UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
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6(e)(2))
[X] Definitive Proxy Statement
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Universal Stainless & Alloy Products, Inc.
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(Name of Registrant as Specified In Its Charter)
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[Universal Stainless & Alloy Products, Inc. Logo]
Universal Stainless & Alloy Products, Inc.
600 Mayer Street
Bridgeville, Pennsylvania 15017
April 16, 2002
Dear Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders of
Universal Stainless & Alloy Products, Inc., to be held at 10:00 a.m., local
time, on Tuesday, May 21, 2002, at the Ramada Inn, 30 Lake Shore Drive East,
Dunkirk, New York 14048.
Please note that the location of the Annual Meeting of Stockholders as stated
in the enclosed Universal Stainless and Alloy Products, Inc. 2001 Annual
Report to Stockholders has been changed to the location referred to above.
The attached Notice of Annual Meeting of Stockholders and Proxy Statement
describe the matters to be acted upon at the Meeting. Please review them
carefully.
YOUR VOTE IS IMPORTANT. Whether or not you personally plan to attend the
Meeting, please take a few moments now to sign, date and return your proxy in
the enclosed postage-paid envelope. Regardless of the number of shares you
own, your presence by proxy is important to establish a quorum, and your vote
is important for proper corporate governance.
Thank you for your interest in Universal Stainless & Alloy Products, Inc.
Sincerely,
/s/ Clarence M. McAninch
Clarence M. McAninch
President and Chief Executive Officer
President and Chief Executive Officer
Universal Stainless & Alloy Products, Inc.
600 Mayer Street
Bridgeville, Pennsylvania 15017
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 2002
The Annual Meeting of Stockholders will be held on Tuesday, May 21, 2002
beginning at 10:00 a.m. at the Ramada Inn, 30 Lake Shore Drive East, Dunkirk,
New York 14048.
Please note that the location of the Annual Meeting of Stockholders as stated
in the enclosed Universal Stainless and Alloy Products, Inc. 2001 Annual
Report to Stockholders has been changed to the location referred to above.
Only holders of the Company's Common Stock at the close of business on March
29, 2002 will be entitled to vote at the meeting. A list of persons who were
stockholders as of that date and time will be available at the meeting and
during regular business hours for the ten (10) days prior to the meeting for
examination by any stockholder, at the Company's facilities located at 88
Howard Avenue, Dunkirk, NY 14048 or at the Company's executive offices,
located at 600 Mayer Street, Bridgeville, PA 15017. Stockholders as of the
record date may vote in person or by proxy. At the meeting we will:
1. Elect a Board of Directors;
2. Approve certain amendments to the Company's 1994 Stock Incentive Plan.
3. Ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants for 2002; and
4. Attend to other business properly presented at the meeting.
Your Board of Directors recommends that you vote in favor of the three
proposals outlined in this proxy statement.
This booklet includes the Universal Stainless & Alloy Products, Inc. proxy
statement. Enclosed with this booklet are a proxy card and a return envelope
that requires no postage if mailed within the United States. A copy of the
Universal Stainless & Alloy Products, Inc. 2001 Annual Report to Stockholders
is also enclosed.
By Order of the Board of Directors,
Paul A. McGrath
Vice President of Operations, General Counsel and Secretary
April 16, 2002
Proxy Statement
Table of Contents
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Page
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Background................................................................. 1
Voting Procedures.......................................................... 1
Proposals You May Vote On.................................................. 2
Nominees for Election of Directors......................................... 6
The Board of Directors..................................................... 6
Committees of the Board of Directors..................................... 6
Director Compensation.................................................... 7
Security Ownership of Certain Beneficial Owners and Management............. 8
Executive Compensation..................................................... 9
Summary of Cash and Certain Other Compensation........................... 9
Stock Options............................................................ 10
Employment Agreements.................................................... 10
Report on Executive Compensation........................................... 11
Audit Committee Report..................................................... 12
Independent Public Accountants............................................. 13
Performance Measurement Comparison......................................... 14
Section 16 (a) Beneficial Ownership Reporting Compliance................... 15
Stockholder Proposals...................................................... 15
Other Matters.............................................................. 15
Appendix A: Stock Incentive Plan
April 16, 2002
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
600 MAYER STREET
BRIDGEVILLE, PENNSYLVANIA 15017
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PROXY STATEMENT
For 2002 Annual Meeting of Stockholders
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BACKGROUND
This Proxy Statement and the accompanying form of proxy are being furnished in
connection with the solicitation by the Board of Directors of Universal
Stainless & Alloy Products, Inc., a Delaware corporation ("Universal
Stainless" or the "Company"), of proxies to be voted at this Annual Meeting of
Stockholders. This Proxy Statement and form of proxy are first being sent or
given to the stockholders on or about April 16, 2002. The cost of solicitation
of proxies will be borne by Universal Stainless, including expenses incurred
in connection with the preparation and mailing of the Proxy Statement. The
solicitation will be by mail and may also be made personally and by telephone
by directors, officers and employees of Universal Stainless, without any
compensation, other than their regular compensation as directors, officers or
employees. Arrangements will be made with brokerage houses, bank and other
custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of the Common Stock and Universal Stainless
will reimburse them for reasonable out-of-pocket expenses incurred by them in
connection therewith.
VOTING PROCEDURES
Who May Vote
Universal Stainless Common Stock holders of record at the close of business on
March 29, 2002 are entitled to vote. Stockholders have one vote per share on
each matter being voted on.
Voting Methods
Stockholders of record may complete, sign, date and return their proxy cards
in the postage-paid envelope provided. If you do not mark any selections, your
shares will be voted as recommended by the Board of Directors.
If you hold your shares in a broker, bank or other nominee account, you are a
"beneficial owner" of Universal Stainless Common Stock. In order to vote your
shares, you must give voting instructions to the "nominee holder" of your
shares. Universal Stainless asks the nominee holders to obtain voting
instructions from the beneficial owners of shares. Proxies that are
transmitted by nominee holders on behalf of beneficial owners will be voted as
instructed by the nominee holder.
Finally, you may vote in person if you attend the meeting.
We urge you to return the proxy card promptly.
Revoking Your Proxy
You may revoke your proxy at any time before it is voted at the meeting by:
. Notifying the Secretary of Universal Stainless in writing that you have
revoked your proxy;
. Sending a revised proxy dated later than the earlier proxy; or
. Voting in person at the meeting.
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Quorum and Voting Information
A quorum is required to conduct business at the Annual Meeting. As of the
record date, 6,077,272 shares of Universal Stainless Common Stock were issued
and outstanding. A majority of the outstanding shares, present in person or
represented by proxy, constitutes a quorum. If you submit a properly executed
proxy card, even if you abstain from voting, you will be considered part of
the quorum.
Abstentions are counted in tabulations of the votes cast by stockholders on
each proposal (other than with regard to the election of Directors) and will
have the effect of a negative vote. Brokers who hold shares in street name for
customers have the authority to vote only on certain routine matters in the
absence of instruction from the beneficial owners. A broker non-vote occurs
when the broker does not have the authority to vote on a particular proposal.
Under applicable Delaware law, broker non-votes will not be counted for
purposes of determining whether any proposal has been approved.
The affirmative vote of a plurality of the shares of Common Stock represented
in person or by proxy at the Annual Meeting is required for the election of
Directors. With regard to the election of Directors, votes may be cast in
favor or withheld; votes that are withheld and broker non-votes will be
excluded entirely from the vote and will have no effect.
Confidential Voting Policy
Universal Stainless maintains a policy of keeping stockholder votes
confidential.
PROPOSALS YOU MAY VOTE ON
1. Election of Directors
There are five (5) nominees for election this year. Detailed information on
each nominee is provided under the heading "Nominees for Election as
Directors." All directors are elected annually, and serve a one-year term
until the next Annual Meeting. If any Director is unable to stand for re-
election, the Board may reduce its size or designate a substitute. If a
substitute is designated, proxies voting on the original candidate will be
cast for the substituted candidate.
The Board of Directors unanimously recommends a vote FOR each of the nominee
directors.
2. Approval of Amendments to the 1994 Stock Incentive Plan
The Company instituted the 1994 Plan in September 1994 and subsequently
amended the 1994 plan in May 1996. An aggregate of 650,000 shares of Common
Stock is currently authorized for issuance under the 1994 Plan. As of December
31, 2001, options (net of cancelled or expired options) covering an aggregate
of 637,833 shares of the Company's Common Stock have been granted under the
1994 Plan, of which options to purchase 20,333 shares have been exercised.
The 1994 Plan is designed to attract, retain and motivate employees and
directors. Awards made pursuant to the Plan are an important component of the
Company's overall compensation program because the Board of Directors believes
that compensation should be strongly linked to Company performance. Moreover,
the Board of Directors believes the 1994 Plan can be used to promote
profitability by aligning the interests of directors and employees with those
of stockholders.
Accordingly, on January 26, 2002, the Board of Directors adopted an amendment
to the 1994 Plan, subject to stockholder approval, to (i) change the name of
the 1994 Stock Incentive Plan to the "Stock Incentive Plan" thereby removing
any reference to 1994, (ii) extend the expiration of the 1994 Plan to January
26, 2012, ten (10) years from the date of the Board action, and (iii) increase
the number of shares of Common Stock authorized for issuance under the 1994
Plan from 650,000 shares to 950,000 shares, an increase of 300,000 shares. The
Board
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of Directors adopted this amendment to ensure that the Company can continue to
grant awards to directors, officers and employees at levels determined
appropriate by the Board of Directors and the Compensation Committee.
The Board also amended the Plan to adjust the timing of the options that are
granted to the directors as part of the directors compensation. The directors
will continue to receive 10,000 options per year, however, the options will be
granted in four installments of 2,500 each, following the Annual Stockholders
Meeting, on the grant dates of May 31, August 31, November 30 and February
28th.
Stockholders are requested in this Proposal No. 2 to approve the amendments to
the 1994 Plan. The affirmative vote of the holders of a majority of the shares
of common stock that are represented in person or by proxy will be required to
approve the amendments to the Plan. As a result, abstentions and broker non-
votes will have the same effect as negative votes.
The Board of Directors unanimously recommends a vote FOR the approval of the
amendments to the 1994 Plan.
The principal provisions of the 1994 Plan as amended (the "Plan") are
summarized below. The following summary of the material provisions of the Plan
does not purport to be complete and is qualified in its entirety by the terms
of the Plan, a complete copy of which, as amended, is attached hereto as
Appendix A.
Stock Incentive Plan
Certain directors and employees of the Company and its subsidiary may be
granted options to purchase shares of Common Stock of the Company under the
Plan. The Company currently has 304 employees, including 11 officers and other
key employees, and 4 directors eligible to receive awards under the Plan. As
of December 31, 2001, awards had been made to approximately 30 individuals. A
maximum of 950,000 shares of Common Stock may be made the subject of options
granted under the Plan. That number of shares may be adjusted in the event of
certain changes in the capitalization of the Company.
The Plan provides that it may be administered by the Board of Directors or a
committee appointed by the Board of Directors (the "Compensation Committee").
Subject to the terms of the Plan, the Compensation Committee determines the
employees who will receive grants of options, the number of shares of Common
Stock subject to each option, the grant date, the expiration date, and other
terms and conditions for the options. Options granted to non-employee
directors are governed by the formula discussed below. The Compensation
Committee has the authority to construe and interpret the provisions of the
Plan or the options granted thereunder. Options granted under the Plan may not
be transferred to another person except by will or the laws of descent and
distribution.
The exercise price for any shares purchased pursuant to the exercise of an
option must be paid in full upon exercise in such form as the Committee may
approve, including the following: (i) cash (by check), (ii) transferring
shares of fully paid Common Stock to the Company with a value equal to the
aggregate exercise price, or (iii) other than in the case of non-employee
director options, by cash payments in installments or pursuant to a full
recourse promissory note. The Committee may also permit cashless exercise of
options through a designated broker.
Director Options
Directors who are not employees of the Company and do not, together with
family members, own in excess of five percent of outstanding Common Stock
("Eligible Directors") will be granted options to purchase 10,000 shares of
Common Stock in 2,500 increments. The grants will be made following each
Annual Stockholders Meeting on the following dates: May 31, August 31,
November 30 and February 28th. The per share exercise price will be equal to
the fair market value of a share of Common Stock on the date the option is
granted. Options granted to Eligible Directors will vest in three (3) annual
installments beginning on the first anniversary of the grant date, at which
time 33% of the options shall vest, and on the second anniversary date of the
original grant,
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at which time an additional 33% of the options shall vest, and the balance of
the options shall vest on the third anniversary date of the original grant.
Options granted to Eligible Directors will expire 10 years from the option
grant date. Of the current directors who are not employees of the Company,
Messrs. Dunn, Keane, Toledano and Wise are Eligible Directors.
If a non-employee director ceases to serve as a director of the Company, the
options that have been previously granted to that director and that are vested
as of the date of such cessation may be exercised by the director after the
date that the director ceases to be a director of the Company. If a non-
employee director dies while a director of the Company, the options that have
been previously granted to that director and that are vested as of the date of
his or her death may be exercised by the administrator of the director's
estate, or by the person to whom those options are transferred by will or the
laws of descent and distribution. In no event, however, may any option be
exercised after the expiration date of such option.
Employee Options
Each employee who is granted a stock option by the Compensation Committee will
receive an option agreement specifying the terms and conditions, as determined
by the Compensation Committee, that apply to the option. No employee may be
granted options, in any calendar year, to purchase more than 100,000 shares of
common stock. The option exercise price may not be less than the fair market
value of the Common Stock on the date the option is granted. Unless the
Compensation Committee provides otherwise, options granted to employees will
vest in four (4) equal annual installments beginning on the first anniversary
of the grant date. Options granted to employees will be designated by the
Compensation Committee as either incentive stock options which qualify for
special tax treatment or non-qualified stock options. Employee options will
terminate as specified in the agreement, but not later that 10 years from the
date the option is granted.
Options granted to employees pursuant to the Plan generally may not be
exercised more than three months after the option holder ceases to be an
employee of the Company, except that in the event of the death or permanent
and total disability of the option holder, the option may be exercised by the
holder (or the holder's estate, as the case may be), for a period of up to one
year after the date of death or permanent and total disability. Options
terminate immediately if the employee is terminated for cause.
Amendment or Termination
The Board of Directors of the Company has the power to terminate or amend the
Plan at any time. If the Board of Directors does not take action to earlier
terminate the Plan, it will terminate on January 26, 2012. Certain amendments
may require the approval of the Company's stockholders, and no amendment may
adversely affect options that have previously been granted.
Federal Income Tax Consequences Relating to Options
In general, an optionee will not recognize taxable income upon the grant or
exercise of an incentive stock option ("ISO"), and the Company and its
subsidiary will not be entitled to any business expense deduction with respect
to the grant or exercise of an ISO. (However, upon the exercise of an ISO, the
excess of the fair market value on the date of exercise of the shares received
over the exercise price of the shares will be treated as an adjustment to
alterative minimum taxable income.) In order for the exercise of an ISO to
qualify for this tax treatment, the optionee generally must be an employee of
the Company or its subsidiary (within the meaning of Section 422 of the Code)
from the date the ISO is granted through the date three months before the date
of exercise (one year preceding the date of exercise in the case of an
optionee who is terminated due to disability). In addition, an option will not
be treated as an ISO to the extent that the fair market value of stock with
respect to which ISOs first become exercisable during any calendar year
exceeds $100,000.
If the optionee has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the
date of exercise, when the optionee disposes of the shares, the difference, if
any, between the sales price of the shares and the exercise price of the
option will be treated as long-term capital
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gain or loss. If the optionee disposed of the shares prior to satisfying these
holding period requirements (a "disqualifying disposition"), the optionee will
recognize ordinary income at the time of the disqualifying disposition,
generally in an amount equal to the excess of the fair market value of the
shares at the time the option was exercised over the exercise price of the
options. The balance of the gain realized, if any, will be long-term or short-
term capital gain, depending upon whether or not the shares were sold more
than one year after the option was exercised. If the optionee sells the shares
in a disqualifying disposition at a price below the fair market value of the
shares at the time the option was exercised, the amount of ordinary income
will be limited to the amount realized on the sale over the exercise price of
the option. The Company and its subsidiary will be allowed a business expense
deduction to the extent the optionee recognized ordinary income.
In general, an optionee who receives a non-qualified stock option will
recognize no income at the time of the grant of the option. Upon exercise of a
non-qualified stock option, an optionee will recognize ordinary income in an
amount equal to the excess of the fair market value of the shares on the date
of exercise over the exercise price of the option. The optionee's tax basis in
shares acquired upon exercise of a non-qualified stock option will be the fair
market value on the date income is recognized, and the optionee's holding
period will commence on that date. The Company and its subsidiary will be
entitled to a business expense deduction in the same amount and at the same
time as the optionee recognizes ordinary income.
Stock Incentive Plan Benefits
The following table shows in the aggregate the options that will be granted to
Eligible Directors in fiscal year 2002 under the Plan if the stockholders
approve the amendments to the Plan. Because future awards to executive
officers and employees of the Company are discretionary and cannot be
determined at this time, the table does not reflect any such awards.
Name and Position Exercise Price (per share) Number of Shares
----------------- -------------------------- ----------------
Non-Executive Directors, as a group
(4 persons)....................... Not Determinable (/1/) 40,000
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(1) The exercise price of the options to acquire shares of Common Stock will
be the fair market value price per share on the option grant date. On
April 9, 2002 the most recent practicable date prior to the date of this
Proxy Statement, the closing price per share of Common Stock of the
Company was $10.91.
3. Ratification of the Appointment of PricewaterhouseCoopers LLP as
Independent Accountants
The Audit Committee has recommended, and the Board has approved, the
appointment of PricewaterhouseCoopers LLP ("PwC") as our independent
accountants for 2002. The Board has directed that the selection of the
independent accountants be submitted for ratification by the stockholders at
the Annual Meeting. PwC has served as our independent accountants since
Universal Stainless' inception in 1994. They have unrestricted access to the
Audit Committee to discuss audit findings and other financial matters.
Representatives of PwC will attend the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions.
Stockholder ratification of the selection of PwC as Universal Stainless'
independent accountants is not required by Universal Stainless' By-laws or
otherwise. However, the Board of Directors is submitting the selection of PwC
to the stockholders for ratification as a matter of what it considers to be
good corporate practice. If the stockholders fail to ratify the selection, the
Board of Directors will consider whether or not to retain that firm. Even if
the selection is ratified, the Board of Directors, in its discretion, may
direct the appointment of a different independent accounting firm at any time
during the year if the Board of Directors determines that such a change would
be in the best interest of Universal Stainless and its stockholders.
Audit services provided by PwC during 2001 included an audit and quarterly
reviews of Universal Stainless' consolidated financial statements, audits of
certain employee benefit plan financial statements and a review of Universal
Stainless' Annual Report and certain other filings with the SEC and certain
other governmental agencies. In addition, provided various non-audit services
to Universal Stainless during 2001.
Your Board unanimously recommends a vote FOR the ratification of
PricewaterhouseCoopers LLP's appointment as independent auditors for 2002.
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NOMINEES FOR ELECTION AS DIRECTORS
Clarence M. McAninch, 66, has been President and Chief Executive Officer and a
Director of Universal Stainless since July 1994. Mr. McAninch served as Vice
President, Sales and Marketing, of the Stainless and Alloy Products Division
of Armco Inc. from 1992 to 1994.
Douglas M. Dunn, 59, has been a Director of Universal Stainless since May
1997. Mr. Dunn has been Dean of the Graduate School of Industrial
Administration, Carnegie Mellon University, since July 1996. Prior to July
1996, Mr. Dunn was employed by AT&T for 26 years, most recently serving as
Vice President of Visual Communications and Multimedia Strategy. Since
November 1999 Mr. Dunn served on the board of Solutions Consulting Inc., a
wholly owned subsidiary of Perot Systems. Mr. Dunn has served on the board of
VocalTec, an internet communications company since January 2000. Mr. Dunn is
also a Board member of RIDC (Regional Industrial Development Corp. of
Southwestern PA), Innovation Works, Three Rivers Connect and the Boy Scouts of
America.
George F. Keane, 72, has been a Director of Universal Stainless since October
1994. Mr. Keane was the Chief Executive Officer of the Common Fund from 1971-
1993 and the President of Endowment Advisers, Inc., since 1988. From 1993 to
1996, Mr. Keane served as President Emeritus and Senior Investment Advisor of
both the Common Fund and Endowment Advisers, Inc. Mr. Keane currently serves
on several other boards, including as a Director, Bramwell Funds, Inc., since
August 1994; and Security Capital Real Estate Mutual Funds since November
1997; and Arlington Oil & Gas since June 2001; and as a Trustee for Nicholas-
Applegate Investment Trust since January 1993.
Udi Toledano, 51, has been a Director of Universal Stainless since July 1994.
Mr. Toledano has been the President of Millennium 3 Capital, Inc., a private
investment company, since December 1999. Mr. Toledano was the President of
Andromeda Enterprises, Inc., a private investment company, from December 1993
until December 2000. Since January 2000, he has managed Millennium 3
Opportunity Fund, a venture capital fund. Mr. Toledano has served on boards of
both public and private companies in various fields, including technology,
software and healthcare.
D. Leonard Wise, 67, has been a Director of Universal Stainless since October
1994. Mr. Wise currently serves as a Director of Weirton Steel Corporation
since May 1998. Mr. Wise served as the President and Chief Executive Officer
of Carolina Steel Corporation from October 1994 to March 1997.
Unless individual stockholders specify otherwise, each returned
Proxy will be voted "FOR" the election to the Board of Directors
of Universal Stainless of each of the five nominees named above.
THE BOARD OF DIRECTORS
The Board of Directors of Universal Stainless held five (5) meetings during
the 2001 fiscal year. During the 2001 fiscal year, the Audit Committee held
three (3) meetings and the Compensation Committee held two (2) meetings. Each
director attended at least 75% of the aggregate meetings of the Board of
Directors and Committees of which he was a member.
Committees of the Board of Directors
The standing Committees of the Board of Directors are the Audit Committee and
Compensation Committee. There is no standing nominating committee for
Directors.
The Audit Committee currently consists of Mr. Keane as Chairman and Messrs.
Dunn, Toledano and Wise. The Audit Committee reviews the scope and timing of
services of Universal Stainless' independent accountants. The Audit Committee
reports on Universal Stainless' financial statements following completion of
the independent accountants' audit, and Universal Stainless' policies and
procedures with respect to internal accounting and
6
financial controls. In addition, the Audit Committee makes annual
recommendations to the Board of Directors for the appointment of independent
accountants for the ensuing year. The Audit Committee held three (3) meetings
during 2001.
The Compensation Committee currently consists of Mr. Toledano as Chairman, and
Messrs. Dunn, Keane, McAninch and Wise. The Compensation Committee reviews and
authorizes the compensation and benefits of all officers of Universal
Stainless, except the President (Mr. McAninch), reviews general policy matters
relating to compensation and benefits of employees of Universal Stainless, and
administers Universal Stainless' 1994 Stock Incentive Plan (the "1994 Plan").
A subcommittee of the Compensation Committee currently consists of
Mr. Toledano as Chairman and Messrs. Dunn, Keane and Wise. The subcommittee
reviews and authorizes compensation and benefits for the President (Mr.
McAninch) and stock options to be granted to officers of Universal Stainless.
The Compensation Committee held two (2) meetings during 2001 and the
Compensation Subcommittee held two (2) meetings during 2001.
Director Compensation
Members of the Board of Directors of Universal Stainless who are employed by
Universal Stainless presently receive no additional remuneration for acting as
Directors. Universal Stainless compensates its non-employee Directors at the
rate of $15,000 per year, plus $1,000 for each regular meeting of the Board of
Directors attended. In addition, Universal Stainless reimburses Directors for
reasonable out-of-pocket expenses incurred by them in connection with their
attendance at Board of Directors and Committee meetings.
Certain members of the Board of Directors of Universal Stainless are also
eligible for the grant of options under the 1994 Plan. Eligible Directors are
Directors who are not employees of Universal Stainless and do not own in
excess of 5% of outstanding Common Stock. Eligible Directors are granted
options to purchase 10,000 shares per year of Common Stock in 2,500 increments
following the annual meeting of stockholders of Universal Stainless. The
options will be granted on May 31, August 31, November 30 and February 28th.
The per share exercise price will be equal to the fair market value of a share
of Common Stock on the date the option is granted. Options granted to Eligible
Directors will vest in three (3) installments beginning on the first
anniversary of the grant date at which time 33% of the options shall vest and
on the second anniversary date of the original grant date, at which time an
additional 33% of the options shall vest, and the remainder of the options
shall vest on the third anniversary of the original grant. Options granted to
Eligible Directors will expire 10 years from the option grant date. All of the
current directors who are not employees of Universal Stainless are Eligible
Directors.
If a non-employee Director ceases to serve as a Director of Universal
Stainless, the options that have been previously granted to that Director and
that are vested as of the date of such cessation may be exercised by the
Director after the date that the Director ceases to be a Director of Universal
Stainless. If a non-employee Director dies while a Director of Universal
Stainless, the options that have been previously granted to that Director and
that are vested as of the date of his or her death may be exercised by the
administrator of the Director's estate, or by the person to whom those options
are transferred by will or the laws of descent and distribution. In no event,
however, may any option be exercised after the expiration date of such option.
Messrs. Keane and Wise have each received grants of options to purchase
120,000 shares of Common Stock of Universal Stainless since December 1994.
Messrs. Dunn and Toledano have each received grants of options to purchase
60,000 shares of Common Stock of Universal Stainless since May 1997.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of shares of Common Stock of Universal Stainless, as of March 29,
2002, except as noted below, by (i) each stockholder known to Universal
Stainless to be the beneficial owner of more than 5% of the outstanding shares
of Common Stock, (ii) each Director of Universal Stainless, (iii) each of the
named executive officers of Universal Stainless, and (iv) all Directors and
executive officers as a group. Except as otherwise indicated, Universal
Stainless has been advised that each of the beneficial owners of Common Stock
listed below, based on information furnished by such owners, has sole
investment and voting power with respect to the shares of Common Stock
attributed to such owner below, subject to community property laws where
applicable. As of March 29, 2002, 6,077,272 shares of Common Stock were issued
and outstanding.
BENEFICIAL OWNERSHIP (/1/)
---------------------------------
Name Number of Shares Percent of Total
---- ---------------- ----------------
Dimensional Fund (/2/)....................... 494,900 8.14%
Douglas M. Dunn (/3/)(/4/)................... 49,999 *
Elkhorn Partners Limited Partnership (/5/)... 549,575 9.04%
Ellwood Group Investment Corp. (/6/)......... 359,500 5.92%
George F. Keane (/3/)(/4/)(/7/).............. 109,999 1.78%
Clarence M. McAninch (/3/)(/8/).............. 290,426 4.75%
Paul A. McGrath (/3/)(/8/)................... 38,100 *
Pennant Capital Management (/9/)............. 312,790 5.15%
Royce & Associates (/10/).................... 348,300 5.73%
Udi Toledano (/3/)(/4/)(/11/)................ 202,227 3.30%
Richard M. Ubinger (/3/)(/8/)................ 46,100 *
D. Leonard Wise (/3/)(/4/)................... 113,999 1.84%
All Executive Officers and Directors as a
Group (7 Persons)........................... 850,850 13.06%
-------
* Less than 1%.
(1) For purposes of this table, "beneficial ownership" is calculated in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
(2) Address is 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. The
information provided is based solely on a Schedule 13G as filed by
Dimensional Fund Advisors, Inc., dated February 12, 2002.
(3) Address is c/o Universal Stainless & Alloy Products, Inc., 600 Mayer
Street, Bridgeville, Pennsylvania 15017.
(4) Includes options to purchase 109,999 shares of common stock for each of
Messrs. Keane and Wise, and 49,999 shares of Common Stock for each of
Messrs. Dunn and Toledano that have vested or will vest within sixty (60)
days of the date of this proxy pursuant to Universal Stainless' 1994 Plan
described under the caption "The Board of Directors--Director
Compensation".
(5) Address in c/o Alan S. Parsow, General Partner, P.O. Box 818, Elkhorn, NE
68022. The information provided is based solely on Schedule 13D filed by
Elkhorn Partners Limited Partnership dated November 13, 2001.
(6) Address is 103 Springer Building, 3411 Silverside Road, Wilmington, DE
19810. The information provided is based solely on a Schedule 13D
(Amendment No. 2) filed by Ellwood Group Investment Corp., dated March
28, 2002.
(7) Shares of Common Stock are owned by the Keane Family Trust, a living
trust, of which Mr. Keane and his wife are sole trustees, and the
survivor of them is the beneficiary.
(8) Includes options to purchase 35,000, 37,000 and 45,000 shares of Common
Stock for Messrs. McAninch, McGrath and Ubinger, respectively that have
vested or will vest within sixty (60) days of the date of this proxy
under options granted pursuant to Universal Stainless' 1994 Stock
Incentive Plan.
(9) Address is 40 Main Street, Chatham, NY 07928. The information provided is
based solely on Schedule 13G as filed by Pennant Capital Management,
Inc., dated March 14, 2002.
(10) Address is 1414 Avenue of America, New York, NY 10019. The information
provided is based solely on Schedule 13G as filed by Royce & Associates,
Inc., dated February 13, 2002.
(11) Includes shares of Common Stock of Universal Stainless owned by Mr.
Toledano's wife and a certain trust for the benefit of their children.
8
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table provides certain summary information concerning
compensation paid or accrued by Universal Stainless and its subsidiaries, to
or on behalf of Universal Stainless' Chief Executive Officer and for each of
the two (2) most highly compensated executive officers of Universal Stainless
(hereinafter referred to as the named executive officers) serving in such
capacity at the end of the fiscal year ended December 31, 2001:
SUMMARY COMPENSATION TABLE (/1/)
Long-term
Compensation
Annual Compensation Awards
------------------------------------------- ------------
Securities
Underlying
Other Annual Options SAR All Other
Name and Principal Position Year Salary ($) Bonus ($) Compensation ($) (/2/) (#) (/3/) Compensation ($) (/4/)
--------------------------- ---- ---------- --------- ---------------------- ------------ ----------------------
Clarence M. McAninch 2001 211,346 125,000 7,110 25,000 15,455
President and CEO 2000 205,000 90,000 7,110 15,455
1999 201,730 45,000 7,110 15,335
Paul A. McGrath 2001 138,807 75,000 10,000 1,200
Vice President
Operations, 2000 119,442 40,000 1,200
General Counsel and
Secretary 1999 98,461 26,000 1,080
Richard M. Ubinger 2001 137,211 75,000 10,000 1,200
Chief Financial Officer, 2000 131,162 40,000 1,200
Principal Accounting
Officer and Treasurer 1999 115,084 26,000 1,080
-------
(1) As to columns omitted in the summary compensation table, the answer is
none.
(2) The amounts represent reimbursement for the payment of taxes for Mr.
McAninch related to life insurance in which the beneficiary is his
spouse. The dollar value of perquisites paid to the named executive
officer does not exceed the lesser of $50,000 or 10% of the total of
annual salary and bonus reported for the named executive officer.
(3) Represents securities, underlying options, granted under the 1994 Plan.
(4) For 2001, represents (i) contributions to Universal Stainless 401(k)
retirement plan of $1,200 for Messrs. McAninch, McGrath, and Ubinger and
(ii) the dollar value of the benefit to Mr. McAninch of life insurance
premiums paid by Universal Stainless for term life insurance for Mr.
McAninch of $14,255. For 2000, represents (i) contributions to Universal
Stainless' 401(k) retirement plan of $1,200 for Messrs. McAninch,
McGrath, and Ubinger and (ii) the dollar value of the benefit to Mr.
McAninch of life insurance premiums paid by Universal Stainless for term
life insurance for Mr. McAninch of $14,255. For 1999, represents (i)
contributions to Universal Stainless' 401(k) retirement plan of $1,080
for Messrs. McAninch, McGrath and Ubinger; (ii) the dollar value of the
benefit to Mr. McAninch of life insurance premiums paid by Universal
Stainless for term life insurance for Mr. McAninch of $14,255.
9
Stock Options
The following table contains information concerning the grant of stock options
for the fiscal year ended December 31, 2001 to the named executive officers:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number % of Total Grant Date
Of Securities Options Granted Exercise or Present
Underlying Options to Employees in Base Price Expiration Value
Name Granted (/1/) Fiscal Year (/2/) Per Share (/3/) Date (/4/)
---- ------------------ ----------------- --------------- ---------- ----------
Clarence M. McAninch 25,000 41.67% $7.10 11/28/11 $87,877
Paul A. McGrath 10,000 16.67% $7.10 11/28/11 $35,151
Richard M. Ubinger 10,000 16.67% $7.10 11/28/11 $35,151
-------
(1) Options granted under the 1994 Plan during the fiscal 2001. Options are
granted at fair market value at date of grant. Each option has a maximum
term of 10 years, subject to earlier termination in the event of the
optionee's termination of employment with Company. Options granted to
Messrs. McAninch, McGrath and Ubinger will vest in a series of four (4)
equal and successive annual installments with the first installment
vesting one year from the grant date.
(2) Options to purchase a total of 60,000 shares of Common Stock were granted
to employees, including executive officers, for the fiscal year ended
December 31, 2001.
(3) The exercise price may be paid in cash, in shares of Common Stock valued
at fair market value on the exercise date or in a combination of cash and
stock. The Compensation Committee (the "Committee") may permit payment of
all or part of applicable withholding taxes due upon exercise of the
option by withholding of shares, valued at the fair market value of the
Company's Common Stock on the date of exercise, otherwise issuable upon
exercise of the option. The Committee may also grant options in exchange
for the cancellation of options previously granted and the purchase price
of shares subject to such new options, which will be as determined by the
Committee, and may be lower than the exercise price of the canceled
options.
(4) Represents grant date valuation computed under the Black-Scholes option
pricing model adapted for use in valuing stock options. The actual value,
if any, that may be realized will depend on the excess of the stock price
over the exercise price on the date the option is exercised, so there can
be no assurance that the value realized will be at or near the value
estimated using the Black-Scholes model. Grant date values were
determined based in part on the following assumptions: risk-free rate of
return of 5%, no dividend yield, time of exercise of 5 years, and
annualized volatility of 50% (based on historical stock prices of the
common stock since December 31, 1996).
Fiscal Year End Option Values (/1/)
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options at December 31, 2001 Options at December 31, 2001 (/2/)
Name Exercisable/Unexercisable (#) Exercisable/Unexercisable ($)
---- ---------------------------------------- ----------------------------------
Clarence
M.
McAninch 35,000/25,000 0/30,000
Paul A.
McGrath 35,750/11,250 0/12,000
Richard
M.
Ubinger 43,750/11,250 0/12,000
-------
(1) No Options were exercised in 2001.
(2) Represents the "value" of unexercised options calculated by subtracting
the exercise price per share from $8.30, which was the market price of a
share of the Company's Common Stock on the last business day of 2001.
Employment Agreements
On November 15, 1998, Clarence M. McAninch entered into a one-year employment
agreement with Universal Stainless for the position of President and Chief
Executive Officer. Mr. McAninch's employment may be
10
automatically extended for one-year periods at Universal Stainless' option.
Mr. McAninch's employment agreement provides for a base annual salary of
$200,000 and a customary benefits package, which may be increased annually at
the discretion of the Board of Directors. The employment agreement of Mr.
McAninch prohibits him from (i) competing with Universal Stainless for one
year following his termination of employment with Universal Stainless and (ii)
disclosing confidential information or trade secrets in any unauthorized
manner. Universal Stainless has a keyman life insurance policy in effect, of
which Universal Stainless is the sole beneficiary, on the life of Mr. McAninch
providing $2.0 million in coverage. Mr. McAninch may be eligible for an amount
equal to eighteen months salary determined at the then-current base annual
salary rate upon a change of control of Universal Stainless.
On January 1, 1998, each of Paul A. McGrath and Richard M. Ubinger, entered
into employment agreements with Universal Stainless for the positions of
Director, Employee Relations, General Counsel and Secretary, in the case of
Mr. McGrath, and Chief Financial Officer and Treasurer, in the case of Mr.
Ubinger. Mr. McGrath's and Mr. Ubinger's employment agreements provide for a
base annual salary of $95,000 and $113,700, respectively, which may be
increased at the discretion of the Board of Directors, the Compensation
Committee or the President of Universal Stainless. Mr. McGrath and Mr. Ubinger
may be eligible for an amount equal to one year base salary upon a change of
control of Universal Stainless.
REPORT ON EXECUTIVE COMPENSATION
Introduction
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Messrs. Toledano (Chairman), Keane, McAninch, Dunn, and Wise, all
of whom are Directors of Universal Stainless. The Committee is responsible for
the establishment and oversight of Universal Stainless' executive compensation
programs. The following report of the Committee discusses generally Universal
Stainless' executive compensation objectives and policies and their
relationship to Universal Stainless' performance in 2001. A subcommittee of
the Compensation Committee currently consists of Mr. Toledano as Chairman and
Messrs. Dunn, Keane and Wise. The subcommittee reviews and authorizes
compensation and benefits for the President (Mr. McAninch) and stock options
to be granted to officers of Universal Stainless. The Compensation Committee
held two (2) meetings during 2001 and the Compensation Subcommittee held two
(2) meetings during 2001.
Executive Compensation Philosophy and Objectives
Universal Stainless' executive compensation programs are designed to attract,
retain and motivate highly effective executives and to reward sustained
corporate and individual performance with an appropriate base annual salary
and incentive compensation. Universal Stainless seeks to increase management
ownership of Universal Stainless and to link executive compensation with
stockholder value, achievement of business objectives and corporate
profitability. Each year, the Committee conducts a review of Universal
Stainless' executive compensation programs for appropriateness and
competitiveness.
Universal Stainless' compensation philosophy is to compensate its executive
officers at market-competitive levels for achieving planned performance.
Market comparisons include general industry norms, metals companies, and a
select group of capital-intensive companies that are approximately the same
size as Universal Stainless. More emphasis is placed on general industry than
the steel industry norms. The comparative market group is a representative
sample of organizations used in the performance graph below, but is not
identical due to limitations on available data.
Compensation Program Components
Consistent with Universal Stainless' executive compensation objectives,
Universal Stainless' compensation for its senior management, including
Clarence M. McAninch, Universal Stainless' Chief Executive Officer, consists
of three components: an annual base salary, annual incentive awards and long-
term incentive awards. During the
11
year ended December 31, 2001, and currently, Universal Stainless' compensation
of its senior executives consisted of cash bonuses, tied to executive
performance, position level and/or continuing employment, and ownership of
Universal Stainless' Common Stock. Universal Stainless encourages stock
ownership to create in management, a true ownership point of view and further
to align executive and stockholder interests. Executives have received, or are
currently eligible to receive, stock option awards based on their individual
performances.
Annual Base Salary. Base salaries for executive officers are determined with
reference to a salary range for each position. Salary ranges are determined by
evaluating a particular employee's position and comparing it with what are
believed to be representative prevailing norms for similar positions in
similarly-sized companies. Within this salary range, an executive's initial
salary level is determined largely through Committee judgment, based on the
experience of its members. Salaries are set at a level to attract, retain and
motivate superior executives. The Committee determines annual salary
adjustments based on Universal Stainless' performance, the individual
executive's contribution to that performance, prevailing industry norms and
the Committee members' knowledge and experience. Other than Messrs. McAninch,
Ubinger, and McGrath, no officer of Universal Stainless received an annual
base compensation in excess of $100,000 for the year ended December 31, 2001.
Annual Incentive Awards. The executive officers are eligible to receive an
annual bonus that is intended to provide additional compensation for
significant and outstanding achievement during the past year.
Messrs., McAninch, McGrath and Ubinger may be eligible for a performance-based
annual bonus, in each case up to a maximum amount that equals the executive's
base annual salary.
Long-term Incentive Awards. Long-term incentive compensation is provided by
the grant of options to purchase shares of Common Stock of Universal Stainless
under the 1994 Plan. In considering the awards, the Committee takes into
account such factors as prevailing norms for the ratio of options outstanding
to total shares outstanding, the effect on maximizing long-term stockholder
value, and vesting and expiration dates of each executive's outstanding
options.
Other
Section 162(m) of the Internal Revenue Code of 1986, as amended ("the Code")
limits the annual deduction that a publicly-held corporation may take for
certain types of compensation paid or accrued with respect to certain
executives to $1 million per year per executive. The Compensation Committee
has determined that it is unlikely that it would require Universal Stainless
to pay any amounts in 2002 that would result in the loss of a federal income
tax deduction under Section 162(m) of the Code, and accordingly, has not
recommended that any special actions be taken or plans or programs be revised
at this time in light of such tax law provision.
The Compensation Committee
Udi Toledano (Chairman) D. Leonard Wise
Douglas M. Dunn Clarence M. McAninch (non participating
George F. Keane as to
his own compensation)
AUDIT COMMITTEE REPORT
The Audit Committee of the Universal Stainless & Alloy Products Board of
Directors ("the Committee") is composed of four members, each of which are
independent, as defined under the applicable rules of the National Association
of Securities Dealers listing standards, and operates under a written charter
adopted by the Board of Directors. The Committee reviews and reassesses the
Charter annually and recommends any changes to the Board for approval.
12
The Committee recommends to the Board of Directors, the selection of the
Corporation's independent accountants. The Committee assists the Board in
overseeing and monitoring the integrity of the Corporation's financial
reporting process, its compliance with legal and regulatory requirements and
the quality of its internal control and external audit processes.
The Committee has reviewed and discussed the consolidated financial statements
with management and the independent accountants. The Committee discussed with
the independent accountants matters required to be discussed by Statement on
Auditing Standards No. 61 (Communication with Audit Committees).
The Committee also has received the written disclosures and the letter from
PricewaterhouseCoopers LLP, required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and the Committee has
discussed with that firm its independence from the Corporation.
Based on the foregoing review and discussions and relying thereon, the
Committee recommended that the Board of Directors include the audited
consolidated financial statements in the Corporation's Annual Report on
Form 10-K for the year ended December 31, 2001 filed with the Securities and
Exchange Commission.
This report is not to be deemed "solicitation material" or filed with the SEC
or subject to Regulation 14A of the Securities Exchange Act of 1934, as
amended, except to the extent specifically requested by the Company or
incorporated by reference in documents otherwise filed.
The Audit Committee
George F. Keane (Chairman) D. Leonard Wise
Douglas M. Dunn Udi Toledano
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors appointed PricewaterhouseCoopers LLP as independent
public accountants to audit the consolidated financial statements of the
Corporation for the year ended December 31, 2001. Representatives of
PricewaterhouseCoopers LLP will be present at the Annual Meeting. They will
have an opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions.
Audit Fees
During 2001, PricewaterhouseCoopers LLP billed the Corporation $93,000 for
professional services rendered by them for the audit of the Corporation's
annual financial statements for its 2001 fiscal year and the reviews of the
Corporation's financial statements included in its forms 10-Q for such fiscal
year.
Financial Information Systems Design and Implementation Fees
During 2001, PricewaterhouseCoopers LLP did not provide the Corporation with
any professional services related to financial information systems design &
implementation as defined in applicable financial reporting regulations.
All Other Fees
During 2001, PricewaterhouseCoopers LLP billed the Corporation $53,000 for
professional services rendered for all other services, which related primarily
to providing the Corporation with employee benefit plan audits, assistance
with an acquisition, and income tax consulting, planning and return
preparation projects.
13
PERFORMANCE MEASUREMENT COMPARISON*
Rules and regulations of the Securities and Exchange Commission require the
presentation of a line graph comparing from December 31, 1996 through December
31, 2001 the yearly percentage change in Universal Stainless' cumulative
stockholder return to (i) the cumulative total return of a broad market equity
index and (ii) the cumulative return of either a published industry index or a
self-constructed group of peer issuers that Universal Stainless believes is
relevant to a comparative understanding of its performance.
The peer group selected by Universal Stainless includes the following
companies: Allegheny Technologies, Inc., Carpenter Technology Corp. and The
Timken Company (collectively, the "Peer Group").
The Peer Group consists of a number of publicly-traded companies that have
some similarity to Universal Stainless. In particular, the Peer Group
companies are all involved in the distribution and/or manufacture of specialty
metal products in the United States, and each Peer Group company has a
division or unit that competes with Universal Stainless. The operating results
of members of the Peer Group are generally readily available to the public.
The graph assumes that $100.00 was invested on December 31, 1996.
PERFORMANCE GRAPH
[PERFORMANCE GRAPH]
* The material in this graph is not "solicitation material," is not deemed
filed with the SEC, and is not incorporated by reference in any filing of
Universal Stainless under the Securities Act or the Exchange Act, whether
made before or after the date hereof and irrespective of any general
incorporation language in any filing. The information in the graph has been
provided by Media General Financial Services.
12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/29/2000 12/31/2001
---------- ---------- ---------- ---------- ---------- ----------
Universal Stainless &
Alloy Products, Inc. 100.0 165.71 85.71 77.14 84.29 94.86
Peer Group 100.0 128.03 101.82 96.35 72.69 78.59
NASDAQ Market Index 100.0 122.32 172.52 304.29 191.25 152.46
14
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires certain officers of Universal
Stainless and its Directors, and persons who beneficially own more than 10% of
any registered class of Universal Stainless' equity securities, to file
reports of ownership in such securities and changes in ownership with the SEC,
the NASDAQ National Stock Market and Universal Stainless.
Based solely upon Universal Stainless' review of the reports and
representations provided to it by persons required to file reports under
Section 16(a), Universal Stainless believes that during 2001, all of the
Section 16(a) filing requirements applicable to Universal Stainless' reporting
officers, directors and greater than 10% beneficial owners were properly and
timely satisfied.
STOCKHOLDER PROPOSALS
If a stockholder intends to present a proposal at the 2003 Annual Meeting,
other than through inclusion of such proposal in Universal Stainless' proxy
materials for that meeting, the stockholder must deliver to the Secretary of
Universal Stainless at its principal executive office written notice of such
proposal no later than December 17, 2002. If Universal Stainless does not
receive notice by the required date and such proposal is presented at the 2003
Annual Meeting, management proxies may use their discretionary voting
authority with respect to such proposal.
OTHER MATTERS
The Board of Directors and management know of no matters to be presented at
the Annual Meeting other than those set forth in this Proxy Statement.
However, if any other business is properly brought before the meeting or any
adjournment thereof, the proxy holders will vote in regard thereto in
accordance with their best judgment, insofar as such proxies are not limited
to the contrary.
By Order of the Board of Directors,
/s/ Paul A. Mc Grath
Paul A. McGrath
Vice President Operations, General Counsel and Secretary
Bridgeville, Pennsylvania
April 16, 2002
15
APPENDIX A
UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC.
STOCK INCENTIVE PLAN
1. Purpose
The purpose of this plan (the "Plan") is to secure for Universal Stainless &
Alloy Products, Inc. (the "Company"), and its stockholders, the benefits
arising from the ownership of stock options by directors and employees
(including, without limitation, officers) of the Company or Subsidiaries (as
defined in Section 18 hereof) who are expected to contribute to the Company's
future growth and success. This Plan is a restatement, effective January 26,
2002, of the plan formerly known as the "Universal Stainless & Alloy Products,
Inc. 1994 Stock Incentive Plan." Grants made prior to January 26, 2002 shall
be governed by the plan as in effect on the date of such grant as well as the
applicable stock option agreement.
2. Types of Plan Benefits and Administration
(a) Types of Awards. Under the Plan, the Company may in its sole discretion
grant, with respect to the Company's common stock, par value $.001 per share
("Common Stock"), options ("Options") to employees (the "Employees"), as
authorized by action of the Board of Directors of the Company (or a committee
designated by the Board of Directors), and the Company shall, subject to the
terms and conditions hereof, grant to each director of the Company who is not
an employee and does not own, individually or together with family members, in
excess of 5 % of outstanding Common Stock (an "Eligible Director"), Options in
accordance with the formula set forth in Section 7 hereof. As used in the
Plan, an "Award" shall mean an Option and an "Award Owner" shall mean the
owner of an Option. Options granted pursuant to the Plan to Employees may be
either incentive stock options ("Incentive Stock Options") meeting the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-statutory options ("Non-Statutory Stock Options"), which
are not intended to or do not meet the requirements of Code Section 422.
Options granted to Eligible Directors pursuant to the Plan shall be only Non-
Statutory Stock Options.
(b) Administration. The Plan will be administered by the Board of Directors
of the Company, except to the extent the Board of Directors appoints from
among its members, a committee to administer the Plan (in either case, the
group administering the Plan is hereinafter referred to as the "Committee").
The Committee's construction and interpretation of the terms and provisions of
the Plan shall be final and conclusive. The Committee may in its sole
discretion, grant Options to purchase shares of the Company's Common Stock to
Employees, and issue shares upon exercise of such Options, as provided in the
Plan. The Committee shall grant Options to purchase shares of the Company's
Common Stock to the Eligible Directors, and issue shares upon exercise of such
Options, as provided in the Plan. The Committee shall have authority, subject
to the express provisions of the Plan, including, but not limited to Section 7
hereof, to construe the respective Award agreements and the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Award agreements, which
need not be identical; to advance the lapse of any waiting or installment
periods and exercise dates; and to make all other determinations in the sole
judgment of the Committee necessary or desirable for the administration of the
Plan. The Committee may correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Award agreement in the manner and to
the extent it shall deem expedient to carry the Plan into effect, and such
determination shall be in the sole and final judgement of the Committee. No
director shall be liable for any action or determination taken or made under
or with respect to the Plan or any Award in good faith.
3. Eligibility
(a) Generally.
(i) Except as provided in paragraph (b) of this Section 3 and Section 7
hereof, Awards shall be granted only to persons selected by the Committee
who are, at the time of grant, directors or employees (including, without
limitation, officers) of the Company or any Subsidiary of the Company.
(ii) An Employee may be granted Incentive Stock Options and/or Non-
Statutory Stock Options. An Employee who has been granted an Award may, if
he or she is otherwise eligible, be granted one or more additional Awards
if the Committee shall so determine.
(b) Incentive Stock Options. No person shall be granted any Incentive Stock
Option under the Plan unless, at the time such Option is granted, such person
is an employee of the Company or any Subsidiary of the Company, and does not
own, directly or indirectly, Common Stock of the Company possessing more than
10% of the total combined voting power of all classes of stock of the Company
or of any Subsidiary (unless the requirements of Section 6(f)(i) are
satisfied).
4. Stock Subject to Plan
Subject to adjustment as provided in Sections 13 and 14 below, the maximum
number of shares of Common Stock of the Company that may be issued and sold
pursuant to Options granted under the Plan is 900,000 shares in the aggregate
(one share per Option). No individual employee shall be granted Options to
purchase more than 100,000 shares in any calendar year. The Company shall
reserve for the purposes of the Plan, out of its authorized but unissued
shares of Common Stock or out of shares held in the Company's treasury, or
partly out of each, such number of shares of Common Stock as shall be
determined by the Committee. If Options granted under the Plan shall expire or
terminate for any reason without having been exercised in full, the shares
subject to the unexercised portions of such Options shall again be available
for subsequent Award grants under the Plan. Common Stock issuable upon
exercise of Options may be subject to such restrictions on transfer,
repurchase rights or other restrictions as shall be determined by the
Committee.
5. Form of Option Agreements
As a condition to the grant of an Option under the Plan, each Employee
recipient of an Option shall execute an Option Agreement, substantially in the
form, not inconsistent with the Plan, as shall be specified by the Committee
at the time such Option is granted. Each Eligible Director, as a condition to
the grant of Options to him or her pursuant to Section 7(a) hereof, shall
execute an Option Agreement, substantially in the form, not inconsistent with
the Plan, as shall be specified by the Committee at the time such Option is
granted.
6. Grants of Awards to Employees
(a) Disinterested Committee. Any Employee who is a director or officer of
the Company shall be granted Awards only if such person has been selected for
participation and the terms and provisions of such Awards have been
determined, solely by, and in the sole discretion of, a Committee of two or
more directors, each of whom is a "disinterested person. For purposes of the
Plan, a person shall be deemed to be "disinterested" only if such person
qualifies as a "disinterested person" within the meaning of paragraph (c)(2)
of Rule 16b-3 of the Securities and Exchange Commission (the "SEC"). The term
"officer" shall have the same meaning as in paragraph (f) of Rule 16a-1. To
the extent required to comply with the rules under Rule 16b-3, all references
to the Committee in the Plan shall mean and relate to the Committee of two or
more "disinterested persons" described in this Section 6(a).
(b) Purchase Price. The purchase price per share of stock issuable upon the
exercise of an Option granted pursuant to this Section 6 shall be, the Fair
Value on the date that such Option is granted. Notwithstanding anything to the
contrary contained herein, in the case of an Incentive Stock Option, the
exercise price shall not be less than 100% of the Fair Value (as defined in
Section 18 hereof) of such stock at the date of grant of such Option, or less
than 110% of such Fair Value in the case of Options described in Section
6(f)(i).
(c) Exercise Period. Each Award to an Employee shall expire on such date as
the Committee shall determine on the date such Award is granted, but in no
event after the expiration of ten years from the date on which such Award is
granted, and in all cases each Award shall be subject to earlier termination
as provided in the Plan.
(d) Vesting of Awards. An Award granted to an Employee may be exercised, and
payment shall be made upon exercise of such Award, only to the extent that
such Award has vested. Awards shall vest based on the collective number of
years of service with or for the Company or a Subsidiary, in accordance with
the schedule or terms set forth in the Award agreement executed by the Award
Owner and a duly authorized officer of the Company. Notwithstanding the
foregoing, unless the Committee specifically authorizes a different vesting
schedule with respect to an Award, an Award to an Employee shall become
exercisable based on the number of full years of service that such Award Owner
has completed with the Company or a Subsidiary since the date of the grant of
such Award, in accordance with the following schedule:
Anniversary of Percentage of Award Available
Date of Grant for Exercise (Cumulative)
-------------- -----------------------------
1 25%
2 50%
3 75%
4 100%
(e) Effect of Termination of Employment. No Award to an Employee may be
exercised unless, at the time of such exercise the Employee is, and
continuously since the date of grant of his or her Award has been, an employee
of the Company or a Subsidiary, except that subject to Section 6(d) and if and
to the extent the Award agreement or instrument so provides:
(i) if the Employee ceases to be an employee of the Company or a
Subsidiary for any reason other than death or disability or a discharge for
"cause" (as defined in (iv) below), the right to exercise the Award shall
terminate three months after such cessation (or within such lesser period
as may be specified in the Award agreement or instrument);
(ii) if the Employee dies while an employee of the Company or a
Subsidiary, or within three months after the Employee ceases to be such an
employee, the Awards may be exercised by the administrator of the
Employee's estate, or by the person to whom the Options are transferred by
will or the laws of descent and distribution, within the period of one year
after the date of death (or within such lesser period as may be specified
in the Award agreement or instrument);
(iii) if the Employee become disabled (within the meaning of Section
22(e)(3) of the Code) while an employee of the Company or a Subsidiary, the
Awards may be exercised within the period of one year after the date the
Employee ceases to be an employee of the Company or Subsidiary because of
such disability (or within such lesser period as may be specified in the
Award agreement or instrument); and
(iv) if the Employee, prior to the expiration date of an Award ceases his
or her services as an employee of the Company or Subsidiary, because he or
she is discharged for "cause" (as defined below), the right to exercise an
Option shall terminate immediately upon such cessation of such services.
"Cause" shall mean: willful misconduct in connection with the Employee's
performance of services for the Company or willful failure to perform his
or her services in the best interest of the Company, determined by the
Committee, which determination shall be conclusive;
provided, however, that in no event may any Award be exercised after the
expiration date of the Award. Any Award or portion thereof that is not
exercised during the applicable time period specified above (or any shorter
period specified in the Award agreement or instrument) shall be deemed
terminated at the end of the applicable time period for purposes of Section 4
hereof.
(f) Incentive Stock Options. Options granted under the Plan that are
intended to be Incentive Stock Options shall be specifically designated as
intending to be Incentive Stock Options and shall be subject to the following
additional terms and conditions:
(i) 10% Stockholder. If an Employee to whom an Incentive Stock Option is
to be granted under the Plan is at the time of the grant of such Option the
owner of stock possessing more than 10% of the total combined voting power
of all classes of stock of the Company or any Subsidiary, then the
following special
provisions shall be applicable to the Incentive Stock Option granted to
such individual: (x) the exercise price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than 110% of the
Fair Value (as defined in Section 18) of one share of Common Stock at the
time of grant; and (y) the option exercise period shall not exceed five
years from the date of grant.
(ii) Dollar Limitation. Common Stock of the Company that is acquired
pursuant to the exercise of an Incentive Stock Option granted to an
Employee under the Plan shall be deemed to be acquired pursuant to the
exercise of an Incentive Stock Option under Code Section 422, only to the
extent that the aggregate Fair Value (determined as of the respective date
or dates of grant) of the Common Stock with respect to which such Incentive
Stock Option, and all other Incentive Stock Options that are granted to
such Employee under the Plan (and under any other incentive stock option
plans of the Company or any Subsidiary), are exercisable for the first time
by such Employee in any one calendar year, does not exceed $100,000. To
effectuate the provisions of Section 6(f), the Committee may designate the
shares of Common Stock that are treated as acquired pursuant to the
exercise of an Incentive Stock Option by issuing a separate certificate for
such shares and identifying such certificates as Incentive Stock Option
stock in its stock transfer records.
(iii) If an Employee makes a disposition, within the meaning of Section
424(c) of the Code and regulations promulgated thereunder, of any share or
shares of Common Stock issued to such Employee pursuant to the exercise of
an Incentive Stock Option within the two-year period commencing on the day
after the date of the grant or within the one-year period commencing on the
day after the date of transfer of such share or shares to the Employee
pursuant to such exercise, the Employee shall, within ten (10) days of such
disposition, notify the Company thereof, by delivery of written notice to
the Company at its principal executive office.
Except as modified by the preceding provisions of this Section 6(f), all the
provisions of the Plan applicable to Options shall be applicable to Incentive
Stock Options granted hereunder.
7. Non-discretionary Formula Grants of Awards to Eligible Directors
(a) Non-discretionary Grants. Notwithstanding anything to the contrary
contained in this Plan, and for so long as shares of Common Stock remain
available for grant under the Plan, as of each May 31, August 31, November 30
and February 28, commencing May 31, 2002, each person who is an Eligible
Director on such date and who will continue to serve as an Eligible Director
after such date shall automatically be granted Options ("Director Options") to
purchase 2,500 shares of Common Stock.
(b) Purchase Price. The purchase price per share of stock issuable upon the
exercise of an Option granted pursuant to this Section 7 shall be the Fair
Value on the date that such Option is granted.
(c) Exercise Period. The term of each Option granted pursuant to this
Section 7 shall be ten years from the date of the grant thereof, subject to
earlier termination as herein provided. Any Option that is not exercised
during the applicable time period specified in this Section 7 shall be deemed
terminated at the end of the applicable time period for purposes of Section 4
hereof. In no event may any Option granted pursuant to this Section 7 be
exercised after the expiration date thereof.
(d) Vesting of Awards. Director Options shall be exercisable by an Eligible
Director only to the extent that they have vested. Director Options shall vest
based on years of service as follows:
Anniversary of Percentage of Award Available
Date of Grant for Exercise (Cumulative)
-------------- -----------------------------
1 33%
2 66%
3 100%
(e) Effect of Termination of Service or Death. If an Eligible Director
ceases to serve as a director of the Company or a Subsidiary, the Options that
have been previously granted to that Eligible Director and that are vested as
of the date of such cessation may be exercised by the Eligible Director after
the date such Eligible Director ceases to be a director of the Company or
Subsidiary. If an Eligible Director dies while a director of the
Company or a Subsidiary, the Options that have been previously granted to that
Eligible Director and that are vested as of the date of such death may be
exercised by the administrator of the Eligible Director's estate, or by the
person to whom such Options are transferred by will or the laws of descent and
distribution. In no event, however, may any Option be exercised after the
expiration date of such Option. Any Option or portion thereof that is not
exercised during the applicable time period specified above shall be deemed
terminated at the end of the applicable time period for purposes of Section 4
hereof.
(f) Limitation on Amendments to Terms of Non-discretionary Grants.
Notwithstanding anything to the contrary contained in this Plan, the
provisions of this Section 7 shall not be amended more than once every six
months, other than to comply with changes in the Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules thereunder. Any reference
to Option or Options in this Section 7 shall refer to Options granted to
Eligible Directors pursuant to this Section 7.
8. Method of Exercise
An Award Owner may exercise an Option granted hereunder by delivering to the
Company at its main office (to the attention of the Secretary) written notice
of exercise, which notice shall specify the number of shares with respect to
which the Option is being exercised, together with payment of the purchase
price in exchange for the Company's issuance and delivery of certificates
therefor. The purchase price for any shares of Common Stock purchased pursuant
to the exercise of an Option shall be paid in full upon such exercise by any
one or a combination of the following: (i) cash (by check), (ii) transferring
shares of fully paid Common Stock to the Company with a Fair Value equal to
the aggregate purchase price, or (iii) solely with respect to Options that are
not Director Options, by cash payments in installments or pursuant to a full
recourse promissory note, in either case, upon such terms as the Committee
deems appropriate. Notwithstanding the foregoing, the Committee shall have
discretion to determine at the time of grant of each Option (other than a
Director Option) or at any later date (up to and including the date of
exercise) the form of payment acceptable in respect of the exercise of such
Option. The written notice pursuant to this Section 8 may also provide
instructions to the Company that upon receipt of the purchase price in cash
from the Award Owner's broker or dealer, designated as such on the written
notice, in payment for any shares purchased pursuant to the exercise of an
Option, the Company shall issue such shares directly to the designated broker
or dealer. Any shares transferred to the Company as payment of the purchase
price under an Option shall be valued at their Fair Value on the day preceding
the date of exercise of such Option. If requested by the Committee, the Award
Owner shall deliver the related Award agreement to the Secretary of the
Company who shall endorse thereon a notation of such exercise and return such
agreement to the Award Owner. No fractional shares (or cash in lieu thereof)
shall be issued upon exercise of an Option and the number of shares that may
be purchased upon exercise shall be rounded to the nearest number of whole
shares.
9. Reload Options
Options (other than Director Options) granted under the Plan may, in the
discretion of the Committee, include the right to acquire a reload option
("Reload Option"). The term "Reload Option" shall mean the right to purchase a
number of shares of Common Stock equal to the number of shares tendered by an
Employee in exercising an Option, and the number of whole shares, if any,
withheld by the Company in satisfaction of Withholding Taxes (as defined in
Section 20). A Reload Option shall have a purchase price equal to the Fair
Value of Common Stock on the date the Employee receives the Reload Option and
a term extending to the expiration date of the Option with respect to which
the Reload Option was granted.
10. Nontransferability of Awards
No Award granted under the Plan shall be assignable or transferable by the
person to whom it is granted, either voluntarily or by operation of law,
except by will or the laws of descent and distribution. During the life of the
recipient, the Award shall be exercisable only by or on behalf of such person.
11. General Restrictions
(a) Award Owner Representations. The Company may require a person to whom an
Award is granted, as a condition of exercising such Award, to:
(i) give such written assurances, in substance and form satisfactory to
the Company, as the Company deems necessary or appropriate in order to
comply with federal and applicable state securities laws, including,
without limitation, that such person is acquiring the Common Stock subject
to the Award for his or her own account for investment and not with any
present intention of selling or otherwise distributing the same;
(ii) with respect to Employees only, grant to the Company the right,
which may be upon such terms as the Committee, in its sole discretion,
prescribes, to repurchase from the Award Owner any or all shares acquired
by such Award Owner through the exercise of an Award which such Award owner
may at any time desire to sell, transfer or otherwise dispose of; and
(iii) if the Award Owner is a director or officer, give written
assurances, in substance and form satisfactory to the Company, that such
person has consulted with competent counsel as to the application of
Section 16(b) of the Securities Exchange Act of 1934 (the Exchange Act") to
such exercise.
Certificates representing shares issued upon exercise of the Award shall bear
such legends as are deemed appropriate by legal counsel to the Company, unless
the Award Owner provides a written opinion of legal counsel, satisfactory to
the Company, that any such legend is not required.
(b) Compliance With Securities Laws.
(i) Each Award shall be subject to the requirement that, if at any time
counsel to the Company shall determine that the listing, registration or
qualification of such Award or the shares subject to such Award upon any
securities exchange or under any state or federal law, or the consent or
approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with the grant or exercise of such Award or
the issuance or purchase of shares thereunder, such Award shall not be
effective or may not be accepted or exercised in whole or in part (as
applicable) unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to
the Committee. Nothing herein shall be deemed to require the Company to
apply for or to obtain such listing, registration, qualification, consent
or approval.
(ii) The Company shall provide each Award Owner with such information,
statements, discussions and analyses with respect to the Company in such
manner and at such times as may be required under state or federal
securities laws.
12. Rights as a Stockholder
The Award Owner shall have no rights as a stockholder with respect to any
shares covered by the Award until the date upon which the stock certificates
are issued to him or her for such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other
rights for which the record date is prior to the date on which such stock
certificate is issued.
13. Recapitalization
In the event that the outstanding shares of Common Stock of the Company are
changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of any recapitalization, reclassification,
stock split, stock dividend, combination or subdivision, an appropriate and
proportionate adjustment shall be made in the number and kind of shares
subject to the Plan and in the number, kind, and per share exercise price, of
shares subject to unexercised Options or portions thereof granted prior to
such adjustment. Any such adjustment to an outstanding Option shall be made
without change in the total price applicable to the unexercised portion of
such Option as of the date of the adjustment. No such adjustment shall be made
with
respect to an Incentive Stock Option that would, within the meaning of any
applicable provisions of the Code, constitute a modification, extension or
renewal of any Option or a grant of additional benefits to the holder of an
Option.
14. Reorganization
In the event the Company is merged or consolidated with another entity or
person other than an Affiliate, and the Company is not a surviving entity, or
in the event all or substantially all of the assets or more than 20% of the
outstanding stock of the Company entitled to vote for directors is acquired by
any other entity or person other than an Affiliate, or in the event of a
reorganization or liquidation of the Company the Committee, or the board of
directors of any corporation assuming the obligations of the Company, shall,
as to outstanding Awards, either (i) in the case of a merger, consolidation or
reorganization of the Company, make appropriate provision for the protection
of any such outstanding Awards by the substitution on an equivalent basis of
appropriate stock of the Company, or of the merged, consolidated or otherwise
reorganized corporation that will be issuable in respect of the shares of
Common Stock of the Company (provided that no additional benefit shall be
conferred upon Award Owners as a result of such substitution), or (ii) upon
written notice to the Award Owners, provide that all unexercised Awards must
be exercised within a specified number of days of the date of such notice or
they will be terminated, or (iii) upon written notice to the Award Owners,
provide that all unexercised Awards shall be purchased by the Company or its
successor within a specified number of days of the date of such notice at a
price equal to the value the Award Owners would have received if they then
exercised all their Awards and immediately received full payment in respect of
such exercise, as determined in good faith by the Committee.
15. No Special Employment Rights
Nothing contained in the Plan or in any Award granted under the Plan shall
confer upon any Award Owner any right with respect to the continuation of his
or her employment by the Company (or any Subsidiary) or interfere in any way
with the right of the Company (or any Subsidiary), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the Award Owner from
the rate in existence at the time of the grant of an Award. Whether an
authorized leave of absence, or absence in military or government service,
shall constitute termination or cessation of services for purposes of this
Plan shall be determined by the Committee.
16. No Special Directorship Rights
Nothing contained in the Plan or in any Award granted under the Plan shall
constitute evidence of any agreement or understanding, express or implied,
that an Eligible Director has a right to continue as a director for any period
of time.
17. Other Employee Benefits
The amount of any income deemed to be received by an Award Owner as a result
of the exercise of an Award or the sale of shares received upon such exercise
will not constitute "compensation" or "earnings" with respect to which any
other benefits of such person are determined by the Company, including without
limitation benefits under any pension, profit sharing, life insurance or
salary continuation plan.
18. Definitions
(a) Affiliate. The term "Affiliate" shall mean a corporation or other entity
or person which, at the time of reference, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with, the Company.
(b) Fair Value. The term "Fair Value" of a share of Common Stock shall mean
(i) if the Common Stock is traded on a national securities exchange, the
closing price for such stock on the day immediately preceding the date of
determination or if there is no closing price on such date, the last preceding
closing price, (ii) if the
Common Stock is not traded on a national securities exchange, the mean of the
high bid and ask quotes of such stock as reported in the NASDAQ/NMS reports or
the National Quotation Bureau Inc.'s pink sheets or in the NASD Bulletin Board
on the day immediately preceding the date of determination or if there were no
high bid and ask quotes on such date, the last preceding day that there were,
and (iii) if neither (i) or (ii) are applicable, as determined in good faith
by the Committee, provided, however, that if the recipient is a director or
holds 10% or more of the Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company (directly or
beneficially), Fair Value shall be determined by an independent securities
valuation firm selected by a committee of "disinterested" persons (as defined
in Section 6(a) hereof) appointed by the Committee.
(c) Rule 16b-3. The term "Rule 16b-3" shall mean Rule 16b-3 of the SEC (or
any successor rule).
(d) Subsidiary. The term "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if, at the time of
the grant of the Award, each of the corporations other than the last
Corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
19. Amendment of the Plan
(a) Except as provided in Section 7 hereof, the Board may at any time and
from time to time modify or amend the Plan in any respect, provided that,
unless the Board shall have received the consent of the stockholders, the
Board may not make any amendments that require approval of the stockholders
under applicable law or regulations. The termination or any modification or
amendment of the Plan shall not, without the consent of an Award Owner, affect
his or her rights under an Award previously granted to him or her. With the
consent of the Award Owners affected, the Committee may amend outstanding
Award agreements in a manner not inconsistent with the Plan.
(b) Notwithstanding the provisions of Sections 19(a)(i) and (iii), the Board
shall have the right, but not the obligation, without the consent of the
Company's stockholders, to (i) amend or modify the terms and provisions of the
Plan and of any outstanding Incentive Stock Options granted under the Plan to
the extent necessary to qualify any or all such options for such favorable
federal income tax treatment (including deferral of taxation upon exercise),
as may be afforded incentive stock options under Section 422 of the Code; and
(ii) amend or modify the terms and provisions of the Plan and of any
outstanding Award granted under the Plan to the extent necessary to comply
with any securities law to which, in the opinion of counsel to the Company,
the Plan or Award is subject.
20. Withholding
At such times as an Award Owner recognizes taxable income in connection with
the receipt of shares of Common Stock hereunder (a "Taxable Event"), the Award
Owner shall pay to the Company an amount equal to the federal, state and local
income taxes and other amounts as may be required by law to be withheld by the
Company in connection with the Taxable Event (the "Withholding Taxes") prior
to the issuance, or release from escrow, of such shares. In satisfaction of
the obligation to pay Withholding Taxes to the Company, the Committee may, in
its discretion and subject to compliance with applicable securities laws and
regulations, withhold Common Stock having an aggregate Fair Value on the date
preceding the date of such issuance equal to the Withholding Taxes.
21. Effective Date and Duration of the Plan
(a) Effective Date. The Plan shall become effective when adopted by the
Board, but no award granted under the Plan (other than Director Options
granted pursuant to Section 7 hereof) shall become exercisable unless and
until the Plan shall have been approved by the Company's stockholders within
twelve months before or after the date of such adoption. If such stockholder
approval is not obtained within such period, further Awards shall be granted
under the Plan. Subject to this limitation, Awards may be granted under the
Plan at any time after the effective date and before the date fixed for
termination of the Plan.
(b) Termination. The Plan shall terminate upon the earlier of (i) the close
of business on the day next preceding the tenth anniversary of the date of its
adoption by the Board or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the exercise of
Awards granted under the Plan. If the date of termination is determined under
(i) above, then Awards outstanding on such date shall continue to have force
and effect in accordance with the provisions of the instruments evidencing
such Awards.
22. Governing Law
The Plan and all Award agreements issued hereunder shall be governed by the
laws of the State of Delaware, other than the conflict of laws provisions
thereof.
23. Expenses of Administration
All costs and expenses incurred in the operation and administration of this
Plan shall be borne by the Company.
PROXY UNIVERSAL STAINLESS & ALLOY PRODUCTS, INC. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD ON MAY 21, 2002
The undersigned hereby appoints Clarence M. McAninch and D. Leonard Wise,
and each of them, with full power of substitution, proxies to vote all shares
of common stock, $.001 par value, of Universal Stainless & Alloy Products,
Inc., a Delaware corporation (the "Company"), for which the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company to be
held at the Ramada Inn, 30 Lake Shore Drive, Dunkirk, NY 14048, on May 21,
2002, at 10:00 a.m., local time, and at any and all adjournments or
postponements thereof.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY CARD USING THE ENCLOSED
ENVELOPE. YOU MAY REVOKE THIS PROXY AT ANY TIME BY FORWARDING TO THE COMPANY A
SUBSEQUENTLY DATED PROXY RECEIVED BY THE COMPANY PRIOR TO THE TAKING OF A VOTE
ON THE MATTERS HEREIN.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS VOTES "FOR" EACH OF THE
FOLLOWING:
1. Election of the following nominees as Directors: Douglas M. Dunn, George F.
Keane, Clarence M. McAninch, Udi Toledano, D. Leonard Wise
For all Withhold for Withhold for the following only: (Write the
nominees all nominees names of the nominee(s) in the space below)
[_] [_] _____________________________________________
2.Approval of amendments to the Company's 1994 Stock Incentive Plan.
FOR [_] AGAINST [_] ABSTAIN [_]
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE DATE, SIGN AND RETURN
PROMPTLY.
3. Ratification of PricewaterhouseCoopers, LLP as Independent Accountants.
FOR [_] AGAINST [_] ABSTAIN [_]
4. OTHER MATTERS: Discretionary authority is hereby granted with respect to
such other matters as may properly come before the meeting or any
adjournment or postponement thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS AND THE PROXY STATEMENT FURNISHED HEREWITH.
Note: Please print and
sign your name exactly as
it appears hereon. When
signing as attorney,
agent, executor,
administrator, trustee,
guardian or corporate
officer, please give full
title as such. Each joint
owner should sign the
Proxy. If a corporation,
please sign as full
corporate name by
president or authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
Date_______________ , 2002
__________________________
Signature (title, if any)
__________________________
Signature (if held
jointly)
The shares represented by this Proxy will be voted in the manner directed, and
if no instructions to the contrary are indicated, will be voted FOR the
election of the named nominees and approval of the proposals set forth in the
Notice of the Annual Meeting of Stockholders.