of the nominees named below. The Board of
Directors knows of no reason why any such nominee should be unwilling to serve,
but if such should be the case, proxies will be voted for the election of some
other person or for fixing the number of Directors at a lesser number.
The Board unanimously recommends that Stockholders vote FOR election of the four
nominees for Director.
The following table sets forth certain information concerning each nominee for
election as a Director of the Company:
Director
Name Age Officer Since Position
---- --- ------------- --------
Rodney I. Smith 63 1970 Chief Executive Officer, President
and Chairman of the Board of
Directors
Ashley B. Smith 40 1994 Vice President of Sales and
Marketing and Director
Wesley A. Taylor 54 1994 Vice President of Administration
and Director
Andrew Kavounis 77 1995 Director
2
Background
The following is a brief summary of the background of each Director and
nominee for Director of the Company:
Rodney I. Smith. Chairman of the Board of Directors, Chief Executive Officer and
President. Rodney I. Smith co-founded the Company in 1960 and became its
President and Chief Executive Officer in 1965. He has served on the Board of
Directors and has been its Chairman since 1970. Mr. Smith is the principal
developer and inventor of the Company's proprietary and patented products. Mr.
Smith is the past President of the National Precast Concrete Association. Mr.
Smith has served on the Board of Trustees of Bridgewater College in Bridgewater,
Virginia since 1986.
Ashley B. Smith. Vice President of Sales and Marketing and Director. Ashley B.
Smith has served as Vice President of Sales and Marketing of the Company since
1990 and as a Director since December 1994. Mr. Smith holds a Bachelor of
Science degree in Business Administration from Bridgewater College. Mr. Ashley
B. Smith is the son of Mr. Rodney I. Smith.
Wesley A. Taylor. Vice President of Administration and Director. Wesley A.
Taylor has served as Vice President of Administration of the Company since 1989
and as a Director since December 1994, and previously held positions as
Controller and Director of Personnel and Administration. Mr. Taylor holds a
Bachelor of Arts degree from Northwestern State University.
Andrew Kavounis. Director. Andrew Kavounis has served as a Director of the
Company since December 1995. Mr. Kavounis was President of Core Development Co.,
Inc., a privately held construction and development concern, from 1991 until he
retired in 1995. From 1989 to 1991, Mr. Kavounis was the Executive Vice
President of the Leadership Group, a Maryland based builder and developer. Prior
to that time, Mr. Kavounis spent 37 years as an executive at assorted
construction and development companies, which included a position as the
National Vice President of Ryland Homes, a privately held company, in which
capacity he was directly responsible for the construction of 17,000 homes
annually, nationwide. Mr. Kavounis received a Bachelor of Science degree in
Chemical Engineering from Presbyterian College, a Bachelor of Science degree in
Civil and Mechanical Engineering from Wofford College, and a Master's degree in
Business Administration from the University of South Carolina.
GENERAL INFORMATION RELATING TO THE BOARD OF DIRECTORS AND OFFICERS
Meetings and Committees of the Board of Directors
The Board of Directors has a Compensation Committee. The Compensation
Committee consists of Andrew Kavounis and Wesley A. Taylor. The Compensation
Committee was established to set and administer the policies that govern annual
compensation for the Company's executives. Following review and approval by the
Compensation Committee of the compensation policies, all issues pertaining to
executive compensation are submitted to the Board of Directors for approval. The
Compensation Committee negotiates and approves compensation arrangements for
officers, employees, consultants and directors of the Company, including, but
not limited to, the grant of options to purchase the Common Stock pursuant to
the Company's 1994 Stock Option Plan or other plans which may be established.
The Compensation Committee did not meet during 2001; rather, these matters were
addressed by the Board of Directors as a whole.
The Company does not have an audit committee, a standing nominating
committee or a committee performing similar functions.
The Board of Directors met formally (2) times during 2001 and met
informally on a number of occasions, voting on corporate actions by written
consent. All of the Company's current directors attended all of the meetings of
the Board of Directors either in person or by telephone.
3
With the exception of Rodney I. Smith and Ashley B. Smith, who are
father and son, respectively, no Director or executive officer of the Company is
related by blood, marriage, or adoption to any of the Company's other Directors
or executive officers.
Compensation of Directors
All non-employee Directors receive $500 per meeting as compensation for
their services as Directors and are reimbursed for expenses incurred in
connection with the performance of their duties. All employee Directors, except
Rodney I Smith, receive $250 per meeting as compensation for their services and
are reimbursed for expenses incurred in connection with the performance of their
duties. Rodney I. Smith receives no compensation as a Director, but is
reimbursed for expenses incurred in connection with the performance of his
duties as a Director.
Compensation of Executive Officers
The following table sets forth the compensation paid by the Company for
services rendered for the last three completed fiscal years to the executive
officers of the Company and its subsidiaries whose cash compensation exceeded
$100,000 during 2001, (the "named executive officers"):
-------------------------- --------------------------------------------- ---------------------------------------------
Annual Compensation Long Term Compensation
-------------------------- --------------------------------------------- ---------------------------------------------
Awards Payouts
-------------------------- --------------------------------------------- ---------------------- ----------------------
Securities
Other Under- All
Name and Annual Restricted lying Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus Sation Awards SARs Payouts Sation
$ $ $ $ (#) $ $
-------------------------- ---------- ----------- ---------- ----------- ----------- ---------- ----------- ----------
Rodney I. Smith 2001 175,000 189,081 - - 120,000 - -
President, Chief 2000 175,000 54,500 - - - - -
Executive Officer 1999 156,825 54,500 - - 20,000 - -
And Chairman of the
Board.
Guy M. Schuch 2001 111,250 - - - 30,000 -
Chief Operating Officer 2000 108,745 - - - - -
Smith-Midland Corp (VA) 1999 61,730 - - - 15,000 -
-------------------------- ---------- ----------- ---------- ----------- ----------- ---------- ----------- ----------
Option Grants in Last Fiscal Year
The following table summarizes option grants during 2001 to the named
executive officers:
4
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
---- ---------------- ---------------- ------------- -------------
Rodney I. Smith 20,000 5.9% 0.80 4/23/11
Rodney I. Smith 80,000 23.6% 0.81 5/04/11
Rodney I. Smith 20,000 5.9% 1.39 12/26/11
Guy M. Schuch 15,000 4.4% 0.80 4/23/11
Guy M. Schuch 15,000 4.4% 1.39 12/26/11
Aggregated Option Exercises in Last Fiscal Year and Year-End Option Values
Shares Number of
Acquired Shares Underlying Value of Unexercised
on Value Unexercised Options In-the-Money Options
Exercise Realized at Fiscal Year End (#) at Fiscal Year-End ($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Rodney I. Smith --- --- 33,333 126,667 20,884 65,400
Guy M. Schuch --- --- 10,000 35,000 8,875 15,087
--------
(1) Value is based on the closing sales price of the Company's Common Stock on
December 31, 2001 ($1.45), the last trading day of 2001, less the option
exercise price.
Employment Agreement
The Company has entered into an employment agreement with Mr. Rodney I.
Smith, which provides for an annual base salary of $175,000. The present term of
the agreement continues until December 31, 2002, and is thereafter automatically
renewed for successive one-year periods unless Mr. Smith or the Company gives
the other party three months prior written notice of non-renewal. Bonuses and
salary increases may be granted by the Compensation Committee of the Board of
Directors, as it so determines from time to time. Mr. Smith also is entitled to
receive benefits offered to the Company's employees generally. If terminated
without cause, Mr. Smith is entitled to receive as severance pay an amount equal
to twenty-four (24) months of his base salary, less taxes, other required
withholdings and any amounts owed to the Company, payable in accordance with the
Company's standard payroll procedures. In addition, the employment agreement
precludes Mr. Smith from competing with the Company during his employment and
for at least one year thereafter, and from disclosing confidential information.
The Company is the owner of and the beneficiary of three key person life
insurance policies on Mr. Smith totaling $1,400,000.
Certain Relationships and Related Transactions
At December 31, 2001, the Company owned an unsecured note for
approximately $558,282 receivable from Mr. Rodney I. Smith, the Company's
President and majority shareholder, accruing interest at a rate of 6% per annum.
Unless extended, the note matures on December 31, 2002. Principal payments on
the note were $72,418 for the year ended December 31, 2001 and $7,647 the year
ended December 31, 2000. Total interest paid on this note was approximately
$37,800 and $38,000 for the years ended December 31, 2001 and 2000,
respectively.
The Company currently leases approximately three and one half acres of
its Midland Virginia property from Mr. Rodney I. Smith, the Company's President
and a major stockholder, as additional storage space for the Company's and some
customers' finished products. The lease provides for a term that automatically
renews on December 31 of each year unless otherwise canceled by either party.
The lease provides for an annual rent of $24,000.
5
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth, as of June 18, 2002, certain
information concerning ownership of the Company's Common Stock by (i) each
person known by the Company to own of record or be the beneficial owner of more
than five percent (5%) of the Company's Common Stock, (ii) named Executive
Officers and Directors, and (iii) all Directors and Executive Officers as a
group. Except as otherwise indicated, the Stockholders listed in the table have
sole voting and investment powers with respect to the shares indicated.
Name and Address of Number of Shares Percentage of
Beneficial Owner(1) Beneficially Owned(2) of Class
------------------- --------------------- --------
Rodney I. Smith (1)(3)(4)(5)(6) 682,466 18.4
Carl W. Grover(1) 203,050 5.6
Ashley B. Smith(1)(3) 116,735 3.2
Wesley A. Taylor(1)(7) 24,584 *
Andrew Kavounis(1)(8) 3,000 *
Guy M. Schuch(1)(9) 15,000 *
All directors, executive officers and key employees
as a group (8 persons)(2)(10) 864,122 22.8
-----------------------------
* Less than 1%
(1) The address for each of Messrs. Rodney I. Smith, Ashley B. Smith,
Taylor, Kavounis, and Schuch is c/o Smith-Midland Corporation, P.O. Box
300, 5119 Catlett Road, Midland, Virginia 22728. The address for Mr.
Grover is 1010 S Ocean Blvd, Suite 1017, Pompano Beach, Florida 33062.
(2) Pursuant to the rules and regulations of the Securities and Exchange
Commission, shares of Common Stock that an individual or group has a
right to acquire within 60 days pursuant to the exercise of options or
warrants are deemed to be outstanding for the purposes of computing the
percentage ownership of such individual or group, but are not deemed to
be outstanding for the purpose of computing the percentage ownership of
any other person shown in the table.
(3) Ashley B. Smith is the son of Rodney I. Smith. Each of Rodney I. Smith
and Ashley B. Smith disclaims beneficial ownership of the other's shares
of Common Stock. Includes options to purchase 27,118 shares.
(4) Does not include an aggregate of 77,972 shares of Common Stock held by
Matthew Smith and Roderick Smith, sons of Rodney I. Smith, and brothers
of Ashley B. Smith, and 112,713 shares held by Merry Robin Bachetti,
sister of Rodney I. Smith and aunt of Ashley B. Smith, for which each of
Rodney I. Smith and Ashley B. Smith disclaims beneficial ownership.
(5) Includes 100,000 shares of Common Stock that have been deposited into an
irrevocable trust (the "Trust") for the benefit of Hazel Smith, the
income beneficiary of the Trust and former wife of Rodney I. Smith, and
mother of Mr. Smith's children. Mr. Smith is the trustee of the Trust
and, as such, may vote the shares, as he deems fit.
(6) Includes options to purchase 66,668 shares.
(7) Includes options to purchase 24,584 shares.
(8) Includes options to purchase 3,000 shares.
(9) Includes options to purchase 15,000 shares.
(10) Includes options to purchase 153,038 shares.
6
Compliance with Section 16(A)
Section 16(a) ("Section 16(a)") of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), requires executive officers and Directors and
persons who beneficially own more than ten percent (10%) of the Company's Common
Stock to file initial reports of ownership on Form 3 and reports of changes in
ownership on Form 4 with the Securities and Exchange Commission (the
"Commission") and any national securities exchange on which the Corporation's
securities are registered.
Based solely on a review of the copies of such forms furnished to the
Company, the Company believes that all Section 16(a) filing requirements
applicable to its executive officers, Directors and greater than ten per cent
(10%) beneficial owners were satisfied.
Proposal #2
PROPOSAL TO RATIFY AN AMENDMENT TO THE 1994 STOCK OPTION PLAN
GENERAL INFORMATION RELATING TO THE 1994 SMITH-MIDLAND CORPORATION STOCK OPTION
PLAN
The Smith-Midland Corporation Stock Option Plan (the "Plan") was
adopted by the Board of Directors and Stockholders on August 4, 1994. The Plan
was intended to encourage and enable employees, consultants, advisors, and
others, who are in a position to make significant contributions to the success
of the Company, to acquire a closer identification of their interest with those
of the Company by providing them with opportunities to purchase stock pursuant
to the options granted under the Plan. Currently, the aggregate number of shares
for which Options could be granted under the Plan is 575,000, subject to
adjustments because of changes in the Company's capital structure such as stock
dividends, stock splits, recapitalizations, and other capital adjustments. The
options to be granted under the Plan will be designated as incentive stock
options or non-incentive stock options by the Board of Directors or a committee
thereof, which also shall have full and final authority in its discretion as to
the persons to be granted options, the number of shares subject to the options
and the terms of the option agreements. Only employees of the Company, including
officers, may be granted incentive stock options.
The Plan provides that all options thereunder shall be exercisable
during a period of no more than ten years from the date of the grant (five years
for options granted to holders of 10% or more of the outstanding shares of
Common Stock), depending upon the specific stock option agreement, and that the
option exercise price shall be at least equal to 100% of the fair market value
of the Common Stock at the time of the grant (110% for options granted to the
holders of 10% or more of the outstanding shares of Common Stock). Pursuant to
the provisions of the Plan, the aggregate fair market value (determined at the
time the options are granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by an employee during
any one calendar year shall not exceed $100,000.
If the optionee shall cease to be an employee for any reason other than
death, any options granted to the optionee shall be exercisable only to the
extent of the vested purchase rights on that date, subject to the original term
of the option or three months from the date of termination (one year in the
event of cessation of employment on account of disability) whichever is earlier.
If employment is terminated by death, the person or persons to whom the
optionee's rights under the option are transferred by will or by the laws of
descent and distribution, subject to the purchase rights vested as of the date
the optionee ceased to be an employee, may exercise such Options any time prior
to one year from the date of death; provided, that such Options or Options shall
expire in any event no later than the last day of the original term of such
Option. In the case of a Participant who is not an employee, provisions relating
to the exercisability of an option following termination of service shall be
7
specified in the award. If not so specified, all Options held by such
Participant shall terminate on termination of service to the Company. Options
are not transferable by the grantee otherwise than by will or the laws of
descent and distribution, and such Options may be exercised during the grantee's
lifetime only by the grantee. If an Option under the Plan expires or terminates
unexercised as to the shares covered thereby, such shares shall thereafter be
available for the granting of other Options under the Plan. The Plan shall
continue until such time as it may be terminated by action of the Board or the
Committee; provided, however, that no Options my be granted under the Plan on or
after the tenth anniversary of the effective date thereof.
On June 11, 2002, the last per share sales price of the Common Stock
was $1.74.
If shares are issued to the holder of a non-incentive option under the
Plan (1) no income will be recognized by the holder at the time of the grant of
the option: (2) except as stated below, upon exercise of the option, the holder
will recognize taxable ordinary income in an amount equal to the excess of the
fair market value of the shares over the option price; (3) if the holder
exercising the option is restricted from selling the shares so acquired because
the holder is an officer or director of the Company and would be subject to
liability under Section 16(b) of the Securities Exchange Act of 1934, then,
unless the holder makes an election to be taxed under the rule of clause (2)
above, the holder will recognize taxable ordinary income, at the time such
Section 16(b) restriction terminates, equal to the excess of the fair market
value of the shares at that time over the option price, and any dividends he or
she received on the shares before that time will be taxable to him or her as
income; (4) the Company will be entitled to a deduction at the same time and in
the same amount as the holder has income under clause (2) or (3); and (5) upon a
sale of shares so acquired, the holder may have additional short-term or
long-term capital gain or loss.
If shares are issued to the holder of an incentive stock option under
the Plan (1) no income will be recognized by such holder at the time of the
grant of the option or the transfer of shares to the holder pursuant to his or
her exercise of the option; (2) the difference between the option price and the
fair market value of the shares at the time of exercise will be treated as an
item of tax preference to the holder; (3) no deduction will be allowed to the
Company for Federal income tax purposes in connection with the grant or exercise
of the option; and (4) upon a sale or exchange of the shares after the later of
(a) one year from the date of transfer of the shares to the original holder, or
(b) two years from the date of grant of the option, any amount realized by the
holder in excess of the option price will be taxed to the holder as a long-term
capital gain and any loss sustained by the holder will be a long-term capital
loss. If the shares are disposed of before the holding period requirements
described in the preceding sentence are satisfied, then (1) the holder will
recognize taxable ordinary income in the year of disposition in an amount
determined under the rules of the Code; (2) the Company will be entitled to a
deduction for such year in the amount of the ordinary income so recognized; (3)
the holder may have additional long-term or short-term capital gain or loss; and
(4) the tax preference provision might not be applicable.
During the year ended December 31, 2001 options to purchase an
aggregate of 343,000 shares of Common Stock at a weighted average purchase price
of $1.02 per share were granted under the Plan. All such options were granted to
executive officers and Directors of the Company .
As of December 31, 2001, 160,000 options were held by Rodney I. Smith,
the President and Chairman of the Board of the Company; 237,150 options by
current executive officers; 3,000 by Andrew Kavounis, the current Director who
is not an executive officer; 103,275 Options by other employees of the Company;
and 3,000 by other outside parties. As of the same date, the Plan had 506,425
Options outstanding with 68,575 Options available for grant. In order to attract
and retain the quantity and quality of employees that are critical to the future
success of the Company, the Board believes that the number of Options available
for grant under the Plan needs to be significantly increased. This proposal
would increase the number of shares available for grant under the Plan to
1,025,000.
8
The Board of Directors recommends that Stockholders vote FOR the
proposal to increase the number of shares available for grant under the
Company's 1994 Stock Option Plan by 450,000 shares.
Proposal #3
ACCOUNTING MATTERS AND RATIFICATION OF AUDITORS
BDO Seidman, LLP acted as our independent certified public accountants
for the years 2001 and 2000. BDO Seidman, LLP has also been selected to act as
our independent auditors for 2002. The persons named in the enclosed proxy will
vote to ratify the selection of BDO Seidman, LLP as independent auditors for the
year ending December 31, 2002 unless otherwise directed by the Stockholders. A
representative of BDO Seidman, LLP is expected to be present at the Annual
Meeting, and will have the opportunity to make a statement and answer questions
from Stockholders if he or she so desires.
Audit Fees
We paid or accrued approximately $52,158 for professional services
rendered by BDO Seidman, LLP in connection with their audit of our annual
consolidated financial statements for 2001 and their quarterly reviews of our
condensed, consolidated financial statements included in our Forms 10-QSB for
that year.
Financial Information Systems Design and Implementation Fees
There were no professional services rendered by BDO Seidman, LLP to us
in 2001 relating to financial information systems design and implementation.
All Other Fees
We paid or accrued approximately $16,850 for all other services
rendered by BDO Seidman, LLP during 2001.
The Board has considered whether the provision of services by the
accountants with respect to the fees above is compatible with maintaining the
independence of the accountants.
The Board of Directors recommends that Stockholders vote FOR approval
of BDO Seidman, LLP as the Company's Independent Auditors.
VOTING AT MEETING
The Board of Directors has fixed June 18, 2002 as the record date for
the determination of Stockholders entitled to vote at this meeting. On or about
that date, 3,638,031 shares of Common Stock were outstanding and entitled to
vote.
9
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company. In
addition to the solicitation of proxies by mail, officers and employees of the
Company may solicit in person or by telephone. The Company may reimburse brokers
or persons holding stock in their names, or in the names of their nominees, for
their expense in sending proxies and proxy material to beneficial owners.
REVOCATION OF PROXY
Subject to the terms and conditions set forth herein, all proxies
received by the Company will be effective, notwithstanding any transfer of the
shares to which such proxies relate, unless prior to the Annual Meeting, the
Company receives a written notice of revocation signed by the person who, as of
the record date, was the registered holder of such shares. The Notice of
Revocation must indicate the certificate number or numbers of the shares to
which such revocation relates and the aggregate number of shares represented by
such certificate(s).
10
STOCKHOLDER PROPOSALS
In order to be included in proxy material for next year's Annual
Meeting, Stockholders' proposed resolutions must be received by the Corporation
no later than February 20, 2003. Stockholders who intend to submit a proposal at
next year's Annual Meeting without inclusion of such proposal in the Company's
proxy materials are required to provide notice of such proposal to the Company
no later than May 1, 2003. The Corporation suggests that proponents submit their
proposals by certified mail, return receipt requested, addressed to the
President of the Corporation.
MISCELLANEOUS
The management does not know of any other matter which may come before
the Annual Meeting. However, if any other matters are properly presented to the
Annual Meeting, it is the intention of the persons names in the accompanying
proxy to vote, or otherwise act, in accordance with their judgment on such
matters.
By Order of the Board of Directors
/s/ Rodney I. Smith
Rodney I. Smith
President
Midland, Virginia
June 18, 2002
MANAGEMENT HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING. WHETHER OR
NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN, AND RETURN THE
ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL GREATLY
FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION WILL BE
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK PERSONALLY
EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
11
SMITH-MIDLAND CORPORATION
PROXY FOR ANNUAL MEETING
TO BE HELD ON JULY 22, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Rodney I. Smith and Wesley A. Taylor
with full power of substitution to vote for and on behalf of the undersigned at
the Annual Meeting of Stockholders of SMITH-MIDLAND CORPORATION, to be held at
the Company's Corporate Headquarters, located at 5119 Catlett Road, Midland,
Virginia 22728, on Monday, July 22, 2002 at 7:00 PM, and at any adjournment or
adjournments thereof, upon and with respect to all shares of the Common Stock of
the Company upon and with respect to which the undersigned would be entitled to
vote and act if personally present. The undersigned hereby directs the said
Rodney I. Smith and Wesley A. Taylor to vote in accordance with their judgment
on any matters which may properly come before the meeting, all as indicated in
the Notice of the meeting, receipt of which is hereby acknowledged, and to act
on the following matters set forth in such Notice as specified by the
undersigned:
If no direction is made, this Proxy will be voted FOR election of Directors and FOR proposals 2 and 3.
(1) Proposal to elect four (4) members of
the Board of Directors of the Company. |_| FOR all nominees listed |_| WITHHOLD AUTHORITY
below (except as marked to vote for all
to the contrary below) nominees listed below
INSTRUCTION: To withhold authority for any individual nominee STRIKE such nominee's name from the list below.
Rodney I. Smith, Ashley B. Smith, Wesley A. Taylor, Andrew Kavounis
(2) |_| FOR |_| AGAINST |_| ABSTAIN Proposal to ratify an amendment to the Smith-Midland 1994 Stock Option
Plan to increase the number of shares authorized to be issued under the plan
by 450,000 shares.
(3) |_| FOR |_| AGAINST |_| ABSTAIN Proposal to ratify and approve the selection of BDO Seidman, LLP as the
independent auditors of the Company for the year ending December 31, 2002.
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2 and 3.
(4) In their discretion to transact such other business as may properly come before the meeting or any
adjournment of adjournments thereof. The shares represented by this proxy will be voted for and in favor of
the items set forth above unless a contrary specification is made.
Please mark, date, sign and return the proxy card promptly Dated_______________________________
using the enclosed envelope. Sign exactly as your name
appears hereon. ____________________________________
NOTE: When shares are held by joint tenants, both should sign. Signature
When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If the person named on ____________________________________
the stock certificate is deceased, please submit evidence of your Signature, if held jointly
authority. If a corporation, sign in full corporate name by an
authorized officer and indicate the office held. If a partnership, ____________________________________
please sign in the partnership name by authorized person. Printed Name
____________________________________
Current Address
12
APPENDIX A
SMITH-MIDLAND CORPORATION
1994 STOCK OPTION PLAN
(as amended through March 31, 2002)
ARTICLE 1
Purpose of the Plan
The purpose of this Plan is to encourage and enable employees,
consultants, and others (other than non-employee directors) who are in a
position to make significant contributions to the success of SMITH-MIDLAND
CORPORATION and of its affiliated corporations upon whose judgment, initiative
and efforts the Corporation depends for the successful conduct of its business,
to acquire a closer identification of their interests with those of the
Corporation by providing them with opportunities to purchase stock in the
Corporation pursuant to options granted hereunder, thereby stimulating their
efforts on behalf of the Corporation and strengthening their desire to remain
involved with the Corporation. Any employee, consultant or advisor designated to
participate in the Plan is referred to as a "Participant."
ARTICLE II
Definitions
2.1 "Affiliated Corporation" means any stock corporation of which a
majority of the voting common or capital stock is owned directly or indirectly
by the Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation or, if one
or more has been appointed, a Committee of the Board of Directors of the
Corporation.
2.4 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5 "Committee" means a Committee of not less than two members of the
Board appointed to the Board to administer the Plan who are disinterested
persons as defined in Section 16b-3 of the Securities Exchange Act of 1934, as
amended.
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2.6 "Corporation" means SMITH-MIDLAND CORPORATION, a Delaware
corporation, or its successor.
2.7 "Employee" means any person who is a regular full-time or part-time
employee of the Corporation or an Affiliated Corporation on or after November 1,
1994.
2.8 "Incentive Stock Option" ("ISO") means an option which qualifies as
an incentive stock option as defined in Section 422 of the Code, as amended.
2.9 "Non-Qualified Option" means any option not intended to qualify as
an Incentive Stock Option.
2.10 "Option" means an Incentive Stock Option or Non-Qualified Option
granted by the Board under Article V of this Plan in the form of a right to
purchase Stock evidenced by an instrument containing such provisions as the
Board may establish. Except as otherwise expressly provided with respect to an
Option grant, no Option granted pursuant to the Plan shall be an Incentive Stock
Option.
2.11 "Participant" means a person selected by the Committee to receive
an award under the Plan.
2.12 "Plan" means this 1994 Stock Option Plan.
2.13 "Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934, as amended, or any successor provision.
2.14 "Restricted Period" means the period of time selected by the
Committee during which an award may be forfeited by the person.
2.15 "Stock" means the Common Stock, $.01 par value per share, of the
Corporation or any successor, including any adjustments in the event of changes
in capital structure of the type described in Article XI.
ARTICLE III
Administration of the Plan
3.1 Administration by Board. This Plan shall be administered by the
Board of Directors of the Corporation. The Board may, from time to time,
delegate any of its functions under this plan to one or more Committees. All
14
references in this Plan to the Board shall also include the Committee or
committees, if one or more have been appointed by the Board. From time to time
the Board may increase the size of the Committee or committees and appoint
additional members thereto, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee or committees and thereafter directly administer
the Plan. No member of the Board or a committee shall be liable for any action
or determination made in good faith with respect to the Plan or any options
granted hereunder.
If a Committee is appointed by the Board, a majority of the members of
the Committee shall constitute a quorum, and all determinations of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of Committee members. The Board shall delegate the
power to select directors and officers to receive Awards under the Plan, and the
timing, pricing and amount of such Awards to a Committee, all members of which
shall be "disinterested persons" within the meaning of Rule 16b-3 under that
Act.
3.2 Powers. The Board of Directors and/or any Committee shall have full
and final authority to operate, manage and administer the Plan on behalf of the
Corporation. This authority includes, but is not limited to:
(a) The power to grant Awards conditionally or unconditionally,
(b) The power to prescribe the form or forms of any instruments
evidencing Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to provide regulations for the operation of the
incentive features of the Plan, and otherwise to prescribe and
rescind regulations for interpretation, management and
administration of the Plan,
(e) The power to delegate responsibility for Plan operation,
management, and administration on such terms, consistent with
the Plan, as the Board may establish,
15
(f) The power to delegate to other persons the responsibility of
performing ministerial acts in furtherance of the Plan's
purpose, and
(g) The power to engage the services of persons, companies, or
organizations in furtherance of the Plan's purpose, including
but not limited to, banks, insurance companies, brokerage
firms and consultants.
3.3 Additional Powers. In addition, as to each Option to buy Stock of
the Corporation, the Board shall have full and final authority in its
discretion: (a) to determine the number of shares of Stock subject to each
Option; (b) to determine the time or times at which Options will be granted; (c)
to determine the option price of the shares of Stock subject to each Option,
which price shall be not less than the minimum price specified in Article V of
this Plan; (d) to determine the time or times when each Option shall become
exercisable and the duration of the exercise period (including the acceleration
of any exercise period), which shall not exceed the maximum period specified in
Article V; (e) to determine whether each Option granted shall be an Incentive
Stock Option or a Non-qualified Option; and (f) to waive compliance by a
Participant with any obligation to be performed by him under an Option, to waive
any condition or provision of an Option, and to amend or cancel any Option (and
if an Option is cancelled, to grant a new Option on such terms as the Board may
specify), except that the Board may not take any action with respect to an
outstanding option that would adversely affect the rights of the Participant
under such Option without such Participant's consent. Nothing in the preceding
sentence shall be construed as limiting the power of the Board to make
adjustments required by Article XI.
In no event may the Corporation grant an Employee any Incentive
Stock Option that is first exercisable during any one calendar year to the
extent the aggregate fair market value of the Stock (determined at the time the
options are granted) exceed $100,000 (under all stock option plans of the
Corporation and any Affiliated Corporation); provided, however, that this
paragraph shall have no force and effect if its inclusion in the Plan is not
necessary for Incentive Stock Options issued under the Plan to qualify as such
pursuant to Section 422(d)(1) of the Code.
16
ARTICLE IV
Eligibility
4.1 Eligible Employees. All Employees (including Directors who are
Employees) are eligible to be granted Incentive Stock Option and Non-Qualified
Option Awards under this Plan.
4.2 Consultants, Directors and other Non-Employees. Any Consultant,
Director (who is an Employee (and any other Non-Employee is eligible to be
granted Non-qualified Option Awards under the Plan, provided the person has not
irrevocably elected to be ineligible to participate in the Plan.
4.3 Relevant Factors. In selecting individual Employees, Consultants,
Directors and Non-Employees to who Awards shall be granted, the Board shall
weigh such factors as are relevant to accomplish the purpose of the Plan as
stated in Article I.
ARTICLE V
Stock Option Awards
5.1 Number of Shares. Subject to the provisions of Article XI of this
Plan, the aggregate number of shares of Stock for which Options may be granted
under this Plan shall not exceed 575,000 shares. The shares to be delivered upon
exercise of Options under this Plan shall be made available, at the discretion
of the Board, either from authorized by unissued shares or from previously
issued as reacquired shares of Stock held by the Corporation as treasury shares,
including shares purchased in the open market.
Stock issuable upon exercise of an option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
5.2 Effect of Expiration, Termination or Surrender. If an Option under
this Plan shall expire or terminate unexercised as to any shares covered
thereby, or shall cease for any reason to be exercisable in whole or in part, or
if the Corporation shall reacquire any unvested shares issued pursuant to
Options under the Plan, such shares shall thereafter be available for the
granting of other Options under this Plan.
17
5.3 Term of Options. The full term of each Option granted hereunder
shall be for such period as the Board shall determine. In the case of Incentive
Stock Options granted hereunder, the term shall not exceed ten (10) years from
the date of granting thereof. Each Option shall be subject to earlier
termination as provided in Sections 6.3 and 6.4. Notwithstanding the foregoing,
options intended to qualify as "Incentive Stock Options" may not be granted to
any employee who at the time such option is granted owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation unless such option is not exercisable until after the expiration of
five (5) years from the date such option is granted.
5.4 Option Price. The Option price shall be determined by the Board at
the time any Option is granted. In the case of Incentive Stock Options, the
exercise price shall not be less than 100% of the fair market value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par value), provided that no Incentive Stock Option shall be
granted hereunder to any Employee if at the time of grant the Employee, directly
or indirectly, owns Stock possessing more than 10% of the combined voting power
of all classes of stock, of the Corporation and its Affiliated Corporations
unless the Incentive Stock Option price equals not less than 110% of the fair
market value of the shares covered thereby at the time the Incentive Stock
Option is granted. In the case of Non-Qualified Stock Options, the exercise
price shall not be less than 50% of fair market value.
5.5 Fair Market Value. If, at the time an Option is granted under the
Plan, the Corporation's Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such Option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Stock on the principal national securities exchange on which the Stock is
traded, if the Stock is then traded, if the Stock is then traded on a national
securities exchange; or (ii) the last reported sale price (on that date) of the
Stock on the NASDAQ National Market System, if the Stock is not then traded on a
national securities exchange; or (iii) the closing bid price (or average of bid
prices) last quoted (on that date) by an established quotation service for
18
over-the-counter securities, if the Stock is not reported on the NASDAQ National
Market System. However, if the Stock is not publicly traded at the time an
Option is granted under the Plan, "fair market value" shall be deemed to be the
fair value of the Stock as determined by the Board after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Stock in private transactions
negotiated at arm's length.
5.6 Non-Transferability of Options. No Option granted under this Plan
shall be transferable by the grantee otherwise than by will or the laws of
descent and distribution, and such Option may be exercised during the grantee's
lifetime only by the grantee.
5.7 Foreign Nationals. Awards may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified.
ARTICLE VI
Exercise of Option
6.1 Exercise. Each Option granted under this Plan shall be exercisable
on such date or dates and during such period and for such number of shares as
shall be determined pursuant to the provisions of the instrument evidencing such
Option. The Board shall have the right to accelerate the date of exercise date
of any Incentive Stock Option granted if such acceleration would violate the
annual vesting limitation contained Section 422(d)(1) of the Code.
6.2 Notice of Exercise. A person electing to exercise an Option shall
give written notice to the Corporation of such election and of the number of
shares he or she has elected to purchase and shall at the time of exercise
tender the full purchase price of the shares he or she has elected to purchase.
The purchase price can be paid partly or completely in the shares of the
Corporation's stock valued at Fair Market Value as defined in Section 5.5
hereof, or by any such other lawful consideration as the Board may determine.
19
Until such person has been issued a certificate or certificates for the shares
so purchased and has fully paid the purchase price for such shares, he or she
shall possess no rights of a record holder with respect to any of such shares.
The Corporation may elect to receive payment for such shares by means of a
promissory note, provided that no officer, director or holders of 5% or more of
the Corporation's outstanding Common Stock may exercise any stock option and
make payment for such shares by means of a promissory note.
6.3 Option Unaffected by Change in Duties. No Incentive Stock Option
(and, unless otherwise determined by the Board of Directors, no Non-Qualified
Option granted to a person who is, on the date of the grant, an Employee of the
Corporation or an Affiliated Corporation) shall be affected by any change of
duties or position of the optionee (including transfer to or from an Affiliated
Corporation), so long as he or she continues to be an Employee. Employment shall
be considered as continuing uninterrupted during any bona fide leave of absence
(such as those attributable to illness, military obligations or governmental
service) provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written approval of
the Board shall not be considered an interruption of employment under the Plan,
provided that such written approval contractually obligates the corporation or
any Affiliated Corporation to continue the employment of the optionee after the
approved period of absence.
If the optionee shall cease to be an Employee for any reason other than
death, such Option shall thereafter be exercisable only to the extent of the
purchase rights, if any, which have accrued as of the date of such cessation;
provided that (i) the Board may provide in the instrument evidencing any Option
that the Board may in its absolute discretion, upon any such cessation of
employment, determine (but be under no obligation to determine) that such
accrued purchase rights shall be deemed to include additional shares covered by
such Option; and (ii) unless the Board shall otherwise provide in the instrument
evidencing any Option, upon any such cessation of employment, such remaining
rights to purchase shall in any event terminate upon the earlier of (A) the
expiration of the original term of the Option; or (B) where such cessation of
employment is on account of disability, the expiration of one year from the date
of such cessation of employment and, otherwise, the expiration of three months
from such date. For purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code.
20
In the case of a Participant who is not an employee, provisions
relating to the exercisability of an Option following termination of service
shall be specified in the award. If not so specified, all Options held by such
Participant shall terminate on termination of service to the Corporation.
6.4 Death of Optionee. Should an optionee die while in possession of
the legal right to exercise an Option or Options under this Plan, such persons
as shall have acquired, by will or by the laws of descent and distribution, the
right to exercise any Options theretofore granted, may, unless otherwise
provided by the Board in any instrument evidencing any Option, exercise such
Options at any time prior to one year from the date of death; provided, that
such Option or Options shall expire in all events no later than the last day of
the original term of such Option; provided, further, that any such exercise
shall be limited to the purchase rights which have accrued as of the date when
the optionee ceased to be an Employee, whether by death or otherwise, unless the
Board provides in the instrument evidencing such Option that, in the discretion
of the Board, additional shares covered by such Option may become subject to
purchase immediately upon the death of the optionee.
ARTICLE VII
Report Person Limitations
To the extent required to qualify for the exemption provided by Rule
16b-3 under the Securities Exchange Act of 1934, as amended, and any successor
provision, at least six months must elapse from the date of acquisition of an
Option by a Reporting person to the date of disposition of such Option (other
than upon exercise) or its underlying Common Stock.
21
ARTICLE VIII
Terms and Conditions of Options
Options shall be evidenced by instruments (which need not be identical)
in such forms as the Board may from time to time approve. Such instruments shall
conform the terms and conditions set forth in Articles V and VI hereof and may
contain such other provisions as the Board deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Board may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to Incentive Stock Options, or to
such other termination and cancellation provisions as the Board may determine.
The Board may from time to time confer authority and responsibility on one or
more of its own members and/or one or more officers of the Corporation to
execute and deliver such instruments. The proper officers of the Corporation are
authorized and directed to take any and all action necessary or advisable from
time to time to carry out the terms of such instruments.
ARTICLE IX
Benefit Plans
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose under the benefit plans of the Corporation, or an Affiliated
Corporation, except as the Board may from time to time expressly provide.
Neither the Plan, an Option or any instrument evidencing an Option confers upon
any Participant any right to continue as an employee of, or consultant or
advisor to, the Corporation or an Affiliated Corporation or affect the right of
the Corporation or any Affiliated Corporation to terminate them at any time.
Except as specifically provided by the Board in any particular case, the loss of
existing or potential profits granted under this Plan shall not constitute an
element of damages in the event of termination of the relationship of a
Participant even if the termination is in violation of an obligation of the
Corporation to the Participant by contract or otherwise.
22
ARTICLE X
Amendment, Suspension or Termination of Plan
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination. The Board may also amend the Plan from time to time, except that
amendments which affect the following subjects must be approved by stockholders
of the Corporation:
(a) Except as provided in Article XI relative to capital changes,
the number of shares as to which Options may be granted
pursuant to Article V;
(b) The maximum term of Options granted;
(c) The minimum price at which Options may be granted;
(d) The term of the Plan; and
(e) The requirements as to eligibility for participation in the
Plan.
Awards granted prior to suspension or termination of the Plan may not
be cancelled solely because of such suspension or termination, except with the
consent of the grantee of the Award.
23
ARTICLE XI
Changes in Capital Structure
The instruments evidencing Options granted hereunder shall be subject
to adjustment in the event of changes in the outstanding Stock of the
Corporation by reason of Stock dividends, Stock splits, recapitalizations,
reorganizations, merger, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date of an Award to the
same extent as would affect an actual share of Stock issued and outstanding on
the effective date of such change. Such adjustment to understanding Options
shall be made without change in the total price applicable to the unexercised
portion of such options, and a corresponding adjustment in the applicable option
price per share shall be made. In the event of any such change, the aggregate
number and classes of shares for which Options may thereafter be granted under
Section 5.1 of this Plan may be appropriately adjusted as determined by the
Board so as to reflect such change.
Notwithstanding the foregoing, any adjustments made pursuant to this
Article XI with respect to Incentive Stock Options shall be made only after the
Board, after consulting with counsel for the Corporation, determines whether
such adjustments would constitute a "Modifications" of such Incentive Stock
Options (as that term is defined in Section 242 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Board determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options, it may
refrain from making such adjustments.
In the event of the proposed dissolution or liquidation of the
Corporation, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as the Board shall determine.
Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.
24
No fractional shares shall be issued under the Plan and the optionee
shall receive from the Corporation cash in lieu of such fractional shares.
ARTICLE XII
Effective Date and Term of the Plan
The Plan shall become effective on September 1, 1994. The Plan shall
continue until such time as it may be terminated by action of the Board or the
Committee; provided, however, that no Options may be granted under this Plan on
or after the tenth anniversary of the effective date hereof.
ARTICLE XIII
Conversion of ISOs into Non-Qualified Options; ISO Termination
The Board, at the written request of any optionee, may in its
discretion take such actions as may be necessary to convert such optionee's
Incentive Stock Options, that have not been exercised on the date of conversion
into Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the
Corporation or an Affiliated Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of such Options. At the time of such conversion, the
Board or the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the Board
or the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with the Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's Incentive Stock Options
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Board or the Committee takes appropriate action. The Board, with
the optionee's consent, may also terminate any portion of any Incentive Stock
Option that has not been exercised at the time of such termination.
ARTICLE XIV
Application of Funds
The proceeds received by the Corporation from the sale of shares
pursuant to Options granted under the Plan shall be used for general corporate
purposes.
25
ARTICLE XV
Governmental Regulation
The Corporation's obligation to sell and deliver shares of Stock under
this Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
26
ARTICLE XVI
Withholding of Additional Income Taxes
Upon the exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition (as defined in Article XVII) the Corporation, in
accordance with Section 3402(a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Board in its
discretion may condition the exercise of an Option on the payment of such
additional withholding.
ARTICLE XVII
Notice to Company of Disqualifying Disposition
Each employee who receives an Incentive Stock Option must agree to
notify the Corporation in writing immediately after the employee makes a
Disqualifying Disposition of any Stock acquired pursuant to the exercise of an
Incentive Stock Option. A Disqualifying Disposition is any disposition
(including any sale) of such Stock before the later of (a) two years after the
date the employee was granted the Incentive Stock Option or (b) one year after
the date the employee acquired Stock by exercising the Incentive Stock Option.
If the employee has died before such stock is sold, these holding period
requirements to not apply and no Disqualifying Disposition can occur thereafter.
ARTICLE XVIII
Governing Law; Construction
The validity and construction of the Plan and the instruments
evidencing Options shall be governed by the laws of the State of Delaware
(without regard to the conflict of law principles thereof). In construing this
Plan, the singular shall include the plural and the masculine gender shall
include the feminine and neuter, unless the context otherwise requires.
27